UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: | 811-08565 | |
Exact name of registrant as specified in charter: | Prudential Investment Portfolios 12 | |
(This Form N-CSR relates solely to the Registrant’s PGIM QMA Long-Short Equity Fund, PGIM Short Duration Muni 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: | 03/31/2021 | |
Date of reporting period: | 09/30/2020 |
Item 1 – Reports to Stockholders
PGIM QMA LONG-SHORT EQUITY FUND
SEMIANNUAL REPORT
SEPTEMBER 30, 2020
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 (pgim.com/investments), 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 pgim.com/investments/resource/edelivery
3 | ||||
4 | ||||
7 | ||||
9 | ||||
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 are for the period covered by this report and are subject to change thereafter.
The accompanying financial statements as of September 30, 2020 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. © 2020 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 pgim.com/investments |
Dear Shareholder:
We hope you find the semiannual report for PGIM QMA Long-Short Equity Fund informative and useful. The report covers performance for the six-month period ended September 30, 2020.
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 16, 2020
PGIM QMA Long-Short Equity Fund | 3 |
Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at pgim.com/investments or by calling (800) 225-1852.
(without sales charges) | Average Annual Total Returns as of 9/30/20 (with sales charges) | |||||||||||||||
Six Months* (%) | One Year (%) | Five Years (%) | Since Inception (%) | |||||||||||||
Class A | –1.02 | –21.33 | –1.80 | 0.15 (5/29/14) | ||||||||||||
Class C | –1.49 | –18.20 | –1.43 | 0.29 (5/29/14) | ||||||||||||
Class Z | –0.91 | –16.61 | –0.44 | 1.30 (5/29/14) | ||||||||||||
Class R6 | –0.91 | –16.54 | N/A | –3.68 (5/25/17) | ||||||||||||
S&P 500 Index | ||||||||||||||||
31.27 | 15.14 | 14.14 | — | |||||||||||||
Customized Blend Index |
| |||||||||||||||
15.05 | 8.58 | 7.76 | — | |||||||||||||
Average Annual Total Returns as of 9/30/20 Since Inception (%) | ||||||||||||||||
Class A, C, Z (5/29/14) | Class R6 (5/25/17) | |||||||||||||||
S&P 500 Index |
| 11.45 | 12.66 | |||||||||||||
Customized Blend Index |
| 6.32 | 7.37 |
*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.
4 | Visit our website at pgim.com/investments |
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 |
Benchmark Definitions
Customized Blend Index—The Customized Blend Index (the Index) is a model portfolio consisting of the S&P 500 Index (50%), which is unmanaged and provides a broad indicator of stock price movements, and the FTSE 3-Month Treasury Bill Index (50%), which is unmanaged and represents monthly return equivalents of yield averages of the last three-month Treasury bill issues.
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.
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 that may be paid by an investor.
PGIM QMA Long-Short Equity Fund | 5 |
Your Fund’s Performance (continued)
Presentation of Fund Holdings as of 9/30/20
Ten Largest Holdings - Long | Line of Business | % of Net Assets | ||
Microsoft Corp. | Software | 4.0% | ||
Facebook, Inc.(Class A Stock) | Interactive Media & Services | 2.5% | ||
Amazon.com, Inc. | Internet & Direct Marketing Retail | 2.4% | ||
Apple, Inc. | Technology Hardware, Storage & Peripherals | 2.0% | ||
AT&T, Inc. | Diversified Telecommunication Services | 1.9% | ||
Bristol-Myers Squibb Co. | Pharmaceuticals | 1.8% | ||
Lowe’s Cos., Inc. | Specialty Retail | 1.8% | ||
Oracle Corp. | Software | 1.7% | ||
Intuit, Inc. | Software | 1.7% | ||
Anthem, Inc. | Health Care Providers & Services | 1.7% |
Ten Largest Holdings - Short | Line of Business | % of Net Assets | ||
Datadog, Inc. (Class A Stock) | Software | (1.7)% | ||
Anaplan, Inc. | Software | (1.6)% | ||
Elastic NV | Software | (1.6)% | ||
Smartsheet, Inc. (Class A Stock) | Software | (1.5)% | ||
Quaker Chemical Corp. | Chemicals | (1.5)% | ||
Penumbra, Inc. | Health Care Equipment & Supplies | (1.5)% | ||
MongoDB, Inc. | IT Services | (1.5)% | ||
Boeing Co. (The) | Aerospace & Defense | (1.5)% | ||
II-VI, Inc. | Electronic Equipment, Instruments & Components | (1.4)% | ||
Cree, Inc. | Semiconductors & Semiconductor Equipment | (1.4)% |
Holdings reflect only long-term Investments and are subject to change.
6 | Visit our website at pgim.com/investments |
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, 2020. The example is for illustrative purposes only; you should consult the Fund’s 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 | 7 |
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, 2020 | Ending Account Value September 30, 2020 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 989.80 | 2.00 | % | $ | 9.98 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.04 | 2.00 | % | $ | 10.10 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 985.10 | 2.75 | % | $ | 13.68 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,011.28 | 2.75 | % | $ | 13.87 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 990.90 | 1.78 | % | $ | 8.88 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,016.14 | 1.78 | % | $ | 9.00 | ||||||||||
Class R6 | Actual | $ | 1,000.00 | $ | 990.90 | 1.79 | % | $ | 8.93 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,016.09 | 1.79 | % | $ | 9.05 | ||||||||||
*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, 2020, and divided by the 365 days in the Fund’s fiscal year ending March 31, 2021 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
8 | Visit our website at pgim.com/investments |
Schedule of Investments (unaudited)
as of September 30, 2020
Description | Shares | Value | ||||||
LONG-TERM INVESTMENTS 99.9% | ||||||||
COMMON STOCKS | ||||||||
Aerospace & Defense 0.8% | ||||||||
BWX Technologies, Inc. | 11,600 | $ | 653,196 | |||||
Vectrus, Inc.* | 5,700 | 216,600 | ||||||
|
| |||||||
869,796 | ||||||||
Automobiles 1.4% | ||||||||
General Motors Co. | 50,700 | 1,500,213 | ||||||
Banks 0.8% | ||||||||
Customers Bancorp, Inc.* | 56,500 | 632,800 | ||||||
Financial Institutions, Inc. | 4,900 | 75,460 | ||||||
RBB Bancorp | 2,800 | 31,752 | ||||||
Southern National Bancorp of Virginia, Inc. | 8,300 | 72,044 | ||||||
|
| |||||||
812,056 | ||||||||
Biotechnology 6.3% | ||||||||
Alexion Pharmaceuticals, Inc.* | 14,700 | 1,682,121 | ||||||
Biogen, Inc.* | 5,800 | 1,645,344 | ||||||
Gilead Sciences, Inc. | 2,900 | 183,251 | ||||||
Neurocrine Biosciences, Inc.* | 15,400 | 1,480,864 | ||||||
Vertex Pharmaceuticals, Inc.* | 6,600 | 1,795,992 | ||||||
|
| |||||||
6,787,572 | ||||||||
Building Products 2.0% | ||||||||
Masco Corp. | 19,200 | 1,058,496 | ||||||
UFP Industries, Inc. | 19,100 | 1,079,341 | ||||||
|
| |||||||
2,137,837 | ||||||||
Capital Markets 0.6% | ||||||||
Federated Hermes, Inc. | 29,700 | 638,847 | ||||||
Chemicals 3.4% | ||||||||
Corteva, Inc. | 60,200 | 1,734,362 | ||||||
LyondellBasell Industries NV (Class A Stock) | 23,900 | 1,684,711 | ||||||
W.R. Grace & Co. | 5,000 | 201,450 | ||||||
|
| |||||||
3,620,523 |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 9 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Commercial Services & Supplies 0.3% | ||||||||
Herman Miller, Inc. | 3,400 | $ | 102,544 | |||||
Interface, Inc. | 36,500 | 223,380 | ||||||
|
| |||||||
325,924 | ||||||||
Communications Equipment 1.8% | ||||||||
NETGEAR, Inc.* | 25,700 | 792,074 | ||||||
NetScout Systems, Inc.* | 50,200 | 1,095,866 | ||||||
|
| |||||||
1,887,940 | ||||||||
Diversified Consumer Services 1.0% | ||||||||
Strategic Education, Inc. | 12,100 | 1,106,787 | ||||||
Diversified Telecommunication Services 2.8% | ||||||||
AT&T, Inc.(u) | 70,000 | 1,995,700 | ||||||
Verizon Communications, Inc. | 17,300 | 1,029,177 | ||||||
|
| |||||||
3,024,877 | ||||||||
Electric Utilities 0.1% | ||||||||
NRG Energy, Inc. | 4,600 | 141,404 | ||||||
Electrical Equipment 1.6% | ||||||||
Acuity Brands, Inc. | 3,500 | 358,225 | ||||||
Atkore International Group, Inc.* | 60,300 | 1,370,619 | ||||||
|
| |||||||
1,728,844 | ||||||||
Electronic Equipment, Instruments & Components 0.2% | ||||||||
Sanmina Corp.* | 5,400 | 146,070 | ||||||
ScanSource, Inc.* | 3,800 | 75,354 | ||||||
|
| |||||||
221,424 | ||||||||
Entertainment 1.9% | ||||||||
Electronic Arts, Inc.* | 9,900 | 1,291,059 | ||||||
Lions Gate Entertainment Corp. (Class B Stock)* | 86,000 | 749,920 | ||||||
|
| |||||||
2,040,979 | ||||||||
Equity Real Estate Investment Trusts (REITs) 1.1% | ||||||||
Weyerhaeuser Co. | 41,000 | 1,169,320 |
See Notes to Financial Statements.
10 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Food & Staples Retailing 0.6% | ||||||||
Kroger Co. (The) | 19,800 | $ | 671,418 | |||||
Food Products 0.4% | ||||||||
Conagra Brands, Inc. | 11,400 | 407,094 | ||||||
Kraft Heinz Co. (The) | 2,100 | 62,895 | ||||||
|
| |||||||
469,989 | ||||||||
Gas Utilities 1.6% | ||||||||
UGI Corp. | 51,400 | 1,695,172 | ||||||
Health Care Equipment & Supplies 5.8% | ||||||||
Hologic, Inc.* | 16,500 | 1,096,755 | ||||||
Meridian Bioscience, Inc.* | 64,800 | 1,100,304 | ||||||
Quidel Corp.* | 7,700 | 1,689,226 | ||||||
STERIS PLC | 3,500 | 616,665 | ||||||
West Pharmaceutical Services, Inc. | 6,200 | 1,704,380 | ||||||
|
| |||||||
6,207,330 | ||||||||
Health Care Providers & Services 6.3% | ||||||||
Anthem, Inc. | 6,800 | 1,826,412 | ||||||
Cigna Corp. | 10,400 | 1,761,864 | ||||||
Humana, Inc. | 4,400 | 1,821,116 | ||||||
McKesson Corp. | 6,400 | 953,152 | ||||||
Universal Health Services, Inc. (Class B Stock) | 3,100 | 331,762 | ||||||
|
| |||||||
6,694,306 | ||||||||
Health Care Technology 0.1% | ||||||||
HMS Holdings Corp.* | 1,900 | 45,505 | ||||||
Hotels, Restaurants & Leisure 0.2% | ||||||||
Del Taco Restaurants, Inc.* | 8,500 | 69,700 | ||||||
Domino’s Pizza, Inc. | 300 | 127,584 | ||||||
|
| |||||||
197,284 | ||||||||
Household Durables 1.5% | ||||||||
D.R. Horton, Inc. | 16,500 | 1,247,895 | ||||||
PulteGroup, Inc. | 8,300 | 384,207 | ||||||
|
| |||||||
1,632,102 |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 11 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Household Products 0.0% | ||||||||
Reynolds Consumer Products, Inc. | 1,200 | $ | 36,744 | |||||
Insurance 0.5% | ||||||||
Heritage Insurance Holdings, Inc. | 6,900 | 69,828 | ||||||
MetLife, Inc. | 1,200 | 44,604 | ||||||
Stewart Information Services Corp. | 10,000 | 437,300 | ||||||
|
| |||||||
551,732 | ||||||||
Interactive Media & Services 2.7% | ||||||||
Alphabet, Inc. (Class C Stock)* | 162 | 238,075 | ||||||
Facebook, Inc. (Class A Stock)*(u) | 10,200 | 2,671,380 | ||||||
|
| |||||||
2,909,455 | ||||||||
Internet & Direct Marketing Retail 5.1% | ||||||||
Amazon.com, Inc.*(u) | 800 | 2,518,984 | ||||||
eBay, Inc. | 25,500 | 1,328,550 | ||||||
Stamps.com, Inc.* | 6,800 | 1,638,460 | ||||||
|
| |||||||
5,485,994 | ||||||||
IT Services 4.4% | ||||||||
Amdocs Ltd. | 14,900 | 855,409 | ||||||
CACI International, Inc. (Class A Stock)* | 7,100 | 1,513,436 | ||||||
Cognizant Technology Solutions Corp. (Class A Stock) | 25,200 | 1,749,384 | ||||||
Hackett Group, Inc. (The) | 40,000 | 447,200 | ||||||
International Money Express, Inc.* | 6,800 | 97,682 | ||||||
|
| |||||||
4,663,111 | ||||||||
Leisure Products 1.4% | ||||||||
American Outdoor Brands, Inc.* | 17,600 | 229,328 | ||||||
Malibu Boats, Inc. (Class A Stock)* | 4,100 | 203,196 | ||||||
Smith & Wesson Brands, Inc. | 70,400 | 1,092,608 | ||||||
|
| |||||||
1,525,132 | ||||||||
Life Sciences Tools & Services 1.6% | ||||||||
Charles River Laboratories International, Inc.* | 5,300 | 1,200,185 | ||||||
Thermo Fisher Scientific, Inc. | 1,200 | 529,824 | ||||||
|
| |||||||
1,730,009 |
See Notes to Financial Statements.
12 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Metals & Mining 1.1% | ||||||||
Newmont Corp. | 19,000 | $ | 1,205,550 | |||||
Mortgage Real Estate Investment Trusts (REITs) 1.7% | ||||||||
Colony Credit Real Estate, Inc. | 24,800 | 121,768 | ||||||
Great Ajax Corp. | 5,400 | 44,766 | ||||||
Starwood Property Trust, Inc. | 107,100 | 1,616,139 | ||||||
|
| |||||||
1,782,673 | ||||||||
Multi-Utilities 2.5% | ||||||||
MDU Resources Group, Inc. | 62,600 | 1,408,500 | ||||||
Public Service Enterprise Group, Inc. | 23,200 | 1,273,912 | ||||||
|
| |||||||
2,682,412 | ||||||||
Paper & Forest Products 0.9% | ||||||||
Boise Cascade Co. | 24,200 | 966,064 | ||||||
Personal Products 1.0% | ||||||||
Nu Skin Enterprises, Inc. (Class A Stock) | 21,100 | 1,056,899 | ||||||
Pharmaceuticals 4.0% | ||||||||
Bristol-Myers Squibb Co. | 31,700 | 1,911,193 | ||||||
Eli Lilly & Co. | 9,400 | 1,391,388 | ||||||
Merck & Co., Inc. | 7,600 | 630,420 | ||||||
Supernus Pharmaceuticals, Inc.* | 18,300 | 381,372 | ||||||
|
| |||||||
4,314,373 | ||||||||
Road & Rail 0.6% | ||||||||
Werner Enterprises, Inc. | 14,700 | 617,253 | ||||||
Semiconductors & Semiconductor Equipment 6.4% | ||||||||
Applied Materials, Inc. | 19,600 | 1,165,220 | ||||||
FormFactor, Inc.* | 46,500 | 1,159,245 | ||||||
Intel Corp. | 26,400 | 1,366,992 | ||||||
MKS Instruments, Inc. | 10,800 | 1,179,684 | ||||||
Semtech Corp.* | 26,500 | 1,403,440 | ||||||
Skyworks Solutions, Inc. | 3,800 | 552,900 | ||||||
|
| |||||||
6,827,481 | ||||||||
Software 16.3% | ||||||||
Adobe, Inc.* | 3,100 | 1,520,333 | ||||||
Cadence Design Systems, Inc.* | 13,200 | 1,407,516 |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 13 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Software (cont’d.) | ||||||||
ChannelAdvisor Corp.* | 33,200 | $ | 480,404 | |||||
Ebix, Inc. | 24,500 | 504,700 | ||||||
Fortinet, Inc.* | 9,500 | 1,119,195 | ||||||
Intuit, Inc. | 5,600 | 1,826,776 | ||||||
Manhattan Associates, Inc.* | 13,600 | 1,298,664 | ||||||
Microsoft Corp.(u) | 20,500 | 4,311,765 | ||||||
MicroStrategy, Inc. (Class A Stock)* | 9,700 | 1,460,432 | ||||||
NortonLifeLock, Inc. | 7,500 | 156,300 | ||||||
OneSpan, Inc.* | 43,400 | 909,664 | ||||||
Oracle Corp. | 30,600 | 1,826,820 | ||||||
Progress Software Corp. | 2,700 | 99,036 | ||||||
Telenav, Inc.* | 24,000 | 86,400 | ||||||
Verint Systems, Inc.* | 8,100 | 390,258 | ||||||
|
| |||||||
17,398,263 | ||||||||
Specialty Retail 3.0% | ||||||||
AutoNation, Inc.* | 1,800 | 95,274 | ||||||
Lowe’s Cos., Inc. | 11,400 | 1,890,804 | ||||||
O’Reilly Automotive, Inc.* | 2,600 | 1,198,808 | ||||||
|
| |||||||
3,184,886 | ||||||||
Technology Hardware, Storage & Peripherals 2.0% | ||||||||
Apple, Inc.(u) | 18,400 | 2,130,904 | ||||||
Tobacco 0.4% | ||||||||
Altria Group, Inc. | 10,000 | 386,400 | ||||||
Trading Companies & Distributors 1.7% | ||||||||
Foundation Building Materials, Inc.* | 9,800 | 154,056 | ||||||
GMS, Inc.* | 68,000 | 1,638,800 | ||||||
|
| |||||||
1,792,856 | ||||||||
|
| |||||||
TOTAL LONG-TERM INVESTMENTS | 106,875,640 | |||||||
|
| |||||||
SHORT-TERM INVESTMENTS 2.1% | ||||||||
AFFILIATED MUTUAL FUND 1.5% | ||||||||
PGIM Core Ultra Short Bond Fund | 1,583,656 | 1,583,656 | ||||||
|
|
See Notes to Financial Statements.
14 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
U.S. TREASURY OBLIGATION(k)(n) 0.6% | ||||||||||||||||
U.S. Treasury Bills | 0.100% | 12/17/20 | 700 | $ | 699,858 | |||||||||||
|
| |||||||||||||||
TOTAL SHORT-TERM INVESTMENTS | 2,283,514 | |||||||||||||||
|
| |||||||||||||||
TOTAL INVESTMENTS, BEFORE SECURITIES SOLD SHORT |
| 109,159,154 | ||||||||||||||
|
| |||||||||||||||
Shares | ||||||||||||||||
SECURITIES SOLD SHORT (58.1)% | ||||||||||||||||
COMMON STOCKS | ||||||||||||||||
Aerospace & Defense (2.3)% | ||||||||||||||||
Boeing Co. (The) | 9,500 | (1,569,970 | ) | |||||||||||||
TransDigm Group, Inc. | 1,900 | (902,728 | ) | |||||||||||||
|
| |||||||||||||||
(2,472,698 | ) | |||||||||||||||
Biotechnology (3.5)% | ||||||||||||||||
Biohaven Pharmaceutical Holding Co. Ltd.* |
| 12,900 | (838,629 | ) | ||||||||||||
Blueprint Medicines Corp.* | 8,100 | (750,870 | ) | |||||||||||||
Global Blood Therapeutics, Inc.* | 9,800 | (540,372 | ) | |||||||||||||
Karuna Therapeutics, Inc.* | 5,100 | (394,332 | ) | |||||||||||||
Mirati Therapeutics, Inc.* | 5,000 | (830,250 | ) | |||||||||||||
TG Therapeutics, Inc.* | 8,100 | (216,756 | ) | |||||||||||||
Vericel Corp.* | 6,700 | (124,151 | ) | |||||||||||||
|
| |||||||||||||||
(3,695,360 | ) | |||||||||||||||
Capital Markets (0.4)% | ||||||||||||||||
Moelis & Co. (Class A Stock) | 9,500 | (333,830 | ) | |||||||||||||
Tradeweb Markets, Inc. (Class A Stock) |
| 2,000 | (116,000 | ) | ||||||||||||
|
| |||||||||||||||
(449,830 | ) | |||||||||||||||
Chemicals (3.0)% | ||||||||||||||||
Albemarle Corp. | 16,100 | (1,437,408 | ) | |||||||||||||
Livent Corp.* | 17,200 | (154,284 | ) | |||||||||||||
Quaker Chemical Corp. | 9,000 | (1,617,390 | ) | |||||||||||||
|
| |||||||||||||||
(3,209,082 | ) | |||||||||||||||
Commercial Services & Supplies (0.3)% | ||||||||||||||||
US Ecology, Inc. | 8,900 | (290,763 | ) |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 15 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Communications Equipment (0.0)% | ||||||||
Applied Optoelectronics, Inc.* | 3,500 | $ | (39,375 | ) | ||||
Construction & Engineering (0.5)% | ||||||||
Ameresco, Inc. (Class A Stock)* | 5,300 | (177,020 | ) | |||||
Dycom Industries, Inc.* | 4,600 | (242,972 | ) | |||||
NV5 Global, Inc.* | 3,100 | (163,587 | ) | |||||
|
| |||||||
(583,579 | ) | |||||||
Consumer Finance (0.7)% | ||||||||
LendingTree, Inc.* | 2,300 | (705,847 | ) | |||||
Diversified Consumer Services (0.0)% | ||||||||
Aspen Group, Inc.* | 4,100 | (45,797 | ) | |||||
Diversified Telecommunication Services (0.1)% | ||||||||
Iridium Communications, Inc.* | 2,200 | (56,276 | ) | |||||
Electrical Equipment (1.0)% | ||||||||
Sunrun, Inc.* | 13,400 | (1,032,738 | ) | |||||
Electronic Equipment, Instruments & Components (2.0)% | ||||||||
II-VI, Inc.* | 37,900 | (1,537,224 | ) | |||||
nLight, Inc.* | 27,600 | (648,048 | ) | |||||
|
| |||||||
(2,185,272 | ) | |||||||
Food & Staples Retailing (1.1)% | ||||||||
Chefs’ Warehouse, Inc. (The)* | 8,200 | (119,228 | ) | |||||
Sysco Corp. | 17,000 | (1,057,740 | ) | |||||
|
| |||||||
(1,176,968 | ) | |||||||
Food Products (0.5)% | ||||||||
Beyond Meat, Inc.* | 1,900 | (315,514 | ) | |||||
Landec Corp.* | 8,900 | (86,508 | ) | |||||
Limoneira Co. | 6,200 | (88,660 | ) | |||||
|
| |||||||
(490,682 | ) | |||||||
Health Care Equipment & Supplies (4.6)% | ||||||||
Glaukos Corp.* | 16,900 | (836,888 | ) | |||||
OrthoPediatrics Corp.* | 10,500 | (482,160 | ) | |||||
Penumbra, Inc.* | 8,100 | (1,574,478 | ) |
See Notes to Financial Statements.
16 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Health Care Equipment & Supplies (cont’d.) | ||||||||
Shockwave Medical, Inc.* | 13,500 | $ | (1,023,300 | ) | ||||
SI-BONE, Inc.* | 4,300 | (101,996 | ) | |||||
Silk Road Medical, Inc.* | 9,900 | (665,379 | ) | |||||
Tactile Systems Technology, Inc.* | 5,300 | (193,927 | ) | |||||
|
| |||||||
(4,878,128 | ) | |||||||
Health Care Providers & Services (3.3)% | ||||||||
1Life Healthcare, Inc.* | 19,300 | (547,348 | ) | |||||
Guardant Health, Inc.* | 7,700 | (860,706 | ) | |||||
HealthEquity, Inc.* | 26,300 | (1,351,031 | ) | |||||
PetIQ, Inc.* | 19,400 | (638,648 | ) | |||||
Surgery Partners, Inc.* | 7,700 | (168,630 | ) | |||||
|
| |||||||
(3,566,363 | ) | |||||||
Health Care Technology (0.8)% | ||||||||
Inspire Medical Systems, Inc.* | 6,500 | (838,825 | ) | |||||
Hotels, Restaurants & Leisure (1.5)% | ||||||||
SeaWorld Entertainment, Inc.* | 8,600 | (169,592 | ) | |||||
Shake Shack, Inc. (Class A Stock)* | 5,200 | (335,296 | ) | |||||
Wynn Resorts Ltd. | 15,200 | (1,091,512 | ) | |||||
|
| |||||||
(1,596,400 | ) | |||||||
Independent Power & Renewable Electricity Producers (0.7)% | ||||||||
Sunnova Energy International, Inc.* | 24,500 | (745,045 | ) | |||||
Insurance (0.4)% | ||||||||
Kinsale Capital Group, Inc. | 2,300 | (437,414 | ) | |||||
Internet & Direct Marketing Retail (0.7)% | ||||||||
Expedia Group, Inc. | 5,600 | (513,464 | ) | |||||
RealReal, Inc. (The)* | 18,800 | (272,036 | ) | |||||
|
| |||||||
(785,500 | ) | |||||||
IT Services (4.2)% | ||||||||
Fastly, Inc. (Class A Stock)* | 15,500 | (1,452,040 | ) | |||||
Fidelity National Information Services, Inc. | 8,000 | (1,177,680 | ) | |||||
MongoDB, Inc.* | 6,800 | (1,574,268 | ) | |||||
Repay Holdings Corp.* | 11,400 | (267,900 | ) | |||||
|
| |||||||
(4,471,888 | ) |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 17 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Leisure Products (2.3)% | ||||||||
Callaway Golf Co. | 20,400 | $ | (390,456 | ) | ||||
Hasbro, Inc. | 14,100 | (1,166,352 | ) | |||||
Peloton Interactive, Inc. (Class A Stock)* | 8,800 | (873,312 | ) | |||||
|
| |||||||
(2,430,120 | ) | |||||||
Life Sciences Tools & Services (3.1)% | ||||||||
Adaptive Biotechnologies Corp.* | 16,900 | (821,847 | ) | |||||
Codexis, Inc.* | 41,500 | (487,210 | ) | |||||
NanoString Technologies, Inc.* | 19,300 | (862,710 | ) | |||||
NeoGenomics, Inc.* | 23,500 | (866,915 | ) | |||||
Quanterix Corp.* | 9,800 | (330,652 | ) | |||||
|
| |||||||
(3,369,334 | ) | |||||||
Machinery (0.1)% | ||||||||
Chart Industries, Inc.* | 1,900 | (133,513 | ) | |||||
Media (0.9)% | ||||||||
Cardlytics, Inc.* | 13,300 | (938,581 | ) | |||||
Metals & Mining (0.2)% | ||||||||
Allegheny Technologies, Inc.* | 21,300 | (185,736 | ) | |||||
Oil, Gas & Consumable Fuels (0.2)% | ||||||||
PDC Energy, Inc.* | 17,200 | (213,194 | ) | |||||
Pharmaceuticals (0.5)% | ||||||||
Reata Pharmaceuticals, Inc. (Class A Stock)* | 5,100 | (496,842 | ) | |||||
WaVe Life Sciences Ltd.* | 5,900 | (50,091 | ) | |||||
|
| |||||||
(546,933 | ) | |||||||
Professional Services (1.0)% | ||||||||
Upwork, Inc.* | 61,200 | (1,067,328 | ) | |||||
Willdan Group, Inc.* | 2,000 | (51,020 | ) | |||||
|
| |||||||
(1,118,348 | ) | |||||||
Real Estate Management & Development (1.4)% | ||||||||
Redfin Corp.* | 29,500 | (1,472,935 | ) | |||||
Semiconductors & Semiconductor Equipment (2.3)% | ||||||||
Cree, Inc.* | 23,400 | (1,491,516 | ) |
See Notes to Financial Statements.
18 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Semiconductors & Semiconductor Equipment (cont’d.) | ||||||||
Impinj, Inc.* | 10,400 | $ | (274,040 | ) | ||||
SunPower Corp.* | 55,500 | (694,305 | ) | |||||
|
| |||||||
(2,459,861 | ) | |||||||
Software (11.1)% | ||||||||
8x8, Inc.* | 33,500 | (520,925 | ) | |||||
Anaplan, Inc.* | 27,200 | (1,702,176 | ) | |||||
Cloudflare, Inc. (Class A Stock)* | 28,800 | (1,182,528 | ) | |||||
Datadog, Inc. (Class A Stock)* | 17,500 | (1,787,800 | ) | |||||
Elastic NV* | 15,500 | (1,672,295 | ) | |||||
Everbridge, Inc.* | 6,200 | (779,526 | ) | |||||
Pluralsight, Inc. (Class A Stock)* | 13,900 | (238,107 | ) | |||||
PROS Holdings, Inc.* | 5,500 | (175,670 | ) | |||||
Slack Technologies, Inc. (Class A Stock)* | 47,400 | (1,273,164 | ) | |||||
Smartsheet, Inc. (Class A Stock)* | 33,000 | (1,630,860 | ) | |||||
Splunk, Inc.* | 4,600 | (865,398 | ) | |||||
|
| |||||||
(11,828,449 | ) | |||||||
Specialty Retail (1.6)% | ||||||||
Carvana Co.* | 3,800 | (847,628 | ) | |||||
Floor & Decor Holdings, Inc. (Class A Stock)* | 11,900 | (890,120 | ) | |||||
|
| |||||||
(1,737,748 | ) | |||||||
Textiles, Apparel & Luxury Goods (0.6)% | ||||||||
Under Armour, Inc. (Class A Stock)* | 56,500 | (634,495 | ) | |||||
Water Utilities (1.2)% | ||||||||
Essential Utilities, Inc. | 33,200 | (1,336,300 | ) | |||||
|
| |||||||
TOTAL SECURITIES SOLD SHORT | (62,159,377 | ) | ||||||
|
| |||||||
TOTAL INVESTMENTS, NET OF SECURITIES SOLD SHORT 43.9% | 46,999,777 | |||||||
Other assets in excess of liabilities(z) 56.1% | 60,030,989 | |||||||
|
| |||||||
NET ASSETS 100.0% | $ | 107,030,766 | ||||||
|
|
Below is a list of the abbreviation(s) used in the semiannual report:
USD—US Dollar
LIBOR—London Interbank Offered Rate
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 19 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
REITs—Real Estate Investment Trust
S&P—Standard & Poor’s
* | 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, 2020:
Number of | Type | Expiration Date | Current Notional Amount | Value / Unrealized Appreciation (Depreciation) | ||||||||||
Long Position: | ||||||||||||||
20 | S&P 500 E-Mini Index | Dec. 2020 | $3,352,000 | $ 21,735 | ||||||||||
|
|
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 | $ | — | $ | 699,858 | ||||
|
|
|
|
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, 2020 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Assets | ||||||||||||
Common Stocks | ||||||||||||
Aerospace & Defense | $ | 869,796 | $ | — | $ | — | ||||||
Automobiles | 1,500,213 | — | — | |||||||||
Banks | 812,056 | — | — | |||||||||
Biotechnology | 6,787,572 | — | — | |||||||||
Building Products | 2,137,837 | — | — |
See Notes to Financial Statements.
20 |
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities (continued) | ||||||||||||
Assets (continued) | ||||||||||||
Common Stocks (continued) | ||||||||||||
Capital Markets | $ | 638,847 | $ | — | $ | — | ||||||
Chemicals | 3,620,523 | — | — | |||||||||
Commercial Services & Supplies | 325,924 | — | — | |||||||||
Communications Equipment | 1,887,940 | — | — | |||||||||
Diversified Consumer Services | 1,106,787 | — | — | |||||||||
Diversified Telecommunication Services | 3,024,877 | — | — | |||||||||
Electric Utilities | 141,404 | — | — | |||||||||
Electrical Equipment | 1,728,844 | — | — | |||||||||
Electronic Equipment, Instruments & Components | 221,424 | — | — | |||||||||
Entertainment | 2,040,979 | — | — | |||||||||
Equity Real Estate Investment Trusts (REITs) | 1,169,320 | — | — | |||||||||
Food & Staples Retailing | 671,418 | — | — | |||||||||
Food Products | 469,989 | — | — | |||||||||
Gas Utilities | 1,695,172 | — | — | |||||||||
Health Care Equipment & Supplies | 6,207,330 | — | — | |||||||||
Health Care Providers & Services | 6,694,306 | — | — | |||||||||
Health Care Technology | 45,505 | — | — | |||||||||
Hotels, Restaurants & Leisure | 197,284 | — | — | |||||||||
Household Durables | 1,632,102 | — | — | |||||||||
Household Products | 36,744 | — | — | |||||||||
Insurance | 551,732 | — | — | |||||||||
Interactive Media & Services | 2,909,455 | — | — | |||||||||
Internet & Direct Marketing Retail | 5,485,994 | — | — | |||||||||
IT Services | 4,663,111 | — | — | |||||||||
Leisure Products | 1,525,132 | — | — | |||||||||
Life Sciences Tools & Services | 1,730,009 | — | — | |||||||||
Metals & Mining | 1,205,550 | — | — | |||||||||
Mortgage Real Estate Investment Trusts (REITs) | 1,782,673 | — | — | |||||||||
Multi-Utilities | 2,682,412 | — | — | |||||||||
Paper & Forest Products | 966,064 | — | — | |||||||||
Personal Products | 1,056,899 | — | — | |||||||||
Pharmaceuticals | 4,314,373 | — | — | |||||||||
Road & Rail | 617,253 | — | — | |||||||||
Semiconductors & Semiconductor Equipment | 6,827,481 | — | — | |||||||||
Software | 17,398,263 | — | — | |||||||||
Specialty Retail | 3,184,886 | — | — | |||||||||
Technology Hardware, Storage & Peripherals | 2,130,904 | — | — | |||||||||
Tobacco | 386,400 | — | — | |||||||||
Trading Companies & Distributors. | 1,792,856 | — | — | |||||||||
Affiliated Mutual Fund | 1,583,656 | — | — | |||||||||
U.S. Treasury Obligation | — | 699,858 | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 108,459,296 | $ | 699,858 | $ | — | ||||||
|
|
|
|
|
|
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 21 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities (continued) | ||||||||||||
Liabilities | ||||||||||||
Common Stocks - Short | ||||||||||||
Aerospace & Defense | $ | (2,472,698 | ) | $ | — | $ | — | |||||
Biotechnology | (3,695,360 | ) | — | — | ||||||||
Capital Markets | (449,830 | ) | — | — | ||||||||
Chemicals | (3,209,082 | ) | — | — | ||||||||
Commercial Services & Supplies | (290,763 | ) | — | — | ||||||||
Communications Equipment | (39,375 | ) | — | — | ||||||||
Construction & Engineering | (583,579 | ) | — | — | ||||||||
Consumer Finance | (705,847 | ) | — | — | ||||||||
Diversified Consumer Services | (45,797 | ) | — | — | ||||||||
Diversified Telecommunication Services | (56,276 | ) | — | — | ||||||||
Electrical Equipment | (1,032,738 | ) | — | — | ||||||||
Electronic Equipment, Instruments & Components | (2,185,272 | ) | — | — | ||||||||
Food & Staples Retailing | (1,176,968 | ) | — | — | ||||||||
Food Products | (490,682 | ) | — | — | ||||||||
Health Care Equipment & Supplies | (4,878,128 | ) | — | — | ||||||||
Health Care Providers & Services | (3,566,363 | ) | — | — | ||||||||
Health Care Technology | (838,825 | ) | — | — | ||||||||
Hotels, Restaurants & Leisure | (1,596,400 | ) | — | — | ||||||||
Independent Power & Renewable Electricity Producers | (745,045 | ) | — | — | ||||||||
Insurance | (437,414 | ) | — | — | ||||||||
Internet & Direct Marketing Retail | (785,500 | ) | — | — | ||||||||
IT Services | (4,471,888 | ) | — | — | ||||||||
Leisure Products | (2,430,120 | ) | — | — | ||||||||
Life Sciences Tools & Services | (3,369,334 | ) | — | — | ||||||||
Machinery | (133,513 | ) | — | — | ||||||||
Media | (938,581 | ) | — | — | ||||||||
Metals & Mining | (185,736 | ) | — | — | ||||||||
Oil, Gas & Consumable Fuels | (213,194 | ) | — | — | ||||||||
Pharmaceuticals | (546,933 | ) | — | — | ||||||||
Professional Services | (1,118,348 | ) | — | — | ||||||||
Real Estate Management & Development | (1,472,935 | ) | — | — | ||||||||
Semiconductors & Semiconductor Equipment | (2,459,861 | ) | — | — | ||||||||
Software | (11,828,449 | ) | — | — | ||||||||
Specialty Retail | (1,737,748 | ) | — | — | ||||||||
Textiles, Apparel & Luxury Goods | (634,495 | ) | — | — | ||||||||
Water Utilities | (1,336,300 | ) | — | — | ||||||||
|
|
|
|
|
| |||||||
Total | $ | (62,159,377 | ) | $ | — | $ | — | |||||
|
|
|
|
|
| |||||||
Other Financial Instruments* | ||||||||||||
Assets | ||||||||||||
Futures Contracts | $ | 21,735 | $ | — | $ | — | ||||||
|
|
|
|
|
|
See Notes to Financial Statements.
22 |
* | 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, 2020 were as follows:
Software | 16.3 | % | ||
Semiconductors & Semiconductor Equipment | 6.4 | |||
Biotechnology | 6.3 | |||
Health Care Providers & Services | 6.3 | |||
Health Care Equipment & Supplies | 5.8 | |||
Internet & Direct Marketing Retail | 5.1 | |||
IT Services | 4.4 | |||
Pharmaceuticals | 4.0 | |||
Chemicals | 3.4 | |||
Specialty Retail | 3.0 | |||
Diversified Telecommunication Services | 2.8 | |||
Interactive Media & Services | 2.7 | |||
Multi-Utilities | 2.5 | |||
Building Products | 2.0 | |||
Technology Hardware, Storage & Peripherals | 2.0 | |||
Entertainment | 1.9 | |||
Communications Equipment | 1.8 | |||
Trading Companies & Distributors | 1.7 | |||
Mortgage Real Estate Investment Trusts (REITs) | 1.7 | |||
Life Sciences Tools & Services | 1.6 | |||
Electrical Equipment | 1.6 | |||
Gas Utilities | 1.6 | |||
Household Durables | 1.5 | |||
Affiliated Mutual Fund | 1.5 | |||
Leisure Products | 1.4 | |||
Automobiles | 1.4 | |||
Metals & Mining | 1.1 | |||
Equity Real Estate Investment Trusts (REITs) | 1.1 | |||
Diversified Consumer Services | 1.0 | |||
Personal Products | 1.0 | |||
Paper & Forest Products | 0.9 | |||
Aerospace & Defense | 0.8 | |||
Banks | 0.8 | |||
U.S. Treasury Obligations | 0.6 | |||
Food & Staples Retailing | 0.6 | |||
Capital Markets | 0.6 | |||
Road & Rail | 0.6 | |||
Insurance | 0.5 | |||
Food Products | 0.4 | |||
Tobacco | 0.4 | |||
Commercial Services & Supplies | 0.3 | |||
Electronic Equipment, Instruments & Components | 0.2 | |||
Hotels, Restaurants & Leisure | 0.2 | |||
Electric Utilities | 0.1 | |||
Health Care Technology | 0.1 | |||
Household Products | 0.0 | * | ||
Securities Sold Short | ||||
Communications Equipment | (0.0 | )* | ||
Diversified Consumer Services | (0.0 | )* | ||
Diversified Telecommunication Services | (0.1 | ) |
Machinery | (0.1 | )% | ||
Metals & Mining | (0.2 | ) | ||
Oil, Gas & Consumable Fuels | (0.2 | ) | ||
Commercial Services & Supplies | (0.3 | ) | ||
Insurance | (0.4 | ) | ||
Capital Markets | (0.4 | ) | ||
Food Products | (0.5 | ) | ||
Pharmaceuticals | (0.5 | ) | ||
Construction & Engineering | (0.5 | ) | ||
Textiles, Apparel & Luxury Goods | (0.6 | ) | ||
Consumer Finance | (0.7 | ) | ||
Independent Power & Renewable Electricity Producers | (0.7 | ) | ||
Internet & Direct Marketing Retail | (0.7 | ) | ||
Health Care Technology | (0.8 | ) | ||
Media | (0.9 | ) | ||
Electrical Equipment | (1.0 | ) | ||
Professional Services | (1.0 | ) | ||
Food & Staples Retailing | (1.1 | ) | ||
Water Utilities | (1.2 | ) | ||
Real Estate Management & Development | (1.4 | ) | ||
Hotels, Restaurants & Leisure | (1.5 | ) | ||
Specialty Retail | (1.6 | ) | ||
Electronic Equipment, Instruments & Components | (2.0 | ) | ||
Leisure Products | (2.3 | ) | ||
Semiconductors & Semiconductor Equipment | (2.3 | ) | ||
Aerospace & Defense | (2.3 | ) | ||
Chemicals | (3.0 | ) | ||
Life Sciences Tools & Services | (3.1 | ) | ||
Health Care Providers & Services | (3.3 | ) | ||
Biotechnology | (3.5 | ) | ||
IT Services | (4.2 | ) | ||
Health Care Equipment & Supplies | (4.6 | ) | ||
Software | (11.1 | ) | ||
|
| |||
43.9 | ||||
Other assets in excess of liabilities | 56.1 | |||
|
| |||
100.0 | % | |||
|
|
* | Less than +/- 0.05% |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 23 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
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, 2020 as presented in the Statement of Assets and Liabilities:
Asset Derivatives | Liability Derivatives | |||||||||||
Derivatives not accounted for as | Statement of | Fair Value | Statement of | Fair Value | ||||||||
Equity contracts | Due from/to broker-variation margin futures | $ | 21,735 | * | — | $ | — | |||||
|
|
|
|
* | 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, 2020 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 | $ | 2,516,684 | ||
|
|
Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Income | ||||
Derivatives not accounted for as hedging instruments, carried at fair value | Futures | |||
Equity contracts | $ | (186,395 | ) | |
|
|
For the six months ended September 30, 2020, the Fund’s average volume of derivative activities is as follows:
Futures Contracts— Long Positions(1) |
$6,792,397 |
(1) | Notional Amount in USD. |
Average volume is based on average quarter end balances as noted for the fiscal year ended September 30, 2020.
See Notes to Financial Statements.
24 |
Financial Instruments/Transactions—Summary of Offsetting and Netting Arrangements:
The Fund entered into financial instruments/transactions during the reporting period that are either offset in accordance with current requirements or are subject to enforceable master netting arrangements or similar agreements that permit offsetting. The information about offsetting and related netting arrangements for financial instruments/transactions where the legal right to set-off exists is presented in the summary below.
Offsetting of financial instrument/transaction assets and liabilities:
Description | Counterparty | Gross Market Value of Recognized Assets/(Liabilities) | Collateral Pledged/(Received)(1) | Net Amount | ||||||||||
Securities Sold Short | Barclays Capital Group | $ | (62,159,377 | ) | $ | 62,159,377 | $ | — | ||||||
|
|
|
|
|
|
(1) | Collateral amount disclosed by the Fund is limited to the market value of financial instruments/transactions. |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 25 |
Statement of Assets and Liabilities (unaudited)
as of September 30, 2020
Assets |
| |||
Investments at value: |
| |||
Unaffiliated investments (cost $94,744,493) | $ | 107,575,498 | ||
Affiliated investments (cost $1,583,656) | 1,583,656 | |||
Deposit with broker for securities sold short | 60,506,258 | |||
Receivable for Fund shares sold | 235,186 | |||
Dividends and interest receivable | 111,781 | |||
Due from broker—variation margin futures | 18,300 | |||
Prepaid expenses | 1,731 | |||
|
| |||
Total Assets | 170,032,410 | |||
|
| |||
Liabilities |
| |||
Securities sold short, at value (proceeds received $52,795,165) | 62,159,377 | |||
Payable for Fund shares reacquired | 585,485 | |||
Accrued expenses and other liabilities | 131,406 | |||
Management fee payable | 83,441 | |||
Dividends and interest payable on securities sold short | 25,819 | |||
Distribution fee payable | 12,491 | |||
Trustees’ fees payable | 2,148 | |||
Affiliated transfer agent fee payable | 1,477 | |||
|
| |||
Total Liabilities | 63,001,644 | |||
|
| |||
Net Assets | $ | 107,030,766 | ||
|
| |||
Net assets were comprised of: |
| |||
Shares of beneficial interest, at par | $ | 10,998 | ||
Paid-in capital in excess of par | 140,482,835 | |||
Total distributable earnings (loss) | (33,463,067 | ) | ||
|
| |||
Net assets, September 30, 2020 | $ | 107,030,766 | ||
|
|
See Notes to Financial Statements.
26 |
Class A | ||||||||
Net asset value and redemption price per share, | ||||||||
($12,364,601 ÷ 1,278,690 shares of beneficial interest issued and outstanding) | $ | 9.67 | ||||||
Maximum sales charge (5.50% of offering price) | 0.56 | |||||||
|
| |||||||
Maximum offering price to public | $ | 10.23 | ||||||
|
| |||||||
Class C | ||||||||
Net asset value, offering price and redemption price per share, | ||||||||
($11,479,253 ÷ 1,239,403 shares of beneficial interest issued and outstanding) | $ | 9.26 | ||||||
|
| |||||||
Class Z | ||||||||
Net asset value, offering price and redemption price per share, | ||||||||
($64,727,130 ÷ 6,598,282 shares of beneficial interest issued and outstanding) | $ | 9.81 | ||||||
|
| |||||||
Class R6 | ||||||||
Net asset value, offering price and redemption price per share, | ||||||||
($18,459,782 ÷ 1,882,005 shares of beneficial interest issued and outstanding) | $ | 9.81 | ||||||
|
|
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 27 |
Statement of Operations (unaudited)
Six Months Ended September 30, 2020
Net Investment Income (Loss) | ||||
Income | ||||
Unaffiliated dividend income | $ | 925,807 | ||
Interest income | 143,114 | |||
Affiliated dividend income | 12,310 | |||
|
| |||
Total income | 1,081,231 | |||
|
| |||
Expenses | ||||
Management fee | 857,658 | |||
Distribution fee(a) | 96,606 | |||
Broker fees and expenses on short sales | 264,487 | |||
Dividend expense on short sales | 124,122 | |||
Transfer agent’s fees and expenses (including affiliated expense of $ 6,381)(a) | 97,152 | |||
Custodian and accounting fees | 37,674 | |||
Registration fees(a) | 32,345 | |||
Audit fee | 17,552 | |||
Shareholders’ reports | 16,985 | |||
Legal fees and expenses | 9,006 | |||
Trustees’ fees | 8,198 | |||
Miscellaneous | 12,841 | |||
|
| |||
Total expenses | 1,574,626 | |||
Less: Fee waiver and/or expense reimbursement(a) | (155,350 | ) | ||
Distribution fee waiver(a) | (4,017 | ) | ||
|
| |||
Net expenses | 1,415,259 | |||
|
| |||
Net investment income (loss) | (334,028 | ) | ||
|
| |||
Realized And Unrealized Gain (Loss) On Investments | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 4,281,345 | |||
Futures transactions | 2,516,684 | |||
Short sales transactions | (25,090,647 | ) | ||
|
| |||
(18,292,618 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 38,246,645 | |||
Futures | (186,395 | ) | ||
Short sales | (16,406,861 | ) | ||
|
| |||
21,653,389 | ||||
|
| |||
Net gain (loss) on investment transactions | 3,360,771 | |||
|
| |||
Net Increase (Decrease) In Net Assets Resulting From Operations | $ | 3,026,743 | ||
|
|
See Notes to Financial Statements.
28
(a) | Class specific expenses and waivers were as follows: |
Class A | Class C | Class Z | Class R6 | |||||||||||||||||
Distribution fee | 24,105 | 72,501 | — | — | ||||||||||||||||
Transfer agent’s fees and expenses | 10,389 | 10,787 | 73,922 | 2,054 | ||||||||||||||||
Registration fees | 8,185 | 6,843 | 11,163 | 6,154 | ||||||||||||||||
Fee waiver and/or expense reimbursement | (21,488 | ) | (20,258 | ) | (101,267 | ) | (12,337 | ) | ||||||||||||
Distribution fee waiver | (4,017 | ) | — | — | — |
See Notes to Financial Statements.
PGIM QMA Long-Short Equity Fund | 29 |
Statements of Changes in Net Assets (unaudited)
Six Months Ended September 30, 2020 | Year Ended March 31, 2020 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | (334,028 | ) | $ | 2,271,403 | |||
Net realized gain (loss) on investment transactions | (18,292,618 | ) | (17,677,368 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 21,653,389 | (37,770,859 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 3,026,743 | (53,176,824 | ) | |||||
|
|
|
| |||||
Dividends and Distributions | ||||||||
Distributions from distributable earnings | ||||||||
Class A | — | (1,423,510 | ) | |||||
Class C | — | (1,183,375 | ) | |||||
Class Z | — | (12,716,071 | ) | |||||
Class R6 | — | (2,950,427 | ) | |||||
|
|
|
| |||||
— | (18,273,383 | ) | ||||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) | ||||||||
Net proceeds from shares sold | 17,178,887 | 106,570,625 | ||||||
Net asset value of shares issued in reinvestment of dividends and distributions | — | 16,005,571 | ||||||
Cost of shares reacquired | (108,999,154 | ) | (351,365,335 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in net assets from Fund share transactions | (91,820,267 | ) | (228,789,139 | ) | ||||
|
|
|
| |||||
Total increase (decrease) | (88,793,524 | ) | (300,239,346 | ) | ||||
Net Assets: | ||||||||
Beginning of period | 195,824,290 | 496,063,636 | ||||||
|
|
|
| |||||
End of period | $ | 107,030,766 | $ | 195,824,290 | ||||
|
|
|
|
See Notes to Financial Statements.
30 |
Notes to Financial Statements (unaudited)
1. Organization
Prudential Investment Portfolios 12 (the “Trust”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company. The Trust currently consists of the following six series: PGIM QMA Large-Cap Core Equity PLUS Fund, PGIM QMA Long-Short Equity Fund and PGIM Short Duration Muni Fund, each of which are diversified funds for purposes of the 1940 Act and PGIM Global Real Estate Fund, PGIM Jennison Technology Fund and PGIM US Real Estate Fund, each of which are non-diversified funds for purposes of the 1940 Act, and therefore, may invest a greater percentage of their assets in the securities of a single company or other issuer than a diversified fund. Investing in a non-diversified fund involves greater risk than investing in a diversified fund because a loss resulting from the decline in value of any one security may represent a greater portion of the total assets of a non-diversified fund. These financial statements relate only to the PGIM QMA Long-Short Equity Fund (the “Fund”).
The investment objective of the Fund is to seek long-term capital appreciation.
2. 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 reporting period-end, securities and other assets and liabilities were fair valued at the close of the last U.S. business day. Trading in certain foreign securities may occur
PGIM QMA Long-Short Equity Fund | 31 |
Notes to Financial Statements (unaudited) (continued)
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.
Common or preferred stocks, exchange-traded funds and derivative instruments, if applicable, that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange where the security principally trades. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price, they are classified as Level 1 in the fair value hierarchy. In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and ask prices, or at the last bid price in the absence of an ask price. These securities are classified as Level 2 in the fair value hierarchy.
Investments in open-end funds (other than exchange-traded 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.
32 |
Illiquid Securities: Pursuant to Rule 22e-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(s) 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 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.
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.
PGIM QMA Long-Short Equity Fund | 33 |
Notes to Financial Statements (unaudited) (continued)
Short Sales: The Fund sold a security it does not own in anticipation of a decline in the market value of that security (short sale). When the Fund makes a short sale, it must borrow the security sold short and deliver it to the broker-dealer through which it made the short sale as collateral for its obligation to deliver the security upon conclusion of the transaction. The Fund may have to pay a fee to borrow the particular security and may be obligated to return any interest or dividends received on such borrowed securities. Dividends declared on open short positions are recorded on the ex-date and the interest payable is accrued daily on fixed income securities sold short, both of which are recorded as an expense. A gain, limited to the price at which the Fund sold the security short, or a loss, unlimited in magnitude, will be recognized upon the termination of a short sale if the market price at termination is less than or greater than, respectively, the proceeds originally received.
Short sales and financial futures contracts involve elements of both market and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities, if applicable. 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 to set-off exists when all the conditions are met such that each of the parties owes the other determinable amounts, the reporting party has the right to set-off the amount owed with the amount owed by the other party, the reporting party intends to set-off and the right of set-off is enforceable by law. During the reporting period, there was no intention to settle on a net basis and all amounts are presented on a gross basis on the Statement of Assets and Liabilities.
Equity and Mortgage Real Estate Investment Trusts (collectively equity REITs): The Fund 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 the
34 |
ex-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 the ex-date. Permanent book/tax differences relating to income and gain (loss) are reclassified between total distributable earnings (loss) and paid-in capital in excess of par, as appropriate.
Estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
3. 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.
PGIM QMA Long-Short Equity Fund | 35 |
Notes to Financial Statements (unaudited) (continued)
The Manager has entered into a subadvisory agreement with QMA LLC (“QMA” or the “subadviser”). 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, 2020.
The Manager has contractually agreed, through July 31, 2021, 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 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 0.30% and 1% of the average daily net assets of the
36 |
Class A and Class C shares, respectively. PIMS has contractually agreed through July 31, 2021 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, 2020, PIMS received $1,597 in front-end sales charges resulting from sales of Class A shares. Additionally, for the reporting period ended September 30, 2020, PIMS received $100 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, PIMS and QMA are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
4. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PGIM Investments and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund’s transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
The Fund may 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 Rule 17a-7 procedures. Rule 17a-7 is an exemptive rule under the 1940 Act, that subject to certain conditions, permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. Pursuant to the Rule 17a-7 procedures and consistent with guidance issued by the Securities and Exchange Commission (“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 such 17a-7 transactions were effected in accordance with the Fund’s Rule 17a-7 procedures. For the reporting period ended September 30, 2020, no 17a-7 transactions were entered into by the Fund.
PGIM QMA Long-Short Equity Fund | 37 |
Notes to Financial Statements (unaudited) (continued)
5. 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, 2020, were $215,294,992 and $278,827,517, respectively.
A summary of the cost of purchases and proceeds from sales of shares of affiliated investments for the reporting period ended September 30, 2020, is presented as follows:
Value, of Period | Cost of | Proceeds | Change in | Realized | Value, | Shares, of | Income | ||||||||||||||
PGIM Core Ultra Short Bond Fund* | |||||||||||||||||||||
$4,530,369 | $64,871,065 | $67,817,778 | $— | $— | $1,583,656 | 1,583,656 | $12,310 | ||||||||||||||
|
|
|
|
|
|
|
* | The Fund did not have any capital gain distributions during the reporting period. |
6. Tax Information
The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of September 30, 2020 were as follows:
Tax Basis | $ 44,502,059 | |||||
|
| |||||
Gross Unrealized Appreciation | 19,051,622 | |||||
Gross Unrealized Depreciation | (16,532,169 | ) | ||||
|
| |||||
Net Unrealized Appreciation | $ 2,519,453 | |||||
|
|
The book basis may differ from tax basis due to certain tax-related adjustments.
For federal income tax purposes, the Fund had a capital loss carryforward as of September 30, 2020 of approximately $19,615,000 which can be carried forward for an unlimited period. No 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, 2020 are subject to such review.
38 |
7. Capital and Ownership
The Fund offers Class A, Class C, Class Z and Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 5.50%. Investors who purchase $1 million or more of Class A shares and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1%, although they are not subject to an initial sales charge. The Class A CDSC is waived for certain retirement and/or benefit plans. A special exchange privilege is also available for shareholders who qualified to purchase Class A shares at net asset value. Class C shares are sold with a CDSC of 1% on sales made within 12 months of purchase. Class 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 charges 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, below.
The Trust has authorized an unlimited number of shares of beneficial interest of the Fund at $0.001 par value per share.
At the reporting period end, the number of shareholders holding greater than 5% of the Fund are as follows:
Affiliated | Unaffiliated | |||||
Number of Shareholders | Percentage of Outstanding Shares | Number of Shareholders | Percentage of Outstanding Shares | |||
— | —% | 6 | 83.4% |
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Six months ended September 30, 2020: | ||||||||
Shares sold | 14,976 | $ | 155,216 | |||||
Shares reacquired | (492,034 | ) | (5,035,125 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (477,058 | ) | (4,879,909 | ) | ||||
Shares issued upon conversion from other share class(es) | 46,124 | 468,124 | ||||||
Shares reacquired upon conversion into other share class(es) | (47,624 | ) | (485,622 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (478,558 | ) | $ | (4,897,407 | ) | |||
|
|
|
| |||||
Year ended March 31, 2020: | ||||||||
Shares sold | 132,124 | $ | 1,562,382 | |||||
Shares issued in reinvestment of dividends and distributions | 119,394 | 1,416,017 | ||||||
Shares reacquired | (2,152,729 | ) | (25,217,406 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (1,901,211 | ) | (22,239,007 | ) | ||||
Shares issued upon conversion from other share class(es) | 302,101 | 3,647,447 | ||||||
Shares reacquired upon conversion into other share class(es) | (121,566 | ) | (1,457,758 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (1,720,676 | ) | $ | (20,049,318 | ) | |||
|
|
|
|
PGIM QMA Long-Short Equity Fund | 39 |
Notes to Financial Statements (unaudited) (continued)
Class C | Shares | Amount | ||||||
Six months ended September 30, 2020: | ||||||||
Shares sold | 2,738 | $ | 27,812 | |||||
Shares reacquired | (453,408 | ) | (4,431,236 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (450,670 | ) | (4,403,424 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (22,454 | ) | (220,648 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (473,124 | ) | $ | (4,624,072 | ) | |||
|
|
|
| |||||
Year ended March 31, 2020: | ||||||||
Shares sold | 64,125 | $ | 744,190 | |||||
Shares issued in reinvestment of dividends and distributions | 103,528 | 1,183,320 | ||||||
Shares reacquired | (1,014,407 | ) | (11,300,215 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (846,754 | ) | (9,372,705 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (480,190 | ) | (5,577,245 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (1,326,944 | ) | $ | (14,949,950 | ) | |||
|
|
|
| |||||
Class Z | ||||||||
Six months ended September 30, 2020: | ||||||||
Shares sold | 660,322 | $ | 6,847,730 | |||||
Shares reacquired | (6,572,189 | ) | (67,649,514 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (5,911,867 | ) | (60,801,784 | ) | ||||
Shares issued upon conversion from other share class(es) | 67,118 | 692,726 | ||||||
Shares reacquired upon conversion into other share class(es) | (39,066 | ) | (401,213 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (5,883,815 | ) | $ | (60,510,271 | ) | |||
|
|
|
| |||||
Year ended March 31, 2020: | ||||||||
Shares sold | 5,273,913 | $ | 63,705,491 | |||||
Shares issued in reinvestment of dividends and distributions | 1,052,839 | 12,644,602 | ||||||
Shares reacquired | (21,465,282 | ) | (250,542,168 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (15,138,530 | ) | (174,192,075 | ) | ||||
Shares issued upon conversion from other share class(es) | 452,976 | 5,518,599 | ||||||
Shares reacquired upon conversion into other share class(es) | (175,699 | ) | (2,135,163 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (14,861,253 | ) | $ | (170,808,639 | ) | |||
|
|
|
| |||||
Class R6 | ||||||||
Six months ended September 30, 2020: | ||||||||
Shares sold | 973,234 | $ | 10,148,129 | |||||
Shares reacquired | (3,047,188 | ) | (31,883,279 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (2,073,954 | ) | (21,735,150 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (5,331 | ) | (53,367 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (2,079,285 | ) | $ | (21,788,517 | ) | |||
|
|
|
| |||||
Year ended March 31, 2020: | ||||||||
Shares sold | 3,278,642 | $ | 40,558,562 | |||||
Shares issued in reinvestment of dividends and distributions | 63,469 | 761,632 | ||||||
Shares reacquired | (5,373,081 | ) | (64,305,546 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (2,030,970 | ) | (22,985,352 | ) | ||||
Shares issued upon conversion from other share class(es) | 340 | 4,120 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (2,030,630 | ) | $ | (22,981,232 | ) | |||
|
|
|
|
40 |
8. Borrowings
The Trust, on behalf of the Fund, along with other affiliated registered investment companies (the “Participating 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 table below provides details of the current SCA in effect at the reporting period-end.
SCA | ||
Term of Commitment | 10/3/2019 – 10/1/2020 | |
Total Commitment | $ 1,222,500,000* | |
Annualized Commitment Fee on the Unused Portion of the SCA | 0.15% | |
Annualized Interest Rate on Borrowings | 1.20% plus the higher of (1) the effective federal funds rate, (2) the one-month LIBOR rate or (3) zero percent | |
* Effective March 31, 2020, the SCA’s total commitment was increased from $900,000,000 to $1,162,500,000 and subsequently, effective April 7, 2020 was increased to $1,222,500,000. |
Subsequent to the reporting period end, the SCA has been renewed effective October 2, 2020 and will provide a commitment of $1,200,000,000 through September 30, 2021. The commitment fee paid by the Participating 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 1.30% plus the higher of (1) the effective federal funds rate, (2) the one-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 Participating Funds in the SCA equitably.
The Fund utilized the SCA during the reporting period ended September 30, 2020. The average daily balance for the 6 days that the Fund had loans outstanding during the period was approximately $7,665,333, borrowed at a weighted average interest rate of 1.37%. The maximum loan outstanding amount during the period was $20,035,000. At September 30, 2020, the Fund did not have an outstanding loan amount.
9. Risks of Investing in the Fund
The Fund’s risks include, but are not limited to, some or all of the risks discussed below. For further information on the Fund’s risks, please refer to the Fund’s Prospectus and Statement of Additional Information.
PGIM QMA Long-Short Equity Fund | 41 |
Notes to Financial Statements (unaudited) (continued)
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 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.
Large Capitalization Company Risk: Companies with large market capitalizations go in and out of favor based on market and economic conditions. Larger companies tend to be less volatile than companies with smaller market capitalizations. In exchange for this potentially lower risk, the Fund’s value may not rise or fall as much as the value of funds that emphasize companies with smaller market capitalizations.
Large Shareholder and Large Scale Redemption Risk: Certain individuals, accounts, funds (including funds affiliated with the Manager) or institutions, including the Manager and its affiliates, may from time to time own or control a substantial amount of the Fund’s shares. There is no requirement that these entities maintain their investment in the Fund. There is a risk that such large shareholders or that the Fund’s shareholders generally may redeem all or a substantial portion of their investments in the Fund in a short period of time, which could have a significant negative impact on the Fund’s NAV, liquidity, and brokerage costs. Large redemptions could also result in tax consequences to shareholders and impact the Fund’s ability to implement its investment strategy. The Fund’s ability to pursue its investment objective after one or more large scale redemptions may be impaired and, as a result, the Fund may invest a larger portion of its assets in cash or cash equivalents.
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.
42 |
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.
Market Disruption and Geopolitical Risks: International wars or conflicts and geopolitical developments in foreign countries, along with instability in regions such as Asia, Eastern Europe, and the Middle East, possible terrorist attacks in the United States or around the world, public health epidemics such as the outbreak of infectious diseases like the recent outbreak of coronavirus globally or the 2014–2016 outbreak in West Africa of the Ebola virus, and other similar events could adversely affect the U.S. and foreign financial markets, including increases in market volatility, reduced liquidity in the securities markets and government intervention, and may cause further long-term economic uncertainties in the United States and worldwide generally.
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.
10. Recent Accounting Pronouncements and Reporting Updates
In March 2020, the FASB issued Accounting Standard Update (“ASU”) No. 2020-04, which provides optional guidance for applying GAAP to contract modifications, hedging relationships and other transactions affected by the reference rate reform if certain criteria are met. ASU 2020-04 is elective and is effective on March 12, 2020 through December 31, 2022. At this time, management is evaluating the implications of certain provisions of the ASU and any impact on the financial statement disclosures has not yet been determined.
PGIM QMA Long-Short Equity Fund | 43 |
Financial Highlights (unaudited)
Class A Shares | ||||||||||||||||||||||||
Six Months Ended September 30, 2020 | Year Ended March 31, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $9.76 | $12.35 | $12.56 | $11.86 | $11.35 | $11.00 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | (0.03 | ) | 0.06 | 0.06 | (0.04 | ) | (0.07 | ) | (0.01 | ) | ||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (0.06 | )(b) | (1.98 | ) | (0.06 | ) | 0.74 | 0.77 | 0.41 | |||||||||||||||
Total from investment operations | (0.09 | ) | (1.92 | ) | - | 0.70 | 0.70 | 0.40 | ||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||
Dividends from net investment income | - | (0.11 | ) | - | - | - | - | |||||||||||||||||
Distributions from net realized gains | - | (0.56 | ) | (0.21 | ) | - | (0.19 | ) | (0.05 | ) | ||||||||||||||
Total dividends and distributions | - | (0.67 | ) | (0.21 | ) | - | (0.19 | ) | (0.05 | ) | ||||||||||||||
Net asset value, end of period | $9.67 | $9.76 | $12.35 | $12.56 | $11.86 | $11.35 | ||||||||||||||||||
Total Return(c): | (1.02 | )% | (16.43 | )% | 0.06 | % | 5.90 | % | 6.17 | % | 3.67 | % | ||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||
Net assets, end of period (000) | $12,365 | $17,149 | $42,954 | $51,585 | $33,579 | $83,612 | ||||||||||||||||||
Average net assets (000) | $16,026 | $29,067 | $49,694 | $39,444 | $69,722 | $28,971 | ||||||||||||||||||
Ratios to average net assets(d)(e): | ||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(f) | 2.00 | %(g) | 2.07 | % | 2.15 | % | 2.44 | % | 2.30 | % | 2.45 | % | ||||||||||||
Expenses before waivers and/or expense reimbursement(f) | 2.32 | %(g) | 2.22 | % | 2.28 | % | 2.59 | % | 2.44 | % | 2.64 | % | ||||||||||||
Net investment income (loss) | (0.55 | )%(g) | 0.49 | % | 0.46 | % | (0.35 | )% | (0.59 | )% | (0.07 | )% | ||||||||||||
Portfolio turnover rate(h) | 99 | % | 142 | % | 160 | % | 83 | % | 83 | % | 160 | % |
(a) | Calculated based on average shares outstanding during the period. |
(b) | The per share amount of realized and unrealized gain (loss) on investments does not directly correlate to the amounts reported in the Statement of Operations due to the timing of portfolio share transactions in relation to fluctuating market values. |
(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 0.50%, 0.56%, 0.65%, 0.94%, 0.72% and 0.70%, for the six months ended September 30, 2020, the years ended March 31, 2020, March 31, 2019, March 31, 2018, March 31, 2017 and March 31, 2016, 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.
44 |
Class C Shares | ||||||||||||||||||||||||
Six Months Ended September 30, 2020 | Year Ended March 31, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $9.38 | $11.90 | $12.20 | $11.61 | $11.20 | $10.93 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | (0.06 | ) | (0.03 | ) | (0.03 | ) | (0.14 | ) | (0.15 | ) | (0.08 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (0.06 | )(b) | (1.91 | ) | (0.06 | ) | 0.73 | 0.75 | 0.40 | |||||||||||||||
Total from investment operations | (0.12 | ) | (1.94 | ) | (0.09 | ) | 0.59 | 0.60 | 0.32 | |||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||
Dividends from net investment income | - | (0.02 | ) | - | - | - | - | |||||||||||||||||
Distributions from net realized gains | - | (0.56 | ) | (0.21 | ) | - | (0.19 | ) | (0.05 | ) | ||||||||||||||
Total dividends and distributions | - | (0.58 | ) | (0.21 | ) | - | (0.19 | ) | (0.05 | ) | ||||||||||||||
Net asset value, end of period | $9.26 | $9.38 | $11.90 | $12.20 | $11.61 | $11.20 | ||||||||||||||||||
Total Return(c): | (1.49 | )% | (17.01 | )% | (0.68 | )% | 5.08 | % | 5.35 | % | 2.96 | % | ||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||
Net assets, end of period (000) | $11,479 | $16,069 | $36,168 | $36,903 | $32,783 | $22,165 | ||||||||||||||||||
Average net assets (000) | $14,461 | $26,594 | $37,987 | $34,263 | $29,401 | $5,719 | ||||||||||||||||||
Ratios to average net assets(d)(e): | ||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(f) | 2.75 | %(g) | 2.82 | % | 2.91 | % | 3.21 | % | 3.08 | % | 3.22 | % | ||||||||||||
Expenses before waivers and/or expense reimbursement(f) | 3.03 | %(g) | 2.94 | % | 3.00 | % | 3.31 | % | 3.19 | % | 3.37 | % | ||||||||||||
Net investment income (loss) | (1.31 | )%(g) | (0.26 | )% | (0.26 | )% | (1.12 | )% | (1.31 | )% | (0.74 | )% | ||||||||||||
Portfolio turnover rate(h) | 99 | % | 142 | % | 160 | % | 83 | % | 83 | % | 160 | % |
(a) | Calculated based on average shares outstanding during the period. |
(b) | The per share amount of realized and unrealized gain (loss) on investments does not directly correlate to the amounts reported in the Statement of Operations due to the timing of portfolio share transactions in relation to fluctuating market values. |
(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 0.50%, 0.57%, 0.65%, 0.96%, 0.77% and 0.71%, for the six months ended September 30, 2020, the years ended March 31, 2020, March 31, 2019, March 31, 2018, March 31, 2017 and March 31, 2016, 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.
PGIM QMA Long-Short Equity Fund | 45 |
Financial Highlights (unaudited)(continued)
Class Z Shares | ||||||||||||||||||||||||
Six Months Ended September 30, 2020 | Year Ended March 31, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $9.89 | $12.51 | $12.69 | $11.95 | $11.41 | $11.03 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | (0.02 | ) | 0.09 | 0.09 | (0.01 | ) | (0.04 | ) | (0.01 | ) | ||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (0.06 | )(b) | (2.01 | ) | (0.06 | ) | 0.75 | 0.77 | 0.44 | |||||||||||||||
Total from investment operations | (0.08 | ) | (1.92 | ) | 0.03 | 0.74 | 0.73 | 0.43 | ||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||
Dividends from net investment income | - | (0.14 | ) | - | - | - | - | |||||||||||||||||
Distributions from net realized gains | - | (0.56 | ) | (0.21 | ) | - | (0.19 | ) | (0.05 | ) | ||||||||||||||
Total dividends and distributions | - | (0.70 | ) | (0.21 | ) | - | (0.19 | ) | (0.05 | ) | ||||||||||||||
Net asset value, end of period | $9.81 | $9.89 | $12.51 | $12.69 | $11.95 | $11.41 | ||||||||||||||||||
Total Return(c): | (0.91) | % | (16.25 | )% | 0.30 | % | 6.19 | % | 6.40 | % | 3.93 | % | ||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||
Net assets, end of period (000) | $64,727 | $123,443 | $342,001 | $395,409 | $274,663 | $163,592 | ||||||||||||||||||
Average net assets (000) | $92,899 | $253,412 | $391,781 | $312,993 | $199,471 | $67,895 | ||||||||||||||||||
Ratios to average net assets(d)(e): | ||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(f) | 1.78 | %(g) | 1.82 | % | 1.91 | % | 2.19 | % | 2.08 | % | 2.18 | % | ||||||||||||
Expenses before waivers and/orexpense reimbursement(f) | 2.00 | %(g) | 1.88 | % | 1.96 | % | 2.27 | % | 2.19 | % | 2.40 | % | ||||||||||||
Net investment income (loss) | (0.32 | )%(g) | 0.75 | % | 0.73 | % | (0.11 | )% | (0.31 | )% | (0.07 | )% | ||||||||||||
Portfolio turnover rate(h) | 99 | % | 142 | % | 160 | % | 83 | % | 83 | % | 160 | % |
(a) | Calculated based on average shares outstanding during the period. |
(b) | The per share amount of realized and unrealized gain (loss) on investments does not directly correlate to the amounts reported in the Statement of Operations due to the timing of portfolio share transactions in relation to fluctuating market values. |
(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 0.52%, 0.57%, 0.65%, 0.94%, 0.78% and 0.68%, for the six months ended September 30, 2020, the years ended March 31, 2020, March 31, 2019, March 31, 2018, March 31, 2017 and March 31, 2016, 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.
46 |
Class R6 Shares | ||||||||||||||||
Six Months Ended September 30, 2020 | Year Ended March 31, | May 25, 2017(a) through March 31, 2018 | ||||||||||||||
2020 | 2019 | |||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||
Net Asset Value, Beginning of Period | $9.89 | $12.51 | $12.68 | $11.98 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income (loss) | (0.02 | ) | 0.08 | 0.12 | (0.01 | ) | ||||||||||
Net realized and unrealized gain (loss) on investment transactions | (0.06 | )(c) | (2.00 | ) | (0.08 | ) | 0.71 | |||||||||
Total from investment operations | (0.08 | ) | (1.92 | ) | 0.04 | 0.70 | ||||||||||
Less Dividends and Distributions: | ||||||||||||||||
Dividends from net investment income | - | (0.14 | ) | - | - | |||||||||||
Distributions from net realized gains | - | (0.56 | ) | (0.21 | ) | - | ||||||||||
Total dividends and distributions | - | (0.70 | ) | (0.21 | ) | - | ||||||||||
Net asset value, end of period | $9.81 | $9.89 | $12.51 | $12.68 | ||||||||||||
Total Return(d): | (0.91 | )% | (16.25 | )% | 0.38 | % | 5.84 | % | ||||||||
Ratios/Supplemental Data: | ||||||||||||||||
Net assets, end of period (000) | $18,460 | $39,163 | $74,941 | $16,090 | ||||||||||||
Average net assets (000) | $25,365 | $44,915 | $30,635 | $15,834 | ||||||||||||
Ratios to average net assets(e)(f): | ||||||||||||||||
Expenses after waivers and/or expense reimbursement(g) | 1.79 | %(h) | 1.82 | % | 1.91 | % | 2.24 | %(h) | ||||||||
Expenses before waivers and/or expense reimbursement(g) | 1.89 | %(h) | 1.83 | % | 1.94 | % | 2.30 | %(h) | ||||||||
Net investment income (loss) | (0.36 | )%(h) | 0.67 | % | 0.92 | % | (0.05 | )%(h) | ||||||||
Portfolio turnover rate(i) | 99 | % | 142 | % | 160 | % | 83 | % |
(a) | Commencement of offering. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | The per share amount of realized and unrealized gain (loss) on investments does not directly correlate to the amounts reported in the Statement of Operations due to the timing of portfolio share transactions in relation to fluctuating market values. |
(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) | 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 0.54%, 0.57%, 0.65% and 0.99%, for the six months ended September 30, 2020, the years ended March 31, 2020, March 31, 2019 and the period ended March 31, 2018, respectively. |
(h) | Annualized. |
(i) | 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 | 47 |
Fund Liquidity Risk Management Program (unaudited)
Consistent with Rule 22e-4 under the 1940 Act (the “Liquidity Rule”), the Fund has adopted and implemented a liquidity risk management program (the “LRMP”). The Fund’s LRMP seeks to assess and manage the Fund’s liquidity risk, which is defined as the risk that the Fund is unable to meet investor redemption requests without significantly diluting the remaining investors’ interests in the Fund. The Trust’s Board of Trustees (the “Board”) has approved PGIM Investments LLC (“PGIM Investments”), the Fund’s investment manager, to serve as the administrator of the Fund’s LRMP. As part of its responsibilities as administrator, PGIM Investments has retained a third party to perform certain functions, including providing market data and liquidity classification model information.
The Fund’s LRMP includes a number of processes designed to support the assessment and management of its liquidity risk. In particular, the Fund’s LRMP includes no less than annual assessments of factors that influence the Fund’s liquidity risk; no less than monthly classifications of the Fund’s investments into one of four liquidity classifications provided for in the Liquidity Rule; a 15% of net assets limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); establishment of a minimum percentage of the Fund’s assets to be invested in investments classified as “highly liquid” (as defined under the Liquidity Rule) if the Fund does not invest primarily in highly liquid investments; and regular reporting to the Board.
At a meeting of the Board on March 3-5, 2020, PGIM Investments provided a written report (“LRMP Report”) to the Board addressing the operation, adequacy, and effectiveness of the Fund’s LRMP, including any material changes to the LRMP for the period from the inception of the Fund’s LRMP on December 1, 2018 through December 31, 2019 (“Reporting Period”). The LRMP Report concluded that the Fund’s LRMP was reasonably designed to assess and manage the Fund’s liquidity risk and was adequately and effectively implemented during the Reporting Period. There were no material changes to the LRMP during the Reporting Period. The LRMP Report further concluded that the Fund’s investment strategies continue to be appropriate given the Fund’s status as an open-end fund.
There can be no assurance that the LRMP will achieve its objectives in the future. Additional information regarding risks of investing in the Fund, including liquidity risks presented by the Fund’s investment portfolio, is found in the Fund’s Prospectus and Statement of Additional Information.
48 |
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”). 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 27, 2020 and on June 9-11, 2020 and approved the renewal of the agreements through July 31, 2021, after concluding that the renewal of the agreements was in the best interests of the Fund and its shareholders.
In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with its consideration. Among other things, the Board considered comparative fee information from PGIM Investments and QMA. Also, the Board considered comparisons with other mutual funds in relevant Peer Universes and Peer Groups, as is further discussed below.
In approving the agreements, the Board, including the Independent Trustees advised by independent legal counsel, considered the factors it deemed relevant, including the nature, quality and extent of services provided by PGIM Investments and the subadviser, the performance of the Fund, the profitability of PGIM Investments and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Fund and its shareholders as the Fund’s assets grow. In their deliberations, the Trustees did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund. In connection with its deliberations, the Board considered information provided by PGIM Investments throughout the year at regular Board meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the meetings on May 27, 2020 and on June 9-11, 2020.
1 | PGIM QMA Long-Short Equity Fund is a series of Prudential Investment Portfolios 12. |
PGIM QMA Long-Short Equity Fund |
Approval of Advisory Agreements (continued)
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 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.
Visit our website at pgim.com/investments |
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PGIM Investments and the subadvisory services provided to the Fund by 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 the one-, three- and five-year periods ended December 31, 2019. 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, 2019. 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 pgim.com/investments |
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 | 3rd Quartile | 2nd Quartile | 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 also considered PGIM Investments’ explanation that the Fund’s underperformance against its benchmark index was driven by the Fund’s long exposure to value stocks and short exposure to expensive, high-growth stocks. The Board noted that the Fund’s underperformance during the periods identified above was largely the result of underperformance during one year, 2019. In that regard, the Board noted that when it considered the performance of the Fund one year before, the Fund ranked in the second quartile of its Peer Group over the one- and five-year periods ended December 31, 2018. |
• | The Board also considered PGIM Investments’ assertion that the Fund has ranked above its Peer Universe median over the past five years, adding value through both long and short positioning. |
• | 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, 2021. |
• | 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 QMA Long-Short Equity Fund |
∎ TELEPHONE | ∎ WEBSITE | |||
655 Broad Street Newark, NJ 07102 | (800) 225-1852 | pgim.com/investments |
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 or by visiting the Securities and Exchange Commission’s website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the 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 • Claudia DiGiacomo, Chief Legal Officer • Dino Capasso, Chief Compliance Officer • Charles H. Smith, Anti-Money Laundering Compliance Officer • Andrew R. French, Secretary • Melissa Gonzalez, Assistant Secretary • Diana N. Huffman, Assistant Secretary • Kelly A. Coyne, Assistant Secretary • Patrick McGuinness, 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 | PricewaterhouseCoopers LLP | 300 Madison Avenue New York, NY 10017 | ||
| ||||
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 at pgim.com/investments or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go to pgim.com/investments/resource/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH TRUSTEES |
Shareholders can communicate directly with the Board of Trustees by writing to the Chair of the Board, PGIM QMA Long-Short Equity Fund, PGIM Investments, Attn: Board of Trustees, 655 Broad Street, Newark, NJ 07102. Shareholders can communicate directly with an individual Trustee by writing to that Trustee at 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 for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT filings are available on the Commission’s website 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 FUND
(Formerly, PGIM Short Duration Muni High Income Fund)
SEMIANNUAL REPORT
SEPTEMBER 30, 2020
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 (pgim.com/investments), 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 pgim.com/investments/resource/edelivery
3 | ||||
4 | ||||
7 | ||||
9 | ||||
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 are for the period covered by this report and are subject to change thereafter.
The accompanying financial statements as of September 30, 2020 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. © 2020 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 pgim.com/investments |
Dear Shareholder:
We hope you find the semiannual report for PGIM Short Duration Muni Fund informative and useful. The report covers performance for the six-month period ended September 30, 2020.
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 Fund
November 16, 2020
PGIM Short Duration Muni Fund | 3 |
Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at pgim.com/investments or by calling (800) 225-1852.
Average Annual Total Returns as of 9/30/20 | ||||||||||||||
(without sales charges) | (with sales charges) | |||||||||||||
Six Months* (%) | One Year (%) | Five Years (%) | Since Inception (%) | |||||||||||
Class A | 4.02 | –0.22 | 2.24 | 2.38 (5/29/14) | ||||||||||
Class C | 3.62 | 0.30 | 1.93 | 1.96 (5/29/14) | ||||||||||
Class Z | 4.09 | 2.27 | 2.95 | 2.99 (5/29/14) | ||||||||||
Class R6 | 4.21 | 2.38 | N/A | 3.16 (5/25/17) | ||||||||||
Bloomberg Barclays 1-8 Year Municipal Index* |
| |||||||||||||
3.62 | 3.88 | 2.44 | — | |||||||||||
Bloomberg Barclays Short Duration Muni 50% HG / 50% HY Index |
| |||||||||||||
4.00 | 2.95 | 2.61 | — | |||||||||||
Bloomberg Barclays Municipal Bond Index |
| |||||||||||||
3.99 | 4.09 | 3.84 | — | |||||||||||
Average Annual Total Returns as of 9/30/20 Since Inception (%) | ||||||||||||||
Class A, C, Z (5/29/14) | Class R6 (5/25/17) | |||||||||||||
Bloomberg Barclays 1-8 Year Municipal Index* |
| 2.28 | 2.72 | |||||||||||
Bloomberg Barclays Short Duration Muni 50% HG / 50% HY Index |
| 2.30 | 3.75 | |||||||||||
Bloomberg Barclays Municipal Bond Index |
| 3.79 | 4.06 |
*The Fund’s total returns prior to April 1, 2020 as reflected in the table are the returns of the Fund when it followed different investment strategies under the name “PGIM Short Duration Muni High Income Fund.” The table compares the Fund’s performance to that of the Bloomberg Barclays Municipal Bond Index and the Bloomberg Barclays Short Duration Muni 50% HG / 50% HY Index. Effective as of April 1, 2020, the Bloomberg Barclays 1-8 Year Municipal Index replaced the Bloomberg Barclays Municipal Bond Index and the Bloomberg Barclays Short Duration Muni 50% HG / 50% HY Index as the performance benchmark against which the Fund measures its performance. Fund management believes that the Bloomberg Barclays 1-8 Year Municipal Index is more relevant to the Fund’s new investment strategies.
4 | Visit our website at pgim.com/investments |
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. | 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 $500,000 or more made within 12 months of purchase | 1.00% on sales made within 12 months of purchase | None | None | ||||
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | 0.25% | 1.00% | None | None |
Benchmark Definitions
Bloomberg Barclays 1-8 Year Municipal Index—The Bloomberg Barclays U.S. Municipal Index covers the USD-denominated long-term tax exempt bond market and has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds and prerefunded bonds. The Bloomberg Barclays 1-8 Year Municipal Index contains bonds with maturities between 1 and 8 years.
Bloomberg Barclays Short Duration Muni 50% HG / 50% HY Index—The Bloomberg Barclays Short Duration Muni 50% HG / 50% HY Index consists of the Bloomberg Barclays Municipal Bond 1-8 Year Index (50%), which is an unmanaged index that includes all benchmark-eligible investment-grade municipal bonds with maturities from 1 to 8 years, and the Bloomberg Barclays Municipal High Yield 1-8 Year Index (50%), which is an unmanaged index that includes all benchmark-eligible Ba1 or lower rated and non-rated municipal bonds with maturities from 1 to 8 years.
Bloomberg Barclays Municipal Bond Index—The Bloomberg Barclays Municipal Bond Index is an unmanaged index of long-term investment-grade municipal bonds. It gives a broad look at how long-term investment-grade municipal bonds have performed.
Investors cannot invest directly in an index. The returns for the Indexes would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes that may be paid by an investor.
PGIM Short Duration Muni Fund | 5 |
Your Fund’s Performance (continued)
Distributions and Yields as of 9/30/20 | ||||||||||||||
Total Distributions Paid for Six Months ($) | SEC 30-Day Subsidized Yield* (%) | Taxable Equivalent 30-Day Subsidized Yield*** at Federal Tax Rates of | SEC 30-Day Unsubsidized Yield** (%) | Taxable Equivalent 30-Day Unsubsidized Yield*** at Federal Tax Rates of | ||||||||||
40.8% | 37.0% | 40.8% | 37.0% | |||||||||||
Class A | 0.09 | 0.72 | 1.22 | 1.14 | 0.60 | 1.01 | 0.95 | |||||||
Class C | 0.05 | –0.08 | –0.14 | –0.13 | –0.20 | –0.34 | –0.32 | |||||||
Class Z | 0.11 | 1.04 | 1.76 | 1.65 | 0.82 | 1.39 | 1.30 | |||||||
Class R6 | 0.11 | 1.07 | 1.81 | 1.70 | –0.92 | –1.55 | –1.46 |
*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.
Credit Quality expressed as a percentage of total investments as of 9/30/20 (%) | ||||
AAA | 3.7 | |||
AA | 23.8 | |||
A | 42.6 | |||
BBB | 22.5 | |||
BB | 0.4 | |||
Not Rated | 2.8 | |||
Cash/Cash Equivalents | 4.2 | |||
Total Investments | 100.0 |
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.
6 | Visit our website at pgim.com/investments |
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, 2020. The example is for illustrative purposes only; you should consult the Fund’s 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 Fund | 7 |
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 Fund | Beginning Account Value April 1, 2020 | Ending Account Value September 30, 2020 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,040.20 | 0.64 | % | $ | 3.27 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,021.86 | 0.64 | % | $ | 3.24 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,036.20 | 1.43 | % | $ | 7.30 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,017.90 | 1.43 | % | $ | 7.23 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,040.90 | 0.32 | % | $ | 1.64 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,023.46 | 0.32 | % | $ | 1.62 | ||||||||||
Class R6 | Actual | $ | 1,000.00 | $ | 1,042.10 | 0.29 | % | $ | 1.48 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,023.61 | 0.29 | % | $ | 1.47 |
* 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, 2020, and divided by the 365 days in the Fund’s fiscal year ending March 31, 2021 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
8 | Visit our website at pgim.com/investments |
Schedule of Investments (unaudited)
as of September 30, 2020
Description | Interest Rate | Maturity Date | Principal (000)# | Value | ||||||||||
LONG-TERM INVESTMENTS 101.0% |
| |||||||||||||
MUNICIPAL BONDS | ||||||||||||||
Alabama 0.6% | ||||||||||||||
Black Belt Energy Gas District, | 4.000% | 12/01/49 | 500 | $ | 573,785 | |||||||||
Selma Industrial Development Board, | 1.375 | 05/01/34 | 400 | 407,440 | ||||||||||
|
| |||||||||||||
981,225 | ||||||||||||||
|
| |||||||||||||
Alaska 0.7% | ||||||||||||||
Alaska Industrial Development & Export Authority, | 5.000 | 10/01/29 | 1,000 | 1,262,930 | ||||||||||
|
| |||||||||||||
Arizona 4.3% | ||||||||||||||
Arizona Health Facilities Authority, | 1.008(c) | 01/01/37 | 2,500 | 2,290,255 | ||||||||||
Arizona Industrial Development Authority, | 5.000 | 02/01/27 | 200 | 250,372 | ||||||||||
Chandler Industrial Development Authority, | 5.000 | 06/01/49 | 1,010 | 1,165,712 | ||||||||||
City of Phoenix Civic Improvement Corp., | 5.000 | 07/01/32 | 500 | 550,330 | ||||||||||
Industrial Development Authority of the City of Phoenix, | 3.750 | 07/01/24 | 390 | 402,402 | ||||||||||
Maricopa County Industrial Development Authority, | 4.000 | 07/01/26 | 500 | 529,180 | ||||||||||
Salt Verde Finance Corp., | ||||||||||||||
Revenue, National Gas Utility | 5.250 | 12/01/21 | 815 | 855,473 | ||||||||||
Revenue, National Gas Utility | 5.250 | 12/01/26 | 1,125 | 1,380,634 | ||||||||||
|
| |||||||||||||
7,424,358 | ||||||||||||||
|
| |||||||||||||
California 7.1% | ||||||||||||||
California Municipal Finance Authority, | 4.000 0.140(cc) | | 06/01/26 12/01/29 | | | 375 3,300 | | | 405,731 3,300,000 | |
See Notes to Financial Statements.
PGIM Short Duration Muni Fund | 9 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Interest Rate | Maturity Date | Principal (000)# | Value | ||||||||||
MUNICIPAL BONDS (Continued) |
| |||||||||||||
California (cont’d.) | ||||||||||||||
California Pollution Control Financing Authority, | 7.000% | 07/01/22 | (d) | 250 | $ | 162,500 | ||||||||
California School Finance Authority, | ||||||||||||||
Revenue, Alliance College Ready Public Schools, Series A, 144A | 4.000 | 07/01/21 | 400 | 407,444 | ||||||||||
Revenue, Alliance College Ready Public Schools, Series A, Rfdg, 144A | 4.000 | 07/01/24 | 270 | 293,806 | ||||||||||
Revenue, Green Dot Public School Project, Series A, 144A | 4.000 | 08/01/25 | 330 | 362,508 | ||||||||||
Revenue, KIPP Project, Series A, 144A | 3.625 | 07/01/25 | 400 | 422,444 | ||||||||||
Chula Vista Municipal Financing Authority, | 5.000 | 09/01/21 | 755 | 788,212 | ||||||||||
City of Roseville, | 5.000 | 09/01/22 | 225 | 239,965 | ||||||||||
Golden State Tobacco Securitization Corp., | ||||||||||||||
Revenue, Series A-1, Rfdg | 5.000 | 06/01/26 | 1,000 | 1,211,560 | ||||||||||
Revenue, Series A-1, Rfdg | 5.000 | 06/01/27 | 1,100 | 1,360,601 | ||||||||||
Long Beach Bond Finance Authority, | 1.638(c) | 11/15/27 | 700 | 711,629 | ||||||||||
San Diego County Water Authority, | 5.000 | 05/01/28 | 500 | 648,200 | ||||||||||
State of California, | 5.000 | 11/01/28 | 1,500 | 1,980,450 | ||||||||||
|
| |||||||||||||
12,295,050 | ||||||||||||||
|
| |||||||||||||
Colorado 4.0% | ||||||||||||||
City & County of Denver, Airport System, | 5.000 | 11/15/28 | 250 | 309,075 | ||||||||||
Colorado Educational & Cultural Facilities Authority, | 4.000 | 11/01/24 | 500 | 517,705 | ||||||||||
Colorado Health Facilities Authority, | ||||||||||||||
Revenue, Christian Living Neighborhood, Rfdg | 4.000 | 01/01/22 | 300 | 306,138 | ||||||||||
Revenue, Commonspirit Health, Series A, Rfdg | 5.000 | 08/01/27 | 1,000 | 1,230,370 | ||||||||||
Revenue, Commonspirit Health, Series A, Rfdg | 5.000 | 08/01/28 | 200 | 250,692 | ||||||||||
Revenue, Commonspirit Health, Series B-2, (Mandatory Put Date 02/01/26) | 5.000 | 08/01/49 | 1,330 | 1,580,452 | ||||||||||
Revenue, National Jewish Health Initiatives, Rfdg | 5.000 | 01/01/22 | 125 | 129,583 | ||||||||||
Revenue, National Jewish Health Initiatives, Rfdg | 5.000 | 01/01/24 | 315 | 325,823 |
See Notes to Financial Statements.
10 |
Description | Interest Rate | Maturity Date | Principal (000)# | Value | ||||||||||
MUNICIPAL BONDS (Continued) |
| |||||||||||||
Colorado (cont’d.) | ||||||||||||||
Colorado Health Facilities Authority, (cont’d.) | ||||||||||||||
Revenue, Valley View Hospital Association Project, Rfdg, (Mandatory Put Date 05/15/23) | 2.800% | 05/15/42 | 950 | $ | 990,062 | |||||||||
Park Creek Metropolitan District, | 5.000 | 12/01/23 | 1,100 | 1,246,553 | ||||||||||
|
| |||||||||||||
6,886,453 | ||||||||||||||
|
| |||||||||||||
Connecticut 2.6% | ||||||||||||||
Harbor Point Infrastructure Improvement District, | 5.000 | 04/01/22 | 600 | 615,300 | ||||||||||
State of Connecticut, | ||||||||||||||
Revenue, Special Tax Obligation, Series A | 5.000 | 05/01/22 | 250 | 268,788 | ||||||||||
Revenue, Special Tax Obligation, Series A | 5.000 | 05/01/27 | 450 | 569,650 | ||||||||||
Revenue, Transportation Infrastructure, Series A | 5.000 | 01/01/23 | 275 | 304,153 | ||||||||||
Revenue, Transportation Infrastructure, Series A | 5.000 | 09/01/24 | 630 | 741,894 | ||||||||||
Revenue, Transportation Infrastructure, Series A | 5.000 | 08/01/25 | 660 | 800,191 | ||||||||||
Series C, GO | 5.000 | 06/15/26 | 1,000 | 1,238,740 | ||||||||||
|
| |||||||||||||
4,538,716 | ||||||||||||||
|
| |||||||||||||
Delaware 1.1% | ||||||||||||||
Delaware State Economic Development Authority, | ||||||||||||||
Series A, Rfdg, (Mandatory Put Date 07/01/25) | 1.050 | 01/01/31 | 500 | 505,895 | ||||||||||
Revenue, Newark Charter School, Series A, Rfdg | 2.800 | 09/01/26 | 335 | 344,993 | ||||||||||
Delaware Transportation Authority, | 5.000 | 07/01/28 | 850 | 1,125,664 | ||||||||||
|
| |||||||||||||
1,976,552 | ||||||||||||||
|
| |||||||||||||
District of Columbia 3.0% | ||||||||||||||
District of Columbia Friendship Public Charter School, | 3.550 | 06/01/22 | 335 | 338,936 | ||||||||||
District of Columbia KIPP Charter School, | ||||||||||||||
Revenue, Project Series B, Rfdg | 5.000 | 07/01/27 | 145 | 171,834 | ||||||||||
Revenue, Rfdg (Escrowed to Maturity Date 07/01/23)(ee) | 5.000 | 07/01/23 | 210 | 225,343 | ||||||||||
Metropolitan Washington Airports Authority, | ||||||||||||||
Revenue, AMT, Rfdg | 5.000 | 10/01/26 | 2,000 | 2,467,720 | ||||||||||
Revenue, Series A, AMT, Rfdg | 5.000 | 10/01/30 | 1,485 | 1,951,661 | ||||||||||
|
| |||||||||||||
5,155,494 | ||||||||||||||
|
|
See Notes to Financial Statements.
PGIM Short Duration Muni Fund | 11 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Interest Rate | Maturity Date | Principal (000)# | Value | ||||||||||
MUNICIPAL BONDS (Continued) |
| |||||||||||||
Florida 9.4% | ||||||||||||||
City of Tallahassee, | ||||||||||||||
Revenue, Memorial Healthcare, Inc., Project, Series A | 5.000% | 12/01/23 | 255 | $ | 286,130 | |||||||||
Revenue, Memorial Healthcare, Inc., Project, Series A | 5.000 | 12/01/25 | 550 | 652,042 | ||||||||||
County of Broward Airport System, | ||||||||||||||
Revenue, Series B, AMT, Rfdg | 5.000 | 10/01/27 | 1,000 | 1,243,650 | ||||||||||
Revenue, Series B, AMT, Rfdg | 5.000 | 10/01/28 | 1,000 | 1,260,850 | ||||||||||
Florida Higher Educational Facilities Financial Authority, | ||||||||||||||
Revenue, Nova Southeastern University, Rfdg | ||||||||||||||
(Escrowed to Maturity Date 04/01/21)(ee) | 4.000 | 04/01/21 | 40 | 40,742 | ||||||||||
Greater Orlando Aviation Authority, | 5.000 | 10/01/24 | 1,000 | 1,165,810 | ||||||||||
Hillsborough County Aviation Authority, | 5.000 | 10/01/25 | 1,500 | 1,684,830 | ||||||||||
JEA Electric System, | 5.000 | 10/01/28 | 1,000 | 1,288,390 | ||||||||||
Lakewood Ranch Stewardship District, | ||||||||||||||
Special Assessment | 4.000 | 05/01/21 | 180 | 181,186 | ||||||||||
Special Assessment | 4.250 | 05/01/25 | 300 | 312,216 | ||||||||||
Special Assessment | 4.250 | 05/01/26 | 250 | 259,943 | ||||||||||
Special Assessment | 4.625 | 05/01/27 | 500 | 539,055 | ||||||||||
Martin County Industrial Development Authority, | 3.950 | 12/15/21 | 250 | 250,615 | ||||||||||
Myrtle Creek Improvement District, | 4.000 | 05/01/27 | 1,000 | 1,127,960 | ||||||||||
Orange County Health Facilities Authority, | ||||||||||||||
Revenue, Orlando Healthcare, Inc., Series A, Rfdg | 5.000 | 10/01/23 | 150 | 168,573 | ||||||||||
Revenue, Orlando Regional Healthcare, NATL, | ||||||||||||||
Series C, Rfdg (Escrowed to Maturity Date 10/01/21)(ee) | 6.250 | 10/01/21 | 40 | 42,313 | ||||||||||
Palm Beach County Health Facilities Authority, | 6.750 | 06/01/24 | 370 | 405,953 | ||||||||||
Village Community Development District No. 04, | 4.125 | 05/01/21 | 90 | 90,265 | ||||||||||
Village Community Development District No. 05, | 3.000 | 05/01/21 | 80 | 80,703 | ||||||||||
Village Community Development District No. 06, | ||||||||||||||
Special Assessment, Revenue, Rfdg | 3.000 | 05/01/21 | 155 | 155,910 | ||||||||||
Special Assessment, Revenue, Rfdg | 4.000 | 05/01/26 | 240 | 274,790 |
See Notes to Financial Statements.
12 |
Description | Interest Rate | Maturity Date | Principal (000)# | Value | ||||||||||
MUNICIPAL BONDS (Continued) |
| |||||||||||||
Florida (cont’d.) | ||||||||||||||
Village Community Development District No. 07, | ||||||||||||||
Special Assessment, Revenue, Rfdg | 4.000% | 05/01/21 | 1,185 | $ | 1,202,242 | |||||||||
Special Assessment, Revenue, Rfdg | 4.000 | 05/01/24 | 1,515 | 1,638,594 | ||||||||||
Special Assessment, Revenue, Rfdg | 4.000 | 05/01/25 | 930 | 1,021,735 | ||||||||||
Special Assessment, Revenue, Rfdg | 4.000 | 05/01/26 | 285 | 312,619 | ||||||||||
Village Community Development District No. 10, | 4.500 | 05/01/23 | 210 | 216,226 | ||||||||||
Village Community Development District No. 12, | 3.250 | 05/01/23 | 245 | 249,001 | ||||||||||
|
| |||||||||||||
16,152,343 | ||||||||||||||
|
| |||||||||||||
Georgia 5.3% | ||||||||||||||
Burke County Development Authority, | ||||||||||||||
Revenue, Georgia Power Co. Plant Vogtle Project, | 2.250 | 10/01/32 | 250 | 258,770 | ||||||||||
Revenue, Georgia Power Co. Plant Vogtle Project, | 1.700 | 12/01/49 | 1,000 | 1,028,300 | ||||||||||
Revenue, Oglethorpe Power Corp., Series V, Rfdg, | 3.250 | 11/01/45 | 500 | 539,190 | ||||||||||
City of Atlanta Department of Aviation, | 5.000 | 07/01/28 | 500 | 637,345 | ||||||||||
Main Street Natural Gas, Inc., | ||||||||||||||
Revenue, Series B, (Mandatory Put Date 09/01/23), 1 Month LIBOR + 0.750% | 0.854(c) | 04/01/48 | 1,200 | 1,201,335 | ||||||||||
Revenue, Series B, (Mandatory Put Date 12/01/24) | 4.000 | 08/01/49 | 1,060 | 1,203,800 | ||||||||||
Revenue, Series C, (Mandatory Put Date 09/01/26) | 4.000 | 03/01/50 | 500 | 580,270 | ||||||||||
Revenue, Sub-Series C, (Mandatory Put Date 12/01/23) | 4.000 | 08/01/48 | 1,540 | 1,697,681 | ||||||||||
Municipal Electric Authority of Georgia, | 5.000 | 01/01/29 | 1,000 | 1,283,760 | ||||||||||
Private Colleges & Universities Authority, | 5.000 | 04/01/22 | 625 | 666,387 | ||||||||||
|
| |||||||||||||
9,096,838 | ||||||||||||||
|
| |||||||||||||
Idaho 0.6% | ||||||||||||||
County of Nez Perce, | 2.750 | 10/01/24 | 1,000 | 1,022,720 | ||||||||||
|
|
See Notes to Financial Statements.
PGIM Short Duration Muni Fund | 13 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Interest Rate | Maturity Date | Principal (000)# | Value | ||||||||||
MUNICIPAL BONDS (Continued) |
| |||||||||||||
Illinois 17.9% | ||||||||||||||
Chicago O’Hare International Airport, | ||||||||||||||
Revenue, Series A, AMT, Rfdg | 5.000% | 01/01/26 | 925 | $ | 1,083,656 | |||||||||
Revenue, Series C, AMT, Rfdg | 5.000 | 01/01/23 | 200 | 219,896 | ||||||||||
Chicago Transit Authority, | 5.000 | 06/01/22 | 1,630 | 1,676,781 | ||||||||||
City of Chicago, | ||||||||||||||
Series 2003 B, GO, Rfdg | 5.000 | 01/01/23 | 370 | 382,695 | ||||||||||
Series C, GO, Rfdg (Escrowed to Maturity Date 01/01/22)(ee) | 5.000 | 01/01/22 | 675 | 715,277 | ||||||||||
Series C, GO, Unrefunded, Rfdg | 5.000 | 01/01/22 | 345 | 351,741 | ||||||||||
City of Chicago Wastewater Transmission, | ||||||||||||||
Revenue, Second Lien | 5.000 | 01/01/25 | 615 | 644,662 | ||||||||||
Revenue, Second Lien, Series C, Rfdg | 5.000 | 01/01/22 | 990 | 1,038,371 | ||||||||||
City of Chicago Waterworks, | ||||||||||||||
Revenue, Second Lien Project, Rfdg | 4.000 | 11/01/21 | 375 | 387,300 | ||||||||||
Revenue, Second Lien, Rfdg | 4.000 | 11/01/20 | 1,065 | 1,067,620 | ||||||||||
Revenue, Second Lien, Rfdg | 4.000 | 11/01/24 | 280 | 297,354 | ||||||||||
Revenue, Second Lien, Rfdg | 5.000 | 11/01/20 | 385 | 386,255 | ||||||||||
Revenue, Second Lien, Rfdg | 5.000 | 11/01/22 | 840 | 909,712 | ||||||||||
City of Springfield Electric, | 5.000 | 03/01/22 | 300 | 319,053 | ||||||||||
County of Cook, | 5.000 | 11/15/23 | 1,000 | 1,117,770 | ||||||||||
Illinois Finance Authority, | ||||||||||||||
Revenue, Advocate Healthcare Project, Series A-1, Rfdg | 4.000 | 11/01/30 | 1,000 | 1,143,280 | ||||||||||
Revenue, American Water Capital Corp. Project, | 0.700 | 05/01/40 | 600 | 596,754 | ||||||||||
Revenue, Presbyterian Homes, Series B, Rfdg, | 1.459(c) | 05/01/36 | 500 | 499,144 | ||||||||||
Revenue, Series B-2, (Mandatory Put Date 11/15/26)(hh) | 5.000 | 05/15/50 | 1,000 | 1,214,420 | ||||||||||
Illinois State Toll Highway Authority, | ||||||||||||||
Senior Revenue, Series A, Rfdg | 5.000 | 01/01/28 | 1,080 | 1,382,994 | ||||||||||
Senior Revenue, Series C, Rfdg | 5.000 | 01/01/28 | 2,125 | 2,721,169 | ||||||||||
Railsplitter Tobacco Settlement Authority, | ||||||||||||||
Revenue | 5.000 | 06/01/22 | 555 | 596,231 | ||||||||||
Revenue | 5.000 | 06/01/24 | 1,005 | 1,161,800 | ||||||||||
Revenue | 5.375 | 06/01/21 | 960 | 991,267 |
See Notes to Financial Statements.
14 |
Description | Interest Rate | Maturity Date | Principal (000)# | Value | ||||||||||
MUNICIPAL BONDS (Continued) |
| |||||||||||||
Illinois (cont’d.) | ||||||||||||||
Regional Transportation Authority, | 5.500% | 07/01/25 | 760 | $ | 921,485 | |||||||||
Sales Tax Securitization Corp., | 5.000 | 01/01/27 | 1,000 | 1,195,910 | ||||||||||
State of Illinois, | ||||||||||||||
GO | 5.000 | 02/01/22 | 200 | 206,918 | ||||||||||
GO | 5.000 | 05/01/23 | 110 | 116,679 | ||||||||||
GO, Rfdg | 5.000 | 08/01/24 | 515 | 537,264 | ||||||||||
Revenue, Junior Obligation, Rfdg | 5.000 | 06/15/24 | 705 | 758,263 | ||||||||||
Revenue, Junior Series D, BAM, Rfdg | 5.000 | 06/15/25 | 1,325 | 1,517,509 | ||||||||||
Series A, GO | 4.000 | 01/01/22 | 75 | 76,530 | ||||||||||
Series A, GO | 4.000 | 01/01/23 | 360 | 367,056 | ||||||||||
Series A, GO | 5.000 | 04/01/22 | 1,000 | 1,038,500 | ||||||||||
Series D, GO | 5.000 | 11/01/23 | 1,500 | 1,587,870 | ||||||||||
Series D, GO | 5.000 | 11/01/26 | 1,100 | 1,198,362 | ||||||||||
University of Illinois, | 5.000 | 04/01/26 | 425 | 498,682 | ||||||||||
|
| |||||||||||||
30,926,230 | ||||||||||||||
|
| |||||||||||||
Indiana 0.7% | ||||||||||||||
City of Rockport, | 3.050 | 06/01/25 | 500 | 550,255 | ||||||||||
City of Whiting Environmental Facilities, | 5.000 | 12/01/44 | 500 | 605,195 | ||||||||||
|
| |||||||||||||
1,155,450 | ||||||||||||||
|
| |||||||||||||
Iowa 0.6% | ||||||||||||||
Iowa Finance Authority, | 2.875 | 05/15/49 | 500 | 500,710 | ||||||||||
PEFA, Inc., | 5.000 | 09/01/49 | 500 | 607,725 | ||||||||||
|
| |||||||||||||
1,108,435 | ||||||||||||||
|
| |||||||||||||
Kentucky 1.5% | ||||||||||||||
County of Trimble, | 1.300 | 09/01/44 | 250 | 249,990 |
See Notes to Financial Statements.
PGIM Short Duration Muni Fund | 15 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Interest Rate | Maturity Date | Principal (000)# | Value | ||||||||||
MUNICIPAL BONDS (Continued) |
| |||||||||||||
Kentucky (cont’d.) | ||||||||||||||
Kentucky Public Energy Authority, | ||||||||||||||
Revenue, Series A-1, (Mandatory Put Date 06/01/25) | 4.000% | 12/01/49 | 1,000 | $ | 1,132,570 | |||||||||
Revenue, Series B, (Mandatory Put Date 01/01/25) | 4.000 | 01/01/49 | 1,125 | 1,262,385 | ||||||||||
|
| |||||||||||||
2,644,945 | ||||||||||||||
|
| |||||||||||||
Louisiana 1.1% | ||||||||||||||
City of New Orleans, | ||||||||||||||
GO, Rfdg | 5.000 | 12/01/22 | 100 | 109,952 | ||||||||||
GO, Rfdg | 5.000 | 12/01/23 | 150 | 171,555 | ||||||||||
City of New Orleans Sewerage Service, | ||||||||||||||
Revenue | 5.000 | 06/01/23 | 300 | 335,949 | ||||||||||
Revenue | 5.000 | 06/01/24 | 200 | 232,228 | ||||||||||
Louisiana Offshore Terminal Authority, | 1.650 | 09/01/34 | 500 | 502,125 | ||||||||||
Louisiana Public Facilities Authority, | 5.000 | 05/15/22 | 265 | 284,144 | ||||||||||
Parish of St. John the Baptist, | 2.100 | 06/01/37 | 200 | 201,056 | ||||||||||
|
| |||||||||||||
1,837,009 | ||||||||||||||
|
| |||||||||||||
Maryland 0.3% | ||||||||||||||
Frederick County Special Obligation, Urbana Community Development Authorization, Special Tax, Series A, Rfdg | 5.000 | 07/01/21 | 100 | 100,135 | ||||||||||
Maryland Economic Development Corp., | 5.000 | 06/01/24 | 350 | 383,512 | ||||||||||
|
| |||||||||||||
483,647 | ||||||||||||||
|
| |||||||||||||
Massachusetts 0.4% | ||||||||||||||
Massachusetts Port Authority, | 5.000 | 07/01/29 | 500 | 643,890 | ||||||||||
|
|
See Notes to Financial Statements.
16 |
Description | Interest Rate | Maturity Date | Principal (000)# | Value | ||||||||||
MUNICIPAL BONDS (Continued) |
| |||||||||||||
Michigan 0.3% | ||||||||||||||
Michigan Finance Authority, | 5.000% | 07/01/22 | 400 | $ | 433,076 | |||||||||
Oakland County Economic Development Corp., | 6.500 | 12/01/20 | 100 | 100,995 | ||||||||||
|
| |||||||||||||
534,071 | ||||||||||||||
|
| |||||||||||||
Minnesota 0.3% | ||||||||||||||
City of St. Paul Housing & Redevelopment Authority, | 5.000 | 11/15/20 | 500 | 502,975 | ||||||||||
|
| |||||||||||||
Mississippi 0.4% | ||||||||||||||
Mississippi Business Finance Corp., | ||||||||||||||
Revenue, Chevron USA, Inc., Series I, FRDD | 0.100(cc) | 11/01/35 | 200 | 200,000 | ||||||||||
Revenue, Pollution Control, Rfdg | 3.200 | 09/01/28 | 500 | 526,800 | ||||||||||
|
| |||||||||||||
726,800 | ||||||||||||||
|
| |||||||||||||
Missouri 0.7% | ||||||||||||||
Kansas City Industrial Development Authority, | 5.000 | 03/01/29 | 1,000 | 1,250,810 | ||||||||||
|
| |||||||||||||
Nebraska 0.4% | ||||||||||||||
Central Plains Energy Project, | 5.000 | 03/01/50 | 675 | 765,308 | ||||||||||
|
| |||||||||||||
Nevada 0.3% | ||||||||||||||
Clark County Airport Department of Aviation, | 5.000 | 07/01/21 | 500 | 516,785 | ||||||||||
|
| |||||||||||||
New Jersey 6.6% | ||||||||||||||
New Jersey Building Authority, | ||||||||||||||
Revenue, Series A, Rfdg (Escrowed to Maturity Date 06/15/21)(ee) | 5.000 | 06/15/21 | 60 | 61,989 | ||||||||||
Revenue, Series A, Unrefunded, Rfdg | 5.000 | 06/15/21 | 625 | 642,500 |
See Notes to Financial Statements.
PGIM Short Duration Muni Fund | 17 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Interest Rate | Maturity Date | Principal (000)# | Value | ||||||||||
MUNICIPAL BONDS (Continued) |
| |||||||||||||
New Jersey (cont’d.) | ||||||||||||||
New Jersey Economic Development Authority, | ||||||||||||||
Revenue, American Water Co., Series B, AMT, Rfdg, (Mandatory Put Date 06/01/23) | 1.200% | 11/01/34 | 250 | $ | 253,617 | |||||||||
Revenue, Port Newark Container, AMT, Rfdg | 5.000 | 10/01/21 | 500 | 511,335 | ||||||||||
Revenue, Series XX, Rfdg | 5.000 | 06/15/22 | 860 | 917,044 | ||||||||||
Revenue, Series XX, Rfdg | 5.000 | 06/15/24 | 420 | 474,781 | ||||||||||
Revenue, State Appropriation, Series B, Rfdg | 4.000 | 11/01/25 | 455 | 496,701 | ||||||||||
New Jersey Health Care Facilities Financing Authority, | ||||||||||||||
Revenue, AHS Hospital Corp., Rfdg | 5.000 | 07/01/24 | 250 | 291,068 | ||||||||||
Revenue, RWJ Barnabas Health Obligation Group, | 5.000 | 07/01/27 | 350 | 429,023 | ||||||||||
Revenue, University Hospital, Series A, AGM, Rfdg | 5.000 | 07/01/23 | 500 | 557,425 | ||||||||||
Revenue, Virtua Health, Rfdg | 5.000 | 07/01/21 | 125 | 129,312 | ||||||||||
New Jersey Transportation Trust Fund Authority, | ||||||||||||||
Revenue, Transportation Program, Series AA | 5.000 | 06/15/22 | 845 | 901,049 | ||||||||||
Revenue, Transportation System Bond, Rfdg | 5.000 | 12/15/26 | 500 | 593,545 | ||||||||||
Revenue, Transportation System, Series A, Rfdg | 5.000 | 12/15/23 | 290 | 323,927 | ||||||||||
Revenue, Transportation System, Series B, AGC, Rfdg | 5.500 | 12/15/21 | 175 | 183,960 | ||||||||||
New Jersey Turnpike Authority, | 0.809(c) | 01/01/24 | 1,000 | 1,000,305 | ||||||||||
South Jersey Transportation Authority, | 5.000 | 11/01/20 | 45 | 45,178 | ||||||||||
Revenue, Series A, Rfdg (Escrowed to Maturity Date 11/01/21)(ee) | 5.000 | 11/01/21 | 175 | 184,257 | ||||||||||
Revenue, Series A, Unrefunded, Rfdg | 5.000 | 11/01/20 | 55 | 55,153 | ||||||||||
Revenue, Series A, Unrefunded, Rfdg | 5.000 | 11/01/21 | 175 | 181,485 | ||||||||||
Tobacco Settlement Financing Corp., | ||||||||||||||
Revenue, Series A, Rfdg | 5.000 | 06/01/25 | 335 | 397,541 | ||||||||||
Revenue, Series A, Rfdg | 5.000 | 06/01/26 | 855 | 1,042,185 | ||||||||||
Revenue, Series A, Rfdg | 5.000 | 06/01/27 | 1,260 | 1,569,267 | ||||||||||
Revenue, Series A, Rfdg | 5.000 | 06/01/30 | 105 | 131,063 | ||||||||||
|
| |||||||||||||
11,373,710 | ||||||||||||||
|
| |||||||||||||
New York 4.0% | ||||||||||||||
Metropolitan Transportation Authority, | 5.000 | 05/15/21 | 3,500 | 3,545,885 | ||||||||||
New York City Transitional Finance Authority, | 5.000 | 11/01/28 | 1,000 | 1,304,430 |
See Notes to Financial Statements.
18 |
Description | Interest Rate | Maturity Date | Principal (000)# | Value | ||||||||||
MUNICIPAL BONDS (Continued) |
| |||||||||||||
New York (cont’d.) | ||||||||||||||
New York State Dormitory Authority, | ||||||||||||||
Revenue, New York University Hospitals Center, Rfdg | 5.000% | 07/01/24 | 310 | $ | 359,684 | |||||||||
Revenue, Sub-Series B | 5.000 | 03/31/21 | 750 | 767,827 | ||||||||||
Port Authority of New York & New Jersey, | 5.000 | 12/01/20 | 540 | 543,704 | ||||||||||
TSASC, Inc., | 5.000 | 06/01/24 | 250 | 289,010 | ||||||||||
|
| |||||||||||||
6,810,540 | ||||||||||||||
|
| |||||||||||||
North Carolina 0.3% | ||||||||||||||
North Carolina Medical Care Commission, | 5.000 | 10/01/20 | 500 | 500,035 | ||||||||||
|
| |||||||||||||
Ohio 2.0% | ||||||||||||||
Akron Bath Copley Joint Township Hospital District, | 5.000 | 11/15/27 | 185 | 228,268 | ||||||||||
Buckeye Tobacco Settlement Financing Authority, | 5.000 | 06/01/28 | 130 | 166,209 | ||||||||||
County of Cuyahoga, | ||||||||||||||
Revenue, MetroHealth System, Rfdg | 4.000 | 02/15/29 | 1,200 | 1,353,816 | ||||||||||
Revenue, MetroHealth System, Rfdg | 5.000 | 02/15/25 | 695 | 806,311 | ||||||||||
Lancaster Port Authority, | 5.000 | 08/01/49 | 250 | 295,365 | ||||||||||
Ohio Air Quality Development Authority, | 2.400 | 12/01/38 | 500 | 515,210 | ||||||||||
|
| |||||||||||||
3,365,179 | ||||||||||||||
|
| |||||||||||||
Oklahoma 1.6% | ||||||||||||||
Oklahoma Development Finance Authority, | ||||||||||||||
Revenue, Gilcrease Expressway West, AMT | 1.625 | 07/06/23 | 500 | 499,505 | ||||||||||
Revenue, University of Oklahoma Medicine Project, Series B | 5.000 | 08/15/25 | 800 | 926,920 | ||||||||||
Revenue, University of Oklahoma Medicine Project, Series B | 5.000 | 08/15/29 | 1,100 | 1,323,322 | ||||||||||
|
| |||||||||||||
2,749,747 | ||||||||||||||
|
|
See Notes to Financial Statements.
PGIM Short Duration Muni Fund | 19 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Interest Rate | Maturity Date | Principal (000)# | Value | ||||||||||
MUNICIPAL BONDS (Continued) |
| |||||||||||||
Pennsylvania 5.8% | ||||||||||||||
Chester County Industrial Development Authority, | ||||||||||||||
Revenue, Renaissance Academy Charter School, Rfdg | 3.750% | 10/01/24 | 330 | $ | 339,656 | |||||||||
Revenue, Renaissance Academy Charter School, Rfdg | 5.000 | 10/01/34 | 260 | 276,229 | ||||||||||
Commonwealth Financing Authority, | 5.000 | 06/01/25 | 1,000 | 1,198,710 | ||||||||||
Commonwealth of Pennsylvania, | ||||||||||||||
First Series, GO, Rfdg | 5.000 | 08/15/25 | 1,000 | 1,218,410 | ||||||||||
Series A, Certificate of Participation, Rfdg | 5.000 | 07/01/26 | 500 | 606,670 | ||||||||||
Delaware River Joint Toll Bridge Commission, | 5.000 | 07/01/28 | 250 | 326,877 | ||||||||||
East Hempfield Township Industrial Development Authority, | 5.000 | 12/01/23 | 500 | 552,015 | ||||||||||
Geisinger Authority, | 5.000 | 04/01/43 | 500 | 613,115 | ||||||||||
Pennsylvania Higher Educational Facilities Authority, | 5.000 | 08/15/28 | 500 | 651,825 | ||||||||||
Revenue, University of Pennsylvania Health System, Rfdg | 5.000 | 08/15/26 | 500 | 604,825 | ||||||||||
Pennsylvania Turnpike Commission, | ||||||||||||||
Revenue, Rfdg | 5.000 | 12/01/29 | 1,245 | 1,617,006 | ||||||||||
Revenue, Series A-2, Rfdg | 5.000 | 12/01/26 | 1,015 | 1,286,279 | ||||||||||
Revenue, Sub-Series A | 5.000 | 12/01/29 | 525 | 673,297 | ||||||||||
|
| |||||||||||||
9,964,914 | ||||||||||||||
|
| |||||||||||||
Puerto Rico 0.1% | ||||||||||||||
Puerto Rico Sales Tax Financing Corp., | (1.151)(s) | 07/01/24 | 181 | 164,884 | ||||||||||
|
| |||||||||||||
Rhode Island 1.8% | ||||||||||||||
Tobacco Settlement Financing Corp., | ||||||||||||||
Revenue, Series A, Rfdg | 5.000 | 06/01/22 | 540 | 578,556 | ||||||||||
Revenue, Series A, Rfdg | 5.000 | 06/01/23 | 100 | 111,182 | ||||||||||
Revenue, Series A, Rfdg | 5.000 | 06/01/24 | 1,940 | 2,195,226 | ||||||||||
Revenue, Series A, Rfdg | 5.000 | 06/01/28 | 240 | 278,040 | ||||||||||
|
| |||||||||||||
3,163,004 | ||||||||||||||
|
|
See Notes to Financial Statements.
20 |
Description | Interest Rate | Maturity Date | Principal (000)# | Value | ||||||||||
MUNICIPAL BONDS (Continued) |
| |||||||||||||
South Carolina 0.2% | ||||||||||||||
South Carolina Public Service Authority, | 5.000% | 12/01/24 | 280 | $ | 295,333 | |||||||||
|
| |||||||||||||
Texas 7.2% | ||||||||||||||
Bexar County Health Facilities Development Corp., | 5.000 | 07/15/24 | 500 | 534,090 | ||||||||||
Central Texas Regional Mobility Authority, | ||||||||||||||
Revenue, Senior Lien, Series A, Rfdg | 5.000 | 01/01/23 | 610 | 670,384 | ||||||||||
Revenue, Sub. Lien, Rfdg | 5.000 | 01/01/21 | 180 | 181,877 | ||||||||||
City of Houston Airport System, | ||||||||||||||
(Pre-refunded Date 07/01/22)(ee) | 5.000 | 07/01/32 | 1,000 | 1,080,510 | ||||||||||
Revenue, Sub-Series A, AMT, Rfdg | 5.000 | 07/01/25 | 1,000 | 1,191,970 | ||||||||||
Clifton Higher Education Finance Corp., | ||||||||||||||
Revenue, Idea Public Schools | 3.750 | 08/15/22 | 180 | 185,827 | ||||||||||
Revenue, Idea Public Schools (Pre-refunded Date 08/15/21)(ee) | 5.500 | 08/15/31 | 410 | 428,881 | ||||||||||
Revenue, Idea Public Schools, Series B | 4.000 | 08/15/23 | 610 | 654,103 | ||||||||||
Revenue, Idea Public Schools, Series B | 5.000 | 08/15/25 | 210 | 242,949 | ||||||||||
Decatur Hospital Authority, | ||||||||||||||
Revenue, Wise Regional Health Systems, Series A, Rfdg | 5.000 | 09/01/22 | 150 | 159,693 | ||||||||||
Revenue, Wise Regional Health Systems, Series A, Rfdg | 5.000 | 09/01/23 | 150 | 164,607 | ||||||||||
Gulf Coast Authority, | ||||||||||||||
Revenue, ExxonMobil Project, FRDD | 0.130(cc) | 06/01/30 | 600 | 600,000 | ||||||||||
Revenue, ExxonMobil Project, FRDD | 0.160(cc) | 12/01/25 | 340 | 340,000 | ||||||||||
Revenue, ExxonMobil Project, Rfdg, FRDD | 0.130(cc) | 10/01/24 | 780 | 780,000 | ||||||||||
Revenue, ExxonMobil Project, Series A, FRDD | 0.130(cc) | 06/01/30 | 2,000 | 2,000,000 | ||||||||||
Houston Higher Education Finance Corp., | 4.000 | 02/15/22 | 35 | 35,448 | ||||||||||
Kerrville Health Facilities Development Corp., | 5.000 | 08/15/22 | 485 | 523,621 | ||||||||||
New Hope Cultural Education Facilities Finance Corp., | 4.000 | 04/01/21 | 300 | 305,793 | ||||||||||
North Texas Tollway Authority, | 5.000 | 01/01/21 | 100 | 101,119 |
See Notes to Financial Statements.
PGIM Short Duration Muni Fund | 21 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Interest Rate | Maturity Date | Principal (000)# | Value | ||||||||||
MUNICIPAL BONDS (Continued) |
| |||||||||||||
Texas (cont’d.) | ||||||||||||||
Tarrant County Cultural Education Facilities Finance Corp., | ||||||||||||||
Revenue, Texas Health Resource System, Series A, Rfdg | 5.000% | 02/15/26 | 315 | $ | 386,640 | |||||||||
Revenue, Trinity Terrace Project, Series A-1, Rfdg | 5.000 | 10/01/29 | 630 | 675,555 | ||||||||||
Texas Municipal Gas Acquisition & Supply Corp. I, | 6.250 | 12/15/26 | 930 | 1,108,058 | ||||||||||
|
| |||||||||||||
12,351,125 | ||||||||||||||
|
| |||||||||||||
Utah 2.4% | ||||||||||||||
County of Utah, | 5.000 | 05/15/60 | 1,000 | 1,248,860 | ||||||||||
Salt Lake City Corp. Airport, | ||||||||||||||
Revenue, Series A, AMT | 5.000 | 07/01/22 | 300 | 322,188 | ||||||||||
Revenue, Series A, AMT | 5.000 | 07/01/23 | 500 | 556,930 | ||||||||||
Revenue, Series A, AMT | 5.000 | 07/01/26 | 1,085 | 1,312,221 | ||||||||||
Revenue, Series A, AMT | 5.000 | 07/01/28 | 500 | 626,290 | ||||||||||
Utah Charter School Finance Authority, | 4.300 | 04/15/25 | 135 | 135,187 | ||||||||||
|
| |||||||||||||
4,201,676 | ||||||||||||||
|
| |||||||||||||
Virginia 0.9% | ||||||||||||||
Virginia Small Business Financing Authority, | ||||||||||||||
Revenue, 95 Express Lanes LLC Project, AMT | 5.000 | 01/01/44 | 1,000 | 1,034,100 | ||||||||||
Revenue, Elizabeth River, Senior Lien | 4.250 | 07/01/22 | 225 | 236,410 | ||||||||||
Wise County Industrial Development Authority, | 1.200 | 11/01/40 | 250 | 255,690 | ||||||||||
|
| |||||||||||||
1,526,200 | ||||||||||||||
|
| |||||||||||||
Washington 2.3% | ||||||||||||||
Port of Seattle, | 5.000 | 04/01/29 | 1,000 | 1,262,300 | ||||||||||
University of Washington, | 5.000 | 04/01/26 | 1,500 | 1,809,585 | ||||||||||
Washington Health Care Facilities Authority, | 5.000 | 10/01/21 | 870 | 909,794 | ||||||||||
|
| |||||||||||||
3,981,679 | ||||||||||||||
|
|
See Notes to Financial Statements.
22 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||
MUNICIPAL BONDS (Continued) |
| |||||||||||||
West Virginia 1.2% | ||||||||||||||
Harrison County Commission, | 3.000% | 10/15/37 | 500 | $ | 508,600 | |||||||||
West Virginia Economic Development Authority, | ||||||||||||||
Revenue, Appalachian Power Co., Series A, Rfdg, (Mandatory Put Date 04/01/24) | 2.550 | 03/01/40 | 1,000 | 1,060,580 | ||||||||||
Revenue, Wheeling Power Co. Mitchell, Series A, AMT, Rfdg, (Mandatory Put Date 04/01/22) | 3.000 | 06/01/37 | 500 | 516,255 | ||||||||||
|
| |||||||||||||
2,085,435 | ||||||||||||||
|
| |||||||||||||
Wisconsin 1.0% | ||||||||||||||
Public Finance Authority, | ||||||||||||||
Revenue, Bancroft Neurohealth Project, Series A, 144A | 5.000 | 06/01/23 | 500 | 529,760 | ||||||||||
Revenue, Trips Obligation Group, Senior Series E, Rfdg | 5.000 | 07/01/23 | 1,175 | 1,237,533 | ||||||||||
|
| |||||||||||||
1,767,293 | ||||||||||||||
|
| |||||||||||||
TOTAL INVESTMENTS 101.0% | 174,189,788 | |||||||||||||
Liabilities in excess of other assets (1.0)% | (1,698,575 | ) | ||||||||||||
|
| |||||||||||||
NET ASSETS 100.0% | $ | 172,491,213 | ||||||||||||
|
|
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.
AGC—Assured Guaranty Corp.
AGM—Assured Guaranty Municipal 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
LP—Limited Partnership
NATL—National Public Finance Guarantee Corp.
OTC—Over-the-counter
PCR—Pollution Control Revenue
Rfdg—Refunding
# | Principal amount is shown in U.S. dollars unless otherwise stated. |
See Notes to Financial Statements.
PGIM Short Duration Muni Fund | 23 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
(c) | Variable rate instrument. The interest rate shown reflects the rate in effect at September 30, 2020. |
(cc) | Variable rate instrument. The rate shown is based on the latest available information as of September 30, 2020. 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. |
(d) | Represents issuer in default on interest payments and/or principal repayment. Non-income producing security. Such securities may be post-maturity. |
(ee) | All or partial escrowed to maturity and pre-refunded issues are secured by escrowed cash, a guaranteed investment contract and /or U.S. guaranteed obligations. |
(hh) | When-issued security. |
(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, 2020 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | |||||||||||||
Investments in Securities | |||||||||||||||
Assets | |||||||||||||||
Municipal Bonds | |||||||||||||||
Alabama | $ | — | $ | 981,225 | $ | — | |||||||||
Alaska | — | 1,262,930 | — | ||||||||||||
Arizona | — | 7,424,358 | — | ||||||||||||
California | — | 12,295,050 | — | ||||||||||||
Colorado | — | 6,886,453 | — | ||||||||||||
Connecticut | — | 4,538,716 | — | ||||||||||||
Delaware | — | 1,976,552 | — | ||||||||||||
District of Columbia | — | 5,155,494 | — | ||||||||||||
Florida | — | 16,152,343 | — | ||||||||||||
Georgia | — | 9,096,838 | — | ||||||||||||
Idaho | — | 1,022,720 | — | ||||||||||||
Illinois | — | 30,926,230 | — | ||||||||||||
Indiana | — | 1,155,450 | — | ||||||||||||
Iowa | — | 1,108,435 | — | ||||||||||||
Kentucky | — | 2,644,945 | — | ||||||||||||
Louisiana | — | 1,837,009 | — | ||||||||||||
Maryland | — | 483,647 | — | ||||||||||||
Massachusetts | — | 643,890 | — | ||||||||||||
Michigan | — | 534,071 | — | ||||||||||||
Minnesota | — | 502,975 | — | ||||||||||||
Mississippi | — | 726,800 | — | ||||||||||||
Missouri | — | 1,250,810 | — |
See Notes to Financial Statements.
24 |
Level 1 | Level 2 | Level 3 | |||||||||||||
Investments in Securities (continued) | |||||||||||||||
Assets (continued) | |||||||||||||||
Municipal Bonds (continued) | |||||||||||||||
Nebraska | $ | — | $ | 765,308 | $ | — | |||||||||
Nevada | — | 516,785 | — | ||||||||||||
New Jersey | — | 11,373,710 | — | ||||||||||||
New York | — | 6,810,540 | — | ||||||||||||
North Carolina | — | 500,035 | — | ||||||||||||
Ohio | — | 3,365,179 | — | ||||||||||||
Oklahoma | — | 2,749,747 | — | ||||||||||||
Pennsylvania | — | 9,964,914 | — | ||||||||||||
Puerto Rico | — | 164,884 | — | ||||||||||||
Rhode Island | — | 3,163,004 | — | ||||||||||||
South Carolina | — | 295,333 | — | ||||||||||||
Texas | — | 12,351,125 | — | ||||||||||||
Utah | — | 4,201,676 | — | ||||||||||||
Virginia | — | 1,526,200 | — | ||||||||||||
Washington | — | 3,981,679 | — | ||||||||||||
West Virginia | — | 2,085,435 | — | ||||||||||||
Wisconsin | — | 1,767,293 | — | ||||||||||||
|
|
|
|
|
| ||||||||||
Total | $ | — | $ | 174,189,788 | $ | — | |||||||||
|
|
|
|
|
|
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, 2020 were as follows:
Transportation | 22.3 | % | ||
Healthcare | 16.7 | |||
Special Tax/Assessment District | 12.5 | |||
Corporate Backed IDB & PCR | 11.4 | |||
Pre-pay Gas | 7.8 | |||
Tobacco | 7.7 | |||
General Obligation | 7.2 | |||
Education | 5.6 | |||
Water & Sewer | 3.7 | |||
Lease Backed Certificate of Participation | 2.7 |
Power | 2.3 | % | ||
Pre-Refunded | 0.9 | |||
Solid Waste/Resource Recovery | 0.1 | |||
Development | 0.1 | |||
|
| |||
101.0 | ||||
Liabilities in excess of other assets | (1.0 | ) | ||
|
| |||
100.0 | % | |||
|
|
See Notes to Financial Statements.
PGIM Short Duration Muni Fund | 25 |
Statement of Assets and Liabilities (unaudited)
as of September 30, 2020
Assets | ||||
Unaffiliated investments (cost $168,304,493) | $ | 174,189,788 | ||
Cash | 99,013 | |||
Interest receivable | 1,971,051 | |||
Receivable for Fund shares sold | 1,613,607 | |||
Prepaid expenses | 1,763 | |||
|
| |||
Total Assets | 177,875,222 | |||
|
| |||
Liabilities | ||||
Payable for investments purchased | 4,505,559 | |||
Payable for Fund shares reacquired | 699,575 | |||
Accrued expenses and other liabilities | 84,627 | |||
Dividends payable | 57,584 | |||
Distribution fee payable | 21,587 | |||
Management fee payable | 13,591 | |||
Trustees’ fees payable | 899 | |||
Affiliated transfer agent fee payable | 587 | |||
|
| |||
Total Liabilities | 5,384,009 | |||
|
| |||
Net Assets | $ | 172,491,213 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 16,549 | ||
Paid-in capital in excess of par | 169,650,917 | |||
Total distributable earnings (loss) | 2,823,747 | |||
|
| |||
Net assets, September 30, 2020 | $ | 172,491,213 | ||
|
|
See Notes to Financial Statements.
26 |
Class A | ||||
Net asset value and redemption price per share, | $ | 10.43 | ||
Maximum sales charge (2.25% of offering price) | 0.24 | |||
|
| |||
Maximum offering price to public | $ | 10.67 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share, ($14,107,927 ÷ 1,354,217 shares of beneficial interest issued and outstanding) | $ | 10.42 |
| |
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share, ($107,704,018 ÷ 10,334,041 shares of beneficial interest issued and outstanding) | $ | 10.42 |
| |
|
| |||
Class R6 | ||||
Net asset value, offering price and redemption price per share, ($681,889 ÷ 65,446 shares of beneficial interest issued and outstanding) | $ | 10.42 |
| |
|
|
See Notes to Financial Statements.
PGIM Short Duration Muni Fund | 27 |
Statement of Operations (unaudited)
Six Months Ended September 30, 2020
Net Investment Income (Loss) | ||||
Interest income | $ | 1,975,933 | ||
|
| |||
Expenses | ||||
Management fee | 229,374 | |||
Distribution fee(a) | 133,966 | |||
Transfer agent’s fees and expenses (including affiliated expense of $2,235)(a) | 76,022 | |||
Custodian and accounting fees | 40,114 | |||
Registration fees(a) | 34,045 | |||
Audit fee | 21,803 | |||
Shareholders’ reports | 12,626 | |||
Legal fees and expenses | 10,182 | |||
Trustees’ fees | 6,979 | |||
Miscellaneous | 8,432 | |||
|
| |||
Total expenses | 573,543 | |||
Less: Fee waiver and/or expense reimbursement(a) | (162,497 | ) | ||
Custodian fee credit | (153 | ) | ||
|
| |||
Net expenses | 410,893 | |||
|
| |||
Net investment income (loss) | 1,565,040 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investments | ||||
Net realized gain (loss) on investment transactions | (1,652,664 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 6,157,301 | |||
|
| |||
Net gain (loss) on investment transactions | 4,504,637 | |||
|
| |||
Net Increase (Decrease) In Net Assets Resulting From Operations | $ | 6,069,677 | ||
|
|
(a) | Class specific expenses and waivers were as follows: |
Class A | Class C | Class Z | Class R6 | |||||||||||||||||
Distribution fee | 50,133 | 83,833 | — | — | ||||||||||||||||
Transfer agent’s fees and expenses | 12,849 | 4,508 | 58,610 | 55 | ||||||||||||||||
Registration fees | 8,660 | 7,381 | 11,018 | 6,986 | ||||||||||||||||
Fee waiver and/or expense reimbursement | (25,915 | ) | (10,834 | ) | (118,090 | ) | (7,658 | ) |
See Notes to Financial Statements.
28 |
Statements of Changes in Net Assets (unaudited)
Six Months Ended | Year Ended March 31, 2020 | ||||||||||||||
Increase (Decrease) in Net Assets | |||||||||||||||
Operations | |||||||||||||||
Net investment income (loss) | $ | 1,565,040 | $ | 3,534,407 | |||||||||||
Net realized gain (loss) on investment transactions | (1,652,664 | ) | (25,277 | ) | |||||||||||
Net change in unrealized appreciation (depreciation) on investments | 6,157,301 | (2,856,033 | ) | ||||||||||||
|
|
|
| ||||||||||||
Net increase (decrease) in net assets resulting from operations | 6,069,677 | 653,097 | |||||||||||||
|
|
|
| ||||||||||||
Dividends and Distributions | |||||||||||||||
Distributions from distributable earnings | |||||||||||||||
Class A | (367,165 | ) | (761,161 | ) | |||||||||||
Class C | (90,158 | ) | (225,310 | ) | |||||||||||
Class Z | (1,089,494 | ) | (2,471,108 | ) | |||||||||||
Class R6 | (10,643 | ) | (38,775 | ) | |||||||||||
|
|
|
| ||||||||||||
(1,557,460 | ) | (3,496,354 | ) | ||||||||||||
|
|
|
| ||||||||||||
Fund share transactions (Net of share conversions) | |||||||||||||||
Net proceeds from shares sold | 40,403,771 | 79,286,731 | |||||||||||||
Net asset value of shares issued in reinvestment of dividends and distributions | 1,220,597 | 2,744,972 | |||||||||||||
Cost of shares reacquired | (34,959,599 | ) | (69,662,934 | ) | |||||||||||
|
|
|
| ||||||||||||
Net increase (decrease) in net assets from Fund share transactions | 6,664,769 | 12,368,769 | |||||||||||||
|
|
|
| ||||||||||||
Total increase (decrease) | 11,176,986 | 9,525,512 | |||||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 161,314,227 | 151,788,715 | |||||||||||||
|
|
|
| ||||||||||||
End of period | $ | 172,491,213 | $ | 161,314,227 | |||||||||||
|
|
|
|
See Notes to Financial Statements.
PGIM Short Duration Muni Fund | 29 |
Notes to Financial Statements (unaudited)
1. Organization
Prudential Investment Portfolios 12 (the “Trust”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company. The Trust currently consists of the following six series: PGIM QMA Large-Cap Core Equity PLUS Fund, PGIM QMA Long-Short Equity Fund and PGIM Short Duration Muni Fund, each of which are diversified funds for purposes of the 1940 Act and PGIM Global Real Estate Fund, PGIM Jennison Technology Fund and PGIM US Real Estate Fund, each of which are non-diversified funds for purposes of the 1940 Act, and therefore, may invest a greater percentage of their assets in the securities of a single company or other issuer than a diversified fund. Investing in a non-diversified fund involves greater risk than investing in a diversified fund because a loss resulting from the decline in value of any one security may represent a greater portion of the total assets of a non-diversified fund. These financial statements relate only to the PGIM Short Duration Muni Fund (the “Fund”).
The investment objective of the Fund is to seek a high level of current income exempt from federal income taxes.
2. 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.
30 |
For the fiscal reporting period-end, securities and other assets and liabilities were fair valued at the close of the last U.S. business day. Trading in certain foreign securities may occur when the NYSE is closed (including weekends and holidays). Because such foreign securities trade in markets that are open on weekends and U.S. holidays, the values of some of the Fund’s foreign investments may change on days when investors cannot purchase or redeem Fund shares.
Various inputs determine how the Fund’s investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the Schedule of Investments and referred to herein as the “fair value hierarchy” in accordance with FASB ASC Topic 820 - Fair Value Measurements and Disclosures.
Common or preferred stocks, exchange-traded funds and derivative instruments, if applicable, 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.
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
PGIM Short Duration Muni Fund | 31 |
Notes to Financial Statements (unaudited) (continued)
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 Rule 22e-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(s) 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 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.
Delayed-Delivery Transactions: The Fund purchased or sold securities on a when-issued or delayed-delivery and forward commitment basis. These transactions involve a commitment by the Fund to purchase or sell securities for a predetermined price or yield, with payment and delivery taking place beyond the customary settlement period. When delayed-delivery purchases are outstanding, the Fund will set aside and maintain an amount of liquid assets sufficient to meet the purchase price in a segregated account until the settlement date. When purchasing a security on a delayed-delivery basis, the Fund assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and takes such fluctuations into account when determining its net asset value. The Fund may dispose of or renegotiate a delayed-delivery transaction subsequent to establishment, and may sell when-issued securities before they are delivered, which may result in a realized gain (loss).
32 |
When selling a security on a delayed-delivery basis, the Fund forfeits its eligibility to realize future gains (losses) with respect to the security.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains (losses) from investment and currency transactions are calculated on the specific identification method. Dividend income is recorded on the ex-date, 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.
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 the ex-date. Permanent book/tax differences relating to income and gain (loss) are reclassified between total distributable earnings (loss) and paid-in capital in excess of par, as appropriate.
Estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
PGIM Short Duration Muni Fund | 33 |
Notes to Financial Statements (unaudited) (continued)
3. 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., (“PGIM, Inc.” or the “subadviser”) 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 0.29% of the Fund’s average daily net assets up to and including $5 billion and 0.28% of the Fund’s average daily net assets in excess of $5 billion. The effective management fee rate before any waivers and/or expense reimbursements was 0.29% for the reporting period ended September 30, 2020.
The Manager has contractually agreed, through July 31, 2021, 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, 0.32% of average daily net assets for Class Z shares and 0.29% 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
34 |
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, 2020, PIMS received $26,597 in front-end sales charges resulting from sales of Class A shares. Additionally, for the reporting period ended September 30, 2020, PIMS received $2 and $551 in contingent deferred sales charges imposed upon redemptions by certain Class A 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 Investments, PGIM, Inc. and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
4. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PGIM Investments and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund’s transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
The Fund may enter into certain securities purchase or sale transactions under Board approved Rule 17a-7 procedures. Rule 17a-7 is an exemptive rule under the 1940 Act, that subject to certain conditions, permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. Pursuant to the Rule 17a-7 procedures and consistent with guidance issued by the Securities and Exchange Commission (“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 such 17a-7
PGIM Short Duration Muni Fund | 35 |
Notes to Financial Statements (unaudited) (continued)
transactions were effected in accordance with the Fund’s Rule 17a-7 procedures.
For the reporting period ended September 30, 2020, the Fund’s purchase and sales transactions under Rule 17a-7 and realized gain as a result of 17a-7 sales transactions were as follows:
Purchases | Sales | Realized | ||
$14,295,997 | $11,240,623 | $— |
5. 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, 2020, were $81,061,007 and $74,690,997, respectively.
6. Tax Information
The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of September 30, 2020 were as follows:
Tax Basis |
|
| $ | 168,115,065 | ||||
|
| |||||||
Gross Unrealized Appreciation | 6,243,179 | |||||||
Gross Unrealized Depreciation | (168,456 | ) | ||||||
|
| |||||||
Net Unrealized Appreciation | $ | 6,074,723 | ||||||
|
|
The book basis may differ from tax basis due to certain tax-related adjustments.
The Fund elected to treat late year losses of approximately $193,000 as having been incurred in the following fiscal year (March 31, 2021).
The Fund utilized approximately $159,000 of its capital loss carryforward to offset net taxable gains realized in the fiscal year ended March 31, 2020. As of March 31, 2020, the Fund had a capital loss carryforward of approximately $1,623,000 which can be carried forward for an unlimited period. No 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, 2020 are subject to such review.
36 |
7. Capital and Ownership
The Fund offers Class A, Class C, Class Z and Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 2.25%. Investors who purchase $500,000 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 although these purchases are not subject to a front-end 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 charges 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, below.
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, 2020, Prudential, through its affiliated entities, including affiliated funds (if applicable), owned shares of the Fund as follows:
Number of Shares | Percentage of Outstanding Shares | |||
Class R6 | 1,065 | 1.6% |
At the reporting period end, the number of shareholders holding greater than 5% of the Fund are as follows:
Affiliated | Unaffiliated | |||||
Number of Shareholders | Percentage of Outstanding Shares | Number of Shareholders | Percentage of Outstanding Shares | |||
— | —% | 4 | 73.7% |
PGIM Short Duration Muni Fund | 37 |
Notes to Financial Statements (unaudited) (continued)
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||||||
Six months ended September 30, 2020: | ||||||||||||
Shares sold | 1,394,360 | $ | 14,442,112 | |||||||||
Shares issued in reinvestment of dividends and distributions | 29,804 | 306,603 | ||||||||||
Shares reacquired | (776,965 | ) | (7,946,999 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding before conversion | 647,199 | 6,801,716 | ||||||||||
Shares issued upon conversion from other share class(es) | 433,509 | 4,505,290 | ||||||||||
Shares reacquired upon conversion into other share class(es) | (26,371 | ) | (271,104 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | 1,054,337 | $ | 11,035,902 | |||||||||
|
|
|
| |||||||||
Year ended March 31, 2020: | ||||||||||||
Shares sold | 2,503,261 | $ | 26,047,735 | |||||||||
Shares issued in reinvestment of dividends and distributions | 63,420 | 660,062 | ||||||||||
Shares reacquired | (2,015,109 | ) | (20,728,167 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding before conversion | 551,572 | 5,979,630 | ||||||||||
Shares issued upon conversion from other share class(es) | 73,634 | 764,420 | ||||||||||
Shares reacquired upon conversion into other share class(es) | (179,749 | ) | (1,862,168 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | 445,457 | $ | 4,881,882 | |||||||||
|
|
|
| |||||||||
Class C | ||||||||||||
Six months ended September 30, 2020: | ||||||||||||
Shares sold | 226,511 | $ | 2,296,186 | |||||||||
Shares issued in reinvestment of dividends and distributions | 4,565 | 46,842 | ||||||||||
Shares reacquired | (169,544 | ) | (1,724,181 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding before conversion | 61,532 | 618,847 | ||||||||||
Shares reacquired upon conversion into other share class(es) | (445,852 | ) | (4,630,250 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | (384,320 | ) | $ | (4,011,403 | ) | |||||||
|
|
|
| |||||||||
Year ended March 31, 2020: | ||||||||||||
Shares sold | 356,651 | $ | 3,712,952 | |||||||||
Shares issued in reinvestment of dividends and distributions | 11,186 | 116,223 | ||||||||||
Shares reacquired | (351,270 | ) | (3,633,827 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding before conversion | 16,567 | 195,348 | ||||||||||
Shares reacquired upon conversion into other share class(es) | (36,069 | ) | (374,999 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | (19,502 | ) | $ | (179,651 | ) | |||||||
|
|
|
|
38 |
Class Z | Shares | Amount | ||||||||||
Six months ended September 30, 2020: | ||||||||||||
Shares sold | 2,294,154 | $ | 23,665,473 | |||||||||
Shares issued in reinvestment of dividends and distributions | 83,347 | 856,509 | ||||||||||
Shares reacquired | (2,446,641 | ) | (24,927,133 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding before conversion | (69,140 | ) | (405,151 | ) | ||||||||
Shares issued upon conversion from other share class(es) | 54,653 | 564,591 | ||||||||||
Shares reacquired upon conversion into other share class(es) | (16,357 | ) | (168,527 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | (30,844 | ) | $ | (9,087 | ) | |||||||
|
|
|
| |||||||||
Year ended March 31, 2020: | ||||||||||||
Shares sold | 4,771,567 | $ | 49,464,644 | |||||||||
Shares issued in reinvestment of dividends and distributions | 185,584 | 1,929,912 | ||||||||||
Shares reacquired | (4,271,488 | ) | (43,894,365 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding before conversion | 685,663 | 7,500,191 | ||||||||||
Shares issued upon conversion from other share class(es) | 182,592 | 1,890,824 | ||||||||||
Shares reacquired upon conversion into other share class(es) | (40,380 | ) | (418,077 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | 827,875 | $ | 8,972,938 | |||||||||
|
|
|
| |||||||||
Class R6 | ||||||||||||
Six months ended September 30, 2020: | ||||||||||||
Shares issued in reinvestment of dividends and distributions | 1,036 | $ | 10,643 | |||||||||
Shares reacquired | (34,714 | ) | (361,286 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | (33,678 | ) | $ | (350,643 | ) | |||||||
|
|
|
| |||||||||
Year ended March 31, 2020: | ||||||||||||
Shares sold | 5,973 | $ | 61,400 | |||||||||
Shares issued in reinvestment of dividends and distributions | 3,734 | 38,775 | ||||||||||
Shares reacquired | (135,120 | ) | (1,406,575 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | (125,413 | ) | $ | (1,306,400 | ) | |||||||
|
|
|
|
8. Borrowings
The Trust, on behalf of the Fund, along with other affiliated registered investment companies (the “Participating 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 table below provides details of the current SCA in effect at the reporting period-end.
SCA | ||
Term of Commitment | 10/3/2019 – 10/1/2020 | |
Total Commitment | $ 1,222,500,000* | |
Annualized Commitment Fee on the Unused Portion of the SCA | 0.15% | |
Annualized Interest Rate on Borrowings | 1.20% plus the higher of (1) the effective federal funds rate, (2) the one-month LIBOR rate or (3) zero percent | |
* Effective March 31, 2020, the SCA’s total commitment was increased from $900,000,000 to $1,162,500,000 and subsequently, effective April 7, 2020 was increased to $1,222,500,000. |
Subsequent to the reporting period end, the SCA has been renewed effective October 2, 2020 and will provide a commitment of $1,200,000,000 through September 30, 2021. The
PGIM Short Duration Muni Fund | 39 |
Notes to Financial Statements (unaudited) (continued)
commitment fee paid by the Participating 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 1.30% plus the higher of (1) the effective federal funds rate, (2) the one-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 Participating Funds in the SCA equitably.
The Fund did not utilize the SCA during the reporting period ended September 30, 2020.
9. Risks of Investing in the Fund
The Fund’s risks include, but are not limited to, some or all of the risks discussed below. For further information on the Fund’s risks, please refer to the Fund’s Prospectus and Statement of Additional Information.
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.
40 |
Large Shareholder and Large Scale Redemption Risk: Certain individuals, accounts, funds (including funds affiliated with the Manager) or institutions, including the Manager and its affiliates, may from time to time own or control a substantial amount of the Fund’s shares. There is no requirement that these entities maintain their investment in the Fund. There is a risk that such large shareholders or that the Fund’s shareholders generally may redeem all or a substantial portion of their investments in the Fund in a short period of time, which could have a significant negative impact on the Fund’s NAV, liquidity, and brokerage costs. Large redemptions could also result in tax consequences to shareholders and impact the Fund’s ability to implement its investment strategy. The Fund’s ability to pursue its investment objective after one or more large scale redemptions may be impaired and, as a result, the Fund may invest a larger portion of its assets in cash or cash equivalents.
LIBOR Risk: Many financial instruments use or may use a floating rate based on the London Interbank Offered Rate, or “LIBOR,” which is the offered rate for short-term Eurodollar deposits between major international banks. On July 27, 2017, the Financial Conduct Authority announced a desire to phase out the use of LIBOR by the end of 2021. There remains uncertainty regarding the future utilization of LIBOR and the nature of any replacement rate. As such, the potential impact of a transition away from LIBOR on the Fund or the financial instruments in which the Fund invest cannot yet be determined. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect the Fund’s performance and/or net asset value. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
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.
PGIM Short Duration Muni Fund | 41 |
Notes to Financial Statements (unaudited) (continued)
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.
Market Disruption and Geopolitical Risks: International wars or conflicts and geopolitical developments in foreign countries, along with instability in regions such as Asia, Eastern Europe, and the Middle East, possible terrorist attacks in the United States or around the world, public health epidemics such as the outbreak of infectious diseases like the recent outbreak of coronavirus globally or the 2014–2016 outbreak in West Africa of the Ebola virus, and other similar events could adversely affect the U.S. and foreign financial markets, including increases in market volatility, reduced liquidity in the securities markets and government intervention, and may cause further long-term economic uncertainties in the United States and worldwide generally.
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.
10. Recent Accounting Pronouncements and Reporting Updates
In March 2020, the FASB issued Accounting Standard Update (“ASU”) No. 2020-04, which provides optional guidance for applying GAAP to contract modifications, hedging relationships and other transactions affected by the reference rate reform if certain criteria are met. ASU 2020-04 is elective and is effective on March 12, 2020 through December 31, 2022. At this time, management is evaluating the implications of certain provisions of the ASU and any impact on the financial statement disclosures has not yet been determined.
42 |
Financial Highlights (unaudited)
Class A Shares | |||||||||||||||||||||||||||||||||||
Six Months 2020 | Year Ended March 31, | ||||||||||||||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||||||||||||||
Per Share Operating Performance(a): | |||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.12 | $10.25 | $10.10 | $10.03 | $10.26 | $10.17 | |||||||||||||||||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.10 | 0.21 | 0.22 | 0.22 | 0.21 | 0.21 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 0.30 | (0.13 | ) | 0.15 | 0.06 | (0.23 | ) | 0.10 | |||||||||||||||||||||||||||
Total from investment operations | 0.40 | 0.08 | 0.37 | 0.28 | (0.02 | ) | 0.31 | ||||||||||||||||||||||||||||
Less Dividends and Distributions: | |||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.09 | ) | (0.21 | ) | (0.22 | ) | (0.21 | ) | (0.21 | ) | (0.21 | ) | |||||||||||||||||||||||
Distributions from net realized gains | - | - | - | - | - | (0.01 | ) | ||||||||||||||||||||||||||||
Total dividends and distributions | (0.09 | ) | (0.21 | ) | (0.22 | ) | (0.21 | ) | (0.21 | ) | (0.22 | ) | |||||||||||||||||||||||
Net asset value, end of period | $10.43 | $10.12 | $10.25 | $10.10 | $10.03 | $10.26 | |||||||||||||||||||||||||||||
Total Return(b): | 4.02 | % | 0.72 | % | 3.69% | 2.78% | (0.23 | )% | 3.07 | % | |||||||||||||||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net assets, end of period (000) | $49,997 | $37,864 | $33,779 | $40,222 | $40,966 | $62,314 | |||||||||||||||||||||||||||||
Average net assets (000) | $39,997 | $38,599 | $31,640 | $38,892 | $58,677 | $32,591 | |||||||||||||||||||||||||||||
Ratios to average net assets(c): | |||||||||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 0.64 | %(d) | 0.85 | % | 0.85 | % | 0.85 | % | 0.85 | % | 0.85 | % | |||||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 0.77 | %(d) | 1.03 | % | 1.04 | % | 1.07 | % | 1.06 | % | 1.11 | % | |||||||||||||||||||||||
Net investment income (loss) | 1.84 | %(d) | 1.99 | % | 2.21 | % | 2.14 | % | 2.07 | % | 2.10 | % | |||||||||||||||||||||||
Portfolio turnover rate(e)(f) | 46 | % | 83 | % | 90 | % | 71 | % | 70 | % | 19 | % |
(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) | Annualized. |
(e) | 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. |
(f) | The portfolio turnover rate includes variable rate demand notes. |
See Notes to Financial Statements.
PGIM Short Duration Muni Fund | 43 |
Financial Highlights (unaudited) (continued)
Class C Shares | |||||||||||||||||||||||||||||||||||
Six Months 2020 | Year Ended March 31, | ||||||||||||||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||||||||||||||
Per Share Operating Performance(a): | |||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.11 | $10.24 | $10.09 | $10.02 | $10.25 | $10.16 | |||||||||||||||||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.06 | 0.13 | 0.15 | 0.14 | 0.14 | 0.14 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 0.30 | (0.13 | ) | 0.14 | 0.06 | (0.24 | ) | 0.10 | |||||||||||||||||||||||||||
Total from investment operations | 0.36 | - | 0.29 | 0.20 | (0.10 | ) | 0.24 | ||||||||||||||||||||||||||||
Less Dividends and Distributions: | |||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.05 | ) | (0.13 | ) | (0.14 | ) | (0.13 | ) | (0.13 | ) | (0.14 | ) | |||||||||||||||||||||||
Distributions from net realized gains | - | - | - | - | - | (0.01 | ) | ||||||||||||||||||||||||||||
Total dividends and distributions | (0.05 | ) | (0.13 | ) | (0.14 | ) | (0.13 | ) | (0.13 | ) | (0.15 | ) | |||||||||||||||||||||||
Net asset value, end of period | $10.42 | $10.11 | $10.24 | $10.09 | $10.02 | $10.25 | |||||||||||||||||||||||||||||
Total Return(b): | 3.62 | % | (0.03 | )% | 2.93% | 2.01% | (0.98 | )% | 2.30 | % | |||||||||||||||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net assets, end of period (000) | $14,108 | $17,580 | $18,002 | $20,309 | $21,240 | $21,023 | |||||||||||||||||||||||||||||
Average net assets (000) | $16,721 | $18,047 | $18,317 | $21,456 | $22,803 | $15,743 | |||||||||||||||||||||||||||||
Ratios to average net assets(c): | |||||||||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.43 | %(d) | 1.60 | % | 1.60 | % | 1.60 | % | 1.60 | % | 1.60 | % | |||||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.56 | %(d) | 1.80 | % | 1.84 | % | 1.85 | % | 1.81 | % | 1.86 | % | |||||||||||||||||||||||
Net investment income (loss) | 1.09 | %(d) | 1.27 | % | 1.46 | % | 1.39 | % | 1.33 | % | 1.39 | % | |||||||||||||||||||||||
Portfolio turnover rate(e)(f) | 46 | % | 83 | % | 90 | % | 71 | % | 70 | % | 19 | % |
(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) | Annualized. |
(e) | 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. |
(f) | The portfolio turnover rate includes variable rate demand notes. |
See Notes to Financial Statements.
44 |
Class Z Shares | |||||||||||||||||||||||||||||||||||
Six Months 2020 | Year Ended March 31, | ||||||||||||||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||||||||||||||
Per Share Operating Performance(a): | |||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.12 | $10.25 | $10.10 | $10.02 | $10.26 | $10.17 | |||||||||||||||||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.11 | 0.24 | 0.25 | 0.24 | 0.24 | 0.24 | |||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 0.30 | (0.14 | ) | 0.14 | 0.07 | (0.25 | ) | 0.10 | |||||||||||||||||||||||||||
Total from investment operations | 0.41 | 0.10 | 0.39 | 0.31 | (0.01 | ) | 0.34 | ||||||||||||||||||||||||||||
Less Dividends and Distributions: | |||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.23 | ) | (0.24 | ) | (0.23 | ) | (0.23 | ) | (0.24 | ) | |||||||||||||||||||||||
Distributions from net realized gains | - | - | - | - | - | (0.01 | ) | ||||||||||||||||||||||||||||
Total dividends and distributions | (0.11 | ) | (0.23 | ) | (0.24 | ) | (0.23 | ) | (0.23 | ) | (0.25 | ) | |||||||||||||||||||||||
Net asset value, end of period | $10.42 | $10.12 | $10.25 | $10.10 | $10.02 | $10.26 | |||||||||||||||||||||||||||||
Total Return(b): | 4.09 | % | 0.97 | % | 3.95% | 3.13% | (0.08 | )% | 3.33 | % | |||||||||||||||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net assets, end of period (000) | $107,704 | $104,867 | $97,709 | $80,839 | $57,368 | $65,093 | |||||||||||||||||||||||||||||
Average net assets (000) | $100,086 | $110,231 | $93,569 | $74,855 | $67,197 | $54,951 | |||||||||||||||||||||||||||||
Ratios to average net assets(c): | |||||||||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 0.32 | %(d) | 0.60 | % | 0.60 | % | 0.60 | % | 0.60 | % | 0.60 | % | |||||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 0.56 | %(d) | 0.79 | % | 0.83 | % | 0.82 | % | 0.81 | % | 0.86 | % | |||||||||||||||||||||||
Net investment income (loss) | 2.18 | %(d) | 2.26 | % | 2.46 | % | 2.40 | % | 2.33 | % | 2.39 | % | |||||||||||||||||||||||
Portfolio turnover rate(e)(f) | 46 | % | 83 | % | 90 | % | 71 | % | 70 | % | 19 | % |
(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) | Annualized. |
(e) | 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. |
(f) | The portfolio turnover rate includes variable rate demand notes. |
See Notes to Financial Statements.
PGIM Short Duration Muni Fund | 45 |
Financial Highlights (unaudited) (continued)
Class R6 Shares | |||||||||||||||||||||||||||||||||||
Six Months 2020 | Year Ended March 31, | May 25, 2017(a) 2018 | |||||||||||||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||||||||||||||
Per Share Operating Performance(b): | |||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.11 | $10.24 | $10.10 | $10.14 | |||||||||||||||||||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.11 | 0.24 | 0.25 | 0.21 | |||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 0.31 | (0.14 | ) | 0.13 | (0.05 | ) | |||||||||||||||||||||||||||||
Total from investment operations | 0.42 | 0.10 | 0.38 | 0.16 | |||||||||||||||||||||||||||||||
Less Dividends and Distributions: | |||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.23 | ) | (0.24 | ) | (0.20 | ) | |||||||||||||||||||||||||||
Net asset value, end of period | $10.42 | $10.11 | $10.24 | $10.10 | |||||||||||||||||||||||||||||||
Total Return(c): | 4.21 | % | 0.97 | % | 3.85 | % | 1.58 | % | |||||||||||||||||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||||||||||||||
Net assets, end of period (000) | $682 | $1,003 | $2,300 | $10 | |||||||||||||||||||||||||||||||
Average net assets (000) | $953 | $1,689 | $1,291 | $10 | |||||||||||||||||||||||||||||||
Ratios to average net assets(d): | |||||||||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 0.29 | %(e) | 0.60 | % | 0.60 | % | 0.60 | %(e) | |||||||||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.89 | %(e) | 1.42 | % | 1.90 | % | 141.66 | %(e) | |||||||||||||||||||||||||||
Net investment income (loss) | 2.24 | %(e) | 2.32 | % | 2.48 | % | 2.42 | %(e) | |||||||||||||||||||||||||||
Portfolio turnover rate(f)(g) | 46 | % | 83 | % | 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 |
Fund Liquidity Risk Management Program (unaudited)
Consistent with Rule 22e-4 under the 1940 Act (the “Liquidity Rule”), the Fund has adopted and implemented a liquidity risk management program (the “LRMP”). The Fund’s LRMP seeks to assess and manage the Fund’s liquidity risk, which is defined as the risk that the Fund is unable to meet investor redemption requests without significantly diluting the remaining investors’ interests in the Fund. The Trust’s Board of Trustees (the “Board”) has approved PGIM Investments LLC (“PGIM Investments”), the Fund’s investment manager, to serve as the administrator of the Fund’s LRMP. As part of its responsibilities as administrator, PGIM Investments has retained a third party to perform certain functions, including providing market data and liquidity classification model information.
The Fund’s LRMP includes a number of processes designed to support the assessment and management of its liquidity risk. In particular, the Fund’s LRMP includes no less than annual assessments of factors that influence the Fund’s liquidity risk; no less than monthly classifications of the Fund’s investments into one of four liquidity classifications provided for in the Liquidity Rule; a 15% of net assets limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); establishment of a minimum percentage of the Fund’s assets to be invested in investments classified as “highly liquid” (as defined under the Liquidity Rule) if the Fund does not invest primarily in highly liquid investments; and regular reporting to the Board.
At a meeting of the Board on March 3-5, 2020, PGIM Investments provided a written report (“LRMP Report”) to the Board addressing the operation, adequacy, and effectiveness of the Fund’s LRMP, including any material changes to the LRMP for the period from the inception of the Fund’s LRMP on December 1, 2018 through December 31, 2019 (“Reporting Period”). The LRMP Report concluded that the Fund’s LRMP was reasonably designed to assess and manage the Fund’s liquidity risk and was adequately and effectively implemented during the Reporting Period. There were no material changes to the LRMP during the Reporting Period. The LRMP Report further concluded that the Fund’s investment strategies continue to be appropriate given the Fund’s status as an open-end fund.
There can be no assurance that the LRMP will achieve its objectives in the future. Additional information regarding risks of investing in the Fund, including liquidity risks presented by the Fund’s investment portfolio, is found in the Fund’s Prospectus and Statement of Additional Information.
PGIM Short Duration Muni Fund | 47 |
Approval of Advisory Agreements
The Fund’s Board of Trustees
The Board of Trustees (the “Board”) of PGIM Short Duration Muni Fund (formerly, PGIM Short Duration Muni High Income Fund)1 (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”). 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 (“PGIM Fixed Income”). In considering the renewal of the agreements, the Board, including all of the Independent Trustees, met on May 27, 2020 and on June 9-11, 2020 and approved the renewal of the agreements through July 31, 2021, after concluding that the renewal of the agreements was in the best interests of the Fund and its shareholders.
In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with its consideration. Among other things, the Board considered comparative fee information from PGIM Investments and PGIM. Also, the Board considered comparisons with other mutual funds in relevant Peer Universes and Peer Groups, as is further discussed below.
In approving the agreements, the Board, including the Independent Trustees advised by independent legal counsel, considered the factors it deemed relevant, including the nature, quality and extent of services provided by PGIM Investments and the subadviser, the performance of the Fund, the profitability of PGIM Investments and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Fund and its shareholders as the Fund’s assets grow. In their deliberations, the Trustees did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund. In connection with its deliberations, the Board considered information provided by PGIM Investments throughout the year at regular Board
1 | PGIM Short Duration Muni Fund is a series of Prudential Investment Portfolios 12. |
PGIM Short Duration Muni Fund |
Approval of Advisory Agreements (continued)
meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the meetings on May 27, 2020 and on June 9-11, 2020.
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 the day-to-day management of the Fund’s portfolio. The Board was provided with information pertaining to PGIM Investments’ and PGIM Fixed Income’s organizational structure, senior management,
Visit our website at pgim.com/investments |
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, 2019 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 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 the one-, three- and five-year periods ended December 31, 2019. 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, 2019. 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 pgim.com/investments |
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 | ||||
4th Quartile | 4th Quartile | 4th Quartile | N/A | |||||
Actual Management Fees: 1st Quartile | ||||||||
Net Total Expenses: 3rd Quartile |
• | The Board noted that the Fund outperformed its benchmark index over the five-year period, though it underperformed over the one-year and the three-year periods. |
• | The Board also noted that the Fund outperformed its benchmark index on a gross basis over the one-, three- and five-year periods. |
• | The Board considered certain strategy enhancements made to the Fund as of April 2020, including updates to the Fund’s name, performance benchmark and peer group category as well as reductions in management and subadvisory fees. The Board noted that PGIM Investments expects relative returns to improve following such strategy enhancements and agreed to continue to monitor the performance of the Fund. |
• | The Board and PGIM Investments agreed to retain the Fund’s existing contractual expense cap that (exclusive of certain fees and expenses) caps the Fund’s annual operating expenses at 0.85% for Class A shares and 1.60% for Class C shares through July 31, 2021. The Board and PGIM Investments contractually agreed to an expense cap that (exclusive of certain fees and expenses) caps the Fund’s annual operating expenses at 0.32% for Class Z shares, and 0.29% for Class R6 shares through July 31, 2021. |
• | 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 approval of the agreements was in the best interests of the Fund and its shareholders.
PGIM Short Duration Muni Fund |
∎ TELEPHONE | ∎ WEBSITE | |||
655 Broad Street Newark, NJ 07102 | (800) 225-1852 | pgim.com/investments |
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 or by visiting the Securities and Exchange Commission’s website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the 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 • Claudia DiGiacomo, Chief Legal Officer • Dino Capasso, Chief Compliance Officer • Charles H. Smith, Anti-Money Laundering Compliance Officer • Andrew R. French, Secretary • Melissa Gonzalez, Assistant Secretary • Diana N. Huffman, Assistant Secretary • Kelly A. Coyne, Assistant Secretary • Patrick McGuinness, 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 | PricewaterhouseCoopers LLP | 300 Madison Avenue New York, NY 10017 | ||
| ||||
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 at pgim.com/investments or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go to pgim.com/investments/resource/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH TRUSTEES |
Shareholders can communicate directly with the Board of Trustees by writing to the Chair of the Board, PGIM Short Duration Muni Fund, PGIM Investments, Attn: Board of Trustees, 655 Broad Street, Newark, NJ 07102. Shareholders can communicate directly with an individual Trustee by writing to that Trustee at 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 for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT filings are available on the Commission’s website 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 FUND
SHARE CLASS | A | C | Z | R6 | ||||
NASDAQ | PDSAX | PDSCX | PDSZX | PDSQX | ||||
CUSIP | 744336835 | 744336827 | 744336819 | 744336744 |
MF222E2
PGIM US REAL ESTATE FUND
SEMIANNUAL REPORT
SEPTEMBER 30, 2020
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 (pgim.com/investments), 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 pgim.com/investments/resource/edelivery
3 | ||||
4 | ||||
7 | ||||
9 | ||||
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 are for the period covered by this report and are subject to change thereafter.
The accompanying financial statements as of September 30, 2020 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. © 2020 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.
Effective June 26, 2020, all of the issued and outstanding Class B shares of the Fund converted into Class A shares.
2 | Visit our website at pgim.com/investments |
Dear Shareholder:
We hope you find the semiannual report for PGIM US Real Estate Fund informative and useful. The report covers performance for the six-month period ended September 30, 2020.
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 US Real Estate Fund
November 16, 2020
PGIM US Real Estate Fund | 3 |
Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at pgim.com/investments or by calling (800) 225-1852.
(without sales charges) | Average Annual Total Returns as of 9/30/20 (with sales charges) | |||||||
Six Months* (%) | One Year (%) | Five Years (%) | Since Inception (%) | |||||
Class A | 13.50 | –16.97 | 4.55 | 7.14 (12/21/10) | ||||
Class C | 12.97 | –13.70 | 4.94 | 6.95 (12/21/10) | ||||
Class Z | 13.63 | –11.95 | 6.01 | 8.03 (12/21/10) | ||||
Class R6 | 13.63 | –11.89 | N/A | 5.02 (5/25/17) | ||||
FTSE NAREIT Equity REITs Index | ||||||||
13.43 | –18.16 | 3.95 | — | |||||
S&P 500 Index | ||||||||
31.27 | 15.14 | 14.14 | — |
Average Annual Total Returns as of 9/30/20 Since Inception (%) | ||||
Class A, C, Z (12/21/10) | Class R6 (5/25/17) | |||
FTSE NAREIT Equity REITs Index | 7.32 | 1.11 | ||
S&P 500 Index | 12.92 | 12.66 |
*Not annualized
Since Inception returns are provided for any share class with less than 10 fiscal years of returns. Since Inception returns for the Index are measured from the closest month-end to the class’ inception date.
4 | Visit our website at pgim.com/investments |
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 |
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.
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. The returns for the Indexes would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes that may be paid by an investor.
PGIM US Real Estate Fund | 5 |
Your Fund’s Performance (continued)
Presentation of Fund Holdings as of 9/30/20
Ten Largest Holdings | Real Estate Sectors | % of Net Assets | ||
Equinix, Inc. | Specialized REITs | 9.2% | ||
Prologis, Inc. | Industrial REITs | 9.1% | ||
Invitation Homes, Inc. | Residential REITs | 5.2% | ||
Essential Properties Realty Trust, Inc. | Diversified REITs | 4.8% | ||
Life Storage, Inc. | Specialized REITs | 4.1% | ||
Apple Hospitality REIT, Inc. | Hotel & Resort REITs | 4.1% | ||
Welltower, Inc. | Health Care REITs | 4.1% | ||
Digital Realty Trust, Inc. | Specialized REITs | 3.6% | ||
Equity LifeStyle Properties, Inc. | Residential REITs | 3.5% | ||
Rexford Industrial Realty, Inc. | Industrial REITs | 3.4% |
Holdings reflect only long-term Investments and are subject to change.
6 | Visit our website at pgim.com/investments |
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, 2020. The example is for illustrative purposes only; you should consult the Fund’s 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 | 7 |
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, 2020 | Ending Account Value September 30, 2020 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,135.00 | 1.25 | % | $ | 6.69 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,018.80 | 1.25 | % | $ | 6.33 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,129.70 | 2.00 | % | $ | 10.68 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.04 | 2.00 | % | $ | 10.10 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,136.30 | 1.00 | % | $ | 5.36 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.05 | 1.00 | % | $ | 5.06 | ||||||||||
Class R6 | Actual | $ | 1,000.00 | $ | 1,136.30 | 1.00 | % | $ | 5.36 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.05 | 1.00 | % | $ | 5.06 |
*Fund expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by the 183 days in the six-month period ended September 30, 2020, and divided by the 365 days in the Fund’s fiscal year ending March 31, 2021 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
8 | Visit our website at pgim.com/investments |
Schedule of Investments (unaudited)
as of September 30, 2020
Description | Shares | Value | ||||||
LONG-TERM INVESTMENTS 98.6% | ||||||||
COMMON STOCKS | ||||||||
Diversified REITs 6.8% | ||||||||
Essential Properties Realty Trust, Inc. | 77,675 | $ | 1,423,006 | |||||
STORE Capital Corp. | 22,326 | 612,402 | ||||||
|
| |||||||
2,035,408 | ||||||||
Health Care REITs 11.5% | ||||||||
Community Healthcare Trust, Inc. | 19,114 | 893,771 | ||||||
Global Medical REIT, Inc. | 68,213 | 920,875 | ||||||
Healthpeak Properties, Inc. | 14,571 | 395,603 | ||||||
Welltower, Inc. | 21,839 | 1,203,110 | ||||||
|
| |||||||
3,413,359 | ||||||||
Hotel & Resort REITs 5.4% | ||||||||
Apple Hospitality REIT, Inc. | 126,576 | 1,216,395 | ||||||
MGM Growth Properties LLC (Class A Stock) | 13,863 | 387,887 | ||||||
|
| |||||||
1,604,282 | ||||||||
Industrial REITs 16.3% | ||||||||
Americold Realty Trust | 13,527 | 483,590 | ||||||
Duke Realty Corp. | 17,688 | 652,687 | ||||||
Prologis, Inc. | 26,820 | 2,698,628 | ||||||
Rexford Industrial Realty, Inc. | 21,973 | 1,005,485 | ||||||
|
| |||||||
4,840,390 | ||||||||
Office REITs 2.7% | ||||||||
Alexandria Real Estate Equities, Inc. | 755 | 120,800 | ||||||
Corporate Office Properties Trust | 28,961 | 686,955 | ||||||
|
| |||||||
807,755 | ||||||||
Residential REITs 19.8% | ||||||||
American Campus Communities, Inc. | 14,294 | 499,147 | ||||||
AvalonBay Communities, Inc. | 4,598 | 686,665 | ||||||
Camden Property Trust | 10,727 | 954,488 | ||||||
Equity LifeStyle Properties, Inc. | 17,031 | 1,044,000 | ||||||
Essex Property Trust, Inc. | 678 | 136,136 | ||||||
Invitation Homes, Inc. | 54,925 | 1,537,351 | ||||||
Sun Communities, Inc. | 1,943 | 273,205 | ||||||
UDR, Inc. | 23,068 | 752,248 | ||||||
|
| |||||||
5,883,240 |
See Notes to Financial Statements.
PGIM US Real Estate Fund | 9 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Retail REITs 9.7% | ||||||||
Agree Realty Corp. | 12,794 | $ | 814,210 | |||||
Realty Income Corp. | 4,329 | 262,987 | ||||||
Regency Centers Corp. | 12,964 | 492,891 | ||||||
Simon Property Group, Inc. | 11,321 | 732,243 | ||||||
Spirit Realty Capital, Inc. | 17,248 | 582,120 | ||||||
|
| |||||||
2,884,451 | ||||||||
Specialized REITs 26.4% | ||||||||
American Tower Corp. | 633 | 153,015 | ||||||
Digital Realty Trust, Inc. | 7,250 | 1,064,010 | ||||||
Equinix, Inc. | 3,592 | 2,730,387 | ||||||
Extra Space Storage, Inc. | 2,163 | 231,419 | ||||||
Gaming & Leisure Properties, Inc. | 13,670 | 504,833 | ||||||
Life Storage, Inc. | 11,606 | 1,221,764 | ||||||
Public Storage | 1,104 | 245,883 | ||||||
QTS Realty Trust, Inc. (Class A Stock) | 10,799 | 680,553 | ||||||
SBA Communications Corp. | 1,054 | 335,678 | ||||||
VICI Properties, Inc. | 29,704 | 694,182 | ||||||
|
| |||||||
7,861,724 | ||||||||
TOTAL INVESTMENTS 98.6% | 29,330,609 | |||||||
Other assets in excess of liabilities 1.4% | 410,779 | |||||||
|
| |||||||
NET ASSETS 100.0% | $ | 29,741,388 | ||||||
|
|
Below is a list of the abbreviation(s) used in the semiannual report:
LIBOR—London Interbank Offered Rate
REITs—Real Estate Investment Trust
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.
See Notes to Financial Statements.
10 |
The following is a summary of the inputs used as of September 30, 2020 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | |||||||||||||
Investments in Securities | |||||||||||||||
Assets | |||||||||||||||
Common Stocks | |||||||||||||||
Diversified REITs | $ | 2,035,408 | $ | — | $ | — | |||||||||
Health Care REITs | 3,413,359 | — | — | ||||||||||||
Hotel & Resort REITs | 1,604,282 | — | — | ||||||||||||
Industrial REITs | 4,840,390 | — | — | ||||||||||||
Office REITs | 807,755 | — | — | ||||||||||||
Residential REITs | 5,883,240 | — | — | ||||||||||||
Retail REITs | 2,884,451 | — | — | ||||||||||||
Specialized REITs | 7,861,724 | — | — | ||||||||||||
|
|
|
|
|
| ||||||||||
Total | $ | 29,330,609 | $ | — | $ | — | |||||||||
|
|
|
|
|
|
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, 2020 were as follows:
Specialized REITs | 26.4 | % | ||
Residential REITs | 19.8 | |||
Industrial REITs | 16.3 | |||
Health Care REITs | 11.5 | |||
Retail REITs | 9.7 | |||
Diversified REITs | 6.8 | |||
Hotel & Resort REITs | 5.4 |
Office REITs | 2.7 | % | ||
|
| |||
98.6 | ||||
Other assets in excess of liabilities | 1.4 | |||
|
| |||
100.0 | % | |||
|
|
See Notes to Financial Statements.
PGIM US Real Estate Fund | 11 |
Statement of Assets and Liabilities (unaudited)
as of September 30, 2020
Assets | |||||
Unaffiliated investments (cost $25,671,324) | $ | 29,330,609 | |||
Receivable for investments sold | 451,649 | ||||
Dividends receivable | 125,217 | ||||
Receivable for Fund shares sold | 24,914 | ||||
Prepaid expenses | 1,350 | ||||
|
| ||||
Total Assets | 29,933,739 | ||||
|
| ||||
Liabilities | |||||
Payable to custodian | 68,205 | ||||
Payable for Fund shares reacquired | 59,014 | ||||
Custodian and accounting fees payable | 19,382 | ||||
Accrued expenses and other liabilities | 14,407 | ||||
Audit fee payable | 12,534 | ||||
Transfer agent’s fees and expenses payable | 12,060 | ||||
Management fee payable | 3,164 | ||||
Distribution fee payable | 1,991 | ||||
Affiliated transfer agent fee payable | 1,430 | ||||
Trustees’ fees payable | 164 | ||||
|
| ||||
Total Liabilities | 192,351 | ||||
|
| ||||
Net Assets | $ | 29,741,388 | |||
|
| ||||
Net assets were comprised of: | |||||
Shares of beneficial interest, at par | $ | 2,488 | |||
Paid-in capital in excess of par | 27,922,037 | ||||
Total distributable earnings (loss) | 1,816,863 | ||||
|
| ||||
Net assets, September 30, 2020 | $ | 29,741,388 | |||
|
|
See Notes to Financial Statements.
12 |
Class A | |||||
Net asset value and redemption price per share, | $ | 11.95 | |||
Maximum sales charge (5.50% of offering price) | 0.70 | ||||
|
| ||||
Maximum offering price to public | $ | 12.65 | |||
|
| ||||
Class C | |||||
Net asset value, offering price and redemption price per share, | $ | 11.66 | |||
|
| ||||
Class Z | |||||
Net asset value, offering price and redemption price per share, | $ | 11.97 | |||
|
| ||||
Class R6 | |||||
Net asset value, offering price and redemption price per share, | $ | 11.97 | |||
|
|
See Notes to Financial Statements.
PGIM US Real Estate Fund | 13 |
Statement of Operations (unaudited)
Six Months Ended September 30, 2020
Net Investment Income (Loss) | |||||
Income | |||||
Unaffiliated dividend income | $ | 409,270 | |||
Affiliated dividend income | 512 | ||||
Affiliated income from securities lending, net | 433 | ||||
|
| ||||
Total income | 410,215 | ||||
|
| ||||
Expenses | |||||
Management fee | 116,860 | ||||
Distribution fee(a) | 15,215 | ||||
Custodian and accounting fees | 34,295 | ||||
Transfer agent’s fees and expenses (including affiliated expense of $5,448)(a) | 29,867 | ||||
Registration fees(a) | 26,259 | ||||
Audit fee | 12,889 | ||||
Legal fees and expenses | 8,327 | ||||
Shareholders’ reports | 7,635 | ||||
Trustees’ fees | 5,584 | ||||
Miscellaneous | 9,210 | ||||
|
| ||||
Total expenses | 266,141 | ||||
Less: Fee waiver and/or expense reimbursement(a) | (94,822 | ) | |||
Distribution fee waiver(a) | (1,568 | ) | |||
|
| ||||
Net expenses | 169,751 | ||||
|
| ||||
Net investment income (loss) | 240,464 | ||||
|
| ||||
Realized And Unrealized Gain (Loss) On Investments | |||||
Net realized gain (loss) on investment transactions | (840,963 | ) | |||
Net change in unrealized appreciation (depreciation) on investments | 4,543,298 | ||||
|
| ||||
Net gain (loss) on investment transactions | 3,702,335 | ||||
|
| ||||
Net Increase (Decrease) In Net Assets Resulting From Operations | $ | 3,942,799 | |||
|
|
(a) | Class specific expenses and waivers were as follows: |
Class A | Class B | Class C | Class Z | Class R6 | |||||||||||||||||||||
Distribution fee | 9,406 | 367 | 5,442 | — | — | ||||||||||||||||||||
Transfer agent’s fees and expenses | 8,161 | 131 | 1,424 | 19,983 | 168 | ||||||||||||||||||||
Registration fees | 6,257 | 1,474 | 6,083 | 6,855 | 5,590 | ||||||||||||||||||||
Fee waiver and/or expense reimbursement | (22,190 | ) | (1,692 | ) | (8,861 | ) | (53,652 | ) | (8,427 | ) | |||||||||||||||
Distribution fee waiver | (1,568 | ) | — | — | — | — |
See Notes to Financial Statements.
14 |
Statements of Changes in Net Assets (unaudited)
Six Months Ended September 30, 2020 | Year Ended March 31, 2020 | |||||||||
Increase (Decrease) in Net Assets | ||||||||||
Operations | ||||||||||
Net investment income (loss) | $ | 240,464 | $ | 505,311 | ||||||
Net realized gain (loss) on investment transactions | (840,963 | ) | 315,624 | |||||||
Net change in unrealized appreciation (depreciation) on investments | 4,543,298 | (5,782,004 | ) | |||||||
|
|
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 3,942,799 | (4,961,069 | ) | |||||||
|
|
|
| |||||||
Dividends and Distributions | ||||||||||
Distributions from distributable earnings | ||||||||||
Class A | (43,426 | ) | (345,221 | ) | ||||||
Class B | (190 | ) | (16,521 | ) | ||||||
Class C | (3,159 | ) | (83,630 | ) | ||||||
Class Z | (167,537 | ) | (1,466,798 | ) | ||||||
Class R6 | (15,309 | ) | (21,465 | ) | ||||||
|
|
|
| |||||||
(229,621 | ) | (1,933,635 | ) | |||||||
|
|
|
| |||||||
Fund share transactions (Net of share conversions) | ||||||||||
Net proceeds from shares sold | 3,706,588 | 17,114,330 | ||||||||
Net asset value of shares issued in reinvestment of dividends and distributions | 226,620 | 1,932,448 | ||||||||
Cost of shares reacquired | (6,063,114 | ) | (11,426,156 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in net assets from Fund share transactions | (2,129,906 | ) | 7,620,622 | |||||||
|
|
|
| |||||||
Total increase (decrease) | 1,583,272 | 725,918 | ||||||||
Net Assets: | ||||||||||
Beginning of period | 28,158,116 | 27,432,198 | ||||||||
|
|
|
| |||||||
End of period | $ | 29,741,388 | $ | 28,158,116 | ||||||
|
|
|
|
See Notes to Financial Statements.
PGIM US Real Estate Fund | 15 |
Notes to Financial Statements (unaudited)
1. Organization
Prudential Investment Portfolios 12 (the “Trust”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company. The Trust currently consists of the following six series: PGIM QMA Large-Cap Core Equity PLUS Fund, PGIM QMA Long-Short Equity Fund and PGIM Short Duration Muni Fund, each of which are diversified funds for purposes of the 1940 Act and PGIM Global Real Estate Fund, PGIM Jennison Technology Fund and PGIM US Real Estate Fund, each of which are non-diversified funds for purposes of the 1940 Act, and therefore, may invest a greater percentage of their assets in the securities of a single company or other issuer than a diversified fund. Investing in a non-diversified fund involves greater risk than investing in a diversified fund because a loss resulting from the decline in value of any one security may represent a greater portion of the total assets of a non-diversified fund. These financial statements relate only to the PGIM US Real Estate Fund (the “Fund”).
The investment objective of the Fund is capital appreciation and income.
2. 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 reporting period-end, securities and other assets and liabilities were fair valued at the close of the last U.S. business day. Trading in certain foreign securities may occur
16 |
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.
Common or preferred stocks, exchange-traded funds and derivative instruments, if applicable, 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 in open-end funds (other than exchange-traded 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
PGIM US Real Estate Fund | 17 |
Notes to Financial Statements (unaudited) (continued)
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 Rule 22e-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(s) 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 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
18 |
results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities held at the end of the period. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities sold during the period. Accordingly, 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 investment 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.
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 to set-off exists when all the conditions are met such that each of the parties owes the other determinable amounts, the reporting party has the right to set-off the amount owed with the amount owed by the other party, the reporting party intends to set-off and the right of set-off is enforceable by law. During the reporting period, there was no intention to settle on a net basis and all amounts are presented on a gross basis on the Statement of Assets and Liabilities.
Securities Lending: The Fund lends its portfolio securities to banks and broker-dealers. The loans are secured by collateral at least equal to the market value of the securities loaned. Collateral pledged by each borrower is invested in an affiliated money market fund and is marked to market daily, based on the previous day’s market value, such that the value of the collateral exceeds the value of the loaned securities. In the event of significant appreciation in value of securities on loan on the last business day of the reporting period, the financial statements may reflect a collateral value that is less than the market value of the loaned securities. Such shortfall is remedied as described above. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of the loan, the borrower will return to the Fund securities identical to the loaned securities. Should the borrower of the securities fail financially, the Fund has the right to repurchase the securities in the open market using the collateral.
PGIM US Real Estate Fund | 19 |
Notes to Financial Statements (unaudited) (continued)
The Fund recognizes income, net of any rebate and securities lending agent fees, for lending its securities in the form of fees or interest on the investment of any cash received as collateral. The borrower receives all interest and dividends from the securities loaned and such payments are passed back to the lender in amounts equivalent thereto. The Fund also continues to recognize any unrealized gain (loss) in the market price of the securities loaned and on the change in the value of the collateral invested that may occur during the term of the loan. In addition, realized gain (loss) is recognized on changes in the value of the collateral invested upon liquidation of the collateral. Net earnings from securities lending are disclosed in the Statement of Operations.
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 the ex-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 quarterly. Distributions from net realized capital and currency gains, if any, are declared and paid annually. Dividends and distributions to shareholders, which are
20 |
determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-date. Permanent book/tax differences relating to income and gain (loss) are reclassified between total distributable earnings (loss) and paid-in capital in excess of par, as appropriate.
Estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
3. 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 an amended and restated subadvisory agreement with PGIM, Inc. (which provides subadvisory services to the Fund through its business unit, PGIM Real Estate) and PGIM Real Estate (UK) Limited, an indirect wholly-owned subsidiary of PGIM, Inc. (together, the “Subadvisers”). The subadvisory agreement provides that the Subadvisers will provide investment advisory services to the Fund with respect to the assets of the Fund allocated to them by the Manager. In connection therewith, the Subadvisers are obligated to keep certain books and records of the Fund. The Manager pays for the services of the Subadvisers, 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 0.75% 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, 2020.
The Manager has contractually agreed, through July 31, 2021, to limit total annual operating expenses after fee waivers and/or expense reimbursements to 1.25% of average daily net
PGIM US Real Estate Fund | 21 |
Notes to Financial Statements (unaudited) (continued)
assets for Class A 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 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 0.30% and 1% of the average daily net assets of the Class A and Class C shares, respectively. PIMS has contractually agreed through July 31, 2021 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, 2020, PIMS received $3,403 in front-end sales charges resulting from sales of Class A shares. Additionally, for the reporting period ended September 30, 2020, PIMS received $10,000 and $775 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, PGIM, Inc. and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
22 |
4. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PGIM Investments and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund’s transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
The Fund may 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 Rule 17a-7 procedures. Rule 17a-7 is an exemptive rule under the 1940 Act, that subject to certain conditions, permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. Pursuant to the Rule 17a-7 procedures and consistent with guidance issued by the Securities and Exchange Commission (“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 such 17a-7 transactions were effected in accordance with the Fund’s Rule 17a-7 procedures. For the reporting period ended September 30, 2020, no 17a-7 transactions were entered into by the Fund.
5. 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, 2020, were $38,296,319 and $40,184,368, respectively.
A summary of the cost of purchases and proceeds from sales of shares of affiliated investments for the reporting period ended September 30, 2020, is presented as follows:
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* | ||||||||||||||||||||||||||||||
$ | 457,595 | $ | 5,701,619 | $ | 6,159,214 | $ | — | $ | — | $ | — | — | $ | 512 |
PGIM US Real Estate Fund | 23 |
Notes to Financial Statements (unaudited) (continued)
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 Institutional Money Market Fund* | ||||||||||||||||||||||||||||||
$ | — | $ | 1,641,273 | $ | 1,641,273 | $ | — | $ | — | $ | — | — | $ | 433 | ** | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
$ | 457,595 | $ | 7,342,892 | $ | 7,800,487 | $ | — | $ | — | $ | — | $ | 945 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* | The Fund did not have any capital gain distributions during the reporting period. |
** | The amount, or a portion thereof, represents the affiliated securities lending income shown on the Statement of Operations. |
6. Tax Information
The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of September 30, 2020 were as follows:
Tax Basis | $ | 26,275,491 | |||
|
| ||||
Gross Unrealized Appreciation | 4,193,493 | ||||
Gross Unrealized Depreciation | (1,138,375 | ) | |||
|
| ||||
Net Unrealized Appreciation | $ | 3,055,118 | |||
|
|
The book basis may differ from tax basis due to certain tax-related adjustments.
The Fund elected to treat late year losses of approximately $551,000 as having been incurred in the following fiscal year (March 31, 2021).
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, 2020 are subject to such review.
7. Capital and Ownership
The Fund offers Class A, Class C, Class Z and Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 5.50%. Investors who purchase $1 million or more of Class A shares and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1%, although they are not subject to an initial sales charge. The Class A CDSC is waived for certain retirement and/or benefit plans. A special exchange privilege is also available for shareholders who qualified to purchase
24 |
Class A shares at net asset value. Effective June 26, 2020, all of the issued and outstanding Class B shares of the Fund converted into Class A shares. 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 charges 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, below.
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, 2020, Prudential, through its affiliated entities, including affiliated funds (if applicable), owned shares of the Fund as follows:
Number of Shares | Percentage of Outstanding Shares | |||
Class Z | 1,512,407 | 87.5% | ||
Class R6 | 985 | 0.4% |
At the reporting period end, the number of shareholders holding greater than 5% of the Fund are as follows:
Affiliated | Unaffiliated | |||||||||||
Number of Shareholders | Percentage of Outstanding Shares |
| Number of Shareholders | Percentage of Outstanding Shares | ||||||||
1 | 60.9% | 2 | 14.0% |
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||||
Six months ended September 30, 2020: | ||||||||||
Shares sold | 28,580 | $ | 313,414 | |||||||
Shares issued in reinvestment of dividends and distributions | 3,571 | 40,447 | ||||||||
Shares reacquired | (167,234 | ) | (2,005,895 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (135,083 | ) | (1,652,034 | ) | ||||||
Shares issued upon conversion from other share class(es) | 17,607 | 203,245 | ||||||||
Shares reacquired upon conversion into other share class(es) | (1,459 | ) | (18,167 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding | (118,935 | ) | $ | (1,466,956 | ) | |||||
|
|
|
| |||||||
Year ended March 31, 2020: | ||||||||||
Shares sold | 226,567 | $ | 2,986,498 | |||||||
Shares issued in reinvestment of dividends and distributions | 25,522 | 344,069 | ||||||||
Shares reacquired | (76,589 | ) | (1,035,967 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 175,500 | 2,294,600 | ||||||||
Shares issued upon conversion from other share class(es) | 34,765 | 477,318 | ||||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding | 210,265 | $ | 2,771,918 | |||||||
|
|
|
|
PGIM US Real Estate Fund | 25 |
Notes to Financial Statements (unaudited) (continued)
Class B | Shares | Amount | ||||||||
Period ended June 26, 2020*: | ||||||||||
Shares sold | 371 | $ | 4,000 | |||||||
Shares issued in reinvestment of dividends and distributions | 18 | 190 | ||||||||
Shares reacquired | (188 | ) | (2,027 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 201 | 2,163 | ||||||||
Shares reacquired upon conversion into other share class(es) | (17,515 | ) | (197,930 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding | (17,314 | ) | $ | (195,767 | ) | |||||
|
|
|
| |||||||
Year ended March 31, 2020: | ||||||||||
Shares sold | 544 | $ | 7,371 | |||||||
Shares issued in reinvestment of dividends and distributions | 1,253 | 16,521 | ||||||||
Shares reacquired | (6,302 | ) | (86,710 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (4,505 | ) | (62,818 | ) | ||||||
Shares reacquired upon conversion into other share class(es) | (22,611 | ) | (308,707 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding | (27,116 | ) | $ | (371,525 | ) | |||||
|
|
|
| |||||||
Class C | ||||||||||
Six months ended September 30, 2020: | ||||||||||
Shares sold | 5,658 | $ | 65,329 | |||||||
Shares issued in reinvestment of dividends and distributions | 285 | 3,159 | ||||||||
Shares reacquired | (45,615 | ) | (495,496 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (39,672 | ) | (427,008 | ) | ||||||
Shares reacquired upon conversion into other share class(es) | (482 | ) | (5,315 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding | (40,154 | ) | $ | (432,323 | ) | |||||
|
|
|
| |||||||
Year ended March 31, 2020: | ||||||||||
Shares sold | 59,600 | $ | 825,665 | |||||||
Shares issued in reinvestment of dividends and distributions | 6,359 | 83,653 | ||||||||
Shares reacquired | (19,067 | ) | (246,112 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 46,892 | 663,206 | ||||||||
Shares reacquired upon conversion into other share class(es) | (12,216 | ) | (159,832 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding | 34,676 | $ | 503,374 | |||||||
|
|
|
| |||||||
Class Z | ||||||||||
Six months ended September 30, 2020: | ||||||||||
Shares sold | 129,885 | $ | 1,511,348 | |||||||
Shares issued in reinvestment of dividends and distributions | 14,800 | 167,515 | ||||||||
Shares reacquired | (272,164 | ) | (3,203,135 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (127,479 | ) | (1,524,272 | ) | ||||||
Shares issued upon conversion from other share class(es) | 1,457 | 18,167 | ||||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding | (126,022 | ) | $ | (1,506,105 | ) | |||||
|
|
|
| |||||||
Year ended March 31, 2020: | ||||||||||
Shares sold | 866,339 | $ | 11,833,075 | |||||||
Shares issued in reinvestment of dividends and distributions | 108,583 | 1,466,740 | ||||||||
Shares reacquired | (712,960 | ) | (9,798,548 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 261,962 | 3,501,267 | ||||||||
Shares reacquired upon conversion into other share class(es) | (654 | ) | (8,779 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding | 261,308 | $ | 3,492,488 | |||||||
|
|
|
|
26 |
Class R6 | Shares | Amount | ||||||||
Six months ended September 30, 2020: | ||||||||||
Shares sold | 163,151 | $ | 1,812,497 | |||||||
Shares issued in reinvestment of dividends and distributions | 1,346 | 15,309 | ||||||||
Shares reacquired | (30,258 | ) | (356,561 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding | 134,239 | $ | 1,471,245 | |||||||
|
|
|
| |||||||
Year ended March 31, 2020: | ||||||||||
Shares sold | 105,866 | $ | 1,461,721 | |||||||
Shares issued in reinvestment of dividends and distributions | 1,596 | 21,465 | ||||||||
Shares reacquired | (18,553 | ) | (258,819 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding | 88,909 | $ | 1,224,367 | |||||||
|
|
|
|
* | Effective June 26, 2020, all of the issued and outstanding Class B shares of the Fund converted into Class A shares. |
8. Borrowings
The Trust, on behalf of the Fund, along with other affiliated registered investment companies (the “Participating 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 table below provides details of the current SCA in effect at the reporting period-end.
SCA | ||
Term of Commitment | 10/3/2019 – 10/1/2020 | |
Total Commitment | $ 1,222,500,000* | |
Annualized Commitment Fee on the Unused Portion of the SCA | 0.15% | |
Annualized Interest Rate on Borrowings | 1.20% plus the higher of (1) the effective federal funds rate, (2) the one-month LIBOR rate or (3) zero percent | |
* Effective March 31, 2020, the SCA’s total commitment was increased from $900,000,000 to $1,162,500,000 and subsequently, effective April 7, 2020 was increased to $1,222,500,000. |
Subsequent to the reporting period end, the SCA has been renewed effective October 2, 2020 and will provide a commitment of $1,200,000,000 through September 30, 2021. The commitment fee paid by the Participating 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 1.30% plus the higher of (1) the effective federal funds rate, (2) the one-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
PGIM US Real Estate Fund | 27 |
Notes to Financial Statements (unaudited) (continued)
to allocate available funding per a Board-approved methodology designed to treat the Participating Funds in the SCA equitably.
The Fund utilized the SCA during the reporting period ended September 30, 2020. The average daily balance for the 17 days that the Fund had loans outstanding during the period was approximately $326,647, borrowed at a weighted average interest rate of 1.36%. The maximum loan outstanding amount during the period was $782,000. At September 30, 2020, the Fund did not have an outstanding loan amount.
9. Risks of Investing in the Fund
The Fund’s risks include, but are not limited to, some or all of the risks discussed below. For further information on the Fund’s risks, please refer to the Fund’s Prospectus and Statement of Additional Information.
Equity and Equity-Related Securities Risks: The value of a particular security could go down and you could lose money. In addition to an individual security losing value, the value of the equity markets or a sector in which the Fund invests could go down. The Fund’s holdings can vary significantly from broad market indexes and the performance of the Fund can deviate from the performance of these indexes. Different parts of a market can react differently to adverse issuer, market, regulatory, political and economic developments.
Foreign Securities Risk: The Fund’s investments in securities of foreign issuers or issuers with significant exposure to foreign markets involve additional risk. Foreign countries in which the Fund may invest may have markets that are less liquid, less regulated and more volatile than US markets. The value of the Fund’s investments may decline because of factors affecting the particular issuer as well as foreign markets and issuers generally, such as unfavorable government actions, and political or financial instability.
Large Shareholder and Large Scale Redemption Risk: Certain individuals, accounts, funds (including funds affiliated with the Manager) or institutions, including the Manager and its affiliates, may from time to time own or control a substantial amount of the Fund’s shares. There is no requirement that these entities maintain their investment in the Fund. There is a risk that such large shareholders or that the Fund’s shareholders generally may redeem all or a substantial portion of their investments in the Fund in a short period of time, which could have a significant negative impact on the Fund’s NAV, liquidity, and brokerage costs. Large redemptions could also result in tax consequences to shareholders and impact the Fund’s ability to implement its investment strategy. The Fund’s ability to pursue its investment objective after one or more large scale redemptions may be impaired and, as a result, the Fund may invest a larger portion of its assets in cash or cash equivalents.
28 |
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.
Market Disruption and Geopolitical Risks: International wars or conflicts and geopolitical developments in foreign countries, along with instability in regions such as Asia, Eastern Europe, and the Middle East, possible terrorist attacks in the United States or around the world, public health epidemics such as the outbreak of infectious diseases like the recent outbreak of coronavirus globally or the 2014–2016 outbreak in West Africa of the Ebola virus, and other similar events could adversely affect the U.S. and foreign financial markets, including increases in market volatility, reduced liquidity in the securities markets and government intervention, and may cause further long-term economic uncertainties in the United States and worldwide generally.
Non-diversification Risk: A non-diversified Fund may invest a greater percentage of its assets in the securities of a single company or industry than a diversified fund. Investing in a non-diversified fund involves greater risk than investing in a diversified fund because a loss resulting from the decline in value of any one security may represent a greater portion of the total assets of a non-diversified fund.
Real Estate Related Securities Risk: An investment in the Fund will be closely linked to the performance of the real estate markets. Real estate securities are subject to the same risks as direct investments in real estate and mortgages, and their value will depend on the value of the underlying properties or the underlying loans or interests. The underlying loans may be subject to the risks of default or of prepayments that occur earlier or later than expected, and such loans may also include so-called “subprime” mortgages. The value of these securities will rise and fall in response to many factors, including economic conditions, the demand for rental property and interest rates. In particular, the value of these securities may decline when interest rates rise and will also be affected by the real estate market and by the management of the underlying properties.
Risks of Investing in equity REITs: Real estate securities are subject to similar risks as direct investments in real estate and mortgages, and their value will depend on the value of the underlying properties or the underlying loans or interests. The underlying loans may be subject to the risks of default or of payments that occur earlier or later than expected, and such loans may also include so-called “subprime” mortgages. The value of these securities will rise and fall in response to many factors, including economic conditions, the demand for rental property and interest rates. In particular, the value of these securities may decline when interest rates rise and will also be affected by the real estate market and by the management of the underlying properties.
PGIM US Real Estate Fund | 29 |
Notes to Financial Statements (unaudited) (continued)
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. Since the Fund concentrates in the real estate industry, the holdings of the Fund can vary significantly from broad market indexes. As a result, the performance of the Fund can deviate from the performance of such indexes.
10. Recent Accounting Pronouncements and Reporting Updates
In March 2020, the FASB issued Accounting Standard Update (“ASU”) No. 2020-04, which provides optional guidance for applying GAAP to contract modifications, hedging relationships and other transactions affected by the reference rate reform if certain criteria are met. ASU 2020-04 is elective and is effective on March 12, 2020 through December 31, 2022. At this time, management is evaluating the implications of certain provisions of the ASU and any impact on the financial statement disclosures has not yet been determined.
30 |
Financial Highlights (unaudited)
Class A Shares | ||||||||||||||||||||||||||||||||||||||
Six Months 2020 | Year Ended March 31, | |||||||||||||||||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.60 | $13.14 | $11.05 | $12.01 | $13.71 | $14.80 | ||||||||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.08 | 0.19 | 0.19 | 0.18 | 0.06 | 0.21 | ||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 1.35 | (1.93 | ) | 2.47 | (0.41 | ) | 0.07 | (0.11 | ) | |||||||||||||||||||||||||||||
Total from investment operations | 1.43 | (1.74 | ) | 2.66 | (0.23 | ) | 0.13 | 0.10 | ||||||||||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.08 | ) | (0.19 | ) | (0.19 | ) | (0.13 | ) | (0.27 | ) | (0.14 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | - | (0.61 | ) | (0.38 | ) | (0.60 | ) | (1.56 | ) | (1.05 | ) | |||||||||||||||||||||||||||
Total dividends and distributions | (0.08 | ) | (0.80 | ) | (0.57 | ) | (0.73 | ) | (1.83 | ) | (1.19 | ) | ||||||||||||||||||||||||||
Net asset value, end of period | $11.95 | $10.60 | $13.14 | $11.05 | $12.01 | $13.71 | ||||||||||||||||||||||||||||||||
Total Return(b): | 13.50 | % | (14.51 | )% | 24.76 | % | (2.36 | )% | 1.01 | % | 1.28 | % | ||||||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||||||||||||
Net assets, end of period (000) | $5,398 | $6,050 | $4,735 | $3,938 | $4,863 | $5,013 | ||||||||||||||||||||||||||||||||
Average net assets (000) | $6,254 | $5,832 | $4,230 | $4,492 | $5,555 | $4,850 | ||||||||||||||||||||||||||||||||
Ratios to average net assets(c)(d): | ||||||||||||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.25 | %(e) | 1.25 | % | 1.25 | % | 1.25 | % | 1.34 | % | 1.61 | %(f) | ||||||||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 2.01 | %(e) | 2.00 | % | 2.36 | % | 2.22 | % | 1.92 | % | 1.73 | %(f) | ||||||||||||||||||||||||||
Net investment income (loss) | 1.35 | %(e) | 1.42 | % | 1.63 | % | 1.49 | % | 0.43 | % | 1.53 | % | ||||||||||||||||||||||||||
Portfolio turnover rate(g) | 124 | % | 211 | % | 154 | % | 92 | % | 122 | % | 156 | % |
(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 C Shares | ||||||||||||||||||||||||||||||||||||||
Six Months 2020 | Year Ended March 31, | |||||||||||||||||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.35 | $12.84 | $10.81 | $11.79 | $13.49 | $14.60 | ||||||||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.04 | 0.09 | 0.10 | 0.08 | (0.05 | ) | 0.11 | |||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 1.30 | (1.88 | ) | 2.41 | (0.39 | ) | 0.08 | (0.11 | ) | |||||||||||||||||||||||||||||
Total from investment operations | 1.34 | (1.79 | ) | 2.51 | (0.31 | ) | 0.03 | - | ||||||||||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.03 | ) | (0.09 | ) | (0.10 | ) | (0.07 | ) | (0.17 | ) | (0.06 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | - | (0.61 | ) | (0.38 | ) | (0.60 | ) | (1.56 | ) | (1.05 | ) | |||||||||||||||||||||||||||
Total dividends and distributions | (0.03 | ) | (0.70 | ) | (0.48 | ) | (0.67 | ) | (1.73 | ) | (1.11 | ) | ||||||||||||||||||||||||||
Net asset value, end of period | $11.66 | $10.35 | $12.84 | $10.81 | $11.79 | $13.49 | ||||||||||||||||||||||||||||||||
Total Return(b): | 12.97 | % | (15.08 | )% | 23.81 | % | (3.11 | )% | 0.26 | % | 0.53 | % | ||||||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||||||||||||
Net assets, end of period (000) | $967 | $1,273 | $1,135 | $949 | $1,536 | $1,491 | ||||||||||||||||||||||||||||||||
Average net assets (000) | $1,085 | $1,360 | $947 | $1,294 | $1,669 | $1,543 | ||||||||||||||||||||||||||||||||
Ratios to average net assets(c)(d): | ||||||||||||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 2.00 | %(e) | 2.00 | % | 2.00 | % | 2.00 | % | 2.08 | % | 2.36 | %(f) | ||||||||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 3.63 | %(e) | 3.32 | % | 4.17 | % | 3.10 | % | 2.62 | % | 2.43 | %(f) | ||||||||||||||||||||||||||
Net investment income (loss) | 0.63 | %(e) | 0.65 | % | 0.89 | % | 0.69 | % | (0.39 | )% | 0.80 | % | ||||||||||||||||||||||||||
Portfolio turnover rate(g) | 124 | % | 211 | % | 154 | % | 92 | % | 122 | % | 156 | % |
(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 Z Shares | ||||||||||||||||||||||||||||||||||||||
Six Months 2020 | Year Ended March 31, | |||||||||||||||||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.62 | $13.16 | $11.07 | $12.02 | $13.72 | $14.80 | ||||||||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.10 | 0.22 | 0.23 | 0.21 | 0.08 | 0.26 | ||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 1.34 | (1.93 | ) | 2.46 | (0.40 | ) | 0.09 | (0.12 | ) | |||||||||||||||||||||||||||||
Total from investment operations | 1.44 | (1.71 | ) | 2.69 | (0.19 | ) | 0.17 | 0.14 | ||||||||||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.09 | ) | (0.22 | ) | (0.22 | ) | (0.16 | ) | (0.31 | ) | (0.17 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | - | (0.61 | ) | (0.38 | ) | (0.60 | ) | (1.56 | ) | (1.05 | ) | |||||||||||||||||||||||||||
Total dividends and distributions | (0.09 | ) | (0.83 | ) | (0.60 | ) | (0.76 | ) | (1.87 | ) | (1.22 | ) | ||||||||||||||||||||||||||
Net asset value, end of period | $11.97 | $10.62 | $13.16 | $11.07 | $12.02 | $13.72 | ||||||||||||||||||||||||||||||||
Total Return(b): | 13.63 | % | (14.27 | )% | 25.03 | % | (2.09 | )% | 1.26 | % | 1.56 | % | ||||||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||||||||||||
Net assets, end of period (000) | $20,694 | $19,702 | $20,978 | $15,422 | $16,397 | $35,941 | ||||||||||||||||||||||||||||||||
Average net assets (000) | $21,530 | $25,381 | $17,162 | $16,394 | $22,153 | $36,976 | ||||||||||||||||||||||||||||||||
Ratios to average net assets(c)(d): | ||||||||||||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.00 | %(e) | 1.00 | % | 1.00 | % | 1.00 | % | 1.13 | % | 1.36 | %(f) | ||||||||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.50 | %(e) | 1.44 | % | 1.54 | % | 1.80 | % | 1.56 | % | 1.43 | %(f) | ||||||||||||||||||||||||||
Net investment income (loss) | 1.63 | %(e) | 1.60 | % | 1.90 | % | 1.76 | % | 0.63 | % | 1.90 | % | ||||||||||||||||||||||||||
Portfolio turnover rate(g) | 124 | % | 211 | % | 154 | % | 92 | % | 122 | % | 156 | % |
(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.
PGIM US Real Estate Fund | 33 |
Financial Highlights (unaudited) (continued)
Class R6 Shares | ||||||||||||||||||||||||||||||||||||||
Six Months 2020 | Year Ended March 31, | May 25, 2017(a) 2018 | ||||||||||||||||||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.62 | $13.16 | $11.06 | $12.16 | ||||||||||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.10 | 0.28 | 0.22 | 0.20 | ||||||||||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 1.34 | (1.99 | ) | 2.48 | (0.54 | ) | ||||||||||||||||||||||||||||||||
Total from investment operations | 1.44 | (1.71 | ) | 2.70 | (0.34 | ) | ||||||||||||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.09 | ) | (0.22 | ) | (0.22 | ) | (0.16 | ) | ||||||||||||||||||||||||||||||
Distributions from net realized gains | - | (0.61 | ) | (0.38 | ) | (0.60 | ) | |||||||||||||||||||||||||||||||
Total dividends and distributions | (0.09 | ) | (0.83 | ) | (0.60 | ) | (0.76 | ) | ||||||||||||||||||||||||||||||
Net asset value, end of period | $11.97 | $10.62 | $13.16 | $11.06 | ||||||||||||||||||||||||||||||||||
Total Return(c): | 13.63 | % | (14.27 | )% | 25.14 | % | (3.31 | )% | ||||||||||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||||||||||||
Net assets, end of period (000) | $2,682 | $954 | $12 | $10 | ||||||||||||||||||||||||||||||||||
Average net assets (000) | $2,135 | $294 | $11 | $10 | ||||||||||||||||||||||||||||||||||
Ratios to average net assets(d)(e): | ||||||||||||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.00 | %(f) | 1.00 | % | 1.00 | % | 1.00 | %(f) | ||||||||||||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.79 | %(f) | 4.99 | % | 135.20 | % | 115.13 | %(f) | ||||||||||||||||||||||||||||||
Net investment income (loss) | 1.73 | %(f) | 2.06 | % | 1.88 | % | 1.93 | %(f) | ||||||||||||||||||||||||||||||
Portfolio turnover rate(g) | 124 | % | 211 | % | 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.
34 |
Fund Liquidity Risk Management Program (unaudited)
Consistent with Rule 22e-4 under the 1940 Act (the “Liquidity Rule”), the Fund has adopted and implemented a liquidity risk management program (the “LRMP”). The Fund’s LRMP seeks to assess and manage the Fund’s liquidity risk, which is defined as the risk that the Fund is unable to meet investor redemption requests without significantly diluting the remaining investors’ interests in the Fund. The Trust’s Board of Trustees (the “Board”) has approved PGIM Investments LLC (“PGIM Investments”), the Fund’s investment manager, to serve as the administrator of the Fund’s LRMP. As part of its responsibilities as administrator, PGIM Investments has retained a third party to perform certain functions, including providing market data and liquidity classification model information.
The Fund’s LRMP includes a number of processes designed to support the assessment and management of its liquidity risk. In particular, the Fund’s LRMP includes no less than annual assessments of factors that influence the Fund’s liquidity risk; no less than monthly classifications of the Fund’s investments into one of four liquidity classifications provided for in the Liquidity Rule; a 15% of net assets limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); establishment of a minimum percentage of the Fund’s assets to be invested in investments classified as “highly liquid” (as defined under the Liquidity Rule) if the Fund does not invest primarily in highly liquid investments; and regular reporting to the Board.
At a meeting of the Board on March 3-5, 2020, PGIM Investments provided a written report (“LRMP Report”) to the Board addressing the operation, adequacy, and effectiveness of the Fund’s LRMP, including any material changes to the LRMP for the period from the inception of the Fund’s LRMP on December 1, 2018 through December 31, 2019 (“Reporting Period”). The LRMP Report concluded that the Fund’s LRMP was reasonably designed to assess and manage the Fund’s liquidity risk and was adequately and effectively implemented during the Reporting Period. There were no material changes to the LRMP during the Reporting Period. The LRMP Report further concluded that the Fund’s investment strategies continue to be appropriate given the Fund’s status as an open-end fund.
There can be no assurance that the LRMP will achieve its objectives in the future. Additional information regarding risks of investing in the Fund, including liquidity risks presented by the Fund’s investment portfolio, is found in the Fund’s Prospectus and Statement of Additional Information.
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”). The Board is responsible for the oversight of the Fund and its operations, and performs the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Trustees have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Trustee. The Board has established four standing committees: the Audit Committee, the Nominating and Governance Committee, and two Investment Committees. Each committee is chaired by, and composed of, Independent Trustees.
Annual Approval of the Fund’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Fund’s management agreement with PGIM Investments LLC (“PGIM Investments”) and the Fund’s subadvisory agreement with PGIM, Inc. (“PGIM”), on behalf of its PGIM Real Estate unit (“PGIM Real Estate”), and PGIM Real Estate (UK) Limited (“PGIM RE (UK)”). In considering the renewal of the agreements, the Board, including all of the Independent Trustees, met on May 27, 2020 and on June 9-11, 2020 and approved the renewal of the agreements through July 31, 2021, 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 Real Estate and PGIM RE (UK). 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 subadvisers, the performance of the Fund, the profitability of PGIM Investments and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Fund and its shareholders as the Fund’s assets grow. In their deliberations, the Trustees did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund. In connection with its deliberations, the Board considered information provided by PGIM Investments throughout the year at regular Board meetings, presentations
1 | PGIM US Real Estate Fund is a series of Prudential Investment Portfolios 12. |
PGIM US Real Estate Fund |
Approval of Advisory Agreements (continued)
from portfolio managers and other information, as well as information furnished at or in advance of the meetings on May 27, 2020 and on June 9-11, 2020.
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 (through its PGIM Real Estate unit), and PGIM RE (UK), which serve as the Fund’s subadvisers 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, PGIM Real Estate and PGIM RE (UK). The Board noted that PGIM Real Estate and PGIM RE (UK) are affiliated with PGIM Investments. The Board considered the services provided by PGIM Investments, including but not limited to the oversight of the subadvisers for the Fund, as well as the provision of fund recordkeeping, compliance and other services to the Fund, 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 PGIM RE (UK), 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 subadvisers, 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, PGIM Real Estate and PGIM RE (UK), and also considered the qualifications, backgrounds and responsibilities of PGIM Real Estate’s and PGIM RE (UK)’s portfolio managers who are responsible for the day-to-day management of the Fund’s portfolio. The Board was
Visit our website at pgim.com/investments |
provided with information pertaining to PGIM Investments’, PGIM Real Estate’s and PGIM RE (UK)’s organizational structure, senior management, investment operations, and other relevant information pertaining to PGIM Investments, PGIM Real Estate and PGIM RE (UK). 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 PGIM RE (UK).
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 PGIM RE (UK), 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 PGIM RE (UK) 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, 2019. 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 PGIM RE (UK)
The Board considered potential ancillary benefits that might be received by PGIM Investments, PGIM Real Estate, PGIM RE (UK) 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 PGIM RE (UK) 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 PGIM RE (UK) 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-, three-, and five-year periods ended December 31, 2019.
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, 2019. 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
Visit our website at pgim.com/investments |
determined by Broadridge, an independent provider of mutual fund data. In certain circumstances, PGIM Investments also may have provided supplemental Peer Universe or Peer Group information for reasons addressed with the Board. The comparisons placed the Fund in various quartiles 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 | 1st Quartile | 1st Quartile | N/A | |||||
Actual Management Fees: 1st Quartile | ||||||||
Net Total Expenses: 1st Quartile |
• | The Board noted that the Fund outperformed its benchmark index over all 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 C shares, 1.00% for Class Z shares and 1.00% for Class R6 shares through July 31, 2021. |
• | 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 | pgim.com/investments |
PROXY VOTING |
The Board of Trustees of the Fund has delegated to the Fund’s subadvisers the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the 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 • Claudia DiGiacomo, Chief Legal Officer • Dino Capasso, Chief Compliance Officer • Charles H. Smith, Anti-Money Laundering Compliance Officer • Andrew R. French, Secretary • Melissa Gonzalez, Assistant Secretary • Diana N. Huffman, Assistant Secretary • Kelly A. Coyne, Assistant Secretary • Patrick McGuinness, 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 | ||
| ||||
SUBADVISERS | PGIM Real Estate | 7 Giralda Farms Madison, NJ 07940 | ||
PGIM Real Estate (UK) Limited | Grand Buildings 1-3 Strand Trafalgar Square, London WC2N-5HR United Kingdom | |||
| ||||
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 | PricewaterhouseCoopers LLP | 300 Madison Avenue New York, NY 10017 | ||
| ||||
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 at pgim.com/investments or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go to pgim.com/investments/resource/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 that Trustee at 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 for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT filings are available on the Commission’s website 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 | C | Z | R6 | ||||
NASDAQ | PJEAX | PJECX | PJEZX | PJEQX | ||||
CUSIP | 744336603 | 744336801 | 744336884 | 744336751 |
MF209E2
PGIM QMA LARGE-CAP CORE EQUITY PLUS FUND
SEMIANNUAL REPORT
SEPTEMBER 30, 2020
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 (pgim.com/investments), 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 pgim.com/investments/resource/edelivery
3 | ||||
4 | ||||
7 | ||||
9 | ||||
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 are for the period covered by this report and are subject to change thereafter.
The accompanying financial statements as of September 30, 2020 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. © 2020 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 pgim.com/investments |
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 the six-month period ended September 30, 2020.
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 16, 2020
PGIM QMA Large-Cap Core Equity PLUS Fund | 3 |
Performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at pgim.com/investments or by calling (800) 225-1852.
Average Annual Total Returns as of 9/30/20 | ||||||
(without sales charges) | (with sales charges) | |||||
Six Months* (%) | One Year (%) | Since Inception (%) | ||||
Class A | 22.02 | –8.79 | 0.92 (9/19/17) | |||
Class C | 21.40 | –5.21 | 2.00 (9/19/17) | |||
Class Z | 22.04 | –3.26 | 2.99 (9/19/17) | |||
Class R6 | 22.13 | –3.26 | 3.05 (9/19/17) | |||
S&P 500 Index | 31.27 | 15.14 | 12.27 |
*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.
4 | Visit our website at pgim.com/investments |
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. The returns for the Index would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes that may be paid by an investor.
PGIM QMA Large-Cap Core Equity PLUS Fund | 5 |
Your Fund’s Performance (continued)
Presentation of Fund Holdings as of 9/30/20
Ten Largest Holdings - Long | Line of Business | % of Net Assets | ||||
Apple, Inc. | Technology Hardware, Storage & Peripherals | 7.5% | ||||
Microsoft Corp. | Software | 6.5% | ||||
Amazon.com, Inc. | Internet & Direct Marketing Retail | 5.1% | ||||
Facebook, Inc. (Class A Stock) | Interactive Media & Services | 3.0% | ||||
NVIDIA Corp. | Semiconductors & Semiconductor Equipment | 2.0% | ||||
Alphabet, Inc. (Class A Stock) | Interactive Media & Services | 1.8% | ||||
Procter & Gamble Co. (The) | Household Products | 1.8% | ||||
UnitedHealth Group, Inc. | Health Care Providers & Services | 1.7% | ||||
Adobe, Inc. | Software | 1.6% | ||||
Johnson & Johnson | Pharmaceuticals | 1.5% | ||||
Ten Largest Holdings - Short | Line of Business | % of Net Assets | ||||
Penumbra, Inc. | Health Care Equipment & Supplies | (1.2)% | ||||
Cree, Inc. | Semiconductors & Semiconductor Equipment | (0.9)% | ||||
Alteryx, Inc. (Class A Stock) | Software | (0.9)% | ||||
Guardant Health, Inc. | Health Care Providers & Services | (0.8)% | ||||
Albemarle Corp. | Chemicals | (0.7)% | ||||
Blueprint Medicines Corp. | Biotechnology | (0.7)% | ||||
Hasbro, Inc. | Leisure Products | (0.7)% | ||||
Carvana Co. | Specialty Retail | (0.7)% | ||||
Datadog, Inc. (Class A Stock) | Software | (0.7)% | ||||
Everbridge, Inc. | Software | (0.6)% |
Holdings reflect only long-term Investments and are subject to change.
6 | Visit our website at pgim.com/investments |
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, 2020. The example is for illustrative purposes only; you should consult the Fund’s 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 | 7 |
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, 2020 | Ending Account Value September 30, 2020 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,220.20 | 1.48 | % | $ | 8.24 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,017.65 | 1.48 | % | $ | 7.49 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,214.00 | 2.22 | % | $ | 12.32 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,013.94 | 2.22 | % | $ | 11.21 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,220.40 | 1.22 | % | $ | 6.79 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,018.95 | 1.22 | % | $ | 6.17 | ||||||||||
Class R6 | Actual | $ | 1,000.00 | $ | 1,221.30 | 1.23 | % | $ | 6.85 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,018.90 | 1.23 | % | $ | 6.23 |
*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, 2020, and divided by the 365 days in the Fund’s fiscal year ending March 31, 2021 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
8 | Visit our website at pgim.com/investments |
Schedule of Investments (unaudited)
as of September 30, 2020
Description | Shares | Value | ||||||
LONG-TERM INVESTMENTS 130.0% | ||||||||
COMMON STOCKS 129.6% | ||||||||
Aerospace & Defense 2.8% | ||||||||
| ||||||||
General Dynamics Corp. | 890 | $ | 123,203 | |||||
Huntington Ingalls Industries, Inc. | 300 | 42,225 | ||||||
Lockheed Martin Corp. | 510 | 195,473 | ||||||
Northrop Grumman Corp. | 300 | 94,647 | ||||||
Raytheon Technologies Corp. | 2,680 | 154,207 | ||||||
|
| |||||||
609,755 | ||||||||
Air Freight & Logistics 0.4% | ||||||||
| ||||||||
Hub Group, Inc. (Class A Stock)* | 1,600 | 80,312 | ||||||
Automobiles 0.7% | ||||||||
| ||||||||
General Motors Co. | 5,300 | 156,827 | ||||||
Banks 3.0% | ||||||||
| ||||||||
Associated Banc-Corp. | 1,000 | 12,620 | ||||||
Bancorp, Inc. (The)* | 5,800 | 50,112 | ||||||
Citigroup, Inc. | 4,200 | 181,062 | ||||||
Civista Bancshares, Inc. | 800 | 10,016 | ||||||
Customers Bancorp, Inc.* | 10,800 | 120,960 | ||||||
Equity Bancshares, Inc. (Class A Stock)* | 2,800 | 43,400 | ||||||
Esquire Financial Holdings, Inc.* | 600 | 9,000 | ||||||
Financial Institutions, Inc. | 2,300 | 35,420 | ||||||
First Internet Bancorp | 700 | 10,311 | ||||||
HBT Financial, Inc. | 4,300 | 48,246 | ||||||
MainStreet Bancshares, Inc.* | 600 | 7,344 | ||||||
Midland States Bancorp, Inc. | 4,200 | 53,970 | ||||||
Southern National Bancorp of Virginia, Inc. | 8,400 | 72,912 | ||||||
|
| |||||||
655,373 | ||||||||
Beverages 1.5% | ||||||||
| ||||||||
Keurig Dr. Pepper, Inc. | 4,600 | 126,960 | ||||||
Monster Beverage Corp.* | 600 | 48,120 | ||||||
PepsiCo, Inc. | 1,180 | 163,548 | ||||||
|
| |||||||
338,628 | ||||||||
Biotechnology 5.8% | ||||||||
| ||||||||
AbbVie, Inc. | 1,400 | 122,626 | ||||||
Alexion Pharmaceuticals, Inc.* | 1,260 | 144,182 | ||||||
Amgen, Inc. | 520 | 132,163 | ||||||
Biogen, Inc.* | 540 | 153,187 |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 9 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Biotechnology (cont’d.) | ||||||||
| ||||||||
Emergent BioSolutions, Inc.* | 600 | $ | 61,998 | |||||
Gilead Sciences, Inc. | 2,800 | 176,932 | ||||||
Incyte Corp.* | 900 | 80,766 | ||||||
Neurocrine Biosciences, Inc.* | 400 | 38,464 | ||||||
Regeneron Pharmaceuticals, Inc.* | 300 | 167,934 | ||||||
Vertex Pharmaceuticals, Inc.* | 740 | 201,369 | ||||||
|
| |||||||
1,279,621 | ||||||||
Building Products 1.2% | ||||||||
| ||||||||
Masco Corp. | 2,000 | 110,260 | ||||||
UFP Industries, Inc. | 2,740 | 154,837 | ||||||
|
| |||||||
265,097 | ||||||||
Capital Markets 2.3% | ||||||||
| ||||||||
Ameriprise Financial, Inc. | 960 | 147,946 | ||||||
Federated Hermes, Inc. | 4,800 | 103,248 | ||||||
Goldman Sachs Group, Inc. (The) | 200 | 40,194 | ||||||
Silvercrest Asset Management Group, Inc. (Class A Stock) | 3,100 | 32,426 | ||||||
Stifel Financial Corp. | 1,800 | 91,008 | ||||||
Virtus Investment Partners, Inc. | 600 | 83,190 | ||||||
|
| |||||||
498,012 | ||||||||
Chemicals 2.6% | ||||||||
| ||||||||
AdvanSix, Inc.* | 900 | 11,592 | ||||||
Corteva, Inc. | 4,400 | 126,764 | ||||||
DuPont de Nemours, Inc. | 600 | 33,288 | ||||||
LyondellBasell Industries NV (Class A Stock) | 1,300 | 91,637 | ||||||
Orion Engineered Carbons SA (Germany) | 2,000 | 25,020 | ||||||
PQ Group Holdings, Inc.* | 1,800 | 18,468 | ||||||
Sherwin-Williams Co. (The) | 200 | 139,348 | ||||||
Stepan Co. | 800 | 87,200 | ||||||
W.R. Grace & Co. | 800 | 32,232 | ||||||
|
| |||||||
565,549 | ||||||||
Commercial Services & Supplies 0.3% | ||||||||
| ||||||||
Deluxe Corp. | 800 | 20,584 | ||||||
Herman Miller, Inc. | 1,700 | 51,272 | ||||||
|
| |||||||
71,856 |
See Notes to Financial Statements.
10 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Communications Equipment 1.6% | ||||||||
| ||||||||
Calix, Inc.* | 6,800 | $ | 120,904 | |||||
Cisco Systems, Inc. | 4,000 | 157,560 | ||||||
Clearfield, Inc.* | 2,000 | 40,340 | ||||||
NetScout Systems, Inc.* | 1,900 | 41,477 | ||||||
|
| |||||||
360,281 | ||||||||
Construction & Engineering 0.3% | ||||||||
| ||||||||
EMCOR Group, Inc. | 700 | 47,397 | ||||||
Primoris Services Corp. | 600 | 10,824 | ||||||
|
| |||||||
58,221 | ||||||||
Construction Materials 0.1% | ||||||||
| ||||||||
Forterra, Inc.* | 1,200 | 14,184 | ||||||
Consumer Finance 0.5% | ||||||||
| ||||||||
OneMain Holdings, Inc. | 1,100 | 34,375 | ||||||
Regional Management Corp.* | 4,500 | 74,970 | ||||||
|
| |||||||
109,345 | ||||||||
Containers & Packaging 0.1% | ||||||||
| ||||||||
Westrock Co. | 500 | 17,370 | ||||||
Diversified Consumer Services 0.5% | ||||||||
| ||||||||
Strategic Education, Inc. | 1,200 | 109,764 | ||||||
Diversified Financial Services 1.1% | ||||||||
| ||||||||
Berkshire Hathaway, Inc. (Class B Stock)* | 900 | 191,646 | ||||||
Marlin Business Services Corp. | 5,800 | 40,890 | ||||||
|
| |||||||
232,536 | ||||||||
Diversified Telecommunication Services 2.6% | ||||||||
| ||||||||
AT&T, Inc.(u) | 9,100 | 259,441 | ||||||
Verizon Communications, Inc.(u) | 5,300 | 315,297 | ||||||
|
| |||||||
574,738 | ||||||||
Electric Utilities 1.2% | ||||||||
| ||||||||
Exelon Corp. | 3,600 | 128,736 |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 11 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Electric Utilities (cont’d.) | ||||||||
| ||||||||
NRG Energy, Inc. | 3,500 | $ | 107,590 | |||||
Otter Tail Corp. | 700 | 25,319 | ||||||
|
| |||||||
261,645 | ||||||||
Electrical Equipment 0.3% | ||||||||
| ||||||||
Acuity Brands, Inc. | 760 | 77,786 | ||||||
Electronic Equipment, Instruments & Components 0.5% | ||||||||
| ||||||||
Bel Fuse, Inc. (Class B Stock) | 800 | 8,544 | ||||||
Jabil, Inc. | 300 | 10,278 | ||||||
Kimball Electronics, Inc.* | 900 | 10,404 | ||||||
PC Connection, Inc. | 400 | 16,424 | ||||||
Sanmina Corp.* | 700 | 18,935 | ||||||
ScanSource, Inc.* | 700 | 13,881 | ||||||
SYNNEX Corp. | 300 | 42,018 | ||||||
|
| |||||||
120,484 | ||||||||
Energy Equipment & Services 0.2% | ||||||||
| ||||||||
TechnipFMC PLC (United Kingdom) | 5,900 | 37,229 | ||||||
Entertainment 2.2% | ||||||||
| ||||||||
Activision Blizzard, Inc. | 2,200 | 178,090 | ||||||
Electronic Arts, Inc.* | 1,100 | 143,451 | ||||||
Lions Gate Entertainment Corp. (Class B Stock)* | 15,500 | 135,160 | ||||||
Spotify Technology SA* | 100 | 24,257 | ||||||
|
| |||||||
480,958 | ||||||||
Equity Real Estate Investment Trusts (REITs) 2.4% | ||||||||
| ||||||||
Apple Hospitality REIT, Inc. | 12,000 | 115,320 | ||||||
CatchMark Timber Trust, Inc. (Class A Stock) | 4,300 | 38,399 | ||||||
Columbia Property Trust, Inc. | 7,700 | 84,007 | ||||||
CoreCivic, Inc. | 9,800 | 78,400 | ||||||
Franklin Street Properties Corp. | 9,700 | 35,502 | ||||||
Gaming & Leisure Properties, Inc. | 1,012 | 37,373 | ||||||
Paramount Group, Inc. | 2,600 | 18,408 | ||||||
Weyerhaeuser Co. | 4,500 | 128,340 | ||||||
|
| |||||||
535,749 | ||||||||
Food & Staples Retailing 1.4% | ||||||||
| ||||||||
Kroger Co. (The) | 3,300 | 111,903 |
See Notes to Financial Statements.
12 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Food & Staples Retailing (cont’d.) | ||||||||
| ||||||||
Walgreens Boots Alliance, Inc. | 2,500 | $ | 89,800 | |||||
Walmart, Inc. | 700 | 97,937 | ||||||
|
| |||||||
299,640 | ||||||||
Food Products 2.4% | ||||||||
| ||||||||
Archer-Daniels-Midland Co. | 2,900 | 134,821 | ||||||
Conagra Brands, Inc. | 2,600 | 92,846 | ||||||
General Mills, Inc. | 600 | 37,008 | ||||||
Kraft Heinz Co. (The) | 4,200 | 125,790 | ||||||
Pilgrim’s Pride Corp.* | 1,800 | 26,937 | ||||||
Tyson Foods, Inc. (Class A Stock) | 1,900 | 113,012 | ||||||
|
| |||||||
530,414 | ||||||||
Gas Utilities 0.4% | ||||||||
| ||||||||
UGI Corp. | 2,800 | 92,344 | ||||||
Health Care Equipment & Supplies 7.4% | ||||||||
| ||||||||
Abbott Laboratories | 2,200 | 239,426 | ||||||
Baxter International, Inc. | 600 | 48,252 | ||||||
Becton, Dickinson & Co. | 200 | 46,536 | ||||||
Danaher Corp. | 900 | 193,797 | ||||||
Edwards Lifesciences Corp.* | 2,400 | 191,568 | ||||||
Hologic, Inc.* | 1,900 | 126,293 | ||||||
Medtronic PLC | 2,000 | 207,840 | ||||||
Meridian Bioscience, Inc.* | 4,300 | 73,014 | ||||||
Quidel Corp.* | 600 | 131,628 | ||||||
ResMed, Inc. | 200 | 34,286 | ||||||
STERIS PLC | 830 | 146,238 | ||||||
Utah Medical Products, Inc. | 600 | 47,922 | ||||||
West Pharmaceutical Services, Inc. | 500 | 137,450 | ||||||
|
| |||||||
1,624,250 | ||||||||
Health Care Providers & Services 5.4% | ||||||||
| ||||||||
Anthem, Inc. | 600 | 161,154 | ||||||
Cigna Corp. | 932 | 157,890 | ||||||
CVS Health Corp. | 2,300 | 134,320 | ||||||
Humana, Inc. | 500 | 206,945 | ||||||
McKesson Corp. | 300 | 44,679 | ||||||
UnitedHealth Group, Inc.(u) | 1,210 | 377,242 | ||||||
Universal Health Services, Inc. (Class B Stock) | 900 | 96,318 | ||||||
|
| |||||||
1,178,548 |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 13 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Hotels, Restaurants & Leisure 1.1% | ||||||||
| ||||||||
Biglari Holdings, Inc. (Class B Stock)* | 200 | $ | 17,802 | |||||
Domino’s Pizza, Inc. | 200 | 85,056 | ||||||
McDonald’s Corp. | 600 | 131,694 | ||||||
Wyndham Destinations, Inc. | 300 | 9,228 | ||||||
|
| |||||||
243,780 | ||||||||
Household Durables 0.8% | ||||||||
| ||||||||
D.R. Horton, Inc. | 1,700 | 128,571 | ||||||
NVR, Inc.* | 10 | 40,831 | ||||||
|
| |||||||
169,402 | ||||||||
Household Products 2.0% | ||||||||
| ||||||||
Procter & Gamble Co. (The)(u) | 2,800 | 389,172 | ||||||
Reynolds Consumer Products, Inc. | 1,800 | 55,116 | ||||||
|
| |||||||
444,288 | ||||||||
Independent Power & Renewable Electricity Producers 0.5% | ||||||||
| ||||||||
Atlantic Power Corp.* | 10,400 | 20,384 | ||||||
Vistra Corp. | 5,200 | 98,072 | ||||||
|
| |||||||
118,456 | ||||||||
Industrial Conglomerates 0.4% | ||||||||
| ||||||||
3M Co. | 500 | 80,090 | ||||||
Insurance 1.8% | ||||||||
| ||||||||
Aflac, Inc. | 1,000 | 36,350 | ||||||
Allstate Corp. (The) | 1,400 | 131,796 | ||||||
Mercury General Corp. | 200 | 8,274 | ||||||
MetLife, Inc. | 3,500 | 130,095 | ||||||
Stewart Information Services Corp. | 1,500 | 65,595 | ||||||
Universal Insurance Holdings, Inc. | 1,300 | 17,992 | ||||||
|
| |||||||
390,102 | ||||||||
Interactive Media & Services 6.1% | ||||||||
| ||||||||
Alphabet, Inc. (Class A Stock)*(u) | 278 | 407,437 | ||||||
Alphabet, Inc. (Class C Stock)*(u) | 191 | 280,693 | ||||||
Facebook, Inc. (Class A Stock)*(u) | 2,520 | 659,988 | ||||||
|
| |||||||
1,348,118 |
See Notes to Financial Statements.
14 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Internet & Direct Marketing Retail 6.4% | ||||||||
| ||||||||
Amazon.com, Inc.*(u) | 355 | $ | 1,117,799 | |||||
eBay, Inc. | 2,500 | 130,250 | ||||||
Qurate Retail, Inc. (Class A Stock) | 4,200 | 30,156 | ||||||
Stamps.com, Inc.* | 500 | 120,475 | ||||||
|
| |||||||
1,398,680 | ||||||||
IT Services 5.5% | ||||||||
| ||||||||
Accenture PLC (Class A Stock) | 1,090 | 246,329 | ||||||
Amdocs Ltd. | 1,700 | 97,597 | ||||||
CACI International, Inc. (Class A Stock)* | 500 | 106,580 | ||||||
Cognizant Technology Solutions Corp. (Class A Stock) | 2,400 | 166,608 | ||||||
EPAM Systems, Inc.* | 200 | 64,656 | ||||||
Euronet Worldwide, Inc.* | 400 | 36,440 | ||||||
Hackett Group, Inc. (The) | 9,800 | 109,564 | ||||||
International Business Machines Corp. | 400 | 48,668 | ||||||
International Money Express, Inc.* | 7,200 | 103,428 | ||||||
KBR, Inc. | 3,300 | 73,788 | ||||||
Perspecta, Inc. | 4,300 | 83,635 | ||||||
Sykes Enterprises, Inc.* | 700 | 23,947 | ||||||
Visa, Inc. (Class A Stock) | 205 | 40,994 | ||||||
|
| |||||||
1,202,234 | ||||||||
Leisure Products 1.2% | ||||||||
| ||||||||
American Outdoor Brands, Inc.* | 675 | 8,795 | ||||||
Brunswick Corp. | 600 | 35,346 | ||||||
Malibu Boats, Inc. (Class A Stock)* | 1,200 | 59,472 | ||||||
Polaris, Inc. | 600 | 56,604 | ||||||
Smith & Wesson Brands, Inc. | 6,600 | 102,432 | ||||||
|
| |||||||
262,649 | ||||||||
Life Sciences Tools & Services 2.1% | ||||||||
| ||||||||
Charles River Laboratories International, Inc.* | 300 | 67,935 | ||||||
IQVIA Holdings, Inc.* | 1,030 | 162,359 | ||||||
Thermo Fisher Scientific, Inc. | 520 | 229,590 | ||||||
|
| |||||||
459,884 | ||||||||
Machinery 0.9% | ||||||||
| ||||||||
AGCO Corp. | 200 | 14,854 | ||||||
Crane Co. | 300 | 15,039 | ||||||
Gates Industrial Corp. PLC* | 9,900 | 110,088 |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 15 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Machinery (cont’d.) | ||||||||
| ||||||||
Oshkosh Corp. | 800 | $ | 58,800 | |||||
Otis Worldwide Corp. | 140 | 8,739 | ||||||
|
| |||||||
207,520 | ||||||||
Marine 0.1% | ||||||||
| ||||||||
Matson, Inc. | 800 | 32,072 | ||||||
Media 0.8% | ||||||||
| ||||||||
Discovery, Inc. (Class C Stock)* | 700 | 13,720 | ||||||
Gray Television, Inc.* | 5,100 | 70,227 | ||||||
Nexstar Media Group, Inc. (Class A Stock) | 200 | 17,986 | ||||||
ViacomCBS, Inc. (Class B Stock) | 2,848 | 79,773 | ||||||
|
| |||||||
181,706 | ||||||||
Metals & Mining 1.2% | ||||||||
| ||||||||
Newmont Corp. | 2,400 | 152,280 | ||||||
Steel Dynamics, Inc. | 2,600 | 74,438 | ||||||
Worthington Industries, Inc. | 700 | 28,546 | ||||||
|
| |||||||
255,264 | ||||||||
Mortgage Real Estate Investment Trusts (REITs) 0.8% | ||||||||
| ||||||||
Colony Credit Real Estate, Inc. | 22,000 | 108,020 | ||||||
Ready Capital Corp. | 6,200 | 69,440 | ||||||
|
| |||||||
177,460 | ||||||||
Multiline Retail 0.3% | ||||||||
| ||||||||
Dollar General Corp. | 300 | 62,886 | ||||||
Multi-Utilities 1.7% | ||||||||
| ||||||||
MDU Resources Group, Inc. | 4,900 | 110,250 | ||||||
Public Service Enterprise Group, Inc. | 2,400 | 131,784 | ||||||
Sempra Energy | 1,200 | 142,032 | ||||||
|
| |||||||
384,066 | ||||||||
Oil, Gas & Consumable Fuels 1.2% | ||||||||
| ||||||||
Ardmore Shipping Corp. (Ireland) | 20,200 | 71,912 | ||||||
Cimarex Energy Co. | 1,600 | 38,928 | ||||||
International Seaways, Inc. | 3,000 | 43,830 |
See Notes to Financial Statements.
16 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Oil, Gas & Consumable Fuels (cont’d.) | ||||||||
| ||||||||
Kinder Morgan, Inc. | 8,400 | $ | 103,572 | |||||
Teekay Tankers Ltd. (Bermuda) (Class A Stock)* | 1,200 | 13,008 | ||||||
|
| |||||||
271,250 | ||||||||
Paper & Forest Products 0.5% | ||||||||
| ||||||||
Boise Cascade Co. | 2,600 | 103,792 | ||||||
Personal Products 0.3% | ||||||||
| ||||||||
Nu Skin Enterprises, Inc. (Class A Stock) | 1,400 | 70,126 | ||||||
Pharmaceuticals 5.0% | ||||||||
| ||||||||
Bristol-Myers Squibb Co. | 4,100 | 247,189 | ||||||
Eli Lilly & Co. | 1,400 | 207,228 | ||||||
Johnson & Johnson(u) | 2,200 | 327,536 | ||||||
Merck & Co., Inc.(u) | 3,700 | 306,915 | ||||||
Mylan NV* | 500 | 7,415 | ||||||
Supernus Pharmaceuticals, Inc.* | 700 | 14,588 | ||||||
|
| |||||||
1,110,871 | ||||||||
Professional Services 0.4% | ||||||||
| ||||||||
Barrett Business Services, Inc. | 900 | 47,196 | ||||||
Kforce, Inc. | 1,200 | 38,604 | ||||||
|
| |||||||
85,800 | ||||||||
Road & Rail 1.2% | ||||||||
| ||||||||
CSX Corp. | 1,800 | 139,806 | ||||||
Schneider National, Inc. (Class B Stock) | 1,400 | 34,622 | ||||||
Werner Enterprises, Inc. | 2,400 | 100,776 | ||||||
|
| |||||||
275,204 | ||||||||
Semiconductors & Semiconductor Equipment 6.6% | ||||||||
| ||||||||
Applied Materials, Inc. | 2,900 | 172,405 | ||||||
FormFactor, Inc.* | 4,300 | 107,199 | ||||||
Intel Corp.(u) | 6,000 | 310,680 | ||||||
KLA Corp. | 400 | 77,496 | ||||||
Micron Technology, Inc.* | 1,000 | 46,960 | ||||||
MKS Instruments, Inc. | 1,000 | 109,230 | ||||||
NVIDIA Corp.(u) | 800 | 432,976 |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 17 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Semiconductors & Semiconductor Equipment (cont’d.) | ||||||||
| ||||||||
Photronics, Inc.* | 7,500 | $ | 74,700 | |||||
Semtech Corp.* | 2,100 | 111,216 | ||||||
|
| |||||||
1,442,862 | ||||||||
Software 15.7% | ||||||||
| ||||||||
A10 Networks, Inc.* | 7,700 | 49,049 | ||||||
Adobe, Inc.*(u) | 700 | 343,301 | ||||||
Autodesk, Inc.* | 500 | 115,505 | ||||||
Cadence Design Systems, Inc.* | 1,300 | 138,619 | ||||||
ChannelAdvisor Corp.* | 1,900 | 27,493 | ||||||
eGain Corp.* | 2,300 | 32,591 | ||||||
Fortinet, Inc.* | 1,100 | 129,591 | ||||||
Intuit, Inc. | 680 | 221,823 | ||||||
Manhattan Associates, Inc.* | 400 | 38,196 | ||||||
Microsoft Corp.(u) | 6,800 | 1,430,244 | ||||||
MicroStrategy, Inc. (Class A Stock)* | 800 | 120,448 | ||||||
Mitek Systems, Inc.* | 1,100 | 14,014 | ||||||
OneSpan, Inc.* | 5,400 | 113,184 | ||||||
Oracle Corp.(u) | 4,200 | 250,740 | ||||||
Paycom Software, Inc.* | 100 | 31,130 | ||||||
Progress Software Corp. | 200 | 7,336 | ||||||
ServiceNow, Inc.* | 200 | 97,000 | ||||||
SolarWinds Corp.* | 900 | 18,306 | ||||||
SS&C Technologies Holdings, Inc. | 1,200 | 72,624 | ||||||
Synopsys, Inc.* | 900 | 192,582 | ||||||
Telenav, Inc.* | 3,000 | 10,800 | ||||||
|
| |||||||
3,454,576 | ||||||||
Specialty Retail 4.4% | ||||||||
| ||||||||
Asbury Automotive Group, Inc.* | 1,500 | 146,175 | ||||||
AutoNation, Inc.* | 1,000 | 52,930 | ||||||
Best Buy Co., Inc. | 300 | 33,387 | ||||||
Hibbett Sports, Inc.* | 1,000 | 39,220 | ||||||
Home Depot, Inc. (The) | 800 | 222,168 | ||||||
Lowe’s Cos., Inc.(u) | 1,600 | 265,376 | ||||||
O’Reilly Automotive, Inc.* | 400 | 184,432 | ||||||
Sonic Automotive, Inc. (Class A Stock) | 900 | 36,144 | ||||||
|
| |||||||
979,832 | ||||||||
Technology Hardware, Storage & Peripherals 7.5% | ||||||||
| ||||||||
Apple, Inc.(u) | 14,200 | 1,644,502 |
See Notes to Financial Statements.
18 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Thrifts & Mortgage Finance 0.2% | ||||||||
| ||||||||
Merchants Bancorp | 800 | $ | 15,768 | |||||
OP Bancorp | 1,600 | 9,152 | ||||||
Southern Missouri Bancorp, Inc. | 800 | 18,864 | ||||||
|
| |||||||
43,784 | ||||||||
Tobacco 0.8% | ||||||||
| ||||||||
Altria Group, Inc. | 4,500 | 173,880 | ||||||
Trading Companies & Distributors 0.9% | ||||||||
| ||||||||
Foundation Building Materials, Inc.* | 7,200 | 113,184 | ||||||
GMS, Inc.* | 4,000 | 96,400 | ||||||
|
| |||||||
209,584 | ||||||||
Water Utilities 0.0% | ||||||||
| ||||||||
Artesian Resources Corp. (Class A Stock) | 200 | 6,894 | ||||||
|
| |||||||
TOTAL COMMON STOCKS | 28,528,130 | |||||||
|
| |||||||
EXCHANGE-TRADED FUND 0.4% | ||||||||
SPDR S&P 500 ETF Trust | 240 | 80,373 | ||||||
|
| |||||||
PREFERRED STOCK 0.0% | ||||||||
Internet & Direct Marketing Retail | ||||||||
| ||||||||
Qurate Retail, Inc., 8.000%, Maturity Date 03/15/2031* | 126 | 12,411 | ||||||
|
| |||||||
TOTAL LONG-TERM INVESTMENTS | 28,620,914 | |||||||
|
| |||||||
SHORT-TERM INVESTMENT 0.1% | ||||||||
AFFILIATED MUTUAL FUND | ||||||||
PGIM Core Ultra Short Bond Fund | 23,562 | 23,562 | ||||||
|
| |||||||
TOTAL INVESTMENTS, BEFORE SECURITIES SOLD SHORT | 28,644,476 | |||||||
|
|
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 19 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Shares | Value | ||||||
SECURITIES SOLD SHORT (30.1)% | ||||||||
COMMON STOCKS | ||||||||
Aerospace & Defense (0.5)% | ||||||||
| ||||||||
Kratos Defense & Security Solutions, Inc.* | 3,700 | $ | (71,336 | ) | ||||
Spirit AeroSystems Holdings, Inc. (Class A Stock) | 1,900 | (35,929 | ) | |||||
|
| |||||||
(107,265 | ) | |||||||
Banks (0.3)% | ||||||||
| ||||||||
Commerce Bancshares, Inc. | 315 | (17,731 | ) | |||||
Cullen/Frost Bankers, Inc. | 700 | (44,765 | ) | |||||
|
| |||||||
(62,496 | ) | |||||||
Biotechnology (3.0)% | ||||||||
| ||||||||
Biohaven Pharmaceutical Holding Co. Ltd.* | 1,800 | (117,018 | ) | |||||
Bioxcel Therapeutics, Inc.* | 700 | (30,352 | ) | |||||
Blueprint Medicines Corp.* | 1,700 | (157,590 | ) | |||||
Epizyme, Inc.* | 3,100 | (36,983 | ) | |||||
Global Blood Therapeutics, Inc.* | 1,600 | (88,224 | ) | |||||
REGENXBIO, Inc.* | 600 | (16,512 | ) | |||||
TG Therapeutics, Inc.* | 1,500 | (40,140 | ) | |||||
Twist Bioscience Corp.* | 1,300 | (98,761 | ) | |||||
Vericel Corp.* | 1,300 | (24,089 | ) | |||||
Y-mAbs Therapeutics, Inc.* | 1,300 | (49,907 | ) | |||||
|
| |||||||
(659,576 | ) | |||||||
Building Products (0.1)% | ||||||||
| ||||||||
AAON, Inc. | 200 | (12,050 | ) | |||||
Capital Markets (0.3)% | ||||||||
| ||||||||
Hamilton Lane, Inc. (Class A Stock) | 1,000 | (64,590 | ) | |||||
Chemicals (1.3)% | ||||||||
| ||||||||
Albemarle Corp. | 1,800 | (160,704 | ) | |||||
Livent Corp.* | 1,400 | (12,558 | ) | |||||
Quaker Chemical Corp. | 600 | (107,826 | ) | |||||
|
| |||||||
(281,088 | ) | |||||||
Commercial Services & Supplies (0.4)% | ||||||||
| ||||||||
Stericycle, Inc.* | 1,500 | (94,590 | ) |
See Notes to Financial Statements.
20 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Communications Equipment (0.1)% | ||||||||
| ||||||||
Harmonic, Inc.* | 2,900 | $ | (16,182 | ) | ||||
Infinera Corp.* | 2,100 | (12,936 | ) | |||||
|
| |||||||
(29,118 | ) | |||||||
Construction & Engineering (0.2)% | ||||||||
| ||||||||
Ameresco, Inc. (Class A Stock)* | 900 | (30,060 | ) | |||||
NV5 Global, Inc.* | 300 | (15,831 | ) | |||||
|
| |||||||
(45,891 | ) | |||||||
Diversified Telecommunication Services (0.2)% | ||||||||
| ||||||||
Bandwidth, Inc. (Class A Stock)* | 300 | (52,371 | ) | |||||
Electrical Equipment (0.4)% | ||||||||
| ||||||||
Plug Power, Inc.* | 6,000 | (80,460 | ) | |||||
Electronic Equipment, Instruments & Components (0.7)% | ||||||||
| ||||||||
II-VI, Inc.* | 2,900 | (117,624 | ) | |||||
Napco Security Technologies, Inc.* | 600 | (14,100 | ) | |||||
nLight, Inc.* | 1,400 | (32,872 | ) | |||||
|
| |||||||
(164,596 | ) | |||||||
Entertainment (0.6)% | ||||||||
| ||||||||
Roku, Inc.* | 700 | (132,160 | ) | |||||
Food & Staples Retailing (0.0)% | ||||||||
| ||||||||
Chefs’ Warehouse, Inc. (The)* | 11 | (160 | ) | |||||
Food Products (0.7)% | ||||||||
| ||||||||
Beyond Meat, Inc.* | 100 | (16,606 | ) | |||||
Hostess Brands, Inc.* | 3,800 | (46,854 | ) | |||||
Landec Corp.* | 900 | (8,748 | ) | |||||
Limoneira Co. | 600 | (8,580 | ) | |||||
Simply Good Foods Co. (The)* | 3,000 | (66,150 | ) | |||||
|
| |||||||
(146,938 | ) | |||||||
Health Care Equipment & Supplies (3.3)% | ||||||||
| ||||||||
Axonics Modulation Technologies, Inc.* | 1,200 | (61,248 | ) | |||||
Glaukos Corp.* | 1,400 | (69,328 | ) | |||||
Heska Corp.* | 300 | (29,637 | ) | |||||
iRhythm Technologies, Inc.* | 300 | (71,433 | ) |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 21 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Health Care Equipment & Supplies (cont’d.) | ||||||||
| ||||||||
Misonix, Inc.* | 600 | $ | (7,038 | ) | ||||
Nevro Corp.* | 400 | (55,720 | ) | |||||
OrthoPediatrics Corp.* | 600 | (27,552 | ) | |||||
Penumbra, Inc.* | 1,300 | (252,694 | ) | |||||
Shockwave Medical, Inc.* | 1,000 | (75,800 | ) | |||||
Silk Road Medical, Inc.* | 700 | (47,047 | ) | |||||
Tactile Systems Technology, Inc.* | 600 | (21,954 | ) | |||||
TransMedics Group, Inc.* | 800 | (11,024 | ) | |||||
|
| |||||||
(730,475 | ) | |||||||
Health Care Providers & Services (2.1)% | ||||||||
| ||||||||
1Life Healthcare, Inc.* | 2,900 | (82,244 | ) | |||||
Guardant Health, Inc.* | 1,500 | (167,670 | ) | |||||
HealthEquity, Inc.* | 2,200 | (113,014 | ) | |||||
PetIQ, Inc.* | 800 | (26,336 | ) | |||||
Progyny, Inc.* | 2,600 | (76,518 | ) | |||||
|
| |||||||
(465,782 | ) | |||||||
Health Care Technology (0.7)% | ||||||||
| ||||||||
Health Catalyst, Inc.* | 1,200 | (43,920 | ) | |||||
Inspire Medical Systems, Inc.* | 900 | (116,145 | ) | |||||
|
| |||||||
(160,065 | ) | |||||||
Hotels, Restaurants & Leisure (0.3)% | ||||||||
| ||||||||
Shake Shack, Inc. (Class A Stock)* | 1,200 | (77,376 | ) | |||||
Household Durables (0.2)% | ||||||||
| ||||||||
Sonos, Inc.* | 3,200 | (48,576 | ) | |||||
Household Products (0.1)% | ||||||||
| ||||||||
WD-40 Co. | 60 | (11,359 | ) | |||||
Independent Power & Renewable Electricity Producers (0.4)% | ||||||||
| ||||||||
Sunnova Energy International, Inc.* | 2,700 | (82,107 | ) | |||||
Insurance (0.1)% | ||||||||
| ||||||||
Markel Corp.* | 20 | (19,474 | ) |
See Notes to Financial Statements.
22 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Internet & Direct Marketing Retail (0.5)% | ||||||||
| ||||||||
Expedia Group, Inc. | 800 | $ | (73,352 | ) | ||||
RealReal, Inc. (The)* | 2,700 | (39,069 | ) | |||||
|
| |||||||
(112,421 | ) | |||||||
IT Services (0.7)% | ||||||||
| ||||||||
Fastly, Inc. (Class A Stock)* | 100 | (9,368 | ) | |||||
MongoDB, Inc.* | 500 | (115,755 | ) | |||||
Repay Holdings Corp.* | 1,600 | (37,600 | ) | |||||
|
| |||||||
(162,723 | ) | |||||||
Leisure Products (1.1)% | ||||||||
| ||||||||
Callaway Golf Co. | 2,800 | (53,592 | ) | |||||
Hasbro, Inc. | 1,900 | (157,168 | ) | |||||
Peloton Interactive, Inc. (Class A Stock)* | 300 | (29,772 | ) | |||||
|
| |||||||
(240,532 | ) | |||||||
Life Sciences Tools & Services (1.4)% | ||||||||
| ||||||||
Adaptive Biotechnologies Corp.* | 2,300 | (111,849 | ) | |||||
Codexis, Inc.* | 2,100 | (24,654 | ) | |||||
NanoString Technologies, Inc.* | 1,200 | (53,640 | ) | |||||
NeoGenomics, Inc.* | 2,500 | (92,225 | ) | |||||
Quanterix Corp.* | 1,000 | (33,740 | ) | |||||
|
| |||||||
(316,108 | ) | |||||||
Media (0.3)% | ||||||||
| ||||||||
Cardlytics, Inc.* | 800 | (56,456 | ) | |||||
Metals & Mining (0.2)% | ||||||||
| ||||||||
Allegheny Technologies, Inc.* | 3,700 | (32,264 | ) | |||||
Cleveland-Cliffs, Inc. | 1,900 | (12,198 | ) | |||||
|
| |||||||
(44,462 | ) | |||||||
Mortgage Real Estate Investment Trusts (REITs) (0.1)% | ||||||||
| ||||||||
Blackstone Mortgage Trust, Inc. (Class A Stock) | 600 | (13,182 | ) | |||||
Pharmaceuticals (0.2)% | ||||||||
| ||||||||
Aerie Pharmaceuticals, Inc.* | 900 | (10,593 | ) | |||||
Reata Pharmaceuticals, Inc. (Class A Stock)* | 100 | (9,742 | ) |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 23 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Pharmaceuticals (cont’d.) | ||||||||
| ||||||||
Theravance Biopharma, Inc.* | 800 | $ | (11,828 | ) | ||||
WaVe Life Sciences Ltd.* | 1,200 | (10,188 | ) | |||||
|
| |||||||
(42,351 | ) | |||||||
Professional Services (0.4)% | ||||||||
| ||||||||
Upwork, Inc.* | 3,900 | (68,016 | ) | |||||
Willdan Group, Inc.* | 400 | (10,204 | ) | |||||
|
| |||||||
(78,220 | ) | |||||||
Real Estate Management & Development (0.5)% | ||||||||
| ||||||||
Redfin Corp.* | 2,300 | (114,839 | ) | |||||
Semiconductors & Semiconductor Equipment (1.0)% | ||||||||
| ||||||||
Cree, Inc.* | 3,300 | (210,342 | ) | |||||
Impinj, Inc.* | 800 | (21,080 | ) | |||||
|
| |||||||
(231,422 | ) | |||||||
Software (5.9)% | ||||||||
| ||||||||
Alteryx, Inc. (Class A Stock)* | 1,700 | (193,035 | ) | |||||
Anaplan, Inc.* | 1,800 | (112,644 | ) | |||||
Cloudflare, Inc. (Class A Stock)* | 2,600 | (106,756 | ) | |||||
Datadog, Inc. (Class A Stock)* | 1,500 | (153,240 | ) | |||||
Elastic NV* | 500 | (53,945 | ) | |||||
Everbridge, Inc.* | 1,100 | (138,303 | ) | |||||
PROS Holdings, Inc.* | 1,400 | (44,716 | ) | |||||
Q2 Holdings, Inc.* | 1,000 | (91,260 | ) | |||||
Slack Technologies, Inc. (Class A Stock)* | 3,500 | (94,010 | ) | |||||
Smartsheet, Inc. (Class A Stock)* | 1,400 | (69,188 | ) | |||||
Splunk, Inc.* | 700 | (131,691 | ) | |||||
Workday, Inc. (Class A Stock)* | 90 | (19,362 | ) | |||||
Yext, Inc.* | 3,500 | (53,130 | ) | |||||
Zuora, Inc. (Class A Stock)* | 3,000 | (31,020 | ) | |||||
|
| |||||||
(1,292,300 | ) | |||||||
Specialty Retail (1.2)% | ||||||||
| ||||||||
Carvana Co.* | 700 | (156,142 | ) | |||||
Five Below, Inc.* | 300 | (38,100 | ) | |||||
Monro, Inc. | 1,100 | (44,627 | ) | |||||
Signet Jewelers Ltd. | 1,500 | (28,050 | ) | |||||
|
| |||||||
(266,919 | ) |
See Notes to Financial Statements.
24 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Water Utilities (0.6)% | ||||||||
| ||||||||
Essential Utilities, Inc. | 3,300 | $ | (132,825 | ) | ||||
|
| |||||||
TOTAL SECURITIES SOLD SHORT | (6,633,323 | ) | ||||||
|
| |||||||
TOTAL INVESTMENTS, NET OF SECURITIES SOLD SHORT 100.0% | 22,011,153 | |||||||
Other assets in excess of liabilities 0.0% | 3,680 | |||||||
|
| |||||||
NET ASSETS 100.0% | $ | 22,014,833 | ||||||
|
|
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
S&P—Standard & Poor’s
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, 2020 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Assets | ||||||||||||
Common Stocks | ||||||||||||
Aerospace & Defense | $ 609,755 | $— | $— | |||||||||
Air Freight & Logistics | 80,312 | — | — | |||||||||
Automobiles | 156,827 | — | — | |||||||||
Banks | 655,373 | — | — | |||||||||
Beverages | 338,628 | — | — | |||||||||
Biotechnology | 1,279,621 | — | — | |||||||||
Building Products | 265,097 | — | — |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 25 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Level 1 | Level 2 | Level 3 | |||||||||||||
Investments in Securities (continued) | |||||||||||||||
Assets (continued) | |||||||||||||||
Common Stocks (continued) | |||||||||||||||
Capital Markets | $ | 498,012 | $ | — | $ | — | |||||||||
Chemicals | 565,549 | — | — | ||||||||||||
Commercial Services & Supplies | 71,856 | — | — | ||||||||||||
Communications Equipment | 360,281 | — | — | ||||||||||||
Construction & Engineering | 58,221 | — | — | ||||||||||||
Construction Materials | 14,184 | — | — | ||||||||||||
Consumer Finance | 109,345 | — | — | ||||||||||||
Containers & Packaging | 17,370 | — | — | ||||||||||||
Diversified Consumer Services | 109,764 | — | — | ||||||||||||
Diversified Financial Services | 232,536 | — | — | ||||||||||||
Diversified Telecommunication Services | 574,738 | — | — | ||||||||||||
Electric Utilities | 261,645 | — | — | ||||||||||||
Electrical Equipment | 77,786 | — | — | ||||||||||||
Electronic Equipment, Instruments & Components | 120,484 | — | — | ||||||||||||
Energy Equipment & Services | 37,229 | — | — | ||||||||||||
Entertainment | 480,958 | — | — | ||||||||||||
Equity Real Estate Investment Trusts (REITs) | 535,749 | — | — | ||||||||||||
Food & Staples Retailing | 299,640 | — | — | ||||||||||||
Food Products | 530,414 | — | — | ||||||||||||
Gas Utilities | 92,344 | — | — | ||||||||||||
Health Care Equipment & Supplies | 1,624,250 | — | — | ||||||||||||
Health Care Providers & Services | 1,178,548 | — | — | ||||||||||||
Hotels, Restaurants & Leisure | 243,780 | — | — | ||||||||||||
Household Durables | 169,402 | — | — | ||||||||||||
Household Products | 444,288 | — | — | ||||||||||||
Independent Power & Renewable Electricity Producers | 118,456 | — | — | ||||||||||||
Industrial Conglomerates | 80,090 | — | — | ||||||||||||
Insurance | 390,102 | — | — | ||||||||||||
Interactive Media & Services | 1,348,118 | — | — | ||||||||||||
Internet & Direct Marketing Retail | 1,398,680 | — | — | ||||||||||||
IT Services | 1,202,234 | — | — | ||||||||||||
Leisure Products | 262,649 | — | — | ||||||||||||
Life Sciences Tools & Services | 459,884 | — | — | ||||||||||||
Machinery | 207,520 | — | — | ||||||||||||
Marine | 32,072 | — | — | ||||||||||||
Media | 181,706 | — | — | ||||||||||||
Metals & Mining | 255,264 | — | — | ||||||||||||
Mortgage Real Estate Investment Trusts (REITs) | 177,460 | — | — | ||||||||||||
Multiline Retail | 62,886 | — | — | ||||||||||||
Multi-Utilities | 384,066 | — | — | ||||||||||||
Oil, Gas & Consumable Fuels | 271,250 | — | — | ||||||||||||
Paper & Forest Products | 103,792 | — | — | ||||||||||||
Personal Products | 70,126 | — | — | ||||||||||||
Pharmaceuticals | 1,110,871 | — | — | ||||||||||||
Professional Services | 85,800 | — | — | ||||||||||||
Road & Rail | 275,204 | — | — |
See Notes to Financial Statements.
26 |
Level 1 | Level 2 | Level 3 | |||||||||||||
Investments in Securities (continued) | |||||||||||||||
Assets (continued) | |||||||||||||||
Common Stocks (continued) | |||||||||||||||
Semiconductors & Semiconductor Equipment | $ | 1,442,862 | $ | — | $ | — | |||||||||
Software | 3,454,576 | — | — | ||||||||||||
Specialty Retail | 979,832 | — | — | ||||||||||||
Technology Hardware, Storage & Peripherals | 1,644,502 | — | — | ||||||||||||
Thrifts & Mortgage Finance | 43,784 | — | — | ||||||||||||
Tobacco | 173,880 | — | — | ||||||||||||
Trading Companies & Distributors | 209,584 | — | — | ||||||||||||
Water Utilities | 6,894 | — | — | ||||||||||||
Exchange-Traded Fund | 80,373 | — | — | ||||||||||||
Preferred Stock | |||||||||||||||
Internet & Direct Marketing Retail | 12,411 | — | — | ||||||||||||
Affiliated Mutual Fund | 23,562 | — | — | ||||||||||||
|
|
|
|
|
| ||||||||||
Total | $ | 28,644,476 | $ | — | $ | — | |||||||||
|
|
|
|
|
| ||||||||||
Liabilities | |||||||||||||||
Common Stocks - Short | |||||||||||||||
Aerospace & Defense | $ | (107,265 | ) | $ | — | $ | — | ||||||||
Banks | (62,496 | ) | — | — | |||||||||||
Biotechnology | (659,576 | ) | — | — | |||||||||||
Building Products | (12,050 | ) | — | — | |||||||||||
Capital Markets | (64,590 | ) | — | — | |||||||||||
Chemicals | (281,088 | ) | — | — | |||||||||||
Commercial Services & Supplies | (94,590 | ) | — | — | |||||||||||
Communications Equipment | (29,118 | ) | — | — | |||||||||||
Construction & Engineering | (45,891 | ) | — | — | |||||||||||
Diversified Telecommunication Services | (52,371 | ) | — | — | |||||||||||
Electrical Equipment | (80,460 | ) | — | — | |||||||||||
Electronic Equipment, Instruments & Components | (164,596 | ) | — | — | |||||||||||
Entertainment | (132,160 | ) | — | — | |||||||||||
Food & Staples Retailing | (160 | ) | — | — | |||||||||||
Food Products | (146,938 | ) | — | — | |||||||||||
Health Care Equipment & Supplies | (730,475 | ) | — | — | |||||||||||
Health Care Providers & Services | (465,782 | ) | — | — | |||||||||||
Health Care Technology | (160,065 | ) | — | — | |||||||||||
Hotels, Restaurants & Leisure | (77,376 | ) | — | — | |||||||||||
Household Durables | (48,576 | ) | — | — | |||||||||||
Household Products | (11,359 | ) | — | — | |||||||||||
Independent Power & Renewable Electricity Producers | (82,107 | ) | — | — | |||||||||||
Insurance | (19,474 | ) | — | — | |||||||||||
Internet & Direct Marketing Retail | (112,421 | ) | — | — | |||||||||||
IT Services | (162,723 | ) | — | — | |||||||||||
Leisure Products | (240,532 | ) | — | — | |||||||||||
Life Sciences Tools & Services | (316,108 | ) | — | — | |||||||||||
Media | (56,456 | ) | — | — | |||||||||||
Metals & Mining | (44,462 | ) | — | — |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 27 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Level 1 | Level 2 | Level 3 | |||||||||||||
Investments in Securities (continued) | |||||||||||||||
Liabilities (continued) | |||||||||||||||
Common Stocks - Short (continued) | |||||||||||||||
Mortgage Real Estate Investment Trusts (REITs) | $ | (13,182 | ) | $ | — | $ | — | ||||||||
Pharmaceuticals | (42,351 | ) | — | — | |||||||||||
Professional Services | (78,220 | ) | — | — | |||||||||||
Real Estate Management & Development | (114,839 | ) | — | — | |||||||||||
Semiconductors & Semiconductor Equipment | (231,422 | ) | — | — | |||||||||||
Software | (1,292,300 | ) | — | — | |||||||||||
Specialty Retail | (266,919 | ) | — | — | |||||||||||
Water Utilities | (132,825 | ) | — | — | |||||||||||
|
|
|
|
|
| ||||||||||
Total | $ | (6,633,323 | ) | $ | — | $ | — | ||||||||
|
|
|
|
|
|
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, 2020 were as follows:
Software | 15.7 | % | Oil, Gas & Consumable Fuels | 1.2 | % | |||||||||
Technology Hardware, Storage & Peripherals | 7.5 | Building Products | 1.2 | |||||||||||
Health Care Equipment & Supplies | 7.4 | Leisure Products | 1.2 | |||||||||||
Semiconductors & Semiconductor Equipment | 6.6 | Electric Utilities | 1.2 | |||||||||||
Internet & Direct Marketing Retail | 6.4 | Metals & Mining | 1.2 | |||||||||||
Interactive Media & Services | 6.1 | Hotels, Restaurants & Leisure | 1.1 | |||||||||||
Biotechnology | 5.8 | Diversified Financial Services | 1.1 | |||||||||||
IT Services | 5.5 | Trading Companies & Distributors | 0.9 | |||||||||||
Health Care Providers & Services | 5.4 | Machinery | 0.9 | |||||||||||
Pharmaceuticals | 5.0 | Media | 0.8 | |||||||||||
Specialty Retail | 4.4 | Mortgage Real Estate Investment Trusts (REITs) | 0.8 | |||||||||||
Banks | 3.0 | Tobacco | 0.8 | |||||||||||
Aerospace & Defense | 2.8 | Household Durables | 0.8 | |||||||||||
Diversified Telecommunication Services | 2.6 | Automobiles | 0.7 | |||||||||||
Chemicals | 2.6 | Electronic Equipment, Instruments & Components | 0.5 | |||||||||||
Equity Real Estate Investment Trusts (REITs) | 2.4 | Independent Power & Renewable Electricity Producers | 0.5 | |||||||||||
Food Products | 2.4 | Diversified Consumer Services | 0.5 | |||||||||||
Capital Markets | 2.3 | Consumer Finance | 0.5 | |||||||||||
Entertainment | 2.2 | Paper & Forest Products | 0.5 | |||||||||||
Life Sciences Tools & Services | 2.1 | Gas Utilities | 0.4 | |||||||||||
Household Products | 2.0 | Professional Services | 0.4 | |||||||||||
Insurance | 1.8 | Exchange-Traded Fund | 0.4 | |||||||||||
Multi-Utilities | 1.7 | Air Freight & Logistics | 0.4 | |||||||||||
Communications Equipment | 1.6 | Industrial Conglomerates | 0.4 | |||||||||||
Beverages | 1.5 | Electrical Equipment | 0.3 | |||||||||||
Food & Staples Retailing | 1.4 | Commercial Services & Supplies | 0.3 | |||||||||||
Road & Rail | 1.2 |
See Notes to Financial Statements.
28 |
Industry Classification (continued):
Personal Products | 0.3 | % | Commercial Services & Supplies | (0.4 | )% | |||||||||
Multiline Retail | 0.3 | Aerospace & Defense | (0.5 | ) | ||||||||||
Construction & Engineering | 0.3 | Internet & Direct Marketing Retail | (0.5 | ) | ||||||||||
Thrifts & Mortgage Finance | 0.2 | Real Estate Management & Development | (0.5 | ) | ||||||||||
Energy Equipment & Services | 0.2 | Entertainment | (0.6 | ) | ||||||||||
Marine | 0.1 | Water Utilities | (0.6 | ) | ||||||||||
Affiliated Mutual Fund | 0.1 | Food Products | (0.7 | ) | ||||||||||
Containers & Packaging | 0.1 | Health Care Technology | (0.7 | ) | ||||||||||
Construction Materials | 0.1 | IT Services | (0.7 | ) | ||||||||||
Water Utilities | 0.0 | * | Electronic Equipment, Instruments & Components | (0.7 | ) | |||||||||
Securities Sold Short | Semiconductors & Semiconductor Equipment | (1.0 | ) | |||||||||||
Food & Staples Retailing | (0.0 | )* | Leisure Products | (1.1 | ) | |||||||||
Household Products | (0.1 | ) | Specialty Retail | (1.2 | ) | |||||||||
Building Products | (0.1 | ) | Chemicals | (1.3 | ) | |||||||||
Mortgage Real Estate Investment Trusts (REITs) | (0.1 | ) | Life Sciences Tools & Services | (1.4 | ) | |||||||||
Insurance | (0.1 | ) | Health Care Providers & Services | (2.1 | ) | |||||||||
Communications Equipment | (0.1 | ) | Biotechnology | (3.0 | ) | |||||||||
Pharmaceuticals | (0.2 | ) | Health Care Equipment & Supplies | (3.3 | ) | |||||||||
Metals & Mining | (0.2 | ) | Software | (5.9 | ) | |||||||||
|
| |||||||||||||
Construction & Engineering | (0.2 | ) |
| 100.0 |
| |||||||||
Household Durables | (0.2 | ) | Other assets in excess of liabilities | 0.0 | * | |||||||||
|
| |||||||||||||
Diversified Telecommunication Services | (0.2 | ) | 100.0 | % | ||||||||||
|
| |||||||||||||
Media | (0.3 | ) | ________________________ * Less than +/- 0.05% | |||||||||||
Banks | (0.3 | ) | ||||||||||||
Capital Markets | (0.3 | ) | ||||||||||||
Hotels, Restaurants & Leisure | (0.3 | ) | ||||||||||||
Professional Services | (0.4 | ) | ||||||||||||
Electrical Equipment | (0.4 | ) | ||||||||||||
Independent Power & Renewable Electricity Producers | (0.4 | ) |
Financial Instruments/Transactions—Summary of Offsetting and Netting Arrangements:
The Fund entered into financial instruments/transactions during the reporting period that are either offset in accordance with current requirements or are subject to enforceable master netting arrangements or similar agreements that permit offsetting. The information about offsetting and related netting arrangements for financial instruments/transactions where the legal right to set-off exists is presented in the summary below.
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 29 |
Schedule of Investments (unaudited) (continued)
as of September 30, 2020
Offsetting of financial instrument/transaction assets and liabilities:
Gross Market | ||||||||||||||||||||||||||
Value of | ||||||||||||||||||||||||||
Recognized | Collateral | Net | ||||||||||||||||||||||||
Description | Counterparty | Assets/(Liabilities) | Pledged/(Received)(1) | Amount | ||||||||||||||||||||||
Securities Sold Short |
| Scotia Capital (USA), Inc. | $ | (6,633,323 | ) | $ | 6,633,323 | $ | — | |||||||||||||||||
|
|
|
|
|
|
|
|
(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, 2020
Assets | |||||
Investments at value: | |||||
Unaffiliated investments (cost $24,286,184) | $ | 28,620,914 | |||
Affiliated investments (cost $23,562) | 23,562 | ||||
Dividends and interest receivable | 20,148 | ||||
Deposit with broker for securities sold short | 15,059 | ||||
Prepaid expenses | 1,350 | ||||
|
| ||||
Total Assets | 28,681,033 | ||||
|
| ||||
Liabilities | |||||
Securities sold short, at value (proceeds received $5,698,954) | 6,633,323 | ||||
Accrued expenses and other liabilities | 27,919 | ||||
Dividends and interest payable on securities sold short | 4,577 | ||||
Management fee payable | 215 | ||||
Affiliated transfer agent fee payable | 72 | ||||
Trustees’ fees payable | 70 | ||||
Distribution fee payable | 24 | ||||
|
| ||||
Total Liabilities | 6,666,200 | ||||
|
| ||||
Net Assets | $ | 22,014,833 | |||
|
| ||||
Net assets were comprised of: | |||||
Shares of beneficial interest, at par | $ | 2,067 | |||
Paid-in capital in excess of par | 20,694,030 | ||||
Total distributable earnings (loss) | 1,318,736 | ||||
|
| ||||
Net assets, September 30, 2020 | $ | 22,014,833 | |||
|
|
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 31 |
Statement of Assets and Liabilities (unaudited)
as of September 30, 2020
Class A | |||||||
Net asset value and redemption price per share, | $ | 10.64 | |||||
Maximum sales charge (5.50% of offering price) | 0.62 | ||||||
|
| ||||||
Maximum offering price to public | $ | 11.26 | |||||
|
| ||||||
Class C | |||||||
Net asset value, offering price and redemption price per share, | |||||||
($10,625 ÷ 1,007 shares of beneficial interest issued and outstanding) | $ | 10.55 | |||||
|
| ||||||
Class Z | |||||||
Net asset value, offering price and redemption price per share, | |||||||
($13,911 ÷ 1,309 shares of beneficial interest issued and outstanding) | $ | 10.63 | |||||
|
| ||||||
Class R6 | |||||||
Net asset value, offering price and redemption price per share, | |||||||
($21,916,748 ÷ 2,058,041 shares of beneficial interest issued and outstanding) | $ | 10.65 | |||||
|
|
See Notes to Financial Statements.
32 |
Statement of Operations (unaudited)
Six Months Ended September 30, 2020
Net Investment Income (Loss) | ||||
Income | ||||
Unaffiliated dividend income (net of $946 foreign withholding tax) | $ | 225,228 | ||
Interest income | 7,784 | |||
Affiliated dividend income | 154 | |||
|
| |||
Total income | 233,166 | |||
|
| |||
Expenses | ||||
Management fee | 84,994 | |||
Distribution fee(a) | 145 | |||
Custodian and accounting fees | 33,005 | |||
Registration fees(a) | 28,570 | |||
Broker fees and expenses on short sales | 22,374 | |||
Audit fee | 12,391 | |||
Shareholders’ reports | 11,784 | |||
Legal fees and expenses | 8,299 | |||
Dividend expense on short sales | 7,589 | |||
Trustees’ fees | 5,470 | |||
Transfer agent’s fees and expenses (including affiliated expense of $257)(a) | 401 | |||
Miscellaneous | 8,339 | |||
|
| |||
Total expenses | 223,361 | |||
Less: Fee waiver and/or expense reimbursement(a) | (92,324 | ) | ||
|
| |||
Net expenses | 131,037 | |||
|
| |||
Net investment income (loss) | 102,129 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investments | ||||
Net realized gain (loss) on: | ||||
Investment transactions | (791,668 | ) | ||
Short sales transactions | (1,230,369 | ) | ||
|
| |||
(2,022,037 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 7,225,028 | |||
Short sales | (1,327,566 | ) | ||
|
| |||
5,897,462 | ||||
|
| |||
Net gain (loss) on investment transactions | 3,875,425 | |||
|
| |||
Net Increase (Decrease) In Net Assets Resulting From Operations | $ | 3,977,554 | ||
|
|
(a) | Class specific expenses and waivers were as follows: |
Class A | Class C | Class Z | Class R6 | |||||||||||||||||
Distribution fee | 88 | 57 | — | — | ||||||||||||||||
Registration fees | 7,143 | 7,143 | 7,142 | 7,142 | ||||||||||||||||
Transfer agent’s fees and expenses | 234 | 34 | 93 | 40 | ||||||||||||||||
Fee waiver and/or expense reimbursement | (7,589 | ) | (7,210 | ) | (7,278 | ) | (70,247 | ) |
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 33 |
Statements of Changes in Net Assets (unaudited)
Six Months Ended | Year Ended | |||||||||
September 30, 2020 | March 31, 2020 | |||||||||
Increase (Decrease) in Net Assets | ||||||||||
Operations | ||||||||||
Net investment income (loss) | $ | 102,129 | $ | 237,400 | ||||||
Net realized gain (loss) on investment transactions | (2,022,037 | ) | 7,150 | |||||||
Net change in unrealized appreciation (depreciation) on investments | 5,897,462 | (4,291,711 | ) | |||||||
|
|
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 3,977,554 | (4,047,161 | ) | |||||||
|
|
|
| |||||||
Dividends and Distributions | ||||||||||
Distributions from distributable earnings | ||||||||||
Class A | — | (680 | ) | |||||||
Class C | — | (23 | ) | |||||||
Class Z | — | (176 | ) | |||||||
Class R6 | — | (265,702 | ) | |||||||
|
|
|
| |||||||
— | (266,581 | ) | ||||||||
|
|
|
| |||||||
Fund share transactions (Net of share conversions) | ||||||||||
Net proceeds from shares sold | 9,730 | 35,732 | ||||||||
Net asset value of shares issued in reinvestment of dividends and distributions | — | 266,581 | ||||||||
Cost of shares reacquired | (20,152 | ) | (31,452 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in net assets from Fund share transactions | (10,422 | ) | 270,861 | |||||||
|
|
|
| |||||||
Total increase (decrease) | 3,967,132 | (4,042,881 | ) | |||||||
Net Assets: | ||||||||||
Beginning of period | 18,047,701 | 22,090,582 | ||||||||
|
|
|
| |||||||
End of period | $ | 22,014,833 | $ | 18,047,701 | ||||||
|
|
|
|
See Notes to Financial Statements.
34 |
Statement of Cash Flows
For the Six Months Ended September 30, 2020
Cash Flows Provided by / (Used for) Operating Activities: | ||||
Net increase (decrease) in net assets resulting from operations | $ | 3,977,554 | ||
|
| |||
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 | 12,850,551 | |||
Purchases of long-term portfolio investments | (11,862,317 | ) | ||
Net proceeds (purchases) of short-term portfolio investments | 88,636 | |||
Costs to cover investments sold short | (4,662,600 | ) | ||
Proceeds from investments sold short | 3,578,937 | |||
Net realized (gain) loss on investment transactions | 791,668 | |||
Net realized (gain) loss on short sales transactions | 1,230,369 | |||
Net change in unrealized (appreciation) depreciation on investment transactions | (7,225,028 | ) | ||
Net change in unrealized (appreciation) depreciation on short sales transactions | 1,327,566 | |||
(Increase) Decrease in Assets: | ||||
Dividends and interest receivable | 11,663 | |||
Prepaid expenses | (990 | ) | ||
Receivable for investments sold | 1,235,738 | |||
Increase (Decrease) in Liabilities: | ||||
Accrued expenses and other liabilities | (15,036 | ) | ||
Dividends and interest payable on securities sold short | (6,538 | ) | ||
Management fee payable | (6,931 | ) | ||
Trustees’ fees payable | 70 | |||
Distribution fee payable | 2 | |||
Affiliated transfer agent fee payable | (100 | ) | ||
Payable for investments purchased | (1,340,266 | ) | ||
|
| |||
Total adjustments | (4,004,606 | ) | ||
|
| |||
Cash provided by (used for) operating activities | (27,052 | ) | ||
|
| |||
Cash Provided By (Used For) Financing Activities: | ||||
Proceeds from fund share sold | 9,730 | |||
Payment of fund share repurchased | (20,152 | ) | ||
|
| |||
Cash provided by (used for) financing activities | (10,422 | ) | ||
|
| |||
Net increase (decrease) in cash and restricted cash, at value | (37,474 | ) | ||
Cash and restricted cash at beginning of period | 52,533 | |||
|
| |||
Cash and Restricted Cash at End of Period | $ | 15,059 | ||
|
|
Reconciliation of Cash and Restricted Cash Reported with the Statement of Assets and Liabilities to the Statement of Cash Flows:
September 30, 2020 | March 31, 2020 | |||||||||
Cash | $ | — | $ | 221 | ||||||
Restricted Cash: | ||||||||||
Deposit with broker for securities sold short | 15,059 | 52,312 | ||||||||
|
|
|
| |||||||
Total cash and restricted cash | $ | 15,059 | $ | 52,533 | ||||||
|
|
|
|
See Notes to Financial Statements.
PGIM QMA Large-Cap Core Equity PLUS Fund | 35 |
Notes to Financial Statements (unaudited)
1. Organization
Prudential Investment Portfolios 12 (the “Trust”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company. The Trust currently consists of the following six series: PGIM QMA Large-Cap Core Equity PLUS Fund, PGIM QMA Long-Short Equity Fund and PGIM Short Duration Muni Fund, each of which are diversified funds for purposes of the 1940 Act and PGIM Global Real Estate Fund, PGIM Jennison Technology Fund and PGIM US Real Estate Fund, each of which are non-diversified funds for purposes of the 1940 Act, and therefore, may invest a greater percentage of their assets in the securities of a single company or other issuer than a diversified fund. Investing in a non-diversified fund involves greater risk than investing in a diversified fund because a loss resulting from the decline in value of any one security may represent a greater portion of the total assets of a non-diversified fund. These financial statements relate only to the PGIM QMA Large-Cap Core Equity PLUS Fund (the “Fund”).
The investment objective of the Fund is to seek long-term capital appreciation.
2. 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 reporting period-end, securities and other assets and liabilities were fair valued at the close of the last U.S. business day. Trading in certain foreign securities may occur
36 |
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.
Common or preferred stocks, exchange-traded funds and derivative instruments, if applicable, that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange where the security principally trades. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price, they are classified as Level 1 in the fair value hierarchy. In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and ask prices, or at the last bid price in the absence of an ask price. These securities are classified as Level 2 in the fair value hierarchy.
Investments in open-end funds (other than exchange-traded 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 Rule 22e-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
PGIM QMA Large-Cap Core Equity PLUS Fund | 37 |
Notes to Financial Statements (unaudited) (continued)
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(s) 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 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 sold a security it does not own in anticipation of a decline in the market value of that security (short sale). When the Fund makes a short sale, it must borrow the security sold short and deliver it to the broker-dealer through which it made the short sale as collateral for its obligation to deliver the security upon conclusion of the transaction. The Fund may have to pay a fee to borrow the particular security and may be obligated to return any interest or dividends received on such borrowed securities. Dividends declared on open short positions are recorded on the ex-date and the interest payable is accrued daily on fixed income securities sold short, both of which are recorded as an expense. A gain, limited to the price at which the Fund sold the security short, or a loss, unlimited in magnitude, will be recognized upon the termination of a short sale if the market price at termination is less than or greater than, respectively, the proceeds originally received. The cash amounts pledged for securities sold short are considered restricted cash and are included in deposit with broker for securities sold short in the Statement of Assets and Liabilities.
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
38 |
Fund. A master netting arrangement between the Fund and the counterparty permits the Fund to offset amounts payable by the Fund to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Fund to cover the Fund’s exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable. In addition to master netting arrangements, the right to set-off exists when all the conditions are met such that each of the parties owes the other determinable amounts, the reporting party has the right to set-off the amount owed with the amount owed by the other party, the reporting party intends to set-off and the right of set-off is enforceable by law. During the reporting period, there was no intention to settle on a net basis and all amounts are presented on a gross basis on the Statement of Assets and Liabilities.
Equity and Mortgage Real Estate Investment Trusts (collectively equity REITs): The Fund 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 the ex-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 the ex-date. Permanent book/tax differences relating to income and gain (loss)
PGIM QMA Large-Cap Core Equity PLUS Fund | 39 |
Notes to Financial Statements (unaudited) (continued)
are reclassified between total distributable earnings (loss) and paid-in capital in excess of par, as appropriate.
Estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
3. 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” or the “subadviser”). 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, 2020.
The Manager has contractually agreed, through July 31, 2021, 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
40 |
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 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, 2020, PIMS did not receive any front-end sales charges resulting from sales of Class A shares. Additionally, for the reporting period ended September 30, 2020, PIMS did not receive any contingent deferred sales charges imposed upon redemptions by certain Class A and Class C shareholders.
PGIM Investments, PIMS and QMA are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
4. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PGIM Investments and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund’s transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
The Fund may 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
PGIM QMA Large-Cap Core Equity PLUS Fund | 41 |
Notes to Financial Statements (unaudited) (continued)
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 Rule 17a-7 procedures. Rule 17a-7 is an exemptive rule under the 1940 Act, that subject to certain conditions, permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. Pursuant to the Rule 17a-7 procedures and consistent with guidance issued by the Securities and Exchange Commission (“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 such 17a-7 transactions were effected in accordance with the Fund’s Rule 17a-7 procedures. For the reporting period ended September 30, 2020, no 17a-7 transactions were entered into by the Fund.
5. 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, 2020, were $15,850,379 and $15,747,192, respectively.
A summary of the cost of purchases and proceeds from sales of shares of affiliated investments for the reporting period ended September 30, 2020, is presented as follows:
Value, Period | Cost of | Proceeds | Change in | Realized | Value, | Shares, of | Income | ||||||||||||
PGIM Core Ultra Short Bond Fund* | |||||||||||||||||||
$112,198 | $388,663 | $477,299 | $— | $— | $23,562 | 23,562 | $154 |
* | The Fund did not have any capital gain distributions during the reporting period. |
42 |
6. Tax Information
The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of September 30, 2020 were as follows:
Tax Basis | $ | 18,695,044 | ||||
|
| |||||
Gross Unrealized Appreciation | 6,236,542 | |||||
Gross Unrealized Depreciation | (2,920,433 | ) | ||||
|
| |||||
Net Unrealized Appreciation | $ | 3,316,109 | ||||
|
|
The book basis may differ from tax basis due to certain tax-related adjustments.
For federal income tax purposes, the Fund had a capital loss carryforward as of March 31, 2020 of approximately $138,000 which can be carried forward for an unlimited period. No 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, 2020 are subject to such review.
7. Capital and Ownership
The Fund offers Class A, Class C, Class Z and Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 5.50%. Investors who purchase $1 million or more of Class A shares and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1%, although they are not subject to an initial sales charge. The Class A CDSC is waived for certain retirement and/or benefit plans. A special exchange privilege is also available for shareholders who qualified to purchase Class A shares at net asset value. Class C shares are sold with a CDSC of 1% on sales made within 12 months of purchase. Class 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 charges 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, below.
The Trust has authorized an unlimited number of shares of beneficial interest of the Fund at $0.001 par value per share.
PGIM QMA Large-Cap Core Equity PLUS Fund | 43 |
Notes to Financial Statements (unaudited) (continued)
As of September 30, 2020, Prudential, through its affiliated entities, including affiliated funds (if applicable), owned shares of the Fund as follows:
Number of Shares | Percentage of Outstanding Shares | |||||||||
Class A | 1,023 | 14.8% | ||||||||
Class C | 1,007 | 100.0% | ||||||||
Class Z | 1,029 | 78.6% | ||||||||
Class R6 | 2,058,041 | 100.0% |
At the reporting period end, the number of shareholders holding greater than 5% of the Fund are as follows:
Affiliated | Unaffiliated | |||||
Number of Shareholders | Percentage of Outstanding Shares | Number of Shareholders | Percentage of Outstanding Shares | |||
1 | 99.5% | — | —% |
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Six months ended September 30, 2020: | ||||||||
Shares sold | 104 | $ | 1,004 | |||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 104 | $ | 1,004 | |||||
|
|
|
| |||||
Year ended March 31, 2020: | ||||||||
Shares sold | 2,006 | $ | 21,554 | |||||
Shares issued in reinvestment of dividends and distributions | 57 | 680 | ||||||
Shares reacquired | (2,247 | ) | (23,451 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (184 | ) | (1,217 | ) | ||||
Shares issued upon conversion from other share class(es) | 1,353 | 15,018 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 1,169 | $ | 13,801 | |||||
|
|
|
| |||||
Class C | ||||||||
Six months ended September 30, 2020: | ||||||||
Shares reacquired | (758 | ) | $ | (7,595 | ) | |||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (758 | ) | $ | (7,595 | ) | |||
|
|
|
| |||||
Year ended March 31, 2020: | ||||||||
Shares sold | 758 | $ | 6,275 | |||||
Shares issued in reinvestment of dividends and distributions | 2 | 23 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 760 | 6,298 | ||||||
Shares reacquired upon conversion into other share class(es) | (1,358 | ) | (15,018 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (598 | ) | $ | (8,720 | ) | |||
|
|
|
|
44 |
Class Z | Shares | Amount | ||||||||
Six months ended September 30, 2020: | ||||||||||
Shares sold | 845 | $ | 8,726 | |||||||
Shares reacquired | (1,210 | ) | (12,557 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding | (365 | ) | $ | (3,831 | ) | |||||
|
|
|
| |||||||
Year ended March 31, 2020: | ||||||||||
Shares sold | 732 | $ | 7,792 | |||||||
Shares issued in reinvestment of dividends and distributions | 15 | 176 | ||||||||
Shares reacquired | (716 | ) | (8,001 | ) | ||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding | 31 | $ | (33 | ) | ||||||
|
|
|
| |||||||
Class R6 | ||||||||||
Six months ended September 30, 2020: | ||||||||||
Net increase (decrease) in shares outstanding | — | $ | — | |||||||
|
|
|
| |||||||
Year ended March 31, 2020: | ||||||||||
Shares sold | — | $ | 111 | |||||||
Shares issued in reinvestment of dividends and distributions | 22,479 | 265,702 | ||||||||
|
|
|
| |||||||
Net increase (decrease) in shares outstanding | 22,479 | $ | 265,813 | |||||||
|
|
|
|
8. Borrowings
The Trust, on behalf of the Fund, along with other affiliated registered investment companies (the “Participating 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 table below provides details of the current SCA in effect at the reporting period-end.
| SCA | |
Term of Commitment | 10/3/2019 – 10/1/2020 | |
Total Commitment | $ 1,222,500,000* | |
Annualized Commitment Fee on the Unused Portion of the SCA | 0.15% | |
Annualized Interest Rate on Borrowings | 1.20% plus the higher of (1) the effective federal funds rate, (2) the one-month LIBOR rate or (3) zero percent | |
* Effective March 31, 2020, the SCA’s total commitment was increased from $900,000,000 to $1,162,500,000 and subsequently, effective April 7, 2020 was increased to $1,222,500,000. |
Subsequent to the reporting period end, the SCA has been renewed effective October 2, 2020 and will provide a commitment of $1,200,000,000 through September 30, 2021. The commitment fee paid by the Participating 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 1.30% plus the higher of (1) the effective federal funds rate, (2) the one-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
PGIM QMA Large-Cap Core Equity PLUS Fund | 45 |
Notes to Financial Statements (unaudited) (continued)
scale asset flows into and out of these portfolios. Consequently, these portfolios may be more likely to utilize the SCA for purposes of funding redemptions. It may be possible for those portfolios to fully exhaust the committed amount of the SCA, thereby requiring the Manager to allocate available funding per a Board-approved methodology designed to treat the Participating Funds in the SCA equitably.
The Fund did not utilize the SCA during the reporting period ended September 30, 2020.
9. Risks of Investing in the Fund
The Fund’s risks include, but are not limited to, some or all of the risks discussed below. For further information on the Fund’s risks, please refer to the Fund’s Prospectus and Statement of Additional Information.
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.
Large Capitalization Company Risk: Companies with large market capitalizations go in and out of favor based on market and economic conditions. Larger companies tend to be less volatile than companies with smaller market capitalizations. In exchange for this potentially lower risk, the Fund’s value may not rise or fall as much as the value of funds that emphasize companies with smaller market capitalizations.
Large Shareholder and Large Scale Redemption Risk: Certain individuals, accounts, funds (including funds affiliated with the Manager) or institutions, including the Manager and its affiliates, may from time to time own or control a substantial amount of the Fund’s shares. There is no requirement that these entities maintain their investment in the Fund. There is a risk that such large shareholders or that the Fund’s shareholders generally may redeem all or a substantial portion of their investments in the Fund in a short period of time, which could have a significant negative impact on the Fund’s NAV, liquidity, and brokerage costs. Large redemptions could also result in tax consequences to shareholders and impact the Fund’s ability to implement its investment strategy. The Fund’s ability to pursue its investment objective after one or more large scale redemptions may be impaired and, as a result, the Fund may invest a larger portion of its assets in cash or cash equivalents.
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
46 |
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.
Market Disruption and Geopolitical Risks: International wars or conflicts and geopolitical developments in foreign countries, along with instability in regions such as Asia, Eastern Europe, and the Middle East, possible terrorist attacks in the United States or around the world, public health epidemics such as the outbreak of infectious diseases like the recent outbreak of coronavirus globally or the 2014–2016 outbreak in West Africa of the Ebola virus, and other similar events could adversely affect the U.S. and foreign financial markets, including increases in market volatility, reduced liquidity in the securities markets and government intervention, and may cause further long-term economic uncertainties in the United States and worldwide generally.
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.
10. Recent Accounting Pronouncements and Reporting Updates
In March 2020, the FASB issued Accounting Standard Update (“ASU”) No. 2020-04, which provides optional guidance for applying GAAP to contract modifications, hedging relationships and other transactions affected by the reference rate reform if certain criteria are met. ASU 2020-04 is elective and is effective on March 12, 2020 through December 31, 2022. At this time, management is evaluating the implications of certain provisions of the ASU and any impact on the financial statement disclosures has not yet been determined.
PGIM QMA Large-Cap Core Equity PLUS Fund | 47 |
Financial Highlights (unaudited)
Class A Shares | ||||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | September 19, 2017(a) through March 31, | ||||||||||||||||||||||||||||
2020 | 2020 | 2019 | 2018 | |||||||||||||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $8.73 | $10.81 | $10.55 | $10.00 | ||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||
Net investment income (loss) | 0.04 | 0.09 | 0.08 | 0.02 | ||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 1.87 | (2.07 | ) | 0.27 | 0.58 | |||||||||||||||||||||||||
Total from investment operations | 1.91 | (1.98 | ) | 0.35 | 0.60 | |||||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||||
Dividends from net investment income | - | (0.10 | ) | (0.07 | ) | (0.03 | ) | |||||||||||||||||||||||
Distributions from net realized gains | - | - | (0.02 | ) | (0.02 | ) | ||||||||||||||||||||||||
Total dividends and distributions | - | (0.10 | ) | (0.09 | ) | (0.05 | ) | |||||||||||||||||||||||
Net asset value, end of period | $10.64 | $8.73 | $10.81 | $10.55 | ||||||||||||||||||||||||||
Total Return(c): | 22.02 | % | (18.63 | )% | 3.39 | % | 6.00 | % | ||||||||||||||||||||||
| ||||||||||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000) | $74 | $59 | $61 | $40 | ||||||||||||||||||||||||||
Average net assets (000) | $71 | $74 | $42 | $20 | ||||||||||||||||||||||||||
Ratios to average net assets(d): | ||||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(e) | 1.48 | %(f) | 1.94 | % | 2.11 | % | 1.72 | %(f) | ||||||||||||||||||||||
Expenses before waivers and/or expense reimbursement(e) | 22.90 | %(f) | 20.53 | % | 37.62 | % | 203.54 | %(f) | ||||||||||||||||||||||
Net investment income (loss) | 0.71 | %(f) | 0.79 | % | 0.72 | % | 0.43 | %(f) | ||||||||||||||||||||||
Portfolio turnover rate(g) | 47 | % | 101 | % | 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 0.28%, 0.74%, 0.91% and 0.52% for the six months ended September 30, 2020, the years ended March 31, 2020, March 31, 2019 and the period ended March 31, 2018, respectively. |
(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.
48 |
Class C Shares | ||||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | September 19, 2017(a) through March 31, | ||||||||||||||||||||||||||||
2020 | 2020 | 2019 | 2018 | |||||||||||||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $8.69 | $10.77 | $10.52 | $10.00 | ||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||
Net investment income (loss) | - | (c) | - | (d) | 0.01 | (0.02 | ) | |||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 1.86 | (2.06 | ) | 0.26 | 0.57 | |||||||||||||||||||||||||
Total from investment operations | 1.86 | (2.06 | ) | 0.27 | 0.55 | |||||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||||
Dividends from net investment income | - | (0.02 | ) | - | (0.01 | ) | ||||||||||||||||||||||||
Distributions from net realized gains | - | - | (0.02 | ) | (0.02 | ) | ||||||||||||||||||||||||
Total dividends and distributions | - | (0.02 | ) | (0.02 | ) | (0.03 | ) | |||||||||||||||||||||||
Net asset value, end of period | $10.55 | $8.69 | $10.77 | $10.52 | ||||||||||||||||||||||||||
Total Return(e): | 21.40 | % | (19.16 | )% | 2.59 | % | 5.48 | % | ||||||||||||||||||||||
| ||||||||||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000) | $11 | $15 | $25 | $11 | ||||||||||||||||||||||||||
Average net assets (000) | $11 | $12 | $17 | $11 | ||||||||||||||||||||||||||
Ratios to average net assets(f): | ||||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(g) | 2.22 | %(h) | 2.66 | % | 2.89 | % | 2.43 | %(h) | ||||||||||||||||||||||
Expenses before waivers and/or expense reimbursement(g) | 128.98 | %(h) | 113.43 | % | 87.13 | % | 383.62 | %(h) | ||||||||||||||||||||||
Net investment income (loss) | (0.05 | )%(h) | 0.04 | % | 0.06 | % | (0.32 | )%(h) | ||||||||||||||||||||||
Portfolio turnover rate(i) | 47 | % | 101 | % | 88 | % | 60 | % |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | Less than $(0.005) per share. |
(d) | Less than $0.005 per share. |
(e) | 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. |
(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 0.27%, 0.70%, 0.94% and 0.48% for the six months ended September 30, 2020, the years ended March 31, 2020, March 31, 2019 and the period ended March 31, 2018, respectively. |
(h) | Annualized. |
(i) | 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 Z Shares | ||||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | September 19, 2017(a) through March 31, | ||||||||||||||||||||||||||||
2020 | 2020 | 2019 | 2018 | |||||||||||||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $8.71 | $10.78 | $10.53 | $10.00 | ||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||
Net investment income (loss) | 0.05 | 0.11 | 0.11 | 0.04 | ||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 1.87 | (2.05 | ) | 0.26 | 0.55 | |||||||||||||||||||||||||
Total from investment operations | 1.92 | (1.94 | ) | 0.37 | 0.59 | |||||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||||
Dividends from net investment income | - | (0.13 | ) | (0.10 | ) | (0.04 | ) | |||||||||||||||||||||||
Distributions from net realized gains | - | - | (0.02 | ) | (0.02 | ) | ||||||||||||||||||||||||
Total dividends and distributions | - | (0.13 | ) | (0.12 | ) | (0.06 | ) | |||||||||||||||||||||||
Net asset value, end of period | $10.63 | $8.71 | $10.78 | $10.53 | ||||||||||||||||||||||||||
Total Return(c): | 22.04 | % | (18.31 | )% | 3.59 | % | 5.87 | % | ||||||||||||||||||||||
| ||||||||||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000) | $14 | $15 | $18 | $15 | ||||||||||||||||||||||||||
Average net assets (000) | $14 | $14 | $18 | $12 | ||||||||||||||||||||||||||
Ratios to average net assets(d): | ||||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(e) | 1.22 | %(f) | 1.69 | % | 1.85 | % | 1.42 | %(f) | ||||||||||||||||||||||
Expenses before waivers and/or expense reimbursement(e) | 102.61 | %(f) | 91.92 | % | 81.69 | % | 341.63 | %(f) | ||||||||||||||||||||||
Net investment income (loss) | 1.01 | %(f) | 1.01 | % | 1.00 | % | 0.71 | %(f) | ||||||||||||||||||||||
Portfolio turnover rate(g) | 47 | % | 101 | % | 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 0.27%, 0.74%, 0.90% and 0.47% for the six months ended September 30, 2020, the years ended March 31, 2020, March 31, 2019 and the period ended March 31, 2018, respectively. |
(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 R6 Shares | ||||||||||||||||||||||||||||||
Six Months Ended September 30, | Year Ended March 31, | September 19, 2017(a) through March 31, | ||||||||||||||||||||||||||||
2020 | 2020 | 2019 | 2018 | |||||||||||||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $8.73 | $10.80 | $10.55 | $10.00 | ||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||
Net investment income (loss) | 0.05 | 0.12 | 0.11 | 0.04 | ||||||||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 1.87 | (2.06 | ) | 0.26 | 0.57 | |||||||||||||||||||||||||
Total from investment operations | 1.92 | (1.94 | ) | 0.37 | 0.61 | |||||||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||||||
Dividends from net investment income | - | (0.13 | ) | (0.10 | ) | (0.04 | ) | |||||||||||||||||||||||
Distributions from net realized gains | - | - | (0.02 | ) | (0.02 | ) | ||||||||||||||||||||||||
Total dividends and distributions | - | (0.13 | ) | (0.12 | ) | (0.06 | ) | |||||||||||||||||||||||
Net asset value, end of period | $10.65 | $8.73 | $10.80 | $10.55 | ||||||||||||||||||||||||||
Total Return(c): | 22.13 | % | (18.37 | )% | 3.58 | % | 6.07 | % | ||||||||||||||||||||||
| ||||||||||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||||
Net assets, end of period (000) | $21,917 | $17,958 | $21,986 | $21,226 | ||||||||||||||||||||||||||
Average net assets (000) | $21,094 | $22,465 | $21,827 | $21,315 | ||||||||||||||||||||||||||
Ratios to average net assets(d): | ||||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(e) | 1.23 | %(f) | 1.69 | % | 1.85 | % | 1.42 | %(f) | ||||||||||||||||||||||
Expenses before waivers and/or expense reimbursement(e) | 1.89 | %(f) | 2.31 | % | 2.63 | % | 2.41 | %(f) | ||||||||||||||||||||||
Net investment income (loss) | 0.96 | %(f) | 1.05 | % | 1.00 | % | 0.68 | %(f) | ||||||||||||||||||||||
Portfolio turnover rate(g) | 47 | % | 101 | % | 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 0.28%, 0.74%, 0.90% and 0.47% for the six months ended September 30, 2020, the years ended March 31, 2020, March 31, 2019 and the period ended March 31, 2018, respectively. |
(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 |
Fund Liquidity Risk Management Program (unaudited)
Consistent with Rule 22e-4 under the 1940 Act (the “Liquidity Rule”), the Fund has adopted and implemented a liquidity risk management program (the “LRMP”). The Fund’s LRMP seeks to assess and manage the Fund’s liquidity risk, which is defined as the risk that the Fund is unable to meet investor redemption requests without significantly diluting the remaining investors’ interests in the Fund. The Trust’s Board of Trustees (the “Board”) has approved PGIM Investments LLC (“PGIM Investments”), the Fund’s investment manager, to serve as the administrator of the Fund’s LRMP. As part of its responsibilities as administrator, PGIM Investments has retained a third party to perform certain functions, including providing market data and liquidity classification model information.
The Fund’s LRMP includes a number of processes designed to support the assessment and management of its liquidity risk. In particular, the Fund’s LRMP includes no less than annual assessments of factors that influence the Fund’s liquidity risk; no less than monthly classifications of the Fund’s investments into one of four liquidity classifications provided for in the Liquidity Rule; a 15% of net assets limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); establishment of a minimum percentage of the Fund’s assets to be invested in investments classified as “highly liquid” (as defined under the Liquidity Rule) if the Fund does not invest primarily in highly liquid investments; and regular reporting to the Board.
At a meeting of the Board on March 3-5, 2020, PGIM Investments provided a written report (“LRMP Report”) to the Board addressing the operation, adequacy, and effectiveness of the Fund’s LRMP, including any material changes to the LRMP for the period from the inception of the Fund’s LRMP on December 1, 2018 through December 31, 2019 (“Reporting Period”). The LRMP Report concluded that the Fund’s LRMP was reasonably designed to assess and manage the Fund’s liquidity risk and was adequately and effectively implemented during the Reporting Period. There were no material changes to the LRMP during the Reporting Period. The LRMP Report further concluded that the Fund’s investment strategies continue to be appropriate given the Fund’s status as an open-end fund.
There can be no assurance that the LRMP will achieve its objectives in the future. Additional information regarding risks of investing in the Fund, including liquidity risks presented by the Fund’s investment portfolio, is found in the Fund’s Prospectus and Statement of Additional Information.
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, nine of whom are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Trustees”). The Board is responsible for the oversight of the Fund and its operations, and performs the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Trustees have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Trustee. The Board has established four standing committees: the Audit Committee, the Nominating and Governance Committee, and two Investment Committees. Each committee is chaired by, and composed of, Independent Trustees.
Annual Approval of the Fund’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Fund’s management agreement with PGIM Investments LLC (“PGIM Investments”) and the Fund’s subadvisory agreement with QMA LLC (“QMA”). In considering the renewal of the agreements, the Board, including all of the Independent Trustees, met on May 27, 2020 and on June 9-11, 2020 and approved the renewal of the agreements through July 31, 2021, after concluding that the renewal of the agreements was in the best interests of the Fund and its shareholders.
In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with its consideration. Among other things, the Board considered comparative fee information from PGIM Investments and QMA. Also, the Board considered comparisons with other mutual funds in relevant Peer Universes and Peer Groups, as is further discussed below.
In approving the agreements, the Board, including the Independent Trustees advised by independent legal counsel, considered the factors it deemed relevant, including the nature, quality and extent of services provided by PGIM Investments and the subadviser, the performance of the Fund, the profitability of PGIM Investments and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Fund and its shareholders as the Fund’s assets grow. In their deliberations, the Trustees did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund. In connection with its deliberations, the Board considered information provided by PGIM Investments throughout the year at regular Board meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the meetings on May 27, 2020 and on June 9-11, 2020.
1 | PGIM QMA Large Cap Core Equity PLUS Fund is a series of Prudential Investment Portfolios 12. |
PGIM QMA Large-Cap Core Equity PLUS Fund |
Approval of Advisory Agreements (continued)
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 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.
Visit our website at pgim.com/investments |
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PGIM Investments and the subadvisory services provided to the Fund by 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. The Board noted that the cost of services provided by PGIM Investments to the Fund during the year ended December 31, 2019, exceeded the management fees paid by the Fund, 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 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, 2019. 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 year ended March 31, 2019. 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 pgim.com/investments |
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: N/A* | ||||||||
Net Total Expenses: N/A* |
* | There were not enough peer funds to create quartile group rankings. The Fund’s actual management fee ranked first out of three peers in its Lipper 15(c) Peer Group. The Fund’s net total expense ratio ranked the second out of three peers in its Lipper 15(c) Peer Group. |
• | 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, 2021. |
• | 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 | pgim.com/investments |
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 or by visiting the Securities and Exchange Commission’s website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the 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 • Claudia DiGiacomo, Chief Legal Officer • Dino Capasso, Chief Compliance Officer • Charles H. Smith, Anti-Money Laundering Compliance Officer • Andrew R. French, Secretary • Melissa Gonzalez, Assistant Secretary • Diana N. Huffman, Assistant Secretary • Kelly A. Coyne, Assistant Secretary • Patrick McGuinness, 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 | PricewaterhouseCoopers LLP | 300 Madison Avenue | ||
| ||||
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 at pgim.com/investments or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go to pgim.com/investments/resource/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 that Trustee at 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 for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT filings are available on the Commission’s website 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 applicable. | |
Item 6 – | Schedule of Investments – The schedule is included as part of the report to shareholders filed under Item 1 of this Form. | |
Item 7 – | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not applicable. | |
Item 8 – | Portfolio Managers of Closed-End Management Investment Companies – Not applicable. | |
Item 9 – | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not applicable. |
Item 10 – | Submission of Matters to a Vote of Security Holders – 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 for Closed-End
Management Investment Companies – Not applicable. | |
Item 13 – | Exhibits |
(a) | (1) Code of Ethics – Not required, as this is not an annual filing. | |||
(3) Any written solicitation to purchase securities under Rule 23c-1. – Not applicable. | ||||
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act – Attached hereto as Exhibit EX-99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: | Prudential Investment Portfolios 12 | |
By: | /s/ Andrew R. French | |
Andrew R. French | ||
Secretary | ||
Date: | November 16, 2020 |
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 16, 2020 | |
By: | /s/ Christian J. Kelly | |
Christian J. Kelly | ||
Treasurer and Principal Financial and Accounting Officer | ||
Date: | November 16, 2020 |