0001193125-13-186353.txt : 20130430 0001193125-13-186353.hdr.sgml : 20130430 20130430135326 ACCESSION NUMBER: 0001193125-13-186353 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20130228 FILED AS OF DATE: 20130430 DATE AS OF CHANGE: 20130430 EFFECTIVENESS DATE: 20130430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRUDENTIAL INVESTMENT PORTFOLIOS 7 CENTRAL INDEX KEY: 0000803191 IRS NUMBER: 133376646 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04864 FILM NUMBER: 13796219 BUSINESS ADDRESS: STREET 1: THREE GATEWAY CENTER, 4TH FLOOR STREET 2: 100 MULBERRY STREET CITY: NEWARK STATE: NJ ZIP: 07102 BUSINESS PHONE: 9738026469 MAIL ADDRESS: STREET 1: THREE GATEWAY CENTER, 4TH FLOOR STREET 2: 100 MULBERRY STREET CITY: NEWARK STATE: NJ ZIP: 07102 FORMER COMPANY: FORMER CONFORMED NAME: JENNISONDRYDEN PORTFOLIOS DATE OF NAME CHANGE: 20071010 FORMER COMPANY: FORMER CONFORMED NAME: JENNISON VALUE FUND DATE OF NAME CHANGE: 20030716 FORMER COMPANY: FORMER CONFORMED NAME: PRUDENTIAL VALUE FUND DATE OF NAME CHANGE: 20000925 0000803191 S000004659 PRUDENTIAL JENNISON VALUE FUND C000012681 Class R JDVRX C000012682 Class A PBEAX C000012683 Class B PBQIX C000012684 Class C PEICX C000012685 Class Z PEIZX C000038978 Class New X C000038979 Class X C000109370 Class Q PJVQX N-CSRS 1 d500035dncsrs.htm PRUDENTIAL INVESTMENT PORTFOLIOS 7 Prudential Investment Portfolios 7

 

 

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:    811-04864
Exact name of registrant as specified in charter:    Prudential Investment Portfolios 7
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:    8/31/2013
Date of reporting period:    2/28/2013

 

 

 


Item 1 – Reports to Stockholders


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PRUDENTIAL INVESTMENTS»MUTUAL FUNDS

 

PRUDENTIAL JENNISON VALUE FUND

 

SEMIANNUAL REPORT · FEBRUARY 28, 2013

 

Fund Type

Large Cap Stock

 

Objective

Capital appreciation

 

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

 

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

 

The accompanying financial statements as of February 28, 2013, were not audited, and accordingly, no auditor’s opinion is expressed on them.

 

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

 

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April 15, 2013

 

Dear Shareholder:

 

We hope you find the semiannual report for the Prudential Jennison Value Fund informative and useful. The report covers performance for the six-month period that ended February 28, 2013.

 

We recognize that ongoing market volatility may make it a difficult time to be an investor. We continue to believe a prudent response to uncertainty is to maintain a diversified portfolio of funds consistent with your tolerance for risk, time horizon, and financial goals.

 

Your financial advisor can help you create a diversified investment plan that may include funds covering all the basic asset classes and that reflects your personal investor profile and risk tolerance. Keep in mind, however, that diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.

 

Prudential Investments® is dedicated to helping you solve your toughest investment challenges—whether it’s capital growth, reliable income, or protection from market volatility and other risks. We offer the expertise of Prudential Financial’s affiliated asset managers* that strive to be leaders in a broad range of funds to help you stay on course to the future you envision. They also manage money for major corporations and pension funds around the world, which means you benefit from the same expertise, innovation, and attention to risk demanded by today’s most sophisticated investors.

 

Thank you for choosing the Prudential Investments family of funds.

 

Sincerely,

 

LOGO

 

Stuart S. Parker, President

Prudential Jennison Value Fund

 

*Most of Prudential Investments’ equity funds are advised by Jennison Associates LLC, Quantitative Management Associates LLC (QMA), or Prudential Real Estate Investors. Prudential Investments’ fixed income and money market funds are advised by Prudential Investment Management, Inc. (PIM) through its Prudential Fixed Income unit. Jennison Associates, QMA, and PIM are registered investment advisers and Prudential Financial companies. Prudential Real Estate Investors is a unit of PIM.

 

Prudential Jennison Value Fund     1   


Your Fund’s Performance (Unaudited)

 

Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. Class A shares have a maximum initial sales charge of 5.50%. Gross operating expenses: Class A, 1.13%; Class B, 1.83%; Class C, 1.83%; Class Q, 0.65%; Class R, 1.58%; Class X, 1.83%; Class Z, 0.83%. Net operating expenses: Class A, 1.13%; Class B, 1.83%; Class C, 1.83%; Class Q, 0.65%; Class R, 1.33%; Class X, 1.08%; Class Z, 0.83%, after contractual reduction through 12/31/2013 for Class R shares.

 

Cumulative Total Returns (Without Sales Charges) as of 2/28/13

     Six Months     One Year     Five Years     Ten Years     Since Inception

Class A

     13.40     9.53     14.03     128.21  

Class B

     13.04        8.73        10.19        112.54     

Class C

     12.97        8.74        10.06        112.39     

Class Q

     13.61        10.03        N/A         N/A       19.09% (10/31/11)

Class R

     13.35        9.33        12.88        N/A       42.18    (6/3/05)    

Class X

     13.43        9.55        15.04        N/A         8.81    (3/16/07)  

Class Z

     13.58        9.86        15.70        134.56     

Russell 1000® Value Index

     13.15        17.63        20.97        131.82     

S&P 500 Index

     8.94        13.45        27.28        120.60     

Lipper Large-Cap Value Funds Average

     11.22        13.55        16.31        111.70     

Lipper Multi-Cap Core Funds Average

     10.58        11.42        23.15        130.86     

 

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Average Annual Total Returns (With Sales Charges) as of 3/31/13

  

     One Year     Five Years     Ten Years     Since Inception  

Class A

     5.91     3.07     8.56       

Class B

     6.33        3.35        8.38          

Class C

     10.27        3.51        8.37          

Class Q

     12.65        N/A         N/A         16.23% (10/31/11)    

Class R

     11.88        4.04        N/A         5.10     (6/3/05)       

Class X

     6.12        3.92        N/A         1.79     (3/16/07)     

Class Z

     12.41        4.56        9.46          

Russell 1000 Value Index

     18.77        4.85        9.18          

S&P 500 Index

     13.95        5.81        8.53          

Lipper Large-Cap Value Funds Average

     14.96        4.12        8.15          

Lipper Multi-Cap Core Funds Average

     13.09        5.27        8.89          

 

Source: Prudential Investments LLC and Lipper Inc.

 

Inception returns are provided for any share class with less than 10 calendar years.

 

The average annual total returns take into account applicable sales charges. Class A shares are subject to a maximum front-end sales charge of 5.50% and an annual 12b-1 fee of 0.30%. Investors who purchase Class A shares in an amount of $1 million or more do not pay a front-end sales charge, but are subject to a contingent deferred sales charge (CDSC) of 1% for shares sold within 12 months of purchase. The CDSC is waived for purchases by certain retirement and/or benefit plans. Under certain circumstances, an exchange may be made from specified share classes of the Fund to one or more other share classes of the Fund. Class B shares are subject to a declining CDSC of 5%, 4%, 3%, 2%, 1%, and 1%, respectively, for the first six years after purchase, and a 12b-1 fee of 1% annually. Approximately seven years after purchase, Class B shares will automatically convert to Class A shares on a quarterly basis. Class C shares are not subject to a front-end sales charge, but are subject to a CDSC of 1% for shares sold within 12 months from the date of purchase, and an annual 12b-1 fee of 1%. Class Q and Class Z shares are not subject to a sales charge or 12b-1 fees. Class R shares are not subject to a sales charge, but charge a 12b-1 fee of 0.75%. Class X shares are not subject to a front-end sales charge, but are subject to a 12b-1 fee of 1% annually and a declining CDSC of 6%, 5%, 4%, 4%, 3%, 2%, 2%, and 1%, respectively, for the first eight years after purchase of Class X shares. Class X shares convert to Class A shares approximately 10 years after purchase. Class X shares are closed to new investors and are available only by exchange from the same share class of another Prudential Investments fund. The returns in the tables reflect the share class expense structure in effect at the close of the fiscal period. Without waiver of fees and/or expense subsidization, the Fund’s returns would have been lower.

 

Benchmark Definitions

 

Russell 1000 Value Index

The Russell 1000 Value Index is an unmanaged index comprising those securities in the Russell 1000 Index with a less-than-average growth orientation. Companies in this index generally have low price-to-book and price-to-earnings ratios, higher dividend yields, and lower forecasted growth values. Russell 1000 Value Index Closest

 

Prudential Jennison Value Fund     3   


Your Fund’s Performance (continued)

 

Month-End to Inception cumulative total returns as of 2/28/13 are 28.83% for Class Q; 44.40% for Class R; and 9.71% for Class X. Russell 1000 Value Index Closest Month-End to Inception average annual total returns as of 3/31/13 are 22.90% for Class Q; 5.32% for Class R; and 2.22% for Class X.

 

S&P 500 Index

The S&P 500 Index is an unmanaged index of 500 stocks of large U.S. public companies. It gives an indication of how U.S. stock prices have performed. S&P 500 Index Closest Month-End to Inception cumulative total returns as of 2/28/13 are 24.63% for Class Q; 49.75% for Class R; and 21.34% for Class X. S&P 500 Index Closest Month-End to Inception average annual total returns as of 3/31/13 are 19.89% for Class Q; 5.79% for Class R; and 3.91% for Class X.

 

Lipper Large-Cap Value Funds Average

The Lipper Large-Cap Value Funds Average represents returns based on the average return of all funds in the Lipper Large-Cap Value Funds category for the periods noted. Funds in the Lipper Large-Cap Value Funds Average invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-cap value funds typically have a lower-than-average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value compared with the S&P 500 Index. Although Lipper classifies the Fund in the Lipper Multi-Cap Value Funds Category, the returns for the Lipper Large-Cap Value Funds Average are also shown, as the Fund’s investment manager believes that the Lipper Large-Cap Value Funds Average is more consistent with the management of the Fund. Lipper Large-Cap Value Funds Average Closest Month-End to Inception cumulative total returns as of 2/28/13 are 24.20% for Class Q; 36.84% for Class R; and 7.96% for Class X. Lipper Large-Cap Value Funds Average Closest Month-End to Inception average annual total returns as of 3/31/13 are 19.78% for Class Q; 4.56% for Class R; and 1.91% for Class X.

 

Lipper Multi-Cap Core Funds Average

Funds in the Lipper Multi-Cap Core Funds Average are funds that, by portfolio practice, invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. Multi-cap core funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P SuperComposite 1500 Index. Lipper Multi-Cap Core Funds Average Closest Month-End to Inception cumulative total returns as of 2/28/13 are 21.77% for Class Q; 47.26% for Class R; and 16.77% for Class X. Lipper Multi-Cap Core Funds Average Closest Month-End to Inception average annual total returns as of 3/31/13 are 17.95% for Class Q; 5.47% for Class R; and 3.14% for Class X.

 

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

 

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Five Largest Holdings expressed as a percentage of net assets as of 2/28/13

  

Liberty Global, Inc. (Series C), Media

     3.2

Mylan, Inc., Pharmaceuticals

     3.0   

Wells Fargo & Co., Commercial Banks

     2.8   

Flextronics International Ltd., Electronic Equipment & Instruments

     2.6   

JPMorgan Chase & Co., Diversified Financial Services

     2.5   

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

 

Five Largest Industries expressed as a percentage of net assets as of 2/28/13

  

Oil, Gas & Consumable Fuels

     10.5

Pharmaceuticals

     7.5   

Media

     6.8   

Food Products

     6.6   

Healthcare Providers & Services

     6.4   

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

 

Prudential Jennison Value Fund     5   


Fees and Expenses (Unaudited)

 

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

 

The example is based on an investment of $1,000 invested on September 1, 2012, at the beginning of the period, and held through the six-month period ended February 28, 2013. 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 Jennison
Value Fund
 

Beginning Account
Value

September 1, 2012

    Ending Account
Value
February 28, 2013
    Annualized
Expense Ratio
Based on the
Six-Month Period
    Expenses Paid
During the
Six-Month Period*
 
         
Class A   Actual   $ 1,000.00      $ 1,134.00        1.13   $ 5.98   
    Hypothetical   $ 1,000.00      $ 1,019.19        1.13   $ 5.66   
         
Class B   Actual   $ 1,000.00      $ 1,130.40        1.83   $ 9.67   
    Hypothetical   $ 1,000.00      $ 1,015.72        1.83   $ 9.15   
         
Class C   Actual   $ 1,000.00      $ 1,129.70        1.83   $ 9.66   
    Hypothetical   $ 1,000.00      $ 1,015.72        1.83   $ 9.15   
         
Class Q   Actual   $ 1,000.00      $ 1,136.10        0.65   $ 3.44   
    Hypothetical   $ 1,000.00      $ 1,021.57        0.65   $ 3.26   
         
Class R   Actual   $ 1,000.00      $ 1,133.50        1.33   $ 7.04   
    Hypothetical   $ 1,000.00      $ 1,018.20        1.33   $ 6.66   
         
Class X   Actual   $ 1,000.00      $ 1,134.30        1.08   $ 5.72   
    Hypothetical   $ 1,000.00      $ 1,019.44        1.08   $ 5.41   
         
Class Z   Actual   $ 1,000.00      $ 1,135.80        0.83   $ 4.40   
    Hypothetical   $ 1,000.00      $ 1,020.68        0.83   $ 4.16   

*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 181 days in the six-month period ended February 28, 2013, and divided by 365 days. Expenses presented in the table include the expenses of any underlying funds in which the Fund may invest.

 

Prudential Jennison Value Fund     7   


 

Portfolio of Investments

 

as of February 28, 2013 (Unaudited)

 

Shares      Description    Value (Note 1)  

LONG-TERM INVESTMENTS    98.7%

  

COMMON STOCKS

  

Aerospace & Defense    2.4%

        
150,257     

Boeing Co. (The)

   $ 11,554,763   
38,770     

United Technologies Corp.

     3,510,624   
       

 

 

 
          15,065,387   

Air Freight & Logistics    0.8%

        
49,863     

FedEx Corp.

     5,257,056   

Airlines    3.8%

        
691,958     

Delta Air Lines, Inc.*

     9,874,241   
531,344     

United Continental Holdings, Inc.*(a)

     14,192,198   
       

 

 

 
          24,066,439   

Auto Components    1.6%

        
191,494     

Lear Corp.

     10,229,609   

Capital Markets    5.0%

        
104,873     

Goldman Sachs Group, Inc. (The)

     15,705,781   
693,817     

Morgan Stanley

     15,645,573   
       

 

 

 
          31,351,354   

Chemicals    1.4%

        
150,826     

Mosaic Co. (The)

     8,829,354   

Commercial Banks    4.2%

        
142,266     

PNC Financial Services Group, Inc.

     8,875,976   
497,377     

Wells Fargo & Co.

     17,447,985   
       

 

 

 
          26,323,961   

Communications Equipment    1.2%

        
527,346     

JDS Uniphase Corp.*

     7,467,219   

Computers & Peripherals    1.3%

        
17,845     

Apple, Inc.

     7,876,783   

Consumer Finance    2.8%

        
127,197     

American Express Co.

     7,905,294   
504,823     

SLM Corp.

     9,576,492   
       

 

 

 
          17,481,786   

 

See Notes to Financial Statements.

 

Prudential Jennison Value Fund     9   


 

Portfolio of Investments

 

as of February 28, 2013 (Unaudited) continued

 

Shares      Description    Value (Note 1)  

COMMON STOCKS (Continued)

  

Diversified Financial Services    4.3%

        
268,721     

Citigroup, Inc.

   $ 11,278,220   
321,695     

JPMorgan Chase & Co.

     15,737,320   
       

 

 

 
          27,015,540   

Diversified Telecommunication Services    1.6%

        
473,011     

Vivendi SA (France)

     9,954,746   

Electronic Equipment & Instruments    2.6%

        
2,452,398     

Flextronics International Ltd.*

     16,308,447   

Energy Equipment & Services    2.2%

        
78,273     

Ensco PLC (Class A Stock)

     4,707,338   
223,086     

Halliburton Co.

     9,260,300   
       

 

 

 
          13,967,638   

Food & Staples Retailing    2.2%

        
172,989     

CVS Caremark Corp.

     8,843,197   
73,719     

Wal-Mart Stores, Inc.

     5,217,831   
       

 

 

 
          14,061,028   

Food Products    6.6%

        
166,611     

Bunge Ltd.

     12,347,541   
50,844     

Kraft Foods Group, Inc.

     2,464,409   
337,449     

Mondelez International, Inc. (Class A Stock)

     9,330,465   
439,369     

Smithfield Foods, Inc.*

     9,771,567   
345,923     

Tyson Foods, Inc. (Class A Stock)

     7,842,074   
       

 

 

 
          41,756,056   

Healthcare Providers & Services    6.4%

        
182,444     

Cigna Corp.

     10,665,676   
152,878     

Express Scripts Holding Co.*

     8,700,287   
266,918     

HCA Holdings, Inc.

     9,899,988   
36,034     

Humana, Inc.

     2,459,681   
164,684     

UnitedHealth Group, Inc.

     8,802,360   
       

 

 

 
          40,527,992   

 

See Notes to Financial Statements.

 

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Shares      Description    Value (Note 1)  

COMMON STOCKS (Continued)

  

Hotels, Restaurants & Leisure    4.0%

        
249,388     

Carnival Corp.

   $ 8,920,609   
170,839     

Hyatt Hotels Corp. (Class A Stock)*

     7,019,775   
582,809     

International Game Technology

     9,289,975   
       

 

 

 
          25,230,359   

Independent Power Producers & Energy Traders    1.8%

        
628,625     

Calpine Corp.*

     11,566,700   

Insurance    3.8%

        
67,709     

Arch Capital Group Ltd.*

     3,325,866   
83,403     

Axis Capital Holdings Ltd.

     3,397,004   
291,646     

MetLife, Inc.

     10,335,934   
85,902     

Travelers Cos., Inc. (The)

     6,908,239   
       

 

 

 
          23,967,043   

Internet Software & Services    2.2%

        
17,527     

Google, Inc. (Class A Stock)*

     14,042,632   

Machinery    0.9%

        
67,943     

SPX Corp.

     5,470,091   

Media    6.8%

        
386,887     

Comcast Corp. (Class A Stock)

     15,394,234   
320,293     

Liberty Global, Inc. (Series C)*(a)

     20,453,911   
121,471     

Viacom, Inc. (Class B Stock)

     7,101,194   
       

 

 

 
          42,949,339   

Metals & Mining    2.5%

        
261,569     

Goldcorp, Inc.

     8,485,298   
186,654     

Newmont Mining Corp.

     7,520,290   
       

 

 

 
          16,005,588   

Multiline Retail    0.6%

        
202,513     

J.C. Penney Co., Inc.

     3,558,153   

Oil, Gas & Consumable Fuels    10.5%

        
135,521     

Anadarko Petroleum Corp.

     10,784,761   
80,933     

EOG Resources, Inc.

     10,174,088   
296,834     

Marathon Oil Corp.

     9,943,939   
139,996     

Newfield Exploration Co.*

     3,236,708   

 

See Notes to Financial Statements.

 

Prudential Jennison Value Fund     11   


 

Portfolio of Investments

 

as of February 28, 2013 (Unaudited) continued

 

Shares      Description    Value (Note 1)  

COMMON STOCKS (Continued)

  

Oil, Gas & Consumable Fuels (cont’d)

        
132,094     

Noble Energy, Inc.

   $ 14,639,978   
119,304     

Occidental Petroleum Corp.

     9,822,298   
250,325     

Suncor Energy, Inc.

     7,572,332   
       

 

 

 
          66,174,104   

Pharmaceuticals    7.5%

        
631,636     

Mylan, Inc.*

     18,702,742   
426,669     

Pfizer, Inc.

     11,677,931   
184,064     

Sanofi (France), ADR

     8,689,661   
215,475     

Teva Pharmaceutical Industries Ltd. (Israel), ADR

     8,058,765   
       

 

 

 
          47,129,099   

Road & Rail    1.8%

        
83,537     

Union Pacific Corp.

     11,453,758   

Semiconductors & Semiconductor Equipment    1.1%

        
231,926     

Maxim Integrated Products, Inc.

     7,231,453   

Software    3.7%

        
470,550     

CA, Inc.

     11,523,770   
416,085     

Microsoft Corp.

     11,567,163   
       

 

 

 
          23,090,933   

Wireless Telecommunication Services    1.1%

        
440,124     

MetroPCS Communications, Inc.*

     4,313,215   
570,713     

NII Holdings, Inc.*

     2,750,837   
       

 

 

 
          7,064,052   
       

 

 

 
    

TOTAL LONG-TERM INVESTMENTS
(cost $471,290,764)

     622,473,699   
       

 

 

 

 

See Notes to Financial Statements.

 

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Shares      Description    Value (Note 1)  

SHORT-TERM INVESTMENT    5.6%

  

AFFILIATED MONEY MARKET MUTUAL FUND

        
35,503,138     

Prudential Investment Portfolios 2 - Prudential Core Taxable
Money Market Fund
(cost $35,503,138, includes $29,165,793 of cash collateral received for securities on loan) (Note 3)(b)(c)

   $ 35,503,138   
       

 

 

 
    

TOTAL INVESTMENTS    104.3%
(cost $506,793,902; Note 5)

     657,976,837   
    

Liabilities in excess of other assets    (4.3%)

     (27,026,788
       

 

 

 
    

NET ASSETS    100.0%

   $ 630,950,049   
       

 

 

 

 

The following abbreviation is used in the portfolio descriptions:

ADR—American Depositary Receipt

* Non-income producing security.
(a) All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is $28,943,526; cash collateral of $29,165,793 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments. Cash collateral is less than 102% of the market value of securities loaned due to significant market increases on February 28, 2013. Collateral was subsequently received on March 1, 2013 and the Fund remained in compliance.
(b) Prudential Investments LLC, the manager of the Fund, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund.
(c) Represents security, or a portion thereof, purchased with cash collateral received for securities on loan.

 

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

 

Level 1—quoted prices generally in active markets for identical securities.

 

Level 2—other significant observable inputs including, but not limited to, quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and amortized cost.

 

Level 3—significant unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.

 

See Notes to Financial Statements.

 

Prudential Jennison Value Fund     13   


 

Portfolio of Investments

 

as of February 28, 2013 (Unaudited) continued

 

 

The following is a summary of the inputs used as of February 28, 2013 in valuing such portfolio securities:

 

     Level 1          Level 2              Level 3      

Investments in Securities

        

Common Stocks

   $ 622,473,699       $   —       $   —   

Affiliated Money Market Mutual Fund

     35,503,138                   
  

 

 

    

 

 

    

 

 

 

Total

   $ 657,976,837       $       $   
  

 

 

    

 

 

    

 

 

 

 

The industry classification of portfolio holdings and liabilities in excess of other assets shown as a percentage of net assets as of February 28, 2013 were as follows:

 

Oil, Gas & Consumable Fuels

     10.5

Pharmaceuticals

     7.5   

Media

     6.8  

Food Products

     6.6  

Healthcare Providers & Services

     6.4  

Affiliated Money Market Mutual Fund
(including 4.6% of collateral received for securities on loan)

     5.6  

Capital Markets

     5.0  

Diversified Financial Services

     4.3  

Commercial Banks

     4.2  

Hotels, Restaurants & Leisure

     4.0  

Airlines

     3.8  

Insurance

     3.8  

Software

     3.7  

Consumer Finance

     2.8  

Electronic Equipment & Instruments

     2.6  

Metals & Mining

     2.5  

Aerospace & Defense

     2.4  

Energy Equipment & Services

     2.2  

Food & Staples Retailing

     2.2 %

Internet Software & Services

     2.2  

Independent Power Producers & Energy Traders

     1.8  

Road & Rail

     1.8  

Auto Components

     1.6  

Diversified Telecommunication Services

     1.6  

Chemicals

     1.4  

Computers & Peripherals

     1.3  

Communications Equipment

     1.2  

Semiconductors & Semiconductor Equipment

     1.1  

Wireless Telecommunication Services

     1.1  

Machinery

     0.9  

Air Freight & Logistics

     0.8  

Multiline Retail

     0.6   
  

 

 

 
     104.3   

Liabilities in excess of other assets

     (4.3
  

 

 

 
     100.0
  

 

 

 

 

See Notes to Financial Statements.

 

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LOGO

 

PRUDENTIAL INVESTMENTS»MUTUAL FUNDS

 

FINANCIAL STATEMENTS

(UNAUDITED)

 

SEMIANNUAL REPORT · February 28, 2013

 

Prudential Jennison Value Fund


 

Statement of Assets and Liabilities

 

as of February 28, 2013 (Unaudited)

 

Assets

        

Investments at value, including securities on loan of $28,943,526:

  

Unaffiliated investments (cost $471,290,764)

   $ 622,473,699   

Affiliated investments (cost $35,503,138)

     35,503,138   

Cash

     31   

Receivable for investments sold

     2,683,163   

Dividends receivable

     1,128,701   

Receivable for Fund shares sold

     260,335   

Prepaid expenses

     6,974   
  

 

 

 

Total assets

     662,056,041   
  

 

 

 

Liabilities

        

Payable to broker for collateral for securities on loan

     29,165,793   

Payable for Fund shares reacquired

     1,078,891   

Accrued expenses

     352,267   

Management fee payable

     283,778   

Distribution fee payable

     147,895   

Affiliated transfer agent fee payable

     75,838   

Deferred trustees’ fees

     1,530   
  

 

 

 

Total liabilities

     31,105,992   
  

 

 

 

Net Assets

   $ 630,950,049   
  

 

 

 
          

Net assets were comprised of:

  

Shares of beneficial interest, at par

   $ 381,490   

Paid-in capital in excess of par

     569,642,631   
  

 

 

 
     570,024,121   

Undistributed net investment income

     1,754,980   

Accumulated net realized loss on investment and foreign currency transactions

     (92,015,244

Net unrealized appreciation on investments and foreign currencies

     151,186,192   
  

 

 

 

Net assets, February 28, 2013

   $ 630,950,049   
  

 

 

 

 

See Notes to Financial Statements.

 

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Class A

        

Net asset value and redemption price per share

($485,071,474 ÷ 29,289,803 shares of beneficial interest issued and outstanding)

   $ 16.56   

Maximum sales charge (5.50% of offering price)

     0.96   
  

 

 

 

Maximum offering price to public

   $ 17.52   
  

 

 

 

Class B

        

Net asset value, offering price and redemption price per share

($13,025,697 ÷ 803,637 shares of beneficial interest issued and outstanding)

   $ 16.21   
  

 

 

 

Class C

        

Net asset value, offering price and redemption price per share

($26,177,500 ÷ 1,615,706 shares of beneficial interest issued and outstanding)

   $ 16.20   
  

 

 

 

Class Q

        

Net asset value, offering price and redemption price per share

($18,748,380 ÷ 1,132,502 shares of beneficial interest issued and outstanding)

   $ 16.55   
  

 

 

 

Class R

        

Net asset value, offering price and redemption price per share

($11,038,889 ÷ 667,587 shares of beneficial interest issued and outstanding)

   $ 16.54   
  

 

 

 

Class X

        

Net asset value, offering price and redemption price per share

($118,441 ÷ 7,180 shares of beneficial interest issued and outstanding)

   $ 16.50   
  

 

 

 

Class Z

        

Net asset value, offering price and redemption price per share

($76,769,668 ÷ 4,632,610 shares of beneficial interest issued and outstanding)

   $ 16.57   
  

 

 

 

 

See Notes to Financial Statements.

 

Prudential Jennison Value Fund     17   


 

Statement of Operations

 

Six Months Ended February 28, 2013 (Unaudited)

 

Net Investment Income

        

Income

  

Unaffiliated dividends (net of foreign withholding taxes of $21,563)

   $ 6,526,612   

Affiliated income from securities loaned, net

     22,152   

Affiliated dividend income

     12,461   
  

 

 

 

Total income

     6,561,225   
  

 

 

 

Expenses

  

Management fee

     1,892,168   

Distribution fee—Class A

     714,819   

Distribution fee—Class B

     63,667   

Distribution fee—Class C

     125,563   

Distribution fee—Class R

     25,574   

Distribution fee—Class X

     158   

Transfer agent’s fees and expenses (including affiliated expense of $103,800) (Note 3)

     576,000   

Registration fees

     63,000   

Custodian’s fees and expenses

     62,000   

Reports to shareholders

     51,000   

Legal fees and expenses

     18,000   

Trustees’ fees

     14,000   

Audit fee

     11,000   

Insurance

     8,000   

Loan interest expense (Note 7)

     371   

Miscellaneous

     12,243   
  

 

 

 

Total expenses

     3,637,563   
  

 

 

 

Net investment income

     2,923,662   
  

 

 

 

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

        

Net realized gain on:

  

Investment transactions

     40,977,609   

Foreign currency transactions

     8,727   
  

 

 

 
     40,986,336   
  

 

 

 

Net change in unrealized appreciation (depreciation) on:

  

Investments

     42,010,522   

Foreign currencies

     (210
  

 

 

 
     42,010,312   
  

 

 

 

Net gain on investment and foreign currency transactions

     82,996,648   
  

 

 

 

Net Increase In Net Assets Resulting From Operations

   $ 85,920,310   
  

 

 

 

 

See Notes to Financial Statements.

 

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Statement of Changes in Net Assets

 

(Unaudited)

 

    

Six Months

Ended

February 28, 2013

    

Year

Ended

August 31, 2012

 

Increase (Decrease) In Net Assets

                 

Operations

     

Net investment income

   $ 2,923,662       $ 4,914,658   

Net realized gain on investment and foreign currency transactions

     40,986,336         28,632,586   

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

     42,010,312         22,923,257   
  

 

 

    

 

 

 

Net increase in net assets resulting from operations

     85,920,310         56,470,501   
  

 

 

    

 

 

 

Dividends from net investment income (Note 1)

     

Class A

     (4,261,131      (1,697,277

Class B

     (34,985        

Class C

     (68,234        

Class L

             (1,486

Class M

             (800

Class Q

     (233,667      (203,679

Class R

     (73,289      (12,536

Class X

     (1,213      (1,061

Class Z

     (932,449      (2,096,859
  

 

 

    

 

 

 
     (5,604,968      (4,013,698
  

 

 

    

 

 

 

Capital Contributions (Note 2)

     

Class X

             43   
  

 

 

    

 

 

 

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

     

Net proceeds from shares sold

     32,186,720         137,285,561   

Net asset value of shares issued in reinvestment of dividends

     5,106,868         2,224,831   

Cost of shares reacquired

     (278,290,142      (360,004,066
  

 

 

    

 

 

 

Net decrease in net assets from Fund share transactions

     (240,996,554      (220,493,674
  

 

 

    

 

 

 

Total decrease

     (160,681,212      (168,036,828

Net Assets:

                 

Beginning of period

     791,631,261         959,668,089   
  

 

 

    

 

 

 

End of period(a)

   $ 630,950,049       $ 791,631,261   
  

 

 

    

 

 

 

(a) Includes undistributed net investment income of:

   $ 1,754,980       $ 4,436,286   
  

 

 

    

 

 

 

 

See Notes to Financial Statements.

 

Prudential Jennison Value Fund     19   


 

Notes to Financial Statements

 

(Unaudited)

 

Prudential Investment Portfolios 7 (the “Portfolios”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end, management investment company and currently consists of Prudential Jennison Value Fund (the “Fund”). The investment objective of the Fund is capital appreciation.

 

Note 1. Accounting Policies

 

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

 

Securities Valuation: The Fund holds portfolio securities and other assets that are fair valued at the close of each day the New York Stock Exchange (“NYSE”) is open for trading. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Board of Trustees (the “Board”) has delegated fair valuation responsibilities to Prudential Investments LLC (“PI” or “Manager”) through the adoption of Valuation Procedures for valuation of the Fund’s securities. Under the current Valuation Procedures, a Valuation Committee is established and responsible for supervising the valuation of portfolio securities and other assets. The Valuation Procedures allow the Fund to utilize independent pricing vendor services, quotations from market makers and other valuation methods in events when market quotations are not readily available or not representative of the fair value of the securities. A record of the Valuation Committee’s actions is subject to review, approval and ratification by the Board at its next regularly scheduled quarterly meeting.

 

Various inputs are used in determining the value of the Fund’s investments, which are summarized in the three broad level hierarchies based on any observable inputs used as described in the table following the Portfolio of Investments. The valuation methodologies and significant inputs used in determining the fair value of securities and other assets classified as Level 1, Level 2 and Level 3 of the hierarchy are as follows:

 

Common stocks, exchange-traded funds and financial derivative instruments (including futures contracts and certain options and swap contracts on securities), that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued

 

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at the last sale price or NASDAQ official closing price, they are classified as Level 1 of the fair value hierarchy.

 

In the event there is no sale or official closing price on such day, these securities are valued at the mean between the last reported bid and asked prices, or at the last bid price in absence of an asked price. These securities are classified as Level 2 of the fair value hierarchy as these inputs are considered as significant other observable inputs to the valuation.

 

For common stocks traded on foreign securities exchanges, certain valuation adjustments will be applied when events occur after the close of the security’s foreign market and before the Fund’s normal pricing time. These securities are valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 of the fair value hierarchy as the adjustment factors are considered as significant other observable inputs to the valuation.

 

Investments in open-end, non-exchange-traded mutual funds are valued at their net asset value as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 as they have the ability to be purchased or sold at their net asset value on the date of valuation.

 

Fixed income securities traded in the over-the-counter market, such as corporate bonds, municipal bonds, U.S. Government agencies issues and guaranteed obligations, U.S. Treasury obligations and sovereign issues are usually valued at prices provided by approved independent pricing vendors. The pricing vendors provide these prices usually after evaluating observable inputs including yield curves, credit rating, yield spreads, default rates, cash flows as well as broker/dealer quotations and reported trades. Securities valued using such vendor prices are classified as Level 2 of the fair value hierarchy.

 

Asset-backed and mortgage-related securities are usually valued by approved independent pricing vendors. The pricing vendors provide the prices using their internal pricing models with inputs from deal terms, tranche level attributes, yield curves, prepayment speeds, default rates and broker/dealer quotes. Securities valued using such vendor prices are classified as Level 2 of the fair value hierarchy.

 

Short-term debt securities of sufficient credit quality, which mature in sixty days or less, are valued using amortized cost method, which approximates fair value. The

 

Prudential Jennison Value Fund     21   


 

Notes to Financial Statements

 

(Unaudited) continued

 

amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between the principal amount due at maturity and cost. These securities are categorized as Level 2 of the fair value hierarchy.

 

Over-the-counter financial derivative instruments, such as option contracts, foreign currency contracts and swaps agreements, are usually valued using pricing vendor services, which derive the valuation based on underlying asset prices, indices, spreads, interest rates, exchange rates and other inputs. These instruments are categorized as Level 2 of the fair value hierarchy.

 

Securities and other assets that cannot be priced using the methods described above are valued with pricing methodologies approved by the Valuation Committee. In the event there are unobservable inputs used when determining such valuations, the securities will be classified as Level 3 of the fair value hierarchy.

 

When determining the fair value of securities, some of the factors influencing the valuation include: the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition and the markets in which it does business; the cost of the investment; the size of the holding and the capitalization of the issuer; the prices of any recent transactions or bids/offers for such securities or any comparable securities; any available analyst media or other reports or information deemed reliable by the investment adviser regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values.

 

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

 

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

 

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

 

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

 

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

 

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

 

Securities Lending: The Fund may lend its portfolio securities to banks and broker-dealers. The loans are secured by collateral at least equal to the market value of the securities loaned. Collateral pledged by each borrower is invested in a highly liquid short-term money market fund and is marked to market daily, based on the previous day’s market value, such that the value of the collateral exceeds the value of the loaned securities. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of the loan, the borrower will return to the Fund 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, and any interest on the investment of 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.

 

Prudential Jennison Value Fund     23   


 

Notes to Financial Statements

 

(Unaudited) continued

 

 

Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains or losses from investment and currency transactions are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on the accrual basis. Expenses are recorded on the accrual basis, which may require the use of certain estimates by management, that may differ from actual.

 

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

 

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

 

Taxes: It is the Fund’s policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net investment income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required.

 

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

 

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

 

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Note 2. Agreements

 

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

 

The management fee paid to PI is accrued daily and payable monthly at an annual rate of .60% of the Fund’s average daily net assets up to $500 million, .50% of the next $500 million, .475% of the next $500 million and .45% of the average daily net assets in excess of $1.5 billion. The effective management fee rate was .58% of the Fund’s average daily net assets for the six months ended February 28, 2013.

 

The Fund has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”), which acts as the distributor of the Class A, Class B, Class C, Class Q, Class R, Class X and Class Z shares. In addition, the Fund has a distribution agreement with Prudential Annuities Distributors, Inc. (“PAD”), which, together with PIMS, serves as co-distributor of the Class X shares of the Fund. The Fund compensates PIMS and PAD, as applicable, for distributing and servicing the Fund’s Class A, Class B, Class C, Class R and Class X shares, pursuant to plans of distribution (the “Distribution Plans”), regardless of expenses actually incurred by PIMS or PAD. The distribution fees are accrued daily and payable monthly. No distribution or service fees are paid to PIMS as distributor of the Class Q and Class Z shares of the Fund.

 

Pursuant to the Distribution Plans, the Fund compensates PIMS and PAD, as applicable, for distribution related activities at an annual rate of up to .30%, 1%, 1%, ..75% and 1% of the average daily net assets of the Class A, B, C, R and X shares, respectively. PIMS has contractually agreed through December 31, 2013 to limit such expenses to .50% of the average daily net assets of the Class R shares. Management has received the maximum allowable amount of sales charges for Class X shares in accordance with regulatory limits. As such, any contingent deferred sales charges received by the Manager are contributed back into the Fund and included in the Statement of Changes in Net Assets and Financial Highlights as a contribution to capital.

 

Prudential Jennison Value Fund     25   


 

Notes to Financial Statements

 

(Unaudited) continued

 

 

PIMS has advised the Fund that it has received $48,724 in front-end sales charges resulting from sales of Class A shares, during the six months ended February 28, 2013. From these fees, PIMS paid such sales charges to affiliated broker-dealers, which in turn paid commissions to salespersons and incurred other distribution costs.

 

PIMS has advised the Fund that for the six months ended February 28, 2013, it received $89, $10,359 and $235 in contingent deferred sales charges imposed upon certain redemptions by Class A, Class B and Class C shareholders, respectively.

 

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

 

Note 3. Other Transactions with Affiliates

 

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

 

Prudential Investment Management (“PIM”), an indirect, wholly-owned subsidiary of Prudential, is the Fund’s securities lending agent. For the six months ended February 28, 2013, PIM has been compensated $6,617 for these services.

 

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

 

Note 4. Portfolio Securities

 

Purchases and sales of portfolio securities, excluding short-term investments, for the six months ended February 28, 2013, were $86,485,379 and $331,027,888, respectively.

 

26   Visit our website at www.prudentialfunds.com


Note 5. Tax Information

 

The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of February 28, 2013 were as follows:

 

Tax Basis

 

Appreciation

 

Depreciation

 

Net

Unrealized
Appreciation

$512,667,655   $161,126,330   $(15,817,148)   $145,309,182

 

The difference between book basis and tax basis is primarily attributable to deferred losses on wash sales as of the most recent fiscal year end.

 

Under the Regulated Investment Company Modernization Act of 2010 (“the Act”), the Fund is permitted to carryforward capital losses incurred in the fiscal year ended August 31, 2012 (“post-enactment losses”) for an unlimited period. Post enactment losses are required to be utilized before the utilization of losses incurred prior to the effective date of the Act. As a result of this ordering rule, capital loss carryforwards related to taxable years ending before August 31, 2012 (“pre-enactment losses”) may have an increased likelihood to expire unused. The Fund utilized approximately $33,160,000 of its pre-enactment losses to offset net taxable gains realized in the fiscal year ended August 31, 2012. No capital gains distributions are expected to be paid to shareholders until net gains have been realized in excess of such losses. As of August 31, 2012, the pre and post-enactment losses were approximately:

 

Post-Enactment Losses:

   $ 0   
  

 

 

 

Pre-Enactment Losses:

  

Expiring 2017

     14,029,000   

Expiring 2018

     107,323,000   
  

 

 

 
   $ 121,352,000   
  

 

 

 

 

The Fund elected to treat post-October capital losses of approximately $5,624,000 as having been incurred in the following fiscal year (August 31, 2013).

 

Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years and has concluded that no provision for income tax is required in the Fund’s financial statements for the current reporting period. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

 

Prudential Jennison Value Fund     27   


 

Notes to Financial Statements

 

(Unaudited) continued

 

 

Note 6. Capital

 

The Fund offers Class A, Class B, Class C, Class Q, Class R, Class X and Class Z shares. Class A shares are subject to a maximum front-end sales charge of 5.50%. Investors who purchase Class A shares in an amount of $1 million or more do not pay a front-end sales charge, but are subject to a contingent deferred sales charge (“CDSC”) of 1% for shares sold within 12 months of purchase. The Class A CDSC is waived for purchases by certain retirement or benefit plans. Class B shares are subject to a CDSC of 5%, which decreases by 1% annually to 1% in the fifth and six years and 0% in the seventh year. Class B shares automatically convert to Class A shares on a quarterly basis approximately seven years after purchase. Class C shares are subject to a CDSC of 1% on shares redeemed within the first 12 months after purchase. Class X shares are subject to a CDSC of 6%, which decreases by 1% annually to 4% in the third and fourth years, by 1% annually to 2% in the sixth and seventh years, and 1% in the eighth year. Class X shares automatically convert to Class A shares on a monthly basis approximately ten years after purchase. The last conversion of Class M shares and Class L shares to Class A shares was completed as of April 13, 2012 and August 24, 2012, respectively. There are no Class M shares and Class L shares outstanding and Class M shares and Class L shares are no longer being offered for sale. A special exchange privilege is also available for shareholders who qualified to purchase Class A shares at net asset value. Class X shares are closed to new initial purchases. Class X shares are only available through exchanges from the same class of shares of certain other funds. Class Q, Class R and Class Z shares are not subject to any sales or redemption charge and are offered exclusively for sale to a limited group of investors.

 

Under certain circumstances, an exchange may be made from specified share classes of the Fund to one or more other share classes of the Fund as presented in the table of transactions in shares of beneficial interest.

 

The Fund has authorized an unlimited number of shares of beneficial interest at $.01 par value divided into seven classes, designated Class A, Class B, Class C, Class Q, Class R, Class X and Class Z.

 

28   Visit our website at www.prudentialfunds.com


Transactions in shares of beneficial interest were as follows:

 

Class A

     Shares      Amount  

Six months ended February 28, 2013:

       

Shares sold

       527,221       $ 8,308,121   

Shares issued in reinvestment of dividends

       272,806         4,133,014   

Shares reacquired

       (4,317,471      (67,178,693
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

       (3,517,444      (54,737,558

Shares issued upon conversion from Class B, Class X and Class Z

       82,088         1,273,244   

Shares reacquired upon conversion into Class Z

       (13,617      (214,300
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

       (3,448,973    $ (53,678,614
    

 

 

    

 

 

 

Year ended August 31, 2012:

       

Shares sold

       1,643,532       $ 23,465,235   

Shares issued in reinvestment of dividends

       124,718         1,648,724   

Shares reacquired

       (8,006,909      (114,529,777
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

       (6,238,659      (89,415,818

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

       365,755         5,197,780   

Shares reacquired upon conversion into Class Z

       (18,417      (256,894
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

       (5,891,321    $ (84,474,932
    

 

 

    

 

 

 

Class B

               

Six months ended February 28, 2013:

       

Shares sold

       54,517       $ 846,235   

Shares issued in reinvestment of dividends

       2,324         34,506   

Shares reacquired

       (80,553      (1,230,096
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

       (23,712      (349,355

Shares reacquired upon conversion into Class A

       (78,496      (1,190,964
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

       (102,208    $ (1,540,319
    

 

 

    

 

 

 

Year ended August 31, 2012:

       

Shares sold

       100,807       $ 1,416,488   

Shares reacquired

       (204,492      (2,845,532
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

       (103,685      (1,429,044

Shares reacquired upon conversion into Class A

       (338,272      (4,698,552
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

       (441,957    $ (6,127,596
    

 

 

    

 

 

 

 

Prudential Jennison Value Fund     29   


 

Notes to Financial Statements

 

(Unaudited) continued

 

Class C

     Shares      Amount  

Six months ended February 28, 2013:

       

Shares sold

       98,397       $ 1,551,156   

Shares issued in reinvestment of dividends

       3,590         53,269   

Shares reacquired

       (200,738      (3,068,950
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

       (98,751    $ (1,464,525
    

 

 

    

 

 

 

Year ended August 31, 2012:

       

Shares sold

       181,065       $ 2,491,318   

Shares reacquired

       (531,899      (7,420,890
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

       (350,834      (4,929,572

Shares reacquired upon conversion into Class Z

       (1,969      (29,968
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

       (352,803    $ (4,959,540
    

 

 

    

 

 

 

Class L

               

Period ended August 24, 2012*:

       

Shares sold

       580       $ 8,358   

Shares issued in reinvestment of dividends

       107         1,415   

Shares reacquired

       (95,628      (1,400,506
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

       (94,941    $ (1,390,733
    

 

 

    

 

 

 

Class M

               

Period ended April 13, 2012**:

       

Shares issued in reinvestment of dividends

       61       $ 798   

Shares reacquired

       (1,905      (26,140
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

       (1,844      (25,342

Shares reacquired upon conversion into Class A

       (21,299      (305,824
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

       (23,143    $ (331,166
    

 

 

    

 

 

 

 

30   Visit our website at www.prudentialfunds.com


Class Q

     Shares      Amount  

Six months ended February 28, 2013:

       

Shares sold

       79,716       $ 1,247,129   

Shares issued in reinvestment of dividends

       15,444         233,667   

Shares reacquired

       (80,597      (1,278,947
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

       14,563       $ 201,849   
    

 

 

    

 

 

 

Period ended August 31, 2012***:

       

Shares sold

       339,398       $ 5,137,936   

Shares issued in reinvestment of dividends

       15,430         203,679   

Shares reacquired

       (1,045,691      (15,659,419
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

       (690,863      (10,317,804

Shares issued upon conversion from Class Z

       1,808,802         25,703,074   
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

       1,117,939       $ 15,385,270   
    

 

 

    

 

 

 

Class R

               

Six months ended February 28, 2013:

       

Shares sold

       87,397       $ 1,375,200   

Shares issued in reinvestment of dividends

       4,462         67,509   

Shares reacquired

       (90,297      (1,406,376
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

       1,562       $ 36,333   
    

 

 

    

 

 

 

Year ended August 31, 2012:

       

Shares sold

       234,601       $ 3,326,409   

Shares issued in reinvestment of dividends

       890         11,758   

Shares reacquired

       (316,954      (4,513,032
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

       (81,463    $ (1,174,865
    

 

 

    

 

 

 

Class X

               

Six months ended February 28, 2013:

       

Shares issued in reinvestment of dividends

       75       $ 1,130   

Shares reacquired

       (362      (5,720
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

       (287      (4,590

Shares reacquired upon conversion into Class A

       (1,728      (27,038
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

       (2,015    $ (31,628
    

 

 

    

 

 

 

Year ended August 31, 2012:

       

Shares sold

             $ 3   

Shares issued in reinvestment of dividends

       78         1,031   

Shares reacquired

       (4,740      (68,087
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

       (4,662      (67,053

Shares reacquired upon conversion into Class A

       (8,665      (125,529
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

       (13,327    $ (192,582
    

 

 

    

 

 

 

 

Prudential Jennison Value Fund     31   


 

Notes to Financial Statements

 

(Unaudited) continued

 

Class Z

     Shares      Amount  

Six months ended February 28, 2013:

       

Shares sold

       1,197,918       $ 18,858,879   

Shares issued in reinvestment of dividends

       38,533         583,773   

Shares reacquired

       (13,193,128      (204,121,360
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

       (11,956,677      (184,678,708

Shares issued upon conversion from Class A

       13,588         214,300   

Shares reacquired upon conversion into Class A

       (3,604      (55,242
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

       (11,946,693    $ (184,519,650
    

 

 

    

 

 

 

Year ended August 31, 2012:

       

Shares sold

       7,166,898       $ 101,439,814   

Shares issued in reinvestment of dividends

       27,037         357,426   

Shares reacquired

       (14,387,682      (213,540,683
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

       (7,193,747      (111,743,443

Shares issued upon conversion from Class A and Class C

       20,309         286,862   

Shares reacquired upon conversion into Class A and Class Q

       (1,813,719      (25,770,949
    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

       (8,987,157    $ (137,227,530
    

 

 

    

 

 

 

 

  * As of August 24, 2012, the last conversion of Class L shares to Class A shares was completed. There are no Class L shares outstanding and Class L shares are no longer being offered for sale.
  ** As of April 13, 2012, the last conversion of Class M shares to Class A shares was completed. There are no Class M shares outstanding and Class M shares are no longer being offered for sale.
  *** Commencement of offering was October 31, 2011.

 

Note 7. Borrowing

 

The Fund, along with other affiliated registered investment companies (the “Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of $900 million for the period November 15, 2012 through November 14, 2013. The Funds pay an annualized commitment fee of 0.08% on the unused portion of the SCA. Prior to November 15, 2012, the Funds had another SCA with substantially similar terms. Interest on any borrowings under the SCA is paid at contracted market rates. The commitment fee for the unused amount is accrued daily and paid quarterly.

 

The Fund utilized the SCA during the six months ended February 28, 2013. The Fund had an average outstanding balance of $1,831,800 for five days at an average interest rate of 1.46%. At February 28, 2012, the Fund did not have an outstanding loan amount.

 

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Note 8. New Accounting Pronouncement

 

In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-11 regarding “Disclosures about Offsetting Assets and Liabilities.” The amendments, which will be effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, require an entity to disclose information about offsetting and related arrangements for assets and liabilities, financial instruments and derivatives that are either currently offset in accordance with current requirements or are subject to enforceable master netting arrangements or similar agreements. At this time, management is evaluating the implications of ASU No. 2011-11 and its impact on the financial statements has not yet been determined.

 

Prudential Jennison Value Fund     33   


 

Financial Highlights

 

(Unaudited)

 

Class A Shares  
    

Six Months

Ended

February 28,

        Year Ended August 31,  
     2013          2012     2011     2010     2009     2008  
Per Share Operating Performance(a):                                                    
Net Asset Value, Beginning Of Period     $14.74            $14.01        $12.27        $11.67        $16.55        $21.81   
Income (loss) from investment operations:                                                    
Net investment income     .07            .07        .05        .05        .07        .15   
Net realized and unrealized gain (loss) on investment and foreign currency transactions     1.89            .71        1.73        .59        (3.87     (2.01
Total from investment operations     1.96            .78        1.78        .64        (3.80     (1.86
Less Dividends and Distributions:                                                    
Dividends from net investment income     (.14         (.05     (.04     (.04     (.12     (.20
Distributions from net realized gains     -            -        -        -        (.96     (3.20
Total dividends and distributions     (.14         (.05     (.04     (.04     (1.08     (3.40
Net asset value, end of period     $16.56            $14.74        $14.01        $12.27        $11.67        $16.55   
Total Return(b):     13.40%            5.57%        14.48%        5.44%        (20.76)%        (9.95)%   
 
Ratios/Supplemental Data:  
Net assets, end of period (000)     $485,071            $482,632        $541,305        $543,424        $565,420        $819,162   
Average net assets (000)     $480,555            $511,257        $614,287        $608,797        $518,332        $910,313   
Ratios to average net assets(d):                                                    
Expenses, including distribution and service (12b-1) fees     1.13% (e)          1.07%        1.04%        1.07%        1.14%        1.00% (c) 
Expenses, excluding distribution and service (12b-1) fees     .83% (e)          .77%        .74%        .77%        .84%        .73%   
Net investment income     .90% (e)          .48%        .33%        .36%        .68%        .83%   
Portfolio turnover rate     13% (f)          31%        56%        56%        60%        51%   

 

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

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

(c) The distributor of the Fund contractually agreed to limit its distribution and service (12b-1) fees to ..25% of the average daily net assets of the Class A shares through 29, 2008.

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

(e) Annualized.

(f) Not annualized.

 

See Notes to Financial Statements.

 

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Class B Shares  
     Six Months
Ended
February 28,
        Year Ended August 31,  
     2013          2012     2011     2010     2009     2008  
Per Share Operating Performance(a):                                                    
Net Asset Value, Beginning Of Period     $14.38            $13.72        $12.07        $11.52        $16.28        $21.52   
Income (loss) from investment operations:                                                    
Net investment income (loss)     .02            (.03     (.05     (.04     - (d)      .02   
Net realized and unrealized gain (loss) on investment and foreign currency transactions     1.85            .69        1.70        .59        (3.79     (2.00
Total from investment operations     1.87            .66        1.65        .55        (3.79     (1.98
Less Dividends and Distributions:                                                    
Dividends from net investment income     (.04         -        -        - (d)      (.01     (.06
Distributions from net realized gains     -            -        -        -        (.96     (3.20
Total dividends and distributions     (.04         -        -        - (d)      (.97     (3.26
Net asset value, end of period     $16.21            $14.38        $13.72        $12.07        $11.52        $16.28   
Total Return(b):     13.04%            4.81%        13.67%        4.78%        (21.28)%        (10.65)%   
 
Ratios/Supplemental Data:  
Net assets, end of period (000)     $13,026            $13,030        $18,493        $23,813        $30,905        $65,520   
Average net assets (000)     $12,840            $15,355        $23,534        $29,060        $33,718        $87,249   
Ratios to average net assets(c):                                                    
Expenses, including distribution and service (12b-1) fees     1.83% (f)          1.77%        1.74%        1.77%        1.84%        1.73%   
Expenses, excluding distribution and service (12b-1) fees     .83% (f)          .77%        .74%        .77%        .84%        .73%   
Net investment income (loss)     .22% (f)          (.21)%        (.36)%        (.33)%        -% (e)      .11%   
Portfolio turnover rate     13% (g)          31%        56%        56%        60%        51%   

 

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

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

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

(d) Less than $.005 per share.

(e) Less than .005%.

(f) Annualized.

(g) Not annualized.

 

See Notes to Financial Statements.

 

Prudential Jennison Value Fund     35   


 

Financial Highlights

 

(Unaudited) continued

 

Class C Shares  
     Six Months
Ended
February 28,
        Year Ended August 31,  
     2013          2012     2011     2010     2009     2008  
Per Share Operating Performance(a):                                                    
Net Asset Value, Beginning Of Period     $14.38            $13.72        $12.06        $11.52        $16.29        $21.52   
Income (loss) from investment operations:                                                    
Net investment income (loss)     .02            (.03     (.05     (.04     - (d)      .02   
Net realized and unrealized gain (loss) on investment and foreign currency transactions     1.84            .69        1.71        .58        (3.80     (1.99
Total from investment operations     1.86            .66        1.66        .54        (3.80     (1.97
Less Dividends and Distributions:                                                    
Dividends from net investment income     (.04         -        -       - (d)      (.01     (.06
Distributions from net realized gains     -            -        -        -        (.96     (3.20
Total dividends and distributions     (.04         -        -       - (d)      (.97     (3.26
Net asset value, end of period     $16.20            $14.38        $13.72        $12.06        $11.52        $16.29   
Total Return(b):     12.97%            4.81%        13.76%        4.69%        (21.33)%        (10.61)%   
 
Ratios/Supplemental Data:  
Net assets, end of period (000)     $26,178            $24,651        $28,355        $28,713        $28,205        $45,882   
Average net assets (000)     $25,323            $26,779        $32,039        $31,259        $27,260        $55,511   
Ratios to average net assets(c):                                                    
Expenses, including distribution and service (12b-1) fees     1.83% (e)          1.77%        1.74%        1.77%        1.84%        1.73%   
Expenses, excluding distribution and service (12b-1) fees     .83% (e)          .77%        .74%        .77%        .84%        .73%   
Net investment income (loss)     .21% (e)          (.22)%        (.37)%        (.33)%        (.02)%        .10%   
Portfolio turnover rate     13% (f)          31%        56%        56%        60%        51%   

 

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

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

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

(d) Less than $.005 per share.

(e) Annualized.

(f) Not annualized.

 

See Notes to Financial Statements.

 

36   Visit our website at www.prudentialfunds.com


Class L Shares  
     Period
Ended
August 24,
        Year Ended August 31,  
     2012(d)          2011     2010     2009     2008  
Per Share Operating Performance(a):                                            
Net Asset Value, Beginning Of Period     $13.96            $12.23        $11.63        $16.48        $21.74   
Income (loss) from investment operations:                                            
Net investment income     .04            .02        .02        .05        .11   
Net realized and unrealized gain (loss) on investment and foreign currency transactions     .76            1.72        .59        (3.85     (2.01
Total from investment operations     .80            1.74        .61        (3.80     (1.90
Less Dividends and Distributions:                                            
Dividends from net investment income     (.02         (.01     (.01     (.09     (.16
Distributions from net realized gains                              (.96     (3.20
Total dividends and distributions     (.02         (.01     (.01     (1.05     (3.36
Net asset value, end of period     $14.74            $13.96        $12.23        $11.63        $16.48   
Total Return(b):     5.72%            14.23%        5.28%        (20.97)%        (10.17)%   
Ratios/Supplemental Data:  
Net assets, end of period (000)     $1,132            $1,326        $1,550        $1,796        $2,896   
Average net assets (000)     $1,250            $1,529        $1,816        $1,707        $4,100   
Ratios to average net assets(c):                                            
Expenses, including distribution and service (12b-1) fees     1.27% (e)          1.24%        1.27%        1.34%        1.23%   
Expenses, excluding distribution and service (12b-1) fees     .77% (e)          .74%        .77%        .84%        .73%   
Net investment income     .27% (e)          .14%        .16%        .48%        .61%   
Portfolio turnover rate     31% (f)          56%        56%        60%        51%   

 

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

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

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

(d) As of August 24, 2012, the last conversion of Class L shares to Class A Shares was completed. There are no Class L shares outstanding and Class L shares are no longer being offered for sale.

(e) Annualized.

(f) Calculated as of August 31, 2012.

 

See Notes to Financial Statements.

 

Prudential Jennison Value Fund     37   


 

Financial Highlights

 

(Unaudited) continued

 

Class M Shares  
     Period
Ended
April 13,
        Year Ended August 31,  
     2012(e)          2011     2010     2009     2008  
Per Share Operating Performance(a):                                            
Net Asset Value, Beginning Of Period     $13.93            $12.20        $11.58        $16.30        $21.53   
Income (loss) from investment operations:                                            
Net investment income     .03            .06        .05        .03        .02   
Net realized and unrealized gain (loss) on investment and foreign currency transactions     .95            1.71        .59        (3.78     (1.99
Total from investment operations     .98            1.77        .64        (3.75     (1.97
Less Dividends and Distributions:                                            
Dividends from net investment income     (.05         (.04     (.03     (.01     (.06
Distributions from net realized gains     -            -        -        (.96     (3.20
Total dividends and distributions     (.05         (.04     (.03     (.97     (3.26
Capital Contributions (Note2):     -            - (c)      .01        - (c)      -   
Net asset value, end of period     $14.86            $13.93        $12.20        $11.58        $16.30   
Total Return(b):     7.10%            14.54%        5.58%        (20.98)%        (10.59)%   
Ratios/Supplemental Data:                                  
Net assets, end of period (000)     $11            $322        $1,186        $2,480        $5,898   
Average net assets (000)     $165            $844        $1,977       $3,046        $9,964   
Ratios to average net assets(d):                                            
Expenses, including distribution and service (12b-1) fees     1.02% (f)          .99%        1.02%        1.52%        1.73%   
Expenses, excluding distribution and service (12b-1) fees     .77% (f)          .74%        .77%        .84%        .73%   
Net investment income     .38% (f)          .40%        .39%        .31%        .11%   
Portfolio turnover rate     31% (g)          56%        56%        60%        51%   

 

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

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

(c) Less than $.005 per share.

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

(e) As of April 13, 2012, the last conversion of Class M shares to Class A Shares was completed. There are no Class M shares outstanding and Class M shares are no longer being offered for sale.

(f) Annualized.

(g) Calculated as of August 31, 2012.

 

See Notes to Financial Statements.

 

38   Visit our website at www.prudentialfunds.com


Class Q Shares  
    

Six Months

Ended
February 28,
2013

         October 31,
2011(b)
through
August 31,
2012
 
Per Share Operating Performance(a):                    
Net Asset Value, Beginning Of Period     $14.77            $14.21   
Income from investment operations:                    
Net investment income     .11            .15   
Net realized and unrealized gain on investment and foreign currency transactions     1.88            .52   
Total from investment operations     1.99            .67   
Less Dividends:                    
Dividends from net investment income     (.21         (.11
Net asset value, end of period     $16.55            $14.77   
Total Return(c):     13.61%            4.83%   
Ratios/Supplemental Data:  
Net assets, end of period (000)     $18,748            $16,509   
Average net assets (000)     $17,619            $22,334   
Ratios to average net assets(f):                    
Expenses, including distribution and service (12b-1) fees     .65% (d)          .62% (d) 
Expenses, excluding distribution and service (12b-1) fees     .65% (d)          .62% (d) 
Net investment income     1.38% (d)          1.06% (d) 
Portfolio turnover rate     13% (e)          31% (e) 

 

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

(b) Commencement of offering.

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

(d) Annualized.

(e) Not annualized.

(f) Does not include expenses of the underlying portfolio in which the Fund invests.

 

See Notes to Financial Statements.

 

Prudential Jennison Value Fund     39   


 

Financial Highlights

 

(Unaudited) continued

 

Class R Shares  
     Six Months
Ended
February 28,
        Year Ended August 31,  
     2013          2012     2011     2010     2009     2008  
Per Share Operating Performance(a):                                                    
Net Asset Value, Beginning Of Period     $14.71            $13.98        $12.24        $11.64        $16.49        $21.75   
Income (loss) from investment operations:                                                    
Net investment income     .05            .04        .02        .02        .05        .11   
Net realized and unrealized gain (loss) on investment and foreign currency transactions     1.89            .71        1.73        .59        (3.85     (2.01
Total from investment operations     1.94            .75        1.75        .61        (3.80     (1.90
Less Dividends and Distributions:                                                    
Dividends from net investment income     (.11         (.02     (.01     (.01     (.09     (.16
Distributions from net realized gains                                     (.96     (3.20
Total dividends and distributions     (.11         (.02     (.01     (.01     (1.05     (3.36
Net asset value, end of period     $16.54            $14.71        $13.98        $12.24        $11.64        $16.49   
Total Return(b):     13.27%            5.35%        14.30%        5.27%        (20.95)%        (10.16)%   
 
Ratios/Supplemental Data:  
Net assets, end of period (000)     $11,039            $9,794        $10,446        $9,583        $5,582        $4,796   
Average net assets (000)     $10,316            $10,660        $11,461        $8,448        $4,424        $3,557   
Ratios to average net assets(d):                                                    
Expenses, including distribution and service (12b-1) fees(c)     1.33% (e)          1.27%        1.24%        1.27%        1.34%        1.23%   
Expenses, excluding distribution and service (12b-1) fees     .83% (e)          .77%        .74%        .77%        .84%        .73%   
Net investment income     .70% (e)          .28%        .13%        .18%        .47%        .60%   
Portfolio turnover rate     13% (f)          31%        56%        56%        60%        51%   

 

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

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

(c) The distributor of the Fund has contractually agreed to limit its distribution and service (12b-1) fees to 50% of the average daily net assets of the Class R shares.

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

(e) Annualized.

(f) Not annualized.

 

See Notes to Financial Statements.

 

40   Visit our website at www.prudentialfunds.com


Class X Shares  
     Six Months
Ended
February 28,
        Year Ended August 31,  
     2013          2012     2011     2010     2009     2008  
Per Share Operating Performance(a):                                                    
Net Asset Value, Beginning Of Period     $14.69            $13.96        $12.22        $11.62        $16.37        $21.52   
Income (loss) from investment operations:                                                    
Net investment income     .07            .07        .06        .05        .08        .15   
Net realized and unrealized gain (loss) on investment and foreign currency transactions     1.89            .71        1.72        .58        (3.81     (1.99
Total from investment operations     1.96            .78        1.78        .63        (3.73     (1.84
Less Dividends and Distributions:                                                    
Dividends from net investment income     (.15         (.05     (.04     (.04     (.09     (.15
Distributions from net realized gains                                     (.96     (3.20
Total dividends and distributions     (.15         (.05     (.04     (.04     (1.05     (3.35
Capital Contributions (Note 2):                (d)     (d)      .01        .03        .04   
Net asset value, end of period     $16.50            $14.69        $13.96        $12.22        $11.62        $16.37   
Total Return(b):     13.43%            5.65%        14.60%        5.51%        (20.42)%        (9.67)%   
 
Ratios/Supplemental Data:  
Net assets, end of period (000)     $118            $135        $314        $572        $1,032        $2,117   
Average net assets (000)     $128            $232        $505        $909        $1,175        $2,927   
Ratios to average net assets(c):                                                    
Expenses, including distribution and service (12b-1) fees     1.08% (e)          1.02%        .99%        1.02%        1.09%        1.02%   
Expenses, excluding distribution and service (12b-1) fees     .83% (e)          .77%        .74%        .77%        .84%        .73%   
Net investment income     .96% (e)          .52%        .39%        .40%        .80%        .82%   
Portfolio turnover rate     13% (f)          31%        56%        56%        60%        51%   

 

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

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

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

(d) Less than $.005 per share.

(e) Annualized.

(f) Not annualized.

 

See Notes to Financial Statements.

 

Prudential Jennison Value Fund     41   


 

Financial Highlights

 

(Unaudited) continued

 

Class Z Shares                                               
     Six Months
Ended
February 28,
        Year Ended August 31,  
     2013          2012     2011     2010     2009     2008  
Per Share Operating Performance(a):                                                    
Net Asset Value, Beginning Of Period     $14.77            $14.05        $12.30        $11.69        $16.61        $21.88   
Income (loss) from investment operations:                                                    
Net investment income     .07            .11        .09        .09        .10        .20   
Net realized and unrealized gain (loss) on investment and foreign currency transactions     1.92            .70        1.74        .59        (3.89     (2.02
Total from investment operations     1.99            .81        1.83        .68        (3.79     (1.82
Less Dividends and Distributions:                                                    
Dividends from net investment income     (.19         (.09     (.08     (.07     (.17     (.25
Distributions from net realized gains     -            -        -        -        (.96     (3.20
Total dividends and distributions     (.19         (.09     (.08     (.07     (1.13     (3.45
Net asset value, end of period     $16.57            $14.77        $14.05        $12.30        $11.69        $16.61   
Total Return(b):     13.58%            5.83%        14.86%        5.78%        (20.54)%        (9.72)%   
 
Ratios/Supplemental Data:                                        
Net assets, end of period (000)     $76,770            $244,881        $359,107        $303,166        $87,194        $109,533   
Average net assets (000)     $116,420            $295,370        $403,570        $259,824        $80,680        $104,223   
Ratios to average net assets(c):                                                    
Expenses, including distribution and service (12b-1) fees     .83% (d)          .77%        .74%        .77%        .84%        .73%   
Expenses, excluding distribution and service (12b-1) fees     .83% (d)          .77%        .74%        .77%        .84%        .73%   
Net investment income     .99% (d)          .78%        .64%        .69%        .98%        1.11%   
Portfolio turnover rate     13% (e)          31%        56%        56%        60%        51%   

 

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

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

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

(d) Annualized.

(e) Not annualized.

 

See Notes to Financial Statements.

 

42   Visit our website at www.prudentialfunds.com


n   MAIL   n   TELEPHONE   n   WEBSITE

Gateway Center Three

100 Mulberry Street

Newark, NJ 07102

  (800) 225-1852   www.prudentialfunds.com

 

PROXY VOTING
The Board of Trustees of the Fund has delegated to the 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. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website.

 

TRUSTEES
Kevin J. Bannon Scott E. Benjamin Linda W. Bynoe Michael S. Hyland Douglas H. McCorkindale Stephen P. Munn Stuart S. Parker Richard A. Redeker Robin B. Smith Stephen G. Stoneburn

 

OFFICERS
Stuart S. Parker, President Scott E. Benjamin, Vice President Grace C. Torres, Treasurer and Principal Financial and Accounting Officer Raymond A. O’Hara, Chief Legal Officer Deborah A. Docs, Secretary Timothy J. Knierim, Chief Compliance Officer  Valerie M. Simpson, Deputy Chief Compliance Officer Theresa C. Thompson, Deputy Chief Compliance Officer Richard W. Kinville, Anti-Money Laundering Compliance Officer Jonathan D. Shain, Assistant Secretary Claudia DiGiacomo, Assistant Secretary Amanda S. Ryan, Assistant Secretary Andrew R. French, Assistant Secretary M. Sadiq Peshimam, Assistant Treasurer Peter Parrella, Assistant Treasurer

 

MANAGER   Prudential Investments LLC    Gateway Center Three

100 Mulberry Street

Newark, NJ 07102

 

INVESTMENT SUBADVISER   Jennison Associates LLC    466 Lexington Avenue

New York, NY 10017

 

DISTRIBUTOR   Prudential Investment
Management Services LLC
   Gateway Center Three

100 Mulberry Street
Newark, NJ 07102

 

CUSTODIAN   The Bank of New York Mellon    One Wall Street

New York, NY 10286

 

TRANSFER AGENT   Prudential Mutual Fund
Services LLC
   PO Box 9658

Providence, RI 02940

 

INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
  KPMG LLP    345 Park Avenue

New York, NY 10154

 

FUND COUNSEL   Willkie Farr & Gallagher LLP    787 Seventh Avenue

New York, NY 10019


An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing.

 

E-DELIVERY
To receive your mutual fund documents online, go to www.prudentialfunds.com/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above.

 

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

 

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

 

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


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PRUDENTIAL JENNISON VALUE FUND

 

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MF131E2    0242446-00001-00


Item 2 – Code of Ethics – Not required, as this is not an annual filing.

Item 3 – Audit Committee Financial Expert – Not required, as this is not an annual filing.

Item 4 – Principal Accountant Fees and Services – Not required, as this is not an annual filing.

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 – Not required, as this is not an annual filing.

 

  (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act – Attached hereto as Exhibit EX-99.CERT.

 

  (3) Any written solicitation to purchase securities under Rule 23c-1. – Not applicable.

 

  (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act – Attached hereto as Exhibit EX-99.906CERT.


SIGNATURES

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

 

Registrant:   Prudential Investment Portfolios 7
By:  

/s/ Deborah A. Docs

  Deborah A. Docs
  Secretary
Date:   April 22, 2013

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:  

/s/ Stuart S. Parker

  Stuart S. Parker
  President and Principal Executive Officer
Date:   April 22, 2013
By:  

/s/ Grace C. Torres

  Grace C. Torres
  Treasurer and Principal Financial Officer
Date:   April 22, 2013
EX-99.CERT 2 d500035dex99cert.htm CERTIFICATIONS PURSUANT TO SECTION 302 Certifications pursuant to Section 302

Item 12

Prudential Investment Portfolios 7

Semi-Annual period ending 2/28/13

File No. 811-04864

CERTIFICATIONS

I, Stuart S. Parker, certify that:

 

  1. I have reviewed this report on Form N-CSR of the above named Fund;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report.

 

  4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and;

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

1


  5. The registrant’s other certifying officers and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

April 22, 2013

 

/s/ Stuart S. Parker

Stuart S. Parker
President and Principal Executive Officer

 

2


Item 12

Prudential Investment Portfolios 7

Semi-Annual period ending 2/28/13

File No. 811-04864

CERTIFICATIONS

I, Grace C. Torres, certify that:

 

  1. I have reviewed this report on Form N-CSR of the above named Fund;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report.

 

  4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and;

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

3


  5. The registrant’s other certifying officers and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

April 22, 2013

 

/s/ Grace C. Torres

Grace C. Torres
Treasurer and Principal Financial Officer

 

4

EX-99.906CERT 3 d500035dex99906cert.htm CERTIFICATIONS PURSUANT TO SECTION 906 Certifications pursuant to Section 906

Certification Pursuant to 18 U.S.C. Section 1350

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Name of Issuer:                 Prudential Investment Portfolios 7

In connection with the Report on Form N-CSR of the above-named issuer that is accompanied by this certification, the undersigned hereby certifies, to his or her knowledge, that:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

 

April 22, 2013  

/s/ Stuart S. Parker

  Stuart S. Parker
  President and Principal Executive Officer
April 22, 2013  

/s/ Grace C. Torres

  Grace C. Torres
  Treasurer and Principal Financial Officer
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