UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: | 811-04930 | |
Exact name of registrant as specified in charter: | Prudential Investment Portfolios 4 | |
Address of principal executive offices: | Gateway Center 3, | |
100 Mulberry Street, | ||
Newark, New Jersey 07102 | ||
Name and address of agent for service: | Deborah A. Docs | |
Gateway Center 3, | ||
100 Mulberry Street, | ||
Newark, New Jersey 07102 | ||
Registrant’s telephone number, including area code: | 800-225-1852 | |
Date of fiscal year end: | 4/30/2012 | |
Date of reporting period: | 10/31/2011 |
Item 1 – Reports to Stockholders |
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
PRUDENTIAL MUNI HIGH INCOME FUND
SEMIANNUAL REPORT · OCTOBER 31, 2011
Fund Type
Municipal bond
Objective
Maximum amount of income that is eligible for exclusion from federal income taxes
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter.
The accompanying financial statements as of October 31, 2011, were not audited and, accordingly, no auditor’s opinion is expressed on them.
Prudential Investments, Prudential, the Prudential logo, and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
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December 15, 2011
Dear Shareholder:
After leading Prudential Investments for the past eight years, I have decided to retire at the end of 2011 from my positions as President of Prudential Investments and President and Trustee of the Prudential Muni High Income Fund (the Fund). Effective January 1, 2012, I will become Chairman of Prudential Investments and act as an advisor to the business during 2012 to help facilitate a smooth transition to my successor, Stuart Parker.
Stuart, who will become President of Prudential Investments and President and Trustee of the Fund on January 1, 2012, previously served as the Executive Vice President of Retail Mutual Fund Distribution at Prudential Investments. With more than 20 years of investment industry experience, Stuart brings a deep understanding of the needs and challenges facing today’s investors.
We hope you find the semiannual report for the Fund informative. We recognize that ongoing market volatility may make it a difficult time to be an investor. We continue to believe a prudent response to uncertainty is to maintain a diversified portfolio, including stock and bond mutual funds consistent with your tolerance for risk, time horizon, and financial goals.
Your financial professional can help you create a diversified investment plan that reflects your personal investor profile and risk tolerance. Keep in mind that diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets. We encourage you to call your financial professional before making any investment decision.
Prudential Investments provides a wide range of mutual funds to choose from that can help you make progress toward your financial goals. Our funds offer the experience, resources, and professional discipline of Prudential Financial’s affiliated asset managers.
Finally, I’ve been privileged to have had the opportunity to help you address your investment needs, and I thank you for choosing the Prudential Investments family of mutual funds.
Sincerely,
Judy A. Rice, President
Prudential Muni High Income Fund
Prudential Muni High Income Fund | 1 |
Your Fund’s Performance (Unaudited)
Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The maximum initial sales charge is 4.00% (Class A shares). Gross operating expenses: Class A, 0.91%; Class B, 1.11%; Class C, 1.61%; Class Z, 0.61%. Net operating expenses: Class A, 0.86%; Class B, 1.11%; Class C, 1.61%; Class Z, 0.61%, after contractual reduction through 8/31/2012 for Class A.
Cumulative Total Returns (Without Sales Charges) as of 10/31/11 |
| |||||||||||||||
Six Months | One Year | Five Years | Ten Years | |||||||||||||
Class A | 6.78 | % | 2.20 | % | 17.68 | % | 56.75 | % | ||||||||
Class B | 6.54 | 1.97 | 16.26 | 52.91 | ||||||||||||
Class C | 6.27 | 1.45 | 14.54 | 48.80 | ||||||||||||
Class Z | 6.93 | 2.46 | 19.27 | 60.89 | ||||||||||||
Barclays Capital Muni Bond Index | 5.56 | 3.78 | 26.44 | 61.78 | ||||||||||||
Barclays Capital Non-Investment-Grade Muni Bond Index | 6.74 | 3.36 | 11.76 | 68.81 | ||||||||||||
Lipper Average | 7.30 | 1.65 | 7.69 | 45.66 | ||||||||||||
Average Annual Total Returns (With Sales Charges) as of 9/30/11 |
| |||||||||||||||
One Year | Five Years | Ten Years | ||||||||||||||
Class A | –0.96 | % | 2.69 | % | 4.29 | % | ||||||||||
Class B | –1.97 | 3.15 | 4.47 | |||||||||||||
Class C | 1.42 | 3.00 | 4.18 | |||||||||||||
Class Z | 3.32 | 3.81 | 4.99 | |||||||||||||
Barclays Capital Muni Bond Index | 3.88 | 5.01 | 5.09 | |||||||||||||
Barclays Capital Non-Investment-Grade Muni Bond Index | 4.18 | 2.48 | 5.37 | |||||||||||||
Lipper Average | 2.30 | 1.65 | 3.91 |
Total returns 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.
2 | Visit our website at www.prudentialfunds.com |
Source: Prudential Investments LLC and Lipper Inc. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of such fee waivers and/or expense reimbursements, total returns would be lower.
The average annual total returns take into account applicable sales charges. Class A, Class B, and Class C shares are subject to an annual distribution and service (12b-1) fee of up to 0.30%, 0.50%, and 1.00%, respectively. Under certain limited circumstances, an exchange may be made from Class A, Class B, or Class C to Class Z shares of the Fund. Under certain circumstances, Class A shares may be subject to a contingent deferred sales charge (CDSC) of 1%. Approximately seven years after purchase, Class B shares will automatically convert to Class A shares on a quarterly basis. Class B and Class C shares are subject to a maximum CDSC of 5% and 1%, respectively. Class Z shares are not subject to a 12b-1 fee or a sales charge. 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.
Benchmark Definitions
Barclays Capital Municipal (Muni) Bond Index
The Barclays Capital Municipal (Muni) Bond Index is an unmanaged index of over 39,000 long-term investment-grade municipal bonds. It gives a broad look at how long-term investment-grade municipal bonds have performed.
Barclays Capital Non-Investment-Grade Municipal (Muni) Bond Index
The Barclays Capital Non-Investment-Grade Municipal (Muni) Bond Index is an unmanaged index of non-rated or Ba1- or below-rated municipal bonds. It gives a broad look at how non-investment-grade municipal bonds have performed. The bonds in this index must have an outstanding par value of at least $3 million and be issued as part of a transaction of at least $20 million. The bonds must also be dated after December 31, 1990, and be at least one year from their maturity date. The inception date of the Barclays Capital Non-Investment-Grade Muni Bond Index is October 1995.
Lipper High Yield Municipal Debt Funds Average
The Lipper High Yield Municipal Debt Funds Average (Lipper Average) represents returns based on an average return of all funds in the Lipper High Yield Municipal Debt Funds category for the periods noted. Funds in the Lipper Average invest at least 50% of their assets in lower-rated municipal debt issues.
Investors cannot invest directly in an index or average. The returns for the Indexes would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses, but not sales charges or taxes.
Distribution and Yields as of 10/31/11 |
| |||||||||||||||
Total Distributions Paid for Six Months | 30-Day SEC Yield | Taxable Equivalent Yield* at Tax Rates of | ||||||||||||||
33% | 35% | |||||||||||||||
Class A | $ | 0.24 | 4.62 | % | 6.90 | % | 7.11 | % | ||||||||
Class B | 0.23 | 4.55 | 6.79 | 7.00 | ||||||||||||
Class C | 0.21 | 4.04 | 6.03 | 6.22 | ||||||||||||
Class Z | 0.25 | 5.07 | 7.57 | 7.80 |
*Some investors may be subject to the federal alternative minimum tax and/or state and local taxes. Taxable equivalent yields reflect federal taxes only.
Prudential Muni High Income Fund | 3 |
Your Fund’s Performance (continued)
Five Largest Holdings expressed as a percentage of net assets as of 10/31/11 |
| |||
Dallas (TX) Performing Arts Cultural Facs. Corp. Cultural, Var., Dallas Arts Ctr. Fdtn., Ser. B, F.R.D.D., | 1.4 | % | ||
Foothill/Eastern (CA) Trans. Corridor Agy. Toll Rd. Rev., Convertible C.A.B.S., Converted to Fixed on 07/15/09, | 1.1 | |||
New Jersey (NJ) Econ. Dev. Auth. Rev., Continental Airlines, Inc. Proj., Spec. Facs. Rev., A.M.T., 6.250%, 09/15/29 | 1.1 | |||
Metro. Pier & Expo. (IL) Auth. Dedicated St. Tax Rev., McCormick Place Expansion, Ser. A, NATL, | 1.0 | |||
Lower Colorado (TX) Riv. Auth. Rev., Rfdg. & Impt., Ser. A, (Prerefunded 05/15/15), | 1.0 |
Holdings are subject to change.
Credit Quality* expressed as a percentage of net assets as of 10/31/11 |
| |||
Aaa | 0.2 | % | ||
Aa | 5.9 | |||
A | 27.5 | |||
Baa | 32.0 | |||
Ba | 5.5 | |||
B | 8.8 | |||
Caa | 2.2 | |||
Less than Caa | 0.4 | |||
Not Rated | 17.3 | |||
Total Investments | 99.8 | |||
Other assets in excess of liabilities | 0.2 | |||
Net Assets | 100.0 | % | ||
|
|
*Source: Moody’s rating, defaulting to S&P when not rated by Moody’s.
Credit Quality is subject to change.
4 | Visit our website at www.prudentialfunds.com |
Fees and Expenses (Unaudited)
As a shareholder of a 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 each Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on May 1, 2011, at the beginning of the period, and held through the six-month period ended October 31, 2011. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of Prudential Investments funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information provided in the expense table. Additional fees have the effect of reducing investment returns.
Actual Expenses
The first line for each share class in the tables on the following pages 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 tables on the following pages 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
Prudential Muni High Income Fund | 5 |
Fees and Expenses (continued)
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.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Prudential Muni High Income Fund | Beginning Account Value May 1, 2011 | Ending Account | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,067.80 | 0.86 | % | $ | 4.47 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.81 | 0.86 | % | $ | 4.37 | ||||||||||
Class B | Actual | $ | 1,000.00 | $ | 1,065.40 | 1.11 | % | $ | 5.76 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,019.56 | 1.11 | % | $ | 5.63 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,062.70 | 1.61 | % | $ | 8.35 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,017.04 | 1.61 | % | $ | 8.16 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,069.30 | 0.61 | % | $ | 3.17 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,022.07 | 0.61 | % | $ | 3.10 |
* Fund expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by the 184 days in the six-month period ended October 31, 2011, and divided by the 366 days in the Fund’s fiscal year ending April 30, 2012 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
6 | Visit our website at www.prudentialfunds.com |
Portfolio of Investments
as of October 31, 2011 (Unaudited)
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS 97.5% |
| |||||||||||||||
Alabama 0.7% | ||||||||||||||||
Cullman Cnty. Healthcare Auth., Cullman Reg. Med. Ctr., Ser. A | Ba1 | 7.000% | 02/01/36 | $ | 1,000 | $ | 996,380 | |||||||||
Selma Indl. Dev. Brd. Rev., Gulf Opportunity Zone, Intl. Paper Co., Ser. A | Baa3 | 5.800 | 05/01/34 | 1,000 | 1,021,310 | |||||||||||
Ser. A | BBB(b) | 6.250 | 11/01/33 | 1,750 | 1,852,130 | |||||||||||
|
| |||||||||||||||
3,869,820 | ||||||||||||||||
Arizona 2.5% | ||||||||||||||||
Maricopa Cnty. Poll. Ctrl. Corp. Rev., El Paso Elec. Co., Ser. B | Baa2 | 7.250 | 04/01/40 | 1,500 | 1,709,910 | |||||||||||
Pima Cnty. Indl. Dev. Auth. Rev., | NR | 6.750 | 04/01/36 | 1,500 | 1,310,805 | |||||||||||
Tucson Elec. Pwr. Co. | Baa3 | 5.750 | 09/01/29 | 3,500 | 3,577,945 | |||||||||||
Tucson Elec. Pwr. Co., San Juan, Ser. A | Baa3 | 4.950 | 10/01/20 | 1,000 | 1,011,820 | |||||||||||
Tucson Elec. Pwr. Co., Ser. A | Baa3 | 5.250 | 10/01/40 | 1,000 | 945,330 | |||||||||||
Pinal Cnty. Indl. Dev. Auth., Correct. Facs. Rev., Florence West Prison Proj., Ser. A, A.C.A. | BBB(b) | 5.250 | 10/01/19 | 3,135 | 3,165,942 | |||||||||||
Salt Verde Finl. Corp. Gas. Rev., Sr. | A3 | 5.000 | 12/01/32 | 3,000 | 2,761,260 | |||||||||||
|
| |||||||||||||||
14,483,012 | ||||||||||||||||
California 12.1% | ||||||||||||||||
ABAG Fin. Auth. for Nonprofit Corp., Rfdg. Episcopal Senior Community | BBB+(b) | 6.125 | 07/01/41 | 775 | 767,079 | |||||||||||
California Cnty. Tob. Sec. Agcy., Tob. Conv. Bonds Asset Bkd., Ser. B | NR | 5.100 | 06/01/28 | 1,750 | 1,411,935 | |||||||||||
California Hlth. Facs. Fing. Auth. Rev., | ||||||||||||||||
Childrens Hosp., Ser. A | A(b) | 5.250 | 11/01/41 | 2,000 | 1,964,420 | |||||||||||
Rfdg. Stanford Hosp., Ser. A-3 | Aa3 | 5.500 | 11/15/40 | 750 | 794,483 | |||||||||||
St. Joseph Hlth. Sys., Ser. A | A1 | 5.750 | 07/01/39 | 1,770 | 1,843,260 | |||||||||||
California Muni. Fin. Auth. Rev., Eisenhower Med. Ctr., Ser. A | Baa2 | 5.750 | 07/01/40 | 500 | 486,275 | |||||||||||
California Poll. Ctrl. Fin. Auth. Rev., Wtr. Facs., Amer. Wtr. Cap. Corp. Proj., 144A | Baa2 | 5.250 | 08/01/40 | 500 | 487,645 |
See Notes to Financial Statements.
Prudential Muni High Income Fund | 7 |
Portfolio of Investments
as of October 31, 2011 (Unaudited) continued
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
California (cont’d.) | ||||||||||||||||
California St., | ||||||||||||||||
GO | A1 | 6.000% | 04/01/38 | $ | 3,500 | $ | 3,874,290 | |||||||||
Var. Purp., GO | A1 | 5.500 | 11/01/39 | 1,000 | 1,046,050 | |||||||||||
Var. Purp., GO | A1 | 6.000 | 11/01/39 | 1,500 | 1,670,010 | |||||||||||
California St. Pub. Wks. Brd. Lease Rev., Various Cap. Proj., | A2 | 5.750 | 10/01/30 | 750 | 787,868 | |||||||||||
Ser. I-1 | A2 | 6.375 | 11/01/34 | 750 | 824,317 | |||||||||||
California Statewide Cmntys. Dev. Auth. Rev., | A+(b) | 5.000 | 11/01/40 | 800 | 782,032 | |||||||||||
John Muir Hlth. | A1 | 5.125 | 07/01/39 | 500 | 490,895 | |||||||||||
Sch. Fac., Aspire Pub. Sch. | NR | 6.000 | 07/01/30 | 1,000 | 1,001,630 | |||||||||||
Sr. Living Southn. Calif. Presbyterian Homes | BBB(b) | 7.250 | 11/15/41 | 500 | 538,725 | |||||||||||
Capistrano Unif. Sch. Dist. Cmnty. Facs., Rev., Talega Cmnty. Facs. Dist. #90-2 | NR | 6.000 | 09/01/33 | 1,000 | 1,004,200 | |||||||||||
Chico Redev. Agcy. Tax Alloc. Chico Amended & Merged Redev., A.M.B.A.C. | Baa1 | 5.000 | 04/01/30 | 2,000 | 1,839,400 | |||||||||||
Foothill/Eastern Trans. Corridor Agy. Toll Rd. Rev., Convertible C.A.B.S., Converted to Fixed on 07/15/09 | Baa3 | 5.875 | 01/15/28 | 6,700 | 6,650,956 | |||||||||||
Golden St. Tob. Secur. Corp. Tob. Settlement Rev., | A2 | 5.000 | 06/01/45 | 1,000 | 930,950 | |||||||||||
Asset Bkd., Sr., Ser. A-1 | B3 | 5.750 | 06/01/47 | 6,515 | 4,690,735 | |||||||||||
Lake Elsinore Spl. Tax Cmnty. Facs., Dist.-2-Area A-A | NR | 5.450 | 09/01/36 | 1,500 | 1,328,190 | |||||||||||
Lincoln Pub. Fing. Auth. Rev., | NR | 6.200 | 09/02/25 | 3,330 | 3,330,999 | |||||||||||
Twelve Bridges, Sub. Ser. B | NR | 6.000 | 09/02/27 | 1,000 | 976,950 | |||||||||||
Los Angeles Regional Arpts. Impt. Corp. Lse. Rev., | Caa2 | 7.500 | 12/01/24 | 3,000 | 2,756,220 | |||||||||||
Rfdg. Facs. Sublease Intl. Arpt. | NR | 6.350 | 11/01/25 | 2,000 | 2,000,000 |
See Notes to Financial Statements.
8 | Visit our website at www.prudentialfunds.com |
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
California (cont’d.) | ||||||||||||||||
M-S-R Energy Auth. Calif., | A(b) | 6.500% | 11/01/39 | $ | 2,000 | $ | 2,252,980 | |||||||||
Ser. A | A(b) | 7.000 | 11/01/34 | 1,650 | 1,958,748 | |||||||||||
Ser. B | A(b) | 6.500 | 11/01/39 | 2,000 | 2,252,980 | |||||||||||
Murrieta Cmnty. Facs. Dist. Spl. Tax., No. 2, The Oaks Impt. Area, Ser. A | NR | 5.900 | 09/01/27 | 1,000 | 976,800 | |||||||||||
Palomar Pomerado Healthcare Dist. Ctfs. Part. | Baa3 | 6.000 | 11/01/41 | 1,800 | 1,695,384 | |||||||||||
Perris Cmnty. Facs. Dist., Spec. Tax, No. 01- 2, Avalon, Ser. A | NR | 6.250 | 09/01/23 | 3,000 | 3,056,430 | |||||||||||
Port of Oakland, Rdfg. Amt., Ser. O | A2 | 5.125 | 05/01/31 | 1,000 | 989,670 | |||||||||||
Rancho Cordova Cmnty. Facs. Dist., Tax No. | ||||||||||||||||
Sunridge Anatolia | NR | 6.000 | 09/01/33 | 1,000 | 956,580 | |||||||||||
Sunridge Anatolia | NR | 6.100 | 09/01/37 | 1,980 | 1,902,800 | |||||||||||
Riverside Cnty. Calif. Redev. Agy. Tax. Alloc. Intst. 215 Corridor, Ser. E | Baa2 | 6.500 | 10/01/40 | 2,000 | 2,087,780 | |||||||||||
San Buenaventura Rev., | ||||||||||||||||
Cmnty. Mem. Hlth. Sys. | Ba2 | 7.500 | 12/01/41 | 1,000 | 1,017,570 | |||||||||||
Cmnty. Mem. Hlth. Sys. | Ba2 | 8.000 | 12/01/26 | 500 | 552,460 | |||||||||||
San Francisco City & Cnty. Arpts. Rfdg. Amt. Second, Ser. C | A1 | 5.000 | 05/01/25 | 1,000 | 1,037,520 | |||||||||||
Saugus Unif. Sch. Dist. Spl. Tax Cmnty. Facs. Dist. No. 2002-1 | NR | 6.000 | 09/01/33 | 1,800 | 1,778,256 | |||||||||||
South Bayside Wste. Mgmt. Auth. Calif. Solid Wste. Enterprise Shoreway Environmental, Ser. A | A3 | 6.000 | 09/01/36 | 500 | 521,505 | |||||||||||
Tustin Cnty. Redev. Agy. Tax Alloc. MCAS Tustin Redev. Proj. Area | A(b) | 5.000 | 09/01/40 | 1,000 | 918,580 | |||||||||||
Vernon California Elec. Sys. Rev., Ser. A | A3 | 5.125 | 08/01/21 | 1,500 | 1,486,830 | |||||||||||
Wm. S. Hart Unif. High Sch. Dist., Spl. Tax Cmnty. Fac. Dist. No. 2005-1 | NR | 5.300 | 09/01/36 | 1,000 | 780,040 | |||||||||||
|
| |||||||||||||||
70,502,427 |
See Notes to Financial Statements.
Prudential Muni High Income Fund | 9 |
Portfolio of Investments
as of October 31, 2011 (Unaudited) continued
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Colorado 1.8% |
| |||||||||||||||
Colorado Hlth. Facs. Auth. Rev., | ||||||||||||||||
Christian Living Cmntys. Proj., Ser. A | NR | 5.750% | 01/01/37 | $ | 1,500 | $ | 1,380,465 | |||||||||
Hosp. Valley View Assn. Proj. | BBB+(b) | 5.250 | 05/15/42 | 2,500 | 2,251,650 | |||||||||||
Valley View Assn. Proj. | BBB+(b) | 5.125 | 05/15/37 | 1,240 | 1,115,479 | |||||||||||
Colorado St. Hlth. Facs. Auth. Rev., Catholic Hlth., Ser. A | Aa2 | 5.000 | 02/01/41 | 2,000 | 1,987,680 | |||||||||||
Colorado Springs Memorial Hosp. Rev., Unrefunded balance | A3 | 6.375 | 12/15/30 | 1,260 | 1,260,529 | |||||||||||
E-470 Pub. Hwy. Auth. Rev., Ser. C | Baa2 | 5.375 | 09/01/26 | 1,000 | 980,410 | |||||||||||
Pub. Auth. Energy Nat. Gas Pur. Rev. | Baa1 | 6.500 | 11/15/38 | 1,500 | 1,631,565 | |||||||||||
|
| |||||||||||||||
10,607,778 | ||||||||||||||||
Connecticut 1.6% |
| |||||||||||||||
Connecticut St. Dev. Auth. Rev., | ||||||||||||||||
Rfdg., Conn. Lt. & Pwr. Co. Proj., Ser. A | A2 | 4.375 | 09/01/28 | 2,000 | 2,001,480 | |||||||||||
Solid Wste. Disp. Facs., PSEG Pwr. LLC Proj., Ser. A, A.M.T. | Baa1 | 5.750 | 11/01/37 | 1,600 | 1,601,536 | |||||||||||
Connecticut St. Hlth. & Edl. Facs. Auth. Rev., | ||||||||||||||||
Hartfort Hlth. Care., Ser. A | A2 | 5.000 | 07/01/41 | 1,250 | 1,236,563 | |||||||||||
Western Conn. Hlth., Ser. M | A(b) | 5.375 | 07/01/41 | 1,250 | 1,291,300 | |||||||||||
Hamden Fac. Rev., Whitney Ctr. Proj., Ser. A | NR | 7.750 | 01/01/43 | 1,000 | 1,038,360 | |||||||||||
Harbor Point Infrastructure Impt. Dist. Spl. Oblig. Rev., Harbor Point Proj., Ser. A | NR | 7.875 | 04/01/39 | 2,000 | 2,121,840 | |||||||||||
|
| |||||||||||||||
9,291,079 | ||||||||||||||||
Delaware 0.2% |
| |||||||||||||||
Delaware St. Hlth. Facs. Auth. Rev., Beebe Med. Ctr. Proj., Ser. A | Ba3 | 5.000 | 06/01/30 | 2,000 | 1,416,920 | |||||||||||
District of Columbia 0.7% |
| |||||||||||||||
Dist. of Columbia Rev., | ||||||||||||||||
Assn. Amern. Med. Colleges, Ser. B | A+(b) | 5.000 | 10/01/41 | 2,500 | 2,398,825 | |||||||||||
Gallaudet Univ. | A2 | 5.500 | 04/01/34 | 400 | 420,996 |
See Notes to Financial Statements.
10 | Visit our website at www.prudentialfunds.com |
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
District of Columbia (cont’d.) |
| |||||||||||||||
Metropolitan Washington D.C. Arpt. Auth. Sys. Rev., Ser. A, A.M.T. | Aa3 | 5.250% | 10/01/27 | $ | 1,500 | $ | 1,570,710 | |||||||||
|
| |||||||||||||||
4,390,531 | ||||||||||||||||
Florida 5.8% |
| |||||||||||||||
Capital Tr. Agy. Rev. Rfdg., Air Cargo, Aero Miami FX LLC, Sr. Lien, Ser. A | Baa3 | 5.350 | 07/01/29 | 2,500 | 2,380,975 | |||||||||||
Citizens Ppty. Ins. Corp., Sr. Secd., | ||||||||||||||||
Coastal, Ser. A-1 | A2 | 5.000 | 06/01/19 | 1,250 | 1,337,612 | |||||||||||
High Act | A2 | 6.000 | 06/01/16 | 1,500 | 1,684,545 | |||||||||||
Florida Dev. Fin. Corp. Edl. Facs. Rev., Renaissance Charter Sch., Ser. A | NR | 6.000 | 09/15/40 | 1,750 | 1,627,885 | |||||||||||
Greater Orlando Aviation Auth., Orlando Arpt. Fac. Rev., | ||||||||||||||||
Spl. Purp. - Jetblue Airways Corp., A.M.T. | NR | 6.375 | 11/15/26 | 3,000 | 2,851,230 | |||||||||||
Spl. Purp. - Jetblue Airways Corp., A.M.T. | NR | 6.500 | 11/15/36 | 2,000 | 1,880,340 | |||||||||||
Highlands Cmnty. Dev. Spl. Assmt. (original cost $400,000; purchased 10/06/05)(d)(e)(f) | NR | 5.550 | 05/01/36 | 400 | 205,812 | |||||||||||
Hillsborough Cnty. Indl. Dev. Auth. Rev., | ||||||||||||||||
Hlth. Facs., Univ. Cmnty. Hosp., Ser. B (Prerefunded 08/15/19)(g) | Baa3 | 8.000 | 08/15/32 | 1,000 | 1,396,380 | |||||||||||
Tampa Electric | Baa1 | 5.650 | 05/15/18 | 1,000 | 1,140,470 | |||||||||||
Indigo Cmnty. Dev. Dist. Cap. Impvt. Rev. | NR | 5.750 | 05/01/36 | 1,860 | 1,014,035 | |||||||||||
Jacksonville Econ. Dev., | Ba1 | 5.300 | 05/01/37 | 3,000 | 2,650,740 | |||||||||||
Miami Beach Hlth. Facs. Auth. Hosp. Rev., Mount Sinai Med. Ctr., Ser. A | Baa3 | 6.700 | 11/15/19 | 1,000 | 1,010,890 | |||||||||||
North Sumter Cnty. Util. Dependent Dist. Util. Rev. | BBB(b) | 5.750 | 10/01/43 | 1,500 | 1,522,905 |
See Notes to Financial Statements.
Prudential Muni High Income Fund | 11 |
Portfolio of Investments
as of October 31, 2011 (Unaudited) continued
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Florida (cont’d.) | ||||||||||||||||
St. Johns Cnty. Fla. Indl. Dev. Auth. Rev., Presbyterian Retirement, Ser. A | NR | 6.000% | 08/01/45 | $ | 1,000 | $ | 1,008,010 | |||||||||
St. Petersburg Hlth. Facs. Auth. Rev., All Childrens Hosp. | A1 | 6.500 | 11/15/39 | 1,500 | 1,638,075 | |||||||||||
Sarasota Cnty. Fla. Pub. Hosp. Dist. Hosp. Rev., Sarasota Mem. Hosp. Proj., Ser. A | A1 | 5.625 | 07/01/39 | 1,000 | 1,018,290 | |||||||||||
Seminole Tribe Rev., 144A, | ||||||||||||||||
Gaming Div., Tribal Eco. Dev. Bds., Ser. 2010A | Ba1 | 5.125 | 10/01/17 | 1,500 | 1,455,360 | |||||||||||
Spl. Oblig., Ser. A | Ba2 | 5.500 | 10/01/24 | 1,000 | 946,850 | |||||||||||
South Lake Cnty. Hosp. Dist. Rev., South Lake Hosp. | A2 | 5.250 | 10/01/34 | 1,250 | 1,241,700 | |||||||||||
South Lake Hosp., Ser. A | Baa2 | 6.250 | 04/01/39 | 1,910 | 1,940,407 | |||||||||||
Village Cmnty. Dev. Dist. No. 8. Fla. Spl. Assmt. Rev., Rfdg., Phase II | NR | 6.125 | 05/01/39 | 2,775 | 2,792,344 | |||||||||||
Village Cmnty. Dev. Dist. No. 9. Fla. Spl. Assmt. Rev. | NR | 7.000 | 05/01/41 | 1,000 | 1,053,560 | |||||||||||
|
| |||||||||||||||
33,798,415 | ||||||||||||||||
Georgia 1.4% | ||||||||||||||||
Atlanta Arpt. Rev., Rfdg., Gen., Ser. B, A.M.T. | A1 | 5.000 | 01/01/30 | 500 | 501,425 | |||||||||||
Burke Cnty. Dev. Auth. Poll. Rev., | Baa1 | 5.500 | 01/01/33 | 1,000 | 1,037,990 | |||||||||||
Clayton Cnty. Dev. Auth. Spl. Facs. Rev., Delta Air Lines, | CCC+(b) | 8.750 | 06/01/29 | 2,000 | 2,312,260 | |||||||||||
Ser. B, A.M.T. | CCC+(b) | 9.000 | 06/01/35 | 1,000 | 1,074,700 | |||||||||||
Fulton Cnty. Residential Care Facs. Rev., Canterbury Court Proj., Ser. A | NR | 6.125 | 02/15/34 | 1,200 | 1,077,492 | |||||||||||
Henry Cnty. Wtr. & Swr. Auth. Rev., A.M.B.A.C. | Aa2 | 6.150 | 02/01/20 | 1,000 | 1,231,110 | |||||||||||
Marietta Development Auth. Rev., Life Univ. | Ba3 | 7.000 | 06/15/39 | 1,000 | 976,040 | |||||||||||
|
| |||||||||||||||
8,211,017 |
See Notes to Financial Statements.
12 | Visit our website at www.prudentialfunds.com |
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Guam 0.2% | ||||||||||||||||
Guam Govt., Ser. A | B+(b) | 7.000% | 11/15/39 | $ | 1,000 | $ | 1,036,200 | |||||||||
Hawaii 0.6% | ||||||||||||||||
Hawaii Pac. Hlth. Rev., | ||||||||||||||||
Spl. Purp. | A3 | 5.750 | 07/01/40 | 500 | 506,420 | |||||||||||
Spl. Purp. Ser. B | A3 | 5.500 | 07/01/40 | 1,000 | 978,740 | |||||||||||
Hawaii St. Dept. Budget & Fin. Spl. Purp. Rev., | ||||||||||||||||
15 Craigside Proj. | NR | 9.000 | 11/15/44 | 1,000 | 1,140,460 | |||||||||||
Hawaiian Elec. Co. | Baa1 | 6.500 | 07/01/39 | 1,000 | 1,067,380 | |||||||||||
|
| |||||||||||||||
3,693,000 | ||||||||||||||||
Idaho 0.4% | ||||||||||||||||
Idaho Hlth. Facs. Auth. Rev., | A2 | 6.750 | 11/01/37 | 1,000 | 1,106,650 | |||||||||||
Idaho Hsg. & Fin. Assn. Rev., | BB(b) | 9.500 | 07/01/39 | 1,000 | 1,048,980 | |||||||||||
|
| |||||||||||||||
2,155,630 | ||||||||||||||||
Illinois 7.7% | ||||||||||||||||
Chicago O’Hare Intl. Arpt. Rev., Gen.-Third Lien, Ser. C | A1 | 6.500 | 01/01/41 | 1,000 | 1,150,420 | |||||||||||
Illinois Fin. Auth. Rev., | ||||||||||||||||
American Water Cap. Corp. Proj. | Baa2 | 5.250 | 10/01/39 | 3,150 | 3,086,559 | |||||||||||
Cent. Dupage Health, Ser. B | AA(b) | 5.500 | 11/01/39 | 1,500 | 1,552,950 | |||||||||||
Chrt. Sch. Rev. Rfdg., UNO Sch. | BBB-(b) | 6.875 | 10/01/31 | 2,500 | 2,509,050 | |||||||||||
Friendship Vlg. Schaumburg, Ser. A | NR | 5.625 | 02/15/37 | 1,000 | 814,230 | |||||||||||
Illinois Inst. of Technology, Ser. A | Baa3 | 5.000 | 04/01/31 | 2,500 | 1,884,725 | |||||||||||
Illinois Inst. of Technology, Ser. A | Baa3 | 5.000 | 04/01/36 | 5,000 | 3,609,150 | |||||||||||
Little Co. Mary Hosp. & Hlth. | A+(b) | 5.375 | 08/15/40 | 1,500 | 1,419,150 | |||||||||||
Navistar Intl. Recovery Zone Fac., Gty. Agmt. - Navistar, Inc. | B1 | 6.500 | 10/15/40 | 1,000 | 1,031,630 | |||||||||||
NorthWestern Mem. Hosp., Ser. A | Aa2 | 6.000 | 08/15/39 | 1,500 | 1,642,215 | |||||||||||
Provena Hlth., Ser. A | Baa1 | 6.000 | 05/01/28 | 1,500 | 1,524,930 | |||||||||||
Provena Hlth., Ser. A | Baa1 | 7.750 | 08/15/34 | 1,000 | 1,109,460 | |||||||||||
Rush Univ. Med. Ctr. Oblig. Grp., Ser. A | A2 | 7.250 | 11/01/38 | 3,405 | 3,741,142 | |||||||||||
Rush Univ. Med. Ctr., Ser. C | A2 | 6.625 | 11/01/39 | 1,000 | 1,065,220 |
See Notes to Financial Statements.
Prudential Muni High Income Fund | 13 |
Portfolio of Investments
as of October 31, 2011 (Unaudited) continued
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Illinois (cont’d.) | ||||||||||||||||
Silver Cross & Med. Ctrs. | BBB(b) | 7.000% | 08/15/44 | $ | 3,000 | $ | 3,144,240 | |||||||||
Student Hsg., Rfdg. Edl. Advancement Fd., Inc., Ser. B | Baa3 | 5.000 | 05/01/30 | 5,000 | 4,597,700 | |||||||||||
Swedish Covenant, Ser. A | BBB+(b) | 6.000 | 08/15/38 | 1,500 | 1,516,410 | |||||||||||
Metro. Pier & Expo. Auth. Dedicated St. Tax Rev., McCormick Place Expansion, Ser. A, NATL | A2 | 5.250 | 06/15/42 | 6,000 | 6,007,020 | |||||||||||
Railsplitter Tob. Settlement Auth. Rev. | A-(b) | 6.000 | 06/01/28 | 2,250 | 2,339,595 | |||||||||||
Round Lake Rev., Lakewood Spl. Tax #1 (Prerefunded 03/01/13)(g) | NR | 6.700 | 03/01/33 | 1,000 | 1,092,310 | |||||||||||
|
| |||||||||||||||
44,838,106 | ||||||||||||||||
Indiana 2.1% |
| |||||||||||||||
Indiana Hlth. & Edl. Fac. Fin. Auth. Hosp. Rev., | ||||||||||||||||
Cmnty. Foundation Northwest Ind. | BBB+(b) | 5.500 | 03/01/37 | 2,000 | 1,959,680 | |||||||||||
Cmnty. Foundation Northwest Ind., Ser. A | BBB+(b) | 6.000 | 03/01/34 | 3,000 | 3,061,890 | |||||||||||
Indiana St. Fin. Auth. Rev., | ||||||||||||||||
Drexel Fndtn. Edl. Facs. Proj., Ser. A | BBB-(b) | 7.000 | 10/01/39 | 1,000 | 1,015,670 | |||||||||||
Env. Facs., Duke Energy Ind., Ser. B | A(b) | 6.000 | 08/01/39 | 1,000 | 1,096,460 | |||||||||||
Rfdg. Impt., U.S. Steel Corp. | B1 | 6.000 | 12/01/26 | 1,000 | 981,960 | |||||||||||
Indiana St. Hsg. Fin. Auth. Single Fam. Mtge. Rev., Ser. B2, A.M.T., G.N.M.A., F.N.M.A. | Aaa | 4.000 | 01/01/34 | 180 | 179,273 | |||||||||||
Indianapolis Ind. Loc. Pub. Impt. Bd. Bk. Wtrwks. Proj., Ser. A | A2 | 5.750 | 01/01/38 | 1,000 | 1,083,420 | |||||||||||
Vigo Cnty. Hosp. Auth. Rev., | ||||||||||||||||
Union Hosp., Inc. | NR | 5.800 | 09/01/47 | 1,500 | 1,358,835 | |||||||||||
Union Hosp., Inc. | NR | 7.750 | 09/01/31 | 1,500 | 1,598,550 | |||||||||||
|
| |||||||||||||||
12,335,738 | ||||||||||||||||
Iowa 0.3% |
| |||||||||||||||
Altoona Urban Renewal Tax Rev., Annual Appr. | BBB+(b) | 6.000 | 06/01/43 | 1,000 | 1,014,580 | |||||||||||
Ames. Hosp., Mary Greely. Med. Ctr. | A2 | 5.250 | 06/15/36 | 1,000 | 995,830 | |||||||||||
|
| |||||||||||||||
2,010,410 |
See Notes to Financial Statements.
14 | Visit our website at www.prudentialfunds.com |
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Kansas 0.5% |
| |||||||||||||||
Kansas St. Dev. Fin. Auth. Hosp. Rev., | ||||||||||||||||
Adventist Hlth. | Aa3 | 5.750% | 11/15/38 | $ | 1,000 | $ | 1,079,320 | |||||||||
KU Hlth. Sys., Ser. H | A+(b) | 5.125 | 03/01/39 | 500 | 500,130 | |||||||||||
Wyandotte Cnty. Kans. City Unified Govt. Spl. Oblig. Rev., Cap. Apprec. Sales Tax-Sub. Lien, Ser. B | NR | 6.880(h) | 06/01/21 | 2,500 | 1,497,900 | |||||||||||
|
| |||||||||||||||
3,077,350 | ||||||||||||||||
Kentucky 1.0% |
| |||||||||||||||
Kentucky Economic Dev. Fin. Auth. Rev., | ||||||||||||||||
Hosp. Facs., Owensboro Med. Health Sys. | Baa2 | 6.375 | 06/01/40 | 3,500 | 3,655,995 | |||||||||||
Masonic Home Indpt. Living | NR | 5.750 | 05/15/17 | 1,250 | 1,250,413 | |||||||||||
Owen Cnty. Wtrwks. Sys. Rev., Amern. Wtr. Co. Proj., | ||||||||||||||||
Ser. A | Baa2 | 6.250 | 06/01/39 | 500 | 527,405 | |||||||||||
Ser. B | Baa2 | 5.625 | 09/01/39 | 500 | 503,575 | |||||||||||
|
| |||||||||||||||
5,937,388 | ||||||||||||||||
Louisiana 2.1% |
| |||||||||||||||
Louisiana Loc. Govt. Envir. Facs. & Cmnty. Rev., | ||||||||||||||||
Westlake Chem. Corp., Ser. A-2 | Baa3 | 6.500 | 11/01/35 | 1,000 | 1,044,630 | |||||||||||
Woman’s Hosp. Foundation, Ser. A | A3 | 6.000 | 10/01/44 | 2,000 | 2,019,120 | |||||||||||
Louisiana Pub. Facs. Auth. Rev., Franciscan Missionaries Hosp. | A2 | 6.750 | 07/01/39 | 2,000 | 2,185,840 | |||||||||||
Louisiana St. Citizens Ppty. Ins. Assmt. Rev., Ser. C, A.G.C. | Aa3 | 6.750 | 06/01/26 | 2,000 | 2,294,920 | |||||||||||
Tobacco Settlement Fing. Corp. Rev., Asset Bkd., | ||||||||||||||||
Ser. 2001B | A1 | 5.500 | 05/15/30 | 1,050 | 1,051,134 | |||||||||||
Ser. 2001B | A3 | 5.875 | 05/15/39 | 4,000 | 4,001,800 | |||||||||||
|
| |||||||||||||||
12,597,444 |
See Notes to Financial Statements.
Prudential Muni High Income Fund | 15 |
Portfolio of Investments
as of October 31, 2011 (Unaudited) continued
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Maine 0.4% |
| |||||||||||||||
Maine Hlth. & Higher Edl. Facs. Auth. Rev., Maine General Med. Center | Baa3 | 7.500% | 07/01/32 | $ | 2,000 | $ | 2,188,220 | |||||||||
Maryland 1.5% |
| |||||||||||||||
Cnty. of Anne Arundel Spl. Oblig., Vlg. South Waugh Chapel Proj., Tax Alloc. | NR | 6.250 | 07/01/40 | 2,000 | 2,007,740 | |||||||||||
Cnty. of Frederick Spl. Oblig., Sub. Urbana Cmnty. Dev. Auth., Ser. B | NR | 5.500 | 07/01/40 | 2,860 | 2,710,022 | |||||||||||
Maryland Econ. Dev. Corp., Potomac Elect. Pwr. Co. | A3 | 6.200 | 09/01/22 | 1,000 | 1,173,950 | |||||||||||
Maryland St. Hlth. & Higher Edl. Facs. Auth. Rev., | ||||||||||||||||
Lifebridge Hlth. | A2 | 6.000 | 07/01/41 | 600 | 638,874 | |||||||||||
Rfdg., Charlestown Cmnty. | NR | 6.250 | 01/01/41 | 1,500 | 1,559,205 | |||||||||||
Maryland St. Indl. Dev. Fin. Auth. Rev., Rfdg. Synagro Baltimore, Ser. A, A.M.T. | NR | 5.250 | 12/01/13 | 700 | 720,692 | |||||||||||
|
| |||||||||||||||
8,810,483 | ||||||||||||||||
Massachusetts 2.6% | ||||||||||||||||
Massachusetts St. Coll. Bldg., Auth. Rev., Proj. & Rfdg. Bonds, Ser. A | Aa1 | 7.500 | 05/01/14 | 1,750 | 1,907,238 | |||||||||||
Massachusetts St. Dev. Fin. Agcy. Rev., | ||||||||||||||||
Alliance Hlth., Ser. A | NR | 7.100 | 07/01/32 | 3,730 | 3,257,521 | |||||||||||
Carleton Willard Vlg. | A-(b) | 5.625 | 12/01/30 | 400 | 406,072 | |||||||||||
Groves in Lincoln-Deacone, Sr. Living Fac. Rev., Ser. B1 | NR | 7.250 | 06/01/16 | 1,000 | 1,000,260 | |||||||||||
Linden Ponds, Inc. Fac. Ser. A-1 | NR | 6.250 | 11/15/46 | 709 | 502,263 | |||||||||||
Linden Ponds, Inc. Fac. Ser. A-2 | NR | 5.500 | 11/15/46 | 38 | 22,770 | |||||||||||
Linden Ponds, Inc. Fac. Ser. B | NR | 14.290(h) | 11/15/56 | 187 | 910 | |||||||||||
Solid Wst. Disp. Rev., Dominion Energy Brayton (Mandatory put date 05/01/19) | Baa2 | 5.750 | 12/01/42 | 1,000 | 1,131,380 | |||||||||||
Tufts Med. Ctr., Ser. I | BBB(b) | 7.250 | 01/01/32 | 2,000 | 2,214,220 |
See Notes to Financial Statements.
16 | Visit our website at www.prudentialfunds.com |
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Massachusetts (cont’d.) |
| |||||||||||||||
Massachusetts St. Hlth. & Edl. Facs. Auth. Rev., Lowell Gen. Hosp., Ser. C | Baa1 | 5.125% | 07/01/35 | $ | 2,000 | $ | 1,787,100 | |||||||||
Massachusetts St. Port Auth. Spl. Facs. Rev., Bosfuel Proj., A.M.T., NATL | A3 | 5.000 | 07/01/32 | 3,000 | 2,965,530 | |||||||||||
|
| |||||||||||||||
15,195,264 | ||||||||||||||||
Michigan 3.7% | ||||||||||||||||
Detroit Mich. Distr. St. Aid, GO | Aa3 | 5.250 | 11/01/35 | 500 | 516,290 | |||||||||||
Detroit Mich. Sewer Disp. Rev., Sr. Lien, Ser. B, A.G.M. | Aa3 | 7.500 | 07/01/33 | 1,000 | 1,185,490 | |||||||||||
Kent Hosp. Fin. Auth. Rev., Metro. Hosp. Proj., Ser. A | BB+(b) | 6.250 | 07/01/40 | 3,000 | 2,870,880 | |||||||||||
Michigan Fin. Auth. Ltd. Oblig. Rev., Pub. Sch. Academy, Old Redford, Ser. A | BBB-(b) | 6.500 | 12/01/40 | 745 | 673,443 | |||||||||||
Michigan Pub. Edl. Facs. Auth. Rev., Rfdg. Ltd. Oblig.-Black River Sch. | NR | 5.800 | 09/01/30 | 1,250 | 1,047,250 | |||||||||||
Michigan St. Bldg. Auth. Rev., Rfdg., Facs. Proj., Ser. I-A | Aa3 | 5.375 | 10/15/41 | 750 | 802,800 | |||||||||||
Michigan St. Hosp. Fin. Auth. Rev., Henry Ford Hlth. | A1 | 5.750 | 11/15/39 | 1,000 | 1,021,900 | |||||||||||
McLaren Healthcare Corp. | Aa3 | 5.750 | 05/15/38 | 1,500 | 1,556,130 | |||||||||||
Michigan Strategic Fund Rev., Rdfg., | ||||||||||||||||
Detroit Ed., Rmkt. | A2 | 5.625 | 07/01/20 | 1,000 | 1,142,360 | |||||||||||
Dow Chemical, Ser. A-1, A.M.T. (Mandatory put date 06/02/14) | A-2 | 6.750 | 12/01/28 | 1,000 | 1,114,420 | |||||||||||
Dow Chemical, Ser. B-1 | A-2 | 6.250 | 06/01/14 | 1,000 | 1,105,020 | |||||||||||
Solid Wste. Disp. Wste. Mgmt., Inc., A.M.T. | BBB(b) | 4.500 | 12/01/13 | 1,000 | 1,053,540 | |||||||||||
Royal Oak Mich. Hosp. Fin. Auth. Hosp. Rev., | ||||||||||||||||
William Beaumont Hosp. | A1 | 8.250 | 09/01/39 | 2,150 | 2,550,029 | |||||||||||
William Beaumont Hosp., Ser. W | A1 | 6.000 | 08/01/39 | 1,000 | 1,034,930 | |||||||||||
Summit Academy Rev., Rfdg., | ||||||||||||||||
North Pub. Sch., Academy | BB+(b) | 5.500 | 11/01/30 | 1,500 | 1,197,465 | |||||||||||
Pub. Sch., Academy | BB+(b) | 6.250 | 11/01/25 | 2,060 | 1,887,475 |
See Notes to Financial Statements.
Prudential Muni High Income Fund | 17 |
Portfolio of Investments
as of October 31, 2011 (Unaudited) continued
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Michigan (cont’d.) | ||||||||||||||||
Wayne Charter Cnty. Mich. Bldg. Impt., Ser. A, GO | A3 | 6.750% | 11/01/39 | $ | 990 | $ | 1,059,161 | |||||||||
|
| |||||||||||||||
21,818,583 | ||||||||||||||||
Minnesota 0.2% | ||||||||||||||||
St. Paul Hsg. & Redev. Auth. Hosp. Rev., Hlth. East Proj. | Ba1 | 6.000 | 11/15/35 | 1,000 | 961,870 | |||||||||||
Mississippi 0.2% | ||||||||||||||||
Warren Cnty. Gulf Opportunity Zone, Intl. Paper, Ser. A | BBB(b) | 6.500 | 09/01/32 | 1,000 | 1,070,730 | |||||||||||
Missouri 0.4% | ||||||||||||||||
Manchester Tax Increment & Transn. Rev., Rfdg. Hwy. 141, Manchester Rd. Proj. | NR | 6.875 | 11/01/39 | 1,500 | 1,531,860 | |||||||||||
Missouri St. Hlth & Ed. Facs., Lutheran Senior Services | NR | 6.000 | 02/01/41 | 1,000 | 999,890 | |||||||||||
|
| |||||||||||||||
2,531,750 | ||||||||||||||||
Nevada 0.7% |
| |||||||||||||||
Clark Cnty. Arpt. Rev., Jet Aviation Fuel Tax, | ||||||||||||||||
Ser. C, A.M.B.A.C., A.M.T. | A1 | 5.375 | 07/01/16 | 1,000 | 1,043,600 | |||||||||||
Ser. C, A.M.B.A.C., A.M.T. | A1 | 5.375 | 07/01/17 | 1,000 | 1,039,030 | |||||||||||
Clark Cnty. Impvt. Dist. Rev., Impvt. Dist. No. 142, Loc. Impvt. | NR | 6.100 | 08/01/18 | 1,840 | 1,897,592 | |||||||||||
|
| |||||||||||||||
3,980,222 | ||||||||||||||||
New Hampshire 0.2% |
| |||||||||||||||
New Hampshire St. Business Fin. Auth. Poll. Ctrl. Rev., United Illuminating Co. Proj., A.M.T. (Mandatory put date 02/01/12) | Baa2 | 7.125 | 07/01/27 | 1,000 | 1,014,450 |
See Notes to Financial Statements.
18 | Visit our website at www.prudentialfunds.com |
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
New Jersey 7.5% |
| |||||||||||||||
Burlington Cnty. Bridge Commn. Econ. Dev. Rev., The Evergreens Proj. | NR | 5.625% | 01/01/38 | $ | 1,000 | $ | 843,250 | |||||||||
New Jersey Econ. Dev. Auth. Rev., | ||||||||||||||||
Cigarrete Tax | Baa3 | 5.500 | 06/15/24 | 1,000 | 983,870 | |||||||||||
Cigarette Tax | Baa3 | 5.625 | 06/15/19 | 505 | 505,162 | |||||||||||
Cigarette Tax | Baa3 | 5.750 | 06/15/34 | 750 | 707,445 | |||||||||||
Continental Airlines, Inc., A.M.T. | B3 | 6.400 | 09/15/23 | 2,000 | 1,952,800 | |||||||||||
Continental Airlines, Inc. Proj., Spec. Facs. Rev., A.M.T. | B3 | 6.250 | 09/15/29 | 6,530 | 6,173,919 | |||||||||||
Cranes Mill Proj. First Mtge., Ser. A | NR | 5.875 | 07/01/28 | 1,000 | 988,400 | |||||||||||
Gloucester Marine, Ser. B, A.M.T. | NR | 6.875 | 01/01/37 | 3,000 | 2,733,840 | |||||||||||
New Jersey Healthcare Facs. Fin. Auth. Rev., | ||||||||||||||||
AHS Hosp. Corp. | A1 | 6.000 | 07/01/41 | 500 | 545,935 | |||||||||||
Rfdg. Barnabas Hlth. Ser. A | Baa2 | 5.625 | 07/01/37 | 1,000 | 992,530 | |||||||||||
Rfdg., Holy Name Med. Ctr. | Baa2 | 5.000 | 07/01/25 | 1,625 | 1,530,392 | |||||||||||
St. Josephs Healthcare Sys. | Ba1 | 6.625 | 07/01/38 | 3,000 | 2,994,060 | |||||||||||
Virtua Hlth. | A(b) | 5.750 | 07/01/33 | 2,000 | 2,108,720 | |||||||||||
New Jersey St. Ed. Facs. Auth. UMDNJ Rfdg., Univ. Med. & Dentistry, Ser. B | Baa1 | 7.500 | 12/01/32 | 1,000 | 1,162,290 | |||||||||||
New Jersey St. Tpke. Auth. Tpke. Rev., Growth & Income Secs., Ser. B, A.M.B.A.C., C.A.B.S. (Converts to 5.15% on 01/01/15) | A3 | 4.850(h) | 01/01/35 | 4,000 | 3,470,000 | |||||||||||
New Jersey St. Transn. Tr. Fd. Sys. Auth., Ser. A | A1 | 5.875 | 12/15/38 | 2,000 | 2,205,560 | |||||||||||
Tobacco Settlement Fin. Corp., NJ Rev., Rfdg., | ||||||||||||||||
Ser. 1A | B1 | 4.500 | 06/01/23 | 5,290 | 4,802,897 | |||||||||||
Ser. 1A | B1 | 4.625 | 06/01/26 | 5,000 | 3,999,600 | |||||||||||
Ser. 1A | B2 | 4.750 | 06/01/34 | 3,000 | 2,006,850 | |||||||||||
Ser. 1A | B2 | 5.000 | 06/01/41 | 4,500 | 2,981,565 | |||||||||||
|
| |||||||||||||||
43,689,085 |
See Notes to Financial Statements.
Prudential Muni High Income Fund | 19 |
Portfolio of Investments
as of October 31, 2011 (Unaudited) continued
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
New Mexico 0.8% |
| |||||||||||||||
Farmington Poll. Ctrl. Rev., Rfdg., Pub. Svc. NM San Juan, Ser. A (Mandatory put date 06/01/20) | Baa3 | 5.200% | 06/01/40 | $ | 2,150 | $ | 2,210,888 | |||||||||
New Mexico Mtge. Fin. Auth. Rev., Sngl. Fam. Mtge., Ser. E, A.M.T., G.N.M.A., F.N.M.A., F.H.L.M.C. | AA+(b) | 5.500 | 07/01/35 | 1,110 | 1,178,509 | |||||||||||
New Mexico St. Hosp. Equip. Ln. Council Hosp. Rev., Presbyterian Healthcare | Aa3 | 5.000 | 08/01/39 | 1,250 | 1,271,600 | |||||||||||
|
| |||||||||||||||
4,660,997 | ||||||||||||||||
New York 4.2% |
| |||||||||||||||
Brooklyn Arena Local Dev. Corp., Barclays Ctr. Proj. | Baa3 | 6.375 | 07/15/43 | 1,250 | 1,294,863 | |||||||||||
Erie Cnty. Tob. Asset Securitization Corp. Cap. Apprec., | ||||||||||||||||
Asset Bkd.-1st Sub., Ser. B, C.A.B.S. | NR | 10.460(h) | 06/01/47 | 5,000 | 132,850 | |||||||||||
Asset Bkd.-2nd Sub., Ser. C, C.A.B.S. | NR | 10.960(h) | 06/01/50 | 4,000 | 65,160 | |||||||||||
Long Island Pwr. Auth. Elec. Sys. Rev., | ||||||||||||||||
Ser. A | A3 | 6.000 | 05/01/33 | 1,500 | 1,686,540 | |||||||||||
Ser. A | A3 | 6.250 | 04/01/33 | 500 | 571,910 | |||||||||||
Metropolitan Transn. Auth. NY Rev., Transn., Ser. A | A2 | 5.000 | 11/15/41 | 1,000 | 1,031,850 | |||||||||||
New York City Indl. Dev. Agcy. Rev., | ||||||||||||||||
Civic Fac., Staten Island Univ. Hosp. Proj., Ser. B (Prerefunded 07/01/12)(g) | Baa3 | 6.375 | 07/01/31 | 2,205 | 2,288,349 | |||||||||||
Spl. Fac., American Airlines, JFK Int’l. Arpt., A.M.T. | B-(b) | 7.500 | 08/01/16 | 1,500 | 1,406,415 | |||||||||||
Spl. Fac., American Airlines, JFK Int’l. Arpt., A.M.T. | B-(b) | 7.750 | 08/01/31 | 2,000 | 1,850,060 | |||||||||||
Spl. Fac., Terminal One Group Assn. Proj., A.M.T. | A3 | 5.500 | 01/01/24 | 2,450 | 2,525,092 | |||||||||||
New York St. Dorm. Auth. Rev., | ||||||||||||||||
Mount Sinai Hosp. Ser. A | A2 | 5.000 | 07/01/41 | 1,250 | 1,246,075 |
See Notes to Financial Statements.
20 | Visit our website at www.prudentialfunds.com |
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
New York (cont’d.) |
| |||||||||||||||
Nonst. Supported Debt, NYU Hosp. Ctr., Ser. A | Baa1 | 6.000% | 07/01/40 | $ | 1,000 | $ | 1,042,410 | |||||||||
North Shore LI. Jewish Ser. A | A3 | 5.000 | 05/01/41 | 3,550 | 3,512,192 | |||||||||||
Orange Reg.-Med. Ctr. | Ba1 | 6.250 | 12/01/37 | 1,500 | 1,493,205 | |||||||||||
Port Auth. of NY & NJ Spl. Oblig. Rev., | ||||||||||||||||
JFK Intl. Air Terminal | Baa3 | 5.000 | 12/01/20 | 500 | 510,595 | |||||||||||
JFK Intl. Air Terminal | Baa3 | 6.000 | 12/01/42 | 2,500 | 2,614,300 | |||||||||||
Suffolk Cnty. Indl. Dev. Agcy. Rev., Keyspan, Port Jefferson, A.M.T. | Baa1 | 5.250 | 06/01/27 | 1,500 | 1,504,215 | |||||||||||
|
| |||||||||||||||
24,776,081 | ||||||||||||||||
North Carolina 0.3% |
| |||||||||||||||
North Carolina Eastn. Mun. Pwr. Agcy. Pwr. Sys. Rev., Ser. C | Baa1 | 6.750 | 01/01/24 | 1,000 | 1,186,250 | |||||||||||
North Carolina Med. Care Commn. Ret. Facs. Rev., First Mtg. Galloway Ridge, Proj., Ser. A | NR | 6.000 | 01/01/39 | 750 | 706,920 | |||||||||||
|
| |||||||||||||||
1,893,170 | ||||||||||||||||
North Dakota 0.3% |
| |||||||||||||||
Ward Cnty. Healthcare Facs. Rev., Trinity Oblig. Rfdg., Group B | BBB+(b) | 6.250 | 07/01/21 | 1,870 | 1,872,525 | |||||||||||
Ohio 4.0% |
| |||||||||||||||
Buckeye Tob. Settlement Fin. Auth., Asset Bkd. Sr. Turbo, | ||||||||||||||||
Ser. A-2 | B3 | 5.125 | 06/01/24 | 6,200 | 4,760,856 | |||||||||||
Ser. A-2 | B3 | 5.375 | 06/01/24 | 2,995 | 2,358,173 | |||||||||||
Ser. A-2 | B3 | 5.875 | 06/01/30 | 3,500 | 2,635,745 | |||||||||||
Ser. A-2 | B3 | 5.875 | 06/01/47 | 1,000 | 707,060 | |||||||||||
Ser. A-2 | B3 | 6.500 | 06/01/47 | 2,500 | 1,941,950 | |||||||||||
Cuyahoga Cnty. Hosp. Facs. Rev., Canton, Inc. Proj. | Baa3 | 7.500 | 01/01/30 | 2,930 | 2,944,445 | |||||||||||
Cnty. of Hancock, Ohio Hosp. Facs. Rev., Blanchard Valley Hlth. Ctr., Ser. A | A3 | 6.250 | 12/01/34 | 600 | 639,582 | |||||||||||
Lucas Cnty. Hosp. Rev., Rfdg., | ||||||||||||||||
Promedica Healthcare, Ser. A | Aa3 | 6.000 | 11/15/41 | 750 | 819,765 |
See Notes to Financial Statements.
Prudential Muni High Income Fund | 21 |
Portfolio of Investments
as of October 31, 2011 (Unaudited) continued
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Ohio (cont’d.) |
| |||||||||||||||
Promedica Healthcare, Ser. A | Aa3 | 6.500% | 11/15/37 | $ | 875 | $ | 996,118 | |||||||||
Montgomery Cnty. Ohio Rev., Miami Valley Hosp., Ser. A | Aa3 | 6.250 | 11/15/39 | 1,500 | 1,568,550 | |||||||||||
Ohio St. Air Quality Dev. Auth. Rev., Poll. FirstEngery Generation, | ||||||||||||||||
Ser. A | Baa2 | 5.700 | 02/01/14 | 1,500 | 1,618,395 | |||||||||||
Ser. C | Baa2 | 5.625 | 06/01/18 | 500 | 554,685 | |||||||||||
Ohio St. Wtr. Dev. Auth. Rev., | ||||||||||||||||
Allied Solid Wste. N.A., Inc., Ser. A, A.M.T. | BBB(b) | 5.150 | 07/15/15 | 1,250 | 1,277,112 | |||||||||||
FirstEnergy Generation, Ser. A (Mandatory put date 06/01/16) | Baa2 | 5.875 | 06/01/33 | 500 | 558,140 | |||||||||||
|
| |||||||||||||||
23,380,576 | ||||||||||||||||
Oklahoma 0.3% |
| |||||||||||||||
Tulsa Arpts. Impt. Tr. Gen. Rev., Ser. A | A3 | 5.375 | 06/01/24 | 1,000 | 1,021,450 | |||||||||||
Tulsa Cnty. Indl. Auth. Sr. Living Cmnty. Rev., Montereau, Inc. Proj., Ser. A | NR | 7.125 | 11/01/30 | 1,000 | 1,033,940 | |||||||||||
|
| |||||||||||||||
2,055,390 | ||||||||||||||||
Pennsylvania 5.7% |
| |||||||||||||||
Allegheny Cnty. Hosp. Dev. Auth. Rev., Hlth. Sys., | ||||||||||||||||
West Penn, Ser. A | B2 | 5.000 | 11/15/17 | 3,975 | 3,864,018 | |||||||||||
West Penn, Ser. A | B2 | 5.000 | 11/15/28 | 1,000 | 833,240 | |||||||||||
West Penn, Ser. A | B2 | 5.375 | 11/15/40 | 2,000 | 1,640,940 | |||||||||||
Butler Cnty. Hosp. Auth. Rev., Butler Hlth. Sys. Proj. | Baa1 | 7.250 | 07/01/39 | 1,000 | 1,096,380 | |||||||||||
Central Bradford Progress Auth. Rev., Rfdg., Guthrie Healthcare Sys. | AA-(b) | 5.375 | 12/01/41 | 2,700 | 2,766,393 | |||||||||||
Cumberland Cnty. Mun. Auth. Rev., | ||||||||||||||||
Asbury PA Oblig. Grp. | NR | 6.125 | 01/01/45 | 2,000 | 1,855,400 | |||||||||||
Diakon Lutheran | NR | 6.375 | 01/01/39 | 1,000 | 1,028,510 | |||||||||||
Fulton Cnty. Indl. Dev. Auth. Hosp. Rev., Med. Ctr. Proj. | NR | 5.900 | 07/01/40 | 1,000 | 860,890 | |||||||||||
Geisinger Auth. Hlth. Sys., Ser. A-1 | Aa2 | 5.125 | 06/01/41 | 1,450 | 1,501,577 |
See Notes to Financial Statements.
22 | Visit our website at www.prudentialfunds.com |
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Pennsylvania (cont’d.) |
| |||||||||||||||
Northampton Cnty. Gen. Purp. Auth. Hosp. Rev., St. Lukes Hosp. Proj., Ser. A | A3 | 5.500% | 08/15/35 | $ | 1,000 | $ | 989,440 | |||||||||
Pennsylvania Econ. Dev. Fin. Auth., | ||||||||||||||||
Res. Recov. Rfdg., Colver Proj., Ser. F, A.M.B.A.C., A.M.T. | Ba1 | 4.625 | 12/01/18 | 4,500 | 4,330,080 | |||||||||||
Res. Recov. Rfdg., Sub., Colver Proj., Ser. G, A.M.T. | NR | 5.125 | 12/01/15 | 1,600 | 1,572,688 | |||||||||||
Sew Sludge Disp. Rev., Philadelphia Biosolids | Baa3 | 6.250 | 01/01/32 | 750 | 787,042 | |||||||||||
US Airways Grp., Ser. B, Gty. Agmt. | Caa3 | 8.000 | 05/01/29 | 500 | 519,640 | |||||||||||
Philadelphia, PA, GO, Ser. B, A.G.M. | Aa3 | 7.125 | 07/15/38 | 1,500 | 1,688,850 | |||||||||||
Philadelphia Auth. For Indl. Dev. Rev., Please Touch Museum Proj. | BBB-(b) | 5.250 | 09/01/31 | 1,500 | 1,159,425 | |||||||||||
Somerset Cnty. Hosp. Auth. Rev., GF Somerset Healthcare First Mtge. (original cost $1,106,647; purchased 02/10/97)(d)(f)(i) | NR | 4.200 | 06/01/09 | ** | 1,095 | 602,009 | ||||||||||
GF Somerset Healthcare First Mtge. (original cost $8,898,687; purchased 02/10/97)(d)(f)(i) | NR | 4.250 | 06/01/24 | 8,805 | 4,840,813 | |||||||||||
Susquehanna Area Regional Arpt. Auth., A.M.T. | Baa3 | 6.500 | 01/01/38 | 1,500 | 1,448,160 | |||||||||||
|
| |||||||||||||||
33,385,495 | ||||||||||||||||
Puerto Rico 2.9% | ||||||||||||||||
Puerto Rico Comwlth., Rfdg. Pub. Impt., Ser. C, GO | Baa1 | 6.000 | 07/01/39 | 800 | 830,752 | |||||||||||
Puerto Rico Comwlth. Govt. Dev. Bank Sr. Notes., Ser. C, A.M.T. | Baa1 | 5.250 | 01/01/15 | 2,000 | 2,110,100 | |||||||||||
Puerto Rico Comwlth. Hwy. & Transn. Auth. Hwy. Rev., Ser. CC | A3 | 5.500 | 07/01/28 | 2,500 | 2,637,150 | |||||||||||
Puerto Rico Pub. Bldg. Auth. Rev., Govt. Facs., Ser. P | Baa1 | 6.750 | 07/01/36 | 750 | 837,728 | |||||||||||
Gtd. Rfdg. Govt. Facs., Ser. M | Baa1 | 6.000 | 07/01/20 | 2,500 | 2,751,425 | |||||||||||
Puerto Rico Elec. Pwr. Auth. Rev., Ser. XX | A3 | 5.250 | 07/01/40 | 2,000 | 2,016,480 |
See Notes to Financial Statements.
Prudential Muni High Income Fund | 23 |
Portfolio of Investments
as of October 31, 2011 (Unaudited) continued
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Puerto Rico (cont’d.) | ||||||||||||||||
Puerto Rico Sales Tax Fin. Corp. Sales Tax Rev., | ||||||||||||||||
Cap. Apprec., Ser. A | A1 | 6.890%(h) | 08/01/33 | $ | 5,000 | $ | 1,316,650 | |||||||||
First Sub., Ser. A | A1 | 5.500 | 08/01/42 | 1,500 | 1,545,975 | |||||||||||
First Sub., Ser. A | A1 | 5.750 | 08/01/37 | 1,000 | 1,048,270 | |||||||||||
First Sub., Ser. A | A1 | 6.000 | 08/01/42 | 1,500 | 1,617,240 | |||||||||||
|
| |||||||||||||||
16,711,770 | ||||||||||||||||
Rhode Island 0.4% | ||||||||||||||||
Rhode Island St. Hlth. & Edl. Bldg. Corp. Rev., Hosp. Fing., Lifespan Oblig., Ser. A | A3 | 7.000 | 05/15/39 | 2,000 | 2,218,160 | |||||||||||
South Dakota 0.5% | ||||||||||||||||
Educational Enhancement Funding Corp., Tobacco, Ser. B | A3 | 6.500 | 06/01/32 | 2,800 | 2,853,032 | |||||||||||
Tennessee 2.4% | ||||||||||||||||
Bradley Cnty. Ind. Dev. Brd. Rev., Rfdg. Olin Corp. Proj., Ser. C | Ba1 | 6.625 | 11/01/17 | 2,000 | 2,063,700 | |||||||||||
Johnson City Hlth. & Edl. Facs. Brd. Hosp. Rev., | ||||||||||||||||
Mountain States Hlth. Alliance | Baa1 | 6.000 | 07/01/38 | 1,000 | 1,037,500 | |||||||||||
Rfdg. First Mtge., Mountain States Hlth., Ser. A, NATL | Baa1 | 6.750 | 07/01/17 | 2,000 | 2,391,520 | |||||||||||
Knox Cnty. Hlth. Edl. & Hsg. Facs. Brd. Hosp. Facs. Rev., Covenant Hlth., Ser. A, C.A.B.S. | A-(b) | 6.210(h) | 01/01/35 | 1,000 | 247,560 | |||||||||||
Rutherford Cnty. Hlth. & Edl. Facs., First Mtge. Rev., Group Homes, Inc. | NR | 9.500 | 12/01/19 | 3,600 | 3,603,060 | |||||||||||
Tennessee Energy Acquisition Corp. Gas Rev., | ||||||||||||||||
Ser. C | Baa3 | 5.000 | 02/01/18 | 2,000 | 2,011,360 | |||||||||||
Ser. C | Baa3 | 5.000 | 02/01/22 | 1,000 | 996,750 | |||||||||||
Ser. C | Baa3 | 5.000 | 02/01/25 | 1,500 | 1,484,145 | |||||||||||
|
| |||||||||||||||
13,835,595 |
See Notes to Financial Statements.
24 | Visit our website at www.prudentialfunds.com |
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Texas 13.2% | ||||||||||||||||
Alliance Arpt. Auth. Inc. Tex. Spl. Facs. Rev., American Airlines, Inc. Proj., A.M.T. | CCC+(b) | 5.750% | 12/01/29 | $ | 2,500 | $ | 1,325,025 | |||||||||
Austin Convention Enterprises, Inc., Convention Ctr., Rfdg., | ||||||||||||||||
Second Tier, Ser. B | Ba2 | 5.750 | 01/01/24 | 2,405 | 2,355,000 | |||||||||||
Second Tier, Ser. B | Ba2 | 5.750 | 01/01/34 | 1,000 | 893,650 | |||||||||||
Brazos River Auth. Poll. Ctrl. Rev., | ||||||||||||||||
TXU Energy Co. LLC Proj., Ser. D (Mandatory put date 10/01/14) | Ca | 5.400 | 10/01/29 | 1,000 | 798,520 | |||||||||||
TXU Energy Co. LLC, Rfdg., A.M.T. | Ca | 5.400 | 05/01/29 | 2,000 | 470,560 | |||||||||||
TXU Energy Rfdg. Elec. Rmkt., A.M.T. | Ca | 8.250 | 10/01/30 | 3,000 | 809,880 | |||||||||||
Capital Area Cultural Ed. Facs. Fin. Corp. Rev., Roman Catholic Diocese, Ser. B, Rmkt. | Baa2 | 6.125 | 04/01/45 | 2,000 | 2,054,740 | |||||||||||
Central Tex. Regl. Mobility Auth. Rev., | ||||||||||||||||
Sr. Lien | Baa3 | 5.750 | 01/01/25 | 1,000 | 1,035,470 | |||||||||||
Sr. Lien | Baa3 | 6.000 | 01/01/41 | 2,000 | 2,013,380 | |||||||||||
Clifton Higher Ed. Fin. Corp. Rev., Tejano Ctr. Cmnty. | BBB-(b) | 9.000 | 02/15/38 | 2,000 | 2,203,540 | |||||||||||
Uplift Ed., Ser. A | BBB-(b) | 6.125 | 12/01/40 | 3,000 | 3,040,440 | |||||||||||
Dallas-Fort Worth Int’l. Arpt. Fac. Impvt. Corp. Rev., Rfdg., | ||||||||||||||||
American Airlines, Inc. | Caa2 | 6.000 | 11/01/14 | 3,000 | 1,830,030 | |||||||||||
American Airlines, Inc., A.M.T. | CCC+(b) | 5.500 | 11/01/30 | 2,000 | 1,060,020 | |||||||||||
American Airlines, Inc., A.M.T. | Caa2 | 6.375 | 05/01/35 | 3,000 | 1,649,940 | |||||||||||
Decatur Hosp. Auth. Rev., Wise Reg. Hlth. Sys., Ser. A | NR | 7.125 | 09/01/34 | 3,000 | 2,992,200 | |||||||||||
Harris Cnty. Indl. Dev. Corp. Solid Wste. Disp. Rev., Deer Park Refining Proj. | A2 | 5.000 | 02/01/23 | 750 | 797,880 | |||||||||||
Houston Arpt. Sys. Rev., Rfdg., Sub. Lien, Ser. A, A.M.T. | A(b) | 5.000 | 07/01/25 | 250 | 255,172 | |||||||||||
Houston Higher Ed. Fin. Corp., Higher Ed. Rev., Cosmos Fndtn., Inc., Ser. A | BBB(b) | 6.500 | 05/15/31 | 1,000 | 1,061,990 |
See Notes to Financial Statements.
Prudential Muni High Income Fund | 25 |
Portfolio of Investments
as of October 31, 2011 (Unaudited) continued
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Texas (cont’d.) | ||||||||||||||||
La Vernia Higher Ed. Fin. Corp. Ed. Rev., | ||||||||||||||||
Kipp, Inc., Ser. A | BBB(b) | 6.375% | 08/15/44 | $ | 1,000 | $ | 1,059,920 | |||||||||
Lifeschools of Dallas, Ser. A | BBB-(b) | 7.500 | 08/15/41 | 2,000 | 2,062,580 | |||||||||||
Lamar Cons. Indpt. Sch. Dist., Rfdg. Sch. House, GO, P.S.F.G.(j) | Aaa | 5.000 | 02/15/21 | 1,000 | 1,161,820 | |||||||||||
Love Field Airport Modernization Corp. Spl. Facs. Rev., Southwest Airlines Co. Proj. | Baa3 | 5.250 | 11/01/40 | 3,500 | 3,320,555 | |||||||||||
Lower Colorado Riv. Auth. Rev., Rfdg. & Impt., | ||||||||||||||||
Ser. A (Prerefunded 05/15/15)(g) | A1 | 7.250 | 05/15/37 | 4,905 | 5,963,695 | |||||||||||
Ser. A, Unrefunded Balance | A1 | 7.250 | 05/15/37 | 95 | 104,664 | |||||||||||
Matagorda Cnty. Nav. Dist. No. 1, Poll. Ctrl. Rev., Bonds Cent. Pwr. & Lt. Co. Proj., Ser. A | Baa2 | 6.300 | 11/01/29 | 1,000 | 1,074,790 | |||||||||||
Mission Econ. Dev. Corp. Allied Wste., Inc., Proj. A, A.M.T. | Baa3 | 5.200 | 04/01/18 | 2,000 | 2,017,600 | |||||||||||
North Tex. Twy. Auth. Rev., Rfdg., | ||||||||||||||||
First Tier, Ser. A | A2 | 5.750 | 01/01/40 | 3,500 | 3,646,965 | |||||||||||
First Tier, Ser. A | A2 | 6.250 | 01/01/39 | 1,500 | 1,621,020 | |||||||||||
First Tier, Sys. | A2 | 6.000 | 01/01/38 | 2,000 | 2,148,520 | |||||||||||
Second Tier, Ser. F | A3 | 5.750 | 01/01/38 | 2,500 | 2,574,200 | |||||||||||
Pharr Higher Ed. Fin. Auth. Ed. Rev., Idea Pub. Sch., Ser. A | BBB+(b) | 6.500 | 08/15/39 | 1,000 | 1,030,010 | |||||||||||
Sabine River Auth. Poll. Ctrl. Rev., TXU Energy Co. LLC Proj., Ser. B | Ca | 6.150 | 08/01/22 | 1,000 | 240,580 | |||||||||||
San Juan Higher Edu. Fin. Auth. Rev. Idea Pub. Schs., Ser. A | BBB+(b) | 6.700 | 08/15/40 | 1,000 | 1,046,040 | |||||||||||
San Leanna Ed. Facs. Corp. Higher Ed. Rev., Rfdg., Saint Edwards Univ. Proj. | Baa2 | 4.750 | 06/01/32 | 2,750 | 2,535,830 | |||||||||||
Tarrant Cnty. Cultural Ed. Facs. Fin. Corp., Hosp. Rev., | ||||||||||||||||
Mirador Proj. Ret. Fac., Temps. 75, Ser. B-1 | NR | 7.250 | 11/15/16 | 1,000 | 996,630 | |||||||||||
Stayton At Museum Way Sr. Living Ctr. Proj. Temps., Ser. C-1 | NR | 7.500 | 11/15/16 | 1,000 | 1,002,340 |
See Notes to Financial Statements.
26 | Visit our website at www.prudentialfunds.com |
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Texas (cont’d.) | ||||||||||||||||
Texas Mun. Pwr. Agcy. Rev., NATL, E.T.M., C.A.B.S.(g) | A2 | 1.170%(h) | 09/01/15 | $ | 50 | $ | 47,808 | |||||||||
Texas Mun. Gas Acquisition & Supply Corp., | ||||||||||||||||
Gas Supply Rev., Sr. Lien, Ser. A | Baa1 | 5.250 | 12/15/26 | 3,900 | 3,722,979 | |||||||||||
Sr. Lien, Ser. D | Baa1 | 6.250 | 12/15/26 | 2,000 | 2,110,380 | |||||||||||
Texas Private Activity Surface Transn. Corp., Sr. Lien, | ||||||||||||||||
LBJ Infrastructure | Baa3 | 7.000 | 06/30/40 | 4,670 | 5,020,670 | |||||||||||
NTE Mobility Partners | Baa2 | 6.875 | 12/31/39 | 2,000 | 2,134,060 | |||||||||||
Texas St. Pub. Fin. Auth. Charter Sch. Fin. Corp. Rev., | ||||||||||||||||
Ed. Cosmos Fndtn., Ser. A | BBB(b) | 5.375 | 02/15/37 | 1,000 | 931,370 | |||||||||||
Ed. Cosmos Fndtn., Ser. A | BBB(b) | 6.200 | 02/15/40 | 1,000 | 1,017,370 | |||||||||||
Idea Pub. Sch. Proj., Ser. A, A.C.A. | BBB+(b) | 5.000 | 08/15/30 | 2,000 | 1,794,960 | |||||||||||
|
| |||||||||||||||
77,034,793 | ||||||||||||||||
Utah 0.3% |
| |||||||||||||||
Riverton Utah Hosp. Rev., IHC Hlth. Svcs., Inc. | Aa1 | 5.000 | 08/15/41 | 1,500 | 1,520,175 | |||||||||||
Virgin Islands 0.1% |
| |||||||||||||||
Virgin Islands Pub. Fin. Auth. Rev., Matching Fd. Ln. Diageo, Ser. A | Baa3 | 6.750 | 10/01/37 | 750 | 803,265 | |||||||||||
Virginia 1.1% |
| |||||||||||||||
Mosaic District Cmnty. Dev. Auth. Rev., Ser. A | NR | 6.875 | 03/01/36 | 1,250 | 1,308,975 | |||||||||||
Norfolk Redev. & Hsg. Auth. Multi-Fam. Rental Hsg. Fac. Rev., Sussex Apts., A.M.T. | NR | 8.000 | 09/01/26 | 4,875 | 4,879,436 | |||||||||||
|
| |||||||||||||||
6,188,411 | ||||||||||||||||
Washington 1.3% |
| |||||||||||||||
Skagit Cnty. Pub. Hosp. Dist. No. 001 Rev., | ||||||||||||||||
Skagit Valley Hosp. | Baa2 | 5.375 | 12/01/22 | 1,190 | 1,210,861 | |||||||||||
Skagit Valley Hosp. | Baa2 | 5.750 | 12/01/35 | 625 | 607,519 |
See Notes to Financial Statements.
Prudential Muni High Income Fund | 27 |
Portfolio of Investments
as of October 31, 2011 (Unaudited) continued
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS (Continued) | ||||||||||||||||
Washington (cont’d.) |
| |||||||||||||||
Tobacco Settlement Auth. of Washington Rev., Asset Bkd. | A3 | 6.500% | 06/01/26 | $ | 2,020 | $ | 2,053,168 | |||||||||
Washington St. Healthcare Fac. Auth. Rev., | ||||||||||||||||
Overlake Hosp. Med. Ctr. | A3 | 5.500 | 07/01/30 | 1,115 | 1,134,122 | |||||||||||
Seattle Childrens Hosp. | Aa3 | 5.625 | 10/01/38 | 1,250 | 1,324,800 | |||||||||||
Swedish Hlth. Svcs., Ser. A | A2 | 6.500 | 11/15/33 | 1,000 | 1,048,090 | |||||||||||
|
| |||||||||||||||
7,378,560 | ||||||||||||||||
Wisconsin 0.5% |
| |||||||||||||||
Milwaukee Redev. Auth. Redev. Rev., Science Ed. Consortium Proj., Ser. A | BBB-(b) | 5.750 | 08/01/35 | 1,500 | 1,295,055 | |||||||||||
Wisconsin Hlth. & Edl. Facs. Auth. Rev., | ||||||||||||||||
Beaver Dam Cmnty. Hosp., Inc., Ser. A | NR | 6.750 | 08/15/34 | 1,250 | 1,255,012 | |||||||||||
Eastcastle Place, Inc. Proj. | NR | 6.125 | 12/01/34 | 1,000 | 640,580 | |||||||||||
|
| |||||||||||||||
3,190,647 | ||||||||||||||||
Wyoming 0.1% |
| |||||||||||||||
Campbell Cnty. Solid Wste. Facs. Rev., Basin Elec. Pwr. Coop., Ser. A | A1 | 5.750 | 07/15/39 | 500 | 542,310 | |||||||||||
|
| |||||||||||||||
Total long-term investments | 569,813,874 | |||||||||||||||
|
| |||||||||||||||
SHORT-TERM INVESTMENTS 2.3% | ||||||||||||||||
California 0.7% |
| |||||||||||||||
California St. Economic Recovery, | ||||||||||||||||
Var. Ser. C. Rmkt., F.R.D.D. | VMIG1 | 0.100(c) | 07/01/23 | 2,400 | 2,400,000 | |||||||||||
Var. Ser. C. Rmkt., F.R.D.D. | VMIG1 | 0.110(c) | 07/01/23 | 1,500 | 1,500,000 | |||||||||||
|
| |||||||||||||||
3,900,000 | ||||||||||||||||
Kansas 0.2% |
| |||||||||||||||
Wichita Kans. Hosp. Rev., | ||||||||||||||||
Var. Facs. Christi Hlth. VIII, Ser. B-1, F.R.D.D. | A-1+(b) | 0.130(c) | 11/15/39 | 600 | 600,000 |
See Notes to Financial Statements.
28 | Visit our website at www.prudentialfunds.com |
Description(a) | Moody’s Rating*† | Interest Rate | Maturity Date | Principal Amount (000) | Value (Note 1) | |||||||||||
SHORT-TERM INVESTMENTS (Continued) | ||||||||||||||||
Kansas (cont’d.) |
| |||||||||||||||
Var. Facs. Christi. Hlth. III. Ser. B-2, F.R.D.D. | A-1+(b) | 0.130%(c) | 11/15/39 | $ | 900 | $ | 900,000 | |||||||||
|
| |||||||||||||||
1,500,000 | ||||||||||||||||
Texas 1.4% |
| |||||||||||||||
Dallas Tex. Performing Arts Cultural Facs. Corp. Cultural, Var., Dallas Arts Ctr. Fdtn., Ser. B, F.R.D.D. | VMIG1 | 0.140(c) | 09/01/41 | 8,135 | 8,135,000 | |||||||||||
|
| |||||||||||||||
Total short-term Investments | 13,535,000 | |||||||||||||||
|
| |||||||||||||||
Total Investments 99.8% | 583,348,874 | |||||||||||||||
Other assets in excess of liabilities(k) 0.2% | 1,107,698 | |||||||||||||||
|
| |||||||||||||||
Net Assets 100.0% | $ | 584,456,572 | ||||||||||||||
|
|
* | The Fund’s current Statement of Additional Information contains a description of Moody’s and Standard & Poor’s ratings. |
** | The 2009 bonds remain an outstanding obligation of Somerset. Revised maturity date to be determined. |
† | The ratings reflected are as of October 31, 2011. Ratings of certain bonds may have changed subsequent to that date. |
(a) | The following abbreviations are used in portfolio descriptions: |
144A—Securities were purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. Unless otherwise noted, 144A securities are deemed to be liquid.
A.C.A.—ACA Financial Guaranty Corp.
A.G.C.—Assured Guaranty Corp.
A.G.M.—Assured Guaranty Municipal Corp.
A.M.B.A.C.—American Municipal Bond Assurance Corp.
A.M.T.—Alternative Minimum Tax.
C.A.B.S.—Capital Appreciation Bonds.
E.T.M.—Escrowed to Maturity.
F.H.L.M.C.—Federal Home Loan Mortgage Corp.
F.N.M.A.—Federal National Mortgage Association.
F.R.D.D.—Floating Rate Daily Demand Note.
G.N.M.A.—Government National Mortgage Association.
GO—General Obligation.
See Notes to Financial Statements.
Prudential Muni High Income Fund | 29 |
Portfolio of Investments
as of October 31, 2011 (Unaudited) continued
I.D.B.—Industrial Development Bond.
LLC—Limited Liability Corp.
NATL—National Public Finance Guaranty Corp.
NR—Not Rated by Moody’s or Standard & Poor’s.
P.C.R.—Pollution Control Revenue.
P.S.F.G.—Permanent School Fund Guarantee Program.
(b) | Standard & Poor’s Rating. |
(c) | Indicates a variable rate instrument. The interest rate shown reflects the rate in effect at October 31, 2011. |
(d) | Indicates a security that has been deemed illiquid. |
(e) | Represents issuer in default on interest payments or principal repayments; non-income producing security. |
(f) | Indicates a restricted security; the aggregate original cost of such securities is $10,405,334. The aggregate value of $5,648,634 is approximately 1.0% of net assets. |
(g) | All or partial escrowed to maturity and pre-funded issues are secured by escrowed cash and/or U.S. guaranteed obligations. |
(h) | Represents zero coupon bond. Rate shown reflects the effective yield on October 31, 2011. |
(i) | Represents issuer in default of interest payments or principal repayments; stated rate does not reflect the current yield. |
(j) | Represents security, or a portion thereof, segregated as collateral for futures contracts. |
(k) | Includes net unrealized appreciation (depreciation) on the following derivative contracts held at reporting period end: |
Open futures contracts outstanding at October 31, 2011:
Number of Contracts | Type | Expiration Date | Value at October 31, 2011 | Value at Trade Date | Unrealized Appreciation (Depreciation) | |||||||||||||||
Short Positions: | ||||||||||||||||||||
27 | 5 Year U.S. Treasury Notes | Dec. 2011 | $ | 3,310,453 | $ | 3,312,512 | $ | 2,059 | ||||||||||||
15 | 10 Year U.S. Treasury Notes | Dec. 2011 | 1,935,938 | 1,940,841 | 4,903 | |||||||||||||||
17 | U.S. Long Bonds | Dec. 2011 | 2,363,531 | 2,361,916 | (1,615 | ) | ||||||||||||||
|
| |||||||||||||||||||
$ | 5,347 | |||||||||||||||||||
|
|
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally for securities actively traded on regulated securities exchange and for open-end mutual funds which trade at daily net asset value.
Level 2—other significant observable inputs (including, but not limited to, quoted prices for similar securities, interest rates, prepayment speeds, foreign
See Notes to Financial Statements.
30 | Visit our website at www.prudentialfunds.com |
currency exchange rates and amortized cost) generally for debt securities, swaps, forward foreign currency contracts and for foreign stocks priced using vendor modeling tools.
Level 3—significant unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of October 31, 2011 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Municipal Bonds | $ | — | $ | 583,348,874 | $ | — | ||||||
Other Financial Instruments* | ||||||||||||
Futures Contracts | 5,347 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 5,347 | $ | 583,348,874 | $ | — | ||||||
|
|
|
|
|
|
* | Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as futures, forwards and swap contracts, which are recorded at the unrealized appreciation/depreciation on the instrument. |
The industry classification of long-term portfolio holdings, short-term investments and other assets in excess of liabilities shown as a percentage of net assets as of October 31, 2011 was as follows:
Healthcare | 28.7 | % | ||
Corporate Backed I.D.B. & P.C.R. | 16.6 | |||
Special Tax/Assessment District | 9.7 | |||
Transportation | 8.2 | |||
Tobacco | 7.7 | |||
Education | 7.7 | |||
Power | 5.1 | |||
Other | 2.8 | |||
Short-Term Investments | 2.3 | |||
General Obligation | 2.2 | |||
Pre-Refunded | 2.2 | % | ||
Other Muni | 1.7 | |||
Lease Backed Certificate of Participation | 1.4 | |||
Solid Waste/Resource Recovery | 1.3 | |||
Housing | 1.1 | |||
Water & Sewer | 0.9 | |||
Tobacco Appropriated | 0.2 | |||
|
| |||
99.8 | ||||
Other assets in excess of liabilities | 0.2 | |||
|
| |||
Net Assets | 100.0 | % | ||
|
|
Industry classification is subject to change.
The Fund invested in derivative instruments during the reporting period. The primary type of risk associated with these derivative instruments is interest rate risk. The effect
See Notes to Financial Statements.
Prudential Muni High Income Fund | 31 |
Portfolio of Investments
as of October 31, 2011 (Unaudited) continued
of such derivative instruments on the Fund’s financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.
Fair values of derivative instruments as of October 31, 2011 as presented in the Statement of Assets and Liabilities:
Derivatives not designated | Asset Derivatives | Liability Derivatives | ||||||||||
Balance | Fair Value | Balance | Fair Value | |||||||||
Interest rate contracts | Due to broker—variation margin | $ | 6,962 | * | Due to broker—variation margin | $ | 1,615 | * | ||||
|
|
|
|
* | Includes cumulative appreciation/depreciation on futures contracts as reported in Portfolio of Investments. Only unsettled variation margin receivable (payable) is reported within the Statement of Assets and Liabilities. |
The effects of derivative instruments on the Statement of Operations for the six months ended October 31, 2011 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | ||||
Derivatives not designated as hedging instruments, carried at fair value | Futures | |||
Interest rate contracts | $ | (2,806,091 | ) | |
|
| |||
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | ||||
Derivatives not designated as hedging instruments, carried at fair value | Futures | |||
Interest rate contracts | $ | 642,958 | ||
|
|
For the six months ended October 31, 2011, the Fund’s average value at trade date for futures short positions was $14,943,977.
See Notes to Financial Statements.
32 | Visit our website at www.prudentialfunds.com |
Financial Statements
(Unaudited)
OCTOBER 31, 2011 | SEMIANNUAL REPORT |
Prudential Muni High Income Fund
Statement of Assets and Liabilities
as of October 31, 2011 (Unaudited)
Assets | ||||
Unaffiliated investments (cost $592,413,069) | $ | 583,348,874 | ||
Cash | 31,759 | |||
Interest receivable | 11,375,389 | |||
Receivable for Fund shares sold | 3,008,751 | |||
Prepaid expenses | 8,678 | |||
|
| |||
Total assets | 597,773,451 | |||
|
| |||
Liabilities | ||||
Payable for investments purchased | 8,274,745 | |||
Dividends payable | 2,252,591 | |||
Payable for Fund shares reacquired | 2,194,685 | |||
Management fee payable | 246,287 | |||
Distribution fee payable | 165,493 | |||
Accrued expenses | 95,741 | |||
Due to broker—variation margin | 65,953 | |||
Affiliated transfer agent fee payable | 11,447 | |||
Deferred trustees’ fees | 9,937 | |||
|
| |||
Total liabilities | 13,316,879 | |||
|
| |||
Net assets | $ | 584,456,572 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 611,534 | ||
Paid-in capital in excess of par | 619,447,235 | |||
|
| |||
620,058,769 | ||||
Undistributed net investment income | 5,221,961 | |||
Accumulated net realized loss on investment transactions | (31,765,310 | ) | ||
Net unrealized depreciation on investments | (9,058,848 | ) | ||
|
| |||
Net assets, October 31, 2011 | $ | 584,456,572 | ||
|
|
See Notes to Financial Statements.
34 | Visit our website at www.prudentialfunds.com |
Class A | ||||
Net asset value and redemption price per share | $ | 9.56 | ||
Maximum sales charge (4% of offering price) | 0.40 | |||
|
| |||
Maximum offering price to public | $ | 9.96 | ||
|
| |||
Class B | ||||
Net asset value, offering price and redemption price per share | $ | 9.56 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share | $ | 9.56 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share | $ | 9.55 | ||
|
|
See Notes to Financial Statements.
Prudential Muni High Income Fund | 35 |
Statement of Operations
Six Months Ended October 31, 2011 (Unaudited)
Net Investment Income | ||||
Income | ||||
Unaffiliated interest | $ | 17,610,456 | ||
|
| |||
Expenses | ||||
Management fee | 1,417,797 | |||
Distribution fee—Class A | 471,957 | |||
Distribution fee—Class B | 99,344 | |||
Distribution fee—Class C | 388,179 | |||
Transfer agent’s fees and expenses (including affiliated expense of $33,300) | 144,000 | |||
Custodian’s fees and expenses | 57,000 | |||
Registration fees | 43,000 | |||
Reports to shareholders | 26,000 | |||
Audit fee | 17,000 | |||
Legal fees and expenses | 14,000 | |||
Trustees’ fees | 12,000 | |||
Insurance | 6,000 | |||
Miscellaneous | 6,229 | |||
|
| |||
Total expenses | 2,702,506 | |||
Less: Custodian fee credit (Note 1) | (94 | ) | ||
|
| |||
Net expenses | 2,702,412 | |||
|
| |||
Net investment income | 14,908,044 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investments | ||||
Net realized loss on: | ||||
Investment transactions | (842,016 | ) | ||
Financial futures transactions | (2,806,091 | ) | ||
|
| |||
(3,648,107 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 24,063,460 | |||
Financial futures contracts | 642,958 | |||
|
| |||
24,706,418 | ||||
|
| |||
Net gain on investments | 21,058,311 | |||
|
| |||
Net Increase In Net Assets Resulting From Operations | $ | 35,966,355 | ||
|
|
See Notes to Financial Statements.
36 | Visit our website at www.prudentialfunds.com |
Statement of Changes in Net Assets
(Unaudited)
Six Months Ended October 31, 2011 | Year Ended April 30, 2011 | |||||||
Increase (Decrease) In Net Assets | ||||||||
Operations | ||||||||
Net investment income | $ | 14,908,044 | $ | 29,592,249 | ||||
Net realized loss on investment transactions | (3,648,107 | ) | (19,700,712 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 24,706,418 | (5,908,311 | ) | |||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 35,966,355 | 3,983,226 | ||||||
|
|
|
| |||||
Dividends from net investment income (Note 1) | ||||||||
Class A | (9,530,030 | ) | (20,298,461 | ) | ||||
Class B | (953,802 | ) | (1,720,876 | ) | ||||
Class C | (1,668,896 | ) | (3,514,852 | ) | ||||
Class Z | (1,910,945 | ) | (2,664,111 | ) | ||||
|
|
|
| |||||
(14,063,673 | ) | (28,198,300 | ) | |||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) (Note 6) | ||||||||
Net proceeds from shares sold | 72,179,995 | 159,219,574 | ||||||
Net asset value of shares issued in reinvestment of dividends | 11,973,076 | 22,243,706 | ||||||
Cost of shares reacquired | (53,043,757 | ) | (173,682,895 | ) | ||||
|
|
|
| |||||
Net increase in net assets from Fund share transactions | 31,109,314 | 7,780,385 | ||||||
|
|
|
| |||||
Total increase (decrease) | 53,011,996 | (16,434,689 | ) | |||||
Net Assets: | ||||||||
Beginning of period | 531,444,576 | 547,879,265 | ||||||
|
|
|
| |||||
End of period(a) | $ | 584,456,572 | $ | 531,444,576 | ||||
|
|
|
| |||||
(a) Includes undistributed net investment income of: | $ | 5,221,961 | $ | 4,377,590 | ||||
|
|
|
|
See Notes to Financial Statements.
Prudential Muni High Income Fund | 37 |
Notes to Financial Statements
(Unaudited)
Prudential Investment Portfolios 4—Prudential Muni High Income Fund (the “Fund”) is an open-end management investment company, registered under the Investment Company Act of 1940, as amended, (“1940 Act”). The Fund was organized as an unincorporated business trust in Massachusetts on November 3, 1986 and currently consists of one series: the Prudential Muni High Income Fund. The Fund is a diversified fund.
The investment objective of the Fund is to provide the maximum amount of income that is eligible for exclusion from federal income taxes.
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements.
Securities Valuation: The Fund values municipal securities (including commitments to purchase such securities on a “when-issued” basis) as of the normal close of trading on the New York Stock Exchange, on the basis of prices provided by a pricing service which uses information with respect to transactions in comparable securities and various relationships between securities in determining values. Securities listed on a securities exchange (other than options on securities and indices) are valued at the last sale price on such exchange on the day of valuation or, if there was no sale on such day, at the mean between the last reported bid and asked prices, or at the last bid price on such day in the absence of an asked price. Securities that are actively traded in the over-the-counter market, including listed securities for which the primary market is believed by Prudential Investments LLC (“PI” or “Manager”) in consultation with the subadvisor, to be over-the-counter, are valued at market value using prices provided, by an independent pricing agent or principal market maker. Futures contracts and options thereon traded on a commodities exchange or board of trade are valued at the last sale price at the close of trading on such exchange or board of trade or, if there was no sale on the applicable commodities exchange or board of trade on such day, at the mean between the most recently quoted prices on such exchange or board of trade or at the last bid price in the absence of an asked price. Securities for which reliable market quotations are not readily available or for which the pricing service does not provide a valuation methodology, or does not present fair value, are valued at fair value in accordance with Board of Trustees’ approved fair valuation procedures. When determining the fair valuation of securities
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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 issuer; the prices of any recent transactions or bids/offers for such securities or any comparable securities; any available analyst media or other reports or information deemed reliable by the investment adviser regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values.
Short-term debt securities of sufficient credit quality, which mature in sixty days or less, are valued at amortized cost, which approximates fair value. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between the principal amount due at maturity and cost. Short-term debt securities which mature in more than sixty days are valued at fair value.
Restricted Securities: The Fund may hold up to 15% of its net assets in illiquid securities, including those which are restricted as to disposition under securities law (“restricted securities”). Restricted securities held by the Fund at the end of the period may include registration rights under which the Fund may demand registration by the issuers, of which the Fund may bear the cost of such registration. Restricted securities, are valued pursuant to the valuation procedures noted above.
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 or loss. When the contract expires or is closed, the gain or loss is realized and is presented in the Statement of Operations as net realized gain or loss on financial futures contracts.
The Fund invested in financial futures contracts in order to hedge its existing portfolio securities, or securities the Fund intends to purchase, against fluctuations in value caused by changes in prevailing interest rates or market conditions. Should interest rates move unexpectedly, the Fund may not achieve the anticipated benefits of the
Prudential Muni High Income Fund | 39 |
Notes to Financial Statements
(Unaudited) continued
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. Financial futures contracts involve elements of risk in excess of the amounts reflected on the Statement of Assets and Liabilities.
With exchange-traded futures, there is a 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.
Futures contracts involve elements of both market and credit risk in excess of the amounts reflected in the Statement of Assets and Liabilities.
Floating-Rate Notes Issued in Conjunction with Securities Held: The Fund invests in inverse floating rate securities (“inverse floaters”) that pay interest at a rate that varies inversely with short-term interest rates. Certain of these securities may be leveraged, whereby the interest rate varies inversely at a multiple of the change in short-term rates. As interest rates rise, inverse floaters produce less current income. The price of such securities is more volatile than comparable fixed rate securities.
When the Fund enters into agreements to create inverse floaters and floater note securities (also known as Tender Option Bond Transactions), the Fund transfers a fixed rate bond to a broker for cash. At the same time the Fund buys (receives) a residual interest in a trust (the “trust”) set up by the broker, often referred to as an inverse floating rate obligation (inverse floaters). Generally, the broker deposits a fixed rate bond (the “fixed rate bond”) into the trust with the same CUSIP number as the fixed rate bond sold to the broker by the Fund. The “trust” also issues floating rate notes (“floating rate notes”), which are sold to third parties. The floating rate notes have interest rates that reset weekly. The inverse floater held by the Fund gives the Fund the right (1) to cause the holders of the floating rate notes to tender their notes at par, and (2) to have the broker transfer the fixed rate bond held by the trust to the Fund thereby collapsing the trust. The Fund accounts for the transaction described above as funded leverage by including the fixed rate bond in its Portfolio of Investments, and accounts for the floating rate notes as a liability under the caption “payable for floating rate notes issued” in the Fund’s “Statement of Assets and Liabilities.” Interest expense related to the Fund’s liability in connection with the floating rate notes held by third parties is recorded as incurred. The interest expense is
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under the caption “interest expenses and fees related to inverse floaters” in the Fund’s “Statement of Operations” and is also included in the Fund’s expense ratio. For the six-months ended October 31, 2011, the Fund did not enter into any Tender Option Bond Transactions.
The Fund may also invest in inverse floaters without transferring a fixed rate bond into a trust, which is not accounted for as funded leverage. The interest rates on these securities have an inverse relationship to the interest rate of other securities or the value of an index. Changes in interest rates on the other security or index inversely affect the rate paid on the inverse floater, and the inverse floater’s price will be more volatile than that of a fixed-rate bond. Additionally, some of these securities contain a “leverage factor” whereby the interest rate moves inversely by a “factor” to the benchmark rate. Certain interest rate movements and other market factors can substantially affect the liquidity of inverse floating rate notes.
The Fund’s investment policies and restrictions permit investments in inverse floating rate securities. Inverse floaters held by the Fund are securities exempt from registration under Rule 144A of the Securities Act of 1933.
When-Issued/Delayed Delivery Securities: Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after trade date; interest income is not accrued until settlement date. At the time a Fund enters into such transactions, it instructs the custodian to segregate assets with a current value at least equal to the amount of its when-issued or delayed-delivery purchase commitments.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains or losses on sales of investments are calculated on the identified cost basis. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on the accrual basis as an adjustment to interest income.
Net investment income or loss (other than distribution fees, which are charged directly to the respective Class) and unrealized and realized gains or losses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class at the beginning of the day.
Dividends and Distributions: The Fund declares dividends from net investment income daily and payment is made monthly. Distributions of net realized capital and currency gains, if any, are made annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-dividend
Prudential Muni High Income Fund | 41 |
Notes to Financial Statements
(Unaudited) continued
date. Permanent book/tax differences relating to income and gains are reclassified amongst undistributed net investment income, accumulated net realized gain or loss and paid-in capital in excess of par, as appropriate.
Federal Income Taxes: For federal income tax purposes, the Fund is treated as a separate taxpaying entity. It is the Fund’s policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required.
Custody Fee Credits: The Fund has an arrangement with its custodian bank, whereby uninvested cash earn credits which reduce the fees charged by the custodian. Such custody fee credits, if any, are presented as a reduction of gross expenses in the accompanying Statement of Operations.
Estimates: The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
Note 2. Agreements
The Fund has a management agreement with PI. Pursuant to this agreement, PI has responsibility for all investment advisory services and supervises the subadvisor’s performance of such services. PI has entered into a subadvisory agreement with Prudential Investment Management, Inc. (“PIM”). The subadvisory agreement provides that PIM will furnish investment advisory services in connection with the management of the Fund. PI pays for the services of PIM, the cost of compensation of officers for the Fund, occupancy and certain clerical and bookkeeping cost of the Fund. The Fund bears all other costs and expenses.
The management fee paid to PI is computed daily and payable monthly at an annual rate of .50% of the Fund’s average daily net assets of up to $1 billion and .45% of the average daily net assets in excess of $1 billion. The effective management fee rate was .50% for the six months ended October 31, 2011. The Fund has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”) which acts as the distributor of the Fund. The Fund compensates PIMS for distributing and servicing the Fund’s Class A, Class B and Class C shares, pursuant to plans of
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distribution (the “Class A, B and C Plans”), regardless of expenses actually incurred by it. The distribution fees are accrued daily and payable monthly. No distribution or service fees are paid to PIMS as distributor of the Class Z shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensates PIMS for distribution related activities at an annual rate of up to .30%, .50% and 1% of the average daily net assets of the Class A, B and C shares, respectively. PIMS contractually agreed to limit such fees to .25% of the average daily net assets of the Class A shares through August 31, 2012.
PIMS has advised the Fund that it received $145,444 for Class A shares in front-end sales charges during the six months ended October 31, 2011. From these fees, PIMS paid such sales charges to affiliated broker-dealers, which in turn paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Fund that for the six months ended October 31, 2011, it received $17,121 and $5,056 in contingent deferred sales charges imposed upon certain redemptions by Class B and C shareholders, respectively.
PI, PIM and PIMS are indirect wholly owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund’s transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
Note 4. Portfolio Securities
Purchases and sales of portfolio securities, other than short-term investments, for the six months ended October 31, 2011, were $125,021,017 and $89,145,812, respectively. Although floating rate daily demand notes are shown as short-term investments in the Portfolio of Investments due to frequent reset of coupon rates, they have long-term maturities and are included in these purchase and sale amounts.
Prudential Muni High Income Fund | 43 |
Notes to Financial Statements
(Unaudited) continued
Note 5. Tax Information
The United States federal income tax basis of the Fund’s investments and net unrealized depreciation as of October 31, 2011 were as follows:
Tax Basis | Appreciation | Depreciation | Net Unrealized Depreciation | |||
$587,989,129 | $26,318,402 | $(30,958,657) | $(4,640,255) |
The difference between book and tax basis were primarily due to the difference between financial and tax reporting with respect to accretion of market discount and other adjustments as of the most recent fiscal year end.
For federal income tax purposes, the Fund had a capital loss carryforward as of April 30, 2011 of approximately $30,453,000 of which $11,064,000 expires in 2014 and $19,389,000 expires in 2019. Accordingly, no capital gains distributions are expected to be paid to shareholders until net gains have been realized in excess of such carryforward. Under the recently enacted Regulated Investment Company Modernization Act of 2010 (“the Act”), the Fund is permitted to carryforward capital losses incurred in taxable years beginning after December 22, 2010 (“post-enactment losses”) for an unlimited period. However, any post-enactment losses are required to be utilized before the utilization of losses incurred prior to the effective date of the Act. As a result of this ordering rule, capital loss carryforwards related to the taxable years beginning prior to the effective date of the Act may have an increased likelihood to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
The Fund has elected to treat post-October capital losses of approximately $2,315,000 as having been incurred on the first day of the following year (April 30, 2012).
Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years and has concluded that no provision for income tax is required in the Fund’s financial statements for the current reporting period. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
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Note 6. Capital
The Fund offers Class A, Class B, Class C and Class Z shares. Class A shares were sold with a front-end sales charge of up to 4%. All investors who purchase Class A shares in the amount of $1 million or more and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (CDSC) of 1%. The Class A CDSC is waived for purchases by certain retirement and/or benefit plans. Class B shares are sold with a contingent deferred sales charge which declines from 5% to zero depending on the period of time the shares are held. Class C shares are sold with a contingent deferred sales charge of 1% on shares redeemed within the first 12 months after purchase. Class B shares automatically convert to Class A shares on a quarterly basis approximately seven years after purchase. In addition, under certain limited circumstances, an exchange may be made from Class A, Class B or Class C to Class Z shares or from Class Z to Class A shares of the Fund. A special exchange privilege is also available for shareholders who qualify to purchase Class A shares at net asset value. Class Z shares are not subject to any sales or redemption charge and are offered exclusively for sale to a limited group of investors.
During the fiscal year ended April 30, 2010, the Fund received $4,034 related to a former affiliate’s settlement of regulatory proceedings involving allegations of improper trading in Fund shares. The Fund was not involved in the proceedings or in the calculation of the amount of settlement.
The Fund has authorized an unlimited number of shares of beneficial interest of each class at $.01 par value per share. Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Six months ended October 31, 2011: | ||||||||
Shares sold | 3,466,531 | $ | 32,880,645 | |||||
Shares issued in reinvestment of dividends | 885,751 | 8,408,605 | ||||||
Shares reacquired | (3,380,013 | ) | (32,065,147 | ) | ||||
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Net increase (decrease) in shares outstanding before conversion | 972,269 | 9,224,103 | ||||||
Shares issued upon conversion from Class B and Z | 105,151 | 995,821 | ||||||
Shares reacquired upon conversion into Class Z | (1,368,204 | ) | (12,930,987 | ) | ||||
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Net increase (decrease) in shares outstanding | (290,784 | ) | $ | (2,711,063 | ) | |||
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Year ended April 30, 2011: | ||||||||
Shares sold | 7,335,435 | $ | 69,288,981 | |||||
Shares issued in reinvestment of dividends | 1,758,634 | 16,587,816 | ||||||
Shares reacquired | (11,875,666 | ) | (111,167,680 | ) | ||||
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Net increase (decrease) in shares outstanding before conversion | (2,781,597 | ) | (25,290,883 | ) | ||||
Shares issued upon conversion from Class B | 418,890 | 3,977,958 | ||||||
Shares reacquired upon conversion into Class Z | (54,761 | ) | (517,026 | ) | ||||
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Net increase (decrease) in shares outstanding | (2,417,468 | ) | $ | (21,829,951 | ) | |||
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Prudential Muni High Income Fund | 45 |
Notes to Financial Statements
(Unaudited) continued
Class B | Shares | Amount | ||||||
Six months ended October 31, 2011: | ||||||||
Shares sold | 741,442 | $ | 7,039,095 | |||||
Shares issued in reinvestment of dividends | 88,480 | 840,805 | ||||||
Shares reacquired | (185,615 | ) | (1,754,164 | ) | ||||
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Net increase (decrease) in shares outstanding before conversion | 644,307 | 6,125,736 | ||||||
Shares reacquired upon conversion into Class A | (102,912 | ) | (975,529 | ) | ||||
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Net increase (decrease) in shares outstanding | 541,395 | $ | 5,150,207 | |||||
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Year ended April 30, 2011: | ||||||||
Shares sold | 1,505,657 | $ | 14,388,514 | |||||
Shares issued in reinvestment of dividends | 151,346 | 1,426,566 | ||||||
Shares reacquired | (652,356 | ) | (6,115,780 | ) | ||||
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Net increase (decrease) in shares outstanding before conversion | 1,004,647 | 9,699,300 | ||||||
Shares reacquired upon conversion into Class A | (418,348 | ) | (3,977,958 | ) | ||||
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Net increase (decrease) in shares outstanding | 586,299 | $ | 5,721,342 | |||||
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Class C | ||||||||
Six months ended October 31, 2011: | ||||||||
Shares sold | 1,200,983 | $ | 11,381,562 | |||||
Shares issued in reinvestment of dividends | 139,129 | 1,321,909 | ||||||
Shares reacquired | (903,328 | ) | (8,548,525 | ) | ||||
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Net increase (decrease) in shares outstanding | 436,784 | $ | 4,154,946 | |||||
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Year ended April 30, 2011: | ||||||||
Shares sold | 3,159,215 | $ | 30,236,469 | |||||
Shares issued in reinvestment of dividends | 257,076 | 2,423,998 | ||||||
Shares reacquired | (3,008,248 | ) | (28,132,971 | ) | ||||
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Net increase (decrease) in shares outstanding before conversion | 408,043 | 4,527,496 | ||||||
Shares reacquired upon conversion into Class Z | (15,675 | ) | (146,716 | ) | ||||
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Net increase (decrease) in shares outstanding | 392,368 | $ | 4,380,780 | |||||
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Class Z | Shares | Amount | ||||||
Six months ended October 31, 2011: | ||||||||
Shares sold | 2,199,071 | $ | 20,878,693 | |||||
Shares issued in reinvestment of dividends | 147,643 | 1,401,757 | ||||||
Shares reacquired | (1,125,429 | ) | (10,675,921 | ) | ||||
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Net increase (decrease) in shares outstanding before conversion | 1,221,285 | 11,604,529 | ||||||
Shares issued upon conversion from Class A | 1,369,809 | 12,930,987 | ||||||
Shares reacquired upon conversion into Class A | (2,129 | ) | (20,292 | ) | ||||
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Net increase (decrease) in shares outstanding | 2,588,965 | $ | 24,515,224 | |||||
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Year ended April 30, 2011: | ||||||||
Shares sold | 4,787,879 | $ | 45,305,610 | |||||
Shares issued in reinvestment of dividends | 191,907 | 1,805,326 | ||||||
Shares reacquired | (3,013,969 | ) | (28,266,464 | ) | ||||
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Net increase (decrease) in shares outstanding before conversion | 1,965,817 | 18,844,472 | ||||||
Shares issued upon conversion from Class A and C | 70,511 | 663,742 | ||||||
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Net increase (decrease) in shares outstanding | 2,036,328 | $ | 19,508,214 | |||||
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Note 7. Borrowings
The Fund, along with other affiliated registered investment companies (the “Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of $750 million for the period December 17, 2010 through December 16, 2011. The Funds pay an annualized commitment fee of 0.10% of the unused portion of the SCA. Interest on any borrowings under these SCA’s is paid at contracted market rates. The commitment fee for the unused amount is accrued daily and paid quarterly. The SCA has been renewed on substantially similar terms with an increase in the amount of commitment to $900 million.
The Fund did not utilize the line of credit during the six months ended October 31, 2011.
Note 8. Dividends to Shareholders
Subsequent to the period end and in addition to the monthly dividends paid by the Fund, the Fund declared ordinary income dividends on November 25, 2011 to shareholders of record on November 28, 2011. The ex-dividend date was November 29, 2011. The per share amounts declared were as follows:
Ordinary Income | ||||
Class A | $ | 0.006637 | ||
Class B | $ | 0.006637 | ||
Class C | $ | 0.006637 | ||
Class Z | $ | 0.006637 |
Prudential Muni High Income Fund | 47 |
Notes to Financial Statements
(Unaudited) continued
Note 9. New Accounting Pronouncements
In April 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-03 “Reconsideration of Effective Control for Repurchase Agreements”. The objective of ASU No. 2011-03 is to improve the accounting for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. Under previous guidance, whether or not to account for a transaction as a sale was based on, in part, if the entity maintained effective control over the transferred financial assets. ASU No. 2011-03 removes the transferor’s ability criterion from the effective control assessment. This guidance is effective prospectively for interim and annual reporting periods beginning on or after December 15, 2011. At this time, management is evaluating the implications of ASU No. 2011-03 and its impact on the financial statements has not been determined.
In May 2011, the FASB issued ASU No. 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”. ASU No. 2011-04 includes common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. ASU No. 2011-04 will require reporting entities to disclose quantitative information about the unobservable inputs used in the fair value measurements categorized within Level 3 of the fair value hierarchy. In addition, ASU No. 2011-04 will require reporting entities to make disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2011. At this time, management is evaluating the implications of ASU No. 2011-04 and its impact on the financial statements has not been determined.
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Financial Highlights
(Unaudited)
Class A Shares | ||||||||||||||||||||||||||
Six Months Ended October 31, | Year Ended April 30, | |||||||||||||||||||||||||
2011(c) | 2011 | 2010 | 2009(c) | 2008 | 2007(c) | |||||||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $9.18 | $9.56 | $8.51 | $9.82 | $10.53 | $10.32 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment income | .25 | .51 | .53 | .54 | .50 | .53 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | .37 | (.41 | ) | 1.03 | (1.33 | ) | (.72 | ) | .18 | |||||||||||||||||
Total from investment operations | .62 | .10 | 1.56 | (.79 | ) | (.22 | ) | .71 | ||||||||||||||||||
Less Dividends: | ||||||||||||||||||||||||||
Dividends from net investment income | (.24 | ) | (.48 | ) | (.51 | ) | (.52 | ) | (.49 | ) | (.50 | ) | ||||||||||||||
Capital Contributions (Note 6) | - | - | - | (f) | - | - | �� | - | ||||||||||||||||||
Net asset value, end of period | $9.56 | $9.18 | $9.56 | $8.51 | $ 9.82 | $10.53 | ||||||||||||||||||||
Total Return(a): | 6.78% | 1.05% | 18.75% | (8.08)% | (2.11)% | 6.94% | ||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Net assets, end of period (000) | $377,672 | $365,513 | $403,864 | $339,959 | $388,838 | $444,751 | ||||||||||||||||||||
Average net assets (000) | $375,514 | $398,618 | $378,340 | $354,290 | $411,884 | $451,239 | ||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees(b) | .86% | (g) | .87% | .87% | .87% | (d) | .87% | (d) | .89% | (d) | ||||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | .61% | (g) | .62% | .62% | .62% | (d) | .62% | (d) | .64% | (d) | ||||||||||||||||
Net investment income | 5.35% | (g) | 5.34% | 5.77% | 6.00% | 4.96% | 5.00% | |||||||||||||||||||
For Class A, B, C and Z shares: | ||||||||||||||||||||||||||
Portfolio turnover rate | 8% | (e)(h) | 24% | (e) | 26% | (e) | 23% | (e) | 41% | 33% |
(a) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported, and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods of less than one full year are not annualized.
(b) The distributor of the Fund has contractually agreed to limit its distribution and service (12b-1) fees to .25% of the average daily net assets of the Class A shares through August 31, 2012.
(c) Calculated based on average shares outstanding during the period.
(d) The expense ratio reflects the interest and fees expense related to the liability for the floating rate notes issued in conjunction with the inverse floater securities. The total expense ratio excluding interest and fees expense and the expense ratio excluding 12b-1 and interest and fees expense is .85% and .60% for the year ended April 30, 2009, .84% and .59% for the year ended April 30, 2008 and .85% and .60% for the year ended April 30, 2007, respectively.
(e) The portfolio turnover rate including variable rate demand notes was 16% for the six months ended October 31, 2011, 49% for the year ended April 30, 2011, 51% for the year ended April 30, 2010 and 50% for the year ended April 30, 2009.
(f) Less than $.005 per share.
(g) Annualized.
(h) Not annualized.
See Notes to Financial Statements.
Prudential Muni High Income Fund | 49 |
Financial Highlights
(Unaudited) continued
Class B Shares | ||||||||||||||||||||||||||
Six Months Ended October 31, | Year Ended April 30, | |||||||||||||||||||||||||
2011(b) | 2011 | 2010 | 2009(b) | 2008 | 2007(b) | |||||||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $9.19 | $9.57 | $8.52 | $9.82 | $10.53 | $10.33 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment income | .24 | .47 | .50 | .51 | .49 | .50 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | .36 | (.39 | ) | 1.04 | (1.31 | ) | (.73 | ) | .18 | |||||||||||||||||
Total from investment operations | .60 | .08 | 1.54 | (.80 | ) | (.24 | ) | .68 | ||||||||||||||||||
Less Dividends: | ||||||||||||||||||||||||||
Dividends from net investment income | (.23 | ) | (.46 | ) | (.49 | ) | (.50 | ) | (.47 | ) | (.48 | ) | ||||||||||||||
Capital Contributions (Note 6) | - | - | - | (d) | - | - | - | |||||||||||||||||||
Net asset value, end of period | $9.56 | $9.19 | $9.57 | $8.52 | $ 9.82 | $10.53 | ||||||||||||||||||||
Total Return(a): | 6.54% | .82% | 18.45% | (8.19)% | (2.35)% | 6.67% | ||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Net assets, end of period (000) | $42,998 | $36,335 | $32,238 | $25,820 | $42,119 | $58,278 | ||||||||||||||||||||
Average net assets (000) | $39,522 | $35,386 | $29,152 | $33,111 | $50,205 | $70,145 | ||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees | 1.11% | (e) | 1.12% | 1.12% | 1.12% | (c) | 1.12% | (c) | 1.14% | (c) | ||||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | .61% | (e) | .62% | .62% | .62% | (c) | .62% | (c) | .64% | (c) | ||||||||||||||||
Net investment income | 5.10% | (e) | 5.11% | 5.52% | 5.66% | 4.70% | 4.74% |
(a) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported, and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods of less than one full year are not annualized.
(b) Calculated based on average shares outstanding during the period.
(c) The expense ratio reflects the interest and fees expense related to the liability for the floating rate notes issued in conjunction with the inverse floater securities. The total expense ratio excluding interest and fees expense and the expense ratio excluding 12b-1 and interest and fees expense is 1.10% and .60% for the year ended April 30, 2009, 1.09% and .59% for the year ended April 30, 2008 and 1.10% and .60% for the year ended April 30, 2007, respectively.
(d) Less than $.005 per share.
(e) Annualized.
See Notes to Financial Statements.
50 | Visit our website at www.prudentialfunds.com |
Class C Shares | ||||||||||||||||||||||||||
Six Months Ended October 31, | Year Ended April 30, | |||||||||||||||||||||||||
2011(c) | 2011 | 2010 | 2009(c) | 2008 | 2007(c) | |||||||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $9.19 | $9.57 | $8.51 | $9.82 | $10.53 | $10.33 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment income | .22 | .44 | .48 | .50 | .45 | .47 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | .36 | (.40 | ) | 1.05 | (1.33 | ) | (.72 | ) | .18 | |||||||||||||||||
Total from investment operations | .58 | .04 | 1.53 | (.83 | ) | (.27 | ) | .65 | ||||||||||||||||||
Less Dividends: | ||||||||||||||||||||||||||
Dividends from net investment income | (.21 | ) | (.42 | ) | (.47 | ) | (.48 | ) | (.44 | ) | (.45 | ) | ||||||||||||||
Capital Contributions (Note 6) | - | - | - | (e) | - | - | - | |||||||||||||||||||
Net asset value, end of period | $9.56 | $9.19 | $9.57 | $8.51 | $ 9.82 | $10.53 | ||||||||||||||||||||
Total Return(a): | 6.27% | .39% | 18.33% | (8.51)% | (2.59)% | 6.41% | ||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Net assets, end of period (000) | $80,445 | $73,273 | $72,570 | $36,474 | $27,097 | $30,256 | ||||||||||||||||||||
Average net assets (000) | $77,214 | $79,419 | $54,768 | $30,512 | $28,247 | $28,519 | ||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees(b) | 1.61% | (f) | 1.54% | 1.37% | 1.37% | (d) | 1.37% | (d) | 1.39% | (d) | ||||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | .61% | (f) | .62% | .62% | .62% | (d) | .62% | (d) | .64% | (d) | ||||||||||||||||
Net investment income | 4.60% | (f) | 4.67% | 5.25% | 5.61% | 4.46% | 4.50% |
(a) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported, and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods of less than one full year are not annualized.
(b) The distributor of the Fund had contractually agreed to limit its distribution and service (12b-1) fees to .75% of the average daily net assets of the Class C shares through August 31, 2010.
(c) Calculated based on average shares outstanding during the period.
(d) The expense ratio reflects the interest and fees expense related to the liability for the floating rate notes issued in conjunction with the inverse floater securities. The total expense ratio excluding interest and fees expense and the expense ratio excluding 12b-1 and interest and fees expense is 1.35% and .60% for the year ended April 30, 2009, 1.34% and .59% for the year ended April 30, 2008 and 1.35% and .60% for the year ended April 30, 2007, respectively.
(e) Less than $.005 per share.
(f) Annualized.
See Notes to Financial Statements.
Prudential Muni High Income Fund | 51 |
Financial Highlights
(Unaudited) continued
Class Z Shares | ||||||||||||||||||||||||||
Six Months Ended October 31, | Year Ended April 30, | |||||||||||||||||||||||||
2011(b) | 2011 | 2010 | 2009(b) | 2008 | 2007(b) | |||||||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $9.17 | $9.56 | $8.50 | $9.81 | $10.52 | $10.31 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment income | .27 | .53 | .55 | .57 | .53 | .55 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | .36 | (.41 | ) | 1.05 | (1.33 | ) | (.72 | ) | .19 | |||||||||||||||||
Total from investment operations | .63 | .12 | 1.60 | (.76 | ) | (.19 | ) | .74 | ||||||||||||||||||
Less Dividends: | ||||||||||||||||||||||||||
Dividends from net investment income | (.25 | ) | (.51 | ) | (.54 | ) | (.55 | ) | (.52 | ) | (.53 | ) | ||||||||||||||
Capital Contributions (Note 6) | - | - | - | (d) | - | - | - | |||||||||||||||||||
Net asset value, end of period | $9.55 | $9.17 | $9.56 | $8.50 | $ 9.81 | $10.52 | ||||||||||||||||||||
Total Return(a): | 6.93% | 1.20% | 19.22% | (7.81)% | (1.86)% | 7.21% | ||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Net assets, end of period (000) | $83,342 | $56,323 | $39,207 | $19,842 | $10,037 | $9,878 | ||||||||||||||||||||
Average net assets (000) | $71,787 | $49,605 | $27,751 | $12,544 | $9,246 | $9,335 | ||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||
Expenses, including distribution and service (12b-1) fees | .61% | (e) | .62% | .62% | .62% | (c) | .62% | (c) | .64% | (c) | ||||||||||||||||
Expenses, excluding distribution and service (12b-1) fees | .61% | (e) | .62% | .62% | .62% | (c) | .62% | (c) | .64% | (c) | ||||||||||||||||
Net investment income | 5.59% | (e) | 5.62% | 6.00% | 6.50% | 5.22% | 5.25% |
(a) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported, and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods of less than one full year are not annualized.
(b) Calculated based on average shares outstanding during the period.
(c) The expense ratio reflects the interest and fees expense related to the liability for the floating rate notes issued in conjunction with the inverse floater securities. The total expense ratio excluding interest and fees expense and the expense ratio excluding 12b-1 and interest and fees expense is .60% and .60% for the year ended April 30, 2009, .59% and .59% for the year ended April 30, 2008 and .60% and .60% for the year ended April 30, 2007, respectively.
(d) Less than $.005 per share.
(e) Annualized.
See Notes to Financial Statements.
52 | Visit our website at www.prudentialfunds.com |
Approval of Advisory Agreements (Unaudited)
The Fund’s Board of Trustees
The Board of Trustees (the “Board”) of the Prudential Muni High Income Fund (the “Fund”)1 consists of 10 individuals, eight of whom are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Trustees”). The Board is responsible for the oversight of the Fund and its operations, and performs the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Trustees have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Trustee. The Board has established three standing committees: the Audit Committee, the Nominating and Governance Committee, and the Investment Committee. Each committee is chaired by, and composed of, Independent Trustees.
Annual Approval of the Fund’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Fund’s management agreement with Prudential Investments LLC (“PI”) and the Fund’s subadvisory agreement with Prudential Investment Management, Inc. (“PIM”). In considering the renewal of the agreements, the Board, including all of the Independent Trustees, met on June 6-8, 2011 and approved the renewal of the agreements through July 31, 2012, 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 PI and PIM. Also, the Board considered comparisons with other mutual funds in relevant Peer Universes and Peer Groups. The mutual funds included in each Peer Universe or Peer Group were objectively determined by Lipper Inc. (“Lipper”), an independent provider of mutual fund data. The comparisons placed the Fund in various quartiles over the one-, three-, five- and 10-year periods ending December 31, 2010, 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).
In approving the agreements, the Board, including the Independent Trustees advised by independent legal counsel, considered the factors it deemed relevant, including the nature, quality and extent of services provided by PI and the subadviser, the performance of the Fund, the profitability of PI and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Fund and its
1 | The Prudential Muni High Income Fund is the sole series of Prudential Investment Portfolios 4. |
Prudential Muni High Income Fund
Approval of Advisory Agreements (continued)
shareholders as the Fund’s assets grow. In their deliberations, the Trustees did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund. In connection with its deliberations, the Board considered information provided by PI 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 June 6-8, 2011.
The Trustees determined that the overall arrangements between the Fund and PI, which serves as the Fund’s investment manager pursuant to a management agreement, and between PI and PIM, which serves as the Fund’s subadviser pursuant to the terms of a subadvisory agreement with PI, are in the interest of the Fund and its shareholders in light of the services performed, fees charged and such other matters as the Trustees considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Trustees’ reaching their determinations to approve the continuance of the agreements are separately discussed below.
Nature, Quality and Extent of Services
The Board received and considered information regarding the nature, quality and extent of services provided to the Fund by PI and PIM. The Board considered the services provided by PI, 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. With respect to PI’s oversight of the subadviser, the Board noted that PI’s Strategic Investment Research Group (“SIRG”), which is a business unit of PI, is responsible for monitoring and reporting to PI’s senior management on the performance and operations of the subadviser. The Board also considered that PI pays the salaries of all of the officers and non-independent Trustees of the Fund. The Board also considered the investment subadvisory services provided by PIM, as well as adherence to the Fund’s investment restrictions and compliance with applicable Fund policies and procedures. The Board considered PI’s evaluation of the subadviser, as well as PI’s recommendation, based on its review of the subadviser, to renew the subadvisory agreement.
The Board reviewed the qualifications, backgrounds and responsibilities of PI’s senior management responsible for the oversight of the Fund and PIM, and also reviewed the qualifications, backgrounds and responsibilities of PIM’s portfolio managers who are responsible for the day-to-day management of the Fund’s portfolio. The Board was provided with information pertaining to PI’s and PIM’s organizational structure, senior management, investment operations, and other relevant information pertaining to both PI and PIM. The Board also noted that it received favorable compliance reports
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from the Fund’s Chief Compliance Officer (“CCO”) as to both PI and PIM. The Board noted that PIM is affiliated with PI.
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PI and the subadvisory services provided to the Fund by PIM, and that there was a reasonable basis on which to conclude that the Fund benefits from the services provided by PI and PIM under the management and subadvisory agreements.
Performance of the Fund
The Board received and considered information about the Fund’s historical performance. The Board considered that the Fund’s gross performance in relation to its Peer Universe (the Lipper High Yield Municipal Debt Funds Performance Universe) was in the first quartile over the three-year period, and in the second quartile over the one-, five- and 10-year periods. The Board also noted that the Fund outperformed or performed competitively against its benchmark index over all periods. The Board concluded that, in light of the Fund’s competitive performance, it would be in the interest of the Fund and its shareholders for the Fund to renew the agreements.
Fees and Expenses
The Board considered that the Fund’s actual management fee (which reflects any subsidies, waivers or expense caps) and total expenses both ranked in the Expense Group’s third quartile. The Board noted PI’s explanation that the Fund’s actual management fee and total expenses were both less than 1 basis point from the median of all funds included in the Expense Group. The Board concluded that the management fees (including subadvisory fees) and total expenses were reasonable in light of the services provided.
Costs of Services and Profits Realized by PI
The Board was provided with information on the profitability of PI and its affiliates in serving as the Fund’s investment manager. The Board discussed with PI the methodology utilized in assembling the information regarding profitability and considered its reasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure and cost of capital. The Board did not separately consider the profitability of the subadviser, an affiliate of PI, as its profitability was reflected in the profitability report for PI. Taking these factors into account, the Board concluded that the profitability of PI and its affiliates in relation to the services rendered was not unreasonable.
Prudential Muni High Income Fund
Approval of Advisory Agreements (continued)
Economies of Scale
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, but at the current level of assets the Fund does not realize the effect of those rate reductions. The Board received and discussed information concerning whether PI realizes economies of scale as the Fund’s assets grow beyond current levels. The Board took note that the Fund’s fee structure would result in benefits to Fund shareholders when (and if) assets reach the levels at which the fee rate is reduced. These benefits will accrue whether or not PI is then realizing any economies of scale.
Other Benefits to PI and PIM
The Board considered potential ancillary benefits that might be received by PI and PIM and their affiliates as a result of their relationship with the Fund. The Board concluded that potential benefits to be derived by PI included fees received by affiliates of PI for serving as the Fund’s securities lending agent, transfer agency fees received by the Fund’s transfer agent (which is affiliated with PI), and benefits to the reputation as well as other intangible benefits resulting from PI’s association with the Fund. The Board concluded that the potential benefits to be derived by PIM included its ability to use soft dollar credits, as well as the potential benefits consistent with those generally resulting from an increase in assets under management, specifically, potential access to additional research resources and benefits to the reputation. The Board concluded that the benefits derived by PI and PIM were consistent with the types of benefits generally derived by investment managers and subadvisers to mutual funds.
After full consideration of these factors, the Board concluded that the approval of the agreements was in the interest of the Fund and its shareholders.
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n MAIL | n TELEPHONE | n WEBSITE | ||
Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | (800) 225-1852 | www.prudentialfunds.com |
PROXY VOTING |
The Board of Trustees of the Fund has delegated to the Fund’s investment subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Commission’s website. |
TRUSTEES |
Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Michael S. Hyland • Douglas H. McCorkindale • Stephen P. Munn • Richard A. Redeker • Judy A. Rice • Robin B. Smith • Stephen G. Stoneburn |
OFFICERS |
Judy A. Rice, President • Scott E. Benjamin, Vice President • Grace C. Torres, Treasurer and Principal Financial and Accounting Officer • Kathryn L. Quirk, Chief Legal Officer • Deborah A. Docs, Secretary • Timothy J. Knierim, Chief Compliance Officer • Valerie M. Simpson, Deputy Chief Compliance Officer • Theresa C. Thompson, Deputy Chief Compliance Officer • Richard W. Kinville, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • John P. Schwartz, Assistant Secretary • Andrew R. French, Assistant Secretary • M. Sadiq Peshimam, Assistant Treasurer • Peter Parrella, Assistant Treasurer |
MANAGER | Prudential Investments LLC | Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | ||
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INVESTMENT SUBADVISER | Prudential Investment Management, Inc. | Gateway Center Two 100 Mulberry Street Newark, NJ 07102 | ||
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DISTRIBUTOR | Prudential Investment Management Services LLC | Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | ||
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CUSTODIAN | The Bank of New York Mellon | One Wall Street New York, NY 10286 | ||
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TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
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FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 |
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go to www.prudentialfunds.com/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH TRUSTEES |
Shareholders can communicate directly with the Board of Trustees by writing to the Chair of the Board, Prudential Muni High Income Fund, Prudential Investments, Attn: Board of Trustees, 100 Mulberry Street, Gateway Center Three, Newark, NJ 07102. Shareholders can communicate directly with an individual Trustee by writing to the same address. Communications are not screened before being delivered to the addressee. |
AVAILABILITY OF PORTFOLIO SCHEDULE |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation and location of the Public Reference Room may be obtained by calling (202) 551-8090. The Fund’s schedule of portfolio holdings is also available on the Fund’s website as of the end of each month. |
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PRUDENTIAL MUNI HIGH INCOME FUND
SHARE CLASS | A | B | C | Z | ||||
NASDAQ | PRHAX | PMHYX | PHICX | PHIZX | ||||
CUSIP | 74440M104 | 74440M203 | 74440M302 | 74440M401 |
MF133E2 0215340-00001-00
Item 2 – | Code of Ethics – Not required, as this is not an annual filing. | |
Item 3 – | Audit Committee Financial Expert – Not required, as this is not an annual filing. | |
Item 4 – | Principal Accountant Fees and Services – Not required, as this is not an annual filing. | |
Item 5 – | Audit Committee of Listed Registrants – Not applicable. | |
Item 6 – | Schedule of Investments – The schedule is included as part of the report to shareholders filed under Item 1 of this Form. | |
Item 7 – | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not applicable. | |
Item 8 – | Portfolio Managers of Closed-End Management Investment Companies – Not applicable. | |
Item 9 – | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not applicable. | |
Item 10 – | Submission of Matters to a Vote of Security Holders – Not applicable. | |
Item 11 – | Controls and Procedures |
(a) | It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure. |
(b) | There has been no significant change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter of the period covered by this report that has materially affected, or is likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12 – Exhibits
(a) | (1) | Code of Ethics – Not required, as this is not an annual filing. | ||||||||||
(2) | Certifications pursuant to Section 302 of the Sarbanes-Oxley Act – Attached hereto as Exhibit EX-99.CERT. | |||||||||||
(3) | Any written solicitation to purchase securities under Rule 23c-1. – Not applicable. | |||||||||||
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act – Attached hereto as Exhibit EX-99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: | Prudential Investment Portfolios 4 | |
By: | /s/ Deborah A. Docs | |
Deborah A. Docs | ||
Secretary | ||
Date: | December 20, 2011 |
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/ Judy A. Rice | |
Judy A. Rice | ||
President and Principal Executive Officer | ||
Date: | December 20, 2011 |
By: | /s/ Grace C. Torres | |
Grace C. Torres | ||
Treasurer and Principal Financial Officer | ||
Date: | December 20, 2011 |