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: | 811-08915 | |
Exact name of registrant as specified in charter: | Target Asset Allocation Funds | |
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 | ||
Registrants telephone number, including area code: | 800-225-1852 | |
Date of fiscal year end: | 7/31/2012 | |
Date of reporting period: | 7/31/2012 |
Item 1 Reports to Stockholders
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
TARGET CONSERVATIVE ALLOCATION FUND
ANNUAL REPORT · JULY 31, 2012
Objective
Seeks current income and a reasonable level of capital appreciation
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The views expressed in this report and information about the Funds portfolio holdings are for the period covered by this report and are subject to change thereafter.
Target Funds, Prudential Investments, Prudential, the Prudential logo, the Rock symbol and Bring Your Challenges are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
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September 14, 2012
Dear Shareholder:
We hope you find the annual report for the Target Conservative Allocation Fund informative and useful. The report covers performance for the 12-month period that ended July 31, 2012.
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, including stock and bond mutual funds consistent with your tolerance for risk, time horizon, and financial goals.
A diversified asset allocation offers two potential advantages: It limits your exposure to any particular asset class; plus it provides a better opportunity to invest some of your assets in the right place at the right time. 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.
We are dedicated to helping you solve your toughest investment challengeswhether its capital growth, reliable income, or protection from market volatility and other risk. We believe our Target Conservative Allocation Fund, which is managed by institutional quality asset managers selected and monitored by our research team, will help you to achieve broad, actively managed diversification at a targeted risk/return balance with a single investment purchase.
Thank you for choosing the Target Conservative Allocation Fund.
Sincerely,
Stuart S. Parker, President
Target Asset Allocation Funds
Target Asset Allocation Funds/Target Conservative Allocation Fund | 1 |
Your Funds Performance
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 investors 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. The maximum initial sales charge is 5.50% (Class A shares). Gross operating expenses: Class A, 1.59%; Class B, 2.29%; Class C, 2.29%; Class R, 2.04%; Class X, 2.29%; Class Z, 1.29%. Net operating expenses: Class A, 1.54%; Class B, 2.29%; Class C, 2.29%; Class R, 1.79%; Class X, 2.29%; Class Z, 1.29%, after contractual reduction through 11/30/2013 for Class A and Class R shares.
Cumulative Total Returns (Without Sales Charges) as of 7/31/12 | ||||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||
Class A |
5.63 | % | 21.64 | % | 86.99 | % | | |||||||
Class B |
4.86 | 17.23 | 73.64 | | ||||||||||
Class C |
4.86 | 17.24 | 73.65 | | ||||||||||
Class R |
5.39 | 20.26 | N/A | 42.84% (10/04/04) | ||||||||||
Class X |
4.86 | 17.56 | N/A | 37.55 (10/04/04) | ||||||||||
Class Z |
5.85 | 23.21 | 91.85 | | ||||||||||
Customized Blend |
7.76 | 28.42 | 87.09 | | ||||||||||
S&P 500 Index |
9.11 | 5.77 | 84.81 | | ||||||||||
Lipper Mixed-Asset Target Allocation Conservative Funds Avg. |
4.10 | 20.59 | 71.28 | | ||||||||||
Average Annual Total Returns (With Sales Charges) as of 6/30/12 | ||||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||
Class A |
1.40 | % | 2.43 | % | 5.21 | % | | |||||||
Class B |
1.34 | 2.67 | 5.04 | | ||||||||||
Class C |
2.66 | 2.85 | 5.04 | | ||||||||||
Class R |
4.10 | 3.35 | N/A | 4.56% (10/04/04) | ||||||||||
Class X |
2.34 | 2.36 | N/A | 3.97 (10/04/04) | ||||||||||
Class Z |
4.67 | 3.88 | 6.09 | | ||||||||||
Customized Blend |
6.50 | 4.69 | 6.07 | | ||||||||||
S&P 500 Index |
5.43 | 0.22 | 5.33 | | ||||||||||
Lipper Mixed-Asset Target Allocation Conservative Funds Avg. |
2.92 | 3.26 | 4.88 | |
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Average Annual Total Returns (With Sales Charges) as of 7/31/12 | ||||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||
Class A |
0.18 | % | 2.83 | % | 5.86 | % | | |||||||
Class B |
0.14 | 3.06 | 5.67 | | ||||||||||
Class C |
3.86 | 3.23 | 5.67 | | ||||||||||
Class R |
5.39 | 3.76 | N/A | 4.66% (10/04/04) | ||||||||||
Class X |
1.14 | 2.76 | N/A | 4.06 (10/04/04) | ||||||||||
Class Z |
5.85 | 4.26 | 6.73 | | ||||||||||
Average Annual Total Returns (Without Sales Charges) as of 7/31/12 | ||||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||
Class A |
5.63 | % | 4.00 | % | 6.46 | % | | |||||||
Class B |
4.86 | 3.23 | 5.67 | | ||||||||||
Class C |
4.86 | 3.23 | 5.67 | | ||||||||||
Class R |
5.39 | 3.76 | N/A | 4.66% (10/04/04) | ||||||||||
Class X |
4.86 | 3.29 | N/A | 4.16 (10/04/04) | ||||||||||
Class Z |
5.85 | 4.26 | 6.73 | |
Growth of a $10,000 Investment
The graph compares a $10,000 investment in the Target Conservative Allocation Fund (Class A shares) with a similar investment in the Standard & Poors 500 Composite Stock Price Index (S&P 500 Index) and the Customized Benchmark for the Target Conservative Allocation Fund (the Customized Blend) by portraying the initial account values at the beginning of the 10-year period for Class A shares (July 31, 2002) and the account values at the end of the current fiscal year (July 31, 2012) 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
Target Asset Allocation Funds/Target Conservative Allocation Fund | 3 |
Your Funds Performance (continued)
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 R, 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 Funds total returns do not reflect the deduction of income taxes on an individuals 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. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of such fee waivers and/or expense reimbursements, total returns would be lower.
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. Class A shares are subject to a maximum front-end sales charge of 5.50%, and a 12b-1 fee of 0.30% annually. 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 CDSC is waived for purchases by certain retirement and/or benefit plans. 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. Class B shares are subject to a declining CDSC of 5%, 4%, 3%, 2%, 1%, and 1%, respectively, for the first six years after purchase and a 12b-1 fee of 1% annually. Approximately seven years after purchase, Class B shares will automatically convert to Class A shares on a quarterly basis. Class C shares are not subject to a front-end sales charge, but charge a CDSC of 1% for Class C shares sold within 12 months from the date of purchase, and an annual 12b-1 fee of 1%. Class X shares are generally closed to new purchases. Class X shares are subject to a declining CDSC of 6%, 5%, 4%, 4%, 3%, 2%, 2% and 1%, respectively for the first eight years, and a 12b-1 fee of 1% annually. Approximately 10 years after purchase Class X shares will automatically convert to Class A shares on a monthly basis. Class R and Z shares are not subject to a sales charge. Class R shares are subject to a 12b-1 fee of up to 0.75% annually. Class Z shares are not subject to a 12b-1 fee. The returns in the graph and tables do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or following the redemption of Fund shares. The returns in the graph and tables reflect the share class expense structure in effect at the close of the fiscal period.
Benchmark Definitions
Customized Blend
The Customized Benchmark for the Target Conservative Allocation Fund (Customized Blend) is a model portfolio consisting of the Russell 3000 Index (40%) and the Barclays U.S. Aggregate Bond Index (60%). The Customized Blend is an unmanaged index generally considered as representing the performance of the Funds asset classes. The Customized Blend is intended to provide a theoretical comparison to the Funds performance, based on the
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amounts allocated to each asset class rather than on amounts allocated to various Fund segments. The Customized Blend does not reflect deductions for any sales charges or operating expenses of a mutual fund. The Russell 3000 Index is an unmanaged index which measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The Barclays U.S. Aggregate Bond Index is an unmanaged index of investment-grade securities issued by the U.S. government and its agencies and by corporations with between one and 10 years remaining to maturity. It gives a broad look at how short- and intermediate-term bonds have performed. Customized Blend Closest Month-End to Inception cumulative total return as of 7/31/12 is 55.86% for Class R and Class X. Customized Blend Closest Month-End to Inception average annual total return as of 6/30/12 is 5.73% for Class R and Class X.
S&P 500 Index
The Standard & Poors 500 Composite Stock Price Index (S&P 500 Index) is an unmanaged index of 500 stocks of large U.S. public companies. It gives an indication of how U.S. stock prices have performed. S&P 500 Index Closest Month-End to Inception cumulative total return as of 7/31/12 is 45.45% for Class R and Class X. S&P 500 Index Closest Month-End to Inception average annual total return as of 6/30/12 is 4.77% for Class R and Class X.
Lipper Mixed-Asset Target Allocation Conservative Funds Average
The Lipper Mixed-Asset Target Allocation Conservative Funds Average (Lipper Average) represents returns based on the average return of all funds in the Lipper Mixed-Asset Target Allocation Conservative Funds category for the periods noted. Funds in the Lipper Average have a primary investment objective of conserving principal by maintaining at all times a balanced portfolio of both stocks and bonds. Mixed-Asset Funds are funds that, by portfolio practice, maintain a mix of between 20% and 40% equity securities, with the remainder invested in bonds, cash, and cash equivalents. Lipper Average Closest Month-End to Inception cumulative total return as of 7/31/12 is 43.38% for Class R and Class X. Lipper Average Closest Month-End to Inception average annual total return as of 6/30/12 is 4.46% for Class R and Class X.
Investors cannot invest directly in an index or average. The returns for the Indexes would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses, but not sales charges or taxes. The Since Inception returns for the Indexes are measured from the closest month-end to inception date, and not from the Class actual inception date.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 5 |
Your Funds Performance (continued)
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Source: Lipper Inc.
The chart above shows the total returns for 12 months ended July 31, 2012, of various securities indexes that are generally considered representative of broad market sectors. It does not reflect a mutual funds expenses. The performance cited does not represent the performance of the Target Conservative Allocation Fund. Past performance is not indicative of future results. Investors cannot invest directly in an index or average.
The Russell 3000 Index is an unmanaged index which measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market.
The Barclays U.S. Aggregate Bond Index is an unmanaged index of investment-grade securities issued by the U.S. Government and its agencies and by corporations with between one and 10 years remaining to maturity. It gives a broad look at how short- and intermediate-term bonds have performed.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 7 |
Strategy and Performance Overview
How did the Fund perform?
The Target Conservative Allocation Funds Class A shares gained 5.63% for the year ended July 31, 2012, underperforming the 7.76% gain of the Customized Blend, a model portfolio described on page 4 that includes the Barclays U.S. Aggregate Bond Index (60%) and the Russell 3000 Index (40%). However, the Funds Class A shares outperformed the 4.10% return of the Lipper Mixed-Asset Target Allocation Conservative Funds Average.
How did the U.S. stock market perform?
The U.S. equity market experienced widespread volatility during the reporting period, which began on August 1, 2011. The U.S. stock market returned 7.33% for the year that ended July 31, 2012, according to the Russell 3000 Index.
| Challenging market conditions were mostly caused by European sovereign debt issues and uncertainty over global growth. Investor sentiment swung between optimism and pessimism on macro-themes related to the euro zone. |
| U.S. economic growth proceeded at a tepid pace, as global uncertainty loomed. Unemployment remained elevated. |
How did fixed-income markets perform?
The U.S. investment-grade bond market was roughly in line with U.S. stock markets and far ahead of declining international stock markets, returning 7.25% for the reporting period, including price change and interest income, according to the Barclays U.S. Aggregate Bond Index.
| Early in the third quarter of 2011, concerns about the economic health of the U.S. and Europe rattled fixed income and foreign exchange markets. After Congress sparred over the U.S. debt ceiling, Standard & Poors downgraded the U.S. credit rating to AA+, compounding the negative market sentiment in credit markets. These events caused a flight-to-quality rally by investors that lifted the U.S. dollar. |
| Strong economic data pushed U.S. Treasury yields higher in October 2011. The combination of consistent U.S. Federal Reserve bond buying and strong investor demand for high-quality, liquid, U.S. dollar-denominated assets ultimately pushed prices higher and brought Treasury yields down (as bond prices move higher, yields move lower). Stronger Treasury prices helped most fixed income sectors post positive returns for 2011. |
| In the first quarter of 2012, risk aversion abated and U.S. Treasury yields rose modestly, driving relative strong performance. |
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| The second quarter was in many ways a risk-averse mirror image of the first quarters risk-friendly market environment. Toward the end of the reporting period, fixed income investors were somewhat encouraged by policy announcements in Europe. |
How did asset allocation affect the Funds performance?
The Fund began the period with a slight overweight to equities, which had a negative impact on results. During the month of October the manager shifted from a slight overweight to equities to a significant underweight. This positioning did not pay off, especially in the month of October, and through the rest of the reporting period.
What contributed the most to the Funds relative performance?
Overall, asset management decisions detracted from relative performance. However, there were some bright spotsthe fixed income portion of the Fund, which is managed by PIMCO, was the largest positive contributor to the Funds return.
| PIMCOs positioning and security selection in U.S. Government agency mortgage-backed securities added to returns. An allocation to selective non-agency mortgages amid continued investor demand also contributed. An underweight to investment-grade corporate bonds helped relative performance, since this sector underperformed similar-duration U.S. Treasuries. |
| PIMCO also purchased derivatives known as credit default swaps (CDS), which helped performance. A credit default swap functions like an insurance policy on a debt security. |
| A position in financial companies augmented the Funds performance. PIMCOs exposure to interest rates in some European countries and Australia contributed positively to performance. PIMCO also held derivatives known as interest rate swaps, in order to manage the Funds exposure to interest rate risk, which helped performance. |
| An overweight to emerging market local debt enhanced PIMCOs relative performance. This included exposure to local debt in Brazil, which was implemented using zero-coupon interest rate swaps, which are derivatives used to limit credit risk, which also helped. |
| PIMCOs exposure to various foreign currencies, with an emphasis on emerging market currencies, detracted from performance as most of these currencies depreciated relative to the U.S. dollar. |
Target Asset Allocation Funds/Target Conservative Allocation Fund | 9 |
Strategy and Performance Overview (continued)
What detracted the most from the Funds relative performance?
The Funds large cap growth managers, Massachusetts Financial Services Company (MFS) and Marsico Capital Management were the largest detractors from the Funds relative performance.
In the MFS segment of the Fund, stock selection had a negligible, marginally positive effect on performance.
| Holdings in Apple, Visa, Mastercard, American Tower, and the biotechnology industry helped performance. However, positions in Oracle, Checkpoint, and healthcare providers and services detracted. An underweight in consumer staples and information technology, both of which had strong returns in the Russell 3000 Index, hindered performance. An overweight in energy, the worst performing sector, also detracted. |
| An underweight to the materials and healthcare sectors slightly benefitted the Fund, since these sectors underperformed relative to the Index. However, risk positioning and significant underexposure to dividend-yielding stocks dragged on results. |
The Marsico-managed segment of the Fund significantly underperformed due to sector allocations and risk exposures through poor stock selection. However, Marsicos optimism regarding long-term growth trends, pricing dislocations, and misunderstood growth stocks hasnt diminished despite the prevalent concerns of many investors during the period.
| Marsico continued to maintain an intermediate-to-long-term investment focus, an aggressive risk posture, and a selective bias toward cyclical stocks (companies that are more sensitive to changes in the economy). Stock selection produced mixed results during the period. Positions in TJX, Visa, and Biogen helped performance. |
| The Marsico segment of the Fund was underweight in the strong information technology and consumer staples sectors. It also had an exposure to foreign stocks, which sharply underperformed. It was overexposed to riskier stocks, in addition to stocks with high price volatility. An underweight to dividend-paying stocks also detracted, as these stocks were heavily favored by investors. For example, during the reporting period, telecommunications led all sectors because these companies were paying highly attractive dividends. |
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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 February 1, 2012, at the beginning of the period, and held through the six-month period ended July 31, 2012. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
The Funds transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of Prudential Investments Funds, including the Target Asset Allocation Funds, 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.
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 Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return. The hypothetical account values and
Target Asset Allocation Funds/Target Conservative Allocation Fund | 11 |
Fees and Expenses (continued)
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.
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.
Target Conservative Allocation Fund |
Beginning Account Value February 1, 2012 |
Ending Account July 31, 2012 |
Annualized Expense Ratio Based on the Six-Month Period |
Expenses Paid During the Six-Month Period* |
||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,040.90 | 1.52 | % | $ | 7.71 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,017.30 | 1.52 | % | $ | 7.62 | ||||||||||
Class B | Actual | $ | 1,000.00 | $ | 1,037.40 | 2.27 | % | $ | 11.50 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,013.58 | 2.27 | % | $ | 11.36 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,038.40 | 2.27 | % | $ | 11.50 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,013.58 | 2.27 | % | $ | 11.36 | ||||||||||
Class R | Actual | $ | 1,000.00 | $ | 1,040.00 | 1.77 | % | $ | 8.98 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,016.06 | 1.77 | % | $ | 8.87 | ||||||||||
Class X | Actual | $ | 1,000.00 | $ | 1,038.40 | 2.27 | % | $ | 11.50 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,013.58 | 2.27 | % | $ | 11.36 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,042.70 | 1.27 | % | $ | 6.45 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,018.55 | 1.27 | % | $ | 6.37 |
* 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 182 days in the six-month period ended July 31, 2012, and divided by the 366 days in the Funds fiscal year ended July 31, 2012 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
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Portfolio of Investments
as of July 31, 2012
Shares | Description | Value (Note 1) | ||||
LONG-TERM INVESTMENTS 98.4% |
| |||||
COMMON STOCKS 38.7% |
| |||||
Aerospace & Defense 0.9% |
| |||||
103 | AAR Corp. |
$ | 1,464 | |||
4,400 | Boeing Co. (The) |
325,204 | ||||
1,300 | Embraer SA, ADR (Brazil) |
32,994 | ||||
670 | Hexcel Corp.(a) |
15,604 | ||||
1,600 | Lockheed Martin Corp. |
142,832 | ||||
86 | Moog, Inc. (Class A Stock)(a) |
3,130 | ||||
5,200 | Northrop Grumman Corp. |
344,240 | ||||
3,600 | Rockwell Collins, Inc. |
182,052 | ||||
55 | Teledyne Technologies, Inc.(a) |
3,426 | ||||
220 | Triumph Group, Inc. |
13,757 | ||||
|
|
|||||
1,064,703 | ||||||
Air Freight & Logistics 0.1% |
| |||||
777 | Atlas Air Worldwide Holdings, Inc.(a) |
35,245 | ||||
900 | FedEx Corp. |
81,270 | ||||
|
|
|||||
116,515 | ||||||
Airlines |
||||||
1,781 | JetBlue Airways Corp.(a) |
9,813 | ||||
Auto Components 0.3% |
| |||||
6,750 | Johnson Controls, Inc. |
166,387 | ||||
900 | Lear Corp. |
31,995 | ||||
2,600 | Magna International, Inc. (Canada) |
104,052 | ||||
|
|
|||||
302,434 | ||||||
Auto Parts & Equipment |
| |||||
892 | Meritor, Inc.(a) |
4,174 | ||||
201 | WABCO Holdings, Inc.(a) |
11,039 | ||||
|
|
|||||
15,213 | ||||||
Beverages 0.5% |
| |||||
1,937 | Anheuser-Busch InBev NV, ADR (Belgium) |
153,449 | ||||
5,074 | Diageo PLC (United Kingdom) |
135,626 | ||||
2,000 | Molson Coors Brewing Co. (Class B Stock) |
84,640 | ||||
3,500 | PepsiCo, Inc. |
254,555 | ||||
|
|
|||||
628,270 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 13 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
||||||
Biotechnology 0.9% |
| |||||
1,140 | Alexion Pharmaceuticals, Inc.(a) |
$ | 119,529 | |||
1,100 | Amgen, Inc. |
90,860 | ||||
4,161 | Biogen Idec, Inc.(a) |
606,799 | ||||
1,234 | Celgene Corp.(a) |
84,480 | ||||
1,610 | Gilead Sciences, Inc.(a) |
87,471 | ||||
820 | Halozyme Therapeutics, Inc.(a) |
7,396 | ||||
249 | Seattle Genetics, Inc.(a) |
6,514 | ||||
294 | United Therapeutics Corp.(a) |
16,105 | ||||
|
|
|||||
1,019,154 | ||||||
Building Products 0.1% |
| |||||
750 | A.O. Smith Corp. |
37,065 | ||||
767 | Lennox International, Inc. |
33,495 | ||||
|
|
|||||
70,560 | ||||||
Business Services 0.2% |
| |||||
396 | MasterCard, Inc. (Class A Stock) |
172,882 | ||||
Capital Markets 0.2% |
| |||||
700 | Goldman Sachs Group, Inc. (The) |
70,630 | ||||
950 | LPL Financial Holdings, Inc. |
26,619 | ||||
2,100 | State Street Corp. |
84,798 | ||||
|
|
|||||
182,047 | ||||||
Chemicals 0.8% |
| |||||
1,050 | Airgas, Inc. |
83,286 | ||||
500 | CF Industries Holdings, Inc. |
97,880 | ||||
230 | Georgia Gulf Corp. |
7,539 | ||||
899 | Huntsman Corp. |
11,372 | ||||
291 | Intrepid Potash, Inc.(a) |
6,792 | ||||
650 | Kraton Performance Polymers, Inc.(a) |
15,223 | ||||
800 | PPG Industries, Inc. |
87,568 | ||||
5,688 | Praxair, Inc. |
590,187 | ||||
268 | Quaker Chemical Corp. |
11,864 | ||||
75 | Scotts Miracle-Gro Co. (The) (Class A Stock) |
2,993 | ||||
375 | TPC Group, Inc.(a) |
14,438 | ||||
85 | Valspar Corp. (The) |
4,267 | ||||
|
|
|||||
933,409 |
See Notes to Financial Statements.
14 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
||||||
Commercial Banks 1.8% |
| |||||
2,600 | Associated Banc-Corp. |
$ | 32,474 | |||
500 | Bank of Hawaii Corp. |
23,355 | ||||
4,500 | CIT Group, Inc.(a) |
164,340 | ||||
499 | Citizens Republic Bancorp, Inc.(a) |
8,982 | ||||
6,000 | Fifth Third Bancorp |
82,920 | ||||
2,080 | FirstMerit Corp. |
33,696 | ||||
800 | Hancock Holding Co. |
24,384 | ||||
3,900 | PNC Financial Services Group, Inc. |
230,490 | ||||
725 | Prosperity Bancshares, Inc. |
29,413 | ||||
8,400 | Regions Financial Corp. |
58,464 | ||||
167 | Trustmark Corp. |
4,038 | ||||
14,936 | U.S. Bancorp |
500,356 | ||||
142 | UMB Financial Corp. |
6,825 | ||||
123 | United Bankshares, Inc. |
2,866 | ||||
1,425 | Webster Financial Corp. |
29,241 | ||||
24,384 | Wells Fargo & Co. |
824,423 | ||||
|
|
|||||
2,056,267 | ||||||
Commercial Services 0.7% |
| |||||
1,700 | Corrections Corp. of America |
52,836 | ||||
1,030 | FleetCor Technologies, Inc.(a) |
38,028 | ||||
626 | GEO Group, Inc. (The)(a) |
14,473 | ||||
1,950 | KAR Auction Services, Inc.(a) |
31,219 | ||||
825 | McGrath RentCorp |
21,953 | ||||
371 | PAREXEL International Corp.(a) |
10,210 | ||||
233 | Sothebys |
6,839 | ||||
2,170 | Verisk Analytics, Inc. (Class A Stock)(a) |
109,042 | ||||
4,265 | Visa, Inc. (Class A Stock) |
550,484 | ||||
457 | Waste Connections, Inc. |
14,062 | ||||
|
|
|||||
849,146 | ||||||
Communications Equipment 0.1% |
||||||
4,500 | Cisco Systems, Inc. |
71,775 | ||||
Computer Services & Software 1.0% |
| |||||
5,058 | Accenture PLC (Class A Stock) (Ireland) |
304,997 | ||||
710 | Autodesk, Inc.(a) |
24,083 | ||||
14,564 | EMC Corp.(a) |
381,723 | ||||
714 | Fortinet, Inc.(a) |
17,143 | ||||
74 | Global Payments, Inc. |
3,169 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 15 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
||||||
Computer Services & Software (contd.) |
| |||||
560 | Google, Inc. (Class A Stock)(a) |
$ | 354,463 | |||
500 | Manhattan Associates, Inc.(a) |
23,345 | ||||
479 | Riverbed Technology, Inc.(a) |
8,450 | ||||
349 | salesforce.com, Inc.(a) |
43,402 | ||||
625 | Super Micro Computer, Inc.(a) |
7,756 | ||||
660 | VeriFone Systems, Inc.(a) |
23,951 | ||||
|
|
|||||
1,192,482 | ||||||
Computers & Peripherals 2.3% |
| |||||
3,707 | Apple, Inc.(a) |
2,264,087 | ||||
1,984 | Cognizant Technology Solutions Corp. (Class A Stock)(a) |
112,632 | ||||
14,100 | Hewlett-Packard Co. |
257,184 | ||||
1,280 | NetApp, Inc.(a) |
41,818 | ||||
|
|
|||||
2,675,721 | ||||||
Construction |
| |||||
112 | Meritage Homes Corp.(a) |
3,931 | ||||
240 | Texas Industries, Inc. |
10,025 | ||||
78 | URS Corp. |
2,735 | ||||
|
|
|||||
16,691 | ||||||
Consumer Finance 0.1% |
| |||||
1,900 | Capital One Financial Corp. |
107,331 | ||||
850 | First Cash Financial Services, Inc.(a) |
34,085 | ||||
|
|
|||||
141,416 | ||||||
Consumer Products & Services 0.2% |
| |||||
4,539 | Estee Lauder Cos., Inc. (The) (Class A Stock) |
237,753 | ||||
80 | Snap-on, Inc. |
5,422 | ||||
463 | Vitamin Shoppe, Inc.(a) |
25,428 | ||||
|
|
|||||
268,603 | ||||||
Containers & Packaging 0.1% |
| |||||
1,025 | Packaging Corp. of America |
31,560 | ||||
1,000 | Silgan Holdings, Inc. |
41,210 | ||||
|
|
|||||
72,770 |
See Notes to Financial Statements.
16 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
||||||
Distribution/Wholesale 0.3% |
| |||||
650 | LKQ Corp.(a) |
$ | 22,964 | |||
1,360 | W.W. Grainger, Inc. |
278,569 | ||||
|
|
|||||
301,533 | ||||||
Diversified Consumer Services 0.1% |
| |||||
5,600 | H&R Block, Inc. |
90,328 | ||||
Diversified Financial Services 1.2% |
| |||||
480 | Affiliated Managers Group, Inc.(a) |
53,563 | ||||
4,400 | American Express Co. |
253,924 | ||||
20,753 | Bank of America Corp. |
152,327 | ||||
1,469 | BlackRock, Inc. |
250,112 | ||||
9,155 | Citigroup, Inc. |
248,375 | ||||
13,200 | JPMorgan Chase & Co. |
475,200 | ||||
|
|
|||||
1,433,501 | ||||||
Diversified Operations |
| |||||
306 | LVMH Moet Hennessy Louis Vuitton SA (France) |
46,032 | ||||
Diversified Telecommunication Services 0.2% |
| |||||
5,800 | AT&T, Inc. |
219,936 | ||||
Electric Utilities 0.5% |
| |||||
3,500 | American Electric Power Co., Inc. |
147,840 | ||||
3,600 | Edison International |
166,248 | ||||
5,200 | Exelon Corp. |
203,424 | ||||
1,500 | PPL Corp. |
43,350 | ||||
|
|
|||||
560,862 | ||||||
Electronic Components |
| |||||
140 | Checkpoint Systems, Inc.(a) |
1,077 | ||||
306 | Coherent, Inc.(a) |
14,942 | ||||
372 | DTS, Inc.(a) |
6,930 | ||||
142 | FLIR Systems, Inc. |
2,904 | ||||
330 | InvenSense, Inc.(a) |
4,257 | ||||
264 | Universal Display Corp.(a) |
8,385 | ||||
531 | Universal Electronics, Inc.(a) |
6,685 | ||||
142 | Woodward, Inc. |
4,767 | ||||
|
|
|||||
49,947 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 17 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
||||||
Electronic Equipment & Instruments 0.2% |
| |||||
9,300 | Corning, Inc. |
$ | 106,113 | |||
139 | EnerSys(a) |
4,747 | ||||
92 | Itron, Inc.(a) |
3,585 | ||||
400 | Littelfuse, Inc. |
21,456 | ||||
600 | ScanSource, Inc.(a) |
17,322 | ||||
2,375 | TE Connectivity Ltd. (Switzerland) |
78,399 | ||||
|
|
|||||
231,622 | ||||||
Energy Equipment & Services 1.1% |
| |||||
1,600 | Cameron International Corp.(a) |
80,432 | ||||
1,300 | Diamond Offshore Drilling, Inc. |
85,046 | ||||
1,800 | Ensco PLC (Class A Stock) (United Kingdom) |
97,794 | ||||
7,634 | Halliburton Co. |
252,914 | ||||
9,479 | National Oilwell Varco, Inc. |
685,332 | ||||
500 | Oil States International, Inc.(a) |
36,350 | ||||
|
|
|||||
1,237,868 | ||||||
Engineering/Construction |
| |||||
490 | Fluor Corp. |
24,294 | ||||
1,125 | MasTec, Inc.(a) |
17,955 | ||||
479 | McDermott International, Inc. (Panama)(a) |
5,605 | ||||
|
|
|||||
47,854 | ||||||
Entertainment & Leisure |
| |||||
405 | Bally Technologies, Inc.(a) |
17,703 | ||||
115 | Life Time Fitness, Inc.(a) |
5,222 | ||||
741 | Pinnacle Entertainment, Inc.(a) |
8,040 | ||||
1,643 | Shuffle Master, Inc.(a) |
24,004 | ||||
|
|
|||||
54,969 | ||||||
Environmental Control |
| |||||
400 | Stericycle, Inc.(a) |
37,140 | ||||
Farming & Agriculture 0.3% |
| |||||
4,716 | Monsanto Co. |
403,784 | ||||
Financial - Bank & Trust |
| |||||
213 | Astoria Financial Corp. |
2,006 |
See Notes to Financial Statements.
18 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
||||||
Financial Services |
| |||||
118 | Eaton Vance Corp. |
$ | 3,131 | |||
224 | Jefferies Group, Inc. |
2,809 | ||||
113 | Raymond James Financial, Inc. |
3,799 | ||||
|
|
|||||
9,739 | ||||||
Food & Staples Retailing 0.5% |
||||||
5,000 | CVS Caremark Corp. |
226,250 | ||||
7,000 | Kroger Co. (The) |
155,190 | ||||
2,324 | Wal-Mart Stores, Inc. |
172,975 | ||||
|
|
|||||
554,415 | ||||||
Food Products 0.3% |
||||||
6,500 | ConAgra Foods, Inc. |
160,485 | ||||
1,560 | General Mills, Inc. |
60,372 | ||||
2,310 | Kraft Foods, Inc. (Class A Stock) |
91,730 | ||||
|
|
|||||
312,587 | ||||||
Foods 0.1% |
||||||
1,149 | Danone (France) |
69,840 | ||||
295 | Fresh Market, Inc. (The)(a) |
17,373 | ||||
900 | Post Holdings, Inc.(a) |
26,640 | ||||
|
|
|||||
113,853 | ||||||
Gas Utilities |
||||||
1,300 | Atmos Energy Corp. |
46,605 | ||||
92 | South Jersey Industries, Inc. |
4,863 | ||||
|
|
|||||
51,468 | ||||||
Hand/Machine Tools 0.1% |
||||||
88 | Franklin Electric Co., Inc. |
4,964 | ||||
1,120 | Stanley Black & Decker, Inc. |
74,917 | ||||
|
|
|||||
79,881 | ||||||
Healthcare Equipment & Supplies 0.2% |
||||||
96 | Cantel Medical Corp. |
2,508 | ||||
64 | MEDNAX, Inc.(a) |
4,232 | ||||
2,100 | Medtronic, Inc. |
82,782 | ||||
920 | Sirona Dental Systems, Inc.(a) |
39,772 | ||||
650 | Teleflex, Inc. |
41,431 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 19 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
||||||
Healthcare Equipment & Supplies (contd.) |
||||||
279 | Thoratec Corp.(a) |
$ | 9,572 | |||
1,000 | Zimmer Holdings, Inc. |
58,930 | ||||
|
|
|||||
239,227 | ||||||
Healthcare Products 0.2% |
||||||
689 | Arthrocare Corp.(a) |
20,381 | ||||
465 | Bruker Corp.(a) |
5,496 | ||||
346 | Cepheid, Inc.(a) |
11,086 | ||||
438 | Cooper Cos., Inc. (The) |
32,964 | ||||
2,418 | Covidien PLC (Ireland) |
135,118 | ||||
290 | IDEXX Laboratories, Inc.(a) |
25,569 | ||||
575 | West Pharmaceutical Services, Inc. |
28,623 | ||||
|
|
|||||
259,237 | ||||||
Healthcare Providers & Services 0.2% |
||||||
418 | Centene Corp.(a) |
15,901 | ||||
3,600 | CIGNA Corp. |
145,008 | ||||
900 | LifePoint Hospitals, Inc.(a) |
34,308 | ||||
|
|
|||||
195,217 | ||||||
Healthcare Services 0.3% |
||||||
7,700 | Aetna, Inc. |
277,662 | ||||
193 | Air Methods Corp.(a) |
21,043 | ||||
125 | Amedisys, Inc.(a) |
1,524 | ||||
100 | AMERIGROUP Corp.(a) |
8,988 | ||||
67 | Covance, Inc.(a) |
3,145 | ||||
117 | Healthways, Inc.(a) |
1,311 | ||||
|
|
|||||
313,673 | ||||||
Hotels & Motels 0.2% |
||||||
2,952 | Wynn Resorts Ltd. |
276,750 | ||||
Hotels, Restaurants & Leisure 0.5% |
||||||
275 | BJs Restaurants, Inc.(a) |
10,884 | ||||
900 | Carnival Corp. (Panama) |
29,952 | ||||
134 | Chipotle Mexican Grill, Inc.(a) |
39,172 | ||||
675 | Choice Hotels International, Inc. |
27,054 | ||||
2,250 | Las Vegas Sands Corp. |
81,945 |
See Notes to Financial Statements.
20 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
||||||
Hotels, Restaurants & Leisure (contd.) |
||||||
3,803 | McDonalds Corp. |
$ | 339,836 | |||
713 | Orient-Express Hotels Ltd. (Class A Stock) (Bermuda)(a) |
6,503 | ||||
|
|
|||||
535,346 | ||||||
Household Products 0.2% |
||||||
78 | Helen of Troy Ltd. (Bermuda)(a) |
2,376 | ||||
1,900 | Kimberly-Clark Corp. |
165,129 | ||||
475 | WD-40 Co. |
22,824 | ||||
|
|
|||||
190,329 | ||||||
Independent Power Production 0.1% |
||||||
4,500 | NRG Energy, Inc.(a) |
89,190 | ||||
Industrial Conglomerates 0.2% |
||||||
11,600 | General Electric Co. |
240,700 | ||||
Insurance 1.6% |
||||||
10,300 | Allstate Corp. (The) |
353,290 | ||||
1,725 | American Equity Investment Life Holding Co. |
20,131 | ||||
7,600 | American International Group, Inc.(a) |
237,652 | ||||
3,725 | CNO Financial Group, Inc.(a) |
30,880 | ||||
1,062 | HCC Insurance Holdings, Inc. |
32,540 | ||||
8,600 | Marsh & McLennan Cos., Inc. |
285,606 | ||||
14,864 | MetLife, Inc. |
457,365 | ||||
150 | Protective Life Corp. |
4,186 | ||||
61 | Reinsurance Group of America, Inc. |
3,396 | ||||
82 | State Auto Financial Corp. |
1,064 | ||||
1,300 | Tower Group, Inc. |
24,232 | ||||
2,600 | Travelers Cos., Inc. (The) |
162,890 | ||||
89 | United Fire Group, Inc. |
1,744 | ||||
6,300 | Unum Group |
119,007 | ||||
384 | Validus Holdings Ltd. (Bermuda)(a) |
12,492 | ||||
3,900 | XL Group PLC (Ireland) |
80,535 | ||||
|
|
|||||
1,827,010 | ||||||
Internet & Catalog Retail 0.5% |
||||||
766 | Amazon.com, Inc.(a) |
178,708 | ||||
589 | priceline.com, Inc.(a) |
389,765 | ||||
|
|
|||||
568,473 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 21 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
||||||
Internet Services 0.2% |
||||||
149 | Digital River, Inc.(a) |
$ | 2,651 | |||
294 | F5 Networks, Inc.(a) |
27,454 | ||||
1,235 | LinkedIn Corp. (Class A Stock)(a) |
126,773 | ||||
2,254 | Monster Worldwide, Inc.(a) |
16,341 | ||||
760 | Sapient Corp. |
7,570 | ||||
427 | TIBCO Software, Inc.(a) |
11,994 | ||||
|
|
|||||
192,783 | ||||||
Internet Software & Services 0.7% |
||||||
2,445 | Baidu, Inc., ADR (Cayman Islands)(a) |
294,672 | ||||
1,680 | eBay, Inc.(a) |
74,424 | ||||
2,350 | Oracle Corp. |
70,970 | ||||
860 | VeriSign, Inc.(a) |
38,201 | ||||
17,200 | Yahoo!, Inc.(a) |
272,448 | ||||
|
|
|||||
750,715 | ||||||
Investment Companies 0.1% |
||||||
203,000 | Hutchison Port Holdings Trust (Singapore) |
154,280 | ||||
528 | KKR Financial Holdings LLC |
4,815 | ||||
|
|
|||||
159,095 | ||||||
IT Services 0.1% |
||||||
1,425 | Broadridge Financial Solutions, Inc. |
30,167 | ||||
500 | International Business Machines Corp. |
97,990 | ||||
|
|
|||||
128,157 | ||||||
Leisure Equipment & Products 0.1% |
||||||
2,400 | Mattel, Inc. |
84,408 | ||||
689 | Polaris Industries, Inc. |
51,785 | ||||
|
|
|||||
136,193 | ||||||
Life Sciences Tools & Services 0.4% |
||||||
7,492 | Thermo Fisher Scientific, Inc. |
417,080 | ||||
Machinery 0.5% |
||||||
1,125 | Actuant Corp. (Class A Stock) |
32,017 | ||||
1,400 | Cummins, Inc. |
134,260 | ||||
1,500 | Deere & Co. |
115,230 | ||||
110 | Gardner Denver, Inc. |
6,268 | ||||
3,100 | PACCAR, Inc. |
124,031 |
See Notes to Financial Statements.
22 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
||||||
Machinery (contd.) |
||||||
1,000 | Parker Hannifin Corp. |
$ | 80,320 | |||
241 | Regal-Beloit Corp. |
15,513 | ||||
515 | Terex Corp.(a) |
10,043 | ||||
173 | Twin Disc, Inc. |
3,387 | ||||
275 | Valmont Industries, Inc. |
34,067 | ||||
|
|
|||||
555,136 | ||||||
Manufacturing 0.6% |
||||||
223 | Colfax Corp.(a) |
6,454 | ||||
7,024 | Danaher Corp. |
370,937 | ||||
137 | Harsco Corp. |
2,911 | ||||
1,340 | Honeywell International, Inc. |
77,787 | ||||
6,100 | Ingersoll-Rand PLC (Ireland) |
258,701 | ||||
|
|
|||||
716,790 | ||||||
Media 1.2% |
||||||
2,600 | CBS Corp. (Class B Stock) |
86,996 | ||||
17,836 | Comcast Corp. (Special Class A Stock) |
569,504 | ||||
1,270 | Discovery Communications, Inc. (Class A Stock)(a) |
64,300 | ||||
3,000 | Interpublic Group of Cos., Inc. (The) |
29,610 | ||||
5,980 | News Corp. (Class A Stock) |
137,660 | ||||
270 | Time Warner Cable, Inc. |
22,931 | ||||
4,200 | Time Warner, Inc. |
164,304 | ||||
3,130 | Viacom, Inc. (Class B Stock) |
146,202 | ||||
1,950 | Walt Disney Co. (The) |
95,823 | ||||
700 | Wiley, (John) & Sons, Inc. (Class A Stock) |
33,355 | ||||
|
|
|||||
1,350,685 | ||||||
Metals & Mining 0.6% |
||||||
132 | AMCOL International Corp. |
4,052 | ||||
5,000 | Freeport-McMoRan Copper & Gold, Inc. |
168,350 | ||||
950 | Globe Specialty Metals, Inc. |
11,904 | ||||
910 | Joy Global, Inc. |
47,265 | ||||
317 | Northwest Pipe Co.(a) |
7,719 | ||||
2,491 | Precision Castparts Corp. |
387,500 | ||||
518 | RTI International Metals, Inc.(a) |
11,629 | ||||
86 | Timken Co. |
3,113 | ||||
709 | Titanium Metals Corp. |
8,267 | ||||
|
|
|||||
649,799 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 23 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
||||||
Miscellaneous Manufacturers |
||||||
640 | Polypore International, Inc.(a) |
$ | 23,782 | |||
Multi-Line Retail 0.3% |
||||||
3,400 | JC Penney Co., Inc. |
76,534 | ||||
5,000 | Kohls Corp. |
248,600 | ||||
|
|
|||||
325,134 | ||||||
Multi-Utilities 0.1% |
||||||
4,900 | Public Service Enterprise Group, Inc. |
162,876 | ||||
Office Electronics 0.1% |
||||||
21,600 | Xerox Corp. |
149,688 | ||||
Oil, Gas & Consumable Fuels 2.0% |
||||||
450 | Anadarko Petroleum Corp. |
31,248 | ||||
1,700 | Apache Corp. |
146,404 | ||||
2,220 | Cabot Oil & Gas Corp. |
93,662 | ||||
4,100 | Chesapeake Energy Corp. |
77,162 | ||||
2,400 | Chevron Corp. |
262,992 | ||||
2,400 | ConocoPhillips |
130,656 | ||||
45 | Core Laboratories NV (Netherlands) |
5,020 | ||||
1,300 | Devon Energy Corp. |
76,856 | ||||
1,420 | Dresser-Rand Group, Inc.(a) |
66,044 | ||||
147 | Dril-Quip, Inc.(a) |
10,776 | ||||
500 | EOG Resources, Inc. |
49,005 | ||||
820 | EQT Corp. |
46,248 | ||||
1,080 | FMC Technologies, Inc.(a) |
48,730 | ||||
243 | Gulfport Energy Corp.(a) |
5,006 | ||||
700 | Hess Corp. |
33,012 | ||||
515 | Lufkin Industries, Inc. |
23,716 | ||||
5,400 | Marathon Oil Corp. |
142,938 | ||||
1,600 | Murphy Oil Corp. |
85,856 | ||||
1,070 | Noble Energy, Inc. |
93,550 | ||||
2,009 | Oasis Petroleum, Inc.(a) |
52,596 | ||||
2,270 | Occidental Petroleum Corp. |
197,558 | ||||
335 | Ocean Rig UDW, Inc. (Marshall Islands)(a) |
5,022 | ||||
102 | ONEOK, Inc. |
4,540 | ||||
3,250 | Phillips 66 |
122,200 | ||||
567 | Pioneer Natural Resources Co. |
50,253 | ||||
2,700 | Royal Dutch Shell PLC (Class B Stock), ADR (United Kingdom) |
190,512 |
See Notes to Financial Statements.
24 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
||||||
Oil, Gas & Consumable Fuels (contd.) |
||||||
715 | Schlumberger Ltd. (Netherlands) |
$ | 50,951 | |||
157 | Swift Energy Co.(a) |
2,934 | ||||
5,000 | Total SA, ADR (France) |
229,750 | ||||
100 | WGL Holdings, Inc. |
4,045 | ||||
|
|
|||||
2,339,242 | ||||||
Paper & Forest Products 0.1% |
||||||
5,000 | International Paper Co. |
164,050 | ||||
Pharmaceuticals 3.4% |
||||||
12,422 | Abbott Laboratories |
823,703 | ||||
3,129 | Allergan, Inc. |
256,797 | ||||
1,100 | AstraZeneca PLC, ADR (United Kingdom) |
51,491 | ||||
172 | BioMarin Pharmaceutical, Inc.(a) |
6,758 | ||||
6,293 | Bristol-Myers Squibb Co. |
224,031 | ||||
903 | Catamaran Corp. (Canada)(a) |
76,344 | ||||
2,700 | Eli Lilly & Co. |
118,881 | ||||
7,800 | Endo Health Solutions, Inc.(a) |
231,894 | ||||
8,580 | Express Scripts Holding Co.(a) |
497,125 | ||||
5,300 | Johnson & Johnson |
366,866 | ||||
6,505 | Mead Johnson Nutrition Co. |
474,605 | ||||
5,400 | Merck & Co., Inc. |
238,518 | ||||
413 | Natural Grocers by Vitamin Cottage, Inc. |
8,375 | ||||
1,200 | Novartis AG, ADR (Switzerland) |
70,344 | ||||
177 | Onyx Pharmaceuticals, Inc.(a) |
13,270 | ||||
12,900 | Pfizer, Inc. |
310,116 | ||||
301 | Salix Pharmaceuticals Ltd.(a) |
13,491 | ||||
2,100 | Sanofi, ADR (France) |
85,344 | ||||
382 | Theravance, Inc.(a) |
11,127 | ||||
|
|
|||||
3,879,080 | ||||||
Pipelines 0.1% |
||||||
4,172 | Kinder Morgan, Inc. |
149,399 | ||||
Professional Services 0.1% |
||||||
501 | Duff & Phelps Corp. (Class A Stock) |
7,385 | ||||
1,400 | Manpower, Inc. |
49,812 | ||||
675 | Towers Watson & Co. (Class A Stock) |
39,575 | ||||
|
|
|||||
96,772 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 25 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
||||||
Real Estate Investment Trusts 0.6% |
||||||
4,100 | American Tower Corp. |
$ | 296,471 | |||
14,300 | Annaly Capital Management, Inc. |
249,249 | ||||
1,075 | Associated Estates Realty Corp. |
16,050 | ||||
173 | First Potomac Realty Trust |
2,005 | ||||
950 | Highwoods Properties, Inc. |
32,177 | ||||
4,200 | Kimco Realty Corp. |
81,858 | ||||
650 | LaSalle Hotel Properties |
17,069 | ||||
319 | Medical Properties Trust, Inc. |
3,142 | ||||
312 | Redwood Trust, Inc. |
4,022 | ||||
803 | Two Harbors Investment Corp. |
9,210 | ||||
|
|
|||||
711,253 | ||||||
Retail & Merchandising 3.5% |
||||||
469 | AutoZone, Inc.(a) |
175,983 | ||||
875 | Big Lots, Inc.(a) |
35,446 | ||||
345 | Cash America International, Inc. |
13,220 | ||||
524 | Chicos FAS, Inc. |
8,028 | ||||
1,353 | Costco Wholesale Corp. |
130,132 | ||||
6,111 | Dollar General Corp.(a) |
311,722 | ||||
1,646 | Dollar Tree, Inc.(a) |
82,860 | ||||
183 | EZCORP, Inc. (Class A Stock)(a) |
4,117 | ||||
592 | Genesco, Inc.(a) |
39,202 | ||||
6,027 | Home Depot, Inc. (The) |
314,489 | ||||
4,459 | Limited Brands, Inc. |
212,025 | ||||
3,129 | Lululemon Athletica, Inc.(a) |
176,726 | ||||
2,100 | Macys, Inc. |
75,264 | ||||
2,916 | OReilly Automotive, Inc.(a) |
250,018 | ||||
1,200 | PetSmart, Inc. |
79,332 | ||||
2,320 | Ross Stores, Inc. |
154,141 | ||||
6,100 | Staples, Inc. |
77,714 | ||||
8,910 | Starbucks Corp. |
403,445 | ||||
2,768 | Target Corp. |
167,879 | ||||
900 | Tiffany & Co. |
49,437 | ||||
17,593 | TJX Cos., Inc. (The) |
779,018 | ||||
530 | Tractor Supply Co. |
48,161 | ||||
2,334 | Urban Outfitters, Inc.(a) |
71,304 | ||||
6,278 | Yum! Brands, Inc. |
407,065 | ||||
|
|
|||||
4,066,728 |
See Notes to Financial Statements.
26 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
||||||
Road & Rail 0.1% |
||||||
224 | Landstar System, Inc. |
$ | 11,068 | |||
1,100 | Norfolk Southern Corp. |
81,455 | ||||
1,100 | Werner Enterprises, Inc. |
25,388 | ||||
|
|
|||||
117,911 | ||||||
Semiconductors 0.3% |
||||||
2,070 | Altera Corp. |
73,381 | ||||
653 | ASML Holding NV (Netherlands) |
37,548 | ||||
1,683 | Broadcom Corp. (Class A Stock)(a) |
57,020 | ||||
66 | Cabot Microelectronics Corp. |
1,940 | ||||
387 | Cavium, Inc.(a) |
10,457 | ||||
195 | Cymer, Inc.(a) |
11,156 | ||||
400 | Hittite Microwave Corp.(a) |
20,268 | ||||
1,290 | Linear Technology Corp. |
41,602 | ||||
1,725 | Microsemi Corp.(a) |
33,396 | ||||
184 | OYO Geospace Corp.(a) |
17,440 | ||||
4,575 | RF Micro Devices, Inc.(a) |
17,751 | ||||
850 | Semtech Corp.(a) |
20,307 | ||||
2,206 | Teradyne, Inc.(a) |
32,450 | ||||
|
|
|||||
374,716 | ||||||
Semiconductors & Semiconductor Equipment 0.5% |
||||||
9,500 | Intel Corp. |
244,150 | ||||
1,800 | KLA-Tencor Corp. |
91,638 | ||||
925 | MKS Instruments, Inc. |
24,420 | ||||
8,600 | Texas Instruments, Inc. |
234,264 | ||||
809 | Veeco Instruments, Inc.(a) |
28,889 | ||||
|
|
|||||
623,361 | ||||||
Software 1.3% |
||||||
3,764 | CA, Inc. |
90,600 | ||||
999 | Cerner Corp.(a) |
73,846 | ||||
4,818 | Check Point Software Technologies Ltd. (Israel)(a) |
234,010 | ||||
1,063 | Citrix Systems, Inc.(a) |
77,259 | ||||
1,602 | Compuware Corp.(a) |
14,754 | ||||
9,400 | Electronic Arts, Inc.(a) |
103,588 | ||||
663 | MedAssets, Inc.(a) |
8,745 | ||||
24,200 | Microsoft Corp. |
713,174 | ||||
397 | OPNET Technologies, Inc. |
10,497 | ||||
1,530 | Parametric Technology Corp.(a) |
32,956 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 27 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
||||||
Software (contd.) |
||||||
472 | QLIK Technologies, Inc.(a) |
$ | 9,440 | |||
500 | Red Hat, Inc.(a) |
26,830 | ||||
800 | SS&C Technologies Holdings, Inc.(a) |
19,440 | ||||
875 | Verint Systems, Inc.(a) |
24,421 | ||||
1,168 | VMware, Inc. (Class A Stock)(a) |
106,008 | ||||
|
|
|||||
1,545,568 | ||||||
Specialty Retail 0.2% |
||||||
1,296 | Aarons, Inc. |
38,012 | ||||
525 | DSW, Inc. (Class A Stock) |
31,038 | ||||
246 | Francescas Holdings Corp.(a) |
7,727 | ||||
1,900 | Gap, Inc. (The) |
56,031 | ||||
475 | Group 1 Automotive, Inc. |
25,531 | ||||
800 | Lithia Motors, Inc. (Class A Stock) |
22,288 | ||||
336 | Sally Beauty Holdings, Inc.(a) |
8,877 | ||||
|
|
|||||
189,504 | ||||||
Telecommunications 0.7% |
||||||
375 | Arris Group, Inc.(a) |
4,759 | ||||
4,700 | CenturyLink, Inc. |
195,238 | ||||
224 | EZchip Semiconductor Ltd. (Israel)(a) |
8,214 | ||||
251 | IPG Photonics Corp.(a) |
13,009 | ||||
519 | NICE Systems Ltd., ADR (Israel)(a) |
18,684 | ||||
8,601 | QUALCOMM, Inc. |
513,308 | ||||
57 | SBA Communications Corp. (Class A Stock)(a) |
3,366 | ||||
|
|
|||||
756,578 | ||||||
Textiles, Apparel & Luxury Goods 0.5% |
||||||
4,368 | NIKE, Inc. (Class B Stock) |
407,753 | ||||
62 | PVH Corp. |
4,925 | ||||
346 | Steven Madden Ltd.(a) |
13,989 | ||||
418 | VF Corp. |
62,407 | ||||
775 | Wolverine World Wide, Inc. |
34,433 | ||||
|
|
|||||
523,507 | ||||||
Thrifts & Mortgage Finance |
||||||
2,700 | Capitol Federal Financial, Inc. |
31,644 |
See Notes to Financial Statements.
28 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
||||||
Tobacco 0.2% |
||||||
2,400 | Altria Group, Inc. |
$ | 86,328 | |||
530 | Lorillard, Inc. |
68,179 | ||||
1,390 | Philip Morris International, Inc. |
127,102 | ||||
|
|
|||||
281,609 | ||||||
Trading Companies & Distributors 0.1% |
||||||
1,095 | United Rentals, Inc.(a) |
31,656 | ||||
625 | WESCO International, Inc.(a) |
34,819 | ||||
|
|
|||||
66,475 | ||||||
Transportation 0.4% |
||||||
133 | Bristow Group, Inc. |
6,088 | ||||
1,895 | Expeditors International of Washington, Inc. |
67,405 | ||||
750 | Kansas City Southern |
54,600 | ||||
497 | Quality Distribution, Inc.(a) |
5,020 | ||||
2,317 | Union Pacific Corp. |
284,087 | ||||
|
|
|||||
417,200 | ||||||
Wireless Telecommunication Services 0.2% |
||||||
7,400 | Vodafone Group PLC, ADR (United Kingdom) |
212,750 | ||||
|
|
|||||
TOTAL COMMON STOCKS |
44,699,608 | |||||
|
|
|||||
PREFERRED STOCK 0.1% |
||||||
Commercial Banks |
||||||
2,650 | Wells Fargo & Co., Series J, 8.00% |
81,249 | ||||
|
|
|||||
UNAFFILIATED MUTUAL FUND |
||||||
3,175 | Ares Capital Corp. |
52,800 | ||||
|
|
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 29 |
Portfolio of Investments
as of July 31, 2012 continued
Moodys Ratings (Unaudited) |
Principal Amount (000)# |
Description | Value (Note 1) | |||||||
ASSET-BACKED SECURITIES 3.0% |
||||||||||
AAA(c) | $ 265 | Asset Backed Funding Certificates, |
$ | 197,198 | ||||||
NR | EUR | 154 | Magnolia Funding Ltd., |
189,539 | ||||||
C | 87 | Merrill Lynch Mortgage Investors, Inc., |
16,970 | |||||||
AAA(c) | 182 | Plymouth Rock CLO Ltd., |
181,924 | |||||||
Caa3 | 531 | Sierra Madre Funding Ltd., (Cayman Islands)(b)(h) |
340,837 | |||||||
Caa3 | 1,262 | Series 2004-1A, Class ALTB, 144A |
809,488 | |||||||
Aaa | 1,021 | SLM Student Loan Trust, |
1,054,455 | |||||||
Caa3 | 55 | Soundview Home Equity Loan Trust, |
16,805 | |||||||
Aaa | 700 | Venture CDO Ltd., |
655,719 | |||||||
|
|
|||||||||
TOTAL ASSET-BACKED SECURITIES |
3,462,935 | |||||||||
|
|
|||||||||
CORPORATE BONDS 21.4% |
||||||||||
Airlines 0.3% |
||||||||||
Ba2 | 300 | Continental Airlines, Inc., |
312,000 | |||||||
Automobile Manufacturers 1.3% |
||||||||||
A2 | 800 | BMW US Capital LLC, |
801,291 | |||||||
A3 | 700 | Daimler Finance North America LLC, |
699,001 | |||||||
|
|
|||||||||
1,500,292 | ||||||||||
|
|
See Notes to Financial Statements.
30 | Visit our website at www.prudentialfunds.com |
Moodys Ratings (Unaudited) |
Principal Amount (000)# |
Description | Value (Note 1) | |||||||
CORPORATE BONDS (Continued) |
||||||||||
Building & Construction 0.5% |
||||||||||
Ba3 | $ 600 | Urbi Desarrollos Urbanos SAB de CV, |
$ | 609,000 | ||||||
Capital Markets 1.8% |
||||||||||
A3 | AUD 1,500 | Goldman Sachs Group, Inc. (The), |
1,436,995 | |||||||
Baa1 | 700 | Morgan Stanley, |
696,020 | |||||||
|
|
|||||||||
2,133,015 | ||||||||||
|
|
|||||||||
Diversified Financial Services 3.6% |
||||||||||
Baa1 | 200 | AK Transneft OJSC Via TransCapital Invest Ltd., |
253,550 | |||||||
A3 | 1,500 | Citigroup, Inc., |
1,542,517 | |||||||
Ba1 | 200 | Ford Motor Credit Co. LLC, |
216,612 | |||||||
Ba1 | 500 | 7.00%, 10/01/13 |
531,889 | |||||||
Ba3 | 700 | International Lease Finance Corp., |
791,875 | |||||||
Aa3 | 800 | JPMorgan Chase & Co., |
866,738 | |||||||
|
|
|||||||||
4,203,181 | ||||||||||
|
|
|||||||||
Electric Utilities 0.6% |
||||||||||
Baa1 | 600 | Ameren Illinois Co., |
712,936 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 31 |
Portfolio of Investments
as of July 31, 2012 continued
Moodys Ratings (Unaudited) |
Principal Amount (000)# |
Description | Value (Note 1) | |||||||
CORPORATE BONDS (Continued) |
||||||||||
Financial - Bank & Trust 3.3% |
||||||||||
Aa3 | $ | 100 | Abbey National Treasury Services PLC, |
$ | 100,020 | |||||
Baa1 | 600 | Banco Santander Brazil SA, |
578,997 | |||||||
Baa1 | 800 | Barclays Bank PLC, |
812,029 | |||||||
Aaa | 100 | ING Bank NV, Govt. Liquid |
105,123 | |||||||
BB+(c) | 800 | Lloyds TSB Bank PLC, |
847,016 | |||||||
Aa2 | 700 | Nordea Bank AB, |
792,819 | |||||||
A2 | 600 | Royal Bank of Scotland PLC, (The), |
626,465 | |||||||
|
|
|||||||||
3,862,469 | ||||||||||
|
|
|||||||||
Financial Services 2.4% |
||||||||||
B1 | 600 | Ally Financial, Inc., |
713,250 | |||||||
NR | 500 | Lehman Brothers Holdings, Inc.,(d) |
121,250 | |||||||
NR | 400 | 6.875%, 05/02/18 |
98,500 | |||||||
Merrill Lynch & Co., Inc., |
||||||||||
Baa2 | 100 | 5.571%, 10/04/12 |
100,356 | |||||||
Baa2 | 500 | 6.875%, 04/25/18 |
577,127 | |||||||
Baa2 | 600 | TNK-BP Finance SA, |
664,500 |
See Notes to Financial Statements.
32 | Visit our website at www.prudentialfunds.com |
Moodys Ratings (Unaudited) |
Principal Amount (000)# |
Description | Value (Note 1) | |||||||
CORPORATE BONDS (Continued) |
||||||||||
Financial Services (contd.) |
||||||||||
Aa3 | $ | 400 | UBS AG, Notes (Switzerland) |
$ | 442,807 | |||||
|
|
|||||||||
2,717,790 | ||||||||||
|
|
|||||||||
Healthcare Providers & Services 0.5% |
||||||||||
Baa3 | 500 | Cardinal Health, Inc., |
579,778 | |||||||
Insurance 0.5% |
||||||||||
Baa1 | 500 | American International Group, Inc., |
616,008 | |||||||
IT Services 0.5% |
||||||||||
A2 | 500 | HP Enterprise Services LLC, |
524,047 | |||||||
Metals & Mining 1.6% |
||||||||||
Ba1 | 600 | CSN Resources SA, |
649,500 | |||||||
Baa2 | 1,000 | Spectra Energy Capital LLC, |
1,201,445 | |||||||
|
|
|||||||||
1,850,945 | ||||||||||
|
|
|||||||||
Oil, Gas & Consumable Fuels 1.3% |
||||||||||
A2 | 400 | BP Capital Markets PLC, |
427,803 | |||||||
A2 | 300 | 4.50%, 10/01/20 |
351,525 | |||||||
Baa1 | 500 | Pride International, Inc., |
743,825 | |||||||
|
|
|||||||||
1,523,153 | ||||||||||
|
|
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 33 |
Portfolio of Investments
as of July 31, 2012 continued
Moodys Ratings (Unaudited) |
Principal Amount (000)# |
Description | Value (Note 1) | |||||||
CORPORATE BONDS (Continued) |
||||||||||
Pharmaceuticals 0.3% |
||||||||||
B1 | $ 300 | Valeant Pharmaceuticals International, |
$ | 303,750 | ||||||
Tobacco 0.9% |
||||||||||
Baa1 | 700 | Altria Group, Inc., |
998,404 | |||||||
Transportation 2.0% |
||||||||||
Baa3 | 2,000 | Con-Way, Inc., |
2,337,054 | |||||||
|
|
|||||||||
TOTAL CORPORATE BONDS |
24,783,822 | |||||||||
|
|
|||||||||
FOREIGN GOVERNMENT BONDS 4.9% |
||||||||||
Aaa | EUR 800 | Bundesobligation, |
1,031,966 | |||||||
Aaa | EUR 1,600 | Bundesschatzanweisungen, |
1,986,131 | |||||||
Aaa | CAD 200 | Canadian Government, |
226,437 | |||||||
Aaa | 700 | Kommunalbanken A/S, |
735,210 | |||||||
Baa3 | BRL 1,300 | Republic of Brazil, |
911,941 | |||||||
Baa1 | 700 | Vnesheconombank Via VEB Finance PLC, |
740,761 | |||||||
|
|
|||||||||
TOTAL FOREIGN GOVERNMENT BONDS |
5,632,446 | |||||||||
|
|
See Notes to Financial Statements.
34 | Visit our website at www.prudentialfunds.com |
Moodys Ratings (Unaudited) |
Principal Amount (000)# |
Description | Value (Note 1) | |||||||
MUNICIPAL BONDS 1.3% |
||||||||||
California 0.4% |
||||||||||
Aa3 | $ | 400 | California State Public Works Board Lease, |
$ | 482,064 | |||||
Illinois 0.6% |
||||||||||
Aa3 | 200 | Chicago Transit Authority, |
247,572 | |||||||
Aa3 | 300 | Chicago Transit Authority, |
371,358 | |||||||
|
|
|||||||||
618,930 | ||||||||||
|
|
|||||||||
Texas 0.3% |
||||||||||
AAA(c) | 300 | Dallas County Hospital District, |
355,773 | |||||||
|
|
|||||||||
TOTAL MUNICIPAL BONDS |
1,456,767 | |||||||||
|
|
|||||||||
RESIDENTIAL MORTGAGE-BACKED SECURITIES 2.7% |
||||||||||
American Home Mortgage Assets, |
||||||||||
Ca | 270 | 0.436%(b), 05/25/46 |
151,538 | |||||||
D(c) | 126 | Bear Stearns Adjustable Rate Mortgage Trust, |
85,639 | |||||||
Caa1 | 149 | Bear Stearns ALT-A Trust, |
130,977 | |||||||
Ca | 297 | Countrywide Alternative Loan Trust, |
126,058 | |||||||
Aaa | 12 | Fannie Mae, |
14,074 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 35 |
Portfolio of Investments
as of July 31, 2012 continued
Moodys Ratings (Unaudited) |
Principal Amount (000)# |
Description | Value (Note 1) | |||||||
RESIDENTIAL MORTGAGE-BACKED SECURITIES (Continued) |
| |||||||||
Aaa | $ 395 | FHLMC Structured Pass-Through Securities, |
$ | 400,085 | ||||||
Aaa | 38 | Freddie Mac, |
40,940 | |||||||
Aaa | 172 | GSR Mortgage Loan Trust, |
170,495 | |||||||
C | 780 | Series 2006-OA1, Class 2A2 |
174,514 | |||||||
Caa1 | 568 | Homebanc Mortgage Trust, |
500,002 | |||||||
Aaa | 200 | Permanent Master Issuer PLC, (United Kingdom) |
201,459 | |||||||
Aaa | EUR 500 | Series 2011-1A, Class 1A3, 144A |
621,037 | |||||||
NR | 96 | Vendee Mortgage Trust, |
116,246 | |||||||
Caa1 | 268 | Washington Mutual Mortgage Pass-Through Certificates, |
214,453 | |||||||
Caa3 | 274 | Series 2007-OA2, Class 1A |
172,415 | |||||||
|
|
|||||||||
TOTAL RESIDENTIAL MORTGAGE-BACKED SECURITIES (cost $3,623,170) |
3,119,932 | |||||||||
|
|
|||||||||
U.S. GOVERNMENT AGENCY OBLIGATIONS 14.7% |
| |||||||||
6 | Federal Home Loan Mortgage Corp. |
6,485 | ||||||||
199 | 2.833%(b), 03/01/36 |
213,131 | ||||||||
83 | 5.50%, 01/01/38 |
90,678 | ||||||||
4,000 | Federal National Mortgage Assoc. |
4,161,250 | ||||||||
326 | 2.558%(b), 06/01/35 |
347,832 | ||||||||
1,000 | 3.00%, TBA |
1,037,500 | ||||||||
2,000 | 3.50%, TBA |
2,116,875 |
See Notes to Financial Statements.
36 | Visit our website at www.prudentialfunds.com |
Principal Amount (000)# |
Description | Value (Note 1) | ||||||
|
U.S. GOVERNMENT AGENCY OBLIGATIONS (Continued) |
|||||||
$ | 2,000 | 3.50%, TBA |
$ | 2,125,625 | ||||
35 | 3.933%(b), 05/01/36 |
37,448 | ||||||
1,000 | 4.00%, TBA |
1,069,531 | ||||||
1,151 | 4.50%, 04/01/24 - 01/01/26 |
1,242,745 | ||||||
1,000 | 4.50%, TBA |
1,076,250 | ||||||
22 | 5.00%, 06/01/23 |
23,691 | ||||||
160 | 5.50%, 12/01/36 |
176,074 | ||||||
36 | 7.50%, 01/01/32 |
36,883 | ||||||
4 | Government National Mortgage Assoc. |
4,355 | ||||||
3,000 | 3.00%, TBA |
3,156,562 | ||||||
26 | 4.50%, 08/15/33-09/15/33 |
28,265 | ||||||
36 | 8.50%, 02/20/30-06/15/30 |
43,358 | ||||||
|
|
|||||||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS |
16,994,538 | |||||||
|
|
|||||||
|
U.S. TREASURY OBLIGATIONS 11.6% |
| ||||||
600 | U.S. Treasury Bonds |
614,156 | ||||||
2,600 | 2.00%, 11/15/21(e) |
2,734,061 | ||||||
300 | 2.00%, 02/15/22 |
314,766 | ||||||
300 | 2.125%, 08/15/21 |
319,594 | ||||||
100 | 3.00%, 05/15/42 |
108,750 | ||||||
1,200 | 3.125%, 11/15/41 |
1,338,000 | ||||||
1,400 | 3.75%, 08/15/41 |
1,748,468 | ||||||
200 | 4.375%, 02/15/38 - 11/15/39 |
274,531 | ||||||
100 | 7.50%, 11/15/24 |
163,938 | ||||||
36 | 8.125%, 05/15/21 |
56,630 | ||||||
2,300 | U.S. Treasury Inflationary Indexed Bonds, TIPS |
2,521,208 | ||||||
200 | 2.125%, 02/15/41 |
316,054 | ||||||
300 | 2.50%, 01/15/29 |
460,348 | ||||||
100 | U.S. Treasury Notes |
101,555 | ||||||
700 | 2.125%, 12/31/15 |
742,000 | ||||||
100 | 2.375%, 05/31/18 |
109,156 | ||||||
1,338 | 2.625%, 08/15/20 - 11/15/20 |
1,487,695 | ||||||
|
|
|||||||
TOTAL U.S. TREASURY OBLIGATIONS |
13,410,910 | |||||||
|
|
|||||||
TOTAL LONG-TERM INVESTMENTS |
113,695,007 | |||||||
|
|
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 37 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||||||
|
SHORT-TERM INVESTMENTS 14.4% |
|||||||||
|
AFFILIATED MONEY MARKET MUTUAL FUND 3.0% |
|||||||||
3,417,683 | Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund |
$ | 3,417,683 | |||||||
|
|
|||||||||
Principal Amount (000)# |
||||||||||
|
REPURCHASE AGREEMENTS(i) 10.8% |
| ||||||||
$ | 6,800 | Barclays Capital, Inc. |
6,800,000 | |||||||
5,700 | Credit Suisse Securities (USA) LLC, |
5,700,000 | ||||||||
|
|
|||||||||
TOTAL REPURCHASE AGREEMENTS |
12,500,000 | |||||||||
|
|
|||||||||
|
CERTIFICATE OF DEPOSIT 0.6% |
| ||||||||
Banco do Brasil New York, |
||||||||||
700 | 1.97%(g), 06/28/13 |
693,857 | ||||||||
|
|
|||||||||
Notional Amount (000)# |
Counterparty |
|||||||||
|
OPTION PURCHASED(a) |
|||||||||
|
Put Option |
|||||||||
200 | Currency Option USD vs CAD |
JPMorgan Chase | 885 | |||||||
|
|
|||||||||
TOTAL SHORT-TERM INVESTMENTS |
16,612,425 | |||||||||
|
|
|||||||||
TOTAL INVESTMENTS, BEFORE OPTIONS WRITTEN 112.8% |
130,307,432 | |||||||||
|
|
See Notes to Financial Statements.
38 | Visit our website at www.prudentialfunds.com |
Notional Amount (000)# |
Description | Counterparty | Value (Note 1) | |||||||
OPTIONS WRITTEN(a) (0.1)% | ||||||||||
Call Options (0.1)% | ||||||||||
$ | 200 | Interest Rate Swap Options, |
Bank of America | $ | (4,757 | ) | ||||
3,000 | Pay a fixed rate of 1.40% and receive a floating rate based on 3-month LIBOR, expiring 03/18/13 |
Deutsche Bank | (71,359 | ) | ||||||
|
|
|||||||||
(76,116 | ) | |||||||||
|
|
|||||||||
|
Put Options |
|||||||||
200 | Interest Rate Swap Options, |
Bank of America | (740 | ) | ||||||
3,000 | Receive a fixed rate of 1.40% and pay a floating rate based on 3-month LIBOR, expiring 03/18/13 |
Deutsche Bank | (11,101 | ) | ||||||
|
|
|||||||||
(11,841 | ) | |||||||||
|
|
|||||||||
TOTAL OPTIONS WRITTEN |
(87,957 | ) | ||||||||
|
|
|||||||||
TOTAL INVESTMENTS, NET OF OPTIONS WRITTEN 112.7% (cost $119,001,467; Note 5) |
130,219,475 | |||||||||
Liabilities in excess of other assets(j) (12.7)% |
(14,663,924 | ) | ||||||||
|
|
|||||||||
NET ASSETS 100% |
$ | 115,555,551 | ||||||||
|
|
The following abbreviations are used in the Portfolio descriptions:
144ASecurity 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.
ADRAmerican Depositary Receipt
CDOCollaterlized Debt Obligation
CDXCredit Derivative Index
CLOCollateralized Loan Obligations
FHLMCFederal Home Loan Mortgage Corporation
LIBORLondon Interbank Offered Rate
MTNMedium Term Note
NRNot Rated by Moodys or Standard & Poors
SLMStudent Loan Mortgage
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 39 |
Portfolio of Investments
as of July 31, 2012 continued
TBATo Be Announced
TIPSTreasury Inflation Protected Securities
AUDAustralian Dollar
BRLBrazilian Real
CADCanadian Dollar
CNYChinese Yuan
EUREuro
GBPBritish Pound
INRIndian Rupee
JPYJapanese Yen
KRWSouth Korean Won
MXNMexican Peso
NOKNorwegian Krone
SGDSingapore Dollar
TWDNew Taiwanese Dollar
USDUnited States Dollar
| The ratings reflected are as of July 31, 2012. Ratings of certain bonds may have changed subsequent to that date. The Funds current Statement of Additional Information contains a description of Moodys and Standard & Poors ratings. |
# | Principal and notional amount is shown in U.S. dollars unless otherwise stated. |
(a) | Non-income producing security. |
(b) | Variable rate instrument. The interest rate shown reflects the rate in effect at July 31, 2012. |
(c) | Standard & Poors rating. |
(d) | Represents issuer in default on interest payments. Non-income producing security. |
(e) | Represents security, or a portion thereof, segregated as collateral for futures contracts. |
(f) | Prudential Investments LLC, the manager of the Fund, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund. |
(g) | Rates shown are the effective yields at purchase date. |
(h) | Indicates a security or securities that have been deemed illiquid. |
(i) | Repurchase agreements are collateralized by U.S. Treasury Notes (coupon rates 3.13% - 6.13%, maturity dates 06/13/17 - 11/25/27), with the aggregate value, including accrued interest of $12,773,934. |
(j) | Includes net unrealized appreciation (depreciation) on the following derivative contracts held at reporting period end: |
Futures contracts open at July 31, 2012:
Number of Contracts |
Type | Expiration Date |
Value at Trade Date |
Value at July 31, 2012 |
Unrealized Depreciation(1) |
|||||||||||||||
Short Positions: | ||||||||||||||||||||
34 | 5 Year U.S. Treasury Notes | Sep. 2012 | $ | 4,209,665 | $ | 4,242,562 | $ | (32,897 | ) | |||||||||||
3 | 10 Year U.S. Treasury Notes | Sep. 2012 | 400,125 | 403,969 | (3,844 | ) | ||||||||||||||
|
|
|||||||||||||||||||
$ | (36,741 | ) | ||||||||||||||||||
|
|
(1) | Cash of $3,000 and U.S. Treasury Securities with a market value of $24,186 has been segregated to cover requirements for open futures contracts at July 31, 2012. |
See Notes to Financial Statements.
40 | Visit our website at www.prudentialfunds.com |
Forward foreign currency exchange contracts outstanding at July 31, 2012:
Purchase Contracts |
Counterparty |
Notional Amount (000) |
Value at Settlement Date Payable |
Current Value |
Unrealized Appreciation (Depreciation) |
|||||||||||||
Brazilian Real, |
||||||||||||||||||
Expiring 08/02/12 |
UBS Securities | BRL | 2,025 | $ | 1,007,694 | $ | 987,789 | $ | (19,905 | ) | ||||||||
Chinese Yuan, |
||||||||||||||||||
Expiring 02/01/13 |
Barclays Capital Group | CNY | 13,295 | 2,108,628 | 2,068,933 | (39,695 | ) | |||||||||||
Expiring 02/01/13 |
Deutsche Bank | CNY | 291 | 46,248 | 45,291 | (957 | ) | |||||||||||
Expiring 02/01/13 |
Deutsche Bank | CNY | 27 | 4,186 | 4,128 | (58 | ) | |||||||||||
Expiring 02/01/13 |
Goldman Sachs & Co. | CNY | 797 | 127,000 | 123,977 | (3,023 | ) | |||||||||||
Expiring 02/01/13 |
JPMorgan Chase | CNY | 880 | 138,076 | 136,906 | (1,170 | ) | |||||||||||
Expiring 02/01/13 |
JPMorgan Chase | CNY | 718 | 114,373 | 111,757 | (2,616 | ) | |||||||||||
Expiring 08/05/13 |
Deutsche Bank | CNY | 743 | 118,602 | 114,928 | (3,674 | ) | |||||||||||
Euro, |
||||||||||||||||||
Expiring 08/03/12 |
Deutsche Bank | EUR | 438 | 536,835 | 538,937 | 2,102 | ||||||||||||
Expiring 10/15/12 |
JPMorgan Chase | EUR | 451 | 555,677 | 555,451 | (226 | ) | |||||||||||
Expiring 10/15/12 |
Royal Bank of Scotland | EUR | 31 | 38,460 | 38,180 | (280 | ) | |||||||||||
Japanese Yen, |
||||||||||||||||||
Expiring 09/10/12 |
JPMorgan Chase | JPY | 3,487 | 44,063 | 44,654 | 591 | ||||||||||||
Expiring 09/10/12 |
UBS Securities | JPY | 9,514 | 120,808 | 121,834 | 1,026 | ||||||||||||
Mexican Peso, |
||||||||||||||||||
Expiring 08/15/12 |
JPMorgan Chase | MXN | 8,381 | 641,121 | 629,232 | (11,889 | ) | |||||||||||
Expiring 12/03/12 |
Credit Suisse First Boston Corp. | MXN | 109 | 8,095 | 8,064 | (31 | ) | |||||||||||
Expiring 12/03/12 |
Hong Kong & Shanghai Bank | MXN | 8,381 | 618,916 | 622,409 | 3,493 | ||||||||||||
New Taiwanese Dollar, |
||||||||||||||||||
Expiring 11/30/12 |
Barclays Capital Group | TWD | 13,711 | 465,249 | 457,755 | (7,494 | ) | |||||||||||
Norwegian Krone, |
||||||||||||||||||
Expiring 08/28/12 |
BNP Paribas | NOK | 635 | 104,233 | 105,230 | 997 | ||||||||||||
Expiring 08/28/12 |
Hong Kong & Shanghai Bank | NOK | 634 | 104,050 | 105,065 | 1,015 | ||||||||||||
Expiring 08/28/12 |
Royal Bank of Scotland | NOK | 635 | 104,268 | 105,230 | 962 | ||||||||||||
Singapore Dollar, |
||||||||||||||||||
Expiring 08/03/12 |
UBS Securities | SGD | 1 | 660 | 655 | (5 | ) | |||||||||||
Expiring 10/22/12 |
Royal Bank of Scotland | SGD | 1 | 648 | 656 | 8 | ||||||||||||
|
|
|
|
|
|
|||||||||||||
$ | 7,007,890 | $ | 6,927,061 | $ | (80,829 | ) | ||||||||||||
|
|
|
|
|
|
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 41 |
Portfolio of Investments
as of July 31, 2012 continued
Sale Contracts |
Counterparty |
Notional Amount (000) |
Value at Settlement Date Receivable |
Current Value |
Unrealized Appreciation (Depreciation) |
|||||||||||||
Australian Dollar, |
||||||||||||||||||
Expiring 08/09/12 |
Deutsche Bank | AUD | 2,190 | $ | 2,188,237 | $ | 2,299,369 | $ | (111,132 | ) | ||||||||
Brazilian Real, |
||||||||||||||||||
Expiring 08/02/12 |
Barclays Capital Group | BRL | 2,025 | 1,035,680 | 987,789 | 47,891 | ||||||||||||
Expiring 10/02/12 |
UBS Securities | BRL | 2,025 | 997,960 | 976,751 | 21,209 | ||||||||||||
British Pound, |
||||||||||||||||||
Expiring 09/12/12 |
BNP Paribas | GBP | 291 | 449,944 | 456,233 | (6,289 | ) | |||||||||||
Canadian Dollar, |
||||||||||||||||||
Expiring 09/20/12 |
UBS Securities | CAD | 205 | 199,434 | 204,190 | (4,756 | ) | |||||||||||
Chinese Yuan, |
||||||||||||||||||
Expiring 10/15/12 |
BNP Paribas | CNY | 11,470 | 1,806,644 | 1,792,702 | 13,942 | ||||||||||||
Euro, |
||||||||||||||||||
Expiring 10/15/12 |
Citigroup Global Markets | EUR | 17 | 20,749 | 20,937 | (188 | ) | |||||||||||
Expiring 10/15/12 |
UBS Securities | EUR | 1,717 | 2,115,492 | 2,114,655 | 837 | ||||||||||||
Expiring 09/13/13 |
JPMorgan Chase | EUR | 1,600 | 1,971,600 | 1,980,500 | (8,900 | ) | |||||||||||
Expiring 10/11/13 |
JPMorgan Chase | EUR | 108 | 130,996 | 133,738 | (2,742 | ) | |||||||||||
Expiring 10/11/13 |
JPMorgan Chase | EUR | 756 | 932,564 | 936,166 | (3,602 | ) | |||||||||||
Indian Rupee, |
||||||||||||||||||
Expiring 10/03/12 |
Hong Kong & Shanghai Bank | INR | 434 | 7,480 | 7,710 | (230 | ) | |||||||||||
Japanese Yen, |
||||||||||||||||||
Expiring 09/10/12 |
Citigroup Global Markets | JPY | 20,372 | 260,982 | 260,879 | 103 | ||||||||||||
Mexican Peso, |
||||||||||||||||||
Expiring 08/15/12 |
Hong Kong & Shanghai Bank | MXN | 8,381 | 625,148 | 629,232 | (4,084 | ) | |||||||||||
New Taiwanese Dollar, |
||||||||||||||||||
Expiring 11/30/12 |
Citigroup Global Markets | TWD | 4,142 | 139,000 | 138,293 | 707 | ||||||||||||
Expiring 11/30/12 |
UBS Securities | TWD | 2,982 | 100,000 | 99,558 | 442 | ||||||||||||
Expiring 11/30/12 |
UBS Securities | TWD | 6,435 | 216,000 | 214,829 | 1,171 | ||||||||||||
Singapore Dollar, |
||||||||||||||||||
Expiring 08/03/12 |
Royal Bank of Canada | SGD | 1 | 648 | 656 | (8 | ) | |||||||||||
South Korean Won, |
||||||||||||||||||
Expiring 09/28/12 |
Barclays Capital Group | KRW | 5,713 | 4,920 | 5,033 | (113 | ) | |||||||||||
|
|
|
|
|
|
|||||||||||||
$ | 13,203,478 | $ | 13,259,220 | $ | (55,742 | ) | ||||||||||||
|
|
|
|
|
|
See Notes to Financial Statements.
42 | Visit our website at www.prudentialfunds.com |
Interest rate swap agreements outstanding at July 31, 2012:
Notional |
Termination Date |
Fixed Rate |
Floating |
Fair Value |
Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
Counterparty | |||||||||||||||||||
|
Over-the-counter swap agreements: |
|
||||||||||||||||||||||||
AUD | 400 | 12/15/17 | 5.500% | 6 month Australian Bank Bill rate(1) | $ | 41,166 | $ | (1,470 | ) | $ | 42,636 | Barclays Bank PLC | ||||||||||||||
AUD | 200 | 12/15/17 | 5.500% | 6 month Australian Bank Bill rate(1) | 20,583 | (658 | ) | 21,241 | Deutsche Bank | |||||||||||||||||
AUD | 1,200 | 03/15/18 | 3.750% | 6 month Australian Bank Bill rate(1) | 10,931 | 1,352 | 9,579 | Deutsche Bank | ||||||||||||||||||
AUD | 600 | 03/15/18 | 3.750% | 6 month Australian Bank Bill rate(1) | 5,466 | 1,267 | 4,199 | Goldman Sachs & Co. | ||||||||||||||||||
AUD | 800 | 03/15/23 | 4.000% | 6 month Australian Bank Bill rate(1) | 6,899 | (5,281 | ) | 12,180 | Goldman Sachs & Co. | |||||||||||||||||
BRL | 2,100 | 01/02/14 | 11.990% | Brazilian overnight interbank lending rate(1) | 75,725 | 257 | 75,468 | Barclays Bank PLC | ||||||||||||||||||
BRL | 2,900 | 01/02/14 | 11.960% | Brazilian overnight interbank lending rate(1) | 103,518 | (6,107 | ) | 109,625 | Goldman Sachs & Co. | |||||||||||||||||
BRL | 300 | 01/02/14 | 10.580% | Brazilian overnight interbank lending rate(1) | 5,243 | (454 | ) | 5,697 | Morgan Stanley & Co. | |||||||||||||||||
BRL | 1,500 | 01/02/15 | 9.940% | Brazilian overnight interbank lending rate(1) | 24,587 | | 24,587 | Goldman Sachs & Co. | ||||||||||||||||||
BRL | 1,900 | 01/02/15 | 9.930% | Brazilian overnight interbank lending rate(1) | 30,947 | 438 | 30,509 | UBS AG | ||||||||||||||||||
BRL | 200 | 01/02/15 | 9.930% | Brazilian overnight interbank lending rate(1) | 3,259 | 43 | 3,216 | Morgan Stanley & Co. | ||||||||||||||||||
BRL | 2,900 | 01/02/15 | 9.890% | Brazilian overnight interbank lending rate(1) | 46,079 | | 46,079 | Bank of America Securities LLC | ||||||||||||||||||
MXN | 8,400 | 03/05/13 | 6.500% | 28 day Mexican interbank rate(1) | 6,968 | (113 | ) | 7,081 | Morgan Stanley & Co. |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 43 |
Portfolio of Investments
as of July 31, 2012 continued
Notional |
Termination Date |
Fixed Rate |
Floating |
Fair Value |
Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
Counterparty | |||||||||||||||||||
|
Over-the-counter swap agreements (contd.): |
|
||||||||||||||||||||||||
MXN | 7,300 | 06/02/21 | 7.500% | 28 day Mexican interbank rate(1) | $ | 79,954 | $ | 22,309 | $ | 57,645 | UBS AG | |||||||||||||||
|
Exchange-traded swap agreements: |
|||||||||||||||||||||||||
$ 3,500 | 06/20/17 | 1.500% | 3 month LIBOR(1) | (126,952 | ) | (116,090 | ) | (10,862 | ) | | ||||||||||||||||
EUR | 1,200 | 03/21/17 | 2.000% | 6 month Euribor(1) | 74,619 | (7,203 | ) | 81,822 | | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||
$ | 408,992 | $ | (111,710 | ) | $ | 520,702 | ||||||||||||||||||||
|
|
|
|
|
|
(1) | Fund pays the floating rate and receives the fixed rate. |
Credit default swap agreements outstanding at July 31, 2012:
Reference Obligation |
Termination Date |
Fixed Rate |
Notional Amount# (000)(4) |
Fair Value(3) |
Upfront Premiums Paid (Received) |
Unrealized Depreciation |
Counterparty | |||||||||||||||||||
Over-the-counter credit default swaps on credit indicesSell Protection(1): |
|
|||||||||||||||||||||||||
Dow Jones CDX IG5 10Y Index |
12/20/15 | 0.460% | $ | 1,500 | $ | (89,786 | ) | $ | | $ | (89,786 | ) | Morgan Stanley & Co. | |||||||||||||
Dow Jones CDX IG5 10Y Index |
12/20/15 | 0.460% | 470 | (28,214 | ) | | (28,214 | ) | Morgan Stanley & Co. | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||
$ | (118,000 | ) | $ | | $ | (118,000 | ) | |||||||||||||||||||
|
|
|
|
|
|
The Fund entered into credit default swap agreements on corporate issues, sovereign issues, asset-backed securities and credit indices as the protection seller to provide a measure of protection against the current portfolio of investments exposure to market conditions, or to take an active position with respect to the likelihood of a particular issuers default or the referenced entitys credit soundness.
Reference |
Termination Date |
Fixed Rate |
Notional Amount# (000)(4) |
Fair Value |
Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
Counterparty | |||||||||||||||||||
Over-the-counter credit default swapsBuy Protection(2): |
|
|||||||||||||||||||||||||
Cardinal Health Inc., |
06/20/17 | 0.560% | $ | 500 | $ | (1,334 | ) | $ | | $ | (1,334 | ) | UBS AG | |||||||||||||
Con-way, Inc., |
03/20/18 | 1.830% | 2,000 | 74,944 | | 74,944 | Bank of America Securities LLC |
See Notes to Financial Statements.
44 | Visit our website at www.prudentialfunds.com |
Reference |
Termination Date |
Fixed Rate |
Notional Amount# (000)(4) |
Fair Value |
Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
Counterparty | |||||||||||||||||||
Over-the-counter credit default swapsBuy Protection(2) (contd.): |
|
|||||||||||||||||||||||||
Dow Jones CDX HY15 5Y Index |
12/20/15 | 5.000% | $ | 768 | $ | (20,210 | ) | $ | (18,856 | ) | $ | (1,354 | ) | Citigroup, Inc. | ||||||||||||
Dow Jones CDX IG5 Index |
12/20/12 | 0.143% | 2,100 | (971 | ) | | (971 | ) | Morgan Stanley & Co. | |||||||||||||||||
Dow Jones CDX IG5 Index |
12/20/12 | 0.143% | 700 | (324 | ) | | (324 | ) | Morgan Stanley & Co. | |||||||||||||||||
Dow Jones iTraxx 16 |
12/20/16 | 1.000% | 200 | 5,972 | 3,544 | 2,428 | Citigroup, Inc. | |||||||||||||||||||
Embarq Corp. |
06/20/13 | 1.000% | 200 | (1,553 | ) | (852 | ) | (701 | ) | Barclays Bank PLC | ||||||||||||||||
Embarq Corp. |
03/20/14 | 1.250% | 400 | (5,704 | ) | | (5,704 | ) | Deutsche Bank | |||||||||||||||||
Embarq Corp. |
03/20/14 | 1.270% | 200 | (2,922 | ) | | (2,922 | ) | Deutsche Bank | |||||||||||||||||
Embarq Corp. |
03/20/14 | 1.430% | 100 | (1,733 | ) | | (1,733 | ) | Deutsche Bank | |||||||||||||||||
Spectra Energy Capital |
06/20/18 | 0.840% | 1,000 | 35,112 | | 35,112 | Deutsche Bank | |||||||||||||||||||
Vertical CDO, Ltd. |
02/09/46 | 2.200% | 600 | 552,130 | | 552,130 | Citigroup, Inc. | |||||||||||||||||||
Exchange-traded credit default swapsBuy Protection(2): |
|
|||||||||||||||||||||||||
Dow Jones CDX IG09 10Y Index |
12/20/17 | 0.800% | 4,453 | 145,215 | 198,344 | (53,129 | ) | | ||||||||||||||||||
Dow Jones CDX IG10 10Y Index |
06/20/18 | 1.500% | 10,454 | (87,537 | ) | 94,242 | (181,779 | ) | | |||||||||||||||||
Dow Jones CDX IG10 5Y Index |
06/20/13 | 1.550% | 6,195 | (63,054 | ) | (28,645 | ) | (34,409 | ) | | ||||||||||||||||
Dow Jones CDX IG14 5Y Index |
06/20/15 | 1.000% | 2,100 | (22,087 | ) | 9,434 | (31,521 | ) | | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||
$ | 605,944 | $ | 257,211 | $ | 348,733 | |||||||||||||||||||||
|
|
|
|
|
|
(1) | 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. |
(2) | 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. |
(3) | The fair value of credit default swap agreements on asset-backed securities and 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 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 45 |
Portfolio of Investments
as of July 31, 2012 continued
the reporting date. Increasing fair value in absolute terms, represents a deterioration of the referenced entitys credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement. |
(4) | 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. |
# | Notional Amount is shown in U.S. dollars unless otherwise stated. |
Various inputs are used in determining the value of the Funds investments. These inputs are summarized in the three broad levels listed below.
Level 1quoted prices generally in active markets for identical securities.
Level 2other 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 3significant unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of July 31, 2012 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities |
||||||||||||
Common Stocks |
$ | 44,448,110 | $ | 251,498 | $ | | ||||||
Preferred Stock |
81,249 | | | |||||||||
Unaffiliated Mutual Fund |
52,800 | | | |||||||||
Asset-Backed Securities |
| 2,123,071 | 1,339,864 | |||||||||
Certificate of Deposit |
| 693,857 | | |||||||||
Corporate Bonds |
| 24,783,822 | | |||||||||
Foreign Government Bonds |
| 5,632,446 | | |||||||||
Municipal Bonds |
| 1,456,767 | | |||||||||
Residential Mortgage-Backed Securities |
| 3,119,932 | | |||||||||
U.S. Government Agency Obligations |
| 16,994,538 | | |||||||||
U.S. Treasury Obligations |
| 13,410,910 | | |||||||||
Option Purchased |
| 885 | | |||||||||
Affiliated Money Market Mutual Fund |
3,417,683 | | | |||||||||
Repurchase Agreements |
| 12,500,000 | | |||||||||
Options Written |
| (87,957 | ) | | ||||||||
Other Financial Instruments* |
||||||||||||
Futures |
(36,741 | ) | | | ||||||||
Forward foreign currency exchange contracts |
| (136,571 | ) | |
See Notes to Financial Statements.
46 | Visit our website at www.prudentialfunds.com |
Level 1 | Level 2 | Level 3 | ||||||||||
Other Financial Instruments* (contd.) |
||||||||||||
Interest rate swap agreements |
$ | 70,960 | $ | 449,742 | $ | | ||||||
Credit default swap agreements |
(300,838 | ) | (20,559 | ) | 552,130 | |||||||
|
|
|
|
|
|
|||||||
Total |
$ | 47,733,223 | $ | 81,172,381 | $ | 1,891,994 | ||||||
|
|
|
|
|
|
* | Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as futures, forwards and swap contracts, which are recorded at the unrealized appreciation/depreciation on the instrument. |
The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:
Asset-Backed Securities |
Credit Default Swap Agreements |
Options Written |
||||||||||
Balance as of 7/31/11 |
$ | | $ | | $ | (24,605 | ) | |||||
Accrued discounts/premiums |
(218,275 | ) | | | ||||||||
Realized gain (loss) |
(2,542 | ) | | 17,320 | ||||||||
Change in unrealized appreciation (depreciation)* |
(14,573 | ) | (336 | ) | 7,285 | |||||||
Purchases |
1,150,460 | | | |||||||||
Sales |
| | | |||||||||
Transfers into Level 3 |
424,794 | 552,466 | | |||||||||
Transfers out of Level 3 |
| | | |||||||||
|
|
|
|
|
|
|||||||
Balance as of 7/31/12 |
$ | 1,339,864 | $ | 552,130 | $ | | ||||||
|
|
|
|
|
|
* | Of which, $(14,909) was included in Net Assets relating to securities held at the reporting period end. |
It is the Funds policy to recognize transfers in and transfers out at the fair value as of the beginning of period. At the reporting period end, there was one Asset-Backed security transferred into Level 3 as a result of being priced by a single broker quote and one credit default swap agreement transferred into Level 3 as a result of being priced by proxy.
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 prices provided by a single broker/dealer, the cost of the investment, and broker quotes adjusted for changes in yields of comparable U.S. Government and other securities using fixed income securities valuation model.
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 47 |
Portfolio of Investments
as of July 31, 2012 continued
The investment allocation of portfolio holdings and liabilities in excess of other assets shown as a percentage of net assets as of July 31, 2012 were as follows:
U.S. Government Agency Obligations |
14.7 | % | ||
U.S. Treasury Obligations |
11.6 | |||
Repurchase Agreements |
10.8 | |||
Foreign Government Bonds |
4.9 | |||
Diversified Financial Services |
4.8 | |||
Pharmaceuticals |
3.7 | |||
Retail & Merchandising |
3.5 | |||
FinancialBank & Trust |
3.3 | |||
Oil, Gas & Consumable Fuels |
3.3 | |||
Asset-Backed Securities |
3.0 | |||
Affiliated Money Market Mutual Fund |
3.0 | |||
Residential Mortgage-Backed Securities |
2.7 | |||
Transportation |
2.4 | |||
Financial Services |
2.4 | |||
Computers & Peripherals |
2.3 | |||
Metals & Mining |
2.2 | |||
Insurance |
2.1 | |||
Capital Markets |
2.0 | |||
Commercial Banks |
1.9 | |||
Software |
1.3 | |||
Automobile Manufacturers |
1.3 | |||
Municipal Bonds |
1.3 | |||
Media |
1.2 | |||
Tobacco |
1.1 | |||
Electric Utilities |
1.1 | |||
Energy Equipment & Services |
1.1 | |||
Computer Services & Software |
1.0 | |||
Aerospace & Defense |
0.9 | |||
Biotechnology |
0.9 | |||
Chemicals |
0.8 | |||
Commercial Services |
0.7 | |||
Healthcare Providers & Services |
0.7 | |||
Telecommunications |
0.7 | |||
Internet Software & Services |
0.7 | |||
Manufacturing |
0.6 | |||
Real Estate Investment Trusts |
0.6 | |||
Certificate of Deposit |
0.6 | |||
IT Services |
0.6 | |||
Beverages |
0.5 | |||
Semiconductors & Semiconductor Equipment |
0.5 | |||
Building & Construction |
0.5 | |||
Internet & Catalog Retail |
0.5 | |||
Machinery |
0.5 | |||
Food & Staples Retailing |
0.5 | |||
Hotels, Restaurants & Leisure |
0.5 | |||
Textiles, Apparel & Luxury Goods |
0.5 | % | ||
Life Sciences Tools & Services |
0.4 | |||
Farming & Agriculture |
0.3 | |||
Semiconductors |
0.3 | |||
Multi-Line Retail |
0.3 | |||
Airlines |
0.3 | |||
Healthcare Services |
0.3 | |||
Food Products |
0.3 | |||
Auto Components |
0.3 | |||
Distribution/Wholesale |
0.3 | |||
Hotels & Motels |
0.2 | |||
Consumer Products & Services |
0.2 | |||
Healthcare Products |
0.2 | |||
Industrial Conglomerates |
0.2 | |||
Healthcare Equipment & Supplies |
0.2 | |||
Electronic Equipment & Instruments |
0.2 | |||
Diversified Telecommunication Services |
0.2 | |||
Wireless Telecommunication Services |
0.2 | |||
Internet Services |
0.2 | |||
Household Products |
0.2 | |||
Specialty Retail |
0.2 | |||
Business Services |
0.2 | |||
Paper & Forest Products |
0.1 | |||
Multi-Utilities |
0.1 | |||
Investment Companies |
0.1 | |||
Office Electronics |
0.1 | |||
Pipelines |
0.1 | |||
Consumer Finance |
0.1 | |||
Leisure Equipment & Products |
0.1 | |||
Road & Rail |
0.1 | |||
Air Freight & Logistics |
0.1 | |||
Foods |
0.1 | |||
Professional Services |
0.1 | |||
Diversified Consumer Services |
0.1 | |||
Independent Power Production |
0.1 | |||
Hand/Machine Tools |
0.1 | |||
Containers & Packaging |
0.1 | |||
Communications Equipment |
0.1 | |||
Building Products |
0.1 | |||
Trading Companies & Distributors |
0.1 | |||
|
|
|||
112.8 | ||||
Options Written |
(0.1 | ) | ||
Liabilities in excess of other assets |
(12.7 | ) | ||
|
|
|||
100.0 | % | |||
|
|
See Notes to Financial Statements.
48 | Visit our website at www.prudentialfunds.com |
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 Funds financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.
Fair values of derivative instruments as of July 31, 2012 as presented in the Statement of Assets and Liabilities:
Derivatives not accounted |
Asset Derivatives |
Liability Derivatives |
||||||||||
Balance |
Fair Value |
Balance |
Fair Value |
|||||||||
Interest rate contracts | | $ | | Receivable from broker variation margin |
$ | 36,741 | * | |||||
Interest rate contracts | Premiums paid for swap agreements | 25,666 | Premiums received for swap agreements | 137,376 | ||||||||
Interest rate contracts | Unrealized appreciation on swap agreements | 531,564 | Unrealized depreciation on swap agreements | 10,862 | ||||||||
Interest rate contracts | | | Outstanding options written, at value | 87,957 | ||||||||
Foreign exchange contracts | Unrealized appreciation on foreign currency exchange contracts | 96,496 | | | ||||||||
Foreign exchange contracts | Unaffiliated investments | 885 | Unrealized depreciation on foreign currency exchange contracts | 233,067 | ||||||||
Credit contracts | Unrealized appreciation on swap agreements | 664,614 | Unrealized depreciation on swap agreements | 433,881 | ||||||||
Credit contracts | Premiums paid for swap agreements | 305,564 | Premiums received for swap agreements | 48,353 | ||||||||
|
|
|
|
|||||||||
Total |
$ | 1,624,789 | $ | 988,237 | ||||||||
|
|
|
|
* | Includes cumulative appreciation/depreciation on futures contracts as reported in the Portfolio of Investments. Only unsettled variation margin receivable (payable) is reported within the Statement of Assets and Liabilities. |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 49 |
Portfolio of Investments
as of July 31, 2012 continued
The effects of derivative instruments on the Statement of Operations for the year ended July 31, 2012 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income |
||||||||||||||||||||
Derivatives not accounted for as hedging |
Futures | Written Options |
Swaps | Forward Currency Contracts |
Total | |||||||||||||||
Interest rate contracts |
$ | 128,701 | $ | 45,845 | $ | 59,748 | $ | | $ | 234,294 | ||||||||||
Foreign exchange contracts |
| 4,830 | | 427,620 | 432,450 | |||||||||||||||
Credit contracts |
| | 116,437 | | 116,437 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 128,701 | $ | 50,675 | $ | 176,185 | $ | 427,620 | $ | 783,181 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income |
||||||||||||||||||||||||
Derivatives not accounted for |
Purchased Options |
Futures | Written Options |
Swaps | Forward Currency Contracts |
Total | ||||||||||||||||||
Interest rate contracts |
$ | | $ | (160,117 | ) | $ | 1,916 | $ | 624,037 | $ | | $ | 465,836 | |||||||||||
Foreign exchange contracts |
(150 | ) | | | | 4,765 | 4,615 | |||||||||||||||||
Credit contracts |
| | (3,281 | ) | (251,628 | ) | | (254,909 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | (150 | ) | $ | (160,117 | ) | $ | (1,365 | ) | $ | 372,409 | $ | 4,765 | $ | 215,542 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended July 31, 2012, the Funds average volume of derivative activities are as follows:
Purchased Options(1) |
Written Options(2) |
Futures Contracts Long Positions(3) |
Futures Contracts Short Positions(3) |
Forward Foreign Currency Exchange Purchase Contracts(4) |
Forward Foreign Currency Exchange Sale Contracts(5) |
Interest Rate Swap Agreements(6) |
Credit Default Swap Agreements Buy Protection(6) |
Credit Default Swap Agreements Sell Protection(6) |
||||||||||||||||||||||||||
$ | 207 | $ | 69,833 | $ | 16,552,482 | $ | 4,816,933 | $ | 8,006,023 | $ | 14,135,214 | $ | 13,854,594 | $ | 31,976,990 | $ | 2,770,000 |
(1) | Cost. |
(2) | Premium Received. |
(3) | Value at Trade Date. |
(4) | Value at Settlement Date Payable. |
(5) | Value at Settlement Date Receivable. |
(6) | Notional Amount. |
See Notes to Financial Statements.
50 | Visit our website at www.prudentialfunds.com |
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
FINANCIAL STATEMENTS
ANNUAL REPORT · JULY 31, 2012
Target Conservative Allocation Fund
Statement of Assets and Liabilities
as of July 31, 2012
Assets |
||||
Investments at value: |
||||
Unaffiliated Investments (cost $103,183,264) |
$ | 114,389,749 | ||
Affiliated Investments (cost $3,417,683) |
3,417,683 | |||
Repurchase Agreements (cost $12,500,000) |
12,500,000 | |||
Cash |
5,644 | |||
Foreign currency, at value (cost $50,554) |
51,880 | |||
Deposit with broker |
48,000 | |||
Receivable for investments sold |
12,108,168 | |||
Unrealized appreciation on swap agreements |
1,196,178 | |||
Dividends and interest receivable |
542,713 | |||
Premiums paid for swap agreements |
331,230 | |||
Unrealized appreciation on foreign currency exchange contracts |
96,496 | |||
Receivable from broker-variation margin |
79,657 | |||
Receivable for Fund shares sold |
19,517 | |||
Tax reclaim receivable |
1,782 | |||
|
|
|||
Total assets |
144,788,697 | |||
|
|
|||
Liabilities |
||||
Payable for investments purchased |
26,567,713 | |||
Payable to broker |
1,130,000 | |||
Unrealized depreciation on swap agreements |
444,743 | |||
Unrealized depreciation on foreign currency exchange contracts |
233,067 | |||
Accrued expenses and other liabilities |
231,178 | |||
Payable for Fund shares reacquired |
223,337 | |||
Premiums received for swap agreements |
185,729 | |||
Outstanding options written (premiums received $99,480) |
87,957 | |||
Management fee payable |
73,422 | |||
Distribution fee payable |
39,861 | |||
Affiliated transfer agent fee payable |
12,432 | |||
Deferred trustees fees |
3,707 | |||
|
|
|||
Total liabilities |
29,233,146 | |||
|
|
|||
Net Assets |
$ | 115,555,551 | ||
|
|
|||
Net assets were comprised of: |
||||
Shares of beneficial interest, at par |
$ | 10,839 | ||
Paid-in capital, in excess of par |
107,988,828 | |||
|
|
|||
107,999,667 | ||||
Undistributed net investment income |
990,919 | |||
Accumulated net realized loss on investment and foreign currency transactions |
(5,232,874 | ) | ||
Net unrealized appreciation on investments and foreign currencies |
11,797,839 | |||
|
|
|||
Net assets, July 31, 2012 |
$ | 115,555,551 | ||
|
|
See Notes to Financial Statements.
52 | Visit our website at www.prudentialfunds.com |
Class A: |
||||
Net asset value and redemption price per share, |
$ | 10.69 | ||
Maximum sales charge (5.5% of offering price) |
.62 | |||
|
|
|||
Maximum offering price to public |
$ | 11.31 | ||
|
|
|||
Class B: |
||||
Net asset value, offering price and redemption price per share, |
$ | 10.54 | ||
|
|
|||
Class C: |
||||
Net asset value, offering price and redemption price per share, |
$ | 10.54 | ||
|
|
|||
Class R: |
||||
Net asset value, offering price and redemption price per share, ($231,203 ÷ 21,671 shares of common stock issued and outstanding) |
$ | 10.67 | ||
|
|
|||
Class X: |
||||
Net asset value, offering price and redemption price per share, |
$ | 10.54 | ||
|
|
|||
Class Z: |
||||
Net asset value, offering price and redemption price per share, |
$ | 10.75 | ||
|
|
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 53 |
Statement of Operations
Year Ended July 31, 2012
Net Investment Income |
||||
Income |
||||
Unaffiliated interest income |
$ | 2,810,214 | ||
Unaffiliated dividend income (net of foreign withholding taxes $6,922) |
918,644 | |||
Affiliated dividend income |
7,593 | |||
|
|
|||
3,736,451 | ||||
|
|
|||
Expenses |
||||
Management fee |
880,913 | |||
Distribution feeClass A |
210,607 | |||
Distribution feeClass B |
108,396 | |||
Distribution feeClass C |
176,506 | |||
Distribution feeClass M |
154 | |||
Distribution feeClass R |
1,096 | |||
Distribution feeClass X |
1,080 | |||
Custodians fees and expenses |
210,000 | |||
Transfer agents fees and expenses (including affiliated expense of $78,000) |
160,000 | |||
Registration fees |
83,000 | |||
Audit fee |
68,000 | |||
Reports to shareholders |
51,000 | |||
Legal fee |
27,000 | |||
Trustees fees |
13,000 | |||
Insurance expense |
3,000 | |||
Miscellaneous |
18,413 | |||
|
|
|||
Total expenses |
2,012,165 | |||
|
|
|||
Net investment income |
1,724,286 | |||
|
|
|||
Net Realized And Unrealized Gain (Loss) On Investments And Foreign Currencies |
||||
Net realized gain (loss) on: |
||||
Investment transactions |
5,401,680 | |||
Options written transactions |
50,675 | |||
Foreign currency transactions |
453,529 | |||
Futures transactions |
128,701 | |||
Swap agreement transactions |
176,185 | |||
Short sale transactions |
(117,968 | ) | ||
|
|
|||
6,092,802 | ||||
|
|
|||
Net change in unrealized appreciation (depreciation) on: |
||||
Investments |
(2,043,757 | ) | ||
Options written |
(1,365 | ) | ||
Foreign currencies |
14,751 | |||
Futures |
(160,117 | ) | ||
Swaps |
372,409 | |||
|
|
|||
(1,818,079 | ) | |||
|
|
|||
Net gain on investments |
4,274,723 | |||
|
|
|||
Net Increase In Net Assets Resulting From Operations |
$ | 5,999,009 | ||
|
|
See Notes to Financial Statements.
54 | Visit our website at www.prudentialfunds.com |
Statement of Changes in Net Assets
Year Ended July 31, | ||||||||
2012 | 2011 | |||||||
Increase (Decrease) In Net Assets |
||||||||
Operations |
||||||||
Net investment income |
$ | 1,724,286 | $ | 1,726,785 | ||||
Net realized gain on investment and foreign currency transactions |
6,092,802 | 5,787,128 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currencies |
(1,818,079 | ) | 4,416,591 | |||||
|
|
|
|
|||||
Net increase in net assets resulting from operations |
5,999,009 | 11,930,504 | ||||||
|
|
|
|
|||||
Dividends and Distributions (Note 1) |
||||||||
Dividends from net investment income: |
||||||||
Class A |
(1,357,601 | ) | (1,475,714 | ) | ||||
Class B |
(103,939 | ) | (236,821 | ) | ||||
Class C |
(165,496 | ) | (245,325 | ) | ||||
Class M |
(182 | ) | (1,302 | ) | ||||
Class R |
(2,943 | ) | (12,420 | ) | ||||
Class X |
(1,007 | ) | (5,173 | ) | ||||
Class Z |
(93,184 | ) | (67,702 | ) | ||||
|
|
|
|
|||||
(1,724,352 | ) | (2,044,457 | ) | |||||
|
|
|
|
|||||
Fund share transactions (Net of share conversions) (Note 6) |
||||||||
Net proceeds from shares sold |
8,889,416 | 16,425,355 | ||||||
Net asset value of shares issued in reinvestment of dividends and distributions |
1,655,544 | 1,985,733 | ||||||
Cost of shares reacquired |
(23,464,188 | ) | (27,536,944 | ) | ||||
|
|
|
|
|||||
Net decrease in net assets resulting from Fund share transactions |
(12,919,228 | ) | (9,125,856 | ) | ||||
|
|
|
|
|||||
Total increase (decrease) |
(8,644,571 | ) | 760,191 | |||||
Net Assets |
||||||||
Beginning of year |
124,200,122 | 123,439,931 | ||||||
|
|
|
|
|||||
End of year(a) |
$ | 115,555,551 | $ | 124,200,122 | ||||
|
|
|
|
|||||
(a) Includes undistributed net income of: |
$ | 990,919 | $ | 583,514 | ||||
|
|
|
|
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 55 |
Notes to Financial Statements
Target Asset Allocation Funds (the Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end, diversified management investment company presently consisting of three portfolios: Target Moderate Allocation Fund, Target Conservative Allocation Fund (the Fund) and Target Growth Allocation Fund. These financial statements relate only to Target Conservative Allocation Fund. The financial statements of the other portfolios are not presented herein. The Trust was organized as a business trust in Delaware on July 29, 1998.
The Fund uses investment managers (Subadvisors), each managing a portion of the Funds assets. The following lists the Subadvisors and their respective segment during the year ended July 31, 2012.
Fund Segment |
Subadvisors | |
Large-cap value stocks | Eaton Vance Management/Epoch Investment Partners, Inc.* NFJ Investment Group LLC | |
Large-cap growth stocks | Marsico Capital Management, LLC Massachusetts Financial Services Company | |
Core fixed income bonds | Pacific Investment Management Company LLC | |
Small-cap value stocks | EARNEST Partners, LLC Vaughan Nelson Investment Management, L.P. | |
Small-cap growth stocks | Eagle Asset Management, Inc. |
* | Effective July 19, 2012, Epoch Investment Partners, Inc. replaced Eaton Vance Management. |
The investment objective of the Fund is to seek to provide current income and a reasonable level of capital appreciation.
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements.
Securities Valuation: The Fund holds portfolio 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 assetor paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Board of Trustees has delegated fair valuation responsibilities
56 | Visit our website at www.prudentialfunds.com |
to the Manager through the adoption of Valuation Procedures for valuation of the Funds securities. Under the current Valuation Procedures, a Valuation Committee is established and responsible for supervising the valuation of portfolio securities and other assets. The Valuation Procedures allow the Portfolio to utilize independent pricing vendor services, quotations from market makers and other valuation methods in events when market quotations are not readily available. A record of the Valuation Committees actions is subject to review, approval and ratification by the Board at its next regularly scheduled quarterly meeting.
Various inputs are used in determining the value of the Funds investments, which are summarized in the three broad level hierarchies based on any observable inputs used as described in the table following the Funds Schedule of Investments. The valuation methodologies and significant inputs used in determining the fair value of securities and other assets classified as Level 1, Level 2 and Level 3 of the hierarchy are as follows:
Common stock, exchange-traded funds and financial derivative instruments (including futures contracts and certain options contracts on securities), 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 of the fair value hierarchy.
In the event there is no sale or official closing price on such day, these securities are valued at the mean between the last reported bid and asked prices, or at the last bid price in absence of an asked price. These securities are classified as Level 2 of the fair value hierarchy as these inputs are considered as significant other observable inputs to the valuation.
For common stocks traded on foreign securities exchanges, certain valuation adjustments will be applied when events occur after the close of the securitys foreign market and before the Funds normal pricing time. These securities are valued using pricing vendor services that provide 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 adjustment factors are classified as Level 2 of the fair value hierarchy.
Investments in open end, non exchange-traded mutual funds are valued at their net asset value as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 as these securities have the ability to be purchased or sold at their net asset value on the date of valuation.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 57 |
Notes to Financial Statements
continued
Fixed income securities traded in the over-the-counter market, such as corporate bonds, municipal bonds, U.S. Government agencies, U.S. Treasury obligations, and sovereign issues are usually valued at prices provide by approved independent pricing vendors. The pricing vendors provide these prices usually after evaluating observable inputs including yield curves, credit rating, yield spreads, default rates, cash flows as well as broker/dealer quotations and reported trades. Securities valued using such vendor prices are classified as Level 2 of the fair value hierarchy.
Asset-backed and mortgage-related securities are usually valued by approved independent pricing vendors. The pricing vendors provide the prices using their internal pricing model with input from deal term, tranche level attributes, yield curve, prepayment speeds, and broker/dealer quotes. Securities valued using such vendor prices are classified as Level 2 of the fair value hierarchy.
Short-term debt securities of sufficient credit quality which mature in 60 days or less are valued at amortized cost which approximates fair market value. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between the principal amount due at maturity and cost. These securities are categorized as Level 2 of the fair value hierarchy.
Over-the-counter financial derivative instruments, such as option contracts, foreign currency contracts and swaps agreements, are usually valued using pricing vendor services, which derive the valuation based on underlying asset prices, indices, spreads, interest rates, exchange rates and other inputs. These instruments are categorized as Level 2 of the fair value hierarchy.
Securities and other assets that cannot be priced using the methods described above are valued with pricing methodologies approved by the Valuation Committee. In the event there are unobservable inputs used when determining such valuations, the securities will be classified as Level 3 of 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 issuers 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
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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 securitys 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 liabilitiesat the current daily rates of exchange.
(ii) purchases and sales of investment securities, income and expensesat the rate 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 period, 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 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 dates on security transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Funds 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 investments and foreign currencies. Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin as a result of, among other factors, the possibility of political and economic instability and the level of governmental supervision and regulation of foreign securities markets.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 59 |
Notes to Financial Statements
continued
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 entered into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings or on specific receivables and payables denominated in a foreign currency and to gain exposure to certain currencies. The contracts are valued daily at current exchange rates and any unrealized gain or loss is included in the Statement of Assets and Liabilities as 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. 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. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts. The Funds 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 contracts life. This risk may be mitigated by having 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 of collateral from the counterparty by the Fund to cover the Funds exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable.
Short Sales: The Fund may sell a security it does not own in anticipation of a decline in the market value of that security (short sale). When the Fund makes a short sale, it will borrow the security sold short and deliver it to the broker-dealer through which it made the short sale as collateral for its obligation to deliver the security upon conclusion of the sale. The Fund may have to pay a fee to borrow the particular securities and may be obligated to return any interest or dividends received on such borrowed securities. Dividends declared on short positions open are recorded on the ex-date and interest payable is accrued daily on fixed income securities sold short, both of which are recorded as an expense.
A gain, limited to the price at which the Fund sold the security short, or a loss, unlimited in magnitude, will be recognized upon the termination of a short sale if the market price at termination is less than or greater than, respectively, the proceeds originally received.
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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 and foreign currency exchange rates, with respect to securities or financial instruments which the Fund currently owns or intends to purchase. The Fund also used purchased options to gain exposure to certain securities and foreign currencies. The Funds 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 at 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 or currencies 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 or currency 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.
When a Fund writes an option on a swap contract, an amount equal to any premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the written option on the swap. If a call option on a swap is exercised, the Fund becomes obligated to pay a fixed interest rate (noted as the strike price) and receive a variable interest rate on a notional amount. If a put option on a swap is exercised, the Fund becomes obligated to pay a variable interest rate and receive a fixed interest rate (noted as the strike price) on a notional amount. Premiums received from writing options on swaps that expire or are exercised are treated as realized gains upon the expiration or exercise of such options on swaps. The risk associated with writing put and call options on swaps, is that the Fund will be obligated to be party to a swap agreement if an option on a swap is exercised.
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
Target Asset Allocation Funds/Target Conservative Allocation Fund | 61 |
Notes to Financial Statements
continued
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 contracts.
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 or market conditions. 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.
With exchange-traded futures and option 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 against default.
Swap Agreements: The Fund entered into credit default and interest rate swap agreements. A swap agreement is an agreement to exchange the return generated by one instrument for the return generated by another instrument. Swap agreements are negotiated in the over-the-counter market and may be executed either directly with counterparty (OTC Traded) or through a central clearing facility, such as a registered commodities exchange (Exchange Traded). 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. Upon entering into an exchange traded swap, the Fund pledges with the clearing broker an initial margin and thereafter, pays or receives an amount, known as variation margin, based on daily changes in valuation of swap contract. 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 reporting date, if any, are listed on the Schedule of Investments.
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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. The Funds 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 contracts remaining life. This risk may be mitigated by having 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 of collateral from the counterparty by the Fund to cover the Funds exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable.
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 (credit event) for the referenced party, 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 purchased credit default swaps to provide a measure of protection against defaults of the issuers. The Fund used credit default swaps on credit indices to hedge a portfolio of credit default swaps or bonds, which is less expensive than it would be to buy many credit default swaps to achieve a similar effect. The Funds maximum risk of loss from counterparty credit risk for purchased credit default swaps is the notional value of a credit default swap agreement. This risk may be mitigated by having 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 of collateral from the counterparty by the Fund to cover the Funds exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable.
As a seller of protection on credit default swap agreements, a 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
Target Asset Allocation Funds/Target Conservative Allocation Fund | 63 |
Notes to Financial Statements
continued
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 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 fair value of credit default swap agreements on corporate issues or sovereign issues of an emerging country as of the reporting date are disclosed in the footnotes to the Schedules of Investments 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 and/or performance risk. Wider credit spreads and increasing market value in absolute terms, when compared to the notional amount of the swap, represent a deterioration of the referenced entitys credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement.
In addition to each instruments primary underlying risk exposure (e.g. interest rate, credit, equity or foreign exchange, etc.), 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
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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 July 31, 2012, the Fund has not met conditions under such agreements, which give the counterparty the right to call for an early termination.
Forward currency contracts, written options, short sales, swaps and financial futures contracts involve elements of both market and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities.
Repurchase Agreements: In connection with transactions in repurchase agreements with United States financial institutions, it is the Funds policy that its custodian or designated subcustodians under triparty repurchase agreements, as the case may be, take possession of the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to ensure the adequacy on the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited.
Reverse Repurchase Agreements: The Fund enters into reverse repurchase agreements with qualified, third party broker-dealers as determined by and under the direction of the Trusts Board of Trustees. Interest on the value of reverse repurchase agreements entered into and outstanding is based upon competitive market rates at the time of execution of the agreement. At the time the Fund enters into a reverse repurchase agreement, it establishes and maintains a segregated account with the lender containing liquid investment grade securities having a value not less than the repurchase price, including accrued interest, of the reverse repurchase agreement.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains or losses from investment and currency transactions on sales of portfolio securities are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date and 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. Net investment income or loss (other than distribution fees, which are charged directly to respective class) and
Target Asset Allocation Funds/Target Conservative Allocation Fund | 65 |
Notes to Financial Statements
continued
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 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 Funds 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 Trust has a management agreement with PI. Pursuant to this agreement, PI manages the investment operations of the Fund, administers the Funds affairs and supervises the Subadvisers performance of all investment advisory services. Pursuant to the advisory agreement, PI pays the cost of compensation of officers of the Fund, occupancy and certain clerical and accounting costs of the Fund. The Fund bears all other costs and expenses.
The management fee paid to PI is computed daily and payable monthly at an annual rate of .75 % of average daily net assets up to $500 million, .70% of average daily net assets for the next $500 million and .65% of average daily net assets in excess of $1 billion. The effective management fee rate was .75% for the year ended July 31, 2012.
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The Fund has a distribution agreement with Prudential Investment Management Services LLC (PIMS), which acts as the distributor of the Class A, Class B, Class C, Class M, Class R and Class Z shares of the Fund. In addition, the Fund has a distribution agreement with Prudential Annuities Distributors, Inc. (PAD), which, together with PIMS, serves as co-distributor of the Class M and Class X shares of the Fund. The Fund compensates PIMS and PAD, as applicable, for distributing and servicing the Funds Class A, Class B, Class C, Class M, Class R and Class X shares, pursuant to plans of distribution (the Distribution Plans), regardless of expenses actually incurred by PIMS or PAD. 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 and PAD, as applicable, for distribution related activities at an annual rate of up to .30%, 1%, 1%, 1%, .75% and 1% of the average daily net assets of the Class A, B, C, M, R and X shares, respectively. PIMS has contractually agreed through November 30, 2013 to limit such expenses to .25% and .50% of the average daily net assets of the Class A and Class R shares, respectively.
PIMS has advised the Fund that it has received $31,973 in front-end sales charges resulting from sales of Class A shares during the year ended July 31, 2012. From these fees, PIMS paid such sales charges to broker-dealers, which in turn paid commissions to sales persons and incurred other distribution costs. PIMS has advised the Fund that for the year ended July 31, 2012, it has received $113, $13,622 and $984 in contingent deferred sales charges imposed upon certain redemptions by Class A, Class B and Class C, respectively.
PIMS and PI 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 Funds 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 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.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 67 |
Notes to Financial Statements
continued
Note 4. Portfolio Securities
Purchases and sales of portfolio securities, excluding short-term investments and U.S. Government investments, for the year ended July 31, 2012, aggregated $242,373,224 and $269,559,662, respectively.
Transactions in options written during the year ended July 31, 2012, were as follows:
Notional Amount (000) |
Premiums Received |
|||||||
Options outstanding at July 31, 2011 |
28,700 | $ | 86,344 | |||||
Written options |
9,600 | 99,480 | ||||||
Expired options |
(20,300 | ) | (43,052 | ) | ||||
Closed options |
(11,600 | ) | (43,292 | ) | ||||
|
|
|
|
|||||
Options outstanding at July 31, 2012 |
6,400 | $ | 99,480 | |||||
|
|
|
|
Note 5. Distributions and Tax Information
Distributions to shareholders, which are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles, are recorded on the ex-dividend date. In order to present undistributed net investment income, accumulated net realized loss on investment and foreign currency transactions, and paid-in capital in excess of par on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to undistributed net investment income and accumulated net realized loss on investment and foreign currency transactions. For the year ended July 31, 2012, the adjustments were to increase undistributed net investment income and increase accumulated net realized loss on investment and foreign currency transactions by $407,471 due to differences in the treatment for book and tax purposes of certain transactions involving foreign securities and currencies, reclasses on swaps, paydown losses and other book to tax adjustments. 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 July 31, 2012 and July 31, 2011, the tax character of dividends paid as reflected in the Statement of Changes in Net Assets were $1,724,352 and $2,044,457 of ordinary income, respectively.
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As of July 31, 2012, the accumulated undistributed earnings on a tax basis was $911,392 of ordinary income. This differs from the amount shown on the Statement of Assets and Liabilities primarily due to cumulative timing differences.
The United States federal income tax basis of the Funds investments and the net unrealized appreciation as of July 31, 2012 were as follows:
Tax Basis |
Appreciation |
Depreciation |
Net |
Other Cost |
Adjusted Net | |||||
$121,097,958 | $12,956,807 | $(3,747,333) | $9,209,474 | $806,877 | $10,016,351 |
The difference between book basis and tax basis was primarily attributable to deferred losses on wash sales and straddles. The other cost basis adjustments are primarily attributable to appreciation (depreciation) of foreign currency transactions and mark to market of receivables, payables, futures, forwards, swaps and options.
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 July 31, 2012 (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 July 31, 2012 (pre-enactment losses) may have an increased likelihood to expire unused. The Fund utilized approximately $4,868,000 of its pre-enactment losses to offset net taxable gains realized in the fiscal year ended July 31, 2012. No capital gains distributions are expected to be paid to shareholders until net gains have been realized in excess of such losses. As of July 31, 2012, the pre and post-enactment losses were approximately:
Post-Enactment Losses: |
$ | 0 | ||
|
|
|||
Pre-Enactment Losses: |
||||
Expiring 2018 |
$ | 3,368,000 | ||
|
|
Management has analyzed the Funds 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 Funds financial statements for the current reporting period. The Funds 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.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 69 |
Notes to Financial Statements
continued
Note 6. Capital
The Fund offers Class A, Class B, Class C, Class R, Class X and Class Z shares. Class A shares are subject to a maximum front-end sales charge of 5.50%. Investors who purchase $1 million or more of Class A shares 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 CDSD is waived for purchases by certain retirement or benefit plans. Class B shares are subject to a CDSC of 5%, which decreases by 1% annually to 1% in the fifth and sixth years and 0% in the seventh year. Class B shares automatically convert to Class A shares on a quarterly basis approximately seven years after purchase. The CDSC for Class C shares is 1% for shares redeemed within 12 months of purchase. Class X shares are generally closed to new purchases. Class X shares are subject to a CDSC of 6%, which decreases by 1% annually to 4% in the third and fourth years, by 1% annually to 2% in the sixth and seventh years, and 1% in the eighth year. Class X shares automatically convert to Class A shares on a monthly basis approximately ten years after purchase. An exchange privilege is also available for shareholders who qualify to purchase Class A shares at net asset value. 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. Class R and 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 as presented in the table of transactions in shares of beneficial interest.
The Fund has authorized an unlimited number of shares of beneficial interest at $.001 par value per share. As of July 31, 2012, Prudential owned 250 shares of Class R shares.
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Transactions in shares of beneficial interest were as follows:
Class A |
Shares | Amount | ||||||
Year ended July 31, 2012: |
||||||||
Shares sold |
487,472 | $ | 4,979,379 | |||||
Shares issued in reinvestment of dividends and distributions |
134,861 | 1,324,337 | ||||||
Shares reacquired |
(1,516,392 | ) | (15,496,481 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(894,059 | ) | (9,192,765 | ) | ||||
Shares issued upon conversion from Class B, Class M, and Class X |
548,362 | 5,636,575 | ||||||
Shares reacquired upon conversion into Class Z |
(1,834 | ) | (19,133 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(347,531 | ) | $ | (3,575,323 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
1,236,113 | $ | 12,355,878 | |||||
Shares issued in reinvestment of dividends and distributions |
146,654 | 1,440,143 | ||||||
Shares reacquired |
(1,774,883 | ) | (17,850,211 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(392,116 | ) | (4,054,190 | ) | ||||
Shares issued upon conversion from Class B, Class M, and Class X |
918,469 | 9,177,661 | ||||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
526,353 | $ | 5,123,471 | |||||
|
|
|
|
|||||
Class B |
||||||||
Year ended July 31, 2012: |
||||||||
Shares sold |
80,688 | $ | 818,127 | |||||
Shares issued in reinvestment of dividends and distributions |
10,392 | 101,111 | ||||||
Shares reacquired |
(176,111 | ) | (1,783,579 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(85,031 | ) | (864,341 | ) | ||||
Shares reaquired upon conversion into Class A |
(547,710 | ) | (5,553,225 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(632,741 | ) | $ | (6,417,566 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
113,360 | $ | 1,125,382 | |||||
Shares issued in reinvestment of dividends and distributions |
23,533 | 228,979 | ||||||
Shares reacquired |
(378,904 | ) | (3,749,663 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(242,011 | ) | (2,395,302 | ) | ||||
Shares reaquired upon conversion into Class A |
(846,320 | ) | (8,353,080 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(1,088,331 | ) | $ | (10,748,382 | ) | |||
|
|
|
|
Target Asset Allocation Funds/Target Conservative Allocation Fund | 71 |
Notes to Financial Statements
continued
Class C |
Shares | Amount | ||||||
Year ended July 31, 2012: |
||||||||
Shares sold |
106,450 | $ | 1,071,197 | |||||
Shares issued in reinvestment of dividends and distributions |
16,158 | 157,216 | ||||||
Shares reacquired |
(364,417 | ) | (3,668,039 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(241,809 | ) | $ | (2,439,626 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
127,848 | $ | 1,261,855 | |||||
Shares issued in reinvestment of dividends and distributions |
23,842 | 231,983 | ||||||
Shares reacquired |
(445,836 | ) | (4,425,705 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(294,146 | ) | $ | (2,931,867 | ) | |||
|
|
|
|
|||||
Class M |
||||||||
Period ended April 13, 2012*: |
||||||||
Shares sold |
| $ | | |||||
Shares issued in reinvestment of dividends and distributions |
19 | 182 | ||||||
Shares reacquired |
(748 | ) | (7,320 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(729 | ) | (7,138 | ) | ||||
Shares reacquired upon conversion into Class A |
(4,157 | ) | (41,636 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(4,886 | ) | $ | (48,774 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
1,156 | $ | 11,297 | |||||
Shares issued in reinvestment of dividends and distributions |
134 | 1,302 | ||||||
Shares reacquired |
(1,844 | ) | (17,937 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(554 | ) | (5,338 | ) | ||||
Shares reacquired upon conversion into Class A |
(12,448 | ) | (121,609 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(13,002 | ) | $ | (126,947 | ) | |||
|
|
|
|
|||||
Class R |
||||||||
Year ended July 31, 2012: |
||||||||
Shares sold |
2,115 | $ | 21,927 | |||||
Shares issued in reinvestment of dividends and distributions |
300 | 2,943 | ||||||
Shares reacquired |
(3,361 | ) | (33,377 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(946 | ) | $ | (8,507 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
20,749 | $ | 203,885 | |||||
Shares issued in reinvestment of dividends and distributions |
1,265 | 12,420 | ||||||
Shares reacquired |
(71,666 | ) | (741,615 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(49,652 | ) | $ | (525,310 | ) | |||
|
|
|
|
72 | Visit our website at www.prudentialfunds.com |
Class X |
Shares | Amount | ||||||
Year ended July 31, 2012: |
||||||||
Shares sold |
3,223 | $ | 31,683 | |||||
Shares issued in reinvestment of dividends and distributions |
103 | 1,007 | ||||||
Shares reacquired |
(2,484 | ) | (23,726 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
842 | 8,964 | ||||||
Shares reacquired upon conversion into Class A |
(4,149 | ) | (41,714 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(3,307 | ) | $ | (32,750 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
16,286 | $ | 158,552 | |||||
Shares issued in reinvestment of dividends and distributions |
532 | 5,173 | ||||||
Shares reacquired |
(15,021 | ) | (146,500 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
1,797 | 17,225 | ||||||
Shares reacquired upon conversion into Class A |
(71,382 | ) | (702,972 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(69,585 | ) | $ | (685,747 | ) | |||
|
|
|
|
|||||
Class Z |
||||||||
Year ended July 31, 2012: |
||||||||
Shares sold |
195,484 | $ | 1,967,103 | |||||
Shares issued in reinvestment of dividends and distributions |
6,972 | 68,748 | ||||||
Shares reacquired |
(237,323 | ) | (2,451,666 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(34,867 | ) | (415,815 | ) | ||||
Shares issued upon conversion from Class A |
1,826 | 19,133 | ||||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(33,041 | ) | $ | (396,682 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
131,164 | $ | 1,308,506 | |||||
Shares issued in reinvestment of dividends and distributions |
6,667 | 65,733 | ||||||
Shares reacquired |
(59,727 | ) | (605,313 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
78,104 | $ | 768,926 | |||||
|
|
|
|
* | 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. |
Note 7. Borrowings
The Trust, 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 December 16, 2011 through December 14, 2012. The Funds pay an annualized commitment fee of 0.08% of the unused portion of the SCA. Prior to December 16, 2011, the Funds had another Syndicated Credit Agreement of a $750 million commitment with an annualized commitment fee of 0.10% of the unused portion.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 73 |
Notes to Financial Statements
continued
Interest on any borrowings under these SCAs is paid at contracted market rates. The commitment fee for the unused amount is accrued daily and paid quarterly.
The Fund did not utilize the SCA during the year ended July 31, 2012.
The average daily balance of reverse repurchase agreements outstanding during the year ended July 31, 2012 was $307,875 at a weighted average interest rate of approximately 0.15%. The average daily balance is based on the number of days the Fund had an outstanding balance. The maximum amount of total reverse repurchase agreements outstanding at any month-end during the period was $307,875 as of January 31, 2012 which was 0.3% of total assets.
Note 8. New Accounting Pronouncement
In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11 regarding Disclosures about Offsetting Assets and Liabilities. The amendments, which will be effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, require an entity to disclose information about offsetting and related arrangements for assets and liabilities, financial instruments and derivatives that are either currently offset in accordance with current requirements or are subject to enforceable master netting arrangements or similar agreements. At this time, management is evaluating the implications of ASU No. 2011-11 and its impact on the financial statements has not yet been determined.
74 | Visit our website at www.prudentialfunds.com |
Financial Highlights
Class A Shares | ||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2012(c) | 2011(c) | 2010(c) | 2009(c) | 2008(c) | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $10.30 | $9.53 | $8.48 | $9.84 | $10.66 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .17 | .16 | .18 | .23 | .27 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | .38 | .79 | .90 | (.92 | ) | (.32 | ) | |||||||||||||
Total from investment operations | .55 | .95 | 1.08 | (.69 | ) | (.05 | ) | |||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.16 | ) | (.18 | ) | (.03 | ) | (.37 | ) | (.27 | ) | ||||||||||
Tax return of capital | - | - | - | (.05 | ) | - | ||||||||||||||
Distributions from net realized gains on investments | - | - | - | (.25 | ) | (.50 | ) | |||||||||||||
Total dividends and distributions | (.16 | ) | (.18 | ) | (.03 | ) | (.67 | ) | (.77 | ) | ||||||||||
Net asset value, end of year | $10.69 | $10.30 | $9.53 | $8.48 | $9.84 | |||||||||||||||
Total Return(a) | 5.53% | 10.04% | 12.72% | (6.36)% | (.75)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $86,352 | $86,746 | $75,228 | $63,491 | $68,408 | |||||||||||||||
Average net assets (000) | $84,243 | $83,395 | $70,865 | $59,479 | $65,817 | |||||||||||||||
Ratios to average net assets(d): | ||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees(b) | 1.54% | 1.52% | 1.52% | 1.64% | (e) | 1.43% | ||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.29% | 1.27% | 1.27% | 1.39% | (e) | 1.18% | ||||||||||||||
Net investment income | 1.64% | 1.59% | 2.00% | 2.76% | 2.59% | |||||||||||||||
Portfolio turnover rate | 248% | 188% | 200% | 356% | 353% |
(a) 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 returns may reflect adjustments to conform to generally accepted accounting principles.
(b) The distributor of the Fund has contractually agreed to limit its distribution and service (12b-1) fees to ..25% of the average daily assets of the Class A shares.
(c) Calculated based upon the average shares outstanding during the year.
(d) Does not include expenses of the underlying portfolios in which the Fund invests.
(e) Includes interest expense of .06%.
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 75 |
Financial Highlights
continued
Class B Shares | ||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2012(b) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $10.15 | $9.41 | $8.43 | $9.82 | $10.64 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .09 | .08 | .11 | .17 | .19 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | .39 | .78 | .89 | (.92 | ) | (.32 | ) | |||||||||||||
Total from investment operations | .48 | .86 | 1.00 | (.75 | ) | (.13 | ) | |||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.09 | ) | (.12 | ) | (.02 | ) | (.34 | ) | (.19 | ) | ||||||||||
Tax return of capital | - | - | - | (.05 | ) | - | ||||||||||||||
Distributions from net realized gains on investments | - | - | - | (.25 | ) | (.50 | ) | |||||||||||||
Total dividends and distributions | (.09 | ) | (.12 | ) | (.02 | ) | (.64 | ) | (.69 | ) | ||||||||||
Net asset value, end of year | $10.54 | $10.15 | $9.41 | $8.43 | $9.82 | |||||||||||||||
Total Return(a) | 4.86% | 9.20% | 11.82% | (7.05)% | (1.49)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $7,856 | $13,995 | $23,212 | $32,609 | $56,853 | |||||||||||||||
Average net assets (000) | $10,840 | $18,900 | $28,746 | $39,077 | $70,345 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees | 2.29% | 2.27% | 2.27% | 2.39% | (d) | 2.18% | ||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.29% | 1.27% | 1.27% | 1.39% | (d) | 1.18% | ||||||||||||||
Net investment income | .93% | .82% | 1.26% | 2.08% | 1.82% | |||||||||||||||
Portfolio turnover rate | 248% | 188% | 200% | 356% | 353% |
(a) 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 returns may reflect adjustments to conform to generally accepted accounting principles.
(b) Calculated based upon the average shares outstanding during the year.
(c) Does not include expenses of the underlying portfolios in which the Fund invests.
(d) Includes interest expense of .06%.
See Notes to Financial Statements.
76 | Visit our website at www.prudentialfunds.com |
Class C Shares | ||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2012(b) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $10.15 | $9.41 | $8.43 | $9.82 | $10.64 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .09 | .08 | .11 | .17 | .19 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | .39 | .78 | .89 | (.92 | ) | (.32 | ) | |||||||||||||
Total from investment operations | .48 | .86 | 1.00 | (.75 | ) | (.13 | ) | |||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.09 | ) | (.12 | ) | (.02 | ) | (.34 | ) | (.19 | ) | ||||||||||
Tax return of capital | - | - | - | (.05 | ) | - | ||||||||||||||
Distributions from net realized gains on investments | - | - | - | (.25 | ) | (.50 | ) | |||||||||||||
Total dividends and distributions | (.09 | ) | (.12 | ) | (.02 | ) | (.64 | ) | (.69 | ) | ||||||||||
Net asset value, end of year | $10.54 | $10.15 | $9.41 | $8.43 | $9.82 | |||||||||||||||
Total Return(a) | 4.86% | 9.20% | 11.82% | (7.05)% | (1.49)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $17,307 | $19,133 | $20,499 | $21,777 | $29,417 | |||||||||||||||
Average net assets (000) | $17,651 | $20,208 | $21,746 | $23,090 | $32,068 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees | 2.29% | 2.27% | 2.27% | 2.39% | (d) | 2.18% | ||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.29% | 1.27% | 1.27% | 1.39% | (d) | 1.18% | ||||||||||||||
Net investment income | .89% | .83% | 1.26% | 2.04% | 1.83% | |||||||||||||||
Portfolio turnover rate | 248% | 188% | 200% | 356% | 353% |
(a) 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 returns may reflect adjustments to conform to generally accepted accounting principles.
(b) Calculated based upon the average shares outstanding during the year.
(c) Does not include expenses of the underlying portfolios in which the Fund invests.
(d) Includes interest expense of .06%.
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 77 |
Financial Highlights
continued
Class M Shares | ||||||||||||||||||||||||||
Period Ended April 13, |
Year Ended July 31, | |||||||||||||||||||||||||
2012(b)(e) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | 2007 | |||||||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $10.15 | $9.41 | $8.43 | $9.82 | $10.64 | $10.31 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment income | .07 | .08 | .12 | .17 | .19 | .17 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | .31 | .78 | .88 | (.92 | ) | (.32 | ) | .56 | ||||||||||||||||||
Total from investment operations | .38 | .86 | 1.00 | (.75 | ) | (.13 | ) | .73 | ||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||
Dividends from net investment income | (.09 | ) | (.12 | ) | (.02 | ) | (.34 | ) | (.19 | ) | (.19 | ) | ||||||||||||||
Tax return of capital | - | - | - | (.05 | ) | - | - | |||||||||||||||||||
Distributions from net realized gains on investments | - | - | - | (.25 | ) | (.50 | ) | (.21 | ) | |||||||||||||||||
Total dividends and distributions | (.09 | ) | (.12 | ) | (.02 | ) | (.64 | ) | (.69 | ) | (.40 | ) | ||||||||||||||
Net asset value, end of period | $10.44 | $10.15 | $9.41 | $8.43 | $9.82 | $10.64 | ||||||||||||||||||||
Total Return(a) | 3.86% | 9.20% | 11.82% | (7.06)% | (1.49)% | 7.12% | ||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Net assets, end of period (000) | $2 | $50 | $168 | $479 | $1,047 | $2,936 | ||||||||||||||||||||
Average net assets (000) | $22 | $94 | $339 | $654 | $2,357 | $3,219 | ||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees | 2.29% | (f) | 2.27% | 2.27% | 2.39% | (d) | 2.18% | 2.10% | ||||||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.29% | (f) | 1.27% | 1.27% | 1.39% | (d) | 1.18% | 1.10% | ||||||||||||||||||
Net investment income | .75% | (f) | .80% | 1.28% | 2.09% | 1.81% | 1.60% | |||||||||||||||||||
Portfolio turnover rate | 248% | (g)(h) | 188% | 200% | 356% | 353% | 395% |
(a) 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 one full year are not annualized.
(b) Calculated based upon the average shares outstanding during the period.
(c) Does not include expenses of the underlying portfolios in which the Fund invests.
(d) Includes interest expense of .06%.
(e) As of April 13, 2012, the last conversion of Class M shares was completed. There are no shares outstanding and Class M shares are no longer being offered for sale.
(f) Annualized.
(g) Not annualized.
(h) Calculated as of July 31, 2012.
See Notes to Financial Statements.
78 | Visit our website at www.prudentialfunds.com |
Class R Shares | ||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2012(c) | 2011(c) | 2010(c) | 2009(c) | 2008(c) | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $10.28 | $9.51 | $8.48 | $9.85 | $10.67 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .14 | .13 | .16 | .24 | .24 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | .39 | .80 | .89 | (.95 | ) | (.31 | ) | |||||||||||||
Total from investment operations | .53 | .93 | 1.05 | (.71 | ) | (.07 | ) | |||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.14 | ) | (.16 | ) | (.02 | ) | (.36 | ) | (.25 | ) | ||||||||||
Tax return of capital | - | - | - | (.05 | ) | - | ||||||||||||||
Distributions from net realized gains on investments | - | - | - | (.25 | ) | (.50 | ) | |||||||||||||
Total dividends and distributions | (.14 | ) | (.16 | ) | (.02 | ) | (.66 | ) | (.75 | ) | ||||||||||
Net asset value, end of year | $10.67 | $10.28 | $9.51 | $8.48 | $9.85 | |||||||||||||||
Total Return(a) | 5.29% | 9.84% | 12.44% | (6.59)% | (.99)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $231 | $232 | $687 | $721 | $4,015 | |||||||||||||||
Average net assets (000) | $219 | $669 | $686 | $1,255 | $4,787 | |||||||||||||||
Ratios to average net assets(d): | ||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees(b) | 1.79% | 1.77% | 1.77% | 1.89% | (e) | 1.68% | ||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.29% | 1.27% | 1.27% | 1.39% | (e) | 1.18% | ||||||||||||||
Net investment income | 1.39% | 1.29% | 1.76% | 2.70% | 2.33% | |||||||||||||||
Portfolio turnover rate | 248% | 188% | 200% | 356% | 353% |
(a) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles.
(b) The distributor of the Fund has contractually agreed to limit its distribution and service (12b-1) fees to .50% of the average daily assets of the Class R shares.
(c) Calculated based upon the average shares outstanding during the year.
(d) Does not include expenses of the underlying portfolios in which the Fund invests.
(e) Includes interest expense of .06%.
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 79 |
Financial Highlights
continued
Class X Shares | ||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2012(b) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $10.16 | $9.41 | $8.43 | $9.82 | $10.63 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .09 | .08 | .12 | .18 | .21 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | .38 | .79 | .88 | (.93 | ) | (.31 | ) | |||||||||||||
Total from investment operations | .47 | .87 | 1.00 | (.75 | ) | (.10 | ) | |||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.09 | ) | (.12 | ) | (.02 | ) | (.34 | ) | (.21 | ) | ||||||||||
Tax return of capital | - | - | - | (.05 | ) | - | ||||||||||||||
Distributions from net realized gains on investments | - | - | - | (.25 | ) | (.50 | ) | |||||||||||||
Total dividends and distributions | (.09 | ) | (.12 | ) | (.02 | ) | (.64 | ) | (.71 | ) | ||||||||||
Net asset value, end of year | $10.54 | $10.16 | $9.41 | $8.43 | $9.82 | |||||||||||||||
Total Return(a) | 4.75% | 9.31% | 11.82% | (7.05)% | (1.22)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $93 | $123 | $769 | $977 | $2,120 | |||||||||||||||
Average net assets (000) | $108 | $391 | $863 | $1,342 | $2,441 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees | 2.29% | 2.27% | 2.27% | 2.37% | (d) | 1.99% | ||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.29% | 1.27% | 1.27% | 1.39% | (d) | 1.18% | ||||||||||||||
Net investment income | .90% | .78% | 1.26% | 2.13% | 2.02% | |||||||||||||||
Portfolio turnover rate | 248% | 188% | 200% | 356% | 353% |
(a) 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 returns may reflect adjustments to conform to generally accepted accounting principles.
(b) Calculated based upon the average shares outstanding during the year.
(c) Does not include expenses of the underlying portfolios in which the Fund invests.
(d) Includes interest expense of .06%.
See Notes to Financial Statements.
80 | Visit our website at www.prudentialfunds.com |
Class Z Shares | ||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2012(b) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $10.35 | $9.57 | $8.50 | $9.85 | $10.67 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .20 | .19 | .21 | .26 | .30 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | .39 | .79 | .89 | (.93 | ) | (.32 | ) | |||||||||||||
Total from investment operations | .59 | .98 | 1.10 | (.67 | ) | (.02 | ) | |||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.19 | ) | (.20 | ) | (.03 | ) | (.38 | ) | (.30 | ) | ||||||||||
Tax return of capital | - | - | - | (.05 | ) | - | ||||||||||||||
Distributions from net realized gains on investments | - | - | - | (.25 | ) | (.50 | ) | |||||||||||||
Total dividends and distributions | (.19 | ) | (.20 | ) | (.03 | ) | (.68 | ) | (.80 | ) | ||||||||||
Net asset value, end of year | $10.75 | $10.35 | $9.57 | $8.50 | $9.85 | |||||||||||||||
Total Return(a) | 5.85% | 10.31% | 12.97% | (6.14)% | (.50)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $3,717 | $3,921 | $2,877 | $3,156 | $5,610 | |||||||||||||||
Average net assets (000) | $4,379 | $3,567 | $3,031 | $3,809 | $5,771 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees | 1.29% | 1.27% | 1.27% | 1.39% | (d) | 1.18% | ||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.29% | 1.27% | 1.27% | 1.39% | (d) | 1.18% | ||||||||||||||
Net investment income | 1.90% | 1.84% | 2.26% | 3.10% | 2.85% | |||||||||||||||
Portfolio turnover rate | 248% | 188% | 200% | 356% | 353% |
(a) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles.
(b) Calculated based upon the average shares outstanding during the year.
(c) Does not include expenses of the underlying portfolios in which the Fund invests.
(d) Includes interest expense of .06%.
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 81 |
Report of Independent Registered Public
Accounting Firm
The Board of Trustees and Shareholders
Target Asset Allocation FundsTarget Conservative Allocation Fund:
We have audited the accompanying statement of assets and liabilities of the Target Conservative Allocation Fund (hereafter referred to as the Fund), a portfolio of the Target Asset Allocation Funds, including the portfolio of investments, as of July 31, 2012, and the related statement of operations for the year then ended, the statement 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 Funds 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 July 31, 2012, 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 July 31, 2012, 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
September 20, 2012
82 | Visit our website at www.prudentialfunds.com |
Tax Information
(Unaudited)
For the year ended July 31, 2012, the Fund reports the maximum amount allowable but not less than the following percentages of ordinary income distributions paid as: 1) qualified dividend income in accordance with Section 854 of the Internal Revenue Code (QDI); 2) eligible for the corporate dividends received deduction in accordance with Section 854 of the Internal Revenue Code (DRD); and 3) interest-related dividends in accordance with Section 871(k)(1) and 881(e)(1) of the Internal Revenue Code (IRD):
QDI | DRD | IRD | ||||||||||
Target Conservative Allocation Fund |
69.98 | % | 63.27 | % | 65.05 | % |
Interest-related dividends do not include any distributions paid by a fund with respect to Fund tax years beginning after July 31, 2012. Consequently, this provision expires with respect to such distributions paid after the Funds fiscal year end.
In January 2013, you will be advised on IRS Form 1099-DIV or substitute 1099-DIV as to the federal tax status of the dividends received by you in calendar year 2012.
We are required by Massachusetts, Missouri and Oregon to inform you that dividends which have been derived from interest on federal obligations are not taxable to shareholders providing the mutual fund meets certain requirements mandated by the respective states taxing authorities. We are pleased to report that 4.86% of the ordinary income dividends paid qualify for such deduction.
For more detailed information regarding your state and local taxes, you should contact your tax advisor or the state/local taxing authorities.
Target Asset Allocation Funds/Target Conservative Allocation Fund | 83 |
INFORMATION ABOUT BOARD MEMBERS AND OFFICERS
(Unaudited)
Information about Board Members and Officers 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.
Independent Board Members(1) |
||||
Name, Address, Age Position(s) Portfolios Overseen |
Principal Occupation(s) During Past Five Years |
Other Directorships Held | ||
Kevin J. Bannon (60) Board Member Portfolios Overseen: 61 |
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 (60) Board Member Portfolios Overseen: 61 |
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). | ||
Michael S. Hyland, CFA (66) Board Member Portfolios Overseen: 61 |
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 (73) Board Member Portfolios Overseen: 61 |
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). |
Target Asset Allocation Funds/Target Conservative Allocation Fund
Independent Board Members(1) |
| |||
Name, Address, Age Position(s) Portfolios Overseen |
Principal Occupation(s) During Past Five Years |
Other Directorships Held | ||
Stephen P. Munn (70) Board Member Portfolios Overseen: 61 |
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). | ||
Richard A. Redeker (69) Board Member & Independent Chair Portfolios Overseen: 61 |
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. | ||
Robin B. Smith (72) Board Member Portfolios Overseen: 61 |
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 (69) Board Member Portfolios Overseen: 61 |
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 (49) Board Member & President Portfolios Overseen: 61 |
President of Prudential Investments LLC (since January 2012); Executive Vice President of Jennison Associates LLC and Head of Retail Distribution of Prudential Investments LLC (June 2005 - December 2011). |
None. |
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Interested Board Members(1) |
| |||
Name, Address, Age Position(s) Portfolios Overseen |
Principal Occupation(s) During Past Five Years |
Other Directorships Held | ||
Scott E. Benjamin (39) Board Member & Vice President Portfolios Overseen: 61 |
Executive Vice President (since June 2009) of Prudential Investments LLC and 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. |
(1) The year that each Board Member joined the Funds Board is as follows:
Kevin J. Bannon, 2008; Linda W. Bynoe, 2005; Michael S. Hyland, 2008; Douglas H. McCorkindale, 1998; Stephen P. Munn, 2008; Richard A. Redeker, 2003; Robin B. Smith, 2003; Stephen G. Stoneburn, 1999; Stuart S. Parker, Board Member and President since 2012; Scott E. Benjamin, Board Member since 2010 and Vice President since 2009.
Fund Officers(a)(1) |
| |
Name, Address and Age Position with Fund |
Principal Occupation(s) During Past Five Years | |
Judy A. Rice (64) Vice President |
President, Chief Executive Officer (May 2011-Present) and Executive Vice President (December 2008-May 2011) of Prudential Investment Management Services LLC; Formerly President, Chief Executive Officer, Chief Operating Officer and Officer-In-Charge (February 2003-December 2011) of Prudential Investments LLC; formerly President, Chief Executive Officer and Officer-In-Charge (April 2003-December 2011) of Prudential Mutual Fund Services LLC (PMFS); formerly Member of the Board of Directors of Jennison Associates LLC (November 2010-December 2011); formerly Vice President (February 1999-April 2006) of Prudential Investment Management Services LLC; formerly President, COO, CEO and Manager of PIFM Holdco, LLC (April 2006-December 2011); formerly President, Chief Executive Officer, Chief Operating Officer and Officer-In-Charge (May 2003-June 2005) and Director (May 2003-March 2006) and Executive Vice President (June 2005-March 2006) of AST Investment Services, Inc.; Member of Board of Governors of the Investment Company Institute. |
Target Asset Allocation Funds/Target Conservative Allocation Fund
Fund Officers(a)(1) |
| |
Name, Address and Age Position with Fund |
Principal Occupation(s) During Past Five Years | |
Raymond A. OHara (56) 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 PMFS (since June 2012) and Corporate Counsel of AST Investment Services, Inc. (since June 2012); formerly 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 1988August 2008) of Blazzard & Hasenauer, P.C. (formerly, Blazzard, Grodd & Hasenauer, P.C.). | |
Deborah A. Docs (54) 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. | |
Jonathan D. Shain (54) 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 PMFS; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | |
Claudia DiGiacomo (37) 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). | |
Andrew R. French (49) 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 PMFS. | |
Amanda S. Ryan (34) 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 (2008-2012). | |
Timothy J. Knierim (53) Chief Compliance Officer |
Chief Compliance Officer of Prudential Investment Management, Inc. (since July 2007); formerly Chief Risk Officer of Prudential Investment Management, Inc. and Prudential Investments LLC (2002-2007) and formerly Chief Ethics Officer of Prudential Investment Management, Inc. and Prudential Investments LLC (2006-2007). | |
Valerie M. Simpson (54) Deputy Chief Compliance Officer |
Chief Compliance Officer (since April 2007) of Prudential Investments LLC and AST Investment Services, Inc.; formerly Vice President-Financial Reporting (June 1999-March 2006) for Prudential Life and Annuities Finance. |
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Fund Officers(a)(1) |
| |
Name, Address and Age Position with Fund |
Principal Occupation(s) During Past Five Years | |
Theresa C. Thompson (50) Deputy Chief Compliance Officer |
Vice President, Compliance, Prudential Investments LLC (since April 2004); and Director, Compliance, Prudential Investments LLC (2001-2004). | |
Richard W. Kinville (44) 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 Financials Internal Audit Department and Manager in AXAs 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). | |
Grace C. Torres (53) 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. | |
M. Sadiq Peshimam (48) Assistant Treasurer |
Vice President (since 2005) of Prudential Investments LLC. | |
Peter Parrella (54) 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). |
(a) Excludes Mr. Parker and Mr. Benjamin, interested Board Members who also serve as President and Vice President, respectively.
(1) The year that each individual became an Officer of the Funds is as follows:
Judy A. Rice, 2012; Raymond A. OHara, 2012; Deborah A. Docs, 2004; Jonathan D. Shain, 2005; Claudia DiGiacomo, 2005; Andrew R. French, 2006; Amanda S. Ryan, 2012; Timothy J. Knierim, 2007; Valerie M. Simpson, 2007; Theresa Thompson, 2008; Richard W. Kinville, 2011; Grace C. Torres, 1998; M. Sadiq Peshimam, 2006; Peter Parrella, 2007.
Explanatory Notes to Tables:
n | 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. |
n | 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. |
n | 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. |
n | 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. |
n | Portfolios Overseen includes all investment companies managed by Prudential Investments LLC. The investment companies for which PI serves as manager include the Prudential Investments Mutual Funds, The Prudential Variable Contract Accounts, Target Mutual Funds, Prudential Short Duration High Yield Fund, Inc., The Prudential Series Fund, Prudentials Gibraltar Fund, Inc. and the Advanced Series Trust. |
Target Asset Allocation Funds/Target Conservative Allocation Fund
Approval of Advisory Agreements
Approval of Existing Agreements
The Funds Board of Trustees
The Board of Trustees (the Board) of Target Conservative Allocation 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). 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 Target Investment Committee. Each committee is chaired by, and composed of, Independent Trustees.
Annual Approval of the Funds Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Funds management agreement with Prudential Investments LLC (PI) and the Funds subadvisory agreements with various subadvisers. In considering the renewal of the agreements, the Board, including all of the Independent Trustees, met on June 5-7, 2012 and approved the renewal of the agreements through July 31, 2013, 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 each subadviser. 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 subadvisers, 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 Funds assets grow. In their deliberations, the Trustees did not identify any single factor which alone was responsible for the Boards 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 | Target Conservative Allocation Fund is one of three series which, together, comprise the Target Asset Allocation Funds. |
Target Asset Allocation Funds/Target Conservative Allocation 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 5-7, 2012.
The Trustees determined that the overall arrangements between the Fund and PI, which serves as the Funds investment manager pursuant to a management agreement with Target Asset Allocation Funds, and between PI and each subadviser,2 each of which serve as 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 determinations to approve the renewal of the agreements are discussed separately 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 each subadviser. The Board considered the services provided by PI, including but not limited to the oversight of the subadvisers, as well as the provision of fund recordkeeping, compliance, and other services to the Fund. With respect to PIs oversight of the subadvisers, the Board noted that PIs Strategic Investment Research Group (SIRG), a business unit of PI, is responsible for screening and recommending new subadvisers when appropriate, as well as monitoring and reporting to the Board on the performance and operations of the subadvisers. The Board also considered that PI pays the salaries of all of the officers and non-independent Trustees of the Fund. The Board also considered the investment subadvisory services provided by each subadviser, as well as compliance with the Funds investment restrictions, policies and procedures. The Board considered PIs evaluation of the subadvisers, as well as PIs recommendation, based on its review of the subadvisers, to renew the subadvisory agreements.
The Board reviewed the qualifications, backgrounds and responsibilities of PIs senior management responsible for the oversight of the Fund and each subadviser, and also reviewed the qualifications, backgrounds and responsibilities of the subadvisers portfolio managers who are responsible for the day-to-day management of the Fund.
2 | The Funds subadvisers are: Eagle Asset Management, Inc., Epoch Investment Partners, Inc. (Epoch), Marsico Capital Management, LLC, Massachusetts Financial Services Company, Hotchkis and Wiley Capital Management, LLC, NFJ Investment Group L.P., EARNEST Partners LLC, Vaughan Nelson Investment Management L.P., and Pacific Investment Management Company LLC. The Board approved the appointment of Epoch to replace Eaton Vance Management at the meeting on June 5-7, 2012. |
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The Board was provided with information pertaining to PIs and each subadvisers organizational structure, senior management, investment operations, and other relevant information pertaining to both PI and each subadviser. The Board also noted that it received favorable compliance reports from the Funds Chief Compliance Officer (CCO) as to both PI and each subadviser.
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 each subadviser, and that there was a reasonable basis on which to conclude that the Fund benefits from the services provided by PI and each subadviser 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 Funds 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 advisers capital structure and cost of capital. Taking these factors into account, the Board concluded that the profitability of PI and its affiliates in relation to the services rendered was not unreasonable.
The Board noted that none of the subadvisers was affiliated with PI, and concluded that the level of profitability of a subadviser not affiliated with PI may not be as significant as PIs profitability given the arms length nature of the process by which the subadvisory fee rates were negotiated by PI and the unaffiliated subadvisers, as well as the fact that PI compensates the subadvisers out of its management fee.
Economies of Scale
The Board noted that the management fee schedule for the Fund includes breakpoints, which have the effect of decreasing the fee rate as assets increase, but at the current level of assets, the Fund does not realize the effect of those rate reductions. The Board received and discussed information concerning whether PI realizes economies of scale as the Funds assets grow beyond current levels. The Board took note that the Funds 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,
Target Asset Allocation Funds/Target Conservative Allocation Fund
Approval of Advisory Agreements (continued)
stemming largely from the Boards understanding that most of PIs costs are not specific to individual funds, but rather are incurred across a variety of products and services.
Other Benefits to PI and the Subadvisers
The Board considered potential ancillary benefits that might be received by PI, the subadvisers, 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 Funds securities lending agent, transfer agency fees received by the Funds transfer agent (which is affiliated with PI), as well as benefits to its reputation or other intangible benefits resulting from PIs association with the Fund. The Board concluded that the potential benefits to be derived by the subadvisers included the ability to use soft dollar credits, brokerage commissions received by affiliates of the subadvisers, as well as the potential benefits consistent with those generally resulting from an increase in assets under management, specifically, potential access to additional research resources and benefits to their reputations. The Board concluded that the benefits derived by PI and the subadvisers 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, 2011.
The Board also considered the Funds actual management fee, as well as the Funds net total expense ratio, for the fiscal year ended July 31, 2011. 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 Mixed-Asset Target Allocation Conservative 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).
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The section below summarizes key factors considered by the Board and the Boards conclusions regarding the Funds 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 | ||||
2nd Quartile | 2nd Quartile | 2nd Quartile | 1st Quartile | |||||
Actual Management Fees: 2nd Quartile | ||||||||
Net Total Expenses: 4th Quartile |
| The Board noted that the Fund outperformed its benchmark index over the three-, five- and ten-year periods, although it underperformed over the one-year period. |
| The Board concluded that, in light of the Funds strong long-term performance and competitive performance generally, it would be in the best interests of the Fund and its shareholders to renew the agreements. |
| The Board concluded that the management fees (including subadvisory fees) and total expenses were reasonable in light of the services provided. |
* * *
After full consideration of these factors, the Board concluded that approval of the agreements was in the best interests of the Fund and its shareholders.
Target Asset Allocation Funds/Target Conservative Allocation Fund
Approval of Advisory Agreements (continued)
Board Approval of a New Subadvisory Agreement
At meetings of the Board held on June 6, 2012, the Trustees, including the Independent Trustees, unanimously approved the recommendations by the Funds investment manager, Prudential Investments LLC (PI or the Manager) to appoint Epoch Investment Partners, Inc. (Epoch) as a subadviser with respect to the Fund, in replacement of Eaton Vance Management (Eaton Vance). In approving the new subadvisory agreement between PI and Epoch (the Subadvisory Agreement), the Board, including the Independent Trustees advised by their independent legal counsel, K&L Gates LLP, considered the factors they deemed relevant, including the nature, quality and extent of services to be provided to the Fund by Epoch; any relevant comparable performance information; the fees proposed to be paid by the Manager to Epoch under the Subadvisory Agreement; and the potential for economies of scale that may be shared with the Fund and its shareholders. In connection with its deliberations, the Trustees reviewed performance, compliance and organization materials regarding Epoch and received presentations from PI, as well as from representatives of Epoch. The Board also received materials relating to the Subadvisory Agreement and had the opportunity to ask questions and request further information.
The Trustees determined that the overall arrangements between the Manager and Epoch, pursuant to the terms of the Subadvisory Agreement, are appropriate in light of the services to be performed and the fees to be charged under the Subadvisory Agreement 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 Subadvisory Agreement are separately discussed below.
Nature, Quality and Extent of Services
The Board received and considered information regarding the nature and extent of services to be provided to the Fund by Epoch under the Subadvisory Agreement, namely, that Epoch would provide day-to-day fund management services to a portion of the Fund and comply with all Fund policies and applicable rules and regulations. The Board also noted that the nature and extent of the services to be provided to the Fund under the Subadvisory Agreement were generally similar to those provided by the other current subadvisers to the Fund under their respective subadvisory agreements.
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With respect to the quality of services, the Board considered, among other things, the background and experience of Epochs fund management team. In connection with the recent annual review of advisory and subadvisory agreements, the Board had reviewed the qualifications, backgrounds and responsibilities of the fund managers who would be responsible for the day-to-day management of the Fund, and the Board was provided with information pertaining to Epochs organizational structure, senior management, investment operations, and other relevant information pertaining to Epoch. The Board noted that it received a favorable compliance report from the Funds Chief Compliance Officer (CCO) as to Epoch.
The Board concluded that there was a reasonable basis on which to conclude that the services to be provided by Epoch under the Subadvisory Agreement should be comparable to the services that were provided by Eaton Vance to the Fund. The Board concluded that it was satisfied with the nature, extent and quality of the investment subadvisory services to be provided by Epoch and that there was a reasonable basis on which to conclude that the Fund would benefit from the subadvisory services to be provided by Epoch under the Subadvisory Agreement.
Performance of the Fund
The Board received and considered information regarding the performance of other investment companies managed by Epoch utilizing an investment style and strategy similar to that proposed for the Fund. The Board concluded that it was satisfied with the performance record of Epoch in the proposal strategy.
Investment Subadvisory Fee Rates
The Board considered that the proposed subadvisory fee rates payable by PI to Epoch under the Subadvisory Agreement were higher than the fee rate applicable to Eaton Vance. The Board also considered, among other things, the fee rates payable to Epoch by other funds with an investment objective similar to that of the Fund. The Board noted that PI, not the Fund, pays the subadvisory fees, and therefore any change in the proposed subadvisory fee rates would not have any impact on the amount of management fees paid by the Fund. The Board considered the proposed subadvisory fees of 0.275% of the Funds first $1 billion of average daily net assets and 0.20% of the Funds average daily assets in excess of $1 billion to be paid by the Manager to Epoch. The Board noted that the proposed fee for Epoch is based on combined assets in the retail funds portfolio that are subadvised by Epoch, managed by the Manager and have substantially the same investment strategy. The Board concluded that the proposed subadvisory fee rate payable to Epoch under the new Subadvisory Agreement was reasonable.
Target Asset Allocation Funds/Target Conservative Allocation Fund
Approval of Advisory Agreements (continued)
Profitability
In connection with their annual review of subadvisory agreements, the Board considered the profitability of PI and subadvisers affiliated with PI. The Board concluded that the level of profitability of a subadviser not affiliated with PI, such as Epoch, may not be as significant as PIs profitability given the arms length nature of the process by which the subadvisory fee rates were negotiated by PI and the unaffiliated subadvisers, as well as the fact that PI compensates the subadvisers out of its management fee. Nonetheless, because the engagement of Epoch is new, there is no historical profitability with regard to its arrangements with the Fund. As a result, the Board did not consider this factor. The Board noted that profitability would be reviewed annually in connection with the review of advisory agreements.
Economies of Scale
In connection with their annual review of advisory agreements, the Board considered the potential for Epoch to experience economies of scale as the amount of assets managed by Epoch increased in size. The Board further considered that the proposed subadvisory fee rate for Epoch would include breakpoints in the fee rate paid by the Manager to Epoch, and that the subadvisory breakpoints would reduce that fee rate if the amount of assets managed by Epoch increased in size. The Board noted that there was no proposed change in advisory agreements fee rates and breakpoints and that it would again review economies of scale at the next annual review of advisory agreements.
Other Benefits to the Subadviser or its Affiliates from Serving as Subadviser
The Board considered potential fall-out or ancillary benefits anticipated to be received by Epoch and its affiliates as a result of their relationship with the Fund. The Boards concluded that any potential benefits to be derived by Epoch included its ability to use soft dollar credits, brokerage commissions received by affiliates of Epoch, potential access to additional research resources, larger assets under management and benefits to their respective reputations, which were consistent with those generally derived by subadvisers to mutual funds.
After full consideration of these factors, the Board concluded that the approval of the Subadvisory Agreement was in the best interest of the Fund and its shareholders.
Visit our website at www.prudentialfunds.com
n MAIL | n TELEPHONE | n WEBSITE | ||
Gateway Center Three 100 Mulberry Street Newark, NJ 07102 |
(800) 225-1852 |
www.prudentialfunds.com |
PROXY VOTING |
The Board of Trustees of the Fund has delegated to the Funds investment subadvisers the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852. 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 Funds website and on the Securities and Exchange Commissions website. |
TRUSTEES |
Kevin J. Bannon Scott E. Benjamin Linda W. Bynoe Michael S. Hyland Douglas H. McCorkindale Stephen P. Munn Stuart S. Parker Richard A. Redeker Robin B. Smith Stephen G. Stoneburn |
OFFICERS |
Stuart S. Parker, President Judy A. Rice, Vice President Scott E. Benjamin, Vice President Grace C. Torres, Treasurer and Principal Financial and Accounting Officer Raymond A. OHara, Chief Legal Officer Deborah A. Docs, Secretary Timothy J. Knierim, Chief Compliance Officer Valerie M. Simpson, Deputy Chief Compliance Officer Theresa C. Thompson, Deputy Chief Compliance Officer Richard W. Kinville, Anti-Money Laundering Compliance Officer Jonathan D. Shain, Assistant Secretary Claudia DiGiacomo, Assistant Secretary Amanda S. Ryan, Assistant Secretary Andrew R. French, Assistant Secretary M. Sadiq Peshimam, Assistant Treasurer Peter Parrella, Assistant Treasurer |
MANAGER | Prudential Investments LLC | Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | ||
| ||||
INVESTMENT SUBADVISERS | Eagle Asset Management, Inc. | 880 Carillon Parkway St. Petersburg, FL 33716 | ||
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EARNEST Partners, LLC | 1180 Peachtree Street Suite 2300 Atlanta, GA 30309 | |||
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Epoch Investment Partners, Inc. |
640 Fifth Avenue New York, NY 10019 | |||
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Hotchkis and Wiley Capital Management, LLC |
725 South Figueroa Street 39th Floor Los Angeles, CA 90017 | |||
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Marsico Capital Management, LLC |
1200 17th Street Suite 1600 Denver, CO 80202 | |||
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Massachusetts Financial Services Company |
500 Boylston Street Boston, MA 02116 |
NFJ Investment Group L.P. |
2100 Ross Avenue Dallas, TX 75201 | |||
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Pacific Investment Management Company LLC |
840 Newport Center Drive Newport Beach, CA 92660 | |||
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Vaughan Nelson Investment Management, L.P. |
600 Travis Street Suite 6300 Houston, TX 77002 | |||
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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, Target Asset Allocation Funds, 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 Funds Forms N-Q are available on the Commissions website at www.sec.gov. The Funds Forms N-Q may also be reviewed and copied at the Commissions 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 Funds schedule of portfolio holdings as of the end of each calendar month is also available on the Funds website no sooner than approximately three business days prior to the end of the following month. |
The Funds Statement of Additional Information contains additional information about the Funds 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 |
TARGET CONSERVATIVE ALLOCATION FUND
SHARE CLASS | A | B | C | R | X | Z | ||||||
NASDAQ | PCGAX | PBCFX | PCCFX | PCLRX | N/A | PDCZX | ||||||
CUSIP | 87612A104 | 87612A203 | 87612A302 | 87612A401 | 87612A708 | 87612A500 |
MFSP504E 0231549-00001-00
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
TARGET MODERATE ALLOCATION FUND
ANNUAL REPORT · JULY 31, 2012
Objective
Seeks capital appreciation and a reasonable level of current 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 Funds portfolio holdings are for the period covered by this report and are subject to change thereafter.
Target Funds, Prudential Investments, Prudential, the Prudential logo, the Rock symbol and Bring Your Challenges are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
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September 14, 2012
Dear Shareholder:
We hope you find the annual report for the Target Moderate Allocation Fund informative and useful. The report covers performance for the 12-month period that ended July 31, 2012.
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, including stock and bond mutual funds consistent with your tolerance for risk, time horizon, and financial goals.
A diversified asset allocation offers two potential advantages: It limits your exposure to any particular asset class; plus it provides a better opportunity to invest some of your assets in the right place at the right time. 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.
We are dedicated to helping you solve your toughest investment challengeswhether its capital growth, reliable income, or protection from market volatility and other risk. We believe our Target Moderate Allocation Fund, which is managed by institutional quality asset managers selected and monitored by our research team, will help you to achieve broad, actively managed diversification at a targeted risk/return balance with a single investment purchase.
Thank you for choosing the Target Moderate Allocation Fund.
Sincerely,
Stuart S. Parker, President
Target Asset Allocation Funds
Target Asset Allocation Funds/Target Moderate Allocation Fund | 1 |
Your Funds Performance
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 investors 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. The maximum initial sales charge is 5.50% (Class A shares). Gross operating expenses: Class A, 1.46%; Class B, 2.16%; Class C, 2.16%; Class R, 1.91%; Class X, 2.16%; Class Z, 1.16%. Net operating expenses: Class A, 1.41%; Class B, 2.16%; Class C, 2.16%; Class R, 1.66%; Class X, 1.41%; Class Z, 1.16%, after contractual reduction through 11/30/2013 for Class A and Class R shares.
Cumulative Total Returns (Without Sales Charges) as of 7/31/12 | ||||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||
Class A |
1.96 | % | 4.80 | % | 84.44 | % | | |||||||
Class B |
1.26 | 0.92 | 71.33 | | ||||||||||
Class C |
1.26 | 0.92 | 71.33 | | ||||||||||
Class R |
1.78 | 3.53 | N/A | 36.98% (10/04/04) | ||||||||||
Class X |
2.05 | 3.06 | N/A | 34.59 (10/04/04) | ||||||||||
Class Z |
2.31 | 6.17 | 89.17 | | ||||||||||
Customized Blend |
5.19 | 14.93 | 91.71 | | ||||||||||
S&P 500 Index |
9.11 | 5.77 | 84.81 | | ||||||||||
Lipper Mixed-Asset Target Allocation Growth Funds Avg. |
2.30 | 6.68 | 77.99 | | ||||||||||
Average Annual Total Returns (With Sales Charges) as of 6/30/12 | ||||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||
Class A |
5.19 | % | 0.67 | % | 4.84 | % | | |||||||
Class B |
5.50 | 0.47 | 4.64 | | ||||||||||
Class C |
1.45 | 0.30 | 4.64 | | ||||||||||
Class R |
0.06 | 0.21 | N/A | 4.04% (10/04/04) | ||||||||||
Class X |
5.63 | 0.43 | N/A | 3.69 (10/04/04) | ||||||||||
Class Z |
0.59 | 0.70 | 5.69 | | ||||||||||
Customized Blend |
3.12 | 2.24 | 6.06 | | ||||||||||
S&P 500 Index |
5.43 | 0.22 | 5.33 | | ||||||||||
Lipper Mixed-Asset Target Allocation Growth Funds Avg. |
0.17 | 0.60 | 5.12 | |
2 | Visit our website at www.prudentialfunds.com |
Average Annual Total Returns (With Sales Charges) as of 7/31/12 | ||||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||
Class A |
3.65 | % | 0.19 | % | 5.71 | % | | |||||||
Class B |
3.74 | 0.01 | 5.53 | | ||||||||||
Class C |
0.26 | 0.18 | 5.53 | | ||||||||||
Class R |
1.78 | 0.70 | N/A | 4.10% (10/04/04) | ||||||||||
Class X |
3.95 | 0.08 | N/A | 3.77 (10/04/04) | ||||||||||
Class Z |
2.31 | 1.21 | 6.58 | | ||||||||||
Average Annual Total Returns (Without Sales Charges) as of 7/31/12 | ||||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||
Class A |
1.96 | % | 0.94 | % | 6.31 | % | | |||||||
Class B |
1.26 | 0.18 | 5.53 | | ||||||||||
Class C |
1.26 | 0.18 | 5.53 | | ||||||||||
Class R |
1.78 | 0.70 | N/A | 4.10% (10/04/04) | ||||||||||
Class X |
2.05 | 0.61 | N/A | 3.87 (10/04/04) | ||||||||||
Class Z |
2.31 | 1.21 | 6.58 | |
Growth of a $10,000 Investment
The graph compares a $10,000 investment in the Target Moderate Allocation Fund (Class A shares) with a similar investment in the Standard & Poors 500 Composite Stock Price Index (S&P 500 Index) and the Customized Benchmark for the Target Moderate Allocation Fund (Customized Blend) by portraying the initial account values at the beginning of the 10-year period for Class A shares (July 31, 2002) and the account values at the end of the current fiscal year (July 31, 2012) as measured on a quarterly basis. For purposes of the graph,
Target Asset Allocation Funds/Target Moderate Allocation Fund | 3 |
Your Funds Performance (continued)
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 R, 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 Funds total returns do not reflect the deduction of income taxes on an individuals 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. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of such fee waivers and/or expense reimbursements, total returns would be lower.
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. Class A shares are subject to a maximum front-end sales charge of 5.50%, and a 12b-1 fee of 0.30% annually. 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 CDSC is waived for purchases by certain retirement and/or benefit plans. 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. Class B shares are subject to a declining CDSC of 5%, 4%, 3%, 2%, 1%, and 1%, respectively, for the first six years after purchase and a 12b-1 fee of 1% annually. Approximately seven years after purchase, Class B shares will automatically convert to Class A shares on a quarterly basis. Class C shares are not subject to a front-end sales charge, but charge a CDSC of 1% for Class C shares sold within 12 months from the date of purchase, and an annual 12b-1 fee of 1%. Class X shares are generally closed to new purchases. Class X shares are subject to a declining CDSC of 6%, 5%, 4%, 4%, 3%, 2%, 2% and 1%, respectively for the first eight years and a 12b-1 fee of 1% annually. Approximately 10 years after purchase Class X shares will automatically convert to Class A shares on a monthly basis. Class R and Z shares are not subject to a sales charge. Class R shares are subject to a 12b-1 fee of up to 0.75% annually. Class Z shares are not subject to a 12b-1 fee. The returns in the graph and tables reflect the share class expense structure in effect at the close of the fiscal period. The returns in the graph and tables do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or following the redemption of Fund shares.
Benchmark Definitions
Customized Blend
The Customized Benchmark for the Target Moderate Allocation Fund (Customized Blend) is a model portfolio consisting of the Russell 3000® Index (52%), Morgan Stanley Capital International Europe, Australasia, and Far
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East Index (MSCI EAFE ND Index) (13%), and the Barclays U.S. Aggregate Bond Index (35%). Each component of the Customized Blend is an unmanaged index generally considered as representing the performance of the Funds asset classes. The Customized Blend is intended to provide a theoretical comparison to the Funds performance, based on the amounts allocated to each asset class rather than on amounts allocated to various Fund segments. The Customized Blend does not reflect deductions for any sales charges or operating expenses of a mutual fund. The Russell 3000 Index is an unmanaged index which measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The MSCI EAFE ND Index is an unmanaged weighted index that reflects stock price movements in Europe, Australasia, and the Far East. It gives a broad look at how foreign stock prices have performed. The Fund utilizes the net dividends (ND) version of the MSCI EAFE Index. The net dividends and gross dividends versions of the MSCI EAFE Index differ in that the net dividends returns reflect the impact of the maximum withholding taxes on reinvested dividends, while the gross dividends version does not reflect the impact of the maximum withholding taxes on reinvested dividends. These returns do not include the effect of any investment management expenses. These returns would have been lower if they included the effect of these expenses. The Barclays U.S. Aggregate Bond Index is an unmanaged index of investment-grade securities issued by the U.S. Government and its agencies and by corporations with between one and 10 years remaining to maturity. It gives a broad look at how short- and intermediate-term bonds have performed. Customized Blend Closest Month-End to Inception cumulative total return as of 7/31/12 is 53.25% for Class R and Class X. Customized Blend Closest Month-End to Inception average annual total return as of 6/30/12 is 5.51% for Class R and Class X.
S&P 500 Index
The Standard & Poors 500 Composite Stock Price Index (S&P 500 Index) is an unmanaged index of 500 stocks of large U.S. public companies. It gives an indication of how U.S. stock prices have performed. S&P 500 Index Closest Month-End to Inception cumulative total return as of 7/31/12 is 45.45% for Class R and Class X. S&P 500 Index Closest Month-End to Inception average annual total return as of 6/30/12 is 4.77% for Class R and Class X.
Lipper Mixed-Asset Target Allocation Growth Funds Average
The Lipper Mixed-Asset Target Allocation Growth Funds Average (Lipper Average) represents returns based on the average return of all funds in the Lipper Mixed-Asset Target Allocation Growth Funds category for the periods noted. Funds in the Lipper Average invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. Mixed-Asset Funds are funds that, by portfolio practice, maintain a mix of between 60% and 80% equity securities, with the remainder invested in bonds, cash, and cash equivalents. Lipper Average Closest Month-End to Inception cumulative total return as of 7/31/12 is 42.94% for Class R and Class X. Lipper Average Closest Month-End to Inception average annual total return as of 6/30/12 is 4.52% for Class R and Class X.
Investors cannot invest directly in an index or average. The returns for the Indexes would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses, but not sales charges or taxes. The Since Inception returns for the Indexes are measured from the closest month-end to inception date, and not from the Class actual inception date.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 5 |
Your Funds Performance (continued)
Source: Lipper Inc.
The chart above shows the total returns for 12 months ended July 31, 2012, of various securities indexes that are generally considered representative of broad market sectors. It does not reflect a mutual funds expenses.
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The performance cited does not represent the performance of the Target Moderate Allocation Fund. Past performance is not indicative of future results. Investors cannot invest directly in an index or average.
The Russell 3000 Index is an unmanaged index which measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market.
The Morgan Stanley Capital International Europe, Australasia, and Far East Index (MSCI EAFE ND Index) is an unmanaged weighted index that reflects stock price movements in Europe, Australasia, and the Far East. It gives a broad look at how foreign stock prices have performed. The Fund utilizes the net dividends (ND) version of the MSCI EAFE Index. The net dividends and gross dividends versions of the MSCI EAFE Index differ in that the net dividends returns reflect the impact of the maximum withholding taxes on reinvested dividends, while the gross dividends version does not reflect the impact of withholding taxes on reinvested dividends. These returns do not include the effect of any investment management expenses. These returns would have been lower if they included the effect of these expenses.
The Barclays U.S. Aggregate Bond Index is an unmanaged index of investment-grade securities issued by the U.S. Government and its agencies and by corporations with between one and 10 years remaining to maturity. It gives a broad look at how short- and intermediate-term bonds have performed.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 7 |
Strategy and Performance Overview
How did the Fund perform?
The Target Moderate Allocation Funds Class A shares gained 1.96% for the year ended July 31, 2012, underperforming the 5.19% gain of the Customized Blend Index, a model portfolio described on page 4 that includes the Russell 3000 Index (52%), the Barclays U.S. Aggregate Bond Index (35%), and the MSCI EAFE ND Index (13%). The Funds Class A shares also lagged the Lipper Mixed-Asset Target Allocation Growth Funds Average, which gained 2.30% for the reporting period.
How did the U.S. stock market perform?
The U.S. equity market experienced widespread volatility during the reporting period, which began on August 1, 2011. The U.S. stock market returned 7.33% for the year that ended July 31, 2012, according to the Russell 3000 Index.
| Challenging market conditions were mostly caused by European sovereign debt issues and uncertainty over global growth. Investor sentiment swung between optimism and pessimism on macro-themes related to the euro zone. |
| U.S. economic growth proceeded at a tepid pace, as global uncertainty loomed. Unemployment remained elevated. |
How did international equity markets perform?
International equities markets faltered during the reporting period. The MSCI EAFE Index, which measures the performance of developed markets excluding the United States and Canada, declined by 11.45%, net of dividends.
| Stocks continued their wild ride, as policy makers in Europe struggled to resolve the widening debt crisis. The focus shifted from Greece to the larger economies of Italy and Spain, raising the prospect of another round of heated bailout discussions. |
| In late Junes European Summit, policymakers made only incremental progress towards ensuring the euro zones survival. With the implementation of austerity measures, many European economies contracted. Elsewhere, stocks struggled in Asia over concerns about slower growth in the region. Growth in China, a key engine of global economic expansion, slowed. |
How did fixed-income markets perform?
The U.S. investment-grade bond market was roughly in line with U.S. stock markets and far ahead of declining international stock markets, returning 7.25% for the reporting period, including price changes and interest income, according to the Barclays U.S. Aggregate Bond Index.
8 | Visit our website at www.prudentialfunds.com |
| Early in the third quarter of 2011, concerns about the economic health of the U.S. and Europe rattled fixed income and foreign exchange markets. After Congress sparred over the U.S. debt ceiling, Standard & Poors downgraded the U.S. credit rating to AA+, compounding the negative market sentiment in credit markets. These events caused a flight-to-quality rally by investors that lifted the U.S. dollar. |
| Strong economic data pushed U.S. Treasury yields higher in October 2011. The combination of consistent U.S. Federal Reserve buying and strong investor demand for high-quality, liquid, U.S. dollar-denominated assets ultimately pushed prices higher and brought Treasury yields down. (As bond prices move higher, yields move lower). Stronger Treasury prices helped most fixed income sectors post positive returns for 2011. |
| In the first quarter of 2012, risk aversion abated and U.S. Treasury yields rose modestly, driving relative strong performance. |
| The second quarter was in many ways a risk-averse mirror image of the first quarters risk-friendly market environment. Toward the end of the reporting period, fixed income investors were somewhat encouraged by policy announcements in Europe. |
How did asset allocation affect the Funds performance?
The Fund began the period with a slight overweight to equities, which had a small negative effect on the Funds performance. In October the Fund shifted holdings from a slight overweight to equities to a significant underweight. This positioning did not pay off through the remainder of the period.
What contributed the most to the Funds relative performance?
Overall, asset management decisions detracted from relative performance. However, there were some bright spotsthe fixed income portion of the Fund, which is managed by PIMCO, was the largest positive contributor to the Funds return.
| PIMCOs positioning and security selection in U.S. Government agency mortgage-backed securities added to returns. An allocation to selective non-agency mortgages amid continued investor demand also contributed. An underweight to investment-grade corporate bonds helped relative performance, since this sector underperformed similar-duration U.S. Treasuries. |
| PIMCO also purchased derivatives known as a credit default swaps (CDS), which helped performance. A credit default swap functions like an insurance policy on a debt security. |
Target Asset Allocation Funds/Target Moderate Allocation Fund | 9 |
Strategy and Performance Overview (continued)
| A position in financial companies augmented the Funds performance. PIMCOs exposure to interest rates in some European countries and Australia contributed positively to performance. PIMCO also held derivatives known as interest rate swaps, in order to manage the Funds exposure to interest rate risk, which helped performance. |
| An overweight to emerging market local debt enhanced PIMCOs relative performance. This included exposure to local debt in Brazil, which was implemented using zero-coupon interest rate swaps, which are derivatives used to limit credit risk, which also helped. |
| PIMCOs exposure to various foreign currencies, with an emphasis on emerging market currencies, detracted from performance as most of these currencies depreciated relative to the U.S. dollar. |
Which asset management decisions detracted the most from the Funds relative performance?
The Funds large cap growth managers, Massachusetts Financial Services Company (MFS) and Marsico Capital Management, were the largest detractors from the Funds relative performance.
In the MFS segment of the Fund, stock selection had a negligible, marginally positive effect on performance.
| Holdings in Apple, Visa, Mastercard, American Tower, and the biotechnology industry helped performance. However, positions in Oracle, Checkpoint, and healthcare providers and services detracted. An underweight in consumer staples and information technology, both of which had strong returns in the Russell 3000 Index, hindered performance. An overweight in energy, the worst performing sector, also detracted. |
| An underweight to the materials and healthcare sectors slightly benefitted the Fund, since these sectors underperformed relative to the Index. However, risk positioning and significant underexposure to dividend-yielding stocks dragged on results. |
The Marsico-managed segment of the Fund significantly underperformed due to sector allocations and risk exposures through poor stock selection. However, Marsicos optimism regarding long-term growth trends, pricing dislocations, and misunderstood growth stocks hasnt diminished despite the prevalent concerns of many investors during the period.
| Marsico continued to maintain an intermediate-to-long-term investment focus, an aggressive risk posture, and a selective bias toward cyclical stocks |
10 | Visit our website at www.prudentialfunds.com |
(companies that are more sensitive to changes in the economy). Stock selection produced mixed results during the period. Positions in TJX, Visa, and Biogen helped performance. |
| The Marsico segment was underweight in the strong information technology and consumer staples sectors. It also had an exposure to foreign stocks, which sharply underperformed. It was overexposed to riskier stocks, in addition to stocks with high price volatility. An underweight to dividend-paying stocks also detracted, as these stocks were heavily favored by investors. For example, during the reporting period, telecommunications led all sectors because these companies were paying highly attractive dividends. |
Target Asset Allocation Funds/Target Moderate Allocation Fund | 11 |
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 February 1, 2012, at the beginning of the period, and held through the six-month period ended July 31, 2012. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
The Funds transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of Prudential Investments Funds, including the Target Asset Allocation Funds, 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.
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 Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return. The hypothetical account values and
12 | Visit our website at www.prudentialfunds.com |
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.
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.
Target Moderate Allocation Fund |
Beginning Account February 1, 2012 |
Ending Account July 31, 2012 |
Annualized Expense Ratio Based on the Six-Month Period |
Expenses Paid During the Six-Month Period* |
||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,027.50 | 1.39 | % | $ | 7.01 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,017.95 | 1.39 | % | $ | 6.97 | ||||||||||
Class B | Actual | $ | 1,000.00 | $ | 1,023.80 | 2.14 | % | $ | 10.77 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,014.22 | 2.14 | % | $ | 10.72 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,023.80 | 2.14 | % | $ | 10.77 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,014.22 | 2.14 | % | $ | 10.72 | ||||||||||
Class R | Actual | $ | 1,000.00 | $ | 1,026.60 | 1.64 | % | $ | 8.26 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,016.71 | 1.64 | % | $ | 8.22 | ||||||||||
Class X | Actual | $ | 1,000.00 | $ | 1,028.40 | 1.39 | % | $ | 7.01 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,017.95 | 1.39 | % | $ | 6.97 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,029.30 | 1.14 | % | $ | 5.75 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,019.19 | 1.14 | % | $ | 5.72 |
* 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 182 days in the six-month period ended July 31, 2012, and divided by the 366 days in the Funds fiscal year ended July 31, 2012 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 13 |
Portfolio of Investments
as of July 31, 2012
Shares | Description | Value (Note 1) | ||||
LONG-TERM INVESTMENTS 96.1% |
| |||||
COMMON STOCKS 62.6% |
| |||||
Advertising 0.1% |
| |||||
3,800 | Publicis Groupe SA (France) |
$ | 187,069 | |||
Aerospace & Defense 1.6% |
| |||||
1,104 | AAR Corp. |
15,688 | ||||
39,000 | BAE Systems PLC (United Kingdom) |
188,224 | ||||
12,530 | Boeing Co. (The) |
926,092 | ||||
1,900 | Elbit Systems Ltd. (Israel) |
61,436 | ||||
7,450 | Embraer SA, ADR (Brazil) |
189,081 | ||||
5,400 | Finmeccanica SpA (Italy)* |
19,731 | ||||
4,756 | Hexcel Corp.* |
110,767 | ||||
3,700 | Honeywell International, Inc. |
214,785 | ||||
4,700 | Lockheed Martin Corp. |
419,569 | ||||
921 | Moog, Inc. (Class A Stock)* |
33,515 | ||||
14,400 | Northrop Grumman Corp. |
953,280 | ||||
10,300 | Rockwell Collins, Inc. |
520,871 | ||||
11,490 | Rolls-Royce Holdings PLC (United Kingdom)* |
152,732 | ||||
586 | Teledyne Technologies, Inc.* |
36,508 | ||||
3,800 | Thales SA (France) |
118,828 | ||||
1,178 | Triumph Group, Inc. |
73,660 | ||||
|
|
|||||
4,034,767 | ||||||
Agriculture 0.1% |
| |||||
293,200 | Golden Agri-Resources Ltd. (Mauritius) |
173,633 | ||||
Air Freight & Logistics 0.1% |
| |||||
1,545 | Atlas Air Worldwide Holdings, Inc.* |
70,081 | ||||
2,600 | FedEx Corp. |
234,780 | ||||
|
|
|||||
304,861 | ||||||
Airlines 0.1% |
| |||||
75,500 | Air New Zealand Ltd. (New Zealand) |
54,962 | ||||
54,000 | Cathay Pacific Airways Ltd. (Hong Kong) |
89,069 | ||||
7,756 | JetBlue Airways Corp.* |
42,735 | ||||
|
|
|||||
186,766 | ||||||
Apparel & Textile 0.1% |
| |||||
4,556 | Adidas AG (Germany) |
341,712 | ||||
900 | Wolverine World Wide, Inc. |
39,987 | ||||
|
|
|||||
381,699 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 15 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Auto Components 0.3% |
| |||||
18,770 | Johnson Controls, Inc. |
$ | 462,681 | |||
2,400 | Lear Corp. |
85,320 | ||||
7,100 | Magna International, Inc. (Canada) |
284,142 | ||||
|
|
|||||
832,143 | ||||||
Auto Parts & Equipment 0.1% |
| |||||
4,628 | Meritor, Inc.* |
21,659 | ||||
919 | WABCO Holdings, Inc.* |
50,471 | ||||
14,000 | Yokohama Rubber Co. Ltd. (The) (Japan) |
96,809 | ||||
|
|
|||||
168,939 | ||||||
Auto Parts & Related 0.1% |
| |||||
3,327 | Cie Generale des Etablissements Michelin (Class B Stock) (France) |
226,059 | ||||
Automobile Manufacturers 0.4% |
| |||||
3,400 | Daimler AG (Germany) |
169,407 | ||||
974 | Hyundai Motor Co. (South Korea) |
202,343 | ||||
10,900 | Nissan Motor Co. Ltd. (Japan) |
102,484 | ||||
6,000 | Nissan Shatai Co. Ltd. (Japan) |
65,692 | ||||
7,983 | Toyota Motor Corp. (Japan) |
305,245 | ||||
1,300 | Volkswagen AG (Germany) |
206,650 | ||||
|
|
|||||
1,051,821 | ||||||
Automobiles 0.1% |
| |||||
1,700 | Renault SA (France) |
74,142 | ||||
3,100 | Valeo SA (France) |
132,811 | ||||
|
|
|||||
206,953 | ||||||
Automotive Parts |
| |||||
300 | Georg Fischer AG (Switzerland)* |
103,951 | ||||
Banks 0.6% |
| |||||
7,600 | Banco Espanol de Credito SA (Spain) |
19,926 | ||||
22,900 | Bank Hapoalim BM (Israel) |
66,357 | ||||
14,800 | Bendigo and Adelaide Bank Ltd. (Australia) |
126,960 | ||||
2,522 | Citizens Republic Bancorp, Inc.* |
45,396 | ||||
18,000 | Fukuoka Financial Group, Inc. (Japan) |
65,640 | ||||
925 | Hancock Holding Co. |
28,194 | ||||
33,230 | HSBC Holdings PLC (United Kingdom) |
277,966 | ||||
4,141 | Julius Baer Group Ltd. (Switzerland)* |
147,916 |
See Notes to Financial Statements.
16 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Banks (contd.) |
| |||||
105,900 | Mizuho Financial Group, Inc. (Japan) |
$ | 174,412 | |||
28,000 | Nishi-Nippon City Bank Ltd. (The) (Japan) |
61,207 | ||||
25,900 | Sapporo Hokuyo Holdings, Inc. (Japan) |
74,056 | ||||
14,287 | Standard Chartered PLC (United Kingdom) |
327,058 | ||||
|
|
|||||
1,415,088 | ||||||
Beverages 0.8% |
| |||||
5,968 | Anheuser-Busch InBev NV, ADR (Belgium) |
472,785 | ||||
14,037 | Diageo PLC (United Kingdom) |
375,203 | ||||
5,500 | Molson Coors Brewing Co. (Class B Stock) |
232,760 | ||||
9,670 | PepsiCo, Inc. |
703,299 | ||||
4,046 | SABMiller PLC (United Kingdom) |
174,452 | ||||
|
|
|||||
1,958,499 | ||||||
Biotechnology 1.1% |
| |||||
3,170 | Alexion Pharmaceuticals, Inc.* |
332,374 | ||||
12,493 | Biogen Idec, Inc.* |
1,821,854 | ||||
821 | BioMarin Pharmaceutical, Inc.* |
32,257 | ||||
3,404 | Celgene Corp.* |
233,038 | ||||
4,470 | Gilead Sciences, Inc.* |
242,855 | ||||
3,628 | Halozyme Therapeutics, Inc.* |
32,725 | ||||
1,087 | Seattle Genetics, Inc.* |
28,436 | ||||
1,275 | United Therapeutics Corp.* |
69,845 | ||||
|
|
|||||
2,793,384 | ||||||
Building Materials 0.1% |
||||||
500 | Ciments Francais SA (France) |
27,615 | ||||
49,213 | Kingfisher PLC (United Kingdom) |
205,252 | ||||
|
|
|||||
232,867 | ||||||
Building Products |
||||||
875 | A.O. Smith Corp. |
43,243 | ||||
1,375 | Lennox International, Inc. |
60,046 | ||||
|
|
|||||
103,289 | ||||||
Capital Goods |
||||||
1,466 | Harsco Corp. |
31,153 | ||||
Capital Markets 0.2% |
||||||
2,100 | Goldman Sachs Group, Inc. (The) |
211,890 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 17 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Capital Markets (contd.) |
||||||
1,487 | Raymond James Financial, Inc. |
$ | 49,993 | |||
6,400 | State Street Corp. |
258,432 | ||||
|
|
|||||
520,315 | ||||||
Chemicals 2.0% |
||||||
2,920 | Airgas, Inc. |
231,614 | ||||
900 | Arkema SA (France) |
66,248 | ||||
2,100 | BASF SE (Germany) |
153,310 | ||||
2,200 | Bayer AG (Germany) |
167,096 | ||||
1,200 | CF Industries Holdings, Inc. |
234,912 | ||||
1,041 | Georgia Gulf Corp. |
34,124 | ||||
3,338 | Huntsman Corp. |
42,226 | ||||
1,287 | Intrepid Potash, Inc.* |
30,039 | ||||
2,500 | Koninklijke DSM NV (Netherlands) |
123,056 | ||||
750 | Kraton Performance Polymers, Inc.* |
17,565 | ||||
1,100 | Lanxess AG (Germany) |
76,264 | ||||
14,251 | Monsanto Co. |
1,220,171 | ||||
6,000 | Nippon Shokubai Co. Ltd. (Japan) |
72,994 | ||||
5,435 | Potash Corp. of Saskatchewan, Inc. (Canada) |
240,010 | ||||
2,200 | PPG Industries, Inc. |
240,812 | ||||
16,503 | Praxair, Inc. |
1,712,351 | ||||
1,295 | Quaker Chemical Corp. |
57,330 | ||||
800 | Scotts Miracle-Gro Co. (The) (Class A Stock) |
31,920 | ||||
440 | Syngenta AG (Switzerland) |
150,032 | ||||
19,000 | Toagosei Co. Ltd. (Japan) |
71,368 | ||||
450 | TPC Group, Inc.* |
17,325 | ||||
1,115 | Valspar Corp. (The) |
55,973 | ||||
|
|
|||||
5,046,740 | ||||||
Clothing & Apparel 0.6% |
||||||
12,469 | NIKE, Inc. (Class B Stock) |
1,163,981 | ||||
1,662 | Steven Madden Ltd.* |
67,195 | ||||
1,222 | VF Corp. |
182,444 | ||||
|
|
|||||
1,413,620 | ||||||
Commercial Banks 2.5% |
||||||
4,500 | Allied Irish Banks PLC (Ireland)* |
277 | ||||
4,800 | Alpha Bank A.E. (Greece)* |
7,108 | ||||
35,000 | Aozora Bank Ltd. (Japan) |
80,190 | ||||
3,000 | Associated Banc-Corp. |
37,470 |
See Notes to Financial Statements.
18 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Commercial Banks (contd.) |
||||||
8,300 | Banco Espirito Santo SA (Portugal)* |
$ | 5,103 | |||
18,500 | Banco Santander SA (Spain) |
112,015 | ||||
600 | Bank of Hawaii Corp. |
28,026 | ||||
32,300 | Barclays PLC (United Kingdom) |
84,122 | ||||
5,000 | Chiba Bank Ltd. (The) (Japan) |
29,127 | ||||
12,710 | CIT Group, Inc.* |
464,169 | ||||
16,000 | Fifth Third Bancorp |
221,120 | ||||
2,411 | FirstMerit Corp. |
39,058 | ||||
11,100 | PNC Financial Services Group, Inc. |
656,010 | ||||
825 | Prosperity Bancshares, Inc. |
33,470 | ||||
23,600 | Regions Financial Corp. |
164,256 | ||||
5,800 | Sumitomo Mitsui Financial Group, Inc. (Japan) |
182,650 | ||||
13,410 | Sumitomo Mitsui Trust Holdings, Inc. (Japan) |
38,302 | ||||
6,400 | Swedbank AB (Class A Stock) (Sweden) |
111,239 | ||||
1,789 | Trustmark Corp. |
43,258 | ||||
42,146 | U.S. Bancorp |
1,411,891 | ||||
794 | UMB Financial Corp. |
38,160 | ||||
1,327 | United Bankshares, Inc. |
30,919 | ||||
1,650 | Webster Financial Corp. |
33,858 | ||||
69,169 | Wells Fargo & Co. |
2,338,604 | ||||
|
|
|||||
6,190,402 | ||||||
Commercial Services 0.1% |
||||||
2,275 | KAR Auction Services, Inc.* |
36,423 | ||||
6,900 | Nichii Gakkan Co. (Japan) |
64,382 | ||||
1,961 | PAREXEL International Corp.* |
53,967 | ||||
|
|
|||||
154,772 | ||||||
Commercial Services & Supplies 1.1% |
||||||
1,975 | Corrections Corp. of America |
61,383 | ||||
2,850 | FleetCor Technologies, Inc.* |
105,222 | ||||
2,954 | GEO Group, Inc. (The)* |
68,297 | ||||
1,095 | MasterCard, Inc. (Class A Stock) |
478,044 | ||||
975 | McGrath RentCorp |
25,945 | ||||
968 | Sothebys |
28,411 | ||||
5,940 | Verisk Analytics, Inc. (Class A Stock)* |
298,485 | ||||
12,844 | Visa, Inc. (Class A Stock) |
1,657,775 | ||||
2,046 | Waste Connections, Inc. |
62,955 | ||||
|
|
|||||
2,786,517 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 19 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Communications Equipment 0.1% |
| |||||
4,028 | Arris Group, Inc.* |
$ | 51,115 | |||
13,700 | Cisco Systems, Inc. |
218,515 | ||||
|
|
|||||
269,630 | ||||||
Computer Hardware 2.6% |
| |||||
10,692 | Apple, Inc.* |
6,530,246 | ||||
Computer Services & Software 1.4% |
| |||||
14,349 | Accenture PLC (Class A Stock) (Ireland) |
865,245 | ||||
1,960 | Autodesk, Inc.* |
66,483 | ||||
26,590 | Electronic Arts, Inc.* |
293,022 | ||||
39,218 | EMC Corp.* |
1,027,904 | ||||
2,861 | Fortinet, Inc.* |
68,693 | ||||
929 | Global Payments, Inc. |
39,780 | ||||
6,300 | Micro Focus International PLC (United Kingdom) |
52,873 | ||||
1,798 | Opnet Technologies, Inc. |
47,539 | ||||
2,336 | QLIK Technologies, Inc.* |
46,720 | ||||
2,516 | Riverbed Technology, Inc.* |
44,382 | ||||
991 | salesforce.com, Inc.* |
123,241 | ||||
4,154 | SAP AG (Germany) |
263,626 | ||||
800 | Super Micro Computer, Inc.* |
9,928 | ||||
6,700 | Tieto Oyj (Finland) |
111,513 | ||||
1,900 | VeriFone Systems, Inc.* |
68,951 | ||||
3,537 | VMware, Inc. (Class A Stock)* |
321,018 | ||||
|
|
|||||
3,450,918 | ||||||
Computers & Peripherals 0.5% |
| |||||
5,519 | Cognizant Technology Solutions Corp. (Class A Stock)* |
313,314 | ||||
41,800 | Hewlett-Packard Co. |
762,432 | ||||
3,590 | NetApp, Inc.* |
117,285 | ||||
|
|
|||||
1,193,031 | ||||||
Construction & Engineering 0.2% |
| |||||
3,700 | COMSYS Holdings Corp. (Japan) |
46,116 | ||||
1,380 | Fluor Corp. |
68,420 | ||||
7,400 | Kyowa Exeo Corp. (Japan) |
75,943 | ||||
1,325 | MasTec, Inc.* |
21,147 | ||||
4,300 | NCC AB (Class B Stock) (Sweden) |
80,514 | ||||
1,314 | Northwest Pipe Co.* |
31,996 | ||||
1,250 | Texas Industries, Inc. |
52,213 |
See Notes to Financial Statements.
20 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Construction & Engineering (contd.) |
| |||||
834 | URS Corp. |
$ | 29,248 | |||
|
|
|||||
405,597 | ||||||
Consumer Finance 0.4% |
| |||||
12,510 | American Express Co. |
721,952 | ||||
5,200 | Capital One Financial Corp. |
293,748 | ||||
2,154 | Cash America International, Inc. |
82,541 | ||||
975 | First Cash Financial Services, Inc.* |
39,098 | ||||
|
|
|||||
1,137,339 | ||||||
Consumer Products & Services 0.5% |
| |||||
12,703 | Estee Lauder Cos., Inc. (The) (Class A Stock) |
665,383 | ||||
155,400 | Pacific Brands Ltd. (Australia) |
84,561 | ||||
6,257 | Reckitt Benckiser Group PLC (United Kingdom) |
343,368 | ||||
1,968 | Vitamin Shoppe, Inc.* |
108,082 | ||||
|
|
|||||
1,201,394 | ||||||
Containers & Packaging 0.1% |
| |||||
1,175 | Packaging Corp. of America |
36,178 | ||||
7,800 | Rexam PLC (United Kingdom) |
53,014 | ||||
1,150 | Silgan Holdings, Inc. |
47,391 | ||||
|
|
|||||
136,583 | ||||||
Cosmetics & Toiletries 0.1% |
| |||||
7,000 | Natura Cosmeticos SA (Brazil) |
182,857 | ||||
Distribution/Wholesale 0.5% |
| |||||
1,800 | LKQ Corp.* |
63,594 | ||||
4,400 | Mitsui & Co. Ltd. (Japan) |
64,973 | ||||
9,800 | Sumitomo Corp. (Japan) |
137,289 | ||||
5,300 | Toyota Tsusho Corp. (Japan) |
97,997 | ||||
3,830 | W.W. Grainger, Inc. |
784,499 | ||||
|
|
|||||
1,148,352 | ||||||
Diversified Consumer Services 0.1% |
| |||||
17,300 | H&R Block, Inc. |
279,049 | ||||
Diversified Financial Services 1.1% |
| |||||
58,959 | Bank of America Corp. |
432,759 | ||||
20,150 | BM&FBOVESPA SA (Brazil) |
113,376 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 21 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Diversified Financial Services (contd.) |
| |||||
22,900 | Challenger Ltd. (Australia) |
$ | 80,220 | |||
25,516 | Citigroup, Inc. |
692,249 | ||||
2,000 | Fuyo General Lease Co. Ltd. (Japan) |
64,847 | ||||
38,800 | JPMorgan Chase & Co. |
1,396,800 | ||||
1,100 | LPL Financial Holdings, Inc. |
30,822 | ||||
11,400 | Tullett Prebon PLC (United Kingdom) |
48,649 | ||||
|
|
|||||
2,859,722 | ||||||
Diversified Manufacturing Operations 0.1% |
||||||
12,000 | Cookson Group PLC (United Kingdom) |
103,220 | ||||
2,550 | Siemens AG (Germany) |
216,086 | ||||
|
|
|||||
319,306 | ||||||
Diversified Operations 0.2% |
||||||
3,067 | LVMH Moet Hennessy Louis Vuitton SA (France) |
461,373 | ||||
Diversified Telecommunication Services 0.3% |
||||||
17,100 | AT&T, Inc. |
648,432 | ||||
9,800 | Koninklijke KPN NV (Netherlands) |
80,439 | ||||
|
|
|||||
728,871 | ||||||
Electric Utilities 0.7% |
||||||
9,600 | American Electric Power Co., Inc. |
405,504 | ||||
10,100 | Edison International |
466,418 | ||||
35,400 | Enel SpA (Italy) |
101,094 | ||||
14,400 | Exelon Corp. |
563,328 | ||||
4,000 | PPL Corp. |
115,600 | ||||
|
|
|||||
1,651,944 | ||||||
Electronic Components 0.2% |
||||||
1,655 | DTS, Inc.* |
30,833 | ||||
93 | ESCO Technologies, Inc. |
3,349 | ||||
1,083 | Fanuc Corp. (Japan) |
167,203 | ||||
1,859 | FLIR Systems, Inc. |
38,017 | ||||
1,635 | InvenSense, Inc.* |
21,091 | ||||
986 | Itron, Inc.* |
38,424 | ||||
927 | Littelfuse, Inc. |
49,724 | ||||
10,000 | Nippon Electric Glass Co. Ltd. (Japan) |
52,644 | ||||
671 | Woodward, Inc. |
22,525 | ||||
|
|
|||||
423,810 |
See Notes to Financial Statements.
22 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Electronic Equipment & Instruments 0.3% |
||||||
1,444 | Coherent, Inc.* |
$ | 70,511 | |||
26,000 | Corning, Inc. |
296,660 | ||||
1,493 | EnerSys* |
50,986 | ||||
28,000 | Kingboard Chemical Holdings Ltd. (Cayman Islands) |
57,578 | ||||
700 | ScanSource, Inc.* |
20,209 | ||||
6,350 | TE Connectivity Ltd. (Switzerland) |
209,613 | ||||
1,321 | Universal Display Corp.* |
41,955 | ||||
|
|
|||||
747,512 | ||||||
Energy Equipment & Services 0.7% |
||||||
4,520 | Cameron International Corp.* |
227,220 | ||||
558 | Core Laboratories NV (Netherlands) |
62,250 | ||||
3,400 | Diamond Offshore Drilling, Inc. |
222,428 | ||||
654 | Dril-Quip, Inc.* |
47,945 | ||||
4,700 | Ensco PLC (Class A Stock) (United Kingdom) |
255,351 | ||||
23,318 | Halliburton Co. |
772,525 | ||||
2,341 | Lufkin Industries, Inc. |
107,803 | ||||
575 | Oil States International, Inc.* |
41,803 | ||||
823 | OYO Geospace Corp.* |
78,004 | ||||
|
|
|||||
1,815,329 | ||||||
Entertainment & Leisure 0.3% |
||||||
2,600 | Carnival Corp. (Panama) |
86,528 | ||||
5,946 | Carnival PLC (United Kingdom) |
199,441 | ||||
6,854 | Hennes & Mauritz AB (Class B Stock) (Sweden) |
253,024 | ||||
1,236 | Life Time Fitness, Inc.* |
56,127 | ||||
2,790 | Pinnacle Entertainment, Inc.* |
30,271 | ||||
1,300 | Sankyo Co. Ltd. (Japan) |
64,435 | ||||
36,200 | Thomas Cook Group PLC (United Kingdom) |
9,478 | ||||
|
|
|||||
699,304 | ||||||
Environmental Control |
||||||
1,100 | Stericycle, Inc.* |
102,135 | ||||
Equipment Services |
||||||
19,200 | Downer EDI Ltd. (Australia)* |
60,803 | ||||
Financial - Bank & Trust 0.7% |
||||||
2,291 | Astoria Financial Corp. |
21,581 | ||||
10,000 | Banco Bilbao Vizcaya Argentaria SA (Spain) |
65,192 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 23 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Financial - Bank & Trust (contd.) |
||||||
8,600 | Bank of Queensland Ltd. (Australia) |
$ | 68,738 | |||
2,400 | BNP Paribas (France) |
88,656 | ||||
86,362 | China Merchants Bank Co. Ltd. (Class H Stock) (China) |
158,200 | ||||
11,400 | Credit Agricole SA (France)* |
48,725 | ||||
5,400 | Credit Suisse Group AG (Switzerland)* |
91,936 | ||||
3,100 | Danske Bank A/S (Denmark)* |
45,954 | ||||
2,300 | Deutsche Bank AG (Germany) |
69,830 | ||||
5,860 | Dexia SA (Belgium)* |
1,583 | ||||
7,700 | DnB ASA (Norway) |
80,841 | ||||
93,300 | Mitsubishi UFJ Financial Group, Inc. (Japan) |
452,415 | ||||
9,300 | National Australia Bank Ltd. (Australia) |
242,656 | ||||
1,675 | Societe Generale SA (France)* |
36,869 | ||||
2,900 | Svenska Handelsbanken AB (Class A Stock) (Sweden) |
100,555 | ||||
9,300 | UBS AG (Switzerland)* |
97,836 | ||||
400 | Verwaltungs-und Privat-Bank AG (Liechtenstein) |
29,294 | ||||
|
|
|||||
1,700,861 | ||||||
Financial Services 0.5% |
||||||
1,340 | Affiliated Managers Group, Inc.* |
149,531 | ||||
4,006 | BlackRock, Inc. |
682,061 | ||||
1,268 | Eaton Vance Corp. |
33,640 | ||||
13,495 | Hong Kong Exchanges and Clearing Ltd. (Hong Kong) |
180,054 | ||||
265,984 | Industrial & Commercial Bank of China Ltd. (Class H Stock) (China) |
151,662 | ||||
2,407 | Jefferies Group, Inc. |
30,184 | ||||
7,400 | Permanent TSB Group Holdings PLC (Ireland)* |
209 | ||||
|
|
|||||
1,227,341 | ||||||
Food & Beverage |
| |||||
12,400 | Dairy Crest Group PLC (United Kingdom) |
65,501 | ||||
Food & Staples Retailing 0.7% |
| |||||
14,800 | CVS Caremark Corp. |
669,700 | ||||
20,700 | Kroger Co. (The) |
458,919 | ||||
73,400 | Wal-Mart de Mexico SAB de CV (Class V Stock) (Mexico) |
207,034 | ||||
6,945 | Wal-Mart Stores, Inc. |
516,916 | ||||
|
|
|||||
1,852,569 | ||||||
Food Products 0.3% |
| |||||
17,700 | ConAgra Foods, Inc. |
437,013 | ||||
6,650 | Kraft Foods, Inc. (Class A Stock) |
264,072 | ||||
|
|
|||||
701,085 |
See Notes to Financial Statements.
24 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Foods 1.0% |
| |||||
3,163 | Danone (France) |
$ | 192,259 | |||
2,500 | Delhaize Group (Belgium) |
89,391 | ||||
1,229 | Fresh Market, Inc. (The)* |
72,376 | ||||
4,270 | General Mills, Inc. |
165,249 | ||||
33,900 | J. Sainsbury PLC (United Kingdom) |
171,446 | ||||
13,600 | Koninklijke Ahold NV (Netherlands) |
165,544 | ||||
47,300 | Metcash Ltd. (Australia) |
169,199 | ||||
2,900 | Metro AG (Germany) |
79,746 | ||||
5,815 | Nestle SA (Switzerland) |
357,252 | ||||
20,000 | Nichirei Corp. (Japan) |
101,433 | ||||
1,300 | Nutreco NV (Netherlands) |
93,341 | ||||
27,900 | Parmalat SpA (Italy) |
52,608 | ||||
1,050 | Post Holdings, Inc.* |
31,080 | ||||
96,514 | Tesco PLC (United Kingdom) |
480,540 | ||||
42,100 | WM Morrison Supermarkets PLC (United Kingdom) |
182,785 | ||||
|
|
|||||
2,404,249 | ||||||
Hand/Machine Tools 0.1% |
| |||||
3,080 | Stanley Black & Decker, Inc. |
206,021 | ||||
Healthcare Equipment & Supplies 0.5% |
| |||||
10,508 | Covidien PLC (Ireland) |
587,187 | ||||
5,900 | Medtronic, Inc. |
232,578 | ||||
1,950 | Sirona Dental Systems, Inc.* |
84,298 | ||||
750 | Teleflex, Inc. |
47,805 | ||||
1,314 | Thoratec Corp.* |
45,083 | ||||
675 | West Pharmaceutical Services, Inc. |
33,602 | ||||
2,900 | Zimmer Holdings, Inc. |
170,897 | ||||
|
|
|||||
1,201,450 | ||||||
Healthcare Products 0.1% |
| |||||
2,111 | Arthrocare Corp.* |
62,444 | ||||
2,390 | Bruker Corp.* |
28,250 | ||||
1,028 | Cantel Medical Corp. |
26,851 | ||||
1,403 | Cepheid, Inc.* |
44,952 | ||||
830 | IDEXX Laboratories, Inc.* |
73,181 | ||||
|
|
|||||
235,678 | ||||||
Healthcare Providers & Services 0.2% |
| |||||
1,339 | Amedisys, Inc.* |
16,323 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 25 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Healthcare Providers & Services (contd.) |
| |||||
1,905 | Centene Corp.* |
$ | 72,466 | |||
11,500 | CIGNA Corp. |
463,220 | ||||
|
|
|||||
552,009 | ||||||
Healthcare Services 0.4% |
| |||||
21,780 | Aetna, Inc. |
785,387 | ||||
586 | Air Methods Corp.* |
63,891 | ||||
1,071 | AMERIGROUP Corp.* |
96,261 | ||||
704 | Covance, Inc.* |
33,046 | ||||
1,256 | Healthways, Inc.* |
14,080 | ||||
1,025 | LifePoint Hospitals, Inc.* |
39,073 | ||||
690 | MEDNAX, Inc.* |
45,630 | ||||
|
|
|||||
1,077,368 | ||||||
Healthcare Technology |
| |||||
9,300 | AGFA-Gevaert NV (Belgium)* |
14,271 | ||||
Holding Companies - Diversified 0.1% |
| |||||
116,000 | First Pacific Co. Ltd. (Bermuda) |
129,692 | ||||
Hotels, Restaurants & Leisure 0.9% |
| |||||
1,660 | Bally Technologies, Inc.* |
72,559 | ||||
1,124 | BJs Restaurants, Inc.* |
44,488 | ||||
775 | Choice Hotels International, Inc. |
31,062 | ||||
6,240 | Las Vegas Sands Corp. |
227,261 | ||||
10,898 | McDonalds Corp. |
973,845 | ||||
3,743 | Orient-Express Hotels Ltd. (Class A Stock) (Bermuda)* |
34,136 | ||||
6,537 | Shuffle Master, Inc.* |
95,505 | ||||
8,933 | Wynn Resorts Ltd. |
837,469 | ||||
|
|
|||||
2,316,325 | ||||||
Household Durables |
| |||||
5,800 | Alpine Electronics, Inc. (Japan) |
60,881 | ||||
1,022 | Helen of Troy Ltd. (Bermuda)* |
31,130 | ||||
2,253 | Universal Electronics, Inc.* |
28,365 | ||||
|
|
|||||
120,376 | ||||||
Household Products 0.2% |
| |||||
5,500 | Kimberly-Clark Corp. |
478,005 | ||||
550 | WD-40 Co. |
26,428 | ||||
|
|
|||||
504,433 |
See Notes to Financial Statements.
26 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Independent Power Producers & Energy Traders 0.1% |
| |||||
4,400 | Drax Group PLC (United Kingdom) |
$ | 32,718 | |||
13,000 | NRG Energy, Inc. |
257,660 | ||||
|
|
|||||
290,378 | ||||||
Industrial Conglomerates 0.3% |
| |||||
31,700 | General Electric Co. |
657,775 | ||||
2,293 | McDermott International, Inc. (Panama)* |
26,828 | ||||
|
|
|||||
684,603 | ||||||
Insurance 2.8% |
| |||||
7,600 | Aegon NV (Netherlands) |
34,499 | ||||
3,000 | Allianz SE (Germany) |
297,626 | ||||
27,000 | Allstate Corp. (The) |
926,100 | ||||
2,000 | American Equity Investment Life Holding Co. |
23,340 | ||||
21,500 | American International Group, Inc.* |
672,305 | ||||
21,100 | Aviva PLC (United Kingdom) |
96,620 | ||||
4,600 | AXA SA (France) |
55,889 | ||||
1,900 | Baloise Holding AG (Switzerland) |
125,370 | ||||
37,900 | Beazley PLC (United Kingdom) |
93,992 | ||||
28,451 | China Life Insurance Co. Ltd. (Class H Stock) (China) |
78,100 | ||||
4,300 | CNO Financial Group, Inc. |
35,647 | ||||
82 | Dai-ichi Life Insurance Co. Ltd. (The) (Japan) |
85,956 | ||||
1,237 | HCC Insurance Holdings, Inc. |
37,902 | ||||
12,300 | ING Groep NV, CVA (Netherlands)* |
80,915 | ||||
61,400 | Legal & General Group PLC (United Kingdom) |
122,218 | ||||
24,300 | Marsh & McLennan Cos., Inc. |
807,003 | ||||
43,248 | MetLife, Inc. |
1,330,741 | ||||
700 | Muenchener Rueckversicherungs AG (Germany) |
99,185 | ||||
44,538 | Old Mutual PLC (United Kingdom) |
109,633 | ||||
1,606 | Protective Life Corp. |
44,823 | ||||
836 | Reinsurance Group of America, Inc. |
46,540 | ||||
3,300 | SCOR SE (France) |
78,200 | ||||
880 | State Auto Financial Corp. |
11,414 | ||||
1,300 | Swiss Life Holding AG (Switzerland)* |
124,021 | ||||
3,200 | Swiss Re Ltd. (Switzerland)* |
200,315 | ||||
1,500 | Tower Group, Inc. |
27,960 | ||||
7,200 | Travelers Cos., Inc. (The) |
451,080 | ||||
954 | United Fire Group, Inc. |
18,698 | ||||
18,000 | Unum Group |
340,020 | ||||
1,858 | Validus Holdings Ltd. (Bermuda) |
60,441 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 27 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Insurance (contd.) |
| |||||
11,000 | XL Group PLC (Ireland) |
$ | 227,150 | |||
800 | Zurich Insurance Group AG (Switzerland)* |
177,554 | ||||
|
|
|||||
6,921,257 | ||||||
Internet 0.1% |
| |||||
821 | F5 Networks, Inc.* |
76,665 | ||||
1,844 | Sapient Corp. |
18,366 | ||||
4,508 | Tencent Holdings Ltd. (Cayman Islands) |
133,840 | ||||
3,800 | Yandex NV (Class A Stock) (Netherlands)* |
73,074 | ||||
|
|
|||||
301,945 | ||||||
Internet Services 1.1% |
| |||||
2,158 | Amazon.com, Inc.* |
503,461 | ||||
1,600 | Digital River, Inc.* |
28,464 | ||||
4,670 | eBay, Inc.* |
206,881 | ||||
1,556 | Google, Inc. (Class A Stock)* |
984,901 | ||||
1,760 | priceline.com, Inc.* |
1,164,663 | ||||
|
|
|||||
2,888,370 | ||||||
Internet Software & Services 1.0% |
| |||||
8,480 | Baidu, Inc., ADR (Cayman Islands)* |
1,022,010 | ||||
3,804 | LinkedIn Corp. (Class A Stock)* |
390,481 | ||||
6,520 | Oracle Corp. |
196,904 | ||||
2,420 | VeriSign, Inc.* |
107,496 | ||||
48,310 | Yahoo!, Inc.* |
765,230 | ||||
|
|
|||||
2,482,121 | ||||||
Investment Companies 0.2% |
| |||||
645,000 | Hutchison Port Holdings Trust (Singapore) |
490,200 | ||||
2,318 | KKR Financial Holdings LLC |
21,140 | ||||
|
|
|||||
511,340 | ||||||
IT Services 0.1% |
| |||||
1,650 | Broadridge Financial Solutions, Inc. |
34,930 | ||||
1,100 | International Business Machines Corp. |
215,578 | ||||
11,800 | Logica PLC (United Kingdom) |
19,303 | ||||
|
|
|||||
269,811 |
See Notes to Financial Statements.
28 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Leisure Equipment & Products 0.1% |
| |||||
6,500 | Mattel, Inc. |
$ | 228,605 | |||
1,889 | Polaris Industries, Inc. |
141,977 | ||||
|
|
|||||
370,582 | ||||||
Life Sciences Tools & Services 0.5% |
| |||||
21,217 | Thermo Fisher Scientific, Inc. |
1,181,150 | ||||
Machinery 1.1% |
| |||||
1,300 | Actuant Corp. (Class A Stock) |
36,998 | ||||
28,000 | BlueScope Steel Ltd. (Australia)* |
7,734 | ||||
3,700 | Cummins, Inc. |
354,830 | ||||
4,080 | Deere & Co. |
313,426 | ||||
948 | Franklin Electric Co., Inc. |
53,477 | ||||
515 | Gardner Denver, Inc. |
29,345 | ||||
17,290 | Ingersoll-Rand PLC (Ireland) |
733,269 | ||||
8,963 | Komatsu Ltd. (Japan) |
198,837 | ||||
44,000 | Mitsui Engineering & Shipbuilding Co. Ltd. (Japan) |
55,183 | ||||
8,500 | PACCAR, Inc. |
340,085 | ||||
2,900 | Parker Hannifin Corp. |
232,928 | ||||
968 | Regal-Beloit Corp. |
62,310 | ||||
1,800 | Rheinmetall AG (Germany) |
89,792 | ||||
854 | Snap-on, Inc. |
57,884 | ||||
2,211 | Terex Corp.* |
43,114 | ||||
819 | Twin Disc, Inc. |
16,036 | ||||
325 | Valmont Industries, Inc. |
40,261 | ||||
|
|
|||||
2,665,509 | ||||||
Manufacturing 0.5% |
||||||
1,346 | Colfax Corp.* |
38,953 | ||||
20,083 | Danaher Corp. |
1,060,583 | ||||
1,810 | Polypore International, Inc.* |
67,260 | ||||
|
|
|||||
1,166,796 | ||||||
Media 1.6% |
||||||
6,900 | CBS Corp. (Class B Stock) |
230,874 | ||||
50,227 | Comcast Corp. (Special Class A Stock) |
1,603,748 | ||||
3,570 | Discovery Communications, Inc. (Class A Stock)* |
180,749 | ||||
8,500 | Interpublic Group of Cos., Inc. (The) |
83,895 | ||||
16,640 | News Corp. (Class A Stock) |
383,053 | ||||
8,726 | Pearson PLC (United Kingdom) |
163,365 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 29 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Media (contd.) |
||||||
750 | Time Warner Cable, Inc. |
$ | 63,698 | |||
12,300 | Time Warner, Inc. |
481,176 | ||||
8,710 | Viacom, Inc. (Class B Stock) |
406,844 | ||||
9,100 | Vivendi (France) |
172,588 | ||||
5,360 | Walt Disney Co. (The) |
263,390 | ||||
825 | Wiley, (John) & Sons, Inc. (Class A Stock) |
39,311 | ||||
|
|
|||||
4,072,691 | ||||||
Medical Supplies & Equipment 0.1% |
||||||
1,522 | Cooper Cos., Inc. (The) |
114,546 | ||||
3,700 | Fresenius Medical Care AG & Co. KGaA (Germany) |
267,466 | ||||
|
|
|||||
382,012 | ||||||
Metals & Mining 1.0% |
||||||
1,418 | AMCOL International Corp. |
43,533 | ||||
88,700 | Arrium Ltd. (Australia) |
66,287 | ||||
1,128 | BHP Billiton Ltd. (Australia) |
37,469 | ||||
5,100 | Boliden AB (Sweden) |
77,323 | ||||
15,300 | Freeport-McMoRan Copper & Gold, Inc. |
515,151 | ||||
1,100 | Globe Specialty Metals, Inc. |
13,783 | ||||
2,540 | Joy Global, Inc. |
131,928 | ||||
33,800 | Mincor Resources NL (Australia) |
22,642 | ||||
7,560 | Precision Castparts Corp. |
1,176,034 | ||||
3,500 | Rio Tinto Ltd. (Australia) |
193,819 | ||||
2,059 | RTI International Metals, Inc.* |
46,224 | ||||
1,115 | Timken Co. |
40,363 | ||||
3,921 | Titanium Metals Corp. |
45,719 | ||||
|
|
|||||
2,410,275 | ||||||
Multi-Line Retail 0.6% |
||||||
5,034 | Dollar Tree, Inc.* |
253,411 | ||||
9,400 | J.C. Penney Co., Inc. |
211,594 | ||||
14,190 | Kohls Corp. |
705,527 | ||||
6,300 | Macys, Inc. |
225,792 | ||||
|
|
|||||
1,396,324 | ||||||
Multi-Utilities 0.2% |
||||||
14,300 | Public Service Enterprise Group, Inc. |
475,332 | ||||
2,400 | RWE AG (Germany) |
94,225 | ||||
|
|
|||||
569,557 |
See Notes to Financial Statements.
30 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Office Electronics 0.2% |
||||||
1,183 | Canon, Inc. (Japan) |
$ | 39,504 | |||
66,200 | Xerox Corp. |
458,766 | ||||
|
|
|||||
498,270 | ||||||
Oil, Gas & Consumable Fuels 4.8% |
||||||
2,440 | Air Liquide SA (France) |
272,882 | ||||
1,270 | Anadarko Petroleum Corp. |
88,189 | ||||
5,200 | Apache Corp. |
447,824 | ||||
1,500 | Atmos Energy Corp. |
53,775 | ||||
14,533 | BG Group PLC (United Kingdom) |
286,085 | ||||
49,400 | BP PLC (United Kingdom) |
328,011 | ||||
6,170 | Cabot Oil & Gas Corp. |
260,312 | ||||
4,138 | Cenovus Energy, Inc. (Canada) |
126,469 | ||||
12,400 | Chesapeake Energy Corp. |
233,368 | ||||
6,300 | Chevron Corp. |
690,354 | ||||
180,954 | CNOOC Ltd. (Hong Kong) |
363,004 | ||||
7,300 | ConocoPhillips |
397,412 | ||||
3,900 | Devon Energy Corp. |
230,568 | ||||
3,940 | Dresser-Rand Group, Inc.* |
183,249 | ||||
10,700 | ENI SpA (Italy) |
220,638 | ||||
1,340 | EOG Resources, Inc. |
131,333 | ||||
2,270 | EQT Corp. |
128,028 | ||||
3,050 | FMC Technologies, Inc.* |
137,616 | ||||
1,297 | Gulfport Energy Corp.* |
26,718 | ||||
1,800 | Hess Corp. |
84,888 | ||||
12,980 | JX Holdings, Inc. (Japan) |
62,393 | ||||
16,500 | Marathon Oil Corp. |
436,755 | ||||
4,500 | Murphy Oil Corp. |
241,470 | ||||
27,104 | National Oilwell Varco, Inc. |
1,959,619 | ||||
2,980 | Noble Energy, Inc. |
260,541 | ||||
4,172 | Oasis Petroleum, Inc.* |
109,223 | ||||
6,930 | Occidental Petroleum Corp. |
603,118 | ||||
1,613 | Ocean Rig UDW, Inc. (Marshall Islands)* |
24,179 | ||||
4,300 | OMV AG (Austria) |
134,918 | ||||
1,301 | ONEOK, Inc. |
57,908 | ||||
9,800 | Phillips 66 |
368,480 | ||||
1,563 | Pioneer Natural Resources Co. |
138,529 | ||||
7,500 | Repsol SA (Spain) |
119,529 | ||||
15,200 | Royal Dutch Shell PLC (Class B Stock) (United Kingdom) |
534,698 | ||||
7,700 | Royal Dutch Shell PLC (Class B Stock), ADR (United Kingdom) |
543,312 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 31 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Oil, Gas & Consumable Fuels (contd.) |
||||||
6,717 | Schlumberger Ltd. (Netherlands) |
$ | 478,653 | |||
985 | South Jersey Industries, Inc. |
52,067 | ||||
5,400 | Statoil ASA (Norway) |
128,340 | ||||
1,689 | Swift Energy Co.* |
31,567 | ||||
6,000 | Total SA (France) |
276,459 | ||||
15,300 | Total SA, ADR (France) |
703,035 | ||||
1,071 | WGL Holdings, Inc. |
43,322 | ||||
|
|
|||||
11,998,838 | ||||||
Paper & Forest Products 0.2% |
| |||||
14,400 | International Paper Co. |
472,464 | ||||
11,800 | Mondi PLC (United Kingdom) |
100,389 | ||||
|
|
|||||
572,853 | ||||||
Pharmaceuticals 5.6% |
| |||||
35,139 | Abbott Laboratories |
2,330,067 | ||||
8,752 | Allergan, Inc. |
718,277 | ||||
2,800 | Amgen, Inc. |
231,280 | ||||
6,400 | AstraZeneca PLC (United Kingdom) |
298,891 | ||||
2,800 | AstraZeneca PLC, ADR (United Kingdom) |
131,068 | ||||
19,249 | Bristol-Myers Squibb Co. |
685,264 | ||||
2,798 | Catamaran Corp. (Canada)* |
236,494 | ||||
7,100 | Eli Lilly & Co. |
312,613 | ||||
21,830 | Endo Heath Solutions, Inc.* |
649,006 | ||||
24,306 | Express Scripts Holding Co.* |
1,408,290 | ||||
6,000 | GlaxoSmithKline PLC (United Kingdom) |
138,058 | ||||
2,200 | H. Lundbeck A/S (Denmark) |
43,560 | ||||
14,800 | Johnson & Johnson |
1,024,456 | ||||
2,800 | Kyorin Holdings, Inc. (Japan) |
61,024 | ||||
19,453 | Mead Johnson Nutrition Co. |
1,419,291 | ||||
14,200 | Merck & Co., Inc. |
627,214 | ||||
700 | Merck KGaA (Germany) |
70,401 | ||||
1,847 | Natural Grocers By Vitamin Cottage, Inc.* |
37,457 | ||||
7,924 | Novartis AG (Switzerland) |
465,290 | ||||
3,400 | Novartis AG, ADR (Switzerland) |
199,308 | ||||
2,757 | Novo Nordisk A/S (Class B Stock) (Denmark) |
425,095 | ||||
749 | Onyx Pharmaceuticals, Inc.* |
56,153 | ||||
3,700 | Otsuka Holdings Co. Ltd. (Japan) |
112,667 | ||||
38,300 | Pfizer, Inc. |
920,732 | ||||
1,200 | Roche Holding AG (Switzerland) |
212,491 |
See Notes to Financial Statements.
32 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Pharmaceuticals (contd.) |
| |||||
1,429 | Salix Pharmaceuticals Ltd.* |
$ | 64,048 | |||
3,900 | Sanofi (France) |
318,193 | ||||
6,000 | Sanofi, ADR (France) |
243,840 | ||||
45,499 | Sinopharm Group Co. Ltd. (Class H Stock) (China) |
133,153 | ||||
2,900 | Teva Pharmaceutical Industries Ltd. (Israel) |
118,279 | ||||
6,863 | Teva Pharmaceutical Industries Ltd., ADR (Israel) |
280,628 | ||||
1,495 | Theravance, Inc.* |
43,549 | ||||
|
|
|||||
14,016,137 | ||||||
Pipelines 0.2% |
| |||||
12,392 | Kinder Morgan, Inc. |
443,758 | ||||
Professional Services 0.1% |
| |||||
2,118 | Duff & Phelps Corp. (Class A Stock) |
31,219 | ||||
3,900 | Manpower, Inc. |
138,762 | ||||
10,647 | Monster Worldwide, Inc.* |
77,191 | ||||
800 | Towers Watson & Co. (Class A Stock) |
46,904 | ||||
|
|
|||||
294,076 | ||||||
Real Estate |
| |||||
1,197 | Meritage Homes Corp.* |
42,015 | ||||
Real Estate Investment Trusts 0.7% |
| |||||
11,398 | American Tower Corp. |
824,189 | ||||
36,100 | Annaly Capital Management, Inc. |
629,223 | ||||
1,275 | Associated Estates Realty Corp. |
19,036 | ||||
1,851 | First Potomac Realty Trust |
21,453 | ||||
1,100 | Highwoods Properties, Inc. |
37,257 | ||||
10,600 | Kimco Realty Corp. |
206,594 | ||||
725 | LaSalle Hotel Properties |
19,038 | ||||
3,423 | Medical Properties Trust, Inc. |
33,717 | ||||
1,535 | Redwood Trust, Inc. |
19,786 | ||||
3,880 | Two Harbors Investment Corp. |
44,504 | ||||
|
|
|||||
1,854,797 | ||||||
Restaurants |
| |||||
410 | Chipotle Mexican Grill, Inc.* |
119,855 | ||||
Retail 0.1% |
| |||||
35,200 | Home Retail Group PLC (United Kingdom) |
42,663 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 33 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Retail (contd.) |
| |||||
1,400 | Rallye SA (France) |
$ | 40,692 | |||
3,600 | Shimachu Co. Ltd. (Japan) |
75,658 | ||||
|
|
|||||
159,013 | ||||||
Retail & Merchandising 3.6% |
| |||||
5,200 | Aoyama Trading Co. Ltd. (Japan) |
101,576 | ||||
1,000 | Big Lots, Inc.* |
40,510 | ||||
2,696 | Chicos FAS, Inc. |
41,303 | ||||
3,770 | Costco Wholesale Corp. |
362,599 | ||||
73,900 | Debenhams PLC (United Kingdom) |
106,308 | ||||
18,284 | Dollar General Corp.* |
932,667 | ||||
1,089 | Ezcorp, Inc. (Class A Stock)* |
24,502 | ||||
1,251 | Francescas Holdings Corp.* |
39,294 | ||||
2,200 | Ks Holdings Corp. (Japan) |
71,639 | ||||
9,568 | Lululemon Athletica, Inc.* |
540,401 | ||||
33,200 | Marks & Spencer Group PLC (United Kingdom) |
173,220 | ||||
2,800 | Matsumotokiyoshi Holdings Co. Ltd. (Japan) |
63,082 | ||||
6,459 | OReilly Automotive, Inc.* |
553,795 | ||||
6,441 | Ross Stores, Inc. |
427,940 | ||||
1,425 | Sally Beauty Holdings, Inc.* |
37,648 | ||||
27,229 | Starbucks Corp. |
1,232,929 | ||||
390 | Swatch Group AG (The) (Switzerland) |
154,611 | ||||
7,777 | Target Corp. |
471,675 | ||||
2,500 | Tiffany & Co. |
137,325 | ||||
49,409 | TJX Cos., Inc. (The) |
2,187,830 | ||||
20,349 | Yum! Brands, Inc. |
1,319,429 | ||||
|
|
|||||
9,020,283 | ||||||
Road & Rail 0.1% |
||||||
839 | Landstar System, Inc. |
41,455 | ||||
3,400 | Norfolk Southern Corp. |
251,770 | ||||
1,275 | Werner Enterprises, Inc. |
29,427 | ||||
|
|
|||||
322,652 | ||||||
Savings & Loan |
||||||
3,125 | Capitol Federal Financial, Inc. |
36,625 | ||||
Semiconductors 0.4% |
||||||
5,800 | Altera Corp. |
205,610 | ||||
14,748 | ARM Holdings PLC (United Kingdom) |
127,578 |
See Notes to Financial Statements.
34 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Semiconductors (contd.) |
||||||
1,800 | ASML Holding NV (Netherlands) |
$ | 103,500 | |||
4,680 | Broadcom Corp. (Class A Stock)* |
158,558 | ||||
798 | Cabot Microelectronics Corp. |
23,461 | ||||
1,865 | Cavium, Inc.* |
50,392 | ||||
1,504 | Checkpoint Systems, Inc.* |
11,566 | ||||
3,620 | Linear Technology Corp. |
116,745 | ||||
2,000 | Microsemi Corp.* |
38,720 | ||||
4,846 | Teradyne, Inc.* |
71,285 | ||||
|
|
|||||
907,415 | ||||||
Semiconductors & Semiconductor Equipment 0.8% |
||||||
775 | Cymer, Inc.* |
44,338 | ||||
3,438 | Entegris, Inc.* |
27,676 | ||||
450 | Hittite Microwave Corp.* |
22,801 | ||||
27,800 | Intel Corp. |
714,460 | ||||
4,000 | KLA-Tencor Corp. |
203,640 | ||||
1,050 | MKS Instruments, Inc. |
27,720 | ||||
5,300 | RF Micro Devices, Inc.* |
20,564 | ||||
124 | Samsung Electronics Co. Ltd. (South Korea) |
142,541 | ||||
1,000 | Semtech Corp.* |
23,890 | ||||
25,000 | Texas Instruments, Inc. |
681,000 | ||||
1,687 | Veeco Instruments, Inc.* |
60,243 | ||||
|
|
|||||
1,968,873 | ||||||
Software 1.6% |
||||||
10,705 | CA, Inc. |
257,669 | ||||
2,807 | Cerner Corp.* |
207,493 | ||||
17,355 | Check Point Software Technologies Ltd. (Israel)* |
842,932 | ||||
2,957 | Citrix Systems, Inc.* |
214,915 | ||||
6,346 | Compuware Corp.* |
58,447 | ||||
600 | Manhattan Associates, Inc.* |
28,014 | ||||
3,235 | MedAssets, Inc.* |
42,670 | ||||
72,400 | Microsoft Corp. |
2,133,628 | ||||
4,280 | Parametric Technology Corp.* |
92,191 | ||||
1,400 | Red Hat, Inc.* |
75,124 | ||||
925 | SS&C Technologies Holdings, Inc.* |
22,478 | ||||
1,605 | TIBCO Software, Inc.* |
45,084 | ||||
1,000 | Verint Systems, Inc.* |
27,910 | ||||
|
|
|||||
4,048,555 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 35 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Specialty Retail 1.3% |
||||||
2,946 | Aarons, Inc. |
$ | 86,406 | |||
1,430 | AutoZone, Inc.* |
536,579 | ||||
600 | DSW, Inc. (Class A Stock) |
35,472 | ||||
5,400 | Gap, Inc. (The) |
159,246 | ||||
2,469 | Genesco, Inc.* |
163,497 | ||||
550 | Group 1 Automotive, Inc. |
29,563 | ||||
16,981 | Home Depot, Inc. (The) |
886,069 | ||||
12,560 | Limited Brands, Inc. |
597,228 | ||||
925 | Lithia Motors, Inc. (Class A Stock) |
25,771 | ||||
3,350 | PetSmart, Inc. |
221,468 | ||||
19,600 | Staples, Inc. |
249,704 | ||||
1,470 | Tractor Supply Co. |
133,579 | ||||
6,477 | Urban Outfitters, Inc.* |
197,872 | ||||
|
|
|||||
3,322,454 | ||||||
Steel Producers/Products |
||||||
3,200 | Voestalpine AG (Austria) |
86,914 | ||||
Telecommunications 1.6% |
||||||
62,400 | BT Group PLC (United Kingdom) |
212,297 | ||||
166,600 | Cable & Wireless Communications PLC (United Kingdom) |
81,518 | ||||
12,870 | CenturyLink, Inc. |
534,620 | ||||
1,207 | EZchip Semiconductor Ltd. (Israel)* |
44,261 | ||||
4,500 | France Telecom SA (France) |
60,260 | ||||
1,123 | IPG Photonics Corp.* |
58,205 | ||||
63 | KDDI Corp. (Japan) |
433,767 | ||||
2,162 | NICE Systems Ltd., ADR (Israel)* |
77,832 | ||||
4,500 | Nippon Telegraph & Telephone Corp. (Japan) |
208,888 | ||||
100 | NTT DoCoMo, Inc. (Japan) |
167,157 | ||||
23,377 | QUALCOMM, Inc. |
1,395,139 | ||||
743 | SBA Communications Corp. (Class A Stock)* |
43,882 | ||||
100,000 | Telecom Italia SpA (Italy) |
81,403 | ||||
4,200 | Telefonica SA (Spain) |
47,642 | ||||
15,400 | Telstra Corp. Ltd. (Australia) |
64,676 | ||||
168,530 | Vodafone Group PLC (United Kingdom) |
482,319 | ||||
|
|
|||||
3,993,866 | ||||||
Textiles, Apparel & Luxury Goods 0.1% |
| |||||
11,000 | Kurabo Industries Ltd. (Japan) |
18,753 | ||||
836 | PVH Corp. |
66,403 |
See Notes to Financial Statements.
36 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Textiles, Apparel & Luxury Goods (contd.) |
| |||||
41,000 | Yue Yuen Industrial Holdings Ltd. (Bermuda) |
$ | 123,786 | |||
|
|
|||||
208,942 | ||||||
Tobacco 0.5% |
| |||||
6,300 | Altria Group, Inc. |
226,611 | ||||
7,398 | British American Tobacco PLC (United Kingdom) |
392,939 | ||||
1,480 | Lorillard, Inc. |
190,387 | ||||
3,870 | Philip Morris International, Inc. |
353,873 | ||||
|
|
|||||
1,163,810 | ||||||
Trading Companies & Distributors 0.1% |
| |||||
25,000 | Marubeni Corp. (Japan) |
166,762 | ||||
1,685 | United Rentals, Inc.* |
48,713 | ||||
725 | WESCO International, Inc.* |
40,390 | ||||
|
|
|||||
255,865 | ||||||
Transportation 0.7% |
| |||||
1,426 | Bristow Group, Inc. |
65,268 | ||||
3,255 | Canadian National Railway Co. (Canada) |
287,151 | ||||
5,400 | Deutsche Post AG (Germany) |
96,948 | ||||
5,255 | Expeditors International of Washington, Inc. |
186,920 | ||||
3,600 | Go-Ahead Group PLC (United Kingdom) |
72,378 | ||||
2,060 | Kansas City Southern |
149,968 | ||||
2,478 | Quality Distribution, Inc.* |
25,028 | ||||
18,000 | Sankyu, Inc. (Japan) |
67,343 | ||||
6,021 | Union Pacific Corp. |
738,235 | ||||
|
|
|||||
1,689,239 | ||||||
Utilities |
| |||||
3,400 | E.ON AG (Germany) |
72,359 | ||||
Wireless Telecommunication Services 0.2% |
| |||||
20,700 | Vodafone Group PLC, ADR (United Kingdom) |
595,125 | ||||
|
|
|||||
TOTAL COMMON STOCKS |
156,876,951 | |||||
|
|
|||||
PREFERRED STOCKS 0.3% |
| |||||
Automobile Manufacturers 0.1% |
| |||||
1,339 | Volkswagen AG, 1.81% (Germany) |
227,862 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 37 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||||||
PREFERRED STOCKS (Continued) |
| |||||||||
Commercial Banks 0.1% |
| |||||||||
7,950 | Wells Fargo & Co., Series J, 8.00%, CVT |
$ | 243,747 | |||||||
Financial Services 0.1% |
| |||||||||
8,700 | Itau Unibanco Holding SA, ADR, 2.79% (Brazil) |
137,547 | ||||||||
|
|
|||||||||
TOTAL PREFERRED STOCKS |
609,156 | |||||||||
|
|
|||||||||
UNAFFILIATED MUTUAL FUND |
| |||||||||
3,675 | Ares Capital Corp. |
61,115 | ||||||||
|
|
|||||||||
Moodys Ratings (Unaudited) |
Principal Amount (000)# |
|||||||||
ASSET-BACKED SECURITIES 3.0% |
||||||||||
Aaa |
EUR | 1,888 | Avoca CLO I BV, |
2,203,871 | ||||||
Aaa |
GBP | 600 | Chester Asset Receivables Dealings, |
924,976 | ||||||
NR |
EUR | 215 | Magnolia Funding Ltd., |
265,355 | ||||||
Aaa |
$ | 600 | Penarth Master Issuer PLC, |
601,446 | ||||||
AAA(b) |
274 | Plymouth Rock CLO Ltd., Inc., |
272,885 | |||||||
Caa3 |
465 | Sierra Madre Funding Ltd., |
298,233 | |||||||
Caa3 |
1,063 | Series 2004-1A, Class ALTB, 144A |
681,674 |
See Notes to Financial Statements.
38 | Visit our website at www.prudentialfunds.com |
Moodys Ratings (Unaudited) |
Principal Amount (000)# |
Description | Value (Note 1) | |||||||
ASSET-BACKED SECURITIES (Continued) |
||||||||||
Aaa | $ | 1,361 | SLM Student Loan Trust, |
$ | 1,405,940 | |||||
Aaa | 1,000 | Venture CDO Ltd., |
936,742 | |||||||
|
|
|||||||||
TOTAL ASSET-BACKED SECURITIES |
7,591,122 | |||||||||
|
|
|||||||||
COMMERCIAL MORTGAGE-BACKED SECURITY |
||||||||||
Aaa | 97 | Federal National Mortgage Assoc., |
104,558 | |||||||
|
|
|||||||||
CORPORATE BONDS 8.8% |
| |||||||||
Automobile Manufacturers 0.8% |
| |||||||||
A2 | 1,000 | BMW US Capital LLC, |
1,001,614 | |||||||
A3 | 900 | Daimler Finance North America LLC, |
898,715 | |||||||
|
|
|||||||||
1,900,329 | ||||||||||
|
|
|||||||||
Commercial Banks 2.8% |
| |||||||||
A1 | 400 | Abbey National Treasury Services PLC, |
388,645 | |||||||
B1 | 100 | Ally Financial, Inc., |
117,636 | |||||||
Baa1 | 400 | Banco Santander Brazil SA, |
385,998 | |||||||
Baa3 | 1,120 | Barclays Bank PLC, |
1,334,301 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 39 |
Portfolio of Investments
as of July 31, 2012 continued
Moodys Ratings (Unaudited) |
Principal Amount (000)# |
Description | Value (Note 1) | |||||||
CORPORATE BONDS (Continued) |
| |||||||||
Commercial Banks (contd.) |
| |||||||||
Aa2 | $ | 1,000 | Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, |
$ | 1,100,118 | |||||
A1 | 900 | Export-Import Bank of Korea, |
900,504 | |||||||
Ba1 | 1,000 | Lloyds TSB Bank PLC, |
1,058,770 | |||||||
A2 | 700 | Morgan Stanley, |
696,020 | |||||||
A3 | 1,000 | Royal Bank of Scotland PLC (The), |
1,044,108 | |||||||
A3 | 100 | 4.875%, 03/16/15 |
105,228 | |||||||
|
|
|||||||||
7,131,328 | ||||||||||
|
|
|||||||||
Consumer Finance 0.3% |
| |||||||||
A3 | 600 | American Express Co., |
762,316 | |||||||
Diversified Financial Services 2.4% |
| |||||||||
A2 | 900 | Bear Stearns Cos. LLC (The), |
1,075,420 | |||||||
Aaa | 1,000 | Credit Agricole Home Loan SFH, |
976,315 | |||||||
NR | 100 | Ford Motor Credit Co. LLC, |
100,000 | |||||||
Baa3 | 600 | Sr. Unsecd. Notes, 144A |
619,237 |
See Notes to Financial Statements.
40 | Visit our website at www.prudentialfunds.com |
Moodys Ratings (Unaudited) |
Principal Amount (000)# |
Description | Value (Note 1) | |||||||
CORPORATE BONDS (Continued) |
| |||||||||
Diversified Financial Services (contd.) |
| |||||||||
Ba2 |
$ | 500 | International Lease Finance Corp., |
$ | 565,625 | |||||
A2 |
700 | JPMorgan Chase & Co., |
758,395 | |||||||
A1 |
700 | JPMorgan Chase Bank NA, |
814,706 | |||||||
Baa2 |
900 | Merrill Lynch & Co., Inc., |
903,210 | |||||||
Baa2 |
100 | 6.875%, 04/25/18 |
115,425 | |||||||
|
|
|||||||||
5,928,333 | ||||||||||
|
|
|||||||||
Financial - Bank & Trust 0.2% |
| |||||||||
A2 |
500 | UBS AG, Notes (Switzerland) |
553,509 | |||||||
Financial Services 0.1% |
| |||||||||
NR |
500 | Lehman Brothers Holdings, Inc., |
123,125 | |||||||
Insurance 0.2% |
| |||||||||
Baa1 |
500 | American International Group, Inc., |
616,008 | |||||||
Metals & Mining 0.4% |
| |||||||||
Baa1 |
900 | Barrick North America Finance LLC, |
979,540 | |||||||
Oil, Gas & Consumable Fuels 0.6% |
| |||||||||
A2 |
400 | BP Capital Markets PLC, |
468,700 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 41 |
Portfolio of Investments
as of July 31, 2012 continued
Moodys Ratings (Unaudited) |
Principal Amount (000)# |
Description | Value (Note 1) | |||||||
CORPORATE BONDS (Continued) |
| |||||||||
Oil, Gas & Consumable Fuels (contd.) |
| |||||||||
Baa2 |
$ | 1,000 | TNK-BP Finance SA, |
$ | 1,034,090 | |||||
|
|
|||||||||
1,502,790 | ||||||||||
|
|
|||||||||
Paper & Forest Products 0.2% |
| |||||||||
Baa3 |
500 | Georgia-Pacific LLC, |
589,475 | |||||||
Pharmaceuticals 0.2% |
| |||||||||
B1 |
400 | Valeant Pharmaceuticals International, |
405,000 | |||||||
Real Estate Investment Trusts 0.4% |
| |||||||||
Baa2 |
1,000 | Goodman Funding Pty Ltd., |
1,058,121 | |||||||
Utilities 0.2% |
| |||||||||
A1 |
500 | Korea Electric Power Corp., |
516,260 | |||||||
|
|
|||||||||
TOTAL CORPORATE BONDS |
22,066,134 | |||||||||
|
|
|||||||||
FOREIGN GOVERNMENT BONDS 2.4% |
| |||||||||
Aaa |
EUR | 1,500 | Bundesobligation, Bonds (Germany) |
1,934,936 | ||||||
Aaa |
EUR | 2,200 | Bundesschatzanweisungen, |
2,730,930 | ||||||
Baa2 |
BRL | 1,800 | Republic of Brazil, |
1,262,688 | ||||||
|
|
|||||||||
TOTAL FOREIGN GOVERNMENT BONDS |
5,928,554 | |||||||||
|
|
See Notes to Financial Statements.
42 | Visit our website at www.prudentialfunds.com |
Moodys Ratings (Unaudited) |
Principal Amount (000)# |
Description | Value (Note 1) | |||||||
MUNICIPAL BONDS 1.8% |
| |||||||||
California 0.9% |
| |||||||||
Aa |
$ | 500 | California State Public Works Board Lease Revenue, |
$ | 602,580 | |||||
A1 |
400 | State of California, General Obligation Unlimited |
428,100 | |||||||
A1 |
800 | 5.00%, 11/01/37 |
860,632 | |||||||
A1 |
200 | 5.00%, 12/01/37 |
215,378 | |||||||
|
|
|||||||||
2,106,690 | ||||||||||
|
|
|||||||||
Illinois 0.9% |
| |||||||||
Aa3 |
1,100 | Chicago Transit Authority, |
1,361,646 | |||||||
Aa3 |
800 |
|
990,288 | |||||||
|
|
|||||||||
2,351,934 | ||||||||||
|
|
|||||||||
TOTAL MUNICIPAL BONDS |
4,458,624 | |||||||||
|
|
|||||||||
RESIDENTIAL MORTGAGE-BACKED SECURITIES 1.4% |
| |||||||||
AAA(b) |
27 | BankTrust Mortgage Trust, |
26,623 | |||||||
Caa1 |
149 | Bear Stearns Adjustable Rate Mortgage Trust, Series 2005-4, Class 23A2 |
130,977 | |||||||
D(b) |
366 | Countrywide Alternative Loan Trust, |
247,917 | |||||||
Series 2006-OA11, Class A1B |
||||||||||
Ca |
403 | 0.436%(a), 09/25/46 |
234,153 | |||||||
Aaa |
17 | Federal Home Loan Mortgage Corp., |
19,319 | |||||||
Aaa |
3 | Series 2266, Class F |
2,990 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 43 |
Portfolio of Investments
as of July 31, 2012 continued
Moodys Ratings (Unaudited) |
Principal Amount (000)# |
Description | Value (Note 1) | |||||||
RESIDENTIAL MORTGAGE-BACKED SECURITIES (Continued) |
| |||||||||
Federal National Mortgage Assoc., |
||||||||||
Aaa |
$ | 5 | 0.698%(a), 10/18/30 |
$ | 5,370 | |||||
Series 2006-5, Class 3A2 |
||||||||||
NR |
409 | 2.655%(a), 05/25/35 |
423,232 | |||||||
NR |
85 | FHLMC Structured Pass-Through Securities, |
85,733 | |||||||
Aaa |
16 | Government National Mortgage Assoc., |
15,797 | |||||||
Aaa |
GBP | 403 | Granite Mortgages PLC, |
615,146 | ||||||
Aaa |
206 | GSR Mortgage Loan Trust, |
204,594 | |||||||
CC(b) |
431 | Series 2005-AR7, Class 4A1 |
336,940 | |||||||
Caa3 |
468 | Harborview Mortgage Loan Trust, |
282,848 | |||||||
Series 2006-12, Class 2A2B |
||||||||||
C |
362 | 0.497%(a), 01/19/38 |
108,799 | |||||||
C |
389 | Indymac Index Mortgage Loan Trust, |
82,379 | |||||||
CCC(b) |
369 | Washington Mutual Mortgage |
262,968 | |||||||
Series 2007-OA3, Class 2A1A |
||||||||||
CCC(b) |
417 | 0.907%(a), 04/25/47 |
316,117 | |||||||
|
|
|||||||||
TOTAL RESIDENTIAL MORTGAGE-BACKED SECURITIES |
3,401,902 | |||||||||
|
|
See Notes to Financial Statements.
44 | Visit our website at www.prudentialfunds.com |
Principal Amount (000)# |
Description | Value (Note 1) | ||||||
|
U.S. GOVERNMENT AGENCY OBLIGATIONS 8.1% |
| ||||||
Federal Home Loan Mortgage Corp. |
||||||||
$ 83 | 2.521%(a), 09/01/35 |
$ | 87,716 | |||||
2,000 | 4.00%, TBA |
2,135,313 | ||||||
38 | 5.50%, 12/01/36 |
41,598 | ||||||
59 | 6.00%, 04/01/16 - 07/01/17 |
63,122 | ||||||
Federal National Mortgage Assoc. |
||||||||
127 | 1.347%(a), 06/01/43 |
128,834 | ||||||
85 | 2.272%(a), 12/01/34 |
89,645 | ||||||
5,000 | 2.50%, TBA |
5,201,562 | ||||||
3,000 | 3.50%, TBA |
3,188,437 | ||||||
35 | 3.933%(a), 05/01/36 |
37,448 | ||||||
1,000 | 4.00%, TBA |
1,070,469 | ||||||
1,082 | 4.50%, 07/01/20 - 04/01/39 |
1,178,138 | ||||||
1,000 | 4.50%, TBA |
1,081,406 | ||||||
45 | 4.638%(a), 09/01/34 |
48,895 | ||||||
2,500 | 5.00%, 06/01/33 - 04/01/39 |
2,732,547 | ||||||
192 | 5.50%, 06/01/36 |
211,412 | ||||||
736 | 6.00%, 09/01/37 |
812,196 | ||||||
Government National Mortgage Assoc. |
||||||||
15 | 1.625%, 09/20/22 - 11/20/29 |
16,004 | ||||||
1,000 | 3.00%, TBA |
1,052,187 | ||||||
1,000 | 3.50%, TBA |
1,082,187 | ||||||
22 | 4.50%, 08/15/33 |
24,703 | ||||||
5 | 8.50%, 05/20/30 - 04/20/31 |
5,492 | ||||||
|
|
|||||||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS |
20,289,311 | |||||||
|
|
|||||||
|
U.S. TREASURY OBLIGATIONS 7.7% |
| ||||||
U.S. Treasury Bonds |
||||||||
2,000 | 1.75%, 05/15/22 |
2,047,188 | ||||||
1,500 | 3.75%, 08/15/41 |
1,873,359 | ||||||
400 | 4.375%, 05/15/41 |
552,625 | ||||||
100 | 7.50%, 11/15/24 |
163,937 | ||||||
U.S. Treasury Inflationary Indexed Bonds, TIPS |
||||||||
1,600 | 0.125%, 01/15/22 |
1,753,884 | ||||||
1,700 | 1.125%, 01/15/21(c) |
2,085,755 | ||||||
100 | 2.125%, 02/15/40 |
158,882 | ||||||
U.S. Treasury Notes |
||||||||
5,800 | 2.00%, 11/15/21 - 02/15/22 |
6,098,123 | ||||||
1,400 | 2.125%, 08/15/21 |
1,491,437 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 45 |
Portfolio of Investments
as of July 31, 2012 continued
Principal Amount (000)# |
Description | Value (Note 1) | ||||||
|
U.S. TREASURY OBLIGATIONS (Continued) |
| ||||||
U.S. Treasury Notes (contd.) |
||||||||
$ | 400 | 2.625%, 11/15/20 |
$ | 444,750 | ||||
2,400 | 3.125%, 11/15/41 |
2,676,000 | ||||||
|
|
|||||||
TOTAL U.S. TREASURY OBLIGATIONS |
19,345,940 | |||||||
|
|
|||||||
TOTAL LONG-TERM INVESTMENTS |
240,733,367 | |||||||
|
|
|||||||
|
SHORT-TERM INVESTMENTS 13.5% |
| ||||||
|
REPURCHASE AGREEMENTS(d) 5.4% |
| ||||||
8,400 | Barclays Capital, Inc., |
8,400,000 | ||||||
5,200 | Credit Suisse Securities (USA) LLC, |
5,200,000 | ||||||
|
|
|||||||
TOTAL REPURCHASE AGREEMENTS |
13,600,000 | |||||||
|
|
Notional Amount (000)# |
Counterparty |
|||||||||
|
OPTION PURCHASED* |
| ||||||||
Put Option | ||||||||||
400 | Currency Option USD vs CAD, expiring 05/16/13, @ FX rate 6.51 |
JPMorgan Chase | 1,770 | |||||||
Shares | ||||||||||
|
AFFILIATED MONEY MARKET MUTUAL FUND 7.7% |
| ||||||||
19,334,111 | Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund |
19,334,111 |
See Notes to Financial Statements.
46 | Visit our website at www.prudentialfunds.com |
Principal Amount (000)# |
Description | Value (Note 1) | ||||||||
|
CERTIFICATE OF DEPOSIT(e) 0.4% |
| ||||||||
$ | 900 | Banco do Brasil SA |
$ | 892,102 | ||||||
|
|
|||||||||
TOTAL SHORT-TERM INVESTMENTS |
33,827,983 | |||||||||
|
|
|||||||||
TOTAL INVESTMENTS, BEFORE OPTIONS WRITTEN AND |
274,561,350 | |||||||||
|
|
|||||||||
Notional Amount (000)# |
Counterparty |
|||||||||
|
OPTIONS WRITTEN* |
| ||||||||
|
Call Options |
| ||||||||
300 | Interest Rate Swap Options, |
Bank of America | (7,136 | ) | ||||||
4,200 | Pay a fixed rate of 1.40% and receive a floating rate based on 3-month LIBOR, expiring 03/18/13 |
Deutsche Bank | (99,903 | ) | ||||||
|
|
|||||||||
(107,039 | ) | |||||||||
|
|
|||||||||
|
Put Options |
| ||||||||
300 | Interest Rate Swap Options, |
Bank of America | (1,110 | ) | ||||||
4,200 | Receive a fixed rate of 1.40% and pay a floating rate based on 3-month LIBOR, expiring 03/18/13 |
Deutsche Bank | (15,541 | ) | ||||||
|
|
|||||||||
(16,651 | ) | |||||||||
|
|
|||||||||
TOTAL OPTIONS WRITTEN |
(123,690 | ) | ||||||||
|
|
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 47 |
Portfolio of Investments
as of July 31, 2012 continued
Principal Amount (000)# |
Description | Value (Note 1) | ||||||
|
SECURITIES SOLD SHORT (0.9)% |
| ||||||
|
U.S. GOVERNMENT AGENCY OBLIGATIONS |
| ||||||
$ | 1,000 | Federal National Mortgage Assoc. |
$ | (1,089,219 | ) | |||
1,000 | 6.00%, TBA |
(1,102,969 | ) | |||||
|
|
|||||||
TOTAL SECURITIES SOLD SHORT |
(2,192,188 | ) | ||||||
|
|
|||||||
TOTAL INVESTMENTS, NET OF OPTIONS WRITTEN AND SECURITIES SOLD SHORT 108.7% |
272,245,472 | |||||||
Liabilities in excess of other assets(i) (8.7)% |
(21,715,188 | ) | ||||||
|
|
|||||||
NET ASSETS 100% |
$ | 250,530,284 | ||||||
|
|
The following abbreviations are used in the Portfolio descriptions:
144ASecurity 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.
ADRAmerican Depositary Receipt
CDOCollaterlized Debt Obligation
CLOCollateralized Loan Obligations
CVACertificate Van Aandelen (Bearer)
CVTConvertible Security
FHLMCFederal Home Loan Mortgage Corporation
LIBORLondon Interbank Offered Rate
MTNMedium Term Note
NRNot Rated by Moodys or Standard & Poors
SLMStudent Loan Mortgage
TBATo Be Announced
TIPSTreasury Inflation Protected Securities
AUDAustralian Dollar
BRLBrazilian Real
CADCanadian Dollar
CNYChinese Yuan
EUREuro
GBPBritish Pound
INRIndian Rupee
JPYJapanese Yen
KRWSouth Korean Won
MXNMexican Peso
MYRMalaysian Ringgit
NOKNorwegian Krone
See Notes to Financial Statements.
48 | Visit our website at www.prudentialfunds.com |
SGDSingapore Dollar
TWDNew Taiwanese Dollar
USDUnited States Dollar
# | Principal amount is shown in U.S. dollars unless otherwise stated. |
* | Non-income producing security. |
| The ratings reflected are as of July 31, 2012. Ratings of certain bonds may have changed subsequent to that date. The Funds current Statement of Additional Information contains a description of Moodys and Standard & Poors ratings. |
(a) | Variable rate instrument. The interest rate shown reflects the rate in effect at July 31, 2012. |
(b) | Standard & Poors rating. |
(c) | Represents security, or a portion thereof, segregated as collateral for futures contracts. |
(d) | Repurchase agreement is collateralized by U.S. Treasury Notes, (coupon rate 1.50%, maturity date 12/31/13), and U.S. Treasury Bond, (coupon rate 0.17%, maturity date 11/15/27), with the aggregate value, including accrued interest of $13,893,549. |
(e) | Rates shown are the effective yields at purchase date. |
(f) | Prudential Investments LLC, the manager of the Portfolio, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund. |
(g) | Represents issuer in default on interest payments. Non-income producing security. |
(h) | Indicates a security or securities that have been deemed illiquid. |
(i) | Includes net unrealized appreciation (depreciation) on the following derivative contracts held at reporting period end: |
Futures contracts open at July 31, 2012:
Number of Contracts |
Type | Expiration Date |
Value at Trade Date |
Value at July 31, 2012 |
Unrealized Depreciation |
|||||||||||||||
Short Positions: | ||||||||||||||||||||
19 | 5 Year U.S. Treasury Notes | Sep. 2012 | $ | 2,353,063 | $ | 2,370,844 | $ | (17,781 | ) | |||||||||||
7 | 10 Year U.S. Treasury Notes | Sep. 2012 | 934,719 | 942,594 | (7,875 | ) | ||||||||||||||
|
|
|||||||||||||||||||
$ | (25,656 | ) | ||||||||||||||||||
|
|
Forward foreign currency exchange contracts outstanding at July 31, 2012:
Purchase Contracts |
Counterparty |
Notional Amount (000) |
Value at Settlement Date Payable |
Current Value |
Unrealized Appreciation (Depreciation) |
|||||||||||||
Brazilian Real, |
||||||||||||||||||
Expiring 08/02/12 |
UBS Securities | BRL | 2,789 | $ | 1,387,811 | $ | 1,360,398 | $ | (27,413 | ) | ||||||||
British Pound, |
||||||||||||||||||
Expiring 08/02/12 |
Royal Bank of Canada | GBP | 1,310 | 2,029,583 | 2,053,870 | 24,287 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 49 |
Portfolio of Investments
as of July 31, 2012 continued
Purchase Contracts |
Counterparty |
Notional Amount (000) |
Value at Settlement Date Payable |
Current Value |
Unrealized Appreciation (Depreciation) |
|||||||||||||
Canadian Dollar, |
||||||||||||||||||
Expiring 09/20/12 |
JPMorgan Chase | CAD | 342 | $ | 340,919 | $ | 340,649 | $ | (270 | ) | ||||||||
Chinese Yuan, |
||||||||||||||||||
Expiring 02/01/13 |
Barclays Capital Group | CNY | 18,066 | 2,865,398 | 2,811,456 | (53,942 | ) | |||||||||||
Expiring 02/01/13 |
Deutsche Bank | CNY | 456 | 72,526 | 71,025 | (1,501 | ) | |||||||||||
Expiring 02/01/13 |
Deutsche Bank | CNY | 40 | 6,279 | 6,192 | (87 | ) | |||||||||||
Expiring 02/01/13 |
Goldman Sachs & Co. | CNY | 1,060 | 169,000 | 164,977 | (4,023 | ) | |||||||||||
Expiring 02/01/13 |
JPMorgan Chase | CNY | 1,129 | 177,235 | 175,733 | (1,502 | ) | |||||||||||
Expiring 02/01/13 |
JPMorgan Chase | CNY | 1,064 | 169,441 | 165,566 | (3,875 | ) | |||||||||||
Expiring 08/05/13 |
UBS Securities | CNY | 1,035 | 163,861 | 160,079 | (3,782 | ) | |||||||||||
Euro, |
||||||||||||||||||
Expiring 08/03/12 |
Deutsche Bank | EUR | 623 | 763,580 | 766,570 | 2,990 | ||||||||||||
Expiring 09/14/12 |
JPMorgan Chase | EUR | 636 | 783,290 | 782,966 | (324 | ) | |||||||||||
Japanese Yen, |
||||||||||||||||||
Expiring 09/10/12 |
JPMorgan Chase | JPY | 4,517 | 57,078 | 57,844 | 766 | ||||||||||||
Expiring 09/10/12 |
UBS Securities | JPY | 12,368 | 157,048 | 158,382 | 1,334 | ||||||||||||
Malaysian Ringgit, |
||||||||||||||||||
Expiring 10/16/12 |
Hong Kong & Shanghai Bank | MYR | 9 | 2,828 | 2,859 | 31 | ||||||||||||
Mexican Peso, |
||||||||||||||||||
Expiring 08/15/12 |
JPMorgan Chase | MXN | 11,694 | 894,563 | 877,973 | (16,590 | ) | |||||||||||
Expiring 12/03/12 |
Credit Suisse First Boston Corp. | MXN | 116 | 8,653 | 8,620 | (33 | ) | |||||||||||
Expiring 12/03/12 |
Hong Kong & Shanghai Bank | MXN | 11,694 | 863,579 | 868,453 | 4,874 | ||||||||||||
New Taiwanese Dollar, |
||||||||||||||||||
Expiring 11/30/12 |
Barclays Capital Group | TWD | 21,560 | 731,602 | 719,818 | (11,784 | ) | |||||||||||
Norwegian Krone, |
||||||||||||||||||
Expiring 08/28/12 |
BNP Paribas | NOK | 841 | 138,047 | 139,368 | 1,321 | ||||||||||||
Expiring 08/28/12 |
Hong Kong & Shanghai Bank | NOK | 842 | 138,187 | 139,534 | 1,347 | ||||||||||||
Expiring 08/28/12 |
Royal Bank of Scotland | NOK | 841 | 138,094 | 139,368 | 1,274 | ||||||||||||
Singapore Dollar, |
||||||||||||||||||
Expiring 08/03/12 |
UBS Securities | SGD | 1 | 1,151 | 1,143 | (8 | ) | |||||||||||
Expiring 10/22/12 |
Royal Bank of Scotland | SGD | 1 | 1,130 | 1,143 | 13 | ||||||||||||
|
|
|
|
|
|
|||||||||||||
$ | 12,060,883 | $ | 11,973,986 | $ | (86,897 | ) | ||||||||||||
|
|
|
|
|
|
See Notes to Financial Statements.
50 | Visit our website at www.prudentialfunds.com |
Sale Contracts |
Counterparty |
Notional Amount (000) |
Value at Settlement Date Receivable |
Current Value |
Unrealized Appreciation (Depreciation) |
|||||||||||||
Australian Dollar, |
||||||||||||||||||
Expiring 08/30/12 |
JPMorgan Chase | AUD | 1,257 | $ | 1,283,755 | $ | 1,316,982 | $ | (33,227 | ) | ||||||||
Brazilian Real, |
||||||||||||||||||
Expiring 08/02/12 |
Barclays Capital Group | BRL | 2,789 | 1,426,353 | 1,360,397 | 65,956 | ||||||||||||
Expiring 10/02/12 |
UBS Securities | BRL | 2,789 | 1,374,406 | 1,345,196 | 29,210 | ||||||||||||
British Pound, |
||||||||||||||||||
Expiring 08/02/12 |
UBS Securities | GBP | 1,310 | 2,044,078 | 2,053,870 | (9,792 | ) | |||||||||||
Expiring 09/04/12 |
Royal Bank of Canada | GBP | 1,310 | 2,029,426 | 2,053,847 | (24,421 | ) | |||||||||||
Canadian Dollar, |
||||||||||||||||||
Expiring 09/20/12 |
UBS Securities | CAD | 312 | 303,529 | 310,768 | (7,239 | ) | |||||||||||
Chinese Yuan, |
||||||||||||||||||
Expiring 10/15/12 |
BNP Paribas | CNY | 15,236 | 2,399,870 | 2,381,350 | 18,520 | ||||||||||||
Euro, |
||||||||||||||||||
Expiring 08/03/12 |
JPMorgan Chase | EUR | 636 | 782,922 | 782,566 | 356 | ||||||||||||
Expiring 09/13/13 |
JPMorgan Chase | EUR | 2,200 | 2,731,520 | 2,723,188 | 8,332 | ||||||||||||
Expiring 09/14/12 |
Citigroup Global Markets | EUR | 3,448 | 4,301,863 | 4,244,761 | 57,102 | ||||||||||||
Expiring 10/11/13 |
JPMorgan Chase | EUR | 1,512 | 1,865,128 | 1,872,332 | (7,204 | ) | |||||||||||
Expiring 10/11/13 |
JPMorgan Chase | EUR | 108 | 130,996 | 133,738 | (2,742 | ) | |||||||||||
Expiring 11/08/12 |
State Street Bank | EUR | 734 | 961,733 | 904,436 | 57,297 | ||||||||||||
Indian Rupee, |
||||||||||||||||||
Expiring 10/03/12 |
Hong Kong & Shanghai Bank | INR | 481 | 8,284 | 8,539 | (255 | ) | |||||||||||
Japanese Yen, |
||||||||||||||||||
Expiring 09/10/12 |
Citigroup Global Markets | JPY | 27,361 | 350,517 | 350,379 | 138 | ||||||||||||
Mexican Peso, |
||||||||||||||||||
Expiring 08/15/12 |
Hong Kong & Shanghai Bank | MXN | 11,694 | 872,275 | 877,973 | (5,698 | ) | |||||||||||
New Taiwanese Dollar, |
||||||||||||||||||
Expiring 11/30/12 |
Citigroup Global Markets | TWD | 6,616 | 222,000 | 220,870 | 1,130 | ||||||||||||
Expiring 11/30/12 |
UBS Securities | TWD | 10,158 | 341,000 | 339,151 | 1,849 | ||||||||||||
Expiring 11/30/12 |
UBS Securities | TWD | 4,771 | 160,000 | 159,293 | 707 | ||||||||||||
Singapore Dollar, |
||||||||||||||||||
Expiring 08/03/12 |
Royal Bank of Canada | SGD | 1 | 1,129 | 1,142 | (13 | ) | |||||||||||
South Korean Won, |
||||||||||||||||||
Expiring 09/28/12 |
Barclays Capital Group | KRW | 10,675 | 9,193 | 9,404 | (211 | ) | |||||||||||
|
|
|
|
|
|
|||||||||||||
$ | 23,599,977 | $ | 23,450,182 | $ | 149,795 | |||||||||||||
|
|
|
|
|
|
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 51 |
Portfolio of Investments
as of July 31, 2012 continued
Interest rate swap agreements outstanding at July 31, 2012:
Notional |
Termination Date |
Fixed Rate |
Floating |
Fair Value |
Upfront Premiums Paid (Received) |
Unrealized Appreciation (Depreciation) |
Counterparty | |||||||||||||||||||
|
Over-the-counter swap agreements: | |||||||||||||||||||||||||
AUD | 1,600 | 03/15/18 | 3.750% | 6 month Australian Bank Bill rate(1) | $ | 14,576 | $ | 2,580 | $ | 11,996 | Deutsche Bank | |||||||||||||||
AUD | 900 | 03/15/18 | 3.750% | 6 month Australian Bank Bill rate(1) | 8,199 | 1,901 | 6,298 | Goldman Sachs & Co. | ||||||||||||||||||
AUD | 500 | 12/15/17 | 5.500% | 6 month Australian Bank Bill rate(1) | 51,506 | (1,833 | ) | 53,339 | Barclays Bank PLC | |||||||||||||||||
AUD | 300 | 12/15/17 | 5.500% | 6 month Australian Bank Bill rate(1) | 30,904 | (984 | ) | 31,888 | Deutsche Bank | |||||||||||||||||
BRL | 4,000 | 01/02/15 | 9.890% | Brazilian overnight interbank lending rate(1) | 63,557 | | 63,557 | Bank of America | ||||||||||||||||||
BRL | 3,900 | 01/02/14 | 11.960% | Brazilian overnight interbank lending rate(1) | 139,215 | (8,243 | ) | 147,458 | Goldman Sachs & Co. | |||||||||||||||||
BRL | 2,800 | 01/02/14 | 11.990% | Brazilian overnight interbank lending rate(1) | 100,967 | 338 | 100,629 | Barclays Bank PLC | ||||||||||||||||||
BRL | 2,000 | 01/02/15 | 9.940% | Brazilian overnight interbank lending rate(1) | 32,782 | | 32,782 | Goldman Sachs & Co. | ||||||||||||||||||
MXN | 10,800 | 03/05/13 | 6.500% | 28 day Mexican interbank rate(1) | 8,958 | (145 | ) | 9,103 | Morgan Stanley & Co. | |||||||||||||||||
|
Exchange-traded swap agreements: |
|
||||||||||||||||||||||||
$ | 5,800 | 06/20/17 | 1.500% | 3 month LIBOR(1) |
(210,335 | ) | (100,031 | ) | (110,304 | ) | | |||||||||||||||
EUR | 1,500 | 03/21/17 | 2.000% | 6 month Euribor(1) |
93,273 | (9,004 | ) | 102,277 | | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||
$ | 333,602 | $ | (115,421 | ) | $ 449,023 | |||||||||||||||||||||
|
|
|
|
|
|
(1) | Fund pays the floating rate and receives the fixed rate. |
See Notes to Financial Statements.
52 | Visit our website at www.prudentialfunds.com |
Credit default swap agreements outstanding at July 31, 2012:
Reference |
Termination Date |
Fixed Rate |
Notional Amount (000)(4)# |
Fair Value(3) |
Upfront Premiums Paid (Received) |
Unrealized Depreciation |
Counterparty | |||||||||||||||||||
Over-the-counter credit default swaps on credit indicesSell Protection(1): | ||||||||||||||||||||||||||
Dow Jones CDX IG5 10Y Index |
12/20/15 | 0.460% | $ | 1,900 | $ | (113,728 | ) | $ | | $ | (113,728 | ) | Morgan Stanley & Co. | |||||||||||||
Dow Jones CDX IG5 10Y Index |
12/20/15 | 0.460% | 530 | (31,822 | ) | | (31,822 | ) | Morgan Stanley & Co. | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||
$ | (145,550 | ) | $ | | $(145,550) | |||||||||||||||||||||
|
|
|
|
|
|
The Fund entered into credit default swap agreements on corporate issues, sovereign issues, asset-backed securities and credit indices as the protection seller to provide a measure of protection against the current portfolio of investments exposure to market conditions, or to take an active position with respect to the likelihood of a particular issuers default or the referenced entitys credit soundness.
Reference |
Termination Date |
Fixed Rate |
Notional Amount (000)(4)# |
Fair Value |
Upfront Premiums Paid (Received) |
Unrealized Depreciation |
Counterparty | |||||||||||||||||||
Over-the-counter credit default swapsBuy Protection(2): | ||||||||||||||||||||||||||
Dow Jones CDX IG5 Index |
12/20/12 | 0.143% | $ | 2,700 | $ | (1,248 | ) | $ | | $ | (1,248 | ) | Morgan Stanley & Co. | |||||||||||||
Dow Jones CDX IG5 Index |
12/20/12 | 0.143% | 700 | (323 | ) | | (323 | ) | Morgan Stanley & Co. | |||||||||||||||||
Embarq Corp. |
03/20/14 | 1.250% | 300 | (4,279 | ) | | (4,279 | ) | Deutsche Bank | |||||||||||||||||
Embarq Corp. |
03/20/14 | 1.430% | 200 | (3,467 | ) | 10 | (3,477 | ) | Deutsche Bank | |||||||||||||||||
Embarq Corp. |
03/20/14 | 1.270% | 200 | (2,922 | ) | | (2,922 | ) | Deutsche Bank | |||||||||||||||||
Embarq Corp. |
03/20/14 | 1.300% | 100 | (1,514 | ) | 5 | (1,519 | ) | Morgan Stanley & Co. | |||||||||||||||||
Exchange-traded credit default swapsBuy Protection(2): | ||||||||||||||||||||||||||
Dow Jones CDX IG09 10Y Index |
12/20/17 | 0.800% | 10,842 | 353,568 | 482,925 | (129,357 | ) | | ||||||||||||||||||
Dow Jones CDX IG10 10Y Index |
06/20/18 | 1.500% | 9,293 | (77,811 | ) | 83,770 | (161,581 | ) | | |||||||||||||||||
Dow Jones CDX IG10 5Y Index |
06/20/13 | 1.550% | 2,226 | (22,660 | ) | (6,426 | ) | (16,234 | ) | |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 53 |
Portfolio of Investments
as of July 31, 2012 continued
Reference |
Termination Date |
Fixed Rate |
Notional Amount (000)(4)# |
Fair Value |
Upfront Premiums Paid (Received) |
Unrealized Depreciation |
Counterparty | |||||||||||||||||||
Exchange-traded credit default swapsBuy Protection(2) (contd.): | ||||||||||||||||||||||||||
Dow Jones CDX IG14 5Y Index |
06/20/15 | 1.000% | $ | 4,000 | $ | (42,072 | ) | $ | 17,920 | $ | (59,992 | ) | | |||||||||||||
Dow Jones CDX IG14 5Y Index |
06/20/15 | 5.000% | 288 | (9,721 | ) | 4,320 | (14,041 | ) | | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||
$ | 187,551 | $ | 582,524 | $ | (394,973 | ) | ||||||||||||||||||||
|
|
|
|
|
|
(1) | 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. |
(2) | 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. |
(3) | The fair value of credit default swap agreements on asset-backed securities and 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 entitys credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement. |
(4) | 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. |
# | Notional Amount is shown in U.S. dollars unless otherwise stated. |
Various inputs are used in determining the value of the Portfolios investments. These inputs are summarized in the three broad levels listed below.
Level 1quoted prices generally in active markets for identical securities.
Level 2other 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.
See Notes to Financial Statements.
54 | Visit our website at www.prudentialfunds.com |
Level 3significant unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of July 31, 2012 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities |
||||||||||||
Common Stocks |
$ | 129,471,111 | $ | 27,405,840 | $ | | ||||||
Preferred Stocks |
381,294 | 227,862 | | |||||||||
Unaffiliated Mutual Fund |
61,115 | | | |||||||||
Asset-Backed Securities |
| 6,345,860 | 1,245,262 | |||||||||
Commercial Mortgage-Backed Security |
| 104,558 | | |||||||||
Corporate Bonds |
| 22,066,134 | | |||||||||
Foreign Government Bonds |
| 5,928,554 | | |||||||||
Municipal Bonds |
| 4,458,624 | | |||||||||
Residential Mortgage-Backed Securities |
| 3,375,279 | 26,623 | |||||||||
U.S. Government Agency Obligations |
| 20,289,311 | | |||||||||
U.S. Treasury Obligations |
| 19,345,940 | | |||||||||
Repurchase Agreement |
| 13,600,000 | | |||||||||
Option Purchased |
| 1,770 | | |||||||||
Affiliated Money Market Mutual Fund |
19,334,111 | | | |||||||||
Certificate of Deposit |
| 892,102 | | |||||||||
Options Written |
| (123,690 | ) | | ||||||||
Securities Sold ShortU.S. Government Agency Obligations |
| (2,192,188 | ) | | ||||||||
Other Financial Instruments* |
||||||||||||
Futures |
(25,656 | ) | | | ||||||||
Forward foreign currency exchange contracts |
| 62,898 | | |||||||||
Interest rate swap agreements |
(8,027 | ) | 457,050 | | ||||||||
Credit default swap agreements |
(381,205 | ) | (159,318 | ) | | |||||||
|
|
|
|
|
|
|||||||
Total |
$ | 148,832,743 | $ | 122,086,586 | $ | 1,271,885 | ||||||
|
|
|
|
|
|
* | Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as futures, forwards and swap contracts, which are recorded at the unrealized appreciation/depreciation on the instrument. |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 55 |
Portfolio of Investments
as of July 31, 2012 continued
The investment allocation of Portfolio holdings and liabilities in excess of other assets shown as a percentage of net assets as of July 31, 2012 were as follows:
U.S. Government Agency Obligations |
8.1 | % | ||
U.S. Treasury Obligations |
7.7 | |||
Affiliated Money Market Mutual Fund |
7.7 | |||
Pharmaceuticals |
5.8 | |||
Repurchase Agreements |
5.4 | |||
Commercial Banks |
5.4 | |||
Oil, Gas & Consumable Fuels |
5.4 | |||
Retail & Merchandising |
3.6 | |||
Diversified Financial Services |
3.5 | |||
Asset-Backed Securities |
3.0 | |||
Insurance |
3.0 | |||
Computer Hardware |
2.6 | |||
Foreign Government Bonds |
2.4 | |||
Chemicals |
2.0 | |||
Municipal Bonds |
1.8 | |||
Media |
1.6 | |||
Software |
1.6 | |||
Aerospace & Defense |
1.6 | |||
Telecommunications |
1.6 | |||
Computer Services & Software |
1.4 | |||
Residential Mortgage-Backed Securities |
1.4 | |||
Metals & Mining |
1.4 | |||
Specialty Retail |
1.3 | |||
Automobile Manufacturers |
1.3 | |||
Real Estate Investment Trusts |
1.1 | |||
Internet Services |
1.1 | |||
Biotechnology |
1.1 | |||
Commercial Services & Supplies |
1.1 | |||
Machinery |
1.1 | |||
Internet Software & Services |
1.0 | |||
Foods |
1.0 | |||
Hotels, Restaurants & Leisure |
0.9 | |||
FinancialBank & Trust |
0.9 | |||
Semiconductors & Semiconductor Equipment |
0.8 | |||
Beverages |
0.8 | |||
Consumer Finance |
0.7 | |||
Food & Staples Retailing |
0.7 | |||
Energy Equipment & Services |
0.7 | |||
Transportation |
0.7 | |||
Electric Utilities |
0.7 | |||
Financial Services |
0.7 | |||
Banks |
0.6 | |||
Clothing & Apparel |
0.6 | |||
Multi-Line Retail |
0.6 | |||
Healthcare Equipment & Supplies |
0.5 | |||
Consumer Products & Services |
0.5 | % | ||
Computers & Peripherals |
0.5 | |||
Life Sciences Tools & Services |
0.5 | |||
Manufacturing |
0.5 | |||
Tobacco |
0.5 | |||
Distribution/Wholesale |
0.5 | |||
Paper & Forest Products |
0.4 | |||
Healthcare Services |
0.4 | |||
Semiconductors |
0.4 | |||
Certificate of Deposit |
0.4 | |||
Auto Components |
0.3 | |||
Electronic Equipment & Instruments |
0.3 | |||
Diversified Telecommunication Services |
0.3 | |||
Food Products |
0.3 | |||
Entertainment & Leisure |
0.3 | |||
Industrial Conglomerates |
0.3 | |||
Wireless Telecommunication Services |
0.2 | |||
Utilities |
0.2 | |||
Multi-Utilities |
0.2 | |||
Healthcare Providers & Services |
0.2 | |||
Capital Markets |
0.2 | |||
Investment Companies |
0.2 | |||
Household Products |
0.2 | |||
Office Electronics |
0.2 | |||
Diversified Operations |
0.2 | |||
Pipelines |
0.2 | |||
Electronic Components |
0.2 | |||
Construction & Engineering |
0.2 | |||
Medical Supplies & Equipment |
0.1 | |||
Apparel & Textile |
0.1 | |||
Leisure Equipment & Products |
0.1 | |||
Road & Rail |
0.1 | |||
Diversified Manufacturing Operations |
0.1 | |||
Air Freight & Logistics |
0.1 | |||
Internet |
0.1 | |||
Professional Services |
0.1 | |||
Independent Power Producers & Energy Traders |
0.1 | |||
Diversified Consumer Services |
0.1 | |||
IT Services |
0.1 | |||
Communications Equipment |
0.1 | |||
Trading Companies & Distributors |
0.1 | |||
Healthcare Products |
0.1 | |||
Building Materials |
0.1 | |||
Auto Parts & Related |
0.1 |
See Notes to Financial Statements.
56 | Visit our website at www.prudentialfunds.com |
Industry (contd.) |
||||
Textiles, Apparel & Luxury Goods |
0.1 | % | ||
Automobiles |
0.1 | |||
Hand/Machine Tools |
0.1 | |||
Advertising |
0.1 | |||
Airlines |
0.1 | |||
Cosmetics & Toiletries |
0.1 | |||
Agriculture |
0.1 | |||
Auto Parts & Equipment |
0.1 | |||
Retail |
0.1 | % | ||
Commercial Services |
0.1 | |||
Containers & Packaging |
0.1 | |||
Holding CompaniesDiversified |
0.1 | |||
U.S. Government Agency Obligations |
(0.9 | ) | ||
|
|
|||
108.7 | ||||
Liabilities in excess of other assets |
(8.7 | ) | ||
|
|
|||
100.0 | % | |||
|
|
The Fund invested in various derivative instruments during the reporting period. The primary types of risk associated with these derivative instruments are credit risk, equity risk, foreign exchange risk and interest rate risk.
The effect of such derivative instruments on the Funds financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.
Fair values of derivative instruments as of July 31, 2012 as presented in the Statement of Assets and Liabilities:
Derivatives not accounted for |
Asset Derivatives |
Liability Derivatives |
||||||||||
Balance |
Fair Value |
Balance |
Fair Value |
|||||||||
Interest rate contracts | | $ | | Payable to brokervariation margin | $ | 25,656 | * | |||||
Interest rate contracts | | | Outstanding options written, at value | 123,690 | ||||||||
Interest rate contracts | Premiums paid for swap agreements | 4,819 | Premiums received for swap agreements | 120,240 | ||||||||
Interest rate contracts | Unrealized appreciation on swap agreements | 559,327 | Unrealized depreciation on swap agreements | 110,304 | ||||||||
Foreign exchange contracts | Unrealized appreciation on foreign currency exchange contracts | 278,834 | Unrealized depreciation on foreign currency exchange contracts | 215,936 | ||||||||
Foreign exchange contracts | Unaffiliated investments | 1,770 | | | ||||||||
Credit contracts | Premiums paid for swap agreements | 588,950 | Premiums received for swap agreements |
6,426 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 57 |
Portfolio of Investments
as of July 31, 2012 continued
Derivatives not accounted for |
Asset Derivatives |
Liability Derivatives |
||||||||||
Balance |
Fair Value |
Balance |
Fair Value |
|||||||||
Credit contracts | | $ | | Unrealized depreciation on swap agreements |
$ | 540,523 | ||||||
|
|
|
|
|||||||||
Total |
$ | 1,433,700 | $ | 1,142,775 | ||||||||
|
|
|
|
* | Includes cumulative appreciation/depreciation on futures contracts as reported in the Schedule of Investments. 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 July 31, 2012 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income |
||||||||||||||||||||||||
Derivatives not accounted for |
Rights | Futures | Written Options |
Swaps | Forward Currency Contracts |
Total | ||||||||||||||||||
Interest rate contracts |
$ | | $ | 1,293,589 | $ | 90,364 | $ | (183,759 | ) | $ | | $ | 1,200,194 | |||||||||||
Foreign exchange contracts |
| | | | 665,296 | 665,296 | ||||||||||||||||||
Credit contracts |
| | 6,409 | 416,102 | | 422,511 | ||||||||||||||||||
Equity contracts |
(15,510 | ) | | | | | (15,510 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | (15,510 | ) | $ | 1,293,589 | $ | 96,773 | $ | 232,343 | $ | 665,296 | $ | 2,272,491 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income |
||||||||||||||||||||||||
Derivatives not accounted for |
Purchased Options |
Futures | Written Options |
Swaps | Forward Currency Contracts |
Total | ||||||||||||||||||
Interest rate contracts |
$ | | $ | (714,442 | ) | $ | 2,861 | $ | 619,558 | $ | | $ | (92,023 | ) | ||||||||||
Foreign exchange contracts |
(300 | ) | | | | 248,606 | 248,306 | |||||||||||||||||
Credit contracts |
| | (4,340 | ) | (565,399 | ) | | (569,739 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | (300 | ) | $ | (714,442 | ) | $ | (1,479 | ) | $ | 54,159 | $ | 248,606 | $ | (413,456 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
58 | Visit our website at www.prudentialfunds.com |
For the year ended July 31, 2012, the Funds average volume of derivative activities are as follows:
Purchased Options(1) |
Written Options(2) |
Futures ContractsLong Positions(3) |
Futures ContractsShort Positions(3) |
Forward Foreign Currency Exchange Purchase Contracts(4) |
||||||||||||||
$ | 414 | $ | 106,469 | $ | 28,963,417 | $ | 2,681,191 | $ | 12,810,780 |
Forward Foreign Currency Exchange Sale Contracts(5) |
Interest Rate Swap Agreements(6) |
Credit Default Swap AgreementsBuy Protection(6) |
Credit Default Swap AgreementsSell Protection(6) |
|||||||||||
$ | 22,047,756 | $ | 19,385,584 | $ | 31,004,390 | $ | 2,850,000 |
(1) | Cost. |
(2) | Premium Received. |
(3) | Value at Trade Date. |
(4) | Value at Settlement Date Payable. |
(5) | Value at Settlement Date Receivable. |
(6) | Notional Amount. |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 59 |
Statement of Assets and Liabilities
as of July 31, 2012
Assets |
||||
Investments at value: |
||||
Unaffiliated investments (cost $228,249,948) |
$ | 255,227,239 | ||
Affiliated investments (cost $19,334,111) |
19,334,111 | |||
Cash |
2,674 | |||
Foreign currency, at value (cost $410,207) |
413,296 | |||
Receivable for investments sold |
29,968,685 | |||
Dividends and interest receivable |
840,698 | |||
Premiums paid for swap agreements |
593,769 | |||
Unrealized appreciation on swap agreements |
559,327 | |||
Unrealized appreciation on foreign currency exchange contracts |
278,834 | |||
Deposit with broker |
228,000 | |||
Tax reclaim receivable |
82,034 | |||
Receivable for Fund shares sold |
53,272 | |||
|
|
|||
Total assets |
307,581,939 | |||
|
|
|||
Liabilities |
||||
Payable for investments purchased |
31,254,725 | |||
Payable for Fund shares reacquired |
21,540,374 | |||
Securities sold short, at value (proceeds received $2,183,750) |
2,192,188 | |||
Unrealized depreciation on swap agreements |
650,827 | |||
Accrued expenses and other liabilities |
283,212 | |||
Payable to broker |
270,000 | |||
Unrealized depreciation on foreign currency exchange contracts |
215,936 | |||
Management fee payable |
172,031 | |||
Premiums received for swap agreements |
126,666 | |||
Outstanding options written (premiums received $139,485) |
123,690 | |||
Distribution fee payable |
104,517 | |||
Payable to broker-variation margin |
77,178 | |||
Affiliated transfer agent fee payable |
36,604 | |||
Deferred trustees' fees |
3,707 | |||
|
|
|||
Total liabilities |
57,051,655 | |||
|
|
|||
Net Assets |
$ | 250,530,284 | ||
|
|
|||
Net assets were comprised of: |
||||
Shares of beneficial interest, at par |
$ | 22,351 | ||
Paid-in capital, in excess of par |
252,150,043 | |||
|
|
|||
252,172,394 | ||||
Undistributed net investment income |
3,385,141 | |||
Accumulated net realized loss on investment and foreign currency transactions |
(31,954,012 | ) | ||
Net unrealized appreciation on investments and foreign currencies |
26,926,761 | |||
|
|
|||
Net assets, July 31, 2012 |
$ | 250,530,284 | ||
|
|
See Notes to Financial Statements.
60 | Visit our website at www.prudentialfunds.com |
Class A: |
||||
Net asset value and redemption price per share, |
$ | 11.23 | ||
Maximum sales charge (5.5% of offering price) |
.65 | |||
|
|
|||
Maximum offering price to public |
$ | 11.88 | ||
|
|
|||
Class B: |
||||
Net asset value, offering price and redemption price per share, |
$ | 11.17 | ||
|
|
|||
Class C: |
||||
Net asset value, offering price and redemption price per share, |
$ | 11.17 | ||
|
|
|||
Class R: |
||||
Net asset value, offering price and redemption price per share, ($311,458 ÷ 27,791 shares of common stock issued and outstanding) |
$ | 11.21 | ||
|
|
|||
Class X: |
||||
Net asset value, offering price and redemption price per share, |
$ | 11.22 | ||
|
|
|||
Class Z: |
||||
Net asset value, offering price and redemption price per share, |
$ | 11.24 | ||
|
|
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 61 |
Statement of Operations
Year Ended July 31, 2012
Net Investment Income |
||||
Income |
||||
Unaffiliated dividend income (net of foreign withholding taxes $155,074) |
$ | 3,924,075 | ||
Unaffiliated interest income |
3,203,989 | |||
Affiliated dividend income |
19,750 | |||
|
|
|||
7,147,814 | ||||
|
|
|||
Expenses |
||||
Management fee |
2,062,669 | |||
Distribution feeClass A |
470,218 | |||
Distribution feeClass B |
299,794 | |||
Distribution feeClass C |
528,312 | |||
Distribution feeClass M |
725 | |||
Distribution feeClass R |
1,531 | |||
Distribution feeClass X |
1,264 | |||
Transfer agents fees and expenses (including affiliated expense of $221,000) |
437,000 | |||
Custodians fees and expenses |
324,000 | |||
Registration fees |
133,000 | |||
Audit fee |
73,000 | |||
Reports to shareholders |
62,000 | |||
Legal fee |
29,000 | |||
Trustees fees |
16,000 | |||
Insurance expense |
6,000 | |||
Loan interest expense (Note 7) |
23 | |||
Miscellaneous |
41,110 | |||
|
|
|||
Total expenses |
4,485,646 | |||
|
|
|||
Net investment income |
2,662,168 | |||
|
|
|||
Net Realized And Unrealized Gain (Loss) On Investments And Foreign Currencies |
||||
Net realized gain (loss) on: |
||||
Investment transactions |
13,032,348 | |||
Options written transactions |
96,773 | |||
Foreign currency transactions |
769,146 | |||
Futures transactions |
1,293,589 | |||
Swap agreement transactions |
232,343 | |||
Short sale transactions |
(317,188 | ) | ||
|
|
|||
15,107,011 | ||||
|
|
|||
Net change in unrealized appreciation (depreciation) on: |
||||
Investments |
(13,194,081 | ) | ||
Options written |
(1,479 | ) | ||
Foreign currencies |
224,575 | |||
Futures |
(714,442 | ) | ||
Swaps |
54,159 | |||
Short Sales |
(8,321 | ) | ||
|
|
|||
(13,639,589 | ) | |||
|
|
|||
Net gain on investments |
1,467,422 | |||
|
|
|||
Net Increase In Net Assets Resulting From Operations |
$ | 4,129,590 | ||
|
|
See Notes to Financial Statements.
62 | Visit our website at www.prudentialfunds.com |
Statement of Changes in Net Assets
Year Ended July 31, | ||||||||
2012 | 2011 | |||||||
Increase (Decrease) In Net Assets |
||||||||
Operations |
||||||||
Net investment income |
$ | 2,662,168 | $ | 2,697,404 | ||||
Net realized gain on investment and foreign currency transactions |
15,107,011 | 19,713,869 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currencies |
(13,639,589 | ) | 14,582,018 | |||||
|
|
|
|
|||||
Net increase in net assets resulting from operations |
4,129,590 | 36,993,291 | ||||||
|
|
|
|
|||||
Dividends and Distributions (Note 1) |
||||||||
Dividends from net investment income: |
||||||||
Class A |
(1,884,201 | ) | (1,566,050 | ) | ||||
Class B |
(76,350 | ) | (72,164 | ) | ||||
Class C |
(134,474 | ) | (97,074 | ) | ||||
Class M |
(177 | ) | (1,307 | ) | ||||
Class R |
(2,203 | ) | (3,071 | ) | ||||
Class X |
(5,882 | ) | (10,214 | ) | ||||
Class Z |
(38,968 | ) | (42,371 | ) | ||||
|
|
|
|
|||||
(2,142,255 | ) | (1,792,251 | ) | |||||
|
|
|
|
|||||
Capital Contributions (Note 2) |
||||||||
Class X |
206 | 106 | ||||||
|
|
|
|
|||||
Fund share transactions (Net of share conversions) (Note 6) |
||||||||
Net proceeds from shares sold |
19,106,613 | 35,562,345 | ||||||
Net asset value of shares issued in reinvestment of dividends and distributions |
2,087,638 | 1,746,778 | ||||||
Cost of shares reacquired |
(70,305,270 | ) | (62,541,358 | ) | ||||
|
|
|
|
|||||
Net decrease in net assets resulting from Fund share transactions |
(49,111,019 | ) | (25,232,235 | ) | ||||
|
|
|
|
|||||
Total increase (decrease) |
(47,123,478 | ) | 9,968,911 | |||||
Net Assets |
||||||||
Beginning of year |
297,653,762 | 287,684,851 | ||||||
|
|
|
|
|||||
End of year(a) |
$ | 250,530,284 | $ | 297,653,762 | ||||
|
|
|
|
|||||
(a) Includes undistributed net income of: |
$ | 3,385,141 | $ | 1,840,351 | ||||
|
|
|
|
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 63 |
Notes to Financial Statements
Target Asset Allocation Funds (the Trust) is registered under the Investment Company Act of 1940 (1940 Act), as amended, as an open-end, diversified management investment company presently consisting of three portfolios: Target Moderate Allocation Fund (the Fund), Target Conservative Allocation Fund and Target Growth Allocation Fund. These financial statements relate only to Target Moderate Allocation Fund. The financial statements of the other portfolios are not presented herein. The Trust was organized as a business trust in Delaware on July 29, 1998.
The Fund uses investment managers (Subadvisors), each managing a portion of the Funds assets. The following lists the Subadvisors and their respective segment during the year ended July 31, 2012.
Fund Segment |
Subadvisors | |
Large-cap value stocks | Eaton Vance Management/Epoch Investment Partners, Inc.* Hotchkis and Wiley Capital Management LLC NFJ Investment Group LLC | |
International stocks | LSV Asset Management Thornburg Investment Management, Inc. | |
Large-cap growth stocks | Marsico Capital Management, LLC Massachusetts Financial Services Company | |
Small-cap value stocks | EARNEST Partners, LLC Vaughan Nelson Investment Management, LP | |
Core fixed income bonds | Pacific Investment Management Company LLC | |
Small-cap growth stocks | Eagle Asset Management, Inc. |
* | Effective July 19, 2012, Epoch Investment Partners, Inc. replaced Eaton Vance Management. |
The investment objective of the Fund is to provide capital appreciation and a reasonable level of current income.
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements.
Securities Valuation: The Fund holds portfolio securities and other assets that are fair valued at the close of each day the New York Stock Exchange (NYSE) is open for
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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 has delegated fair valuation responsibilities to the Manager through the adoption of Valuation Procedures for valuation of the Funds securities. Under the current Valuation Procedures, a Valuation Committee is established and responsible for supervising the valuation of portfolio securities and other assets. The Valuation Procedures allow the Portfolio to utilize independent pricing vendor services, quotations from market makers and other valuation methods in events when market quotations are not readily available. A record of the Valuation Committees actions is subject to review, approval and ratification by the Board at its next regularly scheduled quarterly meeting.
Various inputs are used in determining the value of the Funds investments, which are summarized in the three broad level hierarchies based on any observable inputs used as described in the table following the Funds Schedule of Investments. The valuation methodologies and significant inputs used in determining the fair value of securities and other assets classified as Level 1, Level 2 and Level 3 of the hierarchy are as follows:
Common stock, exchange-traded funds and financial derivative instruments (including futures contracts and certain options contracts on securities), 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 of the fair value hierarchy.
In the event there is no sale or official closing price on such day, these securities are valued at the mean between the last reported bid and asked prices, or at the last bid price in absence of an asked price. These securities are classified as Level 2 of the fair value hierarchy as these inputs are considered as significant other observable inputs to the valuation.
For common stocks traded on foreign securities exchanges, certain valuation adjustments will be applied when events occur after the close of the securitys foreign market and before the Funds normal pricing time. These securities are valued using pricing vendor services that provide 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 adjustment factors are classified as Level 2 of the fair value hierarchy.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 65 |
Notes to Financial Statements
continued
Investments in open end, non exchange-traded mutual funds are valued at their net asset value as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 as these securities have the ability to be purchased or sold at their net asset value on the date of valuation.
Fixed income securities traded in the over-the-counter market, such as corporate bonds, municipal bonds, U.S. Government agencies, U.S. Treasury obligations, and sovereign issues are usually valued at prices provide by approved independent pricing vendors. The pricing vendors provide these prices usually after evaluating observable inputs including yield curves, credit rating, yield spreads, default rates, cash flows as well as broker/dealer quotations and reported trades. Securities valued using such vendor prices are classified as Level 2 of the fair value hierarchy.
Asset-backed and mortgage-related securities are usually valued by approved independent pricing vendors. The pricing vendors provide the prices using their internal pricing model with input from deal term, tranche level attributes, yield curve, prepayment speeds, and broker/dealer quotes. Securities valued using such vendor prices are classified as Level 2 of the fair value hierarchy.
Short-term debt securities of sufficient credit quality which mature in 60 days or less are valued at amortized cost which approximates fair market value. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between the principal amount due at maturity and cost. These securities are categorized as Level 2 of the fair value hierarchy.
Over-the-counter financial derivative instruments, such as option contracts, foreign currency contracts and swaps agreements, are usually valued using pricing vendor services, which derive the valuation based on underlying asset prices, indices, spreads, interest rates, exchange rates and other inputs. These instruments are categorized as Level 2 of the fair value hierarchy.
Securities and other assets that cannot be priced using the methods described above are valued with pricing methodologies approved by the Valuation Committee. In the event there are unobservable inputs used when determining such valuations, the securities will be classified as Level 3 of the fair value hierarchy.
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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 issuers 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 securitys 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 period, 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 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 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 Funds books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains or losses from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates are reflected as a component of net unrealized appreciation (depreciation) on foreign currencies. Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of
Target Asset Allocation Funds/Target Moderate Allocation Fund | 67 |
Notes to Financial Statements
continued
domestic origin as a result of, among other factors, the possibility of political and economic instability and the level of governmental supervision and regulation of foreign securities markets.
Repurchase Agreements: In connection with transactions in repurchase agreements with United States financial institutions, it is the Funds policy that its custodian or designated subcustodians, as the case may be, under triparty repurchase agreements, take possession of the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked to market on a daily basis to ensure the adequacy of the collateral. If the seller defaults or the value of the collateral declines, or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may by delayed or limited.
Reverse Repurchase Agreements: The Fund enters into reverse repurchase agreements with qualified, third party broker-dealers as determined by and under the direction of the Trusts Board of Trustees. Interest on the value of reverse repurchase agreements entered into and outstanding is based upon competitive market rates at the time of execution of the agreement. At the time the Fund enters into a reverse repurchase agreement, it establishes and maintains a segregated account with the lender containing liquid investment grade securities having a value not less than the repurchase price, including accrued interest, of the reverse repurchase agreement.
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 entered into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings or on specific receivables and payables denominated in a foreign currency and to gain exposure to certain currencies. The contracts are valued daily at current exchange rates and any unrealized gain or loss is included in the Statement of Assets and Liabilities as 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. 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. Risks may also arise upon entering into these contracts from the
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potential inability of the counterparties to meet the terms of their contracts. The Funds 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 contracts life. This risk may be mitigated by having 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 of collateral from the counterparty by the Fund to cover the Funds exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable.
Short Sales: The Fund may sell a security it does not own in anticipation of a decline in the market value of that security (short sale). When the Fund makes a short sale, it will borrow the security sold short and deliver it to the broker-dealer through which it made the short sale as collateral for its obligation to deliver the security upon conclusion of the sale. The Fund may have to pay a fee to borrow the particular securities and may be obligated to return any interest or dividends received on such borrowed securities. Dividends declared on short positions open are recorded on the ex-date and interest payable is accrued daily on fixed income securities sold short, both of which are recorded as an expense.
A gain, limited to the price at which the Fund sold the security short, or a loss, unlimited in magnitude, will be recognized upon the termination of a short sale if the market price at termination is less than or greater than, respectively, the proceeds originally received.
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 or foreign currency exchange rates with respect to securities or financial instruments which the Fund currently owns or intends to purchase. The Fund also purchased options to gain exposure to certain securities and foreign currencies. The Funds 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 basis 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 at a closing purchase or sale
Target Asset Allocation Funds/Target Moderate Allocation Fund | 69 |
Notes to Financial Statements
continued
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 or currency 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.
When a Fund writes an option on a swap contract, an amount equal to any premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the written option on the swap. If a call option on a swap is exercised, the Fund becomes obligated to pay a fixed interest rate (noted as the strike price) and receive a variable interest rate on a notional amount. If a put option on a swap is exercised, the Fund becomes obligated to pay a variable interest rate and receive a fixed interest rate (noted as the strike price) on a notional amount. Premiums received from writing options on swaps that expire or are exercised are treated as realized gains upon the expiration or exercise of such options on swaps. The risk associated with writing put and call options on swaps is that the Fund will be obligated to be party to a swap agreement if an option on a swap is exercised.
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 contracts.
The Fund invested 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, and to manage yield curve and duration. The Fund may not achieve the anticipated benefits of the financial futures
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contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets. Financial futures contracts involve elements of risk in excess of the amounts reflected on the Statement of Assets and Liabilities.
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.
Swap Agreements: The Fund entered into credit default and interest rate swap agreements. A swap agreement is an agreement to exchange the return generated by one instrument for the return generated by another instrument. Swap agreements are negotiated in the over-the-counter market and may be executed either directly with counterparty (OTC Traded) or through a central clearing facility, such as a registered commodities exchange (Exchange Traded). 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. Upon entering into an exchange traded swap, the Fund pledges with the clearing broker an initial margin and thereafter, pays or receives an amount, known as variation margin, based on daily changes in valuation of swap contract. 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 reporting date, if any, are listed on the Schedule of Investments.
Interest Rate Swaps: Interest rate swaps represent agreements 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 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. The Funds 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 contracts remaining life. A master netting agreement exists between the Fund and the counterparty which 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 Funds exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 71 |
Notes to Financial Statements
continued
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 (credit event) for the referenced party, 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 purchased credit default swaps to provide a measure of protection against defaults of the issuers. The Fund used credit default swaps on credit indices to hedge a portfolio of credit default swaps or bonds, which is less expensive than it would be to buy many credit default swaps to achieve a similar effect. The Fund took an active short position with respect to the likelihood of a particular issues default by selling credit default swaps. The Funds maximum risk of loss from counterparty credit risk for purchased credit default swaps is the notional value of a credit default swap agreement. A master netting agreement exists between the Fund and the counterparty which 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 Funds exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable.
As a seller of protection on credit default swap agreements, a 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 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.
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Implied credit spreads, represented in absolute terms, utilized in determining the fair value of credit default swap agreements on corporate issues or sovereign issues of an emerging country as of the reporting date are disclosed in the footnotes to the Portfolio of Investments 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 and/or performance risk. Wider credit spreads and increasing market value in absolute terms, when compared to the notional amount of the swap, represent a deterioration of the referenced entitys credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement.
In addition to each instruments primary underlying risk exposure (e.g. interest rate, credit, equity or foreign exchange, etc.), 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 July 31, 2012, the Fund has not met conditions under such agreements, which give the counterparty the right to call for an early termination.
Forward currency contracts, written options, short sales, swaps and financial futures contracts involve elements of both market and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities.
Warrants and Rights: The Fund held warrants and rights acquired either through a direct purchase, including as part of private placement, or pursuant to corporate actions. Warrants and rights entitle the holder to buy a proportionate amount of common stock, or such security that the issuer may specify, at a specific price and
Target Asset Allocation Funds/Target Moderate Allocation Fund | 73 |
Notes to Financial Statements
continued
time through the expiration dates. Such warrants and rights are held as long positions by the Fund until exercised, sold or expired. Warrants and rights are valued at fair value in accordance with the Board approved fair valuation procedures.
When-Issued/Delayed Delivery Securities: Securities purchased or sold on a when issued or delayed-delivery basis may be settled a month or more after trade date; interest income is not accrued until settlement date. At the time a fund enters into such transactions, it instructs the custodian to segregate assets with a current value at least equal to the amount of its when-issued or delayed-delivery purchase commitments.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains or losses from investment and currency transactions on sales of portfolio securities are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date and 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.
Net investment income or loss (other than distribution fees, which are charged directly to its respective class), 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: Dividends from net investment income are declared and paid annually. Distributions of net realized capital and currency gains, if any, are declared and paid 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 Funds intention 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.
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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 Trust has a management agreement with PI. Pursuant to this agreement, PI manages the investment operations of the Fund, administers the Funds affairs and supervises the Subadvisors performance of all investment advisory services. Pursuant to the advisory agreements, PI pays the cost of compensation of officers of the Fund, occupancy and certain clerical and accounting costs of the Fund. The Fund bears all other costs and expenses.
The management fee paid to PI is computed daily and payable monthly at an annual rate of .75% of the average daily net assets up to $500 million, .70% of average daily net assets for the next $500 million and .65% of average daily net assets in excess of $1 billion. The effective management fee rate was .75% for the year ended July 31, 2012.
The Fund has a distribution agreement with Prudential Investment Management Services LLC (PIMS), which acts as the distributor of the Class A, Class B, Class C, Class M, Class R and Class Z shares of the Fund. In addition, the Fund has a distribution agreement with Prudential Annuities Distributors, Inc. (PAD), which, together with PIMS, serves as co-distributor of the Class M and Class X shares of the Fund. The Fund compensates PIMS and PAD, as applicable, for distributing and servicing the Funds Class A, Class B, Class C, Class M, Class R and Class X shares, pursuant to plans of distribution (the Distribution Plans), regardless of expenses actually incurred by PIMS or PAD. 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 and PAD, as applicable, for distribution related activities at an annual rate of up to .30%, 1%, 1%, 1%, .75% and 1% of the average daily net assets of the Class A, B, C, M, R and X shares, respectively. PIMS has contractually agreed through November 30, 2012 to limit such expenses to .25% and .50% of the average daily net assets of the Class A and Class R shares, respectively.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 75 |
Notes to Financial Statements
continued
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 and Financial Highlights as a contribution to capital.
PIMS has advised the Fund that it has received $92,100 in front-end sales charges resulting from sales of Class A shares during the year ended July 31, 2012. From these fees, PIMS paid such sales charges to broker-dealers, which in turn paid commissions to salespersons and incurred other distribution costs. PIMS has advised the Fund that for the year ended July 31, 2012, it has received $164, $36,503 and $3,749 in contingent deferred sales charges imposed upon certain redemptions by Class A, Class B and Class C shareholders, respectively.
PIMS and PI 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 Funds 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 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, excluding short-term investments and U.S. government securities, for the year ended July 31, 2012, aggregated $424,891,844 and $482,680,812, respectively.
76 | Visit our website at www.prudentialfunds.com |
Transactions in options written during the year ended July 31, 2012 were as follows:
Notional Amount (000) |
Premiums Received |
|||||||
Options outstanding at July 31, 2011 |
38,900 | $ | 127,833 | |||||
Written options |
17,200 | 189,408 | ||||||
Expired options |
(27,600 | ) | (61,893 | ) | ||||
Closed options |
(19,500 | ) | (115,863 | ) | ||||
|
|
|
|
|||||
Options outstanding at July 31, 2012 |
9,000 | $ | 139,485 | |||||
|
|
|
|
Note 5. Distributions and Tax Information
Distributions to shareholders, which are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles, are recorded on the ex-dividend date. In order to present undistributed net investment income, accumulated net realized loss on investment and foreign currency transactions and paid-in capital in excess of par on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to undistributed net investment income and accumulated net realized loss on investment and foreign currency transactions. For the year ended July 31, 2012, the adjustments were to increase undistributed net investment income and increase accumulated net realized loss on investment and foreign currency transactions by $1,024,877 due to differences in the treatment for books and tax purposes of certain transactions involving foreign securities and currencies, passive foreign investment companies, paydown securities, swaps and other book to tax adjustments. 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 July 31, 2012 and July 31, 2011, the tax character of dividends paid as reflected in the Statement of Changes in Net Assets were $2,142,255 and $1,792,251 of ordinary income, respectively.
As of July 31, 2012, the accumulated undistributed earnings on a tax basis was $3,494,982 of ordinary income. This differs from the amount shown on the Statement of Assets and Liabilities primarily due to cumulative timing differences.
The United States federal income tax basis of the Funds investments and the net unrealized appreciation as of July 31, 2012 were as follows:
Tax Basis |
Appreciation |
Depreciation |
Net |
Other Cost |
Adjusted Net | |||||
$253,798,883 | $36,105,681 | $(15,343,214) | $20,762,467 | $(60,251) | $20,702,216 |
Target Asset Allocation Funds/Target Moderate Allocation Fund | 77 |
Notes to Financial Statements
continued
The difference between book basis and tax basis was primarily attributable to deferred losses on wash sales, straddles and investments in passive foreign investment companies. The other cost basis adjustments are primarily attributed to appreciation (depreciation) of foreign currencies, swaps, short sales, options, futures, forward currency transactions and mark-to-market of receivables and payables.
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 July 31, 2012 (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 July 31, 2012 (pre-enactment losses) may have an increased likelihood to expire unused. The Fund utilized approximately $10,373,000 of its pre-enactment losses to offset net taxable gains realized in the fiscal year ended July 31, 2012. No capital gains distributions are expected to be paid to shareholders until net gains have been realized in excess of such losses. As of July 31, 2012, the pre and post-enactment losses were approximately:
Post-Enactment Losses: |
$ | 0 | ||
|
|
|||
Pre-Enactment Losses: |
||||
Expiring 2018 |
$ | 25,836,000 | ||
|
|
Management has analyzed the Funds 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 Funds financial statements for the current reporting period. The Funds 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 R, Class X and Class Z shares. Class A shares are subject to a maximum front-end sales charge of 5.50%. Investors who purchase $1 million or more of Class A shares and sell these shares within 12 months of purchase are not subject to an initial sales charge but are subject to a contingent deferred sales charge (CDSC) of 1%. The Class A CDSC is waived for purchases by certain retirement or benefit plans. Class B shares are subject to a CDSC of 5%, which
78 | Visit our website at www.prudentialfunds.com |
decreases by 1% annually to 1% in the fifth and sixth years and 0% in the seventh year. Class B shares automatically convert to Class A shares on a quarterly basis approximately seven years after purchase. The CDSC for Class C shares is 1% for shares redeemed within 12 months of purchase. Class X shares are generally closed to new purchases. Class X shares are subject to a CDSC of 6%, which decreases by 1% annually to 4% in the third and fourth years, by 1% annually to 2% in the sixth and seventh years, and 1% in the eighth year. Class X shares automatically convert to Class A shares on a monthly basis approximately ten years after purchase. An exchange privilege is also available for shareholders who qualify to purchase Class A shares at net asset value. 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. Class R and 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 as presented in the table of transactions in shares of beneficial interest.
As of July 31, 2012, Prudential owns 231 shares of Class R.
The Fund has authorized an unlimited number of shares of beneficial interest at $.001 par value per share.
Transactions in shares of beneficial interest were as follows:
Class A |
Shares | Amount | ||||||
Year ended July 31, 2012: |
||||||||
Shares sold |
1,338,922 | $ | 14,505,778 | |||||
Shares issued in reinvestment of dividends and distributions |
179,082 | 1,846,337 | ||||||
Shares reacquired |
(5,024,165 | ) | (55,172,841 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(3,506,161 | ) | (38,820,726 | ) | ||||
Shares issued upon conversion from Class B, Class M, and Class X |
1,001,041 | 10,820,677 | ||||||
Shares reacquired upon conversion into Class Z |
(1,806 | ) | (20,228 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(2,506,926 | ) | $ | (28,020,277 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
2,790,222 | $ | 30,000,283 | |||||
Shares issued in reinvestment of dividends and distributions |
144,675 | 1,535,007 | ||||||
Shares reacquired |
(3,545,393 | ) | (38,281,566 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(610,496 | ) | (6,746,276 | ) | ||||
Shares issued upon conversion from Class B, Class M, and Class X |
1,641,072 | 17,573,237 | ||||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
1,030,576 | $ | 10,826,961 | |||||
|
|
|
|
Target Asset Allocation Funds/Target Moderate Allocation Fund | 79 |
Notes to Financial Statements
continued
Class B |
Shares | Amount | ||||||
Year ended July 31, 2012: |
||||||||
Shares sold |
196,828 | $ | 2,131,751 | |||||
Shares issued in reinvestment of dividends and distributions |
7,308 | 75,352 | ||||||
Shares reacquired |
(354,686 | ) | (3,810,919 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(150,550 | ) | (1,603,816 | ) | ||||
Shares reaquired upon conversion into Class A |
(954,428 | ) | (10,275,540 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(1,104,978 | ) | $ | (11,879,356 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
235,993 | $ | 2,535,186 | |||||
Shares issued in reinvestment of dividends and distributions |
6,640 | 70,448 | ||||||
Shares reacquired |
(729,893 | ) | (7,818,396 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(487,260 | ) | (5,212,762 | ) | ||||
Shares reaquired upon conversion into Class A |
(1,531,200 | ) | (16,301,175 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(2,018,460 | ) | $ | (21,513,937 | ) | |||
|
|
|
|
|||||
Class C |
||||||||
Year ended July 31, 2012: |
||||||||
Shares sold |
190,935 | $ | 2,038,655 | |||||
Shares issued in reinvestment of dividends and distributions |
11,846 | 122,017 | ||||||
Shares reacquired |
(987,994 | ) | (10,625,686 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(785,213 | ) | $ | (8,465,014 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
250,223 | $ | 2,671,216 | |||||
Shares issued in reinvestment of dividends and distributions |
8,274 | 87,786 | ||||||
Shares reacquired |
(1,352,186 | ) | (14,447,212 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(1,093,689 | ) | $ | (11,688,210 | ) | |||
|
|
|
|
|||||
Class M |
||||||||
Period ended April 13, 2012*: |
||||||||
Shares sold |
| $ | | |||||
Shares issued in reinvestment of dividends and distributions |
18 | 176 | ||||||
Shares reacquired |
(1,363 | ) | (13,890 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(1,345 | ) | (13,714 | ) | ||||
Shares reacquired upon conversion into Class A |
(19,538 | ) | (208,194 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(20,883 | ) | $ | (221,908 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
1,397 | $ | 15,182 | |||||
Shares issued in reinvestment of dividends and distributions |
121 | 1,280 | ||||||
Shares reacquired |
(12,374 | ) | (129,538 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(10,856 | ) | (113,076 | ) | ||||
Shares reacquired upon conversion into Class A |
(80,339 | ) | (868,923 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(91,195 | ) | $ | (981,999 | ) | |||
|
|
|
|
80 | Visit our website at www.prudentialfunds.com |
Class R |
Shares | Amount | ||||||
Year ended July 31, 2012: |
||||||||
Shares sold |
972 | $ | 10,459 | |||||
Shares issued in reinvestment of dividends and distributions |
214 | 2,203 | ||||||
Shares reacquired |
(4,085 | ) | (42,749 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(2,899 | ) | $ | (30,087 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
4,174 | $ | 45,180 | |||||
Shares issued in reinvestment of dividends and distributions |
289 | 3,071 | ||||||
Shares reacquired |
(32,380 | ) | (356,928 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(27,917 | ) | $ | (308,677 | ) | |||
|
|
|
|
|||||
Class X |
||||||||
Year ended July 31, 2012: |
||||||||
Shares sold |
1,476 | $ | 15,508 | |||||
Shares issued in reinvestment of dividends and distributions |
570 | 5,882 | ||||||
Shares reacquired |
(7,905 | ) | (82,973 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(5,859 | ) | (61,583 | ) | ||||
Shares reaquired upon conversion into Class A |
(31,329 | ) | (336,943 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(37,188 | ) | $ | (398,526 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
2,816 | $ | 30,635 | |||||
Shares issued in reinvestment of dividends and distributions |
963 | 10,215 | ||||||
Shares reacquired |
(41,526 | ) | (444,203 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(37,747 | ) | (403,353 | ) | ||||
Shares reaquired upon conversion into Class A |
(37,075 | ) | (403,139 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(74,822 | ) | $ | (806,492 | ) | |||
|
|
|
|
|||||
Class Z |
||||||||
Year ended July 31, 2012: |
||||||||
Shares sold |
36,635 | $ | 404,462 | |||||
Shares issued in reinvestment of dividends and distributions |
3,460 | 35,671 | ||||||
Shares reacquired |
(51,492 | ) | (556,212 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(11,397 | ) | (116,079 | ) | ||||
Shares issued upon conversion from Class A |
1,805 | 20,228 | ||||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(9,592 | ) | $ | (95,851 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
24,117 | $ | 264,663 | |||||
Shares issued in reinvestment of dividends and distributions |
3,670 | 38,971 | ||||||
Shares reacquired |
(98,769 | ) | (1,063,515 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(70,982 | ) | $ | (759,881 | ) | |||
|
|
|
|
* | 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. |
Target Asset Allocation Funds/Target Moderate Allocation Fund | 81 |
Notes to Financial Statements
continued
Note 7. Borrowings
The Trust, 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 December 16, 2011 through December 14, 2012. The Funds pay an annualized commitment fee of 0.08% of the unused portion of the SCA. Prior to December 16, 2011, the Funds had another Syndicated Credit Agreement of a $750 million commitment with an annualized commitment fee of 0.10% of the unused portion. Interest on any borrowings under these SCAs is paid at contracted market rates. The commitment fee for the unused amount is accrued daily and paid quarterly.
The Fund utilized the SCA during the year ended July 31, 2012. The Fund had an outstanding balance of $549,000 for one day at an interest rate of 1.49%.
The average daily balance of reverse repurchase agreements outstanding during the year ended July 31, 2012 was approximately $2,796,500 at a weighted average interest rate of approximately 2.00%. The average daily balance is based on the number of days the Fund had an outstanding balance. The maximum amount of total reverse repurchase agreements outstanding at any month-end during the period was $2,796,500 as of January 31, 2012 which was 1% of total assets.
Note 8. New Accounting Pronouncement
In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11 regarding Disclosures about Offsetting Assets and Liabilities. The amendments, which will be effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, require an entity to disclose information about offsetting and related arrangements for assets and liabilities, financial instruments and derivatives that are either currently offset in accordance with current requirements or are subject to enforceable master netting arrangements or similar agreements. At this time, management is evaluating the implications of ASU No. 2011-11 and its impact on the financial statements has not yet been determined.
82 | Visit our website at www.prudentialfunds.com |
Financial Highlights
Class A Shares | ||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2012(b) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $11.12 | $9.88 | $8.97 | $10.72 | $12.75 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .13 | .13 | .14 | .19 | .25 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | .09 | 1.20 | .90 | (1.59 | ) | (1.05 | ) | |||||||||||||
Total from investment operations | .22 | 1.33 | 1.04 | (1.40 | ) | (.80 | ) | |||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.11 | ) | (.09 | ) | (.13 | ) | (.25 | ) | (.24 | ) | ||||||||||
Distributions from net realized gains | - | - | - | (.10 | ) | (.99 | ) | |||||||||||||
Total dividends and distributions | (.11 | ) | (.09 | ) | (.13 | ) | (.35 | ) | (1.23 | ) | ||||||||||
Net asset value, end of year | $11.23 | $11.12 | $9.88 | $8.97 | $10.72 | |||||||||||||||
Total Return(a) | 2.05% | 13.51% | 11.67% | (12.78)% | (7.02)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $170,788 | $196,985 | $164,925 | $142,715 | $162,212 | |||||||||||||||
Average net assets (000) | $188,087 | $186,704 | $159,007 | $131,169 | $169,156 | |||||||||||||||
Ratios to average net assets(d): | ||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees(c) | 1.41% | 1.37% | 1.41% | 1.48% | (e) | 1.39% | ||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.16% | 1.12% | 1.16% | 1.23% | (e) | 1.14% | ||||||||||||||
Net investment income | 1.19% | 1.16% | 1.39% | 2.18% | 2.05% | |||||||||||||||
Portfolio turnover rate | 174% | 151% | 140% | 249% | 213% |
(a) 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.
(b) Calculated based upon average shares outstanding during the period.
(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 portfolios in which the Fund invests.
(e) Includes interest expense of .03%.
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 83 |
Financial Highlights
continued
Class B Shares | ||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2012(b) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $11.06 | $9.84 | $8.97 | $10.66 | $12.70 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .05 | .04 | .06 | .13 | .16 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | .09 | 1.20 | .91 | (1.58 | ) | (1.04 | ) | |||||||||||||
Total from investment operations | .14 | 1.24 | .97 | (1.45 | ) | (.88 | ) | |||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.03 | ) | (.02 | ) | (.10 | ) | (.14 | ) | (.17 | ) | ||||||||||
Distributions from net realized gains | - | - | - | (.10 | ) | (.99 | ) | |||||||||||||
Total dividends and distributions | (.03 | ) | (.02 | ) | (.10 | ) | (.24 | ) | (1.16 | ) | ||||||||||
Net asset value, end of year | $11.17 | $11.06 | $9.84 | $8.97 | $10.66 | |||||||||||||||
Total Return(a) | 1.26% | 12.57% | 10.82% | (13.43)% | (7.72)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $24,968 | $36,955 | $52,726 | $67,013 | $110,784 | |||||||||||||||
Average net assets (000) | $29,979 | $46,927 | $62,087 | $76,425 | $139,512 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees | 2.16% | 2.12% | 2.16% | 2.23% | (d) | 2.14% | ||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.16% | 1.12% | 1.16% | 1.23% | (d) | 1.14% | ||||||||||||||
Net investment income | .45% | .41% | .65% | 1.46% | 1.30% | |||||||||||||||
Portfolio turnover rate | 174% | 151% | 140% | 249% | 213% |
(a) 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.
(b) Calculated based upon average shares outstanding during the period.
(c) Does not include expenses of the underlying portfolios in which the Fund invests.
(d) Includes interest expense of .03%.
See Notes to Financial Statements.
84 | Visit our website at www.prudentialfunds.com |
Class C Shares | ||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2012(b) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $11.06 | $9.84 | $8.97 | $10.66 | $12.70 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .05 | .04 | .06 | .12 | .16 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | .09 | 1.20 | .91 | (1.57 | ) | (1.04 | ) | |||||||||||||
Total from investment operations | .14 | 1.24 | .97 | (1.45 | ) | (.88 | ) | |||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.03 | ) | (.02 | ) | (.10 | ) | (.14 | ) | (.17 | ) | ||||||||||
Distributions from net realized gains | - | - | - | (.10 | ) | (.99 | ) | |||||||||||||
Total dividends and distributions | (.03 | ) | (.02 | ) | (.10 | ) | (.24 | ) | (1.16 | ) | ||||||||||
Net asset value, end of year | $11.17 | $11.06 | $9.84 | $8.97 | $10.66 | |||||||||||||||
Total Return(a) | 1.26% | 12.57% | 10.82% | (13.43)% | (7.72)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $50,632 | $58,827 | $63,077 | $68,208 | $100,797 | |||||||||||||||
Average net assets (000) | $52,831 | $62,754 | $68,051 | $72,815 | $119,437 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees | 2.16% | 2.12% | 2.16% | 2.23% | (d) | 2.14% | ||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.16% | 1.12% | 1.16% | 1.23% | (d) | 1.14% | ||||||||||||||
Net investment income | .44% | .41% | .64% | 1.45% | 1.30% | |||||||||||||||
Portfolio turnover rate | 174% | 151% | 140% | 249% | 213% |
(a) 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.
(b) Calculated based upon average shares outstanding during the period.
(c) Does not include expenses of the underlying portfolios in which the Fund invests.
(d) Includes interest expense of .03%.
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 85 |
Financial Highlights
continued
Class M Shares | ||||||||||||||||||||||||||
Period Ended April 13, |
Year Ended July 31, | |||||||||||||||||||||||||
2012(b)(e) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | 2007(b) | |||||||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||||||||
Net Asset Value, Beginning Of Year | $11.04 | $9.81 | $8.95 | $10.64 | $12.66 | $11.85 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment income | .04 | .04 | .06 | .13 | .16 | .12 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | .16 | 1.21 | .90 | (1.58 | ) | (1.02 | ) | 1.30 | ||||||||||||||||||
Total from investment operations | .20 | 1.25 | .96 | (1.45 | ) | (.86 | ) | 1.42 | ||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||
Dividends from net investment income | (.03 | ) | (.02 | ) | (.10 | ) | (.14 | ) | (.17 | ) | (.13 | ) | ||||||||||||||
Distributions from net realized gains | - | - | - | (.10 | ) | (.99 | ) | (.48 | ) | |||||||||||||||||
Total dividends and distributions | (.03 | ) | (.02 | ) | (.10 | ) | (.24 | ) | (1.16 | ) | (.61 | ) | ||||||||||||||
Net asset value, end of year | $11.21 | $11.04 | $9.81 | $8.95 | $10.64 | $12.66 | ||||||||||||||||||||
Total Return(a) | 1.81% | 12.71% | 10.74% | (13.46)% | (7.58)% | 12.21% | ||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Net assets, end of year (000) | $13 | $230 | $1,100 | $2,083 | $4,709 | $8,277 | ||||||||||||||||||||
Average net assets (000) | $102 | $702 | $1,717 | $2,764 | $6,746 | $8,529 | ||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees | 2.16% | (f) | 2.12% | 2.16% | 2.23% | (d) | 2.14% | 1.93% | ||||||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.16% | (f) | 1.12% | 1.16% | 1.23% | (d) | 1.14% | .93% | ||||||||||||||||||
Net investment income | .33% | (f) | .38% | .64% | 1.47% | 1.29% | .96% | |||||||||||||||||||
Portfolio turnover rate | 174% | (g)(h) | 151% | 140% | 249% | 213% | 195% |
(a) 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 one full year are not annualized.
(b) Calculated based upon average shares outstanding during the period.
(c) Does not include expenses of the underlying portfolios in which the Fund invests.
(d) Includes interest expense of .03%.
(e) As of April 13, 2012, the last conversion of Class M shares was completed. There are no Class M shares outstanding and Class M shares are no longer being offered for sale.
(f) Annualized.
(g) Not annualized.
(h) Calculated as of July 31, 2012.
See Notes to Financial Statements.
86 | Visit our website at www.prudentialfunds.com |
Class R Shares | ||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2012(b) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $11.10 | $9.87 | $8.97 | $10.73 | $12.76 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .10 | .09 | .11 | .17 | .22 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | .09 | 1.21 | .91 | (1.60 | ) | (1.05 | ) | |||||||||||||
Total from investment operations | .19 | 1.30 | 1.02 | (1.43 | ) | (.83 | ) | |||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.08 | ) | (.07 | ) | (.12 | ) | (.23 | ) | (.21 | ) | ||||||||||
Distributions from net realized gains | - | - | - | (.10 | ) | (.99 | ) | |||||||||||||
Total dividends and distributions | (.08 | ) | (.07 | ) | (.12 | ) | (.33 | ) | (1.20 | ) | ||||||||||
Net asset value, end of year | $11.21 | $11.10 | $9.87 | $8.97 | $10.73 | |||||||||||||||
Total Return(a) | 1.78% | 13.16% | 11.43% | (13.03)% | (7.25)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $311 | $341 | $578 | $761 | $1,950 | |||||||||||||||
Average net assets (000) | $306 | $497 | $632 | $1,024 | $3,358 | |||||||||||||||
Ratios to average net assets(d): | ||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees(c) | 1.66% | 1.62% | 1.66% | 1.73% | (e) | 1.64% | ||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.16% | 1.12% | 1.16% | 1.23% | (e) | 1.14% | ||||||||||||||
Net investment income | .94% | .89% | 1.15% | 1.97% | 1.78% | |||||||||||||||
Portfolio turnover rate | 174% | 151% | 140% | 249% | 213% |
(a) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles.
(b) Calculated based upon average shares outstanding during the period.
(c) The distributor of the Fund has contractually agreed to limit its distribution and service (12b-1) fees to .50% of the average daily net assets of the Class R shares.
(d) Does not include expenses of the underlying portfolios in which the Fund invests.
(e) Includes interest expense of .03%.
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 87 |
Financial Highlights
continued
Class X Shares | ||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2012(b) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $11.12 | $9.88 | $8.97 | $10.66 | $12.69 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .13 | .12 | .10 | .13 | .16 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | .08 | 1.21 | .91 | (1.58 | ) | (1.03 | ) | |||||||||||||
Total from investment operations | .21 | 1.33 | 1.01 | (1.45 | ) | (.87 | ) | |||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.11 | ) | (.09 | ) | (.10 | ) | (.14 | ) | (.17 | ) | ||||||||||
Distributions from net realized gains | - | - | - | (.10 | ) | (.99 | ) | |||||||||||||
Total dividends and distributions | (.11 | ) | (.09 | ) | (.10 | ) | (.24 | ) | (1.16 | ) | ||||||||||
Capital Contribution | - | (e) | - | (e) | - | (e) | - | - | ||||||||||||
Net asset value, end of year | $11.22 | $11.12 | $9.88 | $8.97 | $10.66 | |||||||||||||||
Total Return(a) | 1.96% | 13.51% | 11.28% | (13.43)% | (7.64)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $367 | $777 | $1,430 | $2,235 | $4,299 | |||||||||||||||
Average net assets (000) | $505 | $1,112 | $1,847 | $2,858 | $5,199 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees | 1.41% | 1.37% | 1.77% | 2.21% | (d) | 2.08% | ||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.16% | 1.12% | 1.16% | 1.23% | (d) | 1.14% | ||||||||||||||
Net investment income | 1.20% | 1.15% | 1.04% | 1.48% | 1.35% | |||||||||||||||
Portfolio turnover rate | 174% | 151% | 140% | 249% | 213% |
(a) 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.
(b) Calculated based upon average shares outstanding during the period.
(c) Does not include expenses of the underlying portfolios in which the Fund invests.
(d) Includes interest expense of .03%.
(e) Less than $.005.
See Notes to Financial Statements.
88 | Visit our website at www.prudentialfunds.com |
Class Z Shares | ||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2012(b) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $11.14 | $9.90 | $8.98 | $10.74 | $12.77 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .16 | .15 | .16 | .21 | .28 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | .08 | 1.21 | .90 | (1.60 | ) | (1.05 | ) | |||||||||||||
Total from investment operations | .24 | 1.36 | 1.06 | (1.39 | ) | (.77 | ) | |||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.14 | ) | (.12 | ) | (.14 | ) | (.27 | ) | (.27 | ) | ||||||||||
Distributions from net realized gains | - | - | - | (.10 | ) | (.99 | ) | |||||||||||||
Total dividends and distributions | (.14 | ) | (.12 | ) | (.14 | ) | (.37 | ) | (1.26 | ) | ||||||||||
Net asset value, end of year | $11.24 | $11.14 | $9.90 | $8.98 | $10.74 | |||||||||||||||
Total Return(a) | 2.22% | 13.75% | 11.90% | (12.55)% | (6.78)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $3,464 | $3,539 | $3,848 | $4,786 | $13,558 | |||||||||||||||
Average net assets (000) | $3,240 | $3,846 | $4,425 | $8,208 | $14,407 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees | 1.16% | 1.12% | 1.16% | 1.23% | (d) | 1.14% | ||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.16% | 1.12% | 1.16% | 1.23% | (d) | 1.14% | ||||||||||||||
Net investment income | 1.44% | 1.42% | 1.64% | 2.47% | 2.30% | |||||||||||||||
Portfolio turnover rate | 174% | 151% | 140% | 249% | 213% |
(a) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles.
(b) Calculated based upon average shares outstanding during the period.
(c) Does not include expenses of the underlying portfolios in which the Fund invests.
(d) Includes interest expense of .03%.
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 89 |
Report of Independent Registered Public
Accounting Firm
The Board of Trustees and Shareholders
Target Asset Allocation Funds Target Moderate Allocation Fund:
We have audited the accompanying statement of assets and liabilities of the Target Moderate Allocation Fund (hereafter referred to as the Fund), a portfolio of the Target Asset Allocation Funds, including the portfolio of investments, as of July 31, 2012, and the related statement of operations for the year then ended, the statement 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 Funds 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 July 31, 2012, 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 July 31, 2012, 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
September 20, 2012
90 | Visit our website at www.prudentialfunds.com |
Tax Information
(Unaudited)
For the year ended July 31, 2012, the Fund reports the maximum amount allowable but not less than the following percentages of ordinary income distributions paid as: 1) qualified dividend income in accordance with Section 854 of the Internal Revenue Code (QDI); 2) eligible for the corporate dividend received deduction in accordance with Section 854 of the Internal Revenue Code (DRD); and 3) interest-related dividends in accordance with Section 871(k)(1) and 881(e)(1) of the Internal Revenue Code (IRD):
QDI | DRD | IRD | ||||||||||
Target Moderate Allocation Fund |
100.00 | % | 99.58 | % | 44.84 | % |
Interest-related dividends do not include any distributions paid by a fund with respect to Fund tax years beginning after July 31, 2012. Consequently, this provision expires with respect to such distributions paid after the Funds fiscal year end.
In January 2013, you will be advised on IRS Form 1099-DIV or substituted 1099-DIV as to the federal tax status of dividends and distributions received by you in calendar year 2012.
We are required by Massachusetts, Missouri and Oregon to inform you that dividends which have been derived from interest on federal obligations are not taxable to shareholders providing the mutual fund meets certain requirements mandated by the respective states taxing authorities. We are pleased to report that 5.94% of the ordinary income dividends paid qualify for such deduction.
For more detailed information regarding your state and local taxes, you should contact your tax advisor or the state/local taxing authorities.
Target Asset Allocation Funds/Target Moderate Allocation Fund | 91 |
INFORMATION ABOUT BOARD MEMBERS AND OFFICERS
(Unaudited)
Information about Board Members and Officers 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.
Independent Board Members(1) |
||||
Name, Address, Age Position(s) Portfolios Overseen |
Principal Occupation(s) During Past Five Years |
Other Directorships Held | ||
Kevin J. Bannon (60) Board Member Portfolios Overseen: 61 |
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 (60) Board Member Portfolios Overseen: 61 |
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). | ||
Michael S. Hyland, CFA (66) Board Member Portfolios Overseen: 61 |
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 (73) Board Member Portfolios Overseen: 61 |
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). |
Target Asset Allocation Funds/Target Moderate Allocation Fund
Independent Board Members(1) |
||||
Name, Address, Age Position(s) Portfolios Overseen |
Principal Occupation(s) During Past Five Years |
Other Directorships Held | ||
Stephen P. Munn (70) Board Member Portfolios Overseen: 61 |
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). | ||
Richard A. Redeker (69) Board Member & Independent Chair Portfolios Overseen: 61 |
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. | ||
Robin B. Smith (72) Board Member Portfolios Overseen: 61 |
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 (69) Board Member Portfolios Overseen: 61 |
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 (49) Board Member & President Portfolios Overseen: 61 |
President of Prudential Investments LLC (since January 2012); Executive Vice President of Jennison Associates LLC and Head of Retail Distribution of Prudential Investments LLC (June 2005 - December 2011). |
None. |
Visit our website at www.prudentialfunds.com
Interested Board Members(1) |
||||
Name, Address, Age Position(s) Portfolios Overseen |
Principal Occupation(s) During Past Five Years |
Other Directorships Held | ||
Scott E. Benjamin (39) Board Member & Vice President Portfolios Overseen: 61 |
Executive Vice President (since June 2009) of Prudential Investments LLC and 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. |
(1) The year that each Board Member joined the Funds Board is as follows:
Kevin J. Bannon, 2008; Linda W. Bynoe, 2005; Michael S. Hyland, 2008; Douglas H. McCorkindale, 1998; Stephen P. Munn, 2008; Richard A. Redeker, 2003; Robin B. Smith, 2003; Stephen G. Stoneburn, 1999; Stuart S. Parker, Board Member and President since 2012; Scott E. Benjamin, Board Member since 2010 and Vice President since 2009.
Fund Officers(a)(1) |
||
Name, Address and Age Position with Fund |
Principal Occupation(s) During Past Five Years | |
Judy A. Rice (64) Vice President |
President, Chief Executive Officer (May 2011-Present) and Executive Vice President (December 2008-May 2011) of Prudential Investment Management Services LLC; Formerly President, Chief Executive Officer, Chief Operating Officer and Officer-In-Charge (February 2003-December 2011) of Prudential Investments LLC; formerly President, Chief Executive Officer and Officer-In-Charge (April 2003-December 2011) of Prudential Mutual Fund Services LLC (PMFS); formerly Member of the Board of Directors of Jennison Associates LLC (November 2010-December 2011); formerly Vice President (February 1999-April 2006) of Prudential Investment Management Services LLC; formerly President, COO, CEO and Manager of PIFM Holdco, LLC (April 2006-December 2011); formerly President, Chief Executive Officer, Chief Operating Officer and Officer-In-Charge (May 2003-June 2005) and Director (May 2003-March 2006) and Executive Vice President (June 2005-March 2006) of AST Investment Services, Inc.; Member of Board of Governors of the Investment Company Institute. |
Target Asset Allocation Funds/Target Moderate Allocation Fund
Fund Officers(a)(1) |
| |
Name, Address and Age Position with Fund |
Principal Occupation(s) During Past Five Years | |
Raymond A. OHara (56) 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 PMFS (since June 2012) and Corporate Counsel of AST Investment Services, Inc. (since June 2012); formerly 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 1988August 2008) of Blazzard & Hasenauer, P.C. (formerly, Blazzard, Grodd & Hasenauer, P.C.). | |
Deborah A. Docs (54) 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. | |
Jonathan D. Shain (54) 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 PMFS; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | |
Claudia DiGiacomo (37) 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). | |
Andrew R. French (49) 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 PMFS. | |
Amanda S. Ryan (34) 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 (2008-2012). | |
Timothy J. Knierim (53) Chief Compliance Officer |
Chief Compliance Officer of Prudential Investment Management, Inc. (since July 2007); formerly Chief Risk Officer of Prudential Investment Management, Inc. and Prudential Investments LLC (2002-2007) and formerly Chief Ethics Officer of Prudential Investment Management, Inc. and Prudential Investments LLC (2006-2007). | |
Valerie M. Simpson (54) Deputy Chief Compliance Officer |
Chief Compliance Officer (since April 2007) of Prudential Investments LLC and AST Investment Services, Inc.; formerly Vice President-Financial Reporting (June 1999-March 2006) for Prudential Life and Annuities Finance. |
Visit our website at www.prudentialfunds.com
Fund Officers(a)(1) |
| |
Name, Address and Age Position with Fund |
Principal Occupation(s) During Past Five Years | |
Theresa C. Thompson (50) Deputy Chief Compliance Officer |
Vice President, Compliance, Prudential Investments LLC (since April 2004); and Director, Compliance, Prudential Investments LLC (2001-2004). | |
Richard W. Kinville (44) 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 Financials Internal Audit Department and Manager in AXAs 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). | |
Grace C. Torres (53) 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. | |
M. Sadiq Peshimam (48) Assistant Treasurer |
Vice President (since 2005) of Prudential Investments LLC. | |
Peter Parrella (54) 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). |
(a) Excludes Mr. Parker and Mr. Benjamin, interested Board Members who also serve as President and Vice President, respectively.
(1) The year that each individual became an Officer of the Funds is as follows:
Judy A. Rice, 2012; Raymond A. OHara, 2012; Deborah A. Docs, 2004; Jonathan D. Shain, 2005; Claudia DiGiacomo, 2005; Andrew R. French, 2006; Amanda S. Ryan, 2012; Timothy J. Knierim, 2007; Valerie M. Simpson, 2007; Theresa Thompson, 2008; Richard W.Kinville, 2011; Grace C. Torres, 1998; M. Sadiq Peshimam, 2006; Peter Parrella, 2007.
Explanatory Notes to Tables:
n | 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. |
n | 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. |
n | 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. |
n | 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. |
n | Portfolios Overseen includes all investment companies managed by Prudential Investments LLC. The investment companies for which PI serves as manager include the Prudential Investments Mutual Funds, The Prudential Variable Contract Accounts, Target Mutual Funds, Prudential Short Duration High Yield Fund, Inc., The Prudential Series Fund, Prudentials Gibraltar Fund, Inc. and the Advanced Series Trust. |
Target Asset Allocation Funds/Target Moderate Allocation Fund
Approval of Advisory Agreements
Approval of Existing Agreements
The Funds Board of Trustees
The Board of Trustees (the Board) of Target Moderate Allocation 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). 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 Target Investment Committee. Each committee is chaired by, and composed of, Independent Trustees.
Annual Approval of the Funds Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Funds management agreement with Prudential Investments LLC (PI) and the Funds subadvisory agreements with various subadvisers. In considering the renewal of the agreements, the Board, including all of the Independent Trustees, met on June 5-7, 2012 and approved the renewal of the agreements through July 31, 2013, 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 each subadviser. 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 subadvisers, 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. In their deliberations, the Trustees did not identify any single factor which alone was responsible for the Boards 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 5-7, 2012.
1 | Target Moderate Allocation Fund is one of three series which, together, comprise the Target Asset Allocation Funds. |
Target Asset Allocation Funds/Target Moderate Allocation Fund
Approval of Advisory Agreements (continued)
The Trustees determined that the overall arrangements between the Fund and PI, which serves as the Funds investment manager pursuant to a management agreement with Target Asset Allocation Funds, and between PI and each subadviser,2 each of which serve as 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 determinations to approve the renewal of the agreements and to approve the new subadvisory agreement are discussed separately 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 each subadviser. The Board considered the services provided by PI, including but not limited to the oversight of the subadvisers, as well as the provision of fund recordkeeping, compliance, and other services to the Fund. With respect to PIs oversight of the subadvisers, the Board noted that PIs Strategic Investment Research Group (SIRG), a business unit of PI, is responsible for screening and recommending new subadvisers when appropriate, as well as monitoring and reporting to the Board on the performance and operations of the subadvisers. The Board also considered that PI pays the salaries of all of the officers and non-independent Trustees of the Fund. The Board also considered the investment subadvisory services provided by each subadviser, as well as compliance with the Funds investment restrictions, policies and procedures. The Board considered PIs evaluation of the subadvisers, as well as PIs recommendation, based on its review of the subadvisers, to renew the subadvisory agreements.
The Board reviewed the qualifications, backgrounds and responsibilities of PIs senior management responsible for the oversight of the Fund and each subadviser, and also reviewed the qualifications, backgrounds and responsibilities of the subadvisers portfolio managers who are responsible for the day-to-day management of the Fund. The Board was provided with information pertaining to PIs and each subadvisers organizational structure, senior management, investment operations, and other relevant information pertaining to both PI and each subadviser. The Board also noted
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2 | The Funds subadvisers are: Marsico Capital Management, LLC, Massachusetts Financial Services Company, Hotchkis and Wiley Capital Management, LLC, Eagle Asset Management, Inc., Epoch Investment Partners, Inc. (Epoch), NFJ Investment Group L.P., EARNEST Partners LLC, Vaughan Nelson Investment Management, L.P., LSV Asset Management, Thornburg Investment Management, Inc. and Pacific Investment Management Company LLC. The Board approved the appointment of Epoch to replace Eaton Vance Management at the meeting on June 5-7, 2012. |
that it received favorable compliance reports from the Funds Chief Compliance Officer (CCO) as to both PI and each subadviser.
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 each subadviser, and that there was a reasonable basis on which to conclude that the Fund benefits from the services provided by PI and each subadviser 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 Funds 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 advisers capital structure and cost of capital. Taking these factors into account, the Board concluded that the profitability of PI and its affiliates in relation to the services rendered was not unreasonable.
The Board noted that none of the subadvisers was affiliated with PI, and concluded that the level of profitability of a subadviser not affiliated with PI may not be as significant as PIs profitability given the arms length nature of the process by which the subadvisory fee rates were negotiated by PI and the unaffiliated subadvisers, as well as the fact that PI compensates the subadvisers out of its management fee.
Economies of Scale
The Board noted that the management fee schedule for the Fund includes breakpoints, which have the effect of decreasing the fee rate as assets increase, but at the current level of assets, the Fund does not realize the effect of those rate reductions. The Board received and discussed information concerning whether PI realizes economies of scale as the Funds assets grow beyond current levels. The Board took note that the Funds 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 Boards understanding that most of PIs costs are not specific to individual funds, but rather are incurred across a variety of products and services.
Target Asset Allocation Funds/Target Moderate Allocation Fund
Approval of Advisory Agreements (continued)
Other Benefits to PI and the Subadvisers
The Board considered potential ancillary benefits that might be received by PI, the subadvisers, 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 Funds securities lending agent, transfer agency fees received by the Funds transfer agent (which is affiliated with PI), as well as benefits to its reputation or other intangible benefits resulting from PIs association with the Fund. The Board concluded that the potential benefits to be derived by the subadvisers included the ability to use soft dollar credits, brokerage commissions received by affiliates of the subadvisers, as well as the potential benefits consistent with those generally resulting from an increase in assets under management, specifically, potential access to additional research resources and benefits to their reputations. The Board concluded that the benefits derived by PI and the subadvisers 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, 2011.
The Board also considered the Funds actual management fee, as well as the Funds net total expense ratio, for the fiscal year ended July 31, 2011. 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 Mixed-Asset Target Allocation Growth 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 Boards conclusions regarding the Funds 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
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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 | 4th Quartile | 2nd Quartile | 2nd Quartile | |||||
Actual Management Fees: 3rd Quartile | ||||||||
Net Total Expenses: 3rd Quartile |
| The Board noted that the Fund outperformed its benchmark index over the three-, five- and ten-year periods, although it underperformed over the one-year period. |
| The Board concluded that, in light of the Funds competitive performance, it would be in the best interests of the Fund and its shareholders to renew the agreements. |
| The Board concluded that the management fees (including subadvisory fees) and total expenses were reasonable in light of the services provided. |
* * *
After full consideration of these factors, the Board concluded that approval of the agreements was in the best interests of the Fund and its shareholders.
Target Asset Allocation Funds/Target Moderate Allocation Fund
Approval of Advisory Agreements (continued)
Board Approval of a New Subadvisory Agreement
At meetings of the Board held on June 6, 2012, the Trustees, including the Independent Trustees, unanimously approved the recommendations by the Funds investment manager, Prudential Investments LLC (PI or the Manager) to appoint Epoch Investment Partners, Inc. (Epoch) as a subadviser with respect to the Fund, in replacement of Eaton Vance Management (Eaton Vance). In approving the new subadvisory agreement between PI and Epoch (the Subadvisory Agreement), the Board, including the Independent Trustees advised by their independent legal counsel, K&L Gates LLP, considered the factors they deemed relevant, including the nature, quality and extent of services to be provided to the Fund by Epoch; any relevant comparable performance information; the fees proposed to be paid by the Manager to Epoch under the Subadvisory Agreement; and the potential for economies of scale that may be shared with the Fund and its shareholders. In connection with its deliberations, the Trustees reviewed performance, compliance and organization materials regarding Epoch and received presentations from PI, as well as from representatives of Epoch. The Board also received materials relating to the Subadvisory Agreement and had the opportunity to ask questions and request further information.
The Trustees determined that the overall arrangements between the Manager and Epoch, pursuant to the terms of the Subadvisory Agreement, are appropriate in light of the services to be performed and the fees to be charged under the Subadvisory Agreement 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 Subadvisory Agreement are separately discussed below.
Nature, Quality and Extent of Services
The Board received and considered information regarding the nature and extent of services to be provided to the Fund by Epoch under the Subadvisory Agreement, namely, that Epoch would provide day-to-day fund management services to a portion of the Fund and comply with all Fund policies and applicable rules and regulations. The Board also noted that the nature and extent of the services to be provided to the Fund under the Subadvisory Agreement were generally similar to those provided by the other current subadvisers to the Fund under their respective subadvisory agreements.
With respect to the quality of services, the Board considered, among other things, the background and experience of Epochs fund management team. In connection with the recent annual review of advisory and subadvisory agreements, the Board had reviewed the qualifications, backgrounds and responsibilities of the fund managers
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who would be responsible for the day-to-day management of the Fund, and the Board was provided with information pertaining to Epochs organizational structure, senior management, investment operations, and other relevant information pertaining to Epoch. The Board noted that it received a favorable compliance report from the Funds Chief Compliance Officer (CCO) as to Epoch.
The Board concluded that there was a reasonable basis on which to conclude that the services to be provided by Epoch under the Subadvisory Agreement should be comparable to the services that were provided by Eaton Vance to the Fund. The Board concluded that it was satisfied with the nature, extent and quality of the investment subadvisory services to be provided by Epoch and that there was a reasonable basis on which to conclude that the Fund would benefit from the subadvisory services to be provided by Epoch under the Subadvisory Agreement.
Performance of the Fund
The Board received and considered information regarding the performance of other investment companies managed by Epoch utilizing an investment style and strategy similar to that proposed for the Fund. The Board concluded that it was satisfied with the performance record of Epoch in the proposal strategy.
Investment Subadvisory Fee Rates
The Board considered that the proposed subadvisory fee rates payable by PI to Epoch under the Subadvisory Agreement were higher than the fee rate applicable to Eaton Vance. The Board also considered, among other things, the fee rates payable to Epoch by other funds with an investment objective similar to that of the Fund. The Board noted that PI, not the Fund, pays the subadvisory fees, and therefore any change in the proposed subadvisory fee rates would not have any impact on the amount of management fees paid by the Fund. The Board considered the proposed subadvisory fees of 0.275% of the Funds first $1 billion of average daily net assets and 0.20% of the Funds average daily assets in excess of $1 billion to be paid by the Manager to Epoch. The Board noted that the proposed fee for Epoch is based on combined assets in the retail funds portfolio that are subadvised by Epoch, managed by the Manager and have substantially the same investment strategy. The Board concluded that the proposed subadvisory fee rate payable to Epoch under the new Subadvisory Agreement was reasonable.
Profitability
In connection with their annual review of subadvisory agreements, the Board considered the profitability of PI and subadvisers affiliated with PI. The Board
Target Asset Allocation Funds/Target Moderate Allocation Fund
Approval of Advisory Agreements (continued)
concluded that the level of profitability of a subadviser not affiliated with PI, such as Epoch, may not be as significant as PIs profitability given the arms length nature of the process by which the subadvisory fee rates were negotiated by PI and the unaffiliated subadvisers, as well as the fact that PI compensates the subadvisers out of its management fee. Nonetheless, because the engagement of Epoch is new, there is no historical profitability with regard to its arrangements with the Fund. As a result, the Board did not consider this factor. The Board noted that profitability would be reviewed annually in connection with the review of advisory agreements.
Economies of Scale
In connection with their annual review of advisory agreements, the Board considered the potential for Epoch to experience economies of scale as the amount of assets managed by Epoch increased in size. The Board further considered that the proposed subadvisory fee rate for Epoch would include breakpoints in the fee rate paid by the Manager to Epoch, and that the subadvisory breakpoints would reduce that fee rate if the amount of assets managed by Epoch increased in size. The Board noted that there was no proposed change in advisory agreements fee rates and breakpoints and that it would again review economies of scale at the next annual review of advisory agreements.
Other Benefits to the Subadviser or its Affiliates from Serving as Subadviser
The Board considered potential fall-out or ancillary benefits anticipated to be received by Epoch and its affiliates as a result of their relationship with the Fund. The Boards concluded that any potential benefits to be derived by Epoch included its ability to use soft dollar credits, brokerage commissions received by affiliates of Epoch, potential access to additional research resources, larger assets under management and benefits to their respective reputations, which were consistent with those generally derived by subadvisers to mutual funds.
After full consideration of these factors, the Board concluded that the approval of the Subadvisory Agreement was in the best interest of the Fund and its shareholders.
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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 Funds investment subadvisers the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852. 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 Funds website and on the Securities and Exchange Commissions website. |
TRUSTEES |
Kevin J. Bannon Scott E. Benjamin Linda W. Bynoe
Michael S. Hyland Douglas H. McCorkindale Stephen P. Munn Stuart S. Parker
Richard A. Redeker
Robin B. Smith Stephen G. Stoneburn |
OFFICERS |
Stuart S. Parker, President Judy A. Rice, Vice 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 Timothy J. Knierim, Chief Compliance Officer Valerie M. Simpson, Deputy 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 SUBADVISERS | Eagle Asset Management, Inc. | 880 Carillon Parkway St. Petersburg, FL 33716 | ||
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EARNEST Partners, LLC | 1180 Peachtree Street Suite 2300 Atlanta, GA 30309 | |||
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Epoch Investment Partners, Inc. |
640 Fifth Avenue New York, NY 10019 | |||
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Hotchkis and Wiley Capital Management, LLC | 725 South Figueroa Street 39th Floor Los Angeles, CA 90017 | |||
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LSV Asset Management | 155 North Wacker Drive Suite 4600 Chicago, IL 60606 | |||
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Marsico Capital Management, LLC | 1200 17th Street Suite 1600 Denver, CO 80202 | |||
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Massachusetts Financial Services Company |
500 Boylston Street Boston, MA 02116 | |||
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NFJ Investment Group L.P. | 2100 Ross Avenue Dallas, TX 75201 | |||
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Pacific Investment Management Company LLC |
840 Newport Center Drive Newport Beach, CA 92660 | |||
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Thornburg Investment Management, Inc. |
2300 North Ridgetop Road Santa Fe, NM 87506 | |||
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Vaughan Nelson Investment Management, L.P. |
600 Travis Street Suite 6300 Houston, TX 77002 | |||
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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 | ||
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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, Target Asset Allocation Funds, 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 Funds Forms N-Q are available on the Commissions website at www.sec.gov. The Funds Forms N-Q may also be reviewed and copied at the Commissions 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 Funds schedule of portfolio holdings as of the end of each calendar month is also available on the Funds website no sooner than approximately three business days prior to the end of the following month. |
The Funds Statement of Additional Information contains additional information about the Funds 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 |
TARGET MODERATE ALLOCATION FUND
SHARE CLASS | A | B | C | R | X | Z | ||||||
NASDAQ | PAMGX | DMGBX | PIMGX | SPMRX | N/A | PDMZX | ||||||
CUSIP | 87612A807 | 87612A880 | 87612A872 | 87612A864 | 87612A831 | 87612A856 |
MFSP504E3 0231558-00001-00
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
TARGET GROWTH ALLOCATION FUND
ANNUAL REPORT · JULY 31, 2012
Objective
Seeks long-term capital appreciation
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The views expressed in this report and information about the Funds portfolio holdings are for the period covered by this report and are subject to change thereafter.
Target Funds, Prudential Investments, Prudential, the Prudential logo, the Rock symbol and Bring Your Challenges are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
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September 14, 2012
Dear Shareholder:
We hope you find the annual report for the Target Growth Allocation Fund informative and useful. The report covers performance for the 12-month period that ended July 31, 2012.
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, including stock and bond mutual funds consistent with your tolerance for risk, time horizon, and financial goals.
A diversified asset allocation offers two potential advantages: It limits your exposure to any particular asset class; plus it provides a better opportunity to invest some of your assets in the right place at the right time. 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.
We are dedicated to helping you solve your toughest investment challengeswhether its capital growth, reliable income, or protection from market volatility and other risk. We believe our Target Growth Allocation Fund, which is managed by institutional quality asset managers selected and monitored by our research team, will help you to achieve broad, actively managed diversification at a targeted risk/return balance with a single investment purchase.
Thank you for choosing the Target Growth Allocation Fund.
Sincerely,
Stuart S. Parker, President
Target Asset Allocation Funds
Target Asset Allocation Funds/Target Growth Allocation Fund | 1 |
Your Funds Performance
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 investors 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. The maximum initial sales charge is 5.50% (Class A shares). Gross operating expenses: Class A, 1.60%; Class B, 2.30%; Class C, 2.30%; Class R, 1.90%; Class X, 2.30%; Class Z, 1.30%. Net operating expenses: Class A, 1.55%; Class B, 2.30%; Class C, 2.30%; Class R, 1.65%; Class X, 1.55%; Class Z, 1.30%, after contractual reduction through 11/30/2013 for Class A and Class R shares.
Cumulative Total Returns (Without Sales Charges) as of 7/31/12 | ||||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||
Class A |
0.14 | % | 11.68 | % | 77.82 | % | | |||||||
Class B |
0.95 | 14.99 | 64.74 | | ||||||||||
Class C |
0.85 | 14.90 | 64.90 | | ||||||||||
Class R |
0.24 | 12.67 | N/A | 27.27% (10/04/04) | ||||||||||
Class X |
0.15 | 12.61 | N/A | 25.51 (10/04/04) | ||||||||||
Class Z |
0.12 | 10.66 | 82.34 | | ||||||||||
Customized Blend |
3.36 | 0.27 | 92.48 | | ||||||||||
S&P 500 Index |
9.11 | 5.77 | 84.81 | | ||||||||||
Lipper Large-Cap Core Funds Average |
5.43 | 0.59 | 73.44 | | ||||||||||
Average Annual Total Returns (With Sales Charges) as of 6/30/12 | ||||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||
Class A |
8.21 | % | 4.24 | % | 4.05 | % | | |||||||
Class B |
8.35 | 4.05 | 3.86 | | ||||||||||
Class C |
4.49 | 3.86 | 3.87 | | ||||||||||
Class R |
3.07 | 3.36 | N/A | 3.07% (10/04/04) | ||||||||||
Class X |
8.70 | 3.88 | N/A | 2.79 (10/04/04) | ||||||||||
Class Z |
2.54 | 2.91 | 4.90 | | ||||||||||
Customized Blend |
0.12 | 0.87 | 5.73 | | ||||||||||
S&P 500 Index |
5.43 | 0.22 | 5.33 | | ||||||||||
Lipper Large-Cap Core Funds Average |
1.89 | 0.71 | 4.61 | |
2 | Visit our website at www.prudentialfunds.com |
Average Annual Total Returns (With Sales Charges) as of 7/31/12 |
| |||||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||||
Class A |
5.63 | % | 3.55 | % | 5.33 | % | | |||||||||
Class B |
5.90 | 3.37 | 5.12 | | ||||||||||||
Class C |
1.84 | 3.18 | 5.13 | | ||||||||||||
Class R |
0.24 | 2.67 | N/A | 3.13% (10/04/04) | ||||||||||||
Class X |
6.12 | 3.19 | N/A | 2.85 (10/04/04) | ||||||||||||
Class Z |
0.12 | 2.23 | 6.19 | | ||||||||||||
Average Annual Total Returns (Without Sales Charges) as of 7/31/12 |
| |||||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||||
Class A |
0.14 | % | 2.45 | % | 5.92 | % | | |||||||||
Class B |
0.95 | 3.19 | 5.12 | | ||||||||||||
Class C |
0.85 | 3.18 | 5.13 | | ||||||||||||
Class R |
0.24 | 2.67 | N/A | 3.13% (10/04/04) | ||||||||||||
Class X |
0.15 | 2.66 | N/A | 2.95 (10/04/04) | ||||||||||||
Class Z |
0.12 | 2.23 | 6.19 | |
Growth of a $10,000 Investment
The graph compares a $10,000 investment in the Target Growth Allocation Fund (Class A shares) with a similar investment in the Standard & Poors 500 Composite Stock Price Index (S&P 500 Index) and a Customized Benchmark for the Target Growth Allocation Fund (Customized Blend) by portraying the initial account values at
Target Asset Allocation Funds/Target Growth Allocation Fund | 3 |
Your Funds Performance (continued)
the beginning of the 10-year period for Class A shares (July 31, 2002) and the account values at the end of the current fiscal year (July 31, 2012) 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 R, 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 Funds total returns do not reflect the deduction of income taxes on an individuals 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. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of such fee waivers and/or expense reimbursements, total returns would be lower.
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. Class A shares are subject to a maximum front-end sales charge of 5.50%, and a 12b-1 fee of 0.30% annually. 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 CDSC is waived for purchases by certain retirement and/or benefit plans. 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. Class B shares are subject to a declining CDSC of 5%, 4%, 3%, 2%, 1%, and 1%, respectively, for the first six years after purchase, and a 12b-1 fee of 1% annually. Approximately seven years after purchase, Class B shares will automatically convert to Class A shares on a quarterly basis. Class C shares are not subject to a front-end sales charge, but charge a CDSC of 1% for Class C shares sold within 12 months from the date of purchase and an annual 12b-1 fee of 1%. Class X shares are generally closed to new purchases. Class X shares are subject to a declining CDSC of 6%, 5%, 4%, 4%, 3%, 2%, 2% and 1%, respectively for the first eight years and a 12b-1 fee of 1% annually. Approximately 10 years after purchase Class X shares will automatically convert to Class A shares on a monthly basis. Class R and Z shares are not subject to a sales charge. Class R shares are subject to a 12b-1 fee of up to 0.75% annually. Class Z shares are not subject to a 12b-1 fee. The returns in the graph and tables reflect the share class expense structure in effect at the close of the fiscal period. The returns in the graph and tables do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or following the redemption of Fund shares.
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Benchmark Definitions
Customized Blend
The Customized Benchmark for the Target Growth Allocation Fund (Customized Blend) is a model portfolio consisting of the Russell 3000® Index (80%) and the Morgan Stanley Capital International Europe, Australasia, and Far East Index (MSCI EAFE ND Index) (20%). Each component of the Customized Blend is an unmanaged index generally considered as representing the performance of the Funds asset classes. The Customized Blend is intended to provide a theoretical comparison to the Funds performance, based on the amounts allocated to each asset class rather than on amounts allocated to various Fund segments. The Customized Blend does not reflect deductions for any sales charges or operating expenses of a mutual fund. The Russell 3000 Index is an unmanaged index which measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The MSCI EAFE ND Index is an unmanaged weighted index that reflects stock price movements in Europe, Australasia, and the Far East. It gives a broad look at how foreign stock prices have performed. The Fund utilizes the net dividends (ND) version of the MSCI EAFE Index. The net dividends and gross dividends versions of the MSCI EAFE Index differ in that the net dividends returns reflect the impact of the maximum withholding taxes on reinvested dividends, while the gross dividends version does not reflect the impact of withholding taxes on reinvested dividends. These returns do not include the effect of any investment management expenses. These returns would have been lower if they included the effect of these expenses. Investors cannot invest directly in an index. Customized Blend Closest Month-End to Inception cumulative total return as of 7/31/12 is 47.02% for Class R and Class X. Customized Blend Closest Month-End to Inception average annual total return as of 6/30/12 is 4.96% for Class R and Class X.
S&P 500 Index
The Standard & Poors 500 Composite Stock Price Index (S&P 500 Index) is an unmanaged index of 500 stocks of large U.S. public companies. It gives an indication of how U.S. stock prices have performed. S&P 500 Index Closest Month-End to Inception cumulative total return as of 7/31/12 is 45.45% for Class R and Class X. S&P 500 Index Closest Month-End to Inception average annual total return as of 6/30/12 is 4.77% for Class R and Class X.
Lipper Large-Cap Core Funds Average
The Lipper Large-Cap Core Funds Average (Lipper Average) represents funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) above Lippers US Domestic Equity large-cap floor. Large-cap core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P 500 Index. Lipper Average Closest Month-End to Inception cumulative total return as of 7/31/12 is 39.30% for Class R and Class X. Lipper Average Closest Month-End to Inception average annual total return as of 6/30/12 is 4.11% for Class R and Class X.
Investors cannot invest directly in an index or average. The returns for the Indexes would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses, but not sales charges or taxes. The Since Inception returns for the Indexes are measured from the closest month-end to inception date, and not from the Class actual inception date.
Target Asset Allocation Funds/Target Growth Allocation Fund | 5 |
Your Funds Performance (continued)
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Source: Lipper Inc.
The chart above shows the total returns for 12 months ended July 31, 2012, of various securities indexes that are generally considered representative of broad market sectors. It does not reflect a mutual funds expenses. The performance cited does not represent the performance of the Target Growth Allocation Fund. Past performance is not indicative of future results. Investors cannot invest directly in an index or average.
The Russell 3000 Index is an unmanaged index which measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market.
The Morgan Stanley Capital International Europe, Australasia, and Far East Index (MSCI EAFE ND Index) is an unmanaged weighted index that reflects stock price movements in Europe, Australasia, and the Far East. It gives a broad look at how foreign stock prices have performed. The Fund utilizes the net dividends (ND) version of the MSCI EAFE Index. The net dividends and gross dividends versions of the MSCI EAFE Index differ in that net dividends returns reflect the impact of the maximum withholding taxes on reinvested dividends, while the gross dividends version does not reflect the impact of withholding taxes on reinvested dividends. These returns do not include the effect of any investment management expenses. These returns would have been lower if they included the effect of these expenses.
Target Asset Allocation Funds/Target Growth Allocation Fund | 7 |
Strategy and Performance Overview
How did the Fund perform?
The Target Growth Allocation Funds Class A shares declined by 0.14% for the year ended July 31, 2012, underperforming the 3.36% gain of the Customized Blend Index, a model portfolio described on page 5 that includes the Russell 3000 Index (80%) and the MSCI EAFE ND Index (20%). The Fund underperformed the Lipper Large-Cap Core Funds Average, which gained 5.43% for the reporting period.
How did the U.S. stock market perform?
The U.S. equity market experienced widespread volatility during the reporting period, which began on August 1, 2011. The Russell 3000 Index returned 7.33% for the year that ended July 31, 2012.
| Challenging market conditions were mostly caused by European sovereign debt issues and uncertainty over global growth. Investor sentiment swung between optimism and pessimism on macro-themes related to the euro zone. |
| U.S. economic growth proceeded at a tepid pace, as global uncertainty loomed. Unemployment remained elevated. |
How did international equity markets perform?
International equities markets faltered during the reporting period. The Morgan Stanley Capital International Europe, Australasia and Far East Index (MSCI EAFE Index), which measures the performance of developed markets excluding the United States and Canada, declined by 11.45%, net of dividends.
| Stocks continued their wild ride, as policy makers in Europe struggled to resolve the widening debt crisis. The focus shifted from Greece to the larger economies of Italy and Spain, raising the prospect of another round of heated bailout discussions. |
| In late Junes European Summit, policymakers made only incremental progress towards ensuring the euro zones survival. With the implementation of austerity measures, many European economies contracted. Elsewhere, stocks struggled in Asia over concerns about slower growth in the region. Growth in China, a key engine of global economic expansion, slowed. |
How did asset allocation affect the Funds performance?
During the reporting period that began on August 1, 2011, the Fund had an underweight to international equities versus domestic equities. This strategy modestly helped results, since international stocks sharply underperformed their U.S. counterparts.
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What contributed the most to the Funds relative performance?
There were no segments of the Fund that had a significant positive contribution to performance during this period.
What detracted the most from the Funds relative performance?
The Funds large cap growth managers, Massachusetts Financial Services Company (MFS) and Marsico, were the largest detractors from the Funds relative performance.
In the MFS segment of the Fund, stock selection had a negligible, marginally positive effect on performance.
| Holdings in Apple, Visa, Mastercard, American Tower, and in the biotechnology industry helped performance. However, positions in Oracle, Checkpoint, and healthcare providers and services detracted. An underweight in consumer staples and information technology, both of which had strong returns in the Russell 3000 Index, hindered performance. An overweight in energy, the worst performing sector, also detracted. |
| An underweight to the materials and healthcare sectors slightly benefitted the Fund, since these sectors underperformed relative to the Index. However, risk positioning and significant underexposure to dividend-yielding stocks dragged on results. |
The Marsico-managed segment of the Fund significantly underperformed due to sector allocations and risk exposures through poor stock selection. However, Marsicos optimism regarding long-term growth trends, pricing dislocations, and misunderstood growth stocks hasnt diminished despite the prevalent concerns of many investors during the period.
| Marsico continued to maintain an intermediate-to-long-term investment focus, an aggressive risk posture, and a selective bias toward cyclical stocks (companies that are more sensitive to changes in the economy). Stock selection produced mixed results during the period. Positions in TJX, Visa, and Biogen helped performance. |
| The Marsico segment of the Fund was underweight in the strong information technology and consumer staples sectors. It also had an exposure to foreign stocks, which sharply underperformed. It was overexposed to riskier stocks, in addition to stocks with high price volatility. An underweight to dividend-paying stocks also detracted, as these stocks were heavily favored by investors. For example, during the reporting period, telecommunications led all sectors because these companies were paying highly attractive dividends. |
Target Asset Allocation Funds/Target Growth Allocation Fund | 9 |
Fees and Expenses (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on February 1, 2012, at the beginning of the period, and held through the six-month period ended July 31, 2012. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
The Funds transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of Prudential Investments Funds, including the Target Asset Allocation Funds, 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.
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 Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return. The hypothetical account values and
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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.
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.
Target
Growth Allocation Fund |
Beginning Account Value February 1, 2012 |
Ending Account July 31, 2012 |
Annualized Expense Ratio Based on the Six-Month Period |
Expenses Paid During the Six-Month Period* |
||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,024.20 | 1.52 | % | $ | 7.65 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,017.30 | 1.52 | % | $ | 7.62 | ||||||||||
Class B | Actual | $ | 1,000.00 | $ | 1,019.50 | 2.27 | % | $ | 11.40 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,013.58 | 2.27 | % | $ | 11.36 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,019.50 | 2.27 | % | $ | 11.40 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,013.58 | 2.27 | % | $ | 11.36 | ||||||||||
Class R | Actual | $ | 1,000.00 | $ | 1,023.40 | 1.84 | % | $ | 9.26 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.71 | 1.84 | % | $ | 9.22 | ||||||||||
Class X | Actual | $ | 1,000.00 | $ | 1,023.00 | 1.52 | % | $ | 7.65 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,017.30 | 1.52 | % | $ | 7.62 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,024.40 | 1.27 | % | $ | 6.39 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,018.55 | 1.27 | % | $ | 6.37 |
* 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 182 days in the six-month period ended July 31, 2012, and divided by the 366 days in the Funds fiscal year ended July 31, 2012 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
Target Asset Allocation Funds/Target Growth Allocation Fund | 11 |
Portfolio of Investments
as of July 31, 2012
Shares | Description | Value (Note 1) | ||||
LONG-TERM INVESTMENTS 96.0% |
| |||||
COMMON STOCKS 95.6% |
| |||||
Aerospace & Defense 2.6% |
| |||||
1,188 | AAR Corp. |
$ | 16,882 | |||
37,600 | BAE Systems PLC (United Kingdom) |
181,467 | ||||
13,100 | Boeing Co. (The) |
968,221 | ||||
2,000 | Elbit Systems Ltd. (Israel) |
64,669 | ||||
7,395 | Embraer SA, ADR (Brazil) |
187,685 | ||||
7,800 | Finmeccanica SpA (Italy)* |
28,500 | ||||
5,022 | Hexcel Corp.* |
116,962 | ||||
3,550 | Honeywell International, Inc. |
206,078 | ||||
4,600 | Lockheed Martin Corp. |
410,642 | ||||
992 | Moog, Inc. (Class A Stock)* |
36,099 | ||||
15,700 | Northrop Grumman Corp. |
1,039,340 | ||||
10,700 | Rockwell Collins, Inc. |
541,099 | ||||
10,810 | Rolls-Royce Holdings PLC (United Kingdom)* |
143,693 | ||||
631 | Teledyne Technologies, Inc.* |
39,311 | ||||
2,800 | Thales SA (France) |
87,557 | ||||
1,112 | Triumph Group, Inc. |
69,533 | ||||
|
|
|||||
4,137,738 | ||||||
Air Freight & Logistics 0.2% |
| |||||
1,592 | Atlas Air Worldwide Holdings, Inc.* |
72,213 | ||||
2,800 | FedEx Corp. |
252,840 | ||||
|
|
|||||
325,053 | ||||||
Airlines 0.1% |
| |||||
100,100 | Air New Zealand Ltd. (New Zealand) |
72,869 | ||||
9,825 | JetBlue Airways Corp.* |
54,136 | ||||
33,900 | Qantas Airways Ltd. (Australia)* |
40,375 | ||||
|
|
|||||
167,380 | ||||||
Apparel & Textile 0.1% |
| |||||
1,000 | Wolverine World Wide, Inc. |
44,430 | ||||
27,000 | Yue Yuen Industrial Holdings Ltd. (Bermuda) |
81,517 | ||||
|
|
|||||
125,947 | ||||||
Auto Components 0.5% |
| |||||
19,280 | Johnson Controls, Inc. |
475,252 | ||||
2,500 | Lear Corp. |
88,875 | ||||
7,400 | Magna International, Inc. (Canada) |
296,148 | ||||
|
|
|||||
860,275 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 13 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Auto Parts & Equipment 0.4% |
| |||||
3,385 | Cie Generale des Etablissements Michelin (Class B Stock) (France) |
$ | 230,000 | |||
300 | Georg Fischer AG (Switzerland)* |
103,951 | ||||
1,800 | Keihin Corp. (Japan) |
24,077 | ||||
5,234 | Meritor, Inc.* |
24,495 | ||||
2,600 | Valeo SA (France) |
111,390 | ||||
1,054 | WABCO Holdings, Inc.* |
57,885 | ||||
11,000 | Yokohama Rubber Co. Ltd. (The) (Japan) |
76,064 | ||||
|
|
|||||
627,862 | ||||||
Automobile Manufacturers 0.5% |
| |||||
3,200 | Daimler AG (Germany) |
159,442 | ||||
910 | Hyundai Motor Co. (South Korea) |
189,048 | ||||
7,402 | Toyota Motor Corp. (Japan) |
283,029 | ||||
1,300 | Volkswagen AG (Germany) |
206,650 | ||||
|
|
|||||
838,169 | ||||||
Banks 0.8% |
| |||||
7,100 | Banco Espanol de Credito SA (Spain) |
18,615 | ||||
6,500 | Bank of Queensland Ltd. (Australia) |
51,953 | ||||
2,709 | FirstMerit Corp. |
43,886 | ||||
18,000 | Fukuoka Financial Group, Inc. (Japan) |
65,640 | ||||
3,378 | Julius Baer Group Ltd. (Switzerland)* |
120,661 | ||||
2,100 | KBC Groep NV (Belgium) |
43,864 | ||||
87,100 | Mitsubishi UFJ Financial Group, Inc. (Japan) |
422,351 | ||||
29,000 | Nishi-Nippon City Bank Ltd. (The) (Japan) |
63,393 | ||||
13,392 | Standard Chartered PLC (United Kingdom) |
306,570 | ||||
9,900 | UBS AG (Switzerland)* |
104,148 | ||||
740 | UMB Financial Corp. |
35,564 | ||||
1,409 | United Bankshares, Inc. |
32,830 | ||||
|
|
|||||
1,309,475 | ||||||
Beverages 1.2% |
| |||||
5,097 | Anheuser-Busch InBev NV, ADR (Belgium) |
403,785 | ||||
13,331 | Diageo PLC (United Kingdom) |
356,332 | ||||
5,800 | Molson Coors Brewing Co. (Class B Stock) |
245,456 | ||||
10,100 | PepsiCo, Inc. |
734,573 | ||||
3,791 | SABMiller PLC (United Kingdom) |
163,457 | ||||
|
|
|||||
1,903,603 |
See Notes to Financial Statements.
14 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Biotechnology 1.7% |
| |||||
3,070 | Alexion Pharmaceuticals, Inc.* |
$ | 321,889 | |||
3,400 | Amgen, Inc. |
280,840 | ||||
11,066 | Biogen Idec, Inc.* |
1,613,755 | ||||
3,306 | Celgene Corp.* |
226,329 | ||||
4,290 | Gilead Sciences, Inc.* |
233,076 | ||||
3,789 | Halozyme Therapeutics, Inc.* |
34,177 | ||||
720 | Seattle Genetics, Inc.* |
18,835 | ||||
1,335 | United Therapeutics Corp.* |
73,131 | ||||
|
|
|||||
2,802,032 | ||||||
Building Materials & Construction |
| |||||
1,475 | Lennox International, Inc. |
64,413 | ||||
Building Products |
| |||||
975 | A.O. Smith Corp. |
48,185 | ||||
Business Services 0.3% |
| |||||
1,040 | MasterCard, Inc. (Class A Stock) |
454,033 | ||||
899 | URS Corp. |
31,528 | ||||
|
|
|||||
485,561 | ||||||
Capital Markets 0.3% |
| |||||
1,800 | Goldman Sachs Group, Inc. (The) |
181,620 | ||||
5,500 | State Street Corp. |
222,090 | ||||
|
|
|||||
403,710 | ||||||
Chemicals 3.2% |
| |||||
2,830 | Airgas, Inc. |
224,476 | ||||
1,100 | Arkema SA (France) |
80,969 | ||||
17,000 | Asahi Kasei Corp. (Japan) |
90,102 | ||||
1,600 | BASF SE (Germany) |
116,808 | ||||
1,700 | Bayer AG (Germany) |
129,120 | ||||
1,400 | CF Industries Holdings, Inc. |
274,064 | ||||
1,045 | Georgia Gulf Corp. |
34,255 | ||||
4,253 | Huntsman Corp. |
53,801 | ||||
1,465 | Intrepid Potash, Inc.* |
34,193 | ||||
20,500 | Kingboard Chemical Holdings Ltd. (Cayman Islands) |
42,156 | ||||
2,600 | Koninklijke DSM NV (Netherlands) |
127,979 | ||||
850 | Kraton Performance Polymers, Inc.* |
19,907 | ||||
1,300 | Lanxess AG (Germany) |
90,130 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 15 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Chemicals (contd.) |
| |||||
12,492 | Monsanto Co. |
$ | 1,069,565 | |||
7,000 | Nippon Shokubai Co. Ltd. (Japan) |
85,160 | ||||
5,090 | Potash Corp. of Saskatchewan, Inc. (Canada) |
224,774 | ||||
2,100 | PPG Industries, Inc. |
229,866 | ||||
15,954 | Praxair, Inc. |
1,655,387 | ||||
1,258 | Quaker Chemical Corp. |
55,692 | ||||
861 | Scotts Miracle-Gro Co. (The) (Class A Stock) |
34,354 | ||||
370 | Syngenta AG (Switzerland) |
126,163 | ||||
24,000 | Toagosei Co. Ltd. (Japan) |
90,149 | ||||
500 | TPC Group, Inc.* |
19,250 | ||||
1,312 | Valspar Corp. (The) |
65,862 | ||||
2,200 | Yara International ASA (Norway) |
103,885 | ||||
|
|
|||||
5,078,067 | ||||||
Clothing & Apparel 1.0% |
| |||||
4,267 | Adidas AG (Germany) |
320,036 | ||||
11,865 | NIKE, Inc. (Class B Stock) |
1,107,598 | ||||
1,168 | VF Corp. |
174,382 | ||||
|
|
|||||
1,602,016 | ||||||
Commercial Banks 3.6% |
| |||||
35,000 | Aozora Bank Ltd. (Japan) |
80,191 | ||||
3,325 | Associated Banc-Corp. |
41,529 | ||||
12,700 | Bank Hapoalim BM (Israel) |
36,801 | ||||
650 | Bank of Hawaii Corp. |
30,361 | ||||
13,400 | CIT Group, Inc.* |
489,368 | ||||
2,664 | Citizens Republic Bancorp, Inc.* |
47,952 | ||||
18,000 | Fifth Third Bancorp |
248,760 | ||||
1,025 | Hancock Holding Co. |
31,242 | ||||
11,600 | PNC Financial Services Group, Inc. |
685,560 | ||||
925 | Prosperity Bancshares, Inc. |
37,527 | ||||
24,800 | Regions Financial Corp. |
172,608 | ||||
2,408 | Societe Generale (France)* |
53,003 | ||||
23,920 | Sumitomo Mitsui Trust Holdings, Inc. (Japan) |
68,321 | ||||
8,100 | Swedbank AB (Class A Stock) (Sweden) |
140,787 | ||||
1,926 | Trustmark Corp. |
46,571 | ||||
40,471 | U.S. Bancorp |
1,355,778 | ||||
1,850 | Webster Financial Corp. |
37,962 | ||||
66,733 | Wells Fargo & Co. |
2,256,243 | ||||
|
|
|||||
5,860,564 |
See Notes to Financial Statements.
16 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Commercial Services 0.5% |
| |||||
2,225 | Corrections Corp. of America |
$ | 69,153 | |||
2,750 | FleetCor Technologies, Inc.* |
101,530 | ||||
3,195 | GEO Group, Inc. (The)* |
73,868 | ||||
2,550 | KAR Auction Services, Inc.* |
40,826 | ||||
1,075 | McGrath RentCorp. |
28,606 | ||||
11,173 | Monster Worldwide, Inc.* |
81,004 | ||||
8,200 | Nichii Gakkan Co. (Japan) |
76,512 | ||||
2,048 | PAREXEL International Corp.* |
56,361 | ||||
1,218 | Sothebys |
35,748 | ||||
5,760 | Verisk Analytics, Inc. (Class A Stock)* |
289,440 | ||||
|
|
|||||
853,048 | ||||||
Communications Equipment 0.1% |
| |||||
12,700 | Cisco Systems, Inc. |
202,565 | ||||
Computer Hardware 3.8% |
| |||||
10,042 | Apple, Inc.* |
6,133,252 | ||||
Computer Services & Software 1.9% |
| |||||
14,727 | Accenture PLC (Class A Stock) (Ireland) |
888,038 | ||||
1,890 | Autodesk, Inc.* |
64,109 | ||||
5,289 | Cognizant Technology Solutions Corp. (Class A Stock)* |
300,257 | ||||
39,003 | EMC Corp.* |
1,022,269 | ||||
3,001 | Fortinet, Inc.* |
72,054 | ||||
1,140 | Global Payments, Inc. |
48,815 | ||||
650 | Manhattan Associates, Inc.* |
30,348 | ||||
1,340 | Red Hat, Inc.* |
71,904 | ||||
2,808 | Riverbed Technology, Inc.* |
49,533 | ||||
943 | salesforce.com, Inc.* |
117,271 | ||||
3,897 | SAP AG (Germany) |
247,316 | ||||
4,400 | Tieto Oyj (Finland) |
73,233 | ||||
1,850 | VeriFone Systems, Inc.* |
67,136 | ||||
|
|
|||||
3,052,283 | ||||||
Computers & Peripherals 0.5% |
| |||||
41,600 | Hewlett-Packard Co. |
758,784 | ||||
3,430 | NetApp, Inc.* |
112,058 | ||||
725 | Super Micro Computer, Inc.* |
8,997 | ||||
|
|
|||||
879,839 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 17 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Construction 0.1% |
| |||||
2,500 | COMSYS Holdings Corp. (Japan) |
$ | 31,160 | |||
26,625 | Downer EDI Ltd. (Australia)* |
84,316 | ||||
1,289 | Meritage Homes Corp.* |
45,244 | ||||
1,250 | Texas Industries, Inc. |
52,212 | ||||
|
|
|||||
212,932 | ||||||
Consumer Finance 0.7% |
| |||||
13,100 | American Express Co. |
756,001 | ||||
5,500 | Capital One Financial Corp. |
310,695 | ||||
1,100 | First Cash Financial Services, Inc.* |
44,110 | ||||
|
|
|||||
1,110,806 | ||||||
Consumer Products & Services 0.7% |
| |||||
12,141 | Estee Lauder Cos., Inc. (The) (Class A Stock) |
635,945 | ||||
59,700 | Pacific Brands Ltd. (Australia) |
32,486 | ||||
5,863 | Reckitt Benckiser Group PLC (United Kingdom) |
321,746 | ||||
900 | Snap-on, Inc. |
61,002 | ||||
2,253 | Vitamin Shoppe, Inc.* |
123,735 | ||||
|
|
|||||
1,174,914 | ||||||
Containers & Packaging 0.1% |
| |||||
1,300 | Packaging Corp. of America |
40,027 | ||||
12,100 | Rexam PLC (United Kingdom) |
82,239 | ||||
1,275 | Silgan Holdings, Inc. |
52,543 | ||||
|
|
|||||
174,809 | ||||||
Cosmetics & Toiletries 0.1% |
| |||||
6,560 | Natura Cosmeticos SA (Brazil) |
171,363 | ||||
Distribution/Wholesale 0.8% |
| |||||
1,730 | LKQ Corp.* |
61,121 | ||||
21,000 | Marubeni Corp. (Japan) |
140,080 | ||||
5,000 | Mitsui & Co. Ltd. (Japan) |
73,833 | ||||
7,600 | Sumitomo Corp. (Japan) |
106,469 | ||||
4,800 | Toyota Tsusho Corp. (Japan) |
88,752 | ||||
3,643 | W.W. Grainger, Inc. |
746,196 | ||||
|
|
|||||
1,216,451 | ||||||
Diversified Consumer Services 0.2% |
| |||||
18,100 | H&R Block, Inc. |
291,953 |
See Notes to Financial Statements.
18 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Diversified Financial Services 2.4% |
| |||||
1,290 | Affiliated Managers Group, Inc.* |
$ | 143,951 | |||
61,307 | Bank of America Corp. |
449,993 | ||||
4,209 | BlackRock, Inc. |
716,624 | ||||
18,120 | BM&FBOVESPA SA (Brazil) |
101,954 | ||||
22,900 | Challenger Ltd. (Australia) |
80,221 | ||||
26,740 | Citigroup, Inc. |
725,456 | ||||
2,226 | Duff & Phelps Corp. (Class A Stock) |
32,811 | ||||
2,100 | Fuyo General Lease Co. Ltd. (Japan) |
68,089 | ||||
23,900 | Intermediate Capital Group PLC (United Kingdom) |
97,070 | ||||
38,400 | JPMorgan Chase & Co. |
1,382,400 | ||||
1,225 | LPL Financial Holdings, Inc. |
34,325 | ||||
9,800 | Tullett Prebon PLC (United Kingdom) |
41,821 | ||||
|
|
|||||
3,874,715 | ||||||
Diversified Manufacturing 0.5% |
| |||||
17,900 | Ingersoll-Rand PLC (Ireland) |
759,139 | ||||
Diversified Operations 0.3% |
| |||||
2,892 | LVMH Moet Hennessy Louis Vuitton SA (France) |
435,047 | ||||
Diversified Telecommunication Services 0.4% |
| |||||
18,000 | AT&T, Inc. |
682,560 | ||||
Electric 0.1% |
| |||||
2,100 | E.ON AG (Germany) |
44,692 | ||||
2,100 | RWE AG (Germany) |
82,447 | ||||
|
|
|||||
127,139 | ||||||
Electric Utilities 1.1% |
| |||||
11,400 | American Electric Power Co., Inc. |
481,536 | ||||
10,500 | Edison International |
484,890 | ||||
32,300 | Enel SpA (Italy) |
92,242 | ||||
16,000 | Exelon Corp. |
625,920 | ||||
4,500 | PPL Corp. |
130,050 | ||||
|
|
|||||
1,814,638 | ||||||
Electronic Components & Equipment 0.5% |
| |||||
4,480 | Broadcom Corp. (Class A Stock)* |
151,782 | ||||
1,619 | Checkpoint Systems, Inc.* |
12,450 | ||||
1,555 | Coherent, Inc.* |
75,931 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 19 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Electronic Components & Equipment (contd.) |
| |||||
1,781 | DTS, Inc.* |
$ | 33,180 | |||
1,608 | EnerSys* |
54,913 | ||||
955 | Fanuc Corp. (Japan) |
147,441 | ||||
2,197 | FLIR Systems, Inc. |
44,929 | ||||
1,960 | InvenSense, Inc.* |
25,284 | ||||
1,000 | Littelfuse, Inc. |
53,640 | ||||
105 | Samsung Electronics Co. Ltd. (South Korea) |
120,700 | ||||
1,346 | Universal Display Corp.* |
42,749 | ||||
2,478 | Universal Electronics, Inc.* |
31,198 | ||||
|
|
|||||
794,197 | ||||||
Electronic Equipment & Instruments 0.4% |
| |||||
27,300 | Corning, Inc. |
311,493 | ||||
1,062 | Itron, Inc.* |
41,386 | ||||
775 | ScanSource, Inc.* |
22,374 | ||||
7,075 | TE Connectivity Ltd. (Switzerland) |
233,546 | ||||
|
|
|||||
608,799 | ||||||
Energy Equipment & Services 0.8% |
| |||||
3,600 | Diamond Offshore Drilling, Inc. |
235,512 | ||||
659 | Dril-Quip, Inc.* |
48,311 | ||||
5,300 | Ensco PLC (Class A Stock) (United Kingdom) |
287,949 | ||||
19,912 | Halliburton Co. |
659,685 | ||||
625 | Oil States International, Inc.* |
45,437 | ||||
|
|
|||||
1,276,894 | ||||||
Engineering & Construction 0.1% |
| |||||
1,320 | Fluor Corp. |
65,445 | ||||
1,525 | MasTec, Inc.* |
24,339 | ||||
2,351 | McDermott International, Inc. (Panama)* |
27,507 | ||||
3,800 | NCC AB (Class B Stock) (Sweden) |
71,152 | ||||
|
|
|||||
188,443 | ||||||
Entertainment & Leisure 0.5% |
| |||||
1,951 | Bally Technologies, Inc.* |
85,278 | ||||
5,565 | Carnival PLC (United Kingdom) |
186,662 | ||||
4,600 | Heiwa Corp. (Japan) |
83,112 | ||||
6,060 | Las Vegas Sands Corp. |
220,705 | ||||
1,331 | Life Time Fitness, Inc.* |
60,441 | ||||
2,567 | Pinnacle Entertainment, Inc.* |
27,852 |
See Notes to Financial Statements.
20 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Entertainment & Leisure (contd.) |
| |||||
7,112 | Shuffle Master, Inc.* |
$ | 103,906 | |||
24,000 | Thomas Cook Group PLC (United Kingdom) |
6,284 | ||||
|
|
|||||
774,240 | ||||||
Environmental Control 0.1% |
| |||||
1,070 | Stericycle, Inc.* |
99,349 | ||||
2,097 | Waste Connections, Inc. |
64,525 | ||||
|
|
|||||
163,874 | ||||||
Financial - Bank & Trust 1.0% |
| |||||
2,466 | Astoria Financial Corp. |
23,230 | ||||
7,500 | Banco Bilbao Vizcaya Argentaria SA (Spain) |
48,894 | ||||
13,300 | Banco Santander SA (Spain) |
80,530 | ||||
43,500 | Barclays PLC (United Kingdom) |
113,291 | ||||
2,600 | BNP Paribas (France) |
96,044 | ||||
82,310 | China Merchants Bank Co. Ltd. (Class H Stock) (China) |
150,777 | ||||
7,300 | Credit Agricole SA (France)* |
31,201 | ||||
2,200 | Credit Suisse Group AG (Switzerland)* |
37,455 | ||||
2,200 | Danske Bank A/S (Denmark)* |
32,613 | ||||
8,000 | DBS Group Holdings Ltd. (Singapore) |
94,379 | ||||
2,300 | Deutsche Bank AG (Germany) |
69,830 | ||||
3,758 | Dexia SA (Belgium)* |
1,015 | ||||
30,897 | HSBC Holdings PLC (United Kingdom) |
258,451 | ||||
96,100 | Mizuho Financial Group, Inc. (Japan) |
158,272 | ||||
5,700 | National Australia Bank Ltd. (Australia) |
148,724 | ||||
4,200 | Sumitomo Mitsui Financial Group, Inc. (Japan) |
132,264 | ||||
2,600 | Svenska Handelsbanken AB (Class A Stock) (Sweden) |
90,153 | ||||
|
|
|||||
1,567,123 | ||||||
Financial Services 1.4% |
| |||||
6,000 | DnB ASA (Norway) |
62,993 | ||||
1,365 | Eaton Vance Corp. |
36,213 | ||||
4,000 | Hitachi Capital Corp. (Japan) |
72,574 | ||||
12,610 | Hong Kong Exchanges and Clearing Ltd. (Hong Kong) |
168,246 | ||||
249,900 | Industrial & Commercial Bank of China Ltd. (Class H Stock) (China) |
142,491 | ||||
10,900 | Irish Life & Permanent Group Holdings PLC (Ireland)* |
309 | ||||
2,591 | Jefferies Group, Inc. |
32,491 | ||||
700 | Muenchener Rueckversicherungs-Gesellschaft AG (Germany) |
99,185 | ||||
1,747 | Raymond James Financial, Inc. |
58,734 | ||||
11,796 | Visa, Inc. (Class A Stock) |
1,522,510 | ||||
|
|
|||||
2,195,746 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 21 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Food 1.4% |
| |||||
5,600 | Cermaq ASA (Norway)* |
$ | 66,309 | |||
11,800 | Dairy Crest Group PLC (United Kingdom) |
62,331 | ||||
3,025 | Danone (France) |
183,871 | ||||
2,500 | Delhaize Group (Belgium) |
89,391 | ||||
1,461 | Fresh Market, Inc. (The)* |
86,038 | ||||
156,000 | Golden Agri-Resources Ltd. (Mauritius) |
92,383 | ||||
39,200 | J. Sainsbury PLC (United Kingdom) |
198,251 | ||||
14,700 | Koninklijke Ahold NV (Netherlands) |
178,933 | ||||
34,870 | Marstons PLC (United Kingdom) |
60,745 | ||||
28,600 | Metcash Ltd. (Australia) |
102,306 | ||||
29,000 | Morinaga Milk Industry Co. Ltd. (Japan) |
105,277 | ||||
5,447 | Nestle SA (Switzerland) |
334,643 | ||||
23,400 | Parmalat SpA (Italy) |
44,123 | ||||
1,175 | Post Holdings, Inc.* |
34,780 | ||||
77,195 | Tesco PLC (United Kingdom) |
384,352 | ||||
35,900 | WM Morrison Supermarkets PLC (United Kingdom) |
155,867 | ||||
|
|
|||||
2,179,600 | ||||||
Food & Staples Retailing 1.0% |
| |||||
1,280 | BJs Restaurants, Inc.* |
50,662 | ||||
14,900 | CVS Caremark Corp. |
674,225 | ||||
20,900 | Kroger Co. (The) |
463,353 | ||||
6,522 | Wal-Mart Stores, Inc. |
485,433 | ||||
|
|
|||||
1,673,673 | ||||||
Food Products 0.6% |
||||||
19,200 | ConAgra Foods, Inc. |
474,048 | ||||
4,310 | General Mills, Inc. |
166,797 | ||||
6,620 | Kraft Foods, Inc. (Class A Stock) |
262,880 | ||||
5,000 | Megmilk Snow Brand Co. Ltd. (Japan) |
84,609 | ||||
|
|
|||||
988,334 | ||||||
Gas Utilities 0.1% |
||||||
1,650 | Atmos Energy Corp. |
59,152 | ||||
1,060 | South Jersey Industries, Inc. |
56,032 | ||||
|
|
|||||
115,184 | ||||||
Hand/Machine Tools 0.2% |
||||||
1,021 | Franklin Electric Co., Inc. |
57,595 |
See Notes to Financial Statements.
22 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Hand/Machine Tools (contd.) |
||||||
1,089 | Regal-Beloit Corp. |
$ | 70,099 | |||
2,960 | Stanley Black & Decker, Inc. |
197,994 | ||||
|
|
|||||
325,688 | ||||||
Healthcare Equipment & Supplies 0.4% |
||||||
2,268 | Arthrocare Corp.* |
67,087 | ||||
6,700 | Medtronic, Inc. |
264,114 | ||||
825 | Teleflex, Inc. |
52,586 | ||||
1,441 | Thoratec Corp.* |
49,441 | ||||
750 | West Pharmaceutical Services, Inc. |
37,335 | ||||
2,800 | Zimmer Holdings, Inc. |
165,004 | ||||
|
|
|||||
635,567 | ||||||
Healthcare Products 0.5% |
||||||
2,385 | Bruker Corp.* |
28,191 | ||||
1,106 | Cantel Medical Corp. |
28,889 | ||||
1,657 | Cepheid, Inc.* |
53,090 | ||||
1,525 | Cooper Cos., Inc. (The) |
114,772 | ||||
10,041 | Covidien PLC (Ireland) |
561,091 | ||||
820 | IDEXX Laboratories, Inc.* |
72,299 | ||||
|
|
|||||
858,332 | ||||||
Healthcare Providers & Services 0.3% |
||||||
1,442 | Amedisys, Inc.* |
17,578 | ||||
10,700 | CIGNA Corp. |
430,996 | ||||
1,150 | LifePoint Hospitals, Inc.* |
43,838 | ||||
742 | MEDNAX, Inc.* |
49,068 | ||||
|
|
|||||
541,480 | ||||||
Healthcare Services 0.7% |
||||||
22,800 | Aetna, Inc. |
822,168 | ||||
641 | Air Methods Corp.* |
69,888 | ||||
1,152 | AMERIGROUP Corp.* |
103,542 | ||||
1,919 | Centene Corp.* |
72,999 | ||||
746 | Covance, Inc.* |
35,017 | ||||
1,353 | Healthways, Inc.* |
15,167 | ||||
|
|
|||||
1,118,781 | ||||||
Healthcare Technology |
||||||
14,700 | AGFA-Gevaert NV (Belgium)* |
22,557 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 23 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Holding Companies 0.1% |
||||||
35,000 | Dah Chong Hong Holdings Ltd. (Hong Kong) |
$ | 29,942 | |||
72,000 | First Pacific Co. Ltd. (Bermuda) |
80,498 | ||||
|
|
|||||
110,440 | ||||||
Hotels, Restaurants & Leisure 2.0% |
||||||
2,500 | Carnival Corp. (Panama) |
83,200 | ||||
359 | Chipotle Mexican Grill, Inc.* |
104,946 | ||||
850 | Choice Hotels International, Inc. |
34,068 | ||||
10,971 | McDonalds Corp. |
980,369 | ||||
3,821 | Orient-Express Hotels Ltd. (Class A Stock) (Bermuda)* |
34,847 | ||||
7,861 | Wynn Resorts Ltd. |
736,969 | ||||
19,334 | Yum! Brands, Inc. |
1,253,617 | ||||
|
|
|||||
3,228,016 | ||||||
Household Products 0.3% |
||||||
1,300 | Helen of Troy Ltd. (Bermuda)* |
39,598 | ||||
5,300 | Kimberly-Clark Corp. |
460,623 | ||||
600 | WD-40 Co. |
28,830 | ||||
|
|
|||||
529,051 | ||||||
Independent Power Producers & Energy Traders 0.2% |
||||||
14,000 | NRG Energy, Inc. |
277,480 | ||||
Industrial Conglomerates 0.4% |
||||||
33,700 | General Electric Co. |
699,275 | ||||
Industrial Products 0.7% |
||||||
1,578 | Harsco Corp. |
33,533 | ||||
21,200 | Kurabo Industries Ltd. (Japan) |
36,142 | ||||
6,994 | Precision Castparts Corp. |
1,087,987 | ||||
|
|
|||||
1,157,662 | ||||||
Insurance 4.3% |
||||||
3,085 | Allianz SE (Germany) |
306,059 | ||||
31,900 | Allstate Corp. (The) |
1,094,170 | ||||
2,250 | American Equity Investment Life Holding Co. |
26,257 | ||||
21,500 | American International Group, Inc.* |
672,305 | ||||
20,700 | Aviva PLC (United Kingdom) |
94,789 | ||||
1,400 | Baloise Holding AG (Switzerland) |
92,378 | ||||
31,500 | Beazley PLC (United Kingdom) |
78,120 |
See Notes to Financial Statements.
24 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Insurance (contd.) |
||||||
22,581 | China Life Insurance Co. Ltd. (Class H Stock) (China) |
$ | 61,987 | |||
4,800 | CNO Financial Group, Inc. |
39,792 | ||||
74 | Dai-ichi Life Insurance Co. Ltd. (The) (Japan) |
77,570 | ||||
1,362 | HCC Insurance Holdings, Inc. |
41,732 | ||||
300 | Helvetia Holding AG (Switzerland) |
92,809 | ||||
11,200 | ING Groep NV, CVA (Netherlands)* |
73,678 | ||||
53,200 | Legal & General Group PLC (United Kingdom) |
105,896 | ||||
25,500 | Marsh & McLennan Cos., Inc. |
846,855 | ||||
43,321 | MetLife, Inc. |
1,332,987 | ||||
42,001 | Old Mutual PLC (United Kingdom) |
103,388 | ||||
1,729 | Protective Life Corp. |
48,256 | ||||
944 | Reinsurance Group of America, Inc. |
52,552 | ||||
2,500 | SCOR SE (France) |
59,242 | ||||
947 | State Auto Financial Corp. |
12,283 | ||||
1,000 | Swiss Life Holding AG (Switzerland)* |
95,400 | ||||
2,400 | Swiss Re AG (Switzerland)* |
150,237 | ||||
1,675 | Tower Group, Inc. |
31,222 | ||||
7,800 | Travelers Cos., Inc. (The) |
488,670 | ||||
1,027 | United Fire Group, Inc. |
20,129 | ||||
18,600 | Unum Group |
351,354 | ||||
1,858 | Validus Holdings Ltd. (Bermuda) |
60,441 | ||||
11,400 | XL Group PLC (Ireland) |
235,410 | ||||
700 | Zurich Financial Services AG (Switzerland)* |
155,360 | ||||
|
|
|||||
6,901,328 | ||||||
Internet Services 1.7% |
||||||
2,053 | Amazon.com, Inc.* |
478,965 | ||||
1,722 | Digital River, Inc.* |
30,634 | ||||
781 | F5 Networks, Inc.* |
72,930 | ||||
1,488 | Google, Inc. (Class A Stock)* |
941,859 | ||||
1,571 | priceline.com, Inc.* |
1,039,593 | ||||
3,784 | Sapient Corp. |
37,689 | ||||
4,299 | Tencent Holdings Ltd. (Cayman Islands) |
127,635 | ||||
1,843 | TIBCO Software, Inc.* |
51,770 | ||||
|
|
|||||
2,781,075 | ||||||
Internet Software & Services 1.7% |
||||||
7,929 | Baidu, Inc., ADR (Cayman Islands)* |
955,603 | ||||
4,470 | eBay, Inc.* |
198,021 | ||||
3,412 | LinkedIn Corp. (Class A Stock)* |
350,242 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 25 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Internet Software & Services (contd.) |
||||||
6,240 | Oracle Corp. |
$ | 188,448 | |||
2,290 | VeriSign, Inc.* |
101,722 | ||||
50,700 | Yahoo!, Inc.* |
803,088 | ||||
3,500 | Yandex NV (Netherlands)* |
67,305 | ||||
|
|
|||||
2,664,429 | ||||||
Investment Companies 0.3% |
||||||
576,000 | Hutchison Port Holdings Trust (Singapore) |
437,760 | ||||
2,740 | KKR Financial Holdings LLC |
24,989 | ||||
|
|
|||||
462,749 | ||||||
IT Services 0.2% |
||||||
1,850 | Broadridge Financial Solutions, Inc. |
39,164 | ||||
1,300 | International Business Machines Corp. |
254,774 | ||||
7,300 | Logica PLC (United Kingdom) |
11,942 | ||||
|
|
|||||
305,880 | ||||||
Leisure Equipment & Products 0.3% |
||||||
7,600 | Mattel, Inc. |
267,292 | ||||
1,824 | Polaris Industries, Inc. |
137,092 | ||||
|
|
|||||
404,384 | ||||||
Life Sciences Tools & Services 0.7% |
||||||
21,425 | Thermo Fisher Scientific, Inc. |
1,192,730 | ||||
Machinery 0.7% |
||||||
1,450 | Actuant Corp. (Class A Stock) |
41,267 | ||||
4,000 | Cummins, Inc. |
383,600 | ||||
9,000 | PACCAR, Inc. |
360,090 | ||||
3,200 | Parker Hannifin Corp. |
257,024 | ||||
878 | Twin Disc, Inc. |
17,191 | ||||
375 | Valmont Industries, Inc. |
46,455 | ||||
671 | Woodward, Inc. |
22,526 | ||||
|
|
|||||
1,128,153 | ||||||
Machinery & Equipment 0.4% |
||||||
1,189 | Colfax Corp.* |
34,410 | ||||
4,400 | Deere & Co. |
338,008 | ||||
515 | Gardner Denver, Inc. |
29,345 | ||||
3,700 | Kyowa Exeo Corp. (Japan) |
37,971 |
See Notes to Financial Statements.
26 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Machinery & Equipment (contd.) |
||||||
1,900 | Rheinmetall AG (Germany) |
$ | 94,780 | |||
2,590 | Terex Corp.* |
50,505 | ||||
|
|
|||||
585,019 | ||||||
Machinery - Construction & Mining 0.1% |
||||||
8,423 | Komatsu Ltd. (Japan) |
186,858 | ||||
Manufacturing 0.9% |
||||||
7,500 | Cookson Group PLC (United Kingdom) |
64,513 | ||||
22,329 | Danaher Corp. |
1,179,195 | ||||
100 | ESCO Technologies, Inc. |
3,601 | ||||
1,720 | Polypore International, Inc.* |
63,915 | ||||
2,390 | Siemens AG (Germany) |
202,527 | ||||
|
|
|||||
1,513,751 | ||||||
Media 2.6% |
| |||||
7,700 | CBS Corp. (Class B Stock) |
257,642 | ||||
51,612 | Comcast Corp. (Special Class A Stock) |
1,647,971 | ||||
3,410 | Discovery Communications, Inc. (Class A Stock)* |
172,648 | ||||
8,800 | Interpublic Group of Cos., Inc. (The) |
86,856 | ||||
15,950 | News Corp. (Class A Stock) |
367,169 | ||||
8,178 | Pearson PLC (United Kingdom) |
153,105 | ||||
3,513 | Publicis Groupe SA (France) |
172,940 | ||||
720 | Time Warner Cable, Inc. |
61,150 | ||||
12,900 | Time Warner, Inc. |
504,648 | ||||
8,340 | Viacom, Inc. (Class B Stock) |
389,562 | ||||
5,160 | Walt Disney Co. (The) |
253,562 | ||||
900 | Wiley, (John) & Sons, Inc. (Class A Stock) |
42,885 | ||||
|
|
|||||
4,110,138 | ||||||
Medical Supplies & Equipment 0.2% |
| |||||
3,470 | Fresenius Medical Care AG & Co. KGaA (Germany) |
250,840 | ||||
2,256 | Sirona Dental Systems, Inc.* |
97,527 | ||||
|
|
|||||
348,367 | ||||||
Metals & Mining 0.8% |
| |||||
1,527 | AMCOL International Corp. |
46,879 | ||||
3,900 | ArcelorMittal (Luxembourg) |
62,088 | ||||
78,500 | Arrium Ltd. (Australia) |
58,665 | ||||
952 | BHP Billiton Ltd. (Australia) |
31,623 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 27 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Metals & Mining (contd.) |
| |||||
5,400 | Boliden AB (Sweden) |
$ | 81,871 | |||
16,600 | Freeport-McMoRan Copper & Gold, Inc. |
558,922 | ||||
1,225 | Globe Specialty Metals, Inc. |
15,349 | ||||
2,430 | Joy Global, Inc. |
126,214 | ||||
1,611 | Northwest Pipe Co.* |
39,228 | ||||
2,000 | Rio Tinto Ltd. (Australia) |
110,754 | ||||
2,568 | RTI International Metals, Inc.* |
57,652 | ||||
1,326 | Timken Co. |
48,001 | ||||
3,756 | Titanium Metals Corp. |
43,795 | ||||
|
|
|||||
1,281,041 | ||||||
Miscellaneous Manufacturing 0.1% |
| |||||
318,000 | Singamas Container Holdings Ltd. (Hong Kong) |
65,825 | ||||
8,900 | Trelleborg AB (Sweden) |
91,526 | ||||
|
|
|||||
157,351 | ||||||
Multi-Line Insurance |
| |||||
4,500 | AXA SA (France) |
54,674 | ||||
Multi-Line Retail 0.4% |
| |||||
4,378 | Dollar Tree, Inc.* |
220,389 | ||||
10,000 | J.C. Penney Co., Inc. |
225,100 | ||||
6,400 | Macys, Inc. |
229,376 | ||||
|
|
|||||
674,865 | ||||||
Multi-Utilities 0.3% |
| |||||
14,800 | Public Service Enterprise Group, Inc. |
491,952 | ||||
Office Electronics 0.3% |
| |||||
1,027 | Canon, Inc. (Japan) |
34,295 | ||||
62,000 | Xerox Corp. |
429,660 | ||||
|
|
|||||
463,955 | ||||||
Oil & Gas 1.8% |
| |||||
1,210 | Anadarko Petroleum Corp. |
84,023 | ||||
13,617 | BG Group PLC (United Kingdom) |
268,053 | ||||
3,883 | Cenovus Energy, Inc. (Canada) |
118,676 | ||||
2,170 | EQT Corp. |
122,388 | ||||
1,372 | Gulfport Energy Corp.* |
28,263 | ||||
1,900 | Hess Corp. |
89,604 |
See Notes to Financial Statements.
28 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Oil & Gas (contd.) |
| |||||
26,207 | National Oilwell Varco, Inc. |
$ | 1,894,766 | |||
4,774 | Oasis Petroleum, Inc.* |
124,983 | ||||
4,700 | Statoil ASA (Norway) |
111,703 | ||||
|
|
|||||
2,842,459 | ||||||
Oil, Gas & Consumable Fuels 5.7% |
| |||||
2,331 | Air Liquide SA (France) |
260,691 | ||||
4,800 | Apache Corp. |
413,376 | ||||
46,000 | BP PLC (United Kingdom) |
305,435 | ||||
5,940 | Cabot Oil & Gas Corp. |
250,609 | ||||
4,310 | Cameron International Corp.* |
216,664 | ||||
14,600 | Chesapeake Energy Corp. |
274,772 | ||||
6,900 | Chevron Corp. |
756,102 | ||||
153,505 | CNOOC Ltd. (Hong Kong) |
307,940 | ||||
7,700 | ConocoPhillips |
419,188 | ||||
705 | Core Laboratories NV (Netherlands) |
78,650 | ||||
3,800 | Devon Energy Corp. |
224,656 | ||||
3,750 | Dresser-Rand Group, Inc.* |
174,413 | ||||
10,300 | ENI SpA (Italy) |
212,390 | ||||
1,310 | EOG Resources, Inc. |
128,393 | ||||
2,920 | FMC Technologies, Inc.* |
131,750 | ||||
12,800 | JX Holdings, Inc. (Japan) |
61,527 | ||||
2,439 | Lufkin Industries, Inc. |
112,316 | ||||
15,400 | Marathon Oil Corp. |
407,638 | ||||
4,500 | Murphy Oil Corp. |
241,470 | ||||
2,860 | Noble Energy, Inc. |
250,050 | ||||
6,033 | Occidental Petroleum Corp. |
525,052 | ||||
1,649 | Ocean Rig UDW, Inc. (Marshall Islands)* |
24,719 | ||||
2,700 | Olsen (Fred) Energy ASA (Norway) |
102,048 | ||||
4,100 | OMV AG (Austria) |
128,643 | ||||
1,588 | ONEOK, Inc. |
70,682 | ||||
9,500 | Phillips 66 |
357,200 | ||||
1,500 | Pioneer Natural Resources Co. |
132,945 | ||||
5,300 | Repsol SA (Spain) |
84,467 | ||||
13,500 | Royal Dutch Shell PLC (Class B Stock) (United Kingdom) |
474,897 | ||||
7,700 | Royal Dutch Shell PLC (Class B Stock), ADR (United Kingdom) |
543,312 | ||||
6,347 | Schlumberger Ltd. (Netherlands) |
452,287 | ||||
1,818 | Swift Energy Co.* |
33,978 | ||||
5,700 | Total SA (France) |
262,636 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 29 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Oil, Gas & Consumable Fuels (contd.) |
| |||||
14,500 | Total SA, ADR (France) |
$ | 666,275 | |||
1,152 | WGL Holdings, Inc. |
46,598 | ||||
|
|
|||||
9,133,769 | ||||||
Paper & Forest Products 0.4% |
| |||||
14,300 | International Paper Co. |
469,183 | ||||
15,500 | Mondi PLC (United Kingdom) |
131,867 | ||||
|
|
|||||
601,050 | ||||||
Pharmaceuticals 8.5% |
| |||||
35,818 | Abbott Laboratories |
2,375,092 | ||||
8,347 | Allergan, Inc. |
685,038 | ||||
6,900 | AstraZeneca PLC (United Kingdom) |
322,242 | ||||
3,100 | AstraZeneca PLC, ADR (United Kingdom) |
145,111 | ||||
954 | BioMarin Pharmaceutical, Inc.* |
37,483 | ||||
16,740 | Bristol-Myers Squibb Co. |
595,944 | ||||
2,724 | Catamaran Corp (Canada)* |
230,205 | ||||
7,900 | Eli Lilly & Co. |
347,837 | ||||
23,000 | Endo Health Solutions, Inc.* |
683,790 | ||||
22,879 | Express Scripts Holding Co.* |
1,325,609 | ||||
3,700 | GlaxoSmithKline PLC (United Kingdom) |
85,136 | ||||
3,000 | H. Lundbeck A/S (Denmark) |
59,400 | ||||
15,400 | Johnson & Johnson |
1,065,988 | ||||
4,000 | Kyorin Holdings, Inc. (Japan) |
87,177 | ||||
17,445 | Mead Johnson Nutrition Co. |
1,272,787 | ||||
15,900 | Merck & Co., Inc. |
702,303 | ||||
800 | Merck KGaA (Germany) |
80,459 | ||||
2,040 | Natural Grocers By Vitamin Cottage, Inc.* |
41,371 | ||||
7,722 | Novartis AG (Switzerland) |
453,429 | ||||
3,700 | Novartis AG, ADR (Switzerland) |
216,894 | ||||
2,588 | Novo Nordisk A/S (Class B Stock) (Denmark) |
399,038 | ||||
926 | Onyx Pharmaceuticals, Inc.* |
69,422 | ||||
3,700 | Otsuka Holdings Co. Ltd. (Japan) |
112,667 | ||||
38,500 | Pfizer, Inc. |
925,540 | ||||
900 | Roche Holding AG (Switzerland) |
159,368 | ||||
1,469 | Salix Pharmaceuticals Ltd.* |
65,841 | ||||
3,400 | Sanofi (France) |
277,399 | ||||
6,300 | Sanofi, ADR (France) |
256,032 | ||||
6,600 | Shionogi & Co. Ltd. (Japan) |
94,010 | ||||
42,299 | Sinopharm Group Co. Ltd. (Class H Stock) (China) |
123,788 |
See Notes to Financial Statements.
30 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Pharmaceuticals (contd.) |
| |||||
2,300 | Teva Pharmaceutical Industries Ltd. (Israel) |
$ | 93,807 | |||
6,432 | Teva Pharmaceutical Industries Ltd., ADR (Israel) |
263,005 | ||||
1,983 | Theravance, Inc.* |
57,765 | ||||
|
|
|||||
13,710,977 | ||||||
Pipelines 0.2% |
| |||||
11,088 | Kinder Morgan, Inc. |
397,061 | ||||
Professional Services 0.1% |
| |||||
4,100 | Manpower, Inc. |
145,878 | ||||
875 | Towers Watson & Co. (Class A Stock) |
51,301 | ||||
|
|
|||||
197,179 | ||||||
Real Estate 0.1% |
| |||||
7,000 | Cheung Kong Holdings Ltd. (Hong Kong) |
91,585 | ||||
Real Estate Investment Trusts 1.2% |
| |||||
10,921 | American Tower Corp. |
789,698 | ||||
42,400 | Annaly Capital Management, Inc. |
739,032 | ||||
1,425 | Associated Estates Realty Corp. |
21,275 | ||||
1,993 | First Potomac Realty Trust |
23,099 | ||||
1,225 | Highwoods Properties, Inc. |
41,491 | ||||
12,600 | Kimco Realty Corp. |
245,574 | ||||
825 | LaSalle Hotel Properties |
21,664 | ||||
3,684 | Medical Properties Trust, Inc. |
36,287 | ||||
1,700 | Redwood Trust, Inc. |
21,913 | ||||
3,940 | Two Harbors Investment Corp. |
45,192 | ||||
|
|
|||||
1,985,225 | ||||||
Retail 2.2% |
| |||||
4,400 | Aoyama Trading Co. Ltd. (Japan) |
85,949 | ||||
1,304 | AutoZone, Inc.* |
489,300 | ||||
70,100 | Debenhams PLC (United Kingdom) |
100,841 | ||||
16,317 | Dollar General Corp.* |
832,330 | ||||
900 | EZCORP, Inc. (Class A Stock)* |
20,250 | ||||
2,757 | Genesco, Inc.* |
182,569 | ||||
32,100 | Home Retail Group PLC (United Kingdom) |
38,906 | ||||
2,100 | Ks Holdings Corp. (Japan) |
68,382 | ||||
46,136 | Kingfisher PLC (United Kingdom) |
192,418 | ||||
1,025 | Lithia Motors, Inc. (Class A Stock) |
28,557 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 31 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Retail (contd.) |
| |||||
8,319 | Lululemon Athletica, Inc.* |
$ | 469,857 | |||
29,300 | Marks & Spencer Group PLC (United Kingdom) |
152,872 | ||||
5,631 | OReilly Automotive, Inc.* |
482,802 | ||||
1,707 | Sally Beauty Holdings, Inc.* |
45,099 | ||||
347 | Swatch Group AG (The) (Switzerland) |
137,564 | ||||
1,410 | Tractor Supply Co. |
128,127 | ||||
1,100 | Tsuruha Holdings, Inc. (Japan) |
71,124 | ||||
|
|
|||||
3,526,947 | ||||||
Retail & Merchandising 3.4% |
| |||||
1,125 | Big Lots, Inc.* |
45,574 | ||||
2,391 | Cash America International, Inc. |
91,623 | ||||
2,811 | Chicos FAS, Inc. |
43,064 | ||||
3,610 | Costco Wholesale Corp. |
347,210 | ||||
14,900 | Kohls Corp. |
740,828 | ||||
40,100 | Myer Holdings Ltd. (Australia) |
76,869 | ||||
3,190 | PetSmart, Inc. |
210,891 | ||||
3,600 | Shimachu Co. Ltd. (Japan) |
75,658 | ||||
24,827 | Starbucks Corp. |
1,124,167 | ||||
7,439 | Target Corp. |
451,175 | ||||
48,569 | TJX Cos., Inc. (The) |
2,150,635 | ||||
69,800 | Wal-Mart de Mexico SAB de CV (Class V Stock) (Mexico) |
196,879 | ||||
|
|
|||||
5,554,573 | ||||||
Retail Apparel 0.1% |
| |||||
6,369 | Hennes & Mauritz AB (Class B Stock) (Sweden) |
235,119 | ||||
Road & Rail 0.2% |
| |||||
3,300 | Norfolk Southern Corp. |
244,365 | ||||
1,425 | Werner Enterprises, Inc. |
32,889 | ||||
|
|
|||||
277,254 | ||||||
Savings & Loan |
| |||||
3,475 | Capitol Federal Financial, Inc. |
40,727 | ||||
Semiconductor Components 0.1% |
| |||||
13,776 | ARM Holdings PLC (United Kingdom) |
119,169 | ||||
Semiconductors 0.4% |
| |||||
5,580 | Altera Corp. |
197,811 | ||||
1,729 | ASML Holding NV (Netherlands) |
99,417 |
See Notes to Financial Statements.
32 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Semiconductors (contd.) |
| |||||
759 | Cabot Microelectronics Corp. |
$ | 22,315 | |||
1,910 | Cavium, Inc.* |
51,608 | ||||
2,225 | Microsemi Corp.* |
43,076 | ||||
900 | OYO Geospace Corp.* |
85,302 | ||||
5,128 | Teradyne, Inc.* |
75,433 | ||||
1,929 | Veeco Instruments, Inc.* |
68,885 | ||||
|
|
|||||
643,847 | ||||||
Semiconductors & Semiconductor Equipment 1.2% |
| |||||
906 | Cymer, Inc.* |
51,832 | ||||
3,800 | Entegris, Inc.* |
30,590 | ||||
500 | Hittite Microwave Corp.* |
25,335 | ||||
26,000 | Intel Corp. |
668,200 | ||||
4,900 | KLA-Tencor Corp. |
249,459 | ||||
3,460 | Linear Technology Corp. |
111,585 | ||||
1,175 | MKS Instruments, Inc. |
31,020 | ||||
5,950 | RF Micro Devices, Inc.* |
23,086 | ||||
1,100 | Semtech Corp.* |
26,279 | ||||
25,200 | Texas Instruments, Inc. |
686,448 | ||||
|
|
|||||
1,903,834 | ||||||
Software 2.8% |
| |||||
11,005 | CA, Inc. |
264,890 | ||||
2,688 | Cerner Corp.* |
198,697 | ||||
15,992 | Check Point Software Technologies Ltd. (Israel)* |
776,731 | ||||
2,865 | Citrix Systems, Inc.* |
208,228 | ||||
6,991 | Compuware Corp.* |
64,387 | ||||
27,800 | Electronic Arts, Inc.* |
306,356 | ||||
3,656 | MedAssets, Inc.* |
48,223 | ||||
72,200 | Microsoft Corp. |
2,127,734 | ||||
1,820 | Opnet Technologies, Inc. |
48,121 | ||||
4,120 | Parametric Technology Corp.* |
88,745 | ||||
2,753 | QLIK Technologies, Inc.* |
55,060 | ||||
1,025 | SS&C Technologies Holdings, Inc.* |
24,907 | ||||
1,125 | Verint Systems, Inc.* |
31,399 | ||||
3,076 | VMware, Inc. (Class A Stock)* |
279,178 | ||||
|
|
|||||
4,522,656 | ||||||
Specialty Retail 1.7% |
| |||||
3,219 | Aarons, Inc. |
94,413 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 33 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Specialty Retail (contd.) |
| |||||
675 | DSW, Inc. (Class A Stock) |
$ | 39,906 | |||
1,120 | Francescas Holdings Corp.* |
35,179 | ||||
5,800 | Gap, Inc. (The) |
171,042 | ||||
600 | Group 1 Automotive, Inc. |
32,250 | ||||
16,154 | Home Depot, Inc. (The) |
842,916 | ||||
11,949 | Limited Brands, Inc. |
568,175 | ||||
6,167 | Ross Stores, Inc. |
409,736 | ||||
18,300 | Staples, Inc. |
233,142 | ||||
2,400 | Tiffany & Co. |
131,832 | ||||
6,159 | Urban Outfitters, Inc.* |
188,157 | ||||
|
|
|||||
2,746,748 | ||||||
Steel Producers/Products |
| |||||
2,300 | Voestalpine AG (Austria) |
62,469 | ||||
Telecommunications 2.3% |
| |||||
4,337 | Arris Group, Inc.* |
55,037 | ||||
56,600 | BT Group PLC (United Kingdom) |
192,564 | ||||
152,600 | Cable & Wireless Communications PLC (United Kingdom) |
74,668 | ||||
13,900 | CenturyLink, Inc. |
577,406 | ||||
1,319 | EZchip Semiconductor Ltd. (Israel)* |
48,368 | ||||
3,000 | France Telecom SA (France) |
40,173 | ||||
1,175 | IPG Photonics Corp.* |
60,900 | ||||
55 | KDDI Corp. (Japan) |
378,686 | ||||
6,800 | Koninklijke KPN NV (Netherlands) |
55,815 | ||||
2,491 | NICE Systems Ltd., ADR (Israel)* |
89,676 | ||||
4,300 | Nippon Telegraph & Telephone Corp. (Japan) |
199,604 | ||||
70 | NTT DoCoMo, Inc. (Japan) |
117,010 | ||||
22,317 | QUALCOMM, Inc. |
1,331,879 | ||||
886 | SBA Communications Corp. (Class A Stock)* |
52,327 | ||||
92,200 | Telecom Italia SpA (Italy) |
75,053 | ||||
3,300 | Telefonica SA (Spain) |
37,433 | ||||
18,000 | Telstra Corp. Ltd. (Australia) |
75,595 | ||||
10,126 | Vivendi (France) |
192,047 | ||||
|
|
|||||
3,654,241 | ||||||
Textiles, Apparel & Luxury Goods 0.1% |
| |||||
969 | PVH Corp. |
76,968 | ||||
1,779 | Steven Madden Ltd.* |
71,925 | ||||
|
|
|||||
148,893 |
See Notes to Financial Statements.
34 | Visit our website at www.prudentialfunds.com |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Tobacco 0.7% |
| |||||
7,100 | Altria Group, Inc. |
$ | 255,387 | |||
6,929 | British American Tobacco PLC (United Kingdom) |
368,028 | ||||
1,420 | Lorillard, Inc. |
182,669 | ||||
3,720 | Philip Morris International, Inc. |
340,157 | ||||
|
|
|||||
1,146,241 | ||||||
Trading Companies & Distributors 0.1% |
| |||||
1,765 | United Rentals, Inc.* |
51,026 | ||||
825 | WESCO International, Inc.* |
45,961 | ||||
|
|
|||||
96,987 | ||||||
Transportation 1.1% |
| |||||
1,528 | Bristow Group, Inc. |
69,936 | ||||
3,046 | Canadian National Railway Co. (Canada) |
268,714 | ||||
5,000 | Deutsche Post AG (Germany) |
89,767 | ||||
5,018 | Expeditors International of Washington, Inc. |
178,490 | ||||
1,980 | Kansas City Southern |
144,144 | ||||
929 | Landstar System, Inc. |
45,902 | ||||
2,500 | Quality Distribution, Inc.* |
25,250 | ||||
19,000 | Sankyu, Inc. (Japan) |
71,085 | ||||
10,000 | Seino Holdings Co. Ltd. (Japan) |
67,433 | ||||
6,181 | Union Pacific Corp. |
757,852 | ||||
|
|
|||||
1,718,573 | ||||||
Wireless Telecommunication Services 0.7% |
| |||||
179,870 | Vodafone Group PLC (United Kingdom) |
514,773 | ||||
22,000 | Vodafone Group PLC, ADR (United Kingdom) |
632,500 | ||||
|
|
|||||
1,147,273 | ||||||
|
|
|||||
TOTAL COMMON STOCKS |
154,051,494 | |||||
|
|
|||||
PREFERRED STOCKS 0.4% |
| |||||
Automobile Manufacturers 0.2% |
| |||||
1,251 | Volkswagen AG, 1.81% (Germany) |
212,886 | ||||
Commercial Banks 0.2% |
| |||||
7,800 | Itau Unibanco Holding SA (PRFC), ADR (Brazil) |
123,318 |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 35 |
Portfolio of Investments
as of July 31, 2012 continued
Shares | Description | Value (Note 1) | ||||
PREFERRED STOCKS (Continued) |
| |||||
Commercial Banks (contd.) |
| |||||
7,325 | Wells Fargo & Co., Series J, 8.00%, CVT |
$ | 224,585 | |||
|
|
|||||
347,903 | ||||||
|
|
|||||
TOTAL PREFERRED STOCKS |
560,789 | |||||
|
|
|||||
UNAFFILIATED MUTUAL FUND |
| |||||
4,125 | Ares Capital Corp. |
68,599 | ||||
|
|
|||||
TOTAL LONG-TERM INVESTMENTS |
154,680,882 | |||||
|
|
|||||
SHORT-TERM INVESTMENT 3.9% |
| |||||
AFFILIATED MONEY MARKET MUTUAL FUND |
| |||||
6,204,329 | Prudential Investment Portfolios 2 - Prudential Core |
6,204,329 | ||||
|
|
|||||
TOTAL INVESTMENTS 99.9% |
160,885,211 | |||||
Other assets in excess of liabilities(b) 0.1% |
201,354 | |||||
|
|
|||||
NET ASSETS 100% |
$ | 161,086,565 | ||||
|
|
The following abbreviations are used in the Portfolio descriptions:
ADRAmerican Depositary Receipt
CVACertificate Van Aandelen (Bearer)
CVTConvertible Security
PRFCPreference Shares
EUREuro
* | Non-income producing security. |
(a) | Prudential Investments LLC, the manager of the Fund, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund. |
See Notes to Financial Statements.
36 | Visit our website at www.prudentialfunds.com |
(b) | Includes net unrealized appreciation on the following derivative contracts held at reporting period end: |
Forward foreign currency exchange contracts outstanding at July 31, 2012:
Sale Contracts |
Counterparty |
Notional Amount (000) |
Value at Settlement Date Receivable |
Current Value |
Unrealized Appreciation |
|||||||||||||
Euro, |
||||||||||||||||||
Expiring 11/08/12 |
State Street Bank | EUR | 622 | $ | 814,480 | $ | 765,956 | $ | 48,524 | |||||||||
|
|
|
|
|
|
Various inputs are used in determining the value of the Portfolios investments. These inputs are summarized in the three broad levels listed below.
Level 1quoted prices generally in active markets for identical securities.
Level 2other 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 3significant unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of July 31, 2012 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities |
||||||||||||
Common Stocks |
$ | 128,591,197 | $ | 25,460,297 | $ | | ||||||
Preferred Stocks |
347,903 | 212,886 | | |||||||||
Unaffiliated Mutual Fund |
68,599 | | | |||||||||
Affiliated Money Market Mutual Fund |
6,204,329 | | | |||||||||
Other Financial Instruments* |
||||||||||||
Forward foreign currency exchange contracts |
| 48,524 | | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 135,212,028 | $ | 25,721,707 | $ | | ||||||
|
|
|
|
|
|
* | Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as futures, forwards and swap contracts, which are recorded at the unrealized appreciation/depreciation on the instrument. |
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 37 |
Portfolio of Investments
as of July 31, 2012 continued
The investment allocation of Portfolio holdings and other assets in excess of liabilities shown as a percentage of net assets as of July 31, 2012 were as follows:
Pharmaceuticals |
8.5 | % | ||
Oil, Gas & Consumable Fuels |
5.7 | |||
Insurance |
4.3 | |||
Affiliated Money Market Mutual Fund |
3.9 | |||
Commercial Banks |
3.8 | |||
Computer Hardware |
3.8 | |||
Retail & Merchandising |
3.4 | |||
Chemicals |
3.2 | |||
Software |
2.8 | |||
Aerospace & Defense |
2.6 | |||
Media |
2.6 | |||
Diversified Financial Services |
2.4 | |||
Telecommunications |
2.3 | |||
Retail |
2.2 | |||
Hotels, Restaurants & Leisure |
2.0 | |||
Computer Services & Software |
1.9 | |||
Oil & Gas |
1.8 | |||
Biotechnology |
1.7 | |||
Internet Services |
1.7 | |||
Specialty Retail |
1.7 | |||
Internet Software & Services |
1.7 | |||
Financial Services |
1.4 | |||
Food |
1.4 | |||
Real Estate Investment Trusts |
1.2 | |||
Semiconductors & Semiconductor Equipment |
1.2 | |||
Beverages |
1.2 | |||
Electric Utilities |
1.1 | |||
Transportation |
1.1 | |||
Food & Staples Retailing |
1.0 | |||
Clothing & Apparel |
1.0 | |||
FinancialBank & Trust |
1.0 | |||
Manufacturing |
0.9 | |||
Banks |
0.8 | |||
Metals & Mining |
0.8 | |||
Energy Equipment & Services |
0.8 | |||
Distribution/Wholesale |
0.8 | |||
Life Sciences Tools & Services |
0.7 | |||
Consumer Products & Services |
0.7 | |||
Industrial Products |
0.7 | |||
Wireless Telecommunication Services |
0.7 | |||
Tobacco |
0.7 | |||
Machinery |
0.7 | % | ||
Healthcare Services |
0.7 | |||
Consumer Finance |
0.7 | |||
Automobile Manufacturers |
0.7 | |||
Food Products |
0.6 | |||
Computers & Peripherals |
0.5 | |||
Auto Components |
0.5 | |||
Healthcare Products |
0.5 | |||
Commercial Services |
0.5 | |||
Electronic Components & Equipment |
0.5 | |||
Entertainment & Leisure |
0.5 | |||
Diversified Manufacturing |
0.5 | |||
Industrial Conglomerates |
0.4 | |||
Diversified Telecommunication Services |
0.4 | |||
Multi-Line Retail |
0.4 | |||
Semiconductors |
0.4 | |||
Healthcare Equipment & Supplies |
0.4 | |||
Auto Parts & Equipment |
0.4 | |||
Electronic Equipment & Instruments |
0.4 | |||
Paper & Forest Products |
0.4 | |||
Machinery & Equipment |
0.4 | |||
Healthcare Providers & Services |
0.3 | |||
Household Products |
0.3 | |||
Multi-Utilities |
0.3 | |||
Business Services |
0.3 | |||
Office Electronics |
0.3 | |||
Investment Companies |
0.3 | |||
Diversified Operations |
0.3 | |||
Leisure Equipment & Products |
0.3 | |||
Capital Markets |
0.3 | |||
Pipelines |
0.2 | |||
Medical Supplies & Equipment |
0.2 | |||
Hand/Machine Tools |
0.2 | |||
Air Freight & Logistics |
0.2 | |||
IT Services |
0.2 | |||
Diversified Consumer Services |
0.2 | |||
Independent Power Producers & Energy Traders |
0.2 | |||
Road & Rail |
0.2 | |||
Retail Apparel |
0.1 | |||
Construction |
0.1 |
See Notes to Financial Statements.
38 | Visit our website at www.prudentialfunds.com |
Industry (contd.) |
||||
Communications Equipment |
0.1 | % | ||
Professional Services |
0.1 | |||
Engineering & Construction |
0.1 | |||
MachineryConstruction & Mining |
0.1 | |||
Containers & Packaging |
0.1 | |||
Cosmetics & Toiletries |
0.1 | |||
Airlines |
0.1 | |||
Environmental Control |
0.1 | |||
Miscellaneous Manufacturing |
0.1 | |||
Textiles, Apparel & Luxury Goods |
0.1 | |||
Electric |
0.1 | % | ||
Apparel & Textile |
0.1 | |||
Semiconductor Components |
0.1 | |||
Gas Utilities |
0.1 | |||
Holding Companies |
0.1 | |||
Trading Companies & Distributors |
0.1 | |||
Real Estate |
0.1 | |||
|
|
|||
99.9 | ||||
Other assets in excess of liabilities |
0.1 | |||
|
|
|||
100.0 | % | |||
|
|
The Fund invested in derivative instruments during the reporting period. The primary type of risk associated with these derivative instruments is foreign exchange risk. The effect of such derivative instruments on the Funds financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.
Fair values of derivative instruments as of July 31, 2012 as presented in the Statement of Assets and Liabilities:
Derivatives not accounted |
Asset Derivatives |
Liability Derivatives |
||||||||||
Balance |
Fair Value |
Balance |
Fair Value |
|||||||||
Foreign exchange contracts | Unrealized appreciation on foreign currency exchange contracts | $ | 48,524 | | $ | | ||||||
|
|
|
|
The effects of derivative instruments on the Statement of Operations for the year ended July 31, 2012 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income |
||||||||||||
Derivatives not accounted for as hedging |
Rights | Forward Currency Contracts |
Total | |||||||||
Foreign exchange contracts |
$ | | $ | 87,062 | $ | 87,062 | ||||||
Equity contracts |
(3,351 | ) | | (3,351 | ) | |||||||
|
|
|
|
|
|
|||||||
Total |
$ | (3,351 | ) | $ | 87,062 | $ | 83,711 | |||||
|
|
|
|
|
|
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 39 |
Portfolio of Investments
as of July 31, 2012 continued
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income |
||||
Derivatives not accounted for as hedging |
Forward Currency Contracts |
|||
Foreign exchange contracts |
$ | 56,687 | ||
|
|
For the year ended July 31, 2012, the Funds average volume of derivative activities are as follows:
Forward Foreign Currency Exchange Purchase Contracts(1) |
Forward Foreign Currency Exchange Sale Contracts(2) |
|||||
$ | 26,813 | $ | 827,649 |
(1) | Value at Settlement Date Payable. |
(2) | Value at Settlement Date Receivable. |
See Notes to Financial Statements.
40 | Visit our website at www.prudentialfunds.com |
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
FINANCIAL STATEMENTS
ANNUAL REPORT · JULY 31, 2012
Target Asset Allocation Funds/Target Growth Allocation Fund
Statement of Assets and Liabilities
as of July 31, 2012
Assets |
||||
Investments at value: |
||||
Unaffiliated Investments (cost $131,005,608) |
$ | 154,680,882 | ||
Affiliated Investments (cost $6,204,329) |
6,204,329 | |||
Cash |
4,950 | |||
Foreign currency, at value (cost $156,796) |
157,327 | |||
Receivable for investments sold |
1,198,363 | |||
Dividends receivable |
173,995 | |||
Tax reclaim receivable |
91,095 | |||
Unrealized appreciation on foreign currency exchange contracts |
48,524 | |||
Receivable for Fund shares sold |
35,271 | |||
|
|
|||
Total assets |
162,594,736 | |||
|
|
|||
Liabilities |
||||
Payable for investments purchased |
873,510 | |||
Accrued expenses and other liabilities |
247,969 | |||
Payable for Fund shares reacquired |
186,502 | |||
Management fee payable |
101,773 | |||
Distribution fee payable |
67,183 | |||
Affiliated transfer agent fee payable |
27,527 | |||
Deferred trustees fees |
3,707 | |||
|
|
|||
Total liabilities |
1,508,171 | |||
|
|
|||
Net Assets |
$ | 161,086,565 | ||
|
|
|||
Net assets were comprised of: |
||||
Shares of beneficial interest, at par |
$ | 14,515 | ||
Paid-in capital, in excess of par |
180,823,914 | |||
|
|
|||
180,838,429 | ||||
Undistributed net investment income |
637,450 | |||
Accumulated net realized loss on investment and foreign currency transactions |
(44,112,415 | ) | ||
Net unrealized appreciation on investments and foreign currencies |
23,723,101 | |||
|
|
|||
Net assets, July 31, 2012 |
$ | 161,086,565 | ||
|
|
See Notes to Financial Statements.
42 | Visit our website at www.prudentialfunds.com |
Class A |
||||
Net asset value and redemption price per share, |
$ | 11.44 | ||
Maximum sales charge (5.5% of offering price) |
0.67 | |||
|
|
|||
Maximum offering price to public |
$ | 12.11 | ||
|
|
|||
Class B |
||||
Net asset value, offering price and redemption price per share, |
$ | 10.45 | ||
|
|
|||
Class C |
||||
Net asset value, offering price and redemption price per share, |
$ | 10.46 | ||
|
|
|||
Class R |
||||
Net asset value, offering price and redemption price per share, ($2,449 ÷ 215.7 shares of common stock issued and outstanding) |
$ | 11.35 | ||
|
|
|||
Class X |
||||
Net asset value, offering price and redemption price per share, ($188,516 ÷ 17,677 shares of common stock issued and outstanding) |
$ | 10.66 | ||
|
|
|||
Class Z |
||||
Net asset value, offering price and redemption price per share, |
$ | 11.76 | ||
|
|
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 43 |
Statement of Operations
Year Ended July 31, 2012
Net Investment Income |
||||
Income |
||||
Unaffiliated dividend income (net of foreign withholding taxes $149,894) |
$ | 3,563,705 | ||
Affiliated dividend income |
12,945 | |||
|
|
|||
3,576,650 | ||||
|
|
|||
Expenses |
||||
Management fee |
1,239,111 | |||
Distribution feeClass A |
263,809 | |||
Distribution feeClass B |
204,665 | |||
Distribution feeClass C |
371,613 | |||
Distribution feeClass M |
956 | |||
Distribution feeClass R |
12 | |||
Distribution feeClass X |
816 | |||
Transfer agents fees and expenses (including affiliated expense of $157,700) |
356,000 | |||
Custodians fees and expenses |
267,000 | |||
Registration fees |
110,000 | |||
Reports to shareholders |
53,000 | |||
Audit fee |
44,000 | |||
Legal fee |
30,000 | |||
Trustees fees |
14,000 | |||
Insurance expense |
4,000 | |||
Loan interest expense (Note 7) |
79 | |||
Miscellaneous |
34,829 | |||
|
|
|||
Total expenses |
2,993,890 | |||
|
|
|||
Net investment income |
582,760 | |||
|
|
|||
Net Realized And Unrealized Gain (Loss) On Investments And Foreign Currencies |
||||
Net realized gain on: |
||||
Investment transactions |
8,685,516 | |||
Foreign currency transactions |
63,579 | |||
|
|
|||
8,749,095 | ||||
|
|
|||
Net change in unrealized appreciation (depreciation) on: |
||||
Investments |
(10,894,312 | ) | ||
Foreign currencies |
14,298 | |||
|
|
|||
(10,880,014 | ) | |||
|
|
|||
Net loss on investments |
(2,130,919 | ) | ||
|
|
|||
Net Decrease In Net Assets Resulting From Operations |
$ | (1,548,159 | ) | |
|
|
See Notes to Financial Statements.
44 | Visit our website at www.prudentialfunds.com |
Statement of Changes in Net Assets
Year Ended July 31, | ||||||||
2012 | 2011 | |||||||
Increase (Decrease) In Net Assets |
||||||||
Operations |
||||||||
Net investment income |
$ | 582,760 | $ | 358,305 | ||||
Net realized gain on investment and foreign currency transactions |
8,749,095 | 17,984,733 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currencies |
(10,880,014 | ) | 12,131,854 | |||||
|
|
|
|
|||||
Net increase (decrease) in net assets resulting from operations |
(1,548,159 | ) | 30,474,892 | |||||
|
|
|
|
|||||
Dividends and Distributions (Note 1) |
||||||||
Dividends from net investment income: |
||||||||
Class A |
(310,413 | ) | | |||||
Class B |
| | ||||||
Class C |
| | ||||||
Class M |
| | ||||||
Class R |
(1 | ) | | |||||
Class X |
(1,261 | ) | | |||||
Class Z |
(7,935 | ) | | |||||
|
|
|
|
|||||
(319,610 | ) | | ||||||
|
|
|
|
|||||
Capital Contributions (Note 2) |
||||||||
Class X |
| 185 | ||||||
|
|
|
|
|||||
Fund share transactions (Net of share conversions) (Note 6) |
||||||||
Net proceeds from shares sold |
7,683,966 | 16,650,268 | ||||||
Net asset value of shares issued in reinvestment of dividends and distributions |
313,586 | | ||||||
Cost of shares reacquired |
(29,425,945 | ) | (39,310,006 | ) | ||||
|
|
|
|
|||||
Net decrease in net assets resulting from Fund share transactions |
(21,428,393 | ) | (22,659,738 | ) | ||||
|
|
|
|
|||||
Total increase (decrease) |
(23,296,162 | ) | 7,815,339 | |||||
Net Assets |
||||||||
Beginning of year |
184,382,727 | 176,567,388 | ||||||
|
|
|
|
|||||
End of year(a) |
$ | 161,086,565 | $ | 184,382,727 | ||||
|
|
|
|
|||||
(a) Includes undistributed net income of: |
$ | 637,450 | $ | 311,736 | ||||
|
|
|
|
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 45 |
Notes to Financial Statements
Target Asset Allocation Funds (the Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end, diversified management investment company presently consisting of three portfolios: Target Moderate Allocation Fund, Target Conservative Allocation Fund and Target Growth Allocation Fund (the Fund). These financial statements relate only to Target Growth Allocation Fund. The financial statements of the other portfolios are not presented herein. The Trust was organized as a business trust in Delaware on July 29, 1998.
The Fund uses investment managers (Subadvisers), each managing a portion of the Funds assets. The following lists the Subadvisers and their respective segment during the year ended July 31, 2012.
Fund Segment |
Subadviser | |
Large-cap growth stocks | Marsico Capital Management, LLC Massachusetts Financial Services Company | |
Large-cap value stocks | Eaton Vance Management/ Hotchkis and Wiley Capital Management LLC | |
International stocks | LSV Asset Management Thornburg Investment Management, Inc. | |
Small/Mid-cap growth stocks | Eagle Asset Management, Inc. | |
Small/Mid-cap value stocks | EARNEST Partners, LLC Vaughan Nelson Investment Management, L.P |
* | Effective July 19, 2012, Epoch Investment Partners replaced Eaton Vance Management. |
The investment objective of the Fund is to provide long-term capital appreciation.
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements.
Securities Valuation: The Fund holds portfolio 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 has delegated fair valuation responsibilities to the Manager through the adoption of Valuation Procedures for valuation of the Funds securities. Under the current Valuation Procedures, a Valuation Committee is
46 | Visit our website at www.prudentialfunds.com |
established and responsible for supervising the valuation of portfolio securities and other assets. The Valuation Procedures allow the Portfolio to utilize independent pricing vendor services, quotations from market makers and other valuation methods in events when market quotations are not readily available. A record of the Valuation Committees actions is subject to review, approval and ratification by the Board at its next regularly scheduled quarterly meeting.
Various inputs are used in determining the value of the Funds investments, which are summarized in the three broad level hierarchies based on any observable inputs used as described in the table following the Funds Schedule of Investments. The valuation methodologies and significant inputs used in determining the fair value of securities and other assets classified as Level 1, Level 2 and Level 3 of the hierarchy are as follows:
Common stock, exchange-traded funds and financial derivative instruments (including futures contracts and certain options contracts on securities), 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 of the fair value hierarchy.
In the event there is no sale or official closing price on such day, these securities are valued at the mean between the last reported bid and asked prices, or at the last bid price in absence of an asked price. These securities are classified as Level 2 of the fair value hierarchy as these inputs are considered as significant other observable inputs to the valuation.
For common stocks traded on foreign securities exchanges, certain valuation adjustments will be applied when events occur after the close of the securitys foreign market and before the Funds normal pricing time. These securities are valued using pricing vendor services that provide 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 adjustment factors are classified as Level 2 of the fair value hierarchy.
Investments in open end, non exchange-traded mutual funds are valued at their net asset value as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 as these securities have the ability to be purchased or sold at their net asset value on the date of valuation.
Target Asset Allocation Funds/Target Growth Allocation Fund | 47 |
Notes to Financial Statements
continued
Fixed income securities traded in the over-the-counter market, such as corporate bonds, municipal bonds, U.S. Government agencies, U.S. Treasury obligations, and sovereign issues are usually valued at prices provide by approved independent pricing vendors. The pricing vendors provide these prices usually after evaluating observable inputs including yield curves, credit rating, yield spreads, default rates, cash flows as well as broker/dealer quotations and reported trades. Securities valued using such vendor prices are classified as Level 2 of the fair value hierarchy.
Asset-backed and mortgage-related securities are usually valued by approved independent pricing vendors. The pricing vendors provide the prices using their internal pricing model with input from deal term, tranche level attributes, yield curve, prepayment speeds, and broker/dealer quotes. Securities valued using such vendor prices are classified as Level 2 of the fair value hierarchy.
Short-term debt securities of sufficient credit quality which mature in 60 days or less are valued at amortized cost which approximates fair market value. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between the principal amount due at maturity and cost. These securities are categorized as Level 2 of the fair value hierarchy.
Over-the-counter financial derivative instruments, such as option contracts, foreign currency contracts and swaps agreements, are usually valued using pricing vendor services, which derive the valuation based on underlying asset prices, indices, spreads, interest rates, exchange rates and other inputs. These instruments are categorized as Level 2 of the fair value hierarchy.
Securities and other assets that cannot be priced using the methods described above are valued with pricing methodologies approved by the Valuation Committee. In the event there are unobservable inputs used when determining such valuations, the securities will be classified as Level 3 of 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 issuers 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
48 | Visit our website at www.prudentialfunds.com |
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 securitys 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 period, 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 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 holdings of foreign currencies, currency gains or losses realized between the trade date and settlement date on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Funds 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 investments and foreign currencies. Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin as a result of, among other factors, the possibility of political and economic instability and the level of governmental supervision and regulation of foreign securities markets.
Target Asset Allocation Funds/Target Growth Allocation Fund | 49 |
Notes to Financial Statements
continued
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 entered into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings or on specific receivables and payables denominated in a foreign currency and to gain exposure to certain currencies. The contracts are valued daily at current exchange rates and any unrealized gain or loss is included in the Statement of Assets and Liabilities as 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. 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. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts. The Funds 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 contracts life. This risk may be mitigated by having 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 of collateral from the counterparty by the Fund to cover the Funds exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable.
Warrants and Rights: The Fund held warrants and rights acquired either through a direct purchase, including as part of private placement, or pursuant to corporate actions. Warrants and rights entitle the holder to buy a proportionate amount of common stock at a specific price and time through the expiration dates. Such warrants and rights are held as long positions by the Fund until exercised, sold or expired. Warrants and rights are valued at fair value in accordance with the Board approved fair valuation procedures.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains or losses from investment and currency transactions on sales of portfolio securities are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date and 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
50 | Visit our website at www.prudentialfunds.com |
require the use of certain estimates by management. Net investment income or loss (other than distribution fees, which are charged directly to 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 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 Funds 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 Trust has a management agreement with PI. Pursuant to this agreement, PI manages the investment operations of the Fund, administers the Funds affairs and supervises the Subadvisers performance of all investment advisory services. Pursuant to the advisory agreement, PI pays the cost of compensation of officers of the Fund, occupancy and certain clerical and accounting costs of the Fund. The Fund bears all other costs and expenses.
The management fee paid to PI is computed daily and payable monthly at an annual rate of 0.75% of average daily net assets up to $500 million, 0.70% of average daily net assets for the next $500 million and 0.65% of average daily net assets in excess
Target Asset Allocation Funds/Target Growth Allocation Fund | 51 |
Notes to Financial Statements
continued
of $1 billion. The effective management fee rate was 0.75% for the year ended July 31, 2012.
The Fund has a distribution agreement with Prudential Investment Management Services LLC (PIMS), which acts as the distributor of the Class A, Class B, Class C, Class M, Class R and Class Z shares of the Fund. In addition, the Fund has a distribution agreement with Prudential Annuities Distributors, Inc. (PAD), which, together with PIMS, serves as co-distributor of the Class M and Class X shares of the Fund. The Fund compensates PIMS and PAD, as applicable, for distributing and servicing the Funds Class A, Class B, Class C, Class M, Class R and Class X shares, pursuant to plans of distribution (the Distribution Plans), regardless of expenses actually incurred by PIMS or PAD. 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 and PAD, as applicable, for distribution related activities at an annual rate of up to .30%, 1%, 1%, 1%, .75% and 1% of the average daily net assets of the Class A, B, C, M, R and X shares, respectively. PIMS has contractually agreed through November 30, 2012 to limit such expenses to .25% and .50% of the average daily net assets of the Class A and Class R shares, respectively.
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 and Financial Highlights as a contribution to capital.
PIMS has advised the Fund that it has received $78,957 in front-end sales charges resulting from sales of Class A during the year ended July 31, 2012. From these fees, PIMS paid such sales charges to broker-dealers which in turn paid commissions to salespersons and incurred other distribution costs. PIMS has advised the Fund that for the year ended July 31, 2012, it has received $295, $37,014, and $1,464 in contingent deferred sales charges imposed upon certain redemptions by Class A, Class B, and Class C shareholders, respectively.
PIMS and PI are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (Prudential).
52 | Visit our website at www.prudentialfunds.com |
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 Funds 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 Prudential Investment Portfolios 2, registered under the 1940 Act, as amended, and managed by PI. Earnings from the Portfolio are disclosed on the Statement of Operations as affiliated dividend income.
Note 4. Portfolio Securities
Purchases and sales of portfolio securities, excluding short-term investments and U.S. Government securities, for the year ended July 31, 2012, aggregated $109,219,276 and $130,642,729, respectively.
Note 5. Distributions and Tax Information
Distributions to shareholders, which are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles, are recorded on the ex-dividend date. In order to present undistributed net investment income, accumulated net realized loss on investment and foreign currency transactions and paid-in capital in excess of par on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to undistributed net investment income and accumulated net realized loss on investment and foreign currency transactions. For the year ended July 31, 2012, the adjustments were to increase undistributed net investment income and increase accumulated net realized loss on investment and foreign currency transactions by $62,564 due to differences in the treatment for book and tax purposes of certain transactions involving foreign securities and currencies and other book to tax differences. Net investment income, net realized gain on investment and foreign currency transactions and net assets were not affected by these changes.
For the year ended July 31, 2012, the tax character of dividends paid as reflected in the Statement of Changes in Net Assets was $319,610 of ordinary income. For the year ended July 31, 2011, there were no distributions paid by the Fund.
Target Asset Allocation Funds/Target Growth Allocation Fund | 53 |
Notes to Financial Statements
continued
As of July 31, 2012, the accumulated undistributed earnings on a tax basis was $693,789 of ordinary income. This differs from the amount shown on the Statement of Assets and Liabilities primarily due to cumulative timing differences.
The United States federal income tax basis of the Funds investments and the net unrealized appreciation as of July 31, 2012 were as follows:
Tax Basis |
Appreciation |
Depreciation |
Net |
Other Cost |
Adjusted Net | |||||
$144,071,832 | $30,654,851 | $(13,841,472) | $16,813,379 | $(698) | $16,812,681 |
The difference between book basis and tax basis was primarily attributable to deferred losses on wash sales and investments in passive foreign investment companies. The other cost basis adjustments are primarily attributable to appreciation (depreciation) of foreign currency transactions and mark to market of receivables and payables.
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 July 31, 2012 (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 July 31, 2012 (pre-enactment losses) may have an increased likelihood to expire unused. The Fund utilized approximately $6,313,000 of its pre-enactment losses to offset net taxable gains realized in the fiscal year ended July 31, 2012. No capital gains distributions are expected to be paid to shareholders until net gains have been realized in excess of such losses. As of July 31, 2012, the pre and post-enactment losses were approximately:
Post-Enactment Losses: |
$ | 0 | ||
|
|
|||
Pre-Enactment Losses: |
||||
Expiring 2018 |
$ | 36,798,000 | ||
|
|
The Fund elected to treat post-October capital losses of approximately $456,000 as having been incurred in the following fiscal year (July 31, 2013).
54 | Visit our website at www.prudentialfunds.com |
Management has analyzed the Funds 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 Funds financial statements for the current reporting period. The Funds 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 R, Class X and Class Z shares. Class A shares are subject to a maximum front-end sales charge of 5.50%. Investors who purchase $1 million or more of Class A shares and sell these shares within 12 months of purchase are not subject to an initial sales charge but are subject to a contingent deferred sales charge (CDSC) of 1%. The Class A CDSC is waived for purchases by certain retirement or benefit plans. Class B shares are subject to a CDSC of 5%, which decreases by 1% annually to 1% in the fifth and sixth years and 0% in the seventh year. Class B shares automatically convert to Class A shares on a quarterly basis approximately seven years after purchase. The CDSC for Class C shares is 1% for shares redeemed within 12 months of purchase. Class X shares are generally closed to new purchases. Class X shares are subject to a CDSC of 6%, which decreases by 1% annually to 4% in the third and fourth years, by 1% annually to 2% in the sixth and seventh years, and 1% in the eighth year. Class X shares automatically convert to Class A shares on a monthly basis approximately ten years after purchase. An exchange privilege is also available for shareholders who qualify to purchase Class A shares at net asset value. 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. Class R and 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 as presented in the table of transactions in shares of beneficial interest.
The Fund has authorized an unlimited number of shares of beneficial interest at $.001 par value per share. As of July 31, 2012, Prudential owned 216 Class R shares of the Fund.
Target Asset Allocation Funds/Target Growth Allocation Fund | 55 |
Notes to Financial Statements
continued
Class A |
Shares | Amount | ||||||
Year ended July 31, 2012: |
||||||||
Shares sold |
368,730 | $ | 4,066,164 | |||||
Shares issued in reinvestment of dividends and distributions |
28,375 | 305,036 | ||||||
Shares reacquired |
(1,656,781 | ) | (18,283,333 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(1,259,676 | ) | (13,912,133 | ) | ||||
Shares issued upon conversion from Class B, Class M, and Class X |
501,426 | 5,489,592 | ||||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(758,250 | ) | $ | (8,422,541 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
1,096,884 | $ | 12,074,264 | |||||
Shares issued in reinvestment of dividends and distributions |
| | ||||||
Shares reacquired |
(2,086,641 | ) | (23,089,117 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(989,757 | ) | (11,014,853 | ) | ||||
Shares issued upon conversion from Class B, Class M, and Class X |
714,000 | 7,893,665 | ||||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(275,757 | ) | $ | (3,121,188 | ) | |||
|
|
|
|
|||||
Class B |
||||||||
Year ended July 31, 2012: |
||||||||
Shares sold |
163,794 | $ | 1,657,699 | |||||
Shares issued in reinvestment of dividends and distributions |
| | ||||||
Shares reacquired |
(284,673 | ) | (2,855,223 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(120,879 | ) | (1,197,524 | ) | ||||
Shares reaquired upon conversion into Class A |
(492,682 | ) | (4,940,154 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(613,561 | ) | $ | (6,137,678 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
194,434 | $ | 1,971,991 | |||||
Shares issued in reinvestment of dividends and distributions |
| | ||||||
Shares reacquired |
(451,079 | ) | (4,560,984 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(256,645 | ) | (2,588,993 | ) | ||||
Shares reaquired upon conversion into Class A |
(651,116 | ) | (6,603,508 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(907,761 | ) | $ | (9,192,501 | ) | |||
|
|
|
|
56 | Visit our website at www.prudentialfunds.com |
Class C |
Shares | Amount | ||||||
Year ended July 31, 2012: |
||||||||
Shares sold |
125,350 | $ | 1,263,721 | |||||
Shares issued in reinvestment of dividends and distributions |
| | ||||||
Shares reacquired |
(757,388 | ) | (7,666,449 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(632,038 | ) | (6,402,728 | ) | ||||
Shares reacquired upon conversion into Class Z |
(2,309 | ) | (22,621 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(634,347 | ) | $ | (6,425,349 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
192,897 | $ | 1,953,151 | |||||
Shares issued in reinvestment of dividends and distributions |
| | ||||||
Shares reacquired |
(1,024,910 | ) | (10,431,687 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(832,013 | ) | $ | (8,478,536 | ) | |||
|
|
|
|
|||||
Class M |
||||||||
Period ended April 13, 2012**: |
||||||||
Shares sold |
| $ | | |||||
Shares issued in reinvestment of dividends and distributions |
| | ||||||
Shares reacquired |
(3,801 | ) | (36,659 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(3,801 | ) | (36,659 | ) | ||||
Shares reacquired upon conversion into Class A |
(25,366 | ) | (255,376 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(29,167 | ) | $ | (292,035 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
814 | $ | 8,832 | |||||
Shares issued in reinvestment of dividends and distributions |
| | ||||||
Shares reacquired |
(14,203 | ) | (138,349 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(13,389 | ) | (129,517 | ) | ||||
Shares reacquired upon conversion into Class A |
(68,704 | ) | (713,787 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(82,093 | ) | $ | (843,304 | ) | |||
|
|
|
|
|||||
Class R |
||||||||
Year ended July 31, 2012: |
||||||||
Shares sold |
| $ | | |||||
Shares issued in reinvestment of dividends and distributions |
| * | 1 | |||||
Shares reacquired |
| | ||||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
| $ | 1 | |||||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
1,390 | $ | 15,657 | |||||
Shares issued in reinvestment of dividends and distributions |
| | ||||||
Shares reacquired |
(9,435 | ) | (112,515 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(8,045 | ) | $ | (96,858 | ) | |||
|
|
|
|
Target Asset Allocation Funds/Target Growth Allocation Fund | 57 |
Notes to Financial Statements
continued
Class X |
Shares | Amount | ||||||
Year ended July 31, 2012: |
||||||||
Shares sold |
| $ | | |||||
Shares issued in reinvestment of dividends and distributions |
126 | 1,261 | ||||||
Shares reacquired |
(3,795 | ) | (38,201 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(3,669 | ) | (36,940 | ) | ||||
Shares reacquired upon conversion into Class A |
(28,477 | ) | (294,062 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(32,146 | ) | $ | (331,002 | ) | |||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
1,750 | $ | 18,916 | |||||
Shares issued in reinvestment of dividends and distributions |
| | ||||||
Shares reacquired |
(39,910 | ) | (390,751 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
(38,160 | ) | (371,835 | ) | ||||
Shares reacquired upon conversion into Class A |
(54,589 | ) | (576,370 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
(92,749 | ) | $ | (948,205 | ) | |||
|
|
|
|
|||||
Class Z |
||||||||
Year ended July 31, 2012: |
||||||||
Shares sold |
60,081 | $ | 696,382 | |||||
Shares issued in reinvestment of dividends and distributions |
661 | 7,288 | ||||||
Shares reacquired |
(49,757 | ) | (546,080 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding before conversion |
10,985 | 157,590 | ||||||
Shares issued upon conversion from Class C |
2,066 | 22,621 | ||||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
13,051 | $ | 180,211 | |||||
|
|
|
|
|||||
Year ended July 31, 2011: |
||||||||
Shares sold |
52,178 | $ | 607,457 | |||||
Shares issued in reinvestment of dividends and distributions |
| | ||||||
Shares reacquired |
(51,645 | ) | (586,603 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in shares outstanding |
533 | $ | 20,854 | |||||
|
|
|
|
* | Less than 0.5 shares |
** | 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. |
Note 7. Borrowings
The Trust, 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
58 | Visit our website at www.prudentialfunds.com |
the period December 16, 2011 through December 14, 2012. The Funds pay an annualized commitment fee of 0.08% of the unused portion of the SCA. Prior to December 16, 2011, the Funds had another Syndicated Credit Agreement of a $750 million commitment with an annualized commitment fee of 0.10% of the unused portion. Interest on any borrowings under these SCAs is paid at contracted market rates. The commitment fee for the unused amount is accrued daily and paid quarterly.
The Fund utilized the SCA during the year ended July 31, 2012. The Fund had an average outstanding balance of $125,133 for 15 days at an average interest rate of 1.50%
Note 8. New Accounting Pronouncements
In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11 regarding Disclosures about Offsetting Assets and Liabilities. The amendments, which will be effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, require an entity to disclose information about offsetting and related arrangements for assets and liabilities, financial instruments and derivatives that are either currently offset in accordance with current requirements or are subject to enforceable master netting arrangements or similar agreements. At this time, management is evaluating the implications of ASU No. 2011-11 and its impact on the financial statements has not yet been determined.
Target Asset Allocation Funds/Target Growth Allocation Fund | 59 |
Financial Highlights
Class A Shares | ||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2012(b) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $11.49 | $9.73 | $8.77 | $11.52 | $14.62 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .07 | .05 | .04 | .09 | .13 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (.09 | ) | 1.71 | .98 | (2.73 | ) | (1.90 | ) | ||||||||||||
Total from investment operations | (.02 | ) | 1.76 | 1.02 | (2.64 | ) | (1.77 | ) | ||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.03 | ) | - | (.06 | ) | (.11 | ) | (.07 | ) | |||||||||||
Distributions from net realized gains | - | - | - | - | (e) | (1.26 | ) | |||||||||||||
Total dividends and distributions | (.03 | ) | - | (.06 | ) | (.11 | ) | (1.33 | ) | |||||||||||
Net asset value, end of year | $11.44 | $11.49 | $9.73 | $8.77 | $11.52 | |||||||||||||||
Total Return(a) | (.14)% | 18.09% | 11.69% | (22.71)% | (13.25)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $105,678 | $114,839 | $99,938 | $95,405 | $124,579 | |||||||||||||||
Average net assets (000) | $105,524 | $112,821 | $102,324 | $89,232 | $135,539 | |||||||||||||||
Ratios to average net assets(d): | ||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees(c) | 1.55% | 1.51% | 1.57% | 1.58% | 1.36% | |||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.30% | 1.26% | 1.32% | 1.33% | 1.11% | |||||||||||||||
Net investment income | .61% | .48% | .38% | 1.03% | 1.01% | |||||||||||||||
Portfolio turnover rate | 68% | 73% | 97% | 135% | 83% |
(a) 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 returns may reflect adjustments to conform to generally accepted accounting principles.
(b) Calculations are based on average shares outstanding during the period.
(c) The distributor of the Fund contractually agreed to limit its distribution and service (12b-1) fees to .25% of the average daily assets of the Class A shares.
(d) Does not include expenses of the underlying portfolios in which the Fund invests.
(e) Less than $.005 per share.
See Notes to Financial Statements.
60 | Visit our website at www.prudentialfunds.com |
Class B Shares |
||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2012(b) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $10.55 | $9.00 | $8.13 | $10.68 | $13.67 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (.01 | ) | (.03 | ) | (.03 | ) | .02 | .03 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (.09 | ) | 1.58 | .91 | (2.52 | ) | (1.76 | ) | ||||||||||||
Total from investment operations | (.10 | ) | 1.55 | .88 | (2.50 | ) | (1.73 | ) | ||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | - | - | (.01 | ) | (.05 | ) | - | |||||||||||||
Distributions from net realized gains | - | - | - | - | (d) | (1.26 | ) | |||||||||||||
Total dividends and distributions | - | - | (.01 | ) | (.05 | ) | (1.26 | ) | ||||||||||||
Net asset value, end of year | $10.45 | $10.55 | $9.00 | $8.13 | $10.68 | |||||||||||||||
Total Return(a) | (.95)% | 17.22% | 10.80% | (23.29)% | (13.86)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $18,005 | $24,634 | $29,184 | $33,691 | $58,763 | |||||||||||||||
Average net assets (000) | $20,467 | $28,562 | $33,068 | $37,140 | $78,596 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees | 2.30% | 2.26% | 2.32% | 2.33% | 2.11% | |||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.30% | 1.26% | 1.32% | 1.33% | 1.11% | |||||||||||||||
Net investment income (loss) | (.13)% | (.27)% | (.36)% | .31% | .26% | |||||||||||||||
Portfolio turnover rate | 68% | 73% | 97% | 135% | 83% |
(a) 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 returns may reflect adjustments to conform to generally accepted accounting principles.
(b) Calculations are based on average shares outstanding during the period.
(c) Does not include expenses of the underlying portfolios in which the Fund invests.
(d) Less than $.005 per share.
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 61 |
Financial Highlights
continued
Class C Shares | ||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2012(b) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $10.55 | $9.00 | $8.13 | $10.68 | $13.67 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (.01 | ) | (.03 | ) | (.03 | ) | .02 | .03 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (.08 | ) | 1.58 | .91 | (2.52 | ) | (1.76 | ) | ||||||||||||
Total from investment operations | (.09 | ) | 1.55 | .88 | (2.50 | ) | (1.73 | ) | ||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | - | - | (.01 | ) | (.05 | ) | - | |||||||||||||
Distributions from net realized gains | - | - | - | - | (d) | (1.26 | ) | |||||||||||||
Total dividends and distributions | - | - | (.01 | ) | (.05 | ) | (1.26 | ) | ||||||||||||
Net asset value, end of year | $10.46 | $10.55 | $9.00 | $8.13 | $10.68 | |||||||||||||||
Total Return(a) | (.85)% | 17.22% | 10.80% | (23.29)% | (13.86)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $35,215 | $42,214 | $43,511 | $48,649 | $76,714 | |||||||||||||||
Average net assets (000) | $37,161 | $44,983 | $48,040 | $51,040 | $96,952 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees | 2.30% | 2.26% | 2.32% | 2.33% | 2.11% | |||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.30% | 1.26% | 1.32% | 1.33% | 1.11% | |||||||||||||||
Net investment income (loss) | (.14)% | (.27)% | (.37)% | .30% | .26% | |||||||||||||||
Portfolio turnover rate | 68% | 73% | 97% | 135% | 83% |
(a) 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 returns may reflect adjustments to conform to generally accepted accounting principles.
(b) Calculations are based on average shares outstanding during the period.
(c) Does not include expenses of the underlying portfolios in which the Fund invests.
(d) Less than $.005 per share.
See Notes to Financial Statements.
62 | Visit our website at www.prudentialfunds.com |
Class M Shares | ||||||||||||||||||||||||||
Period Ended April 13, |
Year Ended July 31, | |||||||||||||||||||||||||
2012(b)(e) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | 2007(b) | |||||||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $10.58 | $9.02 | $8.15 | $10.70 | $13.70 | $12.54 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment income (loss) | (.02 | ) | (.03 | ) | (.03 | ) | .03 | .03 | (.01 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | .19 | 1.59 | .91 | (2.53 | ) | (1.77 | ) | 2.01 | ||||||||||||||||||
Total from investment operations | .17 | 1.56 | .88 | (2.50 | ) | (1.74 | ) | 2.00 | ||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||
Dividends from net investment income | - | - | (.01 | ) | (.05 | ) | - | - | ||||||||||||||||||
Distributions from net realized gains | - | - | - | - | (d) | (1.26 | ) | (.84 | ) | |||||||||||||||||
Total dividends and distributions | - | - | (.01 | ) | (.05 | ) | (1.26 | ) | (.84 | ) | ||||||||||||||||
Net asset value, end of period | $10.75 | $10.58 | $9.02 | $8.15 | $10.70 | $13.70 | ||||||||||||||||||||
Total Return(a) | 1.61% | 17.29% | 10.77% | (23.24)% | (13.91)% | 16.28% | ||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Net assets, end of period (000) | $15 | $308 | $1,004 | $2,154 | $4,712 | $10,851 | ||||||||||||||||||||
Average net assets (000) | $135 | $671 | $1,680 | $2,773 | $8,028 | $10,882 | ||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees | 2.32% | (f) | 2.26% | 2.32% | 2.33% | 2.11% | 2.10% | |||||||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.32% | (f) | 1.26% | 1.32% | 1.33% | 1.11% | 1.10% | |||||||||||||||||||
Net investment income (loss) | (.19)% | (f) | (.32)% | (.36)% | .33% | .25% | (.10)% | |||||||||||||||||||
Portfolio turnover rate | 68% | (g)(h) | 73% | 97% | 135% | 83% | 71% |
(a) 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 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 average shares outstanding during the period.
(c) Does not include expenses of the underlying portfolios in which the Fund invests.
(d) Less than $.005 per share.
(e) As of April 13, 2012, the last conversion of Class M shares was completed. There are no shares outstanding and Class M shares are no longer offered for sale.
(f) Annualized.
(g) Not annualized.
(h) Calculated as of July 31, 2012.
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 63 |
Financial Highlights
continued
Class R Shares | ||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2012(b) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $11.38 | $9.66 | $8.71 | $11.44 | $14.52 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | .06 | .01 | .01 | .07 | .10 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (.09 | ) | 1.71 | .98 | (2.71 | ) | (1.88 | ) | ||||||||||||
Total from investment operations | (.03 | ) | 1.72 | .99 | (2.64 | ) | (1.78 | ) | ||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | - | (d) | - | (.04 | ) | (.09 | ) | (.04 | ) | |||||||||||
Distributions from net realized gains | - | - | - | - | (d) | (1.26 | ) | |||||||||||||
Total dividends and distributions | - | (d) | - | (.04 | ) | (.09 | ) | (1.30 | ) | |||||||||||
Net asset value, end of year | $11.35 | $11.38 | $9.66 | $8.71 | $11.44 | |||||||||||||||
Total Return(a) | (.24)% | 17.81% | 11.40% | (22.90)% | (13.42)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $2 | $2 | $80 | $225 | $323 | |||||||||||||||
Average net assets (000) | $2 | $74 | $122 | $203 | $339 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees(e) | 1.65% | 1.76% | 1.82% | 1.83% | 1.61% | |||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.15% | 1.26% | 1.32% | 1.33% | 1.11% | |||||||||||||||
Net investment income (loss) | .55% | .14% | .14% | .82% | .77% | |||||||||||||||
Portfolio turnover rate | 68% | 73% | 97% | 135% | 83% |
(a) 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 returns may reflect adjustments to conform to generally accepted accounting principles.
(b) Calculations are based on average shares outstanding during the period.
(c) Does not include expenses of the underlying portfolios in which the Fund invests.
(d) Less than $.005 per share.
(e) The distributor of the Fund contractually agreed to limit its distribution and service (12b-1) fees to .50% of the average daily assets of the Class R shares.
See Notes to Financial Statements.
64 | Visit our website at www.prudentialfunds.com |
Class X Shares | ||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2012(b) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $10.71 | $9.07 | $8.17 | $10.68 | $13.68 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | .06 | .04 | .03 | .04 | .03 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (.08 | ) | 1.60 | .93 | (2.50 | ) | (1.77 | ) | ||||||||||||
Total from investment operations | (.02 | ) | 1.64 | .96 | (2.46 | ) | (1.74 | ) | ||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.03 | ) | - | (.06 | ) | (.05 | ) | - | ||||||||||||
Distributions from net realized gains | - | - | - | - | (d) | (1.26 | ) | |||||||||||||
Total dividends and distributions | (.03 | ) | - | (.06 | ) | (.05 | ) | (1.26 | ) | |||||||||||
Capital Contributions | - | - | (d) | - | (d) | - | (d) | - | ||||||||||||
Net asset value, end of year | $10.66 | $10.71 | $9.07 | $8.17 | $10.68 | |||||||||||||||
Total Return(a) | (.15)% | 18.08% | 11.71% | (22.91)% | (13.93)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $189 | $534 | $1,293 | $1,705 | $3,759 | |||||||||||||||
Average net assets (000) | $326 | $846 | $1,593 | $2,123 | $4,440 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees | 1.55% | 1.51% | 1.57% | 2.09% | 2.11% | |||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.30% | 1.26% | 1.32% | 1.33% | 1.11% | |||||||||||||||
Net investment income (loss) | .59% | .44% | .39% | .56% | .26% | |||||||||||||||
Portfolio turnover rate | 68% | 73% | 97% | 135% | 83% |
(a) 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 returns may reflect adjustments to conform to generally accepted accounting principles.
(b) Calculations are based on average shares outstanding during the period.
(c) Does not include expenses of the underlying portfolios in which the Fund invests.
(d) Less than $.005 per share.
See Notes to Financial Statements.
Target Asset Allocation Funds/Target Growth Allocation Fund | 65 |
Financial Highlights
continued
Class Z Shares | ||||||||||||||||||||
Year Ended July 31, | ||||||||||||||||||||
2012(b) | 2011(b) | 2010(b) | 2009(b) | 2008(b) | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $11.81 | $9.98 | $8.99 | $11.81 | $14.95 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .10 | .08 | .06 | .12 | .17 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (.09 | ) | 1.75 | 1.02 | (2.81 | ) | (1.94 | ) | ||||||||||||
Total from investment operations | .01 | 1.83 | 1.08 | (2.69 | ) | (1.77 | ) | |||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.06 | ) | - | (.09 | ) | (.13 | ) | (.11 | ) | |||||||||||
Distributions from net realized gains | - | - | - | - | (d) | (1.26 | ) | |||||||||||||
Total dividends and distributions | (.06 | ) | - | (.09 | ) | (.13 | ) | (1.37 | ) | |||||||||||
Net asset value, end of year | $11.76 | $11.81 | $9.98 | $8.99 | $11.81 | |||||||||||||||
Total Return(a) | .12% | 18.34% | 11.98% | (22.54)% | (13.00)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $1,997 | $1,851 | $1,558 | $1,741 | $5,234 | |||||||||||||||
Average net assets (000) | $1,639 | $1,707 | $1,600 | $2,938 | $7,414 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees | 1.30% | 1.26% | 1.32% | 1.33% | 1.11% | |||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | 1.30% | 1.26% | 1.32% | 1.33% | 1.11% | |||||||||||||||
Net investment income | .87% | .73% | .62% | 1.32% | 1.25% | |||||||||||||||
Portfolio turnover rate | 68% | 73% | 97% | 135% | 83% |
(a) 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 returns may reflect adjustments to conform to generally accepted accounting principles.
(b) Calculations are based on average shares outstanding during the period.
(c) Does not include expenses of the underlying portfolios in which the Fund invests.
(d) Less than $.005 per share.
See Notes to Financial Statements.
66 | Visit our website at www.prudentialfunds.com |
Report of Independent Registered Public
Accounting Firm
The Board of Trustees and Shareholders
Target Asset Allocation FundsTarget Growth Allocation Fund:
We have audited the accompanying statement of assets and liabilities of the Target Growth Allocation Fund (hereafter referred to as the Fund), a portfolio of the Target Asset Allocation Funds, including the portfolio of investments, as of July 31, 2012, and the related statement of operations for the year then ended, the statement 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 Funds 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 July 31, 2012, 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 July 31, 2012, 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
September 20, 2012
Target Asset Allocation Funds/Target Growth Allocation Fund | 67 |
Tax Information
(Unaudited)
For the year ended July 31, 2012, the Fund reports the following percentages of ordinary income distributions paid as: 1) qualified dividend income in accordance with Section 854 of the Internal Revenue Code (QDI); and 2) eligible for the corporate dividends received deduction in accordance with Section 854 of the Internal Revenue Code (DRD):
QDI | DRD | |||||||
Target Growth Allocation Fund |
100.00 | % | 100.00 | % |
In January 2013, you will be advised on IRS Form 1099-DIV or substitute 1099-DIV as to the federal tax status of the dividends received by you in calendar year 2012.
68 | Visit our website at www.prudentialfunds.com |
INFORMATION ABOUT BOARD MEMBERS AND OFFICERS
(Unaudited)
Information about Board Members and Officers 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.
Independent Board Members(1) |
||||
Name, Address, Age Position(s) Portfolios Overseen |
Principal Occupation(s) During Past Five Years |
Other Directorships Held | ||
Kevin J. Bannon (60) Board Member Portfolios Overseen: 61 |
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 (60) Board Member Portfolios Overseen: 61 |
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). | ||
Michael S. Hyland, CFA (66) Board Member Portfolios Overseen: 61 |
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 (73) Board Member Portfolios Overseen: 61 |
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). |
Target Asset Allocation Funds/Target Growth Allocation Fund
Independent Board Members(1) |
| |||
Name, Address, Age Position(s) Portfolios Overseen |
Principal Occupation(s) During Past Five Years |
Other Directorships Held | ||
Stephen P. Munn (70) Board Member Portfolios Overseen: 61 |
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). | ||
Richard A. Redeker (69) Board Member & Independent Chair Portfolios Overseen: 61 |
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. | ||
Robin B. Smith (72) Board Member Portfolios Overseen: 61 |
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 (69) Board Member Portfolios Overseen: 61 |
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 (49) Board Member & President Portfolios Overseen: 61 |
President of Prudential Investments LLC (since January 2012); Executive Vice President of Jennison Associates LLC and Head of Retail Distribution of Prudential Investments LLC (June 2005 - December 2011). |
None. |
Visit our website at www.prudentialfunds.com
Interested Board Members(1) |
| |||
Name, Address, Age Position(s) Portfolios Overseen |
Principal Occupation(s) During Past Five Years |
Other Directorships Held | ||
Scott E. Benjamin (39) Board Member & Vice President Portfolios Overseen: 61 |
Executive Vice President (since June 2009) of Prudential Investments LLC and 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. |
(1) The year that each Board Member joined the Funds Board is as follows:
Kevin J. Bannon, 2008; Linda W. Bynoe, 2005; Michael S. Hyland, 2008; Douglas H. McCorkindale, 1998; Stephen P. Munn, 2008; Richard A. Redeker, 2003; Robin B. Smith, 2003; Stephen G. Stoneburn, 1999; Stuart S. Parker, Board Member and President since 2012; Scott E. Benjamin, Board Member since 2010 and Vice President since 2009.
Fund Officers(a)(1) |
| |
Name, Address and Age Position with Fund |
Principal Occupation(s) During Past Five Years | |
Judy A. Rice (64) Vice President |
President, Chief Executive Officer (May 2011-Present) and Executive Vice President (December 2008-May 2011) of Prudential Investment Management Services LLC; Formerly President, Chief Executive Officer, Chief Operating Officer and Officer-In-Charge (February 2003-December 2011) of Prudential Investments LLC; formerly President, Chief Executive Officer and Officer-In-Charge (April 2003-December 2011) of Prudential Mutual Fund Services LLC (PMFS); formerly Member of the Board of Directors of Jennison Associates LLC (November 2010-December 2011); formerly Vice President (February 1999-April 2006) of Prudential Investment Management Services LLC; formerly President, COO, CEO and Manager of PIFM Holdco, LLC (April 2006-December 2011); formerly President, Chief Executive Officer, Chief Operating Officer and Officer-In-Charge (May 2003-June 2005) and Director (May 2003-March 2006) and Executive Vice President (June 2005-March 2006) of AST Investment Services, Inc.; Member of Board of Governors of the Investment Company Institute. |
Target Asset Allocation Funds/Target Growth Allocation Fund
Fund Officers(a)(1) |
| |
Name, Address and Age Position with Fund |
Principal Occupation(s) During Past Five Years | |
Raymond A. OHara (56) 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 PMFS (since June 2012) and Corporate Counsel of AST Investment Services, Inc. (since June 2012); formerly 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 1988August 2008) of Blazzard & Hasenauer, P.C. (formerly, Blazzard, Grodd & Hasenauer, P.C.). | |
Deborah A. Docs (54) 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. | |
Jonathan D. Shain (54) 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 PMFS; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | |
Claudia DiGiacomo (37) 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). | |
Andrew R. French (49) 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 PMFS. | |
Amanda S. Ryan (34) 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 (2008-2012). | |
Timothy J. Knierim (53) Chief Compliance Officer |
Chief Compliance Officer of Prudential Investment Management, Inc. (since July 2007); formerly Chief Risk Officer of Prudential Investment Management, Inc. and Prudential Investments LLC (2002-2007) and formerly Chief Ethics Officer of Prudential Investment Management, Inc. and Prudential Investments LLC (2006-2007). | |
Valerie M. Simpson (54) Deputy Chief Compliance Officer |
Chief Compliance Officer (since April 2007) of Prudential Investments LLC and AST Investment Services, Inc.; formerly Vice President-Financial Reporting (June 1999-March 2006) for Prudential Life and Annuities Finance. |
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Fund Officers(a)(1) |
| |
Name, Address and Age Position with Fund |
Principal Occupation(s) During Past Five Years | |
Theresa C. Thompson (50) Deputy Chief Compliance Officer |
Vice President, Compliance, Prudential Investments LLC (since April 2004); and Director, Compliance, Prudential Investments LLC (2001-2004). | |
Richard W. Kinville (44) 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 Financials Internal Audit Department and Manager in AXAs 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). | |
Grace C. Torres (53) 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. | |
M. Sadiq Peshimam (48) Assistant Treasurer |
Vice President (since 2005) of Prudential Investments LLC. | |
Peter Parrella (54) 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). |
(a) Excludes Mr. Parker and Mr. Benjamin, interested Board Members who also serve as President and Vice President, respectively.
(1) The year that each individual became an Officer of the Funds is as follows:
Judy A. Rice, 2012; Raymond A. OHara, 2012; Deborah A. Docs, 2004; Jonathan D. Shain, 2005; Claudia DiGiacomo, 2005; Andrew R. French, 2006; Amanda S. Ryan,2012; Timothy J. Knierim, 2007; Valerie M. Simpson, 2007; Theresa Thompson, 2008; Richard W. Kinville, 2011; Grace C. Torres, 1998; M. Sadiq Peshimam, 2006; Peter Parrella, 2007.
Explanatory Notes to Tables:
n | 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. |
n | 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. |
n | 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. |
n | 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. |
n | Portfolios Overseen includes all investment companies managed by Prudential Investments LLC. The investment companies for which PI serves as manager include the Prudential Investments Mutual Funds, The Prudential Variable Contract Accounts, Target Mutual Funds, Prudential Short Duration High Yield Fund, Inc., The Prudential Series Fund, Prudentials Gibraltar Fund, Inc. and the Advanced Series Trust. |
Target Asset Allocation Funds/Target Growth Allocation Fund
Approval of Advisory Agreements
Approval of Existing Agreements
The Funds Board of Trustees
The Board of Trustees (the Board) of Target Growth Allocation 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). 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 Target Investment Committee. Each committee is chaired by, and composed of, Independent Trustees.
Annual Approval of the Funds Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Funds management agreement with Prudential Investments LLC (PI) and the Funds subadvisory agreements with various subadvisers. In considering the renewal of the agreements, the Board, including all of the Independent Trustees, met on June 5-7, 2012 and approved the renewal of the agreements through July 31, 2013, 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 each subadviser. 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 subadvisers, 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 Funds assets grow. In their deliberations, the Trustees did not identify any single factor which alone was responsible for the Boards 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 | Target Growth Allocation Fund is one of three series which, together, comprise the Target Asset Allocation Funds. |
Target Asset Allocation Funds/Target Growth Allocation 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 5-7, 2012.
The Trustees determined that the overall arrangements between the Fund and PI, which serves as the Funds investment manager pursuant to a management agreement with Target Asset Allocation Funds, and between PI and each subadviser,2 each of which serve as 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 determinations to approve the renewal of the agreements are discussed separately 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 each subadviser. The Board considered the services provided by PI, including but not limited to the oversight of the subadvisers, as well as the provision of fund recordkeeping, compliance, and other services to the Fund. With respect to PIs oversight of the subadvisers, the Board noted that PIs Strategic Investment Research Group (SIRG), a business unit of PI, is responsible for screening and recommending new subadvisers when appropriate, as well as monitoring and reporting to the Board on the performance and operations of the subadvisers. The Board also considered that PI pays the salaries of all of the officers and non-independent Trustees of the Fund. The Board also considered the investment subadvisory services provided by each subadviser, as well as compliance with the Funds investment restrictions, policies and procedures. The Board considered PIs evaluation of the subadvisers, as well as PIs recommendation, based on its review of the subadvisers, to renew the subadvisory agreements.
The Board reviewed the qualifications, backgrounds and responsibilities of PIs senior management responsible for the oversight of the Fund and each subadviser, and also reviewed the qualifications, backgrounds and responsibilities of the subadvisers portfolio managers who are responsible for the day-to-day management of the Fund. The Board was provided with information pertaining to PIs and each subadvisers organizational structure, senior management, investment operations, and other
2 | The Funds subadvisers are: Epoch Investment Partners, Inc. (Epoch), Marsico Capital Management, LLC, Massachusetts Financial Services Company, Hotchkis and Wiley Capital Management, LLC, NFJ Investment Group L.P., Eagle Asset Management, Inc., EARNEST Partners LLC, Vaughan Nelson Investment Management, L.P., LSV Asset Management, and Thornburg Investment Management, Inc. The Board approved the appointment of Epoch to replace Eaton Vance Management at the meeting on June 5-7, 2012. |
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relevant information pertaining to both PI and each subadviser. The Board also noted that it received favorable compliance reports from the Funds Chief Compliance Officer (CCO) as to both PI and each subadviser.
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 each subadviser, and that there was a reasonable basis on which to conclude that the Fund benefits from the services provided by PI and each subadviser 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 Funds 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 advisers capital structure and cost of capital. Taking these factors into account, the Board concluded that the profitability of PI and its affiliates in relation to the services rendered was not unreasonable.
The Board noted that none of the subadvisers was affiliated with PI, and concluded that the level of profitability of a subadviser not affiliated with PI may not be as significant as PIs profitability given the arms length nature of the process by which the subadvisory fee rates were negotiated by PI and the unaffiliated subadvisers, as well as the fact that PI compensates the subadvisers out of its management fee.
Economies of Scale
The Board noted that the management fee schedule for the Fund includes breakpoints, which have the effect of decreasing the fee rate as assets increase, but at the current level of assets, the Fund does not realize the effect of those rate reductions. The Board received and discussed information concerning whether PI realizes economies of scale as the Funds assets grow beyond current levels. The Board took note that the Funds 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 Boards understanding that most of PIs costs are not specific to individual funds, but rather are incurred across a variety of products and services.
Target Asset Allocation Funds/Target Growth Allocation Fund
Approval of Advisory Agreements (continued)
Other Benefits to PI and the Subadvisers
The Board considered potential ancillary benefits that might be received by PI, the subadvisers, 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 Funds securities lending agent, transfer agency fees received by the Funds transfer agent (which is affiliated with PI), as well as benefits to its reputation or other intangible benefits resulting from PIs association with the Fund. The Board concluded that the potential benefits to be derived by the subadvisers included the ability to use soft dollar credits, brokerage commissions received by affiliates of the subadvisers, as well as the potential benefits consistent with those generally resulting from an increase in assets under management, specifically, potential access to additional research resources and benefits to their reputations. The Board concluded that the benefits derived by PI and the subadvisers 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, 2011.
The Board also considered the Funds actual management fee, as well as the Funds net total expense ratio, for the fiscal year ended July 31, 2011. 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 Multi-Cap Core 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 Boards 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).
3 | Although Lipper classifies the Fund in its Large-Cap Core Funds Performance Universe, the Lipper Multi-Cap Core Funds Performance Universe was utilized for performance comparisons because PI believes that the funds included in this Universe provide a more appropriate basis for Fund performance comparisons. |
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The section below summarizes key factors considered by the Board and the Boards conclusions regarding the Funds 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 | 4th Quartile | 4th Quartile | 3rd Quartile | |||||
Actual Management Fees: 2nd Quartile | ||||||||
Net Total Expenses: 4th Quartile |
| The Board noted that the Fund outperformed its benchmark index over the ten-year period, although it underperformed over the one-, three-, and five-year periods. |
| The Board also considered PIs explanation that the Funds underperformance was primarily attributable to underperformance by subadvisers responsible for the Funds large cap growth and large cap value sleeves. |
| The Board further noted that it had approved a recommendation by PI to replace Eaton Vance Management, one of the Funds existing subadvisers, with a new subadviser to address the Funds underperformance. |
| The Board noted information provided by PI indicating that the Funds fourth quartile ranking for expenses was attributable to the costs associated with the Funds relatively complex sleeve structure. |
| The Board concluded that it was reasonable to continue to monitor the Funds performance, and therefore it would be in the best interests of the Fund and its shareholders to renew the agreements. |
| The Board concluded that the management fees (including subadvisory fees) and total expenses were reasonable in light of the services provided. |
* * *
After full consideration of these factors, the Board concluded that approval of the agreements was in the best interests of the Fund and its shareholders.
Target Asset Allocation Funds/Target Growth Allocation Fund
Approval of Advisory Agreements (continued)
Board Approval of a New Subadvisory Agreement
At meetings of the Board held on June 6, 2012, the Trustees, including the Independent Trustees, unanimously approved the recommendations by the Funds investment manager, Prudential Investments LLC (PI or the Manager) to appoint Epoch Investment Partners, Inc. (Epoch) as a subadviser with respect to the Fund, in replacement of Eaton Vance Management (Eaton Vance). In approving the new subadvisory agreement between PI and Epoch (the Subadvisory Agreement), the Board, including the Independent Trustees advised by their independent legal counsel, K&L Gates LLP, considered the factors they deemed relevant, including the nature, quality and extent of services to be provided to the Fund by Epoch; any relevant comparable performance information; the fees proposed to be paid by the Manager to Epoch under the Subadvisory Agreement; and the potential for economies of scale that may be shared with the Fund and its shareholders. In connection with its deliberations, the Trustees reviewed performance, compliance and organization materials regarding Epoch and received presentations from PI, as well as from representatives of Epoch. The Board also received materials relating to the Subadvisory Agreement and had the opportunity to ask questions and request further information.
The Trustees determined that the overall arrangements between the Manager and Epoch, pursuant to the terms of the Subadvisory Agreement, are appropriate in light of the services to be performed and the fees to be charged under the Subadvisory Agreement 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 Subadvisory Agreement are separately discussed below.
Nature, Quality and Extent of Services
The Board received and considered information regarding the nature and extent of services to be provided to the Fund by Epoch under the Subadvisory Agreement, namely, that Epoch would provide day-to-day fund management services to a portion of the Fund and comply with all Fund policies and applicable rules and regulations. The Board also noted that the nature and extent of the services to be provided to the Fund under the Subadvisory Agreement were generally similar to those provided by the other current subadvisers to the Fund under their respective subadvisory agreements.
With respect to the quality of services, the Board considered, among other things, the background and experience of Epochs fund management team. In connection with the recent annual review of advisory and subadvisory agreements, the Board had
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reviewed the qualifications, backgrounds and responsibilities of the fund managers who would be responsible for the day-to-day management of the Fund, and the Board was provided with information pertaining to Epochs organizational structure, senior management, investment operations, and other relevant information pertaining to Epoch. The Board noted that it received a favorable compliance report from the Funds Chief Compliance Officer (CCO) as to Epoch.
The Board concluded that there was a reasonable basis on which to conclude that the services to be provided by Epoch under the Subadvisory Agreement should be comparable to the services that were provided by Eaton Vance to the Fund. The Board concluded that it was satisfied with the nature, extent and quality of the investment subadvisory services to be provided by Epoch and that there was a reasonable basis on which to conclude that the Fund would benefit from the subadvisory services to be provided by Epoch under the Subadvisory Agreement.
Performance of the Fund
The Board received and considered information regarding the performance of other investment companies managed by Epoch utilizing an investment style and strategy similar to that proposed for the Fund. The Board concluded that it was satisfied with the performance record of Epoch in the proposal strategy.
Investment Subadvisory Fee Rates
The Board considered that the proposed subadvisory fee rates payable by PI to Epoch under the Subadvisory Agreement were higher than the fee rate applicable to Eaton Vance. The Board also considered, among other things, the fee rates payable to Epoch by other funds with an investment objective similar to that of the Fund. The Board noted that PI, not the Fund, pays the subadvisory fees, and therefore any change in the proposed subadvisory fee rates would not have any impact on the amount of management fees paid by the Fund. The Board considered the proposed subadvisory fees of 0.275% of the Funds first $1 billion of average daily net assets and 0.20% of the Funds average daily assets in excess of $1 billion to be paid by the Manager to Epoch. The Board noted that the proposed fee for Epoch is based on combined assets in the retail funds portfolio that are subadvised by Epoch, managed by the Manager and have substantially the same investment strategy. The Board concluded that the proposed subadvisory fee rate payable to Epoch under the new Subadvisory Agreement was reasonable.
Profitability
In connection with their annual review of subadvisory agreements, the Board considered the profitability of PI and subadvisers affiliated with PI. The Board
Target Asset Allocation Funds/Target Growth Allocation Fund
Approval of Advisory Agreements (continued)
concluded that the level of profitability of a subadviser not affiliated with PI, such as Epoch, may not be as significant as PIs profitability given the arms length nature of the process by which the subadvisory fee rates were negotiated by PI and the unaffiliated subadvisers, as well as the fact that PI compensates the subadvisers out of its management fee. Nonetheless, because the engagement of Epoch is new, there is no historical profitability with regard to its arrangements with the Fund. As a result, the Board did not consider this factor. The Board noted that profitability would be reviewed annually in connection with the review of advisory agreements.
Economies of Scale
In connection with their annual review of advisory agreements, the Board considered the potential for Epoch to experience economies of scale as the amount of assets managed by Epoch increased in size. The Board further considered that the proposed subadvisory fee rate for Epoch would include breakpoints in the fee rate paid by the Manager to Epoch, and that the subadvisory breakpoints would reduce that fee rate if the amount of assets managed by Epoch increased in size. The Board noted that there was no proposed change in advisory agreements fee rates and breakpoints and that it would again review economies of scale at the next annual review of advisory agreements.
Other Benefits to the Subadviser or its Affiliates from Serving as Subadviser
The Board considered potential fall-out or ancillary benefits anticipated to be received by Epoch and its affiliates as a result of their relationship with the Fund. The Boards concluded that any potential benefits to be derived by Epoch included its ability to use soft dollar credits, brokerage commissions received by affiliates of Epoch, potential access to additional research resources, larger assets under management and benefits to their respective reputations, which were consistent with those generally derived by subadvisers to mutual funds.
After full consideration of these factors, the Board concluded that the approval of the Subadvisory Agreement was in the best interest of the Fund and its shareholders.
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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 Funds investment subadvisers the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852. 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 Funds website and on the Securities and Exchange Commissions website. |
TRUSTEES |
Kevin J. Bannon Scott E. Benjamin Linda W. Bynoe Michael S. Hyland Douglas H. McCorkindale Stephen P. Munn Stuart S. Parker Richard A. Redeker Robin B. Smith Stephen G. Stoneburn |
OFFICERS |
Stuart S. Parker, President Judy A. Rice, Vice President Scott E. Benjamin, Vice President Grace C. Torres, Treasurer and Principal Financial and Accounting Officer Raymond A. OHara, Chief Legal Officer Deborah A. Docs, Secretary Timothy J. Knierim, Chief Compliance Officer Valerie M. Simpson, Deputy Chief Compliance Officer Theresa C. Thompson, Deputy Chief Compliance Officer Richard W. Kinville, Anti-Money Laundering Compliance Officer Jonathan D. Shain, Assistant Secretary Claudia DiGiacomo, Assistant Secretary Amanda S. Ryan, Assistant Secretary Andrew R. French, Assistant Secretary M. Sadiq Peshimam, Assistant Treasurer Peter Parrella, Assistant Treasurer |
MANAGER | Prudential Investments LLC | Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | ||
| ||||
INVESTMENT SUBADVISERS | Eagle Asset Management, Inc. | 880 Carillon Parkway St. Petersburg, FL 33716 | ||
| ||||
EARNEST Partners, LLC | 1180 Peachtree Street Suite 2300 Atlanta, GA 30309 | |||
| ||||
Epoch Investment Partners, Inc. |
640 Fifth Avenue New York, NY 10019 | |||
| ||||
Hotchkis and Wiley Capital Management |
725 South Figueroa Street 39th Floor Los Angeles, CA 90017 | |||
| ||||
LSV Asset Management | 155 North Wacker Drive Suite 4600 Chicago, IL 60606 | |||
| ||||
Marsico Capital Management, LLC |
1200 17th Street Suite 1600 Denver, CO 80202 |
Massachusetts Financial Services Company |
500 Boylston Street Boston, MA 02116 | |||
| ||||
NFJ Investment Group L.P. | 2100 Ross Avenue Dallas, TX 75201 | |||
| ||||
Thornburg Investment Management, Inc. |
2300 North Ridgetop Road Santa Fe, NM 87506 | |||
| ||||
Vaughan Nelson Investment Management, L.P. |
600 Travis Street Suite 6300 Houston, TX 77002 | |||
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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 | ||
| ||||
TRANSFER AGENT | Prudential Mutual Fund Services LLC |
PO Box 9658 Providence, RI 02940 | ||
| ||||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
| ||||
FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 |
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go to www.prudentialfunds.com/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH TRUSTEES |
Shareholders can communicate directly with the Board of Trustees by writing to the Chair of the Board, Target Asset Allocation Funds, 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 Funds Forms N-Q are available on the Commissions website at www.sec.gov. The Funds Forms N-Q may also be reviewed and copied at the Commissions 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 Funds schedule of portfolio holdings as of the end of each calendar month is also available on the Funds website no sooner than approximately three business days prior to the end of the following month. |
The Funds Statement of Additional Information contains additional information about the Funds 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 |
TARGET GROWTH ALLOCATION FUND
SHARE CLASS | A | B | C | R | X | Z | ||||||
NASDAQ | PHGAX | PIHGX | PHGCX | PGARX | N/A | PDHZX | ||||||
CUSIP | 87612A823 | 87612A815 | 87612A799 | 87612A781 | 87612A757 | 87612A773 |
MFSP504E5 0231559-00001-00
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 registrants Principal Executive Officer and Principal Financial Officer; the registrants 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 registrants Board has determined that Mr. Stephen P. Munn, member of the Boards 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 July 31, 2012 and July 31, 2011, KPMG LLP (KPMG), the Registrants principal accountant, billed the Registrant $185,000 and $185,000, respectively, for professional services rendered for the audit of the Registrants annual financial statements or services that are normally provided in connection with statutory and regulatory filings.
(b) Audit-Related Fees
None.
(c) Tax Fees
During the fiscal year ended July 31, 2012, KPMG billed the Registrant $179 for professional services rendered in connection with agreed upon procedures performed related to the receipt of payments pursuant to certain fair fund settlement orders. Not applicable for the fiscal year ended July 31, 2011.
(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 Funds independent accountants. As part of this responsibility, the Audit Committee must pre-approve any independent accounting firms 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 accountants independence. The Committees 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 Funds 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 auditors 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 Funds 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 Funds 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 Funds 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 Funds 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 Funds 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 accountants engagement to audit the registrants financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountants full-time, permanent employees was 0%.
(g) Non-Audit Fees
Not applicable to Registrant for the fiscal years 2012 and 2011. The aggregate non-audit fees billed by KPMG for services rendered to the registrants 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 2012 and 2011 was $0 and $0, respectively.
(h) Principal Accountants Independence
Not applicable as KPMG has not provided non-audit services to the registrants 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 registrants principal executive officer and principal financial officer that the effectiveness of the registrants 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 Commissions rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrants 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 registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter of the period covered by this report that has materially affected, or is likely to materially affect, the registrants 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: | Target Asset Allocation Funds | |
By: | /s/ Deborah A. Docs | |
Deborah A. Docs | ||
Secretary | ||
Date: | September 24, 2012 |
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: | September 24, 2012 | |
By: | /s/ Grace C. Torres | |
Grace C. Torres | ||
Treasurer and Principal Financial Officer | ||
Date: | September 24, 2012 |
CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND
PRINCIPAL FINANCIAL OFFICERS
I. | Covered Officers/Purpose of the Code |
This code of ethics (the Code) is established for the funds listed on Attachment A hereto (each a Fund and together the Funds) pursuant to Section 406 of the Sarbanes-Oxley Act and the rules adopted thereunder by the Securities and Exchange Commission (SEC). The Code applies to each Funds Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer or Controller, or senior officers performing similar functions (the Covered Officers each of whom are set forth in Exhibit B) for the purpose of promoting:
| honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
| full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the SEC and in other public communications made by a Fund; |
| compliance with applicable governmental laws, rules and regulations; |
| the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and |
| accountability for adherence to the Code. |
Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.
II. | Conflicts of Interest |
A conflict of interest occurs when a Covered Officers private interest interferes with the interests of, or his service to, a Fund. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with a Fund.
Certain conflicts of interest arise out of the relationships between Covered Officers and a Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940, as amended (the 1940 Act) and the Investment Advisers Act of 1940, as amended (the Advisers Act). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with a Fund because of their status as affiliated persons of the Fund. A Funds and its investment advisers compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code.
Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationships between a Fund and the Funds investment adviser, principal underwriter, administrator, or other service providers to the Fund (together Service Providers), of which the Covered Officers may also be principals or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for a Fund or for a Service Provider, or for both), be involved in establishing policies and implementing decisions that will have different effects on such Service Providers and a Fund. The participation of the Covered Officers in such activities is inherent in the contractual relationships between a Fund and its Service Providers and is consistent with the performance by the Covered Officers of their duties as officers of the Fund. Thus, if performed in conformity with the provisions of the 1940 Act and the Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds Board of Directors/Trustees (Boards) that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes.
Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the 1940 Act and the Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of a Fund.
Each Covered Officer must:
| not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by a Fund whereby the Covered Officer would benefit personally to the detriment of the Fund; |
| not cause a Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Fund; and |
| not retaliate against any other Covered Officer or any employee of a Fund or its affiliated persons for reports of potential violations that are made in good faith. |
There are some actual or potential conflict of interest situations that should always be brought to the attention of, and discussed with, the Funds Chief Legal Officer or other senior legal officer, if material. Examples of these include:
| service as a director on the board of any public or private company; |
| the receipt of any non-nominal gifts; |
| the receipt of any entertainment from any company with which a Fund has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; |
| any ownership interest in (other than insubstantial interests in publicly traded entities), or any consulting or employment relationship with, any of a Funds Service Providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof; and |
| a direct or indirect financial interest in commissions, transaction charges or spreads paid by a Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officers employment, such as compensation or equity ownership. |
III. | Disclosure and Compliance |
Each Covered Officer:
| should familiarize himself with the disclosure requirements generally applicable to the Funds; |
| should not knowingly misrepresent, or cause others to misrepresent, facts about a Fund to others, whether within or outside the Fund, including to the Funds Board of Directors/Trustees and its auditors, and to governmental regulators and self-regulatory organizations; |
| should, to the extent appropriate within his area of responsibility, consult with other officers and employees of a Fund and its Service Providers with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Fund files with, or submits to, the SEC and in other public communications made by the Fund; and |
| is responsible to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. |
IV. | Reporting and Accountability |
Each Covered Officer must:
| upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board of Directors/Trustees that he has received, read, and understands the Code; |
| annually thereafter affirm to the Board of Directors/Trustees that he has complied with the requirements of the Code; and |
| notify the Funds Chief Legal Officer promptly if he knows of any violation of this Code. Failure to do so is itself a violation of this Code. |
The Funds Chief Legal Officer is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. In such situations, the Chief Legal Officer is authorized to consult, as appropriate, with counsel to the Funds, counsel to the Independent Directors/Trustees, a Board Committee comprised of Independent Directors/Trustees, or the full Board.
The Funds will follow the following procedures in investigating and enforcing this Code:
| the Funds Chief Legal Officer will take all appropriate action to investigate any potential violations reported to her; |
| if, after such investigation, the Chief Legal Officer believes that no violation has occurred, the Chief Legal Officer is not required to take any further action; |
| any matter that the Chief Legal Officer believes is a violation or that the Chief Legal Officer believes should be reviewed by a Funds Board or Board Committee comprised of Independent Directors/Trustees will be reported to the Funds Board or Board Committee comprised of Independent Directors/Trustees; |
| based upon its review of any matter referred to it, a Funds Board or Board Committee comprised of Independent Directors/Trustees shall determine whether or not a violation has occurred, whether a grant of waiver is appropriate or whether some other action should be taken. Based upon its determination, the Funds Board or Board Committee comprised of Independent Directors/Trustees may take such action as it deems appropriate, which may include without limitation: modifications of applicable policies and procedures; notification to appropriate personnel of the Funds investment adviser, principal underwriter or administrator, or their boards; notification to other Funds for which the Covered Officer serves as a Covered Officer; or recommendation to dismiss the Covered Officer; and |
| any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. |
V. | Other Policies and Procedures |
This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of a Fund or its Service Providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds and their investment advisers and principal underwriters code of ethics under Rule 17j-1 under the 1940 Act are separate requirements applying to the Covered Officers and others, and are not part of this Code.
VI. | Amendments |
Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Board, including a majority of Independent Directors/Trustees.
VII. | Confidentiality |
All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Fund Board of Directors/Trustees, counsel to the Fund, and counsel to the Fund Independent Directors/Trustees.
VIII. | Internal Use |
The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of a Fund, as to any fact, circumstance, or legal conclusion.
IX. | Recordkeeping |
A Fund shall keep the information disclosed about waivers and amendments under the Code for the period of time as specified in the rules adopted pursuant to Section 406 of the Sarbanes-Oxley Act, and furnish such information to the SEC or its staff upon request.
Adopted and approved as of September 3, 2003.
EXHIBIT A
Funds Covered by this Code of Ethics
Prudential Investments Mutual Funds
Target Mutual Funds
The Prudential Variable Contract Account 2
The Prudential Variable Contract Account 10
The Prudential Variable Contract Account 11
Advanced Series Trust
Prudentials Gibraltar Fund, Inc.
The Prudential Series Fund
Prudential Short Duration High Yield Fund, Inc.
EXHIBIT B
Persons Covered by this Code of Ethics
Stuart S. Parker President and Chief Executive Officer of the Prudential Investments Mutual Funds, the Target Mutual Funds, Prudential Short Duration High Yield Fund, Inc. and The Prudential Variable Contract Accounts 2, -10, and -11.
Robert F. ODonnell President and Chief Executive Officer of Advanced Series Trust, Prudentials Gibraltar Fund, Inc. and The Prudential Series Fund.
Grace C. Torres Treasurer and Chief Financial Officer for the Prudential Investments Mutual Funds, the Target Mutual Funds, Prudential Short Duration High Yield Fund, Inc., The Prudential Variable Contract Accounts 2, -10, and -11, Advanced Series Trust, Prudentials Gibraltar Fund, Inc. and The Prudential Series Fund.
Item 12
Target Asset Allocation Funds
Annual period ending 7/31/12
File No. 811-08915
CERTIFICATIONS
I, Stuart S. Parker, certify that:
1. | I have reviewed this report on Form N-CSR of the above named Funds; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report. |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and; |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
1
5. | The registrants other certifying officers and I have disclosed to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
September 24, 2012
/s/ Stuart S. Parker |
Stuart S. Parker |
President and Principal Executive Officer |
2
Item 12
Target Asset Allocation Funds
Annual period ending 7/31/12
File No. 811-08915
CERTIFICATIONS
I, Grace C. Torres, certify that:
1. | I have reviewed this report on Form N-CSR of the above named Funds; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report. |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and; |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
3
5. | The registrants other certifying officers and I have disclosed to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
September 24, 2012
/s/ Grace C. Torres |
Grace C. Torres |
Treasurer and Principal Financial Officer |
4
Certification Pursuant to 18 U.S.C. Section 1350
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Name of Issuer: Target Asset Allocation Funds
In connection with the Report on Form N-CSR of the above-named issuer that is accompanied by this certification, the undersigned hereby certifies, to his or her knowledge, that:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. |
September 24, 2012 | /s/ Stuart S. Parker | |||||
Stuart S. Parker | ||||||
President and Principal Executive Officer | ||||||
September 24, 2012 | /s/ Grace C. Torres | |||||
Grace C. Torres | ||||||
Treasurer and Principal Financial Officer |
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