UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
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Investment Company Act file number: | | 811-09805 |
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Exact name of registrant as specified in charter: | | Prudential Investment Portfolios 3 |
(This Form N-CSR relates solely to the Registrant’s PGIM Real Assets Fund, PGIM Global Dynamic Bond Fund and PGIM Wadhwani Systematic Absolute Return Fund (each a “Fund” and collectively the “Funds”))
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Address of principal executive offices: | | 655 Broad Street, 6th Floor |
| | Newark, New Jersey 07102 |
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Name and address of agent for service: | | Andrew R. French |
| | 655 Broad Street, 6th Floor |
| | Newark, New Jersey 07102 |
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Registrant’s telephone number, including area code: | | 800-225-1852 |
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Date of fiscal year end: | | 10/31/2022 |
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Date of reporting period: | | 10/31/2022 |
Item 1 – Reports to Stockholders
PGIM REAL ASSETS FUND
ANNUAL REPORT
OCTOBER 31, 2022
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Table of Contents
This report presents the consolidated results of the PGIM Real Assets Fund and the PGIM Real Assets Subsidiary, Ltd.
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.
Mutual funds are distributed by Prudential Investment Management Services LLC, a Prudential Financial company, member SIPC. PGIM Quantitative Solutions LLC, a wholly owned subsidiary of PGIM, Inc. (PGIM), is a registered investment adviser and Prudential Financial company. © 2022 Prudential Financial, Inc. and its related entities. PGIM and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
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Letter from the President
| | |
| | Dear Shareholder: We hope you find the annual report for the PGIM Real Assets Fund informative and useful. The report covers performance for the 12-month period that ended October 31, 2022. The attention of the global economy and financial markets pivoted during the period from the COVID-19 pandemic to the challenge of rapidly rising inflation. While job growth remained strong, prices for a wide range of goods and services rose in response to economic re-openings, supply-chain disruptions, governmental stimulus, and Russia’s invasion of Ukraine. With inflation surging to a 40-year high, the Federal Reserve and other central banks aggressively hiked interest rates, prompting recession concerns. |
After rising to record levels at the end of 2021, stocks have fallen sharply in 2022 as investors worried about higher prices, slowing economic growth, geopolitical uncertainty, and new COVID-19 outbreaks. Equities rallied for a time during the summer but began falling again in late August on fears that the Fed would keep raising rates to tame inflation. For the entire 12-month period, equities suffered a broad-based global decline, although large-cap US stocks outperformed their small-cap counterparts. International developed and emerging markets trailed the US market during this time.
Rising rates and economic uncertainty drove fixed income prices broadly lower as well. US and global investment-grade bonds, along with US high yield corporate bonds and emerging market debt, all posted negative returns during the period.
Regarding your investments with PGIM, we believe it is important to maintain a diversified portfolio of funds consistent with your tolerance for risk, time horizon, and financial goals. Your financial advisor can help you create a diversified investment plan that may include funds covering all the basic asset classes and that reflects your personal investor profile and risk tolerance. However, diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
At PGIM Investments, we provide access to active investment strategies across the global markets in the pursuit of consistent outperformance for investors. PGIM is the world’s 11th-largest investment manager with more than $1.5 trillion in assets under management. Our scale and investment expertise allow us to deliver a diversified suite of actively managed solutions across a broad spectrum of asset classes and investment styles.
Thank you for choosing our family of funds.
Sincerely,
Stuart S. Parker, President
PGIM Real Assets Fund
December 15, 2022
PGIM Real Assets 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 pgim.com/investments or by calling (800) 225-1852.
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| | Average Annual Total Returns as of 10/31/22 |
| | One Year (%) | | Five Years (%) | | Ten Years (%) | | Since Inception (%) |
| | | | |
Class A | | | | | | | | |
| | | | |
(with sales charges) | | -9.73 | | 3.85 | | 2.04 | | — |
| | | | |
(without sales charges) | | -4.47 | | 5.04 | | 2.62 | | — |
| | | | |
Class C | | | | | | | | |
| | | | |
(with sales charges) | | -6.06 | | 4.29 | | 1.87 | | — |
| | | | |
(without sales charges) | | -5.22 | | 4.29 | | 1.87 | | — |
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Class Z | | | | | | | | |
| | | | |
(without sales charges) | | -4.27 | | 5.41 | | 2.93 | | — |
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Class R6 | | | | | | | | |
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(without sales charges) | | -4.06 | | 5.52 | | N/A | | 3.18 (01/23/2015) |
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Customized Blend Index | | | | | | | | |
| | | | |
| | -8.91 | | 3.72 | | 1.44 | | — |
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Bloomberg US TIPS Index | | | | | | | | |
| | | | |
| | -11.48 | | 2.16 | | 1.02 | | — |
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|
Average Annual Total Returns as of 10/31/22 Since Inception (%) |
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| | Class R6 (01/23/2015) |
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Customized Blend Index | | 2.32 |
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Bloomberg US TIPS Index | | 1.64 |
Since Inception returns are provided for any share class with less than 10 fiscal years of returns. Since Inception returns for the Indexes are measured from the closest month-end to the class’s inception date.
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Growth of a $10,000 Investment (unaudited)
The graph compares a $10,000 investment in the Fund’s Class Z shares with a similar investment in the Customized Blend Index and the Bloomberg US TIPS Index, by portraying the initial account values at the beginning of the 10-year period for Class Z shares (October 31, 2012) and the account values at the end of the current fiscal year (October 31, 2022), as measured on a quarterly basis. For purposes of the graph, and unless otherwise indicated, it has been assumed that (a) all recurring fees (including management fees) were deducted and (b) all dividends and distributions were reinvested. The line graph provides information for Class Z shares only. As indicated in the tables provided earlier, performance for other share classes will vary due to the differing fees and expenses applicable to each share class (as indicated in the following paragraphs). Without waiver of fees and/or expense reimbursements, if any, the returns would have been lower.
Past performance does not predict future performance. Total returns and the ending account values in the graphs include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown. The Fund’s total returns do not reflect the deduction of income taxes on an individual’s investment. Taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares.
PGIM Real Assets Fund 5
Your Fund’s Performance (continued)
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.
| | | | | | | | |
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| | Class A | | Class C | | Class Z | | Class R6 |
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Maximum initial sales charge | | 5.50% of the public offering price | | None | | None | | None |
Contingent deferred sales charge (CDSC) (as a percentage of the lower of the original purchase price or the net asset value at redemption) | | 1.00% on sales of $1 million or more made within 12 months of purchase | | 1.00% on sales made within 12 months of purchase | | None | | None |
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | | 0.30% (0.25% currently) | | 1.00% | | None | | None |
Benchmark Definitions
Customized Blend Index—The Customized Blend Index (Customized Blend) is a model portfolio consisting of the Bloomberg Commodity Index (33.3%), Morgan Stanley Capital International (MSCI) World Real Estate Net Dividend Index (33.3%), and Bloomberg US TIPS Index (33.3%). Each component of the Customized Blend is an unmanaged index generally considered as representing the performance of the Fund’s asset classes. The Customized Blend is intended to provide a theoretical comparison of the Fund’s performance, based on the amounts allocated to each asset class rather than on amounts allocated to various Fund segments. The Bloomberg Commodity Index is a diversified benchmark for the commodity futures market. It is composed of futures contracts on 19 physical commodities traded on US exchanges, with the exception of aluminum, nickel, and zinc, which trade on the London Metal Exchange (LME). The MSCI World Real Estate Net Dividend Index is a sub-index of the MSCI World Index and represents only securities in the GICS Real Estate Industry Group. The Net Dividend version of the MSCI World Real Estate Index reflects the impact of the maximum withholding taxes on reinvested dividends.
Bloomberg US TIPS Index—The Bloomberg US Treasury Inflation-Protected Securities Index (TIPS Index) is an unmanaged index that consists of inflation-protected securities issued by the US Treasury.
Investors cannot invest directly in an index. The returns for the Indexes would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes that may be paid by an investor.
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Presentation of Fund Holdings as of 10/31/22
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Top Largest Holdings | | Asset Class | | % of Net Assets |
| | |
PGIM Quant Solutions Commodity Strategies Fund | | Commodity | | 23.7% |
| | |
PGIM TIPS Fund | | TIPS | | 22.3% |
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PGIM Jennison Global Infrastructure Fund | | Utilities/Infrastructure | | 12.9% |
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PGIM Jennison MLP Fund | | Master Limited Partnerships (MLPs) | | 10.8% |
| | |
PGIM Jennison Natural Resources Fund | | Natural Resources | | 8.9% |
| | |
PGIM Global Real Estate Fund | | Real Estate | | 8.5% |
| | |
PGIM Select Real Estate Fund | | Real Estate | | 8.4% |
| | |
iShares Gold Trust | | Exchange-Traded Products | | 3.3% |
Holdings reflect only long-term investments and are subject to change.
PGIM Real Assets Fund 7
Strategy and Performance Overview* (unaudited)
How did the Fund perform?
The PGIM Real Assets Fund’s Class Z shares returned –4.27% in the 12-month reporting period that ended October 31, 2022, outperforming the –11.48% return of the Bloomberg US TIPS Index and the – 8.91% return of the Customized Blend Index (the Index). The Customized Blend Index is a model portfolio consisting of the Bloomberg Commodity Index (33.3%), the Morgan Stanley Capital International World Real Estate Net Dividend Index (33.3%), and the Bloomberg US TIPS Index (33.3%).
What were the market conditions?
· | | It was a challenging reporting period across markets as global bonds and risk assets experienced sizeable drawdowns driven by persistent inflationary pressures, hawkish global central banks, and the Russia/Ukraine war. |
· | | Much of the market weakness was driven by global central banks’ laser-beam focus on trying to stem increasing inflation by aggressively hiking interest rates, even at the risk of creating substantial economic pain. The US Federal Reserve (Fed) signaled its intention to do whatever it takes to bring inflation down. |
· | | The US dollar powered ahead despite elevated valuations, driven by the Fed’s aggressive rate hiking posture and the risk averse sentiment in markets. |
· | | Commodity markets outperformed as the war in Ukraine tightened oil, gas, and food supplies, sending energy and agricultural prices higher and further exacerbating global inflationary pressures. |
· | | The US economy suffered two consecutive quarters of negative GDP growth in the first half of 2022, but this downturn has not yet been designated by the National Bureau of Economic Research as an “official” US recession, probably because most other economic indicators remained strong, and third quarter GDP was positive. |
· | | Following the sharp declines in stock prices in the first half of 2022, global equity markets rebounded early in the third quarter, but generally gave back most of their gains by the end of the period. |
· | | As of the end of the period, inflation had not declined as policymakers had anticipated, prompting central banks to become increasingly hawkish. |
What worked?
· | | Relative to the Index, the Fund was overweight commodity-oriented assets, with significant exposures to broad commodities, global natural resource stocks, and midstream energy master limited partnerships (MLPs), all of which saw large, positive returns during the reporting period. |
· | | The Fund was significantly underweight global real estate investment trusts (REITs) and Treasury inflation-protected securities (TIPS)—Index exposures that posted large, negative returns for the period. |
· | | Tactically, an off-Index position in global infrastructure stocks benefited the Fund, given the sector’s outperformance relative to the Index. |
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· | | Among underlying funds, the PGIM Jennison Global Natural Resources Fund and the PGIM Quantitative Solutions Commodity Strategies Fund outperformed their respective benchmarks by sizeable margins—a tailwind for performance. |
What didn’t work?
· | | An off-Index allocation, albeit limited, to gold detracted from the Fund’s performance as gold experienced negative absolute returns during the reporting period. |
· | | Among underlying funds, the PGIM Global Real Estate Fund, PGIM Jennison MLP Fund and PGIM Jennison Global Infrastructure Fund all lagged their benchmarks, detracting from relative performance. |
Did the Fund use derivatives?
· | | The Fund did not use any derivative instruments at the Fund level, although the sub-advisors of the underlying funds may use them, as is permitted in managing their respective strategies. More specifically, both the PGIM Quantitative Solutions Gold asset class and the PGIM Quantitative Solutions Commodity asset class use futures in obtaining exposure to various commodity markets. |
· | | The PGIM Quantitative Solutions Commodity asset class closely tracks the Bloomberg Commodity Index, a diversified benchmark for the commodity futures markets composed of futures contracts on 19 physical commodities. This asset class exhibits a performance profile similar to this Index and is composed entirely of near-dated futures contracts. Derivatives are core holdings of this asset class and are not an off-index position. There is no additional impact from holding derivatives beyond the core investment mandate. |
· | | The PGIM Quantitative Solutions Gold asset class closely tracks the price of gold and may opportunistically invest in other precious metals. Similar to the broader commodity investment complex, this is achieved by purchasing futures contracts for primarily one physical commodity—gold. Historically, this asset class has also purchased silver futures contracts. There is no additional impact from holding derivatives beyond tracking the gold and other precious metals, near-dated futures prices. |
Current outlook
· | | Aggressive monetary policy tightening, sky-high energy prices in Europe, mounting inflation, and heightened geopolitical risk have all raised the specter of a global recession. |
· | | Measured inflation remains high in most major developed economies and did not decline as expected late in the reporting period, even as weaker commodity prices relieved some pressure. |
· | | While equities have already experienced the type of declines one might expect from a mild recession, still-larger declines remain a real possibility given the odds of monetary policy over-tightening (and thus more significant economic contraction) in the current inflationary environment. |
PGIM Real Assets Fund 9
Strategy and Performance Overview* (continued)
· | | PGIM Quantitative Solutions believes commodities are attractive as an inexpensive inflation hedge. In addition, tight energy markets lend additional support to commodity returns. Although secular forces support rising commodity prices, the prices are at risk in the event of a global recession. |
· | | Given this environment, PGIM Quantitative Solutions remains bullish on the outlook for real assets, such as natural resources stocks, MLPs, and commodities. |
· | | PGIM Quantitative Solutions sees dimmer prospects for real estate and fixed income, sectors in which the Fund holds underweight positions relative to the Index. |
*This strategy and performance overview, which discusses what strategies or holdings (including derivatives, if applicable) affected the Fund’s performance, is compiled based on how the Fund performed relative to the Fund’s benchmark index and is viewed for performance attribution purposes at the aggregate Fund level, which in most instances will not directly correlate to the amounts disclosed in the Statement of Operations which conform to US generally accepted accounting principles.
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Fees and Expenses (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 held through the six-month period ended October 31, 2022. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of PGIM funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information
PGIM Real Assets Fund 11
Fees and Expenses (continued)
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.
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PGIM Real Assets Fund | | Beginning Account Value May 1, 2022 | | Ending Account Value October 31, 2022 | | Annualized Expense Ratio Based on the Six-Month Period | | Expenses Paid During the Six-Month Period* |
| | | | | |
Class A | | Actual | | $1,000.00 | | $ 898.50 | | 1.29% | | $ 6.17 |
| | | | | |
| | Hypothetical | | $1,000.00 | | $1,018.70 | | 1.29% | | $ 6.56 |
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Class C | | Actual | | $1,000.00 | | $ 895.20 | | 2.02% | | $ 9.65 |
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| | Hypothetical | | $1,000.00 | | $1,015.02 | | 2.02% | | $10.26 |
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Class Z | | Actual | | $1,000.00 | | $ 899.90 | | 1.01% | | $ 4.84 |
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| | Hypothetical | | $1,000.00 | | $1,020.11 | | 1.01% | | $ 5.14 |
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Class R6 | | Actual | | $1,000.00 | | $ 901.40 | | 0.85% | | $ 4.07 |
| | | | | |
| | Hypothetical | | $1,000.00 | | $1,020.92 | | 0.85% | | $ 4.33 |
*Fund expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by the 184 days in the six-month period ended October 31, 2022, and divided by the 365 days in the Fund’s fiscal year ended October 31, 2022 (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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Consolidated Schedule of Investments
as of October 31, 2022
| | | | | | | | |
| | |
Description | | Shares | | | Value | |
| | |
LONG-TERM INVESTMENTS 98.8% | | | | | | | | |
| | |
AFFILIATED MUTUAL FUNDS 95.5% | | | | | | | | |
| | |
PGIM Global Real Estate Fund (Class R6) | | | 778,205 | | | $ | 13,128,323 | |
PGIM Jennison Global Infrastructure Fund (Class R6) | | | 1,386,393 | | | | 19,977,923 | |
PGIM Jennison MLP Fund (Class R6) | | | 2,327,316 | | | | 16,826,493 | |
PGIM Jennison Natural Resources Fund (Class R6) | | | 233,722 | | | | 13,812,978 | |
PGIM Quant Solutions Commodity Strategies Fund (Class R6) | | | 3,765,132 | | | | 36,747,685 | |
PGIM Select Real Estate Fund (Class R6) | | | 1,216,260 | | | | 12,977,492 | |
PGIM TIPS Fund (Class R6) | | | 4,030,962 | | | | 34,545,343 | |
| | | | | | | | |
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TOTAL AFFILIATED MUTUAL FUNDS (cost $145,224,693)(wd) | | | | | | | 148,016,237 | |
| | | | | | | | |
| | |
EXCHANGE-TRADED FUND 3.3% | | | | | | | | |
iShares Gold Trust* (cost $5,662,596)(bb) | | | 165,920 | | | | 5,140,202 | |
| | | | | | | | |
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TOTAL LONG-TERM INVESTMENTS (cost $150,887,289) | | | | | | | 153,156,439 | |
| | | | | | | | |
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SHORT-TERM INVESTMENT 1.6% | | | | | | | | |
| | |
AFFILIATED MUTUAL FUND | | | | | | | | |
PGIM Core Ultra Short Bond Fund (cost $2,471,356)(bb)(wd) | | | 2,471,356 | | | | 2,471,356 | |
| | | | | | | | |
| | |
TOTAL INVESTMENTS 100.4% (cost $153,358,645) | | | | | | | 155,627,795 | |
Liabilities in excess of other assets (0.4)% | | | | | | | (575,064 | ) |
| | | | | | | | |
| | |
NET ASSETS 100.0% | | | | | | $ | 155,052,731 | |
| | | | | | | | |
Below is a list of the abbreviation(s) used in the annual report:
USD—US Dollar
ETF—Exchange-Traded Fund
LIBOR—London Interbank Offered Rate
MLP—Master Limited Partnership
OTC—Over-the-counter
SOFR—Secured Overnight Financing Rate
TIPS—Treasury Inflation-Protected Securities
* | Non-income producing security. |
(bb) | Represents security, or a portion thereof, held in the Cayman Subsidiary. |
(wd) | PGIM Investments LLC, the manager of the Fund, also serves as the manager of the underlying funds in which the Fund invests. |
See Notes to Consolidated Financial Statements.
PGIM Real Assets Fund 13
Consolidated Schedule of Investments (continued)
as of October 31, 2022
Fair Value Measurements:
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—unadjusted quoted prices generally in active markets for identical securities.
Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other observable inputs.
Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of October 31, 2022 in valuing such portfolio securities:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | |
Investments in Securities | | | | | | | | | | | | | | | | | | | | | | | | |
Assets | | | | | | | | | | | | | | | | | | | | | | | | |
Long-Term Investments | | | | | | | | | | | | | | | | | | | | | | | | |
Affiliated Mutual Funds | | $ | 148,016,237 | | | | | | | | $— | | | | | | | | $— | | | | | |
Exchange-Traded Fund | | | 5,140,202 | | | | | | | | — | | | | | | | | — | | | | | |
Short-Term Investment | | | | | | | | | | | | | | | | | | | | | | | | |
Affiliated Mutual Fund | | | 2,471,356 | | | | | | | | — | | | | | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Total | | $ | 155,627,795 | | | | | | | | $— | | | | | | | | $— | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Fund Composition:
The fund composition of investments (excluding derivatives) and liabilities in excess of other assets shown as a percentage of net assets as of October 31, 2022 were as follows (unaudited):
| | | | |
Commodity | | | 23.7 | % |
TIPS | | | 22.3 | |
Real Estate | | | 16.9 | |
Utilities/Infrastructure | | | 12.9 | |
Master Limited Partnerships (MLPs) | | | 10.8 | |
Natural Resources | | | 8.9 | |
Exchange-Traded Fund | | | 3.3 | |
Short Term | | | 1.6 | |
| | | | |
| |
| | | 100.4 | |
Liabilities in excess of other assets | | | (0.4 | ) |
| | | | |
| |
| | | 100.0 | % |
| | | | |
Effects of Derivative Instruments on the Financial Statements and Primary Underlying Risk Exposure:
The Fund invested in derivative instruments during the reporting period. The primary type of risk associated with these derivative instruments is commodity contracts risk. See the Notes to Consolidated Financial Statements for additional detail regarding these derivative instruments and their risks. The effect of such derivative instruments on the Fund’s financial
See Notes to Consolidated Financial Statements.
14
position and financial performance as reflected in the Consolidated Statement of Assets and Liabilities and Consolidated Statement of Operations is presented in the summary below.
The Fund did not hold any derivative instruments as of October 31, 2022, accordingly, no derivative positions were presented in the Statement of Assets and Liabilities.
| | | | | | |
Amount of Realized Gain (Loss) on Derivatives Recognized in Income | |
| | |
Derivatives not accounted for as hedging instruments, carried at fair value | | | | Futures | |
| | |
Commodity contracts | | | | $ | (23,374 | ) |
| | | | | | |
| | | | | | | | | | | | | | | | |
Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Income | |
| | | | | |
Derivatives not accounted for as hedging instruments, carried at fair value | | | | | | | | | | Futures | | | |
| | | | | |
Commodity contracts | | | | | | | | | | | | $9,404 | | | | |
| | | | | | | | | | | | | | | | |
For the year ended October 31, 2022, the Fund’s average volume of derivative activities is as follows:
| | |
Derivative Contract Type | | Average Volume of Derivative Activities* |
Futures Contracts - Long Positions (1) | | $202,339 |
* | Average volume is based on average quarter end balances as noted for the year ended October 31, 2022. |
(1) | Notional Amount in USD. |
See Notes to Consolidated Financial Statements.
PGIM Real Assets Fund 15
Consolidated Statement of Assets and Liabilities
as of October 31, 2022
| | | | |
| |
Assets | | | | |
| |
Investments at value: | | | | |
Unaffiliated investments (cost $5,662,596) | | $ | 5,140,202 | |
Affiliated investments (cost $147,696,049) | | | 150,487,593 | |
Receivable for Fund shares sold | | | 238,268 | |
Due from Manager | | | 37,383 | |
Prepaid expenses | | | 1,337 | |
| | | | |
| |
Total Assets | | | 155,904,783 | |
| | | | |
| |
Liabilities | | | | |
| |
Payable for Fund shares purchased | | | 730,267 | |
Accrued expenses and other liabilities | | | 62,439 | |
Audit fee payable | | | 52,000 | |
Distribution fee payable | | | 4,569 | |
Affiliated transfer agent fee payable | | | 1,727 | |
Trustees’ fees payable | | | 996 | |
Dividends payable | | | 54 | |
| | | | |
| |
Total Liabilities | | | 852,052 | |
| | | | |
| |
Net Assets | | $ | 155,052,731 | |
| | | | |
| |
| | | | |
| |
Net assets were comprised of: | | | | |
Shares of beneficial interest, at par | | $ | 16,237 | |
Paid-in capital in excess of par | | | 171,383,625 | |
Total distributable earnings (loss) | | | (16,347,131 | ) |
| | | | |
| |
Net assets, October 31, 2022 | | $ | 155,052,731 | |
| | | | |
See Notes to Consolidated Financial Statements.
16
| | | | | | | | |
| | |
Class A | | | | | | | | |
| | |
Net asset value and redemption price per share, ($10,171,417 ÷ 1,066,943 shares of beneficial interest issued and outstanding) | | $ | 9.53 | | | | | |
Maximum sales charge (5.50% of offering price) | | | 0.55 | | | | | |
| | | | | | | | |
| | |
Maximum offering price to public | | $ | 10.08 | | | | | |
| | | | | | | | |
| | |
Class C | | | | | | | | |
| | |
Net asset value, offering price and redemption price per share, ($2,874,495 ÷ 304,457 shares of beneficial interest issued and outstanding) | | $ | 9.44 | | | | | |
| | | | | | | | |
| | |
Class Z | | | | | | | | |
| | |
Net asset value, offering price and redemption price per share, ($85,298,396 ÷ 8,927,454 shares of beneficial interest issued and outstanding) | | $ | 9.55 | | | | | |
| | | | | | | | |
| | |
Class R6 | | | | | | | | |
| | |
Net asset value, offering price and redemption price per share, ($56,708,423 ÷ 5,938,523 shares of beneficial interest issued and outstanding) | | $ | 9.55 | | | | | |
| | | | | | | | |
See Notes to Consolidated Financial Statements.
PGIM Real Assets Fund 17
Consolidated Statement of Operations
Year Ended October 31, 2022
| | | | |
| |
Net Investment Income (Loss) | | | | |
| |
Income | | | | |
Affiliated dividend income | | $ | 12,685,806 | |
Unaffiliated dividend income | | | 12,414 | |
| | | | |
| |
Total income | | | 12,698,220 | |
| | | | |
| |
Expenses | | | | |
Management fee | | | 898,758 | |
Distribution fee(a) | | | 46,680 | |
Transfer agent’s fees and expenses (including affiliated expense of $22,632)(a) | | | 122,193 | |
Custodian and accounting fees | | | 95,369 | |
Registration fees(a) | | | 78,613 | |
Audit fee | | | 52,000 | |
Legal fees and expenses | | | 35,515 | |
Shareholders’ reports | | | 29,387 | |
Trustees’ fees | | | 11,353 | |
Miscellaneous | | | 22,394 | |
| | | | |
| |
Total expenses | | | 1,392,262 | |
Less: Fee waiver and/or expense reimbursement(a) | | | (1,051,147 | ) |
Distribution fee waiver(a) | | | (4,625 | ) |
| | | | |
| |
Net expenses | | | 336,490 | |
| | | | |
| |
Net investment income (loss) | | | 12,361,730 | |
| | | | |
| |
Realized And Unrealized Gain (Loss)On Investments | | | | |
| |
Net realized gain (loss) on: | | | | |
Investment transactions (including affiliated of $(4,607,406)) | | | (5,123,189 | ) |
Affiliated net capital gain distributions received | | | 3,355,708 | |
Futures transactions | | | (23,374 | ) |
| | | | |
| |
| | | (1,790,855 | ) |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | |
Investments (including affiliated of $(22,048,132)) | | | (22,570,749 | ) |
Futures | | | 9,404 | |
| | | | |
| |
| | | (22,561,345 | ) |
| | | | |
| |
Net gain (loss) on investment transactions | | | (24,352,200 | ) |
| | | | |
| |
Net Increase (Decrease) In Net Assets Resulting From Operations | | $ | (11,990,470 | ) |
| | | | |
(a) | Class specific expenses and waivers were as follows: |
| | | | | | | | | | | | | | | | |
| | Class A | | Class C | | Class Z | | Class R6 |
Distribution fee | | | 27,747 | | | | 18,933 | | | | — | | | | — | |
Transfer agent’s fees and expenses | | | 15,638 | | | | 3,132 | | | | 102,742 | | | | 681 | |
Registration fees | | | 16,878 | | | | 13,832 | | | | 33,625 | | | | 14,278 | |
Fee waiver and/or expense reimbursement | | | (78,814 | ) | | | (26,248 | ) | | | (553,038 | ) | | | (393,047 | ) |
Distribution fee waiver | | | (4,625 | ) | | | — | | | | — | | | | — | |
See Notes to Consolidated Financial Statements.
18
Consolidated Statements of Changes in Net Assets
| | | | | | | | |
| |
| | Year Ended October 31, | |
| | | | |
| | |
| | 2022 | | | 2021 | |
| | |
Increase (Decrease) in Net Assets | | | | | | | | |
| | |
Operations | | | | | | | | |
Net investment income (loss) | | $ | 12,361,730 | | | $ | 1,303,340 | |
Net realized gain (loss) on investment transactions | | | (5,146,563 | ) | | | (259,209 | ) |
Affiliated net capital gain distributions received | | | 3,355,708 | | | | 233,636 | |
Net change in unrealized appreciation (depreciation) on investments | | | (22,561,345 | ) | | | 24,109,451 | |
| | | | | | | | |
| | |
Net increase (decrease) in net assets resulting from operations | | | (11,990,470 | ) | | | 25,387,218 | |
| | | | | | | | |
| | |
Dividends and Distributions | | | | | | | | |
Distributions from distributable earnings | | | | | | | | |
Class A | | | (901,285 | ) | | | (284,273 | ) |
Class C | | | (85,421 | ) | | | (50,905 | ) |
Class Z | | | (7,494,153 | ) | | | (3,222,924 | ) |
Class R6 | | | (6,178,597 | ) | | | (2,024,274 | ) |
| | | | | | | | |
| | |
| | | (14,659,456 | ) | | | (5,582,376 | ) |
| | | | | | | | |
Tax return of capital distributions | | | | | | | | |
Class A | | | (19,829 | ) | | | — | |
Class C | | | (1,879 | ) | | | — | |
Class Z | | | (164,878 | ) | | | — | |
Class R6 | | | (135,935 | ) | | | — | |
| | | | | | | | |
| | |
| | | (322,521 | ) | | | — | |
| | | | | | | | |
| | |
Fund share transactions (Net of share conversions) | | | | | | | | |
Net proceeds from shares sold | | | 153,193,402 | | | | 29,735,415 | |
Net asset value of shares issued in reinvestment of dividends and distributions | | | 14,980,895 | | | | 5,582,026 | |
Cost of shares purchased | | | (102,433,411 | ) | | | (31,372,465 | ) |
| | | | | | | | |
| | |
Net increase (decrease) in net assets from Fund share transactions | | | 65,740,886 | | | | 3,944,976 | |
| | | | | | | | |
| | |
Total increase (decrease) | | | 38,768,439 | | | | 23,749,818 | |
| | |
Net Assets: | | | | | | | | |
| | |
Beginning of year | | | 116,284,292 | | | | 92,534,474 | |
| | | | | | | | |
| | |
End of year | | $ | 155,052,731 | | | $ | 116,284,292 | |
| | | | | | | | |
See Notes to Consolidated Financial Statements.
PGIM Real Assets Fund 19
Consolidated Financial Highlights
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Class A Shares | | | | | | | | | | | | | | | | | | | | |
| | Year Ended October 31, | |
| | | | | |
| | 2022 | | | 2021 | | | 2020 | | | 2019 | | | 2018 | |
| | | | | |
Per Share Operating Performance(a): | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Year | | | $11.31 | | | | $9.37 | | | | $9.74 | | | | $8.98 | | | | $9.44 | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | | 0.84 | | | | 0.10 | | | | 0.11 | | | | 0.13 | | | | 0.14 | |
Net realized and unrealized gain (loss) on investment transactions | | | (1.29 | ) | | | 2.37 | | | | (0.26 | ) | | | 0.81 | | | | (0.44 | ) |
Total from investment operations | | | (0.45 | ) | | | 2.47 | | | | (0.15 | ) | | | 0.94 | | | | (0.30 | ) |
Less Dividends and Distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (1.27 | ) | | | (0.28 | ) | | | (0.16 | ) | | | (0.18 | ) | | | (0.16 | ) |
Tax return of capital distributions | | | (0.02 | ) | | | - | | | | - | | | | - | | | | (- | )(b) |
Distributions from net realized gains | | | (0.04 | ) | | | (0.25 | ) | | | (0.06 | ) | | | - | | | | - | |
Total dividends and distributions | | | (1.33 | ) | | | (0.53 | ) | | | (0.22 | ) | | | (0.18 | ) | | | (0.16 | ) |
Net asset value, end of year | | | $9.53 | | | | $11.31 | | | | $9.37 | | | | $9.74 | | | | $8.98 | |
Total Return(c): | | | (4.47 | )% | | | 27.18 | % | | | (1.61 | )% | | | 10.55 | % | | | (3.25 | )% |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000) | | | $10,171 | | | | $7,448 | | | | $4,694 | | | | $4,719 | | | | $5,487 | |
Average net assets (000) | | | $9,249 | | | | $6,059 | | | | $4,479 | | | | $5,438 | | | | $6,032 | |
Ratios to average net assets(d): | | | | | | | | | | | | | | | | | | | | |
Expenses after waivers and/or expense reimbursement | | | 0.54 | % | | | 0.53 | % | | | 0.86 | % | | | 0.85 | % | | | 0.77 | % |
Expenses before waivers and/or expense reimbursement | | | 1.44 | % | | | 1.44 | % | | | 2.12 | % | | | 1.57 | % | | | 1.77 | % |
Net investment income (loss) | | | 8.17 | % | | | 0.92 | % | | | 1.14 | % | | | 1.43 | % | | | 1.50 | % |
Portfolio turnover rate(e) | | | 43 | % | | | 30 | % | | | 96 | % | | | 60 | % | | | 77 | % |
(a) | Calculated based on average shares outstanding during the year. |
(b) | Amount rounds to zero. |
(c) | Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any).If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
20
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Class C Shares | | | | | | | | | | | | | | | | | | | | |
| | Year Ended October 31, | |
| | | | | |
| | 2022 | | | 2021 | | | 2020 | | | 2019 | | | 2018 | |
| | | | | |
Per Share Operating Performance(a): | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Year | | | $11.22 | | | | $9.30 | | | | $9.68 | | | | $8.93 | | | | $9.39 | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | | 0.35 | | | | 0.01 | | | | 0.04 | | | | 0.07 | | | | 0.07 | |
Net realized and unrealized gain (loss) on investment transactions | | | (0.88 | ) | | | 2.37 | | | | (0.25 | ) | | | 0.79 | | | | (0.43 | ) |
Total from investment operations | | | (0.53 | ) | | | 2.38 | | | | (0.21 | ) | | | 0.86 | | | | (0.36 | ) |
Less Dividends and Distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (1.19 | ) | | | (0.21 | ) | | | (0.11 | ) | | | (0.11 | ) | | | (0.10 | ) |
Tax return of capital distributions | | | (0.02 | ) | | | - | | | | - | | | | - | | | | (- | )(b) |
Distributions from net realized gains | | | (0.04 | ) | | | (0.25 | ) | | | (0.06 | ) | | | - | | | | - | |
Total dividends and distributions | | | (1.25 | ) | | | (0.46 | ) | | | (0.17 | ) | | | (0.11 | ) | | | (0.10 | ) |
Net asset value, end of year | | | $9.44 | | | | $11.22 | | | | $9.30 | | | | $9.68 | | | | $8.93 | |
Total Return(c): | | | (5.22 | )% | | | 26.32 | % | | | (2.26 | )% | | | 9.75 | % | | | (3.93 | )% |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000) | | | $2,874 | | | | $613 | | | | $1,163 | | | | $1,486 | | | | $1,783 | |
Average net assets (000) | | | $1,893 | | | | $789 | | | | $1,340 | | | | $1,620 | | | | $2,178 | |
Ratios to average net assets(d): | | | | | | | | | | | | | | | | | | | | |
Expenses after waivers and/or expense reimbursement | | | 1.29 | % | | | 1.29 | % | | | 1.58 | % | | | 1.56 | % | | | 1.49 | % |
Expenses before waivers and/or expense reimbursement | | | 2.68 | % | | | 2.64 | % | | | 3.40 | % | | | 2.45 | % | | | 2.70 | % |
Net investment income (loss) | | | 3.44 | % | | | 0.11 | % | | | 0.41 | % | | | 0.72 | % | | | 0.78 | % |
Portfolio turnover rate(e) | | | 43 | % | | | 30 | % | | | 96 | % | | | 60 | % | | | 77 | % |
(a) | Calculated based on average shares outstanding during the year. |
(b) | Amount rounds to zero. |
(c) | Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any).If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
PGIM Real Assets Fund 21
Consolidated Financial Highlights (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Class Z Shares | | | | | | | | | | | | | | | | | | | | |
| | Year Ended October 31, | |
| | | | | |
| | 2022 | | | 2021 | | | 2020 | | | 2019 | | | 2018 | |
| | | | | |
Per Share Operating Performance(a): | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Year | | | $11.34 | | | | $9.39 | | | | $9.75 | | | | $8.99 | | | | $9.45 | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | | 0.84 | | | | 0.13 | | | | 0.15 | | | | 0.16 | | | | 0.17 | |
Net realized and unrealized gain (loss) on investment transactions | | | (1.27 | ) | | | 2.38 | | | | (0.26 | ) | | | 0.81 | | | | (0.44 | ) |
Total from investment operations | | | (0.43 | ) | | | 2.51 | | | | (0.11 | ) | | | 0.97 | | | | (0.27 | ) |
Less Dividends and Distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (1.30 | ) | | | (0.31 | ) | | | (0.19 | ) | | | (0.21 | ) | | | (0.19 | ) |
Tax return of capital distributions | | | (0.02 | ) | | | - | | | | - | | | | - | | | | (- | )(b) |
Distributions from net realized gains | | | (0.04 | ) | | | (0.25 | ) | | | (0.06 | ) | | | - | | | | - | |
Total dividends and distributions | | | (1.36 | ) | | | (0.56 | ) | | | (0.25 | ) | | | (0.21 | ) | | | (0.19 | ) |
Net asset value, end of year | | | $9.55 | | | | $11.34 | | | | $9.39 | | | | $9.75 | | | | $8.99 | |
Total Return(c): | | | (4.27 | )% | | | 27.70 | % | | | (1.18 | )% | | | 10.94 | % | | | (2.91 | )% |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000) | | | $85,298 | | | | $58,290 | | | | $56,307 | | | | $64,495 | | | | $79,349 | |
Average net assets (000) | | | $77,910 | | | | $57,988 | | | | $58,559 | | | | $67,444 | | | | $85,493 | |
Ratios to average net assets(d): | | | | | | | | | | | | | | | | | | | | |
Expenses after waivers and/or expense reimbursement | | | 0.25 | % | | | 0.19 | % | | | 0.50 | % | | | 0.49 | % | | | 0.42 | % |
Expenses before waivers and/or expense reimbursement | | | 0.96 | % | | | 0.95 | % | | | 1.11 | % | | | 1.07 | % | | | 0.99 | % |
Net investment income (loss) | | | 8.14 | % | | | 1.23 | % | | | 1.58 | % | | | 1.76 | % | | | 1.83 | % |
Portfolio turnover rate(e) | | | 43 | % | | | 30 | % | | | 96 | % | | | 60 | % | | | 77 | % |
(a) | Calculated based on average shares outstanding during the year. |
(b) | Amount rounds to zero. |
(c) | Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
22
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Class R6 Shares | | | | | | | | | | | | | | | | | | | | |
| | Year Ended October 31, | |
| | | | | |
| | 2022 | | | 2021 | | | 2020 | | | 2019 | | | 2018 | |
| | | | | |
Per Share Operating Performance(a): | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Year | | | $11.33 | | | | $9.38 | | | | $9.75 | | | | $8.98 | | | | $9.44 | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | | 0.96 | | | | 0.14 | | | | 0.13 | | | | 0.17 | | | | 0.18 | |
Net realized and unrealized gain (loss) on investment transactions | | | (1.37 | ) | | | 2.38 | | | | (0.24 | ) | | | 0.82 | | | | (0.44 | ) |
Total from investment operations | | | (0.41 | ) | | | 2.52 | | | | (0.11 | ) | | | 0.99 | | | | (0.26 | ) |
Less Dividends and Distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (1.31 | ) | | | (0.32 | ) | | | (0.20 | ) | | | (0.22 | ) | | | (0.20 | ) |
Tax return of capital distributions | | | (0.02 | ) | | | - | | | | - | | | | - | | | | (- | )(b) |
Distributions from net realized gains | | | (0.04 | ) | | | (0.25 | ) | | | (0.06 | ) | | | - | | | | - | |
Total dividends and distributions | | | (1.37 | ) | | | (0.57 | ) | | | (0.26 | ) | | | (0.22 | ) | | | (0.20 | ) |
Net asset value, end of year | | | $9.55 | | | | $11.33 | | | | $9.38 | | | | $9.75 | | | | $8.98 | |
Total Return(c): | | | (4.06 | )% | | | 27.78 | % | | | (1.18 | )% | | | 11.15 | % | | | (2.85 | )% |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000) | | | $56,708 | | | | $49,933 | | | | $30,370 | | | | $27,530 | | | | $44,822 | |
Average net assets (000) | | | $56,304 | | | | $40,677 | | | | $28,578 | | | | $42,776 | | | | $64,112 | |
Ratios to average net assets(d): | | | | | | | | | | | | | | | | | | | | |
Expenses after waivers and/or expense reimbursement | | | 0.12 | % | | | 0.11 | % | | | 0.41 | % | | | 0.40 | % | | | 0.36 | % |
Expenses before waivers and/or expense reimbursement | | | 0.82 | % | | | 0.87 | % | | | 1.04 | % | | | 0.98 | % | | | 0.92 | % |
Net investment income (loss) | | | 9.23 | % | | | 1.31 | % | | | 1.42 | % | | | 1.88 | % | | | 1.93 | % |
Portfolio turnover rate(e) | | | 43 | % | | | 30 | % | | | 96 | % | | | 60 | % | | | 77 | % |
(a) | Calculated based on average shares outstanding during the year. |
(b) | Amount rounds to zero. |
(c) | Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
PGIM Real Assets Fund 23
Notes to Consolidated Financial Statements
Prudential Investment Portfolios 3 (the “Registered Investment Company” or “RIC”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company. The RIC is organized as a Delaware Statutory Trust. These consolidated financial statements relate only to the PGIM Real Assets Fund (the “Fund”), a series of the RIC. The Fund is classified as a diversified fund for purposes of the 1940 Act.
The investment objective of the Fund is to seek long-term real return.
The Fund wholly owns and controls the PGIM Real Assets Subsidiary, Ltd. (the “Cayman Subsidiary”), a company organized under the laws of the Cayman Islands. The Cayman Subsidiary is not registered as an investment company under the 1940 Act. The consolidated financial statements of the Fund include the financial results of the Cayman Subsidiary. The Fund gains exposure to the real asset classes by investing in varying combinations of other PGIM mutual funds (the “Underlying Funds”); the Cayman Subsidiary; and direct investments in various other securities.
In accordance with the accounting rules relating to reporting of a wholly-owned subsidiary, the Consolidated Schedule of Investments includes positions of the Fund and the Cayman Subsidiary. These consolidated financial statements include the accounts of the Fund and the Cayman Subsidiary. All significant inter-company balances and transactions between the Fund and the Cayman Subsidiary have been eliminated in consolidation. The Fund will seek to gain exposure to commodities, commodities-related instruments, derivatives and other investments by directly investing in those instruments or through investments in the Cayman Subsidiary. The Cayman Subsidiary participates in the same investment objective as the Fund. The Cayman Subsidiary pursues its investment objective by investing in commodities, commodities-related instruments, derivatives and other investments. The Cayman Subsidiary (unlike the Fund) may invest without limitation in these instruments. However, the Cayman Subsidiary is otherwise subject to the same investment restrictions and limitations, and follows the same compliance policies and procedures as the Fund.
As of October 31, 2022, the Cayman Subsidiary had net assets of $5,156,669 representing 3.33% of the Fund’s net assets.
The Fund’s disclosures and operations are subject to compliance with applicable regulations governing commodity pools including Commodity Futures Trading Commission “CFTC” rules.
24
The Fund and the Cayman Subsidiary (collectively hereafter, the “Fund”) follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 946 Financial Services — Investment Companies. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform to U.S. generally accepted accounting principles (“GAAP”). The Fund consistently follows such policies in the preparation of its consolidated financial statements.
Securities Valuation: The Fund holds securities and other assets and liabilities that are fair valued as of the close of each day (generally, 4:00 PM Eastern time) the New York Stock Exchange (“NYSE”) is open for trading. As described in further detail below, the Fund’s investments are valued daily based on a number of factors, including the type of investment and whether market quotations are readily available. The Board of Trustees (the “Board”) has approved the Fund’s valuation policies and procedures for security valuation and designated to PGIM Investments LLC (“PGIM Investments” or the “Manager”) as the Valuation Designee pursuant to SEC Rule 2a-5(b) to perform the fair value determination relating to all Fund investments. Pursuant to the Board’s oversight, the Valuation Designee has established a Valuation Committee to perform the duties and responsibilities as valuation designee under SEC Rule 2a-5. 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. 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. A record of the Valuation Committee’s actions is provided to the Board at the first quarterly meeting following the quarter in which such actions take place.
For the fiscal reporting year-end, securities and other assets and liabilities were fair valued at the close of the last U.S. business day. Trading in certain foreign securities may occur when the NYSE is closed (including weekends and holidays). Because such foreign securities trade in markets that are open on weekends and U.S. holidays, the values of some of the Fund’s foreign investments may change on days when investors cannot purchase or redeem Fund shares.
Various inputs determine how the Fund’s investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the Consolidated Schedule of Investments and referred to herein as the “fair value hierarchy” in accordance with FASB ASC Topic 820 - Fair Value Measurement.
Common or preferred stocks, exchange-traded funds and derivative instruments, if applicable, that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange where the security principally trades. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price, they are classified as Level 1 in the fair value hierarchy. In the event that no sale or official closing
PGIM Real Assets Fund 25
Notes to Consolidated Financial Statements (continued)
price on valuation date exists, these securities are generally valued at the mean between the last reported bid and ask prices, or at the last bid price in the absence of an ask price. These securities are classified as Level 2 in the fair value hierarchy.
Investments in open-end funds (other than exchange-traded funds) are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the OTC market are generally classified as Level 2 in the fair value hierarchy. Such fixed income securities are typically valued using the market approach which generally involves obtaining data from an approved independent third-party vendor source. The Fund utilizes the market approach as the primary method to value securities when market prices of identical or comparable instruments are available. The third-party vendors’ valuation techniques used to derive the evaluated bid price are based on evaluating observable inputs, including but not limited to, yield curves, yield spreads, credit ratings, deal terms, tranche level attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations and reported trades. Certain Level 3 securities are also valued using the market approach when obtaining a single broker quote or when utilizing transaction prices for identical securities that have been used in excess of five business days. During the reporting period, there were no changes to report with respect to the valuation approach and/or valuation techniques discussed above.
Securities and other assets that cannot be priced according to the methods described above are valued based on policies and procedures 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. Altering one or more unobservable inputs may result in a significant change to a Level 3 security’s fair value measurement.
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 Valuation Designee regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other unaffiliated mutual funds to calculate their net asset values.
26
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 exchange rate as of the valuation date;
(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 unrealized and realized foreign currency gains (losses) are included in the reported net change in unrealized appreciation (depreciation) on investments and net realized gains (losses) on investment transactions on the Statements of Operations.
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from the disposition of holdings of foreign currencies, currency gains (losses) realized between the trade and settlement dates on investment transactions, and the difference between the amounts of interest, dividends and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) arise from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates.
Commodities: The Fund gains exposure to commodity markets through direct investment of the Fund’s assets or through the Cayman Subsidiary. The Fund gains exposure to the commodity markets primarily through exchange-traded futures on commodities held by the Cayman Subsidiary. The Fund may invest up to 25% of its total assets in the Cayman Subsidiary. The Cayman Subsidiary may invest in commodity investments without limit. The Fund invests in the Cayman Subsidiary in order to gain exposure to commodities within the limitations of the federal tax law requirements applicable to regulated investment companies such as the Fund. The Fund may invest directly in commodity-linked structured notes (CLNs). The Fund may also gain direct exposure to commodities through direct investment in certain exchange-traded funds (ETFs) whose returns are linked to commodities or commodity indices within the limit of applicable tax law. Commodities are assets that have tangible properties, such as oil, agriculture products and precious metals. The value of commodities may be affected by, among other things, changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargos, tariffs and international economic, political and regulatory developments. These factors may have a larger impact on commodity prices and commodity linked instruments
PGIM Real Assets Fund 27
Notes to Consolidated Financial Statements (continued)
than on traditional securities. Certain commodities are also subject to limited pricing flexibility because of supply and demand factors. Others are subject to broad price fluctuations as a result of the volatility of the prices for certain raw materials and the instability of supplies of other materials. These additional variables may create additional risks which subject the Fund’s investments to greater volatility than investments in traditional securities.
Financial/Commodity Futures Contracts: A 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 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 Consolidated Statement of Operations as net realized gain (loss) on futures transactions.
The Fund invested in futures contracts in order to hedge its existing portfolio securities, or securities the Fund intends to purchase, against fluctuations in value caused by changes in prevailing interest rates. Should interest rates move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. The Fund invested in commodity futures contracts in order to hedge or gain exposure to commodity markets. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets. Since futures contracts are exchange-traded, there is minimal counterparty credit risk to the Fund since the exchanges’ clearinghouse acts as counterparty to all exchange-traded futures and guarantees the futures contracts against default.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains (losses) from investment and currency transactions are calculated on the specific identification method. Dividend income is recorded on the ex-date, or for certain foreign securities, when the Fund becomes aware of such dividends. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on the accrual basis. Expenses are recorded on an accrual basis, which may require the use of certain estimates by management that may differ from actual. Net investment income or loss (other than class specific expenses and waivers, which are allocated as noted below) and unrealized and realized gains (losses) are allocated daily to each class of shares based upon the relative proportion of adjusted net assets of each class at the beginning of the day. Class specific expenses and waivers, where applicable, are charged to the respective share classes. Such class specific expenses and
28
waivers include distribution fees and distribution fee waivers, shareholder servicing fees, transfer agent’s fees and expenses, registration fees and fee waivers and/or expense reimbursements, as applicable.
Taxes: It is the Fund’s policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net investment income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required. Withholding taxes on foreign dividends, interest and capital gains, if any, are recorded, net of reclaimable amounts, at the time the related income is earned.
Dividends and Distributions: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from GAAP, are recorded on the ex-date. Permanent book/tax differences relating to income and gain (loss) are reclassified between total distributable earnings (loss) and paid-in capital in excess of par, as appropriate. The chart below sets forth the expected frequency of dividend and capital gains distributions to shareholders. Various factors may impact the frequency of dividend distributions to shareholders, including but not limited to adverse market conditions or portfolio holding-specific events.
| | |
| |
Expected Distribution Schedule to Shareholders* | | Frequency |
Net Investment Income | | Quarterly |
Short-Term Capital Gains | | Annually |
Long-Term Capital Gains | | Annually |
* | Under certain circumstances, the Fund may make more than one distribution of short-term and/or long-term capital gains during a fiscal year. |
Estimates: The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. Actual results could differ from those estimates.
The RIC, on behalf of the Fund, has a management agreement with the Manager pursuant to which it has responsibility for all investment advisory services and supervises the subadviser’s performance of such services, and pursuant to which it renders administrative services.
The Manager has entered into a subadvisory agreement with PGIM Quantitative Solutions LLC (“PGIM Quantitative Solutions” or the “subadviser”). The Manager pays for the services of the subadviser.
PGIM Real Assets Fund 29
Notes to Consolidated Financial Statements (continued)
Fees payable under the management agreement are computed daily and paid monthly. For the reporting period ended October 31, 2022, the contractual and effective management fee rates were as follows:
| | |
| |
Contractual Management Rate* | | Effective Management Fee, before any waivers and/or expense reimbursements |
0.60% of average daily net assets up to $3 billion; | | 0.62% |
0.58% of average daily net assets from $3 billion to $5 billion; | | |
0.57% of average daily net assets from $5 billion to $10 billion; | | |
0.56% of average daily net assets over $10 billion | | |
* | Including the Cayman Subsidiary’s assets. Additionally, the Cayman Subsidiary has entered into a separate management agreement with the Manager whereby the Manager provides advisory and other services to the Cayman Subsidiary substantially similar to the services provided by the Manager to the Fund as discussed above. In consideration for these services, the Cayman Subsidiary pays the Manager a monthly fee at the same annual rates as disclosed in the table above. The Manager has contractually agreed to waive any management fee it receives from the Fund in an amount equal to the management fees paid by the Cayman Subsidiary. This waiver may not be terminated without prior approval of the Fund’s Board as long as the Fund remains invested or intends to invest in the Cayman Subsidiary. The Manager also has entered into a Subadvisory Agreement with PGIM Quantitative Solutions, relating to the Cayman Subsidiary. |
The Manager has contractually agreed, through February 29, 2024, to limit total annual operating expenses and acquired fund fees and expenses after fee waivers and/or expense reimbursements. This contractual waiver excludes interest, brokerage, taxes (such as income and foreign withholding taxes, stamp duty and deferred tax expenses (including acquired fund taxes)), extraordinary expenses, and certain other expenses of the Fund such as dividend and interest expense and broker charges on short sales.
Where applicable, the Manager agrees to waive management fees or shared operating expenses on any share class to the same extent that it waives such expenses on any other share class. In addition, total annual operating expenses for Class R6 shares will not exceed total annual operating expenses for Class Z shares. Fees and/or expenses waived and/or reimbursed by the Manager for the purpose of preventing the expenses from exceeding a certain expense ratio limit may be recouped by the Manager within the same fiscal year during which such waiver and/or reimbursement is made if such recoupment can be realized without exceeding the expense limit in effect at the time of the recoupment for the fiscal year. The expense limitations attributable to each class are as follows:
| | | | |
| |
Class | | Expense Limitations* | |
A | | | 0.85% | |
C | | | 0.85 | |
Z | | | 0.85 | |
R6 | | | 0.85 | |
30
*Expense limitation excludes distribution and service (12b-1) fees, shareholder service fee, and transfer agency expenses (including sub-transfer agency and networking fees).
The RIC, on behalf of the Fund, has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”), which acts as the distributor of the Class A, Class C, Class Z and Class R6 shares of the Fund. The Fund compensates PIMS for distributing and servicing the Fund’s Class A and Class C shares, pursuant to the plans of distribution (the “Distribution Plans”), regardless of expenses actually incurred by PIMS.
Pursuant to the Distribution Plans, the Fund compensates PIMS for distribution related activities at an annual rate based on average daily net assets per class. PIMS has contractually agreed through February 29, 2024 to limit such fees on certain classes based on the average daily net assets. The distribution fees are accrued daily and payable monthly.
The Fund’s annual gross and net distribution rate, where applicable, are as follows:
| | | | |
| | |
Class | | Gross Distribution Fee | | Net Distribution Fee |
| | |
A | | 0.30% | | 0.25% |
| | |
C | | 1.00 | | 1.00 |
| | |
Z | | N/A | | N/A |
| | |
R6 | | N/A | | N/A |
For the year ended October 31, 2022, PIMS received front-end sales charges (“FESL”) resulting from sales of certain class shares and contingent deferred sales charges (“CDSC”) imposed upon redemptions by certain shareholders. From these fees, PIMS paid such sales charges to broker-dealers, who in turn paid commissions to salespersons and incurred other distribution costs. The sales charges are as follows where applicable:
| | | | | | | | |
| | |
Class | | FESL | | | CDSC | |
| | |
A | | $ | 59,088 | | | | $ — | |
| | |
C | | | — | | | | 876 | |
PGIM Investments, PIMS and PGIM Quantitative Solutions are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
4. | Other Transactions with Affiliates |
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PGIM Investments and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund’s transfer agent and shareholder servicing agent. Transfer agent’s fees and expenses in the Consolidated Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
The Fund may invest its overnight sweep cash in the PGIM Core Ultra Short Bond Fund (the “Core Fund”), a fund of Prudential Investment Portfolios 2, registered under the 1940 Act and managed by PGIM Investments. PGIM Investments and/or its affiliates are paid fees or reimbursed for providing their services to the Core Fund. In addition to the realized and
PGIM Real Assets Fund 31
Notes to Consolidated Financial Statements (continued)
unrealized gains on investments in the Core Fund and other affiliated mutual funds, earnings from such investments are disclosed on the Consolidated Statement of Operations as “Affiliated dividend income”.
The Fund may enter into certain securities purchase or sale transactions under Board approved Rule 17a-7 procedures. Rule 17a-7 is an exemptive rule under the 1940 Act, that subject to certain conditions, permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors/trustees, and/or common officers. For the year ended October 31, 2022, no 17a-7 transactions were entered into by the Fund.
The aggregate cost of purchases and proceeds from sales of portfolio securities (excluding short-term investments and U.S. Government securities) for the reporting period ended October 31, 2022, were as follows:
| | |
| |
Cost of Purchases | | Proceeds from Sales |
$126,281,600 | | $60,991,423 |
A summary of the cost of purchases and proceeds from sales of shares of affiliated mutual funds for the year ended October 31, 2022, is presented as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Value, Beginning of Year | | | Cost of Purchases | | | Proceeds from Sales | | | Change in Unrealized Gain (Loss) | | | Realized Gain (Loss) | | | Value, End of Year | | | Shares, End of Year | | | Dividend Income | | | Capital Gain Distributions |
| |
| Long-Term Investments - Affiliated Mutual Funds(wd): | | | | | |
| | | |
| PGIM Floating Rate Income Fund (Class R6)(1) | | | | | | | | | | | | | |
| | | | | | | | |
| $ 3,387,141 | | | $ | 3,850,172 | | | $ | 6,921,043 | | | $ | (11,049 | ) | | $ | (305,221 | ) | | $ | — | | | | — | | | $ | 94,261 | | | $ | — | |
| | | |
| PGIM Global Real Estate Fund (Class R6) | | | | | | | | | | | | | |
| | | | | | | | |
| 13,904,978 | | | | 12,655,262 | | | | 5,712,650 | | | | (6,236,779 | ) | | | (1,482,488 | ) | | | 13,128,323 | | | | 778,205 | | | | 539,124 | | | | 1,948,038 | |
| | |
| PGIM Jennison Global Infrastructure Fund (Class R6) | | | | | | | | | |
| | | | | | | | |
| 12,327,281 | | | | 17,196,081 | | | | 6,411,600 | | | | (2,996,306 | ) | | | (137,533 | ) | | | 19,977,923 | | | | 1,386,393 | | | | 230,270 | | | | 583,712 | |
| | |
| PGIM Jennison MLP Fund (Class R6)(1) | | | | | | | | | |
| | | | | | | | |
| 11,897,716 | | | | 7,907,407 | | | | 4,628,037 | ** | | | 1,625,629 | | | | 23,778 | | | | 16,826,493 | | | | 2,327,316 | | | | 415,345 | ** | | | — | |
| | |
| PGIM Jennison Natural Resources Fund (Class R6)(1) | | | | | | | | | |
| 9,923,127 | | | | 7,060,993 | | | | 4,995,000 | | | | 2,171,022 | | | | (347,164 | ) | | | 13,812,978 | | | | 233,722 | | | | 108,393 | | | | — | |
32
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Value, Beginning of Year | | | Cost of Purchases | | | Proceeds from Sales | | | Change in Unrealized Gain (Loss) | | | Realized Gain (Loss) | | | Value, End of Year | | | Shares, End of Year | | | Dividend Income | | | Capital Gain Distributions |
| |
| PGIM Quant Solutions Commodity Strategies Fund (Class R6)(1) | | | | | |
| | | | | | | | |
| $ 28,687,546 | | | $ | 27,511,877 | | | $ | 12,232,600 | | | $ | (6,266,114 | ) | | $ | (953,024 | ) | | $ | 36,747,685 | | | | 3,765,132 | | | $ | 8,840,877 | | | $ | — | |
| |
| PGIM Select Real Estate Fund (Class R6) | | | | | |
| | | | | | | | |
| 13,896,855 | | | | 10,876,237 | | | | 5,909,550 | | | | (4,964,285 | ) | | | (921,765 | ) | | | 12,977,492 | | | | 1,216,260 | | | | 352,246 | | | | 466,790 | |
| |
| PGIM Short Duration High Yield Income Fund (Class R6)(1) | | | | | |
| | | | | | | | |
| 3,387,293 | | | | 149,551 | | | | 3,506,392 | | | | (215,616 | ) | | | 185,164 | | | | — | | | | — | | | | 36,740 | | | | — | |
| | | | |
| PGIM TIPS Fund (Class R6) | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| 17,468,162 | | | | 26,940,118 | | | | 4,039,150 | | | | (5,154,634 | ) | | | (669,153 | ) | | | 34,545,343 | | | | 4,030,962 | | | | 2,042,950 | | | | 357,168 | |
| | | | | | | | |
| $114,880,099 | | | $ | 114,147,698 | | | $ | 54,356,022 | | | $ | (22,048,132 | ) | | $ | (4,607,406 | ) | | $ | 148,016,237 | | | | | | | $ | 12,660,206 | | | $ | 3,355,708 | |
| | |
| Short-Term Investments - Affiliated Mutual Fund(wd): | | | | | | | | | |
| |
| PGIM Core Ultra Short Bond Fund(1)(bb) | | | | | |
| | | | | | | | |
| $ 1,035,371 | | | $ | 109,217,299 | | | $ | 107,781,314 | | | $ | — | | | $ | — | | | $ | 2,471,356 | | | | 2,471,356 | | | $ | 25,600 | | | $ | — | |
| $115,915,470 | | | $ | 223,364,997 | | | $ | 162,137,336 | | | $ | (22,048,132 | ) | | $ | (4,607,406 | ) | | $ | 150,487,593 | | | | | | | $ | 12,685,806 | | | $ | 3,355,708 | |
** | Amount includes return of capital distribution. |
(1) | The Fund did not have any capital gain distributions during the reporting period. |
(bb) | Represents security, or a portion thereof, held in the Cayman Subsidiary. |
(wd) | PGIM Investments LLC, the manager of the Fund, also serves as the manager of the underlying funds in which the Fund invests. |
6. | Distributions and Tax Information |
Distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from GAAP, are recorded on the ex-date.
For the year ended October 31, 2022, the tax character of dividends paid by the Fund were $14,515,002 of ordinary income, $144,454 of long-term capital gains and $322,521 of tax return of capital. For the year ended October 31, 2021, the tax character of dividends paid by the Fund were $3,102,799 of ordinary income and $2,479,577 of long-term capital gains.
As of October 31, 2022, there were no accumulated undistributed earnings on a tax basis.
The United States federal income tax basis of the Fund’s investments and the net unrealized depreciation as of October 31, 2022 were as follows:
| | | | | | |
| | | |
Tax Basis | | Gross Unrealized Appreciation | | Gross Unrealized Depreciation | | Net Unrealized Depreciation |
$171,974,872 | | $14,803,737 | | $(31,150,814) | | $(16,347,077) |
The difference between GGAP and tax basis were primarily attributable to deferred losses on wash sales and the tax treatment of the investment in the Cayman Subsidiary.
PGIM Real Assets Fund 33
Notes to Consolidated Financial Statements (continued)
The Manager has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years and has concluded that no provision for income tax is required in the Fund’s consolidated financial statements for the current reporting period. Since tax authorities can examine previously filed tax returns, the Fund’s U.S. federal and state tax returns for each of the four fiscal years up to the most recent fiscal year ended October 31, 2022 are subject to such review.
The Fund offers Class A, Class C, Class Z and Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 5.50%. Investors who purchase $1 million or more of Class A shares and sell these shares within 12 months of purchase are subject to a CDSC of 1%, although they are not subject to an initial sales charge. The Class A CDSC is waived for certain retirement and/or benefit plans. A special exchange privilege is also available for shareholders who qualified to purchase Class A shares at net asset value. Effective June 26, 2020, all of the issued and outstanding Class B shares of the Fund converted into Class A shares. Class C shares are sold with a CDSC of 1% on sales made within 12 months of purchase. Class C shares will automatically convert to Class A shares on a monthly basis approximately eight years (ten years prior to January 22, 2021) after purchase. Class Z and Class R6 shares are not subject to any sales or redemption charges and are available exclusively for sale to a limited group of investors.
Under certain circumstances, an exchange may be made from specified share classes of the Fund to one or more other share classes of the Fund as presented in the table of transactions in shares of beneficial interest, below.
The RIC has authorized an unlimited number of shares of beneficial interest of the Fund at $0.001 par value per share, currently divided into four classes, designated Class A, Class C, Class Z and Class R6.
As of October 31, 2022, Prudential, through its affiliated entities, including affiliated funds (if applicable), owned shares of the Fund as follows:
| | | | |
Class | | Number of Shares | | Percentage of Outstanding Shares |
Z | | 1,215,021 | | 13.6% |
R6 | | 3,988,267 | | 67.2 |
34
At the reporting period end, the number of shareholders holding greater than 5% of the Fund are as follows:
| | | | |
| | Number of Shareholders | | Percentage of Outstanding Shares |
Affiliated | | 2 | | 32.1% |
Unaffiliated | | 4 | | 44.1 |
Transactions in shares of beneficial interest were as follows:
| | | | | | | | |
| | |
Share Class | | Shares | | | Amount | |
| | |
Class A | | | | | | |
Year ended October 31, 2022: | | | | | | | | |
| | |
Shares sold | | | 705,940 | | | $ | 7,484,519 | |
| | |
Shares issued in reinvestment of dividends and distributions | | | 91,261 | | | | 920,924 | |
Shares purchased | | | (410,905 | ) | | | (4,159,270 | ) |
| | |
Net increase (decrease) in shares outstanding before conversion | | | 386,296 | | | | 4,246,173 | |
| | |
Shares issued upon conversion from other share class(es) | | | 23,647 | | | | 241,280 | |
Shares purchased upon conversion into other share class(es) | | | (1,260 | ) | | | (13,850 | ) |
Net increase (decrease) in shares outstanding | | | 408,683 | | | $ | 4,473,603 | |
| | |
Year ended October 31, 2021: | | | | | | | | |
| | |
Shares sold | | | 196,422 | | | $ | 2,081,898 | |
| | |
Shares issued in reinvestment of dividends and distributions | | | 28,548 | | | | 283,941 | |
Shares purchased | | | (120,738 | ) | | | (1,242,549 | ) |
| | |
Net increase (decrease) in shares outstanding before conversion | | | 104,232 | | | | 1,123,290 | |
| | |
Shares issued upon conversion from other share class(es) | | | 59,665 | | | | 597,162 | |
Shares purchased upon conversion into other share class(es) | | | (6,734 | ) | | | (65,808 | ) |
Net increase (decrease) in shares outstanding | | | 157,163 | | | $ | 1,654,644 | |
| | |
Class C | | | | | | |
| | |
Year ended October 31, 2022: | | | | | | | | |
| | |
Shares sold | | | 359,313 | | | $ | 3,815,902 | |
| | |
Shares issued in reinvestment of dividends and distributions | | | 8,653 | | | | 86,408 | |
Shares purchased | | | (94,241 | ) | | | (962,936 | ) |
| | |
Net increase (decrease) in shares outstanding before conversion | | | 273,725 | | | | 2,939,374 | |
Shares purchased upon conversion into other share class(es) | | | (23,884 | ) | | | (241,280 | ) |
Net increase (decrease) in shares outstanding | | | 249,841 | | | $ | 2,698,094 | |
| | |
Year ended October 31, 2021: | | | | | | | | |
| | |
Shares sold | | | 772 | | | $ | 8,154 | |
| | |
Shares issued in reinvestment of dividends and distributions | | | 5,285 | | | | 50,887 | |
Shares purchased | | | (17,151 | ) | | | (172,302 | ) |
| | |
Net increase (decrease) in shares outstanding before conversion | | | (11,094 | ) | | | (113,261 | ) |
Shares purchased upon conversion into other share class(es) | | | (59,411 | ) | | | (589,974 | ) |
Net increase (decrease) in shares outstanding | | | (70,505 | ) | | $ | (703,235 | ) |
PGIM Real Assets Fund 35
Notes to Consolidated Financial Statements (continued)
| | | | | | | | |
| | |
Share Class | | Shares | | | Amount | |
| | |
Class Z | | | | | | |
Year ended October 31, 2022: | | | | | | | | |
| | |
Shares sold | | | 10,777,320 | | | $ | 115,259,257 | |
| | |
Shares issued in reinvestment of dividends and distributions | | | 757,076 | | | | 7,659,031 | |
Shares purchased | | | (7,749,932 | ) | | | (80,437,770 | ) |
Net increase (decrease) in shares outstanding before conversion | | | 3,784,464 | | | | 42,480,518 | |
Shares issued upon conversion from other share class(es) | | | 1,257 | | | | 13,850 | |
Net increase (decrease) in shares outstanding | | | 3,785,721 | | | $ | 42,494,368 | |
| | |
Year ended October 31, 2021: | | | | | | | | |
| | |
Shares sold | | | 1,182,117 | | | $ | 12,049,210 | |
| | |
Shares issued in reinvestment of dividends and distributions | | | 324,884 | | | | 3,222,924 | |
Shares purchased | | | (2,354,972 | ) | | | (24,053,330 | ) |
| | |
Net increase (decrease) in shares outstanding before conversion | | | (847,971 | ) | | | (8,781,196 | ) |
| | |
Shares issued upon conversion from other share class(es) | | | 8,426 | | | | 83,059 | |
Shares purchased upon conversion into other share class(es) | | | (17,402 | ) | | | (183,970 | ) |
Net increase (decrease) in shares outstanding | | | (856,947 | ) | | $ | (8,882,107 | ) |
| | |
Class R6 | | | | | | |
Year ended October 31, 2022: | | | | | | | | |
| | |
Shares sold | | | 2,548,631 | | | $ | 26,633,724 | |
| | |
Shares issued in reinvestment of dividends and distributions | | | 624,942 | | | | 6,314,532 | |
Shares purchased | | | (1,641,614 | ) | | | (16,873,435 | ) |
Net increase (decrease) in shares outstanding | | | 1,531,959 | | | $ | 16,074,821 | |
| | |
Year ended October 31, 2021: | | | | | | | | |
| | |
Shares sold | | | 1,516,234 | | | $ | 15,596,153 | |
Shares issued in reinvestment of dividends and distributions | | | 202,087 | | | | 2,024,274 | |
Shares purchased | | | (564,580 | ) | | | (5,904,284 | ) |
Net increase (decrease) in shares outstanding before conversion | | | 1,153,741 | | | | 11,716,143 | |
Shares issued upon conversion from other share class(es) | | | 14,979 | | | | 159,531 | |
Net increase (decrease) in shares outstanding | | | 1,168,720 | | | $ | 11,875,674 | |
The RIC, on behalf of the Fund, along with other affiliated registered investment companies (the “Participating Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary
36
funding for capital share redemptions. The table below provides details of the current SCA in effect at the reporting period-end as well as the prior SCA.
| | | | |
| | |
| | Current SCA | | Prior SCA |
| | |
Term of Commitment | | 9/30/2022 - 9/28/2023 | | 10/1/2021 – 9/29/2022 |
| | |
Total Commitment | | $ 1,200,000,000 | | $ 1,200,000,000 |
| | |
Annualized Commitment Fee on the Unused Portion of the SCA | | 0.15% | | 0.15% |
| | |
Annualized Interest Rate on Borrowings | | 1.00% plus the higher of (1) the effective federal funds rate, (2) the daily SOFR rate plus 0.10% or (3) zero percent | | 1.20% plus the higher of (1) the effective federal funds rate, (2) the one-month LIBOR rate or (3) zero percent |
Certain affiliated registered investment companies that are parties to the SCA include portfolios that are subject to a predetermined mathematical formula used to manage certain benefit guarantees offered under variable annuity contracts. The formula may result in large scale asset flows into and out of these portfolios. Consequently, these portfolios may be more likely to utilize the SCA for purposes of funding redemptions. It may be possible for those portfolios to fully exhaust the committed amount of the SCA, thereby requiring the Manager to allocate available funding per a Board-approved methodology designed to treat the Participating Funds in the SCA equitably.
The Fund utilized the SCA during the year ended October 31, 2022. The average daily balance for the 9 days that the Fund had loans outstanding during the period was approximately $850,111, borrowed at a weighted average interest rate of 2.98%. The maximum loan outstanding amount during the period was $3,464,000. At October 31, 2022, the Fund did not have an outstanding loan amount.
9. | Risks of Investing in the Fund |
The Fund’s risks include, but are not limited to, some or all of the risks discussed below. For further information on the Fund’s risks, please refer to the Fund’s Prospectus and Statement of Additional Information.
Affiliated Funds Risk: The Fund’s manager serves as the manager of the Underlying Funds. It is possible that a conflict of interest among the Fund and the Underlying Funds could impact the manager and the subadviser. Because the amount of the investment management fees to be retained by the manager and the subadviser may differ depending upon the Underlying Funds in which the Fund invests, there is a conflict of interest for the manager and the subadviser in selecting the Underlying Funds. In addition, the manager and the subadviser may have an incentive to take into account the effect on an Underlying Fund in which the Fund may invest in determining whether, and under what circumstances, to purchase or sell shares in that Underlying Fund. Although the manager and the subadviser take steps to address the conflicts of interest, it is possible that the conflicts could impact the Fund. In addition, the subadviser may invest in Underlying Funds that have a limited or no performance history.
PGIM Real Assets Fund 37
Notes to Consolidated Financial Statements (continued)
Asset Allocation Risk: Asset allocation risk is the risk that the Fund’s assets may be allocated to an asset class that underperforms other asset classes. For example, the Fund may be overweight in equities when the stock market is falling and the fixed income market is rising. Likewise, the Fund may be overweight in fixed income securities when fixed income markets are falling and the equity markets are rising. Allocations to underperforming or volatile asset classes or other changes in asset allocations could lead to increased volatility in the Fund’s portfolio.
Asset Class Variation Risk: The Underlying Funds invest principally in the securities constituting their asset class (i.e., domestic or international real estate, utilities, infrastructure, natural resources, MLPs and various types of fixed income investments). However, under normal market conditions, an Underlying Fund may vary the percentage of its assets in these securities (subject to any applicable regulatory requirements). Depending upon the percentage of securities in a particular asset class held by the Underlying Funds at any given time and the percentage of the Fund’s assets invested in the Underlying Funds, the Fund’s actual exposure to the securities in a particular asset class may vary substantially from its allocation to that asset class.
Cayman Subsidiary Risk: By investing in the Cayman Subsidiary, the Fund is indirectly exposed to the risks associated with the Cayman Subsidiary’s investments. The Cayman Subsidiary is not registered as an investment company under the 1940 Act, and, unless otherwise noted in this Prospectus, is not subject to all the investor protections of the 1940 Act. The Fund has received a private letter ruling from the Internal Revenue Service (the IRS) stating that income derived from the Fund’s investment in the Cayman Subsidiary will be considered qualifying regulated investment company (RIC) income for tax purposes. Final tax regulations, on which taxpayers may rely for taxable years beginning after September 28, 2016, also support this result. Changes in the laws of the Cayman Islands, under which the Cayman Subsidiary is incorporated, could result in the inability of the Fund to effect its desired gold/defensive investment strategy.
Commodity Risk: The values of commodities and commodity-linked investments are affected by events that might have less impact on the value of stocks and bonds. Such investments may be speculative. Prices of commodities and related contracts may fluctuate significantly over short periods for a variety of reasons, including weather, crop or livestock disease, investment speculation, resource availability, fluctuations in industrial and commercial supply and demand, U.S. agricultural, fiscal, monetary and exchange control programs, embargoes, tariffs, and international political, economic, military and regulatory developments. These risks may subject the Fund to greater volatility than investments in traditional instruments or securities. In addition, the commodities markets are subject to
38
temporary distortions or other disruptions due to a variety of factors, including participation of speculators, government intervention and regulation, and certain lack of liquidity in the markets.
Commodity-Linked Notes Risk: The Fund may invest in leveraged or unleveraged commodity-linked notes (“CLNs”) to gain exposure to the commodities markets. CLNs are subject to counterparty risk. The value of the CLNs may fluctuate significantly because the values of the investments to which they are linked are volatile. In addition, the terms of a CLN may create economic leverage by requiring payment by the issuer of an amount that is a multiple of the price increase or decrease of the underlying commodity, commodity index or other economic variable. Economic leverage increases the volatility of CLNs and their value may increase or decrease more quickly than the value of the underlying commodity, commodity index or other economic variable.
Commodity Regulatory Risk: The Fund is deemed a “commodity pool” and the manager is considered a “commodity pool operator” with respect to the Fund under the Commodity Exchange Act. The manager, directly or through its affiliates, is therefore subject to dual regulation by the Securities and Exchange Commission (the “SEC”) and the Commodity Futures Trading Commission (the “CFTC”). The regulatory requirements governing the use of commodity futures (which include futures on broad-based securities indexes, interest rate futures and currency futures), options on commodity futures, certain swaps or certain other investments could change at any time.
Credit Risk/Counterparty Risk: The ability, or perceived ability, of the issuer or guarantor of a debt security, or the counterparty (the party on the other side of the transaction) to a derivatives contract or other financial contract to meet its financial obligations will affect the value of the security or derivative. Counterparty and credit risk are especially important in the context of privately negotiated instruments. The Fund expects to enter into certain privately negotiated agreements where the counterparty assumes the physical settlement obligations of the Fund under such transactions. Under this type of arrangement, there is a risk that the relevant counterparty or intermediary would, due to insolvency or other reasons, be unable to or fail to assume the physical settlement obligations of the Fund, in which case the Fund could be required to sell portfolio instruments at unfavorable times or prices or could have insufficient assets to satisfy its physical settlement obligations.
Credit ratings are intended to provide a measure of credit risk. However, credit ratings are only the opinions of the credit rating agency issuing the ratings and are not guarantees as to quality. The lower the rating of a debt security held by the Fund, the greater the degree of credit risk that is perceived to exist by the credit rating agency with respect to that security. Increasing the amount of Fund assets allocated to lower-rated securities generally will increase the credit risk to which the Fund is subject. Not all securities in which the Fund invests are rated. The lower the credit quality of a bond, the more sensitive it is to credit risk.
Currency Risk: The Fund’s and the Underlying Funds’ net asset values (“NAVs”) could decline as a result of changes in exchange rates, which could adversely affect the Fund’s
PGIM Real Assets Fund 39
Notes to Consolidated Financial Statements (continued)
investments in currencies, or in securities that trade in, and receive revenues related to currencies, or in derivatives that provide exposure to currencies. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payment of principal and interest or dividends to investors located outside the country, due to blockage of foreign currency exchanges or otherwise.
Debt Obligations Risk: Debt obligations are subject to credit risk, market risk and interest rate risk. The Fund’s holdings, share price, yield and total return may also fluctuate in response to bond market movements. The value of bonds may decline for issuer-related reasons, including management performance, financial leverage and reduced demand for the issuer’s goods and services. Certain types of fixed income obligations also may be subject to “call and redemption risk,” which is the risk that the issuer may call a bond held by the Fund for redemption before it matures and the Fund may not be able to reinvest at the same rate of interest and therefore would earn less income.
Deflation Risk: During periods of deflation, prices throughout the economy may decline over time, which may have an adverse effect on the creditworthiness of issuers in whose securities the Fund invests. Additionally, since the Fund makes investments that may perform well in periods of rising inflation, during periods of no inflation or deflation an investment in the Fund may underperform broad market measures and may lose value.
Derivatives Risk: Derivatives involve special risks and costs and may result in losses to the Fund. The successful use of derivatives requires sophisticated management, and, to the extent that derivatives are used, the Fund will depend on the subadviser’s ability to analyze and manage derivatives transactions. The prices of derivatives may move in unexpected ways, especially in abnormal market conditions. Some derivatives are “leveraged” or may create economic leverage for the Fund and therefore may magnify or otherwise increase investment losses to the Fund. The Fund’s use of derivatives may also increase the amount of taxes payable by shareholders.
Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the Fund’s derivatives positions. In fact, many over-the-counter derivative instruments will not have liquidity beyond the counterparty to the instrument. Over-the-counter derivative instruments also involve the risk that the other party will not meet its obligations to the Fund. The use of derivatives also exposes the Fund to operational issues, such as documentation and settlement issues, systems failures, inadequate control and human error.
Derivatives may also involve legal risks, such as insufficient documentation, the lack of capacity or authority of a counterparty to execute or settle a transaction, and the legality and enforceability of derivatives contracts. The U.S. Government and foreign governments have
40
adopted (and may adopt further) regulations governing derivatives markets, including mandatory clearing of certain derivatives, margin and reporting requirements and risk exposure limitations. Regulation of derivatives may make derivatives more costly, limit their availability or utility to the Fund, or otherwise adversely affect their performance or disrupt markets
Distribution Risk: The Fund’s distributions may consist of net investment income, if any, and net realized gains, if any, from the sale of investments and/or return of capital. The Fund will provide to shareholders early in each calendar year the final tax character of the Fund’s distributions for the previous year. Also, at such time that the Fund distribution is expected to be from sources other than current or accumulated net income, a notice to shareholders may be required.
Economic and Market Events Risk: Events in the U.S. and global financial markets, including actions taken by the U.S. Federal Reserve or foreign central banks to stimulate or stabilize economic growth or the functioning of the securities markets, or otherwise reduce inflation may at times result in unusually high market volatility, which could negatively impact performance. Governmental efforts to curb inflation often have negative effects on the level of economic activity. Relatively reduced liquidity in credit and fixed income markets could adversely affect issuers worldwide.
Emerging Markets Risk: The risks of foreign investments are greater for investments in or exposed to emerging markets. Emerging market countries typically have economic and political systems that are less fully developed, and can be expected to be less stable, than those of more developed countries. For example, the economies of such countries can be subject to rapid and unpredictable rates of inflation or deflation. Low trading volumes may result in a lack of liquidity and price volatility. Emerging market countries may have policies that restrict investment by non-U.S. investors, or that prevent non-U.S. investors from withdrawing their money at will.
The Fund may invest in some emerging markets that subject it to risks such as those associated with illiquidity, custody of assets, different settlement and clearance procedures and asserting legal title under a developing legal and regulatory regime to a greater degree than in developed markets or even in other emerging markets.
Energy Sector Risk: The Fund’s investments in certain Underlying Funds will expose the Fund to the risks of adverse economic, environmental, business, regulatory or other occurrences affecting the energy sector. The energy sector has historically experienced substantial price volatility. MLPs and other companies operating in the energy sector are subject to specific risks, including, among others, fluctuations in commodity prices; reduced consumer demand for commodities such as oil, natural gas or petroleum products; reduced availability of natural gas or other commodities for transporting, processing, storing or delivering; slowdowns in new construction; extreme weather or other natural disasters; and threats of attack by terrorists on energy assets. Additionally, changes in the regulatory environment for energy companies may adversely impact their profitability. Over time,
PGIM Real Assets Fund 41
Notes to Consolidated Financial Statements (continued)
depletion of natural gas reserves and other energy reserves may also affect the profitability of energy companies.
Foreign Securities Risk: Investments in securities of non-U.S. issuers (including those denominated in U.S. dollars) may involve more risk than investing in securities of U.S. issuers. Foreign political, economic and legal systems, especially those in developing and emerging market countries, may be less stable and more volatile than in the United States. Foreign legal systems generally have fewer regulatory requirements than the U.S. legal system, particularly those of emerging markets. In general, less information is publicly available with respect to non-U.S. companies than U.S. companies. Non-U.S. companies generally are not subject to the same accounting, auditing, and financial reporting standards as are U.S. companies. Additionally, the changing value of foreign currencies and changes in exchange rates could also affect the value of the assets the Fund holds and the Fund’s performance. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payment of principal and interest or dividends to investors located outside the country, due to blockage of foreign currency exchanges or otherwise. Investments in emerging markets are subject to greater volatility and price declines.
In addition, the Fund’s investments in non-U.S. securities may be subject to the risks of nationalization or expropriation of assets, imposition of currency exchange controls or restrictions on the repatriation of non-U.S. currency, confiscatory taxation and adverse diplomatic developments. Special U.S. tax considerations may apply.
Fund of Funds Risk: The value of an investment in the Fund will be related, to a degree, to the investment performance of the Underlying Funds in which it invests. Therefore, the principal risks of investing in the Fund are closely related to the principal risks associated with these Underlying Funds and their investments. Because the Fund’s allocation among different Underlying Funds and direct investments in securities and derivatives will vary, an investment in the Fund may be subject to any and all of these risks at different times and to different degrees. Investing in an Underlying Fund will also expose the Fund to a pro rata portion of the Underlying Fund’s fees and expenses. In addition, one Underlying Fund may buy the same securities that another Underlying Fund sells. Therefore, the Fund would indirectly bear the costs of these trades without accomplishing the investment purpose.
Hedging Risk: The decision as to whether and to what extent the Fund or an Underlying Fund will engage in hedging transactions to hedge against certain risks, such as market risk and issuer risk, will depend on a number of factors, including prevailing market conditions, the composition of the portfolio of the Fund or the Underlying Fund, and the availability of suitable transactions. Hedging transactions involve costs and may result in losses. There is no guarantee that any of these hedging instruments would work as anticipated, and in certain cases the Fund or an Underlying Fund might be better off had it not used a hedging
42
instrument. There can be no assurance that the Fund or the Underlying Fund will engage in hedging transactions at any given time or from time to time, even under volatile market environments, or that any such strategies, if used, will be successful.
Increase in Expenses Risk: Your actual cost of investing in the Fund may be higher than the expenses shown in the expense table in the Fund’s prospectus for a variety of reasons. For example, expense ratios may be higher than those shown if average net assets decrease. Net assets are more likely to decrease and Fund expense ratios are more likely to increase when markets are volatile. Active and frequent trading of Fund securities can increase expenses.
Interest Rate Risk: The value of your investment may go down when interest rates rise. A rise in rates tends to have a greater impact on the prices of longer term or duration debt securities. For example, a fixed income security with a duration of three years is expected to decrease in value by approximately 3% if interest rates increase by 1%. This is referred to as “duration risk.” When interest rates fall, the issuers of debt obligations may prepay principal more quickly than expected, and the Fund may be required to reinvest the proceeds at a lower interest rate. This is referred to as “prepayment risk.” When interest rates rise, debt obligations may be repaid more slowly than expected, and the value of the Fund’s holdings may fall sharply. This is referred to as “extension risk.” The Fund may lose money if short-term or long-term interest rates rise sharply or in a manner not anticipated by the subadviser.
Inflation-indexed bonds, such as TIPS, generally decline in value when real interest rates rise. In certain interest rate environments, such as when real interest rates are rising faster than nominal interest rates, TIPS may experience greater losses than other fixed income securities with similar durations. In addition, any increase in principal value of an inflation-indexed bond caused by an increase in the price index is taxable in the year the increase occurs, even though the Fund generally will not receive cash representing the increase at that time. As a result, the Fund could be required at times to liquidate other investments, including when it is not advantageous to do so, in order to satisfy its distribution requirements as a regulated investment company under the Code. Also, to the extent that the Fund invests in inflation-indexed bonds, income distributions are more likely to fluctuate.
Junk Bonds Risk: High-yield, high-risk bonds have predominantly speculative characteristics, including particularly high credit risk. Junk bonds tend to have lower market liquidity than higher-rated securities. The liquidity of particular issuers or industries within a particular investment category may shrink or disappear suddenly and without warning. The non-investment grade bond market can experience sudden and sharp price swings and become illiquid due to a variety of factors, including changes in economic forecasts, stock market activity, large sustained sales by major investors, a high profile default or a change in the market’s psychology.
PGIM Real Assets Fund 43
Notes to Consolidated Financial Statements (continued)
Large Shareholder and Large Scale Redemption Risk: Certain individuals, accounts, funds (including funds affiliated with the Manager) or institutions, including the Manager and its affiliates, may from time to time own or control a substantial amount of the Fund’s shares. There is no requirement that these entities maintain their investment in the Fund. There is a risk that such large shareholders or that the Fund’s shareholders generally may redeem all or a substantial portion of their investments in the Fund in a short period of time, which could have a significant negative impact on the Fund’s NAV, liquidity, and brokerage costs. Large redemptions could also result in tax consequences to shareholders and impact the Fund’s ability to implement its investment strategy. The Fund’s ability to pursue its investment objective after one or more large scale redemptions may be impaired and, as a result, the Fund may invest a larger portion of its assets in cash or cash equivalents.
Leverage Risk: Certain transactions in which the Fund or an Underlying Fund may engage may give rise to leverage. The use of leverage exaggerates the effect of any increase or decrease in the value of the Fund’s holdings, and makes any change in the Fund’s net asset value greater than it would be without the use of leverage. This could result in increased volatility of investment returns.
Liquidity Risk: Liquidity risk is the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of remaining investors’ interests in the Fund. The Fund may invest in instruments that trade in lower volumes and are more illiquid than other investments. If the Fund is forced to sell these investments to pay redemption proceeds or for other reasons, the Fund may lose money. In addition, when there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may have to accept a lower price or may not be able to sell the instrument at all. An inability to sell a portfolio position can adversely affect the Fund’s value or prevent the Fund from being able to take advantage of other investment opportunities.
Management Risk: Actively managed funds are subject to management risk. The subadviser will apply investment techniques and risk analyses in making investment decisions for the Fund, but the subadviser’s judgments about the attractiveness, value or market trends affecting a particular security, industry or sector or about market movements may be incorrect. Additionally, the investments selected for the Fund may underperform the markets in general, the Fund’s benchmark and other funds with similar investment objectives.
Market Disruption and Geopolitical Risks: Market disruption can be caused by economic, financial or political events and factors, including but not limited to, international wars or conflicts (including Russia’s military invasion of Ukraine), geopolitical developments (including trading and tariff arrangements, sanctions and cybersecurity attacks), instability
44
in regions such as Asia, Eastern Europe and the Middle East, terrorism, natural disasters and public health epidemics (including the outbreak of COVID-19 globally).
The extent and duration of such events and resulting market disruptions cannot be predicted, but could be substantial and could magnify the impact of other risks to the Fund. These and other similar events could adversely affect the U.S. and foreign financial markets and lead to increased market volatility, reduced liquidity in the securities markets, significant negative impacts on issuers and the markets for certain securities and commodities and/or government intervention. They may also cause short- or long-term economic uncertainties in the United States and worldwide. As a result, whether or not the Fund invests in securities of issuers located in or with significant exposure to the countries directly affected, the value and liquidity of the Fund’s investments may be negatively impacted. Further, due to closures of certain markets and restrictions on trading certain securities, the value of certain securities held by the Fund could be significantly impacted, which could lead to such securities being valued at zero.
COVID-19 and the related governmental and public responses have had and may continue to have an impact on the Fund’s investments and net asset value and have led and may continue to lead to increased market volatility and the potential for illiquidity in certain classes of securities and sectors of the market. They have also had and may continue to result in periods of business disruption, business closures, inability to obtain raw materials, supplies and component parts, and reduced or disrupted operations for the issuers in which the Fund invests. The occurrence, reoccurrence and pendency of public health epidemics could adversely affect the economies and financial markets either in specific countries or worldwide.
Market Risk: Securities markets may be volatile and the market prices of the Fund’s securities may decline. Securities fluctuate in price based on changes in an issuer’s financial condition and overall market and economic conditions. If the market prices of the securities owned by the Fund fall, the value of your investment in the Fund will decline.
Master Limited Partnerships Risk: The Fund’s investments in certain Underlying Funds will expose the Fund to the risks of MLPs. An MLP is an investment that combines the tax benefits of a limited partnership with the liquidity of publicly-traded securities. The risks of investing in an MLP are generally those involved in investing in a partnership as opposed to a corporation. For example, state law governing partnerships is often less restrictive than state law governing corporations. Accordingly, there may be fewer protections afforded investors in an MLP than investors in a corporation. Investments held by MLPs may be relatively illiquid, limiting the MLPs’ ability to vary their portfolios promptly in response to changes in economic or other conditions. MLPs may have limited financial resources, their securities may trade infrequently and in limited volume, and they may be subject to more abrupt or erratic price movements than securities of larger or more broadly-based companies. Investments by the Fund in certain Underlying Funds that invest in MLPs may also subject the Fund to the risks associated with the specific industry or industries in which the MLPs invest, risks related to limited control and limited rights to vote on matters affecting
PGIM Real Assets Fund 45
Notes to Consolidated Financial Statements (continued)
the MLP, risks related to potential conflicts of interest between the MLP and the MLP’s general partner, cash flow risks, dilution risks and risks related to the general partner’s right to require unit-holders to sell their common units at an undesirable time or price. MLPs are generally considered interest-rate sensitive investments. During periods of interest rate volatility, these investments may not provide attractive returns. Since MLPs generally conduct business in multiple states, through its investment in certain Underlying Funds, the Fund may be subject to income or franchise tax in each of the states in which the partnership does business. The additional cost of preparing and filing the tax returns and paying the related taxes may adversely impact the Fund’s return on its investment in certain Underlying Funds.
Mortgage-Backed and Asset-Backed Securities Risk: Mortgage-backed and asset-backed securities tend to increase in value less than other debt securities when interest rates decline, but are subject to similar risk of decline in market value during periods of rising interest rates. The values of mortgage-backed and asset-backed securities become more volatile as interest rates rise. In a period of declining interest rates, the Fund may be required to reinvest more frequent prepayments on mortgage-backed and asset-backed securities in lower-yielding investments.
Multi-Manager Risk: While the manager monitors the investments of each subadviser and monitors the overall management of the Fund, each subadviser makes investment decisions for the asset classes it manages independently from one another. It is possible that the investment styles used by a subadviser in an asset class will not always be complementary to those used by others, which could adversely affect the performance of the Fund.
Natural Resources Investment Risk: The Fund’s investments in certain Underlying Funds will expose the Fund to the risk of investment in natural resource companies. The market value of securities of natural resource companies may be affected by numerous factors, including events occurring in nature, inflationary pressures and international politics. For example, events occurring in nature (such as earthquakes or fires in prime natural resource areas) and political events (such as coups, military confrontations or acts of terrorism) can affect the overall supply of a natural resource and the value of companies involved in such natural resource. Political risks and the other risks to which non-US securities are subject may affect domestic companies if they have significant operations or investments in non-US countries. In addition, rising interest rates and general economic conditions may affect the demand for natural resources.
Real Estate Investment Trust (“REIT”) Risk: Investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the quality of any credit extended. REITs
46
are dependent upon management skills, may not be diversified geographically or by property/mortgage asset type, and are subject to heavy cash flow dependency, default by borrowers and self-liquidation. REITs may be more volatile and/or more illiquid than other types of equity securities. REITs (especially mortgage REITs) are subject to interest rate risks. REITs may incur significant amounts of leverage. The Fund will indirectly bear a portion of the expenses, including management fees, paid by each REIT in which it invests, in addition to the expenses of the Fund.
REITs must also meet certain requirements under the Internal Revenue Code of 1986, as amended (the Code) to avoid entity level tax and be eligible to pass-through certain tax attributes of their income to shareholders. REITs are consequently subject to the risk of failing to meet these requirements for favorable tax treatment and of failing to maintain their exemptions from registration under the Investment Company Act of 1940. REITs are subject to the risks of changes in the Code affecting their tax status.
Real Estate Related Securities Risk: Because the Fund invests in real estate securities, including REITs, the Fund is subject to the risks of investing in the real estate industry, such as changes in general and local economic conditions, the supply and demand for real estate and changes in zoning and tax laws. Because the Fund invests in stocks, there is the risk that the price of a particular stock owned by the Fund could go down or pay lower-than-expected or no dividends. In addition to an individual stock losing value, the value of the equity markets or of companies comprising the real estate industry could go down.
Real estate securities are subject to the same risks as direct investments in real estate and mortgages, and their value will depend on the value of the underlying properties or the underlying loans or interests. The underlying loans may be subject to the risks of default or of prepayments that occur earlier or later than expected, and such loans may also include so-called “subprime” mortgages. The value of these securities will rise and fall in response to many factors, including economic conditions, the demand for rental property and interest rates. In particular, the value of these securities may decline when interest rates rise and will also be affected by the real estate market and by the management of the underlying properties.
Small and Medium Sized Companies Risk: Small and medium sized companies usually offer a smaller range of products and services than larger companies. Smaller companies may also have limited financial resources and may lack management depth. As a result, their prices may fluctuate more than the stocks of larger, more established companies. Historically, small and medium sized companies have sometimes gone through extended periods when they did not perform as well as larger companies. Small and medium sized companies generally are more illiquid than larger companies, which may make such investments more difficult to sell at the time and price that the Fund would like.
Tax Risk: In order to qualify as a RIC under the Code, the Fund must meet certain requirements regarding the source of its income, the diversification of its assets and the
PGIM Real Assets Fund 47
Notes to Consolidated Financial Statements (continued)
distribution of its income. If the Fund were to fail to qualify as a RIC, the Fund could be subject to federal income tax on its net income at regular corporate rates (without reduction for distributions to shareholders). When distributed, that income would also be taxable to shareholders as an ordinary dividend to the extent attributable to the Fund’s earnings and profits. If the Fund were to fail to qualify as a RIC and become subject to federal income tax, shareholders of the Fund would be subject to diminished returns.
The Fund has received a private letter ruling from the Internal Revenue Service (the IRS) stating that income derived from the Fund’s investment in the Cayman Subsidiary will constitute qualifying income to the Fund. Final tax regulations, on which taxpayers may rely for taxable years beginning after September 28, 2016, also support this result. However, in the future, if the IRS issues regulations or other guidance, or Congress enacts legislation, limiting the circumstances in which the Fund may treat such income as “qualifying income,” the Fund may need to change its investment strategies, which could adversely affect the Fund. The Cayman Subsidiary will not be subject to U.S. federal income tax. The Cayman Subsidiary will, however, be considered a controlled foreign corporation, and the Fund will be required to include as income annually amounts earned by the Cayman Subsidiary during that year. Furthermore, the Fund will be subject to the distribution requirement applicable to open-end investment companies on such Cayman Subsidiary income, whether or not the Cayman Subsidiary makes a distribution to the Fund during the taxable year.
One of the Underlying Funds, the PGIM Jennison MLP Fund, is taxed as a regular corporation, or “C” corporation, for federal income tax purposes. This means that the PGIM Jennison MLP Fund is generally subject to U.S. federal income tax on its taxable income at the rates applicable to corporations and also subject to state and local income taxes. This may have unexpected and potentially significant consequences for shareholders, including the Fund.
Treasury Inflation Protected Securities (TIPS) Risk: The value of TIPS generally fluctuates in response to inflationary concerns. As inflationary expectations increase, TIPS will become more attractive, because they protect future interest payments against inflation. Conversely, as inflationary concerns decrease, TIPS will become less attractive and less valuable. Although the principal value of TIPS declines in periods of deflation, holders at maturity receive no less than the par value of the bond. However, if an Underlying Fund purchases TIPS in the secondary market, where principal values have been adjusted upward due to inflation since issuance, it may experience a loss if there is a subsequent period of deflation. If inflation is lower than expected during the period an Underlying Fund holds TIPS, the Underlying Fund may earn less on the security than on a conventional bond.
48
U.S. Government and Agency Securities Risk: U.S. Government and agency securities are subject to market risk, interest rate risk and credit risk. Not all U.S. Government securities are insured or guaranteed by the full faith and credit of the U.S. Government; some are only insured or guaranteed by the issuing agency, which must rely on its own resources to repay the debt. Some agency securities carry no guarantee whatsoever and the risk of default associated with these securities would be borne by the Fund or an Underlying Fund. The maximum potential liability of the issuers of some U.S. Government securities held by the Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. No assurance can be given that the U.S. government would provide financial support for any such issuers if it is not obligated to do so by law. It is possible that these issuers will not have the funds to meet their payment obligations in the future. In addition, the value of U.S. Government securities may be affected by changes in the credit rating of the U.S. Government.
Utilities/Infrastructure Investment Risk: The Fund’s investments in certain Underlying Funds will expose the Fund to potential adverse economic, regulatory, political and other changes affecting infrastructure investments, particularly investments in the utilities sector. In most countries and localities, the utilities industry is regulated by governmental entities, which can increase costs and delays for new projects and make it difficult to pass increased costs on to consumers. In certain areas, deregulation of utilities has resulted in increased competition and reduced profitability for certain companies, and increased the risk that a particular company will become bankrupt or fail completely. Reduced profitability, as well as new uses for or additional need of funds (such as for expansion, operations or stock buybacks), could result in reduced dividend payout rates for utilities companies. In addition, utilities companies face the risk of increases in the cost and reduced availability of fuel (such as oil, coal, natural gas or nuclear energy) and potentially high interest costs for borrowing to finance new projects. Issuers in other types of infrastructure-related businesses also are subject to a variety of factors that may adversely affect their business or operations, including high interest costs in connection with capital construction programs, costs associated with environmental and other regulations, the effects of economic slowdown and surplus capacity, increased competition from other providers of services, uncertainties concerning the availability of fuel at reasonable prices, the effects of energy conservation policies, and other factors.
10. | Recent Accounting Pronouncement and Regulatory Developments |
In March 2020, the FASB issued Accounting Standard Update (“ASU”) No. 2020-04, which provides optional guidance for applying GAAP to contract modifications, hedging relationships and other transactions affected by the reference rate reform if certain criteria are met. ASU 2020-04 is elective and is effective on March 12, 2020 through December 31, 2022. Management does not expect ASU 2020-04 to have a material impact on the financial statements.
PGIM Real Assets Fund 49
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Prudential Investment Portfolios 3 and Shareholders of PGIM Real Assets Fund
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, of PGIM Real Assets Fund (one of the funds constituting Prudential Investment Portfolios 3, referred to hereafter as the “Fund”) as of October 31, 2022, the related consolidated statement of operations for the year ended October 31, 2022, the consolidated statements of changes in net assets for each of the two years in the period ended October 31, 2022, including the related notes, and the consolidated financial highlights for each of the three years in the period ended October 31, 2022 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of October 31, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended October 31 2022 and the financial highlights for each of the three years in the period ended October 31, 2022 in conformity with accounting principles generally accepted in the United States of America.
The consolidated financial statements of the Fund as of and for the year ended October 31, 2019 and the consolidated financial highlights for each of the periods ended on or prior to October 31, 2019 (not presented herein, other than the consolidated financial highlights) were audited by other auditors whose report dated December 19, 2019 expressed an unqualified opinion on those consolidated financial statements and consolidated financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2022 by correspondence with the custodian and transfer agent. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
New York, New York
December 16, 2022
We have served as the auditor of one or more investment companies in the PGIM Retail Funds complex since 2020.
50
Tax Information (unaudited)
For the year ended October 31, 2022, the Fund reports the maximum amount allowable under Section 854 of the Internal Revenue Code, but not less than, the following percentages of the ordinary income dividends paid as 1) qualified dividend income (QDI); and 2) eligible for corporate dividends received deduction (DRD):
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Fund | | QDI | | DRD |
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PGIM Real Assets Fund | | 3.62% | | 2.09% |
In January 2023, you will be advised on IRS Form 1099-DIV or substitute 1099-DIV, as to the federal tax status of dividends and distributions received by you in calendar year 2022.
PGIM Real Assets Fund 51
INFORMATION ABOUT BOARD MEMBERS AND OFFICERS (unaudited)
Information about Board Members and Officers of the Fund is set forth below. Board Members who are not deemed to be “interested persons” of the Fund, as defined in the 1940 Act, are referred to as “Independent Board Members.” Board Members who are deemed to be “interested persons” of the Fund are referred to as “Interested Board Members.” The Board Members are responsible for the overall supervision of the operations of the Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Board in turn elects the Officers, who are responsible for administering the day-to-day operations of the Fund.
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Independent Board Members | | | | |
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Name Year of Birth Position(s) Portfolios Overseen | | Principal Occupation(s) During Past Five Years | | Other Directorships Held During Past Five Years | | Length of Board Service |
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Ellen S. Alberding 1958 Board Member Portfolios Overseen: 97 | | President and Board Member, The Joyce Foundation (charitable foundation) (since 2002); formerly Vice Chair, City Colleges of Chicago (community college system) (2011-2015); Trustee, National Park Foundation (charitable foundation for national park system) (2009-2018); Trustee, Economic Club of Chicago (2009-2016); Trustee, Loyola University (since 2018). | | None. | | Since September 2013 |
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Kevin J. Bannon 1952 Board Member Portfolios Overseen: 97 | | Retired; formerly Managing Director (April 2008-May 2015) and Chief Investment Officer (October 2008-November 2013) of Highmount Capital LLC (registered investment adviser); formerly Executive Vice President and Chief Investment Officer (April 1993-August 2007) of Bank of New York Company; President (May 2003-May 2007) of BNY Hamilton Family of Mutual Funds. | | Director of Urstadt Biddle Properties (equity real estate investment trust) (since September 2008). | | Since July 2008 |
PGIM Real Assets Fund
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Independent Board Members | | | | |
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Name Year of Birth Position(s) Portfolios Overseen | | Principal Occupation(s) During Past Five Years | | Other Directorships Held During Past Five Years | | Length of Board Service |
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Linda W. Bynoe 1952 Board Member Portfolios Overseen: 94 | | President and Chief Executive Officer (since March 1995) and formerly Chief Operating Officer (December 1989-February 1995) of Telemat Limited LLC (formerly Telemat Ltd) (management consulting); formerly Vice President (January 1985-June 1989) at Morgan Stanley & Co. (broker-dealer). | | Trustee of Equity Residential (residential real estate) (since December 2009); Director of Northern Trust Corporation (financial services) (since April 2006); formerly Director of Anixter International, Inc. (communication products distributor) (January 2006-June 2020). | | Since March 2005 |
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Barry H. Evans 1960 Board Member Portfolios Overseen: 96 | | Retired; formerly President (2005-2016), Global Chief Operating Officer (2014-2016), Chief Investment Officer - Global Head of Fixed Income (1998-2014), and various portfolio manager roles (1986-2006), Manulife Asset Management (asset management). | | Formerly Director, Manulife Trust Company (2011-2018); formerly Director, Manulife Asset Management Limited (2015-2017); formerly Chairman of the Board of Directors of Manulife Asset Management U.S. (2005-2016); formerly Chairman of the Board, Declaration Investment Management and Research (2008-2016). | | Since September 2017 |
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Keith F. Hartstein 1956 Board Member & Independent Chair Portfolios Overseen: 97 | | Retired; Member (November 2014-September 2022) of the Governing Council of the Independent Directors Council (IDC) (organization of independent mutual fund directors); formerly Executive Committee of the IDC Board of Governors (October 2019-December 2021); formerly President and Chief Executive Officer (2005-2012), Senior Vice President (2004-2005), Senior Vice President of Sales and Marketing (1997-2004), and various executive management positions (1990-1997), John Hancock Funds, LLC (asset management); Chairman, Investment Company Institute’s Sales Force Marketing Committee (2003-2008). | | None. | | Since September 2013 |
Visit our website at pgim.com/investments
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Independent Board Members | | | | |
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Name Year of Birth Position(s) Portfolios Overseen | | Principal Occupation(s) During Past Five Years | | Other Directorships Held During Past Five Years | | Length of Board Service |
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Laurie Simon Hodrick 1962 Board Member Portfolios Overseen: 93 | | A. Barton Hepburn Professor Emerita of Economics in the Faculty of Business, Columbia Business School (since 2018); Visiting Fellow at the Hoover Institution, Stanford University (since 2015); Sole Member, ReidCourt LLC (since 2008) (a consulting firm); formerly Visiting Professor of Law, Stanford Law School (2015-2021); formerly A. Barton Hepburn Professor of Economics in the Faculty of Business, Columbia Business School (1996-2017); formerly Managing Director, Global Head of Alternative Investment Strategies, Deutsche Bank (2006-2008). | | Independent Director, Andela (since January 2022) (global talent network); Independent Director, Roku (since December 2020) (communication services); formerly Independent Director, Synnex Corporation (2019-2021) (information technology); formerly Independent Director, Kabbage, Inc. (2018-2020) (financial services); formerly Independent Director, Corporate Capital Trust (2017-2018) (a business development company). | | Since September 2017 |
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Brian K. Reid 1961 Board Member Portfolios Overseen: 96 | | Retired; formerly Chief Economist for the Investment Company Institute (ICI) (2005-2017); formerly Senior Economist and Director of Industry and Financial Analysis at the ICI (1998-2004); formerly Senior Economist, Industry and Financial Analysis at the ICI (1996-1998); formerly Staff Economist at the Federal Reserve Board (1989-1996); Director, ICI Mutual Insurance Company (2012-2017). | | None. | | Since March 2018 |
PGIM Real Assets Fund
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Independent Board Members | | | | |
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Name Year of Birth Position(s) Portfolios Overseen | | Principal Occupation(s) During Past Five Years | | Other Directorships Held During Past Five Years | | Length of Board Service |
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Grace C. Torres 1959 Board Member Portfolios Overseen: 96 | | Retired; formerly Treasurer and Principal Financial and Accounting Officer of the PGIM Funds, Target Funds, Advanced Series Trust, Prudential Variable Contract Accounts and The Prudential Series Fund (1998-June 2014); Assistant Treasurer (March 1999-June 2014) and Senior Vice President (September 1999-June 2014) of PGIM Investments LLC; Assistant Treasurer (May 2003-June 2014) and Vice President (June 2005-June 2014) of AST Investment Services, Inc.; Senior Vice President and Assistant Treasurer (May 2003-June 2014) of Prudential Annuities Advisory Services, Inc. | | Director (since January 2018) of OceanFirst Financial Corp. and OceanFirst Bank; formerly Director (July 2015-January 2018) of Sun Bancorp, Inc. N.A. and Sun National Bank. | | Since November 2014 |
Visit our website at pgim.com/investments
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Independent Board Members | | | | |
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Name Year of Birth Position(s) Portfolios Overseen | | Principal Occupation(s) During Past Five Years | | Other Directorships Held During Past Five Years | | Length of Board Service |
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Stuart S. Parker 1962 Board Member & President Portfolios Overseen: 96 | | President, Chief Executive Officer, Chief Operating Officer and Officer in Charge of PGIM Investments LLC (formerly known as Prudential Investments LLC) (since January 2012); President and Principal Executive Officer ("PEO") (since September 2022) of the PGIM Private Credit Fund; President and PEO (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Executive Vice President of Jennison Associates LLC and Head of Retail Distribution of PGIM Investments LLC (June 2005-December 2011); Investment Company Institute - Board of Governors (since May 2012). | | None. | | Since January 2012 |
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Scott E. Benjamin 1973 Board Member & Vice President Portfolios Overseen: 97 | | Executive Vice President (since May 2009) of PGIM Investments LLC; Vice President (since June 2012) of Prudential Investment Management Services LLC; Executive Vice President (since September 2009) of AST Investment Services, Inc.; Senior Vice President of Product Development and Marketing, PGIM Investments (since February 2006); Vice President (since September 2022) of the PGIM Private Credit Fund; Vice President (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Vice President of Product Development and Product Management, PGIM Investments LLC (2003-2006). | | None. | | Since March 2010 |
PGIM Real Assets Fund
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Fund Officers(a) | | | | |
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Name Year of Birth Fund Position | | Principal Occupation(s) During Past Five Years | | Length of Service as Fund Officer |
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Claudia DiGiacomo 1974 Chief Legal Officer | | Chief Legal Officer (since September 2022) of the PGIM Private Credit Fund; Chief Legal Officer (since July 2022) of the PGIM Private Real Estate Fund, Inc.; Chief Legal Officer, Executive Vice President and Secretary of PGIM Investments LLC (since August 2020); Chief Legal Officer of Prudential Mutual Fund Services LLC (since August 2020); Chief Legal Officer of PIFM Holdco, LLC (since August 2020); Vice President and Corporate Counsel (since January 2005) of Prudential; and Corporate Counsel of AST Investment Services, Inc. (since August 2020); formerly Vice President and Assistant Secretary of PGIM Investments LLC (2005-2020); formerly Associate at Sidley Austin Brown & Wood LLP (1999-2004). | | Since December 2005 |
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Isabelle Sajous 1976 Chief Compliance Officer | | Chief Compliance Officer (since April 2022) of PGIM Investments LLC, the PGIM Funds, Target Funds, PGIM ETF Trust, PGIM Global High Yield Fund, Inc., PGIM High Yield Bond Fund, Inc., PGIM Short Duration High Yield Opportunities Fund, Advanced Series Trust, The Prudential Series Fund and Prudential’s Gibraltar Fund, Inc.; Chief Compliance Officer (since September 2022) of the PGIM Private Credit Fund; Chief Compliance Officer (since March 2022) of the PGIM Private Real Estate Fund, Inc.; Vice President, Compliance of PGIM Investments LLC (since December 2020); formerly Director, Compliance (July 2018-December 2020) of Credit Suisse Asset Management LLC; and Vice President, Associate General Counsel & Deputy Chief Compliance Officer of Cramer Rosenthal McGlynn, LLC (August 2014-July 2018). | | Since April 2022 |
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Andrew R. French 1962 Secretary | | Vice President (since December 2018) of PGIM Investments LLC; Secretary (since September 2022) of the PGIM Private Credit Fund; Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Vice President and Corporate Counsel (2010-2018) of Prudential; formerly Director and Corporate Counsel (2006-2010) of Prudential; Vice President and Assistant Secretary (since January 2007) of PGIM Investments LLC; Vice President and Assistant Secretary (since January 2007) of Prudential Mutual Fund Services LLC. | | Since October 2006 |
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Melissa Gonzalez 1980 Assistant Secretary | | Vice President and Corporate Counsel (since September 2018) of Prudential; Vice President and Assistant Secretary (since August 2020) of PGIM Investments LLC; Assistant Secretary (since September 2022) of the PGIM Private Credit Fund; Assistant Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Director and Corporate Counsel (March 2014-September 2018) of Prudential. | | Since March 2020 |
Visit our website at pgim.com/investments
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Fund Officers(a) | | | | |
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Name Year of Birth Fund Position | | Principal Occupation(s) During Past Five Years | | Length of Service as Fund Officer |
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Patrick E. McGuinness 1986 Assistant Secretary | | Vice President and Assistant Secretary (since August 2020) of PGIM Investments LLC; Director and Corporate Counsel (since February 2017) of Prudential; Assistant Secretary (since September 2022) of the PGIM Private Credit Fund; Assistant Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc. | | Since June 2020 |
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Debra Rubano 1975 Assistant Secretary | | Vice President and Corporate Counsel (since November 2020) of Prudential; Assistant Secretary (since September 2022) of the PGIM Private Credit Fund; Assistant Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc; formerly Director and Senior Counsel of Allianz Global Investors U.S. Holdings LLC (2010-2020) and Assistant Secretary of numerous funds in the Allianz fund complex (2015-2020). | | Since December 2020 |
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Kelly A. Coyne 1968 Assistant Secretary | | Director, Investment Operations of Prudential Mutual Fund Services LLC (since 2010); Assistant Secretary (since September 2022) of the PGIM Private Credit Fund; Assistant Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc. | | Since March 2015 |
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Christian J. Kelly 1975 Treasurer and Principal Financial and Accounting Officer | | Vice President, Head of Fund Administration of PGIM Investments LLC (since November 2018); Principal Financial Officer (since September 2022) of the PGIM Private Credit Fund; Principal Financial Officer (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly, Treasurer and Principal Accounting Officer (March 2022- July 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Director of Fund Administration of Lord Abbett & Co. LLC (2009-2018), Treasurer and Principal Accounting Officer of the Lord Abbett Family of Funds (2017-2018); Director of Accounting, Avenue Capital Group (2008-2009); Senior Manager, Investment Management Practice of Deloitte & Touche LLP (1998-2007). | | Since January 2019 |
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Lana Lomuti 1967 Assistant Treasurer | | Vice President (since 2007) and Director (2005-2007), within PGIM Investments Fund Administration; formerly Assistant Treasurer (December 2007-February 2014) of The Greater China Fund, Inc. | | Since April 2014 |
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Russ Shupak 1973 Assistant Treasurer | | Vice President (since 2017) and Director (2013-2017), within PGIM Investments Fund Administration; Treasurer and Principal Accounting Officer (since July 2022) of the PGIM Private Real Estate Fund, Inc.; Assistant Treasurer (since September 2022) of the PGIM Private Credit Fund; formerly Assistant Treasurer (March 2022 – July 2022) of the PGIM Private Real Estate Fund, Inc. | | Since October 2019 |
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Deborah Conway 1969 Assistant Treasurer | | Vice President (since 2017) and Director (2007-2017), within PGIM Investments Fund Administration. | | Since October 2019 |
PGIM Real Assets Fund
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Fund Officers(a) | | | | |
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Name Year of Birth Fund Position | | Principal Occupation(s) During Past Five Years | | Length of Service as Fund Officer |
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Elyse M. McLaughlin 1974 Assistant Treasurer | | Vice President (since 2017) and Director (2011-2017), within PGIM Investments Fund Administration; Treasurer and Principal Accounting Officer (since September 2022) of the PGIM Private Credit Fund; Assistant Treasurer (since March 2022) of the PGIM Private Real Estate Fund, Inc. | | Since October 2019 |
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Kelly Florio 1978 Anti-Money Laundering Compliance Officer | | Vice President, Corporate Compliance, Global Compliance Programs and Compliance Risk Management (since December 2021) of Prudential; formerly, Head of Fraud Risk Management (October 2019 to December 2021) at New York Life Insurance Company; formerly, Head of Key Risk Area Operations (November 2018 to October 2019), Director of the US Anti-Money Laundering Compliance Unit (2009-2018) and Bank Loss Prevention Associate (2006 -2009) at MetLife. | | Since June 2022 |
(a) | Excludes Mr. Parker and Mr. Benjamin, interested Board Members who also serve as President and Vice President, respectively. |
Explanatory Notes to Tables:
∎ | | Board Members are deemed to be “Interested,” as defined in the 1940 Act, by reason of their affiliation with PGIM Investments LLC and/or an affiliate of PGIM Investments LLC. |
∎ | | Unless otherwise noted, the address of all Board Members and Officers is c/o PGIM Investments LLC, 655 Broad Street, Newark, New Jersey 07102-4410. |
∎ | | There is no set term of office for Board Members or Officers. The Board Members have adopted a retirement policy, which calls for the retirement of Board Members on December 31 of the year in which they reach the age of 75. |
∎ | | “Other Directorships Held” includes all directorships of companies required to register or file reports with the SEC under the 1934 Act (that is, “public companies”) or other investment companies registered under the 1940 Act. |
∎ | | “Portfolios Overseen” includes all investment companies managed by PGIM Investments LLC. The investment companies for which PGIM Investments LLC serves as manager include the PGIM Mutual Funds, Target Funds, The Prudential Variable Contract Accounts, PGIM ETF Trust, PGIM Private Real Estate Fund, Inc., PGIM Private Credit Fund, PGIM High Yield Bond Fund, Inc., PGIM Global High Yield Fund, Inc., PGIM Short Duration High Yield Opportunities Fund, The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc. and the Advanced Series Trust. |
∎ | | As used in the Fund Officers table “Prudential” means The Prudential Insurance Company of America. |
Visit our website at pgim.com/investments
Approval of Advisory Agreements (unaudited)
The Fund’s Board of Trustees
The Board of Trustees (the “Board”) of PGIM Real Assets Fund (the “Fund”)1 consists of ten individuals, eight of whom are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Trustees”). The Board is responsible for the oversight of the Fund and its operations, and performs the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Trustees have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Trustee. The Board has established five standing committees: the Audit Committee, the Nominating and Governance Committee, the Compliance Committee and two Investment Committees. Each committee is chaired by, and composed of, Independent Trustees.
Annual Approval of the Fund’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Fund’s management agreement with PGIM Investments LLC (“PGIM Investments”) and the Fund’s subadvisory agreement with PGIM Quantitative Solutions LLC (“PGIM Quantitative Solutions”). In considering the renewal of the agreements, the Board, including all of the Independent Trustees, met on May 26 and June 7-9, 2022 (the “Board Meeting”). The Board approved the renewal of the agreements through July 31, 2023, after concluding that the renewal of the agreements was in the best interests of the Fund and its shareholders.
In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with its consideration. Among other things, the Board considered comparative fee information from PGIM Investments and PGIM Quantitative Solutions. Also, the Board considered comparisons with other mutual funds in relevant Peer Universes and Peer Groups, as is further discussed below.
In approving the agreements, the Board, including the Independent Trustees advised by independent legal counsel, considered the factors it deemed relevant, including the nature, quality and extent of services provided by PGIM Investments and the subadviser, the performance of the Fund, the profitability of PGIM Investments and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Fund and its shareholders as the Fund’s assets grow. In their deliberations, the Trustees did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund. In connection with its deliberations, the Board considered information provided by PGIM Investments throughout the year at regular Board meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the Board Meeting.
1 PGIM Real Assets Fund is a series of Prudential Investment Portfolios 3.
PGIM Real Assets Fund
Approval of Advisory Agreements (continued)
The Trustees determined that the overall arrangements between the Fund and PGIM Investments, which serves as the Fund’s investment manager pursuant to a management agreement, and between PGIM Investments and PGIM Quantitative Solutions, which serves as the Fund’s subadviser pursuant to the terms of a subadvisory agreement with PGIM Investments, are in the best interests of the Fund and its shareholders in light of the services performed, fees charged and such other matters as the Trustees considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Trustees’ reaching their determinations to approve the continuance of the agreements are separately discussed below.
Nature, Quality and Extent of Services
The Board received and considered information regarding the nature, quality and extent of services provided to the Fund by PGIM Investments and PGIM Quantitative Solutions. The Board noted that PGIM Quantitative Solutions is affiliated with PGIM Investments. The Board considered the services provided by PGIM Investments, including but not limited to the oversight of the subadviser for the Fund, as well as the provision of fund recordkeeping, compliance and other services to the Fund, and PGIM Investments’ role as administrator for the Fund’s liquidity risk management program. With respect to PGIM Investments’ oversight of the subadviser, the Board noted that PGIM Investments’ Strategic Investment Research Group (“SIRG”), which is a business unit of PGIM Investments, is responsible for monitoring and reporting to PGIM Investments’ senior management on the performance and operations of the subadviser. The Board also considered that PGIM Investments pays the salaries of all of the officers and interested Trustees of the Fund who are part of Fund management. The Board also considered the investment subadvisory services provided by PGIM Quantitative Solutions, including investment research and security selection, as well as adherence to the Fund’s investment restrictions and compliance with applicable Fund policies and procedures. The Board considered PGIM Investments’ evaluation of the subadviser as well as PGIM Investments’ recommendation, based on its review of each subadviser, to renew the subadvisory agreement.
The Board considered the qualifications, backgrounds and responsibilities of PGIM Investments’ senior management responsible for the oversight of the Fund and PGIM Quantitative Solutions and also considered the qualifications, backgrounds and responsibilities of the PGIM Quantitative Solutions portfolio managers who are responsible for the day-to-day management of the Fund’s portfolio. The Board was provided with information pertaining to PGIM Investments’ and PGIM Quantitative Solutions’ organizational structures, senior management, investment operations, and other relevant information pertaining to PGIM Investments and PGIM Quantitative Solutions. The Board also noted that it received favorable compliance reports from the Fund’s Chief Compliance Officer (“CCO”) as to each of PGIM Investments and PGIM Quantitative Solutions.
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The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PGIM Investments and the subadvisory services provided to the Fund by PGIM Quantitative Solutions and that there was a reasonable basis on which to conclude that the Fund benefits from the services provided by PGIM Investments and PGIM Quantitative Solutions under the management and subadvisory agreements.
Costs of Services and Profits Realized by PGIM Investments
The Board was provided with information on the profitability of PGIM Investments and its affiliates in serving as the Fund’s investment manager. The Board discussed with PGIM Investments the methodology utilized in assembling the information regarding profitability and considered its reasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure and cost of capital. However, the Board considered that the cost of services provided by PGIM Investments to the Fund during the year ended December 31, 2021 exceeded the management fees paid by the Fund, resulting in an operating loss to PGIM Investments. Taking these factors into account, the Board concluded that the profitability of PGIM Investments and its affiliates in relation to the services rendered was not unreasonable.
Economies of Scale
The Board received and discussed information concerning economies of scale that PGIM Investments may realize as the Fund’s assets grow beyond current levels. The Board noted that management fee schedule for the Fund includes breakpoints, which have the effect of decreasing the fee rate as assets increase. During the course of time, the Board has considered information regarding the launch date of the Fund, the management fees of the Fund compared to those of similarly managed funds and PGIM Investments’ investment in the Fund over time. The Board noted that economies of scale may be shared with the Fund in several ways, including low management fees from inception, additional technological and personnel investments to enhance shareholder services, and maintaining existing expense structures in the face of a rising cost environment. The Board considered PGIM Investments’ assertion that it continually evaluates the management fee schedule of the Fund and the potential to share economies of scale through breakpoints or fee waivers as asset levels increase.
The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of PGIM Investments’ costs are not specific to individual funds, but rather are incurred across a variety of products and services.
PGIM Real Assets Fund
Approval of Advisory Agreements (continued)
Other Benefits to PGIM Investments and PGIM Quantitative Solutions
The Board considered potential ancillary benefits that might be received by PGIM Investments and PGIM Quantitative Solutions and their affiliates as a result of their relationship with the Fund. The Board concluded that potential benefits to be derived by PGIM Investments included transfer agency fees received by the Fund’s transfer agent (which is affiliated with PGIM Investments), as well as benefits to its reputation or other intangible benefits resulting from PGIM Investments’ association with the Fund. The Board concluded that the potential benefits to be derived by PGIM Quantitative Solutions included its ability to use soft dollar credits, as well as the potential benefits consistent with those generally resulting from an increase in assets under management, specifically, potential access to additional research resources and benefits to their reputations. The Board concluded that the benefits derived by PGIM Investments and PGIM Quantitative Solutions were consistent with the types of benefits generally derived by investment managers and subadvisers to mutual funds.
Performance of the Fund / Fees and Expenses
The Board considered certain additional factors and made related conclusions relating to the historical performance of the Fund for the one-, three-, and five-year periods ended December 31, 2021.
The Board also considered the Fund’s actual management fee, as well as the Fund’s net total expense ratio, for the fiscal year ended October 31, 2021. The Board considered the management fee for the Fund as compared to the management fee charged by PGIM Investments to other funds and the fee charged by other advisers to comparable mutual funds in a Peer Group. The actual management fee represents the fee rate actually paid by Fund shareholders and includes any fee waivers or reimbursements. The net total expense ratio for the Fund represents the actual expense ratio incurred by Fund shareholders.
The mutual funds included in the Peer Universe, which was used to consider performance, and the mutual funds included in the Peer Group, which was used to consider expenses and fees, were selected by PGIM Investments. In certain circumstances, PGIM Investments also provided supplemental Peer Universe or Peer Group information for reasons addressed with the Board. The comparisons placed the Fund in various quartiles over various periods, with the first quartile being the best 25% of the mutual funds (for performance, the best performing mutual funds and, for expenses, the lowest cost mutual funds).
The section below summarizes key factors considered by the Board and the Board’s conclusions regarding the Fund’s performance, fees and overall expenses. The table sets forth net performance comparisons (which reflect the impact on performance of fund expenses, or any subsidies, expense caps or waivers that may be applicable) with the Peer Universe, actual management fees with the Peer Group (which reflect the impact of any subsidies or fee waivers), and net total expenses with the Peer Group, each of which were key factors considered by the Board.
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Net Performance | | 1 Year | | 3 Years | | 5 Years | | 10 Years |
| | 3rd Quartile | | 2nd Quartile | | 3rd Quartile | | 2nd Quartile |
Actual Management Fees: 1st Quartile |
Net Total Expenses: 4th Quartile |
· | | The Board noted that the Fund outperformed its primary benchmark index (the Bloomberg Barclays US TIPS Index) over all periods. |
· | | The Board also noted that the Fund outperformed its secondary benchmark index (a custom blended index) over the three-, five-, and ten-year periods but underperformed over the one-year period. |
· | | The Board also considered that the Fund outperformed its benchmark index and peer group for all periods ended March 31, 2022. |
· | | The Board and PGIM Investments agreed to continue the Fund’s existing contractual expense cap, which (exclusive of certain fees and expenses) caps the annual operating expenses of each class of the Fund’s shares at 0.85% through February 28, 2023. |
· | | In addition, PGIM Investments will waive management fees or shared operating expenses on any share class to the same extent that it waives such expenses on any other share class, and has agreed that total annual fund operating expenses for Class R6 shares will not exceed total annual fund operating expenses for Class Z shares. |
· | | The Board concluded that, in light of the above, it would be in the best interests of the Fund and its shareholders to renew the agreements. |
· | | The Board concluded that the management fees (including subadvisory fees) and total expenses were reasonable in light of the services provided. |
* * *
After full consideration of these factors, the Board concluded that approval of the agreements was in the best interests of the Fund and its shareholders.
PGIM Real Assets Fund
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∎ MAIL | | ∎ TELEPHONE | | ∎ WEBSITE |
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655 Broad Street | | (800) 225-1852 | | pgim.com/investments |
Newark, NJ 07102 | | | | |
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PROXY VOTING |
The Board of Trustees of the Fund has delegated to the Fund’s subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website. |
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TRUSTEES |
Ellen S. Alberding · Kevin J. Bannon · Scott E. Benjamin · Linda W. Bynoe · Barry H. Evans · Keith F. Hartstein · Laurie Simon Hodrick · Stuart S. Parker · Brian K. Reid · Grace C. Torres |
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OFFICERS |
Stuart S. Parker, President · Scott E. Benjamin, Vice President · Christian J. Kelly, Treasurer and Principal Financial and Accounting Officer · Claudia DiGiacomo, Chief Legal Officer · Isabelle Sajous, Chief Compliance Officer · Kelly Florio, Anti-Money Laundering Compliance Officer · Andrew R. French, Secretary · Melissa Gonzalez, Assistant Secretary · Kelly A. Coyne, Assistant Secretary · Patrick E. McGuinness, Assistant Secretary · Debra Rubano, Assistant Secretary · Lana Lomuti, Assistant Treasurer · Russ Shupak, Assistant Treasurer · Elyse M. McLaughlin, Assistant Treasurer · Deborah Conway, Assistant Treasurer |
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MANAGER | | PGIM Investments LLC | | 655 Broad Street Newark, NJ 07102 |
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SUBADVISER | | PGIM Quantitative Solutions 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 | | 240 Greenwich 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 | | PricewaterhouseCoopers LLP | | 300 Madison Avenue New York, NY 10017 |
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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 the prospectus and summary prospectus by visiting our website at pgim.com/investments or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
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E-DELIVERY To receive your mutual fund documents online, go to pgim.com/investments/resource/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
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SHAREHOLDER COMMUNICATIONS WITH TRUSTEES Shareholders can communicate directly with the Board of Trustees by writing to the Chair of the Board, PGIM Real Assets Fund, PGIM Investments, Attn: Board of Trustees, 655 Broad Street, Newark, NJ 07102. Shareholders can communicate directly with an individual Trustee by writing to that Trustee at the same address. Communications are not screened before being delivered to the addressee. |
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AVAILABILITY OF PORTFOLIO HOLDINGS The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT filings are available on the Commission’s website at sec.gov. |
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The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and is available without charge, upon request, by calling (800) 225-1852. |
Mutual Funds:
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ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | | MAY LOSE VALUE | | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PGIM REAL ASSETS FUND
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SHARE CLASS | | A | | C | | Z | | R6 |
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NASDAQ | | PUDAX | | PUDCX | | PUDZX | | PUDQX |
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CUSIP | | 74440K819 | | 74440K785 | | 74440K777 | | 74440K744 |
MF207E
PGIM GLOBAL DYNAMIC BOND FUND
ANNUAL REPORT
OCTOBER 31, 2022
To enroll in e-delivery, go to pgim.com/investments/resource/edelivery
Table of Contents
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.
Mutual funds are distributed by Prudential Investment Management Services LLC (PIMS), member SIPC. PGIM Fixed Income is a unit of PGIM, Inc. (PGIM), a registered investment adviser. PIMS and PGIM are Prudential Financial companies. © 2022 Prudential Financial, Inc. and its related entities. PGIM and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
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2 | | Visit our website at pgim.com/investments |
Letter from the President
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| | Dear Shareholder: |
| We hope you find the annual report for the PGIM Global Dynamic Bond Fund informative and useful. The report covers performance for the 12-month period that ended October 31, 2022. The attention of the global economy and financial markets pivoted during the period from the COVID-19 pandemic to the challenge of rapidly rising inflation. While job growth remained strong, prices for a wide range of goods and services rose in response to economic re-openings, supply-chain disruptions, governmental stimulus, and Russia’s invasion of Ukraine. With inflation surging to a 40-year high, the Federal Reserve and other central banks aggressively hiked interest rates, prompting recession concerns. |
After rising to record levels at the end of 2021, stocks have fallen sharply in 2022 as investors worried about higher prices, slowing economic growth, geopolitical uncertainty, and new COVID-19 outbreaks. Equities rallied for a time during the summer but began falling again in late August on fears that the Fed would keep raising rates to tame inflation. For the entire 12-month period, equities suffered a broad-based global decline, although large-cap US stocks outperformed their small-cap counterparts. International developed and emerging markets trailed the US market during this time.
Rising rates and economic uncertainty drove fixed income prices broadly lower as well. US and global investment-grade bonds, along with US high yield corporate bonds and emerging market debt, all posted negative returns during the period.
Regarding your investments with PGIM, we believe it is important to maintain a diversified portfolio of funds consistent with your tolerance for risk, time horizon, and financial goals. Your financial advisor can help you create a diversified investment plan that may include funds covering all the basic asset classes and that reflects your personal investor profile and risk tolerance. However, diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
At PGIM Investments, we provide access to active investment strategies across the global markets in the pursuit of consistent outperformance for investors. PGIM is the world’s 11th-largest investment manager with more than $1.5 trillion in assets under management. Our scale and investment expertise allow us to deliver a diversified suite of actively managed solutions across a broad spectrum of asset classes and investment styles.
Thank you for choosing our family of funds.
Sincerely,
Stuart S. Parker, President
PGIM Global Dynamic Bond Fund
December 15, 2022
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PGIM Global Dynamic 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 pgim.com/investments or by calling (800) 225-1852.
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| | Average Annual Total Returns as of 10/31/22 |
| | One Year (%) | | | Five Years (%) | | | Since Inception (%) |
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Class A | | | | | | | | | | |
(with sales charges) | | | -18.29 | | | | -0.80 | | | 1.56 (11/03/2015) |
(without sales charges) | | | -15.54 | | | | -0.15 | | | 2.04 (11/03/2015) |
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Class C | | | | | | | | | | |
(with sales charges) | | | -17.02 | | | | -0.90 | | | 1.25 (11/03/2015) |
(without sales charges) | | | -16.22 | | | | -0.90 | | | 1.25 (11/03/2015) |
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Class Z | | | | | | | | | | |
(without sales charges) | | | -15.36 | | | | 0.17 | | | 2.34 (11/03/2015) |
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Class R6 | | | | | | | | | | |
(without sales charges) | | | -15.22 | | | | 0.24 | | | 2.38 (11/03/2015) |
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ICE BofA US 3-Month Treasury Bill Index | | | | | | | | | | |
| | | 0.78 | | | | 1.16 | | | 0.98 |
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ICE BofA US Dollar 3-Month Deposit Offered Rate Constant Maturity Index | | | |
| | | 0.64 | | | | 1.34 | | | 1.19 |
Since Inception returns are provided since the Fund has less than 10 fiscal years of returns. Since Inception returns for the Indexes are measured from the closest month-end to the Fund’s inception date.
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4 | | Visit our website at pgim.com/investments |
Growth of a $10,000 Investment (unaudited)
The graph compares a $10,000 investment in the Fund’s Class Z shares with a similar investment in the ICE BofA US 3-Month Treasury Bill Index and the ICE BofA US Dollar 3-Month Deposit Offered Rate Constant Maturity Index by portraying the initial account values at the commencement of operations for Class Z shares (November 3, 2015) and the account values at the end of the current fiscal year (October 31, 2022), as measured on a quarterly basis. For purposes of the graph, and unless otherwise indicated, it has been assumed that (a) all recurring fees (including management fees) were deducted and (b) all dividends and distributions were reinvested. The line graph provides information for Class Z shares only. As indicated in the tables provided earlier, performance for other share classes will vary due to the differing fees and expenses applicable to each share class (as indicated in the following paragraphs). Without waiver of fees and/or expense reimbursements, if any, the returns would have been lower.
Past performance does not predict future performance. Total returns and the ending account values in the graphs include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown. The Fund’s total returns do not reflect the deduction of income taxes on an individual’s investment. Taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares.
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PGIM Global Dynamic Bond Fund | | | 5 | |
Your Fund’s Performance (continued)
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.
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| | Class A | | Class C | | Class Z | | Class R6 |
Maximum initial sales charge | | 3.25% of the public offering price | | None | | None | | None |
Contingent deferred sales charge (CDSC) (as a percentage of the lower of the original purchase price or the net asset value at redemption) | | 1.00% on sales of $500,000 or more made within 12 months of purchase | | 1.00% on sales made within 12 months of purchase | | None | | None |
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | | 0.25% | | 1.00% | | None | | None |
Benchmark Definitions
ICE BofA US 3-Month Treasury Bill Index*—The ICE BofA US 3-Month Treasury Bill Index tracks the performance of US dollar-denominated US Treasury bills publicly issued in the US domestic market with a remaining term to final maturity of 3 months.
*ICE BofA US 3-Month Treasury Bill Index has replaced ICE BofA US Dollar 3-Month Deposit Offered Rate Constant Maturity Index as the Fund’s primary benchmark due to the pending discontinuation of LIBOR.
ICE BofA USD 3-Month Deposit Offered Rate Constant Maturity Index—The ICE BofA USD 3-Month Deposit Offered Rate Constant Maturity 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 day’s 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.
Investors cannot invest directly in an index. The returns for the Indexes would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes that may be paid by an investor.
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6 | | Visit our website at pgim.com/investments |
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Credit Quality expressed as a percentage of total investments as of 10/31/22 (%) | |
AAA | | | 7.3 | |
A | | | 7.1 | |
BBB | | | 16.3 | |
BB | | | 36.0 | |
B | | | 17.3 | |
CCC | | | 4.6 | |
C | | | 0.1 | |
Not Rated | | | 6.7 | |
Cash/Cash Equivalents | | | 4.6 | |
Total | | | 100.0 | |
Credit ratings reflect the highest rating assigned by a nationally recognized statistical rating organization (NRSRO) such as Moody’s Investors Service, Inc. (Moody’s), S&P Global Ratings (S&P), or Fitch, Inc. (Fitch). Credit ratings reflect the common nomenclature used by both S&P and Fitch. Where applicable, ratings are converted to the comparable S&P/Fitch rating tier nomenclature. These rating agencies are independent and are widely used. The Not Rated category consists of securities that have not been rated by an NRSRO. Credit ratings are subject to change.
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Distributions and Yields as of 10/31/22 |
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| | Total Distributions Paid for One Year ($) | | SEC 30-Day Subsidized Yield* (%) | | SEC 30-Day Unsubsidized Yield** (%) |
Class A | | 0.48 | | 9.46 | | 7.82 |
Class C | | 0.42 | | 9.05 | | 9.85 |
Class Z | | 0.51 | | 10.15 | | 10.41 |
Class R6 | | 0.51 | | 10.21 | | 10.33 |
*SEC 30-Day Subsidized Yield (%)—A standardized yield calculation created by the Securities and Exchange Commission, it reflects the income earned during a 30-day period, after the deduction of the Fund’s net expenses (net of any expense waivers or reimbursements). The investor experience is represented by the SEC 30-Day Subsidized Yield.
**SEC 30-Day Unsubsidized Yield (%)—A standardized yield calculation created by the Securities and Exchange Commission, it reflects the income earned during a 30-day period, after the deduction of the Fund’s gross expenses. The investor experience is represented by the SEC 30-Day Subsidized Yield.
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PGIM Global Dynamic Bond Fund | | | 7 | |
Strategy and Performance Overview* (unaudited)
How did the Fund perform?
The PGIM Global Dynamic Bond Fund’s Class Z shares returned -15.36% in the 12-month reporting period that ended October 31, 2022, underperforming the 0.78% return of the ICE BofA US 3-Month Treasury Bill Index (the Index).
What were the market conditions?
• | | From a starting point of low yields, tight spreads, and high equity multiples, the shift in fundamentals—most notably, high inflation—drove a wholesale repricing of markets during the reporting period. Concerns about central bank tightening, hard economic landings, and the war in Ukraine led global credit spreads to be notably wider, while rate volatility increased as markets first began pricing in more aggressive Federal Open Market Committee policy tightening and then later began to price in a hard economic landing. |
• | | Against the backdrop of historic lows in unemployment and generational highs in inflation, central banks signaled an increased willingness to accept more economic and market pain than they had been over the prior decade of low inflation. A succession of federal funds rate hikes—including outsized 75 basis-point (bp) hikes in June, July, and September—confirmed to markets that the Federal Reserve (the Fed) is fully focused on tackling inflation. (One basis point equals 0.01%.) |
• | | At the August Jackson Hole symposium, Fed Chairman Jerome Powell’s speech was successful in lifting rate-hike expectations for 2022 and removing market pricing for rate cuts in 2023. While long-run inflation expectations remain relatively subdued at this point, Powell expressed the need to exercise vigilance about the trajectory of market expectations to avoid a self-fulfilling inflation spiral. Underpinning this escalation in rhetoric was the reality that Fed officials do not know how high they will ultimately take the fed funds rate in order to tame inflation. |
• | | As a result, enormous volatility continued to be priced into US Treasuries, with sharply higher front-end rates and lower long-dated yields forming a substantially flatter US Treasury yield curve before the curve finally inverted during the last three months of the period. The 10-year/2-year Treasury spread declined from 1.10% on October 31, 2021 to -0.44% by the end of the period. |
• | | Beginning the period at 1.55%, US 10-year Treasury yields ended the period at 4.05%. Meanwhile, the yield on the 2-year Treasury note ended the period at 4.49%, a rise of 404 bps since the beginning of the period. |
• | | In Europe, German 10-year bond yields rose to end the period at 2.43% as the European Central Bank (ECB) raised rates amid mounting inflationary pressures driven by demand and supply-chain bottlenecks. Similarly, UK 10-year bond yields rose over the period to end it at 3.51% as the Bank of England raised rates in order to bring inflation under control. |
• | | US investment-grade corporate spreads widened significantly as corporates were challenged by elevated inflationary pressures, a slower growth outlook, and higher event and geopolitical risk. US high yield bonds posted significant declines through |
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8 | | Visit our website at pgim.com/investments |
| much of 2022 as rate-hike concerns, high and persistent inflation, and recession fears overshadowed the strength of earnings and credit fundamentals. Securitized credit spreads widened, with collateralized loan obligation (CLO) and commercial mortgage-backed securities (CMBS) spreads trading well above their recent tights by the end of the period. The emerging markets sector posted negative total returns, and spreads widened as markets were pressured by tightening financial conditions and slowing growth in China and Europe. Meanwhile, agency mortgage-backed securities (MBS) underperformed Treasuries on concerns that the Fed may begin selling MBS if officials need to step up their inflation fight. |
What worked?
• | | The Fund’s yield curve positioning, in both developed market and emerging market rates, contributed to performance during the reporting period. |
• | | While overall security selection detracted from performance, selection in emerging markets Treasuries and emerging markets derivatives linked to the London Interbank Offered Rate (LIBOR) contributed to performance over the period. |
• | | Within credit, positioning in the upstream energy, midstream energy, aerospace & defense, and downstream energy sectors contributed. |
• | | In individual security selection, the Fund benefited from overweights relative to the Index to Chesapeake Energy Corp. (upstream energy), Bombardier Inc. (aerospace & defense), and Ascent Resources Inc. (upstream energy). |
What didn’t work?
• | | During the period, the Fund’s long duration bias detracted from returns. (Duration measures the sensitivity of the price—the value of principal—of a bond to a change in interest rates.) |
• | | Within security selection, positions in emerging markets sovereign debt, developed markets high yield bonds, emerging markets agency securities, and developed markets Treasuries detracted the most. |
• | | Within credit, positioning in foreign non-corporate bonds as well as the cable & satellite and healthcare & pharmaceuticals sectors detracted from performance. |
• | | In individual security selection, overweights relative to the Index to the Republic of Ukraine, the Russian Federation, and Bausch Health Companies Inc. (healthcare & pharmaceuticals) detracted from performance. |
Did the Fund use derivatives?
The Fund uses derivatives when they facilitate implementation of the overall investment approach. During the reporting period, the Fund held positions in Russia combined with the use of derivatives designed to offset the decline in value of certain Russian securities. The Fund also used interest rate futures, options, and swaps during the period to help manage duration positioning and yield curve exposure, which detracted from performance. Credit default swaps and credit default swap index (CDX) positions
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PGIM Global Dynamic Bond Fund | | | 9 | |
Strategy and Performance Overview* (continued)
were used to either add risk exposure to certain issuers or to hedge credit risk imposed by certain issuers. Overall, credit derivative exposure contributed during the period. In addition, the Fund traded foreign-exchange derivatives, which had a positive impact on performance over the period.
Current outlook
• | | PGIM Fixed Income maintains that it will likely take another quarter to see a material downtrend in the key categories of services inflation. Such relief would come from a combination of a slowdown in labor demand, in line with other slowing measures of aggregate demand, and incremental gains in labor supply as workers with lower balances of savings are drawn back into the workforce. |
• | | Based on its review of inflation and other macroeconomic data, PGIM Fixed Income believes the Fed is unlikely to soon stop raising rates and, as a result, recently raised its terminal rate projection to 4.75% by January—assuming 50-bp and 25-bp rate hikes in December and January, respectively. This would likely be followed by precautionary rate cuts by the end of the second quarter of 2023, as the downturn takes hold amid a negative fiscal impulse, mounting external shocks, and tighter financial conditions. |
• | | In Europe, PGIM Fixed Income expects rates to rise by 50 bps when the ECB meets in December, taking the deposit facility rate to 2% before pausing through the winter period and, ultimately, peaking at less than 3%. However, if inflation continues surprising to the upside, particularly if nominal wages or inflation expectations start to inch above levels consistent with the 2% inflation target, then such a dovish shift could prove premature. In that case, PGIM Fixed Income would expect sequential rate hikes to continue, with rates peaking above 3%. |
• | | Beyond the progression of events over the next few quarters or years, PGIM Fixed Income expects economic conditions to eventually return to a configuration more like pre-COVID-19 conditions, as an aging demographic and high debt burdens are likely to drive a return to moderate growth and inflation, which may lead to a lower interest rate environment. |
• | | PGIM Fixed Income maintains its positive view of spread sectors over the medium to long term and holds allocations to structured products (CLOs, CMBS), investment-grade corporate bonds, high yield bonds, and emerging markets. |
• | | In terms of calling the peak in long-term rates, given the economic strength and level of inflation, PGIM Fixed income believes it’s too early to preclude the possibility of higher highs. Yet, from a long-term perspective, exposure to developed market duration is becoming more compelling after the broad repricing and with the looming moderation in global growth. While acknowledging the immediate trajectory of inflation is going to dictate market volatility and the path of the US Treasury 10-year yield, PGIM Fixed Income’s base case is that implied volatility will ultimately decline, and |
| | |
10 | | Visit our website at pgim.com/investments |
| the 10-year yield will stay below the terminal rate of this interest rate hiking cycle when it is eventually reached. In the meantime, the best course will be to focus on the micro-alpha opportunities within and across sectors, in PGIM Fixed Income’s view. |
*This strategy and performance overview, which discusses what strategies or holdings (including derivatives, if applicable) affected the Fund’s performance, is compiled based on how the Fund performed relative to the Fund’s benchmark index and is viewed for performance attribution purposes at the aggregate Fund level, which in most instances will not directly correlate to the amounts disclosed in the Statement of Operations which conform to US generally accepted accounting principles.
| | | | |
PGIM Global Dynamic Bond Fund | | | 11 | |
Fees and Expenses (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 held through the six-month period ended October 31, 2022. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of PGIM funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information
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12 | | Visit our website at pgim.com/investments |
provided in the expense table. Additional fees have the effect of reducing investment returns.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | | | | | | | | | |
| | | | |
PGIM Global Dynamic Bond Fund | | Beginning Account Value May 1, 2022 | | Ending Account Value October 31, 2022 | | Annualized Expense Ratio Based on the Six-Month Period | | Expenses Paid During the Six-Month Period* |
Class A | | Actual | | $1,000.00 | | $ 965.20 | | 1.20% | | $5.94 |
| | Hypothetical | | $1,000.00 | | $1,019.16 | | 1.20% | | $6.11 |
Class C | | Actual | | $1,000.00 | | $ 961.40 | | 1.95% | | $9.64 |
| | Hypothetical | | $1,000.00 | | $1,015.38 | | 1.95% | | $9.91 |
Class Z | | Actual | | $1,000.00 | | $ 965.70 | | 0.85% | | $4.21 |
| | Hypothetical | | $1,000.00 | | $1,020.92 | | 0.85% | | $4.33 |
Class R6 | | Actual | | $1,000.00 | | $ 967.10 | | 0.80% | | $3.97 |
| | Hypothetical | | $1,000.00 | | $1,021.17 | | 0.80% | | $4.08 |
*Fund expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by the 184 days in the six-month period ended October 31, 2022, and divided by the 365 days in the Fund’s fiscal year ended October 31, 2022 (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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PGIM Global Dynamic Bond Fund | | | 13 | |
Schedule of Investments
as of October 31, 2022
| | | | | | | | | | | | |
| | | | |
Description | | Interest Rate | | Maturity Date | | Principal Amount (000)# | | | Value | |
| | | | |
LONG-TERM INVESTMENTS 88.5% | | | | | | | | | | |
| | | | |
ASSET-BACKED SECURITIES 3.4% | | | | | | | | | | |
| | | | |
Cayman Islands 0.5% | | | | | | | | | | |
Trinitas CLO Ltd., | | | | | | | | | | | | |
Series 2020-14A, Class C, 144A, 3 Month LIBOR + 3.000% (Cap N/A, Floor 3.000%) | | 7.358%(c) | | 01/25/34 | | | 250 | | | $ | 234,190 | |
| | | | |
Spain 0.6% | | | | | | | | | | |
TFS, | | | | | | | | | | | | |
Series 2018-03, Class A1, 1 Month EURIBOR + 3.000%^ | | 0.000(s) | | 04/16/40 | | EUR | — | (r) | | | 302 | |
Series 2018-03, Class A1, 1 Month EURIBOR + 3.000%^ | | 3.845(c) | | 04/16/23 | | EUR | 261 | | | | 245,177 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 245,479 | |
| | | | |
United States 2.3% | | | | | | | | | | |
Laurel Road Prime Student Loan Trust, | | | | | | | | | | | | |
Series 2019-A, Class R, 144A | | 0.000 | | 10/25/48 | | | 707 | | | | 166,654 | |
Oportun Funding XIII LLC, | | | | | | | | | | | | |
Series 2019-A, Class B, 144A | | 3.870 | | 08/08/25 | | | 86 | | | | 82,893 | |
TH MSR Issuer Trust, | | | | | | | | | | | | |
Series 2019-FT01, Class A, 144A, 1 Month LIBOR + 2.800% (Cap N/A, Floor 2.800%) | | 6.386(c) | | 06/25/24 | | | 820 | | | | 761,762 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 1,011,309 | |
| | | | | | | | | | | | |
| | | | |
TOTAL ASSET-BACKED SECURITIES (cost $1,502,190) | | | | | | | | | | | 1,490,978 | |
| | | | | | | | | | | | |
|
COMMERCIAL MORTGAGE-BACKED SECURITIES 14.6% | |
| | | | |
Canada 0.1% | | | | | | | | | | |
Real Estate Asset Liquidity Trust, | | | | | | | | | | | | |
Series 2020-01A, Class A1, 144A | | 2.381(cc) | | 02/12/55 | | CAD | 66 | | | | 44,268 | |
| | | | | | | | | | | | |
| | | | |
United Kingdom 4.0% | | | | | | | | | | |
Deco DAC, | | | | | | | | | | | | |
Series 2019-RAM, Class ASONIA + 2.007% (Cap N/A, Floor 2.007%) | | 3.898(c) | | 08/07/30 | | GBP | 1,560 | | | | 1,703,337 | |
| | | | | | | | | | | | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 15 |
Schedule of Investments (continued)
as of October 31, 2022
| | | | | | | | | | | | |
| | | | |
Description | | Interest Rate | | Maturity Date | | Principal Amount (000)# | | | Value | |
|
COMMERCIAL MORTGAGE-BACKED SECURITIES (Continued) | |
| | | | |
United States 10.5% | | | | | | | | | | |
Barclays Commercial Mortgage Securities Trust, | | | | | | | | | | | | |
Series 2018-CHRS, Class D, 144A | | 4.267%(cc) | | 08/05/38 | | | 300 | | | $ | 228,643 | |
BX Commercial Mortgage Trust, | | | | | | | | | | | | |
Series 2019-XL, Class J, 144A, 1 Month LIBOR + 2.650% (Cap N/A, Floor 2.650%) | | 6.062(c) | | 10/15/36 | | | 544 | | | | 519,830 | |
Cold Storage Trust, | | | | | | | | | | | | |
Series 2020-ICE05, Class E, 144A, 1 Month LIBOR + 2.766% (Cap N/A, Floor 2.833%) | | 6.178(c) | | 11/15/37 | | | 99 | | | | 93,367 | |
Credit Suisse Mortgage Capital Certificates, | | | | | | | | | | | | |
Series 2019-ICE04, Class E, 144A, 1 Month LIBOR + 2.150% (Cap N/A, Floor 2.150%) | | 5.562(c) | | 05/15/36 | | | 275 | | | | 263,981 | |
Series 2019-ICE04, Class F, 144A, 1 Month LIBOR + 2.650% (Cap N/A, Floor 2.650%) | | 6.062(c) | | 05/15/36 | | | 1,250 | | | | 1,198,951 | |
DBWF Mortgage Trust, | | | | | | | | | | | | |
Series 2016-85T, Class E, 144A | | 3.808(cc) | | 12/10/36 | | | 250 | | | | 198,741 | |
GS Mortgage Securities Corp. Trust, | | | | | | | | | | | | |
Series 2021-IP, Class F, 144A, 1 Month LIBOR + 4.550% (Cap N/A, Floor 4.550%) | | 7.962(c) | | 10/15/36 | | | 140 | | | | 128,173 | |
JPMorgan Chase Commercial Mortgage Securities Trust, | | | | | | | | | | | | |
Series 2018-AON, Class E, 144A | | 4.613(cc) | | 07/05/31 | | | 400 | | | | 324,648 | |
MKT Mortgage Trust, | | | | | | | | | | | | |
Series 2020-525M, Class F, 144A | | 2.941(cc) | | 02/12/40 | | | 550 | | | | 310,794 | |
Morgan Stanley Capital I Trust, | | | | | | | | | | | | |
Series 2019-MEAD, Class E, 144A | | 3.177(cc) | | 11/10/36 | | | 650 | | | | 535,425 | |
One New York Plaza Trust, | | | | | | | | | | | | |
Series 2020-01NYP, Class D, 144A, 1 Month LIBOR + 2.750% (Cap N/A, Floor 2.750%) | | 6.162(c) | | 01/15/36 | | | 125 | | | | 116,644 | |
Wells Fargo Commercial Mortgage Trust, | | | | | | | | | | | | |
Series 2021-FCMT, Class E, 144A, 1 Month LIBOR + 4.500% (Cap N/A, Floor 4.500%) | | 7.912(c) | | 05/15/31 | | | 700 | | | | 643,514 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 4,562,711 | |
| | | | | | | | | | | | |
| | | | |
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES (cost $7,287,527) | | | | | | | | | | | 6,310,316 | |
| | | | | | | | | | | | |
| | | | |
CORPORATE BONDS 49.7% | | | | | | | | | | |
| | | | |
Brazil 1.4% | | | | | | | | | | |
Petrobras Global Finance BV, | | | | | | | | | | | | |
Gtd. Notes | | 5.375 | | 10/01/29 | | | GBP 300 | | | | 287,016 | |
See Notes to Financial Statements.
16
| | | | | | | | | | | | |
| | | | |
Description | | Interest Rate | | Maturity Date | | Principal Amount (000)# | | | Value | |
| | | | |
CORPORATE BONDS (Continued) | | | | | | | | | | |
| | | | |
Brazil (cont’d.) | | | | | | | | | | |
Petrobras Global Finance BV, (cont’d.) | | | | | | | | | | | | |
Gtd. Notes | | 6.625% | | 01/16/34 | | | GBP 100 | | | $ | 95,779 | |
Gtd. Notes, EMTN | | 6.250 | | 12/14/26 | | | GBP 200 | | | | 217,290 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 600,085 | |
| | | | |
Bulgaria 0.3% | | | | | | | | | | |
Bulgarian Energy Holding EAD, | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 2.450 | | 07/22/28 | | | EUR 200 | | | | 141,789 | |
| | | | |
Canada 1.7% | | | | | | | | | | |
Bombardier, Inc., | | | | | | | | | | | | |
Sr. Unsec’d. Notes, 144A | | 7.125 | | 06/15/26 | | | 25 | | | | 23,715 | |
Sr. Unsec’d. Notes, 144A | | 7.500 | | 12/01/24 | | | 144 | | | | 143,856 | |
Sr. Unsec’d. Notes, 144A | | 7.875 | | 04/15/27 | | | 395 | | | | 374,618 | |
Brookfield Residential Properties, Inc./Brookfield Residential US LLC, | | | | | | | | | | | | |
Gtd. Notes, 144A | | 4.875 | | 02/15/30 | | | 85 | | | | 64,387 | |
Cenovus Energy, Inc., | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 3.750 | | 02/15/52 | | | 10 | | | | 6,619 | |
Sr. Unsec’d. Notes | | 5.250 | | 06/15/37 | | | 110 | | | | 95,975 | |
MEG Energy Corp., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 7.125 | | 02/01/27 | | | 45 | | | | 45,790 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 754,960 | |
| | | | |
France 3.6% | | | | | | | | | | |
Adevinta ASA, | | | | | | | | | | | | |
Sr. Sec’d. Notes | | 3.000 | | 11/15/27 | | | EUR 250 | | | | 216,536 | |
Sr. Sec’d. Notes, 144A | | 3.000 | | 11/15/27 | | | EUR 100 | | | | 86,651 | |
Altice France SA, | | | | | | | | | | | | |
Sr. Sec’d. Notes | | 3.375 | | 01/15/28 | | | EUR 400 | | | | 302,765 | |
CAB SELAS, | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 3.375 | | 02/01/28 | | | EUR 125 | | | | 96,164 | |
Faurecia SE, | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 3.750 | | 06/15/28 | | | EUR 250 | | | | 207,743 | |
Iliad Holding SASU, | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 5.625 | | 10/15/28 | | | EUR 200 | | | | 177,085 | |
Loxam SAS, | | | | | | | | | | | | |
Sr. Sub. Notes | | 4.500 | | 04/15/27 | | | EUR 100 | | | | 77,476 | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 17 |
Schedule of Investments (continued)
as of October 31, 2022
| | | | | | | | | | | | |
| | | | |
Description | | Interest Rate | | Maturity Date | | Principal Amount (000)# | | | Value | |
| | | | |
CORPORATE BONDS (Continued) | | | | | | | | | | |
| | | | |
France (cont’d.) | | | | | | | | | | |
SPCM SA, | | | | | | | | | | | | |
Sr. Unsec’d. Notes, 144A | | 2.625% | | 02/01/29 | | | EUR 100 | | | $ | 76,072 | |
Verallia SA, | | | | | | | | | | | | |
Gtd. Notes | | 1.625 | | 05/14/28 | | | EUR 400 | | | | 326,816 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 1,567,308 | |
| | | | |
Germany 1.4% | | | | | | | | | | |
Nidda BondCo GmbH, | | | | | | | | | | | | |
Gtd. Notes, 144A | | 5.000 | | 09/30/25 | | | EUR 100 | | | | 79,592 | |
thyssenkrupp AG, | | | | | | | | | | | | |
Sr. Unsec’d. Notes, EMTN | | 1.875 | | 03/06/23 | | | EUR 100 | | | | 97,884 | |
TK Elevator Holdco GmbH, | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 6.625 | | 07/15/28 | | | EUR 90 | | | | 69,545 | |
TK Elevator Midco GmbH, | | | | | | | | | | | | |
Sr. Sec’d. Notes | | 4.375 | | 07/15/27 | | | EUR 100 | | | | 83,458 | |
Sr. Sec’d. Notes, 144A | | 4.375 | | 07/15/27 | | | EUR 100 | | | | 83,619 | |
Volkswagen International Finance NV, | | | | | | | | | | | | |
Gtd. Notes | | 4.625(ff) | | 03/24/26(oo) | | | EUR 200 | | | | 187,171 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 601,269 | |
| | | | |
India 0.8% | | | | | | | | | | |
NTPC Ltd., | | | | | | | | | | | | |
Sr. Unsec’d. Notes, EMTN | | 2.750 | | 02/01/27 | | | EUR 300 | | | | 271,979 | |
Power Finance Corp. Ltd., | | | | | | | | | | | | |
Sr. Unsec’d. Notes, GMTN | | 1.841 | | 09/21/28 | | | EUR 100 | | | | 77,009 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 348,988 | |
| | | | |
Indonesia 0.6% | | | | | | | | | | |
Perusahaan Listrik Negara PT, | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 2.875 | | 10/25/25 | | | EUR 200 | | | | 186,013 | |
Perusahaan Perseroan Persero PT Perusahaan Listrik Negara, | | | | | | | | | | | | |
Sr. Unsec’d. Notes, 144A | | 1.875 | | 11/05/31 | | | EUR 100 | | | | 69,073 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 255,086 | |
| | | | |
Israel 0.2% | | | | | | | | | | |
Energean Israel Finance Ltd., | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 4.500 | | 03/30/24 | | | 100 | | | | 95,240 | |
See Notes to Financial Statements.
18
| | | | | | | | | | | | |
| | | | |
Description | | Interest Rate | | Maturity Date | | Principal Amount (000)# | | | Value | |
| | | | |
CORPORATE BONDS (Continued) | | | | | | | | | | |
| | | | |
Italy 1.0% | | | | | | | | | | |
Assicurazioni Generali SpA, | | | | | | | | | | | | |
Sub. Notes, EMTN | | 5.500%(ff) | | 10/27/47 | | | EUR 100 | | | $ | 96,853 | |
Nexi SpA, | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 2.125 | | 04/30/29 | | | EUR 400 | | | | 314,549 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 411,402 | |
| | | | |
Jamaica 1.1% | | | | | | | | | | |
Digicel International Finance Ltd./Digicel International Holdings Ltd., | | | | | | | | | | | | |
Gtd. Notes, 144A, Cash coupon 6.000% and PIK 7.000% | | 13.000 | | 12/31/25 | | | 277 | | | | 185,710 | |
Sr. Sec’d. Notes, 144A | | 8.750 | | 05/25/24 | | | 200 | | | | 169,580 | |
Digicel Ltd., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 6.750 | | 03/01/23 | | | 200 | | | | 106,000 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 461,290 | |
| | | | |
Kazakhstan 0.2% | | | | | | | | | | |
Kazakhstan Temir Zholy National Co. JSC, | | | | | | | | | | | | |
Gtd. Notes | | 3.250 | | 12/05/23 | | | CHF 100 | | | | 87,182 | |
| | | | |
Luxembourg 1.8% | | | | | | | | | | |
ARD Finance SA, | | | | | | | | | | | | |
Sr. Sec’d. Notes, Cash coupon 5.000% or PIK 5.750% | | 5.000 | | 06/30/27 | | | EUR 294 | | | | 196,963 | |
Sr. Sec’d. Notes, 144A, Cash coupon 5.000% or PIK 5.750% | | 5.000 | | 06/30/27 | | | EUR 200 | | | | 134,135 | |
Codere New Holdco SA, | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A, Cash coupon N/A or PIK 7.500% (original cost $69,918; purchased 11/19/21 - 04/30/22 )(f) | | 7.500 | | 11/30/27(d) | | | EUR 53 | | | | 28,096 | |
Intelsat Jackson Holdings SA, | | | | | | | | | | | | |
Gtd. Notes^ | | 5.500 | | 08/01/23(d) | | | 440 | | | | — | |
Gtd. Notes, 144A^ | | 8.500 | | 10/15/24(d) | | | 25 | | | | — | |
Gtd. Notes, 144A^ | | 9.750 | | 07/15/25(d) | | | 25 | | | | — | |
Sr. Sec’d. Notes, 144A | | 6.500 | | 03/15/30 | | | 90 | | | | 82,543 | |
Matterhorn Telecom SA, | | | | | | | | | | | | |
Sr. Sec’d. Notes | | 3.125 | | 09/15/26 | | | EUR 400 | | | | 346,319 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 788,056 | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 19 |
Schedule of Investments (continued)
as of October 31, 2022
| | | | | | | | | | | | |
| | | | |
Description | | Interest Rate | | Maturity Date | | Principal Amount (000)# | | | Value | |
| | | | |
CORPORATE BONDS (Continued) | | | | | | | | | | |
| | | | |
Mexico 1.7% | | | | | | | | | | |
Comision Federal de Electricidad, | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 5.000% | | 09/29/36 | | | 150 | | | $ | 113,696 | |
Petroleos Mexicanos, | | | | | | | | | | | | |
Gtd. Notes | | 3.625 | | 11/24/25 | | | EUR 200 | | | | 170,078 | |
Gtd. Notes, EMTN | | 4.875 | | 02/21/28 | | | EUR 600 | | | | 457,609 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 741,383 | |
| | | | |
Netherlands 1.6% | | | | | | | | | | |
United Group BV, | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 3.125 | | 02/15/26 | | | EUR 400 | | | | 306,713 | |
WP/AP Telecom Holdings III BV, | | | | | | | | | | | | |
Sr. Unsec’d. Notes, 144A | | 5.500 | | 01/15/30 | | | EUR 225 | | | | 172,022 | |
Ziggo Bond Co. BV, | | | | | | | | | | | | |
Gtd. Notes, 144A | | 3.375 | | 02/28/30 | | | EUR 300 | | | | 217,541 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 696,276 | |
| | | | |
Russia 0.9% | | | | | | | | | | |
Gazprom PJSC Via Gaz Capital SA, | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 1.450 | | 03/06/23(d) | | | CHF 500 | | | | 274,629 | |
Sr. Unsec’d. Notes | | 2.500 | | 03/21/26(d) | | | EUR 100 | | | | 54,354 | |
Sr. Unsec’d. Notes | | 4.250 | | 04/06/24 | | | GBP 100 | | | | 57,340 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 386,323 | |
| | | | |
South Africa 0.8% | | | | | | | | | | |
Eskom Holdings SOC Ltd., | | | | | | | | | | | | |
Gov’t. Gtd. Notes, MTN | | 6.350 | | 08/10/28 | | | 400 | | | | 358,125 | |
| | | | |
Spain 1.7% | | | | | | | | | | |
Cellnex Telecom SA, | | | | | | | | | | | | |
Sr. Unsec’d. Notes, EMTN | | 1.750 | | 10/23/30 | | | EUR 400 | | | | 292,582 | |
Codere Finance 2 Luxembourg SA, | | | | | | | | | | | | |
Sr. Sec’d. Notes, Cash coupon 2.000% and PIK 10.750% (original cost $43,641; purchased 12/02/19 - 04/30/22 )(f) | | 12.750 | | 11/30/27(d) | | | EUR 43 | | | | 35,188 | |
Sr. Sec’d. Notes, 144A, Cash coupon 8.000% and PIK 3.000% (original cost $190,327; purchased 07/24/20 - 09/30/22 )(f) | | 11.000 | | 09/30/26(d) | | | EUR 167 | | | | 153,715 | |
See Notes to Financial Statements.
20
| | | | | | | | | | | | |
| | | | |
Description | | Interest Rate | | Maturity Date | | Principal Amount (000)# | | | Value | |
| | | | |
CORPORATE BONDS (Continued) | | | | | | | | | | |
| | | | |
Spain (cont’d.) | | | | | | | | | | |
ContourGlobal Power Holdings SA, | | | | | | | | | | | | |
Sr. Sec’d. Notes | | 4.125% | | 08/01/25 | | | EUR 100 | | | $ | 94,116 | |
Kaixo Bondco Telecom SA, | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 5.125 | | 09/30/29 | | | EUR 175 | | | | 138,824 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 714,425 | |
| | | | |
Sweden 0.2% | | | | | | | | | | |
Preem Holdings AB, | | | | | | | | | | | | |
Sr. Unsec’d. Notes, 144A | | 12.000 | | 06/30/27 | | | EUR 100 | | | | 103,766 | |
| | | | |
Ukraine 0.0% | | | | | | | | | | |
NAK Naftogaz Ukraine via Kondor Finance PLC, | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 7.125 | | 07/19/24(d) | | | EUR 100 | | | | 15,336 | |
| | | | |
United Kingdom 5.7% | | | | | | | | | | |
Bellis Acquisition Co. PLC, | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 3.250 | | 02/16/26 | | | GBP 500 | | | | 465,770 | |
Bellis Finco PLC, | | | | | | | | | | | | |
Sr. Unsec’d. Notes, 144A | | 4.000 | | 02/16/27 | | | GBP 200 | | | | 159,299 | |
BP Capital Markets PLC, | | | | | | | | | | | | |
Gtd. Notes | | 4.375(ff) | | 06/22/25(oo) | | | 250 | | | | 234,168 | |
eG Global Finance PLC, | | | | | | | | | | | | |
Sr. Sec’d. Notes | | 4.375 | | 02/07/25 | | | EUR 350 | | | | 295,914 | |
Sr. Sec’d. Notes | | 6.250 | | 10/30/25 | | | EUR 100 | | | | 85,164 | |
Sr. Sec’d. Notes, 144A | | 4.375 | | 02/07/25 | | | EUR 100 | | | | 84,549 | |
INEOS Quattro Finance 2 PLC, | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 2.500 | | 01/15/26 | | | EUR 100 | | | | 82,300 | |
Market Bidco Finco PLC, | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 5.500 | | 11/04/27 | | | GBP 300 | | | | 260,198 | |
Saga PLC, | | | | | | | | | | | | |
Gtd. Notes | | 5.500 | | 07/15/26 | | | GBP 200 | | | | 151,124 | |
Sherwood Financing PLC, | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 6.000 | | 11/15/26 | | | GBP 175 | | | | 144,535 | |
Very Group Funding PLC (The), | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 6.500 | | 08/01/26 | | | GBP 225 | | | | 174,815 | |
Virgin Media Finance PLC, | | | | | | | | | | | | |
Gtd. Notes | | 3.750 | | 07/15/30 | | | EUR 300 | | | | 233,559 | |
Virgin Media Vendor Financing Notes III DAC, | | | | | | | | | | | | |
Gtd. Notes | | 4.875 | | 07/15/28 | | | GBP 100 | | | | 91,023 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 2,462,418 | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 21 |
Schedule of Investments (continued)
as of October 31, 2022
| | | | | | | | | | | | |
| | | | |
Description | | Interest Rate | | Maturity Date | | Principal Amount (000)# | | | Value | |
| | | | |
CORPORATE BONDS (Continued) | | | | | | | | | | |
| | | | |
United States 23.0% | | | | | | | | | | |
Adtalem Global Education, Inc., | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 5.500% | | 03/01/28 | | | 66 | | | $ | 60,191 | |
Aethon United BR LP/Aethon United Finance Corp., | | | | | | | | | | | | |
Sr. Unsec’d. Notes, 144A | | 8.250 | | 02/15/26 | | | 75 | | | | 76,529 | |
Alta Mesa Holdings LP/Alta Mesa Finance Services Corp., | | | | | | | | | | | | |
Gtd. Notes^ | | 7.875 | | 12/15/24(d) | | | 400 | | | | 2,720 | |
AMC Entertainment Holdings, Inc., | | | | | | | | | | | | |
Sec’d. Notes, 144A, Cash coupon 10.000% or PIK 12.000% or Cash coupon 5.000% and PIK 6.000% | | 10.000 | | 06/15/26 | | | 131 | | | | 69,768 | |
American Axle & Manufacturing, Inc., | | | | | | | | | | | | |
Gtd. Notes(a) | | 6.250 | | 03/15/26 | | | 38 | | | | 36,100 | |
AmeriGas Partners LP/AmeriGas Finance Corp., | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 5.875 | | 08/20/26 | | | 500 | | | | 469,838 | |
Antero Midstream Partners LP/Antero Midstream Finance Corp., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 5.750 | | 01/15/28 | | | 75 | | | | 71,037 | |
Ascent Resources Utica Holdings LLC/ARU Finance Corp., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 7.000 | | 11/01/26 | | | 50 | | | | 49,260 | |
Sr. Unsec’d. Notes, 144A | | 8.250 | | 12/31/28 | | | 50 | | | | 48,722 | |
Ashton Woods USA LLC/Ashton Woods Finance Co., | | | | | | | | | | | | |
Sr. Unsec’d. Notes, 144A | | 4.625 | | 04/01/30 | | | 25 | | | | 18,558 | |
Avantor Funding, Inc., | | | | | | | | | | | | |
Gtd. Notes | | 3.875 | | 07/15/28 | | | EUR 300 | | | | 258,916 | |
Sr. Sec’d. Notes, 144A | | 2.625 | | 11/01/25 | | | EUR 100 | | | | 91,905 | |
Bausch Health Americas, Inc., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 8.500 | | 01/31/27 | | | 315 | | | | 141,694 | |
Bausch Health Cos., Inc., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 5.250 | | 01/30/30 | | | 50 | | | | 19,250 | |
Gtd. Notes, 144A | | 5.250 | | 02/15/31 | | | 25 | | | | 9,813 | |
Beazer Homes USA, Inc., | | | | | | | | | | | | |
Gtd. Notes | | 5.875 | | 10/15/27 | | | 100 | | | | 83,963 | |
Gtd. Notes | | 6.750 | | 03/15/25 | | | 125 | | | | 116,241 | |
Gtd. Notes | | 7.250 | | 10/15/29 | | | 75 | | | | 62,065 | |
C&S Group Enterprises LLC, | | | | | | | | | | | | |
Gtd. Notes, 144A | | 5.000 | | 12/15/28 | | | 100 | | | | 74,073 | |
Caesars Entertainment, Inc., | | | | | | | | | | | | |
Sr. Unsec’d. Notes, 144A | | 4.625 | | 10/15/29 | | | 25 | | | | 20,006 | |
Calpine Corp., | | | | | | | | | | | | |
Sr. Unsec’d. Notes, 144A | | 4.625 | | 02/01/29 | | | 50 | | | | 42,487 | |
See Notes to Financial Statements.
22
| | | | | | | | | | | | |
| | | | |
Description | | Interest Rate | | Maturity Date | | Principal Amount (000)# | | | Value | |
| | | | |
CORPORATE BONDS (Continued) | | | | | | | | | | |
| | | | |
United States (cont’d.) | | | | | | | | | | |
Calpine Corp., (cont’d.) | | | | | | | | | | | | |
Sr. Unsec’d. Notes, 144A | | 5.000% | | 02/01/31 | | | 185 | | | $ | 156,565 | |
Sr. Unsec’d. Notes, 144A | | 5.125 | | 03/15/28 | | | 75 | | | | 66,727 | |
CCO Holdings LLC/CCO Holdings Capital Corp., | | | | | | | | | | | | |
Sr. Unsec’d. Notes, 144A | | 4.250 | | 02/01/31 | | | 300 | | | | 236,990 | |
Sr. Unsec’d. Notes, 144A | | 4.750 | | 03/01/30 | | | 119 | | | | 99,148 | |
Sr. Unsec’d. Notes, 144A | | 5.375 | | 06/01/29 | | | 50 | | | | 44,706 | |
Chemours Co. (The), | | | | | | | | | | | | |
Gtd. Notes | | 5.375 | | 05/15/27 | | | 125 | | | | 111,886 | |
Chesapeake Energy Corp., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 5.500 | | 02/01/26 | | | 50 | | | | 48,398 | |
Gtd. Notes, 144A | | 5.875 | | 02/01/29 | | | 25 | | | | 23,625 | |
Citigroup, Inc., | | | | | | | | | | | | |
Jr. Sub. Notes | | 3.875(ff) | | 02/18/26(oo) | | | 380 | | | | 311,782 | |
Dana, Inc., | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 4.500 | | 02/15/32 | | | 125 | | | | 95,152 | |
Diamond Sports Group LLC/Diamond Sports Finance Co., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 6.625 | | 08/15/27 | | | 510 | | | | 26,013 | |
DISH DBS Corp., | | | | | | | | | | | | |
Gtd. Notes | | 7.750 | | 07/01/26 | | | 425 | | | | 359,033 | |
Diversified Healthcare Trust, | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 4.750 | | 02/15/28 | | | 225 | | | | 153,412 | |
Dominion Energy, Inc., | | | | | | | | | | | | |
Jr. Sub. Notes, Series B | | 4.650(ff) | | 12/15/24(oo) | | | 200 | | | | 174,128 | |
Endeavor Energy Resources LP/EER Finance, Inc., | | | | | | | | | | | | |
Sr. Unsec’d. Notes, 144A | | 5.750 | | 01/30/28 | | | 25 | | | | 24,339 | |
Energy Transfer LP, | | | | | | | | | | | | |
Jr. Sub. Notes, Series G | | 7.125(ff) | | 05/15/30(oo) | | | 200 | | | | 165,593 | |
Ford Motor Co., | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 4.750 | | 01/15/43 | | | 550 | | | | 383,856 | |
Golden Entertainment, Inc., | | | | | | | | | | | | |
Sr. Unsec’d. Notes, 144A | | 7.625 | | 04/15/26 | | | 200 | | | | 197,815 | |
Goldman Sachs Group, Inc. (The), | | | | | | | | | | | | |
Jr. Sub. Notes, Series U | | 3.650(ff) | | 08/10/26(oo) | | | 115 | | | | 87,819 | |
Griffon Corp., | | | | | | | | | | | | |
Gtd. Notes | | 5.750 | | 03/01/28 | | | 75 | | | | 68,711 | |
Hilcorp Energy I LP/Hilcorp Finance Co., | | | | | | | | | | | | |
Sr. Unsec’d. Notes, 144A | | 5.750 | | 02/01/29 | | | 25 | | | | 22,879 | |
Sr. Unsec’d. Notes, 144A | | 6.000 | | 02/01/31 | | | 25 | | | | 22,675 | |
Sr. Unsec’d. Notes, 144A | | 6.250 | | 11/01/28 | | | 150 | | | | 141,251 | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 23 |
Schedule of Investments (continued)
as of October 31, 2022
| | | | | | | | | | | | |
| | | | |
Description | | Interest Rate | | Maturity Date | | Principal Amount (000)# | | | Value | |
| | | | |
CORPORATE BONDS (Continued) | | | | | | | | | | |
| | | | |
United States (cont’d.) | | | | | | | | | | |
Hilton Domestic Operating Co., Inc., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 3.625% | | 02/15/32 | | | 300 | | | $ | 238,841 | |
Howard Hughes Corp. (The), | | | | | | | | | | | | |
Gtd. Notes, 144A | | 4.125 | | 02/01/29 | | | 275 | | | | 217,783 | |
Hunt Cos., Inc., | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 5.250 | | 04/15/29 | | | 200 | | | | 162,602 | |
International Game Technology PLC, | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 4.125 | | 04/15/26 | | | 200 | | | | 185,600 | |
IQVIA, Inc., | | | | | | | | | | | | |
Gtd. Notes | | 2.250 | | 03/15/29 | | | EUR 250 | | | | 199,838 | |
Gtd. Notes, 144A | | 1.750 | | 03/15/26 | | | EUR 150 | | | | 134,863 | |
JPMorgan Chase & Co., | | | | | | | | | | | | |
Jr. Sub. Notes, Series HH | | 4.600(ff) | | 02/01/25(oo) | | | 420 | | | | 372,900 | |
KB Home, | | | | | | | | | | | | |
Gtd. Notes | | 4.800 | | 11/15/29 | | | 75 | | | | 61,440 | |
Lamb Weston Holdings, Inc., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 4.125 | | 01/31/30 | | | 25 | | | | 21,858 | |
Gtd. Notes, 144A | | 4.375 | | 01/31/32 | | | 25 | | | | 21,538 | |
Lumen Technologies, Inc., | | | | | | | | | | | | |
Sr. Unsec’d. Notes, Series P | | 7.600 | | 09/15/39 | | | 30 | | | | 20,730 | |
Sr. Unsec’d. Notes, Series U | | 7.650 | | 03/15/42 | | | 100 | | | | 67,095 | |
Medline Borrower LP, | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 3.875 | | 04/01/29 | | | 25 | | | | 20,420 | |
Sr. Unsec’d. Notes, 144A | | 5.250 | | 10/01/29 | | | 25 | | | | 19,487 | |
MGM Resorts International, | | | | | | | | | | | | |
Gtd. Notes | | 4.750 | | 10/15/28 | | | 150 | | | | 130,243 | |
Gtd. Notes | | 5.500 | | 04/15/27 | | | 150 | | | | 138,289 | |
MPT Operating Partnership LP/MPT Finance Corp., | | | | | | | | | | | | |
Gtd. Notes | | 2.500 | | 03/24/26 | | | GBP 100 | | | | 88,064 | |
Gtd. Notes | | 3.692 | | 06/05/28 | | | GBP 155 | | | | 123,992 | |
Nabors Industries, Inc., | | | | | | | | | | | | |
Gtd. Notes | | 5.750 | | 02/01/25 | | | 75 | | | | 72,182 | |
Nationstar Mortgage Holdings, Inc., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 5.500 | | 08/15/28 | | | 120 | | | | 97,871 | |
NRG Energy, Inc., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 3.625 | | 02/15/31 | | | 150 | | | | 119,380 | |
Gtd. Notes, 144A | | 5.250 | | 06/15/29 | | | 150 | | | | 136,306 | |
OneMain Finance Corp., | | | | | | | | | | | | |
Gtd. Notes | | 6.875 | | 03/15/25 | | | 25 | | | | 24,248 | |
Gtd. Notes | | 7.125 | | 03/15/26 | | | 125 | | | | 120,340 | |
PennyMac Financial Services, Inc., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 4.250 | | 02/15/29 | | | 100 | | | | 75,749 | |
See Notes to Financial Statements.
24
| | | | | | | | | | | | |
| | | | |
Description | | Interest Rate | | Maturity Date | | Principal Amount (000)# | | | Value | |
| | | | |
CORPORATE BONDS (Continued) | | | | | | | | | | |
| | | | |
United States (cont’d.) | | | | | | | | | | |
Premier Entertainment Sub LLC/Premier Entertainment Finance Corp., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 5.875% | | 09/01/31 | | | 50 | | | $ | 35,485 | |
Rockies Express Pipeline LLC, | | | | | | | | | | | | |
Sr. Unsec’d. Notes, 144A | | 6.875 | | 04/15/40 | | | 75 | | | | 61,758 | |
Sally Holdings LLC/Sally Capital, Inc., | | | | | | | | | | | | |
Gtd. Notes | | 5.625 | | 12/01/25 | | | 100 | | | | 94,744 | |
Scientific Games International, Inc., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 8.625 | | 07/01/25 | | | 300 | | | | 309,188 | |
Service Properties Trust, | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 4.350 | | 10/01/24 | | | 150 | | | | 137,755 | |
Standard Industries, Inc., | | | | | | | | | | | | |
Sr. Unsec’d. Notes, 144A | | 4.375 | | 07/15/30 | | | 25 | | | | 20,243 | |
Suburban Propane Partners LP/Suburban Energy Finance Corp., | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 5.875 | | 03/01/27 | | | 175 | | | | 166,148 | |
Tallgrass Energy Partners LP/Tallgrass Energy Finance Corp., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 6.000 | | 12/31/30 | | | 75 | | | | 68,034 | |
Gtd. Notes, 144A | | 7.500 | | 10/01/25 | | | 150 | | | | 151,932 | |
Taylor Morrison Communities, Inc., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 5.750 | | 01/15/28 | | | 150 | | | | 137,584 | |
Tenet Healthcare Corp., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 6.125 | | 10/01/28 | | | 75 | | | | 65,026 | |
TPC Group, Inc., | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 10.500 | | 08/01/24(d) | | | 50 | | | | 27,338 | |
Sr. Sec’d. Notes, 144A | | 10.875 | | 08/01/24(d) | | | 12 | | | | 11,836 | |
Transocean, Inc., | | | | | | | | | | | | |
Gtd. Notes, 144A | | 7.250 | | 11/01/25 | | | 75 | | | | 66,188 | |
U.S. Bancorp, | | | | | | | | | | | | |
Jr. Sub. Notes | | 3.700(ff) | | 01/15/27(oo) | | | 200 | | | | 153,543 | |
UGI International LLC, | | | | | | | | | | | | |
Gtd. Notes, 144A | | 2.500 | | 12/01/29 | | | EUR 100 | | | | 72,934 | |
United Airlines, Inc., | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 4.375 | | 04/15/26 | | | 65 | | | | 59,472 | |
Sr. Sec’d. Notes, 144A | | 4.625 | | 04/15/29 | | | 15 | | | | 12,878 | |
United Rentals North America, Inc., | | | | | | | | | | | | |
Gtd. Notes | | 3.750 | | 01/15/32 | | | 25 | | | | 20,225 | |
Gtd. Notes | | 4.875 | | 01/15/28 | | | 120 | | | | 111,600 | |
Uniti Group LP/Uniti Fiber Holdings, Inc./CSL Capital LLC, | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 7.875 | | 02/15/25 | | | 50 | | | | 49,543 | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 25 |
Schedule of Investments (continued)
as of October 31, 2022
| | | | | | | | | | | | |
| | | | |
Description | | Interest Rate | | Maturity Date | | Principal Amount (000)# | | | Value | |
| | | | |
CORPORATE BONDS (Continued) | | | | | | | | | | |
| | | | |
United States (cont’d.) | | | | | | | | | | |
Vector Group Ltd., | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 5.750% | | 02/01/29 | | | 125 | | | $ | 109,447 | |
Venture Global Calcasieu Pass LLC, | | | | | | | | | | | | |
Sr. Sec’d. Notes, 144A | | 3.875 | | 08/15/29 | | | 5 | | | | 4,326 | |
Sr. Sec’d. Notes, 144A | | 4.125 | | 08/15/31 | | | 5 | | | | 4,275 | |
Vistra Corp., | | | | | | | | | | | | |
Jr. Sub. Notes, 144A | | 7.000(ff) | | 12/15/26(oo) | | | 25 | | | | 22,218 | |
Jr. Sub. Notes, 144A | | 8.000(ff) | | 10/15/26(oo) | | | 100 | | | | 94,980 | |
Vistra Operations Co. LLC, | | | | | | | | | | | | |
Gtd. Notes, 144A | | 5.000 | | 07/31/27 | | | 180 | | | | 166,054 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 9,952,052 | |
| | | | | | | | | | | | |
| | | | |
TOTAL CORPORATE BONDS (cost $29,491,192) | | | | | | | | | | | 21,542,759 | |
| | | | | | | | | | | | |
| | | | |
FLOATING RATE AND OTHER LOANS 0.5% | | | | | | | | | | |
| | | | |
United States | | | | | | | | | | |
Ascent Resources Utica Holdings LLC, | | | | | | | | | | | | |
Second Lien Term Loan, 3 Month LIBOR + 9.000% | | 12.941(c) | | 11/01/25 | | | 178 | | | | 186,603 | |
Diamond Sports Group LLC, | | | | | | | | | | | | |
First Lien Term Loan, 1 Month SOFR + 8.100% | | 11.890(c) | | 05/25/26 | | | 4 | | | | 4,091 | |
Second Lien Term Loan, 1 Month SOFR + 3.350% | | 6.458(c) | | 08/24/26 | | | 89 | | | | 17,148 | |
TPC Group, Inc., | | | | | | | | | | | | |
Term Loan DIP Facility, 1 - 3 Month SOFR + 10.114%^ | | 13.383(c) | | 03/01/23 | | | 5 | | | | 4,859 | |
| | | | | | | | | | | | |
| | | | |
TOTAL FLOATING RATE AND OTHER LOANS (cost $224,667) | | | | | | | | | | | 212,701 | |
| | | | | | | | | | | | |
| | | | |
MUNICIPAL BOND 0.3% | | | | | | | | | | |
| | | | |
Puerto Rico | | | | | | | | | | |
Commonwealth of Puerto Rico, | | | | | | | | | | | | |
General Obligation, Sub-Series C (cost $167,545) | | 0.000(cc) | | 11/01/43 | | | 300 | | | | 140,338 | |
| | | | | | | | | | | | |
See Notes to Financial Statements.
26
| | | | | | | | | | | | |
| | | | |
Description | | Interest Rate | | Maturity Date | | Principal Amount (000)# | | | Value | |
| | | | |
RESIDENTIAL MORTGAGE-BACKED SECURITIES 6.3% | | | | | | | | | | |
| | | | |
Spain 0.2% | | | | | | | | | | |
Retiro Mortgage Securities DAC, | | | | | | | | | | | | |
Series 01A, Class A1, 144A, 3 Month EURIBOR + 2.000% (Cap 5.000%, Floor 0.000%) | | 3.578%(c) | | 07/30/75 | | | EUR 77 | | | $ | 75,353 | |
| | | | |
United States 6.1% | | | | | | | | | | |
Bellemeade Re Ltd., | | | | | | | | | | | | |
Series 2019-03A, Class M1B, 144A, 1 Month LIBOR + 1.600% (Cap N/A, Floor 1.600%) | | 5.186(c) | | 07/25/29 | | | 94 | | | | 93,712 | |
BVRT Financing Trust, | | | | | | | | | | | | |
Series 2021-04, Class F, 144A, 1 Month SOFR + 2.000%^ | | 4.740(c) | | 09/12/26 | | | 33 | | | | 33,275 | |
Connecticut Avenue Securities Trust, | | | | | | | | | | | | |
Series 2022-R04, Class 1B1, 144A, 30 Day Average SOFR + 5.250% (Cap N/A, Floor 0.000%) | | 8.247(c) | | 03/25/42 | | | 30 | | | | 28,275 | |
FHLMC Structured Agency Credit Risk REMIC Trust, | | | | | | | | | | | | |
Series 2021-DNA05, Class B1, 144A, 30 Day Average SOFR + 3.050% (Cap N/A, Floor 0.000%) | | 6.047(c) | | 01/25/34 | | | 110 | | | | 95,618 | |
Series 2021-DNA05, Class M2, 144A, 30 Day Average SOFR + 1.650% (Cap N/A, Floor 0.000%) | | 4.647(c) | | 01/25/34 | | | 34 | | | | 32,958 | |
Series 2021-HQA01, Class B1, 144A, 30 Day Average SOFR + 3.000% (Cap N/A, Floor 0.000%) | | 5.997(c) | | 08/25/33 | | | 200 | | | | 160,566 | |
Series 2021-HQA01, Class M2, 144A, 30 Day Average SOFR + 2.250% (Cap N/A, Floor 0.000%) | | 5.247(c) | | 08/25/33 | | | 400 | | | | 365,744 | |
Series 2021-HQA02, Class B1, 144A, 30 Day Average SOFR + 3.150% (Cap N/A, Floor 0.000%) | | 6.147(c) | | 12/25/33 | | | 100 | | | | 79,634 | |
Series 2021-HQA03, Class B1, 144A, 30 Day Average SOFR + 3.350% (Cap N/A, Floor 0.000%) | | 6.347(c) | | 09/25/41 | | | 60 | | | | 51,284 | |
Series 2021-HQA03, Class M2, 144A, 30 Day Average SOFR + 2.100% (Cap N/A, Floor 0.000%) | | 5.097(c) | | 09/25/41 | | | 130 | | | | 110,582 | |
Home Re Ltd., | | | | | | | | | | | | |
Series 2021-01, Class M1C, 144A, 1 Month LIBOR + 2.300% (Cap N/A, Floor 0.000%) | | 5.886(c) | | 07/25/33 | | | 185 | | | | 177,928 | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 27 |
Schedule of Investments (continued)
as of October 31, 2022
| | | | | | | | | | | | |
| | | | |
Description | | Interest Rate | | Maturity Date | | Principal Amount (000)# | | | Value | |
|
RESIDENTIAL MORTGAGE-BACKED SECURITIES (Continued) | |
| | | | |
United States (cont’d.) | | | | | | | | | | |
Home Re Ltd., (cont’d.) | | | | | | | | | | | | |
Series 2021-02, Class M1B, 144A, 30 Day Average SOFR + 1.600% (Cap N/A, Floor 0.000%) | | 4.597%(c) | | 01/25/34 | | | 150 | | | $ | 146,785 | |
Series 2021-02, Class M1C, 144A, 30 Day Average SOFR + 2.800% (Cap N/A, Floor 0.000%) | | 5.797(c) | | 01/25/34 | | | 175 | | | | 164,816 | |
Oaktown Re VII Ltd., | | | | | | | | | | | | |
Series 2021-02, Class M1A, 144A, 30 Day Average SOFR + 1.600% (Cap N/A, Floor 1.600%) | | 4.597(c) | | 04/25/34 | | | 700 | | | | 684,604 | |
Series 2021-02, Class M1B, 144A, 30 Day Average SOFR + 2.900% (Cap N/A, Floor 2.900%) | | 5.897(c) | | 04/25/34 | | | 200 | | | | 186,751 | |
PMT Credit Risk Transfer Trust, | | | | | | | | | | | | |
Series 2020-02R, Class A, 144A, 1 Month LIBOR + 3.815% (Cap N/A, Floor 3.815%) | | 7.411(c) | | 12/25/22 | | | 60 | | | | 58,481 | |
PNMAC GMSR Issuer Trust, | | | | | | | | | | | | |
Series 2018-GT01, Class A, 144A, 1 Month LIBOR + 2.850% (Cap N/A, Floor 2.850%) | | 6.436(c) | | 02/25/23 | | | 100 | | | | 98,683 | |
Series 2018-GT02, Class A, 144A, 1 Month LIBOR + 2.650% (Cap N/A, Floor 0.000%) | | 6.236(c) | | 08/25/25 | | | 100 | | | | 97,965 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 2,667,661 | |
| | | | | | | | | | | | |
| | | | |
TOTAL RESIDENTIAL MORTGAGE-BACKED SECURITIES (cost $2,952,454) | | | | | | | | | | | 2,743,014 | |
| | | | | | | | | | | | |
| | | | |
SOVEREIGN BONDS 8.4% | | | | | | | | | | |
| | | | |
Brazil 0.7% | | | | | | | | | | |
Brazil Minas SPE via State of Minas Gerais, | | | | | | | | | | | | |
Gov’t. Gtd. Notes | | 5.333 | | 02/15/28 | | | 330 | | | | 316,450 | |
| | | | |
Greece 0.8% | | | | | | | | | | |
Hellenic Republic Government International Bond, | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 5.200 | | 07/17/34 | | | EUR 120 | | | | 117,581 | |
Sr. Unsec’d. Notes | | 6.140 | | 04/14/28 | | | EUR 200 | | | | 211,588 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 329,169 | |
See Notes to Financial Statements.
28
| | | | | | | | | | | | |
| | | | |
Description | | Interest Rate | | Maturity Date | | Principal Amount (000)# | | | Value | |
| | | | |
SOVEREIGN BONDS (Continued) | | | | | | | | | | |
| | | | |
Italy 0.8% | | | | | | | | | | |
Italy Buoni Poliennali Del Tesoro, | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 0.950% | | 06/01/32 | | EUR | 450 | | | $ | 333,432 | |
| | | | |
Romania 0.6% | | | | | | | | | | |
Romanian Government International Bond, | | | | | | | | | | | | |
Sr. Unsec’d. Notes, EMTN | | 3.500 | | 04/03/34 | | EUR | 100 | | | | 66,849 | |
Sr. Unsec’d. Notes, EMTN | | 4.125 | | 03/11/39 | | EUR | 300 | | | | 195,173 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 262,022 | |
| | | | |
Serbia 1.1% | | | | | | | | | | |
Serbia International Bond, | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 1.500 | | 06/26/29 | | EUR | 300 | | | | 207,588 | |
Sr. Unsec’d. Notes | | 1.650 | | 03/03/33 | | EUR | 500 | | | | 290,391 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 497,979 | |
| | | | |
Spain 2.3% | | | | | | | | | | |
Autonomous Community of Catalonia, | | | | | | | | | | | | |
Sr. Unsec’d. Notes, EMTN | | 6.350 | | 11/30/41 | | EUR | 50 | | | | 60,765 | |
Spain Government Bond, | | | | | | | | | | | | |
Sr. Unsec’d. Notes, 144A(k) | | 1.450 | | 10/31/27 | | EUR | 600 | | | | 559,825 | |
Sr. Unsec’d. Notes, 144A(k) | | 1.450 | | 04/30/29 | | EUR | 405 | | | | 368,405 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 988,995 | |
| | | | |
Turkey 1.1% | | | | | | | | | | |
Turkey Government International Bond, | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 4.625 | | 03/31/25 | | EUR | 500 | | | | 474,360 | |
| | | | |
Ukraine 1.0% | | | | | | | | | | |
Ukraine Government International Bond, | | | | | | | | | | | | |
Sr. Unsec’d. Notes | | 4.375 | | 01/27/32(d) | | EUR | 881 | | | | 130,597 | |
Sr. Unsec’d. Notes | | 6.750 | | 06/20/28(d) | | EUR | 1,300 | | | | 210,615 | |
Sr. Unsec’d. Notes, 144A | | 4.375 | | 01/27/32(d) | | EUR | 600 | | | | 88,942 | |
| | | | | | | | | | | | |
| | | | |
| | | | | | | | | | | 430,154 | |
| | | | | | | | | | | | |
| | | | |
TOTAL SOVEREIGN BONDS (cost $6,847,020) | | | | | | | | | | | 3,632,561 | |
| | | | | | | | | | | | |
| | | | |
U.S. TREASURY OBLIGATIONS 2.0% | | | | | | | | | | |
U.S. Treasury Notes(h) | | 1.375 | | 01/31/25 | | | 275 | | | | 257,017 | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 29 |
Schedule of Investments (continued)
as of October 31, 2022
| | | | | | | | | | | | | | | | |
| | | | |
Description | | Interest Rate | | | Maturity Date | | | Principal Amount (000)# | | | Value | |
| | | | |
U.S. TREASURY OBLIGATIONS (Continued) | | | | | | | | | | | | |
U.S. Treasury Notes | | | 4.250% | | | | 09/30/24 | | | | 620 | | | $ | 616,876 | |
| | | | | | | | | | | | | | | | |
| | | | |
TOTAL U.S. TREASURY OBLIGATIONS (cost $895,860) | | | | | | | | | | | | | | | 873,893 | |
| | | | | | | | | | | | | | | | |
| | | | |
| | | | | | | | Shares | | | | |
| | | | |
COMMON STOCKS 0.7% | | | | | | | | | | | | | | | | |
| | | | |
Luxembourg 0.3% | | | | | | | | | | | | | | | | |
Intelsat Emergence SA* | | | | | | | | | | | 4,592 | | | | 122,147 | |
| | | | | | | | | | | | | | | | |
| | | | |
Spain 0.0% | | | | | | | | | | | | | | | | |
Codere New Topco SA^ (original Cost $0; purchased 11/19/21)(f) | | | | | | | | | | | 1,910 | | | | — | |
| | | | | | | | | | | | | | | | |
| | | | |
United States 0.4% | | | | | | | | | | | | | | | | |
Chesapeake Energy Corp. | | | | | | | | | | | 666 | | | | 68,112 | |
Chesapeake Energy Corp. Backstop Commitment | | | | | | | | | | | 59 | | | | 6,034 | |
Ferrellgas Partners LP (Class B Stock) (original cost $69,478; purchased 10/25/19 )^(f) | | | | | | | | | | | 253 | | | | 52,761 | |
GenOn Energy Holdings, Inc. (Class A Stock) (original cost $65,599; purchased 02/28/19 )^(f) | | | | | | | | | | | 610 | | | | 61,000 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 187,907 | |
| | | | | | | | | | | | | | | | |
| | | | |
TOTAL COMMON STOCKS (cost $204,408) | | | | | | | | | | | | | | | 310,054 | |
| | | | | | | | | | | | | | | | |
| | | | |
EXCHANGE-TRADED FUND 2.3% | | | | | | | | | | | | | | | | |
iShares MBS ETF(a) | | | | | | | | | | | | | | | | |
(cost $991,585) | | | | | | | | | | | 11,000 | | | | 993,740 | |
| | | | | | | | | | | | | | | | |
| | | | |
PREFERRED STOCK 0.3% | | | | | | | | | | | | |
| | | | |
United States | | | | | | | | | | | | |
Ferrellgas Escrow LLC, 8.956%, Maturing 03/30/31^ | | | | | | | | | | | | | | | | |
(cost $145,500; original cost $150,000; purchased 03/29/21)(f) | | | | | | | | | | | 150,000 | | | | 150,000 | |
| | | | | | | | | | | | | | | | |
| | | | |
RIGHTS* 0.0% | | | | | | | | | | | | |
| | | | |
Luxembourg | | | | | | | | | | | | |
Intelsat Jackson Holdings SA, Series A (Luxembourg) CVR, expiring 12/05/25^ | | | | | | | | | | | 479 | | | | 4,565 | |
See Notes to Financial Statements.
30
| | | | | | | | | | | | | | | | |
| | | | |
Description | | | | | | | | Shares | | | Value | |
| | | | |
RIGHTS (Continued)* | | | | | | | | | | | | |
| | | | |
Luxembourg (cont’d.) | | | | | | | | | | | | |
Intelsat Jackson Holdings SA, Series B (Luxembourg) CVR, expiring 12/05/25^ | | | | | | | | | | | 479 | | | $ | 948 | |
| | | | | | | | | | | | | | | | |
| | | | |
TOTAL RIGHTS (cost $0) | | | | | | | | | | | | | | | 5,513 | |
| | | | | | | | | | | | | | | | |
| | | | |
| | | | | | | | Units | | | | |
| | | | |
WARRANTS* 0.0% | | | | | | | | | | | | |
| | | | |
United States | | | | | | | | | | | | |
TPC Group, Inc., expiring 08/01/24^ (cost $0) | | | | | | | | | | | 35,028 | | | | 3 | |
| | | | | | | | | | | | | | | | |
| | | | |
TOTAL LONG-TERM INVESTMENTS (cost $50,709,948) | | | | | | | | | | | | | | | 38,405,870 | |
| | | | | | | | | | | | | | | | |
| | | | |
| | | | | | | | Shares | | | | |
| | | | |
SHORT-TERM INVESTMENTS 12.7% | | | | | | | | | | | | |
| | | | |
AFFILIATED MUTUAL FUND 2.2% | | | | | | | | | | | | |
PGIM Institutional Money Market Fund | | | | | | | | | | | | | | | | |
(cost $963,844; includes $962,891 of cash collateral for securities on loan)(b)(wa) | | | | | | | | | | | 964,713 | | | | 963,844 | |
| | | | | | | | | | | | | | | | |
| | | | |
FOREIGN TREASURY OBLIGATION 0.7% | | | | | | | | | | | | |
Mexico Cetes Series BI (cost $298,294) | | | | | | | | | | | 600,000 | | | | 301,078 | |
| | | | |
| | | | | | | | Principal Amount (000)# | | | | |
| | | | |
U.S. GOVERNMENT AGENCY OBLIGATIONS 4.9% | | | | | | | | | | | | |
Fannie Mae Discount Notes(k) | | | 2.943 | %(s) | | | 11/09/22 | | | | 2,000 | | | | 1,997,661 | |
Federal Home Loan Mortgage Corp. | | | 3.105 | (s) | | | 11/08/22 | | | | 125 | | | | 124,870 | |
| | | | | | | | | | | | | | | | |
| | | | |
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (cost $2,123,622) | | | | | | | | | | | | | | | 2,122,531 | |
| | | | | | | | | | | | | | | | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 31 |
Schedule of Investments (continued)
as of October 31, 2022
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Description | | | | | | | | | | | Shares | | | Value | |
| | | | | |
UNAFFILIATED FUND 4.7% | | | | | | | | | | | | | | | |
Dreyfus Government Cash Management (Institutional Shares) (cost $2,043,177) | | | | | | | | | | | | | | | 2,043,177 | | | $ | 2,043,177 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
OPTIONS PURCHASED*~ 0.2% | | | | | | | | | | | | | | | |
(cost $75,240) | | | | | | | | | | | | | | | | | | | 79,701 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
TOTAL SHORT-TERM INVESTMENTS | | | | | | | | | | | | | | | | | | | | |
(cost $5,504,177) | | | | | | | | | | | | | | | | | | | 5,510,331 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
TOTAL INVESTMENTS, BEFORE OPTIONS WRITTEN 101.2% | | | | | | | | | | | | | | | | | | | | |
(cost $56,214,125) | | | | | | | | | | | | | | | | | | | 43,916,201 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
OPTIONS WRITTEN*~ (0.2)% | | | | | | | | | | | | | | | |
(premiums received $91,219) | | | | | | | | | | | | | | | | | | | (92,608 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
TOTAL INVESTMENTS, NET OF OPTIONS WRITTEN 101.0% | | | | | | | | | | | | | | | | | | | | |
(cost $56,122,906) | | | | | | | | | | | | | | | | | | | 43,823,593 | |
Liabilities in excess of other assets(z) (1.0)% | | | | | | | | | | | | | | | | | | | (451,762 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
NET ASSETS 100.0% | | | | | | | | | | | | | | | | | | $ | 43,371,831 | |
| | | | | | | | | | | | | | | | | | | | |
Below is a list of the abbreviation(s) used in the annual report:
AUD—Australian Dollar
BRL—Brazilian Real
CAD—Canadian Dollar
CHF—Swiss Franc
CLP—Chilean Peso
DKK—Danish Krone
EUR—Euro
GBP—British Pound
HUF—Hungarian Forint
JPY—Japanese Yen
MXN—Mexican Peso
NOK—Norwegian Krone
PLN—Polish Zloty
SAR—Saudi Arabian Riyal
SGD—Singapore Dollar
USD—US Dollar
ZAR—South African Rand
144A—Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and, pursuant to the requirements of Rule 144A, may not be resold except to qualified institutional buyers.
A—Annual payment frequency for swaps
BARC—Barclays Bank PLC
BNP—BNP Paribas S.A.
BOA—Bank of America, N.A.
CDX—Credit Derivative Index
CIGM—Citigroup Global Markets, Inc.
CITI—Citibank, N.A.
CLO—Collateralized Loan Obligation
See Notes to Financial Statements.
32
CVR—Contingent Value Rights
DB—Deutsche Bank AG
DIP—Debtor-In-Possession
EMTN—Euro Medium Term Note
ETF—Exchange-Traded Fund
EURIBOR—Euro Interbank Offered Rate
FHLMC—Federal Home Loan Mortgage Corporation
GMTN—Global Medium Term Note
GSI—Goldman Sachs International
HSBC—HSBC Bank PLC
iTraxx—International Credit Derivative Index
JIBAR—Johannesburg Interbank Agreed Rate
JPM—JPMorgan Chase Bank N.A.
JPS—J.P. Morgan Securities LLC
LIBOR—London Interbank Offered Rate
LP—Limited Partnership
MSI—Morgan Stanley & Co International PLC
MTN—Medium Term Note
NASDAQ—National Association of Securities Dealers Automated Quotations
OTC—Over-the-counter
PIK—Payment-in-Kind
PJSC—Public Joint-Stock Company
Q—Quarterly payment frequency for swaps
REMIC—Real Estate Mortgage Investment Conduit
S—Semiannual payment frequency for swaps
S&P—Standard & Poor’s
SAIBOR—Saudi Arabian Interbank Offered Rate
SCB—Standard Chartered Bank
SOFR—Secured Overnight Financing Rate
SONIA—Sterling Overnight Index Average
TOPIX—Tokyo Stock Price Index
UAG—UBS AG
* | Non-income producing security. |
# | Principal or notional amount is shown in U.S. dollars unless otherwise stated. |
~ | See tables subsequent to the Schedule of Investments for options detail. |
^ | Indicates a Level 3 instrument. The aggregate value of Level 3 instruments is $555,610 and 1.3% of net assets. |
(a) | All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is $937,887; cash collateral of $962,891 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments. In the event of significant appreciation in value of securities on loan on the last business day of the reporting period, the Fund may reflect a collateral value that is less than the market value of the loaned securities and such shortfall is remedied the following business day. |
(b) | Represents security, or portion thereof, purchased with cash collateral received for securities on loan and includes dividend reinvestment. |
(c) | Variable rate instrument. The interest rate shown reflects the rate in effect at October 31, 2022. |
(cc) | Variable rate instrument. The rate shown is based on the latest available information as of October 31, 2022. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description. |
(d) | Represents issuer in default on interest payments and/or principal repayment. Non-income producing security. Such securities may be post-maturity. |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 33 |
Schedule of Investments (continued)
as of October 31, 2022
(f) | Indicates a restricted security that is acquired in unregistered, private sales from the issuing company or from an affiliate of the issuer and is considered restricted as to disposition under federal securities law; the aggregate original cost of such securities is $588,963. The aggregate value of $480,760 is 1.1% of net assets. |
(ff) | Variable rate security. Security may be issued at a fixed coupon rate, which converts to a variable rate at a specified date. Rate shown is the rate in effect as of period end. |
(h) | Represents security, or a portion thereof, segregated as collateral for OTC derivatives. |
(k) | Represents security, or a portion thereof, segregated as collateral for centrally cleared/exchange-traded derivatives. |
(oo) | Perpetual security. Maturity date represents next call date. |
(r) | Principal or notional amount is less than $500 par. |
(s) | Represents zero coupon bond or principal only security. Rate represents yield to maturity at purchase date. |
(wa) | PGIM Investments LLC, the manager of the Fund, also serves as manager of the PGIM Core Ultra Short Bond Fund and PGIM Institutional Money Market Fund, if applicable. |
(z) | Includes net unrealized appreciation/(depreciation) and/or market value of the below holdings which are excluded from the Schedule of Investments: |
Options Purchased:
Exchange Traded
| | | | | | | | | | | | | | | | | | |
Description | | Call/ Put | | Expiration Date | | | Strike | | Contracts | | Notional Amount (000)# | | | Value | |
NASDAQ 100 E-Mini Index | | Call | | | 12/16/22 | | | $15,500.00 | | 19 | | | — | (r) | | $ | 133 | |
NASDAQ 100 E-Mini Index | | Put | | | 11/18/22 | | | $ 9,750.00 | | 10 | | | — | (r) | | | 2,450 | |
NASDAQ 100 E-Mini Index | | Put | | | 11/18/22 | | | $10,750.00 | | 10 | | | — | (r) | | | 20,100 | |
| | | | | | | | | | | | | | | | | | |
Total Exchange Traded (cost $62,640) | | | | | | | | | | | | | | | | $ | 22,683 | |
| | | | | | | | | | | | | | | | | | |
OTC Swaptions
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Description | | Call/ Put | | Counterparty | | Expiration Date | | Strike | | | Receive | | | Pay | | | Notional Amount (000)# | | | Value | |
2- Year Interest Rate Swap, 05/21/25 | | Call | | DB | | 05/17/23 | | | 2.05 | % | | | 2.05%(A) | | |
| 3 Month SAIBOR(Q)/ 5.599% | | | | SAR 3,750 | | | $ | 1 | |
2- Year Interest Rate Swap, 05/21/25 | | Put | | DB | | 05/17/23 | | | 2.05 | % | |
| 3 Month SAIBOR(Q)/ 5.599% | | | | 2.05%(A) | | | | SAR 3,750 | | | | 57,017 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total OTC Swaptions (cost $12,600) | | | | | | | | | | | | | | | | | | $ | 57,018 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Options Purchased (cost $75,240) | | | | | | | | | | | | | | | | | | $ | 79,701 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Options Written:
Exchange Traded
| | | | | | | | | | | | | | | | | | |
Description | | Call/ Put | | Expiration Date | | Strike | | | Contracts | | Notional Amount (000)# | | | Value | |
NASDAQ 100 E-Mini Index | | Call | | 12/16/22 | | $ | 12,800.00 | | | 10 | | | — | (r) | | $ | (14,400 | ) |
See Notes to Financial Statements.
34
Options Written (continued):
Exchange Traded
| | | | | | | | | | | | | | | | | | | | | | | | |
Description | | Call/ Put | | | Expiration Date | | | Strike | | | Contracts | | | Notional Amount (000)# | | | Value | |
NASDAQ 100 E-Mini Index | | | Call | | | | 12/16/22 | | | $ | 13,500.00 | | | | 5 | | | | — | (r) | | $ | (2,050 | ) |
NASDAQ 100 E-Mini Index | | | Put | | | | 11/18/22 | | | $ | 10,150.00 | | | | 20 | | | | — | (r) | | | (11,400 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Exchange Traded (premiums received $76,219) | | | | | | | | | | | $ | (27,850 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
OTC Swaptions
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Description | | Call/ Put | | Counterparty | | Expiration Date | | Strike | | | Receive | | | Pay | | | Notional Amount (000)# | | | Value | |
2- Year Interest Rate Swap, 05/19/25 | | Call | | DB | | 05/17/23 | | | 1.13 | % | |
| 3 Month LIBOR(Q)/ 4.460% | | | | 1.13%(S) | | | | 1,000 | | | $ | (82 | ) |
2- Year Interest Rate Swap, 05/19/25 | | Put | | DB | | 05/17/23 | | | 1.13 | % | | | 1.13%(S) | | |
| 3 Month LIBOR(Q)/ 4.460% | | | | 1,000 | | | | (64,676 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total OTC Swaptions (premiums received $15,000) | | | | | | | | | | | | | | | | | | $ | (64,758 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Options Written (premiums received $91,219) | | | | | | | | | | | | | | | | | | $ | (92,608 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Futures contracts outstanding at October 31, 2022:
| | | | | | | | | | | | | | | | | |
Number of Contracts | | Type | | Expiration Date | | Current Notional Amount | | Value / Unrealized Appreciation (Depreciation) |
Long Positions: | | | | | | | | | | | | | | | |
26 | | 2 Year U.S. Treasury Notes | | | | Dec. 2022 | | | | $ | 5,313,953 | | | | $ | (4,292 | ) |
4 | | S&P 500 E-Mini Index | | | | Dec. 2022 | | | | | 776,600 | | | | | 4,293 | |
1 | | TOPIX Index | | | | Dec. 2022 | | | | | 129,527 | | | | | 1,007 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | 1,008 | |
| | | | | | | | | | | | | | | | | |
Short Positions: | | | | | | | | | | | | | | | |
51 | | 5 Year Euro-Bobl | | | | Dec. 2022 | | | | | 6,031,458 | | | | | 162,440 | |
46 | | 5 Year U.S. Treasury Notes | | | | Dec. 2022 | | | | | 4,903,312 | | | | | 217,168 | |
21 | | 10 Year Euro-Bund | | | | Dec. 2022 | | | | | 2,873,080 | | | | | 148,056 | |
3 | | 10 Year U.K. Gilt | | | | Dec. 2022 | | | | | 351,368 | | | | | 26,984 | |
26 | | 10 Year U.S. Treasury Notes | | | | Dec. 2022 | | | | | 2,875,438 | | | | | (20,534 | ) |
25 | | 10 Year U.S. Ultra Treasury Notes | | | | Dec. 2022 | | | | | 2,899,610 | | | | | 210,318 | |
5 | | 20 Year U.S. Treasury Bonds | | | | Dec. 2022 | | | | | 602,500 | | | | | 37,433 | |
30 | | British Pound Currency | | | | Dec. 2022 | | | | | 2,153,625 | | | | | (75,040 | ) |
32 | | Euro Schatz Index | | | | Dec. 2022 | | | | | 3,381,712 | | | | | 36,037 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | 742,862 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | $ | 743,870 | |
| | | | | | | | | | | | | | | | | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 35 |
Schedule of Investments (continued)
as of October 31, 2022
Forward foreign currency exchange contracts outstanding at October 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchase Contracts | | Counterparty | | Notional Amount (000) | | Value at Settlement Date | | Current Value | | Unrealized Appreciation | | Unrealized Depreciation |
|
OTC Forward Foreign Currency Exchange Contracts: | |
Australian Dollar, | | | | | | | | | | | | |
Expiring 10/31/23 | | JPM | | | | AUD | | | | | 197 | | | | $ | 136,791 | | | | $ | 127,268 | | | | $ | — | | | | $ | (9,523 | ) |
Brazilian Real, | | | | | | | | | | | | | | |
Expiring 04/28/23 | | MSI | | | | BRL | | | | | 1,833 | | | | | 278,449 | | | | | 342,849 | | | | | 64,400 | | | | | — | |
British Pound, | | | | | | | | | | | | | | |
Expiring 01/19/23 | | HSBC | | | | GBP | | | | | 20 | | | | | 23,257 | | | | | 23,167 | | | | | — | | | | | (90 | ) |
Expiring 01/19/23 | | JPM | | | | GBP | | | | | 54 | | | | | 63,511 | | | | | 62,646 | | | | | — | | | | | (865 | ) |
Canadian Dollar, | | | | | | | | | | | | | | |
Expiring 01/19/23 | | HSBC | | | | CAD | | | | | 98 | | | | | 70,851 | | | | | 71,853 | | | | | 1,002 | | | | | — | |
Chilean Peso, | | | | | | | | | | | | | | |
Expiring 12/21/22 | | UAG | | | | CLP | | | | | 12,741 | | | | | 14,048 | | | | | 13,385 | | | | | — | | | | | (663 | ) |
Euro, | | | | | | | | | | | | | | |
Expiring 01/19/23 | | MSI | | | | EUR | | | | | 253 | | | | | 251,050 | | | | | 251,856 | | | | | 806 | | | | | — | |
Expiring 01/19/23 | | SCB | | | | EUR | | | | | 295 | | | | | 299,353 | | | | | 293,510 | | | | | — | | | | | (5,843 | ) |
Expiring 01/19/23 | | SCB | | | | EUR | | | | | 266 | | | | | 269,733 | | | | | 264,243 | | | | | — | | | | | (5,490 | ) |
Expiring 10/31/23 | | HSBC | | | | EUR | | | | | 62 | | | | | 75,000 | | | | | 63,044 | | | | | — | | | | | (11,956 | ) |
Hungarian Forint, | | | | | | | | | | | | | | |
Expiring 12/21/22 | | MSI | | | | HUF | | | | | 25,484 | | | | | 58,787 | | | | | 60,606 | | | | | 1,819 | | | | | — | |
Expiring 01/19/23 | | MSI | | | | HUF | | | | | 45,468 | | | | | 103,522 | | | | | 107,194 | | | | | 3,672 | | | | | — | |
Expiring 01/19/23 | | MSI | | | | HUF | | | | | 36,428 | | | | | 79,763 | | | | | 85,882 | | | | | 6,119 | | | | | — | |
Japanese Yen, | | | | | | | | | | | | | | |
Expiring 04/28/23 | | MSI | | | | JPY | | | | | 20,014 | | | | | 177,150 | | | | | 138,020 | | | | | — | | | | | (39,130 | ) |
Expiring 10/31/23 | | BARC | | | | JPY | | | | | 21,923 | | | | | 230,000 | | | | | 155,449 | | | | | — | | | | | (74,551 | ) |
Expiring 10/31/23 | | BARC | | | | JPY | | | | | 13,554 | | | | | 140,000 | | | | | 96,107 | | | | | — | | | | | (43,893 | ) |
Expiring 10/31/23 | | BOA | | | | JPY | | | | | 105,610 | | | | | 1,058,000 | | | | | 748,838 | | | | | — | | | | | (309,162 | ) |
Expiring 10/31/23 | | DB | | | | JPY | | | | | 22,335 | | | | | 234,000 | | | | | 158,371 | | | | | — | | | | | (75,629 | ) |
Expiring 10/31/23 | | GSI | | | | JPY | | | | | 50,469 | | | | | 518,000 | | | | | 357,855 | | | | | — | | | | | (160,145 | ) |
Expiring 10/31/23 | | MSI | | | | JPY | | | | | 78,211 | | | | | 755,589 | | | | | 554,563 | | | | | — | | | | | (201,026 | ) |
Mexican Peso, | | | | | | | | | | | | | | |
Expiring 12/21/22 | | HSBC | | | | MXN | | | | | 3,127 | | | | | 152,598 | | | | | 156,377 | | | | | 3,779 | | | | | — | |
Expiring 04/28/23 | | JPM | | | | MXN | | | | | 4,649 | | | | | 192,329 | | | | | 226,930 | | | | | 34,601 | | | | | — | |
Expiring 04/28/23 | | MSI | | | | MXN | | | | | 14,804 | | | | | 624,000 | | | | | 722,631 | | | | | 98,631 | | | | | — | |
Norwegian Krone, | | | | | | | | | | | | | | |
Expiring 01/19/23 | | BOA | | | | NOK | | | | | 1,610 | | | | | 150,373 | | | | | 155,288 | | | | | 4,915 | | | | | — | |
Polish Zloty, | | | | | | | | | | | | | | |
Expiring 01/19/23 | | HSBC | | | | PLN | | | | | 686 | | | | | 134,710 | | | | | 141,554 | | | | | 6,844 | | | | | — | |
Swiss Franc, | | | | | | | | | | | | | | |
Expiring 01/19/23 | | HSBC | | | | CHF | | | | �� | 31 | | | | | 30,985 | | | | | 30,974 | | | | | — | | | | | (11 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | $ | 6,121,849 | | | | $ | 5,410,460 | | | | | 226,588 | | | | | (937,977 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See Notes to Financial Statements.
36
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Sale Contracts | | Counterparty | | Notional Amount (000) | | Value at Settlement Date | | Current Value | | Unrealized Appreciation | | Unrealized Depreciation |
|
OTC Forward Foreign Currency Exchange Contracts: | |
Australian Dollar, | | | | | | | | | | | | |
Expiring 04/28/23 | | HSBC | | | | AUD | | | | | 281 | | | | $ | 207,943 | | | | $ | 180,903 | | | | $ | 27,040 | | | | $ | — | |
Brazilian Real, | | | | | | | | | | | | | | |
Expiring 04/28/23 | | BNP | | | | BRL | | | | | 1,833 | | | | | 284,342 | | | | | 342,849 | | | | | — | | | | | (58,507 | ) |
British Pound, | | | | | | | | | | | | | | |
Expiring 01/19/23 | | MSI | | | | GBP | | | | | 2,156 | | | | | 2,454,615 | | | | | 2,479,473 | | | | | — | | | | | (24,858 | ) |
Danish Krone, | | | | | | | | | | | | | | |
Expiring 01/19/23 | | BARC | | | | DKK | | | | | 235 | | | | | 30,976 | | | | | 31,435 | | | | | — | | | | | (459 | ) |
Euro, | | | | | | | | | | | | | | |
Expiring 01/19/23 | | BNP | | | | EUR | | | | | 6,868 | | | | | 6,745,692 | | | | | 6,833,706 | | | | | — | | | | | (88,014 | ) |
Expiring 01/19/23 | | SCB | | | | EUR | | | | | 4,679 | | | | | 4,553,929 | | | | | 4,654,888 | | | | | — | | | | | (100,959 | ) |
Japanese Yen, | | | | | | | | | | | | | | |
Expiring 10/31/23 | | BOA | | | | JPY | | | | | 165,745 | | | | | 1,624,000 | | | | | 1,175,240 | | | | | 448,760 | | | | | — | |
Expiring 10/31/23 | | BOA | | | | JPY | | | | | 107,140 | | | | | 1,062,000 | | | | | 759,689 | | | | | 302,311 | | | | | — | |
Expiring 10/31/23 | | CITI | | | | JPY | | | | | 27,641 | | | | | 286,831 | | | | | 195,988 | | | | | 90,843 | | | | | — | |
Expiring 10/31/23 | | CITI | | | | JPY | | | | | 5,701 | | | | | 54,601 | | | | | 40,423 | | | | | 14,178 | | | | | — | |
Mexican Peso, | | | | | | | | | | | | | | |
Expiring 11/17/22 | | GSI | | | | MXN | | | | | 5,965 | | | | | 296,025 | | | | | 300,096 | | | | | — | | | | | (4,071 | ) |
Expiring 04/28/23 | | MSI | | | | MXN | | | | | 19,453 | | | | | 844,701 | | | | | 949,560 | | | | | — | | | | | (104,859 | ) |
Singapore Dollar, | | | | | | | | | | | | | | |
Expiring 12/21/22 | | BNP | | | | SGD | | | | | 22 | | | | | 15,605 | | | | | 15,513 | | | | | 92 | | | | | — | |
South African Rand, | | | | | | | | | | | | | | |
Expiring 12/21/22 | | MSI | | | | ZAR | | | | | 693 | | | | | 39,678 | | | | | 37,580 | | | | | 2,098 | | | | | — | |
Swiss Franc, | | | | | | | | | | | | | | |
Expiring 01/19/23 | | BOA | | | | CHF | | | | | 95 | | | | | 95,994 | | | | | 95,695 | | | | | 299 | | | | | — | |
Expiring 01/19/23 | | CITI | | | | CHF | | | | | 379 | | | | | 384,794 | | | | | 382,215 | | | | | 2,579 | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | $ | 18,981,726 | | | | $ | 18,475,253 | | | | | 888,200 | | | | | (381,727 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | $ | 1,114,788 | | | | $ | (1,319,704 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cross currency exchange contracts outstanding at October 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Settlement | | Type | | Notional Amount (000) | | In Exchange For (000) | | Unrealized Appreciation | | Unrealized Depreciation | | Counterparty |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
OTC Cross Currency Exchange Contracts: | |
04/28/23 | | | | Buy | | | | | AUD | | | | | 853 | | | | | JPY | | | | | 68,288 | | | | $ | 78,219 | | | | $ | — | | | | | MSI | |
04/28/23 | | | | Buy | | | | | JPY | | | | | 48,274 | | | | | AUD | | | | | 572 | | | | | — | | | | | (35,336 | ) | | | | DB | |
10/31/23 | | | | Buy | | | | | AUD | | | | | 367 | | | | | JPY | | | | | 24,589 | | | | | 62,742 | | | | | — | | | | | DB | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 37 |
Schedule of Investments (continued)
as of October 31, 2022
Cross currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Settlement | | Type | | Notional Amount (000) | | In Exchange For (000) | | Unrealized Appreciation | | Unrealized Depreciation | | Counterparty |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
OTC Cross Currency Exchange Contracts (cont’d): | |
10/31/23 | | | | Buy | | | | | JPY | | | | | 9,277 | | | | | AUD | | | | | 133 | | | | $ | — | | | | $ | (20,144 | ) | | | | GSI | |
10/31/23 | | | | Buy | | | | | JPY | | | | | 29,437 | | | | | AUD | | | | | 431 | | | | | — | | | | | (69,710 | ) | | | | MSI | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 140,961 | | | | $ | (125,190 | ) | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Credit default swap agreements outstanding at October 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reference Entity/ Obligation | | Termination Date | | Fixed Rate | | Notional Amount (000)#(3) | | | | Fair Value | | Upfront Premiums Paid (Received) | | Unrealized Appreciation (Depreciation) | | Counterparty |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
OTC Packaged Credit Default Swap Agreements on corporate and/or sovereign issues - Buy Protection(1)**: |
Arab Republic of Egypt | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 100 | | | | | | | | | $ | 32,917 | | | | $ | 3 | | | | $ | 32,914 | | | | | BARC | |
Emirate of Abu Dhabi | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 100 | | | | | | | | | | (1,941 | ) | | | | 3 | | | | | (1,944 | ) | | | | BARC | |
Federation of Malaysia | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 150 | | | | | | | | | | 329 | | | | | 4 | | | | | 325 | | | | | BARC | |
Federative Republic of Brazil | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 600 | | | | | | | | | | 44,856 | | | | | 16 | | | | | 44,840 | | | | | BARC | |
Kingdom of Saudi Arabia | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 100 | | | | | | | | | | (1,512 | ) | | | | 3 | | | | | (1,515 | ) | | | | BARC | |
People’s Republic of China | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 600 | | | | | | | | | | 5,572 | | | | | 16 | | | | | 5,556 | | | | | BARC | |
Republic of Argentina | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 100 | | | | | | | | | | 78,474 | | | | | 3 | | | | | 78,471 | | | | | BARC | |
Republic of Chile | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 150 | | | | | | | | | | 3,370 | | | | | 4 | | | | | 3,366 | | | | | BARC | |
Republic of Colombia | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 300 | | | | | | | | | | 31,554 | | | | | 8 | | | | | 31,546 | | | | | BARC | |
Republic of Indonesia | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 500 | | | | | | | | | | 7,876 | | | | | 14 | | | | | 7,862 | | | | | BARC | |
Republic of Panama | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 100 | | | | | | | | | | 2,731 | | | | | 3 | | | | | 2,728 | | | | | BARC | |
Republic of Peru | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 150 | | | | | | | | | | 3,512 | | | | | 4 | | | | | 3,508 | | | | | BARC | |
Republic of Philippines | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 100 | | | | | | | | | | 1,079 | | | | | 3 | | | | | 1,076 | | | | | BARC | |
Republic of South Africa | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 550 | | | | | | | | | | 46,809 | | | | | 15 | | | | | 46,794 | | | | | BARC | |
Republic of Turkey | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 600 | | | | | | | | | | 126,424 | | | | | 16 | | | | | 126,408 | | | | | BARC | |
State of Qatar | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 100 | | | | | | | | | | (1,949 | ) | | | | 3 | | | | | (1,952 | ) | | | | BARC | |
Sultanate of Oman | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 100 | | | | | | | | | | 5,783 | | | | | 3 | | | | | 5,780 | | | | | BARC | |
United Mexican States | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 600 | | | | | | | | | | 15,945 | | | | | 16 | | | | | 15,929 | | | | | BARC | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | $ | 401,829 | | | | $ | 137 | | | | $ | 401,692 | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See Notes to Financial Statements.
38
Credit default swap agreements outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reference Entity/ Obligation | | Termination Date | | Fixed Rate | | Notional Amount (000)#(3) | | Implied Credit Spread at October 31, 2022(4) | | Fair Value | | Upfront Premiums Paid (Received) | | Unrealized Appreciation (Depreciation) | | Counterparty |
|
OTC Packaged Credit Default Swap Agreement on credit indices— Sell Protection(2)**: |
CDX.EM.38.V1 | | | | 12/20/27 | | | | | 1.000%(Q) | | | | | 5,000 | | | | | 2.960 | % | | | $ | (408,503 | ) | | | $ | (5,029 | ) | | | $ | (403,474 | ) | | BARC | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
** | The Fund entered into multiple credit default swap agreements in a packaged trade consisting of two parts. The Fund bought/sold protection on an Emerging Market CDX Index and bought/sold protection on the countries which comprise the index. The upfront premium is attached to the index of the trade for the Emerging Markets CDX package(s). Each swap is priced individually. If any of the component swaps are closed out early, the Index exposure will be reduced by an amount proportionate to the terminated swap(s). |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reference Entity/ Obligation | | Termination Date | | Fixed Rate | | Notional Amount (000)#(3) | | Fair Value | | Upfront Premiums Paid (Received) | | Unrealized Appreciation (Depreciation) | | Counterparty |
|
OTC Credit Default Swap Agreement on corporate and/or sovereign issues - Buy Protection(1): |
Gazprom PAO | | 03/20/23 | | | | 1.000%(Q) | | | | | 545 | | | | $ | 105,257 | | | | $ | 115,521 | | | | $ | (10,264 | ) | | BARC | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reference Entity/ Obligation | | Termination Date | | Fixed Rate | | Notional Amount (000)#(3) | | Implied Credit Spread at October 31, 2022(4) | | Fair Value | | Upfront Premiums Paid (Received) | | Unrealized Appreciation (Depreciation) | | Counterparty |
|
OTC Credit Default Swap Agreements on corporate and/or sovereign issues - Sell Protection(2): |
Generalitat de Cataluna | | | | 12/20/22 | | | | | 1.000%(Q) | | | | | 230 | | | | | * | | | | $ | 535 | | | | $ | (887 | ) | | | $ | 1,422 | | | CITI | |
Hellenic Republic | | | | 12/20/24 | | | | | 1.000%(Q) | | | | | 1,650 | | | | | 0.923 | % | | | | 4,490 | | | | | (37,266 | ) | | | | 41,756 | | | CITI | |
Hellenic Republic | | | | 06/20/29 | | | | | 1.000%(Q) | | | | | 250 | | | | | 2.043 | % | | | | (13,865 | ) | | | | (23,425 | ) | | | | 9,560 | | | CITI | |
Hellenic Republic | | | | 12/20/31 | | | | | 1.000%(Q) | | | | | 1,255 | | | | | 2.265 | % | | | | (106,896 | ) | | | | (35,000 | ) | | | | (71,896 | ) | | BARC | |
Republic of Estonia | | | | 12/20/26 | | | | | 1.000%(Q) | | | | | 60 | | | | | 0.973 | % | | | | 130 | | | | | 470 | | | | | (340 | ) | | JPM | |
Republic of Italy | | | | 12/20/25 | | | | | 1.000%(Q) | | | | | 750 | | | | | 1.038 | % | | | | 54 | | | | | (8,960 | ) | | | | 9,014 | | | JPM | |
Republic of Italy | | | | 12/20/29 | | | | | 1.000%(Q) | | | | | 1,000 | | | | | 1.728 | % | | | | (40,962 | ) | | | | (28,175 | ) | | | | (12,787 | ) | | JPM | |
Republic of Kazakhstan | | | | 06/20/23 | | | | | 1.000%(Q) | | | | | 230 | | | | | 0.942 | % | | | | 352 | | | | | — | | | | | 352 | | | CITI | |
Republic of Panama | | | | 12/20/26 | | | | | 1.000%(Q) | | | | | 350 | | | | | 1.397 | % | | | | (4,745 | ) | | | | 834 | | | | | (5,579 | ) | | CITI | |
Republic of Portugal | | | | 12/20/30 | | | | | 1.000%(Q) | | | | | 1,000 | | | | | 0.793 | % | | | | 15,086 | | | | | 27,992 | | | | | (12,906 | ) | | JPM | |
Republic of South Africa | | | | 12/20/23 | | | | | 1.000%(Q) | | | | | 250 | | | | | 1.413 | % | | | | (850 | ) | | | | (3,054 | ) | | | | 2,204 | | | BOA | |
State of Illinois | | | | 12/20/22 | | | | | 1.000%(Q) | | | | | 210 | | | | | 0.659 | % | | | | 343 | | | | | (224 | ) | | | | 567 | | | CITI | |
State of Illinois | | | | 12/20/24 | | | | | 1.000%(Q) | | | | | 200 | | | | | 0.753 | % | | | | 1,223 | | | | | (4,243 | ) | | | | 5,466 | | | GSI | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 39 |
Schedule of Investments (continued)
as of October 31, 2022
Credit default swap agreements outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reference Entity/ Obligation | | Termination Date | | Fixed Rate | | Notional Amount (000)#(3) | | Implied Credit Spread at October 31, 2022(4) | | Fair Value | | Upfront Premiums Paid (Received) | | Unrealized Appreciation (Depreciation) | | Counterparty |
|
OTC Credit Default Swap Agreements on corporate and/or sovereign issues - Sell Protection(2)(cont’d.): |
United Mexican States | | | | 06/20/31 | | | | | 1.000%(Q) | | | | | 320 | | | | | 2.238 | % | | | $ | (26,176 | ) | | | $ | (13,591 | ) | | | $ | (12,585 | ) | | CITI | |
Verizon Communications, Inc. | | | | 06/20/26 | | | | | 1.000%(Q) | | | | | 170 | | | | | 1.164 | % | | | | (719 | ) | | | | 2,593 | | | | | (3,312 | ) | | GSI | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | $ | (172,000 | ) | | | $ | (122,936 | ) | | | $ | (49,064 | ) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reference Entity/ Obligation | | Termination Date | | Fixed Rate | | Notional Amount (000)#(3) | | Implied Credit Spread at October 31, 2022(4) | | Value at Trade Date | | Value at October 31, 2022 | | Unrealized Appreciation (Depreciation) |
| |
Centrally Cleared Credit Default Swap Agreements on credit indices - Sell Protection(2): | | | | | | |
CDX.NA.HY.38.V2 | | | | 06/20/27 | | | | | 5.000%(Q) | | | | | 6,584 | | | | | 4.795% | | | | $ | (1,306 | ) | | | $ | 87,655 | | | | $ | 88,961 | |
iTraxx.XO.38.V1 | | | | 12/20/27 | | | | | 5.000%(Q) | | | | | EUR 1,200 | | | | | 5.558% | | | | | (40,116 | ) | | | | (18,772 | ) | | | | 21,344 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | $ | (41,422 | ) | | | $ | 68,883 | | | | $ | 110,305 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 the 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 and take delivery 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. |
See Notes to Financial Statements.
40
(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) | Implied credit spreads, represented in absolute terms, utilized in determining the fair value of credit default swap agreements where the Fund is the seller of protection as of the reporting date 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. |
* | When an implied credit spread is not available, reference the fair value of credit default swap agreements on credit indices and asset-backed securities. Where the Fund is the seller of protection, it 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. |
Interest rate swap agreements outstanding at October 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notional Amount (000)# | | Termination Date | | Fixed Rate | | Floating Rate | | Value at Trade Date | | Value at October 31, 2022 | | Unrealized Appreciation (Depreciation) |
|
Centrally Cleared Interest Rate Swap Agreements: |
| | EUR 9,645 | | | | | 11/23/24 | | | | | (0.046)%(A) | | | 6 Month EURIBOR(2)(S)/ 2.130% | | | $ | — | | | | $ | (286,100 | ) | | | $ | (286,100 | ) |
| | EUR 270 | | | | | 11/24/41 | | | | | 0.565%(A) | | | 6 Month EURIBOR(1)(S)/ 2.130% | | | | — | | | | | 40,212 | | | | | 40,212 | |
| | EUR 270 | | | | | 11/24/41 | | | | | 0.600%(A) | | | 3 Month EURIBOR(2)(Q)/ 1.704% | | | | — | | | | | (42,133 | ) | | | | (42,133 | ) |
| | EUR 655 | | | | | 11/25/41 | | | | | 0.629%(A) | | | 6 Month EURIBOR(1)(S)/ 2.130% | | | | — | | | | | 94,748 | | | | | 94,748 | |
| | EUR 655 | | | | | 11/25/41 | | | | | 0.663%(A) | | | 3 Month EURIBOR(2)(Q)/ 2.130% | | | | — | | | | | (99,471 | ) | | | | (99,471 | ) |
| | GBP 1,100 | | | | | 05/08/27 | | | | | 1.050%(A) | | | 1 Day SONIA(1)(A)/ 2.184% | | | | 55,014 | | | | | 173,086 | | | | | 118,072 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | 55,014 | | | | $ | (119,658 | ) | | | $ | (174,672 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 41 |
Schedule of Investments (continued)
as of October 31, 2022
Interest rate swap agreements outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notional Amount (000)# | | Termination Date | | Fixed Rate | | Floating Rate | | Fair Value | | Upfront Premiums Paid(Received) | | Unrealized Appreciation (Depreciation) | | Counterparty |
| | | |
OTC Interest Rate Swap Agreements: | | | | | | |
| ZAR | 1,060 | | | | | 03/22/42 | | | | | 7.800%(Q) | | | 3 Month JIBAR(2)(Q)/ 6.517% | | | $ | (10,354 | ) | | | $ | (25 | ) | | | $ | (10,329 | ) | | CITI |
| ZAR | 7,000 | | | | | 09/22/42 | | | | | 8.020%(Q) | | | 3 Month JIBAR(2)(Q)/ 6.517% | | | | (61,186 | ) | | | | (44 | ) | | | | (61,142 | ) | | CITI |
| ZAR | 1,000 | | | | | 03/22/47 | | | | | 7.650%(Q) | | | 3 Month JIBAR(1)(Q)/ 6.517% | | | | 11,282 | | | | | 24 | | | | | 11,258 | | | CITI |
| ZAR | 6,575 | | | | | 09/22/47 | | | | | 7.890%(Q) | | | 3 Month JIBAR(1)(Q)/ 6.517% | | | | 65,940 | | | | | 42 | | | | | 65,898 | | | CITI |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | 5,682 | | | | $ | (3 | ) | | | $ | 5,685 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | The Fund pays the fixed rate and receives the floating rate. |
(2) | The Fund pays the floating rate and receives the fixed rate. |
Balances Reported in the Statement of Assets and Liabilities for OTC Swap Agreements:
| | | | | | | | | | | | | | | | | | | | |
| | Premiums Paid | | Premiums Received | | Unrealized Appreciation | | Unrealized Depreciation |
OTC Swap Agreements | | | $ | 147,613 | | | | $ | (159,923 | ) | | | $ | 554,600 | | | | $ | (610,025 | ) |
Summary of Collateral for Centrally Cleared/Exchange-traded Derivatives:
Cash and securities segregated as collateral, including pending settlement for closed positions, to cover requirements for centrally cleared/exchange-traded derivatives are listed by broker as follows:
| | | | | | | | | | |
Broker | | Cash and/or Foreign Currency | | Securities Market Value |
CIGM | | | $ | — | | | | $ | 920,766 | |
JPS | | | | — | | | | | 739,135 | |
| | | | | | | | | | |
Total | | | $ | — | | | | $ | 1,659,901 | |
| | | | | | | | | | |
Fair Value Measurements:
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—unadjusted quoted prices generally in active markets for identical securities.
Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other observable inputs.
Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
See Notes to Financial Statements.
42
The following is a summary of the inputs used as of October 31, 2022 in valuing such portfolio securities:
| | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | |
Investments in Securities | | | | | | | | | |
Assets | | | | | | | | | |
Long-Term Investments | | | | | | | | | |
Asset-Backed Securities | | | | | | | | | |
Cayman Islands | | $ | — | | | $ | 234,190 | | | $ | — | |
Spain | | | — | | | | — | | | | 245,479 | |
United States | | | — | | | | 1,011,309 | | | | — | |
Commercial Mortgage-Backed Securities | | | | | | | | | | | | |
Canada | | | — | | | | 44,268 | | | | — | |
United Kingdom | | | — | | | | 1,703,337 | | | | — | |
United States | | | — | | | | 4,562,711 | | | | — | |
Corporate Bonds | | | | | | | | | | | | |
Brazil | | | — | | | | 600,085 | | | | — | |
Bulgaria | | | — | | | | 141,789 | | | | — | |
Canada | | | — | | | | 754,960 | | | | — | |
France | | | — | | | | 1,567,308 | | | | — | |
Germany | | | — | | | | 601,269 | | | | — | |
India | | | — | | | | 348,988 | | | | — | |
Indonesia | | | — | | | | 255,086 | | | | — | |
Israel | | | — | | | | 95,240 | | | | — | |
Italy | | | — | | | | 411,402 | | | | — | |
Jamaica | | | — | | | | 461,290 | | | | — | |
Kazakhstan | | | — | | | | 87,182 | | | | — | |
Luxembourg | | | — | | | | 788,056 | | | | — | |
Mexico | | | — | | | | 741,383 | | | | — | |
Netherlands | | | — | | | | 696,276 | | | | — | |
Russia | | | — | | | | 386,323 | | | | — | |
South Africa | | | — | | | | 358,125 | | | | — | |
Spain | | | — | | | | 714,425 | | | | — | |
Sweden | | | — | | | | 103,766 | | | | — | |
Ukraine | | | — | | | | 15,336 | | | | — | |
United Kingdom | | | — | | | | 2,462,418 | | | | — | |
United States | | | — | | | | 9,949,332 | | | | 2,720 | |
Floating Rate and other Loans | | | | | | | | | | | | |
United States | | | — | | | | 207,842 | | | | 4,859 | |
Municipal Bond | | | | | | | | | | | | |
Puerto Rico | | | — | | | | 140,338 | | | | — | |
Residential Mortgage-Backed Securities | | | | | | | | | | | | |
Spain | | | — | | | | 75,353 | | | | — | |
United States | | | — | | | | 2,634,386 | | | | 33,275 | |
Sovereign Bonds | | | | | | | | | | | | |
Brazil | | | — | | | | 316,450 | | | | — | |
Greece | | | — | | | | 329,169 | | | | — | |
Italy | | | — | | | | 333,432 | | | | — | |
Romania | | | — | | | | 262,022 | | | | — | |
Serbia | | | — | | | | 497,979 | | | | — | |
Spain | | | — | | | | 988,995 | | | | — | |
Turkey | | | — | | | | 474,360 | | | | — | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 43 |
Schedule of Investments (continued)
as of October 31, 2022
| | | | | | | | | | | | | | | |
| | Level 1 | | Level 2 | | Level 3 |
Investments in Securities (continued) | | | | | | | | | | | | | | | |
Assets (continued) | | | | | | | | | | | | | | | |
Long-Term Investments (continued) | | | | | | | | | | | | | | | |
Sovereign Bonds (continued) | | | | | | | | | | | | | | | |
Ukraine | | | $ | — | | | | $ | 430,154 | | | | $ | — | |
U.S. Treasury Obligations | | | | — | | | | | 873,893 | | | | | — | |
Common Stocks | | | | | | | | | | | | | | | |
Luxembourg | | | | — | | | | | 122,147 | | | | | — | |
Spain | | | | — | | | | | — | | | | | — | |
United States | | | | 68,112 | | | | | 6,034 | | | | | 113,761 | |
Exchange-Traded Fund | | | | 993,740 | | | | | — | | | | | — | |
Preferred Stock | | | | | | | | | | | | | | | |
United States | | | | — | | | | | — | | | | | 150,000 | |
Rights | | | | | | | | | | | | | | | |
Luxembourg | | | | — | | | | | — | | | | | 5,513 | |
Warrants | | | | | | | | | | | | | | | |
United States | | | | — | | | | | — | | | | | 3 | |
Short-Term Investments | | | | | | | | | | | | | | | |
Affiliated Mutual Fund | | | | 963,844 | | | | | — | | | | | — | |
Foreign Treasury Obligation | | | | | | | | | | | | | | | |
Mexico | | | | — | | | | | 301,078 | | | | | — | |
U.S. Government Agency Obligations | | | | — | | | | | 2,122,531 | | | | | — | |
Unaffiliated Fund | | | | 2,043,177 | | | | | — | | | | | — | |
Options Purchased | | | | 22,683 | | | | | 57,018 | | | | | — | |
| | | | | | | | | | | | | | | |
Total | | | $ | 4,091,556 | | | | $ | 39,269,035 | | | | $ | 555,610 | |
| | | | | | | | | | | | | | | |
| | | |
Liabilities | | | | | | | | | | | | | | | |
Options Written | | | $ | (27,850 | ) | | | $ | (64,758 | ) | | | $ | — | |
| | | | | | | | | | | | | | | |
| | | |
Other Financial Instruments* | | | | | | | | | | | | | | | |
Assets | | | | | | | | | | | | | | | |
Futures Contracts | | | $ | 843,736 | | | | $ | — | | | | $ | — | |
OTC Forward Foreign Currency Exchange Contracts | | | | — | | | | | 1,114,788 | | | | | — | |
OTC Cross Currency Exchange Contracts | | | | — | | | | | 140,961 | | | | | — | |
OTC Packaged Credit Default Swap Agreements | | | | — | | | | | 407,231 | | | | | — | |
Centrally Cleared Credit Default Swap Agreements | | | | — | | | | | 110,305 | | | | | — | |
OTC Credit Default Swap Agreements | | | | — | | | | | 127,470 | | | | | — | |
Centrally Cleared Interest Rate Swap Agreements | | | | — | | | | | 253,032 | | | | | — | |
OTC Interest Rate Swap Agreements | | | | — | | | | | 77,222 | | | | | — | |
| | | | | | | | | | | | | | | |
Total | | | $ | 843,736 | | | | $ | 2,231,009 | | | | $ | — | |
| | | | | | | | | | | | | | | |
| | | |
Liabilities | | | | | | | | | | | | | | | |
Futures Contracts | | | $ | (99,866 | ) | | | $ | — | | | | $ | — | |
OTC Forward Foreign Currency Exchange Contracts | | | | — | | | | | (1,319,704 | ) | | | | — | |
OTC Cross Currency Exchange Contracts | | | | — | | | | | (125,190 | ) | | | | — | |
OTC Packaged Credit Default Swap Agreements | | | | — | | | | | (413,905 | ) | | | | — | |
OTC Credit Default Swap Agreements | | | | — | | | | | (194,213 | ) | | | | — | |
See Notes to Financial Statements.
44
| | | | | | | | | | | | | | | |
| | Level 1 | | Level 2 | | Level 3 |
Other Financial Instruments* (continued) | | | | | | |
Liabilities (continued) | | | | | | |
Centrally Cleared Interest Rate Swap Agreements | | | $ | — | | | | $ | (427,704 | ) | | | $ | — | |
OTC Interest Rate Swap Agreements | | | | — | | | | | (71,540 | ) | | | | — | |
| | | | | | | | | | | | | | | |
Total | | | $ | (99,866 | ) | | | $ | (2,552,256 | ) | | | $ | — | |
| | | | | | | | | | | | | | | |
* | Other financial instruments are derivative instruments, with the exception of unfunded loan commitments, and are not reflected in the Schedule of Investments. Futures, forwards, centrally cleared swap contracts and unfunded loan commitments are recorded at net unrealized appreciation (depreciation) and OTC swap contracts are recorded at fair value. |
The following is a reconciliation of assets in which unobservable inputs (Level 3) were used in determining fair value:
| | | | | | | | | | | | | | | | | | | | |
| | Asset-Backed Securities- Spain | | Corporate Bonds | | Floating Rate and other Loans | | Residential Mortgage-Backed Securities |
Balance as of 10/31/21 | | | $ | — | | | | $ | 2,720 | | | | $ | — | | | | $ | 83,200 | |
Realized gain (loss) | | | | (41,693 | ) | | | | — | | | | | — | | | | | — | |
Change in unrealized appreciation (depreciation) | | | | 6,085 | | | | | (46,808 | ) | | | | — | | | | | (168 | ) |
Purchases/Exchanges/Issuances | | | | 1 | | | | | — | | | | | 6,258 | | | | | — | |
Sales/Paydowns | | | | (173,131 | ) | | | | — | | | | | (1,399 | ) | | | | (49,757 | ) |
Accrued discount/premium | | | | — | | | | | 46,808 | | | | | — | | | | | — | |
Transfers into Level 3* | | | | 454,217 | | | | | — | | | | | — | | | | | — | |
Transfers out of Level 3* | | | | — | | | | | — | | | | | — | | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Balance as of 10/31/22 | | | $ | 245,479 | | | | $ | 2,720 | | | | $ | 4,859 | | | | $ | 33,275 | |
| | | | | | | | | | | | | | | | | | | | |
Change in unrealized appreciation (depreciation) relating to securities still held at reporting period end | | | $ | 6,085 | | | | $ | (46,808 | ) | | | $ | — | | | | $ | (167 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Common Stocks | | Preferred Stocks | | Rights | | Warrants |
Balance as of 10/31/21 | | | $ | 85,400 | | | | $ | 300,000 | | | | $ | — | | | | $ | 164 | |
Realized gain (loss) | | | | 19,496 | | | | | 5,250 | | | | | — | | | | | — | |
Change in unrealized appreciation (depreciation) | | | | (35,061 | ) | | | | (4,500 | ) | | | | 5,513 | | | | | (161 | ) |
Purchases/Exchanges/Issuances | | | | — | | | | | — | | | | | — | | | | | — | |
Sales/Paydowns | | | | (117,784 | ) | | | | (150,750 | ) | | | | — | | | | | — | |
Accrued discount/premium | | | | — | | | | | — | | | | | — | | | | | — | |
Transfers into Level 3* | | | | 161,710 | | | | | — | | | | | — | | | | | — | |
Transfers out of Level 3* | | | | — | | | | | — | | | | | — | | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Balance as of 10/31/22 | | | $ | 113,761 | | | | $ | 150,000 | | | | $ | 5,513 | | | | $ | 3 | |
| | | | | | | | | | | | | | | | | | | | |
Change in unrealized appreciation (depreciation) relating to securities still held at reporting period end | | | $ | (35,061 | ) | | | $ | (4,500 | ) | | | $ | 5,513 | | | | $ | (161 | ) |
| | | | | | | | | | | | | | | | | | | | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 45 |
Schedule of Investments (continued)
as of October 31, 2022
* | It is the Fund’s policy to recognize transfers in and transfers out at the securities’ fair values as of the beginning of period. Securities transferred between Level 2 and Level 3 are due to changes in the method utilized in valuing the investments. Transfers from Level 2 to Level 3 are typically a result of a change from the use of methods used by independent pricing services (Level 2) to the use of a single broker quote or valuation technique which utilizes significant unobservable inputs due to an absence of current or reliable market quotations (Level 3). Transfers from Level 3 to Level 2 are a result of the availability of current and reliable market data provided by independent pricing services or other valuation techniques which utilize observable inputs. In accordance with the requirements of ASC 820, the amounts of transfers into and out of Level 3, if material, are disclosed in the Notes to the Schedule of Investments of the Fund. |
Level 3 securities as presented in the table above are being fair valued using pricing methodologies approved by the Board, which contain unobservable inputs as follows:
| | | | | | | | | | | |
Level 3 Securities** | | Fair Value as of October 31, 2022 | | Valuation Approach | | Valuation Methodology | | Unobservable Inputs |
Asset-Backed Securities-Spain | | | $ | 245,177 | | | Market | | Adjusted Spread | | Estimated Spread |
Asset-Backed Securities-Spain | | | | 302 | | | Market | | Contingent Value | | Contingent Value |
Corporate Bonds | | | | 2,720 | | | Market | | Contingent Value | | Contingent Value |
| | | | | | | | | Transaction | | Unadjusted Last |
Common Stocks | | | | 52,761 | | | Market | | Based/Broker Quote | | Traded Price |
| | | | | | | | | | | Unadjusted Purchase |
Preferred Stocks | | | | 150,000 | | | Market | | Transaction Based | | Price |
Rights | | | | 5,513 | | | Market | | Contingent Value | | Contingent Value |
Warrants | | | | 3 | | | Market | | Worthless | | Placeholder |
| | | | | | | | | | | |
| | | $ | 456,476 | | | | | | | |
| | | | | | | | | | | |
** | The table does not include Level 3 securities and/or derivatives that are valued by independent pricing vendors or brokers. As of October 31, 2022, the aggregate value of these securities and/or derivatives was $99,134. The unobservable inputs for these investments were not developed by the Fund and are not readily available. |
Industry Classification:
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of October 31, 2022 were as follows:
| | | | |
Commercial Mortgage-Backed Securities | | | 14.6 | % |
Sovereign Bonds | | | 8.4 | |
Oil & Gas | | | 6.9 | |
Residential Mortgage-Backed Securities | | | 6.9 | |
Electric | | | 5.1 | |
U.S. Government Agency Obligations | | | 4.9 | |
Unaffiliated Fund | | | 4.7 | |
Telecommunications | | | 4.1 | |
Media | | | 3.1 | |
Entertainment | | | 2.4 | |
| | | | |
Foods | | | 2.3 | % |
Exchange-Traded Fund | | | 2.3 | |
Affiliated Mutual Fund (2.2% represents investments purchased with collateral from securities on loan) | | | 2.2 | |
Banks | | | 2.1 | |
Retail | | | 2.1 | |
U.S. Treasury Obligations | | | 2.0 | |
Other | | | 1.7 | |
Packaging & Containers | | | 1.5 | |
See Notes to Financial Statements.
46
Industry Classification (continued):
| | | | |
Internet | | | 1.4 | % |
Commercial Services | | | 1.3 | |
Auto Manufacturers | | | 1.3 | |
Real Estate Investment Trusts (REITs) | | | 1.3 | |
Home Builders | | | 1.3 | |
Gas | | | 1.3 | |
Aerospace & Defense | | | 1.2 | |
Diversified Financial Services | | | 1.2 | |
Pipelines | | | 1.2 | |
Lodging | | | 1.2 | |
Healthcare-Services | | | 1.1 | |
Healthcare-Products | | | 0.9 | |
Real Estate | | | 0.9 | |
Auto Parts & Equipment | | | 0.8 | |
Chemicals | | | 0.7 | |
Foreign Treasury Obligation | | | 0.7 | |
Engineering & Construction | | | 0.7 | |
Pharmaceuticals | | | 0.6 | |
Insurance | | | 0.6 | |
Machinery-Diversified | | | 0.5 | |
Collateralized Loan Obligation | | | 0.5 | |
Gas Utilities | | | 0.4 | |
| | | | |
Student Loan | | | 0.4 | % |
Municipal Bond | | | 0.3 | |
Wireless Telecommunication Services | | | 0.3 | |
Agriculture | | | 0.3 | |
Iron/Steel | | | 0.2 | |
Building Materials | | | 0.2 | |
Transportation | | | 0.2 | |
Consumer Loans | | | 0.2 | |
Options Purchased | | | 0.2 | |
Oil, Gas & Consumable Fuels | | | 0.2 | |
Airlines | | | 0.2 | |
Electric Utilities | | | 0.1 | |
Hotels, Restaurants & Leisure | | | 0.0 | * |
| | | | |
| | | 101.2 | |
Options Written | | | (0.2 | ) |
Liabilities in excess of other assets | | | (1.0 | ) |
| | | | |
| | | 100.0 | % |
| | | | |
Effects of Derivative Instruments on the Financial Statements and Primary Underlying Risk Exposure:
The Fund invested in derivative instruments during the reporting period. The primary types of risk associated with these derivative instruments are credit contracts risk, equity contracts risk, foreign exchange contracts risk and interest rate contracts risk. See the Notes to Financial Statements for additional detail regarding these derivative instruments and their risks. The effect of such derivative instruments on the Fund’s financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 47 |
Schedule of Investments (continued)
as of October 31, 2022
Fair values of derivative instruments as of October 31, 2022 as presented in the Statement of Assets and Liabilities:
| | | | | | | | | | | | |
Derivatives not accounted for as hedging instruments, carried at fair value | | Asset Derivatives | | | Liability Derivatives | |
| Statement of Assets and Liabilities Location | | Fair Value | | | Statement of Assets and Liabilities Location | | Fair Value | |
Credit contracts | | Due from/to broker-variation margin swaps | | $ | 110,305 | * | | — | | $ | — | |
Credit contracts | | Premiums paid for OTC swap agreements | | | 147,547 | | | Premiums received for OTC swap agreements | | | 159,854 | |
Credit contracts | | Unrealized appreciation on OTC swap agreements | | | 477,444 | | | Unrealized depreciation on OTC swap agreements | | | 538,554 | |
Equity contracts | | Due from/to broker-variation margin futures | | | 5,300 | * | | — | | | — | |
Equity contracts | | Unaffiliated investments | | | 22,683 | | | Options written outstanding, at value | | | 27,850 | |
Foreign exchange contracts | | — | | | — | | | Due from/to broker-variation margin futures | | | 75,040 | * |
Foreign exchange contracts | | Unrealized appreciation on OTC cross currency exchange contracts | | | 140,961 | | | Unrealized depreciation on OTC cross currency exchange contracts | | | 125,190 | |
Foreign exchange contracts | | Unrealized appreciation on OTC forward foreign currency exchange contracts | | | 1,114,788 | | | Unrealized depreciation on OTC forward foreign currency exchange contracts | | | 1,319,704 | |
Interest rate contracts | | Due from/to broker-variation margin futures | | | 838,436 | * | | Due from/to broker-variation margin futures | | | 24,826 | * |
Interest rate contracts | | Due from/to broker-variation margin swaps | | | 253,032 | * | | Due from/to broker-variation margin swaps | | | 427,704 | * |
Interest rate contracts | | Premiums paid for OTC swap agreements | | | 66 | | | Premiums received for OTC swap agreements | | | 69 | |
Interest rate contracts | | Unaffiliated investments | | | 57,018 | | | Options written outstanding, at value | | | 64,758 | |
Interest rate contracts | | Unrealized appreciation on OTC swap agreements | | | 77,156 | | | Unrealized depreciation on OTC swap agreements | | | 71,471 | |
| | | | | | | | | | | | |
| | | | $ | 3,244,736 | | | | | $ | 2,835,020 | |
| | | | | | | | | | | | |
* | Includes cumulative appreciation (depreciation) as reported in the schedule of open futures and centrally cleared swap contracts. Only unsettled variation margin receivable (payable) is reported within the Statement of Assets and Liabilities. |
See Notes to Financial Statements.
48
The effects of derivative instruments on the Statement of Operations for the year ended October 31, 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
Amount of Realized Gain (Loss) on Derivatives Recognized in Income |
Derivatives not accounted for as hedging instruments, carried at fair value | | Options Purchased(1) | | Options Written | | Futures | | Forward & Cross Currency Exchange Contracts | | Swaps |
Credit contracts | | | $ | — | | | | $ | — | | | | $ | — | | | | $ | — | | | | $ | (894,458 | ) |
Equity contracts | | | | (427,160 | ) | | | | 607,106 | | | | | (226,164 | ) | | | | — | | | | | — | |
Foreign exchange contracts | | | | (1,694,121 | ) | | | | 1,862,295 | | | | | — | | | | | 4,155,169 | | | | | — | |
Interest rate contracts | | | | — | | | | | — | | | | | 2,150,990 | | | | | — | | | | | (3,743,621 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | $ | (2,121,281 | ) | | | $ | 2,469,401 | | | | $ | 1,924,826 | | | | $ | 4,155,169 | | | | $ | (4,638,079 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Included in net realized gain (loss) on investment transactions in the Statement of Operations. |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Income |
Derivatives not accounted for as hedging instruments, carried at fair value | | Options Purchased(2) | | Options Written | | Futures | | Forward & Cross Currency Exchange Contracts | | Swaps |
Credit contracts | | | $ | — | | | | $ | — | | | | $ | — | | | | $ | — | | | | $ | (280,917 | ) |
Equity contracts | | | | (234,030 | ) | | | | 126,960 | | | | | (38,205 | ) | | | | — | | | | | — | |
Foreign exchange contracts | | | | 1,451,975 | | | | | (1,605,151 | ) | | | | (75,040 | ) | | | | (585,658 | ) | | | | — | |
Interest rate contracts | | | | 44,126 | | | | | (48,471 | ) | | | | 395,851 | | | | | — | | | | | 1,890,092 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | $ | 1,262,071 | | | | $ | (1,526,662 | ) | | | $ | 282,606 | | | | $ | (585,658 | ) | | | $ | 1,609,175 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
(2) | Included in net change in unrealized appreciation (depreciation) on investments in the Statement of Operations. |
For the year ended October 31, 2022, the Fund’s average volume of derivative activities is as follows:
| | | | | |
Derivative Contract Type | | Average Volume of Derivative Activities* |
Options Purchased (1) | | | $ | 587,635 | |
Options Written (2) | | | | 24,361,703 | |
Futures Contracts - Long Positions (2) | | | | 6,932,460 | |
Futures Contracts - Short Positions (2) | | | | 57,891,422 | |
Forward Foreign Currency Exchange Contracts - Purchased (3) | | | | 12,218,694 | |
Forward Foreign Currency Exchange Contracts - Sold (3) | | | | 31,725,576 | |
Cross Currency Exchange Contracts (4) | | | | 2,432,503 | |
Interest Rate Swap Agreements (2) | | | | 44,392,342 | |
Credit Default Swap Agreements - Buy Protection (2) | | | | 3,959,000 | |
Credit Default Swap Agreements - Sell Protection (2) | | | | 18,879,572 | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 49 |
Schedule of Investments (continued)
as of October 31, 2022
| | | | | |
Derivative Contract Type | | Average Volume of Derivative Activities* |
Inflation Swap Agreements (2) | | | $ | 628,000 | |
* | Average volume is based on average quarter end balances as noted for the year ended October 31, 2022. |
(2) | Notional Amount in USD. |
(3) | Value at Settlement Date. |
Financial Instruments/Transactions—Summary of Offsetting and Netting Arrangements:
The Fund invested in OTC derivatives and entered into financial instruments/transactions during the reporting period that are either offset in accordance with current requirements or are subject to enforceable master netting arrangements or similar agreements that permit offsetting. The information about offsetting and related netting arrangements for OTC derivatives and financial instruments/transactions where the legal right to set-off exists is presented in the summary below.
Offsetting of financial instrument/transaction assets and liabilities:
| | | | | | | | | | | | | | | |
Description | | Gross Market Value of Recognized Assets/(Liabilities) | | Collateral Pledged/(Received)(2) | | Net Amount |
Securities on Loan | | $937,887 | | $(937,887) | | | $ | — | |
Offsetting of OTC derivative assets and liabilities:
| | | | | | | | | | | | | | | | | | | | | | | | | |
Counterparty | | Gross Amounts of Recognized Assets(1) | | Gross Amounts of Recognized Liabilities(1) | | Net Amounts of Recognized Assets/(Liabilities) | | Collateral Pledged/(Received)(2) | | Net Amount |
BARC | | | $ | 522,761 | | | | $ | (649,977 | ) | | | $ | (127,216 | ) | | | $ | — | | | | $ | (127,216 | ) |
BNP | | | | 92 | | | | | (146,521 | ) | | | | (146,429 | ) | | | | — | | | | | (146,429 | ) |
BOA | | | | 758,489 | | | | | (312,216 | ) | | | | 446,273 | | | | | (252,392 | ) | | | | 193,881 | |
CITI | | | | 239,313 | | | | | (165,097 | ) | | | | 74,216 | | | | | — | | | | | 74,216 | |
DB | | | | 119,760 | | | | | (175,723 | ) | | | | (55,963 | ) | | | | — | | | | | (55,963 | ) |
GSI | | | | 8,059 | | | | | (191,915 | ) | | | | (183,856 | ) | | | | 183,856 | | | | | — | |
HSBC | | | | 38,665 | | | | | (12,057 | ) | | | | 26,608 | | | | | — | | | | | 26,608 | |
JPM | | | | 72,077 | | | | | (73,556 | ) | | | | (1,479 | ) | | | | — | | | | | (1,479 | ) |
MSI | | | | 255,764 | | | | | (439,583 | ) | | | | (183,819 | ) | | | | — | | | | | (183,819 | ) |
SCB | | | | — | | | | | (112,292 | ) | | | | (112,292 | ) | | | | — | | | | | (112,292 | ) |
UAG | | | | — | | | | | (663 | ) | | | | (663 | ) | | | | — | | | | | (663 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | $ | 2,014,980 | | | | $ | (2,279,600 | ) | | | $ | (264,620 | ) | | | $ | (68,536 | ) | | | $ | (333,156 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Includes unrealized appreciation/(depreciation) on swaps and forwards, premiums paid/(received) on swap agreements and market value of purchased and written options, as represented on the Statement of Assets and Liabilities. |
(2) | Collateral amount disclosed by the Fund is limited to the market value of financial instruments/transactions and the Fund’s OTC derivative exposure by counterparty. |
See Notes to Financial Statements.
50
Statement of Assets & Liabilities
as of October 31, 2022
| | | | |
Assets | | | | |
Investments at value, including securities on loan of $937,887: | | | | |
Unaffiliated investments (cost $55,250,281) | | $ | 42,952,357 | |
Affiliated investments (cost $963,844) | | | 963,844 | |
Foreign currency, at value (cost $118,747) | | | 112,955 | |
Cash segregated for counterparty - OTC | | | 188,000 | |
Unrealized appreciation on OTC forward foreign currency exchange contracts | | | 1,114,788 | |
Unrealized appreciation on OTC swap agreements | | | 554,600 | |
Dividends and interest receivable | | | 479,355 | |
Premiums paid for OTC swap agreements | | | 147,613 | |
Unrealized appreciation on OTC cross currency exchange contracts | | | 140,961 | |
Receivable for Fund shares sold | | | 101,321 | |
Due from broker—variation margin futures | | | 92,351 | |
Receivable for investments sold | | | 79,060 | |
Prepaid expenses and other assets | | | 1,522 | |
| | | | |
Total Assets | | | 46,928,727 | |
| | | | |
| |
Liabilities | | | | |
Unrealized depreciation on OTC forward foreign currency exchange contracts | | | 1,319,704 | |
Payable to broker for collateral for securities on loan | | | 962,891 | |
Unrealized depreciation on OTC swap agreements | | | 610,025 | |
Premiums received for OTC swap agreements | | | 159,923 | |
Unrealized depreciation on OTC cross currency exchange contracts | | | 125,190 | |
Payable for Fund shares purchased | | | 111,626 | |
Accrued expenses and other liabilities | | | 104,434 | |
Options written outstanding, at value (premiums received $91,219) | | | 92,608 | |
Due to broker—variation margin swaps | | | 37,036 | |
Management fee payable | | | 29,143 | |
Payable for investments purchased | | | 2,061 | |
Trustees’ fees payable | | | 868 | |
Distribution fee payable | | | 821 | |
Affiliated transfer agent fee payable | | | 348 | |
Dividends payable | | | 218 | |
| | | | |
Total Liabilities | | | 3,556,896 | |
| | | | |
| |
Net Assets | | $ | 43,371,831 | |
| | | | |
| |
| | | |
Net assets were comprised of: | | | | |
Shares of beneficial interest, at par | | $ | 5,713 | |
Paid-in capital in excess of par | | | 62,238,508 | |
Total distributable earnings (loss) | | | (18,872,390 | ) |
| | | | |
Net assets, October 31, 2022 | | $ | 43,371,831 | |
| | | | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 51 |
Statement of Assets & Liabilities
as of October 31, 2022
| | | | |
Class A | | | | |
Net asset value and redemption price per share, ($1,167,837 ÷ 153,732 shares of beneficial interest issued and outstanding) | | $ | 7.60 | |
Maximum sales charge (3.25% of offering price) | | | 0.26 | |
| | | | |
Maximum offering price to public | | $ | 7.86 | |
| | | | |
| |
Class C | | | |
Net asset value, offering price and redemption price per share, ($661,729 ÷ 87,257 shares of beneficial interest issued and outstanding) | | $ | 7.58 | |
| | | | |
| |
Class Z | | | |
Net asset value, offering price and redemption price per share, ($12,104,442 ÷ 1,593,771 shares of beneficial interest issued and outstanding) | | $ | 7.59 | |
| | | | |
| |
Class R6 | | | |
Net asset value, offering price and redemption price per share, ($29,437,823 ÷ 3,878,093 shares of beneficial interest issued and outstanding) | | $ | 7.59 | |
| | | | |
See Notes to Financial Statements.
52
Statement of Operations
Year Ended October 31, 2022
| | | | |
Net Investment Income (Loss) | | | | |
Income | | | | |
Interest income (net of $949 foreign withholding tax) | | $ | 2,423,827 | |
Unaffiliated dividend income | | | 41,050 | |
Income from securities lending, net (including affiliated income of $779) | | | 1,760 | |
Affiliated dividend income | | | 191 | |
| | | | |
Total income | | | 2,466,828 | |
| | | | |
| |
Expenses | | | | |
Management fee | | | 358,610 | |
Distribution fee(a) | | | 11,638 | |
Audit fee | | | 62,400 | |
Custodian and accounting fees | | | 62,362 | |
Registration fees(a) | | | 32,836 | |
Transfer agent’s fees and expenses (including affiliated expense of $2,150)(a) | | | 31,026 | |
Legal fees and expenses | | | 20,768 | |
Shareholders’ reports | | | 19,650 | |
Trustees’ fees | | | 9,794 | |
Miscellaneous | | | 23,439 | |
| | | | |
Total expenses | | | 632,523 | |
Less: Fee waiver and/or expense reimbursement(a) | | | (198,241 | ) |
| | | | |
Net expenses | | | 434,282 | |
| | | | |
Net investment income (loss) | | | 2,032,546 | |
| | | | |
| |
Realized And Unrealized Gain (Loss) On Investment And Foreign Currency Transactions | | | | |
Net realized gain (loss) on: | | | | |
Investment transactions (including affiliated of $(8)) | | | (2,799,971 | ) |
Futures transactions | | | 1,924,826 | |
Forward and cross currency contract transactions | | | 4,155,169 | |
Options written transactions | | | 2,469,401 | |
Swap agreement transactions | | | (4,638,079 | ) |
Foreign currency transactions | | | (593,681 | ) |
| | | | |
| | | 517,665 | |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | |
Investments | | | (11,463,033 | ) |
Futures | | | 282,606 | |
Forward and cross currency contracts | | | (585,658 | ) |
Options written | | | (1,526,662 | ) |
Swap agreements | | | 1,609,175 | |
Foreign currencies | | | 271,132 | |
Unfunded loan commitments | | | (228 | ) |
| | | | |
| | | (11,412,668 | ) |
| | | | |
Net gain (loss) on investment and foreign currency transactions | | | (10,895,003 | ) |
| | | | |
Net Increase (Decrease) In Net Assets Resulting From Operations | | $ | (8,862,457 | ) |
| | | | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 53 |
Statement of Operations
Year Ended October 31, 2022
(a) | Class specific expenses and waivers were as follows: |
| | | | | | | | | | | | | | | | |
| | Class A | | | Class C | | | Class Z | | | Class R6 | |
Distribution fee | | | 3,841 | | | | 7,797 | | | | — | | | | — | |
Registration fees | | | 9,114 | | | | 5,413 | | | | 13,136 | | | | 5,173 | |
Transfer agent’s fees and expenses | | | 2,453 | | | | 1,443 | | | | 26,600 | | | | 530 | |
Fee waiver and/or expense reimbursement | | | (13,741 | ) | | | (7,920 | ) | | | (82,657 | ) | | | (93,923 | ) |
See Notes to Financial Statements.
54
Statements of Changes in Net Assets
| | | | | | | | |
| |
| | Year Ended October 31, | |
| | |
| | 2022 | | | 2021 | |
Increase (Decrease) in Net Assets | | | | | | | | |
Operations | | | | | | | | |
Net investment income (loss) | | $ | 2,032,546 | | | $ | 1,989,766 | |
Net realized gain (loss) on investment and foreign currency transactions | | | 517,665 | | | | 995,582 | |
Net change in unrealized appreciation (depreciation) on investments and foreign currencies | | | (11,412,668 | ) | | | (948,783 | ) |
| | | | | | | | |
Net increase (decrease) in net assets resulting from operations | | | (8,862,457 | ) | | | 2,036,565 | |
| | | | | | | | |
| | |
Dividends and Distributions | | | | | | | | |
Distributions from distributable earnings | | | | | | | | |
Class A | | | (59,917 | ) | | | (84,135 | ) |
Class C | | | (26,221 | ) | | | (37,342 | ) |
Class Z | | | (720,726 | ) | | | (1,413,038 | ) |
Class R6 | | | (1,290,242 | ) | | | (1,513,561 | ) |
| | | | | | | | |
| | | (2,097,106 | ) | | | (3,048,076 | ) |
| | | | | | | | |
Tax return of capital distributions | | | | | | | | |
Class A | | | (29,072 | ) | | | — | |
Class C | | | (12,723 | ) | | | — | |
Class Z | | | (349,697 | ) | | | — | |
Class R6 | | | (626,028 | ) | | | — | |
| | | | | | | | |
| | | (1,017,520 | ) | | | — | |
| | | | | | | | |
| | |
Fund share transactions (Net of share conversions) | | | | | | | | |
Net proceeds from shares sold | | | 7,814,302 | | | | 46,855,470 | |
Net asset value of shares issued in reinvestment of dividends and distributions | | | 3,112,219 | | | | 3,041,495 | |
Cost of shares purchased | | | (20,856,503 | ) | | | (47,698,901 | ) |
| | | | | | | | |
Net increase (decrease) in net assets from Fund share transactions | | | (9,929,982 | ) | | | 2,198,064 | |
| | | | | | | | |
Total increase (decrease) | | | (21,907,065 | ) | | | 1,186,553 | |
| | |
Net Assets: | | | | | | |
Beginning of year | | | 65,278,896 | | | | 64,092,343 | |
| | | | | | | | |
End of year | | $ | 43,371,831 | | | $ | 65,278,896 | |
| | | | | | | | |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 55 |
Financial Highlights
| | | | | | | | | | | | | | | | | | | | |
Class A Shares | | | | | | | | | | | | | | | |
| | Year Ended October 31, | |
| | 2022 | | | 2021 | | | 2020 | | | 2019 | | | 2018 | |
Per Share Operating Performance(a): | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Year | | | $9.53 | | | | $9.43 | | | | $10.49 | | | | $10.03 | | | | $10.56 | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | | 0.30 | | | | 0.24 | | | | 0.27 | | | | 0.24 | | | | 0.25 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | (1.75 | ) | | | 0.25 | | | | (0.51 | ) | | | 1.03 | | | | (0.14 | ) |
Total from investment operations | | | (1.45 | ) | | | 0.49 | | | | (0.24 | ) | | | 1.27 | | | | 0.11 | |
Less Dividends and Distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (0.31 | ) | | | (0.39 | ) | | | (0.31 | ) | | | (0.81 | ) | | | (0.57 | ) |
Tax return of capital distributions | | | (0.17 | ) | | | - | | | | (0.20 | ) | | | - | | | | - | |
Distributions from net realized gains | | | - | | | | - | | | | (0.31 | ) | | | - | | | | (0.07 | ) |
Total dividends and distributions | | | (0.48 | ) | | | (0.39 | ) | | | (0.82 | ) | | | (0.81 | ) | | | (0.64 | ) |
Net asset value, end of year | | | $7.60 | | | | $9.53 | | | | $9.43 | | | | $10.49 | | | | $10.03 | |
Total Return(b): | | | (15.54 | )% | | | 5.25 | % | | | (2.43 | )% | | | 13.32 | % | | | 1.00 | % |
| |
Ratios/Supplemental Data: | | | | | | | | | | |
Net assets, end of year (000) | | | $1,168 | | | | $2,018 | | | | $2,249 | | | | $8,693 | | | | $585 | |
Average net assets (000) | | | $1,536 | | | | $2,122 | | | | $3,690 | | | | $2,311 | | | | $1,984 | |
Ratios to average net assets(c): | | | | | | | | | | | | | | | | | | | | |
Expenses after waivers and/or expense reimbursement | | | 1.20 | % | | | 1.21 | % | | | 1.21 | % | | | 1.20 | % | | | 1.20 | % |
Expenses before waivers and/or expense reimbursement | | | 2.09 | % | | | 1.91 | % | | | 2.09 | % | | | 2.52 | % | | | 2.77 | % |
Net investment income (loss) | | | 3.60 | % | | | 2.48 | % | | | 2.80 | % | | | 2.26 | % | | | 2.43 | % |
Portfolio turnover rate(d) | | | 11 | % | | | 105 | % | | | 68 | % | | | 33 | % | | | 106 | % |
(a) | Calculated based on average shares outstanding during the year. |
(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 year reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. |
(c) | Does not include expenses of the underlying funds in which the Fund invests. |
(d) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
56
| | | | | | | | | | | | | | | | | | | | |
Class C Shares | | | | | | | | | | | | | | | |
| | Year Ended October 31, | |
| | 2022 | | | 2021 | | | 2020 | | | 2019 | | | 2018 | |
Per Share Operating Performance(a): | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Year | | | $9.51 | | | | $9.41 | | | | $10.47 | | | | $10.01 | | | | $10.54 | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | | 0.24 | | | | 0.17 | | | | 0.20 | | | | 0.17 | | | | 0.19 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | (1.75 | ) | | | 0.24 | | | | (0.51 | ) | | | 1.02 | | | | (0.16 | ) |
Total from investment operations | | | (1.51 | ) | | | 0.41 | | | | (0.31 | ) | | | 1.19 | | | | 0.03 | |
Less Dividends and Distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (0.25 | ) | | | (0.31 | ) | | | (0.24 | ) | | | (0.73 | ) | | | (0.49 | ) |
Tax return of capital distributions | | | (0.17 | ) | | | - | | | | (0.20 | ) | | | - | | | | - | |
Distributions from net realized gains | | | - | | | | - | | | | (0.31 | ) | | | - | | | | (0.07 | ) |
Total dividends and distributions | | | (0.42 | ) | | | (0.31 | ) | | | (0.75 | ) | | | (0.73 | ) | | | (0.56 | ) |
Net asset value, end of year | | | $7.58 | | | | $9.51 | | | | $9.41 | | | | $10.47 | | | | $10.01 | |
Total Return(b): | | | (16.22 | )% | | | 4.36 | % | | | (3.08 | )% | | | 12.48 | % | | | 0.26 | % |
| |
Ratios/Supplemental Data: | | | | | | | | | | |
Net assets, end of year (000) | | | $662 | | | | $932 | | | | $1,510 | | | | $1,335 | | | | $227 | |
Average net assets (000) | | | $780 | | | | $1,151 | | | | $1,563 | | | | $465 | | | | $162 | |
Ratios to average net assets(c): | | | | | | | | | | | | | | | | | | | | |
Expenses after waivers and/or expense reimbursement | | | 1.95 | % | | | 1.96 | % | | | 1.96 | % | | | 1.95 | % | | | 1.95 | % |
Expenses before waivers and/or expense reimbursement | | | 2.97 | % | | | 2.93 | % | | | 3.34 | % | | | 5.71 | % | | | 12.20 | % |
Net investment income (loss) | | | 2.87 | % | | | 1.75 | % | | | 2.09 | % | | | 1.67 | % | | | 1.81 | % |
Portfolio turnover rate(d) | | | 11 | % | | | 105 | % | | | 68 | % | | | 33 | % | | | 106 | % |
(a) | Calculated based on average shares outstanding during the year. |
(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 year reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. |
(c) | Does not include expenses of the underlying funds in which the Fund invests. |
(d) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 57 |
Financial Highlights (continued)
| | | | | | | | | | | | | | | | | | | | |
Class Z Shares | | | | | | | | | | | | | | | |
| | Year Ended October 31, | |
| | 2022 | | | 2021 | | | 2020 | | | 2019 | | | 2018 | |
Per Share Operating Performance(a): | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Year | | | $9.53 | | | | $9.43 | | | | $10.49 | | | | $10.03 | | | | $10.56 | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | | 0.33 | | | | 0.27 | | | | 0.30 | | | | 0.22 | | | | 0.29 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | (1.76 | ) | | | 0.25 | | | | (0.51 | ) | | | 1.09 | | | | (0.15 | ) |
Total from investment operations | | | (1.43 | ) | | | 0.52 | | | | (0.21 | ) | | | 1.31 | | | | 0.14 | |
Less Dividends and Distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (0.34 | )�� | | | (0.42 | ) | | | (0.34 | ) | | | (0.85 | ) | | | (0.60 | ) |
Tax return of capital distributions | | | (0.17 | ) | | | - | | | | (0.20 | ) | | | - | | | | - | |
Distributions from net realized gains | | | - | | | | - | | | | (0.31 | ) | | | - | | | | (0.07 | ) |
Total dividends and distributions | | | (0.51 | ) | | | (0.42 | ) | | | (0.85 | ) | | | (0.85 | ) | | | (0.67 | ) |
Net asset value, end of year | | | $7.59 | | | | $9.53 | | | | $9.43 | | | | $10.49 | | | | $10.03 | |
Total Return(b): | | | (15.36 | )% | | | 5.62 | % | | | (2.09 | )% | | | 13.73 | % | | | 1.33 | % |
| |
Ratios/Supplemental Data: | | | | | | | | | | |
Net assets, end of year (000) | | | $12,104 | | | | $27,633 | | | | $27,403 | | | | $31,323 | | | | $3,186 | |
Average net assets (000) | | | $17,655 | | | | $33,100 | | | | $31,816 | | | | $11,946 | | | | $4,160 | |
Ratios to average net assets(c): | | | | | | | | | | | | | | | | | | | | |
Expenses after waivers and/or expense reimbursement | | | 0.85 | % | | | 0.86 | % | | | 0.86 | % | | | 0.85 | % | | | 0.87 | % |
Expenses before waivers and/or expense reimbursement | | | 1.32 | % | | | 1.28 | % | | | 1.41 | % | | | 1.79 | % | | | 2.14 | % |
Net investment income (loss) | | | 3.88 | % | | | 2.76 | % | | | 3.14 | % | | | 2.16 | % | | | 2.84 | % |
Portfolio turnover rate(d) | | | 11 | % | | | 105 | % | | | 68 | % | | | 33 | % | | | 106 | % |
(a) | Calculated based on average shares outstanding during the year. |
(b) | Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. |
(c) | Does not include expenses of the underlying funds in which the Fund invests. |
(d) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
58
| | | | | | | | | | | | | | | | | | | | |
Class R6 Shares | | | | | | | | | | | | | | | |
| | Year Ended October 31, | |
| | 2022 | | | 2021 | | | 2020 | | | 2019 | | | 2018 | |
Per Share Operating Performance(a): | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Year | | | $9.52 | | | | $9.42 | | | | $10.49 | | | | $10.02 | | | | $10.55 | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | | 0.34 | | | | 0.28 | | | | 0.31 | | | | 0.34 | | | | 0.30 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | (1.76 | ) | | | 0.24 | | | | (0.52 | ) | | | 0.98 | | | | (0.16 | ) |
Total from investment operations | | | (1.42 | ) | | | 0.52 | | | | (0.21 | ) | | | 1.32 | | | | 0.14 | |
Less Dividends and Distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (0.34 | ) | | | (0.42 | ) | | | (0.35 | ) | | | (0.85 | ) | | | (0.60 | ) |
Tax return of capital distributions | | | (0.17 | ) | | | - | | | | (0.20 | ) | | | - | | | | - | |
Distributions from net realized gains | | | - | | | | - | | | | (0.31 | ) | | | - | | | | (0.07 | ) |
Total dividends and distributions | | | (0.51 | ) | | | (0.42 | ) | | | (0.86 | ) | | | (0.85 | ) | | | (0.67 | ) |
Net asset value, end of year | | | $7.59 | | | | $9.52 | | | | $9.42 | | | | $10.49 | | | | $10.02 | |
Total Return(b): | | | (15.22 | )% | | | 5.56 | % | | | (1.94 | )% | | | 13.79 | % | | | 1.37 | % |
| |
Ratios/Supplemental Data: | | | | | | | | | | |
Net assets, end of year (000) | | | $29,438 | | | | $34,696 | | | | $32,930 | | | | $33,833 | | | | $29,530 | |
Average net assets (000) | | | $31,259 | | | | $34,756 | | | | $32,443 | | | | $31,497 | | | | $29,353 | |
Ratios to average net assets(c): | | | | | | | | | | | | | | | | | | | | |
Expenses after waivers and/or expense reimbursement | | | 0.80 | % | | | 0.81 | % | | | 0.81 | % | | | 0.80 | % | | | 0.83 | % |
Expenses before waivers and/or expense reimbursement | | | 1.10 | % | | | 1.14 | % | | | 1.24 | % | | | 1.66 | % | | | 1.76 | % |
Net investment income (loss) | | | 4.06 | % | | | 2.89 | % | | | 3.22 | % | | | 3.39 | % | | | 2.89 | % |
Portfolio turnover rate(d) | | | 11 | % | | | 105 | % | | | 68 | % | | | 33 | % | | | 106 | % |
(a) | Calculated based on average shares outstanding during the year. |
(b) | Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. |
(c) | Does not include expenses of the underlying funds in which the Fund invests. |
(d) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
| | |
PGIM Global Dynamic Bond Fund | | 59 |
Notes to Financial Statements
1. Organization
Prudential Investment Portfolios 3 (the “Registered Investment Company” or “RIC”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company. The RIC is organized as a Delaware Statutory Trust. These financial statements relate only to the PGIM Global Dynamic Bond Fund (the “Fund”), a series of the RIC. The Fund is classified as a diversified fund for purposes of the 1940 Act.
The investment objective of the Fund is to seek positive returns over the long term, regardless of market conditions.
The Fund is subject to compliance with applicable regulations governing commodity pools including Commodity Futures Trading Commission (“CFTC”) rules.
2. Accounting Policies
The Fund follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 946 Financial Services — Investment Companies. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform to U.S. generally accepted accounting principles (“GAAP”). The Fund consistently follows such policies in the preparation of its financial statements.
Securities Valuation: The Fund holds securities and other assets and liabilities that are fair valued as of the close of each day (generally, 4:00 PM Eastern time) the New York Stock Exchange (“NYSE”) is open for trading. As described in further detail below, the Fund’s investments are valued daily based on a number of factors, including the type of investment and whether market quotations are readily available. The RIC’s Board of Trustees (the “Board”) has approved the Fund’s valuation policies and procedures for security valuation and designated to PGIM Investments LLC (“PGIM Investments” or the “Manager”) as the Valuation Designee pursuant to SEC Rule 2a-5(b) to perform the fair value determination relating to all Fund investments. Pursuant to the Board’s oversight, the Valuation Designee has established a Valuation Committee to perform the duties and responsibilities as valuation designee under SEC Rule 2a-5. 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. 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. A record of the Valuation Committee’s actions is provided to the Board at the first quarterly meeting following the quarter in which such actions take place.
60
Notes to Financial Statements (continued)
For the fiscal reporting year-end, securities and other assets and liabilities were fair valued at the close of the last U.S. business day. Trading in certain foreign securities may occur when the NYSE is closed (including weekends and holidays). Because such foreign securities trade in markets that are open on weekends and U.S. holidays, the values of some of the Fund’s foreign investments may change on days when investors cannot purchase or redeem Fund shares.
Various inputs determine how the Fund’s investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the Schedule of Investments and referred to herein as the “fair value hierarchy” in accordance with FASB ASC Topic 820 - Fair Value Measurement.
Common or preferred stocks, exchange-traded funds and derivative instruments, if applicable, that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange where the security principally trades. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price, they are classified as Level 1 in the fair value hierarchy. In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and ask prices, or at the last bid price in the absence of an ask price. These securities are classified as Level 2 in the fair value hierarchy.
Investments in open-end funds (other than exchange-traded funds) are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the OTC market are generally classified as Level 2 in the fair value hierarchy. Such fixed income securities are typically valued using the market approach which generally involves obtaining data from an approved independent third-party vendor source. The Fund utilizes the market approach as the primary method to value securities when market prices of identical or comparable instruments are available. The third-party vendors’ valuation techniques used to derive the evaluated bid price are based on evaluating observable inputs, including but not limited to, yield curves, yield spreads, credit ratings, deal terms, tranche level attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations and reported trades. Certain Level 3 securities are also valued using the market approach when obtaining a single broker quote or when utilizing transaction prices for identical securities that have been used in excess of five business days. During the reporting period, there were no changes to report with respect to the valuation approach and/or valuation techniques discussed above.
Floating rate and other loans 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. Floating rate and other loans valued using such vendor prices are generally classified as Level 2 in the fair value hierarchy.
| | |
PGIM Global Dynamic Bond Fund | | 61 |
Notes to Financial Statements (continued)
Floating rate and other loans valued based on a single broker quote or at the original transaction price in excess of five business days are classified as Level 3 in the fair value hierarchy.
OTC and centrally cleared derivative instruments are generally classified as Level 2 in the fair value hierarchy. Such derivative instruments are typically valued using the market approach and/or income approach which generally involves obtaining data from an approved independent third-party vendor source. The Fund utilizes the market approach when quoted prices in broker-dealer markets are available but also includes consideration of alternative valuation approaches, including the income approach. In the absence of reliable market quotations, the income approach is typically utilized for purposes of valuing derivatives such as interest rate swaps based on a discounted cash flow analysis whereby the value of the instrument is equal to the present value of its future cash inflows or outflows. Such analysis includes projecting future cash flows and determining the discount rate (including the present value factors that affect the discount rate) used to discount the future cash flows. In addition, the third-party vendors’ valuation techniques used to derive the evaluated derivative price is based on evaluating observable inputs, including but not limited to, underlying asset prices, indices, spreads, interest rates and exchange rates. Certain derivatives may be classified as Level 3 when valued using the market approach by obtaining a single broker quote or when utilizing unobservable inputs in the income approach. During the reporting period, there were no changes to report with respect to the valuation approach and/or valuation techniques discussed above.
Securities and other assets that cannot be priced according to the methods described above are valued based on policies and procedures 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. Altering one or more unobservable inputs may result in a significant change to a Level 3 security’s fair value measurement.
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 Valuation Designee regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other unaffiliated mutual funds to calculate their net asset values.
62
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 exchange rate as of the valuation date;
(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 unrealized and realized foreign currency gains (losses) are included in the reported net change in unrealized appreciation (depreciation) on investments and net realized gains (losses) on investment transactions on the Statements of Operations. 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.
Additionally, net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from the disposition of holdings of foreign currencies, currency gains (losses) realized between the trade and settlement dates on investment transactions, and the difference between the amounts of interest, dividends and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) arise from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates.
Forward and Cross 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, as defined in the prospectus, in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings or on specific receivables and payables denominated in a foreign currency and to gain exposure to certain currencies. The contracts are valued daily at current forward exchange rates and any unrealized gain (loss) is included in net unrealized appreciation or depreciation on forward and cross currency contracts. 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 forward and cross currency contract transactions. Risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the
| | |
PGIM Global Dynamic Bond Fund | | 63 |
Notes to Financial Statements (continued)
terms of their contracts. Forward currency contracts involve risks from currency exchange rate and credit risk in excess of 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. 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/or wrote options in order to hedge against adverse market movements or fluctuations in value caused by changes in prevailing interest rates, value of equities or foreign currency exchange rates with respect to securities or financial instruments 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 or financial instruments 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. The Fund, as purchaser of an OTC option, bears 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.
When the Fund writes an option on a swap, an amount equal to any premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the written option on the swap. If a call option on a swap is exercised, the Fund becomes obligated to pay a fixed interest rate (noted as the strike price) and receive a variable interest rate on a notional amount. If a put option on a swap is exercised, the Fund becomes obligated to pay a variable interest rate and receive a fixed interest rate (noted as the strike
64
price) on a notional amount. Premiums received from writing options on swaps that expire or are exercised are treated as realized gains upon the expiration or exercise of such options on swaps. The risk associated with writing put and call options on swaps is that the Fund will be obligated to be party to a swap agreement if an option on a swap is exercised.
Financial Futures Contracts: A financial futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities at a set price for delivery on a future date. Upon entering into a financial futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount. This amount is known as the “initial margin.” Subsequent payments, known as “variation margin,” are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying security. Such variation margin is recorded for financial statement purposes on a daily basis as unrealized gain (loss). When the contract expires or is closed, the gain (loss) is realized and is presented in the Statement of Operations as net realized gain (loss) on futures transactions.
The Fund invested in financial futures contracts in order to hedge its existing portfolio securities, or securities the Fund intends to purchase, against fluctuations in value caused by changes in prevailing interest rates. Should interest rates move unexpectedly, the Fund may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets. Since futures contracts are exchange-traded, there is minimal counterparty credit risk to the Fund since the exchanges’ clearinghouse acts as counterparty to all exchange-traded futures and guarantees the futures contracts against default.
Swap Agreements: The Fund entered into certain types of swap agreements detailed in the disclosures below. 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 a counterparty (“OTC-traded”) or through a central clearing facility, such as a registered exchange. Swap agreements are valued daily at current market value and any change in value is included in the net unrealized appreciation or depreciation on swap agreements. Centrally cleared swaps pay or receive an amount known as “variation margin”, based on daily changes in the valuation of the swap contract. For OTC-traded, upfront premiums paid and received are shown as swap premiums paid and swap premiums received in the Statement of Assets and Liabilities. 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 Schedule of Investments.
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 objective. The Fund used interest rate swaps to maintain its ability to generate steady cash flow by receiving a stream of fixed
| | |
PGIM Global Dynamic Bond Fund | | 65 |
Notes to Financial Statements (continued)
rate payments or 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 present value of the cash flows to be received from the counterparty over the contract’s remaining life.
Inflation Swaps: The Fund entered into inflation swap agreements to protect against fluctuations in inflation rates. Inflation swaps are characterized by one party paying a fixed rate in exchange for a floating rate that is derived from an inflation index, such as the Consumer Price Index or UK Retail Price Index. Inflation swaps subject the Fund to interest rate risk.
Credit Default Swaps (“CDS”): 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, and as such, has 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’s maximum risk of loss from counterparty credit risk for purchased CDS 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 swap agreements which the Fund entered into for the same referenced entity or index. As a
66
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 where the Fund is the seller of protection as of period end are disclosed in the footnotes to the Schedule 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. 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.
Floating Rate and other Loans: The Fund invested in floating rate and other loans. Floating rate and other loans include loans that are privately negotiated between a corporate borrower and one or more financial institutions, including, but not limited to, term loans, revolvers, and other instruments issued in the floating rate and other loans market. The Fund acquire interests in loans directly (by way of assignment from the selling institution) and/or indirectly (by way of the purchase of a participation interest from the selling institution). Under a floating rate and other loans assignment, the Fund generally will succeed to all the rights and obligations of an assigning lending institution and become a lender under the loan agreement with the relevant borrower in connection with that loan. Under a floating rate and other loans participation, the Fund generally will have a contractual relationship only with the lender, not with the relevant borrower. As a result, the Fund generally will have the right to receive payments of principal, interest, and any fees to which they are entitled only from the lender selling the participation and only upon receipt by the lender of the payments from the relevant borrower. The Fund may not directly benefit from the collateral supporting the debt obligation in which they have purchased the participation. As a result, the Fund will assume the credit risk of both the borrower and the institution selling the participation to the Fund.
Mortgage-Backed and Asset-Backed Securities: Mortgage-backed securities are pass-through securities, meaning that principal and interest payments made by the borrower on the underlying mortgages are passed through to the Fund. Asset-backed securities directly or indirectly represent a participation interest in, or are secured by and payable from, a stream of payments generated by particular assets such as motor vehicle or credit card receivables. Asset-backed securities may be classified as pass-through certificates or collateralized obligations, such as collateralized bond obligations, collateralized loan obligations and other similarly structured securities. The value of mortgage-backed and asset-backed securities varies with changes in interest rates and may be affected by changes in credit quality or value of the mortgage loans or other assets that support the securities.
| | |
PGIM Global Dynamic Bond Fund | | 67 |
Notes to Financial Statements (continued)
Stripped mortgage-backed securities are usually structured with two classes that receive different proportions of the interest (“IO”) and principal (“PO”) distributions on a pool of mortgage assets. Payments received for IOs are included in interest income on the Statements of Operations. Because no principal will be received at the maturity of an IO, adjustments are made to the cost of the security on a monthly basis until maturity. These adjustments are included in interest income on the Statements of Operations. Payments received for POs are treated as reductions to the cost and par value of the securities.
Master Netting Arrangements: The RIC, on behalf of the Fund, is subject to various Master Agreements, or netting arrangements, with select counterparties. These are agreements which a subadviser may have negotiated and entered into on behalf of all or a portion of the Fund. A master netting arrangement between the Fund and the counterparty permits the Fund to offset amounts payable by the Fund to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Fund to cover the Fund’s exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable. In addition to master netting arrangements, the right to set-off exists when all the conditions are met such that each of the parties owes the other determinable amounts, the reporting party has the right to set-off the amount owed with the amount owed by the other party, the reporting party intends to set-off and the right of set-off is enforceable by law.
The Trust, on behalf of the Fund, is a party to International Swaps and Derivatives Association, Inc. (“ISDA”) 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 Schedule of Investments. Collateral pledged by the Fund is segregated by the Fund’s custodian and identified in the Schedule 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
68
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 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.
Short sales and OTC contracts, including forward foreign currency exchange contracts, swaps, forward rate agreements and written options involve elements of both market and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities, if applicable. Such risks may be mitigated by engaging in master netting arrangements.
Warrants and Rights: The Fund held warrants and rights acquired either through a direct purchase or pursuant to corporate actions. Warrants and rights entitle the holder to buy a proportionate amount of common stock, or such other security that the issuer may specify, at a specific price and time through the expiration dates. Such warrants and rights are held as long positions by the Fund until exercised, sold or expired. Warrants and rights are valued at fair value in accordance with the Board approved fair valuation procedures.
Payment-In-Kind: The Fund invested in the open market or received 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 lends its portfolio securities to banks and broker-dealers. The loans are secured by collateral at least equal to the market value of the securities loaned. Collateral pledged by each borrower is invested in an affiliated money market fund and is marked to market daily, based on the previous day’s market value, such that the value of the collateral exceeds the value of the loaned securities. In the event of significant appreciation in value of securities on loan on the last business day of the reporting period, the financial statements may reflect a collateral value that is less than the market value of the loaned securities. Such shortfall is remedied as described above. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of the loan, the borrower will
| | |
PGIM Global Dynamic Bond Fund | | 69 |
Notes to Financial Statements (continued)
return to the Fund securities identical to the loaned securities. The remaining open loans of the securities lending transactions are considered overnight and continuous. 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 from the securities loaned and such payments are passed back to the lender in amounts equivalent thereto, which are reflected in interest income or unaffiliated dividend income based on the nature of the payment on the Statement of Operations. The Fund also continues to recognize any unrealized gain (loss) in the market price of the securities loaned and on the change in the value of the collateral invested that may occur during the term of the loan. In addition, realized gain (loss) is recognized on changes in the value of the collateral invested upon liquidation of the collateral. Net earnings from securities lending are disclosed in the Statement of Operations.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains (losses) from investment and currency transactions are calculated on the specific identification method. Dividend income is recorded on the ex-date, or for certain foreign securities, when the Fund becomes aware of such dividends. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on the accrual basis. Expenses are recorded on an accrual basis, which may require the use of certain estimates by management that may differ from actual. Net investment income or loss (other than class specific expenses and waivers, which are allocated as noted below) and unrealized and realized gains (losses) are allocated daily to each class of shares based upon the relative proportion of adjusted net assets of each class at the beginning of the day. Class specific expenses and waivers, where applicable, are charged to the respective share classes. Such class specific expenses and waivers include distribution fees and distribution fee waivers, shareholder servicing fees, transfer agent’s fees and expenses, registration fees and fee waivers and/or expense reimbursements, as applicable.
Taxes: It is the Fund’s policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net investment income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required. Withholding taxes on foreign dividends, interest and capital gains, if any, are recorded, net of reclaimable amounts, at the time the related income is earned.
70
Dividends and Distributions: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from GAAP, are recorded on the ex-date. Permanent book/tax differences relating to income and gain (loss) are reclassified between total distributable earnings (loss) and paid-in capital in excess of par, as appropriate. The chart below sets forth the expected frequency of dividend and capital gains distributions to shareholders. Various factors may impact the frequency of dividend distributions to shareholders, including but not limited to adverse market conditions or portfolio holding-specific events.
| | |
| |
Expected Distribution Schedule to Shareholders* | | Frequency |
Net Investment Income | | Monthly |
Short-Term Capital Gains | | Annually |
Long-Term Capital Gains | | Annually |
* | Under certain circumstances, the Fund may make more than one distribution of short-term and/or long-term capital gains during a fiscal year. |
Estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
3. Agreements
The RIC, on behalf of the Fund, has a management agreement with the Manager pursuant to which it has responsibility for all investment advisory services and supervises the subadviser’s performance of such services, and pursuant to which it renders administrative services.
The Manager has entered into a subadvisory agreement with PGIM, Inc., which provides subadvisory services to the Fund through its PGIM Fixed Income unit, and PGIM, Inc. has entered into a sub-subadvisory agreement with PGIM Limited (collectively the “subadviser”). The Manager pays for the services of the subadviser.
Fees payable under the management agreement are computed daily and paid monthly. For the reporting period ended October 31, 2022, the contractual and effective management fee rates were as follows:
| | |
| |
Contractual Management Rate | | Effective Management Fee, before any waivers and/or expense reimbursements |
0.70% of the Fund’s average daily net assets up to and including $2.5 billion; | | 0.70% |
0.675% on the next $2.5 billion of the Fund’s average daily net assets; | | |
0.65% of the Fund’s average daily net assets exceeding $5 billion. | | |
The Manager has contractually agreed, through February 29, 2024, to limit total annual operating expenses after fee waivers and/or expense reimbursements. This contractual
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PGIM Global Dynamic Bond Fund | | 71 |
Notes to Financial Statements (continued)
waiver excludes interest, brokerage, taxes (such as income and foreign withholding taxes, stamp duty and deferred tax expenses), acquired fund fees and expenses, extraordinary expenses, and certain other Fund expenses such as dividend and interest expense and broker charges on short sales.
Where applicable, the Manager agrees to waive management fees or shared operating expenses on any share class to the same extent that it waives similar expenses on any other share class. In addition, total annual operating expenses for Class R6 shares will not exceed total annual operating expenses for Class Z shares. Fees and/or expenses waived and/or reimbursed by the Manager for the purpose of preventing the expenses from exceeding a certain expense ratio limit may be recouped by the Manager within the same fiscal year during which such waiver and/or reimbursement is made if such recoupment can be realized without exceeding the expense limit in effect at the time of the recoupment for that fiscal year. The expense limitations attributable to each class are as follows:
| | | | | |
| |
Class | | Expense Limitations |
A | | 1.20% |
C | | 1.95 |
Z | | 0.85 |
R6 | | 0.80 |
The Trust, on behalf of the Fund, has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”), which acts as the distributor of the Class A, Class C, Class Z and Class R6 shares of the Fund. The Fund compensates PIMS for distributing and servicing the Fund’s Class A and Class C shares, pursuant to the plans of distribution (the “Distribution Plans”), regardless of expenses actually incurred by PIMS.
Pursuant to the Distribution Plans, the Fund compensates PIMS for distribution related activities at an annual rate based on average daily net assets per class. The distribution fees are accrued daily and payable monthly.
The Fund’s annual gross and net distribution rate, where applicable, are as follows:
| | | | | | | | | | |
| | |
Class | | Gross Distribution Fee | | Net Distribution Fee |
A | | | | 0.25 | % | | | | 0.25 | % |
C | | | | 1.00 | | | | | 1.00 | |
Z | | | | N/A | | | | | N/A | |
R6 | | | | N/A | | | | | N/A | |
For the year ended October 31, 2022, PIMS received front-end sales charges (“FESL”) resulting from sales of certain class shares and contingent deferred sales charges (“CDSC”) imposed upon redemptions by certain shareholders. From these fees, PIMS paid such sales
72
charges to broker-dealers, who in turn paid commissions to salespersons and incurred other distribution costs. The sales charges are as follows where applicable:
| | | | | | | | |
| | |
Class | | FESL | | | CDSC | |
A | | $ | 1,037 | | | $ | — | |
C | | | — | | | | 27 | |
PGIM Investments, PGIM, Inc., PGIM Limited and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
4. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PGIM Investments and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund’s transfer agent and shareholder servicing agent. Transfer agent’s and shareholder servicing agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
The Fund may invest its overnight sweep cash in the PGIM Core Ultra Short Bond Fund (the “Core Fund”), and its securities lending cash collateral in the PGIM Institutional Money Market Fund (the “Money Market Fund”), each a fund of Prudential Investment Portfolios 2, registered under the 1940 Act and managed by PGIM Investments. PGIM Investments and/or its affiliates are paid fees or reimbursed for providing their services to the Core Fund. In addition to the realized and unrealized gains on investments in the Core Fund and Money Market Fund, earnings from such investments are disclosed on the Statement of Operations as “Affiliated dividend income” and “Income from securities lending, net”, respectively. Effective January 2022, the Fund changed its overnight cash sweep vehicle from the Core Fund to an unaffiliated money market fund.
The Fund may enter into certain securities purchase or sale transactions under Board approved Rule 17a-7 procedures. Rule 17a-7 is an exemptive rule under the 1940 Act, that subject to certain conditions, permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors/trustees, and/or common officers. For the year ended October 31, 2022, no 17a-7 transactions were entered into by the Fund.
5. Portfolio Securities
The aggregate cost of purchases and proceeds from sales of portfolio securities (excluding short-term investments and U.S. Government securities) for the reporting period ended October 31, 2022, were as follows:
| | |
| |
Cost of Purchases | | Proceeds from Sales |
$4,358,355 | | $15,940,659 |
| | |
PGIM Global Dynamic Bond Fund | | 73 |
Notes to Financial Statements (continued)
A summary of the cost of purchases and proceeds from sales of shares of affiliated mutual funds for the year ended October 31, 2022, is presented as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Value, Beginning of Year | | Cost of Purchases | | Proceeds from Sales | | Change in Unrealized Gain (Loss) | | Realized Gain (Loss) | | Value, End of Year | | Shares, End of Year | | Income |
|
Short-Term Investments - Affiliated Mutual Funds: |
|
PGIM Core Ultra Short Bond Fund(1)(wa) |
$916,981 | | | | $2,761,361 | | | | | $3,678,342 | | | | | $— | | | | | $— | | | | | $ — | | | | | — | | | | $ | 191 | |
|
PGIM Institutional Money Market Fund(1)(b)(wa) |
— | | | | 3,489,962 | | | | | 2,526,110 | | | | | — | | | | | (8 | ) | | | | 963,844 | | | | | 964,713 | | | | | 779 | (2) |
$916,981 | | | | $6,251,323 | | | | | $6,204,452 | | | | | $— | | | | | $ (8 | ) | | | | $963,844 | | | | | | | | | $ | 970 | |
(1) | The Fund did not have any capital gain distributions during the reporting period. |
(2) | The amount, or a portion thereof, represents the affiliated securities lending income shown on the Statement of Operations. |
(b) | Represents security, or portion thereof, purchased with cash collateral received for securities on loan and includes dividend reinvestment. |
(wa) | PGIM Investments LLC, the manager of the Fund, also serves as manager of the PGIM Core Ultra Short Bond Fund and PGIM Institutional Money Market Fund, if applicable. |
6. Distributions and Tax Information
Distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from GAAP, are recorded on the ex-date.
For the year ended October 31, 2022, the tax character of dividends paid by the Fund were $2,097,106 of ordinary income and $1,017,520 of tax return of capital. For the year ended October 31, 2021, the tax character of dividends paid by the Fund was $3,048,076 of ordinary income.
As of October 31, 2022, there were no accumulated undistributed earnings on a tax basis.
The United States federal income tax basis of the Fund’s investments and the net unrealized depreciation as of October 31, 2022 were as follows:
| | | | | | |
Tax Basis | | Gross Unrealized Appreciation | | Gross Unrealized Depreciation | | Net Unrealized Depreciation |
$56,954,497 | | $3,941,304 | | $(16,649,585) | | $(12,708,281) |
The differences between GAAP and tax basis were primarily attributable to deferred losses on wash sales, straddles, mark-to-market of options, futures and forward contracts, bond premium amortization and other GAAP to tax differences.
74
For federal income tax purposes, the Fund had a capital loss carryforward as of October 31, 2021of approximately $6,163,000 which can be carried forward for an unlimited period. The Fund utilized approximately $590,000 of its capital loss carryforward to offset net taxable gains realized in the fiscal year ended October 31, 2022. No capital gains distributions are expected to be paid to shareholders until net gains have been realized in excess of such losses.
The Manager has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years and has concluded that no provision for income tax is required in the Fund’s financial statements for the current reporting period. Since tax authorities can examine previously filed tax returns, the Fund’s U.S. federal and state tax returns for each of the four fiscal years up to the most recent fiscal year ended October 31, 2022 are subject to such review.
7. Capital and Ownership
The Fund offers Class A, Class C, Class Z and Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 3.25%. Investors who purchase $500,000 or more of Class A shares and sell those shares within 12 months of purchase are subject to a CDSC of 1% on sales although these purchases are not subject to a front-end sales charge. The Class A CDSC is waived for certain retirement and/or benefit plans. A special exchange privilege is also available for shareholders who qualified to purchase Class A shares at net asset value. Class C shares are sold with a CDSC of 1% on sales made within 12 months of purchase. Class C shares will automatically convert to Class A shares on a monthly basis approximately eight years (ten years prior to January 22, 2021) after purchase. Class Z and Class R6 shares are not subject to any sales or redemption charges and are available exclusively for sale to a limited group of investors.
Under certain circumstances, an exchange may be made from specified share classes of the Fund to one or more other share classes of the Fund as presented in the table of transactions in shares of beneficial interest, below.
The Trust has authorized an unlimited number of shares of beneficial interest of the Fund at $0.001 par value per share, currently divided into four classes, designated Class A, Class C, Class Z and Class R6.
As of October 31, 2022, Prudential, through its affiliated entities, including affiliated funds (if applicable), owned shares of the Fund as follows:
| | | | |
Class | | Number of Shares | | Percentage of Outstanding Shares |
R6 | | 3,869,936 | | 99.8% |
| | |
PGIM Global Dynamic Bond Fund | | 75 |
Notes to Financial Statements (continued)
At the reporting period end, the number of shareholders holding greater than 5% of the Fund are as follows:
| | | | | | | | | | |
| | |
| | Number of Shareholders | | Percentage of Outstanding Shares |
Affiliated | | 1 | | | | 67.4 | % |
Unaffiliated | | 2 | | | | 22.0 | |
Transactions in shares of beneficial interest were as follows:
| | | | | | | | |
| | |
Share Class | | Shares | | | Amount | |
| | |
Class A | | | | | | |
Year ended October 31, 2022: | | | | | | | | |
Shares sold | | | 9,753 | | | $ | 83,271 | |
Shares issued in reinvestment of dividends and distributions | | | 10,606 | | | | 88,980 | |
Shares purchased | | | (77,373 | ) | | | (654,239 | ) |
Net increase (decrease) in shares outstanding before conversion | | | (57,014 | ) | | | (481,988 | ) |
Shares issued upon conversion from other share class(es) | | | 549 | | | | 4,928 | |
Shares purchased upon conversion into other share class(es) | | | (1,522 | ) | | | (11,701 | ) |
Net increase (decrease) in shares outstanding | | | (57,987 | ) | | $ | (488,761 | ) |
| | |
Year ended October 31, 2021: | | | | | | | | |
Shares sold | | | 76,666 | | | $ | 749,059 | |
Shares issued in reinvestment of dividends and distributions | | | 8,327 | | | | 81,124 | |
Shares purchased | | | (84,830 | ) | | | (830,537 | ) |
Net increase (decrease) in shares outstanding before conversion | | | 163 | | | | (354 | ) |
Shares issued upon conversion from other share class(es) | | | 4,054 | | | | 39,214 | |
Shares purchased upon conversion into other share class(es) | | | (31,031 | ) | | | (307,521 | ) |
Net increase (decrease) in shares outstanding | | | (26,814 | ) | | $ | (268,661 | ) |
| | |
Class C | | | | | | |
Year ended October 31, 2022: | | | | | | | | |
Shares sold | | | 1,102 | | | $ | 9,574 | |
Shares issued in reinvestment of dividends and distributions | | | 4,657 | | | | 38,884 | |
Shares purchased | | | (15,928 | ) | | | (129,435 | ) |
Net increase (decrease) in shares outstanding before conversion | | | (10,169 | ) | | | (80,977 | ) |
Shares purchased upon conversion into other share class(es) | | | (550 | ) | | | (4,928 | ) |
Net increase (decrease) in shares outstanding | | | (10,719 | ) | | $ | (85,905 | ) |
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| | | | | | | | |
| | |
Share Class | | Shares | | | Amount | |
| | |
Year ended October 31, 2021: | | | | | | | | |
Shares sold | | | 23,652 | | | $ | 230,769 | |
Shares issued in reinvestment of dividends and distributions | | | 3,830 | | | | 37,260 | |
Shares purchased | | | (85,666 | ) | | | (835,258 | ) |
Net increase (decrease) in shares outstanding before conversion | | | (58,184 | ) | | | (567,229 | ) |
Shares purchased upon conversion into other share class(es) | | | (4,353 | ) | | | (42,078 | ) |
Net increase (decrease) in shares outstanding | | | (62,537 | ) | | $ | (609,307 | ) |
| | |
Class Z | | | | | | |
Year ended October 31, 2022: | | | | | | | | |
Shares sold | | | 905,782 | | | $ | 7,476,072 | |
Shares issued in reinvestment of dividends and distributions | | | 126,705 | | | | 1,068,194 | |
Shares purchased | | | (2,340,614 | ) | | | (19,863,549 | ) |
Net increase (decrease) in shares outstanding before conversion | | | (1,308,127 | ) | | | (11,319,283 | ) |
Shares issued upon conversion from other share class(es) | | | 1,522 | | | | 11,701 | |
Net increase (decrease) in shares outstanding | | | (1,306,605 | ) | | $ | (11,307,582 | ) |
| | |
Year ended October 31, 2021: | | | | | | | | |
Shares sold | | | 4,575,380 | | | $ | 45,396,536 | |
Shares issued in reinvestment of dividends and distributions | | | 145,192 | | | | 1,409,573 | |
Shares purchased | | | (4,758,776 | ) | | | (45,469,931 | ) |
Net increase (decrease) in shares outstanding before conversion | | | (38,204 | ) | | | 1,336,178 | |
Shares issued upon conversion from other share class(es) | | | 31,321 | | | | 310,385 | |
Net increase (decrease) in shares outstanding | | | (6,883 | ) | | $ | 1,646,563 | |
| | |
Class R6 | | | | | | |
Year ended October 31, 2022: | | | | | | | | |
Shares sold | | | 27,947 | | | $ | 245,385 | |
Shares issued in reinvestment of dividends and distributions | | | 230,906 | | | | 1,916,161 | |
Shares purchased | | | (24,077 | ) | | | (209,280 | ) |
Net increase (decrease) in shares outstanding | | | 234,776 | | | $ | 1,952,266 | |
| | |
Year ended October 31, 2021: | | | | | | | | |
Shares sold | | | 49,794 | | | $ | 479,106 | |
Shares issued in reinvestment of dividends and distributions | | | 155,595 | | | | 1,513,538 | |
Shares purchased | | | (57,998 | ) | | | (563,175 | ) |
Net increase (decrease) in shares outstanding | | | 147,391 | | | $ | 1,429,469 | |
8. Borrowings
The Trust, on behalf of the Fund, along with other affiliated registered investment companies (the “Participating Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary
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PGIM Global Dynamic Bond Fund | | 77 |
Notes to Financial Statements (continued)
funding for capital share redemptions. The table below provides details of the current SCA in effect at the reporting period-end as well as the prior SCA.
| | | | |
| | |
| | Current SCA | | Prior SCA |
Term of Commitment | | 9/30/2022 – 9/28/2023 | | 10/1/2021 – 9/29/2022 |
| | |
Total Commitment | | $ 1,200,000,000 | | $ 1,200,000,000 |
| | |
Annualized Commitment Fee on the Unused Portion of the SCA | | 0.15% | | 0.15% |
| | |
Annualized Interest Rate on Borrowings | | 1.00% plus the higher of (1) the effective federal funds rate, (2) the daily SOFR rate plus 0.10% or (3) zero percent | | 1.20% plus the higher of (1) the effective federal funds rate, (2) the one-month LIBOR rate or (3) zero percent |
Certain affiliated registered investment companies that are parties to the SCA include portfolios that are subject to a predetermined mathematical formula used to manage certain benefit guarantees offered under variable annuity contracts. The formula may result in large scale asset flows into and out of these portfolios. Consequently, these portfolios may be more likely to utilize the SCA for purposes of funding redemptions. It may be possible for those portfolios to fully exhaust the committed amount of the SCA, thereby requiring the Manager to allocate available funding per a Board-approved methodology designed to treat the Participating Funds in the SCA equitably.
The Fund utilized the SCA during the year ended October 31, 2022. The average daily balance for the 13 days that the Fund had loans outstanding during the period was approximately $971,154, borrowed at a weighted average interest rate of 1.43%. The maximum loan outstanding amount during the period was $2,775,000. At October 31, 2022, the Fund did not have an outstanding loan amount.
9. Risks of Investing in the Fund
The Fund’s risks include, but are not limited to, some or all of the risks discussed below. For further information on the Fund’s risks, please refer to the Fund’s Prospectus and Statement of Additional Information.
Commodity Regulatory Risk: The Fund is deemed a “commodity pool” and the manager is considered a “commodity pool operator” with respect to the Fund under the Commodity Exchange Act. The manager, directly or through its affiliates, is therefore subject to dual regulation by the Securities and Exchange Commission (the “SEC”) and the Commodity Futures Trading Commission (the “CFTC”). The regulatory requirements governing the use of commodity futures (which include futures on broad-based securities indexes, interest rate futures and currency futures), options on commodity futures, certain swaps or certain other investments could change at any time.
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“Covenant-Lite” Risk: Some of the loans or debt obligations in which the Fund may invest or get exposure to may be “covenant-lite”, which means the loans or obligations contain fewer financial maintenance covenants than other loans or obligations (in some cases, none) and do not include terms which allow the lender to monitor the borrower’s performance and declare a default if certain criteria are breached. An investment by the Fund in a covenant-lite loan may potentially hinder the ability to reprice credit risk associated with the issuer and reduce the ability to restructure a problematic loan and mitigate potential loss. The Fund may also experience difficulty, expenses or delays in enforcing its rights on its holdings of covenant-lite loans or obligations. As a result of these risks, the Fund’s exposure to losses may be increased, which could result in an adverse impact on the Fund’s net income and NAV.
Credit Risk/Counterparty Risk: The ability, or perceived ability, of the issuer or guarantor of a debt security, or the counterparty (the party on the other side of the transaction) to a derivatives contract or other financial contract to meet its financial obligations will affect the value of the security or derivative. Counterparty and credit risk are especially important in the context of privately negotiated instruments. The Fund expects to enter into certain privately negotiated agreements where the counterparty assumes the physical settlement obligations of the Fund under such transactions. Under this type of arrangement, there is a risk that the relevant counterparty or intermediary would, due to insolvency or other reasons, be unable to or fail to assume the physical settlement obligations of the Fund, in which case the Fund could be required to sell portfolio instruments at unfavorable times or prices or could have insufficient assets to satisfy its physical settlement obligations.
Credit ratings are intended to provide a measure of credit risk. However, credit ratings are only the opinions of the credit rating agency issuing the ratings and are not guarantees as to quality. The lower the rating of a debt security held by the Fund, the greater the degree of credit risk that is perceived to exist by the credit rating agency with respect to that security. Increasing the amount of Fund assets allocated to lower-rated securities generally will increase the credit risk to which the Fund is subject. Not all securities in which the Fund invests are rated. The lower the credit quality of a bond, the more sensitive it is to credit risk.
Currency Risk: The Fund’s net asset value could decline as a result of changes in exchange rates, which could adversely affect the Fund’s investments in currencies, or in securities that trade in, and receive revenues related to, currencies, or in derivatives that provide exposure to currencies. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payment of principal and interest or dividends to investors located outside the country, due to blockage of foreign currency exchanges or otherwise.
Debt Obligations Risk: Debt obligations are subject to credit risk, market risk and interest rate risk. The Fund’s holdings, share price, yield and total return may also fluctuate in response to bond market movements. The value of bonds may decline for issuer-related reasons, including management performance, financial leverage and reduced demand for the issuer’s goods and services. Certain types of fixed income obligations also may be subject to “call and redemption risk,” which is the risk that the issuer may call a bond held
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PGIM Global Dynamic Bond Fund | | 79 |
Notes to Financial Statements (continued)
by the Fund for redemption before it matures and the Fund may not be able to reinvest at the same rate of interest and therefore would earn less income.
Derivatives Risk: Derivatives involve special risks and costs and may result in losses to the Fund. The successful use of derivatives requires sophisticated management, and, to the extent that derivatives are used, the Fund will depend on the subadviser’s ability to analyze and manage derivatives transactions. The prices of derivatives may move in unexpected ways, especially in abnormal market conditions. Some derivatives are “leveraged” or may create economic leverage for the Fund and therefore may magnify or otherwise increase investment losses to the Fund. The Fund’s use of derivatives may also increase the amount of taxes payable by shareholders.
Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the Fund’s derivatives positions. In fact, many over-the-counter derivative instruments will not have liquidity beyond the counterparty to the instrument. Over-the-counter derivative instruments also involve the risk that the other party will not meet its obligations to the Fund. The use of derivatives also exposes the Fund to operational issues, such as documentation and settlement issues, systems failures, inadequate control and human error.
Derivatives may also involve legal risks, such as insufficient documentation, the lack of capacity or authority of a counterparty to execute or settle a transaction, and the legality and enforceability of derivatives contracts. The U.S. Government and foreign governments have adopted (and may adopt further) regulations governing derivatives markets, including mandatory clearing of certain derivatives, margin and reporting requirements and risk exposure limitations. Regulation of derivatives may make derivatives more costly, limit their availability or utility to the Fund, or otherwise adversely affect their performance or disrupt markets.
Economic and Market Events Risk: Events in the U.S. and global financial markets, including actions taken by the U.S. Federal Reserve or foreign central banks to stimulate or stabilize economic growth or the functioning of the securities markets, or otherwise reduce inflation may at times result in unusually high market volatility, which could negatively impact performance. Governmental efforts to curb inflation often have negative effects on the level of economic activity. Relatively reduced liquidity in credit and fixed income markets could adversely affect issuers worldwide.
Emerging Markets Risk: The risks of foreign investments are greater for investments in or exposed to emerging markets. Emerging market countries typically have economic and political systems that are less fully developed, and can be expected to be less stable, than those of more developed countries. For example, the economies of such countries can be
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subject to rapid and unpredictable rates of inflation or deflation. Low trading volumes may result in a lack of liquidity and price volatility. Emerging market countries may have policies that restrict investment by non-U.S. investors, or that prevent non-U.S. investors from withdrawing their money at will.
The Fund may invest in some emerging markets that subject it to risks such as those associated with illiquidity, custody of assets, different settlement and clearance procedures and asserting legal title under a developing legal and regulatory regime to a greater degree than in developed markets or even in other emerging markets.
Floating Rate and Other Loans Risk: The Fund’s ability to receive payments of principal and interest and other amounts in connection with loans (whether through participations, assignments or otherwise) will depend primarily on the financial condition of the borrower. The failure by the Fund to receive scheduled interest or principal payments on a loan because of a default, bankruptcy or any other reason would adversely affect the income of the Fund and would likely reduce the value of its assets. Even with loans secured by collateral, there is the risk that the value of the collateral may decline, may be insufficient to meet the obligations of the borrower, or be difficult to liquidate. In the event of a default, the Fund may have difficulty collecting on any collateral and would not have the ability to collect on any collateral for an uncollateralized loan. Further, the Fund’s access to collateral, if any, may be limited by bankruptcy laws. Due to the nature of the private syndication of senior loans, including, for example, lack of publicly-available information, some senior loans are not as easily purchased or sold as publicly-traded securities. In addition, loan participations generally are subject to restrictions on transfer, and only limited opportunities may exist to sell loan participations in secondary markets. As a result, it may be difficult for the Fund to value loans or sell loans at an acceptable price when it wants to sell them. Loans trade in an over-the-counter market, and confirmation and settlement, which are effected through standardized procedures and documentation, may take significantly longer than seven days to complete. Extended trade settlement periods may, in unusual market conditions with a high volume of shareholder redemptions, present a risk to shareholders regarding the Fund’s ability to pay redemption proceeds in a timely manner. In some instances, loans and loan participations are not rated by independent credit rating agencies; in such instances, a decision by the Fund to invest in a particular loan or loan participation could depend exclusively on the subadviser’s credit analysis of the borrower, or in the case of a loan participation, of the intermediary holding the portion of the loan that the Fund has purchased. To the extent the Fund invests in loans of non-U.S. issuers, the risks of investing in non-U.S. issuers are applicable. Loans may not be considered to be “securities” and as a result may not benefit from the protections of the federal securities laws, including anti-fraud protections and those with respect to the use of material non-public information, so that purchasers, such as the Fund, may not have the benefit of these protections. If the Fund is in possession of material non-public information about a borrower as a result of its investment in such borrower’s loan, the Fund may not be able to enter into a transaction with respect to a publicly-traded security of the borrower when it would otherwise be advantageous to do so.
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PGIM Global Dynamic Bond Fund | | 81 |
Notes to Financial Statements (continued)
Foreign Securities Risk: Investments in securities of non-U.S. issuers (including those denominated in U.S. dollars) may involve more risk than investing in securities of U.S. issuers. Foreign political, economic and legal systems, especially those in developing and emerging market countries, may be less stable and more volatile than in the United States. Foreign legal systems generally have fewer regulatory requirements than the U.S. legal system, particularly those of emerging markets. In general, less information is publicly available with respect to non-U.S. companies than U.S. companies. Non-U.S. companies generally are not subject to the same accounting, auditing, and financial reporting standards as are U.S. companies. Additionally, the changing value of foreign currencies and changes in exchange rates could also affect the value of the assets the Fund holds and the Fund’s performance. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payment of principal and interest or dividends to investors located outside the country, due to blockage of foreign currency exchanges or otherwise. Investments in emerging markets are subject to greater volatility and price declines.
In addition, the Fund’s investments in non-U.S. securities may be subject to the risks of nationalization or expropriation of assets, imposition of currency exchange controls or restrictions on the repatriation of non-U.S. currency, confiscatory taxation and adverse diplomatic developments. Special U.S. tax considerations may apply.
Increase in Expenses Risk: Your actual cost of investing in the Fund may be higher than the expenses shown in the expense table in the Fund’s prospectus for a variety of reasons. For example, expense ratios may be higher than those shown if average net assets decrease. Net assets are more likely to decrease and Fund expense ratios are more likely to increase when markets are volatile. Active and frequent trading of Fund securities can increase expenses.
Interest Rate Risk: The value of your investment may go down when interest rates rise. A rise in rates tends to have a greater impact on the prices of longer term or duration debt securities. Similarly, a rise in interest rates may also have a greater negative impact on the value of equity securities whose issuers expect earnings further out in the future. For example, a fixed income security with a duration of three years is expected to decrease in value by approximately 3% if interest rates increase by 1%. This is referred to as “duration risk.” When interest rates fall, the issuers of debt obligations may prepay principal more quickly than expected, and the Fund may be required to reinvest the proceeds at a lower interest rate. This is referred to as “prepayment risk.” When interest rates rise, debt obligations may be repaid more slowly than expected, and the value of the Fund’s holdings may fall sharply. This is referred to as “extension risk.” The Fund may lose money if short-term or long-term interest rates rise sharply or in a manner not anticipated by the subadviser.
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Junk Bonds Risk: High-yield, high-risk bonds have predominantly speculative characteristics, including particularly high credit risk. Junk bonds tend to have lower market liquidity than higher-rated securities. The liquidity of particular issuers or industries within a particular investment category may shrink or disappear suddenly and without warning. The non-investment grade bond market can experience sudden and sharp price swings and become illiquid due to a variety of factors, including changes in economic forecasts, stock market activity, large sustained sales by major investors, a high profile default or a change in the market’s psychology.
Large Shareholder and Large Scale Redemption Risk: Certain individuals, accounts, funds (including funds affiliated with the Manager) or institutions, including the Manager and its affiliates, may from time to time own or control a substantial amount of the Fund’s shares. There is no requirement that these entities maintain their investment in the Fund. There is a risk that such large shareholders or that the Fund’s shareholders generally may redeem all or a substantial portion of their investments in the Fund in a short period of time, which could have a significant negative impact on the Fund’s NAV, liquidity, and brokerage costs. Large redemptions could also result in tax consequences to shareholders and impact the Fund’s ability to implement its investment strategy. The Fund’s ability to pursue its investment objective after one or more large scale redemptions may be impaired and, as a result, the Fund may invest a larger portion of its assets in cash or cash equivalents.
Leverage Risk: Certain transactions in which the Fund may engage may give rise to leverage. The use of leverage exaggerates the effect of any increase or decrease in the value of the Fund’s holdings, and makes any change in the Fund’s net asset value (“NAV”) greater than it would be without the use of leverage. This could result in increased volatility of investment return.
Liquidity Risk: Liquidity risk is the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of remaining investors’ interests in the Fund. The Fund may invest in instruments that trade in lower volumes and are more illiquid than other investments. If the Fund is forced to sell these investments to pay redemption proceeds or for other reasons, the Fund may lose money. In addition, when there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may have to accept a lower price or may not be able to sell the instrument at all. An inability to sell a portfolio position can adversely affect the Fund’s value or prevent the Fund from being able to take advantage of other investment opportunities.
Management Risk: Actively managed funds are subject to management risk. The subadviser will apply investment techniques and risk analyses in making investment decisions for the Fund, but the subadviser’s judgments about the attractiveness, value or market trends affecting a particular security, industry or sector or about market movements may be incorrect. Additionally, the investments selected for the Fund may underperform the markets in general, the Fund’s benchmark and other funds with similar investment objectives.
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PGIM Global Dynamic Bond Fund | | 83 |
Notes to Financial Statements (continued)
Market Disruption and Geopolitical Risks: Market disruption can be caused by economic, financial or political events and factors, including but not limited to, international wars or conflicts (including Russia’s military invasion of Ukraine), geopolitical developments (including trading and tariff arrangements, sanctions and cybersecurity attacks), instability in regions such as Asia, Eastern Europe and the Middle East, terrorism, natural disasters and public health epidemics (including the outbreak of COVID-19 globally).
The extent and duration of such events and resulting market disruptions cannot be predicted, but could be substantial and could magnify the impact of other risks to the Fund. These and other similar events could adversely affect the U.S. and foreign financial markets and lead to increased market volatility, reduced liquidity in the securities markets, significant negative impacts on issuers and the markets for certain securities and commodities and/or government intervention. They may also cause short- or long-term economic uncertainties in the United States and worldwide. As a result, whether or not the Fund invests in securities of issuers located in or with significant exposure to the countries directly affected, the value and liquidity of the Fund’s investments may be negatively impacted. Further, due to closures of certain markets and restrictions on trading certain securities, the value of certain securities held by the Fund could be significantly impacted, which could lead to such securities being valued at zero.
COVID-19 and the related governmental and public responses have had and may continue to have an impact on the Fund’s investments and net asset value and have led and may continue to lead to increased market volatility and the potential for illiquidity in certain classes of securities and sectors of the market. They have also had and may continue to result in periods of business disruption, business closures, inability to obtain raw materials, supplies and component parts, and reduced or disrupted operations for the issuers in which the Fund invests. The occurrence, reoccurrence and pendency of public health epidemics could adversely affect the economies and financial markets either in specific countries or worldwide.
Market Risk: Securities markets may be volatile and the market prices of the Fund’s securities may decline. Securities fluctuate in price based on changes in an issuer’s financial condition and overall market and economic conditions. If the market prices of the securities owned by the Fund fall, the value of your investment in the Fund will decline.
Mortgage-Backed and Asset-Backed Securities Risk: Mortgage-backed and asset-backed securities tend to increase in value less than other debt securities when interest rates decline, but are subject to similar risk of decline in market value during periods of rising interest rates. The values of mortgage-backed and asset-backed securities become more volatile as interest rates rise. In a period of declining interest rates, the Fund may be
84
required to reinvest more frequent prepayments on mortgage-backed and asset-backed securities in lower-yielding investments.
Portfolio Turnover Risk: The length of time the Fund has held a particular security is not generally a consideration in investment decisions. Under certain market conditions, the Fund’s turnover rate may be higher than that of other mutual funds. Portfolio turnover generally involves some expense to the Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestment in other securities. These transactions may result in realization of taxable capital gains. The trading costs and tax effects associated with portfolio turnover may adversely affect the Fund’s investment performance.
Reference Rate Risk: The Fund may be exposed to financial instruments that are tied to the London Interbank Offered Rate (“LIBOR”) to determine payment obligations, financing terms, hedging strategies or investment value. The United Kingdom’s Financial Conduct Authority announced a phase out of LIBOR such that after June 30, 2023, the overnight, 1-month, 3-month, 6-month and 12-month U.S. dollar LIBOR settings will cease to be published or will no longer be representative. All other LIBOR settings and certain other interbank offered rates, such as the Euro Overnight Index Average (“EONIA”), ceased to be published or representative after December 31, 2021. The Fund may have investments linked to other interbank offered rates that may also cease to be published in the future. Various financial industry groups have been planning for the transition away from LIBOR, but there remain challenges to converting certain securities and transactions to a new reference rate (e.g., the Secured Overnight Financing Rate (“SOFR”), which is intended to replace the U.S. dollar LIBOR). Neither the effect of the LIBOR transition process nor its ultimate success can yet be known. The transition process might lead to increased volatility and illiquidity in markets for instruments whose terms currently include LIBOR as well as loan facilities used by the Fund. While some existing LIBOR-based instruments may contemplate a scenario where LIBOR is no longer available by providing for an alternative rate-setting methodology, there may be significant uncertainty regarding the effectiveness of any such alternative methodologies to replicate LIBOR. Not all existing LIBOR-based instruments may have alternative rate-setting provisions and there remains uncertainty regarding the willingness and ability of issuers to add alternative rate-setting provisions in certain existing instruments. Global regulators have advised market participants to cease entering into new contracts using LIBOR as a reference rate, and it is possible that investments in LIBOR-based instruments could invite regulatory scrutiny. There may also be challenges for the Fund to enter into hedging transactions against such newly-issued instruments until a market for such hedging transactions develops. All of the aforementioned may adversely affect the Fund’s performance or net asset value.
Short Position Risk: The Fund may take short positions in derivative instruments that present various risks, including credit/counterparty risk and leverage risk. A short position on a derivative instrument involves the risk of a theoretically unlimited increase in the value of the underlying security or instrument and, thus, the risk of a theoretically unlimited loss
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PGIM Global Dynamic Bond Fund | | 85 |
Notes to Financial Statements (continued)
for the Fund. Short positions/sales also involve transaction and other costs that will reduce potential Fund gains and increase potential Fund losses.
Sovereign Debt Risk: The Fund may invest in sovereign debt issued by governments, their agencies or instrumentalities, or other government-related entities. Holders of sovereign debt may be requested to participate in the rescheduling of such debt and to extend further loans to governmental entities. In addition, there is no bankruptcy proceeding by which defaulted sovereign debt may be collected.
U.S. Government and Agency Securities Risk: U.S. Government and agency securities are subject to market risk, interest rate risk and credit risk. Not all U.S. Government securities are insured or guaranteed by the full faith and credit of the U.S. Government; some are only insured or guaranteed by the issuing agency, which must rely on its own resources to repay the debt. Some agency securities carry no guarantee whatsoever and the risk of default associated with these securities would be borne by the Fund. The maximum potential liability of the issuers of some U.S. Government securities held by the Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. No assurance can be given that the U.S. government would provide financial support to any such issuers if it is not obligated to do so by law. It is possible that these issuers will not have the funds to meet their payment obligations in the future. In addition, the value of U.S. Government securities may be affected by changes in the credit rating of the U.S. Government.
10. Recent Accounting Pronouncement and Regulatory Developments
In March 2020, the FASB issued Accounting Standard Update (“ASU”) No. 2020-04, which provides optional guidance for applying GAAP to contract modifications, hedging relationships and other transactions affected by the reference rate reform if certain criteria are met. ASU 2020-04 is elective and is effective on March 12, 2020 through December 31, 2022. Management does not expect ASU 2020-04 to have a material impact on the financial statements.
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Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Prudential Investment Portfolios 3 and Shareholders of PGIM Global Dynamic Bond Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of PGIM Global Dynamic Bond Fund (one of the funds constituting Prudential Investment Portfolios 3, referred to hereafter as the “Fund”) as of October 31, 2022, the related statement of operations for the year ended October 31, 2022, the statements of changes in net assets for each of the two years in the period ended October 31, 2022, including the related notes, and the financial highlights for each of the three years in the period ended October 31, 2022 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of October 31, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended October 31 2022 and the financial highlights for each of the three years in the period ended October 31, 2022 in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended October 31, 2019 and the financial highlights for each of the periods ended on or prior to October 31, 2019 (not presented herein, other than the financial highlights) were audited by other auditors whose report dated December 19, 2019 expressed an unqualified opinion on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2022 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
New York, New York
December 19, 2022
We have served as the auditor of one or more investment companies in the PGIM Retail Funds complex since 2020.
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PGIM Global Dynamic Bond Fund | | 87 |
Tax Information (unaudited)
For the year ended October 31, 2022, the Fund reports the maximum amount allowable but not less than 50.43% as interest related dividends in accordance with Sections 871(k)(1) and 881(e)(1) of the Internal Revenue Code.
In January 2023, you will be advised on IRS Form 1099-DIV or substitute 1099-DIV as to the federal tax status of dividends received by you in calendar year 2022.
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INFORMATION ABOUT BOARD MEMBERS AND OFFICERS (unaudited)
Information about Board Members and Officers of the Fund is set forth below. Board Members who are not deemed to be “interested persons” of the Fund, as defined in the 1940 Act, are referred to as “Independent Board Members.” Board Members who are deemed to be “interested persons” of the Fund are referred to as “Interested Board Members.” The Board Members are responsible for the overall supervision of the operations of the Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Board in turn elects the Officers, who are responsible for administering the day-to-day operations of the Fund.
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Independent Board Members |
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Name Year of Birth Position(s) Portfolios Overseen | | Principal Occupation(s) During Past Five Years | | Other Directorships Held During Past Five Years | | Length of Board Service |
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Ellen S. Alberding 1958 Board Member Portfolios Overseen: 97 | | President and Board Member, The Joyce Foundation (charitable foundation) (since 2002); formerly Vice Chair, City Colleges of Chicago (community college system) (2011-2015); Trustee, National Park Foundation (charitable foundation for national park system) (2009-2018); Trustee, Economic Club of Chicago (2009-2016); Trustee, Loyola University (since 2018). | | None. | | Since September 2013 |
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Kevin J. Bannon 1952 Board Member Portfolios Overseen: 97 | | Retired; formerly Managing Director (April 2008-May 2015) and Chief Investment Officer (October 2008-November 2013) of Highmount Capital LLC (registered investment adviser); formerly Executive Vice President and Chief Investment Officer (April 1993-August 2007) of Bank of New York Company; President (May 2003-May 2007) of BNY Hamilton Family of Mutual Funds. | | Director of Urstadt Biddle Properties (equity real estate investment trust) (since September 2008). | | Since July 2008 |
PGIM Global Dynamic Bond Fund
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Independent Board Members |
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Name Year of Birth Position(s) Portfolios Overseen | | Principal Occupation(s) During Past Five Years | | Other Directorships Held During Past Five Years | | Length of Board Service |
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Linda W. Bynoe 1952 Board Member Portfolios Overseen: 94 | | President and Chief Executive Officer (since March 1995) and formerly Chief Operating Officer (December 1989-February 1995) of Telemat Limited LLC (formerly Telemat Ltd) (management consulting); formerly Vice President (January 1985-June 1989) at Morgan Stanley & Co. (broker-dealer). | | Trustee of Equity Residential (residential real estate) (since December 2009); Director of Northern Trust Corporation (financial services) (since April 2006); formerly Director of Anixter International, Inc. (communication products distributor) (January 2006-June 2020). | | Since March 2005 |
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Barry H. Evans 1960 Board Member Portfolios Overseen: 96 | | Retired; formerly President (2005-2016), Global Chief Operating Officer (2014-2016), Chief Investment Officer - Global Head of Fixed Income (1998-2014), and various portfolio manager roles (1986-2006), Manulife Asset Management (asset management). | | Formerly Director, Manulife Trust Company (2011-2018); formerly Director, Manulife Asset Management Limited (2015-2017); formerly Chairman of the Board of Directors of Manulife Asset Management U.S. (2005-2016); formerly Chairman of the Board, Declaration Investment Management and Research (2008-2016). | | Since September 2017 |
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Keith F. Hartstein 1956 Board Member & Independent Chair Portfolios Overseen: 97 | | Retired; Member (November 2014-September 2022) of the Governing Council of the Independent Directors Council (IDC) (organization of independent mutual fund directors); formerly Executive Committee of the IDC Board of Governors (October 2019-December 2021); formerly President and Chief Executive Officer (2005-2012), Senior Vice President (2004-2005), Senior Vice President of Sales and Marketing (1997-2004), and various executive management positions (1990-1997), John Hancock Funds, LLC (asset management); Chairman, Investment Company Institute’s Sales Force Marketing Committee (2003-2008). | | None. | | Since September 2013 |
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Visit our website at pgim.com/investments | | | | |
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Independent Board Members |
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Name Year of Birth Position(s) Portfolios Overseen | | Principal Occupation(s) During Past Five Years | | Other Directorships Held During Past Five Years | | Length of Board Service |
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Laurie Simon Hodrick 1962 Board Member Portfolios Overseen: 93 | | A. Barton Hepburn Professor Emerita of Economics in the Faculty of Business, Columbia Business School (since 2018); Visiting Fellow at the Hoover Institution, Stanford University (since 2015); Sole Member, ReidCourt LLC (since 2008) (a consulting firm); formerly Visiting Professor of Law, Stanford Law School (2015-2021); formerly A. Barton Hepburn Professor of Economics in the Faculty of Business, Columbia Business School (1996-2017); formerly Managing Director, Global Head of Alternative Investment Strategies, Deutsche Bank (2006-2008). | | Independent Director, Andela (since January 2022) (global talent network); Independent Director, Roku (since December 2020) (communication services); formerly Independent Director, Synnex Corporation (2019-2021) (information technology); formerly Independent Director, Kabbage, Inc. (2018-2020) (financial services); formerly Independent Director, Corporate Capital Trust (2017-2018) (a business development company). | | Since September 2017 |
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Brian K. Reid 1961 Board Member Portfolios Overseen: 96 | | Retired; formerly Chief Economist for the Investment Company Institute (ICI) (2005-2017); formerly Senior Economist and Director of Industry and Financial Analysis at the ICI (1998-2004); formerly Senior Economist, Industry and Financial Analysis at the ICI (1996-1998); formerly Staff Economist at the Federal Reserve Board (1989-1996); Director, ICI Mutual Insurance Company (2012-2017). | | None. | | Since March 2018 |
PGIM Global Dynamic Bond Fund
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Independent Board Members |
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Name Year of Birth Position(s) Portfolios Overseen | | Principal Occupation(s) During Past Five Years | | Other Directorships Held During Past Five Years | | Length of Board Service |
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Grace C. Torres 1959 Board Member Portfolios Overseen: 96 | | Retired; formerly Treasurer and Principal Financial and Accounting Officer of the PGIM Funds, Target Funds, Advanced Series Trust, Prudential Variable Contract Accounts and The Prudential Series Fund (1998-June 2014); Assistant Treasurer (March 1999-June 2014) and Senior Vice President (September 1999-June 2014) of PGIM Investments LLC; Assistant Treasurer (May 2003-June 2014) and Vice President (June 2005-June 2014) of AST Investment Services, Inc.; Senior Vice President and Assistant Treasurer (May 2003-June 2014) of Prudential Annuities Advisory Services, Inc. | | Director (since January 2018) of OceanFirst Financial Corp. and OceanFirst Bank; formerly Director (July 2015-January 2018) of Sun Bancorp, Inc. N.A. and Sun National Bank. | | Since November 2014 |
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Interested Board Members |
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Name Year of Birth Position(s) Portfolios Overseen | | Principal Occupation(s) During Past Five Years | | Other Directorships Held During Past Five Years | | Length of Board Service |
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Stuart S. Parker 1962 Board Member & President Portfolios Overseen: 96 | | President, Chief Executive Officer, Chief Operating Officer and Officer in Charge of PGIM Investments LLC (formerly known as Prudential Investments LLC) (since January 2012); President and Principal Executive Officer (“PEO”) (since September 2022) of the PGIM Private Credit Fund; President and PEO (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Executive Vice President of Jennison Associates LLC and Head of Retail Distribution of PGIM Investments LLC (June 2005-December 2011); Investment Company Institute - Board of Governors (since May 2012). | | None. | | Since January 2012 |
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Scott E. Benjamin 1973 Board Member & Vice President Portfolios Overseen: 97 | | Executive Vice President (since May 2009) of PGIM Investments LLC; Vice President (since June 2012) of Prudential Investment Management Services LLC; Executive Vice President (since September 2009) of AST Investment Services, Inc.; Senior Vice President of Product Development and Marketing, PGIM Investments (since February 2006); Vice President (since September 2022) of the PGIM Private Credit Fund; Vice President (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Vice President of Product Development and Product Management, PGIM Investments LLC (2003-2006). | | None. | | Since March 2010 |
PGIM Global Dynamic Bond Fund
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Fund Officers(a) |
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Name Year of Birth Fund Position | | Principal Occupation(s) During Past Five Years | | Length of Service as Fund Officer |
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Claudia DiGiacomo 1974 Chief Legal Officer | | Chief Legal Officer (since September 2022) of the PGIM Private Credit Fund; Chief Legal Officer (since July 2022) of the PGIM Private Real Estate Fund, Inc.; Chief Legal Officer, Executive Vice President and Secretary of PGIM Investments LLC (since August 2020); Chief Legal Officer of Prudential Mutual Fund Services LLC (since August 2020); Chief Legal Officer of PIFM Holdco, LLC (since August 2020); Vice President and Corporate Counsel (since January 2005) of Prudential; and Corporate Counsel of AST Investment Services, Inc. (since August 2020); formerly Vice President and Assistant Secretary of PGIM Investments LLC (2005-2020); formerly Associate at Sidley Austin Brown & Wood LLP (1999-2004). | | Since December 2005 |
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Isabelle Sajous 1976 Chief Compliance Officer | | Chief Compliance Officer (since April 2022) of PGIM Investments LLC, the PGIM Funds, Target Funds, PGIM ETF Trust, PGIM Global High Yield Fund, Inc., PGIM High Yield Bond Fund, Inc., PGIM Short Duration High Yield Opportunities Fund, Advanced Series Trust, The Prudential Series Fund and Prudential’s Gibraltar Fund, Inc.; Chief Compliance Officer (since September 2022) of the PGIM Private Credit Fund; Chief Compliance Officer (since March 2022) of the PGIM Private Real Estate Fund, Inc.; Vice President, Compliance of PGIM Investments LLC (since December 2020); formerly Director, Compliance (July 2018-December 2020) of Credit Suisse Asset Management LLC; and Vice President, Associate General Counsel & Deputy Chief Compliance Officer of Cramer Rosenthal McGlynn, LLC (August 2014-July 2018). | | Since April 2022 |
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Andrew R. French 1962 Secretary | | Vice President (since December 2018) of PGIM Investments LLC; Secretary (since September 2022) of the PGIM Private Credit Fund; Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Vice President and Corporate Counsel (2010-2018) of Prudential; formerly Director and Corporate Counsel (2006-2010) of Prudential; Vice President and Assistant Secretary (since January 2007) of PGIM Investments LLC; Vice President and Assistant Secretary (since January 2007) of Prudential Mutual Fund Services LLC. | | Since October 2006 |
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Melissa Gonzalez 1980 Assistant Secretary | | Vice President and Corporate Counsel (since September 2018) of Prudential; Vice President and Assistant Secretary (since August 2020) of PGIM Investments LLC; Assistant Secretary (since September 2022) of the PGIM Private Credit Fund; Assistant Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Director and Corporate Counsel (March 2014-September 2018) of Prudential. | | Since March 2020 |
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Fund Officers(a) |
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Name Year of Birth Fund Position | | Principal Occupation(s) During Past Five Years | | Length of Service as Fund Officer |
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Patrick E. McGuinness 1986 Assistant Secretary | | Vice President and Assistant Secretary (since August 2020) of PGIM Investments LLC; Director and Corporate Counsel (since February 2017) of Prudential; Assistant Secretary (since September 2022) of the PGIM Private Credit Fund; Assistant Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc. | | Since June 2020 |
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Debra Rubano 1975 Assistant Secretary | | Vice President and Corporate Counsel (since November 2020) of Prudential; Assistant Secretary (since September 2022) of the PGIM Private Credit Fund; Assistant Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc; formerly Director and Senior Counsel of Allianz Global Investors U.S. Holdings LLC (2010-2020) and Assistant Secretary of numerous funds in the Allianz fund complex (2015-2020). | | Since December 2020 |
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Kelly A. Coyne 1968 Assistant Secretary | | Director, Investment Operations of Prudential Mutual Fund Services LLC (since 2010); Assistant Secretary (since September 2022) of the PGIM Private Credit Fund; Assistant Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc. | | Since March 2015 |
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Christian J. Kelly 1975 Treasurer and Principal Financial and Accounting Officer | | Vice President, Head of Fund Administration of PGIM Investments LLC (since November 2018); Principal Financial Officer (since September 2022) of the PGIM Private Credit Fund; Principal Financial Officer (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly, Treasurer and Principal Accounting Officer (March 2022- July 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Director of Fund Administration of Lord Abbett & Co. LLC (2009-2018), Treasurer and Principal Accounting Officer of the Lord Abbett Family of Funds (2017-2018); Director of Accounting, Avenue Capital Group (2008-2009); Senior Manager, Investment Management Practice of Deloitte & Touche LLP (1998-2007). | | Since January 2019 |
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Lana Lomuti 1967 Assistant Treasurer | | Vice President (since 2007) and Director (2005-2007), within PGIM Investments Fund Administration; formerly Assistant Treasurer (December 2007-February 2014) of The Greater China Fund, Inc. | | Since April 2014 |
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Russ Shupak 1973 Assistant Treasurer | | Vice President (since 2017) and Director (2013-2017), within PGIM Investments Fund Administration; Treasurer and Principal Accounting Officer (since July 2022) of the PGIM Private Real Estate Fund, Inc.; Assistant Treasurer (since September 2022) of the PGIM Private Credit Fund; formerly Assistant Treasurer (March 2022 – July 2022) of the PGIM Private Real Estate Fund, Inc. | | Since October 2019 |
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Deborah Conway 1969 Assistant Treasurer | | Vice President (since 2017) and Director (2007-2017), within PGIM Investments Fund Administration. | | Since October 2019 |
PGIM Global Dynamic Bond Fund
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Fund Officers(a) |
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Name Year of Birth Fund Position | | Principal Occupation(s) During Past Five Years | | Length of Service as Fund Officer |
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Elyse M. McLaughlin 1974 Assistant Treasurer | | Vice President (since 2017) and Director (2011-2017), within PGIM Investments Fund Administration; Treasurer and Principal Accounting Officer (since September 2022) of the PGIM Private Credit Fund; Assistant Treasurer (since March 2022) of the PGIM Private Real Estate Fund, Inc. | | Since October 2019 |
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Kelly Florio 1978 Anti-Money Laundering Compliance Officer | | Vice President, Corporate Compliance, Global Compliance Programs and Compliance Risk Management (since December 2021) of Prudential; formerly, Head of Fraud Risk Management (October 2019 to December 2021) at New York Life Insurance Company; formerly, Head of Key Risk Area Operations (November 2018 to October 2019), Director of the US Anti-Money Laundering Compliance Unit (2009-2018) and Bank Loss Prevention Associate (2006 -2009) at MetLife. | | Since June 2022 |
(a) Excludes Mr. Parker and Mr. Benjamin, interested Board Members who also serve as President and Vice President, respectively.
Explanatory Notes to Tables:
∎ | | Board Members are deemed to be “Interested,” as defined in the 1940 Act, by reason of their affiliation with PGIM Investments LLC and/or an affiliate of PGIM Investments LLC. |
∎ | | Unless otherwise noted, the address of all Board Members and Officers is c/o PGIM Investments LLC, 655 Broad Street, Newark, New Jersey 07102-4410. |
∎ | | There is no set term of office for Board Members or Officers. The Board Members have adopted a retirement policy, which calls for the retirement of Board Members on December 31 of the year in which they reach the age of 75. |
∎ | | “Other Directorships Held” includes all directorships of companies required to register or file reports with the SEC under the 1934 Act (that is, “public companies”) or other investment companies registered under the 1940 Act. |
∎ | | “Portfolios Overseen” includes all investment companies managed by PGIM Investments LLC. The investment companies for which PGIM Investments LLC serves as manager include the PGIM Mutual Funds, Target Funds, The Prudential Variable Contract Accounts, PGIM ETF Trust, PGIM Private Real Estate Fund, Inc., PGIM Private Credit Fund, PGIM High Yield Bond Fund, Inc., PGIM Global High Yield Fund, Inc., PGIM Short Duration High Yield Opportunities Fund, The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc. and the Advanced Series Trust. |
∎ | | As used in the Fund Officers table “Prudential” means The Prudential Insurance Company of America. |
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Approval of Advisory Agreements (unaudited)
The Fund’s Board of Trustees
The Board of Trustees (the “Board”) of PGIM Global Dynamic Bond Fund (the “Fund”)1 consists of ten individuals, eight of whom are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Trustees”). The Board is responsible for the oversight of the Fund and its operations, and performs the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Trustees have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Trustee. The Board has established five standing committees: the Audit Committee, the Nominating and Governance Committee, the Compliance Committee and two Investment Committees. Each committee is chaired by, and composed of, Independent Trustees.
Annual Approval of the Fund’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Fund’s management agreement with PGIM Investments LLC (“PGIM Investments”), the Fund’s subadvisory agreement with PGIM, Inc. (“PGIM”), on behalf of its PGIM Fixed Income unit (“PGIM Fixed Income”), and the Fund’s sub-subadvisory agreement with PGIM Limited (“PGIML”). In considering the renewal of the agreements, the Board, including all of the Independent Trustees, met on May 26 and June 7-9, 2022 (the “Board Meeting”) and approved the renewal of the agreements through July 31, 2023, after concluding that the renewal of the agreements was in the best interests of the Fund and its shareholders.
In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with its consideration. Among other things, the Board considered comparative fee information from PGIM Investments, PGIM, and where appropriate, affiliates of PGIM. Also, the Board considered comparisons with other mutual funds in relevant Peer Universes and Peer Groups, as is further discussed below.
In approving the agreements, the Board, including the Independent Trustees advised by independent legal counsel, considered the factors it deemed relevant, including the nature, quality and extent of services provided by PGIM Investments, the subadviser and, as relevant, its affiliates, the performance of the Fund, the profitability of PGIM Investments and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Fund and its shareholders as the Fund’s assets grow. In their deliberations, the Trustees did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund. In connection with its deliberations, the Board considered information provided by PGIM Investments throughout the year at regular Board meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the Board Meeting.
1 PGIM Global Dynamic Bond Fund is a series of Prudential Investment Portfolios 3.
PGIM Global Dynamic Bond Fund
Approval of Advisory Agreements (continued)
The Trustees determined that the overall arrangements between the Fund and PGIM Investments, which serves as the Fund’s investment manager pursuant to a management agreement, between PGIM Investments and PGIM, which, through its PGIM Fixed Income unit, serves as the Fund’s subadviser pursuant to the terms of a subadvisory agreement with PGIM Investments, and between PGIM and PGIML, which serves as the Fund’s sub-subadviser pursuant to the terms of a sub-subadvisory agreement with PGIM, are in the best interests of the Fund and its shareholders in light of the services performed, fees charged and such other matters as the Trustees considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Trustees’ reaching their determinations to approve the continuance of the agreements are separately discussed below.
Nature, Quality and Extent of Services
The Board received and considered information regarding the nature, quality and extent of services provided to the Fund by PGIM Investments, PGIM Fixed Income, and PGIML. The Board noted that PGIM Fixed Income and PGIML are affiliated with PGIM Investments. The Board considered the services provided by PGIM Investments, including but not limited to the oversight of the subadviser and sub-subadviser for the Fund, as well as the provision of fund recordkeeping, compliance and other services to the Fund, and PGIM Investments’ role as administrator for the Fund’s liquidity risk management program. With respect to PGIM Investments’ oversight of the subadviser and sub-subadviser, the Board noted that PGIM Investments’ Strategic Investment Research Group (“SIRG”), which is a business unit of PGIM Investments, is responsible for monitoring and reporting to PGIM Investments senior management on the performance and operations of the subadviser and sub-subadviser. The Board also considered that PGIM Investments pays the salaries of all of the officers and interested Trustees of the Fund who are part of Fund management. The Board also considered the investment subadvisory services provided by PGIM Fixed Income and PGIML, including investment research and security selection, as well as adherence to the Fund’s investment restrictions and compliance with applicable Fund policies and procedures. The Board considered PGIM Investments’ evaluation of the subadviser and sub-subadviser, as well as PGIM Investments’ recommendation, based on its review of the subadviser and sub-subadviser, to renew the subadvisory and sub-subadvisory agreements.
The Board considered the qualifications, backgrounds and responsibilities of PGIM Investments’ senior management responsible for the oversight of the Fund, PGIM Fixed Income, and PGIML, and also considered the qualifications, backgrounds and responsibilities of PGIM Fixed Income’s portfolio managers who are responsible for the day-to-day management of the Fund’s portfolio. The Board was provided with information pertaining to PGIM Investments’, PGIM Fixed Income’s, and PGIML’s organizational structure, senior management, investment operations, and other relevant
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information pertaining to PGIM Investments, PGIM Fixed Income, and PGIML. The Board also noted that it received favorable compliance reports from the Fund’s Chief Compliance Officer (“CCO”) as to PGIM Investments, PGIM Fixed Income, and PGIML.
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PGIM Investments, the subadvisory services provided to the Fund by PGIM Fixed Income, and the sub-subadvisory services provided by PGIML, and that there was a reasonable basis on which to conclude that the Fund benefits from the services provided by PGIM Investments, PGIM Fixed Income, and PGIML under the management, subadvisory and sub-subadvisory agreements.
Costs of Services and Profits Realized by PGIM Investments
The Board was provided with information on the profitability of PGIM Investments and its affiliates in serving as the Fund’s investment manager. The Board discussed with PGIM Investments the methodology utilized in assembling the information regarding profitability and considered its reasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure and cost of capital. However, the Board considered that the cost of services provided by PGIM Investments to the Fund during the year ended December 31, 2021 exceeded the management fees paid by the Fund, resulting in an operating loss to PGIM Investments. Taking these factors into account, the Board concluded that the profitability of PGIM Investments and its affiliates in relation to the services rendered was not unreasonable.
Economies of Scale
The Board received and discussed information concerning economies of scale that PGIM Investments may realize as the Fund’s assets grow beyond current levels. The Board noted that the management fee schedule for the Fund includes breakpoints, which have the effect of decreasing the fee rate as assets increase. During the course of time, the Board has considered information regarding the launch date of the Fund, the management fees of the Fund compared to those of similarly managed funds and PGIM Investments’ investment in the Fund over time. The Board noted that economies of scale can be shared with the Fund in other ways, including low management fees from inception, additional technological and personnel investments to enhance shareholder services, and maintaining existing expense structures in the face of a rising cost environment. The Board also considered PGIM Investments’ assertion that it continually evaluates the management fee schedule of the Fund and the potential to share economies of scale through breakpoints or fee waivers as asset levels increase.
PGIM Global Dynamic Bond Fund
Approval of Advisory Agreements (continued)
The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of PGIM Investments’ costs are not specific to individual funds, but rather are incurred across a variety of products and services.
Other Benefits to PGIM Investments, PGIM Fixed Income and PGIML
The Board considered potential ancillary benefits that might be received by PGIM Investments, PGIM Fixed Income, PGIML and their affiliates as a result of their relationship with the Fund. The Board concluded that potential benefits to be derived by PGIM Investments included transfer agency fees received by the Fund’s transfer agent (which is affiliated with PGIM Investments), as well as benefits to its reputation or other intangible benefits resulting from PGIM Investments’ association with the Fund. The Board concluded that the potential benefits to be derived by PGIM Fixed Income and PGIML included the ability to use soft dollar credits, as well as the potential benefits consistent with those generally resulting from an increase in assets under management, specifically, potential access to additional research resources and benefits to their reputations. The Board concluded that the benefits derived by PGIM Investments, PGIM Fixed Income, and PGIML were consistent with the types of benefits generally derived by investment managers and subadvisers to mutual funds.
Performance of the Fund / Fees and Expenses
The Board considered certain additional factors and made related conclusions relating to the historical performance of the Fund for the one-, three- and five-year periods ended December 31, 2021. The Board considered that the Fund commenced operations on November 3, 2015 and that longer-term performance was not yet available.
The Board also considered the Fund’s actual management fee, as well as the Fund’s net total expense ratio, for the fiscal year ended October 31, 2021. The Board considered the management fee for the Fund as compared to the management fee charged by PGIM Investments to other funds and the fee charged by other advisers to comparable mutual funds in a Peer Group. The actual management fee represents the fee rate actually paid by Fund shareholders and includes any fee waivers or reimbursements. The net total expense ratio for the Fund represents the actual expense ratio incurred by Fund shareholders.
The mutual funds included in the Peer Universe, which was used to consider performance, and the Peer Group, which was used to consider expenses and fees, were objectively determined by Broadridge, an independent provider of mutual fund data. In certain circumstances, PGIM Investments also provided supplemental Peer Universe or Peer Group information, for reasons addressed with the Board. The comparisons placed the Fund in various quartiles over various periods, with the first quartile being the best 25% of the mutual funds (for performance, the best performing mutual funds and, for expenses, the lowest cost mutual funds).
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The section below summarizes key factors considered by the Board and the Board’s conclusions regarding the Fund’s performance, fees and overall expenses. The table sets forth net performance comparisons (which reflect the impact on performance of fund expenses, or any subsidies, expense caps or waivers that may be applicable) with the Peer Universe, actual management fees with the Peer Group (which reflect the impact of any subsidies or fee waivers), and net total expenses with the Peer Group, each of which were key factors considered by the Board.
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Net Performance | | 1 Year | | 3 Years | | 5 Years | | 10 Years |
| | 4th Quartile | | 1st Quartile | | 1st Quartile | | N/A |
Actual Management Fees: 1st Quartile | | | | |
Net Total Expenses: 4th Quartile |
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• | | The Board noted that the Fund outperformed its benchmark index over the three- and five-year periods, though it underperformed over the one-year period. |
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• | | The Board considered PGIM Investments’ assertion that despite recent underperformance, they are encouraged by the Fund’s strong longer-term outperformance for the three- and five-year periods ended December 31, 2021 versus peers. |
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• | | The Board and PGIM Investments agreed to retain the existing contractual expense cap, which (exclusive of certain fees and expenses) caps total annual operating expenses at 1.20% for Class A shares, 1.95% for Class C shares, 0.80% for Class R6 shares, and 0.85% for Class Z shares through February 28, 2023. |
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• | | In addition, PGIM Investments will waive management fees or shared operating expenses on any share class to the same extent that it waives such expenses on any other share class, and has agreed that total annual fund operating expenses for Class R6 shares will not exceed total annual fund operating expenses for Class Z shares. |
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• | | The Board concluded that, in light of the above, it would be in the best interests of the Fund and its shareholders to renew the agreements. |
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• | | The Board concluded that the management fees (including subadvisory fees) and total expenses were reasonable in light of the services provided. |
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After full consideration of these factors, the Board concluded that the approval of the agreements was in the best interests of the Fund and its shareholders.
PGIM Global Dynamic Bond Fund
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∎ MAIL | | ∎ TELEPHONE | | ∎ WEBSITE |
655 Broad Street | | (800) 225-1852 | | pgim.com/investments |
Newark, NJ 07102 | | | | |
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PROXY VOTING |
The Board of Trustees of the Fund has delegated to the Fund’s subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website. |
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TRUSTEES |
Ellen S. Alberding • Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Barry H. Evans • Keith F. Hartstein • Laurie Simon Hodrick • Stuart S. Parker • Brian K. Reid • Grace C. Torres |
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OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • Christian J. Kelly, Treasurer and Principal Financial and Accounting Officer • Claudia DiGiacomo, Chief Legal Officer • Isabelle Sajous, Chief Compliance Officer • Kelly Florio, Anti-Money Laundering Compliance Officer • Andrew R. French, Secretary • Melissa Gonzalez, Assistant Secretary • Kelly A. Coyne, Assistant Secretary • Patrick E. McGuinness, Assistant Secretary • Debra Rubano, Assistant Secretary • Lana Lomuti, Assistant Treasurer • Russ Shupak, Assistant Treasurer • Elyse M. McLaughlin, Assistant Treasurer • Deborah Conway, Assistant Treasurer |
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MANAGER | | PGIM Investments LLC | | 655 Broad Street Newark, NJ 07102 |
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SUBADVISER | | PGIM Fixed Income | | 655 Broad Street Newark, NJ 07102 |
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SUB-SUBADVISER | | PGIM Limited | | Grand Buildings, 1-3 Strand Trafalgar Square London, WC2N 5HR United Kingdom |
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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 | | 240 Greenwich 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 | | PricewaterhouseCoopers LLP | | 300 Madison Avenue New York, NY 10017 |
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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 the prospectus and summary prospectus by visiting our website at pgim.com/investments or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
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E-DELIVERY |
To receive your mutual fund documents online, go to pgim.com/investments/resource/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
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SHAREHOLDER COMMUNICATIONS WITH TRUSTEES |
Shareholders can communicate directly with the Board of Trustees by writing to the Chair of the Board, PGIM Global Dynamic Bond Fund, PGIM Investments, Attn: Board of Trustees, 655 Broad Street, Newark, NJ 07102. Shareholders can communicate directly with an individual Trustee by writing to that Trustee at the same address. Communications are not screened before being delivered to the addressee. |
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AVAILABILITY OF PORTFOLIO HOLDINGS |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT filings are available on the Commission’s website at sec.gov. |
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The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and is available without charge, upon request, by calling (800) 225-1852. |
Mutual Funds:
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ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | | MAY LOSE VALUE | | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PGIM GLOBAL DYNAMIC BOND FUND
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SHARE CLASS | | A | | C | | Z | | R6 |
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NASDAQ | | PAJAX | | PAJCX | | PAJZX | | PAJQX |
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CUSIP | | 74440K645 | | 74440K637 | | 74440K611 | | 74440K629 |
MF233E
PGIM WADHWANI SYSTEMATIC ABSOLUTE RETURN FUND
ANNUAL REPORT
OCTOBER 31, 2022
To enroll in e-delivery, go to pgim.com/investments/resource/edelivery
Table of Contents
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.
Mutual funds are distributed by Prudential Investment Management Services LLC, a Prudential Financial company, member SIPC. PGIM Wadhwani is the primary business name of PGIM Wadhwani LLP, a wholly owned subsidiary of PGIM, Inc. (PGIM), a Prudential Financial company. © 2022 Prudential Financial, Inc. and its related entities. PGIM and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
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2 | | Visit our website at pgim.com/investments |
Letter from the President
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| | Dear Shareholder: We hope you find the annual report for the PGIM Wadhwani Systematic Absolute Return Fund informative and useful. The report covers performance for the 12-month period that ended October 31, 2022. The attention of the global economy and financial markets pivoted during the period from the COVID-19 pandemic to the challenge of rapidly rising inflation. While job growth remained strong, prices for a wide range of goods and services rose in response to economic re-openings, supply-chain disruptions, governmental stimulus, and Russia’s invasion of |
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Ukraine. With inflation surging to a 40-year high, the Federal Reserve and other central banks aggressively hiked interest rates, prompting recession concerns. After rising to record levels at the end of 2021, stocks have fallen sharply in 2022 as investors worried about higher prices, slowing economic growth, geopolitical uncertainty, and new COVID-19 outbreaks. Equities rallied for a time during the summer but began falling again in late August on fears that the Fed would keep raising rates to tame inflation. For the entire 12-month period, equities suffered a broad-based global decline, although large-cap US stocks outperformed their small-cap counterparts. International developed and emerging markets trailed the US market during this time. Rising rates and economic uncertainty drove fixed income prices broadly lower as well. US and global investment-grade bonds, along with US high yield corporate bonds and emerging market debt, all posted negative returns during the period. Regarding your investments with PGIM, we believe it is important to maintain a diversified portfolio of funds consistent with your tolerance for risk, time horizon, and financial goals. Your financial advisor can help you create a diversified investment plan that may include funds covering all the basic asset classes and that reflects your personal investor profile and risk tolerance. However, diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets. At PGIM Investments, we provide access to active investment strategies across the global markets in the pursuit of consistent outperformance for investors. PGIM is the world’s 11th-largest investment manager with more than $1.5 trillion in assets under management. Our scale and investment expertise allow us to deliver a diversified suite of actively managed solutions across a broad spectrum of asset classes and investment styles. Thank you for choosing our family of funds. Sincerely, Stuart S. Parker, President PGIM Wadhwani Systematic Absolute Return Fund December 15, 2022 |
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PGIM Wadhwani Systematic Absolute Return 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 pgim.com/investments or by calling (800) 225-1852.
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| | | | | Average Annual Total Returns as of 10/31/22 |
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| | | | | One Year (%) | | Since Inception (%) |
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Class A | | | | | | | | |
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(with sales charges) | | | | | | 3.61 | | 5.38 (09/28/2021) |
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(without sales charges) | | | | | | 9.64 | | 10.98 (09/28/2021) |
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Class C | | | | | | | | |
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(with sales charges) | | | | | | 7.88 | | 10.17 (09/28/2021) |
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(without sales charges) | | | | | | 8.88 | | 10.17 (09/28/2021) |
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Class Z | | | | | | | | |
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(without sales charges) | | | | | | 9.97 | | 11.29 (09/28/2021) |
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Class R6 | | | | | | | | |
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(without sales charges) | | | | | | 9.99 | | 11.30 (09/28/2021) |
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ICE BofA US 3-Month Treasury Bill Index | | | | | | | | |
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| | | | | | 0.78 | | 0.71 |
Since Inception returns are provided since the Fund has less than 10 fiscal years of returns. Since Inception returns for the Index are measured from the closest month-end to the Fund’s inception date.
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4 | | Visit our website at pgim.com/investments |
Growth of a $10,000 Investment (unaudited)
The graph compares a $10,000 investment in the Fund’s Class Z shares with a similar investment in the ICE BofA 3-Month Treasury Bill Index by portraying the initial account values at the commencement of operations for Class Z shares (September 28, 2021) and the account values at the end of the current fiscal year (October 31, 2022), as measured on a quarterly basis. For purposes of the graph, and unless otherwise indicated, it has been assumed that (a) all recurring fees (including management fees) were deducted and (b) all dividends and distributions were reinvested. The line graph provides information for Class Z shares only. As indicated in the tables provided earlier, performance for other share classes will vary due to the differing fees and expenses applicable to each share class (as indicated in the following paragraphs). Without waiver of fees and/or expense reimbursements, if any, the returns would have been lower.
Past performance does not predict future performance. Total returns and the ending account values in the graphs include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown. The Fund’s total returns do not reflect the deduction of income taxes on an individual’s investment. Taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares.
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PGIM Wadhwani Systematic Absolute Return Fund | | | 5 | |
Your Fund’s Performance (continued)
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.
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| | Class A | | Class C | | Class Z | | Class R6 |
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Maximum initial sales charge | | 5.50% of the public offering price | | None | | None | | None |
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Contingent deferred sales charge (CDSC) (as a percentage of the lower of the original purchase price or the net asset value at redemption) | | 1.00% on sales of $1 million or more made within 12 months of purchase | | 1.00% on sales made within 12 months of purchase | | None | | None |
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Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | | 0.25% | | 1.00% | | None | | None |
Benchmark Definition
ICE BofA US 3-Month Treasury Bill Index—The ICE BofA US 3-Month Treasury Bill Index is an unmanaged index which is comprised of a single issue purchased at the beginning of the month and held for a full month. At the end of the month that issue is sold and rolled into a newly selected issue. The issue selected at each month-end rebalancing is the outstanding Treasury Bill that matures closest to, but not beyond, three months from the rebalancing date. To qualify for selection, an issue must have settled on or before the month-end rebalancing date.
Investors cannot invest directly in an index. The returns for the Index would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes that may be paid by an investor.
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6 | | Visit our website at pgim.com/investments |
Strategy and Performance Overview*
(unaudited)
How did the Fund perform?
The PGIM Wadhwani Systematic Absolute Return Fund’s Class Z shares returned 9.97% (net of fees) in the 12-month reporting period that ended October 31, 2022, outperforming the 0.78% return of the ICE BofA US 3-Month Treasury Bill Index (the Index).
What were the market conditions?
· | The main theme driving markets during the reporting period was the realization by central banks that inflationary pressures were not transitory, as inflation spiked to 40-year highs, and the war in Ukraine had—and is continuing to have—a profound impact on growth and inflation, particularly in Europe. |
· | This spike in inflation, the increasing hawkishness of central banks, and the uncertainty caused by the war in Ukraine hurt investor confidence, resulting in a sharp drop in both equity and fixed income markets. Over the last 30 years, developed-market sovereign fixed income has been considered a stable and reliable diversifier of equity risk. However, during the first 10 months of 2022, bonds suffered their worst drawdown in over 40 years, with global Treasury securities (as measured by the Bloomberg Global Treasury Total Return Index Value Unhedged) losing 22.2%, at the same time that the MSCI World Index fell by 18.48%. |
· | Longer-term US Treasury yields saw a dramatic increase in the 10-year Treasury yield of approximately 250 basis points (one basis point equals 0.01%), from 1.5% to over 4%. As long-term interest rates rose, equity valuations corrected significantly, particularly in growth sectors. |
· | The US Federal Reserve’s (Fed) aggressive rate hiking led to significant gains for the US dollar, as measured by the US Dollar Index, which gained 18.5%. The dollar gained ground against the yen, as the Bank of Japan stuck to its yield-curve control policy, as well as the British pound, which suffered from political uncertainty and fiscal policy mistakes. The dollar gained against commodity-sensitive currencies as well, even as commodity prices rose over the past year, except for the Brazilian real, which gained more than 8% against the dollar. |
What worked?
· | In terms of investment styles, the Fund’s directional and relative value models both contributed positively overall to performance during the reporting period. |
· | All three of the asset classes (equities, fixed income, and currencies), on which the Fund focuses, added to performance, with the bulk of gains coming from fixed income. |
· | In equities, during the fourth quarter of 2021, the Fund held long exposure to most developed markets (largely due to signals from directional models) and then turned to short exposure during the first quarter of 2022. The tactical evolution of equity exposure bolstered performance, with losses in the first quarter of 2022 more than offset by gains in directional equity models in the second and third quarters of 2022. |
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PGIM Wadhwani Systematic Absolute Return Fund | | | 7 | |
Strategy and Performance Overview* (continued)
· | In fixed income, the Fund benefited both from directional bond strategies, which were mainly positioned for rates rising more than the market anticipated, and the Fund’s yield-curve trading, where agility allowed the Fund to navigate the fast-changing direction of central banks, making money during the flattening and steepening of yield curves in 2022. |
· | In currencies, the Fund was helped by persistent, long US dollar exposure, particularly against the euro, the pound, and the yen. |
What didn’t work?
· | During the reporting period, the Fund was hurt by its exposure to Japanese equities amid declines in the Japanese equity market, while Italian, Australian, and UK equity markets also contributed small losses. |
· | Within fixed income, country-based relative value models detracted slightly. |
· | Within foreign exchange, the fund lost money in commodity-related currencies like the Australian dollar, the Canadian dollar, and the Norwegian krone. |
Did the Fund use derivatives?
The Fund invests in exchange-traded equity and bond index futures and in forward, foreign currency exchange contracts within both developed and emerging markets. During the reporting period, these derivative exposures were responsible for all the Fund’s positive performance, excluding interest on cash holdings.
Current outlook
· | Throughout the second half of 2022, PGIM Wadhwani has highlighted how investors have been attempting to judge which of a number of different macroeconomic scenarios was the most likely to develop in the US. Four scenarios emerged as warranting consideration: |
| · | A “soft landing”—in which the Fed’s latest (September 2022) forecasts turn out to be broadly correct, with inflation gradually dropping back to target, but without unemployment rising by that much, and with a recession being avoided. |
| · | Persistent inflation & recession—in which inflation proves more stubborn than expected, and the Fed is forced to tighten by more than is priced in and/or keeps rates high for longer, thereby eventually precipitating a recession. |
| · | The Fed tolerates higher inflation—in which the Fed tightens to bring inflation down from current levels but is unwilling to take risks with respect to a recession or financial stability, and so pauses before it has done enough to bring inflation back to target. |
| · | A “hard landing”—in which the tightening in financial conditions that has already occurred leads to a recession, perhaps quite quickly—and thus the Fed may end up tightening less than is currently priced in. |
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8 | | Visit our website at pgim.com/investments |
· | Anything associated with an increase in the probability of either a soft landing (scenario 1) or the possibility that the Fed might be willing to implicitly accept a higher inflation target (scenario 3) is likely to be perceived bullishly by equities (at least in the short run). |
· | As of the end of the reporting period, markets have been flirting with the notion that central banks may change tack and end up tolerating higher inflation (scenario 3). PGIM Wadhwani’s models suggest that central banks will continue to show resolve in fighting inflation. It is possible that central banks may slow down the pace of tightening, but that would imply a higher terminal interest rate (the expected end point for interest rate hikes) for a longer period of time. Such an outcome may lead equity market investors to reconsider their optimism. |
· | At the end of the period, PGIM Wadhwani’s models have positioned the Fund for a continuation of the risk-off environment with a net-short equity exposure. This net short is focused on North American equities, whereas, in Asia, the models suggest that the gloom is overdone, leading to a small net-long exposure in this region. In currencies, the Fund remains long the US dollar, although this exposure has been reduced, particularly relative to the euro and sterling. Turning to fixed income, the Fund’s net-short exposure has been reduced significantly, although there are diverse yield curve and cross-country views. |
*This strategy and performance overview, which discusses what strategies or holdings (including derivatives, if applicable) affected the Fund’s performance, is compiled based on how the Fund performed relative to the Fund’s benchmark index and is viewed for performance attribution purposes at the aggregate Fund level, which in most instances will not directly correlate to the amounts disclosed in the Statement of Operations which conform to US generally accepted accounting principles.
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PGIM Wadhwani Systematic Absolute Return Fund 9 |
Fees and Expenses (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 held through the six-month period ended October 31, 2022. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of PGIM funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information
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10 | | Visit our website at pgim.com/investments |
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.
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PGIM Wadhwani Systematic Absolute Return Fund | | Beginning Account Value May 1, 2022 | | Ending Account Value October 31, 2022 | | Annualized Expense Ratio Based on the Six-Month Period | | Expenses Paid During the Six-Month Period* |
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Class A | | Actual | | $1,000.00 | | $1,069.70 | | 1.49% | | $ 7.77 |
| | Hypothetical | | $1,000.00 | | $1,017.69 | | 1.49% | | $ 7.58 |
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Class C | | Actual | | $1,000.00 | | $1,066.00 | | 2.24% | | $11.66 |
| | Hypothetical | | $1,000.00 | | $1,013.91 | | 2.24% | | $11.37 |
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Class Z | | Actual | | $1,000.00 | | $1,072.60 | | 1.24% | | $ 6.48 |
| | Hypothetical | | $1,000.00 | | $1,018.95 | | 1.24% | | $ 6.31 |
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Class R6 | | Actual | | $1,000.00 | | $1,071.60 | | 1.19% | | $ 6.21 |
| | Hypothetical | | $1,000.00 | | $1,019.21 | | 1.19% | | $ 6.06 |
*Fund expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by the 184 days in the six-month period ended October 31, 2022, and divided by the 365 days in the Fund’s fiscal year ended October 31, 2022 (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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PGIM Wadhwani Systematic Absolute Return Fund | | | 11 | |
Schedule of Investments
as of October 31, 2022
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Description | | Shares | | | Value | |
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SHORT-TERM INVESTMENT 83.0% | | | | | | |
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UNAFFILIATED FUND | | | | | | |
Dreyfus Government Cash Management (Institutional Shares) (cost $41,045,727) | | | 41,045,727 | | | $ | 41,045,727 | |
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TOTAL INVESTMENTS 83.0% | | | | | | |
(cost $41,045,727) | | | | | | | 41,045,727 | |
Other assets in excess of liabilities(z) 17.0% | | | | | | | 8,431,935 | |
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NET ASSETS 100.0% | | | | | | $ | 49,477,662 | |
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Below is a list of the abbreviation(s) used in the annual report:
AUD—Australian Dollar
BRL—Brazilian Real
CAD—Canadian Dollar
CHF—Swiss Franc
CLP—Chilean Peso
CNH—Chinese Renminbi
COP—Colombian Peso
CZK—Czech Koruna
EUR—Euro
GBP—British Pound
HUF—Hungarian Forint
IDR—Indonesian Rupiah
ILS—Israeli Shekel
INR—Indian Rupee
JPY—Japanese Yen
KRW—South Korean Won
MXN—Mexican Peso
NOK—Norwegian Krone
NZD—New Zealand Dollar
PHP—Philippine Peso
PLN—Polish Zloty
SEK—Swedish Krona
SGD—Singapore Dollar
THB—Thai Baht
TRY—Turkish Lira
TWD—New Taiwanese Dollar
USD—US Dollar
ZAR—South African Rand
AEX—Amsterdam Stock Exchange
ASX—Australian Securities Exchange
BTP—Buoni del Tesoro Poliennali
CAC40—French Stock Market Index
DAX—German Stock Index
EURIBOR—Euro Interbank Offered Rate
FTSE—Financial Times Stock Exchange
GS—Goldman Sachs & Co. LLC
See Notes to Financial Statements.
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PGIM Wadhwani Systematic Absolute Return Fund 13 |
Schedule of Investments (continued)
as of October 31, 2022
KLCI—Kuala Lumpur Composite Index
KOSPI—Korean Composite Stock Price Index
LIBOR—London Interbank Offered Rate
MSC—Morgan Stanley & Co. LLC
NASDAQ—National Association of Securities Dealers Automated Quotations
OMXS—Nordic Exchange Stockholm Index
OTC—Over-the-counter
S&P—Standard & Poor’s
SET—Stock Exchange of Thailand
SGX—Singapore Exchange
SOFR—Secured Overnight Financing Rate
SONIA—Sterling Overnight Index Average
SPI—Share Price Index
STOXX—Stock Index of the Eurozone
TOPIX—Tokyo Stock Price Index
TSX—Toronto Stock Exchange
(z) | Includes net unrealized appreciation/(depreciation) and/or market value of the below holdings which are excluded from the Schedule of Investments: |
Futures contracts outstanding at October 31, 2022:
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Number of Contracts | | | Type | | Expiration Date | | | Current Notional Amount | | | Value / Unrealized Appreciation (Depreciation) | |
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Long Positions: | | | | | | | | | |
| 1 | | | 90 Day ASX Bank Bill | | | Jun. 2023 | | | $ | 633,094 | | | $ | 308 | |
| 1 | | | 90 Day ASX Bank Bill | | | Sep. 2023 | | | | 633,032 | | | | 462 | |
| 1 | | | 3 Month Euro EURIBOR | | | Mar. 2023 | | | | 240,194 | | | | 210 | |
| 1 | | | 3 Month Euro EURIBOR | | | Jun. 2023 | | | | 239,651 | | | | 99 | |
| 1 | | | 3 Month Euro EURIBOR | | | Sep. 2023 | | | | 239,515 | | | | 692 | |
| 14 | | | 5 Year Euro-Bobl | | | Dec. 2022 | | | | 1,655,694 | | | | (2,517 | ) |
| 63 | | | 5 Year U.S. Treasury Notes | | | Dec. 2022 | | | | 6,715,406 | | | | 13,007 | |
| 8 | | | 10 Year Euro-Bund | | | Dec. 2022 | | | | 1,094,507 | | | | (1,200 | ) |
| 3 | | | 10 Year Japanese Bonds | | | Dec. 2022 | | | | 3,001,513 | | | | 2,212 | |
| 10 | | | 10 Year U.K. Gilt | | | Dec. 2022 | | | | 1,171,227 | | | | (3,217 | ) |
| 64 | | | 10 Year U.S. Treasury Notes | | | Dec. 2022 | | | | 7,078,000 | | | | (5,832 | ) |
| 7 | | | 30 Year Euro Buxl | | | Dec. 2022 | | | | 997,678 | | | | (7,317 | ) |
| 4 | | | 30 Year U.S. Ultra Treasury Bonds | | | Dec. 2022 | | | | 510,625 | | | | (8,474 | ) |
| 2 | | | Euro-BTP Italian Government Bond | | | Dec. 2022 | | | | 226,606 | | | | 3,537 | |
| 6 | | | FTSE Bursa Malaysia KLCI Index | | | Nov. 2022 | | | | 92,703 | | | | 200 | |
| 5 | | | FTSE/JSE Top 40 Index | | | Dec. 2022 | | | | 164,587 | | | | 2,588 | |
| 1 | | | FTSE/MIB Index | | | Dec. 2022 | | | | 111,391 | | | | 9,204 | |
| 5 | | | Nikkei 225 (SGX) | | | Dec. 2022 | | | | 462,860 | | | | (427 | ) |
| 36 | | | SET 50 Index | | | Dec. 2022 | | | | 185,221 | | | | 3,246 | |
| 1 | | | SGX Nifty 50 Index | | | Nov. 2022 | | | | 36,121 | | | | 839 | |
| 4 | | | TOPIX Index | | | Dec. 2022 | | | | 518,107 | | | | 629 | |
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| | | | | | | | | | | | | | | 8,249 | |
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Short Positions: | | | | | | | |
| 1 | | | 90 Day Euro Dollar | | | Mar. 2023 | | | | 236,875 | | | | 286 | |
See Notes to Financial Statements.
Futures contracts outstanding at October 31, 2022 (continued):
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Number of Contracts | | | Type | | Expiration Date | | | Current Notional Amount | | | Value / Unrealized Appreciation (Depreciation) | |
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Short Positions (cont’d): | | | | | | | | | |
| 1 | | | 90 Day Euro Dollar | | | Jun. 2023 | | | $ | 236,987 | | | $ | 323 | |
| 1 | | | 3 Month SONIA Index | | | Jun. 2023 | | | | 272,867 | | | | (1,664 | ) |
| 1 | | | 3 Month SONIA Index | | | Sep. 2023 | | | | 272,652 | | | | (1,951 | ) |
| 11 | | | 3 Month SONIA Index | | | Dec. 2023 | | | | 3,000,430 | | | | 835 | |
| 102 | | | 2 Year U.S. Treasury Notes | | | Dec. 2022 | | | | 20,847,047 | | | | 43,576 | |
| 6 | | | 10 Year Australian Treasury Bonds | | | Dec. 2022 | | | | 454,721 | | | | (10,190 | ) |
| 22 | | | 10 Year Canadian Government Bonds | | | Dec. 2022 | | | | 1,986,758 | | | | (38,222 | ) |
| 1 | | | 20 Year U.S. Treasury Bonds | | | Dec. 2022 | | | | 120,500 | | | | 249 | |
| 1 | | | AEX Index | | | Nov. 2022 | | | | 132,206 | | | | (4,486 | ) |
| 3 | | | ASX SPI 200 Index | | | Dec. 2022 | | | | 328,908 | | | | (2,594 | ) |
| 4 | | | CAC40 10 Euro | | | Nov. 2022 | | | | 247,794 | | | | (858 | ) |
| 1 | | | DAX Index | | | Dec. 2022 | | | | 328,321 | | | | (4,646 | ) |
| 189 | | | Euro Schatz Index | | | Dec. 2022 | | | | 19,973,239 | | | | (3,324 | ) |
| 18 | | | Euro STOXX 50 Index | | | Dec. 2022 | | | | 643,588 | | | | (4,479 | ) |
| 1 | | | Hang Seng China Enterprises Index | | | Nov. 2022 | | | | 31,460 | | | | 2,278 | |
| 2 | | | KOSPI 200 Index | | | Dec. 2022 | | | | 105,549 | | | | (590 | ) |
| 9 | | | NASDAQ 100 E-Mini Index | | | Dec. 2022 | | | | 2,060,505 | | | | 1,020 | |
| 9 | | | OMXS 30 Index | | | Nov. 2022 | | | | 160,010 | | | | (2,264 | ) |
| 20 | | | Russell 2000 E-Mini Index | | | Dec. 2022 | | | | 1,853,000 | | | | (18,059 | ) |
| 24 | | | S&P 500 E-Mini Index | | | Dec. 2022 | | | | 4,659,600 | | | | (13,403 | ) |
| 2 | | | S&P/TSX 60 Index | | | Dec. 2022 | | | | 345,755 | | | | (869 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | (59,032 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | (50,783 | ) |
| | | | | | | | | | | | | | | | |
Forward foreign currency exchange contracts outstanding at October 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchase Contracts | | Counterparty | | Notional Amount (000) | | Value at Settlement Date | | Current Value | | Unrealized Appreciation | | Unrealized Depreciation |
OTC Forward Foreign Currency Exchange Contracts: | |
Australian Dollar, | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | | AUD | | | | | 1,140 | | | | $ | 725,961 | | | | $ | 729,529 | | | | $ | 3,568 | | | | $ | — | |
Expiring 11/16/22 | | MSC | | | | AUD | | | | | 820 | | | | | 514,205 | | | | | 524,749 | | | | | 10,544 | | | | | — | |
Expiring 11/16/22 | | MSC | | | | AUD | | | | | 600 | | | | | 372,415 | | | | | 383,963 | | | | | 11,548 | | | | | — | |
Expiring 11/16/22 | | MSC | | | | AUD | | | | | 220 | | | | | 137,865 | | | | | 140,786 | | | | | 2,921 | | | | | — | |
Expiring 11/16/22 | | MSC | | | | AUD | | | | | 130 | | | | | 83,204 | | | | | 83,192 | | | | | — | | | | | (12 | ) |
Expiring 11/16/22 | | MSC | | | | AUD | | | | | 70 | | | | | 45,268 | | | | | 44,796 | | | | | — | | | | | (472 | ) |
Expiring 11/16/22 | | MSC | | | | AUD | | | | | 50 | | | | | 31,035 | | | | | 31,997 | | | | | 962 | | | | | — | |
Expiring 11/16/22 | | MSC | | | | AUD | | | | | 10 | | | | | 6,492 | | | | | 6,399 | | | | | — | | | | | (93 | ) |
Brazilian Real, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 12/02/22 | | MSC | | | | BRL | | | | | 4,690 | | | | | 880,000 | | | | | 901,410 | | | | | 21,410 | | | | | — | |
See Notes to Financial Statements.
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 15 | |
Schedule of Investments (continued)
as of October 31, 2022
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchase Contracts | | Counterparty | | Notional Amount (000) | | Value at Settlement Date | | Current Value | | Unrealized Appreciation | | Unrealized Depreciation |
OTC Forward Foreign Currency Exchange Contracts (cont’d.): | | | | | | |
Brazilian Real (cont’d.), | | | | | | | | | | |
Expiring 12/02/22 | | | | MSC | | | | | BRL | | | | | 160 | | | | $ | 30,000 | | | | $ | 30,730 | | | | $ | 730 | | | | $ | — | |
Expiring 12/02/22 | | | | MSC | | | | | BRL | | | | | 157 | | | | | 30,000 | | | | | 30,249 | | | | | 249 | | | | | — | |
Expiring 12/02/22 | | | | MSC | | | | | BRL | | | | | 107 | | | | | 20,000 | | | | | 20,534 | | | | | 534 | | | | | — | |
Expiring 12/02/22 | | | | MSC | | | | | BRL | | | | | 105 | | | | | 20,000 | | | | | 20,164 | | | | | 164 | | | | | — | |
British Pound, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 1,430 | | | | | 1,587,105 | | | | | 1,640,632 | | | | | 53,527 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 950 | | | | | 1,076,839 | | | | | 1,089,930 | | | | | 13,091 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 360 | | | | | 416,855 | | | | | 413,026 | | | | | — | | | | | (3,829 | ) |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 230 | | | | | 259,232 | | | | | 263,877 | | | | | 4,645 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 210 | | | | | 240,887 | | | | | 240,931 | | | | | 44 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 180 | | | | | 204,033 | | | | | 206,513 | | | | | 2,480 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 150 | | | | | 174,038 | | | | | 172,095 | | | | | — | | | | | (1,943 | ) |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 60 | | | | | 68,838 | | | | | 68,838 | | | | | — | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 60 | | | | | 68,838 | | | | | 68,838 | | | | | — | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 50 | | | | | 57,365 | | | | | 57,365 | | | | | — | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 40 | | | | | 46,522 | | | | | 45,891 | | | | | — | | | | | (631 | ) |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 40 | | | | | 46,317 | | | | | 45,892 | | | | | — | | | | | (425 | ) |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 30 | | | | | 34,738 | | | | | 34,419 | | | | | — | | | | | (319 | ) |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 30 | | | | | 34,413 | | | | | 34,419 | | | | | 6 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 20 | | | | | 22,197 | | | | | 22,946 | | | | | 749 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 20 | | | | | 22,637 | | | | | 22,945 | | | | | 308 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 20 | | | | | 22,637 | | | | | 22,945 | | | | | 308 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 20 | | | | | 23,205 | | | | | 22,946 | | | | | — | | | | | (259 | ) |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 20 | | | | | 23,261 | | | | | 22,946 | | | | | — | | | | | (315 | ) |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 10 | | | | | 11,099 | | | | | 11,473 | | | | | 374 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 10 | | | | | 11,319 | | | | | 11,473 | | | | | 154 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 10 | | | | | 11,579 | | | | | 11,473 | | | | | — | | | | | (106 | ) |
Expiring 11/16/22 | | | | MSC | | | | | GBP | | | | | 10 | | | | | 11,473 | | | | | 11,473 | | | | | — | | | | | — | |
Canadian Dollar, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | | | MSC | | | | | CAD | | | | | 1,475 | | | | | 1,070,000 | | | | | 1,082,607 | | | | | 12,607 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | CAD | | | | | 481 | | | | | 349,668 | | | | | 353,153 | | | | | 3,485 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | CAD | | | | | 455 | | | | | 327,591 | | | | | 334,000 | | | | | 6,409 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | CAD | | | | | 441 | | | | | 320,000 | | | | | 323,796 | | | | | 3,796 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | CAD | | | | | 262 | | | | | 190,050 | | | | | 192,253 | | | | | 2,203 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | CAD | | | | | 28 | | | | | 19,808 | | | | | 20,196 | | | | | 388 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | CAD | | | | | 28 | | | | | 20,021 | | | | | 20,253 | | | | | 232 | | | | | — | |
Chilean Peso, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | | | MSC | | | | | CLP | | | | | 28,015 | | | | | 30,000 | | | | | 29,613 | | | | | — | | | | | (387 | ) |
Expiring 11/16/22 | | | | MSC | | | | | CLP | | | | | 19,794 | | | | | 20,000 | | | | | 20,924 | | | | | 924 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | CLP | | | | | 18,980 | | | | | 20,000 | | | | | 20,063 | | | | | 63 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | CLP | | | | | 18,734 | | | | | 20,000 | | | | | 19,803 | | | | | — | | | |
| (197
| )
|
See Notes to Financial Statements.
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchase Contracts | | Counterparty | | | Notional Amount (000) | | | Value at Settlement Date | | | Current Value | | | Unrealized Appreciation | | | Unrealized Depreciation | |
OTC Forward Foreign Currency Exchange Contracts (cont’d.): | |
Chinese Renminbi, | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | | MSC | | | | CNH | | | | 578 | | | $ | 80,067 | | | $ | 78,853 | | | $ | — | | | $ | (1,214 | ) |
Expiring 11/16/22 | | | MSC | | | | CNH | | | | 144 | | | | 20,001 | | | | 19,653 | | | | — | | | | (348 | ) |
Expiring 11/16/22 | | | MSC | | | | CNH | | | | 73 | | | | 9,991 | | | | 9,991 | | | | — | | | | — | |
Expiring 11/16/22 | | | MSC | | | | CNH | | | | 72 | | | | 10,013 | | | | 9,791 | | | | — | | | | (222 | ) |
Colombian Peso, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/17/22 | | | MSC | | | | COP | | | | 97,762 | | | | 20,000 | | | | 19,739 | | | | — | | | | (261 | ) |
Expiring 11/17/22 | | | MSC | | | | COP | | | | 50,033 | | | | 10,000 | | | | 10,102 | | | | 102 | | | | — | |
Expiring 11/17/22 | | | MSC | | | | COP | | | | 45,780 | | | | 10,000 | | | | 9,243 | | | | — | | | | (757 | ) |
Czech Koruna, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | | MSC | | | | CZK | | | | 1,476 | | | | 58,979 | | | | 59,505 | | | | 526 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | CZK | | | | 980 | | | | 39,755 | | | | 39,527 | | | | — | | | | (228 | ) |
Expiring 11/16/22 | | | MSC | | | | CZK | | | | 979 | | | | 39,424 | | | | 39,468 | | | | 44 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | CZK | | | | 734 | | | | 29,448 | | | | 29,610 | | | | 162 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | CZK | | | | 734 | | | | 29,567 | | | | 29,600 | | | | 33 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | CZK | | | | 734 | | | | 29,567 | | | | 29,600 | | | | 33 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | CZK | | | | 492 | | | | 19,658 | | | | 19,833 | | | | 175 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | CZK | | | | 491 | | | | 19,535 | | | | 19,780 | | | | 245 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | CZK | | | | 490 | | | | 19,472 | | | | 19,773 | | | | 301 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | CZK | | | | 245 | | | | 9,939 | | | | 9,882 | | | | — | | | | (57 | ) |
Expiring 11/16/22 | | | MSC | | | | CZK | | | | 245 | | | | 9,931 | | | | 9,874 | | | | — | | | | (57 | ) |
Expiring 11/16/22 | | | MSC | | | | CZK | | | | 245 | | | | 9,814 | | | | 9,868 | | | | 54 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | CZK | | | | 245 | | | | 9,743 | | | | 9,893 | | | | 150 | | | | — | |
Euro, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 680 | | | | 662,387 | | | | 672,764 | | | | 10,377 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 630 | | | | 627,263 | | | | 623,297 | | | | — | | | | (3,966 | ) |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 550 | | | | 555,010 | | | | 544,148 | | | | — | | | | (10,862 | ) |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 230 | | | | 227,547 | | | | 227,553 | | | | 6 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 210 | | | | 207,760 | | | | 207,765 | | | | 5 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 160 | | | | 155,856 | | | | 158,298 | | | | 2,442 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 150 | | | | 151,366 | | | | 148,404 | | | | — | | | | (2,962 | ) |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 140 | | | | 138,181 | | | | 138,510 | | | | 329 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 110 | | | | 109,522 | | | | 108,830 | | | | — | | | | (692 | ) |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 90 | | | | 88,831 | | | | 89,043 | | | | 212 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 40 | | | | 39,826 | | | | 39,574 | | | | — | | | | (252 | ) |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 40 | | | | 39,480 | | | | 39,574 | | | | 94 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 30 | | | | 29,223 | | | | 29,681 | | | | 458 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 30 | | | | 29,610 | | | | 29,681 | | | | 71 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 20 | | | | 19,482 | | | | 19,787 | | | | 305 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 20 | | | | 20,182 | | | | 19,787 | | | | — | | | | (395 | ) |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 20 | | | | 19,787 | | | | 19,788 | | | | 1 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 10 | | | | 9,870 | | | | 9,894 | | | | 24 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | EUR | | | | 10 | | | | 10,091 | | | | 9,894 | | | | — | | | | (197 | ) |
See Notes to Financial Statements.
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 17 | |
Schedule of Investments (continued)
as of October 31, 2022
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchase Contracts | | Counterparty | | Notional Amount (000) | | | Value at Settlement Date | | | Current Value | | | Unrealized Appreciation | | | Unrealized Depreciation | |
OTC Forward Foreign Currency Exchange Contracts (cont’d.): | |
Hungarian Forint, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | HUF | | | | 28,872 | | | $ | 68,434 | | | $ | 69,342 | | | $ | 908 | | | $ | — | |
Expiring 11/16/22 | | MSC | | | HUF | | | | 8,232 | | | | 19,489 | | | | 19,770 | | | | 281 | | | | — | |
Expiring 11/16/22 | | MSC | | | HUF | | | | 8,148 | | | | 19,524 | | | | 19,568 | | | | 44 | | | | — | |
Expiring 11/16/22 | | MSC | | | HUF | | | | 4,180 | | | | 9,633 | | | | 10,040 | | | | 407 | | | | — | |
Expiring 11/16/22 | | MSC | | | HUF | | | | 4,163 | | | | 9,591 | | | | 9,997 | | | | 406 | | | | — | |
Expiring 11/16/22 | | MSC | | | HUF | | | | 4,145 | | | | 9,701 | | | | 9,954 | | | | 253 | | | | — | |
Expiring 11/16/22 | | MSC | | | HUF | | | | 4,145 | | | | 9,899 | | | | 9,954 | | | | 55 | | | | — | |
Expiring 11/16/22 | | MSC | | | HUF | | | | 4,087 | | | | 10,015 | | | | 9,815 | | | | — | | | | (200 | ) |
Expiring 11/16/22 | | MSC | | | HUF | | | | 4,074 | | | | 9,762 | | | | 9,784 | | | | 22 | | | | — | |
Expiring 11/16/22 | | MSC | | | HUF | | | | 11 | | | | 26 | | | | 26 | | | | — | | | | — | |
Indian Rupee, | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | INR | | | | 13,196 | | | | 160,000 | | | | 159,109 | | | | — | | | | (891 | ) |
Expiring 11/16/22 | | MSC | | | INR | | | | 5,799 | | | | 70,000 | | | | 69,924 | | | | — | | | | (76 | ) |
Expiring 11/16/22 | | MSC | | | INR | | | | 4,144 | | | | 50,000 | | | | 49,962 | | | | — | | | | (38 | ) |
Expiring 11/16/22 | | MSC | | | INR | | | | 4,132 | | | | 50,000 | | | | 49,824 | | | | — | | | | (176 | ) |
Expiring 11/16/22 | | MSC | | | INR | | | | 3,334 | | | | 40,000 | | | | 40,194 | | | | 194 | | | | — | |
Expiring 11/16/22 | | MSC | | | INR | | | | 1,667 | | | | 20,000 | | | | 20,103 | | | | 103 | | | | — | |
Expiring 11/16/22 | | MSC | | | INR | | | | 1,660 | | | | 20,000 | | | | 20,018 | | | | 18 | | | | — | |
Expiring 11/16/22 | | MSC | | | INR | | | | 1,652 | | | | 20,000 | | | | 19,919 | | | | — | | | | (81 | ) |
Expiring 11/16/22 | | MSC | | | INR | | | | 1,652 | | | | 20,000 | | | | 19,919 | | | | — | | | | (81 | ) |
Expiring 11/16/22 | | MSC | | | INR | | | | 1,649 | | | | 20,000 | | | | 19,885 | | | | — | | | | (115 | ) |
Expiring 11/16/22 | | MSC | | | INR | | | | 1,649 | | | | 20,000 | | | | 19,886 | | | | — | | | | (114 | ) |
Expiring 11/16/22 | | MSC | | | INR | | | | 1,645 | | | | 20,000 | | | | 19,834 | | | | — | | | | (166 | ) |
Expiring 11/16/22 | | MSC | | | INR | | | | 828 | | | | 10,000 | | | | 9,988 | | | | — | | | | (12 | ) |
Expiring 11/16/22 | | MSC | | | INR | | | | 826 | | | | 10,000 | | | | 9,955 | | | | — | | | | (45 | ) |
Expiring 11/16/22 | | MSC | | | INR | | | | 826 | | | | 10,000 | | | | 9,961 | | | | — | | | | (39 | ) |
Expiring 11/16/22 | | MSC | | | INR | | | | 823 | | | | 10,000 | | | | 9,927 | | | | — | | | | (73 | ) |
Indonesian Rupiah, | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | IDR | | | | 778,265 | | | | 50,000 | | | | 49,811 | | | | — | | | | (189 | ) |
Expiring 11/16/22 | | MSC | | | IDR | | | | 467,975 | | | | 30,000 | | | | 29,951 | | | | — | | | | (49 | ) |
Expiring 11/16/22 | | MSC | | | IDR | | | | 156,049 | | | | 10,000 | | | | 9,987 | | | | — | | | | (13 | ) |
Expiring 11/16/22 | | MSC | | | IDR | | | | 153,651 | | | | 10,000 | | | | 9,834 | | | | — | | | | (166 | ) |
Israeli Shekel, | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | ILS | | | | 143 | | | | 40,305 | | | | 40,377 | | | | 72 | | | | — | |
Expiring 11/16/22 | | MSC | | | ILS | | | | 140 | | | | 40,021 | | | | 39,541 | | | | — | | | | (480 | ) |
Expiring 11/16/22 | | MSC | | | ILS | | | | 70 | | | | 19,985 | | | | 19,873 | | | | — | | | | (112 | ) |
Expiring 11/16/22 | | MSC | | | ILS | | | | 35 | | | | 10,016 | | | | 10,056 | | | | 40 | | | | — | |
Japanese Yen, | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 30,913 | | | | 209,776 | | | | 208,266 | | | | — | | | | (1,510 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 26,696 | | | | 180,804 | | | | 179,855 | | | | — | | | | (949 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 23,719 | | | | 159,762 | | | | 159,795 | | | | 33 | | | | — | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 14,590 | | | | 99,967 | | | | 98,293 | | | | — | | | | (1,674 | ) |
See Notes to Financial Statements.
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchase Contracts | | Counterparty | | Notional Amount (000) | | | Value at Settlement Date | | | Current Value | | | Unrealized Appreciation | | | Unrealized Depreciation | |
OTC Forward Foreign Currency Exchange Contracts (cont’d.): | |
Japanese Yen (cont’d.), | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 11,843 | | | $ | 80,205 | | | $ | 79,784 | | | $ | — | | | $ | (421 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 11,662 | | | | 79,908 | | | | 78,570 | | | | — | | | | (1,338 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 10,289 | | | | 69,822 | | | | 69,319 | | | | — | | | | (503 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 10,233 | | | | 70,117 | | | | 68,943 | | | | — | | | | (1,174 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 8,947 | | | | 60,115 | | | | 60,277 | | | | 162 | | | | — | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 8,945 | | | | 60,251 | | | | 60,265 | | | | 14 | | | | — | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 7,427 | | | | 49,979 | | | | 50,034 | | | | 55 | | | | — | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 7,289 | | | | 49,945 | | | | 49,109 | | | | — | | | | (836 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 7,229 | | | | 49,273 | | | | 48,704 | | | | — | | | | (569 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 4,404 | | | | 30,017 | | | | 29,671 | | | | — | | | | (346 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 2,970 | | | | 20,004 | | | | 20,008 | | | | 4 | | | | — | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 2,950 | | | | 20,017 | | | | 19,873 | | | | — | | | | (144 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 2,749 | | | | 18,825 | | | | 18,520 | | | | — | | | | (305 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 1,489 | | | | 10,027 | | | | 10,029 | | | | 2 | | | | — | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 1,487 | | | | 10,015 | | | | 10,017 | | | | 2 | | | | — | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 1,479 | | | | 10,016 | | | | 9,963 | | | | — | | | | (53 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 1,476 | | | | 10,013 | | | | 9,941 | | | | — | | | | (72 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 1,473 | | | | 10,040 | | | | 9,924 | | | | — | | | | (116 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 1,471 | | | | 9,984 | | | | 9,912 | | | | — | | | | (72 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 1,458 | | | | 9,990 | | | | 9,823 | | | | — | | | | (167 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 1,456 | | | | 9,979 | | | | 9,812 | | | | — | | | | (167 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 1,411 | | | | 9,617 | | | | 9,506 | | | | — | | | | (111 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 2 | | | | 14 | | | | 14 | | | | — | | | | — | |
Mexican Peso, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 23,607 | | | | 1,170,000 | | | | 1,187,902 | | | | 17,902 | | | | — | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 4,842 | | | | 240,000 | | | | 243,630 | | | | 3,630 | | | | — | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 3,183 | | | | 159,472 | | | | 160,144 | | | | 672 | | | | — | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 1,798 | | | | 89,848 | | | | 90,455 | | | | 607 | | | | — | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 1,599 | | | | 79,506 | | | | 80,456 | | | | 950 | | | | — | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 1,398 | | | | 69,859 | | | | 70,331 | | | | 472 | | | | — | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 1,397 | | | | 69,704 | | | | 70,271 | | | | 567 | | | | — | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 1,392 | | | | 69,740 | | | | 70,034 | | | | 294 | | | | — | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 1,002 | | | | 49,716 | | | | 50,398 | | | | 682 | | | | — | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 991 | | | | 49,912 | | | | 49,890 | | | | — | | | | (22 | ) |
Expiring 11/16/22 | | MSC | | | MXN | | | | 798 | | | | 39,906 | | | | 40,176 | | | | 270 | | | | — | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 600 | | | | 29,825 | | | | 30,181 | | | | 356 | | | | — | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 595 | | | | 29,944 | | | | 29,931 | | | | — | | | | (13 | ) |
Expiring 11/16/22 | | MSC | | | MXN | | | | 402 | | | | 19,903 | | | | 20,248 | | | | 345 | | | | — | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 202 | | | | 10,000 | | | | 10,151 | | | | 151 | | | | — | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 201 | | | | 9,998 | | | | 10,107 | | | | 109 | | | | — | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 200 | | | | 9,959 | | | | 10,040 | | | | 81 | | | | — | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 200 | | | | 9,954 | | | | 10,089 | | | | 135 | | | | — | |
See Notes to Financial Statements.
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 19 | |
Schedule of Investments (continued)
as of October 31, 2022
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchase Contracts | | Counterparty | | Notional Amount (000) | | | Value at Settlement Date | | | Current Value | | | Unrealized Appreciation | | | Unrealized Depreciation | |
OTC Forward Foreign Currency Exchange Contracts (cont’d.): | |
Mexican Peso (cont’d.), | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 199 | | | $ | 9,958 | | | $ | 10,039 | | | $ | 81 | | | $ | — | |
New Taiwanese Dollar, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 3,522 | | | | 110,000 | | | | 109,129 | | | | — | | | | (871 | ) |
Expiring 11/16/22 | | MSC | | | TWD | | | | 3,205 | | | | 100,000 | | | | 99,308 | | | | — | | | | (692 | ) |
Expiring 11/16/22 | | MSC | | | TWD | | | | 2,579 | | | | 80,000 | | | | 79,923 | | | | — | | | | (77 | ) |
Expiring 11/16/22 | | MSC | | | TWD | | | | 1,600 | | | | 50,000 | | | | 49,589 | | | | — | | | | (411 | ) |
Expiring 11/16/22 | | MSC | | | TWD | | | | 1,288 | | | | 40,000 | | | | 39,901 | | | | — | | | | (99 | ) |
Expiring 11/16/22 | | MSC | | | TWD | | | | 955 | | | | 30,000 | | | | 29,603 | | | | — | | | | (397 | ) |
Expiring 11/16/22 | | MSC | | | TWD | | | | 955 | | | | 30,000 | | | | 29,608 | | | | — | | | | (392 | ) |
Expiring 11/16/22 | | MSC | | | TWD | | | | 955 | | | | 30,000 | | | | 29,596 | | | | — | | | | (404 | ) |
Expiring 11/16/22 | | MSC | | | TWD | | | | 646 | | | | 20,000 | | | | 20,003 | | | | 3 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 644 | | | | 20,000 | | | | 19,963 | | | | — | | | | (37 | ) |
Expiring 11/16/22 | | MSC | | | TWD | | | | 321 | | | | 10,000 | | | | 9,935 | | | | — | | | | (65 | ) |
Expiring 11/16/22 | | MSC | | | TWD | | | | 319 | | | | 10,000 | | | | 9,893 | | | | — | | | | (107 | ) |
Expiring 11/16/22 | | MSC | | | TWD | | | | 318 | | | | 10,000 | | | | 9,869 | | | | — | | | | (131 | ) |
New Zealand Dollar, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 410 | | | | 235,546 | | | | 238,440 | | | | 2,894 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 290 | | | | 169,866 | | | | 168,653 | | | | — | | | | (1,213 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 150 | | | | 87,376 | | | | 87,234 | | | | — | | | | (142 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 110 | | | | 62,483 | | | | 63,972 | | | | 1,489 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 90 | | | | 50,878 | | | | 52,341 | | | | 1,463 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 80 | | | | 44,873 | | | | 46,525 | | | | 1,652 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 60 | | | | 34,191 | | | | 34,894 | | | | 703 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 60 | | | | 34,009 | | | | 34,894 | | | | 885 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 28,100 | | | | 29,078 | | | | 978 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 28,183 | | | | 29,078 | | | | 895 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 28,057 | | | | 29,078 | | | | 1,021 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 28,304 | | | | 29,078 | | | | 774 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 28,634 | | | | 29,078 | | | | 444 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 28,477 | | | | 29,078 | | | | 601 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 28,443 | | | | 29,078 | | | | 635 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 28,281 | | | | 29,078 | | | | 797 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 28,171 | | | | 29,078 | | | | 907 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 29,009 | | | | 29,078 | | | | 69 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 40 | | | | 22,500 | | | | 23,262 | | | | 762 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 40 | | | | 23,352 | | | | 23,263 | | | | — | | | | (89 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 40 | | | | 23,187 | | | | 23,263 | | | | 76 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 40 | | | | 22,761 | | | | 23,262 | | | | 501 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 40 | | | | 23,159 | | | | 23,262 | | | | 103 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 30 | | | | 16,987 | | | | 17,447 | | | | 460 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 30 | | | | 17,262 | | | | 17,447 | | | | 185 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 30 | | | | 16,800 | | | | 17,447 | | | | 647 | | | | — | |
See Notes to Financial Statements.
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchase Contracts | | Counterparty | | Notional Amount (000) | | | Value at Settlement Date | | | Current Value | | | Unrealized Appreciation | | | Unrealized Depreciation | |
OTC Forward Foreign Currency Exchange Contracts (cont’d.): | |
New Zealand Dollar (cont’d.), | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 30 | | | $ | 17,477 | | | $ | 17,447 | | | $ | — | | | $ | (30 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 30 | | | | 16,747 | | | | 17,447 | | | | 700 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 30 | | | | 17,429 | | | | 17,447 | | | | 18 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 20 | | | | 11,512 | | | | 11,631 | | | | 119 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 20 | | | | 11,348 | | | | 11,632 | | | | 284 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 20 | | | | 11,667 | | | | 11,632 | | | | — | | | | (35 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 20 | | | | 11,506 | | | | 11,631 | | | | 125 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,604 | | | | 5,815 | | | | 211 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,729 | | | | 5,816 | | | | 87 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,599 | | | | 5,815 | | | | 216 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,627 | | | | 5,815 | | | | 188 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,604 | | | | 5,815 | | | | 211 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,562 | | | | 5,815 | | | | 253 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,858 | | | | 5,816 | | | | — | | | | (42 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,729 | | | | 5,816 | | | | 87 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,810 | | | | 5,816 | | | | 6 | | | | — | |
Norwegian Krone, | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 3,730 | | | | 354,132 | | | | 358,940 | | | | 4,808 | | | | — | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 1,149 | | | | 106,662 | | | | 110,625 | | | | 3,963 | | | | — | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 1,132 | | | | 108,968 | | | | 108,969 | | | | 1 | | | | — | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 623 | | | | 58,985 | | | | 59,946 | | | | 961 | | | | — | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 520 | | | | 49,357 | | | | 50,027 | | | | 670 | | | | — | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 519 | | | | 48,844 | | | | 49,957 | | | | 1,113 | | | | — | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 415 | | | | 39,085 | | | | 39,975 | | | | 890 | | | | — | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 410 | | | | 39,939 | | | | 39,444 | | | | — | | | | (495 | ) |
Expiring 11/16/22 | | MSC | | | NOK | | | | 313 | | | | 29,076 | | | | 30,156 | | | | 1,080 | | | | — | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 308 | | | | 30,021 | | | | 29,649 | | | | — | | | | (372 | ) |
Expiring 11/16/22 | | MSC | | | NOK | | | | 208 | | | | 19,533 | | | | 20,065 | | | | 532 | | | | — | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 208 | | | | 19,548 | | | | 19,993 | | | | 445 | | | | — | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 206 | | | | 19,836 | | | | 19,836 | | | | — | | | | — | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 205 | | | | 19,773 | | | | 19,773 | | | | — | | | | — | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 104 | | | | 9,691 | | | | 10,051 | | | | 360 | | | | — | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 1 | | | | 69 | | | | 71 | | | | 2 | | | | — | |
Philippine Peso, | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | PHP | | | | 2,915 | | | | 50,000 | | | | 50,086 | | | | 86 | | | | — | |
Expiring 11/16/22 | | MSC | | | PHP | | | | 1,759 | | | | 30,000 | | | | 30,224 | | | | 224 | | | | — | |
Expiring 11/16/22 | | MSC | | | PHP | | | | 590 | | | | 10,000 | | | | 10,145 | | | | 145 | | | | — | |
Expiring 11/16/22 | | MSC | | | PHP | | | | 578 | | | | 10,000 | | | | 9,932 | | | | — | | | | (68 | ) |
Polish Zloty, | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | PLN | | | | 382 | | | | 79,525 | | | | 79,791 | | | | 266 | | | | — | |
Expiring 11/16/22 | | MSC | | | PLN | | | | 191 | | | | 39,403 | | | | 40,011 | | | | 608 | | | | — | |
Expiring 11/16/22 | | MSC | | | PLN | | | | 95 | | | | 19,886 | | | | 19,952 | | | | 66 | | | | — | |
See Notes to Financial Statements.
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 21 | |
Schedule of Investments (continued)
as of October 31, 2022
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchase Contracts | | Counterparty | | Notional Amount (000) | | | Value at Settlement Date | | | Current Value | | | Unrealized Appreciation | | | Unrealized Depreciation | |
OTC Forward Foreign Currency Exchange Contracts (cont’d.): | |
Polish Zloty (cont’d.), | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | PLN | | | | 48 | | | $ | 9,680 | | | $ | 9,969 | | | $ | 289 | | | $ | — | |
Expiring 11/16/22 | | MSC | | | PLN | | | | 48 | | | | 9,721 | | | | 10,014 | | | | 293 | | | | — | |
Expiring 11/16/22 | | MSC | | | PLN | | | | 47 | | | | 9,742 | | | | 9,896 | | | | 154 | | | | — | |
Singapore Dollar, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | SGD | | | | 141 | | | | 100,208 | | | | 99,485 | | | | — | | | | (723 | ) |
Expiring 11/16/22 | | MSC | | | SGD | | | | 99 | | | | 69,979 | | | | 70,085 | | | | 106 | | | | — | |
Expiring 11/16/22 | | MSC | | | SGD | | | | 85 | | | | 59,962 | | | | 60,237 | | | | 275 | | | | — | |
Expiring 11/16/22 | | MSC | | | SGD | | | | 57 | | | | 39,993 | | | | 40,033 | | | | 40 | | | | — | |
Expiring 11/16/22 | | MSC | | | SGD | | | | 56 | | | | 40,085 | | | | 39,796 | | | | — | | | | (289 | ) |
Expiring 11/16/22 | | MSC | | | SGD | | | | 43 | | | | 29,965 | | | | 30,085 | | | | 120 | | | | — | |
Expiring 11/16/22 | | MSC | | | SGD | | | | 29 | | | | 19,992 | | | | 20,275 | | | | 283 | | | | — | |
Expiring 11/16/22 | | MSC | | | SGD | | | | 29 | | | | 20,146 | | | | 20,177 | | | | 31 | | | | — | |
Expiring 11/16/22 | | MSC | | | SGD | | | | 28 | | | | 20,011 | | | | 20,031 | | | | 20 | | | | — | |
Expiring 11/16/22 | | MSC | | | SGD | | | | 28 | | | | 19,877 | | | | 20,024 | | | | 147 | | | | — | |
South African Rand, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | ZAR | | | | 728 | | | | 39,911 | | | | 39,577 | | | | — | | | | (334 | ) |
Expiring 11/16/22 | | MSC | | | ZAR | | | | 363 | | | | 19,661 | | | | 19,713 | | | | 52 | | | | — | |
Expiring 11/16/22 | | MSC | | | ZAR | | | | 183 | | | | 9,949 | | | | 9,946 | | | | — | | | | (3 | ) |
Expiring 11/16/22 | | MSC | | | ZAR | | | | 181 | | | | 9,977 | | | | 9,816 | | | | — | | | | (161 | ) |
Expiring 11/16/22 | | MSC | | | ZAR | | | | 180 | | | | 10,011 | | | | 9,777 | | | | — | | | | (234 | ) |
Expiring 11/16/22 | | MSC | | | ZAR | | | | 1 | | | | 35 | | | | 34 | | | | — | | | | (1 | ) |
South Korean Won, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | KRW | | | | 56,905 | | | | 40,000 | | | | 39,868 | | | | — | | | | (132 | ) |
Expiring 11/16/22 | | MSC | | | KRW | | | | 43,164 | | | | 30,000 | | | | 30,240 | | | | 240 | | | | — | |
Expiring 11/16/22 | | MSC | | | KRW | | | | 42,779 | | | | 30,000 | | | | 29,971 | | | | — | | | | (29 | ) |
Expiring 11/16/22 | | MSC | | | KRW | | | | 28,644 | | | | 20,000 | | | | 20,068 | | | | 68 | | | | — | |
Expiring 11/16/22 | | MSC | | | KRW | | | | 28,533 | | | | 20,000 | | | | 19,990 | | | | — | | | | (10 | ) |
Expiring 11/16/22 | | MSC | | | KRW | | | | 28,494 | | | | 20,000 | | | | 19,963 | | | | — | | | | (37 | ) |
Expiring 11/16/22 | | MSC | | | KRW | | | | 14,379 | | | | 10,000 | | | | 10,074 | | | | 74 | | | | — | |
Expiring 11/16/22 | | MSC | | | KRW | | | | 14,339 | | | | 10,000 | | | | 10,046 | | | | 46 | | | | — | |
Expiring 11/16/22 | | MSC | | | KRW | | | | 14,283 | | | | 10,000 | | | | 10,007 | | | | 7 | | | | — | |
Expiring 11/16/22 | | MSC | | | KRW | | | | 14,276 | | | | 10,000 | | | | 10,002 | | | | 2 | | | | — | |
Expiring 11/16/22 | | MSC | | | KRW | | | | 14,214 | | | | 10,000 | | | | 9,958 | | | | — | | | | (42 | ) |
Expiring 11/16/22 | | MSC | | | KRW | | | | 14,198 | | | | 10,000 | | | | 9,947 | | | | — | | | | (53 | ) |
Expiring 11/16/22 | | MSC | | | KRW | | | | 14,194 | | | | 10,000 | | | | 9,944 | | | | — | | | | (56 | ) |
Swedish Krona, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | SEK | | | | 1,327 | | | | 118,239 | | | | 120,346 | | | | 2,107 | | | | — | |
Expiring 11/16/22 | | MSC | | | SEK | | | | 873 | | | | 79,151 | | | | 79,141 | | | | — | | | | (10 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 656 | | | | 60,371 | | | | 59,433 | | | | — | | | | (938 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 655 | | | | 59,767 | | | | 59,404 | | | | — | | | | (363 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 438 | | | | 40,300 | | | | 39,674 | | | | — | | | | (626 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 332 | | | | 29,559 | | | | 30,086 | | | | 527 | | | | — | |
See Notes to Financial Statements.
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchase Contracts | | Counterparty | | Notional Amount (000) | | | Value at Settlement Date | | | Current Value | | | Unrealized Appreciation | | | Unrealized Depreciation | |
OTC Forward Foreign Currency Exchange Contracts (cont’d.): | |
Swedish Krona (cont’d.), | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | SEK | | | | 327 | | | $ | 29,672 | | | $ | 29,668 | | | $ | — | | | $ | (4 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 110 | | | | 10,089 | | | | 10,011 | | | | — | | | | (78 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 109 | | | | 9,895 | | | | 9,894 | | | | — | | | | (1 | ) |
Swiss Franc, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | CHF | | | | 432 | | | | 430,736 | | | | 432,059 | | | | 1,323 | | | | — | |
Expiring 11/16/22 | | MSC | | | CHF | | | | 168 | | | | 170,140 | | | | 167,583 | | | | — | | | | (2,557 | ) |
Expiring 11/16/22 | | MSC | | | CHF | | | | 159 | | | | 159,652 | | | | 158,884 | | | | — | | | | (768 | ) |
Expiring 11/16/22 | | MSC | | | CHF | | | | 100 | | | | 100,093 | | | | 100,107 | | | | 14 | | | | — | |
Expiring 11/16/22 | | MSC | | | CHF | | | | 60 | | | | 60,414 | | | | 60,055 | | | | — | | | | (359 | ) |
Expiring 11/16/22 | | MSC | | | CHF | | | | 20 | | | | 20,056 | | | | 19,937 | | | | — | | | | (119 | ) |
Expiring 11/16/22 | | MSC | | | CHF | | | | 10 | | | | 9,994 | | | | 9,935 | | | | — | | | | (59 | ) |
Expiring 11/16/22 | | MSC | | | CHF | | | | 10 | | | | 10,024 | | | | 10,005 | | | | — | | | | (19 | ) |
Expiring 11/16/22 | | MSC | | | CHF | | | | 10 | | | | 10,003 | | | | 9,955 | | | | — | | | | (48 | ) |
Expiring 11/16/22 | | MSC | | | CHF | | | | 10 | | | | 10,092 | | | | 10,032 | | | | — | | | | (60 | ) |
Expiring 11/16/22 | | MSC | | | CHF | | | | 10 | | | | 10,007 | | | | 10,038 | | | | 31 | | | | — | |
Expiring 11/16/22 | | MSC | | | CHF | | | | 8 | | | | 7,712 | | | | 7,698 | | | | — | | | | (14 | ) |
Expiring 11/16/22 | | MSC | | | CHF | | | | — | * | | | 6 | | | | 6 | | | | — | | | | — | |
Thai Baht, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | THB | | | | 1,146 | | | | 30,000 | | | | 30,138 | | | | 138 | | | | — | |
Expiring 11/16/22 | | MSC | | | THB | | | | 1,137 | | | | 30,212 | | | | 29,916 | | | | — | | | | (296 | ) |
Expiring 11/16/22 | | MSC | | | THB | | | | 1,129 | | | | 29,952 | | | | 29,702 | | | | — | | | | (250 | ) |
Expiring 11/16/22 | | MSC | | | THB | | | | 383 | | | | 10,041 | | | | 10,076 | | | | 35 | | | | — | |
Expiring 11/16/22 | | MSC | | | THB | | | | 383 | | | | 10,089 | | | | 10,085 | | | | — | | | | (4 | ) |
Expiring 11/16/22 | | MSC | | | THB | | | | 383 | | | | 10,081 | | | | 10,065 | | | | — | | | | (16 | ) |
Expiring 11/16/22 | | MSC | | | THB | | | | 383 | | | | 10,000 | | | | 10,065 | | | | 65 | | | | — | |
Expiring 11/16/22 | | MSC | | | THB | | | | 383 | | | | 10,080 | | | | 10,064 | | | | — | | | | (16 | ) |
Expiring 11/16/22 | | MSC | | | THB | | | | 380 | | | | 9,988 | | | | 9,988 | | | | — | | | | — | |
Expiring 11/16/22 | | MSC | | | THB | | | | 379 | | | | 10,071 | | | | 9,972 | | | | — | | | | (99 | ) |
Expiring 11/16/22 | | MSC | | | THB | | | | 379 | | | | 10,000 | | | | 9,960 | | | | — | | | | (40 | ) |
Turkish Lira, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | TRY | | | | 3,059 | | | | 160,000 | | | | 162,638 | | | | 2,638 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | $23,512,696 | | | $23,704,288 | | | 251,745 | | | (60,153) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Sale Contracts | | Counterparty | | Notional Amount (000) | | | Value at Settlement Date | | | Current Value | | | Unrealized Appreciation | | | Unrealized Depreciation | |
OTC Forward Foreign Currency Exchange Contracts: | |
Australian Dollar, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | AUD | | | | 990 | | | $ | 634,531 | | | $ | 633,538 | | | $ | 993 | | | $ | — | |
Expiring 11/16/22 | | MSC | | | AUD | | | | 630 | | | | 397,879 | | | | 403,161 | | | | — | | | | (5,282 | ) |
See Notes to Financial Statements.
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 23 | |
Schedule of Investments (continued)
as of October 31, 2022
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Sale Contracts | | Counterparty | | Notional Amount (000) | | | Value at Settlement Date | | | Current Value | | | Unrealized Appreciation | | | Unrealized Depreciation | |
OTC Forward Foreign Currency Exchange Contracts (cont’d.): | |
Australian Dollar (cont’d.), | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | AUD | | | | 490 | | | $ | 313,121 | | | $ | 313,570 | | | $ | — | | | $ | (449 | ) |
Expiring 11/16/22 | | MSC | | | AUD | | | | 350 | | | | 220,464 | | | | 223,978 | | | | — | | | | (3,514 | ) |
Expiring 11/16/22 | | MSC | | | AUD | | | | 240 | | | | 151,176 | | | | 153,586 | | | | — | | | | (2,410 | ) |
Expiring 11/16/22 | | MSC | | | AUD | | | | 140 | | | | 88,418 | | | | 89,592 | | | | — | | | | (1,174 | ) |
Expiring 11/16/22 | | MSC | | | AUD | | | | 120 | | | | 75,550 | | | | 76,793 | | | | — | | | | (1,243 | ) |
Expiring 11/16/22 | | MSC | | | AUD | | | | 110 | | | | 69,385 | | | | 70,393 | | | | — | | | | (1,008 | ) |
Expiring 11/16/22 | | MSC | | | AUD | | | | 100 | | | | 63,902 | | | | 63,994 | | | | — | | | | (92 | ) |
Expiring 11/16/22 | | MSC | | | AUD | | | | 60 | | | | 37,775 | | | | 38,397 | | | | — | | | | (622 | ) |
Expiring 11/16/22 | | MSC | | | AUD | | | | 50 | | | | 31,389 | | | | 31,997 | | | | — | | | | (608 | ) |
Expiring 11/16/22 | | MSC | | | AUD | | | | 40 | | | | 25,638 | | | | 25,598 | | | | 40 | | | | — | |
Expiring 11/16/22 | | MSC | | | AUD | | | | 20 | | | | 12,616 | | | | 12,799 | | | | — | | | | (183 | ) |
Expiring 11/16/22 | | MSC | | | AUD | | | | 20 | | | | 12,616 | | | | 12,799 | | | | — | | | | (183 | ) |
Expiring 11/16/22 | | MSC | | | AUD | | | | 20 | | | | 12,616 | | | | 12,799 | | | | — | | | | (183 | ) |
Expiring 11/16/22 | | MSC | | | AUD | | | | 10 | | | | 6,291 | | | | 6,399 | | | | — | | | | (108 | ) |
Expiring 11/16/22 | | MSC | | | AUD | | | | 10 | | | | 6,296 | | | | 6,400 | | | | — | | | | (104 | ) |
Expiring 11/16/22 | | MSC | | | AUD | | | | 10 | | | | 6,299 | | | | 6,399 | | | | — | | | | (100 | ) |
Expiring 11/16/22 | | MSC | | | AUD | | | | 10 | | | | 6,316 | | | | 6,400 | | | | — | | | | (84 | ) |
Brazilian Real, | | | | | | | | | | | | | | | | | | | | |
Expiring 12/02/22 | | MSC | | | BRL | | | | 420 | | | | 80,000 | | | | 80,795 | | | | — | | | | (795 | ) |
Expiring 12/02/22 | | MSC | | | BRL | | | | 322 | | | | 60,000 | | | | 61,868 | | | | — | | | | (1,868 | ) |
Expiring 12/02/22 | | MSC | | | BRL | | | | 266 | | | | 50,000 | | | | 51,182 | | | | — | | | | (1,182 | ) |
Expiring 12/02/22 | | MSC | | | BRL | | | | 107 | | | | 20,000 | | | | 20,477 | | | | — | | | | (477 | ) |
Expiring 12/02/22 | | MSC | | | BRL | | | | 54 | | | | 10,000 | | | | 10,360 | | | | — | | | | (360 | ) |
Expiring 12/02/22 | | MSC | | | BRL | | | | 54 | | | | 10,000 | | | | 10,345 | | | | — | | | | (345 | ) |
Expiring 12/02/22 | | MSC | | | BRL | | | | 54 | | | | 10,000 | | | | 10,298 | | | | — | | | | (298 | ) |
Expiring 12/02/22 | | MSC | | | BRL | | | | 54 | | | | 10,000 | | | | 10,309 | | | | — | | | | (309 | ) |
British Pound, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | GBP | | | | 2,540 | | | | 2,811,335 | | | | 2,914,129 | | | | — | | | | (102,794 | ) |
Expiring 11/16/22 | | MSC | | | GBP | | | | 860 | | | | 961,274 | | | | 986,674 | | | | — | | | | (25,400 | ) |
Expiring 11/16/22 | | MSC | | | GBP | | | | 780 | | | | 863,300 | | | | 894,890 | | | | — | | | | (31,590 | ) |
Expiring 11/16/22 | | MSC | | | GBP | | | | 440 | | | | 487,086 | | | | 504,809 | | | | — | | | | (17,723 | ) |
Expiring 11/16/22 | | MSC | | | GBP | | | | 280 | | | | 309,908 | | | | 321,242 | | | | — | | | | (11,334 | ) |
Expiring 11/16/22 | | MSC | | | GBP | | | | 250 | | | | 280,281 | | | | 286,824 | | | | — | | | | (6,543 | ) |
Expiring 11/16/22 | | MSC | | | GBP | | | | 230 | | | | 261,472 | | | | 263,878 | | | | — | | | | (2,406 | ) |
Expiring 11/16/22 | | MSC | | | GBP | | | | 120 | | | | 134,723 | | | | 137,676 | | | | — | | | | (2,953 | ) |
Expiring 11/16/22 | | MSC | | | GBP | | | | 100 | | | | 111,776 | | | | 114,730 | | | | — | | | | (2,954 | ) |
Expiring 11/16/22 | | MSC | | | GBP | | | | 60 | | | | 67,731 | | | | 68,837 | | | | — | | | | (1,106 | ) |
Expiring 11/16/22 | | MSC | | | GBP | | | | 60 | | | | 66,420 | | | | 68,837 | | | | — | | | | (2,417 | ) |
Expiring 11/16/22 | | MSC | | | GBP | | | | 40 | | | | 45,473 | | | | 45,891 | | | | — | | | | (418 | ) |
Expiring 11/16/22 | | MSC | | | GBP | | | | 30 | | | | 33,866 | | | | 34,419 | | | | — | | | | (553 | ) |
Expiring 11/16/22 | | MSC | | | GBP | | | | 20 | | | | 22,139 | | | | 22,946 | | | | — | | | | (807 | ) |
Expiring 11/16/22 | | MSC | | | GBP | | | | 10 | | | | 11,227 | | | | 11,473 | | | | — | | | | (246 | ) |
See Notes to Financial Statements.
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Sale Contracts | | Counterparty | | Notional Amount (000) | | | Value at Settlement Date | | | Current Value | | | Unrealized Appreciation | | | Unrealized Depreciation | |
OTC Forward Foreign Currency Exchange Contracts (cont’d.): | |
British Pound (cont’d.), | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | GBP | | | | 10 | | | $ | 11,368 | | | $ | 11,473 | | | $ | — | | | $ | (105 | ) |
Expiring 11/16/22 | | MSC | | | GBP | | | | 10 | | | | 11,211 | | | | 11,473 | | | | — | | | | (262 | ) |
Expiring 11/16/22 | | MSC | | | GBP | | | | 10 | | | | 11,368 | | | | 11,473 | | | | — | | | | (105 | ) |
Expiring 11/16/22 | | MSC | | | GBP | | | | 10 | | | | 11,227 | | | | 11,473 | | | | — | | | | (246 | ) |
Canadian Dollar, | | | | �� | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | CAD | | | | 1,004 | | | | 740,289 | | | | 737,158 | | | | 3,131 | | | | — | |
Expiring 11/16/22 | | MSC | | | CAD | | | | 516 | | | | 379,101 | | | | 378,986 | | | | 115 | | | | — | |
Expiring 11/16/22 | | MSC | | | CAD | | | | 428 | | | | 309,373 | | | | 313,967 | | | | — | | | | (4,594 | ) |
Expiring 11/16/22 | | MSC | | | CAD | | | | 315 | | | | 229,314 | | | | 230,951 | | | | — | | | | (1,637 | ) |
Expiring 11/16/22 | | MSC | | | CAD | | | | 206 | | | | 149,710 | | | | 151,352 | | | | — | | | | (1,642 | ) |
Expiring 11/16/22 | | MSC | | | CAD | | | | 121 | | | | 88,298 | | | | 88,975 | | | | — | | | | (677 | ) |
Expiring 11/16/22 | | MSC | | | CAD | | | | 82 | | | | 60,050 | | | | 60,040 | | | | 10 | | | | — | |
Expiring 11/16/22 | | MSC | | | CAD | | | | 51 | | | | 37,612 | | | | 37,704 | | | | — | | | | (92 | ) |
Expiring 11/16/22 | | MSC | | | CAD | | | | 41 | | | | 29,839 | | | | 29,834 | | | | 5 | | | | — | |
Expiring 11/16/22 | | MSC | | | CAD | | | | 28 | | | | 20,061 | | | | 20,195 | | | | — | | | | (134 | ) |
Expiring 11/16/22 | | MSC | | | CAD | | | | 27 | | | | 19,971 | | | | 19,965 | | | | 6 | | | | — | |
Expiring 11/16/22 | | MSC | | | CAD | | | | 14 | | | | 9,980 | | | | 10,128 | | | | — | | | | (148 | ) |
Expiring 11/16/22 | | MSC | | | CAD | | | | 14 | | | | 10,066 | | | | 10,064 | | | | 2 | | | | — | |
Expiring 11/16/22 | | MSC | | | CAD | | | | 14 | | | | 10,538 | | | | 10,488 | | | | 50 | | | | — | |
Expiring 11/16/22 | | MSC | | | CAD | | | | — | * | | | 2 | | | | 2 | | | | — | | | | — | |
Chilean Peso, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | CLP | | | | 103,205 | | | | 110,000 | | | | 109,093 | | | | 907 | | | | — | |
Expiring 11/16/22 | | MSC | | | CLP | | | | 19,459 | | | | 20,000 | | | | 20,570 | | | | — | | | | (570 | ) |
Chinese Renminbi, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | CNH | | | | 576 | | | | 80,041 | | | | 78,592 | | | | 1,449 | | | | — | |
Expiring 11/16/22 | | MSC | | | CNH | | | | 573 | | | | 80,000 | | | | 78,237 | | | | 1,763 | | | | — | |
Expiring 11/16/22 | | MSC | | | CNH | | | | 143 | | | | 20,034 | | | | 19,573 | | | | 461 | | | | — | |
Expiring 11/16/22 | | MSC | | | CNH | | | | 73 | | | | 10,002 | | | | 9,980 | | | | 22 | | | | — | |
Expiring 11/16/22 | | MSC | | | CNH | | | | 73 | | | | 10,009 | | | | 9,927 | | | | 82 | | | | — | |
Expiring 11/16/22 | | MSC | | | CNH | | | | 72 | | | | 10,023 | | | | 9,839 | | | | 184 | | | | — | |
Expiring 11/16/22 | | MSC | | | CNH | | | | — | * | | | 5 | | | | 5 | | | | — | | | | — | |
Expiring 11/16/22 | | MSC | | | CNH | | | | — | * | | | 3 | | | | 3 | | | | — | | | | — | |
Colombian Peso, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/17/22 | | MSC | | | COP | | | | 185,518 | | | | 40,000 | | | | 37,458 | | | | 2,542 | | | | — | |
Expiring 11/17/22 | | MSC | | | COP | | | | 48,323 | | | | 10,000 | | | | 9,757 | | | | 243 | | | | — | |
Expiring 11/17/22 | | MSC | | | COP | | | | 47,509 | | | | 10,000 | | | | 9,592 | | | | 408 | | | | — | |
Czech Koruna, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | CZK | | | | 1,470 | | | | 59,266 | | | | 59,252 | | | | 14 | | | | — | |
Expiring 11/16/22 | | MSC | | | CZK | | | | 738 | | | | 29,067 | | | | 29,746 | | | | — | | | | (679 | ) |
Expiring 11/16/22 | | MSC | | | CZK | | | | 738 | | | | 29,267 | | | | 29,740 | | | | — | | | | (473 | ) |
Expiring 11/16/22 | | MSC | | | CZK | | | | 246 | | | | 9,832 | | | | 9,914 | | | | — | | | | (82 | ) |
See Notes to Financial Statements.
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 25 | |
Schedule of Investments (continued)
as of October 31, 2022
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Sale Contracts | | Counterparty | | Notional Amount (000) | | | Value at Settlement Date | | | Current Value | | | Unrealized Appreciation | | | Unrealized Depreciation | |
OTC Forward Foreign Currency Exchange Contracts (cont’d.): | |
Euro, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | EUR | | | | 1,470 | | | $ | 1,430,735 | | | $ | 1,454,359 | | | $ | — | | | $ | (23,624 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 1,020 | | | | 992,755 | | | | 1,009,147 | | | | — | | | | (16,392 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 930 | | | | 905,131 | | | | 920,105 | | | | — | | | | (14,974 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 730 | | | | 710,677 | | | | 722,233 | | | | — | | | | (11,556 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 620 | | | | 602,519 | | | | 613,403 | | | | — | | | | (10,884 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 600 | | | | 584,286 | | | | 593,616 | | | | — | | | | (9,330 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 590 | | | | 588,841 | | | | 583,722 | | | | 5,119 | | | | — | |
Expiring 11/16/22 | | MSC | | | EUR | | | | 450 | | | | 443,335 | | | | 445,212 | | | | — | | | | (1,877 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 330 | | | | 323,694 | | | | 326,488 | | | | — | | | | (2,794 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 250 | | | | 249,293 | | | | 247,340 | | | | 1,953 | | | | — | |
Expiring 11/16/22 | | MSC | | | EUR | | | | 190 | | | | 186,174 | | | | 187,979 | | | | — | | | | (1,805 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 190 | | | | 186,174 | | | | 187,979 | | | | — | | | | (1,805 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 140 | | | | 138,474 | | | | 138,511 | | | | — | | | | (37 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 110 | | | | 107,785 | | | | 108,830 | | | | — | | | | (1,045 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 100 | | | | 99,717 | | | | 98,936 | | | | 781 | | | | — | |
Expiring 11/16/22 | | MSC | | | EUR | | | | 80 | | | | 78,815 | | | | 79,149 | | | | — | | | | (334 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 80 | | | | 78,904 | | | | 79,149 | | | | — | | | | (245 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 70 | | | | 69,802 | | | | 69,255 | | | | 547 | | | | — | |
Expiring 11/16/22 | | MSC | | | EUR | | | | 70 | | | | 69,041 | | | | 69,255 | | | | — | | | | (214 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 70 | | | | 69,863 | | | | 69,256 | | | | 607 | | | | — | |
Expiring 11/16/22 | | MSC | | | EUR | | | | 60 | | | | 59,830 | | | | 59,361 | | | | 469 | | | | — | |
Expiring 11/16/22 | | MSC | | | EUR | | | | 60 | | | | 59,178 | | | | 59,362 | | | | — | | | | (184 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 60 | | | | 58,308 | | | | 59,361 | | | | — | | | | (1,053 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 60 | | | | 58,710 | | | | 59,362 | | | | — | | | | (652 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 50 | | | | 48,993 | | | | 49,468 | | | | — | | | | (475 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 50 | | | | 49,045 | | | | 49,468 | | | | — | | | | (423 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 50 | | | | 49,902 | | | | 49,468 | | | | 434 | | | | — | |
Expiring 11/16/22 | | MSC | | | EUR | | | | 40 | | | | 39,921 | | | | 39,574 | | | | 347 | | | | — | |
Expiring 11/16/22 | | MSC | | | EUR | | | | 40 | | | | 38,944 | | | | 39,574 | | | | — | | | | (630 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 40 | | | | 39,887 | | | | 39,574 | | | | 313 | | | | — | |
Expiring 11/16/22 | | MSC | | | EUR | | | | 40 | | | | 39,140 | | | | 39,574 | | | | — | | | | (434 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 40 | | | | 39,564 | | | | 39,574 | | | | — | | | | (10 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 30 | | | | 29,396 | | | | 29,681 | | | | — | | | | (285 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 30 | | | | 29,673 | | | | 29,681 | | | | — | | | | (8 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 30 | | | | 29,396 | | | | 29,681 | | | | — | | | | (285 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 20 | | | | 19,570 | | | | 19,787 | | | | — | | | | (217 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 20 | | | | 19,782 | | | | 19,787 | | | | — | | | | (5 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 20 | | | | 19,436 | | | | 19,787 | | | | — | | | | (351 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 20 | | | | 19,618 | | | | 19,787 | | | | — | | | | (169 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 20 | | | | 19,618 | | | | 19,787 | | | | — | | | | (169 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 20 | | | | 19,570 | | | | 19,787 | | | | — | | | | (217 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 20 | | | | 19,436 | | | | 19,787 | | | | — | | | | (351 | ) |
See Notes to Financial Statements.
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Sale Contracts | | Counterparty | | Notional Amount (000) | | | Value at Settlement Date | | | Current Value | | | Unrealized Appreciation | | | Unrealized Depreciation | |
OTC Forward Foreign Currency Exchange Contracts (cont’d.): | |
Euro (cont’d.), | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | EUR | | | | 10 | | | $ | 9,863 | | | $ | 9,894 | | | $ | — | | | $ | (31 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 10 | | | | 9,891 | | | | 9,894 | | | | — | | | | (3 | ) |
Expiring 11/16/22 | | MSC | | | EUR | | | | 10 | | | | 9,852 | | | | 9,894 | | | | — | | | | (42 | ) |
Hungarian Forint, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | HUF | | | | 16,530 | | | | 39,048 | | | | 39,700 | | | | — | | | | (652 | ) |
Expiring 11/16/22 | | MSC | | | HUF | | | | 4,133 | | | | 9,762 | | | | 9,925 | | | | — | | | | (163 | ) |
Expiring 11/16/22 | | MSC | | | HUF | | | | 4,133 | | | | 9,762 | | | | 9,925 | | | | — | | | | (163 | ) |
Expiring 11/16/22 | | MSC | | | HUF | | | | 11 | | | | 24 | | | | 26 | | | | — | | | | (2 | ) |
Indian Rupee, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | INR | | | | 4,953 | | | | 60,000 | | | | 59,725 | | | | 275 | | | | — | |
Expiring 11/16/22 | | MSC | | | INR | | | | 3,299 | | | | 40,000 | | | | 39,778 | | | | 222 | | | | — | |
Expiring 11/16/22 | | MSC | | | INR | | | | 2,480 | | | | 30,000 | | | | 29,897 | | | | 103 | | | | — | |
Expiring 11/16/22 | | MSC | | | INR | | | | 2,479 | | | | 30,000 | | | | 29,895 | | | | 105 | | | | — | |
Expiring 11/16/22 | | MSC | | | INR | | | | 2,475 | | | | 30,000 | | | | 29,837 | | | | 163 | | | | — | |
Expiring 11/16/22 | | MSC | | | INR | | | | 2,473 | | | | 30,000 | | | | 29,813 | | | | 187 | | | | — | |
Expiring 11/16/22 | | MSC | | | INR | | | | 1,653 | | | | 20,000 | | | | 19,926 | | | | 74 | | | | — | |
Expiring 11/16/22 | | MSC | | | INR | | | | 1,651 | | | | 20,000 | | | | 19,906 | | | | 94 | | | | — | |
Expiring 11/16/22 | | MSC | | | INR | | | | 830 | | | | 10,000 | | | | 10,003 | | | | — | | | | (3 | ) |
Expiring 11/16/22 | | MSC | | | INR | | | | 830 | | | | 10,000 | | | | 10,002 | | | | — | | | | (2 | ) |
Expiring 11/16/22 | | MSC | | | INR | | | | 826 | | | | 10,000 | | | | 9,965 | | | | 35 | | | | — | |
Expiring 11/16/22 | | MSC | | | INR | | | | 826 | | | | 10,000 | | | | 9,960 | | | | 40 | | | | — | |
Expiring 11/16/22 | | MSC | | | INR | | | | 826 | | | | 10,000 | | | | 9,960 | | | | 40 | | | | — | |
Indonesian Rupiah, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | IDR | | | | 3,229,048 | | | | 210,000 | | | | 206,667 | | | | 3,333 | | | | — | |
Expiring 11/16/22 | | MSC | | | IDR | | | | 465,741 | | | | 30,000 | | | | 29,808 | | | | 192 | | | | — | |
Expiring 11/16/22 | | MSC | | | IDR | | | | 312,932 | | | | 20,000 | | | | 20,028 | | | | — | | | | (28 | ) |
Expiring 11/16/22 | | MSC | | | IDR | | | | 311,818 | | | | 20,000 | | | | 19,957 | | | | 43 | | | | — | |
Expiring 11/16/22 | | MSC | | | IDR | | | | 155,994 | | | | 10,000 | | | | 9,984 | | | | 16 | | | | — | |
Expiring 11/16/22 | | MSC | | | IDR | | | | 155,451 | | | | 10,000 | | | | 9,949 | | | | 51 | | | | — | |
Expiring 11/16/22 | | MSC | | | IDR | | | | 154,187 | | | | 10,000 | | | | 9,868 | | | | 132 | | | | — | |
Israeli Shekel, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | ILS | | | | 604 | | | | 170,000 | | | | 171,200 | | | | — | | | | (1,200 | ) |
Expiring 11/16/22 | | MSC | | | ILS | | | | 36 | | | | 10,033 | | | | 10,071 | | | | — | | | | (38 | ) |
Expiring 11/16/22 | | MSC | | | ILS | | | | 35 | | | | 10,025 | | | | 9,990 | | | | 35 | | | | — | |
Expiring 11/16/22 | | MSC | | | ILS | | | | 35 | | | | 10,024 | | | | 9,997 | | | | 27 | | | | — | |
Expiring 11/16/22 | | MSC | | | ILS | | | | 35 | | | | 10,013 | | | | 10,028 | | | | — | | | | (15 | ) |
Japanese Yen, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 286,155 | | | | 1,960,000 | | | | 1,927,845 | | | | 32,155 | | | | — | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 108,037 | | | | 740,000 | | | | 727,855 | | | | 12,145 | | | | — | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 18,001 | | | | 120,413 | | | | 121,271 | | | | — | | | | (858 | ) |
Expiring 11/16/22 | | MSC | | | JPY | | | | 14,168 | | | | 95,976 | | | | 95,449 | | | | 527 | | | | — | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 7,503 | | | | 50,091 | | | | 50,548 | | | | — | | | | (457 | ) |
See Notes to Financial Statements.
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 27 | |
Schedule of Investments (continued)
as of October 31, 2022
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Sale Contracts | | Counterparty | | Notional Amount (000) | | | Value at Settlement Date | | | Current Value | | | Unrealized Appreciation | | | Unrealized Depreciation | |
OTC Forward Foreign Currency Exchange Contracts (cont’d.): | |
Japanese Yen (cont’d.), | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 4,512 | | | $ | 30,439 | | | $ | 30,398 | | | $ | 41 | | | $ | — | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 4,510 | | | | 30,554 | | | | 30,386 | | | | 168 | | | | — | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 3,019 | | | | 20,453 | | | | 20,341 | | | | 112 | | | | — | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 2,920 | | | | 20,000 | | | | 19,671 | | | | 329 | | | | — | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 1,493 | | | | 9,987 | | | | 10,058 | | | | — | | | | (71) | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 1,482 | | | | 9,995 | | | | 9,982 | | | | 13 | | | | — | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 1,460 | | | | 10,000 | | | | 9,836 | | | | 164 | | | | — | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 92 | | | | 620 | | | | 617 | | | | 3 | | | | — | |
Expiring 11/16/22 | | MSC | | | JPY | | | | 11 | | | | 77 | | | | 77 | | | | — | | | | — | |
Expiring 11/16/22 | | MSC | | | JPY | | | | — | * | | | 3 | | | | 3 | | | | — | | | | — | |
Mexican Peso, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 2,580 | | | | 129,947 | | | | 129,835 | | | | 112 | | | | — | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 1,809 | | | | 89,627 | | | | 91,042 | | | | — | | | | (1,415) | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 1,394 | | | | 69,621 | | | | 70,142 | | | | — | | | | (521) | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 992 | | | | 49,550 | | | | 49,921 | | | | — | | | | (371) | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 792 | | | | 39,794 | | | | 39,877 | | | | — | | | | (83) | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 600 | | | | 29,734 | | | | 30,203 | | | | — | | | | (469) | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 596 | | | | 30,001 | | | | 29,975 | | | | 26 | | | | — | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 400 | | | | 19,868 | | | | 20,134 | | | | — | | | | (266) | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 199 | | | | 9,944 | | | | 10,018 | | | | — | | | | (74) | |
Expiring 11/16/22 | | MSC | | | MXN | | | | 198 | | | | 9,978 | | | | 9,969 | | | | 9 | | | | — | |
New Taiwanese Dollar, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 16,535 | | | | 520,000 | | | | 512,392 | | | | 7,608 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 6,678 | | | | 210,000 | | | | 206,928 | | | | 3,072 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 5,088 | | | | 160,000 | | | | 157,659 | | | | 2,341 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 1,926 | | | | 60,000 | | | | 59,668 | | | | 332 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 966 | | | | 30,000 | | | | 29,946 | | | | 54 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 965 | | | | 30,000 | | | | 29,893 | | | | 107 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 963 | | | | 30,000 | | | | 29,852 | | | | 148 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 959 | | | | 30,000 | | | | 29,709 | | | | 291 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 645 | | | | 20,000 | | | | 19,997 | | | | 3 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 645 | | | | 20,000 | | | | 20,000 | | | | — | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 644 | | | | 20,000 | | | | 19,958 | | | | 42 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 643 | | | | 20,000 | | | | 19,936 | | | | 64 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 643 | | | | 20,000 | | | | 19,937 | | | | 63 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 642 | | | | 20,000 | | | | 19,896 | | | | 104 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 641 | | | | 20,000 | | | | 19,863 | | | | 137 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 639 | | | | 20,000 | | | | 19,792 | | | | 208 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 638 | | | | 20,000 | | | | 19,755 | | | | 245 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 323 | | | | 10,000 | | | | 10,022 | | | | — | | | | (22) | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 322 | | | | 10,000 | | | | 9,966 | | | | 34 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 322 | | | | 10,000 | | | | 9,990 | | | | 10 | | | | — | |
See Notes to Financial Statements.
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Sale Contracts | | Counterparty | | Notional Amount (000) | | | Value at Settlement Date | | | Current Value | | | Unrealized Appreciation | | | Unrealized Depreciation | |
OTC Forward Foreign Currency Exchange Contracts (cont’d.): | |
New Taiwanese Dollar (cont’d.), | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 320 | | | $ | 10,000 | | | $ | 9,915 | | | $ | 85 | | | $ | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 319 | | | | 10,000 | | | | 9,877 | | | | 123 | | | | — | |
Expiring 11/16/22 | | MSC | | | TWD | | | | 319 | | | | 10,000 | | | | 9,888 | | | | 112 | | | | — | |
New Zealand Dollar, | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 290 | | | | 161,302 | | | | 168,653 | | | | — | | | | (7,351 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 140 | | | | 78,318 | | | | 81,418 | | | | — | | | | (3,100 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 140 | | | | 81,473 | | | | 81,419 | | | | 54 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 90 | | | | 50,248 | | | | 52,341 | | | | — | | | | (2,093 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 90 | | | | 52,163 | | | | 52,341 | | | | — | | | | (178 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 80 | | | | 45,682 | | | | 46,525 | | | | — | | | | (843 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 80 | | | | 46,374 | | | | 46,525 | | | | — | | | | (151 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 70 | | | | 39,751 | | | | 40,709 | | | | — | | | | (958 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 70 | | | | 39,158 | | | | 40,710 | | | | — | | | | (1,552 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 60 | | | | 35,145 | | | | 34,893 | | | | 252 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 60 | | | | 33,863 | | | | 34,894 | | | | — | | | | (1,031 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 28,318 | | | | 29,079 | | | | — | | | | (761 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 29,014 | | | | 29,078 | | | | — | | | | (64 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 28,121 | | | | 29,078 | | | | — | | | | (957 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 29,218 | | | | 29,078 | | | | 140 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 28,436 | | | | 29,078 | | | | — | | | | (642 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 28,519 | | | | 29,078 | | | | — | | | | (559 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 28,261 | | | | 29,078 | | | | — | | | | (817 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 28,597 | | | | 29,079 | | | | — | | | | (482 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 50 | | | | 29,066 | | | | 29,078 | | | | — | | | | (12 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 40 | | | | 22,899 | | | | 23,263 | | | | — | | | | (364 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 40 | | | | 22,619 | | | | 23,262 | | | | — | | | | (643 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 40 | | | | 23,199 | | | | 23,263 | | | | — | | | | (64 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 40 | | | | 22,651 | | | | 23,262 | | | | — | | | | (611 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 30 | | | | 17,044 | | | | 17,446 | | | | — | | | | (402 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 30 | | | | 17,240 | | | | 17,447 | | | | — | | | | (207 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 30 | | | | 17,088 | | | | 17,446 | | | | — | | | | (358 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 30 | | | | 17,270 | | | | 17,447 | | | | — | | | | (177 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 30 | | | | 17,101 | | | | 17,447 | | | | — | | | | (346 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 30 | | | | 16,803 | | | | 17,447 | | | | — | | | | (644 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 30 | | | | 17,055 | | | | 17,447 | | | | — | | | | (392 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 20 | | | | 11,606 | | | | 11,632 | | | | — | | | | (26 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 20 | | | | 11,279 | | | | 11,631 | | | | — | | | | (352 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 20 | | | | 11,682 | | | | 11,631 | | | | 51 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 20 | | | | 11,448 | | | | 11,632 | | | | — | | | | (184 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 20 | | | | 11,679 | | | | 11,631 | | | | 48 | | | | — | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 20 | | | | 11,625 | | | | 11,631 | | | | — | | | | (6 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 20 | | | | 11,324 | | | | 11,631 | | | | — | | | | (307 | ) |
See Notes to Financial Statements.
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 29 | |
Schedule of Investments (continued)
as of October 31, 2022
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Sale Contracts | | Counterparty | | Notional Amount (000) | | | Value at Settlement Date | | | Current Value | | | Unrealized Appreciation | | | Unrealized Depreciation | |
OTC Forward Foreign Currency Exchange Contracts (cont’d.): | |
New Zealand Dollar (cont’d.), | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | NZD | | | | 20 | | | $ | 11,189 | | | $ | 11,632 | | | $ | — | | | $ | (443 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 20 | | | | 11,510 | | | | 11,632 | | | | — | | | | (122 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 20 | | | | 11,513 | | | | 11,631 | | | | — | | | | (118 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,683 | | | | 5,816 | | | | — | | | | (133 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,563 | | | | 5,816 | | | | — | | | | (253 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,662 | | | | 5,816 | | | | — | | | | (154 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,724 | | | | 5,816 | | | | — | | | | (92 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,624 | | | | 5,816 | | | | — | | | | (192 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,798 | | | | 5,816 | | | | — | | | | (18 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,651 | | | | 5,815 | | | | — | | | | (164 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,756 | | | | 5,815 | | | | — | | | | (59 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,598 | | | | 5,816 | | | | — | | | | (218 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,618 | | | | 5,816 | | | | — | | | | (198 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,752 | | | | 5,816 | | | | — | | | | (64 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,646 | | | | 5,816 | | | | — | | | | (170 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,633 | | | | 5,815 | | | | — | | | | (182 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,563 | | | | 5,816 | | | | — | | | | (253 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,809 | | | | 5,816 | | | | — | | | | (7 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,618 | | | | 5,816 | | | | — | | | | (198 | ) |
Expiring 11/16/22 | | MSC | | | NZD | | | | 10 | | | | 5,641 | | | | 5,815 | | | | — | | | | (174 | ) |
Norwegian Krone, | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 2,067 | | | | 201,705 | | | | 198,967 | | | | 2,738 | | | | — | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 1,965 | | | | 189,347 | | | | 189,146 | | | | 201 | | | | — | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 1,560 | | | | 146,473 | | | | 150,115 | | | | — | | | | (3,642 | ) |
Expiring 11/16/22 | | MSC | | | NOK | | | | 1,356 | | | | 127,311 | | | | 130,477 | | | | — | | | | (3,166 | ) |
Expiring 11/16/22 | | MSC | | | NOK | | | | 1,246 | | | | 118,569 | | | | 119,925 | | | | — | | | | (1,356 | ) |
Expiring 11/16/22 | | MSC | | | NOK | | | | 1,132 | | | | 109,341 | | | | 108,914 | | | | 427 | | | | — | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 1,035 | | | | 99,677 | | | | 99,571 | | | | 106 | | | | — | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 1,031 | | | | 97,995 | | | | 99,222 | | | | — | | | | (1,227 | ) |
Expiring 11/16/22 | | MSC | | | NOK | | | | 831 | | | | 79,030 | | | | 79,934 | | | | — | | | | (904 | ) |
Expiring 11/16/22 | | MSC | | | NOK | | | | 829 | | | | 78,793 | | | | 79,779 | | | | — | | | | (986 | ) |
Expiring 11/16/22 | | MSC | | | NOK | | | | 721 | | | | 68,399 | | | | 69,412 | | | | — | | | | (1,013 | ) |
Expiring 11/16/22 | | MSC | | | NOK | | | | 309 | | | | 29,838 | | | | 29,721 | | | | 117 | | | | — | |
Expiring 11/16/22 | | MSC | | | NOK | | | | 209 | | | | 19,586 | | | | 20,073 | | | | — | | | | (487 | ) |
Expiring 11/16/22 | | MSC | | | NOK | | | | 207 | | | | 19,687 | | | | 19,933 | | | | — | | | | (246 | ) |
Expiring 11/16/22 | | MSC | | | NOK | | | | 104 | | | | 9,855 | | | | 9,978 | | | | — | | | | (123 | ) |
Expiring 11/16/22 | | MSC | | | NOK | | | | 103 | | | | 9,964 | | | | 9,953 | | | | 11 | | | | — | |
Philippine Peso, | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | PHP | | | | 5,909 | | | | 100,000 | | | | 101,512 | | | | — | | | | (1,512 | ) |
Expiring 11/16/22 | | MSC | | | PHP | | | | 1,185 | | | | 20,000 | | | | 20,359 | | | | — | | | | (359 | ) |
Expiring 11/16/22 | | MSC | | | PHP | | | | 592 | | | | 10,000 | | | | 10,170 | | | | — | | | | (170 | ) |
Expiring 11/16/22 | | MSC | | | PHP | | | | 589 | | | | 10,000 | | | | 10,122 | | | | — | | | | (122 | ) |
See Notes to Financial Statements.
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Sale Contracts | | Counterparty | | | Notional Amount (000) | | | Value at Settlement Date | | | Current Value | | | Unrealized Appreciation | | | Unrealized Depreciation | |
OTC Forward Foreign Currency Exchange Contracts (cont’d.): | |
Polish Zloty, | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | | MSC | | | | PLN | | | | 96 | | | $ | 19,376 | | | $ | 20,140 | | | $ | — | | | $ | (764 | ) |
Expiring 11/16/22 | | | MSC | | | | PLN | | | | 96 | | | | 19,620 | | | | 20,015 | | | | — | | | | (395 | ) |
Expiring 11/16/22 | | | MSC | | | | PLN | | | | 95 | | | | 19,448 | | | | 19,892 | | | | — | | | | (444 | ) |
Expiring 11/16/22 | | | MSC | | | | PLN | | | | 48 | | | | 9,810 | | | | 10,007 | | | | — | | | | (197 | ) |
Expiring 11/16/22 | | | MSC | | | | PLN | | | | 47 | | | | 9,993 | | | | 9,861 | | | | 132 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | PLN | | | | —* | | | | 5 | | | | 5 | | | | — | | | | — | |
Singapore Dollar, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | | MSC | | | | SGD | | | | 273 | | | | 190,000 | | | | 192,760 | | | | — | | | | (2,760 | ) |
Expiring 11/16/22 | | | MSC | | | | SGD | | | | 57 | | | | 39,937 | | | | 39,930 | | | | 7 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | SGD | | | | 56 | | | | 39,929 | | | | 39,733 | | | | 196 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | SGD | | | | 42 | | | | 30,039 | | | | 29,951 | | | | 88 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | SGD | | | | 29 | | | | 20,069 | | | | 20,281 | | | | — | | | | (212 | ) |
Expiring 11/16/22 | | | MSC | | | | SGD | | | | 14 | | | | 9,994 | | | | 10,037 | | | | — | | | | (43 | ) |
Expiring 11/16/22 | | | MSC | | | | SGD | | | | 14 | | | | 9,977 | | | | 9,948 | | | | 29 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | SGD | | | | —* | | | | 33 | | | | 33 | | | | — | | | | — | |
Expiring 11/16/22 | | | MSC | | | | SGD | | | | —* | | | | 14 | | | | 14 | | | | — | | | | — | |
Expiring 11/16/22 | | | MSC | | | | SGD | | | | —* | | | | 214 | | | | 215 | | | | — | | | | (1 | ) |
Expiring 11/16/22 | | | MSC | | | | SGD | | | | —* | | | | 3 | | | | 3 | | | | — | | | | — | |
South African Rand, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | | MSC | | | | ZAR | | | | 1,095 | | | | 60,000 | | | | 59,557 | | | | 443 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | ZAR | | | | 913 | | | | 50,000 | | | | 49,625 | | | | 375 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | ZAR | | | | 367 | | | | 20,007 | | | | 19,962 | | | | 45 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | ZAR | | | | 362 | | | | 19,890 | | | | 19,677 | | | | 213 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | ZAR | | | | 359 | | | | 19,950 | | | | 19,510 | | | | 440 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | ZAR | | | | 183 | | | | 10,041 | | | | 9,974 | | | | 67 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | ZAR | | | | 183 | | | | 10,041 | | | | 9,974 | | | | 67 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | ZAR | | | | 182 | | | | 9,992 | | | | 9,885 | | | | 107 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | ZAR | | | | 181 | | | | 9,949 | | | | 9,850 | | | | 99 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | ZAR | | | | 180 | | | | 10,010 | | | | 9,789 | | | | 221 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | ZAR | | | | 179 | | | | 9,975 | | | | 9,755 | | | | 220 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | ZAR | | | | 1 | | | | 80 | | | | 79 | | | | 1 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | ZAR | | | | 1 | | | | 81 | | | | 81 | | | | — | | | | — | |
Expiring 11/16/22 | | | MSC | | | | ZAR | | | | —* | | | | 12 | | | | 12 | | | | — | | | | — | |
South Korean Won, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | | MSC | | | | KRW | | | | 213,792 | | | | 150,000 | | | | 149,782 | | | | 218 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | KRW | | | | 57,011 | | | | 40,000 | | | | 39,942 | | | | 58 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | KRW | | | | 28,527 | | | | 20,000 | | | | 19,986 | | | | 14 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | KRW | | | | 28,363 | | | | 20,000 | | | | 19,871 | | | | 129 | | | | — | |
Expiring 11/16/22 | | | MSC | | | | KRW | | | | 14,396 | | | | 10,000 | | | | 10,086 | | | | — | | | | (86 | ) |
Expiring 11/16/22 | | | MSC | | | | KRW | | | | 14,387 | | | | 10,000 | | | | 10,079 | | | | — | | | | (79 | ) |
Expiring 11/16/22 | | | MSC | | | | KRW | | | | 14,375 | | | | 10,000 | | | | 10,071 | | | | — | | | | (71 | ) |
Expiring 11/16/22 | | | MSC | | | | KRW | | | | 14,368 | | | | 10,000 | | | | 10,066 | | | | — | | | | (66 | ) |
See Notes to Financial Statements.
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 31 | |
Schedule of Investments (continued)
as of October 31, 2022
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Sale Contracts | | Counterparty | | Notional Amount (000) | | | Value at Settlement Date | | | Current Value | | | Unrealized Appreciation | | | Unrealized Depreciation | |
OTC Forward Foreign Currency Exchange Contracts (cont’d.): | |
South Korean Won (cont’d.), | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | KRW | | | | 14,353 | | | $ | 10,000 | | | $ | 10,056 | | | $ | — | | | $ | (56 | ) |
Expiring 11/16/22 | | MSC | | | KRW | | | | 14,336 | | | | 10,000 | | | | 10,043 | | | | — | | | | (43 | ) |
Expiring 11/16/22 | | MSC | | | KRW | | | | 14,320 | | | | 10,000 | | | | 10,032 | | | | — | | | | (32 | ) |
Expiring 11/16/22 | | MSC | | | KRW | | | | 14,282 | | | | 10,000 | | | | 10,006 | | | | — | | | | (6 | ) |
Expiring 11/16/22 | | MSC | | | KRW | | | | 14,270 | | | | 10,000 | | | | 9,997 | | | | 3 | | | | — | |
Expiring 11/16/22 | | MSC | | | KRW | | | | 14,244 | | | | 10,000 | | | | 9,979 | | | | 21 | | | | — | |
Expiring 11/16/22 | | MSC | | | KRW | | | | 14,212 | | | | 10,000 | | | | 9,957 | | | | 43 | | | | — | |
Expiring 11/16/22 | | MSC | | | KRW | | | | 14,197 | | | | 10,000 | | | | 9,946 | | | | 54 | | | | — | |
Swedish Krona, | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | SEK | | | | 4,379 | | | | 399,249 | | | | 397,051 | | | | 2,198 | | | | — | |
Expiring 11/16/22 | | MSC | | | SEK | | | | 2,313 | | | | 204,619 | | | | 209,702 | | | | — | | | | (5,083 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 1,645 | | | | 147,706 | | | | 149,099 | | | | — | | | | (1,393 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 1,529 | | | | 138,023 | | | | 138,635 | | | | — | | | | (612 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 1,104 | | | | 98,883 | | | | 100,116 | | | | — | | | | (1,233 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 880 | | | | 77,685 | | | | 79,799 | | | | — | | | | (2,114 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 549 | | | | 49,351 | | | | 49,816 | | | | — | | | | (465 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 549 | | | | 48,987 | | | | 49,787 | | | | — | | | | (800 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 546 | | | | 49,317 | | | | 49,536 | | | | — | | | | (219 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 440 | | | | 39,515 | | | | 39,888 | | | | — | | | | (373 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 329 | | | | 29,239 | | | | 29,841 | | | | — | | | | (602 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 328 | | | | 29,287 | | | | 29,762 | | | | — | | | | (475 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 221 | | | | 19,815 | | | | 20,061 | | | | — | | | | (246 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 220 | | | | 19,502 | | | | 19,986 | | | | — | | | | (484 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 220 | | | | 19,730 | | | | 19,916 | | | | — | | | | (186 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 110 | | | | 9,860 | | | | 9,983 | | | | — | | | | (123 | ) |
Expiring 11/16/22 | | MSC | | | SEK | | | | 109 | | | | 9,974 | | | | 9,919 | | | | 55 | | | | — | |
Expiring 11/16/22 | | MSC | | | SEK | | | | 109 | | | | 9,970 | | | | 9,915 | | | | 55 | | | | — | |
Expiring 11/16/22 | | MSC | | | SEK | | | | —* | | | | 16 | | | | 16 | | | | — | | | | — | |
Swiss Franc, | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiring 11/16/22 | | MSC | | | CHF | | | | 301 | | | | 301,766 | | | | 300,609 | | | | 1,157 | | | | — | |
Expiring 11/16/22 | | MSC | | | CHF | | | | 250 | | | | 250,495 | | | | 250,255 | | | | 240 | | | | — | |
Expiring 11/16/22 | | MSC | | | CHF | | | | 181 | | | | 180,454 | | | | 180,888 | | | | — | | | | (434 | ) |
Expiring 11/16/22 | | MSC | | | CHF | | | | 130 | | | | 130,362 | | | | 129,790 | | | | 572 | | | | — | |
Expiring 11/16/22 | | MSC | | | CHF | | | | 109 | | | | 110,240 | | | | 109,520 | | | | 720 | | | | — | |
Expiring 11/16/22 | | MSC | | | CHF | | | | 100 | | | | 99,771 | | | | 100,103 | | | | — | | | | (332 | ) |
Expiring 11/16/22 | | MSC | | | CHF | | | | 89 | | | | 90,212 | | | | 89,331 | | | | 881 | | | | — | |
Expiring 11/16/22 | | MSC | | | CHF | | | | 79 | | | | 80,000 | | | | 79,433 | | | | 567 | | | | — | |
Expiring 11/16/22 | | MSC | | | CHF | | | | 20 | | | | 19,840 | | | | 19,705 | | | | 135 | | | | — | |
Expiring 11/16/22 | | MSC | | | CHF | | | | 20 | | | | 20,068 | | | | 19,991 | | | | 77 | | | | — | |
Expiring 11/16/22 | | MSC | | | CHF | | | | 10 | | | | 10,109 | | | | 10,070 | | | | 39 | | | | — | |
Expiring 11/16/22 | | MSC | | | CHF | | | | 10 | | | | 9,976 | | | | 9,879 | | | | 97 | | | | — | |
Expiring 11/16/22 | | MSC | | | CHF | | | | 10 | | | | 10,016 | | | | 9,948 | | | | 68 | | | | — | |
See Notes to Financial Statements.
Forward foreign currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Sale Contracts | | Counterparty | | Notional Amount (000) | | Value at Settlement Date | | Current Value | | Unrealized Appreciation | | Unrealized Depreciation |
OTC Forward Foreign Currency Exchange Contracts (cont’d.): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Swiss Franc (cont’d.), | | | | | | | | | | | | | | |
Expiring 11/16/22 | | | | MSC | | | | | CHF | | | | | 10 | | | | $ | 10,004 | | | | $ | 10,037 | | | | $ | — | | | | $ | (33 | ) |
Thai Baht, | | | | | | | | | | | | | | |
Expiring 11/16/22 | | | | MSC | | | | | THB | | | | | 1,132 | | | | | 29,778 | | | | | 29,767 | | | | | 11 | | | | | — | |
Expiring 11/16/22 | | | | MSC | | | | | THB | | | | | 767 | | | | | 20,000 | | | | | 20,181 | | | | | — | | | | | (181 | ) |
Expiring 11/16/22 | | | | MSC | | | | | THB | | | | | 760 | | | | | 19,977 | | | | | 20,004 | | | | | — | | | | | (27 | ) |
Expiring 11/16/22 | | | | MSC | | | | | THB | | | | | 381 | | | | | 10,000 | | | | | 10,016 | | | | | — | | | | | (16 | ) |
Expiring 11/16/22 | | | | MSC | | | | | THB | | | | | 381 | | | | | 9,938 | | | | | 10,021 | | | | | — | | | | | (83 | ) |
Expiring 11/16/22 | | | | MSC | | | | | THB | | | | | 380 | | | | | 10,000 | | | | | 10,005 | | | | | — | | | | | (5 | ) |
Expiring 11/16/22 | | | | MSC | | | | | THB | | | | | 378 | | | | | 10,000 | | | | | 9,953 | | | | | 47 | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | 32,806,100 | | | | $ | 33,121,982 | | | | | 103,505 | | | | | (419,387 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 355,250 | | | | $ | (479,540 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cross currency exchange contracts outstanding at October 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Settlement | | Type | | Notional Amount (000) | | In Exchange For (000) | | Unrealized Appreciation | | Unrealized Depreciation | | Counterparty |
OTC Cross Currency Exchange Contracts: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
11/16/22 | | | | Buy | | | | | CZK | | | | | 238 | | | | | EUR | | | | | 10 | | | | $ | — | | | | $ | (292 | ) | | MSC |
11/16/22 | | | | Buy | | | | | CZK | | | | | 246 | | | | | EUR | | | | | 10 | | | | | 17 | | | | | — | | | MSC |
11/16/22 | | | | Buy | | | | | CZK | | | | | 246 | | | | | EUR | | | | | 10 | | | | | 17 | | | | | — | | | MSC |
11/16/22 | | | | Buy | | | | | CZK | | | | | 246 | | | | | EUR | | | | | 10 | | | | | 20 | | | | | — | | | MSC |
11/16/22 | | | | Buy | | | | | CZK | | | | | 490 | | | | | EUR | | | | | 20 | | | | | — | | | | | (11 | ) | | MSC |
11/16/22 | | | | Buy | | | | | CZK | | | | | 737 | | | | | EUR | | | | | 30 | | | | | 28 | | | | | — | | | MSC |
11/16/22 | | | | Buy | | | | | CZK | | | | | 15,796 | | | | | EUR | | | | | 640 | | | | | 3,729 | | | | | — | | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 10 | | | | | PLN | | | | | 47 | | | | | 4 | | | | | — | | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 10 | | | | | PLN | | | | | 47 | | | | | 3 | | | | | — | | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 10 | | | | | PLN | | | | | 47 | | | | | — | | | | | — | | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 10 | | | | | PLN | | | | | 48 | | | | | — | | | | | (65 | ) | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 10 | | | | | PLN | | | | | 48 | | | | | — | | | | | (51 | ) | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 10 | | | | | CZK | | | | | 246 | | | | | — | | | | | (26 | ) | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 10 | | | | | CZK | | | | | 246 | | | | | — | | | | | (21 | ) | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 10 | | | | | CZK | | | | | 246 | | | | | — | | | | | (15 | ) | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 10 | | | | | HUF | | | | | 4,150 | | | | | — | | | | | (73 | ) | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 20 | | | | | PLN | | | | | 95 | | | | | — | | | | | (80 | ) | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 20 | | | | | PLN | | | | | 97 | | | | | — | | | | | (445 | ) | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 20 | | | | | CZK | | | | | 492 | | | | | — | | | | | (55 | ) | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 20 | | | | | HUF | | | | | 8,217 | | | | | 54 | | | | | — | | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 20 | | | | | HUF | | | | | 8,693 | | | | | — | | | | | (1,090 | ) | | MSC |
See Notes to Financial Statements.
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 33 | |
Schedule of Investments (continued)
as of October 31, 2022
Cross currency exchange contracts outstanding at October 31, 2022 (continued):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Settlement | | Type | | Notional Amount (000) | | In Exchange For (000) | | Unrealized Appreciation | | Unrealized Depreciation | | Counterparty |
| | | | | | | | |
OTC Cross Currency Exchange Contracts (cont’d.): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
11/16/22 | | | | Buy | | | | | EUR | | | | | 30 | | | | | CZK | | | | | 739 | | | | $ | — | | | | $ | (114 | ) | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 40 | | | | | PLN | | | | | 191 | | | | | — | | | | | (277 | ) | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 40 | | | | | CZK | | | | | 983 | | | | | — | | | | | (81 | ) | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 100 | | | | | HUF | | | | | 43,436 | | | | | — | | | | | (5,382 | ) | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 110 | | | | | SEK | | | | | 1,213 | | | | | — | | | | | (1,152 | ) | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 160 | | | | | SEK | | | | | 1,765 | | | | | — | | | | | (1,689 | ) | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 290 | | | | | SEK | | | | | 3,198 | | | | | — | | | | | (3,043 | ) | | MSC |
11/16/22 | | | | Buy | | | | | EUR | | | | | 550 | | | | | NOK | | | | | 5,748 | | | | | — | | | | | (9,025 | ) | | MSC |
11/16/22 | | | | Buy | | | | | HUF | | | | | 4,135 | | | | | EUR | | | | | 10 | | | | | 38 | | | | | — | | | MSC |
11/16/22 | | | | Buy | | | | | HUF | | | | | 12,411 | | | | | EUR | | | | | 30 | | | | | 127 | | | | | — | | | MSC |
11/16/22 | | | | Buy | | | | | PLN | | | | | 47 | | | | | EUR | | | | | 10 | | | | | — | | | | | (1 | ) | | MSC |
11/16/22 | | | | Buy | | | | | PLN | | | | | 47 | | | | | EUR | | | | | 10 | | | | | — | | | | | (4 | ) | | MSC |
11/16/22 | | | | Buy | | | | | PLN | | | | | 47 | | | | | EUR | | | | | 10 | | | | | — | | | | | (85 | ) | | MSC |
11/16/22 | | | | Buy | | | | | PLN | | | | | 47 | | | | | EUR | | | | | 10 | | | | | 4 | | | | | — | | | MSC |
11/16/22 | | | | Buy | | | | | PLN | | | | | 237 | | | | | EUR | | | | | 50 | | | | | — | | | | | (3 | ) | | MSC |
11/16/22 | | | | Buy | | | | | PLN | | | | | 391 | | | | | EUR | | | | | 80 | | | | | 2,600 | | | | | — | | | MSC |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 6,641 | | | | $ | (23,080 | ) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Summary of Collateral for Centrally Cleared/Exchange-traded Derivatives:
Cash and securities segregated as collateral, including pending settlement for closed positions, to cover requirements for centrally cleared/exchange-traded derivatives are listed by broker as follows:
| | | | | | | | | | | | | | | | |
Broker | | Cash and/or Foreign Currency | | Securities Market Value |
| | | | |
| | | | | | |
GS | | | | $ | 376,377 | | | | | | | $ | — | | | |
MSC | | | | | 963,736 | | | | | | | | — | | | |
| | | | | | | | | | | | | | | | |
| | | | | | |
Total | | | | $ | 1,340,113 | | | | | | | $ | — | | | |
| | | | | | | | | | | | | | | | |
Fair Value Measurements:
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—unadjusted quoted prices generally in active markets for identical securities.
Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other observable inputs.
Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
See Notes to Financial Statements.
The following is a summary of the inputs used as of October 31, 2022 in valuing such portfolio securities:
| | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 |
Short-Term Investment | | | | | | | | | | |
Unaffiliated Fund | | $ | 41,045,727 | | | $ | — | | | $— |
| | | | | | | | | | |
| | | |
Other Financial Instruments* | | | | | | | | | | |
Assets | | | | | | | | | | |
Futures Contracts | | $ | 85,800 | | | $ | — | | | $— |
OTC Forward Foreign Currency Exchange Contracts | | | — | | | | 355,250 | | | — |
OTC Cross Currency Exchange Contracts | | | — | | | | 6,641 | | | — |
| | | | | | | | | | |
Total | | $ | 85,800 | | | $ | 361,891 | | | $— |
| | | | | | | | | | |
| | | |
Liabilities | | | | | | | | | | |
Futures Contracts | | $ | (136,583 | ) | | $ | — | | | $— |
OTC Forward Foreign Currency Exchange Contracts | | | — | | | | (479,540 | ) | | — |
OTC Cross Currency Exchange Contracts | | | — | | | | (23,080 | ) | | — |
| | | | | | | | | | |
Total | | $ | (136,583 | ) | | $ | (502,620 | ) | | $— |
| | | | | | | | | | |
* | Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as futures, forwards and centrally cleared swap contracts, which are recorded at the unrealized appreciation (depreciation) on the instrument, and OTC swap contracts which are recorded at fair value. |
Industry Classification:
The industry classification of investments and other assets in excess of liabilities shown as a percentage of net assets as of October 31, 2022 were as follows:
| | | | |
Unaffiliated Fund | | | 83.0 | % |
Other assets in excess of liabilities | | | 17.0 | |
| | | | |
| | | 100.0 | % |
| | | | |
Effects of Derivative Instruments on the Financial Statements and Primary Underlying Risk Exposure:
The Fund invested in derivative instruments during the reporting period. The primary types of risk associated with these derivative instruments are equity contracts risk, foreign exchange contracts risk and interest rate contracts risk. See the Notes to Financial Statements for additional detail regarding these derivative instruments and their risks. The effect of such derivative instruments on the Fund’s financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.
Fair values of derivative instruments as of October 31, 2022 as presented in the Statement of Assets and Liabilities:
See Notes to Financial Statements.
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 35 | |
Schedule of Investments (continued)
as of October 31, 2022
| | | | | | | | | | | | |
| | Asset Derivatives | | | Liability Derivatives | |
| | | | | | |
| | | | |
Derivatives not accounted for as hedging instruments, carried at fair value | | Statement of Assets and Liabilities Location | | Fair Value | | | Statement of Assets and Liabilities Location | | Fair Value | |
| | | | |
Equity contracts | | Due from/to broker-variation margin futures | | $ | 20,004 | * | | Due from/to broker-variation margin futures | | $ | 52,675 | * |
| | | | |
Foreign exchange contracts | | Unrealized appreciation on OTC cross currency exchange contracts | | | 6,641 | | | Unrealized depreciation on OTC cross currency exchange contracts | | | 23,080 | |
| | | | |
Foreign exchange contracts | | Unrealized appreciation on OTC forward foreign currency exchange contracts | | | 355,250 | | | Unrealized depreciation on OTC forward foreign currency exchange contracts | | | 479,540 | |
| | | | |
Interest rate contracts | | Due from/to broker-variation margin futures | | | 65,796 | * | | Due from/to broker-variation margin futures | | | 83,908 | * |
| | | | | | | | | | | | |
| | | | |
| | | | $ | 447,691 | | | | | $ | 639,203 | |
| | | | | | | | | | | | |
* | Includes cumulative appreciation (depreciation) as reported in the schedule of open futures and centrally cleared swap contracts. Only unsettled variation margin receivable (payable) is reported within the Statement of Assets and Liabilities. |
The effects of derivative instruments on the Statement of Operations for the year ended October 31, 2022 are as follows:
| | | | | | | | | | | | |
Amount of Realized Gain (Loss) on Derivatives Recognized in Income | |
Derivatives not accounted for as hedging instruments, carried at fair value | | Futures | | | Forward & Cross Currency Exchange Contracts | | | Swaps | |
Equity contracts | | $ | 1,489,185 | | | $ | — | | | $ | (9,728 | ) |
Foreign exchange contracts | | | — | | | | 1,094,795 | | | | — | |
Interest rate contracts | | | 1,281,374 | | | | — | | | | — | |
| | | | | | | | | | | | |
Total | | $ | 2,770,559 | | | $ | 1,094,795 | | | $ | (9,728 | ) |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Income |
Derivatives not accounted for as hedging instruments, carried at fair value | | | | Futures | | Forward & Cross Currency Exchange Contracts |
Equity contracts | | | | | | | | $ | (207,509 | ) | | | $ | — | |
Foreign exchange contracts | | | | | | | | | — | | | | | (204,228 | ) |
Interest rate contracts | | | | | | | | | 12,758 | | | | | — | |
| | | | | | | | | | | | | | | |
Total | | | | | | | | $ | (194,751 | ) | | | $ | (204,228 | ) |
| | | | | | | | | | | | | | | |
See Notes to Financial Statements.
For the year ended October 31, 2022, the Fund’s average volume of derivative activities is as follows:
| | | | | |
Derivative Contract Type | | Average Volume of Derivative Activities* |
Futures Contracts - Long Positions (1) | | | $ | 42,659,825 | |
Futures Contracts - Short Positions (1) | | | | 49,804,585 | |
Forward Foreign Currency Exchange Contracts - Purchased (2) | | | | 24,519,915 | |
Forward Foreign Currency Exchange Contracts - Sold (2) | | | | 30,528,370 | |
Cross Currency Exchange Contracts (3) | | | | 3,058,094 | |
Total Return Swap Agreements (1) | | | | 20,428 | |
* | Average volume is based on average quarter end balances as noted for the year ended October 31, 2022. |
(1) | Notional Amount in USD. |
(2) | Value at Settlement Date. |
Financial Instruments/Transactions—Summary of Offsetting and Netting Arrangements:
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.
Offsetting of OTC derivative assets and liabilities:
| | | | | | | | | | |
Counterparty | | Gross Amounts of Recognized Assets(1) | | Gross Amounts of Recognized Liabilities(1) | | Net Amounts of Recognized Assets/(Liabilities) | | Collateral Pledged/(Received)(2) | | Net Amount |
MSC | | $361,891 | | $(502,620) | | $(140,729) | | $140,729 | | $— |
| | | | | | | | | | |
(1) | Includes unrealized appreciation/(depreciation) on swaps and forwards, premiums paid/(received) on swap agreements and market value of purchased and written options, as represented on the Statement of Assets and Liabilities. |
(2) | Collateral amount disclosed by the Fund is limited to the market value of financial instruments/transactions and the Fund’s OTC derivative exposure by counterparty. |
See Notes to Financial Statements.
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 37 | |
Statement of Assets and Liabilities
as of October 31, 2022
| | | | |
Assets | | | | |
Unaffiliated investments (cost $41,045,727) | | $ | 41,045,727 | |
Deposit with prime broker for futures and OTC forward foreign currency exchange contracts | | | 6,064,055 | |
Deposit with broker for centrally cleared/exchange-traded derivatives | | | 1,340,113 | |
Due from broker—variation margin futures | | | 1,154,294 | |
Unrealized appreciation on OTC forward foreign currency exchange contracts | | | 355,250 | |
Dividends receivable | | | 96,858 | |
Receivable for Fund shares sold | | | 41,996 | |
Unrealized appreciation on OTC cross currency exchange contracts | | | 6,641 | |
Prepaid expenses and other assets | | | 99,434 | |
| | | | |
Total Assets | | | 50,204,368 | |
| | | | |
| |
Liabilities | | | | |
Unrealized depreciation on OTC forward foreign currency exchange contracts | | | 479,540 | |
Management fee payable | | | 74,603 | |
Accrued expenses and other liabilities | | | 73,766 | |
Audit fee payable | | | 53,000 | |
Unrealized depreciation on OTC cross currency exchange contracts | | | 23,080 | |
Payable for Fund shares purchased | | | 21,324 | |
Trustees’ fees payable | | | 830 | |
Affiliated transfer agent fee payable | | | 348 | |
Distribution fee payable | | | 215 | |
| | | | |
Total Liabilities | | | 726,706 | |
| | | | |
| |
Net Assets | | $ | 49,477,662 | |
| | | | |
| |
| | | | |
Net assets were comprised of: | | | | |
Shares of beneficial interest, at par | | $ | 4,527 | |
Paid-in capital in excess of par | | | 46,378,956 | |
Total distributable earnings (loss) | | | 3,094,179 | |
| | | | |
Net assets, October 31, 2022 | | $ | 49,477,662 | |
| | | | |
See Notes to Financial Statements.
| | | | | | | | |
Class A | | | | | | | | |
| | |
Net asset value and redemption price per share, ($787,849 ÷ 72,259 shares of beneficial interest issued and outstanding) | | $ | 10.90 | | | | | |
Maximum sales charge (5.50% of offering price) | | | 0.63 | | | | | |
| | | | | | | | |
Maximum offering price to public | | $ | 11.53 | | | | | |
| | | | | | | | |
| | |
Class C | | | | | | | | |
| | |
Net asset value, offering price and redemption price per share, ($62,976 ÷ 5,820 shares of beneficial interest issued and outstanding) | | $ | 10.82 | | | | | |
| | | | | | | | |
| | |
Class Z | | | | | | | | |
| | |
Net asset value, offering price and redemption price per share, ($14,883,369 ÷ 1,362,309 shares of beneficial interest issued and outstanding) | | $ | 10.93 | | | | | |
| | | | | | | | |
| | |
Class R6 | | | | | | | | |
| | |
Net asset value, offering price and redemption price per share, ($33,743,468 ÷ 3,086,268 shares of beneficial interest issued and outstanding) | | $ | 10.93 | | | | | |
| | | | | | | | |
See Notes to Financial Statements.
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 39 | |
Statement of Operations
Year Ended October 31, 2022
| | | | |
Net Investment Income (Loss) | | | | |
| |
Income | | | | |
Unaffiliated dividend income | | $ | 286,090 | |
Affiliated dividend income | | | 6,808 | |
| | | | |
Total income | | | 292,898 | |
| | | | |
| |
Expenses | | | | |
Management fee | | | 364,361 | |
Distribution fee(a) | | | 759 | |
Registration fees(a) | | | 92,013 | |
Audit fee | | | 71,000 | |
Custodian and accounting fees | | | 43,102 | |
Offering fees | | | 37,284 | |
Legal fees and expenses | | | 31,065 | |
Shareholders’ reports | | | 17,478 | |
Broker fees | | | 15,702 | |
Trustees’ fees | | | 9,610 | |
Transfer agent’s fees and expenses (including affiliated expense of $1,095)(a) | | | 3,634 | |
SEC registration fees | | | 142 | |
Miscellaneous | | | 25,539 | |
| | | | |
Total expenses | | | 711,689 | |
Less: Fee waiver and/or expense reimbursement(a) | | | (307,436 | ) |
| | | | |
Net expenses | | | 404,253 | |
| | | | |
Net investment income (loss) | | | (111,355 | ) |
| | | | |
| |
Realized And Unrealized Gain (Loss) On Investment And Foreign Currency Transactions | | | | |
| |
Net realized gain (loss) on: | | | | |
Futures transactions | | | 2,770,559 | |
Forward and cross currency contract transactions | | | 1,094,795 | |
Swap agreement transactions | | | (9,728 | ) |
Foreign currency transactions | | | (91,224 | ) |
| | | | |
| | | 3,764,402 | |
| | | | |
| |
Net change in unrealized appreciation (depreciation) on: | | | | |
Futures | | | (194,751 | ) |
Forward and cross currency contracts | | | (204,228 | ) |
Foreign currencies | | | (6,822 | ) |
| | | | |
| | | (405,801 | ) |
| | | | |
Net gain (loss) on investment and foreign currency transactions | | | 3,358,601 | |
| | | | |
Net Increase (Decrease) In Net Assets Resulting From Operations | | $ | 3,247,246 | |
| | | | |
(a) | Class specific expenses and waivers were as follows: |
| | | | | | | | | | | | | | | | |
| | Class A | | | Class C | | | Class Z | | | Class R6 | |
Distribution fee | | | 577 | | | | 182 | | | | — | | | | — | |
Registration fees | | | 26,455 | | | | 23,601 | | | | 32,451 | | | | 9,506 | |
Transfer agent’s fees and expenses | | | 687 | | | | 48 | | | | 2,810 | | | | 89 | |
Fee waiver and/or expense reimbursement | | | (28,421 | ) | | | (23,746 | ) | | | (49,903 | ) | | | (205,366 | ) |
See Notes to Financial Statements.
Statements of Changes in Net Assets
| | | | | | | | | | |
| | |
| | Year Ended October 31, 2022 | | September 28, 2021* through October 31, 2021 |
| | |
Increase (Decrease) in Net Assets | | | | | | | | | | |
| | |
Operations | | | | | | | | | | |
Net investment income (loss) | | | $ | (111,355 | ) | | | $ | (28,729 | ) |
Net realized gain (loss) on investment and foreign currency transactions | | | | 3,764,402 | | | | | 489,872 | |
Net change in unrealized appreciation (depreciation) on investments and foreign currencies | | | | (405,801 | ) | | | | 204,829 | |
| | | | | | | | | | |
| | |
Net increase (decrease) in net assets resulting from operations | | | | 3,247,246 | | | | | 665,972 | |
| | | | | | | | | | |
| | |
Dividends and Distributions | | | | | | | | | | |
Distributions from distributable earnings | | | | | | | | | | |
Class A | | | | (318 | ) | | | | — | |
Class C | | | | (268 | ) | | | | — | |
Class Z | | | | (684 | ) | | | | — | |
Class R6 | | | | (835,628 | ) | | | | — | |
| | | | | | | | | | |
| | | | (836,898 | ) | | | | — | |
| | | | | | | | | | |
| | |
Fund share transactions (Net of share conversions) | | | | | | | | | | |
Net proceeds from shares sold | | | | 17,749,558 | | | | | 30,041,000 | |
Net asset value of shares issued in reinvestment of dividends and distributions | | | | 836,898 | | | | | — | |
Cost of shares purchased | | | | (2,226,114 | ) | | | | — | |
| | | | | | | | | | |
| | |
Net increase (decrease) in net assets from Fund share transactions | | | | 16,360,342 | | | | | 30,041,000 | |
| | | | | | | | | | |
| | |
Total increase (decrease) | | | | 18,770,690 | | | | | 30,706,972 | |
| | |
Net Assets: | | | | | | | | | | |
Beginning of period | | | | 30,706,972 | | | | | — | |
| | | | | | | | | | |
| | |
End of period | | | $ | 49,477,662 | | | | $ | 30,706,972 | |
| | | | | | | | | | |
* Commencement of operations.
See Notes to Financial Statements.
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 41 | |
Financial Highlights
| | | | | | | | | | | | | | | | | | | | |
|
Class A Shares | |
| | Year Ended October 31, 2022 | | | | September 28, 2021(a) through October 31, 2021 | | |
Per Share Operating Performance(b): | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | | | | $10.22 | | | | | | | | | | $10.00 | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | | | 0.01 | (c) | | | | | | | | | (0.01 | ) | | | | | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | | 0.94 | | | | | | | | | | 0.23 | | | | | | |
Total from investment operations | | | | 0.95 | | | | | | | | | | 0.22 | | | | | | |
Less Dividends and Distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | | (0.05 | ) | | | | | | | | | - | | | | | | |
Distributions from net realized gains | | | | (0.22 | ) | | | | | | | | | - | | | | | | |
Total dividends and distributions | | | | (0.27 | ) | | | | | | | | | - | | | | | | |
Net asset value, end of period | | | | $10.90 | | | | | | | | | | $10.22 | | | | | | |
Total Return(d): | | | | 9.64 | % | | | | | | | | | 2.20 | % | | | | | |
| |
|
Ratios/Supplemental Data: | |
Net assets, end of period (000) | | | | $788 | | | | | | | | | | $11 | | | | | | |
Average net assets (000) | | | | $231 | | | | | | | | | | $10 | | | | | | |
Ratios to average net assets(e): | | | | | | | | | | | | | | | | | | | | |
Expenses after waivers and/or expense reimbursement | | | | 1.45 | %(f) | | | | | | | | | 1.40 | %(g) | | | | | |
Expenses before waivers and/or expense reimbursement | | | | 13.76 | % | | | | | | | | | 200.29 | %(g) | | | | | |
Net investment income (loss) | | | | 0.10 | % | | | | | | | | | (1.32 | )%(g) | | | | | |
Portfolio turnover rate(h) | | | | 0 | % | | | | | | | | | 0 | % | | | | | |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | The per share amount of net investment income (loss) does not directly correlate to the amounts reported in the Statement of Operations due to class specific expenses. |
(d) | Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized. |
(e) | Does not include expenses of the underlying funds in which the Fund invests. |
(f) | Includes derivatives broker fees of 0.05% for the year ended October 31, 2022. |
(g) | Annualized, with the exception of certain non-recurring expenses. |
(h) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
| | | | | | | | | | | | | | | | | | | | |
|
Class C Shares | |
| | Year Ended October 31, 2022 | | | | September 28, 2021(a) through October 31, 2021 | | |
Per Share Operating Performance(b): | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | | | | $10.21 | | | | | | | | | | $10.00 | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | | | (0.10 | ) | | | | | | | | | (0.02 | ) | | | | | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | | 0.98 | | | | | | | | | | 0.23 | | | | | | |
Total from investment operations | | | | 0.88 | | | | | | | | | | 0.21 | | | | | | |
Less Dividends and Distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | | (0.05 | ) | | | | | | | | | - | | | | | | |
Distributions from net realized gains | | | | (0.22 | ) | | | | | | | | | - | | | | | | |
Total dividends and distributions | | | | (0.27 | ) | | | | | | | | | - | | | | | | |
Net asset value, end of period | | | | $10.82 | | | | | | | | | | $10.21 | | | | | | |
Total Return(c): | | | | 8.88 | % | | | | | | | | | 2.10 | % | | | | | |
| |
|
Ratios/Supplemental Data: | |
Net assets, end of period (000) | | | | $63 | | | | | | | | | | $10 | | | | | | |
Average net assets (000) | | | | $18 | | | | | | | | | | $10 | | | | | | |
Ratios to average net assets(d): | | | | | | | | | | | | | | | | | | | | |
Expenses after waivers and/or expense reimbursement | | | | 2.20 | %(e) | | | | | | | | | 2.15 | %(f) | | | | | |
Expenses before waivers and/or expense reimbursement | | | | 133.01 | % | | | | | | | | | 197.54 | %(f) | | | | | |
Net investment income (loss) | | | | (0.92 | )% | | | | | | | | | (2.07 | )%(f) | | | | | |
Portfolio turnover rate(g) | | | | 0 | % | | | | | | | | | 0 | % | | | | | |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | Includes derivatives broker fees of 0.05% for the year ended October 31, 2022. |
(f) | Annualized, with the exception of certain non-recurring expenses. |
(g) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 43 | |
Financial Highlights (continued)
| | | | | | | | | | | | | | | | | | | | |
|
Class Z Shares | |
| | Year Ended October 31, 2022 | | | | September 28, 2021(a) through October 31, 2021 | | |
Per Share Operating Performance(b): | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | | | | $10.22 | | | | | | | | | | $10.00 | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | | | 0.05 | (c) | | | | | | | | | (0.01 | ) | | | | | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | | 0.94 | | | | | | | | | | 0.23 | | | | | | |
Total from investment operations | | | | 0.99 | | | | | | | | | | 0.22 | | | | | | |
Less Dividends and Distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | | (0.06 | ) | | | | | | | | | - | | | | | | |
Distributions from net realized gains | | | | (0.22 | ) | | | | | | | | | - | | | | | | |
Total dividends and distributions | | | | (0.28 | ) | | | | | | | | | - | | | | | | |
Net asset value, end of period | | | | $10.93 | | | | | | | | | | $10.22 | | | | | | |
Total Return(d): | | | | 9.97 | % | | | | | | | | | 2.20 | % | | | | | |
| |
|
Ratios/Supplemental Data: | |
Net assets, end of period (000) | | | | $14,883 | | | | | | | | | | $10 | | | | | | |
Average net assets (000) | | | | $2,763 | | | | | | | | | | $10 | | | | | | |
Ratios to average net assets(e): | | | | | | | | | | | | | | | | | | | | |
Expenses after waivers and/or expense reimbursement | | | | 1.20 | %(f) | | | | | | | | | 1.15 | %(g) | | | | | |
Expenses before waivers and/or expense reimbursement | | | | 3.00 | % | | | | | | | | | 212.41 | %(g) | | | | | |
Net investment income (loss) | | | | 0.49 | % | | | | | | | | | (1.07 | )%(g) | | | | | |
Portfolio turnover rate(h) | | | | 0 | % | | | | | | | | | 0 | % | | | | | |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | The per share amount of net investment income (loss) does not directly correlate to the amounts reported in the Statement of Operations due to class specific expenses. |
(d) | Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized. |
(e) | Does not include expenses of the underlying funds in which the Fund invests. |
(f) | Includes derivatives broker fees of 0.05% for the year ended October 31, 2022. |
(g) | Annualized, with the exception of certain non-recurring expenses. |
(h) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
| | | | | | | | | | | | | | | | | | | | |
|
Class R6 Shares | |
| | Year Ended October 31, 2022 | | | | September 28, 2021(a) through October 31, 2021 | | |
Per Share Operating Performance(b): | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | | | | $10.22 | | | | | | | | | | $10.00 | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) | | | | (0.04 | ) | | | | | | | | | (0.01 | ) | | | | | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | | 1.03 | | | | | | | | | | 0.23 | | | | | | |
Total from investment operations | | | | 0.99 | | | | | | | | | | 0.22 | | | | | | |
Less Dividends and Distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | | (0.06 | ) | | | | | | | | | - | | | | | | |
Distributions from net realized gains | | | | (0.22 | ) | | | | | | | | | - | | | | | | |
Total dividends and distributions | | | | (0.28 | ) | | | | | | | | | - | | | | | | |
Net asset value, end of period | | | | $10.93 | | | | | | | | | | $10.22 | | | | | | |
Total Return(c): | | | | 9.99 | % | | | | | | | | | 2.20 | % | | | | | |
| |
|
Ratios/Supplemental Data: | |
Net assets, end of period (000) | | | | $33,743 | | | | | | | | | | $30,675 | | | | | | |
Average net assets (000) | | | | $31,689 | | | | | | | | | | $30,276 | | | | | | |
Ratios to average net assets(d): | | | | | | | | | | | | | | | | | | | | |
Expenses after waivers and/or expense reimbursement | | | | 1.16 | %(e) | | | | | | | | | 1.10 | %(f) | | | | | |
Expenses before waivers and/or expense reimbursement | | | | 1.81 | % | | | | | | | | | 1.84 | %(f) | | | | | |
Net investment income (loss) | | | | (0.39 | )% | | | | | | | | | (1.02 | )%(f) | | | | | |
Portfolio turnover rate(g) | | | | 0 | % | | | | | | | | | 0 | % | | | | | |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | Includes derivatives broker fees of 0.06% for the year ended October 31, 2022. |
(f) | Annualized, with the exception of certain non-recurring expenses. |
(g) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 45 | |
Notes to Financial Statements
1. Organization
Prudential Investment Portfolios 3 (the “Registered Investment Company” or “RIC”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company. The RIC is organized as a Delaware Statutory Trust. These financial statements relate only to the PGIM Wadhwani Systematic Absolute Return Fund (the “Fund”), a series of the RIC. The Fund is classified as a non-diversified fund for purposes of the 1940 Act.
The investment objective of the Fund is to seek long-term risk adjusted total return.
The Fund is subject to compliance with applicable regulations governing commodity pools including Commodity Futures Trading Commission (“CFTC”) rules.
2. Accounting Policies
The Fund follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 946 Financial Services — Investment Companies. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform to U.S. generally accepted accounting principles (“GAAP”). The Fund consistently follows such policies in the preparation of its financial statements.
Securities Valuation: The Fund holds securities and other assets and liabilities that are fair valued as of the close of each day (generally, 4:00 PM Eastern time) the New York Stock Exchange (“NYSE”) is open for trading. As described in further detail below, the Fund’s investments are valued daily based on a number of factors, including the type of investment and whether market quotations are readily available. The RIC’s Board of Trustees (the “Board”) has approved the Fund’s valuation policies and procedures for security valuation and designated to PGIM Investments LLC (“PGIM Investments” or the “Manager”) as the Valuation Designee pursuant to SEC Rule 2a-5(b) to perform the fair value determination relating to all Fund investments. Pursuant to the Board’s oversight, the Valuation Designee has established a Valuation Committee to perform the duties and responsibilities as valuation designee under SEC Rule 2a-5. 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. 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. A record of the Valuation Committee’s actions is provided to the Board at the first quarterly meeting following the quarter in which such actions take place.
For the fiscal reporting year-end, securities and other assets and liabilities were fair valued at the close of the last U.S. business day. Trading in certain foreign securities may occur when the NYSE is closed (including weekends and holidays). Because such foreign securities trade in markets that are open on weekends and U.S. holidays, the values of some of the Fund’s foreign investments may change on days when investors cannot purchase or redeem Fund shares.
Various inputs determine how the Fund’s investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the Schedule of Investments and referred to herein as the “fair value hierarchy” in accordance with FASB ASC Topic 820 - Fair Value Measurement.
Common or preferred stocks, exchange-traded funds and derivative instruments, if applicable, that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange where the security principally trades. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price, they are classified as Level 1 in the fair value hierarchy. In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and ask prices, or at the last bid price in the absence of an ask price. These securities are classified as Level 2 in the fair value hierarchy.
Investments in open-end funds (other than exchange-traded funds) are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the OTC market are generally classified as Level 2 in the fair value hierarchy. Such fixed income securities are typically valued using the market approach which generally involves obtaining data from an approved independent third-party vendor source. The Fund utilizes the market approach as the primary method to value securities when market prices of identical or comparable instruments are available. The third-party vendors’ valuation techniques used to derive the evaluated bid price are based on evaluating observable inputs, including but not limited to, yield curves, yield spreads, credit ratings, deal terms, tranche level attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations and reported trades. Certain Level 3 securities are also valued using the market approach when obtaining a single broker quote or when utilizing transaction prices for identical securities that have been used in excess of five business days. During the reporting period, there were no changes to report with respect to the valuation approach and/or valuation techniques discussed above.
OTC and centrally cleared derivative instruments are generally classified as Level 2 in the fair value hierarchy. Such derivative instruments are typically valued using the market approach and/or income approach which generally involves obtaining data from an approved independent third-party vendor source. The Fund utilizes the market approach
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 47 | |
Notes to Financial Statements (continued)
when quoted prices in broker-dealer markets are available but also includes consideration of alternative valuation approaches, including the income approach. In the absence of reliable market quotations, the income approach is typically utilized for purposes of valuing derivatives such as interest rate swaps based on a discounted cash flow analysis whereby the value of the instrument is equal to the present value of its future cash inflows or outflows. Such analysis includes projecting future cash flows and determining the discount rate (including the present value factors that affect the discount rate) used to discount the future cash flows. In addition, the third-party vendors’ valuation techniques used to derive the evaluated derivative price is based on evaluating observable inputs, including but not limited to, underlying asset prices, indices, spreads, interest rates and exchange rates. Certain derivatives may be classified as Level 3 when valued using the market approach by obtaining a single broker quote or when utilizing unobservable inputs in the income approach. During the reporting period, there were no changes to report with respect to the valuation approach and/or valuation techniques discussed above.
Securities and other assets that cannot be priced according to the methods described above are valued based on policies and procedures 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. Altering one or more unobservable inputs may result in a significant change to a Level 3 security’s fair value measurement.
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 Valuation Designee regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other unaffiliated mutual funds to calculate their net asset values.
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 exchange rate as of the valuation date;
(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 unrealized and realized foreign currency gains (losses) are included in the reported net change in unrealized appreciation (depreciation) on investments and net realized gains (losses) on investment transactions on the Statements of Operations.
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from the disposition of holdings of foreign currencies, currency gains (losses) realized between the trade and settlement dates on investment transactions, and the difference between the amounts of interest, dividends and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) arise from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates.
Forward and Cross 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, as defined in the prospectus, in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings or on specific receivables and payables denominated in a foreign currency and to gain exposure to certain currencies. The contracts are valued daily at current forward exchange rates and any unrealized gain (loss) is included in net unrealized appreciation or depreciation on forward and cross currency contracts. 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 forward and cross currency contract 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 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. 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.
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
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 49 | |
Notes to Financial Statements (continued)
statement purposes on a daily basis as unrealized gain (loss). When the contract expires or is closed, the gain (loss) is realized and is presented in the Statement of Operations as net realized gain (loss) on futures transactions.
The Fund invested in financial futures contracts in order to hedge its existing portfolio securities, or securities the Fund intends to purchase, against fluctuations in value caused by changes in prevailing interest rates. Should interest rates move unexpectedly, the Fund may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets. Since futures contracts are exchange-traded, there is minimal counterparty credit risk to the Fund since the exchanges’ clearinghouse acts as counterparty to all exchange-traded futures and guarantees the futures contracts against default.
Swap Agreements: The Fund entered into certain types of swap agreements detailed in the disclosures below. 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 a counterparty (“OTC-traded”) or through a central clearing facility, such as a registered exchange. Swap agreements are valued daily at current market value and any change in value is included in the net unrealized appreciation or depreciation on swap agreements. Centrally cleared swaps pay or receive an amount known as “variation margin”, based on daily changes in the valuation of the swap contract. For OTC-traded, upfront premiums paid and received are shown as swap premiums paid and swap premiums received in the Statement of Assets and Liabilities. 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 Schedule of Investments.
Total Return Swaps: In a total return swap, one party receives 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 pays a defined 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 RIC, on behalf of the Fund, is subject to various Master Agreements, or netting arrangements, with select counterparties. These are agreements which a subadviser may have negotiated and entered into on behalf of all or a portion of the Fund. A master netting arrangement between the Fund and the counterparty permits the
Fund to offset amounts payable by the Fund to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Fund to cover the Fund’s exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable. In addition to master netting arrangements, the right to set-off exists when all the conditions are met such that each of the parties owes the other determinable amounts, the reporting party has the right to set-off the amount owed with the amount owed by the other party, the reporting party intends to set-off and the right of set-off is enforceable by law.
The RIC, on behalf of the Fund, is a party to International Swaps and Derivatives Association, Inc. (“ISDA”) 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 Schedule of Investments. Collateral pledged by the Fund is segregated by the Fund’s custodian and identified in the Schedule 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 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.
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 51 | |
Notes to Financial Statements (continued)
Short sales and OTC contracts, including forward foreign currency exchange contracts, swaps, forward rate agreements and written options involve elements of both market and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities, if applicable. Such risks may be mitigated by engaging in master netting arrangements.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains (losses) from investment and currency transactions are calculated on the specific identification method. Dividend income is recorded on the ex-date, or for certain foreign securities, when the Fund becomes aware of such dividends. Expenses are recorded on an accrual basis, which may require the use of certain estimates by management that may differ from actual. Net investment income or loss (other than class specific expenses and waivers, which are allocated as noted below) and unrealized and realized gains (losses) are allocated daily to each class of shares based upon the relative proportion of adjusted net assets of each class at the beginning of the day. Class specific expenses and waivers, where applicable, are charged to the respective share classes. Such class specific expenses and waivers include distribution fees and distribution fee waivers, shareholder servicing fees, transfer agent’s fees and expenses, registration fees and fee waivers and/or expense reimbursements, as applicable.
Offering and Organization Costs: Offering costs paid in connection with the initial offering of shares of the Fund are being amortized on a straight-line basis over twelve months from the date of commencement of operations. Organization costs paid in connection with the organization of the Fund were expensed as incurred.
Taxes: It is the Fund’s policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net investment income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required. Withholding taxes on foreign dividends, interest and capital gains, if any, are recorded, net of reclaimable amounts, at the time the related income is earned.
Dividends and Distributions: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from GAAP, are recorded on the ex-date. Permanent book/tax differences relating to income and gain (loss) are reclassified between total distributable earnings (loss) and paid-in capital in excess of par, as appropriate. The chart below sets forth the expected frequency of dividend and capital gains distributions to shareholders. Various factors may impact the frequency of
dividend distributions to shareholders, including but not limited to adverse market conditions or portfolio holding-specific events.
| | |
| |
Expected Distribution Schedule to Shareholders* | | Frequency |
| |
Net Investment Income | | Annually |
| |
Short-Term Capital Gains | | Annually |
| |
Long-Term Capital Gains | | Annually |
* | Under certain circumstances, the Fund may make more than one distribution of short-term and/or long-term capital gains during a fiscal year. |
Estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
3. Agreements
The RIC, on behalf of the Fund, has a management agreement with the Manager pursuant to which it has responsibility for all investment advisory services and supervises the subadviser’s performance of such services, and pursuant to which it renders administrative services.
The Manager has entered into a subadvisory agreement with PGIM Wadhwani LLP (“PGIM Wadhwani” or the “subadviser”). The Manager pays for the services of the subadviser.
Fees payable under the management agreement are computed daily and paid monthly. For the reporting period ended October 31, 2022, the contractual and effective management fee rates were as follows:
| | | | |
| |
Contractual Management Rate | | Effective Management Fee, before any waivers and/or expense reimbursements | |
| |
1.05% of the average daily net assets of the Fund up to and including $1 billion; | | | 1.05% | |
| |
1.03% of the average daily net assets of the Fund from $1 billion up to and including $3 billion; | | | | |
| |
1.01% of the average daily net assets of the Fund from $3 billion up to and including $5 billion; | | | | |
| |
1.00% of the average daily net assets of the Fund from $5 billion up to and including $10 billion; and | | | | |
| |
0.99% of average daily net assets of the Fund over $10 billion. | | | | |
The Manager has contractually agreed, through February 29, 2024, to limit total annual operating expenses after fee waivers and/or expense reimbursements. This contractual waiver excludes interest, brokerage, taxes (such as income and foreign withholding taxes, stamp duty and deferred tax expenses), acquired fund fees and expenses, extraordinary expenses, and certain other Fund expenses such as dividend and interest expense and broker charges on short sales.
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 53 | |
Notes to Financial Statements (continued)
Where applicable, the Manager agrees to waive management fees or shared operating expenses on any share class to the same extent that it waives such expenses on any other share class. In addition, total annual operating expenses for Class R6 shares will not exceed total annual operating expenses for Class Z shares. Fees and/or expenses waived and/or reimbursed by the Manager for the purpose of preventing the expenses from exceeding a certain expense ratio limit may be recouped by the Manager within the same fiscal year during which such waiver and/or reimbursement is made if such recoupment can be realized without exceeding the expense limit in effect at the time of the recoupment for that fiscal year. The expense limitations attributable to each class are as follows:
| | | | | |
Class | | Expense Limitations |
A | | | | 1.40 | % |
C | | | | 2.15 | |
Z | | | | 1.15 | |
R6 | | | | 1.10 | |
The RIC, on behalf of the Fund, has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”), which acts as the distributor of the Class A, Class C, Class Z and Class R6 shares of the Fund. The Fund compensates PIMS for distributing and servicing the Fund’s Class A and Class C shares, pursuant to the plans of distribution (the “Distribution Plans”), regardless of expenses actually incurred by PIMS.
Pursuant to the Distribution Plans, the Fund compensates PIMS for distribution related activities at an annual rate based on average daily net assets per class. The distribution fees are accrued daily and payable monthly.
The Fund’s annual gross and net distribution rate, where applicable, are as follows:
| | | | | | | | | | |
Class | | Gross Distribution Fee | | Net Distribution Fee |
A | | | | 0.25 | % | | | | 0.25 | % |
C | | | | 1.00 | | | | | 1.00 | |
Z | | | | N/A | | | | | N/A | |
R6 | | | | N/A | | | | | N/A | |
For the year ended October 31, 2022, PIMS received front-end sales charges (“FESL”) resulting from sales of certain class shares and contingent deferred sales charges (“CDSC”) imposed upon redemptions by certain shareholders. From these fees, PIMS paid such sales charges to broker-dealers, who in turn paid commissions to salespersons and incurred other distribution costs. The sales charges are as follows where applicable:
| | | | |
Class | | FESL | | CDSC |
A | | $1,262 | | $ — |
| | | | |
Class | | FESL | | CDSC |
C | | $ — | | $ — |
PGIM Investments, PGIM Wadhwani and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
4. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PGIM Investments and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund’s transfer agent and shareholder servicing agent. Transfer agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
The Fund may invest its overnight sweep cash in the PGIM Core Ultra Short Bond Fund (the “Core Fund”), a fund of Prudential Investment Portfolios 2, registered under the 1940 Act and managed by PGIM Investments. PGIM Investments and/or its affiliates are paid fees or reimbursed for providing their services to the Core Fund. In addition to the realized and unrealized gains on investments in the Core Fund, earnings from such investments are disclosed on the Statement of Operations as “Affiliated dividend income”. Effective January 2022, the Fund changed its overnight cash sweep vehicle from the Core Fund to an unaffiliated money market fund.
The Fund may enter into certain securities purchase or sale transactions under Board approved Rule 17a-7 procedures. Rule 17a-7 is an exemptive rule under the 1940 Act, that subject to certain conditions, permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors/trustees, and/or common officers. For the year ended October 31, 2022, no 17a-7 transactions were entered into by the Fund.
5. Portfolio Securities
There were no purchases or sales of portfolio securities, other than short-term investments, for the year ended October 31, 2022.
A summary of the cost of purchases and proceeds from sales of shares of affiliated mutual funds for the year ended October 31, 2022, is presented as follows:
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 55 | |
Notes to Financial Statements (continued)
| | | | | | | | | | | | | | | | | | | | | | |
Value, Beginning of Year | | Cost of Purchases | | Proceeds from Sales | | Change in Unrealized Gain (Loss) | | Realized Gain (Loss) | | | Value, End of Year | | | Shares, End of Year | | | Income | |
| | | | |
Short-Term Investments - Affiliated Mutual Fund: | | | | | | | | | | | | | | | | |
|
PGIM Core Ultra Short Bond Fund(1)(wb) | |
$24,447,267 | | $2,140,954 | | $26,588,221 | | $— | | | $— | | | | $— | | | | — | | | | $6,808 | |
(1) | The Fund did not have any capital gain distributions during the reporting period. |
(wb) | PGIM Investments LLC, the manager of the Fund, also serves as manager of the PGIM Core Ultra Short Bond Fund. |
6. Distributions and Tax Information
Distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from GAAP, are recorded on the ex-date.
For the year ended October 31, 2022, the tax character of dividends paid by the Fund were $498,976 of ordinary income and $337,922 of long-term capital gains. For the period ended October 31, 2021, there were no distributions paid by the Fund.
As of October 31, 2022, the accumulated undistributed earnings on a tax basis were $2,017,705 of ordinary income and $1,148,763 of long-term capital gains.
The United States federal income tax basis of the Fund’s investments and the net unrealized depreciation as of October 31, 2022 were as follows:
| | | | | | | | | | | | |
Tax Basis | | | | Gross Unrealized Appreciation | | | | Gross Unrealized Depreciation | | | | Net Unrealized Depreciation |
$40,918,898 | | | | $554,199 | | | | $(618,882) | | | | $(64,683) |
The differences between GAAP and tax basis were primarily attributable to deferred losses on wash sales, mark-to-market of futures and forwards contracts and straddle.
The Manager has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years and has concluded that no provision for income tax is required in the Fund’s financial statements for the current reporting period. Since tax authorities can examine previously filed tax returns, the Fund’s U.S. federal and state tax returns for each of the two fiscal years up to the most recent fiscal year ended October 31, 2022 are subject to such review.
7. Capital and Ownership
The Fund offers Class A, Class C, Class Z and Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 5.50%. Investors who purchase $1 million or more of Class A shares and sell these shares within 12 months of purchase are subject to a CDSC of 1%, although they are not subject to an initial sales charge. The Class A CDSC is waived for certain retirement and/or benefit plans. A special exchange privilege is also available for shareholders who qualified to purchase Class A shares at net asset value. Class C shares are sold with a CDSC of 1% on sales made within 12 months of purchase. Class C shares will automatically convert to Class A shares on a monthly basis approximately eight years after purchase. Class Z and Class R6 shares are not subject to any sales or redemption charges and are available exclusively for sale to a limited group of investors.
Under certain circumstances, an exchange may be made from specified share classes of the Fund to one or more other share classes of the Fund as presented in the table of transactions in shares of beneficial interest, below.
The RIC has authorized an unlimited number of shares of beneficial interest at $0.001 par value per share, currently divided into four classes, designated Class A, Class C, Class Z and Class R6.
As of October 31, 2022, Prudential, through its affiliated entities, including affiliated funds (if applicable), owned shares of the Fund as follows:
| | | | | | | | | | |
Class | | Number of Shares | | Percentage of Outstanding Shares |
A | | 1,028 | | | | 1.4 | % |
C | | 1,027 | | | | 17.6 | |
Z | | 1,028 | | | | 0.1 | |
R6 | | 3,086,268 | | | | 100.0 | |
At the reporting period end, the number of shareholders holding greater than 5% of the Fund are as follows:
| | | | | | | | | | |
| | Number of Shareholders | | Percentage of Outstanding Shares |
Affiliated | | | | 1 | | | | | 68.1 | % |
Unaffiliated | | | | 1 | | | | | 26.6 | |
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 57 | |
Notes to Financial Statements (continued)
Transactions in shares of beneficial interest were as follows:
| | | | | | | | |
| | |
Share Class | | Shares | | | Amount | |
| | |
Class A | | | | | | |
Year ended October 31, 2022: | | | | | | |
Shares sold | | | 152,753 | | | $ | 1,636,453 | |
Shares issued in reinvestment of dividends and distributions | | | 32 | | | | 318 | |
Shares purchased | | | (81,625 | ) | | | (868,587 | ) |
Net increase (decrease) in shares outstanding before conversion | | | 71,160 | | | | 768,184 | |
Shares issued upon conversion from other share class(es) | | | 1 | | | | 14 | |
Net increase (decrease) in shares outstanding | | | 71,161 | | | $ | 768,198 | |
| | |
Period ended October 31, 2021*: | | | | | | |
Shares sold | | | 1,098 | | | $ | 11,000 | |
Net increase (decrease) in shares outstanding | | | 1,098 | | | $ | 11,000 | |
| | |
Class C | | | | | | |
Year ended October 31, 2022: | | | | | | |
Shares sold | | | 4,794 | | | $ | 51,349 | |
Shares issued in reinvestment of dividends and distributions | | | 27 | | | | 268 | |
Net increase (decrease) in shares outstanding before conversion | | | 4,821 | | | | 51,617 | |
Shares purchased upon conversion into other share class(es) | | | (1 | ) | | | (14 | ) |
Net increase (decrease) in shares outstanding | | | 4,820 | | | $ | 51,603 | |
| | |
Period ended October 31, 2021*: | | | | | | |
Shares sold | | | 1,000 | | | $ | 10,000 | |
Net increase (decrease) in shares outstanding | | | 1,000 | | | $ | 10,000 | |
| | |
Class Z | | | | | | |
Year ended October 31, 2022: | | | | | | |
Shares sold | | | 1,485,697 | | | $ | 16,061,756 | |
Shares issued in reinvestment of dividends and distributions | | | 70 | | | | 684 | |
Shares purchased | | | (124,458 | ) | | | (1,357,527 | ) |
Net increase (decrease) in shares outstanding | | | 1,361,309 | | | $ | 14,704,913 | |
| | |
Period ended October 31, 2021*: | | | | | | |
Shares sold | | | 1,000 | | | $ | 10,000 | |
Net increase (decrease) in shares outstanding | | | 1,000 | | | $ | 10,000 | |
| | |
Class R6 | | | | | | |
Year ended October 31, 2022: | | | | | | |
Shares issued in reinvestment of dividends and distributions | | | 85,268 | | | $ | 835,628 | |
Net increase (decrease) in shares outstanding | | | 85,268 | | | $ | 835,628 | |
| | | | | | | | |
| | |
Share Class | | Shares | | | Amount | |
| | |
Period ended October 31, 2021*: | | | | | | |
Shares sold | | | 3,001,000 | | | $ | 30,010,000 | |
Net increase (decrease) in shares outstanding | | | 3,001,000 | | | $ | 30,010,000 | |
* | Commencement of operations was September 28, 2021 |
8. Borrowings
The RIC, on behalf of the Fund, along with other affiliated registered investment companies (the “Participating Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions. The table below provides details of the current SCA in effect at the reporting period-end as well as the prior SCA.
| | | | |
| | |
| | Current SCA | | Prior SCA |
Term of Commitment | | 9/30/2022 - 9/28/2023 | | 10/1/2021 – 9/29/2022 |
Total Commitment | | $ 1,200,000,000 | | $ 1,200,000,000 |
Annualized Commitment Fee on the Unused Portion of the SCA | | 0.15% | | 0.15% |
Annualized Interest Rate on Borrowings | | 1.00% plus the higher of (1) the effective federal funds rate, (2) the daily SOFR rate plus 0.10% or (3) zero percent | | 1.20% plus the higher of (1) the effective federal funds rate, (2) the one-month LIBOR rate or (3) zero percent |
Certain affiliated registered investment companies that are parties to the SCA include portfolios that are subject to a predetermined mathematical formula used to manage certain benefit guarantees offered under variable annuity contracts. The formula may result in large scale asset flows into and out of these portfolios. Consequently, these portfolios may be more likely to utilize the SCA for purposes of funding redemptions. It may be possible for those portfolios to fully exhaust the committed amount of the SCA, thereby requiring the Manager to allocate available funding per a Board-approved methodology designed to treat the Participating Funds in the SCA equitably.
The Fund did not utilize the SCA during the year ended October 31, 2022.
9. Risks of Investing in the Fund
The Fund’s risks include, but are not limited to, some or all of the risks discussed below. For further information on the Fund’s risks, please refer to the Fund’s Prospectus and Statement of Additional Information.
Cash Management and Defensive Investing Risk: The value of the investments held by the Fund for cash management or defensive investing purposes can fluctuate. Like other fixed income securities, they are subject to risk, including market, interest rate and credit risk. If the Fund holds cash uninvested, it will be subject to the credit risk of the depository
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 59 | |
Notes to Financial Statements (continued)
institution holding the cash. If the Fund holds cash uninvested, the Fund will not earn income on the cash. If a significant amount of the Fund’s assets are used for cash management or defensive investing purposes, it may not achieve its investment objective.
Commodity Regulatory Risk: The Fund is deemed a “commodity pool” and the manager is considered a “commodity pool operator” with respect to the Fund under the Commodity Exchange Act. The manager, directly or through its affiliates, is therefore subject to dual regulation by the Securities and Exchange Commission (the “SEC”) and the Commodity Futures Trading Commission (the “CFTC”). The regulatory requirements governing the use of commodity futures (which include futures on broad-based securities indexes, interest rate futures and currency futures), options on commodity futures, certain swaps or certain other investments could change at any time.
Credit Risk/Counterparty Risk: The ability, or perceived ability, of the issuer or guarantor of a debt security, or the counterparty (the party on the other side of the transaction) to a derivatives contract or other financial contract to meet its financial obligations will affect the value of the security or derivative. Counterparty and credit risk are especially important in the context of privately negotiated instruments. The Fund expects to enter into certain privately negotiated agreements where the counterparty assumes the physical settlement obligations of the Fund under such transactions. Under this type of arrangement, there is a risk that the relevant counterparty or intermediary would, due to insolvency or other reasons, be unable to or fail to assume the physical settlement obligations of the Fund, in which case the Fund could be required to sell portfolio instruments at unfavorable times or prices or could have insufficient assets to satisfy its physical settlement obligations.
Credit ratings are intended to provide a measure of credit risk. However, credit ratings are only the opinions of the credit rating agency issuing the ratings and are not guarantees as to quality. The lower the rating of a debt security held by the Fund, the greater the degree of credit risk that is perceived to exist by the credit rating agency with respect to that security. Increasing the amount of Fund assets allocated to lower-rated securities generally will increase the credit risk to which the Fund is subject. Not all securities in which the Fund invests are rated. The lower the credit quality of a bond, the more sensitive it is to credit risk.
Currency Risk: A substantial portion of assets of the Fund may be invested in non-US currencies or in securities that trade in, and receive revenues in, non-US currencies or in derivatives that provide exposure to non-US currencies. Such investments are subject to the risk that the value of a particular currency will change in relation to the US dollar or other currencies in a manner that is not anticipated or does not correspond accurately to changes in the value of the Fund’s holdings and may result in Fund losses. Among the factors that may affect currency values are trade balances, levels of short term interest rates, differences in relative values of similar assets in different currencies, long term opportunities for
investment and capital appreciation, central bank policy, and political developments. Currency conversion costs and currency fluctuations could erase investment gains or add to investment losses. Currency exchange rates may be volatile. Certain currency transactions are also subject to counterparty risk.
Debt Obligations Risk: Debt obligations are subject to credit risk, market risk and interest rate risk. The Fund’s holdings, share price, yield and total return may also fluctuate in response to bond market movements. The value of bonds may decline for issuer-related reasons, including management performance, financial leverage and reduced demand for the issuer’s goods and services. Certain types of fixed income obligations also may be subject to “call and redemption risk,” which is the risk that the issuer may call a bond held by the Fund for redemption before it matures and the Fund may not be able to reinvest at the same rate of interest and therefore would earn less income.
Derivatives Risk: Derivatives involve special risks and costs and may result in losses to the Fund. The successful use of derivatives requires sophisticated management, and, to the extent that derivatives are used, the Fund will depend on the subadviser’s ability to analyze and manage derivatives transactions. The prices of derivatives may move in unexpected ways, especially in abnormal market conditions. Some derivatives are “leveraged” or may create economic leverage for the Fund and therefore may magnify or otherwise increase investment losses to the Fund. The Fund’s use of derivatives may also increase the amount of taxes payable by shareholders.
Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the Fund’s derivatives positions. In fact, many over-the-counter derivative instruments will not have liquidity beyond the counterparty to the instrument. Over-the-counter derivative instruments also involve the risk that the other party will not meet its obligations to the Fund. The use of derivatives also exposes the Fund to operational issues, such as documentation and settlement issues, systems failures, inadequate control and human error.
Derivatives may also involve legal risks, such as insufficient documentation, the lack of capacity or authority of a counterparty to execute or settle a transaction, and the legality and enforceability of derivatives contracts. The U.S. Government and foreign governments have adopted (and may adopt further) regulations governing derivatives markets, including mandatory clearing of certain derivatives, margin and reporting requirements and risk exposure limitations. Regulation of derivatives may make derivatives more costly, limit their availability or utility to the Fund, or otherwise adversely affect their performance or disrupt markets.
Economic and Market Events Risk: Events in the U.S. and global financial markets, including actions taken by the U.S. Federal Reserve or foreign central banks to stimulate or stabilize economic growth or the functioning of the securities markets, or otherwise reduce inflation may at times result in unusually high market volatility, which could negatively impact performance. Governmental efforts to curb inflation often have negative effects on
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 61 | |
Notes to Financial Statements (continued)
the level of economic activity. Relatively reduced liquidity in credit and fixed income markets could adversely affect issuers worldwide.
Emerging Markets Risk: The risks of foreign investments are greater for investments in or exposed to emerging markets. Emerging market countries typically have economic and political systems that are less fully developed, and can be expected to be less stable, than those of more developed countries. For example, the economies of such countries can be subject to rapid and unpredictable rates of inflation or deflation. Low trading volumes may result in a lack of liquidity and price volatility. Emerging market countries may have policies that restrict investment by non-U.S. investors, or that prevent non-U.S. investors from withdrawing their money at will.
The Fund may invest in some emerging markets that subject it to risks such as those associated with illiquidity, custody of assets, different settlement and clearance procedures and asserting legal title under a developing legal and regulatory regime to a greater degree than in developed markets or even in other emerging markets.
Equity and Equity-Related Securities Risk: Equity and equity-related securities may be subject to changes in value, and their values may be more volatile than those of other asset classes. In addition to an individual security losing value, the value of the equity markets or a sector in which the Fund invests could go down. Different parts of a market can react differently to adverse issuer, market, regulatory, political and economic developments.
Exchange Traded Fund (“ETF”) Risk: The price movement of an ETF may not track the underlying index or basket of securities and may result in a loss. Investments in ETFs entail duplicate management fees, and the Fund will bear its proportionate share of the other expenses of the ETFs in which it invests. In addition, ETFs that invest in commodities may be, or may become subject to CFTC trading regulations that limit the amount of commodity contracts an ETF may hold. Such regulations could hurt the market value of an ETF’s shares. In addition, some commodity ETFs invest in commodity futures that can lose money even when commodity prices are rising.
Europe Recent Events Risk: A number of countries in Europe have experienced severe economic and financial difficulties. Many non-governmental issuers, and even certain governments, have defaulted on, or been forced to restructure, their debts; many other issuers have faced difficulties obtaining credit or refinancing existing obligations; financial institutions have in many cases required government or central bank support, have needed to raise capital, and/or have been impaired in their ability to extend credit; and financial markets in Europe and elsewhere have experienced extreme volatility and declines in asset values and liquidity. These difficulties may continue, worsen or spread within and beyond Europe. Responses to the financial problems by European governments, central banks and
others, including austerity measures and reforms, may not work, may result in social unrest and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructurings by governments and others of their debt could have additional adverse effects on economies, financial markets and asset valuations around the world. In addition, the United Kingdom (“UK”) has formally withdrawn from the European Union (“EU”) and one or more other countries may withdraw from the EU and/or abandon the Euro, the common currency of the EU. The UK and EU reached an agreement effective January 1, 2021 on the terms of their future trading relationship relating to the trading of goods, however, this does not cover financial services. The Fund may face risks associated with the potential uncertainty and consequences of the new relationship between the UK and EU, including volatility in exchange and interest rates and politically divergent national laws and regulations. Ukraine has experienced ongoing military conflict; this conflict may expand and military attacks could occur elsewhere in Europe. Europe has also been struggling with mass migration from the Middle East and Africa. The impact of these actions, especially if they occur in a disorderly fashion, is not clear but could be significant and far-reaching.
Whether or not the Fund invests in securities of issuers located in Europe or with significant exposure to European issuers or countries, these events could negatively affect the value and relative liquidity of the Fund’s investments. The occurrence of terrorist incidents throughout Europe could also impact financial markets.
Foreign Securities Risk: Investments in securities of non-U.S. issuers (including those denominated in U.S. dollars) may involve more risk than investing in securities of U.S. issuers. Foreign political, economic and legal systems, especially those in developing and emerging market countries, may be less stable and more volatile than in the United States. Foreign legal systems generally have fewer regulatory requirements than the U.S. legal system, particularly those of emerging markets. In general, less information is publicly available with respect to non-U.S. companies than U.S. companies. Non-U.S. companies generally are not subject to the same accounting, auditing, and financial reporting standards as are U.S. companies. Additionally, the changing value of foreign currencies and changes in exchange rates could also affect the value of the assets the Fund holds and the Fund’s performance. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payment of principal and interest or dividends to investors located outside the country, due to blockage of foreign currency exchanges or otherwise. Investments in emerging markets are subject to greater volatility and price declines.
In addition, the Fund’s investments in non-U.S. securities may be subject to the risks of nationalization or expropriation of assets, imposition of currency exchange controls or restrictions on the repatriation of non-U.S. currency, confiscatory taxation and adverse diplomatic developments. Special U.S. tax considerations may apply.
Futures and Forward Contracts Risk: The primary risks associated with the use of futures or forward contracts are (a) the imperfect correlation between the change in market value of the instruments held by the Fund and the price of the futures or forward contract; (b)
| | | | |
PGIM Wadhwani Systematic Absolute Return Fund | | | 63 | |
Notes to Financial Statements (continued)
possible lack of a liquid secondary market for a futures or forward contract and the resulting inability to close a futures or forward contract when desired; (c) losses caused by unanticipated market movements, which are potentially unlimited; (d) the failure to predict correctly the direction of securities or commodities prices, interest rates, currency exchange rates and other economic factors; and (e) the possibility that the counterparty to the futures or forward contract will default in the performance of its obligations. Additionally, not all forward contracts require a counterparty to post collateral, which may expose the Fund to greater losses in the event of a default by a counterparty.
Increase in Expenses Risk: Your actual cost of investing in the Fund may be higher than the expenses shown in the expense table in the Fund’s prospectus for a variety of reasons. For example, expense ratios may be higher than those shown if average net assets decrease. Net assets are more likely to decrease and Fund expense ratios are more likely to increase when markets are volatile. Active and frequent trading of Fund securities can increase expenses.
Interest Rate Risk: The value of your investment may go down when interest rates rise. A rise in rates tends to have a greater impact on the prices of longer term or duration debt securities. Similarly, a rise in interest rates may also have a greater negative impact on the value of equity securities whose issuers expect earnings further out in the future. For example, a fixed income security with a duration of three years is expected to decrease in value by approximately 3% if interest rates increase by 1%. This is referred to as “duration risk.” When interest rates fall, the issuers of debt obligations may prepay principal more quickly than expected, and the Fund may be required to reinvest the proceeds at a lower interest rate. This is referred to as “prepayment risk.” When interest rates rise, debt obligations may be repaid more slowly than expected, and the value of the Fund’s holdings may fall sharply. This is referred to as “extension risk.” The Fund may lose money if short-term or long-term interest rates rise sharply or in a manner not anticipated by the subadviser.
Large Shareholder and Large Scale Redemption Risk: Certain individuals, accounts, funds (including funds affiliated with the Manager) or institutions, including the Manager and its affiliates, may from time to time own or control a substantial amount of the Fund’s shares. There is no requirement that these entities maintain their investment in the Fund. There is a risk that such large shareholders or that the Fund’s shareholders generally may redeem all or a substantial portion of their investments in the Fund in a short period of time, which could have a significant negative impact on the Fund’s NAV, liquidity, and brokerage costs. Large redemptions could also result in tax consequences to shareholders and impact the Fund’s ability to implement its investment strategy. The Fund’s ability to pursue its investment objective after one or more large scale redemptions may be impaired and, as a result, the Fund may invest a larger portion of its assets in cash or cash equivalents.
Leverage Risk: Certain transactions in which the Fund may engage may give rise to leverage. The use of leverage exaggerates the effect of any increase or decrease in the value of the Fund’s holdings, and makes any change in the Fund’s net asset value (“NAV”) greater than it would be without the use of leverage. This could result in increased volatility of investment return. There is a possibility that segregation involving a large percentage of the assets of the Fund could impede portfolio management or the Fund’s ability to meet redemption requests or other current obligations or that the Fund may be required to dispose of some of its investments at unfavorable prices or times.
Management Risk: Actively managed funds are subject to management risk. The subadviser will apply investment techniques and risk analyses in making investment decisions for the Fund, but the subadviser’s judgments about the attractiveness, value or market trends affecting a particular security, industry or sector or about market movements may be incorrect. Additionally, the investments selected for the Fund may underperform the markets in general, the Fund’s benchmark and other funds with similar investment objectives.
Market Disruption and Geopolitical Risks: Market disruption can be caused by economic, financial or political events and factors, including but not limited to, international wars or conflicts (including Russia’s military invasion of Ukraine), geopolitical developments (including trading and tariff arrangements, sanctions and cybersecurity attacks), instability in regions such as Asia, Eastern Europe and the Middle East, terrorism, natural disasters and public health epidemics (including the outbreak of COVID-19 globally).
The extent and duration of such events and resulting market disruptions cannot be predicted, but could be substantial and could magnify the impact of other risks to the Fund. These and other similar events could adversely affect the U.S. and foreign financial markets and lead to increased market volatility, reduced liquidity in the securities markets, significant negative impacts on issuers and the markets for certain securities and commodities and/or government intervention. They may also cause short- or long-term economic uncertainties in the United States and worldwide. As a result, whether or not the Fund invests in securities of issuers located in or with significant exposure to the countries directly affected, the value and liquidity of the Fund’s investments may be negatively impacted. Further, due to closures of certain markets and restrictions on trading certain securities, the value of certain securities held by the Fund could be significantly impacted, which could lead to such securities being valued at zero.
COVID-19 and the related governmental and public responses have had and may continue to have an impact on the Fund’s investments and net asset value and have led and may continue to lead to increased market volatility and the potential for illiquidity in certain classes of securities and sectors of the market. They have also had and may continue to result in periods of business disruption, business closures, inability to obtain raw materials, supplies and component parts, and reduced or disrupted operations for the issuers in which
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PGIM Wadhwani Systematic Absolute Return Fund | | | 65 | |
Notes to Financial Statements (continued)
the Fund invests. The occurrence, reoccurrence and pendency of public health epidemics could adversely affect the economies and financial markets either in specific countries or worldwide.
Market Risk: Markets are volatile and the prices of the Fund’s investments may decline generally. Instruments held by the Fund may fluctuate in price based on changes in an issuer’s financial condition and overall market and economic conditions. If the market prices of the instruments owned by the Fund fall, the value of your investment in the Fund will decline.
Model Design Risk: The subadviser uses certain quantitative models or algorithms to help guide its investment decisions. The design of the underlying models or algorithms may be flawed or incomplete. Additionally, the quantitative techniques that underlie the subadviser’s portfolio construction processes may fail to fully anticipate important risks. When a model or algorithms used in managing the Fund contains an error, or is incorrect or incomplete, any decision made in reliance on the model or algorithm may not produce the desired results and the Fund may realize losses. There is no guarantee that a quantitative model or algorithm used by the subadviser, and the investments selected based on the model or algorithm, will perform as expected or produce the desired results.
Model Implementation Risk: While the subadviser strives to mitigate the likelihood of material implementation errors, it is impossible to completely eliminate the risk of error in the implementation of the computer models that guide the subadviser’s quantitative investment processes. Additionally, it may be difficult to implement model recommendations in volatile and rapidly changing market conditions.
Money Market Instruments Risk: The value of money market instruments may be affected by changing interest rates and by changes in the credit ratings of those instruments. If a significant amount of the Fund’s assets are invested in money market instruments, it will be more difficult for the Fund to achieve its investment objective.
New Fund Risk: The Fund recently commenced operations. As a new and relatively small fund, the Fund’s performance may not represent how the Fund is expected to or may perform in the long term if it becomes larger and after it has fully implemented its investment strategies. Investment positions may have a disproportionate impact (negative or positive) on performance in new and smaller funds. New and smaller funds may also require a period of time before they are invested in securities that meet their investment objectives and policies and achieve a representative portfolio composition. Accordingly, investors in the Fund bear the risk that the Fund may not be successful in implementing its investment strategy, and may not employ a successful investment strategy, either of which could result in the Fund being liquidated at any time without shareholder approval and/or at a time that
may not be favorable for all shareholders. Such a liquidation could result in transaction costs and have negative tax consequences for shareholders.
Non-Diversified Investment Company Risk: The Fund is non-diversified for purposes of the 1940 Act. This means that the Fund may invest a greater percentage of its assets in the securities of a single company or other issuer than a diversified fund. Investing in a non-diversified fund involves greater risk than investing in a diversified fund because a loss resulting from the decline in value of any one security may represent a greater portion of the total assets of a non-diversified fund.
Reference Rate Risk: The Fund may be exposed to financial instruments that are tied to the London Interbank Offered Rate (“LIBOR”) to determine payment obligations, financing terms, hedging strategies or investment value.
The United Kingdom’s Financial Conduct Authority announced a phase out of LIBOR such that after June 30, 2023, the overnight, 1-month, 3-month, 6-month and 12-month U.S. dollar LIBOR settings will cease to be published or will no longer be representative. All other LIBOR settings and certain other interbank offered rates, such as the Euro Overnight Index Average (“EONIA”), ceased to be published or representative after December 31, 2021. The Fund may have investments linked to other interbank offered rates that may also cease to be published in the future. Various financial industry groups have been planning for the transition away from LIBOR, but there remain challenges to converting certain securities and transactions to a new reference rate (e.g., the Secured Overnight Financing Rate (“SOFR”), which is intended to replace the U.S. dollar LIBOR).
Neither the effect of the LIBOR transition process nor its ultimate success can yet be known. The transition process might lead to increased volatility and illiquidity in markets for instruments whose terms currently include LIBOR as well as loan facilities used by the Fund. While some existing LIBOR-based instruments may contemplate a scenario where LIBOR is no longer available by providing for an alternative rate-setting methodology, there may be significant uncertainty regarding the effectiveness of any such alternative methodologies to replicate LIBOR. Not all existing LIBOR-based instruments may have alternative rate-setting provisions and there remains uncertainty regarding the willingness and ability of issuers to add alternative rate-setting provisions in certain existing instruments. Global regulators have advised market participants to cease entering into new contracts using LIBOR as a reference rate, and it is possible that investments in LIBOR-based instruments could invite regulatory scrutiny. There may also be challenges for the Fund to enter into hedging transactions against such newly-issued instruments until a market for such hedging transactions develops. All of the aforementioned may adversely affect the Fund’s performance or net asset value.
Short Position Risk: The Fund’s short sales of a security or short positions in derivative instruments are subject to special risks. If the price of the security or derivative increases, then the Fund will incur a loss equal to the increase in price from the time that the short sale was entered into plus any transaction costs (i.e., premiums and interest) paid to the
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PGIM Wadhwani Systematic Absolute Return Fund | | | 67 | |
Notes to Financial Statements (continued)
broker-dealer to borrow securities. Therefore, short sales involve the risk that losses may be exaggerated, potentially losing more money than the actual cost of the investment. By contrast, a loss on a long position arises from decreases in the value of the security and is limited by the fact that a security’s value cannot decrease below zero. By investing the proceeds received from selling securities short, the Fund could be deemed to be employing a form of leverage, which creates special risks. In times of unusual or adverse market, economic, regulatory or political conditions, the Fund may not be able, fully or partially, to implement its short selling strategy. Also, there is the risk that the third party to the short sale will not fulfill its contractual obligations, causing a loss to the Fund.
Sovereign Debt Risk: The Fund may invest in sovereign debt issued by governments, their agencies or instrumentalities, or other government-related entities. Holders of sovereign debt may be requested to participate in the rescheduling of such debt and to extend further loans to governmental entities. In addition, there is no bankruptcy proceeding by which defaulted sovereign debt may be collected.
Swaps Risk: Swap agreements involve the risk that the party with which the Fund has entered into the swap will default on its obligation to pay the Fund and the risk that the Fund will not be able to meet its obligations to pay the other party to the agreement.
U.S. Government and Agency Securities Risk: U.S. Government and agency securities are subject to market risk, interest rate risk and credit risk. Not all U.S. Government securities are insured or guaranteed by the full faith and credit of the U.S. Government; some are only insured or guaranteed by the issuing agency, which must rely on its own resources to repay the debt. Some agency securities carry no guarantee whatsoever and the risk of default associated with these securities would be borne by the Fund. The maximum potential liability of the issuers of some U.S. Government securities held by the Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. No assurance can be given that the U.S. Government would provide financial support to any such issuers if it is not obligated to do so by law. It is possible that these issuers will not have the funds to meet their payment obligations in the future. In addition, the value of U.S. Government securities may be affected by changes in the credit rating of the U.S. Government.
10. Recent Accounting Pronouncement and Regulatory Developments
In March 2020, the FASB issued Accounting Standard Update (“ASU”) No. 2020-04, which provides optional guidance for applying GAAP to contract modifications, hedging relationships and other transactions affected by the reference rate reform if certain criteria are met. ASU 2020-04 is elective and is effective on March 12, 2020 through December 31,
2022. Management does not expect ASU 2020-04 to have a material impact on the financial statements.
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PGIM Wadhwani Systematic Absolute Return Fund | | | 69 | |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Prudential Investment Portfolios 3 and Shareholders of PGIM Wadhwani Systematic Absolute Return Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of PGIM Wadhwani Systematic Absolute Return Fund (one of the funds constituting Prudential Investment Portfolios 3, referred to hereafter as the “Fund”) as of October 31, 2022, the related statement of operations for the year ended October 31, 2022 and the statement of changes in net assets and the financial highlights for the year ended October 31, 2022 and for the period September 28, 2021 (commencement of operations) through October 31, 2021, including the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of October 31, 2022, the results of its operations for the year ended October 31, 2022, and the changes in its net assets and the financial highlights for the year ended October 31, 2022 and for the period September 28, 2021 (commencement of operations) through October 31, 2021 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2022 by correspondence with the transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
December 16, 2022
We have served as the auditor of one or more investment companies in the PGIM Retail Funds complex since 2020.
INFORMATION ABOUT BOARD MEMBERS AND OFFICERS (unaudited)
Information about Board Members and Officers of the Fund is set forth below. Board Members who are not deemed to be “interested persons” of the Fund, as defined in the 1940 Act, are referred to as “Independent Board Members.” Board Members who are deemed to be “interested persons” of the Fund are referred to as “Interested Board Members.” The Board Members are responsible for the overall supervision of the operations of the Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Board in turn elects the Officers, who are responsible for administering the day-to-day operations of the Fund.
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Independent Board Members |
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Name Year of Birth Position(s) Portfolios Overseen | | Principal Occupation(s) During Past Five Years | | Other Directorships Held During Past Five Years | | Length of Board Service |
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Ellen S. Alberding 1958 Board Member Portfolios Overseen: 97 | | President and Board Member, The Joyce Foundation (charitable foundation) (since 2002); formerly Vice Chair, City Colleges of Chicago (community college system) (2011-2015); Trustee, National Park Foundation (charitable foundation for national park system) (2009-2018); Trustee, Economic Club of Chicago (2009-2016); Trustee, Loyola University (since 2018). | | None. | | Since September 2013 |
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Kevin J. Bannon 1952 Board Member Portfolios Overseen: 97 | | Retired; formerly Managing Director (April 2008-May 2015) and Chief Investment Officer (October 2008-November 2013) of Highmount Capital LLC (registered investment adviser); formerly Executive Vice President and Chief Investment Officer (April 1993-August 2007) of Bank of New York Company; President (May 2003-May 2007) of BNY Hamilton Family of Mutual Funds. | | Director of Urstadt Biddle Properties (equity real estate investment trust) (since September 2008). | | Since July 2008 |
PGIM Wadhwani Systematic Absolute Return Fund
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Independent Board Members |
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Name Year of Birth Position(s) Portfolios Overseen | | Principal Occupation(s) During Past Five Years | | Other Directorships Held During Past Five Years | | Length of Board Service |
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Linda W. Bynoe 1952 Board Member Portfolios Overseen: 94 | | President and Chief Executive Officer (since March 1995) and formerly Chief Operating Officer (December 1989-February 1995) of Telemat Limited LLC (formerly Telemat Ltd) (management consulting); formerly Vice President (January 1985-June 1989) at Morgan Stanley & Co. (broker-dealer). | | Trustee of Equity Residential (residential real estate) (since December 2009); Director of Northern Trust Corporation (financial services) (since April 2006); formerly Director of Anixter International, Inc. (communication products distributor) (January 2006-June 2020). | | Since March 2005 |
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Barry H. Evans 1960 Board Member Portfolios Overseen: 96 | | Retired; formerly President (2005-2016), Global Chief Operating Officer (2014-2016), Chief Investment Officer - Global Head of Fixed Income (1998-2014), and various portfolio manager roles (1986-2006), Manulife Asset Management (asset management). | | Formerly Director, Manulife Trust Company (2011-2018); formerly Director, Manulife Asset Management Limited (2015-2017); formerly Chairman of the Board of Directors of Manulife Asset Management U.S. (2005-2016); formerly Chairman of the Board, Declaration Investment Management and Research (2008-2016). | | Since September 2017 |
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Keith F. Hartstein 1956 Board Member & Independent Chair Portfolios Overseen: 97 | | Retired; Member (November 2014-September 2022) of the Governing Council of the Independent Directors Council (IDC) (organization of independent mutual fund directors); formerly Executive Committee of the IDC Board of Governors (October 2019-December 2021); formerly President and Chief Executive Officer (2005-2012), Senior Vice President (2004-2005), Senior Vice President of Sales and Marketing (1997-2004), and various executive management positions (1990-1997), John Hancock Funds, LLC (asset management); Chairman, Investment Company Institute’s Sales Force Marketing Committee (2003-2008). | | None. | | Since September 2013 |
Visit our website at pgim.com/investments
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Independent Board Members |
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Name Year of Birth Position(s) Portfolios Overseen | | Principal Occupation(s) During Past Five Years | | Other Directorships Held During Past Five Years | | Length of Board Service |
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Laurie Simon Hodrick 1962 Board Member Portfolios Overseen: 93 | | A. Barton Hepburn Professor Emerita of Economics in the Faculty of Business, Columbia Business School (since 2018); Visiting Fellow at the Hoover Institution, Stanford University (since 2015); Sole Member, ReidCourt LLC (since 2008) (a consulting firm); formerly Visiting Professor of Law, Stanford Law School (2015-2021); formerly A. Barton Hepburn Professor of Economics in the Faculty of Business, Columbia Business School (1996-2017); formerly Managing Director, Global Head of Alternative Investment Strategies, Deutsche Bank (2006-2008). | | Independent Director, Andela (since January 2022) (global talent network); Independent Director, Roku (since December 2020) (communication services); formerly Independent Director, Synnex Corporation (2019-2021) (information technology); formerly Independent Director, Kabbage, Inc. (2018-2020) (financial services); formerly Independent Director, Corporate Capital Trust (2017-2018) (a business development company). | | Since September 2017 |
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Brian K. Reid 1961 Board Member Portfolios Overseen: 96 | | Retired; formerly Chief Economist for the Investment Company Institute (ICI) (2005-2017); formerly Senior Economist and Director of Industry and Financial Analysis at the ICI (1998-2004); formerly Senior Economist, Industry and Financial Analysis at the ICI (1996-1998); formerly Staff Economist at the Federal Reserve Board (1989-1996); Director, ICI Mutual Insurance Company (2012-2017). | | None. | | Since March 2018 |
PGIM Wadhwani Systematic Absolute Return Fund
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Independent Board Members |
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Name Year of Birth Position(s) Portfolios Overseen | | Principal Occupation(s) During Past Five Years | | Other Directorships Held During Past Five Years | | Length of Board Service |
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Grace C. Torres 1959 Board Member Portfolios Overseen: 96 | | Retired; formerly Treasurer and Principal Financial and Accounting Officer of the PGIM Funds, Target Funds, Advanced Series Trust, Prudential Variable Contract Accounts and The Prudential Series Fund (1998-June 2014); Assistant Treasurer (March 1999-June 2014) and Senior Vice President (September 1999-June 2014) of PGIM Investments LLC; Assistant Treasurer (May 2003-June 2014) and Vice President (June 2005-June 2014) of AST Investment Services, Inc.; Senior Vice President and Assistant Treasurer (May 2003-June 2014) of Prudential Annuities Advisory Services, Inc. | | Director (since January 2018) of OceanFirst Financial Corp. and OceanFirst Bank; formerly Director (July 2015-January 2018) of Sun Bancorp, Inc. N.A. and Sun National Bank. | | Since November 2014 |
Visit our website at pgim.com/investments
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Interested Board Members |
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Name Year of Birth Position(s) Portfolios Overseen | | Principal Occupation(s) During Past Five Years | | Other Directorships Held During Past Five Years | | Length of Board Service |
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Stuart S. Parker 1962 Board Member & President Portfolios Overseen: 96 | | President, Chief Executive Officer, Chief Operating Officer and Officer in Charge of PGIM Investments LLC (formerly known as Prudential Investments LLC) (since January 2012); President and Principal Executive Officer ( PEO ) (since September 2022) of the PGIM Private Credit Fund; President and PEO (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Executive Vice President of Jennison Associates LLC and Head of Retail Distribution of PGIM Investments LLC (June 2005-December 2011); Investment Company Institute - Board of Governors (since May 2012). | | None. | | Since January 2012 |
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Scott E. Benjamin 1973 Board Member & Vice President Portfolios Overseen: 97 | | Executive Vice President (since May 2009) of PGIM Investments LLC; Vice President (since June 2012) of Prudential Investment Management Services LLC; Executive Vice President (since September 2009) of AST Investment Services, Inc.; Senior Vice President of Product Development and Marketing, PGIM Investments (since February 2006); Vice President (since September 2022) of the PGIM Private Credit Fund; Vice President (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Vice President of Product Development and Product Management, PGIM Investments LLC (2003-2006). | | None. | | Since March 2010 |
PGIM Wadhwani Systematic Absolute Return Fund
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Fund Officers(a) |
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Name Year of Birth Fund Position | | Principal Occupation(s) During Past Five Years | | Length of Service as Fund Officer |
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Claudia DiGiacomo 1974 Chief Legal Officer | | Chief Legal Officer (since September 2022) of the PGIM Private Credit Fund; Chief Legal Officer (since July 2022) of the PGIM Private Real Estate Fund, Inc.; Chief Legal Officer, Executive Vice President and Secretary of PGIM Investments LLC (since August 2020); Chief Legal Officer of Prudential Mutual Fund Services LLC (since August 2020); Chief Legal Officer of PIFM Holdco, LLC (since August 2020); Vice President and Corporate Counsel (since January 2005) of Prudential; and Corporate Counsel of AST Investment Services, Inc. (since August 2020); formerly Vice President and Assistant Secretary of PGIM Investments LLC (2005-2020); formerly Associate at Sidley Austin Brown & Wood LLP (1999-2004). | | Since December 2005 |
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Isabelle Sajous 1976 Chief Compliance Officer | | Chief Compliance Officer (since April 2022) of PGIM Investments LLC, the PGIM Funds, Target Funds, PGIM ETF Trust, PGIM Global High Yield Fund, Inc., PGIM High Yield Bond Fund, Inc., PGIM Short Duration High Yield Opportunities Fund, Advanced Series Trust, The Prudential Series Fund and Prudential’s Gibraltar Fund, Inc.; Chief Compliance Officer (since September 2022) of the PGIM Private Credit Fund; Chief Compliance Officer (since March 2022) of the PGIM Private Real Estate Fund, Inc.; Vice President, Compliance of PGIM Investments LLC (since December 2020); formerly Director, Compliance (July 2018-December 2020) of Credit Suisse Asset Management LLC; and Vice President, Associate General Counsel & Deputy Chief Compliance Officer of Cramer Rosenthal McGlynn, LLC (August 2014-July 2018). | | Since April 2022 |
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Andrew R. French 1962 Secretary | | Vice President (since December 2018) of PGIM Investments LLC; Secretary (since September 2022) of the PGIM Private Credit Fund; Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Vice President and Corporate Counsel (2010-2018) of Prudential; formerly Director and Corporate Counsel (2006-2010) of Prudential; Vice President and Assistant Secretary (since January 2007) of PGIM Investments LLC; Vice President and Assistant Secretary (since January 2007) of Prudential Mutual Fund Services LLC. | | Since October 2006 |
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Melissa Gonzalez 1980 Assistant Secretary | | Vice President and Corporate Counsel (since September 2018) of Prudential; Vice President and Assistant Secretary (since August 2020) of PGIM Investments LLC; Assistant Secretary (since September 2022) of the PGIM Private Credit Fund; Assistant Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Director and Corporate Counsel (March 2014-September 2018) of Prudential. | | Since March 2020 |
Visit our website at pgim.com/investments
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Fund Officers(a) |
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Name Year of Birth Fund Position | | Principal Occupation(s) During Past Five Years | | Length of Service as Fund Officer |
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Patrick E. McGuinness 1986 Assistant Secretary | | Vice President and Assistant Secretary (since August 2020) of PGIM Investments LLC; Director and Corporate Counsel (since February 2017) of Prudential; Assistant Secretary (since September 2022) of the PGIM Private Credit Fund; Assistant Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc. | | Since June 2020 |
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Debra Rubano 1975 Assistant Secretary | | Vice President and Corporate Counsel (since November 2020) of Prudential; Assistant Secretary (since September 2022) of the PGIM Private Credit Fund; Assistant Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc; formerly Director and Senior Counsel of Allianz Global Investors U.S. Holdings LLC (2010-2020) and Assistant Secretary of numerous funds in the Allianz fund complex (2015-2020). | | Since December 2020 |
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Kelly A. Coyne 1968 Assistant Secretary | | Director, Investment Operations of Prudential Mutual Fund Services LLC (since 2010); Assistant Secretary (since September 2022) of the PGIM Private Credit Fund; Assistant Secretary (since March 2022) of the PGIM Private Real Estate Fund, Inc. | | Since March 2015 |
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Christian J. Kelly 1975 Treasurer and Principal Financial and Accounting Officer | | Vice President, Head of Fund Administration of PGIM Investments LLC (since November 2018); Principal Financial Officer (since September 2022) of the PGIM Private Credit Fund; Principal Financial Officer (since March 2022) of the PGIM Private Real Estate Fund, Inc.; formerly, Treasurer and Principal Accounting Officer (March 2022- July 2022) of the PGIM Private Real Estate Fund, Inc.; formerly Director of Fund Administration of Lord Abbett & Co. LLC (2009-2018), Treasurer and Principal Accounting Officer of the Lord Abbett Family of Funds (2017-2018); Director of Accounting, Avenue Capital Group (2008-2009); Senior Manager, Investment Management Practice of Deloitte & Touche LLP (1998-2007). | | Since January 2019 |
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Lana Lomuti 1967 Assistant Treasurer | | Vice President (since 2007) and Director (2005-2007), within PGIM Investments Fund Administration; formerly Assistant Treasurer (December 2007-February 2014) of The Greater China Fund, Inc. | | Since April 2014 |
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Russ Shupak 1973 Assistant Treasurer | | Vice President (since 2017) and Director (2013-2017), within PGIM Investments Fund Administration; Treasurer and Principal Accounting Officer (since July 2022) of the PGIM Private Real Estate Fund, Inc.; Assistant Treasurer (since September 2022) of the PGIM Private Credit Fund; formerly Assistant Treasurer (March 2022 – July 2022) of the PGIM Private Real Estate Fund, Inc. | | Since October 2019 |
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Deborah Conway 1969 Assistant Treasurer | | Vice President (since 2017) and Director (2007-2017), within PGIM Investments Fund Administration. | | Since October 2019 |
PGIM Wadhwani Systematic Absolute Return Fund
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Fund Officers(a) |
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Name Year of Birth Fund Position | | Principal Occupation(s) During Past Five Years | | Length of Service as Fund Officer |
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Elyse M. McLaughlin 1974 Assistant Treasurer | | Vice President (since 2017) and Director (2011-2017), within PGIM Investments Fund Administration; Treasurer and Principal Accounting Officer (since September 2022) of the PGIM Private Credit Fund; Assistant Treasurer (since March 2022) of the PGIM Private Real Estate Fund, Inc. | | Since October 2019 |
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Kelly Florio 1978 Anti-Money Laundering Compliance Officer | | Vice President, Corporate Compliance, Global Compliance Programs and Compliance Risk Management (since December 2021) of Prudential; formerly, Head of Fraud Risk Management (October 2019 to December 2021) at New York Life Insurance Company; formerly, Head of Key Risk Area Operations (November 2018 to October 2019), Director of the US Anti-Money Laundering Compliance Unit (2009-2018) and Bank Loss Prevention Associate (2006 -2009) at MetLife. | | Since June 2022 |
(a) Excludes Mr. Parker and Mr. Benjamin, interested Board Members who also serve as President and Vice President, respectively.
Explanatory Notes to Tables:
∎ | | Board Members are deemed to be “Interested,” as defined in the 1940 Act, by reason of their affiliation with PGIM Investments LLC and/or an affiliate of PGIM Investments LLC. |
∎ | | Unless otherwise noted, the address of all Board Members and Officers is c/o PGIM Investments LLC, 655 Broad Street, Newark, New Jersey 07102-4410. |
∎ | | There is no set term of office for Board Members or Officers. The Board Members have adopted a retirement policy, which calls for the retirement of Board Members on December 31 of the year in which they reach the age of 75. |
∎ | | “Other Directorships Held” includes all directorships of companies required to register or file reports with the SEC under the 1934 Act (that is, “public companies”) or other investment companies registered under the 1940 Act. |
∎ | | “Portfolios Overseen” includes all investment companies managed by PGIM Investments LLC. The investment companies for which PGIM Investments LLC serves as manager include the PGIM Mutual Funds, Target Funds, The Prudential Variable Contract Accounts, PGIM ETF Trust, PGIM Private Real Estate Fund, Inc., PGIM Private Credit Fund, PGIM High Yield Bond Fund, Inc., PGIM Global High Yield Fund, Inc., PGIM Short Duration High Yield Opportunities Fund, The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc. and the Advanced Series Trust. |
∎ | | As used in the Fund Officers table “Prudential” means The Prudential Insurance Company of America. |
Visit our website at pgim.com/investments
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∎ MAIL | | ∎ TELEPHONE | | ∎ WEBSITE |
655 Broad Street Newark, NJ 07102 | | (800) 225-1852 | | pgim.com/investments |
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PROXY VOTING |
The Board of Trustees of the Fund has delegated to the Fund’s subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website. |
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TRUSTEES |
Ellen S. Alberding • Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Barry H. Evans • Keith F. Hartstein • Laurie Simon Hodrick • Stuart S. Parker • Brian K. Reid • Grace C. Torres |
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OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • Christian J. Kelly, Treasurer and Principal Financial and Accounting Officer • Claudia DiGiacomo, Chief Legal Officer • Isabelle Sajous, Chief Compliance Officer • Kelly Florio, Anti-Money Laundering Compliance Officer • Andrew R. French, Secretary • Melissa Gonzalez, Assistant Secretary • Kelly A. Coyne, Assistant Secretary • Patrick E. McGuinness, Assistant Secretary • Debra Rubano, Assistant Secretary • Lana Lomuti, Assistant Treasurer • Russ Shupak, Assistant Treasurer • Elyse M. McLaughlin, Assistant Treasurer • Deborah Conway, Assistant Treasurer |
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MANAGER | | PGIM Investments LLC | | 655 Broad Street Newark, NJ 07102 |
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SUBADVISER | | PGIM Wadhwani LLP | | 5 Upper St. Martin’s Lane Orion House, 9th Floor London WC2H 9EA |
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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 | | 240 Greenwich 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 | | PricewaterhouseCoopers LLP | | 300 Madison Avenue New York, NY 10017 |
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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 the prospectus and summary prospectus by visiting our website at pgim.com/investments or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
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E-DELIVERY |
To receive your mutual fund documents online, go to pgim.com/investments/resource/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
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SHAREHOLDER COMMUNICATIONS WITH TRUSTEES |
Shareholders can communicate directly with the Board of Trustees by writing to the Chair of the Board, PGIM Wadhwani Systematic Absolute Return Fund, PGIM Investments, Attn: Board of Trustees, 655 Broad Street, Newark, NJ 07102. Shareholders can communicate directly with an individual Trustee by writing to that Trustee at the same address. Communications are not screened before being delivered to the addressee. |
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AVAILABILITY OF PORTFOLIO HOLDINGS |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT filings are available on the Commission’s website at sec.gov. |
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The Fund’s Statement of Additional Information contains additional information about the Fund’s Trustees and is available without charge, upon request, by calling (800) 225-1852. |
Mutual Funds:
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ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | | MAY LOSE VALUE | | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PGIM WADHWANI SYSTEMATIC ABSOLUTE RETURN FUND
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SHARE CLASS | | A | | C | | Z | | R6 | | |
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NASDAQ | | PGAEX | | PGAFX | | PGAGX | | PGAHX | | |
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CUSIP | | 74440K512 | | 74440K496 | | 74440K488 | | 74440K470 | | |
MF245E
Item 2 – Code of Ethics — See Exhibit (a)
As of the end of the period covered by this report, the registrant has adopted a code of ethics (the “Section 406 Standards for Investment Companies – Ethical Standards for Principal Executive and Financial Officers”) that applies to the registrant’s Principal Executive Officer and Principal Financial Officer; the registrant’s Principal Financial Officer also serves as the Principal Accounting Officer.
The registrant hereby undertakes to provide any person, without charge, upon request, a copy of the code of ethics. To request a copy of the code of ethics, contact the registrant 800-225-1852, and ask for a copy of the Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive and Financial Officers.
Item 3 – Audit Committee Financial Expert –
The registrant’s Board has determined that Ms. Grace C. Torres, member of the Board’s Audit Committee is an “audit committee financial expert,” and that she is “independent,” for purposes of this item.
Item 4 – Principal Accountant Fees and Services –
(a) Audit Fees
For the fiscal years ended October 31, 2022 and October 31, 2021, PricewaterhouseCoopers LLP (“PwC”), the Registrant’s principal accountant, billed the Registrant $167,400 and $167,400, respectively, for professional services rendered for the audit of the Registrant’s annual financial statements or services that are normally provided in connection with statutory and regulatory filings.
(b) Audit-Related Fees
For the fiscal years ended October 31, 2022 and October 31, 2021: none.
(c) Tax Fees
For the fiscal years ended October 31, 2022 and October 31, 2021: none.
(d) All Other Fees
For the fiscal years ended October 31, 2022 and October 31, 2021: none.
(e) (1) Audit Committee Pre-Approval Policies and Procedures
THE PGIM MUTUAL FUNDS
AUDIT COMMITTEE POLICY
on
Pre-Approval of Services Provided by the Independent
Accountants
The Audit Committee of each PGIM Mutual Fund is charged with the responsibility to monitor the independence of the Fund’s independent accountants. As part of this responsibility, the Audit Committee must pre-approve the independent accounting firm’s engagement to render audit and/or permissible non-audit services, as required by law. In evaluating a proposed engagement of the independent accountants, the Audit Committee will assess the effect that the engagement might reasonably be expected to have on the accountant’s independence. The Committee’s evaluation will be based on:
| • | | a review of the nature of the professional services expected to be provided, |
| • | | a review of the safeguards put into place by the accounting firm to safeguard independence, and |
| • | | periodic meetings with the accounting firm. |
Policy for Audit and Non-Audit Services Provided to the Funds
On an annual basis, the scope of audits for each Fund, audit fees and expenses, and audit-related and non-audit services (and fees proposed in respect thereof) proposed to be performed by the Fund’s independent accountants will be presented by the Treasurer and the independent accountants to the Audit Committee for review and, as appropriate, approval prior to the initiation of such services.
Such presentation shall be accompanied by confirmation by both the Treasurer and the independent accountants that the proposed
non-audit services will not adversely affect the independence of the independent accountants. Such proposed non-audit services shall be described in sufficient detail to enable the Audit Committee to assess the appropriateness of such services and fees, and the compatibility of the provision of such services with the auditor’s independence. The Committee shall receive periodic reports on the progress of the audit and other services which are approved by the Committee or by the Committee Chair pursuant to authority delegated in this Policy.
The categories of services enumerated under “Audit Services”, “Audit-related Services”, and “Tax Services” are intended to provide guidance to the Treasurer and the independent accountants as to those categories of services which the Committee believes are generally consistent with the independence of the independent accountants and which the Committee (or the Committee Chair) would expect upon the presentation of specific proposals to pre-approve. The enumerated categories are not intended as an exclusive list of audit, audit-related or tax services, which the Committee (or the Committee Chair) would consider for pre-approval.
Audit Services
The following categories of audit services are considered to be consistent with the role of the Fund’s independent accountants:
| • | | Annual Fund financial statement audits |
| • | | Seed audits (related to new product filings, as required) |
| • | | SEC and regulatory filings and consents |
Audit-related Services
The following categories of audit-related services are considered to be consistent with the role of the Fund’s independent accountants:
| • | | Accounting consultations |
| • | | Fund merger support services |
| • | | Agreed Upon Procedure Reports |
| • | | Other Internal Control Reports |
Individual audit-related services that fall within one of these categories (except for fund merger support services) and are not presented to the Audit Committee as part of the annual pre-approval process are subject to an authorized pre-approval by the Audit Committee so long as the estimated fee for those services does not exceed $30,000. Any services provided under such pre-approval will be reported to the Audit Committee at its next regular meeting. Should the amount of such services exceed $30,000 any additional fees will be subject to pre-approval by the Committee Chair (or any other Committee member on whom this responsibility has been delegated). Fees related to fund merger support services are subject to a separate authorized
pre-approval by the Audit Committee with fees determined on a per occurrence and merger complexity basis.
Tax Services
The following categories of tax services are considered to be consistent with the role of the Fund’s independent accountants:
| • | | Tax compliance services related to the filing or amendment of the following: |
| • | | Federal, state and local income tax compliance; and, |
| • | | Sales and use tax compliance |
| • | | Timely RIC qualification reviews |
| • | | Tax distribution analysis and planning |
| • | | Tax authority examination services |
| • | | Tax appeals support services |
| • | | Accounting methods studies |
| • | | Fund merger support services |
| • | | Tax consulting services and related projects |
Individual tax services that fall within one of these categories and are not presented to the Audit Committee as part of the annual pre-approval process are subject to an authorized pre-approval by the Audit Committee so long as the estimated fee for those services does not exceed $30,000. Any services provided under such pre-approval will be reported to the Audit Committee at its next regular meeting. Should the amount of such services exceed $30,000 any additional fees will be subject to pre-approval by the Committee Chair (or any other Committee member on whom this responsibility has been delegated).
Other Non-Audit Services
Certain non-audit services that the independent accountants are legally permitted to render will be subject to pre-approval by the Committee or by one or more Committee members to whom the Committee has delegated this authority and who will report to the full Committee any pre-approval decisions made pursuant to this Policy. Non-audit services presented for pre-approval pursuant to this paragraph will be accompanied by a confirmation from both the Treasurer and the independent accountants that the proposed services will not adversely affect the independence of the independent accountants.
Proscribed Services
The Fund’s independent accountants will not render services in the following categories of non-audit services:
| • | | Bookkeeping or other services related to the accounting records or financial statements of the Fund |
| • | | Financial information systems design and implementation |
| • | | Appraisal or valuation services, fairness opinions, or contribution-in-kind reports |
| • | | Internal audit outsourcing services |
| • | | Management functions or human resources |
| • | | Broker or dealer, investment adviser, or investment banking services |
| • | | Legal services and expert services unrelated to the audit |
| • | | Any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible. |
Pre-approval of Non-Audit Services Provided to Other Entities Within the PGIM Fund Complex
Certain non-audit services provided to PGIM Investments LLC or any of its affiliates that also provide ongoing services to the PGIM Mutual Funds will be subject to pre-approval by the Audit Committee. The only non-audit services provided to these entities that will require pre-approval are those related directly to the operations and financial reporting of the Funds.
Individual projects that are not presented to the Audit Committee as part of the annual pre-approval process will be subject to pre-approval by the Committee Chair (or any other Committee member on whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $30,000. Services presented for pre-approval pursuant to this paragraph will be accompanied by a confirmation from both the Treasurer and the independent accountants that the proposed services will not adversely affect the independence of the independent accountants.
Although the Audit Committee will not pre-approve all services provided to PGIM Investments LLC and its affiliates, the Committee will receive an annual report from the Fund’s independent accounting firm showing the aggregate fees for all services provided to PGIM Investments and its affiliates.
(e) (2) | Percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X – |
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| | | | Fiscal Year Ended October 31, 2022 | | Fiscal Year Ended October 31, 2021 |
| | 4(b) | | Not applicable. | | Not applicable. |
| | 4(c) | | Not applicable. | | Not applicable. |
| | 4(d) | | Not applicable. | | Not applicable. |
(f) Percentage of hours expended attributable to work performed by other than full time employees of principal accountant if greater than 50%.
The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was 0%.
(g) Non-Audit Fees
The aggregate non-audit fees billed by the Registrant’s principal accountant for services rendered to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant for the fiscal years ended October 31, 2022 and October 31, 2021 was $0 and $0, respectively.
(h) Principal Accountant’s Independence
Not applicable as the Registrant’s principal accountant has not provided non-audit services to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X.
(i) Not applicable.
(j) Not applicable.
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.
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Item 9 – | | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not applicable. |
Item 10 – Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.
Item 11 – Controls and Procedures
| (a) | It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure. |
| (b) | There has been no significant change in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12 – Controls and Procedures - Disclosure of Securities Lending Activities for Closed-End Management Investment Companies – Not applicable.
Item 13 – Exhibits
| (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.
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Registrant: | | Prudential Investment Portfolios 3 |
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By: | | /s/ Andrew R. French |
| | Andrew R. French |
| | Secretary |
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Date: | | December 19, 2022 |
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.
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By: | | /s/ Stuart S. Parker |
| | Stuart S. Parker |
| | President and Principal Executive Officer |
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Date: | | December 19, 2022 |
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By: | | /s/ Christian J. Kelly |
| | Christian J. Kelly |
| | Treasurer and Principal Financial and Accounting Officer |
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Date: | | December 19, 2022 |