N-CSR 1 dncsr.htm PRUDENTIAL WORLD FUND, INC. Prudential World Fund, Inc.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number:   811-03981
Exact name of registrant as specified in charter:   Prudential World Fund, Inc.
Address of principal executive offices:  

Gateway Center 3,

100 Mulberry Street,

Newark, New Jersey 07102

Name and address of agent for service:  

Deborah A. Docs

Gateway Center 3,

100 Mulberry Street,

Newark, New Jersey 07102

Registrant’s telephone number, including area code:   800-225-1852
Date of fiscal year end:   10/31/2010
Date of reporting period:   10/31/2010

 

 

 

Item 1 – Reports to Stockholders

LOGO

 

ANNUAL REPORT   OCTOBER 31, 2010

 

Prudential International Equity Fund

 

 

 

 

Fund Type

International stock

 

Objective

Long-term growth of capital

      

This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.

 

The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter.

 

Prudential Investments, Prudential, the Prudential logo and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

 

 

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To enroll in e-delivery, go to

www.prudentialfunds.com/edelivery

 

 

 

 

 

December 15, 2010

 

Dear Shareholder:

 

We hope you find the annual report for the Prudential International Equity Fund informative and useful. Because of ongoing market volatility, we understand that this is a difficult time to be an investor. While it is impossible to predict what the future holds, 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 professional can help you create a diversified investment plan that may include mutual funds covering all the basic asset classes and that reflects your personal investor profile and risk tolerance. Keep in mind that diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.

 

Prudential Investments® provides a wide range of mutual funds to choose from that can help you make progress toward your financial goals. Our funds offer the experience, resources, and professional discipline of Prudential Financial’s affiliated asset managers. Most of Prudential Investments’ equity funds are advised by Jennison Associates LLC, Quantitative Management Associates LLC (QMA), or Prudential Real Estate Investors. Prudential Investment Management, Inc. (PIM) advises the Prudential Investments fixed income and money market funds through its Prudential Fixed Income unit. Jennison Associates, QMA, and PIM are registered investment advisers and Prudential Financial companies. Prudential Real Estate Investors is a unit of PIM.

 

Thank you for choosing the Prudential Investments family of mutual funds.

 

Sincerely,

 

LOGO

 

Judy A. Rice, President

Prudential International Equity Fund

 

Prudential International Equity Fund     1   

Your Fund’s 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 investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. Class A and Class L shares have a maximum initial sales charge of 5.50% and 5.75%, respectively. Gross operating expenses: Class A, 1.57%; Class B, 2.27%; Class C, 2.27%; Class F, 2.02%; Class L, 1.77%; Class M, 2.27%; Class X, 2.27%; Class Z, 1.27%. Net operating expenses: Class A, 1.57%; Class B, 2.27%; Class C, 2.27%; Class F, 2.02%; Class L, 1.77%; Class M, 2.27%; Class X, 2.27%; Class Z, 1.27%.

 

Cumulative Total Returns (Without Sales Charges) as of 10/31/10  
       One Year         Five Years         Ten Years         Since Inception  

Class A

      8.78 %      2.16 %      –10.68 %      —   

Class B

      8.11        –1.30        –17.01        —   

Class C

      8.11        –1.29        –17.00        —   

Class F

      8.35        N/A         N/A          –23.97% (12/18/06)   

Class L

      8.59        N/A         N/A          –23.87    (3/19/07)   

Class M

      8.11        N/A         N/A          –25.23    (3/19/07)   

Class X

      8.11        N/A         N/A          –25.23    (3/19/07)   

Class Z

      8.98        3.35        –8.76        —   

MSCI EAFE ND Index

      8.36        17.66        36.66        —   

Lipper Average

      10.34        16.07        30.60        —   
        
Average Annual Total Returns (With Sales Charges) as of 9/30/10  
       One Year         Five Years         Ten Years         Since Inception  

Class A

      –3.54 %      –2.03 %      –2.73 %      —   

Class B

      –3.63        –1.82        –2.91        —   

Class C

      0.37        –1.64        –2.91        —   

Class F

      –3.58        N/A         N/A         –8.44% (12/18/06)   

Class L

      –3.96        N/A         N/A         –9.97    (3/19/07)   

Class M

      –4.63        N/A         N/A         –9.68    (3/19/07)   

Class X

      –4.63        N/A         N/A         –9.92    (3/19/07)   

Class Z

      2.14        –0.67        –1.97        —   

MSCI EAFE ND Index

      3.27        1.97        2.56        —   

Lipper Average

      3.88        1.66        1.77        —   

 

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Average Annual Total Returns (With Sales Charges) as of 10/31/10  
     One Year     Five Years     Ten Years     Since Inception  

Class A

      2.79 %      –0.70 %      –1.68 %      —   

Class B

      3.11        –0.44        –1.85        —   

Class C

      7.11        –0.26        –1.85        —   

Class F

      3.35        N/A         N/A         –7.28% (12/18/06)   

Class L

      2.35        N/A         N/A         –8.76    (3/19/07)   

Class M

      2.11        N/A         N/A         –8.42    (3/19/07)   

Class X

      2.11        N/A         N/A         –8.66    (3/19/07)   

Class Z

      8.98        0.66        –0.91        —   
        
Average Annual Total Returns (Without Sales Charges) as of 10/31/10  
     One Year     Five Years     Ten Years     Since Inception  

Class A

      8.78%        0.43%        –1.12%        —   

Class B

      8.11        –0.26        –1.85        —   

Class C

      8.11        –0.26        –1.85        —   

Class F

      8.35        N/A         N/A         –6.83% (12/18/06)   

Class L

      8.59        N/A         N/A         –7.25    (3/19/07)   

Class M

      8.11        N/A         N/A         –7.71    (3/19/07)   

Class X

      8.11        N/A         N/A         –7.71    (3/19/07)   

Class Z

      8.98        0.66        –0.91        —   

 

Growth of a $10,000 Investment

 

LOGO

 

The graph compares a $10,000 investment in the Prudential International Equity Fund (Class A shares) with a similar investment in the MSCI EAFE ND Index by portraying the initial account values at the beginning of the 10-year period for Class A shares (October 31, 2000) and the account values at the end of the current fiscal year

(October 31, 2010) as measured on a quarterly basis. For purposes of the graph, and unless otherwise indicated,

 

Prudential International Equity Fund     3   

Your Fund’s Performance (continued)

 

 

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 F, Class L, Class M, 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 the distribution and service (12b-1) fee waiver of 0.05% for Class A shares in effect through October 31, 2010, the returns shown in the graph and for Class A shares in the tables would have been lower.

 

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 Since Inception returns for the MSCI EAFE ND Index and the Lipper International Large-Cap Core Funds Average are measured from the closest month-end to inception date, and not from the Fund’s actual inception date.

 

The average annual total returns take into account applicable sales charges. Class A and Class L shares are subject to a maximum front-end sales charge of 5.50%, and 5.75%, respectively, a 12b-1 fee of up to 0.30% and 0.50%, respectively annually, and all investors who purchase Class A and Class L 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%. Class B and Class F shares are subject to a declining CDSC of 5%, 4%, 3%, 2%, 1%, and 1%, respectively for the first six years after purchase and 12b-1 fees of 1% and 0.75%, respectively, annually. Approximately seven years after purchase, Class B and Class F 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 M and Class X shares purchased are not subject to a front-end sales charge, but charge a CDSC of 6% and a 12b-1 fee of 1%. The CDSC for Class M and Class X shares decreases by 1% annually to 2% in the fifth and sixth years after purchase, 1% in the seventh year and 0% in the eighth year after purchase. Class M and Class X shares convert to Class A shares approximately eight years after purchase. 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 the 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

 

Morgan Stanley Capital International Europe, Australasia, and Far East ND Index

The Morgan Stanley Capital International Europe, Australasia, and Far East Net Dividend (MSCI EAFE ND) Index is an unmanaged, weighted index of performance that reflects stock price movements of developed-country markets in Europe, Australasia, and the Far East. The ND version of the MSCI EAFE Index reflects the impact of the maximum withholding taxes on reinvested dividends. MSCI EAFE ND Index Closest Month-End to Inception cumulative total returns as of 10/31/10 are –13.14% for Class F, and –16.54% for Class L, Class M, and Class X. MSCI EAFE ND Index Closest Month-End to Inception average annual total returns as of 9/30/10 are –4.59% for Class F, and –5.99% for Class L, Class M, and Class X.

 

Lipper International Large-Cap Core Funds Average

The Lipper International Large-Cap Core Funds Average (Lipper Average) represents returns based on an average return of all funds in the Lipper International Large-Cap Core Funds category. Funds in the Lipper Average invest

 

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at least 75% of their equity assets in companies strictly outside of the United States with market capitalizations (on a three-year weighted basis) greater than the 250th largest company in the S&P Developed ex-U.S. Broad Market Index (BMI). Large-Cap Core funds typically have an average price-to-cash flow ratio, price-to-book ratio, and three-year sales-per-share growth value compared with the S&P Developed ex-U.S. BMI. Lipper Average Closest Month-End to Inception cumulative total returns as of 10/31/10 are –13.83% for Class F, and –16.72% for Class L, Class M, and Class X. Lipper Average Closest Month-End to Inception average annual total returns as of 9/30/10 are –4.91% for Class F, and –6.19% for Class L, Class M, and Class X.

 

Investors cannot invest directly in an index or average. The returns for the MSCI EAFE ND Index and the Lipper Average would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses, but not sales charges or taxes.

 

Five Largest Holdings in Long-Term Portfolio expressed as a percentage of net assets as of 10/31/10

   

Novartis AG, Pharmaceuticals

      1.5 % 

Total SA, Oil, Gas & Consumable Fuels

      1.5   

Nestle SA, Food Products

      1.5   

Telefonica SA, Diversified Telecommunication Services

      1.4   

GlaxoSmithKline PLC, Pharmaceuticals

      1.4   

Holdings are subject to change.

 

Five Largest Industries in Long-Term Portfolio expressed as a percentage of net assets as of 10/31/10

   

Commercial Banks

      13.0 % 

Oil, Gas & Consumable Fuels

      8.1   

Pharmaceuticals

      7.2   

Metals & Mining

      6.1   

Insurance

      4.2   

Industry weightings are subject to change.

 

Prudential International Equity Fund     5   

Strategy and Performance Overview

 

 

How did the Fund perform?

The Prudential International Equity Fund’s Class A shares gained 8.78% for the 12-month reporting period ended October 31, 2010, outperforming the 8.36% gain of the Morgan Stanley Capital International Europe, Australasia, and Far East Net Dividend Index (MSCI EAFE ND Index). However, the Fund’s Class A shares underperformed the 10.34% gain of the Lipper International Large-Cap Core Funds Average.

 

How is the Fund managed?

Quantitative Management Associates LLC (QMA) tries to outperform the MSCI EAFE ND Index by actively managing the Fund via a quantitative process that evaluates more than 1,000 stocks. Investing in shares of both slowly and rapidly growing companies limits the Fund’s exposure to any particular style of investing and may reduce its volatility relative to the MSCI EAFE ND Index.

 

When selecting stocks of slowly growing companies, QMA emphasizes attractive valuations and invests more heavily in shares that are priced cheaply relative to their firms’ earnings prospects and book values. When selecting stocks of more rapidly growing companies, QMA places a heavier emphasis on “news” or signals about their future growth prospects. For example, upward revisions in earnings forecasts by Wall Street analysts are used as an indication of good news.

 

As part of its strategy, the Fund seeks to remain fully invested. In order to accomplish this and to efficiently manage the Fund, QMA utilizes futures contracts based on equity market indexes to provide liquidity for the Fund. The futures contracts are used to equitize cash that has accrued, enabling the Fund to efficiently process large cash flows without requiring it to maintain large cash positions. During the reporting period, the Fund’s exposure to futures contracts did not have a material impact on its performance.

 

How did international stock markets perform?

Equity markets of economically developed nations, excluding the United States and Canada, posted an 8.36% gain overall in U.S. dollar terms for the 12-month reporting period, according to the MSCI EAFE ND Index. However, there was a huge disparity in the performance of the constituent markets, ranging from a 49.45% loss for Greece to a 30.74% gain for Singapore. This difference in performance was indicative of the contrasting economical and fiscal conditions that existed among nations whose stock markets are included in the MSCI EAFE ND Index.

 

A sovereign-debt crisis that began in Greece in late 2009 spread to other debt-laden nations that participate in the euro during 2010, especially Portugal and Spain. The worst flare-up in the crisis occurred in May. In that month, the European Union, with

 

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Strategy and Performance Overview (continued)

 

 

help from the International Monetary Fund, announced a lending and support package of nearly $1 trillion to aid the weaker regional economies. The European Central Bank (ECB) also began to buy bonds of troubled European nations from banks to help stabilize fixed income markets. While these steps were welcomed by investors, nations most deeply affected by the sovereign-debt crisis still faced severe fiscal and economic challenges. Therefore, stock markets of Greece, Portugal, Ireland, and Spain, all of which participate in the 16-nation euro zone, posted losses for the reporting period.

 

Meanwhile, economical and fiscal conditions were far more favorable in Singapore, Denmark, and Sweden, which helped their stock markets score double-digit gains for the reporting period. Others gainers included euro zone nations Germany, France, and the Netherlands, which enjoyed better economical and fiscal situations than the four previously mentioned countries on the geographic edge of the euro bloc.

 

How did the sectors of the international stock markets perform?

The 10 sectors turned in a mixed performance for the reporting period in U.S. dollar terms. Four of the sectors scored double-digit gains, including materials, consumer discretionary, industrials, and consumer staples. Three sectors posted single-digit gains, including telecommunications services, information technology, and healthcare. The remaining sectors suffered losses, including utilities, financials, and energy.

 

Among slowly growing companies, which stocks or related-group of stocks contributed most and detracted most from the Fund’s return?

Among slowly growing companies, a few of the largest contributors to the Fund’s return were Vodafone, KONE, and Nestle, all of which registered significant gains for the reporting period. Some of the largest detractors were BP, BBVA, and E.ON, all of which suffered considerable losses for the period.

 

Among rapidly growing companies, which stocks or related-group of stocks contributed most and detracted most from the Fund’s return?

Among rapidly growing companies, a few of the largest contributors to the Fund’s return were shares of Genting Singapore, Dongfeng Motor, and Novo Nordisk, all of which registered sharp gains for the reporting period. A few of the largest detractors were shares of JSR, Credit Agricole, and Toyota Motor, all of which suffered double-digit losses for the reporting period.

 

Prudential International Equity Fund     7   

 

 

Fees and Expenses (Unaudited)

 

 

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

 

The example is based on an investment of $1,000 invested on May 1, 2010, at the beginning of the period, and held through the six-month period ended October 31, 2010. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.

 

The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of Prudential Investments funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over the six-month period 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 Fund’s actual expense ratio and an assumed rate of return of 5% per year before

 

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expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

Prudential  International
Equity Fund		   Beginning Account
Value
May 1, 2010		    

Ending Account
Value

October 31, 2010

     Annualized
Expense Ratio
Based on the
Six-Month Period		     Expenses Paid
During the
Six-Month Period*		  
         
Class A   Actual   $ 1,000.00      $ 1,067.50        1.72 %    $ 8.96   
    Hypothetical   $ 1,000.00      $ 1,016.53        1.72 %    $ 8.74   
         
Class B   Actual   $ 1,000.00      $ 1,064.50        2.42 %    $ 12.59   
    Hypothetical   $ 1,000.00      $ 1,013.01        2.42 %    $ 12.28   
         
Class C   Actual   $ 1,000.00      $ 1,064.50        2.42 %    $ 12.59   
    Hypothetical   $ 1,000.00      $ 1,013.01        2.42 %    $ 12.28   
         
Class F   Actual   $ 1,000.00      $ 1,064.50        2.17 %    $ 11.29   
    Hypothetical   $ 1,000.00      $ 1,014.27        2.17 %    $ 11.02   
         
Class L   Actual   $ 1,000.00      $ 1,065.60        1.92 %    $ 10.00   
    Hypothetical   $ 1,000.00      $ 1,015.53        1.92 %    $ 9.75   
         
Class M   Actual   $ 1,000.00      $ 1,064.50        2.42 %    $ 12.59   
    Hypothetical   $ 1,000.00      $ 1,013.01        2.42 %    $ 12.28   
         
Class X   Actual   $ 1,000.00      $ 1,064.50        2.42 %    $ 12.59   
    Hypothetical   $ 1,000.00      $ 1,013.01        2.42 %    $ 12.28   
         
Class Z   Actual   $ 1,000.00      $ 1,066.90        1.42 %    $ 7.40   
    Hypothetical   $ 1,000.00      $ 1,018.05        1.42 %    $ 7.22   

* 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

 

Prudential International Equity Fund     9   

 

 

Fees and Expenses (continued)

 

 

by the average account value over the period, multiplied by the 184 days in the six- month period ended October 31, 2010, and divided by the 365 days in the Fund’s fiscal year ended October 31, 2010 (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 October 31, 2010

 

Shares      Description    Value (Note 1)  
       

LONG-TERM INVESTMENTS    99.3%

  

COMMON STOCKS    98.6%

  

Australia    7.1%

  

114,774     

Australia & New Zealand Banking Group Ltd.

    $ 2,789,302   
28,665     

Bendigo and Adelaide Bank Ltd.

      254,112   
56,220     

BHP Billiton Ltd.

      2,308,540   
65,367     

Caltex Australia Ltd.

      744,029   
106,054     

Coca-Cola Amatil Ltd.

      1,264,279   
32,557     

Commonwealth Bank of Australia

      1,559,476   
482,173     

Fairfax Media Ltd.(b)

      684,851   
2,500     

Flight Centre Ltd.

      55,883   
399,307     

Fortescue Metals Group Ltd.(a)

      2,444,625   
116,780     

Goodman Fielder Ltd.

      169,871   
24,071     

GPT Group

      65,785   
306,741     

GPT Group(a)

      —   
100,681     

National Australia Bank Ltd.

      2,510,911   
96,523     

OneSteel Ltd.

      255,282   
1,250,658     

OZ Minerals Ltd.

      1,917,248   
25,011     

Rio Tinto Ltd.

      2,025,860   
437,095     

SP AusNet

      398,184   
585,712     

Stockland

      2,162,971   
157,991     

TABCORP Holdings Ltd.

      1,142,126   
9,020     

Wesfarmers Ltd. - PPS

      295,018   
56,720     

Westfield Group

      687,832   
61,565     

Westpac Banking Corp.

      1,368,942   
17,489     

Woolworths Ltd.

      485,672   
             
          25,590,799   

Austria    0.1%

  

2,956     

Erste Group Bank AG

      133,423   
97,528     

Immofinanz Immobilien Anlagen(a)(b)

      384,145   
             
          517,568   

Belgium    0.9%

  

10,915     

AGFA-Gevaert NV(a)

      63,653   
7,651     

Delhaize Group SA

      534,459   
45,111     

KBC Groep NV(a)

      1,962,372   
13,578     

Umicore

      639,129   
             
          3,199,613   

 

See Notes to Financial Statements.

 

Prudential International Equity Fund     11   

 

 

Portfolio of Investments

 

as of October 31, 2010 continued

 

Shares      Description    Value (Note 1)  
       

COMMON STOCKS (Continued)

  

Brazil    1.1%

  

3,200     

Banco Do Brasil SA, ADR

    $ 62,400   
6,000     

Centrais Eletricas Brasileiras SA (Class B Stock), ADR

      98,100   
25,000     

Centrais Eletricas Brasileiras SA, ADR

      349,250   
2,100     

Cia de Bebidas DAS Americas, ADR

      292,404   
5,000     

Cia de Saneamento Basico Do Estado de Sao Paulo, ADR

      229,800   
10,000     

Cia Energetica de Minas Gerais, ADR

      178,400   
17,900     

Petroleo Brasileiro SA, ADR

      610,748   
36,400     

Petroleo Brasileiro SA (Class A Stock), ADR

      1,135,316   
68,800     

Tele Norte Leste Participacoes SA, ADR

      1,055,392   
             
          4,011,810   

Chile    0.3%

  

11,000     

Banco Santander Chile, ADR

      1,019,040   
4,000     

Cia Cervecerias Unidas SA, ADR

      225,000   
             
          1,244,040   

China    2.0%

  

310,000     

Anta Sports Products Ltd.

      639,897   
325,000     

Bank of Communications Co. Ltd. (Class H Stock)

      355,136   
102,000     

China Communications Construction Co. Ltd. (Class H Stock)

      97,509   
137,500     

China Merchants Bank Co. Ltd. (Class H Stock)

      390,260   
126,000     

China Minsheng Banking Corp. Ltd. (Class H Stock)

      117,202   
254,000     

China Petroleum & Chemical Corp. (Class H Stock)

      239,541   
248,000     

CSR Corp. Ltd. (Class H Stock)

      252,439   
476,000     

China Zhongwang Holdings Ltd.

      283,712   
588,000     

Country Garden Holdings Co.

      207,853   
1,264,000     

Dongfeng Motor Group Co. Ltd. (Class H Stock)

      2,739,584   
12,000     

Enn Energy Holdings Ltd.

      36,071   
112,500     

KWG Property Holding Ltd.

      89,115   
184,000     

Longfor Properties Co. Ltd.

      219,103   
408,000     

PICC Property & Casualty Co. Ltd. (Class H Stock)(a)

      602,163   
20,800     

Tencent Holdings Ltd.

      476,310   
40,000     

Weichai Power Co. Ltd. (Class H Stock)

      525,335   
             
          7,271,230   

Denmark    1.4%

  

23,334     

Carlsberg A/S (Class B Stock)

      2,551,973   
3,044     

Coloplast A/S (Class B Stock)(b)

      376,942   
19,818     

Novo Nordisk A/S (Class B Stock)

      2,086,066   
             
          5,014,981   

 

See Notes to Financial Statements.

 

12   Visit our website at www.prudentialfunds.com

 

 

 

 

Shares      Description    Value (Note 1)  
       

COMMON STOCKS (Continued)

   

Finland    1.8%

  

30,618     

Fortum Oyj

    $ 868,055   
55,541     

Kone Oyj (Class B Stock)

      2,976,142   
26,376     

Pohjola Bank PLC

      333,881   
28,023     

Sampo Oyj (Class A Stock)

      785,123   
108,394     

Stora ENSO Oyj (Class R Stock)

      1,077,166   
5,221     

Wartsila Oyj

      366,238   
             
          6,406,605   

France    9.7%

  

22,878     

BNP Paribas

      1,673,285   
6,433     

Bouygues SA

      283,513   
15,011     

Bureau Veritas SA

      1,109,388   
22,647     

Cap Gemini SA

      1,155,376   
9,222     

Casino Guichard Perrachon SA

      866,379   
1,282     

Christian Dior SA

      185,478   
49,617     

Cie de Saint-Gobain

      2,317,564   
3,132     

Cie Generale des Etablissements Michelin (Class B Stock)

      249,125   
5,126     

Dassault Systemes SA

      393,177   
683     

Eurazeo

      51,903   
34,662     

France Telecom SA

      832,913   
4,964     

GDF Suez

      198,148   
2,069     

Gecina SA

      251,106   
5,175     

JCDecaux SA(a)

      151,579   
2,574     

LVMH Moet Hennessy Louis Vuitton SA

      403,391   
387,608     

Natixis(a)

      2,377,470   
1,838     

Neopost SA

      152,696   
7,849     

PPR SA

      1,286,882   
23,765     

Renault SA(a)

      1,320,572   
55,201     

Safran SA

      1,750,169   
65,875     

Sanofi-Aventis SA

      4,600,770   
19,455     

Schneider Electric SA

      2,761,917   
1,108     

Societe BIC SA

      98,310   
40,713     

Societe Generale

      2,437,998   
1,513     

Sodexo

      98,467   
10,957     

STMicroelectronics NV

      95,831   
98,622     

Total SA

      5,359,429   
9,217     

Vinci SA

      492,350   
78,010     

Vivendi SA

      2,225,243   
             
          35,180,429   

 

See Notes to Financial Statements.

 

Prudential International Equity Fund     13   

 

 

Portfolio of Investments

 

as of October 31, 2010 continued

 

Shares      Description    Value (Note 1)  
       

COMMON STOCKS (Continued)

   

Germany    7.9%

  

7,623     

Adidas AG

    $ 497,279   
25,034     

Allianz SE

      3,137,220   
62,034     

BASF SE

      4,513,824   
7,584     

Bayerische Motoren Werke AG

      543,712   
31,138     

Daimler AG(a)

      2,055,527   
49,967     

Deutsche Bank AG

      2,880,532   
67,806     

Deutsche Post AG

      1,264,597   
95,501     

E.ON AG

      2,990,679   
41,049     

Hannover Rueckversicherung AG

      2,076,760   
4,031     

Henkel AG & Co. KGaA

      200,206   
120,740     

Infineon Technologies AG(a)

      950,473   
9,837     

Linde AG

      1,416,356   
29,246     

RWE AG

      2,096,298   
13,624     

SAP AG

      710,506   
25,332     

Siemens AG

      2,893,917   
3,427     

TUI AG(a)

      40,037   
1,076     

Volkswagen AG

      141,312   
             
          28,409,235   

Greece    0.4%

  

44,557     

OPAP SA

      840,300   
37,353     

Public Power Corp. SA

      626,458   
             
          1,466,758   

Hong Kong    2.5%

  

51,100     

ASM Pacific Technology Ltd.

      460,815   
55,000     

Belle International Holdings Ltd.

      99,339   
44,200     

Cheung Kong Holdings Ltd.

      672,872   
30,000     

China Resources Enterprise Ltd.

      126,754   
63,000     

China Yurun Food Group Ltd.

      245,051   
23,000     

Hang Lung Properties, Ltd.

      112,608   
81,100     

Hysan Development Co. Ltd.

      313,362   
291,900     

Link REIT (The)

      900,037   
182,300     

Orient Overseas International Ltd.

      1,598,102   
144,800     

Sands China Ltd.(a)

      315,706   
11,000     

Sun Hung Kai Properties Ltd.

      188,460   
88,600     

Swire Pacific Ltd. (Class A Stock)

      1,257,345   
228,700     

Wharf Holdings Ltd.

      1,501,800   
150,900     

Wheelock & Co. Ltd.

      528,551   
252,400     

Wynn Macau Ltd.(a)

      558,121   

 

See Notes to Financial Statements.

 

14   Visit our website at www.prudentialfunds.com

 

 

 

 

Shares      Description    Value (Note 1)  
       

COMMON STOCKS (Continued)

   

Hong Kong (cont’d.)

  

39,500     

Yue Yuen Industrial Holdings Ltd.

    $ 141,667   
             
          9,020,590   

India    0.5%

  

2,213     

Larsen & Toubro Ltd., GDR

      101,013   
4,000     

State Bank of India, GDR

      560,960   
43,000     

Tata Motors Ltd., ADR(b)

      1,209,160   
5,000     

Wipro Ltd., ADR

      71,400   
             
          1,942,533   

Israel    0.2%

  

25,996     

Bank Hapoalim BM(a)

      117,913   
7,370     

Teva Pharmaceutical Industries Ltd.

      383,755   
3,400     

Teva Pharmaceutical Industries Ltd., ADR

      176,460   
             
          678,128   

Italy    2.6%

  

532,092     

ENEL SpA

      3,038,188   
94,578     

ENI SpA

      2,131,161   
270,903     

Snam Rete Gas SpA

      1,467,647   
1,026,127     

Telecom Italia SpA

      1,573,845   
1,010,423     

Telecom Italia SpA-RSP

      1,237,557   
             
          9,448,398   

Japan    19.7%

  

19,100     

77 Bank Ltd. (The)

      90,195   
52,700     

AEON Co. Ltd.

      620,848   
37,100     

Aisin Seiki Co. Ltd.

      1,165,052   
10,000     

Ajinomoto Co., Inc.

      95,439   
214,700     

Aozora Bank Ltd.

      360,190   
100,200     

Asahi Kasei Corp.

      588,972   
89     

Central Japan Railway Co.

      673,555   
145,000     

Chuo Mitsui Trust Holdings, Inc.

      524,357   
4,700     

Coca-Cola West Co. Ltd.

      71,899   
135,000     

Cosmo Oil Co. Ltd.

      364,049   
19,800     

Daicel Chemical Industries Ltd.

      137,790   
150,000     

Daido Steel Co. Ltd.

      764,260   
63,600     

Dena Co. Ltd.

      1,645,523   
57,200     

Denso Corp.

      1,780,614   
20,000     

Fanuc Ltd.

      2,895,489   

 

See Notes to Financial Statements.

 

Prudential International Equity Fund     15   

 

 

Portfolio of Investments

 

as of October 31, 2010 continued

 

Shares      Description    Value (Note 1)  
       

COMMON STOCKS (Continued)

   

Japan (cont’d.)

  

612,100     

Fuji Electric Holdings Co. Ltd.

    $ 1,460,460   
128,000     

Fuji Heavy Industries Ltd.

      885,995   
37,500     

Fujifilm Holdings Corp.

      1,251,243   
280,100     

Fujitsu Ltd.

      1,914,440   
272,500     

Fukuoka Financial Group, Inc.

      1,059,929   
15,800     

Gunma Bank Ltd. (The)

      79,324   
550,100     

Hitachi Ltd.

      2,488,336   
28,000     

Hitachi Metals Ltd.

      319,075   
700     

Idemitsu Kosan Co. Ltd.

      58,892   
98     

Inpex Holdings, Inc.

      509,668   
548,700     

Isuzu Motors Ltd.

      2,113,794   
380,150     

JX Holdings, Inc.

      2,234,509   
18,500     

Kamigumi Co. Ltd.

      144,607   
476,000     

Kawasaki Kisen Kaisha Ltd.

      1,857,388   
727,000     

Kobe Steel Ltd.

      1,599,093   
127,500     

Kuraray Co. Ltd.

      1,826,861   
10,300     

Kyocera Corp.

      1,027,824   
178,722     

Marubeni Corp.

      1,123,814   
14,700     

Maruichi Steel Tube Ltd.

      291,004   
49,100     

Medipal Holdings Corp.

      573,555   
210,400     

Mitsubishi Chemical Holdings Corp.

      1,085,075   
57,400     

Mitsubishi Corp.

      1,380,254   
256,000     

Mitsubishi Electric Corp.

      2,401,889   
14,000     

Mitsubishi Gas Chemical Co., Inc.

      86,641   
47,300     

Mitsubishi UFJ Financial Group, Inc.

      220,424   
44,800     

Mitsui & Co. Ltd.

      704,262   
311,000     

Mitsui Chemicals, Inc.

      912,091   
491,000     

Mitsui Mining & Smelting Co. Ltd.

      1,494,905   
106,000     

Mitsui OSK Lines, Ltd.

      679,707   
518,900     

Mizuho Financial Group, Inc.

      754,459   
7,300     

Murata Manufacturing Co. Ltd.

      410,495   
96,900     

NHK Spring Co. Ltd.

      822,452   
36,100     

Nippon Steel Corp.

      113,499   
53,500     

Nippon Telegraph & Telephone Corp.

      2,430,005   
184,800     

Nishi-Nippon City Bank Ltd. (The)

      505,232   
351,000     

Nisshin Steel Co. Ltd.

      632,472   
5,300     

Nisshinbo Holdings, Inc.

      53,678   
7,100     

Nitori Holdings Ltd.

      624,680   
18,300     

Nitto Denko Corp.

      684,516   
27,700     

NSK Ltd.

      209,979   
3,280     

OBIC Co. Ltd.

      605,701   

 

See Notes to Financial Statements.

 

16   Visit our website at www.prudentialfunds.com

 

 

 

 

Shares      Description    Value (Note 1)  
       

COMMON STOCKS (Continued)

   

Japan (cont’d.)

  

5,340     

ORIX Corp.

    $ 487,083   
220,000     

Resona Holdings, Inc.(b)

      1,755,188   
3,100     

Rinnai Corp.

      188,766   
97,100     

Sapporo Hokuyo Holdings, Inc.

      400,611   
23,300     

Sega Sammy Holdings, Inc.

      380,467   
27,200     

Sekisui Chemical Co. Ltd.

      173,063   
27,400     

Sekisui House Ltd.

      257,758   
792,700     

Shinsei Bank Ltd.(a)(b)

      630,456   
8,200     

SMC Corp.

      1,253,386   
43,800     

Softbank Corp.

      1,409,743   
290,600     

Sojitz Corp.

      534,470   
157,200     

Sumitomo Corp.

      1,992,594   
70,100     

Sumitomo Electric Industries Ltd.

      894,653   
23,500     

Sumitomo Metal Mining Co. Ltd.

      373,220   
40,900     

Sumitomo Mitsui Financial Group, Inc.

      1,225,933   
23,700     

Sumitomo Trust & Banking Co. Ltd. (The)

      129,883   
16,000     

Suzuken Co. Ltd.

      503,243   
45,000     

Taiheiyo Cement Corp.(a)

      48,652   
9,000     

Tokyo Electron Ltd.

      508,326   
209,600     

Tokyo Gas Co. Ltd.

      987,180   
29,000     

Toyota Industries Corp.

      818,069   
35,434     

Toyota Motor Corp.

      1,258,926   
35,500     

Toyota Tsusho Corp.

      551,007   
21,600     

Unicharm Corp.

      825,401   
81     

West Japan Railway Co.

      300,768   
5,074     

Yahoo! Japan Corp.

      1,775,616   
1,430     

Yamada Denki Co. Ltd.

      92,940   
5,000     

Yamaha Motor Co. Ltd.(a)

      76,799   
             
          71,244,660   

Mexico    0.5%

  

16,400     

America Movil SAB de CV (Ser. L), ADR

      939,064   
69,400     

Cemex SAB de CV, ADR(a)

      608,638   
10,000     

Telefonos de Mexico SAB de CV (Ser. L), ADR

      154,800   
             
          1,702,502   

Netherlands    5.6%

  

3,525     

Akzo Nobel NV

      209,295   
33,658     

ASML Holding NV

      1,110,706   
7,209     

Heineken Holding NV

      310,438   

 

See Notes to Financial Statements.

 

Prudential International Equity Fund     17   

 

 

Portfolio of Investments

 

as of October 31, 2010 continued

 

Shares      Description    Value (Note 1)  
       

COMMON STOCKS (Continued)

   

Netherlands (cont’d.)

  

10,770     

Heineken NV

    $ 545,927   
214,724     

ING Groep NV(a)

      2,292,214   
180,391     

Koninklijke Ahold NV

      2,493,121   
91,290     

Koninklijke KPN NV

      1,524,698   
24,631     

Koninklijke Philips Electronics NV

      744,940   
148,727     

Royal Dutch Shell PLC (Class A Stock)

      4,828,242   
127,205     

Royal Dutch Shell PLC (Class B Stock)

      4,073,503   
71,162     

Unilever NV

      2,110,129   
             
          20,243,213   

Norway    0.5%

  

98,809     

DnB NOR ASA

      1,356,460   
15,071     

Statoil ASA

      329,130   
             
          1,685,590   

Portugal    0.7%

  

585,109     

EDP - Energias de Portugal SA

      2,238,674   
22,116     

Jeronimo Martins SGPS SA

      331,821   
             
          2,570,495   

Russia    0.8%

  

17,500     

Gazprom OAO, ADR

      383,600   
5,000     

LUKOIL OAO, ADR

      279,250   
59,117     

MMC Norilsk Nickel, ADR

      1,102,532   
10,218     

Sistema JSFC, GDR

      263,624   
33,000     

Surgutneftegas OJSC, ADR

      319,770   
10,000     

Tatneft, ADR

      316,000   
7,500     

Uralkali, GDR

      185,625   
             
          2,850,401   

Singapore    1.8%

  

159,500     

Fraser and Neave Ltd.

      768,972   
1,569,000     

Genting Singapore PLC(a)

      2,630,557   
50,000     

Olam International Ltd.

      120,915   
99,500     

Oversea-Chinese Banking Corp. Ltd.

      692,648   
107,400     

SembCorp Industries Ltd.

      380,045   
105,400     

SembCorp Marine Ltd.

      374,596   
171,300     

UOL Group Ltd.

      602,190   
162,600     

Wilmar International Ltd.

      804,018   
             
          6,373,941   

 

See Notes to Financial Statements.

 

18   Visit our website at www.prudentialfunds.com

 

 

 

 

Shares      Description    Value (Note 1)  
       

COMMON STOCKS (Continued)

   

South Africa    0.3%

  

17,500     

AngloGold Ashanti Ltd., ADR(b)

    $ 824,425   
14,600     

Gold Fields Ltd., ADR

      230,242   
             
          1,054,667   

South Korea    0.9%

  

30,000     

LG Display Co. Ltd., ADR(b)

      516,300   
9,500     

POSCO, ADR

      987,430   
3,000     

Samsung Electronics Co. Ltd., GDR

      993,112   
8,700     

Shinhan Financial Group Co. Ltd., ADR(b)

      676,599   
             
          3,173,441   

Spain    3.6%

  

175,104     

Banco Bilbao Vizcaya Argentaria SA

      2,303,070   
80,170     

Banco Popular Espanol SA(b)

      518,518   
172,100     

Banco Santander Central Hispano SA

      2,211,103   
69,080     

Criteria CaixaCorp SA

      390,065   
5,604     

Enagas

      123,508   
48,982     

Gas Natural SDG SA

      717,185   
42,022     

Iberdrola SA

      354,428   
4,000     

Inditex SA

      334,090   
40,303     

Repsol YPF SA

      1,117,674   
185,865     

Telefonica SA

      5,018,554   
             
          13,088,195   

Sweden    2.1%

  

58,246     

Atlas Copco AB (Class A Stock)

      1,217,301   
53,321     

Hennes & Mauritz AB (H&M) (Class B Stock)

      1,879,105   
985     

Modern Times Group AB (Class B Stock)

      70,649   
95,734     

Nordea Bank AB

      1,054,132   
21,558     

Scania AB (Class B Stock)

      458,293   
21,937     

Securitas AB (Class B Stock)

      239,907   
290,700     

Skandinaviska Enskilda Banken (Class A Stock)

      2,252,173   
4,558     

SKF AB (Class B Stock)

      117,709   
11,291     

Tele2 AB (Class B Stock)

      248,483   
             
          7,537,752   

Switzerland    6.4%

  

7,539     

Credit Suisse Group AG

      311,428   
97,613     

Nestle SA

      5,346,619   
95,918     

Novartis AG

      5,560,817   

 

See Notes to Financial Statements.

 

Prudential International Equity Fund     19   

 

 

Portfolio of Investments

 

as of October 31, 2010 continued

 

Shares      Description    Value (Note 1)  
       

COMMON STOCKS (Continued)

   

Switzerland (cont’d.)

  

26,589     

Roche Holding AG

    $ 3,904,385   
589     

Sika AG

      1,167,166   
20,457     

Swatch Group AG (The)

      1,421,939   
196,521     

UBS AG(a)

      3,327,107   
8,847     

Zurich Financial Services AG

      2,165,787   
             
          23,205,248   

Taiwan    0.7%

  

31,300     

AU Optronics Corp., ADR(a)

      313,939   
169,600     

Taiwan Semiconductor Manufacturing Co. Ltd., ADR(b)

      1,850,336   
93,400     

United Microelectronics Corp., ADR

      288,606   
             
          2,452,881   

Thailand    0.1%

  

143,500     

CP ALL PCL

      213,000   

United Kingdom    16.4%

  

392,647     

3i Group PLC

      1,884,967   
29,110     

Anglo American PLC

      1,356,427   
88,081     

AstraZeneca PLC

      4,416,893   
243,454     

Aviva PLC

      1,552,991   
37,405     

Babcock International Group PLC

      347,630   
73,242     

BAE Systems PLC

      404,540   
71,002     

Barclays PLC

      312,414   
8,030     

BG Group PLC

      156,398   
15,005     

BHP Billiton PLC

      532,200   
578,246     

BP PLC

      3,945,282   
96,759     

British American Tobacco

      3,690,014   
312,214     

BT Group PLC

      768,929   
31,804     

Cape PLC

      188,302   
128,805     

Diageo PLC

      2,377,634   
253,542     

GlaxoSmithKline PLC

      4,960,498   
429,708     

HSBC Holdings PLC

      4,469,354   
70,307     

Imperial Tobacco Group PLC

      2,252,014   
74,145     

Investec PLC

      591,896   
376,850     

Kingfisher PLC

      1,435,953   
1,602,569     

Legal & General Group PLC

      2,578,162   
3,080,278     

Lloyds Banking Group PLC(a)

      3,402,679   
58,801     

Next PLC

      2,152,934   
505,818     

Old Mutual PLC

      1,052,842   
102,957     

Prudential PLC

      1,040,161   

 

See Notes to Financial Statements.

 

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Shares      Description    Value (Note 1)  
       

COMMON STOCKS (Continued)

   

United Kingdom (cont’d.)

  

43,292     

Reckitt Benckiser Group PLC

    $ 2,421,683   
168,783     

Rexam PLC

      859,222   
34,818     

Rio Tinto PLC

      2,251,722   
6,474     

Standard Chartered PLC

      187,297   
23,477     

Tesco PLC

      160,575   
23,608     

Unilever PLC

      680,534   
2,587,910     

Vodafone Group PLC

      7,043,272   
             
          59,475,419   
             
    

Total common stocks
(cost $302,182,795)

      356,274,122   
             

EXCHANGE TRADED FUND    0.5%

  

United States    0.5%

  

43,000     

iShares MSCI Emerging Markets Index Fund
(cost $1,754,227)

      1,983,590   
             

PREFERRED STOCKS    0.2%

  

Germany    0.2%

  

4,512     

Henkel AG & Co. KGaA

      266,140   
4,107     

RWE AG

      278,205   
             
    

Total preferred stocks
(cost $559,422)

      544,345   
             

RIGHT

  

Belgium

  

10,915     

AGFA-Gevaert NV(a)
(cost $0)

      3,661   
             
    

Total long-term investments
(cost $304,496,444)

      358,805,718   
             
Principal
Amount (000)		              

SHORT-TERM INVESTMENTS    2.4%

  

United States Government Security    0.1%

  

$500     

U.S. Treasury Bills 0.150%, 12/16/10(c)(d)
(cost $499,907)

      499,916   
             

 

See Notes to Financial Statements.

 

Prudential International Equity Fund     21   

 

 

Portfolio of Investments

 

as of October 31, 2010 continued

 

Shares      Description    Value (Note 1)  
       

SHORT-TERM INVESTMENTS (Continued)

   

Affiliated Money Market Mutual Fund    2.3%

  

8,325,875     

Prudential Investment Portfolios 2 - Prudential Core Taxable
Money Market Fund
(cost $8,325,875; includes $8,324,382 of cash
collateral received for securities on loan) (Note 3)(e)(f)

    $ 8,325,875   
             
    

Total short-term investments
(cost $8,825,782)

      8,825,791   
             
    

Total Investments    101.7%
(cost $313,322,226; Note 5)

      367,631,509   
    

Liabilities in excess of other assets(g)    (1.7%)

      (6,132,941 ) 
             
    

Net Assets    100.0%

    $ 361,498,568   
             

 

The following abbreviations are used in the portfolio descriptions:

ADR—American Depositary Receipt.

GDR—Global Depositary Receipt.

PPS—Partially Protected Shares.

REIT—Real Estate Investment Trust.

(a) Non-income producing security.
(b) All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is $7,897,330; cash collateral of $8,324,382 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments.
(c) Rate quoted represents yield-to-maturity as of purchase date.
(d) Represents security, or a portion thereof, segregated as collateral for financial futures contracts.
(e) Prudential Investments LLC, the manager of the Fund, also serves as manager of the Prudential Investment Portfolios 2-Prudential Core Taxable Money Market Fund.
(f) Represents security, or a portion thereof, purchased with cash collateral received for securities on loan.
(g) Liabilities in excess of other assets include net unrealized appreciation (depreciation) on financial futures contracts as follows:

 

Open futures contracts outstanding at October 31, 2010:

 

Number of
Contracts		     Type   Expiration
Date		     Value at
October 31,
2010		     Value at
Trade
Date		     Unrealized
Appreciation
(Depreciation)		  
  Long Positions:        
  4      SPI 200 Futures Index     Dec. 2010      $ 455,196      $ 451,749      $ 3,447   
  7      MSCI Taiwan Index     Nov. 2010        205,730        206,045        (315 ) 
  15      FTSE 100 Index     Dec. 2010        1,360,643        1,333,458        27,185   
  38      DJ Euro Stoxx 50 Index     Dec. 2010        1,501,510        1,457,460        44,050   
               
          $ 74,367   
               

 

See Notes to Financial Statements.

 

22   Visit our website at www.prudentialfunds.com

 

 

 

 

 

Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below.

 

Level 1—quoted prices in active markets for identical securities, generally for stocks and mutual funds with daily NAVs

 

Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc. and amortized cost), generally for foreign stocks priced through vendor modeling tools and debt securities

 

Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

 

The following is a summary of the inputs used as of October 31, 2010 in valuing the Fund’s assets carried at fair value:

 

     Level 1      Level 2      Level 3  

Investments in Securities

         

Common Stocks

         

Australia

    $ 25,590,799       $   —       $   —   

Austria

      517,568         —         —   

Belgium

      3,199,613         —         —   

Brazil

      4,011,810         —         —   

Chile

      1,244,040         —         —   

China

      7,271,230         —         —   

Denmark

      5,014,981         —         —   

Finland

      6,406,605         —         —   

France

      35,180,429         —         —   

Germany

      28,409,235         —         —   

Greece

      1,466,758         —         —   

Hong Kong

      9,020,590         —         —   

India

      1,942,533         —         —   

Israel

      678,128         —         —   

Italy

      9,448,398         —         —   

Japan

      71,244,660         —         —   

Mexico

      1,702,502         —         —   

Netherlands

      20,243,213         —         —   

Norway

      1,685,590         —         —   

Portugal

      2,570,495         —         —   

Russia

      2,850,401         —         —   

Singapore

      6,373,941         —         —   

South Africa

      1,054,667         —         —   

South Korea

      3,173,441         —         —   

Spain

      13,088,195         —         —   

Sweden

      7,537,752         —         —   

 

See Notes to Financial Statements.

 

Prudential International Equity Fund     23   

 

 

Portfolio of Investments

 

as of October 31, 2010 continued

 

     Level 1      Level 2      Level 3  

Common Stocks (continued):

         

Switzerland

    $ 23,205,248       $ —       $ —   

Taiwan

      2,452,881         —         —   

Thailand

      213,000         —         —   

United Kingdom

      59,475,419         —         —   

Exchange Traded Fund

         

United States

      1,983,590         —         —   

Preferred Stocks

         

Germany

      544,345         —         —   

Right

         

Belgium

      3,661         

Affiliated Money Market Mutual Fund

      8,325,875         —         —   

United States Government Security

      —         499,916         —   

Other Financial Instruments*

         

Futures Contracts

      74,367         —         —   
                          

Total

    $ 367,205,960       $ 499,916       $   —   
                          

 

* Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as futures, forwards and swap contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

 

Fair value of Level 2 investments at October 31, 2009 was $566,483,973. $372,089,631 was transferred out of Level 2 into Level 1 at October 31, 2010 as a result of using third-party vendor modeling tools due to the lack of any significant market movements between the time at which the Series valued its securities and the earlier closing of foreign markets.

 

It is the Series’ policy to recognize transfers in and transfers out at the fair value as of the beginning of period.

 

The industry classification of portfolio holdings and liabilities in excess of other assets shown as a percentage of net assets as of October 31, 2010 were as follows:

 

Commercial Banks

      13.0 % 

Oil, Gas & Consumable Fuels

      8.1  

Pharmaceuticals

      7.2  

Metals & Mining

      6.1  

Insurance

      4.2  

Diversified Telecommunication Services

      4.1  

Chemicals

      3.7  

Machinery

      3.3  

Automobiles

      3.1  

Electric Utilities

      3.1  

Wireless Telecommunication Services

      2.7  

Food Products

      2.6  

Capital Markets

      2.5  

Affiliated Money Market Mutual Fund (including 2.3% of collateral received for securities on loan)

      2.3  

Beverages

      2.1  

 

See Notes to Financial Statements.

 

24   Visit our website at www.prudentialfunds.com

 

 

 

 

Electrical Equipment

      2.1 %

Electronic Equipment & Instruments

      1.7  

Food & Staples Retailing

      1.7  

Real Estate Management & Development

      1.7  

Semiconductors & Semiconductor Equipment

      1.7  

Trading Companies & Distributors

      1.7  

Hotels, Restaurants & Leisure

      1.6  

Tobacco

      1.6  

Auto Components

      1.3  

Industrial Conglomerates

      1.3  

Household Products

      1.2  

Specialty Retail

      1.2  

Marine

      1.1  

Multiline Retail

      1.1  

Real Estate Investment Trusts (REITs)

      1.1  

Gas Utilities

      0.9  

Media

      0.9  

Textiles, Apparel & Luxury Goods

      0.9  

Diversified Financial Services

      0.8  

Multi-Utilities

      0.7  

Aerospace

      0.6  

Building Products

      0.6  

Exchange Traded Fund

      0.6  

Internet Software & Services

      0.6  

Computers & Peripherals

      0.5  

Internet & Catalog Retail

      0.5  

IT Services

      0.5  

Air Freight & Logistics

      0.4  

Healthcare Providers & Services

      0.3  

Paper & Forest Products

      0.3  

Professional Services

      0.3  

Road & Rail

      0.3  

Software

      0.3  

Commercial Services & Supplies

      0.2  

Construction & Engineering

      0.2  

Construction Materials

      0.2  

Containers & Packaging

      0.2  

Real Estate Investment Trusts

      0.2  

Consumer Finance

      0.1  

Healthcare Equipment & Supplies

      0.1  

Leisure Equipment & Products

      0.1  

United States Government Security

      0.1  

Water Utilities

      0.1  
        
     101.7  

Liabilities in excess of other assets

      (1.7 )
        
     100.0 % 
        

 

See Notes to Financial Statements.

 

Prudential International Equity Fund     25   

 

 

Portfolio of Investments

 

as of October 31, 2010 continued

 

 

The Fund invested in derivative instruments during the reporting period. The primary types of risk associated with these derivative instruments are equity risk. The effect of such derivative instruments on the Fund’s financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.

 

Fair values of derivative instruments as of October 31, 2010 as presented in the Statement of Assets and Liabilities:

 

Derivatives not designated
as hedging instruments,
carried at fair value

   

Asset Derivatives

    

Liability Derivatives

  
  

Balance
Sheet Location

    Fair
Value		    

Balance
Sheet Location

    Fair
Value		  
Equity contracts    Due from broker— variation margin    $ 74,682 *    Due from broker— variation margin    $ 315 * 
Equity contracts    Unaffiliated Investments      3,661      —      —   
                      

Total

       $ 78,343         $ 315   
                      

 

* 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.

 

The effects of derivative instruments on the Statement of Operations for the year ended October 31, 2010 are as follows:

 

Amount of Realized Gain or (Loss) on Derivatives Recognized in Income

  

Derivatives not designated as hedging
instruments, carried at fair value

      Futures      Warrants        Rights        Total  

Equity contracts

      $ (35,335 )     $ 3,873         $ 728,841         $ 697,379   
                                         

Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income

  

Derivatives not designated as hedging
instruments, carried at fair value

      Futures        Rights      Total  

Equity contracts

      $ 311,048         $ (102,870 )     $ 208,178   
                              

 

For the year ended October 31, 2010, the average value at trade date for futures contracts was $8,028,818.

 

See Notes to Financial Statements.

 

26   Visit our website at www.prudentialfunds.com

 

Financial Statements

 

 

OCTOBER 31, 2010   ANNUAL REPORT

 

Prudential International Equity Fund

 

 

Statement of Assets and Liabilities

 

as of October 31, 2010

 

Assets

         

Investments at value, including securities on loan of $7,897,330

   

Unaffiliated investments (cost $304,996,351)

    $ 359,305,634   

Affiliated investments (cost $8,325,875)

      8,325,875   

Foreign currency, at value (cost $780,664)

      784,459   

Foreign tax reclaim receivable

      1,357,905   

Dividends receivable

      675,577   

Receivable for investments sold

      601,636   

Receivable for Series shares sold

      182,978   

Due from broker—variation margin

      15,402   

Prepaid expenses

      6,317   
        

Total assets

      371,255,783   
        

Liabilities

         

Payable to broker for collateral for securities on loan (Note 3)

      8,324,382   

Payable for Series shares reacquired

      542,451   

Accrued expenses

      392,699   

Management fee payable

      255,160   

Distribution fee payable

      108,531   

Loan payable

      69,000   

Affiliated transfer agent fee payable

      56,886   

Deferred directors’ fees

      8,106   
        

Total liabilities

      9,757,215   
        

Net assets

    $ 361,498,568   
        
          

Net assets were comprised of:

   

Common stock, at par

    $ 588,048   

Paid-in capital in excess of par

      569,108,829   
        
     569,696,877   

Undistributed net investment income

      5,112,695   

Accumulated net realized loss on investment and foreign currency transactions

      (267,842,917 ) 

Net unrealized appreciation on investments and foreign currencies

      54,531,913   
        

Net assets, October 31, 2010

    $ 361,498,568   
        

 

See Notes to Financial Statements.

 

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Class A

         

Net asset value and redemption price per share
($260,555,349 ÷ 42,214,816 shares of common stock issued and outstanding)

    $ 6.17   

Maximum sales charge (5.50% of offering price)

      0.36   
        

Maximum offering price to public

    $ 6.53   
        

Class B

         

Net asset value, offering price and redemption price per share
($9,160,233 ÷ 1,542,800 shares of common stock issued and outstanding)

    $ 5.94   
        

Class C

         

Net asset value, offering price and redemption price per share
($26,624,787 ÷ 4,486,043 shares of common stock issued and outstanding)

    $ 5.94   
        

Class F

         

Net asset value, offering price and redemption price per share
($3,355,313 ÷ 564,755 shares of common stock issued and outstanding)

    $ 5.94   
        

Class L

         

Net asset value, offering price and redemption price per share
($10,918,699 ÷ 1,768,482 shares of common stock issued and outstanding)

    $ 6.17   

Maximum sales charge (5.75% of offering price)

      0.38   
        

Maximum offering price to public

    $ 6.55   
        

Class M

         

Net asset value, offering price and redemption price per share
($2,985,351 ÷ 502,836 shares of common stock issued and outstanding)

    $ 5.94   
        

Class X

         

Net asset value, offering price and redemption price per share
($3,066,410 ÷ 516,454 shares of common stock issued and outstanding)

    $ 5.94   
        

Class Z

         

Net asset value, offering price and redemption price per share
($44,832,426 ÷ 7,208,594 shares of common stock issued and outstanding)

    $ 6.22   
        

 

See Notes to Financial Statements.

 

Prudential International Equity Fund     29   

 

 

Statement of Operations

 

Year Ended October 31, 2010

 

Net Investment Income

         

Income

   

Unaffiliated dividend (net of foreign withholding taxes of $1,159,379)

    $ 14,324,669   

Affiliated income from securities loaned, net

      13,433   

Interest

      7,864   

Affiliated dividend income

      2,432   
        

Total income

      14,348,398   
        

Expenses

   

Management fee

      3,803,410   

Distribution fee—Class A

      772,581   

Distribution fee—Class B

      92,448   

Distribution fee—Class C

      269,724   

Distribution fee—Class F

      30,474   

Distribution fee—Class L

      56,075   

Distribution fee—Class M

      44,409   

Distribution fee—Class X

      40,194   

Transfer agent’s fees and expenses (including affiliated expense of $548,400) (Note 3)

      1,315,000   

Custodian’s fees and expenses

      330,000   

Reports to shareholders

      213,000   

Registration fees

      75,000   

Legal fees and expenses

      56,000   

Audit fee

      29,000   

Directors’ fees

      25,000   

Insurance

      12,000   

Loan interest expense (Note 8)

      1,799   

Miscellaneous

      65,916   
        

Total expenses

      7,232,030   
        

Net investment income

      7,116,368   
        

Realized And Unrealized Gain (Loss) On Investments, Futures And Foreign Currency Transactions

  

Net realized loss on:

   

Investment transactions

      (24,893,807 ) 

Foreign currency transactions

      (431,185 ) 

Financial futures transactions

      (35,335 ) 
        
     (25,360,327 ) 
        

Net change in unrealized appreciation (depreciation) on:

   

Investments

      30,887,292   

Foreign currencies

      (21,125 ) 

Financial futures contracts

      311,048   
        
     31,177,215   
        

Net gain on investments and foreign currencies

      5,816,888   
        

Net Increase In Net Assets Resulting From Operations

    $ 12,933,256   
        

 

See Notes to Financial Statements.

 

30   Visit our website at www.prudentialfunds.com

 

 

Statement of Changes in Net Assets

 

 

     Year Ended October 31,  
     2010      2009  

Increase (Decrease) In Net Assets

                  

Operations

      

Net investment income

    $ 7,116,368       $ 8,785,844   

Net realized loss on investment and foreign currency transactions

      (25,360,327 )       (203,760,871 ) 

Net change in unrealized appreciation (depreciation) on investments and foreign currencies

      31,177,215         308,709,663   
                 

Net increase in net assets resulting from operations

      12,933,256         113,734,636   
                 

Dividends and distributions (Note 1)

      

Dividends from net investment income

      

Class A

      (4,729,701 )       (8,495,865 ) 

Class B

      (120,437 )       (243,083 ) 

Class C

      (351,530 )       (707,927 ) 

Class F

      (73,250 )       (192,959 ) 

Class L

      (189,123 )       (383,035 ) 

Class M

      (75,237 )       (258,869 ) 

Class X

      (67,157 )       (200,563 ) 

Class Z

      (4,587,489 )       (6,584,652 ) 
                 
     (10,193,924 )       (17,066,953 ) 
                 

Series share transactions (Net of share conversions) (Note 6)

      

Net proceeds from shares sold

      46,181,096         73,397,047   

Net asset value of shares issued in reinvestment of dividends

      9,997,085         16,444,537   

Cost of shares reacquired

      (277,348,125 )       (108,323,489 ) 
                 

Net decrease in net assets from Series share transactions

      (221,169,944 )       (18,481,905 ) 
                 

Capital Contributions (Note 6)

      

Proceeds from regulatory settlement

      4,717,145         —   
                 

Total increase (decrease)

      (213,713,467 )       78,185,778   

Net Assets:

                  

Beginning of year

      575,212,035         497,026,257   
                 

End of year (a)

    $ 361,498,568       $ 575,212,035   
                 

(a) Includes undistributed net investment income of:

    $ 5,112,695       $ 8,308,500   
                 

 

See Notes to Financial Statements.

 

Prudential International Equity Fund     31   

 

 

Notes to Financial Statements

 

 

Prudential World Fund, Inc. (the “Fund”) is registered under the Investment Company Act of 1940, as amended, as an open-end, diversified management investment company and currently consists of two series: Prudential International Equity Fund (the “Series”) and Prudential International Value Fund. These financial statements relate to the Prudential International Equity Fund. The financial statements of the other series are not presented herein. The Series commenced investment operations in March 2000. The investment objective of the Series is to achieve long-term growth of capital. The Series seeks to achieve its objective primarily through investment in equity-related securities of foreign issuers.

 

Note 1. Accounting Policies

 

The following is a summary of significant accounting policies followed by the Fund and the Series in the preparation of its financial statements.

 

Securities Valuation: Securities listed on a securities exchange (other than options on securities and indices) are valued at the last sale price on such exchange on the day of valuation or, if there was no sale on such day, at the mean between the last reported bid and asked prices, or at the last bid price on such day in the absence of an asked price. Securities traded via NASDAQ are valued at the NASDAQ official closing price (“NOCP”) on the day of valuation, or if there was no NOCP, at the last sale price. Securities that are actively traded in the over-the-counter market, including listed securities for which the primary market is believed by Prudential Investments LLC (“PI” or “Manager”), in consultation with the subadvisers, to be over-the-counter, are valued at market value using prices provided by an independent pricing agent or principal market maker. Options on securities and indices traded on an exchange are valued at the last sale price as of the close of trading on the applicable exchange or, if there was no sale, at the mean between the most recently quoted bid and asked prices on such exchange. Futures contracts and options thereon traded on a commodities exchange or board of trade are valued at the last sale price at the close of trading on such exchange or board of trade or, if there was no sale on the applicable commodities exchange or board of trade on such day, at the mean between the most recently quoted bid and asked prices on such exchange or board of trade or at the last bid price in the absence of an asked price. Prices may be obtained from independent pricing services which use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. Securities for which reliable market quotations

 

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are not readily available, or whose values have been affected by events occurring after the close of the security’s foreign market and before the Fund’s normal pricing time, are valued at fair value in accordance with the Board of Directors’ approved fair valuation procedures. When determining the fair valuation of securities some of the factors influencing the valuation include, the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition and the markets in which it does business; the cost of the investment; the size of the holding and the capitalization of issuer; the prices of any recent transactions or bids/offers for such securities or any comparable securities; any available analyst media or other reports or information deemed reliable by the investment adviser regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values.

 

Investments in open end, non exchange-traded mutual funds are valued at their net asset value as of the close of the New York Stock Exchange on the date of valuation.

 

Short-term debt securities of sufficient credit quality, which mature in 60 days or less, are valued at amortized cost, which approximates market value. The amortized cost method includes valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between the principal amount due at maturity and cost. Short-term debt securities, which mature in more than 60 days, are valued at fair value.

 

Securities Lending: The Series may lend its portfolio securities to broker-dealers. The loans are secured by collateral, at least equal, at all times to the market value of the securities loaned. Loans are subject to termination at the option of the borrower or the Series. Upon termination of the loan, the borrower will return to the lender securities identical to the loaned securities. Should the borrower of the securities fail financially, the Series has the right to repurchase the securities using the collateral in the open market. The Series recognizes income, net of any rebate and securities lending agent fees, for lending its securities in the form of fees or interest on the investment of any cash received as collateral. The Series also continues to receive interest and dividends or amounts equivalent thereto, on the securities loaned and recognizes any unrealized gain or loss in the market price of the securities loaned that may occur during the term of the loan.

 

Prudential International Equity Fund     33   

 

 

Notes to Financial Statements

 

continued

 

 

Foreign Currency Translation: The books and records of the Series are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis:

 

(i) market value of investment securities, other assets and liabilities-at the current rates of exchange.

 

(ii) purchases and sales of investment securities, income and expenses-at the rate of exchange prevailing on the respective dates of such transactions.

 

The Series does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of long term securities held at the end of the fiscal year. Similarly, the Series does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of portfolio securities sold during the fiscal year. Accordingly, realized foreign currency gains or losses are included in the reported net realized gains or losses on investment transactions.

 

Net realized gains or losses on foreign currency transactions represent net foreign exchange gains or losses from holdings of foreign currencies, currency gains or losses realized between the trade and settlement dates on security transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Series’ books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains or losses from valuing foreign currency denominated assets and liabilities (other than investments) at fiscal year end exchange rates are reflected as a component of net unrealized appreciation (depreciation) on foreign currencies.

 

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin as a result of, among other factors, the possibility of political or economic instability, or the level of governmental supervision and regulation of foreign securities markets.

 

Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains or losses from security and currency transactions are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis. Expenses are recorded on the accrual basis.

 

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Net investment income or loss (other than distribution fees which are charged directly to the respective class) and unrealized and realized gains or losses are allocated daily to each class of shares based upon the relative proportion of net assets of each class at the beginning of the day.

 

Financial Futures Contracts: A financial futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities at a set price for delivery on a future date. Upon entering into a financial futures contract, the Series is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount. This amount is known as the “initial margin.” Subsequent payments, known as “variation margin,” are made or received by the Series each day, depending on the daily fluctuations in the value of the underlying security. Such variation margin is recorded for financial statement purposes on a daily basis as unrealized gain or loss. When the contract expires or is closed, the gain or loss is realized and is presented in the Statement of Operations as net realized gain or loss on financial futures transactions. The Series invest in financial futures contracts in order to hedge its existing portfolio securities, or securities the Series intends to purchase, against fluctuations in value caused by changes in prevailing interest rates, value of equities or foreign currency exchange rates. Should interest rates move unexpectedly, the Series may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets.

 

Financial futures contracts involve elements of both market and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities.

 

Dividends and Distributions: The Series 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 which may differ from generally accepted accounting principles, are recorded on the ex-dividend date.

 

Taxes: For federal income tax purposes, each Series in the Fund is treated as a separate taxpaying entity. It is each Series’ policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net investment income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required.

 

Withholding taxes on foreign dividends are recorded net of reclaimable amounts, at the time the related income is earned.

 

Prudential International Equity Fund     35   

 

 

Notes to Financial Statements

 

continued

 

 

Estimates: The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

 

Note 2. Agreements

 

The Fund has a management agreement for the Series with PI. Pursuant to this agreement, PI has responsibility for all investment advisory services and supervises the subadviser’s performance of such services. PI entered into a subadvisory agreement with Quantitative Management Associates LLC (QMA). The subadvisory agreement provides that QMA furnishes investment advisory services in connection with the management of the Series. In connection therewith, QMA is obligated to keep certain books and records of the Series. PI pays for the services of QMA, the cost of compensation of officers of the Series, occupancy and certain clerical and bookkeeping costs of the Series. The Series bears all other costs and expenses.

 

The management fee paid to PI is computed daily and payable monthly, at an annual rate of .85% of the average daily net assets of the Series up to and including $300 million, .75% of the average daily net assets in excess of $300 million up to and including $1.5 billion and .70% of the Series’ average daily net assets over $1.5 billion. The effective management fee was .81% for the year ended October 31, 2010.

 

The Series has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”) which acts as the distributor of Class A, Class B, Class C, Class F, Class L, Class M, Class X, and Class Z shares of the Series. The Series compensates PIMS for distributing and servicing the Series’ Class A, Class B, Class C, Class F, Class L, Class M and Class X shares, pursuant to a plan of distribution, (the “Class A, B, C, F, L, M and X Plans”), regardless of expenses actually incurred by PIMS. The distribution fees are accrued daily and payable monthly. No distribution or service fees are paid to PIMS as distributor for Class Z shares of the Series.

 

Pursuant to the Class A, B, C, F, L, M and X Plans, the Series compensates PIMS for distribution related activities at an annual rate of up to .30%, 1%, 1%, .75%, .50%, 1%, and 1% of the average daily net assets of the Class A, B, C, F, L, M, and X shares, respectively.

 

PIMS has advised the Series that they received $79,765 in front-end sales charges resulting from sales of Class A shares during the year ended October 31, 2010. From

 

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these fees, PIMS paid such sales charges to broker-dealers, which in turn paid commissions to salespersons and incurred other distribution costs.

 

PIMS has advised the Series that for the year ended October 31, 2010 it received $397, $21,132, $2,477, $3,218 , $3,155 and $2,153 in contingent deferred sales charges imposed upon redemptions by certain Class A, Class B, Class C, Class F, Class M, and Class X shareholders, respectively.

 

PI, QMA and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).

 

Note 3. Other Transactions with Affiliates

 

Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary of Prudential, serves as the Series’ transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.

 

The Series pays networking fees to affiliated and unaffiliated broker/dealers, including fees relating to the services of Wells Fargo Advisors, LLC (“Wells Fargo”), an affiliate of Pl through December 31, 2009. These networking fees are payments made to broker/dealers that clear mutual fund transactions through a national clearing system. For the year ended October 31, 2010, the Series incurred approximately $225,800 in total networking fees, of which approximately $19,800 was paid to Wells Fargo through December 31, 2009. These amounts are included in transfer agents’s fees and expenses on the Statement of Operations.

 

Prudential Investment Management, Inc. (“PIM”), an indirect, wholly-owned subsidiary of Prudential, is the Series’ security lending agent. For the year ended October 31, 2010, PIM has been compensated approximately $4,200 for these services.

 

The Series invests in the Prudential Core Taxable Money Market Fund (the “Core Fund”), a portfolio of the Prudential Investment Portfolios 2 registered under the Investment Company Act of 1940, as amended, and managed by PI. Earnings from the Core Fund are disclosed on the Statement of Operations as affiliated dividend income.

 

Note 4. Portfolio Securities

 

Purchases and sales of investment securities, other than short-term investments, for the year ended October 31, 2010 aggregated $436,141,769 and $479,790,567, respectively.

 

Prudential International Equity Fund     37   

 

 

Notes to Financial Statements

 

continued

 

 

Note 5. Distributions and Tax Information

 

Distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-dividend date. In order to present undistributed net investment income, accumulated net realized loss on investment and foreign currency transactions and paid-in capital in excess of par on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to undistributed net investment income, accumulated net realized loss on investment and foreign currency transactions and paid-in capital in excess of par. For the fiscal year ended October 31, 2010, the adjustments were to decrease undistributed net investment income by $118,249, to decrease accumulated net realized loss on investments and foreign currency transactions by $102,546,464 and to decrease paid-in capital in excess of par by $102,428,215, due to the differences in the treatment for book and tax purposes of certain transactions involving foreign securities and currencies, investments in Passive Foreign Investment Companies, expiration of capital loss carryforward, redemption-in-kind and other book to tax adjustments. Net investment income, net realized loss and net assets were not affected by this change.

 

As of October 31, 2010, the Series had undistributed ordinary income of $6,025,645 on a tax basis.

 

For the fiscal year ended October 31, 2010 and the fiscal year ended October 31, 2009 the tax character of dividends paid as reflected in the Statement of Changes in Net Assets were $10,193,924 and $17,066,953 of ordinary income, respectively.

 

The United States federal income tax basis of the Series’ investments and the net unrealized appreciation as of October 31, 2010 were as follows:

 

Tax Basis

  

Appreciation

  

Depreciation

  

Net
Unrealized
Appreciation

  

Other Cost
Basis
Adjustments

  

Total Net
Unrealized
Appreciation

$323,124,661   $52,927,787   $(8,420,939)   $44,506,848   $222,630   $44,729,478

 

The difference between book basis and tax basis were primarily attributable to deferred losses on wash sales and investments in Passive Foreign Investment

 

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Companies. The other cost basis adjustments are primarily attributable to appreciation (depreciation) of foreign currency and mark-to-market of receivables and payables.

 

For federal income tax purposes, the Series has a capital loss carryforward as of October 31, 2010 of approximately $258,945,000 of which $11,426,000 expires in 2011, $55,105,000 expires in 2016, $184,077,000 expires in 2017 and $8,337,000 expires in 2018. Accordingly, no capital gains distribution is expected to be paid to shareholders until net gains have been realized in excess of such carryforward. It is uncertain whether the Fund will be able to realize the full benefit prior to expiration dates. During the fiscal year ended October 31, 2010, approximately $72,865,000 of the capital loss carryforward expired unused.

 

Management has analyzed the Series’ tax positions taken on federal income tax returns for all open tax years and has concluded that as of October 31, 2010, no provision for income tax would be required in the Series’ financial statements. The Series’ federal and state income tax excise returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the internal Revenue Service and state departments of revenue.

 

Note 6. Capital

 

The Series offers Class A, B, C, F, L, M, X and Z shares. Class A and L shares are sold with a front-end sales charge of up to 5.50% and 5.75%, respectively. All investors who purchase Class A and L shares in an amount of $1 million or more and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (CDSC) of 1%, including investors who purchase their shares through broker-dealers affiliated with Prudential. Class B and F shares are sold with a contingent deferred sales charge which declines from 5% to zero depending on the period of time the shares are held. Class B and F shares will automatically convert to Class A shares on a quarterly basis approximately seven years after purchase. Class C shares are sold with a contingent deferred sales charge of 1% during the first 12 months. Class M and X shares are sold with a contingent deferred sales charge which declines from 6% to zero depending on the period of time the shares are held. Class M and X shares will automatically convert to Class A shares on a quarterly basis approximately eight and ten years after purchase, respectively. A special exchange privilege is also available for shareholders who qualify to purchase Class A shares at net asset value. Class Z shares are not subject to any sales or redemption charge and are offered exclusively for sale to a limited group of investors.

 

There are 1 billion authorized shares of $.01 par value common stock, divided equally into eight classes, designated Class A, Class B, Class C, Class F, Class L, Class M, Class X and Class Z common stock.

 

Prudential International Equity Fund     39   

 

 

Notes to Financial Statements

 

continued

 

 

For the year ended October 31, 2010 the Series received $4,717,145 related to the settlement of regulatory proceedings involving allegations of improper trading. The amounts relating to an affiliate and a third party were $4,493,246 and $223,899, respectively. The total amount is presented in the Series’ statement of changes in net assets. The Series was not involved in the proceedings or the calculation of the payment.

 

Transactions in shares of common stock were as follows:

 

Class A

    Shares      Amount  

Year ended October 31, 2010:

      

Shares sold

      1,468,501       $ 8,439,334   

Shares issued in reinvestment of dividends

      784,260         4,572,227   

Shares reacquired

      (9,136,119 )       (52,354,816 ) 
                 

Net increase (decrease) in shares outstanding before conversion

      (6,883,358 )       (39,343,255 ) 

Shares issued upon conversion from Class B, F, M and X

      1,243,082         7,112,292   
                 

Net increase (decrease) in shares outstanding

      (5,640,276 )     $ (32,230,963 ) 
                 

Year ended October 31, 2009:

      

Shares sold

      2,009,357       $ 9,567,580   

Shares issued in reinvestment of dividends

      1,757,472         7,961,349   

Shares reacquired

      (9,646,158 )       (45,051,592 ) 
                 

Net increase (decrease) in shares outstanding before conversion

      (5,879,329 )       (27,522,663 ) 

Shares issued upon conversion from Class B, F, M and X

      2,392,167         11,305,239   
                 

Net increase (decrease) in shares outstanding

      (3,487,162 )     $ (16,217,424 ) 
                 

Class B

              

Year ended October 31, 2010:

      

Shares sold

      212,889       $ 1,182,667   

Shares issued in reinvestment of dividends

      20,600         116,386   

Shares reacquired

      (361,347 )       (1,987,158 ) 
                 

Net increase (decrease) in shares outstanding before conversion

      (127,858 )       (688,105 ) 

Shares reacquired upon conversion into Class A

      (124,226 )       (674,212 ) 
                 

Net increase (decrease) in shares outstanding

      (252,084 )     $ (1,362,317 ) 
                 

Year ended October 31, 2009:

      

Shares sold

      255,895       $ 1,165,887   

Shares issued in reinvestment of dividends

      52,248         229,892   

Shares reacquired

      (449,135 )       (1,984,539 ) 
                 

Net increase (decrease) in shares outstanding before conversion

      (140,992 )       (588,760 ) 

Shares reacquired upon conversion into Class A

      (495,244 )       (2,234,431 ) 
                 

Net increase (decrease) in shares outstanding

      (636,236 )     $ (2,823,191 ) 
                 

 

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Class C

    Shares      Amount  

Year ended October 31, 2010:

      

Shares sold

      166,469       $ 907,807   

Shares issued in reinvestment of dividends

      59,737         336,914   

Shares reacquired

      (1,018,733 )       (5,562,982 ) 
                 

Net increase (decrease) in shares outstanding

      (792,527 )     $ (4,318,261 ) 
                 

Year ended October 31, 2009:

      

Shares sold

      286,313       $ 1,343,637   

Shares issued in reinvestment of dividends

      152,369         668,901   

Shares reacquired

      (1,424,303 )       (6,485,180 ) 
                 

Net increase (decrease) in shares outstanding

      (985,621 )     $ (4,472,642 ) 
                 

Class F

              

Year ended October 31, 2010:

      

Shares sold

      131       $ 690   

Shares issued in reinvestment of dividends

      12,651         71,355   

Shares reacquired

      (203,435 )       (1,123,341 ) 
                 

Net increase (decrease) in shares outstanding before conversion

      (190,653 )       (1,051,296 ) 

Shares reacquired upon conversion into Class A

      (184,350 )       (996,186 ) 
                 

Net increase (decrease) in shares outstanding

      (375,003 )     $ (2,047,482 ) 
                 

Year ended October 31, 2009:

      

Shares sold

      88       $ 3,278   

Shares issued in reinvestment of dividends

      43,255         189,888   

Shares reacquired

      (257,755 )       (1,126,509 ) 
                 

Net increase (decrease) in shares outstanding before conversion

      (214,412 )       (933,343 ) 

Shares reacquired upon conversion into Class A

      (616,155 )       (2,809,644 ) 
                 

Net increase (decrease) in shares outstanding

      (830,567 )     $ (3,742,987 ) 
                 

Class L

              

Year ended October 31, 2010:

      

Shares sold

      10,093       $ 59,754   

Shares issued in reinvestment of dividends

      31,646         184,815   

Shares reacquired

      (411,930 )       (2,361,389 ) 
                 

Net increase (decrease) in shares outstanding

      (370,191 )     $ (2,116,820 ) 
                 

Year ended October 31, 2009:

      

Shares sold

      14,999       $ 77,524   

Shares issued in reinvestment of dividends

      82,737         375,628   

Shares reacquired

      (592,276 )       (2,726,637 ) 
                 

Net increase (decrease) in shares outstanding

      (494,540 )     $ (2,273,485 ) 
                 

 

Prudential International Equity Fund     41   

 

 

Notes to Financial Statements

 

continued

 

Class M

    Shares      Amount  

Year ended October 31, 2010:

      

Shares sold

      16,379       $ 91,988   

Shares issued in reinvestment of dividends

      12,151         68,651   

Shares reacquired

      (166,265 )       (916,746 ) 
                 

Net increase (decrease) in shares outstanding before conversion

      (137,735 )       (756,107 ) 

Shares reacquired upon conversion into Class A

      (550,701 )       (3,062,454 ) 
                 

Net increase (decrease) in shares outstanding

      (688,436 )     $ (3,818,561 ) 
                 

Year ended October 31, 2009:

      

Shares sold

      20,146       $ 87,325   

Shares issued in reinvestment of dividends

      55,502         244,211   

Shares reacquired

      (495,555 )       (2,164,815 ) 
                 

Net increase (decrease) in shares outstanding before conversion

      (419,907 )       (1,833,279 ) 

Shares reacquired upon conversion into Class A

      (876,961 )       (3,992,545 ) 
                 

Net increase (decrease) in shares outstanding

      (1,296,868 )     $ (5,825,824 ) 
                 

Class X

              

Year ended October 31, 2010:

      

Shares sold

      5,982       $ 33,503   

Shares issued in reinvestment of dividends

      11,154         63,022   

Shares reacquired

      (144,467 )       (804,626 ) 
                 

Net increase (decrease) in shares outstanding before conversion

      (127,331 )       (708,101 ) 

Shares reacquired upon conversion into Class A

      (428,007 )       (2,379,440 ) 
                 

Net increase (decrease) in shares outstanding

      (555,338 )     $ (3,087,541 ) 
                 

Year ended October 31, 2009:

      

Shares sold

      28,389       $ 134,934   

Shares issued in reinvestment of dividends

      44,577         196,141   

Shares reacquired

      (375,394 )       (1,659,860 ) 
                 

Net increase (decrease) in shares outstanding before conversion

      (302,428 )       (1,328,785 ) 

Shares reacquired upon conversion into Class A

      (491,114 )       (2,268,619 ) 
                 

Net increase (decrease) in shares outstanding

      (793,542 )     $ (3,597,404 ) 
                 

 

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Class Z

    Shares      Amount  

Year ended October 31, 2010:

      

Shares sold

      6,103,057       $ 35,465,353   

Shares issued in reinvestment of dividends

      779,543         4,583,715   

Shares reacquired

      (39,124,251 )       (212,237,067 ) 
                 

Net increase (decrease) in shares outstanding

      (32,241,651 )     $ (172,187,999 ) 
                 

Year ended October 31, 2009:

      

Shares sold

      12,836,654       $ 61,016,882   

Shares issued in reinvestment of dividends

      1,439,502         6,578,527   

Shares reacquired

      (9,854,550 )       (47,124,357 ) 
                 

Net increase (decrease) in shares outstanding

      4,421,606       $ 20,471,052   
                 

 

Note 7. In-Kind Redemption

 

During the year ended October 31, 2010, shareholders redeemed fund shares in exchange for fund’s portfolio securities valued at $168,617,337. The Fund realized a loss of $28,278,878 related to the in-kind redemption transactions.

 

Note 8. Borrowing

 

The Fund, along with other affiliated registered investment companies (the “Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with two banks. The SCA provides for a commitment of $500 million. Interest on any borrowings under the SCA is incurred at contracted market rates and a commitment fee for the unused amount is accrued daily and paid quarterly. The Funds pay a commitment fee of .15% of the unused portion of the renewed SCA. The expiration date of the SCA has been extended from October 20, 2010 through December 17, 2010 under the same terms. Effective December 17, 2010 the Fund, along with the Funds entered into a new Syndicated Credit Agreement (“New SCA”) with a group of banks. The New SCA provides for a commitment of $750 million. The Funds will pay an annualized commitment fee of 0.10% of the unused portion of the New SCA. The expiration date of the New SCA is December 16, 2011. Interest on any borrowings under the New SCA will be incurred at contracted market rates and a commitment fee for the unused amount is accrued daily and paid quarterly. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions.

 

The Fund utilized the SCA during the year ended October 31, 2010. The balance for the 91 days the Series had an outstanding balance was $485,495 at an interest rate of 1.45%. At October 31, 2010, the Fund had an outstanding loan amount of $69,000.

 

Prudential International Equity Fund     43   

 

 

Notes to Financial Statements

 

continued

 

 

Note 9. Ownership

 

As of October 31, 2010, approximately 28% of the fund was owned by two institutional shareholders for the beneficial interest of their underlying account holders.

 

Note 10. Notice of Dividends to Shareholders

 

The Fund declared ordinary income dividends on December 8, 2010 to shareholders of record on December 9, 2010. The ex-dividend date was December 10, 2010. The per share amounts declared were as follows:

 

      Ordinary Income  

Class A

    $ 0.09806   

Class B, C, M and X

    $ 0.05986   

Class F

    $ 0.07378   

Class L

    $ 0.08653   

Class Z

    $ 0.11532   
     Special Ordinary
Income		  

Class A, B, C, F, L, M, X and Z

    $ 0.01246   

 

Note 11. New Accounting Pronouncement

 

In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2010-06 “Improving Disclosures about Fair Value Measurements”. ASU 2010-06 will require reporting entities to make new disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined.

 

44   Visit our website at www.prudentialfunds.com

 

 

Financial Highlights

 

Class A Shares  
     Year Ended October 31,  
     2010(a)     2009(a)     2008(a)     2007(a)     2006  
Per Share Operating Performance:                                        
Net Asset Value, Beginning Of Year     $5.77        $4.80        $10.49        $8.54        $6.84   
Income (loss) from investment operations:                                        
Net investment income     .08        .08        .16        .16        .08   
Net realized and unrealized gain (loss) on investment and foreign currency transactions     .36        1.06        (5.37 )      1.92        1.66   
Total from investment operations     .44        1.14        (5.21 )      2.08        1.74   
Less Dividends and Distributions:                                        
Dividends from net investment income     (.10 )      (.17 )      (.14 )      (.13 )      (.04 ) 
Distributions from net realized gains     -        -        (.34 )      -        -   
Total dividends and distributions     (.10 )      (.17 )      (.48 )      (.13 )      (.04 ) 
Capital Contributions     .06        -        -        -        -   
Net asset value, end of year     $6.17        $5.77        $4.80        $10.49        $8.54   
Total Return(b):     8.78%        24.65%        (51.87 )%      24.68%        25.55%   
Ratios/Supplemental Data:  
Net assets, end of year (000)     $260,555       $275,993       $246,234       $557,878       $67,123  
Average net assets (000)     $257,553       $240,744       $438,831       $438,194       $52,174  
Ratios to average net assets(c):                                        
Expenses, including distribution and service (12b-1) fees(d)     1.57%        1.54%        1.43%        1.34%        1.40%   
Expenses, excluding distribution and service (12b-1) fees     1.27%        1.24%        1.15%        1.09%        1.15%   
Net investment income     1.35%        1.75%        1.94%        1.60%        1.23%   
For Class A, B, C, F, L, M, X and Z shares:                                        
Portfolio turnover rate     96%        76%        74%        114%        60%   

 

(a) Calculated based on average shares outstanding during the year.

(b) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported, and includes reinvestment of dividends and distributions. Total return may reflect adjustments to conform to generally accepted accounting principles.

(c) Does not include expenses of the underlying portfolios in which the Series invests.

(d) The distributor of the series has contractually agreed to limit its distribution and service (12b-1) fees to .25% of the average daily net assets of the Class A shares through February 28, 2008.

 

See Notes to Financial Statements.

 

Prudential International Equity Fund     45   

 

 

Financial Highlights

 

continued

 

Class B Shares  
     Year Ended October 31,  
     2010(a)     2009(a)     2008(a)     2007(a)     2006  
Per Share Operating Performance:                                        
Net Asset Value, Beginning Of Year     $5.56        $4.61        $10.09        $8.22        $6.59   
Income (loss) from investment operations:                                        
Net investment income     .04        .05        .09        .06        .04   
Net realized and unrealized gain (loss) on investment and foreign currency transactions     .35        1.02        (5.16 )      1.88        1.59   
Total from investment operations     .39        1.07        (5.07 )      1.94        1.63   
Less Dividends and Distributions:                                        
Dividends from net investment income     (.07 )      (.12 )      (.07 )      (.07 )      -   
Distributions from net realized gains     -        -        (.34 )      -        -   
Total dividends and distributions     (.07 )      (.12 )      (.41 )      (.07 )      -   
Capital Contributions     .06        -        -        -        -   
Net asset value, end of year     $5.94        $5.56        $4.61        $10.09        $8.22   
Total Return(b):     8.11%        23.82%        (52.22 )%      23.73%        24.73%   
Ratios/Supplemental Data:  
Net assets, end of year (000)     $9,160       $9,976       $11,205       $32,905       $46,330  
Average net assets (000)     $9,246       $9,229       $22,786       $39,205       $45,041  
Ratios to average net assets(c):                                        
Expenses, including distribution and service (12b-1) fees     2.27%        2.24%        2.15%        2.09%        2.15%   
Expenses, excluding distribution and service (12b-1) fees     1.27%        1.24%        1.15%        1.09%        1.15%   
Net investment income     .66%        1.06%        1.17%        .67%        .46%   

 

(a) Calculated based on average shares outstanding during the year.

(b) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported, and includes reinvestment of dividends and distributions. Total return may reflect adjustments to conform to generally accepted accounting principles.

(c) Does not include expenses of the underlying portfolios in which the Series invests.

 

See Notes to Financial Statements.

 

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Class C Shares  
     Year Ended October 31,  
     2010(a)     2009(a)     2008(a)     2007(a)     2006  
Per Share Operating Performance:                                        
Net Asset Value, Beginning Of Year     $5.56        $4.61        $10.09        $8.22        $6.59   
Income (loss) from investment operations:                                        
Net investment income     .04        .05        .09        .10        .04   
Net realized and unrealized gain (loss) on investment and foreign currency transactions     .35        1.02        (5.16 )      1.84        1.59   
Total from investment operations     .39        1.07        (5.07 )      1.94        1.63   
Less Dividends and Distributions:                                        
Dividends from net investment income     (.07 )      (.12 )      (.07 )      (.07 )      -   
Distributions from net realized gains     -        -        (.34 )      -        -   
Total dividends and distributions     (.07 )      (.12 )      (.41 )      (.07 )      -   
Capital Contributions     .06        -        -        -        -   
Net asset value, end of year     $5.94        $5.56        $4.61        $10.09        $8.22   
Total Return(b):     8.11%        23.83%        (52.22 )%      23.73%        24.73%   
Ratios/Supplemental Data:  
Net assets, end of year (000)     $26,625       $29,326       $28,858       $75,010       $13,825  
Average net assets (000)     $26,974       $26,677       $55,111       $53,765       $13,478  
Ratios to average net assets(c):                                        
Expenses, including distribution and service (12b-1) fees     2.27%        2.24%        2.15%        2.09%        2.15%   
Expenses, excluding distribution and service (12b-1) fees     1.27%        1.24%        1.15%        1.09%        1.15%   
Net investment income     .66%        1.06%        1.19%        1.03%        0.47%   

 

(a) Calculated based on average shares outstanding during the year.

(b) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported, and includes reinvestment of dividends and distributions. Total return may reflect adjustments to conform to generally accepted accounting principles.

(c) Does not include expenses of the underlying portfolios in which the Series invests.

 

See Notes to Financial Statements.

 

Prudential International Equity Fund     47   

 

 

Financial Highlights

 

continued

 

Class F Shares  
     Year Ended October 31,     December 18,
2006(e)
through
October 31,		  
     2010(a)     2009(a)     2008(a)     2007(a)  
Per Share Operating Performance:                                
Net Asset Value, Beginning Of Period     $5.56        $4.62        $10.11        $8.56   
Income (loss) from investment operations:                                
Net investment income     .05        .06        .11        .09   
Net realized and unrealized gain (loss) on investment and foreign currency transactions     .35        1.01        (5.17 )      1.46   
Total from investment operations     .40        1.07        (5.06 )      1.55   
Less Dividends and Distributions:                                
Dividends from net investment income     (.08 )      (.13 )      (.09 )      -   
Distributions from net realized gains     -        -        (.34 )      -   
Total dividends and distributions     (.08 )      (.13 )      (.43 )      -   
Capital Contributions     .06        -        -        -   
Net asset value, end of period     $5.94        $5.56        $4.62        $10.11   
Total Return(b):     8.35%        24.04%        (52.10 )%      18.11%   
Ratios/Supplemental Data:                        
Net assets, end of period (000)     $3,355       $5,226       $8,171       $28,728  
Average net assets (000)     $4,064       $5,769       $18,310       $33,219  
Ratios to average net assets(c):                                
Expenses, including distribution and service (12b-1) fees     2.02%        1.99%        1.90%        1.84% (d) 
Expenses, excluding distribution and service (12b-1) fees     1.27%        1.24%        1.15%        1.09% (d) 
Net investment income     .95%        1.35%        1.37%        1.13% (d) 

 

(a) Calculated based on average shares outstanding during the period.

(b) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported, and includes reinvestment of dividends and distributions. Total return may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.

(c) Does not include expenses of the underlying portfolios in which the Series invests.

(d) Annualized.

(e) Inception date of Class F shares.

 

See Notes to Financial Statements.

 

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Class L Shares  
     Year Ended October 31,     March 19,
2007(e)
through
October 31,		  
     2010(a)     2009(a)     2008(a)     2007(a)  
Per Share Operating Performance:                                
Net Asset Value, Beginning Of Period     $5.77        $4.79        $10.48        $8.92   
Income (loss) from investment operations:                                
Net investment income     .07        .07        .14        .11   
Net realized and unrealized gain (loss) on investment and foreign currency transactions     .36        1.06        (5.38 )      1.45   
Total from investment operations     .43        1.13        (5.24 )      1.56   
Less Dividends and Distributions:                                
Dividends from net investment income     (.09 )      (.15 )      (.11 )      -   
Distributions from net realized gains     -        -        (.34 )      -   
Total dividends and distributions     (.09 )      (.15 )      (.45 )      -   
Capital Contributions     .06        -        -        -   
Net asset value, end of period     $6.17        $5.77        $4.79        $10.48   
Total Return(b):     8.59%        24.49%        (52.07 )%      17.49%   
Ratios/Supplemental Data:  
Net assets, end of period (000)     $10,919       $12,342       $12,621       $34,433  
Average net assets (000)     $11,216       $11,250       $24,942       $35,182  
Ratios to average net assets(c):                                
Expenses, including distribution and service (12b-1) fees     1.77%        1.74%        1.65%        1.59% (d) 
Expenses, excluding distribution and service (12b-1) fees     1.27%        1.24%        1.15%        1.09% (d) 
Net investment income     1.16%        1.56%        1.68%        1.82% (d) 

 

(a) Calculations are based on average shares outstanding during the period.

(b) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported, and includes reinvestment of dividends and distributions. Total return may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.

(c) Does not include expenses of the underlying portfolios in which the Series invests.

(d) Annualized.

(e) Inception date of Class L shares.

 

See Notes to Financial Statements.

 

Prudential International Equity Fund     49   

 

 

Financial Highlights

 

continued

 

Class M Shares  
     Year Ended October 31,     March 19,
2007(e)
through
October 31,		  
     2010(a)     2009(a)     2008(a)     2007(a)  
Per Share Operating Performance:                                
Net Asset Value, Beginning Of Period     $5.56        $4.61        $10.09        $8.63   
Income (loss) from investment operations:                                
Net investment income     .04        .05        .07        .08   
Net realized and unrealized gain (loss) on investment and foreign currency transactions     .35        1.02        (5.14 )      1.38   
Total from investment operations     .39        1.07        (5.07 )      1.46   
Less Dividends and Distributions:                                
Dividends from net investment income     (.07 )      (.12 )      (.07 )      -   
Distributions from net realized gains     -        -        (.34 )      -   
Total dividends and distributions     (.07 )      (.12 )      (.41 )      -   
Capital Contributions     .06        -        -        -   
Net asset value, end of period     $5.94        $5.56        $4.61        $10.09   
Total Return(b):     8.11%        23.82%        (52.22)%        16.92%   
Ratios/Supplemental Data:  
Net assets, end of period (000)     $2,985       $6,622       $11,467       $68,244  
Average net assets (000)     $4,441       $7,957       $34,319       $76,639  
Ratios to average net assets(c):                                
Expenses, including distribution and service (12b-1) fees     2.27%        2.24%        2.15%        2.09% (d) 
Expenses, excluding distribution and service (12b-1) fees     1.27%        1.24%        1.15%        1.09% (d) 
Net investment income     .68%        1.09%        .92%        1.41% (d) 

 

(a) Calculated based on average shares outstanding during the period.

(b) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported, and includes reinvestment of dividends and distributions. Total return may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.

(c) Does not include expenses of the underlying portfolios in which the Series invests.

(d) Annualized.

(e) Inception date of Class M shares.

 

See Notes to Financial Statements.

 

50   Visit our website at www.prudentialfunds.com

 

 

Class X Shares  
     Year Ended October 31,     March 19,
2007(e)
through
October 31,		  
     2010(a)     2009(a)     2008(a)     2007(a)  
Per Share Operating Performance:                                
Net Asset Value, Beginning Of Period     $5.56        $4.61        $10.09        $8.63   
Income (loss) from investment operations:                                
Net investment income     .04        .05        .09        .08   
Net realized and unrealized gain (loss) on investment and foreign currency transactions     .35        1.02        (5.16 )      1.38   
Total from investment operations     .39        1.07        (5.07 )      1.46   
Less Dividends and Distributions:                                
Dividends from net investment income     (.07 )      (.12 )      (.07 )      -   
Distributions from net realized gains     -        -        (.34 )      -   
Total dividends and distributions     (.07 )      (.12 )      (.41 )      -   
Capital Contributions     .06        -        -        -   
Net asset value, end of period     $5.94        $5.56        $4.61        $10.09   
Total Return(b):     8.11%        23.82%        (52.22)%        16.92%   
Ratios/Supplemental Data:  
Net assets, end of period (000)     $3,067       $5,957       $8,597       $25,428  
Average net assets (000)     $4,020       $6,611       $17,864       $25,351  
Ratios to average net assets(c):                                
Expenses, including distribution and service (12b-1) fees     2.27%        2.24%        2.15%        2.09% (d) 
Expenses, excluding distribution and service (12b-1) fees     1.27%        1.24%        1.15%        1.09% (d) 
Net investment income     .66%        1.10%        1.18%        1.30% (d) 

 

(a) Calculated based on average shares outstanding during the period.

(b) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported, and includes reinvestment of dividends and distributions. Total return may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.

(c) Does not include expenses of the underlying portfolios in which the Series invests.

(d) Annualized.
(e) Inception date of Class X shares.

 

See Notes to Financial Statements.

 

Prudential International Equity Fund     51   

 

 

Financial Highlights

 

continued

 

Class Z Shares  
     Year Ended October 31,  
     2010(a)     2009(a)     2008(a)     2007(a)     2006  
Per Share Operating Performance:                                        
Net Asset Value, Beginning Of Year     $5.82        $4.85        $10.60        $8.62        $6.90   
Income (loss) from investment operations:                                        
Net investment income     .13        .10        .18        .16        .12   
Net realized and unrealized gain (loss) on investment and foreign
currency transactions		     .33        1.06        (5.43 )      1.97        1.65   
Total from investment operations     .46        1.16        (5.25 )      2.13        1.77   
Less Dividends and Distributions:                                        
Dividends from net investment income     (.12 )      (.19 )      (.16 )      (.15 )      (.05 ) 
Distributions from net realized gains     -        -        (.34 )      -        -   
Total dividends and distributions     (.12 )      (.19 )      (.50 )      (.15 )      (.05 ) 
Capital Contributions     .06        -        -        -        -   
Net asset value, end of year     $6.22        $5.82        $4.85        $10.60        $8.62   
Total Return(b):     8.98%        24.95%        (51.77)%        25.05%        25.86%   
Ratios/Supplemental Data:  
Net assets, end of year (000)     $44,833       $229,771       $169,874       $353,771       $243,572  
Average net assets (000)     $149,685       $184,038       $285,097       $301,553       $214,969  
Ratios to average net assets(c):                                        
Expenses, including distribution and service (12b-1) fees     1.27%        1.24%        1.15%        1.09%        1.15%   
Expenses, excluding distribution and service (12b-1) fees     1.27%        1.24%        1.15%        1.09%        1.15%   
Net investment income     2.12%        2.05%        2.22%        1.73%        1.48%   

 

(a) Calculated based on average shares outstanding during the year.

(b) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported, and includes reinvestment of dividends and distributions. Total return may reflect adjustments to conform to generally accepted accounting principles.

(c) Does not include expenses of the underlying portfolios in which the Series invests.

 

See Notes to Financial Statements.

 

52   Visit our website at www.prudentialfunds.com

 

 

Report of Independent Registered Public

Accounting Firm

 

 

The Board of Directors and Shareholders

Prudential World Fund, Inc.:

 

We have audited the accompanying statement of assets and liabilities of Prudential International Equity Fund (formerly Dryden International Equity Fund) (one of the series constituting Prudential World Fund, Inc., hereafter referred to as the “Fund”), including the portfolio of investments, as of October 31, 2010, 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 Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2010, by correspondence with the custodian, transfer agent and brokers or by other appropriate auditing procedures when replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fund as of October 31, 2010, 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.

 

LOGO

 

New York, New York

December 20, 2010

 

Prudential International Equity Fund     53   

 

 

Tax Information

 

(Unaudited)

 

We are required by Internal Revenue Code of 1986, as amended (“the Code”), to advise you within 60 days of the Series’ fiscal year end (October 31, 2010) as to the federal tax status of dividends paid by the Series during such fiscal year. We are advising you in the fiscal year ended October 31, 2010, the Series paid ordinary income dividends of $0.10 per share for Class A, $0.07 per share for Class B, C, M and X, $0.08 per share for Class F, $0.09 per share for Class L and $0.12 per share for Class Z, respectively, which are taxable as such.

 

For the fiscal year ended October 31, 2010, the Series designates the maximum amount allowable, but not less than 100% of the ordinary income dividends paid during the fiscal year as qualified dividend income in accordance with Section 854 of the Internal Revenue Code.

 

For the fiscal year ended October 31, 2010, the Series made an election to pass through the maximum amount of the portion of the ordinary income dividends paid derived from foreign source income as well as any foreign taxes paid by the Series in accordance with Section 853 of the Internal Revenue Code of the following amounts: $1,049,446 foreign tax credit from recognized foreign source income of $15,441,174.

 

In January 2011, you will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of distributions received by you in calendar year 2010.

 

54   Visit our website at www.prudentialfunds.com

MANAGEMENT OF THE FUND

(Unaudited)

Information about Fund Directors/Trustees (referred to herein as “Board Members”) and Fund Officers is set forth below. Board Members who are not deemed to be “interested persons,” as defined in the 1940 Act, are referred to as “Independent Board Members.” Board Members who are deemed to be “interested persons” 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 or trustees 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 (58)

Board Member

Portfolios Overseen: 58

  

 

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 (58)

Board Member

Portfolios Overseen: 58

  

 

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) (since May 2003); 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); formerly Director of Dynegy Inc. (power generation) (September 2002-May 2006), CitiStreet Funds, Inc. (mutual funds) (May 1993-February 2005), AM-CH, Inc. (restaurant holding company) (November 2004-February 2005).

 

Michael S. Hyland, CFA

(65)

Board Member

Portfolios Overseen: 58

  

 

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.

Prudential International Equity Fund

 

 

Douglas H. McCorkindale

(71)

Board Member

Portfolios Overseen: 58

  

 

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 Continental Airlines, Inc. (since May 1993); Director of Lockheed Martin Corp. (aerospace and defense) (since May 2001).

 

Stephen P. Munn (68)

Board Member

Portfolios Overseen: 58

  

 

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 (67)

Board Member

Portfolios Overseen: 58

  

 

Retired Mutual Fund Senior Executive (42 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 (71)

Board Member &

Independent Chair

Portfolios Overseen: 58

  

 

Chairman of the Board (since January 2003) of Publishers Clearing House (direct marketing); 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 (67)

Board Member

Portfolios Overseen: 58

  

 

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.

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

 

Judy A. Rice (62)

Board Member & President

Portfolios Overseen: 58

  

 

President, Chief Executive Officer, Chief Operating Officer and Officer-In-Charge (since February 2003) of Prudential Investments LLC; President, Chief Executive Officer and Officer-In-Charge (since April 2003) of Prudential Mutual Fund Services LLC; Executive Vice President (since December 2008) of Prudential Investment Management Services LLC; Member of the Board of Directors of Jennison Associates LLC (since November 2010); formerly Vice President (February 1999-April 2006) of Prudential Investment Management Services LLC; 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.

  

 

None.

 

Scott E. Benjamin (37)

Board Member & Vice

President

Portfolios Overseen: 58

  

 

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 individual joined the Fund’s Board is as follows:

Linda W. Bynoe, 2005; David E.A. Carson, 2003; Robert E. La Blanc, 1984; Douglas H. McCorkindale, 2003; Richard A. Redeker, 2003; Robin B. Smith, 1996; Stephen G. Stoneburn, 1996; Kevin J. Bannon, 2008; Michael S. Hyland, 2008; Stephen P. Munn, 2008; Judy A. Rice, Board Member since 2000 and President since 2003.

Prudential International Equity Fund

 

 

Fund Officers (a)(1)

 

Name, Address and Age

Position with Fund

   Principal Occupation(s) During Past Five Years

 

Kathryn L. Quirk (58)

Chief Legal Officer

  

 

Vice President and Corporate Counsel (since September 2004) of Prudential; Executive Vice President, Chief Legal Officer and Secretary (since July 2005) of PI and Prudential Mutual Fund Services LLC; Vice President and Corporate Counsel (since June 2005) and Secretary (since February 2006) of AST Investment Services, Inc.; formerly Senior Vice President and Assistant Secretary (November 2004-August 2005) of PI; formerly Assistant Secretary (June 2005-February 2006) of AST Investment Services, Inc.; formerly Managing Director, General Counsel, Chief Compliance Officer, Chief Risk Officer and Corporate Secretary (1997-2002) of Zurich Scudder Investments, Inc.

 

Deborah A. Docs (52)

Secretary

  

 

Vice President and Corporate Counsel (since January 2001) of Prudential; Vice President (since December 1996) and Assistant Secretary (since March 1999) of PI; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc.

 

Jonathan D. Shain (52)

Assistant Secretary

  

 

Vice President and Corporate Counsel (since August 1998) of Prudential; Vice President and Assistant Secretary (since May 2001) of PI; 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 (36)

Assistant Secretary

  

 

Vice President and Corporate Counsel (since January 2005) of Prudential; Vice President and Assistant Secretary of PI (since December 2005); Associate at Sidley Austin Brown & Wood LLP (1999-2004).

 

John P. Schwartz (39)

Assistant Secretary

  

 

Vice President and Corporate Counsel (since April 2005) of Prudential; Vice President and Assistant Secretary of PI (since December 2005); Associate at Sidley Austin Brown & Wood LLP (1997-2005).

 

Andrew R. French (48)

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 PI; Vice President and Assistant Secretary (since January 2007) of PMFS; formerly Senior Legal Analyst of Prudential Mutual Fund Law Department (1997-2006).

 

Timothy J. Knierim (51)

Chief Compliance Officer

  

 

Chief Compliance Officer of Prudential Investment Management, Inc. (since July 2007); formerly Chief Risk Officer of PIM and PI (2002-2007) and formerly Chief Ethics Officer of PIM and PI (2006-2007).

 

Valerie M. Simpson (52)

Deputy Chief Compliance

Officer

  

 

Chief Compliance Officer (since April 2007) of PI and AST Investment Services, Inc.; formerly Vice President-Financial Reporting (June 1999-March 2006) for Prudential Life and Annuities Finance.

 

Theresa C. Thompson (48)

Deputy Chief Compliance

Officer

  

 

Vice President, Compliance, PI (since April 2004); and Director, Compliance, PI (2001-2004).

Visit our website at www.prudentialfunds.com

 

 

Noreen M. Fierro (46)

Anti-Money Laundering

Compliance Officer

  

 

Vice President, Corporate Compliance (since May 2006) of Prudential; formerly Corporate Vice President, Associate General Counsel (April 2002-May 2005) of UBS Financial Services, Inc., in their Money Laundering Prevention Group; Senior Manager (May 2005-May 2006) of Deloitte Financial Advisory Services, LLP, in their Forensic and Dispute Services, Anti-Money Laundering Group.

 

Grace C. Torres (51)

Treasurer and Principal

Financial and Accounting

Officer

  

 

Assistant Treasurer (since March 1999) and Senior Vice President (since September 1999) of PI; 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 (46)

Assistant Treasurer

  

 

Vice President (since 2005) of Prudential Investments LLC.

 

Peter Parrella (52)

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 Ms. Rice 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 Fund is as follows:

Kathryn L. Quirk, 2005; Deborah A. Docs, 2005; Jonathan D. Shain, 2005; Claudia DiGiacomo, 2005; John P. Schwartz, 2006; Andrew R. French, 2006; Timothy J. Knierim, 2007; Valerie M. Simpson, 2007; Theresa C. Thompson, 2008; Noreen M. Fierro, 2006; Grace C. Torres, 1995; Sadiq Peshimam, 2006; Peter Parrella, 2007.

Explanatory Notes to Tables:

 

  •  

Board Members are deemed to be “Interested,” as defined in the 1940 Act, by reason of their affiliation with Prudential Investments LLC and/or an affiliate of Prudential Investments LLC.

 

  •  

Unless otherwise noted, the address of all Board Members and Officers is c/o Prudential Investments LLC, Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077.

 

  •  

There is no set term of office for Board Members or Officers. The Board Members have adopted a retirement policy, which calls for the retirement of Board Members on December 31 of the year in which they reach the age of 75.

 

  •  

“Other Directorships Held” includes only directorships of companies required to register or file reports with the Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (that is, “public companies”) or other investment companies registered under the 1940 Act.

 

  •  

“Portfolios Overseen” includes all investment companies managed by Prudential Investments LLC. The investment companies for which PI serves as manager include the Prudential Investments Mutual Funds, The Prudential Variable Contract Accounts, Target Mutual Funds, The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc. and the Advanced Series Trust.

Prudential International Equity Fund

 

 

Approval of Advisory Agreements

 

 

The Fund’s Board of Directors

 

The Board of Directors (the “Board”) of Prudential International Equity Fund (the “Fund”)1 consists of 10 individuals, eight of whom are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Directors”). The Board is responsible for the oversight of the Fund and its operations, and performs the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Directors have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Director. The Board has established three standing committees: the Audit Committee, the Nominating and Governance Committee, and the Investment Committee. Each committee is chaired by, and composed of, Independent Directors.

 

Annual Approval of the Fund’s Advisory Agreements

 

As required under the 1940 Act, the Board determines annually whether to renew the Fund’s management agreement with Prudential Investments LLC (“PI”) and the Fund’s subadvisory agreement with Quantitative Management Associates LLC (“QMA”). In considering the renewal of the agreements, the Board, including all of the Independent Directors, met on June 21-23, 2010 and approved the renewal of the agreements through July 31, 2011, after concluding that the renewal of the agreements was in the best interests of the Fund and its shareholders.

 

In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with their consideration. Among other things, the Board considered comparative fee information from PI and QMA. Also, the Board considered comparisons with other mutual funds in relevant Peer Universes and Peer Groups. The mutual funds included in each Peer Universe or Peer Group were objectively determined by Lipper Inc. (“Lipper”), an independent provider of mutual fund data. To the extent that PI deems appropriate, and for reasons addressed in detail with the Board, PI may provide supplemental data compiled by Lipper for the Board’s consideration. The comparisons placed the Fund in various quartiles over the one-, three-, and five-year periods ending December 31, 2009, 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).

 

In approving the agreements, the Board, including the Independent Directors advised by independent legal counsel, considered the factors it deemed relevant, including

 

 

1

Prudential International Equity Fund is a series of Prudential World Fund, Inc.

 

Prudential International Equity Fund

 

 

Approval of Advisory Agreements (continued)

 

 

the nature, quality and extent of services provided by PI and the subadviser, the performance of the Fund, the profitability of PI and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Fund and its shareholders as the Fund’s assets grow. In their deliberations, the Directors did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund. In connection with its deliberations, the Board considered information provided by PI throughout the year at regular Board meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the meetings on June 21-23, 2010.

 

The Directors determined that the overall arrangements between the Fund and PI, which serves as the Fund’s investment manager pursuant to a management agreement, and between PI and QMA, which serves as the Fund’s subadviser pursuant to the terms of a subadvisory agreement with PI, are in the interest of the Fund and its shareholders in light of the services performed, fees charged and such other matters as the Directors considered relevant in the exercise of their business judgment.

 

The material factors and conclusions that formed the basis for the Directors’ reaching their determinations to approve the continuance of the agreements are separately discussed below.

 

Nature, Quality, and Extent of Services

 

The Board received and considered information regarding the nature, quality and extent of services provided to the Fund by PI and QMA. The Board considered the services provided by PI, including but not limited to the oversight of the subadviser for the Fund, as well as the provision of fund recordkeeping, compliance, and other services to the Fund. With respect to PI’s oversight of the subadviser, the Board noted that PI’s Strategic Investment Research Group (“SIRG”), which is a business unit of PI, is responsible for monitoring and reporting to PI’s senior management on the performance and operations of the subadviser. The Board also considered that PI pays the salaries of all of the officers and non-independent Directors of the Fund. The Board also considered the investment subadvisory services provided by QMA, as well as adherence to the Fund’s investment restrictions and compliance with applicable Fund policies and procedures. The Board considered PI’s evaluation of the subadviser, as well as PI’s recommendation, based on its review of the subadviser, to renew the subadvisory agreement.

 

The Board reviewed the qualifications, backgrounds and responsibilities of PI’s senior management responsible for the oversight of the Fund and QMA, and also reviewed

 

Visit our website at www.prudentialfunds.com

 

 

 

 

the qualifications, backgrounds and responsibilities of QMA’s portfolio managers who are responsible for the day-to-day management of the Fund’s portfolio. The Board was provided with information pertaining to PI’s and QMA’s organizational structure, senior management, investment operations, and other relevant information pertaining to both PI and QMA. The Board also noted that it received favorable compliance reports from the Fund’s Chief Compliance Officer (“CCO”) as to both PI and QMA. The Board noted that QMA is affiliated with PI.

 

The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PI and the subadvisory services provided to the Fund by QMA, and that there was a reasonable basis on which to conclude that the Fund benefits from the services provided by PI and QMA under the management and subadvisory agreements.

 

Performance of the Fund

 

The Board received and considered information about the Fund’s historical performance. The Board considered that the Fund’s gross performance in relation to its Peer Universe (the Lipper International Large-Cap Core Funds Performance Universe) was in the third quartile over the one-year period and in the fourth quartile over the three- and five-year periods. The Board also noted that the Fund underperformed its benchmark index for all periods. The Board considered PI’s assertion that essentially all of the Fund’s underperformance came from security selection, particularly among slower-growing stocks. The Board noted its concern with the Fund’s short-term and long-term performance record, and requested that PI and QMA report back to the Board with their views on strategic alternatives to address the Fund’s performance at the third quarter Board meeting scheduled for September 2010. The Board also instructed SIRG to provide quarterly updates on Fund performance. The Board noted that the Fund’s performance had improved, with the Fund ranking in the second quartile during the first quarter of 2010. The Board concluded that it was reasonable to renew the agreements, subject to its continued close scrutiny of the Fund’s performance and its consideration of PI’s and QMA’s presentation on strategic alternatives to address the Fund’s performance.

 

Fees and Expenses

 

The Board considered the Fund’s actual management fees (which reflects any subsidies, expense caps or waivers) ranked in the Expense Group’s second quartile and that the Fund’s total expenses ranked in the third quartile. The Board considered that the Fund’s total expenses were 6.5 basis points higher than the median for all funds included in the Expense Group. The Board concluded that the management fees and total expenses were reasonable in light of the services provided.

 

Prudential International Equity Fund

 

 

Approval of Advisory Agreements (continued)

 

 

Costs of Services and Profits Realized by PI

 

The Board was provided with information on the profitability of PI and its affiliates in serving as the Fund’s investment manager. The Board discussed with PI the methodology utilized in assembling the information regarding profitability and considered its reasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure and cost of capital. The Board did not separately consider the profitability of the subadviser, an affiliate of PI, as its profitability was reflected in the profitability report for PI. Taking these factors into account, the Board concluded that the profitability of PI and its affiliates in relation to the services rendered was not unreasonable.

 

Economies of Scale

 

The Board noted that the management fee schedule for the Fund includes breakpoints, which have the effect of decreasing the fee rate as assets increase, and that at its current level of assets the Fund’s effective fee rate reflected some of those rate reductions. The Board received and discussed information concerning whether PI realizes economies of scale as the Fund’s assets grow beyond current levels. The Board took note that the Fund’s fee structure currently results in benefits to Fund shareholders whether or not PI realizes any economies of scale.

 

Other Benefits to PI and QMA

 

The Board considered potential ancillary benefits that might be received by PI and QMA and their affiliates as a result of their relationship with the Fund. The Board concluded that potential benefits to be derived by PI included brokerage commissions received by affiliates of PI, transfer agency fees received by the Fund’s transfer agent (which is affiliated with PI), and benefits to the reputation as well as other intangible benefits resulting from PI’s association with the Fund. The Board concluded that the potential benefits to be derived by QMA included its ability to use soft dollar credits, brokerage commissions received by affiliates of QMA, 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 the reputation. The Board concluded that the benefits derived by PI and QMA were consistent with the types of benefits generally derived by investment managers and subadvisers to mutual funds.

 

After full consideration of these factors, the Board concluded that the approval of the agreements 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 Directors of the Fund has delegated to the Fund’s investment subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Commission’s website.

 

DIRECTORS
Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Michael S. Hyland • Douglas H. McCorkindale • Stephen P. Munn • Richard A. Redeker • Judy A. Rice •
Robin B. Smith • Stephen G. Stoneburn

 

OFFICERS
Judy A. Rice, President • Scott E. Benjamin, Vice President • Grace C. Torres, Treasurer and Principal Financial and Accounting Officer • Kathryn L. Quirk, 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 • Noreen M. Fierro, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • John P. Schwartz, Assistant Secretary • Andrew R. French, Assistant Secretary • M. Sadiq Peshimam, Assistant Treasurer • Peter Parrella, Assistant Treasurer

 

MANAGER   Prudential Investments LLC    Gateway Center Three
100 Mulberry Street
Newark, NJ 07102

 

INVESTMENT SUBADVISER   Quantitative Management
Associates LLC		    Gateway Center Two
100 Mulberry Street
Newark, NJ 07102

 

DISTRIBUTOR   Prudential Investment
Management Services LLC		    Gateway Center Three

100 Mulberry Street
Newark, NJ 07102

 

CUSTODIAN   The Bank of New York Mellon    One Wall Street
New York, NY 10286

 

TRANSFER AGENT   Prudential Mutual Fund
Services LLC		    PO Box 9658
Providence, RI 02940

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   KPMG LLP    345 Park Avenue

New York, NY 10154

 

FUND COUNSEL   Sullivan & Cromwell LLP    125 Broad Street
New York, NY 10004

 

An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus for the Fund contains this and other information about the Fund. An investor may obtain a prospectus by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The 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 e-mail when new materials are available. You can cancel your enrollment or change your e-mail address at any time by visiting the website address above.

 

SHAREHOLDER COMMUNICATIONS WITH DIRECTORS
Shareholders can communicate directly with the Board of Directors by writing to the Chair of the Board, Prudential International Equity Fund, Prudential Investments, Attn: Board of Directors, 100 Mulberry Street, Gateway Center Three, Newark, NJ 07102. Shareholders can communicate directly with an individual Director by writing to the same address. Communications are not screened before being delivered to the addressee.

 

AVAILABILITY OF PORTFOLIO SCHEDULE
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation and location of the Public Reference Room may be obtained by calling (202) 551-8090. The Fund’s schedule of portfolio holdings is also available on the Fund’s website as of the end of each fiscal quarter.

 

The Fund’s Statement of Additional Information contains additional information about the Fund’s Directors and is available without charge, upon request, by calling (800) 225-1852.

 

Mutual Funds:

ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY   MAY LOSE VALUE   ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE

LOGO

 

 

    Prudential International Equity Fund                    
    Share Class   A   B   C   F   L   M   X   Z    
 

NASDAQ

   PJRAX   PJRBX   PJRCX   N/A   DEILX   DEIMX   DEIQX   PJIZX  
 

CUSIP

   743969859   743969867   743969875   743969842   743969834   743969826   743969818   743969883  
                   

MF190E    0192559-00001-00

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ANNUAL REPORT   OCTOBER 31, 2010

 

Prudential International Value Fund

 

Fund Type

International stock

 

Objective

Long-term growth of capital

 

      

This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.

 

The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter.

 

Prudential Investments, Prudential, the Prudential logo and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

 

 

 

LOGO

  

To enroll in e-delivery, go to

www.prudentialfunds.com/edelivery

 

 

 

December 15, 2010

 

Dear Shareholder:

 

We hope you find the annual report for the Prudential International Value Fund informative and useful. Because of ongoing market volatility, we understand that this is a difficult time to be an investor. While it is impossible to predict what the future holds, 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 professional can help you create a diversified investment plan that may include mutual funds covering all the basic asset classes and that reflects your personal investor profile and risk tolerance. Keep in mind that diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.

 

Prudential Investments® provides a wide range of mutual funds to choose from that can help you make progress toward your financial goals. Our funds offer the experience, resources, and professional discipline of Prudential Financial’s affiliated asset managers. Most of Prudential Investments’ equity funds are advised by Jennison Associates LLC, Quantitative Management Associates LLC (QMA), or Prudential Real Estate Investors. Prudential Investment Management, Inc. (PIM) advises the Prudential Investments fixed income and money market funds through its Prudential Fixed Income unit. Jennison Associates, QMA, and PIM are registered investment advisers and Prudential Financial companies. Prudential Real Estate Investors is a unit of PIM.

 

Thank you for choosing the Prudential Investments family of mutual funds.

 

Sincerely,

 

LOGO

 

Judy A. Rice, President

Prudential International Value Fund

 

Prudential International Value Fund     1   

Your Fund’s 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 investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The maximum initial sales charge is 5.50% (Class A shares). Gross operating expenses: Class A, 1.71%; Class B, 2.41%; Class C, 2.41%; Class Z, 1.41%. Net operating expenses: Class A, 1.66%; Class B, 2.41%; Class C, 2.41%; Class Z, 1.41%, after contractual reduction through 2/29/2012.

 

Cumulative Total Returns (Without Sales Charges) as of 10/31/10  
     One Year     Five Years     Ten Years  

Class A

      10.68 %      22.47 %      34.83 % 

Class B

      9.92        17.84        24.82   

Class C

      9.91        17.88        24.97   

Class Z

      11.01        23.96        38.04   

MSCI EAFE® ND Index

      8.36        17.66        36.66   

Lipper Average

      10.34        16.07        30.60   
      
Average Annual Total Returns (With Sales Charges) as of 9/30/10  
     One Year     Five Years     Ten Years  

Class A

      –1.35 %      1.61 %      1.91 % 

Class B

      –1.44        1.80        1.69   

Class C

      2.61        1.97        1.70   

Class Z

      4.64        3.00        2.72   

MSCI EAFE® ND Index

      3.27        1.97        2.56   

Lipper Average

      3.88        1.66        1.77   
      
Average Annual Total Returns (With Sales Charges) as of 10/31/10  
     One Year     Five Years     Ten Years  

Class A

      4.59 %      2.97 %      2.45 % 

Class B

      4.92        3.18        2.24   

Class C

      8.91        3.34        2.25   

Class Z

      11.01        4.39        3.28   

 

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Average Annual Total Returns (Without Sales Charges) as of 10/31/10  
     One Year     Five Years     Ten Years  

Class A

      10.68 %      4.14 %      3.03 % 

Class B

      9.92        3.34        2.24   

Class C

      9.91        3.34        2.25   

Class Z

      11.01        4.39        3.28   

 

Growth of a $10,000 Investment

 

 

LOGO

 

The graph compares a $10,000 investment in the Prudential International Value Fund (Class A shares) with a similar investment in the MSCI EAFE® ND Index by portraying the initial account values at the beginning of the 10-year period for Class A shares (October 31, 2000) and the account values at the end of the current fiscal year (October 31, 2010) as measured on a quarterly basis. For purposes of the graph, and unless otherwise indicated, it has been assumed that (a) the maximum applicable front-end sales charge was deducted from the initial $10,000 investment in Class A shares; (b) all recurring fees (including management fees) were deducted; and (c) all dividends and distributions were reinvested. The line graph provides information for Class A shares only. As indicated in the tables provided earlier, performance for Class B, Class C, and Class Z shares will vary due to the differing charges and expenses applicable to each share class (as indicated in the following paragraphs). Without the contractual distribution and service (12b-1) fee waiver of 0.05% for Class A shares in effect through February 29, 2012, the returns shown in the graph and for Class A shares in the tables would have been lower.

 

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.

 

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%, a 12b-1 fee of up to 0.30% annually, and 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

 

Prudential International Value Fund     3   

 

 

Your Fund’s Performance (continued)

 

 

subject to a contingent deferred sales charge (CDSC) of 1%, in certain circumstances. 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 purchased 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 Z shares are not subject to a sales charge or 12b-1 fees. The returns in the graph and tables reflect the share class expense structure in effect at the close of the fiscal period.

 

Benchmark Definitions

 

Morgan Stanley Capital International Europe, Australasia, and Far East ND Index

The Morgan Stanley Capital International Europe, Australasia, and Far East Index (MSCI EAFE® ND Index) is an unmanaged, weighted index of performance that reflects stock price movements of developed-country markets in Europe, Australasia, and the Far East. The ND version of the MSCI EAFE Index reflects the impact of the maximum withholding taxes on reinvested dividends.

 

Lipper International Large-Cap Core Funds Average

The Lipper International Large-Cap Core Funds Average (Lipper Average) represents returns based on an average return of all funds in the Lipper International Large-Cap Core Funds category. Funds in the Lipper Average invest at least 75% of their equity assets in companies strictly outside of the U.S. with market capitalizations (on a three-year weighted basis) above Lipper’s international large-cap floor. International large-cap core funds typically have average characteristics compared to their large-cap-specific subset of the MSCI EAFE Index.

 

Investors cannot invest directly in an index or average. The returns for the MSCI EAFE® ND Index and the Lipper Average would be lower if they included the effects of sales charges, operating expenses, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses of a mutual fund, but not sales charges or taxes.

 

Five Largest Holdings expressed as a percentage of net assets as of 10/31/10

   

Novartis AG, Pharmaceuticals

      2.1 % 

LVMH Moet Hennessy Louis Vuitton SA, Diversified Operations

      1.5   

BNP Paribas, Financial—Bank & Trust

      1.4   

Volkswagen AG (PRFC Shares), Automobile Manufacturers

      1.4   

Novo Nordisk A/S (Class B Stock), Pharmaceuticals

      1.3   

Holdings reflect only long-term investments and are subject to change.

 

Five Largest Industries expressed as a percentage of net assets as of 10/31/10

   

Pharmaceuticals

      9.5 % 

Oil, Gas & Consumable Fuels

      8.6   

Financial—Bank & Trust

      8.2   

Telecommunications

      6.6   

Insurance

      6.0   

Industry weightings reflect only long-term investments and are subject to change.

 

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Strategy and Performance Overview

 

 

 

How did the Fund perform?

For the 12-month reporting period ended October 31, 2010, the Prudential International Value Fund’s Class A shares posted a 10.68% return, outperforming the 8.36% return of the Morgan Stanley Capital International Europe, Australasia, and Far East Net Dividend Index (MSCI EAFE ND Index). The Fund also outperformed the 10.34% return of the Lipper International Large-Cap Core Funds Average.

 

How is the Fund managed?

LSV Asset Management (LSV) and Thornburg Investment Management, Inc. (Thornburg) are co-managers of the Fund. The Fund combines the distinct investment approaches of LSV International Value (deep value) and Thornburg International (relative value/core).

 

LSV’s active quantitative investment strategy is based on the firm’s research into value investing and behavioral finance. They believe that superior investment performance can be achieved by exploiting behavioral biases exhibited by other investors, including the tendency to extrapolate the past too far into the future, wrongly equating a good company with a good investment irrespective of price, ignoring statistical evidence and developing a “mindset” about a company. The objective of LSV’s purely quantitative modeling approach is to pick undervalued stocks with near-term appreciation potential.

 

Thornburg’s value-based investment approach seeks promising companies trading at a discount to what the investment manager believes is a company’s intrinsic value. The strategy looks to reduce portfolio total risk by exposing the portfolio to traditional, relative, and/or deep value stocks. The investment process utilizes quantitative screens to identify attractively valued stocks (using metrics such as price/earnings, price/forward earnings, and price to cash/flow) poised for fundamental improvement, such as earnings surprises or earnings revisions, relative to peers. Management then performs fundamental research, including visits with company management, peers, competitors, and suppliers, on companies deemed attractive by the screening process. However, Thornburg does reserve the right to circumvent the screening process and often does, in their search for value. The result of their fundamental analysis is an estimate of a company’s intrinsic value, which is compared to current valuations to identify attractive opportunities.

 

What were market conditions like for international stocks?

The Morgan Stanley Capital International Europe Australasia and Far East Index (MSCI EAFE Index), which measures developed markets, performance (excluding the United States and Canada), ended the reporting period with a net gain of 8.36%. The global economy continued to recover, boosted by stimulus efforts enacted in 2009 by a

 

Prudential International Value Fund     5   

 

 

Strategy and Performance Overview (continued)

 

 

range of governments. Major central banks kept interest rates low as liquidity continued to flow into the global economy. A promising development was a strong rise in manufacturing activity.

 

The first quarter of 2010, the Index was virtually flat with a net return of nearly 1%, with the majority of countries in the Index showing losses. During the second quarter, fears about fiscal stability emanating from the euro zone debt crisis, and concerns about policy missteps, caused investors to sell off riskier assets. Subsequently, tighter financial conditions loomed as the euro’s slide and proposed austerity measures helped stall the rally in international equities. While this flight toward quality hit European markets most severely, all advanced nations were affected, as were emerging markets. Furthermore, slower growth in China over inflation fears negatively affected equities and heightened investors’ sensitivity to overall economic signals.

 

However, toward the end of the reporting period, international equities staged a widespread robust recovery as investors overcame their risk-aversion anxiety that had driven dismal returns in the second quarter. These results buoyed investor optimism over recent sovereign debt issues in the euro zone along with a conviction that a sluggish U.S. economy would not impede global growth. Both MSCI stock-style indexes rose. The MSCI-EAFE Growth Index experienced a 12.5% gain, exceeding the 5.2% gain for the Value Index.

 

Sector performance in the MSCI-EAFE Index, priced in U.S. dollars, was mixed. Four sectors experienced double-digit gains, while three sectors ended the reporting period in single digits, and three in low to moderate declines. Materials, supported by mining and metals, rose roughly 18%. Consumer discretionary recorded a double-digit gain, with durables and apparel and consumer services showing strength. Industrials followed closely on a very robust capital goods industry. Consumer staples rose in the low double digits supported by gains in the food and household goods industries. Telecommunication services rose as the wireless industry experienced stronger returns. Information technology, led by semiconductors, turned in a respectable gain. Healthcare was modest, and utilities tipped into nominally negative territory. Energy declined on weakness in the fuel industries. The financials sector declined the most pressured by losses in banks and diversified financial services.

 

What impact did the LSV strategy have on the Fund’s performance?

In the beginning of the reporting period, the rally in riskier assets from the third quarter of 2009 stalled as stocks entered into a correction. The LSV portion struggled out of the gate, underperformed for the first two months of the period, and then outperformed for the remainder of the period.

 

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Moreover, growth stocks outperformed value stocks in international markets. Underperformance by companies with low price-to-book valuation multiples, particularly in the financial sector, pulled down value stocks. LSV was overweight in financial stocks, and concentrated in those with the most attractive valuations, which further detracted from relative performance early in the period.

 

During the rest of the period, beginning in January 2010, LSV outperformed the Index, as equity markets vacillated between risk-friendly rallies and risk-averse corrections. However, LSV’s deep value strategy could not compensate for its slow start, and this muted its overall performance for the reporting period.

 

What impact did Thornburg’s strategy have on the Fund’s performance?

The Thornburg portion of the Portfolio displayed consistent outperformance during the entire period. As a relative value/core strategy, Thornburg benefited from the tailwinds of higher value stocks outperforming lower value stocks and also from growth-style stocks outperforming value stocks in markets outside of the U.S. Overall, Thornburg handily outperformed the Index for the period. Allocations to countries not in the Index significantly boosted performance. Holdings in companies in Canada, Mexico, and South Korea helped performance, as these markets individually outperformed the return of the Index. Additionally, stock selection in the United Kingdom (UK) and Germany further enhanced relative performance, as Thornburg made good stock selections in the UK consumer discretionary sector and also among stocks of German automakers.

 

From time to time, Thornburg uses derivatives in the form of currency forwards as a hedging tool for risk management purposes. Thornburg does not expect a significant portion of the performance to come from currency hedging strategies. For the period ending October 31, 2010, currency hedging detracted slightly from results as Fund hedged on the Euro, British Pound, Brazilian Real and Mexican Peso. The main hedge was earlier in the period, as the fund’s hedge against the Mexican Peso detracted from results.

 

Prudential International Value Fund     7   

 

Fees and Expenses (Unaudited)

 

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

 

The example is based on an investment of $1,000 invested on May 1, 2010, at the beginning of the period, and held through the six-month period ended October 31, 2010. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.

 

The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of Prudential Investments funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over the six-month period 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 Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and

 

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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.

 

Prudential International
Value Fund		   Beginning Account
Value
May 1, 2010		     Ending Account
Value
October 31, 2010		     Annualized
Expense Ratio
Based on the
Six-Month  Period		     Expenses Paid
During the
Six-Month Period*		  
         
Class A   Actual   $ 1,000.00      $ 1,069.60        1.73 %    $ 9.02   
    Hypothetical   $ 1,000.00      $ 1,016.48        1.73 %    $ 8.79   
         
Class B   Actual   $ 1,000.00      $ 1,066.00        2.48 %    $ 12.91   
    Hypothetical   $ 1,000.00      $ 1,012.70        2.48 %    $ 12.58   
         
Class C   Actual   $ 1,000.00      $ 1,065.90        2.48 %    $ 12.91   
    Hypothetical   $ 1,000.00      $ 1,012.70        2.48 %    $ 12.58   
         
Class Z   Actual   $ 1,000.00      $ 1,071.40        1.48 %    $ 7.73   
    Hypothetical   $ 1,000.00      $ 1,017.74        1.48 %    $ 7.53   

* Fund expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by the 184 days in the six-month period ended October 31, 2010, and divided by the 365 days in the Fund’s fiscal year ended October 31, 2010 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.

 

Prudential International Value Fund     9   

 

 

Portfolio of Investments

 

as of October 31, 2010

 

 

Shares      Description    Value (Note 1)  
       

LONG-TERM INVESTMENTS    97.5%

  

COMMON STOCKS    97.5%

  

Australia    4.6%

  

69,400     

Bendigo and Adelaide Bank Ltd.

    $ 615,224   
49,152     

BHP Billiton Ltd.

      2,018,309   
129,488     

BlueScope Steel Ltd.

      253,045   
174,200     

Challenger Financial Services Group Ltd.

      784,931   
120,800     

Downer EDI Ltd.

      599,929   
534,100     

Emeco Holdings Ltd.

      465,627   
255,400     

Goodman Fielder Ltd.

      371,512   
196,700     

Metcash Ltd.

      841,998   
50,700     

National Australia Bank Ltd.

      1,264,421   
228,600     

OneSteel Ltd.

      604,596   
186,200     

Pacific Brands Ltd.*

      197,895   
147,778     

Tabcorp Holdings Ltd.

      1,068,296   
285,900     

Telstra Corp. Ltd.

      747,740   
             
     9,833,523   

Austria    0.5%

  

17,500     

OMV AG

      653,854   
12,000     

Voestalpine AG

      475,748   
             
     1,129,602   

Belgium    0.7%

  

69,000     

AGFA-Gevaert NV*

      402,385   
15,300     

Delhaize Group

      1,068,779   
9,876     

Dexia NV/SA*

      43,972   
             
     1,515,136   

Bermuda    0.4%

  

29,960     

Seadrill Ltd.

      907,507   

Brazil    1.8%

  

180,360     

BM&FBOVESPA SA

      1,504,149   
29,917     

Embraer-Empresa Brasileira de Aeronautica SA, ADR

      863,105   
54,700     

Natura Cosmeticos SA

      1,563,501   
             
     3,930,755   

Canada    2.3%

  

26,670     

Canadian National Railway Co.

      1,727,444   
41,500     

Canadian Natural Resources Ltd.

      1,510,830   

 

See Notes to Financial Statements.

 

Prudential International Value Fund     11   

 

 

Portfolio of Investments

 

as of October 31, 2010 continued

 

Shares      Description    Value (Note 1)  
       

COMMON STOCKS (Continued)

  

Canada (cont’d.)

  

7,520     

Potash Corp. of Saskatchewan, Inc.

    $ 1,091,077   
17,100     

Thomson Reuters Corp.

      653,049   
             
     4,982,400   

China    2.6%

  

40,415     

China Life Insurance Co. Ltd. (Class H Stock)

      177,015   
635,474     

China Merchants Bank Co. Ltd. (Class H Stock)

      1,803,635   
180,000     

Industrial & Commercial Bank of China Asia Ltd.

      666,473   
2,403,000     

Industrial & Commercial Bank of China Ltd. (Class H Stock)

      1,934,491   
271,199     

Sinopharm Group Co. (Class H Stock)

      1,065,378   
             
     5,646,992   

Denmark    2.1%

         
16,200     

Danske Bank A/S*

      430,843   
28,700     

H. Lundbeck A/S

      573,132   
27,365     

Novo Nordisk A/S (Class B Stock)

      2,880,473   
20,216     

Vestas Wind Systems A/S*

      645,179   
             
     4,529,627   

Finland    0.5%

         
56,700     

Nokia Oyj

      612,384   
29,000     

Tieto Oyj

      554,580   
             
     1,166,964   

France    10.2%

         
11,946     

Air Liquide SA

      1,545,270   
27,100     

AXA SA

      493,351   
41,113     

BNP Paribas

      3,006,984   
11,400     

Casino Guichard Perrachon SA

      1,070,996   
5,600     

Ciments Francais SA

      514,646   
76,000     

Credit Agricole SA

      1,245,529   
20,900     

France Telecom SA

      502,218   
25,433     

Lafarge SA

      1,453,436   
9,000     

Lagardere SCA

      383,868   
20,075     

LVMH Moet Hennessy Louis Vuitton SA

      3,146,105   
19,124     

Publicis Groupe SA

      952,620   
10,200     

Rallye SA

      397,855   
9,800     

Renault SA*

      544,566   
27,700     

Sanofi-Aventis SA

      1,934,593   
18,300     

SCOR SE

      450,056   

 

See Notes to Financial Statements.

 

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Shares      Description    Value (Note 1)  
       

COMMON STOCKS (Continued)

  

France (cont’d.)

         
4,300     

Societe Generale

    $ 257,495   
12,500     

Thales SA

      509,663   
34,700     

Total SA

      1,885,707   
56,700     

Vivendi

      1,617,373   
             
     21,912,331   

Germany    8.4%

         
12,200     

Allianz SE

      1,528,884   
6,900     

Aurubis AG

      354,944   
15,300     

BASF SE

      1,113,285   
37,600     

Deutsche Bank AG

      2,167,590   
39,800     

E.ON AG

      1,246,364   
27,828     

Fresenius Medical Care AG & Co. KGaA

      1,772,728   
9,100     

Hannover Rueckversicherung AG

      460,389   
7,600     

MTU Aero Engines Holding AG

      459,074   
5,600     

Muenchener Rueckversicherungs-Gesellschaft AG

      875,670   
6,000     

Rheinmetall AG

      432,240   
15,500     

RWE AG

      1,111,011   
46,539     

SAP AG

      2,427,057   
7,300     

Suedzucker AG

      172,723   
17,300     

ThyssenKrupp AG

      636,630   
19,317     

Volkswagen AG (PRFC Shares)

      2,903,640   
2,400     

Vossloh AG

      279,586   
             
     17,941,815   

Guernsey    0.5%

         
37,544     

Amdocs Ltd.*

      1,151,850   

Hong Kong    2.8%

         
662,720     

Chaoda Modern Agriculture Holdings Ltd.

      540,350   
1,057,117     

CNOOC Ltd.

      2,190,266   
110,148     

Hong Kong Exchanges and Clearing Ltd.

      2,424,286   
122,500     

Kingboard Chemical Holdings Ltd.

      595,807   
88,000     

Yue Yuen Industrial Holdings Ltd.

      315,614   
             
     6,066,323   

Ireland    0.5%

         
43,400     

Allied Irish Banks PLC*

      20,356   
62,300     

Bank of Ireland*

      46,216   

 

See Notes to Financial Statements.

 

Prudential International Value Fund     13   

 

 

Portfolio of Investments

 

as of October 31, 2010 continued

 

Shares      Description    Value (Note 1)  
       

COMMON STOCKS (Continued)

  

Ireland (cont’d.)

         
23,700     

Covidien PLC

    $ 944,919   
32,900     

Irish Life & Permanent Group Holdings PLC*

      69,602   
             
     1,081,093   

Israel    1.7%

         
131,500     

Bank Hapoalim BM*

      596,461   
9,400     

Elbit Systems Ltd.

      502,385   
48,214     

Teva Pharmaceutical Industries Ltd., ADR

      2,502,307   
             
     3,601,153   

Italy    2.8%

         
30,300     

Banco Popolare Scarl

      162,889   
281,600     

Enel SpA

      1,607,905   
67,100     

ENI SpA

      1,511,989   
32,100     

Finmeccanica SpA

      448,111   
11,700     

Fondiaria-SAI SpA

      138,985   
309,980     

Intesa Sanpaolo SpA

      1,090,446   
617,900     

Telecom Italia SpA

      947,718   
             
     5,908,043   

Japan    15.5%

         
2,400     

Aeon Credit Service Co. Ltd.

      27,618   
17,673     

Alpine Electronics, Inc.

      221,379   
15     

Alps Electric Co. Ltd.

      134   
24,000     

Aoyama Trading Co. Ltd.

      390,406   
23,900     

Astellas Pharma, Inc.

      889,233   
31,697     

Canon, Inc.

      1,465,302   
20,600     

Circle K Sunkus Co. Ltd.

      292,348   
47,400     

COMSYS Holdings Corp.

      421,163   
669     

Dai-ichi Life Insurance Co. Ltd. (The)

      811,413   
9,697     

Fanuc Ltd.

      1,403,878   
80,000     

Fukuoka Financial Group, Inc.

      311,172   
18,400     

Fuyo General Lease Co. Ltd.

      522,709   
45,600     

Heiwa Corp.

      574,604   
27,000     

Hitachi Capital Corp.

      359,687   
19,700     

Itochu Techno-Solutions Corp.

      672,008   
122,194     

JX Holdings, Inc.

      718,252   
160     

KDDI Corp.

      861,936   
27,800     

Keihin Corp.

      592,482   
94,645     

Komatsu Ltd.

      2,319,373   

 

See Notes to Financial Statements.

 

14   Visit our website at www.prudentialfunds.com

 

 

 

 

Shares      Description    Value (Note 1)  
       

COMMON STOCKS (Continued)

  

Japan (cont’d.)

         
13,600     

Konami Corp.

    $ 239,652   
105,600     

Kurabo Industries Ltd.

      162,724   
43,000     

Kyorin Holdings, Inc.

      671,157   
54,000     

Kyowa Exeo Corp.

      475,780   
209,000     

Marubeni Corp.

      1,314,204   
17,300     

Miraca Holdings, Inc.

      622,602   
12,400     

Mitsubishi Corp.

      298,173   
329,800     

Mitsubishi UFJ Financial Group, Inc.

      1,536,908   
18,900     

Mitsui & Co. Ltd.

      297,111   
524,700     

Mizuho Financial Group, Inc.

      762,892   
32,800     

Namco Bandai Holdings, Inc.

      302,443   
113,000     

Nichirei Corp.

      492,892   
48,000     

Nippon Shokubai Co. Ltd.

      453,337   
23,000     

Nippon Telegraph & Telephone Corp.

      1,044,675   
166,000     

Nishi-Nippon City Bank Ltd. (The)

      453,834   
62,000     

Nissan Shatai Co. Ltd.

      482,316   
600     

NTT DoCoMo, Inc.

      1,010,314   
7,200     

Sankyo Co. Ltd.

      383,845   
105,000     

Sankyu, Inc.

      441,034   
83,000     

Sanwa Holdings Corp.

      237,231   
10,500     

Seiko Epson Corp.

      167,410   
43,000     

Seino Holdings Co. Ltd.

      262,371   
19,200     

Shimachu Co. Ltd.

      394,403   
54,000     

Shizuoka Gas Co. Ltd.

      316,739   
118,900     

Sumitomo Corp.

      1,507,121   
37,700     

Sumitomo Mitsui Financial Group, Inc.

      1,130,016   
24,000     

Sumitomo Trust & Banking Co. Ltd. (The)

      131,527   
31,500     

Takeda Pharmaceutical Co. Ltd.

      1,475,767   
111,000     

Toagosei Co. Ltd.

      486,927   
35,200     

Toppan Forms Co. Ltd.

      312,763   
53,270     

Toyota Motor Corp.

      1,892,618   
23,500     

Toyota Tsusho Corp.

      364,751   
61,000     

Yokohama Rubber Co. Ltd. (The)

      305,493   
             
          33,286,127   

Luxembourg    0.7%

  

44,300     

ArcelorMittal

      1,423,970   

 

See Notes to Financial Statements.

 

Prudential International Value Fund     15   

 

 

Portfolio of Investments

 

as of October 31, 2010 continued

 

Shares      Description    Value (Note 1)  
       

COMMON STOCKS (Continued)

  

Mexico    1.5%

         
27,013     

America Movil SAB de CV (Class L Stock), ADR

    $ 1,546,765   
611,956     

Wal-Mart de Mexico SAB de CV (Class V Stock)

      1,675,098   
             
          3,221,863   

Netherlands    3.3%

         
39,600     

Aegon NV*

      250,996   
30,000     

Brit Insurance Holdings NV*

      502,339   
12,257     

CSM NV

      388,101   
157,600     

ING Groep NV, CVA*

      1,682,406   
41,100     

Koninklijke Ahold NV

      568,029   
17,500     

Koninklijke DSM NV

      935,782   
17,566     

Koninklijke Philips Electronics NV

      531,266   
7,400     

Nutreco NV

      538,452   
23,469     

Schlumberger Ltd.

      1,640,248   
             
          7,037,619   

New Zealand    0.3%

         
590,300     

Air New Zealand Ltd.

      607,522   

Norway    0.4%

         
43,600     

DnB NOR ASA

      598,545   
15,500     

Statoil ASA

      338,499   
             
          937,044   

Singapore    0.2%

         
235,970     

M1 Ltd.

      404,739   

South Korea    0.8%

         
10,943     

Hyundai Motor Co.

      1,653,241   

Spain    3.4%

         
60,459     

Banco Bilbao Vizcaya Argentaria SA

      795,192   
42,000     

Banco Espanol de Credito SA

      421,175   
155,100     

Banco Santander SA

      1,992,690   
42,800     

Repsol YPF SA

      1,186,920   
102,900     

Telefonica SA

      2,778,410   
             
          7,174,387   

 

See Notes to Financial Statements.

 

16   Visit our website at www.prudentialfunds.com

 

 

 

 

Shares      Description    Value (Note 1)  
       

COMMON STOCKS (Continued)

  

Sweden    1.9%

         
66,700     

Boliden AB

    $ 1,132,362   
58,416     

Hennes & Mauritz AB (Class B Stock)

      2,058,660   
11,700     

Meda AB

      96,162   
11,700     

NCC AB (Class B Stock)

      249,601   
34,900     

Svenska Cellulosa AB SCA (Class B Stock)

      541,292   
             
          4,078,077   

Switzerland    6.6%

         
9,400     

Baloise Holding AG

      868,787   
29,784     

Clariant AG*

      503,639   
27,100     

Credit Suisse Group AG

      1,119,470   
1,200     

Georg Fischer AG*

      514,608   
25,633     

Julius Baer Group Ltd.

      1,082,054   
41,938     

Logitech International SA*

      795,247   
34,800     

Nestle SA

      1,906,123   
77,067     

Novartis AG

      4,467,936   
13,400     

Swiss Reinsurance Co. Ltd.

      644,093   
1,310     

Swisscom AG

      547,270   
2,900     

Verwaltungs-und Privat-Bank AG

      315,035   
5,300     

Zurich Financial Services AG

      1,297,464   
             
          14,061,726   

Turkey    0.5%

         
180,700     

Turkiye Garanti Bankasi A/S

      1,108,628   

United Kingdom    19.5%

         
166,400     

ARM Holdings PLC

      968,676   
40,200     

AstraZeneca PLC

      2,015,862   
128,300     

Aviva PLC

      818,424   
182,100     

BAE Systems PLC

      1,005,798   
180,281     

Barclays PLC

      793,250   
158,557     

Beazley PLC

      306,657   
67,844     

BG Group PLC

      1,321,375   
168,300     

BP PLC

      1,148,285   
58,896     

British American Tobacco PLC

      2,246,066   
109,752     

British Sky Broadcasting Group PLC

      1,242,466   
441,200     

BT Group PLC

      1,086,599   
87,740     

Cairn Energy PLC*

      542,540   
47,873     

Carnival PLC

      2,063,491   
62,100     

Dairy Crest Group PLC

      368,572   

 

See Notes to Financial Statements.

 

Prudential International Value Fund     17   

 

 

Portfolio of Investments

 

as of October 31, 2010 continued

 

Shares      Description    Value (Note 1)  
       

COMMON STOCKS (Continued)

  

United Kingdom (cont’d.)

         
91,800     

Davis Service Group PLC

    $ 611,627   
88,700     

Drax Group PLC

      541,086   
219,700     

DS Smith PLC

      591,776   
63,400     

GlaxoSmithKline PLC

      1,240,408   
208,700     

Home Retail Group PLC

      732,363   
36,500     

IMI PLC

      461,748   
116,000     

Intermediate Capital Group PLC

      600,000   
381,716     

Kingfisher PLC

      1,454,494   
422,600     

Legal & General Group PLC

      679,865   
260,700     

Logica PLC

      540,967   
103,100     

Marston’s PLC

      166,360   
66,200     

Meggitt PLC

      350,157   
152,500     

Melrose PLC

      688,361   
18,400     

NEXT PLC

      673,696   
200,998     

Northern Foods PLC

      152,179   
344,400     

Old Mutual PLC

      716,856   
68,634     

Pearson PLC

      1,049,724   
30,291     

Reckitt Benckiser Group PLC

      1,694,428   
88,700     

Royal Dutch Shell PLC (Class B Stock)

      2,840,452   
211,587     

RSA Insurance Group PLC

      444,140   
39,618     

SABMiller PLC

      1,284,563   
88,600     

Smith & Nephew PLC

      779,410   
23,541     

Spectris PLC

      425,872   
74,309     

Standard Chartered PLC

      2,149,803   
62,077     

Tate & Lyle PLC

      499,338   
338,079     

Tesco PLC

      2,312,348   
120,000     

Thomas Cook Group PLC

      347,840   
107,000     

Tullett Prebon PLC

      678,951   
409,900     

Vodafone Group PLC

      1,115,586   
             
     41,752,459   

United States    0.5%

         
25,990     

Southern Copper Corp.

      1,112,372   
             
    

Total common stocks
(cost $190,405,666)

      209,164,888   
             

 

See Notes to Financial Statements.

 

18   Visit our website at www.prudentialfunds.com

 

 

 

 

Units      Description    Value (Note 1)  
       

RIGHTS*

        

Belgium

                
7,200     

AGFA-Gevaert NV, expiring 11/04/10

    $ 2,415   

United Kingdom

  

9,288     

Standard Chartered PLC - NPR, expiring 11/05/10

      78,209   
             
    

Total rights
(cost $0)

      80,624   
             
    

Total long-term investments
(cost $190,405,666)

      209,245,512   
             
Shares              

SHORT-TERM INVESTMENT    1.6%

   

Affiliated Money Market Mutual Fund

         
3,465,829     

Prudential Investment Portfolios 2 - Prudential Core Taxable
Money Market Fund
(cost $3,465,829)(a)

      3,465,829   
             
    

Total Investments    99.1%
(cost $193,871,495; Note 5)

      212,711,341   
    

Other assets in excess of liabilities(b)    0.9%

      1,827,367   
             
    

Net Assets    100%

    $ 214,538,708   
             

 

The following abbreviations are used in the Portfolio descriptions:

ADR—American Depositary Receipt

CVA—Certificate Van Aandelen

NPR—Nil Paid Rights

PRFC—Preference Shares

AUD—Australian Dollar

EUR—Euro

GBP—British Pound

JPY—Japanese Yen

MXN—Mexican Peso

SEK—Swedish Krona

* Non-income producing security.
(a) Prudential Investments LLC, the manager of the Portfolio, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund.
(b) Other assets in excess of liabilities includes net unrealized appreciation (depreciation) on forward foreign currency exchange contracts as follows:

 

See Notes to Financial Statements.

 

Prudential International Value Fund     19   

 

 

Portfolio of Investments

 

as of October 31, 2010 continued

 

 

Forward foreign currency exchange contracts outstanding at October 31, 2010:

 

Purchase Contracts

  

Counterparty

         Notional
Amount
(000)		     Value at
Settlement
Date
Payable		     Current
Value		     Unrealized
Appreciation		  

Australian Dollar,
Expiring 11/03/10

   UBS Securities     AUD        2      $ 1,779      $ 1,780      $ 1   

British Pound,
Expiring 11/18/10

   Morgan Stanley     GBP        2,099        3,235,334        3,362,207        126,873   

Euro,
Expiring 01/25/11

   State Street Bank     EUR        3,727        5,069,202        5,181,414        112,212   

Japanese Yen,
Expiring 11/04/10

   UBS Securities     JPY        2,615        32,475        32,495        20   

Swedish Krona,
Expiring 11/03/10

   UBS Securities     SEK        38        5,737        5,751        14   
                             
        $ 8,344,527      $ 8,583,647      $ 239,120   
                             

 

Sale Contracts

  

Counterparty

         Notional
Amount
(000)		     Value at
Settlement
Date
Receivable		     Current
Value		     Unrealized
Depreciation		  

British Pound,
Expiring 11/18/10

   Morgan Stanley     GBP        1,118      $ 1,625,253      $ 1,791,169      $ (165,916 ) 

Expiring 11/18/10

   Morgan Stanley     GBP        981        1,415,849        1,571,038        (155,189 ) 

Euro,
Expiring 01/25/11

   State Street Bank     EUR        3,727        4,793,476        5,181,414        (387,938 ) 

Mexican Peso,
Expiring 11/30/10

   State Street Bank     MXN        29,296        2,210,767        2,367,497        (156,730 ) 

Expiring 11/30/10

   State Street Bank     MXN        5,872        473,042        474,539        (1,497 ) 
                             
        $ 10,518,387      $ 11,385,657      $ (867,270 ) 
                             

 

The industry classification of investments and other assets in excess of liabilities shown as a percentage of net assets as of October 31, 2010 were as follows:

 

Pharmaceuticals

      9.5 % 

Oil, Gas & Consumable Fuels

      8.6   

Financial—Bank & Trust

      8.2   

Telecommunications

      6.6   

Insurance

      6.0   

Food & Beverage

      5.2   

Banks

      5.0   

Metals & Mining

      3.7   

 

See Notes to Financial Statements.

 

20   Visit our website at www.prudentialfunds.com

 

 

Industry (cont’d.)   

Automobile Manufacturers

      3.6 % 

Diversified Financial Services

      3.0   

Retail & Merchandising

      2.8   

Computer Services & Software

      2.5   

Media & Entertainment

      2.4   

Chemicals

      2.3   

Entertainment & Leisure

      2.2   

Utilities

      1.9   

Aerospace

      1.7   

Affiliated Money Market Mutual Fund

      1.6   

Diversified Operations

      1.6   

Electronic Components & Equipment

      1.5   

Transportation

      1.1   

Machinery—Construction & Mining

      1.1   

Tobacco

      1.0   

Building Materials

      1.0   

Distribution/Wholesale

      1.0   

Retail

      1.0   

Consumer Products & Services

      0.9   

Healthcare—Services

      0.8   

Office Equipment

      0.8   

Cosmetics & Toiletries

      0.7   

Construction & Engineering

      0.7   

Financial Services

      0.7   

Commercial Services

      0.7   

Automotive Parts

      0.6   

Oil & Gas

      0.6   

Business Services

      0.6   

Beverages

      0.6   

Forest & Paper Products

      0.6   

Miscellaneous Manufacturing

      0.5   

Healthcare Products

      0.5   

Semiconductors

      0.4   

Advertising

      0.4   

Medical Supplies & Equipment

      0.4   

Airlines

      0.3   

Commercial Banks

      0.3   

Agriculture

      0.3   

Independent Power Producers & Energy Traders

      0.2   

Aerospace/Defense

      0.2   

Diversified Manufacturing

      0.2   

Machinery & Equipment

      0.2   

Gas Distribution

      0.2   

Apparel

      0.1   

Toys

      0.1   

Electronics

      0.1   

Engineering & Construction

      0.1   

 

See Notes to Financial Statements.

 

Prudential International Value Fund     21   

 

 

Portfolio of Investments

 

as of October 31, 2010 continued

 

Industry (cont’d.)   

Clothing & Apparel

      0.1 % 

Food

      0.1   
        
     99.1   

Other assets in excess of liabilities

      0.9   
        
     100.0 % 
        

 

Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below.

 

Level 1—quoted prices in active markets for identical securities, generally for stocks and mutual funds with daily NAVs

 

Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc., and amortized cost), generally for foreign stocks priced through vendor modeling tools and debt securities

 

Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

 

The following is a summary of the inputs used as of October 31, 2010 in valuing the Fund's assets carried at fair value:

 

     Level 1      Level 2      Level 3  

Investments in Securities

         

Common Stocks:

         

Australia

    $ 9,833,523       $   —       $   —   

Austria

      1,129,602         —         —   

Belgium

      1,515,136         —         —   

Bermuda

      907,507         —         —   

Brazil

      3,930,755         —         —   

Canada

      4,982,400         —         —   

China

      5,646,992         —         —   

Denmark

      4,529,627         —         —   

Finland

      1,166,964         —         —   

France

      21,912,331         —         —   

Germany

      17,941,815         —         —   

Guernsey

      1,151,850         —         —   

Hong Kong

      6,066,323         —         —   

Ireland

      1,081,093         —         —   

 

See Notes to Financial Statements.

 

22   Visit our website at www.prudentialfunds.com

 

 

 

 

     Level 1      Level 2     Level 3  

Israel

    $ 3,601,153       $ —      $ —   

Italy

      5,908,043         —        —   

Japan

      33,286,127         —        —   

Luxembourg

      1,423,970         —        —   

Mexico

      3,221,863         —        —   

Netherlands

      7,037,619         —        —   

New Zealand

      607,522         —        —   

Norway

      937,044         —        —   

Singapore

      404,739         —        —   

South Korea

      1,653,241         —        —   

Spain

      7,174,387         —        —   

Sweden

      4,078,077         —        —   

Switzerland

      14,061,726         —        —   

Turkey

      1,108,628         —        —   

United Kingdom

      41,752,459         —        —   

United States

      1,112,372         —        —   

Rights:

        

Belgium

      2,415         —        —   

United Kingdom

      78,209         —        —   

Affiliated Money Market Mutual Fund

      3,465,829         —        —   

Other Financial Instruments*

        

Foreign Forward Currency Exchange Contracts

      —         (628,150 )      —   
                         

Total

    $ 212,711,341       $ (628,150 )    $   —   
                         

 

* Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as futures, forwards and swap contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

 

The Fair Value of Level 2 investments at 10/31/09 was $160,882,467. $142,432,806 was transferred out of Level 2 into Level 1 at 10/31/10 as a result of no longer using third-party vendor modeling tools due to the lack of significant market movements between the time at which the Fund valued its securities and the earlier closing of foreign markets.

 

It is the Fund’s policy to recognize transfers in and transfers out at the fair value as of the beginning of the period.

 

The Fund invested in various derivative instruments during the reporting period. The primary types of risk associated with these derivative instruments were equity risk and foreign exchange risk. The effect of such derivative instruments on the Fund’s financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the following summary.

 

See Notes to Financial Statements.

 

Prudential International Value Fund     23   

 

 

Portfolio of Investments

 

as of October 31, 2010 continued

 

 

Fair values of derivative instruments as of October 31, 2010 as presented in the Statement of Assets and Liabilities:

 

Derivatives not accounted for
as hedging instruments,
carried at fair value

   

Asset Derivatives

     

Liability Derivatives

  
  

Balance
Sheet Location

    Fair
Value		     

Balance
Sheet Location

    Fair
Value		  
Foreign exchange contracts    Unrealized appreciation on foreign currency forward contracts    $ 239,120       Unrealized depreciation on foreign currency forward contracts    $ 867,270   
Equity contracts    Unaffiliated investments      80,624       —      —   
                       

Total

       $ 319,744          $ 867,270   
                       

 

The effects of derivative instruments on the Statement of Operations for the year ended October 31, 2010 are as follows:

 

Amount of Realized Gain or (Loss) on Derivatives Recognized in Income

  

Derivatives not accounted
for as hedging instruments,
carried at fair value

      Rights      Warrants        Forward
Currency
Contracts		        Total  

Foreign exchange contracts

      $ —       $ —         $ 91,429         $ 91,429   

Equity contracts

        (493,548 )       4,966           —           (488,582 ) 
                                         

Total

      $ (493,548 )     $ 4,966         $ 91,429         $ (397,153 ) 
                                         

 

Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income

  

Derivatives not accounted for as hedging
instruments, carried at fair value

      Rights        Forward
Currency
Contracts		      Total  

Foreign exchange contracts

      $ —         $ (592,480 )     $ (592,480 ) 

Equity contracts

        59,238           —         59,238   
                              

Total

      $ 59,238         $ (592,480 )     $ (533,242 ) 
                              

 

For the year ended October 31, 2010, the Series’ average volume of derivative activities are as follows:

 

Forward Currency
Contracts-Purchased
(Value at Settlement
Date Payable)		     Forward Currency
Contracts-Sold
(Value at Settlement
Date Receivable)		  
$ 3,106,749      $ 9,011,123   

 

See Notes to Financial Statements.

 

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Financial Statements

 

 

OCTOBER 31, 2010   ANNUAL REPORT

 

Prudential International Value Fund

 

 

Statement of Assets and Liabilities

 

as of October 31, 2010

 

Assets

         

Investments at value:

   

Unaffiliated investments (cost $190,405,666)

    $ 209,245,512   

Affiliated investments (cost $3,465,829)

      3,465,829   

Cash

      1,080,654   

Foreign currency, at value (cost $614,780)

      619,229   

Dividends and interest receivable

      1,122,497   

Receivable for Series shares sold

      492,351   

Unrealized appreciation on foreign currency forward contracts

      239,120   

Receivable for investments sold

      169,955   

Prepaid expenses

      3,494   
        

Total assets

      216,438,641   
        

Liabilities

         

Unrealized depreciation on foreign currency forward contracts

      867,270   

Payable for investments purchased

      510,912   

Advisory fee payable

      180,006   

Accrued expenses

      171,342   

Payable for Series shares redeemed

      110,293   

Affiliated transfer agent fee payable

      39,390   

Distribution fee payable

      18,031   

Deferred directors’ fee

      2,689   
        

Total liabilities

      1,899,933   
        

Net assets

    $ 214,538,708   
        
          

Net assets were comprised of:

   

Common stock, at par value

    $ 105,470   

Paid-in capital in excess of par

      223,650,576   
        
     223,756,046   

Undistributed net investment income

      2,707,642   

Accumulated net realized loss on investment and foreign currency transactions

      (30,211,423 ) 

Net unrealized appreciation on investments and foreign currencies

      18,286,443   
        

Net assets, October 31, 2010

    $ 214,538,708   
        

 

See Notes to Financial Statements.

 

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Class A:

         

Net asset value and redemption price per share
($45,597,918 ÷ 2,247,038 shares of common stock issued and outstanding)

    $ 20.29   

Maximum sales charge (5.5% of offering price)

      1.18   
        

Offering price per share

    $ 21.47   
        

Class B:

         

Net asset value, offering price and redemption price per share
($3,092,751 ÷ 159,676 shares of common stock issued and outstanding)

    $ 19.37   
        

Class C:

         

Net asset value, offering price and redemption price per share
($6,827,884 ÷ 351,949 shares of common stock issued and outstanding)

    $ 19.40   
        

Class Z:

         

Net asset value, offering price and redemption price per share
($159,020,155 ÷ 7,788,379 shares of common stock issued and outstanding)

    $ 20.42   
        

 

See Notes to Financial Statements.

 

Prudential International Value Fund     27   

 

 

Statement of Operations

 

Year Ended October 31, 2010

 

Net Investment Income

         

Investment Income

   

Unaffiliated dividend income (net of foreign withholding tax of $507,759)

    $ 5,464,998   

Affiliated dividend income

      7,427   
        

Total income

      5,472,425   
        

Expenses

   

Advisory fee

      1,937,242   

Distribution fee—Class A

      111,566   

Distribution fee—Class B

      33,145   

Distribution fee—Class C

      67,604   

Transfer agent’s fee and expenses (including affiliated expense of $235,900)

      311,000   

Custodian’s fees and expenses

      248,000   

Registration fees

      51,000   

Reports to shareholders

      49,000   

Legal fees and expenses

      45,000   

Audit fees

      29,000   

Directors’ fees

      18,000   

Insurance fees

      4,000   

Interest expense (Note 7)

      809   

Miscellaneous

      44,899   
        

Total expenses

      2,950,265   
        

Net investment income

      2,522,160   
        

Realized And Unrealized Gain (Loss) On Investment And Foreign Currency Transactions

         

Net realized gain (loss) on:

   

Investment transactions

      (810,406 ) 

Foreign currency transactions

      156,018   
        
     (654,388 ) 
        

Net change in unrealized appreciation (depreciation) on:

   

Investments

      20,189,375   

Foreign currencies

      (657,838 ) 
        
     19,531,537   
        

Net gain on investments and foreign currencies

      18,877,149   
        

Net Increase In Net Assets Resulting From Operations

    $ 21,399,309   
        

 

See Notes to Financial Statements.

 

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Statement of Changes in Net Assets

 

 

     Year
Ended
October 31, 2010		      Year
Ended
October 31, 2009		  

Increase (Decrease) in Net Assets

                  

Operations

      

Net investment income

    $ 2,522,160       $ 2,391,271   

Net realized loss on investment and foreign currency transactions

      (654,388 )       (24,543,371 ) 

Net change in unrealized appreciation (depreciation) on investments and foreign currencies

      19,531,537         61,608,958   
                 

Net increase in net assets resulting from operations

      21,399,309         39,456,858   
                 

Dividends and Distributions (Note 1)

      

Dividends from net investment income

      

Class A

      (304,699 )       (1,642,073 ) 

Class B

      (1,944 )       (143,838 ) 

Class C

      (3,666 )       (227,424 ) 

Class Z

      (1,196,167 )       (5,093,509 ) 
                 
     (1,506,476 )       (7,106,844 ) 
                 

Series share transactions (Net of share conversions) (Note 6)

      

Net proceeds from shares sold

      37,559,143         89,972,236   

Net asset value of shares issued in reinvestment of dividends and distributions

      1,495,770         6,958,242   

Cost of shares reacquired

      (38,267,943 )       (104,539,835 ) 
                 

Net decrease in net assets from Series share transactions

      786,970         (7,609,357 ) 
                 

Capital Contributions (Note 6)

      

Proceeds from regulatory settlement

      329,878         —   
                 

Total increase

      21,009,681         24,740,657   

Net Assets

                  

Beginning of year

      193,529,027         168,788,370   
                 

End of year(a)

    $ 214,538,708       $ 193,529,027   
                 

(a) Includes undistributed net investment income of:

    $ 2,707,642       $ 1,535,940   
                 

 

See Notes to Financial Statements.

 

Prudential International Value Fund     29   

 

 

Notes to Financial Statements

 

 

Prudential World Fund, Inc. (the “Fund”), is registered under the Investment Company Act of 1940 as an open-end diversified management investment company and currently consists of two series: Prudential International Value Fund (the “Series”) and the Prudential International Equity Fund. These financial statements relate to Prudential International Value Fund. The financial statements of the other Series are not presented herein. The investment objective of the Series is to achieve long-term growth of capital. The Series seeks to achieve its objective primarily through investment in common stock and preferred stock of foreign companies of all sizes.

 

Note 1. Accounting Policies

 

The following is a summary of significant accounting policies followed by the Fund and the Series in the preparation of its financial statements.

 

Securities Valuation: Securities listed on a securities exchange (other than options on securities and indices) are valued at the last sale price on such exchange on the day of valuation or, if there was no sale on such day, at the mean between the last reported bid and ask prices, or at the last bid price on such day in the absence of an asked price. Securities traded via NASDAQ are valued at the NASDAQ official closing price (NOCP) on the day of valuation, or if there was no NOCP, at the last sale price. Securities that are actively traded in the over-the-counter market, including listed securities for which the primary market is believed by Prudential Investments LLC (“PI” or “Manager”), in consultation with the subadvisor(s), to be over-the-counter, are valued at market value using prices provided by an independent pricing agent or principal market maker. Options on securities and indices traded on an exchange are valued at the last sale price as of the close of trading on the applicable exchange or, if there was no sale, at the mean between the most recently quoted bid and asked prices on such exchange. Futures contracts and options thereon traded on a commodities exchange or board of trade are valued at the last sale price at the close of trading on such exchange or board of trade or, if there was no sale on the applicable commodities exchange or board of trade on such day, at the mean between the most recently quoted bid and asked prices on such exchange or board of trade or at the last bid price in the absence of an asked price. Securities for which market quotations are not readily available, or whose values have been affected by events occurring after the close of the security’s foreign market and before the Funds’ normal pricing time, are valued at fair value in accordance with the Board of Directors’ approved fair valuation procedures. When determining the fair valuation of

 

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securities some of the factors influencing the valuation include, the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition and the markets in which it does business; the cost of the investment; the size of the holding and the capitalization of 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 advisor regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values.

 

Short-term securities of sufficient credit quality, which mature in 60 days or less, are valued at amortized cost, which approximates market value. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between the principal amount due at maturity and cost. Short-term securities which mature in more than 60 days are valued at fair value.

 

Securities Lending: The Fund may lend its portfolio securities to broker-dealers. The loans are secured by collateral at least equal at all times to the market value of the securities loaned. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of the loan, the borrower will return to the lender securities identical to the loaned securities. Should the borrower of the securities fail financially, the Fund has the right to repurchase the securities using the collateral in the open market. The Fund recognizes income, net of any rebate and securities lending agent fees, for lending its securities in the form of fees or interest on the investment of any cash received as collateral. The Fund also continues to receive interest and dividends or amounts equivalent thereto, on the securities loaned and recognizes any unrealized gain or loss in the market price of the securities loaned that may occur during the term of the loan.

 

Foreign Currency Translation: The books and records of the Series are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis:

 

(i) market value of investment securities, other assets and liabilities—at the current rates of exchange.

 

(ii) Purchases and sales of investment securities, income and expenses—at the rates of exchange prevailing on the respective dates of such transactions.

 

Prudential International Value Fund     31   

 

 

Notes to Financial Statements

 

continued

 

 

Although the net assets of the Series are presented at the foreign exchange rates and market values at the close of the fiscal period, the Series does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of long-term securities held at the end of the fiscal period. Similarly, the Series does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities sold during the fiscal period. Accordingly, realized foreign currency gains or losses are included in the reported net realized gains or losses on investment transactions.

 

Net realized gains or losses on foreign currency transactions represent net foreign exchange gains or losses from the holding of foreign currencies, currency gains or losses realized between the trade date and settlement date on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Series’ books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains or losses from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates are reflected as a component of net unrealized appreciation (depreciation) on investments and foreign currencies.

 

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin as a result of, among other factors, the possibility of political and economic instability or the level of governmental supervision and regulation of foreign securities markets.

 

Forward Currency Contracts: A forward currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The Series enters into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings or specific receivables and payables denominated in a foreign currency. The contracts are valued daily at current exchange rates and any unrealized gain or loss is included in net unrealized appreciation or depreciation on foreign currencies. Gain or loss is realized on the settlement date of the contract equal to the difference between the settlement value of the original and negotiated forward contracts. This gain or loss, if any, is included in net realized gain (loss) on foreign currency transactions. Risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts. Forward currency contracts

 

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involve elements of both market and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities.

 

Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized and unrealized gains or losses on sales of 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 an accrual basis. Expenses are recorded on the accrual basis. Net investment income or loss, (other than distribution fees which are charged directly to the respective class) and unrealized and realized gains or losses are allocated daily to each class of shares based upon the relative proportion of net assets of each class at the beginning of the day.

 

Dividends and Distributions: The Series expects to pay dividends of net investment income and distributions of net realized capital gains, if any, annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-dividend date. Permanent book/tax differences relating to income and gains are reclassified amongst undistributed net investment income, accumulated net realized gain or loss and paid-in capital in excess of par, as appropriate.

 

Taxes: For federal income tax purposes, each series in the Fund is treated as a separate taxpaying entity. It is the Series’ policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net income and capital gains, if any, to shareholders. Therefore, no federal income tax provision is required.

 

Withholding taxes on foreign dividends are recorded, net of reclaimable amounts, at the time the related income is earned.

 

Estimates: The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

 

Note 2. Agreements

 

The Fund has a management agreement for the Series with Prudential Investments LLC (“PI”). Pursuant to this agreement, PI has responsibility for all investment advisory

 

Prudential International Value Fund     33   

 

 

Notes to Financial Statements

 

continued

 

services and supervises the subadvisor’s performance of such services. PI has entered into subadvisory agreements with LSV Asset Management (“LSV”) and Thornburg Investment Management (“Thornburg”) for the Series.

 

The subadvisory agreements provide that LSV and Thornburg furnish investment advisory services in connection with the management of the Series. In connection therewith, LSV and Thornburg are obligated to keep certain books and records of the Series. PI pays for the services of the subadvisors, the compensation of officers of the Series, occupancy and certain clerical and bookkeeping costs of the Series. The Series bears all other costs and expenses.

 

The management fee paid to PI is computed daily and payable monthly at an annual rate of 1% of the average daily net assets up to $300 million, 0.95% of the next $700 million of average daily net assets and 0.90% of average daily net assets in excess of $1 billion of the Series. The effective management fee rate as of October 31, 2010 was 1.00%.

 

The Series has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”), which acts as the distributor of the Class A, Class B, Class C and Class Z shares of the Series. The Series compensates PIMS for distributing and servicing the Series’ Class A, Class B and Class C shares pursuant to plans of distribution (the “Class A, B and C Plans”), regardless of expenses actually incurred by PIMS. The distribution fees are accrued daily and payable monthly. No distribution or service fees are paid to PIMS as distributor of the Class Z shares of the Series.

 

Pursuant to the Class A, B and C Plans, the Series compensates PIMS for distribution related activities at an annual rate of up to 0.30%, 1% and 1% of the average daily net assets of the Class A, B and C shares, respectively. For the year ended October 31, 2010, PIMS contractually agreed to limit such fee to 0.25% of the average daily net assets of the Class A shares.

 

PIMS has advised the Series that it received $42,077 in front-end sales charges resulting from sales of Class A shares, during the year ended October 31, 2010. From these fees, PIMS paid such sales charges to broker-dealers, which in turn paid commissions to salespersons and incurred other distribution costs.

 

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PIMS advised the Series that for the year ended October 31, 2010, it received $391, $6,699 and $98 in contingent deferred sales charges imposed upon certain redemptions by Class A, Class B and Class C shareholders, respectively.

 

PI and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).

 

Note 3. Other Transactions with Affiliates

 

Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly owned subsidiary of Prudential, serves as the Series’ transfer agent. The transfer agent fees and expenses in the Statement of Operations also include certain out-of-pocket expenses paid to non-affiliates, where applicable.

 

The Series pays networking fees to affiliated and unaffiliated broker/dealers, including fees related to the services of Wells Fargo, LLC (“Wells Fargo”), an affiliate of PI through December 31, 2009. These networking fees are payments made to broker/dealers that clear mutual fund transactions through a national clearing system. For the year ended October 31, 2010, the Series incurred approximately $48,000 in total networking fees, of which $5,100 was paid to Wells Fargo through December 31, 2009. These amounts are included in transfer agent’s fees and expenses in the Statement of Operations.

 

The Series invests in the Prudential Core Taxable Money Market Fund (the “Core Fund”), a portfolio of Prudential Investment Portfolios 2 registered under the Investment Company Act of 1940, as amended, and managed by PI. Earnings from the Core Fund are disclosed on the Statement of Operations as affiliated dividend income.

 

Note 4. Portfolio Securities

 

Purchases and sales of investment securities, other than short-term investments, for the year ended October 31, 2010 were $77,998,746 and $76,018,734, 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

 

Prudential International Value Fund     35   

 

 

Notes to Financial Statements

 

continued

 

and Liabilities that more closely represent their tax character, certain adjustments have been made to undistributed net investment income, accumulated net realized loss on investment and foreign currency transactions and paid-in capital in excess of par. For the tax year ended October 31, 2010 the adjustments were to increase undistributed net investment income by $156,018, decrease accumulated net realized loss on investment and foreign currency transactions by $1,000,396 and decrease paid-in-capital in excess of par by $1,156,414 due to differences in the treatment for book and tax purposes of certain transactions involving foreign securities and currencies and the expiration of a capital loss carryforward. Net investment income, net realized loss and net assets were not affected by this change.

 

For the year ended October 31, 2010, the tax character of dividends paid as reflected in the Statement of Changes in Net Assets was $1,506,476 from ordinary income. For the year ended October 31, 2009, the tax character of dividends paid as reflected in the Statement of Changes in Net Assets was $7,106,844 from ordinary income.

 

As of October 31, 2010, the accumulated undistributed earnings on a tax basis was $2,082,181 from ordinary income. This differs from the amount shown on the Statement of Assets and Liabilities primarily due to cumulative timing differences between financial and tax reporting.

 

At October 31, 2010, for federal income tax purposes, the Series had a capital loss carryforward of approximately $28,672,000 of which $334,000 expires in 2011, $1,475,000 expires in 2016, $25,886,000 expires in 2017 and $977,000 expires in 2018. As of October 31, 2010, approximately $1,156,000 of the capital loss carryforward was written off due to expiration. No capital gain distributions are expected to be paid to shareholders until net gains have been realized in excess of such carryforward. It is uncertain whether the Series will be able to realize the full benefit prior to the expiration date.

 

The federal income tax basis of the Series’ investments and the net unrealized appreciation as of October 31, 2010 was as follows:

 

Tax Basis

  

Appreciation

  

Depreciation

  

Net
Unrealized
Appreciation

$195,410,429

  

$39,219,883

  

$(21,918,971)

  

$17,300,912

 

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The difference between book basis and tax basis was primarily attributable to deferred losses on wash sales and mark-to-market of open passive foreign investment companies.

 

Management has analyzed the Series‘ tax positions taken on federal income tax returns for all open tax years and has concluded that as of October 31, 2010, no provisions for income tax would be required in the Series’ financial statements. The Series’ federal and state income and federal excise tax returns for tax years for which the applicable statuses of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

 

Note 6. Capital

 

The Series offers Class A, Class B, Class C and Class Z shares. Class A shares are sold with a front-end sales charge of up to 5.50%. All investors who purchase Class A shares in an amount of $1 million or more and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1%, including investors who purchase their shares through broker-dealers affiliated with Prudential. Class B shares are sold with a CDSC which declines from 5% to zero depending upon the period of time the shares are held. Class C shares are sold with a CDSC of 1% during the first 12 months from the date of purchase. Class B shares will automatically convert to Class A shares on a quarterly basis approximately seven years after purchase. A special exchange privilege is also available for shareholders who qualify to purchase Class A shares at net asset value. Class Z shares are not subject to any sales or redemption charge and are offered exclusively for sale to a limited group of investors.

 

There are 250 million authorized shares of $.01 par value common stock, divided equally into four classes, designated Class A, Class B, Class C and Class Z common stock.

 

For the year ended October 31, 2010, the Series received $329,878 related to an affiliate’s settlement of regulatory proceedings involving allegations of improper trading. This amount is presented in the Series’ Statement of Changes in Net Assets. The Series was not involved in the proceedings or the calculation of the payment.

 

Prudential International Value Fund     37   

 

 

Notes to Financial Statements

 

continued

 

 

Transactions in shares of common stock were as follows:

 

Class A

    Shares      Amount  

Year ended October 31, 2010:

      

Shares sold

      250,295       $ 4,667,067   

Shares issued in reinvestment of dividends and distributions

      15,329         295,084   

Shares reacquired

      (527,727 )       (9,884,143 ) 
                 

Net increase (decrease) in shares outstanding before conversion

      (262,103 )       (4,921,992 ) 

Shares issued upon conversion from Class B

      18,751         346,361   
                 

Net increase (decrease) in shares outstanding

      (243,352 )     $ (4,575,631 ) 
                 

Year ended October 31, 2009:

      

Shares sold

      271,957       $ 4,200,845   

Shares issued in reinvestment of dividends and distributions

      107,354         1,528,724   

Shares reacquired

      (647,455 )       (9,738,556 ) 
                 

Net increase (decrease) in shares outstanding before conversion

      (268,144 )       (4,008,987 ) 

Shares issued upon conversion from Class B

      102,271         1,546,674   
                 

Net increase (decrease) in shares outstanding

      (165,873 )     $ (2,462,313 ) 
                 

Class B

              

Year ended October 31, 2010:

      

Shares sold

      25,281       $ 452,751   

Shares issued in reinvestment of dividends and distributions

      98         1,815   

Shares reacquired

      (63,830 )       (1,130,992 ) 
                 

Net increase (decrease) in shares outstanding before conversion

      (38,451 )       (676,426 ) 

Shares reacquired upon conversion into Class A

      (19,560 )       (346,361 ) 
                 

Net increase (decrease) in shares outstanding

      (58,011 )     $ (1,022,787 ) 
                 

Year ended October 31, 2009:

      

Shares sold

      20,969       $ 316,488   

Shares issued in reinvestment of dividends and distributions

      9,668         132,452   

Shares reacquired

      (58,961 )       (820,037 ) 
                 

Net increase (decrease) in shares outstanding before conversion

      (28,324 )       (371,097 ) 

Shares reacquired upon conversion into Class A

      (106,823 )       (1,546,674 ) 
                 

Net increase (decrease) in shares outstanding

      (135,147 )     $ (1,917,771 ) 
                 

 

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Class C

    Shares      Amount  

Year ended October 31, 2010:

      

Shares sold

      28,606       $ 505,699   

Shares issued in reinvestment of dividends and distributions

      193         3,567   

Shares reacquired

      (101,874 )       (1,808,306 ) 
                 

Net increase (decrease) in shares outstanding

      (73,075 )     $ (1,299,040 ) 
                 

Year ended October 31, 2009:

      

Shares sold

      28,014       $ 411,304   

Shares issued in reinvestment of dividends and distributions

      15,331         210,341   

Shares reacquired

      (122,156 )       (1,753,074 ) 
                 

Net increase (decrease) in shares outstanding

      (78,811 )     $ (1,131,429 ) 
                 

Class Z

              

Year ended October 31, 2010:

      

Shares sold

      1,740,604       $ 31,933,626   

Shares issued in reinvestment of dividends and distributions

      61,869         1,195,304   

Shares reacquired

      (1,357,924 )       (25,444,502 ) 
                 

Net increase (decrease) in shares outstanding

      444,549       $ 7,684,428   
                 

Year ended October 31, 2009:

      

Shares sold

      5,597,370       $ 85,043,599   

Shares issued in reinvestment of dividends and distributions

      355,964         5,086,725   

Shares reacquired

      (6,135,702 )       (92,228,168 ) 
                 

Net increase (decrease) in shares outstanding

      (182,368 )     $ (2,097,844 ) 
                 

 

Note 7. Borrowings

 

The Series, along with other affiliated registered investment companies (the “Funds”), is a party to a Syndicated credit Agreement (“SCA”) with two banks. The SCA provides for a commitment of $500 million. Interest on any borrowings under the SCA would be incurred at contracted market rates and a commitment fee for the unused amount is accrued daily and paid quarterly. The Funds pay an annualized commitment fee of 0.15% of the unused portion of the SCA. The expiration date of the SCA has been extended from October 20, 2010 to December 17, 2010 under the same terms. Effective December 17, 2010, the Series, along with the Funds entered into a new Syndicated Credit Agreement (“New SCA”) with a group of banks. The New SCA provides for a commitment of $750 million. The Funds will pay an annualized commitment fee of 0.10% of the unused portion of the New SCA. The expiration date of the New SCA is December 16, 2011. Interest on any borrowings under the New SCA will be incurred at contracted market rates and a commitment fee for the unused amount is accrued daily and paid quarterly. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions.

 

Prudential International Value Fund     39   

 

 

Notes to Financial Statements

 

continued

 

 

The Series utilized the line of credit during for the year ended October 31, 2010. The average daily balance for the 51 days the Series had debt outstanding during the period was approximately $399,508 at a weighted average interest rate of approximately 1.43%.

 

8. Notice of Dividends to Shareholders

 

The Series declared ordinary income dividends on November 30, 2010 to shareholders of record on December 1, 2010. The ex-dividend date was December 2, 2010. The per share amounts declared were as follows:

 

      Ordinary Income  

Class A

    $ 0.1693   

Class B

    $ 0.0363   

Class C

    $ 0.0363   

Class Z

    $ 0.2163   

 

Note 9. New Accounting Pronouncements

 

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-06 “Improving Disclosures about Fair Value Measurements”. ASU 2010-06 will require reporting entities to make new disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2010. At this time, management is evaluating the implications of ASU No. 2010-06 and its impact on the financial statements has not been determined.

 

40   Visit our website at www.prudentialfunds.com

 

 

Financial Highlights

 

 

Class A Shares  
     Year Ended October 31,  
     2010(b)     2009(b)     2008(b)     2007(b)     2006(b)  
Per Share Operating Performance:                                        
Net Asset Value, Beginning of Year     $18.45        $15.28        $34.10        $27.12        $21.88   
Income (loss) from investment operations:                                        
Net investment income     .22        .20        .44        .51        .45   
Net realized and unrealized gain (loss) on investments     1.71        3.59        (14.93 )      7.85        5.61   
Total from investment operations     1.93        3.79        (14.49 )      8.36        6.06   
Less Dividends and Distributions:                                        
Dividends from net investment income     (.12 )      (.62 )      (.38 )      (.03 )      (.50 ) 
Distributions from net realized gains     -        -        (3.95 )      (1.35 )      (.32 ) 
Total dividends and distributions     (.12 )      (.62 )      (4.33 )      (1.38 )      (.82 ) 
Capital Contributions     .03        -        -        -        -   
Net Asset Value, end of year     $20.29        $18.45        $15.28        $34.10        $27.12   
Total Return(a):     10.68%        26.03%        (48.33)%        32.15%        28.59%   
Ratios/Supplemental Data:  
Net assets, end of year (000)     $45,598        $45,945        $40,580        $91,221        $73,289   
Average net assets (000)     $44,626        $39,582        $71,618        $84,344        $67,590   
Ratios to average net assets(d):                                        
Expenses, including distribution and
service (12b-1) fees (c)		     1.66%        1.65%        1.56%        1.57%        1.65%   
Expenses, excluding distribution and
service (12b-1) fees		     1.41%        1.40%        1.31%        1.32%        1.40%   
Net investment income     1.17%        1.30%        1.79%        1.74%        1.83%   
For Class A, B, C and Z shares:                                        
Portfolio turnover rate     40%        40%        27%        44%        48%   

 

(a) These total returns do not consider the effect of sales load. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles.

(b) Calculations are based on the average daily number of shares outstanding.

(c) The distributor of the Fund has contractually agreed to limit its distribution and service (12b-1) fees to 0.25% of the average daily assets of the Class A shares.

(d) Does not include expenses of the underlying portfolio in which the Series invests.

 

See Notes to Financial Statements.

 

Prudential International Value Fund     41   

 

 

Financial Highlights

 

continued

 

Class B Shares  
     Year Ended October 31,  
     2010(b)     2009(b)     2008(b)     2007(b)     2006(b)  
Per Share Operating Performance:                                        
Net Asset Value, Beginning of Year     $17.64        $14.58        $32.73        $26.24        $21.19   
Income (loss) from investment operations:                                        
Net investment income     .08        .08        .24        .24        .19   
Net realized and unrealized gain (loss) on investments     1.63        3.45        (14.29 )      7.60        5.49   
Total from investment operations     1.71        3.53        (14.05 )      7.84        5.68   
Less Dividends and Distributions:                                        
Dividends from net investment income     (.01 )      (.47 )      (.15 )      -        (.31 ) 
Distributions from net realized gains     -        -        (3.95 )      (1.35 )      (.32 ) 
Total dividends and distributions     (.01 )      (.47 )      (4.10 )      (1.35 )      (.63 ) 
Capital Contributions     .03        -        -        -        -   
Net Asset Value, end of year     $19.37        $17.64        $14.58        $32.73        $26.24   
Total Return(a):     9.86%        25.11%        (48.74)%        31.17%        27.51%   
Ratios/Supplemental Data:  
Net assets, end of year (000)     $3,093        $3,839        $5,143        $16,279        $19,141   
Average net assets (000)     $3,314        $3,985        $10,730        $16,627        $19,346   
Ratios to average net assets(c):                                        
Expenses, including distribution and
service (12b-1) fees		     2.41%        2.40%        2.31%        2.32%        2.40%   
Expenses, excluding distribution and
service (12b-1) fees		     1.41%        1.40%        1.31%        1.32%        1.40%   
Net investment income     .43%        .58%        1.01%        .84%        .78%   

 

(a) These total returns do not consider the effect of sales load. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles.

(b) Calculations are based on the average daily number of shares outstanding.

(c) Does not include expenses of the underlying portfolio in which the Series invests.

 

See Notes to Financial Statements.

 

42   Visit our website at www.prudentialfunds.com

 

 

Class C Shares       
     Year Ended October 31,  
     2010(b)     2009(b)     2008(b)     2007(b)     2006(b)  
Per Share Operating Performance:                                        
Net Asset Value, Beginning of Year     $17.66        $14.60        $32.77        $26.27        $21.21   
Income (loss) from investment operations:                                        
Net investment income     .07        .08        .24        .27        .23   
Net realized and unrealized gain (loss) on investments     1.65        3.45        (14.31 )      7.58        5.46   
Total from investment operations     1.72        3.53        (14.07 )      7.85        5.69   
Less Dividends and Distributions:                                        
Dividends from net investment income     (.01 )      (.47 )      (.15 )      -        (.31 ) 
Distributions from net realized gains     -        -        (3.95 )      (1.35 )      (.32 ) 
Total dividends and distributions     (.01 )      (.47 )      (4.10 )      (1.35 )      (.63 ) 
Capital Contributions     .03        -        -        -        -   
Net asset value, end of year     $19.40        $17.66        $14.60        $32.77        $26.27   
Total Return(a):     9.91%        25.08%        (48.74)%        31.17%        27.53%   
Ratios/Supplemental Data:                              
Net assets, end of year (000)     $6,828        $7,507        $7,355        $17,938        $15,962   
Average net assets (000)     $6,760        $6,807        $13,571        $16,297        $14,909   
Ratios to average net assets(c):                                        
Expenses, including distribution and
service (12b-1) fees		     2.41%        2.40%        2.31%        2.32%        2.40%   
Expenses, excluding distribution and
service (12b-1) fees		     1.41%        1.40%        1.31%        1.32%        1.40%   
Net investment income     .42%        .58%        1.04%        .94%        .98%   

 

(a) These total returns do not consider the effect of sales load. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles.

(b) Calculations are based on the average daily number of shares outstanding.

(c) Does not include expenses of the underlying portfolio in which the Series invests.

 

See Notes to Financial Statements.

 

Prudential International Value Fund     43   

 

 

Financial Highlights

 

continued

 

Class Z Shares  
     Year Ended October 31,  
     2010(b)     2009(b)     2008(b)     2007(b)     2006(b)  
Per Share Operating Performance:                                        
Net Asset Value, Beginning of Year     $18.55        $15.37        $34.30        $27.26        $22.02   
Income (loss) from investment operations:                                        
Net investment income     .26        .24        .50        .60        .28   
Net realized and unrealized gain (loss) on investments     1.74        3.62        (15.02 )      7.89        5.84   
Total from investment operations     2.00        3.86        (14.52 )      8.49        6.12   
Less Dividends and Distributions:                                        
Dividends from net investment income     (.16 )      (.68 )      (.46 )      (.10 )      (.56 ) 
Distributions from net realized gains     -        -        (3.95 )      (1.35 )      (.32 ) 
Total dividends and distributions     (.16 )      (.68 )      (4.41 )      (1.45 )      (.88 ) 
Capital contributions     .03        -        -        -        -   
Net asset value, end of year     $20.42        $18.55        $15.37        $34.30        $27.26   
Total Return(a):     11.01%        26.41%        (48.23)%        32.50%        28.78%   
Ratios/Supplemental Data:                              
Net assets, end of year (000)     $159,020        $136,238        $115,710        $234,828        $177,008   
Average net assets (000)     $139,023        $115,310        $186,380        $206,798        $170,067   
Ratios to average net assets(c):                                        
Expenses, including distribution and
service (12b-1) fees		     1.41%        1.40%        1.31%        1.32%        1.40%   
Expenses, excluding distribution and
service (12b-1) fees		     1.41%        1.40%        1.31%        1.32%        1.40%   
Net investment income     1.41%        1.58%        2.06%        2.02%        1.13%   

 

(a) These total returns do not consider the effect of sales load. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles.

(b) Calculations are based on the average daily number of shares outstanding.

(c) Does not include expenses of the underlying portfolio in which the Series invests.

 

See Notes to Financial Statements.

 

44   Visit our website at www.prudentialfunds.com

 

 

Report of Independent Registered Public

Accounting Firm

 

The Board of Directors and Shareholders

Prudential World Fund, Inc.:

 

We have audited the accompanying statement of assets and liabilities of Prudential International Value Fund (formerly Dryden International Value Fund) (one of the series constituting Prudential World Fund, Inc., hereafter referred to as the “Fund”), including the portfolio of investments, as of October 31, 2010, 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 Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2010, by correspondence with the custodian, transfer agent and brokers or by other appropriate auditing procedures when replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fund as of October 31, 2010, 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.

 

LOGO

New York, New York

December 20, 2010

 

Prudential International Value Fund     45   

 

 

Tax Information

 

(Unaudited)

 

We are required by Internal Revenue Code of 1986, as amended (“the Code”), to advise you within 60 days of the Series’ fiscal year end (October 31, 2010) as to the federal tax status of dividends paid by the Series during such fiscal year. We are advising you in the fiscal year ended October 31, 2010, the Series paid ordinary income dividends of $0.12, $0.01, $0.01 and $0.16 per share from Class A, B, C and Z shares, respectively.

 

For the fiscal year ended October 31, 2010, the Series designates the maximum amount allowable, but not less than 100% of the ordinary income dividends paid during the year as qualified dividend income in accordance with Section 854 of the Internal Revenue Code.

 

For the fiscal year ended October 31, 2010, the Series made an election to pass through the maximum amount of the portion of the ordinary income dividends paid derived from foreign source income as well as any foreign taxes paid by the Series in accordance with Section 853 of the Internal Revenue Code of the following amounts: $507,759 foreign tax credit from recognized foreign source income of $5,836,045.

 

In January 2011, you will be advised on IRS Form 1099DIV or Substitute Form 1099DIV as to the federal tax status of dividends and distributions received by you in calendar year 2010.

 

46   Visit our website at www.prudentialfunds.com

MANAGEMENT OF THE FUND

(Unaudited)

Information about Fund Directors/Trustees (referred to herein as “Board Members”) and Fund Officers is set forth below. Board Members who are not deemed to be “interested persons,” as defined in the 1940 Act, are referred to as “Independent Board Members.” Board Members who are deemed to be “interested persons” 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 or trustees 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 (58)

Board Member

Portfolios Overseen: 58

    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 (58)

Board Member

Portfolios Overseen: 58

    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) (since May 2003); 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); formerly Director of Dynegy Inc. (power generation) (September 2002-May 2006), CitiStreet Funds, Inc. (mutual funds) (May 1993-February 2005), AM- CH, Inc. (restaurant holding company) (November 2004-February 2005).

Michael S. Hyland, CFA (65) Board Member

Portfolios Overseen: 58

    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.

 

Prudential International Value Fund

Douglas H. McCorkindale (71) Board Member

Portfolios Overseen: 58

    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 Continental Airlines, Inc. (since May 1993); Director of Lockheed Martin Corp. (aerospace and defense) (since May 2001).

Stephen P. Munn (68)

Board Member Portfolios Overseen: 58

    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 (67) Board Member Portfolios Overseen: 58    Retired Mutual Fund Senior Executive (42 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 (71)

Board Member & Independent Chair Portfolios Overseen: 58

    Chairman of the Board (since January 2003) of Publishers Clearing House (direct marketing); 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 (67)

Board Member Portfolios Overseen: 58

    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.

 

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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

Judy A. Rice (62)

Board Member & President Portfolios Overseen: 58

    President, Chief Executive Officer, Chief Operating Officer and Officer-In-Charge (since February 2003) of Prudential Investments LLC; President, Chief Executive Officer and Officer-In-Charge (since April 2003) of Prudential Mutual Fund Services LLC; Executive Vice President (since December 2008) of Prudential Investment Management Services LLC; Member of the Board of Directors of Jennison Associates LLC (since November 2010); formerly Vice President (February 1999-April 2006) of Prudential Investment Management Services LLC; 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.    None.
Scott E. Benjamin (37) Board Member & Vice President    Executive Vice President (since June 2009) of Prudential Investments LLC and Prudential Investment Management    None.
Portfolios Overseen: 58    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).     

 

1

The year that each individual joined the Fund’s Board is as follows:

Linda W. Bynoe, 2005; David E.A. Carson, 2003; Robert E. La Blanc, 1984; Douglas H. McCorkindale, 2003; Richard A. Redeker, 2003; Robin B. Smith, 1996; Stephen G. Stoneburn, 1996; Kevin J. Bannon, 2008; Michael S. Hyland, 2008; Stephen P. Munn, 2008; Judy A. Rice, Board Member since 2000 and President since 2003.

 

Prudential International Value Fund

Fund Officers (a)(1)     
Name, Address and Age
Position with Fund		    Principal Occupation(s) During Past Five Years
Kathryn L. Quirk (58) Chief Legal Officer    Vice President and Corporate Counsel (since September 2004) of Prudential; Executive Vice President, Chief Legal Officer and Secretary (since July 2005) of PI and Prudential Mutual Fund Services LLC; Vice President and Corporate Counsel (since June 2005) and Secretary (since February 2006) of AST Investment Services, Inc.; formerly Senior Vice President and Assistant Secretary (November 2004-August 2005) of PI; formerly Assistant Secretary (June 2005-February 2006) of AST Investment Services, Inc.; formerly Managing Director, General Counsel, Chief Compliance Officer, Chief Risk Officer and Corporate Secretary (1997-2002) of Zurich Scudder Investments, Inc.
Deborah A. Docs (52) Secretary    Vice President and Corporate Counsel (since January 2001) of Prudential; Vice President (since December 1996) and Assistant Secretary (since March 1999) of PI; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc.
Jonathan D. Shain (52) Assistant Secretary    Vice President and Corporate Counsel (since August 1998) of Prudential; Vice President and Assistant Secretary (since May 2001) of PI; 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 (36) Assistant Secretary    Vice President and Corporate Counsel (since January 2005) of Prudential; Vice President and Assistant Secretary of PI (since December 2005); Associate at Sidley Austin Brown & Wood LLP (1999-2004).
John P. Schwartz (39) Assistant Secretary    Vice President and Corporate Counsel (since April 2005) of Prudential; Vice President and Assistant Secretary of PI (since December 2005); Associate at Sidley Austin Brown & Wood LLP (1997-2005).
Andrew R. French (48) 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 PI; Vice President and Assistant Secretary (since January 2007) of PMFS; formerly Senior Legal Analyst of Prudential Mutual Fund Law Department (1997-2006).
Timothy J. Knierim (51) Chief Compliance Officer    Chief Compliance Officer of Prudential Investment Management, Inc. (since July 2007); formerly Chief Risk Officer of PIM and PI (2002-2007) and formerly Chief Ethics Officer of PIM and PI (2006-2007).
Valerie M. Simpson (52) Deputy Chief Compliance Officer    Chief Compliance Officer (since April 2007) of PI and AST Investment Services, Inc.; formerly Vice President-Financial Reporting (June 1999-March 2006) for Prudential Life and Annuities Finance.
Theresa C. Thompson (48) Deputy Chief Compliance Officer    Vice President, Compliance, PI (since April 2004); and Director, Compliance, PI (2001-2004).

 

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Noreen M. Fierro (46) Anti-Money Laundering

Compliance Officer

    Vice President, Corporate Compliance (since May 2006) of Prudential; formerly Corporate Vice President, Associate General Counsel (April 2002-May 2005) of UBS Financial Services, Inc., in their Money Laundering Prevention Group; Senior Manager (May 2005-May 2006) of Deloitte Financial Advisory Services, LLP, in their Forensic and Dispute Services, Anti-Money Laundering Group.

Grace C. Torres (51) Treasurer and Principal Financial and Accounting

Officer

    Assistant Treasurer (since March 1999) and Senior Vice President (since September 1999) of PI; 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 (46) Assistant Treasurer    Vice President (since 2005) of Prudential Investments LLC.
Peter Parrella (52) 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 Ms. Rice 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 Fund is as follows:

Kathryn L. Quirk, 2005; Deborah A. Docs, 2005; Jonathan D. Shain, 2005; Claudia DiGiacomo, 2005; John P. Schwartz, 2006; Andrew R. French, 2006; Timothy J. Knierim, 2007; Valerie M. Simpson, 2007; Theresa C. Thompson, 2008; Noreen M. Fierro, 2006; Grace C. Torres, 1995; Sadiq Peshimam, 2006; Peter Parrella, 2007.

Explanatory Notes to Tables:

 

  •  

Board Members are deemed to be “Interested,” as defined in the 1940 Act, by reason of their affiliation with Prudential Investments LLC and/or an affiliate of Prudential Investments LLC.

 

  •  

Unless otherwise noted, the address of all Board Members and Officers is c/o Prudential Investments LLC, Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077.

 

  •  

There is no set term of office for Board Members or Officers. The Board Members have adopted a retirement policy, which calls for the retirement of Board Members on December 31 of the year in which they reach the age of 75.

 

  •  

“Other Directorships Held” includes only directorships of companies required to register or file reports with the Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (that is, “public companies”) or other investment companies registered under the 1940 Act.

 

  •  

“Portfolios Overseen” includes all investment companies managed by Prudential Investments LLC. The investment companies for which PI serves as manager include the Prudential Investments Mutual Funds, The Prudential Variable Contract Accounts, Target Mutual Funds, The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc. and the Advanced Series Trust.

 

Prudential International Value Fund

 

 

Approval of Advisory Agreements

 

The Fund’s Board of Directors

 

The Board of Directors (the “Board”) of Prudential International Value Fund (the “Fund”)1 consists of 10 individuals, eight of whom are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Directors”). The Board is responsible for the oversight of the Fund and its operations, and performs the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Directors have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Director. The Board has established three standing committees: the Audit Committee, the Nominating and Governance Committee, and the Investment Committee. Each committee is chaired by, and composed of, Independent Directors.

 

Annual Approval of the Fund’s Advisory Agreements

 

As required under the 1940 Act, the Board determines annually whether to renew the Fund’s management agreement with Prudential Investments LLC (“PI”) and the Fund’s subadvisory agreements with each of LSV Asset Management (“LSV”) and Thornburg Investment Management, Inc. (“Thornburg”). In considering the renewal of the agreements, the Board, including all of the Independent Directors, met on June 21-23, 2010 and approved the renewal of the agreements through July 31, 2011, after concluding that the renewal of the agreements was in the best interests of the Fund and its shareholders.

 

In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with its consideration. Among other things, the Board considered comparative fee information from PI, LSV and Thornburg. Also, the Board considered comparisons with other mutual funds in relevant Peer Universes and Peer Groups. The mutual funds included in each Peer Universe or Peer Group were objectively determined by Lipper Inc. (“Lipper”), an independent provider of mutual fund data. To the extent that PI deems appropriate, and for reasons addressed in detail with the Board, PI may provide supplemental data compiled by Lipper for the Board’s consideration. The comparisons placed the Fund in various quartiles over the one-, three-, five-, and 10-year periods ending December 31, 2009, 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).

 

In approving the agreements, the Board, including the Independent Directors advised by independent legal counsel, considered the factors it deemed relevant, including

 

 

1

Prudential International Value Fund is a series of Prudential World Fund, Inc.

 

Prudential International Value Fund

 

 

Approval of Advisory Agreements (continued)

 

the nature, quality and extent of services provided by PI and each subadviser, the performance of the Fund, the profitability of PI and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Fund and its shareholders as the Fund’s assets grow. In their deliberations, the Directors did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund. In connection with its deliberations, 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 21-23, 2010.

 

The Directors determined that the overall arrangements between the Fund and PI, which serves as the Fund’s investment manager pursuant to a management agreement, and between PI and each of LSV and Thornburg, which serve as the Fund’s subadvisers pursuant to the terms of subadvisory agreements with PI, are in the interest of the Fund and its shareholders in light of the services performed, fees charged and such other matters as the Directors considered relevant in the exercise of their business judgment.

 

The material factors and conclusions that formed the basis for the Directors’ reaching their determinations to approve the continuance of the agreements are separately discussed below.

 

Nature, Quality, and Extent of Services

 

The Board received and considered information regarding the nature, quality and extent of services provided to the Fund by PI, LSV and Thornburg. The Board considered the services provided by PI, including but not limited to the oversight of the subadvisers for the Fund, as well as the provision of fund recordkeeping, compliance, and other services to the Fund. With respect to PI’s oversight of the subadvisers, the Board noted that PI’s Strategic Investment Research Group (“SIRG”), which is a business unit of PI, is responsible for screening and recommending new subadvisers when appropriate, as well as monitoring and reporting to the Board on the performance and operations of the subadvisers. The Board also considered that PI pays the salaries of all of the officers and non-independent Directors of the Fund. The Board also considered the investment subadvisory services provided by LSV and Thornburg, as well as adherence to the Fund’s investment restrictions and compliance with applicable Fund policies and procedures. The Board considered PI’s evaluations of the subadvisers, as well as PI’s recommendation, based on its review of each subadviser, to renew the subadvisory agreements.

 

The Board reviewed the qualifications, backgrounds and responsibilities of PI’s senior management responsible for the oversight of the Fund and LSV and Thornburg, and

 

Visit our website at www.prudentialfunds.com

 

 

 

 

also reviewed the qualifications, backgrounds and responsibilities of the LSV and Thornburg portfolio managers who are responsible for the day-to-day management of the Fund’s portfolio. The Board was provided with information pertaining to PI’s and LSV’s and Thornburg’s organizational structure, senior management, investment operations, and other relevant information pertaining to PI, LSV and Thornburg. The Board also noted that it received favorable compliance reports from the Fund’s Chief Compliance Officer (“CCO”) as to each of PI and LSV and Thornburg.

 

The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PI and the subadvisory services provided to the Fund by LSV and Thornburg, and that there was a reasonable basis on which to conclude that the Fund benefits from the services provided by PI and LSV and Thornburg under the management and subadvisory agreements.

 

Performance of the Fund

 

The Board received and considered information about the Fund’s historical performance. The Board considered that the Fund’s gross performance in relation to its Peer Universe (a blend of the Lipper International Large-Cap Core Funds and International Multi-Cap Core Funds Performance Universes)2 was in the second quartile over the one-, five-, and 10-year periods, and was in the third quartile over the three-year period. The Board also noted that the Fund outperformed its benchmark index over all periods. The Board concluded that, in light of the Fund’s competitive performance, it would be in the interest of the Fund and its shareholders for the Fund to renew the agreements.

 

Fees and Expenses

 

The Board considered that the Fund’s actual management fees (which reflect any subsidies, waivers or expense caps) ranked in the Expense Group’s second quartile, and that the Fund’s total expenses ranked in the Expense Group’s third quartile. The Board noted that the Fund’s total expenses were 2.6 basis points higher than the Expense Group median. The Board concluded that the management fees and total expenses were reasonable in light of the services provided.

 

Costs of Services and Profits Realized by PI

 

The Board was provided with information on the profitability of PI and its affiliates in serving as the Fund’s investment manager. The Board discussed with PI the methodology utilized in assembling the information regarding profitability and

 

 

2

Although Lipper classifies the Fund in its International Large-Cap Core Funds Performance Universe, the International Large-Cap Core Funds and International Multi-Cap Core Funds Performance Universes were utilized because PI believes that the funds included in these Universes provide a more appropriate basis for Fund performance comparisons.

 

Prudential International Value Fund

 

 

Approval of Advisory Agreements (continued)

 

considered its reasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure and cost of capital. Taking these factors into account, the Board concluded that the profitability of PI and its affiliates in relation to the services rendered was not unreasonable.

 

The Board considered information about the profitability of LSV or Thornburg, but concluded that the level of a subadviser’s profitability may not be as significant given the arm’s length nature of the process by which the subadvisory fee rates were negotiated by PI, LSV and Thornburg as well as the fact that PI compensates the subadvisers out of its management fee.

 

Economies of Scale

 

The Board received and discussed information concerning whether PI realizes economies of scale as the Fund’s assets grow beyond current levels. The Board noted that the management fee schedule for the Fund includes breakpoints, which have the effect of decreasing the fee rate as assets increase, but at the current level of assets the Fund does not realize the effect of those rate reductions. The Board took note that the Fund’s fee structure would result in benefits to Fund shareholders when (and if) assets reach the levels at which the fee rate is reduced. These benefits will accrue whether or not PI is then realizing any economies of scale.

 

Other Benefits to PI, LSV and Thornburg

 

The Board considered potential ancillary benefits that might be received by PI, LSV and Thornburg and their affiliates as a result of their relationship with the Fund. The Board concluded that potential benefits to be derived by PI included brokerage commissions received by affiliates of PI, transfer agency fees received by the Fund’s transfer agent (which is affiliated with PI), and benefits to the reputation as well as other intangible benefits resulting from PI’s association with the Fund. The Board concluded that the potential benefits to be derived by LSV and Thornburg included their ability to use soft dollar credits, brokerage commissions received by affiliates of LSV or Thornburg, as well as the potential benefits consistent with those generally resulting from an increase in assets under management, specifically, potential access to additional research resources and benefits to the reputation. The Board concluded that the benefits derived by PI and LSV and Thornburg were consistent with the types of benefits generally derived by investment managers and subadvisers to mutual funds.

 

After full consideration of these factors, the Board concluded that the approval of the agreements was in the 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 Directors of the Fund has delegated to the Fund’s investment subadvisers the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Commission’s website.

 

DIRECTORS
Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Michael S. Hyland •
Douglas H. McCorkindale • Stephen P. Munn • Richard A. Redeker • Judy A. Rice •
Robin B. Smith • Stephen G. Stoneburn

 

OFFICERS
Judy A. Rice, President • Scott E. Benjamin, Vice President • Grace C. Torres, Treasurer and Principal Financial and Accounting Officer • Kathryn L. Quirk, 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 • Noreen M. Fierro, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • John P. Schwartz, Assistant Secretary • Andrew R. French, Assistant Secretary • M. Sadiq Peshimam, Assistant Treasurer • Peter Parrella, Assistant Treasurer

 

MANAGER   Prudential Investments LLC    Gateway Center Three
100 Mulberry Street
Newark, NJ 07102

 

INVESTMENT SUBADVISERS   LSV Asset Management

Thornburg Investment
Management, Inc.

    155 North Wacker Drive

46th Floor

Chicago, IL 60606

2300 North Ridgetop Road

Santa Fe, NM 87506

 

DISTRIBUTOR   Prudential Investment
Management Services LLC		    Gateway Center Three
100 Mulberry Street
Newark, NJ 07102

 

CUSTODIAN   PFPC Trust Company    301 Bellevue Parkway

Wilmington, DE 19809

 

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   Sullivan & Cromwell LLP    125 Broad Street
New York, NY 10004

An investor should consider the investment objectives, risks, charges, and expenses of the

Fund carefully before investing. The prospectus for the Fund contains this and other information about the Fund. An investor may obtain a prospectus by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The 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 e-mail when new materials are available. You can cancel your enrollment or change your e-mail address at any time by visiting the website address above.

 

SHAREHOLDER COMMUNICATIONS WITH DIRECTORS
Shareholders can communicate directly with the Board of Directors by writing to the Chair of the Board, Prudential International Value Fund, Prudential Investments, Attn: Board of Directors, 100 Mulberry Street, Gateway Center Three, Newark, NJ 07102. Shareholders can communicate directly with an individual Director by writing to the same address. Communications are not screened before being delivered to the addressee.

 

AVAILABILITY OF PORTFOLIO SCHEDULE
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation and location of the Public Reference Room may be obtained by calling (202) 551-8090. The Fund’s schedule of portfolio holdings is also available on the Fund’s website as of the end of each fiscal quarter.

 

The Fund’s Statement of Additional Information contains additional information about the Fund’s Directors and is available without charge, upon request, by calling (800) 225-1852.

 

Mutual Funds:

ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY   MAY LOSE VALUE   ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE

LOGO

 

 

    Prudential International Value Fund    
    Share Class   A   B   C   Z    
 

NASDAQ

   PISAX   PISBX   PCISX   PISZX  
 

CUSIP

   743969503   743969602   743969701   743969800  
           

MF115E    0192549-00001-00

Item 2 – Code of Ethics – See Exhibit (a)

As of the end of the period covered by this report, the registrant has adopted a code of ethics (the “Section 406 Standards for Investment Companies – Ethical Standards for Principal Executive and Financial Officers”) that applies to the registrant’s Principal Executive Officer and Principal Financial Officer; the registrant’s Principal Financial Officer also serves as the Principal Accounting Officer.

The registrant hereby undertakes to provide any person, without charge, upon request, a copy of the code of ethics. To request a copy of the code of ethics, contact the registrant 800-225-1852, and ask for a copy of the Section 406 Standards for Investment Companies – Ethical Standards for Principal Executive and Financial Officers.

Item 3 – Audit Committee Financial Expert –

The registrant’s Board has determined that Mr. Stephen P. Munn, member of the Board’s Audit Committee is an “audit committee financial expert,” and that he is “independent,” for purposes of this Item.

Item 4 – Principal Accountant Fees and Services –

(a) Audit Fees

For the fiscal years ended October 31, 2010 and October 31, 2009, KPMG LLP (“KPMG”), the Registrant’s principal accountant, billed the Registrant $57,500 and $54,984, respectively, for professional services rendered for the audit of the Registrant’s annual financial statements or services that are normally provided in connection with statutory and regulatory filings.

(b) Audit-Related Fees

Not applicable for the fiscal year ended October 31, 2010. During the fiscal year ended October 31, 2009, KPMG, the Registrant’s principal accountant, billed the Registrant $3,115 for professional services rendered in connection with agreed upon procedures performed related to a custody conversion.

(c) Tax Fees

None.

(d) All Other Fees

None.

(e) (1) Audit Committee Pre-Approval Policies and Procedures

THE PRUDENTIAL MUTUAL FUNDS

AUDIT COMMITTEE POLICY

on

Pre-Approval of Services Provided by the Independent Accountants

The Audit Committee of each Prudential Mutual Fund is charged with the responsibility to monitor the independence of the Fund’s independent accountants. As part of this responsibility, the Audit Committee must pre-approve any independent accounting firm’s engagement to render audit and/or permissible non-audit services, as required by law. In evaluating a proposed engagement of the independent accountants, the Audit Committee will assess the effect that the engagement might reasonably be expected to have on the accountant’s independence. The Committee’s evaluation will be based on:

 

  •  

a review of the nature of the professional services expected to be provided,

 

  •  

a review of the safeguards put into place by the accounting firm to safeguard independence, and

 

  •  

periodic meetings with the accounting firm.

Policy for Audit and Non-Audit Services Provided to the Funds

On an annual basis, the scope of audits for each Fund, audit fees and expenses, and audit-related and non-audit services (and fees proposed in respect thereof) proposed to be performed by the Fund’s independent accountants will be presented by the Treasurer and the independent accountants to the Audit Committee for review and, as appropriate, approval prior to the initiation of such services. Such presentation shall be accompanied by confirmation by both the Treasurer and the independent accountants that the proposed services will not adversely affect the independence of the independent accountants. Proposed services shall be described in sufficient detail to enable the Audit Committee to assess the appropriateness of such services and fees, and the compatibility of the provision of such services with the auditor’s independence. The Committee shall receive periodic reports on the progress of the audit and other services which are approved by the Committee or by the Committee Chair pursuant to authority delegated in this Policy.

The categories of services enumerated under “Audit Services”, “Audit-related Services”, and “Tax Services” are intended to provide guidance to the Treasurer and the independent accountants as to those categories of services which the Committee believes are generally consistent with the independence of the independent accountants and which the Committee (or the Committee Chair) would expect upon the presentation of specific proposals to pre-approve. The enumerated categories are not intended as an exclusive list of audit, audit-related or tax services, which the Committee (or the Committee Chair) would consider for pre-approval.

Audit Services

The following categories of audit services are considered to be consistent with the role of the Fund’s independent accountants:

 

  •  

Annual Fund financial statement audits

 

  •  

Seed audits (related to new product filings, as required)

 

  •  

SEC and regulatory filings and consents

Audit-related Services

The following categories of audit-related services are considered to be consistent with the role of the Fund’s independent accountants:

 

  •  

Accounting consultations

 

  •  

Fund merger support services

 

  •  

Agreed Upon Procedure Reports

 

  •  

Attestation Reports

 

  •  

Other Internal Control Reports

Individual audit-related services that fall within one of these categories and are not presented to the Audit Committee as part of the annual pre-approval process will be subject to pre-approval by the Committee Chair (or any other Committee member on whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $50,000.

Tax Services

The following categories of tax services are considered to be consistent with the role of the Fund’s independent accountants:

 

  •  

Tax compliance services related to the filing or amendment of the following:

 

  •  

Federal, state and local income tax compliance; and,

 

  •  

Sales and use tax compliance

 

  •  

Timely RIC qualification reviews

 

  •  

Tax distribution analysis and planning

 

  •  

Tax authority examination services

 

  •  

Tax appeals support services

 

  •  

Accounting methods studies

 

  •  

Fund merger support services

 

  •  

Tax consulting services and related projects

Individual tax services that fall within one of these categories and are not presented to the Audit Committee as part of the annual pre-approval process will be subject to pre-approval by the Committee Chair (or any other Committee member on whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $50,000.

Other Non-audit Services

Certain non-audit services that the independent accountants are legally permitted to render will be subject to pre-approval by the Committee or by one or more Committee members to whom the Committee has delegated this authority and who will report to the full Committee any pre-approval

decisions made pursuant to this Policy. Non-audit services presented for pre-approval pursuant to this paragraph will be accompanied by a confirmation from both the Treasurer and the independent accountants that the proposed services will not adversely affect the independence of the independent accountants.

Proscribed Services

The Fund’s independent accountants will not render services in the following categories of non-audit services:

 

  •  

Bookkeeping or other services related to the accounting records or financial statements of the Fund

 

  •  

Financial information systems design and implementation

 

  •  

Appraisal or valuation services, fairness opinions, or contribution-in-kind reports

 

  •  

Actuarial services

 

  •  

Internal audit outsourcing services

 

  •  

Management functions or human resources

 

  •  

Broker or dealer, investment adviser, or investment banking services

 

  •  

Legal services and expert services unrelated to the audit

 

  •  

Any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible.

Pre-approval of Non-Audit Services Provided to Other Entities Within the Prudential Fund Complex

Certain non-audit services provided to Prudential Investments LLC or any of its affiliates that also provide ongoing services to the Prudential Mutual Funds will be subject to pre-approval by the Audit Committee. The only non-audit services provided to these entities that will require pre-approval are those related directly to the operations and financial reporting of the Funds. Individual projects that are not presented to the Audit Committee as part of the annual pre-approval process will be subject to pre-approval by the Committee Chair (or any other Committee member on whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $50,000. Services presented for pre-approval pursuant to this paragraph will be accompanied by a confirmation from both the Treasurer and the independent accountants that the proposed services will not adversely affect the independence of the independent accountants.

Although the Audit Committee will not pre-approve all services provided to Prudential Investments LLC and its affiliates, the Committee will receive an annual report from the Fund’s independent accounting firm showing the aggregate fees for all services provided to Prudential Investments and its affiliates.

(e) (2) Percentage of services referred to in 4(b) – 4(d) that were approved by the audit committee –

One hundred percent of the services described in Item 4(b) was approved by the audit committee.

(f) Percentage of hours expended attributable to work performed by other than full time employees of principal accountant if greater than 50%.

The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was 0%.

(g) Non-Audit Fees

Not applicable to Registrant for the fiscal years 2010 and 2009. The aggregate non-audit fees billed by KPMG for services rendered to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant for the fiscal years 2010 and 2009 was $0 and $0, respectively.

(h) Principal Accountant’s Independence

Not applicable as KPMG has not provided non-audit services to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X.

Item 5 – Audit Committee of Listed Registrants – Not applicable.

Item 6 – Schedule of Investments – The schedule is included as part of the report to shareholders filed under Item 1 of this Form.

Item 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not applicable.

Item 8 – Portfolio Managers of Closed-End Management Investment Companies – Not applicable.

Item 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not applicable.

Item 10 – Submission of Matters to a Vote of Security Holders – Not applicable.

Item 11 – Controls and Procedures

 

  (a) It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure.

 

  (b) There has been no significant change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter of the period covered by this report that has materially affected, or is likely to materially affect, the registrant’s internal control over financial reporting.

Item 12 – Exhibits

 

(a)    (1)    Code of Ethics – Attached hereto as Exhibit EX-99.CODE-ETH
   (2)    Certifications pursuant to Section 302 of the Sarbanes-Oxley Act – Attached hereto as Exhibit EX-99.CERT.
   (3)    Any written solicitation to purchase securities under Rule 23c-1. – Not applicable.
(b)    Certifications pursuant to Section 906 of the Sarbanes-Oxley Act – Attached hereto as Exhibit EX-99.906CERT.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Registrant:   Prudential World Fund, Inc.
By:  

/S/    DEBORAH A. DOCS        

  Deborah A. Docs
  Secretary
Date:   December 21, 2010

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/    JUDY A. RICE        

  Judy A. Rice
  President and Principal Executive Officer
Date:   December 21, 2010
By:  

/S/    GRACE C. TORRES        

  Grace C. Torres
  Treasurer and Principal Financial Officer
Date:   December 21, 2010