UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORMN-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 FormN-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: | 03/31/2020 | |
Date of reporting period: | 09/30/2019 |
Item 1 – Reports to Stockholders
PGIM US REAL ESTATE FUND
SEMIANNUAL REPORT
SEPTEMBER 30, 2019
COMING SOON: PAPERLESS SHAREHOLDER REPORTS
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website (pgiminvestments.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 1-800-225-1852 or by sending an email request to PGIM Investments at shareholderreports@pgim.com.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary or follow instructions included with this notice to elect to continue to receive paper copies of your shareholder reports. If you invest directly with the Fund, you can call 1-800-225-1852 or send an email request to shareholderreports@pgim.com to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the fund complex if you invest directly with the Fund.
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, 2019 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.© 2019 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.
2 | Visit our website at pgiminvestments.com |
5 | ||||
6 | ||||
9 | ||||
11 | ||||
PGIM US Real Estate Fund | 3 |
This Page Intentionally Left Blank
Dear Shareholder:
We hope you find the semiannual report for PGIM US Real Estate Fund informative and useful. The report covers performance for thesix-month period ended September 30, 2019.
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, 2019
PGIM US Real Estate Fund | 5 |
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 atpgiminvestments.com or by calling (800) 225-1852.
Total Returns as of 9/30/19 (without sales charges) | Average Annual Total Returns as of 9/30/19 (with sales charges) | |||||||
Six Months* (%) | One Year (%) | Five Years (%) | Since Inception (%) | |||||
Class A | 10.43 | 16.37 | 9.06 | 9.59 (12/21/10) | ||||
Class B | 10.00 | 17.20 | 9.34 | 9.49 (12/21/10) | ||||
Class C | 10.10 | 21.34 | 9.50 | 9.48 (12/21/10) | ||||
Class Z | 10.63 | 23.49 | 10.60 | 10.57 (12/21/10) | ||||
Class R6 | 10.56 | 23.51 | N/A | 13.17 (5/25/17) | ||||
FTSE NAREIT Equity REITs Index | ||||||||
9.14 | 18.93 | 10.26 | — | |||||
S&P 500 Index | ||||||||
6.08 | 4.25 | 10.83 | — |
Source: PGIM Investments LLC.
*Not annualized
Since Inception returns are provided for any share class with less than 10 fiscal years of returns. Since Inception returns for the Indexes are measured from the closest month-end to the class’ inception date.
6 | Visit our website at pgiminvestments.com |
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 the original purchase price or the 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.
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 returns for the Index measured from the month-end closest to the inception date of the Fund’s Class A, Class B, Class C, and Class Z shares are 10.69% and 10.70% 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 returns for the Index measured from the month-end closest to the inception date of the Fund’s Class A, Class B, Class C, and Class Z shares are 12.67% and 11.61% for Class R6 shares.
PGIM US Real Estate Fund | 7 |
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.
Presentation of Fund Holdingsas of 9/30/19
Ten Largest Holdings | REIT Sectors | % of Net Assets | ||
Welltower, Inc. | Health Care REITs | 7.9% | ||
Americold Realty Trust | Industrial REITs | 6.7% | ||
AvalonBay Communities, Inc. | Residential REITs | 6.4% | ||
STAG Industrial, Inc. | Industrial REITs | 5.4% | ||
Equinix, Inc. | Specialized REITs | 5.3% | ||
Equity LifeStyle Properties, Inc. | Residential REITs | 4.5% | ||
Camden Property Trust | Residential REITs | 4.1% | ||
Cousins Properties, Inc. | Office REITs | 3.9% | ||
Prologis, Inc. | Industrial REITs | 3.9% | ||
CyrusOne, Inc. | Specialized REITs | 3.8% |
For a complete list of holdings, please refer to the Schedule of Investments section of this report. Holdings reflect only long-term investments.
8 | 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, 2019. 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 | 9 |
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, 2019 | Ending Account Value September 30, 2019 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,104.30 | 1.25 | % | $ | 6.58 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,018.75 | 1.25 | % | $ | 6.31 | ||||||||||
Class B | Actual | $ | 1,000.00 | $ | 1,100.00 | 2.00 | % | $ | 10.50 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.00 | 2.00 | % | $ | 10.08 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,101.00 | 2.00 | % | $ | 10.51 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.00 | 2.00 | % | $ | 10.08 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,106.30 | 1.00 | % | $ | 5.27 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.00 | 1.00 | % | $ | 5.05 | ||||||||||
Class R6 | Actual | $ | 1,000.00 | $ | 1,105.60 | 1.00 | % | $ | 5.26 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.00 | 1.00 | % | $ | 5.05 |
*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, 2019, and divided by the 366 days in the Fund’s fiscal year ending March 31, 2020 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
10 | Visit our website at pgiminvestments.com |
Schedule of Investments(unaudited)
as of September 30, 2019
Description | Shares | Value | ||||||
LONG-TERM INVESTMENTS 99.6% | ||||||||
COMMON STOCKS | ||||||||
Diversified REITs 5.6% | ||||||||
American Assets Trust, Inc. | 21,540 | $ | 1,006,780 | |||||
Essential Properties Realty Trust, Inc. | 29,381 | 673,119 | ||||||
STORE Capital Corp. | 7,247 | 271,110 | ||||||
|
| |||||||
1,951,009 | ||||||||
Health Care REITs 17.4% | ||||||||
CareTrust REIT, Inc. | 39,738 | 934,042 | ||||||
HCP, Inc. | 16,657 | 593,489 | ||||||
Medical Properties Trust, Inc. | 64,203 | 1,255,811 | ||||||
Ventas, Inc. | 7,111 | 519,316 | ||||||
Welltower, Inc. | 30,411 | 2,756,757 | ||||||
|
| |||||||
6,059,415 | ||||||||
Hotel & Resort REITs 4.4% | ||||||||
Apple Hospitality REIT, Inc. | 32,894 | 545,383 | ||||||
MGM Growth Properties LLC (Class A Stock) | 32,403 | 973,710 | ||||||
|
| |||||||
1,519,093 | ||||||||
Industrial REITs 21.8% | ||||||||
Americold Realty Trust | 62,712 | 2,324,734 | ||||||
Duke Realty Corp. | 21,292 | 723,289 | ||||||
First Industrial Realty Trust, Inc. | 10,774 | 426,219 | ||||||
Prologis, Inc. | 15,826 | 1,348,692 | ||||||
Rexford Industrial Realty, Inc. | 19,465 | 856,849 | ||||||
STAG Industrial, Inc. | 64,497 | 1,901,372 | ||||||
|
| |||||||
7,581,155 | ||||||||
Office REITs 11.4% | ||||||||
Cousins Properties, Inc. | 36,252 | 1,362,713 | ||||||
Hudson Pacific Properties, Inc. | 24,591 | 822,815 | ||||||
JBG SMITH Properties | 27,280 | 1,069,649 | ||||||
Kilroy Realty Corp. | 9,243 | 719,937 | ||||||
|
| |||||||
3,975,114 | ||||||||
Residential REITs 18.2% | ||||||||
AvalonBay Communities, Inc. | 10,288 | 2,215,315 | ||||||
Camden Property Trust | 12,906 | 1,432,695 |
See Notes to Financial Statements.
PGIM US Real Estate Fund | 11 |
Schedule of Investments(unaudited)(continued)
as of September 30, 2019
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Residential REITs (cont’d.) | ||||||||
Equity LifeStyle Properties, Inc. | 11,731 | $ | 1,567,261 | |||||
Equity Residential | 13,126 | 1,132,249 | ||||||
|
| |||||||
6,347,520 | ||||||||
Retail REITs 7.2% | ||||||||
Realty Income Corp. | 10,058 | 771,247 | ||||||
Simon Property Group, Inc. | 4,207 | 654,820 | ||||||
Spirit Realty Capital, Inc. | 18,036 | 863,203 | ||||||
Urban Edge Properties | 11,555 | 228,673 | ||||||
|
| |||||||
2,517,943 | ||||||||
Specialized REITs 13.6% | ||||||||
Crown Castle International Corp. | 2,880 | 400,349 | ||||||
CyrusOne, Inc. | 16,566 | 1,310,371 | ||||||
Equinix, Inc. | 3,218 | 1,856,142 | ||||||
Extra Space Storage, Inc. | 9,836 | 1,149,041 | ||||||
|
| |||||||
4,715,903 | ||||||||
|
| |||||||
TOTAL LONG-TERM INVESTMENTS | 34,667,152 | |||||||
|
| |||||||
SHORT-TERM INVESTMENT 0.0% |
| |||||||
AFFILIATED MUTUAL FUND |
| |||||||
PGIM Core Ultra Short Bond Fund | 2,398 | 2,398 | ||||||
|
| |||||||
TOTAL INVESTMENTS 99.6% | 34,669,550 | |||||||
Other assets in excess of liabilities 0.4% | 150,590 | |||||||
|
| |||||||
NET ASSETS 100.0% | $ | 34,820,140 | ||||||
|
|
Below is a list of the abbreviation(s) used in the semiannual report:
LIBOR—London Interbank Offered Rate
REITs—Real Estate Investment Trust
(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.
See Notes to Financial Statements.
12 |
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, 2019 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Common Stocks | ||||||||||||
Diversified REITs | $ | 1,951,009 | $ | — | $ | — | ||||||
Health Care REITs | 6,059,415 | — | — | |||||||||
Hotel & Resort REITs | 1,519,093 | — | — | |||||||||
Industrial REITs | 7,581,155 | — | — | |||||||||
Office REITs | 3,975,114 | — | — | |||||||||
Residential REITs | 6,347,520 | — | — | |||||||||
Retail REITs | 2,517,943 | — | — | |||||||||
Specialized REITs | 4,715,903 | — | — | |||||||||
Affiliated Mutual Fund | 2,398 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 34,669,550 | $ | — | $ | — | ||||||
|
|
|
|
|
|
Sector Classification:
The sector classification of investments and other assets in excess of liabilities shown as a percentage of net assets as of September 30, 2019 were as follows:
Industrial REITs | 21.8 | % | ||
Residential REITs | 18.2 | |||
Health Care REITs | 17.4 | |||
Specialized REITs | 13.6 | |||
Office REITs | 11.4 | |||
Retail REITs | 7.2 | |||
Diversified REITs | 5.6 | |||
Hotel & Resort REITs | 4.4 | |||
Affiliated Mutual Fund | 0.0 | * | ||
|
| |||
99.6 | ||||
Other assets in excess of liabilities | 0.4 | |||
|
| |||
100.0 | % | |||
|
|
* | Less than +/- 0.05% |
See Notes to Financial Statements.
PGIM US Real Estate Fund | 13 |
Statement of Assets and Liabilities(unaudited)
as of September 30, 2019
Assets | ||||
Investments at value: | ||||
Unaffiliated investments (cost $27,925,740) | $ | 34,667,152 | ||
Affiliated investments (cost $2,398) | 2,398 | |||
Cash | 486 | |||
Receivable for investments sold | 223,340 | |||
Dividends receivable | 148,646 | |||
Receivable for Fund shares sold | 14,780 | |||
Prepaid expenses | 900 | |||
|
| |||
Total Assets | 35,057,702 | |||
|
| |||
Liabilities | ||||
Payable for investments purchased | 158,290 | |||
Custodian and accounting fees payable | 25,935 | |||
Registration fees payable | 23,059 | |||
Audit fee payable | 12,844 | |||
Accrued expenses and other liabilities | 6,965 | |||
Management fee payable | 4,365 | |||
Distribution fee payable | 2,610 | |||
Affiliated transfer agent fee payable | 2,307 | |||
Payable for Fund shares reacquired | 1,187 | |||
|
| |||
Total Liabilities | 237,562 | |||
|
| |||
Net Assets | $ | 34,820,140 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 2,416 | ||
Paid-in capital in excess of par | 26,834,959 | |||
Total distributable earnings (loss) | 7,982,765 | |||
|
| |||
Net assets, September 30, 2019 | $ | 34,820,140 | ||
|
|
See Notes to Financial Statements.
14 |
Class A | ||||
Net asset value and redemption price per share, | $ | 14.41 | ||
Maximum sales charge (5.50% of offering price) | 0.84 | |||
|
| |||
Maximum offering price to public | $ | 15.25 | ||
|
| |||
Class B | ||||
Net asset value, offering price and redemption price per share, | ||||
($488,302 ÷ 34,596 shares of beneficial interest issued and outstanding) | $ | 14.11 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share, | ||||
($1,408,032 ÷ 99,945 shares of beneficial interest issued and outstanding) | $ | 14.09 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share, | ||||
($26,987,422 ÷ 1,869,404 shares of beneficial interest issued and outstanding) | $ | 14.44 | ||
|
| |||
Class R6 | ||||
Net asset value, offering price and redemption price per share, | ||||
($25,410 ÷ 1,761 shares of beneficial interest issued and outstanding) | $ | 14.43 | ||
|
|
See Notes to Financial Statements.
PGIM US Real Estate Fund | 15 |
Statement of Operations(unaudited)
Six Months Ended September 30, 2019
Net Investment Income (Loss) | ||||
Income | ||||
Unaffiliated dividend income | $ | 430,600 | ||
Affiliated dividend income | 1,884 | |||
|
| |||
Total income | 432,484 | |||
|
| |||
Expenses | ||||
Management fee | 115,939 | |||
Distribution fee(a) | 16,101 | |||
Registration fees(a) | 35,465 | |||
Custodian and accounting fees | 33,301 | |||
Shareholders’ reports | 13,886 | |||
Transfer agent’s fees and expenses (including affiliated expense of $7,066)(a) | 13,373 | |||
Audit fee | 12,844 | |||
Legal fees and expenses | 8,691 | |||
Trustees’ fees | 5,581 | |||
Miscellaneous | 8,308 | |||
|
| |||
Total expenses | 263,489 | |||
Less: Fee waiver and/or expense reimbursement(a) | (92,802 | ) | ||
Distribution fee waiver(a) | (1,317 | ) | ||
|
| |||
Net expenses | 169,370 | |||
|
| |||
Net investment income (loss) | 263,114 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investment And Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 1,108,432 | |||
Foreign currency transactions | 5,014 | |||
|
| |||
1,113,446 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on investments | 1,843,421 | |||
|
| |||
Net gain (loss) on investment and foreign currency transactions | 2,956,867 | |||
|
| |||
Net Increase (Decrease) In Net Assets Resulting From Operations | $ | 3,219,981 | ||
|
|
(a) | Class specific expenses and waivers were as follows: |
Class A | Class B | Class C | Class Z | Class R6 | ||||||||||||||||
Distribution fee | 7,900 | 2,670 | 5,531 | — | — | |||||||||||||||
Registration fees | 7,093 | 7,093 | 7,093 | 7,093 | 7,093 | |||||||||||||||
Transfer agent’s fees and expenses | 7,164 | 1,217 | 1,332 | 3,626 | 34 | |||||||||||||||
Fee waiver and/or expense reimbursement | (21,754 | ) | (9,080 | ) | (10,000 | ) | (44,819 | ) | (7,149 | ) | ||||||||||
Distribution fee waiver | (1,317 | ) | — | — | — | — |
See Notes to Financial Statements.
16 |
Statements of Changes in Net Assets(unaudited)
Six Months Ended | Year Ended | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 263,114 | $ | 408,670 | ||||
Net realized gain (loss) on investment and foreign currency transactions | 1,113,446 | 1,228,010 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,843,421 | 3,591,530 | ||||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 3,219,981 | 5,228,210 | ||||||
|
|
|
| |||||
Dividends and Distributions | ||||||||
Distributions from distributable earnings | ||||||||
Class A | (35,859 | ) | (195,526 | ) | ||||
Class B | (1,834 | ) | (24,630 | ) | ||||
Class C | (3,756 | ) | (38,028 | ) | ||||
Class Z | (194,033 | ) | (839,636 | ) | ||||
Class R6 | (123 | ) | (526 | ) | ||||
|
|
|
| |||||
(235,605 | ) | (1,098,346 | ) | |||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) | ||||||||
Net proceeds from shares sold | 5,813,104 | 3,095,291 | ||||||
Net asset value of shares issued in reinvestment of dividends and distributions | 235,495 | 1,097,576 | ||||||
Cost of shares reacquired | (1,645,033 | ) | (1,978,612 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in net assets from Fund share transactions | 4,403,566 | 2,214,255 | ||||||
|
|
|
| |||||
Total increase (decrease) | 7,387,942 | 6,344,119 | ||||||
Net Assets: | ||||||||
Beginning of period | 27,432,198 | 21,088,079 | ||||||
|
|
|
| |||||
End of period | $ | 34,820,140 | $ | 27,432,198 | ||||
|
|
|
|
See Notes to Financial Statements.
PGIM US Real Estate Fund | 17 |
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 anopen-end management investment company. The Trust currently consists of the following six series: PGIM QMALarge-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 arenon-diversified funds for purposes of the 1940 Act. These financial statements relate only to the PGIM US Real Estate Fund (the “Fund”).
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 (“ASC”) 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, the Manager has established a Valuation Committee responsible for supervising the fair 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.
For the fiscal reportingperiod-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.
18 |
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 and referred to herein as the “fair value hierarchy” in accordance with FASB ASC Topic 820—Fair Value Measurements and Disclosures.
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 up to the time the Fund is valued. 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 inopen-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 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
PGIM US Real Estate Fund | 19 |
Notes to Financial Statements (unaudited) (continued)
most recent closing price and from the price used by other unaffiliated mutual funds to calculate their net asset values.
Illiquid Securities:Pursuant to Rule22e-4 under the 1940 Act, the Fund has adopted aBoard approved Liquidity Risk Management Program (“LRMP”) that requires, among other things, that the Fund limit its illiquid investments that are assets to no more than 15% of net assets. Illiquid securities are those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale, may not reasonably be expected to be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. 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.
Restricted Securities:Securities acquired in unregistered, private sales from the issuingcompany or from an affiliate of the issuer are considered restricted as to disposition under federal securities law (“restricted securities”). Such restricted securities are valued pursuant to the valuation procedures noted above. Restricted securities that would otherwise be considered illiquid investments pursuant to the Fund’s LRMP 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. Therefore, these Rule 144A securities, as well as commercial paper that is sold in private placements under Section 4(2) of the Securities Act of 1933, may be classified higher than “illiquid” under the LRMP (i.e. “moderately liquid” or “less liquid” investments). However, the liquidity of the Fund’s investments in restricted 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 exchange rates from the fluctuations arising from changes in the market prices of long-term
20 |
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 forward currency 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) arise from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates.
Equity and Mortgage Real Estate Investment Trusts (collectively equity REITs):The Fundinvested 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 onthe trade date. Realized gains (losses) from investment and currency transactions are calculated on the specific identification method. Dividend income is recorded on theex-date, or for certain foreign securities, when the Fund becomes aware of such dividends. 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 RevenueCode 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.
Tax reform legislation commonly referred to as the Tax Cuts and Jobs Act permits a direct REIT shareholder to claim a 20% “qualified business income” deduction for ordinary REIT dividends. The tax legislation did not expressly permit regulated investment companies (“RICs”) paying dividends attributable to such income to pass through this special treatment
PGIM US Real Estate Fund | 21 |
Notes to Financial Statements(unaudited) (continued)
to its shareholders. On January 18, 2019, the Internal Revenue Service issued final regulations that permit RICs to pass through “qualified REIT dividends” to their shareholders.
Dividends and Distributions:The Fund expects to pay dividends from net investmentincome 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 generally accepted accounting principles, are recorded on theex-date. Permanent book/tax differences relating to income and gain (loss) are reclassified between total distributable earnings (loss) andpaid-in capital in excess of par, as appropriate.
Estimates:The preparation of financial statements requires management to make estimatesand assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
2. Agreements
The Fund has a management agreement with the Manager. Pursuant to this agreement, the Manager has responsibility for all investment advisory services and supervises the subadviser’s performance of such services. In addition, under the management agreement, the Manager provides all of the administrative functions necessary for the organization, operation and management of the Fund. The Manager 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. The Manager 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.
The Manager 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. The Manager 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.
22 |
The management fee paid to the Manager 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 effective management fee rate before any waivers and/or expense reimbursements was 0.75% for the reporting period ended September 30, 2019.
The Manager has contractually agreed, through July 31, 2020, to limit total annual 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. Where applicable, the Manager agrees to waive management fees or shared operating expenses on any share class to the same extent that it waives similar expenses on any other share class. In addition, total annual operating expenses for Class R6 shares will not exceed total annual operating expenses for Class Z shares. Fees and/or expenses waived and/or reimbursed by the Manager may be recouped by the Manager 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, 2020 to limit such fees to 0.25% of the average daily net assets of the Class A shares.
For the reporting period ended September 30, 2019, PIMS received $23,570 infront-end sales charges resulting from sales of Class A shares. Additionally, for the reporting period ended September 30, 2019, PIMS received $32 and $126 in contingent deferred sales charges imposed upon redemptions by certain Class B and Class C shareholders, respectively. From these fees, PIMS paid such sales charges to broker-dealers, who in turn paid commissions to salespersons and incurred other distribution costs.
PGIM US Real Estate Fund | 23 |
Notes to Financial Statements(unaudited) (continued)
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 Trust’s transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certainout-of-pocket expenses paid tonon-affiliates, where applicable.
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. Through the Fund’s investments in the mentioned underlying funds, PGIM Investments and/or its affiliates are paid fees or reimbursed for providing their services. In addition to the realized and unrealized gains on investments in the Core Fund, earnings from such investments are disclosed on the Statement of Operations as “Affiliated dividend income”.
The Fund may enter into certain securities purchase or sale transactions under Board approved Rule17a-7 procedures. Rule17a-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. Pursuant to the Rule17a-7 procedures and consistent with guidance issued by the SEC, the Trust’s Chief Compliance Officer (“CCO”) prepares a quarterly summary of all such transactions for submission to the Board, together with the CCO’s written representation that all such17a-7 transactions were effected in accordance with the Fund’s Rule17a-7 procedures. For the reporting period ended September 30, 2019, no17a-7 transactions were entered into by the Fund.
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 reporting period ended September 30, 2019, were $29,864,265 and $25,308,553, respectively.
A summary of the cost of purchases and proceeds from sales of shares of affiliated investments for the reporting period ended September 30, 2019, is presented as follows:
24 |
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 | Income | |||||||||||||||||||||||
PGIM Core Ultra Short Bond Fund* | ||||||||||||||||||||||||||||||
$ | 289,096 | $ | 7,204,120 | $ | 7,490,818 | $ | — | $ | — | $ | 2,398 | 2,398 | $ | 1,884 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* | 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, 2019 were as follows:
Tax Basis | $ | 28,009,427 | ||
|
| |||
Gross Unrealized Appreciation | 6,660,123 | |||
Gross Unrealized Depreciation | — | |||
|
| |||
Net Unrealized Appreciation | $ | 6,660,123 | ||
|
|
The book basis may differ from tax basis due to certaintax-related adjustments.
The Manager 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. Since tax authorities can examine previously filed tax returns, the Fund’s U.S. federal and state tax returns for each of the four fiscal years up to the most recent fiscal year ended March 31, 2019 are subject to such review.
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 maximumfront-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 monthly 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 C shares will automatically convert to Class A shares on a monthly basis approximately 10 years after purchase. Class Z and Class R6 shares are not subject to any sales or redemption charge and are available exclusively for sale to a limited group of investors.
PGIM US Real Estate Fund | 25 |
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 of the Fund at $0.001 par value per share.
As of September 30, 2019, Prudential, through its affiliated entities, including affiliated funds (if applicable), owned 1,423,915 Class Z shares and 927 Class R6 shares of the Fund. At reporting period end, three shareholders of record, each holding greater than 5% of the Fund, held 75% of the Fund’s outstanding shares, of which 59% were held by an affiliate of Prudential.
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Six months ended September 30, 2019: | ||||||||
Shares sold | 57,337 | $ | 780,451 | |||||
Shares issued in reinvestment of dividends and distributions | 2,649 | 35,733 | ||||||
Shares reacquired | (30,165 | ) | (409,827 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 29,821 | 406,357 | ||||||
Shares issued upon conversion from other share class(es) | 19,908 | 267,771 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 49,729 | $ | 674,128 | |||||
|
|
|
| |||||
Year ended March 31, 2019: | ||||||||
Shares sold | 70,301 | $ | 862,796 | |||||
Shares issued in reinvestment of dividends and distributions | 16,740 | 194,981 | ||||||
Shares reacquired | (60,405 | ) | (718,202 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 26,636 | 339,575 | ||||||
Shares issued upon conversion from other share class(es) | 8,642 | 105,884 | ||||||
Shares reacquired upon conversion into other share class(es) | (31,385 | ) | (363,821 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 3,893 | $ | 81,638 | |||||
|
|
|
| |||||
Class B | ||||||||
Six months ended September 30, 2019: | ||||||||
Shares issued in reinvestment of dividends and distributions | 139 | $ | 1,834 | |||||
Shares reacquired | (1,471 | ) | (19,990 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (1,332 | ) | (18,156 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (8,502 | ) | (113,455 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (9,834 | ) | $ | (131,611 | ) | |||
|
|
|
| |||||
Year ended March 31, 2019: | ||||||||
Shares sold | 466 | $ | 5,500 | |||||
Shares issued in reinvestment of dividends and distributions | 2,151 | 24,624 | ||||||
Shares reacquired | (20,315 | ) | (234,544 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (17,698 | ) | (204,420 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (8,813 | ) | (105,884 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (26,511 | ) | $ | (310,304 | ) | |||
|
|
|
|
26 |
Class C | Shares | Amount | ||||||
Six months ended September 30, 2019: | ||||||||
Shares sold | 26,556 | $ | 359,469 | |||||
Shares issued in reinvestment of dividends and distributions | 286 | 3,780 | ||||||
Shares reacquired | (3,470 | ) | (44,980 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 23,372 | 318,269 | ||||||
Shares reacquired upon conversion into other share class(es) | (11,825 | ) | (154,316 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 11,547 | $ | 163,953 | |||||
|
|
|
| |||||
Year ended March 31, 2019: | ||||||||
Shares sold | 19,100 | $ | 229,251 | |||||
Shares issued in reinvestment of dividends and distributions | 3,327 | 38,000 | ||||||
Shares reacquired | (21,841 | ) | (251,878 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 586 | $ | 15,373 | |||||
|
|
|
| |||||
Class Z | ||||||||
Six months ended September 30, 2019: | ||||||||
Shares sold | 347,594 | $ | 4,661,699 | |||||
Shares issued in reinvestment of dividends and distributions | 14,369 | 194,025 | ||||||
Shares reacquired | (86,488 | ) | (1,170,236 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 275,475 | $ | 3,685,488 | |||||
|
|
|
| |||||
Year ended March 31, 2019: | ||||||||
Shares sold | 162,454 | $ | 1,997,744 | |||||
Shares issued in reinvestment of dividends and distributions | 72,024 | 839,444 | ||||||
Shares reacquired | (65,531 | ) | (773,988 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 168,947 | 2,063,200 | ||||||
Shares issued upon conversion from other share class(es) | 31,332 | 363,821 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 200,279 | $ | 2,427,021 | |||||
|
|
|
| |||||
Class R6 | ||||||||
Six months ended September 30, 2019: | ||||||||
Shares sold | 833 | $ | 11,485 | |||||
Shares issued in reinvestment of dividends and distributions | 9 | 123 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 842 | $ | 11,608 | |||||
|
|
|
| |||||
Year ended March 31, 2019: | ||||||||
Shares issued in reinvestment of dividends and distributions | 45 | $ | 527 | |||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 45 | $ | 527 | |||||
|
|
|
|
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 4, 2018 through October 3, 2019. 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. The interest on borrowings under the SCA is paid monthly and at a per annum interest rate of 1.25% plus the higher of (1) the effective federal funds rate, (2) theone-month LIBOR rate or (3) zero percent.
PGIM US Real Estate Fund | 27 |
Notes to Financial Statements(unaudited) (continued)
Subsequent to the reporting period end, the SCA has been renewed effective October 3, 2019 and will continue to provide a commitment of $900 million through October 1, 2020. 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 the renewed SCA will be paid monthly and at a per annum interest rate of 1.20% plus the higher of (1) the effective federal funds rate, (2) theone-month LIBOR rate or (3) zero percent.
Certain 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, 2019.
8. Risks of Investing in the Fund
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 downand 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 issuerswith 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 theFund’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
28 |
guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
Non-diversification Risk:Anon-diversified Fund may invest a greater percentage of itsassets in the securities of a single company or industry than a diversified fund. Investing in anon-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 anon-diversified fund.
Risks of Investing in equity REITs:Real estate securities are subject to similar risks as directinvestments 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 includeso-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 equity 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 equity REITs, while mortgage REITs may be affected by the quality of any credit extended. Equity 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 equity 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. Equity REITs are subject to interest rate risks. Equity REITs may incur significant amounts of leverage. The Fund will indirectly bear a portion of the expenses, including management fees, paid by each equity REIT in which it invests, in addition to the expenses of the Fund.
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. The Manager 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
PGIM US Real Estate Fund | 29 |
Notes to Financial Statements(unaudited) (continued)
effective immediately. The Manager continues to evaluate certain other provisions of the ASU and does not expect a material impact to financial statement disclosures.
30 |
Financial Highlights(unaudited)
Class A Shares | ||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | |||||||||||||||||||||||||||
2019 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $13.14 | $11.05 | $12.01 | $13.71 | $14.80 | $12.78 | ||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.10 | 0.19 | 0.18 | 0.06 | 0.21 | 0.15 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 1.26 | 2.47 | (0.41 | ) | 0.07 | (0.11 | ) | 2.74 | ||||||||||||||||||||
Total from investment operations | 1.36 | 2.66 | (0.23 | ) | 0.13 | 0.10 | 2.89 | |||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.09 | ) | (0.19 | ) | (0.13 | ) | (0.27 | ) | (0.14 | ) | (0.13 | ) | ||||||||||||||||
Distributions from net realized gains | - | (0.38 | ) | (0.60 | ) | (1.56 | ) | (1.05 | ) | (0.74 | ) | |||||||||||||||||
Total dividends and distributions | (0.09 | ) | (0.57 | ) | (0.73 | ) | (1.83 | ) | (1.19 | ) | (0.87 | ) | ||||||||||||||||
Net asset value, end of period | $14.41 | $13.14 | $11.05 | $12.01 | $13.71 | $14.80 | ||||||||||||||||||||||
Total Return(b): | 10.43% | 24.76% | (2.36)% | 1.01% | 1.28% | 23.06% | ||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000) | $5,911 | $4,735 | $3,938 | $4,863 | $5,013 | $6,502 | ||||||||||||||||||||||
Average net assets (000) | $5,267 | $4,230 | $4,492 | $5,555 | $4,850 | $4,728 | ||||||||||||||||||||||
Ratios to average net assets(c)(d): | ||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.25% | (e) | 1.25% | 1.25% | 1.34% | 1.61% | (f) | 1.60% | ||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 2.13% | (e) | 2.36% | 2.22% | 1.92% | 1.73% | (f) | 1.85% | ||||||||||||||||||||
Net investment income (loss) | 1.54% | (e) | 1.63% | 1.49% | 0.43% | 1.53% | 1.06% | |||||||||||||||||||||
Portfolio turnover rate(g) | 82% | 154% | 92% | 122% | 156% | 98% |
(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) | Effective January 1, 2018, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | Annualized. |
(f) | Includes 0.01% of loan interest expense. |
(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. |
See Notes to Financial Statements.
PGIM US Real Estate Fund | 31 |
Financial Highlights(unaudited) (continued)
Class B Shares | ||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | |||||||||||||||||||||||||||
2019 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $12.87 | $10.83 | $11.81 | $13.51 | $14.62 | $12.67 | ||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.04 | 0.09 | 0.08 | (0.04 | ) | 0.11 | 0.05 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 1.24 | 2.43 | (0.39 | ) | 0.07 | (0.11 | ) | 2.69 | ||||||||||||||||||||
Total from investment operations | 1.28 | 2.52 | (0.31 | ) | 0.03 | - | 2.74 | |||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.04 | ) | (0.10 | ) | (0.07 | ) | (0.17 | ) | (0.06 | ) | (0.05 | ) | ||||||||||||||||
Distributions from net realized gains | - | (0.38 | ) | (0.60 | ) | (1.56 | ) | (1.05 | ) | (0.74 | ) | |||||||||||||||||
Total dividends and distributions | (0.04 | ) | (0.48 | ) | (0.67 | ) | (1.73 | ) | (1.11 | ) | (0.79 | ) | ||||||||||||||||
Net asset value, end of period | $14.11 | $12.87 | $10.83 | $11.81 | $13.51 | $14.62 | ||||||||||||||||||||||
Total Return(b): | 10.00% | 23.85% | (3.11)% | 0.26% | 0.52% | 22.05% | ||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000) | $488 | $572 | $768 | $1,089 | $1,276 | $1,814 | ||||||||||||||||||||||
Average net assets (000) | $534 | $642 | $975 | $1,240 | $1,443 | $1,480 | ||||||||||||||||||||||
Ratios to average net assets(c)(d): | ||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 2.00% | (e) | 2.00% | 2.00% | 2.09% | 2.36% | (f) | 2.35% | ||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 5.40% | (e) | 5.00% | 3.21% | 2.61% | 2.43% | (f) | 2.55% | ||||||||||||||||||||
Net investment income (loss) | 0.67% | (e) | 0.78% | 0.72% | (0.35)% | 0.80% | 0.35% | |||||||||||||||||||||
Portfolio turnover rate(g) | 82% | 154% | 92% | 122% | 156% | 98% |
(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) | Effective January 1, 2018, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | Annualized. |
(f) | Includes 0.01% of loan interest expense. |
(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. |
See Notes to Financial Statements.
32 |
Class C Shares | ||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | |||||||||||||||||||||||||||
2019 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $12.84 | $10.81 | $11.79 | $13.49 | $14.60 | $12.65 | ||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.05 | 0.10 | 0.08 | (0.05 | ) | 0.11 | 0.04 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 1.24 | 2.41 | (0.39 | ) | 0.08 | (0.11 | ) | 2.70 | ||||||||||||||||||||
Total from investment operations | 1.29 | 2.51 | (0.31 | ) | 0.03 | - | 2.74 | |||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.04 | ) | (0.10 | ) | (0.07 | ) | (0.17 | ) | (0.06 | ) | (0.05 | ) | ||||||||||||||||
Distributions from net realized gains | - | (0.38 | ) | (0.60 | ) | (1.56 | ) | (1.05 | ) | (0.74 | ) | |||||||||||||||||
Total dividends and distributions | (0.04 | ) | (0.48 | ) | (0.67 | ) | (1.73 | ) | (1.11 | ) | (0.79 | ) | ||||||||||||||||
Net asset value, end of period | $14.09 | $12.84 | $10.81 | $11.79 | $13.49 | $14.60 | ||||||||||||||||||||||
Total Return(b): | 10.10% | 23.81% | (3.11)% | 0.26% | 0.53% | 22.09% | ||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000) | $1,408 | $1,135 | $949 | $1,536 | $1,491 | $1,769 | ||||||||||||||||||||||
Average net assets (000) | $1,106 | $947 | $1,294 | $1,669 | $1,543 | $1,244 | ||||||||||||||||||||||
Ratios to average net assets(c)(d): | ||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 2.00% | (e) | 2.00% | 2.00% | 2.08% | 2.36% | (f) | 2.35% | ||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 3.81% | (e) | 4.17% | 3.10% | 2.62% | 2.43% | (f) | 2.55% | ||||||||||||||||||||
Net investment income (loss) | 0.83% | (e) | 0.89% | 0.69% | (0.39)% | 0.80% | 0.31% | |||||||||||||||||||||
Portfolio turnover rate(g) | 82% | 154% | 92% | 122% | 156% | 98% |
(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) | Effective January 1, 2018, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | Annualized. |
(f) | Includes 0.01% of loan interest expense. |
(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. |
See Notes to Financial Statements.
PGIM US Real Estate Fund | 33 |
Financial Highlights(unaudited) (continued)
Class Z Shares | ||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | |||||||||||||||||||||||||||
2019 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $13.16 | $11.07 | $12.02 | $13.72 | $14.80 | $12.79 | ||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.12 | 0.23 | 0.21 | 0.08 | 0.26 | 0.19 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 1.27 | 2.46 | (0.40 | ) | 0.09 | (0.12 | ) | 2.72 | ||||||||||||||||||||
Total from investment operations | 1.39 | 2.69 | (0.19 | ) | 0.17 | 0.14 | 2.91 | |||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.22 | ) | (0.16 | ) | (0.31 | ) | (0.17 | ) | (0.16 | ) | ||||||||||||||||
Distributions from net realized gains | - | (0.38 | ) | (0.60 | ) | (1.56 | ) | (1.05 | ) | (0.74 | ) | |||||||||||||||||
Total dividends and distributions | (0.11 | ) | (0.60 | ) | (0.76 | ) | (1.87 | ) | (1.22 | ) | (0.90 | ) | ||||||||||||||||
Net asset value, end of period | $14.44 | $13.16 | $11.07 | $12.02 | $13.72 | $14.80 | ||||||||||||||||||||||
Total Return(b): | 10.63% | 25.03% | (2.09)% | 1.26% | 1.56% | 23.27% | ||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000) | $26,987 | $20,978 | $15,422 | $16,397 | $35,941 | $35,218 | ||||||||||||||||||||||
Average net assets (000) | $23,994 | $17,162 | $16,394 | $22,153 | $36,976 | $29,979 | ||||||||||||||||||||||
Ratios to average net assets(c)(d): | ||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.00% | (e) | 1.00% | 1.00% | 1.13% | 1.36% | (f) | 1.35% | ||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.37% | (e) | 1.54% | 1.80% | 1.56% | 1.43% | (f) | 1.55% | ||||||||||||||||||||
Net investment income (loss) | 1.80% | (e) | 1.90% | 1.76% | 0.63% | 1.90% | 1.34% | |||||||||||||||||||||
Portfolio turnover rate(g) | 82% | 154% | 92% | 122% | 156% | 98% |
(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) | Effective January 1, 2018, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | Annualized. |
(f) | Includes 0.01% of loan interest expense. |
(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. |
See Notes to Financial Statements.
34 |
Class R6 Shares | ||||||||||||||||||||
Six Months Ended September 30, 2019 | Year Ended March 31, 2019 | May 25, 2017(a) through March 31, 2018 | ||||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $13.16 | $11.06 | $12.16 | |||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.13 | 0.22 | 0.20 | |||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 1.25 | 2.48 | (0.54 | ) | ||||||||||||||||
Total from investment operations | 1.38 | 2.70 | (0.34 | ) | ||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.22 | ) | (0.16 | ) | ||||||||||||||
Distributions from net realized gains | - | (0.38 | ) | (0.60 | ) | |||||||||||||||
Total dividends and distributions | (0.11 | ) | (0.60 | ) | (0.76 | ) | ||||||||||||||
Net asset value, end of period | $14.43 | $13.16 | $11.06 | |||||||||||||||||
Total Return(c): | 10.56% | 25.14% | (3.31)% | |||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000) | $25 | $12 | $10 | |||||||||||||||||
Average net assets (000) | $16 | $11 | $10 | |||||||||||||||||
Ratios to average net assets(d)(e): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.00% | (f) | 1.00% | 1.00% | (f) | |||||||||||||||
Expenses before waivers and/or expense reimbursement | 89.90% | (f) | 135.20% | 115.13% | (f) | |||||||||||||||
Net investment income (loss) | 1.85% | (f) | 1.88% | 1.93% | (f) | |||||||||||||||
Portfolio turnover rate(g) | 82% | 154% | 92% |
(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) | Effective January 1, 2018, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(e) | Does not include expenses of the underlying funds in which the Fund invests. |
(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. |
See Notes to Financial Statements.
PGIM US Real Estate Fund | 35 |
Approval of Advisory Agreements
The Fund’s Board of Trustees
The Board of Trustees (the “Board”) of PGIM US Real Estate Fund (the “Fund”)1 consists of eleven 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”).2 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 agreements with PGIM, Inc. (“PGIM”), on behalf of its PGIM Real Estate unit, and PGIM Limited (“PGIML”). In considering the renewal of the agreements, the Board, including all of the Independent Trustees, met on May 30, 2019 and on June11-13, 2019 and approved the renewal of the agreements through July 31, 2020, 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, PGIM and PGIML. 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
PGIM US Real Estate Fund |
1 | PGIM US Real Estate Fund is a series of Prudential Investment Portfolios 12. |
2 | Grace C. Torres was an Interested Trustee of the Fund at the time the Board considered and approved the renewal of the Fund’s advisory agreements, but has since become an Independent Trustee of the Fund. |
Approval of Advisory Agreements(continued)
considered information provided by PGIM Investments throughout the year at regular Board meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the meetings on May 30, 2019 and on June11-13, 2019.
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 each of PGIM, which, through its PGIM Real Estate unit, and PGIML, which serve as the Fund’s subadvisers pursuant to the terms of subadvisory agreements 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, PGIM Real Estate and PGIML. The Board noted that PGIM Real Estate and PGIML are affiliated with PGIM Investments. 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, and PGIM Investments’ role as the administrator of the Fund’s liquidity risk management program. With respect to PGIM Investments’ oversight of the subadvisers, 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 subadvisers. 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 each of PGIM Real Estate and PGIML, 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 subadvisers, as well as PGIM Investments’ recommendation, based on its review of the subadviser, to renew the subadvisory agreements.
The Board considered the qualifications, backgrounds and responsibilities of PGIM Investments’ senior management responsible for the oversight of the Fund, PGIM Real Estate and PGIML, and also considered the qualifications, backgrounds and responsibilities of PGIM Real Estate’s and PGIML’s portfolio managers who are responsible for the
Visit our website at pgiminvestments.com |
day-to-day management of the Fund’s portfolio. The Board was provided with information pertaining to PGIM Investments’, PGIM Real Estate’s and PGIML’s organizational structure, senior management, investment operations, and other relevant information pertaining to PGIM Investments, PGIM Real Estate and PGIML. The Board also noted that it received favorable compliance reports from the Fund’s Chief Compliance Officer (“CCO”) as to PGIM Investments, PGIM Real Estate and PGIML.
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 PGIML, and that there was a reasonable basis on which to conclude that the Fund benefits from the services provided by PGIM Investments, PGIM Real Estate and PGIML 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, 2018. 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 US Real Estate Fund |
Approval of Advisory Agreements(continued)
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.
Other Benefits to PGIM Investments, PGIM Real Estate and PGIML
The Board considered potential ancillary benefits that might be received by PGIM Investments, PGIM Real Estate, PGIML 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 and PGIML included their 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, PGIM Real Estate and PGIML 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 factors and made related conclusions relating to the historical performance of the Fund for theone-, three-, and five-year periods ended December 31, 2018.
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, 2018. 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
Visit our website at pgiminvestments.com |
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 over various periods, 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 forth net performance comparisons (which 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.
Net Performance | 1 Year | 3 Years | 5 Years | 10 Years | ||||
1st Quartile | 2nd Quartile | 2nd Quartile | N/A | |||||
Actual Management Fees: 1st Quartile | ||||||||
Net Total Expenses: 2nd Quartile |
• | The Board noted that the Fund outperformed its benchmark index over theone-year period, though it underperformed over the three- and five-year periods. |
• | The Board and PGIM Investments agreed to retain the existing contractual expense cap which (exclusive of certain fees and expenses) caps total 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, 2020. |
• | In addition, PGIM Investments will waive management fees or shared operating expenses on any share class to the same extent that it waives such expenses on any other share class, and has agreed that total annual fund operating expenses for Class R6 shares will not exceed total annual fund operating expenses for Class Z shares. |
• | 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 | pgiminvestments.com |
PROXY VOTING |
The Board of Trustees of the Fund has delegated to the Fund’s 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• Brian K. Reid• Grace C. Torres |
OFFICERS |
Stuart S. Parker,President• Scott E. Benjamin,Vice President• Christian J. Kelly,Treasurer and Principal Financial and Accounting Officer• Raymond A. O’Hara,Chief Legal Officer• Dino Capasso, Chief Compliance Officer• Charles H. Smith,Anti-Money Laundering Compliance Officer•Andrew R. French,Secretary• Jonathan D. Shain,Assistant Secretary• Claudia DiGiacomo,Assistant Secretary• Diana N. Huffman,Assistant Secretary• Kelly A. Coyne,Assistant Secretary• Lana Lomuti, Assistant Treasurer• Russ Shupak,Assistant Treasurer• Elyse McLaughlin,Assistant Treasurer• Deborah Conway,Assistant Treasurer |
MANAGER | PGIM Investments LLC | 655 Broad Street Newark, NJ 07102 | ||
| ||||
SUBADVISER | PGIM Real Estate | 7 Giralda Farms Madison, NJ 07940 | ||
| ||||
DISTRIBUTOR | Prudential Investment Management Services LLC | 655 Broad Street Newark, NJ 07102 | ||
| ||||
CUSTODIAN | The Bank of New York Mellon | 240 Greenwich Street New York, NY 10286 | ||
| ||||
TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
| ||||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
| ||||
FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 | ||
|
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain the prospectus and summary prospectus by visiting our website atpgiminvestments.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 topgiminvestments.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 HOLDINGS |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission on Form N-PORT. The Fund’s Form N-PORT filings are available on the Commission’s website at sec.gov. Form N-PORT is filed with the Commission quarterly, and each Fund’s full portfolio holdings as of the first and third fiscal quarter-ends (as of the third month of the Fund’s fiscal quarter for reporting periods on or after September 30, 2019) will be made publicly available 60 days after the end of each quarter at sec.gov. |
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 |
MF209E2
PGIM QMA LONG-SHORT EQUITY FUND
SEMIANNUAL REPORT
SEPTEMBER 30, 2019
COMING SOON: PAPERLESS SHAREHOLDER REPORTS
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website (pgiminvestments.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 1-800-225-1852 or by sending an email request to PGIM Investments at shareholderreports@pgim.com.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary or follow instructions included with this notice to elect to continue to receive paper copies of your shareholder reports. If you invest directly with the Fund, you can call 1-800-225-1852 or send an email request to shareholderreports@pgim.com to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the fund complex if you invest directly with the Fund.
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, 2019 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 QMA LLC, a wholly owned subsidiary of PGIM, Inc. (PGIM), a Prudential Financial company. © 2019 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.
2 | Visit our website at pgiminvestments.com |
5 | ||||
6 | ||||
9 | ||||
11 | ||||
PGIM QMA Long-Short Equity Fund | 3 |
This Page Intentionally Left Blank
Dear Shareholder:
We hope you find the semiannual report for PGIM QMA Long-Short Equity Fund informative and useful. The report covers performance for thesix-month period ended September 30, 2019.
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, 2019
PGIM QMA Long-Short Equity Fund | 5 |
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 atpgiminvestments.com or by calling (800) 225-1852.
Total Returns as of 9/30/19 (without sales charges) | Average Annual Total Returns as of 9/30/19 (with sales charges) | |||||||
Six Months* | One Year (%) | Five Years (%) | Since Inception (%) | |||||
Class A | –0.65 | –8.81 | 3.34 | 3.67 (5/29/14) | ||||
Class C | –1.01 | –5.13 | 3.75 | 4.00 (5/29/14) | ||||
Class Z | –0.48 | –3.16 | 4.81 | 5.06 (5/29/14) | ||||
Class R6 | –0.56 | –3.24 | N/A | 2.36 (5/25/17) | ||||
S&P 500 Index | ||||||||
6.08 | 4.25 | 10.83 | — | |||||
Customized Blend Index | ||||||||
3.74 | 3.73 | 5.97 | — |
Source: PGIM Investments LLC.
*Not annualized
Since Inception returns are provided for any share class with less than 10 fiscal years of returns. Since Inception returns for the Indexes are measured from the closest month-end to the class’ inception date.
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 the original purchase price or the 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 |
6 | Visit our website at pgiminvestments.com |
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 FTSE3-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 returns for the Index measured from the month-end closest to the inception date of the Fund’s Class A, C, and Z shares are 5.91% and 6.85% for Class R6 shares.
S&P 500 Index—The S&P 500 Index (the 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 returns for the Index measured from the month-end closest to the inception date of the Fund’s Class A, C, and Z shares are 10.77% and 11.61% 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.
Presentation of Fund Holdingsas of 9/30/19
Ten Largest Holdings - Long | Line of Business | % of Net Assets | ||
Microsoft Corp. | Software | 3.0% | ||
Apple, Inc. | Technology Hardware, Storage & Peripherals | 2.8% | ||
Facebook, Inc. (Class A Stock) | Interactive Media & Services | 2.1% | ||
Visa, Inc. (Class A Stock) | IT Services | 1.8% | ||
Oracle Corp. | Software | 1.8% | ||
Citigroup, Inc. | Banks | 1.7% | ||
General Electric Co. | Industrial Conglomerates | 1.5% | ||
Intuit, Inc. | Software | 1.5% | ||
NRG Energy, Inc. | Independent Power & Renewable Electricity Producers | 1.5% | ||
Vulcan Materials Co. | Construction Materials | 1.5% |
PGIM QMA Long-Short Equity Fund | 7 |
Your Fund’s Performance(continued)
Ten Largest Holdings - Short | Line of Business | % of Net Assets | ||
Americold Realty Trust | Equity Real Estate Investment Trusts (REITs) | 1.5% | ||
Deere & Co. | Machinery | 1.4% | ||
International Flavors & Fragrances, Inc. | Chemicals | 1.4% | ||
Advanced Micro Devices, Inc. | Semiconductors & Semiconductor Equipment | 1.4% | ||
Coupa Software, Inc. | Software | 1.3% | ||
Lennox International, Inc. | Building Products | 1.3% | ||
Zendesk, Inc. | Software | 1.3% | ||
Square, Inc. (Class A Stock) | IT Services | 1.3% | ||
Arthur J Gallagher & Co. | Insurance | 1.3% | ||
Advance Auto Parts, Inc. | Specialty Retail | 1.2% |
For a complete list of holdings, please refer to the Schedule of Investments section of this report. Holdings reflect only long-term investments.
8 | 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, 2019. 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 | 9 |
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, 2019 | Ending Account Value September 30, 2019 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 993.50 | 2.12 | % | $ | 10.57 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,014.40 | 2.12 | % | $ | 10.68 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 989.90 | 2.87 | % | $ | 14.28 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,010.65 | 2.87 | % | $ | 14.43 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 995.20 | 1.87 | % | $ | 9.33 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.65 | 1.87 | % | $ | 9.42 | ||||||||||
Class R6 | Actual | $ | 1,000.00 | $ | 994.40 | 1.87 | % | $ | 9.32 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.65 | 1.87 | % | $ | 9.42 | ||||||||||
*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, 2019, and divided by the 366 days in the Fund’s fiscal year ending March 31, 2020 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
10 | Visit our website at pgiminvestments.com |
Schedule of Investments(unaudited)
as of September 30, 2019
Description | Shares | Value | ||||||
LONG-TERM INVESTMENTS 96.9% | ||||||||
COMMON STOCKS | ||||||||
Aerospace & Defense 3.0% | ||||||||
Arconic, Inc. | 175,900 | $ | 4,573,400 | |||||
General Dynamics Corp. | 12,200 | 2,229,306 | ||||||
Lockheed Martin Corp. | 4,600 | 1,794,276 | ||||||
Spirit AeroSystems Holdings, Inc. (Class A Stock) | 12,200 | 1,003,328 | ||||||
Vectrus, Inc.* | 5,100 | 207,315 | ||||||
|
| |||||||
9,807,625 | ||||||||
Air Freight & Logistics 0.8% | ||||||||
Hub Group, Inc. (Class A Stock)* | 53,700 | 2,497,050 | ||||||
Banks 2.4% | ||||||||
Bank of America Corp. | 70,900 | 2,068,153 | ||||||
Citigroup, Inc. | 77,800 | 5,374,424 | ||||||
OFG Bancorp (Puerto Rico) | 21,400 | 468,660 | ||||||
|
| |||||||
7,911,237 | ||||||||
Beverages 1.4% | ||||||||
Keurig Dr. Pepper, Inc. | 161,400 | 4,409,448 | ||||||
Biotechnology 5.7% | ||||||||
Alexion Pharmaceuticals, Inc.* | 44,600 | 4,368,124 | ||||||
Amgen, Inc. | 1,300 | 251,563 | ||||||
Biogen, Inc.* | 19,500 | 4,539,990 | ||||||
Gilead Sciences, Inc. | 15,200 | 963,376 | ||||||
Incyte Corp.* | 60,200 | 4,468,646 | ||||||
Veracyte, Inc.* | 35,100 | 842,400 | ||||||
Vertex Pharmaceuticals, Inc.* | 17,500 | 2,964,850 | ||||||
|
| |||||||
18,398,949 | ||||||||
Building Products 0.5% | ||||||||
American Woodmark Corp.* | 1,700 | 151,147 | ||||||
Resideo Technologies, Inc.* | 91,900 | 1,318,765 | ||||||
Universal Forest Products, Inc. | 5,900 | 235,292 | ||||||
|
| |||||||
1,705,204 | ||||||||
Capital Markets 1.1% | ||||||||
Affiliated Managers Group, Inc. | 23,200 | 1,933,721 |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 11 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Capital Markets (cont’d.) | ||||||||
Brightsphere Investment Group, Inc. | 33,200 | $ | 329,012 | |||||
LPL Financial Holdings, Inc. | 17,700 | 1,449,630 | ||||||
|
| |||||||
3,712,363 | ||||||||
Chemicals 2.5% | ||||||||
CF Industries Holdings, Inc. | 28,900 | 1,421,880 | ||||||
Huntsman Corp. | 165,300 | 3,844,878 | ||||||
Koppers Holdings, Inc.* | 23,700 | 692,277 | ||||||
Trinseo SA | 47,300 | 2,031,535 | ||||||
|
| |||||||
7,990,570 | ||||||||
Commercial Services & Supplies 0.2% | ||||||||
Knoll, Inc. | 22,800 | 577,980 | ||||||
Construction & Engineering 0.9% | ||||||||
EMCOR Group, Inc. | 32,700 | 2,816,124 | ||||||
Construction Materials 1.5% | ||||||||
Vulcan Materials Co. | 32,300 | 4,885,052 | ||||||
Consumer Finance 2.0% | ||||||||
Capital One Financial Corp. | 27,500 | 2,501,950 | ||||||
OneMain Holdings, Inc. | 106,100 | 3,891,748 | ||||||
|
| |||||||
6,393,698 | ||||||||
Distributors 1.8% | ||||||||
Core-Mark Holding Co., Inc. | 29,700 | 953,816 | ||||||
Genuine Parts Co. | 38,500 | 3,834,215 | ||||||
LKQ Corp.* | 30,700 | 965,515 | ||||||
|
| |||||||
5,753,546 | ||||||||
Diversified Consumer Services 1.4% | ||||||||
frontdoor, Inc.* | 90,400 | 4,390,728 | ||||||
Diversified Financial Services 1.1% | ||||||||
FGL Holdings | 130,200 | 1,038,996 | ||||||
Jefferies Financial Group, Inc. | 128,700 | 2,368,080 | ||||||
|
| |||||||
3,407,076 |
See Notes to Financial Statements.
12 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Diversified Telecommunication Services 1.3% | ||||||||
Verizon Communications, Inc. | 70,400 | $ | 4,249,344 | |||||
Electrical Equipment 0.5% | ||||||||
Atkore International Group, Inc.* | 53,700 | 1,629,795 | ||||||
Electronic Equipment, Instruments & Components 3.7% | ||||||||
Anixter International, Inc.* | 13,200 | 912,384 | ||||||
CDW Corp. | 36,200 | 4,461,288 | ||||||
Itron, Inc.* | 30,300 | 2,240,988 | ||||||
SYNNEX Corp. | 39,200 | 4,425,680 | ||||||
|
| |||||||
12,040,340 | ||||||||
Energy Equipment & Services 0.1% | ||||||||
Matrix Service Co.* | 16,000 | 274,240 | ||||||
Entertainment 0.3% | ||||||||
Viacom, Inc. (Class B Stock) | 40,500 | 973,215 | ||||||
Equity Real Estate Investment Trusts (REITs) 2.5% | ||||||||
Franklin Street Properties Corp. | 65,200 | 551,592 | ||||||
GEO Group, Inc. (The) | 140,000 | 2,427,600 | ||||||
Kite Realty Group Trust | 16,600 | 268,090 | ||||||
Park Hotels & Resorts, Inc. | 21,728 | 542,548 | ||||||
Ryman Hospitality Properties, Inc. | 44,400 | 3,632,364 | ||||||
Xenia Hotels & Resorts, Inc. | 24,100 | 508,992 | ||||||
|
| |||||||
7,931,186 | ||||||||
Food Products 3.1% | ||||||||
Bunge Ltd. | 53,800 | 3,046,156 | ||||||
Pilgrim’s Pride Corp.* | 101,600 | 3,255,772 | ||||||
Tyson Foods, Inc. (Class A Stock) | 43,300 | 3,729,862 | ||||||
|
| |||||||
10,031,790 | ||||||||
Gas Utilities 0.8% | ||||||||
UGI Corp. | 49,700 | 2,498,419 | ||||||
Health Care Equipment & Supplies 5.7% | ||||||||
Cooper Cos., Inc. (The) | 11,100 | 3,296,700 | ||||||
DENTSPLY SIRONA, Inc. | 29,700 | 1,583,307 | ||||||
Edwards Lifesciences Corp.* | 3,800 | 835,658 | ||||||
Hologic, Inc.* | 30,900 | 1,560,141 |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 13 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Health Care Equipment & Supplies (cont’d.) | ||||||||
Integer Holdings Corp.* | 18,700 | $ | 1,412,972 | |||||
Masimo Corp.* | 4,300 | 639,797 | ||||||
Medtronic PLC | 22,500 | 2,443,950 | ||||||
STERIS PLC | 23,500 | 3,395,515 | ||||||
Zimmer Biomet Holdings, Inc. | 24,400 | 3,349,388 | ||||||
|
| |||||||
18,517,428 | ||||||||
Health Care Providers & Services 2.6% | ||||||||
AmerisourceBergen Corp. | 11,200 | 922,096 | ||||||
Anthem, Inc. | 5,600 | 1,344,560 | ||||||
Centene Corp.* | 74,000 | 3,201,240 | ||||||
CVS Health Corp. | 34,000 | 2,144,380 | ||||||
HCA Healthcare, Inc. | 4,400 | 529,848 | ||||||
Molina Healthcare, Inc.* | 1,000 | 109,720 | ||||||
|
| |||||||
8,251,844 | ||||||||
Health Care Technology 0.5% | ||||||||
Allscripts Healthcare Solutions, Inc.* | 139,100 | 1,527,318 | ||||||
Simulations Plus, Inc. | 6,700 | 232,490 | ||||||
|
| |||||||
1,759,808 | ||||||||
Hotels, Restaurants & Leisure 1.4% | ||||||||
Extended Stay America, Inc., UTS | 29,400 | 430,416 | ||||||
Starbucks Corp. | 47,000 | 4,155,740 | ||||||
|
| |||||||
4,586,156 | ||||||||
Household Durables 0.5% | ||||||||
M/I Homes, Inc.* | 41,800 | 1,573,770 | ||||||
Toll Brothers, Inc. | 4,300 | 176,515 | ||||||
|
| |||||||
1,750,285 | ||||||||
Household Products 0.1% | ||||||||
Spectrum Brands Holdings, Inc. | 3,217 | 169,600 | ||||||
Independent Power & Renewable Electricity Producers 2.1% | ||||||||
NRG Energy, Inc. | 123,500 | 4,890,600 | ||||||
Vistra Energy Corp. | 69,100 | 1,847,043 | ||||||
|
| |||||||
6,737,643 |
See Notes to Financial Statements.
14 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Industrial Conglomerates 1.5% | ||||||||
General Electric Co. | 553,300 | $ | 4,946,502 | |||||
Insurance 1.4% | ||||||||
American Equity Investment Life Holding Co. | 43,100 | 1,043,020 | ||||||
CNA Financial Corp. | 2,200 | 108,350 | ||||||
MetLife, Inc. | 70,000 | 3,301,200 | ||||||
|
| |||||||
4,452,570 | ||||||||
Interactive Media & Services 2.5% | ||||||||
Alphabet, Inc. (Class A Stock)* | 600 | 732,684 | ||||||
Alphabet, Inc. (Class C Stock)* | 362 | 441,278 | ||||||
Facebook, Inc. (Class A Stock)*(u) | 38,400 | 6,838,272 | ||||||
Liberty TripAdvisor Holdings, Inc. (Class A Stock)* | 15,100 | 142,091 | ||||||
|
| |||||||
8,154,325 | ||||||||
Internet & Direct Marketing Retail 2.8% | ||||||||
1-800-Flowers.com, Inc. (Class A Stock)* | 55,600 | 822,602 | ||||||
Amazon.com, Inc.* | 600 | 1,041,546 | ||||||
eBay, Inc. | 121,300 | 4,728,274 | ||||||
Qurate Retail, Inc. (Class A Stock)* | 229,600 | 2,368,324 | ||||||
|
| |||||||
8,960,746 | ||||||||
IT Services 4.7% | ||||||||
Booz Allen Hamilton Holding Corp. | 3,800 | 269,876 | ||||||
CACI International, Inc. (Class A Stock)* | 3,500 | 809,410 | ||||||
DXC Technology Co. | 47,900 | 1,413,050 | ||||||
FleetCor Technologies, Inc.* | 12,500 | 3,584,750 | ||||||
International Business Machines Corp. | 2,000 | 290,840 | ||||||
Perspecta, Inc. | 102,200 | 2,669,464 | ||||||
Virtusa Corp.* | 11,900 | 428,638 | ||||||
Visa, Inc. (Class A Stock)(u) | 32,700 | 5,624,727 | ||||||
|
| |||||||
15,090,755 | ||||||||
Life Sciences Tools & Services 1.5% | ||||||||
Charles River Laboratories International, Inc.* | 5,400 | 714,798 | ||||||
IQVIA Holdings, Inc.* | 21,400 | 3,196,732 | ||||||
Thermo Fisher Scientific, Inc. | 2,800 | 815,556 | ||||||
|
| |||||||
4,727,086 |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 15 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Machinery 2.2% | ||||||||
Gates Industrial Corp. PLC* | 56,700 | $ | 570,969 | |||||
Meritor, Inc.* | 73,900 | 1,367,150 | ||||||
Oshkosh Corp. | 60,500 | 4,585,900 | ||||||
Wabash National Corp. | 34,900 | 506,399 | ||||||
|
| |||||||
7,030,418 | ||||||||
Media 1.3% | ||||||||
Discovery, Inc. (Class C Stock)* | 174,700 | 4,301,114 | ||||||
Metals & Mining 0.3% | ||||||||
Steel Dynamics, Inc. | 36,400 | 1,084,720 | ||||||
Mortgage Real Estate Investment Trusts (REITs) 0.3% | ||||||||
Colony Credit Real Estate, Inc. | 27,900 | 403,434 | ||||||
Western Asset Mortgage Capital Corp. | 45,300 | 437,145 | ||||||
|
| |||||||
840,579 | ||||||||
Multiline Retail 0.2% | ||||||||
Big Lots, Inc. | 28,800 | 705,600 | ||||||
Multi-Utilities 0.9% | ||||||||
MDU Resources Group, Inc. | 100,400 | 2,830,276 | ||||||
Oil, Gas & Consumable Fuels 1.0% | ||||||||
Ardmore Shipping Corp. (Ireland)* | 19,100 | 127,779 | ||||||
Kinder Morgan, Inc. | 34,400 | 708,984 | ||||||
World Fuel Services Corp. | 59,400 | 2,372,436 | ||||||
|
| |||||||
3,209,199 | ||||||||
Personal Products 0.4% | ||||||||
Avon Products, Inc. (United Kingdom)* | 282,100 | 1,241,240 | ||||||
Pharmaceuticals 1.0% | ||||||||
Horizon Therapeutics PLC* | 118,700 | 3,232,201 | ||||||
Professional Services 0.8% | ||||||||
Barrett Business Services, Inc. | 6,200 | 550,684 | ||||||
Korn Ferry | 54,000 | 2,086,560 | ||||||
|
| |||||||
2,637,244 |
See Notes to Financial Statements.
16 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Real Estate Management & Development 0.2% | ||||||||
Newmark Group, Inc. (Class A Stock) | 55,400 | $ | 501,924 | |||||
Semiconductors & Semiconductor Equipment 2.3% | ||||||||
Diodes, Inc.* | 64,600 | 2,593,690 | ||||||
Intel Corp. | 11,800 | 608,054 | ||||||
Ultra Clean Holdings, Inc.* | 31,100 | 455,148 | ||||||
Universal Display Corp. | 22,300 | 3,744,170 | ||||||
|
| |||||||
7,401,062 | ||||||||
Software 11.5% | ||||||||
Cision Ltd.* | 137,300 | 1,055,837 | ||||||
Fortinet, Inc.* | 8,700 | 667,812 | ||||||
Intuit, Inc. | 18,600 | 4,946,484 | ||||||
LogMeIn, Inc. | 60,800 | 4,314,368 | ||||||
Microsoft Corp.(u) | 70,300 | 9,773,809 | ||||||
Nuance Communications, Inc.* | 194,300 | 3,169,033 | ||||||
Oracle Corp. | 102,200 | 5,624,066 | ||||||
Progress Software Corp. | 53,800 | 2,047,628 | ||||||
SS&C Technologies Holdings, Inc. | 83,500 | 4,306,095 | ||||||
Symantec Corp. | 41,700 | 985,371 | ||||||
Synopsys, Inc.* | 2,500 | 343,125 | ||||||
|
| |||||||
37,233,628 | ||||||||
Specialty Retail 0.9% | ||||||||
Asbury Automotive Group, Inc.* | 17,500 | 1,790,775 | ||||||
Michaels Cos., Inc. (The)* | 85,300 | 835,087 | ||||||
Sonic Automotive, Inc. (Class A Stock) | 13,200 | 414,612 | ||||||
|
| |||||||
3,040,474 | ||||||||
Technology Hardware, Storage & Peripherals 3.8% | ||||||||
Apple, Inc.(u) | 40,200 | 9,003,594 | ||||||
Diebold Nixdorf, Inc.* | 149,700 | 1,676,640 | ||||||
HP, Inc. | 79,000 | 1,494,680 | ||||||
Xerox Holdings Corp. | 4,700 | 140,577 | ||||||
|
| |||||||
12,315,491 | ||||||||
Tobacco 0.7% | ||||||||
Altria Group, Inc. | 58,900 | 2,409,010 | ||||||
Trading Companies & Distributors 3.2% | ||||||||
BMC Stock Holdings, Inc.* | 99,200 | 2,597,056 |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 17 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Shares | Value | ||||||||||||||
COMMON STOCKS (Continued) | ||||||||||||||||
Trading Companies & Distributors (cont’d.) | ||||||||||||||||
GMS, Inc.* | 109,900 | $ | 3,156,328 | |||||||||||||
Herc Holdings, Inc.* | 16,400 | 762,764 | ||||||||||||||
WESCO International, Inc.* | 78,600 | 3,754,722 | ||||||||||||||
|
| |||||||||||||||
10,270,870 | ||||||||||||||||
|
| |||||||||||||||
TOTAL LONG-TERM INVESTMENTS | 312,674,777 | |||||||||||||||
|
| |||||||||||||||
SHORT-TERM INVESTMENTS 0.7% | ||||||||||||||||
AFFILIATED MUTUAL FUND 0.6% | ||||||||||||||||
PGIM Core Ultra Short Bond Fund | 1,882,424 | 1,882,424 | ||||||||||||||
|
| |||||||||||||||
Interest Rate | Maturity Date | Principal | ||||||||||||||
U.S. TREASURY OBLIGATION(K)(N) 0.1% | ||||||||||||||||
U.S. Treasury Bills | 1.914 | % | 12/19/19 | 400 | 398,485 | |||||||||||
|
| |||||||||||||||
TOTAL SHORT-TERM INVESTMENTS | 2,280,909 | |||||||||||||||
|
| |||||||||||||||
TOTAL INVESTMENTS, BEFORE SECURITIES SOLD SHORT | 314,955,686 | |||||||||||||||
|
| |||||||||||||||
Shares | ||||||||||||||||
SECURITIES SOLD SHORT (52.7)% | ||||||||||||||||
COMMON STOCKS | ||||||||||||||||
Aerospace & Defense (1.1)% | ||||||||||||||||
AeroVironment, Inc.* | 11,400 | (610,584 | ) | |||||||||||||
Boeing Co. (The) | 5,300 | (2,016,491 | ) | |||||||||||||
Kratos Defense & Security Solutions, Inc.* | 56,200 | (1,045,039 | ) | |||||||||||||
|
| |||||||||||||||
(3,672,114 | ) | |||||||||||||||
Auto Components (1.3)% | ||||||||||||||||
Dorman Products, Inc.* | 22,400 | (1,781,696 | ) |
See Notes to Financial Statements.
18 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Auto Components (cont’d.) | ||||||||
Motorcar Parts of America, Inc.* | 16,400 | $ | (277,160 | ) | ||||
Visteon Corp.* | 25,600 | (2,113,024 | ) | |||||
|
| |||||||
(4,171,880 | ) | |||||||
Banks (2.0)% | ||||||||
Columbia Banking System, Inc. | 5,100 | (188,190 | ) | |||||
Commerce Bancshares, Inc. | 47,500 | (2,880,875 | ) | |||||
Cullen/Frost Bankers, Inc. | 39,300 | (3,480,015 | ) | |||||
|
| |||||||
(6,549,080 | ) | |||||||
Biotechnology (2.8)% | ||||||||
Agios Pharmaceuticals, Inc.* | 7,200 | (233,280 | ) | |||||
Alnylam Pharmaceuticals, Inc.* | 38,100 | (3,064,002 | ) | |||||
Atara Biotherapeutics, Inc.* | 28,200 | (398,184 | ) | |||||
BioCryst Pharmaceuticals, Inc.* | 58,400 | (167,316 | ) | |||||
Dynavax Technologies Corp.* | 57,600 | (205,920 | ) | |||||
Epizyme, Inc.* | 37,400 | (385,781 | ) | |||||
Fate Therapeutics, Inc.* | 34,800 | (540,444 | ) | |||||
Heron Therapeutics, Inc.* | 64,900 | (1,200,650 | ) | |||||
Progenics Pharmaceuticals, Inc.* | 42,400 | (214,332 | ) | |||||
Sarepta Therapeutics, Inc.* | 35,900 | (2,703,988 | ) | |||||
|
| |||||||
(9,113,897 | ) | |||||||
Building Products (1.5)% | ||||||||
AAON, Inc. | 11,400 | (523,717 | ) | |||||
Lennox International, Inc. | 17,700 | (4,300,569 | ) | |||||
|
| |||||||
(4,824,286 | ) | |||||||
Capital Markets (0.2)% | ||||||||
Hamilton Lane, Inc. (Class A Stock) | 13,800 | (786,048 | ) | |||||
Chemicals (3.3)% | ||||||||
Albemarle Corp. | 32,100 | (2,231,592 | ) | |||||
International Flavors & Fragrances, Inc. | 35,900 | (4,404,571 | ) | |||||
Quaker Chemical Corp. | 9,000 | (1,423,260 | ) | |||||
Sensient Technologies Corp. | 36,200 | (2,485,130 | ) | |||||
|
| |||||||
(10,544,553 | ) | |||||||
Commercial Services & Supplies (0.1)% | ||||||||
US Ecology, Inc. | 6,100 | (390,034 | ) |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 19 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Communications Equipment (0.9)% | ||||||||
Lumentum Holdings, Inc.* | 55,100 | $ | (2,951,156 | ) | ||||
Construction & Engineering (0.6)% | ||||||||
Argan, Inc. | 8,000 | (314,320 | ) | |||||
WillScot Corp.* | 93,800 | (1,461,404 | ) | |||||
|
| |||||||
(1,775,724 | ) | |||||||
Diversified Consumer Services (0.1)% | ||||||||
OneSpaWorld Holdings Ltd. (Bahamas)* | 14,500 | (225,185 | ) | |||||
Electronic Equipment, Instruments & Components (2.0)% | ||||||||
Badger Meter, Inc. | 13,400 | (719,580 | ) | |||||
FARO Technologies, Inc.* | 10,600 | (512,510 | ) | |||||
FLIR Systems, Inc. | 58,500 | (3,076,515 | ) | |||||
Littelfuse, Inc. | 7,600 | (1,347,556 | ) | |||||
Napco Security Technologies, Inc.* | 10,400 | (265,408 | ) | |||||
nLight, Inc.* | 27,600 | (432,216 | ) | |||||
|
| |||||||
(6,353,785 | ) | |||||||
Entertainment (0.6)% | ||||||||
World Wrestling Entertainment, Inc. (Class A Stock) | 24,900 | (1,771,635 | ) | |||||
Equity Real Estate Investment Trusts (REITs) (1.5)% | ||||||||
Americold Realty Trust | 130,800 | (4,848,756 | ) | |||||
Food & Staples Retailing (0.2)% | ||||||||
Chefs’ Warehouse, Inc. (The)* | 12,200 | (491,904 | ) | |||||
Food Products (0.6)% | ||||||||
Cal-Maine Foods, Inc. | 23,100 | (922,960 | ) | |||||
Farmer Brothers Co.* | 10,300 | (133,385 | ) | |||||
Freshpet, Inc.* | 18,600 | (925,722 | ) | |||||
|
| |||||||
(1,982,067 | ) | |||||||
Health Care Equipment & Supplies (2.6)% | ||||||||
Cantel Medical Corp. | 11,300 | (845,240 | ) | |||||
Heska Corp.* | 5,700 | (403,959 | ) | |||||
iRhythm Technologies, Inc.* | 21,600 | (1,600,776 | ) | |||||
Nevro Corp.* | 25,300 | (2,175,041 | ) | |||||
OrthoPediatrics Corp.* | 10,500 | (370,230 | ) | |||||
Penumbra, Inc.* | 20,000 | (2,689,800 | ) |
See Notes to Financial Statements.
20 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Health Care Equipment & Supplies (cont’d.) | ||||||||
Sientra, Inc.* | 30,700 | $ | (198,936 | ) | ||||
ViewRay, Inc.* | 60,500 | (175,450 | ) | |||||
|
| |||||||
(8,459,432 | ) | |||||||
Health Care Providers & Services (1.1)% | ||||||||
Guardant Health, Inc.* | 47,400 | (3,025,542 | ) | |||||
PetIQ, Inc.* | 19,400 | (528,844 | ) | |||||
|
| |||||||
(3,554,386 | ) | |||||||
Health Care Technology (1.4)% | ||||||||
Inspire Medical Systems, Inc.* | 19,300 | (1,177,686 | ) | |||||
Tabula Rasa HealthCare, Inc.* | 16,100 | (884,534 | ) | |||||
Teladoc Health, Inc.* | 27,800 | (1,882,616 | ) | |||||
Vocera Communications, Inc.* | 25,800 | (635,970 | ) | |||||
|
| |||||||
(4,580,806 | ) | |||||||
Hotels, Restaurants & Leisure (0.4)% | ||||||||
Noodles & Co.* | 25,100 | (142,066 | ) | |||||
Shake Shack, Inc. (Class A Stock)* | 12,900 | (1,264,716 | ) | |||||
|
| |||||||
(1,406,782 | ) | |||||||
Household Durables (1.4)% | ||||||||
Leggett & Platt, Inc. | 37,200 | (1,522,968 | ) | |||||
Roku, Inc.* | 30,800 | (3,134,208 | ) | |||||
|
| |||||||
(4,657,176 | ) | |||||||
Independent Power & Renewable Electricity Producers (0.1)% | ||||||||
Clearway Energy, Inc. (Class C Stock) | 11,700 | (213,525 | ) | |||||
Insurance (1.6)% | ||||||||
Arthur J Gallagher & Co. | 44,900 | (4,021,693 | ) | |||||
eHealth, Inc.* | 15,800 | (1,055,282 | ) | |||||
|
| |||||||
(5,076,975 | ) | |||||||
Internet & Direct Marketing Retail (0.9)% | ||||||||
GrubHub, Inc.* | 49,200 | (2,765,532 | ) | |||||
IT Services (4.2)% | ||||||||
Jack Henry & Associates, Inc. | 21,000 | (3,065,370 | ) |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 21 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
IT Services (cont’d.) | ||||||||
MongoDB, Inc.* | 21,100 | $ | (2,542,128 | ) | ||||
Okta, Inc.* | 37,200 | (3,662,712 | ) | |||||
Square, Inc. (Class A Stock)* | 66,400 | (4,113,480 | ) | |||||
USA Technologies, Inc.* | 43,700 | (320,321 | ) | |||||
|
| |||||||
(13,704,011 | ) | |||||||
Life Sciences Tools & Services (0.3)% | ||||||||
Codexis, Inc.* | 41,500 | (569,173 | ) | |||||
Luminex Corp. | 18,100 | (373,765 | ) | |||||
|
| |||||||
(942,938 | ) | |||||||
Machinery (3.1)% | ||||||||
Deere & Co. | 27,000 | (4,554,360 | ) | |||||
Helios Technologies, Inc. | 21,900 | (888,483 | ) | |||||
Lindsay Corp. | 8,100 | (752,085 | ) | |||||
RBC Bearings, Inc.* | 1,600 | (265,456 | ) | |||||
Wabtec Corp. | 26,000 | (1,868,360 | ) | |||||
Xylem, Inc. | 21,100 | (1,679,982 | ) | |||||
|
| |||||||
(10,008,726 | ) | |||||||
Media (0.7)% | ||||||||
Cardlytics, Inc.* | 12,200 | (408,944 | ) | |||||
New York Times Co. (The) (Class A Stock) | 69,900 | (1,990,752 | ) | |||||
|
| |||||||
(2,399,696 | ) | |||||||
Multi-Utilities (0.2)% | ||||||||
WEC Energy Group, Inc. | 6,600 | (627,660 | ) | |||||
Oil, Gas & Consumable Fuels (1.0)% | ||||||||
Callon Petroleum Co.* | 32,800 | (142,352 | ) | |||||
Cimarex Energy Co. | 59,600 | (2,857,224 | ) | |||||
Concho Resources, Inc. | 3,800 | (258,020 | ) | |||||
|
| |||||||
(3,257,596 | ) | |||||||
Pharmaceuticals (0.6)% | ||||||||
Dermira, Inc.* | 39,800 | (254,322 | ) | |||||
Nektar Therapeutics* | 83,100 | (1,513,666 | ) | |||||
|
| |||||||
(1,767,988 | ) |
See Notes to Financial Statements.
22 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Professional Services (1.4)% | ||||||||
Equifax, Inc. | 27,100 | $ | (3,812,157 | ) | ||||
Upwork, Inc.* | 58,600 | (779,673 | ) | |||||
|
| |||||||
(4,591,830 | ) | |||||||
Semiconductors & Semiconductor Equipment (1.5)% | ||||||||
Advanced Micro Devices, Inc.* | 149,600 | (4,336,904 | ) | |||||
Nanometrics, Inc.* | 13,100 | (427,322 | ) | |||||
|
| |||||||
(4,764,226 | ) | |||||||
Software (6.3)% | ||||||||
8x8, Inc.* | 65,000 | (1,346,800 | ) | |||||
Anaplan, Inc.* | 13,900 | (653,300 | ) | |||||
Appfolio, Inc. (Class A Stock)* | 6,200 | (589,868 | ) | |||||
Coupa Software, Inc.* | 33,800 | (4,379,466 | ) | |||||
DocuSign, Inc.* | 20,600 | (1,275,552 | ) | |||||
Instructure, Inc.* | 17,300 | (670,202 | ) | |||||
Pegasystems, Inc. | 12,400 | (843,820 | ) | |||||
Q2 Holdings, Inc.* | 35,700 | (2,815,659 | ) | |||||
SailPoint Technologies Holding, Inc.* | 35,600 | (665,364 | ) | |||||
ShotSpotter, Inc.* | 8,500 | (195,755 | ) | |||||
Smartsheet, Inc. (Class A Stock)* | 46,300 | (1,668,189 | ) | |||||
Varonis Systems, Inc.* | 14,700 | (878,766 | ) | |||||
Zendesk, Inc.* | 58,500 | (4,263,480 | ) | |||||
|
| |||||||
(20,246,221 | ) | |||||||
Specialty Retail (1.9)% | ||||||||
Advance Auto Parts, Inc. | 23,600 | (3,903,440 | ) | |||||
At Home Group, Inc.* | 19,900 | (191,438 | ) | |||||
Tiffany & Co. | 23,200 | (2,149,016 | ) | |||||
|
| |||||||
(6,243,894 | ) | |||||||
Technology Hardware, Storage & Peripherals (0.9)% | ||||||||
Immersion Corp.* | 17,900 | (136,935 | ) | |||||
Pure Storage, Inc. (Class A Stock)* | 154,300 | (2,613,842 | ) | |||||
|
| |||||||
(2,750,777 | ) | |||||||
Thrifts & Mortgage Finance (0.8)% | ||||||||
LendingTree, Inc.* | 8,300 | (2,576,569 | ) |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 23 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Trading Companies & Distributors (1.5)% | ||||||||
Air Lease Corp. | 50,000 | $ | (2,091,000 | ) | ||||
SiteOne Landscape Supply, Inc.* | 36,400 | (2,694,328 | ) | |||||
|
| |||||||
(4,785,328 | ) | |||||||
Wireless Telecommunication Services (0.0)% | ||||||||
Boingo Wireless, Inc.* | 10,000 | (111,000 | ) | |||||
|
| |||||||
TOTAL SECURITIES SOLD SHORT | (169,945,178 | ) | ||||||
|
| |||||||
TOTAL INVESTMENTS, NET OF SECURITIES SOLD SHORT 44.9% | 145,010,508 | |||||||
Other assets in excess of liabilities(z) 55.1% | 177,670,624 | |||||||
|
| |||||||
NET ASSETS 100.0% | $ | 322,681,132 | ||||||
|
|
Below is a list of the abbreviation(s) used in the semiannual report:
LIBOR—London Interbank Offered Rate
REITs—Real Estate Investment Trust
S&P—Standard & Poor’s
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, 2019:
Number of | Type | Expiration Date | Current Notional Amount | Value / Unrealized Appreciation (Depreciation) | ||||||||||||
Long Position: | ||||||||||||||||
48 | S&P 500 E-Mini Index | Dec. 2019 | $ | 7,148,400 | $ | (89,648 | ) | |||||||||
|
|
See Notes to Financial Statements.
24 |
Summary of Collateral for Centrally Cleared/Exchange-traded Derivatives:
Cash and securities segregated as collateral, including pending settlement for closed positions, to cover requirements for centrally cleared/exchange-traded derivatives are listed by broker as follows:
Broker | Cash and/or Foreign Currency | Securities Market Value | ||||||
Goldman Sachs & Co. LLC | $ | — | $ | 398,485 | ||||
|
|
|
|
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, 2019 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Common Stocks | ||||||||||||
Aerospace & Defense | $ | 9,807,625 | $ | — | $ | — | ||||||
Air Freight & Logistics | 2,497,050 | — | — | |||||||||
Banks | 7,911,237 | — | — | |||||||||
Beverages | 4,409,448 | — | — | |||||||||
Biotechnology | 18,398,949 | — | — | |||||||||
Building Products | 1,705,204 | — | — | |||||||||
Capital Markets | 3,712,363 | — | — | |||||||||
Chemicals | 7,990,570 | — | — | |||||||||
Commercial Services & Supplies | 577,980 | — | — | |||||||||
Construction & Engineering | 2,816,124 | — | — | |||||||||
Construction Materials | 4,885,052 | — | — | |||||||||
Consumer Finance | 6,393,698 | — | — | |||||||||
Distributors | 5,753,546 | — | — | |||||||||
Diversified Consumer Services | 4,390,728 | — | — | |||||||||
Diversified Financial Services | 3,407,076 | — | — | |||||||||
Diversified Telecommunication Services | 4,249,344 | — | — | |||||||||
Electrical Equipment | 1,629,795 | — | — | |||||||||
Electronic Equipment, Instruments & Components | 12,040,340 | — | — | |||||||||
Energy Equipment & Services | 274,240 | — | — | |||||||||
Entertainment | 973,215 | — | — | |||||||||
Equity Real Estate Investment Trusts (REITs) | 7,931,186 | — | — | |||||||||
Food Products | 10,031,790 | — | — | |||||||||
Gas Utilities | 2,498,419 | — | — | |||||||||
Health Care Equipment & Supplies | 18,517,428 | — | — | |||||||||
Health Care Providers & Services | 8,251,844 | — | — |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 25 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities (continued) | ||||||||||||
Common Stocks (continued) | ||||||||||||
Health Care Technology | $ | 1,759,808 | $ | — | $ | — | ||||||
Hotels, Restaurants & Leisure | 4,586,156 | — | — | |||||||||
Household Durables | 1,750,285 | — | — | |||||||||
Household Products | 169,600 | — | — | |||||||||
Independent Power & Renewable Electricity Producers | 6,737,643 | — | — | |||||||||
Industrial Conglomerates | 4,946,502 | — | — | |||||||||
Insurance | 4,452,570 | — | — | |||||||||
Interactive Media & Services | 8,154,325 | — | — | |||||||||
Internet & Direct Marketing Retail | 8,960,746 | — | — | |||||||||
IT Services | 15,090,755 | — | — | |||||||||
Life Sciences Tools & Services | 4,727,086 | — | — | |||||||||
Machinery | 7,030,418 | — | — | |||||||||
Media | 4,301,114 | — | — | |||||||||
Metals & Mining | 1,084,720 | — | — | |||||||||
Mortgage Real Estate Investment Trusts (REITs) | 840,579 | — | — | |||||||||
Multiline Retail | 705,600 | — | — | |||||||||
Multi-Utilities | 2,830,276 | — | — | |||||||||
Oil, Gas & Consumable Fuels | 3,209,199 | — | — | |||||||||
Personal Products | 1,241,240 | — | — | |||||||||
Pharmaceuticals | 3,232,201 | — | — | |||||||||
Professional Services | 2,637,244 | — | — | |||||||||
Real Estate Management & Development | 501,924 | — | — | |||||||||
Semiconductors & Semiconductor Equipment | 7,401,062 | — | — | |||||||||
Software | 37,233,628 | — | — | |||||||||
Specialty Retail | 3,040,474 | — | — | |||||||||
Technology Hardware, Storage & Peripherals | 12,315,491 | — | — | |||||||||
Tobacco | 2,409,010 | — | — | |||||||||
Trading Companies & Distributors | 10,270,870 | — | — | |||||||||
Affiliated Mutual Fund | 1,882,424 | — | — | |||||||||
U.S. Treasury Obligation | — | 398,485 | — | |||||||||
Common Stocks—Short | ||||||||||||
Aerospace & Defense | (3,672,114 | ) | — | — | ||||||||
Auto Components | (4,171,880 | ) | — | — | ||||||||
Banks | (6,549,080 | ) | — | — | ||||||||
Biotechnology | (9,113,897 | ) | — | — | ||||||||
Building Products | (4,824,286 | ) | — | — | ||||||||
Capital Markets | (786,048 | ) | — | — | ||||||||
Chemicals | (10,544,553 | ) | — | — | ||||||||
Commercial Services & Supplies | (390,034 | ) | — | — | ||||||||
Communications Equipment | (2,951,156 | ) | — | — | ||||||||
Construction & Engineering | (1,775,724 | ) | — | — | ||||||||
Diversified Consumer Services | (225,185 | ) | — | — | ||||||||
Electronic Equipment, Instruments & Components | (6,353,785 | ) | — | — | ||||||||
Entertainment | (1,771,635 | ) | — | — | ||||||||
Equity Real Estate Investment Trusts (REITs) | (4,848,756 | ) | — | — | ||||||||
Food & Staples Retailing | (491,904 | ) | — | — | ||||||||
Food Products | (1,982,067 | ) | — | — |
See Notes to Financial Statements.
26 |
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities (continued) | ||||||||||||
Common Stocks—Short (continued) | ||||||||||||
Health Care Equipment & Supplies | $ | (8,459,432 | ) | $ | — | $ | — | |||||
Health Care Providers & Services | (3,554,386 | ) | — | — | ||||||||
Health Care Technology | (4,580,806 | ) | — | — | ||||||||
Hotels, Restaurants & Leisure | (1,406,782 | ) | — | — | ||||||||
Household Durables | (4,657,176 | ) | — | — | ||||||||
Independent Power & Renewable Electricity Producers | (213,525 | ) | — | — | ||||||||
Insurance | (5,076,975 | ) | — | — | ||||||||
Internet & Direct Marketing Retail | (2,765,532 | ) | — | — | ||||||||
IT Services | (13,704,011 | ) | — | — | ||||||||
Life Sciences Tools & Services | (942,938 | ) | — | — | ||||||||
Machinery | (10,008,726 | ) | — | — | ||||||||
Media | (2,399,696 | ) | — | — | ||||||||
Multi-Utilities | (627,660 | ) | — | — | ||||||||
Oil, Gas & Consumable Fuels | (3,257,596 | ) | — | — | ||||||||
Pharmaceuticals | (1,767,988 | ) | — | — | ||||||||
Professional Services | (4,591,830 | ) | — | — | ||||||||
Semiconductors & Semiconductor Equipment | (4,764,226 | ) | — | — | ||||||||
Software | (20,246,221 | ) | — | — | ||||||||
Specialty Retail | (6,243,894 | ) | — | — | ||||||||
Technology Hardware, Storage & Peripherals | (2,750,777 | ) | — | — | ||||||||
Thrifts & Mortgage Finance | (2,576,569 | ) | — | — | ||||||||
Trading Companies & Distributors | (4,785,328 | ) | — | — | ||||||||
Wireless Telecommunication Services | (111,000 | ) | — | — | ||||||||
Other Financial Instruments* | ||||||||||||
Futures Contracts | (89,648 | ) | — | — | ||||||||
|
|
|
|
|
| |||||||
Total | $ | 144,522,375 | $ | 398,485 | $ | — | ||||||
|
|
|
|
|
|
* | 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, 2019 were as follows:
Software | 11.5 | % | ||
Health Care Equipment & Supplies | 5.7 | |||
Biotechnology | 5.7 | |||
IT Services | 4.7 | |||
Technology Hardware, Storage & Peripherals | 3.8 | |||
Electronic Equipment, Instruments & Components | 3.7 | |||
Trading Companies & Distributors | 3.2 | |||
Food Products | 3.1 | |||
Aerospace & Defense | 3.0 | |||
Internet & Direct Marketing Retail | 2.8 | |||
Health Care Providers & Services | 2.6 | % | ||
Interactive Media & Services | 2.5 | |||
Chemicals | 2.5 | |||
Equity Real Estate Investment Trusts (REITs) | 2.5 | |||
Banks | 2.4 | |||
Semiconductors & Semiconductor Equipment | 2.3 | |||
Machinery | 2.2 | |||
Independent Power & Renewable Electricity Producers | 2.1 | |||
Consumer Finance | 2.0 |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 27 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Industry Classification (continued):
Distributors | 1.8 | % | ||
Industrial Conglomerates | 1.5 | |||
Construction Materials | 1.5 | |||
Life Sciences Tools & Services | 1.5 | |||
Hotels, Restaurants & Leisure | 1.4 | |||
Insurance | 1.4 | |||
Beverages | 1.4 | |||
Diversified Consumer Services | 1.4 | |||
Media | 1.3 | |||
Diversified Telecommunication Services | 1.3 | |||
Capital Markets | 1.1 | |||
Diversified Financial Services | 1.1 | |||
Pharmaceuticals | 1.0 | |||
Oil, Gas & Consumable Fuels | 1.0 | |||
Specialty Retail | 0.9 | |||
Multi-Utilities | 0.9 | |||
Construction & Engineering | 0.9 | |||
Professional Services | 0.8 | |||
Gas Utilities | 0.8 | |||
Air Freight & Logistics | 0.8 | |||
Tobacco | 0.7 | |||
Affiliated Mutual Fund | 0.6 | |||
Health Care Technology | 0.5 | |||
Household Durables | 0.5 | |||
Building Products | 0.5 | |||
Electrical Equipment | 0.5 | |||
Personal Products | 0.4 | |||
Metals & Mining | 0.3 | |||
Entertainment | 0.3 | |||
Mortgage Real Estate Investment Trusts (REITs) | 0.3 | |||
Multiline Retail | 0.2 | |||
Commercial Services & Supplies | 0.2 | |||
Real Estate Management & Development | 0.2 | |||
U.S. Treasury Obligation | 0.1 | |||
Energy Equipment & Services | 0.1 | |||
Household Products | 0.1 | |||
Securities Sold Short | ||||
Wireless Telecommunication Services | (0.0 | )* | ||
Independent Power & Renewable Electricity Producers | (0.1 | ) | ||
Diversified Consumer Services | (0.1 | ) | ||
Commercial Services & Supplies | (0.1 | ) | ||
Food & Staples Retailing | (0.2 | ) | ||
Multi-Utilities | (0.2 | )% | ||
Capital Markets | (0.2 | ) | ||
Life Sciences Tools & Services | (0.3 | ) | ||
Hotels, Restaurants & Leisure | (0.4 | ) | ||
Pharmaceuticals | (0.6 | ) | ||
Entertainment | (0.6 | ) | ||
Construction & Engineering | (0.6 | ) | ||
Food Products | (0.6 | ) | ||
Media | (0.7 | ) | ||
Thrifts & Mortgage Finance | (0.8 | ) | ||
Technology Hardware, Storage & Peripherals | (0.9 | ) | ||
Internet & Direct Marketing Retail | (0.9 | ) | ||
Communications Equipment | (0.9 | ) | ||
Oil, Gas & Consumable Fuels | (1.0 | ) | ||
Health Care Providers & Services | (1.1 | ) | ||
Aerospace & Defense | (1.1 | ) | ||
Auto Components | (1.3 | ) | ||
Health Care Technology | (1.4 | ) | ||
Professional Services | (1.4 | ) | ||
Household Durables | (1.4 | ) | ||
Semiconductors & Semiconductor Equipment | (1.5 | ) | ||
Trading Companies & Distributors | (1.5 | ) | ||
Building Products | (1.5 | ) | ||
Equity Real Estate Investment Trusts (REITs) | (1.5 | ) | ||
Insurance | (1.6 | ) | ||
Specialty Retail | (1.9 | ) | ||
Electronic Equipment, Instruments & Components | (2.0 | ) | ||
Banks | (2.0 | ) | ||
Health Care Equipment & Supplies | (2.6 | ) | ||
Biotechnology | (2.8 | ) | ||
Machinery | (3.1 | ) | ||
Chemicals | (3.3 | ) | ||
IT Services | (4.2 | ) | ||
Software | (6.3 | ) | ||
|
| |||
44.9 | ||||
Other assets in excess of liabilities | 55.1 | |||
|
| |||
100.0 | % | |||
|
|
* | Less than +/- 0.05% |
See Notes to Financial Statements.
28 |
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. See the Notes to Financial Statements for additional detail regarding these derivative instruments and their risks. 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, 2019 as presented in the Statement of Assets and Liabilities:
Asset Derivatives | Liability Derivatives | |||||||||||
Derivatives not accounted for as hedging instruments, carried at fair value | Statement of | Fair Value | Statement of | Fair Value | ||||||||
Equity contracts | — | $ | — | Due from/to broker-variation margin futures | $ | 89,648 | * | |||||
|
|
|
|
* | 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, 2019 are as follows:
Amount of Realized Gain (Loss) on Derivatives Recognized in Income | ||||
Derivatives not accounted for as hedging instruments, carried at fair value | Futures | |||
Equity contracts | $ | 738,106 | ||
|
| |||
Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Income | ||||
Derivatives not accounted for as hedging instruments, carried at fair value | Futures | |||
Equity contracts | $ | (475,172 | ) | |
|
|
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 29 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
For the six months ended September 30, 2019, the Fund’s average volume of derivative activities is as follows:
Futures Contracts— Long Positions(1) |
$7,620,900 |
(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 toset-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 | $ | (169,945,178 | ) | $ | 169,945,178 | $ | — | ||||||
|
|
|
|
|
|
(1) | Collateral amount disclosed by the Fund is limited to the market value of financial instruments/transactions. |
See Notes to Financial Statements.
30 |
Statement of Assets and Liabilities (unaudited)
as of September 30, 2019
Assets | ||||
Investments at value: | ||||
Unaffiliated investments (cost $291,631,416) | $ | 313,073,262 | ||
Affiliated investments (cost $1,882,424) | 1,882,424 | |||
Deposit with broker for securities sold short | 178,286,118 | |||
Receivable for Fund shares sold | 1,566,073 | |||
Dividends and interest receivable | 554,768 | |||
Due from broker—variation margin futures | 35,280 | |||
Prepaid expenses | 3,093 | |||
|
| |||
Total Assets | 495,401,018 | |||
|
| |||
Liabilities | ||||
Securities sold short, at value (proceeds received $170,273,684) | 169,945,178 | |||
Payable for Fund shares reacquired | 2,097,021 | |||
Management fee payable | 280,166 | |||
Dividends and interest payable on securities sold short | 186,953 | |||
Accrued expenses and other liabilities | 179,493 | |||
Distribution fee payable | 27,273 | |||
Affiliated transfer agent fee payable | 3,802 | |||
|
| |||
Total Liabilities | 172,719,886 | |||
|
| |||
Net Assets | $ | 322,681,132 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 26,066 | ||
Paid-in capital in excess of par | 294,797,676 | |||
Total distributable earnings (loss) | 27,857,390 | |||
|
| |||
Net assets, September 30, 2019 | $ | 322,681,132 | ||
|
|
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 31 |
Statement of Assets and Liabilities (unaudited)
as of September 30, 2019
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 C | ||||
Net asset value, offering price and redemption price per share, | ||||
($25,666,564 ÷ 2,177,782 shares of beneficial interest issued and outstanding) | $ | 11.79 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share, | ||||
($246,953,998 ÷ 19,835,804 shares of beneficial interest issued and outstanding) | $ | 12.45 | ||
|
| |||
Class R6 | ||||
Net asset value, offering price and redemption price per share, | ||||
($22,233,920 ÷ 1,786,220 shares of beneficial interest issued and outstanding) | $ | 12.45 | ||
|
|
See Notes to Financial Statements.
32 |
Statement of Operations(unaudited)
Six Months Ended September 30, 2019
Net Investment Income (Loss) | ||||
Income | ||||
Unaffiliated dividend income (net of $3,486 foreign withholding tax) | $ | 3,112,431 | ||
Interest income | 2,650,601 | |||
Affiliated dividend income | 29,658 | |||
|
| |||
Total income | 5,792,690 | |||
|
| |||
Expenses | ||||
Management fee | 2,326,232 | |||
Distribution fee(a) | 201,648 | |||
Dividend expense on short sales | 882,956 | |||
Broker fees and expenses on short sales | 362,777 | |||
Transfer agent’s fees and expenses (including affiliated expense of $13,362)(a) | 187,043 | |||
Custodian and accounting fees | 51,855 | |||
Registration fees(a) | 37,415 | |||
Shareholders’ reports | 28,208 | |||
Audit fee | 16,076 | |||
Legal fees and expenses | 9,942 | |||
Trustees’ fees | 8,959 | |||
Miscellaneous | 22,076 | |||
|
| |||
Total expenses | 4,135,187 | |||
Less: Fee waiver and/or expense reimbursement(a) | (151,521 | ) | ||
Distribution fee waiver(a) | (8,275 | ) | ||
|
| |||
Net expenses | 3,975,391 | |||
|
| |||
Net investment income (loss) | 1,817,299 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investments | ||||
Net realized gain (loss) on: | ||||
Investment transactions | (3,787,015 | ) | ||
Futures transactions | 738,106 | |||
Short sales transactions | (7,964,309 | ) | ||
|
| |||
(11,013,218 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (16,089,481 | ) | ||
Futures | (475,172 | ) | ||
Short sales | 18,639,359 | |||
|
| |||
2,074,706 | ||||
|
| |||
Net gain (loss) on investment transactions | (8,938,512 | ) | ||
|
| |||
Net Increase (Decrease) In Net Assets Resulting From Operations | $ | (7,121,213 | ) | |
|
|
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 33 |
Statement of Operations(unaudited)
Six Months Ended September 30, 2019
(a) | Class specific expenses and waivers were as follows: |
Class A | Class C | Class Z | Class R6 | |||||||||||||
Distribution fee | 49,648 | 152,000 | — | — | ||||||||||||
Transfer agent’s fees and expenses | 19,430 | 17,145 | 145,614 | 4,854 | ||||||||||||
Registration fees | 7,942 | 8,079 | 13,586 | 7,808 | ||||||||||||
Fee waiver and/or expense reimbursement | (21,379 | ) | (19,875 | ) | (106,571 | ) | (3,696 | ) | ||||||||
Distribution fee waiver | (8,275 | ) | — | — | — |
See Notes to Financial Statements.
34 |
Statements of Changes in Net Assets (unaudited)
Six Months Ended September 30, 2019 | Year Ended March 31, 2019 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 1,817,299 | $ | 3,282,580 | ||||
Net realized gain (loss) on investment transactions | (11,013,218 | ) | 30,739,805 | |||||
Net change in unrealized appreciation (depreciation) on investments | 2,074,706 | (33,432,272 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | (7,121,213 | ) | 590,113 | |||||
|
|
|
| |||||
Distributions from distributable earnings | ||||||||
Class A | — | (775,631 | ) | |||||
Class C | — | (676,927 | ) | |||||
Class Z | — | (6,686,016 | ) | |||||
Class R6 | — | (330,739 | ) | |||||
|
|
|
| |||||
— | (8,469,313 | ) | ||||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) | ||||||||
Net proceeds from shares sold | 39,669,533 | 246,989,633 | ||||||
Net asset value of shares issued in reinvestment of dividends | — | 8,375,053 | ||||||
Cost of shares reacquired | (205,930,824 | ) | (251,409,095 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in net assets from Fund share transactions | (166,261,291 | ) | 3,955,591 | |||||
|
|
|
| |||||
Total increase (decrease) | (173,382,504 | ) | (3,923,609 | ) | ||||
Net Assets: | ||||||||
Beginning of period | 496,063,636 | 499,987,245 | ||||||
|
|
|
| |||||
End of period | $ | 322,681,132 | $ | 496,063,636 | ||||
|
|
|
|
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 35 |
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 anopen-end management investment company. The Trust currently consists of the following six series: PGIM QMALarge-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 arenon-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 anon-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 anon-diversified fund. These financial statements relate only to the PGIM QMA Long-Short Equity Fund (the “Fund”).
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 (“ASC”) 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, the Manager has established a Valuation Committee responsible for supervising the fair 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.
For the fiscal reportingperiod-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
36 |
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 and referred to herein as the “fair value hierarchy” in accordance with FASB ASC Topic 820—Fair Value Measurements and Disclosures.
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 up to the time the Fund is valued. 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 inopen-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 the issuer; the prices of any recent transactions or bids/offers for such securities or any
PGIM QMA Long-Short Equity Fund | 37 |
Notes to Financial Statements(unaudited) (continued)
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.
Illiquid Securities:Pursuant to Rule22e-4 under the 1940 Act, the Fund has adopted a Board approved Liquidity Risk Management Program (“LRMP”) that requires, among other things, that the Fund limit its illiquid investments that are assets to no more than 15% of net assets. Illiquid securities are those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale, may not reasonably be expected to be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. 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.
Restricted Securities:Securities acquired in unregistered, private sales from the issuing company or from an affiliate of the issuer are considered restricted as to disposition under federal securities law (“restricted securities”). Such restricted securities are valued pursuant to the valuation procedures noted above. Restricted securities that would otherwise be considered illiquid investments pursuant to the Fund’s LRMP 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. Therefore, these Rule 144A securities, as well as commercial paper that is sold in private placements under Section 4(2) of the Securities Act of 1933, may be classified higher than “illiquid” under the LRMP (i.e. “moderately liquid” or “less liquid” investments). However, the liquidity of the Fund’s investments in restricted 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 is closed, the gain (loss) is realized and is presented in the Statement of Operations as net realized gain (loss) on futures transactions.
38 |
The Fund invested in financial futures contracts in order to hedge its existing portfolio securities, or securities the Fund intends to purchase, against fluctuations in value caused by changes in prevailing interest rates. Should interest rates move unexpectedly, the Fund may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets. 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 theex-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 Trust, on behalf of 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 all or a portion 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 toset-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 toset-off the amount owed with the amount owed by the other party, the reporting party intends toset-off and the right ofset-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 invested 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 | 39 |
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 theex-date, or for certain foreign securities, when the Fund becomes aware of such dividends. 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 theex-date. Permanent book/tax differences relating to income and gain (loss) are reclassified between total distributable earnings (loss) andpaid-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 the Manager. Pursuant to this agreement, the Manager has responsibility for all investment advisory services and supervises the subadviser’s performance of such services. In addition, under the
40 |
management agreement, the Manager provides all of the administrative functions necessary for the organization, operation and management of the Fund. The Manager 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. The Manager 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.
The Manager has entered into a subadvisory agreement with QMA 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. The Manager 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 the Manager is accrued daily and payable monthly at an annual rate of 1.15% average daily net assets up to and including $5 billion and 1.13% on average daily net assets in excess of $5 billion. The effective management fee rate before any waivers and/or expense reimbursements was 1.15% for the reporting period ended September 30, 2019.
The Manager has contractually agreed, through July 31, 2020, to limit total annual 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. Where applicable, the Manager agrees to waive management fees or shared operating expenses on any share class to the same extent that it waives such expenses on any other share class. In addition, total annual operating expenses for Class R6 shares will not exceed total annual operating expenses for Class Z shares. Fees and/or expenses waived and/or reimbursed by the Manager may be recouped by the Manager within the same fiscal year during which such waiver and/or reimbusement 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
PGIM QMA Long-Short Equity Fund | 41 |
Notes to Financial Statements(unaudited) (continued)
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% and 1% of the average daily net assets of the Class A and Class C shares, respectively. PIMS has contractually agreed through July 31, 2020 to limit such fees to 0.25% of the average daily net assets of the Class A shares.
For the reporting period ended September 30, 2019, PIMS received $14,737 infront-end sales charges resulting from sales of Class A shares. Additionally, for the reporting period ended September 30, 2019, PIMS received $9,521 and $1,290 in contingent deferred sales charges imposed upon redemptions by certain Class A and Class C shareholders. From these fees, PIMS paid such sales charges to broker-dealers, who in turn paid commissions to salespersons and incurred other distribution costs.
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 Trust’s transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certainout-of-pocket expenses paid tonon-affiliates, where applicable.
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. Through the Fund’s investments in the mentioned underlying funds, PGIM Investments and/or its affiliates are paid fees or reimbursed for providing their services. In addition to the realized and unrealized gains on investments in the Core Fund, earnings from such investments are disclosed on the Statement of Operations as “Affiliated dividend income”.
The Fund may enter into certain securities purchase or sale transactions under Board approved Rule17a-7 procedures. Rule17a-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. Pursuant to the Rule17a-7 procedures and consistent with guidance issued by the SEC, the Trust’s Chief Compliance Officer (“CCO”) prepares a
42 |
quarterly summary of all such transactions for submission to the Board, together with the CCO’s written representation that all such17a-7 transactions were effected in accordance with the Fund’s Rule17a-7 procedures. For the reporting period ended September 30, 2019, no17a-7 transactions were entered into by the Fund.
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 reporting period ended September 30, 2019, were $390,427,645 and $448,941,022, respectively.
A summary of the cost of purchases and proceeds from sales of shares of affiliated investments for the reporting period ended September 30, 2019, is presented as follows:
Value, | Cost of Purchases | Proceeds from Sales | Change in Unrealized Gain (Loss) | Realized Gain (Loss) | Value, End of Period | Shares, End of Period | Income | |||||||||||||||||||||||
PGIM Core Ultra Short Bond Fund* | ||||||||||||||||||||||||||||||
$ | 1,606,509 | $ | 114,506,640 | $ | 114,230,725 | $ | — | $ | — | $ | 1,882,424 | 1,882,424 | $ | 29,658 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* | 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, 2019 were as follows:
Tax Basis | $ | 125,771,893 | ||
|
| |||
Gross Unrealized Appreciation | 53,212,372 | |||
Gross Unrealized Depreciation | (34,063,405 | ) | ||
|
| |||
Net Unrealized Appreciation | $ | 19,148,967 | ||
|
|
The book basis may differ from tax basis due to certaintax-related adjustments.
The Manager 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. Since tax authorities can examine previously filed tax returns, the Fund’s U.S. federal and state tax returns for each of the four fiscal years up to the most recent fiscal year ended March 31, 2019 are subject to such review.
6. Capital and Ownership
The Fund offers Class A, Class C, Class Z and Class R6 shares. Class A shares are sold with a maximumfront-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
PGIM QMA Long-Short Equity Fund | 43 |
Notes to Financial Statements(unaudited) (continued)
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 C shares will automatically convert to Class A shares on a monthly basis approximately 10 years after purchase. Class Z and Class R6 shares are not subject to any sales or redemption charge and are available 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 of the Fund at $0.001 par value per share.
At reporting period end, five shareholders of record, each holding greater than 5% of the Fund, held 79% of the Fund’s outstanding shares.
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Six months ended September 30, 2019: | ||||||||
Shares sold | 51,407 | $ | 620,505 | |||||
Shares reacquired | (1,409,512 | ) | (16,890,165 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (1,358,105 | ) | (16,269,660 | ) | ||||
Shares issued upon conversion from other share class(es) | 218,533 | 2,657,895 | ||||||
Shares reacquired upon conversion into other share class(es) | (72,077 | ) | (869,675 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (1,211,649 | ) | $ | (14,481,440 | ) | |||
|
|
|
| |||||
Year ended March 31, 2019: | ||||||||
Shares sold | 1,298,303 | $ | 16,516,947 | |||||
Shares issued in reinvestment of dividends and distributions | 63,093 | 768,477 | ||||||
Shares reacquired | (1,262,949 | ) | (15,841,513 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 98,447 | 1,443,911 | ||||||
Shares issued upon conversion from other share class(es) | 23,798 | 297,595 | ||||||
Shares reacquired upon conversion into other share class(es) | (751,400 | ) | (9,486,386 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (629,155 | ) | $ | (7,744,880 | ) | |||
|
|
|
|
44 |
Class C | Shares | Amount | ||||||
Six months ended September 30, 2019: | ||||||||
Shares sold | 38,894 | $ | 452,008 | |||||
Shares reacquired | (518,784 | ) | (6,002,908 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (479,890 | ) | (5,550,900 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (381,799 | ) | (4,487,329 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (861,689 | ) | $ | (10,038,229 | ) | |||
|
|
|
| |||||
Year ended March 31, 2019: | ||||||||
Shares sold | 600,861 | $ | 7,323,776 | |||||
Shares issued in reinvestment of dividends and distributions | 57,499 | 676,191 | ||||||
Shares reacquired | (599,699 | ) | (7,220,262 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 58,661 | 779,705 | ||||||
Shares reacquired upon conversion into other share class(es) | (44,079 | ) | (539,711 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 14,582 | $ | 239,994 | |||||
|
|
|
| |||||
Class Z | ||||||||
Six months ended September 30, 2019: | ||||||||
Shares sold | 2,806,524 | $ | 34,595,305 | |||||
Shares reacquired | (10,531,657 | ) | (128,183,711 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (7,725,133 | ) | (93,588,406 | ) | ||||
Shares issued upon conversion from other share class(es) | 318,458 | 3,932,032 | ||||||
Shares reacquired upon conversion into other share class(es) | (100,871 | ) | (1,237,043 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (7,507,546 | ) | $ | (90,893,417 | ) | |||
|
|
|
| |||||
Year ended March 31, 2019: | ||||||||
Shares sold | 12,523,590 | $ | 158,956,923 | |||||
Shares issued in reinvestment of dividends and distributions | 537,787 | 6,625,531 | ||||||
Shares reacquired | (17,436,505 | ) | (219,225,827 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (4,375,128 | ) | (53,643,373 | ) | ||||
Shares issued upon conversion from other share class(es) | 784,492 | 10,020,540 | ||||||
Shares reacquired upon conversion into other share class(es) | (235,398 | ) | (3,028,416 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (3,826,034 | ) | $ | (46,651,249 | ) | |||
|
|
|
| |||||
Class R6 | ||||||||
Six months ended September 30, 2019: | ||||||||
Shares sold | 324,881 | $ | 4,001,715 | |||||
Shares reacquired | (4,530,921 | ) | (54,854,040 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (4,206,040 | ) | (50,852,325 | ) | ||||
Shares issued upon conversion from other share class(es) | 340 | 4,120 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (4,205,700 | ) | $ | (50,848,205 | ) | |||
|
|
|
| |||||
Year ended March 31, 2019: | ||||||||
Shares sold | 5,220,932 | $ | 64,191,987 | |||||
Shares issued in reinvestment of dividends and distributions | 24,745 | 304,854 | ||||||
Shares reacquired | (734,581 | ) | (9,121,493 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 4,511,096 | 55,375,348 | ||||||
Shares issued upon conversion from other share class(es) | 212,296 | 2,736,378 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 4,723,392 | $ | 58,111,726 | |||||
|
|
|
|
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
PGIM QMA Long-Short Equity Fund | 45 |
Notes to Financial Statements(unaudited) (continued)
share redemptions. The SCA provides for a commitment of $900 million for the period October 4, 2018 through October 3, 2019. 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. The interest on borrowings under the SCA is paid monthly and at a per annum interest rate of 1.25% plus the higher of (1) the effective federal funds rate, (2) theone-month LIBOR rate or (3) zero percent.
Subsequent to the reporting period end, the SCA has been renewed effective October 3, 2019 and will continue to provide a commitment of $900 million through October 1, 2020. 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 the renewed SCA will be paid monthly and at a per annum interest rate of 1.20% plus the higher of (1) the effective federal funds rate, (2) theone-month LIBOR rate or (3) zero percent.
Certain 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, 2019. The average daily balance for the 36 days that the Fund had loans outstanding during the period was approximately $2,130,333, borrowed at a weighted average interest rate of 3.65%. The maximum loan outstanding amount during the period was $19,461,000. At September 30, 2019, the Fund did not have an outstanding loan amount.
8. Risks of Investing in the Fund
The Fund’s risks include, but are not limited to, some or all of 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 derivative 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. Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary
46 |
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 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. The Manager 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. The Manager continues to evaluate certain other provisions of the ASU and does not expect a material impact to financial statement disclosures.
PGIM QMA Long-Short Equity Fund | 47 |
Financial Highlights(unaudited)
Class A Shares | ||||||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | May 29, 2014(a) through March 31, | ||||||||||||||||||||||||||||||
2019 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||||||||||
Per Share Operating Performance(b): |
| |||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $12.35 | $12.56 | $11.86 | $11.35 | $11.00 | $10.00 | ||||||||||||||||||||||||||
Income (loss) from investment operations: |
| |||||||||||||||||||||||||||||||
Net investment income (loss) | 0.05 | 0.06 | (0.04 | ) | (0.07 | ) | (0.01 | ) | (0.05 | ) | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (0.12 | ) | (0.06 | ) | 0.74 | 0.77 | 0.41 | 1.12 | ||||||||||||||||||||||||
Total from investment operations | (0.07 | ) | - | 0.70 | 0.70 | 0.40 | 1.07 | |||||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||||||
Distributions from net realized gains | - | (0.21 | ) | - | (0.19 | ) | (0.05 | ) | (0.07 | ) | ||||||||||||||||||||||
Net asset value, end of period | $12.28 | $12.35 | $12.56 | $11.86 | $11.35 | $11.00 | ||||||||||||||||||||||||||
Total Return(c): | (0.65)% | 0.06% | 5.90% | 6.17% | 3.67% | 10.73% | ||||||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||||||
Net assets, end of period (000) | $27,827 | $42,954 | $51,585 | $33,579 | $83,612 | $306 | ||||||||||||||||||||||||||
Average net assets (000) | $33,099 | $49,694 | $39,444 | $69,722 | $28,971 | $93 | ||||||||||||||||||||||||||
Ratios to average net assets(d)(e): | ||||||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(f) | 2.12% | (g) | 2.15% | 2.44% | 2.30% | 2.45% | 2.41% | (g) | ||||||||||||||||||||||||
Expenses before waivers and/or expense reimbursement(f) | 2.30% | (g) | 2.28% | 2.59% | 2.44% | 2.64% | 3.61% | (g) | ||||||||||||||||||||||||
Net investment income (loss) | 0.75% | (g) | 0.46% | (0.35)% | (0.59)% | (0.07)% | (0.61)% | (g) | ||||||||||||||||||||||||
Portfolio turnover rate(h) | 63% | 160% | 83% | 83% | 160% | 131% |
(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) | Effective January 1, 2018, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(e) | Does not include expenses of the underlying funds in which the Fund invests. |
(f) | The expense ratio includes dividend expense and broker fees and expenses on short sales of 0.61%, 0.65%, 0.94%, 0.72%, 0.70% and 0.63%, for the six months ended September 30, 2019, the years ended March 31,2019, March 31, 2018, March 31, 2017, March 31, 2016 and the period ended March 31, 2015, respectively. |
(g) | Annualized. |
(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. |
See Notes to Financial Statements.
48 |
Class C Shares | ||||||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | May 29, 2014(a) through March 31, | ||||||||||||||||||||||||||||||
2019 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||||||||||
Per Share Operating Performance(b): |
| |||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $11.90 | $12.20 | $11.61 | $11.20 | $10.93 | $10.00 | ||||||||||||||||||||||||||
Income (loss) from investment operations: |
| |||||||||||||||||||||||||||||||
Net investment income (loss) | - | (c) | (0.03 | ) | (0.14 | ) | (0.15 | ) | (0.08 | ) | (0.12 | ) | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (0.11 | ) | (0.06 | ) | 0.73 | 0.75 | 0.40 | 1.12 | ||||||||||||||||||||||||
Total from investment operations | (0.11 | ) | (0.09 | ) | 0.59 | 0.60 | 0.32 | 1.00 | ||||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||||||
Distributions from net realized gains | - | (0.21 | ) | - | (0.19 | ) | (0.05 | ) | (0.07 | ) | ||||||||||||||||||||||
Net asset value, end of period | $11.79 | $11.90 | $12.20 | $11.61 | $11.20 | $10.93 | ||||||||||||||||||||||||||
Total Return(d): | (1.01)% | (0.68)% | 5.08% | 5.35% | 2.96% | 10.03% | ||||||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||||||
Net assets, end of period (000) | $25,667 | $36,168 | $36,903 | $32,783 | $22,165 | $214 | ||||||||||||||||||||||||||
Average net assets (000) | $30,400 | $37,987 | $34,263 | $29,401 | $5,719 | $56 | ||||||||||||||||||||||||||
Ratios to average net assets(e)(f): | ||||||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(g) | 2.87% | (h) | 2.91% | 3.21% | 3.08% | 3.22% | 3.16% | (h) | ||||||||||||||||||||||||
Expenses before waivers and/or expense reimbursement(g) | 3.00% | (h) | 3.00% | 3.31% | 3.19% | 3.37% | 4.32% | (h) | ||||||||||||||||||||||||
Net investment income (loss) | -% | (h)(i) | (0.26)% | (1.12)% | (1.31)% | (0.74)% | (1.38)% | (h) | ||||||||||||||||||||||||
Portfolio turnover rate(j) | 63% | 160% | 83% | 83% | 160% | 131% |
(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) | Effective January 1, 2018, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(f) | Does not include expenses of the underlying funds in which the Fund invests. |
(g) | The expense ratio includes dividend expense and broker fees and expenses on short sales of 0.62%, 0.65%, 0.96%, 0.77%, 0.71% and 0.65%, for the six months ended September 30, 2019, the years ended March 31, 2019, March 31, 2018, March 31, 2017, March 31, 2016 and the period ended March 31, 2015, respectively. |
(h) | Annualized. |
(i) | Less than (0.005)%. |
(j) | 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. |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 49 |
Financial Highlights(unaudited) (continued)
Class Z Shares | ||||||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | May 29, 2014(a) through March 31, | ||||||||||||||||||||||||||||||
2019 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||||||||||
Per Share Operating Performance(b): |
| |||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $12.51 | $12.69 | $11.95 | $11.41 | $11.03 | $10.00 | ||||||||||||||||||||||||||
Income (loss) from investment operations: |
| |||||||||||||||||||||||||||||||
Net investment income (loss) | 0.06 | 0.09 | (0.01 | ) | (0.04 | ) | (0.01 | ) | (0.04 | ) | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (0.12 | ) | (0.06 | ) | 0.75 | 0.77 | 0.44 | 1.14 | ||||||||||||||||||||||||
Total from investment operations | (0.06 | ) | 0.03 | 0.74 | 0.73 | 0.43 | 1.10 | |||||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||||||
Distributions from net realized gains | - | (0.21 | ) | - | (0.19 | ) | (0.05 | ) | (0.07 | ) | ||||||||||||||||||||||
Net asset value, end of period | $12.45 | $12.51 | $12.69 | $11.95 | $11.41 | $11.03 | ||||||||||||||||||||||||||
Total Return(c): | (0.48)% | 0.30% | 6.19% | 6.40% | 3.93% | 11.03% | ||||||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||||||
Net assets, end of period (000) | $246,954 | $342,001 | $395,409 | $274,663 | $163,592 | $38,825 | ||||||||||||||||||||||||||
Average net assets (000) | $296,322 | $391,781 | $312,993 | $199,471 | $67,895 | $23,245 | ||||||||||||||||||||||||||
Ratios to average net assets(d)(e): | ||||||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(f) | 1.87% | (g) | 1.91% | 2.19% | 2.08% | 2.18% | 2.12% | (g) | ||||||||||||||||||||||||
Expenses before waivers and/or expense reimbursement(f) | 1.94% | (g) | 1.96% | 2.27% | 2.19% | 2.40% | 3.27% | (g) | ||||||||||||||||||||||||
Net investment income (loss) | 0.99% | (g) | 0.73% | (0.11)% | (0.31)% | (0.07)% | (0.44)% | (g) | ||||||||||||||||||||||||
Portfolio turnover rate(h) | 63% | 160% | 83% | 83% | 160% | 131% |
(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) | Effective January 1, 2018, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(e) | Does not include expenses of the underlying funds in which the Fund invests. |
(f) | The expense ratio includes dividend expense and broker fees and expenses on short sales of 0.62%, 0.65%, 0.94%, 0.78%, 0.68% and 0.62%, for the six months ended September 30, 2019, the years ended March 31, 2019, March 31, 2018, March 31, 2017, March 31, 2016 and the period ended March 31, 2015, respectively. |
(g) | Annualized. |
See Notes to Financial Statements.
50 |
(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. |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 51 |
Financial Highlights(unaudited) (continued)
Class R6 Shares | ||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | May 25, 2017(a) through March 31, | ||||||||||||||||||
2019 | 2019 | 2018 | ||||||||||||||||||
Per Share Operating Performance(b): |
| |||||||||||||||||||
Net Asset Value, Beginning of Period | $12.51 | $12.68 | $11.98 | |||||||||||||||||
Income (loss) from investment operations: |
| |||||||||||||||||||
Net investment income (loss) | 0.06 | 0.12 | (0.01 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (0.12 | ) | (0.08 | ) | 0.71 | |||||||||||||||
Total from investment operations | (0.06 | ) | 0.04 | 0.70 | ||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Distributions from net realized gains | - | (0.21 | ) | - | ||||||||||||||||
Net asset value, end of period | $12.45 | $12.51 | $12.68 | |||||||||||||||||
Total Return(c): | (0.56)% | 0.38% | 5.84% | |||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000) | $22,234 | $74,941 | $16,090 | |||||||||||||||||
Average net assets (000) | $44,742 | $30,635 | $15,834 | |||||||||||||||||
Ratios to average net assets(d)(e): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(f) | 1.87% | (g) | 1.91% | 2.24% | (g) | |||||||||||||||
Expenses before waivers and/or expense reimbursement(f) | 1.89% | (g) | 1.94% | 2.30% | (g) | |||||||||||||||
Net investment income (loss) | 0.99% | (g) | 0.92% | (0.05)% | (g) | |||||||||||||||
Portfolio turnover rate(h) | 63% | 160% | 83% |
(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) | Effective January 1, 2018, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(e) | Does not include expenses of the underlying funds in which the Fund invests. |
(f) | The expense ratio includes dividend expense and broker fees and expenses on short sales of 0.62%, 0.65% and 0.99%, for the six months ended September 30, 2019, the year ended March 31, 2019 and the period ended March 31, 2018, respectively. |
(g) | Annualized. |
(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. |
See Notes to Financial Statements.
52 |
Approval of Advisory Agreements
The Fund’s Board of Trustees
The Board of Trustees (the “Board”) of PGIM QMA Long-Short Equity Fund (the “Fund”)1 consists of eleven 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”).2 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 QMA LLC (“QMA”). In considering the renewal of the agreements, the Board, including all of the Independent Trustees, met on May 30, 2019 and on June11-13, 2019 and approved the renewal of the agreements through July 31, 2020, 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
1 | PGIM QMA Long-Short Equity Fund is a series of Prudential Investment Portfolios 12. |
2 | Grace C. Torres was an Interested Trustee of the Fund at the time the Board considered and approved the renewal of the Fund’s advisory agreements, but has since become an Independent Trustee of the Fund. |
PGIM QMA Long-Short Equity Fund |
Approval of Advisory Agreements(continued)
considered information provided by PGIM Investments throughout the year at regular Board meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the meetings on May 30, 2019 and on June11-13, 2019.
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 noted that QMA is affiliated with PGIM Investments. 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, and PGIM Investments’ role as administrator for the Fund’s liquidity risk management program. 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 theday-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
Visit our website at pgiminvestments.com |
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 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 factors and made related conclusions relating to the historical performance of the Fund for theone- and three-year periods ended December 31, 2018. 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, 2018. 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 provided supplemental Peer Universe or Peer Group information for reasons addressed with the Board. The comparisons placed the Fund in various quartiles over various periods, 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 forth net performance comparisons (which reflect the impact on performance of fund
Visit our website at pgiminvestments.com |
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.
Net Performance | 1 Year | 3 Years | 5 Years | 10 Years | ||||
2nd Quartile | 2nd Quartile | N/A | N/A | |||||
Actual Management Fees:1st Quartile | ||||||||
Net Total Expenses: 1st Quartile |
• | The Board noted that the Fund underperformed its benchmark index over all periods. |
• | The Board considered that the Fund commenced investment operations on May 29, 2014 and that longer-term performance was not yet available. |
• | The Board also considered PGIM Investments’ explanation that the Fund’s underperformance against its benchmark index was attributable to the market’s preference forlarge-cap growth stocks, while the Fund was overweightlarge-cap value stocks. |
• | The Board and PGIM Investments agreed to retain the Fund’s existing contractual expense cap which (exclusive of certain fees and expenses) caps total 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, 2020. |
• | In addition, PGIM Investments will waive management fees or shared operating expenses on any share class to the same extent that it waives such expenses on any other share class, and has agreed that total annual fund operating expenses for Class R6 shares will not exceed total annual fund operating expenses for Class Z shares. |
• | 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 longer-term 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 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 | pgiminvestments.com |
PROXY VOTING |
The Board of Trustees of the Fund has delegated to the Fund’s 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• Brian K. Reid• Grace C. Torres |
OFFICERS |
Stuart S. Parker,President• Scott E. Benjamin,Vice President• Christian J. Kelly,Treasurer and Principal Financial and Accounting Officer• Raymond A. O’Hara,Chief Legal Officer• Dino Capasso, Chief Compliance Officer• Charles H. Smith,Anti-Money Laundering Compliance Officer•Andrew R. French,Secretary• Jonathan D. Shain,Assistant Secretary• Claudia DiGiacomo,Assistant Secretary• Diana N. Huffman,Assistant Secretary• Kelly A. Coyne,Assistant Secretary• Lana Lomuti, Assistant Treasurer• Russ Shupak,Assistant Treasurer• Elyse McLaughlin,Assistant Treasurer•Deborah Conway,Assistant Treasurer |
MANAGER | PGIM Investments LLC | 655 Broad Street Newark, NJ 07102 | ||
| ||||
SUBADVISER | QMA LLC | Gateway Center Two 100 Mulberry Street Newark, NJ 07102 | ||
| ||||
DISTRIBUTOR | Prudential Investment Management Services LLC | 655 Broad Street Newark, NJ 07102 | ||
| ||||
CUSTODIAN | The Bank of New York Mellon | 240 Greenwich Street New York, NY 10286 | ||
| ||||
TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
| ||||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
| ||||
FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 | ||
|
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain the prospectus and summary prospectus by visiting our website atpgiminvestments.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 topgiminvestments.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 byvisiting 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 HOLDINGS |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission on Form N-PORT. The Fund’s Form N-PORT filings are available on the Commission’s website at sec.gov. Form N-PORT is filed with the Commission quarterly, and each Fund’s full portfolio holdings as of the first and third fiscal quarter-ends (as of the third month of the Fund’s fiscal quarter for reporting periods on or after September 30, 2019) will be made publicly available 60 days after the end of each quarter at sec.gov. |
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 |
MF221E2
PGIM SHORT DURATION MUNI HIGH INCOME FUND
SEMIANNUAL REPORT
SEPTEMBER 30, 2019
COMING SOON: PAPERLESS SHAREHOLDER REPORTS
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website (pgiminvestments.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 1-800-225-1852 or by sending an email request to PGIM Investments at shareholderreports@pgim.com.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary or follow instructions included with this notice to elect to continue to receive paper copies of your shareholder reports. If you invest directly with the Fund, you can call 1-800-225-1852 or send an email request to shareholderreports@pgim.com to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the fund complex if you invest directly with the Fund.
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, 2019 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.© 2019 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.
2 | Visit our website at pgiminvestments.com |
5 | ||||
6 | ||||
9 | ||||
11 | ||||
PGIM Short Duration Muni High Income Fund | 3 |
This Page Intentionally Left Blank
Dear Shareholder:
We hope you find the semiannual report for PGIM Short Duration Muni High Income Fund informative and useful. The report covers performance for thesix-month period ended September 30, 2019.
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, 2019
PGIM Short Duration Muni High Income Fund | 5 |
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 atpgiminvestments.com or by calling (800) 225-1852.
Total Returns as of 9/30/19 Six Months* (%) | Average Annual Total Returns as of 9/30/19 (with sales charges) | |||||||
One Year (%) | Five Years (%) | Since Inception (%) | ||||||
Class A | 2.64 | 3.14 | 2.38 | 2.44 (5/29/14) | ||||
Class C | 2.26 | 3.74 | 2.08 | 2.09 (5/29/14) | ||||
Class Z | 2.77 | 5.88 | 3.11 | 3.13 (5/29/14) | ||||
Class R6 | 2.77 | 5.78 | N/A | 3.49 (5/25/17) | ||||
Bloomberg Barclays Short Duration Muni 50% HG / 50% HY Index | ||||||||
2.63 | 6.14 | 2.15 | — | |||||
Bloomberg Barclays Municipal Bond Index | ||||||||
3.74 | 8.55 | 3.66 | — |
*Not annualized
Source: PGIM Investments LLC, 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 are measured from the closest month-end to the class’ inception date.
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 | 2.25% of the public offering price (3.25% of the public offering price for purchases prior to July 15, 2019). | None | None | None | ||||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of the original purchase price or the net asset value at redemption) | 1.00% on sales of $500,000 or more made within 12 months of purchase (1.00% on sales of $1 million or more made within 12 months of purchase for purchases prior to July 15, 2019). | 1.00% on sales made within 12 months of purchase | None | None | ||||
Annual distribution and service(12b-1) fees (shown as a percentage of average daily net assets) | 0.25% | 1.00% | None | None |
6 | Visit our website at pgiminvestments.com |
Benchmark Definitions
Bloomberg Barclays Short Duration Muni 50% HG / 50% HY Index—The Bloomberg Barclays Short Duration Muni 50% HG / 50% HY Index consists of the Bloomberg Barclays Municipal Bond 1-8 Year Index (50%), which is an unmanaged index that includes all benchmark-eligible investment-grade municipal bonds with maturities from 1 to 8 years, and the Bloomberg Barclays Municipal High Yield 1-8 Year Index (50%), which is an unmanaged index that includes all benchmark-eligible Ba1 or lower rated and non-rated municipal bonds with maturities from 1 to 8 years. The average annual total returns for the Index measured from the month-end closest to the inception date of the Fund’s Class A, Class C, and Class Z shares are 2.18% and 4.09% for Class R6 shares.
Bloomberg Barclays Municipal Bond Index—The Bloomberg Barclays Municipal Bond Index is an unmanaged index of long-term investment-grade municipal bonds. It gives a broad look at how long-term investment-grade municipal bonds have performed. The average annual total returns for the Index measured from the month-end closest to the inception date of the Fund’s Class A, Class C, and Class Z shares are 3.73% and 4.04% for Class R6 shares.
Investors cannot invest directly in an index. The returns for the Indexes would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes.
Distributions and Yields as of 9/30/19 | ||||||||||||||
Total Distributions Paid for Six Months ($) | SEC 30-Day Subsidized Yield* (%) | Taxable Equivalent30-Day Subsidized Yield*** at Federal Tax Rates of | SEC 30-Day Unsubsidized Yield** (%) | Taxable Equivalent30-Day Unsubsidized Yield*** at Federal Tax Rates of | ||||||||||
37.00% | 40.80% | 37.00% | 40.80% | |||||||||||
Class A | 0.11 | 1.47 | 2.33 | 2.48 | 1.30 | 2.06 | 2.20 | |||||||
Class C | 0.07 | 0.75 | 1.19 | 1.27 | 0.54 | 0.86 | 0.91 | |||||||
Class Z | 0.12 | 1.75 | 2.78 | 2.96 | 1.55 | 2.46 | 2.62 | |||||||
Class R6 | 0.12 | 1.75 | 2.78 | 2.96 | 0.89 | 1.41 | 1.50 |
*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). The investor experience is represented by the SEC 30-Day Subsidized Yield.
**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 investor experience is represented by the SEC 30-Day Subsidized Yield.
***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 and applicable state tax rates.
PGIM Short Duration Muni High Income Fund | 7 |
Your Fund’s Performance(continued)
Credit Quality expressed as a percentage of total investments as of 9/30/19 (%) | ||||
AAA | 1.8 | |||
AA | 16.7 | |||
A | 32.6 | |||
BBB | 28.5 | |||
BB | 9.0 | |||
B | 2.5 | |||
CC | 0.9 | |||
Not Rated | 7.7 | |||
Cash/Cash Equivalents | 0.3 | |||
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.
8 | 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, 2019. 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 | 9 |
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, 2019 | Ending Account Value September 30, 2019 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,026.40 | 0.85 | % | $ | 4.31 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.75 | 0.85 | % | $ | 4.29 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,022.60 | 1.60 | % | $ | 8.09 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,017.00 | 1.60 | % | $ | 8.07 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,027.70 | 0.60 | % | $ | 3.04 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,022.00 | 0.60 | % | $ | 3.03 | ||||||||||
Class R6 | Actual | $ | 1,000.00 | $ | 1,027.70 | 0.60 | % | $ | 3.04 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,022.00 | 0.60 | % | $ | 3.03 |
*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, 2019, and divided by the 366 days in the Fund’s fiscal year ending March 31, 2020 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
10 | Visit our website at pgiminvestments.com |
Schedule of Investments(unaudited)
as of September 30, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS 100.2% |
| |||||||||||||||
Alabama 0.1% | ||||||||||||||||
Selma Industrial Development Board, | 2.000 | % | 11/01/33 | 250 | $ | 250,335 | ||||||||||
Alaska 0.7% | ||||||||||||||||
Alaska Industrial Development & Export Authority, | 5.000 | 10/01/29 | 1,000 | 1,239,420 | ||||||||||||
Arizona 3.9% | ||||||||||||||||
Arizona Health Facilities Authority, Revenue, | 2.364 | (c) | 01/01/37 | 2,005 | 1,962,735 | |||||||||||
Arizona Industrial Development Authority, | 5.000 | 07/15/28 | 500 | 557,865 | ||||||||||||
Chandler Industrial Development Authority, | 5.000 | 06/01/49 | 1,000 | 1,147,530 | ||||||||||||
Industrial Development Authority of the City of Phoenix, | 3.750 | 07/01/24 | 475 | 492,774 | ||||||||||||
Maricopa County Industrial Development Authority, | 4.000 | 07/01/26 | 500 | 536,460 | ||||||||||||
Salt Verde Finance Corp., National Gas Utility, | 5.250 | 12/01/21 | 555 | 596,325 | ||||||||||||
Revenue | 5.250 | 12/01/26 | 1,025 | 1,247,548 | ||||||||||||
|
| |||||||||||||||
6,541,237 | ||||||||||||||||
California 3.8% | ||||||||||||||||
California Municipal Finance Authority, | 4.000 | 06/01/26 | 430 | 458,075 | ||||||||||||
California Pollution Control Financing Authority, | 7.000 | 07/01/22 | 250 | 256,257 | ||||||||||||
California School Finance Authority, | 4.000 | 07/01/21 | 400 | 415,040 | ||||||||||||
Revenue, Alliance College Ready Public Schools, | 4.000 | 07/01/24 | 270 | 294,583 | ||||||||||||
Revenue, Green Dot Public School Project, Series A, 144A | 4.000 | 08/01/25 | 330 | 363,568 | ||||||||||||
Revenue, KIPP Project, Series A, 144A | 3.625 | 07/01/25 | 475 | 497,985 |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 11 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
California (cont’d.) | ||||||||||||||||
Chula Vista Municipal Financing Authority, | 5.000 | % | 09/01/21 | 755 | $ | 806,597 | ||||||||||
City of Roseville, | 5.000 | 09/01/22 | 225 | 246,517 | ||||||||||||
Golden State Tobacco Securitization Corp., | 5.000 | 06/01/26 | 985 | 1,165,088 | ||||||||||||
Revenue, SeriesA-1, Rfdg | 5.000 | 06/01/27 | 1,000 | 1,202,980 | ||||||||||||
Long Beach Bond Finance Authority, | 2.896 | (c) | 11/15/27 | 700 | 709,569 | |||||||||||
|
| |||||||||||||||
6,416,259 | ||||||||||||||||
Colorado 5.2% | ||||||||||||||||
City & County of Denver, | 5.000 | 10/01/32 | 500 | 547,670 | ||||||||||||
Colorado Educational & Cultural Facilities Authority, | 4.000 | 11/01/24 | 500 | 510,630 | ||||||||||||
Colorado Health Facilities Authority, | 4.000 | 01/01/22 | 300 | 313,248 | ||||||||||||
Revenue, Commonspirit Health, SeriesB-2, Rfdg, | 5.000 | 08/01/49 | 2,330 | 2,764,731 | ||||||||||||
Revenue, National Jewish Health Initiatives, Rfdg | 5.000 | 01/01/20 | 695 | 699,740 | ||||||||||||
Revenue, National Jewish Health Initiatives, Rfdg | 5.000 | 01/01/22 | 125 | 132,435 | ||||||||||||
Revenue, National Jewish Health Initiatives, Rfdg | 5.000 | 01/01/24 | 315 | 332,338 | ||||||||||||
Revenue, Retirement Communities, Series A, Rfdg | 4.000 | 12/01/19 | 515 | 517,060 | ||||||||||||
Revenue, Valley View Hospital Association Project, | 2.800 | 05/15/42 | 975 | 1,007,370 | ||||||||||||
E-470 Public Highway Authority, | 5.000 | 09/01/20 | 650 | 670,566 | ||||||||||||
Park Creek Metropolitan District, | 5.000 | 12/01/23 | 1,100 | 1,243,198 | ||||||||||||
|
| |||||||||||||||
8,738,986 | ||||||||||||||||
Connecticut 1.9% | ||||||||||||||||
Harbor Point Infrastructure Improvement District, | 5.000 | 04/01/22 | 900 | 955,269 | ||||||||||||
State of Connecticut, | 5.000 | 06/15/26 | 1,000 | 1,209,650 |
See Notes to Financial Statements.
12 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
Connecticut (cont’d.) | ||||||||||||||||
State of Connecticut, Special Tax, | 5.000 | % | 08/01/25 | 660 | $ | 787,974 | ||||||||||
Revenue, Transportation Infrastructure, Series A | 5.000 | 09/01/24 | 270 | 314,712 | ||||||||||||
|
| |||||||||||||||
3,267,605 | ||||||||||||||||
Delaware 0.7% | ||||||||||||||||
Delaware State Economic Development Authority, | 3.250 | 06/01/26 | 800 | 821,728 | ||||||||||||
Revenue, Newark Charter School, Series A, Rfdg | 2.800 | 09/01/26 | 385 | 395,141 | ||||||||||||
|
| |||||||||||||||
1,216,869 | ||||||||||||||||
District of Columbia 2.0% | ||||||||||||||||
District of Columbia Friendship Public Charter School, Revenue | 3.550 | 06/01/22 | 495 | 505,930 | ||||||||||||
District of Columbia KIPP Charter School, | 5.000 | 07/01/27 | 145 | 173,419 | ||||||||||||
Revenue, Rfdg (Escrowed to Maturity Date 07/01/23)(ee) | 5.000 | 07/01/23 | 275 | 297,731 | ||||||||||||
Metropolitan Washington Airports Authority, | 5.000 | 10/01/26 | 2,000 | 2,440,220 | ||||||||||||
|
| |||||||||||||||
3,417,300 | ||||||||||||||||
Florida 7.5% | ||||||||||||||||
City of Tallahassee, | 5.000 | 12/01/23 | 255 | 287,319 | ||||||||||||
Revenue, Memorial Healthcare, Inc., Project, Series A | 5.000 | 12/01/25 | 550 | 647,735 | ||||||||||||
Cityplace Community Development District, | 5.000 | 05/01/20 | 740 | 754,859 | ||||||||||||
Florida Development Finance Corp., | 6.250 | 01/01/49 | 1,000 | 931,830 | ||||||||||||
Florida Higher Educational Facilities Financial Authority, | 4.000 | 04/01/21 | 40 | 41,499 | ||||||||||||
Greater Orlando Aviation Authority, | 5.000 | 11/15/26 | 500 | 542,420 | ||||||||||||
Lakewood Ranch Stewardship District, | 4.000 | 05/01/21 | 370 | 374,695 | ||||||||||||
Special Assessment | 4.250 | 05/01/25 | 300 | 310,623 | ||||||||||||
Special Assessment | 4.250 | 05/01/26 | 250 | 260,995 | ||||||||||||
Special Assessment | 4.625 | 05/01/27 | 500 | 534,545 | ||||||||||||
Martin County Industrial Development Authority, | 3.950 | 12/15/21 | 250 | 253,487 |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 13 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
Florida (cont’d.) | ||||||||||||||||
Myrtle Creek Improvement District, | 4.000 | % | 05/01/27 | 1,000 | $ | 1,097,040 | ||||||||||
Orange County Health Facilities Authority, | 5.000 | 10/01/23 | 150 | 171,218 | ||||||||||||
Revenue, Orlando Regional Healthcare, NATL, Series C, Rfdg (Escrowed to Maturity Date 10/01/21)(ee) | 6.250 | 10/01/21 | 40 | 41,930 | ||||||||||||
Palm Beach County Health Facilities Authority, | 6.750 | 06/01/24 | 450 | 503,163 | ||||||||||||
Pinellas County Industrial Development Authority, | 5.000 | 07/01/29 | 500 | 599,095 | ||||||||||||
Village Community Development District No. 04, | 4.125 | 05/01/21 | 95 | 96,454 | ||||||||||||
Village Community Development District No. 05, | 3.000 | 05/01/21 | 150 | 151,883 | ||||||||||||
Village Community Development District No. 06, | 3.000 | 05/01/20 | 195 | 196,626 | ||||||||||||
Special Assessment, Revenue, Rfdg | 3.000 | 05/01/21 | 165 | 168,493 | ||||||||||||
Special Assessment, Revenue, Rfdg | 4.000 | 05/01/26 | 245 | 271,609 | ||||||||||||
Village Community Development District No. 07, | 3.000 | 05/01/20 | 900 | 904,428 | ||||||||||||
Special Assessment, Revenue, Rfdg | 4.000 | 05/01/21 | 1,205 | 1,239,499 | ||||||||||||
Special Assessment, Revenue, Rfdg | 4.000 | 05/01/24 | 845 | 909,820 | ||||||||||||
Special Assessment, Revenue, Rfdg | 4.000 | 05/01/25 | 250 | 272,825 | ||||||||||||
Special Assessment, Revenue, Rfdg | 4.000 | 05/01/26 | 290 | 316,204 | ||||||||||||
Village Community Development District No. 10, | 4.500 | 05/01/23 | 210 | 221,615 | ||||||||||||
Village Community Development District No. 12, | 2.875 | 05/01/21 | 335 | 338,139 | ||||||||||||
Special Assessment, Revenue, 144A | 3.250 | 05/01/23 | 250 | 255,455 | ||||||||||||
|
| |||||||||||||||
12,695,503 | ||||||||||||||||
Georgia 4.3% | ||||||||||||||||
Atlanta Development Authority, | ||||||||||||||||
Treatment Center, SeriesA-1 | 6.000 | 01/01/23 | 300 | 306,531 | ||||||||||||
Burke County Development Authority, | 2.250 | 10/01/32 | 250 | 253,345 | ||||||||||||
Revenue, Georgia Power Co. Plant Vogtle Project, | 1.700 | 12/01/49 | 1,000 | 989,690 | ||||||||||||
Revenue, Oglethorpe Power Corp., Series V, Rfdg, | 3.250 | 11/01/45 | 500 | 519,960 |
See Notes to Financial Statements.
14 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
Georgia (cont’d.) | ||||||||||||||||
Main Street Natural Gas, Inc., | 2.150 | %(c) | 04/01/48 | 1,000 | $ | 1,005,960 | ||||||||||
Revenue, Series B, (Mandatory Put Date 12/01/24) | 4.000 | 08/01/49 | 1,000 | 1,125,830 | ||||||||||||
Revenue,Sub-Series C, (Mandatory Put Date 12/01/23) | 4.000 | 08/01/48 | 1,000 | 1,085,480 | ||||||||||||
Municipal Electric Authority of Georgia, | 5.000 | 01/01/29 | 1,000 | 1,230,820 | ||||||||||||
Private Colleges & Universities Authority, | 5.000 | 04/01/22 | 625 | 681,006 | ||||||||||||
|
| |||||||||||||||
7,198,622 | ||||||||||||||||
Guam 0.3% | ||||||||||||||||
Territory of Guam, | 5.000 | 11/15/31 | 500 | 587,185 | ||||||||||||
Idaho 0.6% | ||||||||||||||||
County of Nez Perce, | 2.750 | 10/01/24 | 1,000 | 1,040,340 | ||||||||||||
Illinois 17.3% | ||||||||||||||||
Chicago Board of Education, | 5.500 | 12/01/23 | 360 | 402,678 | ||||||||||||
Series A, GO, Rfdg | 4.000 | 12/01/20 | 500 | 510,625 | ||||||||||||
Series A, GO, Rfdg | 4.000 | 12/01/27 | 500 | 541,505 | ||||||||||||
Series A, GO, Rfdg, CABs | 2.940 | (s) | 12/01/26 | 500 | 404,710 | |||||||||||
Series C, GO, Rfdg | 5.000 | 12/01/22 | 1,500 | 1,625,145 | ||||||||||||
Series F, GO, Rfdg | 5.000 | 12/01/19 | 425 | 426,959 | ||||||||||||
Series F, GO, Rfdg | 5.000 | 12/01/20 | 405 | 418,231 | ||||||||||||
Series F, GO, Rfdg | 5.000 | 12/01/22 | 1,000 | 1,083,430 | ||||||||||||
Series F, GO, Rfdg (Escrowed to Maturity Date 12/01/19)(ee) | 5.000 | 12/01/19 | 70 | 70,418 | ||||||||||||
Chicago O’Hare International Airport, | 5.000 | 01/01/23 | 200 | 221,338 | ||||||||||||
Chicago Transit Authority, | 5.000 | 06/01/22 | 1,630 | 1,724,491 | ||||||||||||
City of Chicago, | 5.000 | 01/01/23 | 370 | 398,875 | ||||||||||||
Series A, GO | 5.000 | 01/01/20 | 200 | 201,394 | ||||||||||||
Series A, GO, Rfdg (Escrowed to Maturity Date 01/01/24)(ee) | 5.000 | 01/01/24 | 335 | 337,368 |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 15 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
Illinois (cont’d.) | ||||||||||||||||
City of Chicago, (cont’d.) | ||||||||||||||||
Series C, GO, Rfdg | 5.000 | % | 01/01/20 | 250 | $ | 251,742 | ||||||||||
Series C, GO, Rfdg | 5.000 | 01/01/22 | 1,020 | 1,076,712 | ||||||||||||
City of Chicago Wastewater Transmission, | 4.000 | 01/01/20 | 1,120 | 1,126,272 | ||||||||||||
Revenue, Second Lien | 5.000 | 01/01/25 | 445 | 475,950 | ||||||||||||
Revenue, Second Lien, Series C, Rfdg | 5.000 | 01/01/22 | 990 | 1,061,973 | ||||||||||||
City of Chicago Waterworks, | 4.000 | 11/01/21 | 375 | 392,257 | ||||||||||||
Revenue, Second Lien, Rfdg | 4.000 | 11/01/19 | 490 | 490,892 | ||||||||||||
Revenue, Second Lien, Rfdg | 4.000 | 11/01/20 | 1,065 | 1,090,986 | ||||||||||||
Revenue, Second Lien, Rfdg | 4.000 | 11/01/24 | 110 | 117,104 | ||||||||||||
Revenue, Second Lien, Rfdg | 5.000 | 11/01/20 | 385 | 398,498 | ||||||||||||
Revenue, Second Lien, Rfdg | 5.000 | 11/01/22 | 750 | 824,160 | ||||||||||||
City of Springfield Electric, | 5.000 | 03/01/22 | 300 | 324,210 | ||||||||||||
County of Cook, | 5.000 | 11/15/23 | 1,000 | 1,128,990 | ||||||||||||
Illinois Finance Authority, | 2.820 | (c) | 05/01/36 | 500 | 501,155 | |||||||||||
Illinois State Toll Highway Authority, | 5.000 | 01/01/28 | 1,080 | 1,346,566 | ||||||||||||
Railsplitter Tobacco Settlement Authority, | 5.000 | 06/01/24 | 565 | 649,903 | ||||||||||||
Revenue | 5.375 | 06/01/21 | 705 | 748,689 | ||||||||||||
Regional Transportation Authority, | 5.500 | 07/01/25 | 760 | 920,178 | ||||||||||||
State of Illinois, | 5.000 | 02/01/22 | 200 | 212,280 | ||||||||||||
GO | 5.000 | 05/01/23 | 110 | 119,684 | ||||||||||||
GO, AGM, Rfdg | 4.000 | 01/01/20 | 525 | 528,071 | ||||||||||||
Revenue, Junior Series D, BAM, Rfdg | 5.000 | 06/15/25 | 1,325 | 1,523,061 | ||||||||||||
Revenue, Rfdg | 5.000 | 06/15/24 | 705 | 770,050 | ||||||||||||
Series 2010, GO, AGM, Rfdg | 5.000 | 01/01/20 | 200 | 201,660 | ||||||||||||
Series A, GO | 4.000 | 01/01/23 | 360 | 372,247 | ||||||||||||
Series A, GO | 5.000 | 04/01/20 | 455 | 461,470 | ||||||||||||
Series B, GO, Rfdg | 5.250 | 01/01/21 | 715 | 742,106 | ||||||||||||
Series D, GO | 5.000 | 11/01/23 | 1,560 | 1,707,592 | ||||||||||||
Series D, GO | 5.000 | 11/01/27 | 750 | 858,360 |
See Notes to Financial Statements.
16 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
Illinois (cont’d.) | ||||||||||||||||
University of Illinois, | 5.000 | % | 04/01/26 | 425 | $ | 498,827 | ||||||||||
|
| |||||||||||||||
29,288,812 | ||||||||||||||||
Indiana 1.2% | ||||||||||||||||
City of Rockport, | 3.050 | 06/01/25 | 500 | 530,710 | ||||||||||||
City of Whiting Environmental Facilities, Revenue, BP Products N.A., | 5.000 | 12/01/44 | 500 | 593,300 | ||||||||||||
Gary Chicago International Airport Authority, | 5.000 | 02/01/20 | 835 | 843,742 | ||||||||||||
|
| |||||||||||||||
1,967,752 | ||||||||||||||||
Iowa 0.7% | ||||||||||||||||
Iowa Finance Authority, | 5.000 | 12/01/19 | 315 | 316,427 | ||||||||||||
PEFA, Inc., | 5.000 | 09/01/49 | 750 | 886,800 | ||||||||||||
|
| |||||||||||||||
1,203,227 | ||||||||||||||||
Kentucky 1.7% | ||||||||||||||||
Kentucky Economic Development Finance Authority, | 5.250 | 06/01/20 | 615 | 627,398 | ||||||||||||
Kentucky Public Energy Authority, National Gas Utility, | 4.000 | 12/01/49 | 1,000 | 1,106,960 | ||||||||||||
Revenue, Series B, (Mandatory Put Date 01/01/25) | 4.000 | 01/01/49 | 1,000 | 1,105,140 | ||||||||||||
|
| |||||||||||||||
2,839,498 | ||||||||||||||||
Louisiana 1.0% | ||||||||||||||||
City of New Orleans, | 5.000 | 12/01/22 | 100 | 110,732 | ||||||||||||
GO, Rfdg | 5.000 | 12/01/23 | 150 | 170,822 | ||||||||||||
City of New Orleans Sewerage Service, | 5.000 | 06/01/23 | 300 | 335,142 | ||||||||||||
Revenue | 5.000 | 06/01/24 | 200 | 229,472 | ||||||||||||
Revenue, Rfdg | 5.000 | 06/01/20 | 350 | 357,983 |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 17 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
Louisiana (cont’d.) | ||||||||||||||||
Louisiana Public Facilities Authority, | 5.000 | % | 05/15/22 | 265 | $ | 287,239 | ||||||||||
Parish of St. John the Baptist, | 2.100 | 06/01/37 | 200 | 200,824 | ||||||||||||
|
| |||||||||||||||
1,692,214 | ||||||||||||||||
Maryland 0.4% | ||||||||||||||||
Frederick County Special Obligation, Urbana Community Development Authorization, | 5.000 | 07/01/20 | 100 | 102,893 | ||||||||||||
Special Tax, Series A, Rfdg | 5.000 | 07/01/21 | 100 | 102,776 | ||||||||||||
Maryland Economic Development Corp., | 5.000 | 06/01/24 | 350 | 400,225 | ||||||||||||
|
| |||||||||||||||
605,894 | ||||||||||||||||
Massachusetts 0.8% | ||||||||||||||||
Massachusetts Development Finance Agency, | 4.000 | 04/15/20 | 110 | 110,960 | ||||||||||||
Revenue, Series A, Rfdg | 5.000 | 07/01/28 | 500 | 619,130 | ||||||||||||
Massachusetts Port Authority, | 5.000 | 07/01/29 | 500 | 642,370 | ||||||||||||
|
| |||||||||||||||
1,372,460 | ||||||||||||||||
Michigan 0.7% | ||||||||||||||||
City of Detroit, | 5.000 | 04/01/21 | 500 | 517,670 | ||||||||||||
Michigan Finance Authority, | 5.000 | 07/01/22 | 400 | 438,328 | ||||||||||||
Oakland County Economic Development Corp., | 6.500 | 12/01/20 | 160 | 162,194 | ||||||||||||
|
| |||||||||||||||
1,118,192 | ||||||||||||||||
Minnesota 0.3% | ||||||||||||||||
City of St. Paul Housing & Redevelopment Authority, | 5.000 | 11/15/20 | 500 | 520,315 | ||||||||||||
|
|
See Notes to Financial Statements.
18 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
Mississippi 0.3% | ||||||||||||||||
Mississippi Business Finance Corp., | 3.200 | % | 09/01/28 | 500 | $ | 512,520 | ||||||||||
Missouri 0.7% | ||||||||||||||||
Kansas City Industrial Development Authority, | 5.000 | 03/01/29 | 1,000 | 1,260,730 | ||||||||||||
Nevada 0.5% | ||||||||||||||||
Clark County Airport Department of Aviation, | 5.000 | 07/01/21 | 500 | 530,595 | ||||||||||||
State of Nevada Department of Business & Industry, | 4.500 | 12/15/29 | 250 | 271,365 | ||||||||||||
|
| |||||||||||||||
801,960 | ||||||||||||||||
New Jersey 5.8% | ||||||||||||||||
Casino Reinvestment Development Authority, | 4.000 | 11/01/19 | 500 | 500,740 | ||||||||||||
New Jersey Building Authority, | 5.000 | 06/15/21 | 625 | 660,107 | ||||||||||||
Revenue, Series A, Rfdg (Escrowed to Maturity Date 06/15/21)(ee) | 5.000 | 06/15/21 | 60 | 63,694 | ||||||||||||
New Jersey Economic Development Authority, | 5.750 | 09/15/27 | 700 | 773,185 | ||||||||||||
Revenue, Port Newark Container, AMT, Rfdg | 5.000 | 10/01/21 | 500 | 530,765 | ||||||||||||
Revenue, Series XX, Rfdg | 5.000 | 06/15/22 | 860 | 933,926 | ||||||||||||
Revenue, Series XX, Rfdg | 5.000 | 06/15/24 | 420 | 477,082 | ||||||||||||
Revenue, State Appropriation, Series B, Rfdg | 4.000 | 11/01/25 | 150 | 163,977 | ||||||||||||
New Jersey Health Care Facilities Financing Authority, | 4.500 | 07/01/20 | 310 | 316,318 | ||||||||||||
Revenue, University Hospital, Series A, AGM, Rfdg | 5.000 | 07/01/23 | 500 | 556,950 | ||||||||||||
Revenue, Virtua Health, Rfdg | 5.000 | 07/01/21 | 125 | 132,760 | ||||||||||||
New Jersey Transportation Trust Fund Authority, | 5.500 | 12/15/21 | 175 | 190,034 | ||||||||||||
Revenue, SeriesB-5, Rfdg | 5.250 | 12/15/19 | 440 | 443,168 | ||||||||||||
Revenue, Transportation Program, Series AA | 5.000 | 06/15/22 | 455 | 494,744 | ||||||||||||
Revenue, Transportation System, Series A, Rfdg | 5.000 | 12/15/23 | 250 | 282,290 | ||||||||||||
New Jersey Turnpike Authority, | 2.162 | (c) | 01/01/24 | 1,000 | 1,005,000 | |||||||||||
South Jersey Transportation Authority LLC, | 5.000 | 11/01/20 | 100 | 103,464 | ||||||||||||
Revenue, Series A, Rfdg | 5.000 | 11/01/21 | 350 | 373,226 |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 19 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
New Jersey (cont’d.) | ||||||||||||||||
Tobacco Settlement Financing Corp., | 5.000 | % | 06/01/26 | 295 | $ | 353,410 | ||||||||||
Revenue, Series A, Rfdg | 5.000 | 06/01/27 | 1,200 | 1,462,728 | ||||||||||||
|
| |||||||||||||||
9,817,568 | ||||||||||||||||
New York 3.6% | ||||||||||||||||
New York State Energy Research & Development Authority, | 2.000 | 02/01/29 | 500 | 501,320 | ||||||||||||
New York Transportation Development Corp., | 5.000 | 01/01/27 | 2,000 | 2,400,280 | ||||||||||||
Revenue, Terminal One Group Association, AMT, Rfdg | 5.000 | 01/01/22 | 1,000 | 1,069,720 | ||||||||||||
Revenue, Terminal One Group Association, AMT, Rfdg | 5.000 | 01/01/23 | 1,000 | 1,098,350 | ||||||||||||
Port Authority of New York & New Jersey, | 5.000 | 12/01/20 | 1,050 | 1,075,347 | ||||||||||||
|
| |||||||||||||||
6,145,017 | ||||||||||||||||
North Carolina 0.3% | ||||||||||||||||
North Carolina Medical Care Commission, | 5.000 | 10/01/20 | 500 | 513,335 | ||||||||||||
North Dakota 0.3% | ||||||||||||||||
Burleigh County Healthcare, St. Alexius Medical Center Project, | 4.000 | 07/01/20 | 500 | 509,320 | ||||||||||||
Ohio 4.5% | ||||||||||||||||
Buckeye Tobacco Settlement Financing Authority, | 5.125 | 06/01/24 | 2,835 | 2,835,000 | ||||||||||||
Revenue, Asset-Backed, Senior Turbo, SeriesA-2 | 5.875 | 06/01/30 | 1,000 | 1,002,380 | ||||||||||||
Cleveland-Cuyahoga County Port Authority, | 5.000 | 12/01/28 | 250 | 279,600 | ||||||||||||
County of Cuyahoga, | 4.000 | 02/15/29 | 1,200 | 1,304,244 | ||||||||||||
Revenue, MetroHealth System, Rfdg | 5.000 | 02/15/25 | 695 | 790,861 | ||||||||||||
Lancaster Port Authority, | 5.000 | 08/01/49 | 250 | 290,163 |
See Notes to Financial Statements.
20 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
Ohio (cont’d.) | ||||||||||||||||
Ohio Air Quality Development Authority, | 2.400 | % | 12/01/38 | 500 | $ | 503,010 | ||||||||||
Revenue, Pratt Paper LLC Project, AMT, 144A | 3.750 | 01/15/28 | 500 | 541,825 | ||||||||||||
|
| |||||||||||||||
7,547,083 | ||||||||||||||||
Oklahoma 1.5% | ||||||||||||||||
Oklahoma Development Finance Authority, | 5.000 | 08/15/25 | 800 | 934,048 | ||||||||||||
Revenue, University of Oklahoma Medicine Project, Series B | 5.000 | 08/15/29 | 1,100 | 1,351,130 | ||||||||||||
Tulsa Airports Improvement Trust, | 5.000 | 06/01/35 | 250 | 282,163 | ||||||||||||
|
| |||||||||||||||
2,567,341 | ||||||||||||||||
Oregon 0.1% | ||||||||||||||||
Hospital Facilities Authority of Multnomah County, | 5.000 | 10/01/19 | 110 | 110,000 | ||||||||||||
Pennsylvania 5.5% | ||||||||||||||||
Allegheny County Hospital Development Authority, | 5.000 | 04/01/27 | 1,000 | 1,229,070 | ||||||||||||
Chester County Industrial Development Authority, | 3.750 | 10/01/24 | 330 | 340,577 | ||||||||||||
Revenue, Renaissance Academy Christian School, Rfdg | 5.000 | 10/01/34 | 260 | 287,261 | ||||||||||||
Commonwealth Financing Authority, | 5.000 | 06/01/25 | 1,000 | 1,176,230 | ||||||||||||
Commonwealth of Pennsylvania, | 5.000 | 08/15/25 | 1,000 | 1,196,980 | ||||||||||||
Series A, Certificate of Participation, Rfdg | 5.000 | 07/01/26 | 500 | 604,740 | ||||||||||||
East Hempfield Township Industrial Development Authority, | 5.000 | 12/01/23 | 500 | 566,810 | ||||||||||||
Montgomery County Industrial Development Authority, | 2.700 | 10/01/34 | 1,000 | 1,005,870 |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 21 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
Pennsylvania (cont’d.) | ||||||||||||||||
Moon Industrial Development Authority, | 5.000 | % | 07/01/20 | 165 | $ | 167,351 | ||||||||||
Pennsylvania Turnpike Commission, | 5.000 | 12/01/29 | 1,000 | 1,276,490 | ||||||||||||
Revenue, SeriesA-2, Rfdg | 5.000 | 12/01/26 | 685 | 848,126 | ||||||||||||
Revenue,Sub-Series A | 5.000 | 12/01/29 | 500 | 638,660 | ||||||||||||
|
| |||||||||||||||
9,338,165 | ||||||||||||||||
Puerto Rico 2.3% | ||||||||||||||||
Puerto Rico Commonwealth Aqueduct & Sewer Authority, | 4.000 | 07/01/22 | 1,410 | 1,459,350 | ||||||||||||
Puerto Rico Sales Tax Financing Corp., | 3.515 | (s) | 07/01/27 | 1,607 | 1,278,851 | |||||||||||
Revenue, SeriesA-1, CABs | 3.878 | (s) | 07/01/24 | 1,304 | 1,137,909 | |||||||||||
|
| |||||||||||||||
3,876,110 | ||||||||||||||||
Rhode Island 1.7% | ||||||||||||||||
Tobacco Settlement Financing Corp., | 5.000 | 06/01/22 | 540 | 586,505 | ||||||||||||
Revenue, Series A, Rfdg | 5.000 | 06/01/24 | 1,940 | 2,216,469 | ||||||||||||
|
| |||||||||||||||
2,802,974 | ||||||||||||||||
South Carolina 0.2% | ||||||||||||||||
South Carolina Public Service Authority, | 5.000 | 12/01/24 | 280 | 300,504 | ||||||||||||
Tennessee 0.6% | ||||||||||||||||
Memphis-Shelby County Industrial Development Board, | 4.750 | 07/01/27 | 650 | 712,075 | ||||||||||||
Tennessee Energy Acquisition Corp., | 5.000 | 02/01/20 | 270 | 272,870 | ||||||||||||
|
| |||||||||||||||
984,945 | ||||||||||||||||
Texas 10.9% | ||||||||||||||||
Austin Convention Enterprises, Inc., | 5.000 | 01/01/26 | 1,500 | 1,763,010 | ||||||||||||
Revenue, First Tier Convention Center, Series A, Rfdg | 5.000 | 01/01/28 | 800 | 949,272 | ||||||||||||
Revenue, Second Tier Convention Center, Series B, Rfdg | 5.000 | 01/01/25 | 650 | 735,715 |
See Notes to Financial Statements.
22 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
Texas (cont’d.) | ||||||||||||||||
Bexar County Health Facilities Development Corp., | 5.000 | % | 07/15/24 | 500 | $ | 561,300 | ||||||||||
Board of Managers Joint Guadalupe County-City of Seguin Hospital, | 5.000 | 12/01/21 | 1,000 | 1,046,530 | ||||||||||||
Central Texas Regional Mobility Authority, | 5.000 | 01/01/23 | 610 | 672,427 | ||||||||||||
Revenue, Sub Lien, Rfdg | 5.000 | 01/01/21 | 180 | 187,195 | ||||||||||||
City of Houston Airport System, | 5.000 | 07/01/25 | 1,000 | 1,179,830 | ||||||||||||
Clifton Higher Education Finance Corp., | 3.750 | 08/15/22 | 265 | 272,674 | ||||||||||||
Revenue, Idea Public Schools(Pre-refunded Date 08/15/21)(ee) | 5.500 | 08/15/31 | 410 | 440,668 | ||||||||||||
Revenue, Idea Public Schools, Series B | 4.000 | 08/15/23 | 610 | 655,402 | ||||||||||||
Revenue, Idea Public Schools, Series B | 5.000 | 08/15/25 | 210 | 244,429 | ||||||||||||
Dallas County Flood Control District No. 1, | 5.000 | 04/01/20 | 750 | 760,065 | ||||||||||||
Decatur Hospital Authority, Wise Regional Health Systems, | 4.000 | 09/01/20 | 200 | 203,382 | ||||||||||||
Revenue, Series A, Rfdg | 5.000 | 09/01/22 | 150 | 162,008 | ||||||||||||
Revenue, Series A, Rfdg | 5.000 | 09/01/23 | 150 | 165,833 | ||||||||||||
Gulf Coast Authority, | 1.900 | (cc) | 09/01/25 | 1,925 | 1,925,000 | |||||||||||
Revenue, ExxonMobil Project, FRDD | 1.900 | (cc) | 12/01/25 | 850 | 850,000 | |||||||||||
Revenue, ExxonMobil Project, Series B, FRDD | 1.800 | (cc) | 06/01/25 | 200 | 200,000 | |||||||||||
Houston Higher Education Finance Corp., | 4.000 | 02/15/22 | 55 | 56,547 | ||||||||||||
Kerrville Health Facilities Development Corp., | 5.000 | 08/15/22 | 485 | 529,625 | ||||||||||||
New Hope Cultural Education Facilities Finance Corp., | 4.250 | 08/15/27 | 500 | 511,450 | ||||||||||||
Revenue, MRC Crestview, Rfdg | 4.000 | 11/15/26 | 1,060 | 1,138,111 | ||||||||||||
Revenue, Tarelton St. University Student Housing Project, Series A | 4.000 | 04/01/21 | 300 | 307,692 | ||||||||||||
North Texas Tollway Authority, | 5.000 | 01/01/21 | 100 | 104,523 | ||||||||||||
Port of Port Arthur Navigation District, | 1.900 | 06/01/49 | 1,000 | 1,000,010 |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 23 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
Texas (cont’d.) | ||||||||||||||||
Tarrant County Cultural Education Facilities Finance Corp., | 5.000 | % | 10/01/29 | 630 | $ | 701,228 | ||||||||||
Texas Municipal Gas Acquisition & Supply Corp. I, | 5.250 | 12/15/19 | 100 | 100,731 | ||||||||||||
Revenue, Senior Lien, Series D | 6.250 | 12/15/26 | 935 | 1,090,790 | ||||||||||||
|
| |||||||||||||||
18,515,447 | ||||||||||||||||
Utah 1.0% | ||||||||||||||||
Salt Lake City Corp. Airport, | 5.000 | 07/01/22 | 300 | 327,555 | ||||||||||||
Revenue, Series A, AMT | 5.000 | 07/01/26 | 1,050 | 1,268,463 | ||||||||||||
Utah Charter School Finance Authority, | 4.300 | 04/15/25 | 135 | 135,838 | ||||||||||||
|
| |||||||||||||||
1,731,856 | ||||||||||||||||
Vermont 0.1% | ||||||||||||||||
Vermont Economic Development Authority, | 5.000 | 05/01/21 | 100 | 103,865 | ||||||||||||
Virginia 1.4% | ||||||||||||||||
Virginia College Building Authority, | 5.000 | 07/01/20 | 500 | 509,440 | ||||||||||||
Revenue, Marymount University Project, Series A, Rfdg, 144A | 5.000 | 07/01/20 | 525 | 534,912 | ||||||||||||
Virginia Small Business Financing Authority, | 5.000 | 01/01/44 | 1,000 | 1,063,530 | ||||||||||||
Revenue, Senior Lien, Express Lanes | 4.250 | 07/01/22 | 225 | 241,056 | ||||||||||||
|
| |||||||||||||||
2,348,938 | ||||||||||||||||
Washington 0.9% | ||||||||||||||||
Port of Seattle, | ||||||||||||||||
Revenue, Intermediate Lien, AMT | 5.000 | 04/01/29 | 1,000 | 1,269,370 | ||||||||||||
Washington Health Care Facilities Authority, | 5.000 | 07/01/20 | 325 | 333,733 | ||||||||||||
|
| |||||||||||||||
1,603,103 |
See Notes to Financial Statements.
24 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS (Continued) |
| |||||||||||||||
West Virginia 1.2% | ||||||||||||||||
Harrison County Commission, | 3.000 | % | 10/15/37 | 500 | $ | 512,480 | ||||||||||
West Virginia Economic Development Authority, | 2.550 | 03/01/40 | 1,000 | 1,040,620 | ||||||||||||
Revenue, Wheeling Power Co. Mitchell, Series A, AMT, | 3.000 | 06/01/37 | 500 | 515,215 | ||||||||||||
|
| |||||||||||||||
2,068,315 | ||||||||||||||||
Wisconsin 1.7% | ||||||||||||||||
Public Finance Authority, | 5.000 | 06/01/23 | 500 | 535,330 | ||||||||||||
Revenue, Celanese U.S. Holdings LLC, Series A, AMT, | 5.000 | 01/01/24 | 1,000 | 1,109,480 | ||||||||||||
Revenue, Series E, AMT, Rfdg | 5.000 | 07/01/23 | 1,210 | 1,285,359 | ||||||||||||
|
| |||||||||||||||
2,930,169 | ||||||||||||||||
TOTAL INVESTMENTS 100.2% | 169,607,290 | |||||||||||||||
Liabilities in excess of other assets (0.2)% | (267,976 | ) | ||||||||||||||
|
| |||||||||||||||
NET ASSETS 100.0% | $ | 169,339,314 | ||||||||||||||
|
|
Below is a list of the abbreviation(s) used in the semiannual report:
144A—Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and, pursuant to the
requirements of Rule 144A, may not be resold except to qualified institutional buyers.
AGM—Assured Guaranty Municipal Corp.
AMBAC—American Municipal Bond Assurance Corp.
AMT—Alternative Minimum Tax
BAM—Build America Mutual
CABS—Capital Appreciation Bonds
FRDD—Floating Rate Daily Demand Note
GO—General Obligation
IDB—Industrial Development Bond
LIBOR—London Interbank Offered Rate
NATL—National Public Finance Guaranty Corp.
OTC—Over-the-counter
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, 2019. |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 25 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
(cc) | Variable rate instrument. The rate shown is based on the latest available information as of September 30, 2019. 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 andpre-refunded issues are secured by escrowed cash, a guaranteed investment contract and /or U.S. guaranteed obligations. |
(s) | Represents zero coupon bond or principal only security. Rate represents yield to maturity at purchase date. |
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, 2019 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Municipal Bonds | ||||||||||||
Alabama | $ | — | $ | 250,335 | $ | — | ||||||
Alaska | — | 1,239,420 | — | |||||||||
Arizona | — | 6,541,237 | — | |||||||||
California | — | 6,416,259 | — | |||||||||
Colorado | — | 8,738,986 | — | |||||||||
Connecticut | — | 3,267,605 | — | |||||||||
Delaware | — | 1,216,869 | — | |||||||||
District of Columbia | — | 3,417,300 | — | |||||||||
Florida | — | 12,695,503 | — | |||||||||
Georgia | — | 7,198,622 | — | |||||||||
Guam | — | 587,185 | — | |||||||||
Idaho | — | 1,040,340 | — | |||||||||
Illinois | — | 29,288,812 | — | |||||||||
Indiana | — | 1,967,752 | — | |||||||||
Iowa | — | 1,203,227 | — | |||||||||
Kentucky | — | 2,839,498 | — | |||||||||
Louisiana | — | 1,692,214 | — | |||||||||
Maryland | — | 605,894 | — | |||||||||
Massachusetts | — | 1,372,460 | — | |||||||||
Michigan | — | 1,118,192 | — | |||||||||
Minnesota | — | 520,315 | — | |||||||||
Mississippi | — | 512,520 | — | |||||||||
Missouri | — | 1,260,730 | — | |||||||||
Nevada | — | 801,960 | — | |||||||||
New Jersey | — | 9,817,568 | — | |||||||||
New York | — | 6,145,017 | — | |||||||||
North Carolina | — | 513,335 | — |
See Notes to Financial Statements.
26 |
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities (continued) | ||||||||||||
Municipal Bonds (continued) | ||||||||||||
North Dakota | $ | — | $ | 509,320 | $ | — | ||||||
Ohio | — | 7,547,083 | — | |||||||||
Oklahoma | — | 2,567,341 | — | |||||||||
Oregon | — | 110,000 | — | |||||||||
Pennsylvania | — | 9,338,165 | — | |||||||||
Puerto Rico | — | 3,876,110 | — | |||||||||
Rhode Island | — | 2,802,974 | — | |||||||||
South Carolina | — | 300,504 | — | |||||||||
Tennessee | — | 984,945 | — | |||||||||
Texas | — | 18,515,447 | — | |||||||||
Utah | — | 1,731,856 | — | |||||||||
Vermont | — | 103,865 | — | |||||||||
Virginia | — | 2,348,938 | — | |||||||||
Washington | — | 1,603,103 | — | |||||||||
West Virginia | — | 2,068,315 | — | |||||||||
Wisconsin | — | 2,930,169 | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | — | $ | 169,607,290 | $ | — | ||||||
|
|
|
|
|
|
Sector Classification:
The sector classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of September 30, 2019 were as follows:
Healthcare | 16.2 | % | ||
Corporate Backed IDB & PCR | 14.7 | |||
Special Tax/Assessment District | 13.4 | |||
Transportation | 11.6 | |||
General Obligation | 11.0 | |||
Tobacco | 7.9 | |||
Education | 7.2 | |||
Pre-pay Gas | 6.3 | |||
Water & Sewer | 5.2 | |||
Development | 2.7 | % | ||
Lease Backed Certificate of Participation | 2.4 | |||
Power | 1.6 | |||
|
| |||
100.2 | ||||
Liabilities in excess of other assets | (0.2 | ) | ||
|
| |||
100.0 | % | |||
|
|
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 27 |
Statement of Assets and Liabilities(unaudited)
as of September 30, 2019
Assets | ||||
Unaffiliated investments (cost $164,796,330) | $ | 169,607,290 | ||
Cash | 22,987 | |||
Interest receivable | 1,996,711 | |||
Receivable for Fund shares sold | 184,558 | |||
Receivable for investments sold | 86,896 | |||
Prepaid expenses | 1,412 | |||
|
| |||
Total Assets | 171,899,854 | |||
|
| |||
Liabilities | ||||
Payable for investments purchased | 2,179,820 | |||
Payable for Fund shares reacquired | 148,250 | |||
Accrued expenses and other liabilities | 100,370 | |||
Dividends payable | 59,927 | |||
Management fee payable | 48,684 | |||
Distribution fee payable | 22,516 | |||
Affiliated transfer agent fee payable | �� | 973 | ||
|
| |||
Total Liabilities | 2,560,540 | |||
|
| |||
Net Assets | $ | 169,339,314 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 16,274 | ||
Paid-in capital in excess of par | 165,826,473 | |||
Total distributable earnings (loss) | 3,496,567 | |||
|
| |||
Net assets, September 30, 2019 | $ | 169,339,314 | ||
|
|
See Notes to Financial Statements.
28 |
Class A | ||||
Net asset value and redemption price per share, | $ | 10.41 | ||
Maximum sales charge (2.25% of offering price) | 0.24 | |||
|
| |||
Maximum offering price to public | $ | 10.65 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share, | ||||
($17,613,856 ÷ 1,693,672 shares of beneficial interest issued and outstanding) | $ | 10.40 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share, | ||||
($110,013,626 ÷ 10,572,656 shares of beneficial interest issued and outstanding) | $ | 10.41 | ||
|
| |||
Class R6 | ||||
Net asset value, offering price and redemption price per share, | ||||
($2,000,421 ÷ 192,307 shares of beneficial interest issued and outstanding) | $ | 10.40 | ||
|
|
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 29 |
Statement of Operations(unaudited)
Six Months Ended September 30, 2019
Net Investment Income (Loss) | ||||
Interest income | $ | 2,372,975 | ||
|
| |||
Expenses | ||||
Management fee | 436,223 | |||
Distribution fee(a) | 130,525 | |||
Transfer agent’s fees and expenses (including affiliated expense of $ 2,854)(a) | 66,977 | |||
Custodian and accounting fees | 41,835 | |||
Registration fees(a) | 35,212 | |||
Audit fee | 21,434 | |||
Shareholders’ reports | 19,028 | |||
Legal fees and expenses | 9,001 | |||
Trustees’ fees | 6,795 | |||
Miscellaneous | 7,258 | |||
|
| |||
Total expenses | 774,288 | |||
Less: Fee waiver and/or expense reimbursement(a) | (167,248 | ) | ||
Custodian fee credit | (635 | ) | ||
|
| |||
Net expenses | 606,405 | |||
|
| |||
Net investment income (loss) | 1,766,570 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investments | ||||
Net realized gain (loss) on investment transactions | 94,100 | |||
Net change in unrealized appreciation (depreciation) on investments | 2,226,933 | |||
|
| |||
Net gain (loss) on investment transactions | 2,321,033 | |||
|
| |||
Net Increase (Decrease) In Net Assets Resulting From Operations | $ | 4,087,603 | ||
|
|
(a) | Class specific expenses and waivers were as follows: |
Class A | Class C | Class Z | Class R6 | |||||||||||||
Distribution fee | 41,704 | 88,821 | — | — | ||||||||||||
Transfer agent’s fees and expenses | 9,326 | 4,905 | 52,696 | 50 | ||||||||||||
Registration fees | 7,990 | 7,855 | 11,976 | 7,391 | ||||||||||||
Fee waiver and/or expense reimbursement | (30,577 | ) | (20,171 | ) | (108,146 | ) | (8,354 | ) |
See Notes to Financial Statements.
30 |
Statements of Changes in Net Assets(unaudited)
Six Months Ended September 30, 2019 | Year Ended March 31, 2019 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 1,766,570 | $ | 3,299,260 | ||||
Net realized gain (loss) on investment transactions | 94,100 | (516,728 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 2,226,933 | 2,542,217 | ||||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 4,087,603 | 5,324,749 | ||||||
|
|
|
| |||||
Dividends and Distributions | ||||||||
Distributions from distributable earnings | ||||||||
Class A | (350,954 | ) | (682,371 | ) | ||||
Class C | (122,045 | ) | (258,181 | ) | ||||
Class Z | (1,247,081 | ) | (2,251,129 | ) | ||||
Class R6 | (25,743 | ) | (31,456 | ) | ||||
|
|
|
| |||||
(1,745,823 | ) | (3,223,137 | ) | |||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) | ||||||||
Net proceeds from shares sold | 38,349,726 | 90,661,046 | ||||||
Net asset value of shares issued in reinvestment of dividends and distributions | 1,359,393 | 2,258,515 | ||||||
Cost of shares reacquired | (24,500,300 | ) | (84,613,280 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in net assets from Fund share transactions | 15,208,819 | 8,306,281 | ||||||
|
|
|
| |||||
Total increase (decrease) | 17,550,599 | 10,407,893 | ||||||
Net Assets: | ||||||||
Beginning of period | 151,788,715 | 141,380,822 | ||||||
|
|
|
| |||||
End of period | $ | 169,339,314 | $ | 151,788,715 | ||||
|
|
|
|
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 31 |
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 anopen-end management investment company. The Trust currently consists of the following six series: PGIM QMALarge-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 arenon-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 anon-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 anon-diversified fund. These financial statements relate only to the PGIM Short Duration Muni High Income Fund (the “Fund”).
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 (“ASC”) 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, the Manager has established a Valuation Committee responsible for supervising the fair 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.
For the fiscal reportingperiod-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
32 |
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 and referred to herein as the “fair value hierarchy” in accordance with FASB ASC Topic 820—Fair Value Measurements and Disclosures.
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 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.
Illiquid Securities:Pursuant to Rule22e-4 under the 1940 Act, the Fund has adopted a Board approved Liquidity Risk Management Program (“LRMP”) that requires, among other things, that the Fund limit its illiquid investments that are assets to no more than 15% of net assets. Illiquid securities are those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale, may not reasonably be expected to be
PGIM Short Duration Muni High Income Fund | 33 |
Notes to Financial Statements(unaudited) (continued)
sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. 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.
Restricted Securities:Securities acquired in unregistered, private sales from the issuing company or from an affiliate of the issuer are considered restricted as to disposition under federal securities law (“restricted securities”). Such restricted securities are valued pursuant to the valuation procedures noted above. Restricted securities that would otherwise be considered illiquid investments pursuant to the Fund’s LRMP 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. Therefore, these Rule 144A securities, as well as commercial paper that is sold in private placements under Section 4(2) of the Securities Act of 1933, may be classified higher than “illiquid” under the LRMP (i.e. “moderately liquid” or “less liquid” investments). However, the liquidity of the Fund’s investments in restricted securities could be impaired if trading does not develop or declines.
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 theex-date, or for certain foreign securities, when the Fund becomes aware of such dividends. 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 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.
34 |
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.
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 theex-date. Permanent book/tax differences relating to income and gain (loss) are reclassified between total distributable earnings (loss) andpaid-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 the Manager. Pursuant to this agreement, the Manager has responsibility for all investment advisory services and supervises the subadviser’s performance of such services. In addition, under the management agreement, the Manager provides all of the administrative functions necessary for the organization, operation and management of the Fund. The Manager 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. The Manager 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.
The Manager 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. The Manager 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 the Manager 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 effective management fee rate before any
PGIM Short Duration Muni High Income Fund | 35 |
Notes to Financial Statements(unaudited) (continued)
waivers and/or expense reimbursements was 0.55% for the reporting period ended September 30, 2019.
The Manager has contractually agreed, through July 31, 2020, to limit total annual 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 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. Where applicable, the Manager agrees to waive management fees or shared operating expenses on any share class to the same extent that it waives similar expenses on any other share class. In addition, total annual operating expenses for Class R6 shares will not exceed total annual operating expenses for Class Z shares. Fees and/or expenses waived and/or reimbursed by the Manager may be recouped by the Manager 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.
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.
For the reporting period ended September 30, 2019, PIMS received $15,355 infront-end sales charges resulting from sales of Class A shares. Additionally, for the reporting period ended September 30, 2019, PIMS received $983 in contingent deferred sales charges imposed upon redemptions by certain Class C shareholders. From these fees, PIMS paid such sales charges to broker-dealers, who in turn paid commissions to salespersons and incurred other distribution costs.
PGIM Investments, PGIM, Inc. and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
36 |
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 certainout-of-pocket expenses paid tonon-affiliates, where applicable.
The Fund may enter into certain securities purchase or sale transactions under Board approved Rule17a-7 procedures. Rule17a-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. Pursuant to the Rule17a-7 procedures and consistent with guidance issued by the SEC, the Trust’s Chief Compliance Officer (“CCO”) prepares a quarterly summary of all such transactions for submission to the Board, together with the CCO’s written representation that all such17a-7 transactions were effected in accordance with the Fund’s Rule17a-7 procedures.
For the reporting period ended September 30, 2019, the Fund’s purchase and sales transactions under Rule17a-7 and realized gain as a result of17a-7 sales transactions were as follows:
Purchases | Sales | Realized Gain | ||||||||
$9,156,170 | $ | 12,362,890 | $ | — |
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 reporting period ended September 30, 2019, were $71,426,940 and $53,543,592, 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, 2019 were as follows:
Tax Basis | $ | 165,060,618 | ||
|
| |||
Gross Unrealized Appreciation | 4,985,725 | |||
Gross Unrealized Depreciation | (439,053 | ) | ||
|
| |||
Net Unrealized Appreciation | $ | 4,546,672 | ||
|
|
The book basis may differ from tax basis due to certaintax-related adjustments.
For federal income tax purposes, the Fund had a capital loss carryforward as of March 31, 2019 of approximately $1,782,000 which can be carried forward for an unlimited period. No
PGIM Short Duration Muni High Income Fund | 37 |
Notes to Financial Statements(unaudited) (continued)
capital gains distributions are expected to be paid to shareholders until net gains have been realized in excess of such losses.
The Manager 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. Since tax authorities can examine previously filed tax returns, the Fund’s U.S. federal and state tax returns for each of the four fiscal years up to the most recent fiscal year ended March 31, 2019 are subject to such review.
6. Capital and Ownership
The Fund offers Class A, Class C, Class Z and Class R6 shares. Class A shares are sold with a maximumfront-end sales charge of 2.25%. Investors who purchase $1 million or more of Class A shares and sell those shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1.00% on sales of $1 million or more made within 12 months of purchase for purchases prior to July 15, 2019, and a CDSC of 1.00% on sales of $500,000 or more made within 12 months of purchase for purchases on or after July 15, 2019. 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 C shares will automatically convert to Class A shares on a monthly basis approximately 10 years after purchase. Class Z and Class R6 shares are not subject to any sales or redemption charge and are available 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 of the Fund at $0.001 par value per share.
As of September 30, 2019, Prudential, through its affiliated entities, including affiliated funds (if applicable), owned 1,042 Class R6 shares of the Fund. At reporting period end, five shareholders of record, each holding greater than 5% of the Fund, held 74% of the Fund’s outstanding shares.
38 |
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Six months ended September 30, 2019: | ||||||||
Shares sold | 1,422,814 | $ | 14,758,971 | |||||
Shares issued in reinvestment of dividends and distributions | 29,349 | 304,595 | ||||||
Shares reacquired | (822,869 | ) | (8,440,189 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 629,294 | 6,623,377 | ||||||
Shares issued upon conversion from other share class(es) | 25,681 | 264,879 | ||||||
Shares reacquired upon conversion into other share class(es) | (135,481 | ) | (1,400,736 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 519,494 | $ | 5,487,520 | |||||
|
|
|
| |||||
Year ended March 31, 2019: | ||||||||
Shares sold | 1,868,510 | $ | 18,910,923 | |||||
Shares issued in reinvestment of dividends and distributions | 43,775 | 442,864 | ||||||
Shares reacquired | (2,586,086 | ) | (26,132,016 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (673,801 | ) | (6,778,229 | ) | ||||
Shares issued upon conversion from other share class(es) | 121,698 | 1,235,224 | ||||||
Shares reacquired upon conversion into other share class(es) | (133,040 | ) | (1,344,183 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (685,143 | ) | $ | (6,887,188 | ) | |||
|
|
|
| |||||
Class C | ||||||||
Six months ended September 30, 2019: | ||||||||
Shares sold | 111,508 | $ | 1,156,009 | |||||
Shares issued in reinvestment of dividends and distributions | 6,041 | 62,604 | ||||||
Shares reacquired | (172,728 | ) | (1,785,534 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (55,179 | ) | (566,921 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (9,188 | ) | (94,944 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (64,367 | ) | $ | (661,865 | ) | |||
|
|
|
| |||||
Year ended March 31, 2019: | ||||||||
Shares sold | 501,606 | $ | 5,059,000 | |||||
Shares issued in reinvestment of dividends and distributions | 13,814 | 139,589 | ||||||
Shares reacquired | (691,837 | ) | (6,983,503 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (176,417 | ) | (1,784,914 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (77,501 | ) | (781,412 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (253,918 | ) | $ | (2,566,326 | ) | |||
|
|
|
| |||||
Class Z | ||||||||
Six months ended September 30, 2019: | ||||||||
Shares sold | 2,161,781 | $ | 22,373,346 | |||||
Shares issued in reinvestment of dividends and distributions | 93,166 | 966,450 | ||||||
Shares reacquired | (1,338,276 | ) | (13,854,197 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 916,671 | 9,485,599 | ||||||
Shares issued upon conversion from other share class(es) | 137,794 | 1,424,520 | ||||||
Shares reacquired upon conversion into other share class(es) | (18,819 | ) | (193,719 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 1,035,646 | $ | 10,716,400 | |||||
|
|
|
| |||||
Year ended March 31, 2019: | ||||||||
Shares sold | 6,574,176 | $ | 66,370,224 | |||||
Shares issued in reinvestment of dividends and distributions | 162,601 | 1,644,606 | ||||||
Shares reacquired | (5,075,691 | ) | (51,213,875 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 1,661,086 | 16,800,955 | ||||||
Shares issued upon conversion from other share class(es) | 209,193 | 2,111,455 | ||||||
Shares reacquired upon conversion into other share class(es) | (337,178 | ) | (3,415,118 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 1,533,101 | $ | 15,497,292 | |||||
|
|
|
|
PGIM Short Duration Muni High Income Fund | 39 |
Notes to Financial Statements(unaudited) (continued)
Class R6 | Shares | Amount | ||||||
Six months ended September 30, 2019: | ||||||||
Shares sold | 5,973 | $ | 61,400 | |||||
Shares issued in reinvestment of dividends and distributions | 2,484 | 25,744 | ||||||
Shares reacquired | (40,687 | ) | (420,380 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (32,230 | ) | $ | (333,236 | ) | |||
|
|
|
| |||||
Year ended March 31, 2019: | ||||||||
Shares sold | 31,919 | $ | 320,899 | |||||
Shares issued in reinvestment of dividends and distributions | 3,109 | 31,456 | ||||||
Shares reacquired | (28,330 | ) | (283,886 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 6,698 | 68,469 | ||||||
Shares issued upon conversion from other share class(es) | 216,833 | 2,194,034 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 223,531 | $ | 2,262,503 | |||||
|
|
|
|
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 4, 2018 through October 3, 2019. 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. The interest on borrowings under the SCA is paid monthly and at a per annum interest rate of 1.25% plus the higher of (1) the effective federal funds rate, (2) theone-month LIBOR rate or (3) zero percent.
Subsequent to the reporting period end, the SCA has been renewed effective October 3, 2019 and will continue to provide a commitment of $900 million through October 1, 2020. 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 the renewed SCA will be paid monthly and at a per annum interest rate of 1.20% plus the higher of (1) the effective federal funds rate, (2) theone-month LIBOR rate or (3) zero percent.
Certain 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.
40 |
The Fund did not utilize the SCA during the reporting period ended September 30, 2019.
8. Risks of Investing in the Fund
The Fund’s risks include, but are not limited to, some or all of 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 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.
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 may face a heightened level of interest rate risk as a result of the U.S. Federal Reserve Board’s policies. 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 may not reasonably be expected to be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment, the Fund may incur higher transaction costs when executing trade orders of a given size. 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.
PGIM Short Duration Muni High Income Fund | 41 |
Notes to Financial Statements(unaudited) (continued)
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.
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. The Manager 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. The Manager continues to evaluate certain other provisions of the ASU and does not expect a material impact to financial statement disclosures.
42 |
Financial Highlights(unaudited)
Class A Shares | ||||||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | May 29, 2014(a) through March 31, | ||||||||||||||||||||||||||||||
2019(b) | 2019(b) | 2018(b) | 2017(b) | 2016(b) | 2015 | |||||||||||||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.25 | $10.10 | $10.03 | $10.26 | $10.17 | $10.00 | ||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.11 | 0.22 | 0.22 | 0.21 | 0.21 | 0.17 | ||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 0.16 | 0.15 | 0.06 | (0.23 | ) | 0.10 | 0.17 | |||||||||||||||||||||||||
Total from investment operations | 0.27 | 0.37 | 0.28 | (0.02 | ) | 0.31 | 0.34 | |||||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.22 | ) | (0.21 | ) | (0.21 | ) | (0.21 | ) | (0.17 | ) | ||||||||||||||||||||
Distributions from net realized gains | - | - | - | - | (0.01 | ) | - | (c) | ||||||||||||||||||||||||
Total dividends and distributions | (0.11 | ) | (0.22 | ) | (0.21 | ) | (0.21 | ) | (0.22 | ) | (0.17 | ) | ||||||||||||||||||||
Net asset value, end of period | $10.41 | $10.25 | $10.10 | $10.03 | $10.26 | $10.17 | ||||||||||||||||||||||||||
Total Return(d): | 2.64% | 3.69% | 2.78% | (0.23)% | 3.07% | 3.43% | ||||||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||||||
Net assets, end of period (000) | $39,711 | $33,779 | $40,222 | $40,966 | $62,314 | $9,062 | ||||||||||||||||||||||||||
Average net assets (000) | $33,363 | $31,640 | $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% | 0.85% | (f) | ||||||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.03% | (f) | 1.04% | 1.07% | 1.06% | 1.11% | 1.40% | (f) | ||||||||||||||||||||||||
Net investment income (loss) | 2.13% | (f) | 2.21% | 2.14% | 2.07% | 2.10% | 2.21% | (f) | ||||||||||||||||||||||||
Portfolio turnover rate(g)(h) | 34% | 90% | 71% | 70% | 19% | 31% |
(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) | Effective January 1, 2018, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(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) | The portfolio turnover rate includes variable rate demand notes. |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 43 |
Financial Highlights(unaudited) (continued)
Class C Shares | ||||||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | May 29, 2014(a) through March 31, | ||||||||||||||||||||||||||||||
2019(b) | 2019(b) | 2018(b) | 2017(b) | 2016(b) | 2015 | |||||||||||||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.24 | $10.09 | $10.02 | $10.25 | $10.16 | $10.00 | ||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.07 | 0.15 | 0.14 | 0.14 | 0.14 | 0.11 | ||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 0.16 | 0.14 | 0.06 | (0.24 | ) | 0.10 | 0.15 | |||||||||||||||||||||||||
Total from investment operations | 0.23 | 0.29 | 0.20 | (0.10 | ) | 0.24 | 0.26 | |||||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.07 | ) | (0.14 | ) | (0.13 | ) | (0.13 | ) | (0.14 | ) | (0.10 | ) | ||||||||||||||||||||
Distributions from net realized gains | - | - | - | - | (0.01 | ) | - | (c) | ||||||||||||||||||||||||
Total dividends and distributions | (0.07 | ) | (0.14 | ) | (0.13 | ) | (0.13 | ) | (0.15 | ) | (0.10 | ) | ||||||||||||||||||||
Net asset value, end of period | $10.40 | $10.24 | $10.09 | $10.02 | $10.25 | $10.16 | ||||||||||||||||||||||||||
Total Return(d): | 2.26% | 2.93% | 2.01% | (0.98)% | 2.30% | 2.69% | ||||||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||||||
Net assets, end of period (000) | $17,614 | $18,002 | $20,309 | $21,240 | $21,023 | $11,962 | ||||||||||||||||||||||||||
Average net assets (000) | $17,764 | $18,317 | $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% | 1.60% | (f) | ||||||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.83% | (f) | 1.84% | 1.85% | 1.81% | 1.86% | 2.19% | (f) | ||||||||||||||||||||||||
Net investment income (loss) | 1.40% | (f) | 1.46% | 1.39% | 1.33% | 1.39% | 1.43% | (f) | ||||||||||||||||||||||||
Portfolio turnover rate(g)(h) | 34% | 90% | 71% | 70% | 19% | 31% |
(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) | Effective January 1, 2018, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(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) | The portfolio turnover rate includes variable rate demand notes. |
See Notes to Financial Statements.
44 |
Class Z Shares | ||||||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | May 29, 2014(a) through March 31, | ||||||||||||||||||||||||||||||
2019(b) | 2019(b) | 2018(b) | 2017(b) | 2016(b) | 2015 | |||||||||||||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.25 | $10.10 | $10.02 | $10.26 | $10.17 | $10.00 | ||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.12 | 0.25 | 0.24 | 0.24 | 0.24 | 0.19 | ||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 0.16 | 0.14 | 0.07 | (0.25 | ) | 0.10 | 0.17 | |||||||||||||||||||||||||
Total from investment operations | 0.28 | 0.39 | 0.31 | (0.01 | ) | 0.34 | 0.36 | |||||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.12 | ) | (0.24 | ) | (0.23 | ) | (0.23 | ) | �� | (0.24 | ) | (0.19 | ) | |||||||||||||||||||
Distributions from net realized gains | - | - | - | - | (0.01 | ) | - | (c) | ||||||||||||||||||||||||
Total dividends and distributions | (0.12 | ) | (0.24 | ) | (0.23 | ) | (0.23 | ) | (0.25 | ) | (0.19 | ) | ||||||||||||||||||||
Net asset value, end of period | $10.41 | $10.25 | $10.10 | $10.02 | $10.26 | $10.17 | ||||||||||||||||||||||||||
Total Return(d): | 2.77% | 3.95% | 3.13% | (0.08)% | 3.33% | 3.65% | ||||||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||||||
Net assets, end of period (000) | $110,014 | $97,709 | $80,839 | $57,368 | $65,093 | $48,254 | ||||||||||||||||||||||||||
Average net assets (000) | $105,337 | $93,569 | $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% | 0.60% | (f) | ||||||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 0.81% | (f) | 0.83% | 0.82% | 0.81% | 0.86% | 1.23% | (f) | ||||||||||||||||||||||||
Net investment income (loss) | 2.39% | (f) | 2.46% | 2.40% | 2.33% | 2.39% | 2.36% | (f) | ||||||||||||||||||||||||
Portfolio turnover rate(g)(h) | 34% | 90% | 71% | 70% | 19% | 31% |
(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) | Effective January 1, 2018, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(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) | The portfolio turnover rate includes variable rate demand notes. |
See Notes to Financial Statements.
PGIM Short Duration Muni High Income Fund | 45 |
Financial Highlights(unaudited) (continued)
Class R6 Shares | ||||||||||||||||||||
Six Months Ended September 30, 2019 | Year Ended March 31, 2019 | May 25, 2017(a) through March 31, 2018 | ||||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.24 | $10.10 | $10.14 | |||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.12 | 0.25 | 0.21 | |||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 0.16 | 0.13 | (0.05 | ) | ||||||||||||||||
Total from investment operations | 0.28 | 0.38 | 0.16 | |||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.12 | ) | (0.24 | ) | (0.20 | ) | ||||||||||||||
Net asset value, end of period | $10.40 | $10.24 | $10.10 | |||||||||||||||||
Total Return(c): | 2.77% | 3.85% | 1.58% | |||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000) | $2,000 | $2,300 | $10 | |||||||||||||||||
Average net assets (000) | $2,163 | $1,291 | $10 | |||||||||||||||||
Ratios to average net assets(d): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 0.60% | (e) | 0.60% | 0.60% | (e) | |||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.37% | (e) | 1.90% | 141.66% | (e) | |||||||||||||||
Net investment income (loss) | 2.41% | (e) | 2.48% | 2.42% | (e) | |||||||||||||||
Portfolio turnover rate(f)(g) | 34% | 90% | 71% |
(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) | Effective January 1, 2018, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(e) | Annualized. |
(f) | 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. |
(g) | The portfolio turnover rate includes variable rate demand notes. |
See Notes to Financial Statements.
46 |
Approval of Advisory Agreements
The Fund’s Board of Trustees
The Board of Trustees (the “Board”) of PGIM Short Duration Muni High Income Fund1 (the “Fund”) consists of eleven 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”).2 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 May 30, 2019 and on June11-13, 2019 and approved the renewal of the agreements through July 31, 2020, 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
1 | PGIM Short Duration Muni High Income Fund is a series of Prudential Investment Portfolios 12. |
2 | Grace C. Torres was an Interested Trustee of the Fund at the time the Board considered and approved the renewal of the Fund’s advisory agreements, but has since become an Independent Trustee of the Fund. |
PGIM Short Duration Muni High Income Fund |
Approval of Advisory Agreements(continued)
considered information provided by PGIM Investments throughout the year at regular Board meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the meetings on May 30, 2019 and on June11-13, 2019.
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 noted that PGIM Fixed Income is affiliated with PGIM Investments. 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, and PGIM Investments’ role as administrator of the Fund’s liquidity risk management program. 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 theday-to-day management of the Fund’s portfolio. The Board was provided with information pertaining to PGIM
Visit our website at pgiminvestments.com |
Investments’ and PGIM Fixed Income’s organizational structure, senior management, investment operations, and other relevant information pertaining to both PGIM Investments 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 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, 2018 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 factors and made related conclusions relating to the historical performance of the Fund for theone- and three-year periods ended December 31, 2018. 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, 2018. 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 provided supplemental Peer Universe or Peer Group information for reasons addressed with the Board. The comparisons placed the Fund in various quartiles over various periods, 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).
Visit our website at pgiminvestments.com |
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 net performance comparisons (which 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.
Net Performance | 1 Year | 3 Years | 5 Years | 10 Years | ||||
3rd Quartile | 4th Quartile | N/A | N/A | |||||
Actual Management Fees:1st Quartile | ||||||||
Net Total Expenses: 2nd Quartile |
• | The Board noted that the Fund outperformed its benchmark index over the three-year period, though it underperformed over theone-year period. |
• | 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 the 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, 2020. |
• | In addition, PGIM Investments will waive management fees or shared operating expenses on any share class to the same extent that it waives such expenses on any other share class, and has agreed that total annual fund operating expenses for Class R6 shares will not exceed total annual fund operating expenses for Class Z shares. |
• | 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 longer-term 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 | pgiminvestments.com |
PROXY VOTING |
The Board of Trustees of the Fund has delegated to the Fund’s 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• Brian K. Reid • Grace C. Torres |
OFFICERS |
Stuart S. Parker,President• Scott E. Benjamin,Vice President• Christian J. Kelly,Treasurer and Principal Financial and Accounting Officer• Raymond A. O’Hara,Chief Legal Officer• Dino Capasso,Chief Compliance Officer• Charles H. Smith,Anti-Money Laundering Compliance Officer• Andrew R. French,Secretary• Jonathan D. Shain,Assistant Secretary• Claudia DiGiacomo,Assistant secretary• Diana N. Huffman,Assistant Secretary• Kelly A. Coyne,Assistant Secretary• Lana Lomuti,Assistant Treasurer• Russ Shupak,Assistant Treasurer• Elyse McLaughlin,Assistant Treasurer• Deborah Conway,Assistant Treasurer |
MANAGER | PGIM Investments LLC | 655 Broad Street Newark, NJ 07102 | ||
| ||||
SUBADVISER | PGIM Fixed Income | 655 Broad Street Newark, NJ 07102 | ||
| ||||
DISTRIBUTOR | Prudential Investment Management Services LLC | 655 Broad Street Newark, NJ 07102 | ||
| ||||
CUSTODIAN | The Bank of New York Mellon | 240 Greenwich Street New York, NY 10286 | ||
| ||||
TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
| ||||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
| ||||
FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 | ||
|
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain the prospectus and summary prospectus by visiting our website atpgiminvestments.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 topgiminvestments.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 byvisiting 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 HOLDINGS |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission on Form N-PORT. The Fund’s Form N-PORT filings are available on the Commission’s website at sec.gov. Form N-PORT is filed with the Commission quarterly, and each Fund’s full portfolio holdings as of the first and third fiscal quarter-ends (as of the third month of the Fund’s fiscal quarter for reporting periods on or after September 30, 2019) will be made publicly available 60 days after the end of each quarter at sec.gov. |
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 |
MF222E2
PGIM QMA LARGE-CAP CORE EQUITY PLUS FUND
SEMIANNUAL REPORT
SEPTEMBER 30, 2019
COMING SOON: PAPERLESS SHAREHOLDER REPORTS
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website (pgiminvestments.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 1-800-225-1852 or by sending an email request to PGIM Investments at shareholderreports@pgim.com.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary or follow instructions included with this notice to elect to continue to receive paper copies of your shareholder reports. If you invest directly with the Fund, you can call 1-800-225-1852 or send an email request to shareholderreports@pgim.com to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the fund complex if you invest directly with the Fund.
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, 2019 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 QMA LLC, a wholly owned subsidiary of PGIM, Inc. (PGIM), a Prudential Financial company.© 2019 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.
2 | Visit our website at pgiminvestments.com |
5 | ||||
6 | ||||
9 | ||||
11 | ||||
PGIM QMA Large-Cap Core Equity PLUS Fund | 3 |
This Page Intentionally Left Blank
Dear Shareholder:
We hope you find the semiannual report for PGIM QMA Large-Cap Core Equity PLUS Fund informative and useful. The report covers performance for thesix-month period ended September 30, 2019.
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, 2019
PGIM QMA Large-Cap Core Equity PLUS Fund | 5 |
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 atpgiminvestments.com or by calling (800) 225-1852.
Total Returns as of 9/30/19 (without sales charges) | Average Annual Total Returns as of 9/30/19 (with sales charges) | |||||
Six Months* (%) | One Year (%) | Since Inception (%) | ||||
Class A | 2.87 | –8.20 | 3.16 (9/19/17) | |||
Class C | 2.51 | –4.59 | 5.24 (9/19/17) | |||
Class Z | 3.06 | –2.67 | 6.21 (9/19/17) | |||
Class R6 | 3.06 | –2.67 | 6.30 (9/19/17) | |||
S&P 500 Index | ||||||
6.08 | 4.25 | 10.87 |
*Not annualized
Source: PGIM Investments LLC
Since Inception returns are provided for any share class with less than 10 fiscal years of returns. Since Inception returns for the Index is measured from the closest month-end to the class’ inception date.
6 | Visit our website at pgiminvestments.com |
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 the original purchase price or the 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 |
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.
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.
PGIM QMA Large-Cap Core Equity PLUS Fund | 7 |
Your Fund’s Performance(continued)
Presentation of Fund Holdingsas of 9/30/19
Ten Largest Holdings - Long | Line of Business | % of Net Assets | ||||
Microsoft Corp. | Software | 4.9% | ||||
Apple, Inc. | Technology Hardware, Storage & Peripherals | 4.5% | ||||
Facebook, Inc. (Class A Stock) | Interactive Media & Services | 2.3% | ||||
Alphabet, Inc. (Class C Stock) | Interactive Media & Services | 2.1% | ||||
Amazon.com, Inc. | Internet & Direct Marketing Retail | 1.9% | ||||
Visa, Inc. (Class A Stock) | IT Services | 1.8% | ||||
Bank of America Corp. | Banks | 1.7% | ||||
Intel Corp. | Semiconductors & Semiconductor Equipment | 1.5% | ||||
Verizon Communications, Inc. | Diversified Telecommunication Services | 1.5% | ||||
Alphabet, Inc. (Class A Stock) | Interactive Media & Services | 1.5% | ||||
Ten Largest Holdings - Short | Line of Business | % of Net Assets | ||||
Coupa Software, Inc. | Software | 1.2% | ||||
Americold Realty Trust | Equity Real Estate Investment Trusts (REITs) | 1.0% | ||||
Roku, Inc. | Household Durables | 0.9% | ||||
International Flavors & Fragrances, Inc. | Chemicals | 0.9% | ||||
Lennox International, Inc. | Building Products | 0.8% | ||||
Penumbra, Inc. | Health Care Equipment & Supplies | 0.8% | ||||
Guardant Health, Inc. | Health Care Providers & Services | 0.8% | ||||
Square, Inc. (Class A Stock) | IT Services | 0.7% | ||||
Pure Storage, Inc. (Class A Stock) | Technology Hardware, Storage & Peripherals | 0.6% | ||||
Lumentum Holdings, Inc. | Communications Equipment | 0.6% |
For a complete list of holdings, please refer to the Schedule of Investments section of this report. Holdings reflect only long-term investments.
8 | 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, 2019. 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 | 9 |
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, 2019 | Ending Account Value September 30, 2019 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,028.70 | 2.07 | % | $ | 10.50 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,014.65 | 2.07 | % | $ | 10.43 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,025.10 | 2.72 | % | $ | 13.77 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,011.40 | 2.72 | % | $ | 13.68 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,030.60 | 1.83 | % | $ | 9.29 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.85 | 1.83 | % | $ | 9.22 | ||||||||||
Class R6 | Actual | $ | 1,000.00 | $ | 1,030.60 | 1.81 | % | $ | 9.19 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.95 | 1.81 | % | $ | 9.12 |
*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, 2019, and divided by the 366 days in the Fund’s fiscal year ending March 31, 2020 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
10 | Visit our website at pgiminvestments.com |
Schedule of Investments(unaudited)
as of September 30, 2019
Description | Shares | Value | ||||||
LONG-TERM INVESTMENTS 127.6% | ||||||||
COMMON STOCKS 127.5% | ||||||||
Aerospace & Defense 3.3% | ||||||||
Arconic, Inc. | 6,300 | $ | 163,800 | |||||
General Dynamics Corp. | 190 | 34,719 | ||||||
Lockheed Martin Corp. | 510 | 198,931 | ||||||
Spirit AeroSystems Holdings, Inc. (Class A Stock) | 1,500 | 123,360 | ||||||
United Technologies Corp. | 1,680 | 229,353 | ||||||
|
| |||||||
750,163 | ||||||||
Air Freight & Logistics 0.6% | ||||||||
Hub Group, Inc. (Class A Stock)* | 2,700 | 125,550 | ||||||
Automobiles 0.6% | ||||||||
Ford Motor Co. | 14,500 | 132,820 | ||||||
Banks 5.0% | ||||||||
Bank of America Corp.(u) | 13,100 | 382,127 | ||||||
Citigroup, Inc.(u) | 4,200 | 290,136 | ||||||
Evans Bancorp, Inc. | 900 | 33,660 | ||||||
Fifth Third Bancorp | 1,500 | 41,070 | ||||||
JPMorgan Chase & Co.(u) | 2,200 | 258,918 | ||||||
OFG Bancorp (Puerto Rico) | 2,500 | 54,750 | ||||||
Popular, Inc. (Puerto Rico) | 1,000 | 54,080 | ||||||
Wells Fargo & Co. | 400 | 20,176 | ||||||
|
| |||||||
1,134,917 | ||||||||
Beverages 1.5% | ||||||||
Keurig Dr. Pepper, Inc. | 4,100 | 112,012 | ||||||
Monster Beverage Corp.* | 600 | 34,836 | ||||||
PepsiCo, Inc. | 1,380 | 189,198 | ||||||
|
| |||||||
336,046 | ||||||||
Biotechnology 5.4% | ||||||||
AbbVie, Inc. | 2,700 | 204,444 | ||||||
Alexion Pharmaceuticals, Inc.* | 1,160 | 113,610 | ||||||
Amgen, Inc. | 1,120 | 216,731 | ||||||
Biogen, Inc.* | 640 | 149,005 | ||||||
Gilead Sciences, Inc. | 2,800 | 177,464 | ||||||
Incyte Corp.* | 1,600 | 118,768 |
See Notes to Financial Statements.
PGIM QMALarge-Cap Core Equity PLUS Fund | 11 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Biotechnology (cont’d.) | ||||||||
Regeneron Pharmaceuticals, Inc.* | 400 | $ | 110,960 | |||||
Vertex Pharmaceuticals, Inc.* | 840 | 142,313 | ||||||
|
| |||||||
1,233,295 | ||||||||
Building Products 1.8% | ||||||||
American Woodmark Corp.* | 600 | 53,346 | ||||||
Builders FirstSource, Inc.* | 4,000 | 82,300 | ||||||
Johnson Controls International PLC | 3,300 | 144,837 | ||||||
Universal Forest Products, Inc. | 3,040 | 121,235 | ||||||
|
| |||||||
401,718 | ||||||||
Capital Markets 3.3% | ||||||||
Affiliated Managers Group, Inc. | 1,230 | 102,521 | ||||||
Ameriprise Financial, Inc. | 560 | 82,376 | ||||||
Brightsphere Investment Group, Inc. | 9,600 | 95,136 | ||||||
Goldman Sachs Group, Inc. (The) | 750 | 155,422 | ||||||
Invesco Ltd. | 1,500 | 25,410 | ||||||
LPL Financial Holdings, Inc. | 1,500 | 122,850 | ||||||
Morgan Stanley | 3,800 | 162,146 | ||||||
|
| |||||||
745,861 | ||||||||
Chemicals 2.8% | ||||||||
CF Industries Holdings, Inc. | 2,400 | 118,080 | ||||||
Corteva, Inc. | 700 | 19,600 | ||||||
DuPont de Nemours, Inc. | 2,300 | 164,013 | ||||||
Huntsman Corp. | 2,900 | 67,454 | ||||||
Koppers Holdings, Inc.* | 4,100 | 119,761 | ||||||
PQ Group Holdings, Inc.* | 2,100 | 33,474 | ||||||
Trinseo SA | 2,800 | 120,260 | ||||||
|
| |||||||
642,642 | ||||||||
Commercial Services & Supplies 0.6% | ||||||||
Deluxe Corp. | 300 | 14,748 | ||||||
Knoll, Inc. | 4,800 | 121,680 | ||||||
|
| |||||||
136,428 | ||||||||
Communications Equipment 1.8% | ||||||||
Cisco Systems, Inc.(u) | 6,700 | 331,047 | ||||||
Clearfield, Inc.* | 3,100 | 36,735 |
See Notes to Financial Statements.
12 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Communications Equipment (cont’d.) | ||||||||
Comtech Telecommunications Corp. | 1,100 | $ | 35,750 | |||||
Extreme Networks, Inc.* | 1,800 | 13,095 | ||||||
|
| |||||||
416,627 | ||||||||
Construction & Engineering 0.5% | ||||||||
Dycom Industries, Inc.* | 40 | 2,042 | ||||||
EMCOR Group, Inc. | 1,200 | 103,344 | ||||||
|
| |||||||
105,386 | ||||||||
Construction Materials 1.0% | ||||||||
Martin Marietta Materials, Inc. | 300 | 82,230 | ||||||
Vulcan Materials Co. | 970 | 146,703 | ||||||
|
| |||||||
228,933 | ||||||||
Consumer Finance 0.9% | ||||||||
Capital One Financial Corp. | 1,700 | 154,666 | ||||||
Navient Corp. | 4,200 | 53,760 | ||||||
|
| |||||||
208,426 | ||||||||
Containers & Packaging 0.1% | ||||||||
Westrock Co. | 500 | 18,225 | ||||||
Distributors 0.8% | ||||||||
Core-Mark Holding Co., Inc. | 1,300 | 41,750 | ||||||
Genuine Parts Co. | 900 | 89,631 | ||||||
LKQ Corp.* | 1,900 | 59,755 | ||||||
|
| |||||||
191,136 | ||||||||
Diversified Consumer Services 0.6% | ||||||||
frontdoor, Inc.* | 2,700 | 131,139 | ||||||
Diversified Financial Services 1.8% | ||||||||
Berkshire Hathaway, Inc. (Class B Stock)* | 900 | 187,218 | ||||||
FGL Holdings | 13,500 | 107,730 | ||||||
Jefferies Financial Group, Inc. | 5,600 | 103,040 | ||||||
|
| |||||||
397,988 |
See Notes to Financial Statements.
PGIM QMALarge-Cap Core Equity PLUS Fund | 13 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Diversified Telecommunication Services 2.9% | ||||||||
AT&T, Inc.(u) | 8,100 | $ | 306,504 | |||||
Verizon Communications, Inc.(u) | 5,700 | 344,052 | ||||||
|
| |||||||
650,556 | ||||||||
Electric Utilities 1.4% | ||||||||
Exelon Corp. | 3,600 | 173,916 | ||||||
FirstEnergy Corp. | 300 | 14,469 | ||||||
MGE Energy, Inc. | 200 | 15,974 | ||||||
Portland General Electric Co. | 500 | 28,185 | ||||||
Southern Co. (The) | 1,300 | 80,301 | ||||||
|
| |||||||
312,845 | ||||||||
Electrical Equipment 0.2% | ||||||||
Acuity Brands, Inc. | 160 | 21,566 | ||||||
Atkore International Group, Inc.* | 700 | 21,245 | ||||||
|
| |||||||
42,811 | ||||||||
Electronic Equipment, Instruments & Components 2.0% | ||||||||
Anixter International, Inc.* | 200 | 13,824 | ||||||
CDW Corp. | 1,300 | 160,212 | ||||||
Itron, Inc.* | 1,800 | 133,128 | ||||||
Jabil, Inc. | 800 | 28,616 | ||||||
Keysight Technologies, Inc.* | 800 | 77,800 | ||||||
SYNNEX Corp. | 300 | 33,870 | ||||||
|
| |||||||
447,450 | ||||||||
Energy Equipment & Services 0.0% | ||||||||
Matrix Service Co.* | 400 | 6,856 | ||||||
Entertainment 1.1% | ||||||||
Electronic Arts, Inc.* | 1,100 | 107,602 | ||||||
Glu Mobile, Inc.* | 13,100 | 65,369 | ||||||
Viacom, Inc. (Class B Stock) | 3,100 | 74,493 | ||||||
|
| |||||||
247,464 | ||||||||
Equity Real Estate Investment Trusts (REITs) 4.0% | ||||||||
American Tower Corp. | 940 | 207,862 | ||||||
Apple Hospitality REIT, Inc. | 1,500 | 24,870 | ||||||
CoreCivic, Inc. | 1,100 | 19,008 | ||||||
Crown Castle International Corp. | 1,300 | 180,713 |
See Notes to Financial Statements.
14 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Equity Real Estate Investment Trusts (REITs) (cont’d.) | ||||||||
DiamondRock Hospitality Co. | 2,000 | $ | 20,500 | |||||
Franklin Street Properties Corp. | 9,700 | 82,062 | ||||||
GEO Group, Inc. (The) | 5,800 | 100,572 | ||||||
Host Hotels & Resorts, Inc. | 3,800 | 65,702 | ||||||
Kite Realty Group Trust | 4,200 | 67,830 | ||||||
Park Hotels & Resorts, Inc. | 3,374 | 84,249 | ||||||
Ryman Hospitality Properties, Inc. | 700 | 57,267 | ||||||
|
| |||||||
910,635 | ||||||||
Food & Staples Retailing 0.8% | ||||||||
US Foods Holding Corp.* | 1,100 | 45,210 | ||||||
Walgreens Boots Alliance, Inc. | 2,400 | 132,744 | ||||||
Walmart, Inc. | 100 | 11,868 | ||||||
|
| |||||||
189,822 | ||||||||
Food Products 2.6% | ||||||||
Archer-Daniels-Midland Co. | 2,300 | 94,461 | ||||||
Bunge Ltd. | 2,000 | 113,240 | ||||||
General Mills, Inc. | 200 | 11,024 | ||||||
J.M. Smucker Co. (The) | 530 | 58,311 | ||||||
Kraft Heinz Co. (The) | 600 | 16,761 | ||||||
Pilgrim’s Pride Corp.* | 3,900 | 124,975 | ||||||
Tyson Foods, Inc. (Class A Stock) | 1,900 | 163,666 | ||||||
|
| |||||||
582,438 | ||||||||
Gas Utilities 0.2% | ||||||||
UGI Corp. | 1,000 | 50,270 | ||||||
Health Care Equipment & Supplies 6.4% | ||||||||
Abbott Laboratories | 2,000 | 167,340 | ||||||
Baxter International, Inc. | 700 | 61,229 | ||||||
Cooper Cos., Inc. (The) | 240 | 71,280 | ||||||
Danaher Corp. | 1,310 | 189,203 | ||||||
DENTSPLY SIRONA, Inc. | 1,900 | 101,289 | ||||||
Edwards Lifesciences Corp.* | 800 | 175,928 | ||||||
Hill-Rom Holdings, Inc. | 200 | 21,046 | ||||||
Hologic, Inc.* | 1,600 | 80,784 | ||||||
Integer Holdings Corp.* | 300 | 22,668 | ||||||
Masimo Corp.* | 680 | 101,177 | ||||||
Medtronic PLC(u) | 2,500 | 271,550 | ||||||
STERIS PLC | 330 | 47,682 |
See Notes to Financial Statements.
PGIM QMALarge-Cap Core Equity PLUS Fund | 15 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Health Care Equipment & Supplies (cont’d.) | ||||||||
Stryker Corp. | 190 | $ | 41,097 | |||||
Zimmer Biomet Holdings, Inc. | 680 | 93,344 | ||||||
|
| |||||||
1,445,617 | ||||||||
Health Care Providers & Services 4.7% | ||||||||
AmerisourceBergen Corp. | 600 | 49,398 | ||||||
Anthem, Inc. | 600 | 144,060 | ||||||
Centene Corp.* | 2,680 | 115,937 | ||||||
Cigna Corp. | 832 | 126,289 | ||||||
CVS Health Corp. | 3,000 | 189,210 | ||||||
HCA Healthcare, Inc. | 1,130 | 136,075 | ||||||
UnitedHealth Group, Inc.(u) | 1,410 | 306,421 | ||||||
|
| |||||||
1,067,390 | ||||||||
Health Care Technology 0.3% | ||||||||
Veeva Systems, Inc. (Class A Stock)* | 480 | 73,291 | ||||||
Hotels, Restaurants & Leisure 2.1% | ||||||||
Hilton Worldwide Holdings, Inc. | 900 | 83,799 | ||||||
McDonald’s Corp. | 300 | 64,413 | ||||||
Penn National Gaming, Inc.* | 3,900 | 72,637 | ||||||
RCI Hospitality Holdings, Inc. | 1,700 | 35,156 | ||||||
Starbucks Corp. | 2,500 | 221,050 | ||||||
|
| |||||||
477,055 | ||||||||
Household Durables 1.1% | ||||||||
M/I Homes, Inc.* | 3,900 | 146,835 | ||||||
NVR, Inc.* | 10 | 37,174 | ||||||
Toll Brothers, Inc. | 300 | 12,315 | ||||||
Whirlpool Corp. | 300 | 47,508 | ||||||
|
| |||||||
243,832 | ||||||||
Household Products 1.3% | ||||||||
Procter & Gamble Co. (The)(u) | 2,100 | 261,198 | ||||||
Spectrum Brands Holdings, Inc. | 640 | 33,741 | ||||||
|
| |||||||
294,939 | ||||||||
Independent Power & Renewable Electricity Producers 1.3% | ||||||||
Atlantic Power Corp.* | 10,400 | 24,336 |
See Notes to Financial Statements.
16 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Independent Power & Renewable Electricity Producers (cont’d.) | ||||||||
NRG Energy, Inc. | 3,700 | $ | 146,520 | |||||
Vistra Energy Corp. | 4,400 | 117,612 | ||||||
|
| |||||||
288,468 | ||||||||
Industrial Conglomerates 0.8% | ||||||||
General Electric Co. | 20,300 | 181,482 | ||||||
Insurance 2.8% | ||||||||
Allstate Corp. (The) | 1,400 | 152,152 | ||||||
American Equity Investment Life Holding Co. | 4,700 | 113,740 | ||||||
American International Group, Inc. | 2,800 | 155,960 | ||||||
CNA Financial Corp. | 300 | 14,775 | ||||||
Hallmark Financial Services, Inc.* | 1,500 | 28,695 | ||||||
MetLife, Inc. | 3,500 | 165,060 | ||||||
|
| |||||||
630,382 | ||||||||
Interactive Media & Services 6.0% | ||||||||
Alphabet, Inc. (Class A Stock)*(u) | 278 | 339,477 | ||||||
Alphabet, Inc. (Class C Stock)*(u) | 391 | 476,629 | ||||||
Facebook, Inc. (Class A Stock)*(u) | 2,920 | 519,994 | ||||||
Liberty TripAdvisor Holdings, Inc. (Class A Stock)* | 2,600 | 24,466 | ||||||
|
| |||||||
1,360,566 | ||||||||
Internet & Direct Marketing Retail 4.0% | ||||||||
1-800-Flowers.com, Inc. (Class A Stock)* | 8,000 | 118,360 | ||||||
Amazon.com, Inc.*(u) | 255 | 442,657 | ||||||
eBay, Inc. | 4,500 | 175,410 | ||||||
Expedia Group, Inc. | 1,000 | 134,410 | ||||||
Qurate Retail, Inc. (Class A Stock)* | 4,200 | 43,323 | ||||||
|
| |||||||
914,160 | ||||||||
IT Services 6.6% | ||||||||
Accenture PLC (Class A Stock)(u) | 1,290 | 248,131 | ||||||
Automatic Data Processing, Inc. | 400 | 64,568 | ||||||
CACI International, Inc. (Class A Stock)* | 110 | 25,439 | ||||||
Cognizant Technology Solutions Corp. (Class A Stock) | 1,800 | 108,477 | ||||||
DXC Technology Co. | 2,500 | 73,750 | ||||||
FleetCor Technologies, Inc.* | 500 | 143,390 | ||||||
Mastercard, Inc. (Class A Stock)(u) | 1,000 | 271,570 | ||||||
Perspecta, Inc. | 4,300 | 112,316 |
See Notes to Financial Statements.
PGIM QMALarge-Cap Core Equity PLUS Fund | 17 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
IT Services (cont’d.) | ||||||||
VeriSign, Inc.* | 290 | $ | 54,703 | |||||
Visa, Inc. (Class A Stock)(u) | 2,305 | 396,483 | ||||||
|
| |||||||
1,498,827 | ||||||||
Life Sciences Tools & Services 1.4% | ||||||||
IQVIA Holdings, Inc.* | 830 | 123,985 | ||||||
Thermo Fisher Scientific, Inc. | 670 | 195,151 | ||||||
|
| |||||||
319,136 | ||||||||
Machinery 2.1% | ||||||||
Gates Industrial Corp. PLC* | 10,700 | 107,749 | ||||||
Meritor, Inc.* | 1,000 | 18,500 | ||||||
Oshkosh Corp. | 1,500 | 113,700 | ||||||
Park-Ohio Holdings Corp. | 1,200 | 35,832 | ||||||
Timken Co. (The) | 2,000 | 87,020 | ||||||
Wabash National Corp. | 8,100 | 117,531 | ||||||
|
| |||||||
480,332 | ||||||||
Media 1.0% | ||||||||
CBS Corp. (Class B Stock) | 500 | 20,185 | ||||||
Comcast Corp. (Class A Stock) | 2,000 | 90,160 | ||||||
Discovery, Inc. (Class C Stock)* | 4,400 | 108,328 | ||||||
|
| |||||||
218,673 | ||||||||
Metals & Mining 0.3% | ||||||||
Steel Dynamics, Inc. | 2,000 | 59,600 | ||||||
Mortgage Real Estate Investment Trusts (REITs) 0.8% | ||||||||
Colony Credit Real Estate, Inc. | 5,400 | 78,084 | ||||||
Ladder Capital Corp. | 1,112 | 19,204 | ||||||
Western Asset Mortgage Capital Corp. | 9,400 | 90,710 | ||||||
|
| |||||||
187,998 | ||||||||
Multiline Retail 0.4% | ||||||||
Big Lots, Inc. | 1,200 | 29,400 | ||||||
Macy’s, Inc. | 4,300 | 66,822 | ||||||
|
| |||||||
96,222 |
See Notes to Financial Statements.
18 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Multi-Utilities 0.8% | ||||||||
Dominion Energy, Inc. | 1,000 | $ | 81,040 | |||||
MDU Resources Group, Inc. | 900 | 25,371 | ||||||
Sempra Energy | 500 | 73,805 | ||||||
|
| |||||||
180,216 | ||||||||
Oil, Gas & Consumable Fuels 3.7% | ||||||||
Ardmore Shipping Corp. (Ireland)* | 17,400 | 116,406 | ||||||
Chevron Corp. | 1,030 | 122,158 | ||||||
ConocoPhillips | 1,400 | 79,772 | ||||||
Exxon Mobil Corp. | 600 | 42,366 | ||||||
HollyFrontier Corp. | 1,300 | 69,732 | ||||||
Kinder Morgan, Inc. | 8,300 | 171,063 | ||||||
Nordic American Tankers Ltd. | 35,500 | 76,680 | ||||||
Phillips 66 | 1,030 | 105,472 | ||||||
Scorpio Tankers, Inc. (Monaco) | 1,000 | 29,760 | ||||||
World Fuel Services Corp. | 800 | 31,952 | ||||||
|
| |||||||
845,361 | ||||||||
Personal Products 0.0% | ||||||||
Nu Skin Enterprises, Inc. (Class A Stock) | 200 | 8,506 | ||||||
Pharmaceuticals 3.6% | ||||||||
Allergan PLC | 60 | 10,097 | ||||||
Horizon Therapeutics PLC* | 4,400 | 119,812 | ||||||
Jazz Pharmaceuticals PLC* | 140 | 17,940 | ||||||
Johnson & Johnson(u) | 2,200 | 284,636 | ||||||
Merck & Co., Inc.(u) | 4,000 | 336,720 | ||||||
Mylan NV* | 500 | 9,890 | ||||||
Zoetis, Inc. | 400 | 49,836 | ||||||
|
| |||||||
828,931 | ||||||||
Professional Services 1.2% | ||||||||
Barrett Business Services, Inc. | 1,400 | 124,348 | ||||||
CoStar Group, Inc.* | 100 | 59,320 | ||||||
Korn Ferry | 2,400 | 92,736 | ||||||
|
| |||||||
276,404 | ||||||||
Real Estate Management & Development 0.5% | ||||||||
Newmark Group, Inc. (Class A Stock) | 12,217 | 110,686 |
See Notes to Financial Statements.
PGIM QMALarge-Cap Core Equity PLUS Fund | 19 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Road & Rail 0.2% | ||||||||
Heartland Express, Inc. | 1,200 | $ | 25,812 | |||||
Norfolk Southern Corp. | 150 | 26,949 | ||||||
|
| |||||||
52,761 | ||||||||
Semiconductors & Semiconductor Equipment 3.6% | ||||||||
AXT, Inc.* | 13,400 | 47,704 | ||||||
Broadcom, Inc. | 400 | 110,428 | ||||||
Diodes, Inc.* | 1,000 | 40,150 | ||||||
Intel Corp.(u) | 6,900 | 355,557 | ||||||
Lam Research Corp. | 200 | 46,222 | ||||||
QUALCOMM, Inc. | 1,900 | 144,932 | ||||||
Universal Display Corp. | 500 | 83,950 | ||||||
|
| |||||||
828,943 | ||||||||
Software 11.8% | ||||||||
Adobe, Inc.*(u) | 900 | 248,625 | ||||||
Cadence Design Systems, Inc.* | 900 | 59,472 | ||||||
Cision Ltd.* | 8,600 | 66,134 | ||||||
Fortinet, Inc.* | 2,000 | 153,520 | ||||||
Intuit, Inc. | 780 | 207,433 | ||||||
LogMeIn, Inc. | 800 | 56,768 | ||||||
Microsoft Corp.(u) | 8,000 | 1,112,240 | ||||||
Nuance Communications, Inc.* | 6,700 | 109,277 | ||||||
Oracle Corp.(u) | 5,000 | 275,150 | ||||||
Progress Software Corp. | 2,700 | 102,762 | ||||||
SS&C Technologies Holdings, Inc. | 1,000 | 51,570 | ||||||
Symantec Corp. | 5,200 | 122,876 | ||||||
Synopsys, Inc.* | 600 | 82,350 | ||||||
TiVo Corp. | 5,400 | 41,121 | ||||||
|
| |||||||
2,689,298 | ||||||||
Specialty Retail 1.8% | ||||||||
Asbury Automotive Group, Inc.* | 400 | 40,932 | ||||||
AutoNation, Inc.* | 1,000 | 50,700 | ||||||
Best Buy Co., Inc. | 300 | 20,697 | ||||||
Lowe’s Cos., Inc. | 1,700 | 186,932 | ||||||
Michaels Cos., Inc. (The)* | 4,300 | 42,097 | ||||||
Sonic Automotive, Inc. (Class A Stock) | 2,400 | 75,384 | ||||||
|
| |||||||
416,742 |
See Notes to Financial Statements.
20 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Technology Hardware, Storage & Peripherals 5.6% | ||||||||
Apple, Inc.(u) | 4,550 | $ | 1,019,063 | |||||
Diebold Nixdorf, Inc.* | 8,800 | 98,560 | ||||||
HP, Inc. | 6,600 | 124,872 | ||||||
Xerox Holdings Corp. | 1,300 | 38,883 | ||||||
|
| |||||||
1,281,378 | ||||||||
Textiles, Apparel & Luxury Goods 0.1% | ||||||||
PVH Corp. | 360 | 31,763 | ||||||
Thrifts & Mortgage Finance 0.5% | ||||||||
Federal Agricultural Mortgage Corp. (Class C Stock) | 900 | 73,494 | ||||||
Merchants Bancorp | 2,000 | 33,080 | ||||||
|
| |||||||
106,574 | ||||||||
Tobacco 1.5% | ||||||||
Altria Group, Inc. | 4,500 | 184,050 | ||||||
Philip Morris International, Inc. | 2,200 | 167,046 | ||||||
|
| |||||||
351,096 | ||||||||
Trading Companies & Distributors 1.6% | ||||||||
BMC Stock Holdings, Inc.* | 5,600 | 146,608 | ||||||
GMS, Inc.* | 4,000 | 114,880 | ||||||
Herc Holdings, Inc.* | 1,500 | 69,765 | ||||||
WESCO International, Inc.* | 800 | 38,216 | ||||||
|
| |||||||
369,469 | ||||||||
|
| |||||||
TOTAL COMMON STOCKS | 28,994,545 | |||||||
|
| |||||||
EXCHANGE-TRADED FUND 0.1% | ||||||||
SPDR S&P 500 ETF Trust | 95 | 28,193 | ||||||
|
| |||||||
TOTAL LONG-TERM INVESTMENTS | 29,022,738 | |||||||
|
|
See Notes to Financial Statements.
PGIM QMALarge-Cap Core Equity PLUS Fund | 21 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Shares | Value | ||||||
SHORT-TERM INVESTMENT 0.2% | ||||||||
AFFILIATED MUTUAL FUND | ||||||||
PGIM Core Ultra Short Bond Fund | 44,139 | $ | 44,139 | |||||
|
| |||||||
TOTAL INVESTMENTS, BEFORE SECURITIES SOLD SHORT | 29,066,877 | |||||||
|
| |||||||
SECURITIES SOLD SHORT (27.9)% | ||||||||
COMMON STOCKS | ||||||||
Aerospace & Defense (0.1)% | ||||||||
Axon Enterprise, Inc.* | 300 | (17,034 | ) | |||||
Auto Components (0.4)% | ||||||||
Dorman Products, Inc.* | 200 | (15,908 | ) | |||||
Visteon Corp.* | 900 | (74,286 | ) | |||||
|
| |||||||
(90,194 | ) | |||||||
Banks (0.3)% | ||||||||
Commerce Bancshares, Inc. | 300 | (18,195 | ) | |||||
Cullen/Frost Bankers, Inc. | 500 | (44,275 | ) | |||||
|
| |||||||
(62,470 | ) | |||||||
Biotechnology (2.6)% | ||||||||
Agios Pharmaceuticals, Inc.* | 1,300 | (42,120 | ) | |||||
Alder Biopharmaceuticals, Inc.* | 1,400 | (26,404 | ) | |||||
Alnylam Pharmaceuticals, Inc.* | 1,200 | (96,504 | ) | |||||
Atara Biotherapeutics, Inc.* | 1,800 | (25,416 | ) | |||||
BioCryst Pharmaceuticals, Inc.* | 3,800 | (10,887 | ) | |||||
BioMarin Pharmaceutical, Inc.* | 200 | (13,480 | ) | |||||
Blueprint Medicines Corp.* | 200 | (14,694 | ) | |||||
Dynavax Technologies Corp.* | 2,300 | (8,223 | ) | |||||
Epizyme, Inc.* | 3,100 | (31,976 | ) | |||||
Fate Therapeutics, Inc.* | 2,500 | (38,825 | ) | |||||
Heron Therapeutics, Inc.* | 2,700 | (49,950 | ) | |||||
Insmed, Inc.* | 1,400 | (24,696 | ) | |||||
Portola Pharmaceuticals, Inc.* | 2,100 | (56,322 | ) | |||||
Progenics Pharmaceuticals, Inc.* | 3,000 | (15,165 | ) | |||||
Sangamo Therapeutics, Inc.* | 800 | (7,240 | ) | |||||
Sarepta Therapeutics, Inc.* | 1,730 | (130,304 | ) | |||||
Vericel Corp.* | 400 | (6,056 | ) | |||||
|
| |||||||
(598,262 | ) |
See Notes to Financial Statements.
22 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Building Products (0.8)% | ||||||||
Lennox International, Inc. | 760 | $ | (184,657 | ) | ||||
Capital Markets (0.4)% | ||||||||
Ares Management Corp. (Class A Stock) | 1,600 | (42,896 | ) | |||||
Hamilton Lane, Inc. (Class A Stock) | 1,000 | (56,960 | ) | |||||
|
| |||||||
(99,856 | ) | |||||||
Chemicals (1.7)% | ||||||||
Albemarle Corp. | 1,100 | (76,472 | ) | |||||
International Flavors & Fragrances, Inc. | 1,570 | (192,623 | ) | |||||
Quaker Chemical Corp. | 100 | (15,814 | ) | |||||
Sensient Technologies Corp. | 1,400 | (96,110 | ) | |||||
|
| |||||||
(381,019 | ) | |||||||
Commercial Services & Supplies (0.5)% | ||||||||
Stericycle, Inc.* | 2,100 | (106,953 | ) | |||||
Communications Equipment (0.6)% | ||||||||
Lumentum Holdings, Inc.* | 2,600 | (139,256 | ) | |||||
Construction & Engineering (0.1)% | ||||||||
Argan, Inc. | 500 | (19,645 | ) | |||||
WillScot Corp.* | 800 | (12,464 | ) | |||||
|
| |||||||
(32,109 | ) | |||||||
Construction Materials (0.1)% | ||||||||
Eagle Materials, Inc. | 300 | (27,003 | ) | |||||
Diversified Consumer Services (0.1)% | ||||||||
OneSpaWorld Holdings Ltd. (Bahamas)* | 2,100 | (32,613 | ) | |||||
Electronic Equipment, Instruments & Components (0.9)% | ||||||||
Badger Meter, Inc. | 1,000 | (53,700 | ) | |||||
Cognex Corp. | 900 | (44,217 | ) | |||||
FARO Technologies, Inc.* | 600 | (29,010 | ) | |||||
FLIR Systems, Inc. | 700 | (36,813 | ) | |||||
Napco Security Technologies, Inc.* | 600 | (15,312 | ) | |||||
nLight, Inc.* | 1,300 | (20,358 | ) | |||||
|
| |||||||
(199,410 | ) |
See Notes to Financial Statements.
PGIM QMALarge-Cap Core Equity PLUS Fund | 23 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Entertainment (0.1)% | ||||||||
World Wrestling Entertainment, Inc. (Class A Stock) | 200 | $ | (14,230 | ) | ||||
Equity Real Estate Investment Trusts (REITs) (1.1)% | ||||||||
Americold Realty Trust | 6,300 | (233,541 | ) | |||||
CoreSite Realty Corp. | 100 | (12,185 | ) | |||||
|
| |||||||
(245,726 | ) | |||||||
Food & Staples Retailing (0.1)% | ||||||||
Chefs’ Warehouse, Inc. (The)* | 300 | (12,096 | ) | |||||
Food Products (0.6)% | ||||||||
Cal-Maine Foods, Inc. | 1,500 | (59,933 | ) | |||||
Farmer Brothers Co.* | 600 | (7,770 | ) | |||||
Freshpet, Inc.* | 1,200 | (59,724 | ) | |||||
Limoneira Co. | 600 | (11,016 | ) | |||||
|
| |||||||
(138,443 | ) | |||||||
Health Care Equipment & Supplies (2.3)% | ||||||||
BioLife Solutions, Inc.* | 700 | (11,637 | ) | |||||
Cantel Medical Corp. | 1,400 | (104,720 | ) | |||||
Heska Corp.* | 300 | (21,261 | ) | |||||
iRhythm Technologies, Inc.* | 900 | (66,699 | ) | |||||
Nevro Corp.* | 1,000 | (85,970 | ) | |||||
OrthoPediatrics Corp.* | 500 | (17,630 | ) | |||||
Penumbra, Inc.* | 1,300 | (174,837 | ) | |||||
RTI Surgical Holdings, Inc.* | 2,500 | (7,125 | ) | |||||
Sientra, Inc.* | 1,700 | (11,016 | ) | |||||
ViewRay, Inc.* | 3,400 | (9,860 | ) | |||||
|
| |||||||
(510,755 | ) | |||||||
Health Care Providers & Services (1.4)% | ||||||||
Addus HomeCare Corp.* | 500 | (39,640 | ) | |||||
Diplomat Pharmacy, Inc.* | 1,600 | (7,840 | ) | |||||
Guardant Health, Inc.* | 2,700 | (172,341 | ) | |||||
HealthEquity, Inc.* | 600 | (34,287 | ) | |||||
National Research Corp. | 200 | (11,550 | ) | |||||
PetIQ, Inc.* | 800 | (21,808 | ) | |||||
Premier, Inc. (Class A Stock)* | 500 | (14,460 | ) | |||||
Tivity Health, Inc.* | 1,600 | (26,608 | ) | |||||
|
| |||||||
(328,534 | ) |
See Notes to Financial Statements.
24 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Health Care Technology (0.3)% | ||||||||
Inspire Medical Systems, Inc.* | 400 | $ | (24,408 | ) | ||||
Tabula Rasa HealthCare, Inc.* | 700 | (38,458 | ) | |||||
Vocera Communications, Inc.* | 400 | (9,860 | ) | |||||
|
| |||||||
(72,726 | ) | |||||||
Hotels, Restaurants & Leisure (0.1)% | ||||||||
Noodles & Co.* | 1,600 | (9,056 | ) | |||||
Shake Shack, Inc. (Class A Stock)* | 200 | (19,608 | ) | |||||
|
| |||||||
(28,664 | ) | |||||||
Household Durables (0.9)% | ||||||||
Roku, Inc.* | 2,000 | (203,520 | ) | |||||
Household Products (0.1)% | ||||||||
WD-40 Co. | 60 | (11,012 | ) | |||||
Independent Power & Renewable Electricity Producers (0.4)% | ||||||||
Clearway Energy, Inc. (Class A Stock) | 3,700 | (64,158 | ) | |||||
Pattern Energy Group, Inc. (Class A Stock) | 1,300 | (35,009 | ) | |||||
|
| |||||||
(99,167 | ) | |||||||
Insurance (0.6)% | ||||||||
eHealth, Inc.* | 800 | (53,432 | ) | |||||
Goosehead Insurance, Inc. (Class A Stock) | 400 | (19,740 | ) | |||||
Markel Corp.* | 20 | (23,638 | ) | |||||
ProAssurance Corp. | 1,100 | (44,297 | ) | |||||
|
| |||||||
(141,107 | ) | |||||||
Interactive Media & Services (0.4)% | ||||||||
Cargurus, Inc.* | 400 | (12,380 | ) | |||||
Eventbrite, Inc. (Class A Stock)* | 1,600 | (28,336 | ) | |||||
Zillow Group, Inc. (Class C Stock)* | 2,000 | (59,640 | ) | |||||
|
| |||||||
(100,356 | ) | |||||||
Internet & Direct Marketing Retail (0.4)% | ||||||||
GrubHub, Inc.* | 1,800 | (101,178 | ) | |||||
IT Services (1.6)% | ||||||||
MongoDB, Inc.* | 800 | (96,384 | ) |
See Notes to Financial Statements.
PGIM QMALarge-Cap Core Equity PLUS Fund | 25 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
IT Services (cont’d.) | ||||||||
Okta, Inc.* | 1,100 | $ | (108,306 | ) | ||||
Square, Inc. (Class A Stock)* | 2,600 | (161,070 | ) | |||||
|
| |||||||
(365,760 | ) | |||||||
Life Sciences Tools & Services (0.4)% | ||||||||
Codexis, Inc.* | 2,100 | (28,802 | ) | |||||
Luminex Corp. | 1,500 | (30,975 | ) | |||||
Quanterix Corp.* | 900 | (19,764 | ) | |||||
|
| |||||||
(79,541 | ) | |||||||
Machinery (1.2)% | ||||||||
Deere & Co. | 430 | (72,532 | ) | |||||
Lindsay Corp. | 400 | (37,140 | ) | |||||
RBC Bearings, Inc.* | 300 | (49,773 | ) | |||||
Wabtec Corp. | 1,100 | (79,046 | ) | |||||
Xylem, Inc. | 400 | (31,848 | ) | |||||
|
| |||||||
(270,339 | ) | |||||||
Media (0.3)% | ||||||||
Cardlytics, Inc.* | 800 | (26,816 | ) | |||||
New York Times Co. (The) (Class A Stock) | 1,100 | (31,328 | ) | |||||
|
| |||||||
(58,144 | ) | |||||||
Mortgage Real Estate Investment Trusts (REITs) (0.1)% | ||||||||
Blackstone Mortgage Trust, Inc. (Class A Stock) | 200 | (7,170 | ) | |||||
Granite Point Mortgage Trust, Inc. | 700 | (13,118 | ) | |||||
|
| |||||||
(20,288 | ) | |||||||
Pharmaceuticals (0.1)% | ||||||||
Dermira, Inc.* | 1,800 | (11,502 | ) | |||||
Professional Services (0.2)% | ||||||||
Upwork, Inc.* | 3,900 | (51,890 | ) | |||||
Semiconductors & Semiconductor Equipment (0.1)% | ||||||||
Advanced Micro Devices, Inc.* | 1,100 | (31,889 | ) | |||||
Software (4.7)% | ||||||||
2U, Inc.* | 900 | (14,652 | ) | |||||
8x8, Inc.* | 3,300 | (68,376 | ) |
See Notes to Financial Statements.
26 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Software (cont’d.) | ||||||||
Alteryx, Inc. (Class A Stock)* | 700 | $ | (75,201 | ) | ||||
Anaplan, Inc.* | 1,600 | (75,200 | ) | |||||
Appfolio, Inc. (Class A Stock)* | 500 | (47,570 | ) | |||||
Coupa Software, Inc.* | 2,100 | (272,097 | ) | |||||
Guidewire Software, Inc.* | 200 | (21,076 | ) | |||||
Instructure, Inc.* | 1,300 | (50,362 | ) | |||||
Pegasystems, Inc. | 500 | (34,025 | ) | |||||
Q2 Holdings, Inc.* | 1,200 | (94,644 | ) | |||||
SailPoint Technologies Holding, Inc.* | 2,900 | (54,201 | ) | |||||
Smartsheet, Inc. (Class A Stock)* | 1,400 | (50,442 | ) | |||||
Varonis Systems, Inc.* | 1,000 | (59,780 | ) | |||||
Workday, Inc. (Class A Stock)* | 90 | (15,296 | ) | |||||
Zendesk, Inc.* | 1,900 | (138,472 | ) | |||||
|
| |||||||
(1,071,394 | ) | |||||||
Specialty Retail (0.1)% | ||||||||
At Home Group, Inc.* | 1,800 | (17,316 | ) | |||||
Technology Hardware, Storage & Peripherals (0.8)% | ||||||||
3D Systems Corp.* | 3,800 | (30,970 | ) | |||||
Immersion Corp.* | 1,100 | (8,415 | ) | |||||
Pure Storage, Inc. (Class A Stock)* | 8,500 | (143,990 | ) | |||||
|
| |||||||
(183,375 | ) | |||||||
Thrifts & Mortgage Finance (0.1)% | ||||||||
Mr. Cooper Group, Inc.* | 2,800 | (29,736 | ) | |||||
Trading Companies & Distributors (0.7)% | ||||||||
Air Lease Corp. | 800 | (33,456 | ) | |||||
SiteOne Landscape Supply, Inc.* | 1,400 | (103,628 | ) | |||||
Textainer Group Holdings Ltd. (China)* | 1,100 | (10,901 | ) | |||||
|
| |||||||
(147,985 | ) |
See Notes to Financial Statements.
PGIM QMALarge-Cap Core Equity PLUS Fund | 27 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Wireless Telecommunication Services (0.1)% | ||||||||
Boingo Wireless, Inc.* | 1,500 | $ | (16,650 | ) | ||||
|
| |||||||
TOTAL SECURITIES SOLD SHORT | (6,334,159 | ) | ||||||
|
| |||||||
TOTAL INVESTMENTS, NET OF SECURITIES SOLD SHORT 99.9% | 22,732,718 | |||||||
Other assets in excess of liabilities 0.1% | 16,619 | |||||||
|
| |||||||
NET ASSETS 100.0% | $ | 22,749,337 | ||||||
|
|
Below is a list of the abbreviation(s) used in the semiannual report:
ETF—Exchange-Traded Fund
LIBOR—London Interbank Offered Rate
REITs—Real Estate Investment Trust
SPDR—Standard & Poor’s Depositary Receipts
* | 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, 2019 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Common Stocks | ||||||||||||
Aerospace & Defense | $ | 750,163 | $ | — | $ | — | ||||||
Air Freight & Logistics | 125,550 | — | — | |||||||||
Automobiles | 132,820 | — | — | |||||||||
Banks | 1,134,917 | — | — | |||||||||
Beverages | 336,046 | — | — | |||||||||
Biotechnology | 1,233,295 | — | — | |||||||||
Building Products | 401,718 | — | — | |||||||||
Capital Markets | 745,861 | — | — | |||||||||
Chemicals | 642,642 | — | — |
See Notes to Financial Statements.
28 |
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities (continued) | ||||||||||||
Common Stocks (continued) | ||||||||||||
Commercial Services & Supplies | $ | 136,428 | $ | — | $ | — | ||||||
Communications Equipment | 416,627 | — | — | |||||||||
Construction & Engineering | 105,386 | — | — | |||||||||
Construction Materials | 228,933 | — | — | |||||||||
Consumer Finance | 208,426 | — | — | |||||||||
Containers & Packaging | 18,225 | — | — | |||||||||
Distributors | 191,136 | — | — | |||||||||
Diversified Consumer Services | 131,139 | — | — | |||||||||
Diversified Financial Services | 397,988 | — | — | |||||||||
Diversified Telecommunication Services | 650,556 | — | — | |||||||||
Electric Utilities | 312,845 | — | — | |||||||||
Electrical Equipment | 42,811 | — | — | |||||||||
Electronic Equipment, Instruments & Components | 447,450 | — | — | |||||||||
Energy Equipment & Services | 6,856 | — | — | |||||||||
Entertainment | 247,464 | — | — | |||||||||
Equity Real Estate Investment Trusts (REITs) | 910,635 | — | — | |||||||||
Food & Staples Retailing | 189,822 | — | — | |||||||||
Food Products | 582,438 | — | — | |||||||||
Gas Utilities | 50,270 | — | — | |||||||||
Health Care Equipment & Supplies | 1,445,617 | — | — | |||||||||
Health Care Providers & Services | 1,067,390 | — | — | |||||||||
Health Care Technology | 73,291 | — | — | |||||||||
Hotels, Restaurants & Leisure | 477,055 | — | — | |||||||||
Household Durables | 243,832 | — | — | |||||||||
Household Products | 294,939 | — | — | |||||||||
Independent Power & Renewable Electricity Producers | 288,468 | — | — | |||||||||
Industrial Conglomerates | 181,482 | — | — | |||||||||
Insurance | 630,382 | — | — | |||||||||
Interactive Media & Services | 1,360,566 | — | — | |||||||||
Internet & Direct Marketing Retail | 914,160 | — | — | |||||||||
IT Services | 1,498,827 | — | — | |||||||||
Life Sciences Tools & Services | 319,136 | — | — | |||||||||
Machinery | 480,332 | — | — | |||||||||
Media | 218,673 | — | — | |||||||||
Metals & Mining | 59,600 | — | — | |||||||||
Mortgage Real Estate Investment Trusts (REITs) | 187,998 | — | — | |||||||||
Multiline Retail | 96,222 | — | — | |||||||||
Multi-Utilities | 180,216 | — | — | |||||||||
Oil, Gas & Consumable Fuels | 845,361 | — | — | |||||||||
Personal Products | 8,506 | — | — | |||||||||
Pharmaceuticals | 828,931 | — | — | |||||||||
Professional Services | 276,404 | — | — | |||||||||
Real Estate Management & Development | 110,686 | — | — | |||||||||
Road & Rail | 52,761 | — | — | |||||||||
Semiconductors & Semiconductor Equipment | 828,943 | — | — | |||||||||
Software | 2,689,298 | — | — | |||||||||
Specialty Retail | 416,742 | — | — |
See Notes to Financial Statements.
PGIM QMALarge-Cap Core Equity PLUS Fund | 29 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities (continued) | ||||||||||||
Common Stocks (continued) | ||||||||||||
Technology Hardware, Storage & Peripherals | $ | 1,281,378 | $ | — | $ | — | ||||||
Textiles, Apparel & Luxury Goods | 31,763 | — | — | |||||||||
Thrifts & Mortgage Finance | 106,574 | — | — | |||||||||
Tobacco | 351,096 | — | — | |||||||||
Trading Companies & Distributors | 369,469 | — | — | |||||||||
Exchange-Traded Fund | 28,193 | — | — | |||||||||
Affiliated Mutual Fund | 44,139 | — | — | |||||||||
Common Stocks—Short | ||||||||||||
Aerospace & Defense | (17,034 | ) | — | — | ||||||||
Auto Components | (90,194 | ) | — | — | ||||||||
Banks | (62,470 | ) | — | — | ||||||||
Biotechnology | (598,262 | ) | — | — | ||||||||
Building Products | (184,657 | ) | — | — | ||||||||
Capital Markets | (99,856 | ) | — | — | ||||||||
Chemicals | (381,019 | ) | — | — | ||||||||
Commercial Services & Supplies | (106,953 | ) | — | — | ||||||||
Communications Equipment | (139,256 | ) | — | — | ||||||||
Construction & Engineering | (32,109 | ) | — | — | ||||||||
Construction Materials | (27,003 | ) | — | — | ||||||||
Diversified Consumer Services | (32,613 | ) | — | — | ||||||||
Electronic Equipment, Instruments & Components | (199,410 | ) | — | — | ||||||||
Entertainment | (14,230 | ) | — | — | ||||||||
Equity Real Estate Investment Trusts (REITs) | (245,726 | ) | — | — | ||||||||
Food & Staples Retailing | (12,096 | ) | — | — | ||||||||
Food Products | (138,443 | ) | — | — | ||||||||
Health Care Equipment & Supplies | (510,755 | ) | — | — | ||||||||
Health Care Providers & Services | (328,534 | ) | — | — | ||||||||
Health Care Technology | (72,726 | ) | — | — | ||||||||
Hotels, Restaurants & Leisure | (28,664 | ) | — | — | ||||||||
Household Durables | (203,520 | ) | — | — | ||||||||
Household Products | (11,012 | ) | — | — | ||||||||
Independent Power & Renewable Electricity Producers | (99,167 | ) | — | — | ||||||||
Insurance | (141,107 | ) | — | — | ||||||||
Interactive Media & Services | (100,356 | ) | — | — | ||||||||
Internet & Direct Marketing Retail | (101,178 | ) | — | — | ||||||||
IT Services | (365,760 | ) | — | — | ||||||||
Life Sciences Tools & Services | (79,541 | ) | — | — | ||||||||
Machinery | (270,339 | ) | — | — | ||||||||
Media | (58,144 | ) | — | — | ||||||||
Mortgage Real Estate Investment Trusts (REITs) | (20,288 | ) | — | — | ||||||||
Pharmaceuticals | (11,502 | ) | — | — | ||||||||
Professional Services | (51,890 | ) | — | — | ||||||||
Semiconductors & Semiconductor Equipment | (31,889 | ) | — | — | ||||||||
Software | (1,071,394 | ) | — | — | ||||||||
Specialty Retail | (17,316 | ) | — | — | ||||||||
Technology Hardware, Storage & Peripherals | (183,375 | ) | — | — | ||||||||
Thrifts & Mortgage Finance | (29,736 | ) | — | — |
See Notes to Financial Statements.
30 |
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities (continued) | ||||||||||||
Common Stocks—Short (continued) | ||||||||||||
Trading Companies & Distributors | $ | (147,985 | ) | $ | — | $ | — | |||||
Wireless Telecommunication Services | (16,650 | ) | — | — | ||||||||
|
|
|
|
|
| |||||||
Total | $ | 22,732,718 | $ | — | $ | — | ||||||
|
|
|
|
|
|
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, 2019 were as follows:
Software | 11.8 | % | ||
IT Services | 6.6 | |||
Health Care Equipment & Supplies | 6.4 | |||
Interactive Media & Services | 6.0 | |||
Technology Hardware, Storage & Peripherals | 5.6 | |||
Biotechnology | 5.4 | |||
Banks | 5.0 | |||
Health Care Providers & Services | 4.7 | |||
Internet & Direct Marketing Retail | 4.0 | |||
Equity Real Estate Investment Trusts (REITs) | 4.0 | |||
Oil, Gas & Consumable Fuels | 3.7 | |||
Semiconductors & Semiconductor Equipment | 3.6 | |||
Pharmaceuticals | 3.6 | |||
Aerospace & Defense | 3.3 | |||
Capital Markets | 3.3 | |||
Diversified Telecommunication Services | 2.9 | |||
Chemicals | 2.8 | |||
Insurance | 2.8 | |||
Food Products | 2.6 | |||
Machinery | 2.1 | |||
Hotels, Restaurants & Leisure | 2.1 | |||
Electronic Equipment, Instruments & Components | 2.0 | |||
Specialty Retail | 1.8 | |||
Communications Equipment | 1.8 | |||
Building Products | 1.8 | |||
Diversified Financial Services | 1.8 | |||
Trading Companies & Distributors | 1.6 | |||
Tobacco | 1.5 | |||
Beverages | 1.5 | |||
Life Sciences Tools & Services | 1.4 | |||
Electric Utilities | 1.4 | |||
Household Products | 1.3 | |||
Independent Power & Renewable Electricity Producers | 1.3 | |||
Professional Services | 1.2 | |||
Entertainment | 1.1 | |||
Household Durables | 1.1 | % | ||
Construction Materials | 1.0 | |||
Media | 1.0 | |||
Consumer Finance | 0.9 | |||
Distributors | 0.8 | |||
Food & Staples Retailing | 0.8 | |||
Mortgage Real Estate Investment Trusts (REITs) | 0.8 | |||
Industrial Conglomerates | 0.8 | |||
Multi-Utilities | 0.8 | |||
Commercial Services & Supplies | 0.6 | |||
Automobiles | 0.6 | |||
Diversified Consumer Services | 0.6 | |||
Air Freight & Logistics | 0.6 | |||
Real Estate Management & Development | 0.5 | |||
Thrifts & Mortgage Finance | 0.5 | |||
Construction & Engineering | 0.5 | |||
Multiline Retail | 0.4 | |||
Health Care Technology | 0.3 | |||
Metals & Mining | 0.3 | |||
Road & Rail | 0.2 | |||
Gas Utilities | 0.2 | |||
Affiliated Mutual Fund | 0.2 | |||
Electrical Equipment | 0.2 | |||
Textiles, Apparel & Luxury Goods | 0.1 | |||
Exchange-Traded Fund | 0.1 | |||
Containers & Packaging | 0.1 | |||
Personal Products | 0.0 | * | ||
Energy Equipment & Services | 0.0 | * | ||
Securities Sold Short | ||||
Household Products | (0.1 | ) | ||
Pharmaceuticals | (0.1 | ) | ||
Food & Staples Retailing | (0.1 | ) | ||
Entertainment | (0.1 | ) | ||
Wireless Telecommunication Services | (0.1 | ) | ||
Aerospace & Defense | (0.1 | ) | ||
Specialty Retail | (0.1 | ) |
See Notes to Financial Statements.
PGIM QMALarge-Cap Core Equity PLUS Fund | 31 |
Schedule of Investments(unaudited) (continued)
as of September 30, 2019
Industry Classification (continued): | ||||
Mortgage Real Estate Investment Trusts (REITs) | (0.1 | )% | ||
Construction Materials | (0.1 | ) | ||
Hotels, Restaurants & Leisure | (0.1 | ) | ||
Thrifts & Mortgage Finance | (0.1 | ) | ||
Semiconductors & Semiconductor Equipment | (0.1 | ) | ||
Construction & Engineering | (0.1 | ) | ||
Diversified Consumer Services | (0.1 | ) | ||
Professional Services | (0.2 | ) | ||
Media | (0.3 | ) | ||
Banks | (0.3 | ) | ||
Health Care Technology | (0.3 | ) | ||
Life Sciences Tools & Services | (0.4 | ) | ||
Auto Components | (0.4 | ) | ||
Independent Power & Renewable Electricity Producers | (0.4 | ) | ||
Capital Markets | (0.4 | ) | ||
Interactive Media & Services | (0.4 | ) | ||
Internet & Direct Marketing Retail | (0.4 | ) | ||
Commercial Services & Supplies | (0.5 | ) | ||
Food Products | (0.6 | ) | ||
Communications Equipment | (0.6 | ) | ||
Insurance | (0.6 | ) | ||
Trading Companies & Distributors | (0.7 | )% | ||
Technology Hardware, Storage & Peripherals | (0.8 | ) | ||
Building Products | (0.8 | ) | ||
Electronic Equipment, Instruments & Components | (0.9 | ) | ||
Household Durables | (0.9 | ) | ||
Equity Real Estate Investment Trusts (REITs) | (1.1 | ) | ||
Machinery | (1.2 | ) | ||
Health Care Providers & Services | (1.4 | ) | ||
IT Services | (1.6 | ) | ||
Chemicals | (1.7 | ) | ||
Health Care Equipment & Supplies | (2.3 | ) | ||
Biotechnology | (2.6 | ) | ||
Software | (4.7 | ) | ||
|
| |||
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 toset-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. | $ | (6,334,159 | ) | $ | 6,334,159 | $ | — | ||||||
|
|
(1) | Collateral amount disclosed by the Fund is limited to the market value of financial instruments/transactions. |
See Notes to Financial Statements.
32 |
Statement of Assets and Liabilities(unaudited)
as of September 30, 2019
Assets | ||||
Investments at value: | ||||
Unaffiliated investments (cost $26,647,579) | $ | 29,022,738 | ||
Affiliated investments (cost $44,139) | 44,139 | |||
Dividends and interest receivable | 39,454 | |||
Deposit with broker for securities sold short | 24,382 | |||
Receivable for Fund shares sold | 2,849 | |||
Due from Manager | 563 | |||
Prepaid expenses | 900 | |||
|
| |||
Total Assets | 29,135,025 | |||
|
| |||
Liabilities | ||||
Securities sold short, at value (proceeds received $6,545,910) | 6,334,159 | |||
Accrued expenses and other liabilities | 34,570 | |||
Dividends and interest payable on securities sold short | 16,848 | |||
Affiliated transfer agent fee payable | 87 | |||
Distribution fee payable | 24 | |||
|
| |||
Total Liabilities | 6,385,688 | |||
|
| |||
Net Assets | $ | 22,749,337 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 2,045 | ||
Paid-in capital in excess of par | 20,427,798 | |||
Total distributable earnings (loss) | 2,319,494 | |||
|
| |||
Net assets, September 30, 2019 | $ | 22,749,337 | ||
|
|
See Notes to Financial Statements.
PGIM QMALarge-Cap Core Equity PLUS Fund | 33 |
Statement of Assets and Liabilities(unaudited)
as of September 30, 2019
Class A | ||||
Net asset value and redemption price per share, | $ | 11.12 | ||
Maximum sales charge (5.50% of offering price) | 0.65 | |||
|
| |||
Maximum offering price to public | $ | 11.77 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share, | ||||
($11,091 ÷ 1,005 shares of beneficial interest issued and outstanding) | $ | 11.04 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share, | ||||
($14,220 ÷ 1,280 shares of beneficial interest issued and outstanding) | $ | 11.11 | ||
|
| |||
Class R6 | ||||
Net asset value, offering price and redemption price per share, | ||||
($22,648,386 ÷ 2,035,562 shares of beneficial interest issued and outstanding) | $ | 11.13 | ||
|
|
See Notes to Financial Statements.
34 |
Statement of Operations(unaudited)
Six Months Ended September 30, 2019
Net Investment Income (Loss) | ||||
Income | ||||
Unaffiliated dividend income (net of $902 foreign withholding tax) | $ | 274,523 | ||
Interest income | 55,197 | |||
Affiliated dividend income | 421 | |||
|
| |||
Total income | 330,141 | |||
|
| |||
Expenses | ||||
Management fee | 88,516 | |||
Distribution fee(a) | 147 | |||
Broker fees and expenses on short sales | 75,382 | |||
Custodian and accounting fees | 33,655 | |||
Registration fees(a) | 27,713 | |||
Dividend expense on short sales | 19,267 | |||
Shareholders’ reports | 14,551 | |||
Audit fee | 11,203 | |||
Legal fees and expenses | 9,153 | |||
Trustees’ fees | 5,649 | |||
Transfer agent’s fees and expenses (including affiliated expense of $256)(a) | 349 | |||
Miscellaneous | 7,208 | |||
|
| |||
Total expenses | 292,793 | |||
Less: Fee waiver and/or expense reimbursement(a) | (92,884 | ) | ||
|
| |||
Net expenses | 199,909 | |||
|
| |||
Net investment income (loss) | 130,232 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investments | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 41,725 | |||
Short sales transactions | (299,687 | ) | ||
|
| |||
(257,962 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 349,529 | |||
Short sales | 442,771 | |||
|
| |||
792,300 | ||||
|
| |||
Net gain (loss) on investment transactions | 534,338 | |||
|
| |||
Net Increase (Decrease) In Net Assets Resulting From Operations | $ | 664,570 | ||
|
|
(a) | Class specific expenses and waivers were as follows: |
Class A | Class C | Class Z | Class R6 | |||||||||||||
Distribution fee | 87 | 60 | — | — | ||||||||||||
Registration fees | 6,929 | 6,928 | 6,928 | 6,928 | ||||||||||||
Transfer agent’s fees and expenses | 179 | 46 | 70 | 54 | ||||||||||||
Fee waiver and/or expense reimbursement | (7,312 | ) | (7,009 | ) | (7,036 | ) | (71,527 | ) |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 35 |
Statements of Changes in Net Assets(unaudited)
Six Months Ended September 30, 2019 | Year Ended March 31, 2019 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations |
| |||||||
Net investment income (loss) | $ | 130,232 | $ | 218,724 | ||||
Net realized gain (loss) on investment transactions | (257,962 | ) | (172,988 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 792,300 | 716,658 | ||||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 664,570 | 762,394 | ||||||
|
|
|
| |||||
Distributions from distributable earnings | ||||||||
Class A | — | (291 | ) | |||||
Class C | — | (49 | ) | |||||
Class Z | — | (156 | ) | |||||
Class R6 | — | (235,055 | ) | |||||
|
|
|
| |||||
— | (235,551 | ) | ||||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) |
| |||||||
Net proceeds from shares sold | 9,162 | 74,995 | ||||||
Net asset value of shares issued in reinvestment of dividends | — | 235,551 | ||||||
Cost of shares reacquired | (14,977 | ) | (38,712 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in net assets from Fund share transactions | (5,815 | ) | 271,834 | |||||
|
|
|
| |||||
Total increase (decrease) | 658,755 | 798,677 | ||||||
Net Assets: |
| |||||||
Beginning of period | 22,090,582 | 21,291,905 | ||||||
|
|
|
| |||||
End of period | $ | 22,749,337 | $ | 22,090,582 | ||||
|
|
|
|
See Notes to Financial Statements.
36 |
Statement of Cash Flows(unaudited)
For the Six Months Ended September 30, 2019
Cash Flows Provided by / (Used for) Operating Activities: | ||||
Net increase (decrease) in net assets resulting from operations | $ | 664,570 | ||
|
| |||
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 | 19,090,779 | |||
Purchases of long-term portfolio investments | (19,280,041 | ) | ||
Net proceeds (purchases) of short-term portfolio investments | (34,206 | ) | ||
Purchases to cover securities sold short | 2,484,470 | |||
Proceeds from securities sold short | (2,422,322 | ) | ||
Net realized (gain) loss on investment transactions | (41,725 | ) | ||
Net realized (gain) loss on short sales transactions | 299,687 | |||
Net change in unrealized (appreciation) depreciation on investments | (349,529 | ) | ||
Net change in unrealized (appreciation) depreciation on short sales | (442,771 | ) | ||
(Increase) Decrease in Assets: | ||||
Dividends and interest receivable | (935 | ) | ||
Deposit with broker for securities sold short | 30,770 | |||
Due from Manager | 10,141 | |||
Prepaid expenses | (523 | ) | ||
Increase (Decrease) in Liabilities: | ||||
Accrued expenses and other liabilities | (4,489 | ) | ||
Dividends and interest payable on securities sold short | 645 | |||
Affiliated transfer agent fee payable | (19 | ) | ||
Distribution fee payable | (10 | ) | ||
|
| |||
Total adjustments | (660,078 | ) | ||
|
| |||
Cash provided by (used for) operating activities | 4,492 | |||
|
| |||
Cash provided by (used for) financing activities: | ||||
Proceeds from Fund shares sold, net of amounts receivable | 6,313 | |||
Payment of Fund shares repurchased | (14,977 | ) | ||
|
| |||
Cash provided by (used for) financing activities | (8,664 | ) | ||
|
| |||
Net increase (decrease) in cash | (4,172 | ) | ||
Cash at beginning of period | 4,172 | |||
|
| |||
Cash at end of period | $ | — | ||
|
|
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 37 |
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 anopen-end management investment company. The Trust currently consists of the following six series: PGIM QMALarge-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 arenon-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 anon-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 anon-diversified fund. These financial statements relate only to the PGIM QMALarge-Cap Core Equity PLUS Fund (the “Fund”).
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 (“ASC”) 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, the Manager has established a Valuation Committee responsible for supervising the fair 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.
For the fiscal reportingperiod-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
38 |
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 and referred to herein as the “fair value hierarchy” in accordance with FASB ASC Topic 820—Fair Value Measurements and Disclosures.
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 inopen-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 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.
Illiquid Securities:Pursuant to Rule22e-4 under the 1940 Act, the Fund has adopted a Board approved Liquidity Risk Management Program (“LRMP”) that requires, among other things, that the Fund limit its illiquid investments that are assets to no more than 15% of net assets. Illiquid securities are those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale, may not reasonably be expected to be
PGIM QMA Large-Cap Core Equity PLUS Fund | 39 |
Notes to Financial Statements(unaudited)(continued)
sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. 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.
Restricted Securities:Securities acquired in unregistered, private sales from the issuing company or from an affiliate of the issuer are considered restricted as to disposition under federal securities law (“restricted securities”). Such restricted securities are valued pursuant to the valuation procedures noted above. Restricted securities that would otherwise be considered illiquid investments pursuant to the Fund’s LRMP 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. Therefore, these Rule 144A securities, as well as commercial paper that is sold in private placements under Section 4(2) of the Securities Act of 1933, may be classified higher than “illiquid” under the LRMP (i.e. “moderately liquid” or “less liquid” investments). However, the liquidity of the Fund’s investments in restricted 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 theex-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 Trust, on behalf of 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 all or a portion 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
40 |
factors are easily enforceable. In addition to master netting arrangements, the right toset-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 toset-off the amount owed with the amount owed by the other party, the reporting party intends toset-off and the right ofset-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 invested 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 theex-date, or for certain foreign securities, when the Fund becomes aware of such dividends. 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 theex-date. Permanent book/tax differences relating to income and gain (loss) are reclassified between total distributable earnings (loss) andpaid-in capital in excess of par, as appropriate.
PGIM QMALarge-Cap Core Equity PLUS Fund | 41 |
Notes to Financial Statements(unaudited) (continued)
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 the Manager. Pursuant to this agreement, the Manager has responsibility for all investment advisory services and supervises the subadviser’s performance of such services. In addition, under the management agreement, the Manager provides all of the administrative functions necessary for the organization, operation and management of the Fund. The Manager 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. The Manager 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.
The Manager has entered into a subadvisory agreement with QMA 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. The Manager 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 the Manager is accrued daily and payable monthly at an annual rate of 0.80% of the Fund’s average daily net assets up to and including $1 billion; 0.78% on the next $2 billion of average daily net assets; 0.76% on the next $2 billion of average daily net assets; 0.75% on the next $5 billion of average daily net assets and 0.74% on the average daily net assets in excess of $10 billion. The effective management fee rate before any waivers and/or expense reimbursements was 0.80% for the reporting period ended September 30, 2019.
The Manager has contractually agreed, through July 31, 2020, to limit total annual operating expenses after fee waivers and/or expense 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 income and foreign withholding taxes, stamp duty and deferred tax expenses), acquired
42 |
fund fees and expenses, extraordinary expenses, and certain other Fund expenses such as dividend and interest expense and broker charges on short sales. Where applicable, the Manager agrees to waive management fees or shared operating expenses on any share class to the same extent that it waives such expenses on any other share class. In addition, total annual operating expenses for Class R6 shares will not exceed total annual operating expenses for Class Z shares. Fees and/or expenses waived and/or reimbursed by the Manager may be recouped by the Manager 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.
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.
For the reporting period ended September 30, 2019, PIMS received $151 infront-end sales charges resulting from sales of Class A shares. Additionally, for the reporting period ended September 30, 2019, PIMS did not receive any contingent deferred sales charges imposed upon redemptions by certain Class A and Class C shareholders. From these fees, PIMS paid such sales charges to broker-dealers, who in turn paid commissions to salespersons and incurred other distribution costs.
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 Trust’s transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certainout-of-pocket expenses paid tonon-affiliates, where applicable.
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. Through the Fund’s investments in the mentioned underlying funds, PGIM Investments and/or its affiliates are paid fees or reimbursed for providing their services. In addition to the realized and unrealized gains on investments in
PGIM QMALarge-Cap Core Equity PLUS Fund | 43 |
Notes to Financial Statements(unaudited) (continued)
the Core Fund, earnings from such investments are disclosed on the Statement of Operations as “Affiliated dividend income”.
The Fund may enter into certain securities purchase or sale transactions under Board approved Rule17a-7 procedures. Rule17a-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. Pursuant to the Rule17a-7 procedures and consistent with guidance issued by the SEC, the Trust’s Chief Compliance Officer (“CCO”) prepares a quarterly summary of all such transactions for submission to the Board, together with the CCO’s written representation that all such17a-7 transactions were effected in accordance with the Fund’s Rule17a-7 procedures. For the reporting period ended September 30, 2019, no17a-7 transactions were entered into by the Fund.
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 reporting period ended September 30, 2019, were $19,280,041 and $19,146,019, respectively.
A summary of the cost of purchases and proceeds from sales of shares of affiliated investments for the reporting period ended September 30, 2019, is presented as follows:
Value, | Cost of Purchases | Proceeds from Sales | Change in Unrealized Gain (Loss) | Realized Gain (Loss) | Value, End of Period | Shares, End of Period | Income | |||||||||||||||||||||||
PGIM Core Ultra Short Bond Fund* | ||||||||||||||||||||||||||||||
$ | 9,933 | $ | 318,336 | $ | 284,130 | $ | — | $ | — | $ | 44,139 | 44,139 | $ | 421 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* | 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, 2019 were as follows:
Tax Basis | $ | 20,165,551 | ||
|
| |||
Gross Unrealized Appreciation | 4,217,630 | |||
Gross Unrealized Depreciation | (1,650,463 | ) | ||
|
| |||
Net Unrealized Appreciation | $ | 2,567,167 | ||
|
|
44 |
The book basis may differ from tax basis due to certaintax-related adjustments.
The Fund elected to treat post-October capital losses of approximately $189,000 as having been incurred in the following fiscal year (March 31, 2020).
The Manager 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. Since tax authorities can examine previously filed tax returns, the Fund’s U.S. federal and state tax returns for each of the two fiscal years up to the most recent fiscal year ended March 31, 2019 are subject to such review.
6. Capital and Ownership
The Fund offers Class A, Class C, Class Z and Class R6 shares. Class A shares are sold with a maximumfront-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 C shares will automatically convert to Class A shares on a monthly basis approximately 10 years after purchase. Class Z and Class R6 shares are not subject to any sales or redemption charge and are available 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 of the Fund at $0.001 par value per share.
As of September 30, 2019, Prudential, through its affiliated entities, including affiliated funds (if applicable), owned 1,014 Class A shares, 1,005 Class C shares, 1,017 Class Z shares and 2,035,562 Class R6 shares of the Fund. At reporting period end, Prudential owned 99.5% of the Fund’s outstanding shares.
PGIM QMA Large-Cap Core Equity PLUS Fund | 45 |
Notes to Financial Statements (unaudited) (continued)
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Six months ended September 30, 2019: | ||||||||
Shares sold | 555 | $ | 6,183 | |||||
Shares reacquired | (745 | ) | (7,908 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (190 | ) | (1,725 | ) | ||||
Shares issued upon conversion from other share class(es) | 1,353 | 15,018 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 1,163 | $ | 13,293 | |||||
|
|
|
| |||||
Year ended March 31, 2019: | ||||||||
Shares sold | 4,527 | $ | 47,455 | |||||
Shares issued in reinvestment of dividends and distributions | 30 | 291 | ||||||
Shares reacquired | (2,733 | ) | (28,712 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 1,824 | $ | 19,034 | |||||
|
|
|
| |||||
Class C | ||||||||
Six months ended September 30, 2019: | ||||||||
Shares reacquired upon conversion into other share class(es) | (1,358 | ) | $ | (15,018 | ) | |||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (1,358 | ) | $ | (15,018 | ) | |||
|
|
|
| |||||
Year ended March 31, 2019: | ||||||||
Shares sold | 1,355 | $ | 15,000 | |||||
Shares issued in reinvestment of dividends and distributions | 5 | 49 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 1,360 | $ | 15,049 | |||||
|
|
|
| |||||
Class Z | ||||||||
Six months ended September 30, 2019: | ||||||||
Shares sold | 274 | $ | 2,979 | |||||
Shares reacquired | (637 | ) | (7,069 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (363 | ) | $ | (4,090 | ) | |||
|
|
|
| |||||
Year ended March 31, 2019: | ||||||||
Shares sold | 1,167 | $ | 12,540 | |||||
Shares issued in reinvestment of dividends and distributions | 15 | 156 | ||||||
Shares reacquired | (933 | ) | (10,000 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 249 | $ | 2,696 | |||||
|
|
|
| |||||
Class R6 | ||||||||
Six months ended September 30, 2019: | ||||||||
Net increase (decrease) in shares outstanding | — | $ | — | |||||
|
|
|
| |||||
Year ended March 31, 2019: | ||||||||
Shares issued in reinvestment of dividends and distributions | 23,791 | $ | 235,055 | |||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 23,791 | $ | 235,055 | |||||
|
|
|
|
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
46 |
October 4, 2018 through October 3, 2019. 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. The interest on borrowings under the SCA is paid monthly and at a per annum interest rate of 1.25% plus the higher of (1) the effective federal funds rate, (2) theone-month LIBOR rate or (3) zero percent.
Subsequent to the reporting period end, the SCA has been renewed effective October 3, 2019 and will continue to provide a commitment of $900 million through October 1, 2020. 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 the renewed SCA will be paid monthly and at a per annum interest rate of 1.20% plus the higher of (1) the effective federal funds rate, (2) theone-month LIBOR rate or (3) zero percent.
Certain 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, 2019.
8. Risks of Investing in the Fund
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.
PGIM QMA Large-Cap Core Equity PLUS Fund | 47 |
Notes to Financial Statements(unaudited) (continued)
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. The Manager 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. The Manager continues to evaluate certain other provisions of the ASU and does not expect a material impact to financial statement disclosures.
48 |
Financial Highlights(unaudited)
Class A Shares | ||||||||||||||||||||
Six Months Ended September 30, 2019 | Year Ended March 31, | September 19, 2017(a) through March 31, 2018 | ||||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.81 | $10.55 | $10.00 | |||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.05 | 0.08 | 0.02 | |||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 0.26 | 0.27 | 0.58 | |||||||||||||||||
Total from investment operations | 0.31 | 0.35 | 0.60 | |||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | - | (0.07 | ) | (0.03 | ) | |||||||||||||||
Distributions from net realized gains | - | (0.02 | ) | (0.02 | ) | |||||||||||||||
Total dividends and distributions | - | (0.09 | ) | (0.05 | ) | |||||||||||||||
Net asset value, end of period | $11.12 | $10.81 | $10.55 | |||||||||||||||||
Total Return(c): | 2.87% | 3.39% | 6.00% | |||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000) | $76 | $61 | $40 | |||||||||||||||||
Average net assets (000) | $70 | $42 | $20 | |||||||||||||||||
Ratios to average net assets(d): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(e) | 2.07% | (f) | 2.11% | 1.72% | (f) | |||||||||||||||
Expenses before waivers and/or expense reimbursement(e) | 23.10% | (f) | 37.62% | 203.54% | (f) | |||||||||||||||
Net investment income (loss) | 0.91% | (f) | 0.72% | 0.43% | (f) | |||||||||||||||
Portfolio turnover rate(g) | 55% | 88% | 60% |
(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 0.87% for the six months ended September 30, 2019, 0.91% for the year ended March 31, 2019 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. |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 49 |
Financial Highlights(unaudited) (continued)
Class C Shares | ||||||||||||||||||||
Six Months Ended September 30, 2019 | Year Ended March 31, | September 19, 2017(a) through March 31, 2018 | ||||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.77 | $10.52 | $10.00 | |||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.01 | 0.01 | (0.02 | ) | ||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 0.26 | 0.26 | 0.57 | |||||||||||||||||
Total from investment operations | 0.27 | 0.27 | 0.55 | |||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | - | - | (0.01 | ) | ||||||||||||||||
Distributions from net realized gains | - | (0.02 | ) | (0.02 | ) | |||||||||||||||
Total dividends and distributions | - | (0.02 | ) | (0.03 | ) | |||||||||||||||
Net asset value, end of period | $11.04 | $10.77 | $10.52 | |||||||||||||||||
Total Return(c): | 2.51% | 2.59% | 5.48% | |||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000) | $11 | $25 | $11 | |||||||||||||||||
Average net assets (000) | $12 | $17 | $11 | |||||||||||||||||
Ratios to average net assets(d): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(e) | 2.72% | (f) | 2.89% | 2.43% | (f) | |||||||||||||||
Expenses before waivers and/or expense reimbursement(e) | 119.97% | (f) | 87.13% | 383.62% | (f) | |||||||||||||||
Net investment income (loss) | 0.21% | (f) | 0.06% | (0.32)% | (f) | |||||||||||||||
Portfolio turnover rate(g) | 55% | 88% | 60% |
(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 0.77% for the six months ended September 30, 2019, 0.94% for the year ended March 31, 2019 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. |
See Notes to Financial Statements.
50 |
Class Z Shares | ||||||||||||||||||||
Six Months Ended September 30, 2019 | Year Ended March 31, | September 19, 2017(a) through March 31, 2018 | ||||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.78 | $10.53 | $10.00 | |||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.06 | 0.11 | 0.04 | |||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 0.27 | 0.26 | 0.55 | |||||||||||||||||
Total from investment operations | 0.33 | 0.37 | 0.59 | |||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | - | (0.10 | ) | (0.04 | ) | |||||||||||||||
Distributions from net realized gains | - | (0.02 | ) | (0.02 | ) | |||||||||||||||
Total dividends and distributions | - | (0.12 | ) | (0.06 | ) | |||||||||||||||
Net asset value, end of period | $11.11 | $10.78 | $10.53 | |||||||||||||||||
Total Return(c): | 3.06% | 3.59% | �� | 5.87% | ||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000) | $14 | $18 | $15 | |||||||||||||||||
Average net assets (000) | $13 | $18 | $12 | |||||||||||||||||
Ratios to average net assets(d): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(e) | 1.83% | (f) | 1.85% | 1.42% | (f) | |||||||||||||||
Expenses before waivers and/or expense reimbursement(e) | 108.33% | (f) | 81.69% | 341.63% | (f) | |||||||||||||||
Net investment income (loss) | 1.13% | (f) | 1.00% | 0.71% | (f) | |||||||||||||||
Portfolio turnover rate(g) | 55% | 88% | 60% |
(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 0.88% for the six months ended September 30, 2019, 0.90% for the year ended March 31, 2019 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. |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 51 |
Financial Highlights(unaudited) (continued)
Class R6 Shares | ||||||||||||||||||||
Six Months Ended September 30, 2019 | Year Ended March 31, | September 19, 2017(a) through March 31, 2018 | ||||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.80 | $10.55 | $10.00 | |||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.06 | 0.11 | 0.04 | |||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 0.27 | 0.26 | 0.57 | |||||||||||||||||
Total from investment operations | 0.33 | 0.37 | 0.61 | |||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | - | (0.10 | ) | (0.04 | ) | |||||||||||||||
Distributions from net realized gains | - | (0.02 | ) | (0.02 | ) | |||||||||||||||
Total dividends and distributions | - | (0.12 | ) | (0.06 | ) | |||||||||||||||
Net asset value, end of period | $11.13 | $10.80 | $10.55 | |||||||||||||||||
Total Return(c): | 3.06% | 3.58% | 6.07% | |||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000) | $22,648 | $21,986 | $21,226 | |||||||||||||||||
Average net assets (000) | $22,034 | $21,827 | $21,315 | |||||||||||||||||
Ratios to average net assets(d): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(e) | 1.81% | (f) | 1.85% | 1.42% | (f) | |||||||||||||||
Expenses before waivers and/or expense reimbursement(e) | 2.46% | (f) | 2.63% | 2.41% | (f) | |||||||||||||||
Net investment income (loss) | 1.18% | (f) | 1.00% | 0.68% | (f) | |||||||||||||||
Portfolio turnover rate(g) | 55% | 88% | 60% |
(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 0.86% for the six months ended September 30, 2019, 0.90% for the year ended March 31, 2019 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. |
See Notes to Financial Statements.
52 |
Approval of Advisory Agreements
The Fund’s Board of Trustees
The Board of Trustees (the “Board”) of PGIM QMA Large-Cap Core Equity PLUS Fund (the “Fund”)1 consists of eleven individuals, eight of whom are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Trustees”).2 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 QMA LLC (“QMA”). In considering the renewal of the agreements, the Board, including all of the Independent Trustees, met on May 30, 2019 and on June 11-13, 2019 and approved the renewal of the agreements through July 31, 2020, 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
1 | PGIM QMA Large Cap Core Equity PLUS Fund is a series of Prudential Investment Portfolios 12. |
2 | Grace C. Torres was an Interested Trustee of the Fund at the time the Board considered and approved the renewal of the Fund’s advisory agreements, but has since become an Independent Trustee of the Fund. |
PGIM QMA Large-Cap Core Equity PLUS Fund |
Approval of Advisory Agreements(continued)
considered information provided by PGIM Investments throughout the year at regular Board meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the meetings on May 30, 2019 and on June 11-13, 2019.
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 noted that QMA is affiliated with PGIM Investments. 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, and PGIM Investments’ role as administrator for the Fund’s liquidity risk management program. 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
Visit our website at pgiminvestments.com |
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 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 Large-Cap Core Equity PLUS 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 factors and made related conclusions relating to the historical performance of the Fund for the one-year period ended December 31, 2018. The Board considered that the Fund commenced operations on September 19, 2017 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 period ended March 31, 2018. 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 provided supplemental Peer Universe or Peer Group information for reasons addressed with the Board. The comparisons placed the Fund in various quartiles over various periods, 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
Visit our website at pgiminvestments.com |
forth net performance comparisons (which 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.
Net Performance | 1 Year | 3 Years | 5 Years | 10 Years | ||||
3rd Quartile | N/A | N/A | N/A | |||||
Actual Management Fees:1st Quartile | ||||||||
Net Total Expenses: 1st Quartile |
• | The Board noted that the Fund underperformed its benchmark index over the one-year period. |
• | The Board noted that the Fund does not yet have a three-year performance record and that, therefore, the subadviser should have more time to develop that record. |
• | The Board and PGIM Investments agreed to retain the Fund’s existing contractual expense cap which (exclusive of certain fees and expenses) caps total annual operating expenses at 1.20% for Class A shares, 1.95% for Class C shares, 0.95% for Class Z shares, and 0.95% for Class R6 shares through July 31, 2020. |
• | In addition, PGIM Investments will waive management fees or shared operating expenses on any share class to the same extent that it waives such expenses on any other share class, and has agreed that total annual fund operating expenses for Class R6 shares will not exceed total annual fund operating expenses for Class Z shares. |
• | The Board concluded that, in light of the above, it would be in the best interests of the Fund and its shareholders to allow the Fund to continue to create a longer-term 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 the approval of the agreements was in the best interests of the Fund and its shareholders.
PGIM QMA Large-Cap Core Equity PLUS Fund |
∎ TELEPHONE | ∎ WEBSITE | |||
655 Broad Street Newark, NJ 07102 | (800) 225-1852 | pgiminvestments.com |
PROXY VOTING |
The Board of Trustees of the Fund has delegated to the Fund’s 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• Brian K. Reid• Grace C. Torres |
OFFICERS |
Stuart S. Parker,President• Scott E. Benjamin,Vice President• Christian J. Kelly,Treasurer and Principal Financial and Accounting Officer• Raymond A. O’Hara,Chief Legal Officer• Dino Capasso,Chief Compliance Officer• Charles H. Smith,Anti-Money Laundering Compliance Officer• Andrew R. French,Secretary• Jonathan D. Shain,Assistant Secretary• Claudia DiGiacomo,Assistant Secretary• Diana N. Huffman,Assistant Secretary• Kelly A. Coyne,Assistant Secretary• Lana Lomuti,Assistant Treasurer• Russ Shupak,Assistant Treasurer• Elyse McLaughlin,Assistant Treasurer• Deborah Conway,Assistant Treasurer |
MANAGER | PGIM Investments LLC | 655 Broad Street Newark, NJ 07102 | ||
| ||||
SUBADVISER | QMA LLC | Gateway Center Two 100 Mulberry Street Newark, NJ 07102 | ||
| ||||
DISTRIBUTOR | Prudential Investment Management Services LLC | 655 Broad Street Newark, NJ 07102 | ||
| ||||
CUSTODIAN | The Bank of New York Mellon | 240 Greenwich Street New York, NY 10286 | ||
| ||||
TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
| ||||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
| ||||
FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 | ||
|
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain the prospectus and summary prospectus by visiting our website atpgiminvestments.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 topgiminvestments.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 HOLDINGS |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission on Form N-PORT. The Fund’s Form N-PORT filings are available on the Commission’s website at sec.gov. Form N-PORT is filed with the Commission quarterly, and each Fund’s full portfolio holdings as of the first and third fiscal quarter-ends (as of the third month of the Fund’s fiscal quarter for reporting periods on or after September 30, 2019) will be made publicly available 60 days after the end of each quarter at sec.gov. |
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 |
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 required, as this is not an annual filing. | |
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 forClosed-End Management Investment Companies – Not applicable. | |
Item 8 – | Portfolio Managers ofClosed-End Management Investment Companies – Not applicable. | |
Item 9 – | Purchases of Equity Securities byClosed-End Management Investment Company and Affiliated Purchasers – Not applicable. |
Item 10 – | Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures. | |
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 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 – | Controls and Procedures - Disclosure of Securities Lending Activities forClosed-End
Management Investment Companies – Not applicable. | |
Item 13 – | 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 asExhibit EX-99.CERT. | ||||
(3) Any written solicitation to purchase securities under Rule23c-1. – Not applicable. | ||||
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act – Attached hereto asExhibit 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 15, 2019 |
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 15, 2019 | |
By: | /s/ Christian J. Kelly | |
Christian J. Kelly | ||
Treasurer and Principal Financial and Accounting Officer | ||
Date: | November 15, 2019 |