N-CSR 1 d407288dncsr.htm PRUDENTIAL'S GIBRALTAR FUND, INC. Prudential's Gibraltar Fund, Inc.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number:    811-01660
Exact name of registrant as specified in charter:    Prudential’s Gibraltar Fund, Inc.
Address of principal executive offices:    Gateway Center 3,
   100 Mulberry Street,
   Newark, New Jersey 07102
Name and address of agent for service:    Deborah A. Docs
   Gateway Center 3,
   100 Mulberry Street,
   Newark, New Jersey 07102
Registrant’s telephone number, including area code:    973-367-7521
Date of fiscal year end:    12/31/2012
Date of reporting period:    12/31/2012

 

 

 

Item 1 – Reports to Stockholders

LOGO

 

 

PRUDENTIAL’S GIBRALTAR FUND, INC.

ANNUAL REPORT Ÿ DECEMBER 31, 2012

 

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.

 

 

    LOGO

This report is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus and current performance results. Investors should carefully consider the contract and the Fund’s investment objective, risks, and charges and expenses before investing. The contract and the Fund prospectus contain information relating to investment objectives, risks, and charges and expenses, as well as other important information. Read them carefully before investing or sending money.

 

A description of the Fund’s proxy voting policies and procedures is available, without charge, upon request. Owners of variable annuity contracts should call (888)778-2888, to obtain descriptions of the Fund’s proxy voting policies and procedures. 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 website of the Securities and Exchange Commission (the Commission) at www.sec.gov and on the Fund’s website at www.prudential.com/variableinsuranceportfolios.

 

The Fund files with the Commission a complete listing of portfolio holdings as of its first and third quarter-end on Form N-Q. Form N-Q is available on the Commission’s website at www.sec.gov or by visiting the Commission’s Public Reference Room. For more information on the Commission’s Public Reference Room, please visit the Commission’s website or call (800)SEC-0330. Form N-Q is also available on the Fund’s website or by calling the telephone numbers referenced above, for variable annuity and variable life insurance contract owners.

 

The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and is available without charge upon request by calling (888)778-2888.

Prudential’s Gibraltar Fund, Inc.

Table of Contents

   Annual Report   December 31, 2012

 

n  

LETTER TO PLANHOLDERS

 

n  

MANAGEMENT REVIEW

 

n  

PRESENTATION OF PORTFOLIO HOLDINGS

 

n  

FEES AND EXPENSES TABLE

 

n  

FINANCIAL REPORTS

Section A   Schedule of Investments and Financial Statements
Section B   Notes to Financial Statements
Section C   Financial Highlights
Section D   Report of Independent Registered Public Accounting Firm
Section E   Information about Trustees and Officers

Prudential’s Gibraltar Fund, Inc.

Letter to Planholders

   Annual Report   December 31, 2012

 

n  

DEAR PLANHOLDER

 

At Prudential, our primary objective is to help investors achieve and maintain long-term financial success. This Prudential’s Gibraltar Fund annual report outlines our efforts to achieve this goal. We hope you find it informative and useful.

 

Prudential has been building on a heritage of success for more than 135 years. The quality of our businesses and risk diversification has enabled us to manage effectively through volatile markets over time. We believe the array of our products provides a highly attractive value proposition to clients like you who are focused on financial security.

 

Your financial professional is the best resource to help you make the most informed investment decisions. Together, you can build a diversified investment portfolio that aligns with your long-term financial goals. Please keep in mind that diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.

 

Thank you for selecting Prudential as one of your financial partners. We value your trust and appreciate the opportunity to help you achieve financial security.

 

Sincerely,

 

LOGO

Robert F. O’Donnell

President,

Prudential’s Gibraltar Fund, Inc.

January 31, 2013

Prudential’s Gibraltar Fund, Inc.   December 31, 2012

 

Investment Manager’s Report - As of December 31, 2012

 

 

 

Average Annual Total
Returns		    1-Year     5-Year     10-Year  

Fund

      20.33 %      3.41 %      8.44 % 

S&P 500 Index

      15.99        1.66        7.10   

 

Past performance is no guarantee of future returns. 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.

 

Fund performance is net of investment fees and fund expenses, but not product charges, which, if included, would significantly lower the performance quoted.

 

$10,000 INVESTED OVER 10 YEARS

 

LOGO

 

 

For the 12-month period ended December 31, 2012, the Prudential’s Gibraltar Fund returned 20.33%.

 

The investment objective of the Fund is growth of capital to the extent compatible with a concern for preservation of principal by investing in common stocks and other securities convertible into common stock. The Fund is subadvised by Jennison Associates LLC (Jennison).

 

Information technology holdings contributed most to the Fund’s return. Apple reported impressive sales of iPhones, iPads, and Mac personal computers. Jennison believes the company’s innovative product design, software, and operating systems, which allow seamless integration of services and apps across mobile and desktop product lines, will continue to foster consumer loyalty and drive share gains. Rackspace Hosting, which provides Web- and cloud-hosting services to more than 180,000 enterprise customers, benefited from the ongoing migration to cloud computing. OpenStack, its partnership, has the potential to become the world’s largest public cloud-based system using open standards. Jennison expects that the long-term benefits of an open cloud will appeal to a broad range of customers and that Rackspace will be seen as one of the facilitators, if not pioneers, of the movement. MasterCard and Visa rose on strong growth in the value of cardholder transactions and reduced legal risk. Jennison expects both companies to continue to benefit from the consumer shift from paper money to electronic credit/debit transactions.

 

In telecommunication services, broadcast, communications, and wireless tower operator Crown Castle International rose on the plans of major wireless carriers to accelerate the adoption of 4G technology. Jennison sees several long-term drivers of tower industry growth, including the expansion of mobile data, household migration to wireless-only service, high barriers to entry, pricing power, low maintenance expenses, and international expansion.

 

The Portfolio benefited from the manager’s stock selection and an underweight position in consumer staples, where Whole Foods reported strong sales and earnings, with solid operating margins and continued capital discipline.

 

Monsanto, the world’s largest agricultural seed maker, was a notable contributor in the materials sector. Jennison views it as a high-quality, technology-driven growth company and considers agriculture sector fundamentals strong.

 

An overweight position in consumer discretionary and an underweight in energy worked well, but stock selection in both sectors detracted from relative returns. Luxury bag and accessories retailer Coach saw its price decline on lower-than-expected revenues, comparable-store sales growth deceleration, competitive threats, and discount pricing. Jennison believes that Coach’s business remains on track and that the handbag and accessory market continues to grow at a solid pace. YUM! Brands, one of the world’s largest fast-food operators, missed earnings expectations slightly as operating profit in China declined, the result of labor and commodity inflation. Independent oil and natural gas exploration and Production Company Anadarko Petroleum was hurt by uncertainty related to ongoing litigation.

 

In healthcare, Shire, which earlier had been rewarded for attractive business opportunities, lagged a surge in biotechnology stocks. Jennison expects Shire’s strong product pipeline to continue to generate competitive revenue growth.

 

Prudential Investments LLC (PI), an indirect, wholly owned subsidiary of Prudential Financial, Inc., serves as the investment manager for the Fund.

The S&P 500 Index is an unmanaged, market value-weighted index of 500 stocks generally representative of the broad stock market. These returns do not include the effect of any investment management expenses. These returns would have been lower if they included the effect of these expenses. Investors cannot invest directly in a market index or average. For a complete list of holdings, refer to the Schedule of Investments section of this report.

 

Jennison Associates LLC is a registered investment advisor and a Prudential Financial Company.

Prudential’s Gibraltar Fund, Inc.

Presentation of Portfolio Holdings — unaudited

   December 31, 2012

 

 

Prudential’s Gibraltar Fund, Inc.   
Five Largest Holdings         (% of Net Assets ) 

Apple, Inc.

     5.8%   

Google, Inc. (Class A Stock)

     5.2%   

Crown Castle International Corp.

     5.0%   

NIKE, Inc. (Class B Stock)

     4.7%   

Amazon.com, Inc.

     4.4%   

 

For a complete listing of holdings, refer to the Schedule of Investments section of this report. Holdings reflect only long-term investments. Holdings/Issues/Industries/Sectors are subject to change.

 

Prudential’s Gibraltar Fund, Inc.

Fees and Expenses — unaudited

   December 31, 2012

 

 

As a Planholder investing in the Fund through a variable contract, you incur ongoing costs, including management fees, and other Fund expenses. 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 investment options. This example does not reflect fees and charges under your contract. If contract charges were included, the costs shown below would be higher. Please consult your contract for more information about contract fees and charges.

 

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2012 through December 31, 2012.

 

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use this information, together with the amount you invested, to estimate the Fund expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Six-Month Period” to estimate the Fund expenses you paid on your account during this period. As noted above, the table does not reflect variable contract fees and charges.

 

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other investment options. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other investment options.

 

Please note that the expenses shown in the table are meant to highlight your ongoing Fund costs only and do not reflect any contract fees and charges, such as sales charges (loads), insurance charges or administrative charges. Therefore the second line of the table is useful to compare ongoing investment option costs only, and will not help you determine the relative total costs of owning different contracts. In addition, if these contract fees and charges were included, your costs would have been higher.

 

Prudential’s Gibraltar Fund, Inc.      Beginning
Account Value
July 1, 2012		        Ending
Account Value
December 31, 2012		        Annualized Expense
Ratio based on the
Six-Month period		      Expenses Paid
During the
Six-Month period*		  
Prudential’s Gibraltar Fund, Inc.    Actual      $ 1,000.00         $ 1,081.90           0.63 %     $ 3.30   
     Hypothetical      $ 1,000.00         $ 1,021.97           0.63 %     $ 3.20   

 

* Fund expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by the 184 days in the six-month period ended December 31, 2012, and divided by the 366 days in the Fund’s fiscal year ended December 31, 2012 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.

     PRUDENTIAL’S GIBRALTAR FUND, INC.    
SCHEDULE OF INVESTMENTS    December 31, 2012

 

LONG-TERM INVESTMENTS — 98.0%        
COMMON STOCKS   Shares
     Value
(Note 1)
  

Aerospace & Defense — 8.6%

                

Boeing Co. (The)

     38,287      $ 2,885,308   

Precision Castparts Corp.

     24,566        4,653,292   

United Technologies Corp.

     50,739        4,161,105   
           
              11,699,705   
           

Biotechnology — 1.3%

                

Vertex Pharmaceuticals, Inc.*

     41,401        1,736,358   
           

Capital Markets — 4.4%

                

Goldman Sachs Group, Inc. (The)

     32,545        4,151,440   

Morgan Stanley

     96,709        1,849,076   
           
              6,000,516   
           

Chemicals — 2.7%

                

Monsanto Co.

     39,328        3,722,395   
           

Computers & Peripherals — 8.4%

                

Apple, Inc.

     14,814        7,896,306   

EMC Corp.*

     136,616        3,456,385   
           
              11,352,691   
           

Diversified Financial Services — 3.1%

  

JPMorgan Chase & Co.

     96,376        4,237,653   
           

Energy Equipment & Services — 1.0%

  

Schlumberger Ltd.

     19,549        1,354,550   
           

Food & Staples Retailing — 4.7%

                

Costco Wholesale Corp.

     37,911        3,744,470   

Whole Foods Market, Inc.

     28,564        2,608,750   
           
              6,353,220   
           

Food Products — 1.5%

                

Kraft Foods Group, Inc.

     15,585        708,650   

Mondelez International, Inc. (Class A Stock)

     51,772        1,318,633   
           
              2,027,283   
           

Healthcare Providers & Services — 3.9%

  

Express Scripts Holding Co.*

     48,764        2,633,256   

UnitedHealth Group, Inc.

     48,269        2,618,111   
           
              5,251,367   
           

Hotels, Restaurants & Leisure — 1.7%

  

Yum! Brands, Inc.

     34,955        2,321,012   
           

Internet & Catalog Retail — 4.4%

                

Amazon.com, Inc.*

     23,583        5,922,635   
           

Internet Software & Services — 8.4%

  

Facebook, Inc. (Class A Stock)*

     34,374        915,380   

Google, Inc. (Class A Stock)*

     10,020        7,107,887   

Rackspace Hosting, Inc.*

     44,590        3,311,699   
           
              11,334,966   
           

IT Services — 7.8%

                

International Business Machines Corp.

     20,093        3,848,814   

MasterCard, Inc. (Class A Stock)

     8,271        4,063,377   

Visa, Inc. (Class A Stock)

     17,305        2,623,092   
           
              10,535,283   
           

Life Sciences Tools & Services — 1.9%

  

Agilent Technologies, Inc.

     64,534        2,642,022   
           

Media — 2.0%

                

Walt Disney Co. (The)

     54,905        2,733,720   
           
COMMON STOCKS
(continued)		   Shares
     Value
(Note 1)
  

Oil, Gas & Consumable Fuels — 3.8%

  

Anadarko Petroleum Corp.

     28,217      $ 2,096,805   

Concho Resources, Inc.*

     36,204        2,916,594   

EOG Resources, Inc.

     1,702        205,585   
           
              5,218,984   
           

Pharmaceuticals — 4.3%

                

Novo Nordisk A/S (Denmark), ADR

     21,046        3,434,917   

Shire PLC (Ireland), ADR

     26,299        2,424,242   
           
              5,859,159   
           

Road & Rail — 3.8%

                

Canadian Pacific Railway Ltd.

     22,710        2,307,790   

Union Pacific Corp.

     22,505        2,829,329   
           
              5,137,119   
           

Semiconductors & Semiconductor Equipment — 3.1%

  

Altera Corp.

     65,141        2,243,456   

Maxim Integrated Products, Inc.

     67,897        1,996,172   
           
              4,239,628   
           

Software — 2.9%

                

Intuit, Inc.

     23,281        1,385,219   

Red Hat, Inc.*

     47,727        2,527,622   
           
              3,912,841   
           

Specialty Retail — 1.0%

                

TJX Cos., Inc. (The)

     31,651        1,343,585   
           

Textiles, Apparel & Luxury Goods — 8.3%

  

Coach, Inc.

     46,608        2,587,210   

NIKE, Inc. (Class B Stock)

     124,688        6,433,901   

Ralph Lauren Corp.

     15,385        2,306,519   
           
              11,327,630   
           

Wireless Telecommunication Services — 5.0%

  

Crown Castle International Corp.*

     94,685        6,832,470   
           

TOTAL LONG-TERM INVESTMENTS
(cost $88,989,981)

             133,096,792   
           
SHORT-TERM INVESTMENT — 2.2%   

Affiliated Money Market Mutual Fund

                

Prudential Investment Portfolios 2 — Prudential Core Taxable Money
Market Fund
(cost $2,996,976) (Note 3)(a)

     2,996,976        2,996,976   
           

TOTAL INVESTMENTS — 100.2%
(cost $91,986,957; Note 5)

             136,093,768   

LIABILITIES IN EXCESS OF OTHER ASSETS — (0.2)%

             (290,498 ) 
           

NET ASSETS — 100.0%

           $ 135,803,270   
           

 

The following abbreviation is used in portfolio descriptions:

 

ADR   American Depositary Receipt

 

* Non-income producing security.

 

(a) Prudential Investments LLC, the Manager of the Fund, also serves as Manager of the Prudential Investment Portfolios 2 — Prudential Core Taxable Money Market Fund.
 

 

SEE NOTES TO FINANCIAL STATEMENTS.

 

A1

     PRUDENTIAL’S GIBRALTAR FUND, INC.  (continued)    
SCHEDULE OF INVESTMENTS    December 31, 2012

 

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

 

Level 1— quoted prices generally in active markets for identical securities.
Level 2— other significant observable inputs including, but not limited to, quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates, and amortized cost.
Level 3— significant unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.

 

The following is a summary of the inputs used as of December 31, 2012 in valuing such portfolio securities:

 

    

Level 1

     

Level 2

     

Level 3

  

Investments in Securities

                           

Common Stocks

    $ 133,096,792       $ —       $ —   

Affiliated Money Market Mutual Fund

      2,996,976         —         —   
    
  
  

Total

    $ 136,093,768       $   —       $   —   
    
  
  

 

The industry classification of portfolio holdings and liabilities in excess of other assets shown as a percentage of net assets as of December 31, 2012 were as follows:

 

Aerospace & Defense

      8.6 % 

Computers & Peripherals

      8.4   

Internet Software & Services

      8.4   

Textiles, Apparel & Luxury Goods

      8.3   

IT Services

      7.8   

Wireless Telecommunication Services

      5.0   

Food & Staples Retailing

      4.7   

Capital Markets

      4.4   

Internet & Catalog Retail

      4.4   

Pharmaceuticals

      4.3   

Healthcare Providers & Services

      3.9   

Oil, Gas & Consumable Fuels

      3.8   

Road & Rail

      3.8   

Diversified Financial Services

      3.1   

Semiconductors & Semiconductor Equipment

      3.1   

Software

      2.9   

Chemicals

      2.7   

Affiliated Money Market Mutual Fund

      2.2   

Media

      2.0   

Life Sciences Tools & Services

      1.9   

Hotels, Restaurants & Leisure

      1.7   

Food Products

      1.5   

Biotechnology

      1.3   

Energy Equipment & Services

      1.0   

Specialty Retail

      1.0   
    
       100.2   

Liabilities in excess of other assets

      (0.2 ) 
    
       100.0 % 
    
 

 

SEE NOTES TO FINANCIAL STATEMENTS.

 

A2

     PRUDENTIAL’S GIBRALTAR FUND, INC.  (continued)    

 

STATEMENT OF ASSETS AND LIABILITIES

as of December 31, 2012

 

ASSETS        

Unaffiliated investments (cost $88,989,981)

   $ 133,096,792   

Affiliated investments (cost $2,996,976)

     2,996,976   

Dividends receivable

     44,983   

Foreign tax reclaim receivable

     24,694   

Prepaid expenses

     1,031   
   

Total Assets

     136,164,476   
   
LIABILITIES        

Payable for investments purchased

     259,909   

Management fee payable

     63,275   

Accrued expenses and other liabilities

     38,022   
   

Total Liabilities

     361,206   
   
NET ASSETS   $ 135,803,270   
   

Net assets were comprised of:

        

Common stock, at $0.01 par value

   $ 111,803   

Paid-in capital in excess of par

     102,523,241   
   
      102,635,044   

Undistributed net investment income

     83,368   

Accumulated net realized loss on investment transactions

     (11,021,953 ) 

Net unrealized appreciation on investments

     44,106,811   
   

Net assets, December 31, 2012

   $ 135,803,270   
   

Net asset value and redemption price per share, 11,180,331 outstanding shares of common stock (authorized 75,000,000 shares)

   $ 12.15   
   

STATEMENT OF OPERATIONS

Year Ended December 31, 2012

 

INCOME        

Unaffiliated dividend income (net of $13,758 foreign withholding tax)

   $ 1,704,322   

Affiliated dividend income

     5,939   
   
      1,710,261   
   
EXPENSES        

Management fee

     757,091   

Custodian’s fees

     51,000   

Audit fee

     20,000   

Directors’ fees

     11,000   

Legal fees and expenses

     10,000   

Insurance expenses

     2,000   

Miscellaneous

     12,356   
   

Total expenses

     863,447   
   
NET INVESTMENT INCOME     846,814   
   
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS        

Net realized gain on investment transactions

     15,163,660   

Net change in unrealized appreciation (depreciation) on investments

     9,438,000   
   
NET GAIN ON INVESTMENTS     24,601,660   
   
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS   $ 25,448,474   
   
 

STATEMENT OF CHANGES IN NET ASSETS

 

     Year Ended December 31,
  
     2012
     2011
  
INCREASE (DECREASE) IN NET ASSETS                 
OPERATIONS:                 

Net investment income

    $ 846,814      $ 511,748   

Net realized gain on investment transactions

      15,163,660        6,240,624   

Net change in unrealized appreciation (depreciation) on investments

      9,438,000        (4,458,213 ) 
    
 

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

      25,448,474        2,294,159   
    
 
DIVIDENDS:                 

Dividends from net investment income

      (833,785 )      (480,000 ) 
    
 
CAPITAL STOCK TRANSACTIONS:                 

Capital stock issued in reinvestment of dividends [70,374 and 47,497 shares, respectively]

      833,785        480,000   

Capital stock repurchased [1,646,923 and 1,771,185 shares, respectively]

      (19,239,178 )      (18,022,548 ) 
    
 

NET DECREASE IN NET ASSETS RESULTING FROM CAPITAL STOCK TRANSACTIONS

      (18,405,393 )      (17,542,548 ) 
    
 
TOTAL INCREASE (DECREASE) IN NET ASSETS      6,209,296        (15,728,389 ) 
NET ASSETS:                 

Beginning of year

      129,593,974        145,322,363   
    
 

End of year(a)

    $ 135,803,270      $ 129,593,974   
    
 

(a) Includes undistributed net investment income of:

    $ 83,368      $ 70,339   
    
 

 

SEE NOTES TO FINANCIAL STATEMENTS.

 

A3

NOTES TO THE FINANCIAL STATEMENTS OF

PRUDENTIAL’S GIBRALTAR FUND, INC.

 

Prudential’s Gibraltar Fund, Inc. (the “Fund”) was originally incorporated in the State of Delaware on March 14, 1968 and was reincorporated in the State of Maryland effective May 1, 1997. It is registered as an open-end, diversified management investment company under the Investment Company Act of 1940, as amended (“1940 Act”). The investment objective of the Fund is growth of capital to the extent compatible with a concern for preservation of principal. The Fund was organized by The Prudential Insurance Company of America (“PICA”) to serve as the investment medium for the variable contract accounts of The Prudential Financial Security Program (“FSP”). The Fund does not sell its shares to the public. The accounts will redeem shares of the Fund to the extent necessary to provide benefits under the contracts or for such other purposes as may be consistent with the contracts.

 

Note 1:   Accounting Policies

 

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

 

Securities Valuation:    The Fund holds portfolio securities and other assets that are fair valued at the close of each day the New York Stock Exchange (“NYSE”) is open for trading. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Board of Directors (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 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 these securities have the ability to be purchased or sold at their net asset value on the date of valuation.

 

Fixed income securities traded in the over-the-counter market, such as corporate bonds, municipal bonds, U.S. Government agencies issues and guaranteed obligations, U.S. Treasury obligations and sovereign

 

B1

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

 

Over-the-counter financial derivative instruments, such as option contracts, foreign currency contracts and swap 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.

 

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

 

Dividends and Distributions:    The Fund expects to pay dividends of net investment income semi-annually and distributions of 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 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 these estimates.

 

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 will furnish investment advisory services in connection with the management of the

 

B2

Fund. PI pays for the services of Jennison, compensation of officers of the Fund, costs related to shareholder reporting, occupancy and certain clerical and administrative expenses of the Fund. The Fund bears all other costs and expenses.

 

The management fee paid to PI is computed daily and payable monthly, at an annual rate of 0.55% of the Fund’s average daily net assets.

 

The Fund has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”) which acts as distributor of the shares of the Fund. No distribution or service fees are paid to PIMS as distributor of shares of the Fund.

 

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

 

The Fund has entered into a brokerage commission recapture agreement with certain registered broker-dealers. Under the brokerage commission recapture program, a portion of the commission is returned to the Fund on whose behalf the trades were made. Commission recapture is paid solely to those funds generating the applicable trades. Such amounts are included within realized gain or loss on investment transactions presented in the Statement of Operations. For the year ended December 31, 2012, brokerage commission recaptured under these agreements was $1,989.

 

Note 3:   Other Transactions with Affiliates

 

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

 

Note 4:   Portfolio Securities

 

Purchases and sales of portfolio securities, other than short-term investments, for the year ended December 31, 2012, were $43,192,065 and $62,503,313, respectively.

 

Note 5:   Tax Information

 

Distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-dividend date.

 

For the years ended December 31, 2012 and December 31, 2011, the tax character of dividends paid as reflected in the Statement of Changes in Net Assets were $833,785 and $480,000 of ordinary income, respectively.

 

As of December 31, 2012, the accumulated undistributed earnings on a tax basis was $83,372 of ordinary income. This differs from the amount on the Statement of Assets and Liabilities primarily due to cumulative timing differences between financial and tax reporting.

 

The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of December 31, 2012 were as follows:

 

Tax Basis

   Appreciation
     Depreciation
     Net Unrealized
Appreciation
  
$92,303,669   $ 44,766,398      $ (976,299 )    $ 43,790,099   

 

The difference between book basis and tax basis is attributable to deferred losses on wash sales.

 

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 December 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 December 31, 2012 (“pre-enactment losses”) may have an increased likelihood to expire unused. The Fund utilized approximately $15,031,000 of its pre-enactment losses to offset net taxable gains realized in the fiscal year ended December 31, 2012. No capital gains distributions are

 

B3

expected to be paid to shareholders until net gains have been realized in excess of such losses. As of December 31, 2012, the pre and post-enactment losses were approximately:

 

Post-Enactment Losses:

    $ 0   
    

Pre-Enactment Losses:

         

Expiring 2016

    $ 5,968,000   

Expiring 2017

      4,737,000   
    
     $ 10,705,000   
    

 

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

 

Note 6:   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% of 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 did not utilize the SCA during the year ended December 31, 2012.

 

Note 7:   New Accounting Pronouncement

 

In December 2011, the Financial Accounting Standards Board 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.

 

B4

Financial Highlights

 

 

     Year Ended December 31,
  
     2012
      2011
      2010
      2009
      2008
  

Per Share Operating Performance:

                                             

Net Asset Value, beginning of year

    $ 10.16       $ 10.04       $ 9.47       $ 6.79       $ 10.56   
    
  
  
  
  

Income (Loss) From Investment Operations:

                                             

Net investment income

      .08         .04         .04         .04         .06   

Net realized and unrealized gain (loss) on investments

      1.98         .12         .57         2.68         (3.76 ) 
    
  
  
  
  

Total from investment operations

      2.06         .16         .61         2.72         (3.70 ) 
    
  
  
  
  

Less Dividends:

                                             

Dividends from net investment income

      (.07 )       (.04 )       (.04 )       (.04 )       (.07 ) 
    
  
  
  
  

Net Asset Value, end of year

    $ 12.15       $ 10.16       $ 10.04       $ 9.47       $ 6.79   
    
  
  
  
  

Total Return(a):

      20.33 %       1.57 %       6.54 %       40.15 %       (35.21 )% 

Ratios/Supplemental Data:

                                             

Net assets, end of year (in millions)

    $ 135.8       $ 129.6       $ 145.3       $ 157.6       $ 130.0   

Ratios to average net assets(b):

                                             

Expenses

      .63 %       .62 %       .62 %       .61 %       .60 % 

Net investment income

      .62 %       .37 %       .45 %       .54 %       .65 % 

Portfolio turnover rate

      32 %       28 %       61 %       56 %       67 % 

 

(a) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions. Past performance is no guarantee of future results. Total returns may reflect adjustments to conform to generally accepted accounting principles.

 

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

 

SEE NOTES TO FINANCIAL STATEMENTS.

 

C1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

THE BOARD OF DIRECTORS AND SHAREHOLDERS

PRUDENTIAL’S GIBRALTAR FUND, INC.:

 

We have audited the accompanying statement of assets and liabilities of Prudential’s Gibraltar Fund, Inc. (hereafter referred to as the “Fund”), including the schedule of investments, as of December 31, 2012, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian, transfer agent and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fund as of December 31, 2012, and the results of its operations, the changes in its net assets and the financial highlights for the periods described in the first paragraph above, in conformity with U.S. generally accepted accounting principles.

 

LOGO

 

New York, New York

February 15, 2013

 

D1

Federal Income Tax Information (Unaudited)

 

For the year ended December 31, 2012, the Fund reports, in accordance with Section 854 of the Internal Revenue Code, the following percentages of the ordinary income distributions paid as 1) qualified dividend income (QDI); and 2) eligible for corporate dividends received deduction (DRD):

 

    QDI
     DRD
  

Prudential’s Gibraltar Fund, Inc.

      100 %      100 % 

 

D2

MANAGEMENT OF THE FUND (Unaudited)

Information pertaining to the Directors of the Fund (hereafter referred to as “Trustees” or “Directors” or “Board Members”) is set forth below. Information pertaining to the Officers of the Fund is also set forth below. Trustees who are not deemed to be interested persons of the Fund as defined in the Investment Company Act of 1940 are referred to as “Independent Trustees.” Trustees who are deemed to be “interested persons” of the Fund are referred to as “Interested Trustees.” “Fund Complex” consists of the Fund and any other investment companies managed by Prudential Investments LLC (PI) or the “Manager.”

 

Independent Trustees(1)        
Name, Address, Age
No. of Portfolios Overseen		   Principal Occupation(s) During Past Five Years   Other Directorships Held
Susan Davenport Austin (45)
No. of Portfolios Overseen: 92		   Vice Chairman (since 2013),Senior Vice President and Chief Financial Officer (2007-2012) and Vice President of Strategic Planning and Treasurer (2002-2007) of Sheridan Broadcasting Corporation; President of Sheridan Gospel Network (Since 2004); Vice President, Goldman, Sachs & Co. (2000-2001); Associate Director, Bear, Stearns & Co. Inc. (1997-2000); Vice President, Salomon Brothers Inc. (1993-1997); President of the Board, The MacDowell Colony (Since 2010); Chairman of the Board of Directors, Broadcast Music, Inc. (Since 2007); Member of the Board of Directors, Hubbard Radio, LLC (Since 2011); formerly Member of the Board of Directors, National Association of Broadcasters (2004-2010).   None.
Sherry S. Barrat (63)
No. of Portfolios Overseen: 92		   Formerly, Vice Chairman of Northern Trust Corporation (financial services and banking institution) (2011-June 2012); formerly, President, Personal Financial Services, Northern Trust Corporation (2006-2010); formerly, Chairman & CEO, Western US Region, Northern Trust Corporation (1999-2005); formerly, President & CEO, Palm Beach/Martin County Region, Northern Trust.   Director of NextEra Energy, Inc. (formerly, FPL Group, Inc.).
Kay Ryan Booth (62)
No. of Portfolios Overseen: 92		   Managing Director of Cappello Waterfield & Co. LLC (since 2011); formerly, Vice Chair, Global Research, J.P. Morgan (financial services and investment banking institution) (June 2008-January 2009); formerly, Global Director of Equity Research, Bear Stearns & Co., Inc. (financial services and investment banking institution) (1995-2008); formerly, Associate Director of Equity Research, Bear Stearns & Co., Inc. (1987-1995).   None.
Delayne Dedrick Gold (74)
No. of Portfolios Overseen: 92		   Marketing Consultant (1982-present); formerly Senior Vice President and Member of the Board of Directors, Prudential Bache Securities, Inc.   None.
W. Scott McDonald, Jr., Ph.D. (75)
No. of Portfolios Overseen: 92		   Formerly Management Consultant (1997-2004) and of Counsel (2004-2005) at Kaludis Consulting Group, Inc. (company serving higher education); formerly principal (1995-1997), Scott McDonald Associates; Chief Operating Officer (1991-1995), Fairleigh Dickinson University; Executive Vice President and Chief Operating Officer (1975-1991), Drew University; interim President (1988-1990), Drew University; formerly Director of School, College and University Underwriters Ltd.   None.
Thomas T. Mooney (71)
No. of Portfolios Overseen: 92		   Formerly Chief Executive Officer, Excell Partners, Inc. (2005-2007); founding partner of High Technology of Rochester and the Lennox Technology Center; formerly President of the Greater Rochester Metro Chamber of Commerce (1976-2004) formerly Rochester City Manager (1973); formerly Deputy Monroe County Executive (1974-1976).   None.
Thomas M. O’Brien (62)
No. of Portfolios Overseen: 92		   Director, The BankUnited (NYSE: BKU) (since May 2012); Consultant, Valley National Bancorp, Inc. and Valley National Bank (since January 2012); Formerly President and COO (November 2006-December 2011) and CEO (April 2007-December 2011) of State Bancorp, Inc. and State Bank; formerly Vice Chairman (January 1997-April 2000) of North Fork Bank; formerly President and Chief Executive Officer (December 1984-December 1996) of North Side Savings Bank; formerly President and Chief Executive Officer (May 2000-June 2006) Atlantic Bank of New York.   Formerly Director (April 2008-January 2012) of Federal Home Loan Bank of New York; formerly Director (December 1996-May 2000) of North Fork Bancorporation, Inc.; formerly Director (May 2000-April 2006) of Atlantic Bank of New York; Director (November 2006-January 2012) of State Bancorp, Inc. (NASDAQ: STBC) and State Bank of Long Island.
F. Don Schwartz (77)
No. of Portfolios Overseen: 92		   Independent Management/Marketing Consultant (since 2002); formerly CEO and President of AceCo, Inc. (1985-2001) (consulting firm specializing in universal/variable life and variable annuity products); formerly Vice President of The Equitable Life Assurance Society; formerly Guest Insurance Professor at the American College, Louisiana State University, Alabama State University and the Insurance Marketing Institute; Advisor to several state insurance commissioners; a Chartered Life Underwriter, Chartered Financial Consultant and Fellow of the Life Insurance Management Institute.   None.

 

E1

Interested Trustees(1)        
Name, Address, Age
No. of Portfolios Overseen		   Principal Occupation(s) During Past Five Years   Other Directorships Held
Robert F. O’Donnell (44)
No. of Portfolios Overseen: 91		   President of Prudential Annuities (since April 2012); Senior Vice President, Head of Product, Investment Management & Marketing for Prudential Annuities (October 2008-April 2012); Senior Vice President, Head of Product (July 2004-October 2008)   None.
Robert F. Gunia (66)
No. of Portfolios Overseen: 91		   Independent Consultant (since October 2009); formerly Chief Administrative Officer (September 1999-September 2009) and Executive Vice President (December 1996-September 2009) of Prudential Investments LLC; formerly Executive Vice President (March 1999-September 2009) and Treasurer (May 2000-September 2009) of Prudential Mutual Fund Services LLC; formerly President (April 1999-December 2008) and Executive Vice President and Chief Operating Officer (December 2008-December 2009) of Prudential Investment Management Services LLC; formerly Chief Administrative Officer, Executive Vice President and Director (May 2003-September 2009) of AST Investment Services, Inc.   Director (since May 1989) of The Asia Pacific Fund, Inc.
Timothy S. Cronin (47)
Number of Portfolios Overseen: 91		   Chief Investment Officer and Strategist of Prudential Annuities (since January 2004); Director of Investment & Research Strategy (since February 1998); President of AST Investment Services, Inc. (since June 2005).   None.

 

(1) The year that each Trustee joined the Fund’s Board is as follows: Susan Davenport Austin, 2011; Sherry S. Barrat, 2013, Kay Ryan Booth, 2013;Timothy S. Cronin, 2009; 1985; Delayne Dedrick Gold, 2003; Robert F. Gunia, 2003; W. Scott McDonald, 1985; Thomas T. Mooney, 2003; Thomas M. O’Brien, 2003; Robert F. O’Donnell, 2012; F. Don Schwartz, 2003.

 

Fund Officers(a)(1)    
Name, Address and Age
Position with the Fund		   Principal Occupation(s) During the Past Five Years

Raymond A. O’Hara (57)

Chief Legal Officer

   Vice President and Corporate Counsel (since July 2010) of Prudential Insurance Company of America (Prudential); Vice President (March 2011-Present) of Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey; Vice President and Corporate Counsel (March 2011-Present) of Prudential Annuities Life Assurance Corporation; Chief Legal Officer of Prudential Investments LLC (since June 2012); Chief Legal Officer of Prudential Mutual Fund Services LLC (since June 2012) and Corporate Counsel of AST Investment Services, Inc. (since June 2012); formerly Assistant Vice President and Corporate Counsel (September 2008-July 2010) of The Hartford Financial Services Group, Inc.; formerly Associate (September 1980-December 1987) and Partner (January 1988-August 2008) of Blazzard & Hasenauer, P.C. (formerly, Blazzard, Grodd & Hasenauer, P.C.).

Deborah A. Docs (54)

Secretary

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

Jonathan D. Shain (54)

Assistant Secretary

   Vice President and Corporate Counsel (since August 1998) of Prudential; Vice President and Assistant Secretary (since May 2001) of PI; Vice President and Assistant Secretary (since February 2001) of PMFS; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc.

Claudia DiGiacomo (38)

Assistant Secretary

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

Andrew R. French (50)

Assistant Secretary

   Vice President and Corporate Counsel (since February 2010) of Prudential; formerly Director and Corporate Counsel (2006-2010) of Prudential; Vice President and Assistant Secretary (since January 2007) of PI; Vice President and Assistant Secretary (since January 2007) of PMFS.

Amanda S. Ryan (35)

Assistant Secretary

   Director and Corporate Counsel (since March 2012) of Prudential; Director and Assistant Secretary (since June 2012) of PI; Associate at Ropes & Gray (2008-2012).

Valerie M. Simpson (53)

Chief Compliance Officer

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

Theresa C. Thompson (50)

Deputy Chief Compliance Officer

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

Richard W. Kinville (44)

Anti-Money Laundering Compliance Officer

   Vice President, Corporate Compliance, Anti-Money Laundering Unit (since January 2005) of Prudential; committee member of the American Council of Life Insurers Anti-Money Laundering and Critical Infrastructure Committee (since January 2007); formerly Investigator and Supervisor in the Special Investigations Unit for the New York Central Mutual Fire Insurance Company (August 1994-January 1999); Investigator in AXA Financial’s Internal Audit Department and Manager in AXA’s Anti-Money Laundering Office (January 1999-January 2005); first chair of the American Council of Life Insurers Anti-Money Laundering and Critical Infrastructure Committee (June 2007-December 2009).

Grace C. Torres (53)

Treasurer and Principal Financial and Accounting Officer

   Assistant Treasurer (since March 1999) and Senior Vice President (since September 1999) of PI; Assistant Treasurer (since May 2003) and Vice President (since June 2005) of AST Investment Services, Inc.; Senior Vice President and Assistant Treasurer (since May 2003) of Prudential Annuities Advisory Services, Inc.; formerly Senior Vice President (May 2003-June 2005) of AST Investment Services, Inc.

M. Sadiq Peshimam (49)

Assistant Treasurer

   Vice President (since 2005) of Prudential Investments LLC.

Peter Parrella (54)

Assistant Treasurer

   Vice President (since 2007) and Director (2004-2007) within Prudential Mutual Fund Administration; formerly Tax Manager at SSB Citi Fund Management LLC (1997-2004).

 

E2

Fund Officers(a)(1)    
Name, Address and Age
Position with the Fund		   Principal Occupation(s) During the Past Five Years

Alan Fu (56)

Assistant Treasurer

   Vice President and Corporate Counsel – Tax, Prudential Financial, Inc. (since October 2003).

 

(a) Excludes Mr. O’Donnell and Mr. Cronin, interested Board Members who also serve as President and Vice President, respectively.

 

(1) The year in which each individual became an Officer of the Fund is as follows: Raymond A. O’Hara, 2012; Deborah A. Docs, 2005; Jonathan D. Shain, 2005; Claudia DiGiacomo, 2005; Amanda S. Ryan 2012; Andrew R. French, 2006; Timothy J. Kneirim, 2007; Valerie M. Simpson, 2007; Theresa C. Thompson, 2008; Grace C. Torres, 1997; Peter Parrella, 2007; M. Sadiq Peshimam, 2006; Alan Fu, 2006; Richard W. Kinville, 2011.

 

Explanatory Notes to Tables:

 

Trustees are deemed to be “Interested”, as defined in the 1940 Act, by reason of their affiliation with Prudential Investments LLC and/or an affiliate of Prudential Investments LLC. Robert O’Donnell and Timothy Cronin are Interested Trustees because they are employed by an affiliate of the Manager of the Fund. Robert F. Gunia will be considered an Interested Trustee for at least two years after his retirement from employment by the Manager and its affiliates (which was on or about October 21, 2009). He will also be an Interested Trustee as long as he holds a beneficial interest in securities issued by the Manager or its affiliates.

 

Unless otherwise noted, the address of all Trustees and Officers is c/o Prudential Investments LLC, Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102.There is no set term of office for Trustees or Officers. The Independent Trustees have adopted a retirement policy, which calls for the retirement of Trustees on December 31 of the year in which they reach the age of 78, provided that the Board may extend the retirement age on a year-by-year basis for a Trustee.

 

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

 

“No. of Portfolios Overseen” includes all investment companies managed by Prudential Investments LLC (PI) and/or AST Investment Services, Inc. (ASTI) (collectively, the Manager) that are overseen by the Trustee. The investment companies for which PI and/or ASTI serves as Manager include The Prudential Variable Contract Accounts, The Prudential Series Fund, Advanced Series Trust, Prudential’s Gibraltar Fund, Inc., Prudential Short Duration High Yield Fund, Inc. and Prudential Global Short Duration High Yield Fund, Inc.

 

E3

 

 

 

 

 

Variable contracts contain exclusions, limitations, reductions of benefits, and terms for keeping them in force. For costs and complete details, refer to your contract or contact your licensed financial professional. Contract guarantees are based on the claims-paying ability of the issuing company.

 

Prudential’s Financial Security Program is issued by The Prudential Insurance Company of America, 751 Broad Street, Newark, NJ 07102-3777. Prudential’s Gibraltar Fund, Inc. is distributed by Prudential Investment Management Services LLC (PIMS), Three Gateway Center, 14th Floor, Newark, NJ 07102-4077, member SIPC. Both are Prudential Financial companies. Each is solely responsible for its own financial condition and contractual obligations.

LOGO

 

The Prudential Insurance Company of America

751 Broad Street

Newark, NJ 07102-3777

       

Presorted

Standard

U.S. Postage

PAID

Prudential

        
        
        

 

The Audited Financial Statements of The Prudential Insurance Company of America are available upon request. You may call 888-778-2888 to obtain a free copy of the Audited Financial Statements.

 

For service-related questions, please contact the Annuity Service Center at 888-778-2888.

 

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

 

 

0239274-00001-00    FSP-AR

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

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

The registrant hereby undertakes to provide any person, without charge, upon request, a copy of the code of ethics. To request a copy of the code of ethics, contact the registrant 973-367-7521, and ask for a copy of the Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive and Financial Officers.

Item 3 – Audit Committee Financial Expert –

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

Item 4 – Principal Accountant Fees and Services –

(a) Audit Fees

For the fiscal years ended December 31, 2012 and December 31, 2011, KPMG LLP (“KPMG”), the Registrant’s principal accountant, billed the Registrant $19,500 and $19,000, respectively, for professional services rendered for the audit of the Registrant’s annual financial statements or services that are normally provided in connection with statutory and regulatory filings.

(b) Audit-Related Fees

None.

(c) Tax Fees

None.

(d) All Other Fees

None.

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

THE PRUDENTIAL MUTUAL FUNDS

AUDIT COMMITTEE POLICY

on

Pre-Approval of Services Provided by the Independent Accountants

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

 

  •  

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

 

  •  

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

 

  •  

periodic meetings with the accounting firm.

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

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

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

Audit Services

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

 

  •  

Annual Fund financial statement audits

  •  

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

 

  •  

SEC and regulatory filings and consents

Audit-related Services

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

 

  •  

Accounting consultations

 

  •  

Fund merger support services

 

  •  

Agreed Upon Procedure Reports

 

  •  

Attestation Reports

 

  •  

Other Internal Control Reports

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

Tax Services

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

 

  •  

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

 

  •  

Federal, state and local income tax compliance; and,

 

  •  

Sales and use tax compliance

 

  •  

Timely RIC qualification reviews

 

  •  

Tax distribution analysis and planning

 

  •  

Tax authority examination services

 

  •  

Tax appeals support services

 

  •  

Accounting methods studies

 

  •  

Fund merger support services

 

  •  

Tax consulting services and related projects

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

Other Non-audit Services

Certain non-audit services that the independent accountants are legally permitted to render will be subject to pre-approval by the Committee or by one or more Committee members to whom the Committee has delegated this authority and who will report to the full Committee any pre-approval decisions made pursuant to this Policy. Non-audit services presented for pre-approval pursuant to this paragraph will be accompanied by a confirmation from both the Treasurer and the independent accountants that the proposed services will not adversely affect the independence of the independent accountants.

Proscribed Services

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

 

  •  

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

 

  •  

Financial information systems design and implementation

 

  •  

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

 

  •  

Actuarial services

 

  •  

Internal audit outsourcing services

 

  •  

Management functions or human resources

 

  •  

Broker or dealer, investment adviser, or investment banking services

 

  •  

Legal services and expert services unrelated to the audit

 

  •  

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

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

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

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

 

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

Not applicable.

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

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

(g) Non-Audit Fees

Not applicable to Registrant for the fiscal years 2012 and 2011. The aggregate non-audit fees billed by KPMG for services rendered to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant for the fiscal years 2012 and 2011 was $0 and $0, respectively.

(h) Principal Accountant’s Independence

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

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

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

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

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

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

applicable.

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

Item 11 – Controls and Procedures

 

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

 

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

Item 12 – Exhibits

 

  (a) (1) Code of Ethics – Attached hereto as Exhibit EX-99.CODE-ETH

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

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

 

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

SIGNATURES

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

 

Registrant:   Prudential’s Gibraltar Fund, Inc.
By:  

/s/ Deborah A. Docs

  Deborah A. Docs
  Secretary
Date:   February 21, 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/ Robert F. O’Donnell

  Robert F. O’Donnell
  President and Principal Executive Officer
Date:   February 21, 2013
By:  

/s/ Grace C. Torres

  Grace C. Torres
  Treasurer and Principal Financial Officer
Date:   February 21, 2013