UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: | 811-09439 | |
Exact name of registrant as specified in charter: | Prudential Investment Portfolios 5 | |
Address of principal executive offices: | 655 Broad Street, 17th Floor | |
Newark, New Jersey 07102 | ||
Name and address of agent for service: | Deborah A. Docs | |
655 Broad Street, 17th Floor | ||
Newark, New Jersey 07102 | ||
Registrant’s telephone number, including area code: | 800-225-1852 | |
Date of fiscal year end: | 7/31/2016 | |
Date of reporting period: | 1/31/2016 |
Item 1 | – | Reports to Stockholders |
PRUDENTIAL INVESTMENTS, A PGIM BUSINESS | MUTUAL FUNDS
PRUDENTIAL JENNISON CONSERVATIVE GROWTH FUND
SEMIANNUAL REPORT · JANUARY 31, 2016
Objective
Seeks long-term capital appreciation
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter.
The accompanying financial statements as of January 31, 2016, were not audited and, accordingly, no auditor’s opinion is expressed on them.
Mutual funds are distributed by Prudential Investment Management Services LLC, member SIPC. Jennison Associates is a registered investment adviser. Both are Prudential Financial companies. © 2016 Prudential Financial, Inc. and its related entities. Jennison Associates, Jennison, the Prudential logo, and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
March 16, 2016
Dear Shareholder:
We hope you find the semiannual report for the Prudential Jennison Conservative Growth Fund informative and useful. The report covers performance for the six-month period that ended January 31, 2016.
Since market conditions change over time, we believe it is important to maintain a diversified portfolio of funds consistent with your tolerance for risk, time horizon, and financial goals.
Your financial advisor can help you create a diversified investment plan that may include funds covering all the basic asset classes and that reflects your personal investor profile and risk tolerance. Keep in mind, however, that diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
Prudential Investments® is dedicated to helping you solve your toughest investment challenges—whether it’s capital growth, reliable income, or protection from market volatility and other risks. We offer the expertise of Prudential Financial’s affiliated asset managers that strive to be leaders in a broad range of funds to help you stay on course to the future you envision. They also manage money for major corporations and pension funds around the world, which means you benefit from the same expertise, innovation, and attention to risk demanded by today’s most sophisticated investors.
Thank you for choosing the Prudential Investments family of funds.
Sincerely,
Stuart S. Parker, President
Prudential Jennison Conservative Growth Fund
Prudential Jennison Conservative Growth Fund | 1 |
Your Fund’s Performance (Unaudited)
Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852.
Cumulative Total Returns (Without Sales Charges) as of 1/31/16 |
| |||||||||||||||
Six Months | One Year | Five Years | Ten Years | |||||||||||||
Class A | –9.99 | % | –2.88 | % | 59.88 | % | 75.09 | % | ||||||||
Class B | –10.34 | –3.63 | 54.24 | 62.61 | ||||||||||||
Class C | –10.34 | –3.63 | 54.24 | 62.61 | ||||||||||||
Russell 1000® Growth Index | –7.18 | 1.32 | 73.69 | 110.45 | ||||||||||||
S&P 500 Index | –6.76 | –0.66 | 67.70 | 87.33 | ||||||||||||
Lipper Large-Cap Growth Funds Average | –9.31 | –0.62 | 63.18 | 87.58 | ||||||||||||
Average Annual Total Returns (With Sales Charges) as of 12/31/15 |
| |||||||||||||||
One Year | Five Years | Ten Years | ||||||||||||||
Class A | –3.00 | % | 10.70 | % | 6.19 | % | ||||||||||
Class B | –2.83 | 10.99 | 6.00 | |||||||||||||
Class C | 1.02 | 11.15 | 6.01 | |||||||||||||
Russell 1000 Growth Index | 5.67 | 13.53 | 8.53 | |||||||||||||
S&P 500 Index | 1.39 | 12.55 | 7.30 | |||||||||||||
Lipper Large-Cap Growth Funds Average | 5.26 | 12.27 | 7.54 |
Source: Prudential Investments LLC and Lipper Inc.
2 | Visit our website at www.prudentialfunds.com |
The returns in the tables do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or following the redemption of Fund shares. The average annual total returns take into account applicable sales charges, which are described for each share class in the table below.
Class A | Class B* | Class C | ||||
Maximum initial sales charge | 5.50% of the public offering price | None | None | |||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or net asset value at redemption) | 1% on sales of $1 million or more made within 12 months of purchase | 5% (Yr.1) 4% (Yr.2) 3% (Yr.3) 2% (Yr.4) 1% (Yr.5/6) 0% (Yr.7) | 1% on sales made within 12 months of purchase | |||
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | .30% (.25% currently) | 1% | 1% |
*Class B shares are closed to all purchase activity and no additional Class B shares may be purchased or acquired except by exchange from Class B shares of another Fund or through dividend or capital gains reinvestment.
Benchmark Definitions
Russell 1000 Growth Index
The Russell 1000 Growth Index is an unmanaged index which contains those securities in the Russell 1000® Index with an above-average growth orientation. Companies in this index tend to exhibit higher price-to-book and price-to-earnings ratios, lower dividend yields, and higher forecasted growth rates.
S&P 500 Index
The Standard & Poor’s 500 Composite Stock Price Index (S&P 500 Index) is an unmanaged index of 502 stocks of large US public companies. It gives a broad look at how stock prices in the United States have performed.
Lipper Large-Cap Growth Funds Average
The Lipper Large-Cap Growth Funds Average (Lipper Average) is based on the average return of all funds in the Lipper Large-Cap Growth Funds category for the periods noted. Funds in the Lipper Average invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index.
Prudential Jennison Conservative Growth Fund | 3 |
Your Fund’s Performance (continued)
Investors cannot invest directly in an index or average. The returns for the Indexes would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes that may be paid by an investor. Returns for the Lipper Averages reflect the deduction of operating expenses, but not sales charges or taxes.
Five Largest Holdings expressed as a percentage of net assets as of 1/31/16 |
| |||
Alphabet, Inc. (Class A Stock), Internet Software & Services | 5.4 | % | ||
Amazon.com, Inc., Internet & Catalog Retail | 4.1 | |||
Facebook, Inc. (Class A Stock), Internet Software & Services | 3.8 | |||
Apple, Inc., Technology Hardware, Storage & Peripherals | 3.1 | |||
McDonald’s Corp., Hotels, Restaurants & Leisure | 2.9 |
Holdings reflect only long-term investments and are subject to change.
Five Largest Industries expressed as a percentage of net assets as of 1/31/16 |
| |||
Internet Software & Services | 13.3 | % | ||
Pharmaceuticals | 7.7 | |||
Internet & Catalog Retail | 6.6 | |||
Capital Markets | 6.6 | |||
Banks | 5.7 |
Industry weightings reflect only long-term investments and are subject to change.
4 | Visit our website at www.prudentialfunds.com |
Fees and Expenses (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on August 1, 2015, at the beginning of the period, and held through the six-month period ended January 31, 2016. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of
Prudential Jennison Conservative Growth Fund | 5 |
Fees and Expenses (continued)
Prudential Investments Funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information provided in the expense table. Additional fees have the effect of reducing investment returns.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Prudential Jennison Conservative Growth Fund | Beginning Account Value August 1, 2015 | Ending Account Value January 31, 2016 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 900.10 | 1.26 | % | $ | 6.02 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,018.80 | 1.26 | % | $ | 6.39 | ||||||||||
Class B | Actual | $ | 1,000.00 | $ | 896.60 | 2.01 | % | $ | 9.58 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.03 | 2.01 | % | $ | 10.18 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 896.60 | 2.01 | % | $ | 9.58 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.03 | 2.01 | % | $ | 10.18 |
*Fund expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by the 184 days in the six-month period ended January 31, 2016, and divided by the 366 days in the Fund’s fiscal year ending July 31, 2016 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
6 | Visit our website at www.prudentialfunds.com |
The Fund’s annualized expense ratios for the six-month period ended January 31, 2016, are as follows:
Class | Gross Operating Expenses | Net Operating Expenses | ||||||
A | 1.31 | % | 1.26 | % | ||||
B | 2.01 | 2.01 | ||||||
C | 2.01 | 2.01 |
Net operating expenses shown above reflect fee waivers and/or expense reimbursements. Additional information on Fund expenses and any fee waivers and/or expense reimbursements can be found in the “Financial Highlights” tables in this report and in the Notes to the Financial Statements in this report.
Prudential Jennison Conservative Growth Fund | 7 |
Portfolio of Investments
as of January 31, 2016 (Unaudited)
Description | Shares | Value (Note 1) | ||||||
LONG-TERM INVESTMENTS 99.3% | ||||||||
COMMON STOCKS | ||||||||
Aerospace & Defense 1.6% |
| |||||||
Boeing Co. (The) | 6,409 | $ | 769,913 | |||||
General Dynamics Corp. | 18,870 | 2,524,240 | ||||||
|
| |||||||
3,294,153 | ||||||||
Auto Components 0.1% | ||||||||
Lear Corp. | 2,116 | 219,704 | ||||||
Banks 5.7% | ||||||||
Bank of America Corp. | 130,987 | 1,852,156 | ||||||
Citigroup, Inc. | 105,759 | 4,503,218 | ||||||
JPMorgan Chase & Co. | 46,332 | 2,756,754 | ||||||
Wells Fargo & Co. | 58,346 | 2,930,720 | ||||||
|
| |||||||
12,042,848 | ||||||||
Beverages 0.4% | ||||||||
Dr. Pepper Snapple Group, Inc. | 7,899 | 741,242 | ||||||
Biotechnology 2.7% | ||||||||
Alexion Pharmaceuticals, Inc.* | 3,631 | 529,872 | ||||||
Amgen, Inc. | 1,943 | 296,754 | ||||||
Biogen, Inc.* | 1,275 | 348,151 | ||||||
Celgene Corp.* | 10,845 | 1,087,970 | ||||||
Gilead Sciences, Inc. | 16,757 | 1,390,831 | ||||||
Regeneron Pharmaceuticals, Inc.* | 3,185 | 1,337,987 | ||||||
United Therapeutics Corp.* | 5,592 | 688,823 | ||||||
|
| |||||||
5,680,388 | ||||||||
Capital Markets 6.6% | ||||||||
Ameriprise Financial, Inc. | 25,566 | 2,317,558 | ||||||
Bank of New York Mellon Corp. (The) | 81,855 | 2,964,788 | ||||||
BlackRock, Inc. | 4,021 | 1,263,640 | ||||||
Invesco Ltd. | 100,785 | 3,016,495 | ||||||
Legg Mason, Inc. | 74,181 | 2,271,422 | ||||||
Morgan Stanley | 82,709 | 2,140,509 | ||||||
|
| |||||||
13,974,412 | ||||||||
Chemicals 2.3% | ||||||||
Dow Chemical Co. (The) | 43,661 | 1,833,762 |
See Notes to Financial Statements.
Prudential Jennison Conservative Growth Fund | 9 |
Portfolio of Investments
as of January 31, 2016 (Unaudited) continued
Description | Shares | Value (Note 1) | ||||||
COMMON STOCKS (Continued) | ||||||||
Chemicals (cont’d.) | ||||||||
Eastman Chemical Co. | 49,979 | $ | 3,059,215 | |||||
|
| |||||||
4,892,977 | ||||||||
Commercial Services & Supplies 0.8% | ||||||||
Waste Management, Inc. | 30,927 | 1,637,585 | ||||||
Diversified Financial Services 0.3% | ||||||||
Berkshire Hathaway, Inc. (Class B Stock)* | 4,105 | 532,706 | ||||||
Diversified Telecommunication Services 1.3% | ||||||||
Verizon Communications, Inc. | 54,022 | 2,699,479 | ||||||
Electrical Equipment 1.5% | ||||||||
Emerson Electric Co.(a) | 70,547 | 3,243,751 | ||||||
Electronic Equipment, Instruments & Components 0.1% | ||||||||
Jabil Circuit, Inc. | 8,641 | 172,042 | ||||||
Energy Equipment & Services 1.2% | ||||||||
Schlumberger Ltd. | 34,625 | 2,502,349 | ||||||
Food & Staples Retailing 2.7% | ||||||||
Costco Wholesale Corp. | 20,445 | 3,089,648 | ||||||
Kroger Co. (The) | 67,364 | 2,614,397 | ||||||
|
| |||||||
5,704,045 | ||||||||
Food Products 0.5% | ||||||||
General Mills, Inc. | 9,587 | 541,761 | ||||||
Tyson Foods, Inc. (Class A Stock) | 11,338 | 604,996 | ||||||
|
| |||||||
1,146,757 | ||||||||
Health Care Equipment & Supplies 1.8% | ||||||||
Abbott Laboratories | 82,214 | 3,111,800 | ||||||
St. Jude Medical, Inc. | 12,928 | 683,374 | ||||||
|
| |||||||
3,795,174 | ||||||||
Health Care Providers & Services 2.3% | ||||||||
Anthem, Inc. | 24,199 | 3,157,728 | ||||||
Cardinal Health, Inc. | 10,563 | 859,511 | ||||||
UnitedHealth Group, Inc. | 7,749 | 892,375 | ||||||
|
| |||||||
4,909,614 |
See Notes to Financial Statements.
10 |
Description | Shares | Value (Note 1) | ||||||
COMMON STOCKS (Continued) | ||||||||
Hotels, Restaurants & Leisure 3.5% | ||||||||
McDonald’s Corp. | 48,786 | $ | 6,038,731 | |||||
Starbucks Corp. | 21,473 | 1,304,914 | ||||||
|
| |||||||
7,343,645 | ||||||||
Independent Power & Renewable Electricity Producers 1.6% | ||||||||
Calpine Corp.* | 223,799 | 3,426,363 | ||||||
Industrial Conglomerates 0.1% | ||||||||
Danaher Corp. | 3,059 | 265,062 | ||||||
Insurance 2.1% | ||||||||
Markel Corp.* | 3,820 | 3,210,557 | ||||||
Marsh & McLennan Cos., Inc. | 22,982 | 1,225,630 | ||||||
|
| |||||||
4,436,187 | ||||||||
Internet & Catalog Retail 6.6% | ||||||||
Amazon.com, Inc.* | 14,857 | 8,721,059 | ||||||
JD.com, Inc. (China), ADR* | 26,294 | 684,433 | ||||||
Netflix, Inc.* | 32,690 | 3,002,250 | ||||||
Priceline Group, Inc. (The)* | 1,485 | 1,581,480 | ||||||
|
| |||||||
13,989,222 | ||||||||
Internet Software & Services 13.3% | ||||||||
Alibaba Group Holding Ltd. (China), ADR*(a) | 35,257 | 2,363,277 | ||||||
Alphabet, Inc. (Class A Stock)* | 14,832 | 11,292,343 | ||||||
eBay, Inc.* | 122,782 | 2,880,466 | ||||||
Facebook, Inc. (Class A Stock)* | 71,856 | 8,062,962 | ||||||
LinkedIn Corp. (Class A Stock)* | 3,307 | 654,488 | ||||||
Tencent Holdings Ltd. (China), ADR | 146,927 | 2,753,412 | ||||||
|
| |||||||
28,006,948 | ||||||||
IT Services 4.9% | ||||||||
International Business Machines Corp. | 24,519 | 3,059,726 | ||||||
MasterCard, Inc. (Class A Stock) | 42,865 | 3,816,271 | ||||||
Visa, Inc. (Class A Stock)(a) | 46,813 | 3,487,100 | ||||||
|
| |||||||
10,363,097 | ||||||||
Machinery 2.8% | ||||||||
Caterpillar, Inc. | 49,648 | 3,090,091 | ||||||
Deere & Co. | 23,396 | 1,801,726 |
See Notes to Financial Statements.
Prudential Jennison Conservative Growth Fund | 11 |
Portfolio of Investments
as of January 31, 2016 (Unaudited) continued
Description | Shares | Value (Note 1) | ||||||
COMMON STOCKS (Continued) | ||||||||
Machinery (cont’d.) | ||||||||
Stanley Black & Decker, Inc.(a) | 9,744 | $ | 919,249 | |||||
|
| |||||||
5,811,066 | ||||||||
Media 2.0% | ||||||||
Comcast Corp. (Class A Stock) | 9,679 | 539,217 | ||||||
Time Warner, Inc. | 3,945 | 277,886 | ||||||
Walt Disney Co. (The) | 36,233 | 3,471,846 | ||||||
|
| |||||||
4,288,949 | ||||||||
Multi-Utilities 1.7% | ||||||||
Dominion Resources, Inc. | 49,882 | 3,599,984 | ||||||
Multiline Retail 1.6% | ||||||||
Target Corp. | 46,471 | 3,365,430 | ||||||
Oil, Gas & Consumable Fuels 5.3% | ||||||||
Chevron Corp. | 23,754 | 2,054,008 | ||||||
Exxon Mobil Corp. | 52,231 | 4,066,183 | ||||||
HollyFrontier Corp. | 81,663 | 2,855,755 | ||||||
Marathon Petroleum Corp. | 18,158 | 758,823 | ||||||
Tesoro Corp. | 17,015 | 1,484,559 | ||||||
|
| |||||||
11,219,328 | ||||||||
Pharmaceuticals 7.7% | ||||||||
Bristol-Myers Squibb Co. | 39,465 | 2,453,144 | ||||||
Eli Lilly & Co. | 29,267 | 2,315,020 | ||||||
Johnson & Johnson | 32,847 | 3,430,541 | ||||||
Merck & Co., Inc. | 63,883 | 3,236,952 | ||||||
Novo Nordisk A/S (Denmark), ADR | 30,952 | 1,729,288 | ||||||
Shire PLC (Ireland), ADR(a) | 17,710 | 2,980,593 | ||||||
|
| |||||||
16,145,538 | ||||||||
Real Estate Investment Trusts (REITs) 0.8% | ||||||||
Public Storage | 6,330 | 1,605,035 | ||||||
Semiconductors & Semiconductor Equipment 2.0% | ||||||||
ARM Holdings PLC (United Kingdom), ADR(a) | 27,200 | 1,171,776 | ||||||
Intel Corp. | 97,947 | 3,038,316 | ||||||
|
| |||||||
4,210,092 |
See Notes to Financial Statements.
12 |
Description | Shares | Value (Note 1) | ||||||
COMMON STOCKS (Continued) | ||||||||
Software 2.6% | ||||||||
Adobe Systems, Inc.* | 15,212 | $ | 1,355,846 | |||||
Microsoft Corp. | 47,883 | 2,637,875 | ||||||
Red Hat, Inc.* | 1,324 | 92,746 | ||||||
salesforce.com, Inc.* | 19,355 | 1,317,301 | ||||||
|
| |||||||
5,403,768 | ||||||||
Specialty Retail 1.4% | ||||||||
Industria de Diseno Textil SA (Spain), ADR | 148,509 | 2,438,518 | ||||||
O’Reilly Automotive, Inc.* | 1,953 | 509,538 | ||||||
|
| |||||||
2,948,056 | ||||||||
Technology Hardware, Storage & Peripherals 3.2% | ||||||||
Apple, Inc. | 68,117 | 6,630,509 | ||||||
Textiles, Apparel & Luxury Goods 2.5% | ||||||||
Luxottica Group SpA (Italy), ADR | 20,398 | 1,255,293 | ||||||
NIKE, Inc. (Class B Stock) | 64,803 | 4,018,434 | ||||||
|
| |||||||
5,273,727 | ||||||||
Tobacco 1.7% | ||||||||
Altria Group, Inc. | 57,967 | 3,542,363 | ||||||
|
| |||||||
TOTAL LONG-TERM INVESTMENTS | 209,063,595 | |||||||
|
| |||||||
SHORT-TERM INVESTMENT 5.7% | ||||||||
AFFILIATED MONEY MARKET MUTUAL FUND | ||||||||
Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund | 12,095,617 | 12,095,617 | ||||||
|
| |||||||
TOTAL INVESTMENTS 105.0% | 221,159,212 | |||||||
Liabilities in excess of other assets (5.0)% | (10,611,346 | ) | ||||||
|
| |||||||
NET ASSETS 100.0% | $ | 210,547,866 | ||||||
|
|
See Notes to Financial Statements.
Prudential Jennison Conservative Growth Fund | 13 |
Portfolio of Investments
as of January 31, 2016 (Unaudited) continued
The following abbreviations are used in the semiannual report:
ADR—American Depositary Receipt
OTC—Over-the-counter
* | Non-income producing security. |
(a) | All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is $10,456,129; cash collateral of $10,368,210 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments. Securities on loan are subject to contractual netting arrangements. Cash collateral is less than 102% of the market value of securities loaned due to significant market increases on last business day of the reporting period. Collateral was subsequently received on the following business day and the Fund remained in compliance. |
(b) | Represents security, or a portion thereof, purchased with cash collateral received for securities on loan. |
(c) | Prudential Investments LLC, the manager of the Fund, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund. |
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.
Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other observable inputs.
Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
See Notes to Financial Statements.
14 |
The following is a summary of the inputs used as of January 31, 2016 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Common Stocks | ||||||||||||
Aerospace & Defense | $ | 3,294,153 | $ | — | $ | — | ||||||
Auto Components | 219,704 | — | — | |||||||||
Banks | 12,042,848 | — | — | |||||||||
Beverages | 741,242 | — | — | |||||||||
Biotechnology | 5,680,388 | — | — | |||||||||
Capital Markets | 13,974,412 | — | — | |||||||||
Chemicals | 4,892,977 | — | — | |||||||||
Commercial Services & Supplies | 1,637,585 | — | — | |||||||||
Diversified Financial Services | 532,706 | — | — | |||||||||
Diversified Telecommunication Services | 2,699,479 | — | — | |||||||||
Electrical Equipment | 3,243,751 | — | — | |||||||||
Electronic Equipment, Instruments & Components | 172,042 | — | — | |||||||||
Energy Equipment & Services | 2,502,349 | — | — | |||||||||
Food & Staples Retailing | 5,704,045 | — | — | |||||||||
Food Products | 1,146,757 | — | — | |||||||||
Health Care Equipment & Supplies | 3,795,174 | — | — | |||||||||
Health Care Providers & Services | 4,909,614 | — | — | |||||||||
Hotels, Restaurants & Leisure | 7,343,645 | — | — | |||||||||
Independent Power & Renewable Electricity Producers | 3,426,363 | — | — | |||||||||
Industrial Conglomerates | 265,062 | — | — | |||||||||
Insurance | 4,436,187 | — | — | |||||||||
Internet & Catalog Retail | 13,989,222 | — | — | |||||||||
Internet Software & Services | 28,006,948 | — | — | |||||||||
IT Services | 10,363,097 | — | — | |||||||||
Machinery | 5,811,066 | — | — | |||||||||
Media | 4,288,949 | — | — | |||||||||
Multi-Utilities | 3,599,984 | — | — | |||||||||
Multiline Retail | 3,365,430 | — | — | |||||||||
Oil, Gas & Consumable Fuels | 11,219,328 | — | — | |||||||||
Pharmaceuticals | 16,145,538 | — | — | |||||||||
Real Estate Investment Trusts (REITs) | 1,605,035 | — | — | |||||||||
Semiconductors & Semiconductor Equipment | 4,210,092 | — | — | |||||||||
Software | 5,403,768 | — | — | |||||||||
Specialty Retail | 2,948,056 | — | — | |||||||||
Technology Hardware, Storage & Peripherals | 6,630,509 | — | — | |||||||||
Textiles, Apparel & Luxury Goods | 5,273,727 | — | — | |||||||||
Tobacco | 3,542,363 | — | — | |||||||||
Affiliated Money Market Mutual Fund | 12,095,617 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 221,159,212 | $ | — | $ | — | ||||||
|
|
|
|
|
|
See Notes to Financial Statements.
Prudential Jennison Conservative Growth Fund | 15 |
Portfolio of Investments
as of January 31, 2016 (Unaudited) continued
The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of January 31, 2016 were as follows:
Internet Software & Services | 13.3 | % | ||
Pharmaceuticals | 7.7 | |||
Internet & Catalog Retail | 6.6 | |||
Capital Markets | 6.6 | |||
Affiliated Money Market Mutual Fund (including 4.9% of collateral for securities on loan) | 5.7 | |||
Banks | 5.7 | |||
Oil, Gas & Consumable Fuels | 5.3 | |||
IT Services | 4.9 | |||
Hotels, Restaurants & Leisure | 3.5 | |||
Technology Hardware, Storage & Peripherals | 3.2 | |||
Machinery | 2.8 | |||
Food & Staples Retailing | 2.7 | |||
Biotechnology | 2.7 | |||
Software | 2.6 | |||
Textiles, Apparel & Luxury Goods | 2.5 | |||
Health Care Providers & Services | 2.3 | |||
Chemicals | 2.3 | |||
Insurance | 2.1 | |||
Media | 2.0 | |||
Semiconductors & Semiconductor Equipment | 2.0 | |||
Health Care Equipment & Supplies | 1.8 | % | ||
Multi-Utilities | 1.7 | |||
Tobacco | 1.7 | |||
Independent Power & Renewable Electricity Producers | 1.6 | |||
Multiline Retail | 1.6 | |||
Aerospace & Defense | 1.6 | |||
Electrical Equipment | 1.5 | |||
Specialty Retail | 1.4 | |||
Diversified Telecommunication Services | 1.3 | |||
Energy Equipment & Services | 1.2 | |||
Commercial Services & Supplies | 0.8 | |||
Real Estate Investment Trusts (REITs) | 0.8 | |||
Food Products | 0.5 | |||
Beverages | 0.4 | |||
Diversified Financial Services | 0.3 | |||
Industrial Conglomerates | 0.1 | |||
Auto Components | 0.1 | |||
Electronic Equipment, Instruments & Components | 0.1 | |||
|
| |||
105.0 | ||||
Liabilities in excess of other assets | (5.0 | ) | ||
|
| |||
100.0 | % | |||
|
|
See Notes to Financial Statements.
16 |
PRUDENTIAL INVESTMENTS, A PGIM BUSINESS | MUTUAL FUNDS
FINANCIAL STATEMENTS
(UNAUDITED)
SEMIANNUAL REPORT · JANUARY 31, 2016
Prudential Jennison Conservative Growth Fund
Statement of Assets & Liabilities
as of January 31, 2016 (Unaudited)
Assets | ||||
Investments at value, including securities on loan of $10,456,129: | ||||
Unaffiliated Investments (cost $187,442,680) | $ | 209,063,595 | ||
Affiliated Investments (cost $12,095,617) | 12,095,617 | |||
Dividends and interest receivable | 222,506 | |||
Receivable for Fund shares sold | 48,076 | |||
Tax reclaim receivable | 13,083 | |||
Prepaid expenses | 1,436 | |||
|
| |||
Total assets | 221,444,313 | |||
|
| |||
Liabilities | ||||
Payable to broker for collateral for securities on loan | 10,368,210 | |||
Accrued expenses and other liabilities | 184,536 | |||
Management fee payable | 126,571 | |||
Payable for Fund shares reacquired | 119,872 | |||
Distribution fee payable | 78,384 | |||
Affiliated transfer agent fee payable | 18,254 | |||
Deferred trustees’ fees | 620 | |||
|
| |||
Total liabilities | 10,896,447 | |||
|
| |||
Net Assets | $ | 210,547,866 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 21,830 | ||
Paid-in capital in excess of par | 190,078,845 | |||
|
| |||
190,100,675 | ||||
Undistributed net investment income | 391,404 | |||
Accumulated net realized loss on investment transactions | (1,565,128 | ) | ||
Net unrealized appreciation on investments | 21,620,915 | |||
|
| |||
Net assets, January 31, 2016 | $ | 210,547,866 | ||
|
|
See Notes to Financial Statements.
18 |
Class A | ||||
Net asset value and redemption price per share | $ | 10.01 | ||
Maximum sales charge (5.50% of offering price) | 0.58 | |||
|
| |||
Maximum offering price to public | $ | 10.59 | ||
|
| |||
Class B | ||||
Net asset value, offering price and redemption price per share | ||||
($3,277,831 ÷ 379,331 shares of beneficial interest issued and outstanding) | $ | 8.64 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share | ||||
($47,242,248 ÷ 5,466,348 shares of beneficial interest issued and outstanding) | $ | 8.64 | ||
|
|
See Notes to Financial Statements.
Prudential Jennison Conservative Growth Fund | 19 |
Statement of Operations
Six Months Ended January 31, 2016 (Unaudited)
Net Investment Income | ||||
Income | ||||
Unaffiliated dividend income (net of foreign withholding taxes of $5,846) | $ | 2,041,123 | ||
Affiliated income from securities lending, net | 8,265 | |||
Affiliated dividend income | 2,827 | |||
|
| |||
Total income | 2,052,215 | |||
|
| |||
Expenses | ||||
Management fee | 802,702 | |||
Distribution fee—Class A | 261,493 | |||
Distribution fee—Class B | 18,650 | |||
Distribution fee—Class C | 256,424 | |||
Transfer agent’s fees and expenses (including affiliated expense of $58,300) | 256,000 | |||
Custodian and accounting fees | 32,000 | |||
Registration fees | 22,000 | |||
Audit fee | 11,000 | |||
Shareholders’ reports | 11,000 | |||
Legal fees and expenses | 10,000 | |||
Trustees’ fees | 9,000 | |||
Insurance expenses | 1,000 | |||
Loan interest expense | 27 | |||
Miscellaneous | 7,008 | |||
|
| |||
Total expenses | 1,698,304 | |||
Less: Distribution fee waiver—Class A | (43,583 | ) | ||
|
| |||
Net expenses | 1,654,721 | |||
|
| |||
Net investment income | 397,494 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investments | ||||
Net realized loss on investment transactions | (1,170,663 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (23,532,948 | ) | ||
|
| |||
Net loss on investment transactions | (24,703,611 | ) | ||
|
| |||
Net Decrease In Net Assets Resulting From Operations | $ | (24,306,117 | ) | |
|
|
See Notes to Financial Statements.
20 |
Statement of Changes in Net Assets
(Unaudited)
Six Months Ended January 31, 2016 | Year Ended July 31, 2015 | |||||||
Increase (Decrease) In Net Assets | ||||||||
Operations | ||||||||
Net investment income | $ | 397,494 | $ | 695,212 | ||||
Net realized gain (loss) on investment transactions | (1,170,663 | ) | 20,291,292 | |||||
Net change in unrealized appreciation (depreciation) on investments | (23,532,948 | ) | 5,651,857 | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | (24,306,117 | ) | 26,638,361 | |||||
|
|
|
| |||||
Dividends and Distributions (Note 1) | ||||||||
Dividends from net investment income | ||||||||
Class A | (533,907 | ) | (525,523 | ) | ||||
|
|
|
| |||||
Distributions from net realized gains | ||||||||
Class A | (12,297,965 | ) | (15,995,502 | ) | ||||
Class B | (285,598 | ) | (491,252 | ) | ||||
Class C | (4,135,309 | ) | (5,722,598 | ) | ||||
|
|
|
| |||||
(16,718,872 | ) | (22,209,352 | ) | |||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) (Note 6) | ||||||||
Net proceeds from shares sold | 4,550,129 | 10,657,979 | ||||||
Net asset value of shares issued in reinvestment of dividends | 16,999,357 | 22,321,741 | ||||||
Cost of shares reacquired | (15,797,832 | ) | (27,454,459 | ) | ||||
|
|
|
| |||||
Net increase in net assets from Fund share transactions | 5,751,654 | 5,525,261 | ||||||
|
|
|
| |||||
Total increase (decrease) | (35,807,242 | ) | 9,428,747 | |||||
Net Assets: | ||||||||
Beginning of period | 246,355,108 | 236,926,361 | ||||||
|
|
|
| |||||
End of period(a) | $ | 210,547,866 | $ | 246,355,108 | ||||
|
|
|
| |||||
(a) Includes undistributed net investment income of: | $ | 391,404 | $ | 527,817 | ||||
|
|
|
|
See Notes to Financial Statements.
Prudential Jennison Conservative Growth Fund | 21 |
Notes to Financial Statements
(Unaudited)
Prudential Investment Portfolios 5 (the “Trust”) is an open-end management investment company, registered under the Investment Company Act of 1940, as amended (“1940 Act”), which was established as a Delaware business trust on July 8, 1999. The Trust consists of two separate funds: Prudential Jennison Conservative Growth Fund and Prudential Jennison Rising Dividend Fund. These financial statements relate to Prudential Jennison Conservative Growth Fund (the “Fund”). The financial statements of the other fund are not presented herein.
The Fund’s investment objective is long-term capital appreciation.
1. Accounting Policies
The Trust follows investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The following accounting policies conform to U.S. generally accepted accounting principles. The Trust and the Fund consistently follow such policies in the preparation of its financial statements.
Securities Valuation: The Fund holds securities and other assets that are fair valued at the close of each day the New York Stock Exchange (“NYSE”) is open for trading. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Board of Trustees (the “Board”) has adopted Valuation Procedures for security valuation under which fair valuation responsibilities have been delegated to Prudential Investments LLC (“PI” or “Manager”). Under the current Valuation Procedures, the established Valuation Committee is responsible for supervising the valuation of portfolio securities and other assets. The Valuation Procedures permit the Fund to utilize independent pricing vendor services, quotations from market makers, and alternative valuation methods when market quotations are either not readily available or not deemed representative of fair value. A record of the Valuation Committee’s actions is subject to the Board’s review, approval and ratification at its next regularly-scheduled quarterly meeting.
Various inputs determine how the Fund’s investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the table following the Portfolio of Investments.
22 |
Common and preferred stocks, exchange-traded funds and derivative instruments such as futures or options that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange where the security principally trades. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price, they are classified as Level 1 in the fair value hierarchy.
In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and ask prices, or at the last bid price in the absence of an ask price. These securities are classified as Level 2 in the fair value hierarchy.
Common and preferred stocks traded on foreign securities exchanges are valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy. Such securities are valued using model prices to the extent that the valuation meets the established confidence level for each security. If the confidence level is not met or the vendor does not provide a model price, securities are valued in accordance with exchange-traded common and preferred stocks discussed above.
Participatory notes (P-notes) are generally valued based upon the value of a related underlying security that trades actively in the market and are classified as Level 2 in the fair value hierarchy.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the OTC market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors provide these prices after evaluating observable inputs including, but not limited to yield curves, credit ratings, yield spreads, deal terms, tranche level attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations and reported trades. Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.
OTC derivative instruments are generally valued using pricing vendor services, which derive the valuation based on inputs such as underlying asset prices, indices, spreads, interest rates and exchange rates. These instruments are categorized as Level 2 in the fair value hierarchy.
Prudential Jennison Conservative Growth Fund | 23 |
Notes to Financial Statements
(Unaudited) continued
Centrally cleared swaps listed or traded on a multilateral or trade facility platform, such as a registered exchange, are generally valued at the daily settlement price determined by the respective exchange. These securities are classified as Level 2 in the fair value hierarchy, as the daily settlement price is not public.
Securities and other assets that cannot be priced according to the methods described above are valued based on pricing methodologies approved by the Board. In the event that unobservable inputs are used when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
When determining the fair value of securities, some of the factors influencing the valuation include: the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition and the markets in which it does business; the cost of the investment; the size of the holding and the capitalization of the issuer; the prices of any recent transactions or bids/offers for such securities or any comparable securities; any available analyst media or other reports or information deemed reliable by the investment adviser regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values.
Restricted and Illiquid Securities: Subject to guidelines adopted by the Board, the Fund may invest up to 15% of its net assets in illiquid securities, including those which are restricted as to disposition under securities law (“restricted securities”). Restricted securities are valued pursuant to the valuation procedures noted above. Illiquid securities are those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale, cannot be sold within seven days in the ordinary course of business at approximately the amount at which the Fund has valued the investment. Therefore, the Fund may find it difficult to sell illiquid securities at the time considered most advantageous by its Subadviser and may incur expenses that would not be incurred in the sale of securities that were freely marketable. Certain securities that would otherwise be considered illiquid because of legal restrictions on resale to the general public may be traded among qualified institutional buyers under Rule 144A of the Securities Act of 1933. These Rule 144A securities, as well as commercial paper that is sold in private placements under Section 4(2) of the Securities Act, may be deemed liquid by the Fund’s Subadviser
24 |
under the guidelines adopted by the Directors of the Fund. However, the liquidity of the Fund’s investments in Rule 144A securities could be impaired if trading does not develop or declines.
Foreign Currency Translation: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis:
(i) market value of investment securities, other assets and liabilities-at the current rates of exchange;
(ii) purchases and sales of investment securities, income and expenses-at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not generally isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities held at the end of the period. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities sold during the period. Accordingly, holding period realized foreign currency gains or losses are included in the reported net realized gains or losses on investment transactions. Notwithstanding the above, the Fund does isolate the effect of fluctuations in foreign currency exchange rates when determining the gain or loss upon the sale or maturity of foreign currency denominated debt obligations; such amounts are included in net realized gains or losses on foreign currency transactions.
Net realized gains or losses on foreign currency transactions represent net foreign exchange gains or losses from holdings of foreign currencies, forward currency contracts, disposition of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains or losses from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates are reflected as a component of net unrealized appreciation (depreciation) on foreign currencies.
Concentration of Risk: Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin as a result of, among other factors, the possibility of political and economic instability, or the level of governmental supervision and regulation of foreign securities markets.
Prudential Jennison Conservative Growth Fund | 25 |
Notes to Financial Statements
(Unaudited) continued
Master Netting Arrangements: The Fund is subject to various Master Agreements, or netting arrangements, with select counterparties. These are agreements which a subadviser may have negotiated and entered into on behalf of the Fund. A master netting arrangement between the Fund and the counterparty permits the Fund to offset amounts payable by the Fund to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Fund to cover the Fund’s exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable. In addition to master netting arrangements, the right to set-off exists when all the conditions are met such that each of the parties owes the other determinable amounts, the reporting party has the right to set-off the amount owed with the amount owed by the other party, the reporting party intends to set-off and the right of set-off is enforceable by law. During the reporting period, there was no intention to settle on a net basis and all amounts are presented on a gross basis on the Statement of Assets and Liabilities.
REITs: The Fund invests in real estate investment trusts (“REITs”), which report information on the source of their distributions annually. Based on current and historical information, a portion of distributions received from REITs during the period is estimated to be dividend income, capital gain or return of capital and recorded accordingly. These estimates are adjusted periodically when the actual sources of distributions are disclosed by the REITs.
Securities Lending: The Fund may lend its portfolio securities to banks and broker-dealers. The loans are secured by collateral at least equal to the market value of the securities loaned. Collateral pledged by each borrower is invested in a highly liquid short-term money market fund and is marked to market daily, based on the previous day’s market value, such that the value of the collateral exceeds the value of the loaned securities. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of the loan, the borrower will return to the Fund securities identical to the loaned securities. Should the borrower of the securities fail financially, the Fund has the right to repurchase the securities in the open market using the collateral. The Fund recognizes income, net of any rebate and securities lending agent fees, for lending its securities, and any interest on the investment of cash received as collateral. The borrower receives all interest and dividends and such payments are passed back to the lender in amounts equivalents thereto. The Fund also continues to recognize any unrealized gain or loss in the market price of the securities loaned that may occur during the term of the loan.
26 |
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains or losses from investment and currency transactions are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on an accrual basis. Expenses are recorded on an accrual basis, which may require the use of certain estimates by management that may differ from actual.
Net investment income or loss (other than distribution fees, which are charged directly to the respective class) and unrealized and realized gains or losses are allocated daily to each class of shares based upon the relative proportion of adjusted net assets of each class at the beginning of the day.
Dividends and Distributions: The Fund expects to pay dividends from net investment income annually and distributions from net realized capital gains, if any, annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-date. Permanent book/tax differences relating to income and gains are reclassified amongst undistributed net investment income, accumulated net realized gain or loss and paid-in capital in excess of par, as appropriate.
Taxes: For federal income tax purposes, the Fund is treated as a separate taxpaying entity. It is the Fund’s policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net investment income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required. Withholding taxes on foreign dividends are recorded, net of reclaimable amounts, at the time the related income is earned.
Estimates: The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
2. Agreements
The Fund has a management agreement with PI. Pursuant to this agreement, PI has responsibility for all investment advisory services and supervises the subadvisor’s performance of such services. PI has entered into a subadvisory agreement with Jennison Associates LLC (“Jennison”). The subadvisory agreement provides that Jennison furnishes investment advisory services in connection with the management
Prudential Jennison Conservative Growth Fund | 27 |
Notes to Financial Statements
(Unaudited) continued
of the Fund. In connection therewith, Jennison is obligated to keep certain books and records of the Fund. PI pays for the services of Jennison, the cost of compensation of officers of the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears all other costs and expenses.
The management fee paid to PI is accrued daily and payable monthly at an annual rate of ..70% of the Fund’s average daily net assets on the first $500 million, .65% of the average daily net assets on the next $500 million and .60% of the average daily net assets in excess of $1 billion. The effective management fee rate was .70% for the six months ended January 31, 2016.
The Fund has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”), which acts as the distributor of the Class A, Class B and Class C shares of the Fund. The Fund compensates PIMS for distributing and servicing the Fund’s Class A, Class B and Class C shares, pursuant to plans of distribution (the “Class A, B and C Plans”), regardless of expenses actually incurred by PIMS. The distribution fees are accrued daily and payable monthly.
Pursuant to the Class A, B and C Plans, the Fund compensates PIMS, as applicable, for distribution related activities at an annual rate of up to .30%, 1% and 1% of the average daily net assets of the Class A, B and C shares, respectively. PIMS contractually agreed to limit such fees to .25% of the average daily net assets of the Class A shares through November 30, 2016.
PIMS has advised the Fund that it received $39,784 in front-end sales charges resulting from sales of Class A shares during the six months ended January 31, 2016. From these fees, PIMS paid such sales charges to affiliated broker-dealers, which in turn paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Fund that for the six months ended January 31, 2016 that it received $3,237 and $1,284 in contingent deferred sales charges imposed upon redemptions by certain Class B and Class C shareholders, respectively.
PI, PIMS and Jennison are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
28 |
3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund’s transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable. PGIM, an indirect, wholly-owned subsidiary of Prudential, is the Fund’s securities lending agent. On January 4, 2016, Prudential Investment Management, Inc. was renamed PGIM, Inc. (“PGIM”). Net earnings from securities lending are disclosed on the Statement of Operations as “Affiliated income from securities lending, net”. For the six months ended January 31, 2016, PGIM was compensated $2,426 for these services.
The Fund may enter into certain securities purchase or sale transactions under Board approved Rule 17a-7 procedures. Rule 17a-7 is an exemptive rule under the 1940 Act, that permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. Such transactions are subject to ratification by the Board.
The Fund invests in the Prudential Core Taxable Money Market Fund (the “Core Fund”), a portfolio of Prudential Investment Portfolios 2, registered under the 1940 Act and managed by PI. Earnings from the Core Fund are disclosed on the Statement of Operations as “Affiliated dividend income”.
4. Portfolio Securities
Purchases and sales of securities, other than short-term investments and U.S. Government Securities, for the six months ended January 31, 2016, were $290,780,884 and $301,655,121, respectively.
5. Tax Information
The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of January 31, 2016 were as follows:
Tax Basis | $ | 199,943,093 | ||
|
| |||
Appreciation | 34,938,060 | |||
Depreciation | (13,721,941 | ) | ||
|
| |||
Net Unrealized Appreciation | $ | 21,216,119 | ||
|
|
The book basis differs from tax basis primarily due to deferred losses on wash sales.
Prudential Jennison Conservative Growth Fund | 29 |
Notes to Financial Statements
(Unaudited) continued
Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years and has concluded that no provisions for income tax are required in the Fund’s financial statements for the current reporting period. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
6. Capital
The Fund offers Class A, Class B and Class C shares. Class A shares are subject to a maximum front-end sales charge of 5.50%. All investors who purchase Class A shares in the amount of $1 million or more and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1%. The Class A CDSC is waived for purchases by certain retirement or benefit plans. Class B shares are sold with a CDSC which declines from 5% to zero depending on the period of time the shares are held. Class B shares automatically convert to Class A shares on a quarterly basis approximately seven years after purchase. Class B shares are closed to new purchases. Class C shares are sold with a CDSC of 1% on sales of shares purchased during the first 12 months.
Under certain circumstances, an exchange may be made from specified share classes of the Fund to one or more other share classes of the Fund as presented in the table of transactions in shares of common stock.
30 |
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Six months ended January 31, 2016: | ||||||||
Shares sold | 263,993 | $ | 2,955,498 | |||||
Shares issued in reinvestment of dividends and distributions | 1,190,961 | 12,683,736 | ||||||
Shares reacquired | (1,061,185 | ) | (11,709,385 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 393,769 | 3,929,849 | ||||||
Shares issued upon conversion from other share class(es) | 37,864 | 424,545 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 431,633 | $ | 4,354,394 | |||||
|
|
|
| |||||
Year ended July 31, 2015: | ||||||||
Shares sold | 714,969 | $ | 8,347,424 | |||||
Shares issued in reinvestment of dividends and distributions | 1,431,264 | 16,287,783 | ||||||
Shares reacquired | (1,756,463 | ) | (20,705,364 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 389,770 | 3,929,843 | ||||||
Shares issued upon conversion from other share class(es) | 269,005 | 3,201,400 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 658,775 | $ | 7,131,243 | |||||
|
|
|
| |||||
Class B | ||||||||
Six months ended January 31, 2016: | ||||||||
Shares sold | 22,358 | $ | 214,560 | |||||
Shares issued in reinvestment of dividends and distributions | 30,027 | 276,249 | ||||||
Shares reacquired | (31,864 | ) | (302,608 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 20,521 | 188,201 | ||||||
Shares issued upon conversion from other share class(es) | (41,727 | ) | (407,493 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (21,206 | ) | $ | (219,292 | ) | |||
|
|
|
| |||||
Year ended July 31, 2015: | ||||||||
Shares sold | 23,813 | $ | 247,228 | |||||
Shares issued in reinvestment of dividends and distributions | 47,745 | 476,976 | ||||||
Shares reacquired | (55,273 | ) | (575,665 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 16,285 | 148,539 | ||||||
Shares reacquired upon conversion into other share class(es) | (105,451 | ) | (1,092,262 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (89,166 | ) | $ | (943,723 | ) | |||
|
|
|
|
Prudential Jennison Conservative Growth Fund | 31 |
Notes to Financial Statements
(Unaudited) continued
Class C | Shares | Amount | ||||||
Six months ended January 31, 2016: | ||||||||
Shares sold | 144,467 | $ | 1,380,071 | |||||
Shares issued in reinvestment of dividends and distributions | 439,062 | 4,039,372 | ||||||
Shares reacquired | (395,087 | ) | (3,785,839 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 188,442 | 1,633,604 | ||||||
Shares issued upon conversion from other share class(es) | (1,712 | ) | (17,052 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 186,730 | $ | 1,616,552 | |||||
|
|
|
| |||||
Year ended July 31, 2015: | ||||||||
Shares sold | 197,783 | $ | 2,063,327 | |||||
Shares issued in reinvestment of dividends and distributions | 556,254 | 5,556,982 | ||||||
Shares reacquired | (596,239 | ) | (6,173,430 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 157,798 | 1,446,879 | ||||||
Shares reacquired upon conversion into other share class(es) | (201,779 | ) | (2,109,138 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (43,981 | ) | $ | (662,259 | ) | |||
|
|
|
|
7. Borrowings
The Fund, along with other affiliated registered investment companies (the “Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of $900 million for the period October 8, 2015 through October 6, 2016. The Funds pay an annualized commitment fee of 0.11% of the unused portion of the SCA. Prior to October 8, 2015, the Funds had another SCA that provided a commitment of $900 million and the Funds paid an annualized commitment fee of 0.075% of the unused portion of the SCA. Interest on any borrowings under the SCA is paid at contracted market rates. The Fund’s portion of the commitment fee for the unused amount is accrued daily and paid quarterly.
The Fund utilized the SCA during the six months ended January 31, 2016. The average daily balance for the 5 days that the Fund had loans outstanding during the period was $134,000, borrowed at a weighted average interest rate of 1.44%. The maximum loan balance outstanding during the period was $134,000. At January 31, 2016, the Fund did not have an outstanding loan balance.
32 |
8. New Accounting Pronouncement
In May 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-07 regarding “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share”. The amendments in this update are effective for the Fund for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. ASU No. 2015-07 will eliminate the requirement to categorize investments in the fair value hierarchy if their fair value is measured at net asset value (“NAV”) per share (or its equivalent) using the practical expedient in the ASU fair value measurement guidance. Management has evaluated the implications of ASU No. 2015-07 and has determined that there is no impact on the financial statement disclosures.
In January 2016, the FASB issued ASU No. 2016-01 regarding “Recognition and Measurement of Financial Assets and Financial Liabilities”. The new guidance is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The new standard affects all entities that hold financial assets or owe financial liabilities. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. At this time, management is evaluating the implications of ASU No. 2016-01 and its impact on the financial statements and disclosures has not yet been determined.
Prudential Jennison Conservative Growth Fund | 33 |
Financial Highlights
(Unaudited)
Class A Shares | ||||||||||||||||||||||||||
Six Months Ended January 31, | Year Ended July 31, | |||||||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $12.01 | $11.81 | $10.46 | $8.38 | $8.02 | $6.71 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment income | .03 | .06 | .04 | .05 | .04 | .02 | ||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.18 | ) | 1.28 | 1.78 | 2.07 | .32 | 1.29 | |||||||||||||||||||
Total from investment operations | (1.15 | ) | 1.34 | 1.82 | 2.12 | .36 | 1.31 | |||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||
Dividends from net investment income | (.03 | ) | (.04 | ) | (.02 | ) | (.04 | ) | - | (d) | - | |||||||||||||||
Distributions from net realized gains | (.82 | ) | (1.10 | ) | (.45 | ) | - | - | - | |||||||||||||||||
Total dividends and distributions | (.85 | ) | (1.14 | ) | (.47 | ) | - | - | - | |||||||||||||||||
Net asset value, end of period | $10.01 | $12.01 | $11.81 | $10.46 | $8.38 | $8.02 | ||||||||||||||||||||
Total Return(b): | (9.99)% | 11.84% | 17.78% | 25.45% | 4.54% | 19.52% | ||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Net assets, end of period (000) | $160,028 | $186,770 | $175,928 | $158,694 | $114,610 | $119,583 | ||||||||||||||||||||
Average net assets (000) | $173,383 | $181,444 | $169,539 | $143,264 | $112,806 | $117,113 | ||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||
Expenses after waiver and/or expense reimbursement | 1.26% | (e) | 1.24% | 1.26% | 1.35% | 1.45% | 1.38% | |||||||||||||||||||
Expenses before waiver and/or expense reimbursement | 1.31% | (e) | 1.29% | 1.31% | 1.40% | 1.50% | 1.43% | |||||||||||||||||||
Net investment income | .53% | (e) | .47% | .36% | .54% | .47% | .33% | |||||||||||||||||||
Portfolio turnover rate | 128% | (f) | 295% | 234% | 148% | 208% | 266% |
(a) Calculated based on average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(c) Does not include expenses of the underlying portfolio in which the Fund invests.
(d) Less than $.005 per share.
(e) Annualized.
(f) Not annualized.
See Notes to Financial Statements.
34 |
Class B Shares | ||||||||||||||||||||||||||
Six Months Ended January 31, | Year Ended July 31, | |||||||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $10.49 | $10.49 | $9.38 | $7.53 | $7.26 | $6.12 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment loss | (.01 | ) | (.03 | ) | (.04 | ) | (.02 | ) | (.02 | ) | (.03 | ) | ||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.02 | ) | 1.13 | 1.60 | 1.87 | .29 | 1.17 | |||||||||||||||||||
Total from investment operations | (1.03 | ) | 1.10 | 1.56 | 1.85 | .27 | 1.14 | |||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||
Distributions from net realized gains | (.82 | ) | (1.10 | ) | (.45 | ) | - | - | - | |||||||||||||||||
Net asset value, end of period | $8.64 | $10.49 | $10.49 | $9.38 | $7.53 | $7.26 | ||||||||||||||||||||
Total Return(b): | (10.34)% | 11.01% | 16.96% | 24.57% | 3.72% | 18.63% | ||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Net assets, end of period (000) | $3,278 | $4,200 | $5,138 | $5,244 | $5,193 | $6,853 | ||||||||||||||||||||
Average net assets (000) | $3,710 | $4,801 | $5,457 | $5,169 | $5,815 | $7,889 | ||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 2.01% | (d) | 1.99% | 2.01% | 2.11% | 2.20% | 2.13% | |||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 2.01% | (d) | 1.99% | 2.01% | 2.11% | 2.20% | 2.13% | |||||||||||||||||||
Net investment loss | (.21)% | (d) | (.25)% | (.38)% | (.19)% | (.28)% | (.42)% | |||||||||||||||||||
Portfolio turnover rate | 128% | (e) | 295% | 234% | 148% | 208% | 266% |
(a) Calculated based on average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are annualized.
(c) Does not include expenses of the underlying portfolio in which the Fund invests.
(d) Annualized.
(e) Not annualized.
See Notes to Financial Statements.
Prudential Jennison Conservative Growth Fund | 35 |
Financial Highlights
(Unaudited) continued
Class C Shares | ||||||||||||||||||||||||||
Six Months Ended January 31, | Year Ended July 31, | |||||||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $10.49 | $10.49 | $9.38 | $7.53 | $7.26 | $6.12 | ||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||
Net investment loss | (.01 | ) | (.03 | ) | (.04 | ) | (.02 | ) | (.02 | ) | (.03 | ) | ||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.02 | ) | 1.13 | 1.60 | 1.87 | .29 | 1.17 | |||||||||||||||||||
Total from investment operations | (1.03 | ) | 1.10 | 1.56 | 1.85 | .27 | 1.14 | |||||||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||||||
Distributions from net realized gains | (.82 | ) | (1.10 | ) | (.45 | ) | - | - | - | |||||||||||||||||
Net asset value, end of period | $8.64 | $10.49 | $10.49 | $9.38 | $7.53 | $7.26 | ||||||||||||||||||||
Total Return(b): | (10.34)% | 11.01% | 16.96% | 24.57% | 3.72% | 18.63% | ||||||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||
Net assets, end of period (000) | $47,242 | $55,384 | $55,860 | $52,005 | $46,232 | $55,417 | ||||||||||||||||||||
Average net assets (000) | $51,001 | $56,581 | $55,220 | $48,375 | $49,057 | $56,582 | ||||||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 2.01% | (d) | 1.99% | 2.01% | 2.10% | 2.20% | 2.13% | |||||||||||||||||||
Expenses before waivers and/or expense reimbursement | 2.01% | (d) | 1.99% | 2.01% | 2.10% | 2.20% | 2.13% | |||||||||||||||||||
Net investment loss | (.22)% | (d) | (.27)% | (.39)% | (.21)% | (.28)% | (.42)% | |||||||||||||||||||
Portfolio turnover rate | 128% | (e) | 295% | 234% | 148% | 208% | 266% |
(a) Calculated based on average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(c) Does not include expenses of the underlying portfolio in which the Fund invests.
(d) Annualized.
(e) Not annualized.
See Notes to Financial Statements.
36 |
n MAIL | n TELEPHONE | n WEBSITE | ||
655 Broad Street Newark, NJ 07102 | (800) 225-1852 | www.prudentialfunds.com |
PROXY VOTING |
The Board of Trustees of the Fund has delegated to the Fund’s investment subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website. |
TRUSTEES |
Ellen S. Alberding • Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Keith F. Hartstein • Michael S. Hyland • Stuart S. Parker • Richard A. Redeker • Stephen G. Stoneburn • Grace C. Torres |
OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • M. Sadiq Peshimam, Treasurer and Principal Financial and Accounting Officer • Raymond A. O’Hara, Chief Legal Officer • Chad A. Earnst, Chief Compliance Officer • Deborah A. Docs, Secretary • Theresa C. Thompson, Deputy Chief Compliance Officer • Richard W. Kinville, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • Amanda S. Ryan, Assistant Secretary • Andrew R. French, Assistant Secretary • Peter Parrella, Assistant Treasurer • Lana Lomuti, Assistant Treasurer • Linda McMullin, Assistant Treasurer • Kelly A. Coyne, Assistant Treasurer |
MANAGER | Prudential Investments LLC | 655 Broad Street Newark, NJ 07102 | ||
| ||||
INVESTMENT SUBADVISER | Jennison Associates LLC | 466 Lexington Avenue New York, NY 10017 | ||
| ||||
DISTRIBUTOR | Prudential Investment Management Services LLC | 655 Broad Street Newark, NJ 07102 | ||
| ||||
CUSTODIAN | The Bank of New York Mellon | One Wall Street New York, NY 10286 | ||
| ||||
TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
| ||||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
| ||||
FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 |
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents 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. |
SHAREHOLDER COMMUNICATIONS WITH TRUSTEES |
Shareholders can communicate directly with the Board of Trustees by writing to the Chair of the Board, Prudential Jennison Conservative Growth Fund, Prudential Investments, Attn: Board of Trustees, 655 Broad Street, Newark, NJ 07102. Shareholders can communicate directly with an individual Trustee by writing to the same address. Communications are not screened before being delivered to the addressee. |
AVAILABILITY OF PORTFOLIO SCHEDULE |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation and location of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund’s schedule of portfolio holdings is also available on the Fund’s website as of the end of each month. |
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PRUDENTIAL JENNISON CONSERVATIVE GROWTH FUND
SHARE CLASS | A | B | C | |||
NASDAQ | TBDAX | TBDBX | TBDCX | |||
CUSIP | 74440V104 | 74440V203 | 74440V302 |
MF503E2 0289486-00001-00
PRUDENTIAL INVESTMENTS, A PGIM BUSINESS | MUTUAL FUNDS
PRUDENTIAL JENNISON
RISING DIVIDEND FUND
SEMIANNUAL REPORT · JANUARY 31, 2016
Objective
Capital appreciation and income
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter.
The accompanying financial statements as of January 31, 2016, were not audited and, accordingly, no auditor’s opinion is expressed on them.
Mutual funds are distributed by Prudential Investment Management Services LLC, member SIPC. Jennison Associates is a registered investment adviser. Both are Prudential Financial companies. © 2016 Prudential Financial, Inc. and its related entities. Jennison Associates, Jennison, the Prudential logo, and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
March 16, 2016
Dear Shareholder:
We hope you find the semiannual report for the Prudential Jennison Rising Dividend Fund informative and useful. The report covers performance for the six-month period that ended January 31, 2016.
Since market conditions change over time, we believe it is important to maintain a diversified portfolio of funds consistent with your tolerance for risk, time horizon, and financial goals.
Your financial advisor can help you create a diversified investment plan that may include funds covering all the basic asset classes and that reflects your personal investor profile and risk tolerance. Keep in mind, however, that diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
Prudential Investments® is dedicated to helping you solve your toughest investment challenges—whether it’s capital growth, reliable income, or protection from market volatility and other risks. We offer the expertise of Prudential Financial’s affiliated asset managers that strive to be leaders in a broad range of funds to help you stay on course to the future you envision. They also manage money for major corporations and pension funds around the world, which means you benefit from the same expertise, innovation, and attention to risk demanded by today’s most sophisticated investors.
Thank you for choosing the Prudential Investments family of funds.
Sincerely,
Stuart S. Parker, President
Prudential Jennison Rising Dividend Fund
Prudential Jennison Rising Dividend Fund | 1 |
Your Fund’s Performance (Unaudited)
Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852.
Cumulative Total Returns (Without Sales Charges) as of 1/31/16 | ||||||||||
Six Months | 1 Year | Since Inception | ||||||||
Class A | –8.91 | % | –2.83 | % | 4.75% (3/5/14) | |||||
Class C | –9.21 | –3.47 | 3.43 (3/5/14) | |||||||
Class Z | –8.78 | –2.59 | 5.32 (3/5/14) | |||||||
S&P 500 Index | –6.76 | –0.66 | 8.49 | |||||||
Lipper Equity Income Funds Average | –7.81 | –5.13 | 1.23 | |||||||
Average Annual Total Returns (With Sales Charges) as of 12/31/15 | ||||||||||
1 Year | Since Inception | |||||||||
Class A | –7.36 | % | 1.86% (3/5/14) | |||||||
Class C | –3.59 | 4.34 (3/5/14) | ||||||||
Class Z | –1.72 | 5.33 (3/5/14) | ||||||||
S&P 500 Index | 1.39 | 7.49 | ||||||||
Lipper Equity Income Funds Average | –3.69 | 2.85 |
Source: Prudential Investments LLC and Lipper Inc.
Inception returns are provided for any share class with less than 10 calendar years of returns.
2 | Visit our website at www.prudentialfunds.com |
The returns in the tables do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or following the redemption of Fund shares. The average annual total returns take into account applicable sales charges, which are described for each share class in the table below.
Class A | Class C | Class Z | ||||
Maximum initial sales charge | 5.50% of the public offering price | None | None | |||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or net asset value at redemption) | 1% on sales of $1 million or more made within 12 months of purchase | 1% on sales made within 12 months of purchase | None | |||
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | .30% (.25% currently) | 1% | None |
Benchmark Definitions
S&P 500 Index
The Standard & Poor’s 500 Composite Stock Price Index (S&P 500 Index) is an unmanaged index of 502 stocks of large US public companies. It gives a broad look at how stock prices in the United States have performed.
Lipper Equity Income Funds Average
The Lipper Equity Income Funds Average is based on the return of all mutual funds in the Lipper Equity Income Funds category and does not include the effect of any sales charges or taxes payable by an investor. Funds in the Lipper Equity Income Funds Average (Lipper Average) seek relatively high current income and growth of income through investing 65% or more of their portfolios in dividend-paying equity securities.
Investors cannot invest directly in an index or average. The returns for the Index would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes that may be paid by an investor. Returns for the Lipper Average reflect the deduction of operating expenses, but not sales charges or taxes. The Since Inception returns for the Index and Lipper Average are measured from the closest month-end to the inception date for the indicated share class.
Five Largest Holdings expressed as a percentage of net assets as of 1/31/16 | ||||
McDonald’s Corp., Hotels, Restaurants & Leisure | 4.0 | % | ||
Cisco Systems, Inc., Communications Equipment | 3.3 | |||
Bristol-Myers Squibb Co., Pharmaceuticals | 3.1 | |||
Philip Morris International, Inc., Tobacco | 2.8 | |||
Microsoft Corp., Software | 2.6 |
Holdings reflect only long-term investments and are subject to change.
Prudential Jennison Rising Dividend Fund | 3 |
Your Fund’s Performance (continued)
Five Largest Industries expressed as a percentage of net assets as of 1/31/16 | ||||
Hotels, Restaurants & Leisure | 7.8 | % | ||
Banks | 7.7 | |||
Tobacco | 7.0 | |||
Pharmaceuticals | 6.4 | |||
Aerospace & Defense | 5.6 |
Industry weightings reflect only long-term investments and are subject to change.
4 | Visit our website at www.prudentialfunds.com |
Fees and Expenses (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution, and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on August 1, 2015, at the beginning of the period and held through the six-month period ended January 31, 2016. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of Prudential Investments funds, including the Fund, that you own. You should consider
Prudential Jennison Rising Dividend Fund | 5 |
Fees and Expenses (continued)
the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information provided in the expense table. Additional fees have the effect of reducing investment returns.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Prudential Jennison Rising Dividend Fund | Beginning Account Value August 1, 2015 | Ending Account January 31, 2016 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 910.90 | 1.24 | % | $ | 5.96 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,018.90 | 1.24 | % | $ | 6.29 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 907.90 | 1.99 | % | $ | 9.54 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.13 | 1.99 | % | $ | 10.08 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 912.20 | 0.99 | % | $ | 4.76 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.16 | 0.99 | % | $ | 5.03 |
*Fund expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by the 184 days in the six-month period ended January 31, 2016, and divided by the 366 days in the Fund’s fiscal year ending July 31, 2016 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
6 | Visit our website at www.prudentialfunds.com |
The Fund’s annualized expense ratios for the six-month period ended January 31, 2016, are as follows:
Class | Gross Operating Expenses | Net Operating Expenses | ||||||
A | 3.41 | % | 1.24 | % | ||||
C | 4.02 | 1.99 | ||||||
Z | 3.12 | .99 |
Net operating expenses shown above reflect any fee waivers and/or expense reimbursements. Additional information on Fund expenses and any fee waivers and/or expense reimbursements can be found in the “Financial Highlights” tables in this report and in the Notes to the Financial Statements in this report.
Prudential Jennison Rising Dividend Fund | 7 |
Portfolio of Investments
as of January 31, 2016 (Unaudited)
Description | Shares | Value (Note 1) | ||||||
LONG-TERM INVESTMENTS 97.2% | ||||||||
COMMON STOCKS | ||||||||
Aerospace & Defense 5.6% | ||||||||
Boeing Co. (The) | 879 | $ | 105,594 | |||||
Honeywell International, Inc. | 1,707 | 176,163 | ||||||
Lockheed Martin Corp. | 1,050 | 221,550 | ||||||
|
| |||||||
503,307 | ||||||||
Banks 7.7% | ||||||||
Bank of America Corp. | 8,947 | 126,510 | ||||||
Citigroup, Inc. | 2,715 | 115,605 | ||||||
JPMorgan Chase & Co. | 3,388 | 201,586 | ||||||
PNC Financial Services Group, Inc. (The) | 1,055 | 91,416 | ||||||
Wells Fargo & Co. | 3,068 | 154,106 | ||||||
|
| |||||||
689,223 | ||||||||
Beverages 5.4% | ||||||||
Coca-Cola Co. (The) | 2,142 | 91,935 | ||||||
Constellation Brands, Inc. (Class A Stock) | 1,353 | 206,305 | ||||||
PepsiCo, Inc. | 1,837 | 182,414 | ||||||
|
| |||||||
480,654 | ||||||||
Capital Markets 2.4% | ||||||||
Goldman Sachs Group, Inc. (The) | 796 | 128,602 | ||||||
TD Ameritrade Holding Corp. | 3,047 | 84,036 | ||||||
|
| |||||||
212,638 | ||||||||
Communications Equipment 3.3% | ||||||||
Cisco Systems, Inc. | 12,216 | 290,619 | ||||||
Diversified Telecommunication Services 1.6% | ||||||||
AT&T, Inc. | 4,075 | 146,945 | ||||||
Food & Staples Retailing 2.2% | ||||||||
Costco Wholesale Corp. | 1,270 | 191,922 | ||||||
Food Products 3.4% | ||||||||
General Mills, Inc. | 784 | 44,304 | ||||||
J.M. Smucker Co. (The) | 1,235 | 158,475 | ||||||
Mondelez International, Inc. (Class A Stock) | 2,293 | 98,828 | ||||||
|
| |||||||
301,607 |
See Notes to Financial Statements.
Prudential Jennison Rising Dividend Fund | 9 |
Portfolio of Investments
as of January 31, 2016 (Unaudited) continued
Description | Shares | Value (Note 1) | ||||||
COMMON STOCKS (Continued) | ||||||||
Health Care Equipment & Supplies 1.1% | ||||||||
Abbott Laboratories | 2,539 | $ | 96,101 | |||||
Health Care Providers & Services 0.7% | ||||||||
UnitedHealth Group, Inc. | 546 | 62,877 | ||||||
Hotels, Restaurants & Leisure 7.8% | ||||||||
Carnival Corp. | 3,263 | 157,048 | ||||||
McDonald’s Corp. | 2,906 | 359,705 | ||||||
Starbucks Corp. | 1,548 | 94,072 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. | 1,311 | 81,597 | ||||||
|
| |||||||
692,422 | ||||||||
Household Products 0.6% | ||||||||
Procter & Gamble Co. (The) | 648 | 52,935 | ||||||
Industrial Conglomerates 1.9% | ||||||||
General Electric Co. | 5,901 | 171,719 | ||||||
Insurance 1.8% | ||||||||
American International Group, Inc. | 1,398 | 78,959 | ||||||
MetLife, Inc. | 1,868 | 83,406 | ||||||
|
| |||||||
162,365 | ||||||||
IT Services 4.5% | ||||||||
MasterCard, Inc. (Class A Stock) | 1,872 | 166,664 | ||||||
Visa, Inc. (Class A Stock) | 2,224 | 165,666 | ||||||
Xerox Corp. | 6,915 | 67,421 | ||||||
|
| |||||||
399,751 | ||||||||
Life Sciences Tools & Services 1.4% | ||||||||
Thermo Fisher Scientific, Inc. | 922 | 121,759 | ||||||
Media 3.0% | ||||||||
Comcast Corp. (Class A Stock) | 2,530 | 140,946 | ||||||
Time Warner, Inc. | 1,752 | 123,411 | ||||||
|
| |||||||
264,357 | ||||||||
Multi-Utilities 3.8% | ||||||||
NiSource, Inc. | 4,643 | 97,550 | ||||||
PG&E Corp. | 2,568 | 141,009 |
See Notes to Financial Statements.
10 |
Description | Shares | Value (Note 1) | ||||||
COMMON STOCKS (Continued) | ||||||||
Multi-Utilities (cont’d.) | ||||||||
Sempra Energy | 1,055 | $ | 99,961 | |||||
|
| |||||||
338,520 | ||||||||
Multiline Retail 2.8% | ||||||||
Dollar General Corp. | 1,276 | 95,777 | ||||||
Macy’s, Inc. | 3,885 | 156,993 | ||||||
|
| |||||||
252,770 | ||||||||
Oil, Gas & Consumable Fuels 3.6% | ||||||||
Chevron Corp. | 699 | 60,443 | ||||||
Columbia Pipeline Group, Inc. | 4,773 | 88,539 | ||||||
Occidental Petroleum Corp. | 1,160 | 79,843 | ||||||
Royal Dutch Shell PLC (Netherlands) (Class A Stock), ADR | 1,193 | 52,408 | ||||||
Williams Cos., Inc. (The) | 1,942 | 37,481 | ||||||
|
| |||||||
318,714 | ||||||||
Pharmaceuticals 6.4% | ||||||||
Bristol-Myers Squibb Co. | 4,494 | 279,347 | ||||||
Eli Lilly & Co. | 1,094 | 86,535 | ||||||
Pfizer, Inc. | 6,785 | 206,875 | ||||||
|
| |||||||
572,757 | ||||||||
Real Estate Investment Trusts (REITs) 4.9% | ||||||||
AvalonBay Communities, Inc. | 902 | 154,684 | ||||||
Crown Castle International Corp. | 1,058 | 91,200 | ||||||
CyrusOne, Inc. | 5,140 | 189,409 | ||||||
|
| |||||||
435,293 | ||||||||
Semiconductors & Semiconductor Equipment 2.9% | ||||||||
Analog Devices, Inc. | 2,447 | 131,796 | ||||||
Texas Instruments, Inc. | 2,456 | 129,996 | ||||||
|
| |||||||
261,792 | ||||||||
Software 3.3% | ||||||||
Intuit, Inc. | 669 | 63,896 | ||||||
Microsoft Corp. | 4,135 | 227,797 | ||||||
|
| |||||||
291,693 |
See Notes to Financial Statements.
Prudential Jennison Rising Dividend Fund | 11 |
Portfolio of Investments
as of January 31, 2016 (Unaudited) continued
Description | Shares | Value (Note 1) | ||||||
COMMON STOCKS (Continued) | ||||||||
Specialty Retail 3.8% | ||||||||
GameStop Corp. (Class A Stock) | 1,951 | $ | 51,136 | |||||
Home Depot, Inc. (The) | 1,190 | 149,654 | ||||||
Lowe’s Cos., Inc. | 1,932 | 138,447 | ||||||
|
| |||||||
339,237 | ||||||||
Technology Hardware, Storage & Peripherals 0.9% | ||||||||
Apple, Inc. | 845 | 82,252 | ||||||
Textiles, Apparel & Luxury Goods 1.7% | ||||||||
NIKE, Inc. (Class B Stock) | 2,494 | 154,653 | ||||||
Tobacco 7.0% | ||||||||
Altria Group, Inc. | 2,665 | 162,858 | ||||||
Philip Morris International, Inc. | 2,779 | 250,138 | ||||||
Reynolds American, Inc. | 4,220 | 210,789 | ||||||
|
| |||||||
623,785 | ||||||||
Wireless Telecommunication Services 1.7% | ||||||||
Vodafone Group PLC (United Kingdom), ADR | 4,802 | 154,624 | ||||||
|
| |||||||
TOTAL LONG-TERM INVESTMENTS | 8,667,291 | |||||||
|
| |||||||
SHORT-TERM INVESTMENT 2.8% | ||||||||
AFFILIATED MONEY MARKET MUTUAL FUND | ||||||||
Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund | 249,568 | 249,568 | ||||||
|
| |||||||
TOTAL INVESTMENTS 100.0% | 8,916,859 | |||||||
Other assets in excess of liabilities | 3,784 | |||||||
|
| |||||||
NET ASSETS 100.0% | $ | 8,920,643 | ||||||
|
|
The following abbreviations are used in the semiannual report:
ADR—American Depositary Receipt
OTC—Over-the-counter
(a) | Prudential Investments LLC, the manager of the Fund, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund. |
See Notes to Financial Statements.
12 |
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.
Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other observable inputs.
Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of January 31, 2016 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Common Stocks | ||||||||||||
Aerospace & Defense | $ | 503,307 | $ | — | $ | — | ||||||
Banks | 689,223 | — | — | |||||||||
Beverages | 480,654 | — | — | |||||||||
Capital Markets | 212,638 | — | — | |||||||||
Communications Equipment | 290,619 | — | — | |||||||||
Diversified Telecommunication Services | 146,945 | — | — | |||||||||
Food & Staples Retailing | 191,922 | — | — | |||||||||
Food Products | 301,607 | — | — | |||||||||
Health Care Equipment & Supplies | 96,101 | — | — | |||||||||
Health Care Providers & Services | 62,877 | — | — | |||||||||
Hotels, Restaurants & Leisure | 692,422 | — | — | |||||||||
Household Products | 52,935 | — | — | |||||||||
Industrial Conglomerates | 171,719 | — | — | |||||||||
Insurance | 162,365 | — | — | |||||||||
IT Services | 399,751 | — | — | |||||||||
Life Sciences Tools & Services | 121,759 | — | — | |||||||||
Media | 264,357 | — | — | |||||||||
Multi-Utilities | 338,520 | — | — | |||||||||
Multiline Retail | 252,770 | — | — | |||||||||
Oil, Gas & Consumable Fuels | 318,714 | — | — | |||||||||
Pharmaceuticals | 572,757 | — | — | |||||||||
Real Estate Investment Trusts (REITs) | 435,293 | — | — | |||||||||
Semiconductors & Semiconductor Equipment | 261,792 | — | — | |||||||||
Software | 291,693 | — | — | |||||||||
Specialty Retail | 339,237 | — | — | |||||||||
Technology Hardware, Storage & Peripherals | 82,252 | — | — |
See Notes to Financial Statements.
Prudential Jennison Rising Dividend Fund | 13 |
Portfolio of Investments
as of January 31, 2016 (Unaudited) continued
Level 1 | Level 2 | Level 3 | ||||||||||
Common Stocks (continued) | ||||||||||||
Textiles, Apparel & Luxury Goods | $ | 154,653 | $ | — | $ | — | ||||||
Tobacco | 623,785 | — | — | |||||||||
Wireless Telecommunication Services | 154,624 | — | — | |||||||||
Affiliated Money Market Mutual Fund | 249,568 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 8,916,859 | $ | — | $ | — | ||||||
|
|
|
|
|
|
The industry classification of investments and other assets in excess of liabilities shown as a percentage of net assets as of January 31, 2016 were as follows:
Hotels, Restaurants & Leisure | 7.8 | % | ||
Banks | 7.7 | |||
Tobacco | 7.0 | |||
Pharmaceuticals | 6.4 | |||
Aerospace & Defense | 5.6 | |||
Beverages | 5.4 | |||
Real Estate Investment Trusts (REITs) | 4.9 | |||
IT Services | 4.5 | |||
Specialty Retail | 3.8 | |||
Multi-Utilities | 3.8 | |||
Oil, Gas & Consumable Fuels | 3.6 | |||
Food Products | 3.4 | |||
Software | 3.3 | |||
Communications Equipment | 3.3 | |||
Media | 3.0 | |||
Semiconductors & Semiconductor Equipment | 2.9 | |||
Multiline Retail | 2.8 | |||
Affiliated Money Market Mutual Fund | 2.8 | % | ||
Capital Markets | 2.4 | |||
Food & Staples Retailing | 2.2 | |||
Industrial Conglomerates | 1.9 | |||
Insurance | 1.8 | |||
Textiles, Apparel & Luxury Goods | 1.7 | |||
Wireless Telecommunication Services | 1.7 | |||
Diversified Telecommunication Services | 1.6 | |||
Life Sciences Tools & Services | 1.4 | |||
Health Care Equipment & Supplies | 1.1 | |||
Technology Hardware, Storage & Peripherals | 0.9 | |||
Health Care Providers & Services | 0.7 | |||
Household Products | 0.6 | |||
|
| |||
100.0 | ||||
Other assets in excess of liabilities | — | * | ||
|
| |||
100.0 | % | |||
|
|
* | Less than 0.05%. |
See Notes to Financial Statements.
14 |
PRUDENTIAL INVESTMENTS, A PGIM BUSINESS | MUTUAL FUNDS
FINANCIAL STATEMENTS
(UNAUDITED)
SEMIANNUAL REPORT · JANUARY 31, 2016
Prudential Jennison Rising Dividend Fund
Statement of Assets & Liabilities
as of January 31, 2016 (Unaudited)
Assets | ||||
Investments at value: | ||||
Unaffiliated investments (cost $8,480,709) | $ | 8,667,291 | ||
Affiliated investments (cost $249,568) | 249,568 | |||
Receivable for Fund shares sold | 105,148 | |||
Receivable for investments sold | 58,546 | |||
Dividends receivable | 11,627 | |||
Due from Manager | 8,909 | |||
Prepaid expenses | 410 | |||
|
| |||
Total assets | 9,101,499 | |||
|
| |||
Liabilities | ||||
Payable for investments purchased | 150,585 | |||
Accrued expenses and other liabilities | 28,291 | |||
Distribution fee payable | 1,618 | |||
Affiliated transfer agent fee payable | 312 | |||
Payable for Fund shares reacquired | 50 | |||
|
| |||
Total liabilities | 180,856 | |||
|
| |||
Net Assets | $ | 8,920,643 | ||
|
| |||
Net assets were comprised of: | ||||
Shares of beneficial interest, at par | $ | 869 | ||
Paid-in capital in excess of par | 8,983,610 | |||
|
| |||
8,984,479 | ||||
Undistributed net investment income | 5,048 | |||
Accumulated net realized loss on investment transactions | (255,466 | ) | ||
Net unrealized appreciation on investments | 186,582 | |||
|
| |||
Net assets, January 31, 2016 | $ | 8,920,643 | ||
|
|
See Notes to Financial Statements.
16 |
Class A | ||||
Net asset value and redemption price per share, | $ | 10.26 | ||
Maximum sales charge (5.50% of offering price) | .60 | |||
|
| |||
Maximum offering price to public | $ | 10.86 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share, | $ | 10.25 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share, | $ | 10.26 | ||
|
|
See Notes to Financial Statements.
Prudential Jennison Rising Dividend Fund | 17 |
Statement of Operations
Six Months Ended January 31, 2016 (Unaudited)
Net Investment Income | ||||
Income | ||||
Unaffiliated dividend income | $ | 97,719 | ||
Affiliated dividend income | 266 | |||
|
| |||
Total income | 97,985 | |||
|
| |||
Expenses | ||||
Management fee | 31,811 | |||
Distribution fee—Class A | 2,143 | |||
Distribution fee—Class C | 4,409 | |||
Custodian and accounting fees | 22,000 | |||
Registration fees | 20,000 | |||
Shareholders’ reports | 12,000 | |||
Audit fee | 12,000 | |||
Legal fees and expenses | 10,000 | |||
Transfer agent’s fees and expenses (including affiliated expense of $800) | 9,000 | |||
Trustees’ fees | 6,000 | |||
Miscellaneous | 4,964 | |||
|
| |||
Total expenses | 134,327 | |||
Less: Management fee waiver and/or expense reimbursement | (87,132 | ) | ||
Distribution fee waiver—Class A | (357 | ) | ||
|
| |||
Net expenses | 46,838 | |||
|
| |||
Net investment income | 51,147 | |||
|
| |||
Realized And Unrealized Loss On Investments | ||||
Net realized loss on investment transactions | (235,609 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (586,284 | ) | ||
|
| |||
Net loss on investments | (821,893 | ) | ||
|
| |||
Net Decrease In Net Assets Resulting From Operations | $ | (770,746 | ) | |
|
|
See Notes to Financial Statements.
18 |
Statement of Changes in Net Assets
(Unaudited)
Six Month Ended January 31, 2016 | Year Ended July 31, 2015 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income | $ | 51,147 | $ | 88,589 | ||||
Net realized loss on investment transactions | (235,609 | ) | (18,334 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (586,284 | ) | 621,035 | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | (770,746 | ) | 691,290 | |||||
|
|
|
| |||||
Dividends and Distributions (Note 1) | ||||||||
Dividends from net investment income | ||||||||
Class A | (9,230 | ) | (9,046 | ) | ||||
Class C | (2,345 | ) | (610 | ) | ||||
Class Z | (42,172 | ) | (77,328 | ) | ||||
|
|
|
| |||||
(53,747 | ) | (86,984 | ) | |||||
|
|
|
| |||||
Distributions from net realized gains | ||||||||
Class A | — | (2,545 | ) | |||||
Class C | — | (442 | ) | |||||
Class Z | — | (17,848 | ) | |||||
|
|
|
| |||||
— | (20,835 | ) | ||||||
|
|
|
| |||||
Fund share transactions (Net of share conversions) (Note 6) | ||||||||
Net proceeds from shares sold | 2,360,326 | 1,988,872 | ||||||
Net asset value of shares issued in reinvestment of dividends and distributions | 53,747 | 107,323 | ||||||
Cost of shares reacquired | (369,396 | ) | (694,730 | ) | ||||
|
|
|
| |||||
Net increase in net assets from Fund share transactions | 2,044,677 | 1,401,465 | ||||||
|
|
|
| |||||
Total increase | 1,220,184 | 1,984,936 | ||||||
Net Assets: | ||||||||
Beginning of period | 7,700,459 | 5,715,523 | ||||||
|
|
|
| |||||
End of period(a) | $ | 8,920,643 | $ | 7,700,459 | ||||
|
|
|
| |||||
(a) Includes undistributed net investment income of: | $ | 5,048 | $ | 7,648 | ||||
|
|
|
|
See Notes to Financial Statements.
Prudential Jennison Rising Dividend Fund | 19 |
Notes to Financial Statements
(Unaudited)
Prudential Investment Portfolios 5 (the “Trust”) is an open-end management investment company, registered under the Investment Company Act of 1940, as amended, (“1940 Act”), which was established as a Delaware business trust on July 8, 1999. The Trust consists of two separate funds: Prudential Jennison Conservative Growth Fund and Prudential Jennison Rising Dividend Fund. These financial statements relate to Prudential Jennison Rising Dividend Fund (the “Fund”). The Fund commenced operations on March 5, 2014. The financial statements of the other fund are not presented herein. The Fund’s investment objectives are capital appreciation and income.
1. Accounting Policies
The Fund follows investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The following accounting policies conform to U.S. generally accepted accounting principles. The Trust and the Fund consistently follow such policies in the preparation of their financial statements.
Securities Valuation: The Fund holds securities and other assets that are fair valued at the close of each day the New York Stock Exchange (“NYSE”) is open for trading. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Board of Trustees (the “Board”) has adopted Valuation Procedures for security valuation under which fair valuation responsibilities have been delegated to Prudential Investments LLC (“PI” or “Manager”). Under the current Valuation Procedures, the established Valuation Committee is responsible for supervising the valuation of portfolio securities and other assets. The Valuation Procedures permit the Fund to utilize independent pricing vendor services, quotations from market makers, and alternative valuation methods when market quotations are either not readily available or not deemed representative of fair value. A record of the Valuation Committee’s actions is subject to the Board’s review, approval, and ratification at its next regularly-scheduled quarterly meeting.
Various inputs determine how the Fund’s investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the table following the Portfolio of Investments. Common and preferred stocks, exchange-traded funds, and derivative instruments such as futures or options, that are traded on
20 |
a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange where the security principally trades. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price, they are classified as Level 1 in the fair value hierarchy.
In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and ask prices, or at the last bid price in the absence of an ask price. These securities are classified as Level 2 in the fair value hierarchy.
Common and preferred stocks traded on foreign securities exchanges are valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy. Such securities are valued using model prices to the extent that the valuation meets the established confidence level for each security. If the confidence level is not met or the vendor does not provide a model price, securities are valued in accordance with exchange-traded common and preferred stocks discussed above.
Participatory notes (P-notes) are generally valued based upon the value of a related underlying security that trades actively in the market and are classified as Level 2 in the fair value hierarchy.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the over-the-counter (“OTC”) market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors provide these prices after evaluating observable inputs including, but not limited to yield curves, yield spreads, credit ratings, deal terms, tranche level attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations, and reported trades. Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.
OTC derivative instruments are generally valued using pricing vendor services, which derive the valuation based on inputs such as underlying asset prices, indices, spreads, interest rates, and exchange rates. These instruments are categorized as Level 2 in the fair value hierarchy.
Prudential Jennison Rising Dividend Fund | 21 |
Notes to Financial Statements
(Unaudited) continued
Centrally cleared swaps listed or traded on a multilateral or trade facility platform, such as a registered exchange, are generally valued at the daily settlement price determined by the respective exchange. These securities are classified as Level 2 in the fair value hierarchy, as the daily settlement price is not public.
Securities and other assets that cannot be priced according to the methods described above are valued based on pricing methodologies approved by the Board. In the event that unobservable inputs are used when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
When determining the fair value of securities, some of the factors influencing the valuation include: the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition and the markets in which it does business; the cost of the investment; the size of the holding and the capitalization of the issuer; the prices of any recent transactions or bids/offers for such securities or any comparable securities; any available analyst media or other reports or information deemed reliable by the investment adviser regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values.
Restricted and Illiquid Securities: Subject to guidelines adopted by the Board, the Fund may invest up to 15% of its net assets in illiquid securities, including those which are restricted as to disposition under securities law (“restricted securities”). Restricted securities are valued pursuant to the valuation procedures noted above. Illiquid securities are those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale, cannot be sold within seven days in the ordinary course of business at approximately the amount at which the Fund has valued the investment. Therefore, the Fund may find it difficult to sell illiquid securities at the time considered most advantageous by its Subadviser and may incur expenses that would not be incurred in the sale of securities that were freely marketable. Certain securities that would otherwise be considered illiquid because of legal restrictions on resale to the general public may be traded among qualified institutional buyers under Rule 144A of the Securities Act of 1933. These Rule 144A securities, as well as commercial paper that is sold in private placements under Section 4(2) of the Securities Act, may be deemed liquid by the Fund’s Subadviser
22 |
under the guidelines adopted by the Trustees of the Fund. However, the liquidity of the Fund’s investments in Rule 144A securities could be impaired if trading does not develop or declines.
Foreign Currency Translation: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis:
(i) market value of investment securities, other assets and liabilities-at the current rates of exchange.
(ii) purchases and sales of investment securities, income and expenses-at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not generally isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities held at the end of the period. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities sold during the period. Accordingly, holding period realized foreign currency gains or losses are included in the reported net realized gains (losses) on investment transactions. Notwithstanding the above, the Fund does not isolate the effect of fluctuations in foreign currency exchange rates when determining the gain or loss upon the sale or maturity of foreign currency denominated debt obligations; such amount are included in the net realized gains or losses on foreign currency transactions.
Net realized gains or losses on foreign currency transactions represent net foreign exchange gains or losses from holdings of foreign currencies, forward currency contracts, disposition of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of interest, dividends and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains or losses from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates are reflected as a component of net unrealized appreciation (depreciation) on foreign currencies.
Concentration of Risk: Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. companies as a result of, among other factors, the possibility of political or economic instability, or the level of governmental supervision and regulation of foreign securities markets.
Prudential Jennison Rising Dividend Fund | 23 |
Notes to Financial Statements
(Unaudited) continued
Master Netting Arrangements: The Fund is subject to various Master Agreements, or netting arrangements, with select counterparties. These are agreements which a sub-adviser may have negotiated and entered into on behalf of the Fund. A master netting arrangement between the Fund and the counterparty permits the Fund to offset amounts payable by the Fund to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Fund to cover the Fund’s exposure to the counterparty. However, there is no assurance that such
mitigating factors are easily enforceable. In addition to master netting arrangements, the right to set-off exists when all the conditions are met such that each of the parties owes the other determinable amounts, the reporting party has the right to set-off the amount owed with the amount owed by the other party, the reporting party intends to set-off and the right of set-off is enforceable by law. During the reporting period, there was no intention to settle on a net basis and all amounts are presented on a gross basis on the Statement of Assets and Liabilities.
Securities Lending: The Fund may lend its portfolio securities to banks and broker-dealers. The loans are secured by collateral at least equal to the market value of the securities loaned. Collateral pledged by each borrower is invested in a highly liquid short-term money market fund and is marked to market daily, based on the previous day’s market value, such that the value of the collateral exceeds the value of the loaned securities. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of the loan, the borrower will return to the Fund securities identical to the loaned securities. Should the borrower of the securities fail financially, the Fund has the right to repurchase the securities in the open market using the collateral. The Fund recognizes income, net of any rebate and securities lending agent fees, for lending its securities, and any interest on the investment of cash received as collateral. The borrower receives all interest and dividends and such payments are passed back to the lender in the amounts equivalent thereto. The Fund also continues to recognize any unrealized gain or loss in the market price of the securities loaned that may occur during the term of the loan.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized and unrealized gains or losses from security and currency transactions are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on the accrual basis. Expenses are recorded on the accrual basis which may require the use of certain estimates by management, that may differ from actual.
24 |
REITs: The Fund invests in real estate investment trusts (“REITs”), which report information on the source of their distributions annually. Based on current and historical information, a portion of distributions received from REITs during the period is estimated to be dividend income, capital gain or return of capital and recorded accordingly. These estimates are adjusted periodically when the actual sources of distributions are disclosed by the REITs.
Net investment income or loss, (other than distribution fees, which are charged directly to the respective class) and unrealized and realized gains or losses are allocated daily to each class of shares based upon the relative proportion of adjusted net assets of each class at the beginning of the day.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders are recorded on the ex-date. Dividends, if any, from net investment income are declared and paid at least quarterly. These dividends and distributions are determined in accordance with federal income tax regulations and may differ from accounting principles generally accepted in the United States of America.
Net realized gains from investment transactions, if any, are distributed at least annually. Permanent book/tax differences relating to income and gains are reclassified amongst undistributed net investment income, accumulated net realized gain or loss and paid-in capital in excess of par, as appropriate.
Taxes: For federal income tax purposes, each Fund in the Trust is treated as a separate taxpaying entity. It is the Fund’s policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net investment income and capital gains, if any, to shareholders. Therefore, no federal income tax provision is required. Withholding taxes on foreign dividends and interest and foreign capital gains tax are recorded net of reclaimable amounts, at the time the related income is earned.
Estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
2. Agreements
The Fund has a management agreement with PI. Pursuant to this agreement, PI has responsibility for all investment advisory services for the Fund and supervises the subadvisor’s performance of such services. PI has entered into a subadvisory
Prudential Jennison Rising Dividend Fund | 25 |
Notes to Financial Statements
(Unaudited) continued
agreement with Jennison Associates LLC (“Jennison”). The subadvisory agreement provides that Jennison furnishes investment advisory services in connection with the management of the Fund. In connection therewith, Jennison is obligated to keep certain books and records of the Fund. PI pays for the services of Jennison, the cost of compensation of officers of the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears all other costs and expenses.
The management fee paid to PI is accrued daily and payable monthly at an annual rate of ..775% of the Fund’s average daily net assets. The management fee amount and/or expense reimbursement exceeds the management fee for the six months ended January 31, 2016 due to expense limitations described below.
PI has contractually agreed through November 30, 2016 to limit net annual Fund operating expenses (exclusive of distribution and service (12b-1) fees, extraordinary expenses and certain other expenses such as taxes, interest and brokerage commissions) to 0.99% of the Fund’s average daily net assets.
The Fund has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”), which acts as the distributor of the Class A, Class C and Class Z shares of the Fund. The Fund compensates PIMS for distributing and servicing the Fund’s Class A and Class C shares, pursuant to plans of distribution (the “Class A and C Plans”), regardless of expenses actually incurred by PIMS. The distribution fees are accrued daily and payable monthly. No distribution or service fees are paid to PIMS as distributor of the Class Z shares of the Fund.
Pursuant to Class A and C Plans, the Fund compensates PIMS for distribution related activities at an annual rate of up to 0.30% and 1% of the average daily net assets of the Class A and C shares, respectively. PIMS has contractually agreed through November 30, 2016 to reduce its distribution and service (12b-1) fees for Class A shares to .25% of the average daily net assets of the Class A shares. PIMS has advised the Fund that it received $11,575 in front-end sales charges resulting from sales of Class A shares during the six months ended January 31, 2016. From these fees, PIMS paid such sales charges to affiliated broker-dealers, which in turn paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Fund that for the six months ended January 31, 2016, it received $2 in contingent deferred sales charges imposed upon redemptions by certain Class C shareholders.
26 |
PI, PIMS and Jennison are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund’s transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
The Fund may enter into certain securities purchase or sale transactions under Board approved Rule 17a-7 procedures. Rule 17a-7 is an exemptive rule under the 1940 Act, that permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. Such transactions are subject to ratification by the Board.
The Fund invests in the Prudential Core Taxable Money Market Fund (the “Core Fund”), a portfolio of Prudential Investment Portfolios 2, registered under the 1940 Act and managed by PI. Earnings from the Core Fund are disclosed on the Statement of Operations as “Affiliated dividend income”.
4. Portfolio Securities
Purchases and sales of securities, other than short-term investments, for the six months ended January 31, 2016, were $4,133,693 and $2,275,349, respectively.
5. Tax Information
The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of January 31, 2016 were as follows:
Tax Basis | $ | 8,731,173 | ||
|
| |||
Appreciation | 612,590 | |||
Depreciation | (426,904 | ) | ||
|
| |||
Net Unrealized Appreciation | $ | 185,686 | ||
|
|
The difference between book basis and tax basis is primarily attributable to deferred losses on wash sales.
Prudential Jennison Rising Dividend Fund | 27 |
Notes to Financial Statements
(Unaudited) continued
For federal income purposes, the Fund had a capital loss carryforward as of July 31, 2015 of approximately $16,000 which can be carried forward for an unlimited period. No capital gains distributions are expected to be paid to shareholders until net gains have been realized in excess of such losses.
The Fund elected to treat post-October capital losses of approximately $3,000 as having been incurred in the following fiscal year (July 31, 2016).
Management has analyzed the Portfolio’s tax positions taken on federal, state and local income tax returns for all open tax years and has concluded that no provision for income tax is required in the Portfolio’s financial statements for the current reporting period. The Portfolio’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
6. Capital
The Fund offers Class A, Class C, and Class Z shares. Class A shares are sold with a maximum front-end sales charge of up to 5.50%. All investors who purchase Class A shares in an amount of $1 million or more and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1%. The Class A CDSC is waived for purchases by certain retirement or benefit plans. Class C shares are sold with a CDSC of 1% for shares redeemed within 12 months of purchase. A special exchange privilege is also available for shareholders who qualify to purchase Class A shares at net asset value. Class Z shares are not subject to any sales or redemption charge and are offered exclusively for sale to a limited group of investors.
Under certain circumstances, an exchange may be made from specified share classes of the Fund to one or more other share classes of the Fund as presented in the table of transactions in shares of beneficial interest.
There is an unlimited number of shares of beneficial interest at $.001 par value per share.
28 |
At January 31, 2016, PI owned 1,088 and 514,298 Class C and Z shares of the Fund, respectively.
Transactions in shares of beneficial interest were as follows:
Class A | Shares | Amount | ||||||
Six months ended January 31, 2016: | ||||||||
Shares sold | 97,851 | $ | 1,038,555 | |||||
Shares issued in reinvestment of dividends and distributions | 881 | 9,230 | ||||||
Shares reacquired | (27,201 | ) | (284,460 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 71,531 | 763,325 | ||||||
Shares reacquired upon conversion into other share class(es) | (1,189 | ) | (11,911 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 70,342 | $ | 751,414 | |||||
|
|
|
| |||||
Year ended July 31, 2015: | ||||||||
Shares sold | 91,778 | $ | 1,006,173 | |||||
Shares issued in reinvestment of dividends and distributions | 999 | 11,111 | ||||||
Shares reacquired | (30,500 | ) | (331,573 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 62,277 | 685,711 | ||||||
Shares reacquired upon conversion into other share class | (3,389 | ) | (37,845 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 58,888 | $ | 647,866 | |||||
|
|
|
| |||||
Class C | ||||||||
Six months ended January 31, 2016: | ||||||||
Shares sold | 113,716 | $ | 1,230,459 | |||||
Shares issued in reinvestment of dividends and distributions | 223 | 2,345 | ||||||
Shares reacquired | (2,242 | ) | (24,050 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 111,697 | $ | 1,208,754 | |||||
|
|
|
| |||||
Year ended July 31, 2015: | ||||||||
Shares sold | 35,322 | $ | 390,015 | |||||
Shares issued in reinvestment of dividends and distributions | 93 | 1,037 | ||||||
Shares reacquired | (1,221 | ) | (13,434 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 34,194 | $ | 377,618 | |||||
|
|
|
|
Prudential Jennison Rising Dividend Fund | 29 |
Notes to Financial Statements
(Unaudited) continued
Class Z | Shares | Amount | ||||||
Six months ended January 31, 2016: | ||||||||
Shares sold | 8,505 | $ | 91,312 | |||||
Shares issued in reinvestment of dividends and distributions | 4,025 | 42,172 | ||||||
Shares reacquired | (5,850 | ) | (60,886 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 6,680 | 72,598 | ||||||
Shares issued upon conversion from other share class(es) | 1,188 | 11,911 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 7,868 | $ | 84,509 | |||||
|
|
|
| |||||
Year ended July 31, 2015: | ||||||||
Shares sold | 53,094 | $ | 592,684 | |||||
Shares issued in reinvestment of dividends and distributions | 8,572 | 95,175 | ||||||
Shares reacquired | (31,096 | ) | (349,723 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 30,570 | 338,136 | ||||||
Shares issued upon conversion from other share class | 3,386 | 37,845 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 33,956 | $ | 375,981 | |||||
|
|
|
|
7. Borrowings
The Fund, along with other affiliated registered investment companies (the “Funds”), are a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of $900 million for the period October 8, 2015 through October 6, 2016. The Funds pay an annualized commitment fee of 0.11% of the unused portion of the SCA. Prior to October 8, 2015, the Funds had another SCA that provided a commitment of $900 million and the Funds paid an annualized commitment fee of 0.075% of the unused portion of the SCA. Interest on any borrowings under the SCA is paid at contracted market rates. The Fund’s portion of the commitment fee for the unused amount is accrued daily and paid quarterly.
The Fund did not utilize the SCA during the six months ended January 31, 2016.
8. New Accounting Pronouncements
In May 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-07 regarding “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share”. The amendments in this update are effective for the Fund for fiscal
30 |
years beginning after December 15, 2015, and interim periods within those fiscal years. ASU No. 2015-07 will eliminate the requirement to categorize investments in the fair value hierarchy if their fair value is measured at net asset value (“NAV”) per share (or its equivalent) using the practical expedient in the FASB’s fair value measurement guidance. At this time, management is evaluating the implications of ASU No. 2015-07 and it has determined there is no impact on the financial statement disclosure.
In January 2016, the FASB issued ASU No. 2016-01 regarding “Recognition and Measurement of Financial Assets and Financial Liabilities”. The new guidance is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The new standard affects all entities that hold financial assets or owe financial liabilities. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. At this time, management is evaluating the implications of ASU No. 2016-01 and its impact on the financial statements and disclosures has not yet been determined.
Prudential Jennison Rising Dividend Fund | 31 |
Financial Highlights
(Unaudited)
Class A Shares | ||||||||||||||||
Six Months January 31, | Year Ended July 31, | March 5, 2014(b) through July 31, 2014(c) | ||||||||||||||
Per Share Operating Performance: | ||||||||||||||||
Net Asset Value, Beginning of Period | $11.33 | $10.34 | $10.00 | |||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income | .06 | .10 | .04 | |||||||||||||
Net realized and unrealized gain (loss) on investments | (1.07 | ) | 1.03 | .33 | ||||||||||||
Total from investment operations | (1.01 | ) | 1.13 | .37 | ||||||||||||
Less Dividends and Distributions: | ||||||||||||||||
Dividends from net investment income | (.06 | ) | (.11 | ) | (.03 | ) | ||||||||||
Distributions from net realized gains on investments | - | (.03 | ) | - | ||||||||||||
Total dividends and distributions | (.06 | ) | (.14 | ) | (.03 | ) | ||||||||||
Net Asset Value, end of period | $10.26 | $11.33 | $10.34 | |||||||||||||
Total Return(a): | (8.82)% | 11.03% | 3.66% | |||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||
Net assets, end of period (000) | $1,707 | $1,087 | $383 | |||||||||||||
Average net assets (000) | $1,421 | $822 | $192 | |||||||||||||
Ratios to average net assets(d): | ||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.24% | (e) | 1.24% | 1.24% | (e) | |||||||||||
Expenses before waivers and/or expense reimbursement | 3.41% | (e) | 3.54% | 8.18% | (e) | |||||||||||
Net investment income | 1.15% | (e) | 1.09% | .85% | (e) | |||||||||||
Portfolio turnover rate | 28% | (f) | 45% | 9% | (f) |
(a) Total return does not consider the effect of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(b) Commencement of operations.
(c) Calculated based on average shares outstanding during the period.
(d) Does not include expenses of the underlying portfolio in which the Fund invests.
(e) Annualized.
(f) Not annualized.
See Notes to Financial Statements.
32 |
Class C Shares | ||||||||||||||||
Six Months January 31, | Year Ended July 31, | March 5, 2014(b) through July 31, 2014(c) | ||||||||||||||
Per Share Operating Performance: | ||||||||||||||||
Net Asset Value, Beginning of Period | $11.32 | $10.33 | $10.00 | |||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income | .02 | .02 | - | (g) | ||||||||||||
Net realized and unrealized gain (loss) on investments | (1.07 | ) | 1.03 | .33 | ||||||||||||
Total from investment operations | (1.05 | ) | 1.05 | .33 | ||||||||||||
Less Dividends and Distributions: | ||||||||||||||||
Dividends from net investment income | (.02 | ) | (.03 | ) | - | (g) | ||||||||||
Distributions from net realized gains on investments | - | (.03 | ) | - | ||||||||||||
Total dividends and distributions | (.02 | ) | (.06 | ) | - | (g) | ||||||||||
Net Asset Value, end of period | $10.25 | $11.32 | $10.33 | |||||||||||||
Total Return(a): | (9.30)% | 10.23% | 3.35% | |||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||
Net assets, end of period (000) | $1,529 | $423 | $33 | |||||||||||||
Average net assets (000) | $877 | $188 | $16 | |||||||||||||
Ratios to average net assets(d): | ||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.99% | (e) | 1.99% | 1.99% | (e) | |||||||||||
Expenses before waivers and/or expense reimbursement | 4.02% | (e) | 4.16% | 8.95% | (e) | |||||||||||
Net investment income | .43% | (e) | .32% | .08% | (e) | |||||||||||
Portfolio turnover rate | 28% | (f) | 45% | 9% | (f) |
(a) Total return does not consider the effect of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(b) Commencement of operations.
(c) Calculated based on average shares outstanding during the period.
(d) Does not include expenses of the underlying portfolio in which the Fund invests.
(e) Annualized.
(f) Not annualized.
(g) Less than $.005.
See Notes to Financial Statements.
Prudential Jennison Rising Dividend Fund | 33 |
Financial Highlights
(Unaudited) continued
Class Z Shares | ||||||||||||||||
Six Months January 31, | Year Ended July 31, | March 5, 2014(b) through July 31, 2014(c) | ||||||||||||||
Per Share Operating Performance: | ||||||||||||||||
Net Asset Value, Beginning of Period | $11.33 | $10.35 | $10.00 | |||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income | .08 | .14 | .05 | |||||||||||||
Net realized and unrealized gain (loss) on investments | (1.07 | ) | 1.01 | .33 | ||||||||||||
Total from investment operations | (.99 | ) | 1.15 | .38 | ||||||||||||
Less Dividends and Distributions: | ||||||||||||||||
Dividends from net investment income | (.08 | ) | (.14 | ) | (.03 | ) | ||||||||||
Distributions from net realized gains on investments | - | (.03 | ) | - | ||||||||||||
Total dividends and distributions | (.08 | ) | (.17 | ) | (.03 | ) | ||||||||||
Net Asset Value, end of period | $10.26 | $11.33 | $10.35 | |||||||||||||
Total Return(a): | (8.78)% | 11.19% | 3.84% | |||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||
Net assets, end of period (000) | $5,685 | $6,190 | $5,299 | |||||||||||||
Average net assets (000) | $5,868 | $5,953 | $5,133 | |||||||||||||
Ratios to average net assets(d): | ||||||||||||||||
Expenses after waivers and/or expense reimbursement | .99% | (e) | .99% | .99% | (e) | |||||||||||
Expenses before waivers and/or expense reimbursement | 3.12% | (e) | 3.31% | 8.04% | (e) | |||||||||||
Net investment income | 1.39% | (e) | 1.33% | 1.09% | (e) | |||||||||||
Portfolio turnover rate | 28% | (f) | 45% | 9% | (f) |
(a) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(b) Commencement of operations.
(c) Calculated based on average shares outstanding during the period.
(d) Does not include expenses of the underlying portfolio in which the Fund invests.
(e) Annualized.
(f) Not annualized.
See Notes to Financial Statements.
34 |
n MAIL | n TELEPHONE | n WEBSITE | ||
655 Broad Street Newark, NJ 07102 | (800) 225-1852 | www.prudentialfunds.com |
PROXY VOTING |
The Board of Trustees of the Fund has delegated to the Fund’s investment subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website. |
TRUSTEES |
Ellen S. Alberding • Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Keith F. Hartstein • Michael S. Hyland • Stuart S. Parker • Richard A. Redeker • Stephen G. Stoneburn • Grace C. Torres |
OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • M. Sadiq Peshimam, Treasurer and Principal Financial and Accounting Officer • Raymond A. O’Hara, Chief Legal Officer • Chad A. Earnst, Chief Compliance Officer • Deborah A. Docs, Secretary • Theresa C. Thompson, Deputy Chief Compliance Officer • Richard W. Kinville, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • Amanda S. Ryan, Assistant Secretary • Andrew R. French, Assistant Secretary • Peter Parrella, Assistant Treasurer • Lana Lomuti, Assistant Treasurer • Linda McMullin, Assistant Treasurer • Kelly A. Coyne, Assistant Treasurer |
MANAGER | Prudential Investments LLC | 655 Broad Street Newark, NJ 07102 | ||
| ||||
INVESTMENT SUBADVISER | Jennison Associates LLC | 466 Lexington Avenue New York, NY 10017 | ||
| ||||
DISTRIBUTOR | Prudential Investment Management Services LLC | 655 Broad Street Newark, NJ 07102 | ||
| ||||
CUSTODIAN | The Bank of New York Mellon | One Wall Street New York, NY 10286 | ||
| ||||
TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
| ||||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
| ||||
FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 |
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go to www.prudentialfunds.com/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH TRUSTEES |
Shareholders can communicate directly with the Board of Trustees by writing to the Chair of the Board, Prudential Jennison Rising Dividend Fund, Prudential Investments, Attn: Board of Trustees, 655 Broad Street, Newark, NJ 07102. Shareholders can communicate directly with an individual Director by writing to the same address. Communications are not screened before being delivered to the addressee. |
AVAILABILITY OF PORTFOLIO SCHEDULE |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation and location of the Public Reference Room may be obtained by calling (202) 551-8090. The Fund’s schedule of portfolio holdings is also available on the Fund’s website as of the end of each month. |
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PRUDENTIAL JENNISON RISING DIVIDEND FUND
SHARE CLASS | A | C | Z | |||
NASDAQ | PJDAX | PJDCX | PJDZX | |||
CUSIP | 74440V823 | 74440V815 | 74440V799 |
MF220E2 0289544-00001-00
Item 2 | – Code of Ethics – Not required, as this is not an annual filing. | |||
Item 3 | – Audit Committee Financial Expert – Not required, as this is not an annual filing. | |||
Item 4 | – Principal Accountant Fees and Services – Not required, as this is not an annual filing. | |||
Item 5 | – Audit Committee of Listed Registrants – Not applicable. | |||
Item 6 | – Schedule of Investments – The schedule is included as part of the report to shareholders filed under Item 1 of this Form. | |||
Item 7 | – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not applicable. | |||
Item 8 | – Portfolio Managers of Closed-End Management Investment Companies – Not applicable. | |||
Item 9 | – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not applicable. | |||
Item 10 | – Submission of Matters to a Vote of Security Holders – Not applicable. | |||
Item 11 | – Controls and Procedures | |||
(a) | It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure. | |||
(b) | There has been no significant change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter of the period covered by this report that has materially affected, or is likely to materially affect, the registrant’s internal control over financial reporting. | |||
Item 12 | – Exhibits | |||
(a) | (1) Code of Ethics – Not required, as this is not an annual filing. | |||
(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act – Attached hereto as Exhibit EX-99.CERT. | ||||
(3) Any written solicitation to purchase securities under Rule 23c-1. – Not applicable. | ||||
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act – Attached hereto as Exhibit EX-99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: | Prudential Investment Portfolios 5 | |
By: | /s/ Deborah A. Docs | |
Deborah A. Docs | ||
Secretary | ||
Date: | March 23, 2016 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Stuart S. Parker | |
Stuart S. Parker | ||
President and Principal Executive Officer | ||
Date: | March 23, 2016 | |
By: | /s/ M. Sadiq Peshimam | |
M. Sadiq Peshimam | ||
Treasurer and Principal Financial and Accounting Officer | ||
Date: | March 23, 2016 |