As filed with the Securities and Exchange Commission on July 23, 2014
Securities Act Registration No. 333-60561
Investment Company Act Registration No. 811-08915
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 30 (X)
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
POST-EFFECTIVE AMENDMENT NO. 30 (X)
Check appropriate box or boxes
Prudential Investment Portfolios 16
Exact name of registrant as specified in charter
Gateway Center Three, 4th floor
100 Mulberry Street
Newark, New Jersey 07102
Address of Principal Executive Offices including Zip Code
(973) 367-7521
Registrant’s Telephone Number, Including Area Code
Deborah A. Docs
Gateway Center Three, 4th floor
100 Mulberry Street
Newark, New Jersey 07102
Name and Address of Agent for Service
It is proposed that this filing will become effective:
__ immediately upon filing pursuant to
paragraph (b)
__ on (____) pursuant to paragraph (b)
(X) 60 days after filing pursuant to paragraph (a)(1)
__ on (____) pursuant to paragraph (a)(1)
__ 75 days after filing pursuant to paragraph (a)(2)
__ on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
__ this post-effective amendment designates a new effective date for a previously filed post-effective amendment.
Shareholder Fees (fees paid directly from your investment) | |||||
Class A | Class B | Class C | Class R | Class Z | |
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) | 5.50% | None | None | None | None |
Maximum deferred sales charge (load) (as a percentage of the lower of original purchase price or sale proceeds) | 1% | 5% | 1% | None | None |
Maximum sales charge (load) imposed on reinvested dividends and other distributions | None | None | None | None | None |
Redemption fee | None | None | None | None | None |
Exchange fee | None | None | None | None | None |
Maximum account fee (accounts under $10,000) | $15 | $15 | $15 | None | None |
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) | |||||
Class A | Class B | Class C | Class R | Class Z | |
Management fees | 0.70% | 0.70% | 0.70% | 0.70% | 0.70% |
+ Distribution and Service (12b-1) fees | 0.30% | 1.00% | 1.00% | 0.75% | None |
+ Other expenses | 0.49% | 0.49% | 0.49% | 0.49% | 0.49% |
+ Acquired Fund Fees and Expenses* | 0.26% | 0.26% | 0.26% | 0.26% | 0.26% |
= Total annual Fund operating expenses | 1.75% | 2.45% | 2.45% | 2.20% | 1.45% |
– Fee waiver and/or expense reimbursement(1)(2) | (0.80)% | (0.75)% | (0.75)% | (1.00)% | (0.75)% |
= Net annual Fund operating expenses(3) | 0.95% | 1.70% | 1.70% | 1.20% | 0.70% |
If Shares Are Redeemed | If Shares Are Not Redeemed | |||||||
Share Class | 1 Year | 3 Years | 5 Years | 10 Years | 1 Year | 3 Years | 5 Years | 10 Years |
Class A | $642 | $997 | $1,376 | $2,436 | $642 | $997 | $1,376 | $2,436 |
Class B | $673 | $992 | $1,338 | $2,474 | $173 | $692 | $1,238 | $2,474 |
Class C | $273 | $692 | $1,238 | $2,729 | $173 | $692 | $1,238 | $2,729 |
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If Shares Are Redeemed | If Shares Are Not Redeemed | |||||||
Share Class | 1 Year | 3 Years | 5 Years | 10 Years | 1 Year | 3 Years | 5 Years | 10 Years |
Class R | $122 | $592 | $1,088 | $2,456 | $122 | $592 | $1,088 | $2,456 |
Class Z | $72 | $385 | $721 | $1,671 | $72 | $385 | $721 | $1,671 |
4 | Prudential Income Builder Fund |
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6 | Prudential Income Builder Fund |
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■ regulation by various government authorities; |
■ government regulation of rates charged to customers; |
■ service interruption due to environmental, operational or other mishaps as well as political and social unrest; |
■ the imposition of special tariffs and changes in tax laws, regulatory policies and accounting standards; and |
■ general changes in market sentiment towards the assets of infrastructure companies. |
8 | Prudential Income Builder Fund |
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Average Annual Total Returns % (including sales charges) (as of 12-31-13) | ||||
Return Before Taxes | One Year | Five Years | Ten Years | Since Inception |
Class B shares | 6.07 | 9.40 | 4.91 | — |
Class C shares | 9.97 | 9.52 | 4.90 | — |
Class R shares | 11.47 | 10.06 | N/A | 5.50 (10/4/04) |
Class Z shares | 12.03 | 10.63 | 5.96 | — |
Class A Shares % (including sales charges) | ||||
Return Before Taxes | 5.67 | 9.12 | 5.11 | — |
Return After Taxes on Distributions | 4.15 | 8.55 | 3.91 | — |
Return After Taxes on Distribution and Sale of Fund Shares | 4.37 | 7.16 | 3.77 | — |
Index % (reflects no deduction for fees, expenses or taxes) | ||||
Customized Blend Index | 11.09 | 10.31 | 6.18 | — |
S&P 500 Index | 32.37 | 17.93 | 7.40 | — |
Barclays US Aggregate Bond Index | -2.02 | 4.44 | 4.55 |
Lipper Average % (reflects no deduction for sales charges or taxes) | ||||
Lipper Mixed-Asset Target Allocation Conservative Funds Average | 6.76 | 9.58 | 4.86 | — |
Investment Manager | Subadviser | Portfolio Managers | Title | Service Date |
Prudential Investments LLC | Quantitative Management Associates LLC | Ted Lockwood | Managing Director | |
Edward L. Campbell, CFA | Principal | |||
Rory Cummings | Investment Associate |
10 | Prudential Income Builder Fund |
Investment Manager | Subadviser | Portfolio Managers | Title | Service Date |
Jennison Associates LLC | Ubong “Bobby” Edemeka | Managing Director | ||
Shaun Hong, CFA | Managing Director | |||
Prudential Investment Management, Inc. – Prudential Fixed Income | Paul Appleby, CFA | Managing Director and Head of Prudential Fixed Income’s Leveraged Finance Team | ||
David Bessey | Managing Director and Head of Prudential Fixed Income’s Emerging Markets Debt Team | |||
Robert Cignarella, CFA | Managing Director and co-Head of Prudential Fixed Income’s Leveraged Finance Team | |||
Michael J. Collins, CFA | Managing Director and Senior Investment Officer of Prudential Fixed Income | |||
Cathy L. Hepworth, CFA | Managing Director of Prudential Fixed Income’s Emerging Markets Debt Team | |||
Terence Wheat, CFA | Principal | |||
Robert Spano, CFA, CPA | Principal | |||
Daniel Thorogood, CFA | Vice-President of Prudential Fixed Income’s Leveraged Finance Team | |||
Ryan Kelly, CFA | Principal | |||
Prudential Investment Management, Inc. – Prudential Real Estate Investors | Marc R. Halle | Managing Director and Head of Global Real Estate Securities | ||
Rick J. Romano | Portfolio Manager: US Real Estate Securities | |||
Gek Lang Lee, CFA | Portfolio Manager: Aisa Real Estate Securities | |||
Michael Gallagher | Portfolio Manager: European Real Estate Securities |
Minimum Initial Investment | Minimum Subsequent Investment | |
Fund shares (most cases)* | $2,500 | $100 |
Retirement accounts and custodial accounts for minors | $1,000 | $100 |
Automatic Investment Plan (AIP) | $50 | $50 |
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12 | Prudential Income Builder Fund |
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14 | Prudential Income Builder Fund |
Underlying Funds | ||
Market Segment/ Strategy | Name of Underlying Fund | Investment Objective and Investment Strategies of Underlying Fund |
Equity | Prudential Jennison MLP Fund(1) | The Fund seeks to provide total return through a combination of current income and capital appreciation. The Fund normally invests at least 80% of its investable assets in MLPs and MLP related investments (together, MLP investments). The Fund’s investments may be of any capitalization size. The Fund’s MLP investments may include, but are not limited to: MLPs structured as limited partnerships (“LPs”) or limited liability companies (“LLCs”); MLPs that are taxed as “C” corporations; institutional units (“I-Units”) issued by MLP affiliates; parent companies of MLPs; shares of companies owning MLP general partnership interests and other securities representing indirect beneficial interest ownership interests in MLP common units, “C” corporations that hold significant interests in MLPs; and other equity and fixed income securities and derivative instruments, including pooled investment vehicles and exchange-traded products (“ETPs”), that provide exposure to MLP investments. MLPs generally own and operate assets that are used in the energy sector, including assets used in exploring, developing, producing, generating, transporting (including marine), transmitting, terminal operation, storing, gathering, processing, refining, distributing, mining or marketing of natural gas, natural gas liquids, crude oil, refined products, coal or electricity, or that provide energy related equipment or services. Many of the MLPs in which the Fund invests operate oil, gas or petroleum facilities, or other facilities within the energy sector. The Fund intends to concentrate its investments in the energy sector. In deciding which stocks to buy, the investment subadviser relies on proprietary fundamental research, focused on the discovery of quality companies with predictable and sustainable cash flows. In narrowing the investment universe, the investment team compares prospective candidates’ competitive positioning, including strategically located assets; distribution coverage ratios; organic growth opportunities; expected dividend or distribution growth; the quality of the management team; balance sheet strength; and the support of the general partner. Valuation and the investment’s degree of liquidity factor into the portfolio managers’ decision calculus, as well. The team also monitors wider industry dynamics and interacts continually with the investment subadviser’s Natural Resources investment professionals to gain insights into emerging trends, such as the anticipation of an acceleration or reduction in production of particular oil and gas plays or a shift in regulatory or tax policy, which could affect potential or current positions. |
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Underlying Funds | ||
Market Segment/ Strategy | Name of Underlying Fund | Investment Objective and Investment Strategies of Underlying Fund |
Equity | Prudential Jennison Utility Fund(1) | The Fund seeks total return through a combination of capital appreciation and current income. The Fund seeks investments whose prices will increase as well as pay the Fund dividends and other income. The Fund normally invest at least 80% of the Fund's investable assets in equity and equity-related and investment-grade debt securities of utility companies. Utility companies, based on the Global Industry Classification Standard (GICS) industry classifications, as they may be amended from time to time, include electric utilities, gas utilities, water utilities, multi-utilities, independent power producers, diversified telecommunication services, wireless telecommunication services, transportation infrastructure, energy equipment and services and oil, gas and consumable fuels. The Fund may invest more than 5% of the Fund's assets in any one issuer. The Fund may invest up to 50% of its investable assets in foreign securities. |
Equity | Prudential Jennison Global Infrastructure Fund(1) | The Fund seeks total return. The Fund normally will invest at least 80% of its investable assets in securities of US and foreign (non-US based) infrastructure companies. The Fund will consider a company an infrastructure company if the company is categorized, based on the GICS industry classifications, as they may be amended from time to time, within the following industries: Aerospace and Defense, Air Freight and Logistics, Airlines, Building Products, Commercial Services and Supplies, Communications Equipment, Construction and Engineering, Construction Equipment, Diversified Telecommunication Services, Electrical Equipment, Electric Utilities, Energy Equipment and Services, Gas Utilities, Health Care Providers and Services, Independent Power Producers and Energy Traders, Industrial Conglomerates, Machinery, Marine, Metals and Mining, Multi-Utilities, Oil, Gas and Consumable Fuels, Rail and Road, Transportation Infrastructure, Water Utilities and Wireless Telecommunication Services. Examples of assets held by infrastructure companies include toll roads, airports, rail track, shipping ports, telecom infrastructure, hospitals, schools, utilities such as electricity, gas distribution networks and water, and oil and gas pipelines. |
Equity | PowerShares Preferred Portfolio(3) | The Fund seeks investment results that generally correspond to the price and yield (before fees and expenses) of The BofA Merrill Lynch Core Plus Fixed Rate Preferred Securities Index (the “Index”).The Fund normally will invest at least 80% of its total assets in fixed rate US dollar-denominated preferred securities that comprise the Index. The Index tracks the performance of fixed rate US dollar-denominated preferred securities issued in the US domestic market. Securities must be rated at least B3, based on an average of three leading ratings agencies: Moody’s, S&P and Fitch and must have an investment-grade country risk profile (based on an average of Moody’s, S&P and Fitch foreign currency long-term sovereign debt ratings). The Fund will concentrate its investments (i.e., invest 25% or more of the value of its total assets) in securities of issuers in any one industry or sector only to the extent that the Index reflects a concentration in that industry or sector. |
Fixed-Income | Prudential Short-Term Corporate Bond Fund, Inc.(2) | The Fund seeks high current income consistent with the preservation of principal. The Fund invests, under normal circumstances, at least 80% of its investable assets in bonds of corporations with varying maturities. For purposes of this policy, bonds include all fixed-income securities, other than preferred stock, and corporations include all private issuers. The effective duration of the Fund's portfolio will generally be less than three years. The Fund will buy and sell securities to take advantage of investment opportunities based on the subadviser's analysis of market conditions, interest rates and general economic factors. |
Fixed-Income | Prudential Short Duration High Yield Income Fund(2) | The Funds seeks to provide a high level of current income. The Fund will seek to achieve its investment objective by investing primarily in a diversified portfolio of high yield fixed income instruments that are rated below investment grade by a NRSRO or, if unrated, are considered by the investment subadviser to be of comparable quality. Under normal market conditions, the Fund will invest at least 80% of its investable assets in a diversified portfolio of high yield fixed income instruments that are below investment grade with varying maturities and other investments (including derivatives) with similar economic characteristics. The term “below investment grade” in this prospectus refers to instruments either rated Ba1 or lower by Moody’s, BB+ or lower by Standard & Poor’s or Fitch, Inc. (Fitch), or comparably rated by another NRSRO, or, if unrated, are considered by the investment subadviser to be of comparable quality. Although the Fund may invest in instruments of any duration or maturity, the Fund normally will seek to maintain a weighted average portfolio duration of three years or less and a weighted average maturity of five years or less. |
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Underlying Funds | ||
Market Segment/ Strategy | Name of Underlying Fund | Investment Objective and Investment Strategies of Underlying Fund |
Fixed-Income | Prudential Floating Rate Income Fund(2) | The Fund seeks to maximize current income. In addition the Fund seeks capital appreciation as a secondary investment objective, but only when consistent with the Fund's primary investment objective of seeking to maximize current income. Under normal market conditions, the Fund will invest at least 80% of its investable assets (net assets plus borrowings for investment purposes, if any) in floating rate loans and other floating rate debt securities. Floating rate loans are debt obligations that have interest rates which adjust or “float” periodically (normally on a monthly or quarterly basis) based on a generally recognized base rate such as the London Interbank Offered Rate (LIBOR) or the prime rate offered by one or more major US banks. |
Fixed-Income | Prudential Short Duration Multi-Sector Bond Fund(2) | The Fund seeks total return. The Fund seeks to achieve its objective by investing in fixed-income instruments, whereby issuers borrow money from investors in return for either a fixed or variable rate of interest and eventual repayment of the amount borrowed. The Fund invests, under normal circumstances, at least 80% of the Fund's investable assets in fixed income instruments with varying maturities. The Fund has the flexibility to allocate its investments across different sectors of the fixed income securities markets. The Fund's investment subadviser allocates assets among different sectors of the fixed income markets, including (but not limited to) US Government securities, mortgage-related and asset-backed securities, corporate debt securities, foreign debt securities and loan participations and assignments. The Fund is not obligated to invest in all of these sectors at a given time and, at times, may invest all of its assets in only one sector. Although the Fund may invest in instruments of any duration or maturity, the Fund normally will seek to maintain a weighted average portfolio duration of three years or less and a weighted average maturity of five years or less. The Fund's weighted average portfolio duration, however, may be longer at any time or from time to time depending on market conditions. |
Fixed-Income | Prudential Absolute Return Bond Fund(2) | The Fund seeks positive returns over the long term, regardless of market conditions. The Fund has a flexible investment strategy and will invest in a variety of securities and instruments. The Fund will also use a variety of investment techniques in pursuing its investment objective, which may include managing duration, credit quality, yield curve positioning and currency exposure, as well as sector and security selection. Under normal market conditions, the Fund will invest at least 80% of its investable assets in debt securities and/or investments that provide exposure to bonds. |
Fixed Income | SPDR® Barclays Convertible Securities ETF(4) | The Fund seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks US convertible securities markets with outstanding issue sizes greater than $500 million. The Fund purchases the underlying securities of the index in order to gain exposure to US convertible bonds with outstanding issue sizes greater than $500 million.Under normal market conditions, the Fund generally invests substantially all, but at least 80%, of its total assets in the securities comprising the Index or in securities that are determined to have economic characteristics that are substantially identical to the economic characteristics of the securities that comprise the Index. In addition, the Fund may invest in debt securities that are not included in the Index, cash and cash equivalents or money market instruments, such as repurchase agreements and money market funds. |
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18 | Prudential Income Builder Fund |
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20 | Prudential Income Builder Fund |
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Common Stocks and Other Equity-Related Securities | |
Risks | Potential Rewards |
■ Individual stocks could lose value.■ Equity markets could go down, resulting in a decline in value of the Fund's investments. ■ Investment style risk—the risk that returns from the types of stocks in which the Fund invests will trail returns from the overall stock market. ■ Companies that normally pay dividends may not do so if they don't have profits or adequate cash flow or to conserve cash. ■ Changes in economic or political conditions, both domestic and international, may result in a decline in value of the Fund's investments. | ■ Historically, stocks have outperformed other investments over the long term.■ Generally, economic growth leads to higher corporate profits, which in turn can lead to an increase in stock prices, known as capital appreciation. ■ May be a source of dividend income. |
Fixed-Income Obligations | |
Risks | Potential Rewards |
■ The Fund's holdings, share price, yield and total return may fluctuate in response to bond market movements.■ Credit risk—the risk that the default of an issuer will leave the Fund with unpaid interest or principal. The lower an instrument's quality, the higher its potential volatility. ■ Market risk—the risk that the market value of an investment may decline, sometimes rapidly or unpredictably. Market risk may affect an industry, a sector, or the market as a whole. ■ Interest rate risk—the risk that the value of most bonds will fall when interest rates rise: the longer a bond's maturity, the more its value typically falls. The Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates. The Fund may lose money if short-term or long-term interest rates rise sharply or in a manner not anticipated by the subadviser. Interest rate risk can lead to price volatility.■ Prepayment risk—During periods of declining interest rates, the issuer of an instrument may exercise its option to prepay principal earlier than scheduled, forcing the Fund to reinvest the proceeds from such prepayment in lower yielding instruments, which may result in a decline in the Fund's income and distributions to shareholders. ■ Reinvestment risk—the risk that income from the Fund's portfolio will decline if and when the Fund invests the proceeds from matured, traded or called fixed income instruments at market interest rates that are below the portfolio's current earnings rate. A decline in income could affect the Fund's NAV or its overall return.■ Spread risk—Wider credit spreads and decreasing market values typically represent a deterioration of the fixed income instrument's credit soundness and a perceived greater likelihood or risk of default by the issuer. Fixed income instruments generally compensate for greater credit risk by paying interest at a higher rate. As the spread on a security widens (or increases), the price (or value) of the security generally falls.■ Not all US Government securities are insured or guaranteed by the full faith and credit of the US | ■ Bonds have generally outperformed money market instruments over the long term with less risk than stocks.■ Most bonds will rise in value when interest rates fall. ■ May provide a source of regular interest income. ■ Generally more secure than stocks since companies must pay their debts before paying stockholders. ■ Investment-grade obligations have a lower risk of default. ■ Bonds with longer maturity dates typically have higher yields. ■ Intermediate-term securities may be less susceptible to loss of principal than longer-term securities. |
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Fixed-Income Obligations | |
Risks | Potential Rewards |
Government—some are backed only by the issuing agency, which must rely on its own resources to repay the debt. |
Foreign Securities | |
Risks | Potential Rewards |
■ Foreign markets, economies and political systems, particularly those in developing countries, may not be as stable as those in the US ■ Currency risk—the risk that adverse changes in the values of foreign currencies can cause losses (non-US dollar denominated securities). ■ May be less liquid than US stocks and bonds. ■ Differences in foreign laws, accounting standards, public information, custody and settlement practices may result in less reliable information on foreign investments and involve more risks. ■ Investments in emerging market securities are subject to greater volatility and price declines. | ■ Investors may participate in the growth of foreign markets through the Fund's investments in companies operating in those markets.■ The Fund may profit from a favorable change in the value of foreign currencies (non-US dollar denominated securities). |
Initial Public Offerings | |
Risks | Potential Rewards |
■ Prices of securities sold in IPOs may be highly volatile or decline shortly after the IPO is completed.■ Depending on the Fund size, investments in IPOs may have a dramatic effect on the Fund’s performance. ■ As the Fund grows in size, the impact of IPOs on performance will decline. ■ Availability of shares in an IPO may be limited and the Fund may not be able to buy shares at all, or as many shares as it would like. ■ Securities issued in IPOs are subject to many of the same risks as investments in small capitalization issuers, such as: a smaller range of products and services than larger companies, limited financial results, and a lack of management depth. | ■ Investments in IPOs have the potential to produce substantial gains. |
Real Estate Securities including REITs | |
Risks | Potential Rewards |
■ Performance and values depend on the value of the underlying properties or the underlying loans or interests, the strength of real estate markets, REIT management and property management, each of which can be affected by many factors, including national and regional economic conditions. ■ Securities of individual REITs could lose value. ■ Changes in economic or political conditions, both domestic and international, may result in a decline in value of REIT investments. ■ REITs charge management fees which may result in layering the management fees paid by the Fund. ■ Real estate companies, including REITs, may be leveraged, which increases risk. | ■ Real estate holdings can generate good returns from rents, rising market values, etc.■ Greater diversification than direct ownership of real estate. ■ Potential for dividend income. |
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MLP Investments | |
Risks | Potential Rewards |
■ Liquidity risk: MLPs may experience limited trading volumes and display abrupt or erratic price movements. The subadviser may find it difficult to sell MLPs at a fair price at times when the subadviser believes it is desirable to do so.■ Changes in the regulatory environment may adversely affect the Fund's investments in MLPs. ■ Investments in MLPs include risks related to limited control and limited rights to vote on matters affecting the MLP, risks related to potential conflicts of interest between the MLP and the MLP’s general partner, cash flow risks, dilution risks and risks related to the general partner’s right to require unit holders to sell their common units at an undesirable time or price.■ Tax risk: A change in current tax law or change in the underlying business mix of an MLP could result in the MLP being treated as a corporation for tax purposes, which could adversely affect the value of the Fund.■ Industry risk: Investments in MLPs are subject to the risks associated with the specific industries in which the MLPs invest. | ■ Potential for both current income and capital appreciation. |
Mortgage-Related Securities | |
Risks | Potential Rewards |
■ Prepayment risk—the risk that the underlying mortgages may be prepaid, partially or completely, generally during periods of falling interest rates, which could adversely affect yield to maturity and could require the Fund to reinvest in lower yielding securities. ■ Extension risk—the risk that rising interest rates may cause the underlying mortgages to be paid off more slowly by the borrower, causing the value of the securities to fall. ■ Credit risk—the risk that the underlying mortgages will not be paid by debtors or by credit insurers or guarantors of such instruments. Some private mortgage securities are unsecured or secured by lower-rated insurers or guarantors and thus may involve greater risk. ■ Market risk—the risk that bonds will lose value in the market, sometimes rapidly or unpredictably, because interest rates rise or there is a lack of confidence in the borrower or the bond's insurer. Market risk may affect an industry, a sector or the market as a whole. ■ Interest rate risk—the risk that the value of most bonds will fall when interest rates rise. The longer a bond's maturity and the lower its credit quality, the more its value typically falls. The Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates. The Fund may lose money if short-term or long-term interest rates rise sharply in a manner not anticipated by the subadviser. Price volatility may result. ■ Illiquidity risk—the risk that securities may be difficult to value precisely and to sell at the time or price desired. | ■ A source of regular interest income.■ The US Government guarantees interest and principal payments on certain securities. ■ May benefit from security interest in real estate collateral. ■ Pass-through instruments provide greater diversification than direct ownership of loans. |
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High Yield Debt Securities (Junk Bonds) | |
Risks | Potential Rewards |
■ Credit risk (particularly high)—the risk that the borrower can’t pay back the money borrowed or make interest payments. The lower a bond’s quality, the higher its potential volatility.■ Market risk (particularly high)—the risk that bonds will lose value in the market, sometimes rapidly or unpredictably, because interest rates rise or there is a lack of confidence in the borrower or the bond's insurer. ■ Illiquidity risk—the risk that bonds may be difficult to value precisely and to sell at the time or price desired. ■ Are generally less secure than higher quality debt securities. ■ Interest rate risk—the risk that the value of most bonds will fall when interest rates rise. The longer a bond’s maturity and the lower the credit quality, the more its value typically falls. The Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates. The Fund may lose money if short-term or long-term interest rates rise sharply in a manner not anticipated by the subadviser. Price volatility may result. | ■ May offer higher interest income and higher potential gains than higher grade debt securities.■ Most bonds rise in value when interest rates fall. |
Equity & Equity-Related Securities of Emerging Markets | |
Risks | Potential Rewards |
■ Emerging markets, economies and political systems may not be as stable as those in the US. ■ Currency risk—changing value of foreign currencies can cause losses (non-US dollar denominated securities). ■ May be less liquid than US equity securities and securities in more developed markets. ■ Differences in foreign laws, accounting standards, public information, custody and settlement practices may result in less reliable information on foreign investments and involve more risks. | ■ Investors may participate in the growth of emerging markets through the Fund's investments in companies operating in those markets.■ Profit from changing value of foreign currencies (non-US dollar denominated securities). |
Asset-Backed Securities | |
Risks: | Potential Rewards: |
■ Credit risk—the risk that the underlying receivables will not be paid by debtors or by credit insurers or guarantors of such instruments. Some asset-backed securities are unsecured or secured by lower-rated insurers or guarantors and thus may involve greater risk. ■ Prepayment risk—the risk that the underlying debt instruments may be prepaid, partially or completely, generally during periods of falling interest rates, which could adversely affect yield to maturity and could require the Fund to reinvest in lower yielding debt instruments. ■ Extension risk—the risk that rising interest rates may cause the underlying debt instruments to be paid off more slowly by the debtor, causing the value of the securities to fall. ■ Market risk—the risk that bonds will lose value in the | ■ A potential source of regular interest income.■ Prepayment risk is generally lower than with mortgage related securities. ■ Pass-through instruments may provide greater diversification than direct ownership of loans. ■ May offer higher yields due to their structure than other instruments. |
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Asset-Backed Securities | |
Risks: | Potential Rewards: |
market, sometimes rapidly or unpredictably, because interest rates rise or there is a lack of confidence in the borrower or the bond’s insurer. Market risk may affect an industry, a sector or the market as a whole. ■ Interest rate risk—the risk that the value of most bonds will fall when interest rates rise. The longer a bond's maturity and the lower its credit quality, the more its value typically falls. The Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates. The Fund may lose money if short-term or long-term interest rates rise sharply in a manner not anticipated by the subadviser. Price volatility may result. ■ Illiquidity risk—the risk that securities may be difficult to value precisely and to sell at the time or price desired. |
Derivatives | |
Risks | Potential Rewards |
■ The value of derivatives (such as forwards, futures, swaps and options) that are used to hedge a portfolio security is generally determined independently from the value of that security and could result in a loss to the Fund if the price movement of the derivative does not correlate with a change in the value of the portfolio security. ■ Derivatives may not have the intended effects and may result in losses or missed opportunities. ■ The counterparty to a derivatives contract could default. ■ Derivatives can increase share price volatility and those that involve leverage could magnify losses. ■ Certain types of derivatives involve costs to the Fund that can reduce returns. ■ Derivatives may be difficult to value precisely or sell at the time or price desired. ■ Recent legislation calls for new regulation of the derivatives markets. The extent and impact of the regulations are not yet fully known and may not be for some time. New regulation of derivatives may make them more costly, may limit their availability, or may otherwise adversely affect their value or performance. | ■ Derivatives could make money and protect against losses if the investment analysis proves correct.■ Derivatives used for return enhancement purposes involve a type of leverage and could generate substantial gains at low cost. ■ One way to manage the Fund's risk/return balance is by locking in the value of an investment ahead of time. ■ Hedges that correlate well with an underlying position can reduce or eliminate the volatility of investment income or capital gains at low cost. |
Exchange-Traded Funds (ETFs) | |
Risks | Potential Rewards |
■ Shares of ETFs are traded on an exchange throughout a trading day, and bought and sold based on market values and not at the net asset value of the ETF. For this reason, shares of an ETF could trade at either a premium or discount to its net asset value. However, the trading prices of index-based ETFs tend to closely track the actual net asset value of the ETF.■ Duplicate management fees. ■ Use of a passive investment strategy by attempting to track the performance of an unmanaged index of securities. Fund may have exposure to constituent securities of an index regardless of the current or projected performance of a specific security or a | ■ Helps to manage cash flows.■ Ability to get rapid exposure to an index. ■ Provides opportunity to buy or sell an entire portfolio of securities in a single transaction in a manner similar to buying or selling a share of stock. ■ The unsystemic risk (risk associated with certain issues rather than the financial markets generally) associated with investments in ETFs is generally low relative to investments in securities of individual issuers. |
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Exchange-Traded Funds (ETFs) | |
Risks | Potential Rewards |
particular industry/market sector. Maintaining investments in securities regardless of market conditions could cause the ETFs’ (and thus the Fund) returns to be lower than if the Fund invested in the ETF that employed an active strategy.■ Investments in passive ETFs generally seek to track performance of an index as closely as possible. Therefore, the return may not match or achieve a high degree of correlation with the return of the index due to operating expenses, transaction costs, cash flows, regulatory requirements and operational inefficiencies. |
Illiquid Securities | |
Risks | Potential Rewards |
■ May be difficult to value precisely.■ May be difficult to sell at the time or price desired. | ■ May offer a more attractive yield or potential for growth than more widely traded securities. |
When-Issued and Delayed Delivery Securities | |
Risks | Potential Rewards |
■ Value of securities may decrease before delivery occurs.■ Counterparty may become insolvent prior to delivery. ■ If the security is not issued, or the counterparty fails to meet its obligation, the Fund loses the investment opportunity for the assets it has set aside to pay for the security and any gain in the security's price. | ■ May enhance investment gains. |
Short Sales, including Short Sales Against the Box | |
Risks | Potential Rewards |
■ May magnify underlying investment losses.■ Share price volatility can magnify losses because the underlying security must be replaced at a specific time. ■ Investment costs may exceed potential underlying investment gains. ■ Short sales pose the risk of potentially unlimited loss. ■ Short sales “against the box” give up the opportunity for capital appreciation in the security. ■ Regardless of the length of time that a short sale is open before being closed, any realized gain or loss will be short-term capital gain or loss for federal income tax purposes. | ■ May magnify underlying investment gains. |
Repurchase Agreements | |
Risks | Potential Rewards |
■ The counterparty to the repurchase agreement may fail to repurchase the securities in a timely manner or at all. | ■ Creates a fixed rate of return for the Fund. |
Reverse Repurchase Agreements and Dollar Rolls | |
Risks | Potential Rewards |
■ Risk that the counterparty may fail to return securities in a timely manner or at all.■ May magnify underlying investment losses. ■ Investment costs may exceed potential underlying investment gains. ■ Leverage risk—the risk that the market value of the securities purchased with proceeds of the sale declines below the price of the securities the Fund must repurchase. | ■ May magnify underlying investment gains. |
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Forward Commitments | |
Risks | Potential Rewards |
■ The counterparty to the forward commitment may fail to make payment or delivery in a timely manner or at all.■ The value of the security to be purchased may decline prior to the settlement date. | ■ Creates a fixed rate of return for the Fund. |
US Government and Agency Securities | |
Risks | Potential Rewards |
■ Not all US Government securities are insured or guaranteed by the US Government. Some are only insured or guaranteed by the issuing agency, which must rely on its own resources to repay the debt. ■ Limits potential for capital appreciation. ■ Credit risk—the risk that the borrower can't pay back the money borrowed or make interest payments (relatively low for US Government securities). ■ Market risk—the risk that the market value of an investment may move up or down, sometimes rapidly or unpredictably, because interest rates rise or there is a lack of confidence in the borrower. Market risk may affect an industry, a sector or the market as a whole.■ Interest rate risk—the risk that the value of most debt obligations will fall when interest rates rise. The longer a bond's maturity, the more its value typically falls. The Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates. The Fund may lose money if short-term or long-term interest rates rise sharply in a manner not anticipated by the subadviser. Price volatility may follow. ■ Inflation-indexed bonds, such as Treasury Inflation-Protected Securities (“TIPS”), may experience greater losses than other fixed income securities with similar durations.■ Investments in inflation-indexed bonds are more likely to cause fluctuations in the Fund’s income distributions. | ■ May preserve the Fund's assets.■ May provide a source of regular interest income. ■ Generally more secure than lower quality debt securities and generally more secure than equity securities. ■ Principal and interest may be guaranteed by the US Government. ■ If interest rates decline, long-term yields should be higher than money market yields. ■ Bonds have generally outperformed money market instruments over the long term. ■ Most bonds rise in value when interest rates fall. |
Principal & Non-Principal Strategies |
■ Equity and Equity-Related Securities: may range between 20% to 80% of total assets■ Fixed-Income Instruments: may range between 20% to 80% of total assets ■ MLPs: up to 25% of total assets ■ Derivatives: up to 25% of total assets ■ Illiquid Securities: up to 15% of net assets ■ Money Market Instruments: Up to 100% of total assets on a temporary basis ■ Short Sales (excluding Short Sales “against the box”): Up to 25% of net assets ■ ETFs: Percentages vary |
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Expected Distribution Schedule* | |
Dividends | Monthly |
Short-Term Capital Gains | Annually |
Long-Term Capital Gains | Annually |
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Share Class | Eligibility |
Class A | Individual investors |
Class B | Individual investors* |
Class C | Individual investors |
Class R | Certain group retirement plans |
Class Z | Institutional investors and certain other investors |
■ | Class A shares purchased in amounts of less than $1 million require you to pay a sales charge at the time of purchase, but the operating expenses of Class A shares are lower than the operating expenses of Class C shares. Investors who purchase $1 million or more of Class A shares and sell these shares within 12 months of purchase are also subject to a contingent deferred sales charge (CDSC) of 1%. The CDSC is waived for certain retirement and/or benefit plans. |
■ | Class C shares do not require you to pay a sales charge at the time of purchase, but do require you to pay a sales charge if you sell your shares within 12 months of purchase. The operating expenses of Class C shares are higher than the operating expenses of Class A shares. |
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■ | The amount of your investment and any previous or planned future investments, which may qualify you for reduced sales charges for Class A shares under Rights of Accumulation or a Letter of Intent. |
■ | The length of time you expect to hold the shares and the impact of varying distribution fees. Over time, these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. For this reason, Class C shares are generally appropriate only for investors who plan to hold their shares for no more than 3 years. |
■ | The different sales charges that apply to each share class—Class A's front-end sales charge (and, in certain cases, CDSC) vs. Class C's CDSC. |
■ | Class C shares purchased in single amounts greater than $1 million are generally less advantageous than purchasing Class A shares. Purchase orders for Class C shares above this amount generally will not be accepted. |
■ | Because Class Z shares have lower operating expenses than Class A or Class C shares, as applicable, you should consider whether you are eligible to purchase Class Z shares. |
Class A | Class B* | Class C | Class R | Class Z | |
Minimum purchase amount | $2,500 | $2,500 | $2,500 | None | None |
Minimum amount for subsequent purchases | $100 | $100 | $100 | None | None |
Maximum initial sales charge | 5.5% of the public offering price | None | None | None | None |
Contingent Deferred Sales Charge (CDSC) (as a percentage of the lower of the original purchase price or the sale proceeds) | 1% on sales of $1 million or more made within 12 months of purchase | 5%(Year 1) 4%(Year 2) 3%(Year 3) 2%(Year 4) 1%(Years 5/6) 0%(Year 7) |
1% on sales made within 12 months of purchase | None | None |
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | .30% (.25% currently) |
1% | 1% | .75% (.50% currently) |
None |
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Amount of Purchase | Sales Charge as a % of Offering Price* |
Sales Charge as a % of Amount Invested* |
Dealer Reallowance |
Less than $25,000 | 5.50% | 5.82% | 5.00% |
$25,000 to $49,999 | 5.00% | 5.26% | 4.50% |
$50,000 to $99,999 | 4.50% | 4.71% | 4.00% |
$100,000 to $249,999 | 3.75% | 3.90% | 3.25% |
$250,000 to $499,999 | 2.75% | 2.83% | 2.50% |
$500,000 to $999,999 | 2.00% | 2.04% | 1.75% |
$1 million to $4,999,999** | None | None | 1.00% |
$5 million to $9,999,999** | None | None | 0.50% |
$10 million and over** | None | None | 0.25% |
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■ | Use your Rights of Accumulation, which allow you or an eligible group of related investors to combine (1) the current value of Class A, Class B and Class C Prudential Investments mutual fund shares you or the group already own, (2) the value of money market shares (other than Direct Purchase money market shares) you or an eligible group of related investors have received for shares of other Prudential Investments mutual funds in an exchange transaction, and (3) the value of the shares you or an eligible group of related investors are purchasing; or |
■ | Sign a Letter of Intent, stating in writing that you or an eligible group of related investors will purchase a certain amount of shares in the Fund and other Prudential Investments mutual funds within 13 months. |
■ | All accounts held in your name (alone or with other account holders) and taxpayer identification number (TIN); |
■ | Accounts held in your spouse's name (alone or with other account holders) and TIN (see definition of spouse below); |
■ | Accounts for your children or your spouse's children, including children for whom you and/or your spouse are legal guardian(s) (e.g., UGMAs and UTMAs); |
■ | Accounts in the name and TINs of your parents; |
■ | Trusts with you, your spouse, your children, your spouse's children and/or your parents as the beneficiaries; |
■ | With limited exclusions, accounts with the same address (exclusions include, but are not limited to, addresses for brokerage firms and other intermediaries and Post Office boxes); and |
■ | Accounts held in the name of a company controlled by you (a person, entity or group that holds 25% or more of the outstanding voting securities of a company will be deemed to control the company, and a partnership will be deemed to be controlled by each of its general partners), including employee benefit plans of the company where the accounts are held in the plan's TIN. |
■ | The person to whom you are legally married. We also consider your spouse to include the following: |
■ | An individual of the same gender with whom you have been joined in a civil union, or legal contract similar to marriage; |
■ | A domestic partner, who is an individual (including one of the same gender) with whom you have shared a primary residence for at least six months, in a relationship as a couple where you, your domestic partner or both provide for the personal or financial welfare of the other without a fee, to whom you are not related by blood; or |
■ | An individual with whom you have a common law marriage, which is a marriage in a state where such marriages are recognized between a man and a woman arising from the fact that the two live together and hold themselves out as being married. |
■ | for Class A shares and any other share class for which a sales charge is paid, the value of existing shares is determined by the maximum offering price (NAV plus maximum sales charge); and |
■ | for all other share classes, the value of existing shares is determined by the NAV. |
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■ | Mutual fund “wrap” or asset allocation programs, where the sponsor places fund trades, links its clients' accounts to a master account in the sponsor's name and charges its clients a management, consulting or other fee for its services; or |
■ | Mutual fund “supermarket” programs, where the sponsor links its clients' accounts to a master account in the sponsor's name and the sponsor charges a fee for its services. |
■ | certain directors, officers, employees (including their spouses, children and parents) of Prudential and its affiliates, the Prudential Investments mutual funds, and the investment subadvisers of the Prudential Investments mutual funds; |
■ | persons who have retired directly from active service with Prudential or one of its subsidiaries; |
■ | certain real estate brokers, agents and employees of real estate brokerage companies affiliated with the Prudential Real Estate Affiliates; |
■ | registered representatives and employees of broker-dealers (including their spouses, children and parents) that have entered into dealer agreements with the Distributor; |
■ | investors in IRAs, provided that: (a) the purchase is made either from a directed rollover to such IRA or with the proceeds of a tax-free rollover of assets from a Benefit Plan for which Prudential Retirement (the institutional Benefit Plan recordkeeping entity of Prudential) provides administrative or recordkeeping services, in each case provided that such purchase is made within 60 days of receipt of the Benefit Plan distribution, and (b) the IRA is established through Prudential Retirement as part of its “Rollover IRA” program (regardless of whether or not the purchase consists of proceeds of a tax-free rollover of assets from a Benefit Plan described above); and |
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■ | Clients of financial intermediaries, who (i) have entered into an agreement with the principal underwriter to offer Class A shares through a no-load network or platform, (ii) charge clients an ongoing fee for advisory, investment, consulting or similar services, or (iii) offer self-directed brokerage accounts that may or may not charge transaction fees to customers. |
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■ | Mutual fund “wrap” or asset allocation programs where the sponsor places fund trades, links its clients' accounts to a master account in the sponsor's name and charges its clients a management, consulting or other fee for its services; or |
■ | Mutual fund “supermarket” programs where the sponsor links its clients' accounts to a master account in the sponsor's name and the sponsor charges a fee for its services. |
■ | Certain participants in the MEDLEY Program (group variable annuity contracts) sponsored by Prudential for whom Class Z shares of the Prudential mutual funds are an available option; |
■ | Current and former Directors/Trustees of mutual funds managed by PI or any other affiliate of Prudential; |
■ | Prudential; |
■ | Prudential funds, including Prudential fund-of-funds; |
■ | Qualified state tuition programs (529 plans); and |
■ | Investors working with fee-based consultants for investment selection and allocations. |
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■ | You are selling more than $100,000 of shares; |
■ | You want the redemption proceeds made payable to someone that is not in our records; |
■ | You want the redemption proceeds sent to some place that is not in our records; |
■ | You are a business or a trust; or |
■ | You are redeeming due to the death of the shareholder or on behalf of the shareholder. |
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■ | Amounts representing shares you purchased with reinvested dividends and distributions, |
■ | Amounts representing the increase in NAV above the total amount of payments for shares made during the past 12 months for Class A shares (in certain cases), six years for Class B shares, and 12 months for Class C shares, and |
■ | Amounts representing the cost of shares held beyond the CDSC period (12 months for Class A shares (in certain cases), six years for Class B shares, and 12 months for Class C shares). |
■ | After a shareholder is deceased or permanently disabled (or, in the case of a trust account, after the death or permanent disability of the grantor). This waiver applies to individual shareholders, as well as shares held in joint tenancy, provided the shares were purchased before the death or permanent disability; |
■ | To provide for certain distributions—made without IRS penalty—from a qualified or tax-deferred retirement plan, benefit plan, IRA or Section 403(b) custodial account; |
■ | To withdraw excess contributions from a qualified or tax-deferred retirement plan, IRA or Section 403(b) custodial account; and |
■ | For redemptions by certain retirement or benefit plans. |
■ | After a shareholder is deceased or permanently disabled (or, in the case of a trust account, after the death or permanent disability of the grantor). This waiver applies to individual shareholders, as well as shares held in joint tenancy, provided the shares were purchased before the death or permanent disability; |
■ | To provide for certain distributions—made without IRS penalty—from a qualified or tax-deferred retirement plan, benefit plan, IRA or Section 403(b) custodial account; |
■ | To withdraw excess contributions from a qualified or tax-deferred retirement plan, IRA or Section 403(b) custodial account; and |
■ | On certain redemptions effected through a Systematic Withdrawal Plan. |
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■ | After a shareholder is deceased or permanently disabled (or, in the case of a trust account, after the death or permanent disability of the grantor). This waiver applies to individual shareholders, as well as shares held in joint tenancy, provided the shares were purchased before the death or permanent disability; |
■ | To provide for certain distributions—made without IRS penalty—from a qualified or tax-deferred retirement plan, benefit plan, IRA or Section 403(b) custodial account; |
■ | To withdraw excess contributions from a qualified or tax-deferred retirement plan, IRA or Section 403(b) custodial account; and |
■ | The CDSC will be waived for redemptions by certain group retirement plans for which Prudential or brokers not affiliated with Prudential provide administrative or recordkeeping services. The CDSC also will be waived for certain redemptions by benefit plans sponsored by Prudential and its affiliates. For more information, call Prudential at (800) 353-2847. |
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Class A Shares | |||||
Year Ended July 31, | |||||
2013(c) | 2012(c) | 2011(c) | 2010(c) | 2009(c) | |
Per Share Operating Performance: | |||||
Net Asset Value, Beginning Of Year | $10.69 | $10.30 | $9.53 | $8.48 | $9.84 |
Income (loss) from investment operations: | |||||
Net investment income | .14 | .17 | .16 | .18 | .23 |
Net realized and unrealized gain (loss) on investments | .86 | .38 | .79 | .90 | (.92) |
Total from investment operations | 1.00 | .55 | .95 | 1.08 | (.69) |
Less Dividends and Distributions: | |||||
Dividends from net investment income | (.14) | (.16) | (.18) | (.03) | (.37) |
Tax return of capital | – | – | – | – | (.05) |
Distributions from net realized gains on investments | – | – | – | – | (.25) |
Total dividends and distributions | (.14) | (.16) | (.18) | (.03) | (.67) |
Net asset value, end of year | $11.55 | $10.69 | $10.30 | $9.53 | $8.48 |
Total Return(a) | 9.41% | 5.53% | 10.04% | 12.72% | (6.36)% |
Ratios/Supplemental Data: | |||||
Net assets, end of year (000) | $86,386 | $86,352 | $86,746 | $75,228 | $63,491 |
Average net assets (000) | $85,636 | $84,243 | $83,395 | $70,865 | $59,479 |
Ratios to average net assets(d): | |||||
Expenses | 1.52% | 1.54% | 1.52% | 1.52% | 1.64%(b) |
Net investment income | 1.25% | 1.64% | 1.59% | 2.00% | 2.76% |
Portfolio turnover rate | 210% | 248% | 188% | 200% | 356% |
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Class B Shares | |||||
Year Ended July 31, | |||||
2013(b) | 2012(b) | 2011(b) | 2010(b) | 2009(b) | |
Per Share Operating Performance: | |||||
Net Asset Value, Beginning Of Year | $10.54 | $10.15 | $9.41 | $8.43 | $9.82 |
Income (loss) from investment operations: | |||||
Net investment income | .06 | .09 | .08 | .11 | .17 |
Net realized and unrealized gain (loss) on investments | .84 | .39 | .78 | .89 | (.92) |
Total from investment operations | .90 | .48 | .86 | 1.00 | (.75) |
Less Dividends and Distributions: | |||||
Dividends from net investment income | (.06) | (.09) | (.12) | (.02) | (.34) |
Tax return of capital | – | – | – | – | (.05) |
Distributions from net realized gains on investments | – | – | – | – | (.25) |
Total dividends and distributions | (.06) | (.09) | (.12) | (.02) | (.64) |
Net asset value, end of year | $11.38 | $10.54 | $10.15 | $9.41 | $8.43 |
Total Return(a) | 8.57% | 4.86% | 9.20% | 11.82% | (7.05)% |
Ratios/Supplemental Data: | |||||
Net assets, end of year (000) | $6,012 | $7,856 | $13,995 | $23,212 | $32,609 |
Average net assets (000) | $6,958 | $10,840 | $18,900 | $28,746 | $39,077 |
Ratios to average net assets(c): | |||||
Expenses | 2.27% | 2.29% | 2.27% | 2.27% | 2.39%(d) |
Net investment income | .52% | .93% | .82% | 1.26% | 2.08% |
Portfolio turnover rate | 210% | 248% | 188% | 200% | 356% |
Class C Shares | |||||
Year Ended July 31, | |||||
2013(b) | 2012(b) | 2011(b) | 2010(b) | 2009(b) | |
Per Share Operating Performance: | |||||
Net Asset Value, Beginning Of Year | $10.54 | $10.15 | $9.41 | $8.43 | $9.82 |
Income (loss) from investment operations: | |||||
Net investment income | .06 | .09 | .08 | .11 | .17 |
Net realized and unrealized gain (loss) on investments | .84 | .39 | .78 | .89 | (.92) |
Total from investment operations | .90 | .48 | .86 | 1.00 | (.75) |
Less Dividends and Distributions: | |||||
Dividends from net investment income | (.06) | (.09) | (.12) | (.02) | (.34) |
Tax return of capital | – | – | – | – | (.05) |
Distributions from net realized gains on investments | – | – | – | – | (.25) |
Total dividends and distributions | (.06) | (.09) | (.12) | (.02) | (.64) |
Net asset value, end of year | $11.38 | $10.54 | $10.15 | $9.41 | $8.43 |
Total Return(a) | 8.57% | 4.86% | 9.20% | 11.82% | (7.05)% |
Ratios/Supplemental Data: | |||||
Net assets, end of year (000) | $17,217 | $17,307 | $19,133 | $20,499 | $21,777 |
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Class C Shares | |||||
Year Ended July 31, | |||||
2013(b) | 2012(b) | 2011(b) | 2010(b) | 2009(b) | |
Average net assets (000) | $17,251 | $17,651 | $20,208 | $21,746 | $23,090 |
Ratios to average net assets(c): | |||||
Expenses | 2.27% | 2.29% | 2.27% | 2.27% | 2.39%(d) |
Net investment income | .51% | .89% | .83% | 1.26% | 2.04% |
Portfolio turnover rate | 210% | 248% | 188% | 200% | 356% |
Class R Shares | |||||
Year Ended July 31, | |||||
2013(c) | 2012(c) | 2011(c) | 2010(c) | 2009(c) | |
Per Share Operating Performance: | |||||
Net Asset Value, Beginning Of Year | $10.67 | $10.28 | $9.51 | $8.48 | $9.85 |
Income (loss) from investment operations: | |||||
Net investment income | .11 | .14 | .13 | .16 | .24 |
Net realized and unrealized gain (loss) on investments | .85 | .39 | .80 | .89 | (.95) |
Total from investment operations | .96 | .53 | .93 | 1.05 | (.71) |
Less Dividends and Distributions: | |||||
Dividends from net investment income | (.11) | (.14) | (.16) | (.02) | (.36) |
Tax return of capital | – | – | – | – | (.05) |
Distributions from net realized gains on investments | – | – | – | – | (.25) |
Total dividends and distributions | (.11) | (.14) | (.16) | (.02) | (.66) |
Net asset value, end of year | $11.52 | $10.67 | $10.28 | $9.51 | $8.48 |
Total Return(a) | 9.07% | 5.29% | 9.84% | 12.44% | (6.59)% |
Ratios/Supplemental Data: | |||||
Net assets, end of year (000) | $167 | $231 | $232 | $687 | $721 |
Average net assets (000) | $196 | $219 | $669 | $686 | $1,255 |
Ratios to average net assets(d): | |||||
Expenses | 1.77% | 1.79% | 1.77% | 1.77% | 1.89%(b) |
Net investment income | 1.04% | 1.39% | 1.29% | 1.76% | 2.70% |
Portfolio turnover rate | 210% | 248% | 188% | 200% | 356% |
Class Z Shares | |||||
Year Ended July 31, | |||||
2013(b) | 2012(b) | 2011(b) | 2010(b) | 2009(b) | |
Per Share Operating Performance: | |||||
Net Asset Value, Beginning Of Year | $10.75 | $10.35 | $9.57 | $8.50 | $9.85 |
Income (loss) from investment operations: |
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Class Z Shares | |||||
Year Ended July 31, | |||||
2013(b) | 2012(b) | 2011(b) | 2010(b) | 2009(b) | |
Net investment income | .17 | .20 | .19 | .21 | .26 |
Net realized and unrealized gain (loss) on investments | .87 | .39 | .79 | .89 | (.93) |
Total from investment operations | 1.04 | .59 | .98 | 1.10 | (.67) |
Less Dividends and Distributions: | |||||
Dividends from net investment income | (.17) | (.19) | (.20) | (.03) | (.38) |
Tax return of capital | – | – | – | – | (.05) |
Distributions from net realized gains on investments | – | – | – | – | (.25) |
Total dividends and distributions | (.17) | (.19) | (.20) | (.03) | (.68) |
Net asset value, end of year | $11.62 | $10.75 | $10.35 | $9.57 | $8.50 |
Total Return(a) | 9.72% | 5.85% | 10.31% | 12.97% | (6.14)% |
Ratios/Supplemental Data: | |||||
Net assets, end of year (000) | $3,178 | $3,717 | $3,921 | $2,877 | $3,156 |
Average net assets (000) | $3,181 | $4,379 | $3,567 | $3,031 | $3,809 |
Ratios to average net assets(c): | |||||
Expenses | 1.27% | 1.29% | 1.27% | 1.27% | 1.39%(d) |
Net investment income | 1.51% | 1.90% | 1.84% | 2.26% | 3.10% |
Portfolio turnover rate | 210% | 248% | 188% | 200% | 356% |
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FOR MORE INFORMATION Please read this Prospectus before you invest in the Fund and keep it for future reference. For information or shareholder questions contact: | |
■ MAIL Prudential Mutual Fund Services LLC PO Box 9658 Providence, RI 02940■ WEBSITE www.prudentialfunds.com |
■ TELEPHONE (800) 225-1852 (973) 367-3529 (from outside the US) |
■ E-DELIVERY To receive your mutual fund documents on-line, 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. |
You can also obtain copies of Fund documents from the Securities and Exchange Commission as follows (the SEC charges a fee to copy documents): | |
■ MAIL Securities and Exchange Commission Public Reference Section 100 F Street, NE Washington, DC 20549-1520■ ELECTRONIC REQUEST publicinfo@sec.gov |
■ IN PERSON Public Reference Room located at 100 F Street, NE in Washington, DC For hours of operation, call (202) 551-8090■ VIA THE INTERNET on the EDGAR Database at www.sec.gov |
The Annual and Semi-Annual Reports and the SAI contain additional information about the Fund. Shareholders may obtain free copies of the SAI, Annual Report and Semi-Annual Report as well as other information about the Fund and may make other shareholder inquiries through the telephone number, address and website listed above. | |
■ STATEMENT OF ADDITIONAL INFORMATION (SAI) (incorporated by reference into this Prospectus) ■ SEMI-ANNUAL REPORT |
■ ANNUAL REPORT (contains a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during the last fiscal year) |
Prudential Income Builder Fund | |||||
Share Class | A | B | C | R | Z |
NASDAQ | PCGAX | PBCFX | PCCFX | PCLRX | PDCZX |
CUSIP | 74442X108 | 74442X207 | 74442X306 | 74442X405 | 74442X504 |
MFSP504STAT | The Fund's Investment Company Act File No. 811-08915 |
Term | Definition |
ADR | American Depositary Receipt |
ADS | American Depositary Share |
Board | Fund’s Board of Directors or Trustees |
Board Member | A trustee or director of the Fund’s Board |
CFTC | US Commodity Futures Trading Commission |
Code | Internal Revenue Code of 1986, as amended |
CDO | Collateralized Debt Obligation |
CMO | Collateralized Mortgage Obligation |
ETF | Exchange-Traded Fund |
EDR | European Depositary Receipt |
Fannie Mae | Federal National Mortgage Association |
FDIC | Federal Deposit Insurance Corporation |
Fitch | Fitch, Inc. |
Freddie Mac | Federal Home Loan Mortgage Corporation |
GDR | Global Depositary Receipt |
Ginnie Mae | Government National Mortgage Association |
IPO | Initial Public Offering |
IRS | Internal Revenue Service |
1933 Act | Securities Act of 1933, as amended |
1934 Act | Securities Exchange Act of 1934, as amended |
1940 Act | Investment Company Act of 1940, as amended |
1940 Act Laws, Interpretations and Exemptions | Exemptive order, SEC release, no-action letter or similar relief or interpretations, collectively |
LIBOR | London Interbank Offered Rate |
Term | Definition |
Manager or PI | Prudential Investments LLC |
Moody’s | Moody’s Investor Services, Inc. |
NASDAQ | National Association of Securities Dealers Automated Quotations System |
NAV | Net Asset Value |
NYSE | New York Stock Exchange |
OTC | Over the Counter |
Prudential | Prudential Financial, Inc. |
PMFS | Prudential Mutual Fund Services LLC |
REIT | Real Estate Investment Trust |
RIC | Regulated Investment Company, as the term is used in the Internal Revenue Code of 1986, as amended |
S&P | Standard & Poor’s Corporation |
SEC | US Securities & Exchange Commission |
World Bank | International Bank for Reconstruction and Development |
■ | Junk bonds are issued by less creditworthy issuers. These securities are vulnerable to adverse changes in the issuer's economic condition and to general economic conditions. Issuers of junk bonds may be unable to meet their interest or principal payment obligations because of an economic downturn, specific issuer developments or the unavailability of additional financing. |
■ | The issuers of junk bonds may have a larger amount of outstanding debt relative to their assets than issuers of investment grade bonds. If the issuer experiences financial stress, it may be unable to meet its debt obligations. |
■ | Junk bonds are frequently ranked junior to claims by other creditors. If the issuer cannot meet its obligations, the senior obligations are generally paid off before the junior obligations. |
■ | Junk bonds frequently have redemption features that permit an issuer to repurchase the security from the Fund before it matures. If an issuer redeems the junk bonds, the Fund may have to invest the proceeds in bonds with lower yields and may lose income. |
■ | Prices of junk bonds are subject to extreme price fluctuations. Negative economic developments may have a greater impact on the prices of junk bonds than on other higher rated fixed income securities. |
■ | Junk bonds may be less liquid than higher rated fixed income securities even under normal economic conditions. There are fewer dealers in the junk bond market, and there may be significant differences in the prices quoted for junk bonds by the dealers. Because they are less liquid, judgment may play a greater role in valuing certain of the Fund’s portfolio securities than in the case of securities trading in a more liquid market. |
■ | The Fund may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting issuer. |
Independent Board Members(1) | ||
Name, Address, Age Position(s) Portfolios Overseen |
Principal Occupation(s) During Past Five Years | Other Directorships Held |
Ellen S. Alberding (56) Board Member Portfolios Overseen: 67 |
President and Board Member, The Joyce Foundation (charitable foundation) (since 2002); Vice Chair, City Colleges of Chicago (community college system) (since 2011); Trustee, Skills for America’s Future (national initiative to connect employers to community colleges) (since 2011); Trustee, National Park Foundation (charitable foundation for national park system) (since 2009); Trustee, Economic Club of Chicago (since 2009). | None. |
Kevin J. Bannon (61) Board Member Portfolios Overseen: 67 |
Managing Director (since April 2008) and Chief Investment Officer (October 2008-November 2013) of Highmount Capital LLC (registered investment adviser); formerly Executive Vice President and Chief Investment Officer (April 1993-August 2007) of Bank of New York Company; President (May 2003-May 2007) of BNY Hamilton Family of Mutual Funds. | Director of Urstadt Biddle Properties (equity real estate investment trust) (since September 2008). |
Linda W. Bynoe (61) Board Member Portfolios Overseen: 67 |
President and Chief Executive Officer (since March 1995) and formerly Chief Operating Officer (December 1989-February 1995) of Telemat Ltd. (management consulting); formerly Vice President (January 1985-June 1989) at Morgan Stanley & Co (broker-dealer). | Director of Simon Property Group, Inc. (retail real estate) (May 2003-May 2012); Director of Anixter International, Inc. (communication products distributor) (since January 2006); Director of Northern Trust Corporation (financial services) (since April 2006); Trustee of Equity Residential (residential real estate) (since December 2009). |
Keith F. Hartstein (57) Board Member Portfolios Overseen: 67 |
Retired; Formerly President and Chief Executive Officer (2005-2012), Senior Vice President (2004-2005), Senior Vice President of Sales and Marketing (1997-2004), and various executive management positions (1990-1997), John Hancock Funds, LLC (asset management); Chairman, Investment Company Institute’s Sales Force Marketing Committee (2003-2008). | None. |
Michael S. Hyland, CFA (68) Board Member Portfolios Overseen: 67 |
Retired (since February 2005); Formerly Senior Managing Director (July 2001-February 2005) of Bear Stearns & Co, Inc.; Global Partner, INVESCO (1999-2001); Managing Director and President of Salomon Brothers Asset Management (1989-1999). | None. |
Douglas H. McCorkindale (74) Board Member Portfolios Overseen: 67 |
Retired; Formerly Chairman (February 2001-June 2006), Chief Executive Officer (June 2000-July 2005), President (September 1997-July 2005) and Vice Chairman (March 1984-May 2000) of Gannett Co. Inc. (publishing and media). | Director of Lockheed Martin Corp. (aerospace and defense) (since May 2001). |
Stephen P. Munn (71) Board Member Portfolios Overseen: 67 |
Lead Director (since 2007) and formerly Chairman (1993-2007) of Carlisle Companies Incorporated (manufacturer of industrial products). | Lead Director (since 2007) of Carlisle Companies Incorporated (manufacturer of industrial products). |
James E. Quinn (62) Board Member Portfolios Overseen: 67 |
Retired; Formerly President (2003-2012) and Director (2003-2008), and Vice Chairman and Director (1998-2003), Tiffany & Company (jewelry retailing); Director, Mutual of America Capital Management Corporation (asset management) (since 1996); Director, Hofstra University (since 2008); Vice Chairman, Museum of the City of New York (since 1994). | Director of Deckers Outdoor Corporation (footwear manufacturer) (since 2011). |
Richard A. Redeker (70) Board Member & Independent Chair Portfolios Overseen: 67 |
Retired Mutual Fund Senior Executive (44 years); Management Consultant; Independent Directors Council (organization of 2,800 Independent Mutual Fund Directors)-Executive Committee, Chair of Policy Steering Committee, Governing Council. | None. |
Robin B. Smith (74) Board Member Portfolios Overseen: 67 |
Chairman of the Board (since January 2003) of Publishers Clearing House (direct marketing); Member of the Board of Directors of ADLPartner (marketing) (since December 2010); formerly Chairman and Chief Executive Officer (August 1996-January 2003) of Publishers Clearing House. | Formerly Director of BellSouth Corporation (telecommunications) (1992-2006). |
Stephen G. Stoneburn (70) Board Member Portfolios Overseen: 67 |
Chairman, (since July 2011), President and Chief Executive Officer (since June 1996) of Quadrant Media Corp. (publishing company); formerly President (June 1995-June 1996) of Argus Integrated Media, Inc.; Senior Vice President and Managing Director (January 1993-1995) of Cowles Business Media; Senior Vice President of Fairchild Publications, Inc. (1975-1989). | None. |
Interested Board Members(1) | ||
Name, Address, Age Position(s) Portfolios Overseen |
Principal Occupation(s) During Past Five Years | Other Directorships Held |
Stuart S. Parker (51) Board Member & President Portfolios Overseen: 67 |
President of Prudential Investments LLC (since January 2012); Executive Vice President of Prudential Investment Management Services LLC (since December 2012); Executive Vice President of Jennison Associates LLC and Head of Retail Distribution of Prudential Investments LLC (June 2005-December 2011). | None. |
Scott E. Benjamin (40) Board Member & Vice President Portfolios Overseen: 67 |
Executive Vice President (since June 2009) of Prudential Investments LLC; Executive Vice President (June 2009-June 2012) and Vice President (since June 2012) of Prudential Investment Management Services LLC; Executive Vice President (since September 2009) of AST Investment Services, Inc.; Senior Vice President of Product Development and Marketing, Prudential Investments (since February 2006); Vice President of Product Development and Product Management, Prudential Investments (2003-2006). | None. |
Fund Officers(a) | ||
Name, Address and Age Position with Fund |
Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer |
Raymond A. O’Hara (58) Chief Legal Officer and Chief Compliance Officer |
Vice President and Corporate Counsel (since July 2010) of Prudential Insurance Company of America (Prudential); Vice President (March 2011-Present) of Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey; Vice President and Corporate Counsel (March 2011-Present) of Prudential Annuities Life Assurance Corporation; Chief Legal Officer of Prudential Investments LLC (since June 2012); Chief Legal Officer of Prudential Mutual Fund Services LLC (since June 2012) and Corporate Counsel of AST Investment Services, Inc. (since June 2012); formerly Assistant Vice President and Corporate Counsel (September 2008-July 2010) of The Hartford Financial Services Group, Inc.; formerly Associate (September 1980-December 1987) and Partner (January 1988–August 2008) of Blazzard & Hasenauer, P.C. (formerly, Blazzard, Grodd & Hasenauer, P.C.). | Since 2012 |
Deborah A. Docs (56) Secretary |
Vice President and Corporate Counsel (since January 2001) of Prudential; Vice President (since December 1996) and Assistant Secretary (since March 1999) of Prudential Investments LLC; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | Since 2004 |
Jonathan D. Shain (55) Assistant Secretary |
Vice President and Corporate Counsel (since August 1998) of Prudential; Vice President and Assistant Secretary (since May 2001) of Prudential Investments LLC; Vice President and Assistant Secretary (since February 2001) of Prudential Mutual Fund Services LLC; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | Since 2005 |
Claudia DiGiacomo (39) Assistant Secretary |
Vice President and Corporate Counsel (since January 2005) of Prudential; Vice President and Assistant Secretary of Prudential Investments LLC (since December 2005); Associate at Sidley Austin Brown & Wood LLP (1999-2004). | Since 2005 |
Andrew R. French (51) Assistant Secretary |
Vice President and Corporate Counsel (since February 2010) of Prudential; formerly Director and Corporate Counsel (2006-2010) of Prudential; Vice President and Assistant Secretary (since January 2007) of Prudential Investments LLC; Vice President and Assistant Secretary (since January 2007) of Prudential Mutual Fund Services LLC. | Since 2006 |
Amanda S. Ryan (36) Assistant Secretary |
Director and Corporate Counsel (since March 2012) of Prudential; Director and Assistant Secretary (since June 2012) of Prudential Investments LLC; Associate at Ropes & Gray LLP (2008-2012). | Since 2012 |
Theresa C. Thompson (51) Deputy Chief Compliance Officer |
Vice President, Compliance, Prudential Investments LLC (since April 2004); and Director, Compliance, Prudential Investments LLC (2001-2004). | Since 2008 |
Richard W. Kinville (45) Anti-Money Laundering Compliance Officer |
Vice President, Corporate Compliance, Anti-Money Laundering Unit (since January 2005) of Prudential; committee member of the American Council of Life Insurers Anti-Money Laundering and Critical Infrastructure Committee (since January 2007); formerly Investigator and Supervisor in the Special Investigations Unit for the New York Central Mutual Fire Insurance Company (August 1994-January 1999); Investigator in AXA Financial's Internal Audit Department and Manager in AXA's Anti-Money Laundering Office (January 1999-January 2005); first chair of the American Council of Life Insurers Anti-Money Laundering and Critical Infrastructure Committee (June 2007-December 2009). | Since 2011 |
Fund Officers(a) | ||
Name, Address and Age Position with Fund |
Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer |
M. Sadiq Peshimam (50) Treasurer and Principal Financial and Accounting Officer |
Assistant Treasurer of funds in the Prudential Mutual Fund Complex (2006-2014); Vice President (since 2005) of Prudential Investments LLC. | Since 2006 |
Peter Parrella (55) Assistant Treasurer |
Vice President (since 2007) and Director (2004-2007) within Prudential Mutual Fund Administration; formerly Tax Manager at SSB Citi Fund Management LLC (1997-2004). | Since 2007 |
Lana Lomuti (46) Assistant Treasurer |
Vice President (since 2007) and Director (2005-2007), within Prudential Mutual Fund Administration; formerly Assistant Treasurer (December 2007-February 2014) of The Greater China Fund, Inc. | Since 2014 |
Linda McMullin (52) Assistant Treasurer |
Vice President (since 2011) and Director (2008-2011) within Prudential Mutual Fund Administration. | Since 2014 |
■ | Board Members are deemed to be “Interested,” as defined in the 1940 Act, by reason of their affiliation with Prudential Investments LLC and/or an affiliate of Prudential Investments LLC. |
■ | Unless otherwise noted, the address of all Board Members and Officers is c/o Prudential Investments LLC, Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077. |
■ | There is no set term of office for Board Members or Officers. The Board Members have adopted a retirement policy, which calls for the retirement of Board Members on December 31 of the year in which they reach the age of 75. |
■ | “Other Directorships Held” includes only directorships of companies required to register or file reports with the SEC under the 1934 Act (that is, “public companies”) or other investment companies registered under the 1940 Act. |
■ | “Portfolios Overseen” includes all investment companies managed by Prudential Investments LLC. The investment companies for which Prudential Investments LLC serves as manager include the Prudential Investments Mutual Funds, The Prudential Variable Contract Accounts, Target Mutual Funds, Prudential Short Duration High Yield Fund, Inc., Prudential Global Short Duration High Yield Fund, Inc., The Prudential Series Fund, Prudential's Gibraltar Fund, Inc. and the Advanced Series Trust. |
Compensation Received by Independent Board Members | ||||
Name | Aggregate Fiscal Year Compensation from Funds |
Pension or Retirement Benefits Accrued as Part of Fund Expenses |
Estimated Annual Benefits Upon Retirement |
Total Compensation from Funds and Fund Complex for Most Recent Calendar Year |
Ellen S. Alberding† | None | None | None | None |
Kevin J. Bannon | $3,240 | None | None | $197,500 (32/63)* |
Linda W. Bynoe** | $3,213 | None | None | $195,500 (32/63)* |
Keith F. Hartstein† | None | None | None | None |
Michael S. Hyland | $3,253 | None | None | $201,500 (32/63)* |
Douglas H. McCorkindale** | $3,213 | None | None | $195,500 (32/63)* |
Stephen P. Munn | $3,253 | None | None | $201,500 (32/63)* |
James E. Quinn† | None | None | None | None |
Compensation Received by Independent Board Members | ||||
Name | Aggregate Fiscal Year Compensation from Funds |
Pension or Retirement Benefits Accrued as Part of Fund Expenses |
Estimated Annual Benefits Upon Retirement |
Total Compensation from Funds and Fund Complex for Most Recent Calendar Year |
Richard A. Redeker | $3,497 | None | None | $235,500 (32/63)* |
Robin B. Smith** | $3,213 | None | None | $195,500 (32/63)* |
Stephen G. Stoneburn** | $3,240 | None | None | $197,500 (32/63)* |
Board Committee Meetings (for most recently completed fiscal year) | ||
Audit Committee | Nominating & Governance Committee | Target Investment Committee |
4 | 3 | 4 |
Name | Dollar Range of Equity Securities in the Fund |
Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen by Board Member in Fund Complex |
Board Member Share Ownership: Independent Board Members | ||
Ellen Alberding* | None | None |
Kevin J. Bannon | None | Over $100,000 |
Linda W. Bynoe | None | Over $100,000 |
Keith Hartstein* | None | None |
Michael S. Hyland | None | Over $100,000 |
Douglas H. McCorkindale | None | Over $100,000 |
Stephen P. Munn | None | Over $100,000 |
James E. Quinn* | None | None |
Richard A. Redeker | None | Over $100,000 |
Robin B. Smith | None | Over $100,000 |
Stephen G. Stoneburn | None | Over $100,000 |
Board Member Share Ownership: Interested Board Members | ||
Stuart S. Parker | None | Over $100,000 |
Scott E. Benjamin | None | Over $100,000 |
■ | the salaries and expenses of all of its and the Fund's personnel except the fees and expenses of Independent Board Members; |
■ | all expenses incurred by the Manager or the Fund in connection with managing the ordinary course of a Fund's business, other than those assumed by the Fund as described below; and |
■ | the fees, costs and expenses payable to any investment subadviser pursuant to a subadvisory agreement between PI and such investment subadviser. |
■ | the fees and expenses incurred by the Fund in connection with the management of the investment and reinvestment of the Fund's assets payable to the Manager; |
■ | the fees and expenses of Independent Board Members; |
■ | the fees and certain expenses of the Custodian and transfer and dividend disbursing agent, including the cost of providing records to the Manager in connection with its obligation of maintaining required records of the Fund and of pricing the Fund's shares; |
■ | the charges and expenses of the Fund's legal counsel and independent auditors and counsel to the Independent Board Members; |
■ | brokerage commissions and any issue or transfer taxes chargeable to the Fund in connection with its securities (and futures, if applicable) transactions; |
■ | all taxes and corporate fees payable by the Fund to governmental agencies; |
■ | the fees of any trade associations of which the Fund may be a member; |
■ | the cost of share certificates representing, and/or non-negotiable share deposit receipts evidencing, shares of the Fund; |
■ | the cost of fidelity, directors and officers and errors and omissions insurance; |
■ | the fees and expenses involved in registering and maintaining registration of the Fund and of its shares with the SEC and paying notice filing fees under state securities laws, including the preparation and printing of the Fund's registration statements and prospectuses for such purposes; allocable communications expenses with respect to investor services and all expenses of shareholders' and Board meetings and of preparing, printing and mailing reports and notices to shareholders; and |
■ | litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of the Fund's business and distribution and service (12b-1) fees. |
Subadvisory Fee Rates and Subadvisory Fees Paid* | |||||
Fund Name | Subadviser | Fee Rate | 2013 | 2012 | 2011 |
Income Builder Fund (formerly, Conservative Allocation Fund) | Eagle Asset Management, Inc. | 0.50% on assets up to and including $50 million; 0.45% on assets over $50 million |
$8,300 | $6,537 | $9,504 |
EARNEST Partners, LLC | 0.40% | $3,055 | $1,248 | $2,221 | |
Eaton Vance Management (terminated July 2012) |
0.25% on first $250 million; 0.24% on next $250 million; 0.23% on next $500 million; 0.22% over $1 billion |
None | $17,969 | $25,268 | |
Epoch Investment Partners, Inc. (started July 2012) |
0.275% to $1 billion; 0.20% over $1 billion |
$18,562 | $585 | None | |
Pacific Investment Management Company LLC | 0.25% to $1 billion; 0.225% over $1 billion |
$145,792 | $157,347 | $166,244 | |
Hotchkis and Wiley Capital Management, LLC | 0.30% | $20,360 | $16,814 | $17,106 | |
Marsico Capital Management, LLC (terminated April 2013) | 0.40% to $1.5 billion; 0.35% over $1.5 billion |
$32,491 | $51,105 | $50,924 | |
Massachusetts Financial Services Company* | 0.375% on assets up to and including $250 million; 0.325% on next $250 milliion; 0.300% on next $250 million; 0.275% on next $250 million; 0.25% on next $500 million; 0.225% over $1.5 billion |
$36,151 | $27,783 | $34,597 | |
Vaughan Nelson Investment Management, L.P. | 0.40% on first $250 million; 0.35% over $250 million |
$4,605 | $7,513 | $8,896 | |
NFJ Investment Group LLC | 0.40% on first $50 million; 0.38% on next $50 million; 0.34% on next $50 million; 0.30% on next $200 million; 0.28% over $350 million |
$28,273 | $22,698 | $19,562 | |
Quantitative Management Associates LLC (QMA)** | 0.175% | n/a | n/a | n/a | |
Jennison Associates LLC (Jennison) | 0.425% to $500 million; 0.40% over $500 million to $1 billion;0.375% over $1 billion |
n/a | n/a | n/a |
Subadvisory Fee Rates and Subadvisory Fees Paid* | |||||
Fund Name | Subadviser | Fee Rate | 2013 | 2012 | 2011 |
Prudential Fixed Income (PFI) | Broad Market High Yield:0.25% Emerging Markets Debt:0.45% to $200 million;0.40% over $200 million |
n/a | n/a | n/a | |
Prudential Real Estate Investors (PREI) | 0.40% | n/a | n/a | n/a |
Prudential Income Builder Fund | |||||
Subadviser | Portfolio Managers | Registered Investment Companies* |
Other Pooled Investment Vehicles* |
Other Accounts* | Ownership of Fund Securities |
Quantitative Management Associates LLC | Ted Lockwood | 23/ $67,659,598,603 | 1/$46,885,261 | 33/$3,535,783,345 1/$50,079,823 |
None |
Edward L. Campbell, CFA | 22/$67,417,887,754 | 1/$46,885,261 | 30/$3,436,379,522 | None | |
Rory Cummings | 22/$67,417,887,754 | 1/$46,885,261 | 30/$3,436,379,522 | None | |
Jennison Associates LLC | Ubong “Bobby” Edemeka | 7/$9,019,310 | 0/$0 | 0/$0 | None |
Shaun Hong, CFA | 7/$9,019,310 | 0/$0 | 0/$0 | None | |
Prudential Investment Management, Inc. – Prudential Fixed Income | Paul Appleby, CFA | None | |||
Michael J. Collins, CFA | , | None | |||
Terence Wheat, CFA | None | ||||
Robert Spano, CFA, CPA | None | ||||
Ryan Kelly, CFA | None | ||||
David Bessey | None | ||||
Cathy L. Hepworth, CFA | None | ||||
Prudential Investment Management, Inc. – Prudential Real Estate Investors | Marc R. Halle | None | |||
Rick J.Romano, CFA | None | ||||
Gek Lang Lee, CFA | None | ||||
Michael Gallagher | None |
■ | Elimination of the conflict; |
■ | Disclosure of the conflict; or |
■ | Management of the conflict through the adoption of appropriate policies and procedures. |
■ | Asset-Based Fees vs. Performance-Based Fees; Other Fee Considerations. QMA manages accounts with asset-based fees alongside accounts with performance-based fees. Asset-based fees are calculated based on the value of a client’s portfolio at periodic measurement dates or over specified periods of time. Performance-based fees are generally based on a share of the capital appreciation of a portfolio, and may offer greater upside potential to an investment manager than asset-based fees, depending on how the fees are structured. This side-by-side management can create an incentive for QMA and its investment professionals to favor one account over another. Specifically, QMA has the incentive to favor accounts for which it receives performance fees, and possibly take greater investment risks in those accounts, in order to bolster performance and increase its fees. In addition, since fees are negotiable, one client may be paying a higher fee than another client with similar investment objectives or goals. In negotiating fees, QMA takes into account a number of factors including, but not limited to, the investment strategy, the size of a portfolio being managed, the relationship with the client, and the required level of service. Fees may also differ based on account type. For example, fees for commingled vehicles, including those that QMA subadvises, may differ from fees charged for single client accounts. |
■ | Long Only/Long-Short Accounts. QMA manages accounts that only allow it to hold securities long as well as accounts that permit short selling. QMA may, therefore, sell a security short in some client accounts while holding the same security long in other client accounts, creating the possibility that QMA is taking inconsistent positions with respect to a particular security in different client accounts. |
■ | Compensation/Benefit Plan Accounts/Other Investments by Investment Professionals. QMA manages certain funds and strategies whose performance is considered in determining long-term incentive plan benefits for certain investment professionals. Investment |
professionals involved in the management of those accounts in these strategies have an incentive to favor them over other accounts they manage in order to increase their compensation. Additionally, QMA’s investment professionals may have an interest in funds in those strategies if the funds are chosen as options in their 401(k) or deferred compensation plans offered by Prudential or if they otherwise invest in those funds directly. | |
■ | Affiliated Accounts. QMA manages accounts on behalf of its affiliates as well as unaffiliated accounts. QMA could have an incentive to favor accounts of affiliates over others. |
■ | Non-Discretionary Accounts or Models. QMA provides non-discretionary model portfolios to some clients and manages other portfolios on a discretionary basis. The non-discretionary clients may be disadvantaged if QMA delivers the model investment portfolio to them after it initiates trading for the discretionary clients, or vice versa. |
■ | Large Accounts. Large accounts typically generate more revenue than do smaller accounts. As a result, a portfolio manager has an incentive when allocating scarce investment opportunities to favor accounts that pay a higher fee or generate more income for QMA. |
■ | Securities of the Same Kind or Class. QMA may buy or sell, or may direct or recommend that one client buy or sell, securities of the same kind or class that are purchased or sold for another client, at prices that may be different. QMA may also, at any time, execute trades of securities of the same kind or class in one direction for an account and in the opposite direction for another account, due to differences in investment strategy or client direction. Different strategies effecting trading in the same securities or types of securities may appear as inconsistencies in QMA’s management of multiple accounts side-by-side. |
■ | Conflicts Arising Out of Legal Restrictions. QMA may be restricted by law, regulation or contract as to how much, if any, of a particular security it may purchase or sell on behalf of a client, and as to the timing of such purchase or sale. These restrictions may apply as a result of QMA’s relationship with Prudential Financial and its other affiliates. For example, QMA’s holdings of a security on behalf of its clients may, under some SEC rules, be aggregated with the holdings of that security by other Prudential Financial affiliates. These holdings could, on an aggregate basis, exceed certain reporting thresholds for which QMA and Prudential monitor |
and QMA and Prudential may restrict purchases to avoid crossing such thresholds. In addition, QMA could receive material, non-public information with respect to a particular issuer from an affiliate and, as a result, be unable to execute purchase or sale transactions in securities of that issuer for our clients. QMA is generally able to avoid receiving material, non-public information from its affiliates by maintaining information barriers to prevent the transfer of information between affiliates. |
■ | QMA, Prudential Financial, Inc., the general account of the Prudential Insurance Company of America (PICA) and accounts of other affiliates of QMA (collectively, affiliated accounts) may, at times, have financial interests in, or relationships with, companies whose securities QMA may hold, purchase or sell in our client accounts. This may occur, for example, because affiliated accounts hold public and private debt and equity securities of a large number of issuers and may invest in some of the same companies as QMA’s client accounts. At any time, these interests and relationships could be inconsistent or in potential or actual conflict with positions held or actions taken by us on behalf of QMA’s client accounts. For instance, QMA may invest client assets in the equity of companies whose debt is held by an affiliate. QMA may also invest in the securities of one or more clients for the accounts of other clients. While these conflicts cannot be eliminated, QMA has implemented policies and procedures, including adherence to PIM’s information barrier policy, that are designed to ensure that investments of clients are managed in their best interests. |
■ | Certain of QMA’s employees may offer and sell securities of, and units in, commingled funds that QMA manages or subadvises. Employees may offer and sell securities in connection with their roles as registered representatives of Prudential Investment Management Services LLC (a broker-dealer affiliate), or as officers, agents, or approved persons of other affiliates. There is an incentive for QMA’s employees to offer these securities to investors regardless of whether the investment is appropriate for such investor since increased assets in these vehicles will result in increased advisory fees to QMA. In addition, such sales could result in increased compensation to the employee. |
■ | A portion of the long-term incentive grant of some of QMA’s investment professionals will increase or decrease based on the annual performance of several of QMA’s advised accounts over a defined time period. Consequently, some of QMA’s portfolio managers from time to time have financial interests in the accounts they advise. To address potential conflicts related to these financial interests, QMA has procedures, including supervisory review procedures, designed to ensure that each of its accounts is managed in a manner that is consistent with QMA’s fiduciary obligations, as well as with the account’s investment objectives, investment strategies and restrictions. Specifically, QMA’s Chief Investment Officer will perform a comparison of trading costs between the advised accounts whose performance is considered in connection with the long-term incentive grant and other accounts, to ensure that such costs are consistent with each other or otherwise in line with expectations. The results of the analysis are discussed at a trade management meeting. Additionally, QMA’s compliance group will review the performance of these accounts to ensure that it is consistent with the performance of other accounts in the same strategy that are not considered in connection with the grant. |
■ | The quality of the portfolio manager’s investment ideas and consistency of the portfolio manager’s judgment; |
■ | Historical and long-term business potential of the product strategies; |
■ | Qualitative factors such as teamwork and responsiveness; and |
■ | Individual factors such as years of experience and responsibilities specific to the individual’s role such as being a team leader or supervisor are also factored into the determination of an investment professional’s total compensation. |
■ | Long only accounts/long-short accounts: Jennison manages accounts in strategies that only hold long securities positions as well as accounts in strategies that are permitted to sell securities short. Jennison may hold a long position in a security in some client accounts while selling the same security short in other client accounts. Jennison permits quantitatively hedged strategies to short securities that are held long in other strategies. Additionally, Jennison permits securities that are held long in quantitatively derived strategies to be shorted by other strategies. The strategies that sell a security short held long by another strategy could lower the price for the security held long. Similarly, if a strategy is purchasing a security that is held short in other strategies, the strategies purchasing the security could increase the price of the security held short. |
■ | Multiple strategies: Jennison may buy or sell, or may direct or recommend that one client buy or sell, securities of the same kind or class that are purchased or sold for another client at prices that may be different. Jennison may also, at any time, execute trades of securities of the same kind or class in one direction for an account and in the opposite direction for another account, due to differences in investment strategy or client direction. Different strategies effecting trading in the same securities or types of securities may appear as inconsistencies in Jennison’s management of multiple accounts side-by-side. |
■ | Affiliated accounts/unaffiliated accounts and seeded/non-seeded accounts and accounts receiving asset allocation assets from affiliated investment advisers: Jennison manages accounts for its affiliates and accounts in which it has an interest alongside unaffiliated accounts. Jennison could have an incentive to favor its affiliated accounts over unaffiliated accounts. Additionally, Jennison’s affiliates may provide initial funding or otherwise invest in vehicles managed by Jennison. When an affiliate provides “seed capital” or other capital for a fund, it may do so with the intention of redeeming all or part of its interest at a particular future point in time or when it deems that sufficient additional capital has been invested in that fund. Jennison typically requests seed capital to start a track record for a new strategy or product. Managing “seeded” accounts alongside “non-seeded” accounts can create an incentive to favor the “seeded” accounts to establish a track record for a new strategy or product. Additionally, Jennison’s affiliated investment advisers could allocate their asset allocation clients’ assets to Jennison. Jennison could favor accounts used by its affiliate for their asset allocation clients to receive more assets from the affiliate. |
■ | Non-discretionary accounts or models: Jennison provides non-discretionary model portfolios to some clients and manages other portfolios on a discretionary basis. |
Recommendations for some non-discretionary models that are derived from discretionary portfolios are communicated after the discretionary portfolio has traded. The non-discretionary clients may be disadvantaged if Jennison delivers the model investment portfolio to them after Jennison initiates trading for the discretionary clients, or vice versa. | |
■ | Higher fee paying accounts or products or strategies: Jennison receives more revenues from (1) larger accounts or client relationships than smaller accounts or client relationships and from (2) managing discretionary accounts than advising nondiscretionary models and from (3) non-wrap fee accounts than from wrap fee accounts and from (4) charging higher fees for some strategies than others. The differences in revenue that Jennison receives could create an incentive for Jennison to favor the higher fee paying or higher revenue generating account or product or strategy over another. |
■ | Personal interests: The performance of one or more accounts managed by Jennison’s investment professionals is taken into consideration in determining their compensation. Jennison also manages accounts that are investment options in its employee benefit plans such as its defined contribution plans or deferred compensation arrangements and where its employees may have personally invested alongside other accounts where there is no personal interest. These factors could create an incentive for Jennison to favor the accounts where it has a personal interest over accounts where Jennison does not have a personal interest. |
■ | Jennison has adopted trade aggregation and allocation procedures that seek to treat all clients (including affiliated accounts) fairly and equitably. These policies and procedures address the allocation of limited investment opportunities, such as initial public offerings (IPOs) and new issues, the allocation of transactions across multiple accounts, and the timing of transactions between its non-wrap accounts and its wrap fee accounts. |
■ | Jennison has policies that limit the ability to short securities in portfolios that primarily rely on its fundamental research and investment processes (fundamental portfolios) if the security is held long in other fundamental portfolios. |
■ | Jennison has adopted procedures to monitor allocations between accounts with performance fees and non-performance fee based accounts and to monitor overlapping long and short positions among long accounts and long-short accounts. |
■ | Jennison has adopted a code of ethics and policies relating to personal trading. |
■ | Jennison provides disclosure of these conflicts as described in its Form ADV. |
■ | business development initiatives, measured primarily by growth in operating income; |
■ | the number of investment professionals receiving a bonus; and |
■ | investment performance of portfolios relative to appropriate peer groups or market benchmarks. |
■ | elimination of the conflict; |
■ | disclosure of the conflict; or |
■ | management of the conflict through the adoption of appropriate policies and procedures. |
■ | Performance Fees— Prudential Fixed Income manages accounts with asset-based fees alongside accounts with performance-based fees. This side-by-side management may be deemed to create an incentive for Prudential Fixed Income and its investment professionals to favor one account over another. Specifically, Prudential Fixed Income could be considered to have the incentive to favor accounts for which it receives performance fees, and possibly take greater investment risks in those accounts, in order to bolster performance and increase its fees. |
■ | Affiliated accounts— Prudential Fixed Income manages accounts on behalf of its affiliates as well as unaffiliated accounts. Prudential Fixed Income could be considered to have an incentive to favor accounts of affiliates over others. |
■ | Large accounts—large accounts typically generate more revenue than do smaller accounts and certain of Prudential Fixed Income’s strategies have higher fees than others. As a result, a portfolio manager could be considered to have an incentive when allocating scarce investment opportunities to favor accounts that pay a higher fee or generate more income for Prudential Fixed Income. |
■ | Long only and long/short accounts— Prudential Fixed Income manages accounts that only allow it to hold securities long as well as accounts that permit short selling. Prudential Fixed Income may, therefore, sell a security short in some client accounts while holding the same security long in other client accounts. These short sales could reduce the value of the securities held in the long only accounts. In addition, purchases for long only accounts could have a negative impact on the short positions. |
■ | Securities of the same kind or class— Prudential Fixed Income may buy or sell for one client account securities of the same kind or class that are purchased or sold for another client at prices that may be different. Prudential Fixed Income may also, at any time, execute trades of securities of the same kind or class in one direction for an account and in the opposite direction for another account due to differences in investment strategy or client direction. Different strategies trading in the same securities or types of securities may appear as inconsistencies in Prudential Fixed Income’s management of multiple accounts side-by-side. |
■ | Financial interests of investment professionals— Prudential Fixed Income investment professionals may invest in investment vehicles that it advises. Also, certain of these investment vehicles are options under the 401(k) and deferred compensation plans offered by Prudential Financial. In addition, the value of grants under Prudential Fixed Income’s long-term incentive plan is affected by the performance of certain client accounts. As a result, Prudential Fixed Income investment professionals may have financial interests in accounts managed by Prudential Fixed Income or that are related to the performance of certain client accounts. |
■ | Non-discretionary accounts or models— Prudential Fixed Income provides non-discretionary investment advice and non-discretionary model portfolios to some clients and manages others on a discretionary basis. Trades in non-discretionary accounts could occur before, in concert with, or after Prudential Fixed Income executes similar trades in its discretionary accounts. The non-discretionary clients may be disadvantaged if Prudential Fixed Income delivers the model investment portfolio or investment advice to them after it initiates trading for the discretionary clients, or vice versa. |
■ | The head of Prudential Fixed Income and its chief investment officer periodically review and compare performance and performance attribution for each client account within its various strategies. In keeping with Prudential Fixed Income’s fiduciary obligations, its policy with respect to trade aggregation and allocation is to treat all of its accounts fairly and equitably over time. |
Prudential Fixed Income’s trade management oversight committee, which generally meets quarterly, is responsible for providing oversight with respect to trade aggregation and allocation. Prudential Fixed Income has compliance procedures with respect to its aggregation and allocation policy that include independent monitoring by its compliance group of the timing, allocation and aggregation of trades and the allocation of investment opportunities. In addition, its compliance group reviews a sampling of new issue allocations and related documentation each month to confirm compliance with the allocation procedures. Prudential Fixed Income’s compliance group reports the results of the monitoring processes to its trade management oversight committee. Prudential Fixed Income’s trade management oversight committee reviews forensic reports of new issue allocation throughout the year so that new issue allocation in each of its strategies is reviewed at least once during each year. This forensic analysis includes such data as: (i) the number of new issues allocated in the strategy; (ii) the size of new issue allocations to each portfolio in the strategy; and (iii) the profitability of new issue transactions. The results of these analyses are reviewed and discussed at Prudential Fixed Income’s trade management oversight committee meetings. Prudential Fixed Income’s trade management oversight committee also reviews forensic reports on the allocation of trading opportunities in the secondary market. The procedures above are designed to detect patterns and anomalies in Prudential Fixed Income’s side-by-side management and trading so that it may assess and improve its processes. | |
■ | Prudential Fixed Income has policies and procedures that specifically address its side-by-side management of long/short and long only portfolios. These policies address potential conflicts that could arise from differing positions between long/short and long only portfolios. In addition, lending opportunities with respect to securities for which the market is demanding a slight premium rate over normal market rates are allocated to long only accounts prior to allocating the opportunities to long/short accounts. |
■ | Conflicts Arising Out of Legal Restrictions. Prudential Fixed Income may be restricted by law, regulation or contract as to how much, if any, of a particular security it may purchase or sell on behalf of a client, and as to the timing of such purchase or sale. These restrictions may apply as a result of its relationship with Prudential Financial and its other affiliates. For example, Prudential Fixed Income’s holdings of a security on behalf of its clients may, under some SEC rules, be aggregated with the holdings of that security by other Prudential Financial affiliates. These holdings could, on an aggregate basis, exceed certain reporting thresholds that are monitored, and Prudential Fixed Income may restrict purchases to avoid exceeding these thresholds. In addition, Prudential Fixed Income could receive material, non-public information with respect to a particular issuer and, as a result, be unable to execute transactions in securities of that issuer for its clients. For example, Prudential Fixed Income’s bank loan team often invests in private bank loans in connection with which the borrower provides material, non-public information, resulting in restrictions on trading securities issued by those borrowers. Prudential Fixed Income has procedures in place to carefully consider whether to intentionally accept material, non-public information with respect to certain issuers. Prudential Fixed Income is generally able to avoid receiving material, non-public information from its affiliates and other units within PIM by maintaining information barriers. In some instances, it may create an isolated information barrier around a small number of its employees so that material, non-public information received by such employees is not attributed to the rest of Prudential Fixed Income. |
■ | Conflicts Related to Outside Business Activity. From time to time, certain of Prudential Fixed Income’s employees or officers may engage in outside business activity, including outside directorships. Any outside business activity is subject to prior approval pursuant to Prudential Fixed Income’s personal conflicts of interest and outside business activities policy. Actual and potential conflicts of interest are analyzed during such approval process. Prudential Fixed Income could be restricted in trading the securities of certain issuers in client portfolios in the unlikely event that an employee or officer, as a result of outside business activity, obtains material, nonpublic information regarding an issuer. The head of Prudential Fixed Income serves on the board of directors of the operator of an electronic trading platform. Prudential Fixed Income has adopted procedures to address the conflict relating to trading on this platform. The procedures include independent monitoring by Prudential Fixed Income’s chief investment officer and chief compliance officer and reporting on Prudential Fixed Income’s use of this platform to the President of PIM. |
■ | Conflicts Related to Investment of Client Assets in Affiliated Funds. Prudential Fixed Income may invest client assets in funds that it manages or subadvises for an affiliate. Prudential Fixed Income may also invest cash collateral from securities lending transactions in these funds. These investments benefit both Prudential Fixed Income and its affiliate. |
■ | PICA General Account. Because of the substantial size of the general account of The Prudential Insurance Company of America (PICA), trading by PICA’s general account, including Prudential Fixed Income’s trades on behalf of the account, may affect market prices. Although Prudential Fixed Income doesn’t expect that PICA’s general account will execute transactions that will move a market frequently, and generally only in response to unusual market or issuer events, the execution of these transactions could have an adverse effect on transactions for or positions held by other clients. |
■ | Securities Holdings. PIM, Prudential Financial, PICA’s general account and accounts of other affiliates of Prudential Fixed Income (collectively, affiliated accounts) hold public and private debt and equity securities of a large number of issuers and may invest in some of the same companies as other client accounts but at different levels in the capital structure. These investments can result in conflicts between the interests of the affiliated accounts and the interests of Prudential Fixed Income’s clients. For example: (i) Affiliated accounts can hold the senior debt of an issuer whose subordinated debt is held by Prudential Fixed Income’s clients or |
hold secured debt of an issuer whose public unsecured debt is held in client accounts. In the event of restructuring or insolvency, the affiliated accounts as holders of senior debt may exercise remedies and take other actions that are not in the interest of, or are adverse to, other clients that are the holders of junior debt. (ii) To the extent permitted by applicable law, Prudential Fixed Income may also invest client assets in offerings of securities the proceeds of which are used to repay debt obligations held in affiliated accounts or other client accounts. Prudential Fixed Income’s interest in having the debt repaid creates a conflict of interest. Prudential Fixed Income has adopted a refinancing policy to address this conflict. |
■ | Conflicts Related to the Offer and Sale of Securities. Certain of Prudential Fixed Income’s employees may offer and sell securities of, and interests in, commingled funds that it manages or subadvises. There is an incentive for Prudential Fixed Income’s employees to offer these securities to investors regardless of whether the investment is appropriate for such investor since increased assets in these vehicles will result in increased advisory fees to it. In addition, such sales could result in increased compensation to the employee. |
■ | Conflicts Related to Long-Term Compensation. The performance of many client accounts is not reflected in the calculation of changes in the value of participation interests under Prudential Fixed Income’s long-term incentive plan. This may be because the composite representing the strategy in which the account is managed is not one of the composites included in the calculation or because the account is excluded from a specified composite due to guideline restrictions or other factors. As a result of the long-term incentive plan, Prudential Fixed Income’s portfolio managers from time to time have financial interests related to the investment performance of some, but not all, of the accounts they manage. To address potential conflicts related to these financial interests, Prudential Fixed Income has procedures, including trade allocation and supervisory review procedures, designed to ensure that each of its client accounts is managed in a manner that is consistent with Prudential Fixed Income’s fiduciary obligations, as well as with the account’s investment objectives, investment strategies and restrictions. Specifically, Prudential Fixed Income’s chief investment officer reviews performance among similarly managed accounts to confirm that performance is consistent with expectations. The results of this review process are discussed at meetings of Prudential Fixed Income’s trade management oversight committee. |
■ | Other Financial Interests. Prudential Fixed Income and its affiliates may also have financial interests or relationships with issuers whose securities it invests in for client accounts. These interests can include debt or equity financing, strategic corporate relationships or investments, and the offering of investment advice in various forms. For example, Prudential Fixed Income may invest client assets in the securities of issuers that are also its advisory clients. |
Compensation Received by PIM for Securities Lending: Income Builder Fund (formerly, Target Conservative Allocation Fund) | |||
2013 | 2012 | 2011 | |
None | None | None |
Compensation Received by PIM for Securities Lending: Defensive Equity Fund | |||
2013 | 2012 | 2011 | |
None | None | None |
Payments Received by the Distributor | |
Income Builder Fund (formerly, Conservative Allocation Fund) | |
Class A Distribution and service (12b-1) fees | $214,091 |
Class A Initial Sales Charges | $37,123 |
Class A Contingent Deferred Sales Charges (CDSC’s) | $5 |
Class B Distribution and service (12b-1) fees | $69,581 |
Class B Contingent Deferred Sales Charges (CDSC’s) | $11,344 |
Payments Received by the Distributor | |
Class C Distribution and service (12b-1) fees | $172,511 |
Class C Contingent Deferred Sales Charges (CDSC’s) | $344 |
Class R Distribution and service (12b-1) fees | $980 |
Amounts Spent by Distributor | |||||
Fund | Share Class | Printing & Mailing Prospectuses to Other than Current Shareholders |
Compensation to Broker/Dealers for Commissions to Representatives and Other Expenses* |
Overhead Costs ** | Total Amount Spent by Distributor |
Income Builder Fund (formerly, Conservative Allocation Fund) | |||||
Class A | $0 | $209,477 | $80,225 | $289,702 | |
Class B | $37 | $39,369 | $6,183 | $45,589 | |
Class C | $90 | $170,690 | $15,232 | $186,012 | |
Class R | $0 | $951 | $171 | $1,122 |
■ | Prudential Retirement |
■ | Wells Fargo Advisors, LLC |
■ | Ameriprise Financial Services Inc. |
■ | Merrill Lynch Pierce Fenner & Smith Inc. |
■ | MSSB |
■ | UBS Financial Services Inc. |
■ | Fidelity |
■ | Raymond James |
■ | Principal Life Insurance Company |
■ | LPL Financial |
■ | GWFS Equities, Inc. (Great West) |
■ | Nationwide Financial Services Inc. |
■ | ADP Broker-Dealer, Inc. |
■ | Hartford Life |
■ | MSCS Financial Services LLC |
■ | ING |
■ | Commonwealth Financial Network |
■ | American United Life Insurance Company |
■ | Charles Schwab & Co., Inc. |
■ | Ascensus |
■ | JP Morgan Chase Bank, N.A. |
■ | MidAtlantic Capital Corp. |
■ | NYLIFE Distributors LLC |
■ | T. Rowe Price Retirement Plan Services |
■ | Lincoln Retirement Services Company LLC |
■ | John Hancock USA |
■ | Benefit Trust Company |
■ | Diversified Investment Advisors |
■ | Mercer HR Services, LLC |
■ | The Ohio National Life Insurance Company |
■ | Security Benefit Life Insurance Company |
■ | RBC Capital Markets Corporation |
■ | Janney Montgomery & Scott, Inc. |
■ | TD Ameritrade Trust Company |
■ | Cambridge |
■ | Hewitt Associates LLC |
■ | Newport Retirement Plan Services, Inc. |
■ | Vanguard Group, Inc. |
■ | Standard Insurance Company |
■ | Securities America, Inc. |
■ | Genworth |
■ | Massachusetts Mutual Life Insurance Company |
■ | Reliance Trust Company |
■ | VALIC Retirement Services Company |
■ | Wilmington Trust Company |
■ | CPI Qualified Plan Consultants, Inc. |
■ | First Allied Securities |
■ | 1st Global Capital Corp. |
■ | ExpertPlan, Inc. |
■ | Daily Access Corporation |
■ | Oppenheimer & Co. |
■ | Northern Trust |
■ | Sammons Retirement Solutions, Inc. |
■ | Triad Advisors Inc. |
■ | AXA Equitable Life Insurance Company |
■ | United Planners Financial Services of America |
■ | Investacorp |
■ | Morgan Keegan & Co. |
■ | BPAS |
■ | National Security Life |
Income Builder Fund | |
Class A | |
NAV and redemption price per Class A share | $11.55 |
Maximum initial sales charge | $.67 |
Maximum offering price to public | $12.22 |
Class B | |
NAV, offering price and redemption price per Class B share | $11.38 |
Class C | |
NAV, offering price and redemption price per Class C share | $11.38 |
Class R | |
NAV, offering price and redemption price per Class R share | $11.52 |
Class Z | |
NAV, offering price and redemption price per Class Z share | $11.62 |
Broker-Dealer Securities Holdings ($) (as of most recently completed fiscal year) | |||
Fund Name | Broker/Dealer Name | Equity (E)/Debt (D) | Amount (000’s) |
Income Builder Fund(formerly, Conservative Allocation Fund) | J.P. Morgan Chase & Co. | D | $2,868 |
Goldman Sachs & Co. | D | $1,459 | |
Banc of America Securities LLC | D | $1,084 | |
J.P. Morgan Chase & Co. | E | $574 | |
Banc of America Securities LLC | E | $481 | |
Morgan Stanley | E | $130 | |
State Street Bank & Trust | E | $111 | |
Goldman Sachs & Co. | E | $82 | |
■ | After a shareholder is deceased or permanently disabled (or, in the case of a trust account, after the death or disability of the grantor). This waiver applies to individual shareholders as well as shares held in joint tenancy, provided the shares were purchased before the death or permanent disability, |
■ | To provide for certain distributions—made without IRS penalty—from a qualified or tax-deferred retirement plan, benefit plan, IRA or Section 403(b) custodial account, |
■ | To withdraw excess contributions from a qualified or tax-deferred retirement plan, IRA or Section 403(b) custodial account, |
■ | For redemptions by certain retirement or benefit plans (Class A shares only), |
■ | On certain redemptions effected through a Systematic Withdrawal Plan (Class B shares only), and |
■ | For redemptions by certain group retirement plans for which Prudential or brokers not affiliated with Prudential provide administrative or record keeping services. The CDSC will also be waived for certain redemptions by benefit plans sponsored by Prudential and its affiliates. For more information, call Prudential Retirement at (800) 353-2847. (Class C shares only) |
■ | Full holdings on a daily basis to Institutional Shareholder Services (ISS), Broadridge and Glass, Lewis & Co. (proxy voting administrator/agents) at the end of each day; |
■ | Full holdings on a daily basis to ISS (securities class action claims administrator) at the end of each day; |
■ | Full holdings on a daily basis to a Fund's Subadviser(s), Custodian Bank, sub-custodian (if any) and accounting agents (which includes the Custodian Bank and any other accounting agent that may be appointed) at the end of each day. When a Fund has more than one Subadviser, each Subadviser receives holdings information only with respect to the “sleeve” or segment of the Fund for which the Subadviser has responsibility; |
■ | Full holdings to a Fund's independent registered public accounting firm as soon as practicable following the Fund's fiscal year-end or on an as-needed basis; and |
■ | Full holdings to financial printers as soon as practicable following the end of a Fund's quarterly, semi-annual and annual period-ends. |
■ | Fund trades on a quarterly basis to Abel/Noser Corp. (an agency-only broker and transaction cost analysis company) as soon as practicable following a Fund's fiscal quarter-end; |
■ | Full holdings on a daily basis to FT Interactive Data (a fair value information service) at the end of each day; |
■ | Full holdings on a daily basis to FactSet Research Systems Inc. and Lipper, Inc. (investment research providers) at the end of each day; |
■ | Full holdings on a daily basis to Performance Explorer Limited (investment research provider for funds engaged in securities lending) at the end of each day, for certain funds; |
■ | Full holdings on a daily basis to Vestek (for preparation of fact sheets) at the end of each day (Target Portfolio Trust, and selected Prudential Investments Funds only); |
■ | Full holdings to Frank Russell Company (investment research provider) at the end of each month (Prudential Jennison Small Company Fund, Prudential Variable Contract Accounts -2 and -10 only); |
■ | Full holdings on a monthly basis to Fidelity Advisors (wrap program provider) approximately five days after the end of each month (Prudential Jennison Growth Fund and certain other selected Prudential Investments Funds only); |
■ | Full holdings on a daily basis to Brown Brothers Harriman & Co. (operations support) (Prudential Financial Services Fund only); |
■ | Full holdings on a daily basis to Markit WSO Corporation (certain operational functions)(Prudential Financial Services Fund only); |
■ | Full holdings on a daily basis to Investment Technology Group, Inc. (analytical service provider) (Prudential Financial Services Fund only); |
■ | Full holdings on a daily basis to State Street Bank and Trust Company (operations service provider) (Prudential Financial Services Fund only); and |
■ | Full holdings on a quarterly basis to Prudential Retirement Services / Watson Wyatt Investment Retirement Services (401(k) plan recordkeeping) approximately 30 days after the close of the Fund's fiscal quarter-end (Prudential Jennison Growth Fund only). |
■ | Leading market positions in well-established industries. |
■ | High rates of return on funds employed. |
■ | Conservative capitalization structure with moderate reliance on debt and ample asset protection. |
■ | Broad margins in earnings coverage of fixed financial charges and high internal cash generation. |
■ | Well-established access to a range of financial markets and assured sources of alternate liquidity. |
■ | Amortization schedule-the longer the final maturity relative to other maturities the more likely it will be treated as a note. |
■ | Source of payment-the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note. |
Name and Principal Business Address | Positions and Offices with Underwriter | |
David Hunt (2) | President and Chief Executive Officer | |
Christine C. Marcks (4) | Executive Vice President | |
Gary F. Neubeck (2) | Executive Vice President |
Name and Principal Business Address | Positions and Offices with Underwriter | |
Stuart S. Parker (1) | Executive Vice President | |
Scott E. Benjamin (1) | Vice President | |
Joanne M. Accurso-Soto (1) | Senior Vice President | |
Michael J. King (3) | Senior Vice President, Chief Legal Officer and Secretary | |
Peter J. Boland (1) | Senior Vice President and Chief Operating Officer | |
John N. Christolini (4) | Senior Vice President | |
Mark R. Hastings (1) | Senior Vice President and Chief Compliance Officer | |
Michael J. McQuade (1) | Senior Vice President, Comptroller and Chief Financial Officer | |
John L. Bronson (3) | Vice President and Deputy Chief Legal Officer | |
Richard W. Kinville (3) | Vice President and Anti-Money Laundering Officer |
(1) | Gateway Center Three, Newark, NJ 07102-4061 |
(2) | Gateway Center Two, Newark, NJ 07102-4061 |
(3) | 751 Broad Street, Newark NJ, 07102-3714 |
(4) | 280 Trumbull Street, Hartford, CT 06103-3509 |
Signature | Title | Date | ||
* Ellen S. Alberding |
Trustee | |||
* Kevin J. Bannon |
Trustee | |||
* Scott E. Benjamin |
Trustee | |||
* Linda W. Bynoe |
Trustee | |||
* Keith F. Hartstein |
Trustee | |||
* Michael S. Hyland |
Trustee | |||
* Douglas H. McCorkindale |
Trustee | |||
* Stephen P. Munn |
Trustee | |||
* Stuart S. Parker |
Trustee and President, Principal Executive Officer | |||
* James E. Quinn |
Trustee | |||
* Richard A. Redeker |
Trustee | |||
* Robin B. Smith |
Trustee | |||
* Stephen Stoneburn |
Trustee |
Signature | Title | Date | ||
* M. Sadiq Peshimam |
Treasurer, Principal Financial and Accounting Officer | |||
*By: /s/ Claudia DiGiacomo Claudia DiGiacomo |
Attorney-in-Fact | July 23, 2014 |
/s/ Ellen S. Alberding Ellen S. Alberding |
/s/ Stephen P. Munn Stephen P. Munn | |
/s/ Kevin J. Bannon Kevin J. Bannon |
/s/ Stuart S. Parker Stuart S. Parker | |
/s/ Scott E. Benjamin Scott E. Benjamin |
/s/ James E. Quinn James E. Quinn | |
/s/ Linda W. Bynoe Linda W. Bynoe |
/s/ Richard A. Redeker Richard A. Redeker | |
/s/ Keith F. Hartstein Keith F. Hartstein |
/s/Robin B. Smith Robin B. Smith | |
/s/ Michael S. Hyland Michael S. Hyland |
/s/ Stephen Stoneburn Stephen Stoneburn | |
/s/ Douglas H. McCorkindale Douglas H. McCorkindale |
||
Dated: September 18, 2013 |
/s/ M. Sadiq Peshimam M. Sadiq Peshimam Treasurer and Principal and Accounting Officer |
||
Dated: May 12, 2014 |
Item 28 Exhibit No. |
Description | |
None | ||
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Prudential Investment Portfolios 16
Gateway Center Three
100 Mulberry Street
Newark, New Jersey 07102
July 23, 2014
VIA EDGAR SUBMISSION
Securities and Exchange Commission
450 Fifth Street
Judiciary Plaza
Washington, D.C. 20549
Re: Prudential Investment Portfolios 16: Form N-1A
Post-Effective Amendment No. 30 to the Registration
Statement under the Securities Act of 1933;
Amendment No. 30 to the Registration Statement under
the Investment Company Act of 1940
Securities Act Registration No. 333-60561
Investment Company Act No. 811-08915
Dear Sir or Madam:
On behalf of Prudential Income Builder Fund (currently known as Target Conservative Allocation Fund) (the “Fund”), a series of Prudential Investment Portfolios 16, pursuant to the Securities Act of 1933, as amended (the “1933 Act”), and the Investment Company Act of 1940, as amended (the “1940 Act”), transmitted herewith for filing Post-Effective Amendment No. 30 to the Registration Statement under the 1933 Act; Amendment No. 30 to the Registration Statement under the 1940 Act (the “Amendment”).
On August 14, 2014 shareholders of the Fund will have an opportunity to approve a proposed repositioning of the Fund. This Amendment is being made pursuant to Rule 485(a) under the 1933 Act in order to add disclosure regarding the proposed repositioning of the Fund from a multi-managed fund subadvised by multiple non-proprietary subadvisers to a multi-sector fund that is subadvised by multiple affiliates of the investment manager. Pending shareholder approval, the repositioning includes investment policy changes and other changes in non-fundamental investment policies. Additionally, as referenced above, subject to shareholder approval, the Fund will change its name from Target Conservative Allocation Fund to the Prudential Income Builder Fund.
The Fund intends to file a subsequent post-effective amendment on or before September 22, 2014 pursuant to Rule 485(b) under the 1933 Act, to include certain other exhibits, as well as non-material financial and other information, and information responsive to any comments from the staff of the Securities and Exchange Commission (the “Staff”) regarding the Amendment filed herewith.
To assist you with the review of this filing, we note that many sections of the Registration Statement are substantially similar to those sections in Registration Statements which were recently reviewed by the Staff:
Prudential Investment Portfolios 3, Registration Statement on Form N-1A, effective April 30, 2014 (File No. 333-95849 and 811-09805); Prudential Investment Portfolios 18, Registration Statement on Form N-1A, effective December 18, 2013 (File No. 333-43491 and 811-08587); Prudential World Fund, Inc., effective February 7, 2014 (File No. 002-89725, and 811-03981); Prudential Investment Portfolios 16, effective September 30, 2013 (File No. 333-60561 and 811-08915); and Prudential Investment Portfolios 12, Registration Statement on Form N-1A, effective on May 28, 2014 (Files No. 333-42705 and 811-08565), (collectively the “Prior Registration Statements”).
The Amendment contains all applicable Staff comments to the Prior Registration Statements. The Amendment includes substantially similar disclosure to the Prior Registration Statements.
Since the Amendment is substantially similar to the Prior Registration Statements of mutual funds in the same fund complex that were recently reviewed by the Staff and declared effective, we kindly request that the Amendment receives “no review” or limited review if deemed necessary by the Staff. The Amendment will go effective on September 22, 2013 and we would appreciate receiving the Staff’s comments, if any, on or about September 9, 2014.
If you have any questions or comments with respect to the foregoing, or if I can be of any further assistance in facilitating the Staff’s review, please contact me at (973) 367-7659. Thank you for your assistance in this matter.
Sincerely yours,
/s/ Melissa Gonzalez
Melissa Gonzalez
Director, Corporate Counsel