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: | 811-08565 | |||
Exact name of registrant as specified in charter: | Prudential Investment Portfolios 12 | |||
(This Form N-CSR relates solely to the Registrant’s: PGIM QMA Long-Short Equity Fund, PGIM Short Duration Muni High Income Fund, PGIM US Real Estate Fund and PGIM QMA Large Cap Core Equity PLUS Fund) | ||||
Address of principal executive offices: | 655 Broad Street, 17th Floor | |||
Newark, New Jersey 07102 | ||||
Name and address of agent for service: | Andrew R. French | |||
655 Broad Street, 17th Floor | ||||
Newark, New Jersey 07102 | ||||
Registrant’s telephone number, including area code: | 800-225-1852 | |||
Date of fiscal year end: | 3/31/2019 | |||
Date of reporting period: | 9/30/2018 |
Item 1 – Reports to Stockholders
PGIM US REAL ESTATE FUND
(Formerly known as Prudential US Real Estate Fund)
SEMIANNUAL REPORT
SEPTEMBER 30, 2018
To enroll in e-delivery, go to pgiminvestments.com/edelivery
Objective: Capital appreciation and income |
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The information about the Fund’s portfolio holdings is for the period covered by this report and is subject to change thereafter.
The accompanying financial statements as of September 30, 2018 were not audited and, accordingly, no auditor’s opinion is expressed on them.
Mutual funds are distributed by Prudential Investment Management Services LLC (PIMS), member SIPC. PGIM Real Estate is a unit of PGIM, Inc. (PGIM), a registered investment adviser. PIMS and PGIM are Prudential Financial companies. © 2018 Prudential Financial, Inc. and its related entities. PGIM Real Estate, PGIM, and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
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PGIM FUNDS — UPDATE
The Board of Directors/Trustees for the Fund has approved the implementation of an automatic conversion feature for Class C shares, effective as of April 1, 2019. To reflect these changes, effective April 1, 2019, the section of the Fund’s Prospectus entitled “How to Buy, Sell and Exchange Fund Shares—How to Exchange Your Shares—Frequent Purchases and Redemptions of Fund Shares” is restated to read as follows:
This supplement should be read in conjunction with your Summary Prospectus, Statutory Prospectus and Statement of Additional Information, be retained for future reference and is in addition to any existing Fund supplements.
1. | In each Fund’s Statutory Prospectus, the following is added at the end of the section entitled “Fund Distributions And Tax Issues—If You Sell or Exchange Your Shares”: |
Automatic Conversion of Class C Shares
The conversion of Class C shares into Class A shares—which happens automatically approximately 10 years after purchase—is not a taxable event for federal income tax purposes. For more information about the automatic conversion of Class C shares, see Class C Shares Automatically Convert to Class A Shares in How to Buy, Sell and Exchange Fund Shares.
2. | In each Fund’s Statutory Prospectus, the following sentence is added at the end of the section entitled “How to Buy, Sell and Exchange Shares—Closure of Certain Share Classes to New Group Retirement Plans”: |
Shareholders owning Class C shares may continue to hold their Class C shares until the shares automatically convert to Class A shares under the conversion schedule, or until the shareholder redeems their Class C shares.
3. | In each Fund’s Statutory Prospectus, the following disclosure is added immediately following the section entitled “How to Buy, Sell and Exchange Shares—How to Buy Shares—Class B Shares Automatically Convert to Class A Shares”: |
Class C Shares Automatically Convert to Class A Shares
Starting on or about April 1, 2019 (the “Effective Date”), Class C shares will be eligible for automatic conversion into Class A shares on a monthly basis approximately ten years after the original date of purchase (the “Conversion Date”). Conversion will take place based on the relative NAV of the two classes, without the imposition of any sales load, fee or other charge. All such automatic conversions of Class C shares will constitute tax-free exchanges for federal income tax purposes.
For shareholders investing in Class C shares through retirement plans or omnibus accounts, and in certain other instances, the Fund and its agents may not have
PGIM US Real Estate Fund | 3 |
transparency into how long a shareholder has held Class C shares for purposes of determining whether such Class C shares are eligible for automatic conversion into Class A shares, and the relevant financial intermediary may not have the ability to track purchases in order to credit individual shareholders’ holding periods. In these circumstances, the Fund will not be able to automatically convert Class C shares into Class A shares as described above. In order to determine eligibility for conversion in these circumstances, it is the responsibility of the financial intermediary to notify the Fund that the shareholder is eligible for the conversion of Class C shares to Class A shares, and the financial intermediary may be required to maintain and provide the Fund with records that substantiate the holding period of Class C shares. It is the financial intermediary’s (and not the Fund’s) responsibility to keep records of transactions made in accounts it holds and to ensure that the shareholder is credited with the proper holding period based on such records or those provided to the financial intermediary by the shareholder. Please consult with your financial intermediary for the applicability of this conversion feature to your shares.
A financial intermediary may sponsor and/or control accounts, programs or platforms that impose a different conversion schedule or different eligibility requirements for the exchange of Class C shares for Class A shares (see Appendix A: Waivers and Discounts Available From Certain Financial Intermediaries of the Prospectus). Please consult with your financial intermediary if you have any questions regarding your shares’ conversion from Class C shares to Class A shares.
4. | In Part II of each Fund’s Statement of Additional Information, the following disclosure is added immediately following the section entitled “Purchase, Redemption and Pricing of Fund Shares—Share Classes—Automatic Conversion of Class B Shares”: |
AUTOMATIC CONVERSION OF CLASS C SHARES. Starting on or about April 1, 2019 (the “Effective Date”), Class C shares will be eligible for automatic conversion into Class A shares on a monthly basis approximately ten years after the original date of purchase (the “Conversion Date”). Conversion will take place based on the relative NAV of the two classes, without the imposition of any sales load, fee or other charge. Class C shares of a Fund acquired through automatic reinvestment of dividends or distributions will convert to Class A shares of the Fund on the Conversion Date pro rata with the converting Class C shares of the Fund that were not acquired through reinvestment of dividends or distributions. All such automatic conversions of Class C shares will constitute tax-free exchanges for federal income tax purposes.
For shareholders investing in Class C shares through retirement plans or omnibus accounts, and in certain other instances, the Fund and its agents may not have transparency into how long a shareholder has held Class C shares for purposes of determining whether such Class C shares are eligible for automatic conversion into Class A shares, and the relevant financial intermediary may not have the ability to track purchases in order to credit individual shareholders’ holding periods. In these circumstances, the
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Fund will not be able to automatically convert Class C shares into Class A shares as described above. In order to determine eligibility for conversion in these circumstances, it is the responsibility of the financial intermediary to notify the Fund that the shareholder is eligible for the conversion of Class C shares to Class A shares, and the financial intermediary may be required to maintain and provide the Fund with records that substantiate the holding period of Class C shares. It is the financial intermediary’s (and not the Fund’s) responsibility to keep records of transactions made in accounts it holds and to ensure that the shareholder is credited with the proper holding period based on such records or those provided to the financial intermediary by the shareholder. Please consult with your financial intermediary for the applicability of this conversion feature to your shares.
Class C shares were generally closed to investments by new group retirement plans effective June 1, 2018. Group retirement plans (and their successor, related and affiliated plans) that have Class C shares of the Fund available to participants on or before the Effective Date may continue to open accounts for new participants in such share class and purchase additional shares in existing participant accounts.
The Fund has no responsibility for monitoring or implementing a financial intermediary’s process for determining whether a shareholder meets the required holding period for conversion. A financial intermediary may sponsor and/or control accounts, programs or platforms that impose a different conversion schedule or different eligibility requirements for the exchange of Class C shares for Class A shares, as set forth on Appendix A: Waivers and Discounts Available From Certain Financial Intermediaries of the Prospectus. In these cases, Class C shareholders may have their shares exchanged for Class A shares under the policies of the financial intermediary. Financial intermediaries will be responsible for making such exchanges in those circumstances. Please consult with your financial intermediary if you have any questions regarding your shares’ conversion from Class C shares to Class A shares.
LR1094
- Not part of the Semiannual Report -
PGIM US Real Estate Fund | 5 |
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Dear Shareholder:
We hope you find the semiannual report for the PGIM US Real Estate Fund informative and useful. The report covers performance for the six-month period ended September 30, 2018.
We have important information to share with you. Effective June 11, 2018, Prudential Mutual Funds were renamed PGIM Funds. This renaming is part of our ongoing effort to further build our reputation and establish our global brand, which began when our firm adopted PGIM Investments as its name in April 2017. Please note that only the Fund’s name has changed. Your Fund’s management and operation, along with its symbols, remained the same.*
Regarding your investments with PGIM, we believe it is important 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. However, diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
At PGIM Investments, we consider it a great privilege and responsibility to help investors participate in opportunities across global markets while meeting their toughest investment challenges. PGIM is a top-10 global investment manager with more than $1 trillion in assets under management. This investment expertise allows us to deliver actively managed funds and strategies to meet the needs of investors around the globe.
Thank you for choosing our family of funds.
Sincerely,
Stuart Parker, President
PGIM US Real Estate Fund
November 15, 2018
*The Prudential Day One Funds did not change their names.
PGIM US Real Estate Fund | 7 |
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.pgiminvestments.com or by calling (800) 225-1852.
Total Returns as of 9/30/18 (without sales charges) | Average Annual Total Returns as of 9/30/18 (with sales charges) | |||||||
Six Months* (%) | One Year (%) | Five Years (%) | Since Inception (%) | |||||
Class A | 11.88 | –0.47 | 7.25 | 7.95 (12/21/10) | ||||
Class B | 11.49 | –0.39 | 7.52 | 7.95 (12/21/10) | ||||
Class C | 11.42 | 3.48 | 7.67 | 7.93 (12/21/10) | ||||
Class Z | 12.01 | 5.58 | 8.75 | 9.01 (12/21/10) | ||||
Class R6** | 12.02 | 5.50 | N/A | 6.08 (5/25/17) | ||||
FTSE NAREIT Equity REITs Index | ||||||||
10.91 | 3.35 | 9.16 | — | |||||
S&P 500 Index | ||||||||
11.40 | 17.91 | 13.93 | — | |||||
Lipper Equity Real Estate Funds Average | ||||||||
8.08 | 3.25 | 8.36 | — |
Source: PGIM Investments LLC and Lipper Inc.
*Not annualized
**Formerly known as Class Q shares.
Since Inception returns are provided for any share class with less than 10 fiscal years of returns. Since Inception returns for the Indexes and the Lipper Average are measured from the closest month-end to the class’ inception date.
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The returns in the tables do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or following the redemption of Fund shares. The average annual total returns take into account applicable sales charges, which are described for each share class in the table below.
Class A | Class B* | Class C | Class Z | Class R6** | ||||||
Maximum initial sales charge | 5.50% of the public offering price | None | None | None | None | |||||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or net asset value at redemption) | 1.00% on sales of $1 million or more made within 12 months of purchase | 5.00% (Yr.1) 4.00% (Yr.2) 3.00% (Yr.3) 2.00% (Yr.4) 1.00% (Yr.5&6) 0.00% (Yr.7) | 1.00% on sales made within 12 months of purchase | None | None | |||||
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | 0.30% (0.25% currently) | 1.00% | 1.00% | None | None |
*Class B shares are closed to all purchase activity and no additional Class B shares may be purchased or acquired except by exchange from Class B shares of another Fund or through dividend or capital gains reinvestment.
**Formerly known as Class Q
Benchmark Definitions
FTSE NAREIT Equity REITs Index—The Financial Times Stock Exchange National Association of Real Estate Investment Trusts (FTSE NAREIT) Equity REITs Index is an unmanaged index which measures the performance of all equity real estate investment trusts (REITs) listed on the New York Stock Exchange, the NASDAQ National Market, and the NYSE MKT LLC. The Index is designed to reflect the performance of all publicly traded equity REITs as a whole. The average annual total return for the Index measured from the month-end closest to the inception date of the Fund’s Class A, B, C, and Z shares is 9.67% and 4.91% for Class R6 shares.
S&P 500 Index—The S&P 500 Index is an unmanaged index of over 500 stocks of large US public companies. It gives a broad look at how stock prices in the United States have performed. The average annual total return for the Index measured from the month-end closest to the inception date of the Fund’s Class A, B, C, and Z shares is 13.80% and 17.47% for Class R6 shares.
Lipper Equity Real Estate Funds Average—The Lipper Equity Real Estate Funds Average (Lipper Average) is based on the average return of all funds in the Lipper Equity Real Estate Funds universe for the periods noted. Funds in the Lipper Average invest their portfolios primarily in shares of domestic companies engaged in the real estate industry. The average annual total return for the Average measured from the month-end closest to the inception date of the Fund’s Class A, B, C, and Z shares is 8.83% and 4.48% for Class R6 shares.
PGIM US Real Estate Fund | 9 |
Your Fund’s Performance (continued)
Investors cannot invest directly in an index or average. The returns for the Indexes would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses, but not sales charges or taxes.
Presentation of Fund Holdings
Five Largest Holdings expressed as a percentage of net assets as of 9/30/18 (%) | ||||
Prologis, Inc., Industrial REITs | 8.5 | |||
Welltower, Inc., Health Care REITs | 7.0 | |||
AvalonBay Communities, Inc., Residential REITs | 6.2 | |||
Equinix, Inc., Specialized REITs | 4.5 | |||
Americold Realty Trust, Industrial REITs | 3.7 |
Holdings reflect only long-term investments and are subject to change.
Five Largest Industries expressed as a percentage of net assets as of 9/30/18 (%) | ||||
Industrial REITs | 19.9 | |||
Residential REITs | 18.4 | |||
Specialized REITs | 16.1 | |||
Office REITs | 13.6 | |||
Health Care REITs | 11.8 |
Industry weightings reflect only long-term investments and are subject to change.
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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 held through the six-month period ended September 30, 2018. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of PGIM 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
PGIM US Real Estate Fund | 11 |
Fees and Expenses (continued)
and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information provided in the expense table. Additional fees have the effect of reducing investment returns.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
PGIM US Real Estate Fund | Beginning Account Value April 1, 2018 | Ending Account Value September 30, 2018 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,118.80 | 1.25 | % | $ | 6.64 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,018.80 | 1.25 | % | $ | 6.33 | ||||||||||
Class B | Actual | $ | 1,000.00 | $ | 1,114.90 | 2.00 | % | $ | 10.60 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.04 | 2.00 | % | $ | 10.10 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,114.20 | 2.00 | % | $ | 10.60 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.04 | 2.00 | % | $ | 10.10 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,120.10 | 1.00 | % | $ | 5.31 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.05 | 1.00 | % | $ | 5.06 | ||||||||||
Class R6** | Actual | $ | 1,000.00 | $ | 1,120.20 | 1.00 | % | $ | 5.32 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.05 | 1.00 | % | $ | 5.06 |
*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 183 days in the six-month period ended September 30, 2018, and divided by the 365 days in the Fund’s fiscal year ending March 31, 2019 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
**Formerly known as Class Q shares.
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Schedule of Investments (unaudited)
as of September 30, 2018
Description | Shares | Value | ||||||
LONG-TERM INVESTMENTS 99.3% | ||||||||
COMMON STOCKS | ||||||||
Diversified REITs 4.7% | ||||||||
American Assets Trust, Inc. | 16,737 | $ | 624,122 | |||||
Empire State Realty Trust, Inc. (Class A Stock) | 29,290 | 486,507 | ||||||
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| |||||||
1,110,629 | ||||||||
Health Care REITs 11.8% | ||||||||
Community Healthcare Trust, Inc. | 6,300 | 195,174 | ||||||
MedEquities Realty Trust, Inc. | 47,539 | 462,079 | ||||||
Sabra Health Care REIT, Inc. | 20,414 | 471,972 | ||||||
Welltower, Inc. | 25,379 | 1,632,377 | ||||||
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2,761,602 | ||||||||
Hotel & Resort REITs 7.9% | ||||||||
DiamondRock Hospitality Co. | 57,100 | 666,357 | ||||||
MGM Growth Properties LLC (Class A Stock) | 20,236 | 596,759 | ||||||
Park Hotels & Resorts, Inc. | 5,090 | 167,054 | ||||||
Sunstone Hotel Investors, Inc. | 25,027 | 409,442 | ||||||
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1,839,612 | ||||||||
Hotels, Resorts & Cruise Lines 1.3% | ||||||||
Hilton Worldwide Holdings, Inc. | 3,856 | 311,488 | ||||||
Industrial REITs 19.9% | ||||||||
Americold Realty Trust | 35,027 | 876,376 | ||||||
Duke Realty Corp. | 22,132 | 627,885 | ||||||
Prologis, Inc. | 29,387 | 1,992,145 | ||||||
Rexford Industrial Realty, Inc. | 16,399 | 524,112 | ||||||
STAG Industrial, Inc. | 22,979 | 631,922 | ||||||
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4,652,440 | ||||||||
Office REITs 13.6% | ||||||||
Columbia Property Trust, Inc. | 24,163 | 571,213 | ||||||
Easterly Government Properties, Inc. | 14,609 | 282,976 | ||||||
Hudson Pacific Properties, Inc. | 21,924 | 717,353 | ||||||
JBG SMITH Properties | 22,354 | 823,298 | ||||||
Kilroy Realty Corp. | 11,176 | 801,208 | ||||||
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| |||||||
3,196,048 |
See Notes to Financial Statements.
PGIM US Real Estate Fund | 13 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Residential REITs 18.4% | ||||||||
American Homes 4 Rent (Class A Stock) | 27,784 | $ | 608,192 | |||||
AvalonBay Communities, Inc. | 7,974 | 1,444,490 | ||||||
Camden Property Trust | 5,159 | 482,728 | ||||||
Equity LifeStyle Properties, Inc. | 8,784 | 847,217 | ||||||
Essex Property Trust, Inc. | 364 | 89,802 | ||||||
UDR, Inc. | 20,968 | 847,736 | ||||||
|
| |||||||
4,320,165 | ||||||||
Retail REITs 5.6% | ||||||||
Macerich Co. (The) | 14,279 | 789,486 | ||||||
Simon Property Group, Inc. | 2,923 | 516,640 | ||||||
|
| |||||||
1,306,126 | ||||||||
Specialized REITs 16.1% | ||||||||
CoreSite Realty Corp. | 3,079 | 342,200 | ||||||
Crown Castle International Corp. | 3,138 | 349,353 | ||||||
Digital Realty Trust, Inc. | 2,893 | 325,405 | ||||||
Equinix, Inc. | 2,437 | 1,054,953 | ||||||
Extra Space Storage, Inc. | 9,460 | 819,614 | ||||||
Four Corners Property Trust, Inc. | 16,301 | 418,773 | ||||||
Life Storage, Inc. | 2,504 | 238,281 | ||||||
Public Storage | 1,052 | 212,115 | ||||||
|
| |||||||
3,760,694 | ||||||||
|
| |||||||
TOTAL LONG-TERM INVESTMENTS | 23,258,804 | |||||||
|
| |||||||
SHORT-TERM INVESTMENT 0.7% | ||||||||
AFFILIATED MUTUAL FUND | ||||||||
PGIM Core Ultra Short Bond Fund | 162,475 | 162,475 | ||||||
|
| |||||||
TOTAL INVESTMENTS 100.0% | 23,421,279 | |||||||
Liabilities in excess of other assets (0.0)% | (8,334 | ) | ||||||
|
| |||||||
NET ASSETS 100.0% | $ | 23,412,945 | ||||||
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|
The following abbreviation is used in the semiannual report:
REITs—Real Estate Investment Trusts
(w) | PGIM Investments LLC, the manager of the Fund, also serves as manager of the PGIM Core Ultra Short Bond Fund. |
See Notes to Financial Statements.
14 |
Fair Value Measurements:
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—unadjusted quoted prices generally in active markets for identical securities.
Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other observable inputs.
Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of September 30, 2018 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Common Stocks | ||||||||||||
Diversified REITs | $ | 1,110,629 | $ | — | $ | — | ||||||
Health Care REITs | 2,761,602 | — | — | |||||||||
Hotel & Resort REITs | 1,839,612 | — | — | |||||||||
Hotels, Resorts & Cruise Lines | 311,488 | — | — | |||||||||
Industrial REITs | 4,652,440 | — | — | |||||||||
Office REITs | 3,196,048 | — | — | |||||||||
Residential REITs | 4,320,165 | — | — | |||||||||
Retail REITs | 1,306,126 | — | — | |||||||||
Specialized REITs | 3,760,694 | — | — | |||||||||
Affiliated Mutual Fund | 162,475 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 23,421,279 | $ | — | $ | — | ||||||
|
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Industry Classification:
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of September 30, 2018 were as follows:
Industrial REITs | 19.9 | % | ||
Residential REITs | 18.4 | |||
Specialized REITs | 16.1 | |||
Office REITs | 13.6 | |||
Health Care REITs | 11.8 | |||
Hotel & Resort REITs | 7.9 | |||
Retail REITs | 5.6 | |||
Diversified REITs | 4.7 | |||
Hotels, Resorts & Cruise Lines | 1.3 | |||
Affiliated Mutual Fund | 0.7 | % | ||
|
| |||
100.0 | ||||
Liabilities in excess of other assets | (0.0 | )* | ||
|
| |||
100.0 | % | |||
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|
* | Less than +/- 0.05% |
See Notes to Financial Statements.
PGIM US Real Estate Fund | 15 |
Statement of Assets & Liabilities (unaudited)
as of September 30, 2018
Assets | ||||
Investments at value: | ||||
Unaffiliated investments (cost $20,533,807) | $ | 23,258,804 | ||
Affiliated investments (cost $162,475) | 162,475 | |||
Foreign currency, at value (cost $175) | 176 | |||
Dividends receivable | 66,150 | |||
Receivable for Fund shares sold | 2,951 | |||
Due from Manager | 865 | |||
Prepaid expenses | 940 | |||
|
| |||
Total Assets | 23,492,361 | |||
|
| |||
Liabilities | ||||
Registration fee payable | 23,052 | |||
Custodian and accounting fees payable | 17,189 | |||
Audit fee payable | 12,879 | |||
Payable for investments purchased | 9,830 | |||
Accrued expenses and other liabilities | 9,393 | |||
Payable for Fund shares reacquired | 2,756 | |||
Distribution fee payable | 2,246 | |||
Affiliated transfer agent fee payable | 2,071 | |||
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Total Liabilities | 79,416 | |||
|
| |||
Net Assets | $ | 23,412,945 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 1,908 | ||
Paid-in capital in excess of par | 20,229,208 | |||
|
| |||
20,231,116 | ||||
Undistributed net investment income | 116,557 | |||
Accumulated net realized gain on investment and foreign currency transactions | 340,274 | |||
Net unrealized appreciation on investments and foreign currencies | 2,724,998 | |||
|
| |||
Net assets, September 30, 2018 | $ | 23,412,945 | ||
|
|
See Notes to Financial Statements.
16 |
Class A | ||||
Net asset value and redemption price per share, | $ | 12.28 | ||
Maximum sales charge (5.50% of offering price) | 0.71 | |||
|
| |||
Maximum offering price to public | $ | 12.99 | ||
|
| |||
Class B | ||||
Net asset value, offering price and redemption price per share, | ||||
($621,301 ÷ 51,614 shares of beneficial interest issued and outstanding) | $ | 12.04 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share, | ||||
($923,340 ÷ 76,859 shares of beneficial interest issued and outstanding) | $ | 12.01 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share, | ||||
($17,176,516 ÷ 1,396,874 shares of beneficial interest issued and outstanding) | $ | 12.30 | ||
|
| |||
Class R6 | ||||
Net asset value, offering price and redemption price per share, | ||||
($10,834 ÷ 881 shares of beneficial interest issued and outstanding) | $ | 12.29 | ||
|
|
See Notes to Financial Statements.
PGIM US Real Estate Fund | 17 |
Statement of Operations (unaudited)
Six Months Ended September 30, 2018
Net Investment Income (Loss) | ||||
Income | ||||
Unaffiliated dividend income | $ | 305,619 | ||
Affiliated dividend income | 2,955 | |||
|
| |||
Total income | 308,574 | |||
|
| |||
Expenses | ||||
Management fee | 83,896 | |||
Distribution fee(a) | 14,477 | |||
Registration fees(a) | 34,563 | |||
Custodian and accounting fees | 30,652 | |||
Shareholders’ reports | 13,075 | |||
Audit fee | 12,879 | |||
Legal fees and expenses | 9,415 | |||
Transfer agent’s fees and expenses (including affiliated expense of $5,680)(a) | 9,302 | |||
Trustees’ fees | 6,240 | |||
Miscellaneous | 7,769 | |||
|
| |||
Total expenses | 222,268 | |||
Less: Fee waiver and/or expense reimbursement(a) | (95,930 | ) | ||
Distribution fee waiver(a) | (1,045 | ) | ||
|
| |||
Net expenses | 125,293 | |||
|
| |||
Net investment income (loss) | 183,281 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investment And Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 871,766 | |||
Foreign currency transactions | 3 | |||
|
| |||
871,769 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,418,541 | |||
Foreign currencies | (4 | ) | ||
|
| |||
1,418,537 | ||||
|
| |||
Net gain (loss) on investment and foreign currency transactions | 2,290,306 | |||
|
| |||
Net Increase (Decrease) In Net Assets Resulting From Operations | $ | 2,473,587 | ||
|
|
(a) | Class specific expenses and waivers were as follows: |
Class A | Class B | Class C | Class Z | Class R6 | ||||||||||||||||
Distribution fee | 6,268 | 3,501 | 4,708 | — | — | |||||||||||||||
Registration fees | 7,151 | 7,151 | 7,152 | 7,152 | 5,957 | |||||||||||||||
Transfer agent’s fees and expenses | 5,870 | 1,284 | 1,113 | 1,016 | 19 | |||||||||||||||
Fee waiver and/or expense reimbursement | (22,748 | ) | (10,064 | ) | (10,453 | ) | (46,666 | ) | (5,999 | ) | ||||||||||
Distribution fee waiver | (1,045 | ) | — | — | — | — |
See Notes to Financial Statements.
18 |
Statements of Changes in Net Assets (unaudited)
Six Months Ended September 30, 2018 | Year Ended March 31, 2018 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 183,281 | $ | 371,802 | ||||
Net realized gain (loss) on investment and foreign currency transactions | 871,769 | 123,022 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currencies | 1,418,537 | (927,639 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 2,473,587 | (432,815 | ) | |||||
|
|
|
| |||||
Dividends and Distributions | ||||||||
Dividends from net investment income | ||||||||
Class A | (26,778 | ) | (49,977 | ) | ||||
Class B | (2,015 | ) | (5,635 | ) | ||||
Class C | (2,723 | ) | (7,078 | ) | ||||
Class Z | (128,686 | ) | (215,378 | ) | ||||
Class R6 | (81 | ) | (133 | ) | ||||
|
|
|
| |||||
(160,283 | ) | (278,201 | ) | |||||
|
|
|
| |||||
Distributions from net realized gains | ||||||||
Class A | — | (210,157 | ) | |||||
Class B | — | (45,310 | ) | |||||
Class C | — | (55,167 | ) | |||||
Class Z | — | (794,247 | ) | |||||
Class R6 | — | (493 | ) | |||||
|
|
|
| |||||
— | (1,105,374 | ) | ||||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) | ||||||||
Net proceeds from shares sold | 623,565 | 640,396 | ||||||
Net asset value of shares issued in reinvestment of dividends and distributions | 160,033 | 1,378,664 | ||||||
Cost of shares reacquired | (772,036 | ) | (3,001,058 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in net assets from Fund share transactions | 11,562 | (981,998 | ) | |||||
|
|
|
| |||||
Total increase (decrease) | 2,324,866 | (2,798,388 | ) | |||||
Net Assets: | ||||||||
Beginning of period | 21,088,079 | 23,886,467 | ||||||
|
|
|
| |||||
End of period(a) | $ | 23,412,945 | $ | 21,088,079 | ||||
|
|
|
| |||||
(a) Includes undistributed/(distributions in excess of) net investment income of: | $ | 116,557 | $ | 93,559 | ||||
|
|
|
|
See Notes to Financial Statements.
PGIM US Real Estate Fund | 19 |
Notes to Financial Statements (unaudited)
Prudential Investment Portfolios 12 (the “Trust”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company. The Trust was established as a Delaware business trust on October 24, 1997. The Trust currently consists of the following six series: PGIM QMA Large-Cap Core Equity PLUS Fund, PGIM QMA Long-Short Equity Fund and PGIM Short Duration Muni High Income Fund, each of which are diversified funds and PGIM Global Real Estate Fund, PGIM Jennison Technology Fund and PGIM US Real Estate Fund, each of which are non-diversified funds for purposes of the 1940 Act and may invest a greater percentage of their assets in the securities of a single company or other issuer than a diversified fund. These financial statements relate only to the PGIM US Real Estate Fund (the “Fund”). Effective June 11, 2018, the Funds’ names were changed by replacing “Prudential” with “PGIM” and each Fund’s Class Q shares were renamed Class R6 shares.
The investment objective of the Fund is capital appreciation and income.
1. Accounting Policies
The Fund follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The following accounting policies conform to U.S. generally accepted accounting principles. The Fund consistently follows such policies in the preparation of its financial statements.
Securities Valuation: The Fund holds securities and other assets and liabilities that are fair valued at the close of each day (generally, 4:00 PM Eastern time) 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 Trust’s Board of Trustees (the “Board”) has adopted valuation procedures for security valuation under which fair valuation responsibilities have been delegated to PGIM Investments LLC (“PGIM Investments” or the “Manager”). Pursuant to the Board’s delegation, a Valuation Committee has been established as two persons, being one or more officers of the Trust, including: the Trust’s Treasurer (or the Treasurer’s direct reports); and the Trust’s Chief or Deputy Chief Compliance Officer (or Vice-President-level direct reports of the Chief or Deputy Chief Compliance Officer). Under the current valuation procedures, the Valuation Committee of the Board is responsible for supervising the valuation of portfolio securities and other assets and liabilities. The valuation procedures permit the Fund to utilize independent pricing vendor services, quotations from market makers, and alternative valuation methods when market quotations are either not readily available or not deemed representative of fair value. A record of the Valuation Committee’s actions is subject to the Board’s review, approval, and ratification at its next regularly scheduled quarterly meeting.
20 |
For the fiscal reporting period-end, securities and other assets and liabilities were fair valued at the close of the last U.S. business day. Trading in certain foreign securities may occur when the NYSE is closed (including weekends and holidays). Because such foreign securities trade in markets that are open on weekends and U.S. holidays, the values of some of the Fund’s foreign investments may change on days when investors cannot purchase or redeem Fund shares.
Various inputs determine how the Fund’s investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the Schedule of Investments referred to herein as the “fair value hierarchy” in accordance with FASB ASC Topic 820.
Common and preferred stocks, exchange-traded funds, and derivative instruments, such as futures or options, 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 where the security principally trades. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price, they are classified as Level 1 in the fair value hierarchy. In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and ask prices, or at the last bid price in the absence of an ask price. These securities are classified as Level 2 in the fair value hierarchy.
Foreign equities traded on foreign securities exchanges are generally valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy. The models generate an evaluated adjustment factor for each security, which is applied to the local closing price to adjust it for post closing market movements. Utilizing that evaluated adjustment factor, the vendor provides an evaluated price for each security. If the vendor does not provide an evaluated price, securities are valued in accordance with exchange-traded common and preferred stock valuation policies discussed above.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Securities and other assets that cannot be priced according to the methods described above are valued based on pricing methodologies approved by the Board. In the event that unobservable inputs are used when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
When determining the fair value of securities, some of the factors influencing the valuation include: the nature of any restrictions on disposition of the securities; assessment of the
PGIM US Real Estate Fund | 21 |
Notes to Financial Statements (unaudited) (continued)
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 Manager 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 unaffiliated mutual funds to calculate their net asset values.
Restricted and Illiquid Securities: Subject to guidelines adopted by the Board, the Fund may invest up to 15% of its net assets in illiquid securities, including those which are restricted as to disposition under securities law (“restricted securities”). Restricted securities are valued pursuant to the valuation procedures noted above. Illiquid securities are those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale, cannot be sold within seven days in the ordinary course of business at approximately the amount at which the Fund has valued the investment. Therefore, the Fund may find it difficult to sell illiquid securities at the time considered most advantageous by its subadviser and may incur transaction costs that would not be incurred in the sale of securities that were freely marketable. Certain securities that would otherwise be considered illiquid because of legal restrictions on resale to the general public may be traded among qualified institutional buyers under Rule 144A of the Securities Act of 1933. These Rule 144A securities, as well as commercial paper that is sold in private placements under Section 4(2) of the Securities Act, may be deemed liquid by the Fund’s subadviser under the guidelines adopted by the Trustees of the Trust. However, the liquidity of the Fund’s investments in Rule 144A securities could be impaired if trading does not develop or declines.
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.
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 generally 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
22 |
exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities sold during the period. Accordingly, holding period realized foreign currency gains (losses) are included in the reported net realized gains (losses) on investment transactions.
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from the disposition of holdings of foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference between the amounts of interest, dividends 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 (losses) from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates are reflected as a component of net unrealized appreciation (depreciation) on foreign currencies.
Equity and Mortgage Real Estate Investment Trusts (collectively equity REITs): The Fund invests in equity REITs, which report information on the source of their distributions annually. Based on current and historical information, a portion of distributions received from equity REITs during the period is estimated to be dividend income, capital gain or return of capital and recorded accordingly. When material, these estimates are adjusted periodically when the actual source of distributions is disclosed by the equity REITs.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains (losses) from investment and currency transactions are calculated on the specific identification method. Dividend income is recorded on the ex-date. Expenses are recorded on an accrual basis, which may require the use of certain estimates by management that may differ from actual. Net investment income or loss (other than class specific expenses and waivers, which are allocated as noted below) and unrealized and realized gains (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. Class specific expenses and waivers, where applicable, are charged to the respective share classes. Class specific expenses include distribution fees and distribution fee waivers, shareholder servicing fees, transfer agent’s fees and expenses, registration fees and fee waivers and/or expense reimbursements, as applicable.
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, interest and capital gains, if any, are recorded, net of reclaimable amounts, at the time the related income is earned.
Dividends and Distributions: The Fund expects to pay dividends from net investment income quarterly. Distributions from net realized capital and currency gains, if any, are declared and paid annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from
PGIM US Real Estate Fund | 23 |
Notes to Financial Statements (unaudited) (continued)
generally accepted accounting principles, are recorded on the ex-date. Permanent book/tax differences relating to income and gain (loss) are reclassified amongst undistributed net investment income, accumulated net realized gain (loss) and paid-in capital in excess of par, as appropriate.
Estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
2. Agreements
The Trust, on behalf of the Fund, has a management agreement with PGIM Investments. Pursuant to this agreement, PGIM Investments has responsibility for all investment advisory services and supervises the subadviser’s performance of such services. In addition, under the management agreement, PGIM Investments provides all of the administrative functions necessary for the organization, operation and management of the Fund. PGIM Investments administers the corporate affairs of the Fund and, in connection therewith, furnishes the Fund with office facilities, together with those ordinary clerical and bookkeeping services which are not being furnished by, the Fund’s custodian, and the Fund’s transfer agent. PGIM Investments is also responsible for the staffing and management of dedicated groups of legal, marketing, compliance and related personnel necessary for the operation of the Fund. The legal, marketing, compliance and related personnel are also responsible for the management and oversight of the various service providers to the Fund, including, but not limited to, the custodian, transfer agent, and accounting agent.
PGIM Investments has entered into a subadvisory agreement with PGIM, Inc., which provides subadvisory services to the Fund through its PGIM Real Estate unit. The subadvisory agreement provides that PGIM Real Estate will furnish investment advisory services in connection with the management of the Fund. In connection therewith, PGIM Real Estate is obligated to keep certain books and records of the Fund. PGIM Investments pays for the services of PGIM Real Estate, the cost of compensation of officers of the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears all other costs and expenses.
The management fee paid to PGIM Investments is accrued daily and payable monthly at an annual rate of 0.75% of the Fund’s average daily net assets up to and including $1 billion, 0.73% on the next $2 billion of average daily net assets, 0.71% on the next $2 billion of average daily net assets, 0.70% on the next $5 billion of average daily net assets and 0.69% on the average daily net assets in excess of $10 billion. The management fee before any waivers and/or expense reimbursements was 0.75% for the six months ended September 30, 2018.
24 |
PGIM Investments has contractually agreed, through July 31, 2019, to limit total annual fund operating expenses after fee waivers and/or expense reimbursements to 1.25% of average daily net assets for Class A shares, 2.00% of average daily net assets for Class B shares, 2.00% of average daily net assets for Class C shares, 1.00% of average daily net assets for Class Z shares, and 1.00% of average daily net assets for Class R6 shares. This contractual waiver excludes interest, brokerage, taxes (such as income and foreign withholding taxes, stamp duty and deferred tax expenses), acquired fund fees and expenses, extraordinary expenses, and certain other Fund expenses such as dividend and interest expense and broker charges on short sales. Fees and/or expenses waived and/or reimbursed by PGIM Investments may be recouped by PGIM Investments within the same fiscal year during which such waiver and/or reimbursement is made if such recoupment can be realized without exceeding the expense limit in effect at the time of the recoupment for that fiscal year.
The Trust, on behalf of 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 Z and Class R6 shares of the Fund. The Fund compensates PIMS for distributing and servicing the Fund’s Class A, Class B and Class C shares, pursuant to the plans of distribution (the “Distribution Plans”), regardless of expenses actually incurred by PIMS. The distribution fees are accrued daily and payable monthly. No distribution or service fees are paid to PIMS as distributor of the Class Z or Class R6 shares of the Fund.
Pursuant to the Distribution Plans, the Fund compensates PIMS for distribution related activities at an annual rate of up to 0.30%, 1% and 1% of the average daily net assets of the Class A, Class B and Class C shares, respectively. PIMS has contractually agreed through July 31, 2019 to limit such fees to 0.25% of the average daily net assets of the Class A shares.
PIMS has advised the Fund that it received $3,007, in front-end sales charges resulting from sales of Class A shares during the six months ended September 30, 2018. From these fees, PIMS paid such sales charges to broker-dealers, who in turn paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Fund that for the six months ended September 30, 2018, it received $872 and $36 in contingent deferred sales charges imposed upon redemptions by certain Class B and Class C shareholders, respectively.
PGIM Investments, PGIM, Inc. and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PGIM Investments and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund’s transfer agent. Transfer
PGIM US Real Estate Fund | 25 |
Notes to Financial Statements (unaudited) (continued)
agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
The Fund may enter into certain securities purchase or sale transactions under Board approved Rule 17a-7 procedures. Rule 17a-7 is an exemptive rule under the 1940 Act, that, subject to certain conditions, permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. Such transactions are subject to ratification by the Board. For the reporting period ended September 30, 2018, no such transactions were entered into by the Fund.
The Fund may invest its overnight sweep cash in the PGIM Core Ultra Short Bond Fund (the “Core Fund”), a series of Prudential Investment Portfolios 2, registered under the 1940 Act and managed by PGIM Investments. Earnings from the Core Fund are disclosed on the Statement of Operations as “Affiliated dividend income”.
4. Portfolio Securities
The aggregate cost of purchases and proceeds from sales of portfolio securities (excluding short-term investments and U.S. Government securities) for the six months ended September 30, 2018, were $17,331,361 and $17,139,162, respectively.
A summary of the cost of purchases and proceeds from sales of shares of an affiliated mutual fund for the six months ended September 30, 2018, is presented as follows:
Affiliated | Value, Beginning of Period | Cost of Purchases | Proceeds from Sales | Change in Unrealized Gain (Loss) | Realized Gain (Loss) | Value, End of Period | Shares, End of Period | Dividend Income | ||||||||||||||||||||||||
PGIM Core Ultra Short Bond Fund | $ | 390,119 | $ | 4,368,380 | $ | 4,596,024 | $ | — | $ | — | $ | 162,475 | 162,475 | $ | 2,955 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* | The Fund did not have any capital gain distributions during the reporting period. |
26 |
5. Tax Information
The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of September 30, 2018 were as follows:
Tax Basis | $ | 21,015,853 | ||
|
| |||
Gross Unrealized Appreciation | 2,540,162 | |||
Gross Unrealized Depreciation | (137,736 | ) | ||
|
| |||
Net Unrealized Appreciation | $ | 2,405,426 | ||
|
|
The book basis may differ from tax basis due to certain tax-related adjustments.
Management has analyzed the Fund’s tax positions taken on federal, state and local 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, state and local 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.
6. Capital and Ownership
The Fund offers Class A, Class B, Class C, Class Z and Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 5.50%. Investors who purchase $1 million or more of Class A shares and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1%, although they are not subject to an initial sales charge. The Class A CDSC is waived for certain retirement and/or benefit plans. A special exchange privilege is also available for shareholders who qualified to purchase Class A shares at net asset value. Class B shares are sold with a CDSC which declines from 5% to zero depending on the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately seven years after purchase. Class B shares are closed to new purchases. Class C shares are sold with a CDSC of 1% on sales made within 12 months of purchase. Class Z and Class R6 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 Trust has authorized an unlimited number of shares of beneficial interest at $0.001 par value per share.
As of September 30, 2018, Prudential, through its affiliated entities, owned 1,353,622 Class Z shares and 881 Class R6 shares of the Fund. At reporting period end, two shareholders of record held 78% of the Fund’s outstanding shares on behalf of multiple beneficial owners, of which 71% were held by an affiliate of Prudential.
PGIM US Real Estate Fund | 27 |
Notes to Financial Statements (unaudited) (continued)
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Six months ended September 30, 2018: | ||||||||
Shares sold | 46,289 | $ | 570,377 | |||||
Shares issued in reinvestment of dividends and distributions | 2,324 | 26,653 | ||||||
Shares reacquired | (26,542 | ) | (307,505 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 22,071 | 289,525 | ||||||
Shares issued upon conversion from other share class(es) | 3,699 | 44,720 | ||||||
Shares reacquired upon conversion into other share class(es) | (984 | ) | (11,987 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 24,786 | $ | 322,258 | |||||
|
|
|
| |||||
Year ended March 31, 2018: | ||||||||
Shares sold | 31,313 | $ | 377,933 | |||||
Shares issued in reinvestment of dividends and distributions | 21,380 | 257,483 | ||||||
Shares reacquired | (100,575 | ) | (1,218,634 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (47,882 | ) | (583,218 | ) | ||||
Shares issued upon conversion from other share class(es) | 1,086 | 12,656 | ||||||
Shares reacquired upon conversion into other share class(es) | (1,756 | ) | (20,301 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (48,552 | ) | $ | (590,863 | ) | |||
|
|
|
| |||||
Class B | ||||||||
Six months ended September 30, 2018: | ||||||||
Shares issued in reinvestment of dividends and distributions | 178 | $ | 2,009 | |||||
Shares reacquired | (15,735 | ) | (180,977 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (15,557 | ) | (178,968 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (3,770 | ) | (44,720 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (19,327 | ) | $ | (223,688 | ) | |||
|
|
|
| |||||
Year ended March 31, 2018: | ||||||||
Shares sold | 854 | $ | 10,394 | |||||
Shares issued in reinvestment of dividends and distributions | 4,216 | 49,811 | ||||||
Shares reacquired | (25,271 | ) | (298,628 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (20,201 | ) | (238,423 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (1,106 | ) | (12,656 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (21,307 | ) | $ | (251,079 | ) | |||
|
|
|
| |||||
Class C | ||||||||
Six months ended September 30, 2018: | ||||||||
Shares sold | 1,223 | $ | 14,145 | |||||
Shares issued in reinvestment of dividends and distributions | 240 | 2,706 | ||||||
Shares reacquired | (12,416 | ) | (141,939 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (10,953 | ) | $ | (125,088 | ) | |||
|
|
|
| |||||
Year ended March 31, 2018: | ||||||||
Shares sold | 6,558 | $ | 78,894 | |||||
Shares issued in reinvestment of dividends and distributions | 5,236 | 61,754 | ||||||
Shares reacquired | (51,214 | ) | (608,394 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (39,420 | ) | (467,746 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (3,122 | ) | (38,594 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (42,542 | ) | $ | (506,340 | ) | |||
|
|
|
|
28 |
Class Z | Shares | Amount | ||||||
Six months ended September 30, 2018: | ||||||||
Shares sold | 3,297 | $ | 39,043 | |||||
Shares issued in reinvestment of dividends and distributions | 11,201 | 128,584 | ||||||
Shares reacquired | (12,257 | ) | (141,615 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 2,241 | 26,012 | ||||||
Shares issued upon conversion from other share class(es) | 983 | 11,987 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 3,224 | $ | 37,999 | |||||
|
|
|
| |||||
Year ended March 31, 2018: | ||||||||
Shares sold | 13,610 | $ | 163,175 | |||||
Shares issued in reinvestment of dividends and distributions | 83,673 | 1,008,990 | ||||||
Shares reacquired | (73,051 | ) | (875,402 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 24,232 | 296,763 | ||||||
Shares issued upon conversion from other share class(es) | 4,806 | 58,895 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 29,038 | $ | 355,658 | |||||
|
|
|
| |||||
Class R6 | ||||||||
Six months ended September 30, 2018: | ||||||||
Shares issued in reinvestment of dividends and distributions | 7 | $ | 81 | |||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 7 | $ | 81 | |||||
|
|
|
| |||||
Period ended March 31, 2018*: | ||||||||
Shares sold | 822 | $ | 10,000 | |||||
Shares issued in reinvestment of dividends and distributions | 52 | 626 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 874 | $ | 10,626 | |||||
|
|
|
|
* | Commencement of offering was May 25, 2017. |
7. Borrowings
The Trust, on behalf of 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 October 5, 2017 through October 4, 2018. The Funds pay an annualized commitment fee of 0.15% of the unused portion of the SCA. The Fund’s portion of the commitment fee for the unused amount, allocated based upon a method approved by the Board, is accrued daily and paid quarterly.
Subsequent to the reporting period end, the SCA was renewed effective October 4, 2018 and will continue to provide a commitment of $900 million through October 3, 2019. The commitment fee paid by the Funds will continue to be 0.15% of the unused portion of the SCA. The interest on borrowings under both SCAs is paid monthly and at a per annum interest rate based upon a contractual spread plus the higher of (1) the effective federal funds rate, (2) the 1-month LIBOR rate or (3) zero percent.
Other affiliated registered investment companies that are parties to the SCA include portfolios that are subject to a predetermined mathematical formula used to manage certain benefit guarantees offered under variable annuity contracts. The formula may result in large
PGIM US Real Estate Fund | 29 |
Notes to Financial Statements (unaudited) (continued)
scale asset flows into and out of these portfolios. Consequently, these portfolios may be more likely to utilize the SCA for purposes of funding redemptions. It may be possible for those portfolios to fully exhaust the committed amount of the SCA, thereby requiring the Manager to allocate available funding per a Board-approved methodology designed to treat the Funds in the SCA equitably.
The Fund did not utilize the SCA during the six months ended September 30, 2018.
8. Notice of Dividends to Shareholders
Subsequent to the six months ended September 30, 2018, the Fund declared ordinary income dividends on October 16, 2018 to shareholders of record on October 17, 2018. The ex-date was October 18, 2018. The per share amounts declared were as follows:
Ordinary Income | ||||
Class A | $ | 0.04519 | ||
Class B | $ | 0.02299 | ||
Class C | $ | 0.02299 | ||
Class Z | $ | 0.05279 | ||
Class R6 | $ | 0.05279 |
9. Other Risks
The Fund’s risks include, but are not limited to, the risks discussed below:
Equity and Equity-Related Securities Risks: The value of a particular security could go down and you could lose money. In addition to an individual security losing value, the value of the equity markets or a sector in which the Fund invests could go down. The Fund’s holdings can vary significantly from broad market indexes and the performance of the Fund can deviate from the performance of these indexes. Different parts of a market can react differently to adverse issuer, market, regulatory, political and economic developments.
Foreign Securities Risk: The Fund’s investments in securities of foreign issuers or issuers with significant exposure to foreign markets involve additional risk. Foreign countries in which the Fund may invest may have markets that are less liquid, less regulated and more volatile than US markets. The value of the Fund’s investments may decline because of factors affecting the particular issuer as well as foreign markets and issuers generally, such as unfavorable government actions, and political or financial instability.
Market and Credit Risk: Securities markets may be volatile and the market prices of the Fund’s securities may decline. Securities fluctuate in price based on changes in an issuer’s
30 |
financial condition and overall market and economic conditions. If the market prices of the securities owned by the Fund fall, the value of an investment in the Fund will decline. Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
Risks of Investing in Real Estate Investment Trusts (REITs): Real estate securities are subject to similar risks as direct investments in real estate and mortgages, and their value will depend on the value of the underlying properties or the underlying loans or interests. The underlying loans may be subject to the risks of default or of payments that occur earlier or later than expected, and such loans may also include so-called “subprime” mortgages. The value of these securities will rise and fall in response to many factors, Including economic conditions, the demand for rental property and interest rates. In particular, the value of these securities may decline when interest rates rise and will also be affected by the real estate market and by the management of the underlying properties.
In addition, investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the quality of any credit extended. REITs are dependent upon management skills, may not be diversified geographically or by property/mortgage asset type, and are subject to heavy cash flow dependency, default by borrowers and self-liquidation. Since REITs are relatively smaller in size when compared to the broader market, and smaller companies tend to be more volatile than larger companies, they may be more volatile and/or more illiquid than other types of equity securities. REITs (especially mortgage REITs) are subject to interest rate risks. REITs may incur significant amounts of leverage. The Fund will indirectly bear a portion of the expenses, including management fees, paid by each REIT in which it invests, in addition to the expenses of the Fund.
10. Recent Accounting Pronouncements and Reporting Updates
In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, which changes certain fair value measurement disclosure requirements. The new ASU, in addition to other modifications and additions, removes the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, and the Fund’s policy for the timing of transfers between levels. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has evaluated the implications of certain provisions of the ASU and has determined to early adopt aspects related to the removal and modification of certain fair value measurement disclosures under the ASU effective immediately. At this time, management is evaluating the implications of certain other provisions of the ASU related to new disclosure requirements and any impact on the financial statement disclosures has not yet been determined.
PGIM US Real Estate Fund | 31 |
Financial Highlights (unaudited)
Class A Shares | ||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | |||||||||||||||||||||||||||
2018 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $11.05 | $12.01 | $13.71 | $14.80 | $ 12.78 | $12.86 | ||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.09 | 0.18 | 0.06 | 0.21 | 0.15 | 0.10 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 1.22 | (0.41 | ) | 0.07 | (0.11 | ) | 2.74 | 0.39 | ||||||||||||||||||||
Total from investment operations | 1.31 | (0.23 | ) | 0.13 | 0.10 | 2.89 | 0.49 | |||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.08 | ) | (0.13 | ) | (0.27 | ) | (0.14 | ) | (0.13 | ) | (0.10 | ) | ||||||||||||||||
Distributions from net realized gains | - | (0.60 | ) | (1.56 | ) | (1.05 | ) | (0.74 | ) | (0.47 | ) | |||||||||||||||||
Total dividends and distributions | (0.08 | ) | (0.73 | ) | (1.83 | ) | (1.19 | ) | (0.87 | ) | (0.57 | ) | ||||||||||||||||
Net asset value, end of period | $12.28 | $11.05 | $12.01 | $13.71 | $ 14.80 | $12.78 | ||||||||||||||||||||||
Total Return(b): | 11.88% | (2.36)% | 1.01% | 1.28% | 23.06% | 4.20% | ||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000) | $4,681 | $3,938 | $4,863 | $5,013 | $ 6,502 | $3,080 | ||||||||||||||||||||||
Average net assets (000) | $4,167 | $4,492 | $5,555 | $4,850 | $ 4,728 | $2,687 | ||||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.25% | (d) | 1.25% | 1.34% | 1.61% | (e) | 1.60% | 1.60% | ||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 2.39% | (d) | 2.22% | (f) | 1.92% | 1.73% | (e) | 1.85% | 2.05% | |||||||||||||||||||
Net investment income (loss) | 1.53% | (d) | 1.49% | 0.43% | 1.53% | 1.06% | 0.79% | |||||||||||||||||||||
Portfolio turnover rate(g) | 77% | (h) | 92% | 122% | 156% | 98% | 66% |
(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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(c) | Does not include expenses of the underlying funds in which the Fund invests. |
(d) | Annualized. |
(e) | Includes 0.01% of loan interest expense. |
(f) | Effective January 1, 2018, class specific expenses include Transfer Agent Fees and expenses and Registration Fees, which are charged to their respective share class. |
(g) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(h) | Not annualized. |
See Notes to Financial Statements.
32 |
Class B Shares | ||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | |||||||||||||||||||||||||||
2018 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.83 | $11.81 | $13.51 | $14.62 | $12.67 | $12.78 | ||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.04 | 0.08 | (0.04 | ) | 0.11 | 0.05 | 0.03 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 1.20 | (0.39 | ) | 0.07 | (0.11 | ) | 2.69 | 0.37 | ||||||||||||||||||||
Total from investment operations | 1.24 | (0.31 | ) | 0.03 | - | 2.74 | 0.40 | |||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.03 | ) | (0.07 | ) | (0.17 | ) | (0.06 | ) | (0.05 | ) | (0.04 | ) | ||||||||||||||||
Distributions from net realized gains | - | (0.60 | ) | (1.56 | ) | (1.05 | ) | (0.74 | ) | (0.47 | ) | |||||||||||||||||
Total dividends and distributions | (0.03 | ) | (0.67 | ) | (1.73 | ) | (1.11 | ) | (0.79 | ) | (0.51 | ) | ||||||||||||||||
Net asset value, end of period | $12.04 | $10.83 | $11.81 | $13.51 | $14.62 | $12.67 | ||||||||||||||||||||||
Total Return(b): | 11.49% | (3.11)% | 0.26% | 0.52% | 22.05% | 3.53% | ||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000) | $621 | $768 | $1,089 | $1,276 | $1,814 | $1,067 | ||||||||||||||||||||||
Average net assets (000) | $698 | $975 | $1,240 | $1,443 | $1,480 | $1,244 | ||||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 2.00% | (d) | 2.00% | 2.09% | 2.36% | (e) | 2.35% | 2.35% | ||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 4.87% | (d) | 3.21% | (f) | 2.61% | 2.43% | (e) | 2.55% | 2.73% | |||||||||||||||||||
Net investment income (loss) | 0.70% | (d) | 0.72% | (0.35)% | 0.80% | 0.35% | 0.21% | |||||||||||||||||||||
Portfolio turnover rate(g) | 77% | (h) | 92% | 122% | 156% | 98% | 66% |
(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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(c) | Does not include expenses of the underlying funds in which the Fund invests. |
(d) | Annualized. |
(e) | Includes 0.01% of loan interest expense. |
(f) | Effective January 1, 2018, class specific expenses include Transfer Agent Fees and expenses and Registration Fees, which are charged to their respective share class. |
(g) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(h) | Not annualized. |
See Notes to Financial Statements.
PGIM US Real Estate Fund | 33 |
Financial Highlights (unaudited) (continued)
Class C Shares | ||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | |||||||||||||||||||||||||||
2018 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.81 | $11.79 | $13.49 | $14.60 | $12.65 | $12.76 | ||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.04 | 0.08 | (0.05 | ) | 0.11 | 0.04 | 0.02 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 1.19 | (0.39 | ) | 0.08 | (0.11 | ) | 2.70 | 0.38 | ||||||||||||||||||||
Total from investment operations | 1.23 | (0.31 | ) | 0.03 | - | 2.74 | 0.40 | |||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.03 | ) | (0.07 | ) | (0.17 | ) | (0.06 | ) | (0.05 | ) | (0.04 | ) | ||||||||||||||||
Distributions from net realized gains | - | (0.60 | ) | (1.56 | ) | (1.05 | ) | (0.74 | ) | (0.47 | ) | |||||||||||||||||
Total dividends and distributions | (0.03 | ) | (0.67 | ) | (1.73 | ) | (1.11 | ) | (0.79 | ) | (0.51 | ) | ||||||||||||||||
Net asset value, end of period | $12.01 | $10.81 | $11.79 | $13.49 | $14.60 | $12.65 | ||||||||||||||||||||||
Total Return(b): | 11.42% | (3.11)% | 0.26% | 0.53% | 22.09% | 3.54% | ||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000) | $923 | $949 | $1,536 | $1,491 | $1,769 | $854 | ||||||||||||||||||||||
Average net assets (000) | $939 | $1,294 | $1,669 | $1,543 | $1,244 | $824 | ||||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 2.00% | (d) | 2.00% | 2.08% | 2.36% | (e) | 2.35% | 2.35% | ||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 4.22% | (d) | 3.10% | (f) | 2.62% | 2.43% | (e) | 2.55% | 2.75% | |||||||||||||||||||
Net investment income (loss) | 0.72% | (d) | 0.69% | (0.39)% | 0.80% | 0.31% | 0.12% | |||||||||||||||||||||
Portfolio turnover rate(g) | 77% | (h) | 92% | 122% | 156% | 98% | 66% |
(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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(c) | Does not include expenses of the underlying funds in which the Fund invests. |
(d) | Annualized. |
(e) | Includes 0.01% of loan interest expense. |
(f) | Effective January 1, 2018, class specific expenses include Transfer Agent Fees and expenses and Registration Fees, which are charged to their respective share class. |
(g) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(h) | Not annualized. |
See Notes to Financial Statements.
34 |
Class Z Shares | ||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | |||||||||||||||||||||||||||
2018 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $11.07 | $12.02 | $13.72 | $14.80 | $12.79 | $12.86 | ||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.10 | 0.21 | 0.08 | 0.26 | 0.19 | 0.14 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 1.22 | (0.40 | ) | 0.09 | (0.12 | ) | 2.72 | 0.39 | ||||||||||||||||||||
Total from investment operations | 1.32 | (0.19 | ) | 0.17 | 0.14 | 2.91 | 0.53 | |||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.09 | ) | (0.16 | ) | (0.31 | ) | (0.17 | ) | (0.16 | ) | (0.13 | ) | ||||||||||||||||
Distributions from net realized gains | - | (0.60 | ) | (1.56 | ) | (1.05 | ) | (0.74 | ) | (0.47 | ) | |||||||||||||||||
Total dividends and distributions | (0.09 | ) | (0.76 | ) | (1.87 | ) | (1.22 | ) | (0.90 | ) | (0.60 | ) | ||||||||||||||||
Net asset value, end of period | $12.30 | $11.07 | $12.02 | $13.72 | $14.80 | $12.79 | ||||||||||||||||||||||
Total Return(b): | 12.01% | (2.09)% | 1.26% | 1.56% | 23.27% | 4.55% | ||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000) | $17,177 | $15,422 | $16,397 | $35,941 | $35,218 | $28,037 | ||||||||||||||||||||||
Average net assets (000) | $16,496 | $16,394 | $22,153 | $36,976 | $29,979 | $21,876 | ||||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.00% | (d) | 1.00% | 1.13% | 1.36% | (e) | 1.35% | 1.35% | ||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.56% | (d) | 1.80% | (f) | 1.56% | 1.43% | (e) | 1.55% | 1.74% | |||||||||||||||||||
Net investment income (loss) | 1.76% | (d) | 1.76% | 0.63% | 1.90% | 1.34% | 1.08% | |||||||||||||||||||||
Portfolio turnover rate(g) | 77% | (h) | 92% | 122% | 156% | 98% | 66% |
(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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(c) | Does not include expenses of the underlying funds in which the Fund invests. |
(d) | Annualized. |
(e) | Includes 0.01% of loan interest expense. |
(f) | Effective January 1, 2018, class specific expenses include Transfer Agent Fees and expenses and Registration Fees, which are charged to their respective share class. |
(g) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(h) | Not annualized. |
See Notes to Financial Statements.
PGIM US Real Estate Fund | 35 |
Financial Highlights (unaudited) (continued)
Class R6 Shares | ||||||||||||
Six Months Ended September 30, 2018 | May 25, 2017(a) through March 31, 2018 | |||||||||||
Per Share Operating Performance(b): | ||||||||||||
Net Asset Value, Beginning of Period | $11.06 | $12.16 | ||||||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income (loss) | 0.10 | 0.20 | ||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 1.22 | (0.54 | ) | |||||||||
Total from investment operations | 1.32 | (0.34 | ) | |||||||||
Less Dividends and Distributions: | ||||||||||||
Dividends from net investment income | (0.09 | ) | (0.16 | ) | ||||||||
Distributions from net realized gains | - | (0.60 | ) | |||||||||
Total dividends and distributions | (0.09 | ) | (0.76 | ) | ||||||||
Net asset value, end of period | $12.29 | $11.06 | ||||||||||
Total Return(c): | 12.02% | (3.31)% | ||||||||||
Ratios/Supplemental Data: | ||||||||||||
Net assets, end of period (000) | $11 | $10 | ||||||||||
Average net assets (000) | $10 | $10 | ||||||||||
Ratios to average net assets(d): | ||||||||||||
Expenses after waivers and/or expense reimbursement | 1.00% | (e) | 1.00% | (e) | ||||||||
Expenses before waivers and/or expense reimbursement | 116.14% | (e) | 115.13% | (e)(f) | ||||||||
Net investment income (loss) | 1.76% | (e) | 1.93% | (e) | ||||||||
Portfolio turnover rate(g) | 77% | (h) | 92% | (h) |
(a) | Commencement of offering. |
(b) | Calculated based on average shares outstanding during the period. |
(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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | Annualized. |
(f) | Effective January 1, 2018, class specific expenses include Transfer Agent Fees and expenses and Registration Fees, which are charged to their respective share class. |
(g) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(h) | Not annualized. |
See Notes to Financial Statements.
36 |
Approval of Advisory Agreements (unaudited)
The Fund’s Board of Trustees
The Board of Trustees (the “Board”) of PGIM US Real Estate Fund (the “Fund”)1 consists of twelve individuals, nine of whom are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Trustees”). The Board is responsible for the oversight of the Fund and its operations, and performs the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Trustees have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Trustee. The Board has established four standing committees: the Audit Committee, the Nominating and Governance Committee, and two Investment Committees. Each committee is chaired by, and composed of, Independent Trustees.
Annual Approval of the Fund’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Fund’s management agreement with PGIM Investments LLC (“PGIM Investments”) and the Fund’s subadvisory agreement with PGIM, Inc. (“PGIM”), on behalf of its PGIM Real Estate unit. In considering the renewal of the agreements, the Board, including all of the Independent Trustees, met on June 7, 2018 and on June 19-21, 2018 and approved the renewal of the agreements through July 31, 2019, after concluding that the renewal of the agreements was in the best interests of the Fund and its shareholders.
In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with its consideration. Among other things, the Board considered comparative fee information from PGIM Investments and PGIM. Also, the Board considered comparisons with other mutual funds in relevant Peer Universes and Peer Groups, as is further discussed below.
In approving the agreements, the Board, including the Independent Trustees advised by independent legal counsel, considered the factors it deemed relevant, including the nature, quality and extent of services provided by PGIM Investments and the subadviser, the performance of the Fund, the profitability of PGIM Investments and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Fund and its shareholders as the Fund’s assets grow. In their deliberations, the Trustees did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund. In connection with its deliberations, the Board considered information provided by PGIM Investments throughout the year at regular Board
1 | PGIM US Real Estate Fund is a series of Prudential Investment Portfolios 12. |
PGIM US Real Estate Fund |
Approval of Advisory Agreements (continued)
meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the meetings on June 7, 2018 and on June 19-21, 2018.
The Trustees determined that the overall arrangements between the Fund and PGIM Investments, which serves as the Fund’s investment manager pursuant to a management agreement, and between PGIM Investments and PGIM, which, through its PGIM Real Estate unit, serves as the Fund’s subadviser pursuant to the terms of a subadvisory agreement with PGIM Investments, are in the best interests of the Fund and its shareholders in light of the services performed, fees charged and such other matters as the Trustees considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Trustees’ reaching their determinations to approve the continuance of the agreements are separately discussed below.
Nature, Quality and Extent of Services
The Board received and considered information regarding the nature, quality and extent of services provided to the Fund by PGIM Investments and PGIM Real Estate. The Board considered the services provided by PGIM Investments, including but not limited to the oversight of the subadviser for the Fund, as well as the provision of fund recordkeeping, compliance, and other services to the Fund. With respect to PGIM Investments’ oversight of the subadviser, the Board noted that PGIM Investments’ Strategic Investment Research Group (“SIRG”), which is a business unit of PGIM Investments, is responsible for monitoring and reporting to PGIM Investments’ senior management on the performance and operations of the subadviser. The Board also considered that PGIM Investments pays the salaries of all of the officers and interested Trustees of the Fund who are part of Fund management. The Board also considered the investment subadvisory services provided by PGIM Real Estate, including investment research and security selection, as well as adherence to the Fund’s investment restrictions and compliance with applicable Fund policies and procedures. The Board considered PGIM Investments’ evaluation of the subadviser, as well as PGIM Investments’ recommendation, based on its review of the subadviser, to renew the subadvisory agreement.
The Board considered the qualifications, backgrounds and responsibilities of PGIM Investments’ senior management responsible for the oversight of the Fund and PGIM Real Estate, and also considered the qualifications, backgrounds and responsibilities of PGIM Real Estate’s portfolio managers who are responsible for the day-to-day management of the Fund’s portfolio. The Board was provided with information pertaining to PGIM Investments’ and PGIM Real Estate’s organizational structure, senior management, investment
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operations, and other relevant information pertaining to PGIM Investments and PGIM Real Estate. The Board also noted that it received favorable compliance reports from the Fund’s Chief Compliance Officer (“CCO”) as to PGIM Investments and PGIM Real Estate. The Board noted that PGIM Real Estate is affiliated with PGIM Investments.
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PGIM Investments and the subadvisory services provided to the Fund by PGIM Real Estate, and that there was a reasonable basis on which to conclude that the Fund benefits from the services provided by PGIM Investments and PGIM Real Estate under the management and subadvisory agreements.
Costs of Services and Profits Realized by PGIM Investments
The Board was provided with information on the profitability of PGIM Investments and its affiliates in serving as the Fund’s investment manager. The Board discussed with PGIM Investments the methodology utilized in assembling the information regarding profitability and considered its reasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure and cost of capital. However, the Board considered that the cost of services provided by PGIM Investments exceeded the management fees received by PGIM Investments, resulting in an operating loss to PGIM Investments for the year ended December 31, 2017. Taking these factors into account, the Board concluded that the profitability of PGIM Investments and its affiliates in relation to the services rendered was not unreasonable.
Economies of Scale
The Board received and discussed information concerning economies of scale that PGIM Investments may realize as the Fund’s assets grow beyond current levels. The Board noted that the management fee schedule for the Fund includes breakpoints, which have the effect of decreasing the fee rate as assets increase. During the course of time, the Board has considered information regarding the launch date of the Fund, the management fees of the Fund compared to those of similarly managed funds and PGIM Investments’ investment in the Fund over time. The Board noted that economies of scale may be shared with the Fund in several ways, including low management fees from inception, additional technological and personnel investments to enhance shareholder services, and maintaining existing expense structures in the face of a rising cost environment. The Board considered PGIM Investments’ assertion that it continually evaluates the management fee schedule of the Fund and the potential to share economies of scale through breakpoints or fee waivers as asset levels increase.
PGIM US Real Estate Fund |
Approval of Advisory Agreements (continued)
The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of PGIM Investments’ costs are not specific to individual funds, but rather are incurred across a variety of products and services.
Other Benefits to PGIM Investments and PGIM Real Estate
The Board considered potential ancillary benefits that might be received by PGIM Investments and PGIM Real Estate and their affiliates as a result of their relationship with the Fund. The Board concluded that potential benefits to be derived by PGIM Investments included transfer agency fees received by the Fund’s transfer agent (which is affiliated with PGIM Investments), and benefits to its reputation as well as other intangible benefits resulting from PGIM Investments’ association with the Fund. The Board concluded that the potential benefits to be derived by PGIM Real Estate included its ability to use soft dollar credits, as well as the potential benefits consistent with those generally resulting from an increase in assets under management, specifically, potential access to additional research resources and benefits to its reputation. The Board concluded that the benefits derived by PGIM Investments and PGIM Real Estate were consistent with the types of benefits generally derived by investment managers and subadvisers to mutual funds.
Performance of the Fund / Fees and Expenses
The Board considered certain additional specific factors and made related conclusions relating to the historical performance of the Fund for the one-, three-, and five-year periods ended December 31, 2017.
The Board also considered the Fund’s actual management fee, as well as the Fund’s net total expense ratio, for the fiscal year ended March 31, 2017. The Board considered the management fee for the Fund as compared to the management fee charged by PGIM Investments to other funds and the fee charged by other advisers to comparable mutual funds in a Peer Group. The actual management fee represents the fee rate actually paid by Fund shareholders and includes any fee waivers or reimbursements. The net total expense ratio for the Fund represents the actual expense ratio incurred by Fund shareholders.
The mutual funds included in the Peer Universe, which was used to consider performance, and the Peer Group, which was used to consider fees and expenses, were objectively determined by Broadridge, an independent provider of mutual fund data. In certain circumstances, PGIM Investments also may have provided supplemental Peer Universe or Peer Group information for reasons addressed with the Board. The comparisons placed the Fund in various quartiles, with the first quartile being the best 25% of the mutual funds (for performance, the best performing mutual funds and, for expenses, the lowest cost mutual funds).
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The section below summarizes key factors considered by the Board and the Board’s conclusions regarding the Fund’s performance, fees and overall expenses. The table sets forth gross performance comparisons (which do not reflect the impact on performance of fund expenses, or any subsidies, expense caps or waivers that may be applicable) with the Peer Universe, actual management fees with the Peer Group (which reflect the impact of any subsidies or fee waivers), and net total expenses with the Peer Group, each of which were key factors considered by the Board.
Gross Performance | 1 Year | 3 Years | 5 Years | 10 Years | ||||
2nd Quartile | 3rd Quartile | 2nd Quartile | N/A | |||||
Actual Management Fees: 1st Quartile | ||||||||
Net Total Expenses: 4th Quartile |
• | The Board noted that the Fund outperformed its benchmark index over the one- and five-year periods, though it underperformed over the three-year period. |
• | The Board and PGIM Investments agreed to retain the Fund’s existing contractual expense cap, which caps the Fund’s annual operating expenses at 1.25% for Class A shares, 2.00% for Class B shares, 2.00% for Class C shares, 1.00% for Class Z shares and 1.00% for Class R6 shares through July 31, 2019. |
• | The Board noted PGIM Investments’ assertion that if the expense cap, which went into effect on July 1, 2016, had been in effect for the full fiscal year, the Fund’s net total expense ratio would have ranked in the first quartile of its Peer Group. |
• | The Board concluded that, in light of the above, it would be in the best interests of the Fund and its shareholders to renew the agreements. |
• | The Board concluded that the management fees (including subadvisory fees) and total expenses were reasonable in light of the services provided. |
* * *
After full consideration of these factors, the Board concluded that the approval of the agreements was in the best interests of the Fund and its shareholders.
PGIM US Real Estate Fund |
∎ TELEPHONE | ∎ WEBSITE | |||
655 Broad Street Newark, NJ 07102 | (800) 225-1852 | www.pgiminvestments.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 |
Ellen S. Alberding • Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Barry H. Evans • Keith F. Hartstein • Laurie Simon Hodrick • Michael S. Hyland • Stuart S. Parker • Richard A. Redeker • Brian K. Reid • Grace C. Torres |
OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • Brian D. Nee, Treasurer and Principal Financial and Accounting Officer • Raymond A. O’Hara, Chief Legal Officer • Andrew R. French, Secretary • Chad A. Earnst, Chief Compliance Officer • Dino Capasso, Vice President and Deputy Chief Compliance Officer • Charles H. Smith, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • Peter Parrella, Assistant Treasurer • Lana Lomuti, Assistant Treasurer • Linda McMullin, Assistant Treasurer • Kelly A. Coyne, Assistant Treasurer |
MANAGER | PGIM Investments LLC | 655 Broad Street Newark, NJ 07102 | ||
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INVESTMENT SUBADVISER | PGIM Real Estate | 7 Giralda Farms Madison, NJ 07940 | ||
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DISTRIBUTOR | Prudential Investment Management Services LLC | 655 Broad Street Newark, NJ 07102 | ||
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CUSTODIAN | The Bank of New York Mellon | 225 Liberty Street New York, NY 10286 | ||
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TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
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FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 | ||
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An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.pgiminvestments.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.pgiminvestments.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, PGIM US Real Estate Fund, PGIM Investments, Attn: Board of Trustees, 655 Broad Street, 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 schedule of portfolio holdings is also available on the Fund’s website as of the end of each month no sooner than 15 days after the end of the 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 |
PGIM US REAL ESTATE FUND
SHARE CLASS | A | B | C | Z | R6* | |||||
NASDAQ | PJEAX | PJEBX | PJECX | PJEZX | PJEQX | |||||
CUSIP | 744336603 | 744336702 | 744336801 | 744336884 | 744336751 |
*Formerly known as Class Q shares.
MF209E2
PGIM QMA LONG-SHORT EQUITY FUND
(Formerly known as Prudential QMA Long-Short Equity Fund)
SEMIANNUAL REPORT
SEPTEMBER 30, 2018
To enroll in e-delivery, go to pgiminvestments.com/edelivery
Objective: Long-term capital appreciation |
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The information about the Fund’s portfolio holdings is for the period covered by this report and is subject to change thereafter.
The accompanying financial statements as of September 30, 2018 were not audited and, accordingly, no auditor’s opinion is expressed on them.
Mutual funds are distributed by Prudential Investment Management Services LLC, a Prudential Financial company and member SIPC. QMA is the primary business name of Quantitative Management Associates LLC, a registered investment adviser and a wholly owned subsidiary of PGIM, Inc. (PGIM), a Prudential Financial company. © 2018 Prudential Financial, Inc. and its related entities. PGIM and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
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PGIM FUNDS — UPDATE
The Board of Directors/Trustees for the Fund has approved the implementation of an automatic conversion feature for Class C shares, effective as of April 1, 2019. To reflect these changes, effective April 1, 2019, the section of the Fund’s Prospectus entitled “How to Buy, Sell and Exchange Fund Shares—How to Exchange Your Shares—Frequent Purchases and Redemptions of Fund Shares” is restated to read as follows:
This supplement should be read in conjunction with your Summary Prospectus, Statutory Prospectus and Statement of Additional Information, be retained for future reference and is in addition to any existing Fund supplements.
1. | In each Fund’s Statutory Prospectus, the following is added at the end of the section entitled “Fund Distributions And Tax Issues—If You Sell or Exchange Your Shares”: |
Automatic Conversion of Class C Shares
The conversion of Class C shares into Class A shares—which happens automatically approximately 10 years after purchase—is not a taxable event for federal income tax purposes. For more information about the automatic conversion of Class C shares, see Class C Shares Automatically Convert to Class A Shares in How to Buy, Sell and Exchange Fund Shares.
2. | In each Fund’s Statutory Prospectus, the following sentence is added at the end of the section entitled “How to Buy, Sell and Exchange Shares—Closure of Certain Share Classes to New Group Retirement Plans”: |
Shareholders owning Class C shares may continue to hold their Class C shares until the shares automatically convert to Class A shares under the conversion schedule, or until the shareholder redeems their Class C shares.
3. | In each Fund’s Statutory Prospectus, the following disclosure is added immediately following the section entitled “How to Buy, Sell and Exchange Shares—How to Buy Shares—Class B Shares Automatically Convert to Class A Shares”: |
Class C Shares Automatically Convert to Class A Shares
Starting on or about April 1, 2019 (the “Effective Date”), Class C shares will be eligible for automatic conversion into Class A shares on a monthly basis approximately ten years after the original date of purchase (the “Conversion Date”). Conversion will take place based on the relative NAV of the two classes, without the imposition of any sales load, fee or other charge. All such automatic conversions of Class C shares will constitute tax-free exchanges for federal income tax purposes.
For shareholders investing in Class C shares through retirement plans or omnibus accounts, and in certain other instances, the Fund and its agents may not have
PGIM QMA Long-Short Equity Fund | 3 |
transparency into how long a shareholder has held Class C shares for purposes of determining whether such Class C shares are eligible for automatic conversion into Class A shares, and the relevant financial intermediary may not have the ability to track purchases in order to credit individual shareholders’ holding periods. In these circumstances, the Fund will not be able to automatically convert Class C shares into Class A shares as described above. In order to determine eligibility for conversion in these circumstances, it is the responsibility of the financial intermediary to notify the Fund that the shareholder is eligible for the conversion of Class C shares to Class A shares, and the financial intermediary may be required to maintain and provide the Fund with records that substantiate the holding period of Class C shares. It is the financial intermediary’s (and not the Fund’s) responsibility to keep records of transactions made in accounts it holds and to ensure that the shareholder is credited with the proper holding period based on such records or those provided to the financial intermediary by the shareholder. Please consult with your financial intermediary for the applicability of this conversion feature to your shares.
A financial intermediary may sponsor and/or control accounts, programs or platforms that impose a different conversion schedule or different eligibility requirements for the exchange of Class C shares for Class A shares (see Appendix A: Waivers and Discounts Available From Certain Financial Intermediaries of the Prospectus). Please consult with your financial intermediary if you have any questions regarding your shares’ conversion from Class C shares to Class A shares.
4. | In Part II of each Fund’s Statement of Additional Information, the following disclosure is added immediately following the section entitled “Purchase, Redemption and Pricing of Fund Shares—Share Classes—Automatic Conversion of Class B Shares”: |
AUTOMATIC CONVERSION OF CLASS C SHARES. Starting on or about April 1, 2019 (the “Effective Date”), Class C shares will be eligible for automatic conversion into Class A shares on a monthly basis approximately ten years after the original date of purchase (the “Conversion Date”). Conversion will take place based on the relative NAV of the two classes, without the imposition of any sales load, fee or other charge. Class C shares of a Fund acquired through automatic reinvestment of dividends or distributions will convert to Class A shares of the Fund on the Conversion Date pro rata with the converting Class C shares of the Fund that were not acquired through reinvestment of dividends or distributions. All such automatic conversions of Class C shares will constitute tax-free exchanges for federal income tax purposes.
For shareholders investing in Class C shares through retirement plans or omnibus accounts, and in certain other instances, the Fund and its agents may not have transparency into how long a shareholder has held Class C shares for purposes of determining whether such Class C shares are eligible for automatic conversion into Class A shares, and the relevant financial intermediary may not have the ability to track purchases in order to credit individual shareholders’ holding periods. In these circumstances, the
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Fund will not be able to automatically convert Class C shares into Class A shares as described above. In order to determine eligibility for conversion in these circumstances, it is the responsibility of the financial intermediary to notify the Fund that the shareholder is eligible for the conversion of Class C shares to Class A shares, and the financial intermediary may be required to maintain and provide the Fund with records that substantiate the holding period of Class C shares. It is the financial intermediary’s (and not the Fund’s) responsibility to keep records of transactions made in accounts it holds and to ensure that the shareholder is credited with the proper holding period based on such records or those provided to the financial intermediary by the shareholder. Please consult with your financial intermediary for the applicability of this conversion feature to your shares.
Class C shares were generally closed to investments by new group retirement plans effective June 1, 2018. Group retirement plans (and their successor, related and affiliated plans) that have Class C shares of the Fund available to participants on or before the Effective Date may continue to open accounts for new participants in such share class and purchase additional shares in existing participant accounts.
The Fund has no responsibility for monitoring or implementing a financial intermediary’s process for determining whether a shareholder meets the required holding period for conversion. A financial intermediary may sponsor and/or control accounts, programs or platforms that impose a different conversion schedule or different eligibility requirements for the exchange of Class C shares for Class A shares, as set forth on Appendix A: Waivers and Discounts Available From Certain Financial Intermediaries of the Prospectus. In these cases, Class C shareholders may have their shares exchanged for Class A shares under the policies of the financial intermediary. Financial intermediaries will be responsible for making such exchanges in those circumstances. Please consult with your financial intermediary if you have any questions regarding your shares’ conversion from Class C shares to Class A shares.
LR1094
- Not part of the Semiannual Report -
PGIM QMA Long-Short Equity Fund | 5 |
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Dear Shareholder:
We hope you find the semiannual report for the PGIM QMA Long-Short Equity Fund informative and useful. The report covers performance for the six-month period ended September 30, 2018.
We have important information to share with you. Effective June 11, 2018, Prudential Mutual Funds were renamed PGIM Funds. This renaming is part of our ongoing effort to further build our reputation and establish our global brand, which began when our firm adopted PGIM Investments as its name in April 2017. Please note that only the Fund’s name has changed. Your Fund’s management and operation, along with its symbols, remained the same.*
Regarding your investments with PGIM, we believe it is important 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. However, diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
At PGIM Investments, we consider it a great privilege and responsibility to help investors participate in opportunities across global markets while meeting their toughest investment challenges. PGIM is a top-10 global investment manager with more than $1 trillion in assets under management. This investment expertise allows us to deliver actively managed funds and strategies to meet the needs of investors around the globe.
Thank you for choosing our family of funds.
Sincerely,
Stuart Parker, President
PGIM QMA Long-Short Equity Fund
November 15, 2018
*The Prudential Day One Funds did not change their names.
PGIM QMA Long-Short Equity Fund | 7 |
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.pgiminvestments.com or by calling (800) 225-1852.
Total Returns as of 9/30/18 (without sales charges) | Average Annual Total Returns as of 9/30/18 (with sales charges) | |||||
Six Months* (%) | One Year (%) | Since Inception (%) | ||||
Class A | 3.03 | –1.07 | 5.40 (5/29/14) | |||
Class C | 2.62 | 2.90 | 5.98 (5/29/14) | |||
Class Z | 3.15 | 4.98 | 7.04 (5/29/14) | |||
Class R6** | 3.15 | 4.98 | 6.71 (5/25/17) | |||
S&P 500 Index | ||||||
11.40 | 17.91 | — | ||||
Customized Blend Index | ||||||
6.08 | 9.56 | — | ||||
Lipper Alternative Long/Short Equity Funds Average | ||||||
3.90 | 5.94 | — |
*Not annualized
**Formerly known as Class Q shares.
Source: PGIM Investments LLC and Lipper Inc.
Since Inception returns are provided for any share class with less than 10 fiscal years of returns. Since Inception returns for the Indexes and the Lipper Average are measured from the closest month-end to the class’ inception date.
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The returns in the tables do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or following the redemption of Fund shares. The average annual total returns take into account applicable sales charges, which are described for each share class in the table below.
Class A | Class C | Class Z | Class R6* | |||||
Maximum initial sales charge | 5.50% of the public offering price | None | None | None | ||||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or net asset value at redemption) | 1.00% on sales of $1 million or more made within 12 months of purchase | 1.00% on sales made within 12 months of purchase | None | None | ||||
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | 0.30% (0.25% currently) | 1.00% | None | None |
*Formerly known as Class Q.
Benchmark Definitions
Customized Blend Index—The Customized Blend Index (the Index) is a model portfolio consisting of the S&P 500 Index (50%), which is unmanaged and provides a broad indicator of stock price movements, and the FTSE 3-Month Treasury Bill Index** (50%), which is unmanaged and represents monthly return equivalents of yield averages of the last three-month Treasury Bill issues. The average annual total return for the Index measured from the month-end closest to the inception date of the Fund’s Class A, C, and Z shares is 6.42% and 9.26% for Class R6 shares.
S&P 500 Index—The S&P 500 Index is an unmanaged index of over 500 stocks of large US public companies. It gives a broad look at how stock prices in the United States have performed. The average annual total return for the Index measured from the month-end closest to the inception date of the Fund’s Class A, C, and Z shares is 12.34% and 17.47% for Class R6 shares.
Lipper Alternative Long/Short Equity Funds Average—The Lipper Alternative Long/Short Equity Funds Average (Lipper Average) is based on an average return of all funds in the Lipper Alternative Long/Short Equity Funds universe for the periods noted. Funds in the Lipper Alternative Long/Short Equity Funds universe employ portfolio strategies combining long holdings of equities with short sales of equity, equity options, or equity index options. The average annual total return for the Average measured from the month-end closest to the inception date of the Fund’s Class A, C, and Z shares is 4.42% and 7.15% for Class R6 shares.
Investors cannot invest directly in an index or average. The returns for the Indexes would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses of a mutual fund, but not sales charges or taxes.
**Source: London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2018. FTSE Russell is a trading name of certain of the LSE Group companies. “FTSE®” and “FTSE Russell®” are trade mark(s) of
PGIM QMA Long-Short Equity Fund | 9 |
Your Fund’s Performance (continued)
the relevant LSE Group companies and is/are used by any other LSE Group company under license. “TMX®” is a trade mark of TSX, Inc. and used by the LSE Group under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.
Presentation of Fund Holdings
Five Largest Holdings—Long Positions* expressed as a percentage of net assets as of 9/30/18 (%) |
Alphabet, Inc., Internet Software & Services | 1.9 | |||
Facebook, Inc., Internet Software & Services | 1.8 | |||
Adobe Systems, Inc., Software | 1.7 | |||
Visa, Inc., IT Services | 1.7 | |||
UnitedHealth Group, Inc., Health Care Providers & Services | 1.6 |
Holdings reflect only long-term investments and are subject to change.
Five Largest Holdings—Short Positions** expressed as a percentage of net assets as of 9/30/18 (%) |
Square, Inc., IT Services | (1.6) | |||
DexCom, Inc., Health Care Equipment & Supplies | (1.4) | |||
Workday, Inc., Software | (1.2) | |||
Seattle Genetics, Inc., Biotechnology | (1.1) | |||
Gartner, Inc., IT Services | (1.1) |
Five Largest Industries expressed as a percentage of net assets as of 9/30/18 (%) | ||||
Health Care Equipment & Supplies | 7.1 | |||
Software | 7.0 | |||
Internet Software & Services | 5.7 | |||
Oil, Gas & Consumable Fuels | 5.6 | |||
Biotechnology | 4.9 |
Industry weightings reflect only long-term investments and are subject to change.
*A long position is defined as buying shares of stock with the expectation of profiting when the share price appreciates and the shares are sold.
**A short position is defined as borrowing shares of stock and then selling those shares with the expectation of profiting when the share price depreciates and those shares can be bought back at a cheaper price. Short positions in the Fund are expressed as a negative percentage of net assets.
10 | Visit our website at pgiminvestments.com |
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 held through the six-month period ended September 30, 2018. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of PGIM 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
PGIM QMA Long-Short Equity Fund | 11 |
Fees and Expenses (continued)
and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information provided in the expense table. Additional fees have the effect of reducing investment returns.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
PGIM QMA Long-Short Equity Fund | Beginning Account Value April 1, 2018 | Ending Account Value September 30, 2018 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,030.30 | 2.20 | % | $ | 11.20 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,014.04 | 2.20 | % | $ | 11.11 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,026.20 | 2.95 | % | $ | 14.98 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,010.28 | 2.95 | % | $ | 14.87 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,031.50 | 1.95 | % | $ | 9.93 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.29 | 1.95 | % | $ | 9.85 | ||||||||||
Class R6** | Actual | $ | 1,000.00 | $ | 1,031.50 | 1.96 | % | $ | 9.98 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.24 | 1.96 | % | $ | 9.90 |
*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 183 days in the six-month period ended September 30, 2018, and divided by the 365 days in the Fund’s fiscal year ending March 31, 2019 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
**Formerly known as Class Q shares.
12 | Visit our website at pgiminvestments.com |
Schedule of Investments (unaudited)
as of September 30, 2018
Description | Shares | Value | ||||||
LONG-TERM INVESTMENTS 98.8% | ||||||||
COMMON STOCKS | ||||||||
Aerospace & Defense 1.2% | ||||||||
Ducommun, Inc.* | 3,300 | $ | 134,772 | |||||
Lockheed Martin Corp. | 10,900 | 3,770,964 | ||||||
Moog, Inc. (Class A Stock) | 5,700 | 490,029 | ||||||
Raytheon Co. | 8,500 | 1,756,610 | ||||||
Vectrus, Inc.* | 8,100 | 252,639 | ||||||
Wesco Aircraft Holdings, Inc.* | 4,700 | 52,875 | ||||||
|
| |||||||
6,457,889 | ||||||||
Auto Components 0.5% | ||||||||
Cooper-Standard Holdings, Inc.* | 400 | 47,992 | ||||||
Tenneco, Inc. | 62,300 | 2,625,322 | ||||||
|
| |||||||
2,673,314 | ||||||||
Banks 2.5% | ||||||||
Citigroup, Inc. | 99,200 | 7,116,608 | ||||||
First BanCorp. (Puerto Rico)* | 21,300 | 193,830 | ||||||
JPMorgan Chase & Co. | 46,300 | 5,224,492 | ||||||
QCR Holdings, Inc. | 2,100 | 85,785 | ||||||
Synovus Financial Corp. | 14,900 | 682,271 | ||||||
|
| |||||||
13,302,986 | ||||||||
Beverages 1.3% | ||||||||
PepsiCo, Inc. | 63,400 | 7,088,120 | ||||||
Biotechnology 4.9% | ||||||||
Amgen, Inc. | 11,580 | 2,400,418 | ||||||
BioSpecifics Technologies Corp.* | 4,700 | 274,903 | ||||||
Celgene Corp.* | 73,100 | 6,541,719 | ||||||
Enanta Pharmaceuticals, Inc.* | 17,900 | 1,529,734 | ||||||
Genomic Health, Inc.* | 3,400 | 238,748 | ||||||
Gilead Sciences, Inc. | 84,600 | 6,531,966 | ||||||
Halozyme Therapeutics, Inc.* | 17,000 | 308,890 | ||||||
Incyte Corp.* | 23,900 | 1,651,012 | ||||||
Myriad Genetics, Inc.* | 7,600 | 349,600 | ||||||
United Therapeutics Corp.* | 4,700 | 601,036 | ||||||
Vertex Pharmaceuticals, Inc.* | 30,600 | 5,897,844 | ||||||
|
| |||||||
26,325,870 |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 13 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Building Products 1.0% | ||||||||
Armstrong World Industries, Inc.* | 5,200 | $ | 361,920 | |||||
Continental Building Products, Inc.* | 67,600 | 2,538,380 | ||||||
NCI Building Systems, Inc.* | 76,000 | 1,151,400 | ||||||
Patrick Industries, Inc.* | 12,550 | 742,960 | ||||||
Universal Forest Products, Inc. | 17,100 | 604,143 | ||||||
|
| |||||||
5,398,803 | ||||||||
Capital Markets 1.1% | ||||||||
Ameriprise Financial, Inc. | 36,300 | 5,360,058 | ||||||
Evercore, Inc. (Class A Stock) | 3,600 | 361,980 | ||||||
|
| |||||||
5,722,038 | ||||||||
Chemicals 2.0% | ||||||||
Celanese Corp. | 10,000 | 1,140,000 | ||||||
Chemours Co. (The) | 75,700 | 2,985,608 | ||||||
Huntsman Corp. | 32,800 | 893,144 | ||||||
Koppers Holdings, Inc.* | 19,000 | 591,850 | ||||||
LyondellBasell Industries NV (Class A Stock) | 6,600 | 676,566 | ||||||
Olin Corp. | 58,100 | 1,492,008 | ||||||
Sherwin-Williams Co. (The) | 2,300 | 1,046,983 | ||||||
Trinseo SA | 7,200 | 563,760 | ||||||
Westlake Chemical Corp. | 14,900 | 1,238,339 | ||||||
|
| |||||||
10,628,258 | ||||||||
Commercial Services & Supplies 0.1% | ||||||||
Quad/Graphics, Inc. | 16,300 | 339,692 | ||||||
Steelcase, Inc. (Class A Stock) | 11,600 | 214,600 | ||||||
|
| |||||||
554,292 | ||||||||
Communications Equipment 1.6% | ||||||||
CommScope Holding Co., Inc.* | 94,000 | 2,891,440 | ||||||
F5 Networks, Inc.* | 22,400 | 4,467,008 | ||||||
Plantronics, Inc. | 19,500 | 1,175,850 | ||||||
|
| |||||||
8,534,298 | ||||||||
Construction & Engineering 0.3% | ||||||||
EMCOR Group, Inc. | 21,900 | 1,644,909 | ||||||
Consumer Finance 1.8% | ||||||||
American Express Co. | 25,700 | 2,736,793 |
See Notes to Financial Statements.
14 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Consumer Finance (cont’d.) | ||||||||
Capital One Financial Corp. | 48,800 | $ | 4,632,584 | |||||
Green Dot Corp. (Class A Stock)* | 3,400 | 301,988 | ||||||
Navient Corp. | 106,100 | 1,430,228 | ||||||
OneMain Holdings, Inc.* | 16,600 | 557,926 | ||||||
Santander Consumer USA Holdings, Inc. | 8,400 | 168,336 | ||||||
|
| |||||||
9,827,855 | ||||||||
Containers & Packaging 0.6% | ||||||||
Greif, Inc. (Class A Stock) | 35,000 | 1,878,100 | ||||||
Owens-Illinois, Inc.* | 59,600 | 1,119,884 | ||||||
|
| |||||||
2,997,984 | ||||||||
Distributors 0.1% | ||||||||
Core-Mark Holding Co., Inc. | 4,900 | 166,404 | ||||||
LKQ Corp.* | 12,200 | 386,374 | ||||||
|
| |||||||
552,778 | ||||||||
Diversified Consumer Services 0.9% | ||||||||
Grand Canyon Education, Inc.* | 39,200 | 4,421,760 | ||||||
Service Corp. International | 13,400 | 592,280 | ||||||
|
| |||||||
5,014,040 | ||||||||
Diversified Telecommunication Services 2.8% | ||||||||
AT&T, Inc. | 212,200 | 7,125,676 | ||||||
Verizon Communications, Inc.(u) | 149,800 | 7,997,822 | ||||||
|
| |||||||
15,123,498 | ||||||||
Electrical Equipment 0.3% | ||||||||
Atkore International Group, Inc.* | 55,500 | 1,472,415 | ||||||
Electronic Equipment, Instruments & Components 1.6% | ||||||||
Anixter International, Inc.* | 5,300 | 372,590 | ||||||
Arrow Electronics, Inc.* | 14,200 | 1,046,824 | ||||||
CDW Corp. | 61,500 | 5,468,580 | ||||||
Insight Enterprises, Inc.* | 3,800 | 205,542 | ||||||
Jabil, Inc. | 13,400 | 362,872 | ||||||
PC Connection, Inc. | 7,700 | 299,453 |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 15 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Electronic Equipment, Instruments & Components (cont’d.) | ||||||||
SYNNEX Corp. | 10,600 | $ | 897,820 | |||||
Tech Data Corp.* | 2,900 | 207,553 | ||||||
|
| |||||||
8,861,234 | ||||||||
Energy Equipment & Services 0.8% | ||||||||
Archrock, Inc. | 178,700 | 2,180,140 | ||||||
Mammoth Energy Services, Inc. | 5,000 | 145,500 | ||||||
Superior Energy Services, Inc.* | 215,000 | 2,094,100 | ||||||
|
| |||||||
4,419,740 | ||||||||
Equity Real Estate Investment Trusts (REITs) 2.7% | ||||||||
Brixmor Property Group, Inc. | 29,600 | 518,296 | ||||||
Chesapeake Lodging Trust | 13,100 | 420,117 | ||||||
CoreCivic, Inc. | 28,700 | 698,271 | ||||||
DiamondRock Hospitality Co. | 25,600 | 298,752 | ||||||
Franklin Street Properties Corp. | 68,400 | 546,516 | ||||||
Gaming & Leisure Properties, Inc. | 26,700 | 941,175 | ||||||
GEO Group, Inc. (The) | 106,200 | 2,671,992 | ||||||
InfraREIT, Inc. | 9,000 | 190,350 | ||||||
Park Hotels & Resorts, Inc. | 21,400 | 702,348 | ||||||
Ryman Hospitality Properties, Inc. | 33,700 | 2,903,929 | ||||||
Spirit MTA REIT | 13,250 | 152,640 | ||||||
Spirit Realty Capital, Inc. | 132,500 | 1,067,950 | ||||||
VEREIT, Inc. | 161,500 | 1,172,490 | ||||||
WP Carey, Inc. | 12,400 | 797,444 | ||||||
Xenia Hotels & Resorts, Inc. | 68,800 | 1,630,560 | ||||||
|
| |||||||
14,712,830 | ||||||||
Food & Staples Retailing 0.2% | ||||||||
Kroger Co. (The) | 41,200 | 1,199,332 | ||||||
Food Products 1.0% | ||||||||
Archer-Daniels-Midland Co. | 86,900 | 4,368,463 | ||||||
Tyson Foods, Inc. (Class A Stock) | 17,300 | 1,029,869 | ||||||
|
| |||||||
5,398,332 | ||||||||
Gas Utilities 0.6% | ||||||||
UGI Corp. | 55,000 | 3,051,400 | ||||||
Health Care Equipment & Supplies 7.1% | ||||||||
Abbott Laboratories | 31,100 | 2,281,496 |
See Notes to Financial Statements.
16 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Health Care Equipment & Supplies (cont’d.) | ||||||||
Align Technology, Inc.*(u) | 20,800 | $ | 8,137,376 | |||||
Baxter International, Inc. | 31,800 | 2,451,462 | ||||||
Danaher Corp. | 41,000 | 4,455,060 | ||||||
DENTSPLY SIRONA, Inc. | 71,500 | 2,698,410 | ||||||
Edwards Lifesciences Corp.* | 19,100 | 3,325,310 | ||||||
Hill-Rom Holdings, Inc. | 9,200 | 868,480 | ||||||
IDEXX Laboratories, Inc.* | 23,200 | 5,792,112 | ||||||
Inogen, Inc.* | 3,800 | 927,656 | ||||||
Masimo Corp.* | 40,200 | 5,006,508 | ||||||
West Pharmaceutical Services, Inc. | 3,500 | 432,145 | ||||||
Zimmer Biomet Holdings, Inc. | 15,300 | 2,011,491 | ||||||
|
| |||||||
38,387,506 | ||||||||
Health Care Providers & Services 4.0% | ||||||||
Anthem, Inc. | 7,600 | 2,082,780 | ||||||
Express Scripts Holding Co.* | 61,400 | 5,833,614 | ||||||
Magellan Health, Inc.* | 7,200 | 518,760 | ||||||
MEDNAX, Inc.* | 3,200 | 149,312 | ||||||
Tenet Healthcare Corp.* | 55,000 | 1,565,300 | ||||||
UnitedHealth Group, Inc.(u) | 31,400 | 8,353,656 | ||||||
WellCare Health Plans, Inc.* | 9,300 | 2,980,557 | ||||||
|
| |||||||
21,483,979 | ||||||||
Health Care Technology 0.6% | ||||||||
athenahealth, Inc.* | 4,700 | 627,920 | ||||||
Cerner Corp.* | 8,000 | 515,280 | ||||||
HealthStream, Inc. | 15,100 | 468,251 | ||||||
Veeva Systems, Inc. (Class A Stock)* | 12,900 | 1,404,423 | ||||||
|
| |||||||
3,015,874 | ||||||||
Hotels, Restaurants & Leisure 1.1% | ||||||||
Bloomin’ Brands, Inc. | 58,400 | 1,155,736 | ||||||
Churchill Downs, Inc. | 800 | 222,160 | ||||||
Extended Stay America, Inc., UTS | 89,000 | 1,800,470 | ||||||
Hilton Grand Vacations, Inc.* | 38,300 | 1,267,730 | ||||||
Las Vegas Sands Corp. | 19,500 | 1,156,935 | ||||||
Ruth’s Hospitality Group, Inc. | 6,100 | 192,455 | ||||||
|
| |||||||
5,795,486 | ||||||||
Household Durables 0.8% | ||||||||
Cavco Industries, Inc.* | 2,400 | 607,200 |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 17 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Household Durables (cont’d.) | ||||||||
Meritage Homes Corp.* | �� | 41,900 | $ | 1,671,810 | ||||
NVR, Inc.* | 840 | 2,075,472 | ||||||
|
| |||||||
4,354,482 | ||||||||
Independent Power & Renewable Electricity Producers 1.9% | ||||||||
AES Corp. | 263,000 | 3,682,000 | ||||||
NRG Energy, Inc. | 167,300 | 6,257,020 | ||||||
|
| |||||||
9,939,020 | ||||||||
Industrial Conglomerates 1.3% | ||||||||
Honeywell International, Inc. | 42,700 | 7,105,280 | ||||||
Insurance 0.7% | ||||||||
American Equity Investment Life Holding Co. | 9,700 | 342,992 | ||||||
First American Financial Corp. | 10,300 | 531,377 | ||||||
Hanover Insurance Group, Inc. (The) | 3,300 | 407,121 | ||||||
MetLife, Inc. | 52,500 | 2,452,800 | ||||||
|
| |||||||
3,734,290 | ||||||||
Internet & Direct Marketing Retail 0.5% | ||||||||
1-800-Flowers.com, Inc. (Class A Stock)* | 50,500 | 595,900 | ||||||
Nutrisystem, Inc. | 37,200 | 1,378,260 | ||||||
Qurate Retail, Inc.* | 36,200 | 804,002 | ||||||
|
| |||||||
2,778,162 | ||||||||
Internet Software & Services 5.7% | ||||||||
Akamai Technologies, Inc.* | 20,100 | 1,470,315 | ||||||
Alphabet, Inc. (Class A Stock)* | 2,900 | 3,500,532 | ||||||
Alphabet, Inc. (Class C Stock)*(u) | 8,362 | 9,979,796 | ||||||
Blucora, Inc.* | 21,700 | 873,425 | ||||||
Envestnet, Inc.* | 7,900 | 481,505 | ||||||
Facebook, Inc. (Class A Stock)*(u) | 58,900 | 9,686,694 | ||||||
VeriSign, Inc.* | 25,800 | 4,131,096 | ||||||
XO Group, Inc.* | 20,200 | 696,496 | ||||||
|
| |||||||
30,819,859 | ||||||||
IT Services 4.1% | ||||||||
Automatic Data Processing, Inc. | 2,200 | 331,452 | ||||||
Booz Allen Hamilton Holding Corp. | 19,300 | 957,859 | ||||||
CACI International, Inc. (Class A Stock)* | 7,700 | 1,417,955 |
See Notes to Financial Statements.
18 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
IT Services (cont’d.) | ||||||||
Cognizant Technology Solutions Corp. (Class A Stock) | 66,900 | $ | 5,161,335 | |||||
DXC Technology Co. | 25,700 | 2,403,464 | ||||||
ExlService Holdings, Inc.* | 5,500 | 364,100 | ||||||
Hackett Group, Inc. (The) | 11,300 | 227,695 | ||||||
Leidos Holdings, Inc. | 19,200 | 1,327,872 | ||||||
MAXIMUS, Inc. | 3,600 | 234,216 | ||||||
Travelport Worldwide Ltd. | 41,500 | 700,105 | ||||||
Visa, Inc. (Class A Stock)(u) | 60,500 | 9,080,445 | ||||||
|
| |||||||
22,206,498 | ||||||||
Leisure Products 0.2% | ||||||||
Vista Outdoor, Inc.* | 46,300 | 828,307 | ||||||
Life Sciences Tools & Services 2.7% | ||||||||
Bruker Corp. | 47,300 | 1,582,185 | ||||||
Illumina, Inc.* | 19,800 | 7,267,788 | ||||||
Medpace Holdings, Inc.* | 14,600 | 874,686 | ||||||
Thermo Fisher Scientific, Inc. | 18,500 | 4,515,480 | ||||||
|
| |||||||
14,240,139 | ||||||||
Machinery 3.4% | ||||||||
Caterpillar, Inc. | 40,200 | 6,130,098 | ||||||
Cummins, Inc. | 32,900 | 4,805,703 | ||||||
Global Brass & Copper Holdings, Inc. | 16,000 | 590,400 | ||||||
Harsco Corp.* | 19,200 | 548,160 | ||||||
Milacron Holdings Corp.* | 30,800 | 623,700 | ||||||
Oshkosh Corp. | 35,300 | 2,514,772 | ||||||
SPX Corp.* | 31,400 | 1,045,934 | ||||||
Timken Co. (The) | 7,800 | 388,830 | ||||||
Wabash National Corp. | 74,900 | 1,365,427 | ||||||
|
| |||||||
18,013,024 | ||||||||
Media 0.7% | ||||||||
News Corp. (Class A Stock) | 32,300 | 426,037 | ||||||
TEGNA, Inc. | 23,300 | 278,668 | ||||||
Tribune Media Co. (Class A Stock) | 78,900 | 3,032,127 | ||||||
|
| |||||||
3,736,832 | ||||||||
Metals & Mining 2.3% | ||||||||
Alcoa Corp.* | 16,100 | 650,440 | ||||||
Freeport-McMoRan, Inc. | 388,100 | 5,402,352 |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 19 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Metals & Mining (cont’d.) | ||||||||
Reliance Steel & Aluminum Co. | 5,100 | $ | 434,979 | |||||
Southern Copper Corp. (Peru) | 54,000 | 2,329,560 | ||||||
Steel Dynamics, Inc. | 79,500 | 3,592,605 | ||||||
Worthington Industries, Inc. | 2,300 | 99,728 | ||||||
|
| |||||||
12,509,664 | ||||||||
Mortgage Real Estate Investment Trusts (REITs) 0.1% | ||||||||
Ladder Capital Corp. | 29,500 | 499,730 | ||||||
Western Asset Mortgage Capital Corp. | 11,000 | 110,220 | ||||||
|
| |||||||
609,950 | ||||||||
Multiline Retail 2.0% | ||||||||
Kohl’s Corp. | 85,500 | 6,374,025 | ||||||
Macy’s, Inc. | 120,000 | 4,167,600 | ||||||
|
| |||||||
10,541,625 | ||||||||
Multi-Utilities 0.5% | ||||||||
MDU Resources Group, Inc. | 112,600 | 2,892,694 | ||||||
Oil, Gas & Consumable Fuels 5.6% | ||||||||
Anadarko Petroleum Corp. | 91,100 | 6,141,051 | ||||||
Cheniere Energy, Inc.* | 53,600 | 3,724,664 | ||||||
ConocoPhillips | 93,700 | 7,252,380 | ||||||
Continental Resources, Inc.* | 79,900 | 5,455,572 | ||||||
HollyFrontier Corp. | 15,100 | 1,055,490 | ||||||
Kosmos Energy Ltd. (Ghana)* | 28,300 | 264,605 | ||||||
Laredo Petroleum, Inc.* | 224,300 | 1,832,531 | ||||||
Phillips 66 | 23,900 | 2,694,008 | ||||||
Valero Energy Corp. | 15,100 | 1,717,625 | ||||||
|
| |||||||
30,137,926 | ||||||||
Personal Products 0.7% | ||||||||
Avon Products, Inc. (United Kingdom)* | 8,200 | 18,040 | ||||||
Herbalife Nutrition Ltd.* | 22,400 | 1,221,920 | ||||||
Nu Skin Enterprises, Inc. (Class A Stock) | 5,700 | 469,794 | ||||||
USANA Health Sciences, Inc.* | 16,900 | 2,037,295 | ||||||
|
| |||||||
3,747,049 | ||||||||
Pharmaceuticals 1.6% | ||||||||
Allergan PLC | 400 | 76,192 |
See Notes to Financial Statements.
20 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Pharmaceuticals (cont’d.) | ||||||||
Horizon Pharma PLC* | 21,300 | $ | 417,054 | |||||
Mallinckrodt PLC* | 50,700 | 1,486,017 | ||||||
Mylan NV* | 44,000 | 1,610,400 | ||||||
Zoetis, Inc. | 52,800 | 4,834,368 | ||||||
|
| |||||||
8,424,031 | ||||||||
Professional Services 1.2% | ||||||||
Insperity, Inc. | 53,500 | 6,310,325 | ||||||
Real Estate Management & Development 0.7% | ||||||||
CBRE Group, Inc. (Class A Stock)* | 79,000 | 3,483,900 | ||||||
Marcus & Millichap, Inc.* | 8,500 | 295,035 | ||||||
RMR Group, Inc. (The) (Class A Stock) | 2,500 | 232,000 | ||||||
|
| |||||||
4,010,935 | ||||||||
Road & Rail 1.3% | ||||||||
CSX Corp. | 81,400 | 6,027,670 | ||||||
Old Dominion Freight Line, Inc. | 6,000 | 967,560 | ||||||
|
| |||||||
6,995,230 | ||||||||
Semiconductors & Semiconductor Equipment 3.2% | ||||||||
Advanced Energy Industries, Inc.* | 5,600 | 289,240 | ||||||
Amkor Technology, Inc.* | 14,100 | 104,199 | ||||||
Cabot Microelectronics Corp. | 1,500 | 154,755 | ||||||
Entegris, Inc. | 5,900 | 170,805 | ||||||
Intel Corp. | 160,000 | 7,566,400 | ||||||
MKS Instruments, Inc. | 28,800 | 2,308,320 | ||||||
NVE Corp. | 1,900 | 201,172 | ||||||
NVIDIA Corp. | 20,400 | 5,732,808 | ||||||
ON Semiconductor Corp.* | 14,200 | 261,706 | ||||||
SMART Global Holdings, Inc.* | 18,200 | 523,068 | ||||||
|
| |||||||
17,312,473 | ||||||||
Software 7.0% | ||||||||
Activision Blizzard, Inc. | 69,200 | 5,756,748 | ||||||
Adobe Systems, Inc.*(u) | 34,000 | 9,178,300 | ||||||
Dell Technologies, Inc. (Class V Stock)* | 67,200 | 6,526,464 | ||||||
Fortinet, Inc.* | 54,700 | 5,047,169 | ||||||
Intuit, Inc. | 30,100 | 6,844,740 | ||||||
Microsoft Corp. | 6,200 | 709,094 |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 21 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Software (cont’d.) | ||||||||
Progress Software Corp. | 8,200 | $ | 289,378 | |||||
Synopsys, Inc.* | 34,300 | 3,382,323 | ||||||
|
| |||||||
37,734,216 | ||||||||
Specialty Retail 2.5% | ||||||||
Advance Auto Parts, Inc. | 8,500 | 1,430,805 | ||||||
Asbury Automotive Group, Inc.* | 19,600 | 1,347,500 | ||||||
AutoNation, Inc.* | 9,800 | 407,190 | ||||||
Burlington Stores, Inc.* | 31,800 | 5,180,856 | ||||||
Dick’s Sporting Goods, Inc. | 59,800 | 2,121,704 | ||||||
Foot Locker, Inc. | 34,100 | 1,738,418 | ||||||
Gap, Inc. (The) | 38,400 | 1,107,840 | ||||||
J. Jill, Inc.* | 45,900 | 283,662 | ||||||
|
| |||||||
13,617,975 | ||||||||
Technology Hardware, Storage & Peripherals 2.7% | ||||||||
Apple, Inc. | 15,100 | 3,408,674 | ||||||
Hewlett Packard Enterprise Co. | 341,100 | 5,563,341 | ||||||
HP, Inc. | 174,800 | 4,504,596 | ||||||
Western Digital Corp. | 19,900 | 1,164,946 | ||||||
|
| |||||||
14,641,557 | ||||||||
Textiles, Apparel & Luxury Goods 1.4% | ||||||||
Carter’s, Inc. | 10,600 | 1,045,160 | ||||||
Lululemon Athletica, Inc.* | 38,000 | 6,174,620 | ||||||
Wolverine World Wide, Inc. | 11,900 | 464,695 | ||||||
|
| |||||||
7,684,475 | ||||||||
Thrifts & Mortgage Finance 0.7% | ||||||||
Radian Group, Inc. | 169,200 | 3,497,364 | ||||||
Trading Companies & Distributors 0.4% | ||||||||
BMC Stock Holdings, Inc.* | 48,400 | 902,660 | ||||||
Veritiv Corp.* | 6,800 | 247,520 | ||||||
WESCO International, Inc.* | 14,800 | 909,460 | ||||||
|
| |||||||
2,059,640 | ||||||||
Transportation Infrastructure 0.1% | ||||||||
Macquarie Infrastructure Corp. | 9,900 | 456,687 |
See Notes to Financial Statements.
22 |
Description | Interest Rate | Maturity Date | Shares | Value | ||||||||||||
COMMON STOCKS (Continued) | ||||||||||||||||
Wireless Telecommunication Services 0.1% | ||||||||||||||||
Shenandoah Telecommunications Co. | 6,800 | $ | 263,500 | |||||||||||||
Telephone & Data Systems, Inc. | 8,700 | 264,741 | ||||||||||||||
|
| |||||||||||||||
528,241 | ||||||||||||||||
|
| |||||||||||||||
TOTAL LONG-TERM INVESTMENTS | 531,113,010 | |||||||||||||||
|
| |||||||||||||||
SHORT-TERM INVESTMENTS 0.2% | ||||||||||||||||
AFFILIATED MUTUAL FUND 0.1% | ||||||||||||||||
PGIM Core Ultra Short Bond Fund | 427,350 | 427,350 | ||||||||||||||
|
| |||||||||||||||
Principal | ||||||||||||||||
U.S. TREASURY OBLIGATION(k)(n) 0.1% | ||||||||||||||||
U.S. Treasury Bills | 2.139 | % | 12/20/18 | 500 | 497,635 | |||||||||||
|
| |||||||||||||||
TOTAL SHORT-TERM INVESTMENTS | 924,985 | |||||||||||||||
|
| |||||||||||||||
TOTAL INVESTMENTS, BEFORE SECURITIES SOLD SHORT | 532,037,995 | |||||||||||||||
|
| |||||||||||||||
Shares | ||||||||||||||||
SECURITIES SOLD SHORT (54.1)% | ||||||||||||||||
COMMON STOCKS | ||||||||||||||||
Aerospace & Defense (0.7)% | ||||||||||||||||
Axon Enterprise, Inc.* | 18,700 | (1,279,641 | ) | |||||||||||||
Kratos Defense & Security Solutions, Inc.* | 12,000 | (177,360 | ) | |||||||||||||
Mercury Systems, Inc.* | 38,600 | (2,135,352 | ) | |||||||||||||
|
| |||||||||||||||
(3,592,353 | ) | |||||||||||||||
Airlines (0.2)% | ||||||||||||||||
Allegiant Travel Co. | 5,500 | (697,400 | ) | |||||||||||||
Spirit Airlines, Inc.* | 12,900 | (605,913 | ) | |||||||||||||
|
| |||||||||||||||
(1,303,313 | ) |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 23 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Auto Components (0.3)% | ||||||||
Cooper Tire & Rubber Co. | 8,100 | $ | (229,230 | ) | ||||
LCI Industries | 2,700 | (223,560 | ) | |||||
Motorcar Parts of America, Inc.* | 9,300 | (218,085 | ) | |||||
Visteon Corp.* | 10,800 | (1,003,320 | ) | |||||
|
| |||||||
(1,674,195 | ) | |||||||
Banks (1.1)% | ||||||||
Bank of Hawaii Corp. | 2,800 | (220,948 | ) | |||||
CenterState Bank Corp. | 6,600 | (185,130 | ) | |||||
Community Bank System, Inc. | 7,000 | (427,490 | ) | |||||
CVB Financial Corp. | 27,200 | (607,104 | ) | |||||
First Horizon National Corp. | 30,400 | (524,704 | ) | |||||
First Republic Bank | 33,700 | (3,235,200 | ) | |||||
Glacier Bancorp, Inc. | 10,600 | (456,754 | ) | |||||
|
| |||||||
(5,657,330 | ) | |||||||
Beverages (0.1)% | ||||||||
MGP Ingredients, Inc. | 3,600 | (284,328 | ) | |||||
Biotechnology (5.6)% | ||||||||
Alder Biopharmaceuticals, Inc.* | 32,900 | (547,785 | ) | |||||
Array BioPharma, Inc.* | 105,100 | (1,597,520 | ) | |||||
Atara Biotherapeutics, Inc.* | 16,600 | (686,410 | ) | |||||
BioCryst Pharmaceuticals, Inc.* | 52,300 | (399,049 | ) | |||||
BioMarin Pharmaceutical, Inc.* | 12,600 | (1,221,822 | ) | |||||
Clovis Oncology, Inc.* | 43,800 | (1,286,406 | ) | |||||
Exact Sciences Corp.* | 69,300 | (5,469,156 | ) | |||||
Heron Therapeutics, Inc.* | 30,100 | (952,665 | ) | |||||
ImmunoGen, Inc.* | 97,700 | (925,219 | ) | |||||
Immunomedics, Inc.* | 19,600 | (408,268 | ) | |||||
Insmed, Inc.* | 14,100 | (285,102 | ) | |||||
Intellia Therapeutics, Inc.* | 7,300 | (208,926 | ) | |||||
Ironwood Pharmaceuticals, Inc.* | 60,500 | (1,116,830 | ) | |||||
Portola Pharmaceuticals, Inc.* | 54,600 | (1,453,998 | ) | |||||
Radius Health, Inc.* | 11,000 | (195,800 | ) | |||||
Sangamo Therapeutics, Inc.* | 25,800 | (437,310 | ) | |||||
Sarepta Therapeutics, Inc.* | 35,300 | (5,701,303 | ) | |||||
Seattle Genetics, Inc.* | 74,600 | (5,753,152 | ) | |||||
Spark Therapeutics, Inc.* | 26,100 | (1,423,755 | ) | |||||
Verastem, Inc.* | 23,400 | (169,650 | ) | |||||
|
| |||||||
(30,240,126 | ) |
See Notes to Financial Statements.
24 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Building Products (1.3)% | ||||||||
AAON, Inc. | 26,100 | $ | (986,580 | ) | ||||
Allegion PLC | 17,700 | (1,603,089 | ) | |||||
American Woodmark Corp.* | 2,800 | (219,660 | ) | |||||
JELD-WEN Holding, Inc.* | 25,400 | (626,364 | ) | |||||
Lennox International, Inc. | 5,800 | (1,266,720 | ) | |||||
Owens Corning | 45,700 | (2,480,139 | ) | |||||
|
| |||||||
(7,182,552 | ) | |||||||
Capital Markets (1.6)% | ||||||||
CME Group, Inc. | 27,900 | (4,748,859 | ) | |||||
FactSet Research Systems, Inc. | 7,100 | (1,588,341 | ) | |||||
Hamilton Lane, Inc. (Class A Stock) | 20,900 | (925,452 | ) | |||||
MarketAxess Holdings, Inc. | 5,800 | (1,035,242 | ) | |||||
Virtu Financial, Inc. (Class A Stock) | 9,500 | (194,275 | ) | |||||
|
| |||||||
(8,492,169 | ) | |||||||
Chemicals (1.8)% | ||||||||
DowDuPont, Inc. | 39,300 | (2,527,383 | ) | |||||
International Flavors & Fragrances, Inc. | 20,000 | (2,782,400 | ) | |||||
Rayonier Advanced Materials, Inc. | 41,600 | (766,688 | ) | |||||
RPM International, Inc. | 28,900 | (1,876,766 | ) | |||||
Sensient Technologies Corp. | 21,200 | (1,622,012 | ) | |||||
|
| |||||||
(9,575,249 | ) | |||||||
Commercial Services & Supplies (0.8)% | ||||||||
ABM Industries, Inc. | 53,700 | (1,731,825 | ) | |||||
Healthcare Services Group, Inc. | 59,100 | (2,400,642 | ) | |||||
|
| |||||||
(4,132,467 | ) | |||||||
Communications Equipment (0.5)% | ||||||||
CalAmp Corp.* | 9,100 | (218,036 | ) | |||||
ViaSat, Inc.* | 34,400 | (2,199,880 | ) | |||||
|
| |||||||
(2,417,916 | ) | |||||||
Construction & Engineering (0.1)% | ||||||||
Dycom Industries, Inc.* | 5,800 | (490,680 | ) | |||||
Construction Materials (0.7)% | ||||||||
Martin Marietta Materials, Inc. | 21,600 | (3,930,120 | ) |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 25 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Containers & Packaging (0.8)% | ||||||||
Ball Corp. | 22,600 | $ | (994,174 | ) | ||||
Graphic Packaging Holding Co. | 251,800 | (3,527,718 | ) | |||||
|
| |||||||
(4,521,892 | ) | |||||||
Diversified Consumer Services (0.1)% | ||||||||
H&R Block, Inc. | 27,400 | (705,550 | ) | |||||
Diversified Telecommunication Services (0.1)% | ||||||||
Iridium Communications, Inc.* | 11,400 | (256,500 | ) | |||||
Electric Utilities (0.4)% | ||||||||
Alliant Energy Corp. | 38,300 | (1,630,431 | ) | |||||
El Paso Electric Co. | 3,000 | (171,600 | ) | |||||
Evergy, Inc. | 9,210 | (505,813 | ) | |||||
|
| |||||||
(2,307,844 | ) | |||||||
Electronic Equipment, Instruments & Components (1.0)% | ||||||||
Cognex Corp. | 17,900 | (999,178 | ) | |||||
Coherent, Inc.* | 20,000 | (3,443,800 | ) | |||||
Electro Scientific Industries, Inc.* | 9,500 | (165,775 | ) | |||||
Fitbit, Inc. (Class A Stock)* | 143,200 | (766,120 | ) | |||||
Rogers Corp.* | 1,200 | (176,784 | ) | |||||
|
| |||||||
(5,551,657 | ) | |||||||
Energy Equipment & Services (1.4)% | ||||||||
Baker Hughes a GE Co. | 164,100 | (5,551,503 | ) | |||||
Cactus, Inc. (Class A Stock)* | 4,900 | (187,572 | ) | |||||
Dril-Quip, Inc.* | 5,700 | (297,825 | ) | |||||
NCS Multistage Holdings, Inc.* | 10,300 | (170,053 | ) | |||||
Oil States International, Inc.* | 5,600 | (185,920 | ) | |||||
US Silica Holdings, Inc. | 47,400 | (892,542 | ) | |||||
|
| |||||||
(7,285,415 | ) | |||||||
Equity Real Estate Investment Trusts (REITs) (2.9)% | ||||||||
Alexandria Real Estate Equities, Inc. | 23,800 | (2,993,802 | ) | |||||
CoreSite Realty Corp. | 7,200 | (800,208 | ) | |||||
CubeSmart | 15,100 | (430,803 | ) | |||||
CyrusOne, Inc. | 48,300 | (3,062,220 | ) | |||||
Healthcare Realty Trust, Inc. | 24,300 | (711,018 | ) | |||||
Macerich Co. (The) | 13,900 | (768,531 | ) |
See Notes to Financial Statements.
26 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Equity Real Estate Investment Trusts (REITs) (cont’d.) | ||||||||
National Retail Properties, Inc. | 44,300 | $ | (1,985,526 | ) | ||||
Public Storage | 15,000 | (3,024,450 | ) | |||||
Retail Opportunity Investments Corp. | 29,100 | (543,297 | ) | |||||
Tanger Factory Outlet Centers, Inc. | 28,900 | (661,232 | ) | |||||
UDR, Inc. | 11,200 | (452,816 | ) | |||||
|
| |||||||
(15,433,903 | ) | |||||||
Food Products (0.2)% | ||||||||
Hormel Foods Corp. | 5,300 | (208,820 | ) | |||||
Post Holdings, Inc.* | 8,100 | (794,124 | ) | |||||
|
| |||||||
(1,002,944 | ) | |||||||
Health Care Equipment & Supplies (3.8)% | ||||||||
AxoGen, Inc.* | 16,300 | (600,655 | ) | |||||
Cooper Cos., Inc. (The) | 7,600 | (2,106,340 | ) | |||||
DexCom, Inc.* | 53,300 | (7,624,032 | ) | |||||
GenMark Diagnostics, Inc.* | 35,600 | (261,660 | ) | |||||
Heska Corp.* | 5,600 | (634,536 | ) | |||||
Insulet Corp.* | 6,800 | (720,460 | ) | |||||
iRhythm Technologies, Inc.* | 16,000 | (1,514,560 | ) | |||||
Nevro Corp.* | 24,200 | (1,379,400 | ) | |||||
Novocure Ltd.* | 8,900 | (466,360 | ) | |||||
NuVasive, Inc.* | 36,200 | (2,569,476 | ) | |||||
Quidel Corp.* | 13,600 | (886,312 | ) | |||||
Tactile Systems Technology, Inc.* | 3,000 | (213,150 | ) | |||||
Wright Medical Group NV* | 41,000 | (1,189,820 | ) | |||||
|
| |||||||
(20,166,761 | ) | |||||||
Health Care Providers & Services (0.6)% | ||||||||
BioTelemetry, Inc.* | 18,000 | (1,160,100 | ) | |||||
Cross Country Healthcare, Inc.* | 17,900 | (156,267 | ) | |||||
Diplomat Pharmacy, Inc.* | 25,700 | (498,837 | ) | |||||
Premier, Inc. (Class A Stock)* | 16,200 | (741,636 | ) | |||||
Tivity Health, Inc.* | 25,600 | (823,040 | ) | |||||
|
| |||||||
(3,379,880 | ) | |||||||
Health Care Technology (1.4)% | ||||||||
Allscripts Healthcare Solutions, Inc.* | 21,300 | (303,525 | ) | |||||
Evolent Health, Inc. (Class A Stock)* | 10,300 | (292,520 | ) | |||||
Medidata Solutions, Inc.* | 47,500 | (3,482,225 | ) | |||||
Tabula Rasa HealthCare, Inc.* | 4,100 | (332,879 | ) |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 27 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Health Care Technology (cont’d.) | ||||||||
Teladoc Health, Inc.* | 33,600 | $ | (2,901,360 | ) | ||||
Vocera Communications, Inc.* | 12,700 | (464,566 | ) | |||||
|
| |||||||
(7,777,075 | ) | |||||||
Hotels, Restaurants & Leisure (2.4)% | ||||||||
Caesars Entertainment Corp.* | 409,100 | (4,193,275 | ) | |||||
Planet Fitness, Inc. (Class A Stock)* | 60,300 | (3,258,009 | ) | |||||
Starbucks Corp. | 85,000 | (4,831,400 | ) | |||||
Wingstop, Inc. | 9,900 | (675,873 | ) | |||||
|
| |||||||
(12,958,557 | ) | |||||||
Household Durables (1.7)% | ||||||||
Garmin Ltd. | 6,800 | (476,340 | ) | |||||
Installed Building Products, Inc.* | 5,700 | (222,300 | ) | |||||
Leggett & Platt, Inc. | 41,900 | (1,834,801 | ) | |||||
Mohawk Industries, Inc.* | 8,200 | (1,437,870 | ) | |||||
Roku, Inc.* | 55,100 | (4,023,953 | ) | |||||
Tempur Sealy International, Inc.* | 13,900 | (735,310 | ) | |||||
Universal Electronics, Inc.* | 11,300 | (444,655 | ) | |||||
|
| |||||||
(9,175,229 | ) | |||||||
Household Products (0.1)% | ||||||||
WD-40 Co. | 3,700 | (636,770 | ) | |||||
Independent Power & Renewable Electricity Producers (0.3)% | ||||||||
Pattern Energy Group, Inc. (Class A Stock) | 78,700 | (1,563,769 | ) | |||||
Insurance (0.3)% | ||||||||
Cincinnati Financial Corp. | 6,100 | (468,541 | ) | |||||
eHealth, Inc.* | 6,400 | (180,864 | ) | |||||
Markel Corp.* | 600 | (713,094 | ) | |||||
|
| |||||||
(1,362,499 | ) | |||||||
Internet & Direct Marketing Retail (0.3)% | ||||||||
Wayfair, Inc. (Class A Stock)* | 10,500 | (1,550,535 | ) | |||||
Internet Software & Services (1.8)% | ||||||||
2U, Inc.* | 24,600 | (1,849,674 | ) | |||||
Alteryx, Inc. (Class A Stock)* | 24,100 | (1,378,761 | ) | |||||
Benefitfocus, Inc.* | 17,900 | (724,055 | ) |
See Notes to Financial Statements.
28 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Internet Software & Services (cont’d.) | ||||||||
Box, Inc. (Class A Stock)* | 118,200 | $ | (2,826,162 | ) | ||||
Etsy, Inc.* | 33,700 | (1,731,506 | ) | |||||
Instructure, Inc.* | 6,400 | (226,560 | ) | |||||
Okta, Inc.* | 6,100 | (429,196 | ) | |||||
Q2 Holdings, Inc.* | 3,900 | (236,145 | ) | |||||
|
| |||||||
(9,402,059 | ) | |||||||
IT Services (4.1)% | ||||||||
Gartner, Inc.* | 36,000 | (5,706,000 | ) | |||||
Global Payments, Inc. | 12,300 | (1,567,020 | ) | |||||
Perspecta, Inc. | 20,700 | (532,404 | ) | |||||
Square, Inc. (Class A Stock)* | 84,800 | (8,396,048 | ) | |||||
Teradata Corp.* | 10,300 | (388,413 | ) | |||||
Worldpay, Inc. (Class A Stock)* | 55,500 | (5,620,485 | ) | |||||
|
| |||||||
(22,210,370 | ) | |||||||
Leisure Products (0.2)% | ||||||||
Hasbro, Inc. | 8,100 | (851,472 | ) | |||||
Life Sciences Tools & Services (0.3)% | ||||||||
Syneos Health, Inc.* | 32,300 | (1,665,065 | ) | |||||
Machinery (0.8)% | ||||||||
Chart Industries, Inc.* | 24,800 | (1,942,584 | ) | |||||
CIRCOR International, Inc. | 10,400 | (494,000 | ) | |||||
Graco, Inc. | 6,700 | (310,478 | ) | |||||
John Bean Technologies Corp. | 7,200 | (858,960 | ) | |||||
Sun Hydraulics Corp. | 16,300 | (892,914 | ) | |||||
|
| |||||||
(4,498,936 | ) | |||||||
Marine (0.1)% | ||||||||
Kirby Corp.* | 9,300 | (764,925 | ) | |||||
Media (0.6)% | ||||||||
GCI Liberty, Inc. (Class A Stock)* | 40,080 | (2,044,080 | ) | |||||
New York Times Co. (The) (Class A Stock) | 46,900 | (1,085,735 | ) | |||||
|
| |||||||
(3,129,815 | ) | |||||||
Metals & Mining (0.3)% | ||||||||
Allegheny Technologies, Inc.* | 34,300 | (1,013,565 | ) |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 29 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Metals & Mining (cont’d.) | ||||||||
Coeur Mining, Inc.* | 29,500 | $ | (157,235 | ) | ||||
Haynes International, Inc. | 6,900 | (244,950 | ) | |||||
|
| |||||||
(1,415,750 | ) | |||||||
Mortgage Real Estate Investment Trusts (REITs) (0.0)% | ||||||||
Apollo Commercial Real Estate Finance, Inc. | 12,100 | (228,327 | ) | |||||
Multiline Retail (0.1)% | ||||||||
Dollar Tree, Inc.* | 8,100 | (660,555 | ) | |||||
Multi-Utilities (0.9)% | ||||||||
Sempra Energy | 43,300 | (4,925,375 | ) | |||||
Oil, Gas & Consumable Fuels (3.5)% | ||||||||
Callon Petroleum Co.* | 133,200 | (1,597,068 | ) | |||||
Centennial Resource Development, Inc. (Class A Stock)* | 50,700 | (1,107,795 | ) | |||||
EQT Corp. | 110,900 | (4,905,107 | ) | |||||
Green Plains, Inc. | 26,500 | (455,800 | ) | |||||
Matador Resources Co.* | 17,500 | (578,375 | ) | |||||
Parsley Energy, Inc. (Class A Stock)* | 184,800 | (5,405,400 | ) | |||||
PDC Energy, Inc.* | 52,900 | (2,589,984 | ) | |||||
SemGroup Corp. (Class A Stock) | 21,700 | (478,485 | ) | |||||
SRC Energy, Inc.* | 105,700 | (939,673 | ) | |||||
W&T Offshore, Inc.* | 79,800 | (769,272 | ) | |||||
|
| |||||||
(18,826,959 | ) | |||||||
Pharmaceuticals (0.3)% | ||||||||
Aerie Pharmaceuticals, Inc.* | 14,000 | (861,700 | ) | |||||
Amneal Pharmaceuticals, Inc.* | 13,100 | (290,689 | ) | |||||
Medicines Co. (The)* | 8,200 | (245,262 | ) | |||||
Reata Pharmaceuticals, Inc. (Class A Stock)* | 2,900 | (237,104 | ) | |||||
|
| |||||||
(1,634,755 | ) | |||||||
Professional Services (0.5)% | ||||||||
IHS Markit Ltd.* | 26,600 | (1,435,336 | ) | |||||
WageWorks, Inc.* | 25,800 | (1,102,950 | ) | |||||
|
| |||||||
(2,538,286 | ) |
See Notes to Financial Statements.
30 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Road & Rail (0.5)% | ||||||||
AMERCO | 1,400 | $ | (499,310 | ) | ||||
Knight-Swift Transportation Holdings, Inc. | 65,600 | (2,261,888 | ) | |||||
|
| |||||||
(2,761,198 | ) | |||||||
Semiconductors & Semiconductor Equipment (2.1)% | ||||||||
Ambarella, Inc.* | 17,900 | (692,372 | ) | |||||
Cree, Inc.* | 46,300 | (1,753,381 | ) | |||||
Ichor Holdings Ltd.* | 22,500 | (459,450 | ) | |||||
Inphi Corp.* | 33,500 | (1,272,330 | ) | |||||
MACOM Technology Solutions Holdings, Inc.* | 42,000 | (865,200 | ) | |||||
MaxLinear, Inc.* | 43,300 | (860,804 | ) | |||||
Microchip Technology, Inc. | 63,100 | (4,979,221 | ) | |||||
PDF Solutions, Inc.* | 25,600 | (231,168 | ) | |||||
Veeco Instruments, Inc.* | 33,800 | (346,450 | ) | |||||
|
| |||||||
(11,460,376 | ) | |||||||
Software (3.8)% | ||||||||
Blackline, Inc.* | 34,100 | (1,925,627 | ) | |||||
Ebix, Inc. | 2,100 | (166,215 | ) | |||||
Everbridge, Inc.* | 11,300 | (651,332 | ) | |||||
Guidewire Software, Inc.* | 6,000 | (606,060 | ) | |||||
Pegasystems, Inc. | 6,000 | (375,600 | ) | |||||
Proofpoint, Inc.* | 26,400 | (2,807,112 | ) | |||||
PROS Holdings, Inc.* | 13,200 | (462,264 | ) | |||||
ServiceNow, Inc.* | 29,100 | (5,692,833 | ) | |||||
Tableau Software, Inc. (Class A Stock)* | 11,300 | (1,262,662 | ) | |||||
Workday, Inc. (Class A Stock)* | 43,700 | (6,379,326 | ) | |||||
|
| |||||||
(20,329,031 | ) | |||||||
Specialty Retail (1.1)% | ||||||||
At Home Group, Inc.* | 27,500 | (867,075 | ) | |||||
Children’s Place, Inc. (The) | 12,000 | (1,533,600 | ) | |||||
Floor & Decor Holdings, Inc. (Class A Stock)* | 38,400 | (1,158,528 | ) | |||||
Lumber Liquidators Holdings, Inc.* | 22,500 | (348,525 | ) | |||||
RH* | 13,700 | (1,794,837 | ) | |||||
|
| |||||||
(5,702,565 | ) |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 31 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Technology Hardware, Storage & Peripherals (0.1)% | ||||||||
Cray, Inc.* | 20,500 | $ | (440,750 | ) | ||||
USA Technologies, Inc.* | 47,400 | (341,280 | ) | |||||
|
| |||||||
(782,030 | ) | |||||||
Trading Companies & Distributors (0.4)% | ||||||||
SiteOne Landscape Supply, Inc.* | 15,100 | (1,137,634 | ) | |||||
Watsco, Inc. | 5,800 | (1,032,980 | ) | |||||
|
| |||||||
(2,170,614 | ) | |||||||
Wireless Telecommunication Services (0.0)% | ||||||||
Boingo Wireless, Inc.* | 5,100 | (177,990 | ) | |||||
|
| |||||||
TOTAL SECURITIES SOLD SHORT | (290,746,031 | ) | ||||||
|
| |||||||
TOTAL INVESTMENTS, NET OF SECURITIES SOLD SHORT 44.9% | 241,291,964 | |||||||
Other assets in excess of liabilities(z) 55.1% | 296,511,651 | |||||||
|
| |||||||
NET ASSETS 100.0% | $ | 537,803,615 | ||||||
|
|
The following abbreviations are used in the semiannual report:
REITs—Real Estate Investment Trusts
UTS—Unit Trust Security
* | Non-income producing security. |
# | Principal amount is shown in U.S. dollars unless otherwise stated. |
(k) | Represents security, or a portion thereof, segregated as collateral for centrally cleared/exchange-traded derivatives. |
(n) | Rate shown reflects yield to maturity at purchased date. |
(u) | Represents security, or a portion thereof, segregated as collateral for short sales. |
(w) | PGIM Investments LLC, the manager of the Fund, also serves as manager of the PGIM Core Ultra Short Bond Fund. |
(z) | Includes net unrealized appreciation/(depreciation) and/or market value of the below holdings which are excluded from the Schedule of Investments: |
Futures contracts outstanding at September 30, 2018:
Number of Contracts | Type | Expiration Date | Current Notional Amount | Value / Unrealized Appreciation (Depreciation) | ||||||||||||
Long Position: | ||||||||||||||||
29 | S&P 500 E-Mini Index | Dec. 2018 | $ | 4,232,550 | $ | 33,049 | ||||||||||
|
|
See Notes to Financial Statements.
32 |
Summary of Collateral for Centrally Cleared/Exchange-traded Derivatives:
Cash and securities segregated as collateral to cover requirements for open centrally cleared/exchange-traded derivatives are listed by broker as follows:
Broker | Cash and/or Foreign Currency | Securities Market Value | ||||||
Goldman Sachs & Co | $ | — | $ | 497,635 | ||||
|
|
|
|
Fair Value Measurements:
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—unadjusted quoted prices generally in active markets for identical securities.
Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other observable inputs.
Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of September 30, 2018 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Common Stocks | ||||||||||||
Aerospace & Defense | $ | 6,457,889 | $ | — | $ | — | ||||||
Auto Components | 2,673,314 | — | — | |||||||||
Banks | 13,302,986 | — | — | |||||||||
Beverages | 7,088,120 | — | — | |||||||||
Biotechnology | 26,325,870 | — | — | |||||||||
Building Products | 5,398,803 | — | — | |||||||||
Capital Markets | 5,722,038 | — | — | |||||||||
Chemicals | 10,628,258 | — | — | |||||||||
Commercial Services & Supplies | 554,292 | — | — | |||||||||
Communications Equipment | 8,534,298 | — | — | |||||||||
Construction & Engineering | 1,644,909 | — | — | |||||||||
Consumer Finance | 9,827,855 | — | — | |||||||||
Containers & Packaging | 2,997,984 | — | — | |||||||||
Distributors | 552,778 | — | — | |||||||||
Diversified Consumer Services | 5,014,040 | — | — | |||||||||
Diversified Telecommunication Services | 15,123,498 | — | — | |||||||||
Electrical Equipment | 1,472,415 | — | — | |||||||||
Electronic Equipment, Instruments & Components | 8,861,234 | — | — | |||||||||
Energy Equipment & Services | 4,419,740 | — | — | |||||||||
Equity Real Estate Investment Trusts (REITs) | 14,712,830 | — | — | |||||||||
Food & Staples Retailing | 1,199,332 | — | — | |||||||||
Food Products | 5,398,332 | — | — | |||||||||
Gas Utilities | 3,051,400 | — | — | |||||||||
Health Care Equipment & Supplies | 38,387,506 | — | — | |||||||||
Health Care Providers & Services | 21,483,979 | — | — |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 33 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities (continued) | ||||||||||||
Common Stocks (continued) | ||||||||||||
Health Care Technology | $ | 3,015,874 | $ | — | $ | — | ||||||
Hotels, Restaurants & Leisure | 5,795,486 | — | — | |||||||||
Household Durables | 4,354,482 | — | — | |||||||||
Independent Power & Renewable Electricity Producers | 9,939,020 | — | — | |||||||||
Industrial Conglomerates | 7,105,280 | — | — | |||||||||
Insurance | 3,734,290 | — | — | |||||||||
Internet & Direct Marketing Retail | 2,778,162 | — | — | |||||||||
Internet Software & Services | 30,819,859 | — | — | |||||||||
IT Services | 22,206,498 | — | — | |||||||||
Leisure Products | 828,307 | — | — | |||||||||
Life Sciences Tools & Services | 14,240,139 | — | — | |||||||||
Machinery | 18,013,024 | — | — | |||||||||
Media | 3,736,832 | — | — | |||||||||
Metals & Mining | 12,509,664 | — | — | |||||||||
Mortgage Real Estate Investment Trusts (REITs) | 609,950 | — | — | |||||||||
Multiline Retail | 10,541,625 | — | — | |||||||||
Multi-Utilities | 2,892,694 | — | — | |||||||||
Oil, Gas & Consumable Fuels | 30,137,926 | — | — | |||||||||
Personal Products | 3,747,049 | — | — | |||||||||
Pharmaceuticals | 8,424,031 | — | — | |||||||||
Professional Services | 6,310,325 | — | — | |||||||||
Real Estate Management & Development | 4,010,935 | — | — | |||||||||
Road & Rail | 6,995,230 | — | — | |||||||||
Semiconductors & Semiconductor Equipment | 17,312,473 | — | — | |||||||||
Software | 37,734,216 | — | — | |||||||||
Specialty Retail | 13,617,975 | — | — | |||||||||
Technology Hardware, Storage & Peripherals | 14,641,557 | — | — | |||||||||
Textiles, Apparel & Luxury Goods | 7,684,475 | — | — | |||||||||
Thrifts & Mortgage Finance | 3,497,364 | — | — | |||||||||
Trading Companies & Distributors | 2,059,640 | — | — | |||||||||
Transportation Infrastructure | 456,687 | — | — | |||||||||
Wireless Telecommunication Services | 528,241 | — | — | |||||||||
Affiliated Mutual Fund | 427,350 | — | — | |||||||||
U.S. Treasury Obligation | — | 497,635 | — | |||||||||
Common Stocks—Short | ||||||||||||
Aerospace & Defense | (3,592,353 | ) | — | — | ||||||||
Airlines | (1,303,313 | ) | — | — | ||||||||
Auto Components | (1,674,195 | ) | — | — | ||||||||
Banks | (5,657,330 | ) | — | — | ||||||||
Beverages | (284,328 | ) | — | — | ||||||||
Biotechnology | (30,240,126 | ) | — | — | ||||||||
Building Products | (7,182,552 | ) | — | — | ||||||||
Capital Markets | (8,492,169 | ) | — | — | ||||||||
Chemicals | (9,575,249 | ) | — | — | ||||||||
Commercial Services & Supplies | (4,132,467 | ) | — | — | ||||||||
Communications Equipment | (2,417,916 | ) | — | — | ||||||||
Construction & Engineering | (490,680 | ) | — | — |
See Notes to Financial Statements.
34 |
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities (continued) | ||||||||||||
Common Stocks—Short (continued) | ||||||||||||
Construction Materials | $ | (3,930,120 | ) | $ | — | $ | — | |||||
Containers & Packaging | (4,521,892 | ) | — | — | ||||||||
Diversified Consumer Services | (705,550 | ) | — | — | ||||||||
Diversified Telecommunication Services | (256,500 | ) | — | — | ||||||||
Electric Utilities | (2,307,844 | ) | — | — | ||||||||
Electronic Equipment, Instruments & Components | (5,551,657 | ) | — | — | ||||||||
Energy Equipment & Services | (7,285,415 | ) | — | — | ||||||||
Equity Real Estate Investment Trusts (REITs) | (15,433,903 | ) | — | — | ||||||||
Food Products | (1,002,944 | ) | — | — | ||||||||
Health Care Equipment & Supplies | (20,166,761 | ) | — | — | ||||||||
Health Care Providers & Services | (3,379,880 | ) | — | — | ||||||||
Health Care Technology | (7,777,075 | ) | — | — | ||||||||
Hotels, Restaurants & Leisure | (12,958,557 | ) | — | — | ||||||||
Household Durables | (9,175,229 | ) | — | — | ||||||||
Household Products | (636,770 | ) | — | — | ||||||||
Independent Power & Renewable Electricity Producers | (1,563,769 | ) | — | — | ||||||||
Insurance | (1,362,499 | ) | — | — | ||||||||
Internet & Direct Marketing Retail | (1,550,535 | ) | — | — | ||||||||
Internet Software & Services | (9,402,059 | ) | — | — | ||||||||
IT Services | (22,210,370 | ) | — | — | ||||||||
Leisure Products | (851,472 | ) | — | — | ||||||||
Life Sciences Tools & Services | (1,665,065 | ) | — | — | ||||||||
Machinery | (4,498,936 | ) | — | — | ||||||||
Marine | (764,925 | ) | — | — | ||||||||
Media | (3,129,815 | ) | — | — | ||||||||
Metals & Mining | (1,415,750 | ) | — | — | ||||||||
Mortgage Real Estate Investment Trusts (REITs) | (228,327 | ) | — | — | ||||||||
Multiline Retail | (660,555 | ) | — | — | ||||||||
Multi-Utilities | (4,925,375 | ) | — | — | ||||||||
Oil, Gas & Consumable Fuels | (18,826,959 | ) | — | — | ||||||||
Pharmaceuticals | (1,634,755 | ) | — | — | ||||||||
Professional Services | (2,538,286 | ) | — | — | ||||||||
Road & Rail | (2,761,198 | ) | — | — | ||||||||
Semiconductors & Semiconductor Equipment | (11,460,376 | ) | — | — | ||||||||
Software | (20,329,031 | ) | — | — | ||||||||
Specialty Retail | (5,702,565 | ) | — | — | ||||||||
Technology Hardware, Storage & Peripherals | (782,030 | ) | — | — | ||||||||
Trading Companies & Distributors | (2,170,614 | ) | — | — | ||||||||
Wireless Telecommunication Services | (177,990 | ) | — | — | ||||||||
Other Financial Instruments* | ||||||||||||
Futures Contracts | 33,049 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 240,827,378 | $ | 497,635 | $ | — | ||||||
|
|
|
|
|
|
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 35 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
* | Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as futures, forwards and centrally cleared swap contracts, which are recorded at the unrealized appreciation (depreciation) on the instrument, and OTC swap contracts which are recorded at fair value. |
Industry Classification:
The industry classification of investments and other assets in excess of liabilities shown as a percentage of net assets as of September 30, 2018 were as follows:
Health Care Equipment & Supplies | 7.1 | % | ||
Software | 7.0 | |||
Internet Software & Services | 5.7 | |||
Oil, Gas & Consumable Fuels | 5.6 | |||
Biotechnology | 4.9 | |||
IT Services | 4.1 | |||
Health Care Providers & Services | 4.0 | |||
Machinery | 3.4 | |||
Semiconductors & Semiconductor Equipment | 3.2 | |||
Diversified Telecommunication Services | 2.8 | |||
Equity Real Estate Investment Trusts (REITs) | 2.7 | |||
Life Sciences Tools & Services | 2.7 | |||
Technology Hardware, Storage & Peripherals | 2.7 | |||
Banks | 2.5 | |||
Specialty Retail | 2.5 | |||
Metals & Mining | 2.3 | |||
Multiline Retail | 2.0 | |||
Chemicals | 2.0 | |||
Independent Power & Renewable Electricity Producers | 1.9 | |||
Consumer Finance | 1.8 | |||
Electronic Equipment, Instruments & Components | 1.6 | |||
Communications Equipment | 1.6 | |||
Pharmaceuticals | 1.6 | |||
Textiles, Apparel & Luxury Goods | 1.4 | |||
Beverages | 1.3 | |||
Road & Rail | 1.3 | |||
Industrial Conglomerates | 1.3 | |||
Aerospace & Defense | 1.2 | |||
Professional Services | 1.2 | |||
Capital Markets | 1.1 | |||
Hotels, Restaurants & Leisure | 1.1 | |||
Building Products | 1.0 | |||
Food Products | 1.0 | |||
Diversified Consumer Services | 0.9 | |||
Energy Equipment & Services | 0.8 | |||
Household Durables | 0.8 | |||
Media | 0.7 | |||
Insurance | 0.7 | |||
Personal Products | 0.7 |
Real Estate Management & Development | 0.7 | % | ||
Thrifts & Mortgage Finance | 0.7 | |||
Health Care Technology | 0.6 | |||
Containers & Packaging | 0.6 | |||
Gas Utilities | 0.6 | |||
Multi-Utilities | 0.5 | |||
Auto Components | 0.5 | |||
Internet & Direct Marketing Retail | 0.5 | |||
Trading Companies & Distributors | 0.4 | |||
Construction & Engineering | 0.3 | |||
Electrical Equipment | 0.3 | |||
Food & Staples Retailing | 0.2 | |||
Leisure Products | 0.2 | |||
U.S. Treasury Obligation | 0.1 | |||
Distributors | 0.1 | |||
Commercial Services & Supplies | 0.1 | |||
Wireless Telecommunication Services | 0.1 | |||
Transportation Infrastructure | 0.1 | |||
Mortgage Real Estate Investment Trusts (REITs) | 0.1 | |||
Affiliated Mutual Fund | 0.1 | |||
Securities Sold Short | ||||
Mortgage Real Estate Investment Trusts (REITs) | (0.0 | )* | ||
Wireless Telecommunication Services | (0.0 | )* | ||
Household Products | (0.1 | ) | ||
Marine | (0.1 | ) | ||
Beverages | (0.1 | ) | ||
Technology Hardware, Storage & Peripherals | (0.1 | ) | ||
Multiline Retail | (0.1 | ) | ||
Construction & Engineering | (0.1 | ) | ||
Diversified Consumer Services | (0.1 | ) | ||
Diversified Telecommunication Services | (0.1 | ) | ||
Airlines | (0.2 | ) | ||
Leisure Products | (0.2 | ) | ||
Food Products | (0.2 | ) | ||
Pharmaceuticals | (0.3 | ) | ||
Auto Components | (0.3 | ) | ||
Metals & Mining | (0.3 | ) | ||
Insurance | (0.3 | ) | ||
Independent Power & Renewable Electricity Producers | (0.3 | ) |
See Notes to Financial Statements.
36 |
Industry Classification (cont’d):
| ||||
Internet & Direct Marketing Retail | (0.3 | )% | ||
Life Sciences Tools & Services | (0.3 | ) | ||
Electric Utilities | (0.4 | ) | ||
Trading Companies & Distributors | (0.4 | ) | ||
Communications Equipment | (0.5 | ) | ||
Professional Services | (0.5 | ) | ||
Road & Rail | (0.5 | ) | ||
Health Care Providers & Services | (0.6 | ) | ||
Media | (0.6 | ) | ||
Aerospace & Defense | (0.7 | ) | ||
Construction Materials | (0.7 | ) | ||
Containers & Packaging | (0.8 | ) | ||
Commercial Services & Supplies | (0.8 | ) | ||
Machinery | (0.8 | ) | ||
Multi-Utilities | (0.9 | ) | ||
Electronic Equipment, Instruments & Components | (1.0 | ) | ||
Banks | (1.1 | ) | ||
Specialty Retail | (1.1 | ) | ||
Building Products | (1.3 | ) | ||
Health Care Technology | (1.4 | ) | ||
Energy Equipment & Services | (1.4 | ) |
Capital Markets | (1.6 | )% | ||
Household Durables | (1.7 | ) | ||
Internet Software & Services | (1.8 | ) | ||
Chemicals | (1.8 | ) | ||
Semiconductors & Semiconductor Equipment | (2.1 | ) | ||
Hotels, Restaurants & Leisure | (2.4 | ) | ||
Equity Real Estate Investment Trusts (REITs) | (2.9 | ) | ||
Oil, Gas & Consumable Fuels | (3.5 | ) | ||
Software | (3.8 | ) | ||
Health Care Equipment & Supplies | (3.8 | ) | ||
IT Services | (4.1 | ) | ||
Biotechnology | (5.6 | ) | ||
|
| |||
44.9 | ||||
Other assets in excess of liabilities | 55.1 | |||
|
| |||
100.0 | % | |||
|
|
* | Less than +/- 0.05% |
Effects of Derivative Instruments on the Financial Statements and Primary Underlying Risk Exposure:
The Fund invested in derivative instruments during the reporting period. The primary type of risk associated with these derivative instruments is equity contracts risk. The effect of such derivative instruments on the Fund’s financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.
Fair values of derivative instruments as of September 30, 2018 as presented in the Statement of Assets and Liabilities:
Asset Derivatives | Liability Derivatives | |||||||||||
Derivatives not accounted | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||
Equity contracts | Due from/ to broker— variation margin futures | $ | 33,049 | * | — | $ | — | |||||
|
|
|
|
* | Includes cumulative appreciation (depreciation) as reported in the schedule of open futures and centrally cleared swap contracts. Only unsettled variation margin receivable (payable) is reported within the Statement of Assets and Liabilities. |
The effects of derivative instruments on the Statement of Operations for the six months ended September 30, 2018 are as follows:
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 37 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Amount of Realized Gain (Loss) on Derivatives Recognized in Income | ||||
Derivatives not accounted for as hedging | Futures | |||
Equity contracts | $ | 585,694 | ||
|
|
Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Income | ||||
Derivatives not accounted for as hedging | Futures | |||
Equity contracts | $ | 13,743 | ||
|
|
For the six months ended September 30, 2018, the Fund’s average volume of derivative activities is as follows:
Futures | ||
$ | 9,024,290 |
(1) | Notional Amount in USD. |
Financial Instruments/Transactions—Summary of Offsetting and Netting Arrangements:
The Fund entered into financial instruments/transactions during the reporting period that are either offset in accordance with current requirements or are subject to enforceable master netting arrangements or similar agreements that permit offsetting. The information about offsetting and related netting arrangements for financial instruments/transactions, where the legal right to set-off exists, is presented in the summary below.
Offsetting of financial instrument/transaction assets and liabilities:
Description | Counterparty | Gross Market Value of Recognized Assets/(Liabilities) | Collateral Pledged/(Received)(1) | Net Amount | ||||||||||||
Securities Sold Short | Barclays Capital Group | $ | (290,746,031 | ) | $ | 290,746,031 | $ | — | ||||||||
|
|
(1) | Collateral amount disclosed by the Fund is limited to the market value of financial instruments/transactions. |
See Notes to Financial Statements.
38 |
Statement of Assets & Liabilities (unaudited)
as of September 30, 2018
Assets | ||||
Investments at value: | ||||
Unaffiliated investments (cost $439,129,811) | $ | 531,610,645 | ||
Affiliated investments (cost $427,350) | 427,350 | |||
Deposit with broker for securities sold short | 298,257,129 | |||
Receivable for Fund shares sold | 4,506,408 | |||
Dividends and interest receivable | 844,071 | |||
Prepaid expenses | 13,478 | |||
|
| |||
Total Assets | 835,659,081 | |||
|
| |||
Liabilities | ||||
Securities sold short, at value (proceeds received $257,172,604) | 290,746,031 | |||
Payable for Fund shares reacquired | 4,643,452 | |||
Loan payable | 1,514,000 | |||
Management fee payable | 479,317 | |||
Dividends and interest payable on securities sold short | 292,494 | |||
Accrued expenses and other liabilities | 127,519 | |||
Distribution fee payable | 43,893 | |||
Affiliated transfer agent fee payable | 7,455 | |||
Due to broker—variation margin futures | 1,305 | |||
|
| |||
Total Liabilities | 297,855,466 | |||
|
| |||
Net Assets | $ | 537,803,615 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 41,294 | ||
Paid-in capital in excess of par | 478,810,958 | |||
|
| |||
478,852,252 | ||||
Undistributed net investment income | 779,761 | |||
Accumulated net realized loss on investment transactions | (768,854 | ) | ||
Net unrealized appreciation on investments | 58,940,456 | |||
|
| |||
Net assets, September 30, 2018 | $ | 537,803,615 | ||
|
|
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 39 |
Statement of Assets & Liabilities (unaudited)
as of September 30, 2018
Class A | ||||
Net asset value and redemption price per share, | $ | 12.94 | ||
Maximum sales charge (5.50% of offering price) | 0.75 | |||
|
| |||
Maximum offering price to public | $ | 13.69 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share, | ||||
($39,682,257 ÷ 3,169,705 shares of beneficial interest issued and outstanding) | $ | 12.52 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share, | ||||
($418,454,111 ÷ 31,983,542 shares of beneficial interest issued and outstanding) | $ | 13.08 | ||
|
| |||
Class R6 | ||||
Net asset value, offering price and redemption price per share, | ||||
($20,183,925 ÷ 1,542,890 shares of beneficial interest issued and outstanding) | $ | 13.08 | ||
|
|
See Notes to Financial Statements.
40 |
Statement of Operations (unaudited)
Six Months Ended September 30, 2018
Net Investment Income (Loss) | ||||
Income | ||||
Unaffiliated dividend income | $ | 3,483,947 | ||
Interest income | 2,566,997 | |||
Affiliated dividend income | 22,470 | |||
|
| |||
Total income | 6,073,414 | |||
|
| |||
Expenses | ||||
Management fee | 2,969,365 | |||
Distribution fee(a) | 272,325 | |||
Dividend expense on short sales | 1,305,898 | |||
Broker fees and expenses on short sales | 496,636 | |||
Transfer agent’s fees and expenses (including affiliated expense of $ 30,750)(a) | 214,645 | |||
Registration fees(a) | 45,567 | |||
Custodian and accounting fees | 41,591 | |||
Shareholders’ reports | 24,070 | |||
Audit fee | 16,119 | |||
Legal fees and expenses | 10,695 | |||
Trustees’ fees | 10,084 | |||
Miscellaneous | 17,030 | |||
|
| |||
Total expenses | 5,424,025 | |||
Less: Fee waiver and/or expense reimbursement(a) | (119,005 | ) | ||
Distribution fee waiver(a) | (13,260 | ) | ||
|
| |||
Net expenses | 5,291,760 | |||
|
| |||
Net investment income (loss) | 781,654 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investments | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 29,566,726 | |||
Futures transactions | 585,694 | |||
Short sales transactions | (21,209,385 | ) | ||
|
| |||
8,943,035 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 20,751,863 | |||
Futures | 13,743 | |||
Short sales | (14,863,420 | ) | ||
|
| |||
5,902,186 | ||||
|
| |||
Net gain (loss) on investment transactions | 14,845,221 | |||
|
| |||
Net Increase (Decrease) In Net Assets Resulting From Operations | $ | 15,626,875 | ||
|
|
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 41 |
Statement of Operations (unaudited)
Six Months Ended September 30, 2018
(a) | Class specific expenses and waivers were as follows: |
Class A | Class C | Class Z | Class R6 | |||||||||||||
Distribution fee | 79,559 | 192,766 | — | — | ||||||||||||
Transfer agent’s fees and expenses | 22,580 | 18,488 | 173,514 | 63 | ||||||||||||
Registration fees | 9,069 | 8,643 | 21,252 | 6,603 | ||||||||||||
Fee waiver and/or expense reimbursement | (17,304 | ) | (16,606 | ) | (83,270 | ) | (1,825 | ) | ||||||||
Distribution fee waiver | (13,260 | ) | — | — | — |
See Notes to Financial Statements.
42 |
Statements of Changes in Net Assets (unaudited)
Six Months Ended September 30, 2018 | Year Ended March 31, 2018 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 781,654 | $ | (868,822 | ) | |||
Net realized gain (loss) on investment transactions | 8,943,035 | (378,219 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 5,902,186 | 21,241,166 | ||||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 15,626,875 | 19,994,125 | ||||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) | ||||||||
Net proceeds from shares sold | 100,390,818 | 260,353,113 | ||||||
Cost of shares reacquired | (78,201,323 | ) | (121,385,509 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in net assets from Fund share transactions | 22,189,495 | 138,967,604 | ||||||
|
|
|
| |||||
Total increase (decrease) | 37,816,370 | 158,961,729 | ||||||
Net Assets: | ||||||||
Beginning of period | 499,987,245 | 341,025,516 | ||||||
|
|
|
| |||||
End of period(a) | $ | 537,803,615 | $ | 499,987,245 | ||||
|
|
|
| |||||
(a) Includes undistributed/(distributions in excess of) net investment income of: | $ | 779,761 | $ | (1,893 | ) | |||
|
|
|
|
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 43 |
Notes to Financial Statements (unaudited)
Prudential Investment Portfolios 12 (the “Trust”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company. The Trust was established as a Delaware business trust on October 24, 1997. The Trust currently consists of the following six series: PGIM QMA Large-Cap Core Equity PLUS Fund, PGIM QMA Long-Short Equity Fund and PGIM Short Duration Muni High Income Fund, each of which are diversified funds and PGIM Global Real Estate Fund, PGIM Jennison Technology Fund and PGIM US Real Estate Fund, each of which are non-diversified funds for purposes of the 1940 Act and may invest a greater percentage of their assets in the securities of a single company or other issuer than a diversified fund. Investing in a non-diversified fund involves greater risk than investing in a diversified fund because a loss resulting from the decline in value of any one security may represent a greater portion of the total assets of a non-diversified fund. These financial statements relate only to the PGIM QMA Long-Short Equity Fund (the “Fund”). Effective June 11, 2018, the Funds’ names were changed by replacing “Prudential” with “PGIM” and each Fund’s Class Q shares were renamed Class R6 shares.
The investment objective of the Fund is long-term capital appreciation.
1. Accounting Policies
The Fund follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The following accounting policies conform to U.S. generally accepted accounting principles. The Fund consistently follows such policies in the preparation of its financial statements.
Securities Valuation: The Fund holds securities and other assets and liabilities that are fair valued at the close of each day (generally, 4:00 PM Eastern time) 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 Trust’s Board of Trustees (the “Board”) has adopted valuation procedures for security valuation under which fair valuation responsibilities have been delegated to PGIM Investments LLC (“PGIM Investments” or the “Manager”). Pursuant to the Board’s delegation, a Valuation Committee has been established as two persons, being one or more officers of the Trust, including: the Trust’s Treasurer (or the Treasurer’s direct reports); and the Trust’s Chief or Deputy Chief Compliance Officer (or Vice-President-level direct reports of the Chief or Deputy Chief Compliance Officer). Under the current valuation procedures, the Valuation Committee of the Board is responsible for supervising the valuation of portfolio securities and other assets and liabilities. The valuation procedures permit the Fund to utilize independent pricing vendor services, quotations from market makers, and alternative valuation methods when market quotations are either not
44 |
readily available or not deemed representative of fair value. A record of the Valuation Committee’s actions is subject to the Board’s review, approval, and ratification at its next regularly scheduled quarterly meeting.
For the fiscal reporting period-end, securities and other assets and liabilities were fair valued at the close of the last U.S. business day. Trading in certain foreign securities may occur when the NYSE is closed (including weekends and holidays). Because such foreign securities trade in markets that are open on weekends and U.S. holidays, the values of some of the Fund’s foreign investments may change on days when investors cannot purchase or redeem Fund shares.
Various inputs determine how the Fund’s investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the Schedule of Investments referred to herein as the “fair value hierarchy” in accordance with FASB ASC Topic 820.
Common and preferred stocks, exchange-traded funds, and derivative instruments, such as futures or options, 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 where the security principally trades. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price, they are classified as Level 1 in the fair value hierarchy. In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and ask prices, or at the last bid price in the absence of an ask price. These securities are classified as Level 2 in the fair value hierarchy.
Foreign equities traded on foreign securities exchanges are generally valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy. The models generate an evaluated adjustment factor for each security, which is applied to the local closing price to adjust it for post closing market movements. Utilizing that evaluated adjustment factor, the vendor provides an evaluated price for each security. If the vendor does not provide an evaluated price, securities are valued in accordance with exchange-traded common and preferred stock valuation policies discussed above.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Securities and other assets that cannot be priced according to the methods described above are valued based on pricing methodologies approved by the Board. In the event that
PGIM QMA Long-Short Equity Fund | 45 |
Notes to Financial Statements (unaudited) (continued)
unobservable inputs are used when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
When determining the fair value of securities, some of the factors influencing the valuation include: the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition 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 Manager 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 unaffiliated mutual funds to calculate their net asset values.
Restricted and Illiquid Securities: Subject to guidelines adopted by the Board, the Fund may invest up to 15% of its net assets in illiquid securities, including those which are restricted as to disposition under securities law (“restricted securities”). Restricted securities are valued pursuant to the valuation procedures noted above. Illiquid securities are those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale, cannot be sold within seven days in the ordinary course of business at approximately the amount at which the Fund has valued the investment. Therefore, the Fund may find it difficult to sell illiquid securities at the time considered most advantageous by its subadviser and may incur transaction costs that would not be incurred in the sale of securities that were freely marketable. Certain securities that would otherwise be considered illiquid because of legal restrictions on resale to the general public may be traded among qualified institutional buyers under Rule 144A of the Securities Act of 1933. These Rule 144A securities, as well as commercial paper that is sold in private placements under Section 4(2) of the Securities Act, may be deemed liquid by the Fund’s subadviser under the guidelines adopted by the Trustees of the Trust. However, the liquidity of the Fund’s investments in Rule 144A securities could be impaired if trading does not develop or declines.
Financial Futures Contracts: A financial futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities at a set price for delivery on a future date. Upon entering into a financial futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount. This amount is known as the “initial margin.” Subsequent payments, known as “variation margin,” are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying security. Such variation margin is recorded for financial statement purposes on a daily basis as unrealized gain (loss). When the contract expires or
46 |
is closed, the gain (loss) is realized and is presented in the Statement of Operations as net realized gain (loss) on futures transactions.
The Fund invested in financial futures contracts in order to hedge its existing portfolio securities, or securities the Fund intends to purchase, against fluctuations in value caused by changes in value of equities. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts and the underlying hedged assets. Since futures contracts are exchange-traded, there is minimal counterparty credit risk to the Fund since the exchanges’ clearinghouse acts as counterparty to all exchange-traded futures and guarantees the futures contracts against default.
Short Sales: The Fund sells a security it does not own in anticipation of a decline in the market value of that security (short sale). When the Fund makes a short sale, it must borrow the security sold short and deliver it to the broker-dealer through which it made the short sale as collateral for its obligation to deliver the security upon conclusion of the transaction. The Fund may have to pay a fee to borrow the particular security and may be obligated to return any interest or dividends received on such borrowed securities. Dividends declared on open short positions are recorded on the ex-date and the interest payable is accrued daily on fixed income securities sold short, both of which are recorded as an expense. A gain, limited to the price at which the Fund sold the security short, or a loss, unlimited in magnitude, will be recognized upon the termination of a short sale if the market price at termination is less than or greater than, respectively, the proceeds originally received.
Short sales and financial futures contracts involve elements of both market and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities. Such risks may be mitigated by engaging in master netting arrangements.
Master Netting Arrangements: The Fund is subject to various Master Agreements, or netting arrangements, with select counterparties. These are agreements which a subadviser may have negotiated and entered into on behalf of the Fund. A master netting arrangement between the Fund and the counterparty permits the Fund to offset amounts payable by the Fund to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Fund to cover the Fund’s exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable. In addition to master netting arrangements, the right to set-off exists when all the conditions are met such that each of the parties owes the other determinable amounts, the reporting party has the right to set-off the amount owed with the amount owed by the other party, the reporting party intends to set-off and the right of set-off is enforceable by law. During the reporting period, there was no intention to settle on a net basis and all amounts are presented on a gross basis on the Statement of Assets and Liabilities.
Equity and Mortgage Real Estate Investment Trusts (collectively equity REITs): The Fund invests in equity REITs, which report information on the source of their distributions annually. Based on current and historical information, a portion of distributions received from equity REITs during the period is estimated to be dividend income, capital gain or
PGIM QMA Long-Short Equity Fund | 47 |
Notes to Financial Statements (unaudited) (continued)
return of capital and recorded accordingly. When material, these estimates are adjusted periodically when the actual source of distributions is disclosed by the equity REITs.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains (losses) from investment and currency transactions are calculated on the specific identification method. Dividend income is recorded on the ex-date. Expenses are recorded on an accrual basis, which may require the use of certain estimates by management that may differ from actual. Net investment income or loss (other than class specific expenses and waivers, which are allocated as noted below) and unrealized and realized gains (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. Class specific expenses and waivers, where applicable, are charged to the respective share classes. Class specific expenses include distribution fees and distribution fee waivers, shareholder servicing fees, transfer agent’s fees and expenses, registration fees and fee waivers and/or expense reimbursements, as applicable.
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, interest and capital gains, if any, are recorded, net of reclaimable amounts, at the time the related income is earned.
Dividends and Distributions: The Fund expects to pay dividends from net investment income and distributions from net realized capital gains, if any, annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-date. Permanent book/tax differences relating to income and gain (loss) are reclassified amongst undistributed net investment income, accumulated net realized gain (loss) and paid-in capital in excess of par, as appropriate.
Estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
2. Agreements
The Trust, on behalf of the Fund, has a management agreement with PGIM Investments. Pursuant to this agreement, PGIM Investments has responsibility for all investment advisory services and supervises the subadviser’s performance of such services. In addition, under the management agreement, PGIM Investments provides all of the administrative functions
48 |
necessary for the organization, operation and management of the Fund. PGIM Investments administers the corporate affairs of the Fund and, in connection therewith, furnishes the Fund with office facilities, together with those ordinary clerical and bookkeeping services which are not being furnished by, the Fund’s custodian, and the Fund’s transfer agent. PGIM Investments is also responsible for the staffing and management of dedicated groups of legal, marketing, compliance and related personnel necessary for the operation of the Fund. The legal, marketing, compliance and related personnel are also responsible for the management and oversight of the various service providers to the Fund, including, but not limited to, the custodian, transfer agent, and accounting agent.
PGIM Investments has entered into a subadvisory agreement with Quantitative Management Associates LLC (“QMA”). The subadvisory agreement provides that QMA will furnish investment advisory services in connection with the management of the Fund. In connection therewith, QMA is obligated to keep certain books and records of the Fund. PGIM Investments pays for the services of QMA, the cost of compensation of officers of the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears all other costs and expenses.
The management fee paid to PGIM Investments is accrued daily and payable monthly at an annual rate of 1.15% on average daily net assets up to and including $5 billion and 1.13% on the average daily net assets in excess of $5 billion. The management fee rate before any waivers and/or expense reimbursements was 1.15% for the six months ended September 30, 2018.
PGIM Investments has contractually agreed, through July 31, 2019, to limit total annual fund operating expenses after fee waivers and/or expense reimbursements to 1.50% of average daily net assets for Class A shares, 2.25% of average daily net assets for Class C shares, 1.25% of average daily net assets for Class Z shares, and 1.25% of average daily net assets for Class R6 shares. This contractual waiver excludes interest, brokerage, taxes, (such as income and foreign withholding taxes, stamp duty and deferred tax expenses), acquired fund fees and expenses, extraordinary expenses, and certain other Fund expenses such as dividend and interest expense and broker charges on short sales. Fees and/or expenses waived and/or reimbursed by PGIM Investments may be recouped by PGIM Investments within the same fiscal year during which such waiver and/or reimbursement is made if such recoupment can be realized without exceeding the expense limit in effect at the time of the recoupment for that fiscal year.
The Trust, on behalf of the Fund, has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”) which acts as the distributor of the Class A, Class C, Class Z and Class R6 shares of the Fund. The Fund compensates PIMS for distributing and servicing the Fund’s Class A and Class C shares, pursuant to the plans of distribution (the “Distribution Plans”), regardless of expenses actually incurred by PIMS. The distribution fees are accrued daily and payable monthly. No distribution or service fees are paid to PIMS as distributor of the Class Z or Class R6 shares of the Fund.
PGIM QMA Long-Short Equity Fund | 49 |
Notes to Financial Statements (unaudited) (continued)
Pursuant to the Distribution Plans, the Fund compensates PIMS for distribution related activities at an annual rate of up to 0.30% and 1% of the average daily net assets of the Class A and Class C shares, respectively. PIMS has contractually agreed through July 31, 2019 to limit such fees to 0.25% of the average daily net assets of the Class A shares.
PIMS has advised the Fund that it received $66,169, in front-end sales charges resulting from sales of Class A shares during the six months ended September 30, 2018. From these fees, PIMS paid such sales charges to broker-dealers, who in turn paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Fund that for the six months ended September 30, 2018, it received $2,289 in contingent deferred sales charges imposed upon redemptions by certain Class C shareholders.
PGIM Investments, PIMS and QMA are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PGIM Investments 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.
The Fund may enter into certain securities purchase or sale transactions under Board approved Rule 17a-7 procedures. Rule 17a-7 is an exemptive rule under the 1940 Act, that, subject to certain conditions, permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. Such transactions are subject to ratification by the Board. For the reporting period ended September 30, 2018, no such transactions were entered into by the Fund.
The Fund may invest its overnight sweep cash in the PGIM Core Ultra Short Bond Fund (the “Core Fund”), a series of Prudential Investment Portfolios 2, registered under the 1940 Act and managed by PGIM Investments. Earnings from the Core Fund are disclosed on the Statement of Operations as “Affiliated dividend income”.
50 |
4. Portfolio Securities
The aggregate cost of purchases and proceeds from sales of portfolio securities (excluding short-term investments and U.S. Government securities) for the six months ended September 30, 2018, were $357,937,953 and $382,458,733, respectively.
A summary of the cost of purchases and proceeds from sales of shares of an affiliated mutual fund for the six months ended September 30, 2018, is presented as follows:
Affiliated Mutual Fund* | Value, Beginning of Period | Cost of Purchases | Proceeds from Sales | Change in Unrealized Gain (Loss) | Realized Gain (Loss) | Value, End of Period | Shares, End of Period | Dividend Income | ||||||||||||||||||||||||
PGIM Core Ultra Short Bond Fund | $ | 4,065,366 | $ | 58,969,740 | $ | 62,607,756 | $ | — | $ | — | $ | 427,350 | 427,350 | $ | 22,470 | |||||||||||||||||
|
|
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|
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|
|
* | The Fund did not have any capital gain distributions during the reporting period. |
5. Tax Information
The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of September 30, 2018 were as follows:
Tax Basis | $ | 183,580,297 | ||
|
| |||
Gross Unrealized Appreciation | 117,439,674 | |||
Gross Unrealized Depreciation | (59,694,958 | ) | ||
|
| |||
Net Unrealized Appreciation | $ | 57,744,716 | ||
|
|
The book basis may differ from tax basis due to certain tax-related adjustments.
Management has analyzed the Fund’s tax positions taken on federal, state and local 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, state and local 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.
6. Capital and Ownership
The Fund offers Class A, Class C, Class Z and Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 5.50%. Investors who purchase $1 million or more of Class A shares and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1%, although they are not subject to an initial sales charge. The Class A CDSC is waived for certain retirement and/or benefit plans. A special exchange privilege is also available for shareholders who qualified to purchase Class A shares at net asset value. Class C shares are sold with a CDSC of 1% on sales made within 12 months of purchase. Class Z and Class R6 shares are not subject to any sales or redemption charge and are offered exclusively for sale to a limited group of investors.
PGIM QMA Long-Short Equity Fund | 51 |
Notes to Financial Statements (unaudited) (continued)
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 Trust has authorized an unlimited number of shares of beneficial interest at $0.001 par value per share.
As of September 30, 2018, Prudential, through its affiliated entities, including affiliated funds (if applicable), owned 1,223,449 Class R6 shares of the Fund. At reporting period end, five shareholders of record held 82% of the Fund’s outstanding shares on behalf of multiple beneficial owners.
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Six months ended September 30, 2018: | ||||||||
Shares sold | 1,074,490 | $ | 13,740,652 | |||||
Shares reacquired | (389,859 | ) | (4,971,168 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 684,631 | 8,769,484 | ||||||
Shares issued upon conversion from other share class(es) | 6,449 | 82,452 | ||||||
Shares reacquired upon conversion into other share class(es) | (200,403 | ) | (2,575,685 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 490,677 | $ | 6,276,251 | |||||
|
|
|
| |||||
Year ended March 31, 2018: | ||||||||
Shares sold | 2,037,622 | $ | 25,503,997 | |||||
Shares reacquired | (519,201 | ) | (6,398,830 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 1,518,421 | 19,105,167 | ||||||
Shares issued upon conversion from other share class(es) | 14,593 | 183,701 | ||||||
Shares reacquired upon conversion into other share class(es) | (256,174 | ) | (3,154,920 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 1,276,840 | $ | 16,133,948 | |||||
|
|
|
| |||||
Class C | ||||||||
Six months ended September 30, 2018: | ||||||||
Shares sold | 383,933 | $ | 4,750,614 | |||||
Shares reacquired | (216,637 | ) | (2,685,528 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 167,296 | 2,065,086 | ||||||
Shares reacquired upon conversion into other share class(es) | (22,480 | ) | (278,391 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 144,816 | $ | 1,786,695 | |||||
|
|
|
| |||||
Year ended March 31, 2018: | ||||||||
Shares sold | 941,979 | $ | 11,404,623 | |||||
Shares reacquired | (708,299 | ) | (8,481,594 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 233,680 | 2,923,029 | ||||||
Shares reacquired upon conversion into other share class(es) | (32,158 | ) | (386,607 | ) | ||||
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|
|
| |||||
Net increase (decrease) in shares outstanding | 201,522 | $ | 2,536,422 | |||||
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|
|
52 |
Class Z | Shares | Amount | ||||||
Six months ended September 30, 2018: | ||||||||
Shares sold | 6,225,804 | $ | 80,298,004 | |||||
Shares reacquired | (5,412,761 | ) | (69,752,538 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 813,043 | 10,545,466 | ||||||
Shares issued upon conversion from other share class(es) | 219,791 | 2,854,076 | ||||||
Shares reacquired upon conversion into other share class(es) | (218,676 | ) | (2,818,830 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 814,158 | $ | 10,580,712 | |||||
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|
| |||||
Year ended March 31, 2018: | ||||||||
Shares sold | 17,698,176 | $ | 222,718,426 | |||||
Shares reacquired | (8,485,111 | ) | (105,491,893 | ) | ||||
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|
| |||||
Net increase (decrease) in shares outstanding before conversion | 9,213,065 | 117,226,533 | ||||||
Shares issued upon conversion from other share class(es) | 283,997 | 3,528,375 | ||||||
Shares reacquired upon conversion into other share class(es) | (1,304,854 | ) | (15,642,084 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 8,192,208 | $ | 105,112,824 | |||||
|
|
|
| |||||
Class R6 | ||||||||
Six months ended September 30, 2018: | ||||||||
Shares sold | 123,234 | $ | 1,601,548 | |||||
Shares reacquired | (61,168 | ) | (792,089 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 62,066 | 809,459 | ||||||
Shares issued upon conversion from other share class(es) | 212,296 | 2,736,378 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 274,362 | $ | 3,545,837 | |||||
|
|
|
| |||||
Period ended March 31, 2018*: | ||||||||
Shares sold | 57,883 | $ | 726,067 | |||||
Shares reacquired | (80,802 | ) | (1,013,192 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (22,919 | ) | (287,125 | ) | ||||
Shares issued upon conversion from other share class(es) | 1,291,447 | 15,471,535 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 1,268,528 | $ | 15,184,410 | |||||
|
|
|
|
* | Commencement of offering was May 25, 2017. |
7. Borrowings
The Trust, on behalf of 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 October 5, 2017 through October 4, 2018. The Funds pay an annualized commitment fee of 0.15% of the unused portion of the SCA. The Fund’s portion of the commitment fee for the unused amount, allocated based upon a method approved by the Board, is accrued daily and paid quarterly.
Subsequent to the reporting period end, the SCA was renewed effective October 4, 2018 and will continue to provide a commitment of $900 million through October 3, 2019. The commitment fee paid by the Funds will continue to be 0.15% of the unused portion of the SCA. The interest on borrowings under both SCAs is paid monthly and at a per annum interest rate based upon a contractual spread plus the higher of (1) the effective federal funds rate, (2) the 1-month London Interbank Offering Rate or (3) zero percent.
PGIM QMA Long-Short Equity Fund | 53 |
Notes to Financial Statements (unaudited) (continued)
Other affiliated registered investment companies that are parties to the SCA include portfolios that are subject to a predetermined mathematical formula used to manage certain benefit guarantees offered under variable annuity contracts. The formula may result in large scale asset flows into and out of these portfolios. Consequently, these portfolios may be more likely to utilize the SCA for purposes of funding redemptions. It may be possible for those portfolios to fully exhaust the committed amount of the SCA, thereby requiring the Manager to allocate available funding per a Board-approved methodology designed to treat the Funds in the SCA equitably.
The Fund utilized the SCA during the reporting period ended September 30, 2018. The average daily balance for the 22 days that the Fund had loans outstanding during the period was $1,310,273, borrowed at a weighted average interest rate of 3.23%. The maximum loan balance outstanding during the period was $3,881,000. At September 30, 2018, the Fund had an outstanding loan balance of $1,514,000.
8. Other Risks
The Fund’s risks include, but are not limited to, the risks discussed below:
Derivatives Risk: Derivatives involve special risks and costs and may result in losses to the Fund. The successful use of derivatives requires sophisticated management, and, to the extent that derivatives are used, the Fund will depend on the subadviser’s ability to analyze and manage derivatives transactions. The prices of derivatives may move in unexpected ways, especially in abnormal market conditions. Some derivatives are “leveraged” and therefore may magnify or otherwise increase investment losses to the Fund. The Fund’s use of derivatives may also increase the amount of taxes payable by shareholders. Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the Fund’s derivatives positions. In fact, many OTC derivative instruments will not have liquidity beyond the counterparty to the instrument. OTC derivative instruments also involve the risk that the other party will not meet its obligations to the Fund.
Equity and Equity-Related Securities Risks: The value of a particular security could go down and you could lose money. In addition to an individual security losing value, the value of the equity markets or a sector in which the Fund invests could go down. The Fund’s holdings can vary significantly from broad market indexes and the performance of the Fund can deviate from the performance of these indexes. Different parts of a market can react differently to adverse issuer, market, regulatory, political and economic developments.
Market and Credit Risk: Securities markets may be volatile and the market prices of the Fund’s securities may decline. Securities fluctuate in price based on changes in an issuer’s
54 |
financial condition and overall market and economic conditions. If the market prices of the securities owned by the Fund fall, the value of an investment in the Fund will decline. Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
Risks of Investing in Real Estate Investment Trusts (REITs): Real estate securities are subject to similar risks as direct investments in real estate and mortgages, and their value will depend on the value of the underlying properties or the underlying loans or interests. The underlying loans may be subject to the risks of default or of payments that occur earlier or later than expected, and such loans may also include so-called “subprime” mortgages. The value of these securities will rise and fall in response to many factors, Including economic conditions, the demand for rental property and interest rates. In particular, the value of these securities may decline when interest rates rise and will also be affected by the real estate market and by the management of the underlying properties.
In addition, investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the quality of any credit extended. REITs are dependent upon management skills, may not be diversified geographically or by property/mortgage asset type, and are subject to heavy cash flow dependency, default by borrowers and self-liquidation. Since REITs are relatively smaller in size when compared to the broader market, and smaller companies tend to be more volatile than larger companies, they may be more volatile and/or more illiquid than other types of equity securities. REITs (especially mortgage REITs) are subject to interest rate risks. REITs may incur significant amounts of leverage. The Fund will indirectly bear a portion of the expenses, including management fees, paid by each REIT in which it invests, in addition to the expenses of the Fund.
Short Sales Risk: Short sales involve costs and risks. The Fund must pay the lender interest on the security it borrows, and the Fund will lose money to the extent that the price of the security increases between the time of the short sale and the date when the Fund replaces the borrowed security. Although the Fund’s gain is limited to the price at which it sold the securities short, its potential loss is limited only by the maximum attainable price of the securities, less the price at which the security was sold and may, theoretically, be unlimited. When selling short against the box (i.e. short selling securities which the Fund already owns), the Fund gives up the opportunity for capital appreciation in the security.
9. Recent Accounting Pronouncements and Reporting Updates
In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, which changes certain fair value measurement disclosure requirements. The new ASU, in addition to other modifications and additions, removes the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, and the Fund’s policy for the timing of transfers between levels. The amendments are
PGIM QMA Long-Short Equity Fund | 55 |
Notes to Financial Statements (unaudited) (continued)
effective for financial statements issued for fiscal years beginning after December, 15, 2019, and interim periods within those fiscal years. Management has evaluated the implications of certain other provisions of the ASU and has determined to early adopt aspects related to the removal and modifications of certain fair value measurement disclosures under the ASU effective immediately. At this time, management is evaluating the implications of certain other provisions of the ASU related to new disclosure requirements and any impact on the financial statement disclosures has not yet been determined.
56 |
Financial Highlights (unaudited)
Class A Shares | ||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | May 29, 2014(a) through March 31, | ||||||||||||||||||||||||||
2018 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $12.56 | $11.86 | $11.35 | $11.00 | $10.00 | |||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.01 | (0.04 | ) | (0.07 | ) | (0.01 | ) | (0.05 | ) | |||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 0.37 | 0.74 | 0.77 | 0.41 | 1.12 | |||||||||||||||||||||||
Total from investment operations | 0.38 | 0.70 | 0.70 | 0.40 | 1.07 | |||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||
Distributions from net realized gains | - | - | (0.19 | ) | (0.05 | ) | (0.07 | ) | ||||||||||||||||||||
Net asset value, end of period | $12.94 | $12.56 | $11.86 | $11.35 | $11.00 | |||||||||||||||||||||||
Total Return(c): | 3.03% | 5.90% | 6.17% | 3.67% | 10.73% | |||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000) | $59,483 | $51,585 | $33,579 | $83,612 | $306 | |||||||||||||||||||||||
Average net assets (000) | $52,895 | $39,444 | $69,722 | $28,971 | $93 | |||||||||||||||||||||||
Ratios to average net assets(d): | ||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(e) | 2.20% | (f) | 2.44% | 2.30% | 2.45% | 2.41% | (f) | |||||||||||||||||||||
Expenses before waivers and/or expense reimbursement(e) | 2.32% | (f) | 2.59% | (g) | 2.44% | 2.64% | 3.61% | (f) | ||||||||||||||||||||
Net investment income (loss) | 0.15% | (f) | (0.35)% | (0.59)% | (0.07)% | (0.61)% | (f) | |||||||||||||||||||||
Portfolio turnover rate(h) | 46% | (i) | 83% | 83% | 160% | 131% | (i) |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | 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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The expense ratio includes dividend expense and broker fees and expenses on short sales of 0.70%, 0.94%, 0.72%, 0.70% and 0.63%, for the six months ended September 30, 2018, years ended March 31, 2018, March 31, 2017, March 31, 2016 and the period ended March 31, 2015, respectively. |
(f) | Annualized. |
(g) | Effective January 1, 2018, class specific expenses include Transfer Agent Fees and expenses and Registration Fees, which are charged to their respective share class. |
(h) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(i) | Not annualized. |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 57 |
Financial Highlights (unaudited) (continued)
Class C Shares | ||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | May 29, 2014(a) through March 31, | ||||||||||||||||||||||||||
2018 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $12.20 | $11.61 | $11.20 | $ 10.93 | $10.00 | |||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income (loss) | (0.04 | ) | (0.14 | ) | (0.15 | ) | (0.08 | ) | (0.12 | ) | ||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 0.36 | 0.73 | 0.75 | 0.40 | 1.12 | |||||||||||||||||||||||
Total from investment operations | 0.32 | 0.59 | 0.60 | 0.32 | 1.00 | |||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||
Distributions from net realized gains | - | - | (0.19 | ) | (0.05 | ) | (0.07 | ) | ||||||||||||||||||||
Net asset value, end of period | $12.52 | $12.20 | $11.61 | $ 11.20 | $10.93 | |||||||||||||||||||||||
Total Return(c): | 2.62% | 5.08% | 5.35% | 2.96% | 10.03% | |||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000) | $39,682 | $36,903 | $32,783 | $22,165 | $214 | |||||||||||||||||||||||
Average net assets (000) | $38,448 | $34,263 | $29,401 | $ 5,719 | $56 | |||||||||||||||||||||||
Ratios to average net assets(d): | ||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(e) | 2.95% | (f) | 3.21% | 3.08% | 3.22% | 3.16% | (f) | |||||||||||||||||||||
Expenses before waivers and/or expense reimbursement(e) | 3.04% | (f) | 3.31% | (g) | 3.19% | 3.37% | 4.32% | (f) | ||||||||||||||||||||
Net investment income (loss) | (0.60)% | (f) | (1.12)% | (1.31)% | (0.74)% | (1.38)% | (f) | |||||||||||||||||||||
Portfolio turnover rate(h) | 46% | (i) | 83% | 83% | 160% | 131% | (i) |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | 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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The expense ratio includes dividend expense and broker fees and expenses on short sales of 0.70%, 0.96%, 0.77%, 0.71% and 0.65%, for the six months ended September 30, 2018, years ended March 31, 2018, March 31, 2017, March 31, 2016 and the period ended March 31, 2015, respectively. |
(f) | Annualized. |
(g) | Effective January 1, 2018, class specific expenses include Transfer Agent Fees and expenses and Registration Fees, which are charged to their respective share class. |
(h) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(i) | Not annualized. |
See Notes to Financial Statements.
58 |
Class Z Shares | ||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | May 29, 2014(a) through March 31, | ||||||||||||||||||||||||||
2018 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $12.69 | $11.95 | $ 11.41 | $11.03 | $10.00 | |||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.03 | (0.01 | ) | (0.04 | ) | (0.01 | ) | (0.04 | ) | |||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 0.36 | 0.75 | 0.77 | 0.44 | 1.14 | |||||||||||||||||||||||
Total from investment operations | 0.39 | 0.74 | 0.73 | 0.43 | 1.10 | |||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||
Distributions from net realized gains | - | - | (0.19 | ) | (0.05 | ) | (0.07 | ) | ||||||||||||||||||||
Net asset value, end of period | $13.08 | $12.69 | $ 11.95 | $11.41 | $11.03 | |||||||||||||||||||||||
Total Return(c): | 3.07% | 6.19% | 6.40% | 3.93% | 11.03% | |||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000) | $418,454 | $395,409 | $274,663 | $163,592 | $38,825 | |||||||||||||||||||||||
Average net assets (000) | $405,657 | $312,993 | $199,471 | $67,895 | $23,245 | |||||||||||||||||||||||
Ratios to average net assets(d): | ||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(e) | 1.95% | (f) | 2.19% | 2.08% | 2.18% | 2.12% | (f) | |||||||||||||||||||||
Expenses before waivers and/or expense reimbursement(e) | 1.99% | (f) | 2.27% | (g) | 2.19% | 2.40% | 3.27% | (f) | ||||||||||||||||||||
Net investment income (loss) | 0.40% | (f) | (0.11)% | (0.31)% | (0.07)% | (0.44)% | (f) | |||||||||||||||||||||
Portfolio turnover rate(h) | 46% | (i) | 83% | 83% | 160% | 131% | (i) |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. (d) Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The expense ratio includes dividend expense and broker fees and expenses on short sales of 0.70%, 0.94%, 0.78%, 0.68% and 0.62%, for the six months ended September 30, 2018, years ended March 31, 2018, March 31, 2017, March 31, 2016 and the period ended March 31, 2015, respectively. |
(f) | Annualized. |
(g) | Effective January 1, 2018, class specific expenses include Transfer Agent Fees and expenses and Registration Fees, which are charged to their respective share class. |
(h) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(i) | Not annualized. |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 59 |
Financial Highlights (unaudited) (continued)
Class R6 Shares | ||||||||||||
Six Months Ended September 30, 2018 | May 25, 2017(a) through March 31, 2018 | |||||||||||
Per Share Operating Performance(b): | ||||||||||||
Net Asset Value, Beginning of Period | $12.68 | $11.98 | ||||||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income (loss) | 0.03 | (0.01 | ) | |||||||||
Net realized and unrealized gain (loss) on investment transactions | 0.37 | 0.71 | ||||||||||
Total from investment operations | 0.40 | 0.70 | ||||||||||
Net asset value, end of period | $13.08 | $12.68 | ||||||||||
Total Return(c): | 3.15% | 5.84% | ||||||||||
Ratios/Supplemental Data: | ||||||||||||
Net assets, end of period (000) | $20,184 | $16,090 | ||||||||||
Average net assets (000) | $18,001 | $15,834 | ||||||||||
Ratios to average net assets(d): | ||||||||||||
Expenses after waivers and/or expense reimbursement(e) | 1.96% | (f) | 2.24% | (f) | ||||||||
Expenses before waivers and/or expense reimbursement(e) | 1.98% | (f) | 2.30% | (f)(g) | ||||||||
Net investment income (loss) | 0.40% | (f) | (0.05)% | (f) | ||||||||
Portfolio turnover rate(h) | 46% | (i) | 83% | (i) |
(a) | Commencement of offering. |
(b) | Calculated based on average shares outstanding during the period. |
(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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The expense ratio includes dividend expense and broker fees and expenses on short sales of 0.71% and 0.99%, for the six months ended September 30, 2018 and the period ended March 31, 2018, respectively. |
(f) | Annualized. |
(g) | Effective January 1, 2018, class specific expenses include Transfer Agent Fees and expenses and Registration Fees, which are charged to their respective share class. |
(h) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(i) | Not annualized. |
See Notes to Financial Statements.
60 |
Approval of Advisory Agreements (unaudited)
The Fund’s Board of Trustees
The Board of Trustees (the “Board”) of PGIM QMA Long-Short Equity Fund (the “Fund”)1 consists of twelve individuals, nine of whom are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Trustees”). The Board is responsible for the oversight of the Fund and its operations, and performs the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Trustees have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Trustee. The Board has established four standing committees: the Audit Committee, the Nominating and Governance Committee, and two Investment Committees. Each committee is chaired by, and composed of, Independent Trustees.
Annual Approval of the Fund’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Fund’s management agreement with PGIM Investments LLC (“PGIM Investments”) and the Fund’s subadvisory agreement with Quantitative Management Associates LLC (“QMA”). In considering the renewal of the agreements, the Board, including all of the Independent Trustees, met on June 7, 2018 and on June 19-21, 2018 and approved the renewal of the agreements through July 31, 2019, after concluding that the renewal of the agreements was in the best interests of the Fund and its shareholders.
In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with its consideration. Among other things, the Board considered comparative fee information from PGIM Investments and QMA. Also, the Board considered comparisons with other mutual funds in relevant Peer Universes and Peer Groups, as is further discussed below.
In approving the agreements, the Board, including the Independent Trustees advised by independent legal counsel, considered the factors it deemed relevant, including the nature, quality and extent of services provided by PGIM Investments and the subadviser, the performance of the Fund, the profitability of PGIM Investments and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Fund and its shareholders as the Fund’s assets grow. In their deliberations, the Trustees did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund. In connection with its deliberations, the Board considered information provided by PGIM Investments throughout the year at regular Board meetings, presentations from portfolio managers and other information, as well as
1 | PGIM QMA Long-Short Equity Fund is a series of Prudential Investment Portfolios 12. |
PGIM QMA Long-Short Equity Fund |
Approval of Advisory Agreements (continued)
information furnished at or in advance of the meetings on June 7, 2018 and on June 19-21, 2018.
The Trustees determined that the overall arrangements between the Fund and PGIM Investments, which serves as the Fund’s investment manager pursuant to a management agreement, and between PGIM Investments and QMA, which serves as the Fund’s subadviser pursuant to the terms of a subadvisory agreement with PGIM Investments, are in the best interests of the Fund and its shareholders in light of the services performed, fees charged and such other matters as the Trustees considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Trustees’ reaching their determinations to approve the continuance of the agreements are separately discussed below.
Nature, Quality and Extent of Services
The Board received and considered information regarding the nature, quality and extent of services provided to the Fund by PGIM Investments and QMA. The Board considered the services provided by PGIM Investments, including but not limited to the oversight of the subadviser for the Fund, as well as the provision of fund recordkeeping, compliance, and other services to the Fund. With respect to PGIM Investments’ oversight of the subadviser, the Board noted that PGIM Investments’ Strategic Investment Research Group (“SIRG”), which is a business unit of PGIM Investments, is responsible for monitoring and reporting to PGIM Investments’ senior management on the performance and operations of the subadviser. The Board also considered that PGIM Investments pays the salaries of all of the officers and interested Trustees of the Fund who are part of Fund management. The Board also considered the investment subadvisory services provided by QMA, including investment research and security selection, as well as adherence to the Fund’s investment restrictions and compliance with applicable Fund policies and procedures. The Board considered PGIM Investments’ evaluation of the subadviser, as well as PGIM Investments’ recommendation, based on its review of the subadviser, to renew the subadvisory agreement.
The Board considered the qualifications, backgrounds and responsibilities of PGIM Investments’ senior management responsible for the oversight of the Fund and QMA, and also considered the qualifications, backgrounds and responsibilities of QMA’s portfolio managers who are responsible for the day-to-day management of the Fund’s portfolio. The Board was provided with information pertaining to PGIM Investments’ and QMA’s organizational structure, senior management, investment operations, and other relevant information pertaining to both PGIM Investments and QMA. The Board also noted that it received favorable compliance reports from the Fund’s Chief Compliance Officer (“CCO”) as to both PGIM Investments and QMA. The Board noted that QMA is affiliated with PGIM Investments.
Visit our website at pgiminvestments.com |
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PGIM Investments and the subadvisory services provided to the Fund by QMA, and that there was a reasonable basis on which to conclude that the Fund benefits from the services provided by PGIM Investments and QMA under the management and subadvisory agreements.
Costs of Services and Profits Realized by PGIM Investments
The Board was provided with information on the profitability of PGIM Investments and its affiliates in serving as the Fund’s investment manager. The Board discussed with PGIM Investments the methodology utilized in assembling the information regarding profitability and considered its reasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure and cost of capital. Taking these factors into account, the Board concluded that the profitability of PGIM Investments and its affiliates in relation to the services rendered was not unreasonable.
Economies of Scale
The Board received and discussed information concerning economies of scale that PGIM Investments may realize as the Fund’s assets grow beyond current levels. The Board noted that the management fee schedule for the Fund includes breakpoints, which have the effect of reducing the fee rate as assets increase. During the course of time, the Board has considered information regarding the launch date of the Fund, the management fees of the Fund compared to those of similarly managed funds and PGIM Investments’ investment in the Fund over time. The Board noted that economies of scale can be shared with the Fund in other ways, including low management fees from inception, additional technological and personnel investments to enhance shareholder services, and maintaining existing expense structures in the face of a rising cost environment. The Board also considered PGIM Investments’ assertion that it continually evaluates the management fee schedule of the Fund and the potential to share economies of scale through breakpoints or fee waivers as asset levels increase.
The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of PGIM Investments’ costs are not specific to individual funds, but rather are incurred across a variety of products and services.
PGIM QMA Long-Short Equity Fund |
Approval of Advisory Agreements (continued)
Other Benefits to PGIM Investments and QMA
The Board considered potential ancillary benefits that might be received by PGIM Investments, QMA and their affiliates as a result of their relationship with the Fund. The Board concluded that potential benefits to be derived by PGIM Investments included transfer agency fees received by the Fund’s transfer agent (which is affiliated with PGIM Investments), and benefits to its reputation as well as other intangible benefits resulting from PGIM Investments’ association with the Fund. The Board concluded that the potential benefits to be derived by QMA included its ability to use soft dollar credits, as well as the potential benefits consistent with those generally resulting from an increase in assets under management, specifically, potential access to additional research resources and benefits to its reputation. The Board concluded that the benefits derived by PGIM Investments and QMA were consistent with the types of benefits generally derived by investment managers and subadvisers to mutual funds.
Performance of the Fund / Fees and Expenses
The Board considered certain additional specific factors and made related conclusions relating to the historical performance of the Fund for the one- and three-year periods ended December 31, 2017. The Board considered that the Fund commenced operations on May 29, 2014 and that longer-term performance was not yet available.
The Board also considered the Fund’s actual management fee, as well as the Fund’s net total expense ratio, for the fiscal year ended March 31, 2017. The Board considered the management fee for the Fund as compared to the management fee charged by PGIM Investments to other funds and the fee charged by other advisers to comparable mutual funds in a Peer Group. The actual management fee represents the fee rate actually paid by Fund shareholders and includes any fee waivers or reimbursements. The net total expense ratio for the Fund represents the actual expense ratio incurred by Fund shareholders.
The mutual funds included in the Peer Universe, which was used to consider performance, and the Peer Group, which was used to consider expenses and fees, were objectively determined by Broadridge, an independent provider of mutual fund data. In certain circumstances, PGIM Investments also may have provided supplemental Peer Universe or Peer Group information for reasons addressed with the Board. The comparisons placed the Fund in various quartiles, with the first quartile being the best 25% of the mutual funds (for performance, the best performing mutual funds and, for expenses, the lowest cost mutual funds).
The section below summarizes key factors considered by the Board and the Board’s conclusions regarding the Fund’s performance, fees and overall expenses. The table sets
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forth gross performance comparisons (which do not reflect the impact on performance of fund expenses, or any subsidies, expense caps or waivers that may be applicable) with the Peer Universe, actual management fees with the Peer Group (which reflect the impact of any subsidies or fee waivers), and net total expenses with the Peer Group, each of which were key factors considered by the Board.
Gross Performance | 1 Year | 3 Years | 5 Years | 10 Years | ||||
3rd Quartile | 1st Quartile | N/A | N/A | |||||
Actual Management Fees: 2nd Quartile | ||||||||
Net Total Expenses: 1st Quartile |
• | The Board noted that the Fund underperformed its benchmark index over all periods. |
• | The Board also considered that, when it evaluated performance the prior year, the Fund ranked in the first quartile of its peers for the one-year period ended December 31, 2016. |
• | The Board and PGIM Investments agreed to retain the Fund’s existing contractual expense cap which (exclusive of certain fees and expenses), caps the Fund’s annual operating expenses at 1.50% for Class A shares, 2.25% for Class C shares, 1.25% for Class Z shares, and 1.25% for Class R6 shares through July 31, 2019. |
• | The Board concluded that, in light of the above, it would be in the best interests of the Fund and its shareholders to renew the agreements. |
• | The Board concluded that the management fees (including subadvisory fees) and total expenses were reasonable in light of the services provided. |
* * *
After full consideration of these factors, the Board concluded that the approval of the agreements was in the best interests of the Fund and its shareholders.
PGIM QMA Long-Short Equity Fund |
∎ TELEPHONE | ∎ WEBSITE | |||
655 Broad Street Newark, NJ 07102 | (800) 225-1852 | www.pgiminvestments.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 |
Ellen S. Alberding • Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Barry H. Evans • Keith F. Hartstein • Laurie Simon Hodrick • Michael S. Hyland • Stuart S. Parker • Richard A. Redeker • Brian K. Reid • Grace C. Torres |
OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • Brian D. Nee, Treasurer and Principal Financial and Accounting Officer • Raymond A. O’Hara, Chief Legal Officer • Andrew R. French, Secretary • Chad A. Earnst, Chief Compliance Officer • Dino Capasso, Vice President and Deputy Chief Compliance Officer • Charles H. Smith, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • Peter Parrella, Assistant Treasurer • Lana Lomuti, Assistant Treasurer • Linda McMullin, Assistant Treasurer • Kelly A. Coyne, Assistant Treasurer |
MANAGER | PGIM Investments LLC | 655 Broad Street Newark, NJ 07102 | ||
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INVESTMENT SUBADVISER | Quantitative Management Associates LLC | Gateway Center Two 100 Mulberry Street Newark, NJ 07102 | ||
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DISTRIBUTOR | Prudential Investment Management Services LLC | 655 Broad Street Newark, NJ 07102 | ||
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CUSTODIAN | The Bank of New York Mellon | 225 Liberty Street New York, NY 10286 | ||
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TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
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FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 | ||
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An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.pgiminvestments.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.pgiminvestments.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, PGIM QMA Long-Short Equity Fund, PGIM Investments, Attn: Board of Trustees, 655 Broad Street, 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 schedule of portfolio holdings is also available on the Fund’s website as of the end of each month no sooner than 15 days after the end of the 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 |
PGIM QMA LONG-SHORT EQUITY FUND
SHARE CLASS | A | C | Z | R6* | ||||||
NASDAQ | PLHAX | PLHCX | PLHZX | PLHQX | ||||||
CUSIP | 744336868 | 744336850 | 744336843 | 744336736 |
* Formerly known as Class Q shares.
MF221E2
PGIM SHORT DURATION MUNI HIGH INCOME FUND
(Formerly known as Prudential Short Duration Muni High Income Fund)
SEMIANNUAL REPORT
SEPTEMBER 30, 2018
To enroll in e-delivery, go to pgiminvestments.com/edelivery
Objective: Maximum amount of income that is eligible for exclusion from federal income taxes |
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The information about the Fund’s portfolio holdings is for the period covered by this report and is subject to change thereafter.
The accompanying financial statements as of September 30, 2018 were not audited and, accordingly, no auditor’s opinion is expressed on them.
Mutual funds are distributed by Prudential Investment Management Services LLC (PIMS), member SIPC. PGIM Fixed Income is a unit of PGIM, Inc. (PGIM), a registered investment adviser. PIMS and PGIM are Prudential Financial companies. © 2018 Prudential Financial, Inc. and its related entities. PGIM and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
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PGIM FUNDS — UPDATE
The Board of Directors/Trustees for the Fund has approved the implementation of an automatic conversion feature for Class C shares, effective as of April 1, 2019. To reflect these changes, effective April 1, 2019, the section of the Fund’s Prospectus entitled “How to Buy, Sell and Exchange Fund Shares—How to Exchange Your Shares—Frequent Purchases and Redemptions of Fund Shares” is restated to read as follows:
This supplement should be read in conjunction with your Summary Prospectus, Statutory Prospectus and Statement of Additional Information, be retained for future reference and is in addition to any existing Fund supplements.
1. | In each Fund’s Statutory Prospectus, the following is added at the end of the section entitled “Fund Distributions And Tax Issues—If You Sell or Exchange Your Shares”: |
Automatic Conversion of Class C Shares
The conversion of Class C shares into Class A shares—which happens automatically approximately 10 years after purchase—is not a taxable event for federal income tax purposes. For more information about the automatic conversion of Class C shares, see Class C Shares Automatically Convert to Class A Shares in How to Buy, Sell and Exchange Fund Shares.
2. | In each Fund’s Statutory Prospectus, the following sentence is added at the end of the section entitled “How to Buy, Sell and Exchange Shares—Closure of Certain Share Classes to New Group Retirement Plans”: |
Shareholders owning Class C shares may continue to hold their Class C shares until the shares automatically convert to Class A shares under the conversion schedule, or until the shareholder redeems their Class C shares.
3. | In each Fund’s Statutory Prospectus, the following disclosure is added immediately following the section entitled “How to Buy, Sell and Exchange Shares—How to Buy Shares—Class B Shares Automatically Convert to Class A Shares”: |
Class C Shares Automatically Convert to Class A Shares
Starting on or about April 1, 2019 (the “Effective Date”), Class C shares will be eligible for automatic conversion into Class A shares on a monthly basis approximately ten years after the original date of purchase (the “Conversion Date”). Conversion will take place based on the relative NAV of the two classes, without the imposition of any sales load, fee or other charge. All such automatic conversions of Class C shares will constitute tax-free exchanges for federal income tax purposes.
For shareholders investing in Class C shares through retirement plans or omnibus accounts, and in certain other instances, the Fund and its agents may not have
PGIM Short Duration Muni High Income Fund | 3 |
transparency into how long a shareholder has held Class C shares for purposes of determining whether such Class C shares are eligible for automatic conversion into Class A shares, and the relevant financial intermediary may not have the ability to track purchases in order to credit individual shareholders’ holding periods. In these circumstances, the Fund will not be able to automatically convert Class C shares into Class A shares as described above. In order to determine eligibility for conversion in these circumstances, it is the responsibility of the financial intermediary to notify the Fund that the shareholder is eligible for the conversion of Class C shares to Class A shares, and the financial intermediary may be required to maintain and provide the Fund with records that substantiate the holding period of Class C shares. It is the financial intermediary’s (and not the Fund’s) responsibility to keep records of transactions made in accounts it holds and to ensure that the shareholder is credited with the proper holding period based on such records or those provided to the financial intermediary by the shareholder. Please consult with your financial intermediary for the applicability of this conversion feature to your shares.
A financial intermediary may sponsor and/or control accounts, programs or platforms that impose a different conversion schedule or different eligibility requirements for the exchange of Class C shares for Class A shares (see Appendix A: Waivers and Discounts Available From Certain Financial Intermediaries of the Prospectus). Please consult with your financial intermediary if you have any questions regarding your shares’ conversion from Class C shares to Class A shares.
4. | In Part II of each Fund’s Statement of Additional Information, the following disclosure is added immediately following the section entitled “Purchase, Redemption and Pricing of Fund Shares—Share Classes—Automatic Conversion of Class B Shares”: |
AUTOMATIC CONVERSION OF CLASS C SHARES. Starting on or about April 1, 2019 (the “Effective Date”), Class C shares will be eligible for automatic conversion into Class A shares on a monthly basis approximately ten years after the original date of purchase (the “Conversion Date”). Conversion will take place based on the relative NAV of the two classes, without the imposition of any sales load, fee or other charge. Class C shares of a Fund acquired through automatic reinvestment of dividends or distributions will convert to Class A shares of the Fund on the Conversion Date pro rata with the converting Class C shares of the Fund that were not acquired through reinvestment of dividends or distributions. All such automatic conversions of Class C shares will constitute tax-free exchanges for federal income tax purposes.
For shareholders investing in Class C shares through retirement plans or omnibus accounts, and in certain other instances, the Fund and its agents may not have transparency into how long a shareholder has held Class C shares for purposes of determining whether such Class C shares are eligible for automatic conversion into Class A shares, and the relevant financial intermediary may not have the ability to track purchases in order to credit individual shareholders’ holding periods. In these circumstances, the
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Fund will not be able to automatically convert Class C shares into Class A shares as described above. In order to determine eligibility for conversion in these circumstances, it is the responsibility of the financial intermediary to notify the Fund that the shareholder is eligible for the conversion of Class C shares to Class A shares, and the financial intermediary may be required to maintain and provide the Fund with records that substantiate the holding period of Class C shares. It is the financial intermediary’s (and not the Fund’s) responsibility to keep records of transactions made in accounts it holds and to ensure that the shareholder is credited with the proper holding period based on such records or those provided to the financial intermediary by the shareholder. Please consult with your financial intermediary for the applicability of this conversion feature to your shares.
Class C shares were generally closed to investments by new group retirement plans effective June 1, 2018. Group retirement plans (and their successor, related and affiliated plans) that have Class C shares of the Fund available to participants on or before the Effective Date may continue to open accounts for new participants in such share class and purchase additional shares in existing participant accounts.
The Fund has no responsibility for monitoring or implementing a financial intermediary’s process for determining whether a shareholder meets the required holding period for conversion. A financial intermediary may sponsor and/or control accounts, programs or platforms that impose a different conversion schedule or different eligibility requirements for the exchange of Class C shares for Class A shares, as set forth on Appendix A: Waivers and Discounts Available From Certain Financial Intermediaries of the Prospectus. In these cases, Class C shareholders may have their shares exchanged for Class A shares under the policies of the financial intermediary. Financial intermediaries will be responsible for making such exchanges in those circumstances. Please consult with your financial intermediary if you have any questions regarding your shares’ conversion from Class C shares to Class A shares.
LR1094
- Not part of the Semiannual Report -
PGIM Short Duration Muni High Income Fund | 5 |
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Dear Shareholder:
We hope you find the semiannual report for the PGIM Short Duration Muni High Income Fund informative and useful. The report covers performance for the six-month period ended September 30, 2018.
We have important information to share with you. Effective June 11, 2018, Prudential Mutual Funds were renamed PGIM Funds. This renaming is part of our ongoing effort to further build our reputation and establish our global brand, which began when our firm adopted PGIM Investments as its name in April 2017. Please note that only the Fund’s name has changed. Your Fund’s management and operation, along with its symbols, remained the same.*
Regarding your investments with PGIM, we believe it is important 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. However, diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
At PGIM Investments, we consider it a great privilege and responsibility to help investors participate in opportunities across global markets while meeting their toughest investment challenges. PGIM is a top-10 global investment manager with more than $1 trillion in assets under management. This investment expertise allows us to deliver actively managed funds and strategies to meet the needs of investors around the globe.
Thank you for choosing our family of funds.
Sincerely,
Stuart S. Parker, President
PGIM Short Duration Muni High Income Fund
November 15, 2018
*The Prudential Day One Funds did not change their names.
PGIM Short Duration Muni High Income Fund | 7 |
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.pgiminvestments.com or by calling (800) 225-1852.
Total Returns as of 9/30/18 (without sales charges) | Average Annual Total Returns as of 9/30/18 (with sales charges) | |||||
Six Months* (%) | One Year (%) | Since Inception (%) | ||||
Class A | 0.77 | –2.46 | 1.50 (5/29/14) | |||
Class C | 0.39 | –0.92 | 1.49 (5/29/14) | |||
Class Z | 0.89 | 1.06 | 2.51 (5/29/14) | |||
Class R6** | 0.89 | 1.06 | 1.83 (5/25/17) | |||
Bloomberg Barclays Short Duration Muni 50% HG / 50% HY Index | ||||||
2.78 | 2.53 | — | ||||
Bloomberg Barclays Municipal Bond Index | ||||||
0.72 | 0.35 | — | ||||
Lipper High Yield Municipal Debt Funds Average | ||||||
1.86 | 2.84 | — |
*Not annualized
**Formerly known as Class Q shares.
Source: PGIM Investments LLC, Lipper Inc. and Bloomberg Barclays
Since Inception returns are provided for any share class with less than 10 fiscal years of returns. Since Inception returns for the Indexes and the Lipper Average are measured from the closest month-end to the class’ inception date.
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The returns in the tables do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or following the redemption of Fund shares. The average annual total returns take into account applicable sales charges, which are described for each share class in the table below.
Class A | Class C | Class Z | Class R6* | |||||
Maximum initial sales charge | 3.25% of the public offering price | None | None | None | ||||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or net asset value at redemption) | 1.00% on sales of $1 million or more made within 12 months of purchase | 1.00% on sales made within 12 months of purchase | None | None | ||||
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | 0.25% | 1.00% | None | None |
*Formerly known as Class Q
Benchmark Definitions
Bloomberg Barclays Short Duration Muni 50% HG / 50% HY Index—The Bloomberg Barclays Short Duration Muni 50% HG / 50% HY Index consists of the Bloomberg Barclays Municipal Bond 1-8 Year Index (50%), which is an unmanaged index that includes all benchmark-eligible investment-grade municipal bonds with maturities from 1 to 8 years, and the Bloomberg Barclays Municipal High Yield 1-8 Year Index (50%), which is an unmanaged index that includes all benchmark-eligible Ba1 or lower rated and non-rated municipal bonds with maturities from 1 to 8 years. The average annual total return for the Index measured from the month-end closest to the inception date of the Fund’s Class A, C, and Z shares is 1.28% and 2.58% for Class R6 shares.
Bloomberg Barclays Municipal Bond Index—The Bloomberg Barclays Municipal Bond Index is an unmanaged index of long-term investment-grade municipal bonds. It gives a broad look at how long-term investment-grade municipal bonds have performed. The average annual total return for the Index measured from the month-end closest to the inception date of the Fund’s Class A, C, and Z shares is 2.65% and 0.78% for Class R6 shares.
Lipper High Yield Municipal Debt Funds Average—The Lipper High Yield Municipal Debt Funds Average (Lipper Average) is based on the average return of all funds in the Lipper High Yield Municipal Debt Funds universe for the periods noted. The Lipper High Yield Municipal Debt Funds Average consists of funds that typically invest 50% or more of their assets in municipal debt issues rated BBB or lower. The average annual total return for the Average measured from the month-end closest to the inception date of the Fund’s Class A, C, and Z shares is 4.39% and 3.34% for Class R6 shares.
Investors cannot invest directly in an index. The returns for the Indexes would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses, but not sales charges or taxes.
PGIM Short Duration Muni High Income Fund | 9 |
Your Fund’s Performance (continued)
Distributions and Yields as of 9/30/18 | ||||||||||||||
Total Distributions Paid for Six Months ($) | SEC 30-Day Subsidized Yield* (%) | Taxable Equivalent 30-Day Subsidized Yield*** at Federal Tax Rates of | SEC 30-Day Unsubsidized Yield** (%) | Taxable Equivalent 30-Day Unsubsidized Yield*** at Federal Tax Rates of | ||||||||||
37.00% | 40.80% | 37.00% | 40.80% | |||||||||||
Class A | 0.11 | 2.17 | 3.44 | 3.67 | 1.99 | 3.16 | 3.36 | |||||||
Class C | 0.07 | 1.49 | 2.37 | 2.52 | 1.26 | 2.00 | 2.13 | |||||||
Class Z | 0.12 | 2.50 | 3.97 | 4.22 | 2.28 | 3.62 | 3.85 | |||||||
Class R6**** | 0.12 | 2.50 | 3.97 | 4.22 | 1.40 | 2.22 | 2.36 |
*SEC 30-Day Subsidized Yield (%)—A standardized yield calculation created by the Securities and Exchange Commission, it reflects the income earned during a 30-day period, after the deduction of the Fund’s net expenses (net of any expense waivers or reimbursements).
**SEC 30-Day Unsubsidized Yield (%)—A standardized yield calculation created by the Securities and Exchange Commission, it reflects the income earned during a 30-day period, after the deduction of the Fund’s gross expenses.
***The taxable equivalent yield is the yield an investor would have to earn on a taxable investment in order to equal the yield provided by a tax-exempt municipal bond. Some investors may be subject to the federal alternative minimum tax (AMT). Taxable equivalent yields reflect federal tax rates.
****Formerly known as Class Q
Credit Quality expressed as a percentage of total investments as of 9/30/18 (%) | ||||
AAA | 1.8 | |||
AA | 19.1 | |||
A | 28.1 | |||
BBB | 29.5 | |||
BB | 9.0 | |||
B | 4.3 | |||
Not Rated | 7.0 | |||
Cash/Cash Equivalents | 1.2 | |||
Total Investments | 100.0 |
Source: PGIM Fixed Income
Credit ratings reflect the highest rating assigned by a nationally recognized statistical rating organization (NRSRO) such as Moody’s Investors Service, Inc. (Moody’s), S&P Global Ratings (S&P), or Fitch, Inc. (Fitch). Credit ratings reflect the common nomenclature used by both S&P and Fitch. Where applicable, ratings are converted to the comparable S&P/Fitch rating tier nomenclature. These rating agencies are independent and are widely used. The Not Rated category consists of securities that have not been rated by a NRSRO. Credit ratings are subject to change. Values may not sum to 100.0% due to rounding.
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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 held through the six-month period ended September 30, 2018. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of PGIM funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over
PGIM Short Duration Muni High Income Fund | 11 |
Fees and Expenses (continued)
the six-month period when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information provided in the expense table. Additional fees have the effect of reducing investment returns.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
PGIM Short Duration Muni High Income Fund | Beginning Account Value April 1, 2018 | Ending Account Value September 30, 2018 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,007.70 | 0.85 | % | $ | 4.28 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.81 | 0.85 | % | $ | 4.31 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,003.90 | 1.60 | % | $ | 8.04 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,017.05 | 1.60 | % | $ | 8.09 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,008.90 | 0.60 | % | $ | 3.02 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,022.06 | 0.60 | % | $ | 3.04 | ||||||||||
Class R6** | Actual | $ | 1,000.00 | $ | 1,008.90 | 0.60 | % | $ | 3.02 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,022.06 | 0.60 | % | $ | 3.04 |
*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 183 days in the six-month period ended September 30, 2018, and divided by the 365 days in the Fund’s fiscal year ending March 31, 2019 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
**Formerly known as Class Q shares.
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Schedule of Investments (unaudited)
as of September 30, 2018
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS 97.5% | ||||||||||||||||
Alabama 0.7% | ||||||||||||||||
Black Belt Energy Gas District, Revenue, Series B-1, (Mandatory Put Date 12/01/23), 1 Month LIBOR + 0.900% | 2.316 | %(c) | 12/01/48 | 1,000 | $ | 1,000,000 | ||||||||||
Arizona 2.8% | ||||||||||||||||
Arizona Health Facilities Authority, Revenue, Banner Health, Series B, 3 Month LIBOR + 0.810% | 2.376 | (c) | 01/01/37 | 2,005 | 1,905,071 | |||||||||||
Industrial Development Authority of the City of Phoenix, Revenue, Great Hearts Academies Project | 3.750 | 07/01/24 | 560 | 571,497 | ||||||||||||
Maricopa County Industrial Development Authority, | 4.000 | 07/01/26 | 500 | 505,060 | ||||||||||||
Revenue, Reid Traditional Schools Project | 4.000 | 07/01/26 | 500 | 506,635 | ||||||||||||
Salt Verde Finance Corp., National Gas Utility, Revenue | 5.250 | 12/01/21 | 555 | 600,954 | ||||||||||||
|
| |||||||||||||||
4,089,217 | ||||||||||||||||
California 4.2% | ||||||||||||||||
California Municipal Finance Authority, Revenue, American Heritage Foundation, Series A, Rfdg | 4.000 | 06/01/26 | 480 | 495,926 | ||||||||||||
California Pollution Control Financing Authority, Revenue, Green Bonds Project, AMT, 144A | 7.000 | 07/01/22 | 250 | 257,640 | ||||||||||||
California School Finance Authority, | 4.000 | 07/01/21 | 400 | 413,560 | ||||||||||||
Revenue, Alliance College Ready Public Schools, Series A, Rfdg, 144A | 4.000 | 07/01/24 | 270 | 282,404 | ||||||||||||
Revenue, Alliance College Ready Public Schools, Series A, Rfdg, 144A | 4.000 | 07/01/25 | 285 | 298,022 | ||||||||||||
Revenue, Green Dot Public School Project, Series A, 144A | 4.000 | 08/01/25 | 330 | 343,398 | ||||||||||||
Revenue, KIPP LA Project, Series A, Rfdg, 144A | 3.625 | 07/01/25 | 550 | 559,284 | ||||||||||||
Chula Vista Municipal Financing Authority, Specialty Tax, Rfdg | 5.000 | 09/01/21 | 755 | 813,452 | ||||||||||||
City of Fontana Sierra Hills, Special Tax, Series 22, Rfdg | 4.000 | 09/01/19 | 385 | 391,510 | ||||||||||||
City of Roseville, Westpark Community Facility District No.1, Special Tax, Rfdg | 5.000 | 09/01/22 | 225 | 246,285 | ||||||||||||
Long Beach Bond Finance Authority, Natural Gas, Revenue, Series B, 3 Month LIBOR + 1.450% | 3.000 | (c) | 11/15/27 | 700 | 703,794 |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 13 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
California (cont’d.) | ||||||||||||||||
Southern California Public Power Authority Natural Gas Project, Revenue, Project No.1, Series A-1, 3 Month LIBOR + 1.470% | 3.040 | %(c) | 11/01/38 | 1,360 | $ | 1,277,108 | ||||||||||
Tobacco Securitization Authority of Northern California, Revenue, Asset-Backed, Series A-1, Rfdg | 4.750 | 06/01/23 | 25 | 25,114 | ||||||||||||
|
| |||||||||||||||
6,107,497 | ||||||||||||||||
Colorado 5.4% | ||||||||||||||||
City & County of Denver, Revenue, United Airlines, Inc., AMT, Rfdg | 5.000 | 10/01/32 | 500 | 531,990 | ||||||||||||
City & County of Denver Airport System, Revenue, Series A, AMT, Rfdg | 5.000 | 12/01/28 | 1,500 | 1,732,635 | ||||||||||||
Colorado Educational & Cultural Facilities Authority, Revenue, Lighthouse Building Corp. Stem Project, Rfdg | 4.000 | 11/01/24 | 505 | 504,717 | ||||||||||||
Colorado Health Facilities Authority, | 5.000 | 07/01/19 | 100 | 101,865 | ||||||||||||
Revenue, Christian Living Neighborhood, Rfdg | 4.000 | 01/01/22 | 300 | 308,454 | ||||||||||||
Revenue, National Jewish Health Initiatives, Rfdg | 5.000 | 01/01/20 | 695 | 711,347 | ||||||||||||
Revenue, National Jewish Health Initiatives, Rfdg | 5.000 | 01/01/22 | 125 | 131,290 | ||||||||||||
Revenue, National Jewish Health Initiatives, Rfdg | 5.000 | 01/01/24 | 300 | 310,884 | ||||||||||||
Revenue, Retirement Communities, Series A, Rfdg | 4.000 | 12/01/19 | 515 | 524,687 | ||||||||||||
Revenue, Valley View Hospital Association Project, Rfdg, (Mandatory Put Date 05/15/23) | 2.800 | 05/15/42 | 1,000 | 999,550 | ||||||||||||
E-470 Public Highway Authority, Revenue, Series A, Rfdg | 5.000 | 09/01/20 | 650 | 684,541 | ||||||||||||
Park Creek Metropolitan District, Revenue, Series A, Rfdg | 5.000 | 12/01/23 | 1,100 | 1,222,265 | ||||||||||||
|
| |||||||||||||||
7,764,225 | ||||||||||||||||
Connecticut 1.9% | ||||||||||||||||
Harbor Point Infrastructure Improvement District, Rfdg, 144A | 5.000 | 04/01/22 | 900 | 955,341 | ||||||||||||
State of Connecticut, Series C, GO | 5.000 | 06/15/26 | 1,000 | 1,121,250 | ||||||||||||
State of Connecticut, Special Tax, | 5.000 | 08/01/25 | 375 | 420,502 | ||||||||||||
Revenue, Transportation Infrastructure, Series A | 5.000 | 09/01/24 | 165 | 183,703 | ||||||||||||
|
| |||||||||||||||
2,680,796 |
See Notes to Financial Statements.
14 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
Delaware 0.8% | ||||||||||||||||
Delaware State Economic Development Authority, | 3.250 | % | 06/01/26 | 800 | $ | 740,168 | ||||||||||
Revenue, Newark Charter School, Series A, Rfdg | 2.800 | 09/01/26 | 435 | 424,999 | ||||||||||||
|
| |||||||||||||||
1,165,167 | ||||||||||||||||
District of Columbia 2.4% | ||||||||||||||||
District of Columbia Friendship Public Charter School, Revenue | 3.550 | 06/01/22 | 650 | 657,286 | ||||||||||||
District of Columbia KIPP Charter School, | 5.000 | 07/01/27 | 125 | 140,924 | ||||||||||||
Revenue, Rfdg (Escrowed to Maturity Date 07/01/23)(ee) | 5.000 | 07/01/23 | 275 | 299,247 | ||||||||||||
Metropolitan Washington Airports Authority, Revenue, AMT, Rfdg | 5.000 | 10/01/26 | 2,000 | 2,287,120 | ||||||||||||
|
| |||||||||||||||
3,384,577 | ||||||||||||||||
Florida 6.7% | ||||||||||||||||
City of Tallahassee, | 5.000 | 12/01/23 | 220 | 242,332 | ||||||||||||
Revenue, Memorial Healthcare, Inc., Project, Series A | 5.000 | 12/01/25 | 550 | 614,773 | ||||||||||||
Cityplace Community Development District, Special Assessment, Rfdg | 5.000 | 05/01/20 | 740 | 773,648 | ||||||||||||
Florida Higher Educational Facilities Financial Authority, Revenue, Nova Southeastern University, Rfdg | 4.000 | 04/01/21 | 40 | 41,395 | ||||||||||||
Greater Orlando Aviation Authority, Revenue, Jet Blue Airways Corp., AMT, Rfdg | 5.000 | 11/15/26 | 500 | 531,715 | ||||||||||||
Lakewood Ranch Stewardship District, | 4.000 | 05/01/21 | 300 | 303,819 | ||||||||||||
Special Assessment | 4.250 | 05/01/25 | 400 | 404,404 | ||||||||||||
Special Assessment | 4.250 | 05/01/26 | 250 | 254,018 | ||||||||||||
Special Assessment | 4.625 | 05/01/27 | 500 | 511,645 | ||||||||||||
Martin County Industrial Development Authority, Revenue, Indiantown Co-Generation LP, AMT, Rfdg, 144A | 3.950 | 12/15/21 | 250 | 255,705 | ||||||||||||
Myrtle Creek Improvement District, Special Assessment, Series A, BAM, Rfdg | 4.000 | 05/01/27 | 1,000 | 1,043,450 | ||||||||||||
Orange County Health Facilities Authority, Revenue, Regional Healthcare, NATL, Series C, Rfdg (Escrowed to Maturity Date 10/01/21)(ee) | 6.250 | 10/01/21 | 65 | 68,965 | ||||||||||||
Palm Beach County Health Facilities Authority, Revenue, Sinai Residences, Series A, Rfdg | 6.750 | 06/01/24 | 450 | 507,946 | ||||||||||||
Village Community Development District No. 04, Special Assessment, Revenue, Rfdg | 4.125 | 05/01/21 | 95 | 98,577 |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 15 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
Florida (cont’d.) | ||||||||||||||||
Village Community Development District No. 05, Phase I, Special Assessment, Revenue, Rfdg | 3.000 | % | 05/01/21 | 155 | $ | 157,069 | ||||||||||
Village Community Development District No. 06, | 3.000 | 05/01/20 | 200 | 202,844 | ||||||||||||
Special Assessment, Revenue, Rfdg | 3.000 | 05/01/21 | 170 | 172,791 | ||||||||||||
Special Assessment, Revenue, Rfdg | 4.000 | 05/01/26 | 250 | 259,775 | ||||||||||||
Village Community Development District No. 07, | 4.000 | 05/01/21 | 475 | 495,111 | ||||||||||||
Special Assessment, Revenue, Rfdg | 4.000 | 05/01/24 | 860 | 917,543 | ||||||||||||
Special Assessment, Revenue, Rfdg | 4.000 | 05/01/25 | 240 | 255,857 | ||||||||||||
Special Assessment, Revenue, Rfdg | 4.000 | 05/01/26 | 285 | 301,026 | ||||||||||||
Village Community Development District No. 10, Special Assessment, Revenue | 4.500 | 05/01/23 | 315 | 332,127 | ||||||||||||
Village Community Development District No. 11, Special Assessment, Revenue | 3.250 | 05/01/19 | 185 | 186,722 | ||||||||||||
Village Community Development District No. 12, | 2.875 | 05/01/21 | 495 | 497,500 | ||||||||||||
Special Assessment, Revenue, 144A | 3.250 | 05/01/23 | 250 | 250,670 | ||||||||||||
|
| |||||||||||||||
9,681,427 | ||||||||||||||||
Georgia 2.2% | ||||||||||||||||
Burke County Development Authority, Revenue, Variable Oglethorpe Power Corp., Series V, Rfdg, (Mandatory Put Date 02/03/25) | 3.250 | 11/01/45 | 500 | 494,335 | ||||||||||||
Main Street Natural Gas, Inc., | 2.170 | (c) | 04/01/48 | 1,000 | 994,210 | |||||||||||
Revenue, Sub-Series C (Mandatory Put Date 12/01/23) | 4.000 | 08/01/48 | 1,000 | 1,051,880 | ||||||||||||
Private Colleges & Universities Authority, Revenue, Savannah College of Art & Design | 5.000 | 04/01/22 | 625 | 678,106 | ||||||||||||
|
| |||||||||||||||
3,218,531 | ||||||||||||||||
Idaho 0.7% | ||||||||||||||||
County of Nez Perce, Revenue, Rfdg | 2.750 | 10/01/24 | 1,000 | 981,840 | ||||||||||||
Illinois 20.6% | ||||||||||||||||
Chicago Board of Education, | 4.250 | 12/01/18 | 375 | 375,608 | ||||||||||||
Dedicated Revenues, Series B, GO, AMBAC, Rfdg | 5.000 | 12/01/18 | 350 | 350,991 | ||||||||||||
Series A, GO, AMBAC, Rfdg | 5.500 | 12/01/23 | 315 | 342,493 | ||||||||||||
Series A, GO, Rfdg | 4.000 | 12/01/20 | 500 | 503,380 |
See Notes to Financial Statements.
16 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
Illinois (cont’d.) | ||||||||||||||||
Chicago Board of Education, (cont’d.) | ||||||||||||||||
Series A, NATL, GO, Rfdg | 5.000 | % | 12/01/18 | 160 | $ | 160,496 | ||||||||||
Series F, GO, Rfdg | 5.000 | 12/01/18 | 1,815 | 1,820,136 | ||||||||||||
Series F, GO, Rfdg | 5.000 | 12/01/19 | 305 | 310,615 | ||||||||||||
Series F, GO, Rfdg | 5.000 | 12/01/22 | 1,000 | 1,041,070 | ||||||||||||
Series F, GO, Rfdg (Escrowed to Maturity Date 12/01/19)(ee) | 5.000 | 12/01/19 | 70 | 72,377 | ||||||||||||
Chicago O’Hare International Airport, Revenue, Series C, AMT, Rfdg | 5.000 | 01/01/23 | 200 | 219,006 | ||||||||||||
Chicago Transit Authority, Revenue, Federal Transit Administration Section 530, AGM, Rfdg | 5.000 | 06/01/22 | 1,630 | 1,731,728 | ||||||||||||
City of Chicago, | 4.000 | 12/01/18 | 250 | 250,590 | ||||||||||||
Series A, GO | 5.000 | 01/01/20 | 200 | 204,778 | ||||||||||||
Series A, GO, Rfdg (Escrowed to Maturity Date 01/01/24)(ee) | 5.000 | 01/01/24 | 335 | 341,228 | ||||||||||||
Series B, GO, Rfdg | 5.000 | 01/01/19 | 750 | 754,080 | ||||||||||||
Series B, GO, Rfdg | 5.000 | 01/01/23 | 370 | 393,661 | ||||||||||||
Series C, GO, Rfdg | 5.000 | 01/01/20 | 250 | 255,940 | ||||||||||||
Series C, GO, Rfdg | 5.000 | 01/01/22 | 945 | 994,934 | ||||||||||||
City of Chicago Wastewater Transmission, | 4.000 | 01/01/20 | 1,120 | 1,143,106 | ||||||||||||
Revenue, Second Lien, Rfdg | 5.000 | 01/01/25 | 390 | 416,438 | ||||||||||||
Revenue, Second Lien, Series C, Rfdg | 5.000 | 01/01/22 | 990 | 1,063,814 | ||||||||||||
City of Chicago Waterworks, | 4.000 | 11/01/24 | 110 | 114,579 | ||||||||||||
Revenue, Second Lien Project | 4.000 | 11/01/21 | 375 | 390,551 | ||||||||||||
Revenue, Second Lien, AGM, Rfdg | 4.250 | 11/01/18 | 300 | 300,483 | ||||||||||||
Revenue, Second Lien, Rfdg | 4.000 | 11/01/19 | 490 | 498,835 | ||||||||||||
Revenue, Second Lien, Rfdg | 4.000 | 11/01/20 | 1,065 | 1,098,047 | ||||||||||||
Revenue, Second Lien, Rfdg | 5.000 | 11/01/20 | 385 | 404,870 | ||||||||||||
Revenue, Second Lien, Rfdg | 5.000 | 11/01/22 | 750 | 817,117 | ||||||||||||
Revenue, Second Lien, Rfdg | 5.000 | 11/01/24 | 600 | 669,408 | ||||||||||||
Revenue, Second Lien, Series 2017-2, Rfdg | 5.000 | 11/01/24 | 270 | 301,234 | ||||||||||||
City of Springfield Electric, Revenue, Senior Lien, Rfdg | 5.000 | 03/01/22 | 275 | 297,825 | ||||||||||||
County of Cook, Series A, GO, Rfdg | 5.000 | 11/15/23 | 1,000 | 1,121,960 | ||||||||||||
Illinois Finance Authority, | 5.500 | 11/01/18 | 30 | 30,085 | ||||||||||||
Revenue, Advocate Healthcare, Series A-2, Rfdg (Mandatory Put Date 02/12/20) | 5.000 | (cc) | 11/01/30 | 350 | 363,349 |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 17 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
Illinois (cont’d.) | ||||||||||||||||
Illinois Finance Authority, (cont’d.) | ||||||||||||||||
Revenue, Presbyterian Homes, Series B, Rfdg (Mandatory Put Date 05/01/21), 1 Month LIBOR + 1.350% | 2.830 | %(c) | 05/01/36 | 500 | $ | 502,110 | ||||||||||
Revenue, Silver Cross Hospital, Series C, Rfdg | 5.000 | 08/15/19 | 155 | 158,024 | ||||||||||||
Railsplitter Tobacco Settlement Authority, | 5.000 | 06/01/24 | 500 | 557,225 | ||||||||||||
Revenue | 5.375 | 06/01/21 | 705 | 757,276 | ||||||||||||
Regional Transportation Authority, Revenue, Series A, Rfdg | 5.500 | 07/01/25 | 760 | 881,782 | ||||||||||||
State of Illinois, | 5.000 | 02/01/22 | 200 | 208,640 | ||||||||||||
GO, AGM, Rfdg | 4.000 | 01/01/20 | 525 | 533,494 | ||||||||||||
GO, Rfdg | 5.000 | 02/01/24 | 500 | 526,460 | ||||||||||||
Revenue | 5.000 | 06/15/24 | 705 | 765,094 | ||||||||||||
Revenue, Junior Series D, BAM, Rfdg | 5.000 | 06/15/25 | 1,325 | 1,488,187 | ||||||||||||
Revenue, Series A, GO | 4.000 | 06/15/19 | 150 | 151,680 | ||||||||||||
Series 2010, GO, AGM, Rfdg | 5.000 | 01/01/20 | 200 | 205,670 | ||||||||||||
Series A, GO | 4.000 | 01/01/23 | 360 | 361,836 | ||||||||||||
Series A, GO | 5.000 | 04/01/20 | 455 | 468,564 | ||||||||||||
Series A, GO, AGM | 4.000 | 09/01/22 | 150 | 150,188 | ||||||||||||
Series B, GO, Rfdg | 5.250 | 01/01/21 | 715 | 743,192 | ||||||||||||
Series D, GO | 5.000 | 11/01/23 | 1,500 | 1,578,165 | ||||||||||||
University of Illinois, Revenue, Series A, Rfdg | 5.000 | 04/01/26 | 425 | 473,246 | ||||||||||||
|
| |||||||||||||||
29,665,645 | ||||||||||||||||
Indiana 0.9% | ||||||||||||||||
City of Rockport, Revenue, Power Co. Project, Series A, Rfdg | 3.050 | 06/01/25 | 500 | 497,895 | ||||||||||||
Gary Chicago International Airport Authority, Revenue, AMT | 5.000 | 02/01/20 | 835 | 862,238 | ||||||||||||
|
| |||||||||||||||
1,360,133 | ||||||||||||||||
Iowa 0.7% | ||||||||||||||||
Iowa Finance Authority, | 5.000 | 12/01/19 | 540 | 551,491 | ||||||||||||
Revenue, Iowa Fertilizer Co. Project, Rfdg | 5.500 | 12/01/22 | 415 | 416,565 | ||||||||||||
|
| |||||||||||||||
968,056 |
See Notes to Financial Statements.
18 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
Kentucky 1.1% | ||||||||||||||||
Kentucky Economic Development Finance Authority, Revenue, Owensboro Medical Health Systems, Series A | 5.250 | % | 06/01/20 | 500 | $ | 517,445 | ||||||||||
Kentucky Public Energy Authority, National Gas Utility, Revenue, Series B, (Mandatory Put Date 01/01/25) | 4.000 | 01/01/49 | 1,000 | 1,054,790 | ||||||||||||
|
| |||||||||||||||
1,572,235 | ||||||||||||||||
Louisiana 1.3% | ||||||||||||||||
City of New Orleans, | 5.000 | 12/01/22 | 100 | 109,866 | ||||||||||||
GO, Rfdg | 5.000 | 12/01/23 | 150 | 167,362 | ||||||||||||
City of New Orleans Sewerage Service, | 5.000 | 06/01/23 | 300 | 331,977 | ||||||||||||
Revenue | 5.000 | 06/01/24 | 200 | 225,458 | ||||||||||||
Revenue, Rfdg | 5.000 | 06/01/19 | 400 | 407,596 | ||||||||||||
Revenue, Rfdg | 5.000 | 06/01/20 | 350 | 365,855 | ||||||||||||
Louisiana Public Facilities Authority, Revenue, Ochsner Clinic Foundation, Rfdg | 5.000 | 05/15/22 | 265 | 288,071 | ||||||||||||
|
| |||||||||||||||
1,896,185 | ||||||||||||||||
Maryland 0.4% | ||||||||||||||||
Frederick County Special Obligation, Urbana Community | 5.000 | 07/01/20 | 100 | 105,459 | ||||||||||||
Specialty Tax, Series A, Rfdg | 5.000 | 07/01/21 | 100 | 105,868 | ||||||||||||
Maryland Economic Development Corp., Revenue, Transportation Project, Series A, Rfdg | 5.000 | 06/01/24 | 350 | 387,352 | ||||||||||||
|
| |||||||||||||||
598,679 | ||||||||||||||||
Massachusetts 0.2% | ||||||||||||||||
Massachusetts Development Finance Agency, Revenue, International Charter School, Rfdg | 4.000 | 04/15/20 | 220 | 223,608 | ||||||||||||
Michigan 0.4% | ||||||||||||||||
Michigan Finance Authority, Revenue, Local Government Loan Program, Series D-1, Rfdg | 5.000 | 07/01/22 | 400 | 436,144 | ||||||||||||
Oakland County Economic Development Corp., Revenue, Roman Catholic Archdiocese of Detroit, Rfdg | 6.500 | 12/01/20 | 160 | 162,702 | ||||||||||||
|
| |||||||||||||||
598,846 |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 19 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Minnesota 0.5% | ||||||||||||||||
City of St. Paul Housing & Redevelopment Authority, Revenue, Healtheast Care System Project, Rfdg (Escrowed to Maturity Date 11/15/20)(ee) | 5.000 | % | 11/15/20 | 500 | $ | 529,785 | ||||||||||
Shakopee Healthcare Facility, Revenue, St. Francis Regional Medical Center, Rfdg | 5.000 | 09/01/19 | 185 | 189,114 | ||||||||||||
|
| |||||||||||||||
718,899 | ||||||||||||||||
Missouri 0.4% | ||||||||||||||||
Health & Educational Facilities Authority of the State of Missouri, | 2.150 | 02/01/19 | 500 | 499,920 | ||||||||||||
Revenue, St. Louis College of Pharmacy Project, Rfdg | 5.000 | 05/01/19 | 125 | 127,386 | ||||||||||||
|
| |||||||||||||||
627,306 | ||||||||||||||||
Nevada 0.5% | ||||||||||||||||
Clark County Airport Department of Aviation, Revenue, Jet Aviation Fuel Tax, Series A, AMT, Rfdg | 5.000 | 07/01/21 | 500 | 534,760 | ||||||||||||
State of Nevada Department of Business & Industry, Revenue, Somerset Academy, Series A, 144A | 4.500 | 12/15/29 | 250 | 251,360 | ||||||||||||
|
| |||||||||||||||
786,120 | ||||||||||||||||
New Jersey 8.6% | ||||||||||||||||
Casino Reinvestment Development Authority, Revenue, Rfdg | 4.000 | 11/01/19 | 500 | 508,100 | ||||||||||||
New Jersey Building Authority, | 5.000 | 06/15/21 | 625 | 660,362 | ||||||||||||
Revenue, Series A, Rfdg (Escrowed to Maturity Date 06/15/21)(ee) | 5.000 | 06/15/21 | 60 | 64,498 | ||||||||||||
New Jersey Economic Development Authority, | 5.750 | 09/15/27 | 700 | 766,591 | ||||||||||||
Revenue, Police Barracks Project | 4.750 | 06/15/19 | 245 | 249,016 | ||||||||||||
Revenue, Port Newark Container, AMT, Rfdg | 5.000 | 10/01/21 | 500 | 531,265 | ||||||||||||
Revenue, School Facilities Construction, Series NN, Rfdg | 5.000 | 03/01/19 | 150 | 151,885 | ||||||||||||
Revenue, Series XX, Rfdg | 5.000 | 06/15/22 | 800 | 857,384 | ||||||||||||
Revenue, Series XX, Rfdg | 5.000 | 06/15/24 | 420 | 458,875 | ||||||||||||
Revenue, Transit Project Sublease, Series A, Rfdg | 5.000 | 05/01/19 | 275 | 279,268 | ||||||||||||
Revenue, United Airlines, Series A, AMT | 4.875 | 09/15/19 | 510 | 519,777 | ||||||||||||
New Jersey Health Care Facilities Financing Authority, | 4.250 | 07/01/19 | 150 | 151,725 | ||||||||||||
Revenue, Holy Name Medical Center, Rfdg | 4.500 | 07/01/20 | 310 | 319,663 | ||||||||||||
Revenue, Holy Name Medical Center, Rfdg | 5.000 | 07/01/19 | 235 | 238,997 |
See Notes to Financial Statements.
20 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
New Jersey (cont’d.) | ||||||||||||||||
New Jersey Health Care Facilities Financing Authority, (cont’d.) | ||||||||||||||||
Revenue, University Hospital, Series A, AGM, Rfdg | 5.000 | % | 07/01/23 | 500 | $ | 551,600 | ||||||||||
Revenue, Virtua Health, Rfdg | 5.000 | 07/01/21 | 125 | 134,276 | ||||||||||||
New Jersey Transportation Trust Fund Authority, | 5.000 | 06/15/19 | 100 | 101,868 | ||||||||||||
Revenue, Series B, AGM, Rfdg | 5.500 | 12/15/21 | 175 | 190,717 | ||||||||||||
Revenue, Series B, NATL, Rfdg | 5.500 | 12/15/20 | 200 | 213,174 | ||||||||||||
Revenue, Series B, Rfdg | 5.250 | 12/15/19 | 440 | 454,978 | ||||||||||||
Revenue, Transportation Project, Series AA | 5.000 | 06/15/22 | 315 | 338,052 | ||||||||||||
New Jersey Turnpike Authority, Revenue, Variable, Series D-1, Rfdg, 1 Month LIBOR + 0.700% | 2.180 | (c) | 01/01/24 | 1,000 | 1,003,800 | |||||||||||
South Jersey Transportation Authority LLC, | 5.000 | 11/01/20 | 100 | 105,348 | ||||||||||||
Revenue, Series A, Rfdg | 5.000 | 11/01/21 | 350 | 375,672 | ||||||||||||
Tobacco Settlement Financing Corp., | 5.000 | 06/01/28 | 1,000 | 1,142,310 | ||||||||||||
Revenue, Sub-Series B, Rfdg | 3.200 | 06/01/27 | 2,000 | 1,992,440 | ||||||||||||
|
| |||||||||||||||
12,361,641 | ||||||||||||||||
New York 4.9% | ||||||||||||||||
New York State Dormitory Authority, Revenue, Orange Regional Medical Center, Rfdg, 144A | 5.000 | 12/01/21 | 500 | 533,850 | ||||||||||||
New York State Energy Research & Development Authority, Revenue, Series B, Rfdg (Mandatory Put Date 05/01/20) | 2.000 | 02/01/29 | 500 | 496,990 | ||||||||||||
New York Transportation Development Corp., | 5.000 | 01/01/27 | 2,000 | 2,237,520 | ||||||||||||
Revenue, Terminal One Group Association, AMT, Rfdg | 5.000 | 01/01/22 | 1,000 | 1,071,010 | ||||||||||||
Revenue, Terminal One Group Association, AMT, Rfdg | 5.000 | 01/01/23 | 1,000 | 1,085,810 | ||||||||||||
Port Authority of New York & New Jersey, Revenue, JFK International Air Terminal | 5.000 | 12/01/20 | 1,540 | 1,589,696 | ||||||||||||
|
| |||||||||||||||
7,014,876 | ||||||||||||||||
North Carolina 0.4% | ||||||||||||||||
North Carolina Medical Care Commission, Revenue, Pennybyrn at Maryfield, Rfdg | 5.000 | 10/01/20 | 500 | 522,015 | ||||||||||||
North Dakota 0.4% | ||||||||||||||||
Burleigh County Healthcare, St. Alexius Project, Revenue, Series A, Rfdg (Escrowed to Maturity Date 07/01/20)(ee) | 4.000 | 07/01/20 | 500 | 514,980 |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 21 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Ohio 4.4% | ||||||||||||||||
Buckeye Tobacco Settlement Financing Authority, | 5.125 | % | 06/01/24 | 3,505 | $ | 3,470,336 | ||||||||||
Revenue, Asset-Backed, Senior Turbo, Series A-2 | 5.875 | 06/01/30 | 1,000 | 1,004,960 | ||||||||||||
Cleveland-Cuyahoga County Port Authority, Revenue, Playhouse Square Foundation Project, Rfdg | 5.000 | 12/01/28 | 250 | 268,320 | ||||||||||||
County of Cuyahoga, Revenue, MetroHealth System, Rfdg | 5.000 | 02/15/25 | 695 | 755,687 | ||||||||||||
Ohio Air Quality Development Authority, Revenue, Pratt Paper LLC Project, AMT, 144A | 3.750 | 01/15/28 | 500 | 499,980 | ||||||||||||
State of Ohio, Revenue, Portsmouth Bypass Project, AMT | 5.000 | 06/30/19 | 265 | 270,144 | ||||||||||||
|
| |||||||||||||||
6,269,427 | ||||||||||||||||
Oklahoma 0.5% | ||||||||||||||||
Oklahoma Development Finance Authority, Revenue, University of Oklahoma Medicine Project, Series B | 5.000 | 08/15/25 | 450 | 501,637 | ||||||||||||
Tulsa Airports Improvement Trust, Revenue, American Airlines Group, AMT, Rfdg (Mandatory Put Date 06/01/25) | 5.000 | 06/01/35 | 250 | 265,688 | ||||||||||||
|
| |||||||||||||||
767,325 | ||||||||||||||||
Oregon 0.1% | ||||||||||||||||
Hospital Facilities Authority of Multnomah County, Revenue, Mirabella at South Water Front, Series A, Rfdg | 5.000 | 10/01/19 | 110 | 111,461 | ||||||||||||
Pennsylvania 4.9% | ||||||||||||||||
Allegheny County Hospital Development Authority, Revenue, Allegheny Health Network, Series A, Rfdg | 5.000 | 04/01/27 | 1,000 | 1,133,790 | ||||||||||||
Chester County Industrial Development Authority, Revenue, Renaissance Academy Christian School, Rfdg | 3.750 | 10/01/24 | 390 | 394,731 | ||||||||||||
Commonwealth Financing Authority, Revenue, Tobacco Master Settlement Payment | 5.000 | 06/01/25 | 1,000 | 1,122,520 | ||||||||||||
Commonwealth of Pennsylvania, | 5.000 | 08/15/25 | 1,000 | 1,136,580 | ||||||||||||
Series A, Certificate of Participation, Rfdg | 5.000 | 07/01/26 | 500 | 560,935 | ||||||||||||
East Hempfield Township Industrial Development Authority, Revenue, Willow Valley Community, Rfdg | 5.000 | 12/01/23 | 500 | 551,515 | ||||||||||||
Montgomery County Industrial Development Authority, Revenue, Exelon Generation Co., Series A, AMT, Rfdg (Mandatory Put Date 04/01/20) | 2.700 | 10/01/34 | 1,000 | 997,820 |
See Notes to Financial Statements.
22 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Pennsylvania (cont’d.) | ||||||||||||||||
Moon Industrial Development Authority, Revenue, Baptist Homes Society, Rfdg | 5.000 | % | 07/01/20 | 320 | $ | 327,065 | ||||||||||
Pennsylvania Economic Development Financing Authority, Revenue, Pennsylvania Bridges Finco LP, AMT | 5.000 | 12/31/18 | 250 | 251,685 | ||||||||||||
Pennsylvania Turnpike Commission, Revenue, Series A-2, Rfdg | 5.000 | 12/01/26 | 470 | 544,608 | ||||||||||||
|
| |||||||||||||||
7,021,249 | ||||||||||||||||
Rhode Island 1.1% | ||||||||||||||||
Tobacco Settlement Financing Corp., | 5.000 | 06/01/24 | 1,185 | 1,321,287 | ||||||||||||
Revenue, Series A, Rfdg | 5.000 | 06/01/22 | 300 | 325,764 | ||||||||||||
|
| |||||||||||||||
1,647,051 | ||||||||||||||||
South Carolina 0.9% | ||||||||||||||||
Patriots Energy Group Financing Agency, National Gas Utility, Revenue, Series A, (Mandatory Put Date 02/01/24) | 4.000 | (cc) | 10/01/48 | 1,000 | 1,054,950 | |||||||||||
South Carolina Public Service Authority, Revenue, Santee Cooper, Series A, Rfdg | 5.000 | 12/01/24 | 280 | 297,293 | ||||||||||||
|
| |||||||||||||||
1,352,243 | ||||||||||||||||
Tennessee 0.7% | ||||||||||||||||
Memphis-Shelby County Industrial Development Board, Senior Tax Project, Rfdg | 4.750 | 07/01/27 | 650 | 679,295 | ||||||||||||
Tennessee Energy Acquisition Corp., Revenue, Series C | 5.000 | 02/01/20 | 270 | 279,418 | ||||||||||||
|
| |||||||||||||||
958,713 | ||||||||||||||||
Texas 10.8% | ||||||||||||||||
Austin Convention Enterprises, Inc., | 5.000 | 01/01/26 | 1,350 | 1,522,894 | ||||||||||||
Revenue, Second Tier Convention Center, Series B, Rfdg | 5.000 | 01/01/25 | 650 | 727,051 | ||||||||||||
Bexar County Health Facilities Development Corp., Revenue, Army Retirement Residence Foundation, Rfdg | 5.000 | 07/15/24 | 500 | 544,690 | ||||||||||||
Board of Managers Joint Guadalupe County-City of Seguin Hospital, Revenue, Rfdg | 5.000 | 12/01/21 | 1,000 | 1,039,340 | ||||||||||||
Central Texas Regional Mobility Authority, Revenue, Senior Lien, Series A, Rfdg | 5.000 | 01/01/23 | 610 | 671,323 |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 23 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Texas (cont’d.) | ||||||||||||||||
Central Texas Regional Mobility Authority, (cont’d.) | ||||||||||||||||
Revenue, Sub Lien, Rfdg | 5.000 | % | 01/01/21 | 180 | $ | 190,334 | ||||||||||
City of Houston Airport System, Revenue, Sub-Series A, AMT | 5.000 | 07/01/25 | 1,000 | 1,138,320 | ||||||||||||
Clifton Higher Education Finance Corp., | 3.750 | 08/15/22 | 345 | 352,673 | ||||||||||||
Revenue, Idea Academy, Inc. (Pre-refunded Date 08/15/21)(ee) | 5.500 | 08/15/31 | 410 | 446,338 | ||||||||||||
Revenue, Idea Public Schools, Series B | 4.000 | 08/15/23 | 610 | 640,817 | ||||||||||||
Revenue, Idea Public Schools, Series B | 5.000 | 08/15/25 | 210 | 234,098 | ||||||||||||
Dallas County Flood Control District No. 1, GO, Rfdg, 144A | 5.000 | 04/01/20 | 750 | 772,470 | ||||||||||||
Decatur Hospital Authority, Wise Regional Health Systems, | 4.000 | 09/01/20 | 200 | 204,064 | ||||||||||||
Revenue, Series A, Rfdg | 5.000 | 09/01/22 | 150 | 160,311 | ||||||||||||
Revenue, Series A, Rfdg | 5.000 | 09/01/23 | 150 | 162,183 | ||||||||||||
Houston Higher Education Finance Corp., Revenue, Cosmos Foundation, Series A, Rfdg | 4.000 | 02/15/22 | 75 | 76,768 | ||||||||||||
Kerrville Health Facilities Development Corp., Revenue, Peterson Regional Medical Center Project, Rfdg | 5.000 | 08/15/22 | 485 | 522,932 | ||||||||||||
New Hope Cultural Education Facilities Finance Corp., | 4.250 | 08/15/27 | 500 | 494,520 | ||||||||||||
Revenue, MRC Crestview, Rfdg | 4.000 | 11/15/26 | 1,060 | 1,068,014 | ||||||||||||
Revenue, Tarelton St. University Student Housing Project, Series A | 4.000 | 04/01/21 | 300 | 308,331 | ||||||||||||
North Texas Tollway Authority, Revenue, Series A, Rfdg | 5.000 | 01/01/21 | 100 | 105,967 | ||||||||||||
Tarrant County Cultural Education Facilities Finance Corp., Revenue, Trinity Terrace Project, Series A-1, Rfdg | 5.000 | 10/01/29 | 630 | 676,141 | ||||||||||||
Texas Municipal Gas Acquisition & Supply Corp. I, | 5.250 | 12/15/19 | 100 | 103,488 | ||||||||||||
Revenue, Senior Lien, Series B, 3 Month LIBOR + 0.700% | 2.264 | (c) | 12/15/26 | 825 | 814,432 | |||||||||||
Revenue, Senior Lien, Series D | 6.250 | 12/15/26 | 1,005 | 1,155,358 | ||||||||||||
Texas Municipal Gas Acquisition & Supply Corp. II, Revenue, 3 Month LIBOR + 0.870% | 2.434 | (c) | 09/15/27 | 1,405 | 1,392,088 | |||||||||||
|
| |||||||||||||||
15,524,945 | ||||||||||||||||
Utah 0.3% | ||||||||||||||||
Salt Lake City Corp. Airport, Revenue, Series A, AMT | 5.000 | 07/01/22 | 250 | 272,120 | ||||||||||||
Utah Charter School Finance Authority, Revenue, Spectrum Academy Project, 144A | 4.300 | 04/15/25 | 140 | 140,888 | ||||||||||||
|
| |||||||||||||||
413,008 |
See Notes to Financial Statements.
24 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Vermont 0.1% | ||||||||||||||||
Vermont Economic Development Authority, Revenue, Wake Robin Corp. Project, Rfdg | 5.000 | % | 05/01/21 | 100 | $ | 104,979 | ||||||||||
Virginia 0.9% | ||||||||||||||||
Virginia College Building Authority, | 5.000 | 07/01/20 | 500 | 516,790 | ||||||||||||
Revenue, Marymount University Project, Series A, Rfdg, 144A | 5.000 | 07/01/20 | 525 | 542,629 | ||||||||||||
Virginia Small Business Financing Authority, Revenue, Senior Lien, Express Lanes, AMT | 4.250 | 07/01/22 | 150 | 159,275 | ||||||||||||
|
| |||||||||||||||
1,218,694 | ||||||||||||||||
Washington 0.2% | ||||||||||||||||
Washington Health Care Facilities Authority, Revenue, Overlake Medical Center, Rfdg | 5.000 | 07/01/20 | 300 | 314,523 | ||||||||||||
West Virginia 0.9% | ||||||||||||||||
Harrison County Commission, Revenue, Monongahela Power Co., Series A, AMT, Rfdg, (Mandatory Put Date 10/15/21) | 3.000 | 10/15/37 | 500 | 497,985 | ||||||||||||
Monongalia County Commission Special District, Revenue, Series A, Rfdg, 144A | 4.500 | 06/01/27 | 250 | 247,337 | ||||||||||||
West Virginia Economic Development Authority, Revenue, Wheeling Power Co. Mitchell, Series A, AMT, Rfdg (Mandatory Put Date 04/01/22) | 3.000 | 06/01/37 | 500 | 498,025 | ||||||||||||
|
| |||||||||||||||
1,243,347 | ||||||||||||||||
Wisconsin 2.6% | ||||||||||||||||
Public Finance Authority, | 5.000 | 06/01/23 | 500 | 530,225 | ||||||||||||
Revenue, Celanese U.S. Holdings LLC, Series A, AMT, Rfdg, 144A | 5.000 | 01/01/24 | 1,000 | 1,094,860 | ||||||||||||
Revenue, Series E, AMT, Rfdg | 5.000 | 07/01/23 | 2,000 | 2,130,740 | ||||||||||||
|
| |||||||||||||||
3,755,825 | ||||||||||||||||
TOTAL INVESTMENTS 97.5% | 140,205,291 | |||||||||||||||
Other assets in excess of liabilities 2.5% | 3,590,689 | |||||||||||||||
|
| |||||||||||||||
NET ASSETS 100.0% | $ | 143,795,980 | ||||||||||||||
|
|
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 25 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
The following abbreviations are used in the semiannual report:
144A—Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. Unless otherwise noted, 144A securities are deemed to be liquid.
AGM—Assured Guaranty Municipal Corp.
AMBAC—American Municipal Bond Assurance Corp.
AMT—Alternative Minimum Tax
BAM—Build America Mutual
GO—General Obligation
IDB—Industrial Development Bond
LIBOR—London Interbank Offered Rate
NATL—National Public Finance Guaranty Corp.
PCR—Pollution Control Revenue
Rfdg—Refunding
# | Principal amount is shown in U.S. dollars unless otherwise stated. |
(c) | Variable rate instrument. The interest rate shown reflects the rate in effect at September 30, 2018. |
(cc) | Variable rate instrument. The rate shown is based on the latest available information as of September 30, 2018. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description. |
(ee) | All or partial escrowed to maturity and pre-refunded issues are secured by escrowed cash, a guaranteed investment contract and /or U.S. guaranteed obligations. |
Fair Value Measurements:
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—unadjusted quoted prices generally in active markets for identical securities.
Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other observable inputs.
Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of September 30, 2018 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Municipal Bonds | ||||||||||||
Alabama | $ | — | $ | 1,000,000 | $ | — | ||||||
Arizona | — | 4,089,217 | — | |||||||||
California | — | 6,107,497 | — | |||||||||
Colorado | — | 7,764,225 | — | |||||||||
Connecticut | — | 2,680,796 | — | |||||||||
Delaware | — | 1,165,167 | — | |||||||||
District of Columbia | — | 3,384,577 | — | |||||||||
Florida | — | 9,681,427 | — | |||||||||
Georgia | — | 3,218,531 | — | |||||||||
Idaho | — | 981,840 | — | |||||||||
Illinois | — | 29,665,645 | — | |||||||||
Indiana | — | 1,360,133 | — |
See Notes to Financial Statements.
26 |
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities (continued) | ||||||||||||
Municipal Bonds (continued) | ||||||||||||
Iowa | $ | — | $ | 968,056 | $ | — | ||||||
Kentucky | — | 1,572,235 | — | |||||||||
Louisiana | — | 1,896,185 | — | |||||||||
Maryland | — | 598,679 | — | |||||||||
Massachusetts | — | 223,608 | — | |||||||||
Michigan | — | 598,846 | — | |||||||||
Minnesota | — | 718,899 | — | |||||||||
Missouri | — | 627,306 | — | |||||||||
Nevada | — | 786,120 | — | |||||||||
New Jersey | — | 12,361,641 | — | |||||||||
New York | — | 7,014,876 | — | |||||||||
North Carolina | — | 522,015 | — | |||||||||
North Dakota | — | 514,980 | — | |||||||||
Ohio | — | 6,269,427 | — | |||||||||
Oklahoma | — | 767,325 | — | |||||||||
Oregon | — | 111,461 | — | |||||||||
Pennsylvania | — | 7,021,249 | — | |||||||||
Rhode Island | — | 1,647,051 | — | |||||||||
South Carolina | — | 1,352,243 | — | |||||||||
Tennessee | — | 958,713 | — | |||||||||
Texas | — | 15,524,945 | — | |||||||||
Utah | — | 413,008 | — | |||||||||
Vermont | — | 104,979 | — | |||||||||
Virginia | — | 1,218,694 | — | |||||||||
Washington | — | 314,523 | — | |||||||||
West Virginia | — | 1,243,347 | — | |||||||||
Wisconsin | — | 3,755,825 | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | — | $ | 140,205,291 | $ | — | ||||||
|
|
|
|
|
|
Industry Classification:
The industry classification of investments and other assets in excess of liabilities shown as a percentage of net assets as of September 30, 2018 were as follows:
Healthcare | 14.7 | % | ||
Special Tax/Assessment District | 12.7 | |||
General Obligation | 12.5 | |||
Corporate Backed IDB & PCR | 12.4 | |||
Education | 9.2 | |||
Transportation | 8.6 | |||
Tobacco | 8.2 | |||
Pre-pay Gas | 6.5 | |||
Water & Sewer | 6.2 | |||
Lease Backed Certificate of Participation | 3.2 | % | ||
Development | 1.8 | |||
Power | 1.5 | |||
|
| |||
97.5 | ||||
Other assets in excess of liabilities | 2.5 | |||
|
| |||
100.0 | % | |||
|
|
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 27 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Effects of Derivative Instruments on the Financial Statements and Primary Underlying Risk Exposure:
The Fund invested in derivative instruments during the reporting period. The primary type of risk associated with these derivative instruments is interest rate contracts risk. The effect of such derivative instruments on the financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.
The Fund did not hold any derivative instruments as of September 30, 2018, accordingly, no derivative positions were presented in the Statement of Assets and Liabilities.
The effects of derivative instruments on the Statement of Operations for the six months ended September 30, 2018 are as follows:
Amount of Realized Gain (Loss) on Derivatives Recognized in Income | ||||
Derivatives not accounted for as hedging | Futures | |||
Interest rate contracts | $ | 6,538 | ||
|
|
For the six months ended September 30, 2018, the Fund did not have any net change in unrealized appreciation (depreciation) on investments in the Statement of Operations.
For the six months ended September 30, 2018, the Fund’s average volume of derivative activities is as follows:
Futures Contracts— Short Positions(1) | ||
$ | 636,885 |
(1) | Notional Amount in USD. |
See Notes to Financial Statements.
28 |
Statement of Assets & Liabilities (unaudited)
as of September 30, 2018
Assets | ||||
Unaffiliated investments (cost $140,236,259) | $ | 140,205,291 | ||
Receivable for Fund shares sold | 2,519,682 | |||
Interest receivable | 1,773,864 | |||
Receivable for investments sold | 175,000 | |||
Prepaid expenses | 1,476 | |||
|
| |||
Total Assets | 144,675,313 | |||
|
| |||
Liabilities | ||||
Payable for Fund shares reacquired | 583,641 | |||
Payable to custodian | 91,125 | |||
Accrued expenses and other liabilities | 74,858 | |||
Dividends payable | 69,638 | |||
Management fee payable | 38,275 | |||
Distribution fee payable | 20,813 | |||
Affiliated transfer agent fee payable | 983 | |||
|
| |||
Total Liabilities | 879,333 | |||
|
| |||
Net Assets | $ | 143,795,980 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 14,277 | ||
Paid-in capital in excess of par | 145,110,136 | |||
|
| |||
145,124,413 | ||||
Undistributed net investment income | 332,723 | |||
Accumulated net realized loss on investment transactions | (1,630,188 | ) | ||
Net unrealized depreciation on investments | (30,968 | ) | ||
|
| |||
Net assets, September 30, 2018 | $ | 143,795,980 | ||
|
|
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 29 |
Statement of Assets & Liabilities (unaudited)
as of September 30, 2018
Class A | ||||
Net asset value and redemption price per share, | $ | 10.08 | ||
Maximum sales charge (3.25% of offering price) | 0.34 | |||
|
| |||
Maximum offering price to public | $ | 10.42 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share, | ||||
($17,606,438 ÷ 1,749,106 shares of beneficial interest issued and outstanding) | $ | 10.07 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share, | ||||
($93,235,575 ÷ 9,257,075 shares of beneficial interest issued and outstanding) | $ | 10.07 | ||
|
| |||
Class R6 | ||||
Net asset value, offering price and redemption price per share, | ||||
($1,542,290 ÷ 153,180 shares of beneficial interest issued and outstanding) | $ | 10.07 | ||
|
|
See Notes to Financial Statements.
30 |
Statement of Operations (unaudited)
Six Months Ended September 30, 2018
Net Investment Income (Loss) | ||||
Interest income | $ | 2,218,459 | ||
|
| |||
Expenses | ||||
Management fee | 403,263 | |||
Distribution fee(a) | 136,004 | |||
Transfer agent’s fees and expenses (including affiliated expense of $ 2,932)(a) | 61,906 | |||
Custodian and accounting fees | 37,863 | |||
Registration fees(a) | 36,698 | |||
Audit fee | 21,493 | |||
Shareholders’ reports | 13,517 | |||
Legal fees and expenses | 9,803 | |||
Trustees’ fees | 7,528 | |||
Miscellaneous | 7,325 | |||
|
| |||
Total expenses | 735,400 | |||
Less: Fee waiver and/or expense reimbursement(a) | (158,469 | ) | ||
Custodian fee credit | (656 | ) | ||
|
| |||
Net expenses | 576,275 | |||
|
| |||
Net investment income (loss) | 1,642,184 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investments | ||||
Net realized gain (loss) on: | ||||
Investment transactions | (355,747 | ) | ||
Futures transactions | 6,538 | |||
|
| |||
(349,209 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on investments | (72,778 | ) | ||
|
| |||
Net gain (loss) on investment transactions | (421,987 | ) | ||
|
| |||
Net Increase (Decrease) In Net Assets Resulting From Operations | $ | 1,220,197 | ||
|
|
(a) | Class specific expenses and waivers were as follows: |
Class A | Class C | Class Z | Class R6 | |||||||||||||
Distribution fee | 40,578 | 95,426 | — | — | ||||||||||||
Transfer agent’s fees and expenses | 8,192 | 5,671 | 48,025 | 18 | ||||||||||||
Registration fees | 9,081 | 8,410 | 12,303 | 6,904 | ||||||||||||
Fee waiver and/or expense reimbursement | (30,563 | ) | (21,906 | ) | (98,739 | ) | (7,261 | ) |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 31 |
Statements of Changes in Net Assets (unaudited)
Six Months Ended September 30, 2018 | Year Ended March 31, 2018 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 1,642,184 | $ | 2,930,150 | ||||
Net realized gain (loss) on investment transactions | (349,209 | ) | (484,666 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (72,778 | ) | 978,520 | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 1,220,197 | 3,424,004 | ||||||
|
|
|
| |||||
Dividends from net investment income | ||||||||
Class A | (343,809 | ) | (795,132 | ) | ||||
Class C | (131,240 | ) | (277,358 | ) | ||||
Class Z | (1,117,642 | ) | (1,718,832 | ) | ||||
Class R6 | (9,114 | ) | (198 | ) | ||||
|
|
|
| |||||
(1,601,805 | ) | (2,791,520 | ) | |||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) | ||||||||
Net proceeds from shares sold | 49,052,667 | 71,917,437 | ||||||
Net asset value of shares issued in reinvestment of dividends | 1,090,118 | 1,658,596 | ||||||
Cost of shares reacquired | (47,346,019 | ) | (52,401,883 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in net assets from Fund share transactions | 2,796,766 | 21,174,150 | ||||||
|
|
|
| |||||
Total increase (decrease) | 2,415,158 | 21,806,634 | ||||||
Net Assets: | ||||||||
Beginning of period | 141,380,822 | 119,574,188 | ||||||
|
|
|
| |||||
End of period(a) | $ | 143,795,980 | $ | 141,380,822 | ||||
|
|
|
| |||||
(a) Includes undistributed/(distributions in excess of) net investment income of: | $ | 332,723 | $ | 292,344 | ||||
|
|
|
|
See Notes to Financial Statements.
32 |
Notes to Financial Statements (unaudited)
Prudential Investment Portfolios 12 (the “Trust”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company. The Trust was established as a Delaware business trust on October 24, 1997. The Trust currently consists of the following six series: PGIM QMA Large-Cap Core Equity PLUS Fund, PGIM QMA Long-Short Equity Fund and PGIM Short Duration Muni High Income Fund, each of which are diversified funds and PGIM Global Real Estate Fund, PGIM Jennison Technology Fund and PGIM US Real Estate Fund, each of which are non-diversified funds for purposes of the 1940 Act and may invest a greater percentage of their assets in the securities of a single company or other issuer than a diversified fund. Investing in a non-diversified fund involves greater risk than investing in a diversified fund because a loss resulting from the decline in value of any one security may represent a greater portion of the total assets of a non-diversified fund. These financial statements relate only to the PGIM Short Duration Muni High Income Fund (the “Fund”). Effective June 11, 2018, the Funds’ names were changed by replacing “Prudential” with “PGIM” and each Fund’s Class Q shares were renamed Class R6 shares.
The investment objective of the Fund is to provide the maximum amount of income that is eligible for exclusion from federal income taxes.
1. Accounting Policies
The Fund follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The following accounting policies conform to U.S. generally accepted accounting principles. The Fund consistently follows such policies in the preparation of its financial statements.
Securities Valuation: The Fund holds securities and other assets and liabilities that are fair valued at the close of each day (generally, 4:00 PM Eastern time) 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 Trust’s Board of Trustees (the “Board”) has adopted valuation procedures for security valuation under which fair valuation responsibilities have been delegated to PGIM Investments LLC (“PGIM Investments” or the “Manager”). Pursuant to the Board’s delegation, a Valuation Committee has been established as two persons, being one or more officers of the Trust, including: the Trust’s Treasurer (or the Treasurer’s direct reports); and the Trust’s Chief or Deputy Chief Compliance Officer (or Vice-President-level direct reports of the Chief or Deputy Chief Compliance Officer). Under the current valuation procedures, the Valuation Committee of the Board is responsible for supervising the valuation of portfolio securities and other assets and liabilities. The valuation procedures permit the Fund to utilize independent pricing vendor services, quotations from
PGIM Short Duration Muni High Income Fund | 33 |
Notes to Financial Statements (unaudited) (continued)
market makers, and alternative valuation methods when market quotations are either not readily available or not deemed representative of fair value. A record of the Valuation Committee’s actions is subject to the Board’s review, approval, and ratification at its next regularly scheduled quarterly meeting.
For the fiscal reporting period-end, securities and other assets and liabilities were fair valued at the close of the last U.S. business day. Trading in certain foreign securities may occur when the NYSE is closed (including weekends and holidays). Because such foreign securities trade in markets that are open on weekends and U.S. holidays, the values of some of the Fund’s foreign investments may change on days when investors cannot purchase or redeem Fund shares.
Various inputs determine how the Fund’s investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the Schedule of Investments referred to herein as the “fair value hierarchy” in accordance with FASB ASC Topic 820.
Derivative instruments, such as futures or options, 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 where the security principally trades. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price, they are classified as Level 1 in the fair value hierarchy. In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and ask prices, or at the last bid price in the absence of an ask price. These securities are classified as Level 2 in the fair value hierarchy.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the OTC market are generally classified as Level 2 in the fair value hierarchy. Such fixed income securities are typically valued using the market approach which generally involves obtaining data from an approved independent third-party vendor source. The Fund utilizes the market approach as the primary method to value securities when market prices of identical or comparable instruments are available. The third-party vendors’ valuation techniques used to derive the evaluated bid price are based on evaluating observable inputs, including but not limited to, yield curves, yield spreads, credit ratings, deal terms, tranche level attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations and reported trades. Certain Level 3 securities are also
34 |
valued using the market approach when obtaining a single broker quote or when utilizing transaction prices for identical securities that have been used in excess of five business days. During the reporting period, there were no changes to report with respect to the valuation approach and/or valuation techniques discussed above.
Securities and other assets that cannot be priced according to the methods described above are valued based on pricing methodologies approved by the Board. In the event that unobservable inputs are used when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
When determining the fair value of securities, some of the factors influencing the valuation include: the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition 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 Manager 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 unaffiliated mutual funds to calculate their net asset values.
Restricted and Illiquid Securities: Subject to guidelines adopted by the Board, the Fund may invest up to 15% of its net assets in illiquid securities, including those which are restricted as to disposition under securities law (“restricted securities”). Restricted securities are valued pursuant to the valuation procedures noted above. Illiquid securities are those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale, cannot be sold within seven days in the ordinary course of business at approximately the amount at which the Fund has valued the investment. Therefore, the Fund may find it difficult to sell illiquid securities at the time considered most advantageous by its subadviser and may incur transaction costs that would not be incurred in the sale of securities that were freely marketable. Certain securities that would otherwise be considered illiquid because of legal restrictions on resale to the general public may be traded among qualified institutional buyers under Rule 144A of the Securities Act of 1933. These Rule 144A securities, as well as commercial paper that is sold in private placements under Section 4(2) of the Securities Act, may be deemed liquid by the Fund’s subadviser under the guidelines adopted by the Trustees of the Trust. However, the liquidity of the Fund’s investments in Rule 144A securities could be impaired if trading does not develop or declines.
Financial Futures Contracts: A financial futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities at a set price for delivery on a future date. Upon entering into a financial futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount. This amount is known as the “initial margin.” Subsequent payments, known as “variation margin,” are made or received by the Fund each day, depending on the daily fluctuations in
PGIM Short Duration Muni High Income Fund | 35 |
Notes to Financial Statements (unaudited) (continued)
the value of the underlying security. Such variation margin is recorded for financial statement purposes on a daily basis as unrealized gain (loss). When the contract expires or is closed, the gain (loss) is realized and is presented in the Statement of Operations as net realized gain (loss) on futures transactions.
The Fund invested in financial futures contracts in order to hedge its existing portfolio securities, or securities the Fund intends to purchase, against fluctuations in value caused by changes in value of equities. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts and the underlying hedged assets. Since futures contracts are exchange-traded, there is minimal counterparty credit risk to the Fund since the exchanges’ clearinghouse acts as counterparty to all exchange-traded futures and guarantees the futures contracts against default.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains (losses) from investment and currency transactions are calculated on the specific identification method. Dividend income is recorded on the ex-date. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on the accrual basis. Expenses are recorded on an annual accrual basis, which may require the use of certain estimates by management that may differ from actual, Net investment income or loss (other than class specific expenses and waivers, which are allocated as noted below) and unrealized and realized gains and (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. Class specific expenses and waivers, where applicable, are charged to the respective share classes. Class specific expenses include distribution fees and distribution fee waivers, shareholder servicing fee, transfer agent fees and expenses, registration fees and fee waivers and/or expense reimbursements, as applicable.
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, interest and capital gains, if any, are recorded, net of reclaimable amounts, at the time the related income is earned.
Custody Fee Credits: The Fund has an arrangement with its custodian bank, whereby uninvested monies earn credits which reduce the fees charged by the custodian. Such custody fee credits, if any, are presented as a reduction of gross expenses in the accompanying Statement of Operations.
36 |
Dividends and Distributions: The Fund expects to declare dividends of its net investment income daily and pay such dividends monthly. Distributions of net realized capital gains, if any, are declared and paid 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-date. Permanent book/tax differences relating to income and gain (loss) are reclassified amongst undistributed net investment income, accumulated net realized gain (loss) and paid-in capital in excess of par, as appropriate.
Estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
2. Agreements
The Trust, on behalf of the Fund, has a management agreement with PGIM Investments. Pursuant to this agreement, PGIM Investments has responsibility for all investment advisory services and supervises the subadviser’s performance of such services. In addition, under the management agreement, PGIM Investments provides all of the administrative functions necessary for the organization, operation and management of the Fund. PGIM Investments administers the corporate affairs of the Fund and, in connection therewith, furnishes the Fund with office facilities, together with those ordinary clerical and bookkeeping services which are not being furnished by, the Fund’s custodian, and the Fund’s transfer agent. PGIM Investments is also responsible for the staffing and management of dedicated groups of legal, marketing, compliance and related personnel necessary for the operation of the Fund. The legal, marketing, compliance and related personnel are also responsible for the management and oversight of the various service providers to the Fund, including, but not limited to, the custodian, transfer agent, and accounting agent.
PGIM Investments has entered into a subadvisory agreement with PGIM, Inc., which provides subadvisory services to the Fund through its PGIM Fixed Income unit. The subadvisory agreement provides that PGIM, Inc. will furnish investment advisory services in connection with the management of the Fund. In connection therewith, PGIM, Inc. is obligated to keep certain books and records of the Fund. PGIM Investments pays for the services of PGIM, Inc., the cost of compensation of officers of the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears all other costs and expenses.
The management fee paid to PGIM Investments is accrued daily and payable monthly at an annual rate of 0.55% of the Fund’s average daily net assets up to and including $5 billion, 0.525% on the next $5 billion of average daily net assets, and 0.515% of the Fund’s average daily net assets in excess of $10 billion. The management fee rate before any waivers and/or expense reimbursements was 0.55% for the six months ended September 30, 2018.
PGIM Short Duration Muni High Income Fund | 37 |
Notes to Financial Statements (unaudited) (continued)
PGIM Investments has contractually agreed, through July 31, 2019, to limit total annual fund operating expenses after fee waivers and/or expense reimbursements to 0.85% of average daily net assets for Class A shares, 1.60% of average daily net assets for Class C shares, 0.60% of average daily net assets for Class Z shares, and 0.60% of average daily net assets for Class R6 shares. This contractual waiver excludes interest, brokerage, taxes (such as income and foreign withholding taxes, stamp duty and deferred tax expense), acquired fund fees and expenses, extraordinary expenses, and certain other Fund expenses such as dividend and interest expense and broker charges on short sales. Fees and/or expenses waived and/or reimbursed by PGIM Investments may be recouped by PGIM Investments within the same fiscal year during which such waiver and/or reimbursements is made if such recoupment can be realized without exceeding the expense limit in effect at the time of the recoupment for that fiscal year.
The Trust, on behalf of the Fund, has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”) who acts as the distributor of the Class A, Class C, Class Z and Class R6 shares of the Fund. The Fund compensates PIMS for distributing and servicing the Fund’s Class A and Class C shares, pursuant to the plans of distribution (the “Distribution Plans”), regardless of expenses actually incurred by PIMS. The distribution fees are accrued daily and payable monthly. No distribution or service fees are paid to PIMS as distributor of the Class Z or Class R6 shares of the Fund.
Pursuant to the Distribution Plans, the Fund compensates PIMS for distribution related activities at an annual rate of up to 0.25% and 1% of the average daily net assets of the Class A and Class C shares, respectively.
PIMS has advised the Fund that it received $9,836 in front-end sales charges resulting from sales of Class A shares during the six months ended September 30, 2018. From these fees, PIMS paid such sales charges to broker-dealers, who in turn paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Fund that for the six months ended September 30, 2018, it received $2,759 and $988 in contingent deferred sales charges imposed upon redemptions by certain Class A and Class C shareholders, respectively.
PGIM Investments, PGIM, Inc. and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PGIM Investments and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund’s transfer agent. Transfer
38 |
agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
The Fund may enter into certain securities purchase or sale transactions under Board approved Rule 17a-7 procedures. Rule 17a-7 is an exemptive rule under the 1940 Act, that, subject to certain conditions, permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. Such transactions are subject to ratification by the Board. For the six months ended September 30, 2018, the Fund’s purchases and sales transactions under Rule 17a-7, were $2,801,009 and $6,403,077, respectively. There were no realized gains (losses) associated with these 17a-7 transactions during the reporting period.
4. Portfolio Securities
The aggregate cost of purchases and proceeds from sales of portfolio securities (excluding short-term investments and U.S. Government securities) for the six months ended September 30, 2018, were $79,000,673 and $78,247,521, respectively.
5. Tax Information
The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of September 30, 2018 were as follows:
Tax Basis | $ | 140,037,413 | ||
|
| |||
Gross Unrealized Appreciation | 955,814 | |||
Gross Unrealized Depreciation | (787,936 | ) | ||
|
| |||
Net Unrealized Appreciation | $ | 167,878 | ||
|
|
The book basis may differ from tax basis due to certain tax-related adjustments.
Management has analyzed the Fund’s tax positions taken on federal, state and local 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, state and local 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.
6. Capital and Ownership
The Fund offers Class A, Class C, Class Z and Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 3.25%. Investors who purchase $1 million or more of Class A shares and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1%, although they are not subject to an initial sales charge. The Class A CDSC is waived for certain retirement and/or benefit plans. A special exchange privilege is also available for shareholders who qualified to purchase
PGIM Short Duration Muni High Income Fund | 39 |
Notes to Financial Statements (unaudited) (continued)
Class A shares at net asset value. Class C shares are sold with a CDSC of 1% on sales made within 12 months of purchase. Class Z and Class R6 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 Trust has authorized an unlimited number of shares of beneficial interest at $0.001 par value per share.
As of September 30, 2018, Prudential, through its affiliated entities, including affiliated funds (if applicable), owned 1,018 Class R6 shares of the Fund. At reporting period end, six shareholders of record held 82% of the Fund’s outstanding shares on behalf of multiple beneficial owners.
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Six months ended September 30, 2018: | ||||||||
Shares sold | 468,389 | $ | 4,729,595 | |||||
Shares issued in reinvestment of dividends and distributions | 21,730 | 219,814 | ||||||
Shares reacquired | (1,342,003 | ) | (13,563,952 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (851,884 | ) | (8,614,543 | ) | ||||
Shares issued upon conversion from other share class(es) | 98,914 | 1,004,837 | ||||||
Shares reacquired upon conversion into other share class(es) | (110,406 | ) | (1,117,344 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (863,376 | ) | $ | (8,727,050 | ) | |||
|
|
|
| |||||
Year ended March 31, 2018: | ||||||||
Shares sold | 1,598,580 | $ | 16,271,516 | |||||
Shares issued in reinvestment of dividends and distributions | 51,589 | 524,300 | ||||||
Shares reacquired | (1,507,946 | ) | (15,358,050 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 142,223 | 1,437,766 | ||||||
Shares issued upon conversion from other share class(es) | 5,391 | 54,730 | ||||||
Shares reacquired upon conversion into other share class(es) | (253,091 | ) | (2,583,514 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (105,477 | ) | $ | (1,091,018 | ) | |||
|
|
|
|
40 |
Class C | Shares | Amount | ||||||
Six months ended September 30, 2018: | ||||||||
Shares sold | 205,708 | $ | 2,079,512 | |||||
Shares issued in reinvestment of dividends and distributions | 7,135 | 72,110 | ||||||
Shares reacquired | (404,173 | ) | (4,086,363 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (191,330 | ) | (1,934,741 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (71,521 | ) | (721,296 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (262,851 | ) | $ | (2,656,037 | ) | |||
|
|
|
| |||||
Year ended March 31, 2018: | ||||||||
Shares sold | 587,792 | $ | 5,965,886 | |||||
Shares issued in reinvestment of dividends and distributions | 14,298 | 145,175 | ||||||
Shares reacquired | (622,083 | ) | (6,314,755 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (19,993 | ) | (203,694 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (88,455 | ) | (899,678 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (108,448 | ) | $ | (1,103,372 | ) | |||
|
|
|
| |||||
Class Z | ||||||||
Six months ended September 30, 2018: | ||||||||
Shares sold | 4,182,344 | $ | 42,242,378 | |||||
Shares issued in reinvestment of dividends and distributions | 78,020 | 789,080 | ||||||
Shares reacquired | (2,938,236 | ) | (29,687,364 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 1,322,128 | 13,344,094 | ||||||
Shares issued upon conversion from other share class(es) | 181,965 | 1,838,629 | ||||||
Shares reacquired upon conversion into other share class(es) | (250,927 | ) | (2,542,911 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 1,253,166 | $ | 12,639,812 | |||||
|
|
|
| |||||
Year ended March 31, 2018: | ||||||||
Shares sold | 4,871,549 | $ | 49,670,035 | |||||
Shares issued in reinvestment of dividends and distributions | 97,362 | 988,923 | ||||||
Shares reacquired | (3,025,094 | ) | (30,729,078 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 1,943,817 | 19,929,880 | ||||||
Shares issued upon conversion from other share class(es) | 338,789 | 3,455,139 | ||||||
Shares reacquired upon conversion into other share class(es) | (2,631 | ) | (26,677 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 2,279,975 | $ | 23,358,342 | |||||
|
|
|
| |||||
Class R6 | ||||||||
Six months ended September 30, 2018: | ||||||||
Shares sold | 117 | $ | 1,182 | |||||
Shares issued in reinvestment of dividends and distributions | 901 | 9,114 | ||||||
Shares reacquired | (824 | ) | (8,340 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 194 | 1,956 | ||||||
Shares issued upon conversion from other share class(es) | 151,980 | 1,538,085 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 152,174 | $ | 1,540,041 | |||||
|
|
|
| |||||
Period ended March 31, 2018*: | ||||||||
Shares sold | 986 | $ | 10,000 | |||||
Shares issued in reinvestment of dividends and distributions | 20 | 198 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 1,006 | $ | 10,198 | |||||
|
|
|
|
* | Commencement of offering was May 25, 2017. |
PGIM Short Duration Muni High Income Fund | 41 |
Notes to Financial Statements (unaudited) (continued)
7. Borrowings
The Trust, on behalf of 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 October 5, 2017 through October 4, 2018. The Funds pay an annualized commitment fee of 0.15% of the unused portion of the SCA. The Fund’s portion of the commitment fee for the unused amount, allocated based upon a method approved by the Board, is accrued daily and paid quarterly.
Subsequent to the reporting period end, the SCA was renewed effective October 4, 2018 and will continue to provide a commitment of $900 million through October 3, 2019. The commitment fee paid by the Funds will continue to be 0.15% of the unused portion of the SCA. The interest on borrowings under both SCAs is paid monthly and at a per annum interest rate based upon a contractual spread plus the higher of (1) the effective federal funds rate, (2) the 1-month LIBOR rate or (3) zero percent.
Other affiliated registered investment companies that are parties to the SCA include portfolios that are subject to a predetermined mathematical formula used to manage certain benefit guarantees offered under variable annuity contracts. The formula may result in large scale asset flows into and out of these portfolios. Consequently, these portfolios may be more likely to utilize the SCA for purposes of funding redemptions. It may be possible for those portfolios to fully exhaust the committed amount of the SCA, thereby requiring the Manager to allocate available funding per a Board-approved methodology designed to treat the Funds in the SCA equitably.
The Fund utilized the SCA during the reporting period ended September 30, 2018. The average daily balance for the 1 day that the Fund had loans outstanding during the period was $3,996,000, borrowed at a weighted average interest rate of 3.15%. The maximum loan balance outstanding during the period was $3,996,000. At September 30, 2018, the Fund did not have an outstanding loan balance.
8. Other Risks
The Fund’s risks include, but are not limited to, the risks discussed below:
Bond Obligations Risk: The Fund’s holdings, share price, yield and total return may fluctuate in response to bond market movements. The value of bonds may decline for issuer-related reasons, including management performance, financial leverage and reduced demand for the issuer’s goods and services. Certain types of fixed-income obligations also may be subject to “call and redemption risk,” which is the risk that the issuer may call a bond held
42 |
by the Fund for redemption before it matures and the Fund may not be able to reinvest at the same level and therefore would earn less income.
Derivatives Risk: Derivatives involve special risks and costs and may result in losses to the Fund. The successful use of derivatives requires sophisticated management, and, to the extent that derivatives are used, the Fund will depend on the subadviser’s ability to analyze and manage derivatives transactions. The prices of derivatives may move in unexpected ways, especially in abnormal market conditions. Some derivatives are “leveraged” and therefore may magnify or otherwise increase investment losses to the Fund. The Fund’s use of derivatives may also increase the amount of taxes payable by shareholders. Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the Fund’s derivatives positions. In fact, many OTC derivative instruments will not have liquidity beyond the counterparty to the instrument. OTC derivative instruments also involve the risk that the other party will not meet its obligations to the Fund.
Interest Rate Risk: The value of an investment may go down when interest rates rise. A rise in rates tends to have a greater impact on the prices of longer term or duration securities. When interest rates fall, the issuers of debt obligations may prepay principal more quickly than expected, and the Fund may be required to reinvest the proceeds at a lower interest rate. This is referred to as “prepayment risk.” When interest rates rise, debt obligations may be repaid more slowly than expected, and the value of the Fund’s holdings may fall sharply. This is referred to as “extension risk”. The Fund’s investments may lose value if short-term or long-term interest rates rise sharply or in a manner not anticipated by the subadviser.
Liquidity Risk: The Fund may invest in instruments that trade in lower volumes and are less liquid than other investments. Liquidity risk exists when particular investments made by the Fund are difficult to purchase or sell. Liquidity risk includes the risk that the Fund may make investments that may become less liquid in response to market developments or adverse investor perceptions. Investments that are illiquid or that trade in lower volumes may be more difficult to value. If the Fund is forced to sell these investments to pay redemption proceeds or for other reasons, the Fund may lose money. In addition, when there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may have to accept a lower price or may not be able to sell the instrument at all. The reduction in dealer market-making capacity in the fixed-income markets that has occurred in recent years also has the potential to reduce liquidity. An inability to sell a portfolio position can adversely affect the Fund’s value or prevent the Fund from being able to take advantage of other investment opportunities.
Market and Credit Risk: Securities markets may be volatile and the market prices of the Fund’s securities may decline. Securities fluctuate in price based on changes in an issuer’s financial condition and overall market and economic conditions. If the market prices of the securities owned by the Fund fall, the value of an investment in the Fund will decline. Additionally, the Fund may also be exposed to credit risk in the event that an issuer or
PGIM Short Duration Muni High Income Fund | 43 |
Notes to Financial Statements (unaudited) (continued)
guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
Municipal Bonds Risk: Municipal bonds are subject to credit risk, market risk and interest rate risk. The Fund’s holdings, share price, yield and total return may also fluctuate in response to municipal bond market movements. Municipal bonds are also subject to the risk that potential future legislative changes could affect the market for and value of municipal bonds, which may adversely affect the Fund’s yield or the value of the Fund’s investments in municipal bonds.
9. Recent Accounting Pronouncements and Reporting Updates
In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, which changes certain fair value measurement disclosure requirements. The new ASU, in addition to other modifications and additions, removes the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, and the Fund’s policy for the timing of transfers between levels. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has evaluated the implications of certain provisions of the ASU and has determined to early adopt aspects related to the removal and modification of certain fair value measurement disclosures under the ASU effective immediately. At this time, management is evaluating the implications of certain other provisions of the ASU related to new disclosure requirements and any impact on the financial statement disclosures has not yet been determined.
44 |
Financial Highlights (unaudited)
Class A Shares | ||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | May 29, 2014(a) through March 31, | ||||||||||||||||||||||||||
2018(b) | 2018(b) | 2017(b) | 2016(b) | 2015 | ||||||||||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.10 | $10.03 | $10.26 | $ 10.17 | $10.00 | |||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.11 | 0.22 | 0.21 | 0.21 | 0.17 | |||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (0.02 | ) | 0.06 | (0.23 | ) | 0.10 | 0.17 | |||||||||||||||||||||
Total from investment operations | 0.09 | 0.28 | (0.02 | ) | 0.31 | 0.34 | ||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.21 | ) | (0.21 | ) | (0.21 | ) | (0.17 | ) | ||||||||||||||||||
Distributions from net realized gains | - | - | - | (0.01 | ) | - | (c) | |||||||||||||||||||||
Total dividends and distributions | (0.11 | ) | (0.21 | ) | (0.21 | ) | (0.22 | ) | (0.17 | ) | ||||||||||||||||||
Net asset value, end of period | $10.08 | $10.10 | $10.03 | $ 10.26 | $10.17 | |||||||||||||||||||||||
Total Return(d): | 0.87% | 2.78% | (0.23)% | 3.07% | 3.43% | |||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000) | $31,412 | $40,222 | $40,966 | $62,314 | $9,062 | |||||||||||||||||||||||
Average net assets (000) | $32,373 | $38,892 | $58,677 | $32,591 | $5,344 | |||||||||||||||||||||||
Ratios to average net assets(e): | ||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 0.85% | (f) | 0.85% | 0.85% | 0.85% | 0.85% | (f) | |||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.04% | (f) | 1.07% | (g) | 1.06% | 1.11% | 1.40% | (f) | ||||||||||||||||||||
Net investment income (loss) | 2.17% | (f) | 2.14% | 2.07% | 2.10% | 2.21% | (f) | |||||||||||||||||||||
Portfolio turnover rate(h) | 54% | (i) | 71% | 70% | 19% | 31% | (i) |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | Less than $0.005 per share. |
(d) | 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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(e) | Does not include expenses of the underlying funds in which the Fund invests. |
(f) | Annualized. |
(g) | Effective January 1, 2018, class specific expenses include Transfer Agent Fees and expenses and Registration Fees, which are charged to their respective share class. |
(h) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(i) | Not annualized. |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 45 |
Financial Highlights (unaudited) (continued)
Class C Shares | ||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | May 29, 2014(a) through March 31, | ||||||||||||||||||||||||||
2018(b) | 2018(b) | 2017(b) | 2016(b) | 2015 | ||||||||||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.09 | $10.02 | $10.25 | $ 10.16 | $10.00 | |||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.07 | 0.14 | 0.14 | 0.14 | 0.11 | |||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (0.02 | ) | 0.06 | (0.24 | ) | 0.10 | 0.15 | |||||||||||||||||||||
Total from investment operations | 0.05 | 0.20 | (0.10 | ) | 0.24 | 0.26 | ||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.07 | ) | (0.13 | ) | (0.13 | ) | (0.14 | ) | (0.10 | ) | ||||||||||||||||||
Distributions from net realized gains | - | - | - | (0.01 | ) | - | (c) | |||||||||||||||||||||
Total dividends and distributions | (0.07 | ) | (0.13 | ) | (0.13 | ) | (0.15 | ) | (0.10 | ) | ||||||||||||||||||
Net asset value, end of period | $10.07 | $10.09 | $10.02 | $ 10.25 | $10.16 | |||||||||||||||||||||||
Total Return(d): | 0.49% | 2.01% | (0.98)% | 2.30% | 2.69% | |||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000) | $17,606 | $20,309 | $21,240 | $21,023 | $11,962 | |||||||||||||||||||||||
Average net assets (000) | $19,033 | $21,456 | $22,803 | $15,743 | $5,073 | |||||||||||||||||||||||
Ratios to average net assets(e): | ||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.60% | (f) | 1.60% | 1.60% | 1.60% | 1.60% | (f) | |||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.83% | (f) | 1.85% | (g) | 1.81% | 1.86% | 2.19% | (f) | ||||||||||||||||||||
Net investment income (loss) | 1.43% | (f) | 1.39% | 1.33% | 1.39% | 1.43% | (f) | |||||||||||||||||||||
Portfolio turnover rate(h) | 54% | (i) | 71% | 70% | 19% | 31% | (i) |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | Less than $0.005 per share. |
(d) | 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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(e) | Does not include expenses of the underlying funds in which the Fund invests. |
(f) | Annualized. |
(g) | Effective January 1, 2018, class specific expenses include Transfer Agent Fees and expenses and Registration Fees, which are charged to their respective share class. |
(h) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(i) | Not annualized. |
See Notes to Financial Statements.
46 |
Class Z Shares | ||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | May 29, 2014(a) through March 31, | ||||||||||||||||||||||||||
2018(b) | 2018(b) | 2017(b) | 2016(b) | 2015 | ||||||||||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.10 | $10.02 | $10.26 | $ 10.17 | $10.00 | |||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.12 | 0.24 | 0.24 | 0.24 | 0.19 | |||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (0.03 | ) | 0.07 | (0.25 | ) | 0.10 | 0.17 | |||||||||||||||||||||
Total from investment operations | 0.09 | 0.31 | (0.01 | ) | 0.34 | 0.36 | ||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.12 | ) | (0.23 | ) | (0.23 | ) | (0.24 | ) | (0.19 | ) | ||||||||||||||||||
Distributions from net realized gains | - | - | - | (0.01 | ) | - | (c) | |||||||||||||||||||||
Total dividends and distributions | (0.12 | ) | (0.23 | ) | (0.23 | ) | (0.25 | ) | (0.19 | ) | ||||||||||||||||||
Net asset value, end of period | $10.07 | $10.10 | $10.02 | $ 10.26 | $10.17 | |||||||||||||||||||||||
Total Return(d): | 0.89% | 3.13% | (0.08)% | 3.33% | 3.65% | |||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000) | $93,236 | $80,839 | $57,368 | $65,093 | $48,254 | |||||||||||||||||||||||
Average net assets (000) | $94,082 | $74,855 | $67,197 | $54,951 | $38,695 | |||||||||||||||||||||||
Ratios to average net assets(e): | ||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 0.60% | (f) | 0.60% | 0.60% | 0.60% | 0.60% | (f) | |||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 0.81% | (f) | 0.82% | (g) | 0.81% | 0.86% | 1.23% | (f) | ||||||||||||||||||||
Net investment income (loss) | 2.43% | (f) | 2.40% | 2.33% | 2.39% | 2.36% | (f) | |||||||||||||||||||||
Portfolio turnover rate(h) | 54% | (i) | 71% | 70% | 19% | 31% | (i) |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | Less than $0.005 per share. |
(d) | Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(e) | Does not include expenses of the underlying funds in which the Fund invests. |
(f) | Annualized. |
(g) | Effective January 1, 2018, class specific expenses include Transfer Agent Fees and expenses and Registration Fees, which are charged to their respective share class. |
(h) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(i) | Not annualized. |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 47 |
Financial Highlights (unaudited) (continued)
Class R6 Shares | ||||||||||||
Six Months Ended September 30, 2018 | May 25, 2017(a) through March 31, 2018 | |||||||||||
Per Share Operating Performance(b): | ||||||||||||
Net Asset Value, Beginning of Period | $10.10 | $10.14 | ||||||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income (loss) | 0.12 | 0.21 | ||||||||||
Net realized and unrealized gain (loss) on investment transactions | (0.03 | ) | (0.05 | ) | ||||||||
Total from investment operations | 0.09 | 0.16 | ||||||||||
Less Dividends and Distributions: | ||||||||||||
Dividends from net investment income | (0.12 | ) | (0.20 | ) | ||||||||
Net asset value, end of period | $10.07 | $10.10 | ||||||||||
Total Return(c): | 0.89% | 1.58% | ||||||||||
Ratios/Supplemental Data: | ||||||||||||
Net assets, end of period (000) | $1,542 | $10 | ||||||||||
Average net assets (000) | $752 | $10 | ||||||||||
Ratios to average net assets(d): | ||||||||||||
Expenses after waivers and/or expense reimbursement | 0.60% | (e) | 0.60% | (e) | ||||||||
Expenses before waivers and/or expense reimbursement | 2.53% | (e) | 141.66% | (e)(f) | ||||||||
Net investment income (loss) | 2.46% | (e) | 2.42% | (e) | ||||||||
Portfolio turnover rate(g) | 54% | (h) | 71% | (h) |
(a) | Commencement of offering. |
(b) | Calculated based on average shares outstanding during the period. |
(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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | Annualized. |
(f) | Effective January 1, 2018, class specific expenses include Transfer Agent Fees and expenses and Registration Fees, which are charged to their respective share class. |
(g) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(h) | Not annualized. |
See Notes to Financial Statements.
48 |
Approval of Advisory Agreements (unaudited)
The Fund’s Board of Trustees
The Board of Trustees (the “Board”) of PGIM Short Duration Muni High Income Fund1 (the “Fund”) consists of twelve individuals, nine of whom are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Trustees”). The Board is responsible for the oversight of the Fund and its operations, and performs the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Trustees have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Trustee. The Board has established four standing committees: the Audit Committee, the Nominating and Governance Committee, and two Investment Committees. Each committee is chaired by, and composed of, Independent Trustees.
Annual Approval of the Fund’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Fund’s management agreement with PGIM Investments LLC (“PGIM Investments”) and the Fund’s subadvisory agreement with PGIM, Inc. (“PGIM”) on behalf of its PGIM Fixed Income unit. In considering the renewal of the agreements, the Board, including all of the Independent Trustees, met on June 7, 2018 and on June 19-21, 2018 and approved the renewal of the agreements through July 31, 2019, after concluding that the renewal of the agreements was in the best interests of the Fund and its shareholders.
In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with its consideration. Among other things, the Board considered comparative fee information from PGIM Investments and PGIM. Also, the Board considered comparisons with other mutual funds in relevant Peer Universes and Peer Groups, as is further discussed below.
In approving the agreements, the Board, including the Independent Trustees advised by independent legal counsel, considered the factors it deemed relevant, including the nature, quality and extent of services provided by PGIM Investments and the subadviser, the performance of the Fund, the profitability of PGIM Investments and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Fund and its shareholders as the Fund’s assets grow. In their deliberations, the Trustees did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund. In connection with its deliberations, the Board considered information provided by PGIM Investments throughout the year at regular Board
1 | PGIM Short Duration Muni High Income Fund is a series of Prudential Investment Portfolios 12. |
PGIM Short Duration Muni High Income Fund |
Approval of Advisory Agreements (continued)
meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the meetings on June 7, 2018 and on June 19-21, 2018.
The Trustees determined that the overall arrangements between the Fund and PGIM Investments, which serves as the Fund’s investment manager pursuant to a management agreement, and between PGIM Investments and PGIM, which, through its PGIM Fixed Income unit, serves as the Fund’s subadviser pursuant to the terms of a subadvisory agreement with PGIM Investments, are in the best interests of the Fund and its shareholders in light of the services performed, fees charged and such other matters as the Trustees considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Trustees’ reaching their determinations to approve the continuance of the agreements are separately discussed below.
Nature, Quality and Extent of Services
The Board received and considered information regarding the nature, quality and extent of services provided to the Fund by PGIM Investments and PGIM Fixed Income. The Board considered the services provided by PGIM Investments, including but not limited to the oversight of the subadviser for the Fund, as well as the provision of fund recordkeeping, compliance, and other services to the Fund. With respect to PGIM Investments’ oversight of the subadviser, the Board noted that PGIM Investments’ Strategic Investment Research Group (“SIRG”), which is a business unit of PGIM Investments, is responsible for monitoring and reporting to PGIM Investments’ senior management on the performance and operations of the subadviser. The Board also considered that PGIM Investments pays the salaries of all of the officers and interested Trustees of the Fund who are part of Fund management. The Board also considered the investment subadvisory services provided by PGIM Fixed Income, including investment research and security selection, as well as adherence to the Fund’s investment restrictions and compliance with applicable Fund policies and procedures. The Board considered PGIM Investments’ evaluation of the subadviser, as well as PGIM Investments’ recommendation, based on its review of the subadviser, to renew the subadvisory agreement.
The Board considered the qualifications, backgrounds and responsibilities of PGIM Investments’ senior management responsible for the oversight of the Fund and PGIM Fixed Income, and also considered the qualifications, backgrounds and responsibilities of PGIM Fixed Income’s portfolio managers who are responsible for the day-to-day management of the Fund’s portfolio. The Board was provided with information pertaining to PGIM Investments’ and PGIM Fixed Income’s organizational structure, senior management, investment operations, and other relevant information pertaining to both PGIM Investments
Visit our website at pgiminvestments.com |
and PGIM Fixed Income. The Board also noted that it received favorable compliance reports from the Fund’s Chief Compliance Officer (“CCO”) as to both PGIM Investments and PGIM Fixed Income. The Board noted that PGIM Fixed Income is affiliated with PGIM Investments.
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PGIM Investments and the subadvisory services provided to the Fund by PGIM Fixed Income, and that there was a reasonable basis on which to conclude that the Fund benefits from the services provided by PGIM Investments and PGIM Fixed Income under the management and subadvisory agreements.
Costs of Services and Profits Realized by PGIM Investments
The Board was provided with information on the profitability of PGIM Investments and its affiliates in serving as the Fund’s investment manager. The Board discussed with PGIM Investments the methodology utilized in assembling the information regarding profitability and considered its reasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure and cost of capital. However, the Board considered that the cost of services provided by PGIM Investments during the year ended December 31, 2017 exceeded the management fees received by PGIM Investments, resulting in an operating loss to PGIM Investments. Taking these factors into account, the Board concluded that the profitability of PGIM Investments and its affiliates in relation to the services rendered was not unreasonable.
Economies of Scale
The Board received and discussed information concerning economies of scale that PGIM Investments may realize as the Fund’s assets grow beyond current levels. The Board noted that the management fee schedule for the Fund includes breakpoints, which have the effect of decreasing the fee rate as assets increase. During the course of time, the Board has considered information regarding the launch date of the Fund, the management fees of the Fund compared to those of similarly managed funds and PGIM Investments’ investment in the Fund over time. The Board noted that economies of scale may be shared with the Fund in several ways, including low management fees from inception, additional technological and personnel investments to enhance shareholder services, and maintaining existing expense structures in the face of a rising cost environment. The Board considered PGIM Investments’ assertion that it continually evaluates the management fee schedule of the Fund and the potential to share economies of scale through breakpoints or fee waivers as asset levels increase.
PGIM Short Duration Muni High Income Fund |
Approval of Advisory Agreements (continued)
The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of PGIM Investments’ costs are not specific to individual funds, but rather are incurred across a variety of products and services.
Other Benefits to PGIM Investments and PGIM Fixed Income
The Board considered potential ancillary benefits that might be received by PGIM Investments, PGIM Fixed Income and their affiliates as a result of their relationship with the Fund. The Board concluded that potential benefits to be derived by PGIM Investments included transfer agency fees received by the Fund’s transfer agent (which is affiliated with PGIM Investments), as well as benefits to its reputation or other intangible benefits resulting from PGIM Investments’ association with the Fund. The Board concluded that the potential benefits to be derived by PGIM Fixed Income included the ability to use soft dollar credits, as well as the potential benefits consistent with those generally resulting from an increase in assets under management, specifically, potential access to additional research resources and benefits to its reputation. The Board concluded that the benefits derived by PGIM Investments and PGIM Fixed Income were consistent with the types of benefits generally derived by investment managers and subadvisers to mutual funds.
Performance of the Fund / Fees and Expenses
The Board considered certain additional specific factors and made related conclusions relating to the historical performance of the Fund for the one- and three-year periods ended December 31, 2017. The Board considered that the Fund commenced operations on May 29, 2014 and that longer-term performance was not yet available.
The Board also considered the Fund’s actual management fee, as well as the Fund’s net total expense ratio, for the fiscal year ended March 31, 2017. The Board considered the management fee for the Fund as compared to the management fee charged by PGIM Investments to other funds and the fee charged by other advisers to comparable mutual funds in a Peer Group. The actual management fee represents the fee rate actually paid by Fund shareholders and includes any fee waivers or reimbursements. The net total expense ratio for the Fund represents the actual expense ratio incurred by Fund shareholders.
The mutual funds included in the Peer Universe, which was used to consider performance, and the mutual funds included in the Peer Group, which was used to consider fees and expenses, were objectively determined by Broadridge, an independent provider of mutual fund data. In certain circumstances, PGIM Investments also may have provided supplemental Peer Universe or Peer Group information for reasons addressed with the Board. The comparisons placed the Fund in various quartiles, with the first quartile being the best 25% of the mutual funds (for performance, the best performing mutual funds and, for expenses, the lowest cost mutual funds).
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The section below summarizes key factors considered by the Board and the Board’s conclusions regarding the Fund’s performance, fees and overall expenses. The table sets forth gross performance comparisons (which do not reflect the impact on performance of fund expenses, or any subsidies, expense caps or waivers that may be applicable) with the Peer Universe, actual management fees with the Peer Group (which reflect the impact of any subsidies or fee waivers), and net total expenses with the Peer Group, each of which were key factors considered by the Board.
Gross Performance | 1 Year | 3 Years | 5 Years | 10 Years | ||||
4th Quartile | 4th Quartile | N/A | N/A | |||||
Actual Management Fees: 2nd Quartile | ||||||||
Net Total Expenses: 2nd Quartile |
• | The Board noted that the Fund outperformed its benchmark index over all periods. |
• | The Board considered PGIM Investments’ assertion that the benchmark index is a better comparative source against which to evaluate the performance of the Fund than the Peer Universe. In this regard, the Board considered PGIM Investments assertion that Peer Universe included relatively few funds that utilized a short duration, high quality, high-yield strategy similar to that of the Fund. |
• | The Board considered that the Fund commenced investment operations on May 29, 2014 and that longer-term performance was not yet available. |
• | The Board and PGIM Investments agreed to retain the Fund’s existing contractual expense cap, which (exclusive of certain fees and expenses) caps the Fund’s annual operating expenses at 0.85% for Class A shares, 1.60% for Class C shares, 0.60% for Class Z shares, and 0.60% for Class R6 shares through July 31, 2019. |
• | The Board concluded that, in light of the above, it would be in the best interests of the Fund and its shareholders to continue to allow the Fund to create a performance record and to renew the agreements. |
• | The Board concluded that the management fees (including subadvisory fees) and total expenses were reasonable in light of the services provided. |
* * *
After full consideration of these factors, the Board concluded that approval of the agreements was in the best interests of the Fund and its shareholders.
PGIM Short Duration Muni High Income Fund |
∎ TELEPHONE | ∎ WEBSITE | |||
655 Broad Street Newark, NJ 07102 | (800) 225-1852 | www.pgiminvestments.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 |
Ellen S. Alberding • Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Barry H. Evans • Keith F. Hartstein • Laurie Simon Hodrick • Michael S. Hyland • Stuart S. Parker • Richard A. Redeker • Brian K. Reid • Grace C. Torres |
OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • Brian D. Nee, Treasurer and Principal Financial and Accounting Officer • Raymond A. O’Hara, Chief Legal Officer • Andrew R. French, Secretary • Chad A. Earnst, Chief Compliance Officer • Dino Capasso, Vice President and Deputy Chief Compliance Officer • Charles H. Smith, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • Peter Parrella, Assistant Treasurer • Lana Lomuti, Assistant Treasurer • Linda McMullin, Assistant Treasurer • Kelly A. Coyne, Assistant Treasurer |
MANAGER | PGIM Investments LLC | 655 Broad Street Newark, NJ 07102 | ||
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INVESTMENT SUBADVISER | PGIM Fixed Income | 655 Broad Street Newark, NJ 07102 | ||
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DISTRIBUTOR | Prudential Investment Management Services LLC | 225 Liberty Street Newark, NJ 07102 | ||
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CUSTODIAN | The Bank of New York Mellon | One Wall Street New York, NY 10286 | ||
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TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
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FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 |
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.pgiminvestments.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.pgiminvestments.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, PGIM Short Duration Muni High Income Fund, PGIM Investments, Attn: Board of Trustees, 655 Broad Street, 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 schedule of portfolio holdings is also available on the Fund’s website as of the end of each month no sooner than 15 days after the end of the 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 |
PGIM SHORT DURATION MUNI HIGH INCOME FUND
SHARE CLASS | A | C | Z | R6* | ||||
NASDAQ | PDSAX | PDSCX | PDSZX | PDSQX | ||||
CUSIP | 744336835 | 744336827 | 744336819 | 744336744 |
*Formerly known as Class Q shares.
MF222E2
PGIM QMA LARGE-CAP CORE EQUITY PLUS FUND
(Formerly known as Prudential QMA Large-Cap Core Equity PLUS Fund)
SEMIANNUAL REPORT
SEPTEMBER 30, 2018
To enroll in e-delivery, go to pgiminvestments.com/edelivery
Objective: Long-term capital appreciation |
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The information about the Fund’s portfolio holdings is for the period covered by this report and is subject to change thereafter.
The accompanying financial statements as of September 30, 2018 were not audited and, accordingly, no auditor’s opinion is expressed on them.
Mutual funds are distributed by Prudential Investment Management Services LLC, a Prudential Financial company and member SIPC. QMA is the primary business name of Quantitative Management Associates LLC, a registered investment adviser and a wholly owned subsidiary of PGIM, Inc. (PGIM), a Prudential Financial company. © 2018 Prudential Financial, Inc. and its related entities. PGIM and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
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PGIM FUNDS — UPDATE
The Board of Directors/Trustees for the Fund has approved the implementation of an automatic conversion feature for Class C shares, effective as of April 1, 2019. To reflect these changes, effective April 1, 2019, the section of the Fund’s Prospectus entitled “How to Buy, Sell and Exchange Fund Shares—How to Exchange Your Shares—Frequent Purchases and Redemptions of Fund Shares” is restated to read as follows:
This supplement should be read in conjunction with your Summary Prospectus, Statutory Prospectus and Statement of Additional Information, be retained for future reference and is in addition to any existing Fund supplements.
1. | In each Fund’s Statutory Prospectus, the following is added at the end of the section entitled “Fund Distributions And Tax Issues—If You Sell or Exchange Your Shares”: |
Automatic Conversion of Class C Shares
The conversion of Class C shares into Class A shares—which happens automatically approximately 10 years after purchase—is not a taxable event for federal income tax purposes. For more information about the automatic conversion of Class C shares, see Class C Shares Automatically Convert to Class A Shares in How to Buy, Sell and Exchange Fund Shares.
2. | In each Fund’s Statutory Prospectus, the following sentence is added at the end of the section entitled “How to Buy, Sell and Exchange Shares—Closure of Certain Share Classes to New Group Retirement Plans”: |
Shareholders owning Class C shares may continue to hold their Class C shares until the shares automatically convert to Class A shares under the conversion schedule, or until the shareholder redeems their Class C shares.
3. | In each Fund’s Statutory Prospectus, the following disclosure is added immediately following the section entitled “How to Buy, Sell and Exchange Shares—How to Buy Shares—Class B Shares Automatically Convert to Class A Shares”: |
Class C Shares Automatically Convert to Class A Shares
Starting on or about April 1, 2019 (the “Effective Date”), Class C shares will be eligible for automatic conversion into Class A shares on a monthly basis approximately ten years after the original date of purchase (the “Conversion Date”). Conversion will take place based on the relative NAV of the two classes, without the imposition of any sales load, fee or other charge. All such automatic conversions of Class C shares will constitute tax-free exchanges for federal income tax purposes.
For shareholders investing in Class C shares through retirement plans or omnibus accounts, and in certain other instances, the Fund and its agents may not have
PGIM QMA Large-Cap Core Equity PLUS Fund | 3 |
transparency into how long a shareholder has held Class C shares for purposes of determining whether such Class C shares are eligible for automatic conversion into Class A shares, and the relevant financial intermediary may not have the ability to track purchases in order to credit individual shareholders’ holding periods. In these circumstances, the Fund will not be able to automatically convert Class C shares into Class A shares as described above. In order to determine eligibility for conversion in these circumstances, it is the responsibility of the financial intermediary to notify the Fund that the shareholder is eligible for the conversion of Class C shares to Class A shares, and the financial intermediary may be required to maintain and provide the Fund with records that substantiate the holding period of Class C shares. It is the financial intermediary’s (and not the Fund’s) responsibility to keep records of transactions made in accounts it holds and to ensure that the shareholder is credited with the proper holding period based on such records or those provided to the financial intermediary by the shareholder. Please consult with your financial intermediary for the applicability of this conversion feature to your shares.
A financial intermediary may sponsor and/or control accounts, programs or platforms that impose a different conversion schedule or different eligibility requirements for the exchange of Class C shares for Class A shares (see Appendix A: Waivers and Discounts Available From Certain Financial Intermediaries of the Prospectus). Please consult with your financial intermediary if you have any questions regarding your shares’ conversion from Class C shares to Class A shares.
4. | In Part II of each Fund’s Statement of Additional Information, the following disclosure is added immediately following the section entitled “Purchase, Redemption and Pricing of Fund Shares—Share Classes—Automatic Conversion of Class B Shares”: |
AUTOMATIC CONVERSION OF CLASS C SHARES. Starting on or about April 1, 2019 (the “Effective Date”), Class C shares will be eligible for automatic conversion into Class A shares on a monthly basis approximately ten years after the original date of purchase (the “Conversion Date”). Conversion will take place based on the relative NAV of the two classes, without the imposition of any sales load, fee or other charge. Class C shares of a Fund acquired through automatic reinvestment of dividends or distributions will convert to Class A shares of the Fund on the Conversion Date pro rata with the converting Class C shares of the Fund that were not acquired through reinvestment of dividends or distributions. All such automatic conversions of Class C shares will constitute tax-free exchanges for federal income tax purposes.
For shareholders investing in Class C shares through retirement plans or omnibus accounts, and in certain other instances, the Fund and its agents may not have transparency into how long a shareholder has held Class C shares for purposes of determining whether such Class C shares are eligible for automatic conversion into Class A shares, and the relevant financial intermediary may not have the ability to track purchases in order to credit individual shareholders’ holding periods. In these circumstances, the
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Fund will not be able to automatically convert Class C shares into Class A shares as described above. In order to determine eligibility for conversion in these circumstances, it is the responsibility of the financial intermediary to notify the Fund that the shareholder is eligible for the conversion of Class C shares to Class A shares, and the financial intermediary may be required to maintain and provide the Fund with records that substantiate the holding period of Class C shares. It is the financial intermediary’s (and not the Fund’s) responsibility to keep records of transactions made in accounts it holds and to ensure that the shareholder is credited with the proper holding period based on such records or those provided to the financial intermediary by the shareholder. Please consult with your financial intermediary for the applicability of this conversion feature to your shares.
Class C shares were generally closed to investments by new group retirement plans effective June 1, 2018. Group retirement plans (and their successor, related and affiliated plans) that have Class C shares of the Fund available to participants on or before the Effective Date may continue to open accounts for new participants in such share class and purchase additional shares in existing participant accounts.
The Fund has no responsibility for monitoring or implementing a financial intermediary’s process for determining whether a shareholder meets the required holding period for conversion. A financial intermediary may sponsor and/or control accounts, programs or platforms that impose a different conversion schedule or different eligibility requirements for the exchange of Class C shares for Class A shares, as set forth on Appendix A: Waivers and Discounts Available From Certain Financial Intermediaries of the Prospectus. In these cases, Class C shareholders may have their shares exchanged for Class A shares under the policies of the financial intermediary. Financial intermediaries will be responsible for making such exchanges in those circumstances. Please consult with your financial intermediary if you have any questions regarding your shares’ conversion from Class C shares to Class A shares.
LR1094
- Not part of the Semiannual Report -
PGIM QMA Large-Cap Core Equity PLUS Fund | 5 |
Table of Contents
Letter from the President | 7 | |||
Your Fund’s Performance | 8 | |||
Fees and Expenses | 11 | |||
Holdings and Financial Statements | 13 |
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Letter from the President
Dear Shareholder:
We hope you find the semiannual report for the PGIM QMA Large-Cap Core Equity PLUS Fund informative and useful. The report covers performance for the six-month period ended September 30, 2018.
We have important information to share with you. Effective June 11, 2018, Prudential Mutual Funds were renamed PGIM Funds. This renaming
is part of our ongoing effort to further build our reputation and establish our global brand, which began when our firm adopted PGIM Investments as its name in April 2017. Please note that only the Fund’s name has changed. Your Fund’s management and operation, along with its symbols, remained the same.*
Regarding your investments with PGIM, we believe it is important 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. However, diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
At PGIM Investments, we consider it a great privilege and responsibility to help investors participate in opportunities across global markets while meeting their toughest investment challenges. PGIM is a top-10 global investment manager with more than $1 trillion in assets under management. This investment expertise allows us to deliver actively managed funds and strategies to meet the needs of investors around the globe.
Thank you for choosing our family of funds.
Sincerely,
Stuart S. Parker, President
PGIM QMA Large-Cap Core Equity PLUS Fund
November 15, 2018
*The Prudential Day One Funds did not change their names.
PGIM QMA Large-Cap Core Equity PLUS Fund | 7 |
Your Fund’s Performance (unaudited)
Performance data quoted represents 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.pgiminvestments.com or by calling (800) 225-1852.
Total Returns as of 9/30/18 (without sales charges) | Average Annual Total Returns as of 9/30/18 (with sales charges) | |||||
Six Months* (%) | One Year (%) | Since Inception (%) | ||||
Class A | 9.48 | 9.22 | 9.35 (9/19/17) | |||
Class C | 9.13 | 13.65 | 14.60 (9/19/17) | |||
Class Z | 9.69 | 15.55 | 15.58 (9/19/17) | |||
Class R6** | 9.67 | 15.74 | 15.78 (9/19/17) | |||
S&P 500 Index | ||||||
11.40 | 17.91 | 17.91 | ||||
Lipper EQ Alternative Active Extension Funds Average | ||||||
9.28 | 15.76 | 15.76 |
*Not annualized
**Formerly known as Class Q shares
Source: PGIM Investments LLC and Lipper Inc.
Since Inception returns are provided for any share class with less than 10 fiscal years of returns. Since Inception returns for the Index and the Lipper Average are measured from the closest month-end to the class’ inception date.
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The returns in the tables do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or following the redemption of Fund shares. The average annual total returns take into account applicable sales charges, which are described for each share class in the table below.
Class A | Class C | Class Z | Class R6* | |||||
Maximum initial sales charge | 5.50% of the public offering price | None | None | None | ||||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or net asset value at redemption) | 1.00% on sales of $1 million or more made within 12 months of purchase | 1.00% on sales made within 12 months of purchase | None | None | ||||
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | 0.25% | 1.00% | None | None |
*Formerly known as Class Q
Benchmark Definitions
S&P 500 Index—The S&P 500 Index is an unmanaged index of over 500 stocks of large US public companies. It gives a broad look at how stock prices in the United States have performed.
Lipper EQ Alternative Active Extension Funds Average—The Lipper EQ Alternative Active Extension Funds Average (Lipper Average) is an index of funds that combine long- and short-stock selection to invest in a diversified portfolio of U.S. large-cap equities, with a target net exposure of 100% long. Typical strategies vary between 110% long and 10% short to 160% long and 60% short.
Investors cannot invest directly in an index or average. The returns for the Index would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses of a mutual fund, but not sales charges or taxes.
PGIM QMA Large-Cap Core Equity PLUS Fund | 9 |
Your Fund’s Performance (continued)
Presentation of Fund Holdings
Five Largest Holdings—Long Positions* expressed as a percentage of net assets as of 9/30/18 (%) | ||||
Apple, Inc., Technology Hardware, Storage & Peripherals | 4.1 | |||
Microsoft Corp., Software | 3.3 | |||
Amazon.com, Inc., Internet & Direct Marketing Retail | 3.0 | |||
JPMorgan Chase & Co., Banks | 2.1 | |||
Alphabet, Inc. (Class C Stock), Internet Software & Services | 2.0 |
Holdings reflect only long-term investments and are subject to change.
Five Largest Holdings—Short Positions** as of 9/30/18 (%) | ||||
Square, Inc. (Class A Stock), IT Services | (1.2) | |||
Exact Sciences Corp., Biotechnology | (1.0) | |||
DexCom, Inc., Health Care Equipment & Supplies | (1.0) | |||
Sarepta Therapeutics, Inc., Biotechnology | (1.0) | |||
Microchip Technology, Inc., Semiconductors & Semiconductor Equipment | (0.9) |
Five Largest Industries expressed as a percentage of net assets as of 9/30/18 (%) | ||||
Software | 9.1 | |||
Oil, Gas & Consumable Fuels | 8.4 | |||
Health Care Equipment & Supplies | 7.5 | |||
Internet Software & Services | 7.1 | |||
IT Services | 5.9 |
Industry weightings reflect only long-term investments and are subject to change.
*A long position is defined as buying shares of stock with the expectation of profiting when the share price appreciates and the shares are sold.
**A short position is defined as borrowing shares of stock and then selling those shares with the expectation of profiting when the share price depreciates and those shares can be bought back at a cheaper price. Short positions in the Fund are expressed as a negative percentage of net assets.
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Fees and Expenses (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution, and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 held through the six-month period ended September 30, 2018. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of PGIM 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
PGIM QMA Large-Cap Core Equity PLUS Fund | 11 |
Fees and Expenses (continued)
and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information provided in the expense table. Additional fees have the effect of reducing investment returns.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
PGIM QMA Large-Cap Core Equity PLUS Fund | Beginning Account Value April 1, 2018 | Ending Account Value September 30, 2018 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,094.80 | 2.03 | % | $ | 10.66 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,014.89 | 2.03 | % | $ | 10.25 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,091.30 | 2.78 | % | $ | 14.57 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,011.13 | 2.78 | % | $ | 14.02 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,096.90 | 1.80 | % | $ | 9.46 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,016.04 | 1.80 | % | $ | 9.10 | ||||||||||
Class R6** | Actual | $ | 1,000.00 | $ | 1,096.70 | 1.78 | % | $ | 9.36 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,016.14 | 1.78 | % | $ | 9.00 |
*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 183 days in the six-month period ended September 30, 2018, and divided by the 365 days in the Fund’s fiscal year ending March 31, 2019 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
**Formerly known as Class Q shares.
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Schedule of Investments (unaudited)
as of September 30, 2018
Description | Shares | Value | ||||||
LONG-TERM INVESTMENTS 129.2% | ||||||||
COMMON STOCKS 129.0% | ||||||||
Aerospace & Defense 2.2% | ||||||||
Ducommun, Inc.* | 2,400 | $ | 98,016 | |||||
Lockheed Martin Corp. | 600 | 207,576 | ||||||
Northrop Grumman Corp. | 160 | 50,779 | ||||||
Raytheon Co. | 800 | 165,328 | ||||||
|
| |||||||
521,699 | ||||||||
Airlines 0.1% | ||||||||
Hawaiian Holdings, Inc. | 800 | 32,080 | ||||||
Auto Components 0.1% | ||||||||
Tenneco, Inc. | 700 | 29,498 | ||||||
Banks 5.9% | ||||||||
Bank of America Corp.(u) | 13,100 | 385,926 | ||||||
BankUnited, Inc. | 300 | 10,620 | ||||||
BB&T Corp. | 1,600 | 77,664 | ||||||
Citigroup, Inc.(u) | 4,000 | 286,960 | ||||||
Citizens Financial Group, Inc. | 1,100 | 42,427 | ||||||
JPMorgan Chase & Co.(u) | 4,300 | 485,212 | ||||||
PNC Financial Services Group, Inc. (The) | 200 | 27,238 | ||||||
SunTrust Banks, Inc. | 100 | 6,679 | ||||||
Synovus Financial Corp. | 1,200 | 54,948 | ||||||
|
| |||||||
1,377,674 | ||||||||
Beverages 1.1% | ||||||||
PepsiCo, Inc.(u) | 2,380 | 266,084 | ||||||
Biotechnology 5.9% | ||||||||
AbbVie, Inc.(u) | 2,600 | 245,908 | ||||||
Alexion Pharmaceuticals, Inc.* | 180 | 25,022 | ||||||
Amgen, Inc.(u) | 1,220 | 252,894 | ||||||
Biogen, Inc.* | 160 | 56,529 | ||||||
Celgene Corp.* | 1,960 | 175,400 | ||||||
Eagle Pharmaceuticals, Inc.* | 700 | 48,531 | ||||||
Emergent BioSolutions, Inc.* | 300 | 19,749 | ||||||
Genomic Health, Inc.* | 200 | 14,044 | ||||||
Gilead Sciences, Inc. | 2,800 | 216,188 | ||||||
Incyte Corp.* | 1,600 | 110,528 |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 13 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Biotechnology (cont’d.) | ||||||||
Myriad Genetics, Inc.* | 600 | $ | 27,600 | |||||
Vertex Pharmaceuticals, Inc.* | 970 | 186,958 | ||||||
|
| |||||||
1,379,351 | ||||||||
Building Products 0.6% | ||||||||
Armstrong World Industries, Inc.* | 600 | 41,760 | ||||||
Builders FirstSource, Inc.* | 4,900 | 71,932 | ||||||
PGT Innovations, Inc.* | 400 | 8,640 | ||||||
Universal Forest Products, Inc. | 540 | 19,078 | ||||||
|
| |||||||
141,410 | ||||||||
Capital Markets 2.8% | ||||||||
Affiliated Managers Group, Inc. | 230 | 31,446 | ||||||
Ameriprise Financial, Inc. | 930 | 137,324 | ||||||
BGC Partners, Inc. (Class A Stock) | 900 | 10,638 | ||||||
Evercore, Inc. (Class A Stock) | 200 | 20,110 | ||||||
Goldman Sachs Group, Inc. (The) | 730 | 163,695 | ||||||
Invesco Ltd. | 1,500 | 34,320 | ||||||
Morgan Stanley | 600 | 27,942 | ||||||
State Street Corp. | 1,200 | 100,536 | ||||||
T. Rowe Price Group, Inc. | 1,200 | 131,016 | ||||||
|
| |||||||
657,027 | ||||||||
Chemicals 2.8% | ||||||||
Celanese Corp. | 420 | 47,880 | ||||||
Chemours Co. (The) | 2,100 | 82,824 | ||||||
Huntsman Corp. | 1,100 | 29,953 | ||||||
Ingevity Corp.* | 1,100 | 112,068 | ||||||
Koppers Holdings, Inc.* | 2,300 | 71,645 | ||||||
LyondellBasell Industries NV (Class A Stock) | 1,300 | 133,263 | ||||||
Olin Corp. | 1,000 | 25,680 | ||||||
Sherwin-Williams Co. (The) | 320 | 145,667 | ||||||
Trinseo SA | 200 | 15,660 | ||||||
|
| |||||||
664,640 | ||||||||
Commercial Services & Supplies 0.7% | ||||||||
Herman Miller, Inc. | 1,900 | 72,960 | ||||||
Quad/Graphics, Inc. | 4,000 | 83,360 | ||||||
|
| |||||||
156,320 |
See Notes to Financial Statements.
14 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Communications Equipment 2.2% | ||||||||
Arista Networks, Inc.* | 340 | $ | 90,392 | |||||
Cisco Systems, Inc.(u) | 7,200 | 350,280 | ||||||
CommScope Holding Co., Inc.* | 1,700 | 52,292 | ||||||
F5 Networks, Inc.* | 90 | 17,948 | ||||||
Plantronics, Inc. | 200 | 12,060 | ||||||
|
| |||||||
522,972 | ||||||||
Construction & Engineering 0.4% | ||||||||
Dycom Industries, Inc.* | 40 | 3,384 | ||||||
EMCOR Group, Inc. | 1,200 | 90,132 | ||||||
|
| |||||||
93,516 | ||||||||
Construction Materials 0.1% | ||||||||
United States Lime & Minerals, Inc. | 200 | 15,790 | ||||||
Consumer Finance 1.2% | ||||||||
Capital One Financial Corp. | 1,700 | 161,381 | ||||||
Discover Financial Services | 500 | 38,225 | ||||||
Navient Corp. | 4,200 | 56,616 | ||||||
OneMain Holdings, Inc.* | 600 | 20,166 | ||||||
|
| |||||||
276,388 | ||||||||
Containers & Packaging 0.4% | ||||||||
Greif, Inc. (Class A Stock) | 1,300 | 69,758 | ||||||
Owens-Illinois, Inc.* | 1,200 | 22,548 | ||||||
|
| |||||||
92,306 | ||||||||
Distributors 0.3% | ||||||||
LKQ Corp.* | 1,900 | 60,173 | ||||||
Diversified Consumer Services 0.2% | ||||||||
Grand Canyon Education, Inc.* | 180 | 20,304 | ||||||
Service Corp. International | 400 | 17,680 | ||||||
|
| |||||||
37,984 | ||||||||
Diversified Financial Services 1.4% | ||||||||
Berkshire Hathaway, Inc. (Class B Stock)*(u) | 1,490 | 319,024 | ||||||
Jefferies Financial Group, Inc. | 700 | 15,372 | ||||||
|
| |||||||
334,396 |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 15 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Diversified Telecommunication Services 2.7% | ||||||||
AT&T, Inc.(u) | 9,400 | $ | 315,652 | |||||
Verizon Communications, Inc.(u) | 6,000 | 320,340 | ||||||
|
| |||||||
635,992 | ||||||||
Electric Utilities 1.0% | ||||||||
Eversource Energy | 400 | 24,576 | ||||||
Exelon Corp. | 3,600 | 157,176 | ||||||
FirstEnergy Corp. | 200 | 7,434 | ||||||
Portland General Electric Co. | 700 | 31,927 | ||||||
|
| |||||||
221,113 | ||||||||
Electrical Equipment 0.7% | ||||||||
AMETEK, Inc. | 1,700 | 134,504 | ||||||
Atkore International Group, Inc.* | 700 | 18,571 | ||||||
|
| |||||||
153,075 | ||||||||
Electronic Equipment, Instruments & Components 0.6% | ||||||||
CDW Corp. | 1,000 | 88,920 | ||||||
Jabil, Inc. | 800 | 21,664 | ||||||
Tech Data Corp.* | 100 | 7,157 | ||||||
Zebra Technologies Corp. (Class A Stock)* | 150 | 26,525 | ||||||
|
| |||||||
144,266 | ||||||||
Energy Equipment & Services 0.3% | ||||||||
Archrock, Inc. | 2,200 | 26,840 | ||||||
Mammoth Energy Services, Inc. | 500 | 14,550 | ||||||
Superior Energy Services, Inc.* | 3,900 | 37,986 | ||||||
|
| |||||||
79,376 | ||||||||
Equity Real Estate Investment Trusts (REITs) 2.6% | ||||||||
Apple Hospitality REIT, Inc. | 1,500 | 26,235 | ||||||
Brixmor Property Group, Inc. | 2,000 | 35,020 | ||||||
Chesapeake Lodging Trust | 1,700 | 54,519 | ||||||
CoreCivic, Inc. | 1,000 | 24,330 | ||||||
DDR Corp. | 500 | 6,695 | ||||||
DiamondRock Hospitality Co. | 3,100 | 36,177 | ||||||
Empire State Realty Trust, Inc. (Class A Stock) | 600 | 9,966 | ||||||
Franklin Street Properties Corp. | 9,700 | 77,503 | ||||||
Gaming & Leisure Properties, Inc. | 1,100 | 38,775 | ||||||
Hospitality Properties Trust | 1,600 | 46,144 |
See Notes to Financial Statements.
16 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Equity Real Estate Investment Trusts (REITs) (cont’d.) | ||||||||
Host Hotels & Resorts, Inc. | 1,700 | $ | 35,870 | |||||
Park Hotels & Resorts, Inc. | 800 | 26,256 | ||||||
Ryman Hospitality Properties, Inc. | 400 | 34,468 | ||||||
Spirit MTA REIT | 1,190 | 13,709 | ||||||
Spirit Realty Capital, Inc. | 11,900 | 95,914 | ||||||
VICI Properties, Inc. | 1,700 | 36,754 | ||||||
|
| |||||||
598,335 | ||||||||
Food & Staples Retailing 0.7% | ||||||||
Kroger Co. (The) | 3,600 | 104,796 | ||||||
Performance Food Group Co.* | 900 | 29,970 | ||||||
Walgreens Boots Alliance, Inc. | 400 | 29,160 | ||||||
|
| |||||||
163,926 | ||||||||
Food Products 1.2% | ||||||||
Archer-Daniels-Midland Co. | 3,000 | 150,810 | ||||||
J.M. Smucker Co. (The) | 830 | 85,166 | ||||||
Tyson Foods, Inc. (Class A Stock) | 800 | 47,624 | ||||||
|
| |||||||
283,600 | ||||||||
Gas Utilities 0.1% | ||||||||
UGI Corp. | 400 | 22,192 | ||||||
Health Care Equipment & Supplies 7.5% | ||||||||
Abbott Laboratories(u) | 3,500 | 256,760 | ||||||
Align Technology, Inc.* | 510 | 199,522 | ||||||
Baxter International, Inc. | 1,300 | 100,217 | ||||||
Boston Scientific Corp.* | 3,900 | 150,150 | ||||||
Danaher Corp. | 1,700 | 184,722 | ||||||
DENTSPLY SIRONA, Inc. | 2,400 | 90,576 | ||||||
Edwards Lifesciences Corp.* | 1,020 | 177,582 | ||||||
Hill-Rom Holdings, Inc. | 200 | 18,880 | ||||||
IDEXX Laboratories, Inc.* | 630 | 157,286 | ||||||
Inogen, Inc.* | 190 | 46,383 | ||||||
Intuitive Surgical, Inc.* | 30 | 17,220 | ||||||
Masimo Corp.* | 700 | 87,178 | ||||||
Medtronic PLC | 1,100 | 108,207 | ||||||
Meridian Bioscience, Inc. | 6,000 | 89,400 | ||||||
STERIS PLC | 200 | 22,880 | ||||||
Stryker Corp. | 190 | 33,759 | ||||||
|
| |||||||
1,740,722 |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 17 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Health Care Providers & Services 4.7% | ||||||||
Anthem, Inc. | 160 | $ | 43,848 | |||||
Centene Corp.* | 590 | 85,420 | ||||||
CVS Health Corp. | 1,700 | 133,824 | ||||||
Express Scripts Holding Co.* | 1,200 | 114,012 | ||||||
HCA Healthcare, Inc. | 1,300 | 180,856 | ||||||
Humana, Inc. | 130 | 44,008 | ||||||
MEDNAX, Inc.* | 400 | 18,664 | ||||||
Tenet Healthcare Corp.* | 1,200 | 34,152 | ||||||
UnitedHealth Group, Inc.(u) | 1,410 | 375,116 | ||||||
WellCare Health Plans, Inc.* | 200 | 64,098 | ||||||
|
| |||||||
1,093,998 | ||||||||
Health Care Technology 0.7% | ||||||||
athenahealth, Inc.* | 400 | 53,440 | ||||||
Cerner Corp.* | 100 | 6,441 | ||||||
Veeva Systems, Inc. (Class A Stock)* | 1,000 | 108,870 | ||||||
|
| |||||||
168,751 | ||||||||
Hotels, Restaurants & Leisure 1.7% | ||||||||
Aramark | 500 | 21,510 | ||||||
Bloomin’ Brands, Inc. | 2,100 | 41,559 | ||||||
Churchill Downs, Inc. | 50 | 13,885 | ||||||
Dine Brands Global, Inc. | 100 | 8,131 | ||||||
Extended Stay America, Inc., UTS | 1,500 | 30,345 | ||||||
Hilton Grand Vacations, Inc.* | 2,200 | 72,820 | ||||||
Las Vegas Sands Corp. | 1,500 | 88,995 | ||||||
Marriott International, Inc. (Class A Stock) | 770 | 101,663 | ||||||
Penn National Gaming, Inc.* | 600 | 19,752 | ||||||
|
| |||||||
398,660 | ||||||||
Household Durables 0.3% | ||||||||
Meritage Homes Corp.* | 600 | 23,940 | ||||||
New Home Co., Inc. (The)* | 3,100 | 24,986 | ||||||
NVR, Inc.* | 10 | 24,708 | ||||||
|
| |||||||
73,634 | ||||||||
Household Products 0.7% | ||||||||
Procter & Gamble Co. (The) | 1,800 | 149,814 | ||||||
Spectrum Brands Holdings, Inc. | 200 | 14,944 | ||||||
|
| |||||||
164,758 |
See Notes to Financial Statements.
18 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Independent Power & Renewable Electricity Producers 1.2% | ||||||||
AES Corp. | 9,400 | $ | 131,600 | |||||
NRG Energy, Inc. | 4,100 | 153,340 | ||||||
|
| |||||||
284,940 | ||||||||
Industrial Conglomerates 1.2% | ||||||||
General Electric Co. | 3,000 | 33,870 | ||||||
Honeywell International, Inc.(u) | 1,470 | 244,608 | ||||||
|
| |||||||
278,478 | ||||||||
Insurance 1.8% | ||||||||
Allstate Corp. (The) | 700 | 69,090 | ||||||
First American Financial Corp. | 300 | 15,477 | ||||||
MetLife, Inc. | 3,400 | 158,848 | ||||||
National General Holdings Corp. | 5,600 | 150,304 | ||||||
Old Republic International Corp. | 300 | 6,714 | ||||||
Unum Group | 600 | 23,442 | ||||||
|
| |||||||
423,875 | ||||||||
Internet & Direct Marketing Retail 3.6% | ||||||||
1-800-Flowers.com, Inc. (Class A Stock)* | 4,600 | 54,280 | ||||||
Amazon.com, Inc.*(u) | 345 | 691,035 | ||||||
Nutrisystem, Inc. | 1,600 | 59,280 | ||||||
Qurate Retail, Inc.* | 1,900 | 42,199 | ||||||
|
| |||||||
846,794 | ||||||||
Internet Software & Services 7.1% | ||||||||
Akamai Technologies, Inc.* | 600 | 43,890 | ||||||
Alphabet, Inc. (Class A Stock)*(u) | 280 | 337,982 | ||||||
Alphabet, Inc. (Class C Stock)*(u) | 385 | 459,486 | ||||||
Blucora, Inc.* | 200 | 8,050 | ||||||
eBay, Inc.* | 3,700 | 122,174 | ||||||
Facebook, Inc. (Class A Stock)*(u) | 2,670 | 439,108 | ||||||
VeriSign, Inc.* | 680 | 108,882 | ||||||
XO Group, Inc.* | 4,100 | 141,368 | ||||||
|
| |||||||
1,660,940 | ||||||||
IT Services 5.9% | ||||||||
Accenture PLC (Class A Stock)(u) | 1,290 | 219,558 | ||||||
Automatic Data Processing, Inc. | 1,400 | 210,924 | ||||||
Booz Allen Hamilton Holding Corp. | 1,200 | 59,556 |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 19 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
IT Services (cont’d.) | ||||||||
CACI International, Inc. (Class A Stock)* | 110 | $ | 20,256 | |||||
Cognizant Technology Solutions Corp. (Class A Stock) | 2,000 | 154,300 | ||||||
DXC Technology Co. | 1,500 | 140,280 | ||||||
Fidelity National Information Services, Inc. | 200 | 21,814 | ||||||
Fiserv, Inc.* | 720 | 59,314 | ||||||
International Business Machines Corp. | 170 | 25,706 | ||||||
Total System Services, Inc. | 800 | 78,992 | ||||||
Visa, Inc. (Class A Stock)(u) | 2,640 | 396,237 | ||||||
|
| |||||||
1,386,937 | ||||||||
Leisure Products 0.1% | ||||||||
Vista Outdoor, Inc.* | 1,100 | 19,679 | ||||||
Life Sciences Tools & Services 1.9% | ||||||||
Charles River Laboratories International, Inc.* | 180 | 24,217 | ||||||
Illumina, Inc.* | 610 | 223,906 | ||||||
Medpace Holdings, Inc.* | 200 | 11,982 | ||||||
Thermo Fisher Scientific, Inc. | 770 | 187,942 | ||||||
|
| |||||||
448,047 | ||||||||
Machinery 2.3% | ||||||||
Caterpillar, Inc. | 1,370 | 208,911 | ||||||
Cummins, Inc. | 830 | 121,238 | ||||||
Global Brass & Copper Holdings, Inc. | 3,100 | 114,390 | ||||||
Mueller Industries, Inc. | 2,700 | 78,246 | ||||||
Timken Co. (The) | 300 | 14,955 | ||||||
|
| |||||||
537,740 | ||||||||
Media 1.7% | ||||||||
Comcast Corp. (Class A Stock) | 4,300 | 152,263 | ||||||
News Corp. (Class A Stock) | 3,200 | 42,208 | ||||||
Saga Communications, Inc. (Class A Stock) | 400 | 14,460 | ||||||
Sinclair Broadcast Group, Inc. (Class A Stock) | 1,300 | 36,855 | ||||||
TEGNA, Inc. | 6,400 | 76,544 | ||||||
Tribune Media Co. (Class A Stock) | 600 | 23,058 | ||||||
Viacom, Inc. (Class B Stock) | 1,300 | 43,888 | ||||||
|
| |||||||
389,276 | ||||||||
Metals & Mining 1.2% | ||||||||
Alcoa Corp.* | 300 | 12,120 | ||||||
Freeport-McMoRan, Inc. | 8,900 | 123,888 |
See Notes to Financial Statements.
20 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Metals & Mining (cont’d.) | ||||||||
Nucor Corp. | 1,300 | $ | 82,485 | |||||
Steel Dynamics, Inc. | 1,600 | 72,304 | ||||||
|
| |||||||
290,797 | ||||||||
Mortgage Real Estate Investment Trusts (REITs) 0.6% | ||||||||
Ladder Capital Corp. | 1,400 | 23,716 | ||||||
Two Harbors Investment Corp. | 800 | 11,944 | ||||||
Western Asset Mortgage Capital Corp. | 9,400 | 94,188 | ||||||
|
| |||||||
129,848 | ||||||||
Multiline Retail 1.3% | ||||||||
Kohl’s Corp. | 2,000 | 149,100 | ||||||
Macy’s, Inc. | 4,300 | 149,339 | ||||||
Nordstrom, Inc. | 200 | 11,962 | ||||||
|
| |||||||
310,401 | ||||||||
Multi-Utilities 0.7% | ||||||||
CenterPoint Energy, Inc. | 2,500 | 69,125 | ||||||
MDU Resources Group, Inc. | 3,600 | 92,484 | ||||||
|
| |||||||
161,609 | ||||||||
Oil, Gas & Consumable Fuels 8.4% | ||||||||
Anadarko Petroleum Corp. | 2,600 | 175,266 | ||||||
Cheniere Energy, Inc.* | 1,800 | 125,082 | ||||||
Chevron Corp. | 1,360 | 166,301 | ||||||
ConocoPhillips(u) | 3,200 | 247,680 | ||||||
CONSOL Energy, Inc.* | 200 | 8,162 | ||||||
Continental Resources, Inc.* | 1,800 | 122,904 | ||||||
Exxon Mobil Corp. | 1,100 | 93,522 | ||||||
Hess Corp. | 1,300 | 93,054 | ||||||
HollyFrontier Corp. | 1,800 | 125,820 | ||||||
Marathon Petroleum Corp. | 1,900 | 151,943 | ||||||
Murphy Oil Corp. | 200 | 6,668 | ||||||
Occidental Petroleum Corp. | 1,600 | 131,472 | ||||||
Par Pacific Holdings, Inc.* | 4,000 | 81,600 | ||||||
PBF Energy, Inc. (Class A Stock) | 1,800 | 89,838 | ||||||
Phillips 66 | 1,430 | 161,190 | ||||||
Valero Energy Corp. | 1,500 | 170,625 | ||||||
World Fuel Services Corp. | 600 | 16,608 | ||||||
|
| |||||||
1,967,735 |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 21 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Paper & Forest Products 0.0% | ||||||||
Louisiana-Pacific Corp. | 400 | $ | 10,596 | |||||
Personal Products �� 0.7% | ||||||||
Herbalife Nutrition Ltd.* | 2,000 | 109,100 | ||||||
Medifast, Inc. | 130 | 28,802 | ||||||
USANA Health Sciences, Inc.* | 220 | 26,521 | ||||||
|
| |||||||
164,423 | ||||||||
Pharmaceuticals 4.7% | ||||||||
Allergan PLC | 960 | 182,861 | ||||||
Johnson & Johnson(u) | 2,100 | 290,157 | ||||||
Mallinckrodt PLC* | 2,900 | 84,999 | ||||||
Merck & Co., Inc. | 2,700 | 191,538 | ||||||
Pfizer, Inc. | 3,700 | 163,059 | ||||||
Zoetis, Inc. | 1,900 | 173,964 | ||||||
|
| |||||||
1,086,578 | ||||||||
Professional Services 0.8% | ||||||||
Insperity, Inc. | 1,490 | 175,746 | ||||||
Real Estate Management & Development 1.2% | ||||||||
CBRE Group, Inc. (Class A Stock)* | 2,500 | 110,250 | ||||||
RMR Group, Inc. (The) (Class A Stock) | 1,700 | 157,760 | ||||||
|
| |||||||
268,010 | ||||||||
Road & Rail 1.7% | ||||||||
CSX Corp. | 2,400 | 177,720 | ||||||
Norfolk Southern Corp. | 850 | 153,425 | ||||||
Old Dominion Freight Line, Inc. | 360 | 58,054 | ||||||
|
| |||||||
389,199 | ||||||||
Semiconductors & Semiconductor Equipment 4.7% | ||||||||
Analog Devices, Inc. | 1,600 | 147,936 | ||||||
Cirrus Logic, Inc.* | 400 | 15,440 | ||||||
Cypress Semiconductor Corp. | 4,800 | 69,552 | ||||||
Intel Corp.(u) | 6,900 | 326,301 | ||||||
KLA-Tencor Corp. | 760 | 77,299 | ||||||
Micron Technology, Inc.* | 3,400 | 153,782 | ||||||
MKS Instruments, Inc. | 1,100 | 88,165 | ||||||
NVIDIA Corp. | 230 | 64,635 | ||||||
ON Semiconductor Corp.* | 1,200 | 22,116 |
See Notes to Financial Statements.
22 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Semiconductors & Semiconductor Equipment (cont’d.) | ||||||||
Qorvo, Inc.* | 600 | $ | 46,134 | |||||
Semtech Corp.* | 200 | 11,120 | ||||||
SMART Global Holdings, Inc.* | 700 | 20,118 | ||||||
SolarEdge Technologies, Inc.* | 400 | 15,060 | ||||||
Texas Instruments, Inc. | 200 | 21,458 | ||||||
Versum Materials, Inc. | 200 | 7,202 | ||||||
|
| |||||||
1,086,318 | ||||||||
Software 9.1% | ||||||||
Activision Blizzard, Inc. | 2,300 | 191,337 | ||||||
Adobe Systems, Inc.*(u) | 1,110 | 299,644 | ||||||
American Software, Inc. (Class A Stock) | 3,200 | 38,816 | ||||||
Cadence Design Systems, Inc.* | 1,600 | 72,512 | ||||||
Dell Technologies, Inc. (Class V Stock)* | 1,500 | 145,680 | ||||||
Fortinet, Inc.* | 2,000 | 184,540 | ||||||
Intuit, Inc. | 910 | 206,934 | ||||||
Microsoft Corp.(u) | 6,700 | 766,279 | ||||||
Progress Software Corp. | 400 | 14,116 | ||||||
salesforce.com, Inc.* | 1,320 | 209,920 | ||||||
|
| |||||||
2,129,778 | ||||||||
Specialty Retail 3.7% | ||||||||
Advance Auto Parts, Inc. | 480 | 80,798 | ||||||
Asbury Automotive Group, Inc.* | 200 | 13,750 | ||||||
AutoNation, Inc.* | 1,000 | 41,550 | ||||||
Best Buy Co., Inc. | 1,300 | 103,168 | ||||||
Dick’s Sporting Goods, Inc. | 2,700 | 95,796 | ||||||
Foot Locker, Inc. | 2,900 | 147,842 | ||||||
Gap, Inc. (The) | 1,400 | 40,390 | ||||||
Murphy USA, Inc.* | 900 | 76,914 | ||||||
Tilly’s, Inc. (Class A Stock) | 6,800 | 128,860 | ||||||
Ulta Beauty, Inc.* | 500 | 141,060 | ||||||
|
| |||||||
870,128 | ||||||||
Technology Hardware, Storage & Peripherals 5.7% | ||||||||
Apple, Inc.(u) | 4,190 | 945,851 | ||||||
Hewlett Packard Enterprise Co. | 8,400 | 137,004 | ||||||
HP, Inc. | 6,600 | 170,082 | ||||||
Western Digital Corp. | 1,300 | 76,102 | ||||||
|
| |||||||
1,329,039 |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 23 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Textiles, Apparel & Luxury Goods 1.0% | ||||||||
Lululemon Athletica, Inc.* | 490 | $ | 79,620 | |||||
NIKE, Inc. (Class B Stock) | 1,200 | 101,664 | ||||||
Wolverine World Wide, Inc. | 1,600 | 62,480 | ||||||
|
| |||||||
243,764 | ||||||||
Thrifts & Mortgage Finance 0.4% | ||||||||
Radian Group, Inc. | 4,400 | 90,948 | ||||||
Tobacco 1.5% | ||||||||
Altria Group, Inc. | 2,500 | 150,775 | ||||||
Philip Morris International, Inc. | 2,400 | 195,696 | ||||||
|
| |||||||
346,471 | ||||||||
Trading Companies & Distributors 0.7% | ||||||||
GMS, Inc.* | 400 | 9,280 | ||||||
Veritiv Corp.* | 3,200 | 116,480 | ||||||
WESCO International, Inc.* | 700 | 43,015 | ||||||
|
| |||||||
168,775 | ||||||||
Transportation Infrastructure 0.2% | ||||||||
Macquarie Infrastructure Corp. | 800 | 36,904 | ||||||
|
| |||||||
TOTAL COMMON STOCKS | 30,135,479 | |||||||
|
| |||||||
EXCHANGE TRADED FUND 0.2% | ||||||||
SPDR S&P 500 ETF Trust | 135 | 39,247 | ||||||
|
| |||||||
TOTAL LONG-TERM INVESTMENTS | 30,174,726 | |||||||
|
| |||||||
SHORT-TERM INVESTMENT 0.1% | ||||||||
AFFILIATED MUTUAL FUND | ||||||||
PGIM Core Ultra Short Bond Fund | 14,603 | 14,603 | ||||||
|
| |||||||
TOTAL INVESTMENTS, BEFORE SECURITIES SOLD SHORT | 30,189,329 | |||||||
|
| |||||||
SECURITIES SOLD SHORT (29.4)% |
See Notes to Financial Statements.
24 |
Description | Shares | Value | ||||||
COMMON STOCKS | ||||||||
Aerospace & Defense (0.2)% | ||||||||
Axon Enterprise, Inc.* | 300 | $ | (20,529 | ) | ||||
Mercury Systems, Inc.* | 600 | (33,192 | ) | |||||
|
| |||||||
(53,721 | ) | |||||||
Airlines (0.2)% | ||||||||
Allegiant Travel Co. | 180 | (22,824 | ) | |||||
Spirit Airlines, Inc.* | 500 | (23,485 | ) | |||||
|
| |||||||
(46,309 | ) | |||||||
Auto Components (0.1)% | ||||||||
Visteon Corp.* | 290 | (26,941 | ) | |||||
Banks (0.5)% | ||||||||
CenterState Bank Corp. | 300 | (8,415 | ) | |||||
First Horizon National Corp. | 2,400 | (41,424 | ) | |||||
First Republic Bank | 800 | (76,800 | ) | |||||
|
| |||||||
(126,639 | ) | |||||||
Beverages (0.0)% | ||||||||
MGP Ingredients, Inc. | 100 | (7,898 | ) | |||||
Biotechnology (3.9)% | ||||||||
Alder Biopharmaceuticals, Inc.* | 1,400 | (23,310 | ) | |||||
Atara Biotherapeutics, Inc.* | 800 | (33,080 | ) | |||||
BioCryst Pharmaceuticals, Inc.* | 3,400 | (25,942 | ) | |||||
BioMarin Pharmaceutical, Inc.* | 200 | (19,394 | ) | |||||
Clovis Oncology, Inc.* | 1,100 | (32,307 | ) | |||||
Exact Sciences Corp.* | 3,000 | (236,760 | ) | |||||
Heron Therapeutics, Inc.* | 800 | (25,320 | ) | |||||
ImmunoGen, Inc.* | 1,600 | (15,152 | ) | |||||
Immunomedics, Inc.* | 900 | (18,747 | ) | |||||
Intellia Therapeutics, Inc.* | 300 | (8,586 | ) | |||||
Invitae Corp.* | 500 | (8,365 | ) | |||||
Portola Pharmaceuticals, Inc.* | 2,000 | (53,260 | ) | |||||
Progenics Pharmaceuticals, Inc.* | 2,400 | (15,048 | ) | |||||
Puma Biotechnology, Inc.* | 300 | (13,755 | ) | |||||
Radius Health, Inc.* | 800 | (14,240 | ) | |||||
Sarepta Therapeutics, Inc.* | 1,390 | (224,499 | ) | |||||
Seattle Genetics, Inc.* | 1,100 | (84,832 | ) | |||||
Spark Therapeutics, Inc.* | 1,200 | (65,460 | ) | |||||
|
| |||||||
(918,057 | ) |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 25 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Building Products (0.7)% | ||||||||
Allegion PLC | 600 | $ | (54,342 | ) | ||||
JELD-WEN Holding, Inc.* | 800 | (19,728 | ) | |||||
Owens Corning | 1,600 | (86,832 | ) | |||||
|
| |||||||
(160,902 | ) | |||||||
Capital Markets (0.8)% | ||||||||
CME Group, Inc. | 1,010 | (171,912 | ) | |||||
MarketAxess Holdings, Inc. | 100 | (17,849 | ) | |||||
|
| |||||||
(189,761 | ) | |||||||
Chemicals (0.7)% | ||||||||
International Flavors & Fragrances, Inc. | 280 | (38,954 | ) | |||||
RPM International, Inc. | 1,300 | (84,422 | ) | |||||
Sensient Technologies Corp. | 300 | (22,953 | ) | |||||
Valvoline, Inc. | 600 | (12,906 | ) | |||||
|
| |||||||
(159,235 | ) | |||||||
Commercial Services & Supplies (0.2)% | ||||||||
ABM Industries, Inc. | 1,100 | (35,475 | ) | |||||
Communications Equipment (0.3)% | ||||||||
ARRIS International PLC* | 500 | (12,995 | ) | |||||
Finisar Corp.* | 1,400 | (26,670 | ) | |||||
ViaSat, Inc.* | 600 | (38,370 | ) | |||||
|
| |||||||
(78,035 | ) | |||||||
Containers & Packaging (0.5)% | ||||||||
Ball Corp. | 900 | (39,591 | ) | |||||
Graphic Packaging Holding Co. | 4,900 | (68,649 | ) | |||||
|
| |||||||
(108,240 | ) | |||||||
Electronic Equipment, Instruments & Components (0.8)% | ||||||||
Cognex Corp. | 900 | (50,238 | ) | |||||
Coherent, Inc.* | 480 | (82,651 | ) | |||||
Fitbit, Inc. (Class A Stock)* | 7,400 | (39,590 | ) | |||||
Rogers Corp.* | 60 | (8,839 | ) | |||||
|
| |||||||
(181,318 | ) |
See Notes to Financial Statements.
26 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Energy Equipment & Services (0.2)% | ||||||||
Dril-Quip, Inc.* | 200 | $ | (10,450 | ) | ||||
Oil States International, Inc.* | 300 | (9,960 | ) | |||||
US Silica Holdings, Inc. | 900 | (16,947 | ) | |||||
|
| |||||||
(37,357 | ) | |||||||
Equity Real Estate Investment Trusts (REITs) (0.4)% | ||||||||
CoreSite Realty Corp. | 100 | (11,114 | ) | |||||
Healthcare Realty Trust, Inc. | 500 | (14,630 | ) | |||||
Macerich Co. (The) | 900 | (49,761 | ) | |||||
National Storage Affiliates Trust | 900 | (22,896 | ) | |||||
|
| |||||||
(98,401 | ) | |||||||
Health Care Equipment & Supplies (3.3)% | ||||||||
AxoGen, Inc.* | 1,100 | (40,535 | ) | |||||
DexCom, Inc.* | 1,600 | (228,864 | ) | |||||
Glaukos Corp.* | 1,200 | (77,880 | ) | |||||
Insulet Corp.* | 700 | (74,165 | ) | |||||
IntriCon Corp.* | 100 | (5,620 | ) | |||||
iRhythm Technologies, Inc.* | 400 | (37,864 | ) | |||||
Nevro Corp.* | 1,000 | (57,000 | ) | |||||
Novocure Ltd.* | 700 | (36,680 | ) | |||||
NuVasive, Inc.* | 1,800 | (127,764 | ) | |||||
Quidel Corp.* | 800 | (52,136 | ) | |||||
Wright Medical Group NV* | 1,400 | (40,628 | ) | |||||
|
| |||||||
(779,136 | ) | |||||||
Health Care Providers & Services (0.5)% | ||||||||
Acadia Healthcare Co., Inc.* | 400 | (14,080 | ) | |||||
Cross Country Healthcare, Inc.* | 1,300 | (11,349 | ) | |||||
Diplomat Pharmacy, Inc.* | 1,600 | (31,056 | ) | |||||
Patterson Cos., Inc. | 800 | (19,560 | ) | |||||
Tivity Health, Inc.* | 1,400 | (45,010 | ) | |||||
|
| |||||||
(121,055 | ) | |||||||
Health Care Technology (1.2)% | ||||||||
Evolent Health, Inc. (Class A Stock)* | 2,300 | (65,320 | ) | |||||
Medidata Solutions, Inc.* | 500 | (36,655 | ) | |||||
Teladoc Health, Inc.* | 2,000 | (172,700 | ) | |||||
|
| |||||||
(274,675 | ) |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 27 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Hotels, Restaurants & Leisure (0.8)% | ||||||||
Caesars Entertainment Corp.* | 10,600 | $ | (108,650 | ) | ||||
Planet Fitness, Inc. (Class A Stock)* | 400 | (21,612 | ) | |||||
Starbucks Corp. | 1,100 | (62,524 | ) | |||||
|
| |||||||
(192,786 | ) | |||||||
Household Durables (0.3)% | ||||||||
Leggett & Platt, Inc. | 1,100 | (48,169 | ) | |||||
Universal Electronics, Inc.* | 500 | (19,675 | ) | |||||
|
| |||||||
(67,844 | ) | |||||||
Independent Power & Renewable Electricity Producers (0.3)% | ||||||||
Ormat Technologies, Inc. | 900 | (48,699 | ) | |||||
Pattern Energy Group, Inc. (Class A Stock) | 1,500 | (29,805 | ) | |||||
|
| |||||||
(78,504 | ) | |||||||
Insurance (0.1)% | ||||||||
eHealth, Inc.* | 600 | (16,956 | ) | |||||
Markel Corp.* | 11 | (13,073 | ) | |||||
|
| |||||||
(30,029 | ) | |||||||
Internet Software & Services (1.4)% | ||||||||
2U, Inc.* | 900 | (67,671 | ) | |||||
Alteryx, Inc. (Class A Stock)* | 1,100 | (62,931 | ) | |||||
Box, Inc. (Class A Stock)* | 4,100 | (98,031 | ) | |||||
Instructure, Inc.* | 1,000 | (35,400 | ) | |||||
Okta, Inc.* | 500 | (35,180 | ) | |||||
Stamps.com, Inc.* | 90 | (20,358 | ) | |||||
|
| |||||||
(319,571 | ) | |||||||
IT Services (2.3)% | ||||||||
Gartner, Inc.* | 1,050 | (166,425 | ) | |||||
Global Payments, Inc. | 340 | (43,316 | ) | |||||
Jack Henry & Associates, Inc. | 190 | (30,415 | ) | |||||
Square, Inc. (Class A Stock)* | 2,900 | (287,129 | ) | |||||
|
| |||||||
(527,285 | ) | |||||||
Life Sciences Tools & Services (0.2)% | ||||||||
Syneos Health, Inc.* | 900 | (46,395 | ) |
See Notes to Financial Statements.
28 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Machinery (0.4)% | ||||||||
Chart Industries, Inc.* | 600 | $ | (46,998 | ) | ||||
CIRCOR International, Inc. | 600 | (28,500 | ) | |||||
Graco, Inc. | 300 | (13,902 | ) | |||||
|
| |||||||
(89,400 | ) | |||||||
Marine (0.1)% | ||||||||
Kirby Corp.* | 400 | (32,900 | ) | |||||
Metals & Mining (0.3)% | ||||||||
Allegheny Technologies, Inc.* | 2,100 | (62,055 | ) | |||||
Haynes International, Inc. | 400 | (14,200 | ) | |||||
|
| |||||||
(76,255 | ) | |||||||
Mortgage Real Estate Investment Trusts (REITs) (0.1)% | ||||||||
Apollo Commercial Real Estate Finance, Inc. | 1,200 | (22,644 | ) | |||||
Multiline Retail (0.1)% | ||||||||
Dollar Tree, Inc.* | 400 | (32,620 | ) | |||||
Multi-Utilities (0.6)% | ||||||||
Sempra Energy | 1,140 | (129,675 | ) | |||||
Oil, Gas & Consumable Fuels (2.2)% | ||||||||
Centennial Resource Development, Inc. (Class A Stock)* | 2,300 | (50,255 | ) | |||||
EQT Corp. | 4,000 | (176,920 | ) | |||||
Green Plains, Inc. | 1,400 | (24,080 | ) | |||||
Halcon Resources Corp.* | 5,200 | (23,244 | ) | |||||
Matador Resources Co.* | 1,500 | (49,575 | ) | |||||
Parsley Energy, Inc. (Class A Stock)* | 1,800 | (52,650 | ) | |||||
PDC Energy, Inc.* | 1,200 | (58,752 | ) | |||||
Ring Energy, Inc.* | 1,900 | (18,829 | ) | |||||
SRC Energy, Inc.* | 3,900 | (34,671 | ) | |||||
W&T Offshore, Inc.* | 3,000 | (28,920 | ) | |||||
|
| |||||||
(517,896 | ) | |||||||
Pharmaceuticals (0.3)% | ||||||||
Aerie Pharmaceuticals, Inc.* | 600 | (36,930 | ) | |||||
Medicines Co. (The)* | 700 | (20,937 | ) | |||||
Reata Pharmaceuticals, Inc. (Class A Stock)* | 200 | (16,352 | ) | |||||
|
| |||||||
(74,219 | ) |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 29 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Professional Services (0.3)% | ||||||||
WageWorks, Inc.* | 1,400 | $ | (59,850 | ) | ||||
Real Estate Management & Development (0.4)% | ||||||||
Howard Hughes Corp. (The)* | 680 | (84,470 | ) | |||||
Road & Rail (0.1)% | ||||||||
AMERCO | 50 | (17,833 | ) | |||||
Semiconductors & Semiconductor Equipment (1.6)% | ||||||||
Ambarella, Inc.* | 900 | (34,812 | ) | |||||
MACOM Technology Solutions Holdings, Inc.* | 2,200 | (45,320 | ) | |||||
Microchip Technology, Inc. | 2,600 | (205,166 | ) | |||||
PDF Solutions, Inc.* | 1,100 | (9,933 | ) | |||||
Universal Display Corp. | 700 | (82,530 | ) | |||||
|
| |||||||
(377,761 | ) | |||||||
Software (2.1)% | ||||||||
ACI Worldwide, Inc.* | 500 | (14,070 | ) | |||||
Ebix, Inc. | 900 | (71,235 | ) | |||||
Everbridge, Inc.* | 400 | (23,056 | ) | |||||
Guidewire Software, Inc.* | 300 | (30,303 | ) | |||||
Pegasystems, Inc. | 400 | (25,040 | ) | |||||
Proofpoint, Inc.* | 920 | (97,823 | ) | |||||
Tableau Software, Inc. (Class A Stock)* | 900 | (100,566 | ) | |||||
Workday, Inc. (Class A Stock)* | 810 | (118,244 | ) | |||||
|
| |||||||
(480,337 | ) | |||||||
Specialty Retail (0.5)% | ||||||||
At Home Group, Inc.* | 1,100 | (34,683 | ) | |||||
Floor & Decor Holdings, Inc. (Class A Stock)* | 1,200 | (36,204 | ) | |||||
Lithia Motors, Inc. (Class A Stock) | 200 | (16,332 | ) | |||||
Lumber Liquidators Holdings, Inc.* | 1,000 | (15,490 | ) | |||||
Monro, Inc. | 200 | (13,920 | ) | |||||
|
| |||||||
(116,629 | ) | |||||||
Tobacco (0.0)% | ||||||||
Vector Group Ltd. | 420 | (5,788 | ) |
See Notes to Financial Statements.
30 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Trading Companies & Distributors (0.4)% | ||||||||
SiteOne Landscape Supply, Inc.* | 600 | $ | (45,204 | ) | ||||
Watsco, Inc. | 220 | (39,182 | ) | |||||
|
| |||||||
(84,386 | ) | |||||||
|
| |||||||
TOTAL SECURITIES SOLD SHORT | (6,868,232 | ) | ||||||
|
| |||||||
TOTAL INVESTMENTS, NET OF SECURITIES SOLD SHORT 99.9% | 23,321,097 | |||||||
Other assets in excess of liabilities 0.1% | 30,771 | |||||||
|
| |||||||
NET ASSETS 100.0% | $ | 23,351,868 | ||||||
|
|
The following abbreviations are used in the semiannual report:
ETF—Exchange Traded Fund
REITs—Real Estate Investment Trusts
SPDR—Standard & Poor’s Depositary Receipts
UTS—Unit Trust Security
* | Non-income producing security. |
(u) | Represents security, or a portion thereof, segregated as collateral for short sales. |
(w) | PGIM Investments LLC, the manager of the Fund, also serves as manager of the PGIM Core Ultra Short Bond Fund. |
Fair Value Measurements:
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—unadjusted quoted prices generally in active markets for identical securities.
Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other observable inputs.
Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of September 30, 2018 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Common Stocks | ||||||||||||
Aerospace & Defense | $ | 521,699 | $ | — | $ | — | ||||||
Airlines | 32,080 | — | — | |||||||||
Auto Components | 29,498 | — | — | |||||||||
Banks | 1,377,674 | — | — | |||||||||
Beverages | 266,084 | — | — | |||||||||
Biotechnology | 1,379,351 | — | — |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 31 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities (continued) | ||||||||||||
Common Stocks (continued) | ||||||||||||
Building Products | $ | 141,410 | $ | — | $ | — | ||||||
Capital Markets | 657,027 | — | — | |||||||||
Chemicals | 664,640 | — | — | |||||||||
Commercial Services & Supplies | 156,320 | — | — | |||||||||
Communications Equipment | 522,972 | — | — | |||||||||
Construction & Engineering | 93,516 | — | — | |||||||||
Construction Materials | 15,790 | — | — | |||||||||
Consumer Finance | 276,388 | — | — | |||||||||
Containers & Packaging | 92,306 | — | — | |||||||||
Distributors | 60,173 | — | — | |||||||||
Diversified Consumer Services | 37,984 | — | — | |||||||||
Diversified Financial Services | 334,396 | — | — | |||||||||
Diversified Telecommunication Services | 635,992 | — | — | |||||||||
Electric Utilities | 221,113 | — | — | |||||||||
Electrical Equipment | 153,075 | — | — | |||||||||
Electronic Equipment, Instruments & Components | 144,266 | — | — | |||||||||
Energy Equipment & Services | 79,376 | — | — | |||||||||
Equity Real Estate Investment Trusts (REITs) | 598,335 | — | — | |||||||||
Food & Staples Retailing | 163,926 | — | — | |||||||||
Food Products | 283,600 | — | — | |||||||||
Gas Utilities | 22,192 | — | — | |||||||||
Health Care Equipment & Supplies | 1,740,722 | — | — | |||||||||
Health Care Providers & Services | 1,093,998 | — | — | |||||||||
Health Care Technology | 168,751 | — | — | |||||||||
Hotels, Restaurants & Leisure | 398,660 | — | — | |||||||||
Household Durables | 73,634 | — | — | |||||||||
Household Products | 164,758 | — | — | |||||||||
Independent Power & Renewable Electricity Producers | 284,940 | — | — | |||||||||
Industrial Conglomerates | 278,478 | — | — | |||||||||
Insurance | 423,875 | — | — | |||||||||
Internet & Direct Marketing Retail | 846,794 | — | — | |||||||||
Internet Software & Services | 1,660,940 | — | — | |||||||||
IT Services | 1,386,937 | — | — | |||||||||
Leisure Products | 19,679 | — | — | |||||||||
Life Sciences Tools & Services | 448,047 | — | — | |||||||||
Machinery | 537,740 | — | — | |||||||||
Media | 389,276 | — | — | |||||||||
Metals & Mining | 290,797 | — | — | |||||||||
Mortgage Real Estate Investment Trusts (REITs) | 129,848 | — | — | |||||||||
Multiline Retail | 310,401 | — | — | |||||||||
Multi-Utilities | 161,609 | — | — | |||||||||
Oil, Gas & Consumable Fuels | 1,967,735 | — | — | |||||||||
Paper & Forest Products | 10,596 | — | — | |||||||||
Personal Products | 164,423 | — | — | |||||||||
Pharmaceuticals | 1,086,578 | — | — | |||||||||
Professional Services | 175,746 | — | — | |||||||||
Real Estate Management & Development | 268,010 | — | — |
See Notes to Financial Statements.
32 |
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities (continued) | ||||||||||||
Common Stocks (continued) | ||||||||||||
Road & Rail | $ | 389,199 | $ | — | $ | — | ||||||
Semiconductors & Semiconductor Equipment | 1,086,318 | — | — | |||||||||
Software | 2,129,778 | — | — | |||||||||
Specialty Retail | 870,128 | — | — | |||||||||
Technology Hardware, Storage & Peripherals | 1,329,039 | — | — | |||||||||
Textiles, Apparel & Luxury Goods | 243,764 | — | — | |||||||||
Thrifts & Mortgage Finance | 90,948 | — | — | |||||||||
Tobacco | 346,471 | — | — | |||||||||
Trading Companies & Distributors | 168,775 | — | — | |||||||||
Transportation Infrastructure | 36,904 | — | — | |||||||||
Exchange Traded Fund | 39,247 | — | — | |||||||||
Affiliated Mutual Fund | 14,603 | — | — | |||||||||
Common Stocks—Short | ||||||||||||
Aerospace & Defense | (53,721 | ) | — | — | ||||||||
Airlines | (46,309 | ) | — | — | ||||||||
Auto Components | (26,941 | ) | — | — | ||||||||
Banks | (126,639 | ) | — | — | ||||||||
Beverages | (7,898 | ) | — | — | ||||||||
Biotechnology | (918,057 | ) | — | — | ||||||||
Building Products | (160,902 | ) | — | — | ||||||||
Capital Markets | (189,761 | ) | — | — | ||||||||
Chemicals | (159,235 | ) | — | — | ||||||||
Commercial Services & Supplies | (35,475 | ) | — | — | ||||||||
Communications Equipment | (78,035 | ) | — | — | ||||||||
Containers & Packaging | (108,240 | ) | — | — | ||||||||
Electronic Equipment, Instruments & Components | (181,318 | ) | — | — | ||||||||
Energy Equipment & Services | (37,357 | ) | — | — | ||||||||
Equity Real Estate Investment Trusts (REITs) | (98,401 | ) | — | — | ||||||||
Health Care Equipment & Supplies | (779,136 | ) | — | — | ||||||||
Health Care Providers & Services | (121,055 | ) | — | — | ||||||||
Health Care Technology | (274,675 | ) | — | — | ||||||||
Hotels, Restaurants & Leisure | (192,786 | ) | — | — | ||||||||
Household Durables | (67,844 | ) | — | — | ||||||||
Independent Power & Renewable Electricity Producers | (78,504 | ) | — | — | ||||||||
Insurance | (30,029 | ) | — | — | ||||||||
Internet Software & Services | (319,571 | ) | — | — | ||||||||
IT Services | (527,285 | ) | — | — | ||||||||
Life Sciences Tools & Services | (46,395 | ) | — | — | ||||||||
Machinery | (89,400 | ) | — | — | ||||||||
Marine | (32,900 | ) | — | — | ||||||||
Metals & Mining | (76,255 | ) | — | — | ||||||||
Mortgage Real Estate Investment Trusts (REITs) | (22,644 | ) | — | — | ||||||||
Multiline Retail | (32,620 | ) | — | — | ||||||||
Multi-Utilities | (129,675 | ) | — | — | ||||||||
Oil, Gas & Consumable Fuels | (517,896 | ) | — | — | ||||||||
Pharmaceuticals | (74,219 | ) | — | — | ||||||||
Professional Services | (59,850 | ) | — | — |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 33 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2018
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities (continued) | ||||||||||||
Common Stocks—Short (continued) | ||||||||||||
Real Estate Management & Development | $ | (84,470 | ) | $ | — | $ | — | |||||
Road & Rail | (17,833 | ) | — | — | ||||||||
Semiconductors & Semiconductor Equipment | (377,761 | ) | — | — | ||||||||
Software | (480,337 | ) | — | — | ||||||||
Specialty Retail | (116,629 | ) | — | — | ||||||||
Tobacco | (5,788 | ) | — | — | ||||||||
Trading Companies & Distributors | (84,386 | ) | — | — | ||||||||
|
|
|
|
|
| |||||||
Total | $ | 23,321,097 | $ | — | $ | — | ||||||
|
|
|
|
|
|
Industry Classification:
The industry classification of investments and other assets in excess of liabilities shown as a percentage of net assets as of September 30, 2018 were as follows:
Software | 9.1 | % | ||
Oil, Gas & Consumable Fuels | 8.4 | |||
Health Care Equipment & Supplies | 7.5 | |||
Internet Software & Services | 7.1 | |||
IT Services | 5.9 | |||
Banks | 5.9 | |||
Biotechnology | 5.9 | |||
Technology Hardware, Storage & Peripherals | 5.7 | |||
Semiconductors & Semiconductor Equipment | 4.7 | |||
Health Care Providers & Services | 4.7 | |||
Pharmaceuticals | 4.7 | |||
Specialty Retail | 3.7 | |||
Internet & Direct Marketing Retail | 3.6 | |||
Capital Markets | 2.8 | |||
Chemicals | 2.8 | |||
Diversified Telecommunication Services | 2.7 | |||
Equity Real Estate Investment Trusts (REITs) | 2.6 | |||
Machinery | 2.3 | |||
Communications Equipment | 2.2 | |||
Aerospace & Defense | 2.2 | |||
Life Sciences Tools & Services | 1.9 | |||
Insurance | 1.8 | |||
Hotels, Restaurants & Leisure | 1.7 | |||
Road & Rail | 1.7 | |||
Media | 1.7 | |||
Tobacco | 1.5 | |||
Diversified Financial Services | 1.4 | |||
Multiline Retail | 1.3 | |||
Industrial Conglomerates | 1.2 | |||
Independent Power & Renewable Electricity Producers | 1.2 | |||
Consumer Finance | 1.2 | % | ||
Metals & Mining | 1.2 | |||
Food Products | 1.2 | |||
Real Estate Management & Development | 1.2 | |||
Beverages | 1.1 | |||
Electric Utilities | 1.0 | |||
Textiles, Apparel & Luxury Goods | 1.0 | |||
Professional Services | 0.8 | |||
Trading Companies & Distributors | 0.7 | |||
Health Care Technology | 0.7 | |||
Household Products | 0.7 | |||
Electrical Equipment | 0.7 | |||
Commercial Services & Supplies | 0.7 | |||
Food & Staples Retailing | 0.7 | |||
Multi-Utilities | 0.7 | |||
Personal Products | 0.7 | |||
Electronic Equipment, Instruments & Components | 0.6 | |||
Building Products | 0.6 | |||
Mortgage Real Estate Investment Trusts (REITs) | 0.6 | |||
Containers & Packaging | 0.4 | |||
Construction & Engineering | 0.4 | |||
Thrifts & Mortgage Finance | 0.4 | |||
Energy Equipment & Services | 0.3 | |||
Distributors | 0.3 | |||
Household Durables | 0.3 | |||
Exchange Traded Fund | 0.2 | |||
Diversified Consumer Services | 0.2 | |||
Transportation Infrastructure | 0.2 | |||
Airlines | 0.1 | |||
Auto Components | 0.1 | |||
Leisure Products | 0.1 |
See Notes to Financial Statements.
34 |
Industry Classification (cont’d.): | ||||
Construction Materials | 0.1 | % | ||
Gas Utilities | 0.1 | |||
Affiliated Mutual Fund | 0.1 | |||
Paper & Forest Products | 0.0 | * | ||
Securities Sold Short | ||||
Beverages | (0.0 | )* | ||
Tobacco | (0.0 | )* | ||
Mortgage Real Estate Investment Trusts (REITs) | (0.1 | ) | ||
Insurance | (0.1 | ) | ||
Marine | (0.1 | ) | ||
Multiline Retail | (0.1 | ) | ||
Road & Rail | (0.1 | ) | ||
Auto Components | (0.1 | ) | ||
Aerospace & Defense | (0.2 | ) | ||
Airlines | (0.2 | ) | ||
Energy Equipment & Services | (0.2 | ) | ||
Commercial Services & Supplies | (0.2 | ) | ||
Life Sciences Tools & Services | (0.2 | ) | ||
Pharmaceuticals | (0.3 | ) | ||
Communications Equipment | (0.3 | ) | ||
Household Durables | (0.3 | ) | ||
Metals & Mining | (0.3 | ) | ||
Independent Power & Renewable Electricity Producers | (0.3 | ) | ||
Professional Services | (0.3 | ) | ||
Equity Real Estate Investment Trusts (REITs) | (0.4 | ) | ||
Real Estate Management & Development | (0.4 | ) | ||
Machinery | (0.4 | ) | ||
Trading Companies & Distributors | (0.4 | )% | ||
Containers & Packaging | (0.5 | ) | ||
Specialty Retail | (0.5 | ) | ||
Health Care Providers & Services | (0.5 | ) | ||
Banks | (0.5 | ) | ||
Multi-Utilities | (0.6 | ) | ||
Chemicals | (0.7 | ) | ||
Building Products | (0.7 | ) | ||
Electronic Equipment, Instruments & Components | (0.8 | ) | ||
Capital Markets | (0.8 | ) | ||
Hotels, Restaurants & Leisure | (0.8 | ) | ||
Health Care Technology | (1.2 | ) | ||
Internet Software & Services | (1.4 | ) | ||
Semiconductors & Semiconductor Equipment | (1.6 | ) | ||
Software | (2.1 | ) | ||
Oil, Gas & Consumable Fuels | (2.2 | ) | ||
IT Services | (2.3 | ) | ||
Health Care Equipment & Supplies | (3.3 | ) | ||
Biotechnology | (3.9 | ) | ||
|
| |||
99.9 | ||||
Other assets in excess of liabilities | 0.1 | |||
|
| |||
100.0 | % | |||
|
|
* | Less than +/- 0.05% |
Financial Instruments/Transactions—Summary of Offsetting and Netting Arrangements:
The Fund entered into financial instruments/transactions during the reporting period that are either offset in accordance with current requirements or are subject to enforceable master netting arrangements or similar agreements that permit offsetting. The information about offsetting and related netting arrangements for financial instruments/transactions, where the legal right to set-off exists, is presented in the summary below.
Offsetting of financial instrument/transaction assets and liabilities:
Description | Counterparty | Gross Market Value of Recognized Assets/(Liabilities) | Collateral Pledged/(Received)(1) | Net Amount | ||||||||||
Securities Sold Short | Scotia Capital (USA), Inc. | $ | (6,868,232 | ) | $ | 6,868,232 | $ | — | ||||||
|
|
(1) | Collateral amount disclosed by the Fund is limited to the market value of financial instruments/transactions. |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 35 |
Statement of Assets & Liabilities (unaudited)
as of September 30, 2018
Assets | ||||
Investments at value: | ||||
Unaffiliated investments (cost $26,454,414) | $ | 30,174,726 | ||
Affiliated investments (cost $14,603) | 14,603 | |||
Cash | 4,172 | |||
Dividends receivable | 31,430 | |||
Deposit with broker for securities sold short | 21,904 | |||
Due from Manager | 651 | |||
Prepaid expenses | 939 | |||
|
| |||
Total Assets | 30,248,425 | |||
|
| |||
Liabilities | ||||
Securities sold short, at value (proceeds received $6,267,460) | 6,868,232 | |||
Accrued expenses and other liabilities | 20,444 | |||
Dividends and interest payable on securities sold short | 7,817 | |||
Affiliated transfer agent fee payable | 45 | |||
Distribution fee payable | 19 | |||
|
| |||
Total Liabilities | 6,896,557 | |||
|
| |||
Net Assets | $ | 23,351,868 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 2,019 | ||
Paid-in capital in excess of par | 20,170,639 | |||
|
| |||
20,172,658 | ||||
Undistributed net investment income | 112,208 | |||
Accumulated net realized loss on investment transactions | (52,538 | ) | ||
Net unrealized appreciation on investments | 3,119,540 | |||
|
| |||
Net assets, September 30, 2018 | $ | 23,351,868 | ||
|
|
See Notes to Financial Statements.
36 |
Class A | ||||
Net asset value and redemption price per share, | $ | 11.55 | ||
Maximum sales charge (5.50% of offering price) | 0.67 | |||
|
| |||
Maximum offering price to public | $ | 12.22 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share, | $ | 11.48 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share, | $ | 11.55 | ||
|
| |||
Class R6 | ||||
Net asset value, offering price and redemption price per share, | $ | 11.57 | ||
|
|
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 37 |
Statement of Operations (unaudited)
Six Months Ended September 30, 2018
Net Investment Income (Loss) | ||||
Income | ||||
Unaffiliated dividend income (net of $343 foreign withholding tax) | $ | 235,625 | ||
Interest income | 51,156 | |||
Affiliated dividend income | 296 | |||
|
| |||
Total income | 287,077 | |||
|
| |||
Expenses | ||||
Management fee | 89,549 | |||
Distribution fee(a) | 109 | |||
Broker fees and expenses on short sales | 74,976 | |||
Registration fees(a) | 41,613 | |||
Custodian and accounting fees | 29,516 | |||
Dividend expense on short sales | 18,099 | |||
Audit fee | 11,773 | |||
Legal fees and expenses | 9,581 | |||
Shareholders’ reports | 8,516 | |||
Trustees’ fees | 6,317 | |||
Transfer agent’s fees and expenses (including affiliated expense of $100)(a) | 158 | |||
Miscellaneous | 6,754 | |||
|
| |||
Total expenses | 296,961 | |||
Less: Fee waiver and/or expense reimbursement(a) | (97,438 | ) | ||
|
| |||
Net expenses | 199,523 | |||
|
| |||
Net investment income (loss) | 87,554 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investments | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 530,611 | |||
Short sales transactions | (608,624 | ) | ||
|
| |||
(78,013 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 2,470,365 | |||
Short sales | (428,777 | ) | ||
|
| |||
2,041,588 | ||||
|
| |||
Net gain (loss) on investment transactions | 1,963,575 | |||
|
| |||
Net Increase (Decrease) In Net Assets Resulting From Operations | $ | 2,051,129 | ||
|
|
(a) | Class specific expenses and waivers were as follows: |
Class A | Class C | Class Z | Class R6 | |||||||||||||
Distribution fee | 54 | 55 | — | — | ||||||||||||
Registration fees | 10,404 | 10,403 | 10,403 | 10,403 | ||||||||||||
Transfer agent’s fees and expenses | 62 | 22 | 37 | 37 | ||||||||||||
Fee waiver and/or expense reimbursement | (10,572 | ) | (10,450 | ) | (10,491 | ) | (65,925 | ) |
See Notes to Financial Statements.
38 |
Statements of Changes in Net Assets (unaudited)
Six Months Ended | September 19, 2017* March 31, 2018 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 87,554 | $ | 77,447 | ||||
Net realized gain (loss) on investment transactions | (78,013 | ) | 60,853 | |||||
Net change in unrealized appreciation (depreciation) on investments | 2,041,588 | 1,077,952 | ||||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 2,051,129 | 1,216,252 | ||||||
|
|
|
| |||||
Dividends and Distributions | ||||||||
Dividends from net investment income | ||||||||
Class A | — | (34 | ) | |||||
Class C | — | (11 | ) | |||||
Class Z | — | (41 | ) | |||||
Class R6 | — | (81,901 | ) | |||||
|
|
|
| |||||
— | (81,987 | ) | ||||||
|
|
|
| |||||
Distributions from net realized gains | ||||||||
Class A | — | (17 | ) | |||||
Class C | — | (17 | ) | |||||
Class Z | — | (17 | ) | |||||
Class R6 | — | (33,945 | ) | |||||
|
|
|
| |||||
— | (33,996 | ) | ||||||
|
|
|
| |||||
Fund share transactions | ||||||||
Net proceeds from shares sold | 8,834 | 20,075,653 | ||||||
Net asset value of shares issued in reinvestment of dividends and distributions | — | 115,983 | ||||||
|
|
|
| |||||
Net increase (decrease) in net assets from Fund share transactions | 8,834 | 20,191,636 | ||||||
|
|
|
| |||||
Total increase (decrease) | 2,059,963 | 21,291,905 | ||||||
Net Assets: | ||||||||
Beginning of period | 21,291,905 | — | ||||||
|
|
|
| |||||
End of period(a) | $ | 23,351,868 | $ | 21,291,905 | ||||
|
|
|
| |||||
(a) Includes undistributed/(distributions in excess of) net investment income of: | $ | 112,208 | $ | 24,654 | ||||
|
|
|
|
* | Commencement of operations. |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 39 |
Statement of Cash Flows (unaudited)
For the Six Months Ended September 30, 2018
Cash Flows Provided by / (Used for) Operating Activities: | ||||
Net increase (decrease) in net assets resulting from operations | $ | 2,051,129 | ||
|
| |||
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by / (used for) operating activities: | ||||
Proceeds from disposition of long-term portfolio investments | 10,650,122 | |||
Purchases of long-term portfolio investments | (10,353,498 | ) | ||
Net proceeds (purchases) of short-term portfolio investments | 13,233 | |||
Purchases to cover securities sold short | 4,800,312 | |||
Proceeds from securities sold short | (5,218,427 | ) | ||
Net realized (gain) loss on investment transactions | (530,611 | ) | ||
Net realized (gain) loss on short sales transactions | 608,624 | |||
Net change in unrealized (appreciation) depreciation on investments | (2,470,365 | ) | ||
Net change in unrealized (appreciation) depreciation on short sales | 428,777 | |||
(Increase) Decrease in Assets: | ||||
Dividends receivable | (3,842 | ) | ||
Deposit with broker for securities sold short | (9,998 | ) | ||
Due from Manager | 27,250 | |||
Prepaid expenses | (489 | ) | ||
Increase (Decrease) in Liabilities: | ||||
Accrued expenses and other liabilities | (4,499 | ) | ||
Dividends and interest payable on securities sold short | 36 | |||
Affiliated transfer agent fee payable | 25 | |||
Distribution fee payable | 1 | |||
|
| |||
Total adjustments | (2,063,349 | ) | ||
|
| |||
Cash provided by (used for) operating activities | (12,220 | ) | ||
|
| |||
Cash provided by (used for) financing activities: | ||||
Proceeds from fund shares sold | 9,993 | |||
|
| |||
Cash provided by (used for) financing activities | 9,993 | |||
|
| |||
Net increase (decrease) in cash | (2,227 | ) | ||
Cash at beginning of period | 6,399 | |||
|
| |||
Cash at end of period | $ | 4,172 | ||
|
|
See Notes to Financial Statements.
40 |
Notes to Financial Statements (unaudited)
Prudential Investment Portfolios 12 (the “Trust”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company. The Trust was established as a Delaware business trust on October 24, 1997. The Trust currently consists of the following six series: PGIM QMA Large-Cap Core Equity PLUS Fund, PGIM QMA Long-Short Equity Fund and PGIM Short Duration Muni High Income Fund, each of which are diversified funds and PGIM Global Real Estate Fund, PGIM Jennison Technology Fund and PGIM US Real Estate Fund, each of which are non-diversified funds for purposes of the 1940 Act and may invest a greater percentage of their assets in the securities of a single company or other issuer than a diversified fund. Investing in a non-diversified fund involves greater risk than investing in a diversified fund because a loss resulting from the decline in value of any one security may represent a greater portion of the total assets of a non-diversified fund. These financial statements relate only to the PGIM QMA Large-Cap Core Equity PLUS Fund (the “Fund”). The Fund commenced investment operations on September 19, 2017. Effective June 11, 2018, the Funds’ names were changed by replacing “Prudential” with “PGIM” and each Fund’s Class Q shares were renamed Class R6 shares.
The investment objective of the Fund is to seek long-term capital appreciation.
1. Accounting Policies
The Fund follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The following accounting policies conform to U.S. generally accepted accounting principles. The Fund consistently follows such policies in the preparation of its financial statements.
Securities Valuation: The Fund holds securities and other assets and liabilities that are fair valued at the close of each day (generally, 4:00 PM Eastern time) 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 Trust’s Board of Trustees (the “Board”) has adopted valuation procedures for security valuation under which fair valuation responsibilities have been delegated to PGIM Investments LLC (“PGIM Investments” or the “Manager”). Pursuant to the Board’s delegation, a Valuation Committee has been established as two persons, being one or more officers of the Trust, including: the Trust’s Treasurer (or the Treasurer’s direct reports); and the Trust’s Chief or Deputy Chief Compliance Officer (or Vice-President-level direct reports of the Chief or Deputy Chief Compliance Officer). Under the current valuation procedures, the Valuation Committee of the Board is responsible for supervising the valuation of portfolio securities and other assets and liabilities. The valuation procedures permit the Fund to utilize independent pricing vendor services, quotations from
PGIM QMA Large-Cap Core Equity PLUS Fund | 41 |
Notes to Financial Statements (unaudited) (continued)
market makers, and alternative valuation methods when market quotations are either not readily available or not deemed representative of fair value. A record of the Valuation Committee’s actions is subject to the Board’s review, approval, and ratification at its next regularly scheduled quarterly meeting.
For the fiscal reporting period-end, securities and other assets and liabilities were fair valued at the close of the last U.S. business day. Trading in certain foreign securities may occur when the NYSE is closed (including weekends and holidays). Because such foreign securities trade in markets that are open on weekends and U.S. holidays, the values of some of the Fund’s foreign investments may change on days when investors cannot purchase or redeem Fund shares.
Various inputs determine how the Fund’s investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the Schedule of Investments referred to herein as the “fair value hierarchy” in accordance with FASB ASC Topic 820.
Common and preferred stocks, exchange-traded funds, and derivative instruments, such as futures or options, 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 where the security principally trades. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price, they are classified as Level 1 in the fair value hierarchy. In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and ask prices, or at the last bid price in the absence of an ask price. These securities are classified as Level 2 in the fair value hierarchy.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Securities and other assets that cannot be priced according to the methods described above are valued based on pricing methodologies approved by the Board. In the event that unobservable inputs are used when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
When determining the fair value of securities, some of the factors influencing the valuation include: the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition and the markets in which it does business; the cost of the investment; the size of the holding and the capitalization of
42 |
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 Manager 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 unaffiliated mutual funds to calculate their net asset values.
Restricted and Illiquid Securities: Subject to guidelines adopted by the Board, the Fund may invest up to 15% of its net assets in illiquid securities, including those which are restricted as to disposition under securities law (“restricted securities”). Restricted securities are valued pursuant to the valuation procedures noted above. Illiquid securities are those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale, cannot be sold within seven days in the ordinary course of business at approximately the amount at which the Fund has valued the investment. Therefore, the Fund may find it difficult to sell illiquid securities at the time considered most advantageous by its subadviser and may incur transaction costs that would not be incurred in the sale of securities that were freely marketable. Certain securities that would otherwise be considered illiquid because of legal restrictions on resale to the general public may be traded among qualified institutional buyers under Rule 144A of the Securities Act of 1933. These Rule 144A securities, as well as commercial paper that is sold in private placements under Section 4(2) of the Securities Act, may be deemed liquid by the Fund’s subadviser under the guidelines adopted by the Trustees of the Trust. However, the liquidity of the Fund’s investments in Rule 144A securities could be impaired if trading does not develop or declines.
Short Sales: The Fund sells a security it does not own in anticipation of a decline in the market value of that security (short sale). When the Fund makes a short sale, it must borrow the security sold short and deliver it to the broker-dealer through which it made the short sale as collateral for its obligation to deliver the security upon conclusion of the transaction. The Fund may have to pay a fee to borrow the particular security and may be obligated to return any interest or dividends received on such borrowed securities. Dividends declared on open short positions are recorded on the ex-date and the interest payable is accrued daily on fixed income securities sold short, both of which are recorded as an expense. A gain, limited to the price at which the Fund sold the security short, or a loss, unlimited in magnitude, will be recognized upon the termination of a short sale if the market price at termination is less than or greater than, respectively, the proceeds originally received.
Short sales involve elements of both market and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities. Such risks may be mitigated by engaging in master netting arrangements.
Master Netting Arrangements: The Fund is subject to various Master Agreements, or netting arrangements, with select counterparties. These are agreements which a subadviser may have negotiated and entered into on behalf of the Fund. A master netting arrangement between the Fund and the counterparty permits the Fund to offset amounts payable by the
PGIM QMA Large-Cap Core Equity PLUS Fund | 43 |
Notes to Financial Statements (unaudited) (continued)
Fund to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Fund to cover the Fund’s exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable. In addition to master netting arrangements, the right to set-off exists when all the conditions are met such that each of the parties owes the other determinable amounts, the reporting party has the right to set-off the amount owed with the amount owed by the other party, the reporting party intends to set-off and the right of set-off is enforceable by law. During the reporting period, there was no intention to settle on a net basis and all amounts are presented on a gross basis on the Statement of Assets and Liabilities.
Equity and Mortgage Real Estate Investment Trusts (collectively equity REITs): The Fund invests in equity REITs, which report information on the source of their distributions annually. Based on current and historical information, a portion of distributions received from equity REITs during the period is estimated to be dividend income, capital gain or return of capital and recorded accordingly. When material, these estimates are adjusted periodically when the actual source of distributions is disclosed by the equity REITs.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains (losses) from investment and currency transactions are calculated on the specific identification method. Dividend income is recorded on the ex-date. Expenses are recorded on an accrual basis, which may require the use of certain estimates by management that may differ from actual. Net investment income or loss (other than class specific expenses and waivers, which are allocated as noted below) and unrealized and realized gains (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. Class specific expenses and waivers, where applicable, are charged to the respective share classes. Class specific expenses include distribution fees and distribution fee waivers, shareholder servicing fees, transfer agent’s fees and expenses, registration fees and fee waivers and/or expense reimbursements, as applicable.
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, interest and capital gains, if any, are recorded, net of reclaimable amounts, at the time the related income is earned.
Dividends and Distributions: The Fund expects to pay dividends from net investment income and distributions from net realized capital gains, if any, annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are
44 |
recorded on the ex-date. Permanent book/tax differences relating to income and gain (loss) are reclassified amongst undistributed net investment income, accumulated net realized gain (loss) and paid-in capital in excess of par, as appropriate.
Estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
2. Agreements
The Trust, on behalf of the Fund, has a management agreement with PGIM Investments. Pursuant to this agreement, PGIM Investments has responsibility for all investment advisory services and supervises the subadviser’s performance of such services. In addition, under the management agreement, PGIM Investments provides all of the administrative functions necessary for the organization, operation and management of the Fund. PGIM Investments administers the corporate affairs of the Fund and, in connection therewith, furnishes the Fund with office facilities, together with those ordinary clerical and bookkeeping services which are not being furnished by, the Fund’s custodian, and the Fund’s transfer agent. PGIM Investments is also responsible for the staffing and management of dedicated groups of legal, marketing, compliance and related personnel necessary for the operation of the Fund. The legal, marketing, compliance and related personnel are also responsible for the management and oversight of the various service providers to the Fund, including, but not limited to, the custodian, transfer agent, and accounting agent.
PGIM Investments has entered into a subadvisory agreement with Quantitative Management Associates LLC (“QMA”). The subadvisory agreement provides that QMA will furnish investment advisory services in connection with the management of the Fund. In connection therewith, QMA is obligated to keep certain books and records of the Fund. PGIM Investments pays for the services of QMA, the cost of compensation of officers of the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears all other costs and expenses.
The management fee paid to PGIM Investments is accrued daily and payable monthly at an annual rate of 0.80% of average daily net assets up to and including $1 billion; 0.78% of average daily net assets between $1 billion and $3 billion; 0.76% of average daily net assets between $3 billion and $5 billion; 0.75% of average daily net assets between $5 billion and $10 billion; 0.74% of average daily net assets over $10 billion. The management fee rate before any waivers and/or expense reimbursements was 0.80% for the six months ended September 30, 2018.
PGIM Investments has contractually agreed, through July 31, 2019, to limit total annual Fund operating expenses after fee waivers and/or reimbursements to 1.20% of average daily net assets for Class A shares, 1.95% of average daily net assets for Class C shares, 0.95% of average daily net assets for Class Z shares, and 0.95% of average daily net assets for Class R6 shares. This contractual waiver excludes interest, brokerage, taxes (such as
PGIM QMA Large-Cap Core Equity PLUS Fund | 45 |
Notes to Financial Statements (unaudited) (continued)
income and foreign withholding taxes, stamp duty and deferred tax expenses), acquired fund fees and expenses, extraordinary expenses, and certain other Fund expenses such as dividend and interest expense and broker charges on short sales. Expenses waived/ reimbursed by the Manager in accordance with this agreement may be recouped by the Manager within the same fiscal year during which such waiver/reimbursement is made if such recoupment can be realized without exceeding the expense limit in effect at the time of the recoupment for that fiscal year.
The Trust, on behalf of the Fund, has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”) which acts as the distributor of the Class A, Class C, Class Z and Class R6 shares of the Fund. The Fund compensates PIMS for distributing and servicing the Fund’s Class A and Class C shares, pursuant to the plans of distribution (the “Distribution Plans”), regardless of expenses actually incurred by PIMS. The distribution fees are accrued daily and payable monthly. No distribution or service fees are paid to PIMS as distributor of the Class Z or Class R6 shares of the Fund.
Pursuant to the Distribution Plans, the Fund compensates PIMS for distribution related activities at an annual rate of up to 0.25% and 1% of the average daily net assets of the Class A and Class C shares, respectively.
PIMS has advised the Fund that it did not receive any front-end sales charges resulting from sales of Class A shares during the six months ended September 30, 2018. From these fees, if any, PIMS paid such sales charges to broker-dealers, who in turn paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Fund that for the six months ended September 30, 2018, it did not receive any contingent deferred sales charges imposed upon redemptions by certain Class A and Class C shareholders.
PGIM Investments, PIMS and QMA are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PGIM Investments 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.
The Fund may enter into certain securities purchase or sale transactions under Board approved Rule 17a-7 procedures. Rule 17a-7 is an exemptive rule under the 1940 Act, that,
46 |
subject to certain conditions, permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. Such transactions are subject to ratification by the Board. For the reporting period ended September 30, 2018, no such transactions were entered into by the Fund.
The Fund may invest its overnight sweep cash in the PGIM Core Ultra Short Bond Fund (the “Core Fund”), a series of Prudential Investment Portfolios 2, registered under the 1940 Act and managed by PGIM Investments. Earnings from the Core Fund are disclosed on the Statement of Operations as “Affiliated dividend income”.
4. Portfolio Securities
The aggregate cost of purchases and proceeds from sales of portfolio securities (excluding short-term investments and U.S. Government securities) for the period ended September 30, 2018, were $15,356,532 and $15,225,138, respectively.
A summary of the cost of purchases and proceeds from sales of shares of an affiliated mutual fund for the six months ended September 30, 2018, is presented as follows:
Affiliated Mutual Fund* | Value, Beginning of Period | Cost of Purchases | Proceeds from Sales | Change in Unrealized Gain (Loss) | Realized Gain (Loss) | Value, End of Period | Shares, End of Period | Dividend Income | ||||||||||||||||||||||||
PGIM Core Ultra Short Bond Fund | $ | 27,836 | $ | 295,459 | $ | 308,692 | $ | — | $ | — | $ | 14,603 | 14,603 | $ | 296 | |||||||||||||||||
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* | The Fund did not have any capital gain distributions during the reporting period. |
5. Tax Information
The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of September 30, 2018 were as follows:
Tax Basis | $ | 20,201,978 | ||
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Gross Unrealized Appreciation | 4,969,431 | |||
Gross Unrealized Depreciation | (1,850,312 | ) | ||
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Net Unrealized Appreciation | $ | 3,119,119 | ||
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The book basis may differ from tax basis due to certain tax-related adjustments.
Management has analyzed the Fund’s tax positions taken on federal, state and local 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, state and local 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
PGIM QMA Large-Cap Core Equity PLUS Fund | 47 |
Notes to Financial Statements (unaudited) (continued)
Revenue Service and state departments of revenue.
6. Capital and Ownership
The Fund offers Class A, Class C, Class Z and Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 5.50%. Investors who purchase $1 million or more of Class A shares and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1%, although they are not subject to an initial sales charge. The Class A CDSC is waived for certain retirement and/or benefit plans. A special exchange privilege is also available for shareholders who qualified to purchase Class A shares at net asset value. Class C shares are sold with a CDSC of 1% on sales made within 12 months of purchase. Class Z and Class R6 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 Trust has authorized an unlimited number of shares of beneficial interest at $0.001 par value per share.
As of September 30, 2018, Prudential, through its affiliated entities, including affiliated funds (if applicable), owned 1,005 Class A shares, 1,003 Class C shares, 1,005 Class Z shares and 2,011,771 Class R6 shares of the Fund. At reporting period end, Prudential owned 99.6% of the Fund’s outstanding shares.
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Six months ended September 30, 2018: | ||||||||
Shares sold | 138 | $ | 1,548 | |||||
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Net increase (decrease) in shares outstanding | 138 | $ | 1,548 | |||||
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Period ended March 31, 2018*: | ||||||||
Shares sold | 3,811 | $ | 41,337 | |||||
Shares issued in reinvestment of dividends and distributions | 5 | 51 | ||||||
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Net increase (decrease) in shares outstanding | 3,816 | $ | 41,388 | |||||
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Class C | ||||||||
Six months ended September 30, 2018: | ||||||||
Net increase (decrease) in shares outstanding | — | $ | — | |||||
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Period ended March 31, 2018*: | ||||||||
Shares sold | 1,000 | $ | 10,000 | |||||
Shares issued in reinvestment of dividends and distributions | 3 | 28 | ||||||
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Net increase (decrease) in shares outstanding | 1,003 | $ | 10,028 | |||||
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48 |
Class Z | Shares | Amount | ||||||
Six months ended September 30, 2018: | ||||||||
Shares sold | 658 | $ | 7,286 | |||||
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Net increase (decrease) in shares outstanding | 658 | $ | 7,286 | |||||
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Period ended March 31, 2018*: | ||||||||
Shares sold | 1,389 | $ | 14,316 | |||||
Shares issued in reinvestment of dividends and distributions | 5 | 58 | ||||||
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Net increase (decrease) in shares outstanding | 1,394 | $ | 14,374 | |||||
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Class R6 | ||||||||
Six months ended September 30, 2018: | ||||||||
Net increase (decrease) in shares outstanding | — | $ | — | |||||
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Period ended March 31, 2018*: | ||||||||
Shares sold | 2,001,000 | $ | 20,010,000 | |||||
Shares issued in reinvestment of dividends and distributions | 10,771 | 115,846 | ||||||
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Net increase (decrease) in shares outstanding | 2,011,771 | $ | 20,125,846 | |||||
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* | Commencement of operations was September 19, 2017. |
7. Borrowings
The Trust, on behalf of 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 October 5, 2017 through October 4, 2018. The Funds pay an annualized commitment fee of 0.15% of the unused portion of the SCA. The Fund’s portion of the commitment fee for the unused amount, allocated based upon a method approved by the Board, is accrued daily and paid quarterly.
Subsequent to the reporting period end, the SCA was renewed effective October 4, 2018 and will continue to provide a commitment of $900 million through October 3, 2019. The commitment fee paid by the Funds will continue to be 0.15% of the unused portion of the SCA. The interest on borrowings under both SCAs is paid monthly and at a per annum interest rate based upon a contractual spread plus the higher of (1) the effective federal funds rate, (2) the 1-month London Interbank Offered Rate or (3) zero percent.
Other affiliated registered investment companies that are parties to the SCA include portfolios that are subject to a predetermined mathematical formula used to manage certain benefit guarantees offered under variable annuity contracts. The formula may result in large scale asset flows into and out of these portfolios. Consequently, these portfolios may be more likely to utilize the SCA for purposes of funding redemptions. It may be possible for those portfolios to fully exhaust the committed amount of the SCA, thereby requiring the Manager to allocate available funding per a Board-approved methodology designed to treat the Funds in the SCA equitably.
The Fund did not utilize the SCA during the reporting period ended September 30, 2018.
PGIM QMA Large-Cap Core Equity PLUS Fund | 49 |
Notes to Financial Statements (unaudited) (continued)
8. Other Risks
The Fund’s risks include, but are not limited to, some or all of the risks discussed below:
Equity and Equity-Related Securities Risks: The value of a particular security could go down and you could lose money. In addition to an individual security losing value, the value of the equity markets or a sector in which the Fund invests could go down. The Fund’s holdings can vary significantly from broad market indexes and the performance of the Fund can deviate from the performance of these indexes. Different parts of a market can react differently to adverse issuer, market, regulatory, political and economic developments.
Market and Credit Risk: Securities markets may be volatile and the market prices of the Fund’s securities may decline. Securities fluctuate in price based on changes in an issuer’s financial condition and overall market and economic conditions. If the market prices of the securities owned by the Fund fall, the value of an investment in the Fund will decline. Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
Short Sales Risk: Short sales involve costs and risks. The Fund must pay the lender interest on the security it borrows, and the Fund will lose money to the extent that the price of the security increases between the time of the short sale and the date when the Fund replaces the borrowed security. Although the Fund’s gain is limited to the price at which it sold the securities short, its potential loss is limited only by the maximum attainable price of the securities, less the price at which the security was sold and may, theoretically, be unlimited. When selling short against the box (i.e. short selling securities which the Fund already owns), the Fund gives up the opportunity for capital appreciation in the security.
9. Recent Accounting Pronouncements and Reporting Updates
In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, which changes certain fair value measurement disclosure requirements. The new ASU, in addition to other modifications and additions, removes the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, and the Fund’s policy for the timing of transfers between levels. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has evaluated the implications of certain provisions of the ASU and has determined to early adopt aspects related to the removal and modification of certain fair value measurement disclosures under the ASU effective immediately. At this time, management is evaluating the implications of certain other provisions of the ASU related to new disclosure requirements and any impact on the financial statement disclosures has not yet been determined.
50 |
Financial Highlights (unaudited)
Class A Shares | ||||||||
Six Months Ended | September 19, 2017(a) through March 31, 2018 | |||||||
Per Share Operating Performance(b): | ||||||||
Net Asset Value, Beginning of Period | $10.55 | $10.00 | ||||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) | 0.03 | 0.02 | ||||||
Net realized and unrealized gain (loss) on investment transactions | 0.97 | 0.58 | ||||||
Total from investment operations | 1.00 | 0.60 | ||||||
Less Dividends and Distributions: | ||||||||
Dividends from net investment income | - | (0.03 | ) | |||||
Distributions from net realized gains | - | (0.02 | ) | |||||
Total dividends and distributions | - | (0.05 | ) | |||||
Net asset value, end of period | $11.55 | $10.55 | ||||||
Total Return(c): | 9.48% | 6.00% | ||||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000) | $46 | $40 | ||||||
Average net assets (000) | $43 | $20 | ||||||
Ratios to average net assets(d): | ||||||||
Expenses after waivers and/or expense reimbursement(e) | 2.03% | (f) | 1.72% | (f) | ||||
Expenses before waivers and/or expense reimbursement(e) | 51.52% | (f) | 203.54% | (f) | ||||
Net investment income (loss) | 0.53% | (f) | 0.43% | (f) | ||||
Portfolio turnover rate(g) | 43% | (h) | 60% | (h) |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | 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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The expense ratio includes dividend expense and broker fees and expenses on short sales of 0.83% for the six months ended September 30, 2018 and 0.52% for the period ended March 31, 2018. |
(f) | Annualized. |
(g) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(h) | Not annualized. |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 51 |
Financial Highlights (unaudited) (continued)
Class C Shares | ||||||||
Six Months Ended September 30, 2018 | September 19, March 31, 2018 | |||||||
Per Share Operating Performance(b): | ||||||||
Net Asset Value, Beginning of Period | $10.52 | $10.00 | ||||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) | (0.01 | ) | (0.02 | ) | ||||
Net realized and unrealized gain (loss) on investment transactions | 0.97 | 0.57 | ||||||
Total from investment operations | 0.96 | 0.55 | ||||||
Less Dividends and Distributions: | ||||||||
Dividends from net investment income | - | (0.01 | ) | |||||
Distributions from net realized gains | - | (0.02 | ) | |||||
Total dividends and distributions | - | (0.03 | ) | |||||
Net asset value, end of period | $11.48 | $10.52 | ||||||
Total Return(c): | 9.13% | 5.48% | ||||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000) | $12 | $11 | ||||||
Average net assets (000) | $11 | $11 | ||||||
Ratios to average net assets(d): | ||||||||
Expenses after waivers and/or expense reimbursement(e) | 2.78% | (f) | 2.43% | (f) | ||||
Expenses before waivers and/or expense reimbursement(e) | 191.69% | (f) | 383.62% | (f) | ||||
Net investment income (loss) | (0.22)% | (f) | (0.32)% | (f) | ||||
Portfolio turnover rate(g) | 43% | (h) | 60% | (h) |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | 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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The expense ratio includes dividend expense and broker fees and expenses on short sales of 0.83% for six months ended September 30, 2018 and 0.48% for the period ended March 31, 2018. |
(f) | Annualized. |
(g) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(h) | Not annualized. |
See Notes to Financial Statements.
52 |
Class Z Shares | ||||||||
Six Months Ended September 30, 2018 | September 19, through March 31, 2018 | |||||||
Per Share Operating Performance(b): | ||||||||
Net Asset Value, Beginning of Period | $10.53 | $10.00 | ||||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) | 0.04 | 0.04 | ||||||
Net realized and unrealized gain (loss) on investment transactions | 0.98 | 0.55 | ||||||
Total from investment operations | 1.02 | 0.59 | ||||||
Less Dividends and Distributions: | ||||||||
Dividends from net investment income | - | (0.04 | ) | |||||
Distributions from net realized gains | - | (0.02 | ) | |||||
Total dividends and distributions | - | (0.06 | ) | |||||
Net asset value, end of period | $11.55 | $10.53 | ||||||
Total Return(c): | 9.69% | 5.87% | ||||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000) | $24 | $15 | ||||||
Average net assets (000) | $19 | $12 | ||||||
Ratios to average net assets(d): | ||||||||
Expenses after waivers and/or expense reimbursement(e) | 1.80% | (f) | 1.42% | (f) | ||||
Expenses before waivers and/or expense reimbursement(e) | 111.97% | (f) | 341.63% | (f) | ||||
Net investment income (loss) | 0.79% | (f) | 0.71% | (f) | ||||
Portfolio turnover rate(g) | 43% | (h) | 60% | (h) |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The expense ratio includes dividend expense and broker fees and expenses on short sales of 0.85% for the six months ended September 30, 2018 and 0.47% for the period ended March 31, 2018. |
(f) | Annualized. |
(g) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(h) | Not annualized. |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 53 |
Financial Highlights (unaudited) (continued)
Class R6 Shares | ||||||||
Six Months Ended September 30, 2018 | September 19, 2017(a) through March 31, | |||||||
Per Share Operating Performance(b): | ||||||||
Net Asset Value, Beginning of Period | $10.55 | $10.00 | ||||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss) | 0.04 | 0.04 | ||||||
Net realized and unrealized gain (loss) on investment transactions | 0.98 | 0.57 | ||||||
Total from investment operations | 1.02 | 0.61 | ||||||
Less Dividends and Distributions: | ||||||||
Dividends from net investment income | - | (0.04 | ) | |||||
Distributions from net realized gains | - | (0.02 | ) | |||||
Total dividends and distributions | - | (0.06 | ) | |||||
Net asset value, end of period | $11.57 | $10.55 | ||||||
Total Return(c): | 9.67% | 6.07% | ||||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000) | $23,271 | $21,226 | ||||||
Average net assets (000) | $22,254 | $21,315 | ||||||
Ratios to average net assets(d): | ||||||||
Expenses after waivers and/or expense reimbursement(e) | 1.78% | (f) | 1.42% | (f) | ||||
Expenses before waivers and/or expense reimbursement(e) | 2.37% | (f) | 2.41% | (f) | ||||
Net investment income (loss) | 0.78% | (f) | 0.68% | (f) | ||||
Portfolio turnover rate(g) | 43% | (h) | 60% | (h) |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(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, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The expense ratio includes dividend expense and broker fees and expenses on short sales of 0.83% for the six months ended September 30, 2018 and 0.47% for the period ended March 31, 2018. |
(f) | Annualized. |
(g) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(h) | Not annualized. |
See Notes to Financial Statements.
54 |
Approval of Advisory Agreements (unaudited)
Initial Approval of the Fund’s Advisory Agreements
As required by the Investment Company Act of 1940 (the 1940 Act), the Board of Prudential Investment Portfolios 12 considered the proposed management agreement with PGIM Investments LLC (the Manager) and the proposed subadvisory agreement between the Manager and Quantitative Management Associates LLC (QMA or the Subadviser) with respect to the PGIM QMA Large-Cap Core Equity PLUS Fund (the Fund) prior to the Fund’s commencement of operations. The Board, including a majority of the Independent Trustees, met on June 6-8, 2017 and approved the agreements for an initial two year period, after concluding that approval of the agreements was in the best interests of the Fund.
In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with its consideration.
In approving the agreements, the Board, including the Independent Trustees advised by independent legal counsel, considered the factors it deemed relevant, including the nature, quality and extent of services to be provided to the Fund by the Manager and QMA; any relevant comparable performance and the qualifications and track record of QMA in serving other affiliated mutual funds; the fees proposed to be paid by the Fund to the Manager and by the Manager to the Subadviser, under the agreements; and the potential for economies of scale that may be shared with the Fund and its shareholders. In connection with its deliberations, the Board considered information provided by the Manager and QMA at or in advance of the meetings on June 6-8, 2017. The Board also considered information provided by the Manager with respect to other funds managed by the Manager and QMA, which information had been provided throughout the year at regular Board meetings. In their deliberations, the Trustees did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund.
The Trustees determined that the overall arrangements between the Fund and the Manager, which will serve as the Fund’s investment manager pursuant to a management agreement, and between the Manager and QMA, which will serve as the Fund’s subadviser pursuant to the terms of a subadvisory agreement, were in the best interests of the Fund in light of the services to be performed and the fees to be charged under the agreements and such other matters as the Trustees considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Trustees’ reaching their determinations to approve the agreements are separately discussed below.
PGIM QMA Large-Cap Core Equity PLUS Fund |
Approval of Advisory Agreements (continued)
Nature, quality and extent of services
With respect to the Manager, the Board noted that it had received and considered information about the Manager at the June 6-8, 2017 meetings in connection with the renewal of the management agreements between the Manager and the other PGIM Investments Retail Funds. The Board also noted that it received and considered information at other regular meetings throughout the year, regarding the nature, quality and extent of services provided by the Manager. The Board considered the services to be provided by the Manager, including but not limited to the oversight of QMA, as well as the provision of fund recordkeeping, compliance and other services to the Fund. With respect to the Manager’s oversight of QMA, the Board noted that the Manager’s Strategic Investment Research Group, which is a business unit of the Manager, is responsible for monitoring and reporting to the Manager’s senior management on the performance and operations of QMA. The Board also noted that the Manager pays the salaries of all the officers and interested Trustees of the Fund who are members of management. The Board reviewed the qualifications, backgrounds and responsibilities of the Manager’s senior management responsible for the oversight of the Fund and QMA, and was also provided with information pertaining to the Manager’s organizational structure, senior management, investment operations and other relevant information. The Board further noted that it received favorable compliance reports from the Fund’s Chief Compliance Officer as to the Manager. The Board noted that it had concluded that it was satisfied with the nature, quality and extent of the services provided by the Manager to the other PGIM Investments Retail Funds and determined that it was reasonable to conclude that the nature, quality and extent of services to be provided by the Manager under the management agreement for the Fund would be similar in nature to those provided under the other management agreements.
With respect to the Subadviser, the Board noted that it had received and considered information about QMA at the June 6-8, 2017 meetings in connection with the renewal of the subadvisory agreements between the Manager and QMA with respect to other PGIM Investments Retail Funds. The Board also noted that it received and considered information at other regular meetings throughout the year, regarding the nature, quality and extent of services provided by QMA. The Board considered, among other things, the qualifications, background and experience of QMA’s portfolio managers who will be responsible for the day-to-day management of the Fund’s portfolio, as well as information on the organizational structure, senior management, investment operations and other relevant information of QMA. The Board further noted that it received favorable compliance reports from the Fund’s Chief Compliance Officer as to QMA. The Board noted that QMA is affiliated with the Manager. The Board noted that it was satisfied with the nature, quality and extent of services provided by QMA with respect to the other PGIM Investments Retail Funds served by QMA and determined that it was reasonable to conclude that the nature,
Visit our website at pgiminvestments.com |
quality and extent of services to be provided by QMA under the subadvisory agreement for the Fund would be similar in nature to those provided under the other subadvisory agreements.
Performance
Because the Fund had not yet commenced operations, no investment performance for the Fund existed for Board review. The Board did consider QMA’s track record in managing another registered investment company that follows substantially similar investment strategies. The Board considered the background and professional experience of the proposed portfolio management team for the Fund. The Manager will provide information relating to performance to the Board in connection with future annual reviews of the management agreement and subadvisory agreement.
Fee Rates
The Board considered the proposed management fees of 0.80% of the Fund’s average daily net assets up to $1 billion, 0.78% of the Fund’s average daily net assets from $1 billion to $3 billion, 0.76% of the Fund’s average daily net assets from $3 billion to $5 billion, 0.75% of the Fund’s average daily net assets from $5 billion to $10 billion and 0.74% of the Fund’s average daily net assets over $10 billion to be paid by the Fund to the Manager, and the proposed subadvisory fees at the annual rate of 0.45% of the Fund’s average daily net assets up to $250 million and 0.40% of the Fund’s daily net assets over $250 billion to be paid by the Manager to the Subadviser.
The Board considered information provided by the Manager comparing the Fund’s proposed management fee rate and total expenses for Class A shares to a Peer Group of comparable funds chosen by Broadridge. The Board noted that the Fund’s contractual management fee was in the first quartile of the Broadridge Peer Group (first quartile being the lowest fee). The Board further noted that the anticipated net total expenses for Class A shares were in the first quartile of the Broadridge Peer Group (first quartile being the lowest expenses).
The Board noted that the Manager had contractually agreed to waive fees and/or reimburse expenses so that the Fund’s net annual operating expenses (exclusive of taxes (such as income and foreign withholding taxes, stamp duty and deferred tax expenses), interest, brokerage commissions, distribution and service (12b-1) fees, acquired fund fees and expenses and dividend and other expenses related to short sales) of each class of shares would not exceed 0.95% of the Fund’s average daily net assets through July 31, 2019.
PGIM QMA Large-Cap Core Equity PLUS Fund |
Approval of Advisory Agreements (continued)
Profitability
Because the Fund had not yet commenced operations and the actual asset base of the Fund has not yet been determined, the Board noted that there was no historical profitability information with respect to the Fund to be reviewed. The Board noted that QMA was affiliated with the Manager and, as a result, the Board will not separately consider QMA’s profitability since its profitability will be reflected in the Manager’s profitability report. The Board noted that it would review profitability information in connection with the annual renewal of the advisory and subadvisory agreements.
Economies of Scale
The Board noted that the proposed management fees payable by the Fund to the Manager contained breakpoints that would reduce the fee rates on assets above specified levels, as did the subadvisory fee payable by the Manager to the Subadviser. The Board considered the potential for the Manager and the Subadviser to experience economies of scale as the amount of assets managed by the Manager and the Subadviser, respectively, increased in size. Because the Fund had not yet commenced operations and the actual asset base of the Fund has not yet been determined, the Board noted that there was no historical information regarding economies of scale with respect to the Fund to be reviewed. The Board noted that it would review such information in connection with the annual renewal of the advisory and subadvisory agreements.
Other Benefits to the Manager and the Subadviser
The Board considered potential “fall-out” or ancillary benefits anticipated to be received by the Manager, QMA and their affiliates as a result of their relationships with the Fund. The Board concluded that any potential benefits to be derived by the Manager were similar to benefits derived by the Manager in connection with its management of the other PGIM Investments Retail Funds, which are reviewed on an annual basis. The Board also concluded that any potential benefits to be derived by QMA were consistent with those generally derived by subadvisers to the PGIM Investments Retail Funds, and that those benefits are reviewed on an annual basis. The Board concluded that any potential benefits derived by the Manager and QMA were consistent with the types of benefits generally derived by investment managers and subadvisers to mutual funds.
* * *
After full consideration of these factors, the Board concluded that the approval of the agreements was in the best interests of the Fund and its shareholders.
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∎ TELEPHONE | ∎ WEBSITE | |||
655 Broad Street Newark, NJ 07102 | (800) 225-1852 | www.pgiminvestments.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 |
Ellen S. Alberding • Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Barry H. Evans • Keith F. Hartstein • Laurie Simon Hodrick • Michael S. Hyland • Stuart S. Parker • Richard A. Redeker • Brian K. Reid • Grace C. Torres |
OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • Brian D. Nee, Treasurer and Principal Financial and Accounting Officer • Raymond A. O’Hara, Chief Legal Officer • Andrew R. French, Secretary • Chad A. Earnst, Chief Compliance Officer • Dino Capasso, Vice President and Deputy Chief Compliance Officer • Charles H. Smith, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • Peter Parrella, Assistant Treasurer • Lana Lomuti, Assistant Treasurer • Linda McMullin, Assistant Treasurer • Kelly A. Coyne, Assistant Treasurer |
MANAGER | PGIM Investments LLC | 655 Broad Street Newark, NJ 07102 | ||
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INVESTMENT SUBADVISER | Quantitative Management Associates LLC | Gateway Center Two 100 Mulberry Street Newark, NJ 07102 | ||
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DISTRIBUTOR | Prudential Investment Management Services LLC | 655 Broad Street Newark, NJ 07102 | ||
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CUSTODIAN | The Bank of New York Mellon | 225 Liberty Street New York, NY 10286 | ||
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TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
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FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 | ||
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An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.pgiminvestments.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.pgiminvestments.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, PGIM QMA Large-Cap Core Equity PLUS Fund, PGIM Investments, Attn: Board of Trustees, 655 Broad Street, 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 schedule of portfolio holdings is also available on the Fund’s website as of the end of each month no sooner than 15 days after the end of the 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 |
PGIM QMA LARGE-CAP CORE EQUITY PLUS FUND
SHARE CLASS | A | C | Z | R6* | ||||
NASDAQ | PQMAX | PQMCX | PQMZX | PQMQX | ||||
CUSIP | 744336728 | 744336710 | 744336686 | 744336694 |
*Formerly known as Class Q shares.
MF237E2
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 12 | |
By: | /s/ Andrew R. French | |
Andrew R. French | ||
Secretary | ||
Date: | November 19, 2018 |
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: | November 19, 2018 | |
By: | /s/ Brian D. Nee | |
Brian D. Nee | ||
Treasurer and Principal Financial and Accounting Officer | ||
Date: | November 19, 2018 |