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: | 811-09101 | |
Exact name of registrant as specified in charter: | Prudential Investment Portfolios 9 | |
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 REAL ESTATE FUND
ANNUAL REPORT · OCTOBER 31, 2013
Fund Type
Sector Stock
Objective
To seek capital appreciation and income
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 Real Estate Investors, also known as PREI®, is a unit of Prudential Investment Management, Inc. (PIM), a registered investment adviser. 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.
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December 16, 2013
Dear Shareholder:
We hope you find the annual report for the Prudential International Real Estate 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 Real Estate 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 Real Estate 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 | 11.67 | % | 19.57% (12/21/10) | |||
Class B | 11.01 | 16.55 (12/21/10) | ||||
Class C | 11.86 | 18.45 (12/21/10) | ||||
Class Z | 12.08 | 19.80 (12/21/10) | ||||
FTSE EPRA/NAREIT Developed ex-U.S. Net Index | 14.25 | 25.38 | ||||
MSCI EAFE ND Index | 26.88 | 23.74 | ||||
Lipper Equity International Real Estate Funds Average | 12.59 | 21.33 | ||||
Average Annual Total Returns (With Sales Charges) as of 9/30/13 | ||||||
One Year | Since Inception | |||||
Class A | 7.56 | % | 4.25% (12/21/10) | |||
Class B | 8.05 | 4.46 (12/21/10) | ||||
Class C | 12.92 | 6.03 (12/21/10) | ||||
Class Z | 14.14 | 6.47 (12/21/10) | ||||
FTSE EPRA/NAREIT Developed ex-U.S. Net Index | 15.16 | 8.01 | ||||
MSCI EAFE ND Index | 23.77 | 6.76 | ||||
Lipper Equity International Real Estate Funds Average | 13.67 | 6.66 | ||||
Average Annual Total Returns (With Sales Charges) as of 10/31/13 | ||||||
One Year | Since Inception | |||||
Class A | 5.52 | % | 4.36% (12/21/10) | |||
Class B | 6.01 | 4.54 (12/21/10) | ||||
Class C | 10.86 | 6.09 (12/21/10) | ||||
Class Z | 12.08 | 6.51 (12/21/10) |
2 | Visit our website at www.prudentialfunds.com |
Average Annual Total Returns (Without Sales Charges) as of 10/31/13 | ||||||
One Year | Since Inception | |||||
Class A | 11.67 | % | 6.44% (12/21/10) | |||
Class B | 11.01 | 5.49 (12/21/10) | ||||
Class C | 11.86 | 6.09 (12/21/10) | ||||
Class Z | 12.08 | 6.51 (12/21/10) |
Growth of a $10,000 Investment
The graph compares a $10,000 investment in the Prudential International Real Estate Fund (Class A shares) with a similar investment in the FTSE EPRA/NAREIT Developed ex-U.S. Net Index by portraying the initial account values at the commencement of operations for Class A shares (December 21, 2010) and the account values at the end of the current fiscal period (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.
Prudential International Real Estate Fund | 3 |
Your Fund’s Performance (continued)
Source: Prudential Investments LLC and Lipper Inc.
Inception Date: 12/21/10
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 | 5.5% 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
FTSE EPRA/NAREIT Developed ex-U.S. Net Index
The Financial Times Stock Exchange European Public Real Estate Association/National Association of Real Estate Investment Trusts (FTSE EPRA/NAREIT) Developed ex-U.S. Net Total Return Index is an unmanaged index that tracks the performance of listed REITs and real estate companies globally, excluding the U.S.
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 Equity International Real Estate Funds Average
Funds in the Lipper Equity International Real Estate Funds Average invest at least 75% of their equity portfolios in shares of companies engaged in the real estate industry that are strictly outside of the U.S. or whose securities are principally traded outside of the U.S.
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 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 | ||||
Mitsubishi Estate Co. Ltd., Diversified Real Estate Activities | 7.7 | % | ||
Mitsui Fudosan Co. Ltd., Diversified Real Estate Activities | 7.6 | |||
Sun Hung Kai Properties Ltd., Diversified Real Estate Activities | 6.0 | |||
Westfield Group, REIT, Retail REITs | 4.9 | |||
Unibail-Rodamco, REIT, Retail REITs | 4.6 |
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 | ||||
Diversified Real Estate Activities | 36.7 | % | ||
Retail REITs | 17.7 | |||
Diversified REITs | 12.1 | |||
Real Estate Operating Companies | 11.9 | |||
Industrial REITs | 6.3 |
Industry weightings reflect only long-term investments and are subject to change.
Prudential International Real Estate Fund | 5 |
Strategy and Performance Overview
How did the Fund perform?
For the 12-month reporting period ended October 31, 2013, the Prudential International Real Estate Fund’s (the Fund) Class A shares rose by 11.67%, underperforming the 14.25% gain of the FTSE EPRA/NAREIT Developed ex-U.S. Net Index (the Index) and the 12.59% advance of the Lipper Equity International Real Estate Funds Average.
What were conditions like in the international real estate securities market?
• | Europe and Asia delivered positive total returns over the reporting period. In North America, Canada slightly underperformed. Within Europe, the UK, France, Italy, and the Nordic countries, with the exception of Finland, led performance in the region. In Asia, Japan led by a wide margin. |
• | In Asia, Japan outperformed by a wide margin due to attractive valuations, improving headline economic numbers, a decline in the Tokyo office vacancy rate, a favorable political situation with Prime Minister Abe’s re-election in July, and a positive outlook from the Bank of Japan. Regional peers Hong Kong and Singapore have been only modestly positive over the reporting period. |
• | In Europe, the economic picture continues to improve in the UK and northern European markets and across the rest of the continent. Attractive valuations, encouraging indicators, and reduced concern over the dissolution of the euro zone paved the way for regional outperformance by the UK, Italy, Sweden, and France. |
Which holdings or related groups of holdings made the largest positive and negative contributions to the Fund’s return?
• | By region, the Fund was the most underweight in Europe, followed by Asia and North Canada in North America. The Fund also continued to have an allocation to Brazil. |
• | The Fund’s performance relative to the benchmark was largely driven by security selection in each region, except for Brazil in South America. Europe was the most positive contributor. The Fund’s underweight in Switzerland contributed the most to relative performance in the region. In addition, security selection in the Netherlands, Germany, and France contributed positively. Conversely, the largest detractor from relative performance came from the Fund’s underweight and security selection in the UK. |
• | Asia’s effect on the Fund’s relative performance was fairly neutral. The Fund benefitted from its underweight position in Singapore and from security selection in Japan, although these were offset largely by security selection in Hong Kong. |
6 | Visit our website at www.prudentialfunds.com |
Did any tactical shifts in portfolio risk characteristics, including significant sales and purchases, affect the Fund?
• | The most significant shift in the Fund’s exposure during the reporting period was an increase in its allocation to Japan. The increased overweight to Japan was in line with attractive valuations, improving headline economic numbers, a decline in the Tokyo office vacancy rate, a favorable political situation with Prime Minister Abe’s re-election in July, and a positive outlook from the Bank of Japan. Signs of a potential economic recovery have been reinforced due to an increase in both residential and commercial land prices, as well as condo sales that are driving earnings revisions positive. |
• | In Europe, the most notable tactical (short-term) shifts over the period included a decrease in the Fund’s allocation to the Netherlands, as well as an increase in the allocation to Germany and France. The decrease in the allocation to the Netherlands was largely attributable to reducing the Fund’s position in Wereldhave NV. The increased allocation to France was attributable to an overweight in Fonciere des Regions; and for Germany, the increase is related to the Fund’s positions in LEG Immobilien and Alstria office REIT. |
• | In North America, the Fund decreased its allocation to Canada as the Fund eliminated its position in Brookfield Office Properties. In South America, the Fund reduced its allocation to Brazil. |
What is PREI’s outlook for the international real estate securities markets?
• | In Asia, the Fund is overweight in Japan as PREI, also known as Prudential Real Estate Investors, believes its economic recovery has begun and that will have a positive spillover effect on the real estate market. The Fund is also overweight in Hong Kong, notwithstanding the residential transaction volumes drop, as there appears to be underlying pent-up demand and developers are still able to offload their projects at the right pricing. PREI believes a lot of the downside risk is already factored into the share price and valuations are looking very attractive in Hong Kong. |
• | As the economic recovery in Europe is gaining traction, PREI has moved to a broadly neutral weight for the region over the last year. PREI feels that the best opportunities are concentrated in the UK, Germany, and the Nordic region of Europe, and has recently increased overweights in these markets. Additionally, PREI has selectively invested in other markets where it sees good value opportunities. PREI still believes it is too early to look at southern Europe, where private equity players are starting to become active, and it is difficult to access real estate through the public markets. Valuations in the European region still offer interesting returns in PREI’s view, despite recent strong performance. Evidence of growth appears to be building in the leading markets of the UK and northern Europe. |
Prudential International Real Estate Fund | 7 |
Comments on Largest Holdings
7.7% | Mitsubishi Estate Co. Ltd., Diversified Real Estate Activities |
Mitsubishi Estate Co. Ltd. engages in real estate activities, primarily in Japan, the United States, and internationally. It operates in multiple business segments.
7.6% | Mitsui Fudosan Co. Ltd., Diversified Real Estate Activities |
Mitsui Fudosan Co., Ltd. is a Japan-based real estate company that has multiple business segments.
6.0% | Sun Hung Kai Properties Ltd., Diversified Real Estate Activities |
Sun Hung Kai Properties Ltd., through its subsidiaries, develops and invests in properties in Asia. The company also operates hotels, and manages properties, car parking, and transportation infrastructure. In addition, Sun Hung Kai operates a logistics business, construction, financial services, telecommunication, Internet infrastructure, and other services.
4.9% | Westfield Group, REIT, Retail REITs |
Westfield Group is a property trust that invests in, leases, and manages retail shopping centers in Australia, New Zealand, the United States, and the United Kingdom. The group’s operations also include asset management, property development, and construction.
4.6% | Unibail-Rodamco, REIT, Retail REITs |
Unibail-Rodamco leases and rents building space, finances real estate investments, and renovates real estate for sale. The company’s properties, mainly shopping centers, office buildings, and convention-exhibition centers, are primarily located in city centers or near major access routes.
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 amount, or may be waived, based on your total account balance or the number of
Prudential International Real Estate Fund | 9 |
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 International Real Estate 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 | $ | 936.80 | 1.60 | % | $ | 7.81 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,017.14 | 1.60 | % | $ | 8.13 | ||||||||||
Class B | Actual | $ | 1,000.00 | $ | 933.70 | 2.35 | % | $ | 11.45 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,013.36 | 2.35 | % | $ | 11.93 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 937.20 | 1.60 | % | $ | 7.81 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,017.14 | 1.60 | % | $ | 8.13 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 938.10 | 1.35 | % | $ | 6.59 | |||||||||
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 Portfolio’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.
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 | 2.42% | 1.60% | ||
B | 3.05 | 2.35 | ||
C | 2.31 | 1.60 | ||
Z | 2.08 | 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 International Real Estate Fund | 11 |
Portfolio of Investments
as of October 31, 2013
Shares | Description | Value (Note 1) | ||||
LONG-TERM INVESTMENTS 97.1% | ||||||
COMMON STOCKS 97.0% | ||||||
Australia 13.8% | ||||||
14,300 | Australand Property Group, REIT | $ | 50,403 | |||
106,900 | CFS Retail Property Trust Group, REIT | 209,214 | ||||
21,400 | Charter Hall Retail, REIT | 81,704 | ||||
247,900 | Dexus Property Group, REIT | 254,054 | ||||
56,700 | Federation Centres Ltd., REIT | 133,067 | ||||
68,740 | Goodman Group, REIT | 328,509 | ||||
91,900 | GPT Group, REIT | 320,299 | ||||
53,375 | Investa Office Fund, REIT | 156,693 | ||||
173,800 | Mirvac Group, REIT | 285,720 | ||||
43,100 | Stockland, REIT | 163,355 | ||||
105,900 | Westfield Group, REIT | 1,083,731 | ||||
|
| |||||
3,066,749 | ||||||
Brazil 0.7% | ||||||
6,073 | BR Malls Participacoes SA | 58,827 | ||||
26,203 | Brookfield Incorporacoes SA(a) | 16,492 | ||||
3,162 | Multiplan Empreendimentos Imobiliarios SA | 74,230 | ||||
|
| |||||
149,549 | ||||||
Canada 6.4% | ||||||
8,750 | Boardwalk Real Estate Investment Trust, REIT | 497,734 | ||||
14,000 | Canadian Apartment Properties, REIT | 289,090 | ||||
20,150 | Chartwell Retirement Residences, REIT | 207,172 | ||||
17,500 | RioCan Real Estate Investment Trust, REIT | 427,157 | ||||
|
| |||||
1,421,153 | ||||||
Finland 0.7% | ||||||
30,207 | Sponda Oyj | 156,535 | ||||
France 7.4% | ||||||
3,186 | Fonciere des Regions, REIT | 272,852 | ||||
839 | ICADE, REIT | 77,171 | ||||
5,906 | Klepierre, REIT | 264,893 | ||||
3,923 | Unibail-Rodamco SE, REIT | 1,024,963 | ||||
|
| |||||
1,639,879 |
See Notes to Financial Statements.
Prudential International Real Estate Fund | 13 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
Germany 2.5% | ||||||
7,727 | Alstria Office REIT-AG, REIT | $ | 97,968 | |||
506 | Deutsche Annington Immobilien SE(a) | 13,191 | ||||
2,803 | DIC Asset AG | 30,952 | ||||
5,792 | Gagfah SA(a) | 82,101 | ||||
3,804 | GSW Immobilien AG | 176,898 | ||||
2,248 | LEG Immobilien AG | 128,194 | ||||
6,986 | Prime Office REIT-AG, REIT(a) | 30,580 | ||||
|
| |||||
559,884 | ||||||
Hong Kong 17.1% | ||||||
102,000 | Hang Lung Properties Ltd. | 335,899 | ||||
100,900 | Henderson Land Development Co. Ltd. | 597,054 | ||||
53,000 | Hongkong Land Holdings Ltd. | 326,480 | ||||
27,000 | Hysan Development Co. Ltd. | 126,301 | ||||
28,500 | Kerry Properties Ltd. | 123,591 | ||||
67,000 | Shimao Property Holdings Ltd. | 168,388 | ||||
140,400 | Sino Land Co. Ltd. | 196,910 | ||||
101,000 | Sun Hung Kai Properties Ltd. | 1,322,972 | ||||
60,000 | Wharf Holdings Ltd. (The) | 504,916 | ||||
15,000 | Wheelock & Co. Ltd. | 76,550 | ||||
|
| |||||
3,779,061 | ||||||
Japan 28.5% | ||||||
11,550 | AEON Mall Co. Ltd. | 328,031 | ||||
600 | Daito Trust Construction Co. Ltd. | 61,262 | ||||
6,000 | Daiwa House Industry Co. Ltd. | 120,203 | ||||
153 | GLP J-REIT, REIT | 158,744 | ||||
10 | Japan Logistics Fund, Inc., REIT | 104,011 | ||||
60,000 | Mitsubishi Estate Co. Ltd. | 1,714,777 | ||||
51,000 | Mitsui Fudosan Co. Ltd. | 1,689,421 | ||||
34 | Nippon Building Fund, Inc., REIT | 420,611 | ||||
18 | Nippon Prologis REIT, Inc., REIT | 179,752 | ||||
13,200 | Nomura Real Estate Holdings, Inc. | 333,979 | ||||
15,900 | NTT Urban Development Corp. | 202,969 | ||||
20,000 | Sumitomo Realty & Development Co. Ltd. | 946,329 | ||||
41 | United Urban Investment Corp., REIT | 62,576 | ||||
|
| |||||
6,322,665 | ||||||
Jersey 0.4% | ||||||
13,817 | Atrium European Real Estate Ltd. | 82,657 |
See Notes to Financial Statements.
14 |
Shares | Description | Value (Note 1) | ||||
Netherlands 1.9% | ||||||
2,061 | Corio NV, REIT | $ | 89,717 | |||
4,354 | Eurocommercial Properties NV, REIT | 184,999 | ||||
1,950 | Wereldhave NV, REIT | 151,516 | ||||
|
| |||||
426,232 | ||||||
Norway 0.5% | ||||||
82,891 | Norwegian Property ASA | 106,102 | ||||
Singapore 6.0% | ||||||
65,000 | Ascendas Real Estate Investment Trust, REIT | 123,587 | ||||
61,000 | Cache Logistics Trust, REIT | 58,582 | ||||
125,000 | CapitaLand Ltd. | 313,186 | ||||
86,000 | CapitaMalls Asia Ltd. | 139,662 | ||||
85,000 | Global Logistic Properties Ltd. | 210,996 | ||||
391,250 | Keppel REIT, REIT | 379,618 | ||||
25,000 | Mapletree Commercial Trust, REIT | 25,293 | ||||
77,880 | Mapletree Industrial Trust, REIT | 86,584 | ||||
|
| |||||
1,337,508 | ||||||
Sweden 0.9% | ||||||
2,930 | Atrium Ljungberg AB (Class B Stock) | 39,948 | ||||
3,865 | Fabege AB | 44,471 | ||||
8,700 | Hufvudstaden AB (Class A Stock) | 113,872 | ||||
|
| |||||
198,291 | ||||||
Switzerland 0.8% | ||||||
2,001 | PSP Swiss Property AG | 171,984 | ||||
United Kingdom 9.4% | ||||||
13,233 | Big Yellow Group PLC, REIT | 99,151 | ||||
45,550 | British Land Co. PLC, REIT | 454,293 | ||||
20,874 | Great Portland Estates PLC, REIT | 191,550 | ||||
52,535 | Hammerson PLC, REIT | 445,171 | ||||
34,667 | Land Securities Group PLC, REIT | 549,550 | ||||
63,231 | SEGRO PLC, REIT | 331,177 | ||||
|
| |||||
2,070,892 | ||||||
|
| |||||
TOTAL COMMON STOCKS | 21,489,141 | |||||
|
|
See Notes to Financial Statements.
Prudential International Real Estate Fund | 15 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
PREFERRED STOCK 0.1% | ||||||
Sweden | ||||||
495 | Klovern AB (PRFC) | $ | 11,283 | |||
|
| |||||
TOTAL LONG-TERM INVESTMENTS | 21,500,424 | |||||
|
| |||||
SHORT-TERM INVESTMENT 3.0% | ||||||
AFFILIATED MONEY MARKET MUTUAL FUND | ||||||
666,299 | Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund | 666,299 | ||||
|
| |||||
TOTAL INVESTMENTS 100.1% | 22,166,723 | |||||
Liabilities in excess of other assets (0.1)% | (15,425 | ) | ||||
|
| |||||
NET ASSETS 100% | $ | 22,151,298 | ||||
|
|
The following abbreviations are used in the Portfolio descriptions:
PRFC—Preference Shares
REIT—Real Estate Investment Trust
(a) | Non-income producing security. |
(b) | Prudential Investments LLC, the manager of the Fund, 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 Fund’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.
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: | ||||||||||||
Australia | $ | — | $ | 3,066,749 | $ | — | ||||||
Brazil | 149,549 | — | — | |||||||||
Canada | 1,421,153 | — | — | |||||||||
Finland | — | 156,535 | — | |||||||||
France | — | 1,639,879 | — | |||||||||
Germany | 446,831 | 113,053 | — | |||||||||
Hong Kong | 326,480 | 3,452,581 | — | |||||||||
Japan | — | 6,322,665 | — | |||||||||
Jersey | 82,657 | — | — | |||||||||
Netherlands | — | 426,232 | — | |||||||||
Norway | 106,102 | — | — | |||||||||
Singapore | — | 1,337,508 | — | |||||||||
Sweden | 39,948 | 158,343 | — | |||||||||
Switzerland | — | 171,984 | — | |||||||||
United Kingdom | 99,151 | 1,971,741 | — | |||||||||
Preferred Stock—Sweden | — | 11,283 | — | |||||||||
Affiliated Money Market Mutual Fund | 666,299 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 3,338,170 | $ | 18,828,553 | $ | — | ||||||
|
|
|
|
|
|
Fair Value of Level 2 investments at 10/31/12 was $0. An amount of $11,969,651 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 market movements between the time at which the Fund normally values its securities and the earlier closing of foreign markets.
It is the Fund’s policy to recognize transfers in and transfers out of the fair value as of the beginning of the period.
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of October 31, 2013 were as follows:
Diversified Real Estate Activities | 36.7 | % | ||
Retail REITs | 17.7 | |||
Diversified REITs | 12.1 | |||
Real Estate Operating Companies | 11.9 | |||
Industrial REITs | 6.3 | |||
Office REITs | 5.7 | |||
Residential REITs | 3.6 | |||
Affiliated Money Market Mutual Fund | 3.0 | |||
Real Estate Development | 1.7 | % | ||
Specialized REITs | 1.3 | |||
Homebuilding | 0.1 | |||
|
| |||
100.1 | ||||
Liabilities in excess of other assets | (0.1 | ) | ||
|
| |||
100.0 | % | |||
|
|
See Notes to Financial Statements.
Prudential International Real Estate Fund | 17 |
Portfolio of Investments
as of October 31, 2013 continued
The Fund invested in various derivative instruments during the reporting period. The primary type of risk associated with these derivative instruments was foreign exchange contracts risk. The effect of such derivative instruments on the Fund’s financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.
The Fund did not hold any derivative instruments as of October 31, 2013, accordingly, no derivative positions were presented in the Statements 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 instruments, carried at fair value | Forward Currency Contracts | |||
Foreign exchange contracts | $ | (2,829 | ) | |
|
|
For the year ended October 31, 2013, the Portfolio did not have any unrealized appreciation or (depreciation) on derivatives recognized in income.
See Notes to Financial Statements.
18 |
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
FINANCIAL STATEMENTS
ANNUAL REPORT · OCTOBER 31, 2013
Prudential International Real Estate Fund
Statement of Assets and Liabilities
as of October 31, 2013
Assets | ||||
Investments at value: | ||||
Unaffiliated investments (cost $18,448,515) | $ | 21,500,424 | ||
Affiliated investments (cost $666,299) | 666,299 | |||
Receivable for Fund shares sold | 250,047 | |||
Dividends receivable | 47,223 | |||
Tax reclaim receivable | 12,951 | |||
Due from Manager | 6,656 | |||
Prepaid expenses | 560 | |||
|
| |||
Total assets | 22,484,160 | |||
|
| |||
Liabilities | ||||
Payable for Fund shares reacquired | 250,007 | |||
Accrued expenses | 82,268 | |||
Distribution fee payable | 325 | |||
Affiliated transfer agent fee payable | 262 | |||
|
| |||
Total liabilities | 332,862 | |||
|
| |||
Net Assets | $ | 22,151,298 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 2,028 | ||
Paid-in capital in excess of par | 19,971,842 | |||
|
| |||
19,973,870 | ||||
Distributions in excess of net investment income | (105,391 | ) | ||
Accumulated net realized loss on investment and foreign currency transactions | (769,486 | ) | ||
Net unrealized appreciation on investments and foreign currencies | 3,052,305 | |||
|
| |||
Net Assets, October 31, 2013 | $ | 22,151,298 | ||
|
|
See Notes to Financial Statements.
20 |
Class A: | ||||
Net asset value and redemption price per share | ||||
($948,496 ÷ 86,529 shares of beneficial interest issued and outstanding) | $ | 10.96 | ||
Maximum sales charge (5.50% of offering price) | 0.64 | |||
|
| |||
Maximum offering price to public | $ | 11.60 | ||
|
| |||
Class B: | ||||
Net asset value, offering price and redemption price per share | ||||
($144,014 ÷ 13,277 shares of beneficial interest issued and outstanding) | $ | 10.85 | ||
|
| |||
Class C: | ||||
Net asset value, offering price and redemption price per share | ||||
($210,809 ÷ 19,362 shares of beneficial interest issued and outstanding) | $ | 10.89 | ||
|
| |||
Class Z: | ||||
Net asset value, offering price and redemption price per share | ||||
($20,847,979 ÷ 1,908,718 shares of beneficial interest issued and outstanding) | $ | 10.92 | ||
|
|
See Notes to Financial Statements.
Prudential International Real Estate Fund | 21 |
Statement of Operations
Year Ended October 31, 2013
Net Investment Income | ||||
Income | ||||
Unaffiliated dividend income (net of foreign withholding tax of $60,879) | $ | 637,603 | ||
Affiliated dividend income | 799 | |||
|
| |||
Total income | 638,402 | |||
|
| |||
Expenses | ||||
Management fee | 214,747 | |||
Distribution fee—Class A | 1,472 | |||
Distribution fee—Class B | 2,754 | |||
Distribution fee—Class C | 556 | |||
Custodian’s fees and expenses | 80,000 | |||
Registration fees | 39,000 | |||
Audit fees | 30,000 | |||
Reports to shareholders | 25,000 | |||
Legal fees and expenses | 21,000 | |||
Directors’ fees | 10,000 | |||
Transfer agent’s fees and expenses (including affiliated expense of $1,500) (Note 3) | 5,000 | |||
Insurance fees | 1,000 | |||
Loan interest expense (Note 7) | 356 | |||
Miscellaneous | 21,384 | |||
|
| |||
Total expenses | 452,269 | |||
Less: Expense reimbursement (Note 2) | (157,224 | ) | ||
|
| |||
Net expenses | 295,045 | |||
|
| |||
Net investment income | 343,357 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investment And Foreign Currencies | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 344,577 | |||
Foreign currency transactions | (12,111 | ) | ||
|
| |||
332,466 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,560,324 | |||
Foreign currencies | 584 | |||
|
| |||
1,560,908 | ||||
|
| |||
Net gain on investments and foreign currencies | 1,893,374 | |||
|
| |||
Net Increase In Net Assets Resulting From Operations | $ | 2,236,731 | ||
|
|
See Notes to Financial Statements.
22 |
Statement of Changes in Net Assets
Year Ended October 31, | ||||||||
2013 | 2012 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income | $ | 343,357 | $ | 341,594 | ||||
Net realized gain (loss) on investment and foreign currency transactions | 332,466 | (436,287 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments and foreign currencies | 1,560,908 | 2,585,278 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 2,236,731 | 2,490,585 | ||||||
|
|
|
| |||||
Dividends (Note 1) | ||||||||
Dividends from net investment income | ||||||||
Class A | (26,219 | ) | (4,411 | ) | ||||
Class B | (6,041 | ) | (105 | ) | ||||
Class C | (5,237 | ) | (955 | ) | ||||
Class Z | (972,177 | ) | (420,230 | ) | ||||
|
|
|
| |||||
(1,009,674 | ) | (425,701 | ) | |||||
|
|
|
| |||||
Fund share transactions (Note 6) | ||||||||
Net proceeds from shares sold | 7,891,720 | 6,420,938 | ||||||
Net asset value of shares issued in reinvestment of dividends | 1,007,331 | 425,701 | ||||||
Cost of shares reacquired | (7,502,053 | ) | (3,465,794 | ) | ||||
|
|
|
| |||||
Net increase in net assets resulting from Fund share transactions | 1,396,998 | 3,380,845 | ||||||
|
|
|
| |||||
Total increase | 2,624,055 | 5,445,729 | ||||||
Net Assets | ||||||||
Beginning of year | 19,527,243 | 14,081,514 | ||||||
|
|
|
| |||||
End of year(a) | $ | 22,151,298 | $ | 19,527,243 | ||||
|
|
|
| |||||
(a) Includes undistributed net investment income of: | $ | — | $ | 191,880 | ||||
|
|
|
|
See Notes to Financial Statements.
Prudential International Real Estate Fund | 23 |
Notes to Financial Statements
Prudential Investment Portfolios 9 (the “Trust”) is an open-end management investment company, registered under the Investment Company Act of 1940, as amended, (“1940 Act”). The Trust currently consists of three portfolios: Prudential International Real Estate Fund, Prudential Large-Cap Core Equity Fund and Prudential Absolute Return Bond Fund. These financial statements relate only to Prudential International Real Estate Fund (the “Fund”). The financial statements of the other portfolios are not presented herein. The Fund’s investment objective is to seek capital appreciation and income.
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 Fund 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 Trustees (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 Fund 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 Fund’s 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 NASDAQ official closing price. To the extent these securities are valued at the last
24 |
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 Trustees. 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
Prudential International Real Estate Fund | 25 |
Notes to Financial Statements
continued
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 Fund 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 daily 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 Fund are presented at the foreign exchange rates and market values at the close of the fiscal year, the Fund 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 portfolio securities held at the end of the fiscal year. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of portfolio securities sold during the fiscal year. Accordingly, these net 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 Fund’s 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 year-end exchange rates are reflected as a component of net unrealized appreciation (depreciation) on foreign currencies.
26 |
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.
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. The Fund 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 Fund’s 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 Fund and the counterparty permits the Fund to offset amounts payable by the Fund to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Fund to cover the Fund’s 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 an 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
Prudential International Real Estate Fund | 27 |
Notes to Financial Statements
continued
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.
Dividends and Distributions: The Fund expects to pay dividends of net investment income and distributions of 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. 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 Fund’s 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 with PI. Pursuant to this agreement, PI manages the investment operations of the Fund, administers the Fund’s affairs and supervises the Subadviser’s performance of all investment advisory services. PI has entered into a subadvisory agreement with Prudential Real Estate Investors (“PREI”), which is a business unit of Prudential Investment Management, Inc. (“PIM”). The subadvisory agreement provides that PREI will furnish investment advisory services in connection with the management of the Fund. In connection therewith, PREI is obligated to keep certain books and records of the Fund. Pursuant to the advisory agreement, PI pays for the services of PREI, the cost of compensation of officers of the
28 |
Fund, occupancy and certain clerical and accounting costs of the Fund. The Fund 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 Fund’s average daily net assets.
PI has contractually agreed through February 28, 2014 to limit net annual Fund operating expenses (exclusive of distribution and service (12b-1) fees, extraordinary and certain other expenses, such as taxes, interest and brokerage commissions) of each class of shares to 1.35% of the Fund’s average daily net assets.
The Fund has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”), which acts as the distributor of the Class A, B, C and Z shares of the Fund. The Fund compensates PIMS for distributing and servicing the Fund’s Class A, B and C shares, pursuant to plans of distribution (the “Distribution 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 Fund.
Pursuant to the Distribution Plans, the Fund compensates PIMS for distribution related activities at an annual rate of up to .30%, 1%, and 1% of the average daily net assets of the Class A, B, and C shares, respectively. PIMS has contractually agreed through February 28, 2014 to limit such fees to .25% of the average daily net assets of the Class A shares.
PIMS has advised the Fund that it has received $7,735 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 Fund that for the year ended October 31, 2013, it received $17,986 and $357 in contingent deferred sales charges imposed upon redemptions by certain Class B 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 Fund’s transfer agent. Transfer
Prudential International Real Estate Fund | 29 |
Notes to Financial Statements
continued
agent fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
The Fund invests in the Prudential Core Taxable Money Market Fund (the “Core 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.
Note 4. Portfolio Securities
Purchases and sales of portfolio securities, other than short-term investments, for the year ended October 31, 2013, were $8,842,858 and $7,613,866, 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 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 decrease distributions in excess of net investment income and increase accumulated net realized loss on investment and foreign currency transactions by $369,046 due to differences in the treatment for book and tax purposes of certain transactions involving investments in passive foreign investment companies and foreign currencies. Net investment income, net realized gain on investment 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 as reflected in the Statement of Changes in Net Assets were $1,009,674 and $425,701 of ordinary income, respectively.
As of October 31, 2013, the accumulated undistributed earnings on a tax basis was $490,961 of ordinary income. This differs from the amount shown on the Statement
30 |
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 | Other Cost | Total Net | |||||
$19,826,068 | $3,003,529 | $(662,874) | $2,340,655 | $396 | $2,341,051 |
The difference between book basis and tax basis is 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 currencies.
Under the Regulated Investment Company Modernization Act of 2010 (“the Act”), the Fund 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. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law. 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: | $ | 465,000 | ||
|
| |||
Pre-Enactment Losses: | ||||
Expiring 2019 | $ | 190,000 | ||
|
|
Management has analyzed the Fund’s 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 Fund’s financial statements for the current reporting period. The Fund’s 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.
Prudential International Real Estate Fund | 31 |
Notes to Financial Statements
continued
Note 6. Capital
The Fund offers Class A, Class B, Class C and Class Z shares. Class A shares are sold subject to a maximum front-end sales charge of up to 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 and/or benefit plans. Class B shares are sold with a CDSC which declines from 5% to zero depending on the period of time the shares are held. Class C shares are sold with a CDSC of 1% on shares redeemed within the first 12 months after purchase. Class B shares 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 qualified 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 Fund to one or more other share classes of the Fund.
The Trust has authorized an unlimited number of shares of beneficial interest at $.001 par value per share.
As of October 31, 2013, Prudential owned 109 Class A shares, 107 Class B shares, 109 Class C shares and 1,097,199 Class Z shares of the Fund.
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 86,235 | $ | 931,453 | |||||
Shares issued in reinvestment of dividends and distributions | 2,345 | 24,409 | ||||||
Shares reacquired | (37,815 | ) | (407,984 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 50,765 | 547,878 | ||||||
Shares issued, upon conversion from Class B | 2,266 | 24,319 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 53,031 | $ | 572,197 | |||||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 19,755 | $ | 187,815 | |||||
Shares issued in reinvestment of dividends and distributions | 560 | 4,411 | ||||||
Shares reacquired | (75,300 | ) | (675,175 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (54,985 | ) | $ | (482,949 | ) | |||
|
|
|
|
32 |
Class B | Shares | Amount | ||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 36,956 | $ | 400,282 | |||||
Shares issued in reinvestment of dividends and distributions | 588 | 6,090 | ||||||
Shares reacquired | (38,294 | ) | (393,337 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (750 | ) | 13,035 | |||||
Shares reacquired upon conversion into Class A | (2,284 | ) | (24,319 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (3,034 | ) | $ | (11,284 | ) | |||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 16,157 | $ | 154,445 | |||||
Shares issued in reinvestment of dividends and distributions | 13 | 105 | ||||||
Shares reacquired | (349 | ) | (3,500 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 15,821 | $ | 151,050 | |||||
|
|
|
| |||||
Class C | ||||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 48,152 | $ | 508,320 | |||||
Shares issued in reinvestment of dividends and distributions | 451 | 4,655 | ||||||
Shares reacquired | (31,207 | ) | (333,279 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 17,396 | $ | 179,696 | |||||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 12,709 | $ | 117,395 | |||||
Shares issued in reinvestment of dividends and distributions | 122 | 955 | ||||||
Shares reacquired | (14,206 | ) | (128,361 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (1,375 | ) | $ | (10,011 | ) | |||
|
|
|
| |||||
Class Z | ||||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 569,729 | $ | 6,051,665 | |||||
Shares issued in reinvestment of dividends and distributions | 93,930 | 972,177 | ||||||
Shares reacquired | (601,785 | ) | (6,367,453 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 61,874 | $ | 656,389 | |||||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 642,247 | $ | 5,961,283 | |||||
Shares issued in reinvestment of dividends and distributions | 53,669 | 420,230 | ||||||
Shares reacquired | (295,236 | ) | (2,658,758 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 400,680 | $ | 3,722,755 | |||||
|
|
|
|
Note 7. Borrowings
The Fund, 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
Prudential International Real Estate Fund | 33 |
Notes to Financial Statements
continued
the period November 15, 2012 through November 4, 2013. The Funds pay an annualized commitment fee of .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 Fund utilized the SCA during year ended October 31, 2013. The average balance for the 24 days the Fund had loans outstanding during the year was $369,833, borrowed at a weighted average interest rate of 1.49%. At October 31, 2013, the Fund did not have an outstanding loan amount.
Note 8. Notice of Dividend to Shareholders
The Fund declared ordinary 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* | $ | 0.26632 | ||
Class B* | $ | 0.18699 | ||
Class C* | $ | 0.26632 | ||
Class Z* | $ | 0.29298 |
* | Includes $0.11262 of Special Ordinary Income. |
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.
34 |
Financial Highlights
Class A Shares | ||||||||||||||
Year Ended October 31, | December 21, 2010(e) through October 31, | |||||||||||||
2013(b) | 2012(b) | 2011(b) | ||||||||||||
Per Share Operating Performance: | ||||||||||||||
Net Asset Value, Beginning of Period | $10.33 | $9.20 | $10.00 | |||||||||||
Income (loss) from investment operations: | ||||||||||||||
Net investment income | .14 | .19 | .07 | |||||||||||
Net realized and unrealized gain (loss) on investments | 1.04 | 1.23 | (.87 | ) | ||||||||||
Total from investment operations | 1.18 | 1.42 | (.80 | ) | ||||||||||
Less Dividends and Distributions: | ||||||||||||||
Dividends from net investment income | (.55 | ) | (.29 | ) | - | |||||||||
Total dividends and distributions | (.55 | ) | (.29 | ) | - | |||||||||
Net Asset Value, end of period | $10.96 | $10.33 | $9.20 | |||||||||||
Total Return(a): | 11.67% | 16.39% | (8.00)% | |||||||||||
Ratios/Supplemental Data: | ||||||||||||||
Net assets, end of period (000) | $948 | $346 | $814 | |||||||||||
Average net assets (000) | $589 | $228 | $353 | |||||||||||
Ratios to average net assets(d): | ||||||||||||||
Expenses After Waivers and/or Expense Reimbursement(c) | 1.60% | 1.60% | 1.60% | (f) | ||||||||||
Expenses Before Waivers and/or Expense Reimbursement | 2.42% | 2.93% | 3.85% | (f) | ||||||||||
Net investment income | 1.33% | 2.00% | .89% | (f) | ||||||||||
Portfolio turnover rate | 37% | 21% | 30% | (g) |
(a) Total return does not consider the effect 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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(b) Calculations are based on the average daily number of shares outstanding.
(c) The distributor of the Fund 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.
(d) Does not include expenses of the underlying fund in which the Fund invests.
(e) Commencement of operations.
(f) Annualized.
(g) Not annualized.
See Notes to Financial Statements.
Prudential International Real Estate Fund | 35 |
Financial Highlights
continued
Class B Shares | ||||||||||||||
Year Ended October 31, | December 21, 2010(d) through October 31, | |||||||||||||
2013(b) | 2012(b) | 2011(b) | ||||||||||||
Per Share Operating Performance: | ||||||||||||||
Net Asset Value, Beginning of Period | $10.22 | $9.08 | $10.00 | |||||||||||
Income (loss) from investment operations: | ||||||||||||||
Net investment income | .06 | .08 | .11 | |||||||||||
Net realized and unrealized gain (loss) on investments | 1.04 | 1.27 | (1.03 | ) | ||||||||||
Total from investment operations | 1.10 | 1.35 | (.92 | ) | ||||||||||
Less Dividends and Distributions: | ||||||||||||||
Dividends from net investment income | (.47 | ) | (.21 | ) | - | |||||||||
Total dividends and distributions | (.47 | ) | (.21 | ) | - | |||||||||
Net Asset Value, end of period | $10.85 | $10.22 | $9.08 | |||||||||||
Total Return(a): | 11.01% | 15.63% | (9.20)% | |||||||||||
Ratios/Supplemental Data: | ||||||||||||||
Net assets, end of period (000) | $144 | $167 | $4 | |||||||||||
Average net assets (000) | $275 | $52 | $5 | |||||||||||
Ratios to average net assets(c): | ||||||||||||||
Expenses After Waivers and/or Expense Reimbursement | 2.35% | 2.35% | 2.35% | (e) | ||||||||||
Expenses Before Waivers and/or Expense Reimbursement | 3.05% | 3.74% | 4.55% | (e) | ||||||||||
Net investment income | .61% | .87% | 1.29% | (e) | ||||||||||
Portfolio turnover rate | 37% | 21% | 30% | (f) |
(a) Total return does not consider the effect 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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(b) Calculations are based on the average daily number of shares outstanding.
(c) Does not include expenses of the underlying fund in which the Fund invests.
(d) Commencement of operations.
(e) Annualized.
(f) Not annualized.
See Notes to Financial Statements.
36 |
Class C Shares | ||||||||||||||
Year Ended October 31, | December 21, through October 31, | |||||||||||||
2013(b) | 2012(b) | 2011(b) | ||||||||||||
Per Share Operating Performance: | ||||||||||||||
Net Asset Value, Beginning of Period | $10.25 | $9.10 | $10.00 | |||||||||||
Income (loss) from investment operations: | ||||||||||||||
Net investment income | .16 | .21 | .14 | |||||||||||
Net realized and unrealized gain (loss) on investments | 1.03 | 1.20 | (1.04 | ) | ||||||||||
Total from investment operations | 1.19 | 1.41 | (.90 | ) | ||||||||||
Less Dividends and Distributions: | ||||||||||||||
Dividends from net investment income | (.55 | ) | (.26 | ) | - | |||||||||
Total dividends and distributions | (.55 | ) | (.26 | ) | - | |||||||||
Net Asset Value, end of period | $10.89 | $10.25 | $9.10 | |||||||||||
Total Return(a): | 11.86% | 16.36% | (9.00)% | |||||||||||
Ratios/Supplemental Data: | ||||||||||||||
Net assets, end of period (000) | $211 | $20 | $30 | |||||||||||
Average net assets (000) | $222 | $23 | $23 | |||||||||||
Ratios to average net assets(c): | ||||||||||||||
Expenses After Waivers and/or Expense Reimbursement | 1.60% | 1.60% | 1.96% | (e) | ||||||||||
Expenses Before Waivers and/or Expense Reimbursement | 2.31% | 2.86% | 4.16% | (e) | ||||||||||
Net investment income | 1.45% | 2.31% | 1.68% | (e) | ||||||||||
Portfolio turnover rate | 37% | 21% | 30% | (f) |
(a) Total return does not consider the effect 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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(b) Calculations are based on the average daily number of shares outstanding.
(c) Does not include expenses of the underlying fund in which the Fund invests.
(d) Commencement of operations.
(e) Annualized.
(f) Not annualized.
See Notes to Financial Statements.
Prudential International Real Estate Fund | 37 |
Financial Highlights
continued
Class Z Shares | ||||||||||||||
Year Ended October 31, | December 21, through October 31, | |||||||||||||
2013(b) | 2012(b) | 2011(b) | ||||||||||||
Per Share Operating Performance: | ||||||||||||||
Net Asset Value, Beginning of Period | $10.28 | $9.15 | $10.00 | |||||||||||
Income (loss) from investment operations: | ||||||||||||||
Net investment income | .17 | .22 | .18 | |||||||||||
Net realized and unrealized gain (loss) on investments | 1.04 | 1.22 | (1.03 | ) | ||||||||||
Total from investment operations | 1.21 | 1.44 | (.85 | ) | ||||||||||
Less Dividends and Distributions: | ||||||||||||||
Dividends from net investment income | (.57 | ) | (.31 | ) | - | |||||||||
Total dividends and distributions | (.57 | ) | (.31 | ) | - | |||||||||
Net Asset Value, end of period | $10.92 | $10.28 | $9.15 | |||||||||||
Total Return(a): | 12.08% | 16.82% | (8.50)% | |||||||||||
Ratios/Supplemental Data: | ||||||||||||||
Net assets, end of period (000) | $20,848 | $18,994 | $13,233 | |||||||||||
Average net assets (000) | $20,388 | $14,068 | $12,252 | |||||||||||
Ratios to average net assets(c): | ||||||||||||||
Expenses After Waivers and/or Expense Reimbursement | 1.35% | 1.35% | 1.35% | (e) | ||||||||||
Expenses Before Waivers and/or Expense Reimbursement | 2.08% | 2.65% | 3.55% | (e) | ||||||||||
Net investment income | 1.62% | 2.39% | 2.15% | (e) | ||||||||||
Portfolio turnover rate | 37% | 21% | 30% | (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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(b) Calculations are based on the average daily number of shares outstanding.
(c) Does not include expenses of the underlying fund in which the Fund invests.
(d) Commencement of operations.
(e) Annualized.
(f) Not annualized.
See Notes to Financial Statements.
38 |
Report of Independent Registered Public
Accounting Firm
The Board of Trustees and Shareholders
Prudential Investment Portfolios 9:
We have audited the accompanying statement of assets and liabilities of Prudential International Real Estate Fund, a series of Prudential Investment Portfolios 9 (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 two-year period then ended and for the period December 21, 2010 (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 and transfer agent. 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 two-year period then ended and for the period December 21, 2010 to October 31, 2011, in conformity with U.S. generally accepted accounting principles.
New York, New York
December 20, 2013
Prudential International Real Estate Fund | 39 |
Tax Information
(Unaudited)
For the year ended October 31, 2013, the Fund reports the maximum amount allowable under Section 854 of the Internal Revenue Code but not less than the following percentage of the ordinary income dividends paid as qualified dividend income (QDI):
QDI | ||||
Prudential International Real Estate Fund | 28.75% |
For the year ended October 31, 2013, the Fund 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 Fund in accordance with Section 853 of the Internal Revenue Code of the following amounts: $38,299 foreign tax credit from recognized foreign source income of $698,478.
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.
40 |
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 Real Estate 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 Real Estate Fund
(1) | The year that each individual joined the Fund’s Board is as follows: |
Ellen S. Alberding, 2013; Linda W. Bynoe, 2005; Douglas H. McCorkindale, 1998; Richard A. Redeker, 1998; Robin B. Smith, 1998; Stephen G. Stoneburn, 2003; Kevin J. Bannon, 2008; Keith F. Hartstein, 2013; Michael S. Hyland, 2008; Stephen P. Munn, 2008; James E. Quinn, 2013; Stuart S. Parker, Board Member since 2012 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 Real Estate 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. |
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Approval of Advisory Agreements
The Fund’s Board of Trustees
The Board of Trustees (the “Board”) of Prudential International Real Estate 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 Trustees”).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 Trustees have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Trustee. 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 Trustees.
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”), which provides subadvisory services to the Fund through its Prudential Real Estate Investors unit (“PREI”). In considering the renewal of the agreements, the Board, including all of the Independent Trustees, 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 Trustees 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 the Fund’s assets grow. In their deliberations, the Trustees 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 International Real Estate Fund is a series of Prudential Investment Portfolios 9. |
2 | Ms. Alberding and Messrs. Hartstein and Quinn were elected to the Board effective September 1, 2013. |
Prudential International Real Estate 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 Trustees 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, 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 Trustees considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Trustees’ 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 PREI. 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 Trustees of the Fund. The Board also considered the investment subadvisory services provided by PREI, 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 PREI, and also considered the qualifications, backgrounds and responsibilities of PREI’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, PIM’s and PREI’s organizational structure, senior management, investment operations, and other relevant information pertaining to PI, PIM and PREI. The Board also noted that it received favorable compliance reports from the Fund’s Chief Compliance Officer (“CCO”) as to PI, PIM and PREI. The Board noted that PREI and PIM are affiliated with PI.
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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 through PREI, and that there was a reasonable basis on which to conclude that the Fund benefits from the services provided by PI and PIM through PREI 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 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 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 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), and benefits to its reputation as well as other intangible benefits resulting from PI’s association with the
Prudential International Real Estate Fund
Approval of Advisory Agreements (continued)
Fund. The Board concluded that the potential benefits to be derived by PIM 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 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 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 Real Estate 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 | ||||
3rd Quartile | N/A | N/A | N/A | |||||
Actual Management Fees: 1st Quartile | ||||||||
Net Total Expenses: 2nd Quartile |
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• | The Board noted that the Fund outperformed its benchmark index over the one-year period. |
• | 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, 2014. |
• | The Board concluded that, in light of the Fund’s recent inception date and competitive performance against its benchmark index, 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 International Real Estate 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 Trustees 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. |
TRUSTEES |
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 | ||
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INVESTMENT SUBADVISER | Prudential Real Estate Investors | 7 Giralda Farms Madison, NJ 07940 | ||
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DISTRIBUTOR | Prudential Investment Management Services LLC | Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | ||
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CUSTODIAN | The Bank of New York Mellon | One Wall Street New York, NY 10286 | ||
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TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
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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 TRUSTEES |
Shareholders can communicate directly with the Board of Trustees by writing to the Chair of the Board, Prudential International Real Estate Fund, Prudential Investments, Attn: Board of Trustees, 100 Mulberry Street, Gateway Center Three, Newark, NJ 07102. Shareholders can communicate directly with an individual Trustee 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 Trustees 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 REAL ESTATE FUND
SHARE CLASS | A | B | C | Z | ||||
NASDAQ | PUEAX | PUEBX | PUECX | PUEZX | ||||
CUSIP | 74441J803 | 74441J886 | 74441J878 | 74441J860 |
MF210E 0255299-00001-00
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
PRUDENTIAL LARGE-CAP CORE EQUITY FUND
ANNUAL REPORT · OCTOBER 31, 2013
Fund Type
Large-Cap Stock
Objective
Long-term after-tax 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.
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December 16, 2013
Dear Shareholder:
We hope you find the annual report for the Prudential Large-Cap Core 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 Large-Cap Core 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 Large-Cap Core 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 | 26.00 | % | 89.28 | % | 90.57 | % | — | |||||||
Class B | 25.02 | 82.47 | 77.03 | — | ||||||||||
Class C | 24.99 | 82.58 | 77.13 | — | ||||||||||
Class X | 25.99 | 90.51 | N/A | 35.84% (3/19/07) | ||||||||||
Class Z | 26.28 | 91.77 | 95.42 | — | ||||||||||
S&P 500 Index | 27.16 | 102.55 | 105.21 | — | ||||||||||
Lipper Large-Cap Core Funds Average | 26.63 | 95.20 | 98.49 | — | ||||||||||
Average Annual Total Returns (With Sales Charges) as of 9/30/13 | ||||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||
Class A | 12.90 | % | 7.45 | % | 6.28 | % | — | |||||||
Class B | 13.57 | 7.74 | 6.09 | — | ||||||||||
Class C | 17.64 | 7.89 | 6.10 | — | ||||||||||
Class X | 13.49 | 8.46 | N/A | 3.96% (3/19/07) | ||||||||||
Class Z | 19.76 | 8.95 | 7.14 | — | ||||||||||
S&P 500 Index | 19.34 | 10.01 | 7.56 | — | ||||||||||
Lipper Large-Cap Core Funds Average | 19.68 | 9.18 | 7.16 | — | ||||||||||
Average Annual Total Returns (With Sales Charges) as of 10/31/13 | ||||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||
Class A | 19.07 | % | 12.33 | % | 6.06 | % | — | |||||||
Class B | 20.02 | 12.66 | 5.88 | — | ||||||||||
Class C | 23.99 | 12.79 | 5.88 | — | ||||||||||
Class X | 19.99 | 13.40 | N/A | 4.50% (3/19/07) | ||||||||||
Class Z | 26.28 | 13.91 | 6.93 | — |
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Average Annual Total Returns (Without Sales Charges) as of 10/31/13 |
| |||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||
Class A | 26.00% | 13.61 | % | 6.66 | % | — | ||||||||
Class B | 25.02 | 12.78 | 5.88 | — | ||||||||||
Class C | 24.99 | 12.79 | 5.88 | — | ||||||||||
Class X | 25.99 | 13.76 | N/A | 4.73% (3/19/07) | ||||||||||
Class Z | 26.28 | 13.91 | 6.93 | — |
Growth of a $10,000 Investment
The graph compares a $10,000 investment in the Prudential Large-Cap Core Equity Fund (Class A shares) with a similar investment in the S&P 500 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, 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.
Prudential Large-Cap Core Equity Fund | 3 |
Your Fund’s Performance (continued)
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 X | Class Z | ||||||
Maximum initial sales charge | 5.50% of the public offering price | None | None | None | None | |||||
Contingent deferred sales charge (CDSC) | 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 | 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) 0% (Yr. 10) | None | |||||
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | .30% (.25% currently) | 1% | 1% | 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.
Benchmark Definitions
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 U.S. stock prices have performed. S&P 500 Index Closest Month-End to Inception cumulative total return as of 10/31/13 is 42.61% for Class X. S&P 500 Index Closest Month-End to Inception average annual total return as of 9/30/13 is 4.89% for Class X.
Lipper Large-Cap Core Funds Average
The Lipper Large-Cap Core Funds Average (Lipper Average) represents returns based on an average return of all funds in the Lipper Large-Cap Core Funds category for the periods noted. Funds in the Lipper Average invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-cap core funds have wide latitude in the companies in which they invest. These funds typically have a below-average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share-growth value compared with the S&P 500 Index. Lipper Average Closest Month-End to Inception
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cumulative total return as of 10/31/13 is 38.10% for Class X. Lipper Average Closest Month-End to Inception average annual total return as of 9/30/13 is 4.35% 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 of a mutual fund, but not sales charges or taxes.
Five Largest Holdings expressed as a percentage of net assets as of 10/31/13 | ||||
Apple Inc., Computers & Peripherals | 3.3 | % | ||
Exxon Mobil Corp., Oil, Gas & Consumable Fuels | 3.2 | |||
Wells Fargo & Co., Commercial Banks | 2.1 | |||
Pfizer Inc., Pharmaceuticals | 2.0 | |||
Google Inc. (Class A Stock), Internet Software & Services | 2.0 | |||
JPMorgan Chase & Co., Diversified Financial Services | 1.8 |
Excludes securities purchased with cash received as a result of securities on loan.
Holdings are subject to change.
Five Largest Sectors expressed as a percentage of net assets as of 10/31/13 | ||||
Information Technology | 19.3 | % | ||
Financials | 14.7 | |||
Healthcare | 14.4 | |||
Consumer Discretionary | 13.9 | |||
Industrials | 11.7 |
Industry weightings are subject to change.
Prudential Large-Cap Core Equity Fund | 5 |
Strategy and Performance Overview
How did the Fund perform?
Prudential Large-Cap Core Equity Fund’s Class A shares gained 26.00% for the 12-month reporting period ended October 31, 2013, slightly underperforming the 27.16% gain of the benchmark S&P 500 Index (the Index), as well as the 26.63% gain of the Lipper Large-Cap Core Funds Average.
What were conditions like in the U.S. stock market?
• | The U.S. stock market advanced in November and December despite a tumultuous 2012 when investors were confronted at home with issues related to the fiscal cliff and the looming sequester, and abroad over the euro-zone sovereign debt crisis and an apparent weakening in China’s economy. |
• | In January, stocks advanced along with the resolution of the U.S. fiscal cliff negotiations and increased confidence that central banks would maintain accommodative monetary policy. In February, the fiscal “sequestration” curtailed government spending. Labor markets improved slightly but unemployment remained elevated. In March, U.S. equity markets were temporarily sidetracked by a banking crisis flare-up in Cyprus, a member of the European Union, although stocks recovered on generally strong corporate earnings. The U.S. equity market closed the quarter with one of its strongest finishes ever. |
• | During the second quarter, stocks peaked in mid-May. The housing industry improved, auto sales were strong, and consumer spending rose. Six-month employment gains averaged over 200,000 jobs per month, although unemployment remained elevated. The Federal Reserve (the Fed) announced that it could begin to “taper” its bond-buying stimulus program later in the year on upbeat economic news, sending interest rate yields on U.S. Treasuries higher, as investors feared that extremely low borrowing rates were coming to an end. Stocks sold off in a very volatile June, although U.S. equities ended the quarter in record territory. |
• | During the third quarter, U.S. equities rose on corporate earnings strength and an improving economy relative to much of the rest of the world. But in August stocks slumped on continued anxiety that the Fed would begin scaling back its bond-buying program. Investor confidence recovered around the middle of September after the Federal Open Market Committee (FOMC) announced that more signs of economic improvement, especially in labor markets, were necessary before the Fed would begin to taper. Budget-ceiling debates and a looming shutdown of the Federal government pressured stocks, and equities closed the quarter with modest gains. |
6 | Visit our website at www.prudentialfunds.com |
• | Despite the 16-day partial government shutdown in October, there was minimal U.S. stock market turbulence. Stocks posted another solid gain for the month, building on September’s gains. |
How did the sectors of the S&P 500 Index perform?
• | Given the performance of the broader market, it was not surprising that both the cyclical and economically sensitive sectors of the Index, with the exception of utilities, posted double-digit returns. Consumer discretionary posted the largest absolute return but returns in the financials, healthcare, and industrials sectors were also strong. Financials, consumer discretionary, and healthcare were the primary contributors to Index returns. |
• | The Fund’s sector weighting was close to that of the Index, so sector allocation did not have a meaningful effect on performance. Stock selection in consumer staples, financials, healthcare, telecommunication services, and utilities modestly contributed to Fund performance, while stock selection in the consumer discretionary, energy, industrials, information technology, and materials detracted slightly. |
How did the U.S. stock market perform with respect to investment styles?
• | Over the past 12 months, all investment styles advanced. Small-cap stocks outperformed large-cap stocks. Growth stocks, on average, outperformed value stocks, with the exception of the mid-cap indexes, where value outperformed. |
Among slowly growing companies, which stocks or related groups of stocks contributed most and detracted most from the Fund’s return?
• | Quantitative Management Associates (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. |
• | Valuation factors did not make a significant contribution to performance as both inexpensive and expensive stocks experienced similar returns. |
• | However, among slower growing stocks, valuation factors did add to performance. As an example, Hewlett-Packard advanced 81.0% over the period, as prospects for the company improved. |
• | The Fund’s news factor, which measures the direction of analysts’ earnings estimates, is not as heavily weighted as valuation for slower growing stocks, but is still an important factor; it performed well among slower growing stocks and added to performance. |
• | Detracting from performance were some of the Fund’s energy holdings such as Exxon Mobil, which gained 0.96%, and Marathon Petroleum, which declined by 2.00%. |
Prudential Large-Cap Core Equity Fund | 7 |
Strategy and Performance Overview (continued)
Among rapidly growing companies, which stocks or related groups of stocks contributed most and detracted most from the Fund’s return?
• | For faster growing stocks, QMA’s process places a heavier weighting on the Fund’s news factor, which measures the direction of analysts’ earnings estimates. |
• | The news factor performed well over the reporting period, adding to overall fund performance and to faster growing companies specifically. Exemplifying this, several biotechnology stocks, including Celgene and Biogen Idec, which advanced 102.0% and 77.0%, respectively, benefited from positive news and contributed to performance. |
• | Detracting from performance among faster growing companies was the underperformance of the Fund’s quality factors. Overall, quality factors did not perform well over the time period, as investors were willing to add more risk to their portfolios as the stock market advanced. |
How did the Fund’s tax management strategy affect its performance?
• | Although difficult to quantify, the Fund’s tax management objective affected performance over the course of the reporting period. Trading in the portfolio is not dictated by tax concerns, but the potential impact that trading can have on taxes is factored into investment decisions. |
• | Over the reporting period, the Fund’s performance was comparable to other similar strategies that did not have tax management as an objective. |
Did the Fund hold derivatives, and did they affect performance?
• | The Fund held futures contracts on the S&P 500. |
• | QMA uses these instruments as a means to hold a position and manage daily cash flows, and not as a means of adding to performance. 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 amount, or may be waived, based on your total account balance or the number of
Prudential Large-Cap Core Equity Fund | 9 |
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 Large-Cap Core Equity 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 | $ | 1,103.60 | 1.20 | % | $ | 6.36 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,019.16 | 1.20 | % | $ | 6.11 | ||||||||||
Class B | Actual | $ | 1,000.00 | $ | 1,100.10 | 1.95 | % | $ | 10.32 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.38 | 1.95 | % | $ | 9.91 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,100.00 | 1.95 | % | $ | 10.32 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.38 | 1.95 | % | $ | 9.91 | ||||||||||
Class X | Actual | $ | 1,000.00 | $ | 1,103.90 | 1.20 | % | $ | 6.36 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,019.16 | 1.20 | % | $ | 6.11 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,105.60 | 0.95 | % | $ | 5.04 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.42 | 0.95 | % | $ | 4.84 |
*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.
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 | 1.30% | 1.20% | ||
B | 2.00 | 1.95 | ||
C | 2.00 | 1.95 | ||
X | 1.25 | 1.20 | ||
Z | 1.00 | 0.95 |
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 Large-Cap Core Equity Fund | 11 |
Portfolio of Investments
as of October 31, 2013
Shares | Description | Value (Note 1) | ||||
LONG-TERM INVESTMENTS 100.0% |
| |||||
COMMON STOCKS | ||||||
CONSUMER DISCRETIONARY 13.9% | ||||||
Automobiles 1.3% | ||||||
83,000 | Ford Motor Co. | $ | 1,420,130 | |||
10,900 | General Motors Co.* | 402,755 | ||||
1,700 | Thor Industries, Inc. | 98,617 | ||||
|
| |||||
1,921,502 | ||||||
Hotels, Restaurants & Leisure 2.3% | ||||||
3,700 | International Game Technology | 69,560 | ||||
4,500 | Jack in the Box, Inc.* | 183,060 | ||||
1,500 | Marriott Vacations Worldwide Corp.* | 75,120 | ||||
15,500 | McDonald’s Corp. | 1,496,060 | ||||
4,200 | Sonic Corp.* | 81,060 | ||||
19,100 | Starbucks Corp. | 1,548,055 | ||||
|
| |||||
3,452,915 | ||||||
Household Durables 0.8% | ||||||
800 | NACCO Industries, Inc. (Class A Stock) | 45,576 | ||||
8,400 | Whirlpool Corp. | 1,226,484 | ||||
|
| |||||
1,272,060 | ||||||
Internet & Catalog Retail 0.1% | ||||||
200 | Amazon.com, Inc.* | 72,806 | ||||
800 | HSN, Inc. | 41,920 | ||||
|
| |||||
114,726 | ||||||
Leisure Equipment & Products 0.7% | ||||||
8,400 | Polaris Industries, Inc.(a) | 1,099,980 | ||||
Media 4.1% | ||||||
42,900 | Comcast Corp. (Class A Stock) | 2,041,182 | ||||
1,900 | Liberty Media Corp. (Class A Stock)* | 290,529 | ||||
5,900 | Time Warner, Inc. | 405,566 | ||||
51,100 | Twenty-First Century Fox, Inc. | 1,741,488 | ||||
15,500 | Viacom, Inc. (Class B Stock) | 1,290,995 | ||||
3,460 | Walt Disney Co. (The) | 237,321 | ||||
300 | Washington Post Co. (The) (Class B Stock) | 192,996 | ||||
|
| |||||
6,200,077 |
See Notes to Financial Statements.
Prudential Large-Cap Core Equity Fund | 13 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
CONSUMER DISCRETIONARY (Continued) | ||||||
Multiline Retail 0.5% | ||||||
2,500 | Dillard’s, Inc. (Class A Stock) | $ | 204,950 | |||
11,600 | Macy’s, Inc. | 534,876 | ||||
|
| |||||
739,826 | ||||||
Specialty Retail 3.2% | ||||||
5,500 | Foot Locker, Inc. | 190,850 | ||||
5,500 | Gap, Inc. (The) | 203,445 | ||||
19,300 | Home Depot, Inc. (The) | 1,503,277 | ||||
3,400 | Lowe’s Cos., Inc. | 169,252 | ||||
2,100 | Murphy USA, Inc.* | 85,218 | ||||
15,300 | Ross Stores, Inc. | 1,183,455 | ||||
26,100 | TJX Cos., Inc. (The) | 1,586,619 | ||||
|
| |||||
4,922,116 | ||||||
Textiles, Apparel & Luxury Goods 0.9% | ||||||
1,000 | Carter’s, Inc. | 69,150 | ||||
14,900 | Coach, Inc. | 755,132 | ||||
7,700 | NIKE, Inc. (Class B Stock) | 583,352 | ||||
|
| |||||
1,407,634 | ||||||
CONSUMER STAPLES 8.8% | ||||||
Beverages 1.3% | ||||||
33,100 | Coca-Cola Co. (The) | 1,309,767 | ||||
6,894 | PepsiCo, Inc. | 579,716 | ||||
|
| |||||
1,889,483 | ||||||
Food & Staples Retailing 3.2% | ||||||
29,300 | CVS Caremark Corp. | 1,824,218 | ||||
21,900 | Kroger Co. (The) | 938,196 | ||||
26,470 | Wal-Mart Stores, Inc. | 2,031,573 | ||||
|
| |||||
4,793,987 | ||||||
Food Products 2.4% | ||||||
25,138 | Archer-Daniels-Midland Co. | 1,028,144 | ||||
400 | Cal-Maine Foods, Inc. | 20,292 | ||||
2,900 | Chiquita Brands International, Inc.* | 30,015 | ||||
12,200 | Darling International, Inc.*(a) | 283,894 | ||||
8,100 | Dean Foods Co.* | 157,950 | ||||
2,800 | J.M. Smucker Co. (The) | 311,388 | ||||
16,800 | Kraft Foods Group, Inc. | 913,584 |
See Notes to Financial Statements.
14 |
Shares | Description | Value (Note 1) | ||||
CONSUMER STAPLES (Continued) | ||||||
Food Products (cont’d.) | ||||||
7,000 | Pilgrim’s Pride Corp.* | $ | 99,190 | |||
1,200 | Sanderson Farms, Inc. | 75,852 | ||||
28,400 | Tyson Foods, Inc. (Class A Stock) | 785,828 | ||||
|
| |||||
3,706,137 | ||||||
Household Products 1.0% | ||||||
19,564 | Procter & Gamble Co. (The) | 1,579,793 | ||||
Personal Products 0.3% | ||||||
3,400 | Medifast, Inc.* | 79,254 | ||||
3,100 | Nu Skin Enterprises, Inc. (Class A Stock) | 362,483 | ||||
|
| |||||
441,737 | ||||||
Tobacco 0.6% | ||||||
9,000 | Philip Morris International, Inc. | 802,080 | ||||
2,600 | Reynolds American, Inc.(a) | 133,562 | ||||
|
| |||||
935,642 | ||||||
ENERGY 11.0% | ||||||
Energy Equipment & Services 1.0% | ||||||
800 | Baker Hughes, Inc. | 46,472 | ||||
16,100 | Ensco PLC (Class A Stock) | 928,165 | ||||
4,000 | Schlumberger Ltd. | 374,880 | ||||
4,000 | Superior Energy Services, Inc.* | 107,320 | ||||
|
| |||||
1,456,837 | ||||||
Oil, Gas & Consumable Fuels 10.0% | ||||||
13,300 | Anadarko Petroleum Corp. | 1,267,357 | ||||
4,500 | Apache Corp. | 399,600 | ||||
20,184 | Chevron Corp. | 2,421,273 | ||||
12,800 | ConocoPhillips | 938,240 | ||||
54,474 | Exxon Mobil Corp. | 4,881,960 | ||||
4,700 | Hess Corp. | 381,640 | ||||
19,900 | Kinder Morgan, Inc. | 702,669 | ||||
29,500 | Marathon Oil Corp. | 1,040,170 | ||||
14,450 | Marathon Petroleum Corp. | 1,035,487 | ||||
8,400 | Murphy Oil Corp. | 506,688 | ||||
17,250 | Phillips 66 | 1,111,418 | ||||
9,800 | Tesoro Corp. | 479,122 | ||||
|
| |||||
15,165,624 |
See Notes to Financial Statements.
Prudential Large-Cap Core Equity Fund | 15 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
FINANCIALS 14.7% | ||||||
Capital Markets 2.8% | ||||||
4,800 | BlackRock, Inc. | $ | 1,443,888 | |||
10,500 | Goldman Sachs Group, Inc. (The) | 1,689,030 | ||||
13,700 | Morgan Stanley | 393,601 | ||||
7,900 | State Street Corp. | 553,553 | ||||
2,700 | Waddell & Reed Financial, Inc. (Class A Stock) | 166,725 | ||||
|
| |||||
4,246,797 | ||||||
Commercial Banks 3.6% | ||||||
3,000 | BB&T Corp. | 101,910 | ||||
33,600 | Fifth Third Bancorp | 639,408 | ||||
38,700 | Huntington Bancshares, Inc. | 340,560 | ||||
28,500 | KeyCorp | 357,105 | ||||
58,300 | Regions Financial Corp. | 561,429 | ||||
8,391 | U.S. Bancorp | 313,488 | ||||
73,264 | Wells Fargo & Co. | 3,127,640 | ||||
|
| |||||
5,441,540 | ||||||
Consumer Finance 1.2% | ||||||
25,800 | Discover Financial Services | 1,338,504 | ||||
12,600 | Nelnet, Inc. (Class A Stock) | 537,138 | ||||
|
| |||||
1,875,642 | ||||||
Diversified Financial Services 4.0% | ||||||
50,768 | Bank of America Corp. | 708,721 | ||||
9,400 | Berkshire Hathaway, Inc. (Class B Stock)* | 1,081,752 | ||||
21,670 | Citigroup, Inc. | 1,057,063 | ||||
54,000 | JPMorgan Chase & Co. | 2,783,160 | ||||
6,000 | McGraw-Hill Financial, Inc. | 418,080 | ||||
|
| |||||
6,048,776 | ||||||
Insurance 2.0% | ||||||
5,300 | American Financial Group, Inc. | 298,178 | ||||
29,600 | MetLife, Inc. | 1,400,376 | ||||
2,200 | Symetra Financial Corp. | 41,206 | ||||
24,000 | Unum Group | 761,760 | ||||
18,400 | XL Group PLC | 562,488 | ||||
|
| |||||
3,064,008 |
See Notes to Financial Statements.
16 |
Shares | Description | Value (Note 1) | ||||
FINANCIALS (Continued) | ||||||
Real Estate Investment Trusts 0.6% | ||||||
6,200 | Franklin Street Properties Corp. | $ | 81,840 | |||
9,400 | Resource Capital Corp. | 57,810 | ||||
13,900 | RLJ Lodging Trust | 351,114 | ||||
2,000 | Simon Property Group, Inc.(a) | 309,100 | ||||
8,100 | Winthrop Realty Trust | 95,337 | ||||
|
| |||||
895,201 | ||||||
Real Estate Management & Development 0.5% | ||||||
35,400 | CBRE Group, Inc. (Class A Stock)* | 822,342 | ||||
HEALTHCARE 14.4% | ||||||
Biotechnology 3.5% | ||||||
2,000 | Alexion Pharmaceuticals, Inc.* | 245,900 | ||||
16,400 | Amgen, Inc. | 1,902,400 | ||||
6,300 | Biogen Idec, Inc.* | 1,538,397 | ||||
11,100 | Celgene Corp.* | 1,648,239 | ||||
|
| |||||
5,334,936 | ||||||
Healthcare Equipment & Supplies 1.4% | ||||||
20,600 | Abbott Laboratories | 752,930 | ||||
1,700 | CareFusion Corp.* | 65,909 | ||||
19,300 | Covidien PLC | 1,237,323 | ||||
1,800 | Medtronic, Inc. | 103,320 | ||||
|
| |||||
2,159,482 | ||||||
Healthcare Providers & Services 3.4% | ||||||
17,300 | Aetna, Inc. | 1,084,710 | ||||
5,500 | Cigna Corp. | 423,390 | ||||
20,200 | Express Scripts Holding Co.* | 1,262,904 | ||||
21,300 | UnitedHealth Group, Inc. | 1,453,938 | ||||
11,200 | WellPoint, Inc. | 949,760 | ||||
|
| |||||
5,174,702 | ||||||
Life Sciences Tools & Services 1.1% | ||||||
6,300 | Life Technologies Corp.* | 474,453 | ||||
11,500 | Thermo Fisher Scientific, Inc.(a) | 1,124,470 | ||||
|
| |||||
1,598,923 |
See Notes to Financial Statements.
Prudential Large-Cap Core Equity Fund | 17 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
HEALTHCARE (Continued) | ||||||
Pharmaceuticals 5.0% | ||||||
13,200 | AbbVie, Inc. | $ | 639,540 | |||
9,500 | Eli Lilly & Co. | 473,290 | ||||
1,200 | Jazz Pharmaceuticals PLC* | 108,888 | ||||
26,599 | Johnson & Johnson | 2,463,333 | ||||
14,300 | Merck & Co., Inc. | 644,787 | ||||
101,234 | Pfizer, Inc. | 3,105,859 | ||||
2,400 | Questcor Pharmaceuticals, Inc.(a) | 147,288 | ||||
|
| |||||
7,582,985 | ||||||
INDUSTRIALS 11.7% | ||||||
Aerospace & Defense 3.4% | ||||||
3,700 | Alliant Techsystems, Inc.(a) | 402,819 | ||||
8,000 | Exelis, Inc. | 131,920 | ||||
14,300 | General Dynamics Corp. | 1,238,809 | ||||
1,000 | Huntington Ingalls Industries, Inc. | 71,550 | ||||
5,300 | L-3 Communications Holdings, Inc. | 532,385 | ||||
3,200 | Lockheed Martin Corp. | 426,688 | ||||
10,400 | Northrop Grumman Corp. | 1,118,104 | ||||
13,000 | Raytheon Co. | 1,070,810 | ||||
4,700 | Spirit Aerosystems Holdings, Inc. (Class A Stock)* | 125,443 | ||||
|
| |||||
5,118,528 | ||||||
Airlines 0.1% | ||||||
3,400 | Spirit Airlines, Inc.* | 146,710 | ||||
Building Products 0.3% | ||||||
4,300 | AO Smith Corp. | 222,095 | ||||
3,100 | Lennox International, Inc. | 241,986 | ||||
900 | Masco Corp. | 19,017 | ||||
|
| |||||
483,098 | ||||||
Commercial Services & Supplies 0.5% | ||||||
16,300 | Tyco International Ltd. | 595,765 | ||||
1,100 | UniFirst Corp. | 113,102 | ||||
|
| |||||
708,867 | ||||||
Construction & Engineering 0.3% | ||||||
6,000 | AECOM Technology Corp.* | 190,680 | ||||
4,200 | Jacobs Engineering Group, Inc.* | 255,444 | ||||
|
| |||||
446,124 |
See Notes to Financial Statements.
18 |
Shares | Description | Value (Note 1) | ||||
INDUSTRIALS (Continued) | ||||||
Electrical Equipment 1.2% | ||||||
12,100 | Babcock & Wilcox Co. (The) | $ | 389,741 | |||
17,900 | Emerson Electric Co. | 1,198,763 | ||||
2,800 | Rockwell Automation, Inc. | 309,148 | ||||
900 | Thermon Group Holdings, Inc.* | 21,159 | ||||
|
| |||||
1,918,811 | ||||||
Industrial Conglomerates 1.2% | ||||||
70,800 | General Electric Co. | 1,850,712 | ||||
Machinery 2.0% | ||||||
1,200 | AGCO Corp. | 70,056 | ||||
14,200 | Deere & Co.(a) | 1,162,128 | ||||
1,400 | Hyster-Yale Materials Handling, Inc. | 109,816 | ||||
8,100 | Ingersoll-Rand PLC | 546,993 | ||||
2,600 | Lincoln Electric Holdings, Inc. | 180,024 | ||||
600 | Mueller Industries, Inc. | 36,174 | ||||
19,400 | Oshkosh Corp.* | 923,246 | ||||
700 | Toro Co. (The) | 41,258 | ||||
|
| |||||
3,069,695 | ||||||
Marine | ||||||
1,000 | Matson, Inc. | 27,090 | ||||
Road & Rail 1.9% |
| |||||
700 | AMERCO* | 141,351 | ||||
19,900 | CSX Corp. | 518,594 | ||||
6,500 | Norfolk Southern Corp. | 559,130 | ||||
10,800 | Union Pacific Corp. | 1,635,120 | ||||
|
| |||||
2,854,195 | ||||||
Trading Companies & Distributors 0.8% | �� | |||||
600 | DXP Enterprises, Inc.* | 55,140 | ||||
7,800 | MRC Global, Inc.* | 218,010 | ||||
3,300 | WW Grainger, Inc. | 887,601 | ||||
|
| |||||
1,160,751 | ||||||
INFORMATION TECHNOLOGY 19.3% | ||||||
Communications Equipment 2.1% | ||||||
87,150 | Cisco Systems, Inc. | 1,960,875 | ||||
2,900 | Harris Corp. | 179,684 |
See Notes to Financial Statements.
Prudential Large-Cap Core Equity Fund | 19 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
INFORMATION TECHNOLOGY (Continued) | ||||||
Communications Equipment (cont’d.) | ||||||
15,800 | Juniper Networks, Inc.* | $ | 294,512 | |||
11,800 | QUALCOMM, Inc. | 819,746 | ||||
|
| |||||
3,254,817 | ||||||
Computers & Peripherals 5.0% | ||||||
9,660 | Apple, Inc. | 5,045,901 | ||||
44,900 | EMC Corp. | 1,080,743 | ||||
60,200 | Hewlett-Packard Co. | 1,467,074 | ||||
|
| |||||
7,593,718 | ||||||
Electronic Equipment, Instruments & Components 0.2% | ||||||
10,200 | Ingram Micro, Inc. (Class A Stock)* | 236,334 | ||||
Internet Software & Services 3.5% | ||||||
2,800 | Active Network, Inc. (The)* | 40,432 | ||||
22,900 | Akamai Technologies, Inc.* | 1,024,546 | ||||
2,970 | Google, Inc. (Class A Stock)* | 3,060,823 | ||||
38,300 | Yahoo!, Inc.* | 1,261,219 | ||||
|
| |||||
5,387,020 | ||||||
IT Services 3.4% | ||||||
8,800 | CoreLogic, Inc.* | 292,776 | ||||
800 | DST Systems, Inc. | 67,816 | ||||
7,470 | International Business Machines Corp. | 1,338,699 | ||||
2,600 | MasterCard, Inc. (Class A Stock) | 1,864,460 | ||||
1,000 | Syntel, Inc. | 85,840 | ||||
7,400 | Visa, Inc. (Class A Stock) | 1,455,358 | ||||
|
| |||||
5,104,949 | ||||||
Semiconductors & Semiconductor Equipment 0.8% | ||||||
16,600 | Intel Corp. | 405,538 | ||||
19,500 | LSI Corp. | 165,360 | ||||
45,700 | Marvell Technology Group Ltd. | 548,400 | ||||
2,300 | Skyworks Solutions, Inc.* | 59,294 | ||||
|
| |||||
1,178,592 | ||||||
Software 4.3% | ||||||
2,600 | Activision Blizzard, Inc. | 43,264 | ||||
800 | ANSYS, Inc.* | 69,960 | ||||
10,200 | CA, Inc. | 323,952 |
See Notes to Financial Statements.
20 |
Shares | Description | Value (Note 1) | ||||
INFORMATION TECHNOLOGY (Continued) | ||||||
Software (cont’d.) | ||||||
12,100 | Intuit, Inc.(a) | $ | 864,061 | |||
1,700 | Manhattan Associates, Inc.* | 181,067 | ||||
51,500 | Microsoft Corp. | 1,820,525 | ||||
63,400 | Oracle Corp. | 2,123,900 | ||||
1,200 | Pegasystems, Inc. | 45,672 | ||||
6,900 | Rovi Corp.* | 115,644 | ||||
20,000 | Symantec Corp. | 454,800 | ||||
15,400 | TiVo, Inc.* | 204,666 | ||||
4,500 | VMware, Inc. (Class A Stock)* | 365,760 | ||||
|
| |||||
6,613,271 | ||||||
MATERIALS 3.0% | ||||||
Chemicals 2.3% | ||||||
6,200 | Eastman Chemical Co. | 488,498 | ||||
1,400 | FutureFuel Corp. | 24,374 | ||||
15,600 | LyondellBasell Industries NV (Class A Stock) | 1,163,760 | ||||
4,600 | PPG Industries, Inc. | 839,868 | ||||
1,800 | Sherwin-Williams Co. (The) | 338,400 | ||||
5,400 | Westlake Chemical Corp. | 580,068 | ||||
|
| |||||
3,434,968 | ||||||
Metals & Mining 0.7% | ||||||
31,000 | Freeport-McMoRan Copper & Gold, Inc. | 1,139,560 | ||||
TELECOMMUNICATIONS SERVICES 1.5% | ||||||
Diversified Telecommunication Services 1.5% | ||||||
30,268 | AT&T, Inc. | 1,095,702 | ||||
24,000 | Verizon Communications, Inc. | 1,212,240 | ||||
|
| |||||
2,307,942 | ||||||
UTILITIES 1.7% |
| |||||
Electric Utilities 0.7% |
| |||||
900 | El Paso Electric Co. | 31,653 | ||||
3,000 | IDACORP., Inc. | 154,800 | ||||
30,700 | PPL Corp. | 940,341 | ||||
|
| |||||
1,126,794 |
See Notes to Financial Statements.
Prudential Large-Cap Core Equity Fund | 21 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
UTILITIES (Continued) |
| |||||
Gas Utilities 0.5% |
| |||||
4,400 | New Jersey Resources Corp. | $ | 202,532 | |||
12,200 | UGI Corp. | 504,714 | ||||
|
| |||||
707,246 | ||||||
Independent Power Producers & Energy Traders 0.3% |
| |||||
35,400 | AES Corp. (The) | 498,786 | ||||
Multi-Utilities 0.1% |
| |||||
1,700 | Avista Corp. | 47,243 | ||||
1,700 | Vectren Corp. | 59,364 | ||||
|
| |||||
106,607 | ||||||
Water Utilities 0.1% |
| |||||
1,700 | American States Water Co. | 48,416 | ||||
2,300 | American Water Works Co., Inc. | 98,601 | ||||
1,100 | California Water Service Group | 23,978 | ||||
|
| |||||
170,995 | ||||||
|
| |||||
TOTAL LONG-TERM INVESTMENTS | 151,991,590 | |||||
|
| |||||
SHORT-TERM INVESTMENTS 4.2% |
| |||||
AFFILIATED MONEY MARKET MUTUAL FUND 4.1% |
| |||||
6,186,762 | Prudential Investment Portfolios 2 - Prudential Core Taxable | 6,186,762 | ||||
|
| |||||
Principal Amount (000)# | ||||||
U.S. TREASURY OBLIGATION 0.1% |
| |||||
$ 200 | U.S. Treasury Bill, | 199,991 | ||||
|
| |||||
TOTAL SHORT-TERM INVESTMENTS | 6,386,753 | |||||
|
| |||||
TOTAL INVESTMENTS 104.2% | 158,378,343 | |||||
Liabilities in excess of other assets(f) (4.2)% | (6,411,822 | ) | ||||
|
| |||||
NET ASSETS 100.0% | $ | 151,966,521 | ||||
|
|
See Notes to Financial Statements.
22 |
# | Principal amount shown in U.S. dollars unless otherwise stated. |
* | Non-income producing security. |
(a) | All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is $5,485,213; cash collateral of $5,616,395 (included with liabilities) was received with which the Fund purchased highly liquid short-term investments. |
(b) | Represents security, or a portion thereof, purchased with cash collateral received for securities on loan. |
(c) | Prudential Investments LLC, the manager of the Fund, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund. |
(d) | Represents security, or a portion thereof, segregated as collateral for futures contracts. |
(e) | Rate quoted represents yield-to-maturity as of purchase date. |
(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: | ||||||||||||||||||||
9 | S&P 500 E-Mini | Dec. 2013 | $ | 742,744 | $ | 787,950 | $ | 45,206 | ||||||||||||
|
|
Various inputs are used in determining the value of the Fund’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 Large-Cap Core Equity Fund | 23 |
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 | $ | 151,991,590 | $ | — | $ | — | ||||||
Affiliated Money Market Mutual Fund | 6,186,762 | — | — | |||||||||
U.S. Treasury Obligation | — | 199,991 | — | |||||||||
Other Financial Instruments* | ||||||||||||
Futures Contracts | 45,206 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 158,223,558 | $ | 199,991 | $ | — | ||||||
|
|
|
|
|
|
* | 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 of the instrument. |
The industry classification of investments and liabilities in excess of other assets shown as percentage of net assets as of October 31, 2013 was as follows:
Information Technology | 19.3 | % | ||
Financials | 14.7 | |||
Healthcare | 14.4 | |||
Consumer Discretionary | 13.9 | |||
Industrials | 11.7 | |||
Energy | 11.0 | |||
Consumer Staples | 8.8 | |||
Affiliated Money Market Mutual Fund (including 3.7% of collateral received for securities on loan) | 4.1 | |||
Materials | 3.0 | % | ||
Utilities | 1.7 | |||
Telecommunications Services | 1.5 | |||
U.S. Treasury Obligation | 0.1 | |||
|
| |||
104.2 | ||||
Liabilities in excess of other assets | (4.2 | ) | ||
|
| |||
100.0 | % | |||
|
|
The Fund 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 Fund’s 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.
24 |
Fair values of derivative instruments as of October 31, 2013 as presented in the Statement of Assets and Liabilities:
Derivatives not accounted | Asset Derivatives | Liability Derivatives | ||||||||||
Balance | Fair Value | Balance | Fair Value | |||||||||
Equity contracts | Due to broker—variation margin | $ | 45,206 | * | — | $ | — | |||||
|
|
|
|
* | Includes cumulative appreciation/depreciation as reported in 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 instruments, carried at fair value | Futures | |||
Equity contracts | $ | 453,923 | ||
|
| |||
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | ||||
Derivatives not accounted for as hedging instruments, carried at fair value | Futures | |||
Equity contracts | $ | 68,511 | ||
|
|
For the year ended October 31, 2013, the Fund’s average value at trade date for futures long positions was $1,866,811.
See Notes to Financial Statements.
Prudential Large-Cap Core Equity Fund | 25 |
Statement of Assets & Liabilities
as of October 31, 2013
Assets | ||||
Investments at value, including securities on loan of $5,485,213: | ||||
Unaffiliated Investments (cost $97,203,624) | $ | 152,191,581 | ||
Affiliated Investments (cost $6,186,762) | 6,186,762 | |||
Dividends receivable | 125,336 | |||
Receivable for Fund shares sold | 10,219 | |||
Tax reclaim receivable | 1,480 | |||
Prepaid expenses | 1,666 | |||
|
| |||
Total assets | 158,517,044 | |||
|
| |||
Liabilities | ||||
Payable to broker for collateral for securities on loan | 5,616,395 | |||
Payable for Fund shares reacquired | 649,058 | |||
Accrued expenses | 126,360 | |||
Management fee payable | 96,663 | |||
Distribution fee payable | 46,470 | |||
Affiliated transfer agent fee payable | 11,257 | |||
Due to broker—variation margin | 4,320 | |||
|
| |||
Total liabilities | 6,550,523 | |||
|
| |||
Net Assets | $ | 151,966,521 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 10,090 | ||
Paid-in capital in excess of par | 84,932,697 | |||
|
| |||
84,942,787 | ||||
Undistributed net investment income | 846,557 | |||
Accumulated net realized gain on investment transactions | 11,144,014 | |||
Net unrealized appreciation on investments | 55,033,163 | |||
|
| |||
Net assets, October 31, 2013 | $ | 151,966,521 | ||
|
|
See Notes to Financial Statements.
26 |
Class A | ||||
Net asset value and redemption price per share | $ | 15.23 | ||
Maximum sales charge (5.50% of offering price) | 0.89 | |||
|
| |||
Maximum offering price to public | $ | 16.12 | ||
|
| |||
Class B | ||||
Net asset value, offering price and redemption price per share | $ | 14.29 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share | $ | 14.30 | ||
|
| |||
Class X | ||||
Net asset value, offering price and redemption price per share | $ | 14.66 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share | $ | 15.49 | ||
|
|
See Notes to Financial Statements.
Prudential Large-Cap Core Equity Fund | 27 |
Statement of Operations
Year Ended October 31, 2013
Net Investment Income | ||||
Income | ||||
Unaffiliated dividend income (net of foreign withholding taxes of $2,789) | $ | 3,074,720 | ||
Affiliated income from securities loaned, net | 9,644 | |||
Affiliated dividend income | 2,841 | |||
Interest income | 90 | |||
|
| |||
Total income | 3,087,295 | |||
|
| |||
Expenses | ||||
Management fee | 918,604 | |||
Distribution fee—Class A | 191,139 | |||
Distribution fee—Class B | 30,852 | |||
Distribution fee—Class C | 237,012 | |||
Distribution fee—Class X | 710 | |||
Transfer agent’s fees and expenses (including affiliated expense of $49,000) (Note 3) | 220,000 | |||
Registration fees | 75,000 | |||
Custodian’s fees and expenses | 72,000 | |||
Shareholders’ reports | 49,000 | |||
Audit fee | 23,000 | |||
Legal fees and expenses | 22,000 | |||
Trustees’ fees | 12,000 | |||
Insurance | 3,000 | |||
Loan interest expense (Note 7) | 196 | |||
Miscellaneous | 13,995 | |||
|
| |||
Total expenses | 1,868,508 | |||
Less: Management fee waiver (Note 2) | (66,079 | ) | ||
|
| |||
Net expenses | 1,802,429 | |||
|
| |||
Net investment income | 1,284,866 | |||
|
| |||
Realized and Unrealized Gain on Investments | ||||
Net realized gain on: | ||||
Investment transactions | 10,791,251 | |||
Futures transactions | 453,923 | |||
|
| |||
11,245,174 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 19,750,988 | |||
Futures | 68,511 | |||
|
| |||
19,819,499 | ||||
|
| |||
Net gain on investment transactions | 31,064,673 | |||
|
| |||
Net Increase In Net Assets Resulting From Operations | $ | 32,349,539 | ||
|
|
See Notes to Financial Statements.
28 |
Statement of Changes in Net Assets
Year Ended October 31, | ||||||||
2013 | 2012 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income | $ | 1,284,866 | $ | 1,098,167 | ||||
Net realized gain on investment transactions | 11,245,174 | 5,098,720 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 19,819,499 | 12,544,827 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 32,349,539 | 18,741,714 | ||||||
|
|
|
| |||||
Dividends and Distributions (Note 1) | ||||||||
Dividends from net investment income | ||||||||
Class A | (726,945 | ) | (595,220 | ) | ||||
Class B | (12,154 | ) | (12,057 | ) | ||||
Class C | (79,585 | ) | (62,241 | ) | ||||
Class L | — | (28,457 | ) | |||||
Class M | — | (1,808 | ) | |||||
Class X | (4,390 | ) | (8,207 | ) | ||||
Class Z | (434,622 | ) | (395,158 | ) | ||||
|
|
|
| |||||
(1,257,696 | ) | (1,103,148 | ) | |||||
|
|
|
| |||||
Distributions from net realized gains | ||||||||
Class A | (2,653,620 | ) | (4,106,809 | ) | ||||
Class B | (122,170 | ) | (280,388 | ) | ||||
Class C | (806,651 | ) | (1,447,462 | ) | ||||
Class L | — | (255,983 | ) | |||||
Class M | — | (42,040 | ) | |||||
Class X | (15,871 | ) | (54,719 | ) | ||||
Class Z | (1,288,999 | ) | (2,115,448 | ) | ||||
|
|
|
| |||||
(4,887,311 | ) | (8,302,849 | ) | |||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) (Note 6) | ||||||||
Net proceeds from shares sold | 19,935,052 | 8,861,788 | ||||||
Net asset value of shares issued in reinvestment of dividends | 6,008,550 | 9,057,492 | ||||||
Cost of shares reacquired | (28,841,167 | ) | (23,068,721 | ) | ||||
|
|
|
| |||||
Net decrease in net assets from Fund share transactions | (2,897,565 | ) | (5,149,441 | ) | ||||
|
|
|
| |||||
Captial Contributions (Note 2) | ||||||||
Class X | — | 34 | ||||||
|
|
|
| |||||
Total increase | 23,306,967 | 4,186,310 | ||||||
Net Assets: | ||||||||
Beginning of year | 128,659,554 | 124,473,244 | ||||||
|
|
|
| |||||
End of year(a) | $ | 151,966,521 | $ | 128,659,554 | ||||
|
|
|
| |||||
(a) Includes undistributed net investment income of: | $ | 846,557 | $ | 829,041 | ||||
|
|
|
|
See Notes to Financial Statements.
Prudential Large-Cap Core Equity Fund | 29 |
Notes to Financial Statements
Prudential Investment Portfolios 9 (the “Trust”) is an open-end management investment company, registered under the Investment Company Act of 1940 (“1940 Act”). The Trust currently consists of three funds: Prudential Large-Cap Core Equity Fund (the “Fund”), Prudential International Real Estate Fund and Prudential Absolute Return Bond Fund. These financial statements relate to Prudential Large-Cap Core Equity Fund, a diversified fund. The financial statements of the Prudential International Real Estate Fund and Prudential Absolute Return Bond Fund are not presented herein.
The Fund’s investment objective is long-term after-tax 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 Fund 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 Trustees (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 Fund 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 Fund’s 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
30 |
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 Trustees. 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 Large-Cap Core Equity Fund | 31 |
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.
Securities Lending: The Fund may lend their 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 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 Fund. Upon termination of the loan, the borrower will return securities identical to the loaned securities to the Fund. Should the borrower of the securities fail financially, the Fund has the right to repurchase the securities using the collateral in the open market. The Fund recognizes income, net of any rebate and securities lending agent fees, for lending its securities in the form of fees or interest on the investment of any cash received as collateral. The Fund also continues to receive interest and dividends, or amounts equivalent thereto, on 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.
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 Fund 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 Fund 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.
32 |
The Fund invests in financial futures contracts in order to hedge its existing portfolio securities, or securities the Fund intends to purchase, against fluctuations in value caused by changes in value of equities. The Fund may also use futures to gain additional market exposure. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts 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 a minimal counterparty credit risk to the Fund since the exchanges’ clearinghouse acts as counterparty to all exchange traded futures and guarantees the futures contracts against default.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains or losses from investment transactions are calculated on an 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 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 period 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.
Dividends and Distributions: The Fund 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-capital in excess of par, as appropriate.
Prudential Large-Cap Core Equity Fund | 33 |
Notes to Financial Statements
continued
Taxes: For federal income tax purposes, the Fund is treated as a separate taxpaying entity. It is the Fund’s 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 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 Trust has a management agreement for the Fund 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 Quantitative Management Associates LLC (“QMA”). The subadvisory agreement provides that QMA will furnish investment advisory services in connection with the management of the Fund. PI pays for the services of QMA, the cost of compensation of officers of the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears all other costs and expenses.
The management fee paid to PI is computed daily and payable monthly at an annual rate of .65% of the Fund’s average daily net assets up to and including $500 million and .60% of the Fund’s average daily net assets in excess of $500 million. The effective management fee rate was .65% for the year ended October 31, 2013.
Effective July 1, 2011, PI has contractually agreed through February 28, 2015 to waive a portion of the Fund’s management fees so that the Fund’s annual operating expenses (exclusive of distribution and service (12b-1) fees, and certain other expenses such as taxes, interest, and brokerage commissions) do not exceed .95% of the Fund’s average daily net assets.
The Fund has distribution agreements with Prudential Investment Management Services LLC (“PIMS”) and Prudential Annuities Distributors, Inc. (“PAD”). PIMS and
34 |
PAD are both affiliates of PI and indirect, wholly-owned subsidiaries of Prudential. PIMS serves as the distributor of the Fund’s Class A, Class B, Class C, and Class Z shares. PIMS, together with PAD, serves as co-distributor of the Fund’s Class X shares.
The Fund has adopted a separate Distribution and Service plan (each a “Plan” and collectively the “Plans”) for the Class A, Class B, Class C, and Class X shares of the Fund in accordance with Rule 12b-1 of the 1940 Act, as amended. No distribution or service fees are paid to PIMS as distributor for the Fund’s Class Z shares.
Under the Plans, the Fund compensates PIMS and PAD a distribution and service fee at the annual rate of .30%, 1%, 1%, and 1% of the average daily net assets of the Class A, B, C, and X shares, respectively. Through February 28, 2015, PIMS has contractually agreed to limit such fees to .25% of the average daily net assets of the Class A shares.
Management has received the maximum allowable amount of sales charges for Class X in accordance with regulatory limits. As such, any contingent deferred sales charges received by the manager are contributed back into the Fund and included in the Statement of Changes in Net Assets and Financial Highlights as a contribution to capital.
PIMS has advised the Fund that it received $51,937 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 Fund that for the year ended October 31, 2013, it received $21, $5,224, and $246 in contingent deferred sales charges imposed upon certain redemptions by Class A, B, and C, 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 Fund’s transfer agent. Transfer agent fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
Prudential Large-Cap Core Equity Fund | 35 |
Notes to Financial Statements
continued
Prudential Investment Management, Inc., (“PIM”), an indirect, wholly-owned subsidiary of Prudential, is the Fund’s securities lending agent. For the year ended October 31, 2013, PIM has been compensated in the amount of approximately $2,900 for these services.
The Fund invests in the Prudential Core Taxable Money Market 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 investment securities, other than short-term investments, for the year ended October 31, 2013, were $130,873,002 and $136,948,431, 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 undistributed net investment income, accumulated net realized gain on investment 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 gain on investment transactions. For the year ended October 31, 2013, the adjustments were to decrease undistributed net investment income and increase accumulated net realized gain on investment transactions by $9,654 due to reclassification of distributions and other book to tax differences. Net investment income, net realized gain on investment transactions and net assets were not affected by this change.
The tax character of dividends paid as reflected in the Statement of Changes in Net Assets were $1,199,312 of ordinary income and $4,945,695 of long-term capital gains for the year ended October 31, 2013 and $1,094,619 of ordinary income and $8,311,378 of long-term capital gains for the year ended October 31, 2012, respectively.
As of October 31, 2013, the accumulated undistributed earnings on a tax basis were $2,538,760 of ordinary income and $9,586,672 of long-term capital gains.
36 |
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 Appreciation | |||
$103,480,042 | $55,028,357 | $(130,056) | $54,898,301 |
The difference between book basis and tax basis is primarily attributable to deferred losses on wash sales and other cost basis differences between financial and tax accounting.
Management has analyzed the Fund’s 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 Fund’s financial statements for the current reporting period. The Fund’s 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 Fund offers Class A, Class B, Class C, Class X and Class Z shares. Class A shares are sold with a front-end sales charge of up to 5.50%. Purchases of $1 million or more are subject to a contingent deferred sales charge (“CDSC”) if shares are redeemed within 12 months of their purchase. The Class A shares CDSC is waived for purchases by certain retirement and/or benefit plans. 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 B shares will automatically convert to Class A shares approximately seven years after purchase. Class C shares are sold with a CDSC of 1% on shares redeemed within the first 12 months of purchase. Class X shares are closed to new purchases. Class X shares will automatically convert to Class A shares approximately ten years after purchase. The last conversion of Class M and Class L shares to Class A shares was completed as of April 13, 2012 and August 24, 2012, respectively. There are no Class M and Class L shares outstanding and Class M and Class L shares are no longer being offered for sale. Class Z shares are not subject to any sales or redemption charge and are offered exclusively for a sale to a limited group of investors.
Under certain circumstances, an exchange may be made from specified share classes of the Fund to one or more other share classes of the Fund as presented in the table of transactions in shares of capital stock.
Prudential Large-Cap Core Equity Fund | 37 |
Notes to Financial Statements
continued
The Fund has authorized an unlimited number of shares of beneficial interest at $.001 par value.
As of October 31, 2013, Prudential Financial, Inc. through its affiliates owned 56 Class A shares of the Fund.
Transactions in shares of common stock were as follows:
Class A | Shares | Amount | ||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 364,797 | $ | 4,938,234 | |||||
Shares issued in reinvestment of dividends | 269,781 | 3,291,313 | ||||||
Shares reacquired | (892,566 | ) | (12,198,754 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (257,988 | ) | (3,969,207 | ) | ||||
Shares issued upon conversion from Class B, Class X and Class Z | 75,436 | 1,018,722 | ||||||
Shares reacquired upon conversion into Class Z | (10,617 | ) | (148,013 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (193,169 | ) | $ | (3,098,498 | ) | |||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 342,118 | $ | 4,156,661 | |||||
Shares issued in reinvestment of dividends and distributions | 412,010 | 4,499,152 | ||||||
Shares reacquired | (963,525 | ) | (11,523,902 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (209,397 | ) | (2,868,089 | ) | ||||
Shares issued upon conversion from Class B, Class L, Class M, Class X and Class Z | 528,491 | 6,505,425 | ||||||
Shares reacquired upon conversion into Class Z | (3,591 | ) | (43,726 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 315,503 | $ | 3,593,610 | |||||
|
|
|
| |||||
Class B | ||||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 52,733 | $ | 696,257 | |||||
Shares issued in reinvestment of dividends | 11,253 | 129,638 | ||||||
Shares reacquired | (36,694 | ) | (473,332 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 27,292 | 352,563 | ||||||
Shares reacquired upon conversion into Class A | (51,453 | ) | (656,954 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (24,161 | ) | $ | (304,391 | ) | |||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 41,138 | $ | 471,324 | |||||
Shares issued in reinvestment of dividends and distributions | 26,935 | 278,772 | ||||||
Shares reacquired | (50,973 | ) | (579,463 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 17,100 | 170,633 | ||||||
Shares reacquired upon conversion into Class A | (124,237 | ) | (1,399,463 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (107,137 | ) | $ | (1,228,830 | ) | |||
|
|
|
|
38 |
Class C | Shares | Amount | ||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 682,397 | $ | 9,223,964 | |||||
Shares issued in reinvestment of dividends | 74,688 | 861,139 | ||||||
Shares reacquired | (190,238 | ) | (2,426,384 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 566,847 | 7,658,719 | ||||||
Shares reacquired upon conversion into Class Z | (2,851 | ) | (39,228 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 563,996 | $ | 7,619,491 | |||||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 63,033 | $ | 710,705 | |||||
Shares issued in reinvestment of dividends and distributions | 138,334 | 1,433,144 | ||||||
Shares reacquired | (357,707 | ) | (4,006,440 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (156,340 | ) | (1,862,591 | ) | ||||
Shares reacquired upon conversion into Class Z | (2,762 | ) | (32,878 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (159,102 | ) | $ | (1,895,469 | ) | |||
|
|
|
| |||||
Class L | ||||||||
Period ended August 24, 2012:* | ||||||||
Shares sold | 62 | $ | 728 | |||||
Shares issued in reinvestment of dividends and distributions | 25,537 | 278,864 | ||||||
Shares reacquired | (32,770 | ) | (390,254 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (7,171 | ) | (110,662 | ) | ||||
Shares reacquired upon conversion into Class A | (318,177 | ) | (4,007,434 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (325,348 | ) | $ | (4,118,096 | ) | |||
|
|
|
| |||||
Class M | ||||||||
Period ended April 13, 2012:** | ||||||||
Shares sold | 14 | $ | 154 | |||||
Shares issued in reinvestment of dividends and distributions | 3,887 | 40,276 | ||||||
Shares reacquired | (2,084 | ) | (22,170 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 1,817 | 18,260 | ||||||
Shares reacquired upon conversion into Class A | (67,391 | ) | (744,750 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (65,574 | ) | $ | (726,490 | ) | |||
|
|
|
|
Prudential Large-Cap Core Equity Fund | 39 |
Notes to Financial Statements
continued
Class X | Shares | Amount | ||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 246 | $ | 3,019 | |||||
Shares issued in reinvestment of dividends | 1,726 | 20,261 | ||||||
Shares reacquired | (2,587 | ) | (33,991 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (615 | ) | (10,711 | ) | ||||
Shares reacquired upon conversion into Class A | (27,195 | ) | (351,590 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (27,810 | ) | $ | (362,301 | ) | |||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 64 | $ | 738 | |||||
Shares issued in reinvestment of dividends and distributions | 5,974 | 62,910 | ||||||
Shares reacquired | (10,613 | ) | (122,332 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (4,575 | ) | (58,684 | ) | ||||
Shares reacquired upon conversion into Class A | (30,138 | ) | (349,136 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (34,713 | ) | $ | (407,820 | ) | |||
|
|
|
| |||||
Class Z | ||||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 372,381 | $ | 5,073,578 | |||||
Shares issued in reinvestment of dividends | 137,819 | 1,706,199 | ||||||
Shares reacquired | (949,135 | ) | (13,708,706 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (438,935 | ) | (6,928,929 | ) | ||||
Shares issued upon conversion from Class A and Class C | 13,084 | 187,241 | ||||||
Shares reacquired upon conversion into Class A | (768 | ) | (10,178 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (426,619 | ) | $ | (6,751,866 | ) | |||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 283,238 | $ | 3,521,478 | |||||
Shares issued in reinvestment of dividends and distributions | 222,617 | 2,464,374 | ||||||
Shares reacquired | (531,038 | ) | (6,424,160 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (25,183 | ) | (438,308 | ) | ||||
Shares issued upon conversion from Class A and C | 6,103 | 76,604 | ||||||
Shares reacquired upon conversion into Class A | (372 | ) | (4,642 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (19,452 | ) | $ | (366,346 | ) | |||
|
|
|
|
* | 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. |
40 |
Note 7. Borrowings
The Fund, 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 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 Fund utilized the SCA during the year ended October 31, 2013. The average daily balance for the 4 days the Fund had loans outstanding during the period was approximately $1,228,250 borrowed at a weighted average interest rate of 1.434%. At October 31, 2013, the Fund did not have an outstanding loan amount.
Note 8. Notice of Dividends and Distributions to Shareholders
The Fund declared ordinary income dividends and capital gain distributions 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 | Short-Term Capital Gains | Long-Term Capital Gains | ||||||||||
Class A | $ | 0.1250 | $ | 0.1702 | $ | 0.9486 | ||||||
Class B | $ | 0.0266 | $ | 0.1702 | $ | 0.9486 | ||||||
Class C | $ | 0.0256 | $ | 0.1702 | $ | 0.9486 | ||||||
Class X | $ | 0.1270 | $ | 0.1702 | $ | 0.9486 | ||||||
Class Z | $ | 0.1606 | $ | 0.1702 | $ | 0.9486 |
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
Prudential Large-Cap Core Equity Fund | 41 |
Notes to Financial Statements
continued
“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.
42 |
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 | $12.70 | $11.84 | $11.01 | $9.71 | $9.32 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .14 | .11 | .05 | .05 | .09 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 3.01 | 1.65 | .80 | 1.30 | .40 | |||||||||||||||
Total from investment operations | 3.15 | 1.76 | .85 | 1.35 | .49 | |||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.13 | ) | (.11 | ) | (.02 | ) | (.05 | ) | (.10 | ) | ||||||||||
Distributions from net realized gains | (.49 | ) | (.79 | ) | - | - | - | |||||||||||||
Total dividends and distributions | (.62 | ) | (.90 | ) | (.02 | ) | (.05 | ) | (.10 | ) | ||||||||||
Net asset value, end of year | $15.23 | $12.70 | $11.84 | $11.01 | $9.71 | |||||||||||||||
Total Return(b): | 26.00% | 16.16% | 7.71% | 13.92% | 5.40% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $81,558 | $70,475 | $61,961 | $64,473 | $62,739 | |||||||||||||||
Average net assets (000) | $76,459 | $65,277 | $65,724 | $64,562 | $58,578 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.20% | (d) | 1.20% | (d) | 1.55% | (d) | 1.48% | 1.55% | ||||||||||||
Expenses before waivers and/or expense reimbursement | 1.30% | 1.40% | 1.69% | 1.48% | 1.55% | |||||||||||||||
Net investment income | .99% | .95% | .43% | .45% | 1.10% | |||||||||||||||
Portfolio turnover rate | 94% | 89% | 121% | 116% | 116% |
(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 return may reflect adjustments to conform to generally accepted accounting principles.
(c) Does not include the expenses of the underlying funds in which the Fund invests.
(d) Effective July 1, 2011, the distributor of the Fund contractually agreed to limit its distribution and service (12b-1) fees to .25% of the average daily net assets of the Class A shares through February 28, 2015.
See Notes to Financial Statements.
Prudential Large-Cap Core Equity Fund | 43 |
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 | $11.96 | $11.20 | $10.47 | $9.26 | $8.87 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | .03 | .03 | (.03 | ) | (.02 | ) | .04 | |||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 2.84 | 1.55 | .76 | 1.23 | .37 | |||||||||||||||
Total from investment operations | 2.87 | 1.58 | .73 | 1.21 | .41 | |||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.05 | ) | (.03 | ) | - | - | (.02 | ) | ||||||||||||
Distributions from net realized gains | (.49 | ) | (.79 | ) | - | - | - | |||||||||||||
Total dividends and distributions | (.54 | ) | (.82 | ) | - | - | (.02 | ) | ||||||||||||
Net asset value, end of year | $14.29 | $11.96 | $11.20 | $10.47 | $9.26 | |||||||||||||||
Total Return(b): | 25.02% | 15.29% | 6.97% | 13.07% | 4.67% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $3,275 | $3,029 | $4,038 | $5,317 | $6,555 | |||||||||||||||
Average net assets (000) | $3,085 | $3,496 | $4,886 | $5,904 | $6,912 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.95% | 1.95% | 2.27% | 2.18% | 2.25% | |||||||||||||||
Expenses before waivers and/or expense reimbursement | 2.00% | 2.11% | 2.38% | 2.18% | 2.25% | |||||||||||||||
Net investment income (loss) | .25% | .22% | (.28)% | (.22)% | .48% | |||||||||||||||
Portfolio turnover rate | 94% | 89% | 121% | 116% | 116% |
(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 return may reflect adjustments to conform to generally accepted accounting principles.
(c) Does not include the expenses of the underlying funds in which the Fund invests.
See Notes to Financial Statements.
44 |
Class C Shares | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $11.97 | $11.21 | $10.48 | $9.26 | $8.87 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | .03 | .02 | (.03 | ) | (.02 | ) | .04 | |||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 2.84 | 1.56 | .76 | 1.24 | .37 | |||||||||||||||
Total from investment operations | 2.87 | 1.58 | .73 | 1.22 | .41 | |||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.05 | ) | (.03 | ) | - | - | (.02 | ) | ||||||||||||
Distributions from net realized gains | (.49 | ) | (.79 | ) | - | - | - | |||||||||||||
Total dividends and distributions | (.54 | ) | (.82 | ) | - | - | (.02 | ) | ||||||||||||
Net asset value, end of year | $14.30 | $11.97 | $11.21 | $10.48 | $9.26 | |||||||||||||||
Total Return(b): | 24.99% | 15.28% | 6.97% | 13.17% | 4.67% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $32,128 | $20,134 | $20,636 | $22,496 | $24,601 | |||||||||||||||
Average net assets (000) | $23,702 | $20,445 | $22,444 | $23,934 | $24,715 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.95% | 1.95% | 2.27% | 2.18% | 2.25% | |||||||||||||||
Expenses before waivers and/or expense reimbursement | 2.00% | 2.10% | 2.39% | 2.18% | 2.25% | |||||||||||||||
Net investment income (loss) | .20% | .20% | (.28)% | (.24)% | .44% | |||||||||||||||
Portfolio turnover rate | 94% | 89% | 121% | 116% | 116% |
(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 return may reflect adjustments to conform to generally accepted accounting principles.
(c) Does not include the expenses of the underlying funds in which the Fund invests.
See Notes to Financial Statements.
Prudential Large-Cap Core Equity Fund | 45 |
Financial Highlights
continued
Class L Shares | ||||||||||||||||||||||
Period Ended August 24, | Year Ended October 31, | |||||||||||||||||||||
2012(d) | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $11.82 | $11.00 | $9.70 | $9.30 | $14.83 | |||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment income | .08 | .03 | .03 | .08 | .09 | |||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 1.57 | .79 | 1.30 | .39 | (5.54 | ) | ||||||||||||||||
Total from investment operations | 1.65 | .82 | 1.33 | .47 | (5.45 | ) | ||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||
Dividends from net investment income | (.09 | ) | - | (.03 | ) | (.07 | ) | (.08 | ) | |||||||||||||
Distributions from net realized gains | (.79 | ) | - | - | - | - | ||||||||||||||||
Total dividends and distributions | (.88 | ) | - | (.03 | ) | (.07 | ) | (.08 | ) | |||||||||||||
Net asset value, end of period | $12.59 | $11.82 | $11.00 | $9.70 | $9.30 | |||||||||||||||||
Total Return(b): | 15.08% | 7.45% | 13.74% | 5.21% | (36.94)% | |||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||
Net assets, end of period (000) | $4,009 | $3,847 | $4,222 | $4,860 | $6,113 | |||||||||||||||||
Average net assets (000) | $3,947 | $4,181 | $4,625 | $4,965 | $9,856 | |||||||||||||||||
Ratios to average net assets(c) | ||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.46% | (e) | 1.77% | 1.68% | 1.75% | 1.56% | ||||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.65% | (e) | 1.89% | 1.68% | 1.75% | 1.56% | ||||||||||||||||
Net investment income | .79% | (e) | .22% | .27% | .94% | .73% | ||||||||||||||||
Portfolio turnover rate | 89% | (f)(g) | 121% | 116% | 116% | 96% |
(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 return may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than a full year are not annualized.
(c) Does not include the expenses of the underlying funds in which the Fund invests.
(d) 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.
(e) Annualized.
(f) Not Annualized.
(g) Calculated as of October 31, 2012.
See Notes to Financial Statements.
46 |
Class M Shares | ||||||||||||||||||||||
Period April 13, | Year Ended October 31, | |||||||||||||||||||||
2012(d) | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $11.21 | $10.48 | $9.26 | $8.87 | $14.14 | |||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment income (loss) | .02 | (.03 | ) | (.02 | ) | .04 | .03 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 1.15 | .76 | 1.24 | .37 | (5.29 | ) | ||||||||||||||||
Total from investment operations | 1.17 | .73 | 1.22 | .41 | (5.26 | ) | ||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||
Dividends from net investment income | (.03 | ) | - | - | (.02 | ) | (.01 | ) | ||||||||||||||
Distributions from net realized gains | (.79 | ) | - | - | - | - | ||||||||||||||||
Total dividends and distributions | (.82 | ) | - | - | (.02 | ) | (.01 | ) | ||||||||||||||
Net asset value, end of period | $11.56 | $11.21 | $10.48 | $9.26 | $8.87 | |||||||||||||||||
Total Return(b) | 11.33% | 6.97% | 13.17% | 4.67% | (37.22)% | |||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||
Net assets, end of period (000) | $33 | $735 | $4,103 | $8,052 | $15,423 | |||||||||||||||||
Average net assets (000) | $344 | $2,311 | $5,918 | $10,385 | $29,289 | |||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.94% | (e) | 2.30% | 2.18% | 2.25% | 2.06% | ||||||||||||||||
Expenses before waivers and/or expense reimbursement | 2.17% | (e) | 2.36% | 2.18% | 2.25% | 2.06% | ||||||||||||||||
Net investment income (loss) | .41% | (e) | (.27)% | (.15)% | .55% | .24% | ||||||||||||||||
Portfolio turnover rate | 89% | (f)(g) | 121% | 116% | 116% | 96% |
(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 return may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than a full year are not annualized.
(c) Does not include the expenses of the underlying funds in which the Fund invests.
(d) 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.
(e) Annualized.
(f) Not Annualized.
(g) Calculated as of October 31, 2012.
See Notes to Financial Statements.
Prudential Large-Cap Core Equity Fund | 47 |
Financial Highlights
continued
Class X Shares | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $12.25 | $11.46 | $10.65 | $9.40 | $8.97 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .15 | .11 | .05 | .06 | .12 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 2.88 | 1.59 | .78 | 1.24 | .40 | |||||||||||||||
Total from investment operations | 3.03 | 1.70 | .83 | 1.30 | .52 | |||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.13 | ) | (.12 | ) | (.02 | ) | (.05 | ) | (.10 | ) | ||||||||||
Distributions from net realized gains | (.49 | ) | (.79 | ) | - | - | - | |||||||||||||
Total dividends and distributions | (.62 | ) | (.91 | ) | (.02 | ) | (.05 | ) | (.10 | ) | ||||||||||
Capital Contributions (Note 6) | - | - | (d) | - | (d) | - | (d) | .01 | ||||||||||||
Net asset value, end of year | $14.66 | $12.25 | $11.46 | $10.65 | $9.40 | |||||||||||||||
Total Return(b): | 25.99% | 16.12% | 7.84% | 13.91% | 6.00% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $154 | $470 | $837 | $1,394 | $2,096 | |||||||||||||||
Average net assets (000) | $284 | $632 | $1,137 | $1,689 | $2,245 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses after waivers and/or expenses reimbursement | 1.20% | 1.20% | 1.53% | 1.43% | 1.50% | |||||||||||||||
Expenses before waivers and/or expenses reimbursement | 1.25% | 1.37% | 1.63% | 2.18% | 1.50% | |||||||||||||||
Net investment income | 1.14% | .97% | .46% | .56% | 1.46% | |||||||||||||||
Portfolio turnover rate | 94% | 89% | 121% | 116% | 116% |
(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 return may reflect adjustments to conform to generally accepted accounting principles.
(c) Does not include the expenses of the underlying funds in which the Fund invests.
(d) Less than $.005 per share.
See Notes to Financial Statements.
48 |
Class Z Shares | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $12.91 | $12.03 | $11.18 | $9.87 | $9.47 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .17 | .15 | .07 | .08 | .08 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 3.06 | 1.67 | .83 | 1.30 | .45 | |||||||||||||||
Total from investment operations | 3.23 | 1.82 | .90 | 1.38 | .53 | |||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.16 | ) | (.15 | ) | (.05 | ) | (.07 | ) | (.13 | ) | ||||||||||
Distributions from net realized gains | (.49 | ) | (.79 | ) | - | - | - | |||||||||||||
Total dividends and distributions | (.65 | ) | (.94 | ) | (.05 | ) | (.07 | ) | (.13 | ) | ||||||||||
Net asset value, end of year | $15.49 | $12.91 | $12.03 | $11.18 | $9.87 | |||||||||||||||
Total Return(b): | 26.28% | 16.41% | 8.04% | 14.09% | 5.83% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $34,851 | $34,551 | $32,419 | $141,793 | $202,941 | |||||||||||||||
Average net assets (000) | $37,799 | $32,953 | $144,295 | $145,193 | $90,113 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | .95% | .95% | 1.42% | 1.18% | 1.25% | |||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.00% | 1.10% | 1.44% | 1.18% | 1.25% | |||||||||||||||
Net investment income | 1.25% | 1.21% | .58% | .76% | .96% | |||||||||||||||
Portfolio turnover rate | 94% | 89% | 121% | 116% | 116% |
(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 returns may reflect adjustments to conform to generally accepted accounting principles.
(c) Does not include the expenses of the underlying funds in which the Fund invests.
See Notes to Financial Statements.
Prudential Large-Cap Core Equity Fund | 49 |
Report of Independent Registered Public
Accounting Firm
The Board of Trustees and Shareholders
Prudential Investment Portfolios 9:
We have audited the accompanying statement of assets and liabilities of Prudential Large-Cap Core Equity Fund, a series of Prudential Investment Portfolios 9 (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
50 |
Tax Information
(Unaudited)
We are advising you that during the fiscal year ended October 31, 2013, the Fund reports the maximum amount allowed per share but not less than $0.49 for Class A, B, C, X 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 Fund reports the maximum amount allowable under Section 854 of the Internal Revenue Code, but not less than, the following percentages of the ordinary income dividends paid as 1) qualified dividend income (QDI); and 2) eligible for corporate dividends received deduction (DRD):
QDI | DRD | |||||||
Prudential Large-Cap Core Equity Fund | 100.00 | % | 96.79 | % |
In January 2014, you will be advised on IRS Form 1099-DIV or substitute 1099-DIV, as to the federal tax status of dividends and distributions received by you in calendar year 2013.
Prudential Large-Cap Core Equity Fund | 51 |
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 Large-Cap Core 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 Large-Cap Core Equity Fund
(1) | The year that each individual joined the Fund’s Board is as follows: |
Ellen S. Alberding, 2013; Linda W. Bynoe, 2005; Douglas H. McCorkindale, 1998; Richard A. Redeker, 1998; Robin B. Smith, 1998; Stephen G. Stoneburn, 2003; Kevin J. Bannon, 2008; Keith F. Hartstein, 2013; Michael S. Hyland, 2008; Stephen P. Munn, 2008; James E. Quinn, 2013; Stuart S. Parker, Board Member since 2012 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 Large-Cap Core 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 Trustees
The Board of Trustees (the “Board”) of Prudential Large-Cap Core 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 Trustees”).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 Trustees have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Trustee. 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 Trustees.
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 Trustees, 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 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 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 Trustees 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 Trustees 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 Large-Cap Core Equity Fund is a series of Prudential Investment Portfolios 9. |
2 | Ms. Alberding and Messrs. Hartstein and Quinn were elected to the Board effective September 1, 2013. |
Prudential Large-Cap Core Equity 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 Trustees 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 Trustees considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Trustees’ 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 Trustees 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.
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
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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. 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 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 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.
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 Fund. The Board concluded that the potential benefits to be derived by QMA
Prudential Large-Cap Core Equity Fund
Approval of Advisory Agreements (continued)
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 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 | 1st Quartile | 3rd Quartile | 2nd Quartile | |||||
Actual Management Fees: 1st Quartile | ||||||||
Net Total Expenses: 2nd Quartile |
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• | The Board noted that the Fund outperformed its benchmark index over the one-, three- and ten-year periods, though it slightly underperformed its benchmark index over the five-year period. |
• | The Board accepted PI’s recommendation to retain the existing expense cap of 0.95% (exclusive of 12b-1 and certain other fees) through February 28, 2014. |
• | The Board concluded that, in light of the Fund’s strong 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 the approval of the agreements was in the best interests of the Fund and its shareholders.
Prudential Large-Cap Core 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 Trustees 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. |
TRUSTEES |
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 | ||
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INVESTMENT SUBADVISER | Quantitative Management Associates LLC | Gateway Center Two 100 Mulberry Street Newark, NJ 07102 | ||
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DISTRIBUTOR | Prudential Investment Management Services LLC | Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | ||
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CUSTODIAN | The Bank of New York Mellon | One Wall Street New York, NY 10286 | ||
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TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
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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 TRUSTEES |
Shareholders can communicate directly with the Board of Trustees by writing to the Chair of the Board, Prudential Large-Cap Core Equity Fund, Prudential Investments, Attn: Board of Trustees, 100 Mulberry Street, Gateway Center Three, Newark, NJ 07102. Shareholders can communicate directly with an individual Trustee 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 Trustees 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 LARGE-CAP CORE EQUITY FUND
SHARE CLASS | A | B | C | X | Z | |||||
NASDAQ | PTMAX | PTMBX | PTMCX | N/A | PTEZX | |||||
CUSIP | 74441J100 | 74441J209 | 74441J308 | 74441J704 | 74441J407 |
MF187E 0255227-00001-00
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
PRUDENTIAL ABSOLUTE RETURN BOND FUND
ANNUAL REPORT · OCTOBER 31, 2013
Fund Type
Absolute Return Bond
Objective
To seek positive returns over the long term, regardless of market conditions
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 adviser. 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.
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December 16, 2013
Dear Shareholder:
We hope you find the annual report for the Prudential Absolute Return Bond 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 Absolute Return Bond 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 Absolute Return Bond 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 | 1.86 | % | 6.09% | |||||
Class C | 1.18 | 4.17 | ||||||
Class Q | 2.10 | 7.02 | ||||||
Class Z | 2.21 | 6.91 | ||||||
BofAML USD LIBOR 3-Month CM Index | 0.30 | 0.95 | ||||||
Lipper FI Alternative Credit Focus Funds Average | 1.59 | 8.70 | ||||||
Average Annual Total Returns (With Sales Charges) as of 9/30/13 | ||||||||
One Year | Since Inception | |||||||
Class A | –3.13 | % | 0.13% | |||||
Class C | –0.23 | 1.28 | ||||||
Class Q | 1.69 | 2.34 | ||||||
Class Z | 1.79 | 2.29 | ||||||
BofAML USD LIBOR 3-Month CM Index | 0.32 | 0.37 | ||||||
Lipper FI Alternative Credit Focus Funds Average | 1.08 | 2.98 | ||||||
Average Annual Total Returns (With Sales Charges) as of 10/31/13 | ||||||||
One Year | Since Inception | |||||||
Class A | –2.73 | % | 0.50% | |||||
Class C | 0.19 | 1.59 | ||||||
Class Q | 2.10 | 2.65 | ||||||
Class Z | 2.21 | 2.61 | ||||||
Average Annual Total Returns (Without Sales Charges) as of 10/31/13 | ||||||||
One Year | Since Inception | |||||||
Class A | 1.86 | % | 2.31% | |||||
Class C | 1.18 | 1.59 | ||||||
Class Q | 2.10 | 2.65 | ||||||
Class Z | 2.21 | 2.61 |
Inception date: 3/30/11
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Growth of a $10,000 Investment
The graph compares a $10,000 investment in the Prudential Absolute Return Bond Fund (Class A shares) with a similar investment in the BofAML USD LIBOR 3-Month Constant Maturity (CM) 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 Absolute Return Bond 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 | 4.5% 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
BofAML USD LIBOR 3-Month CM Index
The BofA Merrill Lynch US Dollar LIBOR 3-Month Constant Maturity (CM) Index is an unmanaged index which tracks the performance of a synthetic asset paying LIBOR to a stated maturity. The index is based on the assumed purchase at par of a synthetic instrument having exactly its stated maturity and with a coupon equal to that day’s fixing rate. That issue is assumed to be sold the following business day (priced at a yield equal to the current day fixing rate) and rolled into a new instrument.
Lipper Alternative Credit Focus Funds Average
Funds in the Lipper Alternative Credit Focus Funds Average are funds that, by prospectus language, invest in a wide range of credit-structured vehicles by using either fundamental credit research analysis or quantitative credit portfolio modeling trying to benefit from any changes in credit quality, credit spreads, and market liquidity.
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 of a mutual fund, but not sales charges or taxes.
Distributions and Yields as of 10/31/13 |
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Total Distributions Paid for 12 Months | 30-Day SEC Yield | |||||||
Class A | $ | 0.28 | 2.11 | % | ||||
Class C | 0.21 | 1.45 | ||||||
Class Q | 0.32 | 2.43 | ||||||
Class Z | 0.31 | 2.44 |
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Five Largest Holdings expressed as a percentage of net assets as of 10/31/13 | ||||
Carlyle Daytona CLO Ltd. (Cayman Islands), Series 2007-1A, Class A1L, 144A, 0.488%, 04/27/21 | 0.9 | % | ||
Ireland Government Bond (Ireland), Bonds, 4.400%, 06/18/19 | 0.8 | |||
Verizon Communications, Inc., Sr. Unsec’d. Notes, 6.550%, 09/15/43 | 0.7 | |||
Tyron Park CLO Ltd. (Cayman Islands), Series 2013-1A, Class A1, 144A, 1.392%, 07/15/25 | 0.7 | |||
Benefit Street Partners CLO Ltd. (Cayman Islands), Series 2013-IIA, Class A1, 144A, 1.472%, 07/15/24 | 0.6 |
Holdings reflect only long-term investments and are subject to change.
Credit Quality* expressed as a percentage of net assets as of 10/31/13 | ||||
U.S. Government & Agency | 2.0 | % | ||
Aaa | 21.2 | |||
Aa | 6.5 | |||
A | 9.5 | |||
Baa | 28.2 | |||
Ba | 16.0 | |||
B | 12.2 | |||
Caa | 1.2 | |||
Less than Caa | 0.2 | |||
Not Rated** | 3.2 | |||
Total Investments | 100.2 | |||
Liabilities in excess of other assets | –0.2 | |||
Net Assets | 100.0 | % | ||
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*Source: Moody’s rating, defaulting to S&P when not rated by Moody’s.
**Approximately 3.1% of Not Rated is invested in affiliated money market mutual fund.
Credit Quality is subject to change.
Prudential Absolute Return Bond Fund | 5 |
Strategy and Performance Overview
How did the Fund perform?
The Prudential Absolute Return Bond Fund’s Class A shares gained 1.86% for the 12-month reporting period that ended October 31, 2013, significantly outperforming the 0.30% return of the BofAML USD 3-Month LIBOR Constant Maturity Index (the Index) and the 1.59% gain of the Lipper Alternative Credit Focus Funds Average.
How did the U.S. investment-grade fixed-income market perform?
The reporting period that began November 1, 2012, proved challenging 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 across most investment-grade bond sectors. (Bond prices move inversely to yields.)
• | The spike in U.S. Treasury yields was caused mainly by the U.S. Federal Reserve’s (the Fed) announcement in May 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. |
• | Early in the period, Treasury yields traded in a relatively narrow range near their all-time lows, as the Fed announced plans in December 2012 to ramp up its bond purchases, adding $45 billion a month to the $40 billion already being bought. At the same time, the Fed also adopted numerical thresholds for its policy, stating it would likely keep the federal funds rate close to zero as long as the U.S. unemployment rate remained above 6.5%, inflation between one and two years ahead was projected to be no more than 2.5%, and longer-term inflation expectations continued to be well-anchored. |
• | Over the summer, U.S. economic data was somewhat disappointing, and in September the Fed surprised the markets by announcing its decision to postpone tapering quantitative easing, which triggered large one-day gains in bond and stock prices. However, bond prices closed the 12-month period well below their year-earlier levels. |
• | Most investment-grade bond benchmarks lost ground over the 12-month period, with Treasuries faring the worst because of their sensitivity to movements in interest rates. Long-term Treasuries fared significantly worse than those with shorter maturities. Corporates also struggled but held up better than Treasuries, as did most other “spread sectors”—i.e., those sectors that involve more risk than Treasuries and therefore offer higher yields to compensate for it. |
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How did the U.S. high-yield corporate bond market perform?
High yield bonds, also known as “junk” bonds, were one of the best-performing fixed income sectors, as they are typically less rate-sensitive than debt securities of higher quality. Instead of reacting to interest rates, high yield bonds generally are influenced by the stock market, which advanced smartly during the period. High yield bonds also react to the prospects for corporate earnings, which remained generally upbeat, and the rate at which corporations default on their debt payments, which stayed low.
The high yield debt sector did experience a sharp sell-off in May and June, around when the Fed revealed its intention to taper. However, prices in the group rebounded to close the period near their highs, resulting in healthy single-digit gains for most junk bond benchmarks.
Which strategies made the largest positive contribution to the Fund’s performance?
Prudential Fixed Income manages the Fund, which outperformed the Index by a significant amount, primarily due to its sector allocation strategy and favorable security selection within certain sectors. The Index does not include any bonds but closely tracks the three-month London interbank offered rate (LIBOR), the most widely used benchmark for short-term interest rates.
• | The Fund invested in many sectors of the fixed income markets in the United States and abroad. Its sector allocation strategy de-emphasized U.S. Treasury securities, instead focusing on a variety of spread sectors. Key sectors that aided performance included U.S. high yield bonds, U.S. asset-backed securities, developed market sovereign debt, and U.S. loans. Exposure here worked well, as each of these spread sectors outperformed similar duration U.S. Treasury securities. |
• | Favorable security selection within a number of spread sectors also lifted the Fund’s results above and beyond what resulted from simply having an allocation to those sectors. Sectors in which security selection was a positive factor included high yield corporate bonds, investment-grade corporate bonds, commercial mortgage-backed securities, asset-backed securities, and emerging market bonds. |
• | The Fund also held credit default swaps and credit default indexes to hedge credit risk and add incremental return in both the corporate and high yield markets. |
What strategies detracted from the Fund’s performance?
The Fund employs an absolute return strategy that seeks to mitigate (or even eliminate) interest-rate risk when appropriate. During the period, the Fund was hampered by its strategy to manage duration, which is a measure of the interest rate
Prudential Absolute Return Bond Fund | 7 |
Strategy and Performance Overview (continued)
sensitivity of a bond portfolio or debt securities that is expressed as a number of years. The Fund maintains an overall duration of plus/minus three years. The longer the duration, the greater the potential risk and reward when interest rates move.
• | Also detracting was the Fund’s mild bias in favor of flatter yield curves, which are single line graphs that illustrate the relationship between the yields and maturities of fixed income securities. They are created by plotting the yields of different maturities for the same type of bonds. The slope of most yield curves steepened during the period, as prices of longer-term bonds declined sharply and pushed up their yields. |
• | The Fund’s foreign currency exposure was a negative factor, especially during the interest rate surge from May through early September, as taper speculation led to a revaluation of the U.S. dollar against many foreign currencies. |
• | The Fund uses derivatives when they facilitate implementation of the overall investment approach. The Fund used interest rate futures and swaps, and to a lesser extent options to help manage overall U.S. and global duration and yield curve exposure. These holdings had a modestly negative impact on returns, with duration adding to performance, but yield curve exposure detracting. In addition, the fund traded foreign exchange derivatives, which had negative results. |
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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 Absolute Return Bond 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 Absolute Return Bond 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 | $ | 995.30 | 1.15 | % | $ | 5.78 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,019.41 | 1.15 | % | $ | 5.85 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 991.50 | 1.90 | % | $ | 9.54 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.63 | 1.90 | % | $ | 9.65 | ||||||||||
Class Q | Actual | $ | 1,000.00 | $ | 995.20 | 0.90 | % | $ | 4.53 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.67 | 0.90 | % | $ | 4.58 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 996.60 | 0.90 | % | $ | 4.53 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.67 | 0.90 | % | $ | 4.58 |
*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 | 1.28% | 1.14% | ||
C | 1.98 | 1.89 | ||
Q | 0.94 | 0.90 | ||
Z | 0.99 | 0.90 |
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 Absolute Return Bond Fund | 11 |
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 97.1% | ||||||||||||||||
ASSET-BACKED SECURITIES 20.9% | ||||||||||||||||
Collateralized Debt Obligations 0.1% | ||||||||||||||||
Highlander Euro CDO Cayman Ltd. (Cayman Islands), | Baa1 | 4.820%(a) | 08/01/16 | EUR | 250 | $ | 337,612 | |||||||||
Landmark VIII CDO Ltd. | Aaa | 0.572(a) | 10/19/20 | 2,500 | 2,435,100 | |||||||||||
|
| |||||||||||||||
2,772,712 | ||||||||||||||||
Collateralized Loan Obligations 9.2% | ||||||||||||||||
ACAS CLO Ltd. (Cayman Islands), | Aaa | 1.422(a) | 04/20/25 | 6,050 | 5,939,999 | |||||||||||
Series 2013-1A, Class B2, 144A | AA(b) | 3.360 | 04/20/25 | 700 | 663,012 | |||||||||||
Anchorage Capital CLO Ltd. (Cayman Islands), | Aaa | 1.466(a) | 07/13/25 | 8,600 | 8,437,082 | |||||||||||
Ares XVI CLO Ltd. | Aaa | 1.243(a) | 05/17/21 | 5,813 | 5,779,332 | |||||||||||
Babson CLO Ltd. | Aaa | 1.342(a) | 04/20/25 | 5,700 | 5,592,122 | |||||||||||
Ballyrock CLO LLC | Aaa | 1.450(a) | 05/20/25 | 9,800 | 9,639,319 | |||||||||||
Battalion CLO IV Ltd. | Aaa | 1.689(a) | 10/22/25 | 5,450 | 5,416,908 | |||||||||||
Benefit Street Partners CLO II Ltd. (Cayman Islands), | AA(b) | 3.339 | 07/15/24 | 10,000 | 10,037,880 | |||||||||||
Benefit Street Partners CLO Ltd. (Cayman Islands), | Aaa | 1.472(a) | 07/15/24 | 11,200 | 11,084,080 |
See Notes to Financial Statements.
Prudential Absolute Return Bond 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) | |||||||||||
ASSET-BACKED SECURITIES (Continued) | ||||||||||||||||
Collateralized Loan Obligations (cont’d.) | ||||||||||||||||
BMI CLO I (Cayman Islands), Series 2013-1AR, | Aaa | 1.204%(a) | 08/01/21 | $ | 10,653 | $ | 10,571,813 | |||||||||
Brookside Mill CLO Ltd. (Cayman Islands), | AAA(b) | 1.394(a) | 04/17/25 | 10,300 | 10,119,534 | |||||||||||
Series 2013-1A, | AA(b) | 3.020 | 04/17/25 | 6,200 | 5,838,100 | |||||||||||
Carlyle Daytona CLO Ltd. (Cayman Islands), | Aaa | 0.488(a) | 04/27/21 | 17,302 | 17,028,158 | |||||||||||
Carlyle Global Market Strategies CLO (Cayman Islands), | Aaa | 1.632(a) | 01/20/25 | 2,500 | 2,497,573 | |||||||||||
Series 2012-4A, Class B1, 144A | Aa2 | 2.492(a) | 01/20/25 | 3,500 | 3,512,635 | |||||||||||
Cavalry CLO II (Cayman Islands), | Aaa | 1.594(a) | 01/17/24 | 4,200 | 4,203,024 | |||||||||||
Series 2013-2A, | AA(b) | 2.244(a) | 01/17/24 | 4,000 | 3,951,176 | |||||||||||
Fraser Sullivan CLO Ltd. (Cayman Islands), | Aaa | 0.724(a) | 03/15/20 | 500 | 487,627 | |||||||||||
Grosvenor Place CLO I BV (Netherlands), | Aaa | 0.474(a) | 07/20/21 | EUR | 133 | 179,108 | ||||||||||
Gulf Stream-Sextant CLO Ltd. (Cayman Islands), | Aaa | 0.493(a) | 08/21/20 | 74 | 73,967 | |||||||||||
ING Investment Management CLO Ltd. (Cayman Islands), | Aaa | 1.384(a) | 04/15/24 | 4,100 | 4,026,532 | |||||||||||
ING Investment Management CLO Ltd., Series 2013-2A, | Aaa | 1.388(a) | 04/25/25 | 2,400 | 2,357,575 |
See Notes to Financial Statements.
14 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
ASSET-BACKED SECURITIES (Continued) | ||||||||||||||||
Collateralized Loan Obligations (cont’d.) | ||||||||||||||||
ING Investment Management CLO Ltd., | AA(b) | 3.070% | 04/25/25 | $ | 2,000 | $ | 1,885,832 | |||||||||
Lafayette CLO Ltd. (Cayman Islands), | AAA(b) | 1.659(a) | 09/06/22 | 255 | 254,815 | |||||||||||
LightPoint CLO III Ltd., | Aaa | 0.514(a) | 09/15/17 | 80 | 78,720 | |||||||||||
LightPoint Pan-European CLO PLC (Ireland), | Aaa | 0.478(a) | 01/31/22 | EUR | 535 | 709,430 | ||||||||||
Marine Park CLO Ltd. (Cayman Islands), | Aaa | 1.733(a) | 05/18/23 | 500 | 499,999 | |||||||||||
Mayport CLO Ltd. (Cayman Islands), | Aaa | 0.512(a) | 02/22/20 | 5,855 | 5,778,684 | |||||||||||
Mountain Capital CLO IV Ltd. (Cayman Islands), | Aaa | 0.504(a) | 03/15/18 | 101 | 100,898 | |||||||||||
Mountain View CLO III Ltd., | Aaa | 0.461(a) | 04/16/21 | 1,982 | 1,952,120 | |||||||||||
OCP CLO Ltd. (Cayman Islands), | Aaa | 1.662(a) | 11/22/23 | 1,700 | 1,698,348 | |||||||||||
Series 2012-2A, | AA(b) | 2.462(a) | 11/22/23 | 700 | 682,449 | |||||||||||
Shackleton CLO Ltd. (Cayman Islands), | AA(b) | 3.440 | 04/15/25 | 2,800 | 2,684,808 |
See Notes to Financial Statements.
Prudential Absolute Return Bond 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) | |||||||||||
ASSET-BACKED SECURITIES (Continued) | ||||||||||||||||
Collateralized Loan Obligations (cont’d.) | ||||||||||||||||
Sheridan Square CLO Ltd. (Cayman Islands), | Aaa | 1.294%(a) | 04/15/25 | $ | 10,400 | $ | 10,169,422 | |||||||||
Sound Point CLO Ltd. (Cayman Islands), | AA(b) | 2.942(a) | 10/20/23 | 550 | 551,515 | |||||||||||
Trimaran CLO VI Ltd. (Cayman Islands), | Aaa | 0.515(a) | 11/01/18 | 314 | 311,483 | |||||||||||
Tyron Park CLO Ltd. (Cayman Islands), | Aaa | 1.392(a) | 07/15/25 | 12,500 | 12,313,163 | |||||||||||
Wind River CLO Ltd. (Cayman Islands), | Aaa | 0.000(a)(c) | 01/18/26 | 4,750 | 4,736,225 | |||||||||||
|
| |||||||||||||||
171,844,467 | ||||||||||||||||
Non-Residential Mortgage-Backed Securities 2.8% | ||||||||||||||||
Atrium IV, | Aaa | 0.508(a) | 06/08/19 | 1,722 | 1,704,363 | |||||||||||
Chase Issuance Trust, | Baa2 | 0.634(a) | 04/15/19 | 8,000 | 7,892,888 | |||||||||||
Citibank Credit Card Issuance Trust, | Baa2 | 0.640(a) | 03/24/17 | 4,800 | 4,785,298 | |||||||||||
Fortress Credit BSL Ltd. (Cayman Islands), | Aaa | 1.422(a) | 01/19/25 | 1,000 | 984,389 | |||||||||||
Series 2013-1A, Class B, 144A | AA(b) | 2.142(a) | 01/19/25 | 1,050 | 1,037,504 | |||||||||||
LCM III LP (Cayman Islands), | Aaa | 0.520(a) | 06/01/17 | 44 | 44,342 |
See Notes to Financial Statements.
16 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
ASSET-BACKED SECURITIES (Continued) | ||||||||||||||||
Non-Residential Mortgage-Backed Securities (cont’d.) |
| |||||||||||||||
Magnetite VI Ltd. (Cayman Islands), | AAA(b) | 1.754%(a) | 09/15/23 | $ | 10,900 | $ | 10,898,060 | |||||||||
Octagon Investment Partners XV Ltd. (Cayman Islands), | Aaa | 1.532(a) | 01/19/25 | 3,750 | 3,673,583 | |||||||||||
Octagon Investment Partners XVI Ltd. (Cayman Islands), | Aaa | 1.392(a) | 07/17/25 | 8,000 | 7,879,920 | |||||||||||
OHA Intrepid Leveraged Loan Fund Ltd. (Cayman Islands), | Aaa | 1.162(a) | 04/20/21 | 6,770 | 6,753,080 | |||||||||||
OZLM Funding IV Ltd. (Cayman Islands), | Aaa | 1.470(a) | 07/22/25 | 4,200 | 4,124,824 | |||||||||||
Sierra Timeshare Receivables Funding LLC, | A+(b) | 1.870 | 08/20/29 | 556 | 557,832 | |||||||||||
Slater Mill Loan Fund LP (Cayman Islands), | AA(b) | 2.913(a) | 08/17/22 | 250 | 250,470 | |||||||||||
SVO VOI Mortgage LLC, | A+(b) | 2.000 | 09/20/29 | 713 | 711,787 | |||||||||||
|
| |||||||||||||||
51,298,340 | ||||||||||||||||
Residential Mortgage-Backed Securities 8.8% | ||||||||||||||||
ABFC Trust, | BBB+(b) | 0.870(a) | 06/25/34 | 1,127 | 1,065,751 | |||||||||||
Accredited Mortgage Loan Trust, | Aaa | 1.370(a) | 10/25/34 | 5,736 | 5,510,114 | |||||||||||
Series 2004-3, Class 2A5 | A1 | 1.250(a) | 10/25/34 | 2,805 | 2,677,020 | |||||||||||
Series 2005-3, Class M1 | Ba1 | 0.620(a) | 09/25/35 | 2,000 | 1,828,864 | |||||||||||
ACE Securities Corp. Home Equity Loan Trust, | B2 | 1.070(a) | 09/25/33 | 755 | 697,929 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 17 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
ASSET-BACKED SECURITIES (Continued) | ||||||||||||||||
Residential Mortgage-Backed Securities (cont’d.) | ||||||||||||||||
Aegis Asset-Backed Securities Trust Mortgage Pass-Through Certificates, | Aa1 | 0.530%(a) | 10/25/34 | $ | 3,283 | $ | 3,219,364 | |||||||||
Ameriquest Mortgage Securities, Inc. Asset-Backed Pass-Through Certificates, | B1 | 1.520(a) | 02/25/33 | 2,778 | 2,615,196 | |||||||||||
Series 2005-R10, Class A2C | A3 | 0.500(a) | 01/25/36 | 564 | 554,427 | |||||||||||
Amortizing Residential Collateral Trust, Series 2002-BC8, Class A3 | A3 | 1.170(a) | 11/25/32 | 1,380 | 1,326,437 | |||||||||||
Argent Securities, Inc., Series 2003-W5, Class M1 | Baa1 | 1.220(a) | 10/25/33 | 106 | 101,914 | |||||||||||
Series 2003-W7, Class A2 | Aaa | 0.950(a) | 03/25/34 | 1,419 | 1,310,758 | |||||||||||
Argent Securities, Inc. Asset-Backed Pass-Through Certificate, | Ba1 | 1.220(a) | 12/25/33 | 1,292 | 1,237,074 | |||||||||||
Series 2003-W9, Class M1 | Baa1 | 1.205(a) | 01/25/34 | 1,717 | 1,607,426 | |||||||||||
Series 2004-W6, Class AF | Aaa | 3.623(d) | 05/25/34 | 352 | 356,584 | |||||||||||
Series 2004-W6, Class AV5 | Aaa | 0.570(a) | 05/25/34 | 587 | 544,815 | |||||||||||
Asset-Backed Pass-Through Certificates, Series 2004-R2, Class A1A | Baa2 | 0.860(a) | 04/25/34 | 5,357 | 5,073,218 | |||||||||||
Asset-Backed Securities Corp. Home Equity Loan Trust, Series 2003-HE6, Class A2 | Aaa | 0.850(a) | 11/25/33 | 1,758 | 1,649,745 | |||||||||||
Series 2004-HE6, Class A2 | Aaa | 0.530(a) | 09/25/34 | 2,328 | 2,228,682 | |||||||||||
Series 2005-HE1, Class M1 | B1 | 0.920(a) | 03/25/35 | 7,134 | 6,911,670 | |||||||||||
Bear Stearns Asset-Backed Securities I Trust, Series 2004-FR2, Class M2 | Ba2 | 1.190(a) | 06/25/34 | 1,100 | 924,718 | |||||||||||
Series 2004-HE9, Class M1 | Ba1 | 1.145(a) | 11/25/34 | 2,631 | 2,446,083 | |||||||||||
Series 2004-HE11, Class M2 | B1 | 1.745(a) | 12/25/34 | 3,000 | 2,796,225 | |||||||||||
Bear Stearns Asset-Backed Securities Trust, | A3 | 0.760(a) | 06/25/43 | 223 | 220,511 | |||||||||||
Series 2003-HE1, Class M1 | A3 | 1.265(a) | 01/25/34 | 806 | 745,040 |
See Notes to Financial Statements.
18 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
ASSET-BACKED SECURITIES (Continued) | ||||||||||||||||
Residential Mortgage-Backed Securities (cont’d.) | ||||||||||||||||
Chase Funding Trust, | A1 | 0.810%(a) | 08/25/32 | $ | 268 | $ | 243,112 | |||||||||
Series 2003-4, Class 1A5 | Ba1 | 5.416 | 05/25/33 | 1,513 | 1,585,575 | |||||||||||
Citigroup Mortgage Loan Trust, Inc., Series 2005-OPT1, Class M1 | A3 | 0.800(a) | 02/25/35 | 317 | 294,462 | |||||||||||
Countrywide Asset-Backed Certificates, | Ba3 | 1.220(a) | 07/25/33 | 522 | 489,632 | |||||||||||
Series 2004-1, Class M1 | Ba1 | 0.920(a) | 03/25/34 | 390 | 367,446 | |||||||||||
Series 2004-BC4, Class M1 | B+(b) | 1.220(a) | 11/25/34 | 1,440 | 1,326,655 | |||||||||||
Credit-Based Asset Servicing and Securitization LLC, | A2 | 3.379(d) | 12/25/32 | 272 | 263,457 | |||||||||||
Series 2003-CB5, Class M1 | B2 | 1.190(a) | 11/25/33 | 267 | 252,540 | |||||||||||
Series 2004-CB1, Class AF1 | Aaa | 4.520(d) | 10/25/32 | 1,974 | 1,891,500 | |||||||||||
Equifirst Mortgage Loan Trust, | A3 | 0.620(a) | 04/25/35 | 1,531 | 1,401,236 | |||||||||||
Finance America Mortgage Loan Trust, | Ba1 | 1.220(a) | 09/25/33 | 288 | 270,343 | |||||||||||
Series 2004-2, Class M1 | Baa1 | 0.995(a) | 08/25/34 | 8,574 | 7,776,037 | |||||||||||
First Frankin Mortgage Loan Trust, | AA+(b) | 0.930(a) | 08/25/34 | 2,002 | 1,892,336 | |||||||||||
Series 2005-FF3, Class M3 | Baa2 | 0.650(a) | 04/25/35 | 6,500 | 6,087,159 | |||||||||||
Fremont Home Loan Trust, | Baa3 | 0.965(a) | 03/25/35 | 2,512 | 2,311,507 | |||||||||||
GSAMP Trust, | A3 | 0.770(a) | 08/25/33 | 1,351 | 1,221,739 | |||||||||||
Home Equity Asset Trust, | B2 | 1.220(a) | 02/25/34 | 2,003 | 1,876,598 | |||||||||||
Series 2004-3, Class M1 | Ba1 | 1.025(a) | 08/25/34 | 1,959 | 1,823,928 | |||||||||||
Series 2004-7, Class A2 | Aaa | 1.010(a) | 01/25/35 | 1,050 | 984,622 | |||||||||||
HSBC Home Equity Loan Trust, | Aaa | 0.463(a) | 01/20/34 | 3,491 | 3,435,678 | |||||||||||
Series 2006-1, Class A1 | Aaa | 0.333(a) | 01/20/36 | 334 | 324,856 | |||||||||||
Series 2006-2, Class A2 | Aaa | 0.353(a) | 03/20/36 | 461 | 449,859 | |||||||||||
Series 2007-3, Class A4 | Aa2 | 1.673(a) | 11/20/36 | 1,020 | 983,593 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 19 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
ASSET-BACKED SECURITIES (Continued) | ||||||||||||||||
Residential Mortgage-Backed Securities (cont’d.) | ||||||||||||||||
Long Beach Mortgage Loan Trust, | Aa1 | 0.790%(a) | 08/25/33 | $ | 659 | $ | 593,722 | |||||||||
Series 2004-2, Class A1 | Aa1 | 0.610(a) | 06/25/34 | 985 | 886,600 | |||||||||||
Mastr Asset-Backed Securities Trust, | B1 | 2.945(a) | 12/25/32 | 4,960 | 4,787,882 | |||||||||||
Series 2003-WMC2, Class M2 | B3 | 2.645(a) | 08/25/33 | 1,750 | 1,700,959 | |||||||||||
Series 2005-NC1, Class M1 | Baa3 | 0.890(a) | 12/25/34 | 8,068 | 7,455,042 | |||||||||||
Morgan Stanley ABS Capital I, Inc. Trust, | Ba3 | 1.190(a) | 10/25/33 | 7,206 | 6,651,735 | |||||||||||
Series 2003-NC6, Class M1 | Ba1 | 1.370(a) | 06/25/33 | 1,061 | 1,025,115 | |||||||||||
Series 2003-NC8, Class M1 | Caa1 | 1.220(a) | 09/25/33 | 1,131 | 1,064,375 | |||||||||||
Series 2004-HE3, Class M1 | BB-(b) | 1.025(a) | 03/25/34 | 1,087 | 1,003,094 | |||||||||||
Series 2004-HE4, Class M1 | B3 | 1.070(a) | 05/25/34 | 3,174 | 2,969,555 | |||||||||||
Series 2004-HE5, Class M1 | Ba3 | 1.115(a) | 06/25/34 | 1,577 | 1,468,115 | |||||||||||
Series 2004-NC3, Class M1 | B3 | 0.965(a) | 03/25/34 | 3,991 | 3,758,244 | |||||||||||
Series 2004-NC6, Class M1 | B1 | 1.070(a) | 07/25/34 | 3,004 | 2,814,415 | |||||||||||
Series 2004-OP1, Class M1 | A3 | 1.040(a) | 11/25/34 | 1,941 | 1,713,486 | |||||||||||
Series 2004-WMC1, Class M1 | Ba1 | 1.100(a) | 06/25/34 | 252 | 234,782 | |||||||||||
Morgan Stanley Home Equity Loan Trust, Series 2006-1, Class A2C | Ba3 | 0.500(a) | 12/25/35 | 443 | 413,143 | |||||||||||
New Century Home Equity Loan Trust, Series 2005-3, Class M2 | Baa3 | 0.660(a) | 07/25/35 | 1,500 | 1,394,852 | |||||||||||
Option Mortgage Loan Trust, | B1 | 1.070(a) | 01/25/34 | 2,655 | 2,464,125 | |||||||||||
Option One Mortgage Loan Trust, | Ba1 | 0.810(a) | 07/25/33 | 1,001 | 924,947 | |||||||||||
Series 2005-1, Class A4 | AA+(b) | 0.970(a) | 02/25/35 | 959 | 936,035 | |||||||||||
Series 2005-3, Class M1 | A3 | 0.640(a) | 08/25/35 | 2,000 | 1,841,794 | |||||||||||
Park Place Securities, Inc., | Baa3 | 0.620(a) | 09/25/35 | 2,500 | 2,349,560 | |||||||||||
RAMP Trust, | Baa1 | 0.660(a) | 07/25/35 | 3,509 | 3,277,104 | |||||||||||
RASC Trust, | Ba1 | 0.640(a) | 04/25/35 | 2,000 | 1,859,890 | |||||||||||
Series 2005-KS8, Class M1 | A2 | 0.580(a) | 08/25/35 | 283 | 280,998 |
See Notes to Financial Statements.
20 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
ASSET-BACKED SECURITIES (Continued) | ||||||||||||||||
Residential Mortgage-Backed Securities (cont’d.) | ||||||||||||||||
Saxon Asset Securities Trust, | A3 | 0.630%(a) | 11/25/35 | $ | 1,600 | $ | 1,516,074 | |||||||||
Securitized Asset-Backed Receivables LLC Trust, | B1 | 0.950(a) | 02/25/34 | 2,206 | 1,972,582 | |||||||||||
Series 2004-OP1, Class M1 | Ba3 | 0.935(a) | 02/25/34 | 638 | 585,255 | |||||||||||
Specialty Underwriting & Residential Finance Trust, | Ba3 | 1.070(a) | 11/25/34 | 2,599 | 2,385,606 | |||||||||||
Series 2004-BC3, Class M1 | B1 | 1.100(a) | 07/25/35 | 2,773 | 2,608,852 | |||||||||||
Series 2004-BC4, Class A2C | Baa2 | 1.150(a) | 10/25/35 | 1,846 | 1,731,775 | |||||||||||
Structured Asset Investment Loan Trust, | A+(b) | 1.170(a) | 10/25/33 | 2,972 | 2,789,463 | |||||||||||
Series 2004-1, Class A3 | AA+(b) | 0.970(a) | 02/25/34 | 4,783 | 4,475,505 | |||||||||||
Series 2004-8, Class A8 | Aaa | 1.170(a) | 09/25/34 | 2,123 | 2,049,859 | |||||||||||
Series 2005-4, Class M2 | Baa3 | 0.830(a) | 05/25/35 | 4,000 | 3,798,608 | |||||||||||
Structured Asset Securities Corp. Mortgage Loan Trust, | Baa3 | 0.570(a) | 11/25/35 | 250 | 235,555 | |||||||||||
Wells Fargo Mortgage-Backed Securities Trust, | Baa3 | 2.617(a) | 12/25/34 | 522 | 526,031 | |||||||||||
|
| |||||||||||||||
163,748,169 | ||||||||||||||||
|
| |||||||||||||||
TOTAL ASSET-BACKED SECURITIES | 389,663,688 | |||||||||||||||
�� |
| |||||||||||||||
BANK LOANS(a) 6.1% | ||||||||||||||||
Aerospace & Defense | ||||||||||||||||
Wesco Aircraft Hardware Corp. | Ba3 | 2.430 | 12/07/17 | 899 | 897,517 | |||||||||||
Airlines 0.1% | ||||||||||||||||
United Airlines | Ba2 | 4.000 | 04/01/19 | 1,318 | 1,325,296 | |||||||||||
Automotive 0.2% | ||||||||||||||||
Allison Transmission, Inc. | Ba3 | 3.180 | 08/07/17 | 1,446 | 1,449,351 | |||||||||||
Chrysler Group LLC | Ba1 | 4.250 | 05/24/17 | 82 | 82,170 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 21 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
BANK LOANS(a) (Continued) | ||||||||||||||||
Automotive (cont’d) | ||||||||||||||||
Delphi Corp. | Baa2 | 1.688% | 03/01/18 | $ | 2,963 | $ | 2,955,094 | |||||||||
Schaeffler AG (Germany) | Ba2 | 4.250 | 01/27/17 | 100 | 100,524 | |||||||||||
|
| |||||||||||||||
4,587,139 | ||||||||||||||||
Banking 0.4% | ||||||||||||||||
AA Group (United Kingdom) | BBB-(b) | 3.264 | 07/31/18 | GBP | 3,000 | 4,762,134 | ||||||||||
Kasima LLC | Baa2 | 3.250 | 05/17/21 | 2,600 | 2,582,666 | |||||||||||
|
| |||||||||||||||
7,344,800 | ||||||||||||||||
Brokerage 0.1% | ||||||||||||||||
LPL Holdings, Inc. | Ba2 | 3.250 | 03/29/19 | 1,496 | 1,488,135 | |||||||||||
Cable 0.4% | ||||||||||||||||
Cequel Communication LLC | Ba2 | 3.500 | 02/14/19 | 250 | 250,043 | |||||||||||
Charter Communications Operating LLC | Baa3 | 3.000 | 07/01/20 | 1,995 | 1,973,237 | |||||||||||
CSC Holdings LLC | Baa3 | 2.668 | 04/17/20 | 3,965 | 3,927,394 | |||||||||||
Virgin Media Investment Holdings Ltd. (United Kingdom) | Ba3 | 3.500 | 06/08/20 | 1,500 | 1,498,542 | |||||||||||
|
| |||||||||||||||
7,649,216 | ||||||||||||||||
Capital Goods 0.7% | ||||||||||||||||
ADS Waste Holdings, Inc. | B1 | 4.250 | 10/09/19 | 1,496 | 1,504,024 | |||||||||||
Allflex Holdings III, Inc. | B1 | 4.250 | 07/17/20 | (e)(f) | 1,000 | 1,003,125 | ||||||||||
Gardner Denver, Inc. | B1 | 4.250 | 07/30/20 | (e)(f) | 2,000 | 2,000,228 | ||||||||||
Gardner Denver, Inc. | B1 | 4.750 | 07/30/20 | (e)(f) | EUR | 1,350 | 1,842,708 | |||||||||
OGF SA | B2 | 4.658 | 10/30/20 | EUR | 3,000 | 4,107,635 | ||||||||||
RBS Global, Inc./Rexnord LLC | B2 | 4.000 | 08/21/20 | 3,500 | 3,501,096 | |||||||||||
|
| |||||||||||||||
13,958,816 | ||||||||||||||||
Chemicals 0.3% | ||||||||||||||||
Ceramtec GmbH (Germany) | Ba3 | 4.500 | 08/30/20 | EUR | 1,304 | 1,782,023 | ||||||||||
Ceramtec GmbH (Germany) | B2 | 4.750 | 08/30/20 | EUR | 396 | 542,029 |
See Notes to Financial Statements.
22 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
BANK LOANS(a) (Continued) | ||||||||||||||||
Eastman Chemical Co. | Baa2 | 1.688 | 02/28/17 | $ | 174 | $ | 173,333 | |||||||||
Macdermid, Inc. | B1 | 4.000 | 06/08/20 | 998 | 999,246 | |||||||||||
OXEA Finance & Cy SCA (Luxembourg) | B1 | 4.500 | 01/15/20 | EUR | 1,333 | 1,812,150 | ||||||||||
|
| |||||||||||||||
5,308,781 | ||||||||||||||||
Consumer 0.6% | ||||||||||||||||
ISS A/S (Denmark) | Ba3 | 3.750% | 04/30/18 | 2,219 | 2,218,050 | |||||||||||
Pilot Travel Centers LLC | Ba2 | 3.750 | 03/30/18 | 247 | 247,077 | |||||||||||
PVH Corp. | Ba1 | 3.250 | 02/13/20 | 1,325 | 1,328,290 | |||||||||||
Revlon Consumer Products Corp. | Ba2 | 4.000 | 08/19/19 | 1,840 | 1,844,569 | |||||||||||
Seaworld Parks & Entertainment, Inc. | Ba3 | 3.000 | 05/14/20 | 2,368 | 2,346,844 | |||||||||||
Spectrum Brands, Inc. | Ba3 | 3.000 | 09/04/17 | 2,500 | 2,499,553 | |||||||||||
|
| |||||||||||||||
10,484,383 | ||||||||||||||||
Electric 0.4% | ||||||||||||||||
Calpine Construction Finance Co. LP | Ba3 | 3.000 | 05/04/20 | 524 | 516,487 | |||||||||||
Calpine Corp. | B1 | 4.000 | 04/01/18 | 27 | �� | 26,695 | ||||||||||
Calpine Corp. | B1 | 4.000 | 04/01/18 | 27 | 26,705 | |||||||||||
Calpine Corp. | B1 | 4.000 | 10/09/19 | 495 | 497,398 | |||||||||||
NRG Energy, Inc. | Baa3 | 2.750 | 07/01/18 | 5,734 | 5,723,295 | |||||||||||
|
| |||||||||||||||
6,790,580 | ||||||||||||||||
Foods 0.2% | ||||||||||||||||
Birds Eye Iglo Group Ltd. | B1 | 5.129 | 01/31/18 | EUR | 375 | 515,068 | ||||||||||
Dunkin Brands, Inc. | B2 | 3.750 | 02/14/20 | 1,239 | 1,241,624 | |||||||||||
H.J. Heinz Co. | Ba2 | 3.250 | 06/07/19 | 1,995 | 2,004,410 | |||||||||||
|
| |||||||||||||||
3,761,102 | ||||||||||||||||
Gaming 0.4% | ||||||||||||||||
Bally Technologies, Inc. | Ba3 | 0.000(c) | 06/30/21 | 1,250 | 1,251,173 | |||||||||||
Boyd Gaming Corp. | Ba3 | 4.000 | 08/14/20 | 850 | 849,363 | |||||||||||
CCM Merger, Inc. | B2 | 5.000 | 03/01/17 | 367 | 369,186 | |||||||||||
Las Vegas Sands LLC | Ba2 | 1.670 | 05/23/14 | 866 | 864,726 | |||||||||||
Las Vegas Sands LLC | Ba2 | 1.670 | 05/23/14 | 2,127 | 2,125,524 | |||||||||||
MGM Resorts International | Ba2 | 2.918 | 12/20/17 | 1,489 | 1,487,261 | |||||||||||
|
| |||||||||||||||
6,947,233 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 23 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
BANK LOANS(a) (Continued) | ||||||||||||||||
Healthcare & Pharmaceutical 0.6% |
| |||||||||||||||
Alere, Inc. | Ba3 | 3.168 | 06/30/16 | $ | 46 | $ | 45,911 | |||||||||
Alere, Inc. | Ba3 | 4.250 | 06/30/17 | 46 | 46,085 | |||||||||||
Alere, Inc. | Ba3 | 4.250 | 06/30/17 | 17 | 16,929 | |||||||||||
Apria Healthcare Group, Inc. | B2 | 6.750 | 04/06/20 | 249 | 251,865 | |||||||||||
Catalent Pharma Solutions, Inc. | Ba3 | 3.668% | 09/15/16 | 842 | 843,108 | |||||||||||
Community Health Systems, Inc. | Ba2 | 3.760 | 01/25/17 | 500 | 501,389 | |||||||||||
DaVita, Inc. | Ba2 | 2.670 | 11/01/17 | 1,684 | 1,683,322 | |||||||||||
DaVita, Inc. | Ba2 | 4.000 | 11/01/19 | 101 | 101,633 | |||||||||||
Endo Pharmaceuticals Holdings, Inc. | �� | Ba1 | 2.000 | 03/15/18 | 3,394 | 3,385,729 | ||||||||||
HCA, Inc. | BB(b) | 2.998 | 03/31/17 | 200 | 200,374 | |||||||||||
HCR Healthcare LLC | B1 | 5.000 | 04/06/18 | 98 | 95,306 | |||||||||||
Health Management Assoc., Inc. | Ba3 | 2.750 | 11/18/16 | 444 | 443,126 | |||||||||||
Hologic, Inc. | Ba2 | 2.168 | 08/01/17 | 234 | 234,375 | |||||||||||
Lifepoint Hospital, Inc. | Ba1 | 1.920 | 07/24/17 | 581 | 580,281 | |||||||||||
Quintiles Transnational Corp. | B1 | 4.000 | 06/08/18 | 982 | 983,789 | |||||||||||
RPI Finance Trust (Luxembourg) | Baa2 | 3.500 | 05/09/18 | 390 | 390,928 | |||||||||||
Universal Health Services, Inc. | Ba2 | 1.678 | 08/15/16 | 488 | 486,891 | |||||||||||
|
| |||||||||||||||
10,291,041 | ||||||||||||||||
Lodging 0.1% | ||||||||||||||||
Hilton Worldwide Finance LLC | Ba3 | 4.000 | 10/26/20 | 1,500 | 1,508,250 | |||||||||||
Media & Entertainment 0.3% | ||||||||||||||||
Cinemark USA, Inc. | Ba1 | 3.177 | 12/18/19 | 1,092 | 1,097,209 | |||||||||||
Entravision Communications Corp. | B2 | 3.500 | 05/29/20 | 1,000 | 981,875 | |||||||||||
National CineMedia LLC | Ba2 | 2.920 | 11/26/19 | 2,000 | 1,991,500 | |||||||||||
Nielsen Finance LLC | Ba2 | 2.924 | 05/02/16 | 1,489 | 1,492,472 | |||||||||||
|
| |||||||||||||||
5,563,056 | ||||||||||||||||
Non-Captive Finance 0.3% | ||||||||||||||||
RBS WorldPay, Inc. (United Kingdom) | Ba3 | 4.500 | 11/30/19 | 3,500 | 3,508,750 | |||||||||||
RBS WorldPay, Inc. (United Kingdom) | Ba3 | 5.750 | 11/29/19 | GBP | 1,500 | 2,422,656 | ||||||||||
|
| |||||||||||||||
5,931,406 | ||||||||||||||||
Packaging 0.1% | ||||||||||||||||
Pact Group USA, Inc. | Ba3 | 3.750 | 05/29/20 | 1,995 | 1,976,297 |
See Notes to Financial Statements.
24 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
BANK LOANS(a) (Continued) | ||||||||||||||||
Pipelines & Other 0.1% | ||||||||||||||||
Ruby Western Pipeline Holdings LLC | Ba2 | 3.500 | 03/27/20 | $ | 2,179 | $ | 2,182,041 | |||||||||
Real Estate Investment Trusts 0.1% | ||||||||||||||||
CBRE Services | Ba1 | 2.930% | 03/26/21 | 2,786 | 2,786,872 | |||||||||||
Retailers 0.1% | ||||||||||||||||
Alliance Boots Holdings Ltd. (United Kingdom) | B1 | 3.977 | 07/09/17 | GBP | 325 | 517,201 | ||||||||||
BJ’s Wholesale Club, Inc. | Caa1 | 4.250 | 09/26/19 | 997 | 997,261 | |||||||||||
|
| |||||||||||||||
1,514,462 | ||||||||||||||||
Technology 0.5% | ||||||||||||||||
CDW Corp. | Ba3 | 3.500 | 04/29/20 | 1,244 | 1,235,114 | |||||||||||
Dealer Computer Services, Inc. | Ba3 | 2.168 | 04/21/16 | 48 | 48,219 | |||||||||||
Edwards (Cayman Islands II) Ltd. | B2 | 4.750 | 03/26/20 | 793 | 793,710 | |||||||||||
First Data Corp | B1 | 4.170 | 09/24/18 | 225 | 225,281 | |||||||||||
First Data Corp. | B1 | 4.170 | 03/26/18 | 141 | 140,906 | |||||||||||
Freescale Semiconductor, Inc. | B1 | 5.000 | 02/28/20 | 100 | 100,270 | |||||||||||
Interactive Data Corp. | Ba3 | 3.750 | 02/12/18 | 2,993 | 2,990,565 | |||||||||||
NXP BV (Netherlands) | Ba3 | 4.750 | 01/11/20 | 422 | 426,294 | |||||||||||
Sensata Technologies BV, Inc. (Netherlands) | Baa3 | 3.750 | 05/12/18 | 91 | 91,610 | |||||||||||
SunGard Data Systems, Inc. | Ba3 | 4.000 | 03/06/20 | 1,493 | 1,504,161 | |||||||||||
Syniverse Holdings, Inc. | B1 | 4.000 | 04/23/19 | 970 | 971,138 | |||||||||||
|
| |||||||||||||||
8,527,268 | ||||||||||||||||
Telecommunications 0.1% | ||||||||||||||||
Crown Castle Operating Co. | Ba2 | 3.250 | 01/31/19 | 798 | 795,548 | |||||||||||
Level 3 Finance, Inc. | Ba3 | 4.000 | 01/15/20 | 1,000 | 1,004,490 | |||||||||||
|
| |||||||||||||||
1,800,038 | ||||||||||||||||
Transportation | ||||||||||||||||
Hertz Corp. | Ba1 | 3.000 | 03/11/18 | 296 | 296,171 | |||||||||||
RAC PLC | B2 | 5.141 | 10/29/19 | (e)(f) | GBP | 300 | 485,834 | |||||||||
|
| |||||||||||||||
782,005 | ||||||||||||||||
|
| |||||||||||||||
TOTAL BANK LOANS | 113,405,734 | |||||||||||||||
|
|
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 25 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES 14.5% |
| |||||||||||||||
Banc of America Commercial Mortgage Trust, | BBB+(b) | 5.889%(a) | 07/10/44 | $ | 700 | $ | 767,350 | |||||||||
Series 2006-6, Class A2 | Aaa | 5.309 | 10/10/45 | 324 | 326,130 | |||||||||||
Series 2006-6, Class A4 | Aaa | 5.356 | 10/10/45 | 2,988 | 3,248,380 | |||||||||||
Series 2007-1, Class A3 | Aaa | 5.449 | 01/15/49 | 128 | 127,843 | |||||||||||
Series 2007-1, Class A4 | Aaa | 5.451 | 01/15/49 | 2,000 | 2,201,166 | |||||||||||
Series 2007-1, Class AAB | Aaa | 5.422 | 01/15/49 | 26 | 26,363 | |||||||||||
Series 2007-2, Class A1A | A+(b) | 5.572(a) | 04/10/49 | 2,595 | 2,841,925 | |||||||||||
Series 2007-2, Class A3 | AAA(b) | 5.596(a) | 04/10/49 | 200 | 207,763 | |||||||||||
Series 2007-2, Class A4 | A+(b) | 5.623(a) | 04/10/49 | 5,000 | 5,601,305 | |||||||||||
Series 2007-5, Class A3 | AAA(b) | 5.620 | 02/10/51 | 29 | 29,679 | |||||||||||
Banc of America Merrill Lynch Commercial Mortgage, Inc., | Aaa | 4.913(a) | 07/10/43 | 50 | 52,700 | |||||||||||
Bear Stearns Commercial Mortgage Securities, | AAA(b) | 5.736 | 06/11/50 | 179 | 184,110 | |||||||||||
Citigroup Commercial Mortgage Trust, | Aaa | 5.705(a) | 12/10/49 | 1,210 | 1,369,486 | |||||||||||
Series 2008-C7, Class A4 | Aaa | 6.132(a) | 12/10/49 | 4,000 | 4,576,344 | |||||||||||
Series 2013-GC11, Class A3 | Aaa | 2.815 | 04/10/46 | 200 | 190,479 | |||||||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust, | Aaa | 5.617 | 10/15/48 | 20 | 21,950 | |||||||||||
Series 2007-CD4, Class A2B | Aaa | 5.205 | 12/11/49 | 7 | 6,919 | |||||||||||
Series 2007-CD4, Class A3 | Aaa | 5.293 | 12/11/49 | 200 | 204,016 | |||||||||||
Series 2007-CD4, Class A4 | Aa3 | 5.322 | 12/11/49 | 6,325 | 7,008,214 | |||||||||||
COBALT Commercial Mortgage Trust, Series 2006-C1, Class A4 | AA+(b) | 5.223 | 08/15/48 | 7,427 | 8,052,353 | |||||||||||
Commercial Mortgage | Aaa | 2.540 | 12/10/45 | 1,000 | 938,493 | |||||||||||
Series 2013-CR11, Class A3 | Aaa | 3.983 | 10/10/46 | 5,300 | 5,461,465 | |||||||||||
Series 2013-CR12, Class A2 | Aaa | 2.904 | 10/10/46 | 10,200 | 10,506,000 | |||||||||||
Series 2013-CR9, Class A3 | AAA(b) | 4.022 | 07/10/45 | 7,200 | 7,484,292 | |||||||||||
Commercial Mortgage Trust, | Baa1 | 4.859(a) | 08/10/42 | 1,200 | 1,248,404 | |||||||||||
Series 2006-C7, Class A4 | AAA(b) | 5.754(a) | 06/10/46 | 85 | 93,070 |
See Notes to Financial Statements.
26 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (Continued) |
| |||||||||||||||
Series 2007-GG9, Class A2 | Aaa | 5.381% | 03/10/39 | $ | 275 | $ | 281,948 | |||||||||
Series 2012-CR1, Class A3 | Aaa | 3.391 | 05/15/45 | 15 | 15,125 | |||||||||||
Series 2013-CR10, Class A3 | Aaa | 3.923 | 08/10/46 | 3,500 | 3,619,658 | |||||||||||
Series 2013-CR7, Class A3 | Aaa | 2.929 | 03/10/46 | 265 | 254,405 | |||||||||||
Credit Suisse Commercial Mortgage Trust, | AAA(b) | 5.390(a) | 02/15/39 | 1,014 | 1,088,136 | |||||||||||
Series 2006-C5, Class A3 | Aaa | 5.311 | 12/15/39 | 2,600 | 2,836,090 | |||||||||||
Series 2007-C4, Class A3 | Aaa | 5.761(a) | 09/15/39 | 1,383 | 1,400,664 | |||||||||||
Credit Suisse First Boston Mortgage Securities Corp., | A1 | 4.832 | 04/15/37 | 3,337 | 3,473,814 | |||||||||||
Series 2005-C6, Class AM | Aaa | 5.230(a) | 12/15/40 | 100 | 106,487 | |||||||||||
Federal National Mortgage Association, | AA+(b) | 2.229(a) | 12/25/19 | 50,576 | 4,435,981 | |||||||||||
FHLMC Multifamily Structured Pass-Through Certificates, | AA+(b) | 1.219(a) | 04/25/20 | 5,502 | 323,970 | |||||||||||
Series K008, Class X1, IO | AA+(b) | 1.667(a) | 06/25/20 | 1,283 | 106,720 | |||||||||||
Series K010, Class X1, IO | AA+(b) | 0.397(a) | 10/25/20 | 24,705 | 420,259 | |||||||||||
Series K019, Class A2 | AA+(b) | 2.272 | 03/25/22 | 2,000 | 1,896,216 | |||||||||||
Series K020, Class A2, IO | AA+(b) | 2.373 | 05/25/22 | 1,430 | 1,358,634 | |||||||||||
Series K020, Class X1, IO | AA+(b) | 1.474(a) | 05/25/22 | 1,981 | 190,811 | |||||||||||
Series K021, Class A2 | AA+(b) | 2.396 | 06/25/22 | 565 | 536,718 | |||||||||||
Series K021, Class X1, IO | AA+(b) | 1.512(a) | 06/25/22 | 4,479 | 449,295 | |||||||||||
Series K501, Class X1A, IO | AA+(b) | 1.752(a) | 08/25/16 | 391 | 13,400 | |||||||||||
Series K710, Class X1, IO | AA+(b) | 1.783(a) | 05/25/19 | 497 | 41,361 | |||||||||||
Series K711, Class X1, IO | AA+(b) | 1.710(a) | 07/25/19 | 3,988 | 323,371 | |||||||||||
GE Capital Commercial Mortgage Corp., | Aaa | 5.310(a) | 11/10/45 | 4,000 | 4,282,916 | |||||||||||
Series 2007-C1, Class AAB | Aaa | 5.477 | 12/10/49 | 96 | 99,828 | |||||||||||
GMAC Commercial Mortgage Securities, Inc. Trust, | AAA(b) | 4.754 | 05/10/43 | 425 | 441,594 | |||||||||||
Greenwich Capital Commercial Funding Corp., | Aaa | 4.569 | 08/10/42 | 27 | 26,482 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 27 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (Continued) |
| |||||||||||||||
Greenwich Capital Commercial Mortgage Trust, | Aaa | 4.799%(a) | 08/10/42 | $ | 1,570 | $ | 1,620,554 | |||||||||
Series 2005-GG5, Class A5 | Aa2 | 5.224(a) | 04/10/37 | 5,000 | 5,304,635 | |||||||||||
Series 2005-GG5, Class AAB | Aaa | 5.190(a) | 04/10/37 | 78 | 79,510 | |||||||||||
Greenwich Capital Commercial Mortgage Trust II, | AAA(b) | 5.716 | 12/10/49 | 102 | 101,873 | |||||||||||
GS Mortgage Securities Corp. II, | Aaa | 4.680 | 07/10/39 | 17 | 17,021 | |||||||||||
Series 2013-GC10, | A-(b) | 0.501(a) | 02/10/46 | 103,126 | 4,218,266 | |||||||||||
GS Mortgage Securities Trust, | AAA(b) | 5.506(a) | 04/10/38 | 38 | 38,001 | |||||||||||
Series 2006-GG6, Class A4 | AAA(b) | 5.553(a) | 04/10/38 | 105 | 113,726 | |||||||||||
Series 2006-GG8, Class A3 | Aaa | 5.542 | 11/10/39 | 64 | 64,578 | |||||||||||
Series 2013-GC12, Class A3 | AAA(b) | 2.860 | 06/10/46 | 4,000 | 3,810,124 | |||||||||||
Series 2013-GC12, Class XB, IO | A-(b) | 0.547(a) | 06/10/46 | 37,400 | 1,664,973 | |||||||||||
Series 2013-GC13, Class A4 | Aaa | 3.871(a) | 07/10/46 | 4,500 | 4,582,845 | |||||||||||
Series 2013-GC14, Class A4 | Aaa | 3.955 | 08/10/46 | 6,700 | 6,933,984 | |||||||||||
JPMorgan Chase Commercial Mortgage Securities Corp., | Aaa | 2.475 | 12/15/47 | 1,000 | 981,027 | |||||||||||
Series 2012-LC9, Class A4 | Aaa | 2.611 | 12/15/47 | 1,700 | 1,598,717 | |||||||||||
JPMorgan Chase Commercial Mortgage Securities Trust, | Aa1 | 4.951(a) | 01/12/37 | 200 | 203,981 | |||||||||||
Series 2005-CB13, Class A3A1 | Aaa | 5.243(a) | 01/12/43 | 27 | 27,539 | |||||||||||
Series 2005-LDP3, Class A4B | Aaa | 4.996(a) | 08/15/42 | 180 | 191,386 | |||||||||||
Series 2005-LDP4, Class AM | Aa2 | 4.999(a) | 10/15/42 | 750 | 798,187 | |||||||||||
Series 2005-LDP5, Class A3 | Aaa | 5.229(a) | 12/15/44 | 1,140 | 1,160,627 | |||||||||||
Series 2006-LDP6, Class ASB | Aaa | 5.490(a) | 04/15/43 | 77 | 79,569 | |||||||||||
Series 2007-CB20, Class A4 | Aaa | 5.794(a) | 02/12/51 | 60 | 67,939 | |||||||||||
Series 2007-LD11, Class A2 | Aaa | 5.798(a) | 06/15/49 | 929 | 949,472 | |||||||||||
Series 2007-LD11, Class A3 | Aaa | 5.813(a) | 06/15/49 | 218 | 222,521 | |||||||||||
Series 2007-LD11, Class A4 | A3 | 5.813(a) | 06/15/49 | 1,109 | 1,251,073 | |||||||||||
Series 2007-LD12, Class A2 | Aaa | 5.827 | 02/15/51 | 11 | 10,818 | |||||||||||
Series 2007-LD12, Class A3 | Aaa | 5.925(a) | 02/15/51 | 1,700 | 1,742,913 | |||||||||||
Series 2007-LD12, Class A4 | Aaa | 5.882(a) | 02/15/51 | 4,000 | 4,526,112 | |||||||||||
Series 2011-C3, Class A2, 144A | AAA(b) | 3.673 | 02/15/46 | 500 | 526,543 |
See Notes to Financial Statements.
28 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (Continued) |
| |||||||||||||||
Series 2012-C8, Class A2 | AAA(b) | 1.797% | 10/15/45 | $ | 2,000 | $ | 2,004,892 | |||||||||
Series 2012-CBX, Class A3 | Aaa | 3.139 | 06/15/45 | 55 | 56,005 | |||||||||||
Series 2013-C12, Class A3 | Aaa | 3.272 | 07/15/45 | 4,413 | 4,489,292 | |||||||||||
Series 2013-C13, Class A3 | Aaa | 3.525 | 01/15/46 | 4,630 | 4,784,887 | |||||||||||
Series 2013-FL3, | BB(b) | 1.661(a) | 04/15/28 | 192,000 | 1,956,864 | |||||||||||
Series 2013-LC11, Class A3 | Aaa | 2.592 | 04/15/46 | 5,000 | 4,894,215 | |||||||||||
Series 2013-LC11, Class A4 | Aaa | 2.694 | 04/15/46 | 6,350 | 5,961,424 | |||||||||||
Series 2013-LC11, Class XB, IO | A2 | 0.588(a) | 04/15/46 | 34,956 | 1,569,606 | |||||||||||
LB-UBS Commercial Mortgage Trust, | AAA(b) | 5.020(a) | 08/15/29 | 12 | 12,615 | |||||||||||
Series 2005-C7, Class AM | AA(b) | 5.263(a) | 11/15/40 | 70 | 75,495 | |||||||||||
Series 2006-C7, Class A2 | AAA(b) | 5.300 | 11/15/38 | 141 | 148,074 | |||||||||||
Series 2007-C3, Class A3 | Aaa | 5.874(a) | 07/15/44 | 172 | 175,095 | |||||||||||
Merrill Lynch Mortgage Trust, | Aaa | 5.308(a) | 01/12/44 | 102 | 109,249 | |||||||||||
Series 2006-C1, Class AM | AA(b) | 5.679(a) | 05/12/39 | 30 | 32,450 | |||||||||||
Series 2007-C1, Class A3 | AAA(b) | 5.852(a) | 06/12/50 | 945 | 967,992 | |||||||||||
Merrill Lynch/Countrywide Commercial Mortgage Trust, | AA-(b) | 5.519(a) | 02/12/39 | 5,160 | 5,616,892 | |||||||||||
Series 2006-4, Class A2 | Aaa | 5.112(a) | 12/12/49 | 16 | 16,136 | |||||||||||
Series 2006-4, Class A2FL | Aaa | 0.294(a) | 12/12/49 | 7 | 7,070 | |||||||||||
ML-CFC Commercial Mortgage Trust, | Aa2 | 5.896(a) | 06/12/46 | 100 | 109,782 | |||||||||||
Series 2006-3, Class A4 | Aaa | 5.414(a) | 07/12/46 | 4,500 | 4,918,860 | |||||||||||
Series 2007-7, Class A4 | Aa3 | 5.737(a) | 06/12/50 | 5,053 | 5,642,048 | |||||||||||
Morgan Stanley Bank of America Merrill Lynch Trust, | Aa2 | 0.238(a) | 08/15/45 | 65,968 | 1,343,240 | |||||||||||
Series 2013-C10, Class A3 | Aaa | 3.968(a) | 07/15/46 | 10,000 | 10,421,650 | |||||||||||
Series 2013-C11, Class A3 | Aaa | 3.960 | 08/15/46 | 8,400 | 8,706,230 | |||||||||||
Series 2013-C7, Class A3 | Aaa | 2.655 | 02/15/46 | 3,000 | 2,830,599 | |||||||||||
Series 2013-C8, Class A3 | AAA(b) | 2.863 | 12/15/48 | 4,000 | 3,838,964 | |||||||||||
Series 2013-C8, | AA-(b) | 0.497(a) | 12/15/48 | 68,276 | 2,531,695 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 29 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (Continued) |
| |||||||||||||||
Morgan Stanley Capital I Trust, | Aaa | 5.284%(a) | 09/15/42 | $ | 1,000 | $ | 1,058,363 | |||||||||
Series 2006-HQ9, Class AM | AAA(b) | 5.773(a) | 07/12/44 | 200 | 219,511 | |||||||||||
Series 2007-HQ11, Class A31 | Aaa | 5.439 | 02/12/44 | 105 | 106,163 | |||||||||||
Series 2007-HQ11, Class A4 | Aaa | 5.447(a) | 02/12/44 | 4,100 | 4,509,697 | |||||||||||
Series 2007-HQ12, Class A2FX | BBB(b) | 5.579(a) | 04/12/49 | 40 | 40,771 | |||||||||||
Series 2007-IQ13, Class A1A | AAA(b) | 5.312 | 03/15/44 | 251 | 277,012 | |||||||||||
Series 2007-IQ14, Class AAB | Aaa | 5.654(a) | 04/15/49 | 249 | 258,669 | |||||||||||
UBS-Barclays Commercial Mortgage Trust, | Aaa | 3.595 | 01/10/45 | 1,135 | 1,158,783 | |||||||||||
Series 2012-C4, Class A3 | AAA(b) | 2.533 | 12/10/45 | 2,800 | 2,746,806 | |||||||||||
Series 2012-C4, Class A4 | AAA(b) | 2.792 | 12/10/45 | 1,500 | 1,426,674 | |||||||||||
Series 2013-C6, Class A3 | Aaa | 2.971 | 04/10/46 | 2,900 | 2,790,722 | |||||||||||
Series 2013-C6, | A2 | 0.408(a) | 04/10/46 | 140,883 | 4,603,352 | |||||||||||
Wachovia Bank Commercial Mortgage Trust, | Aaa | 4.748 | 02/15/41 | 14 | 14,144 | |||||||||||
Series 2005-C17, Class AJ | Aa2 | 5.224(a) | 03/15/42 | 500 | 524,680 | |||||||||||
Series 2005-C20, Class AMFX | Aa1 | 5.179(a) | 07/15/42 | 167 | 178,405 | |||||||||||
Series 2005-C21, Class AM | Aaa | 5.239(a) | 10/15/44 | 321 | 342,133 | |||||||||||
Series 2005-C22, Class A4 | Aaa | 5.289(a) | 12/15/44 | 3,975 | 4,252,467 | |||||||||||
Series 2006-C23, Class A5 | Aaa | 5.416(a) | 01/15/45 | 3,000 | 3,251,973 | |||||||||||
Series 2006-C25, Class A5 | Aaa | 5.724(a) | 05/15/43 | 4,000 | 4,411,812 | |||||||||||
Series 2006-C27, Class A3 | Aaa | 5.765(a) | 07/15/45 | 8,008 | 8,641,833 | |||||||||||
Series 2006-C28, Class A4 | Aaa | 5.572 | 10/15/48 | 5,000 | 5,495,570 | |||||||||||
Series 2007-C31, Class A4 | Aa2 | 5.509 | 04/15/47 | 2,500 | 2,759,500 | |||||||||||
Series 2007-C32, Class A1A | A1 | 5.733(a) | 06/15/49 | 2,707 | 3,001,605 | |||||||||||
Series 2007-C33, Class A4 | Aaa | 5.925(a) | 02/15/51 | 250 | 277,353 | |||||||||||
Series 2007-C34, Class A1A | Aaa | 5.608(a) | 05/15/46 | 5,825 | 6,430,935 | |||||||||||
Wells Fargo Commercial Mortgage Trust, | Aaa | 3.986 | 07/15/46 | 5,000 | 5,169,016 | |||||||||||
|
| |||||||||||||||
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES | 270,857,866 | |||||||||||||||
|
|
See Notes to Financial Statements.
30 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS 38.7% |
| |||||||||||||||
Aerospace & Defense 0.3% | ||||||||||||||||
B/E Aerospace, Inc., | Ba2 | 5.250% | 04/01/22 | $ | 100 | $ | 102,750 | |||||||||
Bombardier, Inc. (Canada), | Ba2 | 7.500 | 03/15/18 | 2,200 | 2,491,500 | |||||||||||
Moog, Inc., | Ba3 | 7.250 | 06/15/18 | 1,876 | 1,946,350 | |||||||||||
Precision Castparts Corp., | A2 | 2.500 | 01/15/23 | 490 | 456,032 | |||||||||||
Textron, Inc., | Baa3 | 4.625 | 09/21/16 | 500 | 539,195 | |||||||||||
|
| |||||||||||||||
5,535,827 | ||||||||||||||||
Airlines 0.4% | ||||||||||||||||
American Airlines Pass-Through Trust, Series 2013-1, Class A, Equipment Trust, 144A | BBB-(b) | 4.000 | 07/15/25 | 3,590 | 3,410,500 | |||||||||||
Continental Airlines | Baa2 | 5.983 | 04/19/22 | 103 | 111,967 | |||||||||||
Series 2012-2, Class A, | Baa2 | 4.000 | 10/29/24 | 125 | 121,250 | |||||||||||
Delta Air Lines, Inc. | Baa1 | 6.821 | 08/10/22 | 969 | 1,077,745 | |||||||||||
Series 2011-1, Class A, | Baa1 | 5.300 | 04/15/19 | 99 | 106,597 | |||||||||||
United Airlines Pass-Through Trust, Series 2013-1, Class A, | A-(b) | 4.300 | 08/15/25 | 2,450 | 2,407,125 | |||||||||||
|
| |||||||||||||||
7,235,184 | ||||||||||||||||
Automotive 1.4% | ||||||||||||||||
American Axle & Manufacturing Holdings, Inc., | Ba1 | 9.250 | 01/15/17 | 272 | 289,000 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 31 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Automotive (cont’d.) | ||||||||||||||||
Chrysler Group LLC, | B1 | 8.000% | 06/15/19 | $ | 1,500 | $ | 1,661,250 | |||||||||
Cummins, Inc., | A3 | 4.875 | 10/01/43 | 175 | 181,087 | |||||||||||
Daimler Finance North America LLC, | A3 | 2.375 | 08/01/18 | 625 | 629,859 | |||||||||||
Gtd. Notes, 144A | A3 | 2.950 | 01/11/17 | 750 | 779,135 | |||||||||||
Dana Holding Corp., | B2 | 5.375 | 09/15/21 | 750 | 766,875 | |||||||||||
Sr. Unsec’d. Notes | B2 | 6.500 | 02/15/19 | 2,512 | 2,687,840 | |||||||||||
Ford Motor Co., | Baa3 | 4.750 | 01/15/43 | 150 | 139,563 | |||||||||||
Ford Motor Credit Co. LLC, | Baa3 | 2.375 | 01/16/18 | 650 | 653,721 | |||||||||||
Sr. Unsec’d. Notes | Baa3 | 3.000 | 06/12/17 | 410 | 426,779 | |||||||||||
Sr. Unsec’d. Notes | Baa3 | 4.207 | 04/15/16 | 200 | 213,462 | |||||||||||
Sr. Unsec’d. Notes | Baa3 | 4.250 | 02/03/17 | 6,470 | 6,986,170 | |||||||||||
General Motors Co., | Ba1 | 4.875 | 10/02/23 | 2,000 | 2,025,000 | |||||||||||
Sr. Unsec’d. Notes, 144A | Ba1 | 6.250 | 10/02/43 | 1,850 | 1,924,000 | |||||||||||
General Motors Financial Co., Inc., | Ba3 | 2.750 | 05/15/16 | 1,575 | 1,586,813 | |||||||||||
Gtd. Notes, 144A | Ba3 | 3.250 | 05/15/18 | 575 | 572,844 | |||||||||||
Sr. Notes, 144A | Ba3 | 4.250 | 05/15/23 | 575 | 552,000 | |||||||||||
Harley-Davidson Financial Services, Inc., | Baa1 | 2.700 | 03/15/17 | 25 | 25,845 | |||||||||||
Johnson Controls, Inc., | Baa1 | 4.250 | 03/01/21 | 3,090 | 3,241,827 | |||||||||||
Lear Corp., | Ba2 | 7.875 | 03/15/18 | 93 | 98,580 | |||||||||||
Tenedora Nemak SA de CV (Mexico), | Ba2 | 5.500 | 02/28/23 | 1,000 | 992,500 | |||||||||||
|
| |||||||||||||||
26,434,150 |
See Notes to Financial Statements.
32 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Banking 8.1% | ||||||||||||||||
Abbey National Treasury Services PLC (United Kingdom), Bank | A2 | 2.875% | 04/25/14 | $ | 50 | $ | 50,510 | |||||||||
American Express Co., | A3 | 2.650 | 12/02/22 | 3,099 | 2,911,052 | |||||||||||
Sr. Unsec’d. Notes | A3 | 7.000 | 03/19/18 | 165 | 199,670 | |||||||||||
Banco de Credito del Peru (Peru), | Baa2 | 4.250 | 04/01/23 | 263 | 250,508 | |||||||||||
Bank of America Corp., | B1 | 8.000(a) | 12/29/49 | 3,190 | 3,532,925 | |||||||||||
Jr. Sub. Notes | B1 | 8.125(a) | 12/29/49 | 1,000 | 1,117,500 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 4.100 | 07/24/23 | 3,450 | 3,495,909 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 5.625 | 10/14/16 | 160 | 179,334 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 5.700 | 01/24/22 | 2,945 | 3,380,727 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 5.875 | 01/05/21 | 450 | 522,046 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 6.000 | 09/01/17 | 500 | 574,003 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 7.625 | 06/01/19 | 490 | 610,866 | |||||||||||
Sr. Unsec’d. Notes, MTN | Baa2 | 3.300 | 01/11/23 | 9,525 | 9,141,685 | |||||||||||
Sr. Unsec’d. Notes, MTN | Baa2 | 5.875 | 02/07/42 | 650 | 746,754 | |||||||||||
BB&T Corp., | A2 | 1.600 | 08/15/17 | 25 | 24,990 | |||||||||||
Branch Banking & Trust Co., | A2 | 0.574(a) | 09/13/16 | 1,500 | 1,486,166 | |||||||||||
Capital One Bank USA NA, | Baa1 | 3.375 | 02/15/23 | 1,720 | 1,639,435 | |||||||||||
Capital One Financial Corp., | Baa1 | 3.500 | 06/15/23 | 330 | 317,612 | |||||||||||
Sr. Unsec’d. Notes | Baa1 | 4.750 | 07/15/21 | 300 | 322,923 | |||||||||||
Sub. Notes | Baa2 | 6.150 | 09/01/16 | 110 | 123,377 | |||||||||||
Citigroup, Inc., | Baa2 | 3.375 | 03/01/23 | 7,400 | 7,169,897 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 3.875 | 10/25/23 | 2,350 | 2,350,306 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 4.500 | 01/14/22 | 1,525 | 1,627,877 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 6.125 | 05/15/18 | 330 | 384,274 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 8.125 | 07/15/39 | 1,455 | 2,044,824 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 8.500 | 05/22/19 | 350 | 452,858 | |||||||||||
Sub. Notes | Baa3 | 6.675 | 09/13/43 | 1,000 | 1,117,818 | |||||||||||
Sub. Notes | Baa3 | 3.500 | 05/15/23 | 2,500 | 2,320,245 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 33 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Banking (cont’d.) | ||||||||||||||||
Sub. Notes | Baa3 | 4.050% | 07/30/22 | $ | 550 | $ | 544,256 | |||||||||
Sub. Notes | Baa3 | 4.875 | 05/07/15 | 250 | 263,447 | |||||||||||
Sub. Notes | Baa3 | 5.000 | 09/15/14 | 100 | 103,483 | |||||||||||
Discover Bank, | Baa3 | 2.000 | 02/21/18 | 1,200 | 1,186,751 | |||||||||||
Sr. Unsec’d. Notes | Baa3 | 4.200 | 08/08/23 | 2,900 | 2,940,870 | |||||||||||
Sub. Notes | Ba1 | 7.000 | 04/15/20 | 800 | 944,425 | |||||||||||
Fifth Third Bank, | A3 | 1.450 | 02/28/18 | 2,275 | 2,234,507 | |||||||||||
Goldman Sachs Group, Inc. (The), | A3 | 3.625 | 01/22/23 | 6,000 | 5,853,390 | |||||||||||
Sr. Unsec’d. Notes | A3 | 5.125 | 01/15/15 | 100 | 105,060 | |||||||||||
Sr. Unsec’d. Notes | A3 | 5.250 | 07/27/21 | 1,840 | 2,030,935 | |||||||||||
Sr. Unsec’d. Notes | A3 | 5.750 | 01/24/22 | 4,590 | 5,204,968 | |||||||||||
Sr. Unsec’d. Notes | A3 | 6.250 | 02/01/41 | 600 | 694,436 | |||||||||||
Sr. Unsec’d. Notes, MTN(g) | A3 | 6.000 | 06/15/20 | 4,450 | 5,151,578 | |||||||||||
Sub. Notes | Baa1 | 5.625 | 01/15/17 | 130 | 144,633 | |||||||||||
HSBC Bank PLC (United Kingdom), | Aa3 | 3.500 | 06/28/15 | 120 | 125,559 | |||||||||||
HSBC Holdings PLC (United Kingdom), | Aa3 | 4.000 | 03/30/22 | 1,600 | 1,656,194 | |||||||||||
Sub. Notes | A3 | 6.500 | 05/02/36 | 610 | 719,286 | |||||||||||
Huntington Bancshares, Inc., | Baa1 | 2.600 | 08/02/18 | 2,350 | 2,371,512 | |||||||||||
ING Bank NV (Netherlands), | A2 | 2.000 | 09/25/15 | 300 | 304,713 | |||||||||||
Intesa Sanpaolo SpA (Italy), | Baa2 | 3.125 | 01/15/16 | 475 | 484,392 | |||||||||||
JPMorgan Chase & Co., | Ba1 | 6.000(a) | 12/31/49 | 3,725 | 3,603,938 | |||||||||||
Jr. Sub. Notes | Ba1 | 7.900(a) | 04/29/49 | 130 | 143,325 | |||||||||||
Sr. Unsec’d. Notes | A2 | 3.150 | 07/05/16 | 15 | 15,755 | |||||||||||
Sr. Unsec’d. Notes | A2 | 3.200 | 01/25/23 | 9,500 | 9,121,796 | |||||||||||
Sr. Unsec’d. Notes(g) | A2 | 3.250 | 09/23/22 | 2,115 | 2,042,929 | |||||||||||
Sr. Unsec’d. Notes | A2 | 4.500 | 01/24/22 | 720 | 767,125 | |||||||||||
Sr. Unsec’d. Notes | A2 | 5.400 | 01/06/42 | 600 | 650,723 | |||||||||||
Sr. Unsec’d. Notes | A2 | 6.000 | 01/15/18 | 130 | 150,358 | |||||||||||
Sub. Notes | A3 | 3.375 | 05/01/23 | 1,925 | 1,804,156 |
See Notes to Financial Statements.
34 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Banking (cont’d.) | ||||||||||||||||
KeyBank NA, | A3 | 1.650% | 02/01/18 | $ | 700 | $ | 693,153 | |||||||||
Lloyds Bank PLC (United Kingdom), Bank | A2 | 6.375 | 01/21/21 | 4,570 | 5,418,804 | |||||||||||
Gtd. Notes, MTN, 144A | A2 | 5.800 | 01/13/20 | 100 | 114,952 | |||||||||||
Mizuho Bank Ltd. (Japan), | A1 | 1.850 | 03/21/18 | 675 | 666,271 | |||||||||||
Morgan Stanley, | Baa1 | 6.625 | 04/01/18 | 100 | 117,282 | |||||||||||
Sr. Unsec’d. Notes | Baa1 | 2.125 | 04/25/18 | 2,880 | 2,863,426 | |||||||||||
Sr. Unsec’d. Notes | Baa1 | 3.750 | 02/25/23 | 7,150 | 7,059,352 | |||||||||||
Sr. Unsec’d. Notes | Baa1 | 6.375 | 07/24/42 | 700 | 828,225 | |||||||||||
Sr. Unsec’d. Notes, MTN | Baa1 | 4.100 | 01/26/15 | 130 | 134,654 | |||||||||||
Sr. Unsec’d. Notes, MTN | Baa1 | 5.500 | 07/28/21 | 1,900 | 2,138,427 | |||||||||||
Sr. Unsec’d. Notes, MTN | Baa1 | 5.625 | 09/23/19 | 680 | 775,948 | |||||||||||
Sr. Unsec’d. Notes, MTN | Baa1 | 5.750 | 10/18/16 | 365 | 409,456 | |||||||||||
Sr. Unsec’d. Notes, MTN | Baa1 | 6.250 | 08/28/17 | 1,930 | 2,222,970 | |||||||||||
Sub. Notes, MTN | Baa2 | 4.100 | 05/22/23 | 1,730 | 1,671,092 | |||||||||||
Nordea Bank AB (Sweden), | Aa3 | 1.625 | 05/15/18 | 4,125 | 4,058,175 | |||||||||||
Sr. Unsec’d. Notes, 144A | Aa3 | 3.125 | 03/20/17 | 200 | 210,320 | |||||||||||
Northern Trust Corp., | A2 | 3.950 | 10/30/25 | 4,375 | 4,381,908 | |||||||||||
People’s United Financial, Inc., | A3 | 3.650 | 12/06/22 | 325 | 314,151 | |||||||||||
PNC Bank NA, | A3 | 2.950 | 01/30/23 | 900 | 840,627 | |||||||||||
Sub. Notes | A3 | 3.800 | 07/25/23 | 2,425 | 2,412,548 | |||||||||||
Sub. Notes | A3 | 4.200 | 11/01/25 | 2,125 | 2,148,194 | |||||||||||
PNC Financial Services Group, Inc., | A3 | 2.854(d) | 11/09/22 | 125 | 117,295 | |||||||||||
PNC Funding Corp., Bank | A3 | 2.700 | 09/19/16 | 50 | 52,098 | |||||||||||
Royal Bank of Scotland Group PLC (The) (United Kingdom), Bank | A3 | 4.875 | 03/16/15 | 100 | 105,099 | |||||||||||
Gtd. Notes | A3 | 6.125 | 01/11/21 | 350 | 400,636 | |||||||||||
Sr. Unsec’d. Notes | Baa1 | 2.550 | 09/18/15 | 50 | 51,209 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 35 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Banking (cont’d.) | ||||||||||||||||
Santander Holdings USA, Inc., | Baa2 | 3.000% | 09/24/15 | $ | 75 | $ | 77,229 | |||||||||
Sr. Unsec’d. Notes | Baa2 | 4.625 | 04/19/16 | 870 | 933,418 | |||||||||||
Sumitomo Mitsui Banking Corp. (Japan), Bank | Aa3 | 3.000 | 01/18/23 | 800 | 761,246 | |||||||||||
SunTrust Bank, | A3 | 2.750 | 05/01/23 | 1,225 | 1,123,945 | |||||||||||
SunTrust Banks, Inc., | Baa1 | 2.350 | 11/01/18 | 2,000 | 2,008,100 | |||||||||||
US Bancorp, | A3 | 3.442 | 02/01/16 | 130 | 136,017 | |||||||||||
Sub. Notes, MTN | A2 | 2.950 | 07/15/22 | 25 | 23,753 | |||||||||||
Wells Fargo & Co., | A2 | 0.438(a) | 10/28/15 | 200 | 199,635 | |||||||||||
Sr. Unsec’d. Notes, MTN | A2 | 2.100 | 05/08/17 | 100 | 102,766 | |||||||||||
Sr. Unsec’d. Notes, MTN | A2 | 3.500 | 03/08/22 | 930 | 943,893 | |||||||||||
Sr. Unsec’d. Notes, MTN | A2 | 4.600 | 04/01/21 | 250 | 275,450 | |||||||||||
Sub. Notes | A3 | 4.125 | 08/15/23 | 2,900 | 2,900,244 | |||||||||||
Sub. Notes | A3 | 5.375 | 11/02/43 | 1,480 | 1,497,389 | |||||||||||
|
| |||||||||||||||
150,649,948 | ||||||||||||||||
Brokerage | ||||||||||||||||
Jefferies Group LLC, | Baa3 | 6.500 | 01/20/43 | 175 | 173,965 | |||||||||||
Nomura Holdings, Inc. (Japan), | Baa3 | 2.000 | 09/13/16 | 540 | 543,947 | |||||||||||
|
| |||||||||||||||
717,912 | ||||||||||||||||
Building Materials & Construction 0.5% |
| |||||||||||||||
Building Materials Corp. of America, | Ba3 | 6.875 | 08/15/18 | (e)(f) | 2,176 | 2,317,440 | ||||||||||
Cemex Espana Luxembourg (Mexico), | B+(b) | 9.875 | 04/30/19 | 770 | 870,100 |
See Notes to Financial Statements.
36 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Building Materials & Construction 0.5% |
| |||||||||||||||
Cemex SAB de CV (Mexico), | B+(b) | 6.500% | 12/10/19 | $ | 2,000 | $ | 2,030,000 | |||||||||
Faenza GmbH (Germany), | Caa1 | 8.250 | 08/15/21 | EUR | 500 | 721,307 | ||||||||||
HD Supply, Inc., | B1 | 8.125 | 04/15/19 | 2,228 | 2,490,236 | |||||||||||
KB Home, | B2 | 7.500 | 09/15/22 | 675 | 707,063 | |||||||||||
Mohawk Industries, Inc., | Ba1 | 3.850 | 02/01/23 | 209 | 201,984 | |||||||||||
Odebrecht Finance Ltd. (Brazil), | Baa3 | 5.125 | 06/26/22 | 600 | 600,000 | |||||||||||
Gtd. Notes, 144A | Baa3 | 7.125 | 06/26/42 | 220 | 215,600 | |||||||||||
Owens Corning, Inc., | Ba1 | 4.200 | 12/15/22 | 125 | 124,123 | |||||||||||
|
| |||||||||||||||
10,277,853 | ||||||||||||||||
Cable 1.3% | ||||||||||||||||
CCO Holdings LLC/CCO Holdings Capital Corp., | B1 | 5.750 | 01/15/24 | 2,000 | 1,895,000 | |||||||||||
Columbus International, Inc. (Barbados), | B2 | 11.500 | 11/20/14 | (e)(f) | 2,600 | 2,801,500 | ||||||||||
Comcast Corp., | A3 | 4.250 | 01/15/33 | 925 | 887,815 | |||||||||||
Gtd. Notes | A3 | 6.450 | 03/15/37 | 750 | 912,257 | |||||||||||
Gtd. Notes | A3 | 6.500 | 01/15/17 | 100 | 116,111 | |||||||||||
CSC Holdings LLC, | Ba3 | 6.750 | 11/15/21 | 50 | 54,500 | |||||||||||
Sr. Unsec’d. Notes | Ba3 | 8.625 | 02/15/19 | 35 | 41,388 | |||||||||||
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc., | Baa2 | 3.500 | 03/01/16 | 130 | 136,165 | |||||||||||
Dish DBS Corp., | Ba3 | 4.250 | 04/01/18 | 1,500 | 1,522,500 | |||||||||||
Gtd. Notes | Ba3 | 6.625 | 10/01/14 | 200 | 209,250 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 37 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Cable (cont’d.) |
| |||||||||||||||
NBCUniversal Media LLC, | A3 | 4.450% | 01/15/43 | $ | 325 | $ | 307,399 | |||||||||
Gtd. Notes | A3 | 5.950 | 04/01/41 | 230 | 264,809 | |||||||||||
NET Servicos de Comunicacao SA (Brazil), | Baa3 | 7.500 | 01/27/20 | 2,207 | 2,383,560 | |||||||||||
Time Warner Cable, Inc., | Baa2 | 5.875 | 11/15/40 | 870 | 745,760 | |||||||||||
Gtd. Notes | Baa2 | 6.550 | 05/01/37 | 75 | 70,186 | |||||||||||
Time Warner Entertainment Co. LP, | Baa2 | 8.375 | 07/15/33 | 660 | 722,694 | |||||||||||
Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH (Germany), | Ba3 | 5.500 | 09/15/22 | EUR | 160 | 220,499 | ||||||||||
Sr. Sec’d. Notes, MTN, 144A | Ba3 | 5.125 | 01/21/23 | EUR | 620 | 825,738 | ||||||||||
UPC Holding BV (Netherlands), | B2 | 9.875 | 04/15/18 | 3,050 | 3,301,625 | |||||||||||
UPCB Finance III Ltd. (Netherlands), | Ba3 | 6.625 | 07/01/20 | 150 | 160,125 | |||||||||||
Videotron Ltd (Canada), | Ba2 | 9.125 | 04/15/18 | 347 | 364,784 | |||||||||||
Gtd. Notes | Ba2 | 5.000 | 07/15/22 | 4,500 | 4,421,250 | |||||||||||
Virgin Media Secured Finance PLC (United Kingdom), | Ba3 | 6.000 | 04/15/21 | GBP | 800 | 1,324,418 | ||||||||||
|
| |||||||||||||||
23,689,333 | ||||||||||||||||
Capital Goods 1.6% | ||||||||||||||||
Actuant Corp., | Ba2 | 5.625 | 06/15/22 | 75 | 75,188 | |||||||||||
Avis Budget Car Rental LLC/Avis Budget Finance, Inc., | B2 | 8.250 | 01/15/19 | 2,225 | 2,425,250 | |||||||||||
Caterpillar Financial Services Corp., | A2 | 1.250 | 11/06/17 | 325 | 320,968 |
See Notes to Financial Statements.
38 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Capital Goods (cont’d.) |
| |||||||||||||||
CNH Capital LLC, | Ba1 | 3.875% | 11/01/15 | $ | 500 | $ | 515,625 | |||||||||
Deere & Co., | A2 | 2.600 | 06/08/22 | 50 | 47,968 | |||||||||||
ERAC USA Finance LLC, | Baa1 | 2.750 | 03/15/17 | (e)(f) | 45 | 46,476 | ||||||||||
Gtd. Notes, 144A | Baa1 | 6.700 | 06/01/34 | (e)(f) | 110 | 126,189 | ||||||||||
Gtd. Notes, 144A (original cost $2,232,116; purchased 05/14/13) | Baa1 | 7.000 | 10/15/37 | (e)(f) | 1,725 | 2,075,872 | ||||||||||
General Electric Co., | Aa3 | 4.125 | 10/09/42 | 125 | 115,435 | |||||||||||
Griffon Corp., | B1 | 7.125 | 04/01/18 | 1,850 | 1,977,188 | |||||||||||
Hertz Corp. (The), | B2 | 6.750 | 04/15/19 | 3,125 | 3,371,094 | |||||||||||
Hertz Holdings Netherlands BV, | B1 | 8.500 | 07/31/15 | EUR | 100 | 141,546 | ||||||||||
Penske Truck Leasing Co. LP/PTL Finance Corp., | Baa3 | 2.500 | 07/11/14 | (e)(f) | 25 | 25,254 | ||||||||||
Sr. Unsec’d. Notes, 144A (original cost $274,593; purchased 09/24/12) | Baa3 | 2.500 | 03/15/16 | (e)(f) | 275 | 281,056 | ||||||||||
Sr. Unsec’d. Notes, 144A (original cost $449,024; purchased 01/14/13) | Baa3 | 2.875 | 07/17/18 | (e)(f) | 450 | 452,633 | ||||||||||
Unsec’d. Notes, 144A (original cost $24,976; purchased 05/08/12) | Baa3 | 3.125 | 05/11/15 | (e)(f) | 25 | 25,688 | ||||||||||
Pentair Finance SA, | Baa2 | 1.350 | 12/01/15 | 325 | 326,146 | |||||||||||
Gtd. Notes | Baa2 | 1.875 | 09/15/17 | 50 | 49,656 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 39 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Capital Goods (cont’d.) |
| |||||||||||||||
Roper Industries, Inc., | Baa2 | 1.850% | 11/15/17 | $ | 175 | $ | 174,993 | |||||||||
SPX Corp., | Ba3 | 6.875 | 09/01/17 | 1,000 | 1,123,750 | |||||||||||
Gtd. Notes | Ba3 | 7.625 | 12/15/14 | 600 | 642,000 | |||||||||||
Terex Corp., | B2 | 6.000 | 05/15/21 | 5,050 | 5,277,250 | |||||||||||
Gtd. Notes | B2 | 6.500 | 04/01/20 | 1,005 | 1,075,350 | |||||||||||
United Rentals North America, Inc., | B2 | 7.625 | 04/15/22 | 3,869 | 4,333,280 | |||||||||||
Gtd. Notes | B3 | 8.375 | 09/15/20 | 1,000 | 1,117,500 | |||||||||||
Gtd. Notes | B2 | 9.250 | 12/15/19 | 240 | 269,700 | |||||||||||
Sr. Unsec’d. Notes | B2 | 8.250 | 02/01/21 | 550 | 622,875 | |||||||||||
United Technologies Corp., | A2 | 1.800 | 06/01/17 | 50 | 50,974 | |||||||||||
Sr. Unsec’d. Notes | A2 | 4.500 | 06/01/42 | 140 | 138,084 | |||||||||||
Votorantim Cimentos SA (Brazil), | Baa3 | 7.250 | 04/05/41 | 1,070 | 985,000 | |||||||||||
Xylem, Inc., | Baa2 | 3.550 | 09/20/16 | 1,635 | 1,723,450 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 4.875 | 10/01/21 | 50 | 53,486 | |||||||||||
|
| |||||||||||||||
29,986,924 | ||||||||||||||||
Chemicals 1.4% | ||||||||||||||||
Agrium, Inc. (Canada), | Baa2 | 4.900 | 06/01/43 | 2,020 | 1,901,004 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 6.125 | 01/15/41 | 170 | 186,771 | |||||||||||
Ashland, Inc., | Ba1 | 4.750 | 08/15/22 | 700 | 672,000 | |||||||||||
Sr. Unsec’d. Notes | Ba1 | 3.875 | 04/15/18 | 2,625 | 2,638,125 | |||||||||||
Celanese US Holdings LLC, | Ba2 | 6.625 | 10/15/18 | 610 | 658,038 | |||||||||||
CF Industries, Inc., | Baa2 | 4.950 | 06/01/43 | 1,765 | 1,669,095 | |||||||||||
Gtd. Notes | Baa2 | 6.875 | 05/01/18 | 160 | 189,541 | |||||||||||
Gtd. Notes | Baa2 | 7.125 | 05/01/20 | 125 | 148,914 |
See Notes to Financial Statements.
40 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Capital Goods (cont’d.) |
| |||||||||||||||
Dow Chemical Co. (The), | Baa2 | 3.000% | 11/15/22 | $ | 1,550 | $ | 1,456,732 | |||||||||
Sr. Unsec’d. Notes | Baa2 | 4.250 | 11/15/20 | 3,150 | 3,362,121 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 5.250 | 11/15/41 | 125 | 126,711 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 9.400 | 05/15/39 | 120 | 177,899 | |||||||||||
Ecolab, Inc., | Baa1 | 1.450 | 12/08/17 | 600 | 591,259 | |||||||||||
Koppers, Inc., | B1 | 7.875 | 12/01/19 | 1,600 | 1,736,000 | |||||||||||
LYB International Finance BV (Netherlands), | Baa1 | 5.250 | 07/15/43 | 775 | 788,297 | |||||||||||
LyondellBasell Industries NV, | Baa1 | 6.000 | 11/15/21 | 700 | 814,453 | |||||||||||
Mexichem SAB de CV (Mexico), | Ba1 | 4.875 | 09/19/22 | 2,000 | 1,980,000 | |||||||||||
Sr. Unsec’d. Notes, RegS | Ba1 | 4.875 | 09/19/22 | 950 | 940,500 | |||||||||||
NOVA Chemicals Corp. (Canada), | Ba2 | 8.625 | 11/01/19 | 2,118 | 2,340,390 | |||||||||||
Phosagro OAO via Phosagro Bond Funding Ltd. (Russia), | Baa3 | 4.204 | 02/13/18 | 930 | 932,325 | |||||||||||
Rhodia SA (France), | Baa2 | 6.875 | 09/15/20 | 1,000 | 1,115,205 | |||||||||||
Sherwin-Williams Co. (The), | A3 | 1.350 | 12/15/17 | 350 | 345,278 | |||||||||||
Sibur Securities Ltd. (Russia), | Ba1 | 3.914 | 01/31/18 | 900 | 879,750 | |||||||||||
|
| |||||||||||||||
25,650,408 | ||||||||||||||||
Consumer 0.6% | ||||||||||||||||
ADT Corp. (The), | Ba2 | 2.250 | 07/15/17 | 50 | 48,490 | |||||||||||
First Quality Finance Co., Inc., | B2 | 4.625 | 05/15/21 | 3,500 | 3,307,500 | |||||||||||
Jarden Corp., | Ba3 | 6.125 | 11/15/22 | 500 | 533,750 | |||||||||||
Newell Rubbermaid, Inc., | Baa3 | 2.050 | 12/01/17 | 375 | 372,949 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 41 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Consumer (cont’d) | ||||||||||||||||
PVH Corp., | Ba3 | 4.500% | 12/15/22 | $ | 700 | $ | 666,750 | |||||||||
Sr. Unsec’d. Notes | Ba3 | 7.375 | 05/15/20 | 505 | 552,975 | |||||||||||
QVC, Inc., | Ba2 | 4.375 | 03/15/23 | 2,000 | 1,901,128 | |||||||||||
Sr. Sec’d. Notes | Ba2 | 5.125 | 07/02/22 | 1,800 | 1,825,223 | |||||||||||
Sr. Sec’d. Notes, 144A | Ba2 | 7.500 | 10/01/19 | 525 | 566,899 | |||||||||||
Service Corp. International, | B1 | 7.000 | 05/15/19 | 1,500 | 1,612,500 | |||||||||||
|
| |||||||||||||||
11,388,164 | ||||||||||||||||
Electric 1.0% | ||||||||||||||||
AES Corp. (The), | Ba3 | 8.000 | 10/15/17 | 1,655 | 1,948,763 | |||||||||||
Alabama Power Co., | A2 | 3.850 | 12/01/42 | 275 | 243,466 | |||||||||||
American Electric Power Co., Inc., | Baa2 | 2.950 | 12/15/22 | 550 | 514,538 | |||||||||||
Calpine Corp., | B1 | 7.500 | 02/15/21 | 1,500 | 1,620,000 | |||||||||||
Sr. Sec’d. Notes, 144A | B1 | 7.875 | 07/31/20 | 2,000 | 2,185,000 | |||||||||||
Connecticut Light & Power Co. (The), | A3 | 2.500 | 01/15/23 | 375 | 352,983 | |||||||||||
Covanta Holding Corp., | Ba3 | 7.250 | 12/01/20 | 3,100 | 3,353,472 | |||||||||||
Dominion Gas Holdings LLC, | A3 | 4.800 | 11/01/43 | 125 | 125,666 | |||||||||||
DPL, Inc., | Ba2 | 7.250 | 10/15/21 | 1,500 | 1,560,000 | |||||||||||
Duke Energy Carolinas LLC, | Aa3 | 4.000 | 09/30/42 | 50 | 46,235 | |||||||||||
Duke Energy Corp., | Baa1 | 1.625 | 08/15/17 | 225 | 225,278 | |||||||||||
Entergy Arkansas, Inc., | A3 | 3.050 | 06/01/23 | 450 | 430,338 | |||||||||||
Entergy Corp., | Baa3 | 4.700 | 01/15/17 | 75 | 80,581 |
See Notes to Financial Statements.
42 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Electric (cont’d.) |
| |||||||||||||||
FirstEnergy Corp., | Baa3 | 2.750% | 03/15/18 | $ | 950 | $ | 931,152 | |||||||||
Nextera Energy Capital Holdings, Inc., | Baa1 | 3.625 | 06/15/23 | 1,575 | 1,510,764 | |||||||||||
NRG Energy, Inc., | B1 | 7.625 | 01/15/18 | 2,775 | 3,149,625 | |||||||||||
Progress Energy, Inc., | Baa2 | 3.150 | 04/01/22 | 75 | 73,298 | |||||||||||
Publicvice Electric & Gas Co., | A1 | 3.800 | 01/01/43 | 200 | 178,987 | |||||||||||
South Carolina Electric & Gas Co., | A3 | 4.350 | 02/01/42 | 130 | 124,561 | |||||||||||
Techem Energy Metering Service GmbH & Co. KG (Germany), | B3 | 7.875 | 10/01/20 | EUR | 125 | 188,942 | ||||||||||
Techem GmbH (Germany), | Ba3 | 6.125 | 10/01/19 | EUR | 200 | 293,275 | ||||||||||
Westar Energy, Inc., | A3 | 4.100 | 04/01/43 | 325 | 301,594 | |||||||||||
|
| |||||||||||||||
19,438,518 | ||||||||||||||||
Energy - Integrated 0.7% | ||||||||||||||||
BP Capital Markets PLC (United Kingdom), | A2 | 1.846 | 05/05/17 | 150 | 152,582 | |||||||||||
Cenovus Energy, Inc. (Canada), | Baa2 | 3.000 | 08/15/22 | 175 | 166,601 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 4.450 | 09/15/42 | 1,070 | 985,713 | |||||||||||
Pacific Rubiales Energy Corp. (Colombia), | Ba2 | 7.250 | 12/12/21 | 3,750 | 4,125,000 | |||||||||||
Reliance Holdings USA, Inc. (India), | Baa2 | 5.400 | 02/14/22 | 2,250 | 2,300,510 | |||||||||||
Rosneft Finance SA (Russia), | Baa2 | 6.625 | 03/20/17 | 180 | 198,450 | |||||||||||
Sasol Financing International PLC (South Africa), | Baa1 | 4.500 | 11/14/22 | 4,600 | 4,393,000 | |||||||||||
|
| |||||||||||||||
12,321,856 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 43 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Energy - Other 1.3% | ||||||||||||||||
Afren PLC (United Kingdom), | B+(b) | 10.250% | 04/08/19 | $ | 900 | $ | 1,030,500 | |||||||||
Anadarko Petroleum Corp., | Baa3 | 6.375 | 09/15/17 | 4,460 | 5,213,860 | |||||||||||
Sr. Unsec���d. Notes | Baa3 | 6.450 | 09/15/36 | 750 | 882,725 | |||||||||||
Cameron International Corp., | Baa1 | 1.191(a) | 06/02/14 | 125 | 125,460 | |||||||||||
Sr. Unsec’d. Notes | Baa1 | 3.600 | 04/30/22 | 450 | 453,422 | |||||||||||
Sr. Unsec’d. Notes | Baa1 | 4.500 | 06/01/21 | 340 | 366,110 | |||||||||||
Sr. Unsec’d. Notes | Baa1 | 5.950 | 06/01/41 | 100 | 112,565 | |||||||||||
Continental Resources, Inc., | Ba2 | 5.000 | 09/15/22 | 2,240 | 2,332,400 | |||||||||||
Devon Energy Corp., | Baa1 | 1.875 | 05/15/17 | 75 | 75,586 | |||||||||||
Diamond Offshore Drilling, Inc., | A3 | 4.875 | 11/01/43 | 1,100 | 1,098,284 | |||||||||||
Halliburton Co., | A2 | 4.750 | 08/01/43 | 3,100 | 3,126,158 | |||||||||||
Nabors Industries, Inc., | Baa2 | 4.625 | 09/15/21 | 240 | 242,855 | |||||||||||
Gtd. Notes | Baa2 | 6.150 | 02/15/18 | 80 | 90,244 | |||||||||||
Noble Energy, Inc., | Baa2 | 4.150 | 12/15/21 | 500 | 525,530 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 6.000 | 03/01/41 | 1,775 | 2,038,850 | |||||||||||
Noble Holding International Ltd., | Baa2 | 2.500 | 03/15/17 | 25 | 25,371 | |||||||||||
Phillips 66, | Baa1 | 2.950 | 05/01/17 | 25 | 26,019 | |||||||||||
Pioneer Natural Resources Co., | Baa3 | 3.950 | 07/15/22 | 2,536 | 2,584,679 | |||||||||||
Sr. Unsec’d. Notes | Baa3 | 7.500 | 01/15/20 | 610 | 756,551 | |||||||||||
Plains Exploration & Production Co., | Baa3 | 6.500 | 11/15/20 | 600 | 661,036 | |||||||||||
Schlumberger Norge A/S, | A1 | 1.250 | 08/01/17 | 1,200 | 1,187,040 | |||||||||||
Transocean, Inc. (Cayman Islands), | Baa3 | 2.500 | 10/15/17 | 150 | 151,401 |
See Notes to Financial Statements.
44 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Energy - Other (cont’d) | ||||||||||||||||
Weatherford International Ltd., | Baa2 | 5.950% | 04/15/42 | $ | 785 | $ | 780,040 | |||||||||
Gtd. Notes | Baa2 | 6.750 | 09/15/40 | 1,125 | 1,208,998 | |||||||||||
|
| |||||||||||||||
25,095,684 | ||||||||||||||||
Foods 1.6% | ||||||||||||||||
Anheuser-Busch InBev Finance, Inc. (Bermuda), | A3 | 4.000 | 01/17/43 | 600 | 554,578 | |||||||||||
Anheuser-Busch InBev Worldwide, Inc. (Bermuda), | A3 | 2.500 | 07/15/22 | 200 | 188,374 | |||||||||||
Gtd. Notes | A3 | 8.200 | 01/15/39 | 250 | 376,094 | |||||||||||
ARAMARK Corp., | B3 | 5.750 | 03/15/20 | 1,600 | 1,676,000 | |||||||||||
BFF International Ltd. (Brazil), | Baa3 | 7.250 | 01/28/20 | 525 | 594,563 | |||||||||||
BRF SA (Brazil), | Baa3 | 3.950 | 05/22/23 | 525 | 472,500 | |||||||||||
Coca-Cola Icecek A/S (Turkey), | Baa3 | 4.750 | 10/01/18 | 950 | 986,480 | |||||||||||
ConAgra Foods, Inc., | Baa2 | 2.100 | 03/15/18 | 225 | 224,895 | |||||||||||
Constellation Brands, Inc., | Ba1 | 6.000 | 05/01/22 | 450 | 490,500 | |||||||||||
Gtd. Notes | Ba1 | 7.250 | 09/01/16 | 550 | 627,688 | |||||||||||
Cott Beverages, Inc., | B3 | 8.125 | 09/01/18 | 7,057 | 7,612,739 | |||||||||||
Darling International, Inc., | Ba2 | 8.500 | 12/15/18 | 3,400 | 3,757,000 | |||||||||||
Embotelladora Andina SA (Chile), | BBB(b) | 5.000 | 10/01/23 | 1,050 | 1,079,424 | |||||||||||
Fiesta Restaurant Group, Inc., | B2 | 8.875 | 08/15/16 | 2,750 | 2,918,438 | |||||||||||
Kraft Foods Group, Inc., | Baa2 | 2.250 | 06/05/17 | 50 | 51,178 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 6.125 | 08/23/18 | 160 | 189,005 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 6.500 | 02/09/40 | 1,020 | 1,220,893 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 45 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Foods (cont’d.) |
| |||||||||||||||
Minerva Luxembourg SA (Brazil), | B1 | 12.250% | 02/10/22 | $ | 250 | $ | 280,000 | |||||||||
Molson Coors Brewing Co., | Baa2 | 2.000 | 05/01/17 | 50 | 50,691 | |||||||||||
Sigma Alimentos SA de CV (Mexico), | Baa3 | 5.625 | 04/14/18 | 1,100 | 1,199,000 | |||||||||||
Stater Brothers Holdings, Inc., | B2 | 7.375 | 11/15/18 | 1,006 | 1,063,845 | |||||||||||
Gtd. Notes | B2 | 7.750 | 04/15/15 | 125 | 125,470 | |||||||||||
Sun Merger Sub, Inc., | B2 | 5.875 | 08/01/21 | 2,400 | 2,508,000 | |||||||||||
TreeHouse Foods, Inc., | Ba2 | 7.750 | 03/01/18 | 500 | 528,750 | |||||||||||
Tyson Foods, Inc., | Baa3 | 6.600 | 04/01/16 | 340 | 381,697 | |||||||||||
|
| |||||||||||||||
29,157,802 | ||||||||||||||||
Gaming 0.1% | ||||||||||||||||
Marina District Finance Co., Inc., | B2 | 9.875 | 08/15/18 | 100 | 108,750 | |||||||||||
MGM Resorts International, | B3 | 6.625 | 12/15/21 | 1,000 | 1,068,750 | |||||||||||
Gtd. Notes | B3 | 7.625 | 01/15/17 | 500 | 568,750 | |||||||||||
|
| |||||||||||||||
1,746,250 | ||||||||||||||||
Healthcare & Pharmaceutical 1.7% |
| |||||||||||||||
AbbVie, Inc., | Baa1 | 4.400 | 11/06/42 | 125 | 117,845 | |||||||||||
Actavis PLC, | Baa3 | 1.875 | 10/01/17 | 1,850 | 1,845,419 | |||||||||||
Sr. Unsec’d. Notes | Baa3 | 4.625 | 10/01/42 | 75 | 69,149 | |||||||||||
Amgen, Inc., | Baa1 | 2.125 | 05/15/17 | 125 | 127,584 | |||||||||||
Sr. Unsec’d. Notes | Baa1 | 5.375 | 05/15/43 | 610 | 633,722 | |||||||||||
AstraZeneca PLC (United Kingdom), | A2 | 4.000 | 09/18/42 | 130 | 116,334 |
See Notes to Financial Statements.
46 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Healthcare & Pharmaceutical (cont’d.) |
| |||||||||||||||
Celgene Corp., | Baa2 | 1.900% | 08/15/17 | $ | 50 | $ | 50,435 | |||||||||
CHS/Community Health Systems, Inc., | B3 | 8.000 | 11/15/19 | 2,300 | 2,492,625 | |||||||||||
Sr. Sec’d. Notes | Ba2 | 5.125 | 08/15/18 | 150 | 156,000 | |||||||||||
Express Scripts Holding Co., | Baa3 | 2.100 | 02/12/15 | 50 | 50,789 | |||||||||||
Gilead Sciences, Inc., | Baa1 | 5.650 | 12/01/41 | 670 | 755,842 | |||||||||||
Glaxosmithkline Capital, Inc., | A1 | 6.375 | 05/15/38 | 730 | 918,564 | |||||||||||
HCA, Inc., | B3 | 8.000 | 10/01/18 | 500 | 587,500 | |||||||||||
Sr. Sec’d. Notes | Ba3 | 4.750 | 05/01/23 | 3,400 | 3,276,750 | |||||||||||
Sr. Sec’d. Notes | Ba3 | 5.875 | 03/15/22 | 3,425 | 3,604,813 | |||||||||||
Sr. Unsec’d. Notes | B3 | 7.190 | 11/15/15 | 100 | 109,500 | |||||||||||
Sr. Unsec’d. Notes, MTN | B3 | 9.000 | 12/15/14 | 200 | 216,000 | |||||||||||
Laboratory Corp. of America Holdings, | Baa2 | 3.750 | 08/23/22 | 25 | 24,533 | |||||||||||
Medco Health Solutions, Inc., | Baa3 | 7.125 | 03/15/18 | 1,000 | 1,204,116 | |||||||||||
Merck & Co, Inc., | A2 | 4.150 | 05/18/43 | 2,650 | 2,484,306 | |||||||||||
Mylan, Inc., | Baa3 | 2.600 | 06/24/18 | 1,200 | 1,208,299 | |||||||||||
Gtd. Notes, 144A | Baa3 | 6.000 | 11/15/18 | 550 | 591,746 | |||||||||||
Pfizer, Inc., | A1 | 4.300 | 06/15/43 | 2,350 | 2,245,181 | |||||||||||
Roche Holdings, Inc. (Switzerland), | A1 | 7.000 | 03/01/39 | 550 | 741,498 | |||||||||||
Sanofi (France), | A1 | 1.250 | 04/10/18 | 925 | 910,775 | |||||||||||
Tenet Healthcare Corp., | Ba3 | 6.250 | 11/01/18 | 600 | 657,000 | |||||||||||
Teva Pharmaceutical Finance Co. BV (Curacao), | A3 | 2.950 | 12/18/22 | 300 | 278,225 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 47 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Healthcare & Pharmaceutical (cont’d.) |
| |||||||||||||||
Valeant Pharmaceuticals International, | B1 | 6.500% | 07/15/16 | $ | 680 | $ | 703,800 | |||||||||
Gtd. Notes, 144A | B1 | 6.875 | 12/01/18 | 500 | 534,375 | |||||||||||
Sr. Unsec’d. Notes, 144A | B1 | 6.750 | 08/15/18 | 3,570 | 3,909,150 | |||||||||||
Zoetis, Inc., | Baa2 | 4.700 | 02/01/43 | 975 | 920,768 | |||||||||||
|
| |||||||||||||||
31,542,643 | ||||||||||||||||
Healthcare Insurance 0.3% | ||||||||||||||||
Aetna, Inc., | Baa2 | 2.750 | 11/15/22 | 450 | 420,629 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 4.125 | 11/15/42 | 325 | 290,068 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 4.500 | 05/15/42 | 530 | 502,571 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 6.000 | 06/15/16 | 50 | 56,404 | |||||||||||
Cigna Corp., | Baa2 | 5.375 | 02/15/42 | 350 | 374,158 | |||||||||||
Coventry Health Care, Inc., | Baa2 | 5.950 | 03/15/17 | 320 | 363,779 | |||||||||||
UnitedHealth Group, Inc., | A3 | 3.950 | 10/15/42 | 175 | 152,941 | |||||||||||
Sr. Unsec’d. Notes | A3 | 4.375 | 03/15/42 | 1,055 | 995,812 | |||||||||||
WellPoint, Inc., | Baa2 | 4.650 | 01/15/43 | 400 | 374,736 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 5.100 | 01/15/44 | 1,925 | 1,934,906 | |||||||||||
|
| |||||||||||||||
5,466,004 | ||||||||||||||||
Insurance 1.8% | ||||||||||||||||
Allied World Assurance Co. Ltd., Gtd. Notes | Baa1 | 7.500 | 08/01/16 | 100 | 116,049 | |||||||||||
Allstate Corp. (The), | A3 | 4.500 | 06/15/43 | 175 | 173,682 | |||||||||||
American International Group, Inc., | Baa1 | 6.400 | 12/15/20 | 4,490 | 5,386,644 | |||||||||||
Sr. Unsec’d. Notes, MTN | Baa1 | 5.450 | 05/18/17 | 2,190 | 2,467,383 | |||||||||||
Aon Corp. (United Kingdom), | Baa2 | 3.125 | 05/27/16 | 110 | 115,221 |
See Notes to Financial Statements.
48 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Insurance (cont’d.) |
| |||||||||||||||
Axis Capital Holdings Ltd. (Bermuda), | Baa1 | 5.750% | 12/01/14 | $ | 500 | $ | 526,107 | |||||||||
Berkshire Hathaway, Inc., | Aa2 | 4.500 | 02/11/43 | 740 | 713,556 | |||||||||||
Hartford Financial Services Group, Inc., | Baa3 | 4.300 | 04/15/43 | 1,062 | 976,174 | |||||||||||
Sr. Unsec’d. Notes | Baa3 | 5.125 | 04/15/22 | 205 | 229,275 | |||||||||||
Sr. Unsec’d. Notes | Baa3 | 6.100 | 10/01/41 | 470 | 558,796 | |||||||||||
Liberty Mutual Group, Inc., | Baa2 | 4.250 | 06/15/23 | 1,975 | 1,975,962 | |||||||||||
Gtd. Notes, 144A | Baa2 | 4.950 | 05/01/22 | 75 | 79,293 | |||||||||||
Gtd. Notes, 144A | Baa2 | 6.500 | 05/01/42 | 1,530 | 1,709,290 | |||||||||||
Sr. Unsec’d. Notes, 144A | Baa2 | 6.700 | 08/15/16 | 115 | 131,152 | |||||||||||
Lincoln National Corp., | Baa1 | 4.200 | 03/15/22 | 70 | 72,938 | |||||||||||
Sr. Unsec’d. Notes | Baa1 | 6.300 | 10/09/37 | 175 | 207,459 | |||||||||||
Sr. Unsec’d. Notes | Baa1 | 7.000 | 06/15/40 | 3,290 | 4,242,721 | |||||||||||
Markel Corp., | Baa2 | 4.900 | 07/01/22 | 2,020 | 2,157,396 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 5.000 | 03/30/43 | 125 | 119,505 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 7.125 | 09/30/19 | 630 | 763,115 | |||||||||||
Massachusetts Mutual Life Insurance Co., | A1 | 5.375 | 12/01/41 | 320 | 340,689 | |||||||||||
MetLife, Inc., | A3 | 3.048 | 12/15/22 | 225 | 216,353 | |||||||||||
Sr. Unsec’d. Notes | A3 | 4.125 | 08/13/42 | 720 | 655,412 | |||||||||||
Sr. Unsec’d. Notes | A3 | 4.368 | 09/15/23 | 2,025 | 2,137,460 | |||||||||||
Metropolitan Life Global Funding I, Sec’d. Notes, 144A | Aa3 | 1.500 | 01/10/18 | 725 | 715,091 | |||||||||||
Nippon Life Insurance Co. (Japan), Sub. Notes, 144A | A2 | 5.000(a) | 10/18/42 | 200 | 203,000 | |||||||||||
Northwestern Mutual Life Insurance Co. (The), | Aa2 | 6.063 | 03/30/40 | 200 | 233,700 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 49 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Insurance (cont’d.) |
| |||||||||||||||
Principal Financial Group, Inc., | A3 | 4.350% | 05/15/43 | $ | 975 | $ | 911,029 | |||||||||
Swiss Re Treasury US Corp., | A1 | 4.250 | 12/06/42 | 795 | 706,721 | |||||||||||
Teachers Insurance & Annuity Association of America, | Aa2 | 6.850 | 12/16/39 | 640 | 806,460 | |||||||||||
W.R. Berkley Corp., | Baa2 | 4.625 | 03/15/22 | 1,435 | 1,498,836 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 5.375 | 09/15/20 | 1,500 | 1,654,454 | |||||||||||
|
| |||||||||||||||
32,800,923 | ||||||||||||||||
Lodging 0.4% | ||||||||||||||||
Carnival Corp. (Panama), | Baa1 | 1.200 | 02/05/16 | 950 | 945,462 | |||||||||||
Gtd. Notes | Baa1 | 1.875 | 12/15/17 | 425 | 416,786 | |||||||||||
Marriott International, Inc., | Baa2 | 3.000 | 03/01/19 | 115 | 116,839 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 3.250 | 09/15/22 | 75 | 71,411 | |||||||||||
Starwood Hotels & Resorts Worldwide, Inc., | Baa2 | 6.750 | 05/15/18 | 150 | 177,546 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 7.150 | 12/01/19 | 550 | 671,018 | |||||||||||
Wyndham Worldwide Corp., | Baa3 | 2.500 | 03/01/18 | 275 | 275,097 | |||||||||||
Sr. Unsec’d. Notes | Baa3 | 2.950 | 03/01/17 | 3,820 | 3,916,180 | |||||||||||
Sr. Unsec’d. Notes | Baa3 | 4.250 | 03/01/22 | 475 | 473,549 | |||||||||||
|
| |||||||||||||||
7,063,888 | ||||||||||||||||
Media & Entertainment 2.4% | ||||||||||||||||
AMC Entertainment, Inc., | Caa1 | 9.750 | 12/01/20 | 3,450 | 3,941,625 | |||||||||||
AMC Networks, Inc., | B1 | 4.750 | 12/15/22 | 2,770 | 2,679,975 | |||||||||||
Belo Corp., | Ba1 | 8.000 | 11/15/16 | 1,902 | 1,987,590 |
See Notes to Financial Statements.
50 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Media & Entertainment (cont’d.) |
| |||||||||||||||
CBS Corp., | Baa2 | 1.950% | 07/01/17 | $ | 50 | $ | 50,457 | |||||||||
Gtd. Notes | Baa2 | 4.850 | 07/01/42 | 350 | 324,652 | |||||||||||
Gtd. Notes | Baa2 | 8.875 | 05/15/19 | 220 | 282,523 | |||||||||||
Cedar Fair LP/Canada’s Wonderland Co./Magnum Management Corp., | B1 | 9.125 | 08/01/18 | 4,153 | 4,547,535 | |||||||||||
Clear Channel Worldwide Holdings, Inc., | B1 | 6.500 | 11/15/22 | 135 | 140,400 | |||||||||||
Gtd. Notes | B1 | 6.500 | 11/15/22 | 365 | 383,250 | |||||||||||
Griffey Intermediate, Inc./Griffey Finance Sub LLC, | Caa2 | 7.000 | 10/15/20 | 3,500 | 2,537,500 | |||||||||||
Intelsat Jackson Holdings SA (Luxembourg), | B3 | 5.500 | 08/01/23 | 2,000 | 1,930,000 | |||||||||||
Lamar Media Corp., | Ba2 | 9.750 | 04/01/14 | 475 | 491,625 | |||||||||||
Liberty Interactive LLC, | B2 | 8.250 | 02/01/30 | 2,500 | 2,662,500 | |||||||||||
Myriad International Holdings BV (South Africa), | Baa3 | 6.000 | 07/18/20 | 2,325 | 2,476,125 | |||||||||||
News America, Inc., | Baa1 | 6.150 | 03/01/37 | 1,150 | 1,282,151 | |||||||||||
Gtd. Notes | Baa1 | 6.150 | 02/15/41 | 1,550 | 1,749,398 | |||||||||||
Gtd. Notes | Baa1 | 8.000 | 10/17/16 | 100 | 118,859 | |||||||||||
Nielsen Finance LLC/Nielsen Finance Co. (Netherlands), | B2 | 7.750 | 10/15/18 | 1,500 | 1,635,000 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 51 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Media & Entertainment (cont’d.) |
| |||||||||||||||
SSI Investments II Ltd./SSI Co.-Issuer LLC, | Caa1 | 11.125% | 06/01/18 | $ | 4,000 | $ | 4,380,000 | |||||||||
Starz LLC/Starz Finance Corp., | Ba2 | 5.000 | 09/15/19 | 2,525 | 2,550,250 | |||||||||||
Telesat Canada/Telesat LLC (Canada), | B3 | 6.000 | 05/15/17 | 2,400 | 2,508,000 | |||||||||||
Time Warner, Inc., | Baa2 | 4.900 | 06/15/42 | 790 | 764,436 | |||||||||||
Gtd. Notes | Baa2 | 6.200 | 03/15/40 | 1,750 | 1,951,775 | |||||||||||
Vail Resorts, Inc., | Ba3 | 6.500 | 05/01/19 | 950 | 1,009,375 | |||||||||||
Viacom, Inc., | Baa2 | 4.500 | 02/27/42 | 250 | 218,638 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 5.850 | 09/01/43 | 1,150 | 1,220,981 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 6.250 | 04/30/16 | 100 | 111,481 | |||||||||||
|
| |||||||||||||||
43,936,101 | ||||||||||||||||
Metals 1.2% | ||||||||||||||||
Adaro Indonesia PT (Indonesia), | Ba1 | 7.625 | 10/22/19 | 2,030 | 2,146,725 | |||||||||||
ArcelorMittal (Luxembourg), | Ba1 | 4.250 | 08/05/15 | 475 | 490,438 | |||||||||||
Sr. Unsec’d. Notes | Ba1 | 6.125 | 06/01/18 | 500 | 542,500 | |||||||||||
Berau Capital Resources (Singapore), | B1 | 12.500 | 07/08/15 | 1,900 | 2,004,500 | |||||||||||
BHP Billiton Finance USA Ltd. (Australia), | A1 | 5.000 | 09/30/43 | 1,700 | 1,746,422 | |||||||||||
CONSOL Energy, Inc., | B1 | 8.000 | 04/01/17 | 575 | 609,500 | |||||||||||
Eldorado Gold Corp. (Canada), | Ba3 | 6.125 | 12/15/20 | 2,375 | 2,363,125 | |||||||||||
FMG Resources (August 2006) Pty Ltd. (Australia), | B1 | 6.000 | 04/01/17 | 1,700 | 1,776,500 | |||||||||||
Gtd. Notes, 144A | B1 | 6.375 | 02/01/16 | 1,700 | 1,772,250 | |||||||||||
Gtd. Notes, 144A | B1 | 7.000 | 11/01/15 | 1,000 | 1,037,500 |
See Notes to Financial Statements.
52 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Metals (cont’d.) |
| |||||||||||||||
FQM Akubra, Inc. (Canada), | B1 | 8.750% | 06/01/20 | $ | 1,550 | $ | 1,712,750 | |||||||||
Freeport-McMoran Copper & Gold, Inc., | Baa3 | 2.150 | 03/01/17 | 50 | 50,206 | |||||||||||
Peabody Energy Corp., | Ba2 | 6.000 | 11/15/18 | 100 | 105,500 | |||||||||||
Gtd. Notes | Ba2 | 6.250 | 11/15/21 | 400 | 413,000 | |||||||||||
Southern Copper Corp., | Baa2 | 6.750 | 04/16/40 | 375 | 369,696 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 7.500 | 07/27/35 | 800 | 851,985 | |||||||||||
Teck Resources Ltd. (Canada), | Baa2 | 2.500 | 02/01/18 | 100 | 100,435 | |||||||||||
Gtd. Notes | Baa2 | 3.000 | 03/01/19 | 125 | 124,869 | |||||||||||
Vedanta Resources PLC (India), | Ba3 | 6.000 | 01/31/19 | 1,500 | 1,447,500 | |||||||||||
Xstrata Finance Canada Ltd. (Canada), | Baa2 | 2.050 | 10/23/15 | 1,675 | 1,688,264 | |||||||||||
Gtd. Notes, 144A | Baa2 | 2.700 | 10/25/17 | 350 | 351,664 | |||||||||||
Gtd. Notes, 144A | Baa2 | 2.850 | 11/10/14 | 50 | 50,751 | |||||||||||
|
| |||||||||||||||
21,756,080 | ||||||||||||||||
Non-Captive Finance 0.6% | ||||||||||||||||
CIT Group, Inc., | Ba3 | 5.000 | 05/15/17 | 3,000 | 3,225,000 | |||||||||||
Sr. Unsec’d. Notes | Ba3 | 5.250 | 03/15/18 | 1,800 | 1,946,250 | |||||||||||
General Electric Capital Corp., | A1 | 2.300 | 04/27/17 | 100 | 103,076 | |||||||||||
Sr. Unsec’d. Notes, MTN | A1 | 3.100 | 01/09/23 | 100 | 96,397 | |||||||||||
Sr. Unsec’d. Notes, MTN | A1 | 3.150 | 09/07/22 | 200 | 195,856 | |||||||||||
Sr. Unsec’d. Notes, MTN | A1 | 5.875 | 01/14/38 | 920 | 1,038,291 | |||||||||||
Sr. Unsec’d. Notes, MTN(g) | A1 | 6.875 | 01/10/39 | 750 | 948,018 | |||||||||||
Sub. Notes | A2 | 5.300 | 02/11/21 | 450 | 501,144 | |||||||||||
International Lease Finance Corp., | Ba3 | 5.750 | 05/15/16 | 25 | 26,719 | |||||||||||
Sr. Unsec’d. Notes | Ba3 | 6.250 | 05/15/19 | 25 | 27,250 | |||||||||||
Sr. Unsec’d. Notes | Ba3 | 8.625 | 09/15/15 | 90 | 100,125 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 53 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Non-Captive Finance (cont’d) | ||||||||||||||||
NYSE Euronext, | A3 | 2.000% | 10/05/17 | $ | 475 | $ | 477,480 | |||||||||
Schahin II Finance Co. SPV Ltd. (Brazil), | Baa3 | 5.875 | 09/25/22 | 1,150 | 1,120,860 | |||||||||||
SLM Corp., | Ba1 | 3.875 | 09/10/15 | 300 | 310,500 | |||||||||||
Springleaf Finance Corp., | B3 | 6.900 | 12/15/17 | 300 | 324,750 | |||||||||||
|
| |||||||||||||||
10,441,716 | ||||||||||||||||
Packaging 0.3% | ||||||||||||||||
Ball Corp., | Ba1 | 4.000 | 11/15/23 | 500 | 460,625 | |||||||||||
Crown Americas LLC/Crown Americas Capital Corp IV, | Ba2 | 4.500 | 01/15/23 | 525 | 492,188 | |||||||||||
Owens-Brockway Glass Container, Inc., | Ba3 | 7.375 | 05/15/16 | 900 | 1,013,625 | |||||||||||
Sealed Air Corp., | B1 | 8.375 | 09/15/21 | 2,550 | 2,919,750 | |||||||||||
|
| |||||||||||||||
4,886,188 | ||||||||||||||||
Paper 0.4% | ||||||||||||||||
Georgia-Pacific LLC, | Baa2 | 5.400 | 11/01/20 | (e)(f) | 35 | 39,570 | ||||||||||
Sr. Unsec’d. Notes | Baa2 | 7.375 | 12/01/25 | (e)(f) | 400 | 509,071 | ||||||||||
International Paper Co., | Baa3 | 6.000 | 11/15/41 | 610 | 667,125 | |||||||||||
Sr. Unsec’d. Notes | Baa3 | 9.375 | 05/15/19 | 100 | 132,483 | |||||||||||
Rock-Tenn Co., | Ba1 | 4.000 | 03/01/23 | 475 | 464,723 | |||||||||||
Gtd. Notes | Ba1 | 4.450 | 03/01/19 | 35 | 37,494 | |||||||||||
Gtd. Notes | Ba1 | 4.900 | 03/01/22 | 1,190 | 1,256,203 |
See Notes to Financial Statements.
54 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Paper (cont’d) | ||||||||||||||||
Smurfit Kappa Acquisitions (Ireland), | Ba2 | 4.875% | 09/15/18 | $ | 3,647 | $ | 3,738,175 | |||||||||
|
| |||||||||||||||
6,844,844 | ||||||||||||||||
Pipelines & Other 1.5% | ||||||||||||||||
AGL Capital Corp., | Baa1 | 4.400 | 06/01/43 | 1,375 | 1,270,940 | |||||||||||
Buckeye Partners LP, | Baa3 | 4.150 | 07/01/23 | 2,685 | 2,646,331 | |||||||||||
CenterPoint Energy Resources Corp., | Baa2 | 5.850 | 01/15/41 | 700 | 817,272 | |||||||||||
DCP Midstream LLC, | Baa2 | 8.125 | 08/16/30 | 3,350 | 4,089,439 | |||||||||||
Sr. Unsec’d. Notes, 144A | Baa2 | 5.350 | 03/15/20 | 1,270 | 1,364,408 | |||||||||||
DCP Midstream Operating LP, | Baa3 | 2.500 | 12/01/17 | 225 | 225,250 | |||||||||||
Gtd. Notes | Baa3 | 3.250 | 10/01/15 | 2,000 | 2,064,834 | |||||||||||
El Paso Pipeline Partners Operating Co. LLC, | Ba1 | 6.500 | 04/01/20 | 750 | 871,391 | |||||||||||
Energy Transfer Partners LP, | Baa3 | 5.150 | 02/01/43 | 250 | 234,354 | |||||||||||
Enterprise Products Operating LLC, | Baa1 | 3.350 | 03/15/23 | 2,100 | 2,027,155 | |||||||||||
Gtd. Notes | Baa1 | 4.850 | 03/15/44 | 1,730 | 1,659,288 | |||||||||||
Gtd. Notes | Baa1 | 5.700 | 02/15/42 | 50 | 53,397 | |||||||||||
Kinder Morgan Energy Partners LP, | Baa2 | 3.450 | 02/15/23 | 200 | 189,697 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 5.000 | 08/15/42 | 650 | 615,250 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 5.000 | 03/01/43 | 625 | 589,567 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 7.300 | 08/15/33 | 175 | 208,258 | |||||||||||
Magellan Midstream Partners LP, | Baa2 | 4.200 | 12/01/42 | 125 | 109,474 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 4.250 | 02/01/21 | 1,950 | 2,056,341 | |||||||||||
Series 20431015, | Baa2 | 5.150 | 10/15/43 | 1,350 | 1,377,564 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 55 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Pipelines & Other (cont’d) | ||||||||||||||||
Nisource Finance Corp., | Baa3 | 4.800% | 02/15/44 | $ | 450 | $ | 411,409 | |||||||||
ONEOK Partners LP, | Baa2 | 6.200 | 09/15/43 | 2,175 | 2,387,900 | |||||||||||
Gtd. Notes | Baa2 | 2.000 | 10/01/17 | 800 | 797,874 | |||||||||||
Sempra Energy, | Baa1 | 2.300 | 04/01/17 | 50 | 51,254 | |||||||||||
Sunoco Logistics Partners Operations LP, | Baa3 | 4.950 | 01/15/43 | 200 | 183,106 | |||||||||||
Tesoro Logistics LP/Tesoro Logistics Finance Corp., | B1 | 6.125 | 10/15/21 | 1,700 | 1,759,500 | |||||||||||
Western Gas Partners LP, | Baa3 | 4.000 | 07/01/22 | 75 | 74,452 | |||||||||||
|
| |||||||||||||||
28,135,705 | ||||||||||||||||
Railroads 0.4% | ||||||||||||||||
Burlington Northern Santa Fe LLC, | A3 | 4.375 | 09/01/42 | 180 | 165,060 | |||||||||||
CSX Corp., | Baa2 | 4.100 | 03/15/44 | 705 | 612,706 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 7.375 | 02/01/19 | 4,000 | 4,942,652 | |||||||||||
Norfolk Southern Railway Co., | Baa1 | 9.750 | 06/15/20 | 1,300 | 1,790,272 | |||||||||||
Union Pacific Corp., | Baa1 | 4.300 | 06/15/42 | 600 | 562,764 | |||||||||||
Sr. Unsec’d. Notes | Baa1 | 6.250 | 05/01/34 | 207 | 246,284 | |||||||||||
|
| |||||||||||||||
8,319,738 | ||||||||||||||||
Real Estate Investment Trusts 0.4% | ||||||||||||||||
Aviv Healthcare Properties LP/Aviv Healthcare Capital Corp., | Ba3 | 7.750 | 02/15/19 | 600 | 647,250 | |||||||||||
Digital Realty Trust LP, | Baa2 | 4.500 | 07/15/15 | 1,300 | 1,363,223 | |||||||||||
Felcor Lodging LP, | B2 | 5.625 | 03/01/23 | 1,050 | 1,034,250 | |||||||||||
Sr. Sec’d. Notes | B2 | 10.000 | 10/01/14 | 66 | 70,703 |
See Notes to Financial Statements.
56 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Real Estate Investment Trusts (cont’d) | ||||||||||||||||
Mack-Cali Realty LP, | Baa2 | 2.500% | 12/15/17 | $ | 100 | $ | 99,530 | |||||||||
Omega Healthcare Investors, Inc., | Ba1 | 7.500 | 02/15/20 | 500 | 547,500 | |||||||||||
Realty Income Corp., | Baa1 | 2.000 | 01/31/18 | 200 | 197,262 | |||||||||||
Sr. Unsec’d. Notes | Baa1 | 5.500 | 11/15/15 | 50 | 54,161 | |||||||||||
Sabra Health Care LP/Sabra Capital Corp., | B1 | 5.375 | 06/01/23 | 1,965 | 1,920,788 | |||||||||||
Simon Property Group LP, | A2 | 6.125 | 05/30/18 | 60 | 70,839 | |||||||||||
Sr. Unsec’d. Notes, 144A | A2 | 1.500 | 02/01/18 | 700 | 688,615 | |||||||||||
Ventas Realty LP/Ventas Capital Corp., | Baa1 | 2.000 | 02/15/18 | 150 | 148,169 | |||||||||||
|
| |||||||||||||||
6,842,290 | ||||||||||||||||
Retailers 0.7% | ||||||||||||||||
Claire’s Stores, Inc., | B2 | 9.000 | 03/15/19 | 475 | 530,813 | |||||||||||
CVS Caremark Corp., | Baa1 | 5.750 | 05/15/41 | 700 | 776,201 | |||||||||||
Dufry Finance SCA (Switzerland), | Ba3 | 5.500 | 10/15/20 | 3,450 | 3,498,441 | |||||||||||
Home Depot, Inc. (The), | A3 | 4.200 | 04/01/43 | 700 | 653,351 | |||||||||||
L Brands, Inc., | Ba1 | 5.625 | 02/15/22 | 3,725 | 3,836,750 | |||||||||||
Lowe’s Cos, Inc., | A3 | 5.000 | 09/15/43 | 900 | 935,919 | |||||||||||
Macy’s Retail Holdings, Inc., | Baa3 | 3.875 | 01/15/22 | 125 | 124,835 | |||||||||||
Gtd. Notes | Baa3 | 4.300 | 02/15/43 | 755 | 640,694 | |||||||||||
Gtd. Notes | Baa3 | 5.900 | 12/01/16 | 43 | 48,499 | |||||||||||
Picard Groupe SA (France), | Ba3 | 4.476(a) | 08/01/19 | EUR | 1,650 | 2,279,501 | ||||||||||
Walgreen Co., | Baa1 | 1.800 | 09/15/17 | 150 | 150,888 | |||||||||||
|
| |||||||||||||||
13,475,892 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 57 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Technology 2.6% | ||||||||||||||||
Arrow Electronics, Inc., | Baa3 | 3.000% | 03/01/18 | $ | 1,400 | $ | 1,426,118 | |||||||||
Sr. Unsec’d. Notes | Baa3 | 3.375 | 11/01/15 | 50 | 51,684 | |||||||||||
Audatex North America, Inc., | Ba2 | 6.750 | 06/15/18 | 1,500 | 1,603,950 | |||||||||||
Avaya, Inc., | Caa1 | 10.500 | 03/01/21 | 600 | 522,000 | |||||||||||
Brightstar Corp., | B1+ | 7.250 | 08/01/18 | (e)(f) | 5,000 | 5,350,000 | ||||||||||
CDW LLC/CDW Finance Corp., | B3 | 12.535 | 10/12/17 | 828 | 861,120 | |||||||||||
Sr. Sec’d. Notes | Ba3 | 8.000 | 12/15/18 | 1,000 | 1,095,000 | |||||||||||
Ceridian Corp., | Caa2 | 11.250 | 11/15/15 | 2,300 | 2,314,375 | |||||||||||
Sr. Sec’d. Notes, 144A | B1 | 8.875 | 07/15/19 | 1,000 | 1,157,500 | |||||||||||
CommScope, Inc., | B2 | 8.250 | 01/15/19 | (e)(f) | 1,325 | 1,454,188 | ||||||||||
Fidelity National Information Services, Inc., | Baa3 | 7.875 | 07/15/20 | 1,400 | 1,542,125 | |||||||||||
First Data Corp., | Caa1 | 12.625 | 01/15/21 | 700 | 807,625 | |||||||||||
Gtd. Notes, 144A | Caa1 | 10.625 | 06/15/21 | 2,400 | 2,577,000 | |||||||||||
Fiserv, Inc., | Baa2 | 3.125 | 10/01/15 | 1,059 | 1,100,402 | |||||||||||
Gtd. Notes | Baa2 | 3.125 | 06/15/16 | 2,645 | 2,767,382 | |||||||||||
Freescale Semiconductor, Inc., | B1 | 9.250 | 04/15/18 | 5,160 | 5,579,250 | |||||||||||
Interactive Data Corp., | B3 | 10.250 | 08/01/18 | 1,200 | 1,327,500 | |||||||||||
Jabil Circuit, Inc., | Ba1 | 4.700 | 09/15/22 | 1,045 | 1,013,650 | |||||||||||
Sr. Unsec’d. Notes | Ba1 | 5.625 | 12/15/20 | 6,400 | 6,720,000 |
See Notes to Financial Statements.
58 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Technology (cont’d.) |
| |||||||||||||||
NXP BV/NXP Funding LLC (Netherlands), | B3 | 3.750% | 06/01/18 | $ | 1,150 | $ | 1,152,875 | |||||||||
Gtd. Notes, 144A | B3 | 5.750 | 02/15/21 | 1,500 | 1,563,750 | |||||||||||
Seagate HDD Cayman, | Ba1 | 3.750 | 11/15/18 | 1,250 | 1,250,000 | |||||||||||
SunGard Data Systems, Inc., | B3 | 4.875 | 01/15/14 | 100 | 100,500 | |||||||||||
TransUnion LLC/TransUnion Financing Corp., | B2 | 11.375 | 06/15/18 | 1,150 | 1,276,500 | |||||||||||
Tyco Electronics Group SA (Switzerland), | Baa2 | 6.550 | 10/01/17 | 2,750 | 3,185,108 | |||||||||||
Xerox Corp., | Baa2 | 1.083(a) | 05/16/14 | 100 | 100,144 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 4.250 | 02/15/15 | 440 | 458,351 | |||||||||||
|
| |||||||||||||||
48,358,097 | ||||||||||||||||
Telecommunications 3.3% | ||||||||||||||||
AT&T, Inc., | A3 | 5.350 | 09/01/40 | 820 | 798,723 | |||||||||||
Sr. Unsec’d. Notes | A3 | 5.550 | 08/15/41 | 670 | 669,349 | |||||||||||
Bharti Airtel International Netherlands BV (India), | Baa3 | 5.125 | 03/11/23 | 2,225 | 2,085,938 | |||||||||||
British Telecommunications PLC (United Kingdom), | Baa2 | 5.950 | 01/15/18 | 170 | 195,721 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 9.625 | 12/15/30 | 340 | 507,258 | |||||||||||
CenturyLink, Inc., | Ba2 | 5.150 | 06/15/17 | 2,035 | 2,162,188 | |||||||||||
Digicel Group Ltd. (Bermuda), | B1 | 8.250 | 09/01/17 | 1,000 | 1,041,500 | |||||||||||
Sr. Unsec’d. Notes, 144A | Caa1 | 8.250 | 09/30/20 | 275 | 290,125 | |||||||||||
Sr. Unsec’d. Notes, 144A | Caa1 | 10.500 | 04/15/18 | 1,550 | 1,674,000 | |||||||||||
Eileme 2 AB (Poland), | B3 | 11.750 | 01/31/20 | EUR | 350 | 561,466 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 59 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Telecommunications (cont’d.) |
| |||||||||||||||
Embarq Corp., | Baa3 | 7.082% | 06/01/16 | (e)(f) | $ | 120 | $ | 134,582 | ||||||||
Sr. Unsec’d. Notes | Baa3 | 7.995 | 06/01/36 | (e)(f) | 240 | 244,494 | ||||||||||
Indosat Palapa Co. BV (Indonesia), | Ba1 | 7.375 | 07/29/20 | 3,000 | 3,228,750 | |||||||||||
Qwest Communications International, Inc., | Ba1 | 7.125 | 04/01/18 | 3,000 | 3,112,500 | |||||||||||
Qwest Corp., | Baa3 | 7.500 | 10/01/14 | 40 | 42,268 | |||||||||||
Rogers Communications, Inc. (Canada), | Baa1 | 4.500 | 03/15/43 | 250 | 219,826 | |||||||||||
Softbank Corp. (Japan), | Ba1 | 4.500 | 04/15/20 | 5,900 | 5,841,000 | |||||||||||
Sprint Capital Corp., | B1 | 6.900 | 05/01/19 | 4,100 | 4,417,750 | |||||||||||
Sprint Communications, Inc., | B1 | 6.000 | 12/01/16 | 6,900 | 7,460,625 | |||||||||||
Sprint Nextel Corp., | B1 | 9.125 | 03/01/17 | 1,500 | 1,770,000 | |||||||||||
T-Mobile USA, Inc., | Ba3 | 6.464 | 04/28/19 | 3,850 | 4,081,000 | |||||||||||
Verizon Communications, Inc., | Baa1 | 6.400 | 09/15/33 | 3,325 | 3,763,498 | |||||||||||
Sr. Unsec’d. Notes | Baa1 | 6.550 | 09/15/43 | 10,900 | 12,646,300 | |||||||||||
Vimpel Communications Via VIP Finance Ireland Ltd. OJSC (Russia), | Ba3 | 9.125 | 04/30/18 | (e) | 1,300 | 1,517,750 | ||||||||||
Wind Acquisition Finance SA (Italy), | B3 | 11.750 | 07/15/17 | 2,650 | 2,815,625 | |||||||||||
Sec’d. Notes, RegS | B3 | 11.750 | 07/15/17 | EUR | 700 | 1,013,442 | ||||||||||
|
| |||||||||||||||
62,295,678 |
See Notes to Financial Statements.
60 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Tobacco 0.4% | ||||||||||||||||
Altria Group, Inc., | Baa1 | 4.000% | 01/31/24 | $ | 1,550 | $ | 1,555,814 | |||||||||
Gtd. Notes | Baa1 | 9.950 | 11/10/38 | 975 | 1,522,596 | |||||||||||
Imperial Tobacco Finance PLC (United Kingdom), | Baa3 | 2.050 | 02/11/18 | 925 | 913,900 | |||||||||||
Lorillard Tobacco Co., | Baa2 | 2.300 | 08/21/17 | 475 | 479,811 | |||||||||||
Gtd. Notes | Baa2 | 3.500 | 08/04/16 | 235 | 247,950 | |||||||||||
Gtd. Notes | Baa2 | 3.750 | 05/20/23 | 2,850 | 2,676,469 | |||||||||||
Philip Morris International, Inc., | A2 | 2.500 | 08/22/22 | 200 | 186,505 | |||||||||||
Reynolds American, Inc., | Baa2 | 3.250 | 11/01/22 | 400 | 378,018 | |||||||||||
Gtd. Notes | Baa2 | 6.750 | 06/15/17 | 115 | 133,365 | |||||||||||
|
| |||||||||||||||
8,094,428 | ||||||||||||||||
|
| |||||||||||||||
TOTAL CORPORATE BONDS | 719,586,028 | |||||||||||||||
|
| |||||||||||||||
MUNICIPAL BONDS 0.9% | ||||||||||||||||
California 0.1% | ||||||||||||||||
Bay Area Toll Authority, BABs, Revenue Bonds | Aa3 | 6.263 | 04/01/49 | 550 | 678,024 | |||||||||||
Los Angeles Department of Water & Power, BABs, Revenue Bonds | Aa3 | 6.574 | 07/01/45 | 585 | 737,188 | |||||||||||
University of California, BABs, Revenue Bonds | Aa1 | 5.770 | 05/15/43 | 390 | 446,683 | |||||||||||
|
| |||||||||||||||
1,861,895 | ||||||||||||||||
Colorado 0.1% | ||||||||||||||||
Regional Transportation District, BABs, Revenue Bonds, | Aa2 | 5.844 | 11/01/50 | 1,190 | 1,383,304 | |||||||||||
Illinois | ||||||||||||||||
Chicago O’Hare International Airport, BABs, Revenue Bonds | A2 | 6.395 | 01/01/40 | 360 | 411,509 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 61 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
MUNICIPAL BONDS (Continued) |
| |||||||||||||||
New Jersey | ||||||||||||||||
Rutgers State University, BABs, Revenue Bonds | Aa3 | 5.665% | 05/01/40 | $ | 200 | $ | 220,566 | |||||||||
New York 0.4% | ||||||||||||||||
Memorial Sloan-Kettering Cancer Center, Sr. Unsec’d. Notes | Aa3 | 4.125 | 07/01/52 | 75 | 63,076 | |||||||||||
New York City Water & Sewer System, BABs, Revenue Bonds, | Aa2 | 5.000 | 06/15/47 | 5,975 | 6,204,500 | |||||||||||
New York City Water & Sewer System, BABs, Taxable, Revenue Bonds | Aa2 | 5.882 | 06/15/44 | 400 | 470,484 | |||||||||||
Port Authority of New York & New Jersey, Revenue Bonds | Aa3 | 4.458 | 10/01/62 | 100 | 88,278 | |||||||||||
|
| |||||||||||||||
6,826,338 | ||||||||||||||||
Ohio 0.2% | ||||||||||||||||
Ohio State Turnpiike Commission, BABs, Revenue Bonds, Series A-1 | A1 | 5.000 | 02/15/48 | 4,050 | 4,078,026 | |||||||||||
Ohio State University, Taxable, Revenue Bonds, Series A | Aa1 | 4.800 | 06/01/2111 | 180 | 159,221 | |||||||||||
|
| |||||||||||||||
4,237,247 | ||||||||||||||||
Pennsylvania 0.1% | ||||||||||||||||
Pennsylvania Turnpike Commission, Revenue Bonds, | A1 | 5.000 | 12/01/43 | 1,550 | 1,585,697 | |||||||||||
Texas | ||||||||||||||||
City Public Service Board of San Antonio, BABs, Taxable, Revenue Bonds | Aa1 | 4.427 | 02/01/42 | 120 | 115,884 | |||||||||||
|
| |||||||||||||||
TOTAL MUNICIPAL BONDS | 16,642,440 | |||||||||||||||
|
|
See Notes to Financial Statements.
62 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
NON-CORPORATE FOREIGN AGENCIES 2.5% |
| |||||||||||||||
CNOOC Finance 2013 Ltd. (China), | Aa3 | 3.000% | 05/09/23 | $ | 2,415 | $ | 2,199,763 | |||||||||
Comision Federal de Electricidad (Mexico), | Baa1 | 4.875 | 01/15/24 | 1,350 | 1,368,563 | |||||||||||
Ecopetrol SA (Colombia), | Baa2 | 7.625 | 07/23/19 | 1,000 | 1,205,000 | |||||||||||
Export Credit Bank of Turkey (Turkey), | Baa3 | 5.375 | 11/04/16 | 2,440 | 2,549,800 | |||||||||||
Gazprom OAO Via Gaz Capital SA (Russia), | Baa1 | 6.510 | 03/07/22 | 2,200 | 2,414,500 | |||||||||||
Sr. Unsec’d. Notes, 144A | Baa1 | 9.250 | 04/23/19 | 1,950 | 2,432,625 | |||||||||||
KazMunayGas National Co. JSC (Kazakhstan), | Baa3 | 5.750 | 04/30/43 | 1,175 | 1,066,195 | |||||||||||
Sr. Unsec’d. Notes, MTN, 144A | Baa3 | 9.125 | 07/02/18 | 1,680 | 2,055,900 | |||||||||||
Sr. Unsec’d. Notes, MTN, 144A | Baa3 | 11.750 | 01/23/15 | 410 | 458,175 | |||||||||||
Korea Development Bank (The) (South Korea) | Aa3 | 8.350 | 06/18/15 | TRY | 3,000 | 1,478,487 | ||||||||||
Korea Development Bank (The) (South Korea), | Aa3 | 3.000 | 09/14/22 | 2,700 | 2,595,210 | |||||||||||
Sr. Unsec’d. Notes | Aa3 | 3.500 | 08/22/17 | 500 | 528,581 | |||||||||||
Korea Hydro & Nuclear Power Co. Ltd. (South Korea), | A1 | 3.000 | 09/19/22 | 1,850 | 1,733,600 | |||||||||||
Majapahit Holding BV (Indonesia), | Baa3 | 7.750 | 10/17/16 | 200 | 224,000 | |||||||||||
Gtd. Notes, RegS | Baa3 | 7.250 | 06/28/17 | 1,500 | 1,691,250 | |||||||||||
Gtd. Notes, RegS | Baa3 | 7.750 | 10/17/16 | 3,203 | 3,587,360 | |||||||||||
MFB Magyar Fejlesztesi Bank Zrt (Hungary), | Ba1 | 6.250 | 10/21/20 | 1,055 | 1,082,694 | |||||||||||
Pertamina Persero PT (Indonesia), | Baa3 | 4.300 | 05/20/23 | 1,200 | 1,095,000 | |||||||||||
Petrobras Global Finance BV (Brazil), | Baa1 | 4.375 | 05/20/23 | 720 | 665,348 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 63 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
NON-CORPORATE FOREIGN AGENCIES (Continued) |
| |||||||||||||||
Petroleos de Venezuela SA (Venezuela), | NR | 4.900% | 10/28/14 | $ | 2,050 | $ | 1,927,000 | |||||||||
Petroleos Mexicanos (Mexico), | Baa1 | 3.500 | 01/30/23 | 750 | 695,625 | |||||||||||
Gtd. Notes | Baa1 | 4.875 | 01/24/22 | 250 | 260,000 | |||||||||||
Gtd. Notes | Baa1 | 5.500 | 06/27/44 | 2,190 | 2,047,650 | |||||||||||
Gtd. Notes | Baa1 | 6.500 | 06/02/41 | 1,000 | 1,065,000 | |||||||||||
Gtd. Notes, MTN | Baa1 | 8.250 | 06/02/22 | GBP | 1,300 | 2,594,706 | ||||||||||
Power Sector Assets & Liabilities | Baa3 | 7.390 | 12/02/24 | 2,200 | 2,766,500 | |||||||||||
RSHB Capital SA For OJSC Russian | Baa3 | 6.299 | 05/15/17 | 325 | 350,188 | |||||||||||
Sr. Unsec’d. Notes, 144A | Baa3 | 7.750 | 05/29/18 | 1,485 | 1,678,199 | |||||||||||
State Bank of India (India), | Baa3 | 4.500 | 11/30/15 | EUR | 950 | 1,333,916 | ||||||||||
VTB Bank OJSC Via VTB Capital SA (Russia), | Baa2 | 6.875 | 05/29/18 | 1,425 | 1,570,065 | |||||||||||
|
| |||||||||||||||
TOTAL NON-CORPORATE FOREIGN AGENCIES | 46,720,900 | |||||||||||||||
|
| |||||||||||||||
SOVEREIGN BONDS 11.7% | ||||||||||||||||
Bank of England Euro Note (United Kingdom), | Aa1 | 0.500 | 03/21/16 | 1,000 | 1,000,480 | |||||||||||
Sr. Unsec’d. Notes, RegS | Aa1 | 1.375 | 03/07/14 | 200 | 200,834 | |||||||||||
Brazil Government International Bond (Brazil), | Baa2 | 4.875 | 01/22/21 | 2,575 | 2,793,875 | |||||||||||
Brazilian Government International Bond (Brazil), | Baa2 | 5.625 | 01/07/41 | 700 | 714,000 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 7.375 | 02/03/15 | EUR | 991 | 1,453,581 | ||||||||||
Bulgaria Government International Bond (Bulgaria), | Baa2 | 4.250 | 07/09/17 | EUR | 3,500 | 5,126,611 | ||||||||||
Sr. Unsec’d. Notes, RegS | Baa2 | 8.250 | 01/15/15 | 2,500 | 2,717,000 |
See Notes to Financial Statements.
64 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
SOVEREIGN BONDS (Continued) |
| |||||||||||||||
Canada Government International Bond (Canada), | Aaa | 0.875% | 02/14/17 | $ | 500 | $ | 501,923 | |||||||||
China Government Bond (China), | Aa3 | 2.380 | 07/19/14 | CNY | 2,940 | 482,458 | ||||||||||
Sr. Unsec’d. Notes, RegS | Aa3 | 0.600 | 08/18/14 | CNY | 3,000 | 484,645 | ||||||||||
Sr. Unsec’d. Notes, RegS | Aa3 | 2.560 | 06/29/17 | CNY | 7,000 | 1,130,600 | ||||||||||
Corp. Andina de Fomento (Supranational Bank), | Aa3 | 3.750 | 01/15/16 | 70 | 73,236 | |||||||||||
Czech Republic International (Czech Republic), | A1 | 5.000 | 06/11/18 | EUR | 1,000 | 1,585,179 | ||||||||||
Denmark Government International Bond (Denmark), | AAA(b) | 0.625 | 05/22/15 | 500 | 501,989 | |||||||||||
Sr. Unsec’d. Notes, MTN | Aaa | 3.165 | 03/31/14 | SEK | 4,000 | 622,174 | ||||||||||
Sr. Unsec’d. Notes, RegS | AAA(b) | 0.625 | 05/22/15 | 200 | 200,897 | |||||||||||
Euasian Development Bank (Supranational Bank), | A3 | 5.000 | 09/26/20 | 2,325 | 2,359,875 | |||||||||||
Finland Government International Bond (Finland), | Aaa | 1.125 | 05/02/17 | 1,000 | 1,007,900 | |||||||||||
Hellenic Republic Government Bond (Greece), | B-(b) | 2.000 | 02/24/23 | EUR | 3,350 | 3,105,292 | ||||||||||
Sr. Unsec’d. Notes, Series 9BR | C | 5.800 | 07/14/15 | JPY | 249,800 | 2,311,787 | ||||||||||
Sr. Unsec’d. Notes, Series 9RG | C | 5.800 | 07/14/15 | JPY | 81,700 | 756,097 | ||||||||||
Hellenic Republic Government International Bond (Greece), | C | 5.250 | 02/01/16 | JPY | 100,000 | 925,455 | ||||||||||
Hungary Government International Bond (Hungary), | Ba1 | 4.125 | 02/19/18 | 2,480 | 2,504,800 | |||||||||||
Sr. Unsec’d. Notes | Ba1 | 5.375 | 02/21/23 | 760 | 756,998 | |||||||||||
Sr. Unsec’d. Notes, RegS | Ba1 | 6.000 | 01/11/19 | EUR | 545 | 799,248 | ||||||||||
Iceland Government International Bond (Iceland), | Baa3 | 4.875 | 06/16/16 | 500 | 521,875 | |||||||||||
Unsec’d. Notes, RegS | Baa3 | 4.875 | 06/16/16 | 1,400 | 1,461,250 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 65 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
SOVEREIGN BONDS (Continued) |
| |||||||||||||||
Indonesia Government International Bond (Indonesia), | Baa3 | 5.875% | 03/13/20 | $ | 3,400 | $ | 3,723,000 | |||||||||
Sr. Unsec’d. Notes, RegS | Baa3 | 6.875 | 03/09/17 | 1,138 | 1,294,475 | |||||||||||
Sr. Unsec’d. Notes, RegS | Baa3 | 6.875 | 01/17/18 | 2,250 | 2,553,750 | |||||||||||
Ireland Government Bond (Ireland), | Ba1 | 4.400 | 06/18/19 | EUR | 9,515 | 14,038,084 | ||||||||||
Bonds | Ba1 | 5.900 | 10/18/19 | EUR | 1,000 | 1,576,250 | ||||||||||
Unsec’d. Notes | Ba1 | 4.500 | 04/18/20 | EUR | 1,160 | 1,698,790 | ||||||||||
Israel Government International Bond (Israel), | A1 | 3.750 | 10/12/15 | EUR | 1,000 | 1,429,037 | ||||||||||
Italy Buoni Poliennali del Tesoro (Italy), | Baa2 | 4.750 | 05/01/17 | EUR | 1,425 | 2,087,263 | ||||||||||
Bonds | Baa2 | 5.500 | 11/01/22 | EUR | 800 | 1,218,069 | ||||||||||
Bonds | Baa2 | 7.250 | 11/01/26 | EUR | 400 | 698,701 | ||||||||||
Sr. Unsec’d. Notes | Baa2 | 6.500 | 11/01/27 | EUR | 1,610 | 2,646,052 | ||||||||||
Italy Government International Bond (Italy), | BBB(b) | 4.500 | 01/21/15 | 1,000 | 1,042,670 | |||||||||||
Sr. Unsec’d. Notes | BBB(b) | 5.250 | 09/20/16 | 1,500 | 1,627,950 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 6.875 | 09/27/23 | 500 | 606,706 | |||||||||||
Sr. Unsec’d. Notes, RegS | Baa2 | 2.500 | 03/02/15 | CHF | 1,000 | 1,117,981 | ||||||||||
Sr. Unsec’d. Notes, RegS | Baa2 | 3.450 | 03/24/17 | JPY | 190,000 | 1,989,823 | ||||||||||
Sr. Unsec’d. Notes, RegS | Baa2 | 4.500 | 06/08/15 | JPY | 340,000 | 3,598,509 | ||||||||||
Sr. Unsec’d. Notes, RegS | Baa2 | 5.500 | 12/15/14 | JPY | 200,000 | 2,115,745 | ||||||||||
Sr. Unsec’d. Notes, RegS | Baa2 | 6.000 | 08/04/28 | GBP | 400 | 665,852 | ||||||||||
Series E, Sr. Unsec’d. Notes, RegS | Baa2 | 5.750 | 07/25/16 | EUR | 1,000 | 1,485,351 | ||||||||||
Kingdom of Belgium (Belgium), | Aa3 | 8.875 | 12/01/24 | 1,000 | 1,426,673 | |||||||||||
Notes, MTN | Aa3 | 5.000 | 04/24/18 | GBP | 1,000 | 1,792,632 | ||||||||||
Sr. Unsec’d. Notes, RegS, 144A | AA(b) | 2.750 | 03/05/15 | 570 | 586,855 | |||||||||||
Sr. Unsec’d. Notes, RegS, 144A | AA+(b) | 2.875 | 09/15/14 | 417 | 425,652 | |||||||||||
Lithuania Government International Bond (Lithuania), | Baa1 | 6.750 | 01/15/15 | 2,000 | 2,126,000 | |||||||||||
Malaysia Sukuk Global Bhd (Malaysia), | A3 | 3.928 | 06/04/15 | 1,700 | 1,768,371 |
See Notes to Financial Statements.
66 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
SOVEREIGN BONDS (Continued) |
| |||||||||||||||
Netherlands Government Bond (Netherlands), | Aaa | 1.000% | 02/24/17 | $ | 1,000 | $ | 1,004,310 | |||||||||
Peru Enhanced Pass-Through Finance Ltd. (Peru), Pass-Through Certificates, RegS | Baa2 | 1.643(c) | 05/31/18 | 538 | 498,559 | |||||||||||
Perusahaan Penerbit SBSN Indonesia (Indonesia), | Baa3 | 4.000 | 11/21/18 | 3,321 | 3,316,849 | |||||||||||
Peruvian Government International Bond (Peru), | Baa2 | 7.350 | 07/21/25 | 1,000 | 1,289,000 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 9.875 | 02/06/15 | 1,069 | 1,184,452 | |||||||||||
Sr. Unsec’d. Notes, RegS | Baa2 | 7.500 | 10/14/14 | EUR | 3,959 | 5,697,872 | ||||||||||
Sr. Unsec’d. Notes, RegS | Baa2 | 9.910 | 05/05/15 | PEN | 980 | 384,013 | ||||||||||
Philippine Government International Bond (Philippines), | Baa3 | 7.750 | 01/14/31 | 1,500 | 2,017,500 | |||||||||||
Poland Government International Bond (Poland), | A2 | 1.050 | 11/08/17 | JPY | 200,000 | 2,031,085 | ||||||||||
Sr. Unsec’d. Notes, RegS | A2 | 2.340 | 11/13/14 | JPY | 100,000 | 1,037,862 | ||||||||||
Sr. Unsec’d. Notes, MTN | A2 | 2.125 | 03/31/14 | CHF | 1,135 | 1,260,778 | ||||||||||
Portugal Obrigacoes do Tesouro OT (Portugal), | Ba3 | 3.850 | 04/15/21 | EUR | 120 | 141,505 | ||||||||||
Sr. Unsec’d. Notes, RegS, 144A | Ba3 | 4.450 | 06/15/18 | EUR | 700 | 921,170 | ||||||||||
Sr. Unsec’d. Notes, RegS, 144A | Ba3 | 4.750 | 06/14/19 | EUR | 6,070 | 7,890,975 | ||||||||||
Sr. Unsec’d. Notes, RegS, 144A | Ba3 | 4.800 | 06/15/20 | EUR | 850 | 1,079,768 | ||||||||||
Sr. Unsec’d. Notes, RegS, 144A | Ba3 | 4.950 | 10/25/23 | EUR | 500 | 616,943 | ||||||||||
Sr. Unsec’d. Notes, RegS, 144A | Ba3 | 6.400 | 02/15/16 | EUR | 600 | 850,579 | ||||||||||
Qatar Government International Bond (Qatar), | Aa2 | 5.750 | 01/20/42 | 1,500 | 1,635,000 | |||||||||||
Republic of Armenia, (Armenia), | Ba2 | 6.000 | 09/30/20 | 3,550 | 3,491,425 | |||||||||||
Republic of Brazil (Brazil), | Baa2 | 7.125 | 01/20/37 | 650 | 780,000 | |||||||||||
Sr. Unsec’d. Notes | Baa2 | 8.250 | 01/20/34 | 1,130 | 1,508,550 | |||||||||||
Unsec’d. Notes | Baa2 | 11.000 | 06/26/17 | EUR | 4,619 | 8,226,287 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 67 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
SOVEREIGN BONDS (Continued) |
| |||||||||||||||
Republic of Columbia (Colombia), | Baa3 | 7.375% | 09/18/37 | $ | 1,115 | $ | 1,438,350 | |||||||||
Republic of Latvia (Latvia), | Baa2 | 5.250 | 02/22/17 | 2,000 | 2,183,000 | |||||||||||
Republic of Phillipines (Philippines), | Baa3 | 6.250 | 03/15/16 | EUR | 5,360 | 7,985,673 | ||||||||||
Republic of Portugal (Portugal), | Ba3 | 3.500 | 03/25/15 | 8,809 | 8,783,366 | |||||||||||
Republic of Serbia (Serbia), | BB-(b) | 6.750 | 11/01/24 | 4,451 | 4,339,949 | |||||||||||
Republic of Slovakia (Slovakia), Sr. Unsec’d. Notes, RegS | A2 | 4.375 | 05/21/22 | 2,800 | 2,940,000 | |||||||||||
Republic of Turkey (Turkey), | Baa3 | 5.125 | 05/18/20 | EUR | 1,850 | 2,669,842 | ||||||||||
Sr. Unsec’d. Notes | Baa3 | 5.875 | 04/02/19 | EUR | 900 | 1,351,631 | ||||||||||
Romanian Government International (Romania), | Baa3 | 5.000 | 03/18/15 | EUR | 3,400 | 4,820,410 | ||||||||||
Slovakia Government Bond (Slovakia), | A2 | 4.625 | 01/19/17 | EUR | 1,000 | 1,509,104 | ||||||||||
Slovakia Government International Bond (Slovakia), | A2 | 4.375 | 05/21/22 | 500 | 525,000 | |||||||||||
Slovenia Government Bond (Slovenia), | Ba1 | 4.375 | 02/06/19 | EUR | 1,200 | 1,556,899 | ||||||||||
Slovenia Government International Bond (Slovenia), | Ba1 | 5.850 | 05/10/23 | 1,500 | 1,462,500 | |||||||||||
Sr. Unsec’d. Notes, 144A | Ba1 | 4.750 | 05/10/18 | 2,500 | 2,468,750 | |||||||||||
South Africa Government International (South Africa), | Baa1 | 4.500 | 04/05/16 | EUR | 1,050 | 1,516,599 | ||||||||||
Spain Government Bond (Spain), | Baa3 | 4.250 | 10/31/16 | EUR | 7,410 | 10,709,895 | ||||||||||
Bonds | Baa3 | 5.850 | 01/31/22 | EUR | 220 | 342,332 |
See Notes to Financial Statements.
68 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
SOVEREIGN BONDS (Continued) |
| |||||||||||||||
Spain Government International Bond (Spain), | Baa3 | 4.000% | 03/06/18 | $ | 7,500 | $ | 7,719,000 | |||||||||
Sweden Government International Bond (Sweden), | Aaa | 1.000 | 06/03/14 | 700 | 703,570 | |||||||||||
Turkey Government International Bond (Turkey), | Baa3 | 6.500 | 02/10/14 | EUR | 500 | 688,755 | ||||||||||
United Mexican States (Mexico), | Baa1 | 2.750 | 04/22/23 | EUR | 5,070 | 6,651,488 | ||||||||||
Sr. Unsec’d. Notes, MTN | Baa1 | 4.250 | 07/14/17 | EUR | 2,402 | 3,524,679 | ||||||||||
Sr. Unsec’d. Notes, MTN | Baa1 | 4.750 | 03/08/44 | 3,000 | 2,812,500 | |||||||||||
Sr. Unsec’d. Notes, MTN | Baa1 | 11.000 | 05/08/17 | ITL | 1,095,000 | 982,832 | ||||||||||
Uruguay Government International (Uruguay), | Baa3 | 6.875 | 01/19/16 | EUR | 100 | 149,014 | ||||||||||
|
| |||||||||||||||
TOTAL SOVEREIGN BONDS | 218,139,920 | |||||||||||||||
|
| |||||||||||||||
MORTGAGE-BACKED SECURITIES 0.3% |
| |||||||||||||||
Chase Mortgage Finance Trust, | Ba1 | 2.774(a) | 02/25/37 | 535 | 532,194 | |||||||||||
Citigroup Mortgage Loan Trust, Inc., Series 2005-WF1, Class A5 | Ba1 | 5.010(a) | 11/25/34 | 903 | 920,032 | |||||||||||
JPMorgan Mortgage Trust, | B1 | 2.737(a) | 07/25/35 | 583 | 578,828 | |||||||||||
Structured Asset Securities Corp., Series 2003-37A, Class 3A7 | Ba3 | 2.581(a) | 12/25/33 | 1,897 | 1,866,476 | |||||||||||
Structured Asset Securities Corp. Mortgage Pass-Through Certificates, Series 2003-30, Class 2A1 | A+(b) | 5.075(a) | 10/25/33 | 960 | 1,005,712 | |||||||||||
|
| |||||||||||||||
TOTAL MORTGAGE-BACKED SECURITIES | 4,903,242 | |||||||||||||||
|
|
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 69 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||
U.S. GOVERNMENT AGENCY OBLIGATIONS 0.2% |
| |||||||||||||
Federal Home Loan Mortgage Corp. | 1.375% | 05/01/20 | $ | 400 | $ | 382,705 | ||||||||
Federal Home Loan Mortgage Corp. | 2.375 | 01/13/22 | 2,665 | 2,612,547 | ||||||||||
|
| |||||||||||||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 2,995,252 | |||||||||||||
|
| |||||||||||||
U.S. TREASURY OBLIGATIONS 1.3% |
| |||||||||||||
U.S. Treasury Notes | 1.750 | 10/31/20 | 10,045 | 9,919,438 | ||||||||||
U.S. Treasury Notes(h) | 2.000 | 11/15/21 | 1,555 | 1,530,703 | ||||||||||
U.S. Treasury Notes(g) | 2.375 | 02/28/15 | 6,000 | 6,171,798 | ||||||||||
U.S. Treasury Notes(g) | 4.500 | 05/15/17 | 5,985 | 6,754,135 | ||||||||||
|
| |||||||||||||
TOTAL U.S. TREASURY OBLIGATIONS | 24,376,074 | |||||||||||||
|
| |||||||||||||
TOTAL LONG-TERM INVESTMENTS | 1,807,291,144 | |||||||||||||
|
| |||||||||||||
Shares | ||||||||||||||
SHORT-TERM INVESTMENT 3.1% |
| |||||||||||||
AFFILIATED MONEY MARKET MUTUAL FUND |
| |||||||||||||
Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund | 57,505,636 | 57,505,636 | ||||||||||||
|
| |||||||||||||
TOTAL INVESTMENTS 100.2% |
| 1,864,796,780 | ||||||||||||
Liabilities in excess of other assets(j) (0.2)% | (3,655,279 | ) | ||||||||||||
|
| |||||||||||||
NET ASSETS 100.0% | $ | 1,861,141,501 | ||||||||||||
|
|
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—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.
ABS—Asset-Backed Security
AUD—Australian Dollar
BABs—Build America Bonds
BBR—New Zealand Bank Bill Rate
BBSW—Australian Bank Bill Swap Reference Rate
bps—Basis Points
BRL—Brazilian Real
See Notes to Financial Statements.
70 |
BUBOR—Budapest Interbank Offered Rate
BZDIOVER—Brazil Cetip Interbank Deposit Overnight Rate
CAD—Canadian Dollar
CDO—Collateralized Debt Obligation
CDX—Credit Derivative Index
CHF—Swiss Franc
CLO—Collateralized Loan Obligation
CLP—Chilean Peso
CNY—Chinese Yuan
COP—Colombian Peso
CZK—Czech Republic Koruna
EUR—Euro
EURIBOR—Euro Interbank Offered Rate
FHLMC—Federal Home Loan Mortgage Corp.
GBP—British Pound
HKD—Hong Kong Dollar
HUF—Hungarian Forint
ILS—Israeli New Shekel
INR—Indian Rupee
IO—Interest Only
ITL—Italian Lira
JIBAR—Johannesburg Interbank Agreed Rate
JIBOR—Jakarta Interbank Offered Rate
JPY—Japanese Yen
KRW—South Korean Won
LIBOR—London Interbank Offered Rate
MIBOR—Mumbai Interbank Offered Rate
MosPrime—Moscow Prime Offered Rate
MTN—Medium Term Note
MXN—Mexican Peso
MYR—Malaysian Ringgit
NOK—Norwegian Krone
NR—Not Rated by Moody’s or Standard & Poor’s
NZD—New Zealand Dollar
PEN—Peruvian Nuevo Sol
PHP—Philippine Peso
PLN—Polish Zloty
RON—Romanian Leu
RUB—Russian Ruble
SEK—Swedish Krona
SGD—Singapore Dollar
THB—Thai Baht
TRY—Turkish Lira
TWD—New Taiwanese Dollar
WIBOR—Warsaw Interbank Offered Rate
ZAR—South African Rand
† | 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. |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 71 |
Portfolio of Investments
as of October 31, 2013 continued
# | Principal amount or notional amount shown in U.S. dollars unless otherwise stated. |
(a) | Variable rate instrument. The interest rate shown reflects the rate in effect at October 31, 2013. |
(b) | Standard & Poor’s Rating. |
(c) | Represents zero coupon bond or principal only securities. Rate represents yield to maturity at purchase date. |
(d) | Represents step coupon bond. Rate shown reflects the rate in effect at October 31, 2013. |
(e) | Indicates a security or securities that have been deemed illiquid. |
(f) | Indicates a restricted security; the aggregate cost of the restricted securities is $21,036,809. The aggregate value of $21,215,908, is approximately 1.1% of net assets. |
(g) | Represents security, or a portion thereof, segregated as collateral for swap agreements. |
(h) | Represents security, or a portion thereof, segregated as collateral for futures contracts. |
(i) | Prudential Investments LLC, the manager of the Fund, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund. |
(j) | 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 (Depreciation) | |||||||||||||||
Long Positions: | ||||||||||||||||||||
7 | U.S. Long Bonds | Dec. 2013 | $ | 946,547 | $ | 943,687 | $ | (2,860 | ) | |||||||||||
1,375 | 10 Year U.S. Treasury Notes | Dec. 2013 | 173,677,672 | 175,119,141 | 1,441,469 | |||||||||||||||
54 | 10 Year U.S. Treasury Notes | Mar. 2014 | 6,805,200 | 6,809,063 | 3,863 | |||||||||||||||
|
| |||||||||||||||||||
1,442,472 | ||||||||||||||||||||
|
| |||||||||||||||||||
Short Positions: | ||||||||||||||||||||
3 | 5 Year U.S. Treasury Notes | Dec. 2013 | 363,954 | 365,062 | (1,108 | ) | ||||||||||||||
184 | U.S. Ultra Bonds | Dec. 2013 | 26,116,336 | 26,513,250 | (396,914 | ) | ||||||||||||||
|
| |||||||||||||||||||
(398,022 | ) | |||||||||||||||||||
|
| |||||||||||||||||||
$ | 1,044,450 | |||||||||||||||||||
|
|
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) | |||||||||||||
Australian Dollar, | ||||||||||||||||||
Expiring 01/23/14 | Citigroup Global Markets | AUD | 20,199 | $ | 19,325,275 | $ | 18,982,946 | $ | (342,329 | ) | ||||||||
Expiring 01/23/14 | JP Morgan Securities | AUD | 2,935 | 2,770,400 | 2,758,229 | (12,171 | ) |
See Notes to Financial Statements.
72 |
Purchase Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date Payable | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
Brazilian Real, | ||||||||||||||||||
Expiring 01/17/14 | Citigroup Global Markets | BRL | 6,162 | $ | 2,763,200 | $ | 2,700,463 | $ | (62,737 | ) | ||||||||
Expiring 01/22/14 | Citigroup Global Markets | BRL | 8,776 | 3,918,008 | 3,841,295 | (76,713 | ) | |||||||||||
British Pound, | ||||||||||||||||||
Expiring 01/27/14 | JP Morgan Securities | GBP | 4,028 | 6,454,495 | 6,454,495 | — | ||||||||||||
Expiring 01/27/14 | Credit Suisse | GBP | 1,356 | 2,192,341 | 2,173,255 | (19,086 | ) | |||||||||||
Canadian Dollar, | ||||||||||||||||||
Expiring 01/22/14 | Barclays Bank International | CAD | 12,756 | 12,189,800 | 12,207,883 | 18,083 | ||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | CAD | 9,597 | 9,308,429 | 9,184,854 | (123,575 | ) | |||||||||||
Expiring 01/22/14 | Deutsche Bank | CAD | 9,597 | 9,305,514 | 9,184,854 | (120,660 | ) | |||||||||||
Expiring 01/22/14 | JP Morgan Securities | CAD | 4,821 | 4,617,300 | 4,614,004 | (3,296 | ) | |||||||||||
Chilean Peso, | ||||||||||||||||||
Expiring 12/11/13 | Citigroup Global Markets | CLP | 4,404,509 | 8,543,487 | 8,546,959 | 3,472 | ||||||||||||
Expiring 12/11/13 | Citigroup Global Markets | CLP | 1,344,440 | 2,646,900 | 2,608,888 | (38,012 | ) | |||||||||||
Chinese Yuan, | ||||||||||||||||||
Expiring 01/15/14 | Citigroup Global Markets | CNY | 61,868 | 10,096,446 | 10,121,776 | 25,330 | ||||||||||||
Expiring 01/15/14 | Citigroup Global Markets | CNY | 45,256 | 7,427,200 | 7,403,973 | (23,227 | ) | |||||||||||
Expiring 01/15/14 | HSBC Securities, Inc. | CNY | 24,328 | 3,970,571 | 3,980,109 | 9,538 | ||||||||||||
Expiring 01/15/14 | JP Morgan Securities | CNY | 28,432 | 4,639,792 | 4,651,470 | 11,678 | ||||||||||||
Expiring 01/15/14 | UBS Warburg LLC | CNY | 29,296 | 4,779,646 | 4,792,849 | 13,203 | ||||||||||||
Colombian Peso, | ||||||||||||||||||
Expiring 11/06/13 | Citigroup Global Markets | COP | 5,015,346 | 2,639,100 | 2,648,860 | 9,760 | ||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | COP | 5,015,346 | 2,647,179 | 2,631,973 | (15,206 | ) | |||||||||||
Expiring 01/22/14 | Citigroup Global Markets | COP | 4,158,692 | 2,181,895 | 2,182,415 | 520 | ||||||||||||
Czech Republic Koruna, | ||||||||||||||||||
Expiring 01/24/14 | Barclays Bank International | CZK | 86,453 | 4,642,000 | 4,551,959 | (90,041 | ) | |||||||||||
Expiring 01/24/14 | Deutsche Bank | CZK | 103,856 | 5,559,400 | 5,468,269 | (91,131 | ) | |||||||||||
Euro, | ||||||||||||||||||
Expiring 01/27/14 | Barclays Bank International | EUR | 2,844 | 3,892,893 | 3,861,965 | (30,928 | ) | |||||||||||
Expiring 01/27/14 | Citigroup Global Markets | EUR | 7,887 | 10,866,295 | 10,709,620 | (156,675 | ) | |||||||||||
Expiring 01/27/14 | Citigroup Global Markets | EUR | 579 | 787,446 | 786,729 | (717 | ) | |||||||||||
Expiring 01/27/14 | Goldman Sachs & Company | EUR | 2,016 | 2,779,700 | 2,736,920 | (42,780 | ) | |||||||||||
Hong Kong Dollar, | ||||||||||||||||||
Expiring 01/23/14 | Citigroup Global Markets | HKD | 127,117 | 16,399,500 | 16,399,226 | (274 | ) | |||||||||||
Hungarian Forint, | ||||||||||||||||||
Expiring 01/24/14 | Citigroup Global Markets | HUF | 798,205 | 3,698,200 | 3,646,151 | (52,049 | ) | |||||||||||
Expiring 01/24/14 | Citigroup Global Markets | HUF | 292,223 | 1,331,012 | 1,334,856 | 3,844 | ||||||||||||
Expiring 01/24/14 | Citigroup Global Markets | HUF | 292,223 | 1,331,376 | 1,334,856 | 3,480 | ||||||||||||
Expiring 01/24/14 | Deutsche Bank | HUF | 1,736,982 | 8,028,203 | 7,934,430 | (93,773 | ) | |||||||||||
Expiring 01/24/14 | HSBC Securities, Inc. | HUF | 1,736,982 | 8,084,626 | 7,934,430 | (150,196 | ) |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 73 |
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) | |||||||||||||
Indian Rupee, | ||||||||||||||||||
Expiring 11/05/13 | Citigroup Global Markets | INR | 122,390 | $ | 2,076,700 | $ | 1,989,217 | $ | (87,483 | ) | ||||||||
Expiring 11/05/13 | Citigroup Global Markets | INR | 8,993 | 147,500 | 146,165 | (1,335 | ) | |||||||||||
Expiring 11/05/13 | UBS Warburg LLC | INR | 372,942 | 6,072,981 | 6,061,445 | (11,536 | ) | |||||||||||
Expiring 11/05/13 | UBS Warburg LLC | INR | 149,401 | 2,472,100 | 2,428,230 | (43,870 | ) | |||||||||||
Expiring 11/05/13 | UBS Warburg LLC | INR | 92,157 | 1,668,000 | 1,497,833 | (170,167 | ) | |||||||||||
Expiring 02/03/14 | Citigroup Global Markets | INR | 173,741 | 2,762,700 | 2,765,901 | 3,201 | ||||||||||||
Expiring 02/03/14 | UBS Warburg LLC | INR | 372,942 | 5,922,060 | 5,937,125 | 15,065 | ||||||||||||
Expiring 02/03/14 | UBS Warburg LLC | INR | 316,928 | 4,979,430 | 5,045,406 | 65,976 | ||||||||||||
Israeli Shekel, | ||||||||||||||||||
Expiring 01/30/14 | Deutsche Bank | ILS | 27,828 | 7,886,738 | 7,879,713 | (7,025 | ) | |||||||||||
Japanese Yen, | ||||||||||||||||||
Expiring 01/27/14 | Citigroup Global Markets | JPY | 630,797 | 6,486,000 | 6,418,943 | (67,057 | ) | |||||||||||
Expiring 01/27/14 | Credit Suisse | JPY | 270,390 | 2,779,700 | 2,751,468 | (28,232 | ) | |||||||||||
Expiring 01/27/14 | Goldman Sachs & Company | JPY | 831,128 | 8,541,300 | 8,457,496 | (83,804 | ) | |||||||||||
Malaysian Ringgit, | ||||||||||||||||||
Expiring 01/16/14 | UBS Warburg LLC | MYR | 8,493 | 2,629,100 | 2,677,116 | 48,016 | ||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | MYR | 8,738 | 2,770,400 | 2,753,057 | (17,343 | ) | |||||||||||
Mexican Peso, | ||||||||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | MXN | 84,278 | 6,510,300 | 6,416,851 | (93,449 | ) | |||||||||||
Expiring 01/22/14 | Citigroup Global Markets | MXN | 47,872 | 3,693,900 | 3,644,929 | (48,971 | ) | |||||||||||
Expiring 01/22/14 | JP Morgan Securities | MXN | 251,797 | 19,511,279 | 19,171,562 | (339,717 | ) | |||||||||||
Expiring 01/22/14 | Morgan Stanley & Co., Inc. | MXN | 48,227 | 3,720,200 | 3,671,939 | (48,261 | ) | |||||||||||
New Taiwanese Dollar, | ||||||||||||||||||
Expiring 11/13/13 | Citigroup Global Markets | TWD | 12,012 | 420,500 | 408,957 | (11,543 | ) | |||||||||||
Expiring 11/13/13 | UBS Warburg LLC | TWD | 12,109 | 423,900 | 412,264 | (11,636 | ) | |||||||||||
Expiring 12/06/13 | Citigroup Global Markets | TWD | 77,912 | 2,646,900 | 2,653,996 | 7,096 | ||||||||||||
Expiring 12/06/13 | Citigroup Global Markets | TWD | 77,522 | 2,631,600 | 2,640,717 | 9,117 | ||||||||||||
Expiring 12/06/13 | Citigroup Global Markets | TWD | 77,435 | 2,650,800 | 2,637,770 | (13,030 | ) | |||||||||||
New Zealand Dollar, | ||||||||||||||||||
Expiring 01/23/14 | Citigroup Global Markets | NZD | 23,792 | 19,798,917 | 19,536,030 | (262,887 | ) | |||||||||||
Expiring 10/23/14 | Goldman Sachs & Company | NZD | 8,019 | 6,464,300 | 6,441,089 | (23,211 | ) | |||||||||||
Norwegian Krone, | ||||||||||||||||||
Expiring 01/24/14 | Barclays Bank International | NOK | 32,900 | 5,547,300 | 5,508,377 | (38,923 | ) | |||||||||||
Expiring 01/24/14 | Credit Suisse | NOK | 38,531 | 6,478,878 | 6,451,164 | (27,714 | ) | |||||||||||
Expiring 01/24/14 | JP Morgan Securities | NOK | 38,531 | 6,479,303 | 6,451,164 | (28,139 | ) | |||||||||||
Expiring 01/24/14 | Morgan Stanley & Co., Inc. | NOK | 27,203 | 4,617,300 | 4,554,545 | (62,755 | ) | |||||||||||
Expiring 01/24/14 | UBS Warburg LLC | NOK | 21,967 | 3,713,600 | 3,677,912 | (35,688 | ) |
See Notes to Financial Statements.
74 |
Purchase Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date Payable | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
Peruvian Nuevo Sol, | ||||||||||||||||||
Expiring 11/04/13 | Citigroup Global Markets | PEN | 14,685 | $ | 5,326,720 | $ | 5,293,003 | $ | (33,717 | ) | ||||||||
Expiring 11/04/13 | Citigroup Global Markets | PEN | 7,482 | 2,658,022 | 2,696,572 | 38,550 | ||||||||||||
Expiring 11/04/13 | Citigroup Global Markets | PEN | 7,482 | 2,713,749 | 2,696,572 | (17,177 | ) | |||||||||||
Expiring 11/04/13 | Citigroup Global Markets | PEN | 7,350 | 2,642,300 | 2,649,003 | 6,703 | ||||||||||||
Expiring 11/04/13 | Citigroup Global Markets | PEN | 7,336 | 2,599,000 | 2,644,000 | 45,000 | ||||||||||||
Expiring 02/04/14 | Citigroup Global Markets | PEN | 14,685 | 5,264,846 | 5,239,762 | (25,084 | ) | |||||||||||
Philippine Peso, | ||||||||||||||||||
Expiring 11/29/13 | Citigroup Global Markets | PHP | 113,396 | 2,650,800 | 2,626,061 | (24,739 | ) | |||||||||||
Expiring 11/29/13 | Citigroup Global Markets | PHP | 105,689 | 2,450,600 | 2,447,592 | (3,008 | ) | |||||||||||
Expiring 11/29/13 | Citigroup Global Markets | PHP | 89,122 | 2,076,700 | 2,063,907 | (12,793 | ) | |||||||||||
Expiring 11/29/13 | UBS Warburg LLC | PHP | 95,394 | 2,212,300 | 2,209,175 | (3,125 | ) | |||||||||||
Polish Zloty, | ||||||||||||||||||
Expiring 01/24/14 | JP Morgan Securities | PLN | 66,043 | 21,589,753 | 21,326,819 | (262,934 | ) | |||||||||||
Romanian Leu, | ||||||||||||||||||
Expiring 01/24/14 | Barclays Bank International | RON | 20,586 | 6,316,764 | 6,273,818 | (42,946 | ) | |||||||||||
Expiring 01/24/14 | Citigroup Global Markets | RON | 20,586 | 6,321,613 | 6,273,818 | (47,795 | ) | |||||||||||
Expiring 01/24/14 | Citigroup Global Markets | RON | 11,921 | 3,693,900 | 3,633,089 | (60,811 | ) | |||||||||||
Russian Ruble, | ||||||||||||||||||
Expiring 11/18/13 | Citigroup Global Markets | RUB | 85,747 | 2,650,800 | 2,665,278 | 14,478 | ||||||||||||
Expiring 01/17/14 | Citigroup Global Markets | RUB | 90,419 | 2,763,200 | 2,780,067 | 16,867 | ||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | RUB | 89,577 | 2,773,700 | 2,752,310 | (21,390 | ) | |||||||||||
Expiring 01/22/14 | Credit Suisse | RUB | 89,523 | 2,785,200 | 2,750,671 | (34,529 | ) | |||||||||||
Singapore Dollar, | ||||||||||||||||||
Expiring 01/17/14 | Credit Suisse | SGD | 12,201 | 9,814,178 | 9,822,798 | 8,620 | ||||||||||||
Expiring 01/17/14 | Deutsche Bank | SGD | 12,201 | 9,817,929 | 9,822,798 | 4,869 | ||||||||||||
South African Rand, | ||||||||||||||||||
Expiring 01/30/14 | Barclays Bank International | ZAR | 54,300 | 5,438,273 | 5,334,585 | (103,688 | ) | |||||||||||
South Korean Won, | ||||||||||||||||||
Expiring 01/17/14 | Citigroup Global Markets | KRW | 10,615,029 | 9,796,800 | 9,952,311 | 155,511 | ||||||||||||
Swedish Krona, | ||||||||||||||||||
Expiring 01/24/14 | Credit Suisse | SEK | 86,408 | 13,508,938 | 13,306,666 | (202,272 | ) | |||||||||||
Expiring 01/24/14 | Deutsche Bank | SEK | 23,587 | 3,720,200 | 3,632,404 | (87,796 | ) | |||||||||||
Swiss Franc, | ||||||||||||||||||
Expiring 01/24/14 | Credit Suisse | CHF | 5,782 | 6,486,000 | 6,376,564 | (109,436 | ) | |||||||||||
Expiring 01/24/14 | Deutsche Bank | CHF | 2,476 | 2,779,700 | 2,731,119 | (48,581 | ) | |||||||||||
Thai Baht, | ||||||||||||||||||
Expiring 11/18/13 | Barclays Bank International | THB | 110,154 | 3,546,400 | 3,535,096 | (11,304 | ) | |||||||||||
Expiring 11/18/13 | Barclays Bank International | THB | 82,288 | 2,648,200 | 2,640,787 | (7,413 | ) | |||||||||||
Expiring 11/18/13 | Morgan Stanley & Co., Inc. | THB | 82,144 | 2,629,100 | 2,636,169 | 7,069 | ||||||||||||
|
|
|
|
|
| |||||||||||||
$ | 491,997,000 | $ | 488,272,156 | $ | (3,724,844 | ) | ||||||||||||
|
|
|
|
|
|
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 75 |
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) | |||||||||||||
Australian Dollar, | ||||||||||||||||||
Expiring 01/23/14 | Citigroup Global Markets | AUD | 5,743 | $ | 5,418,551 | $ | 5,396,855 | $ | 21,696 | |||||||||
Expiring 01/23/14 | JP Morgan Securities | AUD | 2,918 | 2,785,200 | 2,742,441 | 42,759 | ||||||||||||
Brazilian Real, | ||||||||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | BRL | 6,244 | 2,785,200 | 2,733,105 | 52,095 | ||||||||||||
British Pound, | ||||||||||||||||||
Expiring 01/27/14 | Citigroup Global Markets | GBP | 786 | 1,260,076 | 1,258,882 | 1,194 | ||||||||||||
Expiring 01/27/14 | Credit Suisse | GBP | 3,842 | 6,226,010 | 6,155,901 | 70,109 | ||||||||||||
Expiring 01/27/14 | JP Morgan Securities | GBP | 2,874 | 4,642,000 | 4,604,426 | 37,574 | ||||||||||||
Canadian Dollar, | ||||||||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | CAD | 2,922 | 2,790,100 | 2,795,969 | (5,869 | ) | |||||||||||
Expiring 01/22/14 | Citigroup Global Markets | CAD | 5,822 | 5,570,400 | 5,571,382 | (982 | ) | |||||||||||
Expiring 01/22/14 | Goldman Sachs & Company | CAD | 11,569 | 11,118,800 | 11,071,407 | 47,393 | ||||||||||||
Expiring 01/22/14 | JP Morgan Securities | CAD | 7,711 | 7,412,600 | 7,379,557 | 33,043 | ||||||||||||
Chilean Peso, | ||||||||||||||||||
Expiring 12/11/13 | Citigroup Global Markets | CLP | 1,695,525 | 3,332,400 | 3,290,170 | 42,230 | ||||||||||||
Expiring 12/11/13 | Citigroup Global Markets | CLP | 1,805,852 | 3,527,400 | 3,504,260 | 23,140 | ||||||||||||
Expiring 12/11/13 | Citigroup Global Markets | CLP | 2,218,724 | 4,381,800 | 4,305,439 | 76,361 | ||||||||||||
Chinese Yuan, | ||||||||||||||||||
Expiring 01/15/14 | Citigroup Global Markets | CNY | 17,911 | 2,936,094 | 2,930,274 | 5,820 | ||||||||||||
Colombian Peso, | ||||||||||||||||||
Expiring 11/06/13 | Citigroup Global Markets | COP | 5,015,346 | 2,663,487 | 2,648,860 | 14,627 | ||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | COP | 4,091,629 | 2,159,512 | 2,147,221 | 12,291 | ||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | COP | 5,268,921 | 2,779,700 | 2,765,046 | 14,654 | ||||||||||||
Czech Republic Koruna, | ||||||||||||||||||
Expiring 01/24/14 | Barclays Bank International | CZK | 104,592 | 5,547,300 | 5,506,996 | 40,304 | ||||||||||||
Expiring 01/24/14 | Deutsche Bank | CZK | 87,611 | 4,617,300 | 4,612,934 | 4,366 | ||||||||||||
Euro, | ||||||||||||||||||
Expiring 11/04/13 | Citigroup Global Markets | EUR | 579 | 787,346 | 786,632 | 714 | ||||||||||||
Expiring 01/27/14 | UBS Warburg LLC | EUR | 20,375 | 27,704,100 | 27,668,530 | 35,570 | ||||||||||||
Expiring 01/27/14 | Barclays Bank International | EUR | 34,426 | 47,431,831 | 46,748,277 | 683,554 | ||||||||||||
Expiring 01/27/14 | Credit Suisse | EUR | 34,426 | 47,445,945 | 46,748,277 | 697,668 | ||||||||||||
Expiring 01/27/14 | Goldman Sachs & Company | EUR | 8,966 | 12,189,800 | 12,175,851 | 13,949 | ||||||||||||
Expiring 01/27/14 | JP Morgan Securities | EUR | 4,741 | 6,454,495 | 6,437,016 | 17,479 | ||||||||||||
Indian Rupee, | ||||||||||||||||||
Expiring 11/05/13 | Citigroup Global Markets | INR | 8,993 | 146,443 | 146,165 | 278 | ||||||||||||
Expiring 11/05/13 | Citigroup Global Markets | INR | 122,390 | 1,993,003 | 1,989,217 | 3,786 | ||||||||||||
Expiring 11/05/13 | UBS Warburg LLC | INR | 92,157 | 1,500,684 | 1,497,833 | 2,851 | ||||||||||||
Expiring 11/05/13 | UBS Warburg LLC | INR | 149,401 | 2,432,851 | 2,428,230 | 4,621 | ||||||||||||
Expiring 11/05/13 | UBS Warburg LLC | INR | 372,942 | 6,057,199 | 6,061,445 | (4,246 | ) |
See Notes to Financial Statements.
76 |
Sale Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date Receivable | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
Indian Rupee, (cont’d.) | ||||||||||||||||||
Expiring 03/04/14 | Citigroup Global Markets | INR | 112,092 | $ | 1,788,600 | $ | 1,773,709 | $ | 14,891 | |||||||||
Expiring 03/04/14 | Citigroup Global Markets | INR | 139,530 | 2,178,800 | 2,207,893 | (29,093 | ) | |||||||||||
Expiring 03/04/14 | UBS Warburg LLC | INR | 11,573 | 199,200 | 183,121 | 16,079 | ||||||||||||
Expiring 03/04/14 | UBS Warburg LLC | INR | 77,268 | 1,318,000 | 1,222,665 | 95,335 | ||||||||||||
Expiring 03/04/14 | UBS Warburg LLC | INR | 108,248 | 1,879,300 | 1,712,884 | 166,416 | ||||||||||||
Expiring 03/04/14 | UBS Warburg LLC | INR | 110,633 | 1,907,300 | 1,750,628 | 156,672 | ||||||||||||
Expiring 03/04/14 | UBS Warburg LLC | INR | 117,732 | 1,727,800 | 1,862,966 | (135,166 | ) | |||||||||||
Israeli Shekel, | ||||||||||||||||||
Expiring 01/30/14 | Credit Suisse | ILS | 27,674 | 7,852,819 | 7,836,144 | 16,675 | ||||||||||||
Japanese Yen, | ||||||||||||||||||
Expiring 01/27/13 | Citigroup Global Markets | JPY | 362,560 | 3,693,900 | 3,689,385 | 4,515 | ||||||||||||
Expiring 01/27/14 | Barclays Bank International | JPY | 1,987,777 | 20,444,404 | 20,227,459 | 216,945 | ||||||||||||
Expiring 01/27/14 | Citigroup Global Markets | JPY | 455,527 | 4,632,800 | 4,635,402 | (2,602 | ) | |||||||||||
Expiring 01/27/14 | Credit Suisse | JPY | 273,152 | 2,770,400 | 2,779,573 | (9,173 | ) | |||||||||||
Malaysian Ringgit, | ||||||||||||||||||
Expiring 01/16/14 | Citigroup Global Markets | MYR | 8,493 | 2,641,118 | 2,677,116 | (35,998 | ) | |||||||||||
Mexican Peso, | ||||||||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | MXN | 72,870 | 5,570,400 | 5,548,226 | 22,174 | ||||||||||||
Expiring 01/22/14 | Morgan Stanley & Co., Inc. | MXN | 84,517 | 6,486,000 | 6,435,010 | 50,990 | ||||||||||||
New Taiwanese Dollar, | ||||||||||||||||||
Expiring 11/13/13 | UBS Warburg LLC | TWD | 24,120 | 830,588 | 821,221 | 9,367 | ||||||||||||
New Zealand Dollar, | ||||||||||||||||||
Expiring 01/23/14 | Goldman Sachs & Company | NZD | 3,357 | 2,785,200 | 2,756,799 | 28,401 | ||||||||||||
Expiring 01/23/14 | Goldman Sachs & Company | NZD | 4,504 | 3,720,200 | 3,698,359 | 21,841 | ||||||||||||
Expiring 01/23/14 | Morgan Stanley & Co., Inc. | NZD | 7,785 | 6,486,000 | 6,392,238 | 93,762 | ||||||||||||
Expiring 01/23/14 | UBS Warburg LLC | NZD | 8,135 | 6,696,300 | 6,679,452 | 16,848 | ||||||||||||
Peruvian Nuevo Sol, | ||||||||||||||||||
Expiring 11/04/13 | Citigroup Global Markets | PEN | 7,336 | 2,660,843 | 2,644,000 | 16,843 | ||||||||||||
Expiring 11/04/13 | Citigroup Global Markets | PEN | 7,350 | 2,665,877 | 2,649,003 | 16,874 | ||||||||||||
Expiring 11/04/13 | Citigroup Global Markets | PEN | 7,482 | 2,643,372 | 2,696,572 | (53,200 | ) | |||||||||||
Expiring 11/04/13 | Citigroup Global Markets | PEN | 7,482 | 2,713,749 | 2,696,572 | 17,177 | ||||||||||||
Expiring 11/04/13 | Citigroup Global Markets | PEN | 14,685 | 5,313,037 | 5,293,003 | 20,034 | ||||||||||||
Russian Ruble, | ||||||||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | RUB | 120,032 | 3,689,900 | 3,688,088 | 1,812 | ||||||||||||
Swedish Krona, | ||||||||||||||||||
Expiring 01/24/14 | Morgan Stanley & Co., Inc. | SEK | 91,006 | 14,036,700 | 14,014,688 | 22,012 | ||||||||||||
Expiring 01/24/14 | UBS Warburg LLC | SEK | 23,748 | 3,693,900 | 3,657,164 | 36,736 | ||||||||||||
Swiss Franc, | ||||||||||||||||||
Expiring 01/24/14 | Credit Suisse | CHF | 3,334 | 3,723,900 | 3,677,139 | 46,761 | ||||||||||||
Expiring 01/24/14 | Credit Suisse | CHF | 4,981 | 5,543,066 | 5,493,128 | 49,938 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 77 |
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) | |||||||||||||
Thai Baht, | ||||||||||||||||||
Expiring 11/18/13 | Barclays Bank International | THB | 83,461 | $ | 2,662,100 | $ | 2,678,441 | $ | (16,341 | ) | ||||||||
Expiring 11/18/13 | Barclays Bank International | THB | 111,723 | 3,549,700 | 3,585,433 | (35,733 | ) | |||||||||||
Expiring 11/18/13 | Morgan Stanley & Co., Inc. | THB | 81,105 | 2,576,300 | 2,602,846 | (26,546 | ) | |||||||||||
Turkish Lira, | ||||||||||||||||||
Expiring 01/30/14 | Citigroup Global Markets | TRY | 63,986 | 31,845,770 | 31,534,997 | 310,773 | ||||||||||||
Expiring 01/30/14 | Deutsche Bank | TRY | 2,613 | 1,299,800 | 1,287,672 | 12,128 | ||||||||||||
Expiring 01/30/14 | JP Morgan Securities | TRY | 63,986 | 31,718,532 | 31,534,997 | 183,535 | ||||||||||||
|
|
|
|
|
| |||||||||||||
$ | 442,043,302 | $ | 438,732,591 | $ | 3,310,711 | |||||||||||||
|
|
|
|
|
| |||||||||||||
$ | (414,133 | ) | ||||||||||||||||
|
|
Currency swap agreements outstanding at October 31, 2013:
Notional Amount (000)# | Fund | Notional Amount (000)# | Fund Pays | Counterparty | Termination Date | Fair Value | Upfront Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||
1,242 | 3 month LIBOR | CHF | 1,150 | 3 month CHF LIBOR minus 22.50 bps | Barclays Capital Group | 01/18/14 | $ | (24,854 | ) | $ | — | $ | (24,854 | ) | ||||||||||||||
7,932 | 3 Month LIBOR | EUR | 5,980 | 3 month EURIBOR minus 26.25 bps | Barclays Capital Group | 01/25/15 | (167,459 | ) | — | (167,459 | ) | |||||||||||||||||
2,243 | 3 Month LIBOR | EUR | 1,700 | 3 month EURIBOR minus 28.25 bps | Barclays Capital Group | 01/04/16 | (55,477 | ) | — | (55,477 | ) | |||||||||||||||||
364 | 3 Month LIBOR | EUR | 280 | 3 month EURIBOR minus 30.50 bbps | Barclays Capital Group | 12/04/14 | (15,388 | ) | — | (15,388 | ) | |||||||||||||||||
196 | 3 Month LIBOR | EUR | 150 | 3 month EURIBOR minus 31.70 bps | Barclays Capital Group | 12/14/15 | (7,110 | ) | — | (7,110 | ) | |||||||||||||||||
1,817 | 3 month LIBOR | GBP | 1,200 | 3 month GBP LIBOR minus 14.25 bps | Barclays Capital Group | 04/05/18 | (98,302 | ) | — | (98,302 | ) | |||||||||||||||||
602 | 3 Month LIBOR | JPY | 60,000 | 3 month JPY LIBOR minus 54.00 bps | Barclays Capital Group | 10/12/16 | (5,434 | ) | — | (5,434 | ) | |||||||||||||||||
6,619 | 3 Month LIBOR | EUR | 4,975 | 3 month EURIBOR minus 26.00 bps | Citigroup Global Markets | 01/25/15 | (119,586 | ) | — | (119,586 | ) | |||||||||||||||||
1,079 | 3 Month LIBOR | EUR | 820 | 3 month EURIBOR minus 30.00 bps | Citigroup Global Markets | 12/18/15 | (29,444 | ) | — | (29,444 | ) | |||||||||||||||||
254 | 3 Month LIBOR | EUR | 200 | 3 month EURIBOR minus 31.25 bps | Citigroup Global Markets | 11/15/15 | (16,425 | ) | — | (16,425 | ) | |||||||||||||||||
1,622 | 3 Month LIBOR | JPY | 158,135 | 3 month JPY LIBOR minus 32.75 bps | Citigroup Global Markets | 05/02/15 | 18,177 | — | 18,177 | |||||||||||||||||||
1,077 | 3 month LIBOR | JPY | 100,000 | 3 month JPY LIBOR minus 28.00 bps | Citigroup Global Markets | 10/05/14 | 61,810 | — | 61,810 | |||||||||||||||||||
2,013 | 3 month LIBOR | JPY | 200,000 | 3 month JPY LIBOR minus 53.25 bps | Citigroup Global Markets | 04/24/17 | (13,959 | ) | — | (13,959 | ) | |||||||||||||||||
64 | 3 month LIBOR plus 432 bps | JPY | 5,000 | 3.45% | Citigroup Global Markets | 03/24/17 | 15,772 | 311 | 15,461 | |||||||||||||||||||
43 | 3 Month LIBOR plus 208 bps | EUR | 35 | 4.25% | Citigroup Global Markets | 07/14/17 | (8,475 | ) | (4,000 | ) | (4,475 | ) |
See Notes to Financial Statements.
78 |
Notional Amount (000)# | Fund | Notional Amount (000)# | Fund Pays | Counterparty | Termination Date | Fair Value | Upfront Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||
79 | 3 Month LIBOR plus 220 bps | EUR | 65 | 4.25% | Citigroup Global Markets | 07/14/17 | $ | (15,628 | ) | $ | (6,770 | ) | $ | (8,858 | ) | |||||||||||||
256 | 3 Month LIBOR plus 333 bps | JPY | 20,000 | 4.50% | Citigroup Global Markets | 06/08/15 | 49,280 | (10,063 | ) | 59,343 | ||||||||||||||||||
257 | 3 Month LIBOR plus 313 bps | JPY | 20,000 | 4.50% | Citigroup Global Markets | 06/08/15 | 49,218 | (11,240 | ) | 60,458 | ||||||||||||||||||
121 | 3 Month LIBOR plus 412 bps | EUR | 100 | 4.50% | Citigroup Global Markets | 11/30/15 | (20,666 | ) | (1,140 | ) | (19,526 | ) | ||||||||||||||||
6,211 | 3 month LIBOR | EUR | 4,700 | 3 month EURIBOR minus 29.75 bps | Deutsche Bank AG | 12/31/15 | (141,717 | ) | — | (141,717 | ) | |||||||||||||||||
1,492 | 3 month LIBOR | JPY | 150,000 | 3 month JPY LIBOR minus 19.50 bps | HSBC Bank USA NA | 07/22/14 | (33,364 | ) | — | (33,364 | ) | |||||||||||||||||
1,070 | 3 Month LIBOR | CHF | 1,000 | 3 month CHF LIBOR minus 29.00 bps | HSBC Bank USA NA | 04/24/15 | (30,421 | ) | — | (30,421 | ) | |||||||||||||||||
1,800 | 3 Month LIBOR | EUR | 1,350 | 3 month EURIBOR minus 25.75 bps | HSBC Bank USA NA | 01/17/15 | (29,087 | ) | — | (29,087 | ) | |||||||||||||||||
2,618 | 3 month LIBOR | EUR | 2,000 | 3 month EURIBOR minus 26.00 bps | HSBC Bank USA NA | 04/16/15 | (89,943 | ) | — | (89,943 | ) | |||||||||||||||||
724 | 3 Month LIBOR | EUR | 550 | 3 month EURIBOR minus 30.25 bps | HSBC Bank USA NA | 12/19/15 | (19,425 | ) | — | (19,425 | ) | |||||||||||||||||
1,686 | 3 Month LIBOR | EUR | 1,290 | 3 month EURIBOR minus 30.50 bps | HSBC Bank USA NA | 12/17/15 | (51,313 | ) | — | (51,313 | ) | |||||||||||||||||
2,656 | 3 month LIBOR | GBP | 1,745 | 3 month GBP LIBOR minus 9.50 bps | HSBC Bank USA NA | 06/04/18 | (135,459 | ) | — | (135,459 | ) | |||||||||||||||||
3,211 | 3 Month LIBOR | EUR | 2,420 | 3 month EURIBOR minus 26.00 bps | HSBC Bank USA NA | 01/25/15 | (66,659 | ) | — | (66,659 | ) | |||||||||||||||||
1,305 | 3 month LIBOR | EUR | 1,000 | 3 month EURIBOR minus 25.25 bps | JPMorgan Chase Bank | 04/11/15 | (49,285 | ) | — | (49,285 | ) | |||||||||||||||||
1,246 | 3 Month LIBOR | EUR | 950 | 3 month EURIBOR minus 28.375 bps | JPMorgan Chase Bank | 10/19/14 | (40,602 | ) | — | (40,602 | ) | |||||||||||||||||
127 | 3 Month LIBOR | EUR | 100 | 3 month EURIBOR minus 31.25 bps | JPMorgan Chase Bank | 11/15/14 | (8,274 | ) | — | (8,274 | ) | |||||||||||||||||
1,061 | 3 month LIBOR | JPY | 105,000 | 3 month JPY LIBOR minus 37.00 bps | JPMorgan Chase Bank | 04/11/15 | (4,705 | ) | — | (4,705 | ) | |||||||||||||||||
123 | 3 Month LIBOR plus 398 bps | EUR | 100 | 4.50% | JPMorgan Chase Bank | 11/30/15 | (19,658 | ) | (2,121 | ) | (17,537 | ) | ||||||||||||||||
TRY 10,920 | 7.70% | 5,672 | 3 month LIBOR | Barclays Capital Group | 07/22/18 | (43,209 | ) | — | (43,209 | ) | ||||||||||||||||||
TRY 11,530 | 7.71% | 5,996 | 3 month LIBOR | Barclays Capital Group | 07/23/18 | (50,620 | ) | — | (50,620 | ) | ||||||||||||||||||
TRY 40,000 | 8.68% | 19,498 | 3 month LIBOR | HSBC Bank USA NA | 09/05/15 | 1,322,072 | — | 1,322,072 | ||||||||||||||||||||
TRY 59,000 | 8.69% | 28,393 | 3 month LIBOR | HSBC Bank USA NA | 09/09/15 | 2,298,489 | — | 2,298,489 | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
$ | 2,402,870 | $ | (35,023 | ) | $ | 2,437,893 | ||||||||||||||||||||||
|
|
|
|
|
|
# | Notional amount is shown in U.S. dollars unless otherwise stated. |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 79 |
Portfolio of Investments
as of October 31, 2013 continued
Interest rate swap agreements outstanding at October 31, 2013:
Notional | Termination Date | Fixed Rate | Floating | Value at Trade Date | Value at October 31, 2013 | Unrealized Appreciation (Depreciation) | ||||||||||||||||||
| Exchange-traded swap agreements: |
| ||||||||||||||||||||||
52,700 | 08/29/15 | 0.740% | 3 month LIBOR(1) | $ | 185 | $ | (134,684 | ) | $ | (134,869 | ) | |||||||||||||
NZD | 70,260 | 09/01/15 | 3.858% | 3 Month NZD LIBOR(2) | 156 | 58,906 | 58,750 | |||||||||||||||||
EUR | 52,000 | 09/11/15 | 0.565% | 6 month EURIBOR(1) | 367 | (105,266 | ) | (105,633 | ) | |||||||||||||||
68,380 | 02/28/18 | 1.649% | 3 month LIBOR(1) | 445 | (1,162,052 | ) | (1,162,497 | ) | ||||||||||||||||
PLN | 9,000 | 09/02/18 | 2.630% | 6 Month WIBOR(2) | 57 | 66,617 | 66,560 | |||||||||||||||||
PLN | 85,000 | 09/03/18 | 2.730% | 6 month WIBOR(2) | 159 | 586,590 | 586,431 | |||||||||||||||||
51,465 | 08/31/20 | 2.085% | 3 month LIBOR(1) | 459 | — | (459 | ) | |||||||||||||||||
47,500 | 08/31/20 | 2.219% | 3 month LIBOR(1) | 431 | (443,888 | ) | (444,319 | ) | ||||||||||||||||
48,750 | 08/31/20 | 2.220% | 3 month LIBOR(1) | 438 | (458,590 | ) | (459,028 | ) | ||||||||||||||||
87,500 | 08/31/20 | 2.278% | 3 month LIBOR(1) | 669 | (1,149,179 | ) | (1,149,848 | ) | ||||||||||||||||
10,925 | 08/31/20 | 2.490% | 3 month LIBOR(1) | 212 | (292,267 | ) | (292,479 | ) | ||||||||||||||||
142,000 | 08/31/20 | 2.575% | 3 month LIBOR(1) | 982 | (4,566,517 | ) | (4,567,499 | ) | ||||||||||||||||
136,750 | 09/24/20 | 0.250% | 3 month LIBOR(2) | 956 | 2,261,349 | 2,260,393 | ||||||||||||||||||
2,665 | 01/31/22 | 2.505% | 3 month LIBOR(1) | 165 | (28,196 | ) | (28,361 | ) | ||||||||||||||||
62,775 | 08/07/23 | 4.248% | 3 month LIBOR(2) | 422 | 525,081 | 524,659 | ||||||||||||||||||
27,465 | 08/08/23 | 4.283% | 3 month LIBOR(2) | 268 | 270,287 | 270,019 | ||||||||||||||||||
27,465 | 08/09/23 | 4.231% | 3 month LIBOR(2) | 267 | 208,349 | 208,082 | ||||||||||||||||||
NZD | 9,130 | 08/19/23 | 2.620% | 3 month NZD LIBOR(2) | 176 | 578 | 402 | |||||||||||||||||
101,900 | 09/24/23 | 2.903% | 3 month LIBOR(1) | 955 | (2,135,960 | ) | (2,136,915 | ) | ||||||||||||||||
EUR | 10,800 | 08/26/23 | 2.216% | 3 month EURIBOR(1) | 310 | (359,847 | ) | (360,157 | ) | |||||||||||||||
GBP | 7,500 | 08/29/23 | 0.591% | 3 month STERLING LIBOR(2) | 320 | 94,136 | 93,816 | |||||||||||||||||
HUF | 683,800 | 09/02/23 | 3.750% | 6 month BUBOR(2) | 24 | 268,726 | 268,702 | |||||||||||||||||
HUF | 50,000 | 09/03/23 | 3.750% | 6 month BUBOR(2) | 3 | 17,046 | 17,043 | |||||||||||||||||
ZAR | 11,500 | 10/22/23 | 5.142% | 3 month JIBAR(2) | 25 | (23,712 | ) | (23,737 | ) | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
$ | 8,451 | $ | (6,502,493 | ) | $ | (6,510,944 | ) | |||||||||||||||||
|
|
|
|
|
|
Notional | Termination Date | Fixed Rate | Floating | Fair Value | Upfront Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | Counterparty | |||||||||||||||||||
| Over-the-counter swap agreements: | |||||||||||||||||||||||||
3,800 | 08/24/14 | 0.475% | 3 month LIBOR(1) | $ | (7,619 | ) | $ | — | $ | (7,619 | ) | Citigroup Global Markets | ||||||||||||||
9,700 | 12/03/14 | 0.376% | 3 month LIBOR(1) | (19,080 | ) | — | (19,080 | ) | Citigroup Global Markets | |||||||||||||||||
EUR | 3,155 | 12/14/14 | 0.349% | 3 month EURIBOR(1) | (4,794 | ) | — | (4,794 | ) | Citigroup Global Markets | ||||||||||||||||
3,470 | 12/14/14 | 0.351% | 3 month LIBOR(2) | 5,529 | — | 5,529 | Citigroup Global Markets | |||||||||||||||||||
8,000 | 01/03/15 | 0.385% | 3 month LIBOR(1) | (16,011 | ) | — | (16,011 | ) | Citigroup Global Markets | |||||||||||||||||
EUR | 13,000 | 05/22/15 | 0.238% | 3 month EURIBOR(1) | 8,907 | — | 8,907 | Barclays Bank Group | ||||||||||||||||||
5,000 | 08/24/15 | 0.573% | 3 month LIBOR(1) | (19,881 | ) | — | (19,881 | ) | Citigroup Global Markets |
See Notes to Financial Statements.
80 |
Notional | Termination Date | Fixed Rate | Floating | Fair Value | Upfront Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | Counterparty | |||||||||||||||||||
| Over-the-counter swap agreements (cont’d.): | |||||||||||||||||||||||||
MXN | 15,000 | 12/02/15 | 5.080% | 28 day Mexican Interbank Rate(2) | $ | 20,769 | $ | — | $ | 20,769 | Morgan Stanley & Co., Inc. | |||||||||||||||
13,000 | 12/03/15 | 0.450% | 3 month LIBOR(1) | (22,344 | ) | — | (22,344 | ) | Citigroup Global Markets | |||||||||||||||||
3,985 | 12/03/15 | 0.450% | 3 month LIBOR(1) | (6,849 | ) | — | (6,849 | ) | Citigroup Global Markets | |||||||||||||||||
7,660 | 01/25/16 | 0.503% | 3 month LIBOR(1) | (16,467 | ) | — | (16,467 | ) | Citigroup Global Markets | |||||||||||||||||
EUR | 6,390 | 01/25/16 | 0.695% | 6 month EURIBOR(2) | 76,506 | — | 76,506 | Citigroup Global Markets | ||||||||||||||||||
2,000 | 04/08/16 | 2.520% | 3 month LIBOR(1) | (100,003 | ) | — | (100,003 | ) | Citigroup Global Markets | |||||||||||||||||
2,000 | 04/27/16 | 2.313% | 3 month LIBOR(1) | (89,110 | ) | — | (89,110 | ) | Citigroup Global Markets | |||||||||||||||||
1,000 | 05/18/16 | 2.040% | 3 month LIBOR(1) | (46,630 | ) | — | (46,630 | ) | Citigroup Global Markets | |||||||||||||||||
1,305 | 06/07/16 | 0.654% | 3 Month LIBOR(2) | 6,004 | — | 6,004 | JPMorgan Chase Bank | |||||||||||||||||||
2,000 | 06/30/16 | 1.821% | 3 month LIBOR(1) | (77,715 | ) | — | (77,715 | ) | Citigroup Global Markets | |||||||||||||||||
NZD | 1,000 | 08/09/16 | 3.125% | 3 month BBR(2) | (12,050 | ) | — | (12,050 | ) | Citigroup Global Markets | ||||||||||||||||
2,070 | 08/31/16 | 0.934% | 3 Month LIBOR(2) | 20,061 | — | 20,061 | Credit Suisse First Boston Corp. | |||||||||||||||||||
645 | 08/31/16 | 0.975% | 3 Month LIBOR(1) | (7,039 | ) | — | (7,039 | ) | JPMorgan Chase Bank | |||||||||||||||||
645 | 08/31/16 | 0.978% | 3 Month LIBOR(1) | (7,108 | ) | — | (7,108 | ) | JPMorgan Chase Bank | |||||||||||||||||
BRL | 2,166 | 01/01/17 | 8.330% | 1 day BZDIOVER(2) | (86,055 | ) | — | (86,055 | ) | Citigroup Global Markets | ||||||||||||||||
BRL | 1,026 | 01/01/17 | 9.130% | 1 day BZDIOVER(2) | (24,342 | ) | — | (24,342 | ) | Barclays Bank Group | ||||||||||||||||
BRL | 73,728 | 01/01/17 | 10.580% | 1 day BZDIOVER(2) | (602,276 | ) | — | (602,276 | ) | HSBC Bank USA NA | ||||||||||||||||
24,900 | 02/28/17 | 0.687% | 3 month LIBOR(1) | 79,781 | — | 79,781 | Credit Suisse First Boston | |||||||||||||||||||
NZD | 130 | 03/26/17 | 3.810% | 3 Month BBR(2) | (215 | ) | — | (215 | ) | HSBC Bank USA NA | ||||||||||||||||
2,500 | 08/24/17 | 0.944% | 3 month LIBOR(1) | 1,008 | — | 1,008 | Citigroup Global Markets | |||||||||||||||||||
14,325 | 08/31/17 | 0.751% | 3 month LIBOR(1) | 119,964 | — | 119,964 | Bank of Nova Scotia |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 81 |
Portfolio of Investments
as of October 31, 2013 continued
Notional | Termination Date | Fixed Rate | Floating | Fair Value | Upfront Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | Counterparty | |||||||||||||||||||
| Over-the-counter swap agreements (cont’d.): | |||||||||||||||||||||||||
12,000 | 09/10/17 | 0.845% | 3 month LIBOR(1) | $ | 64,674 | $ | — | $ | 64,674 | Morgan Stanley & Co., Inc. | ||||||||||||||||
125,750 | 11/30/17 | 1.170% | 3 month LIBOR(1) | (522,216 | ) | — | (522,216 | ) | Credit Suisse First Boston | |||||||||||||||||
5,000 | 12/03/17 | 0.759% | 3 month LIBOR(1) | 54,690 | — | 54,690 | Citigroup Global Markets | |||||||||||||||||||
19,100 | 01/02/18 | 0.839% | 3 month LIBOR(1) | 179,540 | — | 179,540 | Citigroup Global Markets | |||||||||||||||||||
EUR | 2,900 | 01/07/18 | 0.848% | 3 month EURIBOR(1) | (14,535 | ) | — | (14,535 | ) | Citigroup Global Markets | ||||||||||||||||
3,500 | 01/07/18 | 0.863% | 3 month LIBOR(2) | (30,085 | ) | — | (30,085 | ) | Barclays Bank Group | |||||||||||||||||
290 | 04/18/18 | 0.985% | 6 month LIBOR(1) | 4,574 | — | 4,574 | Barclays Bank Group | |||||||||||||||||||
850 | 04/18/18 | 0.986% | 6 month LIBOR(1) | 13,370 | — | 13,370 | Citigroup Global Markets | |||||||||||||||||||
3,000 | 04/22/18 | 0.865% | 3 month LIBOR(1) | 49,542 | — | 49,542 | JPMorgan Chase Bank | |||||||||||||||||||
EUR | 6,700 | 05/22/18 | 0.649% | 3 month EURIBOR(1) | 66,516 | — | 66,516 | Barclays Bank Group | ||||||||||||||||||
MXN | 143,100 | 06/20/18 | 6.020% | 28 day Mexican Interbank Rate(2) | 394,928 | — | 394,928 | Credit Suisse First Boston Corp. | ||||||||||||||||||
ZAR | 119,800 | 06/25/18 | 7.420% | 3 month JIBAR(2) | 252,459 | — | 252,459 | Barclays Capital Group | ||||||||||||||||||
PLN | 56,900 | 06/28/18 | 3.736% | 6 month WIBOR(2) | 247,415 | — | 247,415 | Citigroup Global Markets | ||||||||||||||||||
NZD | 3,380 | 08/12/18 | 4.143% | 3 month BBR(2) | (2,013 | ) | — | (2,013 | ) | Citigroup Global Markets | ||||||||||||||||
NZD | 2,540 | 08/13/18 | 4.160% | 3 month BBR(2) | 114 | — | 114 | Citigroup Global Markets | ||||||||||||||||||
NZD | 2,540 | 08/13/18 | 4.218% | 3 month BBR(2) | 5,595 | — | 5,595 | Barclays Capital Group | ||||||||||||||||||
300 | 09/21/18 | 1.670% | 3 month LIBOR(1) | (4,335 | ) | — | (4,335 | ) | Goldman Sachs & Co. | |||||||||||||||||
11,110 | 08/15/19 | 1.231% | 3 month LIBOR(1) | 282,829 | — | 282,829 | Credit Suisse First Boston | |||||||||||||||||||
6,620 | 11/15/19 | 1.334% | 3 month LIBOR(1) | 143,187 | — | 143,187 | Citigroup Global Markets | |||||||||||||||||||
23,800 | 01/24/20 | 1.348% | 3 month LIBOR(1) | 643,993 | — | 643,993 | Credit Suisse First Boston | |||||||||||||||||||
16,855 | 02/15/20 | 1.355% | 3 Month LIBOR(2) | (497,425 | ) | — | (497,425 | ) | Morgan Stanley & Co., Inc. |
See Notes to Financial Statements.
82 |
Notional | Termination Date | Fixed Rate | Floating | Fair Value | Upfront Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | Counterparty | |||||||||||||||||||
| Over-the-counter swap agreements (cont’d.): | |||||||||||||||||||||||||
50,000 | 02/25/20 | 1.478% | 3 month LIBOR(1) | $ | 1,131,127 | $ | — | $ | 1,131,127 | Bank of America NA | ||||||||||||||||
2,090 | 04/19/20 | 1.441% | 6 month LIBOR(1) | 77,266 | — | 77,266 | Citigroup Global Markets | |||||||||||||||||||
1,040 | 04/19/20 | 1.443% | 6 month LIBOR(1) | 38,351 | — | 38,351 | Credit Suisse First Boston | |||||||||||||||||||
112,850 | 05/15/20 | 1.762% | 3 month LIBOR(1) | 1,122,236 | — | 1,122,236 | Citigroup Global Markets | |||||||||||||||||||
JPY | 585,000 | 05/20/20 | 0.698% | 6 month JPY LIBOR(2) | 108,782 | — | 108,782 | Credit Suisse First Boston Corp. | ||||||||||||||||||
JPY | 2,435,000 | 05/21/20 | 0.689% | 6 month JPY LIBOR(2) | 437,541 | — | 437,541 | Credit Suisse First Boston Corp. | ||||||||||||||||||
2,000 | 04/05/21 | 1.619% | 3 month LIBOR(1) | 77,302 | — | 77,302 | Citigroup Global Markets | |||||||||||||||||||
1,000 | 04/19/21 | 3.514% | 3 month LIBOR(1) | (95,647 | ) | — | (95,647 | ) | Citigroup Global Markets | |||||||||||||||||
1,000 | 06/30/21 | 3.078% | 3 month LIBOR(1) | (71,663 | ) | — | (71,663 | ) | Citigroup Global Markets | |||||||||||||||||
700 | 09/08/21 | 2.150% | 3 month LIBOR(2) | (4,819 | ) | — | (4,819 | ) | Citigroup Global Markets | |||||||||||||||||
2,000 | 01/13/22 | 1.781% | 3 month LIBOR(1) | 78,360 | — | 78,360 | Barclays Bank Group | |||||||||||||||||||
MXN | 2,900 | 05/25/22 | 6.370% | 28 day Mexican Interbank Rate(2) | 1,007 | — | 1,007 | Morgan Stanley & Co., Inc. | ||||||||||||||||||
2,400 | 08/24/22 | 1.855% | 3 month LIBOR(1) | 115,787 | — | 115,787 | Citigroup Global Markets | |||||||||||||||||||
NZD | 230 | 09/25/22 | 3.790% | 3 Month BBR(2) | (13,521 | ) | — | (13,521 | ) | Citigroup Global Markets | ||||||||||||||||
15,900 | 12/03/22 | 1.661% | 3 month LIBOR(1) | 1,065,839 | — | 1,065,839 | Citigroup Global Markets | |||||||||||||||||||
7,000 | 12/12/22 | 1.675% | 3 month LIBOR(1) | 466,011 | — | 466,011 | Morgan Stanley & Co., Inc. | |||||||||||||||||||
3,000 | 01/02/23 | 1.773% | 3 month LIBOR(1) | 180,149 | — | 180,149 | Citigroup Global Markets | |||||||||||||||||||
1,400 | 02/08/23 | 2.050% | 3 month LIBOR(1) | 55,705 | — | 55,705 | JPMorgan Chase Bank | |||||||||||||||||||
24,000 | 04/03/23 | 2.015% | 3 month LIBOR(1) | 1,160,275 | — | 1,160,275 | Morgan Stanley & Co., Inc. | |||||||||||||||||||
MXN | 164,100 | 04/28/23 | 5.100% | 28 day Mexican Interbank Rate(2) | (1,383,614 | ) | — | (1,383,614 | ) | Barclays Capital Group |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 83 |
Portfolio of Investments
as of October 31, 2013 continued
Notional | Termination Date | Fixed Rate | Floating | Fair Value | Upfront Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | Counterparty | |||||||||||||||||||
| Over-the-counter swap agreements (cont’d.): | |||||||||||||||||||||||||
INR | 235,000 | 05/03/23 | 7.000% | 1 day MIBOR(2) | $ | (327,856 | ) | $ | — | $ | (327,856 | ) | Barclays Capital Group | |||||||||||||
RUB | 150,000 | 05/17/23 | 7.250% | 3 month MOSPRIME(2) | 41,816 | — | 41,816 | Credit Suisse First Boston Corp. | ||||||||||||||||||
2,600 | 05/20/23 | 1.997% | 3 month LIBOR(1) | 118,208 | — | 118,208 | Credit Suisse First Boston | |||||||||||||||||||
RUB | 150,000 | 05/20/23 | 7.250% | 3 month MosPrime(2) | 41,081 | — | 41,081 | Credit Suisse First Boston Corp. | ||||||||||||||||||
NZD | 3,435 | 08/12/23 | 4.648% | 3 month BBR(2) | (31,798 | ) | — | (31,798 | ) | Citigroup Global Markets | ||||||||||||||||
NZD | 2,495 | 08/13/23 | 4.668% | 3 month BBR(2) | (19,856 | ) | — | (19,856 | ) | Citigroup Global Markets | ||||||||||||||||
NZD | 2,495 | 08/13/23 | 4.730% | 3 month BBR(2) | (9,511 | ) | — | (9,511 | ) | Barclays Capital Group | ||||||||||||||||
MXN | 98,000 | 10/20/23 | 6.540% | 28 day Mexican Interbank Rate(2) | (24,200 | ) | — | (24,200 | ) | Deutsche Bank | ||||||||||||||||
MXN | 6,100 | 10/20/23 | 6.550% | 28 day Mexican Interbank Rate(2) | (1,122 | ) | — | (1,122 | ) | Citigroup Global Markets | ||||||||||||||||
2,500 | 12/03/27 | 2.170% | 3 month LIBOR(1) | 271,695 | — | 271,695 | Citigroup Global Markets | |||||||||||||||||||
EUR | 360 | 12/13/27 | 2.065% | 3 month EURIBOR(1) | 9,736 | — | 9,736 | Barclays Capital Group | ||||||||||||||||||
460 | 12/13/27 | 2.200% | 3 month LIBOR(2) | (48,681 | ) | — | (48,681 | ) | Barclays Capital Group | |||||||||||||||||
AUD | 360 | 12/19/32 | 4.423% | 6 Month BBSW(2) | (15,627 | ) | — | (15,627 | ) | Citigroup Global Markets | ||||||||||||||||
AUD | 450 | 12/20/32 | 4.420% | 6 month Australian Bank Bill Rate(2) | (19,858 | ) | — | (19,858 | ) | Citigroup Global Markets | ||||||||||||||||
500 | 01/07/33 | 2.676% | 3 month LIBOR(1) | 50,086 | — | 50,086 | Citigroup Global Markets | |||||||||||||||||||
5,000 | 01/24/33 | 2.650% | 3 month LIBOR(1) | 528,244 | — | 528,244 | Barclays Bank Group | |||||||||||||||||||
ZAR | 20,000 | 09/03/33 | 8.970% | 3 Month JIBAR(2) | 96,555 | — | 96,555 | HSBC Bank USA NA | ||||||||||||||||||
17,000 | 08/15/39 | 2.980% | 3 month LIBOR(1) | 1,649,528 | — | 1,649,528 | Morgan Stanley & Co., Inc. | |||||||||||||||||||
31,925 | 08/15/39 | 3.154% | 3 month LIBOR(1) | 2,186,249 | — | 2,186,249 | Citigroup Global Markets | |||||||||||||||||||
130 | 02/16/42 | 2.766% | 3 month LIBOR(2) | (19,448 | ) | — | (19,448 | ) | Citigroup Global Markets |
See Notes to Financial Statements.
84 |
Notional | Termination Date | Fixed Rate | Floating | Fair Value | Upfront Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | Counterparty | |||||||||||||||||||
| Over-the-counter swap agreements (cont’d.): | |||||||||||||||||||||||||
170 | 02/21/42 | 2.800% | 3 month LIBOR(2) | $ | (24,394 | ) | $ | — | $ | (24,394 | ) | Citigroup Global Markets | ||||||||||||||
700 | 08/24/42 | 2.620% | 3 month LIBOR(1) | 126,701 | — | 126,701 | Citigroup Global Markets | |||||||||||||||||||
4,765 | 10/11/42 | 2.708% | 3 month LIBOR(1) | 799,099 | — | 799,099 | Bank Of Nova Scotia | |||||||||||||||||||
1,400 | 12/03/42 | 2.561% | 3 month LIBOR(1) | 263,232 | — | 263,232 | Citigroup Global Markets | |||||||||||||||||||
1,300 | 12/12/42 | 2.590% | 3 month LIBOR(1) | 237,922 | — | 237,922 | Morgan Stanley & Co., Inc. | |||||||||||||||||||
2,800 | 01/02/43 | 2.715% | 3 month LIBOR(1) | 447,781 | — | 447,781 | Citigroup Global Markets | |||||||||||||||||||
2,000 | 01/24/43 | 2.831% | 3 month LIBOR(1) | 277,490 | — | 277,490 | Barclays Bank Group | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
$ | 11,655,304 | $ | — | $ | 11,655,304 | |||||||||||||||||||||
|
|
|
|
|
|
(1) | The Fund pays the fixed rate and receives the floating rate. |
(2) | The Fund pays the floating rate and receives the fixed rate. |
# | Notional amount is shown in U.S. dollars unless otherwise stated. |
Credit default swap agreements outstanding at October 31, 2013:
Reference | Termination Date | Fixed Rate | Notional Amount (000)#(3) | Fair Value | Upfront Premiums Paid (Received) | Unrealized Depreciation | Counterparty | |||||||||||||||||||
Over-the-counter credit default swaps on credit indices—Buy Protection(1): | ||||||||||||||||||||||||||
iTRAXX.EUR.18.V1 | 12/20/17 | 1.000% | 1,600 | $ | (33,053 | ) | $ | 15,448 | $ | (48,501 | ) | Bank of America | ||||||||||||||
iTRAXX.EUR.18.V1 | 12/20/17 | 1.000% | 1,600 | (33,053 | ) | 25,504 | (58,557 | ) | Deutsche Bank | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
$ | (66,106 | ) | $ | 40,952 | $ | (107,058 | ) | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
Reference | Termination Date | Fixed Rate | Notional Amount (000)#(3) | Fair Value(4) | Upfront Premiums Paid (Received) | Unrealized Appreciation | Counterparty | |||||||||||||||||||
Over-the-counter credit default swaps on credit indices—Sell Protection(2): | ||||||||||||||||||||||||||
CDX.NA.HY.17.V5 | 12/20/16 | 5.000% | 3,360 | $ | 303,131 | $ | 140,933 | $ | 162,198 | Credit Suisse First Boston Corp. | ||||||||||||||||
CDX.NA.HY.17.V5 | 12/20/16 | 5.000% | 6,240 | 562,957 | 285,133 | 277,824 | Deutsche Bank | |||||||||||||||||||
CDX.NA.HY.17.V5 | 12/20/16 | 5.000% | 8,880 | 801,132 | 383,567 | 417,565 | Deutsche Bank | |||||||||||||||||||
CDX.NA.HY.17.V5 | 12/20/16 | 5.000% | 5,520 | 498,001 | 241,883 | 256,118 | Deutsche Bank | |||||||||||||||||||
CDX.NA.HY.18.V2 | 06/20/17 | 5.000% | 990 | 89,933 | (77,275 | ) | 167,208 | Citigroup Global Markets |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 85 |
Portfolio of Investments
as of October 31, 2013 continued
Reference | Termination Date | Fixed Rate | Notional Amount (000)#(3) | Fair Value(4) | Upfront Premiums Paid (Received) | Unrealized Appreciation | Counterparty | |||||||||||||||||||
Over-the-counter credit default swaps on credit indices—Sell Protection(2) (cont’d.): | ||||||||||||||||||||||||||
CDX.NA.HY.18.V2 | 06/20/17 | 5.000% | 2,970 | $ | 269,801 | $ | (79,612 | ) | $ | 349,413 | Citigroup Global Markets | |||||||||||||||
CDX.NA.HY.18.V2 | 06/20/17 | 5.000% | 1,980 | 179,867 | (40,700 | ) | 220,567 | Goldman Sachs & Co. | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
$ | 2,704,822 | $ | 853,929 | $ | 1,850,893 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
Reference | Termination Date | Fixed Rate | Notional Amount (000)#(3) | Value at October 31, 2013(4) | Value at Trade Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||
Exchange-traded credit default swaps on credit indices—Sell Protection(2) |
| |||||||||||||||||||||||||
CDX.NA.HY.17.V5 | 12/20/16 | 5.000% | 76,800 | $ | 6,489,715 | $ | 6,187,227 | $ | 302,488 | |||||||||||||||||
CDX.NA.HY.18.V2 | 06/20/17 | 5.000% | 14,850 | 1,276,116 | 1,365,592 | (89,476 | ) | |||||||||||||||||||
CDX.NA.IG.21.V1 | 12/20/18 | 1.000% | 175,250 | (2,334,919 | ) | (1,686,348 | ) | (648,571 | ) | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
$ | 5,430,912 | $ | 5,866,471 | $ | (435,559 | ) | ||||||||||||||||||||
|
|
|
|
|
|
The Fund entered into credit default swaps as the protection seller on credit indices and sovereign issues to take an active short position with respect to the likelihood of a particular issuer’s default or the referenced entity’s credit soundness.
(1) | If the Fund is a buyer of protection, it pays the fixed rate. When a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and make delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. |
(2) | If the Fund is a seller of protection, it receives the fixed rate. When a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. |
(3) | Notional amount represents the maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement. |
(4) | The fair value of credit default swap agreements on credit indices serves as an indicator of the current status of the payment/performance risk and represents the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement be closed/sold as of the reporting date. Increasing fair value in absolute terms, represents a deterioration of the referenced entity’s credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement. |
# | Notional amount is shown in U.S. dollars unless otherwise stated. |
See Notes to Financial Statements.
86 |
Various inputs are used in determining the value of the Fund’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.
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 | ||||||||||||
Asset-Backed Securities | ||||||||||||
Collateralized Debt Obligations | $ | — | $ | 2,772,712 | $ | — | ||||||
Collateralized Loan Obligations | — | 156,536,429 | 15,308,038 | |||||||||
Non-Residential Mortgage-Backed Securities | — | 44,545,260 | 6,753,080 | |||||||||
Residential Mortgage-Backed Securities | — | 163,748,169 | — | |||||||||
Bank Loans | — | 104,630,523 | 8,775,211 | |||||||||
Commercial Mortgage-Backed Securities | — | 260,351,866 | 10,506,000 | |||||||||
Corporate Bonds | — | 712,350,844 | 7,235,184 | |||||||||
Municipal Bonds | — | 16,642,440 | — | |||||||||
Non-Corporate Foreign Agencies | — | 46,720,900 | — | |||||||||
Sovereign Bonds | — | 217,214,465 | 925,455 | |||||||||
Mortgage-Backed Securities | — | 4,903,242 | — | |||||||||
U.S. Government Agency Obligations | — | 2,995,252 | — | |||||||||
U.S. Treasury Obligations | — | 24,376,074 | — | |||||||||
Affiliated Money Market Mutual Fund | 57,505,636 | — | — | |||||||||
Other Financial Instruments* | ||||||||||||
Futures Contracts | 1,044,450 | — | — | |||||||||
Forward Foreign Currency Exchange Contracts | — | (414,133 | ) | — | ||||||||
Currency Swap Agreements | — | 2,437,893 | — | |||||||||
Interest Rate Swap Agreements | (6,510,944 | ) | 11,655,304 | — | ||||||||
Credit Default Swap Agreements | (435,559 | ) | 1,743,835 | — | ||||||||
|
|
|
|
|
| |||||||
Total | $ | 51,603,583 | $ | 1,773,211,075 | $ | 49,502,968 | ||||||
|
|
|
|
|
|
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 87 |
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:
Asset- Backed Securities | Bank Loans | Commercial Mortgage- Backed Securities | Corporate Bonds | Sovereigns | ||||||||||||||||
Balance as of 10/31/12 | $ | 3,823,000 | $ | 98,256 | $ | — | $ | 372,864 | $ | — | ||||||||||
Realized gain (loss) | 7,888 | (306 | ) | — | — | — | ||||||||||||||
Change in unrealized appreciation (depreciation)** | (97,886 | ) | 265,381 | 473 | (73,751 | ) | 7,511 | |||||||||||||
Purchases | 24,136,225 | 8,371,832 | 10,505,527 | 6,975,804 | 916,217 | |||||||||||||||
Sales | (3,235,109 | ) | (214,374 | ) | — | (42,958 | ) | — | ||||||||||||
Accrued discount/premium | — | 7,547 | — | 3,225 | 1,727 | |||||||||||||||
Transfer into Level 3 | — | 246,875 | — | — | — | |||||||||||||||
Transfer out of Level 3 | �� | (2,573,000 | ) | — | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance as of 10/31/13 | $ | 22,061,118 | $ | 8,775,211 | $ | 10,506,000 | $ | 7,235,184 | $ | 925,455 | ||||||||||
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|
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|
|
|
* | 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 of the instrument. |
** | Of which, $101,729 was included in Net Asset relating to securities at the reporting period end. |
It is the Fund’s policy to recognize transfers in and transfers out at the fair value as of the beginning of the period. At the reporting period end, 2 Asset-Backed Securities transferred out of Level 3 as a result of being valued by an independent pricing source and 1 Bank Loan transferred into Level 3 as a result of using a single broker quote.
Level 3 securities as presented in the table above are being fair valued using pricing methodologies approved by the Valuation Committee, which contain unobservable inputs. Such methodologies include, but are not limited to, using pricing provided by a single broker/dealer, the cost of the investment, and prices of any recent transactions or bids/offers for such securities or any comparable securities.
See Notes to Financial Statements.
88 |
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as October 31, 2013 were as follows:
Commercial Mortgage-Backed Securities | 14.5 | % | ||
Sovereign Bonds | 11.7 | |||
Collateralized Loan Obligations | 9.2 | |||
Residential Mortgage-Backed Securities | 8.8 | |||
Banking | 8.5 | |||
Telecommunications | 3.4 | |||
Affiliated Money Market Mutual Fund | 3.1 | |||
Technology | 3.1 | |||
Non-Residential Mortgage-Backed Securities | 2.8 | |||
Media & Entertainment | 2.7 | |||
Non-Corporate Foreign Agencies | 2.5 | |||
Capital Goods | 2.3 | |||
Healthcare & Pharmaceutical | 2.3 | |||
Foods | 1.8 | |||
Insurance | 1.8 | |||
Cable | 1.7 | |||
Chemicals | 1.7 | |||
Pipelines & Other | 1.6 | |||
Automotive | 1.6 | |||
Electric | 1.4 | |||
Energy—Other | 1.3 | |||
U.S. Treasury Obligations | 1.3 | |||
Consumer | 1.2 | |||
Metals | 1.2 | |||
Municipal Bonds | 0.9 | % | ||
Non-Captive Finance | 0.9 | |||
Retailers | 0.8 | |||
Energy—Integrated | 0.7 | |||
Building Materials & Construction | 0.5 | |||
Real Estate Investment Trusts | 0.5 | |||
Gaming | 0.5 | |||
Airlines | 0.5 | |||
Lodging | 0.5 | |||
Railroads | 0.4 | |||
Tobacco | 0.4 | |||
Packaging | 0.4 | |||
Paper | 0.4 | |||
Aerospace & Defense | 0.3 | |||
Healthcare Insurance | 0.3 | |||
Mortgage-Backed Securities | 0.3 | |||
U.S. Government Agency Obligations | 0.2 | |||
Collateralized Debt Obligations | 0.1 | |||
Brokerage | 0.1 | |||
Transportation | — | * | ||
|
| |||
100.2 | ||||
Liabilities in excess of other assets | (0.2 | ) | ||
|
| |||
100.0 | % | |||
|
|
* | Less than 0.05% |
The Fund invested in derivative instruments during the reporting period. The primary types of risk associated with these derivative instruments are credit risk, foreign exchange risk and interest rate risk. The effect of such derivative instruments on the Fund’s 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 Absolute Return Bond Fund | 89 |
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 | Asset Derivatives | Liability Derivatives | ||||||||||
Balance | Fair Value | Balance | Fair Value | |||||||||
Credit contracts | Unrealized appreciation on over-the-counter swap agreements | $ | 1,850,893 | Unrealized depreciation on over-the-counter swap agreements | $ | 107,058 | ||||||
Credit contracts | Premiums paid for swap agreements | 1,092,468 | Premiums received for swap agreements | 197,587 | ||||||||
Credit contracts | Due from broker—variation margin | 302,488 | * | Due from broker—variation margin | 738,047 | * | ||||||
Foreign exchange contracts | Unrealized appreciation on forward foreign currency contracts | 4,210,706 | Unrealized depreciation on forward foreign currency contracts | 4,624,839 | ||||||||
Interest rate contracts | Due from broker—variation margin | 5,800,189 | * | Due from broker—variation margin | 11,266,683 | * | ||||||
Interest rate contracts | Premiums paid for swap agreements | 311 | Premiums received for swap agreements | 35,334 | ||||||||
Interest rate contracts | Unrealized appreciation on over-the-counter swap agreements | 19,838,926 | Unrealized depreciation on over-the-counter swap agreements | 5,745,729 | ||||||||
|
|
|
| |||||||||
Total | $ | 33,095,981 | $ | 22,715,277 | ||||||||
|
|
|
|
* | Includes cumulative appreciation/depreciation as reported in the schedule of open futures and exchange-traded swap contracts. 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 | Options Purchased | Options Written | Futures | Forward Currency Contracts | Forward Rate Agreements | Swaps | Total | |||||||||||||||||||||
Credit contracts | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 3,226,060 | $ | 3,226,060 | ||||||||||||||
Foreign exchange contracts | — | — | — | (14,121,629 | ) | — | — | (14,121,629 | ) | |||||||||||||||||||
Interest rate contracts | (712,629 | ) | (25,797 | ) | 115,958 | — | 21,568 | 3,192,704 | 2,591,804 | |||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
| |||||||||||||||
$ | (712,629 | ) | $ | (25,797 | ) | $ | 115,958 | $ | (14,121,629 | ) | $ | 21,568 | $ | 6,418,764 | $ | (8,303,765 | ) | |||||||||||
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|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
90 |
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | ||||||||||||||||
Derivatives not accounted for as hedging | Futures | Forward Currency Contracts | Swaps | Total | ||||||||||||
Credit contracts | $ | — | $ | — | $ | 1,072,517 | $ | 1,072,517 | ||||||||
Foreign exchange contracts | — | (308,085 | ) | — | (308,085 | ) | ||||||||||
Interest rate contracts | 1,060,494 | — | 8,628,268 | 9,688,762 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | 1,060,494 | $ | (308,085 | ) | $ | 9,700,785 | $ | 10,453,194 | ||||||||
|
|
|
|
|
|
|
|
As of October 31, 2013, the Fund’s average volume of derivatives activities is as follows:
Options Purchased (Cost) | Futures Long Positions (Value at Trade Date) | Futures Short Positions (Value at Trade Date) | Forward Currency Contracts— Purchased (Value at Settlement Date Payable) | Forward Currency Contracts— Sold (Value at Settlement Date Receivable) | Forward Rate Agreements (Notional Amount in USD (000)) | |||||||||||||||||
$ | 121,718 | $ | 131,836,586 | $ | 91,663,319 | $ | 246,423,714 | $ | 211,553,153 | $ | 43,121 |
Currency Swaps (Notional Amount in USD (000)) | Interest Rate Swaps (Notional Amount in USD (000)) | Credit Default Swaps as Buyer (Notional Amount in USD (000)) | Credit Default Swaps as Writer (Notional Amount in USD (000)) | |||||||||||
$ | 53,380 | $ | 807,345 | $ | 74,765 | $ | 57,962 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 91 |
Statement of Assets & Liabilities
as of October 31, 2013
Assets | ||||
Investments at value: | ||||
Unaffiliated Investments (cost $1,815,695,427) | $ | 1,807,291,144 | ||
Affiliated Investments (cost $57,505,636) | 57,505,636 | |||
Foreign currency, at value (cost $612,738) | 612,557 | |||
Unrealized appreciation on over-the-counter swap agreements | 21,689,819 | |||
Dividends and interest receivable | 16,976,245 | |||
Receivable for Fund shares sold | 14,239,196 | |||
Receivable for investments sold | 8,420,794 | |||
Unrealized appreciation on forward foreign currency exchange contracts | 4,210,706 | |||
Premiums paid for swap agreements | 1,092,779 | |||
Due from broker—variation margin | 234,652 | |||
Prepaid expenses | 17,228 | |||
|
| |||
Total assets | 1,932,290,756 | |||
|
| |||
Liabilities | ||||
Payable for investments purchased | 46,167,366 | |||
Payable for Fund shares reacquired | 10,257,668 | |||
Unrealized depreciation on over-the-counter swap agreements | 5,852,787 | |||
Unrealized depreciation on forward foreign currency exchange contracts | 4,624,839 | |||
Dividends payable | 2,207,596 | |||
Accrued expenses | 647,897 | |||
Management fee payable | 741,994 | |||
Distribution fee payable | 241,819 | |||
Premiums received for swap agreements | 232,921 | |||
Payable to custodian | 130,892 | |||
Affiliated transfer agent fee payable | 43,476 | |||
|
| |||
Total liabilities | 71,149,255 | |||
|
| |||
Net Assets | $ | 1,861,141,501 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 188,976 | ||
Paid-in capital in excess of par | 1,874,576,247 | |||
|
| |||
1,874,765,223 | ||||
Distributions in excess of net investment income | (13,522,184 | ) | ||
Accumulated net realized loss on investment and foreign currency transactions | (1,162,587 | ) | ||
Net unrealized appreciation on investments and foreign currencies | 1,061,049 | |||
|
| |||
Net assets, October 31, 2013 | $ | 1,861,141,501 | ||
|
|
See Notes to Financial Statements.
92 |
Class A | ||||
Net asset value and redemption price per share | $ | 9.82 | ||
Maximum sales charge (4.50% of offering price) | 0.46 | |||
|
| |||
Maximum offering price to public | $ | 10.28 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share | $ | 9.85 | ||
|
| |||
Class Q | ||||
Net asset value, offering price and redemption price per share | $ | 9.83 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share | $ | 9.86 | ||
|
|
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 93 |
Statement of Operations
Year Ended October 31, 2013
Net Investment Income | ||||
Income | ||||
Interest income (net of foreign withholding taxes of $32,761) | $ | 35,613,688 | ||
Affiliated dividend income | 124,001 | |||
|
| |||
Total income | 35,737,689 | |||
|
| |||
Expenses | ||||
Management fee | 8,611,876 | |||
Distribution fee—Class A | 758,105 | |||
Distribution fee—Class C | 977,360 | |||
Transfer agent’s fees and expenses (including affiliated expense of $127,400) (Note 3) | 1,073,000 | |||
Registration fees | 364,000 | |||
Custodian’s fees and expenses | 326,000 | |||
Shareholders’ reports | 77,000 | |||
Audit fee | 60,000 | |||
Legal fees and expenses | 31,000 | |||
Trustees’ fees | 22,000 | |||
Insurance | 5,000 | |||
Miscellaneous | 17,870 | |||
|
| |||
Total expenses | 12,323,211 | |||
Expense reimbursement (Note 2) | (957,568 | ) | ||
|
| |||
Net expenses | 11,365,643 | |||
|
| |||
Net investment income | 24,372,046 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investment And Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions | (4,282,214 | ) | ||
Futures transactions | 115,958 | |||
Options written transactions | (25,797 | ) | ||
Forward rate agreement transactions | 21,568 | |||
Swap agreement transactions | 6,418,764 | |||
Foreign currency transactions | (14,122,443 | ) | ||
|
| |||
(11,874,164 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (10,601,571 | ) | ||
Futures | 1,060,494 | |||
Swap agreements | 9,700,785 | |||
Foreign currencies | (349,470 | ) | ||
|
| |||
(189,762 | ) | |||
|
| |||
Net loss on investment and foreign currency transactions | (12,063,926 | ) | ||
|
| |||
Net Increase In Net Assets Resulting From Operations | $ | 12,308,120 | ||
|
|
See Notes to Financial Statements.
94 |
Statement of Changes in Net Assets
Year Ended October 31, | ||||||||
2013 | 2012 | |||||||
Increase (Decrease) In Net Assets | ||||||||
Operations | ||||||||
Net investment income | $ | 24,372,046 | $ | 1,593,061 | ||||
Net realized loss on investment and foreign currency transactions | (11,874,164 | ) | (211,643 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments and foreign currencies | (189,762 | ) | 2,160,497 | |||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 12,308,120 | 3,541,915 | ||||||
|
|
|
| |||||
Dividends and Distributions (Note 1) | ||||||||
Dividends from net investment income | ||||||||
Class A | (7,276,650 | ) | (511,595 | ) | ||||
Class C | (1,722,557 | ) | (155,703 | ) | ||||
Class Q | (93,879 | ) | (35 | ) | ||||
Class Z | (17,559,659 | ) | (1,104,600 | ) | ||||
|
|
|
| |||||
(26,652,745 | ) | (1,771,933 | ) | |||||
|
|
|
| |||||
Tax return of capital | ||||||||
Class A | (1,385,177 | ) | — | |||||
Class C | (327,906 | ) | — | |||||
Class Q | (17,869 | ) | — | |||||
Class Z | (3,342,641 | ) | — | |||||
|
|
|
| |||||
(5,073,593 | ) | — | ||||||
|
|
|
| |||||
Distributions from net realized gains | ||||||||
Class A | — | (7,914 | ) | |||||
Class C | — | (10,670 | ) | |||||
Class Q | — | (2 | ) | |||||
Class Z | — | (73,142 | ) | |||||
|
|
|
| |||||
— | (91,728 | ) | ||||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) (Note 6) | ||||||||
Net proceeds from shares sold | 2,236,633,995 | 205,702,874 | ||||||
Net asset value of shares issued in reinvestment of dividends and tax return of capital | 18,312,304 | 1,631,105 | ||||||
Cost of shares reacquired | (576,709,754 | ) | (41,620,418 | ) | ||||
|
|
|
| |||||
Net increase in net assets from Fund share transactions | 1,678,236,545 | 165,713,561 | ||||||
|
|
|
| |||||
Total increase | 1,658,818,327 | 167,391,815 | ||||||
Net Assets: | ||||||||
Beginning of year | 202,323,174 | 34,931,359 | ||||||
|
|
|
| |||||
End of year | $ | 1,861,141,501 | $ | 202,323,174 | ||||
|
|
|
|
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 95 |
Notes to Financial Statements
Prudential Investment Portfolios 9 (the “Trust”) is an open-end management investment company, registered under the Investment Company Act of 1940, as amended (“1940 Act”). The Trust currently consists of three funds: Prudential Large-Cap Core Equity Fund, Prudential International Real Estate Fund and Prudential Absolute Return Bond Fund (the “Fund”). These financial statements relate to Prudential Absolute Return Bond Fund, a diversified fund. The financial statements of the Prudential Large-Cap Core Equity Fund and Prudential International Real Estate Fund are not presented herein. The Trust was organized as a business trust in Delaware on September 18, 1998. The Fund commenced investment operations on March 30, 2011.
The Fund’s investment objective is to seek positive returns over the long term, regardless of market conditions.
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 Fund 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 Trustees (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 Fund 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 Fund’s 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.
96 |
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 Trustees. 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 Absolute Return Bond Fund | 97 |
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 Fund 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.
The Fund 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 period. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of 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 and settlement date on security transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s 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.
98 |
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 Fund 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 Fund 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 (loss). When the contract expires or is closed, the gain (loss) is realized and is presented in the Statement of Operations as net realized gain (loss) on futures transactions. Financial futures contracts involve elements of risk in excess of the amounts reflected on the Statement of Assets and Liabilities.
The Fund invests in financial futures contracts in order to hedge its existing portfolio securities, or securities the Fund 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 Fund 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.
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 Fund 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 risks from currency exchange rate and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities. The Fund’s 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 Fund and the counterparty which may permit the Fund to offset amounts payable by the Fund to the same counterparty against amounts to be received; and by the receipt
Prudential Absolute Return Bond Fund | 99 |
Notes to Financial Statements
continued
of collateral from the counterparty by the Fund to cover the Fund’s exposure to the counterparty. However, there are no assurances that such mitigating factors are easily enforceable.
Forward Rate Agreements: Forward rate agreements represent an agreement between counterparties to exchange cash flows based on the difference between two interest rates, applied to a notional principal amount on a fixed future date. The Fund entered into forward rate agreements to gain yield exposure based on anticipated market conditions at the specified termination date of the agreement.
Options: The Fund purchased and wrote options in order to hedge against adverse market movements or fluctuations in value caused by changes in prevailing interest rates with respect to securities which the Fund currently owns or intends to purchase. The Fund’s principal reason for writing options is to realize, through receipt of premiums, a greater current return than would be realized on the underlying security alone. When the Fund purchases an option, it pays a premium and an amount equal to that premium is recorded as an asset. When the Fund 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 Fund realizes a gain or loss to the extent of the premium received or paid. If an option is exercised, the premium received or paid is recorded as an adjustment to the proceeds from the sale or the cost of the purchase in determining whether the Fund 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 Fund, 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 Fund 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 Fund since the exchanges’ clearinghouse acts as counterparty to all exchange-traded futures and options and guarantees the futures and options contracts against default.
100 |
Swap Agreements: The Fund entered into credit default, interest rate swap and other forms of 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”). 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 Fund 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.
Credit Default Swaps: Credit default swaps involve one party (the protection buyer) making a stream of payments to another party (the protection seller) in exchange for the right to receive a specified payment in the event of a default or as a result of a default (collectively a “credit event”) for the referenced entity, typically corporate issues or sovereign issues of an emerging country, on its obligation; or in the event of a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising a credit index.
The Fund is subject to credit risk in the normal course of pursuing its investment objectives. The Fund entered into credit default swaps to provide a measure of protection against defaults of the issuers. The Fund’s maximum risk of loss from counterparty credit risk for purchased credit default swaps is the inability of the counterparty to honor the contract up to the notional value based on credit event. A master netting arrangement between the Fund and the counterparty permits the Fund to offset amounts payable by the Fund to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Fund to cover the Fund’s exposure to the counterparty. However, there are no assurances that such mitigating factors are easily enforceable.
As a seller of protection on credit default swap agreements, the Fund will generally receive from the buyer of protection an agreed upon payment throughout the term of the swap provided that there is no credit event. As the seller, the Fund would effectively increase investment risk to its portfolio because, in addition to its total net assets, the Fund may be subject to investment exposure on the notional amount of the swap.
The maximum amount of the payment that the Fund as a seller of protection could be required to make under a credit default swap agreement would be equal to the
Prudential Absolute Return Bond Fund | 101 |
Notes to Financial Statements
continued
notional amount of the underlying security or index contract as a result of a credit event. These potential amounts will be partially offset by any recovery values of the respective referenced obligations, or net amounts received from the settlement of buy protection credit default swap agreements entered into by the Fund for the same referenced entity or index. As a buyer of protection, the Fund generally receives an amount up to the notional value of the swap if a credit event occurs.
Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate issues or sovereign issues of an emerging country as of period end are disclosed in the footnotes to the Portfolio of Investments, if applicable, and serve as an indicator of the current status of the payment/performance risk and represent the likelihood of risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to enter into the agreement. For credit default swap agreements on asset-backed securities and credit indices, the quoted market prices and resulting values serve as the indicator of the current status of the payment/performance risk. Wider credits spreads and increasing market value in absolute terms, when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement.
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 Fund is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. The Fund 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.
Currency Swaps: The Fund entered into currency swap agreements primarily to gain yield exposure on foreign bonds. Currency swap agreements involve two parties exchanging two different currencies with an agreement to reverse the exchange at a later date at specified exchange rates.
The Fund’s 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
102 |
remaining life. A master netting arrangement between the Fund and the counterparty permits the Fund to offset amounts payable by the Fund to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Fund to cover the Fund’s exposure to the counterparty. However, there is no assurance 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 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, and 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.
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 Fund has not met conditions under such agreements, which give the counterparty the right to call for an early termination.
Forward currency contracts, forward rate agreements, financial futures contracts and swaps involve elements of both market and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities.
Concentration of Risk: The ability of issuers of debt securities (other than those issued or guaranteed by the U.S. Government) held by the Fund 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 and economic instability or the level of governmental supervision and regulation of foreign securities markets.
Restricted and Illiquid Securities: The Fund 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 Absolute Return Bond Fund | 103 |
Notes to Financial Statements
continued
within seven days in the ordinary course of business at approximately the amount at which the Fund has valued the investment. Therefore, the Fund 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 Fund’s Subadviser under the guidelines adopted by the Fund. However, the liquidity of the Fund’s 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 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 Fund declares dividends of net investment income daily and payment is made monthly. Distributions of 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 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 it is the Fund’s policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment
104 |
companies and to distribute all of its taxable net 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 Fund has a management agreement with PI. Pursuant to this agreement, PI has responsibility for all investment advisory services and supervises the subadviser’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 Fund. In connection therewith, PIM is obligated to keep certain books and records of the Fund. PI pays for the services of PIM, the cost of compensation of officers of the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The Fund 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.
Effective March 1, 2013 PI has contractually agreed to limit net annual Fund operating expenses (exclusive of distribution and service (12b-1) fees, extraordinary and certain other expenses such as taxes, interest and brokerage commissions) of each class of shares to .90% of the Fund’s average daily net assets until February 28, 2014. Prior to this agreement, PI contractually agreed to limit net annual Fund operating expenses (exclusive of distribution and service (12b-1) fees, extraordinary and certain other expenses such as taxes, interest and brokerage commissions) of each class of shares to .85% of the Fund’s average daily net assets.
The Fund 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 Fund compensates PIMS for distributing and servicing the Fund’s Class A and Class C shares, pursuant to plans of distribution (the “Distribution 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 Q and Class Z shares of the Fund.
Prudential Absolute Return Bond Fund | 105 |
Notes to Financial Statements
continued
Pursuant to the Distribution Plans, the Fund 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 has contractually agreed to limit such expenses to .25% of the average daily net assets of the Class A shares.
PIMS has advised the Fund that it received $1,003,229 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 Fund that for the year ended October 31, 2013, it received $96,137 and $45,129, in contingent deferred sales charges imposed upon certain redemptions by Class A and Class C shareholders.
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 Fund’s 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 Fund 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 and U.S. government securities, for the year ended October 31, 2013, were $1,953,299,068 and $322,043,936, respectively.
106 |
Transactions in options written during the year ended October 31, 2013, were as follows:
Notional Amount | Premiums Received | |||||||
Options outstanding at October 31, 2012 | $ | — | $ | — | ||||
Options written | 13,438,000 | 47,468 | ||||||
Options terminated in closing purchase transactions | (13,438,000 | ) | (47,468 | ) | ||||
Options expired | — | — | ||||||
|
|
|
| |||||
Options outstanding at October 31, 2013 | $ | — | $ | — | ||||
|
|
|
|
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 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, 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 increase distributions in excess of net investment income by $10,805,194, decrease accumulated net realized loss on investment and foreign currency transactions by $10,720,306 and increase paid-in capital in excess of par by $84,888, primarily due to the difference between financial and tax reporting purposes of premium amortization, certain transactions involving foreign currencies, paydown gains (losses), swaps, reclassification of distributions and other book to tax adjustments. Net investment income, net realized 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 $26,442,872 of ordinary income, $209,873 of long-term capital gains and $5,073,593 of tax return of capital. For the year ended October 31, 2012, the tax character of dividends paid was $1,863,661 of ordinary income.
As of October 31, 2013, the Fund did not have any distributable earnings on a tax basis.
Prudential Absolute Return Bond Fund | 107 |
Notes to Financial Statements
continued
The United States federal income tax basis of the Fund’s investments and the net unrealized depreciation as of October 31, 2013 were as follows:
Tax Basis | Appreciation | Depreciation | Net | Other Cost | Total Net | |||||
$1,884,677,272 | $969,248,738 | $(989,129,230) | $(19,880,492) | $8,466,549 | $(11,413,943) |
The difference between book basis and tax basis is primarily attributable to deferred losses on wash sales, difference in the treatment of premium amortization and other book to tax differences. The other cost basis adjustments are primarily attributable to appreciation (depreciation) of foreign currencies, swaps, futures, forward currency transactions and mark-to-market of receivables and payables.
Management has analyzed the Fund’s 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 Fund’s financial statements for the current reporting period. The Fund’s 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 Fund 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 during 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 Fund to one or more other share classes of the Fund as presented in the table of transactions in shares of beneficial interest.
108 |
At October 31, 2013, Prudential Financial, Inc. through its affiliates owned 108 Class A shares, 106 Class C shares, 109 Class Q shares and 108 Class Z shares of the Fund.
The Trust has authorized an unlimited number of shares of beneficial interest at $.001 par value.
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 48,546,885 | $ | 480,859,340 | |||||
Shares issued in reinvestment of dividends and tax return of capital | 663,764 | 6,536,425 | ||||||
Shares reacquired | (10,595,616 | ) | (104,246,576 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 38,615,033 | 383,149,189 | ||||||
Shares reacquired upon conversion into Class Z | (2,915 | ) | (28,980 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 38,612,118 | $ | 383,120,209 | |||||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 9,518,943 | $ | 93,730,024 | |||||
Shares issued in reinvestment of dividends and distributions | 45,961 | 452,847 | ||||||
Shares reacquired | (641,928 | ) | (6,297,287 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 8,922,976 | $ | 87,885,584 | |||||
|
|
|
| |||||
Class C | ||||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 16,433,529 | $ | 163,052,219 | |||||
Shares issued in reinvestment of dividends and tax return of capital | 163,938 | 1,615,376 | ||||||
Shares reacquired | (1,989,398 | ) | (19,580,417 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 14,608,069 | $ | 145,087,178 | |||||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 2,600,357 | $ | 25,728,166 | |||||
Shares issued in reinvestment of dividends and distributions | 14,607 | 143,179 | ||||||
Shares reacquired | (140,273 | ) | (1,374,474 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 2,474,691 | $ | 24,496,871 | |||||
|
|
|
| |||||
Class Q | ||||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 1,801,643 | $ | 17,557,026 | |||||
Shares issued in reinvestment of dividends and tax return of capital | 11,420 | 111,748 | ||||||
Shares reacquired | (2 | ) | (21 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 1,813,061 | $ | 17,668,753 | |||||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares issued in reinvestment of dividends and distributions | 3.8 | $ | 37 | |||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 3.8 | $ | 37 | |||||
|
|
|
|
Prudential Absolute Return Bond Fund | 109 |
Notes to Financial Statements
continued
Class Z | Shares | Amount | ||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 158,561,138 | $ | 1,575,165,410 | |||||
Shares issued in reinvestment of dividends and tax return of capital | 1,018,650 | 10,048,755 | ||||||
Shares reacquired | (46,004,620 | ) | (452,882,740 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 113,575,168 | 1,132,331,425 | ||||||
Shares issued upon conversion from Class A | 2,904 | 28,980 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 113,578,072 | $ | 1,132,360,405 | |||||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 8,697,989 | $ | 86,244,684 | |||||
Shares issued in reinvestment of dividends and distributions | 105,876 | 1,035,042 | ||||||
Shares reacquired | (3,424,051 | ) | (33,948,657 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 5,379,814 | $ | 53,331,069 | |||||
|
|
|
|
Note 7. Borrowings
The Fund, 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 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 Fund 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
110 |
“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 Absolute Return Bond Fund | 111 |
Financial Highlights
Class A Shares | ||||||||||||||
Year Ended October 31, | March 30, 2011(e) through October 31, | |||||||||||||
2013 | 2012 | 2011 | ||||||||||||
Per Share Operating Performance(a): | ||||||||||||||
Net Asset Value, Beginning Of Period | $9.92 | $9.72 | $10.00 | |||||||||||
Income (loss) from investment operations: | ||||||||||||||
Net investment income | .21 | .22 | .18 | |||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.03 | ) | .30 | (.31 | ) | |||||||||
Total from investment operations | .18 | .52 | (.13 | ) | ||||||||||
Less Dividends and Distributions: | ||||||||||||||
Dividends from net investment income | (.23 | ) | (.30 | ) | (.15 | ) | ||||||||
Tax return of capital | (.05 | ) | - | - | ||||||||||
Distributions from net realized gains | - | (.02 | ) | - | ||||||||||
Total dividends and distributions | (.28 | ) | (.32 | ) | (.15 | ) | ||||||||
Net asset value, end of period | $9.82 | $9.92 | $9.72 | |||||||||||
Total Return(b): | 1.86% | 5.49% | (1.27)% | |||||||||||
Ratios/Supplemental Data: | ||||||||||||||
Net assets, end of period (000) | $469,604 | $91,250 | $2,709 | |||||||||||
Average net assets (000) | $303,234 | $18,023 | $2,240 | |||||||||||
Ratios to average net assets(c): | ||||||||||||||
Expenses after waivers and/or expense reimbursement(d) | 1.14% | 1.11% | 1.30% | (f) | ||||||||||
Expenses before waivers and/or expense reimbursement | 1.28% | 1.54% | 2.70% | (f) | ||||||||||
Net investment income | 2.17% | 2.53% | 2.90% | (f) | ||||||||||
Portfolio turnover rate | 125% | 152% | 112% | (g) |
(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 returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than a full year are not annualized.
(c) Does not include expenses of the underlying portfolio in which the Fund invests.
(d) The distributor of the Fund 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.
(e) Commencement of operations.
(f) Annualized.
(g) Not annualized.
See Notes to Financial Statements.
112 |
Class C Shares | ||||||||||||||
Year Ended October 31, | March 30, 2011(d) through October 31, | |||||||||||||
2013 | 2012 | 2011 | ||||||||||||
Per Share Operating Performance(a): | ||||||||||||||
Net Asset Value, Beginning Of Period | $9.94 | $9.73 | $10.00 | |||||||||||
Income (loss) from investment operations: | ||||||||||||||
Net investment income | .14 | .16 | .13 | |||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.02 | ) | .29 | (.30 | ) | |||||||||
Total from investment operations | .12 | .45 | (.17 | ) | ||||||||||
Less Dividends and Distributions: | ||||||||||||||
Dividends from net investment income | (.16 | ) | (.22 | ) | (.10 | ) | ||||||||
Tax return of capital | (.05 | ) | - | - | ||||||||||
Distributions from net realized gains | - | (.02 | ) | - | ||||||||||
Total dividends and distributions | (.21 | ) | (.24 | ) | (.10 | ) | ||||||||
Net asset value, end of period | $9.85 | $9.94 | $9.73 | |||||||||||
Total Return(b): | 1.18% | 4.78% | (1.74)% | |||||||||||
Ratios/Supplemental Data: | ||||||||||||||
Net assets, end of period (000) | $172,326 | $28,708 | $4,030 | |||||||||||
Average net assets (000) | $97,736 | $7,066 | $2,254 | |||||||||||
Ratios to average net assets(c): | ||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.89% | 1.88% | 2.05% | (e) | ||||||||||
Expenses before waivers and/or expense reimbursement | 1.98% | 2.39% | 3.39% | (e) | ||||||||||
Net investment income | 1.41% | 1.86% | 2.17% | (e) | ||||||||||
Portfolio turnover rate | 125% | 152% | 112% | (f) |
(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 returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than a full year are not annualized.
(c) Does not include expenses of the underlying portfolio in which the Fund invests.
(d) Commencement of operations.
(e) Annualized.
(f) Not annualized.
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 113 |
Financial Highlights
continued
Class Q Shares | ||||||||||||||
Year Ended October 31, | March 30, 2011(d) through October 31, | |||||||||||||
2013 | 2012 | 2011 | ||||||||||||
Per Share Operating Performance(a): | ||||||||||||||
Net Asset Value, Beginning Of Period | $9.94 | $9.73 | $10.00 | |||||||||||
Income (loss) from investment operations: | ||||||||||||||
Net investment income | .27 | .30 | .16 | |||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.06 | ) | .26 | (.27 | ) | |||||||||
Total from investment operations | .21 | .56 | (.11 | ) | ||||||||||
Less Dividends and Distributions: | ||||||||||||||
Dividends from net investment income | (.27 | ) | (.33 | ) | (.16 | ) | ||||||||
Tax return of capital | (.05 | ) | - | - | ||||||||||
Distributions from net realized gains | - | (.02 | ) | - | ||||||||||
Total dividends and distributions | (.32 | ) | (.35 | ) | (.16 | ) | ||||||||
Net asset value, end of period | $9.83 | $9.94 | $9.73 | |||||||||||
Total Return(b): | 2.10% | 5.99% | (1.09)% | |||||||||||
Ratios/Supplemental Data: | ||||||||||||||
Net assets, end of period (000) | $17,829 | $1 | $1 | |||||||||||
Average net assets (000) | $3,144 | $1 | $1 | |||||||||||
Ratios to average net assets(c): | ||||||||||||||
Expenses after waivers and/or expense reimbursement | .90% | .89% | 1.05% | (e) | ||||||||||
Expenses before waivers and/or expense reimbursement | .94% | 1.54% | 2.45% | (e) | ||||||||||
Net investment income | 2.87% | 3.11% | 2.74% | (e) | ||||||||||
Portfolio turnover rate | 125% | 152% | 112% | (f) |
(a) Calculated based on average shares outstanding during the period.
(b) 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.
(c) Does not include expenses of the underlying portfolio in which the Fund invests.
(d) Commencement of operations.
(e) Annualized.
(f) Not annualized.
See Notes to Financial Statements.
114 |
Class Z Shares | ||||||||||||||
Year Ended October 31, | March 30, 2011(d) through October 31, | |||||||||||||
2013 | 2012 | 2011 | ||||||||||||
Per Share Operating Performance(a): | ||||||||||||||
Net Asset Value, Beginning Of Period | $9.95 | $9.74 | $10.00 | |||||||||||
Income (loss) from investment operations: | ||||||||||||||
Net investment income | .24 | .27 | .16 | |||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.02 | ) | .28 | (.27 | ) | |||||||||
Total from investment operations | .22 | .55 | (.11 | ) | ||||||||||
Less Dividends and Distributions: | ||||||||||||||
Dividends from net investment income | (.26 | ) | (.32 | ) | (.15 | ) | ||||||||
Tax return of capital | (.05 | ) | - | - | ||||||||||
Distributions from net realized gains | - | (.02 | ) | - | ||||||||||
Total dividends and distributions | (.31 | ) | (.34 | ) | (.15 | ) | ||||||||
Net asset value, end of period | $9.86 | $9.95 | $9.74 | |||||||||||
Total Return(b): | 2.21% | 5.81% | (1.14)% | |||||||||||
Ratios/Supplemental Data: | ||||||||||||||
Net assets, end of period (000) | $1,201,383 | $82,364 | $28,192 | |||||||||||
Average net assets (000) | $672,382 | $34,383 | $27,018 | |||||||||||
Ratios to average net assets(c): | ||||||||||||||
Expenses after waivers and/or expense reimbursement | .90% | .89% | 1.05% | (e) | ||||||||||
Expenses before waivers and/or expense reimbursement | .99% | 1.50% | 2.48% | (e) | ||||||||||
Net investment income | 2.43% | 2.92% | 2.70% | (e) | ||||||||||
Portfolio turnover rate | 125% | 152% | 112% | (f) |
(a) Calculated based on average shares outstanding during the period.
(b) 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.
(c) Does not include expenses of the underlying portfolio in which the Fund invests.
(d) Commencement of operations.
(e) Annualized.
(f) Not annualized.
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 115 |
Report of Independent Registered Public
Accounting Firm
The Board of Trustees and Shareholders
Prudential Investment Portfolios 9:
We have audited the accompanying statement of assets and liabilities of Prudential Absolute Return Bond Fund, a series of Prudential Investment Portfolios 9 (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 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, in conformity with U.S. generally accepted accounting principles.
New York, New York
December 23, 2013
116 |
Tax Information
(Unaudited)
For the year ended October 31, 2013, the Fund reports 100% 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 Form 1099-DIV as to the federal tax status of the distributions received by you in calendar year 2013.
Prudential Absolute Return Bond Fund | 117 |
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 Absolute Return Bond 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. |
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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 Absolute Return Bond Fund
(1) | The year that each individual joined the Fund’s Board is as follows: |
Ellen S. Alberding, 2013; Linda W. Bynoe, 2005; Douglas H. McCorkindale, 1998; Richard A. Redeker, 1998; Robin B. Smith, 1998; Stephen G. Stoneburn, 2003; Kevin J. Bannon, 2008; Keith F. Hartstein, 2013; Michael S. Hyland, 2008; Stephen P. Munn, 2008; James E. Quinn, 2013; Stuart S. Parker, Board Member since 2012 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 |
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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 Absolute Return Bond 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. |
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Approval of Advisory Agreements
The Fund’s Board of Trustees
The Board of Trustees (the “Board”) of Prudential Absolute Return Bond 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 Trustees”).2 The Board is responsible for the oversight of the Fund and its operations, and performs the various duties imposed on the Trustees of investment companies by the 1940 Act. The Independent Trustees have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Trustee. 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 Trustees.
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 Trustees, 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 Trustees 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 Trustees 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 Absolute Return Bond Fund is a series of Prudential Investment Portfolios 9. |
2 | Ms. Alberding and Messrs. Hartstein and Quinn were elected to the Board as of September 1, 2013. |
Prudential Absolute Return Bond Fund
Approval of Advisory Agreements (continued)
The Trustees 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 Trustees considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Trustees’ 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 Trustees 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 conclude that the Fund benefits from the services provided by PI and PIM under the management and subadvisory agreements.
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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 exceeded the management fees received by PI, resulting in an operating loss to PI. The Board also 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 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
Prudential Absolute Return Bond Fund
Approval of Advisory Agreements (continued)
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 fixed-income funds within the Lipper Absolute Return 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 fixed-income funds within the Lipper Absolute Return Funds Performance Universe, although Lipper classifies the Fund as an Absolute Return Fund. The Fund was compared to the fixed-income funds within the Lipper Absolute Return Funds Performance Universe because PI believes that the fixed-income funds included in this Universe provide a more appropriate basis for Fund performance comparisons. |
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(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 | ||||
2nd Quartile | N/A | N/A | N/A | |||||
Actual Management Fees: 1st Quartile | ||||||||
Net Total Expenses: 1st Quartile |
• | The Board noted that the Fund outperformed its benchmark index over the one-year period. |
• | The Board accepted PI’s recommendation to continue the existing expense cap of 0.90% (exclusive of 12b-1 fees and certain other fees) through February 28, 2014. |
• | 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 the approval of the agreements was in the best interests of the Fund and its shareholders.
Prudential Absolute Return Bond 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 Trustees 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. |
TRUSTEES |
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 | ||
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INVESTMENT SUBADVISER | Prudential Investment Management, Inc. | Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | ||
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DISTRIBUTOR | Prudential Investment Management Services LLC | Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | ||
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CUSTODIAN | The Bank of New York Mellon | One Wall Street New York, NY 10286 | ||
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TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
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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 TRUSTEES |
Shareholders can communicate directly with the Board of Trustees by writing to the Chair of the Board, Prudential Absolute Return Bond Fund, Prudential Investments, Attn: Board of Trustees, 100 Mulberry Street, Gateway Center Three, Newark, NJ 07102. Shareholders can communicate directly with an individual Trustee 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 Trustees 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 ABSOLUTE RETURN BOND FUND
SHARE CLASS | A | C | Q | Z | ||||
NASDAQ | PADAX | PADCX | PADQX | PADZX | ||||
CUSIP | 74441J852 | 74441J845 | 74441J837 | 74441J829 |
MF213E 0255311-00001-00
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 $112,000 and $107,000, 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 $1,375 for professional services rendered in connection with a preliminary analysis of certain United States federal tax matters affecting a potential investment in real estate mezzanine debt.
(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 Investment Portfolios 9 | |
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 |