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: | 811-09101 | |
Exact name of registrant as specified in charter: | Prudential Investment Portfolios 9 | |
Address of principal executive offices: | 655 Broad Street, 17th Floor | |
Newark, New Jersey 07102 | ||
Name and address of agent for service: | Deborah A. Docs | |
655 Broad Street, 17th Floor | ||
Newark, New Jersey 07102 | ||
Registrant’s telephone number, including area code: | 800-225-1852 | |
Date of fiscal year end: | 10/31/2016 | |
Date of reporting period: | 4/30/2016 |
Item 1 – Reports to Stockholders
PRUDENTIAL INVESTMENTS, A PGIM BUSINESS | MUTUAL FUNDS
Prudential International Real Estate Fund
SEMIANNUAL REPORT | APRIL 30, 2016 |
To enroll in e-delivery, go to prudentialfunds.com/edelivery
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Objective: To seek capital appreciation and income |
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter.
The accompanying financial statements as of April 30, 2016, 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. © 2016 Prudential Financial, Inc. and its related entities. The Prudential logo and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
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Letter from the President
Dear Shareholder:
The Prudential International Real Estate Fund semiannual report covers performance for the six-month period that ended April 30, 2016.
The Board of Directors (the “Board”) of the Fund recently approved the liquidation of all outstanding shares of the Fund. The liquidation is
scheduled to take place at the close of business on or about Monday, August 22, 2016 (the “liquidation date”).
In anticipation of the liquidation, the Board also approved closing the Fund to most purchases and exchanges into the Fund after the close of business on or about June 20, 2016.
As always, we at Prudential Investments remain committed to helping investors like you reach your financial objectives by offering a wide range of investment choices for purchase and exchange. For more information about our family of funds, visit www.prudentialfunds.com.
If you have any questions, please contact your financial advisor, or call the Prudential Mutual Funds Service Center at (800) 225-1852, Monday through Friday, 8 a.m. to 6 p.m. Eastern Time.
Thank you for choosing Prudential Investments.
Sincerely,
Stuart S. Parker, President
Prudential International Real Estate Fund
June 15, 2016
Prudential International Real Estate Fund | 3 |
Your Fund’s Performance (unaudited)
Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852.
Cumulative Total Returns (Without Sales Charges) as of 4/30/16 | ||||||||
Six Months (%) | One Year (%) | Five Years (%) | Since Inception (%) | |||||
Class A | 0.46 | –6.15 | 13.82 | 19.51 (12/21/10) | ||||
Class B | 0.05 | –6.95 | 8.96 | 14.19 (12/21/10) | ||||
Class C | 0.37 | –6.28 | 12.85 | 18.27 (12/21/10) | ||||
Class Z | 0.55 | –5.93 | 14.62 | 20.47 (12/21/10) | ||||
FTSE EPRA/NAREIT Developed ex-US Net Index | 3.35 | –2.87 | 25.10 | 31.69 | ||||
MSCI EAFE ND Index | –3.07 | –9.32 | 8.75 | 19.13 | ||||
Lipper Equity International Real Estate Funds Average | 0.80 | –4.96 | 21.98 | 28.68 | ||||
Average Annual Total Returns (With Sales Charges) as of 3/31/16 | ||||||||
One Year (%) | Five Years (%) | Since Inception (%) | ||||||
Class A | –9.67 | 1.93 | 2.00 (12/21/10) | |||||
Class B | –9.91 | 2.02 | 2.06 (12/21/10) | |||||
Class C | –5.47 | 2.90 | 2.90 (12/21/10) | |||||
Class Z | –4.17 | 3.23 | 3.26 (12/21/10) | |||||
FTSE EPRA/NAREIT Developed ex-US Net Index | –2.27 | 4.91 | 4.82 | |||||
MSCI EAFE ND Index | –8.27 | 2.29 | 2.83 | |||||
Lipper Equity International Real Estate Funds Average | –3.00 | 4.57 | 4.47 |
Source: Prudential Investments LLC and Lipper Inc.
Inception returns are provided for any share class with less than 10 calendar years of returns.
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The returns in the tables do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or following the redemption of Fund shares. The average annual total returns take into account applicable sales charges, which are described for each share class in the table below.
Class A | Class B* | Class C | Class Z | |||||
Maximum initial sales charge | 5.50% of the public offering price | None | None | None | ||||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or net asset value at redemption) | 1% on sales of $1 million or more made within 12 months of purchase | 5% (Yr. 1) 4% (Yr. 2) 3% (Yr. 3) 2% (Yr. 4) 1% (Yr. 5/6) 0% (Yr. 7) | 1% on sales made within 12 months of purchase | None | ||||
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | .30% (.25% currently) | 1% | 1% | None |
*Class B shares are closed to all purchase activity and no additional Class B shares may be purchased or acquired except by exchange from Class B shares of another Fund or through dividend or capital gains reinvestment.
Benchmark Definitions
FTSE EPRA/NAREIT Developed ex-US Net Index—The Financial Times Stock Exchange European Public Real Estate Association/National Association of Real Estate Investment Trusts (FTSE EPRA/NAREIT) Developed ex-US Net Total Return Index is an unmanaged index that tracks the performance of listed real estate investment trusts (REITs) and real estate companies globally, excluding the US.
Morgan Stanley Capital International Europe, Australasia, and Far East Net Dividend Index—The Morgan Stanley Capital International Europe, Australasia, and Far East Net Dividend Index (MSCI EAFE ND Index) is an unmanaged, weighted index of performance that reflects stock price movements of developed-country markets in Europe, Australasia, and the Far East. It gives an indication of how foreign stocks have performed. The MSCI EAFE ND Index reflects the impact of the maximum withholding taxes on reinvested dividends.
Lipper Equity International Real Estate Funds Average—The Lipper Equity International Real Estate Funds Average (Lipper Average) is based on the average return of all funds in the Lipper Equity International Real Estate Funds category for the periods noted. Funds in the Lipper Average invest at least 75% of their equity portfolios in shares of companies engaged in the real estate industry that are strictly outside of the US or whose securities are principally traded outside of the US.
Investors cannot invest directly in an index or average. The returns for the Indexes would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the
Prudential International Real Estate Fund | 5 |
Your Fund’s Performance (continued)
Lipper Average reflect the deduction of operating expenses of a mutual fund, but not sales charges or taxes. The Since Inception returns for the Indexes and the Lipper Average are measured from the closest month-end to the inception date for the indicated share class.
Five Largest Holdings expressed as a percentage of net assets as of 4/30/16 (%) | ||||
Mitsui Fudosan Co. Ltd., Diversified Real Estate Activities | 4.9 | |||
Sun Hung Kai Properties Ltd., Diversified Real Estate Activities | 4.8 | |||
Unibail-Rodamco SE, REIT, Retail REITs | 4.7 | |||
Mitsubishi Estate Co. Ltd., Diversified Real Estate Activities | 4.2 | |||
Vonovia SE, Real Estate Operating Companies | 3.6 |
Holdings reflect only long-term investments and are subject to change.
Five Largest Industries expressed as a percentage of net assets as of 4/30/16 (%) | ||||
Retail REITs | 30.2 | |||
Diversified Real Estate Activities | 17.8 | |||
Real Estate Operating Companies | 13.7 | |||
Office REITs | 12.2 | |||
Diversified REITs | 8.6 |
Industry weightings reflect only long-term investments and are subject to change.
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Fees and Expenses (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution, and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on November 1, 2015, at the beginning of the period, and held through the six-month period ended April 30, 2016. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of Prudential Investments funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value, as these
Prudential International Real Estate Fund | 7 |
Fees and Expenses (continued)
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.
Prudential International Real Estate Fund | Beginning Account Value November 1, 2015 | Ending Account Value April 30, 2016 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,004.60 | 1.61 | % | $ | 8.02 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,016.86 | 1.61 | % | $ | 8.07 | ||||||||||
Class B | Actual | $ | 1,000.00 | $ | 1,000.50 | 2.36 | % | $ | 11.74 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,013.13 | 2.36 | % | $ | 11.81 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,003.70 | 1.61 | % | $ | 8.02 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,016.86 | 1.61 | % | $ | 8.07 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,005.50 | 1.36 | % | $ | 6.78 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,018.10 | 1.36 | % | $ | 6.82 |
*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 182 days in the six-month period ended April 30, 2016, and divided by the 366 days in the Fund’s fiscal year ending October 31, 2016 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
The Fund’s annualized expense ratios for the six-month period ended April 30, 2016, are as follows:
Class | Gross Operating Expenses (%) | Net Operating Expenses (%) | ||
A | 2.18 | 1.61 | ||
B | 2.88 | 2.36 | ||
C | 2.13 | 1.61 | ||
Z | 1.88 | 1.36 |
Net operating expenses shown above reflect any fee waivers and/or expense reimbursements. Additional information on Fund expenses and any fee waivers and/or expense reimbursements can be found in the “Financial Highlights” tables in this report and in the Notes to the Financial Statements in this report.
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Portfolio of Investments (unaudited)
as of April 30, 2016
Description | Shares | Value (Note 1) | ||||||
LONG-TERM INVESTMENTS 102.5% | ||||||||
COMMON STOCKS | ||||||||
Australia 13.8% | ||||||||
Dexus Property Group, REIT | 79,951 | $ | 509,783 | |||||
Goodman Group, REIT | 103,539 | 539,426 | ||||||
Investa Office Fund, REIT | 33,602 | 106,099 | ||||||
LendLease Group | 5,803 | 55,742 | ||||||
Mirvac Group, REIT | 153,130 | 216,654 | ||||||
Scentre Group, REIT | 214,343 | 760,817 | ||||||
Stockland, REIT | 93,688 | 309,874 | ||||||
Vicinity Centres, REIT | 265,116 | 666,395 | ||||||
Westfield Corp., REIT | 131,581 | 1,004,967 | ||||||
|
| |||||||
4,169,757 | ||||||||
Canada 5.8% | ||||||||
Boardwalk Real Estate Investment Trust, REIT | 9,509 | 406,976 | ||||||
Brookfield Canada Office Properties, REIT | 9,138 | 200,938 | ||||||
Canadian Apartment Properties, REIT | 32,084 | 762,785 | ||||||
Chartwell Retirement Residences, UTS, REIT | 35,406 | 390,265 | ||||||
|
| |||||||
1,760,964 | ||||||||
China 0.2% | ||||||||
China Overseas Land & Investment Ltd. | 22,000 | 69,834 | ||||||
France 7.5% | ||||||||
Fonciere des Regions, REIT* | 2,589 | 244,936 | ||||||
Klepierre, REIT | 8,339 | 392,206 | ||||||
Mercialys SA, REIT | 9,134 | 203,452 | ||||||
Unibail-Rodamco SE, REIT | 5,281 | 1,415,554 | ||||||
|
| |||||||
2,256,148 | ||||||||
Germany 9.6% | ||||||||
ADO Properties SA* | 7,036 | 231,628 | ||||||
Alstria Office REIT-AG, REIT* | 16,548 | 232,364 | ||||||
Deutsche Wohnen AG | 15,685 | 480,934 | ||||||
LEG Immobilien AG* | 4,509 | 418,275 | ||||||
TLG Immobilien AG | 15,917 | 337,159 | ||||||
VIB Vermoegen AG | 4,994 | 103,818 | ||||||
Vonovia SE | 32,663 | 1,101,014 | ||||||
|
| |||||||
2,905,192 | ||||||||
Hong Kong 11.0% | ||||||||
Henderson Land Development Co. Ltd. | 49,679 | 309,626 | ||||||
Hongkong Land Holdings Ltd. | 71,100 | 451,485 |
See Notes to Financial Statements.
Prudential International Real Estate Fund | 9 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Description | Shares | Value (Note 1) | ||||||
COMMON STOCKS (Continued) | ||||||||
Hong Kong (cont’d.) | ||||||||
Link REIT (The), REIT | 143,500 | $ | 870,597 | |||||
Sun Hung Kai Properties Ltd. | 115,500 | 1,455,661 | ||||||
Wharf Holdings Ltd. (The) | 45,000 | 243,227 | ||||||
|
| |||||||
3,330,596 | ||||||||
Ireland 2.4% | ||||||||
Green REIT PLC, REIT | 111,654 | 184,360 | ||||||
Hibernia REIT PLC, REIT | 169,132 | 249,635 | ||||||
Irish Residential Properties REIT PLC, REIT | 231,807 | 297,283 | ||||||
|
| |||||||
731,278 | ||||||||
Japan 29.4% | ||||||||
Activia Properties, Inc., REIT | 89 | 478,212 | ||||||
Advance Residence Investment, REIT | 48 | 129,282 | ||||||
Daito Trust Construction Co. Ltd. | 900 | 127,289 | ||||||
Daiwa House REIT Investment Corp., REIT | 9 | 48,294 | ||||||
Frontier Real Estate Investment Corp., REIT | 61 | 305,972 | ||||||
GLP J-REIT, REIT | 334 | 405,712 | ||||||
Hoshino Resorts REIT Inc., REIT | 8 | 97,488 | ||||||
Invincible Investment Corp.,REIT | 567 | 430,541 | ||||||
Japan Excellent, Inc., REIT | 137 | 195,135 | ||||||
Japan Hotel REIT Investment Corp., REIT | 465 | 419,459 | ||||||
Japan Real Estate Investment Corp., REIT | 57 | 354,940 | ||||||
Japan Retail Fund Investment Corp., REIT | 279 | 685,467 | ||||||
Kenedix Retail REIT Corp., REIT | 358 | 944,109 | ||||||
Lasalle Logiport REIT, REIT* | 86 | 82,120 | ||||||
Mitsubishi Estate Co. Ltd. | 66,000 | 1,254,173 | ||||||
Mitsui Fudosan Co. Ltd. | 61,000 | 1,489,769 | ||||||
Nippon Building Fund, Inc., REIT | 92 | 582,820 | ||||||
Nippon Prologis REIT, Inc., REIT | 72 | 172,644 | ||||||
Orix J-REIT, Inc., REIT | 118 | 196,541 | ||||||
Sumitomo Realty & Development Co. Ltd. | 16,000 | 465,220 | ||||||
|
| |||||||
8,865,187 | ||||||||
Netherlands 0.9% | ||||||||
Eurocommercial Properties NV, REIT | 5,559 | 259,621 | ||||||
Singapore 3.2% | ||||||||
Ascendas Real Estate Investment Trust, REIT | 177,638 | 324,205 | ||||||
Cache Logistics Trust, REIT | 244,500 | 157,135 | ||||||
Keppel REIT, REIT | 390,050 | 303,982 | ||||||
Mapletree Commercial Trust, REIT | 165,000 | 183,905 | ||||||
|
| |||||||
969,227 |
See Notes to Financial Statements.
10 |
Description | Shares | Value (Note 1) | ||||||
COMMON STOCKS (Continued) | ||||||||
Spain 0.6% | ||||||||
Axiare Patrimonio SOCIMI SA, REIT | 11,545 | $ | 175,822 | |||||
Sweden 2.9% | ||||||||
Atrium Ljungberg AB (Class B Stock) | 8,100 | 128,410 | ||||||
Fabege AB | 13,129 | 219,246 | ||||||
Hufvudstaden AB (Class A Stock) | 14,000 | 217,259 | ||||||
Kungsleden AB | 26,624 | 183,269 | ||||||
Pandox AB* | 6,819 | 115,737 | ||||||
|
| |||||||
863,921 | ||||||||
Switzerland 0.9% | ||||||||
PSP Swiss Property AG | 2,701 | 260,496 | ||||||
United Kingdom 14.3% | ||||||||
Big Yellow Group PLC, REIT | 28,308 | 333,453 | ||||||
British Land Co. PLC (The), REIT | 60,148 | 632,849 | ||||||
Derwent London PLC, REIT | 8,542 | 410,549 | ||||||
Empiric Student Property PLC, REIT | 88,964 | 145,914 | ||||||
Great Portland Estates PLC, REIT | 32,774 | 363,406 | ||||||
Hammerson PLC, REIT | 57,166 | 489,223 | ||||||
Kennedy Wilson Europe Real Estate PLC | 7,122 | 113,414 | ||||||
Land Securities Group PLC, REIT | 53,498 | 886,112 | ||||||
Segro PLC, REIT | 67,231 | 410,774 | ||||||
Shaftesbury PLC, REIT | 23,423 | 311,562 | ||||||
Tritax Big Box REIT PLC, REIT | 117,021 | 232,028 | ||||||
|
| |||||||
4,329,284 | ||||||||
|
| |||||||
TOTAL LONG-TERM INVESTMENTS | 30,947,327 | |||||||
|
| |||||||
SHORT-TERM INVESTMENT | ||||||||
AFFILIATED MUTUAL FUND | ||||||||
Prudential Investment Portfolios 2 - Prudential Core Ultra Short Bond Fund | 701 | 701 | ||||||
TOTAL INVESTMENTS 102.5% | 30,948,028 | |||||||
Liabilities in excess of other assets (2.5)% | (758,802 | ) | ||||||
|
| |||||||
NET ASSETS 100.0% | $ | 30,189,226 | ||||||
|
|
See Notes to Financial Statements.
Prudential International Real Estate Fund | 11 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
The following abbreviations are used in the semiannual report:
OTC—Over-the-counter
REIT—Real Estate Investment Trust
UTS—Unit Trust Security
* | Non-income producing security. |
(a) | Prudential Investments LLC, the manager of the Fund, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Ultra Short Bond Fund. |
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.
Level 2—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 April 30, 2016 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Common Stocks | ||||||||||||
Australia | $ | — | $ | 4,169,757 | $ | — | ||||||
Canada | 1,760,964 | — | — | |||||||||
China | — | 69,834 | — | |||||||||
France | — | 2,256,148 | — | |||||||||
Germany | 335,446 | 2,569,746 | — | |||||||||
Hong Kong | 451,485 | 2,879,111 | — | |||||||||
Ireland | 731,278 | — | — | |||||||||
Japan | 82,120 | 8,783,067 | — | |||||||||
Netherlands | — | 259,621 | — | |||||||||
Singapore | — | 969,227 | — | |||||||||
Spain | 175,822 | — | — | |||||||||
Sweden | — | 863,921 | — | |||||||||
Switzerland | — | 260,496 | — | |||||||||
United Kingdom | 377,942 | 3,951,342 | — | |||||||||
Affiliated Mutual Fund | 701 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 3,915,758 | $ | 27,032,270 | $ | — | ||||||
|
|
|
|
|
|
See Notes to Financial Statements.
12 |
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of April 30, 2016 were as follows:
Retail REITs | 30.2 | % | ||
Diversified Real Estate Activities | 17.8 | |||
Real Estate Operating Companies | 13.7 | |||
Office REITs | 12.2 | |||
Diversified REITs | 8.6 | |||
Industrial REITs | 7.8 | |||
Residential REITs | 7.1 | |||
Hotel & Resort REITs | 1.7 | |||
Health Care Facilities | 1.3 | % | ||
Specialized REITs | 1.1 | |||
Real Estate Development | 0.6 | |||
Hotels, Resorts & Cruise Lines | 0.4 | |||
|
| |||
102.5 | ||||
Liabilities in excess of other assets | (2.5 | ) | ||
|
| |||
100.0 | % | |||
|
|
See Notes to Financial Statements.
Prudential International Real Estate Fund | 13 |
Statement of Assets & Liabilities (unaudited)
as of April 30, 2016
Assets | ||||
Investments at value: | ||||
Unaffiliated investments (cost $26,855,409) | $ | 30,947,327 | ||
Affiliated investments (cost $701) | 701 | |||
Dividends receivable | 115,340 | |||
Tax reclaim receivable | 43,908 | |||
Receivable for Fund shares sold | 97 | |||
Prepaid expenses | 219 | |||
|
| |||
Total assets | 31,107,592 | |||
|
| |||
Liabilities | ||||
Loan payable | 782,000 | |||
Accrued expenses and other liabilities | 74,890 | |||
Payable for investments purchased | 47,214 | |||
Management fee payable | 11,203 | |||
Payable for Fund shares reacquired | 2,135 | |||
Distribution fee payable | 443 | |||
Affiliated transfer agent fee payable | 334 | |||
Loan interest payable (Note 7) | 147 | |||
|
| |||
Total liabilities | 918,366 | |||
|
| |||
Net Assets | $ | 30,189,226 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 3,006 | ||
Paid-in capital in excess of par | 30,970,449 | |||
|
| |||
30,973,455 | ||||
Distributions in excess of net investment income | (353,752 | ) | ||
Accumulated net realized loss on investment and foreign currency transactions | (4,526,414 | ) | ||
Net unrealized appreciation on investments and foreign currencies | 4,095,937 | |||
|
| |||
Net assets, April 30, 2016 | $ | 30,189,226 | ||
|
|
See Notes to Financial Statements.
14 |
Class A | ||||
Net asset value and redemption price per share, | $ | 10.10 | ||
Maximum sales charge (5.50% of offering price) | 0.59 | |||
|
| |||
Maximum offering price to public | $ | 10.69 | ||
|
| |||
Class B | ||||
Net asset value, offering price and redemption price per share, | $ | 10.03 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share, | $ | 10.03 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share, | $ | 10.04 | ||
|
|
See Notes to Financial Statements.
Prudential International Real Estate Fund | 15 |
Statement of Operations (unaudited)
Six Months Ended April 30, 2016
Net Investment Income | ||||
Income | ||||
Unaffiliated dividend income (net of foreign withholding taxes of $45,216) | $ | 494,647 | ||
Affiliated dividend income | 1,393 | |||
|
| |||
Total income | 496,040 | |||
|
| |||
Expenses | ||||
Management fee | 161,793 | |||
Distribution fee—Class A | 1,419 | |||
Distribution fee—Class B | 478 | |||
Distribution fee—Class C | 637 | |||
Custodian and accounting fees | 51,000 | |||
Registration fees | 33,000 | |||
Audit fee | 15,000 | |||
Shareholders’ reports | 11,000 | |||
Legal fees and expenses | 9,000 | |||
Trustees’ fees | 6,000 | |||
Transfer agent’s fees and expenses (including affiliated expense of $1,000) | 3,000 | |||
Loan interest expense | 1,643 | |||
Miscellaneous | 13,025 | |||
|
| |||
Total expenses | 306,995 | |||
Less: Management fee waiver and/or expense reimbursement | (84,255 | ) | ||
Distribution fee waiver—Class A | (236 | ) | ||
|
| |||
Net expenses | 222,504 | |||
|
| |||
Net investment income | 273,536 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investment And Foreign Currency Transactions | ||||
Net realized loss on: | ||||
Investment transactions | (1,601,566 | ) | ||
Foreign currency transactions | (4,964 | ) | ||
|
| |||
(1,606,530 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,234,305 | |||
Foreign currencies | 5,223 | |||
|
| |||
1,239,528 | ||||
|
| |||
Net loss on investment and foreign currency transactions | (367,002 | ) | ||
|
| |||
Net Decrease In Net Assets Resulting From Operations | $ | (93,466 | ) | |
|
|
See Notes to Financial Statements.
16 |
Statement of Changes in Net Assets (unaudited)
Six Months Ended April 30, 2016 | Year Ended October 31, 2015 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income | $ | 273,536 | $ | 526,536 | ||||
Net realized loss on investment and foreign currency transactions | (1,606,530 | ) | (837,752 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments and foreign currencies | 1,239,528 | (996,956 | ) | |||||
|
|
|
| |||||
Net decrease in net assets resulting from operations | (93,466 | ) | (1,308,172 | ) | ||||
|
|
|
| |||||
Dividends from net investment income (Note 1) | ||||||||
Class A | (14,638 | ) | (97,062 | ) | ||||
Class B | (572 | ) | (3,274 | ) | ||||
Class C | (8,307 | ) | (20,385 | ) | ||||
Class Z | (559,681 | ) | (1,103,587 | ) | ||||
|
|
|
| |||||
(583,198 | ) | (1,224,308 | ) | |||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) (Note 6) | ||||||||
Net proceeds from shares sold | 4,518,083 | 15,229,157 | ||||||
Net asset value of shares issued in reinvestment of dividends and distributions | 579,669 | 1,208,479 | ||||||
Cost of shares reacquired | (9,369,930 | ) | (7,801,618 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in net assets from Fund share transactions | (4,272,178 | ) | 8,636,018 | |||||
|
|
|
| |||||
Total increase (decrease) | (4,948,842 | ) | 6,103,538 | |||||
Net Assets: | ||||||||
Beginning of period | 35,138,068 | 29,034,530 | ||||||
|
|
|
| |||||
End of period | $ | 30,189,226 | $ | 35,138,068 | ||||
|
|
|
|
See Notes to Financial Statements.
Prudential International Real Estate Fund | 17 |
Notes to Financial Statements (unaudited)
Prudential Investment Portfolios 9 (the “Trust”) is an open-end management investment company, registered under the Investment Company Act of 1940, as amended, (“1940 Act”). The Trust currently consists of five portfolios: Prudential Select Real Estate, Prudential International Real Estate Fund, Prudential QMA Large-Cap Core Equity Fund (formerly Prudential Large-Cap Core Equity), Prudential Absolute Return Bond Fund and Prudential Real Estate Income Fund. These financial statements relate only to Prudential International Real Estate Fund (the “Fund”). The financial statements of the other portfolios are not presented herein. The Trust was organized as a Delaware business trust on September 18, 1998. The Fund commenced operations on December 21, 2010. The Fund’s investment objective is to seek capital appreciation and income.
Note 1. Accounting Policies
The Fund follows investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The following accounting policies conform to U.S. generally accepted accounting principles. The Fund consistently follows such policies in the preparation of its financial statements.
Securities Valuation: The Fund holds securities and other assets 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 Board of Trustees (the “Board”) has adopted Valuation Procedures for security valuation under which fair valuation responsibilities have been delegated to Prudential Investments LLC (“PI” or “Manager”). Under the current Valuation Procedures, the established Valuation Committee is responsible for supervising the valuation of portfolio securities and other assets. 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.
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 table following the Portfolio of Investments.
Common and preferred stocks, exchange-traded funds, and derivative instruments such as futures or options that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange where the security
18 |
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.
Common and preferred stocks traded on foreign securities exchanges are valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy. The models generate an evaluated adjustment factor for each security, which can be applied to the local closing price to adjust it for post closing market movements. Utilizing that evaluated adjustment factor, the vendor provides an evaluated price to the extent that the valuation meets the established confidence level for each security. Such confidence level is a measure of the probability of a relationship between a given equity security and the factors used in the models. If the confidence level is not met or the vendor does not provide an evaluated price, securities are valued in accordance with exchange-traded common and preferred stocks discussed above.
Participatory notes (P-notes) are generally valued based upon the value of a related underlying security that trades actively in the market and are classified as Level 2 in the fair value hierarchy.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the OTC market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors provide these prices after 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. Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.
Bank loans traded in the OTC market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors utilize broker/dealer quotations and provide prices based on the average of such quotations. Bank loans valued using such vendor prices are generally classified as Level 2 in the fair value hierarchy.
Prudential International Real Estate Fund | 19 |
Notes to Financial Statements (unaudited) (continued)
OTC derivative instruments are generally valued using pricing vendor services, which derive the valuation based on inputs such as underlying asset prices, indices, spreads, interest rates, and exchange rates. These instruments are categorized as Level 2 in the fair value hierarchy.
Centrally cleared swaps listed or traded on a multilateral or trade facility platform, such as a registered exchange, are generally valued at the daily settlement price determined by the respective exchange. These securities are classified as Level 2 in the fair value hierarchy, as the daily settlement price is not public.
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 investment adviser regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values.
Foreign Currency Translation: The books and records of the Fund are maintained in U.S dollars. Foreign currency amounts are translated into U.S. dollars on the following basis:
(i) market value of investment securities, other assets and liabilities at the current daily rates of exchange;
(ii) purchases and sales of investment securities, income and expenses at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not generally isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities held at the end of the period. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of
20 |
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. Notwithstanding the above, the Fund does isolate the effect of fluctuations in foreign currency exchange rates when determining the gain (loss) upon the sale or maturity of foreign currency denominated debt obligations; such amounts are included in net realized gain (loss) on foreign currency transactions.
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from holdings of foreign currencies, forward currency contracts, disposition of foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference between the amounts of interest, dividends and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates are reflected as a component of net unrealized appreciation (depreciation) on foreign currencies.
Concentration of Risk: Foreign security and currency transactions may involve certain considerations and risk not typically associated with those of domestic origin as a result of, among other factors, the possibility of political and economic instability or the level of the governmental supervision and regulation of foreign securities markets.
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 identified cost basis. Dividend income is recorded on the ex-date. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on the accrual basis. Expenses are recorded on an accrual basis, which may require the use of certain estimates by management that may differ from actual.
Net investment income (loss) (other than distribution fees which are charged directly to the respective class) 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.
REITs: The Fund invests in real estate investment trusts (“REITs”), which report information on the source of their distributions annually. Based on current and historical information, a portion of distributions received from REITs during the year is estimated to be dividend income, capital gain or return of capital and is recorded accordingly. These estimates are adjusted when the actual source of distributions are disclosed by the REITs.
Dividends and Distributions: The Fund expects to pay dividends of net investment income and distributions of net realized capital and currency gains, if any, annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from generally accepted accounting principles, are recorded on the ex-date. Permanent book/tax differences relating to income and gains are reclassified
Prudential International Real Estate Fund | 21 |
Notes to Financial Statements (unaudited) (continued)
amongst undistributed net investment income (loss), accumulated net realized gain (loss) and paid-in capital in excess of par, as appropriate.
Taxes: For federal income tax purposes, the Fund is treated as a separate tax paying entity. It is the Fund’s policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net investment income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required. Withholding taxes on foreign dividends are recorded, net of reclaimable amounts, at the time the related income is earned.
Estimates: The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
Note 2. Agreements
The Fund has a management agreement with PI. Pursuant to this agreement, PI has responsibility for all the investment advisory services and supervises the subadviser’s performance of such services. PI has entered into a subadvisory agreement with PGIM Real Estate, formerly known as Prudential Real Estate Investors (“PREI”), which is a business unit of PGIM, Inc. The subadvisory agreement provides that PGIM Real Estate will furnish investment advisory services in connection with the management of the Fund. In connection therewith, PGIM Real Estate is obligated to keep certain books and records of the Fund. PI pays for the services of PGIM Real Estate, the cost of compensation of officers of the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears all other costs and expenses. Prior to January 4, 2016, PGIM, Inc. was known as Prudential Investment Management, Inc. (“PIM”).
Effective October 1, 2015, the management fee paid to PI is accrued daily and payable monthly at an annual rate of 1.00% of the Fund’s average daily net assets up to and including $1 billion, .98% of the next $2 billion, .96% of the next $2 billion, .95% of the next $5 billion and .94% of the Fund’s average daily net assets in excess of $10 billion. Prior to October 1, 2015, the management fee paid to PI is accrued daily and payable monthly at an annual rate of 1.00% of the Fund’s average daily net assets. The effective management fee rate before any waivers and/or expense reimbursement was 1.00% for the six months ended April 30, 2016. The effective management fee rate, net of waivers and/or expense reimbursement, was .48%.
PI has contractually agreed through February 28, 2017 to limit net annual Fund operating expenses (exclusive of distribution and service (12b-1) fees, extraordinary and certain other expenses, such as taxes, interest and brokerage commissions) of each class of shares to 1.35% of the Fund’s average daily net assets.
22 |
The Fund has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”), which acts as the distributor of the Class A, Class B, Class C and Class Z shares of the Fund. The Fund compensates PIMS for distributing and servicing the Fund’s Class A, Class B and Class C shares, pursuant to 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 shares of the Fund.
Pursuant to the Distribution Plans, the Fund compensates PIMS for distribution related activities at an annual rate of up to .30%, 1%, and 1% of the average daily net assets of the Class A, B, and C shares, respectively. PIMS has contractually agreed through February 28, 2017 to limit such fees to .25% of the average daily net assets of the Class A shares.
PIMS has advised the Fund that it has received $1,315 in front-end sales charges resulting from sales of Class A shares during the six months ended April 30, 2016. From these fees, PIMS paid such sales charges to affiliated broker-dealers, which in turn paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Fund that for the six months ended April 30, 2016, it has received $20 in contingent deferred sales charges imposed upon redemptions by certain Class B shareholders.
Management has received the maximum allowable amount of sales charges for Class C in accordance with regulatory limits.
PI, PGIM, Inc. and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund’s transfer agent. Transfer agent 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 permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. Such transactions are subject to ratification by the Board.
The Fund invests in the Prudential Core Ultra Short Bond Fund, (formerly known as Prudential Core Taxable Money Market Fund), (the “Core Fund”), a portfolio of the Prudential Investment Portfolios 2, registered under the 1940 Act, and managed by PI. Earnings from the Core Fund are disclosed on the Statement of Operations as “Affiliated dividend income”.
Prudential International Real Estate Fund | 23 |
Notes to Financial Statements (unaudited) (continued)
Note 4. Portfolio Securities
The cost of purchases and proceeds from sales of portfolio securities, other than short-term investments, for the six months ended April 30, 2016, were $9,850,349 and $13,268,796, respectively.
Note 5. Tax Information
The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of April 30, 2016 were as follows:
Tax Basis | $ | 27,607,187 | ||
|
| |||
Appreciation | 3,604,369 | |||
Depreciation | (263,528 | ) | ||
|
| |||
Net Unrealized Appreciation | $ | 3,340,841 | ||
|
|
The book basis may differ from tax basis due to certain tax-related adjustments.
Under the Regulated Investment Company Modernization Act of 2010 (‘the Act”), the Fund is permitted to carryforward capital losses realized on or after November 1, 2011 (“post-enactment losses”) for an unlimited period. Post-enactment losses are required to be utilized before the utilization of losses incurred prior to the effective date of the Act. As a result of this ordering rule, capital loss carryforwards related to taxable years ending before October 31, 2012 (“pre-enactment losses”) may have an increased likelihood to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law. No capital gains distributions are expected to be paid to shareholders until net gains have been realized in excess of such losses. As of October 31, 2015, the pre and post-enactment losses were approximately:
Post-Enactment Losses: | $ | 2,478,000 | ||
|
| |||
Pre-Enactment Losses: | ||||
Expiring 2018 | $ | 190,000 | ||
|
|
Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years and has concluded that no provisions for income tax is required in the Fund’s financial statements for the current reporting period. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
24 |
Note 6. Capital
The Fund offers Class A, Class B, Class C and Class Z shares. Class A shares are sold subject to a maximum front end sales charge of up to 5.50%. Investors who purchase Class A shares in an amount of $1 million or more and sell these shares within 12 months of purchase are not subject to an initial sales charge, but are subject to a contingent deferred sales charge (“CDSC”) of 1%. The Class A CDSC is waived for purchases by certain retirement and/or benefit plans. Class B shares are sold with a CDSC which declines from 5% to zero depending on the period of time the shares are held. Class C shares are sold with a CDSC of 1% on shares redeemed within the first 12 months after purchase. Class B shares automatically convert to Class A shares on a quarterly basis approximately seven years after purchase. Class B shares are closed to new purchases. A special exchange privilege is also available for shareholders who qualified to purchase Class A shares at net asset value. Class Z shares are not subject to any sales or redemption charge and are offered exclusively for sale to a limited group of investors.
Under certain circumstances, an exchange may be made from specified share classes of the Fund to one or more other share classes of the Fund.
The Trust has authorized an unlimited number of shares of beneficial interest at $.001 par value per share.
As of April 30, 2016, Prudential, through its affiliates, owned 114 Class B shares, 118 Class C shares and 1,199,881 Class Z shares of the Fund.
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Six months ended April 30, 2016: | ||||||||
Shares sold | 5,927 | $ | 56,906 | |||||
Shares issued in reinvestment of dividends and distributions | 1,193 | 11,265 | ||||||
Shares reacquired | (10,679 | ) | (101,560 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (3,559 | ) | (33,389 | ) | ||||
Shares issued upon conversion from other share class(es) | 39 | 373 | ||||||
Shares reacquired upon conversion into other share class(es) | (935 | ) | (9,121 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (4,455 | ) | $ | (42,137 | ) | |||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 32,836 | $ | 349,714 | |||||
Shares issued in reinvestment of dividends and distributions | 8,043 | 81,233 | ||||||
Shares reacquired | (166,568 | ) | (1,710,762 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (125,689 | ) | (1,279,815 | ) | ||||
Shares issued upon conversion from other share class(es) | 789 | 8,264 | ||||||
Shares reacquired upon conversion into other share class(es) | (5,937 | ) | (61,227 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (130,837 | ) | $ | (1,332,778 | ) | |||
|
|
|
|
Prudential International Real Estate Fund | 25 |
Notes to Financial Statements (unaudited) (continued)
Class B | Shares | Amount | ||||||
Six months ended April 30, 2016: | ||||||||
Shares sold | 9,307 | $ | 90,964 | |||||
Shares issued in reinvestment of dividends and distributions | 61 | 572 | ||||||
Shares reacquired | (1,970 | ) | (19,493 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 7,398 | 72,043 | ||||||
Shares reacquired upon conversion into other share class(es) | (39 | ) | (373 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 7,359 | $ | 71,670 | |||||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 913 | $ | 9,703 | |||||
Shares issued in reinvestment of dividends and distributions | 325 | 3,274 | ||||||
Shares reacquired | (1,690 | ) | (17,511 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (452 | ) | (4,534 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (795 | ) | (8,264 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (1,247 | ) | $ | (12,798 | ) | |||
|
|
|
| |||||
Class C | ||||||||
Six months ended April 30, 2016: | ||||||||
Shares sold | 599 | $ | 5,602 | |||||
Shares issued in reinvestment of dividends and distributions | 888 | 8,307 | ||||||
Shares reacquired | (4,248 | ) | (39,587 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (2,761 | ) | (25,678 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (1,516 | ) | (13,914 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (4,277 | ) | $ | (39,592 | ) | |||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 13,351 | $ | 140,536 | |||||
Shares issued in reinvestment of dividends and distributions | 2,032 | 20,385 | ||||||
Shares reacquired | (8,554 | ) | (88,380 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 6,829 | $ | 72,541 | |||||
|
|
|
| |||||
Class Z | ||||||||
Six months ended April 30, 2016: | ||||||||
Shares sold | 473,725 | $ | 4,364,611 | |||||
Shares issued in reinvestment of dividends and distributions | 59,714 | 559,525 | ||||||
Shares reacquired | (984,427 | ) | (9,209,290 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (450,988 | ) | (4,285,154 | ) | ||||
Shares issued upon conversion from other share class(es) | 2,453 | 23,035 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (448,535 | ) | $ | (4,262,119 | ) | |||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 1,412,587 | $ | 14,729,204 | |||||
Shares issued in reinvestment of dividends and distributions | 109,919 | 1,103,587 | ||||||
Shares reacquired | (588,366 | ) | (5,984,965 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 934,140 | 9,847,826 | ||||||
Shares issued upon conversion from other share class(es) | 5,968 | 61,227 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 940,108 | $ | 9,909,053 | |||||
|
|
|
|
26 |
Note 7. Borrowings
The Fund, along with other affiliated registered investment companies (the “Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of $900 million for the period October 8, 2015 through October 6, 2016. The Funds pay an annualized commitment fee of .11% of the unused portion of the SCA. Prior to October 8, 2015, the Funds had another SCA that provided a commitment of $900 million and the Funds paid an annualized commitment fee of .075% of the unused portion of the SCA. Interest on any borrowings under the SCA is paid at contracted market rates. The Fund’s portion of the commitment fee for the unused amount is accrued daily and paid quarterly.
The Fund utilized the SCA during the six months ended April 30, 2016. The average daily balance for the 22 days that the Fund had loans outstanding during the period was $1,666,273, borrowed at a weighted average interest rate of 1.69%. The maximum loan outstanding amount during the period was $3,580,000. There was a balance of $782,000 outstanding at April 30, 2016.
Note 8. New Accounting Pronouncements
In May 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-07 regarding “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share”. The amendments in this update are effective for the Fund for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. ASU No. 2015-07 will eliminate the requirement to categorize investments in the fair value hierarchy if their fair value is measured at net asset value (“NAV”) per share (or its equivalent) using the practical expedient in the FASB’s fair value measurement guidance. Management has evaluated the implications of ASU No. 2015-07 and has determined that there is no impact on the financial statement disclosures.
In January 2016, the FASB issued ASU No. 2016-01 regarding “Recognition and Measurement of Financial Assets and Financial Liabilities”. The new guidance is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation and disclosure of financial instruments. The new standard affects all entities that hold financial assets or owe financial liabilities. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. At this time, management is evaluating the implications of ASU No. 2016-01 and its impact on the financial statements and disclosures has not yet been determined.
Prudential International Real Estate Fund | 27 |
Notes to Financial Statements (unaudited) (continued)
Note 9. Subsequent Event
The Board of Directors (the “Board”) of the Fund recently approved the liquidation of all outstanding shares of the Fund. The liquidation is scheduled to take place at the close of business on or about Monday, August 22, 2016 (the “liquidation date”).
28 |
Financial Highlights (unaudited)
Class A Shares | ||||||||||||||||||||||||||||
Six Months Ended April 30, | Year Ended October 31, | December 21, 2010(d) through October 31, | ||||||||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.21 | $11.03 | $10.96 | $10.33 | $9.20 | $10.00 | ||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income | .07 | .19 | .16 | .14 | .19 | .07 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (.03 | ) | (.60 | ) | .18 | 1.04 | 1.23 | (.87 | ) | |||||||||||||||||||
Total from investment operations | .04 | (.41 | ) | .34 | 1.18 | 1.42 | (.80 | ) | ||||||||||||||||||||
Less Dividends: | ||||||||||||||||||||||||||||
Dividends from net investment income | (.15 | ) | (.41 | ) | (.27 | ) | (.55 | ) | (.29 | ) | - | |||||||||||||||||
Net Asset Value, end of period | $10.10 | $10.21 | $11.03 | $10.96 | $10.33 | $9.20 | ||||||||||||||||||||||
Total Return(a): | .46% | (3.66)% | 3.27% | 11.67% | 16.39% | (8.00)% | ||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000) | $976 | $1,033 | $2,559 | $948 | $346 | $814 | ||||||||||||||||||||||
Average net assets (000) | $951 | $2,074 | $2,133 | $589 | $228 | $353 | ||||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.61% | (e)(g) | 1.60% | 1.60% | 1.60% | 1.60% | 1.60% | (e) | ||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 2.18% | (e) | 2.11% | 2.48% | 2.42% | 2.93% | 3.85% | (e) | ||||||||||||||||||||
Net investment income | 1.54% | (e) | 1.77% | 1.53% | 1.33% | 2.00% | .89% | (e) | ||||||||||||||||||||
Portfolio turnover rate | 30% | (f) | 46% | 48% | 37% | 21% | 30% | (f) |
(a) | Total return does not consider the effect 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. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | Does not include expenses of the underlying portfolio in which the Fund invests. |
(d) | Commencement of operations. |
(e) | Annualized. |
(f) | Not annualized. |
(g) | Includes 0.01% of loan interest expense. |
See Notes to Financial Statements.
Prudential International Real Estate Fund | 29 |
Financial Highlights (unaudited) (continued)
Class B Shares | ||||||||||||||||||||||||||||
Six Months Ended April 30, | Year Ended October 31, | December 21, through | ||||||||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.10 | $10.92 | $10.85 | $10.22 | $9.08 | $10.00 | ||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income | .05 | .08 | .08 | .06 | .08 | .11 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (.05 | ) | (.57 | ) | .18 | 1.04 | 1.27 | (1.03 | ) | |||||||||||||||||||
Total from investment operations | - | (.49 | ) | .26 | 1.10 | 1.35 | (.92 | ) | ||||||||||||||||||||
Less Dividends: | ||||||||||||||||||||||||||||
Dividends from net investment income | (.07 | ) | (.33 | ) | (.19 | ) | (.47 | ) | (.21 | ) | - | |||||||||||||||||
Net Asset Value, end of period | $10.03 | $10.10 | $10.92 | $10.85 | $10.22 | $9.08 | ||||||||||||||||||||||
Total Return(a): | .05% | (4.46)% | 2.50% | 11.01% | 15.63% | (9.20)% | ||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000) | $162 | $88 | $109 | $144 | $167 | $4 | ||||||||||||||||||||||
Average net assets (000) | $96 | $99 | $117 | $275 | $52 | $5 | ||||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 2.36% | (e)(g) | 2.35% | 2.35% | 2.35% | 2.35% | 2.35% | (e) | ||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 2.88% | (e) | 2.81% | 3.18% | 3.05% | 3.74% | 4.55% | (e) | ||||||||||||||||||||
Net investment income | 1.11% | (e) | .76% | .79% | .61% | .87% | 1.29% | (e) | ||||||||||||||||||||
Portfolio turnover rate | 30% | (f) | 46% | 48% | 37% | 21% | 30% | (f) |
(a) | Total return does not consider the effect 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. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | Does not include expenses of the underlying portfolio in which the Fund invests. |
(d) | Commencement of operations. |
(e) | Annualized. |
(f) | Not annualized. |
(g) | Includes 0.01% of loan interest expense. |
See Notes to Financial Statements.
30 |
Class C Shares | ||||||||||||||||||||||||||||
Six Months Ended April 30, | Year Ended October 31, | December 21, 2010(d) through October 31, | ||||||||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.14 | $10.96 | $10.89 | $10.25 | $9.10 | $10.00 | ||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income | .07 | .14 | .14 | .16 | .21 | .14 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (.03 | ) | (.55 | ) | .20 | 1.03 | 1.20 | (1.04 | ) | |||||||||||||||||||
Total from investment operations | .04 | (.41 | ) | .34 | 1.19 | 1.41 | (.90 | ) | ||||||||||||||||||||
Less Dividends: | ||||||||||||||||||||||||||||
Dividends from net investment income | (.15 | ) | (.41 | ) | (.27 | ) | (.55 | ) | (.26 | ) | - | |||||||||||||||||
Net Asset Value, end of period | $10.03 | $10.14 | $10.96 | $10.89 | $10.25 | $9.10 | ||||||||||||||||||||||
Total Return(a): | .47% | (3.69)% | 3.29% | 11.86% | 16.36% | (9.00)% | ||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000) | $522 | $571 | $542 | $211 | $20 | $30 | ||||||||||||||||||||||
Average net assets (000) | $513 | $551 | $365 | $222 | $23 | $23 | ||||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.61% | (e)(g) | 1.60% | 1.60% | 1.60% | 1.60% | 1.96% | (e) | ||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 2.13% | (e) | 2.06% | 2.43% | 2.31% | 2.86% | 4.16% | (e) | ||||||||||||||||||||
Net investment income | 1.50% | (e) | 1.36% | 1.35% | 1.45% | 2.31% | 1.68% | (e) | ||||||||||||||||||||
Portfolio turnover rate | 30% | (f) | 46% | 48% | 37% | 21% | 30% | (f) |
(a) | Total return does not consider the effect 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. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | Does not include expenses of the underlying portfolio in which the Fund invests. |
(d) | Commencement of operations. |
(e) | Annualized. |
(f) | Not annualized. |
(g) | Includes 0.01% of loan interest expense. |
See Notes to Financial Statements.
Prudential International Real Estate Fund | 31 |
Financial Highlights (unaudited) (continued)
Class Z Shares | ||||||||||||||||||||||||||||
Six Months Ended April 30, | Year Ended October 31, | December 21, 2010(d) through October 31, | ||||||||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $10.17 | $10.99 | $10.92 | $10.28 | $9.15 | $10.00 | ||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income | .08 | .16 | .19 | .17 | .22 | .18 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (.04 | ) | (.54 | ) | .17 | 1.04 | 1.22 | (1.03 | ) | |||||||||||||||||||
Total from investment operations | .04 | (.38 | ) | .36 | 1.21 | 1.44 | (.85 | ) | ||||||||||||||||||||
Less Dividends: | ||||||||||||||||||||||||||||
Dividends from net investment income | (.17 | ) | (.44 | ) | (.29 | ) | (.57 | ) | (.31 | ) | - | |||||||||||||||||
Net Asset Value, end of period | $10.04 | $10.17 | $10.99 | $10.92 | $10.28 | $9.15 | ||||||||||||||||||||||
Total Return(a): | .55% | (3.42)% | 3.55% | 12.08% | 16.82% | (8.50)% | ||||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000) | $28,529 | $33,446 | $25,824 | $20,848 | $18,994 | $13,233 | ||||||||||||||||||||||
Average net assets (000) | $30,981 | $32,071 | $21,323 | $20,388 | $14,068 | $12,252 | ||||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.36% | (e)(g) | 1.35% | 1.35% | 1.35% | 1.35% | 1.35% | (e) | ||||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.88% | (e) | 1.81% | 2.18% | 2.08% | 2.65% | 3.55% | (e) | ||||||||||||||||||||
Net investment income | 1.70% | (e) | 1.50% | 1.74% | 1.62% | 2.39% | 2.15% | (e) | ||||||||||||||||||||
Portfolio turnover rate | 30% | (f) | 46% | 48% | 37% | 21% | 30% | (f) |
(a) | 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. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | Does not include expenses of the underlying portfolio in which the Fund invests. |
(d) | Commencement of operations. |
(e) | Annualized. |
(f) | Not annualized. |
(g) | Includes 0.01% of loan interest expense. |
See Notes to Financial Statements.
32 |
n MAIL | n TELEPHONE | n WEBSITE | ||
655 Broad Street Newark, NJ 07102 | (800) 225-1852 | www.prudentialfunds.com |
PROXY VOTING |
The Board of Trustees of the Fund has delegated to the Fund’s investment subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at www.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 • Keith F. Hartstein • Michael S. Hyland • Stuart S. Parker • Richard A. Redeker • Stephen G. Stoneburn • Grace C. Torres |
OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • M. Sadiq Peshimam, Treasurer and Principal Financial and Accounting Officer • Raymond A. O’Hara, Chief Legal Officer • Deborah A. Docs, Secretary • Chad A. Earnst, Chief Compliance Officer • Theresa C. Thompson, Deputy Chief Compliance Officer • Richard W. Kinville, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • Amanda S. Ryan, Assistant Secretary • Andrew R. French, Assistant Secretary • Peter Parrella, Assistant Treasurer • Lana Lomuti, Assistant Treasurer • Linda McMullin, Assistant Treasurer • Kelly A. Coyne, Assistant Treasurer |
MANAGER | Prudential Investments LLC | 655 Broad Street Newark, NJ 07102 | ||
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INVESTMENT SUBADVISER | PGIM Real Estate | 7 Giralda Farms Madison, NJ 07940 | ||
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DISTRIBUTOR | Prudential Investment Management Services LLC | 655 Broad Street Newark, NJ 07102 | ||
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CUSTODIAN | The Bank of New York Mellon | One Wall Street New York, NY 10286 | ||
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TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
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FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 | ||
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An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go to www.prudentialfunds.com/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH TRUSTEES |
Shareholders can communicate directly with the Board of Trustees by writing to the Chair of the Board, Prudential International Real Estate Fund, Prudential Investments, Attn: Board of Trustees, 655 Broad Street, Newark, NJ 07102. Shareholders can communicate directly with an individual Trustee by writing to the same address. Communications are not screened before being delivered to the addressee. |
AVAILABILITY OF PORTFOLIO SCHEDULE |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation and location of the Public Reference Room may be obtained by calling (202) 551-8090. The Fund’s schedule of portfolio holdings is also available on the Fund’s website as of the end of each month no sooner than 15 days after the end of the month. |
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PRUDENTIAL INTERNATIONAL REAL ESTATE FUND
SHARE CLASS | A | B | C | Z | ||||
NASDAQ | PUEAX | PUEBX | PUECX | PUEZX | ||||
CUSIP | 74441J803 | 74441J886 | 74441J878 | 74441J860 |
MF210E2 0293020-00001-00
PRUDENTIAL INVESTMENTS, A PGIM BUSINESS | MUTUAL FUNDS
Prudential QMA Large-Cap Core Equity Fund
SEMIANNUAL REPORT | APRIL 30, 2016 |
To enroll in e-delivery, go to prudentialfunds.com/edelivery
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Objective: Long-term after-tax growth of capital |
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter.
The accompanying financial statements as of April 30, 2016, were not audited and, accordingly, no auditor’s opinion is expressed on them.
Mutual funds are distributed by Prudential Investment Management Services LLC, a Prudential Financial company and member SIPC. QMA is the primary business name of Quantitative Management Associates LLC, a wholly owned subsidiary of PGIM, Inc. (PGIM), a Prudential Financial company. © 2016 Prudential Financial, Inc. and its related entities. The Prudential logo and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
2 | Visit our website at prudentialfunds.com |
Letter from the President
Dear Shareholder:
We hope you find the semiannual report for the Prudential QMA Large-Cap Core Equity Fund informative and useful. The report covers performance for the six-month period that ended April 30, 2016.
Since market conditions change over time, 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. Keep in mind, however, that diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
Prudential Investments® is dedicated to helping you solve your toughest investment challenges—whether it’s capital growth, reliable income, or protection from market volatility and other risks. We offer the expertise of Prudential Financial’s affiliated asset managers that strive to be leaders in a broad range of funds to help you stay on course to the future you envision. They also manage money for major corporations and pension funds around the world, which means you benefit from the same expertise, innovation, and attention to risk demanded by today’s most sophisticated investors.
Thank you for choosing the Prudential Investments family of funds.
Sincerely,
Stuart S. Parker, President
Prudential QMA Large-Cap Core Equity Fund
June 15, 2016
Prudential QMA Large-Cap Core Equity Fund | 3 |
Your Fund’s Performance (unaudited)
Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852.
Cumulative Total Returns (Without Sales Charges) as of 4/30/16 | ||||||||
Six Months (%) | One Year (%) | Five Years (%) | Ten Years (%) | |||||
Class A | 0.16 | 0.09 | 65.80 | 78.29 | ||||
Class B | –0.19 | –0.66 | 59.64 | 65.60 | ||||
Class C | –0.19 | –0.66 | 59.80 | 65.77 | ||||
Class Z | 0.35 | 0.35 | 67.84 | 82.83 | ||||
S&P 500 Index | 0.43 | 1.21 | 68.52 | 94.91 | ||||
Lipper Large-Cap Core Funds Average | –0.79 | –1.30 | 56.33 | 79.02 | ||||
Average Annual Total Returns (With Sales Charges) as of 3/31/16 | ||||||||
One Year (%) | Five Years (%) | Ten Years (%) | ||||||
Class A | –5.78 | 9.96 | 5.51 | |||||
Class B | –5.70 | 10.24 | 5.32 | |||||
Class C | –1.94 | 10.38 | 5.33 | |||||
Class Z | 0.03 | 11.49 | 6.38 | |||||
S&P 500 Index | 1.78 | 11.56 | 7.00 | |||||
Lipper Large-Cap Core Funds Average | –1.24 | 9.80 | 6.00 |
Source: Prudential Investments LLC and Lipper Inc.
4 | Visit our website at prudentialfunds.com |
The returns in the tables do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or following the redemption of Fund shares. The average annual total returns take into account applicable sales charges, which are described for each share class in the table below.
Class A | Class B* | Class C | Class Z | |||||
Maximum initial sales charge | 5.50% of the public offering price | None | None | None | ||||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or net asset value at redemption) | 1% on sales of $1 million or more made within 12 months of purchase | 5% (Yr. 1) 4% (Yr. 2) 3% (Yr. 3) 2% (Yr. 4) 1% (Yr. 5) 1% (Yr. 6) 0% (Yr. 7) | 1% on sales made within 12 months of purchase | None | ||||
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | .30% (.25% currently) | 1% | 1% | None |
*Class B shares are closed to all purchase activity and no additional Class B shares may be purchased or acquired except by exchange from Class B shares of another Fund or through dividend or capital gains reinvestment.
Benchmark Definitions
S&P 500 Index—The Standard & Poor’s 500 Composite Stock Price Index (S&P 500 Index) is an unmanaged index of over 500 stocks of large US public companies. It gives a broad look at how stock prices in the United States have performed.
Lipper Large-Cap Core Funds Average—The Lipper Large-Cap Core Funds Average (Lipper Average) is based on the average return of all funds in the Lipper Large-Cap Core Funds category for the periods noted. Funds in the Lipper Average invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-cap core funds have wide latitude in the companies in which they invest. These funds typically have a below-average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share-growth value compared with the S&P 500 Index.
Investors cannot invest directly in an index or average. The returns for the Index would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses of a mutual fund, but not sales charges or taxes.
Prudential QMA Large-Cap Core Equity Fund | 5 |
Your Fund’s Performance (continued)
Five Largest Holdings expressed as a percentage of net assets as of 4/30/16 (%) | ||||
Apple, Inc., Technology Hardware, Storage & Peripherals | 3.4 | |||
Exxon Mobil Corp., Oil, Gas & Consumable Fuels | 2.1 | |||
Facebook, Inc. (Class A Stock), Internet Software & Services | 2.0 | |||
JPMorgan Chase & Co., Banks | 1.8 | |||
Microsoft Corp., Software | 1.7 |
Holdings reflect only long-term investments and are subject to change.
Five Largest Industries expressed as a percentage of net assets as of 4/30/16 (%) | ||||
Information Technology | 20.1 | |||
Health Care | 15.9 | |||
Financials | 14.5 | |||
Consumer Discretionary | 13.0 | |||
Consumer Staples | 11.1 |
Industry weightings reflect only long-term investments and are subject to change.
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Fees and Expenses (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution, and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on November 1, 2015, the beginning of the period, and held through the six-month period ended April 30, 2016. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of Prudential Investments funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value, as these
Prudential QMA Large-Cap Core Equity Fund | 7 |
Fees and Expenses (continued)
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.
Prudential QMA Large-Cap Core Equity Fund | Beginning Account Value November 1, 2015 | Ending Account Value April 30, 2016 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,001.60 | 1.13 | % | $ | 5.62 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,019.24 | 1.13 | % | $ | 5.67 | ||||||||||
Class B | Actual | $ | 1,000.00 | $ | 998.10 | 1.88 | % | $ | 9.34 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.51 | 1.88 | % | $ | 9.42 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 998.10 | 1.88 | % | $ | 9.34 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.51 | 1.88 | % | $ | 9.42 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,003.50 | 0.88 | % | $ | 4.38 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.49 | 0.88 | % | $ | 4.42 |
*Fund expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by the 182 days in the six-month period ended April 30, 2016, and divided by the 366 days in the Fund’s fiscal year ending October 31, 2016 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
The Fund’s annualized expense ratios for the six-month period ended April 30, 2016, are as follows:
Class | Gross Operating Expenses (%) | Net Operating Expenses (%) | ||
A | 1.18 | 1.13 | ||
B | 1.88 | 1.88 | ||
C | 1.88 | 1.88 | ||
Z | 0.88 | 0.88 |
Net operating expenses shown above reflect any fee waivers and/or expense reimbursements. Additional information on Fund expenses and any fee waivers and/or expense reimbursements can be found in the “Financial Highlights” tables in this report and in the Notes to the Financial Statements in this report.
8 | Visit our website at prudentialfunds.com |
Portfolio of Investments (unaudited)
as of April 30, 2016
Shares | Value (Note 1) | |||||||
LONG-TERM INVESTMENTS 98.3% | ||||||||
COMMON STOCKS | ||||||||
CONSUMER DISCRETIONARY 13.0% | ||||||||
Auto Components 0.2% | ||||||||
Dana Holding Corp. | 11,500 | $ | 148,695 | |||||
Tenneco, Inc.* | 3,400 | 181,220 | ||||||
|
| |||||||
329,915 | ||||||||
Automobiles 1.1% | ||||||||
Ford Motor Co. | 115,100 | 1,560,756 | ||||||
General Motors Co. | 20,000 | 636,000 | ||||||
|
| |||||||
2,196,756 | ||||||||
Distributors 0.1% | ||||||||
LKQ Corp.* | 5,700 | 182,685 | ||||||
Hotels, Restaurants & Leisure 2.7% | ||||||||
Bloomin’ Brands, Inc. | 18,600 | 347,820 | ||||||
Jack in the Box, Inc. | 3,300 | 222,915 | ||||||
Marriott Vacations Worldwide Corp. | 1,600 | 100,224 | ||||||
McDonald’s Corp. | 21,900 | 2,770,131 | ||||||
Sonic Corp. | 3,900 | 134,043 | ||||||
Wyndham Worldwide Corp. | 14,800 | 1,050,060 | ||||||
Yum! Brands, Inc. | 11,900 | 946,764 | ||||||
|
| |||||||
5,571,957 | ||||||||
Household Durables 0.7% | ||||||||
D.R. Horton, Inc. | 5,200 | 156,312 | ||||||
Meritage Homes Corp.* | 5,000 | 170,150 | ||||||
Whirlpool Corp. | 6,900 | 1,201,566 | ||||||
|
| |||||||
1,528,028 | ||||||||
Internet & Catalog Retail 1.4% | ||||||||
Amazon.com, Inc.* | 4,500 | 2,968,155 | ||||||
Leisure Products 0.5% | ||||||||
Polaris Industries, Inc. | 7,200 | 704,736 | ||||||
Vista Outdoor, Inc.* | 5,000 | 239,900 | ||||||
|
| |||||||
944,636 | ||||||||
Media 1.7% | ||||||||
Comcast Corp. (Class A Stock) | 6,000 | 364,560 | ||||||
TEGNA, Inc. | 9,600 | 224,256 |
See Notes to Financial Statements.
Prudential QMA Large-Cap Core Equity Fund | 9 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Shares | Value (Note 1) | |||||||
CONSUMER DISCRETIONARY (Continued) | ||||||||
Media (cont’d.) | ||||||||
Time Warner, Inc. | 5,100 | $ | 383,214 | |||||
Twenty-First Century Fox, Inc. (Class A Stock) | 12,600 | 381,276 | ||||||
Viacom, Inc. (Class B Stock) | 14,800 | 605,320 | ||||||
Walt Disney Co. (The) | 14,100 | 1,455,966 | ||||||
|
| |||||||
3,414,592 | ||||||||
Multiline Retail 0.7% | ||||||||
Macy’s, Inc. | 28,200 | 1,116,438 | ||||||
Target Corp. | 5,400 | 429,300 | ||||||
|
| |||||||
1,545,738 | ||||||||
Specialty Retail 3.4% | ||||||||
Best Buy Co., Inc. | 22,300 | 715,384 | ||||||
GNC Holdings, Inc. (Class A Stock) | 16,200 | 394,632 | ||||||
Home Depot, Inc. (The) | 16,900 | 2,262,741 | ||||||
Murphy USA, Inc.* | 3,700 | 212,454 | ||||||
Ross Stores, Inc. | 26,800 | 1,521,704 | ||||||
Staples, Inc. | 12,800 | 130,560 | ||||||
TJX Cos., Inc. (The) | 22,500 | 1,705,950 | ||||||
|
| |||||||
6,943,425 | ||||||||
Textiles, Apparel & Luxury Goods 0.5% | ||||||||
Michael Kors Holdings Ltd.* | 6,600 | 340,956 | ||||||
NIKE, Inc. (Class B Stock) | 11,000 | 648,340 | ||||||
|
| |||||||
989,296 | ||||||||
CONSUMER STAPLES 11.1% | ||||||||
Beverages 1.3% | ||||||||
Coca-Cola Co. (The) | 7,000 | 313,600 | ||||||
Coca-Cola Enterprises, Inc. | 2,300 | 120,704 | ||||||
PepsiCo, Inc. | 21,994 | 2,264,502 | ||||||
|
| |||||||
2,698,806 | ||||||||
Food & Staples Retailing 3.7% | ||||||||
CVS Health Corp. | 22,400 | 2,251,200 | ||||||
Kroger Co. (The) | 33,000 | 1,167,870 | ||||||
Wal-Mart Stores, Inc. | 35,370 | 2,365,192 | ||||||
Walgreens Boots Alliance, Inc. | 21,000 | 1,664,880 | ||||||
|
| |||||||
7,449,142 |
See Notes to Financial Statements.
10 |
Shares | Value (Note 1) | |||||||
CONSUMER STAPLES (Continued) | ||||||||
Food Products 2.1% | ||||||||
Archer-Daniels-Midland Co. | 35,700 | $ | 1,425,858 | |||||
ConAgra Foods, Inc. | 28,400 | 1,265,504 | ||||||
Tyson Foods, Inc. (Class A Stock) | 25,300 | 1,665,246 | ||||||
|
| |||||||
4,356,608 | ||||||||
Household Products 2.7% | ||||||||
Colgate-Palmolive Co. | 11,600 | 822,672 | ||||||
Kimberly-Clark Corp. | 10,500 | 1,314,495 | ||||||
Procter & Gamble Co. (The) | 42,564 | 3,410,228 | ||||||
|
| |||||||
5,547,395 | ||||||||
Tobacco 1.3% | ||||||||
Altria Group, Inc. | 42,400 | 2,658,904 | ||||||
ENERGY 5.8% | ||||||||
Energy Equipment & Services 0.4% | ||||||||
Bristow Group, Inc. | 10,400 | 238,368 | ||||||
Ensco PLC (Class A Stock) | 38,900 | 465,244 | ||||||
|
| |||||||
703,612 | ||||||||
Oil, Gas & Consumable Fuels 5.4% | ||||||||
Chevron Corp. | 5,084 | 519,483 | ||||||
Columbia Pipeline Group, Inc. | 22,100 | 566,202 | ||||||
ConocoPhillips | 6,100 | 291,519 | ||||||
Exxon Mobil Corp. | 47,474 | 4,196,702 | ||||||
Hess Corp. | 7,400 | 441,188 | ||||||
Kinder Morgan, Inc. | 32,300 | 573,648 | ||||||
Marathon Petroleum Corp. | 27,300 | 1,066,884 | ||||||
Phillips 66 | 16,850 | 1,383,553 | ||||||
Tesoro Corp. | 9,300 | 741,117 | ||||||
Valero Energy Corp. | 12,700 | 747,649 | ||||||
Western Refining, Inc. | 20,100 | 537,876 | ||||||
|
| |||||||
11,065,821 | ||||||||
FINANCIALS 14.5% | ||||||||
Banks 6.2% | ||||||||
Bank of America Corp. | 125,368 | 1,825,358 | ||||||
Citigroup, Inc. | 36,900 | 1,707,732 | ||||||
East West Bancorp, Inc. | 5,000 | 187,450 | ||||||
JPMorgan Chase & Co. | 58,800 | 3,716,160 | ||||||
PNC Financial Services Group, Inc. (The) | 17,500 | 1,536,150 |
See Notes to Financial Statements.
Prudential QMA Large-Cap Core Equity Fund | 11 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Shares | Value (Note 1) | |||||||
FINANCIALS (Continued) | ||||||||
Banks (cont’d.) | ||||||||
Regions Financial Corp. | 19,300 | $ | 181,034 | |||||
U.S. Bancorp | 7,991 | 341,136 | ||||||
Wells Fargo & Co. | 64,464 | 3,221,911 | ||||||
|
| |||||||
12,716,931 | ||||||||
Capital Markets 1.8% | ||||||||
BlackRock, Inc. | 4,500 | 1,603,485 | ||||||
Goldman Sachs Group, Inc. (The) | 11,100 | 1,821,621 | ||||||
State Street Corp. | 4,100 | 255,430 | ||||||
|
| |||||||
3,680,536 | ||||||||
Consumer Finance 1.5% | ||||||||
Discover Financial Services | 22,700 | 1,277,329 | ||||||
Navient Corp. | 47,300 | 646,591 | ||||||
Nelnet, Inc. (Class A Stock) | 12,000 | 502,920 | ||||||
Synchrony Financial* | 18,405 | 562,641 | ||||||
|
| |||||||
2,989,481 | ||||||||
Diversified Financial Services 0.7% | ||||||||
Berkshire Hathaway, Inc. (Class B Stock)* | 9,800 | 1,425,704 | ||||||
Insurance 2.7% | ||||||||
Aflac, Inc. | 22,000 | 1,517,340 | ||||||
Allstate Corp. (The) | 19,500 | 1,268,475 | ||||||
American International Group, Inc. | 6,000 | 334,920 | ||||||
Lincoln National Corp. | 5,200 | 225,940 | ||||||
MetLife, Inc. | 16,100 | 726,110 | ||||||
Travelers Cos., Inc. (The) | 3,700 | 406,630 | ||||||
Unum Group | 22,700 | 776,567 | ||||||
XL Group PLC (Ireland) | 7,700 | 252,021 | ||||||
|
| |||||||
5,508,003 | ||||||||
Real Estate Investment Trusts (REITs) 1.5% | ||||||||
Ares Commercial Real Estate Corp. | 8,900 | 106,800 | ||||||
Chimera Investment Corp | 25,000 | 355,000 | ||||||
Empire State Realty Trust, Inc. (Class A Stock) | 8,700 | 161,037 | ||||||
GEO Group, Inc. (The) | 7,100 | 227,413 | ||||||
HCP, Inc. | 1,900 | 64,277 | ||||||
Prologis, Inc. | 21,600 | 980,856 | ||||||
RLJ Lodging Trust | 8,400 | 176,988 | ||||||
Ryman Hospitality Properties, Inc. | 3,600 | 185,508 | ||||||
Xenia Hotels & Resorts, Inc. | 56,800 | 873,584 | ||||||
|
| |||||||
3,131,463 |
See Notes to Financial Statements.
12 |
Shares | Value (Note 1) | |||||||
FINANCIALS (Continued) | ||||||||
Real Estate Management & Development 0.1% | ||||||||
Altisource Portfolio Solutions SA*(a) | 3,000 | $ | 93,870 | |||||
Jones Lang LaSalle, Inc. | 1,200 | 138,204 | ||||||
|
| |||||||
232,074 | ||||||||
HEALTH CARE 15.9% | ||||||||
Biotechnology 3.3% | ||||||||
AbbVie, Inc. | 4,400 | 268,400 | ||||||
Amgen, Inc. | 15,000 | 2,374,500 | ||||||
Biogen, Inc.* | 6,400 | 1,759,936 | ||||||
Celgene Corp.* | 18,700 | 1,933,767 | ||||||
Gilead Sciences, Inc. | 5,600 | 493,976 | ||||||
|
| |||||||
6,830,579 | ||||||||
Health Care Equipment & Supplies 3.7% | ||||||||
Abbott Laboratories | 21,900 | 851,910 | ||||||
Baxter International, Inc. | 31,400 | 1,388,508 | ||||||
C.R. Bard, Inc. | 3,700 | 785,029 | ||||||
Edwards Lifesciences Corp.* | 11,400 | 1,210,794 | ||||||
Hill-Rom Holdings, Inc. | 4,400 | 212,740 | ||||||
Hologic, Inc.* | 12,500 | 419,875 | ||||||
Medtronic PLC | 23,500 | 1,860,025 | ||||||
Stryker Corp.(a) | 8,000 | 872,080 | ||||||
|
| |||||||
7,600,961 | ||||||||
Health Care Providers & Services 3.9% | ||||||||
Aetna, Inc. | 14,300 | 1,605,461 | ||||||
Anthem, Inc. | 10,200 | 1,435,854 | ||||||
Cardinal Health, Inc. | 5,800 | 455,068 | ||||||
Centene Corp.* | 6,600 | 408,936 | ||||||
Cigna Corp. | 2,900 | 401,766 | ||||||
Express Scripts Holding Co.* | 6,300 | 464,499 | ||||||
HCA Holdings, Inc.* | 2,900 | 233,798 | ||||||
Magellan Health, Inc.* | 3,000 | 211,380 | ||||||
McKesson Corp. | 1,500 | 251,730 | ||||||
UnitedHealth Group, Inc. | 19,700 | 2,594,096 | ||||||
|
| |||||||
8,062,588 | ||||||||
Life Sciences Tools & Services 0.7% | ||||||||
Bruker Corp. | 6,600 | 186,780 | ||||||
Thermo Fisher Scientific, Inc. | 7,400 | 1,067,450 | ||||||
VWR Corp.* | 5,900 | 157,176 | ||||||
|
| |||||||
1,411,406 |
See Notes to Financial Statements.
Prudential QMA Large-Cap Core Equity Fund | 13 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Shares | Value (Note 1) | |||||||
HEALTH CARE (Continued) | ||||||||
Pharmaceuticals 4.3% | ||||||||
Bristol-Myers Squibb Co. | 16,900 | $ | 1,219,842 | |||||
Jazz Pharmaceuticals PLC* | 2,900 | 437,030 | ||||||
Johnson & Johnson | 29,499 | 3,306,248 | ||||||
Merck & Co., Inc. | 12,300 | 674,532 | ||||||
Pfizer, Inc. | 93,634 | 3,062,768 | ||||||
|
| |||||||
8,700,420 | ||||||||
INDUSTRIALS 9.6% | ||||||||
Aerospace & Defense 2.9% | ||||||||
BWX Technologies, Inc. | 4,900 | 163,611 | ||||||
General Dynamics Corp. | 11,500 | 1,615,980 | ||||||
Huntington Ingalls Industries, Inc. | 5,100 | 738,327 | ||||||
Northrop Grumman Corp. | 8,900 | 1,835,714 | ||||||
Orbital ATK, Inc. | 3,300 | 287,100 | ||||||
Raytheon Co. | 5,200 | 657,020 | ||||||
Spirit AeroSystems Holdings, Inc. (Class A Stock)* | 12,300 | 579,945 | ||||||
|
| |||||||
5,877,697 | ||||||||
Air Freight & Logistics 1.2% | ||||||||
FedEx Corp. | 10,200 | 1,684,122 | ||||||
United Parcel Service, Inc. (Class B Stock) | 7,400 | 777,518 | ||||||
|
| |||||||
2,461,640 | ||||||||
Airlines 0.9% | ||||||||
Southwest Airlines Co. | 37,800 | 1,686,258 | ||||||
Spirit Airlines, Inc.* | 3,200 | 140,576 | ||||||
|
| |||||||
1,826,834 | ||||||||
Building Products 0.8% | ||||||||
Allegion PLC | 2,400 | 157,080 | ||||||
Insteel Industries, Inc. | 12,500 | 362,375 | ||||||
Masco Corp. | 33,300 | 1,022,643 | ||||||
Universal Forest Products, Inc. | 1,900 | 145,635 | ||||||
|
| |||||||
1,687,733 | ||||||||
Commercial Services & Supplies | ||||||||
Steelcase, Inc. (Class A Stock) | 4,700 | 71,722 | ||||||
Construction & Engineering | ||||||||
EMCOR Group, Inc. | 1,400 | 67,872 |
See Notes to Financial Statements.
14 |
Shares | Value (Note 1) | |||||||
INDUSTRIALS (Continued) | ||||||||
Electrical Equipment 0.7% | ||||||||
Acuity Brands, Inc. | 1,300 | $ | 317,057 | |||||
Eaton Corp. PLC | 15,100 | 955,377 | ||||||
Emerson Electric Co. | 2,500 | 136,575 | ||||||
|
| |||||||
1,409,009 | ||||||||
Industrial Conglomerates 1.7% | ||||||||
3M Co. | 11,100 | 1,857,918 | ||||||
Carlisle Cos., Inc. | 3,500 | 356,650 | ||||||
General Electric Co. | 39,279 | 1,207,829 | ||||||
|
| |||||||
3,422,397 | ||||||||
Machinery 0.3% | ||||||||
Illinois Tool Works, Inc. | 5,700 | 595,764 | ||||||
Professional Services 0.1% | ||||||||
Robert Half International, Inc. | 5,800 | 222,198 | ||||||
Road & Rail 0.9% | ||||||||
AMERCO | 700 | 246,400 | ||||||
Union Pacific Corp. | 18,500 | 1,613,755 | ||||||
|
| |||||||
1,860,155 | ||||||||
Trading Companies & Distributors 0.1% | ||||||||
HD Supply Holdings, Inc.* | 2,600 | 89,128 | ||||||
INFORMATION TECHNOLOGY 20.1% | ||||||||
Communications Equipment 1.3% | ||||||||
Brocade Communications Systems, Inc. | 20,800 | 199,888 | ||||||
Cisco Systems, Inc. | 82,150 | 2,258,304 | ||||||
NETGEAR, Inc.* | 3,200 | 135,680 | ||||||
|
| |||||||
2,593,872 | ||||||||
Electronic Equipment, Instruments & Components 0.3% | ||||||||
Ingram Micro, Inc. (Class A Stock) | 13,900 | 485,805 | ||||||
Sanmina Corp.* | 7,500 | 177,375 | ||||||
|
| |||||||
663,180 | ||||||||
Internet Software & Services 5.1% | ||||||||
Akamai Technologies, Inc.* | 18,100 | 922,919 | ||||||
Alphabet, Inc. (Class A Stock)* | 2,770 | 1,960,827 | ||||||
Alphabet, Inc. (Class C Stock)* | 4,877 | 3,379,810 | ||||||
Facebook, Inc. (Class A Stock)* | 34,900 | 4,103,542 | ||||||
|
| |||||||
10,367,098 |
See Notes to Financial Statements.
Prudential QMA Large-Cap Core Equity Fund | 15 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Shares | Value (Note 1) | |||||||
INFORMATION TECHNOLOGY (Continued) | ||||||||
IT Services 2.2% | ||||||||
Accenture PLC (Class A Stock) | 8,500 | $ | 959,820 | |||||
Cognizant Technology Solutions Corp. (Class A Stock)* | 5,900 | 344,383 | ||||||
CSRA, Inc. | 6,700 | 173,932 | ||||||
DST Systems, Inc. | 3,100 | 374,108 | ||||||
International Business Machines Corp. | 6,870 | 1,002,608 | ||||||
Leidos Holdings, Inc. | 1,700 | 84,337 | ||||||
MasterCard, Inc. (Class A Stock) | 8,800 | 853,512 | ||||||
Visa, Inc. (Class A Stock)(a) | 10,400 | 803,296 | ||||||
|
| |||||||
4,595,996 | ||||||||
Semiconductors & Semiconductor Equipment 1.2% | ||||||||
Broadcom Ltd. (Singapore) | 2,800 | 408,100 | ||||||
Intel Corp. | 39,700 | 1,202,116 | ||||||
ON Semiconductor Corp.* | 28,600 | 270,842 | ||||||
QUALCOMM, Inc. | 6,300 | 318,276 | ||||||
Skyworks Solutions, Inc. | 2,300 | 153,686 | ||||||
Texas Instruments, Inc. | 3,400 | 193,936 | ||||||
|
| |||||||
2,546,956 | ||||||||
Software 5.4% | ||||||||
Activision Blizzard, Inc. | 22,300 | 768,681 | ||||||
Adobe Systems, Inc.* | 10,100 | 951,622 | ||||||
Citrix Systems, Inc.* | 15,700 | 1,284,888 | ||||||
Intuit, Inc. | 11,100 | 1,119,879 | ||||||
Manhattan Associates, Inc.* | 6,600 | 399,564 | ||||||
Microsoft Corp. | 71,200 | 3,550,744 | ||||||
Nuance Communications, Inc.* | 36,000 | 618,480 | ||||||
Oracle Corp. | 57,900 | 2,307,894 | ||||||
Symantec Corp. | 4,000 | 66,580 | ||||||
|
| |||||||
11,068,332 | ||||||||
Technology Hardware, Storage & Peripherals 4.6% | ||||||||
Apple, Inc. | 73,620 | 6,901,139 | ||||||
EMC Corp. | 42,600 | 1,112,286 | ||||||
Hewlett Packard Enterprise Co. | 47,700 | 794,682 | ||||||
HP, Inc. | 47,700 | 585,279 | ||||||
|
| |||||||
9,393,386 | ||||||||
MATERIALS 2.0% | ||||||||
Chemicals 1.4% | ||||||||
Air Products & Chemicals, Inc. | 6,400 | 933,696 | ||||||
Cabot Corp. | 2,500 | 121,975 |
See Notes to Financial Statements.
16 |
Shares | Value (Note 1) | |||||||
MATERIALS (Continued) | ||||||||
Chemicals (cont’d.) | ||||||||
GCP Applied Technologies, Inc.* | 4,300 | $ | 95,159 | |||||
Huntsman Corp. | 24,300 | 382,482 | ||||||
LyondellBasell Industries NV (Class A Stock) | 13,900 | 1,149,113 | ||||||
Westlake Chemical Corp. | 4,000 | 200,760 | ||||||
|
| |||||||
2,883,185 | ||||||||
Containers & Packaging 0.3% | ||||||||
Greif, Inc. (Class A Stock) | 4,100 | 142,270 | ||||||
Packaging Corp. of America | 7,300 | 473,624 | ||||||
|
| |||||||
615,894 | ||||||||
Metals & Mining 0.2% | ||||||||
Steel Dynamics, Inc. | 16,200 | 408,402 | ||||||
Paper & Forest Products 0.1% | ||||||||
KapStone Paper & Packaging Corp. | 13,300 | 211,337 | ||||||
TELECOMMUNICATIONS SERVICES 1.9% | ||||||||
Diversified Telecommunication Services 1.9% | ||||||||
AT&T, Inc. | 6,054 | 235,016 | ||||||
Inteliquent, Inc. | 4,600 | 76,314 | ||||||
Verizon Communications, Inc. | 69,400 | 3,535,236 | ||||||
|
| |||||||
3,846,566 | ||||||||
UTILITIES 4.4% | ||||||||
Electric Utilities 2.6% | ||||||||
American Electric Power Co., Inc. | 4,700 | 298,450 | ||||||
Entergy Corp. | 15,900 | 1,195,362 | ||||||
Exelon Corp. | 43,100 | 1,512,379 | ||||||
FirstEnergy Corp. | 26,400 | 860,376 | ||||||
PPL Corp. | 38,200 | 1,437,848 | ||||||
|
| |||||||
5,304,415 | ||||||||
Gas Utilities 0.6% | ||||||||
AGL Resources, Inc. | 14,000 | 922,040 | ||||||
UGI Corp. | 10,600 | 426,544 | ||||||
|
| |||||||
1,348,584 | ||||||||
Independent Power & Renewable Electricity Producers 0.6% | ||||||||
AES Corp. | 111,100 | 1,239,876 |
See Notes to Financial Statements.
Prudential QMA Large-Cap Core Equity Fund | 17 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Shares | Value (Note 1) | |||||||
UTILITIES (Continued) | ||||||||
Multi-Utilities 0.6% | ||||||||
MDU Resources Group, Inc. | 17,100 | $ | 343,026 | |||||
Public Service Enterprise Group, Inc. | 18,800 | 867,244 | ||||||
|
| |||||||
1,210,270 | ||||||||
|
| |||||||
TOTAL LONG-TERM INVESTMENTS | 201,275,115 | |||||||
|
| |||||||
SHORT-TERM INVESTMENTS 2.5% | ||||||||
AFFILIATED MUTUAL FUND 2.4% | ||||||||
Prudential Investment Portfolios 2 - | 4,904,070 | 4,904,070 | ||||||
|
| |||||||
Principal Amount (000)# | ||||||||
U.S. TREASURY OBLIGATION 0.1% | ||||||||
U.S. Treasury Bills, | 240 | 239,957 | ||||||
|
| |||||||
TOTAL SHORT-TERM INVESTMENTS | 5,144,027 | |||||||
|
| |||||||
TOTAL INVESTMENTS 100.8% | 206,419,142 | |||||||
Liabilities in excess of other assets(f) (0.8)% | (1,709,400 | ) | ||||||
|
| |||||||
NET ASSETS 100.0% | $ | 204,709,742 | ||||||
|
|
The following abbreviation is used in the semiannual report:
OTC—Over-the-counter
# | Principal amount shown in U.S. dollars unless otherwise stated. |
* | Non-income producing security. |
(a) | All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is $1,751,554; cash collateral of $1,795,949 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments. Securities on loan are subject to contractual netting arrangements. |
(b) | Represents security, or a portion thereof, purchased with cash collateral received for securities on loan. |
(c) | Prudential Investments LLC, the manager of the Fund, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Ultra Short Bond Fund. |
(d) | Represents security, or a portion thereof, segregated as collateral for futures contracts. |
(e) | Rate quoted represents yield-to-maturity as of purchase date. |
See Notes to Financial Statements.
18 |
(f) | Includes net unrealized appreciation (depreciation) on the following derivative contracts held at reporting period end: |
Futures contracts outstanding at April 30, 2016:
Number of Contracts | Type | Expiration Date | Value at Trade Date | Value at April 30, 2016 | Unrealized Appreciation (Depreciation)(1) | |||||||||||||||
Long Position: | ||||||||||||||||||||
33 | S&P 500 E-Mini Index | Jun. 2016 | $ | 3,332,502 | $ | 3,397,515 | $ | 65,013 | ||||||||||||
|
|
(1) | A U.S. Treasury Obligation with a market value of $239,957 has been segregated with Goldman Sachs & Co. to cover requirements for open contracts at April 30, 2016. |
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.
Level 2—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 April 30, 2016 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Common Stocks | ||||||||||||
Consumer Discretionary | $ | 26,615,183 | $ | — | $ | — | ||||||
Consumer Staples | 22,710,855 | — | — | |||||||||
Energy | 11,769,433 | — | — | |||||||||
Financials | 29,684,192 | — | — | |||||||||
Health Care | 32,605,954 | — | — | |||||||||
Industrials | 19,592,149 | — | — | |||||||||
Information Technology | 41,228,820 | — | — | |||||||||
Materials | 4,118,818 | — | — | |||||||||
Telecommunications Services | 3,846,566 | — | — | |||||||||
Utilities | 9,103,145 | — | — | |||||||||
Affiliated Mutual Fund | 4,904,070 | — | — | |||||||||
U.S. Treasury Obligation | — | 239,957 | — | |||||||||
Other Financial Instruments* | ||||||||||||
Futures Contracts | 65,013 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 206,244,198 | $ | 239,957 | $ | — | ||||||
|
|
|
|
|
|
* | Other financial instruments are derivative instruments not reflected in the Portfolio 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. |
See Notes to Financial Statements.
Prudential QMA Large-Cap Core Equity Fund | 19 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of April 30, 2016 were as follows:
Information Technology | 20.1 | % | ||
Health Care | 15.9 | |||
Financials | 14.5 | |||
Consumer Discretionary | 13.0 | |||
Consumer Staples | 11.1 | |||
Industrials | 9.6 | |||
Energy | 5.8 | |||
Utilities | 4.4 | |||
Affiliated Mutual Fund (including 0.9% of collateral for securities on loan) | 2.4 | % | ||
Materials | 2.0 | |||
Telecommunications Services | 1.9 | |||
U.S. Treasury Obligation | 0.1 | |||
|
| |||
100.8 | ||||
Liabilities in excess of other assets | (0.8 | ) | ||
|
| |||
100.0 | % | |||
|
|
The Fund invested in derivative instruments during the reporting period. The primary type of risk associated with these derivative instruments is equity risk. The effect of such derivative instruments on the Fund’s financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.
Fair values of derivative instruments as of April 30, 2016 as presented in the Statement of Assets and Liabilities:
Asset Derivatives | Liability Derivatives | |||||||||||
Derivatives not accounted | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Equity contracts | Due from/to broker— variation margin futures | $ | 65,013 | * | — | $ | — | |||||
|
|
|
|
* | Includes cumulative appreciation/depreciation as reported in schedule of open futures 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 April 30, 2016 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | ||||
Derivatives not accounted for as hedging | Futures | |||
Equity contracts | $ | 183,066 | ||
|
|
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | ||||
Derivatives not accounted for as hedging | Futures | |||
Equity contracts | $ | (112,959 | ) | |
|
|
For the six months ended April 30, 2016, the Fund’s average value at trade date for futures contracts-long positions was $3,129,063.
See Notes to Financial Statements.
20 |
PRUDENTIAL INVESTMENTS, A PGIM BUSINESS | MUTUAL FUNDS
Statement of Assets and Liabilities, Statement of Operations and Statement of Changes in Net Assets (unaudited)
SEMIANNUAL REPORT | APRIL 30, 2016 |
Prudential QMA Large-Cap Core Equity Fund
Statement of Assets & Liabilities (unaudited)
as of April 30, 2016
Assets | ||||
Investments at value, including securities on loan of $1,751,554: | ||||
Unaffiliated investments (cost $139,038,375) | $ | 201,515,072 | ||
Affiliated investments (cost $4,904,070) | 4,904,070 | |||
Dividends and interest receivable | 243,842 | |||
Receivable for Fund shares sold | 194,237 | |||
Tax reclaim receivable | 525 | |||
Prepaid expenses | 606 | |||
|
| |||
Total assets | 206,858,352 | |||
|
| |||
Liabilities | ||||
Payable to broker for collateral for securities on loan | 1,795,949 | |||
Payable for Fund shares reacquired | 120,488 | |||
Management fee payable | 109,735 | |||
Distribution fee payable | 52,173 | |||
Accrued expenses | 30,340 | |||
Due to broker—variation margin futures | 21,945 | |||
Affiliated transfer agent fee payable | 17,980 | |||
|
| |||
Total liabilities | 2,148,610 | |||
|
| |||
Net Assets | $ | 204,709,742 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 13,699 | ||
Paid-in capital in excess of par | 140,913,423 | |||
|
| |||
140,927,122 | ||||
Undistributed net investment income | 600,785 | |||
Accumulated net realized gain on investment transactions | 640,125 | |||
Net unrealized appreciation on investments | 62,541,710 | |||
|
| |||
Net assets, April 30, 2016 | $ | 204,709,742 | ||
|
|
See Notes to Financial Statements.
22 |
Class A | ||||
Net asset value and redemption price per share ($89,025,872 ÷ 5,909,412 shares of beneficial interest issued and outstanding) | $ | 15.07 | ||
Maximum sales charge (5.50% of offering price) | 0.88 | |||
|
| |||
Maximum offering price to public | $ | 15.95 | ||
|
| |||
Class B | ||||
Net asset value, offering price and redemption price per share ($2,350,545 ÷ 168,441 shares of beneficial interest issued and outstanding) | $ | 13.95 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share ($38,141,591 ÷ 2,730,094 shares of beneficial interest issued and outstanding) | $ | 13.97 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share ($75,191,734 ÷ 4,891,485 shares of beneficial interest issued and outstanding) | $ | 15.37 | ||
|
|
See Notes to Financial Statements.
Prudential QMA Large-Cap Core Equity Fund | 23 |
Statement of Operations (unaudited)
Six Months Ended April 30, 2016
Net Investment Income | ||||
Income | ||||
Unaffiliated dividend income (net of foreign withholding taxes of $788) | $ | 2,157,277 | ||
Affiliated income from securities lending, net | 10,883 | |||
Affiliated dividend income | 6,118 | |||
Interest income | 306 | |||
|
| |||
Total income | 2,174,584 | |||
|
| |||
Expenses | ||||
Management fee | 653,419 | |||
Distribution fee—Class A | 128,822 | |||
Distribution fee—Class B | 12,027 | |||
Distribution fee—Class C | 187,062 | |||
Transfer agent’s fees and expenses (including affiliated expense of $45,100) | 118,000 | |||
Custodian and accounting fees | 35,000 | |||
Registration fees | 30,000 | |||
Shareholders’ reports | 16,000 | |||
Audit fee | 12,000 | |||
Legal fees and expenses | 9,000 | |||
Trustees’ fees | 7,000 | |||
Insurance expenses | 1,000 | |||
Loan interest expense | 68 | |||
Miscellaneous | 7,221 | |||
|
| |||
Total expenses | 1,216,619 | |||
Less: Distribution fee waiver-Class A | (21,471 | ) | ||
|
| |||
Net expenses | 1,195,148 | |||
|
| |||
Net investment income | 979,436 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investments | ||||
Net realized gain on: | ||||
Investment transactions | 749,625 | |||
Futures transactions | 183,066 | |||
|
| |||
932,691 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (1,656,084 | ) | ||
Futures | (112,959 | ) | ||
|
| |||
(1,769,043 | ) | |||
|
| |||
Net loss on investment transactions | (836,352 | ) | ||
|
| |||
Net Increase In Net Assets Resulting From Operations | $ | 143,084 | ||
|
|
See Notes to Financial Statements.
24 |
Statement of Changes in Net Assets (unaudited)
Six Months Ended April 30, 2016 | Year Ended October 31, 2015 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income | $ | 979,436 | $ | 1,510,203 | ||||
Net realized gain on investment transactions | 932,691 | 9,377,131 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (1,769,043 | ) | (3,941,549 | ) | ||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 143,084 | 6,945,785 | ||||||
|
|
|
| |||||
Dividends and Distributions (Note 1) | ||||||||
Dividends from net investment income | ||||||||
Class A | (774,919 | ) | (577,534 | ) | ||||
Class B | (5,279 | ) | (162 | ) | ||||
Class C | (81,031 | ) | (1,954 | ) | ||||
Class Z | (852,298 | ) | (355,525 | ) | ||||
|
|
|
| |||||
(1,713,527 | ) | (935,175 | ) | |||||
|
|
|
| |||||
Distributions from net realized gains | ||||||||
Class A | (4,028,233 | ) | (6,437,641 | ) | ||||
Class B | (123,545 | ) | (244,987 | ) | ||||
Class C | (1,896,176 | ) | (2,948,080 | ) | ||||
Class Z | (3,445,643 | ) | (2,966,065 | ) | ||||
|
|
|
| |||||
(9,493,597 | ) | (12,596,773 | ) | |||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) (Note 6) | ||||||||
Net proceeds from shares sold | 14,618,565 | 71,467,428 | ||||||
Net asset value of shares issued in reinvestment of dividends and distributions | 10,951,763 | 13,218,125 | ||||||
Cost of shares reacquired | (20,406,990 | ) | (38,917,142 | ) | ||||
|
|
|
| |||||
Net increase in net assets from Fund share transactions | 5,163,338 | 45,768,411 | ||||||
|
|
|
| |||||
Total increase (decrease) | (5,900,702 | ) | 39,182,248 | |||||
Net Assets: | ||||||||
Beginning of period | 210,610,444 | 171,428,196 | ||||||
|
|
|
| |||||
End of period(a) | $ | 204,709,742 | $ | 210,610,444 | ||||
|
|
|
| |||||
(a) Includes undistributed net investment income of: | $ | 600,785 | $ | 1,334,876 | ||||
|
|
|
|
See Notes to Financial Statements.
Prudential QMA Large-Cap Core Equity Fund | 25 |
Notes to Financial Statements (unaudited)
Prudential Investment Portfolios 9 (the “Trust”) is an open-end management investment company, registered under the Investment Company Act of 1940, as amended (“1940 Act”). The Trust currently consists of five funds: Prudential QMA Large-Cap Core Equity Fund (the “Fund”, formerly Prudential Large-Cap Core Equity Fund), Prudential International Real Estate Fund, Prudential Absolute Return Bond Fund, Prudential Select Real Estate Fund and Prudential Real Estate Income Fund. These financial statements relate to Prudential QMA Large-Cap Core Equity Fund, a diversified fund. The financial statements of the Prudential International Real Estate Fund, Prudential Absolute Return Bond Fund, Prudential Select Real Estate Fund and Prudential Real Estate Income Fund are not presented herein. The Fund’s investment objective is long-term after-tax growth of capital.
Note 1. Accounting Policies
The Fund follows investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The following accounting policies conform to U.S. generally accepted accounting principles. The Fund consistently follows such policies in the preparation of its financial statements.
Securities Valuation: The Fund holds securities and other assets 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 Board of Trustees (the “Board”) has adopted Valuation Procedures for security valuation under which fair valuation responsibilities have been delegated to Prudential Investments LLC (“PI” or “Manager”). Under the current Valuation Procedures, the established Valuation Committee is responsible for supervising the valuation of portfolio securities and other assets. 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.
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 table following the Portfolio of Investments.
Common and preferred stocks, exchange-traded funds, and derivative instruments such as futures or options that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange where the security
26 |
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.
Common and preferred stocks traded on foreign securities exchanges are valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy. The models generate an evaluated adjustment factor for each security, which can be applied to the local closing price to adjust it for post closing market movements. Utilizing that evaluated adjustment factor, the vendor provides an evaluated price to the extent that the valuation meets the established confidence level for each security. Such confidence level is a measure of the probability of a relationship between a given equity security and the factors used in the models. If the confidence level is not met or the vendor does not provide an evaluated price, securities are valued in accordance with exchange-traded common and preferred stocks discussed above.
Participatory notes (P-notes) are generally valued based upon the value of a related underlying security that trades actively in the market and are classified as Level 2 in the fair value hierarchy.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the OTC market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors provide these prices after 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. Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.
Bank loans traded in the OTC market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors utilize broker/dealer quotations and provide prices based on the average of such quotations. Bank loans valued using such vendor prices are generally classified as Level 2 in the fair value hierarchy.
Prudential QMA Large-Cap Core Equity Fund | 27 |
Notes to Financial Statements (unaudited) (continued)
OTC derivative instruments are generally valued using pricing vendor services, which derive the valuation based on inputs such as underlying asset prices, indices, spreads, interest rates, and exchange rates. These instruments are categorized as Level 2 in the fair value hierarchy.
Centrally cleared swaps listed or traded on a multilateral or trade facility platform, such as a registered exchange, are generally valued at the daily settlement price determined by the respective exchange. These securities are classified as Level 2 in the fair value hierarchy, as the daily settlement price is not public.
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 investment adviser regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values.
Restricted and Illiquid Securities: Subject to guidelines adopted by the Board, the Fund may invest up to 15% of its net assets in illiquid securities, including those which are restricted as to disposition under securities law (“restricted securities”). Restricted securities are valued pursuant to the valuation procedures noted above. Illiquid securities are those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale, cannot be sold within seven days in the ordinary course of business at approximately the amount at which the Fund has valued the investment. Therefore, the Fund may find it difficult to sell illiquid securities at the time considered most advantageous by its Subadviser and may incur expenses that would not be incurred in the sale of securities that were freely marketable. Certain securities that would otherwise be considered illiquid because of legal restrictions on resale to the general public may be traded among qualified institutional buyers under Rule 144A of the Securities Act of 1933. These Rule 144A securities, as well as commercial paper that is sold in private placements under Section 4(2) of the Securities Act, may be deemed liquid by the Fund’s Subadviser
28 |
under the guidelines adopted by the Directors of the Fund. However, the liquidity of the Fund’s investments in Rule 144A securities could be impaired if trading does not develop or declines.
Financial Futures Contracts: A financial futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities at a set price for delivery on a future date. Upon entering into a financial futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount. This amount is known as the “initial margin”. Subsequent payments, known as “variation margin”, are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying security. Such variation margin is recorded for financial statement purposes on a daily basis as unrealized gain (loss). When the contract expires or 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 or foreign currency exchange 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. With exchange-traded futures contracts, 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.
Master Netting Arrangements: The Fund is subject to various Master Agreements, or netting arrangements, with select counterparties. These are agreements which a subadviser may have negotiated and entered into on behalf of the Fund. A master netting arrangement between the Fund and the counterparty permits the Fund to offset amounts payable by the Fund to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Fund to cover the Fund’s exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable. In addition to master netting arrangements, the right to set-off exists when all the conditions are met such that each of the parties owes the other determinable amounts, the reporting party has the right to set-off the amount owed with the amount owed by the other party, the reporting party intends to set-off and the right of set-off is enforceable by law. During the reporting period, there was no intention to settle on a net basis and all amounts are presented on a gross basis on the Statement of Assets and Liabilities.
Securities Lending: The Fund may lend their portfolio securities to banks and broker-dealers. The loans are secured by collateral at least equal to the market value of the securities loaned. Collateral pledged by each borrower is invested in a highly liquid ultra short-term bond fund and is marked to market daily, based on the previous day’s market value, such that the value of the collateral exceeds the value of the loaned securities. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of
Prudential QMA Large-Cap Core Equity Fund | 29 |
Notes to Financial Statements (unaudited) (continued)
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. 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 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 that may occur during the term of the loan.
REITs: The Fund invests in real estate investment trusts (“REITs”), which report information on the source of their distributions annually. Based on current and historical information, a portion of distributions received from REITs during the period is estimated to be dividend income, capital gain or return of capital and is recorded accordingly. These estimates are adjusted when the actual source of distributions is disclosed by the 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 identified cost basis. Dividend income is recorded on the ex-date. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on an 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 distribution fees which are charged directly to the respective class) 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.
Dividends and Distributions: The Fund expects to pay dividends of net investment income and distributions of net realized capital gains, if any, at least annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from generally accepted accounting principles, are recorded on the ex-date. Permanent book/tax differences relating to income and gains are reclassified amongst undistributed net investment income (loss), accumulated net realized gain (loss) and paid-capital in excess of par, as appropriate.
Taxes: For federal income tax purposes, the Fund is treated as a separate taxpaying entity. 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 shareholders. Therefore, no federal income tax provision is required. Withholding taxes on foreign dividends are recorded net of reclaimable amounts, at the time related income is earned.
30 |
Estimates: The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
Note 2. Agreements
The Trust has a management agreement for the Fund with PI. Pursuant to this agreement, PI has responsibility for all investment advisory services and supervises the subadvisor’s performance of such services. PI has entered into a subadvisory agreement with Quantitative Management Associates LLC (“QMA”). The subadvisory agreement provides that QMA will furnish investment advisory services in connection with the management of the Fund. In connection therewith, QMA is obligated to keep certain books and records of the Fund. PI 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 PI is computed daily and payable monthly at an annual rate of .65% of the Fund’s average daily net assets up to and including $500 million and .60% of the Fund’s average daily net assets in excess of $500 million. The effective management fee rate was ..65% for the six months ended April 30, 2016.
PI had contractually agreed, through February 29, 2016, to waive a portion of the Fund’s management fees so that the Fund���s annual operating expenses (exclusive of distribution and service (12b-1) fees, and certain other expenses such as taxes, interest, and brokerage commissions) do not exceed .95% of the Fund’s average daily net assets.
The Fund has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”), which acts as the distributor of the Class A, Class B, Class C and Class Z shares of the Fund. The Fund compensates PIMS for distributing and servicing the Fund’s Class A, Class B and Class C shares, pursuant to plans of distribution (the “Class A, B and C 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 shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensates PIMS for distribution-related activities at an annual rate of up to .30%, 1% and 1% of the average daily net assets of the Class A, B and C shares, respectively. Through February 28, 2017, PIMS contractually agreed to limit such fees to .25% of the average daily net assets of Class A shares.
PIMS has advised the Fund that it received $34,260 in front-end sales charges resulting from sales of Class A shares during the six months ended April 30, 2016.
From these fees, PIMS paid such sales charges to affiliated broker-dealers, which in turn paid commissions to salespersons and incurred other distribution costs.
Prudential QMA Large-Cap Core Equity Fund | 31 |
Notes to Financial Statements (unaudited) (continued)
PIMS has advised the Fund that for the six months ended April 30, 2016, it received $1,371 and $327 in contingent deferred sales charges imposed upon certain redemptions by Class B and Class C shareholders, respectively.
PI, QMA and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund’s transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
PGIM, Inc., an indirect, wholly-owned subsidiary of Prudential, is the Fund’s securities lending agent. Net earnings from securities lending are disclosed on the Statement of Operations as “Affiliated income from securities lending, net”. For the six months ended April 30, 2016, PGIM, Inc. has been compensated approximately $1,600 for these services. Effective February 5, 2016, PGIM, Inc. is being paid no compensation for acting as securities lending agent. In addition, the securities lending agent continues to absorb the transaction costs associated with the securities lending activity. Prior to January 4, 2016, PGIM, Inc. was known as Prudential Investment Management, Inc. (“PIM”).
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 permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. Such transactions are subject to ratification by the Board.
The Fund invests in the Prudential Core Ultra Short Bond Fund, (formerly known as Prudential Core Taxable Money Market Fund), (the “Core Fund”), a portfolio of the Prudential Investment Portfolios 2, registered under the 1940 Act and managed by PI. Earnings from the Core Fund are disclosed on the Statement of Operations as “Affiliated dividend income”.
Note 4. Portfolio Securities
The cost of purchases and proceeds from sales of investment securities, other than short-term investments, for the six months ended April 30, 2016, were $85,304,558 and $91,111,859, respectively.
32 |
Note 5. Tax Information
The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of April 30, 2016 were as follows:
Tax Basis | $ | 144,038,217 | ||
|
| |||
Appreciation | 62,792,915 | |||
Depreciation | (411,990 | ) | ||
|
| |||
Net Unrealized Appreciation | $ | 62,380,925 | ||
|
|
The book basis may differ from tax basis due to certain tax-related adjustments.
Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years and has concluded that no provision for income tax is required in the Fund’s financial statements for the current reporting period. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
Note 6. Capital
The Fund offers Class A, Class B, Class C and Class Z shares. Class A shares are sold with a front-end sales charge of up to 5.50%. Purchases of $1 million or more are subject to a contingent deferred sales charge (“CDSC”) if shares are redeemed within 12 months of their purchase. The Class A shares CDSC is waived for purchases by certain retirement and/or benefit plans. Class B shares are sold with a CDSC which declines from 5% to zero depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares approximately seven years after purchase. Class B shares are closed to new purchases. Class C shares are sold with a CDSC of 1% on shares redeemed within the first 12 months of purchase. Class Z shares are not subject to any sales or redemption charge and are offered exclusively for a 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 capital stock.
The Fund has authorized an unlimited number of shares of beneficial interest at $.001 par value.
Prudential QMA Large-Cap Core Equity Fund | 33 |
Notes to Financial Statements (unaudited) (continued)
Class A | Shares | Amount | ||||||
Six months ended April 30, 2016: | ||||||||
Shares sold | 296,912 | $ | 4,393,413 | |||||
Shares issued in reinvestment of dividends and distributions | 320,176 | 4,668,169 | ||||||
Shares reacquired | (309,419 | ) | (4,555,287 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 307,669 | 4,506,295 | ||||||
Shares issued upon conversion from other share class(es) | 16,919 | 256,064 | ||||||
Shares reacquired upon conversion into other share class(es) | (1,808 | ) | (28,606 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 322,780 | $ | 4,733,753 | |||||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 430,871 | $ | 6,889,335 | |||||
Shares issued in reinvestment of dividends and distributions | 432,617 | 6,839,669 | ||||||
Shares reacquired | (616,725 | ) | (9,820,019 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 246,763 | 3,908,985 | ||||||
Shares issued upon conversion from other share class(es) | 68,269 | 1,096,026 | ||||||
Shares reacquired upon conversion into other share class(es) | (80,198 | ) | (1,279,380 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 234,834 | $ | 3,725,631 | |||||
|
|
|
| |||||
Class B | ||||||||
Six months ended April 30, 2016: | ||||||||
Shares sold | 8,826 | $ | 121,434 | |||||
Shares issued in reinvestment of dividends and distributions | 8,828 | 119,535 | ||||||
Shares reacquired | (13,513 | ) | (179,733 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 4,141 | 61,236 | ||||||
Shares reacquired upon conversion into other share class(es) | (17,104 | ) | (239,533 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (12,963 | ) | $ | (178,297 | ) | |||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 33,048 | $ | 497,026 | |||||
Shares issued in reinvestment of dividends and distributions | 15,954 | 235,324 | ||||||
Shares reacquired | (32,007 | ) | (471,704 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 16,995 | 260,646 | ||||||
Shares reacquired upon conversion into other share class(es) | (33,347 | ) | (493,572 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (16,352 | ) | $ | (232,926 | ) | |||
|
|
|
|
34 |
Class C | Shares | Amount | ||||||
Six months ended April 30, 2016: | ||||||||
Shares sold | 113,878 | $ | 1,574,903 | |||||
Shares issued in reinvestment of dividends and distributions | 141,301 | 1,916,041 | ||||||
Shares reacquired | (148,349 | ) | (2,015,912 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 106,830 | 1,475,032 | ||||||
Shares reacquired upon conversion into other share class(es) | (12,313 | ) | (171,971 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 94,517 | $ | 1,303,061 | |||||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 339,669 | $ | 5,033,340 | |||||
Shares issued in reinvestment of dividends and distributions | 194,484 | 2,870,589 | ||||||
Shares reacquired | (275,243 | ) | (4,084,964 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 258,910 | 3,818,965 | ||||||
Shares reacquired upon conversion into other share class(es) | (62,640 | ) | (935,768 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 196,270 | $ | 2,883,197 | |||||
|
|
|
| |||||
Class Z | ||||||||
Six months ended April 30, 2016: | ||||||||
Shares sold | 585,196 | $ | 8,528,815 | |||||
Shares issued in reinvestment of dividends and distributions | 285,869 | 4,248,018 | ||||||
Shares reacquired | (921,974 | ) | (13,656,058 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (50,909 | ) | (879,225 | ) | ||||
Shares issued upon conversion from other share class(es) | 12,431 | 191,898 | ||||||
Shares reacquired upon conversion into other share class(es) | (510 | ) | (7,852 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (38,988 | ) | $ | (695,179 | ) | |||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 3,631,013 | $ | 59,047,727 | |||||
Shares issued in reinvestment of dividends and distributions | 203,264 | 3,272,543 | ||||||
Shares reacquired | (1,502,440 | ) | (24,540,455 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 2,331,837 | 37,779,815 | ||||||
Shares issued upon conversion from other shares class(es) | 100,946 | 1,639,421 | ||||||
Shares reacquired upon conversion into other share class(es) | (1,655 | ) | (26,727 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 2,431,128 | $ | 39,392,509 | |||||
|
|
|
|
Note 7. Borrowings
The Fund, along with other affiliated registered investment companies (the “Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of $900 million for the period October 8, 2015 through October 6, 2016. The Funds pay an annualized commitment fee of .11% of the unused portion of the SCA. Prior to October 8, 2015, the Funds had another SCA that provided a commitment of $900 million and the Funds paid an annualized commitment fee of .075% of the unused portion of the SCA. Interest on any borrowings under the SCA is paid at contracted market rates. The Fund’s portion of the commitment fee for the unused amount is accrued daily and paid quarterly.
Prudential QMA Large-Cap Core Equity Fund | 35 |
Notes to Financial Statements (unaudited) (continued)
The Fund utilized the SCA during the six months ended April 30, 2016. The average daily balance for the 5 days the Fund had loans outstanding during the period was $289,800, borrowed at a weighted average interest rate of 1.69%. The maximum loan outstanding amount during the period was $369,000. At April 30, 2016, the Fund did not have an outstanding loan amount.
Note 8. New Accounting Pronouncements
In May 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-07 regarding “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share”. The amendments in this update are effective for the Fund for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. ASU No. 2015-07 will eliminate the requirement to categorize investments in the fair value hierarchy if their fair value is measured at net asset value (“NAV”) per share (or its equivalent) using the practical expedient in the FASB’s fair value measurement guidance. Management has evaluated the implications of ASU No. 2015-07 and has determined that there is no impact on the financial statement disclosures.
In January 2016, the FASB issued ASU No. 2016-01 regarding “Recognition and Measurement of Financial Assets and Financial Liabilities”. The new guidance is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The new standard affects all entities that hold financial assets or owe financial liabilities. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. At this time, management is evaluating the implications of ASU No. 2016-01 and its impact on the financial statements and disclosures has not yet been determined.
36 |
Financial Highlights (unaudited)
Class A Shares | ||||||||||||||||||||||||||
Six Months Ended April 30, | Year Ended October 31, | |||||||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $15.92 | $16.55 | $15.23 | $12.70 | $11.84 | $11.01 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment income | .08 | .14 | .11 | .14 | .11 | .05 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.07 | ) | .55 | 2.46 | 3.01 | 1.65 | .80 | |||||||||||||||||||
Total from investment operations | .01 | .69 | 2.57 | 3.15 | 1.76 | .85 | ||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||
Dividends from net investment income | (.14 | ) | (.11 | ) | (.13 | ) | (.13 | ) | (.11 | ) | (.02 | ) | ||||||||||||||
Distributions from net realized gains | (.72 | ) | (1.21 | ) | (1.12 | ) | (.49 | ) | (.79 | ) | - | |||||||||||||||
Total dividends and distributions | (.86 | ) | (1.32 | ) | (1.25 | ) | (.62 | ) | (.90 | ) | (.02 | ) | ||||||||||||||
Net asset value, end of period | $15.07 | $15.92 | $16.55 | $15.23 | $12.70 | $11.84 | ||||||||||||||||||||
Total Return(b): | .22% | 4.20% | 18.09% | 26.00% | 16.16% | 7.71% | ||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Net assets, end of period (000) | $89,026 | $88,920 | $88,561 | $81,558 | $70,475 | $61,961 | ||||||||||||||||||||
Average net assets (000) | $86,355 | $90,171 | $86,047 | $76,459 | $65,277 | $65,724 | ||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.13% | (d) | 1.14% | 1.16% | 1.20% | 1.20% | 1.55% | |||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.18% | (d) | 1.19% | 1.21% | 1.30% | 1.40% | 1.69% | |||||||||||||||||||
Net investment income | 1.02% | (d) | .89% | .74% | .99% | .95% | .43% | |||||||||||||||||||
Portfolio turnover rate | 43% | (e) | 112% | 91% | 94% | 89% | 121% |
(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 return may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(c) | Does not include the expenses of the underlying funds in which the Fund invests. |
(d) | Annualized. |
(e) | Not annualized. |
See Notes to Financial Statements.
Prudential QMA Large-Cap Core Equity Fund | 37 |
Financial Highlights (unaudited) (continued)
Class B Shares | ||||||||||||||||||||||||||
Six Months Ended April 30, | Year Ended October 31, | |||||||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $14.75 | $15.43 | $14.29 | $11.96 | $11.20 | $10.47 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment income (loss) | .02 | .02 | - | (d) | .03 | .03 | (.03 | ) | ||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.07 | ) | .51 | 2.29 | 2.84 | 1.55 | .76 | |||||||||||||||||||
Total from investment operations | (.05 | ) | .53 | 2.29 | 2.87 | 1.58 | .73 | |||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||
Dividends from net investment income | (.03 | ) | - | (d) | (.03 | ) | (.05 | ) | (.03 | ) | - | |||||||||||||||
Distributions from net realized gains | (.72 | ) | (1.21 | ) | (1.12 | ) | (.49 | ) | (.79 | ) | - | |||||||||||||||
Total dividends and distributions | (.75 | ) | (1.21 | ) | (1.15 | ) | (.54 | ) | (.82 | ) | - | |||||||||||||||
Net asset value, end of period | $13.95 | $14.75 | $15.43 | $14.29 | $11.96 | $11.20 | ||||||||||||||||||||
Total Return(b): | (.19)% | 3.42% | 17.16% | 25.02% | 15.29% | 6.97% | ||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Net assets, end of period (000) | $2,351 | $2,676 | $3,052 | $3,275 | $3,029 | $4,038 | ||||||||||||||||||||
Average net assets (000) | $2,419 | $3,018 | $3,150 | $3,085 | $3,496 | $4,886 | ||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.88% | (f) | 1.89% | 1.91% | 1.95% | 1.95% | 2.27% | |||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.88% | (f) | 1.89% | 1.91% | �� | 2.00% | 2.11% | 2.38% | ||||||||||||||||||
Net investment income (loss) | .30% | (f) | .15% | - | (e) | .25% | .22% | (.28)% | ||||||||||||||||||
Portfolio turnover rate | 43% | (g) | 112% | 91% | 94% | 89% | 121% |
(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 return may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(c) | Does not include the expenses of the underlying funds in which the Fund invests. |
(d) | Less than $.005 per share. |
(e) | Less than .005%. |
(f) | Annualized. |
(g) | Not annualized. |
See Notes to Financial Statements.
38 |
Class C Shares | ||||||||||||||||||||||||||
Six Months Ended April 30, | Year Ended October 31, | |||||||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $14.77 | $15.45 | $14.30 | $11.97 | $11.21 | $10.48 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment income (loss) | .02 | .02 | - | (d) | .03 | .02 | (.03 | ) | ||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.07 | ) | .51 | 2.30 | 2.84 | 1.56 | .76 | |||||||||||||||||||
Total from investment operations | (.05 | ) | .53 | 2.30 | 2.87 | 1.58 | .73 | |||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||
Dividends from net investment income | (.03 | ) | - | (d) | (.03 | ) | (.05 | ) | (.03 | ) | - | |||||||||||||||
Distributions from net realized gains | (.72 | ) | (1.21 | ) | (1.12 | ) | (.49 | ) | (.79 | ) | - | |||||||||||||||
Total dividends and distributions | (.75 | ) | (1.21 | ) | (1.15 | ) | (.54 | ) | (.82 | ) | - | |||||||||||||||
Net asset value, end of period | $13.97 | $14.77 | $15.45 | $14.30 | $11.97 | $11.21 | ||||||||||||||||||||
Total Return(b): | (.19)% | 3.42% | 17.21% | 24.99% | 15.28% | 6.97% | ||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Net assets, end of period (000) | $38,142 | $38,919 | $37,681 | $32,128 | $20,134 | $20,636 | ||||||||||||||||||||
Average net assets (000) | $37,618 | $38,738 | $35,817 | $23,702 | $20,445 | $22,444 | ||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.88% | (e) | 1.89% | 1.91% | 1.95% | 1.95% | 2.27% | |||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.88% | (e) | 1.89% | 1.91% | 2.00% | 2.10% | 2.39% | |||||||||||||||||||
Net investment income (loss) | .27% | (e) | .14% | (.01)% | .20% | .20% | (.28)% | |||||||||||||||||||
Portfolio turnover rate | 43% | (f) | 112% | 91% | 94% | 89% | 121% |
(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 return may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(c) | Does not include the expenses of the underlying funds in which the Fund invests. |
(d) | Less than $.005 per share. |
(e) | Annualized. |
(f) | Not annualized. |
See Notes to Financial Statements.
Prudential QMA Large-Cap Core Equity Fund | 39 |
Financial Highlights (unaudited) (continued)
Class Z Shares | ||||||||||||||||||||||||||
Six Months Ended April 30, | Year Ended October 31, | |||||||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $16.24 | $16.86 | $15.49 | $12.91 | $12.03 | $11.18 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment income | .10 | .18 | .16 | .17 | .15 | .07 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.07 | ) | .55 | 2.49 | 3.06 | 1.67 | .83 | |||||||||||||||||||
Total from investment operations | .03 | .73 | 2.65 | 3.23 | 1.82 | .90 | ||||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||
Dividends from net investment income | (.18 | ) | (.14 | ) | (.16 | ) | (.16 | ) | (.15 | ) | (.05 | ) | ||||||||||||||
Distributions from net realized gains | (.72 | ) | (1.21 | ) | (1.12 | ) | (.49 | ) | (.79 | ) | - | |||||||||||||||
Total dividends and distributions | (.90 | ) | (1.35 | ) | (1.28 | ) | (.65 | ) | (.94 | ) | (.05 | ) | ||||||||||||||
Net asset value, end of period | $15.37 | $16.24 | $16.86 | $15.49 | $12.91 | $12.03 | ||||||||||||||||||||
Total Return(b): | .35% | 4.41% | 18.39% | 26.28% | 16.41% | 8.04% | ||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Net assets, end of period (000) | $75,192 | $80,096 | $42,134 | $34,851 | $34,551 | $32,419 | ||||||||||||||||||||
Average net assets (000) | $75,770 | $57,677 | $38,052 | $37,799 | $32,953 | $144,295 | ||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | .88% | (d) | .89% | .91% | .95% | .95% | 1.42% | |||||||||||||||||||
Expenses before waivers and/or expense reimbursement | .88% | (d) | .89% | .91% | 1.00% | 1.10% | 1.44% | |||||||||||||||||||
Net investment income | 1.29% | (d) | 1.12% | .99% | 1.25% | 1.21% | .58% | |||||||||||||||||||
Portfolio turnover rate | 43% | (e) | 112% | 91% | 94% | 89% | 121% |
(a) | Calculated based on average shares outstanding during the period. |
(b) | Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(c) | Does not include the expenses of the underlying funds in which the Fund invests. |
(d) | Annualized. |
(e) | Not annualized. |
See Notes to Financial Statements.
40 |
n MAIL | n TELEPHONE | n WEBSITE | ||
655 Broad Street Newark, NJ 07102 | (800) 225-1852 | www.prudentialfunds.com |
PROXY VOTING |
The Board of Trustees of the Fund has delegated to the Fund’s investment subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at www.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 • Keith F. Hartstein • Michael S. Hyland • Stuart S. Parker • Richard A. Redeker • Stephen G. Stoneburn • Grace C. Torres |
OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • M. Sadiq Peshimam, Treasurer and Principal Financial and Accounting Officer • Raymond A. O’Hara, Chief Legal Officer • Deborah A. Docs, Secretary • Chad A. Earnst, Chief Compliance Officer • Theresa C. Thompson, Deputy Chief Compliance Officer • Richard W. Kinville, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • Amanda S. Ryan, Assistant Secretary • Andrew R. French, Assistant Secretary • Peter Parrella, Assistant Treasurer • Lana Lomuti, Assistant Treasurer • Linda McMullin, Assistant Treasurer • Kelly A. Coyne, Assistant Treasurer |
MANAGER | Prudential Investments LLC | 655 Broad Street Newark, NJ 07102 | ||
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INVESTMENT SUBADVISER | Quantitative Management Associates LLC | Gateway Center Two 100 Mulberry Street Newark, NJ 07102 | ||
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DISTRIBUTOR | Prudential Investment Management Services LLC | 655 Broad Street Newark, NJ 07102 | ||
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CUSTODIAN | The Bank of New York Mellon | One Wall Street New York, NY 10286 | ||
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TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
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FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 | ||
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An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go to www.prudentialfunds.com/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH TRUSTEES |
Shareholders can communicate directly with the Board of Trustees by writing to the Chair of the Board, Prudential QMA Large-Cap Core Equity Fund, Prudential Investments, Attn: Board of Trustees, 655 Broad Street, Newark, NJ 07102. Shareholders can communicate directly with an individual Trustee by writing to the same address. Communications are not screened before being delivered to the addressee. |
AVAILABILITY OF PORTFOLIO SCHEDULE |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation and location of the Public Reference Room may be obtained by calling (202) 551-8090. The Fund’s schedule of portfolio holdings is also available on the Fund’s website as of the end of each month no sooner than 15 days after the end of the month. |
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PRUDENTIAL QMA LARGE-CAP CORE EQUITY FUND
SHARE CLASS | A | B | C | Z | ||||
NASDAQ | PTMAX | PTMBX | PTMCX | PTEZX | ||||
CUSIP | 74441J100 | 74441J209 | 74441J308 | 74441J407 |
MF187E2 0292994-00001-00
PRUDENTIAL INVESTMENTS, A PGIM BUSINESS | MUTUAL FUNDS
Prudential Absolute Return Bond Fund
SEMIANNUAL REPORT | APRIL 30, 2016 |
To enroll in e-delivery, go to prudentialfunds.com/edelivery
| ![]() |
Objective: To seek positive returns over the long term, regardless of market conditions |
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter.
The accompanying financial statements as of April 30, 2016, 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. Prudential Fixed Income is a unit of PGIM, Inc. (PGIM), a registered investment adviser. PIMS and PGIM are Prudential Financial companies. © 2016 Prudential Financial, Inc. and its related entities. The Prudential logo and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
2 | Visit our website at prudentialfunds.com |
Letter from the President
Dear Shareholder:
We hope you find the semiannual report for the Prudential Absolute Return Bond Fund informative and useful. The report covers performance for the six-month period that ended April 30, 2016.
Since market conditions change over time, 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. Keep in mind, however, that diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
Prudential Investments® is dedicated to helping you solve your toughest investment challenges—whether it’s capital growth, reliable income, or protection from market volatility and other risks. We offer the expertise of Prudential Financial’s affiliated asset managers that strive to be leaders in a broad range of funds to help you stay on course to the future you envision. They also manage money for major corporations and pension funds around the world, which means you benefit from the same expertise, innovation, and attention to risk demanded by today’s most sophisticated investors.
Thank you for choosing the Prudential Investments family of funds.
Sincerely,
Stuart S. Parker, President
Prudential Absolute Return Bond Fund
June 15, 2016
Prudential Absolute Return Bond Fund | 3 |
Your Fund’s Performance (unaudited)
Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852.
Cumulative Total Returns (Without Sales Charges) as of 4/30/16 | ||||||||
Six Months (%) | One Year (%) | Five Years (%) | Since Inception (%) | |||||
Class A | 0.55 | –0.59 | 8.25 | 8.76 (3/30/11) | ||||
Class C | 0.18 | –1.33 | 4.26 | 4.81 (3/30/11) | ||||
Class Q | 0.70 | –0.28 | 9.74 | 10.55 (3/30/11) | ||||
Class Z | 0.67 | –0.34 | 9.45 | 10.27 (3/30/11) | ||||
BofA ML USD LIBOR 3-Month CM Index | 0.21 | 0.35 | 1.64 | 1.67 | ||||
Lipper Alternative Credit Focus Funds Average | –0.21 | –2.18 | 9.72 | 10.56 | ||||
Average Annual Total Returns (With Sales Charges) as of 3/31/16 | ||||||||
One Year (%) | Five Years (%) | Since Inception (%) | ||||||
Class A | –6.30 | 0.47 | 0.46 (3/30/11) | |||||
Class C | –3.56 | 0.66 | 0.66 (3/30/11) | |||||
Class Q | –1.47 | 1.74 | 1.74 (3/30/11) | |||||
Class Z | –1.63 | 1.67 | 1.67 (3/30/11) | |||||
BofA ML USD LIBOR 3-Month CM Index | 0.33 | 0.32 | 0.32 | |||||
Lipper Alternative Credit Focus Funds Average | –3.05 | 1.73 | 1.73 |
Source: Prudential Investments LLC and Lipper Inc.
Inception returns are provided for any share class with less than 10 calendar years of returns.
4 | Visit our website at prudentialfunds.com |
The returns in the tables do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or following the redemption of Fund shares. The average annual total returns take into account applicable sales charges, which are described for each share class in the table below.
Class A | Class C | Class Q | Class Z | |||||
Maximum initial sales charge | 4.50% of the public offering price | None | None | None | ||||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or net asset value at redemption) | 1% on sales of $1 million or more made within 12 months of purchase | 1% 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) | .25% | 1% | None | None |
Benchmark Definitions
BofA ML USD LIBOR 3-Month CM Index—The Bank of America Merrill Lynch US Dollar LIBOR 3-Month Constant Maturity Index (BofA ML USD LIBOR 3-Month CM Index) is an unmanaged index that tracks the performance of a synthetic asset paying LIBOR to a stated maturity. The Index is based on the assumed purchase at par of a synthetic instrument having exactly its stated maturity and with a coupon equal to that current day fixing rate. That issue is assumed to be sold the following business day (priced at a yield equal to the current day fixing rate) and rolled into a new instrument.
Lipper Alternative Credit Focus Funds Average—The Lipper Alternative Credit Focus Funds Average (Lipper Average) is based on the average return of all funds in the Lipper Alternative Credit Focus Funds category for the periods noted. Funds in the Lipper Average are funds that, by prospectus language, invest in a wide range of credit-structured vehicles by using either fundamental credit research analysis or quantitative credit portfolio modeling trying to benefit from any changes in credit quality, credit spreads, and market liquidity.
Investors cannot invest directly in an index or average. The returns for the Index would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses of a mutual fund, but not sales charges or taxes. The Since Inception returns for the Index and the Lipper Average are measured from the closest month-end to the inception date for the indicated share class.
Prudential Absolute Return Bond Fund | 5 |
Your Fund’s Performance (continued)
Distributions and Yields as of 4/30/16 | ||||||
Total Distributions Paid for Six Months ($) | SEC 30-Day Subsidized Yield* (%) | SEC 30-Day Unsubsidized Yield** (%) | ||||
Class A | 0.10 | 2.52 | 2.43 | |||
Class C | 0.07 | 1.89 | 1.80 | |||
Class Q | 0.11 | 2.93 | 2.93 | |||
Class Z | 0.11 | 2.87 | 2.78 |
*SEC 30-Day Subsidized Yield (%)—A standardized yield calculation created by the Securities and Exchange Commission, it reflects the income earned during a 30-day period, after the deduction of the Fund’s net expenses (net of any expense waivers or reimbursements).
**SEC 30-Day Unsubsidized Yield (%)—A standardized yield calculation created by the Securities and Exchange Commission, it reflects the income earned during a 30-day period, after the deduction of the Fund’s gross expenses.
Credit Quality expressed as a percentage of total investments as of 4/30/2016 (%) | ||||
AAA | 20.5 | |||
AA | 5.2 | |||
A | 9.2 | |||
BBB | 16.6 | |||
BB | 26.4 | |||
B | 8.9 | |||
CCC | 0.2 | |||
C | 0.1 | |||
Not Rated | 5.4 | |||
Cash/Cash Equivalents | 7.5 | |||
Total Investments | 100.0 |
Source: PGIM, Inc.
Credit ratings reflect the highest rating assigned by a nationally recognized statistical rating organization (NRSRO) such as Moody’s Investor Service, Inc. (Moody’s), Standard & Poor’s (S&P), or Fitch, Inc. (Fitch). Credit ratings reflect the common nomenclature used by both S&P and Fitch. Where applicable, ratings are converted to the comparable S&P/Fitch rating tier nomenclature. These rating agencies are independent and are widely used. The Not Rated category consists of securities that have not been rated by a NRSRO. Credit ratings are subject to change. Values may not sum to 100.0% due to rounding.
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Fees and Expenses (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on November 1, 2015, at the beginning of the period, and held through the six-month period ended April 30, 2016. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of Prudential Investments funds, including the Fund, that you own. You should consider the additional fees that were charged to your
Prudential Absolute Return Bond Fund | 7 |
Fees and Expenses (continued)
Fund account over the six-month period when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information provided in the expense table. Additional fees have the effect of reducing investment returns.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Prudential Absolute Return Bond Fund | Beginning Account Value November 1, 2015 | Ending Account Value April 30, 2016 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,005.50 | 1.15 | % | $ | 5.73 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,019.14 | 1.15 | % | $ | 5.77 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,001.80 | 1.90 | % | $ | 9.46 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.42 | 1.90 | % | $ | 9.52 | ||||||||||
Class Q | Actual | $ | 1,000.00 | $ | 1,007.00 | 0.86 | % | $ | 4.29 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.59 | 0.86 | % | $ | 4.32 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,006.70 | 0.90 | % | $ | 4.49 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.39 | 0.90 | % | $ | 4.52 |
*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 182 days in the six-month period ended April 30, 2016, and divided by the 366 days in the Fund’s fiscal year ending October 31, 2016 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
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The Fund’s annualized expense ratios for the six-month period ended April 30, 2016, are as follows:
Class | Gross Operating Expenses (%) | Net Operating Expenses (%) | ||
A | 1.24 | 1.15 | ||
C | 1.99 | 1.90 | ||
Q | 0.86 | 0.86 | ||
Z | 0.99 | 0.90 |
Net operating expenses shown above reflect any fee waivers and/or expense reimbursements. Additional information on Fund expenses and any fee waivers and/or expense reimbursements can be found in the “Financial Highlights” tables in this report and in the Notes to the Financial Statements in this report.
Prudential Absolute Return Bond Fund | 9 |
Portfolio of Investments (unaudited)
as of April 30, 2016
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
LONG-TERM INVESTMENTS 95.1% | ||||||||||||||||
ASSET-BACKED SECURITIES 29.4% |
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Collateralized Debt Obligation 0.1% |
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Landmark VIII CDO Ltd. (Cayman Islands), Series 2006-8A, Class A2, 144A | 0.963 | %(a) | 10/19/20 | 2,500 | $ | 2,455,640 | ||||||||||
Collateralized Loan Obligations 16.4% |
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A Voce CLO Ltd. (Cayman Islands), | 2.078 | (a) | 07/15/26 | 13,250 | 13,086,067 | |||||||||||
Series 2014-1A, Class A2A, 144A | 2.628 | (a) | 07/15/26 | 8,500 | 8,059,861 | |||||||||||
ACAS CLO Ltd. (Cayman Islands), Series 2013-1A, Class A, 144A | 1.814 | (a) | 04/20/25 | 6,050 | 5,991,383 | |||||||||||
AIMCO CLO (Cayman Islands), Series 2014-AA, Class B1, 144A | 2.634 | (a) | 07/20/26 | 5,000 | 4,911,818 | |||||||||||
Series 2014-AA, Class B2, 144A | 4.580 | 07/20/26 | 1,000 | 971,679 | ||||||||||||
ALM Loan Funding CLO (Cayman Islands), | 2.734 | (a) | 07/28/26 | 500 | 498,622 | |||||||||||
Anchorage Capital CLO Ltd. (Cayman Islands), Series 2014-5A, Class A, 144A | 2.228 | (a) | 10/15/26 | 9,750 | 9,768,265 | |||||||||||
Atlas Senior Loan Fund CLO Ltd. (Cayman Islands), Series 2014-6A, Class A, 144A | 2.168 | (a) | 10/15/26 | 250 | 249,569 | |||||||||||
Babson CLO Ltd. (Cayman Islands), Series 2013-IA, Class A, 144A | 1.734 | (a) | 04/20/25 | 2,070 | 2,047,938 | |||||||||||
Ballyrock CLO LLC (Cayman Islands), Series 2013-1A, Class A, 144A | 1.798 | (a) | 05/20/25 | 9,800 | 9,645,827 | |||||||||||
Battalion CLO IV Ltd. (Cayman Islands), Series 2013-4A, Class A1, 144A | 2.035 | (a) | 10/22/25 | 5,450 | 5,424,095 | |||||||||||
Battalion CLO VII Ltd. (Cayman Islands), Series 2014-7A, Class A1, 144A | 2.233 | (a) | 10/17/26 | 12,500 | 12,442,521 | |||||||||||
Battalion CLO VIII Ltd. (Cayman Islands), Series 2015-8A, Class A1, 144A | 2.163 | (a) | 04/18/27 | 12,500 | 12,270,247 | |||||||||||
Benefit Street Partners CLO II Ltd. (Cayman Islands), | 1.828 | (a) | 07/15/24 | 11,200 | 11,053,725 | |||||||||||
Series 2013-IIA, Class A2B, 144A | 3.339 | 07/15/24 | 10,000 | 10,003,646 | ||||||||||||
Brookside Mill CLO Ltd. (Cayman Islands), Series 2013-1A, Class A1, 144A | 1.783 | (a) | 04/17/25 | 10,300 | 10,121,368 | |||||||||||
Series 2013-1A, Class B1, 144A | 2.383 | (a) | 04/17/25 | 5,250 | 5,050,602 | |||||||||||
Series 2013-1A, Class B2, 144A | 3.020 | 04/17/25 | 6,200 | 5,982,856 | ||||||||||||
Cavalry CLO II (Cayman Islands), Series 2013-2A, Class A, 144A | 1.983 | (a) | 01/17/24 | 4,200 | 4,144,014 | |||||||||||
ECP CLO Ltd. (Cayman Islands), Series 2014-6A, Class A1A, 144A | 2.078 | (a) | 07/15/26 | 7,600 | 7,440,782 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 11 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
ASSET-BACKED SECURITIES (Continued) |
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Collateralized Loan Obligations (cont’d.) |
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Flatiron CLO Ltd. (Cayman Islands), Series 2013-1A, Class A1, 144A | 2.033 | %(a) | 01/17/26 | 4,500 | $ | 4,473,949 | ||||||||||
Galaxy CLO Ltd. (Cayman Islands), Series 2014-18A, Class A, 144A | 2.098 | (a) | 10/15/26 | 23,800 | 23,640,281 | |||||||||||
ICG US CLO Ltd. (Cayman Islands), Series 2014-3A, Class A1B, 144A | 3.280 | 01/25/27 | 11,000 | 10,987,711 | ||||||||||||
ING Investment Management CLO Ltd. (Cayman Islands), | 1.768 | (a) | 04/15/24 | 1,600 | 1,580,153 | |||||||||||
Series 2013-2A, Class A1, 144A | 1.788 | (a) | 04/25/25 | 1,000 | 987,441 | |||||||||||
Series 2013-2A, Class A2B, 144A | 3.070 | 04/25/25 | 2,000 | 1,992,226 | ||||||||||||
Jackson Mill CLO Ltd. (Cayman Islands), Series 2015-1A, Class A, 144A | 2.168 | (a) | 04/15/27 | 12,000 | 11,920,876 | |||||||||||
KVK CLO Ltd. (Cayman Islands), | 2.728 | (a) | 10/15/26 | 7,250 | 7,132,009 | |||||||||||
Limerock CLO II Ltd. (Cayman Islands), Series 2014-2A, Class A, 144A | 2.133 | (a) | 04/18/26 | 2,000 | 1,988,283 | |||||||||||
Magnetite IX CLO Ltd. (Cayman Islands), Series 2014-9A, Class A1, 144A | 2.058 | (a) | 07/25/26 | 1,000 | 998,189 | |||||||||||
Magnetite XI CLO Ltd. (Cayman Islands), Series 2014-11A, Class A1, 144A | 2.083 | (a) | 01/18/27 | 5,750 | 5,714,326 | |||||||||||
Neuberger Berman CLO XII Ltd. (Cayman Islands), Series 2012-12A, Class BR, 144A | 2.738 | (a) | 07/25/23 | 2,250 | 2,221,808 | |||||||||||
Ocean Trails CLO IV (Cayman Islands), Series 2013-4A, Class A, 144A | 1.918 | (a) | 08/13/25 | 9,900 | 9,753,439 | |||||||||||
OneMain Financial Issuance Trust, | 4.330 | 09/18/24 | 8,000 | 7,735,533 | ||||||||||||
Series 2015-1A, Class B, 144A | 3.850 | 03/18/26 | 2,000 | 1,941,799 | ||||||||||||
Series 2015-2A, Class B, 144A(b) | 3.100 | 07/18/25 | 5,000 | 4,812,857 | ||||||||||||
Palmer Square CLO Ltd. (Cayman Islands), | 2.134 | (a) | 07/20/27 | 12,000 | 11,928,868 | |||||||||||
Race Point VIII CLO Ltd. (Cayman Islands), | 1.868 | (a) | 02/20/25 | 1,000 | 993,486 | |||||||||||
Regatta III Funding Ltd. (Cayman Islands), Series 2014-1A, Class A1A, 144A | 2.148 | (a) | 04/15/26 | 1,500 | 1,498,507 | |||||||||||
Shackleton VI CLO Ltd. (Cayman Islands), Series 2014-6A, Class A1, 144A | 2.113 | (a) | 07/17/26 | 19,500 | 19,290,562 | |||||||||||
Sheridan Square CLO Ltd. (Cayman Islands), | 1.678 | (a) | 04/15/25 | 10,400 | 10,217,859 | |||||||||||
Silver Spring CLO Ltd. (Cayman Islands), Series 2014-1A, Class A, 144A | 2.078 | (a) | 10/15/26 | 2,729 | 2,696,887 |
See Notes to Financial Statements.
12 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
ASSET-BACKED SECURITIES (Continued) |
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Collateralized Loan Obligations (cont’d.) |
| |||||||||||||||
Sound Point CLO Ltd. (Cayman Islands), Series 2012-1A, Class B, 144A | 3.334 | %(a) | 10/20/23 | 550 | $ | 549,964 | ||||||||||
THL Credit Wind River CLO Ltd. (Cayman Islands), Series 2013-2A, Class A1, 144A | 2.083 | (a) | 01/18/26 | 4,750 | 4,724,160 | |||||||||||
Vibrant CLO Ltd. (Cayman Islands), | 2.264 | (a) | 04/20/26 | 28,000 | 27,800,217 | |||||||||||
|
| |||||||||||||||
316,746,275 | ||||||||||||||||
Non-Residential Mortgage-Backed Securities 2.2% |
| |||||||||||||||
Highbridge Loan Management Ltd. (Cayman Islands), Series 2015-6A, | 2.071 | (a) | 05/05/27 | 15,250 | 15,132,107 | |||||||||||
OZLM Funding IV Ltd. (Cayman Islands), Series 2013-4A, Class A1, 144A | 1.785 | (a) | 07/22/25 | 4,200 | 4,157,935 | |||||||||||
Sierra Timeshare Receivables Funding LLC, | 1.870 | 08/20/29 | 187 | 185,847 | ||||||||||||
Slater Mill Loan Fund LP (Cayman Islands), | 3.268 | (a) | 08/17/22 | 250 | 248,509 | |||||||||||
Springleaf Funding Trust, | 3.160 | 11/15/24 | 12,930 | 12,944,663 | ||||||||||||
Series 2015-AA, Class B, 144A | 3.620 | 11/15/24 | 3,430 | 3,307,910 | ||||||||||||
Series 2015-AA, Class C, 144A | 5.040 | 11/15/24 | 6,000 | 5,782,131 | ||||||||||||
|
| |||||||||||||||
41,759,102 | ||||||||||||||||
Residential Mortgage-Backed Securities 10.7% |
| |||||||||||||||
Accredited Mortgage Loan Trust, | 1.639 | (a) | 10/25/34 | 4,256 | 4,238,096 | |||||||||||
Series 2004-3, Class 2A5 | 1.519 | (a) | 10/25/34 | 2,176 | 2,018,780 | |||||||||||
Series 2005-3, Class M1 | 0.880 | (a) | 09/25/35 | 1,964 | 1,933,940 | |||||||||||
ACE Securities Corp. Home Equity Loan Trust, Series 2004-FM1, Class M1 | 1.339 | (a) | 09/25/33 | 609 | 571,148 | |||||||||||
Ameriquest Mortgage Securities, Inc., | ||||||||||||||||
Series 2003-1, Class M1 | 1.789 | (a) | 02/25/33 | 2,093 | 1,970,557 | |||||||||||
Series 2003-10, Class AV1 | 1.199 | (a) | 12/25/33 | 4,554 | 4,429,758 | |||||||||||
Series 2005-R10, Class A2C | 0.769 | (a) | 01/25/36 | 469 | 461,203 | |||||||||||
Amortizing Residential Collateral Trust, Series 2002-BC8, Class A3 | 1.439 | (a) | 11/25/32 | 984 | 954,871 | |||||||||||
Argent Securities, Inc., | ||||||||||||||||
Series 2003-W5, Class M1 | 1.489 | (a) | 10/25/33 | 58 | 56,466 | |||||||||||
Series 2003-W7, Class M1 | 1.474 | (a) | 03/25/34 | 1,476 | 1,445,387 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 13 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
ASSET-BACKED SECURITIES (Continued) |
| |||||||||||||||
Residential Mortgage-Backed Securities (cont’d.) |
| |||||||||||||||
Argent Securities, Inc., Asset-Backed Pass-Through Certificates, | ||||||||||||||||
Series 2003-W8, Class M1 | 1.489 | %(a) | 12/25/33 | 1,022 | $ | 912,077 | ||||||||||
Series 2003-W9, Class M1 | 1.474 | (a) | 01/25/34 | 2,459 | 2,285,784 | |||||||||||
Series 2004-W6, Class AF | 4.123 | (a) | 05/25/34 | 280 | 283,796 | |||||||||||
Series 2004-W6, Class AV5 | 1.239 | (a) | 05/25/34 | 587 | 548,336 | |||||||||||
Asset Backed Funding Certificates, Series 2004-OPT5, Class A1 | 1.139 | (a) | 06/25/34 | 1,498 | 1,391,348 | |||||||||||
Asset-Backed Securities Corp. Home Equity Loan Trust, | ||||||||||||||||
Series 2003-HE6, Class A2 | 1.119 | (a) | 11/25/33 | 1,758 | 1,660,805 | |||||||||||
Series 2003-HE6, Class A3B | 1.399 | (a) | 11/25/33 | 3,546 | 3,176,107 | |||||||||||
Series 2004-HE3, Class M1 | 1.249 | (a) | 06/25/34 | 3,536 | 3,308,303 | |||||||||||
Bayview Opportunity Master Fund liib NPL Trust, | 3.721 | (a) | 07/28/35 | 11,461 | 11,429,656 | |||||||||||
Bear Stearns Asset-Backed Securities I Trust, | ||||||||||||||||
Series 2004-FR2, Class M2 | 1.459 | (a) | 06/25/34 | 1,100 | 997,043 | |||||||||||
Series 2004-HE11, Class M2 | 2.014 | (a) | 12/25/34 | 5,194 | 5,086,741 | |||||||||||
Bear Stearns Asset-Backed Securities Trust, | ||||||||||||||||
Series 2002-2, Class A1 | 1.099 | (a) | 10/25/32 | 1,742 | 1,644,589 | |||||||||||
Series 2003-3, Class A2 | 1.619 | (a) | 06/25/43 | 178 | 168,708 | |||||||||||
Series 2003-HE1, Class M1 | 1.534 | (a) | 01/25/34 | 2,418 | 2,341,629 | |||||||||||
Series 2004-HE5, Class M1 | 1.294 | (a) | 07/25/34 | 5,039 | 4,805,786 | |||||||||||
Chase Funding Trust, | ||||||||||||||||
Series 2002-3, Class 2A1 | 1.079 | (a) | 08/25/32 | 339 | 307,033 | |||||||||||
Series 2003-4, Class 1A5 | 5.416 | 05/25/33 | 1,005 | 1,032,915 | ||||||||||||
Citigroup Mortgage Loan Trust, Inc., | ||||||||||||||||
Series 2005-OPT1, Class M1 | 1.069 | (a) | 02/25/35 | 317 | 305,529 | |||||||||||
Series 2005-WF1, Class A5 | 5.010 | (a) | 11/25/34 | 199 | 202,179 | |||||||||||
Countrywide Asset-Backed Certificates, | ||||||||||||||||
Series 2003-BC4, Class M1 | 1.489 | (a) | 07/25/33 | 1,161 | 1,092,779 | |||||||||||
Series 2004-BC4, Class M1 | 1.489 | (a) | 11/25/34 | 1,068 | 1,018,302 | |||||||||||
Series 2004-1, Class M1 | 1.189 | (a) | 03/25/34 | 227 | 217,244 | |||||||||||
Series 2004-3, Class 1A | 0.859 | (a) | 08/25/34 | 8,662 | 7,944,690 | |||||||||||
Series 2004-6, Class 1A1 | 0.979 | (a) | 12/25/34 | 2,463 | 2,267,844 | |||||||||||
Credit-Based Asset Servicing and Securitization LLC, | ||||||||||||||||
Series 2003-CB3, Class AF1 | 3.379 | (a) | 12/25/32 | 197 | 192,449 | |||||||||||
Series 2003-CB5, Class M1 | 1.459 | (a) | 11/25/33 | 930 | 878,747 | |||||||||||
Series 2004-CB1, Class AF1 | 4.520 | 10/25/32 | 1,974 | 1,966,519 | ||||||||||||
Finance America Mortgage Loan Trust, | ||||||||||||||||
Series 2003-1, Class M1 | 1.489 | (a) | 09/25/33 | 2,685 | 2,476,738 | |||||||||||
Series 2004-2, Class M1 | 1.264 | (a) | 08/25/34 | 7,700 | 7,034,937 |
See Notes to Financial Statements.
14 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
ASSET-BACKED SECURITIES (Continued) |
| |||||||||||||||
Residential Mortgage-Backed Securities (cont’d.) |
| |||||||||||||||
First Franklin Mortgage Loan Trust, Series 2004-FF5, Class A2 | 1.199 | %(a) | 08/25/34 | 1,695 | $ | 1,565,481 | ||||||||||
Fremont Home Loan Trust, Series 2004-4, Class M1 | 1.234 | (a) | 03/25/35 | 2,512 | 2,348,673 | |||||||||||
GSAMP Trust, | ||||||||||||||||
Series 2003-HE2, Class A1A, 144A | 1.039 | (a) | 08/25/33 | 1,158 | 1,074,209 | |||||||||||
Series 2004-AR1, Class A2B | 1.639 | (a) | 06/25/34 | 1,422 | 1,401,969 | |||||||||||
Series 2004-FM1, Class M1 | 1.414 | (a) | 11/25/33 | 346 | 323,461 | |||||||||||
Series 2004-FM2, Class M1 | 1.189 | (a) | 01/25/34 | 2,273 | 2,110,592 | |||||||||||
Series 2004-NC2, Class A1B | 1.339 | (a) | 10/25/34 | 1,787 | 1,483,397 | |||||||||||
Home Equity Asset Trust, | ||||||||||||||||
Series 2003-6, Class M1 | 1.489 | (a) | 02/25/34 | 1,438 | 1,357,940 | |||||||||||
Series 2004-3, Class M1 | 1.294 | (a) | 08/25/34 | 1,645 | 1,568,376 | |||||||||||
Series 2004-7, Class A2 | 1.279 | (a) | 01/25/35 | 1,050 | 996,626 | |||||||||||
HSBC Home Equity Loan Trust U.S.A., Series 2007-3, Class A4 | 1.939 | (a) | 11/20/36 | 847 | 847,789 | |||||||||||
JPMorgan Mortgage Acquisition Corp., Series 2005-OPT2, Class M1 | 0.869 | (a) | 12/25/35 | 916 | 861,747 | |||||||||||
Long Beach Mortgage Loan Trust, | ||||||||||||||||
Series 2003-4, Class AV1 | 1.059 | (a) | 08/25/33 | 1,464 | 1,309,360 | |||||||||||
Series 2004-2, Class A1 | 0.879 | (a) | 06/25/34 | 985 | 917,868 | |||||||||||
Mastr Asset-Backed Securities Trust, | ||||||||||||||||
Series 2003-OPT1, Class M2 | 3.214 | (a) | 12/25/32 | 2,020 | 2,023,740 | |||||||||||
Series 2003-WMC2, Class M2 | 2.914 | (a) | 08/25/33 | 1,213 | 1,191,476 | |||||||||||
Series 2005-NC1, Class M1 | 1.159 | (a) | 12/25/34 | 8,247 | 7,524,527 | |||||||||||
Merrill Lynch Mortgage Investors Trust, Series 2002-HE1, Class A1 | 1.439 | (a) | 08/25/32 | 3,838 | 3,707,452 | |||||||||||
Morgan Stanley ABS Capital I, Inc. Trust, | ||||||||||||||||
Series 2003-HE3, Class M1 | 1.459 | (a) | 10/25/33 | 4,608 | 4,300,205 | |||||||||||
Series 2003-NC6, Class M1 | 1.639 | (a) | 06/25/33 | 899 | 867,044 | |||||||||||
Series 2003-NC8, Class M1 | 1.489 | (a) | 09/25/33 | 817 | 773,681 | |||||||||||
Series 2003-NC10, Class M1 | 1.459 | (a) | 10/25/33 | 1,119 | 1,054,036 | |||||||||||
Series 2004-HE3, Class M1 | 1.294 | (a) | 03/25/34 | 812 | 768,437 | |||||||||||
Series 2004-HE4, Class M1 | 1.339 | (a) | 05/25/34 | 6,584 | 6,255,267 | |||||||||||
Series 2004-HE5, Class M1 | 1.384 | (a) | 06/25/34 | 1,138 | 1,069,899 | |||||||||||
Series 2004-NC3, Class M1 | 1.234 | (a) | 03/25/34 | 2,765 | 2,628,491 | |||||||||||
Series 2004-NC5, Class M1 | 1.339 | (a) | 05/25/34 | 352 | 322,831 | |||||||||||
Series 2004-NC6, Class M1 | 1.339 | (a) | 07/25/34 | 2,280 | 2,153,094 | |||||||||||
Series 2004-OP1, Class M1 | 1.309 | (a) | 11/25/34 | 1,941 | 1,756,150 | |||||||||||
Series 2004-WMC1, Class M1 | 1.369 | (a) | 06/25/34 | 182 | 175,698 | |||||||||||
Morgan Stanley Home Equity Loan Trust, Series 2006-1, Class A2C | 0.769 | (a) | 12/25/35 | 270 | 260,786 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 15 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
ASSET-BACKED SECURITIES (Continued) |
| |||||||||||||||
Residential Mortgage-Backed Securities (cont’d.) |
| |||||||||||||||
Option One Mortgage Accep Corp. Asset-Backed Certificates, | 1.019 | %(a) | 06/25/33 | 1,963 | $ | 1,791,523 | ||||||||||
Series 2003-4, Class A2 | 1.079 | (a) | 07/25/33 | 883 | 817,858 | |||||||||||
Option One Mortgage Loan Trust, | 1.339 | (a) | 01/25/34 | 2,104 | 1,956,713 | |||||||||||
Series 2005-1, Class A4 | 1.239 | (a) | 02/25/35 | 479 | 476,323 | |||||||||||
Park Place Securities, Inc., Asset-Backed Pass-Through Certificates, | 1.279 | (a) | 01/25/36 | 1,500 | 1,434,072 | |||||||||||
Series 2005-WCW1, Class M1 | 0.889 | (a) | 09/25/35 | 1,647 | 1,634,325 | |||||||||||
RAMP Trust, Series 2005-EFC3, Class M3 | 0.929 | (a) | 08/25/35 | 1,522 | 1,494,618 | |||||||||||
RASC Trust, | 1.144 | (a) | 04/25/35 | 1,798 | 1,790,260 | |||||||||||
Series 2005-KS11, Class M1 | 0.839 | (a) | 12/25/35 | 800 | 765,363 | |||||||||||
Saxon Asset Securities Trust, | 0.899 | (a) | 11/25/35 | 913 | 902,123 | |||||||||||
Securitized Asset-Backed Receivables LLC Trust, | 1.219 | (a) | 02/25/34 | 1,634 | 1,517,791 | |||||||||||
Series 2004-OP1, Class M1 | 1.204 | (a) | 02/25/34 | 5,268 | 4,885,400 | |||||||||||
Specialty Underwriting & Residential Finance Trust, | 1.339 | (a) | 11/25/34 | 2,115 | 1,961,805 | |||||||||||
Series 2004-BC2, Class M1 | 1.264 | (a) | 05/25/35 | 3,249 | 3,031,317 | |||||||||||
Series 2004-BC3, Class M1 | 1.369 | (a) | 07/25/35 | 1,885 | 1,798,531 | |||||||||||
Series 2004-BC4, Class A2C | 1.419 | (a) | 10/25/35 | 1,487 | 1,436,383 | |||||||||||
Structured Asset Investment Loan Trust, | 1.239 | (a) | 02/25/34 | 3,622 | 3,437,401 | |||||||||||
Series 2004-8, Class A8 | 1.439 | (a) | 09/25/34 | 2,123 | 2,052,323 | |||||||||||
Series 2004-BNC1, Class A2 | 1.439 | (a) | 09/25/34 | 4,010 | 3,871,409 | |||||||||||
Series 2005-3, Class M2 | 1.099 | (a) | 04/25/35 | 2,000 | 1,920,431 | |||||||||||
Structured Asset Securities Corp. Mortgage Loan Trust, | 0.839 | (a) | 11/25/35 | 131 | 129,432 | |||||||||||
Series 2005-WF4, Class M2 | 0.869 | (a) | 11/25/35 | 950 | 924,646 | |||||||||||
Volt XLIV LLC, Series 2016-NPL4, Class A1, 144A(c) | 4.250 | 04/25/46 | 4,000 | 3,999,584 | ||||||||||||
Volt XXVII LLC, Series 2014-NPL7, Class A1, 144A | 3.375 | 08/27/57 | 3,937 | 3,896,889 | ||||||||||||
Volt XXX LLC, Series 2015-NPL1, Class A1, 144A | 3.625 | 10/25/57 | 9,830 | 9,746,280 | ||||||||||||
Volt XXXI LLC, Series 2015-NPL2, Class A1, 144A | 3.375 | 02/25/55 | 9,127 | 9,006,089 | ||||||||||||
|
| |||||||||||||||
206,738,010 | ||||||||||||||||
|
| |||||||||||||||
TOTAL ASSET-BACKED SECURITIES | 567,699,027 | |||||||||||||||
|
|
See Notes to Financial Statements.
16 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
BANK LOANS(a) 3.3% | ||||||||||||||||
Automotive 0.1% | ||||||||||||||||
Chrysler Group LLC | 3.250 | % | 12/31/18 | 1,439 | $ | 1,437,452 | ||||||||||
Chrysler Group LLC | 3.500 | 05/24/17 | 47 | 46,647 | ||||||||||||
|
| |||||||||||||||
1,484,099 | ||||||||||||||||
Brokerage 0.1% | ||||||||||||||||
LPL Holdings, Inc.(c) | 4.250 | 03/29/21 | 1,463 | 1,447,875 | ||||||||||||
Cable 0.1% | ||||||||||||||||
Virgin Media Investment Holdings Ltd. (United Kingdom) | 3.500 | 06/30/23 | 1,010 | 1,007,457 | ||||||||||||
Capital Goods 0.3% | ||||||||||||||||
OGF SA, Private Placement | 3.750 | 10/30/20 | EUR | 2,781 | 3,198,526 | |||||||||||
RBS Global, Inc./Rexnord LLC | 4.000 | 08/21/20 | 3,413 | 3,384,470 | ||||||||||||
|
| |||||||||||||||
6,582,996 | ||||||||||||||||
Chemicals 0.2% | ||||||||||||||||
Axalta Coating Systems US Holdings | 3.750 | 02/01/20 | 1,701 | 1,696,889 | ||||||||||||
CeramTec GmbH (Germany)(c) | 4.250 | 08/30/20 | EUR | 1,700 | 1,944,162 | |||||||||||
Macdermid, Inc. | 5.500 | 06/08/20 | 973 | 952,746 | ||||||||||||
|
| |||||||||||||||
4,593,797 | ||||||||||||||||
Consumer 0.2% | ||||||||||||||||
Motor Fuel Group (United Kingdom) | 6.000 | 07/15/22 | GBP | 3,000 | 4,299,084 | |||||||||||
Electric 0.1% | ||||||||||||||||
Calpine Construction Finance Co. LP | 3.000 | 05/04/20 | 511 | 500,564 | ||||||||||||
Calpine Corp. | 4.000 | 10/09/19 | 483 | 481,495 | ||||||||||||
NRG Energy, Inc. | 2.750 | 07/01/18 | 942 | 937,180 | ||||||||||||
|
| |||||||||||||||
1,919,239 | ||||||||||||||||
Food & Beverage 0.3% | ||||||||||||||||
Albertsons Holdings LLC | 5.125 | 08/23/19 | 4,912 | 4,911,781 | ||||||||||||
B.C. Unlimited Liability Co. | 3.750 | 12/10/21 | 923 | 924,268 | ||||||||||||
|
| |||||||||||||||
5,836,049 | ||||||||||||||||
Healthcare & Pharmaceutical 0.8% | ||||||||||||||||
CHS Community Health Systems, Inc.(c) | 3.136 | 01/25/19 | 4,125 | 4,021,875 | ||||||||||||
CHS Community Health Systems, Inc. | 3.750 | 12/31/18 | 1,297 | 1,289,194 | ||||||||||||
CHS Community Health Systems, Inc. | 3.750 | 12/31/19 | 125 | 123,403 | ||||||||||||
CHS Community Health Systems, Inc. | 4.000 | 01/27/21 | 231 | 227,057 | ||||||||||||
Grifols Worldwide OPS Ltd. | 3.630 | 02/26/21 | 1,919 | 1,919,942 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 17 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
BANK LOANS(a) (Continued) | ||||||||||||||||
Healthcare & Pharmaceutical (cont’d.) | ||||||||||||||||
Mallinckrodt International Finance (Luxembourg) | 3.500 | % | 03/19/21 | 1,508 | $ | 1,486,683 | ||||||||||
Ortho Clinical Diagnostics, Inc. | 4.750 | 06/30/21 | 2,211 | 2,095,027 | ||||||||||||
Valeant Pharmaceuticals International, Inc. | 4.750 | 08/05/20 | 1,978 | 1,921,978 | ||||||||||||
Valeant Pharmaceuticals International, Inc. | 5.000 | 04/01/22 | 1,955 | 1,911,297 | ||||||||||||
|
| |||||||||||||||
14,996,456 | ||||||||||||||||
Media & Entertainment 0.1% | ||||||||||||||||
CBS Outdoor Americas CAP LLC | 3.000 | 02/01/21 | 1,825 | 1,815,114 | ||||||||||||
Retailers 0.4% | ||||||||||||||||
Douglas Holdings AG (Germany) | 6.000 | 08/13/22 | EUR | 2,000 | 2,299,056 | |||||||||||
Euro Garages (United Kingdom) | 5.000 | 01/31/23 | GBP | 2,100 | 3,054,618 | |||||||||||
Staples, Inc. | 4.750 | 02/02/22 | 2,200 | 2,201,375 | ||||||||||||
|
| |||||||||||||||
7,555,049 | ||||||||||||||||
Technology 0.5% | ||||||||||||||||
BMC Software Finance, Inc. | 5.000 | 09/10/20 | 2,209 | 1,903,879 | ||||||||||||
First Data Corp. | 4.131 | 09/24/18 | 225 | 224,953 | ||||||||||||
First Data Corp. | 4.439 | 03/24/21 | 114 | 113,856 | ||||||||||||
NXP BV (Netherlands) | 3.250 | 01/10/20 | 414 | 413,235 | ||||||||||||
TransUnion LLC/TransUnion Financing Corp. | 3.500 | 04/09/21 | 2,742 | 2,726,123 | ||||||||||||
Vantiv LLC | 2.631 | 06/13/19 | 913 | 903,375 | ||||||||||||
Vantiv LLC | 3.750 | 06/11/21 | 3,578 | 3,586,265 | ||||||||||||
|
| |||||||||||||||
9,871,686 | ||||||||||||||||
Telecommunications | ||||||||||||||||
SBA Senior Finance II, LLC | 3.250 | 03/24/21 | 707 | 705,360 | ||||||||||||
Transportation 0.1% | ||||||||||||||||
XPO Logistics, Inc. | 5.500 | 11/01/21 | 2,494 | 2,504,660 | ||||||||||||
|
| |||||||||||||||
TOTAL BANK LOANS | 64,618,921 | |||||||||||||||
|
| |||||||||||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES 5.9% |
| |||||||||||||||
Banc of America Commercial Mortgage Trust, | 5.356 | 10/10/45 | 2,988 | 3,004,942 | ||||||||||||
Series 2007-2, Class A1A | 5.739 | (a) | 04/10/49 | 1,978 | 2,024,442 | |||||||||||
Series 2007-5, Class A1A | 5.361 | 02/10/51 | 2,006 | 2,089,629 | ||||||||||||
CD Commercial Mortgage Trust, Series 2007-CD4, Class AMFX | 5.366 | (a) | 12/11/49 | 8,600 | 8,737,024 |
See Notes to Financial Statements.
18 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (Continued) |
| |||||||||||||||
COMM Mortgage Trust, | 3.391 | % | 05/15/45 | 15 | $ | 15,949 | ||||||||||
Series 2012-CR1, Class XA, IO | 2.252 | (a) | 05/15/45 | 14,020 | 1,159,612 | |||||||||||
Series 2012-CR5, Class A3 | 2.540 | 12/10/45 | 1,000 | 1,009,748 | ||||||||||||
Series 2013-CR7, Class A3 | 2.929 | 03/10/46 | 265 | 274,650 | ||||||||||||
Series 2014-UBS2, Class XB, IO, 144A | 0.208 | (a) | 03/10/47 | 171,811 | 1,781,543 | |||||||||||
Series 2015-LC19, Class XB, IO, 144A | 0.357 | (a) | 02/10/48 | 123,049 | 2,636,620 | |||||||||||
Commercial Mortgage Loan Trust, Series 2008-LS1, Class A1A | 6.298 | (a) | 12/10/49 | 1,180 | 1,242,769 | |||||||||||
Credit Suisse Commercial Mortgage Trust, | 6.244 | (a) | 06/15/38 | 10 | 10,140 | |||||||||||
CSAIL Commercial Mortgage Trust, Series 2015-C1, Class XB, IO | 0.400 | (a) | 04/15/50 | 66,743 | 1,435,495 | |||||||||||
FHLMC Multifamily Structured Pass-Through Certificates, | 1.331 | (a) | 04/25/20 | 5,063 | 167,209 | |||||||||||
Series K008, Class X1, IO | 1.797 | (a) | 06/25/20 | 22,119 | 1,095,295 | |||||||||||
Series K010, Class X1, IO | 0.476 | (a) | 10/25/20 | 21,321 | 189,274 | |||||||||||
Series K018, Class X1, IO | 1.550 | (a) | 01/25/22 | 16,081 | 1,023,981 | |||||||||||
Series K020, Class X1, IO | 1.586 | (a) | 05/25/22 | 20,993 | 1,513,447 | |||||||||||
Series K021, Class X1, IO | 1.622 | (a) | 06/25/22 | 4,329 | 316,942 | |||||||||||
Series K025, Class X1, IO | 1.015 | (a) | 10/25/22 | 95,761 | 4,383,589 | |||||||||||
Series K501, Class X1A, IO | 1.665 | (a) | 08/25/16 | 226 | 177 | |||||||||||
Series K710, Class X1, IO | 1.895 | (a) | 05/25/19 | 471 | 21,156 | |||||||||||
Series K711, Class X1, IO | 1.820 | (a) | 07/25/19 | 3,853 | 168,656 | |||||||||||
GS Mortgage Securities Corp. II, | 0.643 | (a) | 02/10/46 | 103,126 | 3,195,442 | |||||||||||
Series 2014-GC20, Class XB, IO | 0.500 | (a) | 04/10/47 | 28,307 | 906,147 | |||||||||||
GS Mortgage Securities Trust, Series 2013-GC12, Class XB, IO | 0.681 | (a) | 06/10/46 | 37,400 | 1,268,694 | |||||||||||
JPMBB Commercial Mortgage Securities Trust, | 0.475 | (a) | 08/15/47 | 45,056 | 1,147,671 | |||||||||||
Series 2015-C27, Class XB, IO | 0.586 | (a) | 02/15/48 | 52,766 | 1,782,641 | |||||||||||
JPMorgan Chase Commercial Mortgage Securities Corp., | 2.475 | 12/15/47 | 1,000 | 1,007,953 | ||||||||||||
Series 2012-LC9, Class A4 | 2.611 | 12/15/47 | 1,700 | 1,729,676 | ||||||||||||
JPMorgan Chase Commercial Mortgage Securities Trust, | 4.951 | (a) | 01/12/37 | 67 | 67,418 | |||||||||||
Series 2005-LDP2, Class AJ | 4.842 | (a) | 07/15/42 | 47 | 46,950 | |||||||||||
Series 2007-CB20, Class A4 | 5.794 | (a) | 02/12/51 | 53 | 55,140 | |||||||||||
Series 2007-LD11, Class A3 | 5.929 | (a) | 06/15/49 | 38 | 39,072 | |||||||||||
Series 2007-LD11, Class A4 | 5.929 | (a) | 06/15/49 | 1,109 | 1,135,186 | |||||||||||
Series 2007-LD12, Class A3 | 6.135 | (a) | 02/15/51 | 35 | 35,049 | |||||||||||
Series 2011-C3, Class A2, 144A | 3.673 | 02/15/46 | 16 | 15,602 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 19 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (Continued) |
| |||||||||||||||
JPMorgan Chase Commercial Mortgage Securities Trust, (cont’d.) | ||||||||||||||||
Series 2013-C13, Class A3 | 3.525 | % | 01/15/46 | 4,630 | $ | 4,828,840 | ||||||||||
Series 2013-LC11, Class A3 | 2.592 | 04/15/46 | 5,000 | 5,051,821 | ||||||||||||
Series 2013-LC11, Class XB, IO | 0.723 | (a) | 04/15/46 | 34,956 | 1,189,376 | |||||||||||
Merrill Lynch Mortgage Trust, | 5.921 | (a) | 05/12/39 | 12 | 11,817 | |||||||||||
Series 2007-C1, Class A3 | 6.026 | (a) | 06/12/50 | 77 | 76,857 | |||||||||||
ML-CFC Commercial Mortgage Trust, Series 2006-2, Class AM | 6.103 | (a) | 06/12/46 | 100 | 99,900 | |||||||||||
Morgan Stanley Bank of America Merrill Lynch Trust, | 0.397 | (a) | 08/15/45 | 65,968 | 1,009,700 | |||||||||||
Series 2013-C7, Class A3 | 2.655 | 02/15/46 | 3,000 | 3,054,353 | ||||||||||||
Series 2013-C8, Class A3 | 2.863 | 12/15/48 | 6,900 | 7,082,660 | ||||||||||||
Series 2013-C8, Class XB, IO, 144A | 0.497 | (a) | 12/15/48 | 68,276 | 1,962,252 | |||||||||||
Series 2013-C9, Class A3 | 2.834 | 05/15/46 | 5,400 | 5,554,135 | ||||||||||||
Morgan Stanley Capital I Trust, | 5.773 | (a) | 07/12/44 | 200 | 200,667 | |||||||||||
Series 2007-HQ11, Class A31 | 5.439 | 02/12/44 | 17 | 17,302 | ||||||||||||
Series 2007-IQ13, Class A1A | 5.312 | 03/15/44 | 217 | 222,176 | ||||||||||||
Series 2007-IQ14, Class AAB | 5.654 | (a) | 04/15/49 | 54 | 54,363 | |||||||||||
Series 2015-XLF1, Class B, 144A | 2.187 | (a) | 08/14/31 | 8,400 | 8,364,021 | |||||||||||
Series 2015-XLF1, Class XCP, IO, 144A | 1.574 | (a) | 08/14/31 | 143,582 | 429,310 | |||||||||||
UBS-Barclays Commercial Mortgage Trust, | 2.533 | 12/10/45 | 2,800 | 2,865,895 | ||||||||||||
Series 2013-C5, Class A3 | 2.920 | 03/10/46 | 6,400 | 6,591,731 | ||||||||||||
Series 2013-C6, Class XB, IO, 144A | 0.497 | (a) | 04/10/46 | 140,883 | 3,733,484 | |||||||||||
Wachovia Bank Commercial Mortgage Trust, | 5.509 | 04/15/47 | 2,500 | 2,547,243 | ||||||||||||
Series 2007-C31, Class A5 | 5.500 | 04/15/47 | 3,415 | 3,518,784 | ||||||||||||
Series 2007-C32, Class A1A | 5.889 | (a) | 06/15/49 | 2,011 | 2,076,992 | |||||||||||
Series 2007-C33, Class A4 | 6.147 | (a) | 02/15/51 | 234 | 241,024 | |||||||||||
Series 2007-C34, Class A1A | 5.608 | (a) | 05/15/46 | 5,720 | 5,883,308 | |||||||||||
|
| |||||||||||||||
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES |
| 113,402,941 | ||||||||||||||
|
| |||||||||||||||
CORPORATE BONDS 42.3% | ||||||||||||||||
Aerospace & Defense 0.1% | ||||||||||||||||
Harris Corp., Sr. Unsec’d. Notes | 3.832 | 04/27/25 | 800 | 833,743 | ||||||||||||
Agriculture | ||||||||||||||||
Altria Group, Inc., Gtd. Notes(d) | 9.950 | 11/10/38 | 314 | 567,360 |
See Notes to Financial Statements.
20 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Airlines 0.6% | ||||||||||||||||
American Airlines, Pass-Through Trust, Series 2013-1, Class A, Pass Through Certificates(e) | 4.000 | % | 07/15/25 | 3,143 | $ | 3,233,215 | ||||||||||
Continental Airlines, Inc., Pass-Through Trust, | 5.983 | 04/19/22 | 942 | 1,041,221 | ||||||||||||
Series 2012-2, Class A, Pass-Through Certificates | 4.000 | 10/29/24 | 109 | 112,826 | ||||||||||||
Series 2012-3, Class C, Pass-Through Certificates | 6.125 | 04/29/18 | 3,000 | 3,150,000 | ||||||||||||
Delta Air Lines, Inc., Pass-Through Trust, | 6.821 | 08/10/22 | 798 | 920,231 | ||||||||||||
Series 2011-1, Class A, Pass-Through Certificates | 5.300 | 04/15/19 | 73 | 77,048 | ||||||||||||
United Airlines Pass-Through Trust, Series 2013-1, Class A, Pass-Through Certificates(d) | 4.300 | 08/15/25 | 2,271 | 2,390,570 | ||||||||||||
|
| |||||||||||||||
10,925,111 | ||||||||||||||||
Auto Manufacturers 0.8% | ||||||||||||||||
Ford Motor Co., Sr. Unsec’d. Notes(d) | 4.750 | 01/15/43 | 1,670 | 1,736,115 | ||||||||||||
Ford Motor Credit Co. LLC, Sr. Unsec’d. Notes | 2.597 | 11/04/19 | 7,050 | 7,141,523 | ||||||||||||
General Motors Co., | 4.875 | 10/02/23 | 2,000 | 2,141,020 | ||||||||||||
Sr. Unsec’d. Notes | 6.250 | 10/02/43 | 2,230 | 2,513,137 | ||||||||||||
General Motors Financial Co., Inc., | 3.250 | 05/15/18 | 575 | 588,251 | ||||||||||||
Gtd. Notes | 4.250 | 05/15/23 | 575 | 591,931 | ||||||||||||
|
| |||||||||||||||
14,711,977 | ||||||||||||||||
Auto Parts & Equipment 0.8% | ||||||||||||||||
Dana Holding Corp., Sr. Unsec’d. Notes | 6.750 | 02/15/21 | 1,925 | 1,992,375 | ||||||||||||
Johnson Controls, Inc., Sr. Unsec’d. Notes | 4.250 | 03/01/21 | 3,090 | 3,293,387 | ||||||||||||
Lear Corp., | 5.250 | 01/15/25 | 5,375 | 5,710,937 | ||||||||||||
Gtd. Notes | 5.375 | 03/15/24 | 1,410 | 1,498,125 | ||||||||||||
Meritor, Inc., Gtd. Notes(d) | 6.250 | 02/15/24 | 4,150 | 3,703,875 | ||||||||||||
|
| |||||||||||||||
16,198,699 | ||||||||||||||||
Banks 6.5% | ||||||||||||||||
Banco de Credito del Peru (Peru), Sr. Unsec’d. Notes, 144A | 4.250 | 04/01/23 | 263 | 274,835 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 21 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Banks (cont’d.) | ||||||||||||||||
Bank of America Corp., | 5.125 | % (a) | 12/31/49 | 2,175 | $ | 2,036,344 | ||||||||||
Jr. Sub. Notes | 6.100 | (a) | 12/31/49 | 8,820 | 8,825,512 | |||||||||||
Jr. Sub. Notes | 8.000 | (a) | 12/29/49 | 3,190 | 3,110,250 | |||||||||||
Jr. Sub. Notes | 8.125 | (a) | 12/29/49 | 1,000 | 982,500 | |||||||||||
Sr. Unsec’d. Notes, MTN | 5.000 | 01/21/44 | 280 | 312,098 | ||||||||||||
Sr. Unsec’d. Notes, MTN | 5.875 | 02/07/42 | 385 | 476,565 | ||||||||||||
Sub. Notes, MTN | 4.200 | 08/26/24 | 2,825 | 2,877,034 | ||||||||||||
CIT Group, Inc., | 3.875 | 02/19/19 | 2,800 | 2,814,000 | ||||||||||||
Sr. Unsec’d. Notes | 5.000 | 08/01/23 | 370 | 384,800 | ||||||||||||
Citigroup, Inc., | 5.950 | (a) | 12/31/49 | 17,685 | 17,110,237 | |||||||||||
Sr. Unsec’d. Notes | 8.125 | 07/15/39 | 1,455 | 2,230,752 | ||||||||||||
Sub. Notes | 4.050 | 07/30/22 | 550 | 575,736 | ||||||||||||
Sub. Notes | 4.400 | 06/10/25 | 2,300 | 2,373,860 | ||||||||||||
Credit Suisse Group Funding Guernsey Ltd. (Switzerland), Gtd. Notes(d) | 3.800 | 09/15/22 | 1,600 | 1,618,266 | ||||||||||||
Credit Suisse New York (Switzerland), Sr. Unsec’d. Notes, MTN | 3.625 | 09/09/24 | 2,375 | 2,463,184 | ||||||||||||
Discover Bank, | 4.200 | 08/08/23 | 5,500 | 5,760,623 | ||||||||||||
Sub. Notes | 7.000 | 04/15/20 | 800 | 906,756 | ||||||||||||
Fifth Third Bancorp, Sub. Notes | 4.300 | 01/16/24 | 4,975 | 5,249,754 | ||||||||||||
Goldman Sachs Group, Inc. (The), | 5.375 | (a) | 12/31/49 | 5,225 | 5,044,737 | |||||||||||
Sr. Unsec’d. Notes(e) | 5.750 | 01/24/22 | 4,590 | 5,282,581 | ||||||||||||
Sr. Unsec’d. Notes | 6.250 | 02/01/41 | 345 | 439,314 | ||||||||||||
Sr. Unsec’d. Notes, MTN | 4.000 | 03/03/24 | 1,875 | 1,978,266 | ||||||||||||
Sr. Unsec’d. Notes, MTN(d) | 4.800 | 07/08/44 | 2,105 | 2,260,888 | ||||||||||||
JPMorgan Chase & Co., | 5.150 | (a) | 12/31/49 | 3,725 | 3,622,563 | |||||||||||
Jr. Sub. Notes(d) | 6.000 | (a) | 12/31/49 | 7,707 | 7,881,178 | |||||||||||
Jr. Sub. Notes | 6.100 | (a) | 12/31/49 | 3,400 | 3,497,750 | |||||||||||
Jr. Sub. Notes | 7.900 | (a) | 04/29/49 | 130 | 130,731 | |||||||||||
Sub. Notes(d) | 3.375 | 05/01/23 | 1,925 | 1,946,573 | ||||||||||||
Morgan Stanley, | 5.450 | (a) | 12/31/49 | 13,110 | 12,487,275 | |||||||||||
Jr. Sub. Notes, Series J(d) | 5.550 | (a) | 12/31/49 | 2,175 | 2,153,250 | |||||||||||
Sr. Unsec’d. Notes | 6.375 | 07/24/42 | 700 | 924,952 | ||||||||||||
Sub. Notes, MTN | 4.100 | 05/22/23 | 815 | 842,627 | ||||||||||||
Sub. Notes, MTN | 4.875 | 11/01/22 | 930 | 1,011,846 | ||||||||||||
Sub. Notes, MTN(d) | 5.000 | 11/24/25 | 2,075 | 2,258,530 |
See Notes to Financial Statements.
22 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Banks (cont’d.) | ||||||||||||||||
National Savings Bank (Sri Lanka), Sr. Unsec’d. Notes, RegS | 8.875 | % | 09/18/18 | 1,000 | $ | 1,051,250 | ||||||||||
People’s United Bank, Sub. Notes | 4.000 | 07/15/24 | 1,125 | 1,111,308 | ||||||||||||
State Street Corp., Jr. Sub. Notes | 5.250 | (a) | 12/31/49 | 3,555 | 3,622,545 | |||||||||||
Wells Fargo & Co., | 5.606 | 01/15/44 | 1,460 | 1,710,289 | ||||||||||||
Sub. Notes, MTN(e) | 4.125 | 08/15/23 | 2,900 | 3,103,238 | ||||||||||||
Sub. Notes, MTN(e) | 4.650 | 11/04/44 | 3,185 | 3,301,456 | ||||||||||||
|
| |||||||||||||||
126,046,253 | ||||||||||||||||
Beverages 0.3% | ||||||||||||||||
Anheuser-Busch InBev Worldwide, Inc. (Belgium), Gtd. Notes | 8.200 | 01/15/39 | 250 | 387,741 | ||||||||||||
Coca-Cola Icecek A/S (Turkey), Sr. Unsec’d. Notes, 144A | 4.750 | 10/01/18 | 950 | 993,793 | ||||||||||||
Constellation Brands, Inc., Gtd. Notes(d) | 6.000 | 05/01/22 | 450 | 511,875 | ||||||||||||
Cott Beverages, Inc. (Canada), Gtd. Notes | 6.750 | 01/01/20 | 4,400 | 4,609,000 | ||||||||||||
Molson Coors Brewing Co., Gtd. Notes | 2.000 | 05/01/17 | 50 | 50,293 | ||||||||||||
|
| |||||||||||||||
6,552,702 | ||||||||||||||||
Biotechnology |
| |||||||||||||||
Amgen, Inc., Sr. Unsec’d. Notes | 5.375 | 05/15/43 | 380 | 444,855 | ||||||||||||
Building Materials 1.4% |
| |||||||||||||||
Building Materials Corp. of America, Sr. Unsec’d. Notes, 144A (original cost $5,902,500; purchased 10/27/14 - | 5.375 | 11/15/24 | 5,825 | 6,072,562 | ||||||||||||
Cemex Espana Luxembourg (Mexico), Sr. Sec’d. Notes, RegS | 9.875 | 04/30/19 | 1,770 | 1,860,712 | ||||||||||||
Cemex Finance LLC (Mexico), Sr. Sec’d. Notes, 144A | 9.375 | 10/12/22 | 1,125 | 1,236,375 | ||||||||||||
Cemex SAB de CV (Mexico), | 4.750 | 01/11/22 | EUR | 1,600 | 1,842,166 | |||||||||||
Sr. Sec’d. Notes, 144A | 5.700 | 01/11/25 | 350 | 336,875 | ||||||||||||
CeramTec Group GmbH (Germany), Gtd. Notes, RegS | 8.250 | 08/15/21 | EUR | 500 | 616,269 | |||||||||||
Griffon Corp., Gtd. Notes | 5.250 | 03/01/22 | 6,450 | 6,482,250 | ||||||||||||
Owens Corning, Inc., Gtd. Notes | 4.200 | 12/15/22 | 125 | 128,601 | ||||||||||||
Unifrax I LLC/Unifrax Holding Co., Gtd. Notes, 144A (original cost $3,299,400; purchased 06/30/14)(b)(f) | 7.500 | 02/15/19 | 3,120 | 2,472,600 | ||||||||||||
US Concrete, Inc., Sr. Sec’d. Notes | 8.500 | 12/01/18 | 6,300 | 6,552,000 | ||||||||||||
|
| |||||||||||||||
27,600,410 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 23 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Chemicals 1.5% |
| |||||||||||||||
Agrium, Inc. (Canada), | 4.900 | % | 06/01/43 | 1,350 | $ | 1,338,727 | ||||||||||
Sr. Unsec’d. Notes | 5.250 | 01/15/45 | 655 | 678,947 | ||||||||||||
Sr. Unsec’d. Notes | 6.125 | 01/15/41 | 170 | 192,609 | ||||||||||||
Ashland, Inc., Sr. Unsec’d. Notes(b) | 6.875 | 05/15/43 | 4,100 | 4,079,500 | ||||||||||||
Axalta Coating Systems US Holdings, Inc./Axalta Coating Systems Dutch Holdings BV, Gtd. Notes, 144A | 7.375 | 05/01/21 | 4,032 | 4,263,840 | ||||||||||||
CF Industries, Inc., | 4.950 | 06/01/43 | 1,765 | 1,656,869 | ||||||||||||
Gtd. Notes | 5.375 | 03/15/44 | 1,300 | 1,280,148 | ||||||||||||
Gtd. Notes | 6.875 | 05/01/18 | 160 | 174,342 | ||||||||||||
Gtd. Notes | 7.125 | 05/01/20 | 125 | 143,619 | ||||||||||||
Dow Chemical Co. (The), | 3.000 | 11/15/22 | 1,550 | 1,597,497 | ||||||||||||
Sr. Unsec’d. Notes | 4.250 | 11/15/20 | 1,951 | 2,124,920 | ||||||||||||
Sr. Unsec’d. Notes | 4.625 | 10/01/44 | 15 | 15,279 | ||||||||||||
Sr. Unsec’d. Notes | 5.250 | 11/15/41 | 125 | 136,832 | ||||||||||||
Sr. Unsec’d. Notes | 9.400 | 05/15/39 | 95 | 145,585 | ||||||||||||
Eastman Chemical Co., | 2.700 | 01/15/20 | 3,080 | 3,147,055 | ||||||||||||
Sr. Unsec’d. Notes | 3.600 | 08/15/22 | 500 | 524,008 | ||||||||||||
Sr. Unsec’d. Notes(d) | 4.650 | 10/15/44 | 1,210 | 1,212,783 | ||||||||||||
LYB International Finance BV, | 4.875 | 03/15/44 | 1,835 | 1,916,329 | ||||||||||||
Gtd. Notes | 5.250 | 07/15/43 | 415 | 452,766 | ||||||||||||
LyondellBasell Industries NV, | 4.625 | 02/26/55 | 2,090 | 1,947,838 | ||||||||||||
Sr. Unsec’d. Notes | 6.000 | 11/15/21 | 700 | 821,660 | ||||||||||||
Mosaic Co. (The), Sr. Unsec’d. Notes | 5.450 | 11/15/33 | 710 | 765,507 | ||||||||||||
|
| |||||||||||||||
28,616,660 | ||||||||||||||||
Commercial Services 0.9% |
| |||||||||||||||
ADT Corp. (The), Sr. Unsec’d. Notes | 2.250 | 07/15/17 | 50 | 50,625 | ||||||||||||
Ashtead Capital, Inc. (United Kingdom), Sec’d. Notes, | 6.500 | 07/15/22 | 1,925 | 2,030,875 | ||||||||||||
ERAC USA Finance LLC, | 6.700 | 06/01/34 | 110 | 139,183 | ||||||||||||
Gtd. Notes, 144A (original cost $2,232,116; purchased 05/14/13)(b)(f) | 7.000 | 10/15/37 | 1,725 | 2,229,508 |
See Notes to Financial Statements.
24 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Commercial Services (cont’d.) |
| |||||||||||||||
Hertz Corp. (The), Gtd. Notes(d) | 6.750 | % | 04/15/19 | 3,125 | $ | 3,180,406 | ||||||||||
Service Corp. International, Sr. Unsec’d. Notes | 4.500 | 11/15/20 | 2,135 | 2,199,050 | ||||||||||||
United Rentals North America, Inc., | 5.500 | 07/15/25 | 925 | 919,879 | ||||||||||||
Gtd. Notes | 7.625 | 04/15/22 | 6,444 | 6,878,970 | ||||||||||||
Sr. Unsec’d. Notes | 8.250 | 02/01/21 | 272 | 283,560 | ||||||||||||
|
| |||||||||||||||
17,912,056 | ||||||||||||||||
Computers 0.1% |
| |||||||||||||||
NCR Corp., Gtd. Notes | 6.375 | 12/15/23 | 790 | 821,600 | ||||||||||||
Cosmetics/Personal Care 0.2% |
| |||||||||||||||
First Quality Finance Co., Inc., Sr. Unsec’d. Notes, 144A | 4.625 | 05/15/21 | 4,700 | 4,476,750 | ||||||||||||
Distribution/Wholesale 0.1% |
| |||||||||||||||
H&E Equipment Services, Inc., Gtd. Notes(d) | 7.000 | 09/01/22 | 2,000 | 2,020,000 | ||||||||||||
Diversified Financial Services 1.4% |
| |||||||||||||||
AerCap Ireland Capital Ltd./AerCap Global Aviation Trust (Netherlands), Gtd. Notes | 4.500 | 05/15/21 | 1,150 | 1,187,375 | ||||||||||||
American Express Co., | 4.900 | (a) | 12/31/49 | 8,780 | 7,902,000 | |||||||||||
Jr. Sub. Notes(d) | 5.200 | (a) | 12/31/49 | 705 | 668,869 | |||||||||||
Capital One Bank USA NA, Sub. Notes | 3.375 | 02/15/23 | 2,065 | 2,077,982 | ||||||||||||
Discover Financial Services, Sr. Unsec’d. Notes(d) | 3.750 | 03/04/25 | 2,560 | 2,537,462 | ||||||||||||
GE Capital International Funding Co., Gtd. Notes, 144A | 4.418 | 11/15/35 | 1,610 | 1,767,912 | ||||||||||||
General Electric Capital Corp., Sr. Unsec’d. Notes, MTN | 5.875 | 01/14/38 | 158 | 208,310 | ||||||||||||
Grain Spectrum Funding II LLC, Sec’d. Notes, 144A | 3.290 | 10/10/19 | 773 | 751,637 | ||||||||||||
International Lease Finance Corp., | 5.750 | 05/15/16 | 25 | 25,016 | ||||||||||||
Sr. Unsec’d. Notes | 6.250 | 05/15/19 | 25 | 27,125 | ||||||||||||
Sr. Unsec’d. Notes | 8.750 | 03/15/17 | 5,340 | 5,623,020 | ||||||||||||
Jefferies Group LLC, Sr. Unsec’d. Notes | 6.500 | 01/20/43 | 175 | 163,348 | ||||||||||||
Navient Corp., Sr. Unsec’d. Notes(d) | 4.875 | 06/17/19 | 1,155 | 1,106,490 | ||||||||||||
OneMain Financial Holdings, Inc., | 6.750 | 12/15/19 | 2,350 | 2,402,875 | ||||||||||||
Gtd. Notes, 144A | 7.250 | 12/15/21 | 1,250 | 1,300,000 | ||||||||||||
|
| |||||||||||||||
27,749,421 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 25 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Electric 2.0% |
| |||||||||||||||
Calpine Corp., | 5.375 | % | 01/15/23 | 2,175 | $ | 2,194,031 | ||||||||||
Sr. Unsec’d. Notes | 5.500 | 02/01/24 | 1,250 | 1,262,500 | ||||||||||||
Sr. Unsec’d. Notes(d) | 5.750 | 01/15/25 | 3,575 | 3,610,750 | ||||||||||||
DPL, Inc., | 6.750 | 10/01/19 | 1,650 | 1,695,375 | ||||||||||||
Sr. Unsec’d. Notes | 7.250 | 10/15/21 | 2,225 | 2,358,255 | ||||||||||||
Duke Energy Carolinas LLC, First Ref. Mtge. | 4.000 | 09/30/42 | 50 | 52,437 | ||||||||||||
Dynegy, Inc., | 6.750 | 11/01/19 | 5,850 | 5,899,725 | ||||||||||||
Gtd. Notes(d) | 7.375 | 11/01/22 | 9,200 | 9,087,576 | ||||||||||||
Entergy Corp., Sr. Unsec’d. Notes | 4.700 | 01/15/17 | 75 | 76,224 | ||||||||||||
FirstEnergy Corp., Sr. Unsec’d. Notes(d) | 2.750 | 03/15/18 | 950 | 960,085 | ||||||||||||
FirstEnergy Transmission LLC, Sr. Unsec’d. Notes, 144A | 5.450 | 07/15/44 | 800 | 859,116 | ||||||||||||
NextEra Energy Capital Holdings, Inc., Gtd. Notes | 3.625 | 06/15/23 | 1,575 | 1,624,151 | ||||||||||||
NRG Energy, Inc., | 6.250 | 05/01/24 | 2,125 | 2,071,875 | ||||||||||||
Gtd. Notes | 6.625 | 03/15/23 | 1,000 | 982,500 | ||||||||||||
Gtd. Notes(d) | 7.625 | 01/15/18 | 4,406 | 4,714,420 | ||||||||||||
South Carolina Electric & Gas Co., First Mtge. | 4.350 | 02/01/42 | 130 | 135,942 | ||||||||||||
Westar Energy, Inc., First Mtge. | 4.100 | 04/01/43 | 325 | 343,306 | ||||||||||||
|
| |||||||||||||||
37,928,268 | ||||||||||||||||
Electronics 0.4% |
| |||||||||||||||
Jabil Circuit, Inc., | 4.700 | 09/15/22 | 1,045 | 1,061,783 | ||||||||||||
Sr. Unsec’d. Notes | 5.625 | 12/15/20 | 6,400 | 6,760,000 | ||||||||||||
Techem Energy Metering Service GmbH & Co. KG (Germany), Gtd. Notes, MTN, 144A | 7.875 | 10/01/20 | EUR | 125 | 152,257 | |||||||||||
Techem GmbH (Germany), Sr. Sec’d. Notes, MTN, 144A | 6.125 | 10/01/19 | EUR | 200 | 239,694 | |||||||||||
|
| |||||||||||||||
8,213,734 | ||||||||||||||||
Engineering & Construction | ||||||||||||||||
Odebrecht Finance Ltd. (Brazil), | ||||||||||||||||
Gtd. Notes, 144A (original cost $625,000; purchased 06/19/14)(b)(f) | 5.250 | 06/27/29 | 625 | 223,438 | ||||||||||||
Gtd. Notes, 144A (original cost $255,785; purchased 10/22/12)(b)(f) | 7.125 | 06/26/42 | 220 | 79,750 | ||||||||||||
|
| |||||||||||||||
303,188 |
See Notes to Financial Statements.
26 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Entertainment 1.8% | ||||||||||||||||
AMC Entertainment, Inc., Gtd. Notes | 5.750 | % | 06/15/25 | 3,175 | $ | 3,254,375 | ||||||||||
Cedar Fair LP/Canada’s Wonderland Co./Magnum Management Corp., Gtd. Notes(d) | 5.375 | 06/01/24 | 6,900 | 7,201,875 | ||||||||||||
Cinemark USA, Inc., | ||||||||||||||||
Gtd. Notes(d) | 4.875 | 06/01/23 | 6,500 | 6,451,965 | ||||||||||||
Gtd. Notes(d) | 5.125 | 12/15/22 | 3,200 | 3,312,000 | ||||||||||||
CPUK Finance Ltd. (United Kingdom), Sec’d. Notes, 144A | 7.000 | 08/28/20 | GBP | 2,550 | 3,884,298 | |||||||||||
NAI Entertainment Holdings/NAI Entertainment Holdings Finance Corp., Sr. Sec’d. Notes, 144A (original cost $4,724,606; purchased 09/22/14)(b)(f) | 5.000 | 08/01/18 | 4,615 | 4,684,225 | ||||||||||||
Pinnacle Entertainment, Inc., Gtd. Notes(d) | 8.750 | 05/15/20 | 1,400 | 1,444,100 | ||||||||||||
Scientific Games International, Inc., Gtd. Notes(d) | 10.000 | 12/01/22 | 6,000 | 4,959,000 | ||||||||||||
|
| |||||||||||||||
35,191,838 | ||||||||||||||||
Environmental Control 0.2% | ||||||||||||||||
Covanta Holding Corp., Sr. Unsec’d. Notes | 7.250 | 12/01/20 | 3,100 | 3,216,250 | ||||||||||||
Food 1.6% | ||||||||||||||||
Bertin SA/Bertin Finance Ltd. (Brazil), Gtd. Notes, 144A | 10.250 | 10/05/16 | 3,380 | 3,459,768 | ||||||||||||
BRF SA (Brazil), Sr. Unsec’d. Notes, 144A | 4.750 | 05/22/24 | 500 | 484,350 | ||||||||||||
Ingles Markets, Inc., Sr. Unsec’d. Notes | 5.750 | 06/15/23 | 5,250 | 5,460,000 | ||||||||||||
JBS Investments GmbH (Brazil), Sr. Unsec’d. Notes, 144A | 7.750 | 10/28/20 | 2,650 | 2,722,875 | ||||||||||||
JBS USA LLC/JBS USA Finance, Inc. (Brazil), | ||||||||||||||||
Gtd. Notes, 144A (original cost $1,081,250; purchased 06/17/14)(b)(f) | 7.250 | 06/01/21 | 1,000 | 1,025,000 | ||||||||||||
Gtd. Notes, 144A (original cost $2,014,000; purchased 12/09/15)(b)(f) | 7.250 | 06/01/21 | 2,000 | 2,050,000 | ||||||||||||
Gtd. Notes, RegS (original cost $1,605,000; purchased 10/01/14)(b)(f) | 8.250 | 02/01/20 | 1,500 | 1,563,750 | ||||||||||||
Sr. Unsec’d. Notes, 144A (original cost $2,750,000; purchased 05/20/15)(b)(f) | 5.750 | 06/15/25 | 2,750 | 2,530,000 | ||||||||||||
Kraft Foods Group, Inc., Sr. Unsec’d. Notes(d) | 6.500 | 02/09/40 | 1,020 | 1,285,113 | ||||||||||||
Minerva Luxembourg SA (Brazil), Gtd. Notes, 144A | 12.250 | 02/10/22 | 250 | 262,187 | ||||||||||||
Picard Groupe SA (France), Sr. Sec’d. Notes, 144A | 4.250 | (a) | 08/01/19 | EUR | 1,650 | 1,889,342 | ||||||||||
Smithfield Foods, Inc., | ||||||||||||||||
Sr. Unsec’d. Notes | 6.625 | 08/15/22 | 2,000 | 2,115,000 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 5.250 | 08/01/18 | 3,387 | 3,442,039 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 27 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Food (cont’d.) | ||||||||||||||||
Smithfield Foods, Inc., (cont’d.) | ||||||||||||||||
Sr. Unsec’d. Notes, 144A | 5.875 | % | 08/01/21 | 2,400 | $ | 2,502,000 | ||||||||||
|
| |||||||||||||||
30,791,424 | ||||||||||||||||
Food Service 0.1% | ||||||||||||||||
ARAMARK Corp., Gtd. Notes | 5.750 | 03/15/20 | 1,600 | 1,652,000 | ||||||||||||
Forest & Paper Products 0.4% |
| |||||||||||||||
Georgia-Pacific LLC, | ||||||||||||||||
Gtd. Notes, 144A (original cost $35,100; purchased | 5.400 | 11/01/20 | 35 | 39,442 | ||||||||||||
Sr. Unsec’d. Notes (original cost $544,908; purchased 12/20/12)(b)(f) | 7.375 | 12/01/25 | 400 | 516,883 | ||||||||||||
International Paper Co., | ||||||||||||||||
Sr. Unsec’d. Notes | 4.800 | 06/15/44 | 2,770 | 2,804,824 | ||||||||||||
Sr. Unsec’d. Notes | 6.000 | 11/15/41 | 610 | 710,443 | ||||||||||||
Sr. Unsec’d. Notes | 9.375 | 05/15/19 | 100 | 120,149 | ||||||||||||
Smurfit Kappa Acquisitions (Ireland), Sr. Sec’d. Notes, 144A | 4.875 | 09/15/18 | 3,647 | 3,820,232 | ||||||||||||
|
| |||||||||||||||
8,011,973 | ||||||||||||||||
Gas 0.2% |
| |||||||||||||||
AGL Capital Corp., Gtd. Notes | 4.400 | 06/01/43 | 1,375 | 1,345,950 | ||||||||||||
CenterPoint Energy Resources Corp., Sr. Unsec’d. Notes | 5.850 | 01/15/41 | 700 | 767,685 | ||||||||||||
Dominion Gas Holdings LLC, Sr. Unsec’d. Notes | 4.800 | 11/01/43 | 125 | 130,292 | ||||||||||||
Fermaca Enterprises S de RL de CV (Mexico), Sr. Sec’d. Notes, 144A (original cost $591,803; purchased | 6.375 | 03/30/38 | 566 | 544,431 | ||||||||||||
GNL Quintero SA (Chile), Sr. Unsec’d. Notes, 144A (original cost $1,037,500; purchased 11/03/14)(b)(f) | 4.634 | 07/31/29 | 1,000 | 1,010,000 | ||||||||||||
Sempra Energy, Sr. Unsec’d. Notes | 2.300 | 04/01/17 | 50 | 50,392 | ||||||||||||
|
| |||||||||||||||
3,848,750 | ||||||||||||||||
Healthcare-Products 0.6% |
| |||||||||||||||
ConvaTec Finance International SA (Luxembourg), Sr. Unsec’d. Notes, PIK, 144A | 8.250 | 01/15/19 | 5,024 | 5,036,560 | ||||||||||||
ConvaTec Healthcare E SA (Luxembourg), Gtd. Notes, 144A | 10.500 | 12/15/18 | 3,684 | 3,776,100 | ||||||||||||
Medtronic, Inc., Gtd. Notes | 4.375 | 03/15/35 | 3,150 | 3,507,988 | ||||||||||||
|
| |||||||||||||||
12,320,648 |
See Notes to Financial Statements.
28 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Healthcare-Services 3.2% |
| |||||||||||||||
Aetna, Inc., | ||||||||||||||||
Sr. Unsec’d. Notes | 2.750 | % | 11/15/22 | 450 | $ | 454,660 | ||||||||||
Sr. Unsec’d. Notes | 4.125 | 11/15/42 | 325 | 315,742 | ||||||||||||
Sr. Unsec’d. Notes | 4.500 | 05/15/42 | 530 | 549,811 | ||||||||||||
Anthem, Inc., | ||||||||||||||||
Sr. Unsec’d. Notes | 4.650 | 01/15/43 | 120 | 123,892 | ||||||||||||
Sr. Unsec’d. Notes | 5.100 | 01/15/44 | 515 | 566,455 | ||||||||||||
CHS/Community Health Systems, Inc., | ||||||||||||||||
Gtd. Notes(d) | 8.000 | 11/15/19 | 5,300 | 5,333,125 | ||||||||||||
Sr. Sec’d. Notes(d) | 5.125 | 08/15/18 | 150 | 151,875 | ||||||||||||
Cigna Corp., Sr. Unsec’d. Notes | 5.375 | 02/15/42 | 350 | 388,285 | ||||||||||||
Fresenius Medical Care US Finance II, Inc. (Germany), Gtd. Notes, 144A(d) | 6.500 | 09/15/18 | 2,415 | 2,653,360 | ||||||||||||
HCA, Inc., | ||||||||||||||||
Gtd. Notes | 5.375 | 02/01/25 | 4,500 | 4,601,250 | ||||||||||||
Gtd. Notes | 5.875 | 05/01/23 | 2,000 | 2,103,750 | ||||||||||||
Sr. Sec’d. Notes | 4.250 | 10/15/19 | 1,675 | 1,742,000 | ||||||||||||
Sr. Sec’d. Notes(d) | 4.750 | 05/01/23 | 3,400 | 3,485,000 | ||||||||||||
Sr. Sec’d. Notes | 5.250 | 04/15/25 | 2,000 | 2,070,000 | ||||||||||||
Sr. Sec’d. Notes(d) | 5.875 | 03/15/22 | 3,425 | 3,741,812 | ||||||||||||
Healthsouth Corp., | ||||||||||||||||
Gtd. Notes | 5.125 | 03/15/23 | 1,200 | 1,203,000 | ||||||||||||
Gtd. Notes(d) | 5.750 | 11/01/24 | 2,900 | 2,994,250 | ||||||||||||
Laboratory Corp. of America Holdings, | ||||||||||||||||
Sr. Unsec’d. Notes | 3.200 | 02/01/22 | 25 | 25,454 | ||||||||||||
Sr. Unsec’d. Notes | 4.625 | 11/15/20 | 4,500 | 4,860,882 | ||||||||||||
LifePoint Hospitals, Inc., Gtd. Notes(d) | 5.500 | 12/01/21 | 3,875 | 4,030,000 | ||||||||||||
MEDNAX, Inc., Gtd. Notes, 144A | 5.250 | 12/01/23 | 2,650 | 2,742,750 | ||||||||||||
Select Medical Corp., Gtd. Notes(d) | 6.375 | 06/01/21 | 7,821 | 7,420,174 | ||||||||||||
Tenet Healthcare Corp., | ||||||||||||||||
Sr. Sec’d. Notes | 4.375 | 10/01/21 | 2,750 | 2,756,875 | ||||||||||||
Sr. Sec’d. Notes | 6.250 | 11/01/18 | 600 | 642,000 | ||||||||||||
Sr. Unsec’d. Notes(d) | 8.125 | 04/01/22 | 1,700 | 1,763,750 | ||||||||||||
UnitedHealth Group, Inc., | 3.950 | 10/15/42 | 175 | 180,406 | ||||||||||||
Sr. Unsec’d. Notes(d) | 4.375 | 03/15/42 | 1,055 | 1,113,209 | ||||||||||||
Sr. Unsec’d. Notes(d)(e) | 4.625 | 07/15/35 | 3,135 | 3,538,678 | ||||||||||||
|
| |||||||||||||||
61,552,445 | ||||||||||||||||
Holding Companies-Diversified 0.2% |
| |||||||||||||||
Carlson Travel Holdings, Inc., Sr. Unsec’d. Notes, PIK, 144A (original cost $2,543,750; purchased 08/04/14)(b)(f) | 7.500 | 08/15/19 | 2,500 | 2,418,750 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 29 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Holding Companies-Diversified (cont’d.) |
| |||||||||||||||
CeramTec Group GmbH (Germany), Gtd. Notes, 144A | 8.250 | % | 08/15/21 | EUR | 500 | $ | 616,269 | |||||||||
|
| |||||||||||||||
3,035,019 | ||||||||||||||||
Home Builders 1.6% |
| |||||||||||||||
CalAtlantic Group, Inc., Gtd. Notes | 8.375 | 05/15/18 | 9,378 | 10,409,580 | ||||||||||||
KB Home, Gtd. Notes(d) | 7.500 | 09/15/22 | 3,425 | 3,496,583 | ||||||||||||
M/I Homes, Inc., Gtd. Notes | 6.750 | 01/15/21 | 5,850 | 5,850,000 | ||||||||||||
Taylor Morrison Communities, Inc./Monarch Communities, Inc., Gtd. Notes, 144A | 5.250 | 04/15/21 | 6,700 | 6,683,250 | ||||||||||||
William Lyon Homes, Inc., Gtd. Notes | 8.500 | 11/15/20 | 5,000 | 5,187,500 | ||||||||||||
|
| |||||||||||||||
31,626,913 | ||||||||||||||||
Housewares |
| |||||||||||||||
Newell Rubbermaid, Inc., Sr. Unsec’d. Notes | 2.050 | 12/01/17 | 375 | 377,705 | ||||||||||||
Insurance 1.7% |
| |||||||||||||||
Allied World Assurance Co. Ltd., Gtd. Notes | 7.500 | 08/01/16 | 100 | 101,543 | ||||||||||||
American International Group, Inc., Sr. Unsec’d. Notes | 4.500 | 07/16/44 | 2,800 | 2,705,164 | ||||||||||||
Dai-ichi Life Insurance Co. Ltd. (The) (Japan), Sub. Notes, 144A | 5.100 | (a) | 12/29/49 | 625 | 688,437 | |||||||||||
Hartford Financial Services Group, Inc. (The), | 4.300 | 04/15/43 | 1,062 | 1,012,368 | ||||||||||||
Sr. Unsec’d. Notes | 5.950 | 10/15/36 | 215 | 246,788 | ||||||||||||
Sr. Unsec’d. Notes | 6.100 | 10/01/41 | 280 | 333,648 | ||||||||||||
Liberty Mutual Group, Inc., | 4.250 | 06/15/23 | 1,975 | 2,069,296 | ||||||||||||
Gtd. Notes, 144A | 4.850 | 08/01/44 | 5,425 | 5,221,161 | ||||||||||||
Gtd. Notes, 144A | 4.950 | 05/01/22 | 75 | 81,554 | ||||||||||||
Gtd. Notes, 144A | 6.500 | 05/01/42 | 1,530 | 1,799,003 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 6.700 | 08/15/16 | 115 | 116,716 | ||||||||||||
Lincoln National Corp., | 4.200 | 03/15/22 | 70 | 73,974 | ||||||||||||
Sr. Unsec’d. Notes | 6.300 | 10/09/37 | 175 | 197,523 | ||||||||||||
Sr. Unsec’d. Notes | 7.000 | 06/15/40 | 3,540 | 4,367,684 | ||||||||||||
Markel Corp., | 4.900 | 07/01/22 | 2,020 | 2,212,276 | ||||||||||||
Sr. Unsec’d. Notes | 5.000 | 03/30/43 | 3,125 | 3,152,794 | ||||||||||||
Northwestern Mutual Life Insurance Co. (The), Sub. Notes, 144A | 6.063 | 03/30/40 | 200 | 243,592 | ||||||||||||
Principal Financial Group, Inc., Gtd. Notes | 4.350 | 05/15/43 | 975 | 946,885 |
See Notes to Financial Statements.
30 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Insurance (cont’d.) |
| |||||||||||||||
Swiss Re Treasury US Corp. (Switzerland), Gtd. Notes, 144A | 4.250 | % | 12/06/42 | 795 | $ | 789,154 | ||||||||||
Teachers Insurance & Annuity Association of America, | 4.900 | 09/15/44 | 1,950 | 2,098,040 | ||||||||||||
Sub. Notes, 144A | 6.850 | 12/16/39 | 640 | 829,988 | ||||||||||||
TIAA Asset Management Finance LLC, Sr. Unsec’d. Notes, 144A (original cost $1,716,904; purchased 10/27/14)(b)(f) | 2.950 | 11/01/19 | 1,720 | 1,754,419 | ||||||||||||
W.R. Berkley Corp., Sr. Unsec’d. Notes | 4.625 | 03/15/22 | 1,435 | 1,542,827 | ||||||||||||
|
| |||||||||||||||
32,584,834 | ||||||||||||||||
Iron/Steel 0.1% |
| |||||||||||||||
ArcelorMittal (Luxembourg), | 5.125 | 06/01/20 | 500 | 492,500 | ||||||||||||
Sr. Unsec’d. Notes(d) | 5.500 | 02/25/17 | 975 | 1,006,688 | ||||||||||||
|
| |||||||||||||||
1,499,188 | ||||||||||||||||
Lodging 0.7% |
| |||||||||||||||
FelCor Lodging LP, | 6.000 | 06/01/25 | 3,400 | 3,510,500 | ||||||||||||
Sr. Sec’d. Notes | 5.625 | 03/01/23 | 1,050 | 1,078,875 | ||||||||||||
Marriott International, Inc., Sr. Unsec’d. Notes | 3.250 | 09/15/22 | 75 | 76,099 | ||||||||||||
MGM Resorts International, | 6.000 | 03/15/23 | 4,800 | 4,986,000 | ||||||||||||
Gtd. Notes | 6.625 | 12/15/21 | 1,000 | 1,065,000 | ||||||||||||
Gtd. Notes | 7.625 | 01/15/17 | 500 | 518,750 | ||||||||||||
Starwood Hotels & Resorts Worldwide, Inc., Sr. Unsec’d. Notes | 7.150 | 12/01/19 | 550 | 636,889 | ||||||||||||
Wynn Macau Ltd. (Macau), Sr. Unsec’d. Notes, 144A(d) | 5.250 | 10/15/21 | 2,375 | 2,274,062 | ||||||||||||
|
| |||||||||||||||
14,146,175 | ||||||||||||||||
Machinery-Construction & Mining 0.3% |
| |||||||||||||||
Terex Corp., | 6.000 | 05/15/21 | 5,050 | 4,999,500 | ||||||||||||
Gtd. Notes | 6.500 | 04/01/20 | 1,005 | 1,005,503 | ||||||||||||
|
| |||||||||||||||
6,005,003 | ||||||||||||||||
Machinery-Diversified |
| |||||||||||||||
Xylem, Inc., Sr. Unsec’d. Notes | 4.875 | 10/01/21 | 50 | 53,916 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 31 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Media 2.4% |
| |||||||||||||||
AMC Networks, Inc., Gtd. Notes | 4.750 | % | 12/15/22 | 1,270 | $ | 1,279,525 | ||||||||||
CCO Holdings LLC/CCO Holdings Capital Corp., | 5.750 | 01/15/24 | 1,100 | 1,153,625 | ||||||||||||
Gtd. Notes | 7.000 | 01/15/19 | 1,712 | 1,742,474 | ||||||||||||
Gtd. Notes, 144A | 5.125 | 05/01/23 | 2,625 | 2,677,500 | ||||||||||||
Gtd. Notes, 144A | 5.375 | 05/01/25 | 1,650 | 1,689,187 | ||||||||||||
Gtd. Notes, 144A(d) | 5.875 | 05/01/27 | 5,075 | 5,201,875 | ||||||||||||
CCO Safari II LLC, | 6.384 | 10/23/35 | 1,525 | 1,760,301 | ||||||||||||
Sr. Sec’d. Notes, 144A(d) | 6.484 | 10/23/45 | 1,835 | 2,167,818 | ||||||||||||
Sr. Sec’d. Notes, 144A | 6.834 | 10/23/55 | 485 | 557,434 | ||||||||||||
Clear Channel Worldwide Holdings, Inc., | 6.500 | 11/15/22 | 135 | 130,950 | ||||||||||||
Gtd. Notes(d) | 6.500 | 11/15/22 | 365 | 366,825 | ||||||||||||
CSC Holdings LLC, Sr. Unsec’d. Notes | 7.875 | 02/15/18 | 1,040 | 1,123,200 | ||||||||||||
DISH DBS Corp., Gtd. Notes | 4.250 | 04/01/18 | 1,500 | 1,530,000 | ||||||||||||
Grupo Televisa SAB (Mexico), Sr. Unsec’d. Notes | 6.125 | 01/31/46 | 1,060 | 1,145,860 | ||||||||||||
Liberty Interactive LLC, Sr. Unsec’d. Notes(d) | 8.250 | 02/01/30 | 2,500 | 2,593,750 | ||||||||||||
Myriad International Holdings BV (South Africa), Gtd. Notes, 144A | 6.375 | 07/28/17 | 5,010 | 5,235,450 | ||||||||||||
Nielsen Finance LLC/Nielsen Finance Co., Gtd. Notes, 144A(d) | 5.000 | 04/15/22 | 4,239 | 4,323,780 | ||||||||||||
TEGNA, Inc., Gtd. Notes, 144A(d) | 4.875 | 09/15/21 | 1,625 | 1,657,500 | ||||||||||||
Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH (Germany), | 5.500 | 09/15/22 | EUR | 130 | 158,461 | |||||||||||
Sr. Sec’d. Notes, MTN, 144A | 5.125 | 01/21/23 | EUR | 502 | 612,425 | |||||||||||
Univision Communications, Inc., Sr. Sec’d. Notes, 144A (original cost $1,900,781; purchased 04/13/15)(b)(f) | 5.125 | 02/15/25 | 1,875 | 1,853,906 | ||||||||||||
Videotron Ltd. (Canada), | 5.000 | 07/15/22 | 4,500 | 4,668,750 | ||||||||||||
Gtd. Notes, 144A(d) | 5.375 | 06/15/24 | 2,400 | 2,505,000 | ||||||||||||
|
| |||||||||||||||
46,135,596 | ||||||||||||||||
Mining 0.7% | ||||||||||||||||
Alcoa, Inc., Sr. Unsec’d. Notes(d) | 5.125 | 10/01/24 | 1,000 | 973,750 | ||||||||||||
BHP Billiton Finance USA Ltd. (Australia), | 5.000 | 09/30/43 | 1,700 | 1,898,696 | ||||||||||||
Gtd. Notes, 144A(d) | 6.750 | (a) | 10/19/75 | 2,675 | 2,774,643 | |||||||||||
Eldorado Gold Corp. (Canada), Sr. Unsec’d. Notes, 144A | 6.125 | 12/15/20 | 2,375 | 2,185,000 |
See Notes to Financial Statements.
32 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Mining (cont’d.) | ||||||||||||||||
Kaiser Aluminum Corp., Gtd. Notes | 8.250 | % | 06/01/20 | 2,200 | $ | 2,288,000 | ||||||||||
Southern Copper Corp. (Peru), | 5.875 | 04/23/45 | 1,225 | 1,123,014 | ||||||||||||
Sr. Unsec’d. Notes | 6.750 | 04/16/40 | 2,575 | 2,561,139 | ||||||||||||
|
| |||||||||||||||
13,804,242 | ||||||||||||||||
Miscellaneous Manufacturing 0.4% | ||||||||||||||||
Actuant Corp., Gtd. Notes(d) | 5.625 | 06/15/22 | 3,075 | 3,136,500 | ||||||||||||
Bombardier, Inc. (Canada), Sr. Unsec’d. Notes, 144A(d) | 7.500 | 03/15/18 | 2,200 | 2,241,250 | ||||||||||||
General Electric Co., | 4.125 | 10/09/42 | 50 | 53,354 | ||||||||||||
Sr. Unsec’d. Notes | 4.500 | 03/11/44 | 75 | 84,278 | ||||||||||||
Koppers, Inc., Gtd. Notes | 7.875 | 12/01/19 | 1,600 | 1,626,000 | ||||||||||||
Pentair Finance SA (United Kingdom), Gtd. Notes | 1.875 | 09/15/17 | 50 | 49,833 | ||||||||||||
|
| |||||||||||||||
7,191,215 | ||||||||||||||||
Oil & Gas 0.8% | ||||||||||||||||
Anadarko Petroleum Corp., Sr. Unsec’d. Notes(d) | 6.450 | 09/15/36 | 750 | 809,131 | ||||||||||||
California Resources Corp., | 6.000 | 11/15/24 | 615 | 255,994 | ||||||||||||
Sec’d. Notes, 144A | 8.000 | 12/15/22 | 1,648 | 1,133,000 | ||||||||||||
Cenovus Energy, Inc. (Canada), Sr. Unsec’d. Notes | 4.450 | 09/15/42 | 1,070 | 828,538 | ||||||||||||
Denbury Resources, Inc., Gtd. Notes | 5.500 | 05/01/22 | 2,000 | 1,285,000 | ||||||||||||
Nabors Industries, Inc., | 4.625 | 09/15/21 | 762 | 699,774 | ||||||||||||
Gtd. Notes | 6.150 | 02/15/18 | 80 | 81,628 | ||||||||||||
Noble Energy, Inc., | 4.150 | 12/15/21 | 500 | 510,246 | ||||||||||||
Sr. Unsec’d. Notes | 5.250 | 11/15/43 | 395 | 373,974 | ||||||||||||
Sr. Unsec’d. Notes | 6.000 | 03/01/41 | 1,390 | 1,380,794 | ||||||||||||
Noble Holding International Ltd. (United Kingdom), Gtd. | 2.500 | 03/15/17 | 25 | 24,406 | ||||||||||||
Pacific Exploration and Production Corp. (Colombia), | 5.375 | 01/26/19 | 6,540 | 981,000 | ||||||||||||
Gtd. Notes, 144A (original cost $6,492,500; purchased 09/26/12 - 07/29/14)(b)(f)(k) | 7.250 | 12/12/21 | 5,750 | 862,500 | ||||||||||||
Reliance Holding USA, Inc. (India), Gtd. Notes, 144A | 5.400 | 02/14/22 | 1,750 | 1,938,883 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 33 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Oil & Gas (cont’d.) | ||||||||||||||||
Sasol Financing International PLC (South Africa), Gtd. Notes | 4.500 | % | 11/14/22 | 4,360 | $ | 4,284,354 | ||||||||||
|
| |||||||||||||||
15,449,222 | ||||||||||||||||
Oil & Gas Services | ||||||||||||||||
Cameron International Corp., Sr. Unsec’d. Notes | 5.950 | 06/01/41 | 100 | 118,229 | ||||||||||||
Packaging & Containers 0.2% | ||||||||||||||||
Ball Corp., | 4.000 | 11/15/23 | 500 | 494,875 | ||||||||||||
Gtd. Notes | 4.375 | 12/15/23 | EUR | 1,825 | 2,272,578 | |||||||||||
Crown Americas LLC/Crown Americas Capital Corp. IV, Gtd. Notes(d) | 4.500 | 01/15/23 | 525 | 535,500 | ||||||||||||
WestRock RKT Co., | 4.450 | 03/01/19 | 35 | 36,681 | ||||||||||||
Gtd. Notes | 4.900 | 03/01/22 | 1,190 | 1,308,405 | ||||||||||||
|
| |||||||||||||||
4,648,039 | ||||||||||||||||
Pharmaceuticals 1.0% | ||||||||||||||||
AbbVie, Inc., Sr. Unsec’d. Notes | 4.500 | 05/14/35 | 4,085 | 4,249,290 | ||||||||||||
Actavis Funding SCS, | 4.550 | 03/15/35 | 3,770 | 3,771,316 | ||||||||||||
Gtd. Notes(d) | 4.750 | 03/15/45 | 522 | 528,018 | ||||||||||||
Capsugel SA, Sr. Unsec’d. Notes, PIK, 144A | 7.000 | 05/15/19 | 1,926 | 1,940,445 | ||||||||||||
Forest Laboratories, Inc., | 4.875 | 02/15/21 | 1,120 | 1,224,476 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 5.000 | 12/15/21 | 1,830 | 2,018,869 | ||||||||||||
Valeant Pharmaceuticals International, Inc., | 6.750 | 08/15/18 | 3,570 | 3,445,050 | ||||||||||||
Sr. Unsec’d. Notes, 144A(d) | 6.125 | 04/15/25 | 1,275 | 1,065,109 | ||||||||||||
|
| |||||||||||||||
18,242,573 | ||||||||||||||||
Pipelines 0.7% | ||||||||||||||||
DCP Midstream LLC, Sr. Unsec’d. Notes, 144A | 5.350 | 03/15/20 | 227 | 215,650 | ||||||||||||
DCP Midstream Operating LP, Gtd. Notes(d) | 2.500 | 12/01/17 | 225 | 217,688 | ||||||||||||
Enterprise Products Operating LLC, | 3.350 | 03/15/23 | 2,100 | 2,132,143 | ||||||||||||
Sr. Unsec’d. Notes | 4.950 | 10/15/54 | 5,200 | 4,865,026 | ||||||||||||
Magellan Midstream Partners LP, | 4.200 | 12/01/42 | 125 | 110,277 | ||||||||||||
Sr. Unsec’d. Notes | 4.250 | 02/01/21 | 1,950 | 2,069,779 | ||||||||||||
Sr. Unsec’d. Notes | 5.150 | 10/15/43 | 1,350 | 1,364,523 |
See Notes to Financial Statements.
34 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Pipelines (cont’d.) | ||||||||||||||||
Tesoro Logistics LP/Tesoro Logistics Finance Corp., Gtd. Notes | 6.125 | % | 10/15/21 | 1,700 | $ | 1,738,250 | ||||||||||
Western Gas Partners LP, Sr. Unsec’d. Notes | 4.000 | 07/01/22 | 75 | 71,922 | ||||||||||||
|
| |||||||||||||||
12,785,258 | ||||||||||||||||
Real Estate Investment Trusts (REITs) 0.3% | ||||||||||||||||
Mack-Cali Realty LP, Sr. Unsec’d. Notes | 2.500 | 12/15/17 | 100 | 100,308 | ||||||||||||
Sabra Health Care LP/Sabra Capital Corp., | 5.375 | 06/01/23 | 1,965 | 1,910,962 | ||||||||||||
Gtd. Notes | 5.500 | 02/01/21 | 1,500 | 1,515,000 | ||||||||||||
Trust F/1401 (Mexico), Sr. Unsec’d. Notes, 144A | 5.250 | 12/15/24 | 2,000 | 2,075,000 | ||||||||||||
|
| |||||||||||||||
5,601,270 | ||||||||||||||||
Retail 2.0% | ||||||||||||||||
Claire’s Stores, Inc., Sr. Sec’d. Notes, 144A | 9.000 | 03/15/19 | 475 | 342,000 | ||||||||||||
CVS Health Corp., | 4.875 | 07/20/35 | 1,395 | 1,563,729 | ||||||||||||
Sr. Unsec’d. Notes(d) | 5.125 | 07/20/45 | 1,765 | 2,062,664 | ||||||||||||
Sr. Unsec’d. Notes | 5.300 | 12/05/43 | 475 | 561,177 | ||||||||||||
Douglas GmbH (Germany), Sr. Sec’d. Notes, 144A | 6.250 | 07/15/22 | EUR | 1,200 | 1,482,275 | |||||||||||
Dufry Finance SCA (Switzerland), | 5.500 | 10/15/20 | 3,450 | 3,588,000 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 4.500 | 08/01/23 | EUR | 2,400 | 2,930,197 | |||||||||||
L Brands, Inc., Gtd. Notes(d) | 5.625 | 02/15/22 | 10,975 | 12,113,656 | ||||||||||||
Landry’s, Inc., Gtd. Notes, 144A (original cost $4,037,500; purchased 12/08/15)(b)(f) | 9.375 | 05/01/20 | 3,800 | 3,994,750 | ||||||||||||
Macy’s Retail Holdings, Inc., Gtd. Notes | 4.300 | 02/15/43 | 755 | 601,250 | ||||||||||||
PVH Corp., Sr. Unsec’d. Notes | 4.500 | 12/15/22 | 5,005 | 5,173,919 | ||||||||||||
QVC, Inc., Sr. Sec’d. Notes | 5.125 | 07/02/22 | 1,800 | 1,903,333 | ||||||||||||
Tops Holding LLC/Tops Markets II Corp., Sr. Sec’d. Notes, 144A (original cost $1,950,000; purchased | 8.000 | 06/15/22 | 1,950 | 1,745,250 | ||||||||||||
|
| |||||||||||||||
38,062,200 | ||||||||||||||||
Savings & Loans |
| |||||||||||||||
People’s United Financial, Inc., Sr. Unsec’d. Notes | 3.650 | 12/06/22 | 325 | 326,423 | ||||||||||||
Semiconductors 0.5% |
| |||||||||||||||
Micron Technology, Inc., Sr. Unsec’d. Notes(d) | 5.500 | 02/01/25 | 8,000 | 6,480,000 | ||||||||||||
Sensata Technologies BV (Netherlands), Gtd. Notes, 144A | 5.000 | 10/01/25 | 2,750 | 2,763,750 | ||||||||||||
|
| |||||||||||||||
9,243,750 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 35 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Software 0.4% |
| |||||||||||||||
First Data Corp., | ||||||||||||||||
Gtd. Notes, 144A(d) | 7.000 | % | 12/01/23 | 5,125 | $ | 5,265,938 | ||||||||||
Sr. Sec’d. Notes, 144A | 6.750 | 11/01/20 | 1,778 | 1,866,900 | ||||||||||||
|
| |||||||||||||||
7,132,838 | ||||||||||||||||
Telecommunications 2.8% |
| |||||||||||||||
AT&T, Inc., | ||||||||||||||||
Sr. Unsec’d. Notes | 3.400 | 05/15/25 | 2,795 | 2,841,221 | ||||||||||||
Sr. Unsec’d. Notes | 4.500 | 05/15/35 | 1,010 | 1,015,804 | ||||||||||||
Sr. Unsec’d. Notes | 4.750 | 05/15/46 | 1,520 | 1,531,585 | ||||||||||||
Sr. Unsec’d. Notes | 4.800 | 06/15/44 | 575 | 578,887 | ||||||||||||
Sr. Unsec’d. Notes | 5.550 | 08/15/41 | 670 | 742,653 | ||||||||||||
Bharti Airtel International Netherlands BV (India), | ||||||||||||||||
Gtd. Notes, 144A | 5.125 | 03/11/23 | 3,725 | 4,009,679 | ||||||||||||
Gtd. Notes, 144A | 5.350 | 05/20/24 | 1,550 | 1,679,482 | ||||||||||||
Gtd. Notes, RegS | 5.125 | 03/11/23 | 645 | 694,294 | ||||||||||||
CenturyLink, Inc., Sr. Unsec’d. Notes | 5.150 | 06/15/17 | 2,035 | 2,085,875 | ||||||||||||
CommScope Holding Co., Inc., Sr. Unsec’d. Notes, PIK, 144A | 6.625 | 06/01/20 | 2,000 | 2,065,000 | ||||||||||||
CommScope Technologies Finance LLC, Sr. Unsec’d. Notes, 144A(d) | 6.000 | 06/15/25 | 2,225 | 2,280,625 | ||||||||||||
CommScope, Inc., Gtd. Notes, 144A(d) | 5.000 | 06/15/21 | 2,275 | 2,309,125 | ||||||||||||
Digicel Group Ltd. (Jamaica), | ||||||||||||||||
Gtd. Notes, 144A | 6.750 | 03/01/23 | 2,050 | 1,848,844 | ||||||||||||
Sr. Unsec’d. Notes, RegS | 8.250 | 09/30/20 | 1,500 | 1,368,750 | ||||||||||||
Embarq Corp., | ||||||||||||||||
Sr. Unsec’d. Notes (original cost $135,646; purchased 05/04/11 - 05/11/11)(b)(f) | 7.082 | 06/01/16 | 120 | 120,555 | ||||||||||||
Sr. Unsec’d. Notes (original cost $10,796; purchased 08/17/12)(b)(f) | 7.995 | 06/01/36 | 10 | 10,000 | ||||||||||||
Intelsat Jackson Holdings SA (Luxembourg), Gtd. Notes(d) | 5.500 | 08/01/23 | 2,000 | 1,263,750 | ||||||||||||
Sprint Communications, Inc., Gtd. Notes, 144A | 9.000 | 11/15/18 | 4,802 | 5,078,115 | ||||||||||||
T-Mobile USA, Inc., Gtd. Notes | 6.464 | 04/28/19 | 3,850 | 3,927,000 | ||||||||||||
TBG Global Pte Ltd. (Indonesia), Gtd. Notes, RegS | 4.625 | 04/03/18 | 1,885 | 1,906,301 | ||||||||||||
Telesat Canada/Telesat LLC (Canada), Gtd. Notes, 144A | 6.000 | 05/15/17 | 2,400 | 2,397,120 | ||||||||||||
Verizon Communications, Inc., | ||||||||||||||||
Sr. Unsec’d. Notes | 4.672 | 03/15/55 | 3,011 | 2,911,878 | ||||||||||||
Sr. Unsec’d. Notes | 5.012 | 08/21/54 | 6,110 | 6,275,227 |
See Notes to Financial Statements.
36 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Telecommunications (cont’d.) |
| |||||||||||||||
Vimpel Communications Via VIP Finance Ireland Ltd. OJSC (Russia), | ||||||||||||||||
Sr. Unsec’d. Notes, 144A | 9.125 | % | 04/30/18 | 1,300 | $ | 1,423,500 | ||||||||||
Sr. Unsec’d. Notes, RegS | 9.125 | 04/30/18 | 2,335 | 2,556,825 | ||||||||||||
Virgin Media Secured Finance PLC (United Kingdom), Sr. Sec’d. Notes, 144A | 6.000 | 04/15/21 | GBP | 720 | 1,093,061 | |||||||||||
|
| |||||||||||||||
54,015,156 | ||||||||||||||||
Textiles |
| |||||||||||||||
Mohawk Industries, Inc., Sr. Unsec’d. Notes | 3.850 | 02/01/23 | 104 | 107,405 | ||||||||||||
Transportation 0.3% |
| |||||||||||||||
AP Moeller-Maersk A/S (Denmark), Unsec’d. Notes, 144A | 2.550 | 09/22/19 | 2,450 | 2,461,679 | ||||||||||||
Onorato Armatori SpA (Italy), Sr. Unsec’d. Notes, 144A | 7.750 | 02/15/23 | EUR | 3,000 | 3,469,518 | |||||||||||
Union Pacific Corp., Sr. Unsec’d. Notes | 6.250 | 05/01/34 | 207 | 266,771 | ||||||||||||
|
| |||||||||||||||
6,197,968 | ||||||||||||||||
Trucking & Leasing |
| |||||||||||||||
Penske Truck Leasing Co. LP/PTL Finance Corp., Sr. Unsec’d. Notes, 144A (original cost $449,024; purchased 01/14/13)(b)(f) | 2.875 | 07/17/18 | 450 | 453,567 | ||||||||||||
|
| |||||||||||||||
TOTAL CORPORATE BONDS | 817,351,819 | |||||||||||||||
|
| |||||||||||||||
MUNICIPAL BONDS 0.7% | ||||||||||||||||
California 0.4% |
| |||||||||||||||
Bay Area Toll Authority, BABs, Revenue Bonds | 6.263 | 04/01/49 | 550 | 801,707 | ||||||||||||
Los Angeles Department of Water & Power, | ||||||||||||||||
BABs, Revenue Bonds(e) | 6.008 | 07/01/39 | 3,610 | 4,616,396 | ||||||||||||
BABs, Revenue Bonds | 6.574 | 07/01/45 | 585 | 851,678 | ||||||||||||
University of California, | ||||||||||||||||
BABs, Revenue Bonds | 5.770 | 05/15/43 | 390 | 507,909 | ||||||||||||
Taxable, Revenue Bonds, Series AP | 3.931 | 05/15/45 | 625 | 645,206 | ||||||||||||
Taxable, Revenue Bonds, Series J | 4.131 | 05/15/45 | 675 | 702,196 | ||||||||||||
|
| |||||||||||||||
8,125,092 | ||||||||||||||||
Colorado 0.1% |
| |||||||||||||||
Regional Transportation District, BABs, Revenue Bonds, Series 2010B | 5.844 | 11/01/50 | 1,190 | 1,656,682 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 37 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
MUNICIPAL BONDS (Continued) | ||||||||||||||||
Illinois |
| |||||||||||||||
Chicago O’Hare International Airport, BABs, Revenue Bonds | 6.395 | % | 01/01/40 | 360 | $ | 482,091 | ||||||||||
New Jersey 0.2% |
| |||||||||||||||
New Jersey State Turnpike Authority, Revenue Bonds, Series F, BABs | 7.414 | 01/01/40 | 2,000 | 3,039,180 | ||||||||||||
Rutgers State University, BABs, Revenue Bonds | 5.665 | 05/01/40 | 200 | 247,646 | ||||||||||||
|
| |||||||||||||||
3,286,826 | ||||||||||||||||
New York |
| |||||||||||||||
Memorial Sloan-Kettering Cancer Center, Sr. Unsec’d. Notes | 4.125 | 07/01/52 | 75 | 75,962 | ||||||||||||
New York City Water & Sewer System, BABs, Taxable, Revenue Bonds | 5.882 | 06/15/44 | 400 | 548,020 | ||||||||||||
|
| |||||||||||||||
623,982 | ||||||||||||||||
Ohio |
| |||||||||||||||
Ohio State University, Taxable, Revenue Bonds, Series A | 4.800 | 06/01/2111 | 180 | 193,082 | ||||||||||||
Texas |
| |||||||||||||||
City Public Service Board of San Antonio, BABs, Taxable, Revenue Bonds | 4.427 | 02/01/42 | 120 | 137,664 | ||||||||||||
|
| |||||||||||||||
TOTAL MUNICIPAL BONDS | 14,505,419 | |||||||||||||||
|
| |||||||||||||||
NON-CORPORATE FOREIGN AGENCIES 1.3% | ||||||||||||||||
Comision Federal de Electricidad (Mexico), Sr. Unsec’d. Notes, 144A | 4.875 | 01/15/24 | 1,350 | 1,404,000 | ||||||||||||
Export Credit Bank of Turkey (Turkey), Sr. Unsec’d. Notes, 144A | 5.375 | 11/04/16 | 2,440 | 2,481,578 | ||||||||||||
Gazprom OAO Via Gaz Capital SA (Russia), | 6.510 | 03/07/22 | 2,200 | 2,380,246 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 9.250 | 04/23/19 | 1,950 | 2,237,500 | ||||||||||||
KazMunayGas National Co. JSC (Kazakhstan), | 9.125 | 07/02/18 | 4,785 | 5,239,575 | ||||||||||||
Majapahit Holding BV (Indonesia), | 7.750 | 01/20/20 | 2,180 | 2,496,100 | ||||||||||||
Gtd. Notes, RegS | 8.000 | 08/07/19 | 2,250 | 2,563,875 | ||||||||||||
Petrobras Global Finance BV (Brazil), Gtd. Notes | 2.000 | 05/20/16 | 1,300 | 1,298,960 | ||||||||||||
Power Sector Assets & Liabilities Management Corp. (Philippines), Gov’t. Gtd. Notes, RegS | 7.390 | 12/02/24 | 2,200 | 2,965,653 |
See Notes to Financial Statements.
38 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
NON-CORPORATE FOREIGN AGENCIES (Continued) |
| |||||||||||||||
Russian Agricultural Bank OJSC Via RSHB Capital SA (Russia), | 6.299 | % | 05/15/17 | 325 | $ | 332,771 | ||||||||||
Sr. Unsec’d. Notes, 144A | 7.750 | 05/29/18 | 1,485 | 1,594,931 | ||||||||||||
|
| |||||||||||||||
TOTAL NON-CORPORATE FOREIGN AGENCIES | 24,995,189 | |||||||||||||||
|
| |||||||||||||||
RESIDENTIAL MORTGAGE-BACKED SECURITIES 8.3% |
| |||||||||||||||
Banc of America Funding Corp., | 0.643 | (a) | 05/26/37 | 3,505 | 3,271,541 | |||||||||||
Series 2014-R5, Class 1A1, 144A | 2.413 | (a) | 09/26/45 | 5,374 | 5,267,193 | |||||||||||
Series 2015-R3, Class 1A1, 144A | 0.629 | (a) | 03/27/36 | 17,056 | 15,857,721 | |||||||||||
Series 2015-R3, Class 6A1, 144A | 0.603 | (a) | 05/28/36 | 4,517 | 4,276,435 | |||||||||||
Series 2015-R4, Class 4A1, 144A | 3.500 | (a) | 07/26/36 | 4,643 | 4,632,083 | |||||||||||
Chase Mortgage Finance Trust, Series 2007-A1, Class 1A3 | 2.815 | (a) | 02/25/37 | 304 | 299,070 | |||||||||||
Fannie Mae Connecticut Avenue Securities, Series 2013-CO1, Class M2(g) | 5.689 | (a) | 10/25/23 | 3,540 | 3,768,611 | |||||||||||
Freddie Mac Structured Agency Credit Risk Debt Notes, | 3.733 | (a) | 10/25/27 | 2,000 | 1,987,012 | |||||||||||
Series 2015-DNA3, Class M2(g) | 3.289 | (a) | 04/25/28 | 3,000 | 3,054,446 | |||||||||||
GSMSC Resecuritization Trust, | 0.573 | (a) | 01/26/37 | 5,015 | 4,804,890 | |||||||||||
Series 2015-3R, Class 1A2, 144A | 0.573 | (a) | 01/26/37 | 1,670 | 1,325,736 | |||||||||||
Series 2015-3R, Class 2A1, 144A | 0.573 | (a) | 10/26/36 | 5,624 | 5,283,845 | |||||||||||
Series 2015-3R, Class 2A2, 144A | 0.573 | (a) | 10/26/36 | 1,400 | 995,628 | |||||||||||
Series 2015-4R, Class A1, 144A | 0.573 | (a) | 03/26/37 | 11,281 | 10,656,820 | |||||||||||
Series 2015-4R, Class A2, 144A | 0.573 | (a) | 03/26/37 | 2,702 | 2,068,215 | |||||||||||
JPMorgan Mortgage Trust, Series 2007-A1, Class 4A1 | 2.725 | (a) | 07/25/35 | 311 | 310,428 | |||||||||||
JPMorgan Resecuritization Trust, Series 2015-1, Class 6A1, 144A | 0.713 | (a) | 12/27/45 | 3,870 | 3,607,677 | |||||||||||
LSTAR Securities Investment Trust, | 3.539 | (a) | 09/01/21 | 9,870 | 9,777,154 | |||||||||||
Series 2014-2, Class A, 144A(c) | 2.434 | (a) | 12/01/21 | 8,635 | 8,510,853 | |||||||||||
LSTAR Securities Investment Trust, | ||||||||||||||||
Series 2015-1, Class A, 144A | 2.434 | (a) | 01/01/20 | 2,250 | 2,210,744 | |||||||||||
Series 2015-2, Class A, 144A | 2.434 | (a) | 01/01/20 | 12,371 | 12,206,299 | |||||||||||
Series 2015-3, Class A, 144A | 2.439 | (a) | 03/01/20 | 9,950 | 9,734,527 | |||||||||||
Series 2015-5, Class A1, 144A(c) | 2.439 | (a) | 04/01/20 | 4,494 | 4,398,222 | |||||||||||
Series 2015-6, Class A, 144A(c) | 2.439 | (a) | 05/01/20 | 17,473 | 17,057,943 | |||||||||||
Series 2015-8, Class A2, 144A | 3.934 | (a) | 08/01/20 | 7,500 | 7,241,890 | |||||||||||
Series 2015-9, Class A1, 144A | 2.439 | (a) | 10/01/20 | 4,737 | 4,648,196 | |||||||||||
Series 2016-1, Class A1, 144A(c) | 2.439 | (a) | 01/01/21 | 10,517 | 10,201,160 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 39 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
RESIDENTIAL MORTGAGE-BACKED SECURITIES (Continued) |
| |||||||||||||||
Structured Asset Securities Corp., Series 2003-37A, Class 3A7 | 2.679 | % (a) | 12/25/33 | 1,253 | $ | 1,228,021 | ||||||||||
Structured Asset Securities Corp. Mortgage Pass-Through Certificates, Series 2003-30, Class 2A1 | 5.027 | (a) | 10/25/33 | 419 | 424,968 | |||||||||||
Wells Fargo Mortgage-Backed Securities Trust, Series 2004-EE, Class 2A1 | 2.763 | (a) | 12/25/34 | 274 | 275,596 | |||||||||||
|
| |||||||||||||||
TOTAL RESIDENTIAL MORTGAGE-BACKED SECURITIES |
| 159,382,924 | ||||||||||||||
|
| |||||||||||||||
SOVEREIGN BONDS 3.9% | ||||||||||||||||
Argentina Bonar Bond (Argentina), Sr. Unsec’d. Notes | 7.000 | 04/17/17 | 1,900 | 1,932,489 | ||||||||||||
Argentine Republic Government International Bond (Argentina), Sr. Unsec’d. Notes, 144A | 6.875 | 04/22/21 | 7,175 | 7,390,250 | ||||||||||||
Brazilian Government International Bond (Brazil), Unsec’d. Notes | 11.000 | 06/26/17 | EUR | 6,600 | 8,406,513 | |||||||||||
Cyprus Government International Bond (Cyprus), Sr. Unsec’d. Notes, EMTN, 144A | 4.625 | 02/03/20 | EUR | 300 | 363,269 | |||||||||||
Dominican Republic International Bond (Dominican Republic), Sr. Unsec’d. Notes, RegS | 7.500 | 05/06/21 | 2,590 | 2,836,050 | ||||||||||||
Hellenic Republic Government International Bond (Greece), Sr. Unsec’d. Notes, EMTN(b) | 3.800 | 08/08/17 | JPY | 1,010,000 | 8,537,272 | |||||||||||
Hungary Government International Bond (Hungary), | ||||||||||||||||
Sr. Unsec’d. Notes | 2.110 | 10/26/17 | JPY | 400,000 | 3,799,906 | |||||||||||
Sr. Unsec’d. Notes | 5.375 | 02/21/23 | 1,250 | 1,377,412 | ||||||||||||
Sr. Unsec’d. Notes | 6.375 | 03/29/21 | 6,470 | 7,366,095 | ||||||||||||
Sr. Unsec’d. Notes | 7.625 | 03/29/41 | 2,000 | 2,824,700 | ||||||||||||
Sr. Unsec’d. Notes, RegS | 6.000 | 01/11/19 | EUR | 545 | 711,922 | |||||||||||
Indonesia Government International Bond (Indonesia), | ||||||||||||||||
Sr. Unsec’d. Notes, 144A | 3.375 | 07/30/25 | EUR | 2,975 | 3,469,286 | |||||||||||
Sr. Unsec’d. Notes, 144A(d) | 5.125 | 01/15/45 | 1,735 | 1,760,229 | ||||||||||||
Sr. Unsec’d. Notes, MTN, 144A | 2.875 | 07/08/21 | EUR | 1,825 | 2,164,957 | |||||||||||
Panama Government International Bond (Panama), Sr. Unsec’d. Notes | 3.750 | 03/16/25 | 3,035 | 3,126,050 | ||||||||||||
Peru Enhanced Pass-Through Finance Ltd. (Peru), Pass-Through Certificates, RegS | 1.610 | (h) | 05/31/18 | 269 | 259,594 | |||||||||||
Portugal Government International Bond (Portugal), | 5.125 | 10/15/24 | 9,100 | 9,032,241 | ||||||||||||
Unsec’d. Notes, MTN, RegS | 5.125 | 10/15/24 | 5,400 | 5,359,792 |
See Notes to Financial Statements.
40 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | ||||||||||||
SOVEREIGN BONDS (Continued) | ||||||||||||||||
Republic of Serbia (Serbia), Sr. Unsec’d. Notes, RegS | 6.750 | %(a) | 11/01/24 | 3,484 | $ | 3,583,862 | ||||||||||
Romanian Government International Bond (Romania), Sr. Unsec’d. Notes, 144A | 4.875 | 01/22/24 | 920 | 1,006,250 | ||||||||||||
|
| |||||||||||||||
TOTAL SOVEREIGN BONDS | 75,308,139 | |||||||||||||||
|
| |||||||||||||||
TOTAL LONG-TERM INVESTMENTS | 1,837,264,379 | |||||||||||||||
|
| |||||||||||||||
Shares | ||||||||||||||||
SHORT-TERM INVESTMENT 8.4% | ||||||||||||||||
AFFILIATED MUTUAL FUND | ||||||||||||||||
Prudential Investment Portfolios 2 - Prudential Core Ultra Short Bond Fund (cost $161,320,913; includes $130,312,653 of cash collateral for securities on loan)(Note 3)(i)(j) | 161,320,913 | 161,320,913 | ||||||||||||||
|
| |||||||||||||||
TOTAL INVESTMENTS 103.5% | 1,998,585,292 | |||||||||||||||
Liabilities in excess of other assets(l) (3.5)% | (67,866,389 | ) | ||||||||||||||
|
| |||||||||||||||
NET ASSETS 100.0% | $ | 1,930,718,903 | ||||||||||||||
|
|
The following abbreviations are used in the semiannual report:
* | Non-income producing security. |
144A—Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. Unless otherwise noted, 144A securities are deemed to be liquid.
RegS—Regulation S. Security was purchased pursuant to Regulation S and may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.
ABS—Asset-Backed Security
AUD—Australian Dollar
BABs—Build America Bonds
bps—Basis Points
BRL—Brazilian Real
CAD—Canadian Dollar
CDO—Collateralized Debt Obligation
CDS—Credit Default Swap
CDX—Credit Derivative Index
CHF—Swiss Franc
CLO—Collateralized Loan Obligation
CLP—Chilean Peso
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 41 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
CMBX—Commercial Mortgage Backed Securities Index
CNH—Chinese Renminbi
COP—Colombian Peso
CZK—Czech Koruna
EMTN—Euro Medium Term Note
EUR—Euro
EURIBOR—Euro Interbank Offered Rate
FHLMC—Federal Home Loan Mortgage Corp.
GBP—British Pound
HUF—Hungarian Forint
INR—Indian Rupee
IO—Interest Only
JIBAR—Johannesburg Interbank Agreed Rate
JPY—Japanese Yen
L2—Level 2
L3—Level 3
LIBOR—London Interbank Offered Rate
MTN—Medium Term Note
MXN—Mexican Peso
NOK—Norwegian Krone
NZD—New Zealand Dollar
OIS—Overnight Index Swap
OTC—Over-the-counter
PIK—Payment-in-Kind
PLN—Polish Zloty
RUB—Russian Ruble
SEK—Swedish Krona
SGD—Singapore Dollar
TRY—Turkish Lira
TWD—New Taiwanese Dollar
USOIS—United States Overnight Federal Funds Effective Rate
ZAR—South African Rand
# | Principal or notional amount is shown in U.S. dollars unless otherwise stated. |
(a) | Variable rate instrument. The interest rate shown reflects the rate in effect at April 30, 2016. |
(b) | Indicates a security that has been deemed illiquid. |
(c) | Indicates a Level 3 security. The aggregate value of Level 3 securities is $61,380,627 and 3.2% of net assets. |
(d) | All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is $127,127,770; cash collateral of $130,312,653 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments. Securities on loan are subject to contractual netting arrangements. |
(e) | Represents security, or a portion thereof, segregated as collateral for OTC swap agreements. |
(f) | Indicates a restricted security; the aggregate original cost of the restricted securities is $52,656,993. The aggregate value, $39,375,469, is approximately 2.0% of net assets. |
(g) | Represents Connecticut Avenue security issued by Fannie Mae or a Structured Agency Credit Risk security issued by Freddie Mac. |
(h) | Represents zero coupon bond or principal only securities. Rate represents yield to maturity at purchase date. |
(i) | Represents security, or a portion thereof, purchased with cash collateral received for securities on loan. |
See Notes to Financial Statements.
42 |
(j) | Prudential Investments LLC, the manager of the Fund, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Ultra Short Bond Fund. |
(k) | Represents issuer in default on interest payments and/or principal repayment; non-income producing security. |
(l) | Includes net unrealized appreciation (depreciation) on the following derivative contracts held at reporting period end: |
Futures contracts outstanding at April 30, 2016:
Number of Contracts | Type | Expiration Date | Value at Trade Date | Value at April 30, 2016 | Unrealized Appreciation (Depreciation)(1) | |||||||||||||||
Long Positions: | ||||||||||||||||||||
1,785 | 2 Year U.S. Treasury Notes | Jun. 2016 | $ | 390,177,591 | $ | 390,245,625 | $ | 68,034 | ||||||||||||
36 | 5 Year U.S. Treasury Notes | Jun. 2016 | 4,334,329 | 4,352,906 | 18,577 | |||||||||||||||
5,120 | 10 Year U.S. Treasury Notes | Jun. 2016 | 665,592,697 | 665,920,000 | 327,303 | |||||||||||||||
821 | U.S. Ultra Bonds | Jun. 2016 | 141,219,260 | 140,673,219 | (546,041 | ) | ||||||||||||||
|
| |||||||||||||||||||
(132,127 | ) | |||||||||||||||||||
|
| |||||||||||||||||||
Short Positions: | ||||||||||||||||||||
1,060 | 90 Day Euro Dollar | Mar. 2017 | 262,348,474 | 262,562,000 | (213,526 | ) | ||||||||||||||
2,661 | 90 Day Euro Dollar | Jun. 2017 | 659,368,901 | 658,730,550 | 638,351 | |||||||||||||||
175 | 90 Day Euro Dollar | Sep. 2017 | 43,325,232 | 43,292,813 | 32,419 | |||||||||||||||
175 | 90 Day Euro Dollar | Dec. 2017 | 43,222,418 | 43,262,187 | (39,769 | ) | ||||||||||||||
949 | U.S. Long Bonds | Jun. 2016 | 156,976,789 | 154,983,563 | 1,993,226 | |||||||||||||||
|
| |||||||||||||||||||
2,410,701 | ||||||||||||||||||||
|
| |||||||||||||||||||
$ | 2,278,574 | |||||||||||||||||||
|
|
(1) | Cash of $8,290,000 has been segregated with Goldman Sachs & Co. to cover requirements for open contracts at April 30, 2016. |
Forward foreign currency exchange contracts outstanding at April 30, 2016:
Purchase Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
OTC forward foreign currency exchange contracts: | ||||||||||||||||||
Australian Dollar, | ||||||||||||||||||
Expiring 07/14/2016 | Citigroup Global Markets | AUD | 2,501 | $ | 1,947,400 | $ | 1,895,783 | $ | (51,617 | ) | ||||||||
Expiring 07/14/2016 | Citigroup Global Markets | AUD | 3,835 | 2,928,700 | 2,906,864 | (21,836 | ) | |||||||||||
Expiring 07/14/2016 | JPMorgan Chase | AUD | 4,780 | 3,640,196 | 3,623,114 | (17,082 | ) | |||||||||||
Expiring 07/14/2016 | Toronto Dominion | AUD | 2,538 | 1,951,600 | 1,923,858 | (27,742 | ) | |||||||||||
Brazilian Real, | ||||||||||||||||||
Expiring 05/12/2016 | Citigroup Global Markets | BRL | 4,647 | 1,251,900 | 1,345,642 | 93,742 | ||||||||||||
Expiring 05/12/2016 | Citigroup Global Markets | BRL | 5,492 | 1,491,682 | 1,590,506 | 98,824 | ||||||||||||
Expiring 05/12/2016 | Citigroup Global Markets | BRL | 7,087 | 1,923,094 | 2,052,336 | 129,242 | ||||||||||||
British Pound, | ||||||||||||||||||
Expiring 07/27/2016 | Citigroup Global Markets | GBP | 2,676 | 3,879,800 | 3,910,751 | 30,951 | ||||||||||||
Expiring 07/27/2016 | Citigroup Global Markets | GBP | 4,015 | 5,819,700 | 5,868,410 | 48,710 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 43 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Forward foreign currency exchange contracts outstanding at April 30, 2016 (continued):
Purchase Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
OTC forward foreign currency exchange contracts (cont’d): |
| |||||||||||||||||
Canadian Dollar, | ||||||||||||||||||
Expiring 07/14/2016 | Citigroup Global Markets | CAD | 2,468 | $ | 1,947,400 | $ | 1,966,977 | $ | 19,577 | |||||||||
Expiring 07/14/2016 | Citigroup Global Markets | CAD | 2,498 | 1,970,074 | 1,991,081 | 21,007 | ||||||||||||
Expiring 07/14/2016 | Toronto Dominion | CAD | 12,611 | 9,841,185 | 10,050,802 | 209,617 | ||||||||||||
Chilean Peso, | ||||||||||||||||||
Expiring 05/13/2016 | Barclays Capital Group | CLP | 347,870 | 502,775 | 525,890 | 23,115 | ||||||||||||
Expiring 05/13/2016 | Citigroup Global Markets | CLP | 347,669 | 502,775 | 525,586 | 22,811 | ||||||||||||
Expiring 05/13/2016 | Citigroup Global Markets | CLP | 380,595 | 530,669 | 575,363 | 44,694 | ||||||||||||
Expiring 05/13/2016 | Citigroup Global Markets | CLP | 683,898 | 1,002,899 | 1,033,877 | 30,978 | ||||||||||||
Colombian Peso, | ||||||||||||||||||
Expiring 05/13/2016 | Barclays Capital Group | COP | 1,657,855 | 490,780 | 580,790 | 90,010 | ||||||||||||
Expiring 05/13/2016 | Citigroup Global Markets | COP | 637,449 | 188,762 | 223,315 | 34,553 | ||||||||||||
Expiring 05/13/2016 | Citigroup Global Markets | COP | 891,633 | 264,266 | 312,362 | 48,096 | ||||||||||||
Expiring 05/13/2016 | Citigroup Global Markets | COP | 952,030 | 281,916 | 333,521 | 51,605 | ||||||||||||
Expiring 05/13/2016 | Citigroup Global Markets | COP | 5,158,042 | 1,542,109 | 1,806,996 | 264,887 | ||||||||||||
Czech Koruna, | ||||||||||||||||||
Expiring 07/22/2016 | Citigroup Global Markets | CZK | 401,858 | 16,938,512 | 17,051,013 | 112,501 | ||||||||||||
Euro, | ||||||||||||||||||
Expiring 07/27/2016 | JPMorgan Chase | EUR | 2,527 | 2,901,400 | 2,901,054 | (346 | ) | |||||||||||
Indian Rupee, | ||||||||||||||||||
Expiring 05/23/2016 | Barclays Capital Group | INR | 87,646 | 1,306,199 | 1,315,328 | 9,129 | ||||||||||||
Expiring 05/23/2016 | Citigroup Global Markets | INR | 116,096 | 1,730,063 | 1,742,283 | 12,220 | ||||||||||||
Expiring 07/22/2016 | Citigroup Global Markets | INR | 124,235 | 1,852,044 | 1,843,752 | (8,292 | ) | |||||||||||
Japanese Yen, | ||||||||||||||||||
Expiring 07/27/2016 | JPMorgan Chase | JPY | 144,138 | 1,354,000 | 1,358,287 | 4,287 | ||||||||||||
Expiring 07/27/2016 | JPMorgan Chase | JPY | 206,125 | 1,934,300 | 1,942,427 | 8,127 | ||||||||||||
Expiring 07/27/2016 | JPMorgan Chase | JPY | 269,178 | 2,514,600 | 2,536,606 | 22,006 | ||||||||||||
Expiring 07/27/2016 | JPMorgan Chase | JPY | 321,931 | 2,905,200 | 3,033,727 | 128,527 | ||||||||||||
Expiring 04/03/2017 | JPMorgan Chase | JPY | 704,000 | 6,262,231 | 6,705,033 | 442,802 | ||||||||||||
Expiring 04/06/2017 | JPMorgan Chase | JPY | 5,130,000 | 45,684,100 | 48,865,769 | 3,181,669 | ||||||||||||
Mexican Peso, | ||||||||||||||||||
Expiring 07/22/2016 | Citigroup Global Markets | MXN | 9,744 | 559,666 | 561,719 | 2,053 | ||||||||||||
Expiring 07/22/2016 | Citigroup Global Markets | MXN | 15,825 | 908,563 | 912,285 | 3,722 | ||||||||||||
Expiring 07/22/2016 | Citigroup Global Markets | MXN | 16,451 | 942,655 | 948,385 | 5,730 | ||||||||||||
Expiring 07/22/2016 | Citigroup Global Markets | MXN | 32,595 | 1,851,219 | 1,879,045 | 27,826 | ||||||||||||
Expiring 07/22/2016 | JPMorgan Chase | MXN | 31,918 | 1,838,231 | 1,840,068 | 1,837 | ||||||||||||
New Taiwanese Dollar, | ||||||||||||||||||
Expiring 07/13/2016 | Bank of America | TWD | 30,006 | 927,025 | 931,061 | 4,036 | ||||||||||||
Expiring 07/13/2016 | Citigroup Global Markets | TWD | 59,928 | 1,853,847 | 1,859,506 | 5,659 | ||||||||||||
Expiring 07/13/2016 | Citigroup Global Markets | TWD | 82,973 | 2,591,706 | 2,574,604 | (17,102 | ) |
See Notes to Financial Statements.
44 |
Forward foreign currency exchange contracts outstanding at April 30, 2016 (continued):
Purchase Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
OTC forward foreign currency exchange contracts (cont’d): |
| |||||||||||||||||
New Zealand Dollar, | ||||||||||||||||||
Expiring 07/14/2016 | Bank of America | NZD | 2,779 | $ | 1,934,300 | $ | 1,932,558 | $ | (1,742 | ) | ||||||||
Expiring 07/14/2016 | Citigroup Global Markets | NZD | 2,831 | 1,951,399 | 1,968,859 | 17,460 | ||||||||||||
Expiring 07/14/2016 | JPMorgan Chase | NZD | 1,976 | 1,356,700 | 1,374,578 | 17,878 | ||||||||||||
Expiring 07/14/2016 | JPMorgan Chase | NZD | 2,837 | 1,952,500 | 1,973,173 | 20,673 | ||||||||||||
Expiring 07/14/2016 | JPMorgan Chase | NZD | 4,192 | 2,902,500 | 2,915,307 | 12,807 | ||||||||||||
Expiring 07/14/2016 | Toronto Dominion | NZD | 4,171 | 2,921,100 | 2,900,660 | (20,440 | ) | |||||||||||
Norwegian Krone, | ||||||||||||||||||
Expiring 07/22/2016 | Goldman Sachs & Co. | NOK | 46,709 | 5,802,800 | 5,798,888 | (3,912 | ) | |||||||||||
Expiring 07/22/2016 | Goldman Sachs & Co. | NOK | 113,393 | 13,950,117 | 14,077,828 | 127,711 | ||||||||||||
Polish Zloty, | ||||||||||||||||||
Expiring 07/22/2016 | Bank of America | PLN | 7,034 | 1,859,552 | 1,840,073 | (19,479 | ) | |||||||||||
Expiring 07/22/2016 | Bank of America | PLN | 7,136 | 1,841,267 | 1,866,628 | 25,361 | ||||||||||||
Expiring 07/22/2016 | Citigroup Global Markets | PLN | 3,443 | 892,263 | 900,597 | 8,334 | ||||||||||||
Expiring 07/22/2016 | Citigroup Global Markets | PLN | 3,671 | 973,700 | 960,278 | (13,422 | ) | |||||||||||
Russian Ruble, | ||||||||||||||||||
Expiring 07/20/2016 | Barclays Capital Group | RUB | 58,556 | 865,229 | 884,588 | 19,359 | ||||||||||||
Expiring 07/20/2016 | Barclays Capital Group | RUB | 124,755 | 1,853,847 | 1,884,624 | 30,777 | ||||||||||||
Expiring 07/20/2016 | Citigroup Global Markets | RUB | 67,016 | 988,820 | 1,012,388 | 23,568 | ||||||||||||
Singapore Dollar, | ||||||||||||||||||
Expiring 07/13/2016 | Toronto Dominion | SGD | 3,911 | 2,921,100 | 2,903,828 | (17,272 | ) | |||||||||||
Swedish Krona, | ||||||||||||||||||
Expiring 07/22/2016 | Deutsche Bank AG | SEK | 69,490 | 8,605,018 | 8,679,953 | 74,935 | ||||||||||||
Expiring 07/22/2016 | JPMorgan Chase | SEK | 51,252 | 6,322,189 | 6,401,886 | 79,697 | ||||||||||||
Swiss Franc, | ||||||||||||||||||
Expiring 07/27/2016 | Bank of America | CHF | 2,892 | 3,007,522 | 3,026,836 | 19,314 | ||||||||||||
Expiring 07/27/2016 | Citigroup Global Markets | CHF | 4,617 | 4,835,700 | 4,832,105 | (3,595 | ) | |||||||||||
Expiring 07/27/2016 | Citigroup Global Markets | CHF | 5,550 | 5,802,800 | 5,809,024 | 6,224 | ||||||||||||
Expiring 07/27/2016 | JPMorgan Chase | CHF | 2,810 | 2,905,200 | 2,940,632 | 35,432 | ||||||||||||
Turkish Lira, | ||||||||||||||||||
Expiring 05/20/2016 | Barclays Capital Group | TRY | 1,764 | 601,266 | 626,937 | 25,671 | ||||||||||||
Expiring 05/20/2016 | Citigroup Global Markets | TRY | 1,037 | 363,643 | 368,677 | 5,034 | ||||||||||||
Expiring 05/20/2016 | Citigroup Global Markets | TRY | 3,710 | 1,302,454 | 1,318,670 | 16,216 | ||||||||||||
Expiring 05/20/2016 | Citigroup Global Markets | TRY | 4,771 | 1,666,097 | 1,695,868 | 29,771 | ||||||||||||
Expiring 05/20/2016 | Citigroup Global Markets | TRY | 8,916 | 3,012,700 | 3,169,170 | 156,470 | ||||||||||||
Expiring 05/20/2016 | Citigroup Global Markets | TRY | 8,929 | 3,008,700 | 3,173,624 | 164,924 | ||||||||||||
Expiring 05/20/2016 | Citigroup Global Markets | TRY | 8,965 | 3,015,321 | 3,186,331 | 171,010 | ||||||||||||
|
|
|
|
|
| |||||||||||||
$ | 230,171,047 | $ | 236,270,344 | 6,099,297 | ||||||||||||||
|
|
|
|
|
|
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 45 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Forward foreign currency exchange contracts outstanding at April 30, 2016 (continued):
Sale Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
OTC forward foreign currency exchange contracts: |
| |||||||||||||||||
Australian Dollar, | ||||||||||||||||||
Expiring 07/14/2016 | Citigroup Global Markets | AUD | 7,684 | $ | 5,814,500 | $ | 5,823,700 | $ | (9,200 | ) | ||||||||
Brazilian Real, | ||||||||||||||||||
Expiring 05/12/2016 | Citigroup Global Markets | BRL | 1,256 | 342,374 | 363,768 | (21,394 | ) | |||||||||||
Expiring 05/12/2016 | Citigroup Global Markets | BRL | 1,253 | 342,375 | 362,975 | (20,600 | ) | |||||||||||
Expiring 05/12/2016 | Credit Suisse First Boston Corp. | BRL | 11,955 | 2,960,736 | 3,462,113 | (501,377 | ) | |||||||||||
Expiring 06/02/2016 | Citigroup Global Markets | BRL | 1,392 | 388,000 | 400,246 | (12,246 | ) | |||||||||||
British Pound, | ||||||||||||||||||
Expiring 07/27/2016 | Citigroup Global Markets | GBP | 17,766 | 25,740,246 | 25,965,612 | (225,366 | ) | |||||||||||
Expiring 07/27/2016 | Citigroup Global Markets | GBP | 6,428 | 9,241,468 | 9,394,274 | (152,806 | ) | |||||||||||
Expiring 07/27/2016 | Citigroup Global Markets | GBP | 1,333 | 1,936,800 | 1,948,073 | (11,273 | ) | |||||||||||
Expiring 07/27/2016 | JPMorgan Chase | GBP | 1,994 | 2,902,501 | 2,913,727 | (11,226 | ) | |||||||||||
Canadian Dollar, | ||||||||||||||||||
Expiring 07/14/2016 | Citigroup Global Markets | CAD | 3,772 | 2,923,000 | 3,006,453 | (83,453 | ) | |||||||||||
Chilean Peso, | ||||||||||||||||||
Expiring 05/13/2016 | Bank of America | CLP | 1,563,959 | 2,168,552 | 2,364,305 | (195,753 | ) | |||||||||||
Expiring 05/13/2016 | Citigroup Global Markets | CLP | 214,824 | 308,146 | 324,759 | (16,613 | ) | |||||||||||
Chinese Renminbi, | ||||||||||||||||||
Expiring 07/27/2016 | JPMorgan Chase | CNH | 12,690 | 1,939,900 | 1,950,544 | (10,644 | ) | |||||||||||
Colombian Peso, | ||||||||||||||||||
Expiring 05/13/2016 | Barclays Capital Group | COP | 2,389,530 | 715,000 | 837,114 | (122,114 | ) | |||||||||||
Expiring 05/13/2016 | Barclays Capital Group | COP | 2,259,680 | 702,200 | 791,625 | (89,425 | ) | |||||||||||
Expiring 05/13/2016 | Citigroup Global Markets | COP | 2,613,542 | 801,700 | 915,592 | (113,892 | ) | |||||||||||
Expiring 05/13/2016 | Citigroup Global Markets | COP | 2,391,675 | 715,000 | 837,866 | (122,866 | ) | |||||||||||
Euro, | ||||||||||||||||||
Expiring 07/27/2016 | Bank of America | EUR | 7,613 | 8,644,863 | 8,741,455 | (96,592 | ) | |||||||||||
Expiring 07/27/2016 | JPMorgan Chase | EUR | 22,858 | 25,836,308 | 26,246,843 | (410,535 | ) | |||||||||||
Hungarian Forint, | ||||||||||||||||||
Expiring 07/22/2016 | Citigroup Global Markets | HUF | 885,295 | 3,242,840 | 3,246,652 | (3,812 | ) | |||||||||||
Japanese Yen, | ||||||||||||||||||
Expiring 07/27/2016 | Citigroup Global Markets | JPY | 35,536 | 320,654 | 334,879 | (14,225 | ) | |||||||||||
Mexican Peso, | ||||||||||||||||||
Expiring 07/22/2016 | Citigroup Global Markets | MXN | 31,906 | 1,837,558 | 1,839,373 | (1,815 | ) | |||||||||||
New Zealand Dollar, | ||||||||||||||||||
Expiring 07/14/2016 | Citigroup Global Markets | NZD | 2,794 | 1,947,400 | 1,943,332 | 4,068 | ||||||||||||
Expiring 07/14/2016 | JPMorgan Chase | NZD | 9,066 | 6,247,157 | 6,305,430 | (58,273 | ) | |||||||||||
Expiring 07/14/2016 | JPMorgan Chase | NZD | 1,976 | 1,364,400 | 1,374,346 | (9,946 | ) | |||||||||||
Expiring 07/14/2016 | Toronto Dominion | NZD | 5,707 | 3,903,300 | 3,968,855 | (65,555 | ) | |||||||||||
Polish Zloty, | ||||||||||||||||||
Expiring 07/22/2016 | Citigroup Global Markets | PLN | 11,701 | 3,086,679 | 3,060,926 | 25,753 |
See Notes to Financial Statements.
46 |
Forward foreign currency exchange contracts outstanding at April 30, 2016 (continued):
Sale Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
OTC forward foreign currency exchange contracts (cont’d): |
| |||||||||||||||||
Singapore Dollar, | ||||||||||||||||||
Expiring 07/13/2016 | Bank of America | SGD | 2,530 | $ | 1,854,048 | $ | 1,878,164 | $ | (24,116 | ) | ||||||||
Expiring 07/13/2016 | Citigroup Global Markets | SGD | 4,016 | 2,966,156 | 2,981,580 | (15,424 | ) | |||||||||||
Expiring 07/13/2016 | Citigroup Global Markets | SGD | 134 | 98,863 | 99,263 | (400 | ) | |||||||||||
Expiring 07/13/2016 | Deutsche Bank AG | SGD | 1,841 | 1,364,400 | 1,366,795 | (2,395 | ) | |||||||||||
Swiss Franc, | ||||||||||||||||||
Expiring 07/27/2016 | JPMorgan Chase | CHF | 3,080 | 3,173,761 | 3,223,962 | (50,201 | ) | |||||||||||
Turkish Lira, | ||||||||||||||||||
Expiring 05/20/2016 | Citigroup Global Markets | TRY | 3,728 | 1,225,724 | 1,324,934 | (99,210 | ) | |||||||||||
Expiring 05/20/2016 | JPMorgan Chase | TRY | 23,193 | 7,712,093 | 8,243,616 | (531,523 | ) | |||||||||||
|
|
|
|
|
| |||||||||||||
$ | 134,768,702 | $ | 137,843,151 | (3,074,449 | ) | |||||||||||||
|
|
|
|
|
| |||||||||||||
$ | 3,024,848 | |||||||||||||||||
|
|
Cross currency exchange contracts outstanding at April 30, 2016:
Settlement | Type | Notional Amount (000) | In Exchange For (000) | Unrealized Appreciation (Depreciation) | Counterparty | |||||||||||||||
OTC cross currency exchange contracts: |
| |||||||||||||||||||
05/20/2016 | Buy | TRY | 8,578 | EUR | 2,616 | $ | 52,076 | Citigroup Global Markets | ||||||||||||
07/14/2016 | Buy | AUD | 2,548 | EUR | 1,709 | (29,967 | ) | JPMorgan Chase | ||||||||||||
07/14/2016 | Buy | CAD | 2,468 | JPY | 216,469 | (71,914 | ) | JPMorgan Chase | ||||||||||||
07/14/2016 | Buy | EUR | 1,691 | AUD | 2,559 | 1,455 | JPMorgan Chase | |||||||||||||
07/14/2016 | Buy | NZD | 5,672 | EUR | 3,450 | (15,454 | ) | Toronto Dominion | ||||||||||||
07/22/2016 | Buy | EUR | 5,130 | NOK | 47,507 | (8,871 | ) | JPMorgan Chase | ||||||||||||
07/22/2016 | Buy | GBP | 2,029 | CZK | 70,188 | (12,657 | ) | JPMorgan Chase | ||||||||||||
07/22/2016 | Buy | SEK | 11,063 | EUR | 1,205 | (1,326 | ) | Citigroup Global Markets | ||||||||||||
07/27/2016 | Buy | EUR | 2,536 | GBP | 1,990 | 4,474 | Citigroup Global Markets | |||||||||||||
07/27/2016 | Buy | EUR | 1,691 | GBP | 1,329 | (480 | ) | Citigroup Global Markets | ||||||||||||
07/27/2016 | Buy | GBP | 4,065 | EUR | 5,207 | (37,144 | ) | Citigroup Global Markets | ||||||||||||
07/27/2016 | Buy | GBP | 3,997 | CHF | 5,652 | (73,637 | ) | JPMorgan Chase | ||||||||||||
07/27/2016 | Buy | GBP | 533 | EUR | 686 | (8,746 | ) | Citigroup Global Markets | ||||||||||||
07/27/2016 | Buy | GBP | 1,334 | EUR | 1,711 | (14,684 | ) | JPMorgan Chase | ||||||||||||
07/27/2016 | Buy | GBP | 1,994 | EUR | 2,564 | (30,395 | ) | Citigroup Global Markets | ||||||||||||
07/27/2016 | Buy | GBP | 1,991 | EUR | 2,559 | (28,063 | ) | Citigroup Global Markets | ||||||||||||
|
| |||||||||||||||||||
$ | (275,333 | ) | ||||||||||||||||||
|
|
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 47 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Currency swap agreements outstanding at April 30, 2016:
Notional | Fund | Notional Amount (000)# | Fund | Counterparty | Termination Date | Fair Value | Upfront Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||
| OTC currency swap agreements: | |||||||||||||||||||||||||||
602 | 3 Month LIBOR | JPY | 60,000 | 3 Month JPY LIBOR minus 54.00 bps | Barclays Capital Group | 10/12/16 | $ | 38,672 | $ | — | $ | 38,672 | ||||||||||||||||
1,817 | 3 Month LIBOR | GBP | 1,200 | 3 Month GBP LIBOR minus 14.25 bps | Barclays Capital Group | 04/05/18 | 65,999 | — | 65,999 | |||||||||||||||||||
707 | 3 Month LIBOR | EUR | 600 | 3 Month EURIBOR minus 21.25 bps | Citigroup Global Markets | 01/16/17 | 20,915 | — | 20,915 | |||||||||||||||||||
1,810 | 3 Month LIBOR | EUR | 1,560 | 3 Month EURIBOR minus 24.50 bps | Citigroup Global Markets | 01/16/17 | 24,722 | — | 24,722 | |||||||||||||||||||
64 | 3 Month LIBOR plus 423 bps | JPY | 5,000 | 3.450% | Citigroup Global Markets | 03/24/17 | 18,220 | 1,542 | 16,678 | |||||||||||||||||||
2,013 | 3 Month LIBOR | JPY | 200,000 | 3 Month JPY LIBOR minus 53.25 bps | Citigroup Global Markets | 04/24/17 | 134,452 | — | 134,452 | |||||||||||||||||||
43 | 3 Month LIBOR plus 208 bps | EUR | 35 | 4.250% | Citigroup Global Markets | 07/14/17 | 151 | (4,000 | ) | 4,151 | ||||||||||||||||||
79 | 3 Month LIBOR plus 220 bps | EUR | 65 | 4.250% | Citigroup Global Markets | 07/14/17 | 167 | (6,770 | ) | 6,937 | ||||||||||||||||||
9,427 | 3 Month LIBOR | JPY | 961,510 | 3 Month JPY LIBOR minus 31.25 bps | Deutsche Bank AG | 05/14/17 | 378,682 | — | 378,682 | |||||||||||||||||||
4,025 | 3 Month LIBOR | EUR | 3,500 | 3 Month EURIBOR minus 25.00 bps | Goldman Sachs & Co. | 01/20/17 | 16,501 | — | 16,501 | |||||||||||||||||||
2,656 | 3 Month LIBOR | GBP | 1,745 | 3 Month GBP LIBOR minus 9.50 bps | Hong Kong & Shanghai Bank | 06/04/18 | 106,942 | — | 106,942 | |||||||||||||||||||
JPY | 1,010,000 | 3 Month JPY LIBOR minus 43.35 bps | 8,574 | 3 Month LIBOR | JPMorgan Chase | 11/26/16 | 910,043 | — | 910,043 | |||||||||||||||||||
JPY | 4,040,000 | 3 Month JPY LIBOR minus 42.10 bps | 34,223 | 3 Month LIBOR | JPMorgan Chase | 11/28/16 | 3,738,087 | — | 3,738,087 | |||||||||||||||||||
32,517 | 3 Month LIBOR | EUR | 28,300 | 3 Month EURIBOR minus 26.95 | JPMorgan Chase | 02/17/17 | 36,313 | — | 36,313 | |||||||||||||||||||
3,310 | 3 Month JPY LIBOR plus 54.25 bps | JPY | 400,000 | 0.155% | JPMorgan Chase | 10/26/17 | (472,635 | ) | — | (472,635 | ) | |||||||||||||||||
6,262 | 3 Month LIBOR | JPY | 704,000 | 3 Month JPY LIBOR minus 99.25 bps | JPMorgan Chase | 04/03/20 | 23,584 | — | 23,584 | |||||||||||||||||||
45,684 | 3 Month LIBOR | JPY | 5,130,000 | 3 Month JPY LIBOR minus 98.63 bps | JPMorgan Chase | 04/06/20 | 162,184 | — | 162,184 | |||||||||||||||||||
8,574 | 3 Month LIBOR | JPY | 1,010,000 | 3 Month JPY LIBOR minus 69.88 bps | JPMorgan Chase | 11/26/24 | (1,091,939 | ) | — | (1,091,939 | ) | |||||||||||||||||
34,223 | 3 Month LIBOR | JPY | 4,040,000 | 3 Month JPY LIBOR minus 67.32 bps | JPMorgan Chase | 11/28/24 | (4,529,530 | ) | — | (4,529,530 | ) | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
$ | (418,470 | ) | $ | (9,228 | ) | $ | (409,242 | ) | ||||||||||||||||||||
|
|
|
|
|
|
See Notes to Financial Statements.
48 |
Interest rate swap agreements outstanding at April 30, 2016:
Notional | Termination Date | Fixed Rate | Floating Rate | Value at Trade Date | Value at April 30, 2016 | Unrealized Appreciation (Depreciation) | ||||||||||||||||||
| Centrally cleared swap agreements: |
| ||||||||||||||||||||||
EUR | 16,000 | 08/13/17 | 0.099% | 1 Day EUR OIS(1) | $ | 6,494 | $ | (157,181 | ) | $ | (163,675 | ) | ||||||||||||
EUR | 13,800 | 08/01/19 | 0.346% | 1 Day EUR OIS(1) | 20,789 | (428,597 | ) | (449,386 | ) | |||||||||||||||
EUR | 6,600 | 02/23/26 | 0.324% | 1 Day EUR OIS(1) | 2,328 | 42,495 | 40,167 | |||||||||||||||||
GBP | 3,200 | 02/23/21 | 0.639% | 1 Day GBP OIS(1) | 2,458 | 22,403 | 19,945 | |||||||||||||||||
MXN | 460,000 | 02/09/18 | 4.630% | 28 Day Mexican Interbank Rate(2) | (34,061 | ) | 8,281 | 42,342 | ||||||||||||||||
MXN | 200,000 | 04/18/19 | 5.480% | 28 Day Mexican Interbank Rate(2) | (90,947 | ) | 198,643 | 289,590 | ||||||||||||||||
MXN | 125,350 | 08/20/19 | 5.110% | 28 Day Mexican Interbank Rate(2) | (41,905 | ) | 35,923 | 77,828 | ||||||||||||||||
MXN | 2,900 | 05/25/22 | 6.370% | 28 Day Mexican Interbank Rate(2) | (2,373 | ) | 7,297 | 9,670 | ||||||||||||||||
MXN | 19,300 | 04/28/23 | 5.100% | 28 Day Mexican Interbank Rate(2) | (3,484 | ) | (43,715 | ) | (40,231 | ) | ||||||||||||||
MXN | 162,700 | 08/13/24 | 6.120% | 28 Day Mexican Interbank Rate(2) | (43,919 | ) | 138,040 | 181,959 | ||||||||||||||||
MXN | 124,750 | 12/27/24 | 5.795% | 28 Day Mexican Interbank Rate(2) | 24,462 | (84,735 | ) | (109,197 | ) | |||||||||||||||
MXN | 47,600 | 07/27/34 | 6.720% | 28 Day Mexican Interbank Rate(2) | 3,808 | 1,403 | (2,405 | ) | ||||||||||||||||
35,555 | 06/30/16 | 0.618% | 3 Month LIBOR(1) | 239 | 1,448 | 1,209 | ||||||||||||||||||
112,690 | 06/30/16 | 0.655% | 3 Month LIBOR(1) | 432 | (2,379 | ) | (2,811 | ) | ||||||||||||||||
80,000 | 08/01/16 | 0.743% | 3 Month LIBOR(1) | 350 | (18,562 | ) | (18,912 | ) | ||||||||||||||||
50,000 | 08/04/16 | 0.733% | 3 Month LIBOR(1) | 275 | (10,747 | ) | (11,022 | ) | ||||||||||||||||
460,000 | 08/06/16 | 0.677% | 3 Month LIBOR(1) | 1,300 | (30,755 | ) | (32,055 | ) | ||||||||||||||||
900,000 | 08/07/16 | 0.689% | 3 Month LIBOR(1) | 130,834 | (81,314 | ) | (212,148 | ) | ||||||||||||||||
55,800 | 09/30/16 | 0.877% | 3 Month LIBOR(1) | 289 | (46,806 | ) | (47,095 | ) | ||||||||||||||||
38,000 | 10/02/16 | 0.834% | 3 Month LIBOR(1) | 245 | (25,581 | ) | (25,826 | ) | ||||||||||||||||
61,500 | 10/07/16 | 0.805% | 3 Month LIBOR(1) | 304 | (34,734 | ) | (35,038 | ) | ||||||||||||||||
171,500 | 10/08/16 | 0.815% | 3 Month LIBOR(1) | (431,465 | ) | (104,611 | ) | 326,854 | ||||||||||||||||
43,600 | 11/10/16 | 0.739% | 3 Month LIBOR(1) | 259 | (10,257 | ) | (10,516 | ) | ||||||||||||||||
133,000 | 03/11/17 | 0.966% | 3 Month LIBOR(1) | (900,355 | ) | (241,603 | ) | 658,752 | ||||||||||||||||
317,460 | 03/11/17 | 0.966% | 3 Month LIBOR(1) | (593,687 | ) | (576,685 | ) | 17,002 | ||||||||||||||||
346,000 | 01/26/18 | 1.124% | 3 Month LIBOR(1) | (66,157 | ) | (484,307 | ) | (418,150 | ) | |||||||||||||||
154,300 | 02/08/18 | 0.884% | 3 Month LIBOR(1) | 500 | 164,742 | 164,242 | ||||||||||||||||||
234,300 | 11/09/18 | 1.160% | 3 Month LIBOR(1) | (88,868 | ) | (1,079,899 | ) | (991,031 | ) | |||||||||||||||
152,880 | 02/25/19 | 1.755% | 3 Month LIBOR(2) | 533 | 3,142,571 | 3,142,038 | ||||||||||||||||||
71,400 | 01/06/21 | 1.800% | 3 Month LIBOR(2) | 440 | 1,915,789 | 1,915,349 | ||||||||||||||||||
263,500 | 05/15/21 | 2.202% | 3 Month LIBOR(1) | (3,255,762 | ) | (12,340,037 | ) | (9,084,275 | ) | |||||||||||||||
2,570 | 07/31/21 | 2.290% | 3 Month LIBOR(1) | (42,741 | ) | (133,765 | ) | (91,024 | ) | |||||||||||||||
54,000 | 12/31/21 | 1.842% | 3 Month LIBOR(1) | 442 | (1,546,608 | ) | (1,547,050 | ) | ||||||||||||||||
167,900 | 06/30/22 | 2.020% | 3 Month LIBOR(1) | 1,057 | (6,484,759 | ) | (6,485,816 | ) | ||||||||||||||||
24,000 | 04/03/23 | 2.015% | 3 Month LIBOR(1) | 387,010 | (909,090 | ) | (1,296,100 | ) | ||||||||||||||||
16,300 | 06/20/23 | 2.604% | 3 Month LIBOR(1) | (423,982 | ) | (1,275,729 | ) | (851,747 | ) | |||||||||||||||
101,900 | 09/24/23 | 2.903% | 3 Month LIBOR(1) | (4,887,264 | ) | (10,247,050 | ) | (5,359,786 | ) | |||||||||||||||
98,000 | 08/15/24 | 2.559% | 3 Month LIBOR(1) | (1,570,311 | ) | (7,706,360 | ) | (6,136,049 | ) | |||||||||||||||
56,550 | 09/09/24 | 2.558% | 3 Month LIBOR(1) | (904,581 | ) | (4,448,011 | ) | (3,543,430 | ) | |||||||||||||||
4,300 | 02/23/25 | 2.232% | 3 Month LIBOR(1) | 181 | (224,761 | ) | (224,942 | ) | ||||||||||||||||
50,000 | 02/25/25 | 2.208% | 3 Month LIBOR(1) | 510 | (2,513,554 | ) | (2,514,064 | ) |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 49 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Interest rate swap agreements outstanding at April 30, 2016 (continued):
Notional | Termination Date | Fixed Rate | Floating Rate | Value at Trade Date | Value at April 30, 2016 | Unrealized Appreciation (Depreciation) | ||||||||||||||||||
| Centrally cleared swap agreements (cont’d): |
| ||||||||||||||||||||||
23,440 | 04/28/26 | 1.809% | 3 Month LIBOR(1) | $ | 320 | $ | (246,946 | ) | $ | (247,266 | ) | |||||||||||||
13,465 | 04/28/26 | 1.909% | 3 Month LIBOR(2) | 259 | 269,006 | 268,747 | ||||||||||||||||||
8,500 | 02/15/40 | 3.193% | 3 Month LIBOR(1) | (567,614 | ) | (1,744,796 | ) | (1,177,182 | ) | |||||||||||||||
14,000 | 02/15/41 | 2.647% | 3 Month LIBOR(1) | 402 | (1,379,004 | ) | (1,379,406 | ) | ||||||||||||||||
1,300 | 12/12/42 | 2.590% | 3 Month LIBOR(1) | 65,803 | (115,067 | ) | (180,870 | ) | ||||||||||||||||
13,400 | 08/21/44 | 3.190% | 3 Month LIBOR(1) | (926,224 | ) | (3,015,977 | ) | (2,089,753 | ) | |||||||||||||||
4,000 | 07/02/45 | 2.937% | 3 Month LIBOR(1) | 222 | (682,746 | ) | (682,968 | ) | ||||||||||||||||
ZAR | 234,500 | 08/26/20 | 7.855% | 3 Month JIBAR(2) | (54,270 | ) | (140,214 | ) | (85,944 | ) | ||||||||||||||
ZAR | 11,500 | 10/22/23 | 7.625% | 3 Month JIBAR(2) | 916 | (36,263 | ) | (37,179 | ) | |||||||||||||||
ZAR | 88,600 | 11/14/23 | 8.190% | 3 Month JIBAR(2) | (85,064 | ) | (85,479 | ) | (415 | ) | ||||||||||||||
ZAR | 50,000 | 01/08/25 | 7.540% | 3 Month JIBAR(2) | 13,041 | (209,079 | ) | (222,120 | ) | |||||||||||||||
ZAR | 14,200 | 01/12/25 | 7.430% | 3 Month JIBAR(2) | 5,480 | (66,279 | ) | (71,759 | ) | |||||||||||||||
ZAR | 34,200 | 01/13/25 | 7.430% | 3 Month JIBAR(2) | 13,227 | (159,635 | ) | (172,862 | ) | |||||||||||||||
ZAR | 85,600 | 01/13/25 | 7.440% | 3 Month JIBAR(2) | 32,093 | (395,845 | ) | (427,938 | ) | |||||||||||||||
ZAR | 17,100 | 01/11/26 | 9.330% | 3 Month JIBAR(2) | 3,842 | 61,276 | 57,434 | |||||||||||||||||
ZAR | 16,800 | 01/11/26 | 9.330% | 3 Month JIBAR(2) | 3,775 | 60,201 | 56,426 | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
$ | (14,290,115 | ) | $ | (53,500,004 | ) | $ | (39,209,889 | ) | ||||||||||||||||
|
|
|
|
|
|
Notional | Termination Date | Fixed Rate | Floating Rate | Fair Value | Upfront Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | Counterparty | |||||||||||||||||||
| OTC swap agreements: |
| ||||||||||||||||||||||||
MXN | 143,100 | 06/20/18 | 6.020% | 28 Day Mexican Interbank Rate(2) | $ | 235,542 | $ | — | $ | 235,542 | Credit Suisse First Boston Corp. | |||||||||||||||
MXN | 173,100 | 11/09/18 | 5.410% | 28 Day Mexican Interbank Rate(2) | 164,387 | — | 164,387 | Deutsche Bank AG | ||||||||||||||||||
100,250 | 11/30/17 | 1.170% | 3 Month LIBOR(1) | (876,106 | ) | — | (876,106 | ) | Credit Suisse First Boston Corp. | |||||||||||||||||
ZAR | 20,000 | 09/03/33 | 8.970% | 3 Month JIBAR(2) | 61,996 | — | 61,996 | Hong Kong & Shanghai Bank | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
$ | (414,181 | ) | $ | — | $ | (414,181 | ) | |||||||||||||||||||
|
|
|
|
|
|
(1) | The Fund pays the fixed rate and receives the floating rate. |
(2) | The Fund pays the floating rate and receives the fixed rate. |
See Notes to Financial Statements.
50 |
Credit default swap agreements outstanding at April 30, 2016:
Reference | Termination Date | Fixed Rate | Notional Amount (000)#(3) | Value at Trade Date | Value at April 30, 2016(4) | Unrealized Appreciation | ||||||||||||||||||
Centrally cleared credit default swap on credit indices—Buy Protection(1): |
| |||||||||||||||||||||||
CDX.NA.IG.24.V1 | 06/20/20 | 1.000% | 144,050 | $ | (2,761,661 | ) | $ | (1,157,317 | ) | $ | 1,604,344 | |||||||||||||
|
|
|
|
|
|
Reference | Termination Date | Fixed Rate | Notional Amount (000)#(3) | Fair Value(4) | Upfront Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | Counterparty | |||||||||||||||||||
OTC credit default swaps on asset-backed securities—Sell Protection(2): |
| |||||||||||||||||||||||||
Ameriquest Home Equity(c) | 05/31/16 | 1.500% | 556 | $ | 46 | $ | — | $ | 46 | Goldman Sachs & Co. | ||||||||||||||||
Ameriquest Home Equity(c) | 05/31/16 | 1.500% | 961 | 80 | — | 80 | Goldman Sachs & Co. | |||||||||||||||||||
Ameriquest Home Equity(c) | 05/31/16 | 1.500% | 866 | 72 | — | 72 | Goldman Sachs & Co. | |||||||||||||||||||
Bank of America Prime Mortgage(c) | 05/31/16 | 1.500% | 1,553 | 129 | — | 129 | Goldman Sachs & Co. | |||||||||||||||||||
BSABS(c) | 05/31/16 | 1.500% | 435 | 36 | — | 36 | Goldman Sachs & Co. | |||||||||||||||||||
BSABS(c) | 05/31/16 | 1.500% | 875 | 73 | — | 73 | Goldman Sachs & Co. | |||||||||||||||||||
Chase Mortgage(c) | 05/31/16 | 1.500% | 1,221 | 102 | — | 102 | Goldman Sachs & Co. | |||||||||||||||||||
Chase Mortgage(c) | 05/31/16 | 1.500% | 863 | 72 | — | 72 | Goldman Sachs & Co. | |||||||||||||||||||
Citigroup Commercial Mortgage Trust(c) | 05/23/16 | 1.500% | 764 | 634 | — | 634 | Goldman Sachs & Co. | |||||||||||||||||||
Citigroup Commercial Mortgage Trust(c) | 05/23/16 | 1.500% | 291 | 242 | — | 242 | Goldman Sachs & Co. | |||||||||||||||||||
COMM Mortgage Trust(c) | 05/23/16 | 1.500% | 224 | 158 | — | 158 | Goldman Sachs & Co. | |||||||||||||||||||
COMM Mortgage Trust(c) | 05/23/16 | 1.500% | 1,312 | 1,089 | — | 1,089 | Goldman Sachs & Co. | |||||||||||||||||||
COMM Mortgage Trust(c) | 05/23/16 | 1.500% | 848 | 704 | — | 704 | Goldman Sachs & Co. | |||||||||||||||||||
COMM Mortgage Trust(c) | 05/23/16 | 1.500% | 772 | 641 | — | 641 | Goldman Sachs & Co. | |||||||||||||||||||
COMM Mortgage Trust(c) | 05/23/16 | 1.500% | 181 | 151 | — | 151 | Goldman Sachs & Co. | |||||||||||||||||||
Equifirst Home Equity(c) | 05/31/16 | 1.500% | 416 | 35 | — | 35 | Goldman Sachs & Co. | |||||||||||||||||||
Federal Home Loan Mortgage Corp.(c) | 05/02/16 | 1.500% | 818 | 965 | — | 965 | Goldman Sachs & Co. | |||||||||||||||||||
Federal Home Loan Mortgage Corp.(c) | 05/02/16 | 1.500% | 2,767 | 3,264 | — | 3,264 | Goldman Sachs & Co. | |||||||||||||||||||
Federal Home Loan Mortgage Corp.(c) | 05/02/16 | 1.500% | 226 | 267 | — | 267 | Goldman Sachs & Co. | |||||||||||||||||||
Fremont Home Equity(c) | 05/31/16 | 1.500% | 277 | 23 | — | 23 | Goldman Sachs & Co. | |||||||||||||||||||
Fremont Home Equity(c) | 05/31/16 | 1.500% | 497 | 41 | — | 41 | Goldman Sachs & Co. | |||||||||||||||||||
GC Mortgage Securities Trust(c) | 05/23/16 | 1.500% | 342 | 241 | — | 241 | Goldman Sachs & Co. | |||||||||||||||||||
GMAC Home Equity(c) | 05/31/16 | 1.500% | 326 | 27 | — | 27 | Goldman Sachs & Co. | |||||||||||||||||||
GMAC Home Equity(c) | 05/31/16 | 1.500% | 1,184 | 99 | — | 99 | Goldman Sachs & Co. | |||||||||||||||||||
GS Mortgage Securities Trust(c) | 05/23/16 | 1.500% | 426 | 301 | — | 301 | Goldman Sachs & Co. |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 51 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Credit default swap agreements outstanding at April 30, 2016 (continued):
Reference | Termination Date | Fixed Rate | Notional Amount (000)#(3) | Fair Value(4) | Upfront Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | Counterparty | |||||||||||||||||||
OTC credit default swaps on asset-backed securities—Sell Protection(2) (cont’d): |
| |||||||||||||||||||||||||
GS Mortgage Securities Trust(c) | 05/23/16 | 1.500% | 688 | $ | 485 | $ | — | $ | 485 | Goldman Sachs & Co. | ||||||||||||||||
GS Mortgage Securities Trust(c) | 05/23/16 | 1.500% | 2,249 | 1,729 | — | 1,729 | Goldman Sachs & Co. | |||||||||||||||||||
GS Mortgage Securities Trust(c) | 05/23/16 | 1.500% | 671 | 557 | — | 557 | Goldman Sachs & Co. | |||||||||||||||||||
GS Mortgage Securities Trust(c) | 05/23/16 | 1.500% | 190 | 158 | — | 158 | Goldman Sachs & Co. | |||||||||||||||||||
GS Mortgage Securities Trust(c) | 05/23/16 | 1.500% | 283 | 235 | — | 235 | Goldman Sachs & Co. | |||||||||||||||||||
GS Mortgage Securities Trust(c) | 05/23/16 | 1.500% | 764 | 634 | — | 634 | Goldman Sachs & Co. | |||||||||||||||||||
GSAMP Home Equity(c) | 05/31/16 | 1.500% | 379 | 32 | — | 32 | Goldman Sachs & Co. | |||||||||||||||||||
JPMBB Commercial Mortgage Securities(c) | 05/23/16 | 1.500% | 418 | 347 | — | 347 | Goldman Sachs & Co. | |||||||||||||||||||
Lehman Home Equity(c) | 05/31/16 | 1.500% | 910 | 76 | — | 76 | Goldman Sachs & Co. | |||||||||||||||||||
LNR CCO Ltd.(c) | 05/11/16 | 1.500% | 4,348 | 4,670 | — | 4,670 | Goldman Sachs & Co. | |||||||||||||||||||
Long Beach Home Equity(c) | 05/31/16 | 1.500% | 618 | 51 | — | 51 | Goldman Sachs & Co. | |||||||||||||||||||
Morgan Stanley BAML Trust(c) | 05/23/16 | 1.500% | 198 | 140 | — | 140 | Goldman Sachs & Co. | |||||||||||||||||||
Morgan Stanley BAML Trust(c) | 05/23/16 | 1.500% | 1,835 | 1,523 | — | 1,523 | Goldman Sachs & Co. | |||||||||||||||||||
Morgan Stanley Home Equity(c) | 05/31/16 | 1.500% | 320 | 27 | — | 27 | Goldman Sachs & Co. | |||||||||||||||||||
Morgan Stanley Home Equity(c) | 05/31/16 | 1.500% | 322 | 27 | — | 27 | Goldman Sachs & Co. | |||||||||||||||||||
New Century Home Equity(c) | 05/31/16 | 1.500% | 472 | 39 | — | 39 | Goldman Sachs & Co. | |||||||||||||||||||
New Century Home Equity(c) | 05/31/16 | 1.500% | 738 | 61 | — | 61 | Goldman Sachs & Co. | |||||||||||||||||||
Option One Home Equity(c) | 05/31/16 | 1.500% | 233 | 19 | — | 19 | Goldman Sachs & Co. | |||||||||||||||||||
WF-RBS Commercial Mortgage Trust(c) | 05/23/16 | 1.500% | 1,700 | 1,411 | — | 1,411 | Goldman Sachs & Co. | |||||||||||||||||||
WMC Home Equity(c) | 05/31/16 | 1.500% | 1,032 | 86 | — | 86 | Goldman Sachs & Co. | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
$ | 21,799 | $ | — | $ | 21,799 | |||||||||||||||||||||
|
|
|
|
|
|
See Notes to Financial Statements.
52 |
Credit default swap agreements outstanding at April 30, 2016 (continued):
Reference | Termination Date | Fixed Rate | Notional Amount (000)#(3) | Fair Value(4) | Upfront Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | Counterparty | |||||||||||||||||||
OTC credit default swaps on credit indices—Sell Protection(2): | ||||||||||||||||||||||||||
CMBX.NA.6.AA | 05/11/63 | 1.500% | 8,000 | $ | (228,777 | ) | $ | (489,693 | ) | $ | 260,916 | Credit Suisse First Boston Corp. | ||||||||||||||
CMBX.NA.6.AA | 05/11/63 | 1.500% | 7,000 | (200,180 | ) | 38,818 | (238,998 | ) | UBS AG | |||||||||||||||||
CMBX.NA.6.AA | 05/11/63 | 1.500% | 23,500 | (672,031 | ) | 296,195 | (968,226 | ) | Credit Suisse First Boston Corp. | |||||||||||||||||
CMBX.NA.6.AA | 05/11/63 | 1.500% | 23,500 | (672,031 | ) | 312,157 | (984,188 | ) | Credit Suisse First Boston Corp. | |||||||||||||||||
CMBX.NA.6.AA | 05/11/63 | 1.500% | 23,000 | (657,733 | ) | 268,547 | (926,280 | ) | Deutsche Bank AG | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
$ | (2,430,752 | ) | $ | 426,024 | $ | (2,856,776 | ) | |||||||||||||||||||
|
|
|
|
|
|
Reference | Termination Date | Fixed Rate | Notional Amount (000)#(3) | Implied Credit Spread at April 30, 2016(5) | Fair Value | Upfront Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | Counterparty | ||||||||||||||||||||||
OTC credit default swaps on sovereign issues—Sell Protection(2): |
| |||||||||||||||||||||||||||||
Kingdom of Spain | 12/20/20 | 1.000% | 32,160 | 0.865 | % | $ | 231,255 | $ | (7,147 | ) | $ | 238,402 | JPMorgan Chase | |||||||||||||||||
Mexico United Mexican States Government | 12/20/20 | 1.000% | 7,000 | 1.479 | % | (140,822 | ) | (123,939 | ) | (16,883 | ) | Goldman Sachs & Co. | ||||||||||||||||||
Peoples Republic of China | 03/20/22 | 1.000% | 5,000 | 1.402 | % | (104,648 | ) | (79,787 | ) | (24,861 | ) | Deutsche Bank AG | ||||||||||||||||||
Republic of Indonesia | 09/20/20 | 1.000% | 8,000 | 1.626 | % | (199,702 | ) | (322,295 | ) | 122,593 | Barclays Capital Group | |||||||||||||||||||
Republic of Italy | 09/20/20 | 1.000% | 12,000 | 1.157 | % | (65,455 | ) | (63,450 | ) | (2,005 | ) | JPMorgan Chase | ||||||||||||||||||
Republic of Panama Government | 09/20/20 | 1.000% | 1,700 | 1.399 | % | (26,650 | ) | (43,542 | ) | 16,892 | Deutsche Bank AG | |||||||||||||||||||
Republic of Portugal | 12/20/20 | 1.000% | 1,800 | 2.513 | % | (113,595 | ) | (63,832 | ) | (49,763 | ) | Goldman Sachs & Co. | ||||||||||||||||||
Republic of Slovenia | 09/20/20 | 1.000% | 2,500 | 0.931 | % | 10,273 | (18,359 | ) | 28,632 | Barclays Capital Group | ||||||||||||||||||||
Republic of Slovenia | 09/20/20 | 1.000% | 25,000 | 0.931 | % | 102,730 | (181,167 | ) | 283,897 | Barclays Capital Group | ||||||||||||||||||||
Republic of Turkey | 09/20/20 | 1.000% | 2,000 | 2.098 | % | (89,047 | ) | (148,016 | ) | 58,969 | Barclays Capital Group | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||
$ | (395,661 | ) | $ | (1,051,534 | ) | $ | 655,873 | |||||||||||||||||||||||
|
|
|
|
|
|
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 53 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Cash of $39,915,000 has been segregated with Citigroup Global Markets to cover requirements for open cleared interest rate and credit default swap contracts at April 30, 2016.
The Fund entered into credit default swaps (“CDS”) to provide a measure of protection against defaults or to take an active long or short position with respect to the likelihood of a particular issuer’s default or the reference entity’s credit soundness. CDS contracts generally trade based on a spread which represents the cost a protection buyer has to pay the protection seller. The protection buyer is said to be short the credit as the value of the contract rises the more credit deteriorates. The value of the CDS contract increases for the protection buyer if the spread increases.
(1) | If the Fund is a buyer of protection, it pays the fixed rate. When a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and make delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. |
(2) | If the Fund is a seller of protection, it receives the fixed rate. When a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. |
(3) | Notional amount represents the maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement. |
(4) | The fair value of credit default swap agreements on credit indices and asset-backed securities serves as an indicator of the current status of the payment/performance risk and represents the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement be closed/sold as of the reporting date. Increasing fair value in absolute terms, when compared to the notional amount of the swap, represents a deterioration of the referenced entity’s credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement. |
(5) | Implied credit spreads, represented in absolute terms, utilized in determining the fair value of credit default swap agreements on corporate issues or sovereign issues of an emerging country as of the period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood of risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include up-front payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement. |
Total return swap agreements outstanding at April 30, 2016:
Counterparty | Termination Date | Notional Amount (000)# | Description | Fair Value | Upfront Premiums Paid (Received) | Unrealized Appreciation (Depreciation)(1) | ||||||||||||||||
OTC total return swap agreements: |
| |||||||||||||||||||||
Deutsche Bank AG | 06/11/16 | 2,100 | Pay variable payments based on 1 Day USOIS plus 30 bps and receive variable payments based on U.S. Treasury Strip | $ | 7,109 | $ | — | $ | 7,109 |
See Notes to Financial Statements.
54 |
Total return swap agreements outstanding at April 30, 2016 (continued):
Counterparty | Termination Date | Notional Amount (000)# | Description | Fair Value | Upfront Premiums Paid (Received) | Unrealized Appreciation (Depreciation)(1) | ||||||||||||||||
Deutsche Bank AG | 06/11/16 | 4,200 | Pay variable payments based on 1 Day USOIS plus 30 bps and receive variable payments based on U.S. Treasury Strip | $ | (19,006 | ) | $ | — | $ | (19,006 | ) | |||||||||||
Deutsche Bank AG | 06/11/16 | 2,100 | Pay variable payments based on 1 Day USOIS plus 30 bps and receive variable payments based on U.S. Treasury Strip | 16,919 | — | 16,919 | ||||||||||||||||
Deutsche Bank AG | 06/11/16 | 4,200 | Pay variable payments based on 1 Day USOIS plus 30 bps and receive variable payments based on U.S. Treasury Strip | (44,031 | ) | — | (44,031 | ) | ||||||||||||||
Credit Suisse First Boston Corp. | 01/12/41 | 16,259 | Receive fixed payments based on the IOS.FN30.450.10 Index and pay variable payments based on the 1 Month LIBOR | 92,344 | (44,543 | ) | 136,887 | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||
$ | 53,335 | $ | (44,543 | ) | $ | 97,878 | ||||||||||||||||
|
|
|
|
|
|
(1) | Upfront/recurring fees or commissions, as applicable, are included in the net unrealized appreciation (depreciation). |
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.
Level 2—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 April 30, 2016 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Asset-Backed Securities | ||||||||||||
Collateralized Debt Obligation | $ | — | $ | 2,455,640 | $ | — | ||||||
Collateralized Loan Obligations | — | 316,746,275 | — | |||||||||
Non-Residential Mortgage-Backed Securities | — | 41,759,102 | — | |||||||||
Residential Mortgage-Backed Securities | — | 202,738,426 | 3,999,584 | |||||||||
Bank Loans | — | 57,205,009 | 7,413,912 | |||||||||
Commercial Mortgage-Backed Securities | — | 113,402,941 | — |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 55 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Level 1 | Level 2 | Level 3 | ||||||||||
Corporate Bonds | $ | — | $ | 817,351,819 | $ | — | ||||||
Municipal Bonds | — | 14,505,419 | — | |||||||||
Non-Corporate Foreign Agencies | — | 24,995,189 | — | |||||||||
Residential Mortgage-Backed Securities | — | 109,437,592 | 49,945,332 | |||||||||
Sovereign Bonds | — | 75,308,139 | — | |||||||||
Affiliated Mutual Fund | 161,320,913 | — | — | |||||||||
Other Financial Instruments* | ||||||||||||
Futures Contracts | 2,278,574 | — | — | |||||||||
OTC Forward Foreign Currency Exchange Contracts | — | 3,024,848 | — | |||||||||
OTC Cross Currency Exchange Contracts | — | (275,333 | ) | — | ||||||||
OTC Currency Swap Agreements | — | (418,470 | ) | — | ||||||||
Centrally Cleared Interest Rate Swap Agreements | — | (39,209,889 | ) | — | ||||||||
OTC Interest Rate Swap Agreements | — | (414,181 | ) | — | ||||||||
Centrally Cleared Credit Default Swap Agreements | — | 1,604,344 | — | |||||||||
OTC Credit Default Swap Agreements | — | (2,826,413 | ) | 21,799 | ||||||||
OTC Total Return Swap Agreements | — | 53,335 | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 163,599,487 | $ | 1,737,443,792 | $ | 61,380,627 | ||||||
|
|
|
|
|
|
The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:
Bank Loans | Asset-Backed Residential Mortgage- Backed Securities | Asset-Backed Non-Residential Mortgage- Backed Securities | Residential Mortgage- Backed Securities | Forward Rate Agreements | Credit Default Swaps | |||||||||||||||||||
Balance as of 10/31/15 | $ | 1,375,465 | $ | — | $ | 14,607,300 | $ | 4,939,860 | $ | (386,245 | ) | $ | — | |||||||||||
Realized gain (loss) | (41,701 | ) | — | 14,658 | — | — | — | |||||||||||||||||
Change in unrealized appreciation (depreciation)** | 24,194 | 3,817 | (8,271 | ) | (680,945 | ) | 386,245 | 21,799 | ||||||||||||||||
Purchases | 1,457,002 | 3,995,767 | — | 14,845,257 | — | — | ||||||||||||||||||
Sales | (1,600,535 | ) | — | (14,613,687 | ) | (6,331,894 | ) | — | — | |||||||||||||||
Accrued discount/premium | — | — | — | 48,754 | — | — | ||||||||||||||||||
Transfer into Level 3 | 6,199,487 | — | — | 42,064,160 | — | — | ||||||||||||||||||
Transfer out of Level 3 | — | — | — | (4,939,860 | ) | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance as of 04/30/16 | $ | 7,413,912 | $ | 3,999,584 | $ | — | $ | 49,945,332 | $ | — | $ | 21,799 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
* | Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as futures, forwards and centrally cleared swaps contracts, which are recorded at the unrealized appreciation/depreciation of the instrument, and OTC swap contracts which are recorded at fair value. |
** | Of which, $(644,578) was relating to securities held at the reporting period end. |
See Notes to Financial Statements.
56 |
Level 3 securities as presented in the table above are being fair valued using pricing methodologies approved by Board, which contain unobservable inputs as follows:
Level 3 Securities | Fair Value as of April 30, 2016 | Valuation Methodology | Unobservable Inputs | |||||||||
Bank Loans | $ | 7,413,912 | Market Approach | Single Broker Indicative Quote | ||||||||
Asset-Backed Residential Mortgage-Backed Securities | 3,999,584 | Market Approach | Single Broker Indicative Quote | |||||||||
Residential Mortgage-Backed Securities | 49,945,332 | Market Approach | Single Broker Indicative Quote | |||||||||
Credit Default Swaps | 21,799 | Market Approach | Single Broker Indicative Quote | |||||||||
|
| |||||||||||
$ | 61,380,627 | |||||||||||
|
|
It is the Fund’s policy to recognize transfers in and transfers out at the fair value as of the beginning of period. At the reporting period end, securities transferred levels as follows:
Investments in Securities | Amount Transferred | Level Transfer | Logic | |||||||
Bank Loans | $ | 6,199,487 | L2 to L3 | Multiple Broker Quotes to Single Broker Indicative Quotes | ||||||
Residential Mortgage-Backed Securities | 42,064,160 | L2 to L3 | Evaluated Bid to Single Broker Indicative Quotes | |||||||
Residential Mortgage-Backed Securities | 4,939,860 | L3 to L2 | Single Broker Indicative Quote to Evaluated Bid |
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of April 30, 2016 were as follows:
Residential Mortgage-Backed Securities | 19.0 | % | ||
Collateralized Loan Obligations | 16.4 | |||
Affiliated Mutual Fund (including 6.7% of collateral for securities on loan) | 8.4 | |||
Banks | 6.5 | |||
Commercial Mortgage-Backed Securities | 5.9 | |||
Sovereign Bonds | 3.9 | |||
Healthcare-Services | 3.2 | |||
Telecommunications | 2.8 | |||
Media | 2.4 | |||
Non-Residential Mortgage-Backed Securities | 2.2 | |||
Electric | 2.1 | |||
Retail | 2.0 | |||
Entertainment | 1.8 | |||
Chemicals | 1.7 | |||
Insurance | 1.7 | |||
Home Builders | 1.6 | |||
Food | 1.6 | |||
Diversified Financial Services | 1.4 | |||
Building Materials | 1.4 | |||
Non-Corporate Foreign Agencies | 1.3 | % | ||
Pharmaceuticals | 1.0 | |||
Commercial Services | 0.9 | |||
Auto Parts & Equipment | 0.8 | |||
Oil & Gas | 0.8 | |||
Healthcare & Pharmaceutical | 0.8 | |||
Auto Manufacturers | 0.8 | |||
Municipal Bonds | 0.7 | |||
Lodging | 0.7 | |||
Mining | �� | 0.7 | ||
Pipelines | 0.7 | |||
Healthcare-Products | 0.6 | |||
Airlines | 0.6 | |||
Technology | 0.5 | |||
Semiconductors | 0.5 | |||
Transportation | 0.4 | |||
Electronics | 0.4 | |||
Forest & Paper Products | 0.4 | |||
Retailers | 0.4 | |||
Miscellaneous Manufacturing | 0.4 |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 57 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Software | 0.4 | % | ||
Capital Goods | 0.3 | |||
Beverages | 0.3 | |||
Machinery-Construction & Mining | 0.3 | |||
Food & Beverage | 0.3 | |||
Real Estate Investment Trusts (REITs) | 0.3 | |||
Packaging & Containers | 0.2 | |||
Cosmetics/Personal Care | 0.2 | |||
Consumer | 0.2 | |||
Gas | 0.2 | |||
Environmental Control | 0.2 | |||
Holding Companies—Diversified | 0.2 | |||
Collateralized Debt Obligations | 0.1 | |||
Distribution/Wholesale | 0.1 | % | ||
Media & Entertainment | 0.1 | |||
Food Service | 0.1 | |||
Iron/Steel | 0.1 | |||
Automotive | 0.1 | |||
Brokerage | 0.1 | |||
Cable | 0.1 | |||
Aerospace & Defense | 0.1 | |||
Computers | 0.1 | |||
|
| |||
103.5 | ||||
Liabilities in excess of other assets | (3.5 | ) | ||
|
| |||
100.0 | % | |||
|
|
The Fund invested in derivative instruments during the reporting period. The primary types of risk associated with these derivative instruments are credit risk, foreign exchange risk and interest rate risk. The effect of such derivative instruments on the Fund’s financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.
Fair values of derivative instruments as of April 30, 2016 as presented in the Statement of Assets and Liabilities:
Asset Derivatives | Liability Derivatives | |||||||||||
Derivatives not accounted | Balance Sheet | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Credit contracts | Unrealized appreciation on OTC swap agreements | $ | 1,032,100 | Unrealized depreciation on OTC swap agreements | $ | 3,211,204 | ||||||
Credit contracts | Premiums paid for OTC swap agreements | 915,717 | Premiums received for OTC swap agreements | 1,541,227 | ||||||||
Credit contracts | Due from/to broker—variation margin swaps | 1,604,344 | * | Due from/to broker—variation margin swaps | — | * | ||||||
Foreign exchange contracts | Unrealized appreciation on OTC forward foreign currency exchange contracts | 6,352,997 | Unrealized depreciation on OTC forward foreign currency exchange contracts | 3,328,149 | ||||||||
Foreign exchange contracts | Unrealized appreciation on OTC cross currency exchange contracts | 58,005 | Unrealized depreciation on OTC cross currency exchange contracts | 333,338 | ||||||||
Interest rate contracts | Due from/to broker—variation margin futures | 3,077,910 | * | Due from/to broker—variation margin futures | 799,336 | * | ||||||
Interest rate contracts | Due from/to broker—variation margin swaps | 7,269,554 | * | Due from/to broker—variation margin swaps | 46,479,443 | * | ||||||
Interest rate contracts | Unrealized appreciation on OTC swap agreements | 6,307,702 | Unrealized depreciation on OTC swap agreements | 7,033,247 |
See Notes to Financial Statements.
58 |
Asset Derivatives | Liability Derivatives | |||||||||||
Derivatives not accounted | Balance Sheet | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Interest rate contracts | Premiums paid for OTC swap agreements | $ | 1,542 | Premiums received for OTC swap agreements | $ | 55,313 | ||||||
|
|
|
| |||||||||
Total | $ | 26,619,871 | $ | 62,781,257 | ||||||||
|
|
|
|
* | Includes cumulative appreciation/depreciation as reported in the schedule of open futures contracts 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 April 30, 2016 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | ||||||||||||||||||||||||||||
Derivatives not hedging instruments, | Options Purchased* | Options Written | Futures | Forward and Cross Currency Contracts** | Forward Rate Agreements | Swaps | Total | |||||||||||||||||||||
Credit contracts | $ | (1,119,300 | ) | $ | 572,187 | $ | — | $ | — | $ | — | $ | (3,268,850 | ) | $ | (3,815,963 | ) | |||||||||||
Equity contracts | — | — | — | — | — | — | — | |||||||||||||||||||||
Foreign exchange contracts | — | — | — | (3,230,120 | ) | — | — | (3,230,120 | ) | |||||||||||||||||||
Interest rate contracts | (2,632,747 | ) | 1,044,306 | 8,597,668 | — | (659,418 | ) | (9,471,170 | ) | (3,121,361 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
$ | (3,752,047 | ) | $ | 1,616,493 | $ | 8,597,668 | $ | (3,230,120 | ) | $ | (659,418 | ) | $ | (12,740,020 | ) | $ | (10,167,444 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* | Included in net realized gain (loss) on investment transactions in the Statement of Operations. |
** | Included in net realized gain (loss) on foreign currency transactions in the Statement of Operations. |
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | ||||||||||||||||||||||||||||
Derivatives not | Options Purchased* | Options Written | Futures | Forward and Cross Currency Contracts** | Forward Rate Agreements | Swaps | Total | |||||||||||||||||||||
Credit contracts | $ | 52,135 | $ | 49,581 | $ | — | $ | — | $ | — | $ | 1,813,698 | $ | 1,915,414 | ||||||||||||||
Equity contracts | — | — | — | — | — | — | — | |||||||||||||||||||||
Foreign exchange contracts | — | — | — | 1,969,029 | — | — | 1,969,029 | |||||||||||||||||||||
Interest rate contracts | (1,769,242 | ) | (606,616 | ) | 666,832 | — | 386,245 | (20,102,662 | ) | (21,425,443 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
$ | (1,717,107 | ) | $ | (557,035 | ) | $ | 666,832 | $ | 1,969,029 | $ | 386,245 | $ | (18,288,964 | ) | $ | (17,541,000 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* | Included in net change in unrealized appreciation (depreciation) on investments in the Statement of Operations. |
** | Included in net change in unrealized appreciation (depreciation) on foreign currencies in the Statement of Operations. |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 59 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
For the six months ended April 30, 2016, the Fund’s average volume of derivative activities are as follows:
Options | Options Written(2) | Futures— Long Positions(3) | Futures— Short Positions(3) | Forward Foreign Currency Exchange Contracts— Purchased(4) | Forward Foreign Currency Exchange Contracts— Sold(4) | |||||||||||||||||
$ | 4,616,602 | $ | 2,146,363 | $ | 777,328,141 | $ | 803,385,211 | $ | 156,446,910 | $ | 226,483,698 |
Cross | Currency Swap Agreements(2) | Forward Rate Agreements(2) | Interest Rate Swap Agreements(2) | Credit Default Swap Agreements— Buy Protection(2) | Credit Default Swap Agreements— Sell Protection(2) | Total Return Swap Agreements(2) | ||||||||||||||||||||
$ | 39,328,882 | $ | 165,977 | $ | 148,767 | $ | 4,795,071 | $ | 215,517 | $ | 285,297 | $ | 39,825 |
(1) | Cost. |
(2) | Notional Amount in USD (000). |
(3) | Value at Trade Date. |
(4) | Value at Settlement Date. |
Offsetting of OTC derivative assets and liabilities:
The Fund invested in OTC derivatives 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 OTC derivatives, where the legal right to set-off exists, is presented in the summary below.
Counterparty | Gross Amounts of Recognized Assets(1) | Gross Amounts Available for Offset | Collateral Received | Net Amount | ||||||||||||
Bank of America | $ | 48,711 | $ | (48,711 | ) | $ | — | $ | — | |||||||
Barclays Capital Group | 796,823 | (796,823 | ) | — | — | |||||||||||
Citigroup Global Markets | 2,004,167 | (1,157,383 | ) | — | 846,784 | |||||||||||
Credit Suisse First Boston Corp. | 1,241,697 | (1,241,697 | ) | — | — | |||||||||||
Deutsche Bank AG | 927,471 | (927,471 | ) | — | — | |||||||||||
Goldman Sachs & Co. | 166,011 | (166,011 | ) | — | — | |||||||||||
Hong Kong & Shanghai Bank | 168,938 | — | (145,091 | ) | 23,847 | |||||||||||
JPMorgan Chase | 9,065,810 | (7,478,212 | ) | — | 1,587,598 | |||||||||||
Toronto Dominion | 209,617 | (146,463 | ) | — | 63,154 | |||||||||||
UBS AG | 38,818 | (38,818 | ) | — | — | |||||||||||
|
| |||||||||||||||
$ | 14,668,063 | |||||||||||||||
|
|
See Notes to Financial Statements.
60 |
Counterparty | Gross Amounts of Recognized Liabilities(2) | Gross Amounts Available for Offset | Collateral Pledged | Net Amount | ||||||||||||
Bank of America | $ | (337,682 | ) | $ | 48,711 | $ | 288,971 | $ | — | |||||||
Barclays Capital Group | (881,376 | ) | 796,823 | — | (84,553 | ) | ||||||||||
Citigroup Global Markets | (1,157,383 | ) | 1,157,383 | — | — | |||||||||||
Credit Suisse First Boston Corp. | (3,864,133 | ) | 1,241,697 | 2,622,436 | — | |||||||||||
Deutsche Bank AG | (1,139,902 | ) | 927,471 | — | (212,431 | ) | ||||||||||
Goldman Sachs & Co. | (258,329 | ) | 166,011 | 92,318 | — | |||||||||||
Hong Kong & Shanghai Bank | — | — | — | — | ||||||||||||
JPMorgan Chase | (7,478,212 | ) | 7,478,212 | — | — | |||||||||||
Toronto Dominion | (146,463 | ) | 146,463 | — | — | |||||||||||
UBS AG | (238,998 | ) | 38,818 | 200,180 | — | |||||||||||
|
| |||||||||||||||
$ | (15,502,478 | ) | ||||||||||||||
|
|
(1) | Includes unrealized appreciation on swaps and forwards, premiums paid on swap agreements and market value of purchased options. |
(2) | Includes unrealized depreciation on swaps and forwards, premiums received on swap agreements and market value of written options. |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 61 |
Statement of Assets & Liabilities (unaudited)
as of April 30, 2016
Assets | ||||
Investments at value, including securities on loan of $127,127,770: | ||||
Unaffiliated investments (cost $1,858,342,033) | $ | 1,837,264,379 | ||
Affiliated investments (cost $161,320,913) | 161,320,913 | |||
Cash | 4,601,031 | |||
Foreign currency, at value (cost $3,377,181) | 3,378,381 | |||
Dividends and interest receivable | 17,677,678 | |||
Unrealized appreciation on OTC swap agreements | 7,339,802 | |||
Unrealized appreciation on OTC forward foreign currency exchange contracts | 6,352,997 | |||
Deposit with broker for centrally cleared swaps | 39,915,000 | |||
Deposit with broker for futures | 8,290,000 | |||
Receivable for investments sold | 4,565,599 | |||
Receivable for Fund shares sold | 1,773,053 | |||
Premium paid for OTC swap agreements | 917,259 | |||
Due from broker—variation margin futures | 832,081 | |||
Unrealized appreciation on OTC cross currency exchange contracts | 58,005 | |||
Prepaid expenses | 8,313 | |||
|
| |||
Total assets | 2,094,294,491 | |||
|
| |||
Liabilities | ||||
Payable to broker for collateral for securities on loan | 130,312,653 | |||
Unrealized depreciation on OTC swap agreements | 10,244,451 | |||
Payable for Fund shares reacquired | 7,944,854 | |||
Payable for investments purchased | 5,834,778 | |||
Unrealized depreciation on OTC forward foreign currency exchange contracts | 3,328,149 | |||
Premium received for OTC swap agreements | 1,596,540 | |||
Management fee payable | 1,139,342 | |||
Dividends payable | 1,094,570 | |||
Accrued expenses and other liabilities | 913,180 | |||
Due to broker—variation margin swaps | 575,302 | |||
Unrealized depreciation on OTC cross currency exchange contracts | 333,338 | |||
Distribution fee payable | 160,879 | |||
Affiliated transfer agent fee payable | 97,552 | |||
|
| |||
Total liabilities | 163,575,588 | |||
|
| |||
Net Assets | $ | 1,930,718,903 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 204,121 | ||
Paid-in capital in excess of par | 2,052,744,155 | |||
|
| |||
2,052,948,276 | ||||
Distributions in excess of net investment income | (9,947,848 | ) | ||
Accumulated net realized loss on investment and foreign currency transactions | (55,674,644 | ) | ||
Net unrealized depreciation on investments and foreign currencies | (56,606,881 | ) | ||
|
| |||
Net assets, April 30, 2016 | $ | 1,930,718,903 | ||
|
|
See Notes to Financial Statements.
62 |
Class A | ||||
Net asset value and redemption price per share | $ | 9.43 | ||
Maximum sales charge (4.50% of offering price) | 0.44 | |||
|
| |||
Maximum offering price to public | $ | 9.87 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share | ||||
($132,785,366 ÷ 14,040,379 shares of beneficial interest issued and outstanding) | $ | 9.46 | ||
|
| |||
Class Q | ||||
Net asset value, offering price and redemption price per share | ||||
($159,491,458 ÷ 16,894,363 shares of beneficial interest issued and outstanding) | $ | 9.44 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share | ||||
($1,401,790,054 ÷ 148,080,341 shares of beneficial interest issued and outstanding) | $ | 9.47 | ||
|
|
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 63 |
Statement of Operations (unaudited)
Six Months Ended April 30, 2016
Net Investment Income | ||||
Income | ||||
Interest income | $ | 41,322,722 | ||
Affiliated income from securities lending, net | 176,378 | |||
Affiliated dividend income | 60,702 | |||
|
| |||
Total income | 41,559,802 | |||
|
| |||
Expenses | ||||
Management fee | 8,696,559 | |||
Distribution fee—Class A | 347,860 | |||
Distribution fee—Class C | 725,090 | |||
Transfer agent’s fees and expenses (including affiliated expense of $337,253) | 1,434,000 | |||
Custodian and accounting fees | 268,000 | |||
Registration fees | 115,000 | |||
Shareholders’ reports | 72,000 | |||
Audit fee | 30,000 | |||
Trustees’ fees | 27,000 | |||
Loan interest expense | 27,309 | |||
Legal fees and expenses | 19,000 | |||
Insurance expenses | 16,000 | |||
Commitment fee on syndicated credit agreement | 7,000 | |||
Miscellaneous | 12,329 | |||
|
| |||
Total expenses | 11,797,147 | |||
Less: Expense reimbursement | (948,644 | ) | ||
|
| |||
Net expenses | 10,848,503 | |||
|
| |||
Net investment income | 30,711,299 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investments And Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions | (18,320,297 | ) | ||
Futures transactions | 8,597,668 | |||
Options written transactions | 1,616,493 | |||
Swap agreement transactions | (12,740,020 | ) | ||
Foreign currency transactions | (1,581,520 | ) | ||
Forward rate agreements | (659,418 | ) | ||
|
| |||
(23,087,094 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 11,920,144 | |||
Futures | 666,832 | |||
Options written | (557,035 | ) | ||
Swap agreements | (18,288,964 | ) | ||
Foreign currencies | 1,954,273 | |||
Forward rate agreements | 386,245 | |||
|
| |||
(3,918,505 | ) | |||
|
| |||
Net loss on investment and foreign currency transactions | (27,005,599 | ) | ||
|
| |||
Net Increase In Net Assets Resulting From Operations | $ | 3,705,700 | ||
|
|
See Notes to Financial Statements.
64 |
Statement of Changes in Net Assets (unaudited)
Six Months Ended April 30, 2016 | Year Ended October 31, 2015 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income | $ | 30,711,299 | $ | 68,302,192 | ||||
Net realized loss on investment and foreign currency transactions | (23,087,094 | ) | (39,940,409 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments and foreign currencies | (3,918,505 | ) | (45,524,134 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 3,705,700 | (17,162,351 | ) | |||||
|
|
|
| |||||
Dividends from net investment income (Note 1) | ||||||||
Class A | (3,007,206 | ) | (8,455,798 | ) | ||||
Class C | (1,024,882 | ) | (2,762,018 | ) | ||||
Class Q | (1,863,395 | ) | (2,721,218 | ) | ||||
Class Z | (19,153,529 | ) | (47,805,272 | ) | ||||
|
|
|
| |||||
(25,049,012 | ) | (61,744,306 | ) | |||||
|
|
|
| |||||
Tax Return of Capital | ||||||||
Class A | — | (1,197,797 | ) | |||||
Class C | — | (391,251 | ) | |||||
Class Q | — | (385,471 | ) | |||||
Class Z | — | (6,771,802 | ) | |||||
|
|
|
| |||||
— | (8,746,321 | ) | ||||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) (Note 6) | ||||||||
Net proceeds from shares sold | 271,811,305 | 1,007,801,320 | ||||||
Net asset value of shares issued in reinvestment of dividends and distributions | 17,241,167 | 44,726,683 | ||||||
Cost of shares reacquired | (720,844,361 | ) | (1,319,175,381 | ) | ||||
|
|
|
| |||||
Net decrease in net assets from Fund share transactions | (431,791,889 | ) | (266,647,378 | ) | ||||
|
|
|
| |||||
Total decrease | (453,135,201 | ) | (354,300,356 | ) | ||||
Net Assets: | ||||||||
Beginning of period | 2,383,854,104 | 2,738,154,460 | ||||||
|
|
|
| |||||
End of period | $ | 1,930,718,903 | $ | 2,383,854,104 | ||||
|
|
|
|
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 65 |
Notes to Financial Statements (unaudited)
Prudential Investment Portfolios 9 (the “Trust”) is an open-end management investment company, registered under the Investment Company Act of 1940, as amended (“1940 Act”). The Trust currently consists of five funds: Prudential QMA Large-Cap Core Equity Fund (formerly Prudential Large-Cap Core Equity Fund), Prudential International Real Estate Fund, Prudential Absolute Return Bond Fund (the “Fund”), Prudential Select Real Estate Fund and Prudential Real Estate Income Fund. These financial statements relate to Prudential Absolute Return Bond Fund, a diversified fund. The financial statements of the other portfolios are not presented herein. The Trust was organized as a business trust in Delaware on September 18, 1998. The Fund commenced investment operations on March 30, 2011.
The Fund’s investment objective is to seek positive returns over the long term, regardless of market conditions.
Note 1. Accounting Policies
The Fund follows investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The following accounting policies conform to U.S. generally accepted accounting principles. The Fund consistently follows such policies in the preparation of its financial statements.
Securities Valuation: The Fund holds securities and other assets 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 Board of Trustees (the “Board”) has adopted Valuation Procedures for security valuation under which fair valuation responsibilities have been delegated to Prudential Investments LLC (“PI” or “Manager”). Under the current Valuation Procedures, the established Valuation Committee is responsible for supervising the valuation of portfolio securities and other assets. 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.
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 table following the Portfolio of Investments.
66 |
Common and preferred stocks, exchange-traded funds and derivative instruments, such as futures or options, that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange where the security principally trades. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price, they are classified as Level 1 in the fair value hierarchy.
In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and ask prices, or at the last bid price in the absence of an ask price. These securities are classified as Level 2 in the fair value hierarchy.
Common and preferred stocks traded on foreign securities exchanges are valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy. The models generate an evaluated adjustment factor for each security, which can be applied to the local closing price to adjust it for post closing market movements. Utilizing that evaluated adjustment factor, the vendor provides an evaluated price to the extent that the valuation meets the established confidence level for each security. Such confidence level is a measure of the probability of a relationship between a given equity security and the factors used in the models. If the confidence level is not met or the vendor does not provide an evaluated price, securities are valued in accordance with exchange-traded common and preferred stocks discussed above.
Participatory notes (P-notes) are generally valued based upon the value of a related underlying security that trades actively in the market and are classified as Level 2 in the fair value hierarchy.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the OTC market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors provide these prices after 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. Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.
Bank loans traded in the OTC market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors utilize broker/dealer quotations and provide prices based on the average of such quotations. Bank loans valued using such vendor prices are generally classified as Level 2 in the fair value hierarchy.
Prudential Absolute Return Bond Fund | 67 |
Notes to Financial Statements (unaudited) (continued)
OTC derivative instruments are generally valued using pricing vendor services, which derive the valuation based on inputs such as underlying asset prices, indices, spreads, interest rates, and exchange rates. These instruments are categorized as Level 2 in the fair value hierarchy.
Centrally cleared swaps listed or traded on a multilateral or trade facility platform, such as a registered exchange, are generally valued at the daily settlement price determined by the respective exchange. These securities are classified as Level 2 in the fair value hierarchy, as the daily settlement price is not public.
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 investment adviser regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values.
Restricted and Illiquid Securities: Subject to guidelines adopted by the Board, the Fund may invest up to 15% of its net assets in illiquid securities, including those which are restricted as to disposition under securities law (“restricted securities”). Restricted securities are valued pursuant to the valuation procedures noted above. Illiquid securities are those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale, cannot be sold within seven days in the ordinary course of business at approximately the amount at which the Fund has valued the investment. Therefore, the Fund may find it difficult to sell illiquid securities at the time considered most advantageous by its Subadviser and may incur expenses that would not be incurred in the sale of securities that were freely marketable. Certain securities that would otherwise be considered illiquid because of legal restrictions on resale to the general public may be traded among qualified institutional buyers under Rule 144A of the Securities Act of 1933. These Rule 144A securities, as well as commercial paper that is sold in private placements under Section 4(2) of the Securities Act, may be deemed liquid by the Fund’s Subadviser
68 |
under the guidelines adopted by the Trustees of the Fund. However, the liquidity of the Fund’s investments in Rule 144A securities could be impaired if trading does not develop or declines.
The Fund purchased government controlled Fannie Mae and Freddie Mac securities that transfer most of the cost of defaults to private investors including the funds. These are insurance-like products that are called Connecticut Avenue Securities by Fannie Mae and Structured Agency Credit Risk securities by Freddie Mac. Payments on the securities are based primarily on the performance of a reference pool of underlying mortgages. With such securities, the Fund could lose some or all of its principal if the underlying mortgages experience credit defaults.
Foreign Currency Translation: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis:
(i) market value of investment securities, other assets and liabilities-at the current rates of exchange.
(ii) purchases and sales of investment securities, income and expenses-at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not generally isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities held at the end of the period. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of long-term 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. Notwithstanding the above, the Fund does isolate the effect of fluctuations in foreign currency exchange rates when determining the gain (loss) upon the sale or maturity of foreign currency denominated debt obligations; such amounts are included in net realized gains (losses) on foreign currency transactions.
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from holdings of foreign currencies, forward currency contracts, disposition of foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference between the amounts of interest, dividends and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates are reflected as a component of net unrealized appreciation (depreciation) on foreign currencies.
Concentration of Risk: The ability of debt securities issuers (other than those issued or guaranteed by the U.S. Government) held by the Fund to meet its obligations may be
Prudential Absolute Return Bond Fund | 69 |
Notes to Financial Statements (unaudited) (continued)
affected by the economic or political developments in a specific industry, region or country. Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin as a result of, among other factors, the possibility of political or economic instability or the level of governmental supervision and regulation of foreign securities markets.
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 or foreign currency exchange rates. The Fund may also use futures to gain additional market exposure. 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. With exchange-traded futures contracts, 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.
Forward Currency Contracts: A forward currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The Fund enters into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings or specific receivables and payables denominated in a foreign currency. The contracts are valued daily at current exchange rates and any unrealized gain (loss) is included in net unrealized appreciation or depreciation on foreign currencies. Gain (loss) is realized on the settlement date of the contract equal to the difference between the settlement value of the original and negotiated forward contracts. This gain (loss), if any, is included in net realized gain (loss) on foreign currency transactions. Risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts. Forward currency contracts involve risks from currency exchange rate and credit risk in excess of
70 |
the amounts reflected on the Statement of Assets and Liabilities. The Fund’s maximum risk of loss from counterparty credit risk is the net value of the cash flows to be received from the counterparty at the end of the contract’s life.
Cross Currency Exchange Contracts: A cross currency contract is a forward contract where a specified amount of one foreign currency will be exchanged for a specified amount of another foreign currency.
Options: The Fund purchased and wrote options in order to hedge against adverse market movements or fluctuations in value caused by changes in prevailing interest rates or foreign currency exchange rates, with respect to securities which the Fund currently owns or intends to purchase. The Fund may also use options to gain additional market exposure. The Fund’s principal reason for writing options is to realize, through receipt of premiums, a greater current return than would be realized on the underlying security alone. When the Fund purchases an option, it pays a premium and an amount equal to that premium is recorded as an asset. When the Fund writes an option, it receives a premium and an amount equal to that premium is recorded as a liability. The asset or liability is adjusted daily to reflect the current market value of the option. If an option expires unexercised, the Fund realizes a gain (loss) to the extent of the premium received or paid. If an option is exercised, the premium received or paid is recorded as an adjustment to the proceeds from the sale or the cost of the purchase in determining whether the Fund has realized a gain (loss). The difference between the premium and the amount received or paid at the closing of a purchase or sale transaction is also treated as a realized gain (loss). Gain (loss) on purchased options is included in net realized gain (loss) on investment transactions. Gain (loss) on written options is presented separately as net realized gain (loss) on options written transactions. The Fund, as writer of an option, may have no control over whether the underlying securities may be sold (called) or purchased (put). As a result, the Fund bears the market risk of an unfavorable change in the price of the security or financial instrument underlying the written option. OTC options also involve the risk of the potential inability of the counterparties to meet the terms of their contracts. With exchange-traded options contracts, there is minimal counterparty credit risk to the Fund since the exchanges’ clearinghouse acts as counterparty to all exchange-traded options and guarantees the options contracts against default.
Forward Rate Agreements: Forward rate agreements represent an agreement between counterparties to exchange cash flows based on the difference between two interest rates, applied to a notional principal amount on a fixed future date. The Fund may enter into forward rate agreements to gain yield exposure based on anticipated market conditions at the specified termination date of the agreement.
Swap Agreements: The Fund entered into credit default, interest rate and other forms of swap agreements. A swap agreement is an agreement to exchange the return generated by one instrument for the return generated by another instrument. Swap agreements are negotiated in the OTC market and may be executed either directly with counterparty (“OTC-traded”) or through a central clearing facility, such as a registered commodities exchange.
Prudential Absolute Return Bond Fund | 71 |
Notes to Financial Statements (unaudited) (continued)
Swap agreements are valued daily at current market value and any change in value is included in the net unrealized appreciation or depreciation on investments. Centrally cleared swaps pay or receive an amount known as “variation margin”, based on daily changes in the valuation of the swap contract. Payments received or paid by the Fund are recorded as realized gains (losses) upon termination or maturity of the swap. Risk of loss may exceed amounts recognized on the Statement of Assets and Liabilities. Swap agreements outstanding at period end, if any, are listed on the Portfolio of Investments.
Credit Default Swaps: Credit default swaps (“CDS”) involve one party (the protection buyer) making a stream of payments to another party (the protection seller) in exchange for the right to receive a specified payment in the event of a default or as a result of a default (collectively a “credit event”) for the referenced entity (typically corporate issues or sovereign issues of an emerging country) on its obligation; or in the event of a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising a credit index.
The Fund is subject to credit risk in the normal course of pursuing its investment objectives. The Fund entered into CDS contracts to provide a measure of protection against defaults or to take an active long or short position with respect to the likelihood of a particular issuer’s default or the reference entity’s credit soundness. CDS contracts generally trade based on a spread which represents the cost a protection buyer has to pay the protection seller. The protection buyer is said to be short the credit as the value of the contract rises the more the credit deteriorates. The value of the CDS contract increases for the protection buyer if the spread increases. The Fund sold protection using credit default swaps to take an active short position with respect to the likelihood of a particular issuer’s default. The Fund’s maximum risk of loss from counterparty credit risk for purchased credit default swaps is the inability of the counterparty to honor the contract up to the notional value due to a credit event.
As a seller of protection on credit default swap agreements, the Fund generally receives an agreed upon payment from the buyer of protection throughout the term of the swap, provided no credit event occurs. As the seller, the Fund effectively increases its investment risk because, in addition to its total net assets, the Fund may be subject to investment exposure on the notional amount of the swap.
The maximum amount of the payment that the Fund, as a seller of protection, could be required to make under a credit default swap agreement would be equal to the notional amount of the underlying security or index contract as a result of a credit event. This potential amount will be partially offset by any recovery values of the respective referenced obligations, or net amounts received from the settlement of buy protection credit default
72 |
swap agreements which the Fund entered into for the same referenced entity or index. As a buyer of protection, the Fund generally receives an amount up to the notional value of the swap if a credit event occurs.
Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues of an emerging country as of period end are disclosed in the footnotes to the Portfolio of Investments, if applicable. These spreads serve as indicators of the current status of the payment/performance risk and represent the likelihood of default risk for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to enter into the agreement. For credit default swap agreements on asset-backed securities and credit indices, the quoted market prices and resulting values serve as indicators of the current status of the payment/performance risk. Wider credit spreads and increased market value in absolute terms, when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement.
Interest Rate Swaps: Interest rate swaps represent an agreement between counterparties to exchange cash flows based on the difference between two interest rates, applied to a notional principal amount for a specified period. The Fund is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. The Fund used interest rate swaps to maintain its ability to generate steady cash flow by receiving a stream of fixed-rate payments and to increase exposure to prevailing market rates by receiving floating rate payments. The Fund’s maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from the counterparty over the contract’s remaining life.
Currency Swaps: The Fund entered into currency swap agreements primarily to gain yield exposure on foreign bonds. Currency swap agreements involve two parties exchanging two different currencies with an agreement to reverse the exchange at a later date at specified exchange rates.
Total Return Swaps: In a total return swap, one party would receive payments based on the market value of the security or the commodity involved, or total return of a specific referenced asset, such as an equity, index or bond, and in return pay a fixed amount. The Fund is subject to risk exposures associated with the referenced asset in the normal course of pursuing its investment objectives. The Fund entered into total return swaps to manage its exposure to a security or an index. The Fund’s maximum risk of loss from counterparty credit risk is the change in the value of the security, in the Fund’s favor, from the point of entering into the contract.
Master Netting Arrangements: The Fund is subject to various Master Agreements, or netting arrangements, with select counterparties. These are agreements which a subadviser may have negotiated and entered into on behalf of the Fund. A master netting arrangement
Prudential Absolute Return Bond Fund | 73 |
Notes to Financial Statements (unaudited) (continued)
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.
The Fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements with certain counterparties that govern OTC derivative and foreign exchange contracts entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral posted to the Fund is held in a segregated account by the Fund’s custodian and with respect to those amounts which can be sold or re-pledged, is presented in the Portfolio of Investments. Collateral pledged by the Fund is segregated by the Fund’s custodian and identified in the Portfolio of Investments. Collateral can be in the form of cash or debt securities issued by the U.S. Government or related agencies or other securities as agreed to by the Fund and the applicable counterparty. Collateral requirements are determined based on the Fund’s net position with each counterparty. Termination events applicable to the Fund may occur upon a decline in the Fund’s net assets below a specified threshold over a certain period of time. Termination events applicable to counterparties may occur upon a decline in the counterparty’s long-term and short term credit ratings below a specified level. In each case, upon occurrence, the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contracts outstanding, including the payment of any losses and costs resulting from such early termination, as reasonably determined by the terminating party. Any decision by one or more of the Fund’s counterparties to elect early termination could impact the Fund’s future derivative activity.
In addition to each instrument’s primary underlying risk exposure (e.g. interest rate, credit, equity or foreign exchange, etc.), swap agreements involve, to varying degrees, elements of credit, market and documentation risk. Such risks involve the possibility that no liquid market for these agreements will exist, the counterparty to the agreement may default on its obligation to perform or disagree on the contractual terms of the agreement, and changes in net interest rates will be unfavorable. In connection with these agreements, securities in the portfolio may be identified or received as collateral from the counterparty in accordance
74 |
with the terms of the respective swap agreements to provide or receive assets of value and to serve as recourse in the event of default or bankruptcy/insolvency of either party. Such OTC derivative agreements include conditions which, when materialized, give the counterparty the right to cause an early termination of the transactions under those agreements. Any election by the counterparty for early termination of the contract(s) may impact the amounts reported on financial statements.
As of April 30, 2016, the Fund has not met conditions under such agreements which give the counterparty the right to call for an early termination.
Forward currency contracts, written options, swaps and financial futures contracts involve elements of both market and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities. Such risks may be mitigated by engaging in master netting arrangements.
Loan Participations: The Fund may invest in loan participations, another type of restricted security. When the Fund purchases a loan participation, the Fund typically enters into a contractual relationship with the lender or third party selling such participations (“Selling Participant”), but not the borrower. As a result, the Fund assumes the credit risk of the borrower, the Selling Participant and any other persons interpositioned between the Fund and the borrower. The Fund may not directly benefit from the collateral supporting the senior loan in which it has purchased the loan participation.
Payment In Kind Securities: The Fund may invest in open market or receive pursuant to debt restructuring, securities that pay in kind (PIK) the interest due on such debt instruments. The PIK interest, computed at the contractual rate specified, is added to the existing principal balance of the debt when issued bonds have same terms as the bond or recorded as a separate bond when terms are different from the existing debt, and is recorded as interest income.
Securities Lending: The Fund may lend its portfolio securities to banks and broker-dealers. The loans are secured by collateral at least equal to the market value of the securities loaned. Collateral pledged by each borrower is invested in a highly liquid ultra short-term bond fund and is marked to market daily, based on the previous day’s market value, such that the value of the collateral exceeds the value of the loaned securities. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of the loan, the borrower will return to the Fund securities identical to the loaned securities. Should the borrower of the securities fail financially, the Fund has the right to repurchase the securities in the open market using the collateral. 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 and such payments are passed back to the lender in amounts equivalent thereto. The Fund also continues to receive any unrealized gain (loss) in the market price of the securities loaned that may occur during the term of the loan.
Prudential Absolute Return Bond Fund | 75 |
Notes to Financial Statements (unaudited) (continued)
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 identified cost basis. Dividend income is recorded on the ex-date. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on an 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 distribution fees which are charged directly to the respective class and transfer agency fees specific to Class Q shares which are charged to that share class) 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.
Dividends and Distributions: The Fund declares dividends from net investment income daily and payment is made monthly. Distributions of net realized capital and currency gains, if any, are made annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from generally accepted accounting principles, are recorded on the ex-date. Permanent book/tax differences relating to income and gains are reclassified amongst undistributed net investment income (loss), accumulated net realized gain (loss) and paid-in-capital in excess of par, as appropriate.
Taxes: For federal income tax purposes, the Fund is treated as a separate taxpaying entity. It is the Fund’s policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required. Withholding taxes on foreign interest are recorded, net of reclaimable amounts, at the time the related income is earned.
Estimates: The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
Note 2. Agreements
The Fund has a management agreement with PI. Pursuant to this agreement, PI has responsibility for all investment advisory services and supervises the subadviser’s performance of such services. PI has entered into a subadvisory agreement with Prudential Fixed Income (“PFI”), which is a business unit of PGIM, Inc. The subadvisory agreement provides that PFI will furnish investment advisory services in connection with the management of the Fund. In connection therewith, PFI is obligated to keep certain books
76 |
and records of the Fund. PI pays for the services of PFI, 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. Prior to January 4, 2016, PGIM, Inc. was known as Prudential Investment Management, Inc. (“PIM”).
The management fee paid to PI is accrued daily and payable monthly at an annual rate of .80% of the Fund’s average daily net assets up to $2.5 billion, .775% of the average daily net assets up to $5 billion and .75% of the average daily net assets in excess of $5 billion. The effective management fee rate before any waivers and/or expense reimbursement was .80% for the six months ended April 30, 2016. The effective management fee rate, net of waivers and/or expense reimbursement, was .71%
PI has contractually agreed to limit net annual Fund operating expenses (exclusive of distribution and service (12b-1) fees, extraordinary and certain other expenses such as taxes, interest and brokerage commissions) of each class of shares to .90% of the Fund’s average daily net assets until February 28, 2017.
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 Q and Class Z shares of the Fund. The Fund compensates PIMS for distributing and servicing the Fund’s Class A and Class C shares, pursuant to 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 Q and Class Z shares of the Fund.
Pursuant to the Distribution Plans, the Fund compensates PIMS for distribution related activities at an annual rate of up to .25% and 1% of the average daily net assets of the Class A and C shares, respectively. Effective March 9, 2015, the Class A contractual distribution and service (12b-1) fees were reduced from .30% to ..25% of the average daily net assets and the contractual 12b-1 fee waiver of .05% was terminated.
PIMS has advised the Fund that it has received $67,716 in front-end sales charges resulting from sales of Class A shares during the six months ended April 30, 2016. From these fees, PIMS paid such sales charges to affiliated broker-dealers, which in turn paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Fund that for the six months ended April 30, 2016, it received $737 and $8,673, in contingent deferred sales charges imposed upon redemptions by certain Class A and Class C shareholders.
PI, PGIM, Inc. and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
Prudential Absolute Return Bond Fund | 77 |
Notes to Financial Statements (unaudited) (continued)
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund’s transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
PGIM, Inc., an indirect, wholly-owned subsidiary of Prudential, is the Fund’s securities lending agent. Net earnings from securities lending are disclosed on the Statement of Operations as “Affiliated income from securities lending, net”. For the six months ended April 30, 2016, PGIM, Inc. has been compensated approximately $22,920 for these services. Effective February 5, 2016, PGIM, Inc. is being paid no compensation for acting as the securities lending agent. In addition, the securities lending agent continues to absorb the transaction costs associated with the securities lending activity.
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 permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. Such transactions are subject to ratification by the Board.
The Fund invests in the Prudential Core Ultra Short Bond Fund, (formerly known as Prudential Core Taxable Money Market Fund), (the “Core Fund”), a portfolio of the Prudential Investment Portfolios 2, registered under the 1940 Act, and managed by PI. Earnings from the Core Fund are disclosed on the Statement of Operations as “Affiliated dividend income”.
Note 4. Portfolio Securities
The cost of purchases and proceeds from sales of portfolio securities, other than short-term investments and U.S. government securities, for the six months ended April 30, 2016, were $451,852,471 and $887,715,133, respectively.
Transactions in options written during the six months ended April 30, 2016, were as follows:
Notional Amount (000) | Premiums Received | |||||||
Balance at beginning of period | $ | 2,621,160 | $ | 2,256,581 | ||||
Options written | 7,376,520 | 5,543,986 | ||||||
Options closed | (3,566,150 | ) | (4,030,060 | ) | ||||
Options expired | (6,431,530 | ) | (3,770,507 | ) | ||||
|
|
|
| |||||
Balance at end of period | $ | — | $ | — | ||||
|
|
|
|
78 |
Note 5. Tax Information
The United States federal income tax basis of the Fund’s investments and the net unrealized depreciation as of April 30, 2016 were as follows:
Tax Basis | $ | 2,033,262,014 | ||
|
| |||
Appreciation | 21,060,588 | |||
Depreciation | (55,737,310 | ) | ||
|
| |||
Net Unrealized Depreciation | $ | (34,676,722 | ) | |
|
|
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 October 31, 2015 of approximately $30,857,000 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.
Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years and has concluded that no provision for income tax is required in the Fund’s financial statements for the current reporting period. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
Note 6. Capital
The Fund offers Class A, Class C, Class Q and Class Z shares. Class A shares are sold with a front-end sales charge of up to 4.50%. All investors who purchase Class A shares in an amount of $1 million or more and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1%. The Class A CDSC is waived for purchases by certain retirement and/or benefit plans. Class C shares are sold with a CDSC of 1% on shares redeemed during the first 12 months after purchase. A special exchange privilege is also available for shareholders who qualified to purchase Class A shares at net asset value. Class Q and Class Z shares are not subject to any sales or redemption charge and are offered exclusively for sale to a limited group of investors.
Under certain circumstances, an exchange may be made from specified share classes of the Fund to one or more other share classes of the Fund as presented in the table of transactions in shares of beneficial interest.
The Trust has authorized an unlimited number of shares of beneficial interest at $.001 par value.
Prudential Absolute Return Bond Fund | 79 |
Notes to Financial Statements (unaudited) (continued)
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Six months ended April 30, 2016: | ||||||||
Shares sold | 1,932,353 | $ | 18,069,055 | |||||
Shares issued in reinvestment of dividends and distributions | 251,168 | 2,343,728 | ||||||
Shares reacquired | (10,054,278 | ) | (93,572,424 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (7,870,757 | ) | (73,159,641 | ) | ||||
Shares issued upon conversion from other share class(es) | 130,986 | 1,218,185 | ||||||
Shares reacquired upon conversion into other share class(es) | (416,193 | ) | (3,877,281 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (8,155,964 | ) | $ | (75,818,737 | ) | |||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 9,159,964 | $ | 88,548,404 | |||||
Shares issued in reinvestment of dividends and distributions and tax return of capital | 767,890 | 7,406,202 | ||||||
Shares reacquired | (22,214,130 | ) | (214,083,595 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (12,286,276 | ) | (118,128,989 | ) | ||||
Shares issued upon conversion from other share class(es) | 413,369 | 3,999,231 | ||||||
Shares reacquired upon conversion into other share class(es) | (1,116,748 | ) | (10,782,429 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (12,989,655 | ) | $ | (124,912,187 | ) | |||
|
|
|
| |||||
Class C | ||||||||
Six months ended April 30, 2016: | ||||||||
Shares sold | 516,853 | $ | 4,850,480 | |||||
Shares issued in reinvestment of dividends and distributions | 87,239 | 816,632 | ||||||
Shares reacquired | (3,392,631 | ) | (31,715,034 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (2,788,539 | ) | (26,047,922 | ) | ||||
Shares issued upon conversion from other share class(es) | 7,065 | 66,762 | ||||||
Shares reacquired upon conversion into other share class(es) | (182,155 | ) | (1,709,018 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (2,963,629 | ) | $ | (27,690,178 | ) | |||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 3,281,932 | $ | 31,827,844 | |||||
Shares issued in reinvestment of dividends and distributions and tax return of capital | 252,859 | 2,455,008 | ||||||
Shares reacquired | (5,849,278 | ) | (56,486,343 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (2,314,487 | ) | (22,203,491 | ) | ||||
Shares issued upon conversion from other share class(es) | 293 | 2,817 | ||||||
Shares reacquired upon conversion into other share class(es) | (568,639 | ) | (5,485,484 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (2,882,833 | ) | $ | (27,686,158 | ) | |||
|
|
|
|
80 |
Class Q | Shares | Amount | ||||||
Six months ended April 30, 2016: | ||||||||
Shares sold | 628,286 | $ | 5,848,524 | |||||
Shares issued in reinvestment of dividends and distributions | 199,425 | 1,864,443 | ||||||
Shares reacquired† | (285,124 | ) | (2,642,179 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 542,587 | 5,070,788 | ||||||
Shares issued upon conversion from other share class(es) | 410,684 | 3,778,293 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 953,271 | $ | 8,849,081 | |||||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 15,365,666 | $ | 148,814,878 | |||||
Shares issued in reinvestment of dividends and distributions and tax return of capital | 322,957 | 3,104,469 | ||||||
Shares reacquired | (2,026,331 | ) | (19,436,578 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 13,662,292 | 132,482,769 | ||||||
Shares issued upon conversion from other share class(es) | 338,526 | 3,270,165 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 14,000,818 | $ | 135,752,934 | |||||
|
|
|
| |||||
Class Z | ||||||||
Six months ended April 30, 2016: | ||||||||
Shares sold | 25,814,214 | $ | 243,043,246 | |||||
Shares issued in reinvestment of dividends and distributions | 1,303,599 | 12,216,364 | ||||||
Shares reacquired | (63,569,862 | ) | (592,914,724 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (36,452,049 | ) | (337,655,114 | ) | ||||
Shares issued upon conversion from other share class(es) | 596,386 | 5,586,299 | ||||||
Shares reacquired upon conversion into other share class(es) | (547,273 | ) | (5,063,240 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (36,402,936 | ) | $ | (337,132,055 | ) | |||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 76,184,518 | $ | 738,610,194 | |||||
Shares issued in reinvestment of dividends and distributions and tax return on capital | 3,283,088 | 31,761,004 | ||||||
Shares reacquired | (106,576,807 | ) | (1,029,168,865 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (27,109,201 | ) | (258,797,667 | ) | ||||
Shares issued upon conversion from other shares class(es) | 1,675,175 | 16,217,078 | ||||||
Shares reacquired upon conversion into other share class(es) | (744,228 | ) | (7,221,378 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (26,178,254 | ) | $ | (249,801,967 | ) | |||
|
|
|
|
† | Includes affiliated redemption of 116 shares with a value of $1,093 for Class Q shares. |
Note 7. Borrowings
The Fund, along with other affiliated registered investment companies (the “Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of $900 million for the period October 8, 2015 through October 6, 2016. The Funds pay an annualized commitment fee of .11% of the unused portion of the SCA. Prior to October 8, 2015, the Funds had another SCA that provided a commitment of $900 million and the Funds paid an annualized commitment fee of .075% of the unused portion of the SCA. Interest on any borrowings under the SCA is paid at contracted market rates. The Fund’s portion of the commitment fee for the unused amount is accrued daily and paid quarterly.
Prudential Absolute Return Bond Fund | 81 |
Notes to Financial Statements (unaudited) (continued)
The Fund utilized the SCA during the six months ended April 30, 2016. The average daily balance for the 35 days that the Fund had loans outstanding during the period was $16,695,714, borrowed at a weighted average interest rate of 1.68%. The maximum loan outstanding amount during the period was $74,114,000. As of April 30, 2016, the Fund did not have an outstanding loan amount.
Note 8. New Accounting Pronouncements
In May 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-07 regarding “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share”. The amendments in this update are effective for the Fund for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. ASU No. 2015-07 will eliminate the requirement to categorize investments in the fair value hierarchy if their fair value is measured at net asset value (“NAV”) per share (or its equivalent) using the practical expedient in the FASB’s fair value measurement guidance. Management has evaluated the implications of ASU No. 2015-07 and has determined that there is no impact on the financial statement disclosures.
In January 2016, the FASB issued ASU No. 2016-01 regarding “Recognition and Measurement of Financial Assets and Financial Liabilities”. The new guidance is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The new standard affects all entities that hold financial assets or owe financial liabilities. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. At this time, management is evaluating the implications of ASU No. 2016-01 and its impact on the financial statements and disclosures has not yet been determined.
82 |
Financial Highlights (unaudited)
Class A Shares | ||||||||||||||||||||||||||
Six Months | Year Ended October 31, | March 30, | ||||||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $9.48 | $9.79 | $9.82 | $9.92 | $9.72 | $10.00 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment income | .12 | .23 | .25 | .21 | .22 | .18 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.07 | ) | (.30 | ) | .02 | (.03 | ) | .30 | (.31 | ) | ||||||||||||||||
Total from investment operations | .05 | (.07 | ) | .27 | .18 | .52 | (.13 | ) | ||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||
Dividends from net investment income | (.10 | ) | (.21 | ) | (.30 | ) | (.23 | ) | (.30 | ) | (.15 | ) | ||||||||||||||
Tax return of capital | - | (.03 | ) | - | (.05 | ) | - | - | ||||||||||||||||||
Distributions from net realized gains | - | - | - | - | (.02 | ) | - | |||||||||||||||||||
Total dividends and distributions | (.10 | ) | (.24 | ) | (.30 | ) | (.28 | ) | (.32 | ) | (.15 | ) | ||||||||||||||
Net asset value, end of period | $9.43 | $9.48 | $9.79 | $9.82 | $9.92 | $9.72 | ||||||||||||||||||||
Total Return(b): | .55% | (.78)% | 2.76% | 1.86% | 5.49% | (1.27)% | ||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Net assets, end of period (000) | $236,652 | $315,214 | $452,955 | $469,604 | $91,250 | $2,709 | ||||||||||||||||||||
Average net assets (000) | $279,805 | $383,950 | $483,199 | $303,234 | $18,023 | $2,240 | ||||||||||||||||||||
Ratios to average net assets(c)(d): | ||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.15% | (f) | 1.15% | 1.15% | 1.14% | 1.11% | 1.30% | (f) | ||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.24% | (f) | 1.24% | 1.27% | 1.28% | 1.54% | 2.70% | (f) | ||||||||||||||||||
Net investment income | 2.69% | (f) | 2.39% | 2.58% | 2.17% | 2.53% | 2.90% | (f) | ||||||||||||||||||
Portfolio turnover rate | 26% | (g) | 64% | 64% | 125% | 152% | 112% | (g) |
(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 a full year are not annualized. |
(c) | Does not include expenses of the underlying portfolio in which the Fund invests. |
(d) | Effective March 9, 2015, the contractual distribution and service (12b-1) fees were reduced from .30% to .25% of the average daily net assets and the .05% contractual 12b-1 waiver was terminated. |
(e) | Commencement of operations. |
(f) | Annualized. |
(g) | Not annualized. |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 83 |
Financial Highlights (unaudited) (continued)
Class C Shares | ||||||||||||||||||||||||||
Six Months | Year Ended October 31, | March 30, 2011(d) through October 31, | ||||||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $9.51 | $9.82 | $9.85 | $9.94 | $9.73 | $10.00 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment income | .09 | .16 | .18 | .14 | .16 | .13 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.07 | ) | (.31 | ) | .01 | (.02 | ) | .29 | (.30 | ) | ||||||||||||||||
Total from investment operations | .02 | (.15 | ) | .19 | .12 | .45 | (.17 | ) | ||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||
Dividends from net investment income | (.07 | ) | (.13 | ) | (.22 | ) | (.16 | ) | (.22 | ) | (.10 | ) | ||||||||||||||
Tax return of capital | - | (.03 | ) | - | (.05 | ) | - | - | ||||||||||||||||||
Distributions from net realized gains | - | - | - | - | (.02 | ) | - | |||||||||||||||||||
Total dividends and distributions | (.07 | ) | (.16 | ) | (.22 | ) | (.21 | ) | (.24 | ) | (.10 | ) | ||||||||||||||
Net asset value, end of period | $9.46 | $9.51 | $9.82 | $9.85 | $9.94 | $9.73 | ||||||||||||||||||||
Total Return(b): | 0.18% | (1.51)% | 1.97% | 1.18% | 4.78% | (1.74)% | ||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Net assets, end of period (000) | $132,785 | $161,679 | $195,312 | $172,326 | $28,708 | $4,030 | ||||||||||||||||||||
Average net assets (000) | $145,816 | $183,419 | $183,745 | $97,736 | $7,066 | $2,254 | ||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.90% | (e) | 1.90% | 1.90% | 1.89% | 1.88% | 2.05% | (e) | ||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.99% | (e) | 1.97% | 1.97% | 1.98% | 2.39% | 3.39% | (e) | ||||||||||||||||||
Net investment income | 1.93% | (e) | 1.62% | 1.81% | 1.41% | 1.86% | 2.17% | (e) | ||||||||||||||||||
Portfolio turnover rate | 26% | (f) | 64% | 64% | 125% | 152% | 112% | (f) |
(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 a full year are not annualized. |
(c) | Does not include expenses of the underlying portfolio in which the Fund invests. |
(d) | Commencement of operations. |
(e) | Annualized. |
(f) | Not annualized. |
See Notes to Financial Statements.
84 |
Class Q Shares | ||||||||||||||||||||||||||
Six Months | Year Ended October 31, | March 30, 2011(d) through October 31, | ||||||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $9.49 | $9.81 | $9.83 | $9.94 | $9.73 | $10.00 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment income | .14 | .25 | .28 | .27 | .30 | .16 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.08 | ) | (.30 | ) | .03 | (.06 | ) | .26 | (.27 | ) | ||||||||||||||||
Total from investment operations | .06 | (.05 | ) | .31 | .21 | .56 | (.11 | ) | ||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||
Dividends from net investment income | (.11 | ) | (.24 | ) | (.33 | ) | (.27 | ) | (.33 | ) | (.16 | ) | ||||||||||||||
Tax return of capital | - | (.03 | ) | - | (.05 | ) | - | - | ||||||||||||||||||
Distributions from net realized gains | - | - | - | - | (.02 | ) | - | |||||||||||||||||||
Total dividends and distributions | (.11 | ) | (.27 | ) | (.33 | ) | (.32 | ) | (.35 | ) | (.16 | ) | ||||||||||||||
Net asset value, end of period | $9.44 | $9.49 | $9.81 | $9.83 | $9.94 | $9.73 | ||||||||||||||||||||
Total Return(b): | .70% | (.57)% | 3.16% | 2.10% | 5.99% | (1.09)% | ||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Net assets, end of period (000) | $159,491 | $151,294 | $19,025 | $17,829 | $1 | $1 | ||||||||||||||||||||
Average net assets (000) | $151,566 | $125,910 | $18,604 | $3,144 | $1 | $1 | ||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | .86% | (e) | .85% | .85% | .90% | .89% | 1.05% | (e) | ||||||||||||||||||
Expenses before waivers and/or expense reimbursement | .86% | (e) | .85% | .85% | .94% | 1.54% | 2.45% | (e) | ||||||||||||||||||
Net investment income | 2.98% | (e) | 2.61% | 2.87% | 2.87% | 3.11% | 2.74% | (e) | ||||||||||||||||||
Portfolio turnover rate | 26% | (f) | 64% | 64% | 125% | 152% | 112% | (f) |
(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 a full year are not annualized. |
(c) | Does not include expenses of the underlying portfolio in which the Fund invests. |
(d) | Commencement of operations. |
(e) | Annualized. |
(f) | Not annualized. |
See Notes to Financial Statements.
Prudential Absolute Return Bond Fund | 85 |
Financial Highlights (unaudited) (continued)
Class Z Shares | ||||||||||||||||||||||||||
Six Months Ended April 30, | Year Ended October 31, | March 30, 2011(d) through October 31, | ||||||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $9.52 | $9.83 | $9.86 | $9.95 | $9.74 | $10.00 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment income | .14 | .25 | .27 | .24 | .27 | .16 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.08 | ) | (.30 | ) | .02 | (.02 | ) | .28 | (.27 | ) | ||||||||||||||||
Total from investment operations | .06 | (.05 | ) | .29 | .22 | .55 | (.11 | ) | ||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||
Dividends from net investment income | (.11 | ) | (.23 | ) | (.32 | ) | (.26 | ) | (.32 | ) | (.15 | ) | ||||||||||||||
Tax return of capital | - | (.03 | ) | - | (.05 | ) | - | - | ||||||||||||||||||
Distributions from net realized gains | - | - | - | - | (.02 | ) | - | |||||||||||||||||||
Total dividends and distributions | (.11 | ) | (.26 | ) | (.32 | ) | (.31 | ) | (.34 | ) | (.15 | ) | ||||||||||||||
Net asset value, end of period | $9.47 | $9.52 | $9.83 | $9.86 | $9.95 | $9.74 | ||||||||||||||||||||
Total Return(b): | .67% | (.53)% | 3.00% | 2.21% | 5.81% | (1.14)% | ||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Net assets, end of period (000) | $1,401,790 | $1,755,667 | $2,070,862 | $1,201,383 | $82,364 | $28,192 | ||||||||||||||||||||
Average net assets (000) | $1,608,831 | $2,029,397 | $1,484,697 | $672,382 | $34,383 | $27,018 | ||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | .90% | (e) | .90% | .90% | .90% | .89% | 1.05% | (e) | ||||||||||||||||||
Expenses before waivers and/or expense reimbursement | .99% | (e) | .97% | .97% | .99% | 1.50% | 2.48% | (e) | ||||||||||||||||||
Net investment income | 2.92% | (e) | 2.61% | 2.79% | 2.43% | 2.92% | 2.70% | (e) | ||||||||||||||||||
Portfolio turnover rate | 26% | (f) | 64% | 64% | 125% | 152% | 112% | (f) |
(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 a full year are not annualized. |
(c) | Does not include expenses of the underlying portfolio in which the Fund invests. |
(d) | Commencement of operations. |
(e) | Annualized. |
(f) | Not annualized. |
See Notes to Financial Statements.
86 |
n MAIL | n TELEPHONE | n WEBSITE | ||
655 Broad Street | (800) 225-1852 | www.prudentialfunds.com |
PROXY VOTING |
The Board of Trustees of the Fund has delegated to the Fund’s investment subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at www.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 • Keith F. Hartstein • Michael S. Hyland • Stuart S. Parker • Richard A. Redeker • Stephen G. Stoneburn • Grace C. Torres |
OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • M. Sadiq Peshimam, Treasurer and Principal Financial and Accounting Officer • Raymond A. O’Hara, Chief Legal Officer • Deborah A. Docs, Secretary • Chad A. Earnst, Chief Compliance Officer • Theresa C. Thompson, Deputy Chief Compliance Officer • Richard W. Kinville, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • Amanda S. Ryan, Assistant Secretary • Andrew R. French, Assistant Secretary • Peter Parrella, Assistant Treasurer • Lana Lomuti, Assistant Treasurer • Linda McMullin, Assistant Treasurer • Kelly A. Coyne, Assistant Treasurer |
MANAGER | Prudential Investments LLC | 655 Broad Street Newark, NJ 07102 | ||
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INVESTMENT SUBADVISER | Prudential Fixed Income | 655 Broad Street Newark, NJ 07102 | ||
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DISTRIBUTOR | Prudential Investment Management Services LLC | 655 Broad Street Newark, NJ 07102 | ||
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CUSTODIAN | The Bank of New York Mellon | One Wall Street New York, NY 10286 | ||
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TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
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FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 | ||
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An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go to www.prudentialfunds.com/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH TRUSTEES |
Shareholders can communicate directly with the Board of Trustees by writing to the Chair of the Board, Prudential Absolute Return Bond Fund, Prudential Investments, Attn: Board of Trustees, 655 Broad Street, Newark, NJ 07102. Shareholders can communicate directly with an individual Trustee by writing to the same address. Communications are not screened before being delivered to the addressee. |
AVAILABILITY OF PORTFOLIO SCHEDULE |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation and location of the Public Reference Room may be obtained by calling (202) 551-8090. The Fund’s schedule of portfolio holdings is also available on the Fund’s website as of the end of each month no sooner than 15 days after the end of the month. |
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PRUDENTIAL ABSOLUTE RETURN BOND FUND
SHARE CLASS | A | C | Q | Z | ||||
NASDAQ | PADAX | PADCX | PADQX | PADZX | ||||
CUSIP | 74441J852 | 74441J845 | 74441J837 | 74441J829 |
MF213E2 0293026-00001-00
PRUDENTIAL INVESTMENTS, A PGIM BUSINESS | MUTUAL FUNDS
Prudential Select Real Estate Fund
SEMIANNUAL REPORT | APRIL 30, 2016 |
To enroll in e-delivery, go to prudentialfunds.com/edelivery
| ![]() |
Objective: Capital appreciation and income |
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter.
The accompanying financial statements as of April 30, 2016, 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. © 2016 Prudential Financial, Inc. and its related entities. The Prudential logo and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
2 | Visit our website at prudentialfunds.com |
Letter from the President
Dear Shareholder:
We hope you find the semiannual report for the Prudential Select Real Estate Fund informative and useful. The report covers performance for the six-month period that ended April 30, 2016.
Since market conditions change over time, 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. Keep in mind, however, that diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
Prudential Investments® is dedicated to helping you solve your toughest investment challenges—whether it’s capital growth, reliable income, or protection from market volatility and other risks. We offer the expertise of Prudential Financial’s affiliated asset managers that strive to be leaders in a broad range of funds to help you stay on course to the future you envision. They also manage money for major corporations and pension funds around the world, which means you benefit from the same expertise, innovation, and attention to risk demanded by today’s most sophisticated investors.
Thank you for choosing the Prudential Investments family of funds.
Sincerely,
Stuart S. Parker, President
Prudential Select Real Estate Fund
June 15, 2016
Prudential Select Real Estate Fund | 3 |
Your Fund’s Performance (unaudited)
Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852.
Cumulative Total Returns (Without Sales Charges) as of 4/30/16 | ||||||
Six Months (%) | One Year (%) | Since Inception (%) | ||||
Class A | –0.39 | 0.55 | 7.57 (8/1/14) | |||
Class C | –0.66 | –0.19 | 6.19 (8/1/14) | |||
Class Q | –0.24 | 0.81 | 8.01 (8/1/14) | |||
Class Z | –0.17 | 0.86 | 8.11 (8/1/14) | |||
FTSE EPRA/NAREIT Developed Real Estate Index | 3.63 | 1.91 | 7.03 | |||
S&P 500 Index | 0.43 | 1.21 | 10.98 | |||
Lipper Global Real Estate Funds Average | 2.28 | 0.17 | 5.85 | |||
S&P Developed Property Net Index | 4.19 | 1.77 | 7.41 | |||
Average Annual Total Returns (With Sales Charges) as of 3/31/16 | ||||||
One Year (%) | Since Inception (%) | |||||
Class A | –5.36 | 1.55 (8/1/14) | ||||
Class C | –1.53 | 4.24 (8/1/14) | ||||
Class Q | 0.41 | 5.31 (8/1/14) | ||||
Class Z | 0.40 | 5.32 (8/1/14) | ||||
FTSE EPRA/NAREIT Developed Real Estate Index | 0.41 | 4.22 | ||||
S&P 500 Index | 1.78 | 6.20 | ||||
Lipper Global Real Estate Funds Average | –0.48 | 3.66 | ||||
S&P Developed Property Net Index | 0.78 | 4.36 |
Source: Prudential Investments LLC and Lipper Inc.
Inception returns are provided for any share class with less than 10 calendar years of returns.
4 | Visit our website at prudentialfunds.com |
The returns in the tables do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or following the redemption of Fund shares. The average annual total returns take into account applicable sales charges, which are described for each share class in the table below.
Class A | Class C | Class Q | Class Z | |||||
Maximum initial sales charge | 5.50% of the public offering price | None | None | None | ||||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or net asset value at redemption) | 1% on sales of $1 million or more made within 12 months of purchase | 1% 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) | .30% (.25% currently) | 1% | None | None |
Benchmark Definitions
FTSE EPRA/NAREIT Developed Real Estate Index—The Financial Times Stock Exchange European Public Real Estate Association/National Association of Real Estate investment Trusts (FTSE EPRA/NAREIT) Developed Real Estate Index is unmanaged and designed to track the performance of listed real estate companies and REITs worldwide.
S&P 500 Index—The Standard & Poor’s 500 Composite Stock Price Index (S&P 500 Index) is an unmanaged index of over 500 stocks of large US public companies. It gives a broad look at how stock prices in the United States have performed.
Lipper Global Real Estate Funds Average—The Lipper Global Real Estate Funds Average (Lipper Average) includes funds that invest at least 25% but less than 75% of their equity portfolios in shares of companies engaged in the real estate industry that are strictly outside of the US or whose securities are principally traded outside of the US.
S&P Developed Property Net Index—The S&P Developed Property Net Index is an unmanaged, weighted index which measures the investable universe of publicly traded property companies domiciled in developed markets.
Investors cannot invest directly in an index or average. The returns for the Indexes would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses, but not sales charges or taxes. The Since Inception
Prudential Select Real Estate Fund | 5 |
Your Fund’s Performance (continued)
returns for the Indexes and Lipper Average are measured from the closest month-end to the inception date for the indicated share class.
Five Largest Holdings expressed as a percentage of net assets as of 4/30/16 (%) | ||||
Mitsui Fudosan Co. Ltd. (Japan), Diversified Real Estate Activities | 5.2 | |||
Hudson Pacific Properties, Inc., Office REITs | 4.4 | |||
New York REIT, Inc., Office REITs | 4.0 | |||
General Growth Properties, Inc., Retail REITs | 3.9 | |||
Sovran Self Storage, Inc., Specialized REITs | 3.8 |
Holdings reflect only long-term investments and are subject to change.
Five Largest Industries expressed as a percentage of net assets as of 4/30/16 (%) | ||||
Retail REITs | 22.0 | |||
Residential REITs | 20.8 | |||
Office REITs | 15.0 | |||
Diversified REITs | 14.5 | |||
Specialized REITs | 9.4 |
Industry weightings reflect only long-term investments and are subject to change.
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Fees and Expenses (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution, and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on November 1, 2015, at the beginning of the period, and held through the six-month period ended April 30, 2016. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of Prudential Investments funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses paid over
Prudential Select Real Estate Fund | 7 |
Fees and Expenses (continued)
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.
Prudential Select Real Estate Fund | Beginning Account Value November 1, 2015 | Ending Account Value April 30, 2016 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 996.10 | 1.35 | % | $ | 6.70 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,018.15 | 1.35 | % | $ | 6.77 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 993.40 | 2.10 | % | $ | 10.41 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,014.42 | 2.10 | % | $ | 10.52 | ||||||||||
Class Q | Actual | $ | 1,000.00 | $ | 997.60 | 1.10 | % | $ | 5.46 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,019.39 | 1.10 | % | $ | 5.52 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 998.30 | 1.10 | % | $ | 5.47 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,019.39 | 1.10 | % | $ | 5.52 |
*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 182 days in the six-month period ended April 30, 2016, and divided by the 366 days in the Portfolio’s fiscal year ending October 31, 2016 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
The Fund’s annualized expense ratios for the six-month period ended April 30, 2016, are as follows:
Class | Gross Operating Expenses (%) | Net Operating Expenses (%) | ||
A | 5.76 | 1.35 | ||
C | 6.45 | 2.10 | ||
Q | 4.94 | 1.10 | ||
Z | 5.49 | 1.10 |
Net operating expenses shown above reflect any fee waivers and/or expense reimbursements. Additional information on Fund expenses and any fee waivers and/or expense reimbursements can be found in the “Financial Highlights” tables in this report and in the Notes to the Financial Statements in this report.
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Portfolio of Investments (unaudited)
as of April 30, 2016
Shares | Value (Note 1) | |||||||
LONG-TERM INVESTMENTS 99.2% | ||||||||
COMMON STOCKS | ||||||||
Diversified Real Estate Activities 8.0% | ||||||||
Mitsui Fudosan Co. Ltd. (Japan) | 12,110 | $ | 295,755 | |||||
Sun Hung Kai Properties Ltd. (Hong Kong) | 12,770 | 160,942 | ||||||
|
| |||||||
456,697 | ||||||||
Diversified REITs 14.5% | ||||||||
Empire State Realty Trust, Inc. (Class A Stock) | 9,600 | 177,696 | ||||||
First Potomac Realty Trust | 10,894 | 91,619 | ||||||
Hibernia REIT PLC (Ireland) | 76,962 | 113,594 | ||||||
Land Securities Group PLC (United Kingdom) | 11,350 | 187,995 | ||||||
STORE Capital Corp., REIT | 5,550 | 142,468 | ||||||
Suntec Real Estate Investment Trust (Singapore) | 93,650 | 117,009 | ||||||
|
| |||||||
830,381 | ||||||||
Health Care REITs 4.0% | ||||||||
Community Healthcare Trust, Inc. | 4,811 | 87,560 | ||||||
Physicians Realty Trust | 7,580 | 137,426 | ||||||
|
| |||||||
224,986 | ||||||||
Hotel & Resort REITs 2.8% | ||||||||
Sunstone Hotel Investors, Inc. | 12,439 | 159,344 | ||||||
Industrial REITs 2.7% | ||||||||
Rexford Industrial Realty, Inc. | 4,866 | 91,335 | ||||||
Segro PLC (United Kingdom) | 10,300 | 62,932 | ||||||
|
| |||||||
154,267 | ||||||||
Office REITs 15.0% | ||||||||
Great Portland Estates PLC (United Kingdom) | 14,870 | 164,882 | ||||||
Hudson Pacific Properties, Inc. | 8,700 | 254,475 | ||||||
Keppel REIT (Singapore) | 160,630 | 125,186 | ||||||
New York REIT, Inc. | 23,279 | 228,832 | ||||||
SL Green Realty Corp. | 820 | 86,166 | ||||||
|
| |||||||
859,541 | ||||||||
Residential REITs 20.8% | ||||||||
Apartment Investment & Management Co. (Class A Stock) | 3,110 | 124,587 | ||||||
Boardwalk Real Estate Investment Trust (Canada) | 2,850 | 121,977 | ||||||
Empiric Student Property PLC (United Kingdom) | 83,283 | 136,596 | ||||||
Equity LifeStyle Properties, Inc. | 1,380 | 94,516 | ||||||
Equity Residential | 2,450 | 166,772 | ||||||
Essex Property Trust, Inc. | 890 | 196,201 |
See Notes to Financial Statements.
Prudential Select Real Estate Fund | 9 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Shares | Value (Note 1) | |||||||
COMMON STOCKS (Continued) | ||||||||
Residential REITs (cont’d.) | ||||||||
Irish Residential Properties REIT PLC (Ireland) | 73,398 | $ | 94,130 | |||||
Monogram Residential Trust, Inc. | 8,500 | 86,105 | ||||||
Sun Communities, Inc. | 2,489 | 168,928 | ||||||
|
| |||||||
1,189,812 | ||||||||
Retail REITs 22.0% | ||||||||
Acadia Realty Trust | 3,900 | 131,430 | ||||||
British Land Co. PLC (The) (United Kingdom) | 18,350 | 193,070 | ||||||
Equity One, Inc. | 6,136 | 173,649 | ||||||
Federal Realty Investment Trust | 1,140 | 173,371 | ||||||
General Growth Properties, Inc. | 7,875 | 220,736 | ||||||
Mapletree Commercial Trust (Singapore) | 97,000 | 108,114 | ||||||
Retail Properties of America, Inc. (Class A Stock) | 9,750 | 155,902 | ||||||
Taubman Centers, Inc. | 1,490 | 103,481 | ||||||
|
| |||||||
1,259,753 | ||||||||
Specialized REITs 9.4% | ||||||||
CyrusOne, Inc. | 1,300 | 57,369 | ||||||
Equinix, Inc. | 220 | 72,677 | ||||||
Extra Space Storage, Inc. | 2,275 | 193,261 | ||||||
Sovran Self Storage, Inc. | 2,030 | 215,627 | ||||||
|
| |||||||
538,934 | ||||||||
|
| |||||||
TOTAL INVESTMENTS 99.2% | 5,673,715 | |||||||
Other assets in excess of liabilities 0.8% | 46,267 | |||||||
|
| |||||||
NET ASSETS 100.0% | $ | 5,719,982 | ||||||
|
|
The following abbreviations are used in the semiannual report:
OTC—Over-the-counter
REIT—Real Estate Investment Trust
See Notes to Financial Statements.
10 |
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.
Level 2—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 April 30, 2016 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Common Stocks | ||||||||||||
Diversified Real Estate Activities | $ | — | $ | 456,697 | $ | — | ||||||
Diversified REITs | 525,377 | 305,004 | — | |||||||||
Health Care REITs | 224,986 | — | — | |||||||||
Hotel & Resort REITs | 159,344 | — | — | |||||||||
Industrial REITs | 91,335 | 62,932 | — | |||||||||
Office REITs | 569,473 | 290,068 | — | |||||||||
Residential REITs | 1,189,812 | — | — | |||||||||
Retail REITs | 958,569 | 301,184 | — | |||||||||
Specialized REITs | 538,934 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 4,257,830 | $ | 1,415,885 | $ | — | ||||||
|
|
|
|
|
|
The industry classification of investments and other assets in excess of liabilities shown as a percentage of net assets as of April 30, 2016 were as follows:
Retail REITs | 22.0 | % | ||
Residential REITs | 20.8 | |||
Office REITs | 15.0 | |||
Diversified REITs | 14.5 | |||
Specialized REITs | 9.4 | |||
Diversified Real Estate Activities | 8.0 | |||
Health Care REITs | 4.0 | |||
Hotel & Resort REITs | 2.8 | % | ||
Industrial REITs | 2.7 | |||
|
| |||
99.2 | ||||
Other assets in excess of liabilities | 0.8 | |||
|
| |||
100.0 | % | |||
|
|
See Notes to Financial Statements.
Prudential Select Real Estate Fund | 11 |
Statement of Assets & Liabilities (unaudited)
as of April 30, 2016
Assets | ||||
Investments at value: | ||||
Unaffiliated investments (cost $5,717,141) | $ | 5,673,715 | ||
Receivable for investments sold | 136,826 | |||
Due from Manager | 13,800 | |||
Dividends receivable | 10,903 | |||
Tax reclaim receivable | 128 | |||
Prepaid expenses | 207 | |||
|
| |||
Total assets | 5,835,579 | |||
|
| |||
Liabilities | ||||
Payable for investments purchased | 67,946 | |||
Accrued expenses and other liabilities | 43,580 | |||
Payable to custodian | 3,925 | |||
Affiliated transfer agent fee payable | 86 | |||
Distribution fee payable | 60 | |||
|
| |||
Total liabilities | 115,597 | |||
|
| |||
Net Assets | $ | 5,719,982 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 577 | ||
Paid-in capital in excess of par | 5,777,834 | |||
|
| |||
5,778,411 | ||||
Distributions in excess of net investment income | (26,572 | ) | ||
Accumulated net realized gain on investment and foreign currency transactions | 11,408 | |||
Net unrealized depreciation on investments and foreign currencies | (43,265 | ) | ||
|
| |||
Net assets, April 30, 2016 | $ | 5,719,982 | ||
|
|
See Notes to Financial Statements.
12 |
Class A | ||||
Net asset value and redemption price per share, | $ | 10.03 | ||
Maximum sales charge (5.50% of offering price) | 0.58 | |||
|
| |||
Maximum offering price to public | $ | 10.61 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share, | $ | 9.97 | ||
|
| |||
Class Q | ||||
Net asset value, offering price and redemption price per share, | $ | 9.91 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share, | $ | 10.05 | ||
|
|
See Notes to Financial Statements.
Prudential Select Real Estate Fund | 13 |
Statement of Operations (unaudited)
Six Months Ended April 30, 2016
Net Investment Income | ||||
Income | ||||
Unaffiliated dividend income (net of foreign withholding taxes of $3,883) | $ | 107,886 | ||
Affiliated dividend income | 324 | |||
|
| |||
Total income | 108,210 | |||
|
| |||
Expenses | ||||
Management fee | 25,988 | |||
Distribution fee—Class A | 132 | |||
Distribution fee—Class C | 210 | |||
Registration fees | 32,000 | |||
Custodian and accounting fees | 25,000 | |||
Audit fee | 15,000 | |||
Shareholders’ reports | 11,000 | |||
Legal fees and expenses | 10,000 | |||
Trustees’ fees | 5,000 | |||
Transfer agent’s fees and expenses (including affiliated expense of $240) | 700 | |||
Miscellaneous | 11,227 | |||
|
| |||
Total expenses | 136,257 | |||
Less: Management fee waiver and/or expense reimbursement | (105,828 | ) | ||
Distribution fee waiver—Class A | (22 | ) | ||
|
| |||
Net expenses | 30,407 | |||
|
| |||
Net investment income | 77,803 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investment And Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 42,946 | |||
Foreign currency transactions | (307 | ) | ||
|
| |||
42,639 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (142,925 | ) | ||
Foreign currencies | 188 | |||
|
| |||
(142,737 | ) | |||
|
| |||
Net loss on investment and foreign currency transactions | (100,098 | ) | ||
|
| |||
Net Decrease In Net Assets Resulting From Operations | $ | (22,295 | ) | |
|
|
See Notes to Financial Statements.
14 |
Statement of Changes in Net Assets (unaudited)
Six Months Ended April 30, 2016 | Year Ended October 31, 2015 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income | $ | 77,803 | $ | 51,391 | ||||
Net realized gain on investment and foreign currency transactions | 42,639 | 221,338 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currencies | (142,737 | ) | (4,864 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | (22,295 | ) | 267,865 | |||||
|
|
|
| |||||
Dividends and Distributions (Note 1) | ||||||||
Dividends from net investment income | ||||||||
Class A | (1,938 | ) | — | |||||
Class C | (487 | ) | — | |||||
Class Q | (137,024 | ) | (51,503 | ) | ||||
Class Z | (3,104 | ) | — | |||||
|
|
|
| |||||
(142,553 | ) | (51,503 | ) | |||||
|
|
|
| |||||
Distributions from net realized gains | ||||||||
Class A | (3,969 | ) | (160 | ) | ||||
Class C | (1,433 | ) | (322 | ) | ||||
Class Q | (215,530 | ) | (43,237 | ) | ||||
Class Z | (5,495 | ) | (87 | ) | ||||
|
|
|
| |||||
(226,427 | ) | (43,806 | ) | |||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) (Note 6) | ||||||||
Net proceeds from shares sold | 258,574 | 184,146 | ||||||
Net asset value of shares issued in reinvestment of dividends and distributions | 368,979 | 95,307 | ||||||
Cost of shares reacquired | (143,407 | ) | (27,737 | ) | ||||
|
|
|
| |||||
Net increase in net assets from Fund share transactions | 484,146 | 251,716 | ||||||
|
|
|
| |||||
Total increase | 92,871 | 424,272 | ||||||
Net Assets: | ||||||||
Beginning of period | 5,627,111 | 5,202,839 | ||||||
|
|
|
| |||||
End of period(a) | $ | 5,719,982 | $ | 5,627,111 | ||||
|
|
|
| |||||
(a) Includes undistributed net investment income of: | $ | — | $ | 38,178 | ||||
|
|
|
|
See Notes to Financial Statements.
Prudential Select Real Estate Fund | 15 |
Notes to Financial Statements (unaudited)
Prudential Investment Portfolios 9 (the “Trust”) is an open-end management investment company, registered under the Investment Company Act of 1940, as amended (“1940 Act”). The Trust currently consists of five portfolios: Prudential Select Real Estate (the “Fund”), Prudential International Real Estate Fund, Prudential QMA Large-Cap Core Equity Fund, Prudential Absolute Return Bond Fund and Prudential Real Estate Income Fund. These financial statements relate only to Prudential Select Real Estate Fund. The financial statements of the other portfolios are not presented herein. The Trust was organized as a Delaware business trust on September 18, 1998. The Fund commenced operations on August 1, 2014. The Fund’s investment objective is to seek capital appreciation and income.
Note 1. Accounting Policies
The Fund follows investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The following accounting policies conform to U.S. generally accepted accounting principles. The Fund consistently follows such policies in the preparation of its financial statements.
Securities Valuation: The Fund holds securities and other assets 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 Board of Trustees (the “Board”) has adopted Valuation Procedures for security valuation under which fair valuation responsibilities have been delegated to Prudential Investments LLC (“PI” or “Manager”). Under the current Valuation Procedures, the established Valuation Committee is responsible for supervising the valuation of portfolio securities and other assets. 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.
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 table following the Portfolio of Investments.
Common and preferred stocks, exchange-traded funds, and derivative instruments such as futures or options that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange where the security principally trades. Securities traded via NASDAQ are valued at the NASDAQ official closing
16 |
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.
Common and preferred stocks traded on foreign securities exchanges are valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy. The models generate an evaluated adjustment factor for each security, which can be applied to the local closing price to adjust it for post closing market movements. Utilizing that evaluated adjustment factor, the vendor provides an evaluated price to the extent that the valuation meets the established confidence level for each security. Such confidence level is a measure of the probability of a relationship between a given equity security and the factors used in the models. If the confidence level is not met or the vendor does not provide an evaluated price, securities are valued in accordance with exchange-traded common and preferred stocks discussed above.
Participatory notes (P-notes) are generally valued based upon the value of a related underlying security that trades actively in the market and are classified as Level 2 in the fair value hierarchy.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the OTC market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors provide these prices after 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. Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.
Bank loans traded in the OTC market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors utilize broker/dealer quotations and provide prices based on the average of such quotations. Bank loans valued using such vendor prices are generally classified as Level 2 in the fair value hierarchy.
OTC derivative instruments are generally valued using pricing vendor services, which derive the valuation based on inputs such as underlying asset prices, indices, spreads, interest
Prudential Select Real Estate Fund | 17 |
Notes to Financial Statements (unaudited) (continued)
rates, and exchange rates. These instruments are categorized as Level 2 in the fair value hierarchy.
Centrally cleared swaps listed or traded on a multilateral or trade facility platform, such as a registered exchange, are generally valued at the daily settlement price determined by the respective exchange. These securities are classified as Level 2 in the fair value hierarchy, as the daily settlement price is not public.
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 investment adviser regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values.
Foreign Currency Translation: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis:
(i) market value of investment securities, other assets and liabilities at the current daily rates of exchange;
(ii) purchases and sales of investment securities, income and expenses at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not generally isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities held at the end of the period. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of long-term 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. Notwithstanding the above, the Fund does isolate the effect of
18 |
fluctuations in foreign currency exchange rates when determining the gain (loss) upon the sale or maturity of foreign currency denominated debt obligations: such amounts are included in net realized gain (loss) on foreign currency transactions.
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from holdings of foreign currencies, forward currency contracts, disposition of foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference between the amounts of interest, dividends and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates are reflected as a component of net unrealized appreciation (depreciation) on foreign currencies.
Concentration of Risk: Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin as a result of, among other factors, the possibility of political and economic instability or the level of the governmental supervision and regulation of foreign securities markets.
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 identified cost basis. Dividend income is recorded on the ex-date. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on the accrual basis. Expenses are recorded on an accrual basis, which may require the use of certain estimates by management that may differ from actual.
Net investment income (loss) (other than distribution fees which are charged directly to the respective class and transfer agency fees specific to Class Q shares which are charged to that share class) 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.
REITs: The Fund invests in real estate investment trusts (“REITs”), which report information on the source of their distributions annually. Based on current and historical information, a portion of distributions received from REITs during the period is estimated to be dividend income, capital gain or return of capital and is recorded accordingly. These estimates are adjusted when the actual source of distributions is disclosed by the REITs.
Dividends and Distributions: The Fund expects to pay dividends from net investment income quarterly and distributions of net realized capital and currency gains, if any, annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from generally accepted accounting principles, are recorded on the ex-date. Permanent book/tax differences relating to income and gains are reclassified amongst undistributed net investment income (loss), accumulated net realized gain (loss) and paid-in capital in excess of par, as appropriate.
Prudential Select Real Estate Fund | 19 |
Notes to Financial Statements (unaudited) (continued)
Taxes: For federal income tax purposes, the Fund is treated as a separate tax paying entity. It is the Fund’s policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net investment income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required. Withholding taxes on foreign dividends are recorded, net of reclaimable amounts, at the time the related income is earned.
Estimates: The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
Note 2. Agreements
The Fund has a management agreement with PI. Pursuant to this agreement, PI has responsibility for all the investment advisory services and supervises the subadviser’s performance of such services. PI has entered into a subadvisory agreement with PGIM Real Estate, formerly known as Prudential Real Estate Investors (“PREI”), which is a business unit of PGIM, Inc. The subadvisory agreement provides that PGIM Real Estate will furnish investment advisory services in connection with the management of the Fund. In connection therewith, PGIM Real Estate is obligated to keep certain books and records of the Fund. PI pays for the services of PGIM Real Estate, the cost of compensation of officers of the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears all other costs and expenses. Prior to January 4, 2016, PGIM, Inc. was known as Prudential Investment Management, Inc. (“PIM”).
The management fee paid to PI is accrued daily and payable monthly at an annual rate of the Fund’s average daily net assets. Through September 30, 2015, the management fee paid to PI was based on an annual fee rate of .95% of the Funds average daily net assets. Effective October 1, 2015 the management fee paid to PI is based on an annual rate of .95% of the Fund’s average daily net assets up to $1 billion, .93% of the next $2 billion, .91% of the next $2 billion, .90% of the next $5 billion and .89% of the average daily net assets in excess of $10 billion. The effective management fee rate before any waivers and/or expense reimbursements was .95% for the period ended April 30, 2016. For the period ended April 30, 2016, waivers and/or expense reimbursements exceeded the effective management fee.
PI has contractually agreed through February 28, 2017 to limit net annual Fund operating expenses (exclusive of distribution and service (12b-1) fees, extraordinary and certain other expenses, such as taxes, interest and brokerage commissions) of each class of shares to 1.10% of the Fund’s average daily net assets.
The Fund has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”), which acts as the distributor of the Class A, C, Q and Z shares of the Fund.
20 |
The Fund compensates PIMS for distributing and servicing the Fund’s Class A and C shares, pursuant to 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 Q or Class Z shares of the Fund.
Pursuant to the Distribution Plans, the Fund compensates PIMS for distribution related activities at an annual rate of up to .30% and 1% of the average daily net assets of the Class A and C shares, respectively. PIMS has contractually agreed through February 28, 2017 to limit such fees to .25% of the average daily net assets of the Class A shares.
PIMS has advised the Fund that it has received $192 in front-end sales charges resulting from sales of Class A shares during the six months ended April 30, 2016. From these fees, PIMS paid such sales charges to affiliated broker-dealers, which in turn paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Fund that for the six months ended April 30, 2016, there were no contingent deferred sales charges imposed.
PI, PGIM, Inc., and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund’s transfer agent. Transfer agent 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 permits purchase and sale transactions among affiliated investment companies, or between and investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. Such transactions are subject to ratification by the Board.
The Fund invests in the Prudential Core Ultra Short Bond Fund, (formerly known as Prudential Core Taxable Money Market Fund), (the “Core Fund”), a portfolio of the Prudential Investment Portfolios 2, registered under the Investment Company 1940 Act, and managed by PI. Earnings from the Core Fund are disclosed on the Statement of Operations as “Affiliated dividend income.”
Note 4. Portfolio Securities
The cost of purchases and proceeds from sales of portfolio securities, other than short-term investments, for the six months ended April 30, 2016, were $3,916,023 and $3,767,315, respectively.
Prudential Select Real Estate Fund | 21 |
Notes to Financial Statements (unaudited) (continued)
Note 5. Tax Information
The United States federal income tax basis of the Fund’s investments and the net unrealized depreciation as of April 30, 2016 were as follows:
Tax Basis | $ | 5,776,742 | ||
|
| |||
Appreciation | 166,212 | |||
Depreciation | (269,239 | ) | ||
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| |||
Net Unrealized Depreciation | $ | (103,027 | ) | |
|
|
The book basis may differ from tax basis due to certain tax-related adjustments.
Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years and has concluded that no provision for income tax is required in the Fund’s financial statements for the current reporting period. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
Note 6. Capital
The Fund offers Class A, Class C, Class Q and Class Z shares. Class A shares are subject to a maximum front-end sales charge of up to 5.50%. Investors who purchase Class A shares in an amount of $1 million or more and sell these shares within 12 months of purchase are not subject to an initial sales charge, but are subject to a contingent deferred sales charge (“CDSC”) of 1%. The Class A CDSC is waived for purchases by certain retirement or benefit plans. Class C shares are sold with a CDSC of 1% on shares redeemed within the first 12 months after purchase. A special exchange privilege is also available for shareholders who qualified to purchase Class A shares at net asset value. Class Q and Class Z shares are not subject to any sales or redemption charge and are offered exclusively for sale to a limited group of investors.
Under certain circumstances, an exchange may be made from specified share classes of the Fund to one or more other share classes of the Fund as presented in the table of transactions in shares of beneficial interest.
The Trust has authorized an unlimited number of shares of beneficial interest at $.001 par value per share.
22 |
As of April 30, 2016, Prudential, through its affiliates, owned 1,073 Class A shares, 1,065 Class C shares, 546,032 Class Q shares and 1,076 Class Z shares of the Fund.
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Six months ended April 30, 2016: | ||||||||
Shares sold | 9,090 | $ | 92,322 | |||||
Shares issued in reinvestment of dividends and distributions | 593 | 5,905 | ||||||
Shares reacquired | (2,559 | ) | (23,530 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 7,124 | 74,697 | ||||||
Shares issued upon conversion from other share class(es) | 52 | 567 | ||||||
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|
| |||||
Net increase (decrease) in shares outstanding | 7,176 | $ | 75,264 | |||||
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| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 5,019 | $ | 51,736 | |||||
Shares issued in reinvestment of dividends and distributions | 15 | 160 | ||||||
Shares reacquired | (396 | ) | (4,113 | ) | ||||
|
|
|
| |||||
Net Increase (decrease) in shares outstanding before conversion | 4,638 | 47,783 | ||||||
Shares reacquired upon conversion into other share class(es) | (579 | ) | (6,225 | ) | ||||
|
|
|
| |||||
Net Increase (decrease) in shares outstanding | 4,059 | $ | 41,558 | |||||
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| |||||
Class C | ||||||||
Six months ended April 30, 2016: | ||||||||
Shares sold | 1,203 | $ | 12,000 | |||||
Shares issued in reinvestment of dividends and distributions | 194 | 1,920 | ||||||
|
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|
| |||||
Net increase (decrease) in shares outstanding | 1,397 | $ | 13,920 | |||||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 4,423 | $ | 45,727 | |||||
Shares issued in reinvestment of dividends and distributions | 31 | 322 | ||||||
Shares reacquired | (2,061 | ) | (21,998 | ) | ||||
|
|
|
| |||||
Net Increase (decrease) in shares outstanding | 2,393 | $ | 24,051 | |||||
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| |||||
Class Q | ||||||||
Six months ended April 30, 2016: | ||||||||
Shares issued in reinvestment of dividends and distributions | 35,780 | $ | 352,555 | |||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 35,780 | $ | 352,555 | |||||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares issued in reinvestment of dividends and distributions | 9,252 | $ | 94,739 | |||||
|
|
|
| |||||
Net Increase (decrease) in shares outstanding | 9,252 | $ | 94,739 | |||||
|
|
|
|
Prudential Select Real Estate Fund | 23 |
Notes to Financial Statements (unaudited) (continued)
Class Z | Shares | Amount | ||||||
Six months ended April 30, 2016: | ||||||||
Shares sold | 15,273 | $ | 154,252 | |||||
Shares issued in reinvestment of dividends and distributions | 862 | 8,599 | ||||||
Shares reacquired | (13,188 | ) | (119,877 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 2,947 | 42,974 | ||||||
Shares reacquired upon conversion into other share class(es) | (52 | ) | (567 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 2,895 | $ | 42,407 | |||||
|
|
|
| |||||
Year ended October 31, 2015: | ||||||||
Shares sold | 8,495 | $ | 86,683 | |||||
Shares issued in reinvestment of dividends and distributions | 8 | 86 | ||||||
Shares reacquired | (156 | ) | (1,626 | ) | ||||
|
|
|
| |||||
Net Increase (decrease) in shares outstanding before conversion | 8,347 | 85,143 | ||||||
Shares issued upon conversion from other share class(es) | 577 | 6,225 | ||||||
|
|
|
| |||||
Net Increase (decrease) in shares outstanding | 8,924 | $ | 91,368 | |||||
|
|
|
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Note 7. Borrowings
The Fund, along with other affiliated registered investment companies (the “Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of $900 million for the period October 8, 2015 through October 6, 2016. The Funds pay an annualized commitment fee of .11% of the unused portion of the SCA. Prior to October 8, 2015, the Funds had another SCA that provided a commitment of $900 million and the Funds paid an annualized commitment fee of .075% of the unused portion of the SCA. Interest on any borrowings under the SCA is paid at contracted market rates. The commitment fee for the unused amount is accrued daily and paid quarterly.
The Fund did not utilize the SCA during the six months ended April 30, 2016.
Note 8. New Accounting Pronouncements
In May 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-07 regarding “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share”. The amendments in this update are effective for the Fund for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. ASU No. 2015-07 will eliminate the requirement to categorize investments in the fair value hierarchy if their fair value is measured at net asset value (“NAV”) per share (or its equivalent) using the practical expedient in the FASB’s fair value measurement guidance.
24 |
Management has evaluated the implications of ASU No. 2015-07 and it has been determined that there is no impact on the financial statement disclosures.
In January 2016, the FASB issued ASU No. 2016-01 regarding “Recognition and Measurement of Financial Assets and Financial Liabilities”. The new guidance is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The new standard affects all entities that hold financial assets or owe financial liabilities. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. At this time, management is evaluating the implications of ASU No. 2016-01 and its impact on the financial statements and disclosures has not yet been determined.
Prudential Select Real Estate Fund | 25 |
Financial Highlights (unaudited)
Class A Shares | ||||||||||||||||
Six Months Ended April 30, 2016 | Year Ended October 31, 2015 | August 1, 2014(b) through October 31, 2014 | ||||||||||||||
Per Share Operating Performance(c): | ||||||||||||||||
Net Asset Value, Beginning Of Period | $10.71 | $10.30 | $10.00 | |||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income | .12 | .09 | .01 | |||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.17 | ) | .41 | .29 | ||||||||||||
Total from investment operations | (.05 | ) | .50 | .30 | ||||||||||||
Less Dividends and Distributions: | ||||||||||||||||
Dividends from net investment income | (.21 | ) | - | - | ||||||||||||
Distributions from net realized gains | (.42 | ) | (.09 | ) | - | |||||||||||
Total dividends and distributions | (.63 | ) | (.09 | ) | - | |||||||||||
Net asset value, end of period | $10.03 | $10.71 | $10.30 | |||||||||||||
Total Return(a) | (.39)% | 4.85% | 3.00% | |||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||
Net assets, end of period (000) | $130 | $62 | $18 | |||||||||||||
Average net assets (000) | $88 | $27 | $15 | |||||||||||||
Ratios to average net assets(d): | ||||||||||||||||
Expense after waivers and/or expense reimbursement | 1.35% | (e) | 1.35% | 1.35% | (e) | |||||||||||
Expense before waivers and/or expense reimbursement | 5.76% | (e) | 5.16% | 20.58% | (e) | |||||||||||
Net investment income | 2.50% | (e) | .86% | .46% | (e) | |||||||||||
Portfolio turnover rate | 69% | (f) | 150% | 18% | (f) |
(a) | Total return does not consider the effect of sales load. 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. |
(b) | Commencement of operations. |
(c) | Calculated based on the average shares outstanding during the period. |
(d) | Does not include expenses of the underlying portfolio in which the Fund invests. |
(e) | Annualized. |
(f) | Not annualized. |
See Notes to Financial Statements.
26 |
Class C Shares | ||||||||||||||||
Six Months Ended April 30, 2016 | Year Ended October 31, 2015 | August 1, 2014(b) through October 31, 2014 | ||||||||||||||
Per Share Operating Performance(c): | ||||||||||||||||
Net Asset Value, Beginning Of Period | $10.60 | $10.28 | $10.00 | |||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income (loss) | .08 | (.03 | ) | (.01 | ) | |||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.16 | ) | .44 | .29 | ||||||||||||
Total from investment operations | (.08 | ) | .41 | .28 | ||||||||||||
Less Dividends and Distributions: | ||||||||||||||||
Dividends from net investment income | (.13 | ) | - | - | ||||||||||||
Distributions from net realized gains | (.42 | ) | (.09 | ) | - | |||||||||||
Total dividends and distributions | (.55 | ) | (.09 | ) | - | |||||||||||
Net asset value, end of period | $9.97 | $10.60 | $10.28 | |||||||||||||
Total Return(a) | (.66)% | 3.98% | 2.80% | |||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||
Net assets, end of period (000) | $48 | $36 | $10 | |||||||||||||
Average net assets (000) | $42 | $46 | $10 | |||||||||||||
Ratios to average net assets(d): | ||||||||||||||||
Expense after waivers and/or expense reimbursement | 2.10% | (e) | 2.10% | 2.10% | (e) | |||||||||||
Expense before waivers and/or expense reimbursement | 6.45% | (e) | 5.54% | 20.42% | (e) | |||||||||||
Net investment (loss) income | 1.71% | (e) | (.30)% | (.26)% | (e) | |||||||||||
Portfolio turnover rate | 69% | (f) | 150% | 18% | (f) |
(a) | Total return does not consider the effect of sales load. 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. |
(b) | Commencement of operations. |
(c) | Calculated based on the average shares outstanding during the period. |
(d) | Does not include expenses of the underlying portfolio in which the Fund invests. |
(e) | Annualized. |
(f) | Not annualized. |
See Notes to Financial Statements.
Prudential Select Real Estate Fund | 27 |
Financial Highlights (unaudited) (continued)
Class Q Shares | ||||||||||||||||
Six Months Ended April 30, 2016 | Year Ended October 31, 2015 | August 1, 2014(b) through October 31, 2014 | ||||||||||||||
Per Share Operating Performance(c): | ||||||||||||||||
Net Asset Value, Beginning Of Period | $10.63 | $10.31 | $10.00 | |||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income | .14 | .10 | .02 | |||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.17 | ) | .41 | .29 | ||||||||||||
Total from investment operations | (.03 | ) | .51 | .31 | ||||||||||||
Less Dividends and Distributions: | ||||||||||||||||
Dividends from net investment income | (.27 | ) | (.10 | ) | - | |||||||||||
Distributions from net realized gains | (.42 | ) | (.09 | ) | - | |||||||||||
Total dividends and distributions | (.69 | ) | (.19 | ) | - | |||||||||||
Net asset value, end of period | $9.91 | $10.63 | $10.31 | |||||||||||||
Total Return(a) | (.24)% | 5.01% | 3.10% | |||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||
Net assets, end of period (000) | $5,413 | $5,423 | $5,165 | |||||||||||||
Average net assets (000) | $5,227 | $5,288 | $4,983 | |||||||||||||
Ratios to average net assets(d): | ||||||||||||||||
Expense after waivers and/or expense reimbursement | 1.10% | (e) | 1.10% | 1.10% | (e) | |||||||||||
Expense before waivers and/or expense reimbursement | 4.94% | (e) | 4.51% | 14.06% | (e) | |||||||||||
Net investment income | 2.87% | (e) | .96% | .75% | (e) | |||||||||||
Portfolio turnover rate | 69% | (f) | 150% | 18% | (f) |
(a) | Total return is calculated assuming a purchase of a shares 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. |
(b) | Commencement of operations. |
(c) | Calculated based on the average shares outstanding during the period. |
(d) | Does not include expenses of the underlying portfolio in which the Fund invests. |
(e) | Annualized. |
(f) | Not annualized. |
See Notes to Financial Statements.
28 |
Class Z Shares | ||||||||||||||||
Six Months Ended April 30, 2016 | Year 2015 | August 1, 2014(b) through October 31, 2014 | ||||||||||||||
Per Share Operating Performance(c): | ||||||||||||||||
Net Asset Value, Beginning Of Period | $10.74 | $10.31 | $10.00 | |||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income | .13 | .10 | .02 | |||||||||||||
Net realized and unrealized gain on investment transactions | (.16 | ) | .42 | .29 | ||||||||||||
Total from investment operations | (.03 | ) | .52 | .31 | ||||||||||||
Less Dividends and Distributions: | ||||||||||||||||
Dividends from net investment income | (.24 | ) | - | - | ||||||||||||
Distributions from net realized gains | (.42 | ) | (.09 | ) | - | |||||||||||
Total dividends and distributions | (.66 | ) | (.09 | ) | - | |||||||||||
Net asset value, end of period | $10.05 | $10.74 | $10.31 | |||||||||||||
Total Return(a) | (.17)% | 5.04% | 3.10% | |||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||
Net assets, end of period (000) | $129 | $107 | $10 | |||||||||||||
Average net assets (000) | $142 | $39 | $10 | |||||||||||||
Ratios to average net assets(d): | ||||||||||||||||
Expense after waivers and/or expense reimbursement | 1.10% | (e) | 1.10% | 1.10% | (e) | |||||||||||
Expense before waivers and/or expense reimbursement | 5.49% | (e) | 5.16% | 19.50% | (e) | |||||||||||
Net investment income | 2.63% | (e) | .98% | .77% | (e) | |||||||||||
Portfolio turnover rate | 69% | (f) | 150% | 18% | (f) |
(a) | 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. |
(b) | Commencement of operations. |
(c) | Calculated based on the average shares outstanding during the period. |
(d) | Does not include expenses of the underlying portfolio in which the Fund invests. |
(e) | Annualized. |
(f) | Not annualized. |
See Notes to Financial Statements.
Prudential Select Real Estate Fund | 29 |
n MAIL | n TELEPHONE | n WEBSITE | ||
655 Broad Street | (800) 225-1852 | www.prudentialfunds.com |
PROXY VOTING |
The Board of Trustees of the Fund has delegated to the Fund’s investment subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website. |
TRUSTEES |
Ellen S. Alberding • Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Keith F. Hartstein • Michael S. Hyland • Stuart S. Parker • Richard A. Redeker • Stephen G. Stoneburn • Grace C. Torres |
OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • M. Sadiq Peshimam, Treasurer and Principal Financial and Accounting Officer • Raymond A. O’Hara, Chief Legal Officer • Chad A. Earnst, Chief Compliance Officer • Deborah A. Docs, Secretary • Theresa C. Thompson, Deputy Chief Compliance Officer • Richard W. Kinville, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • Amanda S. Ryan, Assistant Secretary • Andrew R. French, Assistant Secretary • Peter Parrella, Assistant Treasurer • Lana Lomuti, Assistant Treasurer • Linda McMullin, Assistant Treasurer • Kelly A. Coyne, Assistant Treasurer |
MANAGER | Prudential Investments LLC | 655 Broad Street Newark, NJ 07102 | ||
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INVESTMENT SUBADVISER | PGIM Real Estate | 7 Giralda Farms Madison, NJ 07940 | ||
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DISTRIBUTOR | Prudential Investment Management Services LLC | 655 Broad Street Newark, NJ 07102 | ||
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CUSTODIAN | The Bank of New York Mellon | One Wall Street New York, NY 10286 | ||
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TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
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FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 | ||
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An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go to www.prudentialfunds.com/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH TRUSTEES |
Shareholders can communicate directly with the Board of Trustees by writing to the Chair of the Board, Prudential Select Real Estate Fund, Prudential Investments, Attn: Board of Trustees, 655 Broad Street, Newark, NJ 07102. Shareholders can communicate directly with an individual Director by writing to the same address. Communications are not screened before being delivered to the addressee. |
AVAILABILITY OF PORTFOLIO SCHEDULE |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation and location of the Public Reference Room may be obtained by calling (202) 551-8090. The Fund’s schedule of portfolio holdings is also available on the Fund’s website as of the end of each month no sooner than 15 days after the end of the month. |
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PRUDENTIAL SELECT REAL ESTATE FUND
SHARE CLASS | A | C | Q | Z | ||||
NASDAQ | SREAX | SRECX | SREQX | SREZX | ||||
CUSIP | 74441J811 | 74441J795 | 74441J787 | 74441J779 |
MF223E2 0293068-00001-00
PRUDENTIAL INVESTMENTS, A PGIM BUSINESS | MUTUAL FUNDS
Prudential Real Estate Income Fund
SEMIANNUAL REPORT | APRIL 30, 2016 |
To enroll in e-delivery, go to prudentialfunds.com/edelivery
| ![]() |
Objective: To seek income and capital appreciation |
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter.
The accompanying financial statements as of April 30, 2016, 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. © 2016 Prudential Financial, Inc. and its related entities. The Prudential logo and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
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Letter from the President
Dear Shareholder:
We hope you find the semiannual report for the Prudential Real Estate Income Fund informative and useful. The report covers performance for the six-month period that ended April 30, 2016.
Since market conditions change over time, 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. Keep in mind, however, that diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
Prudential Investments® is dedicated to helping you solve your toughest investment challenges—whether it’s capital growth, reliable income, or protection from market volatility and other risks. We offer the expertise of Prudential Financial’s affiliated asset managers that strive to be leaders in a broad range of funds to help you stay on course to the future you envision. They also manage money for major corporations and pension funds around the world, which means you benefit from the same expertise, innovation, and attention to risk demanded by today’s most sophisticated investors.
Thank you for choosing the Prudential Investments family of funds.
Sincerely,
Stuart S. Parker, President
Prudential Real Estate Income Fund
June 15, 2016
Prudential Real Estate Income Fund | 3 |
Your Fund’s Performance (unaudited)
Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852.
Cumulative Total Returns (Without Sales Charges) as of 4/30/16 | ||||||
Six Months (%) | Since Inception (%) | |||||
Class A | 1.41 | –1.17 (6/3/15) | ||||
Class C | 1.14 | –1.80 (6/3/15) | ||||
Class Z | 1.54 | –0.96 (6/3/15) | ||||
Custom Blend Index | 3.81 | 4.64 | ||||
Lipper Global Real Estate Funds Average | 2.28 | 1.50 | ||||
Average Annual Total Returns (With Sales Charges) as of 3/31/16 | ||||||
Since Inception (%) | ||||||
Class A | N/A (6/3/15) | |||||
Class C | N/A (6/3/15) | |||||
Class Z | N/A (6/3/15) | |||||
Custom Blend Index | N/A | |||||
Lipper Global Real Estate Funds Average | N/A |
Source: Prudential Investments LLC and Lipper Inc.
Inception returns are provided for any share class with less than 10 years of returns.
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The returns in the tables do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or following the redemption of Fund shares. The average annual total returns take into account applicable sales charges, which are described for each share class in the table below.
Class A | Class C | Class Z | ||||
Maximum initial sales charge | 5.50% of the public offering price | None | None | |||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or net asset value at redemption) | 1% on sales of $1 million or more made within 12 months of purchase | 1% on sales made within 12 months of purchase | None | |||
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | .30% (.25% currently) | 1% | None |
Benchmark Definitions
Custom Blend Index—The Custom Blend Index is a model portfolio consisting of the FTSE EPRA/NAREIT Developed Real Estate Index (80%), which is an unmanaged index that measures the performance of all real estate investment trusts (REITs) listed on the New York Stock Exchange, NASDAQ National Market, and American Stock Exchange; and the BofA Merrill Lynch 7% Constrained REIT Preferred Securities Index (20%), an unmanaged index that is a subset of the BofA Merrill Lynch Fixed Rate Preferred Securities Index including all REIT-issued preferred securities.
Lipper Global Real Estate Funds Average—The Lipper Global Real Estate Funds Average includes funds that invest at least 25% but less than 75% of their equity portfolios in shares of companies engaged in the real estate industry that are strictly outside of the US or whose securities are principally traded outside of the US.
Investors cannot invest directly in an index or average. The returns for the Index would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses, but not sales charges or taxes.
Prudential Real Estate Income Fund | 5 |
Your Fund’s Performance (continued)
Five Largest Holdings expressed as a percentage of net assets as of 4/30/16 (%) | ||||
MGM Growth Properties LLC, Hotel & Resort REITs | 5.0 | |||
Ascendas Real Estate Investment Trust (Singapore), Industrial REITs | 4.7 | |||
Community Healthcare Trust, Inc., Health Care REITs | 4.7 | |||
Chesapeake Lodging Trust, Hotel & Resort REITs | 4.3 | |||
Keppel REIT (Singapore), Office REITs | 3.9 |
Holdings reflect only long-term investments and are subject to change.
Five Largest Industries expressed as a percentage of net assets as of 4/30/16 (%) | ||||
Retail REITs | 20.7 | |||
Health Care REITs | 19.6 | |||
Diversified REITs | 16.3 | |||
Industrial REITs | 13.2 | |||
Hotel & Resort REITs | 12.9 |
Industry weightings reflect only long-term investments and are subject to change.
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Fees and Expenses (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on November 1, 2015, at the beginning of the period, and held through the six-month period ended April 30, 2016. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of Prudential Investments funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses
Prudential Real Estate Income Fund | 7 |
Fees and Expenses (continued)
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.
Prudential Real Estate Income Fund | Beginning Account Value November 1, 2015 | Ending Account Value April 30, 2016 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,014.10 | 1.35 | % | $ | 6.76 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,018.15 | 1.35 | % | $ | 6.77 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,011.40 | 2.10 | % | $ | 10.50 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,014.42 | 2.10 | % | $ | 10.52 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,015.40 | 1.10 | % | $ | 5.51 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,019.39 | 1.10 | % | $ | 5.52 |
*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 182 days in the six-month period ended April 30, 2016, and divided by the 366 days in the Fund’s fiscal year ending October 31, 2016 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
The Fund’s annualized expense ratios for the six-month period ended April 30, 2016, are as follows:
Class | Gross Operating Expenses (%) | Net Operating Expenses (%) | ||
A | 6.43 | 1.35 | ||
C | 7.44 | 2.10 | ||
Z | 6.56 | 1.10 |
Net operating expenses shown above reflect any fee waivers and/or expense reimbursements. Additional information on Fund expenses and any fee waivers and/or expense reimbursements can be found in the “Financial Highlights” tables in this report and in the Notes to the Financial Statements in this report.
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Portfolio of Investments
as of April 30, 2016 (Unaudited)
Description | Shares | Value (Note 1) | ||||||
LONG-TERM INVESTMENTS 99.9% | ||||||||
COMMON STOCKS 80.7% | ||||||||
Diversified REITs 10.5% | ||||||||
Agellan Commercial Real Estate Investment Trust (Canada) | 8,640 | $ | 63,697 | |||||
First Potomac Realty Trust | 11,179 | 94,015 | ||||||
Lexington Realty Trust | 13,295 | 116,730 | ||||||
Mirvac Group (Australia) | 15,458 | 21,871 | ||||||
Northstar Realty Finance Corp. | 13,315 | 170,299 | ||||||
STORE Capital Corp. | 1,935 | 49,671 | ||||||
Suntec Real Estate Investment Trust (Singapore) | 31,341 | 39,158 | ||||||
|
| |||||||
555,441 | ||||||||
Health Care REITs 19.6% | ||||||||
Care Capital Properties, Inc. | 5,290 | 141,084 | ||||||
Community Healthcare Trust, Inc. | 13,609 | 247,684 | ||||||
Physicians Realty Trust | 9,940 | 180,212 | ||||||
Sabra Health Care REIT, Inc. | 5,616 | 118,442 | ||||||
Senior Housing Properties Trust | 8,903 | 156,515 | ||||||
Welltower, Inc. | 2,717 | 188,614 | ||||||
|
| |||||||
1,032,551 | ||||||||
Hotel & Resort REITs 9.3% | ||||||||
Chesapeake Lodging Trust | 9,211 | 226,867 | ||||||
MGM Growth Properties LLC (Class A Stock)* | 12,085 | 266,716 | ||||||
|
| |||||||
493,583 | ||||||||
Industrial REITs 11.7% | ||||||||
Ascendas Real Estate Investment Trust (Singapore) | 137,051 | 250,130 | ||||||
Cache Logistics Trust (Singapore) | 320,237 | 205,809 | ||||||
Prologis Property Mexico SA de CV (Mexico)* | 60,657 | 95,826 | ||||||
STAG Industrial, Inc. | 3,360 | 67,066 | ||||||
|
| |||||||
618,831 | ||||||||
Office REITs 9.4% | ||||||||
Alstria Office REIT-AG (Germany)* | 5,425 | 76,177 | ||||||
Dexus Property Group (Australia) | 9,419 | 60,057 | ||||||
Investa Office Fund (Australia) | 17,099 | 53,991 | ||||||
Keppel REIT (Singapore) | 264,200 | 205,902 | ||||||
New York REIT, Inc. | 10,132 | 99,598 | ||||||
Parkway Properties, Inc. | 56 | 921 | ||||||
|
| |||||||
496,646 |
See Notes to Financial Statements.
Prudential Real Estate Income Fund | 9 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
Description | Shares | Value (Note 1) | ||||||
COMMON STOCKS (Continued) | ||||||||
Real Estate Operating Companies 1.9% | ||||||||
TLG Immobilien AG (Germany) | 4,750 | $ | 100,616 | |||||
Residential REITs 2.0% | ||||||||
Empiric Student Property PLC (United Kingdom) | 63,807 | 104,653 | ||||||
Retail REITs 16.3% | ||||||||
CBL & Associates Properties, Inc. | 12,104 | 141,375 | ||||||
Eurocommercial Properties NV (Netherlands) | 1,087 | 50,766 | ||||||
Mapletree Commercial Trust (Singapore) | 8,819 | 9,829 | ||||||
Mercialys SA (France) | 4,540 | 101,125 | ||||||
Retail Properties of America, Inc. (Class A Stock) | 3,163 | 50,576 | ||||||
Starhill Global REIT (Singapore) | 278,600 | 161,387 | ||||||
Vicinity Centres (Australia) | 58,089 | 146,012 | ||||||
WP GLIMCHER, Inc. | 18,959 | 198,880 | ||||||
|
| |||||||
859,950 | ||||||||
|
| |||||||
TOTAL COMMON STOCKS | 4,262,271 | |||||||
|
| |||||||
PREFERRED STOCKS 19.2% | ||||||||
Diversified REITs 5.8% | ||||||||
Gramercy Property Trust | 5,600 | 148,428 | ||||||
VEREIT, Inc. | 6,025 | 155,023 | ||||||
|
| |||||||
303,451 | ||||||||
Hotel & Resort REITs 3.6% | ||||||||
Sunstone Hotel Investors, Inc.* | 7,000 | 190,540 | ||||||
Industrial REITs 1.5% | ||||||||
STAG Industrial, Inc.* | 3,000 | 78,900 | ||||||
Office REITs 1.0% | ||||||||
Boston Properties, Inc. | 2,000 | 52,000 | ||||||
Retail REITs 4.4% | ||||||||
Cedar Realty Trust, Inc. | 3,250 | 84,013 | ||||||
Pennsylvania Real Estate Investment Trust | 5,650 | 148,821 | ||||||
|
| |||||||
232,834 |
See Notes to Financial Statements.
10 |
Description | Shares | Value (Note 1) | ||||||
PREFERRED STOCKS (Continued) | ||||||||
Specialized REITs 2.9% | ||||||||
Digital Realty Trust, Inc. | 5,900 | $ | 154,285 | |||||
|
| |||||||
TOTAL PREFERRED STOCKS | 1,012,010 | |||||||
|
| |||||||
TOTAL LONG-TERM INVESTMENTS | 5,274,281 | |||||||
|
| |||||||
SHORT-TERM INVESTMENT 1.1% | ||||||||
AFFILIATED MUTUAL FUND | ||||||||
Prudential Investment Portfolios 2 - Prudential Core | 57,531 | 57,531 | ||||||
|
| |||||||
TOTAL INVESTMENTS 101.0% | 5,331,812 | |||||||
Liabilities in excess of other assets (1.0)% | (50,962 | ) | ||||||
|
| |||||||
NET ASSETS 100.0% | $ | 5,280,850 | ||||||
|
|
The following abbreviations are used in the semiannual report:
L1—Level 1
L2—Level 2
OTC—Over-the-counter
REIT—Real Estate Investment Trust
* | Non-income producing security. |
(a) | Prudential Investments LLC, the manager of the Fund, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Ultra Short Bond Fund. |
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.
Level 2—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.
Prudential Real Estate Income Fund | 11 |
Portfolio of Investments (unaudited) (continued)
as of April 30, 2016
The following is a summary of the inputs used as of April 30, 2016 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Common Stocks | ||||||||||||
Diversified REITs | $ | 494,412 | $ | 61,029 | $ | — | ||||||
Health Care REITs | 1,032,551 | — | — | |||||||||
Hotel & Resort REITs | 493,583 | — | — | |||||||||
Industrial REITs | 162,892 | 455,939 | — | |||||||||
Office REITs | 100,519 | 396,127 | — | |||||||||
Real Estate Operating Companies | — | 100,616 | — | |||||||||
Residential REITs | 104,653 | — | — | |||||||||
Retail REITs | 390,831 | 469,119 | — | |||||||||
Preferred Stocks | ||||||||||||
Diversified REITs | 303,451 | — | — | |||||||||
Hotel & Resort REITs | 190,540 | — | — | |||||||||
Industrial REITs | 78,900 | — | — | |||||||||
Office REITs | 52,000 | — | — | |||||||||
Retail REITs | 232,834 | — | — | |||||||||
Specialized REITs | 154,285 | — | — | |||||||||
Affiliated Mutual Fund | 57,531 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 3,848,982 | $ | 1,482,830 | $ | — | ||||||
|
|
|
|
|
|
It is the Fund’s policy to recognize transfers in and transfers out at the fair value as of the beginning of period. At the reporting period end, securities transferred levels as follows:
Investments in Securities | Amount Transferred | Level Transfer | Logic | |||||||||
Common Stocks | $ | 83,455 | L1 to L2 | Official Close to Model Price |
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of April 30, 2016 were as follows:
Retail REITs | 20.7 | % | ||
Health Care REITs | 19.6 | |||
Diversified REITs | 16.3 | |||
Industrial REITs | 13.2 | |||
Hotel & Resort REITs | 12.9 | |||
Office REITs | 10.4 | |||
Specialized REITs | 2.9 |
Residential REITs | 2.0 | % | ||
Real Estate Operating Companies | 1.9 | |||
Affiliated Mutual Fund | 1.1 | |||
|
| |||
101.0 | ||||
Liabilities in excess of other assets | (1.0 | ) | ||
|
| |||
100.0 | % | |||
|
|
See Notes to Financial Statements.
12 |
PRUDENTIAL INVESTMENTS, A PGIM BUSINESS | MUTUAL FUNDS
Statement of Assets and Liabilities, Statement of Operations and Statement of Changes in Net Assets (unaudited)
SEMIANNUAL REPORT | APRIL 30, 2016 |
Prudential Real Estate Income Fund
Statement of Assets & Liabilities (unaudited)
as of April 30, 2016
Assets | ||||
Investments at value: | ||||
Unaffiliated investments (cost $5,332,052) | $ | 5,274,281 | ||
Affiliated investments (cost $57,531) | 57,531 | |||
Dividends receivable | 16,195 | |||
Due from Manager | 13,364 | |||
Tax reclaim receivable | 1,519 | |||
Receivable for Fund shares sold | 940 | |||
Prepaid expenses | 207 | |||
|
| |||
Total assets | 5,364,037 | |||
|
| |||
Liabilities | ||||
Accrued expenses and other liabilities | 57,944 | |||
Payable for investments purchased | 24,099 | |||
Payable for Fund shares reacquired | 945 | |||
Distribution fee payable | 136 | |||
Affiliated transfer agent fee payable | 63 | |||
|
| |||
Total liabilities | 83,187 | |||
|
| |||
Net Assets | $ | 5,280,850 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 563 | ||
Paid-in capital in excess of par | 5,567,405 | |||
|
| |||
5,567,968 | ||||
Distributions in excess of net investment income | (69,444 | ) | ||
Accumulated net realized loss on investment and foreign currency transactions | (159,918 | ) | ||
Net unrealized depreciation on investments and foreign currencies | (57,756 | ) | ||
|
| |||
Net assets, April 30, 2016 | $ | 5,280,850 | ||
|
|
See Notes to Financial Statements.
14 |
Class A | ||||
Net asset value and redemption price per share, | $ | 9.38 | ||
Maximum sales charge (5.50% of offering price) | 0.55 | |||
|
| |||
Maximum offering price to public | $ | 9.93 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share, | ||||
$ | 9.38 | |||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share, | ||||
$ | 9.38 | |||
|
|
See Notes to Financial Statements.
Prudential Real Estate Income Fund | 15 |
Statement of Operations (unaudited)
Six Months Ended April 30, 2016
Net Investment Income | ||||
Income | ||||
Unaffiliated dividend income (net of foreign withholding taxes of $5,987) | $ | 121,709 | ||
Affiliated dividend income | 119 | |||
|
| |||
Total income | 121,828 | |||
|
| |||
Expenses | ||||
Management fee | 19,202 | |||
Distribution fee—Class A | 96 | |||
Distribution fee—Class C | 328 | |||
Registration fees | 51,000 | |||
Custodian and accounting fees | 32,000 | |||
Legal fees and expenses | 26,000 | |||
Audit fee | 14,000 | |||
Trustees’ fees | 6,000 | |||
Shareholders’ reports | 5,000 | |||
Transfer agent’s fees and expenses (including affiliated expense of $150) | 207 | |||
Miscellaneous | 3,778 | |||
|
| |||
Total expenses | 157,611 | |||
Less: Management fee waiver and/or expense reimbursement | (130,782 | ) | ||
Distribution fee waiver—Class A | (16 | ) | ||
|
| |||
Net expenses | 26,813 | |||
|
| |||
Net investment income | 95,015 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investments And Foreign Currency Transactions | ||||
Net realized loss on: | ||||
Investment transactions | (84,893 | ) | ||
Foreign currency transactions | (718 | ) | ||
|
| |||
(85,611 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 78,208 | |||
Foreign currencies | 93 | |||
|
| |||
78,301 | ||||
|
| |||
Net loss on investment and foreign currency transactions | (7,310 | ) | ||
|
| |||
Net Increase In Net Assets Resulting From Operations | $ | 87,705 | ||
|
|
See Notes to Financial Statements.
16 |
Statement of Changes in Net Assets (unaudited)
Six Months Ended April 30, 2016 | June 3, 2015* through October 31, 2015 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income | $ | 95,015 | $ | 82,612 | ||||
Net realized loss on investment and foreign currency transactions | (85,611 | ) | (70,663 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments and foreign currencies | 78,301 | (136,057 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 87,705 | (124,108 | ) | |||||
|
|
|
| |||||
Dividends from net investment income (Note 1) | ||||||||
Class A | (2,490 | ) | (434 | ) | ||||
Class C | (1,451 | ) | (155 | ) | ||||
Class Z | (174,718 | ) | (82,870 | ) | ||||
|
|
|
| |||||
(178,659 | ) | (83,459 | ) | |||||
|
|
|
| |||||
Fund share transactions (Note 6) | ||||||||
Net proceeds from shares sold | 271,928 | 5,055,945 | ||||||
Net asset value of shares issued in reinvestment of dividends and distributions | 178,549 | 83,459 | ||||||
Cost of shares reacquired | (10,510 | ) | — | |||||
|
|
|
| |||||
Net increase in net assets from Fund share transactions | 439,967 | 5,139,404 | ||||||
|
|
|
| |||||
Total increase | 349,013 | 4,931,837 | ||||||
Net Assets: | ||||||||
Beginning of period | 4,931,837 | — | ||||||
|
|
|
| |||||
End of period(a) | $ | 5,280,850 | $ | 4,931,837 | ||||
|
|
|
| |||||
(a) Includes undistributed net investment income of: | $ | — | $ | 14,200 | ||||
|
|
|
|
* | Commencement of operations. |
See Notes to Financial Statements.
Prudential Real Estate Income Fund | 17 |
Notes to Financial Statements (unaudited)
Prudential Investment Portfolios 9 (the “Trust”) is an open-end management investment company, registered under the Investment Company Act of 1940, as amended (“1940 Act”). The Trust currently consists of five portfolios: Prudential Select Real Estate, Prudential International Real Estate Fund, Prudential Real Estate Income Fund, Prudential QMA Large-Cap Core Equity Fund and Prudential Absolute Return Bond Fund. These financial statements relate only to Prudential Real Estate Income Fund (the “Fund”). The financial statements of the other portfolios are not presented herein.
The Fund commenced investment operations on June 3, 2015.
The investment objective of the Fund is to seek income and capital appreciation.
Note 1. Accounting Policies
The Fund follows investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The following accounting policies conform to U.S. generally accepted accounting principles. The Fund consistently follows such policies in the preparation of its financial statements.
Securities Valuation: The Fund holds securities and other assets 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 Board of Trustees (the “Board”) has adopted Valuation Procedures for security valuation under which fair valuation responsibilities have been delegated to Prudential Investments LLC (“PI” or “Manager”). Under the current Valuation Procedures, the established Valuation Committee is responsible for supervising the valuation of portfolio securities and other assets. 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.
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 table following the Portfolio of Investments.
Common and preferred stocks, exchange-traded funds, and derivative instruments such as futures or options that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange where the security
18 |
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.
Common and preferred stocks traded on foreign securities exchanges are valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy. The models generate an evaluated adjustment factor for each security, which can be applied to the local closing price to adjust it for post closing market movements. Utilizing that evaluated adjustment factor, the vendor provides an evaluated price to the extent that the valuation meets the established confidence level for each security. Such confidence level is a measure of the probability of a relationship between a given equity security and the factors used in the models. If the confidence level is not met or the vendor does not provide a model price, securities are valued in accordance with exchange-traded common and preferred stocks discussed above.
Participatory notes (P-notes) are generally valued based upon the value of a related underlying security that trades actively in the market and are classified as Level 2 in the fair value hierarchy.
Investments in open-end, non-exchange-traded mutual funds are generally valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the OTC market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors provide these prices after 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. Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.
Bank loans traded in the OTC market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors utilize broker/dealer quotations and provide prices based on the average of such quotations. Bank loans valued using such vendor prices are generally classified as Level 2 in the fair value hierarchy.
OTC derivative instruments are generally valued using pricing vendor services, which derive the valuation based on inputs such as underlying asset prices, indices, spreads, interest rates, and exchange rates. These instruments are categorized as Level 2 in the fair value hierarchy.
Prudential Real Estate Income Fund | 19 |
Notes to Financial Statements (unaudited) (continued)
Centrally cleared swaps listed or traded on a multilateral or trade facility platform, such as a registered exchange, are generally valued at the daily settlement price determined by the respective exchange. These securities are classified as Level 2 in the fair value hierarchy, as the daily settlement price is not public.
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 investment adviser regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values.
Foreign Currency Translation: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis:
(i) market value of investment securities, other assets and liabilities-at the current rates of exchange;
(ii) purchases and sales of investment securities, income and expenses-at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not generally isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities held at the end of the period. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of long-term 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. Notwithstanding the above, the Fund does isolate the effect of fluctuations in foreign currency exchange rates when determining the gain (loss) upon the sale or maturity of foreign currency denominated debt obligations; such amounts are included in net realized gains (losses) on foreign currency transactions.
20 |
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from holdings of foreign currencies, forward currency contracts, disposition of foreign currencies, currency realized between the trade date and settlement date on securities transactions, and the difference between the amounts of interest, dividends and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) from valuing foreign currency denominated assets and liabilities (other than investments) at period-end exchange rates are reflected as a component of net unrealized appreciation (depreciation) on investments and foreign currencies.
Concentration of Risk: Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin as a result of, among other factors, the possibility of political and economic instability, or the level of governmental supervision and regulation of foreign securities markets.
Securities 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 identified cost basis. Dividend income is recorded on the ex-date. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on the accrual basis. Expenses are recorded on an accrual basis, which may require the use of certain estimates by management that may differ from actual.
Net investment income or loss (other than distribution fees which are charged directly to the respective class) and unrealized and realized gains (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.
REITs: The Fund invests in real estate investment trusts (“REITs”), which report information on the source of their distributions annually. Based on current and historical information, a portion of distributions received from REITs during the period is estimated to be dividend income, capital gain or a return of capital and recorded accordingly. These estimates are adjusted periodically when the actual sources of distributions is disclosed by the REITs.
Dividends and Distributions: The Fund expects to pay dividends from net investment income quarterly. Distributions from net realized capital and currency gains, if any, are declared and paid annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations, may differ from generally accepted accounting principles, are recorded on the ex-date. Permanent book/tax differences relating to income and gains are reclassified amongst undistributed net investment income (loss), accumulated net realized gain (loss) and paid-in capital in excess of par, as appropriate.
Prudential Real Estate Income Fund | 21 |
Notes to Financial Statements (unaudited) (continued)
Taxes: For federal income tax purposes, the Fund is treated as a separate taxpaying entity. It is the Fund’s policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net investment income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required. Withholding taxes on foreign dividends are recorded, net of reclaimable amounts, at the time the related income is earned.
Estimates: The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
Note 2. Agreements
The Fund has a management agreement with PI. Pursuant to this agreement, PI has responsibility for all investment advisory services and supervises the subadviser’s performance of such services. PI has entered into a subadvisory agreement with PGIM Real Estate, formerly known as Prudential Real Estate Investors (“PREI”), which is a business unit of PGIM, Inc. The subadvisory agreement provides that PGIM Real Estate will furnish investment advisory services in connection with the management of the Fund. In connection therewith, PGIM Real Estate is obligated to keep certain books and records of the Fund. PI pays for the services of PGIM Real Estate, the cost of compensation of officers of the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears all other costs and expenses. Prior to January 4, 2016, PGIM, Inc. was known as Prudential Investment Management, Inc. (“PIM”).
Effective October 1, 2015, the management fee paid to PI is accrued daily and payable monthly at an annual rate of .80% of the Fund’s average daily net assets up to and including $1 billion, .78% of the next $2 billion, .76% of the next $2 billion, .75% of the next $5 billion and .74% of the Fund’s average daily net assets in excess of $10 billion. Prior to October 1, 2015, the management fee paid to PI was accrued daily and payable monthly at an annual rate of .80% of the Fund’s average daily net assets. For the six months ended April 30, 2016, the effective management fee rate before any waivers and/or expense reimbursement was 0.80%. For the period ended April 30, 2016, waivers and/or expense reimbursements exceeded the effective management fee.
The manager has contractually agreed through February 28, 2017 to limit the net annual operating expenses (exclusive of distribution and service (12b-1) fees, interest, taxes, acquired fund fees and expenses, brokerage, extraordinary and certain other expenses) of each class of shares of the Fund to 1.10% of the Fund’s average daily net assets.
22 |
The Fund has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”), which acts as the distributor of the Class A, Class C and Class Z shares of the Fund. The Fund compensates PIMS for distributing and servicing the Fund’s Class A and Class C shares, pursuant to plans of distribution (the “Class A and C 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 shares of the Fund.
Pursuant to the Class A and C Plans, the Fund compensates PIMS for distribution related activities at an annual rate of up to .30% and 1% of the average daily net assets of the Class A and C shares, respectively. The distributor has contractually agreed through February 28, 2017 to reduce its distribution and service (12b-1) fees for Class A shares to .25% of the average daily net assets of Class A shares.
PIMS has advised the Fund that it has received $3,038 in front-end sales charges resulting from sales of Class A shares during the six months ended April 30, 2016. From these fees, PIMS paid such sales charges to affiliated broker-dealers, which in turn paid commissions to salespersons and incurred other distribution costs.
PI, PIMS and PGIM, Inc. are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund’s transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
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 permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. Such transactions are subject to ratification by the Board.
The Fund invests in the Prudential Core Ultra Short Bond Fund, (formerly known as Prudential Core Taxable Money Market Fund, (the “Core Fund”), a portfolio of Prudential Investment Portfolios 2, registered under the 1940 Act and managed by PI. Earnings from the Core Fund are disclosed on the Statement of Operations as “Affiliated dividend income”.
Note 4. Portfolio Securities
Purchases and sales of portfolio securities, other than short-term investments, for the six months ended April 30, 2016, were $2,621,240 and $2,191,684, respectively.
Prudential Real Estate Income Fund | 23 |
Notes to Financial Statements (unaudited) (continued)
Note 5. Tax Information
The United States federal income tax basis of the Fund’s investments and the net unrealized depreciation as of April 30, 2016 were as follows:
Tax Basis | $ | 5,441,240 | ||
|
| |||
Appreciation | 155,062 | |||
Depreciation | (264,490 | ) | ||
|
| |||
Net Unrealized Depreciation | $ | (109,428 | ) | |
|
|
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 October 31, 2015 of approximately $37,000 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.
Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years and has concluded that no provision for income tax is required in the Fund’s financial statements for the current reporting period. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
Note 6. Capital
The Fund offers Class A, Class C and Class Z shares. Class A shares are sold with a front-end sales charge of up to 5.50%. All investors who purchase Class A shares in an amount of $1 million or more and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1%. The Class A shares CDSC is waived for purchases by certain retirement and/or benefit plans. Class C shares are sold with a CDSC of 1% on shares redeemed within the first 12 months of purchase. Class Z shares are not subject to any sales or redemption charge and are offered exclusively for a sale to a limited group of investors.
Under certain circumstances, an exchange may be made from specified share classes of the Fund to one or more other share classes of the Fund as presented in the table of transactions in shares of beneficial interest.
The Trust has authorized an unlimited number of shares of beneficial interest, $.001 par value per share, divided into three classes, designated Class A, Class C, and Class Z.
24 |
As of April 30, 2016, Prudential, through its affiliates, owned 1,054, 1,047 and 528,963 Class A, C and Z shares of the Fund, respectively.
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Six months ended April 30, 2016: | ||||||||
Shares sold | 14,302 | $ | 131,329 | |||||
Shares issued in reinvestment of dividends and distributions | 260 | 2,379 | ||||||
Shares reacquired | (1,134 | ) | (10,510 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 13,428 | $ | 123,198 | |||||
|
|
|
| |||||
Period ended October 31, 2015*: | ||||||||
Shares sold | 3,377 | $ | 33,048 | |||||
Shares issued in reinvestment of dividends and distributions | 45 | 434 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 3,422 | $ | 33,482 | |||||
|
|
|
| |||||
Class C | ||||||||
Six months ended April 30, 2016: | ||||||||
Shares sold | 12,871 | $ | 116,599 | |||||
Shares issued in reinvestment of dividends and distributions | 158 | 1,452 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 13,029 | $ | 118,051 | |||||
|
|
|
| |||||
Period ended October 31, 2015*: | ||||||||
Shares sold | 1,315 | $ | 12,897 | |||||
Shares issued in reinvestment of dividends and distributions | 16 | 155 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 1,331 | $ | 13,052 | |||||
|
|
|
| |||||
Class Z | ||||||||
Six months ended April 30, 2016: | ||||||||
Shares sold | 2,554 | $ | 24,000 | |||||
Shares issued in reinvestment of dividends and distributions | 19,465 | 174,718 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 22,019 | $ | 198,718 | |||||
|
|
|
| |||||
Period ended October 31, 2015*: | ||||||||
Shares sold | 501,000 | $ | 5,010,000 | |||||
Shares issued in reinvestment of dividends and distributions | 8,519 | 82,870 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 509,519 | $ | 5,092,870 | |||||
|
|
|
|
* | Commencement of operations was June 3, 2015. |
Note 7. Borrowings
The Fund, along with other affiliated registered investment companies (the “Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of $900 million for the period October 8, 2015 through October 6, 2016. The Funds pay an annualized commitment fee of .11% of the unused portion of the SCA. Prior to October 8, 2015, the Funds had another SCA that provided a
Prudential Real Estate Income Fund | 25 |
Notes to Financial Statements (unaudited) (continued)
commitment of $900 million and the Funds paid an annualized commitment fee of .075% of the unused portion of the SCA. Interest on any borrowings under the SCA is paid at contracted market rates. The Fund’s portion of the commitment fee for the unused amount is accrued daily and paid quarterly.
The Fund did not utilize the SCA during the six months ended April 30, 2016.
Note 8. New Accounting Pronouncements
In May 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-07 regarding “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share”. The amendments in this update are effective for the Fund for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. ASU No. 2015-07 will eliminate the requirement to categorize investments in the fair value hierarchy if their fair value is measured at net asset value (“NAV”) per share (or its equivalent) using the practical expedient in the FASB’s fair value measurement guidance. Management has evaluated the implications of ASU No. 2015-07 and it has been determined that there is no impact on the financial statement disclosures.
In January 2016, the FASB issued ASU No. 2016-01 regarding “Recognition and Measurement of Financial Assets and Financial Liabilities”. The new guidance is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The new standard affects all entities that hold financial assets or owe financial liabilities. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. At this time, management is evaluating the implications of ASU No. 2016-01 and its impact on the financial statements and disclosures has not yet been determined.
26 |
Financial Highlights (unaudited)
Class A Shares | ||||||||||
Six Months Ended April 30, 2016 | June 3, 2015(b) through October 31, 2015 | |||||||||
Per Share Operating Performance(c): | ||||||||||
Net Asset Value, Beginning Of Period | $9.59 | $10.00 | ||||||||
Income (loss) from investment operations: | ||||||||||
Net investment income (loss) | (.03 | ) | .13 | |||||||
Net realized and unrealized gain (loss) on investments | .15 | (.38 | ) | |||||||
Total from investment operations | .12 | (.25 | ) | |||||||
Less Dividends: | ||||||||||
Dividends from net investment income | (.33 | ) | (.16 | ) | ||||||
Net asset value, end of period | $9.38 | $9.59 | ||||||||
Total Return(a) | 1.41% | (2.55)% | ||||||||
Ratios/Supplemental Data: | ||||||||||
Net assets, end of period (000) | $158 | $33 | ||||||||
Average net assets (000) | $64 | $24 | ||||||||
Ratios to average net assets(d): | ||||||||||
Expense after waivers and/or expense reimbursement | 1.35% | (e) | 1.36% | (e) | ||||||
Expense before waivers and/or expense reimbursement | 6.43% | (e) | 9.50% | (e) | ||||||
Net investment income (loss) | (0.71)% | (e) | 3.15% | (e) | ||||||
Portfolio turnover rate | 45% | (f) | 98% | (f) |
(a) | Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions. Total return may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(b) | Commencement of operations. |
(c) | Calculated based on the average shares outstanding during the period. |
(d) | Does not include expenses of the underlying portfolios in which the Fund invests. |
(e) | Annualized. |
(f) | Not annualized. |
See Notes to Financial Statements.
Prudential Real Estate Income Fund | 27 |
Financial Highlights (unaudited) (continued)
Class C Shares | ||||||||||
Six Months Ended April 30, 2016 | June 3, 2015(b) through October 31, 2015 | |||||||||
Per Share Operating Performance(c): | ||||||||||
Net Asset Value, Beginning Of Period | $9.58 | $10.00 | ||||||||
Income (loss) from investment operations: | ||||||||||
Net investment income (loss) | (.02 | ) | .11 | |||||||
Net realized and unrealized gain (loss) on investments | .11 | (.40 | ) | |||||||
Total from investment operations | .09 | (.29 | ) | |||||||
Less Dividends: | ||||||||||
Dividends from net investment income | (.29 | ) | (.13 | ) | ||||||
Net asset value, end of period | $9.38 | $9.58 | ||||||||
Total Return(a) | 1.14% | (2.91)% | ||||||||
Ratios/Supplemental Data: | ||||||||||
Net assets, end of period (000) | $135 | $13 | ||||||||
Average net assets (000) | $66 | $11 | ||||||||
Ratios to average net assets(d): | ||||||||||
Expense after waivers and/or expense reimbursement | 2.10% | (e) | 2.13% | (e) | ||||||
Expense before waivers and/or expense reimbursement | 7.44% | (e) | 10.11% | (e) | ||||||
Net investment income (loss) | (0.42)% | (e) | 2.87% | (e) | ||||||
Portfolio turnover rate | 45% | (f) | 98% | (f) |
(a) | Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions. Total return may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(b) | Commencement of operations. |
(c) | Calculated based on the average shares outstanding during the period. |
(d) | Does not include expenses of the underlying portfolios in which the Fund invests. |
(e) | Annualized. |
(f) | Not annualized. |
See Notes to Financial Statements.
28 |
Class Z Shares | ||||||||||
Six Months Ended April 30, 2016 | June 3, 2015(b) through October 31, 2015 | |||||||||
Per Share Operating Performance(c): | ||||||||||
Net Asset Value, Beginning Of Period | $9.59 | $10.00 | ||||||||
Income (loss) from investment operations: | ||||||||||
Net investment income | .18 | .16 | ||||||||
Net realized and unrealized gain (loss) on investments | (.05 | ) | (.41 | ) | ||||||
Total from investment operations | .13 | (.25 | ) | |||||||
Less Dividends: | ||||||||||
Dividends from net investment income | (.34 | ) | (.16 | ) | ||||||
Net asset value, end of period | $9.38 | $9.59 | ||||||||
Total Return(a) | 1.54% | (2.47)% | ||||||||
Ratios/Supplemental Data: | ||||||||||
Net assets, end of period (000) | $4,988 | $4,886 | ||||||||
Average net assets (000) | $4,697 | $4,868 | ||||||||
Ratios to average net assets(d): | ||||||||||
Expense after waivers and/or expense reimbursement | 1.10% | (e) | 1.10% | (e) | ||||||
Expense before waivers and/or expense reimbursement | 6.56% | (e) | 8.98% | (e) | ||||||
Net investment income | 4.08% | (e) | 4.08% | (e) | ||||||
Portfolio turnover rate | 45% | (f) | 98% | (f) |
(a) | Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions. Total return may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(b) | Commencement of operations. |
(c) | Calculated based on the average shares outstanding during the period. |
(d) | Does not include expenses of the underlying portfolios in which the Fund invests. |
(e) | Annualized. |
(f) | Not annualized. |
See Notes to Financial Statements.
Prudential Real Estate Income Fund | 29 |
n MAIL | n TELEPHONE | n WEBSITE | ||
655 Broad Street Newark, NJ 07102 | (800) 225-1852 | www.prudentialfunds.com |
PROXY VOTING |
The Board of Trustees of the Fund has delegated to the Fund’s investment subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at www.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 • Keith F. Hartstein • Michael S. Hyland • Stuart S. Parker • Richard A. Redeker • Stephen G. Stoneburn • Grace C. Torres |
OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • M. Sadiq Peshimam, Treasurer and Principal Financial and Accounting Officer • Raymond A. O’Hara, Chief Legal Officer • Deborah A. Docs, Secretary • Chad A. Earnst, Chief Compliance Officer • Theresa C. Thompson, Deputy Chief Compliance Officer • Richard W. Kinville, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • Amanda S. Ryan, Assistant Secretary • Andrew R. French, Assistant Secretary • Peter Parrella, Assistant Treasurer • Lana Lomuti, Assistant Treasurer • Linda McMullin, Assistant Treasurer • Kelly A. Coyne, Assistant Treasurer |
MANAGER | Prudential Investments LLC | 655 Broad Street Newark, NJ 07102 | ||
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INVESTMENT SUBADVISER | PGIM Real Estate | 7 Giralda Farms | ||
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DISTRIBUTOR | Prudential Investment Management Services LLC | 655 Broad Street Newark, NJ 07102 | ||
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CUSTODIAN | The Bank of New York Mellon | One Wall Street New York, NY 10286 | ||
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TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
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FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 | ||
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An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go to www.prudentialfunds.com/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH TRUSTEES |
Shareholders can communicate directly with the Board of Trustees by writing to the Chair of the Board, Prudential Real Estate Income Fund, Prudential Investments, Attn: Board of Trustees, 655 Broad Street, Newark, NJ 07102. Shareholders can communicate directly with an individual Trustee by writing to the same address. Communications are not screened before being delivered to the addressee. |
AVAILABILITY OF PORTFOLIO SCHEDULE |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation and location of the Public Reference Room may be obtained by calling (202) 551-8090. The Fund’s schedule of portfolio holdings is also available on the Fund’s website as of the end of each month no sooner than 15 days after the end of the month. |
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PRUDENTIAL REAL ESTATE INCOME FUND
SHARE CLASS | A | C | Z | |||
NASDAQ | PRKAX | PRKCX | PRKZX | |||
CUSIP | 74441J761 | 74441J753 | 74441J746 |
MF228E2 0293033-00001-00
Item 2 – | Code of Ethics – Not required, as this is not an annual filing. |
Item 3 – | Audit Committee Financial Expert – Not required, as this is not an annual filing. |
Item 4 – | Principal Accountant Fees and Services – Not required, as this is not an annual filing. |
Item 5 – | Audit Committee of Listed Registrants – Not applicable. |
Item 6 – | Schedule of Investments – The schedule is included as part of the report to shareholders filed under Item 1 of this Form. |
Item 7 – | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not applicable. |
Item 8 – | Portfolio Managers of Closed-End Management Investment Companies – Not applicable. |
Item 9 – | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not applicable. |
Item 10 – | Submission of Matters to a Vote of Security Holders – Not applicable. |
Item 11 – | Controls and Procedures |
(a) | It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure. |
(b) | There has been no significant change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter of the period covered by this report that has materially affected, or is likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12 – | Exhibits |
(a) | (1) Code of Ethics – Not required, as this is not an annual filing. |
(2) | Certifications pursuant to Section 302 of the Sarbanes-Oxley Act – Attached hereto as Exhibit EX-99.CERT. |
(3) | Any written solicitation to purchase securities under Rule 23c-1. – Not applicable. |
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act – Attached hereto as Exhibit EX-99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: | Prudential Investment Portfolios 9 | |
By: | /s/ Deborah A. Docs | |
Deborah A. Docs | ||
Secretary | ||
Date: | June 17, 2016 |
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: | June 17, 2016 | |
By: | /s/ M. Sadiq Peshimam | |
M. Sadiq Peshimam | ||
Treasurer and Principal Financial and Accounting Officer | ||
Date: | June 17, 2016 |