UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORMN-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: | 811-02896 | |
Exact name of registrant as specified in charter: | Prudential Investment Portfolios, Inc. 15 | |
Address of principal executive offices: | 655 Broad Street, 17th Floor Newark, New Jersey 07102 | |
Name and address of agent for service: | Andrew R. French 655 Broad Street, 17th Floor Newark, New Jersey 07102 | |
Registrant’s telephone number, including area code: | 800-225-1852 | |
Date of fiscal year end: | 8/31/2019 | |
Date of reporting period: | 8/31/2019 |
Item 1 – Reports to Stockholders
PGIM SHORT DURATION HIGH YIELD INCOME FUND
ANNUAL REPORT
AUGUST 31, 2019
COMING SOON: PAPERLESS SHAREHOLDER REPORTS
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website (pgiminvestments.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 1-800-225-1852 or by sending an email request to PGIM Investments at shareholderreports@pgim.com.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary or follow instructions included with this notice to elect to continue to receive paper copies of your shareholder reports. If you invest directly with the Fund, you can call 1-800-225-1852 or send an email request to shareholderreports@pgim.com to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the fund complex if you invest directly with the Fund.
To enroll in e-delivery, go to pgiminvestments.com/edelivery
Objective: To provide a high level of current income |
Highlights(unaudited)
• | The Fund benefited from very strong industry and security selection. In terms of industry selection, an underweight to the upstream energy sector, coupled with overweights to homebuilders and telecom, were the top contributors to performance. |
• | Positioning within the metals & mining, media & entertainment, and health care & pharmaceutical sectors also boosted returns. |
• | Underweights to finance & insurance and the paper & packaging sectors detracted from returns. |
• | Issue selection within aerospace & defense, midstream energy, and cable & satellite also hurt performance. |
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.© 2019 Prudential Financial, Inc. and its related entities. PGIM and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
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PGIM Short Duration High Yield Income Fund | 3 |
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Dear Shareholder:
We hope you find the annual report for the PGIM Short Duration High Yield Income Fund informative and useful. The report covers performance for the 12-month period that ended August 31, 2019.
While the US economy remained healthy, with rising corporate profits and strong job growth, the Federal Reserve cut interest rates late in the period for the first time since the Great Recession more than a decade ago. After nine rate increases in recent years, the cut was a proactive attempt by the Fed to extend the longest domestic economic expansion on record as growth in many other regions weakened. China in particular showed signs of slowing amid trade tensions with the US, and turmoil in the United Kingdom continued as it negotiated an exit from the European Union.
Despite the growing US economy, volatility returned to the equity markets during the period. After corporate tax cuts and regulatory reforms helped boost US stocks early in the period, equities declined significantly at the end of 2018 on concerns about China’s economy, a potential global trade war, higher interest rates, and worries that profit growth might slow. Stocks reversed course early in 2019, rising sharply after the Fed moderated its position on additional rate hikes for the remainder of the year. For the period overall, large-cap US equities rose while small-cap US stocks fell. Stocks also declined in developed foreign and emerging markets.
The overall US bond market posted strong returns during the period on a significant rally in interest rates that saw the 10-year US Treasury yield decline from around 3% to 2%. Investment grade corporate bonds led the way with a double-digit gain, while corporate high yield and municipal bonds each had a high single-digit return. Globally, bonds in developed markets delivered solid returns, while emerging markets debt also posted positive results. A continuing trend during the period was the inversion of a portion of the US Treasury yield curve, as the yield on certain shorter maturities exceeded the yield on the 10-year bond.
Regarding your investments with PGIM, we believe it is important to maintain a diversified portfolio of funds consistent with your tolerance for risk, time horizon, and financial goals. Your financial advisor can help you create a diversified investment plan that may include funds covering all the basic asset classes and that reflects your personal investor profile and risk tolerance. However, diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
At PGIM Investments, we consider it a great privilege and responsibility to help investors participate in opportunities across global markets while meeting their toughest investment challenges. PGIM is a top-10 global investment manager with more than $1 trillion in assets under management. This scale and investment expertise allow us to deliver actively managed funds and strategies to meet the needs of investors around the globe.
Thank you for choosing our family of funds.
Sincerely,
Stuart S. Parker, President
PGIM Short Duration High Yield Income Fund
October 15, 2019
PGIM Short Duration High Yield Income Fund | 5 |
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 atpgiminvestments.com or by calling (800) 225-1852.
Average Annual Total Returns as of 8/31/19 (with sales charges) | ||||||||||
One Year (%) | Five Years (%) | Since Inception (%) | ||||||||
Class A | 4.04 | 3.75 | 3.91 (10/26/12) | |||||||
Class C | 4.64 | 3.45 | 3.48 (10/26/12) | |||||||
Class Z | 6.57 | 4.48 | 4.52 (10/26/12) | |||||||
Class R6 | 6.63 | N/A | 4.80 (10/27/14) | |||||||
Bloomberg Barclays US High Yield Ba/B Rated 1–5 Yr 1% Capped Index |
| |||||||||
6.04 | 4.11 | — | ||||||||
Lipper High Yield Funds Average |
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4.13 | 2.97 | — | ||||||||
Average Annual Total Returns as of 8/31/19 (without sales charges) | ||||||||||
One Year (%) | Five Years (%) | Since Inception (%) | ||||||||
Class A | 6.43 | 4.22 | 4.26 (10/26/12) | |||||||
Class C | 5.64 | 3.45 | 3.48 (10/26/12) | |||||||
Class Z | 6.57 | 4.48 | 4.52 (10/26/12) | |||||||
Class R6 | 6.63 | N/A | 4.80 (10/27/14) | |||||||
Bloomberg Barclays US High Yield Ba/B Rated 1–5 Yr 1% Capped Index |
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6.04 | 4.11 | — | ||||||||
Lipper High Yield Funds Average |
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4.13 | 2.97 | — |
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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 Bloomberg Barclays US High Yield Ba/B Rated 1-5 Year 1% Capped Index by portraying the initial account values at the beginning of the period (October 26, 2012) and the account values at the end of the current fiscal year (August 31, 2019) 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 charges and expenses applicable to each share class (as indicated in the following paragraphs). Without waiver of fees and/or expense reimbursement, if any, the Fund’s 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.
Source: PGIM Investments LLC, Lipper Inc., and Bloomberg Barclays
Since Inception returns are provided for any share class with less than 10 fiscal years of returns. Since Inception returns for the Index and the Lipper Average are measured from the closest month-end to the class’ inception date.
PGIM Short Duration High Yield Income Fund | 7 |
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.
Class A | Class C | Class Z | Class R6 | |||||
Maximum initial sales charge | For purchases prior to July 15, 2019: 3.25% of the public offering price. For purchases on/after July 15, 2019: 2.25% of the public offering price. | None | None | None | ||||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or net asset value at redemption) | For purchases prior to July 15, 2019: 1.00% on sales of $1 million or more made within 12 months of purchase. For purchases on/after July 15, 2019: 1.00% on sales of $500,000 or more within 12 months of purchase. | 1.00% on sales made within 12 months of purchase | None | None | ||||
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | 0.25% | 1.00% | None | None |
Benchmark Definitions
Bloomberg Barclays US High Yield Ba/B Rated 1–5 Year 1% Capped Index—The Bloomberg Barclays US High Yield Ba/B Rated 1–5 Year 1% Capped Index (the Index) represents the performance of US short duration, higher-rated high yield bonds. The average annual total returns for the Index measured from the month-end closest to the inception date of the Fund’s Class A, Class C, and Class Z shares are 4.81% and 4.31% for Class R6 shares.
Lipper High Yield Funds Average—The Lipper High Yield Funds Average (Lipper Average) is based on the average return of all funds in the Lipper High Yield Funds universe for the periods noted. Funds in the Lipper Average aim at high (relative) current yield from fixed income securities, have no quality or maturity restrictions, and tend to invest in lower-grade debt issues. The average annual total returns for the Lipper Average measured from the month-end closest to the inception date of the Fund’s Class A, Class C, and Class Z shares are 3.35% and 3.24% for Class R6 shares.
Investors cannot invest directly in an index or average. The returns for the Index would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses of a mutual fund, but not sales charges or taxes.
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Credit Quality expressed as a percentage of total investments as of 8/31/19 (%) | ||||
BBB | 5.2 | |||
BB | 39.7 | |||
B | 42.7 | |||
CCC | 6.1 | |||
CC | 0.4 | |||
Not Rated | 0.3 | |||
Cash/Cash Equivalents | 5.6 | |||
Total Investments | 100.0 |
Source: PGIM Fixed Income
Credit ratings reflect the highest rating assigned by a nationally recognized statistical rating organization (NRSRO) such as Moody’s Investors Service, Inc. (Moody’s), S&P Global Ratings (S&P), or Fitch, Inc. (Fitch). Credit ratings reflect the common nomenclature used by both S&P and Fitch. Where applicable, ratings are converted to the comparable S&P/Fitch rating tier nomenclature. These rating agencies are independent and are widely used. The Not Rated category consists of securities that have not been rated by a NRSRO. Credit ratings are subject to change.
Distributions and Yields as of 8/31/19 | ||||||
Total Distributions Paid for 12 Months ($) | SEC 30-Day Subsidized Yield* (%) | SEC 30-Day Unsubsidized Yield** (%) | ||||
Class A | 0.48 | 4.34 | 4.25 | |||
Class C | 0.42 | 3.69 | 3.63 | |||
Class Z | 0.51 | 4.69 | 4.54 | |||
Class R6 | 0.51 | 4.74 | 4.67 |
*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.
PGIM Short Duration High Yield Income Fund | 9 |
Strategy and Performance Overview(unaudited)
Howe did the Fund perform?
ThePGIM ShortDuration High Yield Income Fund’s Class Z shares returned 6.57% in the12-month reporting period that ended August 31, 2019, outperforming the 6.04% return of the Bloomberg Barclays US High Yield Ba/B Rated 1–5 Year 1% Capped Index (the Index) and the 4.13% return of the Lipper High Yield Funds Average.
What were the market conditions?
• | While the momentum in the US high yield market that closed the third quarter of 2018 carried into the fourth quarter of 2018, the positive sentiment soon abated in the face of several concerns that the markets could not ignore. An escalatingUS-China trade war, prospects for political gridlock, and concerns over further Federal Reserve (Fed) policy tightening all led to fears surrounding trade and global growth, inducing volatility within the high yield asset class. |
• | Apart from intermittent weakness, the US high yield market rebounded strongly in the first quarter of 2019. Although weaker-than-expected European economic data late in the first quarter prompted a swift sentiment change, the sector ended the quarter firmly in positive territory. |
• | In a volatile second quarter of 2019, US high yield spreads per the Bloomberg Barclays US High Yield index approached their tightest levelyear-to-date in April 2019, widened by almost 100 basis points (bps) in May, and subsequently recovered in June. (One basis point is 0.01%.) |
• | The US high yield market got off to a negative start in August 2019, as increasedUS-China trade tensions, global growth concerns, an inverted yield curve, and a sell-off in equities weighed on the market. Notably, one of the largestsingle-day spread widening events in the last 10 years occurred on August 5. As the month progressed, a steady decline in rates coupled with renewed optimism regarding aUS-China trade resolution helped offset equity weakness and settled the market. In total, August saw over $4 billion of outflows from high yield funds. The par weighted average high yield index bond price increased $0.13 month over month (adjusted for rebalancing), ending the month at $99.04. |
• | For the period, spreads on the Bloomberg Barclays US High Yield1-5 Year 1% Issuer Constrained Index widened 23 bps. |
What worked?
• | The Fund benefited from very strong industry and security selection. |
• | In terms of industry selection, an underweight to the upstream energy sector, coupled with overweights to homebuilders and telecom, were the top contributors to performance. |
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• | Positioning within the metals & mining, media & entertainment, and health care & pharmaceutical sectors also boosted returns. |
• | A few of the top single-name contributors to performance included an underweight toMallinckrodt Pharmaceuticals (health care & pharmaceutical) and overweights toWind Tre Spa (telecom) andPetSmart Inc. (retail). |
What didn’t work?
• | Underweights to finance & insurance and the paper & packaging sectors detracted from returns. |
• | Issue selection within aerospace & defense, midstream energy, and cable & satellite also hurt performance. |
• | The largest single-name detractors from returns included overweights toAlta Mesa Resources Inc. (upstream energy) andFerrellgas Partners LP (midstream energy). |
Did the Fund use derivatives and, if so, how did they affect performance?
The Fund utilized Treasury futures to hedge interest rate risk relative to the Index to help immunize any impact from fluctuations in interest rates. Derivatives in the form of forward currency exchange contracts were used to hedge against the Fund’s positions not denominated in US dollars. The derivatives help immunize any impact from fluctuating currencies outside the US dollar. The Fund held a position in a credit default swap index (CDX) to hedge credit risk and help manage the overall beta of the portfolio.
Current outlook
• | Looking ahead in US high yield, Moody’s expects the global default rate to reach 2.4% by the end of the second quarter of 2020. With current spreads adequately compensating for recession risk, strong credit fundamentals, and low default expectations, PGIM Fixed Income remains constructive on US high yield. The relatively better insulation of US high yield credits from the protracted trade war with China combined with the technical support provided by stimulative central bank policies—in an already supply-limited asset class—support this favorable view. |
• | Key positioning themes continue to be underweights to financials and energy sectors. The Fund is also underweight the consumer and packaging sectors. Overweights include building materials and construction, technology, and cable. |
PGIM Short Duration High Yield Income Fund | 11 |
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 August 31, 2019. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of PGIM funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses paid over the period
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and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information provided in the expense table. Additional fees have the effect of reducing investment returns.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
PGIM Short Duration High Yield Income Fund | Beginning Account Value March 1, 2019 | Ending Account Value August 31, 2019 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,040.60 | 1.00 | % | $ | 5.14 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.16 | 1.00 | % | $ | 5.09 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,036.70 | 1.75 | % | $ | 8.98 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,016.38 | 1.75 | % | $ | 8.89 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,040.70 | 0.75 | % | $ | 3.86 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,021.42 | 0.75 | % | $ | 3.82 | ||||||||||
Class R6 | Actual | $ | 1,000.00 | $ | 1,041.00 | 0.70 | % | $ | 3.60 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,021.68 | 0.70 | % | $ | 3.57 |
* 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 August 31, 2019, and divided by the 365 days in the Fund’s fiscal year ended August 31, 2019 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
PGIM Short Duration High Yield Income Fund | 13 |
Schedule of Investments
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS 92.5% |
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BANK LOANS 13.0% |
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Auto Manufacturers 0.3% | ||||||||||||||||
Navistar, Inc., | 5.700 | %(c) | 11/06/24 | 9,825 | $ | 9,776,063 | ||||||||||
Beverages 0.0% | ||||||||||||||||
Jacobs Douwe Egberts International BV (Netherlands), | 2.500 | (c) | 11/01/25 | EUR | 202 | 222,965 | ||||||||||
Building Materials 0.4% | ||||||||||||||||
Ply Gem Midco, Inc., | 5.951 | (c) | 04/14/25 | 10,275 | 9,966,750 | |||||||||||
Chemicals 1.0% | ||||||||||||||||
Hexion, Inc., | 5.820 | (c) | 07/01/26 | 10,600 | 10,573,500 | |||||||||||
Solenis International LP, | 6.112 | (c) | 06/26/25 | 15,331 | 14,871,251 | |||||||||||
Starfruit Finco BV (Netherlands), | 5.463 | (c) | 10/01/25 | 3,000 | 2,890,314 | |||||||||||
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28,335,065 | ||||||||||||||||
Commercial Services 0.6% | ||||||||||||||||
Financial & Risk US Holdings, Inc., | 5.862 | (c) | 10/01/25 | 18,323 | 18,398,177 | |||||||||||
Computers 0.9% | ||||||||||||||||
McAfee LLC, | ||||||||||||||||
Second Lien Initial Loan, 1 Month LIBOR + 8.500% | 10.616 | (c) | 09/29/25 | 6,228 | 6,285,505 | |||||||||||
Term B USD Loan, 1 Month LIBOR + 3.750% | 5.866 | (c) | 09/30/24 | 20,689 | 20,692,740 | |||||||||||
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26,978,245 |
See Notes to Financial Statements.
PGIM Short Duration High Yield Income Fund | 15 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
BANK LOANS (Continued) |
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Electric 0.5% | ||||||||||||||||
Heritage Power LLC, | 8.205 | %(c) | 07/30/26 | 11,125 | $ | 10,846,875 | ||||||||||
Vistra Operations Co. LLC, | 4.208 | (c) | 12/31/25 | 3,710 | 3,712,354 | |||||||||||
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14,559,229 | ||||||||||||||||
Healthcare-Services 0.7% | ||||||||||||||||
LifePoint Health, Inc., | 6.645 | (c) | 11/16/25 | 21,575 | 21,330,182 | |||||||||||
Insurance 0.3% | ||||||||||||||||
Asurion LLC, | 8.612 | (c) | 08/04/25 | 8,500 | 8,608,902 | |||||||||||
Media 0.2% | ||||||||||||||||
Radiate Holdco LLC, | 5.112 | (c) | 02/01/24 | 6,434 | 6,359,110 | |||||||||||
Mining 0.3% | ||||||||||||||||
Aleris International, Inc., | 6.862 | (c) | 02/27/23 | 9,843 | 9,835,353 | |||||||||||
Oil & Gas 0.1% | ||||||||||||||||
Citgo Petroleum Corp., | 6.819 | (c) | 07/29/21 | 3,332 | 3,326,258 | |||||||||||
Pharmaceuticals 0.3% | ||||||||||||||||
NVA Holdings, Inc., | 4.862 | (c) | 02/02/25 | 9,810 | 9,794,749 | |||||||||||
Retail 0.9% | ||||||||||||||||
CEC Entertainment, Inc., | — | (p) | 08/31/26 | 9,225 | 8,909,809 | |||||||||||
Sally Holdings LLC, | 4.500 | 07/05/24 | 18,829 | 18,264,130 | ||||||||||||
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27,173,939 |
See Notes to Financial Statements.
16 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
BANK LOANS (Continued) |
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Software 3.4% | ||||||||||||||||
Boxer Parent Co., Inc., | 6.580 | %(c) | 10/02/25 | 20,130 | $ | 18,982,947 | ||||||||||
Dun & Bradstreet Corp., | 7.145 | (c) | 02/06/26 | 9,075 | 9,097,688 | |||||||||||
Exela Intermediate LLC, | 8.884 | (c) | 07/12/23 | 2,757 | 1,833,392 | |||||||||||
Finastra USA, Inc., | 5.696 | (c) | 06/13/24 | 17,139 | 16,517,373 | |||||||||||
Greeneden US Holdings II LLC, | 5.362 | (c) | 12/01/23 | 7,280 | 7,185,892 | |||||||||||
Infor US, Inc., | 5.080 | (c) | 02/01/22 | 18,600 | 18,588,421 | |||||||||||
Informatica LLC, | 5.362 | (c) | 08/05/22 | 19,442 | 19,447,336 | |||||||||||
Ultimate Software Group, Inc., | 6.080 | (c) | 05/04/26 | 7,000 | 7,011,669 | |||||||||||
|
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98,664,718 | ||||||||||||||||
Telecommunications 3.1% | ||||||||||||||||
CenturyLink, Inc., | 4.862 | (c) | 01/31/25 | 9,975 | 9,825,063 | |||||||||||
Digicel International Finance Ltd. (Saint Lucia), | 5.340 | (c) | 05/27/24 | 9,579 | 8,182,416 | |||||||||||
Intelsat Jackson Holdings SA (Luxembourg), | ||||||||||||||||
Tranche B-3 Term Loan, 1 Month LIBOR + 3.750% | 5.895 | (c) | 11/27/23 | 4,000 | 3,995,000 | |||||||||||
Tranche B-5 Term Loan | 6.625 | 01/02/24 | 17,833 | 17,997,854 | ||||||||||||
Sprint Communications, Inc., | 4.625 | (c) | 02/02/24 | 4,975 | 4,938,798 | |||||||||||
West Corp., | ||||||||||||||||
Incremental B-1 Term Loan, 1 Month LIBOR + 3.500% | 5.612 | (c) | 10/10/24 | 6,384 | 5,665,693 | |||||||||||
Initial Term B Loan, 1 Month LIBOR + 4.000% | 6.112 | (c) | 10/10/24 | 19,228 | 17,245,278 |
See Notes to Financial Statements.
PGIM Short Duration High Yield Income Fund | 17 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
BANK LOANS (Continued) |
| |||||||||||||||
Telecommunications (cont’d.) |
| |||||||||||||||
Xplornet Communications, Inc. (Canada), | 6.330 | %(c) | 09/09/21 | 24,058 | $ | 24,028,038 | ||||||||||
|
| |||||||||||||||
91,878,140 | ||||||||||||||||
|
| |||||||||||||||
TOTAL BANK LOANS | 385,207,845 | |||||||||||||||
|
| |||||||||||||||
CORPORATE BONDS 79.1% | ||||||||||||||||
Advertising 1.3% |
| |||||||||||||||
Clear Channel International BV, | 8.750 | 12/15/20 | 10,000 | 10,218,700 | ||||||||||||
National CineMedia LLC, | 6.000 | 04/15/22 | 8,376 | 8,449,290 | ||||||||||||
Outfront Media Capital LLC/Outfront Media Capital Corp., | 5.625 | 02/15/24 | 18,245 | 18,792,350 | ||||||||||||
|
| |||||||||||||||
37,460,340 | ||||||||||||||||
Aerospace & Defense 2.4% | ||||||||||||||||
Bombardier, Inc. (Canada), | ||||||||||||||||
Sr. Unsec’d. Notes, 144A | 7.500 | 12/01/24 | 23,250 | 23,165,137 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 7.500 | 03/15/25 | 13,272 | 12,923,610 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 8.750 | 12/01/21 | 28,550 | 30,976,750 | ||||||||||||
TransDigm, Inc., | 6.000 | 07/15/22 | 3,000 | 3,048,750 | ||||||||||||
|
| |||||||||||||||
70,114,247 | ||||||||||||||||
Agriculture 0.3% | ||||||||||||||||
Vector Group Ltd., | 6.125 | 02/01/25 | 8,807 | 8,630,860 | ||||||||||||
Auto Manufacturers 0.2% |
| |||||||||||||||
Ford Motor Credit Co. LLC, | 5.584 | 03/18/24 | 6,025 | 6,476,473 | ||||||||||||
Auto Parts & Equipment 1.3% |
| |||||||||||||||
American Axle & Manufacturing, Inc., | 6.250 | 04/01/25 | 24,584 | 23,108,468 |
See Notes to Financial Statements.
18 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Auto Parts & Equipment (cont’d.) |
| |||||||||||||||
Dana Financing Luxembourg Sarl, | ||||||||||||||||
Gtd. Notes, 144A | 5.750 | % | 04/15/25 | 9,433 | $ | 9,621,660 | ||||||||||
Gtd. Notes, 144A | 6.500 | 06/01/26 | 575 | 602,313 | ||||||||||||
Meritor, Inc., | 6.250 | 02/15/24 | 4,175 | 4,284,594 | ||||||||||||
|
| |||||||||||||||
37,617,035 | ||||||||||||||||
Banks 0.5% | ||||||||||||||||
CIT Group, Inc., | 5.250 | 03/07/25 | 2,100 | 2,352,000 | ||||||||||||
Popular, Inc. (Puerto Rico), | 6.125 | 09/14/23 | 12,050 | 13,016,410 | ||||||||||||
|
| |||||||||||||||
15,368,410 | ||||||||||||||||
Building Materials 2.3% | ||||||||||||||||
Griffon Corp., | 5.250 | 03/01/22 | 25,959 | 26,146,164 | ||||||||||||
Standard Industries, Inc., | 5.375 | 11/15/24 | 8,012 | 8,242,345 | ||||||||||||
Summit Materials LLC/Summit Materials Finance Corp., | ||||||||||||||||
Gtd. Notes(a) | 6.125 | 07/15/23 | 2,000 | 2,032,500 | ||||||||||||
Gtd. Notes, 144A(a) | 5.125 | 06/01/25 | 6,714 | 6,881,850 | ||||||||||||
U.S. Concrete, Inc., | 6.375 | 06/01/24 | 23,089 | 24,185,728 | ||||||||||||
|
| |||||||||||||||
67,488,587 | ||||||||||||||||
Chemicals 4.4% | ||||||||||||||||
Alpha 2 BV (Germany), | 8.750 | 06/01/23 | 7,170 | 6,928,013 | ||||||||||||
Alpha 3 BV/Alpha US Bidco, Inc. (United Kingdom), | 6.250 | 02/01/25 | 1,815 | 1,801,388 | ||||||||||||
Chemours Co. (The), | ||||||||||||||||
Gtd. Notes(a) | 6.625 | 05/15/23 | 30,915 | 31,456,012 | ||||||||||||
Gtd. Notes(a) | 7.000 | 05/15/25 | 5,585 | 5,515,188 | ||||||||||||
Cornerstone Chemical Co., | 6.750 | 08/15/24 | 6,000 | 5,520,000 | ||||||||||||
NOVA Chemicals Corp. (Canada), | ||||||||||||||||
Sr. Unsec’d. Notes, 144A | 4.875 | 06/01/24 | 21,885 | 22,459,481 |
See Notes to Financial Statements.
PGIM Short Duration High Yield Income Fund | 19 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Chemicals (cont’d.) | ||||||||||||||||
NOVA Chemicals Corp. (Canada), (cont’d.) | ||||||||||||||||
Sr. Unsec’d. Notes, 144A | 5.000 | % | 05/01/25 | 1,000 | $ | 1,022,500 | ||||||||||
Sr. Unsec’d. Notes, 144A | 5.250 | 08/01/23 | 11,369 | 11,587,853 | ||||||||||||
PQ Corp., | 6.750 | 11/15/22 | 12,592 | 13,066,718 | ||||||||||||
Rain CII Carbon LLC/CII Carbon Corp., | 7.250 | 04/01/25 | 7,036 | 6,613,840 | ||||||||||||
Sasol Financing International Ltd. (South Africa), | 4.500 | 11/14/22 | 2,000 | 2,051,000 | ||||||||||||
Starfruit Finco BV/Starfruit US Holdco LLC (Netherlands), | 8.000 | 10/01/26 | 4,900 | 4,777,500 | ||||||||||||
TPC Group, Inc., | 10.500 | 08/01/24 | 9,649 | 10,131,450 | ||||||||||||
Tronox, Inc., | 6.500 | 04/15/26 | 8,025 | 7,623,750 | ||||||||||||
|
| |||||||||||||||
130,554,693 | ||||||||||||||||
Commercial Services 1.6% | ||||||||||||||||
Laureate Education, Inc., | 8.250 | 05/01/25 | 11,020 | 11,998,025 | ||||||||||||
Nielsen Finance LLC/Nielsen Finance Co., | 5.000 | 04/15/22 | 13,764 | 13,832,820 | ||||||||||||
United Rentals North America, Inc., | ||||||||||||||||
Gtd. Notes | 4.625 | 10/15/25 | 1,625 | 1,671,231 | ||||||||||||
Gtd. Notes | 5.875 | 09/15/26 | 4,700 | 5,040,750 | ||||||||||||
Gtd. Notes(a) | 6.500 | 12/15/26 | 13,605 | 14,795,438 | ||||||||||||
|
| |||||||||||||||
47,338,264 | ||||||||||||||||
Computers 1.4% | ||||||||||||||||
Dell International LLC/EMC Corp., | ||||||||||||||||
Gtd. Notes, 144A | 5.875 | 06/15/21 | 11,520 | 11,710,397 | ||||||||||||
Gtd. Notes, 144A(a) | 7.125 | 06/15/24 | 8,113 | 8,552,886 | ||||||||||||
EMC Corp., | ||||||||||||||||
Sr. Unsec’d. Notes | 2.650 | 06/01/20 | 6,100 | 6,076,208 | ||||||||||||
Sr. Unsec’d. Notes(a) | 3.375 | 06/01/23 | 3,500 | 3,469,629 | ||||||||||||
Everi Payments, Inc., | 7.500 | 12/15/25 | 6,225 | 6,536,250 | ||||||||||||
NCR Corp., | ||||||||||||||||
Gtd. Notes | 4.625 | 02/15/21 | 535 | 535,054 | ||||||||||||
Gtd. Notes(a) | 5.000 | 07/15/22 | 1,320 | 1,329,002 |
See Notes to Financial Statements.
20 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Computers (cont’d.) | ||||||||||||||||
Tempo Acquisition LLC/Tempo Acquisition Finance Corp., | 6.750 | % | 06/01/25 | 3,575 | $ | 3,672,597 | ||||||||||
|
| |||||||||||||||
41,882,023 | ||||||||||||||||
Distribution/Wholesale 0.5% | ||||||||||||||||
Anixter, Inc., | 5.500 | 03/01/23 | 3,200 | 3,436,000 | ||||||||||||
H&E Equipment Services, Inc., | 5.625 | 09/01/25 | 9,740 | 10,202,650 | ||||||||||||
|
| |||||||||||||||
13,638,650 | ||||||||||||||||
Diversified Financial Services 3.3% | ||||||||||||||||
Allied Universal Holdco LLC/Allied Universal Finance Corp., | 6.625 | 07/15/26 | 5,125 | 5,445,313 | ||||||||||||
Avolon Holdings Funding Ltd. (Ireland), | ||||||||||||||||
Gtd. Notes, 144A | 5.125 | 10/01/23 | 6,970 | 7,400,049 | ||||||||||||
Gtd. Notes, 144A | 5.500 | 01/15/23 | 6,125 | 6,525,575 | ||||||||||||
Fairstone Financial, Inc. (Canada), | 7.875 | 07/15/24 | 2,940 | 3,064,950 | ||||||||||||
Nationstar Mortgage Holdings, Inc., | 8.125 | 07/15/23 | 27,055 | 28,017,617 | ||||||||||||
Navient Corp., | 8.000 | 03/25/20 | 125 | 128,750 | ||||||||||||
Park Aerospace Holdings Ltd. (Ireland), | ||||||||||||||||
Gtd. Notes, 144A | 4.500 | 03/15/23 | 1,924 | 1,990,570 | ||||||||||||
Gtd. Notes, 144A | 5.250 | 08/15/22 | 9,569 | 10,107,256 | ||||||||||||
Gtd. Notes, 144A | 5.500 | 02/15/24 | 50 | 54,070 | ||||||||||||
Springleaf Finance Corp., | ||||||||||||||||
Gtd. Notes | 6.875 | 03/15/25 | 8,975 | 10,175,406 | ||||||||||||
Gtd. Notes | 7.125 | 03/15/26 | 20,638 | 23,537,639 | ||||||||||||
VFH Parent LLC/Orchestra Co-Issuer, Inc., | 6.750 | 06/15/22 | 1,125 | 1,161,563 | ||||||||||||
|
| |||||||||||||||
97,608,758 | ||||||||||||||||
Electric 1.6% | ||||||||||||||||
Calpine Corp., | ||||||||||||||||
Sr. Sec’d. Notes, 144A | 5.875 | 01/15/24 | 2,375 | 2,425,730 | ||||||||||||
Sr. Unsec’d. Notes(a) | 5.375 | 01/15/23 | 17,065 | 17,298,279 |
See Notes to Financial Statements.
PGIM Short Duration High Yield Income Fund | 21 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Electric (cont’d.) | ||||||||||||||||
Calpine Corp., (cont’d.) | ||||||||||||||||
Sr. Unsec’d. Notes(a) | 5.500 | % | 02/01/24 | 12,309 | $ | 12,401,194 | ||||||||||
Sr. Unsec’d. Notes(a) | 5.750 | 01/15/25 | 14,000 | 14,210,000 | ||||||||||||
|
| |||||||||||||||
46,335,203 | ||||||||||||||||
Electronics 0.0% | ||||||||||||||||
Sensata Technologies BV, | 5.625 | 11/01/24 | 1,100 | 1,193,500 | ||||||||||||
Engineering & Construction 0.2% | ||||||||||||||||
AECOM, | 5.875 | 10/15/24 | 6,245 | 6,744,600 | ||||||||||||
Entertainment 4.0% | ||||||||||||||||
AMC Entertainment Holdings, Inc., | 5.750 | 06/15/25 | 9,585 | 9,105,750 | ||||||||||||
Caesars Resort Collection LLC/CRC Finco, Inc., | 5.250 | 10/15/25 | 18,375 | 18,696,562 | ||||||||||||
CCM Merger, Inc., | 6.000 | 03/15/22 | 14,450 | 14,811,250 | ||||||||||||
Golden Entertainment, Inc., | 7.625 | 04/15/26 | 2,775 | 2,886,278 | ||||||||||||
International Game Technology PLC, | ||||||||||||||||
Sr. Sec’d. Notes, 144A | 6.250 | 02/15/22 | 6,775 | 7,164,563 | ||||||||||||
Sr. Sec’d. Notes, 144A(a) | 6.500 | 02/15/25 | 10,781 | 11,832,147 | ||||||||||||
Jacobs Entertainment, Inc., | 7.875 | 02/01/24 | 10,511 | 11,167,937 | ||||||||||||
Lions Gate Capital Holdings LLC, | 6.375 | 02/01/24 | 11,630 | 12,283,490 | ||||||||||||
Penn National Gaming, Inc., | 5.625 | 01/15/27 | 750 | 769,763 | ||||||||||||
Scientific Games International, Inc., | ||||||||||||||||
Gtd. Notes(a) | 6.250 | 09/01/20 | 3,897 | 3,906,743 | ||||||||||||
Gtd. Notes | 6.625 | 05/15/21 | 9,838 | 9,997,867 | ||||||||||||
Gtd. Notes(a) | 10.000 | 12/01/22 | 14,674 | 15,224,275 | ||||||||||||
|
| |||||||||||||||
117,846,625 |
See Notes to Financial Statements.
22 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Foods 0.7% | ||||||||||||||||
Iceland Bondco PLC (United Kingdom), | 5.017 | %(c) | 07/15/20 | GBP | 316 | $ | 382,608 | |||||||||
JBS USA LUX SA/JBS USA Finance, Inc., | ||||||||||||||||
Gtd. Notes, 144A(a) | 5.750 | 06/15/25 | 3,428 | 3,565,154 | ||||||||||||
Gtd. Notes, 144A | 5.875 | 07/15/24 | 4,945 | 5,093,350 | ||||||||||||
Pilgrim’s Pride Corp., | 5.750 | 03/15/25 | 7,406 | 7,702,240 | ||||||||||||
Post Holdings, Inc., | 5.000 | 08/15/26 | 4,775 | 4,977,938 | ||||||||||||
|
| |||||||||||||||
21,721,290 | ||||||||||||||||
Forest Products & Paper 0.1% | ||||||||||||||||
Mercer International, Inc. (Germany), | 7.750 | 12/01/22 | 1,849 | 1,897,536 | ||||||||||||
Gas 0.1% | ||||||||||||||||
AmeriGas Partners LP/AmeriGas Finance Corp., | ||||||||||||||||
Sr. Unsec’d. Notes | 5.500 | 05/20/25 | 2,825 | 2,987,437 | ||||||||||||
Sr. Unsec’d. Notes | 5.625 | 05/20/24 | 1,400 | 1,485,750 | ||||||||||||
|
| |||||||||||||||
4,473,187 | ||||||||||||||||
Healthcare-Services 4.0% | ||||||||||||||||
Acadia Healthcare Co., Inc., | ||||||||||||||||
Gtd. Notes | 5.125 | 07/01/22 | 1,010 | 1,017,575 | ||||||||||||
Gtd. Notes | 6.500 | 03/01/24 | 9,000 | 9,292,500 | ||||||||||||
CHS/Community Health Systems, Inc., | ||||||||||||||||
Sec’d. Notes, 144A(a) | 8.125 | 06/30/24 | 13,896 | 10,560,960 | ||||||||||||
Sr. Sec’d. Notes(a) | 6.250 | 03/31/23 | 5,250 | 5,079,900 | ||||||||||||
HCA, Inc., | ||||||||||||||||
Gtd. Notes | 5.375 | 02/01/25 | 1,650 | 1,831,500 | ||||||||||||
Gtd. Notes(a) | 5.875 | 05/01/23 | 1,000 | 1,104,375 | ||||||||||||
Gtd. Notes | 7.500 | 02/15/22 | 3,000 | 3,359,430 | ||||||||||||
Gtd. Notes(a) | 7.500 | 12/15/23 | 3,000 | 3,401,250 | ||||||||||||
MEDNAX, Inc., | 5.250 | 12/01/23 | 20,872 | 20,976,360 | ||||||||||||
Molina Healthcare, Inc., | ||||||||||||||||
Sr. Unsec’d. Notes | 5.375 | 11/15/22 | 6,619 | 7,074,321 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 4.875 | 06/15/25 | 4,832 | 4,928,640 |
See Notes to Financial Statements.
PGIM Short Duration High Yield Income Fund | 23 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Healthcare-Services (cont’d.) | ||||||||||||||||
RegionalCare Hospital Partners Holdings, Inc./LifePoint Health, Inc., | 9.750 | % | 12/01/26 | 2,780 | $ | 2,971,125 | ||||||||||
Tenet Healthcare Corp., | ||||||||||||||||
Sr. Sec’d. Notes | 4.625 | 07/15/24 | 4,398 | 4,524,443 | ||||||||||||
Sr. Sec’d. Notes | 4.750 | 06/01/20 | 5,850 | 5,949,450 | ||||||||||||
Sr. Unsec’d. Notes(a) | 6.750 | 06/15/23 | 13,250 | 13,614,375 | ||||||||||||
Sr. Unsec’d. Notes | 8.125 | 04/01/22 | 20,823 | 22,434,700 | ||||||||||||
|
| |||||||||||||||
118,120,904 | ||||||||||||||||
Home Builders 6.2% | ||||||||||||||||
Ashton Woods USA LLC/Ashton Woods Finance Co., | 6.750 | 08/01/25 | 2,420 | 2,395,800 | ||||||||||||
Beazer Homes USA, Inc., | 8.750 | 03/15/22 | 26,468 | 27,625,975 | ||||||||||||
Brookfield Residential Properties, Inc. (Canada), | ||||||||||||||||
Gtd. Notes, 144A | 6.375 | 05/15/25 | 1,240 | 1,258,600 | ||||||||||||
Gtd. Notes, 144A | 6.500 | 12/15/20 | 3,213 | 3,217,016 | ||||||||||||
Brookfield Residential Properties, Inc./Brookfield Residential US Corp. (Canada), Gtd. Notes, 144A | 6.125 | 07/01/22 | 11,346 | 11,502,007 | ||||||||||||
Forestar Group, Inc., | 8.000 | 04/15/24 | 4,025 | 4,321,844 | ||||||||||||
KB Home, | ||||||||||||||||
Gtd. Notes | 7.000 | 12/15/21 | 3,270 | 3,546,740 | ||||||||||||
Gtd. Notes | 7.500 | 09/15/22 | 5,345 | 6,039,850 | ||||||||||||
Gtd. Notes(a) | 7.625 | 05/15/23 | 4,871 | 5,479,875 | ||||||||||||
Lennar Corp., | ||||||||||||||||
Gtd. Notes | 4.125 | 01/15/22 | 8,200 | 8,446,000 | ||||||||||||
Gtd. Notes | 4.875 | 12/15/23 | 3,350 | 3,592,875 | ||||||||||||
Gtd. Notes | 6.250 | 12/15/21 | 1,382 | 1,463,193 | ||||||||||||
M/I Homes, Inc., | 6.750 | 01/15/21 | 10,175 | 10,314,906 | ||||||||||||
Mattamy Group Corp. (Canada), | ||||||||||||||||
Sr. Unsec’d. Notes, 144A | 6.500 | 10/01/25 | 3,727 | 3,950,620 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 6.875 | 12/15/23 | 12,443 | 12,956,274 | ||||||||||||
Meritage Homes Corp., | ||||||||||||||||
Gtd. Notes | 6.000 | 06/01/25 | 5,200 | 5,739,500 | ||||||||||||
Gtd. Notes | 7.000 | 04/01/22 | 990 | 1,086,525 | ||||||||||||
New Home Co., Inc. (The), | 7.250 | 04/01/22 | 13,214 | 12,553,300 |
See Notes to Financial Statements.
24 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Home Builders (cont’d.) | ||||||||||||||||
Taylor Morrison Communities, Inc./Taylor Morrison Holdings II, Inc., | ||||||||||||||||
Gtd. Notes, 144A | 5.625 | % | 03/01/24 | 10,598 | $ | 11,127,900 | ||||||||||
Gtd. Notes, 144A | 5.875 | 04/15/23 | 6,545 | 6,970,425 | ||||||||||||
TRI Pointe Group, Inc., | 4.875 | 07/01/21 | 8,395 | 8,657,344 | ||||||||||||
William Lyon Homes, Inc., | ||||||||||||||||
Gtd. Notes | 5.875 | 01/31/25 | 400 | 404,000 | ||||||||||||
Gtd. Notes | 6.000 | 09/01/23 | 27,421 | 28,449,287 | ||||||||||||
Gtd. Notes | 7.000 | 08/15/22 | 958 | 960,395 | ||||||||||||
|
| |||||||||||||||
182,060,251 | ||||||||||||||||
Home Furnishings 0.4% | ||||||||||||||||
Tempur Sealy International, Inc., | 5.625 | 10/15/23 | 12,186 | 12,551,580 | ||||||||||||
Housewares 0.1% | ||||||||||||||||
Scotts Miracle-Gro Co. (The), | 6.000 | 10/15/23 | 2,988 | 3,094,014 | ||||||||||||
Internet 0.8% | ||||||||||||||||
Zayo Group LLC/Zayo Capital, Inc., | 6.000 | 04/01/23 | 22,345 | 23,046,186 | ||||||||||||
Iron/Steel 0.4% | ||||||||||||||||
Cleveland-Cliffs, Inc., | ||||||||||||||||
Gtd. Notes(a) | 5.750 | 03/01/25 | 519 | 520,297 | ||||||||||||
Sr. Sec’d. Notes, 144A | 4.875 | 01/15/24 | 12,092 | 12,333,840 | ||||||||||||
|
| |||||||||||||||
12,854,137 | ||||||||||||||||
Lodging 1.3% | ||||||||||||||||
Boyd Gaming Corp., | 6.000 | 08/15/26 | 3,805 | 4,019,031 | ||||||||||||
Jack Ohio Finance LLC/Jack Ohio Finance 1 Corp., | ||||||||||||||||
Sec’d. Notes, 144A | 10.250 | 11/15/22 | 10,162 | 10,784,423 | ||||||||||||
Sr. Sec’d. Notes, 144A | 6.750 | 11/15/21 | 12,200 | 12,474,500 | ||||||||||||
MGM Resorts International, | ||||||||||||||||
Gtd. Notes | 4.625 | 09/01/26 | 3,350 | 3,467,250 |
See Notes to Financial Statements.
PGIM Short Duration High Yield Income Fund | 25 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Lodging (cont’d.) | ||||||||||||||||
MGM Resorts International, (cont’d.) | ||||||||||||||||
Gtd. Notes(a) | 5.750 | % | 06/15/25 | 6,275 | $ | 6,910,532 | ||||||||||
Gtd. Notes | 6.000 | 03/15/23 | 1,350 | 1,485,000 | ||||||||||||
|
| |||||||||||||||
39,140,736 | ||||||||||||||||
Machinery-Diversified 0.4% | ||||||||||||||||
Cloud Crane LLC, | 10.125 | 08/01/24 | 11,418 | 12,274,350 | ||||||||||||
Media 12.2% | ||||||||||||||||
CCO Holdings LLC/CCO Holdings Capital Corp., | ||||||||||||||||
Sr. Unsec’d. Notes | 5.125 | 02/15/23 | 3,575 | 3,633,094 | ||||||||||||
Sr. Unsec’d. Notes | 5.250 | 09/30/22 | 21,560 | 21,775,600 | ||||||||||||
Sr. Unsec’d. Notes | 5.750 | 01/15/24 | 1,000 | 1,022,500 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 5.125 | 05/01/23 | 24,372 | 24,932,556 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 5.875 | 04/01/24 | 13,500 | 14,056,875 | ||||||||||||
Clear Channel Worldwide Holdings, Inc., | ||||||||||||||||
Gtd. Notes, 144A | 9.250 | 02/15/24 | 17,553 | 19,242,476 | ||||||||||||
Gtd. Notes, Series A | 6.500 | 11/15/22 | 13,440 | 13,731,245 | ||||||||||||
Gtd. Notes, Series B(a) | 6.500 | 11/15/22 | 13,968 | 14,270,687 | ||||||||||||
CSC Holdings LLC, | ||||||||||||||||
Gtd. Notes, 144A | 5.375 | 07/15/23 | 13,727 | 14,108,062 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 5.125 | 12/15/21 | 50,336 | 50,398,920 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 5.125 | 12/15/21 | 4,402 | 4,407,502 | ||||||||||||
Cumulus Media New Holdings, Inc., | 6.750 | 07/01/26 | 495 | 509,850 | ||||||||||||
Diamond Sports Group LLC/Diamond Sports Finance Co., | 5.375 | 08/15/26 | 3,775 | 3,963,750 | ||||||||||||
DISH DBS Corp., | ||||||||||||||||
Gtd. Notes | 5.000 | 03/15/23 | 2,243 | 2,200,944 | ||||||||||||
Gtd. Notes(a) | 5.125 | 05/01/20 | 22,757 | 23,013,244 | ||||||||||||
Gtd. Notes(a) | 5.875 | 07/15/22 | 1,642 | 1,699,470 | ||||||||||||
Gtd. Notes(a) | 5.875 | 11/15/24 | 19,639 | 18,682,581 | ||||||||||||
Gtd. Notes(a) | 6.750 | 06/01/21 | 7,524 | 7,925,029 | ||||||||||||
Entercom Media Corp., | 7.250 | 11/01/24 | 4,275 | 4,344,469 | ||||||||||||
EW Scripps Co. (The), | 5.125 | 05/15/25 | 9,000 | 9,067,500 | ||||||||||||
Gray Television, Inc., | 5.125 | 10/15/24 | 542 | 559,615 |
See Notes to Financial Statements.
26 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Media (cont’d.) | ||||||||||||||||
Mediacom Broadband LLC/Mediacom Broadband Corp., | 5.500 | % | 04/15/21 | 4,637 | $ | 4,637,000 | ||||||||||
Nexstar Broadcasting, Inc., | ||||||||||||||||
Gtd. Notes, 144A(a) | 5.625 | 08/01/24 | 6,155 | 6,401,200 | ||||||||||||
Gtd. Notes, 144A(a) | 6.125 | 02/15/22 | 3,950 | 3,999,375 | ||||||||||||
Quebecor Media, Inc. (Canada), | 5.750 | 01/15/23 | 3,525 | 3,816,976 | ||||||||||||
Radiate Holdco LLC/Radiate Finance, Inc., | ||||||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 6.625 | 02/15/25 | 3,700 | 3,672,250 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 6.875 | 02/15/23 | 4,335 | 4,421,700 | ||||||||||||
Sinclair Television Group, Inc., | ||||||||||||||||
Gtd. Notes(a) | 6.125 | 10/01/22 | 9,443 | 9,572,841 | ||||||||||||
Gtd. Notes, 144A(a) | 5.625 | 08/01/24 | 10,335 | 10,645,050 | ||||||||||||
TEGNA, Inc., | ||||||||||||||||
Gtd. Notes(a) | 6.375 | 10/15/23 | 7,663 | 7,877,564 | ||||||||||||
Gtd. Notes, 144A | 4.875 | 09/15/21 | 11,887 | 11,892,943 | ||||||||||||
Gtd. Notes, 144A(a) | 5.500 | 09/15/24 | 2,000 | 2,050,000 | ||||||||||||
Univision Communications, Inc., | ||||||||||||||||
Sr. Sec’d. Notes, 144A(a) | 5.125 | 05/15/23 | 13,910 | 13,736,125 | ||||||||||||
Sr. Sec’d. Notes, 144A | 6.750 | 09/15/22 | 23,757 | 24,053,962 | ||||||||||||
|
| |||||||||||||||
360,322,955 | ||||||||||||||||
Metal Fabricate/Hardware 0.4% | ||||||||||||||||
Zekelman Industries, Inc., | 9.875 | 06/15/23 | 10,380 | 10,956,090 | ||||||||||||
Mining 2.6% | ||||||||||||||||
Constellium SE, | ||||||||||||||||
Gtd. Notes, 144A | 5.750 | 05/15/24 | 2,202 | 2,268,060 | ||||||||||||
Gtd. Notes, 144A(a) | 6.625 | 03/01/25 | 5,630 | 5,893,906 | ||||||||||||
Eldorado Gold Corp. (Canada), | 9.500 | 06/01/24 | 7,200 | 7,740,000 | ||||||||||||
First Quantum Minerals Ltd. (Zambia), | ||||||||||||||||
Gtd. Notes, 144A | 7.000 | 02/15/21 | 3,614 | 3,614,000 | ||||||||||||
Gtd. Notes, 144A(a) | 7.250 | 05/15/22 | 9,526 | 9,264,035 | ||||||||||||
Gtd. Notes, 144A | 7.250 | 04/01/23 | 3,000 | 2,820,000 | ||||||||||||
Freeport-McMoRan, Inc., | ||||||||||||||||
Gtd. Notes(a) | 3.875 | 03/15/23 | 11,605 | 11,725,692 | ||||||||||||
Gtd. Notes(a) | 4.550 | 11/14/24 | 7,085 | 7,154,504 | ||||||||||||
Gtd. Notes | 6.875 | 02/15/23 | 4,265 | 4,497,869 |
See Notes to Financial Statements.
PGIM Short Duration High Yield Income Fund | 27 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Mining (cont’d.) | ||||||||||||||||
IAMGOLD Corp. (Canada), | 7.000 | % | 04/15/25 | 6,449 | $ | 6,723,083 | ||||||||||
New Gold, Inc. (Canada), | 6.250 | 11/15/22 | 3,270 | 3,204,600 | ||||||||||||
Novelis Corp., | 6.250 | 08/15/24 | 11,281 | 11,816,847 | ||||||||||||
|
| |||||||||||||||
76,722,596 | ||||||||||||||||
Miscellaneous Manufacturing 0.0% | ||||||||||||||||
FXI Holdings, Inc., | 7.875 | 11/01/24 | 850 | 754,375 | ||||||||||||
Oil & Gas 6.2% | ||||||||||||||||
Alta Mesa Holdings LP/Alta Mesa Finance Services Corp., | 7.875 | 12/15/24 | 10,985 | 1,977,300 | ||||||||||||
Antero Resources Corp., | ||||||||||||||||
Gtd. Notes(a) | 5.125 | 12/01/22 | 3,300 | 3,036,000 | ||||||||||||
Gtd. Notes(a) | 5.375 | 11/01/21 | 3,400 | 3,302,250 | ||||||||||||
Gtd. Notes(a) | 5.625 | 06/01/23 | 19,880 | 18,339,300 | ||||||||||||
Ascent Resources Utica Holdings LLC/ARU Finance Corp., | 10.000 | 04/01/22 | 27,282 | 27,350,205 | ||||||||||||
Citgo Holding, Inc., | 9.250 | 08/01/24 | 7,300 | 7,719,750 | ||||||||||||
CNX Resources Corp., | 5.875 | 04/15/22 | 11,173 | 10,809,877 | ||||||||||||
Denbury Resources, Inc., | 9.000 | 05/15/21 | 1,150 | 1,046,500 | ||||||||||||
Endeavor Energy Resources LP/EER Finance, Inc., | 5.500 | 01/30/26 | 6,500 | 6,751,875 | ||||||||||||
Hilcorp Energy I LP/Hilcorp Finance Co., | ||||||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 5.000 | 12/01/24 | 2,225 | 2,052,563 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 5.750 | 10/01/25 | 8,161 | 7,610,132 | ||||||||||||
MEG Energy Corp. (Canada), | ||||||||||||||||
Gtd. Notes, 144A | 6.375 | 01/30/23 | 24,342 | 23,003,190 | ||||||||||||
Gtd. Notes, 144A | 7.000 | 03/31/24 | 1,325 | 1,260,406 | ||||||||||||
Nabors Industries, Inc., | 5.750 | 02/01/25 | 11,240 | 8,992,000 | ||||||||||||
Precision Drilling Corp. (Canada), | 7.125 | 01/15/26 | 8,221 | 7,337,243 |
See Notes to Financial Statements.
28 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Oil & Gas (cont’d.) | ||||||||||||||||
Range Resources Corp., | ||||||||||||||||
Gtd. Notes(a) | 5.000 | % | 03/15/23 | 10,275 | $ | 9,093,375 | ||||||||||
Gtd. Notes | 5.875 | 07/01/22 | 11,194 | 10,718,255 | ||||||||||||
Sunoco LP/Sunoco Finance Corp., | 4.875 | 01/15/23 | 9,200 | 9,407,000 | ||||||||||||
Transocean, Inc., | ||||||||||||||||
Gtd. Notes, 144A(a) | 7.250 | 11/01/25 | 1,200 | 1,092,000 | ||||||||||||
Gtd. Notes, 144A(a) | 7.500 | 01/15/26 | 8,325 | 7,596,563 | ||||||||||||
WPX Energy, Inc., | ||||||||||||||||
Sr. Unsec’d. Notes | 6.000 | 01/15/22 | 8,325 | 8,553,937 | ||||||||||||
Sr. Unsec’d. Notes | 8.250 | 08/01/23 | 4,720 | 5,251,000 | ||||||||||||
|
| |||||||||||||||
182,300,721 | ||||||||||||||||
Oil & Gas Services 0.1% | ||||||||||||||||
Nine Energy Service, Inc., | 8.750 | 11/01/23 | 3,875 | 3,497,188 | ||||||||||||
Packaging & Containers 1.2% | ||||||||||||||||
ARD Finance SA (Luxembourg), | 7.125 | 09/15/23 | 17,135 | 17,584,794 | ||||||||||||
ARD Securities Finance SARL (Luxembourg), | 8.750 | 01/31/23 | 5,219 | 5,401,406 | ||||||||||||
Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc. (Ireland), | 4.625 | 05/15/23 | 2,300 | 2,353,958 | ||||||||||||
Reynolds Group Issuer, Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Lu, | 5.750 | 10/15/20 | 9,689 | 9,713,362 | ||||||||||||
|
| |||||||||||||||
35,053,520 | ||||||||||||||||
Pharmaceuticals 0.9% | ||||||||||||||||
Bausch Health Cos., Inc., | ||||||||||||||||
Gtd. Notes, 144A | 5.500 | 03/01/23 | 1,137 | 1,148,370 | ||||||||||||
Gtd. Notes, 144A(a) | 6.125 | 04/15/25 | 21,325 | 21,964,750 | ||||||||||||
Sr. Sec’d. Notes, 144A | 6.500 | 03/15/22 | 2,575 | 2,665,897 | ||||||||||||
|
| |||||||||||||||
25,779,017 |
See Notes to Financial Statements.
PGIM Short Duration High Yield Income Fund | 29 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Pipelines 0.3% | ||||||||||||||||
Global Partners LP/GLP Finance Corp., | 7.000 | % | 06/15/23 | 4,865 | $ | 4,913,650 | ||||||||||
Tallgrass Energy Partners LP/Tallgrass Energy Finance Corp., | 5.500 | 09/15/24 | 4,000 | 3,900,000 | ||||||||||||
|
| |||||||||||||||
8,813,650 | ||||||||||||||||
Real Estate 0.2% | ||||||||||||||||
Greystar Real Estate Partners LLC, | 5.750 | 12/01/25 | 3,450 | 3,537,457 | ||||||||||||
Howard Hughes Corp. (The), | 5.375 | 03/15/25 | 2,250 | 2,317,500 | ||||||||||||
Hunt Cos., Inc., | 6.250 | 02/15/26 | 50 | 48,625 | ||||||||||||
|
| |||||||||||||||
5,903,582 | ||||||||||||||||
Real Estate Investment Trusts (REITs) 0.8% | ||||||||||||||||
GLP Capital LP/GLP Financing II, Inc., | 5.375 | 11/01/23 | 2,130 | 2,307,983 | ||||||||||||
SBA Communications Corp., | 4.000 | 10/01/22 | 18,915 | 19,246,012 | ||||||||||||
VICI Properties 1 LLC/VICI FC, Inc., | 8.000 | 10/15/23 | 2,730 | 2,982,525 | ||||||||||||
|
| |||||||||||||||
24,536,520 | ||||||||||||||||
Retail 5.2% | ||||||||||||||||
Beacon Roofing Supply, Inc., | 6.375 | 10/01/23 | 4,415 | 4,571,070 | ||||||||||||
Brinker International, Inc., | 5.000 | 10/01/24 | 12,508 | 12,883,240 | ||||||||||||
Carvana Co., | 8.875 | 10/01/23 | 15,700 | 16,171,000 | ||||||||||||
CEC Entertainment, Inc., | 8.000 | 02/15/22 | 6,925 | 6,578,750 | ||||||||||||
Ferrellgas LP/Ferrellgas Finance Corp., | ||||||||||||||||
Gtd. Notes | 6.750 | 06/15/23 | 6,075 | 5,103,000 | ||||||||||||
Sr. Unsec’d. Notes | 6.500 | 05/01/21 | 2,248 | 1,910,800 | ||||||||||||
Sr. Unsec’d. Notes | 6.750 | 01/15/22 | 3,505 | 2,961,725 |
See Notes to Financial Statements.
30 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Retail (cont’d.) | ||||||||||||||||
Ferrellgas Partners LP/Ferrellgas Partners Finance Corp., | ||||||||||||||||
Sr. Unsec’d. Notes | 8.625 | % | 06/15/20 | 4,790 | $ | 3,576,693 | ||||||||||
Sr. Unsec’d. Notes(a) | 8.625 | 06/15/20 | 9,025 | 6,738,968 | ||||||||||||
Golden Nugget, Inc., | ||||||||||||||||
Gtd. Notes, 144A(a) | 8.750 | 10/01/25 | 7,625 | 7,996,719 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 6.750 | 10/15/24 | 6,525 | 6,671,813 | ||||||||||||
L Brands, Inc., | ||||||||||||||||
Gtd. Notes | 5.625 | 10/15/23 | 25,576 | 26,854,800 | ||||||||||||
Gtd. Notes | 6.625 | 04/01/21 | 8,325 | 8,762,062 | ||||||||||||
PetSmart, Inc., | 7.125 | 03/15/23 | 5,250 | 4,882,500 | ||||||||||||
Rite Aid Corp., | 6.125 | 04/01/23 | 16,307 | 13,167,902 | ||||||||||||
Sally Holdings LLC/Sally Capital, Inc., | ||||||||||||||||
Gtd. Notes | 5.500 | 11/01/23 | 2,717 | 2,757,755 | ||||||||||||
Gtd. Notes(a) | 5.625 | 12/01/25 | 7,745 | 7,764,363 | ||||||||||||
Stonegate Pub Co. Financing PLC (United Kingdom), | ||||||||||||||||
Sr. Sec’d. Notes, 144A | 4.875 | 03/15/22 | GBP | 2,675 | 3,323,033 | |||||||||||
Sr. Sec’d. Notes, 144A, 3 Month GBP LIBOR + 4.375% | 5.163 | (c) | 03/15/22 | GBP | 1,875 | 2,291,785 | ||||||||||
Suburban Propane Partners LP/Suburban Energy Finance Corp., | 5.750 | 03/01/25 | 7,942 | 8,061,130 | ||||||||||||
|
| |||||||||||||||
153,029,108 | ||||||||||||||||
Software 2.5% | ||||||||||||||||
Infor US, Inc., | 6.500 | 05/15/22 | 25,830 | 26,249,737 | ||||||||||||
Informatica LLC, | 7.125 | 07/15/23 | 9,322 | 9,485,135 | ||||||||||||
RP Crown Parent LLC, | 7.375 | 10/15/24 | 4,895 | 5,101,618 | ||||||||||||
TIBCO Software, Inc., | 11.375 | 12/01/21 | 32,445 | 34,067,250 | ||||||||||||
|
| |||||||||||||||
74,903,740 | ||||||||||||||||
Telecommunications 6.1% | ||||||||||||||||
CenturyLink, Inc., | ||||||||||||||||
Sr. Unsec’d. Notes(a) | 5.625 | 04/01/25 | 5,000 | 5,112,500 | ||||||||||||
Sr. Unsec’d. Notes, Series S | 6.450 | 06/15/21 | 24,250 | 25,553,437 |
See Notes to Financial Statements.
PGIM Short Duration High Yield Income Fund | 31 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Telecommunications (cont’d.) | ||||||||||||||||
CommScope Technologies LLC, | 6.000 | % | 06/15/25 | 9,503 | $ | 8,481,428 | ||||||||||
CommScope, Inc., | ||||||||||||||||
Gtd. Notes, 144A | 5.000 | 06/15/21 | 5,538 | 5,538,055 | ||||||||||||
Gtd. Notes, 144A(a) | 5.500 | 06/15/24 | 12,578 | 11,901,932 | ||||||||||||
Sr. Sec’d. Notes, 144A | 6.000 | 03/01/26 | 3,025 | 3,080,963 | ||||||||||||
Digicel International Finance Ltd./Digicel Holdings Bermuda Ltd. (Saint Lucia), | 8.750 | 05/25/24 | 12,850 | 12,079,000 | ||||||||||||
Intelsat Jackson Holdings SA (Luxembourg), | 8.000 | 02/15/24 | 9,672 | 10,070,970 | ||||||||||||
Iridium Communications, Inc., | 10.250 | 04/15/23 | 13,095 | 14,208,075 | ||||||||||||
Level 3 Financing, Inc., | ||||||||||||||||
Gtd. Notes | 5.125 | 05/01/23 | 8,500 | 8,638,465 | ||||||||||||
Gtd. Notes | 5.375 | 08/15/22 | 1,485 | 1,490,569 | ||||||||||||
Gtd. Notes | 5.625 | 02/01/23 | 3,475 | 3,534,805 | ||||||||||||
Gtd. Notes | 6.125 | 01/15/21 | 8,493 | 8,535,465 | ||||||||||||
ORBCOMM, Inc., | 8.000 | 04/01/24 | 12,705 | 13,117,912 | ||||||||||||
Sprint Communications, Inc., | 6.000 | 11/15/22 | 6,000 | 6,386,220 | ||||||||||||
Sprint Corp., | ||||||||||||||||
Gtd. Notes | 7.250 | 09/15/21 | 11,720 | 12,607,204 | ||||||||||||
Gtd. Notes | 7.625 | 02/15/25 | 5,365 | 6,002,094 | ||||||||||||
Gtd. Notes(a) | 7.875 | 09/15/23 | 16,065 | 18,073,125 | ||||||||||||
T-Mobile USA, Inc., | 6.375 | 03/01/25 | 4,725 | 4,892,738 | ||||||||||||
Xplornet Communications, Inc. (Canada), | 9.625 | 06/01/22 | 2,000 | 2,040,000 | ||||||||||||
|
| |||||||||||||||
181,344,957 | ||||||||||||||||
Transportation 0.6% | ||||||||||||||||
XPO Logistics, Inc., | ||||||||||||||||
Gtd. Notes, 144A(a) | 6.125 | 09/01/23 | 4,500 | 4,653,000 |
See Notes to Financial Statements.
32 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) |
| |||||||||||||||
Transportation (cont’d.) |
| |||||||||||||||
XPO Logistics, Inc., (cont’d.) | ||||||||||||||||
Gtd. Notes, 144A | 6.500 | % | 06/15/22 | 1,301 | $ | 1,329,531 | ||||||||||
Gtd. Notes, 144A | 6.750 | 08/15/24 | 10,750 | 11,583,125 | ||||||||||||
|
| |||||||||||||||
17,565,656 | ||||||||||||||||
|
| |||||||||||||||
TOTAL CORPORATE BONDS |
| 2,339,016,114 | ||||||||||||||
|
| |||||||||||||||
SOVEREIGN BOND 0.1% | ||||||||||||||||
Ecuador Government International Bond (Ecuador), | 10.750 | 03/28/22 | 1,080 | 1,175,861 | ||||||||||||
|
| |||||||||||||||
Shares | ||||||||||||||||
COMMON STOCK 0.3% | ||||||||||||||||
Electric Utilities |
| |||||||||||||||
GenOn Energy Holdings, Inc. (Class A Stock)^* | 41,315 | 8,159,712 | ||||||||||||||
|
| |||||||||||||||
TOTAL LONG-TERM INVESTMENTS | 2,733,559,532 | |||||||||||||||
|
| |||||||||||||||
SHORT-TERM INVESTMENTS 21.1% | ||||||||||||||||
AFFILIATED MUTUAL FUNDS | ||||||||||||||||
PGIM Core Ultra Short Bond Fund(w) | 185,911,278 | 185,911,278 | ||||||||||||||
PGIM Institutional Money Market Fund | 439,114,425 | 439,158,336 | ||||||||||||||
|
| |||||||||||||||
TOTAL SHORT-TERM INVESTMENTS | 625,069,614 | |||||||||||||||
|
| |||||||||||||||
TOTAL INVESTMENTS 113.6% | 3,358,629,146 | |||||||||||||||
Liabilities in excess of other assets(z) (13.6)% | (402,613,613 | ) | ||||||||||||||
|
| |||||||||||||||
NET ASSETS 100.0% | $ | 2,956,015,533 | ||||||||||||||
|
|
See Notes to Financial Statements.
PGIM Short Duration High Yield Income Fund | 33 |
Schedule of Investments(continued)
as of August 31, 2019
Below is a list of the abbreviation(s) used in the annual report:
144A—Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and, pursuant to the requirements of Rule 144A, may not be resold except to qualified institutional buyers.
EURIBOR—Euro Interbank Offered Rate
LIBOR—London Interbank Offered Rate
MTN—Medium Term Note
OTC—Over-the-counter
PIK—Payment-in-Kind
REITs—Real Estate Investment Trust
EUR—Euro
GBP—British Pound
USD—US Dollar
* | Non-income producing security. |
# | Principal or notional amount is shown in U.S. dollars unless otherwise stated. |
^ | Indicates a Level 3 security. The aggregate value of Level 3 securities is $62,715,468 and 2.1% 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 $429,161,155; cash collateral of $438,200,582 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments. |
(b) | Represents security 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 August 31, 2019. |
(p) | Interest rate not available as of August 31, 2019. |
(w) | 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. |
(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 August 31, 2019:
Number of Contracts | Type | Expiration Date | Current Notional Amount | Value / Unrealized Appreciation (Depreciation) | ||||||||||||
Long Positions: | ||||||||||||||||
1,096 | 2 Year U.S. Treasury Notes | Dec. 2019 | $ | 236,864,438 | $ | 162,392 | ||||||||||
41 | 5 Year U.S. Treasury Notes | Dec. 2019 | 4,919,039 | 5,865 | ||||||||||||
3 | 20 Year U.S. Treasury Bonds | Dec. 2019 | 495,750 | 339 | ||||||||||||
2 | 30 Year U.S. Ultra Treasury Bonds | Dec. 2019 | 394,875 | 5,569 | ||||||||||||
|
| |||||||||||||||
174,165 | ||||||||||||||||
|
| |||||||||||||||
Short Positions: | ||||||||||||||||
14 | 5 Year Euro-Bobl | Dec. 2019 | 2,103,362 | (4,397 | ) | |||||||||||
18 | 10 Year U.K. Gilt | Dec. 2019 | 2,941,054 | (4,433 | ) | |||||||||||
150 | 10 Year U.S. Treasury Notes | Dec. 2019 | 19,757,813 | 8,628 | ||||||||||||
|
| |||||||||||||||
(202 | ) | |||||||||||||||
|
| |||||||||||||||
$ | 173,963 | |||||||||||||||
|
|
See Notes to Financial Statements.
34 |
Forward foreign currency exchange contracts outstanding at August 31, 2019:
Purchase Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date | Current Value | Unrealized Appreciation | Unrealized Depreciation | ||||||||||||||||||
OTC Forward Foreign Currency Exchange Contracts: |
| |||||||||||||||||||||||
British Pound, | ||||||||||||||||||||||||
Expiring 09/04/19 | | Morgan Stanley & Co. International PLC | | GBP | 4,604 | $ | 5,631,977 | $ | 5,603,098 | $ | — | $ | (28,879 | ) | ||||||||||
Euro, | ||||||||||||||||||||||||
Expiring 09/04/19 | Citibank, N.A. | EUR | 6,798 | 7,562,964 | 7,474,345 | — | (88,619 | ) | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
$ | 13,194,941 | $ | 13,077,443 | — | (117,498 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Sale Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date | Current Value | Unrealized Appreciation | Unrealized Depreciation | ||||||||||||||||||
OTC Forward Foreign Currency Exchange Contracts: |
| |||||||||||||||||||||||
British Pound, | ||||||||||||||||||||||||
Expiring 09/04/19 | | Morgan Stanley & Co. International PLC | | GBP | 4,604 | $ | 5,728,933 | $ | 5,603,098 | $ | 125,835 | $ | — | |||||||||||
Expiring 10/02/19 | | Morgan Stanley & Co. International PLC | | GBP | 4,604 | 5,639,136 | 5,609,900 | 29,236 | — | |||||||||||||||
Euro, | ||||||||||||||||||||||||
Expiring 09/04/19 | Citibank, N.A. | EUR | 6,798 | 7,589,348 | 7,474,345 | 115,003 | — | |||||||||||||||||
Expiring 10/02/19 | Citibank, N.A. | EUR | 6,798 | 7,579,763 | 7,490,466 | 89,297 | — | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
$ | 26,537,180 | $ | 26,177,809 | $ | 359,371 | $ | — | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
$ | 359,371 | $ | (117,498 | ) | ||||||||||||||||||||
|
|
|
|
Credit default swap agreements outstanding at August 31, 2019:
Reference | Termination Date | Fixed Rate | Notional Amount (000)#(3) | Value at Trade Date | Value at August 31, 2019 | Unrealized Appreciation (Depreciation) | ||||||||||||||||||
Centrally Cleared Credit Default Swap Agreement on credit indices—Buy Protection(1): |
| |||||||||||||||||||||||
CDX.NA.HY.32.V2 | 06/20/24 | 5.000%(Q) | 52,470 | $ | (4,235,495 | ) | $ | (4,031,924 | ) | $ | 203,571 | |||||||||||||
|
|
|
|
|
|
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 |
See Notes to Financial Statements.
PGIM Short Duration High Yield Income Fund | 35 |
Schedule of Investments(continued)
as of August 31, 2019
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. |
(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 includeup-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. |
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 | ||||||
Citigroup Global Markets, Inc. | $ | 2,685,000 | $ | — | ||||
|
|
|
|
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 August 31, 2019 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Bank Loans | $ | — | $ | 330,652,089 | $ | 54,555,756 | ||||||
Corporate Bonds | — | 2,339,016,114 | — |
See Notes to Financial Statements.
36 |
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities (continued) | ||||||||||||
Sovereign Bond | $ | — | $ | 1,175,861 | $ | — | ||||||
Common Stock | — | — | 8,159,712 | |||||||||
Affiliated Mutual Funds | 625,069,614 | — | — | |||||||||
Other Financial Instruments* | ||||||||||||
Futures Contracts | 173,963 | — | — | |||||||||
OTC Forward Foreign Currency Exchange Contracts | — | 241,873 | — | |||||||||
Centrally Cleared Credit Default Swap Agreement | — | 203,571 | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 625,243,577 | $ | 2,671,289,508 | $ | 62,715,468 | ||||||
|
|
|
|
|
|
The following is a reconciliation of assets in which unobservable inputs (Level 3) were used in determining fair value:
Bank Loans | Common Stocks | |||||||
Balance as of 08/31/18 | $ | 26,094,669 | $ | — | ||||
Realized gain (loss) | 1,457 | — | ||||||
Change in unrealized appreciation (depreciation) | (251,098 | ) | 3,715,113 | |||||
Purchases/Exchanges/Issuances | 31,296,048 | 4,444,599 | ||||||
Sales/Paydowns | (161,850 | ) | — | |||||
Accrued discount/premium | 38,499 | — | ||||||
Transfers into of Level 3 | 13,036,400 | — | ||||||
Transfers out of Level 3 | (15,498,369 | ) | — | |||||
|
|
|
| |||||
Balance as of 08/31/19 | $ | 54,555,756 | $ | 8,159,712 | ||||
|
|
|
| |||||
Change in unrealized appreciation (depreciation) relating to securities still held at reporting period end | (251,098 | ) | 3,715,113 | |||||
|
|
|
|
* | 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. |
Level 3 securities as presented in the table above are being fair valued using pricing methodologies approved by Board, which contain unobservable inputs as follows:
Level 3 Securities | Fair Value as of August 31, 2019 | Valuation Technique | Unobservable Inputs | |||||||||
Bank Loans | $ | 54,555,756 | Market Approach | Single Broker Indicative Quote | ||||||||
Common Stocks | 8,159,712 | Market Approach | Single Broker Indicative Quote | |||||||||
|
| |||||||||||
$ | 62,715,468 | |||||||||||
|
|
It is the Fund’s policy to recognize transfers in and transfers out at the fair value as of the beginning of period. Securities transferred levels as follows:
Investments in Securities | Amount Transferred | Level Transfer | Logic | |||||||
Bank Loans | $ | 15,498,369 | L3 to L2 | Single Broker Indicative Quote to Multiple Broker Quotes |
See Notes to Financial Statements.
PGIM Short Duration High Yield Income Fund | 37 |
Schedule of Investments(continued)
as of August 31, 2019
Investments in Securities | Amount Transferred | Level Transfer | Logic | |||||||
Bank Loans | $ | 13,036,400 | L2 to L3 | Multiple Broker Quotes to Single Broker Indicative Quote |
Industry Classification:
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of August 31, 2019 were as follows (unaudited):
Affiliated Mutual Funds (14.8% represents investments purchased with collateral from securities on loan) | 21.1 | % | ||
Media | 12.4 | |||
Telecommunications | 9.2 | |||
Oil & Gas | 6.3 | |||
Home Builders | 6.2 | |||
Retail | 6.1 | |||
Software | 5.9 | |||
Chemicals | 5.4 | |||
Healthcare-Services | 4.7 | |||
Entertainment | 4.0 | |||
Diversified Financial Services | 3.3 | |||
Mining | 2.9 | |||
Building Materials | 2.7 | |||
Aerospace & Defense | 2.4 | |||
Computers | 2.3 | |||
Commercial Services | 2.2 | |||
Electric | 2.1 | |||
Lodging | 1.3 | |||
Auto Parts & Equipment | 1.3 | |||
Advertising | 1.3 | |||
Pharmaceuticals | 1.2 | |||
Packaging & Containers | 1.2 | |||
Real Estate Investment Trusts (REITs) | 0.8 | |||
Internet | 0.8 | |||
Foods | 0.7 | |||
Transportation | 0.6 | |||
Auto Manufacturers | 0.5 |
Banks | 0.5 | % | ||
Distribution/Wholesale | 0.5 | |||
Iron/Steel | 0.4 | |||
Home Furnishings | 0.4 | |||
Machinery-Diversified | 0.4 | |||
Metal Fabricate/Hardware | 0.4 | |||
Pipelines | 0.3 | |||
Agriculture | 0.3 | |||
Insurance | 0.3 | |||
Electric Utilities | 0.3 | |||
Engineering & Construction | 0.2 | |||
Real Estate | 0.2 | |||
Gas | 0.1 | |||
Oil & Gas Services | 0.1 | |||
Housewares | 0.1 | |||
Forest Products & Paper | 0.1 | |||
Sovereign Bond | 0.1 | |||
Electronics | 0.0 | * | ||
Miscellaneous Manufacturing | 0.0 | * | ||
Beverages | 0.0 | * | ||
|
| |||
113.6 | ||||
Liabilities in excess of other assets | (13.6 | ) | ||
|
| |||
100.0 | % | |||
|
|
* | Less than +/- 0.05% |
Effects of Derivative Instruments on the Financial Statements and Primary Underlying Risk Exposure:
The Fund invested in derivative instruments during the reporting period. The primary types of risk associated with these derivative instruments are credit 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.
38 |
Fair values of derivative instruments as of August 31, 2019 as presented in the Statement of Assets and Liabilities:
Asset Derivatives | Liability Derivatives | |||||||||||
Derivatives not accounted for as | 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 | $ | 203,571 | * | — | $ | — | |||||
Foreign exchange contracts | Unrealized appreciation on OTC forward foreign currency exchange contracts | 359,371 | Unrealized depreciation on OTC forward foreign currency exchange contracts | 117,498 | ||||||||
Interest rate contracts | Due from/to broker— variation margin futures | 182,793 | * | Due from/to broker— variation margin | 8,830 | * | ||||||
|
|
|
| |||||||||
$ | 745,735 | $ | 126,328 | |||||||||
|
|
|
|
* | 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 August 31, 2019 are as follows:
Amount of Realized Gain (Loss) on Derivatives Recognized in Income | ||||||||||||
Derivatives not accounted for as hedging instruments, carried at fair value | Futures | Forward Currency Exchange Contracts | Swaps | |||||||||
Credit contracts | $ | — | $ | — | $ | 281,797 | ||||||
Foreign exchange contracts | — | 1,078,922 | — | |||||||||
Interest rate contracts | 4,519,767 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 4,519,767 | $ | 1,078,922 | $ | 281,797 | ||||||
|
|
|
|
|
| |||||||
Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Income | ||||||||||||
Derivatives not accounted | Futures | Forward Currency Exchange Contracts | Swaps | |||||||||
Credit contracts | $ | — | $ | — | $ | 203,571 | ||||||
Foreign exchange contracts | — | (43,327 | ) | — | ||||||||
Interest rate contracts | 179,173 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 179,173 | $ | (43,327 | ) | $ | 203,571 | |||||
|
|
|
|
|
|
See Notes to Financial Statements.
PGIM Short Duration High Yield Income Fund | 39 |
Schedule of Investments(continued)
as of August 31, 2019
For the year ended August 31, 2019, the Fund’s average volume of derivative activities is as follows:
Futures Contracts— Long Positions(1) | Futures Contracts— Short Positions(1) | Forward Foreign Currency Exchange Contracts—Purchased(2) | ||||||||
$ | 240,861,452 | $ | 14,126,553 | $ | 17,731,110 | |||||
Forward Foreign Currency Exchange Contracts—Sold(2) | Credit Default Swap Agreements— Buy Protection(1) | |||||||||
$ | 34,085,811 | $ | 10,494,000 |
(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 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 toset-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 | $ | 429,161,155 | $ | (429,161,155 | ) | $ | — | |||||
|
|
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 | |||||||||||||||
Citibank, N.A. | $ | 204,300 | $ | (88,619 | ) | $ | 115,681 | $ | — | $ | 115,681 | |||||||||
Morgan Stanley & Co. International PLC | 155,071 | (28,879 | ) | 126,192 | — | 126,192 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 359,371 | $ | (117,498 | ) | $ | 241,873 | $ | — | $ | 241,873 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(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.
40 |
Statement of Assets & Liabilities
as of August 31, 2019
Assets | ||||
Investments at value, including securities on loan of $429,161,155: | ||||
Unaffiliated investments (cost $2,713,613,097) | $ | 2,733,559,532 | ||
Affiliated investments (cost $625,030,204) | 625,069,614 | |||
Cash | 243,118 | |||
Foreign currency, at value (cost $7,172,836) | 7,137,454 | |||
Dividends and interest receivable | 45,866,920 | |||
Receivable for Fund shares sold | 17,562,188 | |||
Receivable for investments sold | 14,670,172 | |||
Deposit with broker for centrally cleared/exchange-traded derivatives | 2,685,000 | |||
Unrealized appreciation on OTC forward foreign currency exchange contracts | 359,371 | |||
Due from broker—variation margin futures | 89,833 | |||
Prepaid expenses | 24,887 | |||
|
| |||
Total Assets | 3,447,268,089 | |||
|
| |||
Liabilities | ||||
Payable to broker for collateral for securities on loan | 438,200,582 | |||
Payable for investments purchased | 32,493,747 | |||
Payable for Fund shares reacquired | 16,124,233 | |||
Accrued expenses and other liabilities | 1,433,380 | |||
Management fee payable | 1,406,743 | |||
Dividends payable | 1,117,748 | |||
Distribution fee payable | 338,212 | |||
Unrealized depreciation on OTC forward foreign currency exchange contracts | 117,498 | |||
Affiliated transfer agent fee payable | 20,259 | |||
Due to broker—variation margin swaps | 154 | |||
|
| |||
Total Liabilities | 491,252,556 | |||
|
| |||
Net Assets | $ | 2,956,015,533 | ||
|
| |||
Net assets were comprised of: | ||||
Common stock, at par | $ | 3,294,858 | ||
Paid-in capital in excess of par | 3,085,271,994 | |||
Total distributable earnings (loss) | (132,551,319 | ) | ||
|
| |||
Net assets, August 31, 2019 | $ | 2,956,015,533 | ||
|
|
See Notes to Financial Statements.
PGIM Short Duration High Yield Income Fund | 41 |
Statement of Assets & Liabilities(continued)
as of August 31, 2019
Class A | ||||
Net asset value and redemption price per share, ($270,852,621 ÷ 30,195,686 shares of common stock issued and outstanding) | $ | 8.97 | ||
Maximum sales charge (2.25% of offering price) | 0.21 | |||
|
| |||
Maximum offering price to public | $ | 9.18 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share, | ||||
($332,502,606 ÷ 37,071,901 shares of common stock issued and outstanding) | $ | 8.97 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share, | ||||
($2,188,123,314 ÷ 243,883,954 shares of common stock issued and outstanding) | $ | 8.97 | ||
|
| |||
Class R6 | ||||
Net asset value, offering price and redemption price per share, | ||||
($164,536,992 ÷ 18,334,253 shares of common stock issued and outstanding) | $ | 8.97 | ||
|
|
See Notes to Financial Statements.
42 |
Statement of Operations
Year Ended August 31, 2019
Net Investment Income (Loss) | ||||
Income | ||||
Interest income | $ | 145,293,411 | ||
Affiliated dividend income | 2,857,358 | |||
Income from securities lending, net (including affiliated income of $656,612) | 1,075,919 | |||
|
| |||
Total income | 149,226,688 | |||
|
| |||
Expenses | ||||
Management fee | 17,909,404 | |||
Distribution fee(a) | 3,892,206 | |||
Transfer agent’s fees and expenses (including affiliated expense of $118,190)(a) | 2,398,167 | |||
Custodian and accounting fees | 235,943 | |||
Registration fees(a) | 183,263 | |||
Shareholders’ reports | 145,406 | |||
SEC registration fees | 76,301 | |||
Directors’ fees | 56,670 | |||
Audit fee | 41,129 | |||
Legal fees and expenses | 31,915 | |||
Miscellaneous | 49,563 | |||
|
| |||
Total expenses | 25,019,967 | |||
Less: Fee waiver and/or expense reimbursement(a) | (1,854,601 | ) | ||
|
| |||
Net expenses | 23,165,366 | |||
|
| |||
Net investment income (loss) | 126,061,322 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investment And Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions (including affiliated of $(5,639)) | 5,828,962 | |||
Futures transactions | 4,519,767 | |||
Forward currency contract transactions | 1,078,922 | |||
Swap agreement transactions | 281,797 | |||
Foreign currency transactions | (170,092 | ) | ||
|
| |||
11,539,356 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (including affiliated of $2,008) | 28,856,282 | |||
Futures | 179,173 | |||
Forward currency contracts | (43,327 | ) | ||
Swap agreements | 203,571 | |||
Foreign currencies | (83,260 | ) | ||
|
| |||
29,112,439 | ||||
|
| |||
Net gain (loss) on investment and foreign currency transactions | 40,651,795 | |||
|
| |||
Net Increase (Decrease) In Net Assets Resulting From Operations | $ | 166,713,117 | ||
|
|
See Notes to Financial Statements.
PGIM Short Duration High Yield Income Fund | 43 |
Statement of Operations
Year Ended August 31, 2019
(a) | Class specific expenses and waivers were as follows: |
Class A | Class C | Class Z | Class R6 | |||||||||||||
Distribution fee | 631,534 | 3,260,672 | — | — | ||||||||||||
Transfer agent’s fees and expenses | 236,844 | 251,091 | 1,909,263 | 969 | ||||||||||||
Registration fees | 33,660 | 29,763 | 89,123 | 30,717 | ||||||||||||
Fee waiver and/or expense reimbursement | (191,596 | ) | (180,850 | ) | (1,422,900 | ) | (59,255 | ) |
See Notes to Financial Statements.
44 |
Statements of Changes in Net Assets
Year Ended August 31, | ||||||||
2019 | 2018 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 126,061,322 | $ | 109,937,229 | ||||
Net realized gain (loss) on investment and foreign currency transactions | 11,539,356 | (5,957,898 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments and foreign currencies | 29,112,439 | (20,313,872 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 166,713,117 | 83,665,459 | ||||||
|
|
|
| |||||
Dividends and Distributions | ||||||||
Distributions from distributable earnings* | ||||||||
Class A | (13,829,701 | ) | — | |||||
Class C | (15,431,122 | ) | — | |||||
Class Z | (106,446,362 | ) | — | |||||
Class R6 | (8,165,570 | ) | — | |||||
|
|
|
| |||||
(143,872,755 | ) | — | ||||||
|
|
|
| |||||
Tax return of capital distributions | ||||||||
Class A | — | (718,848 | ) | |||||
Class C | — | (721,146 | ) | |||||
Class Z | — | (3,759,002 | ) | |||||
Class R6 | — | (215,926 | ) | |||||
|
|
|
| |||||
— | (5,414,922 | ) | ||||||
|
|
|
| |||||
Dividends from net investment income* | ||||||||
Class A | (15,695,003 | ) | ||||||
Class C | (15,745,175 | ) | ||||||
Class Z | (82,072,392 | ) | ||||||
Class R6 | (4,714,436 | ) | ||||||
|
|
|
| |||||
* | (118,227,006 | ) | ||||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) | ||||||||
Net proceeds from shares sold | 1,607,088,461 | 881,202,898 | ||||||
Net asset value of shares issued in reinvestment of dividends and distributions | 126,951,425 | 101,932,229 | ||||||
Cost of shares reacquired | (1,084,977,308 | ) | (1,061,794,781 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in net assets from Fund share transactions | 649,062,578 | (78,659,654 | ) | |||||
|
|
|
| |||||
Total increase (decrease) | 671,902,940 | (118,636,123 | ) | |||||
Net Assets: | ||||||||
Beginning of year | 2,284,112,593 | 2,402,748,716 | ||||||
|
|
|
| |||||
End of year(a) | $ | 2,956,015,533 | $ | 2,284,112,593 | ||||
|
|
|
| |||||
(a) Includes undistributed/(distributions in excess of) net investment income of: | $ | * | $ | (992,319 | ) | |||
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* | For the year ended August 31, 2019, the disclosures have been revised to reflect revisions to RegulationS-X adopted by the SEC in 2018 (refer to Note 9). |
See Notes to Financial Statements.
PGIM Short Duration High Yield Income Fund | 45 |
Notes to Financial Statements
Prudential Investment Portfolios, Inc. 15 (the “Company”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as a diversifiedopen-end management investment company. The Company consists of two funds: PGIM High Yield Fund and PGIM Short Duration High Yield Income Fund. These financial statements relate only to the PGIM Short Duration High Yield Income Fund (the “Fund”).
The investment objective of the Fund is to provide a high level of current income.
1. Accounting Policies
The Fund follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 946 Financial Services—Investment Companies.The following accounting policies conform to U.S. generally accepted accounting principles. The Fund consistently follows such policies in the preparation of its financial statements.
Securities Valuation:The Fund holds securities and other assets and liabilities that are fair valued at the close of each day (generally, 4:00 PM Eastern time) the New York Stock Exchange (“NYSE”) is open for trading. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Company’s Board of Directors (the “Board”) has adopted valuation procedures for security valuation under which fair valuation responsibilities have been delegated to PGIM Investments LLC (“PGIM Investments” or the “Manager”). Pursuant to the Board’s delegation, the Manager has established a Valuation Committee responsible for supervising the fair valuation of portfolio securities and other assets and liabilities. The valuation procedures permit the Fund to utilize independent pricing vendor services, quotations from market makers, and alternative valuation methods when market quotations are either not readily available or not deemed representative of fair value. A record of the Valuation Committee’s actions is subject to the Board’s review, approval, and ratification at its next regularly scheduled quarterly meeting.
For the fiscal reportingyear-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
46 |
Investments and referred to herein as the “fair value hierarchy” in accordance with FASB ASC Topic 820 - Fair Value Measurements and Disclosures.
Derivative instruments, such as futures or options, that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange where the security principally trades. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price, they are classified as Level 1 in the fair value hierarchy. In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and ask prices, or at the last bid price in the absence of an ask price. These securities are classified as Level 2 in the fair value hierarchy.
Investments inopen-end,non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
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.
Bank 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. Bank loans valued using such vendor prices are generally classified as Level 2 in the fair value hierarchy. Bank 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
PGIM Short Duration High Yield Income Fund | 47 |
Notes to Financial Statements(continued)
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 pricing methodologies approved by the Board. In the event that unobservable inputs are used when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
When determining the fair value of securities, some of the factors influencing the valuation include: the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition and the markets in which it does business; the cost of the investment; the size of the holding and the capitalization of the issuer; the prices of any recent transactions or bids/offers for such securities or any comparable securities; any available analyst media or other reports or information deemed reliable by the Manager regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other unaffiliated mutual funds to calculate their net asset values.
Illiquid Securities:Pursuant to Rule22e-4 under the 1940 Act, the Fund has adopted a Board approved Liquidity Risk Management Program (“LRMP”) that requires, among other things, that the Fund limit its illiquid investments that are assets to no more than 15% of net assets. Illiquid securities are those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale, may not reasonably be expected to be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. The Fund may find it difficult to sell illiquid securities at the time considered most advantageous by its subadviser and may incur transaction costs that would not be incurred in the sale of securities that were freely marketable.
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Restricted Securities:Securities acquired in unregistered, private sales from the issuing company or from an affiliate of the issuer are considered restricted as to disposition under federal securities law (“restricted securities”). Such restricted securities are valued pursuant to the valuation procedures noted above. Restricted securities that would otherwise be considered illiquid investments pursuant to the Fund’s LRMP because of legal restrictions on resale to the general public may be traded among qualified institutional buyers under Rule 144A of the Securities Act of 1933. Therefore, these Rule 144A securities, as well as commercial paper that is sold in private placements under Section 4(2) of the Securities Act of 1933, may be classified higher than “illiquid” under the LRMP (i.e. “moderately liquid” or “less liquid” investments). However, the liquidity of the Fund’s investments in restricted securities could be impaired if trading does not develop or declines.
Foreign Currency Translation:The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis:
(i) market value of investment securities, other assets and liabilities—at the current rates of exchange;
(ii) purchases and sales of investment securities, income and expenses—at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not generally isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities held at the end of the period. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities sold during the period. Accordingly, holding period realized foreign currency gains (losses) are included in the reported net realized gains (losses) on investment transactions. Notwithstanding the above, the Fund does isolate the effect of fluctuations in foreign currency exchange rates when determining the gain (loss) upon the sale or maturity of foreign currency denominated debt obligations; such amounts are included in net realized gains (losses) on foreign currency transactions.
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 forward currency transactions, and the difference between the amounts of interest, dividends and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) arise from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates.
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
PGIM Short Duration High Yield Income Fund | 49 |
Notes to Financial Statements(continued)
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 (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 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.
Bank Loans:The Fund invested in bank loans. Bank loans include fixed and floating rate 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
50 |
in the bank loan market. The Fund may acquire interests in loans directly (by way of assignment from the selling institution) or indirectly (by way of the purchase of a participation interest from the selling institution). Under a bank loan assignment, the Fund generally will succeed to all the rights and obligations of an assigning lending institution and becomes a lender under the loan agreement with the relevant borrower in connection with that loan. Under a bank loan 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 it is 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 it has 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.
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 (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. Any 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.
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.
PGIM Short Duration High Yield Income Fund | 51 |
Notes to Financial Statements(continued)
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 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.
Master Netting Arrangements:The Company, on behalf of the Fund, is subject to various Master Agreements, or netting arrangements, with select counterparties. These are agreements which a subadviser may have negotiated and entered into on behalf of all or a portion of the Fund. A master netting arrangement between the Fund and the counterparty permits the Fund to offset amounts payable by the Fund to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Fund to cover the Fund’s exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable. In addition to master netting arrangements, the right to set-off exists when all the conditions are met such that each of the parties owes the other determinable amounts, the reporting party has the right to set-off the amount owed with the amount owed by the other party, the reporting party intends to set-off and the right of set-off is enforceable by law. During the reporting period, there was no intention to settle on a net basis and all amounts are presented on a gross basis on the Statement of Assets and Liabilities.
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The Company, 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.
As of August 31, 2019, the Fund has not met conditions under such agreements which give the counterparty the right to call for an early termination.
Forward currency contracts, forward rate agreements, written options, short sales, swaps and financial futures contracts involve elements of both market and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities. Such risks may be mitigated by engaging in master netting arrangements.
PGIM Short Duration High Yield Income Fund | 53 |
Notes to Financial Statements(continued)
Payment-In-Kind:The Fund invested in the open market or receive pursuant to debt restructuring, securities that pay-in-kind (PIK) the interest due on such debt instruments. The PIK interest, computed at the contractual rate specified, is added to the existing principal balance of the debt when issued bonds have same terms as the bond or recorded as a separate bond when terms are different from the existing debt, and is recorded as interest income.
Securities Lending:The Fund lends its portfolio securities to banks and broker-dealers. The loans are secured by collateral at least equal to the market value of the securities loaned. Collateral pledged by each borrower is invested in an affiliated money market fund and is marked to market daily, based on the previous day’s market value, such that the value of the collateral exceeds the value of the loaned securities. In the event of significant appreciation in value of securities on loan on the last business day of the reporting period, the financial statements may reflect a collateral value that is less than the market value of the loaned securities. Such shortfall is remedied as described above. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of the loan, the borrower will return to the Fund securities identical to the loaned securities. Should the borrower of the securities fail financially, the Fund has the right to repurchase the securities in the open market using the collateral.
The Fund recognizes income, net of any rebate and securities lending agent fees, for lending its securities in the form of fees or interest on the investment of any cash received as collateral. The borrower receives all interest and dividends from the securities loaned and such payments are passed back to the lender in amounts equivalent thereto. The Fund also continues to recognize any unrealized gain (loss) in the market price of the securities loaned and on the change in the value of the collateral invested that may occur during the term of the loan. In addition, realized gain (loss) is recognized on changes in the value of the collateral invested upon liquidation of the collateral. Net earnings from securities lending are disclosed on the Statement of Operations as “Income from securities lending, net”.
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
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applicable, are charged to the respective share classes. Class specific expenses include distribution fees and distribution fee waivers, shareholder servicing fees, transfer agent’s fees and expenses, registration fees and fee waivers and/or expense reimbursements, as applicable.
Taxes:It is the Fund’s policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net investment income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required. Withholding taxes on foreign dividends, interest and capital gains, if any, are recorded, net of reclaimable amounts, at the time the related income is earned.
Dividends and Distributions:The Fund expects to declare dividends of its net investment income daily and pay such dividends monthly. Distributions of net realized capital and currency gains, if any, are declared and paid at least annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-date. Permanent book/tax differences relating to income and gain (loss) are reclassified between total distributable earnings (loss) and paid-in capital in excess of par, as appropriate.
Estimates:The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
2. Agreements
The Company, on behalf of the Fund, has a management agreement with the Manager. Pursuant to this agreement, the Manager has responsibility for all investment advisory services and supervises the subadviser’s performance of such services. In addition, under the management agreement, the Manager provides all of the administrative functions necessary for the organization, operation and management of the Fund. The Manager administers the corporate affairs of the Fund and, in connection therewith, furnishes the Fund with office facilities, together with those ordinary clerical and bookkeeping services which are not being furnished by the Fund’s custodian and the Fund’s transfer agent. The Manager is also responsible for the staffing and management of dedicated groups of legal, marketing, compliance and related personnel necessary for the operation of the Fund. The legal, marketing, compliance and related personnel are also responsible for the management and oversight of the various service providers to the Fund, including, but not limited to, the custodian, transfer agent, and accounting agent.
The Manager has entered into a subadvisory agreement with PGIM, Inc., which provides subadvisory services to the Fund through its PGIM Fixed Income unit. The subadvisory agreement provides that PGIM, Inc. will furnish investment advisory services in connection with the management of the Fund. In connection therewith, PGIM, Inc. is obligated to keep
PGIM Short Duration High Yield Income Fund | 55 |
Notes to Financial Statements(continued)
certain books and records of the Fund. The Manager pays for the services of PGIM, Inc., the cost of compensation of officers of the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears all other costs and expenses.
The management fee paid to the Manager is accrued daily and payable monthly at an annual rate of 0.70% of the Fund’s average daily net assets up to $2 billion and 0.675% of the average daily net assets in excess of $2 billion. The effective management fee rate before any waivers and/or expense reimbursements was 0.69% for the year ended August 31, 2019.
The Manager has contractually agreed, through December 31, 2020, to limit total annual operating expenses after fee waivers and/or expense reimbursements to 1.00% of average daily net assets for Class A shares, 1.75% of average daily net assets for Class C shares, 0.75% of average daily net assets for Class Z shares, and 0.70% of average daily net assets for Class R6 shares. This contractual waiver excludes interest, brokerage, taxes (such as income and foreign withholding taxes, stamp duty and deferred tax expenses), acquired fund fees and expenses, extraordinary expenses, and certain other Fund expenses such as dividend and interest expense and broker charges on short sales. Where applicable, the Manager agrees to waive management fees or shared operating expenses on any share class to the same extent that it waives similar expenses on any other share class. In addition, total annual operating expenses for Class R6 shares will not exceed total annual operating expenses for Class Z shares. Fees and/or expenses waived and/or reimbursed by the Manager may be recouped by the Manager within the same fiscal year during which such waiver/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 Company, on behalf of the Fund, has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”), which acts as the distributor of the Class A, Class C, Class Z and Class R6 shares of the Fund. The Fund compensates PIMS for distributing and servicing the Fund’s Class A and Class C shares, pursuant to the plans of distribution (the “Distribution Plans”), regardless of expenses actually incurred by PIMS. The distribution fees are accrued daily and payable monthly. No distribution or service fees are paid to PIMS as distributor of the Class Z or Class R6 shares of the Fund.
Pursuant to the Distribution Plans, the Fund compensates PIMS for distribution related activities at an annual rate of up to 0.25% and 1% of the average daily net assets of the Class A and Class C shares, respectively.
For the year ended August 31, 2019, PIMS received $740,837 in front-end sales charges resulting from sales of Class A shares. Additionally, for the year ended August 31, 2019,
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PIMS received $33,759 in contingent deferred sales charges imposed upon redemptions by certain Class C shareholders.
PGIM Investments, PGIM, Inc. and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PGIM Investments and an indirect, wholly-owned subsidiary of Prudential, serves as the Company’s transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
The Fund may invest its overnight sweep cash in the PGIM Core Ultra Short Bond Fund (the “Core Fund”), and its securities lending cash collateral in the PGIM Institutional Money Market Fund (the “Money Market Fund”), each a series of Prudential Investment Portfolios 2, registered under the 1940 Act and managed by PGIM Investments. Through the Fund’s investments in the mentioned underlying funds, PGIM Investments and/or its affiliates are paid fees or reimbursed for providing their services. Earnings from the Core Fund and Money Market Fund are disclosed on the Statement of Operations as “Affiliated dividend income” and “Income from securities lending, net”, respectively.
The Fund may enter into certain securities purchase or sale transactions under Board approved Rule 17a-7 procedures. Rule 17a-7 is an exemptive rule under the 1940 Act, that subject to certain conditions, permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. Pursuant to the Rule 17a-7 procedures and consistent with guidance issued by the SEC, the Company’s Chief Compliance Officer (“CCO”) prepares a quarterly summary of all such transactions for submission to the Board, together with the CCO’s written representation that all such 17a-7 transactions were effected in accordance with the Fund’s Rule 17a-7 procedures. For the year ended August 31, 2019, no 17a-7 transactions were entered into by the Fund.
4. Portfolio Securities
The aggregate cost of purchases and proceeds from sales of portfolio securities (excluding short-term investments and U.S. Government securities) for the year ended August 31, 2019, were $1,735,910,477 and $1,194,832,039, respectively.
A summary of the cost of purchases and proceeds from sales of shares of affiliated investments for the year ended August 31, 2019, is presented as follows:
PGIM Short Duration High Yield Income Fund | 57 |
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 | |||||||||||||||||||||||
PGIM Core Ultra Short Bond Fund* | ||||||||||||||||||||||||||||||
$ | 74,054,732 | $ | 1,123,988,743 | $ | 1,012,132,197 | $ | — | $ | — | $ | 185,911,278 | 185,911,278 | $ | 2,857,358 | ||||||||||||||||
PGIM Institutional Money Market Fund* | ||||||||||||||||||||||||||||||
495,904,850 | 986,809,039 | 1,043,551,922 | 2,008 | (5,639 | ) | 439,158,336 | 439,114,425 | 656,612 | ** | |||||||||||||||||||||
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$ | 569,959,582 | $ | 2,110,797,782 | $ | 2,055,684,119 | $ | 2,008 | $ | (5,639 | ) | $ | 625,069,614 | $ | 3,513,970 | ||||||||||||||||
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* | The Fund did not have any capital gain distributions during the reporting period. |
** | This amount is included in “Income from securities lending, net” on the Statement of Operations. |
5. Distributions and Tax Information
Distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-date.
For the year ended August 31, 2019, the tax character of dividends paid by the Fund was $143,872,755 of ordinary income. For the year ended August 31, 2018, the tax character of dividends paid by the Fund were $118,227,006 of ordinary income and $5,414,922 of tax return of capital.
As of August 31, 2019, the accumulated undistributed earnings on a tax basis was $3,187,760 of ordinary income.
The United States federal income tax basis of the Fund’s investments and the net unrealized depreciation as of August 31, 2019 were as follows:
Tax Basis | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Depreciation | |||
$3,361,326,097 | $37,908,995 | $(39,986,539) | $(2,077,544) |
The difference between book and tax basis is primarily attributable to deferred losses on wash sales, differences in the treatment of premium amortization for book and tax purposes and other cost basis adjustments.
For federal income tax purposes, the Fund had a capital loss carryforward as of August 31, 2019 of approximately $132,541,000 which can be carried forward for an unlimited period. The Fund utilized approximately $1,714,000 of its capital loss carryforward to offset net
58 |
taxable gains realized in the fiscal year ended August 31, 2019. 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 August 31, 2019 are subject to such review.
6. Capital and Ownership
The Fund offers Class A, Class C, Class Z and Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 2.25%. Investors who purchase $1 million or more of Class A shares and sell those shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1.00% on sales of $1 million or more made within 12 months of purchase for purchases prior to July 15, 2019, and a CDSC of 1.00% on sales of $500,000 or more made within 12 months of purchase for purchases on or after July 15, 2019. The Class A CDSC is waived for certain retirement and/or benefit plans. A special exchange privilege is also available for shareholders who qualified to purchase Class A shares at net asset value. Class C shares are sold with a CDSC of 1% on sales made within 12 months of purchase. Class C shares will automatically convert to Class A shares on a monthly basis approximately 10 years after purchase. Class Z and Class R6 shares are not subject to any sales or redemption charge and are available exclusively for sale to a limited group of investors.
Under certain circumstances, an exchange may be made from specified share classes of the Fund to one or more other share classes of the Fund as presented in the table of transactions in shares of common stock.
The Company is authorized to issue 6 billion shares of common stock, with a par value of $0.01 per share. Of the Company’s authorized capital stock, 1,185 billion authorized shares have been allocated to the Fund and divided into five classes, designated Class A, Class C, Class R6, Class Z and Class T common stock, each of which consists of 160 million, 100 million, 150 million, 700 million and 75 million authorized shares, respectively. The Fund currently does not have any Class T shares outstanding.
As of August 31, 2019, Prudential, through its affiliated entities, including affiliated funds (if applicable), owned and 2,308,252 Class R6 shares of the Fund. At reporting period end, seven shareholders of record, each holding greater than 5% of the Fund, held 70% of the Fund’s outstanding shares.
PGIM Short Duration High Yield Income Fund | 59 |
Notes to Financial Statements(continued)
Transactions in shares of common stock were as follows:
Class A | Shares | Amount | ||||||
Year ended August 31, 2019: | ||||||||
Shares sold | 11,528,235 | $ | 102,112,212 | |||||
Shares issued in reinvestment of dividends and distributions | 1,474,258 | 13,046,141 | ||||||
Shares reacquired | (10,445,976 | ) | (91,885,274 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 2,556,517 | 23,273,079 | ||||||
Shares issued upon conversion from other share class(es) | 1,053,119 | 9,341,086 | ||||||
Shares reacquired upon conversion into other share class(es) | (4,135,314 | ) | (36,576,670 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (525,678 | ) | $ | (3,962,505 | ) | |||
|
|
|
| |||||
Year ended August 31, 2018: | ||||||||
Shares sold | 8,429,647 | $ | 75,415,197 | |||||
Shares issued in reinvestment of dividends and distributions | 1,736,593 | 15,528,712 | ||||||
Shares reacquired | (16,356,242 | ) | (146,548,672 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (6,190,002 | ) | (55,604,763 | ) | ||||
Shares issued upon conversion from other share class(es) | 694,329 | 6,206,627 | ||||||
Shares reacquired upon conversion into other share class(es) | (3,589,822 | ) | (32,068,644 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (9,085,495 | ) | $ | (81,466,780 | ) | |||
|
|
|
| |||||
Class C | ||||||||
Year ended August 31, 2019: | ||||||||
Shares sold | 8,005,611 | $ | 70,818,384 | |||||
Shares issued in reinvestment of dividends and distributions | 1,607,284 | 14,222,040 | ||||||
Shares reacquired | (8,332,369 | ) | (73,544,160 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 1,280,526 | 11,496,264 | ||||||
Shares reacquired upon conversion into other share class(es) | (1,773,483 | ) | (15,723,232 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (492,957 | ) | $ | (4,226,968 | ) | |||
|
|
|
| |||||
Year ended August 31, 2018: | ||||||||
Shares sold | 6,948,165 | $ | 62,231,411 | |||||
Shares issued in reinvestment of dividends and distributions | 1,614,952 | 14,435,461 | ||||||
Shares reacquired | (10,734,529 | ) | (96,006,947 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (2,171,412 | ) | (19,340,075 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (1,603,212 | ) | (14,374,275 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (3,774,624 | ) | $ | (33,714,350 | ) | |||
|
|
|
|
60 |
Class Z | Shares | Amount | ||||||
Year ended August 31, 2019: | ||||||||
Shares sold | 147,565,528 | $ | 1,306,227,248 | |||||
Shares issued in reinvestment of dividends and distributions | 10,737,610 | 95,124,237 | ||||||
Shares reacquired | (94,810,133 | ) | (836,533,352 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 63,493,005 | 564,818,133 | ||||||
Shares issued upon conversion from other share class(es) | 5,553,893 | 49,156,975 | ||||||
Shares reacquired upon conversion into other share class(es) | (749,213 | ) | (6,640,643 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 68,297,685 | $ | 607,334,465 | |||||
|
|
|
| |||||
Year ended August 31, 2018: | ||||||||
Shares sold | 75,528,215 | $ | 675,650,511 | |||||
Shares issued in reinvestment of dividends and distributions | 7,779,964 | 69,552,364 | ||||||
Shares reacquired | (82,452,080 | ) | (738,142,728 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 856,099 | 7,060,147 | ||||||
Shares issued upon conversion from other share class(es) | 5,076,870 | 45,399,311 | ||||||
Shares reacquired upon conversion into other share class(es) | (7,979,711 | ) | (71,238,497 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (2,046,742 | ) | $ | (18,779,039 | ) | |||
|
|
|
| |||||
Class R6 | ||||||||
Year ended August 31, 2019: | ||||||||
Shares sold | 14,530,956 | $ | 127,930,617 | |||||
Shares issued in reinvestment of dividends and distributions | 514,087 | 4,559,007 | ||||||
Shares reacquired | (9,383,081 | ) | (83,014,522 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 5,661,962 | 49,475,102 | ||||||
Shares issued upon conversion from other share class(es) | 50,196 | 442,484 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 5,712,158 | $ | 49,917,586 | |||||
|
|
|
| |||||
Year ended August 31, 2018: | ||||||||
Shares sold | 7,588,059 | $ | 67,905,779 | |||||
Shares issued in reinvestment of dividends and distributions | 270,353 | 2,415,692 | ||||||
Shares reacquired | (9,075,595 | ) | (81,096,434 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (1,217,183 | ) | (10,774,963 | ) | ||||
Shares issued upon conversion from other share class(es) | 7,406,338 | 66,118,936 | ||||||
Shares reacquired upon conversion into other share class(es) | (4,879 | ) | (43,458 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 6,184,276 | $ | 55,300,515 | |||||
|
|
|
|
7. Borrowings
The Company, on behalf of the Fund, along with other affiliated registered investment companies (the “Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of $900 million for the period October 4, 2018 through October 3, 2019. The Funds pay an annualized commitment fee of 0.15% of the unused portion of the SCA. The Fund’s portion of the commitment fee for the unused amount, allocated based upon a method approved by the Board, is accrued daily and paid quarterly. Prior to October 4, 2018, the Funds had another SCA that provided a commitment of $900 million and the Funds paid an annualized commitment fee of 0.15% of the unused portion of the SCA. The interest on borrowings under both SCAs is paid monthly and at a per annum interest rate of 1.25% plus the higher of (1) the effective federal funds rate, (2) the one-month LIBOR rate or (3) zero percent.
PGIM Short Duration High Yield Income Fund | 61 |
Notes to Financial Statements(continued)
Subsequent to the reporting period end, the SCA has been renewed effective October 3, 2019 and will continue to provide a commitment of $900 million through October 1, 2020. The commitment fee paid by the Funds will continue to be 0.15% of the unused portion of the SCA. The interest on borrowings under the renewed SCA will be paid monthly and at a per annum interest rate of 1.20% plus the higher of (1) the effective federal funds rate, (2) 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 Funds in the SCA equitably.
The Fund did not utilize the SCA during the year ended August 31, 2019.
8. Risks of Investing in the Fund
The Fund’s risks include, but are not limited to, some or all of the risks discussed below:
Bond Obligations Risk:The Fund’s holdings, share price, yield and total return may fluctuate in response to bond market movements. The value of bonds may decline for issuer-related reasons, including management performance, financial leverage and reduced demand for the issuer’s goods and services. Certain types of fixed-income obligations also may be subject to “call and redemption risk,” which is the risk that the issuer may call a bond held by the Fund for redemption before it matures and the Fund may not be able to reinvest at the same level and therefore would earn less income.
Derivatives Risk:Derivatives involve special risks and costs and may result in losses to the Fund. The successful use of derivatives requires sophisticated management, and, to the extent that derivatives are used, the Fund will depend on the subadviser’s ability to analyze and manage derivative transactions. The prices of derivatives may move in unexpected ways, especially in abnormal market conditions. Some derivatives are “leveraged” and therefore may magnify or otherwise increase investment losses to the Fund. Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the Fund’s derivatives positions. In fact, many OTC derivative instruments will not have liquidity beyond the counterparty to the instrument. OTC derivative instruments also involve the risk that the other party will not meet its obligations to the Fund.
62 |
Foreign Securities Risk:The Fund’s investments in securities of foreign issuers or issuers with significant exposure to foreign markets involve additional risk. Foreign countries in which the Fund may invest may have markets that are less liquid, less regulated and more volatile than US markets. The value of the Fund’s investments may decline because of factors affecting the particular issuer as well as foreign markets and issuers generally, such as unfavorable government actions, and political or financial instability.
Interest Rate Risk:The value of an investment may go down when interest rates rise. A rise in rates tends to have a greater impact on the prices of longer term or duration securities. When interest rates fall, the issuers of debt obligations may prepay principal more quickly than expected, and the Fund may be required to reinvest the proceeds at a lower interest rate. This is referred to as “prepayment risk.” When interest rates rise, debt obligations may be repaid more slowly than expected, and the value of the Fund’s holdings may fall sharply. This is referred to as “extension risk. The Fund may face a heightened level of interest rate risk as a result of the U.S. Federal Reserve Board’s policies. The Fund’s investments may lose value if short-term or long-term interest rates rise sharply or in a manner not anticipated by the subadviser.
Junk Bonds Risks:High-yield, high-risk bonds have predominantly speculative characteristics, including particularly high credit risk. Junk bonds tend to be less liquid 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.
Liquidity Risk:The Fund may invest in instruments that trade in lower volumes and are less liquid than other investments. Liquidity risk exists when particular investments made by the Fund are difficult to purchase or sell. Liquidity risk includes the risk that the Fund may make investments that may become less liquid in response to market developments or adverse investor perceptions. Investments that are illiquid or that trade in lower volumes may be more difficult to value. If the Fund is forced to sell these investments to pay redemption proceeds or for other reasons, the Fund may lose money. In addition, when there is no willing buyer and investments may not reasonably be expected to be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment, the Fund may incur higher transaction costs when executing trade orders of a given size. The reduction in dealer market-making capacity in the fixed-income markets that has occurred in recent years also has the potential to reduce liquidity. An inability to sell a portfolio position can adversely affect the Fund’s value or prevent the Fund from being able to take advantage of other investment opportunities.
Market and Credit Risk:Securities markets may be volatile and the market prices of the Fund’s securities may decline. Securities fluctuate in price based on changes in an issuer’s
PGIM Short Duration High Yield Income Fund | 63 |
Notes to Financial Statements(continued)
financial condition and overall market and economic conditions. If the market prices of the securities owned by the Fund fall, the value of an investment in the Fund will decline. Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
Risks of Investments in Bank Loans: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’s 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.
9. Recent Accounting Pronouncements and Reporting Updates
In August 2018, the Securities and Exchange Commission (the “SEC”) adopted amendments to Regulation S-X to update and simplify the disclosure requirements for registered investment companies by eliminating requirements that are redundant or duplicative of US GAAP requirements or other SEC disclosure requirements. The new amendments require the presentation of the total, rather than the components, of distributable earnings on the Statement of Assets and Liabilities and the total, rather than the components, of dividends from net investment income and distributions from net realized gains on the Statements of Changes in Net Assets. The amendments also removed the requirement for the parenthetical disclosure of undistributed net investment income on the Statements of Changes in Net Assets and certain tax adjustments that were reflected in the Notes to Financial Statements. The Manager has adopted the amendments and reflected them in the Fund’s financial statements.
In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, which changes certain fair value measurement disclosure requirements. The new ASU, in addition to other modifications and additions, removes the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, and the Fund’s policy for the timing of transfers between levels. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Manager has evaluated the implications of certain provisions of the ASU and has determined to early adopt aspects related to the
64 |
removal and modification of certain fair value measurement disclosures under the ASU effective immediately. The Manager continues to evaluate certain other provisions of the ASU and does not expect a material impact to financial statement disclosures.
PGIM Short Duration High Yield Income Fund | 65 |
Financial Highlights
Class A Shares | ||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||
2019(a) | 2018(a) | 2017(a) | 2016(a) | 2015 | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning of Year | $8.90 | $9.06 | $9.16 | $9.21 | $9.73 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.43 | 0.43 | 0.42 | 0.42 | 0.44 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 0.12 | (0.10 | ) | (0.01 | ) | 0.08 | (0.37 | ) | ||||||||||||
Total from investment operations | 0.55 | 0.33 | 0.41 | 0.50 | 0.07 | |||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.48 | ) | (0.47 | ) | (0.51 | ) | (0.55 | ) | (0.59 | ) | ||||||||||
Tax return of capital distributions | - | (0.02 | ) | - | - | - | ||||||||||||||
Total dividends and distributions | (0.48 | ) | (0.49 | ) | (0.51 | ) | (0.55 | ) | (0.59 | ) | ||||||||||
Net asset value, end of year | $8.97 | $8.90 | $9.06 | $9.16 | $9.21 | |||||||||||||||
Total Return(b): | 6.43% | 3.73% | 4.65% | 5.68% | 0.72% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $270,853 | $273,521 | $360,573 | $560,800 | $366,345 | |||||||||||||||
Average net assets (000) | $252,620 | $303,566 | $462,309 | $425,721 | $381,350 | |||||||||||||||
Ratios to average net assets(c)(d)(e): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.00% | 1.00% | 1.04% | 1.08% | 1.11% | |||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.08% | 1.07% | 1.07% | 1.08% | 1.14% | |||||||||||||||
Net investment income (loss) | 4.81% | 4.80% | 4.67% | 4.67% | 4.70% | |||||||||||||||
Portfolio turnover rate(f) | 49% | 67% | 66% | 58% | 56% |
(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 generally accepted accounting principles. |
(c) | Effective September 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | Effective March 9, 2015, the contractual distribution and service (12b-1) fees were reduced from 0.30% to 0.25% of the average daily net assets and the 0.05% contractual 12b-1 fee waiver was terminated. |
(f) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
66 |
Class C Shares | ||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||
2019(a) | 2018(a) | 2017(a) | 2016(a) | 2015 | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning of Year | $8.90 | $9.06 | $9.15 | $9.21 | $9.73 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.36 | 0.36 | 0.36 | 0.36 | 0.37 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | �� | 0.13 | (0.10 | ) | (0.01 | ) | 0.06 | (0.37 | ) | |||||||||||
Total from investment operations | 0.49 | 0.26 | 0.35 | 0.42 | - | |||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.42 | ) | (0.40 | ) | (0.44 | ) | (0.48 | ) | (0.52 | ) | ||||||||||
Tax return of capital distributions | - | (0.02 | ) | - | - | - | ||||||||||||||
Total dividends and distributions | (0.42 | ) | (0.42 | ) | (0.44 | ) | (0.48 | ) | (0.52 | ) | ||||||||||
Net asset value, end of year | $8.97 | $8.90 | $9.06 | $9.15 | $9.21 | |||||||||||||||
Total Return(b): | 5.64% | 2.95% | 3.98% | 4.78% | (0.02)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $332,503 | $334,430 | $374,417 | $372,754 | $286,999 | |||||||||||||||
Average net assets (000) | $326,067 | $353,409 | $377,098 | $304,363 | $298,555 | |||||||||||||||
Ratios to average net assets(c)(d): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.75% | 1.75% | 1.78% | 1.83% | 1.86% | |||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.81% | 1.81% | 1.83% | 1.83% | 1.86% | |||||||||||||||
Net investment income (loss) | 4.06% | 4.05% | 3.92% | 3.94% | 3.95% | |||||||||||||||
Portfolio turnover rate(e) | 49% | 67% | 66% | 58% | 56% |
(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 generally accepted accounting principles. |
(c) | Effective September 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
PGIM Short Duration High Yield Income Fund | 67 |
Financial Highlights(continued)
Class Z Shares | ||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||
2019(a) | 2018(a) | 2017(a) | 2016(a) | 2015 | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning of Year | $8.91 | $9.06 | $9.16 | $9.21 | $9.73 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.45 | 0.45 | 0.45 | 0.44 | 0.47 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 0.12 | (0.09 | ) | (0.01 | ) | 0.08 | (0.38 | ) | ||||||||||||
Total from investment operations | 0.57 | 0.36 | 0.44 | 0.52 | 0.09 | |||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.51 | ) | (0.49 | ) | (0.54 | ) | (0.57 | ) | (0.61 | ) | ||||||||||
Tax return of capital distributions | - | (0.02 | ) | - | - | - | ||||||||||||||
Total dividends and distributions | (0.51 | ) | (0.51 | ) | (0.54 | ) | (0.57 | ) | (0.61 | ) | ||||||||||
Net asset value, end of year | $8.97 | $8.91 | $9.06 | $9.16 | $9.21 | |||||||||||||||
Total Return(b): | 6.57% | 4.11% | 4.91% | 5.94% | 0.98% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $2,188,123 | $1,563,724 | $1,609,403 | $1,201,161 | $656,491 | |||||||||||||||
Average net assets (000) | $1,859,209 | $1,517,050 | $1,414,559 | $818,901 | $675,793 | |||||||||||||||
Ratios to average net assets(c)(d): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 0.75% | 0.75% | 0.78% | 0.83% | 0.86% | |||||||||||||||
Expenses before waivers and/or expense reimbursement | 0.83% | 0.83% | 0.83% | 0.83% | 0.86% | |||||||||||||||
Net investment income (loss) | 5.03% | 5.05% | 4.92% | 4.90% | 4.96% | |||||||||||||||
Portfolio turnover rate(e) | 49% | 67% | 66% | 58% | 56% |
(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 generally accepted accounting principles. |
(c) | Effective September 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
68 |
Class R6 Shares | ||||||||||||||||||||
Year Ended August 31, | October 27, 2014(a) 2015 | |||||||||||||||||||
2019(b) | 2018(b) | 2017(b) | 2016(b) | |||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $8.91 | $9.06 | $9.16 | $9.22 | $9.59 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.45 | 0.46 | 0.45 | 0.45 | 0.39 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 0.12 | (0.10 | ) | (0.01 | ) | 0.07 | (0.24 | ) | ||||||||||||
Total from investment operations | 0.57 | 0.36 | 0.44 | 0.52 | 0.15 | |||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.51 | ) | (0.49 | ) | (0.54 | ) | (0.58 | ) | (0.52 | ) | ||||||||||
Tax return of capital distributions | - | (0.02 | ) | - | - | - | ||||||||||||||
Total dividends and distributions | (0.51 | ) | (0.51 | ) | (0.54 | ) | (0.58 | ) | (0.52 | ) | ||||||||||
Net asset value, end of period | $8.97 | $8.91 | $9.06 | $9.16 | $9.22 | |||||||||||||||
Total Return(c): | 6.63% | 4.15% | 4.97% | 5.92% | 1.65% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000) | $164,537 | $112,437 | $58,356 | $25,252 | $16,690 | |||||||||||||||
Average net assets (000) | $141,275 | $86,373 | $46,030 | $29,782 | $15,387 | |||||||||||||||
Ratios to average net assets(d)(e): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 0.70% | 0.70% | 0.71% | 0.74% | 0.77% | (f) | ||||||||||||||
Expenses before waivers and/or expense reimbursement | 0.74% | 0.75% | 0.72% | 0.74% | 0.77% | (f) | ||||||||||||||
Net investment income (loss) | 5.08% | 5.10% | 4.97% | 4.99% | 4.77% | (f) | ||||||||||||||
Portfolio turnover rate(g) | 49% | 67% | 66% | 58% | 56% |
(a) | Commencement of offering. |
(b) | Calculated based on average shares outstanding during the year. |
(c) | Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(d) | Effective September 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(e) | Does not include expenses of the underlying funds in which the Fund invests. |
(f) | Annualized. |
(g) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
PGIM Short Duration High Yield Income Fund | 69 |
Report of Independent Registered Public Accounting Firm
To the Shareholders of PGIM Short Duration High Yield Income Fund and Board of Directors
Prudential Investment Portfolios, Inc. 15:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of PGIM Short Duration High Yield Income Fund, a series of Prudential Investment Portfolios, Inc. 15, (the Fund), including the schedule of investments, as of August 31, 2019, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended August 31, 2019, and the related notes (collectively, the financial statements) and the financial highlights for the years or period indicated therein. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of August 31, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period ended August 31, 2019, and the financial highlights for the years or period indicated therein, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights 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 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 and financial highlights 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 and financial highlights, 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 and financial highlights. Such procedures also included confirmation of securities owned as of August 31, 2019, by correspondence with the custodian, transfer agent, and brokers, or by other appropriate auditing procedures when replies were not received. 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 and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more PGIM and/or Prudential Retail investment companies since 2003.
New York, New York
October 18, 2019
70 |
Tax Information(unaudited)
For the year ended August 31, 2019, the Fund reports the maximum amount allowable but not less than 82.39% as interest related dividends in accordance with Section 871(k)(1) and 881(e)(1) of the Internal Revenue Code.
In January 2020, 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 2019.
PGIM Short Duration High Yield Income Fund | 71 |
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 theday-to-day operations of the Fund.
Independent Board Members | ||||||
Name Date of Birth Position(s) Portfolios Overseen | Principal Occupation(s) | Other Directorships | Length of | |||
Ellen S. Alberding 3/11/58 Board Member Portfolios Overseen: 96 | President and Board Member, The Joyce Foundation (charitable foundation) (since 2002); 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 (since 2009); Trustee, Loyola University (since 2018). | None. | Since September 2013 | |||
Kevin J. Bannon 7/13/52 Board Member Portfolios Overseen: 96 | Retired; Managing Director (April2008-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 (May2003-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 Short Duration High Yield Income Fund
Independent Board Members | ||||||
Name Date of Birth Position(s) Portfolios Overseen
| Principal Occupation(s) During Past Five Years | Other Directorships Held During Past Five Years | Length of Board Service | |||
Linda W. Bynoe 7/9/52 Board Member Portfolios Overseen: 96 | President and Chief Executive Officer (since March 1995) and formerly Chief Operating Officer (December 1989-February 1995) of Telemat Ltd. (management consulting); formerly Vice President (January 1985-June 1989) at Morgan Stanley & Co. (broker-dealer). | Director of Anixter International, Inc. (communication products distributor) (since January 2006); Director of Northern Trust Corporation (financial services) (since April 2006); Trustee of Equity Residential (residential real estate) (since December 2009). | Since March 2005 | |||
Barry H. Evans 11/2/60 Board Member Portfolios Overseen: 95 | 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 U.S. | 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 | |||
Keith F. Hartstein 10/13/56 Board Member & Independent Chair Portfolios Overseen: 96 | Retired; Member (since November 2014) of the Governing Council of the Independent Directors Council (organization of independent mutual fund directors); 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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Independent Board Members | ||||||
Name Date of Birth Position(s) Portfolios Overseen
| Principal Occupation(s) During Past Five Years | Other Directorships Held During Past Five Years | Length of Board Service | |||
Laurie Simon Hodrick 9/29/62 Board Member Portfolios Overseen: 95 | A. Barton Hepburn Professor Emerita of Economics in the Faculty of Business, Columbia Business School (since 2018); Visiting Professor of Law, Stanford Law School (since 2015); Visiting Fellow at the Hoover Institution, Stanford University (since 2015); Sole Member, ReidCourt LLC (since 2008) (a consulting firm); 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, Synnex Corporation (since April 2019) (information technology); Independent Director, Kabbage, Inc. (since July 2018) (financial services); Independent Director, Corporate Capital Trust (2017-2018) (a business development company). | Since September 2017 | |||
Michael S. Hyland, CFA 10/4/45 Board Member Portfolios Overseen: 96 | Retired (since February 2005); formerly Senior Managing Director (July 2001-February 2005) of Bear Stearns & Co, Inc.; Global Partner, INVESCO (1999-2001); Managing Director and President of Salomon Brothers Asset Management (1989-1999). | None. | Since July 2008 | |||
Brian K. Reid 9/22/61 Board Member Portfolios Overseen: 95 | 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 Short Duration High Yield Income Fund
Independent Board Members | ||||||
Name | Principal Occupation(s) | Other Directorships | Length of | |||
Grace C. Torres 6/28/59 Board Member Portfolios Overseen: 95 | 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. | Formerly Director (July 2015-January 2018) of Sun Bancorp, Inc. N.A. and Sun National Bank; Director (since January 2018) of OceanFirst Financial Corp. and OceanFirst Bank. | Since November 2014 |
Interested Board Members | ||||||
Name | Principal Occupation(s) | Other Directorships | Length of | |||
Stuart S. Parker 10/5/62 Board Member & President Portfolios Overseen: 96 | President of PGIM Investments LLC (formerly known as Prudential Investments LLC) (since January 2012); Executive Vice President of Prudential Investment Management Services LLC (since December 2012); formerly Executive Vice President of Jennison Associates LLC and Head of Retail Distribution of PGIM Investments LLC (June 2005-December 2011). | None. | Since January 2012 |
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Interested Board Members | ||||||
Name Date of Birth Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held During Past Five Years | Length of Board Service | |||
Scott E. Benjamin 5/21/73 Board Member & Vice President Portfolios Overseen:96 | Executive Vice President (since June 2009) of PGIM Investments LLC; Executive Vice President (June 2009-June 2012) and 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); formerly Vice President of Product Development and Product Management, PGIM Investments LLC (2003-2006). | None. | Since March 2010 |
Fund Officers(a) | ||||
Name Date of Birth Fund Position | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Raymond A. O’Hara 9/11/55 Chief Legal Officer | Vice President and Corporate Counsel (since July 2010) of Prudential Insurance Company of America (Prudential); Vice President (March 2011-Present) of Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey; Vice President and Corporate Counsel (March 2011-Present) of Prudential Annuities Life Assurance Corporation; Chief Legal Officer of PGIM Investments LLC (since June 2012); Chief Legal Officer of Prudential Mutual Fund Services LLC (since June 2012) and Corporate Counsel of AST Investment Services, Inc. (since June 2012); formerly Assistant Vice President and Corporate Counsel (September 2008-July 2010) of The Hartford Financial Services Group, Inc.; formerly Associate (September 1980-December 1987) and Partner (January 1988–August 2008) of Blazzard & Hasenauer, P.C. (formerly, Blazzard, Grodd & Hasenauer, P.C.). | Since June 2012 |
PGIM Short Duration High Yield Income Fund
Fund Officers(a) | ||||
Name Date of Birth Fund Position
| Principal Occupation(s) During Past Five Years | Length of Officer | ||
Dino Capasso 8/19/74 Chief Compliance Officer | Chief Compliance Officer (July 2019-Present) of PGIM Investments LLC; Chief Compliance Officer (July 2019-Present) of the PGIM Funds, Target Funds, Advanced Series Trust, The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc., PGIM Global High Yield Fund, Inc., and PGIM High Yield Bond Fund, Inc.; Vice President and Deputy Chief Compliance Officer (June 2017-2019) of PGIM Investments LLC; formerly, Senior Vice President and Senior Counsel (January 2016-June 2017), and Vice President and Counsel (February 2012-December 2015) of Pacific Investment Management Company LLC. | Since March 2018 | ||
Andrew R. French 12/22/62 Secretary | Vice President of PGIM Investments LLC (December 2018-Present); formerly Vice President and Corporate Counsel (February 2010-December 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 | ||
Jonathan D. Shain 8/9/58 Assistant Secretary | Vice President and Corporate Counsel (since August 1998) of Prudential; Vice President and Assistant Secretary (since May 2001) of PGIM Investments LLC; Vice President and Assistant Secretary (since February 2001) of Prudential Mutual Fund Services LLC; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | Since May 2005 | ||
Claudia DiGiacomo 10/14/74 Assistant Secretary | Vice President and Corporate Counsel (since January 2005) of Prudential; Vice President and Assistant Secretary of PGIM Investments LLC (since December 2005); formerly Associate at Sidley Austin Brown & Wood LLP (1999-2004). | Since December 2005 | ||
Diana N. Huffman 4/14/82 Assistant Secretary | Vice President and Corporate Counsel (since September 2015) of Prudential; formerly Associate at Willkie Farr & Gallagher LLP (2009-2015). | Since March 2019 | ||
Kelly A. Coyne 8/8/68 Assistant Secretary | Director, Investment Operations of Prudential Mutual Fund Services LLC (since 2010). | Since March 2015 | ||
Christian J. Kelly 5/5/75 Treasurer and Principal Financial and Accounting Officer | Vice President, Head of Fund Administration of PGIM Investments LLC (since November 2018); 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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Fund Officers(a) | ||||
Name Date of Birth Fund Position
| Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Lana Lomuti 6/7/67 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 | ||
Russ Shupak 10/08/73 Assistant Treasurer | Vice President (since 2017) and Director (2013-2017), within PGIM Investments Fund Administration. | Since October 2019 | ||
Deborah Conway 3/26/69 Assistant Treasurer | Vice President (since 2017) and Director (2007-2017), within PGIM Investments Fund Administration. | Since October 2019 | ||
Elyse M. McLaughlin 1/20/74 Assistant Treasurer | Vice President (since 2017) and Director (2011-2017), within PGIM Investments Fund Administration. | Since October 2019 | ||
Charles H. Smith 1/11/73 Anti-Money Laundering Compliance Officer | Vice President, Corporate Compliance, Anti-Money Laundering Unit (since January 2015) of Prudential; committee member of the American Council of Life Insurers Anti-Money Laundering and Critical Infrastructure Committee (since January 2016); formerly Global Head of Economic Sanctions Compliance at AIG Property Casualty (February 2007-December 2014); Assistant Attorney General at the New York State Attorney General’s Office, Division of Public Advocacy. (August 1998-January 2007). | Since January 2017 |
(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 only 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 Funds, The Prudential Variable Contract Accounts, PGIM ETF Trust, PGIM High Yield Bond Fund, Inc., PGIM Global High Yield Fund, Inc., The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc. and the Advanced Series Trust. |
PGIM Short Duration High Yield Income Fund
Approval of Advisory Agreements(unaudited)
The Fund’s Board of Directors
The Board of Directors (the “Board”) of PGIM Short Duration High Yield Income Fund1 (the “Fund”) consists of eleven individuals, nine of whom are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Directors”).2 The Board is responsible for the oversight of the Fund and its operations, and performs the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Directors have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Director. The Board has established four standing committees: the Audit Committee, the Nominating and Governance Committee, and two Investment Committees. Each committee is chaired by, and composed of, Independent Directors.
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, 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 Directors, met on May 30, 2019 and on June11-13, 2019 and approved the renewal of the agreements through July 31, 2020, after concluding that the renewal of the agreements was in the best interests of the Fund and its shareholders.
In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with its consideration. Among other things, the Board considered comparative fee information from PGIM Investments, PGIM, and, 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 Directors 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 Directors did not identify any single factor which alone was responsible for the Board’s
1 | PGIM Short Duration High Yield Income Fund is a series of Prudential Investment Portfolios, Inc. 15. |
2 | Grace C. Torres was an Interested Director of the Fund at the time the Board considered and approved the renewal of the Fund’s advisory agreements, but has since become an Independent Director of the Fund. |
PGIM Short Duration High Yield Income Fund |
Approval of Advisory Agreements(continued)
decision to approve the agreements with respect to the Fund. In connection with its deliberations, the Board considered information provided by PGIM Investments throughout the year at regular Board meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the meetings on May 30, 2019 and on June11-13, 2019.
The Directors 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 Directors considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Directors’ 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 of 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 Directors 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.
Visit our website at pgiminvestments.com |
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 theday-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 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. 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
PGIM Short Duration High Yield Income Fund |
Approval of Advisory Agreements(continued)
existing expense structures in the face of a rising cost environment. The Board also considered PGIM Investments’ assertion that it continually evaluates the management fee schedule of the Fund and the potential to share economies of scale through breakpoints or fee waivers as asset levels increase.
The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of PGIM Investments’ costs are not specific to individual funds, but rather are incurred across a variety of products and services.
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, and 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 specific factors and made related conclusions relating to the historical performance of the Fund for theone-, three- and five-year periods ended December 31, 2018.
The Board also considered the Fund’s actual management fee, as well as the Fund’s net total expense ratio, for the fiscal year ended August 31, 2018. The Board considered the management fee for the Fund as compared to the management fee charged by PGIM Investments to other funds and the fee charged by other advisers to comparable mutual funds in a Peer Group. The actual management fee represents the fee rate actually paid by Fund shareholders and includes any fee waivers or reimbursements. The net total expense ratio for the Fund represents the actual expense ratio incurred by Fund shareholders.
Visit our website at pgiminvestments.com |
The mutual funds included in the Peer Universe, which was used to consider performance, and the Peer Group, which was used to consider expenses and fees, were objectively determined by Broadridge, an independent provider of mutual fund data. In certain circumstances, PGIM Investments also provided supplemental Peer Universe or Peer Group information for reasons addressed with the Board. The comparisons placed the Fund in various quartiles over various periods, with the first quartile being the best 25% of the mutual funds (for performance, the best performing mutual funds and, for expenses, the lowest cost mutual funds).
The section below summarizes key factors considered by the Board and the Board’s conclusions regarding the Fund’s performance, fees and overall expenses. The table sets forth net performance comparisons (which do not reflect the impact on performance of fund expenses, or any subsidies, expense caps or waivers that may be applicable) with the Peer Universe, actual management fees with the Peer Group (which reflect the impact of any subsidies or fee waivers), and net total expenses with the Peer Group, each of which were key factors considered by the Board.
Net Performance | 1 Year | 3 Years | 5 Years | 10 Years | ||||
1st Quartile | 4th Quartile | 1st Quartile | N/A | |||||
Actual Management Fees:4th Quartile | ||||||||
Net Total Expenses: 2nd Quartile |
• | The Board noted that Fund outperformed its benchmark index over theone- and five-year periods, though it underperformed over the three-year period. |
• | The Board and PGIM Investments agreed to continue the existing contractual expense cap, which (exclusive of certain fees and expenses) caps total annual operating expenses at 1.00% for Class A shares, 1.75% for Class C shares, 0.70% for Class R6 shares, and 0.75% for Class Z shares through December 31, 2019. |
• | 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 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 and sub-subadvisory fees) and total expenses were reasonable in light of the services provided. |
* * *
After full consideration of these factors, the Board concluded that approval of the agreements was in the best interests of the Fund and its shareholders.
PGIM Short Duration High Yield Income Fund |
∎ TELEPHONE | ∎ WEBSITE | |||
655 Broad Street Newark, NJ 07102 | (800) 225-1852 | pgiminvestments.com |
PROXY VOTING |
The Board of Directors of the Fund has delegated to the Fund’s subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website. |
DIRECTORS |
Ellen S. Alberding • Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Barry H. Evans • Keith F. Hartstein • Laurie Simon Hodrick • Michael S. Hyland • Stuart S. Parker • Brian K. Reid • Grace C. Torres |
OFFICERS |
Stuart S. Parker,President•Scott E. Benjamin,Vice President• Christian J. Kelly,Treasurer and Principal Financial and Accounting Officer• Raymond A. O’Hara,Chief Legal Officer • Dino Capasso,Chief Compliance Officer • Charles H. Smith,Anti-Money Laundering Compliance Officer • Andrew R. French,Secretary • Jonathan D. Shain,Assistant Secretary• Claudia DiGiacomo,Assistant Secretary•Diana N. Huffman,Assistant Secretary• Kelly A. Coyne,Assistant Secretary• Lana Lomuti,Assistant Treasurer • Russ Shupak,Assistant Treasurer• Elyse McLaughlin,Assistant Treasurer• Deborah Conway,Assistant Treasurer |
MANAGER | PGIM Investments LLC | 655 Broad Street Newark, NJ 07102 | ||
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SUBADVISER | PGIM Fixed Income | 655 Broad Street Newark, NJ 07102 | ||
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DISTRIBUTOR | Prudential Investment Management Services LLC | 655 Broad Street Newark, NJ 07102 | ||
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CUSTODIAN | The Bank of New York Mellon | 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 | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
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FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 | ||
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An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain the prospectus and summary prospectus by visiting our website atpgiminvestments.com or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go topgiminvestments.com/edeliveryand enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH DIRECTORS |
Shareholders can communicate directly with the Board of Directors by writing to the Chair of the Board, PGIM Short Duration High Yield Income Fund, PGIM Investments, Attn: Board of Directors, 655 Broad Street, Newark, NJ 07102. Shareholders can communicate directly with an individual Director by writing to the same address. Communications are not screened before being delivered to the addressee. |
AVAILABILITY OF PORTFOLIO SCHEDULE |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission on Form N-PORT. The Fund’s Form N-PORT filings are available on the Commission’s website at sec.gov. Form N-PORT is filed with the Commission quarterly, and each Fund’s full portfolio holdings as of the first and third fiscal quarter-ends (as of the third month of the Fund’s fiscal quarter for reporting periods on or after September 30, 2019) will be made publicly available 60 days after the end of each quarter at sec.gov. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Directors and is available without charge, upon request, by calling (800) 225-1852. |
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PGIM SHORT DURATION HIGH YIELD INCOME FUND
SHARE CLASS | A | C | Z | R6 | ||||
NASDAQ | HYSAX | HYSCX | HYSZX | HYSQX | ||||
CUSIP | 74442J109 | 74442J208 | 74442J307 | 74442J406 |
MF216E
PGIM HIGH YIELD FUND
ANNUAL REPORT
AUGUST 31, 2019
COMING SOON: PAPERLESS SHAREHOLDER REPORTS
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website (pgiminvestments.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 1-800-225-1852 or by sending an email request to PGIM Investments at shareholderreports@pgim.com.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary or follow instructions included with this notice to elect to continue to receive paper copies of your shareholder reports. If you invest directly with the Fund, you can call 1-800-225-1852 or send an email request to shareholderreports@pgim.com to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the fund complex if you invest directly with the Fund.
To enroll in e-delivery, go to pgiminvestments.com/edelivery
Objective: Maximize current income, and capital appreciation as a secondary objective |
Highlights(unaudited)
• | The Fund benefited from very strong security selection, accounting for a large portion of the outperformance in the reporting period. This was mostly driven by positioning in the upstream energy, electric utility, technology, and metals & mining sectors. |
• | Overweights to Wind Tre (telecom) and Calpine (electric utilities), as well as underweights to upstream energy issuers EP Energy and Weatherford International, were among the largest single-name contributors. |
• | Although overall industry allocation was positive in the period, underweights to the banking and consumer non-cyclical sectors hurt performance. An overweight to automotive was also negative. |
• | Security selection within midstream energy and automotive was a drag on performance. The largest single-name detractors from returns included overweights to Digicel (telecom) and Alta Mesa Holdings (upstream energy). |
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.© 2019 Prudential Financial, Inc. and its related entities. PGIM and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
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PGIM High Yield Fund | 3 |
This Page Intentionally Left Blank
Dear Shareholder:
We hope you find the annual report for the PGIM High Yield Fund informative and useful. The report covers performance for the 12-month period that ended August 31, 2019.
While the US economy remained healthy, with rising corporate profits and strong job growth, the Federal Reserve cut interest rates late in the period for the first time since the Great Recession more than a decade ago. After nine rate increases in recent years, the cut was a proactive attempt by the Fed to extend the longest domestic economic expansion on record as growth in many other regions weakened. China in particular showed signs of slowing amid trade tensions with the US, and turmoil in the United Kingdom continued as it negotiated an exit from the European Union.
Despite the growing US economy, volatility returned to the equity markets during the period. After corporate tax cuts and regulatory reforms helped boost US stocks early in the period, equities declined significantly at the end of 2018 on concerns about China’s economy, a potential global trade war, higher interest rates, and worries that profit growth might slow. Stocks reversed course early in 2019, rising sharply after the Fed moderated its position on additional rate hikes for the remainder of the year. For the period overall, large-cap US equities rose while small-cap US stocks fell. Stocks also declined in developed foreign and emerging markets.
The overall US bond market posted strong returns during the period on a significant rally in interest rates that saw the 10-year US Treasury yield decline from around 3% to 2%. Investment grade corporate bonds led the way with a double-digit gain, while corporate high yield and municipal bonds each had a high single-digit return. Globally, bonds in developed markets delivered solid returns, while emerging markets debt also posted positive results. A continuing trend during the period was the inversion of a portion of the US Treasury yield curve, as the yield on certain shorter maturities exceeded the yield on the 10-year bond.
Regarding your investments with PGIM, we believe it is important to maintain a diversified portfolio of funds consistent with your tolerance for risk, time horizon, and financial goals. Your financial advisor can help you create a diversified investment plan that may include funds covering all the basic asset classes and that reflects your personal investor profile and risk tolerance. However, diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
At PGIM Investments, we consider it a great privilege and responsibility to help investors participate in opportunities across global markets while meeting their toughest investment challenges. PGIM is a top-10 global investment manager with more than $1 trillion in assets under management. This scale and investment expertise allow us to deliver actively managed funds and strategies to meet the needs of investors around the globe.
Thank you for choosing our family of funds.
Sincerely,
Stuart S. Parker, President
PGIM High Yield Fund
October 15, 2019
PGIM High Yield Fund | 5 |
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 atpgiminvestments.com or by calling (800) 225-1852.
Average Annual Total Returns as of 8/31/19 (with sales charges) | ||||||||
One Year (%) | Five Years (%) | Ten Years (%) | Since Inception (%) | |||||
Class A | 3.79 | 4.45 | 7.88 | — | ||||
Class B | 1.77 | 4.43 | 7.71 | — | ||||
Class C | 5.55 | 4.34 | 7.49 | — | ||||
Class R | 7.17 | 4.86 | 7.96 | — | ||||
Class Z | 7.56 | 5.39 | 8.53 | — | ||||
Class R2 | 7.36 | N/A | N/A | 5.89 (12/27/17) | ||||
Class R4 | 7.66 | N/A | N/A | 6.17 (12/27/17) | ||||
Class R6 | 7.71 | 5.51 | N/A | 7.07 (10/31/11) | ||||
Bloomberg Barclays US Corporate High Yield 1% Issuer Capped Index | ||||||||
6.38 | 4.80 | 8.42 | — | |||||
Lipper High Yield Funds Average | ||||||||
5.61 | 3.77 | 7.30 | — |
Average Annual Total Returns as of 8/31/19 (without sales charges) | ||||||||
One Year (%) | Five Years (%) | Ten Years (%) | Since Inception (%) | |||||
Class A | 7.28 | 5.14 | 8.24 | — | ||||
Class B | 6.77 | 4.59 | 7.71 | — | ||||
Class C | 6.55 | 4.34 | 7.49 | — | ||||
Class R | 7.17 | 4.86 | 7.96 | — | ||||
Class Z | 7.56 | 5.39 | 8.53 | — | ||||
Class R2 | 7.36 | N/A | N/A | 5.89 (12/27/17) | ||||
Class R4 | 7.66 | N/A | N/A | 6.17 (12/27/17) | ||||
Class R6 | 7.71 | 5.51 | N/A | 7.07 (10/31/11) | ||||
Bloomberg Barclays US Corporate High Yield 1% Issuer Capped Index | ||||||||
6.38 | 4.80 | 8.42 | — | |||||
Lipper High Yield Funds Average | 5.61 | 3.77 | 7.30 | — |
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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 Bloomberg Barclays US Corporate High Yield 1% Issuer Capped Index by portraying the initial account values at the beginning of the 10-year period (August 31, 2009) and the account values at the end of the current fiscal year (August 31, 2019) 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 charges and expenses applicable to each share class (as indicated in the following paragraphs). Without waiver of fees and/or expense reimbursement, if any, the Fund’s 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.
Source: PGIM Investments LLC and Lipper Inc.
Since Inception returns are provided for any share class with less than 10 fiscal years of returns. Since Inception returns for the Index and the Lipper Average are measured from the closest month-end to the class’ inception date.
PGIM High Yield Fund | 7 |
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.
Class A | Class B* | Class C | Class R | Class Z | Class R2 | Class R4 | Class R6 | |||||||||
Maximum initial sales charge | For purchases prior to July 15, 2019: 4.50% of the public offering price. For purchases on/after July 15, 2019: 3.25% of the public offering price. | None | None | None | None | None | None | None | ||||||||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or net asset value at redemption) | For purchases prior to July 15, 2019: 1.00% on sales of $1 million or more made within 12 months of purchase. For purchases on/after July 15, 2019, 1.00% on sales of $500,000 or more made within 12 months of purchase. | 5.00% (Yr. 1) 4.00% (Yr. 2) 3.00% (Yr. 3) 2.00% (Yr. 4) 1.00% (Yr. 5) 1.00% (Yr. 6) 0.00% (Yr. 7) | 1.00% on sales made within 12 months of purchase | None | None | None | None | None | ||||||||
Annual distribution and service(12b-1) fees (shown as a percentage of average daily net assets) | 0.25% | 0.75% | 1.00% | 0.75% (0.50% currently) | None | 0.25% | None | None | ||||||||
Shareholder service fees | None | None | None | None | None | 0.10% | 0.10% | None |
*Class B shares are closed to all purchase activity and no additional Class B shares may be purchased or acquired except by exchange from Class B shares of another Fund or through dividend or capital gains reinvestment.
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Benchmark Definitions
Bloomberg Barclays US Corporate High Yield 1% Issuer Capped Index—The Bloomberg Barclays US Corporate High Yield 1% Issuer Capped Index (the Index) is an unmanaged index which covers the universe of US dollar-denominated, non-convertible, fixed rate,non-investment-grade debt. Issuers are capped at 1% of the Index. Index holdings must have at least one year to final maturity, at least $150 million par amount outstanding, and be publicly issued with a rating of Ba1 or lower. The average annual total returns for the Index measured from the month-end closest to the inception date of the Fund’s Class R2 and Class R4 shares are 4.99% and 6.74% for Class R6 shares.
Lipper High Yield Funds Average—The Lipper High Yield Funds Average (Lipper Average) is based on the average return of all funds in the Lipper High Yield Funds universe for the periods noted. Funds in the Lipper Average aim at high (relative) current yield from fixed income securities, have no quality or maturity restrictions, and tend to invest in lower-grade debt issues. The average annual total returns for the Lipper Average measured from the month-end closest to the inception date of the Fund’s Class R2 and Class R4 shares are 4.19% and 5.76% for Class R6 shares.
Investors cannot invest directly in an index or average. The returns for the Index would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses of a mutual fund, but not sales charges or taxes.
Credit Quality expressed as a percentage of total investments as of 8/31/19 (%) | ||||
AAA | 5.7 | |||
BBB | 5.4 | |||
BB | 33.4 | |||
B | 38.0 | |||
CCC | 9.3 | |||
CC | 0.6 | |||
Not Rated | 0.8 | |||
Cash/Cash Equivalents | 6.8 | |||
Total Investments | 100.0 |
Source: PGIM Fixed Income
Credit ratings reflect the highest rating assigned by a nationally recognized statistical rating organization (NRSRO) such as Moody’s Investors Service, Inc. (Moody’s), S&P Global Ratings (S&P), or Fitch, Inc. (Fitch). Credit ratings reflect the common nomenclature used by both S&P and Fitch. Where applicable, ratings are converted to the comparable S&P/Fitch rating tier nomenclature. These rating agencies are independent and are widely used. The Not Rated category consists of securities that have not been rated by a NRSRO. Credit ratings are subject to change. Values may not sum to 100.0% due to rounding.
PGIM High Yield Fund | 9 |
Your Fund’s Performance(continued)
Distributions and Yields as of 8/31/19 | ||||||
Total Distributions Paid for 12 Months ($) | SEC 30-Day Subsidized Yield* (%) | SEC 30-Day Unsubsidized Yield** (%) | ||||
Class A | 0.33 | 5.68 | 5.68 | |||
Class B | 0.30 | 5.49 | 5.49 | |||
Class C | 0.29 | 5.26 | 5.26 | |||
Class R | 0.31 | 5.60 | 5.35 | |||
Class Z | 0.34 | 6.16 | 6.16 | |||
Class R2 | 0.32 | 5.84 | 4.93 | |||
Class R4 | 0.34 | 6.09 | 5.53 | |||
Class R6 | 0.35 | 6.34 | 6.34 |
*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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Strategy and Performance Overview(unaudited)
How did the Fund perform?
ThePGIM High Yield Fund’s Class Z shares returned 7.56% in the 12-month reporting period that ended August 31, 2019, outperforming the 6.38% return of the Bloomberg Barclays US Corporate High Yield 1% Issuer Capped Index (the Index) and the 5.61% return of the Lipper High Yield Funds Average.
What were the market conditions?
• | While the momentum that closed the third quarter of 2018 carried into the fourth quarter for both the US and European high yield markets, the positive sentiment soon abated in the face of several concerns that the markets could not ignore. As a result, spreads widened and quarterly total returns declined into negative territory. On the back of the continued strength from the third quarter of 2018, US high yield spreads hit their post-financial crisis tights of 316 basis points (bps) early in the fourth quarter. (One basis point is 0.01%.) However, the momentum was short lived as spreads reached their 2018 year-to-date wides less than a month later amid an escalating US-China trade war, several corporate profit warnings, prospects for political gridlock, and concerns over further Federal Reserve (Fed) policy tightening. European high yield spreads began the fourth quarter with a positive tone—32 bps tighter than the year-to-date wides reached at the start of the third quarter—as negative noise around Italian political developments faded and meaningful high yield bond supply was digested. Spreads remained relatively stable in October 2018 but sold off sharply in November and December on intensifying trade war rhetoric, concerns around a broader deceleration in global growth, and continued Brexit uncertainty. This sent spreads 155 bps wider overall in the fourth quarter. |
• | Apart from intermittent weakness, the US and European high yield markets rebounded strongly in the first quarter of 2019. Although weaker-than-expected European economic data late in the quarter prompted a swift sentiment change, the sector ended the quarter firmly in positive territory. In terms of quality, while CCC-rated bonds led the way in the quarter, they only partially recouped their significant underperformance from the fourth quarter of 2018. Meanwhile, B- and BB-rated bonds generated strong first-quarter 2019 excess returns versus swaps. Energy was the top-performing sector in the quarter, helped by a 29% bounce in oil prices amid pledged production cuts. The airline sector was the weakest performer on margin pressure associated with higher oil prices. European high yield got off to a strong start in 2019, with the European high yield index snapping back sharply from fourth-quarter 2018 weakness. Concerns around decelerating global growth were largely shrugged off due to accommodative central bank policies, a lack of new-issue supply, and a stabilization/reversals of fund flows, all of which helped drive spreads tighter by 110 bps (to 405 bps). |
• | In a volatile second quarter of 2019, US high yield spreads hit year-to-date tights in April, widened by almost 100 bps in May, and subsequently recovered in June. Energy was the |
PGIM High Yield Fund | 11 |
Strategy and Performance Overview(continued)
only sector in negative territory following a 24% peak-to-trough decline in crude oil prices, and the retail sectors generally outperformed. European high yield continued its strong start to 2019 with higher-rated credits faring the best in the second quarter. However, lower-quality credits still outperformed year-to-date (YTD). Gross high yield issuance totaled€20 billion in the second quarter, more than double the€9.4 billion that priced in the first quarter. Despite the jump in supply during the quarter, 2019 gross issuance was down more than 40% through the end of the period. |
• | In the first half of July 2019, the US high yield market was flat to slightly negative despite dovish commentary from the Fed. The lackluster performance was primarily driven by weakness in the energy sector. During the second half of July, as stock prices rose from expected Fed rate cuts and solid earnings, the market remained well bid until the end of the month when trade fears resurfaced and added to concerns regarding a weakening global economy. European high yield continued its strong YTD performance in July with a 0.78% return, taking total YTD returns to 8.52%. Dovish actions and rhetoric from the central banks and a lack of net new supply continued to support the market, despite ongoing concerns regarding decelerating global growth. |
• | The US high yield market got off to a negative start in August 2019, as increased US-China trade tensions, global growth concerns, an inverted yield curve, and a sell-off in equities weighed on the market. Notably, one of the largest single-day spread widening events in the last 10 years occurred on August 5. As the month progressed, a steady decline in rates coupled with renewed optimism regarding a trade resolution helped offset equity weakness and settled the market. In total, August saw over $4 billion of outflows from high yield funds. Overall, the Index ended the month up 0.37%. For the month, the Index’s option-adjusted spread (adjusted for re-balancing) widened 24 bps and closed the period at 399 bps. |
What worked?
• | The Fund benefited from very strong security selection, accounting for a large portion of the outperformance in the reporting period. This was mostly driven by positioning in the upstream energy, electric utility, technology, and metals & mining sectors. |
• | Overweights toWind Tre Spa (telecom) andCalpine Corp. (electric utilities), as well as underweights to upstream energy issuersEP Energy Corp. andWeatherford International plc, were among the largest single-name contributors. |
• | Industry selection was also a contributor to performance, with the Fund benefiting from an underweight to the upstream energy industry, coupled with overweights to building materials & home construction and electric utilities. An underweight to the cable & satellite sector also boosted returns. |
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What didn’t work?
• | Although overall industry allocation was positive in the period, underweights to the banking and consumer non-cyclical sectors hurt performance. An overweight to automotive also negatively impacted performance. |
• | Security selection within midstream energy and automotive was a drag on performance. The largest single-name detractors from returns included overweights toDigicel (telecom) andAlta Mesa Holdings LP (upstream energy). |
Did the Fund use derivatives and, if so, how did they affect performance?
• | The Fund utilized US Treasury and euro bund futures to hedge interest rate risk relative to the Index to help immunize any impact from fluctuations in interest rates. |
• | Derivatives in the form of forward currency exchange contracts were used to hedge against the Fund’s positions not denominated in US dollars. The derivatives help immunize any impact from fluctuating currencies outside the US dollar. |
• | The Fund also held positions in a credit default swap index (CDX) to hedge credit risk and help manage the overall beta of the portfolio. |
Current outlook
• | Looking ahead in US high yield, Moody’s expects the global default rate to reach 2.4% by the end of the second quarter of 2020. With current spreads adequately compensating for recession risk, strong credit fundamentals, and low default expectations, PGIM Fixed Income remains constructive on US high yield. The relatively better insulation of US high yield credits from the protracted trade war with China combined with the technical support provided by stimulative central bank policies—in an already supply-limited asset class—supports this favorable view. |
• | Key positioning themes include underweights to the financials and energy sectors. The Fund is also underweight the consumer and paper & packaging sectors. Overweights include electric utilities, building materials & home construction, and automotive. |
PGIM High Yield Fund | 13 |
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 August 31, 2019. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of PGIM funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over
14 | Visit our website at pgiminvestments.com |
Fees and Expenses(continued)
the six-month period when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information provided in the expense table. Additional fees have the effect of reducing investment returns.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
PGIM High Yield Fund | Beginning Account Value March 1, 2019 | Ending Account Value August 31, 2019 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,054.70 | 0.81 | % | $ | 4.19 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,021.12 | 0.81 | % | $ | 4.13 | ||||||||||
Class B | Actual | $ | 1,000.00 | $ | 1,052.20 | 1.29 | % | $ | 6.67 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,018.70 | 1.29 | % | $ | 6.56 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,051.10 | 1.49 | % | $ | 7.70 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,017.69 | 1.49 | % | $ | 7.58 | ||||||||||
Class R | Actual | $ | 1,000.00 | $ | 1,053.30 | 1.08 | % | $ | 5.59 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,019.76 | 1.08 | % | $ | 5.50 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,056.10 | 0.55 | % | $ | 2.85 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,022.43 | 0.55 | % | $ | 2.80 | ||||||||||
Class R2 | Actual | $ | 1,000.00 | $ | 1,054.10 | 0.91 | % | $ | 4.71 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.62 | 0.91 | % | $ | 4.63 | ||||||||||
Class R4 | Actual | $ | 1,000.00 | $ | 1,055.80 | 0.66 | % | $ | 3.42 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,021.88 | 0.66 | % | $ | 3.36 | ||||||||||
Class R6 | Actual | $ | 1,000.00 | $ | 1,056.90 | 0.40 | % | $ | 2.07 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,023.19 | 0.40 | % | $ | 2.04 |
*Fund expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by the 184 days in the six-month period ended August 31, 2019, and divided by the 365 days in the Fund’s fiscal year ended August 31, 2019 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
PGIM High Yield Fund | 15 |
Schedule of Investments
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
LONG-TERM INVESTMENTS 91.3% | ||||||||||||||||
ASSET-BACKED SECURITIES 5.6% | ||||||||||||||||
Collateralized Loan Obligations | ||||||||||||||||
Adams Mill CLO Ltd. (Cayman Islands), | 3.403 | %(c) | 07/15/26 | 17,039 | $ | 17,034,004 | ||||||||||
Avery Point CLO Ltd. (Cayman Islands), | 3.443 | (c) | 01/15/28 | 15,000 | 14,996,946 | |||||||||||
Benefit Street Partners CLO Ltd. (Cayman Islands), | ||||||||||||||||
Series 2015-VIIA, Class A1AR, 144A, 3 Month LIBOR + 0.780% | 3.080 | (c) | 07/18/27 | 30,000 | 29,909,358 | |||||||||||
Series2017-12A, Class A1, 144A, 3 Month LIBOR + 1.250% | 3.553 | (c) | 10/15/30 | 20,000 | 19,964,862 | |||||||||||
CBAM Ltd. (Cayman Islands), | 3.243 | (c) | 07/15/31 | 33,000 | 32,935,148 | |||||||||||
Eaton Vance CLO Ltd. (Cayman Islands), | 3.377 | (c) | 01/15/28 | 30,000 | 29,999,970 | |||||||||||
HPS Loan Management Ltd. (Cayman Islands), | 3.282 | (c) | 01/20/28 | 25,000 | 25,000,000 | |||||||||||
JMP Credit Advisors CLO Ltd. (Cayman Islands), | 3.467 | (c) | 07/17/29 | 25,000 | 25,066,992 | |||||||||||
LCM LP (Cayman Islands), | 3.325 | (c) | 07/19/27 | 25,000 | 25,001,850 | |||||||||||
OCP CLO Ltd. (Cayman Islands), | 3.103 | (c) | 07/15/27 | 20,000 | 19,981,766 | |||||||||||
OZLM Ltd. (Cayman Islands), | 3.346 | (c) | 07/30/27 | 23,650 | 23,575,252 | |||||||||||
Palmer Square Loan Funding Ltd. (Cayman Islands), | — | (p) | 08/20/27 | 20,000 | 19,980,462 | |||||||||||
Regatta Funding LP (Cayman Islands), | 3.553 | (c) | 01/15/29 | 30,000 | 30,049,788 | |||||||||||
SCOF Ltd. (Cayman Islands), | 3.483 | (c) | 07/15/28 | 42,375 | 42,339,240 |
See Notes to Financial Statements.
PGIM High Yield Fund | 17 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
ASSET-BACKED SECURITIES (Continued) | ||||||||||||||||
Collateralized Loan Obligations (cont’d.) | ||||||||||||||||
Silvermore CLO Ltd. (Cayman Islands), | 3.328 | %(c) | 05/15/26 | 26,360 | $ | 26,366,113 | ||||||||||
Sound Point CLO Ltd. (Cayman Islands), | 3.568 | (c) | 10/20/28 | 40,000 | 40,043,924 | |||||||||||
TCW CLO Ltd. (Cayman Islands), | 3.598 | (c) | 02/15/29 | 20,000 | 20,019,660 | |||||||||||
TICP CLO Ltd. (Cayman Islands), | 3.503 | (c) | 01/15/29 | 4,000 | 4,002,919 | |||||||||||
Venture CLO Ltd. (Cayman Islands), | 3.183 | (c) | 07/15/27 | 50,000 | 49,993,120 | |||||||||||
Wellfleet CLO Ltd. (Cayman Islands), | 3.188 | (c) | 04/20/28 | 3,000 | 2,984,333 | |||||||||||
Zais CLO Ltd. (Cayman Islands), | ||||||||||||||||
Series2016-02A, Class A1, 144A, 3 Month LIBOR + 1.530% | 3.833 | (c) | 10/15/28 | 20,000 | 20,004,354 | |||||||||||
Series2018-02A, Class A, 144A, 3 Month LIBOR + 1.200% | 3.478 | (c) | 07/20/31 | 30,000 | 29,546,406 | |||||||||||
|
| |||||||||||||||
TOTAL ASSET-BACKED SECURITIES | 548,796,467 | |||||||||||||||
|
| |||||||||||||||
BANK LOANS 4.2% | ||||||||||||||||
Chemicals 0.5% | ||||||||||||||||
Solenis International LP, | ||||||||||||||||
First Lien Initial Dollar Term Loan, 1 Month LIBOR + 4.000%^ | 6.112 | (c) | 06/26/25 | 18,836 | 18,270,452 | |||||||||||
Second Lien Initial Term Loan, 3 Month LIBOR + 8.500%^ | 10.624 | (c) | 06/26/26 | 34,184 | 32,987,929 | |||||||||||
|
| |||||||||||||||
51,258,381 | ||||||||||||||||
Commercial Services 0.4% | ||||||||||||||||
Financial & Risk US Holdings, Inc., | 5.862 | (c) | 10/01/25 | 39,626 | 39,788,619 |
See Notes to Financial Statements.
18 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
BANK LOANS (Continued) | ||||||||||||||||
Computers 1.1% | ||||||||||||||||
McAfee LLC, | ||||||||||||||||
Second Lien Initial Loan, 1 Month LIBOR + 8.500% | 10.616 | %(c) | 09/29/25 | 45,179 | $ | 45,593,125 | ||||||||||
Term B USD Loan, 1 Month LIBOR + 3.750% | 5.866 | (c) | 09/30/24 | 55,334 | 55,346,179 | |||||||||||
|
| |||||||||||||||
100,939,304 | ||||||||||||||||
Electric 0.5% | ||||||||||||||||
Calpine Corp., | 4.830 | (c) | 01/15/24 | 14,064 | 14,048,920 | |||||||||||
Heritage Power LLC, | 8.205 | (c) | 07/30/26 | 36,375 | 35,465,625 | |||||||||||
|
| |||||||||||||||
49,514,545 | ||||||||||||||||
Entertainment 0.1% | ||||||||||||||||
Scientific Games International, Inc., | 4.873 | (c) | 08/14/24 | 7,699 | 7,601,227 | |||||||||||
Mining 0.2% | ||||||||||||||||
Aleris International, Inc., | 6.862 | (c) | 02/27/23 | 22,288 | 22,269,821 | |||||||||||
Oil & Gas 0.3% | ||||||||||||||||
Citgo Petroleum Corp., | ||||||||||||||||
2019 Incremental Term B Loan, 3 Month LIBOR + 5.000%^ | 7.319 | (c) | 03/27/24 | 13,079 | 13,177,281 | |||||||||||
Term B Loan, 3 Month LIBOR + 4.500% | 6.819 | (c) | 07/29/21 | 15,345 | 15,315,681 | |||||||||||
|
| |||||||||||||||
28,492,962 | ||||||||||||||||
Retail 0.2% | ||||||||||||||||
EG America LLC (United Kingdom), | 10.330 | (c) | 04/20/26 | 7,764 | 7,657,214 | |||||||||||
Sally Holdings LLC, | 4.500 | 07/05/24 | 15,275 | 14,816,750 | ||||||||||||
|
| |||||||||||||||
22,473,964 | ||||||||||||||||
Software 0.7% | ||||||||||||||||
Boxer Parent Co., Inc., | 6.580 | (c) | 10/02/25 | 19,406 | 18,300,784 |
See Notes to Financial Statements.
PGIM High Yield Fund | 19 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
BANK LOANS (Continued) | ||||||||||||||||
Software (cont’d.) | ||||||||||||||||
Finastra USA, Inc., | 9.446 | %(c) | 06/13/25 | 21,374 | $ | 20,893,116 | ||||||||||
Infor US, Inc., | 5.080 | (c) | 02/01/22 | 5,545 | 5,541,680 | |||||||||||
Informatica LLC, | 5.362 | (c) | 08/05/22 | 9,950 | 9,951,840 | |||||||||||
Kronos, Inc., | 10.503 | (c) | 11/01/24 | 7,500 | 7,681,252 | |||||||||||
|
| |||||||||||||||
62,368,672 | ||||||||||||||||
Telecommunications 0.2% | ||||||||||||||||
Intelsat Jackson Holdings SA (Luxembourg), | 6.625 | 01/02/24 | 12,305 | 12,418,821 | ||||||||||||
West Corp., | 6.112 | (c) | 10/10/24 | 10,566 | 9,476,124 | |||||||||||
|
| |||||||||||||||
21,894,945 | ||||||||||||||||
|
| |||||||||||||||
TOTAL BANK LOANS | 406,602,440 | |||||||||||||||
|
| |||||||||||||||
CORPORATE BONDS 80.8% | ||||||||||||||||
Advertising 0.3% | ||||||||||||||||
Clear Channel International BV, | 8.750 | 12/15/20 | 3,807 | 3,890,259 | ||||||||||||
Mood Media Borrower LLC/Mood MediaCo-Issuer, Inc., | — | (p) | 12/31/23 | 2,237 | 1,940,903 | |||||||||||
National CineMedia LLC, | 5.750 | 08/15/26 | 20,485 | 19,819,238 | ||||||||||||
|
| |||||||||||||||
25,650,400 | ||||||||||||||||
Aerospace & Defense 2.4% | ||||||||||||||||
Bombardier, Inc. (Canada), | ||||||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 5.750 | 03/15/22 | 1,413 | 1,425,364 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 6.125 | 01/15/23 | 1,207 | 1,200,965 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 7.450 | 05/01/34 | 1,275 | 1,236,750 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 7.500 | 12/01/24 | 70,926 | 70,667,120 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 7.500 | 03/15/25 | 20,372 | 19,837,235 |
See Notes to Financial Statements.
20 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Aerospace & Defense (cont’d.) | ||||||||||||||||
Bombardier, Inc. (Canada), (cont’d.) | ||||||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 7.875 | % | 04/15/27 | 78,150 | $ | 75,707,812 | ||||||||||
Sr. Unsec’d. Notes, 144A | 8.750 | 12/01/21 | 39,850 | 43,237,250 | ||||||||||||
TransDigm UK Holdings PLC, | 6.875 | 05/15/26 | 4,875 | 5,106,563 | ||||||||||||
TransDigm, Inc., | ||||||||||||||||
Gtd. Notes(a) | 6.375 | 06/15/26 | 11,450 | 12,016,660 | ||||||||||||
Gtd. Notes | 6.500 | 07/15/24 | 4,830 | 4,986,975 | ||||||||||||
Gtd. Notes | 6.500 | 05/15/25 | 2,300 | 2,397,750 | ||||||||||||
|
| |||||||||||||||
237,820,444 | ||||||||||||||||
Agriculture 0.2% | ||||||||||||||||
Vector Group Ltd., | 6.125 | 02/01/25 | 22,252 | 21,806,960 | ||||||||||||
Auto Manufacturers 1.7% | ||||||||||||||||
Allison Transmission, Inc., | ||||||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 4.750 | 10/01/27 | 5,950 | 6,098,750 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 5.875 | 06/01/29 | 8,775 | 9,411,188 | ||||||||||||
Ford Motor Co., | ||||||||||||||||
Sr. Unsec’d. Notes | 4.750 | 01/15/43 | 12,350 | 11,142,171 | ||||||||||||
Sr. Unsec’d. Notes(a) | 5.291 | 12/08/46 | 66,758 | 64,230,481 | ||||||||||||
Ford Motor Credit Co. LLC, | 5.584 | 03/18/24 | 10,375 | 11,152,432 | ||||||||||||
General Motors Co., | ||||||||||||||||
Sr. Unsec’d. Notes | 5.000 | 10/01/28 | 17,000 | 18,323,168 | ||||||||||||
Sr. Unsec’d. Notes | 5.200 | 04/01/45 | 2,150 | 2,191,754 | ||||||||||||
Navistar International Corp., | 6.625 | 11/01/25 | 40,197 | 40,699,463 | ||||||||||||
|
| |||||||||||||||
163,249,407 | ||||||||||||||||
Auto Parts & Equipment 2.1% | ||||||||||||||||
Adient Global Holdings Ltd., | 4.875 | 08/15/26 | 51,613 | 39,871,042 | ||||||||||||
American Axle & Manufacturing, Inc., | ||||||||||||||||
Gtd. Notes(a) | 6.250 | 04/01/25 | 15,675 | 14,734,187 | ||||||||||||
Gtd. Notes(a) | 6.250 | 03/15/26 | 36,060 | 33,445,650 | ||||||||||||
Gtd. Notes(a) | 6.500 | 04/01/27 | 31,794 | 29,170,995 | ||||||||||||
Cooper-Standard Automotive, Inc., | 5.625 | 11/15/26 | 30,181 | 25,880,207 |
See Notes to Financial Statements.
PGIM High Yield Fund | 21 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Auto Parts & Equipment (cont’d.) | ||||||||||||||||
Dana Financing Luxembourg Sarl, | ||||||||||||||||
Gtd. Notes, 144A(a) | 5.750 | % | 04/15/25 | 6,559 | $ | 6,690,180 | ||||||||||
Gtd. Notes, 144A(a) | 6.500 | 06/01/26 | 37,992 | 39,796,620 | ||||||||||||
IHO Verwaltungs GmbH (Germany), | 4.750 | 09/15/26 | 2,725 | 2,633,031 | ||||||||||||
Meritor, Inc., | 6.250 | 02/15/24 | 2,375 | 2,437,344 | ||||||||||||
Titan International, Inc., | 6.500 | 11/30/23 | 13,625 | 10,865,938 | ||||||||||||
|
| |||||||||||||||
205,525,194 | ||||||||||||||||
Banks 0.3% | ||||||||||||||||
CIT Group, Inc., | 6.125 | 03/09/28 | 23,900 | 28,590,375 | ||||||||||||
Beverages 0.2% | ||||||||||||||||
Cott Holdings, Inc. (Canada), | 5.500 | 04/01/25 | 17,082 | 17,808,497 | ||||||||||||
Building Materials 1.7% | ||||||||||||||||
Cemex SAB de CV (Mexico), | ||||||||||||||||
Sr. Sec’d. Notes, 144A(a) | 5.700 | 01/11/25 | 4,635 | 4,745,128 | ||||||||||||
Sr. Sec’d. Notes, 144A(a) | 7.750 | 04/16/26 | 1,850 | 1,991,081 | ||||||||||||
Cornerstone Building Brands, Inc., | 8.000 | 04/15/26 | 25,911 | 24,550,673 | ||||||||||||
Griffon Corp., | 5.250 | 03/01/22 | 24,550 | 24,727,005 | ||||||||||||
Masonite International Corp., | ||||||||||||||||
Gtd. Notes, 144A | 5.375 | 02/01/28 | 9,530 | 10,054,150 | ||||||||||||
Gtd. Notes, 144A(a) | 5.750 | 09/15/26 | 12,409 | 13,138,029 | ||||||||||||
Standard Industries, Inc., | 4.750 | 01/15/28 | 22,735 | 22,848,675 | ||||||||||||
Summit Materials LLC/Summit Materials Finance Corp., | ||||||||||||||||
Gtd. Notes(a) | 6.125 | 07/15/23 | 9,383 | 9,535,474 | ||||||||||||
Gtd. Notes, 144A(a) | 5.125 | 06/01/25 | 7,482 | 7,669,050 | ||||||||||||
Gtd. Notes, 144A | 6.500 | 03/15/27 | 6,600 | 7,095,000 | ||||||||||||
U.S. Concrete, Inc., | 6.375 | 06/01/24 | 35,427 | 37,109,782 | ||||||||||||
|
| |||||||||||||||
163,464,047 |
See Notes to Financial Statements.
22 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Chemicals 3.6% | ||||||||||||||||
Alpha 2 BV (Germany), | 8.750 | % | 06/01/23 | 29,996 | $ | 28,983,635 | ||||||||||
Alpha 3 BV/Alpha US Bidco, Inc. (United Kingdom), | 6.250 | 02/01/25 | 5,979 | 5,934,157 | ||||||||||||
Ashland LLC, | 6.875 | 05/15/43 | 32,720 | 36,319,200 | ||||||||||||
Chemours Co. (The), | ||||||||||||||||
Gtd. Notes | 5.375 | 05/15/27 | 20,600 | 18,282,500 | ||||||||||||
Gtd. Notes(a) | 6.625 | 05/15/23 | 2,354 | 2,395,195 | ||||||||||||
Gtd. Notes(a) | 7.000 | 05/15/25 | 20,478 | 20,222,025 | ||||||||||||
Cornerstone Chemical Co., | 6.750 | 08/15/24 | 18,513 | 17,031,960 | ||||||||||||
Element Solutions, Inc., | 5.875 | 12/01/25 | 13,420 | 14,007,125 | ||||||||||||
Hexion, Inc., | 7.875 | 07/15/27 | 18,625 | 18,019,687 | ||||||||||||
NOVA Chemicals Corp. (Canada), | ||||||||||||||||
Sr. Unsec’d. Notes, 144A | 4.875 | 06/01/24 | 2,820 | 2,894,025 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 5.000 | 05/01/25 | 4,100 | 4,192,250 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 5.250 | 06/01/27 | 52,441 | 54,735,294 | ||||||||||||
PQ Corp., | 6.750 | 11/15/22 | 3,525 | 3,657,893 | ||||||||||||
Rain CII Carbon LLC/CII Carbon Corp., | 7.250 | 04/01/25 | 29,264 | 27,508,160 | ||||||||||||
Starfruit Finco BV/Starfruit US Holdco LLC (Netherlands), | 8.000 | 10/01/26 | 24,835 | 24,214,125 | ||||||||||||
TPC Group, Inc., | 10.500 | 08/01/24 | 13,075 | 13,728,750 | ||||||||||||
Tronox Finance PLC, | 5.750 | 10/01/25 | 25,942 | 24,061,205 | ||||||||||||
Tronox, Inc., | 6.500 | 04/15/26 | 14,970 | 14,221,500 | ||||||||||||
Venator Finance Sarl/Venator Materials LLC, | 5.750 | 07/15/25 | 22,167 | 18,511,662 | ||||||||||||
|
| |||||||||||||||
348,920,348 | ||||||||||||||||
Coal 0.1% | ||||||||||||||||
Warrior Met Coal, Inc., | 8.000 | 11/01/24 | 7,628 | 7,961,725 |
See Notes to Financial Statements.
PGIM High Yield Fund | 23 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Commercial Services 3.3% | ||||||||||||||||
Laureate Education, Inc., | 8.250 | % | 05/01/25 | 47,511 | $ | 51,727,601 | ||||||||||
Nielsen Finance LLC/Nielsen Finance Co., | 5.000 | 04/15/22 | 7,514 | 7,551,570 | ||||||||||||
Refinitiv US Holdings, Inc., | 8.250 | 11/15/26 | 81,529 | 91,720,125 | ||||||||||||
United Rentals North America, Inc., | ||||||||||||||||
Gtd. Notes | 4.625 | 10/15/25 | 500 | 514,225 | ||||||||||||
Gtd. Notes | 4.875 | 01/15/28 | 70,500 | 73,936,875 | ||||||||||||
Gtd. Notes(a) | 5.250 | 01/15/30 | 19,190 | 20,509,312 | ||||||||||||
Gtd. Notes(a) | 5.500 | 05/15/27 | 12,005 | 12,881,485 | ||||||||||||
Gtd. Notes(a) | 5.875 | 09/15/26 | 26,975 | 28,930,687 | ||||||||||||
Gtd. Notes(a) | 6.500 | 12/15/26 | 16,475 | 17,916,563 | ||||||||||||
Verscend Escrow Corp., | 9.750 | 08/15/26 | 12,025 | 12,873,725 | ||||||||||||
|
| |||||||||||||||
318,562,168 | ||||||||||||||||
Computers 1.6% | ||||||||||||||||
Banff Merger Sub, Inc., | 9.750 | 09/01/26 | 83,773 | 76,233,430 | ||||||||||||
Dell International LLC/EMC Corp., | ||||||||||||||||
Gtd. Notes, 144A | 5.875 | 06/15/21 | 1,800 | 1,829,749 | ||||||||||||
Gtd. Notes, 144A(a) | 7.125 | 06/15/24 | 1,290 | 1,359,944 | ||||||||||||
Everi Payments, Inc., | 7.500 | 12/15/25 | 21,496 | 22,570,800 | ||||||||||||
MTS Systems Corp., | 5.750 | 08/15/27 | 4,780 | 4,995,100 | ||||||||||||
NCR Corp., | ||||||||||||||||
Gtd. Notes | 5.000 | 07/15/22 | 9,403 | 9,467,128 | ||||||||||||
Gtd. Notes, 144A | 5.750 | 09/01/27 | 13,925 | 14,705,636 | ||||||||||||
Tempo Acquisition LLC/Tempo Acquisition Finance Corp., | 6.750 | 06/01/25 | 21,850 | 22,446,505 | ||||||||||||
|
| |||||||||||||||
153,608,292 | ||||||||||||||||
Distribution/Wholesale 0.3% | ||||||||||||||||
Anixter, Inc., | ||||||||||||||||
Gtd. Notes | 5.500 | 03/01/23 | 1,975 | 2,120,656 | ||||||||||||
Gtd. Notes | 6.000 | 12/01/25 | 11,770 | 13,005,850 |
See Notes to Financial Statements.
24 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Distribution/Wholesale (cont’d.) | ||||||||||||||||
H&E Equipment Services, Inc., | 5.625 | % | 09/01/25 | 11,975 | $ | 12,543,813 | ||||||||||
|
| |||||||||||||||
27,670,319 | ||||||||||||||||
Diversified Financial Services 3.1% | ||||||||||||||||
Allied Universal Holdco LLC/Allied Universal Finance Corp., | ||||||||||||||||
Sr. Sec’d. Notes, 144A | 6.625 | 07/15/26 | 10,950 | 11,634,375 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 9.750 | 07/15/27 | 31,200 | 32,682,000 | ||||||||||||
Avolon Holdings Funding Ltd. (Ireland), | 5.500 | 01/15/23 | 4,000 | 4,261,600 | ||||||||||||
Fairstone Financial, Inc. (Canada), | 7.875 | 07/15/24 | 7,590 | 7,912,575 | ||||||||||||
LPL Holdings, Inc., | 5.750 | 09/15/25 | 17,325 | 18,234,562 | ||||||||||||
Nationstar Mortgage Holdings, Inc., | ||||||||||||||||
Gtd. Notes, 144A | 8.125 | 07/15/23 | 4,100 | 4,245,878 | ||||||||||||
Gtd. Notes, 144A(a) | 9.125 | 07/15/26 | 82,300 | 87,032,250 | ||||||||||||
Navient Corp., | ||||||||||||||||
Sr. Unsec’d. Notes(a) | 7.250 | 09/25/23 | 6,675 | 7,409,250 | ||||||||||||
Sr. Unsec’d. Notes, MTN | 8.000 | 03/25/20 | 2,720 | 2,801,600 | ||||||||||||
Park Aerospace Holdings Ltd. (Ireland), | ||||||||||||||||
Gtd. Notes, 144A | 4.500 | 03/15/23 | 6,666 | 6,896,644 | ||||||||||||
Gtd. Notes, 144A | 5.500 | 02/15/24 | 9,390 | 10,154,346 | ||||||||||||
Springleaf Finance Corp., | ||||||||||||||||
Gtd. Notes | 6.625 | 01/15/28 | 18,465 | 20,265,337 | ||||||||||||
Gtd. Notes | 6.875 | 03/15/25 | 14,925 | 16,921,219 | ||||||||||||
Gtd. Notes | 7.125 | 03/15/26 | 57,075 | 65,094,037 | ||||||||||||
VFH Parent LLC/OrchestraCo-Issuer, Inc., | 6.750 | 06/15/22 | 5,925 | 6,117,563 | ||||||||||||
|
| |||||||||||||||
301,663,236 | ||||||||||||||||
Electric 2.8% | ||||||||||||||||
Calpine Corp., | ||||||||||||||||
Sr. Unsec’d. Notes | 5.375 | 01/15/23 | 3,392 | 3,438,369 | ||||||||||||
Sr. Unsec’d. Notes | 5.500 | 02/01/24 | 27,870 | 28,078,746 | ||||||||||||
Sr. Unsec’d. Notes(a) | 5.750 | 01/15/25 | 110,464 | 112,120,960 | ||||||||||||
Keystone Power Pass-Through Holders LLC/Conemaugh Power Pass-Through Holders, | 13.000 | 06/01/24 | 8,092 | 8,335,323 |
See Notes to Financial Statements.
PGIM High Yield Fund | 25 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Electric (cont’d.) | ||||||||||||||||
Keystone & Conemaugh Pass-Through Certificates, | 9.000 | % | 12/01/23 | 4,074 | $ | 4,155,145 | ||||||||||
Mirant Corp., | 7.400 | 07/15/49 | (d) | 2,675 | 2,675 | |||||||||||
NRG Energy, Inc., | ||||||||||||||||
Gtd. Notes(a) | 5.750 | 01/15/28 | 12,050 | 12,983,875 | ||||||||||||
Gtd. Notes | 6.625 | 01/15/27 | 2,385 | 2,575,800 | ||||||||||||
Gtd. Notes(a) | 7.250 | 05/15/26 | 10,778 | 11,815,383 | ||||||||||||
Gtd. Notes, 144A(a) | 5.250 | 06/15/29 | 5,050 | 5,388,704 | ||||||||||||
Vistra Energy Corp., | 8.000 | 01/15/25 | 1,190 | 1,253,963 | ||||||||||||
Vistra Operations Co. LLC, | ||||||||||||||||
Gtd. Notes, 144A | 5.000 | 07/31/27 | 18,610 | 19,214,825 | ||||||||||||
Gtd. Notes, 144A | 5.500 | 09/01/26 | 26,180 | 27,489,000 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 5.625 | 02/15/27 | 37,750 | 39,967,812 | ||||||||||||
|
| |||||||||||||||
276,820,580 | ||||||||||||||||
Electronics 0.2% | ||||||||||||||||
Itron, Inc., | 5.000 | 01/15/26 | 6,325 | 6,467,313 | ||||||||||||
Sensata Technologies BV, | ||||||||||||||||
Gtd. Notes, 144A | 4.875 | 10/15/23 | 6,090 | 6,389,019 | ||||||||||||
Gtd. Notes, 144A(a) | 5.000 | 10/01/25 | 1,800 | 1,908,000 | ||||||||||||
Gtd. Notes, 144A | 5.625 | 11/01/24 | 950 | 1,030,750 | ||||||||||||
|
| |||||||||||||||
15,795,082 | ||||||||||||||||
Engineering & Construction 0.7% | ||||||||||||||||
AECOM, | ||||||||||||||||
Gtd. Notes | 5.125 | 03/15/27 | 31,284 | 32,676,764 | ||||||||||||
Gtd. Notes(a) | 5.875 | 10/15/24 | 8,925 | 9,639,000 | ||||||||||||
TopBuild Corp., | 5.625 | 05/01/26 | 27,653 | 28,828,252 | ||||||||||||
|
| |||||||||||||||
71,144,016 | ||||||||||||||||
Entertainment 3.1% | ||||||||||||||||
AMC Entertainment Holdings, Inc., | ||||||||||||||||
Gtd. Notes(a) | 5.750 | 06/15/25 | 12,925 | 12,278,750 | ||||||||||||
Gtd. Notes(a) | 5.875 | 11/15/26 | 35,814 | 32,769,810 | ||||||||||||
Gtd. Notes(a) | 6.125 | 05/15/27 | 5,250 | 4,843,125 |
See Notes to Financial Statements.
26 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Entertainment (cont’d.) | ||||||||||||||||
Caesars Resort Collection LLC/CRC Finco, Inc., | 5.250 | % | 10/15/25 | 59,191 | $ | 60,226,842 | ||||||||||
Golden Entertainment, Inc., | 7.625 | 04/15/26 | 8,875 | 9,230,888 | ||||||||||||
International Game Technology PLC, | ||||||||||||||||
Sr. Sec’d. Notes, 144A(a) | 6.250 | 01/15/27 | 15,090 | 16,561,275 | ||||||||||||
Sr. Sec’d. Notes, 144A | 6.500 | 02/15/25 | 13,431 | 14,740,523 | ||||||||||||
Jacobs Entertainment, Inc., | 7.875 | 02/01/24 | 21,815 | 23,178,437 | ||||||||||||
Penn National Gaming, Inc., | 5.625 | 01/15/27 | 27,472 | 28,195,887 | ||||||||||||
Scientific Games International, Inc., | ||||||||||||||||
Gtd. Notes | 6.250 | 09/01/20 | 4,925 | 4,937,313 | ||||||||||||
Gtd. Notes | 6.625 | 05/15/21 | 27,015 | 27,453,994 | ||||||||||||
Gtd. Notes(a) | 10.000 | 12/01/22 | 24,515 | 25,434,312 | ||||||||||||
Gtd. Notes, 144A(a) | 8.250 | 03/15/26 | 30,524 | 32,355,440 | ||||||||||||
Sr. Sec’d. Notes, 144A | 5.000 | 10/15/25 | 250 | 258,310 | ||||||||||||
Twin River Worldwide Holdings, Inc., | 6.750 | 06/01/27 | 8,325 | 8,772,469 | ||||||||||||
|
| |||||||||||||||
301,237,375 | ||||||||||||||||
Environmental Control 0.0% | ||||||||||||||||
Advanced Disposal Services, Inc., | 5.625 | 11/15/24 | 445 | 466,138 | ||||||||||||
Foods 2.2% | ||||||||||||||||
B&G Foods, Inc., | 5.250 | 04/01/25 | 10,428 | 10,574,513 | ||||||||||||
JBS USA LUX SA/JBS USA Finance, Inc., | ||||||||||||||||
Gtd. Notes, 144A | 5.750 | 06/15/25 | 32,670 | 33,977,127 | ||||||||||||
Gtd. Notes, 144A(a) | 5.875 | 07/15/24 | 10,418 | 10,730,540 | ||||||||||||
JBS USA LUX SA/JBS USA Food Co./JBS USA Finance, Inc., | ||||||||||||||||
Gtd. Notes, 144A | 6.500 | 04/15/29 | 27,520 | 30,478,400 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 5.500 | 01/15/30 | 14,750 | 15,635,000 | ||||||||||||
Picard Groupe SAS (France), | 3.000 | (c) | 11/30/23 | EUR | 10,250 | 11,036,600 | ||||||||||
Pilgrim’s Pride Corp., | 5.875 | 09/30/27 | 43,390 | 46,752,725 | ||||||||||||
Post Holdings, Inc., | 5.000 | 08/15/26 | 6,225 | 6,489,563 |
See Notes to Financial Statements.
PGIM High Yield Fund | 27 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Foods (cont’d.) | ||||||||||||||||
Post Holdings, Inc., (cont’d.) | ||||||||||||||||
Gtd. Notes, 144A(a) | 5.500 | % | 12/15/29 | 14,583 | $ | 15,417,293 | ||||||||||
Gtd. Notes, 144A(a) | 5.625 | 01/15/28 | 29,402 | 31,313,130 | ||||||||||||
|
| |||||||||||||||
212,404,891 | ||||||||||||||||
Forest Products & Paper 0.0% | ||||||||||||||||
Mercer International, Inc. (Germany), | 6.500 | 02/01/24 | 1,550 | 1,596,500 | ||||||||||||
Gas 0.8% | ||||||||||||||||
AmeriGas Partners LP/AmeriGas Finance Corp., | ||||||||||||||||
Sr. Unsec’d. Notes(a) | 5.500 | 05/20/25 | 28,830 | 30,487,725 | ||||||||||||
Sr. Unsec’d. Notes | 5.750 | 05/20/27 | 23,677 | 25,052,634 | ||||||||||||
Sr. Unsec’d. Notes(a) | 5.875 | 08/20/26 | 24,154 | 26,230,036 | ||||||||||||
|
| |||||||||||||||
81,770,395 | ||||||||||||||||
Healthcare-Services 5.1% | ||||||||||||||||
Acadia Healthcare Co., Inc., | ||||||||||||||||
Gtd. Notes | 5.125 | 07/01/22 | 1,486 | 1,497,145 | ||||||||||||
Gtd. Notes | 6.125 | 03/15/21 | 2,070 | 2,075,175 | ||||||||||||
Gtd. Notes | 6.500 | 03/01/24 | 6,849 | 7,071,593 | ||||||||||||
CHS/Community Health Systems, Inc., | ||||||||||||||||
Sec’d. Notes, 144A(a) | 8.125 | 06/30/24 | 27,282 | 20,734,320 | ||||||||||||
Sr. Sec’d. Notes | 6.250 | 03/31/23 | 13,425 | 12,990,030 | ||||||||||||
DaVita, Inc., | 5.000 | 05/01/25 | 10,147 | 10,159,684 | ||||||||||||
Hadrian Merger Sub, Inc., | 8.500 | 05/01/26 | 21,334 | 20,427,305 | ||||||||||||
HCA, Inc., | ||||||||||||||||
Gtd. Notes | 5.375 | 02/01/25 | 35,907 | 39,856,770 | ||||||||||||
Gtd. Notes | 5.375 | 09/01/26 | 2,750 | 3,066,250 | ||||||||||||
Gtd. Notes(a) | 5.625 | 09/01/28 | 15,162 | 17,251,513 | ||||||||||||
Gtd. Notes | 5.875 | 02/01/29 | 6,904 | 7,948,230 | ||||||||||||
Gtd. Notes | 7.500 | 12/15/23 | 12,480 | 14,149,200 | ||||||||||||
MEDNAX, Inc., | 6.250 | 01/15/27 | 72,324 | 70,877,520 | ||||||||||||
Polaris Intermediate Corp., | 8.500 | 12/01/22 | 22,160 | 18,614,400 |
See Notes to Financial Statements.
28 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Healthcare-Services (cont’d.) | ||||||||||||||||
RegionalCare Hospital Partners Holdings, Inc./LifePoint Health, Inc., | 9.750 | % | 12/01/26 | 65,483 | $ | 69,984,956 | ||||||||||
Surgery Center Holdings, Inc., | ||||||||||||||||
Gtd. Notes, 144A(a) | 6.750 | 07/01/25 | 12,227 | 10,461,666 | ||||||||||||
Gtd. Notes, 144A(a) | 10.000 | 04/15/27 | 18,050 | 17,282,875 | ||||||||||||
Tenet Healthcare Corp., | ||||||||||||||||
Sec’d. Notes, 144A | 6.250 | 02/01/27 | 30,246 | 31,380,225 | ||||||||||||
Sr. Sec’d. Notes, 144A | 5.125 | 11/01/27 | 6,375 | 6,590,156 | ||||||||||||
Sr. Unsec’d. Notes(a) | 6.750 | 06/15/23 | 41,064 | 42,193,260 | ||||||||||||
Sr. Unsec’d. Notes(a) | 7.000 | 08/01/25 | 57,113 | 57,684,130 | ||||||||||||
Sr. Unsec’d. Notes(a) | 8.125 | 04/01/22 | 18,646 | 20,089,200 | ||||||||||||
|
| |||||||||||||||
502,385,603 | ||||||||||||||||
Home Builders 4.5% | ||||||||||||||||
Ashton Woods USA LLC/Ashton Woods Finance Co., | ||||||||||||||||
Sr. Unsec’d. Notes, 144A | 6.750 | 08/01/25 | 21,144 | 20,932,560 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 9.875 | 04/01/27 | 26,936 | 29,360,240 | ||||||||||||
Beazer Homes USA, Inc., | ||||||||||||||||
Gtd. Notes(a) | 5.875 | 10/15/27 | 21,941 | 20,789,097 | ||||||||||||
Gtd. Notes | 6.750 | 03/15/25 | 11,275 | 11,359,562 | ||||||||||||
Gtd. Notes | 7.250 | 02/01/23 | 421 | 421,000 | ||||||||||||
Gtd. Notes | 8.750 | 03/15/22 | 9,451 | 9,864,481 | ||||||||||||
Brookfield Residential Properties, Inc. (Canada), | 6.375 | 05/15/25 | 12,275 | 12,459,125 | ||||||||||||
Brookfield Residential Properties, Inc./Brookfield Residential US Corp. (Canada), | 6.125 | 07/01/22 | 3,725 | 3,776,219 | ||||||||||||
Century Communities, Inc., | 6.750 | 06/01/27 | 22,725 | 24,088,500 | ||||||||||||
Forestar Group, Inc., | 8.000 | 04/15/24 | 12,575 | 13,502,406 | ||||||||||||
KB Home, | ||||||||||||||||
Gtd. Notes(a) | 6.875 | 06/15/27 | 6,750 | 7,593,750 | ||||||||||||
Gtd. Notes | 7.000 | 12/15/21 | 1,412 | 1,531,498 | ||||||||||||
Gtd. Notes | 7.500 | 09/15/22 | 525 | 593,250 | ||||||||||||
Gtd. Notes | 7.625 | 05/15/23 | 8,400 | 9,450,000 | ||||||||||||
Lennar Corp., | ||||||||||||||||
Gtd. Notes | 4.750 | 05/30/25 | 1,224 | 1,309,680 | ||||||||||||
Gtd. Notes | 4.875 | 12/15/23 | 4,075 | 4,370,438 | ||||||||||||
Gtd. Notes | 5.250 | 06/01/26 | 9,250 | 10,070,937 |
See Notes to Financial Statements.
PGIM High Yield Fund | 29 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Home Builders (cont’d.) | ||||||||||||||||
Lennar Corp., (cont’d.) | ||||||||||||||||
Gtd. Notes | 5.375 | % | 10/01/22 | 3,675 | $ | 3,923,063 | ||||||||||
M/I Homes, Inc., | ||||||||||||||||
Gtd. Notes | 5.625 | 08/01/25 | 12,591 | 13,031,685 | ||||||||||||
Gtd. Notes | 6.750 | 01/15/21 | 5,550 | 5,626,313 | ||||||||||||
Mattamy Group Corp. (Canada), | ||||||||||||||||
Sr. Unsec’d. Notes, 144A | 6.500 | 10/01/25 | 17,910 | 18,984,600 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 6.875 | 12/15/23 | 11,725 | 12,208,656 | ||||||||||||
Meritage Homes Corp., | ||||||||||||||||
Gtd. Notes | 5.125 | 06/06/27 | 22,873 | 24,073,832 | ||||||||||||
Gtd. Notes | 6.000 | 06/01/25 | 14,125 | 15,590,469 | ||||||||||||
New Home Co., Inc. (The), | 7.250 | 04/01/22 | 15,721 | 14,934,950 | ||||||||||||
PulteGroup, Inc., | ||||||||||||||||
Gtd. Notes | 5.000 | 01/15/27 | 14,950 | 16,071,250 | ||||||||||||
Gtd. Notes | 5.500 | 03/01/26 | 3,000 | 3,292,500 | ||||||||||||
Taylor Morrison Communities, Inc., | 5.875 | 06/15/27 | 23,440 | 25,139,400 | ||||||||||||
Taylor Morrison Communities, Inc./Taylor Morrison Holdings II, Inc., | ||||||||||||||||
Gtd. Notes, 144A | 5.625 | 03/01/24 | 16,329 | 17,145,450 | ||||||||||||
Gtd. Notes, 144A | 5.875 | 04/15/23 | 7,469 | 7,954,485 | ||||||||||||
William Lyon Homes, Inc., | ||||||||||||||||
Gtd. Notes | 5.875 | 01/31/25 | 37,565 | 37,940,650 | ||||||||||||
Gtd. Notes | 6.000 | 09/01/23 | 9,300 | 9,648,750 | ||||||||||||
Gtd. Notes(a) | 7.000 | 08/15/22 | 1,406 | 1,409,515 | ||||||||||||
Gtd. Notes, 144A | 6.625 | 07/15/27 | 29,430 | 29,430,000 | ||||||||||||
|
| |||||||||||||||
437,878,311 | ||||||||||||||||
Home Furnishings 0.0% | ||||||||||||||||
Tempur Sealy International, Inc., | 5.500 | 06/15/26 | 2,571 | 2,686,695 | ||||||||||||
Household Products/Wares 0.1% | ||||||||||||||||
Spectrum Brands, Inc., | 5.750 | 07/15/25 | 11,552 | 12,014,080 |
See Notes to Financial Statements.
30 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Housewares 0.1% | ||||||||||||||||
ScottsMiracle-Gro Co. (The), | ||||||||||||||||
Gtd. Notes | 5.250 | % | 12/15/26 | 9,634 | $ | 9,995,275 | ||||||||||
Gtd. Notes | 6.000 | 10/15/23 | 1,793 | 1,856,616 | ||||||||||||
|
| |||||||||||||||
11,851,891 | ||||||||||||||||
Internet 0.6% | ||||||||||||||||
Zayo Group LLC/Zayo Capital, Inc., | ||||||||||||||||
Gtd. Notes | 6.000 | 04/01/23 | 5,755 | 5,935,592 | ||||||||||||
Gtd. Notes, 144A | 5.750 | 01/15/27 | 53,032 | 54,092,640 | ||||||||||||
|
| |||||||||||||||
60,028,232 | ||||||||||||||||
Iron/Steel 0.5% | ||||||||||||||||
Cleveland-Cliffs, Inc., | ||||||||||||||||
Gtd. Notes(a) | 5.750 | 03/01/25 | 6,935 | 6,952,337 | ||||||||||||
Gtd. Notes, 144A(a) | 5.875 | 06/01/27 | 45,375 | 44,240,625 | ||||||||||||
|
| |||||||||||||||
51,192,962 | ||||||||||||||||
Lodging 0.5% | ||||||||||||||||
Boyd Gaming Corp., | 6.000 | 08/15/26 | 8,900 | 9,400,625 | ||||||||||||
Interval Acquisition Corp., | 5.625 | 04/15/23 | 3,500 | 3,552,500 | ||||||||||||
Jack Ohio Finance LLC/Jack Ohio Finance 1 Corp., | ||||||||||||||||
Sec’d. Notes, 144A | 10.250 | 11/15/22 | 12,049 | 12,787,001 | ||||||||||||
Sr. Sec’d. Notes, 144A | 6.750 | 11/15/21 | 7,875 | 8,052,188 | ||||||||||||
MGM Resorts International, | ||||||||||||||||
Gtd. Notes | 4.625 | 09/01/26 | 675 | 698,625 | ||||||||||||
Gtd. Notes(a) | 5.500 | 04/15/27 | 10,248 | 11,106,270 | ||||||||||||
|
| |||||||||||||||
45,597,209 | ||||||||||||||||
Machinery-Diversified 0.5% | ||||||||||||||||
ATS Automation Tooling Systems, Inc. (Canada), | 6.500 | 06/15/23 | 8,177 | 8,452,974 | ||||||||||||
Cloud Crane LLC, | 10.125 | 08/01/24 | 32,715 | 35,168,625 | ||||||||||||
RBS Global, Inc./Rexnord LLC, | 4.875 | 12/15/25 | 6,300 | 6,489,000 | ||||||||||||
|
| |||||||||||||||
50,110,599 |
See Notes to Financial Statements.
PGIM High Yield Fund | 31 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Media 7.8% | ||||||||||||||||
AMC Networks, Inc., | 4.750 | % | 08/01/25 | 9,040 | $ | 9,232,100 | ||||||||||
Cablevision Systems Corp., | 8.000 | 04/15/20 | 10,000 | 10,287,500 | ||||||||||||
CCO Holdings LLC/CCO Holdings Capital Corp., | ||||||||||||||||
Sr. Unsec’d. Notes | 5.125 | 02/15/23 | 7,086 | 7,201,147 | ||||||||||||
Sr. Unsec’d. Notes | 5.250 | 03/15/21 | 3,131 | 3,140,784 | ||||||||||||
Sr. Unsec’d. Notes | 5.750 | 01/15/24 | 305 | 311,863 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 5.000 | 02/01/28 | 29,580 | 31,059,000 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 5.125 | 05/01/23 | 7,730 | 7,907,790 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 5.375 | 05/01/25 | 4,802 | 4,988,078 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 5.375 | 06/01/29 | 37,028 | 39,573,675 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 5.500 | 05/01/26 | 2,685 | 2,829,319 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 5.875 | 05/01/27 | 10,892 | 11,599,980 | ||||||||||||
Clear Channel Worldwide Holdings, Inc., | ||||||||||||||||
Gtd. Notes, 144A(a) | 9.250 | 02/15/24 | 74,135 | 81,270,494 | ||||||||||||
Gtd. Notes, Series A | 6.500 | 11/15/22 | 29,955 | 30,604,125 | ||||||||||||
Sr. Sec’d. Notes, 144A | 5.125 | 08/15/27 | 12,500 | 13,078,125 | ||||||||||||
CSC Holdings LLC, | ||||||||||||||||
Gtd. Notes, 144A | 5.375 | 02/01/28 | 11,490 | 12,268,562 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 5.125 | 12/15/21 | 37,717 | 37,764,146 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 5.125 | 12/15/21 | 25,434 | 25,465,792 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 7.500 | 04/01/28 | 20,537 | 23,104,125 | ||||||||||||
Cumulus Media New Holdings, Inc., | 6.750 | 07/01/26 | 13,395 | 13,796,850 | ||||||||||||
Diamond Sports Group LLC/Diamond Sports Finance Co., | ||||||||||||||||
Gtd. Notes, 144A(a) | 6.625 | 08/15/27 | 12,990 | 13,607,025 | ||||||||||||
Sr. Sec’d. Notes, 144A | 5.375 | 08/15/26 | 11,525 | 12,101,250 | ||||||||||||
DISH DBS Corp., | ||||||||||||||||
Gtd. Notes(a) | 5.000 | 03/15/23 | 3,000 | 2,943,750 | ||||||||||||
Gtd. Notes(a) | 5.875 | 11/15/24 | 10,690 | 10,169,397 | ||||||||||||
Gtd. Notes(a) | 7.750 | 07/01/26 | 151,615 | 148,961,737 | ||||||||||||
Entercom Media Corp., | 6.500 | 05/01/27 | 9,620 | 9,956,700 | ||||||||||||
Gray Television, Inc., | ||||||||||||||||
Gtd. Notes, 144A(a) | 5.125 | 10/15/24 | 2,408 | 2,486,260 | ||||||||||||
Gtd. Notes, 144A | 5.875 | 07/15/26 | 18,683 | 19,523,735 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 7.000 | 05/15/27 | 8,564 | 9,364,306 | ||||||||||||
Midcontinent Communications/Midcontinent Finance Corp., | 5.375 | 08/15/27 | 7,675 | 7,966,880 |
See Notes to Financial Statements.
32 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Media (cont’d.) | ||||||||||||||||
Nexstar Broadcasting, Inc., | 5.625 | % | 08/01/24 | 17,264 | $ | 17,954,560 | ||||||||||
Quebecor Media, Inc. (Canada), | 5.750 | 01/15/23 | 12,231 | 13,244,094 | ||||||||||||
Radiate Holdco LLC/Radiate Finance, Inc., | ||||||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 6.625 | 02/15/25 | 16,935 | 16,807,987 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 6.875 | 02/15/23 | 29,829 | 30,425,580 | ||||||||||||
Scripps Escrow, Inc., | 5.875 | 07/15/27 | 6,370 | 6,425,737 | ||||||||||||
Sinclair Television Group, Inc., | ||||||||||||||||
Gtd. Notes, 144A | 5.625 | 08/01/24 | 8,685 | 8,945,550 | ||||||||||||
Gtd. Notes, 144A(a) | 5.875 | 03/15/26 | 2,275 | 2,383,063 | ||||||||||||
TEGNA, Inc., | ||||||||||||||||
Gtd. Notes(a) | 6.375 | 10/15/23 | 1,928 | 1,981,984 | ||||||||||||
Gtd. Notes, 144A(a) | 5.500 | 09/15/24 | 2,250 | 2,306,250 | ||||||||||||
Tribune Media Co., | 5.875 | 07/15/22 | 2,071 | 2,101,423 | ||||||||||||
Univision Communications, Inc., | ||||||||||||||||
Sr. Sec’d. Notes, 144A | 5.125 | 05/15/23 | 24,350 | 24,045,625 | ||||||||||||
Sr. Sec’d. Notes, 144A(a) | 5.125 | 02/15/25 | 18,722 | 18,064,671 | ||||||||||||
Sr. Sec’d. Notes, 144A | 6.750 | 09/15/22 | 4,297 | 4,350,713 | ||||||||||||
Videotron Ltd. (Canada), | 5.000 | 07/15/22 | 650 | 681,688 | ||||||||||||
Virgin Media Finance PLC (United Kingdom), | 5.750 | 01/15/25 | 2,500 | 2,599,275 | ||||||||||||
Ziggo Bond Co. BV (Netherlands), | 6.000 | 01/15/27 | 8,411 | 8,768,467 | ||||||||||||
|
| |||||||||||||||
763,651,162 | ||||||||||||||||
Metal Fabricate/Hardware 0.2% | ||||||||||||||||
TriMas Corp., | 4.875 | 10/15/25 | 4,730 | 4,789,125 | ||||||||||||
Zekelman Industries, Inc., | 9.875 | 06/15/23 | 10,083 | 10,642,607 | ||||||||||||
|
| |||||||||||||||
15,431,732 | ||||||||||||||||
Mining 2.4% | ||||||||||||||||
Constellium SE, | ||||||||||||||||
Gtd. Notes, 144A(a) | 5.875 | 02/15/26 | 18,827 | 19,627,147 | ||||||||||||
Gtd. Notes, 144A(a) | 6.625 | 03/01/25 | 16,110 | 16,865,156 |
See Notes to Financial Statements.
PGIM High Yield Fund | 33 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Mining (cont’d.) | ||||||||||||||||
Eldorado Gold Corp. (Canada), | 9.500 | % | 06/01/24 | 21,750 | $ | 23,381,250 | ||||||||||
First Quantum Minerals Ltd. (Zambia), | ||||||||||||||||
Gtd. Notes, 144A | 6.500 | 03/01/24 | 21,085 | 19,134,637 | ||||||||||||
Gtd. Notes, 144A(a) | 6.875 | 03/01/26 | 10,850 | 9,642,938 | ||||||||||||
Gtd. Notes, 144A | 7.000 | 02/15/21 | 5,160 | 5,160,000 | ||||||||||||
Gtd. Notes, 144A(a) | 7.250 | 04/01/23 | 2,230 | 2,096,200 | ||||||||||||
Gtd. Notes, 144A(a) | 7.500 | 04/01/25 | 20,650 | 18,894,750 | ||||||||||||
Freeport-McMoRan, Inc., | ||||||||||||||||
Gtd. Notes | 3.550 | 03/01/22 | 3,329 | 3,337,323 | ||||||||||||
Gtd. Notes | 3.875 | 03/15/23 | 19,395 | 19,596,708 | ||||||||||||
Gtd. Notes(a) | 4.550 | 11/14/24 | 19,421 | 19,611,520 | ||||||||||||
IAMGOLD Corp. (Canada), | 7.000 | 04/15/25 | 26,892 | 28,034,910 | ||||||||||||
New Gold, Inc. (Canada), | ||||||||||||||||
Gtd. Notes, 144A | 6.250 | 11/15/22 | 14,403 | 14,114,940 | ||||||||||||
Gtd. Notes, 144A(a) | 6.375 | 05/15/25 | 2,000 | 1,790,000 | ||||||||||||
Novelis Corp., | ||||||||||||||||
Gtd. Notes, 144A | 5.875 | 09/30/26 | 22,283 | 23,536,419 | ||||||||||||
Gtd. Notes, 144A(a) | 6.250 | 08/15/24 | 6,306 | 6,605,535 | ||||||||||||
|
| |||||||||||||||
231,429,433 | ||||||||||||||||
Miscellaneous Manufacturing 0.2% | ||||||||||||||||
Amsted Industries, Inc., | 5.625 | 07/01/27 | 7,400 | 7,899,500 | ||||||||||||
FXI Holdings, Inc., | 7.875 | 11/01/24 | 12,225 | 10,849,688 | ||||||||||||
|
| |||||||||||||||
18,749,188 | ||||||||||||||||
Office/Business Equipment 0.1% | ||||||||||||||||
CDW LLC/CDW Finance Corp., | 5.500 | 12/01/24 | 5,105 | 5,558,069 | ||||||||||||
Oil & Gas 7.2% | ||||||||||||||||
Alta Mesa Holdings LP/Alta Mesa Finance Services Corp., | 7.875 | 12/15/24 | 89,039 | 16,027,020 | ||||||||||||
Antero Resources Corp., | ||||||||||||||||
Gtd. Notes(a) | 5.000 | 03/01/25 | 28,295 | 24,475,175 | ||||||||||||
Gtd. Notes(a) | 5.375 | 11/01/21 | 1,090 | 1,058,663 |
See Notes to Financial Statements.
34 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Oil & Gas (cont’d.) | ||||||||||||||||
Antero Resources Corp., (cont’d.) | ||||||||||||||||
Gtd. Notes(a) | 5.625 | % | 06/01/23 | 18,040 | $ | 16,641,900 | ||||||||||
Ascent Resources Utica Holdings LLC/ARU Finance Corp., | ||||||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 7.000 | 11/01/26 | 29,975 | 24,757,851 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 10.000 | 04/01/22 | 35,399 | 35,487,497 | ||||||||||||
Centennial Resource Production LLC, | 5.375 | 01/15/26 | 6,886 | 6,558,915 | ||||||||||||
Chesapeake Energy Corp., | 8.000 | 06/15/27 | 79,501 | 57,440,268 | ||||||||||||
Citgo Holding, Inc., | 9.250 | 08/01/24 | 24,175 | 25,565,062 | ||||||||||||
CNX Resources Corp., | ||||||||||||||||
Gtd. Notes | 5.875 | 04/15/22 | 21,859 | 21,148,582 | ||||||||||||
Gtd. Notes, 144A | 7.250 | 03/14/27 | 24,964 | 20,907,350 | ||||||||||||
CrownRock LP/CrownRock Finance, Inc., | 5.625 | 10/15/25 | 12,275 | 12,152,250 | ||||||||||||
Denbury Resources, Inc., | 9.000 | 05/15/21 | 4,350 | 3,958,500 | ||||||||||||
Diamond Offshore Drilling, Inc., | 7.875 | 08/15/25 | 5,225 | 4,808,568 | ||||||||||||
Endeavor Energy Resources LP/EER Finance, Inc., | 5.750 | 01/30/28 | 12,015 | 12,585,712 | ||||||||||||
Extraction Oil & Gas, Inc., | ||||||||||||||||
Gtd. Notes, 144A | 5.625 | 02/01/26 | 43,492 | 28,704,720 | ||||||||||||
Gtd. Notes, 144A | 7.375 | 05/15/24 | 12,785 | 9,588,750 | ||||||||||||
Hilcorp Energy I LP/Hilcorp Finance Co., | ||||||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 5.000 | 12/01/24 | 3,100 | 2,859,750 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 5.750 | 10/01/25 | 15,448 | 14,405,260 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 6.250 | 11/01/28 | 21,614 | 19,884,880 | ||||||||||||
MEG Energy Corp. (Canada), | ||||||||||||||||
Gtd. Notes, 144A | 6.375 | 01/30/23 | 61,650 | 58,259,250 | ||||||||||||
Gtd. Notes, 144A | 7.000 | 03/31/24 | 16,326 | 15,530,107 | ||||||||||||
Nabors Industries, Inc., | 5.750 | 02/01/25 | 45,803 | 36,642,400 | ||||||||||||
Petrobras Global Finance BV (Brazil), | ||||||||||||||||
Gtd. Notes(a) | 5.299 | 01/27/25 | 2,720 | 2,940,864 | ||||||||||||
Gtd. Notes(a) | 7.375 | 01/17/27 | 5,705 | 6,772,463 | ||||||||||||
Gtd. Notes | 8.750 | 05/23/26 | 4,750 | 5,947,000 | ||||||||||||
Precision Drilling Corp. (Canada), | ||||||||||||||||
Gtd. Notes | 7.750 | 12/15/23 | 5,650 | 5,579,375 | ||||||||||||
Gtd. Notes, 144A(a) | 7.125 | 01/15/26 | 28,618 | 25,541,565 |
See Notes to Financial Statements.
PGIM High Yield Fund | 35 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Oil & Gas (cont’d.) | ||||||||||||||||
Range Resources Corp., | ||||||||||||||||
Gtd. Notes(a) | 4.875 | % | 05/15/25 | 30,625 | $ | 25,112,500 | ||||||||||
Gtd. Notes | 5.000 | 08/15/22 | 1,600 | 1,492,000 | ||||||||||||
Gtd. Notes(a) | 5.000 | 03/15/23 | 7,181 | 6,355,185 | ||||||||||||
Gtd. Notes | 5.875 | 07/01/22 | 21,518 | 20,603,485 | ||||||||||||
Rowan Cos., Inc., | 7.375 | 06/15/25 | 1,250 | 787,500 | ||||||||||||
Seven Generations Energy Ltd. (Canada), | 5.375 | 09/30/25 | 8,250 | 7,899,375 | ||||||||||||
Seventy Seven Energy, Inc., Escrow Shares, | 6.500 | 07/15/22 | (d) | 1,800 | 18 | |||||||||||
Sunoco LP/Sunoco Finance Corp., | ||||||||||||||||
Gtd. Notes | 4.875 | 01/15/23 | 824 | 842,540 | ||||||||||||
Gtd. Notes | 5.500 | 02/15/26 | 11,550 | 11,983,125 | ||||||||||||
Gtd. Notes | 5.875 | 03/15/28 | 1,525 | 1,586,000 | ||||||||||||
Transocean Pontus Ltd., | 6.125 | 08/01/25 | 5,273 | 5,346,548 | ||||||||||||
Transocean, Inc., | ||||||||||||||||
Gtd. Notes, 144A(a) | 7.250 | 11/01/25 | 37,665 | 34,275,150 | ||||||||||||
Gtd. Notes, 144A(a) | 7.500 | 01/15/26 | 18,658 | 17,025,425 | ||||||||||||
Valaris PLC, | ||||||||||||||||
Sr. Unsec’d. Notes | 5.750 | 10/01/44 | 6,475 | 3,237,500 | ||||||||||||
Sr. Unsec’d. Notes(a) | 7.750 | 02/01/26 | 34,900 | 22,154,520 | ||||||||||||
WPX Energy, Inc., | ||||||||||||||||
Sr. Unsec’d. Notes | 5.250 | 09/15/24 | 8,200 | 8,323,000 | ||||||||||||
Sr. Unsec’d. Notes | 5.750 | 06/01/26 | 6,445 | 6,686,688 | ||||||||||||
Sr. Unsec’d. Notes(a) | 6.000 | 01/15/22 | 10,858 | 11,156,595 | ||||||||||||
Sr. Unsec’d. Notes(a) | 8.250 | 08/01/23 | 4,165 | 4,633,563 | ||||||||||||
|
| |||||||||||||||
705,730,414 | ||||||||||||||||
Oil & Gas Services 0.1% | ||||||||||||||||
Nine Energy Service, Inc., | 8.750 | 11/01/23 | 6,325 | 5,708,313 | ||||||||||||
Packaging & Containers 1.1% | ||||||||||||||||
ARD Finance SA (Luxembourg), | 7.125 | 09/15/23 | 61,785 | 63,406,855 | ||||||||||||
ARD Securities Finance SARL (Luxembourg), | 8.750 | 01/31/23 | 13,542 | 14,015,673 |
See Notes to Financial Statements.
36 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Packaging & Containers (cont’d.) | ||||||||||||||||
Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc. (Ireland), | ||||||||||||||||
Gtd. Notes, 144A | 6.750 | % | 05/15/24 | EUR | 1,000 | $ | 1,159,498 | |||||||||
Sr. Sec’d. Notes, 144A(a) | 4.625 | 05/15/23 | 4,475 | 4,579,984 | ||||||||||||
Owens-Brockway Glass Container, Inc., | 6.375 | 08/15/25 | 2,561 | 2,740,270 | ||||||||||||
Reynolds Group Issuer, Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Lu, | 7.000 | 07/15/24 | 15,810 | 16,343,587 | ||||||||||||
Sealed Air Corp., | 5.125 | 12/01/24 | 1,100 | 1,178,375 | ||||||||||||
|
| |||||||||||||||
103,424,242 | ||||||||||||||||
Pharmaceuticals 1.7% | ||||||||||||||||
Bausch Health Americas, Inc., | 8.500 | 01/31/27 | 8,455 | 9,384,881 | ||||||||||||
Bausch Health Cos., Inc., | ||||||||||||||||
Gtd. Notes, 144A | 5.500 | 03/01/23 | 2,306 | 2,329,060 | ||||||||||||
Gtd. Notes, 144A(a) | 6.125 | 04/15/25 | 63,531 | 65,436,930 | ||||||||||||
Gtd. Notes, 144A | 7.000 | 01/15/28 | 13,900 | 14,566,227 | ||||||||||||
Gtd. Notes, 144A(a) | 7.250 | 05/30/29 | 14,325 | 15,148,687 | ||||||||||||
Sr. Sec’d. Notes, 144A | 5.750 | 08/15/27 | 3,895 | 4,177,388 | ||||||||||||
Endo Dac/Endo Finance LLC/Endo Finco, Inc., | ||||||||||||||||
Gtd. Notes, 144A | 6.000 | 07/15/23 | 7,367 | 4,862,220 | ||||||||||||
Gtd. Notes, 144A | 6.000 | 02/01/25 | 21,080 | 13,175,000 | ||||||||||||
Mallinckrodt International Finance SA/Mallinckrodt CB LLC, | ||||||||||||||||
Gtd. Notes, 144A(a) | 5.500 | 04/15/25 | 14,273 | 6,538,818 | ||||||||||||
Gtd. Notes, 144A(a) | 5.625 | 10/15/23 | 4,131 | 2,106,810 | ||||||||||||
NVA Holdings, Inc., | 6.875 | 04/01/26 | 28,808 | 30,761,182 | ||||||||||||
|
| |||||||||||||||
168,487,203 | ||||||||||||||||
Pipelines 2.5% | ||||||||||||||||
Antero Midstream Partners LP/Antero Midstream Finance Corp., | ||||||||||||||||
Gtd. Notes | 5.375 | 09/15/24 | 4,075 | 3,840,688 | ||||||||||||
Gtd. Notes, 144A | 5.750 | 01/15/28 | 34,345 | 31,168,087 |
See Notes to Financial Statements.
PGIM High Yield Fund | 37 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Pipelines (cont’d.) | ||||||||||||||||
CNX Midstream Partners LP/CNX Midstream Finance Corp., | 6.500 | % | 03/15/26 | 9,125 | $ | 8,536,438 | ||||||||||
DCP Midstream Operating LP, | ||||||||||||||||
Gtd. Notes | 5.125 | 05/15/29 | 7,125 | 7,303,481 | ||||||||||||
Gtd. Notes(a) | 5.600 | 04/01/44 | 5,131 | 4,835,968 | ||||||||||||
Gtd. Notes, 144A | 6.450 | 11/03/36 | 12,900 | 13,512,750 | ||||||||||||
Energy Transfer Operating LP, | 7.500 | 10/15/20 | 10,800 | 11,382,482 | ||||||||||||
Global Partners LP/GLP Finance Corp., | ||||||||||||||||
Gtd. Notes | 7.000 | 06/15/23 | 18,670 | 18,856,700 | ||||||||||||
Gtd. Notes, 144A | 7.000 | 08/01/27 | 17,740 | 17,961,750 | ||||||||||||
NGPL PipeCo LLC, | ||||||||||||||||
Sr. Unsec’d. Notes, 144A | 4.875 | 08/15/27 | 4,775 | 5,069,029 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 7.768 | 12/15/37 | 13,150 | 17,144,707 | ||||||||||||
Rockies Express Pipeline LLC, | ||||||||||||||||
Sr. Unsec’d. Notes, 144A | 6.875 | 04/15/40 | 39,028 | 43,157,162 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 7.500 | 07/15/38 | 6,715 | 7,596,344 | ||||||||||||
Tallgrass Energy Partners LP/Tallgrass Energy Finance Corp., | ||||||||||||||||
Gtd. Notes, 144A | 5.500 | 09/15/24 | 8,650 | 8,433,750 | ||||||||||||
Gtd. Notes, 144A | 5.500 | 01/15/28 | 34,546 | 32,516,422 | ||||||||||||
Targa Resources Partners LP/Targa Resources Partners Finance Corp., | ||||||||||||||||
Gtd. Notes | 4.250 | 11/15/23 | 8,439 | 8,428,451 | ||||||||||||
Gtd. Notes | 5.125 | 02/01/25 | 2,350 | 2,408,750 | ||||||||||||
Gtd. Notes(a) | 6.750 | 03/15/24 | 4,900 | 5,089,875 | ||||||||||||
|
| |||||||||||||||
247,242,834 | ||||||||||||||||
Real Estate 1.0% | ||||||||||||||||
Five Point Operating Co. LP/Five Point Capital Corp., | 7.875 | 11/15/25 | 29,425 | 29,516,953 | ||||||||||||
Greystar Real Estate Partners LLC, | 5.750 | 12/01/25 | 29,252 | 29,993,538 | ||||||||||||
Howard Hughes Corp. (The), | 5.375 | 03/15/25 | 7,095 | 7,307,850 | ||||||||||||
Hunt Cos., Inc., | 6.250 | 02/15/26 | 27,022 | 26,278,895 | ||||||||||||
|
| |||||||||||||||
93,097,236 |
See Notes to Financial Statements.
38 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Real Estate Investment Trusts (REITs) 0.9% | ||||||||||||||||
GLP Capital LP/GLP Financing II, Inc., | 5.375 | % | 04/15/26 | 14,202 | $ | 15,588,967 | ||||||||||
MGM Growth Properties Operating Partnership LP/MGP FinanceCo-Issuer, Inc., | ||||||||||||||||
Gtd. Notes | 4.500 | 09/01/26 | 9,100 | 9,532,250 | ||||||||||||
Gtd. Notes | 4.500 | 01/15/28 | 20,429 | 20,888,653 | ||||||||||||
MPT Operating Partnership LP/MPT Finance Corp., | ||||||||||||||||
Gtd. Notes | 5.000 | 10/15/27 | 21,150 | 22,577,625 | ||||||||||||
Gtd. Notes | 5.250 | 08/01/26 | 5,735 | 6,059,314 | ||||||||||||
Sabra Health Care LP, | 5.125 | 08/15/26 | 5,886 | 6,353,916 | ||||||||||||
Senior Housing Properties Trust, | 6.750 | 12/15/21 | 5,475 | 5,839,119 | ||||||||||||
|
| |||||||||||||||
86,839,844 | ||||||||||||||||
Retail 4.3% | ||||||||||||||||
Beacon Roofing Supply, Inc., | ||||||||||||||||
Gtd. Notes | 6.375 | 10/01/23 | 5,926 | 6,135,484 | ||||||||||||
Gtd. Notes, 144A(a) | 4.875 | 11/01/25 | 14,484 | 14,284,845 | ||||||||||||
Brinker International, Inc., | 5.000 | 10/01/24 | 6,104 | 6,287,120 | ||||||||||||
CEC Entertainment, Inc., | 8.000 | 02/15/22 | 28,310 | 26,894,500 | ||||||||||||
Ferrellgas LP/Ferrellgas Finance Corp., | ||||||||||||||||
Gtd. Notes | 6.750 | 06/15/23 | 17,660 | 14,834,400 | ||||||||||||
Sr. Unsec’d. Notes | 6.500 | 05/01/21 | 15,765 | 13,400,250 | ||||||||||||
Sr. Unsec’d. Notes | 6.750 | 01/15/22 | 16,550 | 13,984,750 | ||||||||||||
Ferrellgas Partners LP/Ferrellgas Partners Finance Corp., | ||||||||||||||||
Sr. Unsec’d. Notes(a) | 8.625 | 06/15/20 | 34,212 | 25,546,100 | ||||||||||||
Sr. Unsec’d. Notes(a) | 8.625 | 06/15/20 | 35,345 | 26,392,112 | ||||||||||||
Golden Nugget, Inc., | ||||||||||||||||
Gtd. Notes, 144A(a) | 8.750 | 10/01/25 | 30,275 | 31,750,906 | ||||||||||||
Sr. Unsec’d. Notes, 144A | 6.750 | 10/15/24 | 23,126 | 23,646,335 | ||||||||||||
L Brands, Inc., | ||||||||||||||||
Gtd. Notes(a) | 5.625 | 10/15/23 | 5,250 | 5,512,500 | ||||||||||||
Gtd. Notes | 6.750 | 07/01/36 | 32,178 | 27,029,520 | ||||||||||||
Gtd. Notes(a) | 6.875 | 11/01/35 | 17,455 | 14,749,475 | ||||||||||||
Michaels Stores, Inc., | 8.000 | 07/15/27 | 23,000 | 22,027,560 |
See Notes to Financial Statements.
PGIM High Yield Fund | 39 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Retail (cont’d.) | ||||||||||||||||
PetSmart, Inc., | ||||||||||||||||
Gtd. Notes, 144A(a) | 7.125 | % | 03/15/23 | 14,292 | $ | 13,291,560 | ||||||||||
Sr. Sec’d. Notes, 144A | 5.875 | 06/01/25 | 30,714 | 30,099,720 | ||||||||||||
Rite Aid Corp., | 6.125 | 04/01/23 | 41,580 | 33,575,850 | ||||||||||||
Sally Holdings LLC/Sally Capital, Inc., | 5.625 | 12/01/25 | 34,152 | 34,237,380 | ||||||||||||
Suburban Propane Partners LP/Suburban Energy Finance Corp., | ||||||||||||||||
Sr. Unsec’d. Notes | 5.500 | 06/01/24 | 16,347 | 16,592,205 | ||||||||||||
Sr. Unsec’d. Notes | 5.750 | 03/01/25 | 6,640 | 6,739,600 | ||||||||||||
Superior Plus LP/Superior General Partner, Inc. (Canada), | 7.000 | 07/15/26 | 15,325 | 16,052,938 | ||||||||||||
|
| |||||||||||||||
423,065,110 | ||||||||||||||||
Semiconductors 0.1% | ||||||||||||||||
NXP BV/NXP Funding LLC (Netherlands), | 4.625 | 06/15/22 | 6,125 | 6,450,678 | ||||||||||||
Sensata Technologies UK Financing Co. PLC, | 6.250 | 02/15/26 | 5,054 | 5,368,409 | ||||||||||||
|
| |||||||||||||||
11,819,087 | ||||||||||||||||
Software 1.1% | ||||||||||||||||
Dun & Bradstreet Corp. (The), | 6.875 | 08/15/26 | 7,640 | 8,279,850 | ||||||||||||
Infor US, Inc., | 6.500 | 05/15/22 | 56,067 | 56,978,089 | ||||||||||||
Informatica LLC, | 7.125 | 07/15/23 | 4,865 | 4,950,137 | ||||||||||||
IQVIA, Inc., | 5.000 | 05/15/27 | 9,432 | 9,962,550 | ||||||||||||
RP Crown Parent LLC, | 7.375 | 10/15/24 | 26,901 | 28,036,491 | ||||||||||||
TIBCO Software, Inc., | 11.375 | 12/01/21 | 3,365 | 3,533,250 | ||||||||||||
|
| |||||||||||||||
111,740,367 |
See Notes to Financial Statements.
40 |
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Telecommunications 6.9% | ||||||||||||||||
C&W Senior Financing DAC (Ireland), | 6.875 | % | 09/15/27 | 22,500 | $ | 23,960,025 | ||||||||||
CenturyLink, Inc., | ||||||||||||||||
Sr. Unsec’d. Notes, Series P(a) | 7.600 | 09/15/39 | 19,868 | 19,073,280 | ||||||||||||
Sr. Unsec’d. Notes, Series S | 6.450 | 06/15/21 | 18,030 | 18,999,113 | ||||||||||||
Sr. Unsec’d. Notes, Series U(a) | 7.650 | 03/15/42 | 24,283 | 23,190,265 | ||||||||||||
Sr. Unsec’d. Notes, Series V(a) | 5.625 | 04/01/20 | 1,085 | 1,103,988 | ||||||||||||
CommScope Technologies LLC, | 6.000 | 06/15/25 | 40,222 | 35,898,135 | ||||||||||||
CommScope, Inc., | ||||||||||||||||
Gtd. Notes, 144A(a) | 5.500 | 06/15/24 | 13,530 | 12,802,763 | ||||||||||||
Gtd. Notes, 144A(a) | 8.250 | 03/01/27 | 14,575 | 14,283,500 | ||||||||||||
Digicel Group One Ltd. (Jamaica), | 8.250 | 12/30/22 | 26,824 | 15,021,440 | ||||||||||||
Digicel Group Two Ltd. (Jamaica), | ||||||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 8.250 | 09/30/22 | 6,637 | 1,194,660 | ||||||||||||
Sr. Unsec’d. Notes, 144A, Cash coupon 7.125% or PIK 2.000% | 9.125 | 04/01/24 | 783 | 58,750 | ||||||||||||
Digicel International Finance Ltd./Digicel Holdings Bermuda Ltd. (Saint Lucia), | 8.750 | 05/25/24 | 9,150 | 8,601,000 | ||||||||||||
Digicel Ltd. (Jamaica), | ||||||||||||||||
Gtd. Notes, 144A(a) | 6.750 | 03/01/23 | 80,521 | 34,020,122 | ||||||||||||
Sr. Unsec’d. Notes, 144A(a) | 6.000 | 04/15/21 | 27,950 | 17,573,842 | ||||||||||||
Embarq Corp., | 7.995 | 06/01/36 | 49,307 | 48,338,611 | ||||||||||||
Intelsat Jackson Holdings SA (Luxembourg), | ||||||||||||||||
Gtd. Notes | 5.500 | 08/01/23 | 10,315 | 9,386,650 | ||||||||||||
Gtd. Notes, 144A | 9.750 | 07/15/25 | 28,450 | 29,196,812 | ||||||||||||
Iridium Communications, Inc., | 10.250 | 04/15/23 | 14,261 | 15,473,185 | ||||||||||||
Level 3 Financing, Inc., | ||||||||||||||||
Gtd. Notes | 5.125 | 05/01/23 | 7,976 | 8,105,929 | ||||||||||||
Gtd. Notes | 5.625 | 02/01/23 | 4,510 | 4,587,617 | ||||||||||||
ORBCOMM, Inc., | 8.000 | 04/01/24 | 34,514 | 35,635,705 | ||||||||||||
Sprint Capital Corp., | ||||||||||||||||
Gtd. Notes(a) | 6.875 | 11/15/28 | 27,145 | 30,097,019 | ||||||||||||
Gtd. Notes(a) | 8.750 | 03/15/32 | 63,328 | 79,317,053 | ||||||||||||
Sprint Corp., | ||||||||||||||||
Gtd. Notes | 7.125 | 06/15/24 | 3,805 | 4,206,275 | ||||||||||||
Gtd. Notes | 7.625 | 02/15/25 | 53,663 | 60,035,481 |
See Notes to Financial Statements.
PGIM High Yield Fund | 41 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Interest Rate | Maturity Date | Principal Amount (000)# | Value | ||||||||||||
CORPORATE BONDS (Continued) | ||||||||||||||||
Telecommunications (cont’d.) | ||||||||||||||||
Sprint Corp., (cont’d.) | ||||||||||||||||
Gtd. Notes | 7.875 | % | 09/15/23 | 5,267 | $ | 5,925,375 | ||||||||||
T-Mobile USA, Inc., | 6.375 | 03/01/25 | 1,038 | 1,074,849 | ||||||||||||
West Corp., | 8.500 | 10/15/25 | 70,030 | 54,273,250 | ||||||||||||
Xplornet Communications, Inc. (Canada), | 9.625 | 06/01/22 | 57,646 | 58,798,527 | ||||||||||||
|
| |||||||||||||||
670,233,221 | ||||||||||||||||
Transportation 0.6% | ||||||||||||||||
Navios Maritime Holdings, Inc./Navios Maritime Finance II US, Inc. (Greece), | 7.375 | 01/15/22 | 6,100 | 4,026,000 | ||||||||||||
XPO Logistics, Inc., | ||||||||||||||||
Gtd. Notes, 144A(a) | 6.125 | 09/01/23 | 6,475 | 6,695,150 | ||||||||||||
Gtd. Notes, 144A | 6.500 | 06/15/22 | 7,952 | 8,126,387 | ||||||||||||
Gtd. Notes, 144A | 6.750 | 08/15/24 | 40,268 | 43,388,770 | ||||||||||||
|
| |||||||||||||||
62,236,307 | ||||||||||||||||
|
| |||||||||||||||
TOTAL CORPORATE BONDS | 7,881,725,733 | |||||||||||||||
|
| |||||||||||||||
Shares | ||||||||||||||||
COMMON STOCKS 0.7% | ||||||||||||||||
Chemicals 0.0% | ||||||||||||||||
Hexion Holdings Corp. (Class B Stock)* | 339,630 | 4,075,560 | ||||||||||||||
Electric Utilities 0.6% | ||||||||||||||||
GenOn Energy Holdings, Inc. (Class A Stock)^* | 193,539 | 38,223,952 | ||||||||||||||
Keycon Power Holdings LLC^* | 53,388 | 16,283,340 | ||||||||||||||
|
| |||||||||||||||
54,507,292 | ||||||||||||||||
Independent Power & Renewable Electricity Producers 0.1% | ||||||||||||||||
Vistra Energy Corp. | 342,429 | 8,543,604 |
See Notes to Financial Statements.
42 |
Description | Shares | Value | ||||||
COMMON STOCKS (Continued) | ||||||||
Media 0.0% | ||||||||
Mood Media Corp.^* | 669,375 | $ | 6,694 | |||||
Mood Media Corp.^* | 546,428 | 5,464 | ||||||
|
| |||||||
12,158 | ||||||||
Oil, Gas & Consumable Fuels 0.0% | ||||||||
Ascent Resources - Marcellus LLC (Class A Stock)^* | 35,140 | 89,607 | ||||||
Frontera Energy Corp. (Colombia)^ | 55,828 | 537,618 | ||||||
|
| |||||||
627,225 | ||||||||
|
| |||||||
TOTAL COMMON STOCKS | 67,765,839 | |||||||
|
| |||||||
PREFERRED STOCKS 0.0% | ||||||||
Capital Markets 0.0% | ||||||||
Goldman Sachs Group, Inc. (The) Series K, 6.375% | 87,000 | 2,404,680 | ||||||
Construction Materials 0.0% | ||||||||
New Millennium Homes LLC^* | 2,000 | 40,000 | ||||||
Media 0.0% | ||||||||
Adelphia Communications Corp.^ | 20,000 | 20 | ||||||
|
| |||||||
TOTAL PREFERRED STOCKS | 2,444,700 | |||||||
|
| |||||||
Units | ||||||||
WARRANTS* 0.0% | ||||||||
Chemicals 0.0% | ||||||||
Hercules, Inc., expiring 03/31/29 | 230 | — | ||||||
|
|
See Notes to Financial Statements.
PGIM High Yield Fund | 43 |
Schedule of Investments(continued)
as of August 31, 2019
Description | Units | Value | ||||||
WARRANTS (Continued) | ||||||||
Oil, Gas & Consumable Fuels 0.0% | ||||||||
Ascent Resources - Marcellus LLC, 2nd Lien Tranche A, expiring 3/30/2023^ | 229,837 | $ | 28,730 | |||||
Ascent Resources - Marcellus LLC, 2nd Lien Tranche B, expiring 3/30/2023^ | 178,762 | 13,407 | ||||||
|
| |||||||
42,137 | ||||||||
|
| |||||||
TOTAL WARRANTS | 42,137 | |||||||
|
| |||||||
TOTAL LONG-TERM INVESTMENTS | 8,907,377,316 | |||||||
|
| |||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS 23.2% | ||||||||
AFFILIATED MUTUAL FUNDS | ||||||||
PGIM Core Ultra Short Bond Fund(w) | 705,006,288 | 705,006,288 | ||||||
PGIM Institutional Money Market Fund | 1,561,848,273 | 1,562,004,458 | ||||||
|
| |||||||
TOTAL SHORT-TERM INVESTMENTS | 2,267,010,746 | |||||||
|
| |||||||
TOTAL INVESTMENTS 114.5% | 11,174,388,062 | |||||||
Liabilities in excess of other assets(z) (14.5)% | (1,411,001,673 | ) | ||||||
|
| |||||||
NET ASSETS 100.0% | $ | 9,763,386,389 | ||||||
|
|
Below is a list of the abbreviation(s) used in the annual report:
144A—Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and, pursuant to the requirements of Rule 144A, may not be resold except to qualified institutional buyers.
CLO—Collateralized Loan Obligation
EURIBOR—Euro Interbank Offered Rate
LIBOR—London Interbank Offered Rate
MTN—Medium Term Note
OTC—Over-the-counter
PIK—Payment-in-Kind
REITs—Real Estate Investment Trust
EUR—Euro
USD—US Dollar
* | Non-income producing security. |
See Notes to Financial Statements.
44 |
# | Principal or notional amount is shown in U.S. dollars unless otherwise stated. |
^ | Indicates a Level 3 security. The aggregate value of Level 3 securities is $169,949,562 and 1.7% 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 $1,525,030,457; cash collateral of $1,558,377,374 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments. |
(b) | Represents security 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 August 31, 2019. |
(d) | Represents issuer in default on interest payments and/or principal repayment. Non-income producing security. Such securities may be post-maturity. |
(p) | Interest rate not available as of August 31, 2019. |
(w) | 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. |
(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 August 31, 2019:
Number of Contracts | Type | Expiration Date | Current Notional Amount | Value / Unrealized Appreciation (Depreciation) | ||||||||||||
Long Positions: | ||||||||||||||||
2,485 | 2 Year U.S. Treasury Notes | Dec. 2019 | $ | 537,051,211 | $ | 343,251 | ||||||||||
1,696 | 5 Year U.S. Treasury Notes | Dec. 2019 | 203,480,246 | 363,105 | ||||||||||||
2,089 | 10 Year U.S. Treasury Notes | Dec. 2019 | 275,160,469 | 708,366 | ||||||||||||
314 | 20 Year U.S. Treasury Bonds | Dec. 2019 | 51,888,500 | 236,180 | ||||||||||||
|
| |||||||||||||||
1,650,902 | ||||||||||||||||
|
| |||||||||||||||
Short Positions: | ||||||||||||||||
3 | 5 Year Euro-Bobl | Dec. 2019 | 450,720 | (794 | ) | |||||||||||
1 | 10 Year Euro-Bund | Dec. 2019 | 193,741 | (122 | ) | |||||||||||
282 | 30 Year U.S. Ultra Treasury Bonds | Dec. 2019 | 55,677,375 | 125,980 | ||||||||||||
|
| |||||||||||||||
125,064 | ||||||||||||||||
|
| |||||||||||||||
$ | 1,775,966 | |||||||||||||||
|
|
Forward foreign currency exchange contracts outstanding at August 31, 2019:
Purchase Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date | Current Value | Unrealized Appreciation | Unrealized Depreciation | ||||||||||||||||
OTC Forward Foreign Currency Exchange Contracts: |
| |||||||||||||||||||||
Euro, | Citibank, N.A. | EUR 12,097 | $ | 13,458,412 | $ | 13,300,712 | $ | — | $ | (157,700 | ) | |||||||||||
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
PGIM High Yield Fund | 45 |
Schedule of Investments(continued)
as of August 31, 2019
Forward foreign currency exchange contracts outstanding at August 31, 2019 (continued):
Sale Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date | Current Value | Unrealized Appreciation | Unrealized Depreciation | ||||||||||||||||
OTC Forward Foreign Currency Exchange Contracts: |
| |||||||||||||||||||||
Euro, | ||||||||||||||||||||||
Expiring 09/04/19 | Citibank, N.A. | EUR | 12,097 | $ | 13,505,362 | $ | 13,300,712 | $ | 204,650 | $ | — | |||||||||||
Expiring 10/02/19 | Citibank, N.A. | EUR | 12,097 | 13,488,305 | 13,329,400 | 158,905 | — | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
$ | 26,993,667 | $ | 26,630,112 | 363,555 | — | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
$ | 363,555 | $ | (157,700 | ) | ||||||||||||||||||
|
|
|
|
Credit default swap agreements outstanding at August 31, 2019:
Reference Entity/ Obligation | Termination Date | Fixed Rate | Notional Amount (000)#(3) | Value at Trade Date | Value at August 31, 2019 | Unrealized Appreciation (Depreciation) | ||||||||||||||||
Centrally Cleared Credit Default Swap Agreement on credit indices - Buy Protection(1): |
| |||||||||||||||||||||
CDX.NA.HY.32.V2 | 06/20/24 | 5.000 | %(Q) | 41,085 | $ | (3,040,290 | ) | $ | (3,157,072 | ) | $ | (116,782 | ) | |||||||||
|
|
|
|
|
|
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. |
(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 |
See Notes to Financial Statements.
46 |
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. |
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 | ||||||
Citigroup Global Markets, Inc. | $ | 7,940,000 | $ | — | ||||
|
|
|
|
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 August 31, 2019 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Asset-Backed Securities | ||||||||||||
Collateralized Loan Obligations | $ | — | $ | 548,796,467 | $ | — | ||||||
Bank Loans | — | 291,884,403 | 114,718,037 | |||||||||
Corporate Bonds | — | 7,881,723,040 | 2,693 | |||||||||
Common Stocks | 12,619,164 | — | 55,146,675 | |||||||||
Preferred Stocks | 2,404,680 | — | 40,020 | |||||||||
Warrants | — | — | 42,137 | |||||||||
Affiliated Mutual Funds | 2,267,010,746 | — | — | |||||||||
Other Financial Instruments* | ||||||||||||
Futures Contracts | 1,775,966 | — | — | |||||||||
OTC Forward Foreign Currency Exchange Contracts | — | 205,855 | — | |||||||||
Centrally Cleared Credit Default Swap Agreement | — | (116,782 | ) | — | ||||||||
|
|
|
|
|
| |||||||
Total | $ | 2,283,810,556 | $ | 8,722,492,983 | $ | 169,949,562 | ||||||
|
|
|
|
|
|
* | 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. |
See Notes to Financial Statements.
PGIM High Yield Fund | 47 |
Schedule of Investments(continued)
as of August 31, 2019
The following is a reconciliation of assets in which unobservable inputs (Level 3) were used in determining fair value:
Bank Loans | Corporate Bonds | Common Stocks | Preferred Stocks | |||||||||||||
Balance as of 08/31/18 | $ | 11,536,000 | $ | 2,693 | $ | 350,337 | $ | 54,020 | ||||||||
Realized gain (loss) | 349,373 | — | — | — | ||||||||||||
Change in unrealized appreciation (depreciation) | (1,418,465 | ) | — | 19,036,687 | (14,000 | ) | ||||||||||
Purchases/Exchanges/Issuances | 90,748,690 | — | 34,965,777 | — | ||||||||||||
Sales/Paydowns | (11,542,813 | ) | — | — | — | |||||||||||
Accrued discount/premium | 124,139 | — | — | — | ||||||||||||
Transfers into of Level 3 | 24,921,113 | — | 793,874 | — | ||||||||||||
Transfers out of Level 3 | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance as of 08/31/19 | $ | 114,718,037 | $ | 2,693 | $ | 55,146,675 | $ | 40,020 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Change in unrealized appreciation (depreciation) relating to securities still held at reporting period end | $ | (1,054,703 | ) | $ | — | $ | 19,036,687 | $ | (14,000 | ) | ||||||
|
|
|
|
|
|
|
|
Warrants | ||||
Balance as of 08/31/18 | $ | 41,881 | ||
Realized gain (loss) | — | |||
Change in unrealized appreciation (depreciation) | 256 | |||
Purchases/Exchanges/Issuances | — | |||
Sales/Paydowns | — | |||
Accrued discount/premium | — | |||
Transfers into of Level 3 | — | |||
Transfers out of Level 3 | — | |||
|
| |||
Balance as of 08/31/19 | $ | 42,137 | ||
|
| |||
Change in unrealized appreciation (depreciation) relating to securities still held at reporting period end | $ | 256 | ||
|
|
Level 3 securities as presented in the table above are being fair valued using pricing methodologies approved by Board, which contain unobservable inputs as follows:
Level 3 Securities | Fair Value as of August 31, 2019 | Valuation Technique | Unobservable Inputs | |||||||||
Bank Loans | $ | 114,718,037 | Market Approach | Single Broker Indicative Quote | ||||||||
Corporate Bonds | 2,693 | Formula Pricing | Estimated Future Distributions | |||||||||
Common Stocks | 537,618 | Stale Pricing | Unadjusted Last Trade Price | |||||||||
Common Stocks | 54,596,899 | Market Approach | Single Broker Indicative Quote | |||||||||
Common Stocks | 12,158 | Formula Pricing | Estimated EBITDA | |||||||||
Preferred Stocks | 40,000 | Formula Pricing | Estimated Future Distributions | |||||||||
Preferred Stocks | 20 | Formula Pricing | Estimated Future Distributions | |||||||||
Warrants | 42,137 | Market Approach | Single Broker Indicative Quote | |||||||||
|
| |||||||||||
$ | 169,949,562 | |||||||||||
|
|
See Notes to Financial Statements.
48 |
It is the Fund’s policy to recognize transfers in and transfers out at the fair value as of the beginning of period. Securities transferred levels as follows:
Investments in Securities | Amount Transferred | Level Transfer | Logic | |||||||||
Bank Loans | $ | 24,921,113 | L2 to L3 | | Multiple Broker Quotes to Single Broker Indicative Quote | | ||||||
Common Stocks | $ | 793,874 | L1 to L3 | Official Close to Stale Price |
Industry Classification:
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of August 31, 2019 were as follows (unaudited):
Affiliated Mutual Funds (16.0% represents investments purchased with collateral from securities on loan) | 23.2 | % | ||
Media | 7.8 | |||
Oil & Gas | 7.5 | |||
Telecommunications | 7.1 | |||
Collateralized Loan Obligations | 5.6 | |||
Healthcare-Services | 5.1 | |||
Retail | 4.5 | |||
Home Builders | 4.5 | |||
Chemicals | 4.1 | |||
Commercial Services | 3.7 | |||
Electric | 3.3 | |||
Entertainment | 3.2 | |||
Diversified Financial Services | 3.1 | |||
Computers | 2.7 | |||
Mining | 2.6 | |||
Pipelines | 2.5 | |||
Aerospace & Defense | 2.4 | |||
Foods | 2.2 | |||
Auto Parts & Equipment | 2.1 | |||
Software | 1.8 | |||
Pharmaceuticals | 1.7 | |||
Building Materials | 1.7 | |||
Auto Manufacturers | 1.7 | |||
Packaging & Containers | 1.1 | |||
Real Estate | 1.0 | |||
Real Estate Investment Trusts (REITs) | 0.9 | |||
Gas | 0.8 | |||
Engineering & Construction | 0.7 | |||
Transportation | 0.6 | |||
Internet | 0.6 | |||
Electric Utilities | 0.6 | |||
Iron/Steel | 0.5 | % | ||
Machinery-Diversified | 0.5 | |||
Lodging | 0.5 | |||
Banks | 0.3 | |||
Distribution/Wholesale | 0.3 | |||
Advertising | 0.3 | |||
Agriculture | 0.2 | |||
Miscellaneous Manufacturing | 0.2 | |||
Beverages | 0.2 | |||
Electronics | 0.2 | |||
Metal Fabricate/Hardware | 0.2 | |||
Household Products/Wares | 0.1 | |||
Housewares | 0.1 | |||
Semiconductors | 0.1 | |||
Independent Power & Renewable Electricity Producers | 0.1 | |||
Coal | 0.1 | |||
Oil & Gas Services | 0.1 | |||
Office/Business Equipment | 0.1 | |||
Home Furnishings | 0.0 | * | ||
Capital Markets | 0.0 | * | ||
Forest Products & Paper | 0.0 | * | ||
Oil, Gas & Consumable Fuels | 0.0 | * | ||
Environmental Control | 0.0 | * | ||
Construction Materials | 0.0 | * | ||
|
| |||
114.5 | ||||
Liabilities in excess of other assets | (14.5 | ) | ||
|
| |||
100.0 | % | |||
|
|
* | Less than +/- 0.05% |
See Notes to Financial Statements.
PGIM High Yield Fund | 49 |
Schedule of Investments(continued)
as of August 31, 2019
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.
Fair values of derivative instruments as of August 31, 2019 as presented in the Statement of Assets and Liabilities:
Asset Derivatives | Liability Derivatives | |||||||||||
Derivatives not accounted carried at fair value | Statement of | Fair Value | Statement of | Fair Value | ||||||||
Credit contracts | — | $ | — | Due from/to broker—variation margin swaps | $ | 116,782 | * | |||||
Equity contracts | Unaffiliated investments | 42,137 | — | — | ||||||||
Foreign exchange contracts | Unrealized appreciation on OTC forward foreign currency exchange contracts | 363,555 | Unrealized depreciation on OTC forward foreign currency exchange contracts | 157,700 | ||||||||
Interest rate contracts | Due from/to broker—variation margin futures | 1,776,882 | * | Due from/to broker—variation margin futures | 916 | * | ||||||
|
|
|
| |||||||||
$ | 2,182,574 | $ | 275,398 | |||||||||
|
|
|
|
* | 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 August 31, 2019 are as follows:
Amount of Realized Gain (Loss) on Derivatives Recognized in Income | ||||||||||||
Derivatives not accounted | Futures | Forward Currency Exchange Contracts | Swaps | |||||||||
Credit contracts | $ | — | $ | — | $ | (810,488 | ) | |||||
Foreign exchange contracts | — | 605,797 | — | |||||||||
Interest rate contracts | 17,759,012 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 17,759,012 | $ | 605,797 | $ | (810,488 | ) | |||||
|
|
|
|
|
|
See Notes to Financial Statements.
50 |
Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Income | ||||||||||||||||
Derivatives not accounted | Warrants(1) | Futures | Forward Currency Exchange Contracts | Swaps | ||||||||||||
Credit contracts | $ | — | $ | — | $ | — | $ | (116,782 | ) | |||||||
Equity contracts | 256 | — | — | — | ||||||||||||
Foreign exchange contracts | — | — | 201,608 | — | ||||||||||||
Interest rate contracts | — | 1,701,562 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 256 | $ | 1,701,562 | $ | 201,608 | $ | (116,782 | ) | |||||||
|
|
|
|
|
|
|
|
(1) | Included in net change in unrealized appreciation (depreciation) on investments in the Statement of Operations. |
For the year ended August 31, 2019, the Fund’s average volume of derivative activities is as follows:
Futures Contracts— Long Positions(1) | Futures Contracts— Short Positions(1) | Forward Foreign Currency Exchange Contracts— Purchased(2) | ||||||
$807,538,775 | $ | 23,706,540 | $ | 8,592,182 |
Forward Foreign Currency Exchange Contracts— Sold(2) | Credit Default Swap Agreements— Buy Protection(1) | |||||
$ | 17,252,131 | $ | 8,217,000 |
(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 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 | $ | 1,525,030,457 | $ | (1,525,030,457 | ) | $ | — | |||||
|
|
See Notes to Financial Statements.
PGIM High Yield Fund | 51 |
Schedule of Investments(continued)
as of August 31, 2019
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 | |||||||||||||||
Citibank, N.A. | $ | 363,555 | $ | (157,700 | ) | $ | 205,855 | $ | — | $ | 205,855 | |||||||||
|
|
|
|
|
|
|
|
|
|
(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.
52 |
Statement of Assets and Liabilities
as of August 31, 2019
Assets | ||||
Investments at value, including securities on loan of $1,525,030,457: | ||||
Unaffiliated investments (cost $8,846,954,668) | $ | 8,907,377,316 | ||
Affiliated investments (cost $2,266,822,453) | 2,267,010,746 | |||
Cash | 287,374 | |||
Foreign currency, at value (cost $2,014,696) | 2,002,195 | |||
Dividends and interest receivable | 147,691,068 | |||
Receivable for Fund shares sold | 36,129,846 | |||
Deposit with broker for centrally cleared/exchange-traded derivatives | 7,940,000 | |||
Receivable for investments sold | 4,061,410 | |||
Due from broker—variation margin swaps | 1,569,194 | |||
Due from broker—variation margin futures | 436,637 | |||
Unrealized appreciation on OTC forward foreign currency exchange contracts | 363,555 | |||
Prepaid expenses | 80,738 | |||
|
| |||
Total Assets | 11,374,950,079 | |||
|
| |||
Liabilities | ||||
Payable to broker for collateral for securities on loan | 1,558,377,374 | |||
Payable for Fund shares reacquired | 33,231,248 | |||
Accrued expenses and other liabilities | 6,799,090 | |||
Payable for investments purchased | 5,775,241 | |||
Dividends payable | 3,352,612 | |||
Management fee payable | 3,051,061 | |||
Distribution fee payable | 636,557 | |||
Affiliated transfer agent fee payable | 182,651 | |||
Unrealized depreciation on OTC forward foreign currency exchange contracts | 157,700 | |||
Affiliated shareholder servicing fees payable | 156 | |||
|
| |||
Total Liabilities | 1,611,563,690 | |||
|
| |||
Net Assets | $ | 9,763,386,389 | ||
|
| |||
Net assets were comprised of: | ||||
Common stock, at par | $ | 17,760,644 | ||
Paid-in capital in excess of par | 9,733,637,062 | |||
Total distributable earnings (loss) | 11,988,683 | |||
|
| |||
Net assets, August 31, 2019 | $ | 9,763,386,389 | ||
|
|
See Notes to Financial Statements.
PGIM High Yield Fund | 53 |
Statement of Assets and Liabilities(continued)
as of August 31, 2019
Class A | ||||
Net asset value and redemption price per share, | $ | 5.49 | ||
Maximum sales charge (3.25% of offering price) | 0.18 | |||
|
| |||
Maximum offering price to public | $ | 5.67 | ||
|
| |||
Class B | ||||
Net asset value, offering price and redemption price per share, | ||||
($82,018,386 ÷ 14,953,689 shares of common stock issued and outstanding) | $ | 5.48 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share, | ||||
($234,164,526 ÷ 42,695,998 shares of common stock issued and outstanding) | $ | 5.48 | ||
|
| |||
Class R | ||||
Net asset value, offering price and redemption price per share, | ||||
($74,523,274 ÷ 13,576,031 shares of common stock issued and outstanding) | $ | 5.49 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share, | ||||
($4,643,765,851 ÷ 843,767,303 shares of common stock issued and outstanding) | $ | 5.50 | ||
|
| |||
Class R2 | ||||
Net asset value, offering price and redemption price per share, | ||||
($7,402,435 ÷ 1,346,478 shares of common stock issued and outstanding) | $ | 5.50 | ||
|
| |||
Class R4 | ||||
Net asset value, offering price and redemption price per share, | ||||
($11,469,025 ÷ 2,086,911 shares of common stock issued and outstanding) | $ | 5.50 | ||
|
| |||
Class R6 | ||||
Net asset value, offering price and redemption price per share, | ||||
($3,022,241,240 ÷ 550,274,655 shares of common stock issued and outstanding) | $ | 5.49 | ||
|
|
See Notes to Financial Statements.
54 |
Statement of Operations
Year Ended August 31, 2019
Net Investment Income (Loss) | ||||
Income | ||||
Interest income | $ | 526,986,917 | ||
Affiliated dividend income | 10,553,794 | |||
Income from securities lending, net (including affiliated income of $2,623,321) | 7,774,777 | |||
Unaffiliated dividend income (net of $7,776 foreign withholding tax) | 5,146,640 | |||
|
| |||
Total income | 550,462,128 | |||
|
| |||
Expenses | ||||
Management fee | 31,565,113 | |||
Distribution fee(a) | 7,160,230 | |||
Shareholder servicing fees (including affiliated expense of $351)(a) | 10,825 | |||
Transfer agent’s fees and expenses (including affiliated expense of $1,017,743)(a) | 7,895,966 | |||
Custodian and accounting fees | 618,603 | |||
Shareholders’ reports | 488,178 | |||
Registration fees(a) | 420,132 | |||
SEC registration fees | 243,942 | |||
Directors’ fees | 156,947 | |||
Legal fees and expenses | 60,825 | |||
Audit fee | 41,826 | |||
Miscellaneous | 116,385 | |||
|
| |||
Total expenses | 48,778,972 | |||
Less: Fee waiver and/or expense reimbursement(a) | (38,093 | ) | ||
Distribution fee waiver(a) | (179,168 | ) | ||
|
| |||
Net expenses | 48,561,711 | |||
|
| |||
Net investment income (loss) | 501,900,417 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investment And Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions (including affiliated of $10,592) | 26,696,139 | |||
Futures transactions | 17,759,012 | |||
Forward currency contract transactions | 605,797 | |||
Swap agreement transactions | (810,488 | ) | ||
Foreign currency transactions | (88,645 | ) | ||
|
| |||
44,161,815 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (including affiliated of $22,170) | 85,510,919 | |||
Futures | 1,701,562 | |||
Forward currency contracts | 201,608 | |||
Swap agreements | (116,782 | ) | ||
Foreign currencies | (18,775 | ) | ||
|
| |||
87,278,532 | ||||
|
| |||
Net gain (loss) on investment and foreign currency transactions | 131,440,347 | |||
|
| |||
Net Increase (Decrease) In Net Assets Resulting From Operations | $ | 633,340,764 | ||
|
|
See Notes to Financial Statements.
PGIM High Yield Fund | 55 |
Statement of Operations
Year Ended August 31, 2019
(a) | Class specific expenses and waivers were as follows: |
Class A | Class B | Class C | Class R | Class Z | Class R2 | Class R4 | Class R6 | |||||||||||||||||||||||||
Distribution fee | 3,506,604 | 754,472 | 2,346,016 | 537,504 | — | 15,634 | — | — | ||||||||||||||||||||||||
Shareholder servicing fees | — | — | — | — | — | 6,253 | 4,572 | — | ||||||||||||||||||||||||
Transfer agent’s fees and expenses | 2,062,086 | 115,500 | 192,917 | 114,046 | 5,354,858 | 10,231 | 6,622 | 39,706 | ||||||||||||||||||||||||
Registration fees | 45,105 | 17,729 | 24,425 | 18,764 | 225,435 | 19,215 | 19,215 | 50,244 | ||||||||||||||||||||||||
Fee waiver and/or expense reimbursement | — | — | — | — | — | (19,527 | ) | (18,566 | ) | — | ||||||||||||||||||||||
Distribution fee waiver | — | — | — | (179,168 | ) | — | — | — | — |
See Notes to Financial Statements.
56 |
Statements of Changes in Net Assets
Year Ended August 31, | ||||||||
2019 | 2018 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 501,900,417 | $ | 407,254,971 | ||||
Net realized gain (loss) on investment and foreign currency transactions | 44,161,815 | (10,181,320 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments and foreign currencies | 87,278,532 | (145,272,901 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 633,340,764 | 251,800,750 | ||||||
|
|
|
| |||||
Dividends and Distributions | ||||||||
Distributions from distributable earnings* | ||||||||
Class A | (86,195,898 | ) | — | |||||
Class B | (5,683,691 | ) | — | |||||
Class C | (12,778,038 | ) | — | |||||
Class R | (4,198,997 | ) | — | |||||
Class Z | (257,568,473 | ) | — | |||||
Class R2 | (378,803 | ) | — | |||||
Class R4 | (287,969 | ) | — | |||||
Class R6 | (161,233,775 | ) | — | |||||
|
|
|
| |||||
(528,325,644 | ) | — | ||||||
|
|
|
| |||||
Dividends from net investment income* | ||||||||
Class A | (77,758,149 | ) | ||||||
Class B | (7,643,669 | ) | ||||||
Class C | (13,311,231 | ) | ||||||
Class R | (3,975,941 | ) | ||||||
Class Z | (194,377,366 | ) | ||||||
Class R2 | (39,555 | ) | ||||||
Class R4 | (15,936 | ) | ||||||
Class R6 | (117,518,238 | ) | ||||||
|
|
|
| |||||
* | (414,640,085 | ) | ||||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) | ||||||||
Net proceeds from shares sold | 4,500,624,470 | 3,066,560,066 | ||||||
Net asset value of shares issued in reinvestment of dividends and distributions | 469,792,599 | 375,749,809 | ||||||
Cost of shares reacquired | (2,835,520,016 | ) | (2,062,702,073 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in net assets from Fund share transactions | 2,134,897,053 | 1,379,607,802 | ||||||
|
|
|
| |||||
Total increase (decrease) | 2,239,912,173 | 1,216,768,467 | ||||||
Net Assets: | ||||||||
Beginning of year | 7,523,474,216 | 6,306,705,749 | ||||||
|
|
|
| |||||
End of year(a) | $ | 9,763,386,389 | $ | 7,523,474,216 | ||||
|
|
|
| |||||
(a) Includes undistributed/(distributions in excess of) net investment income of: | $ | * | $ | 8,971,765 | ||||
|
|
|
|
* | For the year ended August 31, 2019, the disclosures have been revised to reflect revisions to Regulation S-X adopted by the SEC in 2018 (refer to Note 9). |
See Notes to Financial Statements.
PGIM High Yield Fund | 57 |
Notes to Financial Statements
Prudential Investment Portfolios, Inc. 15 (the “Company”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as a diversified open-end management investment company. The Company consists of two funds: PGIM High Yield Fund and PGIM Short Duration High Yield Income Fund. These financial statements relate only to the PGIM High Yield Fund (the “Fund”).
The investment objective of the Fund is to maximize current income. As a secondary investment objective, the Fund seeks capital appreciation but only when consistent with the Fund’s primary objective of current income.
1. Accounting Policies
The Fund follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 946 Financial Services—Investment Companies.The following accounting policies conform to U.S. generally accepted accounting principles. The Fund consistently follows such policies in the preparation of its financial statements.
Securities Valuation:The Fund holds securities and other assets and liabilities that are fair valued at the close of each day (generally, 4:00 PM Eastern time) the New York Stock Exchange (“NYSE”) is open for trading. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Company’s Board of Directors (the “Board”) has adopted valuation procedures for security valuation under which fair valuation responsibilities have been delegated to PGIM Investments LLC (“PGIM Investments” or the “Manager”). Pursuant to the Board’s delegation, the Manager has established a Valuation Committee responsible for supervising the fair valuation of portfolio securities and other assets and liabilities. The valuation procedures permit the Fund to utilize independent pricing vendor services, quotations from market makers, and alternative valuation methods when market quotations are either not readily available or not deemed representative of fair value. A record of the Valuation Committee’s actions is subject to the Board’s review, approval, and ratification at its next regularly scheduled quarterly meeting.
For the fiscal reporting 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.
58 |
Various inputs determine how the Fund’s investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the Schedule of Investments and referred to herein as the “fair value hierarchy” in accordance with FASB ASC Topic 820—Fair Value Measurements and Disclosures.
Derivative instruments, such as futures or options, that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange where the security principally trades. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price, they are classified as Level 1 in the fair value hierarchy. In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and ask prices, or at the last bid price in the absence of an ask price. These securities are classified as Level 2 in the fair value hierarchy.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the OTC market are generally classified as Level 2 in the fair value hierarchy. Such fixed income securities are typically valued using the market approach which generally involves obtaining data from an approved independent third-party vendor source. The Fund utilizes the market approach as the primary method to value securities when market prices of identical or comparable instruments are available. The third-party vendors’ valuation techniques used to derive the evaluated bid price are based on evaluating observable inputs, including but not limited to, yield curves, yield spreads, credit ratings, deal terms, tranche level attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations and reported trades. Certain Level 3 securities are also 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.
Bank 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. Bank loans valued using such vendor prices are generally classified as Level 2 in the fair value hierarchy. Bank 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
PGIM High Yield Fund | 59 |
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 pricing methodologies approved by the Board. In the event that unobservable inputs are used when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
When determining the fair value of securities, some of the factors influencing the valuation include: the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition and the markets in which it does business; the cost of the investment; the size of the holding and the capitalization of the issuer; the prices of any recent transactions or bids/offers for such securities or any comparable securities; any available analyst media or other reports or information deemed reliable by the Manager regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other unaffiliated mutual funds to calculate their net asset values.
Illiquid Securities:Pursuant to Rule 22e-4 under the 1940 Act, the Fund has adopted a Board approved Liquidity Risk Management Program (“LRMP”) that requires, among other things, that the Fund limit its illiquid investments that are assets to no more than 15% of net assets. Illiquid securities are those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale, may not reasonably be expected to be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. The Fund may find it difficult to sell illiquid securities at the time considered most advantageous by its subadviser and may incur transaction costs that would not be incurred in the sale of securities that were freely marketable.
60 |
Restricted Securities:Securities acquired in unregistered, private sales from the issuing company or from an affiliate of the issuer are considered restricted as to disposition under federal securities law (“restricted securities”). Such restricted securities are valued pursuant to the valuation procedures noted above. Restricted securities that would otherwise be considered illiquid investments pursuant to the Fund’s LRMP because of legal restrictions on resale to the general public may be traded among qualified institutional buyers under Rule 144A of the Securities Act of 1933. Therefore, these Rule 144A securities, as well as commercial paper that is sold in private placements under Section 4(2) of the Securities Act of 1933, may be classified higher than “illiquid” under the LRMP (i.e. “moderately liquid” or “less liquid” investments). However, the liquidity of the Fund’s investments in restricted securities could be impaired if trading does not develop or declines.
Foreign Currency Translation:The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis:
(i) market value of investment securities, other assets and liabilities—at the current rates of exchange;
(ii) purchases and sales of investment securities, income and expenses—at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not generally isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities held at the end of the period. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities sold during the period. Accordingly, holding period realized foreign currency gains (losses) are included in the reported net realized gains (losses) on investment transactions. Notwithstanding the above, the Fund does isolate the effect of fluctuations in foreign currency exchange rates when determining the gain (loss) upon the sale or maturity of foreign currency denominated debt obligations; such amounts are included in net realized gains (losses) on foreign currency transactions.
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 forward currency transactions, and the difference between the amounts of interest, dividends and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) arise from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates.
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
PGIM High Yield Fund | 61 |
Notes to Financial Statements(continued)
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 (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 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.
Bank Loans:The Fund invested in bank loans. Bank loans include fixed and floating rate 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
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in the bank loan market. The Fund may acquire interests in loans directly (by way of assignment from the selling institution) or indirectly (by way of the purchase of a participation interest from the selling institution). Under a bank loan assignment, the Fund generally will succeed to all the rights and obligations of an assigning lending institution and becomes a lender under the loan agreement with the relevant borrower in connection with that loan. Under a bank loan 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 it is 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 it has 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.
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 (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. Any 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.
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.
PGIM High Yield Fund | 63 |
Notes to Financial Statements(continued)
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 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.
Master Netting Arrangements:The Company, on behalf of the Fund, is subject to various Master Agreements, or netting arrangements, with select counterparties. These are agreements which a subadviser may have negotiated and entered into on behalf of all or a portion of the Fund. A master netting arrangement between the Fund and the counterparty permits the Fund to offset amounts payable by the Fund to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Fund to cover the Fund’s exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable. In addition to master netting arrangements, the right to set-off exists when all the conditions are met such that each of the parties owes the other determinable amounts, the reporting party has the right to set-off the amount owed with the amount owed by the other party, the reporting party intends to set-off and the right of set-off is enforceable by law. During the reporting period, there was no intention to settle on a net basis and all amounts are presented on a gross basis on the Statement of Assets and Liabilities.
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The Company, 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 consolidated financial statements.
As of August 31, 2019, the Fund has not met conditions under such agreements which give the counterparty the right to call for an early termination.
Forward currency contracts, swaps and financial futures contracts involve elements of both market and credit risk in excess of the amounts reflected on the Consolidated Statement of Assets and Liabilities. Such risks may be mitigated by engaging in master netting arrangements.
PGIM High Yield Fund | 65 |
Notes to Financial Statements(continued)
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 receive pursuant to debt restructuring, securities that pay-in-kind (PIK) the interest due on such debt instruments. The PIK interest, computed at the contractual rate specified, is added to the existing principal balance of the debt when issued bonds have same terms as the bond or recorded as a separate bond when terms are different from the existing debt, and is recorded as interest income.
Securities Lending:The Fund lends its portfolio securities to banks and broker-dealers. The loans are secured by collateral at least equal to the market value of the securities loaned. Collateral pledged by each borrower is invested in an affiliated money market fund and is marked to market daily, based on the previous day’s market value, such that the value of the collateral exceeds the value of the loaned securities. In the event of significant appreciation in value of securities on loan on the last business day of the reporting period, the financial statements may reflect a collateral value that is less than the market value of the loaned securities. Such shortfall is remedied as described above. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of the loan, the borrower will return to the Fund securities identical to the loaned securities. Should the borrower of the securities fail financially, the Fund has the right to repurchase the securities in the open market using the collateral.
The Fund recognizes income, net of any rebate and securities lending agent fees, for lending its securities in the form of fees or interest on the investment of any cash received as collateral. The borrower receives all interest and dividends from the securities loaned and such payments are passed back to the lender in amounts equivalent thereto. The Fund also continues to recognize any unrealized gain (loss) in the market price of the securities loaned and on the change in the value of the collateral invested that may occur during the term of the loan. In addition, realized gain (loss) is recognized on changes in the value of the collateral invested upon liquidation of the collateral. Net earnings from securities lending are disclosed on the Statement of Operations as ��Income from securities lending, net”.
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.
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Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on the accrual basis. Expenses are recorded on an accrual basis, which may require the use of certain estimates by management that may differ from actual. Net investment income or loss (other than class specific expenses and waivers, which are allocated as noted below) and unrealized and realized gains (losses) are allocated daily to each class of shares based upon the relative proportion of adjusted net assets of each class at the beginning of the day. Class specific expenses and waivers, where applicable, are charged to the respective share classes. Class specific expenses include distribution fees and distribution fee waivers, shareholder servicing fees, transfer agent’s fees and expenses, registration fees and fee waivers and/or expense reimbursements, as applicable.
Taxes:It is the Fund’s policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net investment income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required. Withholding taxes on foreign dividends, interest and capital gains, if any, are recorded, net of reclaimable amounts, at the time the related income is earned.
Dividends and Distributions:The Fund expects to declare dividends of its net investment income daily and pay such dividends monthly. Distributions of net realized capital and currency gains, if any, are declared and paid at least annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-date. Permanent book/tax differences relating to income and gain (loss) are reclassified between total distributable earnings (loss) and paid-in capital in excess of par, as appropriate.
Estimates:The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
2. Agreements
The Company, on behalf of the Fund, has a management agreement with the Manager. Pursuant to this agreement, the Manager has responsibility for all investment advisory services and supervises the subadviser’s performance of such services. In addition, under the management agreement, the Manager provides all of the administrative functions necessary for the organization, operation and management of the Fund. The Manager administers the corporate affairs of the Fund and, in connection therewith, furnishes the Fund with office facilities, together with those ordinary clerical and bookkeeping services which are not being furnished by the Fund’s custodian and the Fund’s transfer agent. The Manager is also responsible for the staffing and management of dedicated groups of legal, marketing, compliance and related personnel necessary for the operation of the Fund. The legal, marketing, compliance and related personnel are also responsible for the
PGIM High Yield Fund | 67 |
Notes to Financial Statements(continued)
management and oversight of the various service providers to the Fund, including, but not limited to, the custodian, transfer agent, and accounting agent.
The Manager has entered into subadvisory agreements with PGIM, Inc., which provides subadvisory services to the Fund through its PGIM Fixed Income unit. The subadvisory agreements provide that PGIM, Inc. will furnish investment advisory services in connection with the management of the Fund. In connection therewith, are obligated to keep certain books and records of the Fund. The Manager pays for the services of PGIM, Inc., the cost of compensation of officers of the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears all other costs and expenses.
The management fee paid to the Manager is accrued daily and payable monthly at an annual rate of 0.50% of the Fund’s average daily net assets up to $250 million, 0.475% of the next $500 million, 0.45% of the next $750 million, 0.425% of the next $500 million, 0.40% of the next $500 million, 0.375% of the next $500 million and 0.35% of the Fund’s average daily net assets in excess of $3 billion. The effective management fee rate before any waivers and/or expense reimbursements was 0.38% for the year ended August 31, 2019.
The Manager has contractually agreed, through December 31, 2020, to limit transfer agency, shareholder servicing, sub-transfer agency, and blue sky fees, as applicable, to the extent that such fees cause the total annual operating expenses to exceed 0.91% of average daily net assets for Class R2 shares, or 0.66% of average daily net assets for Class R4 shares. This contractual waiver excludes interest, brokerage, taxes (such as income and foreign withholding taxes, stamp duty and deferred tax expenses), acquired fund fees and expenses, extraordinary expenses, and certain other Fund expenses such as dividend and interest expense and broker charges on short sales. Where applicable, the Manager agrees to waive management fees or shared operating expenses on any share class to the same extent that it waives such expenses on any other share class. In addition, total annual fund operating expenses for Class R6 shares will not exceed total annual operating expenses for Class Z shares. Fees and/or expenses waived and/or reimbursed by the Manager may be recouped by the Manager within the same fiscal year during which such waiver and/or reimbursement is made if such recoupment can be realized without exceeding the expense limit in effect at the time of the recoupment for that fiscal year.
The Company, on behalf of the Fund, has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”), which acts as the distributor of the Class A Class B, Class C, Class R, Class Z, Class R2, Class R4 and Class R6 shares of the Fund. The Fund compensates PIMS for distributing and servicing the Fund’s Class A, Class B, Class C, Class R and Class R2 shares, pursuant to the plans of distribution (the “Distribution Plans”), regardless of expenses actually incurred by PIMS. The distribution fees are accrued daily
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and payable monthly. No distribution or service fees are paid to PIMS as distributor of the Class Z, Class R4 or Class R6 shares of the Fund.
Pursuant to the Distribution Plans, the Fund compensates PIMS for distribution related activities at an annual rate of up to 0.25%, 0.75%, 1%, 0.75% and 0.25% of the average daily net assets of the Class A, Class B, Class C, Class R and Class R2 shares, respectively. PIMS has contractually agreed through December 31, 2020 to limit such fees to 0.50% of the average daily net assets of the Class R shares.
The Fund has adopted a Shareholder Services Plan with respect to Class R2 and Class R4 shares. Under the terms of the Shareholder Services Plan, Class R2 and Class R4 shares are authorized to pay to Prudential Mutual Fund Services LLC (“PMFS”), its affiliates or third-party service providers, as compensation for services rendered to the shareholders of such Class R2 or Class R4 shares, a shareholder service fee at an annual rate of 0.10% of the average daily net assets attributable to Class R2 and Class R4 shares. The shareholder service fee is accrued daily and paid monthly.
For the year ended August 31, 2019, PIMS received $2,245,252 in front-end sales charges resulting from sales of Class A shares. Additionally, for the year ended August 31, 2019, PIMS received $1,472, $38,592 and $12,385 in contingent deferred sales charges imposed upon redemptions by certain Class A, Class B and Class C shareholders, respectively. From these fees, PIMS paid such sales charges to broker-dealers, who in turn paid commissions to salespersons and incurred other distribution costs.
PGIM Investments, PGIM, Inc. and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PGIM Investments and an indirect, wholly-owned subsidiary of Prudential, serves as the Company’s transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
The Fund may invest its overnight sweep cash in the PGIM Core Ultra Short Bond Fund (the “Core Fund”), and its securities lending cash collateral in the PGIM Institutional Money Market Fund (the “Money Market Fund”), each a series of Prudential Investment Portfolios 2, registered under the 1940 Act and managed by PGIM Investments. Through the Fund’s investments in the mentioned underlying funds, PGIM Investments and/or its affiliates are paid fees or reimbursed for providing their services. Earnings from the Core Fund and Money Market Fund are disclosed on the Statement of Operations as “Affiliated dividend income” and “Income from securities lending, net”, respectively.
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
PGIM High Yield Fund | 69 |
Notes to Financial Statements(continued)
subject to certain conditions, permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. Pursuant to the Rule 17a-7 procedures and consistent with guidance issued by the SEC, the Company’s Chief Compliance Officer (“CCO”) prepares a quarterly summary of all such transactions for submission to the Board, together with the CCO’s written representation that all such 17a-7 transactions were effected in accordance with the Fund’s Rule 17a-7 procedures. For the year ended August 31, 2019, no 17a-7 transactions were entered into by the Fund.
4. Portfolio Securities
The aggregate cost of purchases and proceeds from sales of portfolio securities (excluding short-term investments and U.S. Government securities) for the year ended August 31, 2019, were $5,239,454,082 and $3,391,439,140, respectively.
A summary of the cost of purchases and proceeds from sales of shares of affiliated investments for the year ended August 31, 2019, 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 | |||||||||||||||||||||||
PGIM Core Ultra Short Bond Fund* | ||||||||||||||||||||||||||||||
$ | 485,066,805 | $ | 3,054,166,413 | $ | 2,834,226,930 | $ | — | $ | — | $ | 705,006,288 | 705,006,288 | $ | 10,553,794 | ||||||||||||||||
PGIM Institutional Money Market Fund* | ||||||||||||||||||||||||||||||
1,484,028,566 | 2,529,310,578 | 2,451,367,448 | 22,170 | 10,592 | 1,562,004,458 | 1,561,848,273 | 2,623,321 | ** | ||||||||||||||||||||||
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$ | 1,969,095,371 | $ | 5,583,476,991 | $ | 5,285,594,378 | $ | 22,170 | $ | 10,592 | $ | 2,267,010,746 | $ | 13,177,115 | |||||||||||||||||
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* | The Fund did not have any capital gain distributions during the reporting period. |
** | This amount is included in “Income from securities lending, net” on the Statement of Operations. |
5. Distributions and Tax Information
Distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-date.
For the years ended August 31, 2019 and August 31, 2018, the tax character of dividends paid by the Fund were $528,325,644 and $414,640,085 of ordinary income, respectively.
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As of August 31, 2019, the accumulated undistributed earnings on a tax basis was $16,916,373 of ordinary income.
The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of August 31, 2019 were as follows:
Tax Basis | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation | |||
$11,130,296,551 | $339,978,956 | $(294,022,406) | $45,956,550 |
The difference between book and tax basis was primarily attributable to deferred losses on wash sales, differences in the treatment of premium amortization for book and tax purposes, securities in default and other book to tax differences.
As of August 31, 2019, the Fund has a capital loss carryforward of approximately $47,532,000 which can be carried forward for an unlimited period. The Fund utilized approximately $16,184,000 of its capital loss carryforward to offset net taxable gains realized in the fiscal year ended August 31, 2019. 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 August 31, 2019 are subject to such review.
6. Capital and Ownership
The Fund offers Class A, Class B, Class C, Class R, Class Z, Class R2, Class R4 and Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 3.25%. Investors who purchase $1 million or more of Class A shares and sell those shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1.00% on sales of $1 million or more made within 12 months of purchase for purchases prior to July 15, 2019, and a CDSC of 1.00% on sales of $500,000 or more made within 12 months of purchase for purchases on or after July 15, 2019. The Class A CDSC is waived for certain retirement and/or benefit plans. A special exchange privilege is also available for shareholders who qualified to purchase Class A shares at net asset value. Class B shares are sold with a CDSC which declines from 5% to zero depending on the period of time the shares are held. Class B shares will automatically convert to Class A shares on a monthly basis approximately seven years after purchase. Class B shares are closed to new purchases. Class C shares are sold with a CDSC of 1% on sales made within 12 months of purchase. Class C shares will automatically convert to Class A shares on a monthly basis approximately 10 years after purchase. Class R, Class Z, Class R2, Class R4 and Class R6
PGIM High Yield Fund | 71 |
Notes to Financial Statements(continued)
shares are not subject to any sales or redemption charge and are available exclusively for sale to a limited group of investors.
Under certain circumstances, an exchange may be made from specified share classes of the Fund to one or more other share classes of the Fund as presented in the table of transactions in shares of common stock.
The Company is authorized to issue 6 billion shares of common stock, with a par value of $0.01 per share. Of the Company’s authorized capital stock, 4.815 billion authorized shares have been allocated to the Fund and divided into nine classes, designated Class A, Class B, Class C, Class R, Class Z, Class T, Class R2, Class R4 and Class R6 common stock, each of which consists of 665 million, 50 million, 200 million, 150 million, 2.250 billion, 300 million, 100 million, 100 million and 1 billion authorized shares, respectively. The Fund currently does not have any Class T shares outstanding.
As of August 31, 2019, Prudential, through its affiliated entities, including affiliated funds (if applicable), owned 2,001 Class R2 shares, 2,010 Class R4 shares of the Fund. At reporting period end, two shareholders of record, each holding greater than 5% of the Fund, held 34% of the Fund’s outstanding shares.
Transactions in shares of common stock were as follows:
Class A | Shares | Amount | ||||||
Year ended August 31, 2019: | ||||||||
Shares sold | 74,068,779 | $ | 400,860,582 | |||||
Shares issued in reinvestment of dividends and distributions | 13,820,329 | 74,462,632 | ||||||
Shares reacquired | (65,675,358 | ) | (352,350,701 | ) | ||||
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Net increase (decrease) in shares outstanding before conversion | 22,213,750 | 122,972,513 | ||||||
Shares issued upon conversion from other share class(es) | 49,421,196 | 265,931,388 | ||||||
Shares reacquired upon conversion into other share class(es) | (2,596,164 | ) | (14,033,948 | ) | ||||
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Net increase (decrease) in shares outstanding | 69,038,782 | $ | 374,869,953 | |||||
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Year ended August 31, 2018: | ||||||||
Shares sold | 41,452,856 | $ | 227,190,349 | |||||
Shares issued in reinvestment of dividends and distributions | 12,026,313 | 65,810,112 | ||||||
Shares reacquired | (63,962,439 | ) | (350,444,095 | ) | ||||
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Net increase (decrease) in shares outstanding before conversion | (10,483,270 | ) | (57,443,634 | ) | ||||
Shares issued upon conversion from other share class(es) | 5,019,853 | 27,483,371 | ||||||
Shares reacquired upon conversion into other share class(es) | (4,359,054 | ) | (23,861,398 | ) | ||||
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Net increase (decrease) in shares outstanding | (9,822,471 | ) | $ | (53,821,661 | ) | |||
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Class B | Shares | Amount | ||||||
Year ended August 31, 2019: | ||||||||
Shares sold | 76,351 | $ | 408,306 | |||||
Shares issued in reinvestment of dividends and distributions | 922,179 | 4,944,227 | ||||||
Shares reacquired | (2,831,547 | ) | (15,147,986 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (1,833,017 | ) | (9,795,453 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (6,058,037 | ) | (32,643,134 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (7,891,054 | ) | $ | (42,438,587 | ) | |||
|
|
|
| |||||
Year ended August 31, 2018: | ||||||||
Shares sold | 266,008 | $ | 1,470,659 | |||||
Shares issued in reinvestment of dividends and distributions | 1,175,286 | 6,425,312 | ||||||
Shares reacquired | (3,679,116 | ) | (20,102,326 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (2,237,822 | ) | (12,206,355 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (4,381,449 | ) | (23,996,383 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (6,619,271 | ) | $ | (36,202,738 | ) | |||
|
|
|
| |||||
Class C | ||||||||
Year ended August 31, 2019: | ||||||||
Shares sold | 8,382,124 | $ | 45,169,549 | |||||
Shares issued in reinvestment of dividends and distributions | 2,183,508 | 11,717,900 | ||||||
Shares reacquired | (8,337,158 | ) | (44,548,250 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 2,228,474 | 12,339,199 | ||||||
Shares reacquired upon conversion into other share class(es) | (5,545,717 | ) | (30,129,254 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (3,317,243 | ) | $ | (17,790,055 | ) | |||
|
|
|
| |||||
Year ended August 31, 2018: | ||||||||
Shares sold | 6,963,702 | $ | 38,156,539 | |||||
Shares issued in reinvestment of dividends and distributions | 2,184,739 | 11,936,819 | ||||||
Shares reacquired | (9,644,357 | ) | (52,719,957 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (495,916 | ) | (2,626,599 | ) | ||||
Shares reacquired upon conversion into other share class(es) | (1,468,942 | ) | (8,038,162 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (1,964,858 | ) | $ | (10,664,761 | ) | |||
|
|
|
| |||||
Class R | ||||||||
Year ended August 31, 2019: | ||||||||
Shares sold | 3,446,973 | $ | 18,546,178 | |||||
Shares issued in reinvestment of dividends and distributions | 778,085 | 4,184,315 | ||||||
Shares reacquired | (3,869,348 | ) | (20,706,500 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 355,710 | $ | 2,023,993 | |||||
|
|
|
| |||||
Year ended August 31, 2018: | ||||||||
Shares sold | 6,214,810 | $ | 33,933,000 | |||||
Shares issued in reinvestment of dividends and distributions | 732,744 | 4,004,529 | ||||||
Shares reacquired | (5,314,039 | ) | (28,996,499 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 1,633,515 | $ | 8,941,030 | |||||
|
|
|
|
PGIM High Yield Fund | 73 |
Notes to Financial Statements(continued)
Class Z | Shares | Amount | ||||||
Year ended August 31, 2019: | ||||||||
Shares sold | 492,259,381 | $ | 2,654,385,212 | |||||
Shares issued in reinvestment of dividends and distributions | 42,734,126 | 230,499,156 | ||||||
Shares reacquired | (325,325,069 | ) | (1,746,604,410 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 209,668,438 | 1,138,279,958 | ||||||
Shares issued upon conversion from other share class(es) | 3,695,884 | 19,976,110 | ||||||
Shares reacquired upon conversion into other share class(es) | (43,314,164 | ) | (233,499,501 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 170,050,158 | $ | 924,756,567 | |||||
|
|
|
| |||||
Year ended August 31, 2018: | ||||||||
Shares sold | 367,472,874 | $ | 2,017,011,323 | |||||
Shares issued in reinvestment of dividends and distributions | 32,895,573 | 180,215,326 | ||||||
Shares reacquired | (215,791,963 | ) | (1,183,369,604 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 184,576,484 | 1,013,857,045 | ||||||
Shares issued upon conversion from other share class(es) | 5,490,592 | 30,124,848 | ||||||
Shares reacquired upon conversion into other share class(es) | (38,031,206 | ) | (210,930,963 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 152,035,870 | $ | 833,050,930 | |||||
|
|
|
| |||||
Class R2 | ||||||||
Year ended August 31, 2019: | ||||||||
Shares sold | 1,196,673 | $ | 6,442,025 | |||||
Shares issued in reinvestment of dividends and distributions | 69,807 | 376,505 | ||||||
Shares reacquired | (727,646 | ) | (3,930,608 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 538,834 | $ | 2,887,922 | |||||
|
|
|
| |||||
Period ended August 31, 2018*: | ||||||||
Shares sold | 828,234 | $ | 4,461,622 | |||||
Shares issued in reinvestment of dividends and distributions | 7,654 | 41,571 | ||||||
Shares reacquired | (28,244 | ) | (153,128 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 807,644 | $ | 4,350,065 | |||||
|
|
|
| |||||
Class R4 | ||||||||
Year ended August 31, 2019: | ||||||||
Shares sold | 2,080,853 | $ | 11,306,131 | |||||
Shares issued in reinvestment of dividends and distributions | 45,376 | 246,023 | ||||||
Shares reacquired | (400,115 | ) | (2,166,698 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 1,726,114 | $ | 9,385,456 | |||||
|
|
|
| |||||
Period ended August 31, 2018*: | ||||||||
Shares sold | 358,100 | $ | 1,932,289 | |||||
Shares issued in reinvestment of dividends and distributions | 3,105 | 16,881 | ||||||
Shares reacquired | (408 | ) | (2,219 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 360,797 | $ | 1,946,951 | |||||
|
|
|
|
74 |
Class R6 | Shares | Amount | ||||||
Year ended August 31, 2019: | ||||||||
Shares sold | 252,950,534 | $ | 1,363,506,487 | |||||
Shares issued in reinvestment of dividends and distributions | 26,618,588 | 143,361,841 | ||||||
Shares reacquired | (120,965,520 | ) | (650,064,863 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 158,603,602 | 856,803,465 | ||||||
Shares issued upon conversion from other share class(es) | 4,752,224 | 25,575,165 | ||||||
Shares reacquired upon conversion into other share class(es) | (221,801 | ) | (1,176,826 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 163,134,025 | $ | 881,201,804 | |||||
|
|
|
| |||||
Year ended August 31, 2018: | ||||||||
Shares sold | 135,389,864 | $ | 742,404,285 | |||||
Shares issued in reinvestment of dividends and distributions | 19,628,032 | 107,299,259 | ||||||
Shares reacquired | (78,047,021 | ) | (426,914,245 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 76,970,875 | 422,789,299 | ||||||
Shares issued upon conversion from other share class(es) | 37,913,483 | 209,624,787 | ||||||
Shares reacquired upon conversion into other share class(es) | (74,508 | ) | (406,100 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 114,809,850 | $ | 632,007,986 | |||||
|
|
|
|
* | Commencement of offering was December 27, 2017. |
7. Borrowings
The Company, on behalf of the Fund, along with other affiliated registered investment companies (the “Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of $900 million for the period October 4, 2018 through October 3, 2019. The Funds pay an annualized commitment fee of 0.15% of the unused portion of the SCA. The Fund’s portion of the commitment fee for the unused amount, allocated based upon a method approved by the Board, is accrued daily and paid quarterly. Prior to October 4, 2018, the Funds had another SCA that provided a commitment of $900 million and the Funds paid an annualized commitment fee of 0.15% of the unused portion of the SCA. The interest on borrowings under both SCAs is paid monthly and at a per annum interest rate of 1.25% plus the higher of (1) the effective federal funds rate, (2) the one-month LIBOR rate or (3) zero percent.
Subsequent to the reporting period end, the SCA has been renewed effective October 3, 2019 and will continue to provide a commitment of $900 million through October 1, 2020. The commitment fee paid by the Funds will continue to be 0.15% of the unused portion of the SCA. The interest on borrowings under the renewed SCA will be paid monthly and at a per annum interest rate of 1.20% plus the higher of (1) the effective federal funds rate, (2) 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
PGIM High Yield Fund | 75 |
Notes to Financial Statements(continued)
portfolios to fully exhaust the committed amount of the SCA, thereby requiring the Manager to allocate available funding per a Board-approved methodology designed to treat the Funds in the SCA equitably.
The Fund utilized the SCA during the year ended August 31, 2019. The average daily balance for the 1 day that the Fund had loans outstanding during the period was approximately $5,304,000, borrowed at a weighted average interest rate of 3.63%. The maximum loan outstanding amount during the period was $5,304,000. At August 31, 2019, the Fund did not have an outstanding loan amount.
8. Risks of Investing in the Fund
The Fund’s risks include, but are not limited to, some or all of the risks discussed below:
Bond Obligations Risk:The Fund’s holdings, share price, yield and total return may fluctuate in response to bond market movements. The value of bonds may decline for issuer-related reasons, including management performance, financial leverage and reduced demand for the issuer’s goods and services. Certain types of fixed-income obligations also may be subject to “call and redemption risk,” which is the risk that the issuer may call a bond held by the Fund for redemption before it matures and the Fund may not be able to reinvest at the same level and therefore would earn less income.
Derivatives Risk:Derivatives involve special risks and costs and may result in losses to the Fund. The successful use of derivatives requires sophisticated management, and, to the extent that derivatives are used, the Fund will depend on the subadviser’s ability to analyze and manage derivative transactions. The prices of derivatives may move in unexpected ways, especially in abnormal market conditions. Some derivatives are “leveraged” and therefore may magnify or otherwise increase investment losses to the Fund. Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the Fund’s derivatives positions. In fact, many OTC derivative instruments will not have liquidity beyond the counterparty to the instrument. OTC derivative instruments also involve the risk that the other party will not meet its obligations to the Fund.
Foreign Securities Risk:The Fund’s investments in securities of foreign issuers or issuers with significant exposure to foreign markets involve additional risk. Foreign countries in which the Fund may invest may have markets that are less liquid, less regulated and more volatile than US markets. The value of the Fund’s investments may decline because of factors affecting the particular issuer as well as foreign markets and issuers generally, such as unfavorable government actions, and political or financial instability.
76 |
Interest Rate Risk:The value of an investment may go down when interest rates rise. A rise in rates tends to have a greater impact on the prices of longer term or duration securities. When interest rates fall, the issuers of debt obligations may prepay principal more quickly than expected, and the Fund may be required to reinvest the proceeds at a lower interest rate. This is referred to as “prepayment risk.” When interest rates rise, debt obligations may be repaid more slowly than expected, and the value of the Fund’s holdings may fall sharply. This is referred to as “extension risk. The Fund may face a heightened level of interest rate risk as a result of the U.S. Federal Reserve Board’s policies. The Fund’s investments may lose value if short-term or long-term interest rates rise sharply or in a manner not anticipated by the subadviser.
Junk Bonds Risks:High-yield, high-risk bonds have predominantly speculative characteristics, including particularly high credit risk. Junk bonds tend to be less liquid 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.
Liquidity Risk:The Fund may invest in instruments that trade in lower volumes and are less liquid than other investments. Liquidity risk exists when particular investments made by the Fund are difficult to purchase or sell. Liquidity risk includes the risk that the Fund may make investments that may become less liquid in response to market developments or adverse investor perceptions. Investments that are illiquid or that trade in lower volumes may be more difficult to value. If the Fund is forced to sell these investments to pay redemption proceeds or for other reasons, the Fund may lose money. In addition, when there is no willing buyer and investments may not reasonably be expected to be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment, the Fund may incur higher transaction costs when executing trade orders of a given size. The reduction in dealer market-making capacity in the fixed-income markets that has occurred in recent years also has the potential to reduce liquidity. An inability to sell a portfolio position can adversely affect the Fund’s value or prevent the Fund from being able to take advantage of other investment opportunities.
Market and Credit Risk:Securities markets may be volatile and the market prices of the Fund’s securities may decline. Securities fluctuate in price based on changes in an issuer’s financial condition and overall market and economic conditions. If the market prices of the securities owned by the Fund fall, the value of an investment in the Fund will decline. Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
PGIM High Yield Fund | 77 |
Notes to Financial Statements(continued)
Risks of Investments in Bank Loans: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’s 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.
9. Recent Accounting Pronouncements and Reporting Updates
In August 2018, the Securities and Exchange Commission (the “SEC”) adopted amendments to Regulation S-X to update and simplify the disclosure requirements for registered investment companies by eliminating requirements that are redundant or duplicative of US GAAP requirements or other SEC disclosure requirements. The new amendments require the presentation of the total, rather than the components, of distributable earnings on the Statement of Assets and Liabilities and the total, rather than the components, of dividends from net investment income and distributions from net realized gains on the Statements of Changes in Net Assets. The amendments also removed the requirement for the parenthetical disclosure of undistributed net investment income on the Statements of Changes in Net Assets and certain tax adjustments that were reflected in the Notes to Financial Statements. The Manager has adopted the amendments and reflected them in the Fund’s financial statements.
In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, which changes certain fair value measurement disclosure requirements. The new ASU, in addition to other modifications and additions, removes the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, and the Fund’s policy for the timing of transfers between levels. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Manager has evaluated the implications of certain provisions of the ASU and has determined to early adopt aspects related to the removal and modification of certain fair value measurement disclosures under the ASU effective immediately. The Manager continues to evaluate certain other provisions of the ASU and does not expect a material impact to financial statement disclosures.
78 |
10. Subsequent Event
At a meeting held on September 11, 2019, the Board approved the addition of PGIM Limited as Subadviser to the Fund. This change became effective on September 16, 2019.
PGIM High Yield Fund | 79 |
Financial Highlights
Class A Shares | ||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||
Net Asset Value, Beginning of Year | $5.44 | $5.57 | $5.45 | $5.38 | $5.80 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.31 | 0.31 | 0.33 | 0.32 | 0.33 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 0.07 | (0.12 | ) | 0.13 | 0.08 | (0.41 | ) | |||||||||||||
Total from investment operations | 0.38 | 0.19 | 0.46 | 0.40 | (0.08 | ) | ||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.33 | ) | (0.32 | ) | (0.34 | ) | (0.33 | ) | (0.34 | ) | ||||||||||
Net asset value, end of year | $5.49 | $5.44 | $5.57 | $5.45 | $5.38 | |||||||||||||||
Total Return(b): | 7.28% | 3.60% | 8.60% | 7.96% | (1.39)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $1,687,802 | $1,295,643 | $1,382,192 | $1,302,432 | $1,218,179 | |||||||||||||||
Average net assets (000) | $1,402,647 | $1,328,272 | $1,344,300 | $1,180,916 | $1,290,432 | |||||||||||||||
Ratios to average net assets(c)(d)(e): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 0.80% | 0.80% | 0.81% | 0.82% | 0.83% | |||||||||||||||
Expenses before waivers and/or expense reimbursement | 0.80% | 0.80% | 0.81% | 0.82% | 0.85% | |||||||||||||||
Net investment income (loss) | 5.82% | 5.75% | 5.99% | 6.18% | 5.88% | |||||||||||||||
Portfolio turnover rate(f) | 43% | 44% | 40% | 28% | 48% |
(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 generally accepted accounting principles. |
(c) | Effective March 9, 2015, the contractual distribution and service (12b-1) fees were reduced from 0.30% to 0.25% of the average daily net assets and the 0.05% contractual 12b-1 fee waiver was terminated. |
(d) | Effective September 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(e) | Does not include expenses of the underlying funds in which the Fund invests. |
(f) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
80 |
Class B Shares | ||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||
Net Asset Value, Beginning of Year | $5.43 | $5.56 | $5.44 | $5.37 | $5.80 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.29 | 0.29 | 0.30 | 0.29 | 0.30 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 0.06 | (0.12 | ) | 0.13 | 0.09 | (0.42 | ) | |||||||||||||
Total from investment operations | 0.35 | 0.17 | 0.43 | 0.38 | (0.12 | ) | ||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.30 | ) | (0.30 | ) | (0.31 | ) | (0.31 | ) | (0.31 | ) | ||||||||||
Net asset value, end of year | $5.48 | $5.43 | $5.56 | $5.44 | $5.37 | |||||||||||||||
Total Return(b): | 6.77% | 3.10% | 8.07% | 7.43% | (2.06)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $82,018 | $124,044 | $163,904 | $188,011 | $215,462 | |||||||||||||||
Average net assets (000) | $100,597 | $142,113 | $173,630 | $191,578 | $235,221 | |||||||||||||||
Ratios to average net assets(c)(d): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.28% | 1.26% | 1.30% | 1.32% | 1.33% | |||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.28% | 1.26% | 1.30% | 1.32% | 1.33% | |||||||||||||||
Net investment income (loss) | 5.35% | 5.27% | 5.49% | 5.67% | 5.38% | |||||||||||||||
Portfolio turnover rate(e) | 43% | 44% | 40% | 28% | 48% |
(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 generally accepted accounting principles. |
(c) | Effective September 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
PGIM High Yield Fund | 81 |
Financial Highlights(continued)
Class C Shares | ||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||
Net Asset Value, Beginning of Year | $5.43 | $5.56 | $5.44 | $5.37 | $5.80 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.28 | 0.28 | 0.29 | 0.28 | 0.29 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 0.06 | (0.13 | ) | 0.12 | 0.08 | (0.42 | ) | |||||||||||||
Total from investment operations | 0.34 | 0.15 | 0.41 | 0.36 | (0.13 | ) | ||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.29 | ) | (0.28 | ) | (0.29 | ) | (0.29 | ) | (0.30 | ) | ||||||||||
Net asset value, end of year | $5.48 | $5.43 | $5.56 | $5.44 | $5.37 | |||||||||||||||
Total Return(b): | 6.55% | 2.86% | 7.80% | 7.16% | (2.31)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $234,165 | $249,818 | $266,881 | $250,106 | $236,533 | |||||||||||||||
Average net assets (000) | $234,601 | $258,579 | $260,724 | $224,095 | $254,515 | |||||||||||||||
Ratios to average net assets(c)(d): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.49% | 1.50% | 1.56% | 1.57% | 1.58% | |||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.49% | 1.50% | 1.56% | 1.57% | 1.58% | |||||||||||||||
Net investment income (loss) | 5.14% | 5.04% | 5.24% | 5.42% | 5.13% | |||||||||||||||
Portfolio turnover rate(e) | 43% | 44% | 40% | 28% | 48% |
(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 generally accepted accounting principles. |
(c) | Effective September 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
82 |
Class R Shares | ||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||
Net Asset Value, Beginning of Year | $5.43 | $5.57 | $5.45 | $5.38 | $5.80 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.30 | 0.30 | 0.32 | 0.31 | 0.31 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 0.07 | (0.13 | ) | 0.12 | 0.08 | (0.40 | ) | |||||||||||||
Total from investment operations | 0.37 | 0.17 | 0.44 | 0.39 | (0.09 | ) | ||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.31 | ) | (0.31 | ) | (0.32 | ) | (0.32 | ) | (0.33 | ) | ||||||||||
Net asset value, end of year | $5.49 | $5.43 | $5.57 | $5.45 | $5.38 | |||||||||||||||
Total Return(b): | 7.17% | 3.10% | 8.33% | 7.70% | (1.63)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $74,523 | $71,841 | $64,518 | $57,520 | $51,716 | |||||||||||||||
Average net assets (000) | $71,667 | $71,368 | $61,642 | $50,921 | $54,089 | |||||||||||||||
Ratios to average net assets(c)(d): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.09% | 1.09% | 1.06% | 1.07% | 1.08% | |||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.34% | 1.34% | 1.31% | 1.32% | 1.33% | |||||||||||||||
Net investment income (loss) | 5.55% | 5.46% | 5.74% | 5.93% | 5.63% | |||||||||||||||
Portfolio turnover rate(e) | 43% | 44% | 40% | 28% | 48% |
(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 generally accepted accounting principles. |
(c) | Effective September 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
PGIM High Yield Fund | 83 |
Financial Highlights(continued)
Class Z Shares | ||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||
Net Asset Value, Beginning of Year | $5.45 | $5.58 | $5.46 | $5.39 | $5.82 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.33 | 0.33 | 0.34 | 0.34 | 0.34 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 0.06 | (0.12 | ) | 0.13 | 0.08 | (0.41 | ) | |||||||||||||
Total from investment operations | 0.39 | 0.21 | 0.47 | 0.42 | (0.07 | ) | ||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.34 | ) | (0.34 | ) | (0.35 | ) | (0.35 | ) | (0.36 | ) | ||||||||||
Net asset value, end of year | $5.50 | $5.45 | $5.58 | $5.46 | $5.39 | |||||||||||||||
Total Return(b): | 7.56% | 3.87% | 8.89% | 8.26% | (1.29)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $4,643,766 | $3,670,684 | $2,912,057 | $2,661,635 | $1,510,074 | |||||||||||||||
Average net assets (000) | $4,021,108 | $3,176,813 | $2,808,766 | $1,842,948 | $1,394,662 | |||||||||||||||
Ratios to average net assets(c)(d): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 0.54% | 0.55% | 0.55% | 0.57% | 0.58% | |||||||||||||||
Expenses before waivers and/or expense reimbursement | 0.54% | 0.55% | 0.55% | 0.57% | 0.58% | |||||||||||||||
Net investment income (loss) | 6.09% | 6.01% | 6.25% | 6.44% | 6.13% | |||||||||||||||
Portfolio turnover rate(e) | 43% | 44% | 40% | 28% | 48% |
(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 generally accepted accounting principles. |
(c) | Effective September 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
84 |
Class R2 Shares | ||||||||||||
Year Ended 2019 | December 27, 2018 | |||||||||||
Per Share Operating Performance(b): | ||||||||||||
Net Asset Value, Beginning of Period | $5.44 | $5.52 | ||||||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income (loss) | 0.31 | 0.21 | ||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 0.07 | (0.07 | ) | |||||||||
Total from investment operations | 0.38 | 0.14 | ||||||||||
Less Dividends and Distributions: | ||||||||||||
Dividends from net investment income | (0.32 | ) | (0.22 | ) | ||||||||
Net asset value, end of period | $5.50 | $5.44 | ||||||||||
Total Return(c): | 7.36% | 2.53% | ||||||||||
Ratios/Supplemental Data: | ||||||||||||
Net assets, end of period (000) | $7,402 | $4,395 | ||||||||||
Average net assets (000) | $6,253 | $967 | ||||||||||
Ratios to average net assets(d): | ||||||||||||
Expenses after waivers and/or expense reimbursement | 0.91% | 0.91% | (e) | |||||||||
Expenses before waivers and/or expense reimbursement | 1.22% | 3.42% | (e) | |||||||||
Net investment income (loss) | 5.73% | 5.89% | (e) | |||||||||
Portfolio turnover rate(f) | 43% | 44% |
(a) | Commencement of offering. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | Annualized. |
(f) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
PGIM High Yield Fund | 85 |
Financial Highlights(continued)
Class R4 Shares | ||||||||||||
Year Ended 2019 | December 27, 2018 | |||||||||||
Per Share Operating Performance(b): | ||||||||||||
Net Asset Value, Beginning of Period | $5.44 | $5.52 | ||||||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income (loss) | 0.33 | 0.22 | ||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 0.07 | (0.07 | ) | |||||||||
Total from investment operations | 0.40 | 0.15 | ||||||||||
Less Dividends and Distributions: | ||||||||||||
Dividends from net investment income | (0.34 | ) | (0.23 | ) | ||||||||
Net asset value, end of period | $5.50 | $5.44 | ||||||||||
Total Return(c): | 7.66% | 2.71% | ||||||||||
Ratios/Supplemental Data: | ||||||||||||
Net assets, end of period (000) | $11,469 | $1,963 | ||||||||||
Average net assets (000) | $4,571 | $372 | ||||||||||
Ratios to average net assets(d): | ||||||||||||
Expenses after waivers and/or expense reimbursement | 0.66% | 0.66% | (e) | |||||||||
Expenses before waivers and/or expense reimbursement | 1.07% | 7.16% | (e) | |||||||||
Net investment income (loss) | 6.00% | 6.17% | (e) | |||||||||
Portfolio turnover rate(f) | 43% | 44% |
(a) | Commencement of offering. |
(b) | Calculated based on average shares outstanding during the period. |
(c) | Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | Annualized. |
(f) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
86 |
Class R6 Shares | ||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||
Net Asset Value, Beginning of Year | $5.44 | $5.57 | $5.46 | $5.39 | $5.81 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.34 | 0.34 | 0.35 | 0.34 | 0.35 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 0.06 | (0.13 | ) | 0.12 | 0.08 | (0.41 | ) | |||||||||||||
Total from investment operations | 0.40 | 0.21 | 0.47 | 0.42 | (0.06 | ) | ||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.35 | ) | (0.34 | ) | (0.36 | ) | (0.35 | ) | (0.36 | ) | ||||||||||
Net asset value, end of year | $5.49 | $5.44 | $5.57 | $5.46 | $5.39 | |||||||||||||||
Total Return(b): | 7.71% | 4.00% | 8.82% | 8.36% | (1.01)% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $3,022,241 | $2,105,086 | $1,517,154 | $327,725 | $58,416 | |||||||||||||||
Average net assets (000) | $2,462,874 | $1,880,226 | $988,188 | $178,565 | $44,388 | |||||||||||||||
Ratios to average net assets(c)(d): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 0.40% | 0.42% | 0.42% | 0.45% | 0.46% | |||||||||||||||
Expenses before waivers and/or expense reimbursement | 0.40% | 0.42% | 0.42% | 0.45% | 0.46% | |||||||||||||||
Net investment income (loss) | 6.22% | 6.14% | 6.35% | 6.61% | 6.27% | |||||||||||||||
Portfolio turnover rate(e) | 43% | 44% | 40% | 28% | 48% |
(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 generally accepted accounting principles. |
(c) | Effective September 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class. |
(d) | Does not include expenses of the underlying funds in which the Fund invests. |
(e) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
See Notes to Financial Statements.
PGIM High Yield Fund | 87 |
Report of Independent Registered Public Accounting Firm
To the Shareholders of PGIM High Yield Fund and Board of Directors
Prudential Investment Portfolios, Inc. 15:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of PGIM High Yield Fund, a series of Prudential Investment Portfolios, Inc. 15, (the Fund), including the schedule of investments, as of August 31, 2019, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period ended August 31, 2019, and the related notes (collectively, the financial statements) and the financial highlights for the years or period indicated therein. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of August 31, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period ended August 31, 2019, and the financial highlights for the years or period indicated therein, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights 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 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 and financial highlights 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 and financial highlights, 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 and financial highlights. Such procedures also included confirmation of securities owned as of August 31, 2019, by correspondence with the custodian, transfer agent, and brokers, or by other appropriate auditing procedures when replies were not received. 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 and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more PGIM and/or Prudential Retail investment companies since 2003.
New York, New York
October 18, 2019
88 |
Federal Income Tax Information(unaudited)
For the year ended August 31, 2019, the Fund reports the maximum amount allowable but not less than 82.18% as interest related dividends in accordance with Section 871(k)(1) and 881(e)(1) of the Internal Revenue Code.
In January 2020, you will be advised on IRS Form 1099-DIV or substitute 1099-DIV, as to the federal tax status of the dividends received by you in calendar year 2019.
PGIM High Yield Fund | 89 |
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 theday-to-day operations of the Fund.
Independent Board Members | ||||||
Name Date of Birth Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held During Past Five Years | Length of Board Service | |||
Ellen S. Alberding 3/11/58 Board Member Portfolios Overseen: 96 | President and Board Member, The Joyce Foundation (charitable foundation) (since 2002); 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 (since 2009); Trustee, Loyola University (since 2018). | None. | Since September 2013 | |||
Kevin J. Bannon 7/13/52 Board Member Portfolios Overseen: 96 | Retired; Managing Director (April2008-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 (May2003-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 High Yield Fund
Independent Board Members | ||||||
Name Date of Birth Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held During Past Five Years | Length of Board Service | |||
Linda W. Bynoe 7/9/52 Board Member Portfolios Overseen: 96 | President and Chief Executive Officer (since March 1995) and formerly Chief Operating Officer (December 1989-February 1995) of Telemat Ltd. (management consulting); formerly Vice President (January 1985-June 1989) at Morgan Stanley & Co. (broker-dealer). | Director of Anixter International, Inc. (communication products distributor) (since January 2006); Director of Northern Trust Corporation (financial services) (since April 2006); Trustee of Equity Residential (residential real estate) (since December 2009). | Since March 2005 | |||
Barry H. Evans 11/2/60 Board Member Portfolios Overseen: 95 | 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 U.S. | 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 | |||
Keith F. Hartstein 10/13/56 Board Member & Independent Chair Portfolios Overseen: 96 | Retired; Member (since November 2014) of the Governing Council of the Independent Directors Council (organization of independent mutual fund directors); 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 pgiminvestments.com
Independent Board Members | ||||||
Name Date of Birth Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held During Past Five Years | Length of Board Service | |||
Laurie Simon Hodrick 9/29/62 Board Member Portfolios Overseen: 95 | A. Barton Hepburn Professor Emerita of Economics in the Faculty of Business, Columbia Business School (since 2018); Visiting Professor of Law, Stanford Law School (since 2015); Visiting Fellow at the Hoover Institution, Stanford University (since 2015); Sole Member, ReidCourt LLC (since 2008) (a consulting firm); 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, Synnex Corporation (since April 2019) (information technology); Independent Director, Kabbage, Inc. (since July 2018) (financial services); Independent Director, Corporate Capital Trust (2017-2018) (a business development company). | Since September 2017 | |||
Michael S. Hyland, CFA 10/4/45 Board Member Portfolios Overseen: 96 | Retired (since February 2005); formerly Senior Managing Director (July 2001-February 2005) of Bear Stearns & Co, Inc.; Global Partner, INVESCO (1999-2001); Managing Director and President of Salomon Brothers Asset Management (1989-1999). | None. | Since July 2008 | |||
Brian K. Reid 9/22/61 Board Member Portfolios Overseen: 95 | 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 High Yield Fund
Independent Board Members | ||||||
Name Date of Birth Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held During Past Five Years | Length of Board Service | |||
Grace C. Torres 6/28/59 Board Member Portfolios Overseen: 95 | 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. | Formerly Director (July 2015-January 2018) of Sun Bancorp, Inc. N.A. and Sun National Bank; Director (since January 2018) of OceanFirst Financial Corp. and OceanFirst Bank. | Since November 2014 |
Interested Board Members | ||||||
Name Date of Birth Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held During Past Five Years | Length of Board Service | |||
Stuart S. Parker 10/5/62 Board Member & President Portfolios Overseen: 96 | President of PGIM Investments LLC (formerly known as Prudential Investments LLC) (since January 2012); Executive Vice President of Prudential Investment Management Services LLC (since December 2012); formerly Executive Vice President of Jennison Associates LLC and Head of Retail Distribution of PGIM Investments LLC (June 2005-December 2011). | None. | Since January 2012 |
Visit our website at pgiminvestments.com
Interested Board Members | ||||||
Name Date of Birth Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held During Past Five Years | Length of Board Service | |||
Scott E. Benjamin 5/21/73 Board Member & Vice President Portfolios Overseen:96 | Executive Vice President (since June 2009) of PGIM Investments LLC; Executive Vice President (June 2009-June 2012) and 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); formerly Vice President of Product Development and Product Management, PGIM Investments LLC (2003-2006). | None. | Since March 2010 |
Fund Officers(a) | ||||
Name Date of Birth Fund Position | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Raymond A. O’Hara 9/11/55 Chief Legal Officer | Vice President and Corporate Counsel (since July 2010) of Prudential Insurance Company of America (Prudential); Vice President (March 2011-Present) of Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey; Vice President and Corporate Counsel (March 2011-Present) of Prudential Annuities Life Assurance Corporation; Chief Legal Officer of PGIM Investments LLC (since June 2012); Chief Legal Officer of Prudential Mutual Fund Services LLC (since June 2012) and Corporate Counsel of AST Investment Services, Inc. (since June 2012); formerly Assistant Vice President and Corporate Counsel (September 2008-July 2010) of The Hartford Financial Services Group, Inc.; formerly Associate (September 1980-December 1987) and Partner (January 1988–August 2008) of Blazzard & Hasenauer, P.C. (formerly, Blazzard, Grodd & Hasenauer, P.C.). | Since June 2012 |
PGIM High Yield Fund
Fund Officers(a) | ||||
Name Date of Birth Fund Position | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Dino Capasso 8/19/74 Chief Compliance Officer | Chief Compliance Officer (July 2019-Present) of PGIM Investments LLC; Chief Compliance Officer (July 2019-Present) of the PGIM Funds, Target Funds, Advanced Series Trust, The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc., PGIM Global High Yield Fund, Inc., and PGIM High Yield Bond Fund, Inc.; Vice President and Deputy Chief Compliance Officer (June 2017-2019) of PGIM Investments LLC; formerly, Senior Vice President and Senior Counsel (January 2016-June 2017), and Vice President and Counsel (February 2012-December 2015) of Pacific Investment Management Company LLC. | Since March 2018 | ||
Andrew R. French 12/22/62 Secretary | Vice President of PGIM Investments LLC (December 2018-Present); formerly Vice President and Corporate Counsel (February 2010-December 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 | ||
Jonathan D. Shain 8/9/58 Assistant Secretary | Vice President and Corporate Counsel (since August 1998) of Prudential; Vice President and Assistant Secretary (since May 2001) of PGIM Investments LLC; Vice President and Assistant Secretary (since February 2001) of Prudential Mutual Fund Services LLC; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | Since May 2005 | ||
Claudia DiGiacomo 10/14/74 Assistant Secretary | Vice President and Corporate Counsel (since January 2005) of Prudential; Vice President and Assistant Secretary of PGIM Investments LLC (since December 2005); formerly Associate at Sidley Austin Brown & Wood LLP (1999-2004). | Since December 2005 | ||
Diana N. Huffman 4/14/82 Assistant Secretary | Vice President and Corporate Counsel (since September 2015) of Prudential; formerly Associate at Willkie Farr & Gallagher LLP (2009-2015). | Since March 2019 | ||
Kelly A. Coyne 8/8/68 Assistant Secretary | Director, Investment Operations of Prudential Mutual Fund Services LLC (since 2010). | Since March 2015 | ||
Christian J. Kelly 5/5/75 Treasurer and Principal Financial and Accounting Officer | Vice President, Head of Fund Administration of PGIM Investments LLC (since November 2018); 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 |
Visit our website at pgiminvestments.com
Fund Officers(a) | ||||
Name Date of Birth Fund Position | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Lana Lomuti 6/7/67 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 | ||
Russ Shupak 10/08/73 Assistant Treasurer | Vice President (since 2017) and Director (2013-2017), within PGIM Investments Fund Administration. | Since October 2019 | ||
Deborah Conway 3/26/69 Assistant Treasurer | Vice President (since 2017) and Director (2007-2017), within PGIM Investments Fund Administration. | Since October 2019 | ||
Elyse M. McLaughlin 1/20/74 Assistant Treasurer | Vice President (since 2017) and Director (2011-2017), within PGIM Investments Fund Administration. | Since October 2019 | ||
Charles H. Smith 1/11/73 Anti-Money Laundering Compliance Officer | Vice President, Corporate Compliance, Anti-Money Laundering Unit (since January 2015) of Prudential; committee member of the American Council of Life Insurers Anti-Money Laundering and Critical Infrastructure Committee (since January 2016); formerly Global Head of Economic Sanctions Compliance at AIG Property Casualty (February 2007-December 2014); Assistant Attorney General at the New York State Attorney General’s Office, Division of Public Advocacy. (August 1998-January 2007). | Since January 2017 |
(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 only 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 Funds, The Prudential Variable Contract Accounts, PGIM ETF Trust, PGIM High Yield Bond Fund, Inc., PGIM Global High Yield Fund, Inc., The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc. and the Advanced Series Trust. |
PGIM High Yield Fund
Approval of Advisory Agreements(unaudited)
The Fund’s Board of Directors
The Board of Directors (the “Board”) of PGIM High Yield Fund1 (the “Fund”) consists of eleven individuals, nine of whom are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Directors”).2 The Board is responsible for the oversight of the Fund and its operations, and performs the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Directors have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Director. The Board has established four standing committees: the Audit Committee, the Nominating and Governance Committee, and two Investment Committees. Each committee is chaired by, and composed of, Independent Directors.
Annual Approval of the Fund’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Fund’s management agreement with PGIM Investments LLC (“PGIM Investments”) and the Fund’s subadvisory agreement with PGIM, Inc. (“PGIM”) on behalf of its PGIM Fixed Income unit. In considering the renewal of the agreements, the Board, including all of the Independent Directors, met on May 30, 2019 and on June11-13, 2019 and approved the renewal of the agreements through July 31, 2020, after concluding that the renewal of the agreements was in the best interests of the Fund and its shareholders.
In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with its consideration. Among other things, the Board considered comparative fee information from PGIM Investments and PGIM. Also, the Board considered comparisons with other mutual funds in relevant Peer Universes and Peer Groups, as is further discussed below.
In approving the agreements, the Board, including the Independent Directors 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 Directors did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund. In connection with its deliberations, the Board
1 | PGIM High Yield Fund is a series of Prudential Investment Portfolios, Inc. 15. |
2 | Grace C. Torres was an Interested Director of the Fund at the time the Board considered and approved the renewal of the Fund’s advisory agreements, but has since become an Independent Director of the Fund. |
PGIM High Yield Fund |
Approval of Advisory Agreements(continued)
considered information provided by PGIM Investments throughout the year at regular Board meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the meetings on May 30, 2019 and onJune 11-13, 2019.
The Directors determined that the overall arrangements between the Fund and PGIM Investments, which serves as the Fund’s investment manager pursuant to a management agreement, and between PGIM Investments and PGIM, which, through its PGIM Fixed Income unit, serves as the Fund’s subadviser pursuant to the terms of a subadvisory agreement with PGIM Investments, are in the best interests of the Fund and its shareholders in light of the services performed, fees charged and such other matters as the Directors considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Directors’ reaching their determinations to approve the continuance of the agreements are separately discussed below.
Nature, Quality and Extent of Services
The Board received and considered information regarding the nature, quality and extent of services provided to the Fund by PGIM Investments and PGIM Fixed Income. The Board noted that PGIM Fixed Income is affiliated with PGIM Investments. The Board considered the services provided by PGIM Investments, including but not limited to the oversight of the subadviser for the Fund, as well as the provision of fund recordkeeping, compliance and other services to the Fund, and PGIM Investments’ role as administrator 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 Directors of the Fund who are part of Fund management. The Board also considered the investment subadvisory services provided by PGIM Fixed Income, including investment research and security selection, as well as adherence to the Fund’s investment restrictions and compliance with applicable Fund policies and procedures. The Board considered PGIM Investments’ evaluation of the subadviser, as well as PGIM Investments’ recommendation, based on its review of the subadviser, to renew the subadvisory agreement.
The Board considered the qualifications, backgrounds and responsibilities of PGIM Investments’ senior management responsible for the oversight of the Fund and PGIM Fixed Income, and also considered the qualifications, backgrounds and responsibilities of PGIM
Visit our website at pgiminvestments.com |
Fixed Income’s portfolio managers who are responsible for theday-to-day management of the Fund’s portfolio. The Board was provided with information pertaining to PGIM Investments’ and PGIM Fixed Income’s organizational structure, senior management, investment operations, and other relevant information pertaining to both PGIM Investments and PGIM Fixed Income. The Board also noted that it received favorable compliance reports from the Fund’s Chief Compliance Officer (“CCO”) as to both PGIM Investments and PGIM Fixed Income. The Board noted that PGIM Fixed Income is affiliated with PGIM Investments.
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PGIM Investments and the subadvisory services provided to the Fund by PGIM Fixed Income, and that there was a reasonable basis on which to conclude that the Fund benefits from the services provided by PGIM Investments and PGIM Fixed Income under the management and subadvisory agreements.
Costs of Services and Profits Realized by PGIM Investments
The Board was provided with information on the profitability of PGIM Investments and its affiliates in serving as the Fund’s investment manager. The Board discussed with PGIM Investments the methodology utilized in assembling the information regarding profitability and considered its reasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure and cost of capital. 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 High Yield Fund |
Approval of Advisory Agreements(continued)
The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of PGIM Investments’ costs are not specific to individual funds, but rather are incurred across a variety of products and services.
Other Benefits to PGIM Investments and PGIM Fixed Income
The Board considered potential ancillary benefits that might be received by PGIM Investments, PGIM Fixed Income and their affiliates as a result of their relationship with the Fund. The Board concluded that potential benefits to be derived by PGIM Investments included transfer agency fees received by the Fund’s transfer agent (which is affiliated with PGIM Investments), as well as benefits to its reputation or other intangible benefits resulting from PGIM Investments association with the Fund. The Board concluded that the potential benefits to be derived by PGIM Fixed Income included the ability to use soft dollar credits, as well as the potential benefits consistent with those generally resulting from an increase in assets under management, specifically, potential access to additional research resources and benefits to its reputation. The Board concluded that the benefits derived by PGIM Investments and PGIM Fixed Income were consistent with the types of benefits generally derived by investment managers and subadvisers to mutual funds.
Performance of the Fund / Fees and Expenses
The Board considered certain additional factors and made related conclusions relating to the historical performance of the Fund for theone-, three-, five- andten-year periods ended December 31, 2018.
The Board also considered the Fund’s actual management fee, as well as the Fund’s net total expense ratio, for the fiscal year ended August 31, 2018. The Board considered the management fee for the Fund as compared to the management fee charged by PGIM Investments to other funds and the fee charged by other advisers to comparable mutual funds in a Peer Group. The actual management fee represents the fee rate actually paid by Fund shareholders and includes any fee waivers or reimbursements. The net total expense ratio for the Fund represents the actual expense ratio incurred by Fund shareholders.
The mutual funds included in the Peer Universe, which was used to consider performance, and the Peer Group, which was used to consider fees and expenses, were objectively determined by Broadridge, an independent provider of mutual fund data. In certain circumstances, PGIM Investments also provided supplemental Peer Universe or Peer Group information, for reasons addressed with the Board. The comparisons placed the Fund in various quartiles over various periods, with the first quartile being the best 25% of the mutual funds (for performance, the best performing mutual funds and, for expenses, the lowest cost mutual funds).
Visit our website at pgiminvestments.com |
The section below summarizes key factors considered by the Board and the Board’s conclusions regarding the Fund’s performance, fees and overall expenses. The table sets forth net performance comparisons (which reflect the impact on performance of fund expenses, or any subsidies, expense caps or waivers that may be applicable) with the Peer Universe, actual management fees with the Peer Group (which reflect the impact of any subsidies or fee waivers), and net total expenses with the Peer Group, each of which were key factors considered by the Board.
Net Performance | 1 Year | 3 Years | 5 Years | 10 Years | ||||
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1st Quartile | 1st Quartile | 1st Quartile | 1st Quartile | |||||
Actual Management Fees:1st Quartile | ||||||||
Net Total Expenses: 1st Quartile |
• | The Board noted that the Fund outperformed its benchmark index over theone- and five-year periods, though it underperformed over the three- andten-year periods. |
• | The Board and PGIM Investments agreed to retain the Fund’s existing contractual expense cap which (exclusive of certain fees and expenses) limits transfer agency, shareholder servicing,sub-transfer agency and blue sky fees to the extent that such fees cause total annual operating expenses to exceed 0.91% for Class R2 shares and 0.66% for Class R4 shares through December 31, 2019. |
• | 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 High Yield Fund |
∎ TELEPHONE | ∎ WEBSITE | |||
655 Broad Street Newark, NJ 07102 | (800) 225-1852 | pgiminvestments.com |
PROXY VOTING |
The Board of Directors of the Fund has delegated to the Fund’s subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website. |
DIRECTORS |
Ellen S. Alberding• Kevin J. Bannon• Scott E. Benjamin• Linda W. Bynoe• Barry H. Evans• Keith F. Hartstein• Laurie Simon Hodrick• Michael S. Hyland• Stuart S. Parker• Brian K. Reid• Grace C. Torres |
OFFICERS |
Stuart S. Parker,President• Scott E. Benjamin,Vice President• Christian J. Kelly,Treasurer and Principal Financial and Accounting Officer• Raymond A. O’Hara,Chief Legal Officer• Dino Capasso,Chief Compliance Officer • Charles H. Smith,Anti-Money Laundering Compliance Officer • Andrew R. French,Secretary • Jonathan D. Shain,Assistant Secretary• Claudia DiGiacomo,Assistant Secretary • Diana N. Huffman,Assistant Secretary•Kelly A. Coyne,Assistant Secretary• Lana Lomuti,Assistant Treasurer• Russ Shupak,Assistant Treasurer• Elyse McLaughlin,Assistant Treasurer• Deborah Conway,Assistant Treasurer |
MANAGER | PGIM Investments LLC | 655 Broad Street Newark, NJ 07102 | ||
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SUBADVISER | PGIM Fixed Income | 655 Broad Street Newark, NJ 07102 | ||
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DISTRIBUTOR | Prudential Investment Management Services LLC | 655 Broad Street Newark, NJ 07102 | ||
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CUSTODIAN | The Bank of New York Mellon | 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 | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
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FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 | ||
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An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain the prospectus and summary prospectus by visiting our website atpgiminvestments.com or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go topgiminvestments.com/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH DIRECTORS |
Shareholders can communicate directly with the Board of Directors by writing to the Chair of the Board, PGIM High Yield Fund, PGIM Investments, Attn: Board of Directors, 655 Broad Street, Newark, NJ 07102. Shareholders can communicate directly with an individual Director by writing to the same address. Communications are not screened before being delivered to the addressee. |
AVAILABILITY OF PORTFOLIO SCHEDULE |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission on Form N-PORT. The Fund’s Form N-PORT filings are available on the Commission’s website at sec.gov. Form N-PORT is filed with the Commission quarterly, and each Fund’s full portfolio holdings as of the first and third fiscal quarter-ends (as of the third month of the Fund’s fiscal quarter for reporting periods on or after September 30, 2019) will be made publicly available 60 days after the end of each quarter at sec.gov. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Directors and is available without charge, upon request, by calling (800) 225-1852. |
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PGIM HIGH YIELD FUND
SHARE CLASS | A | B | C | R | Z | R2 | R4 | R6 | ||||||||
NASDAQ | PBHAX | PBHYX | PRHCX | JDYRX | PHYZX | PHYEX | PHYGX | PHYQX | ||||||||
CUSIP | 74440Y108 | 74440Y207 | 74440Y306 | 74440Y603 | 74440Y801 | 74442J604 | 74442J703 | 74440Y884 |
MF110E
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 registrant800-225-1852, 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 Mr. Kevin J. Bannon, member of the Board’s Audit Committee is an “audit committee financial expert,” and that he is “independent,” for purposes of this Item.
Item 4 – Principal Accountant Fees and Services – (a) Audit Fees
For the fiscal years ended August 31, 2019 and August 31, 2018, KPMG LLP (“KPMG”), the Registrant’s principal accountant, billed the Registrant $82,955 and $87,134 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 August 31, 2019 and August 31, 2018: none.
(c)Tax Fees
For the fiscal years ended August 31, 2019 and August 31, 2018: none.
(d)All Other Fees
For the fiscal years ended August 31, 2019 and August 31, 2018: none.
(e) (1)Audit CommitteePre-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 mustpre-approve the independent
accounting firm’s engagement to render audit and/or permissiblenon-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 andNon-Audit Services Provided to the Funds
On an annual basis, the scope of audits for each Fund, audit fees and expenses, and audit-related andnon-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 proposednon-audit services will not adversely affect the independence of the independent accountants. Such proposednon-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 topre-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 forpre-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 |
• | Attestation 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 annualpre-approval process are subject to an authorizedpre-approval by the Audit Committee so long as the estimated fee for those services does not exceed $30,000. Any services provided under suchpre-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 topre-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 authorizedpre-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 annualpre-approval process are subject to an authorizedpre-approval by the Audit Committee so long as the estimated fee for those services does not exceed $30,000. Any services provided under suchpre-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 topre-approval by the Committee Chair (or any other Committee member on whom this responsibility has been delegated).
OtherNon-Audit Services
Certainnon-audit services that the independent accountants are legally permitted to render will be subject topre-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 anypre-approval decisions made pursuant to this Policy.Non-audit services presented forpre-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 ofnon-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, orcontribution-in-kind reports |
• | Actuarial services |
• | 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 ofNon-Audit Services Provided to Other Entities Within the PGIM Fund Complex
Certainnon-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 topre-approval by the Audit Committee. The onlynon-audit services provided to these entities that will requirepre-approval are thoserelated directly to the operations and financial reporting of the Funds. Individual projects that are not presented to the Audit Committee as part of the annualpre-approval process will be subject topre-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 forpre-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 notpre-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 referred to in 4(b) – 4(d) that were approved by the audit committee– For the fiscal years ended August 31, 2019 and August 31, 2018: none. |
(f)Percentage of hours expended attributable to work performed by other than full time employees of principal accountant if greaterthan 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 aggregatenon-audit fees billed by KPMG 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 August 31, 2019 and August 31, 2018 was $0 and $0, respectively.
(h)Principal Accountant’s Independence
Not applicable as KPMG has not providednon-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 notpre-approved pursuant to Rule2-01(c)(7)(ii) of RegulationS-X.
Item 5 – Audit Committee of Listed Registrants –
The registrant has a separately designated standing audit committee (the “Audit Committee”) established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The members of the Audit Committee are Kevin J. Bannon (chair), Laurie Simon Hodrick, Michael S. Hyland, CFA, Brian K. Reid, and Keith F. Hartstein(ex-officio).
Item 6 – Schedule of Investments – The schedule is included as part of the report to shareholders filed under Item 1 of this Form.
Item 7 – Disclosure of Proxy Voting Policies and Procedures forClosed-End Management Investment Companies – Not applicable.
Item 8 – Portfolio Managers ofClosed-End Management Investment Companies – Not applicable.
Item 9 – | Purchases of Equity Securities byClosed-End Management Investment Company and Affiliated Purchasers – Not applicable. |
Item 10 – Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.
Item 11 – Controls and Procedures
(a) | It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and |
reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure. |
(b) | There has been no significant change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter of the period covered by this report that has materially affected, or is likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12 – Controls and Procedures - Disclosure of Securities Lending Activities forClosed-End Management Investment Companies – Not applicable.
Item 13 – Exhibits
(a) | (1) Code of Ethics – Attached hereto as ExhibitEX-99.CODE-ETH
(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act – Attached hereto as Exhibit EX-99.CERT.
(3) Any written solicitation to purchase securities under Rule23c-1. – Not applicable. | |||
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act – Attached hereto as ExhibitEX-99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: | Prudential Investment Portfolios, Inc. 15 | |
By: | /s/ Andrew R. French | |
Andrew R. French | ||
Secretary | ||
Date: | October 18, 2019 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Stuart S. Parker | |
Stuart S. Parker | ||
President and Principal Executive Officer | ||
Date: | October 18, 2019 | |
By: | /s/ Christian J. Kelly | |
Christian J. Kelly | ||
Treasurer and Principal Financial and Accounting Officer | ||
Date: | October 18, 2019 |