N-CSR 1 d134188dncsr.htm PRUDENTIAL INVESTMENT PORTFOLIOS, INC. 14 Prudential Investment Portfolios, Inc. 14

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:    811-03712
Exact name of registrant as specified in charter:    Prudential Investment Portfolios, Inc. 14
Address of principal executive offices:    655 Broad Street, 17th Floor
   Newark, New Jersey 07102
Name and address of agent for service:    Andrew R. French
   655 Broad Street, 17th Floor
   Newark, New Jersey 07102
Registrant’s telephone number, including area code:    800-225-1852
Date of fiscal year end:    2/28/2021
Date of reporting period:    2/28/2021


Item 1 – Reports to Stockholders


LOGO

 

PGIM GOVERNMENT INCOME FUND

 

 

ANNUAL REPORT

FEBRUARY 28, 2021

 

LOGO

 

To enroll in e-delivery, go to pgim.com/investments/resource/edelivery


Table of Contents

 

Letter from the President

     3  

Your Fund’s Performance

     4  

Growth of a $10,000 Investment

     5  

Strategy and Performance Overview

     8  

Fees and Expenses

     11  

Holdings and Financial Statements

     13  

 

This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.

 

The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter.

 

Mutual funds are distributed by Prudential Investment Management Services LLC (PIMS), member SIPC. PGIM Fixed Income is a unit of PGIM, Inc. (PGIM), a registered investment adviser. PIMS and PGIM are Prudential Financial companies. © 2021 Prudential Financial, Inc. and its related entities. PGIM and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

 

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Letter from the President

 

LOGO

 

Dear Shareholder,

 

We hope you find the annual report for the PGIM Government Income Fund informative and useful. The report covers performance for the 12-month period that ended February 28, 2021.

 

The COVID-19 pandemic had a significant impact on the global economy and markets during the period. After many years of rising corporate profits and strong job growth, the outlook changed dramatically early in the period as the pandemic

quickly and substantially shut down economic activity worldwide, leading to significant job losses and a steep decline in global growth and earnings. Responding to this disruption, the Federal Reserve (the Fed) cut the federal funds rate target to near zero and flooded capital markets with liquidity; and Congress passed stimulus bills worth several trillion dollars that offered an economic lifeline to consumers and businesses. These initiatives worked, as growth returned and markets rebounded.

 

Stocks tumbled early in the period amid a spike in volatility, ending the 11-year-long equity bull market. With stores and factories closing and consumers staying at home to limit the spread of the virus, investors sold stocks on fears that corporate earnings would take a serious hit. Equities rallied throughout the spring and summer as states reopened their economies, but became more volatile in the fall as investors worried that a surge in COVID-19 infections would stall the economic recovery. The approval of several effective vaccines, optimistic growth forecasts, and the resolution of the US presidential election subsequently lifted equity markets to record levels, helping stocks around the globe post gains for the full period.

 

The bond market overall—including US and global bonds as well as emerging market debt—rose during the period as investors sought safety in fixed income. A significant rally in interest rates pushed the 10-year US Treasury yield down to a record low during the middle of the period, but longer-term interest rates moved higher later in the period as investors began to focus on the economic recovery. The Fed also took several aggressive actions to keep the bond markets running smoothly, restarting many of the relief programs that proved to be successful in helping end the global financial crisis in 2008-09.

 

Regarding your investments with PGIM, we believe it is important to maintain a diversified portfolio of funds consistent with your tolerance for risk, time horizon, and financial goals. Your financial advisor can help you create a diversified investment plan that may include funds covering all the basic asset classes and that reflects your personal investor profile and risk tolerance. However, diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.

 

At PGIM Investments, we consider it a great privilege and responsibility to help investors participate in opportunities across global markets while meeting their toughest investment challenges. PGIM is a top-10 global investment manager with more than $1 trillion in assets under management. This scale and investment expertise allow us to deliver actively managed funds and strategies to meet the needs of investors around the globe.

 

Thank you for choosing our family of funds.

 

Sincerely,

 

LOGO

 

Stuart S. Parker, President

PGIM Government Income Fund

April 15, 2021

 

PGIM Government Income Fund

    3  


Your Fund’s Performance (unaudited)

 

Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at pgim.com/investments or by calling (800) 225-1852.

 

    Average Annual Total Returns as of 2/28/21  
    One Year (%)   Five Years (%)     Ten Years (%)     Since Inception (%)  
Class A        
(with sales charges)   –3.17     1.50       2.24        
(without sales charges)     0.08     2.18       2.58        
Class C        
(with sales charges)   –1.74     1.37       1.79        
(without sales charges)   –0.75     1.37       1.79        
Class R        
(without sales charges)   –0.30     1.88       2.30        
Class Z        
(without sales charges)     0.55     2.53       2.88        
Class R6        
(without sales charges)     0.46     N/A       N/A       2.32 (8/9/16)  
Bloomberg Barclays US Government Bond Index

 

  –0.04     2.60       2.99        
Bloomberg Barclays US Aggregate ex-Credit Index

 

      0.70     2.66       2.98        
                             
Average Annual Total Returns as of 2/28/21 Since Inception (%)
    Class R6 (8/9/16)
Bloomberg Barclays US Government Bond Index   2.26
Bloomberg Barclays US Aggregate ex-Credit Index   2.41

 

Since Inception returns are provided for any share class with less than 10 fiscal years of returns. Since Inception returns for the Indexes are measured from the closest month-end to the class’ inception date.

 

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Growth of a $10,000 Investment (unaudited)

 

LOGO

 

The graph compares a $10,000 investment in the Fund’s Class Z shares with a similar investment in the Bloomberg Barclays US Government Bond Index by portraying the initial account values at the beginning of the 10-year period for Class Z shares (February 28, 2011) and the account values at the end of the latest fiscal year (February 28, 2021) as measured on a quarterly basis. For purposes of the graph, and unless otherwise indicated, it has been assumed that (a) all recurring fees (including management fees) were deducted; and (b) all dividends and distributions were reinvested. The line graph provides information for Class Z shares only. As indicated in the tables provided earlier, performance for other share classes will vary due to the differing fees and expenses applicable to each share class (as indicated in the following paragraphs). Without waiver of fees and/or expense reimbursements, if any, the Fund’s returns would have been lower.

 

Past performance does not predict future performance. Total returns and the ending account values in the graph include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown. The Fund’s total returns do not reflect the deduction of income taxes on an individual’s investment. Taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares.

 

PGIM Government Income Fund

    5  


Your Fund’s Performance (continued)

 

The returns in the tables do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or following the redemption of Fund shares. The average annual total returns take into account applicable sales charges, which are described for each share class in the table below.

 

           
     Class A   Class C   Class R   Class Z   Class R6
Maximum initial sales charge   3.25% of the public offering price   None   None   None   None
Contingent deferred sales charge (CDSC) (as a percentage of the lower of the original purchase price or the net asset value at redemption)   1.00% on sales of $500,000 or more made within 12 months of purchase   1.00% on sales made within 12 months of purchase   None   None   None
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets)   0.25%   1.00%   0.75%
(0.50%
currently)
  None   None

 

Benchmark Definitions

 

Bloomberg Barclays US Government Bond Index—The Bloomberg Barclays US Government Bond Index is an unmanaged index of securities issued or backed by the US government, its agencies, and instrumentalities with between one and 30 years remaining to maturity. It gives a broad look at how US government bonds have performed.

 

Bloomberg Barclays US Aggregate ex-Credit Index—The Bloomberg Barclays US Aggregate ex-Credit Index is an unmanaged index that represents securities that are SEC-registered, taxable, and dollar denominated. The Index covers the US investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indexes that are calculated and reported on a regular basis.

 

Investors cannot invest directly in an index. The returns for the Indexes would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes that may be paid by an investor.

 

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Credit Quality expressed as a percentage of total investments as of 2/28/21 (%)  
AAA     98.9  
AA     1.2  
Not Rated     0.1  
Cash/Cash Equivalents     –0.2  
Total Investments     100.0  

 

Credit ratings reflect the highest rating assigned by a nationally recognized statistical rating organization (NRSRO) such as Moody’s Investors Service, Inc. (Moody’s), S&P Global Ratings (S&P), or Fitch, Inc. (Fitch). Credit ratings reflect the common nomenclature used by both S&P and Fitch. Where applicable, ratings are converted to the comparable S&P/Fitch rating tier nomenclature used by both S&P and Fitch. These ratings agencies are independent and are widely used. The Not Rated category consists of securities that have not been rated by a NRSRO. Credit ratings are subject to change.

 

Distributions and Yields as of 2/28/21
  Total Distributions
Paid for
One Year ($)
   SEC 30-Day
Subsidized
Yield* (%)
   SEC 30-Day
Unsubsidized
Yield** (%)
Class A   0.16      0.51      0.41
Class C   0.09    –0.11    –0.21
Class R   0.13      0.39      0.05
Class Z   0.21      1.14      0.73
Class R6   0.21      1.16      1.03

 

*SEC 30-Day Subsidized Yield (%)—A standardized yield calculation created by the Securities and Exchange Commission, it reflects the income earned during a 30-day period, after the deduction of the Fund’s net expenses (net of any expense waivers or reimbursements). The investor experience is represented by the SEC 30-Day Subsidized Yield.

**SEC 30-Day Unsubsidized Yield (%)—A standardized yield calculation created by the Securities and Exchange Commission, it reflects the income earned during a 30-day period, after the deduction of the Fund’s gross expenses. The investor experience is represented by the SEC 30-Day Subsidized Yield.

 

PGIM Government Income Fund

    7  


Strategy and Performance Overview (unaudited)

 

How did the Fund perform?

The PGIM Government Income Fund’s Class Z shares returned 0.55% in the 12-month reporting period that ended February 28, 2021, outperforming the -0.04% return of the Bloomberg Barclays US Government Bond Index (the Index).

 

What were the market conditions?

   

The reporting period was dominated by the global outbreak of COVID-19, its economic impact, the resulting decline in risk sentiment, and the subsequent rebound in markets as investors responded to unprecedented monetary and fiscal stimulus programs. The optimism generated by the US-China trade deal at the beginning of 2020 quickly gave way to lockdowns, spiraling unemployment, and a sharp drop in US gross domestic product. Financial markets then witnessed a dramatic turn of events, perhaps best exemplified by the sharp drop in US Treasury yields.

 

   

The US economy decelerated rapidly and financial markets sold off sharply during the first quarter of 2020. Mortgage-backed securities (MBS) were not insulated from the volatility, with spreads widening to 132 basis points (bps) as investors reached for liquidity. (One basis point equals 0.01%.) Commercial mortgage-backed securities (CMBS) markets also widened across the capital stack, with spreads on high-quality tranches of conduit CMBS widening by 98 bps during the quarter and by as much as 250 bps in March 2020 before the Federal Reserve (the Fed) intervened to stabilize markets.

 

   

The Fed reacted by cutting the federal funds rate by 0.50% on March 3, 2020, and then by another 1.00% on March 15. It quickly deployed—and then moved beyond—its playbook from the global financial crisis in 2008-09 by cutting the federal funds rate to a range of 0.00%-0.25%, reopening its swap lines, unleashing unlimited quantitative easing purchases, and injecting huge quantities of liquidity into the markets. Reintroducing the Term Asset-Backed Securities Loan Facility, the Fed sought to further support credit flow and market liquidity by expanding the program to include non-agency CMBS and collateralized loan obligations (CLOs), in addition to a wide swath of consumer and commercial asset-backed securities, as eligible collateral. For its part, Congress approved $2.5 trillion in spending and tax breaks to provide help for the unemployed, cash to many households, and resources for small businesses.

 

   

Following a difficult first quarter, spread markets rebounded sharply through the remainder of the period amid the Fed’s unprecedented monetary policy responses, further fiscal stimulus, the initial rollout of COVID-19 vaccines, and an ongoing economic recovery. Spreads on agency MBS and agency CMBS ended the period below pre-pandemic levels.

 

   

The US Treasury yield curve steepened over the period, with the 10-year/2-year Treasury spread rising from 0.27% to 1.30% during the period. (A yield curve is a line

 

8  

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  graph that illustrates the relationship between the yields and maturities of fixed income securities. It is created by plotting the yields of different maturities for the same type of bonds.) The US 10-year Treasury yield dropped to its 2020 low in early August as COVID-19 cases flared up across the country, with the yield dropping to 50 bps and the curve flattening amid uncertainty over the economic re-opening. US Treasury yields then rose and steepened as the market priced in both the Biden administration’s proposed $1.9 trillion fiscal stimulus package and also signs of accelerating economic momentum. The yield on the US 10-year Treasury note rose sharply during the last two months of the period to end it at 1.42%. In addition, the 5-year inflation break-even rate rose 48 bps in January and February 2021 to end the period at 2.43%, its highest level since 2008.

 

What worked?

   

Overall security selection was the largest contributor to the Fund’s performance during the period, highlighted by positioning in CMBS, US Treasuries, CLOs, MBS, and agencies.

 

   

While overall sector allocation detracted from performance, an overweight to CLOs relative to the Index was a strong contributor.

 

What didn’t work?

   

The duration of the Fund was actively managed and was between 0.48 years short and 0.66 years long for the period. (Duration measures the sensitivity of the price—the value of principal—of a bond to a change in interest rates.) Duration positioning detracted from the Fund’s performance during the period. The Fund ended the period 0.25 years long duration.

 

   

The Fund maintained a yield curve flattener position, which also detracted from performance over the period. (A yield curve flattener is an interest rate environment in which long-term rates are decreasing more quickly than short-term rates.)

 

   

Sector allocation hurt performance, with overweights to CMBS and agencies relative to the Index both detracting from returns.

 

Did the Fund use derivatives?

The Fund held futures contracts on US Treasuries, interest rate swaps, and options to help manage its duration and yield curve exposure, which reduced its sensitivity to changes in the level of interest rates. The use of futures and interest rate swaps added to performance, while the use of options had a modestly negative impact on performance.

 

Current outlook

   

Current US 10-year Treasury rates price in a recovery scenario that appears highly optimistic while potentially overlooking secular factors, such as the effects of rising debt

 

PGIM Government Income Fund

    9  


Strategy and Performance Overview (continued)

 

  levels on growth rates and deteriorating demographics, that drove rates lower over the past several decades. The COVID-19 pandemic may make the effects from these factors even more pronounced in the years ahead. Therefore, PGIM Fixed Income remains constructive on duration.

 

   

As 2021 commenced, US MBS market valuations were firm relative to US Treasuries but remained wider than prior periods of balance sheet expansion by the Fed. The Fed is the market’s largest buyer and appears set to maintain its activity, which is PGIM Fixed Income’s base case through the second half of the year, given the Fed’s pledge to increase its MBS holdings by at least $40 billion per month until the economy reaches maximum employment and price stability goals. As of the end of the period, net US Fed agency MBS purchases totaled $1.7 trillion. Away from the Fed, MBS demand may persist on the potential for increased activity from yield-sensitive buyers, in PGIM Fixed Income’s view, particularly in a scenario where rates move slightly higher.

 

   

CMBS conduit AAA spreads are below pre-COVID-19 levels and held up well during the rate sell-off in February 2021 due to limited supply in both the secondary and new-issue markets. With the refinance market beginning to open for commercial real estate (CRE) outside of hotel and retail properties, PGIM Fixed Income believes conduit supply could slightly increase in the second quarter of 2021. PGIM Fixed Income continues to favor well-enhanced CMBS tranches and is wary of chasing conduit mezzanine tranches given structural leverage and CRE uncertainty, with risks in hotels and class-B and class-C malls of particular concern.

 

   

PGIM Fixed Income continues to find both AAA and AA CLOs attractive at current spread levels and believes single A-rated tranches, at times, may also offer good value as a surrogate for loans themselves. Down the stack, PGIM Fixed Income remains wary of the value in BBB- and lower-rated tranches as the market does not appear to be pricing in the potential for greater losses in the underlying collateral given the overwhelming demand for yield.

 

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Fees and Expenses (unaudited)

 

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

 

The example is based on an investment of $1,000 held through the six-month period ended February 28, 2021. The example is for illustrative purposes only; you should consult the Fund’s Prospectus for information on initial and subsequent minimum investment requirements.

 

Actual Expenses

The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.

 

Hypothetical Example for Comparison Purposes

The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

 

The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of PGIM funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses paid over the period

 

PGIM Government Income Fund

    11  


Fees and Expenses (continued)

 

and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information provided in the expense table. Additional fees have the effect of reducing investment returns.

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

       
PGIM Government
Income Fund
  Beginning Account
Value
September 1, 2020
   

Ending Account
Value

February 28, 2021

    Annualized
Expense Ratio
Based on the
Six-Month Period
    Expenses Paid
During  the
Six-Month Period*
 
Class A   Actual   $ 1,000.00     $ 981.10       1.00   $ 4.91  
  Hypothetical   $ 1,000.00     $ 1,019.84       1.00   $ 5.01  
Class C   Actual   $ 1,000.00     $ 976.70       1.73   $ 8.48  
  Hypothetical   $ 1,000.00     $ 1,016.22       1.73   $ 8.65  
Class R   Actual   $ 1,000.00     $ 978.90       1.26   $ 6.18  
  Hypothetical   $ 1,000.00     $ 1,018.55       1.26   $ 6.31  
Class Z   Actual   $ 1,000.00     $ 983.60       0.48   $ 2.36  
  Hypothetical   $ 1,000.00     $ 1,022.41       0.48   $ 2.41  
Class R6   Actual   $ 1,000.00     $ 983.60       0.47   $ 2.31  
    Hypothetical   $ 1,000.00     $ 1,022.46       0.47   $ 2.36  

 

*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 181 days in the six-month period ended February 28, 2021, and divided by the 365 days in the Fund’s fiscal year ended February 28, 2021 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.

 

12  

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Schedule of Investments

as of February 28, 2021

 

  Description   

Interest      

Rate

  

Maturity    

Date

  

    Principal    

Amount

(000)#

               Value            

LONG-TERM INVESTMENTS    100.4%

           

ASSET-BACKED SECURITIES    7.5%

           

Collateralized Loan Obligations

                           

AGL Core CLO Ltd. (Cayman Islands),

           

Series 2019-02A, Class A1, 144A, 3 Month LIBOR + 1.390% (Cap N/A, Floor 1.390%)

   1.614%(c)    04/20/32      2,000      $ 2,004,453  

Series 2020-04A, Class A, 144A, 3 Month LIBOR + 2.210% (Cap N/A, Floor 2.210%)

   2.434(c)    04/20/28      6,000        5,994,709  

Atlas Senior Loan Fund Ltd. (Cayman Islands),

           

Series 2014-01A, Class AR2, 144A, 3 Month LIBOR + 1.260% (Cap N/A, Floor 0.000%)

   1.483(c)    07/16/29      3,450        3,446,202  

Battalion CLO Ltd. (Cayman Islands),

           

Series 2018-12A, Class A2R, 144A, 3 Month LIBOR + 1.450% (Cap N/A, Floor 1.450%)

   1.672(c)    05/17/31      4,500        4,494,197  

Series 2020-15A, Class A1, 144A, 3 Month LIBOR + 1.350% (Cap N/A, Floor 1.350%)

   1.573(c)    01/17/33      2,250        2,244,705  

Canyon CLO Ltd. (Cayman Islands),

           

Series 2020-01A, Class A, 144A, 3 Month LIBOR + 1.920% (Cap N/A, Floor 1.920%)

   2.161(c)    07/15/28      3,538        3,538,347  

ICG US CLO Ltd. (Cayman Islands),

           

Series 2019-01A, Class A1A, 144A, 3 Month LIBOR + 1.380% (Cap N/A, Floor 1.380%)

   1.595(c)    10/26/32      4,000        4,011,601  

KKR CLO Ltd. (Cayman Islands),

           

Series 30A, Class A1, 144A, 3 Month LIBOR + 1.500% (Cap N/A, Floor 1.500%)

   1.736(c)    10/17/31      4,000        3,997,182  

Octagon Investment Partners 45 Ltd. (Cayman Islands),

           

Series 2019-01A, Class A, 144A, 3 Month LIBOR + 1.330% (Cap N/A, Floor 1.330%)

   1.571(c)    10/15/32      6,000        5,998,383  

Race Point CLO Ltd. (Cayman Islands),

           

Series 2015-09A, Class A1AR, 144A, 3 Month LIBOR + 1.210% (Cap N/A, Floor 0.000%)

   1.451(c)    10/15/30      1,989        1,988,107  

Trimaran Cavu Ltd. (Cayman Islands),

           

Series 2019-01A, Class A1, 144A, 3 Month LIBOR + 1.460% (Cap N/A, Floor 1.460%)

   1.684(c)    07/20/32      4,000        3,998,368  

Trinitas CLO Ltd. (Cayman Islands),

           

Series 2016-05A, Class ARR, 144A

   0.000(cc)    10/25/28      2,850        2,846,885  

Wellfleet CLO Ltd. (Cayman Islands),

           

Series 2015-01A, Class AR3, 144A, 3 Month LIBOR + 1.280% (Cap N/A, Floor 1.280%)

   1.504(c)    07/20/29      1,968        1,968,183  

 

See Notes to Financial Statements.

PGIM Government Income Fund    13


Schedule of Investments  (continued)

as of February 28, 2021

 

  Description   

Interest      

Rate

  

Maturity    

Date

  

    Principal    

Amount

(000)#

               Value            

ASSET-BACKED SECURITIES (Continued)

           

Collateralized Loan Obligations (cont’d.)

                           

York CLO Ltd. (Cayman Islands),

           

Series 2020-01A, Class A1, 144A, 3 Month LIBOR + 1.500% (Cap N/A, Floor 1.500%)

   1.669%(c)    04/20/32      1,500      $ 1,499,227  
           

 

 

 

TOTAL ASSET-BACKED SECURITIES

           

(cost $46,588,257)

              48,030,549  
           

 

 

 

COMMERCIAL MORTGAGE-BACKED SECURITIES    11.8%

           

BANK,

           

Series 2017-BNK05, Class A3

   3.020    06/15/60      3,600        3,792,135  

Barclays Commercial Mortgage Trust,

           

Series 2019-C04, Class A4

   2.661    08/15/52      6,000        6,310,091  

Fannie Mae-Aces,

           

Series 2012-M02, Class A2

   2.717    02/25/22      92        93,252  

Series 2018-M14, Class A1

   3.578(cc)    08/25/28      1,480        1,641,400  

FHLMC Multifamily Structured Pass-Through Certificates,

           

Series K0019, Class X1, IO

   1.585(cc)    03/25/22      21,829        224,387  

Series K0020, Class X1, IO

   1.341(cc)    05/25/22      12,788        167,009  

Series K0021, Class X1, IO

   1.401(cc)    06/25/22      14,268        180,742  

Series K0025, Class X1, IO

   0.796(cc)    10/25/22      36,179        370,689  

Series K0060, Class AM

   3.300(cc)    10/25/26      3,860        4,322,540  

Series K0064, Class AM

   3.327(cc)    03/25/27      2,100        2,348,647  

Series K0068, Class AM

   3.315    08/25/27      3,200        3,588,428  

Series K0076, Class AM

   3.900    04/25/28      750        865,921  

Series K0077, Class AM

   3.850(cc)    05/25/28      310        361,626  

Series K0078, Class AM

   3.920    06/25/28      925        1,080,219  

Series K0079, Class AM

   3.930    06/25/28      1,225        1,426,492  

Series K0080, Class AM

   3.986(cc)    07/25/28      3,300        3,868,996  

Series K0081, Class AM

   3.900(cc)    08/25/28      2,600        3,049,235  

Series K0083, Class AM

   4.030(cc)    10/25/28      450        529,224  

Series K0084, Class AM

   3.880(cc)    10/25/28      2,200        2,569,351  

Series K0085, Class AM

   4.060(cc)    10/25/28      1,100        1,294,828  

Series K0086, Class A2

   3.859(cc)    11/25/28      2,500        2,928,529  

Series K0086, Class AM

   3.919(cc)    12/25/28      350        410,163  

Series K0087, Class AM

   3.832(cc)    12/25/28      400        464,778  

Series K0088, Class AM

   3.761(cc)    01/25/29      880        1,024,223  

Series K0090, Class AM

   3.492(cc)    03/25/29      1,450        1,653,453  

Series K0091, Class AM

   3.566    03/25/29      1,650        1,898,593  

Series K0151, Class A3

   3.511    04/25/30      900        1,030,068  

Series K0152, Class A2

   3.080    01/25/31      375        417,191  

Series K0157, Class A2

   3.990(cc)    05/25/33      2,900        3,483,944  

 

See Notes to Financial Statements.

 

14


    

    

 

  Description   

Interest      

Rate

  

Maturity    

Date

  

    Principal    

Amount

(000)#

               Value            

COMMERCIAL MORTGAGE-BACKED SECURITIES (Continued)

        

FHLMC Multifamily Structured Pass-Through Certificates, (cont’d.)

        

Series K0157, Class A3

   3.990%(cc)    08/25/33      755      $ 907,003  

Series K0158, Class A2

   3.900(cc)    12/25/30      1,275        1,500,019  

Series K1513, Class A3

   2.797    08/25/34      6,500        7,101,573  

Series K1514, Class A2

   2.859    10/25/34      5,217        5,733,858  

Series KC03, Class A2

   3.499    01/25/26      1,100        1,185,825  

Series W5FX, Class AFX

   3.336(cc)    04/25/28      1,970        2,137,371  

JPMBB Commercial Mortgage Securities Trust,

           

Series 2016-C01, Class A3

   3.515    03/15/49      2,500        2,593,052  

Morgan Stanley Bank of America Merrill Lynch Trust,

        

Series 2013-C09, Class A3

   2.834    05/15/46      772        802,522  

Wells Fargo Commercial Mortgage Trust,

           

Series 2015-LC22, Class A3

   3.572    09/15/58      2,067        2,269,435  
           

 

 

 

TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES

        

(cost $69,667,787)

              75,626,812  
           

 

 

 

CORPORATE BONDS    0.6%

           

Diversified Financial Services

                           

Private Export Funding Corp.,

           

U.S. Gov’t. Gtd. Notes, Series BB

   4.300    12/15/21      1,210        1,246,556  

U.S. Gov’t. Gtd. Notes, Series KK

   3.550    01/15/24      2,085        2,263,862  
           

 

 

 

TOTAL CORPORATE BONDS

           

(cost $3,376,078)

              3,510,418  
           

 

 

 

RESIDENTIAL MORTGAGE-BACKED SECURITIES    0.0%

        

Merrill Lynch Mortgage Investors Trust,

           

Series 2003-E, Class A1, 1 Month LIBOR + 0.620% (Cap 11.750%, Floor 0.620%) 0.738(c)

   10/25/28      32        32,614  

Structured Adjustable Rate Mortgage Loan Trust,

           

Series 2004-01, Class 4A3

   2.549(cc)    02/25/34      139        140,364  
           

 

 

 

TOTAL RESIDENTIAL MORTGAGE-BACKED SECURITIES

        

(cost $171,197)

              172,978  
           

 

 

 

U.S. GOVERNMENT AGENCY OBLIGATIONS    42.8%

        

Fannie Mae Principal Strips, MTN

   2.001(s)    10/08/27      270        249,660  

Federal Home Loan Bank

   3.250    11/16/28      1,800        2,061,667  

Federal Home Loan Mortgage Corp.

   2.000    01/01/32      325        337,563  

Federal Home Loan Mortgage Corp.

   2.500    05/01/23      74        77,467  

Federal Home Loan Mortgage Corp.

   2.500    12/01/23      118        122,927  

Federal Home Loan Mortgage Corp.

   2.500    02/01/28      1,317        1,388,870  

Federal Home Loan Mortgage Corp.

   2.500    05/01/28      918        959,788  

 

See Notes to Financial Statements.

PGIM Government Income Fund    15


Schedule of Investments  (continued)

as of February 28, 2021

 

  Description   

Interest      

Rate

  

Maturity    

Date

  

    Principal    

Amount

(000)#

               Value            

U.S. GOVERNMENT AGENCY OBLIGATIONS (Continued)

           

Federal Home Loan Mortgage Corp.

   2.500%    05/01/28      1,127      $ 1,179,047  

Federal Home Loan Mortgage Corp.

   2.500    03/01/30      734        777,615  

Federal Home Loan Mortgage Corp.

   2.500    09/01/31      466        487,875  

Federal Home Loan Mortgage Corp.

   2.500    10/01/32      547        578,598  

Federal Home Loan Mortgage Corp.

   2.500    11/01/46      1,619        1,685,769  

Federal Home Loan Mortgage Corp.

   3.000    10/01/28      127        135,393  

Federal Home Loan Mortgage Corp.

   3.000    06/01/29      385        411,231  

Federal Home Loan Mortgage Corp.

   3.000    12/01/30      469        501,485  

Federal Home Loan Mortgage Corp.

   3.000    01/01/37      843        891,064  

Federal Home Loan Mortgage Corp.

   3.000    04/01/43      1,137        1,223,296  

Federal Home Loan Mortgage Corp.

   3.000    07/01/43      1,293        1,381,403  

Federal Home Loan Mortgage Corp.

   3.000    10/01/46      544        572,778  

Federal Home Loan Mortgage Corp.

   3.000    11/01/46      507        534,719  

Federal Home Loan Mortgage Corp.

   3.000    12/01/46      478        507,798  

Federal Home Loan Mortgage Corp.

   3.000    01/01/47      1,045        1,109,103  

Federal Home Loan Mortgage Corp.

   3.000    03/01/47      354        372,892  

Federal Home Loan Mortgage Corp.

   3.000    07/01/49      4,000        4,189,889  

Federal Home Loan Mortgage Corp.

   3.000    08/01/49      83        87,102  

Federal Home Loan Mortgage Corp.

   3.000    11/01/49      1,565        1,636,660  

Federal Home Loan Mortgage Corp.

   3.000    06/01/50      1,210        1,266,837  

Federal Home Loan Mortgage Corp.

   3.500    11/01/28      799        867,456  

Federal Home Loan Mortgage Corp.

   3.500    11/01/37      383        409,300  

Federal Home Loan Mortgage Corp.

   3.500    06/01/42      937        1,016,950  

Federal Home Loan Mortgage Corp.

   3.500    06/01/43      666        722,719  

Federal Home Loan Mortgage Corp.

   3.500    07/01/43      1,850        2,012,643  

Federal Home Loan Mortgage Corp.

   3.500    07/01/47      2,851        3,046,662  

Federal Home Loan Mortgage Corp.

   3.500    08/01/47      2,179        2,321,671  

Federal Home Loan Mortgage Corp.

   3.500    10/01/47      191        203,825  

Federal Home Loan Mortgage Corp.

   4.000    06/01/26      57        60,312  

Federal Home Loan Mortgage Corp.

   4.000    09/01/26      167        178,516  

Federal Home Loan Mortgage Corp.

   4.000    11/01/39      733        813,376  

Federal Home Loan Mortgage Corp.

   4.000    09/01/40      431        473,994  

Federal Home Loan Mortgage Corp.

   4.000    12/01/40      265        293,611  

Federal Home Loan Mortgage Corp.

   4.000    12/01/40      359        395,030  

Federal Home Loan Mortgage Corp.

   4.000    04/01/42      630        698,524  

Federal Home Loan Mortgage Corp.

   4.000    04/01/42      758        836,326  

Federal Home Loan Mortgage Corp.

   4.000    05/01/46      1,001        1,090,686  

Federal Home Loan Mortgage Corp.

   4.000    08/01/46      271        296,998  

Federal Home Loan Mortgage Corp.

   4.000    12/01/46      234        254,281  

Federal Home Loan Mortgage Corp.

   4.000    07/01/47      572        618,432  

Federal Home Loan Mortgage Corp.

   4.000    08/01/47      218        235,521  

Federal Home Loan Mortgage Corp.

   4.000    08/01/47      597        645,112  

Federal Home Loan Mortgage Corp.

   4.000    06/01/48      151        161,763  

Federal Home Loan Mortgage Corp.

   4.000    11/01/48      299        320,509  

Federal Home Loan Mortgage Corp.

   4.500    09/01/39      992        1,114,896  

 

See Notes to Financial Statements.

 

16


    

    

 

  Description   

Interest      

Rate

  

Maturity    

Date

  

    Principal    

Amount

(000)#

               Value            

U.S. GOVERNMENT AGENCY OBLIGATIONS (Continued)

           

Federal Home Loan Mortgage Corp.

   4.500%    07/01/47      200      $ 218,606  

Federal Home Loan Mortgage Corp.

   4.500    07/01/47      220        240,994  

Federal Home Loan Mortgage Corp.

   4.500    08/01/47      695        763,005  

Federal Home Loan Mortgage Corp.

   5.000    06/01/33      556        638,987  

Federal Home Loan Mortgage Corp.

   5.000    03/01/34      60        69,391  

Federal Home Loan Mortgage Corp.

   5.000    05/01/34      48        56,403  

Federal Home Loan Mortgage Corp.

   5.000    05/01/34      575        665,778  

Federal Home Loan Mortgage Corp.

   5.000    02/01/48      237        264,917  

Federal Home Loan Mortgage Corp.

   5.500    05/01/37      75        87,925  

Federal Home Loan Mortgage Corp.

   5.500    01/01/38      65        76,530  

Federal Home Loan Mortgage Corp.

   6.000    12/01/33      35        41,065  

Federal Home Loan Mortgage Corp.

   6.000    09/01/34      133        150,075  

Federal Home Loan Mortgage Corp.

   6.250    07/15/32      40        59,401  

Federal Home Loan Mortgage Corp.

   6.500    09/01/32      37        41,837  

Federal Home Loan Mortgage Corp.

   6.500    09/01/32      76        85,340  

Federal Home Loan Mortgage Corp.

   7.000    09/01/32      28        28,838  

Federal Home Loan Mortgage Corp.

   8.000    08/01/22      1        1,054  

Federal Home Loan Mortgage Corp., MTN

   1.899(s)    11/15/38      2,500        1,697,314  

Federal National Mortgage Assoc.

   0.875    08/05/30      970        916,784  

Federal National Mortgage Assoc.

   1.500    TBA      5,000        4,912,305  

Federal National Mortgage Assoc.

   2.000    08/01/31      405        420,012  

Federal National Mortgage Assoc.

   2.000    06/01/40      989        1,005,834  

Federal National Mortgage Assoc.

   2.000    02/01/41      6,920        7,097,409  

Federal National Mortgage Assoc.

   2.000    10/01/50      7,514        7,595,243  

Federal National Mortgage Assoc.

   2.000    01/01/51      1,500        1,516,970  

Federal National Mortgage Assoc.

   2.500    TBA(tt)      1,900        1,969,766  

Federal National Mortgage Assoc.

   2.500    TBA      10,500        10,863,193  

Federal National Mortgage Assoc.

   2.500    06/01/28      422        442,142  

Federal National Mortgage Assoc.

   2.500    08/01/28      436        456,477  

Federal National Mortgage Assoc.

   2.500    11/01/28      965        1,009,029  

Federal National Mortgage Assoc.

   2.500    08/01/29      91        95,299  

Federal National Mortgage Assoc.

   2.500    08/01/31      438        458,511  

Federal National Mortgage Assoc.

   2.500    11/01/31      277        293,315  

Federal National Mortgage Assoc.

   2.500    02/01/43      210        219,985  

Federal National Mortgage Assoc.

   2.500    12/01/46      957        996,924  

Federal National Mortgage Assoc.

   2.500    03/01/50      374        388,415  

Federal National Mortgage Assoc.

   2.500    05/01/50      1,561        1,619,782  

Federal National Mortgage Assoc.

   2.500    06/01/50      921        955,871  

Federal National Mortgage Assoc.

   2.500    08/01/50      623        646,262  

Federal National Mortgage Assoc.

   2.500    09/01/50      6,675        6,927,664  

Federal National Mortgage Assoc.

   2.500    10/01/50      6,274        6,510,639  

Federal National Mortgage Assoc.

   3.000    01/01/27      345        366,567  

Federal National Mortgage Assoc.

   3.000    08/01/28      724        765,915  

Federal National Mortgage Assoc.

   3.000    02/01/31      672        710,474  

Federal National Mortgage Assoc.

   3.000    11/01/36      323        337,885  

 

See Notes to Financial Statements.

PGIM Government Income Fund    17


Schedule of Investments  (continued)

as of February 28, 2021

 

  Description   

Interest      

Rate

  

Maturity    

Date

  

    Principal    

Amount

(000)#

               Value            

U.S. GOVERNMENT AGENCY OBLIGATIONS (Continued)

           

Federal National Mortgage Assoc.

   3.000%    12/01/42      1,089      $ 1,162,990  

Federal National Mortgage Assoc.

   3.000    02/01/43      521        556,239  

Federal National Mortgage Assoc.

   3.000    03/01/43      351        380,803  

Federal National Mortgage Assoc.

   3.000    04/01/43      530        571,069  

Federal National Mortgage Assoc.

   3.000    06/01/43      257        273,358  

Federal National Mortgage Assoc.

   3.000    06/01/43      528        560,782  

Federal National Mortgage Assoc.

   3.000    07/01/43      1,690        1,805,218  

Federal National Mortgage Assoc.

   3.000    09/01/46      1,660        1,748,471  

Federal National Mortgage Assoc.

   3.000    11/01/46      1,785        1,880,396  

Federal National Mortgage Assoc.

   3.000    11/01/46      1,927        2,045,357  

Federal National Mortgage Assoc.

   3.000    01/01/47      230        242,836  

Federal National Mortgage Assoc.

   3.000    04/01/47      3,844        4,053,562  

Federal National Mortgage Assoc.

   3.000    12/01/49      678        716,130  

Federal National Mortgage Assoc.

   3.000    12/01/49      1,441        1,507,490  

Federal National Mortgage Assoc.

   3.000    01/01/50      28        29,164  

Federal National Mortgage Assoc.

   3.000    01/01/50      83        86,870  

Federal National Mortgage Assoc.

   3.000    06/01/50      581        609,174  

Federal National Mortgage Assoc.

   3.000    06/01/50      1,769        1,853,623  

Federal National Mortgage Assoc.

   3.500    12/01/30      65        70,371  

Federal National Mortgage Assoc.

   3.500    11/01/32      2,193        2,361,230  

Federal National Mortgage Assoc.

   3.500    02/01/33      118        126,504  

Federal National Mortgage Assoc.

   3.500    05/01/33      222        237,447  

Federal National Mortgage Assoc.

   3.500    10/01/41      1,349        1,463,938  

Federal National Mortgage Assoc.

   3.500    12/01/41      400        434,025  

Federal National Mortgage Assoc.

   3.500    03/01/42      413        448,763  

Federal National Mortgage Assoc.

   3.500    05/01/42      1,892        2,053,546  

Federal National Mortgage Assoc.

   3.500    07/01/42      663        718,940  

Federal National Mortgage Assoc.

   3.500    12/01/42      1,240        1,352,714  

Federal National Mortgage Assoc.

   3.500    03/01/43      527        574,949  

Federal National Mortgage Assoc.

   3.500    06/01/45      3,046        3,282,510  

Federal National Mortgage Assoc.

   3.500    01/01/46      870        933,077  

Federal National Mortgage Assoc.

   3.500    12/01/46      1,478        1,584,146  

Federal National Mortgage Assoc.

   3.500    11/01/47      3,546        3,772,533  

Federal National Mortgage Assoc.

   3.500    01/01/48      1,291        1,368,990  

Federal National Mortgage Assoc.

   3.500    03/01/48      3,361        3,578,308  

Federal National Mortgage Assoc.

   3.500    04/01/48      2,730        2,898,198  

Federal National Mortgage Assoc.

   3.500    11/01/48      1,924        2,042,312  

Federal National Mortgage Assoc.

   4.000    09/01/40      711        784,859  

Federal National Mortgage Assoc.

   4.000    01/01/41      931        1,023,305  

Federal National Mortgage Assoc.

   4.000    09/01/44      660        725,080  

Federal National Mortgage Assoc.

   4.000    06/01/47      2,535        2,747,665  

Federal National Mortgage Assoc.

   4.000    06/01/47      2,892        3,129,943  

Federal National Mortgage Assoc.

   4.000    08/01/47      619        670,483  

Federal National Mortgage Assoc.

   4.000    09/01/47      3,508        3,796,836  

Federal National Mortgage Assoc.

   4.000    10/01/47      197        212,484  

 

See Notes to Financial Statements.

 

18


    

    

 

  Description   

Interest      

Rate

  

Maturity    

Date

  

    Principal    

Amount

(000)#

              Value            

U.S. GOVERNMENT AGENCY OBLIGATIONS (Continued)

          

Federal National Mortgage Assoc.

   4.000%    10/01/47      1,755     $ 1,895,680  

Federal National Mortgage Assoc.

   4.000    11/01/47      2,080       2,247,919  

Federal National Mortgage Assoc.

   4.000    12/01/47      437       472,382  

Federal National Mortgage Assoc.

   4.000    06/01/48      220       237,246  

Federal National Mortgage Assoc.

   4.500    04/01/41      757       845,940  

Federal National Mortgage Assoc.

   4.500    05/01/41      493       554,995  

Federal National Mortgage Assoc.

   4.500    01/01/45      201       225,978  

Federal National Mortgage Assoc.

   4.500    12/01/47      1,646       1,795,511  

Federal National Mortgage Assoc.

   4.500    06/01/48      430       467,955  

Federal National Mortgage Assoc.

   4.500    10/01/48      1,803       1,964,203  

Federal National Mortgage Assoc.

   5.000    12/01/31      60       66,732  

Federal National Mortgage Assoc.

   5.000    03/01/34      261       301,422  

Federal National Mortgage Assoc.

   5.000    07/01/35      102       118,707  

Federal National Mortgage Assoc.

   5.000    09/01/35      62       72,325  

Federal National Mortgage Assoc.

   5.000    11/01/35      70       81,427  

Federal National Mortgage Assoc.

   5.000    05/01/36      40       46,402  

Federal National Mortgage Assoc.

   5.500    02/01/34      286       333,444  

Federal National Mortgage Assoc.

   5.500    09/01/34      504       588,959  

Federal National Mortgage Assoc.

   5.500    02/01/35      387       445,860  

Federal National Mortgage Assoc.

   5.500    06/01/35      56       62,137  

Federal National Mortgage Assoc.

   5.500    06/01/35      158       178,255  

Federal National Mortgage Assoc.

   5.500    09/01/35      94       105,162  

Federal National Mortgage Assoc.

   5.500    09/01/35      237       268,393  

Federal National Mortgage Assoc.

   5.500    10/01/35      268       309,822  

Federal National Mortgage Assoc.

   5.500    11/01/35      254       287,422  

Federal National Mortgage Assoc.

   5.500    11/01/35      556       647,811  

Federal National Mortgage Assoc.

   5.500    11/01/36      7       7,711  

Federal National Mortgage Assoc.

   6.000    08/01/21      1       1,213  

Federal National Mortgage Assoc.

   6.000    09/01/21      1       1,330  

Federal National Mortgage Assoc.

   6.000    07/01/22      —(r     416  

Federal National Mortgage Assoc.

   6.000    09/01/33      1       569  

Federal National Mortgage Assoc.

   6.000    11/01/33      —(r     460  

Federal National Mortgage Assoc.

   6.000    02/01/34      —(r     281  

Federal National Mortgage Assoc.

   6.000    06/01/34      —(r     141  

Federal National Mortgage Assoc.

   6.000    09/01/34      —(r     218  

Federal National Mortgage Assoc.

   6.000    09/01/34      15       17,539  

Federal National Mortgage Assoc.

   6.000    09/01/34      20       22,997  

Federal National Mortgage Assoc.

   6.000    11/01/34      4       4,279  

Federal National Mortgage Assoc.

   6.000    11/01/34      27       31,488  

Federal National Mortgage Assoc.

   6.000    02/01/35      —(r     516  

Federal National Mortgage Assoc.

   6.000    03/01/35      11       12,382  

Federal National Mortgage Assoc.

   6.000    04/01/35      1       668  

Federal National Mortgage Assoc.

   6.000    12/01/35      60       67,813  

Federal National Mortgage Assoc.

   6.000    01/01/36      160       180,931  

Federal National Mortgage Assoc.

   6.000    05/01/36      71       84,777  

 

See Notes to Financial Statements.

PGIM Government Income Fund    19


Schedule of Investments  (continued)

as of February 28, 2021

 

  Description   

Interest      

Rate

  

Maturity    

Date

  

    Principal    

Amount

(000)#

               Value            

U.S. GOVERNMENT AGENCY OBLIGATIONS (Continued)

           

Federal National Mortgage Assoc.

   6.000%    05/01/36      377      $ 452,770  

Federal National Mortgage Assoc.

   6.250    05/15/29      100        137,839  

Federal National Mortgage Assoc.

   6.500    07/01/32      399        468,258  

Federal National Mortgage Assoc.

   6.500    08/01/32      190        217,464  

Federal National Mortgage Assoc.

   6.500    09/01/32      75        86,347  

Federal National Mortgage Assoc.

   6.500    10/01/32      77        88,597  

Federal National Mortgage Assoc.

   6.500    10/01/32      472        560,996  

Federal National Mortgage Assoc.

   6.500    10/01/37      268        320,210  

Federal National Mortgage Assoc.

   6.625    11/15/30      580        847,143  

Federal National Mortgage Assoc.

   7.000    05/01/24      6        5,966  

Federal National Mortgage Assoc.

   7.000    05/01/24      9        9,312  

Federal National Mortgage Assoc.

   7.000    05/01/24      11        11,017  

Federal National Mortgage Assoc.

   7.000    05/01/24      41        44,020  

Federal National Mortgage Assoc.

   7.000    12/01/31      238        277,359  

Federal National Mortgage Assoc.

   7.000    09/01/33      61        63,499  

Federal National Mortgage Assoc.

   7.000    11/01/33      64        66,146  

Federal National Mortgage Assoc.

   9.000    04/01/25      2        2,119  

Federal National Mortgage Assoc.

   9.500    01/01/25      1        628  

Federal National Mortgage Assoc.

   9.500    01/01/25      2        1,613  

Federal National Mortgage Assoc.

   9.500    01/01/25      5        5,181  

Federal National Mortgage Assoc.

   9.500    02/01/25      1        909  

Government National Mortgage Assoc.

   2.000    TBA      7,000        7,104,727  

Government National Mortgage Assoc.

   2.500    TBA      8,500        8,806,797  

Government National Mortgage Assoc.

   2.500    12/20/46      328        342,509  

Government National Mortgage Assoc.

   3.000    03/15/45      1,168        1,226,151  

Government National Mortgage Assoc.

   3.000    07/20/45      2,589        2,741,587  

Government National Mortgage Assoc.

   3.000    07/20/46      1,347        1,412,817  

Government National Mortgage Assoc.

   3.000    08/20/46      2,506        2,652,223  

Government National Mortgage Assoc.

   3.000    10/20/46      201        212,404  

Government National Mortgage Assoc.

   3.000    02/20/47      3,481        3,681,236  

Government National Mortgage Assoc.

   3.000    05/20/47      669        708,705  

Government National Mortgage Assoc.

   3.000    12/20/47      260        273,194  

Government National Mortgage Assoc.

   3.000    04/20/49      1,061        1,107,020  

Government National Mortgage Assoc.

   3.000    12/20/49      639        665,298  

Government National Mortgage Assoc.

   3.000    01/20/50      4,925        5,137,413  

Government National Mortgage Assoc.

   3.500    04/20/42      232        252,462  

Government National Mortgage Assoc.

   3.500    01/20/43      1,389        1,513,614  

Government National Mortgage Assoc.

   3.500    04/20/43      628        684,358  

Government National Mortgage Assoc.

   3.500    03/20/45      985        1,059,028  

Government National Mortgage Assoc.

   3.500    04/20/45      541        581,786  

Government National Mortgage Assoc.

   3.500    07/20/46      2,110        2,259,955  

Government National Mortgage Assoc.

   3.500    01/20/47      447        477,634  

Government National Mortgage Assoc.

   3.500    03/20/47      204        218,038  

Government National Mortgage Assoc.

   3.500    07/20/47      1,279        1,367,023  

Government National Mortgage Assoc.

   3.500    02/20/48      2,888        3,095,142  

 

See Notes to Financial Statements.

 

20


    

    

 

  Description   

Interest      

Rate

  

Maturity    

Date

  

    Principal    

Amount

(000)#

              Value            

U.S. GOVERNMENT AGENCY OBLIGATIONS (Continued)

          

Government National Mortgage Assoc.

   3.500%    11/20/48      746     $ 791,639  

Government National Mortgage Assoc.

   3.500    01/20/49      645       689,374  

Government National Mortgage Assoc.

   3.500    02/20/49      4,187       4,458,368  

Government National Mortgage Assoc.

   3.500    05/20/49      1,243       1,317,151  

Government National Mortgage Assoc.

   3.500    06/20/49      2,845       3,015,613  

Government National Mortgage Assoc.

   4.000    02/20/41      306       339,521  

Government National Mortgage Assoc.

   4.000    06/20/44      642       707,596  

Government National Mortgage Assoc.

   4.000    08/20/44      196       216,957  

Government National Mortgage Assoc.

   4.000    11/20/45      419       461,914  

Government National Mortgage Assoc.

   4.000    11/20/46      396       434,245  

Government National Mortgage Assoc.

   4.000    02/20/47      390       423,670  

Government National Mortgage Assoc.

   4.000    10/20/47      441       479,842  

Government National Mortgage Assoc.

   4.000    12/20/47      315       341,059  

Government National Mortgage Assoc.

   4.000    07/20/48      1,007       1,086,949  

Government National Mortgage Assoc.

   4.000    02/20/49      1,279       1,376,277  

Government National Mortgage Assoc.

   4.000    03/20/49      2,063       2,216,986  

Government National Mortgage Assoc.

   4.500    02/20/40      186       209,336  

Government National Mortgage Assoc.

   4.500    01/20/41      112       127,452  

Government National Mortgage Assoc.

   4.500    02/20/41      543       619,670  

Government National Mortgage Assoc.

   4.500    03/20/41      275       309,106  

Government National Mortgage Assoc.

   4.500    06/20/44      403       453,839  

Government National Mortgage Assoc.

   4.500    02/20/46      39       43,312  

Government National Mortgage Assoc.

   4.500    03/20/46      195       218,132  

Government National Mortgage Assoc.

   4.500    03/20/47      1,070       1,178,259  

Government National Mortgage Assoc.

   4.500    08/20/47      197       215,421  

Government National Mortgage Assoc.

   4.500    01/20/48      162       177,322  

Government National Mortgage Assoc.

   4.500    02/20/48      1,076       1,164,204  

Government National Mortgage Assoc.

   5.000    07/15/33      351       412,529  

Government National Mortgage Assoc.

   5.000    09/15/33      497       578,446  

Government National Mortgage Assoc.

   5.000    04/15/34      15       17,378  

Government National Mortgage Assoc.

   5.500    02/15/34      189       210,596  

Government National Mortgage Assoc.

   5.500    02/15/36      94       109,033  

Government National Mortgage Assoc.

   7.000    12/15/22      —(r     139  

Government National Mortgage Assoc.

   7.000    12/15/22      —(r     316  

Government National Mortgage Assoc.

   7.000    01/15/23      —(r     201  

Government National Mortgage Assoc.

   7.000    01/15/23      —(r     304  

Government National Mortgage Assoc.

   7.000    01/15/23      —(r     406  

Government National Mortgage Assoc.

   7.000    01/15/23      1       847  

Government National Mortgage Assoc.

   7.000    01/15/23      1       1,451  

Government National Mortgage Assoc.

   7.000    03/15/23      1       807  

Government National Mortgage Assoc.

   7.000    03/15/23      1       1,350  

Government National Mortgage Assoc.

   7.000    04/15/23      —(r     501  

Government National Mortgage Assoc.

   7.000    04/15/23      1       1,454  

Government National Mortgage Assoc.

   7.000    05/15/23      —(r     55  

Government National Mortgage Assoc.

   7.000    05/15/23      —(r     97  

 

See Notes to Financial Statements.

PGIM Government Income Fund    21


Schedule of Investments  (continued)

as of February 28, 2021

 

  Description   

Interest      

Rate

  

Maturity    

Date

  

    Principal    

Amount

(000)#

              Value            

U.S. GOVERNMENT AGENCY OBLIGATIONS (Continued)

          

Government National Mortgage Assoc.

   7.000%    05/15/23      —(r   $ 218  

Government National Mortgage Assoc.

   7.000    05/15/23      —(r     280  

Government National Mortgage Assoc.

   7.000    05/15/23      —(r     331  

Government National Mortgage Assoc.

   7.000    05/15/23      —(r     377  

Government National Mortgage Assoc.

   7.000    05/15/23      1       605  

Government National Mortgage Assoc.

   7.000    05/15/23      3       2,847  

Government National Mortgage Assoc.

   7.000    05/15/23      3       3,099  

Government National Mortgage Assoc.

   7.000    05/15/23      4       4,192  

Government National Mortgage Assoc.

   7.000    06/15/23      —(r     66  

Government National Mortgage Assoc.

   7.000    06/15/23      —(r     275  

Government National Mortgage Assoc.

   7.000    06/15/23      1       555  

Government National Mortgage Assoc.

   7.000    06/15/23      1       793  

Government National Mortgage Assoc.

   7.000    06/15/23      1       829  

Government National Mortgage Assoc.

   7.000    06/15/23      2       1,869  

Government National Mortgage Assoc.

   7.000    07/15/23      —(r     79  

Government National Mortgage Assoc.

   7.000    07/15/23      —(r     95  

Government National Mortgage Assoc.

   7.000    07/15/23      —(r     136  

Government National Mortgage Assoc.

   7.000    07/15/23      —(r     152  

Government National Mortgage Assoc.

   7.000    07/15/23      —(r     236  

Government National Mortgage Assoc.

   7.000    07/15/23      —(r     395  

Government National Mortgage Assoc.

   7.000    07/15/23      —(r     474  

Government National Mortgage Assoc.

   7.000    07/15/23      —(r     495  

Government National Mortgage Assoc.

   7.000    07/15/23      1       654  

Government National Mortgage Assoc.

   7.000    07/15/23      2       1,795  

Government National Mortgage Assoc.

   7.000    07/15/23      8       8,371  

Government National Mortgage Assoc.

   7.000    08/15/23      —(r     123  

Government National Mortgage Assoc.

   7.000    08/15/23      —(r     240  

Government National Mortgage Assoc.

   7.000    08/15/23      —(r     249  

Government National Mortgage Assoc.

   7.000    08/15/23      1       509  

Government National Mortgage Assoc.

   7.000    08/15/23      1       772  

Government National Mortgage Assoc.

   7.000    08/15/23      1       799  

Government National Mortgage Assoc.

   7.000    08/15/23      1       884  

Government National Mortgage Assoc.

   7.000    08/15/23      1       1,072  

Government National Mortgage Assoc.

   7.000    08/15/23      1       1,218  

Government National Mortgage Assoc.

   7.000    08/15/23      1       1,253  

Government National Mortgage Assoc.

   7.000    08/15/23      1       1,304  

Government National Mortgage Assoc.

   7.000    08/15/23      2       1,574  

Government National Mortgage Assoc.

   7.000    08/15/23      3       2,735  

Government National Mortgage Assoc.

   7.000    08/15/23      3       2,859  

Government National Mortgage Assoc.

   7.000    09/15/23      —(r     216  

Government National Mortgage Assoc.

   7.000    09/15/23      —(r     337  

Government National Mortgage Assoc.

   7.000    09/15/23      —(r     512  

Government National Mortgage Assoc.

   7.000    09/15/23      1       514  

Government National Mortgage Assoc.

   7.000    09/15/23      1       545  

Government National Mortgage Assoc.

   7.000    09/15/23      3       3,515  

 

See Notes to Financial Statements.

 

22


    

    

 

  Description   

Interest      

Rate

  

Maturity    

Date

  

    Principal    

Amount

(000)#

              Value            

U.S. GOVERNMENT AGENCY OBLIGATIONS (Continued)

          

Government National Mortgage Assoc.

   7.000%    09/15/23      13     $ 13,481  

Government National Mortgage Assoc.

   7.000    10/15/23      —(r     81  

Government National Mortgage Assoc.

   7.000    10/15/23      —(r     124  

Government National Mortgage Assoc.

   7.000    10/15/23      —(r     181  

Government National Mortgage Assoc.

   7.000    10/15/23      —(r     297  

Government National Mortgage Assoc.

   7.000    10/15/23      —(r     331  

Government National Mortgage Assoc.

   7.000    10/15/23      —(r     421  

Government National Mortgage Assoc.

   7.000    10/15/23      1       534  

Government National Mortgage Assoc.

   7.000    10/15/23      1       542  

Government National Mortgage Assoc.

   7.000    10/15/23      1       665  

Government National Mortgage Assoc.

   7.000    10/15/23      1       739  

Government National Mortgage Assoc.

   7.000    10/15/23      1       757  

Government National Mortgage Assoc.

   7.000    10/15/23      1       761  

Government National Mortgage Assoc.

   7.000    10/15/23      1       776  

Government National Mortgage Assoc.

   7.000    10/15/23      1       844  

Government National Mortgage Assoc.

   7.000    10/15/23      1       870  

Government National Mortgage Assoc.

   7.000    10/15/23      1       1,123  

Government National Mortgage Assoc.

   7.000    10/15/23      1       1,207  

Government National Mortgage Assoc.

   7.000    10/15/23      1       1,268  

Government National Mortgage Assoc.

   7.000    10/15/23      2       1,956  

Government National Mortgage Assoc.

   7.000    10/15/23      3       3,506  

Government National Mortgage Assoc.

   7.000    10/15/23      4       3,885  

Government National Mortgage Assoc.

   7.000    10/15/23      6       6,473  

Government National Mortgage Assoc.

   7.000    10/15/23      7       7,230  

Government National Mortgage Assoc.

   7.000    10/15/23      12       11,615  

Government National Mortgage Assoc.

   7.000    10/15/23      17       18,083  

Government National Mortgage Assoc.

   7.000    11/15/23      —(r     287  

Government National Mortgage Assoc.

   7.000    11/15/23      —(r     338  

Government National Mortgage Assoc.

   7.000    11/15/23      —(r     408  

Government National Mortgage Assoc.

   7.000    11/15/23      1       541  

Government National Mortgage Assoc.

   7.000    11/15/23      1       547  

Government National Mortgage Assoc.

   7.000    11/15/23      1       572  

Government National Mortgage Assoc.

   7.000    11/15/23      1       935  

Government National Mortgage Assoc.

   7.000    11/15/23      1       965  

Government National Mortgage Assoc.

   7.000    11/15/23      1       1,214  

Government National Mortgage Assoc.

   7.000    11/15/23      1       1,340  

Government National Mortgage Assoc.

   7.000    11/15/23      2       1,650  

Government National Mortgage Assoc.

   7.000    11/15/23      2       1,691  

Government National Mortgage Assoc.

   7.000    11/15/23      2       2,203  

Government National Mortgage Assoc.

   7.000    11/15/23      2       2,381  

Government National Mortgage Assoc.

   7.000    11/15/23      3       2,889  

Government National Mortgage Assoc.

   7.000    11/15/23      3       3,420  

Government National Mortgage Assoc.

   7.000    11/15/23      7       7,099  

Government National Mortgage Assoc.

   7.000    12/15/23      —(r     170  

Government National Mortgage Assoc.

   7.000    12/15/23      —(r     187  

 

See Notes to Financial Statements.

PGIM Government Income Fund    23


Schedule of Investments  (continued)

as of February 28, 2021

 

  Description   

Interest      

Rate

  

Maturity    

Date

  

    Principal    

Amount

(000)#

              Value            

U.S. GOVERNMENT AGENCY OBLIGATIONS (Continued)

          

Government National Mortgage Assoc.

   7.000%    12/15/23      —(r   $ 223  

Government National Mortgage Assoc.

   7.000    12/15/23      —(r     270  

Government National Mortgage Assoc.

   7.000    12/15/23      —(r     278  

Government National Mortgage Assoc.

   7.000    12/15/23      —(r     331  

Government National Mortgage Assoc.

   7.000    12/15/23      1       625  

Government National Mortgage Assoc.

   7.000    12/15/23      1       630  

Government National Mortgage Assoc.

   7.000    12/15/23      1       665  

Government National Mortgage Assoc.

   7.000    12/15/23      1       905  

Government National Mortgage Assoc.

   7.000    12/15/23      1       932  

Government National Mortgage Assoc.

   7.000    12/15/23      1       957  

Government National Mortgage Assoc.

   7.000    12/15/23      1       1,250  

Government National Mortgage Assoc.

   7.000    12/15/23      1       1,301  

Government National Mortgage Assoc.

   7.000    12/15/23      1       1,449  

Government National Mortgage Assoc.

   7.000    12/15/23      2       1,531  

Government National Mortgage Assoc.

   7.000    12/15/23      2       1,686  

Government National Mortgage Assoc.

   7.000    12/15/23      2       1,894  

Government National Mortgage Assoc.

   7.000    12/15/23      2       2,424  

Government National Mortgage Assoc.

   7.000    12/15/23      3       2,686  

Government National Mortgage Assoc.

   7.000    12/15/23      3       2,832  

Government National Mortgage Assoc.

   7.000    12/15/23      3       3,458  

Government National Mortgage Assoc.

   7.000    12/15/23      5       4,646  

Government National Mortgage Assoc.

   7.000    12/15/23      5       5,170  

Government National Mortgage Assoc.

   7.000    12/15/23      6       6,455  

Government National Mortgage Assoc.

   7.000    12/15/23      10       10,306  

Government National Mortgage Assoc.

   7.000    01/15/24      —(r     226  

Government National Mortgage Assoc.

   7.000    01/15/24      —(r     319  

Government National Mortgage Assoc.

   7.000    01/15/24      —(r     448  

Government National Mortgage Assoc.

   7.000    01/15/24      —(r     488  

Government National Mortgage Assoc.

   7.000    01/15/24      1       783  

Government National Mortgage Assoc.

   7.000    01/15/24      1       926  

Government National Mortgage Assoc.

   7.000    01/15/24      1       1,086  

Government National Mortgage Assoc.

   7.000    01/15/24      1       1,359  

Government National Mortgage Assoc.

   7.000    01/15/24      2       1,604  

Government National Mortgage Assoc.

   7.000    01/15/24      2       2,462  

Government National Mortgage Assoc.

   7.000    02/15/24      —(r     209  

Government National Mortgage Assoc.

   7.000    02/15/24      —(r     254  

Government National Mortgage Assoc.

   7.000    02/15/24      —(r     446  

Government National Mortgage Assoc.

   7.000    02/15/24      1       699  

Government National Mortgage Assoc.

   7.000    02/15/24      1       889  

Government National Mortgage Assoc.

   7.000    02/15/24      1       1,046  

Government National Mortgage Assoc.

   7.000    02/15/24      5       4,957  

Government National Mortgage Assoc.

   7.000    03/15/24      —(r     71  

Government National Mortgage Assoc.

   7.000    03/15/24      —(r     102  

Government National Mortgage Assoc.

   7.000    03/15/24      1       611  

Government National Mortgage Assoc.

   7.000    03/15/24      1       1,163  

 

See Notes to Financial Statements.

 

24


    

    

 

  Description   

Interest      

Rate

  

Maturity    

Date

  

    Principal    

Amount

(000)#

              Value            

U.S. GOVERNMENT AGENCY OBLIGATIONS (Continued)

          

Government National Mortgage Assoc.

   7.000%    04/15/24      —(r   $ 62  

Government National Mortgage Assoc.

   7.000    04/15/24      —(r     140  

Government National Mortgage Assoc.

   7.000    04/15/24      —(r     253  

Government National Mortgage Assoc.

   7.000    04/15/24      —(r     499  

Government National Mortgage Assoc.

   7.000    04/15/24      1       612  

Government National Mortgage Assoc.

   7.000    04/15/24      1       673  

Government National Mortgage Assoc.

   7.000    04/15/24      1       1,022  

Government National Mortgage Assoc.

   7.000    04/15/24      1       1,178  

Government National Mortgage Assoc.

   7.000    04/15/24      4       4,314  

Government National Mortgage Assoc.

   7.000    04/15/24      5       4,773  

Government National Mortgage Assoc.

   7.000    05/15/24      —(r     110  

Government National Mortgage Assoc.

   7.000    05/15/24      —(r     141  

Government National Mortgage Assoc.

   7.000    05/15/24      —(r     250  

Government National Mortgage Assoc.

   7.000    05/15/24      —(r     464  

Government National Mortgage Assoc.

   7.000    05/15/24      1       964  

Government National Mortgage Assoc.

   7.000    05/15/24      1       1,361  

Government National Mortgage Assoc.

   7.000    05/15/24      2       1,554  

Government National Mortgage Assoc.

   7.000    05/15/24      2       1,917  

Government National Mortgage Assoc.

   7.000    05/15/24      3       2,657  

Government National Mortgage Assoc.

   7.000    05/15/24      4       4,128  

Government National Mortgage Assoc.

   7.000    05/15/24      6       6,108  

Government National Mortgage Assoc.

   7.000    06/15/24      —(r     111  

Government National Mortgage Assoc.

   7.000    06/15/24      —(r     143  

Government National Mortgage Assoc.

   7.000    06/15/24      —(r     238  

Government National Mortgage Assoc.

   7.000    06/15/24      —(r     478  

Government National Mortgage Assoc.

   7.000    06/15/24      1       1,152  

Government National Mortgage Assoc.

   7.000    06/15/24      2       1,734  

Government National Mortgage Assoc.

   7.000    06/15/24      2       2,073  

Government National Mortgage Assoc.

   7.000    06/15/24      3       2,603  

Government National Mortgage Assoc.

   7.000    06/15/24      4       4,531  

Government National Mortgage Assoc.

   7.000    07/15/24      —(r     352  

Government National Mortgage Assoc.

   7.000    07/15/24      2       1,659  

Government National Mortgage Assoc.

   7.000    02/15/29      6       5,821  

Government National Mortgage Assoc.

   7.500    01/15/23      —(r     22  

Government National Mortgage Assoc.

   7.500    01/15/23      —(r     58  

Government National Mortgage Assoc.

   7.500    03/15/23      —(r     204  

Government National Mortgage Assoc.

   7.500    05/15/23      2       2,523  

Government National Mortgage Assoc.

   7.500    06/15/23      —(r     103  

Government National Mortgage Assoc.

   7.500    07/15/23      —(r     115  

Government National Mortgage Assoc.

   7.500    09/15/23      1       1,452  

Government National Mortgage Assoc.

   7.500    10/15/23      2       2,266  

Government National Mortgage Assoc.

   7.500    10/15/23      5       5,300  

Government National Mortgage Assoc.

   7.500    11/15/23      —(r     448  

Government National Mortgage Assoc.

   7.500    11/15/23      5       5,600  

Government National Mortgage Assoc.

   7.500    12/15/23      —(r     415  

 

See Notes to Financial Statements.

PGIM Government Income Fund    25


Schedule of Investments  (continued)

as of February 28, 2021

 

  Description   

Interest      

Rate

  

Maturity    

Date

  

    Principal    

Amount

(000)#

              Value            

U.S. GOVERNMENT AGENCY OBLIGATIONS (Continued)

          

Government National Mortgage Assoc.

   7.500%    12/15/23      1     $ 1,354  

Government National Mortgage Assoc.

   7.500    01/15/24      1       568  

Government National Mortgage Assoc.

   7.500    01/15/24      1       755  

Government National Mortgage Assoc.

   7.500    01/15/24      1       1,235  

Government National Mortgage Assoc.

   7.500    01/15/24      6       5,929  

Government National Mortgage Assoc.

   7.500    01/15/24      7       7,049  

Government National Mortgage Assoc.

   7.500    02/15/24      1       545  

Government National Mortgage Assoc.

   7.500    02/15/24      6       6,637  

Government National Mortgage Assoc.

   7.500    03/15/24      2       2,031  

Government National Mortgage Assoc.

   7.500    04/15/24      2       1,598  

Government National Mortgage Assoc.

   7.500    04/15/24      2       1,696  

Government National Mortgage Assoc.

   7.500    04/15/24      4       4,083  

Government National Mortgage Assoc.

   7.500    05/15/24      —(r     145  

Government National Mortgage Assoc.

   7.500    06/15/24      —(r     174  

Government National Mortgage Assoc.

   7.500    06/15/24      1       853  

Government National Mortgage Assoc.

   7.500    06/15/24      2       2,602  

Government National Mortgage Assoc.

   7.500    06/15/24      4       3,584  

Government National Mortgage Assoc.

   7.500    07/15/24      3       3,008  

Government National Mortgage Assoc.

   7.500    07/15/24      6       6,419  

Government National Mortgage Assoc.

   8.500    04/15/25      56       60,808  

Government National Mortgage Assoc.

   9.500    07/20/21      —(r     2  

Israel Government, AID Bond, U.S. Gov’t. Gtd. Notes

   5.500    09/18/33      500       707,222  

Resolution Funding Corp. Interest Strips, Bonds

   1.547(s)    04/15/28      900       818,113  

Resolution Funding Corp. Interest Strips, Bonds

   2.046(s)    01/15/30      280       237,688  

Resolution Funding Corp. Interest Strips, Bonds

   2.477(s)    01/15/29      500       435,526  

Resolution Funding Corp. Interest Strips, Bonds

   3.624(s)    04/15/30      1,000       852,043  

Resolution Funding Corp. Principal Strips, Bonds

   2.737(s)    01/15/30      1,540       1,333,454  

Resolution Funding Corp. Principal Strips, Bonds

   3.114(s)    04/15/30      2,280       1,957,520  

Tennessee Valley Authority, Sr. Unsec’d. Notes

   0.750    05/15/25      1,485       1,487,260  

Tennessee Valley Authority, Sr. Unsec’d. Notes

   2.875    02/01/27      335       371,656  

Tennessee Valley Authority, Sr. Unsec’d. Notes

   5.880    04/01/36      170       251,606  

Tennessee Valley Authority, Sr. Unsec’d. Notes

   6.750    11/01/25      1,300       1,652,143  

Tennessee Valley Authority, Sr. Unsec’d. Notes

   7.125    05/01/30      1,170       1,739,701  
          

 

 

 

TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS

          

(cost $267,387,459)

             273,953,560  
          

 

 

 

U.S. TREASURY OBLIGATIONS    37.7%

          

U.S. Treasury Bonds

   1.375    11/15/40      7,370       6,603,059  

U.S. Treasury Bonds

   1.625    11/15/50      1,110       988,247  

U.S. Treasury Bonds

   3.000    11/15/44      14,705       17,257,696  

U.S. Treasury Bonds

   3.125    08/15/44      8,300       9,932,766  

U.S. Treasury Bonds

   3.375    05/15/44      22,885       28,459,643  

U.S. Treasury Bonds

   3.375    11/15/48      6,600       8,390,250  

U.S. Treasury Bonds

   3.625    08/15/43(k)      18,395       23,700,808  

 

See Notes to Financial Statements.

 

26


    

    

 

  Description   

Interest      

Rate

  

Maturity    

Date

  

    Principal    

Amount

(000)#

               Value            

U.S. TREASURY OBLIGATIONS (Continued)

           

U.S. Treasury Bonds

   3.625%    02/15/44      7,315      $ 9,439,779  

U.S. Treasury Bonds

   3.750    11/15/43      27,745        36,415,312  

U.S. Treasury Notes

   0.750    01/31/28      17,100        16,696,547  

U.S. Treasury Notes

   1.125    02/15/31      110        107,336  

U.S. Treasury Notes

   2.875    05/15/28      11,400        12,784,031  

U.S. Treasury Strips Coupon

   0.768(s)    05/15/30      1,145        999,191  

U.S. Treasury Strips Coupon

   0.919(s)    02/15/29      8,675        7,783,440  

U.S. Treasury Strips Coupon

   1.020(s)    05/15/33      820        662,278  

U.S. Treasury Strips Coupon

   1.052(s)    05/15/29      10,710        9,568,716  

U.S. Treasury Strips Coupon

   1.122(s)    02/15/36      480        360,281  

U.S. Treasury Strips Coupon

   1.123(s)    05/15/36      815        607,748  

U.S. Treasury Strips Coupon

   1.225(s)    02/15/41      150        97,910  

U.S. Treasury Strips Coupon

   1.351(s)    08/15/43      350        213,773  

U.S. Treasury Strips Coupon

   1.389(s)    05/15/43      4,550        2,799,139  

U.S. Treasury Strips Coupon

   1.417(s)    02/15/38      810        574,246  

U.S. Treasury Strips Coupon

   1.450(s)    08/15/42      180        112,767  

U.S. Treasury Strips Coupon

   1.453(s)    02/15/39(k)      11,255        7,762,872  

U.S. Treasury Strips Coupon

   1.463(s)    11/15/42      475        295,892  

U.S. Treasury Strips Coupon

   1.505(s)    11/15/41      2,445        1,561,935  

U.S. Treasury Strips Coupon

   1.626(s)    08/15/35      320        243,237  

U.S. Treasury Strips Coupon

   1.677(s)    02/15/43(k)      19,800        12,259,758  

U.S. Treasury Strips Coupon

   1.775(s)    02/15/40      1,505        1,009,232  

U.S. Treasury Strips Coupon

   1.872(s)    05/15/31      1,100        933,023  

U.S. Treasury Strips Coupon

   1.982(s)    08/15/39      2,050        1,393,359  

U.S. Treasury Strips Coupon

   2.010(s)    08/15/30      1,585        1,371,211  

U.S. Treasury Strips Coupon

   2.056(s)    11/15/38      590        409,451  

U.S. Treasury Strips Coupon

   2.089(s)    11/15/35      1,525        1,146,848  

U.S. Treasury Strips Coupon

   2.172(s)    02/15/28      695        638,966  

U.S. Treasury Strips Coupon

   2.188(s)    05/15/39      1,505        1,031,572  

U.S. Treasury Strips Coupon

   2.228(s)    05/15/28      345        315,432  

U.S. Treasury Strips Coupon

   2.251(s)    08/15/40      2,200        1,457,156  

U.S. Treasury Strips Coupon

   2.353(s)    02/15/44      620        373,816  

U.S. Treasury Strips Coupon

   2.365(s)    05/15/44      2,275        1,363,223  

U.S. Treasury Strips Coupon

   2.365(s)    11/15/44      5,050        2,983,643  

U.S. Treasury Strips Coupon

   2.434(s)    11/15/45      590        340,702  

U.S. Treasury Strips Coupon

   2.436(s)    02/15/46      665        380,998  

U.S. Treasury Strips Coupon

   2.480(s)    11/15/43      13,768        8,312,968  

U.S. Treasury Strips Coupon

   3.117(s)    08/15/27      920        855,205  
           

 

 

 

TOTAL U.S. TREASURY OBLIGATIONS

           

(cost $252,348,515)

              240,995,462  
           

 

 

 

TOTAL LONG-TERM INVESTMENTS

           

(cost $639,539,293)

              642,289,779  
           

 

 

 

 

See Notes to Financial Statements.

PGIM Government Income Fund    27


Schedule of Investments  (continued)

as of February 28, 2021

 

  Description              Shares      Value  

SHORT-TERM INVESTMENTS    4.5%

           

AFFILIATED MUTUAL FUND    4.4%

           

PGIM Core Ultra Short Bond Fund

           

(cost $28,289,549)(wb)

           28,289,549      $ 28,289,549  
           

 

 

 

OPTION PURCHASED*~    0.1%

           

(cost $236,356)

              503,250  
           

 

 

 

TOTAL SHORT-TERM INVESTMENTS

           

(cost $28,525,905)

              28,792,799  
           

 

 

 

TOTAL INVESTMENTS, BEFORE OPTIONS WRITTEN    104.9%

           

(cost $668,065,198)

              671,082,578  
           

 

 

 

OPTIONS WRITTEN*~    (0.1)%

           

(premiums received $98,617)

              (278,313
           

 

 

 

TOTAL INVESTMENTS, NET OF OPTIONS WRITTEN    104.8%

           

(cost $667,966,581)

              670,804,265  

Liabilities in excess of other assets(z)    (4.8)%

              (30,881,871
           

 

 

 

NET ASSETS    100.0%

            $   639,922,394  
           

 

 

 

 

 

See the Glossary for a list of the abbreviation(s) used in the annual report:

USD—US Dollar

144A—Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and, pursuant to the requirements of Rule 144A, may not be resold except to qualified institutional buyers.

A—Annual payment frequency for swaps

Aces—Alternative Credit Enhancements Securities

AID—Agency for International Development

CLO—Collateralized Loan Obligation

CPI—Consumer Price Index

FHLMC—Federal Home Loan Mortgage Corporation

IO—Interest Only (Principal amount represents notional)

LIBOR—London Interbank Offered Rate

MTN—Medium Term Note

NSA—Non-Seasonally Adjusted

OTC—Over-the-counter

Strips—Separate Trading of Registered Interest and Principal of Securities

T—Swap payment upon termination

TBA—To Be Announced

USOIS—United States Overnight Index Swap

*

Non-income producing security.

#

Principal or notional amount is shown in U.S. dollars unless otherwise stated.

~

See tables subsequent to the Schedule of Investments for options detail.

(c)

Variable rate instrument. The interest rate shown reflects the rate in effect at February 28, 2021.

(cc)

Variable rate instrument. The rate shown is based on the latest available information as of February 28, 2021. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description.

 

See Notes to Financial Statements.

 

28


    

    

 

(k)

Represents security, or a portion thereof, segregated as collateral for centrally cleared/exchange-traded derivatives.

(r)

Principal or notional amount is less than $500 par.

(s)

Represents zero coupon bond or principal only security. Rate represents yield to maturity at purchase date.

(tt)

All or partial principal amount represents “TBA” mortgage dollar rolls. The aggregate mortgage dollar roll principal amount of 1,900,000 is 0.3% of net assets.

(wb)

PGIM Investments LLC, the manager of the Fund, also serves as manager of the PGIM Core Ultra Short Bond Fund.

(z)

Includes net unrealized appreciation/(depreciation) and/or market value of the below holdings which are excluded from the Schedule of Investments:

Forward Commitment Contracts

 

U.S. Government Agency Obligations

  

Interest

Rate

   Maturity
Date
     Settlement
Date
    Principal
Amount
(000)#
    Value  

Federal National Mortgage Assoc.

              

(proceeds receivable $1,510,078)

   2.000%      TBA        03/11/21         (1,500   $ (1,515,176
            

 

 

   

 

 

 

Options Purchased:

Exchange Traded

Description

   Call/
Put
   Expiration
Date
   Strike      Contracts      Notional
Amount
(000)#
     Value  

10 Year U.S. Treasury Notes Futures

   Put    05/21/21      $134.00        244        244       $ 503,250  
                 

 

 

 

(cost $236,356)

                 

Options Written:

Exchange Traded

Description

 

          Call/          

Put

   Expiration
Date
     Strike      Contracts      Notional
Amount
(000)#
     Value  

10 Year U.S. Treasury Notes Futures

  Put      05/21/21      $ 132.00        244        244      $ (278,313
                

 

 

 

(premiums received $98,617)

                

 

Futures contracts outstanding at February 28, 2021:

              

 

Number

of

Contracts

    

Type

 

 Expiration 

Date

   Current
Notional
Amount
     Value /
Unrealized
Appreciation
(Depreciation)
 
 

Long Positions:

       
  344      2 Year U.S. Treasury Notes   Jun. 2021    $ 75,943,376       $ (54,552
  904      5 Year U.S. Treasury Notes   Jun. 2021      112,067,750        (1,009,608
  816      10 Year U.S. Treasury Notes   Jun. 2021      108,298,500        (937,340
          

 

 

 
             (2,001,500
          

 

 

 
 

Short Positions:

       
  716      10 Year U.S. Ultra Treasury Notes   Jun. 2021      105,498,125        1,455,598  

 

See Notes to Financial Statements.

PGIM Government Income Fund    29


Schedule of Investments  (continued)

as of February 28, 2021

 

Futures contracts outstanding at February 28, 2021 (continued):

 

Number

of

Contracts

  

Type

 

 Expiration 

Date

   Current
Notional
Amount
   Value /
Unrealized
Appreciation
(Depreciation)

Short Positions (cont’d):

           
224    20 Year U.S. Treasury Bonds   Jun. 2021      $ 35,665,000      $ 483,004
386    30 Year U.S. Ultra Treasury Bonds   Jun. 2021        72,978,125        693,830
              

 

 

 
                 2,632,432
              

 

 

 
               $ 630,932
              

 

 

 

Inflation swap agreements outstanding at February 28, 2021:

 

Notional

Amount
(000)#

  

 Termination 

Date

  

Fixed

Rate

  

Floating

Rate

   Value at
Trade Date
   Value at
February 28,
2021
   Unrealized
Appreciation
(Depreciation)

Centrally Cleared Inflation Swap Agreements:

              

3,360

   01/12/26    2.205%(T)    U.S. CPI Urban Consumers NSA Index(2)(T)      $      $ (30,963 )      $ (30,963 )

6,720

   01/13/26    2.152%(T)    U.S. CPI Urban Consumers NSA Index(2)(T)               (80,844 )        (80,844 )

10,080

   02/02/26    2.295%(T)    U.S. CPI Urban Consumers NSA Index(2)(T)               (42,133 )        (42,133 )
             

 

 

      

 

 

      

 

 

 
              $      $ (153,940 )      $ (153,940 )
             

 

 

      

 

 

      

 

 

 

 

(1)

  The Fund pays the fixed rate and receives the floating rate.

(2)

  The Fund pays the floating rate and receives the fixed rate.

Interest rate swap agreements outstanding at February 28, 2021:

 

Notional

Amount
(000)#

   Termination
Date
  

Fixed

Rate

  

Floating

Rate

   Value at
Trade Date
   Value at
February 28,
2021
   Unrealized
Appreciation
(Depreciation)

Centrally Cleared Interest Rate Swap Agreements:

 

    

3,360

       01/12/26    0.392%(A)    1 Day USOIS(1)(A)      $      $ 41,193      $ 41,193

6,720

       01/13/26    0.406%(A)    1 Day USOIS(1)(A)               78,121        78,121

10,080

       02/02/26    0.362%(A)    1 Day USOIS(1)(A)               148,239        148,239
               

 

 

      

 

 

      

 

 

 
                $      $ 267,553      $ 267,553
               

 

 

      

 

 

      

 

 

 

(1)   The Fund pays the fixed rate and receives the floating rate.

(2)   The Fund pays the floating rate and receives the fixed rate.

 

See Notes to Financial Statements.

 

30


    

    

 

Summary of Collateral for Centrally Cleared/Exchange-traded Derivatives:

Cash and securities segregated as collateral, including pending settlement for closed positions, to cover requirements for centrally cleared/exchange-traded derivatives are listed by broker as follows:

 

Broker

  

  Cash and/or Foreign Currency  

  

      Securities Market Value      

Citigroup Global Markets, Inc.

   $—    $6,807,591

Fair Value Measurements:

Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below.

Level 1—unadjusted quoted prices generally in active markets for identical securities.

Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other observable inputs.

Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.

The following is a summary of the inputs used as of February 28, 2021 in valuing such portfolio securities:

 

     Level 1     Level 2     Level 3

Investments in Securities

      

Assets

      

Asset-Backed Securities

    Collateralized Loan Obligations

   $     $ 48,030,549       $—  

Commercial Mortgage-Backed Securities

           75,626,812        

Corporate Bonds

           3,510,418        

Residential Mortgage-Backed Securities

           172,978        

U.S. Government Agency Obligations

           273,953,560        

U.S. Treasury Obligations

           240,995,462        

Affiliated Mutual Fund

     28,289,549              

Option Purchased

     503,250              
  

 

 

   

 

 

   

 

 

 

Total

   $ 28,792,799     $ 642,289,779       $—  
  

 

 

   

 

 

   

 

 

 

Liabilities

      

Option Written

   $ (278,313   $         $—    
  

 

 

   

 

 

   

 

 

 

Other Financial Instruments*

      

Assets

      

Futures Contracts

   $ 2,632,432     $       $—  

Centrally Cleared Interest Rate Swap Agreements

           267,553        
  

 

 

   

 

 

   

 

 

 

Total

   $ 2,632,432     $ 267,553       $—  
  

 

 

   

 

 

   

 

 

 

Liabilities

      

Forward Commitment Contract

   $     $ (1,515,176     $—  

 

See Notes to Financial Statements.

PGIM Government Income Fund    31


Schedule of Investments  (continued)

as of February 28, 2021

 

     Level 1     Level 2     Level 3

Other Financial Instruments* (continued)

      

Liabilities (continued)

      

Futures Contracts

   $ (2,001,500   $         $—    

Centrally Cleared Inflation Swap Agreements

           (153,940      
  

 

 

   

 

 

   

 

 

 

Total

   $   (2,001,500)     $   (1,669,116     $—  
  

 

 

   

 

 

   

 

 

 

 

 

*

Other financial instruments are derivative instruments, with the exception of forward commitment contracts, and are not reflected in the Schedule of Investments. Futures, forwards and centrally cleared swap contracts are recorded at net unrealized appreciation (depreciation) and OTC swap contracts are recorded at fair value. Forward commitment contracts are recorded at market value.

Industry Classification:

The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of February 28, 2021 were as follows (unaudited):

 

U.S. Government Agency Obligations

    42.8

U.S. Treasury Obligations

    37.7  

Commercial Mortgage-Backed Securities

    11.8  

Collateralized Loan Obligations

    7.5  

Affiliated Mutual Fund

    4.4  

Diversified Financial Services

    0.6  

Option Purchased

    0.1  

Residential Mortgage-Backed Securities

        0.0
    104.9  

Option Written

    (0.1

Liabilities in excess of other assets

       (4.8
    100.0
 

    

 

 

 

*

Less than +/- 0.05%

 

See Notes to Financial Statements.

 

32


    

    

 

Effects of Derivative Instruments on the Financial Statements and Primary Underlying Risk Exposure:

The Fund invested in derivative instruments during the reporting period. The primary type of risk associated with these derivative instruments is interest rate contracts risk. See the Notes to Financial Statements for additional detail regarding these derivative instruments and their risks. The effect of such derivative instruments on the Fund’s financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.

Fair values of derivative instruments as of February 28, 2021 as presented in the Statement of Assets and Liabilities:

 

    

Asset Derivatives

   

Liability Derivatives

 

Derivatives not accounted for

as hedging instruments,

carried at fair value

  

Statement of

Assets and

Liabilities Location

   Fair
Value
   

Statement of

Assets and

Liabilities Location

   Fair
Value
 
     Due from/to broker-variation margin          Due from/to broker-variation margin       

Interest rate contracts

   futures    $ 2,632,432   futures    $ 2,001,500

Interest rate contracts

   Due from/to broker-variation margin swaps      267,553   Due from/to broker-variation margin swaps      153,940

Interest rate contracts

   Unaffiliated investments      503,250     Options written outstanding, at value      278,313  
     

 

 

      

 

 

 
      $ 3,403,235        $ 2,433,753  
     

 

 

      

 

 

 

 

*

Includes cumulative appreciation (depreciation) as reported in the schedule of open futures and centrally cleared swap contracts. Only unsettled variation margin receivable (payable) is reported within the Statement of Assets and Liabilities.

The effects of derivative instruments on the Statement of Operations for the year ended February 28, 2021 are as follows:

 

Amount of Realized Gain (Loss) on Derivatives Recognized in Income

Derivatives not accounted for as hedging

instruments, carried at fair value

  

Options
Purchased(1)

 

  Options  
Written

 

  Futures  

  

  Swaps  

Interest rate contracts

     $ 396,832     $ 228,617     $ 14,846,561      $ (8,210,304 )
    

 

 

     

 

 

     

 

 

      

 

 

 

(1)  Included in net realized gain (loss) on investment transactions in the Statement of Operations.

 

   

Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Income

Derivatives not accounted for

as hedging instruments,

carried at fair value

  

Options
Purchased(2)

 

  Options  
Written

 

  Futures  

  

  Swaps  

Interest rate contracts

     $ (83,210 )     $ (190,884 )     $ 1,206,482      $ 8,096,238
    

 

 

     

 

 

     

 

 

      

 

 

 

 

(2)

Included in net change in unrealized appreciation (depreciation) on investments in the Statement of Operations.

 

See Notes to Financial Statements.

PGIM Government Income Fund    33


Schedule of Investments  (continued)

as of February 28, 2021

 

For the year ended February 28, 2021, the Fund’s average volume of derivative activities is as follows:

 

    Options

Purchased(1)

 

Options

Written(2)

    

Futures

Contracts—

Long

Positions(2)

    

Futures

Contracts—

Short

Positions(2)

    $99,748

  $163,800      $181,030,589      $198,932,019

 

    Inflation Swap

Agreements(2)

 

                             

  

Interest Rate

Swap

Agreements(2)

$4,032,000

     $86,456,440

 

 

 

(1)

Cost.

(2)

Notional Amount in USD.

Average volume is based on average quarter end balances as noted for the year ended February 28, 2021.

 

See Notes to Financial Statements.

 

34


Statement of Assets and Liabilities

as of February 28, 2021

 

Assets

        

Investments at value:

  

Unaffiliated investments (cost $639,775,649)

   $ 642,793,029  

Affiliated investments (cost $28,289,549)

     28,289,549  

Receivable for investments sold

     18,829,236  

Receivable for Fund shares sold

     2,345,319  

Dividends and interest receivable

     2,046,021  

Prepaid expenses

     4,517  
  

 

 

 

Total Assets

     694,307,671  
  

 

 

 

Liabilities

        

Payable for investments purchased

     45,331,635  

Payable for Fund shares purchased

     4,972,359  

Due to broker—variation margin futures

     1,713,823  

Forward commitment contracts, at value (proceeds receivable $1,510,078)

     1,515,176  

Options written outstanding, at value (premiums received $98,617)

     278,313  

Accrued expenses and other liabilities

     241,644  

Management fee payable

     122,814  

Distribution fee payable

     67,378  

Due to broker—variation margin swaps

     59,054  

Dividends payable

     46,131  

Affiliated transfer agent fee payable

     33,890  

Directors’ fees payable

     3,060  
  

 

 

 

Total Liabilities

     54,385,277  
  

 

 

 

Net Assets

   $ 639,922,394  
  

 

 

 
          

Net assets were comprised of:

  

Common stock, at par

   $ 649,935  

Paid-in capital in excess of par

     632,137,537  

Total distributable earnings (loss)

     7,134,922  
  

 

 

 

Net assets, February 28, 2021

   $ 639,922,394  
  

 

 

 

 

See Notes to Financial Statements.

PGIM Government Income Fund    35


Statement of Assets and Liabilities

as of February 28, 2021

 

Class A

                 

Net asset value and redemption price per share,

     

($268,125,946 ÷ 27,203,640 shares of common stock issued and outstanding)

   $ 9.86     

Maximum sales charge (3.25% of offering price)

     0.33     
  

 

 

    

Maximum offering price to public

   $ 10.19     
  

 

 

    

Class C

                 

Net asset value, offering price and redemption price per share,

     

($12,166,134 ÷ 1,231,192 shares of common stock issued and outstanding)

   $ 9.88              
  

 

 

    

Class R

                 

Net asset value, offering price and redemption price per share,

     

($11,915,276 ÷ 1,206,902 shares of common stock issued and outstanding)

   $ 9.87     
  

 

 

    

Class Z

                 

Net asset value, offering price and redemption price per share,

     

($233,898,273 ÷ 23,774,073 shares of common stock issued and outstanding)

   $ 9.84     
  

 

 

    

Class R6

                 

Net asset value, offering price and redemption price per share,

     

($113,816,765 ÷ 11,577,700 shares of common stock issued and outstanding)

   $ 9.83     
  

 

 

    

 

See Notes to Financial Statements.

 

36


Statement of Operations

Year Ended February 28, 2021

 

Net Investment Income (Loss)

        

Income

  

Interest income

   $   11,083,357  

Affiliated dividend income

     279,491  
  

 

 

 

Total income

     11,362,848  
  

 

 

 

Expenses

  

Management fee

     3,567,629  

Distribution fee(a)

     1,124,092  

Transfer agent’s fees and expenses (including affiliated expense of $217,280)(a)

     1,139,998  

Custodian and accounting fees

     182,823  

Registration fees(a)

     161,222  

Shareholders’ reports

     42,180  

Audit fee

     39,467  

Legal fees and expenses

     27,902  

Directors’ fees

     21,347  

Miscellaneous

     26,971  
  

 

 

 

Total expenses

     6,333,631  

Less: Fee waiver and/or expense reimbursement(a)

     (734,543

        Distribution fee waiver(a)

     (30,434
  

 

 

 

Net expenses

     5,568,654  
  

 

 

 

Net investment income (loss)

     5,794,194  
  

 

 

 

Realized And Unrealized Gain (Loss) On Investments

        

Net realized gain (loss) on:

  

Investment transactions

     6,053,101  

Futures transactions

     14,846,561  

Options written transactions

     228,617  

Swap agreement transactions

     (8,210,304
  

 

 

 
     12,917,975  
  

 

 

 

Net change in unrealized appreciation (depreciation) on:

  

Investments

     (26,379,141

Futures

     1,206,482  

Options written

     (190,884

Swap agreements

     8,096,238  
  

 

 

 
     (17,267,305
  

 

 

 

Net gain (loss) on investment transactions

     (4,349,330
  

 

 

 

Net Increase (Decrease) In Net Assets Resulting From Operations

   $ 1,444,864  
  

 

 

 

                                                         

(a)   Class specific expenses and waivers were as follows:

 

     Class A     Class B     Class C     Class R     Class Z     Class R6  

Distribution fee

     892,670       913       139,209       91,300              

Transfer agent’s fees and expenses

     780,475       1,500       14,950       16,653       325,270       1,150  

Registration fees

     34,623       3,921       16,176       15,613       64,019       26,870  

Fee waiver and/or expense reimbursement

     (161,156     (4,954     (6,283     (5,494     (481,906     (74,750

Distribution fee waiver

                       (30,434            

 

See Notes to Financial Statements.

PGIM Government Income Fund    37


Statements of Changes in Net Assets    

 

    

 

Year Ended

February 28/29,

       
     2021     2020        

Increase (Decrease) in Net Assets

                        

Operations

      

Net investment income (loss)

   $     5,794,194     $     7,472,417    

Net realized gain (loss) on investment transactions

     12,917,975       8,618,111    

Net change in unrealized appreciation (depreciation) on investments

     (17,267,305     22,584,899    
  

 

 

   

 

 

   

Net increase (decrease) in net assets resulting from operations

     1,444,864       38,675,427    
  

 

 

   

 

 

   

Dividends and Distributions

      

Distributions from distributable earnings

      

Class A

     (5,635,628     (5,213,881  

Class B

     (640     (4,955  

Class C

     (115,511     (94,145  

Class R

     (158,592     (200,302  

Class Z

     (5,540,438     (2,004,007  

Class R6

     (2,116,938     (1,483,720  
  

 

 

   

 

 

   
     (13,567,747     (9,001,010  
  

 

 

   

 

 

   

Fund share transactions (Net of share conversions)

      

Net proceeds from shares sold

     746,647,316       123,187,816    

Net asset value of shares issued in reinvestment of dividends and distributions

     12,780,854       8,087,886    

Cost of shares purchased

     (554,848,129     (115,168,912  
  

 

 

   

 

 

   

Net increase (decrease) in net assets from Fund share transactions

     204,580,041       16,106,790    
  

 

 

   

 

 

   

Total increase (decrease)

     192,457,158       45,781,207    

Net Assets:

                        

Beginning of year

     447,465,236       401,684,029    
  

 

 

   

 

 

   

End of year

   $ 639,922,394     $ 447,465,236    
  

 

 

   

 

 

   

 

See Notes to Financial Statements.

 

38


Notes to Financial Statements

1.     Organization

Prudential Investment Portfolios, Inc. 14 (the “Company”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company. The Company currently consists of two funds: PGIM Government Income Fund and PGIM Floating Rate Income Fund. These financial statements relate only to the PGIM Government Income Fund (the “Fund’). The Fund is classified as a diversified fund for purposes of the 1940 Act.

The investment objective of the Fund is to seek high current return.

2.     Accounting Policies

The Fund follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 946 Financial Services — Investment Companies. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform to U.S. generally accepted accounting principles (“GAAP”). The Fund consistently follows such policies in the preparation of its financial statements.

Securities Valuation: The Fund holds securities and other assets and liabilities that are fair valued as of the close of each day (generally, 4:00 PM Eastern time) the New York Stock Exchange (“NYSE”) is open for trading. As described in further detail below, the Fund’s investments are valued daily based on a number of factors, including the type of investment and whether market quotations are readily available. The Company’s Board of Directors (the “Board”) has adopted valuation procedures for security valuation under which fair valuation responsibilities have been delegated to PGIM Investments LLC (“PGIM Investments” or the “Manager”). Pursuant to the Board’s delegation, the Manager has established a Valuation Committee responsible for supervising the fair valuation of portfolio securities and other assets and liabilities. The valuation procedures permit the Fund to utilize independent pricing vendor services, quotations from market makers, and alternative valuation methods when market quotations are either not readily available or not deemed representative of fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. A record of the Valuation Committee’s actions is subject to the Board’s review at its first quarterly meeting following the quarter in which such actions take place.

For the fiscal reporting year-end, securities and other assets and liabilities were fair valued at the close of the last U.S. business day. Trading in certain foreign securities may occur when the NYSE is closed (including weekends and holidays). Because such foreign securities

 

PGIM Government Income Fund    39


Notes to Financial Statements (continued)

 

trade in markets that are open on weekends and U.S. holidays, the values of some of the Fund’s foreign investments may change on days when investors cannot purchase or redeem Fund shares.

Various inputs determine how the Fund’s investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the Schedule of Investments and referred to herein as the “fair value hierarchy” in accordance with FASB ASC Topic 820 - Fair Value Measurements and Disclosures.

Common or preferred stocks, exchange-traded funds and derivative instruments, if applicable, that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange where the security principally trades. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price, they are classified as Level 1 in the fair value hierarchy. In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and ask prices, or at the last bid price in the absence of an ask price. These securities are classified as Level 2 in the fair value hierarchy.

Investments in open-end funds (other than exchange-traded funds) are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.

Fixed income securities traded in the OTC market are generally classified as Level 2 in the fair value hierarchy. Such fixed income securities are typically valued using the market approach which generally involves obtaining data from an approved independent third-party vendor source. The Fund utilizes the market approach as the primary method to value securities when market prices of identical or comparable instruments are available. The third-party vendors’ valuation techniques used to derive the evaluated bid price are based on evaluating observable inputs, including but not limited to, yield curves, yield spreads, credit ratings, deal terms, tranche level attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations and reported trades. Certain Level 3 securities are also valued using the market approach when obtaining a single broker quote or when utilizing transaction prices for identical securities that have been used in excess of five business days. During the reporting period, there were no changes to report with respect to the valuation approach and/or valuation techniques discussed above.

OTC and centrally cleared derivative instruments are generally classified as Level 2 in the fair value hierarchy. Such derivative instruments are typically valued using the market approach and/or income approach which generally involves obtaining data from an

 

40


approved independent third-party vendor source. The Fund utilizes the market approach when quoted prices in broker-dealer markets are available but also includes consideration of alternative valuation approaches, including the income approach. In the absence of reliable market quotations, the income approach is typically utilized for purposes of valuing derivatives such as interest rate swaps based on a discounted cash flow analysis whereby the value of the instrument is equal to the present value of its future cash inflows or outflows. Such analysis includes projecting future cash flows and determining the discount rate (including the present value factors that affect the discount rate) used to discount the future cash flows. In addition, the third-party vendors’ valuation techniques used to derive the evaluated derivative price is based on evaluating observable inputs, including but not limited to, underlying asset prices, indices, spreads, interest rates and exchange rates. Certain derivatives may be classified as Level 3 when valued using the market approach by obtaining a single broker quote or when utilizing unobservable inputs in the income approach. During the reporting period, there were no changes to report with respect to the valuation approach and/or valuation techniques discussed above.

Securities and other assets that cannot be priced according to the methods described above are valued based on 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. Altering one or more unobservable inputs may result in a significant change to a Level 3 security’s fair value measurement.

When determining the fair value of securities, some of the factors influencing the valuation include: the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition and the markets in which it does business; the cost of the investment; the size of the holding and the capitalization of the issuer; the prices of any recent transactions or bids/offers for such securities or any comparable securities; any available analyst media or other reports or information deemed reliable by the Manager regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other unaffiliated mutual funds to calculate their net asset values.

Options: The Fund purchased and/or wrote options in order to hedge against adverse market movements or fluctuations in value caused by changes in prevailing interest rates, value of equities or foreign currency exchange rates with respect to securities or financial instruments which the Fund currently owns or intends to purchase. The Fund may also use options to gain additional market exposure. The Fund’s principal reason for writing options is to realize, through receipt of premiums, a greater current return than would be realized on the underlying security alone. When the Fund purchases an option, it pays a premium and an amount equal to that premium is recorded as an asset. When the Fund writes an option, it receives a premium and an amount equal to that premium is recorded as a liability. The asset or liability is adjusted daily to reflect the current market value of the option. If an option expires unexercised, the Fund realizes a gain (loss) to the extent of the premium received or paid. If an option is exercised, the premium received or paid is recorded as an adjustment to

 

PGIM Government Income Fund    41


Notes to Financial Statements (continued)

 

the proceeds from the sale or the cost of the purchase in determining whether the Fund has realized a gain (loss). The difference between the premium and the amount received or paid at the closing of a purchase or sale transaction is also treated as a realized gain (loss). Gain (loss) on purchased options is included in net realized gain (loss) on investment transactions. Gain (loss) on written options is presented separately as net realized gain (loss) on options written transactions.

The Fund, as writer of an option, may have no control over whether the underlying securities or financial instruments may be sold (called) or purchased (put). As a result, the Fund bears the market risk of an unfavorable change in the price of the security or financial instrument underlying the written option. The Fund, as purchaser of an OTC option, bears the risk of the potential inability of the counterparties to meet the terms of their contracts. With exchange-traded options contracts, there is minimal counterparty credit risk to the Fund since the exchanges’ clearinghouse acts as counterparty to all exchange-traded options and guarantees the options contracts against default.

When the Fund writes an option on a swap, an amount equal to any premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the written option on the swap. If a call option on a swap is exercised, the Fund becomes obligated to pay a fixed interest rate (noted as the strike price) and receive a variable interest rate on a notional amount. If a put option on a swap is exercised, the Fund becomes obligated to pay a variable interest rate and receive a fixed interest rate (noted as the strike price) on a notional amount. Premiums received from writing options on swaps that expire or are exercised are treated as realized gains upon the expiration or exercise of such options on swaps. The risk associated with writing put and call options on swaps is that the Fund will be obligated to be party to a swap agreement if an option on a swap is exercised.

Financial Futures Contracts: A financial futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities at a set price for delivery on a future date. Upon entering into a financial futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount. This amount is known as the “initial margin.” Subsequent payments, known as “variation margin,” are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying security. Such variation margin is recorded for financial statement purposes on a daily basis as unrealized gain (loss). When the contract expires or is closed, the gain (loss) is realized and is presented in the Statement of Operations as net realized gain (loss) on futures transactions.

The Fund invested in financial futures contracts in order to hedge its existing portfolio securities, or securities the Fund intends to purchase, against fluctuations in value caused by changes in prevailing interest rates. Should interest rates move unexpectedly, the Fund

 

42


may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets. Since futures contracts are exchange-traded, there is minimal counterparty credit risk to the Fund since the exchanges’ clearinghouse acts as counterparty to all exchange-traded futures and guarantees the futures contracts against default.

Swap Agreements: The Fund entered into certain types of swap agreements detailed in the disclosures below. A swap agreement is an agreement to exchange the return generated by one instrument for the return generated by another instrument. Swap agreements are negotiated in the OTC market and may be executed either directly with a counterparty (“OTC-traded”) or through a central clearing facility, such as a registered exchange. Swap agreements are valued daily at current market value and any change in value is included in the net unrealized appreciation or depreciation on swap agreements. Centrally cleared swaps pay or receive an amount known as “variation margin”, based on daily changes in the valuation of the swap contract. For OTC-traded, upfront premiums paid and received are shown as swap premiums paid and swap premiums received in the Statement of Assets and Liabilities. Risk of loss may exceed amounts recognized on the Statement of Assets and Liabilities. Swap agreements outstanding at period end, if any, are listed on the Schedule of Investments.

Interest Rate Swaps: Interest rate swaps represent an agreement between counterparties to exchange cash flows based on the difference between two interest rates, applied to a notional principal amount for a specified period. The Fund is subject to interest rate risk exposure in the normal course of pursuing its investment objective. The Fund used interest rate swaps to maintain its ability to generate steady cash flow by receiving a stream of fixed rate payments or to increase exposure to prevailing market rates by receiving floating rate payments. The Fund’s maximum risk of loss from counterparty credit risk is the discounted net present value of the cash flows to be received from the counterparty over the contract’s remaining life.

Inflation Swaps: The Fund entered into inflation swap agreements to protect against fluctuations in inflation rates. Inflation swaps are characterized by one party paying a fixed rate in exchange for a floating rate that is derived from an inflation index, such as the Consumer Price Index or UK Retail Price Index. Inflation swaps subject the Fund to interest rate risk.

Master Netting Arrangements: The Company, on behalf of the Fund, is subject to various Master Agreements, or netting arrangements, with select counterparties. These are agreements which a subadviser may have negotiated and entered into on behalf of all or a portion of the Fund. A master netting arrangement between the Fund and the counterparty permits the Fund to offset amounts payable by the Fund to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Fund to cover the Fund’s exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable. In addition to master netting arrangements, the

 

PGIM Government Income Fund    43


Notes to Financial Statements (continued)

 

right to set-off exists when all the conditions are met such that each of the parties owes the other determinable amounts, the reporting party has the right to set-off the amount owed with the amount owed by the other party, the reporting party intends to set-off and the right of set-off is enforceable by law.

The Company, on behalf of the Fund, is a party to International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreements with certain counterparties that govern OTC derivative and foreign exchange contracts entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral posted to the Fund is held in a segregated account by the Fund’s custodian and with respect to those amounts which can be sold or re-pledged, is presented in the Schedule of Investments. Collateral pledged by the Fund is segregated by the Fund’s custodian and identified in the Schedule of Investments. Collateral can be in the form of cash or debt securities issued by the U.S. Government or related agencies or other securities as agreed to by the Fund and the applicable counterparty. Collateral requirements are determined based on the Fund’s net position with each counterparty. Termination events applicable to the Fund may occur upon a decline in the Fund’s net assets below a specified threshold over a certain period of time. Termination events applicable to counterparties may occur upon a decline in the counterparty’s long-term and short-term credit ratings below a specified level. In each case, upon occurrence, the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contracts outstanding, including the payment of any losses and costs resulting from such early termination, as reasonably determined by the terminating party. Any decision by one or more of the Fund’s counterparties to elect early termination could impact the Fund’s future derivative activity.

In addition to each instrument’s primary underlying risk exposure (e.g. interest rate, credit, equity or foreign exchange, etc.), swap agreements involve, to varying degrees, elements of credit, market and documentation risk. Such risks involve the possibility that no liquid market for these agreements will exist, the counterparty to the agreement may default on its obligation to perform or disagree on the contractual terms of the agreement, and changes in net interest rates will be unfavorable. In connection with these agreements, securities in the portfolio may be identified or received as collateral from the counterparty in accordance with the terms of the respective swap agreements to provide or receive assets of value and to serve as recourse in the event of default or bankruptcy/insolvency of either party. Such OTC derivative agreements include conditions which, when materialized, give the counterparty the right to cause an early termination of the transactions under those agreements. Any election by the counterparty for early termination of the contract(s) may impact the amounts reported on financial statements.

 

44


Short sales and OTC contracts, including forward foreign currency exchange contracts, swaps, forward rate agreements and written options involve elements of both market and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities, if applicable. Such risks may be mitigated by engaging in master netting arrangements.

Delayed-Delivery Transactions: The Fund purchased or sold securities on a when-issued or delayed-delivery and forward commitment basis. These transactions involve a commitment by the Fund to purchase or sell securities for a predetermined price or yield, with payment and delivery taking place beyond the customary settlement period. When delayed-delivery purchases are outstanding, the Fund will set aside and maintain an amount of liquid assets sufficient to meet the purchase price in a segregated account until the settlement date. When purchasing a security on a delayed-delivery basis, the Fund assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and takes such fluctuations into account when determining its net asset value. The Fund may dispose of or renegotiate a delayed-delivery transaction subsequent to establishment, and may sell when-issued securities before they are delivered, which may result in a realized gain (loss). When selling a security on a delayed-delivery basis, the Fund forfeits its eligibility to realize future gains (losses) with respect to the security.

Mortgage Dollar Rolls: The Fund entered into mortgage dollar rolls in which the Fund sells mortgage securities for delivery in the current month, realizing a gain (loss), and simultaneously enter into contracts to repurchase somewhat similar (same type, coupon and maturity) securities on a specified future date. During the roll period, the Fund forgoes principal and interest paid on the securities. The Fund is compensated by the interest earned on the cash proceeds of the initial sale and by the lower repurchase price at the future date. The difference between the sale proceeds and the lower repurchase price is recorded as a realized gain on investment transactions. The Fund maintains a segregated account, the dollar value of which is at least equal to its obligations, with respect to dollar rolls. The Fund is subject to the risk that the market value of the securities the Fund is obligated to repurchase under the agreement may decline below the repurchase price.

Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains (losses) from investment and currency transactions are calculated on the specific identification method. Dividend income is recorded on the ex-date, or for certain foreign securities, when the Fund becomes aware of such dividends. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on the accrual basis. Expenses are recorded on an accrual basis, which may require the use of certain estimates by management that may differ from actual. Net investment income or loss (other than class specific expenses and waivers, which are allocated as noted below) and unrealized and realized gains (losses) are allocated daily to each class of shares based upon the relative proportion of adjusted net assets of each class at the beginning of the day. Class specific expenses and waivers, where applicable, are charged to the respective share classes. Such class specific expenses and waivers include distribution fees and distribution fee waivers, shareholder servicing fees,

 

PGIM Government Income Fund    45


Notes to Financial Statements (continued)

 

transfer agent’s fees and expenses, registration fees and fee waivers and/or expense reimbursements, as applicable.

Taxes: It is the Fund’s policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net investment income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required. Withholding taxes on foreign dividends, interest and capital gains, if any, are recorded, net of reclaimable amounts, at the time the related income is earned.

Dividends and Distributions: The Fund expects to declare dividends of its net investment income daily and pay such dividends monthly. Distributions of net realized capital and currency gains, if any, are declared and paid at least annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from GAAP, are recorded on the ex-date. Permanent book/tax differences relating to income and gain (loss) are reclassified between total distributable earnings (loss) and paid-in capital in excess of par, as appropriate.

Estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

3.     Agreements

The Company, on behalf of the Fund, has a management agreement with the Manager. Pursuant to this agreement, the Manager has responsibility for all investment advisory services and supervises the subadviser’s performance of such services.

The Manager has entered into a subadvisory agreement with PGIM, Inc., which provides subadvisory services to the Fund through its business unit PGIM Fixed Income. The Manager pays for the services of PGIM, Inc..

The management fee paid to the Manager is accrued daily and payable monthly at an annual rate of 0.47% of the Fund’s average daily net assets up to and including $1 billion, 0.42% of the Fund’s average daily net assets of the next $1 billion, 0.32% of the Fund’s average daily net assets of the next $1 billion, and 0.27% of the average daily net assets in excess of $3 billion. The effective management fee rate before any waivers and/or expense reimbursements was 0.47% for the reporting period ended February 28, 2021.

The Manager has contractually agreed, through June 30, 2022, to limit total annual fund operating expenses, after fee waivers and/or expense reimbursements to 0.48% of average daily net assets for Class Z shares and 0.47% of average daily net assets for Class R6

 

46


shares. This contractual waiver excludes interest, brokerage, taxes (such as income and foreign withholding taxes, stamp duty and deferred tax expenses), acquired fund fees and expenses, extraordinary expenses, and certain other Fund expenses such as dividend and interest expense and broker charges on short sales.

Where applicable, the Manager agrees to waive management fees or shared operating expenses on any share class to the same extent that it waives such expenses on any other share class and, in addition, total annual operating expenses for Class R6 shares will not exceed total annual operating expenses for Class Z shares. Fees and/or expenses waived and/or reimbursed by the Manager may be recouped by PGIM Investments within the same fiscal year during which such waiver and/or reimbursement is made if such recoupment can be realized without exceeding the expense limit in effect at the time of the recoupment for that fiscal year.

The Company, on behalf of the Fund, has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”), which acts as the distributor of the Class A, Class C, Class R, Class Z and Class R6 shares of the Fund. The Fund compensates PIMS for distributing and servicing the Fund’s Class A, Class C and Class R shares, pursuant to the plans of distribution (the “Distribution Plans”), regardless of expenses actually incurred by PIMS.

Pursuant to the Distribution Plans, the Fund compensates PIMS for distribution related activities at an annual rate of up to 0.25%, 1% and 0.75% of the average daily net assets of the Class A, Class C and Class R shares, respectively. PIMS has contractually agreed through June 30, 2022 to limit such expenses to 0.50% of the average daily net assets of the Class R shares. The distribution fees are accrued daily and payable monthly. No distribution or service fees are paid to PIMS as distributor of the Class Z or Class R6 shares of the Fund.

For the year ended February 28, 2021, PIMS received $240,022 in front-end sales charges resulting from sales of Class A shares. Additionally, for the year ended February 28, 2021, PIMS received $3,472 and $1,144 in contingent deferred sales charges imposed upon redemptions by certain Class A and Class C shareholders. From these fees, PIMS paid such sales charges to broker-dealers, who in turn paid commissions to salespersons and incurred other distribution costs.

PGIM Investments, PGIM, Inc. and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).

4.     Other Transactions with Affiliates

Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PGIM Investments and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund’s transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.

 

PGIM Government Income Fund    47


Notes to Financial Statements (continued)

 

The Fund may invest its overnight sweep cash in the PGIM Core Ultra Short Bond Fund (the “Core Fund”), a series of Prudential Investment Portfolios 2, registered under the 1940 Act and managed by PGIM Investments. PGIM Investments and/or its affiliates are paid fees or reimbursed for providing their services to the Core Fund. In addition to the realized and unrealized gains on investments in the Core Fund, earnings from such investments are disclosed on the Statement of Operations as “Affiliated dividend income”.

The Fund may enter into certain securities purchase or sale transactions under Board approved Rule 17a-7 procedures. Rule 17a-7 is an exemptive rule under the 1940 Act, that subject to certain conditions, permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. For the year ended February 28, 2021, no 17a-7 transactions were entered into by the Fund.

5.     Portfolio Securities

The aggregate cost of purchases and proceeds from sales of portfolio securities (excluding short-term investments and U.S. Government securities) for the year ended February 28, 2021, were $1,534,908,424 and $1,399,200,372, respectively.

A summary of the cost of purchases and proceeds from sales of shares of an affiliated mutual fund for the year ended February 28, 2021, is presented as follows:

 

Value,

Beginning

of Year

  

Cost of
Purchases

  

Proceeds

from Sales

  

Change in
Unrealized
Gain
(Loss)

  

Realized
Gain
(Loss)

   Value,
End of Year
   Shares,
End

of Year
   Income
 

 

 

 

Short-Term Investments - Affiliated Mutual Fund:

 

 

 

 

 

 

PGIM Core Ultra Short Bond Fund (1)(wb)

 

 

                   
  $ 7,704,655        $ 708,584,332      $ 687,999,438      $      $      $ 28,289,549        28,289,549      $ 279,491
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

           

 

 

 

 

(1)

The Fund did not have any capital gain distributions during the reporting period.

(wb)

PGIM Investments LLC, the manager of the Fund, also serves as manager of the PGIM Core Ultra Short Bond Fund.

6.    Distributions and Tax Information

Distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from GAAP, are recorded on the ex-date.

For the year ended February 28, 2021, the tax character of dividends paid by the Fund was $13,567,747 of ordinary income. For the year ended February 29, 2020, the tax character of dividends paid by the Fund was $9,001,010 of ordinary income.

 

48


 

As of February 28, 2021, the accumulated undistributed earnings on a tax basis were $5,051,400 of ordinary income and $4,103,255 of long-term capital gains.

The United States federal income tax basis of the Fund’s investments and the net unrealized depreciation as of February 28, 2021 were as follows:

 

Tax Basis   

Gross

Unrealized

Appreciation

  

Gross

Unrealized

Depreciation

  

Net

Unrealized

Depreciation

$672,007,236

   $14,726,099    $(16,699,701)    $(1,973,602)

The difference between GAAP basis and tax basis was primarily attributable to deferred losses on wash sales, the difference in the treatment of premium amortization for GAAP and tax purposes and appreciation (depreciation) of swaps, options and futures.

The Fund utilized approximately $1,111,000 of its capital loss carryforward to offset net taxable gains realized in the fiscal year ended February 28, 2021.

The Manager has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years and has concluded that no provision for income tax is required in the Fund’s financial statements for the current reporting period. Since tax authorities can examine previously filed tax returns, the Fund’s U.S. federal and state tax returns for each of the four fiscal years up to the most recent fiscal year ended February 28, 2021 are subject to such review.

7.     Capital and Ownership

The Fund offers Class A, Class C, Class R, Class Z and Class R6 shares. Class A shares are sold with a maximum front-end sales charge of 3.25%. Investors who purchase $500,000 or more of Class A shares and sell those shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1.00% on sales although these purchases are not subject to a front-end sales charge. The Class A CDSC is waived for certain retirement and/or benefit plans. A special exchange privilege is also available for shareholders who qualified to purchase Class A shares at net asset value. Effective June 26, 2020, all of the issued and outstanding Class B shares of the Fund converted into Class A shares. Class C shares are sold with a CDSC of 1% on sales made within 12 months of purchase. Class C shares will automatically convert to Class A shares on a monthly basis approximately 10 years after purchase. Effective January 22, 2021, Class C shares will automatically convert to Class A shares on a monthly basis approximately eight years after purchase. Class R shares are available to certain retirement plans, clearing and settlement firms. Class R, Class Z and Class R6 shares are not subject to any sales or redemption charges and are available exclusively for sale to a limited group of investors.

Under certain circumstances, an exchange may be made from specified share classes of the Fund to one or more other share classes of the Fund as presented in the table of transactions in shares of common stock, below.

 

PGIM Government Income Fund    49


Notes to Financial Statements (continued)

 

The Company is authorized to issue 3.4 billion shares of common stock, $0.01 par value per share, 2.5 billon of which are designated as shares of the Fund. The shares are further classified and designated as follows:

 

Class A

       230,000,000  

Class B

     5,000,000  

Class C

     495,000,000  

Class R

     500,000,000  

Class Z

     500,000,000  

Class T

     270,000,000  

Class R6

     500,000,000  

The Fund currently does not have any Class B or Class T shares outstanding.

As of February 28, 2021, Prudential, through its affiliated entities, including affiliated funds (if applicable), owned shares of the Fund as follows:

 

      Number of Shares     

Percentage of

Outstanding Shares  

Class A

   18,251            0.1%        

Class C

   215            0.1%        

Class R

   917,577            76.0%        

Class Z

   16,301            0.1%        

At the reporting period end, the number of shareholders holding greater than 5% of the Fund are as follows:

 

Affiliated    Unaffiliated
Number of    Percentage of    Number of    Percentage of
Shareholders    Outstanding Shares    Shareholders    Outstanding Shares

   —%    4    60.0%

 

50


Transactions in shares of common stock were as follows:

 

Class A

   Shares      Amount  

Year ended February 28, 2021:

     

Shares sold

     19,503,373      $ 196,126,633  

Shares issued in reinvestment of dividends and distributions

     496,281        5,011,272  

Shares purchased

     (18,549,898      (186,044,581
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

     1,449,756        15,093,324  

Shares issued upon conversion from other share class(es)

     164,327        1,645,158  

Shares purchased upon conversion into other share class(es)

     (267,945      (2,700,528
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

     1,346,138      $ 14,037,954  
  

 

 

    

 

 

 

Year ended February 29, 2020:

     

Shares sold

     3,235,426      $ 31,419,676  

Shares issued in reinvestment of dividends and distributions

     455,748        4,414,191  

Shares purchased

     (5,517,649      (53,327,126
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

     (1,826,475      (17,493,259

Shares issued upon conversion from other share class(es)

     282,544        2,681,196  

Shares purchased upon conversion into other share class(es)

     (81,855      (793,566
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

     (1,625,786    $ (15,605,629
  

 

 

    

 

 

 

Class B

     

Period ended June 26, 2020*:

     

Shares sold

     6,552      $ 64,393  

Shares issued in reinvestment of dividends and distributions

     45        464  

Shares purchased

     (1,377      (13,769
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

     5,220        51,088  

Shares purchased upon conversion into other share class(es)

     (32,496      (329,857
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

     (27,276    $ (278,769
  

 

 

    

 

 

 

Year ended February 29, 2020:

     

Shares sold

     6,097      $ 59,572  

Shares issued in reinvestment of dividends and distributions

     470        4,536  

Shares purchased

     (3,790      (36,580
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

     2,777        27,528  

Shares purchased upon conversion into other share class(es)

     (54,898      (526,575
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

     (52,121    $ (499,047
  

 

 

    

 

 

 

Class C

     

Year ended February 28, 2021:

     

Shares sold

     1,199,603      $ 12,100,131  

Shares issued in reinvestment of dividends and distributions

     11,282        114,156  

Shares purchased

     (610,383      (6,141,844
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

     600,502        6,072,443  

Shares purchased upon conversion into other share class(es)

     (143,391      (1,434,313
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

     457,111      $ 4,638,130  
  

 

 

    

 

 

 

Year ended February 29, 2020:

     

Shares sold

     202,853      $ 1,961,582  

Shares issued in reinvestment of dividends and distributions

     9,428        91,520  

Shares purchased

     (133,758      (1,293,981
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

     78,523        759,121  

Shares purchased upon conversion into other share class(es)

     (232,547      (2,208,495
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

     (154,024    $ (1,449,374
  

 

 

    

 

 

 

 

PGIM Government Income Fund    51


Notes to Financial Statements (continued)

 

Class R

   Shares      Amount  

Year ended February 28, 2021:

     

Shares sold

     458,311      $ 4,621,876  

Shares issued in reinvestment of dividends and distributions

     14,048        141,968  

Shares purchased

     (396,921      (4,006,654
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

     75,438      $ 757,190  
  

 

 

    

 

 

 

Year ended February 29, 2020:

     

Shares sold

     179,411      $ 1,742,049  

Shares issued in reinvestment of dividends and distributions

     17,942        174,027  

Shares purchased

     (371,562      (3,572,626
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

     (174,209    $ (1,656,550
  

 

 

    

 

 

 

Class Z

     

Year ended February 28, 2021:

     

Shares sold

     44,624,811      $ 448,590,847  

Shares issued in reinvestment of dividends and distributions

     535,955        5,396,964  

Shares purchased

     (31,506,607      (316,530,316
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

     13,654,159        137,457,495  

Shares issued upon conversion from other share class(es)

     263,110        2,644,208  

Shares purchased upon conversion into other share class(es)

     (14,860      (148,742
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

     13,902,409      $ 139,952,961  
  

 

 

    

 

 

 

Year ended February 29, 2020:

     

Shares sold

     5,615,924      $ 54,132,059  

Shares issued in reinvestment of dividends and distributions

     199,558        1,931,996  

Shares purchased

     (3,583,290      (34,443,691
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

     2,232,192        21,620,364  

Shares issued upon conversion from other share class(es)

     83,261        805,747  

Shares purchased upon conversion into other share class(es)

     (21      (192
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

     2,315,432      $ 22,425,919  
  

 

 

    

 

 

 

Class R6

     

Year ended February 28, 2021:

     

Shares sold

     8,464,824      $ 85,143,436  

Shares issued in reinvestment of dividends and distributions

     210,395        2,116,030  

Shares purchased

     (4,199,046      (42,110,965
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

     4,476,173        45,148,501  

Shares issued upon conversion from other share class(es)

     32,270        324,074  
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

     4,508,443      $ 45,472,575  
  

 

 

    

 

 

 

Year ended February 29, 2020:

     

Shares sold

     3,518,298      $ 33,872,878  

Shares issued in reinvestment of dividends and distributions

     152,207        1,471,616  

Shares purchased

     (2,343,806      (22,494,908
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding before conversion

     1,326,699        12,849,586  

Shares issued upon conversion from other share class(es)

     4,324        41,885  
  

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

     1,331,023      $ 12,891,471  
  

 

 

    

 

 

 

 

 

*

Effective June 26, 2020, all of the issued and outstanding Class B shares of the Fund converted into Class A shares.

 

52


8.     Borrowings

The Company, on behalf of the Fund, along with other affiliated registered investment companies (the “Participating Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions. The table below provides details of the current SCA in effect at the reporting period-end as well as the prior SCA.

 

      Current SCA    Prior SCA

Term of Commitment

   10/2/2020 – 9/30/2021    10/3/2019 – 10/1/2020

Total Commitment

   $ 1,200,000,000    $ 1,222,500,000*
Annualized Commitment Fee on the Unused Portion of the SCA    0.15%    0.15%

Annualized Interest Rate on Borrowings

  

1.30% plus the higher of (1) the effective federal funds rate, (2) the one-month LIBOR rate or (3) zero percent

 

  

1.20% plus the higher of (1) the effective federal funds rate, (2) the one-month LIBOR rate or (3) zero percent

 

* Effective March 31, 2020, the SCA’s total commitment was increased from $900,000,000 to $1,162,500,000 and subsequently, effective April 7, 2020 was increased to $1,222,500,000.

Certain affiliated registered investment companies that are parties to the SCA include portfolios that are subject to a predetermined mathematical formula used to manage certain benefit guarantees offered under variable annuity contracts. The formula may result in large scale asset flows into and out of these portfolios. Consequently, these portfolios may be more likely to utilize the SCA for purposes of funding redemptions. It may be possible for those portfolios to fully exhaust the committed amount of the SCA, thereby requiring the Manager to allocate available funding per a Board-approved methodology designed to treat the Participating Funds in the SCA equitably.

The Fund utilized the SCA during the year ended February 28, 2021. The average daily balance for the 1 day that the Fund had loans outstanding during the period was approximately $41,990,000, borrowed at a weighted average interest rate of 1.43%. The maximum loan outstanding amount during the period was $41,990,000. At February 28, 2021, the Fund did not have an outstanding loan amount.

9.     Risks of Investing in the Fund

The Fund’s risks include, but are not limited to, some or all of the risks discussed below. For further information on the Fund’s risks, please refer to the Fund’s Prospectus and Statement of Additional Information.

Bond Obligations Risk: As with credit risk, market risk and interest rate risk, the Fund’s holdings, share price, yield and total return may fluctuate in response to bond market movements. The value of bonds may decline for issuer-related reasons, including management performance, financial leverage and reduced demand for the issuer’s goods and services. Certain types of fixed income obligations also may be subject to “call and redemption risk,” which is the risk that the issuer may call a bond held by the Fund for redemption before it matures and the Fund may lose income.

 

PGIM Government Income Fund    53


Notes to Financial Statements (continued)

 

Credit Risk: This is the risk that the issuer, the guarantor or the insurer of a fixed income security, or the counterparty to a contract, may be unable or unwilling to make timely principal and interest payments, or to otherwise honor its obligations. Additionally, fixed income securities could lose value due to a loss of confidence in the ability of the issuer, guarantor, insurer or counterparty to pay back debt. The longer the maturity and the lower the credit quality of a bond, the more sensitive it is to credit risk.

Derivatives Risk: Derivatives involve special risks and costs and may result in losses to the Fund. The successful use of derivatives requires sophisticated management, and, to the extent that derivatives are used, the Fund will depend on the subadviser’s ability to analyze and manage derivative transactions. The prices of derivatives may move in unexpected ways, especially in abnormal market conditions. Some derivatives are “leveraged” and therefore may magnify or otherwise increase investment losses to the Fund. The Fund’s use of derivatives may also increase the amount of taxes payable by shareholders. Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the Fund’s derivatives positions. In fact, many OTC derivative instruments lack liquidity beyond the counterparty to the instrument. OTC derivative instruments also involve the risk that the other party will not meet its obligations to the Fund.

Interest Rate Risk: The value of your investment may go down when interest rates rise. A rise in rates tends to have a greater impact on the prices of longer term or duration debt securities. For example, a fixed income security with a duration of three years is expected to decrease in value by approximately 3% if interest rates increase by 1%. This is referred to as “duration risk.” When interest rates fall, the issuers of debt obligations may prepay principal more quickly than expected, and the Fund may be required to reinvest the proceeds at a lower interest rate. This is referred to as “prepayment risk.” When interest rates rise, debt obligations may be repaid more slowly than expected, and the value of the Fund’s holdings may fall sharply. This is referred to as “extension risk.” The Fund may lose money if short-term or long-term interest rates rise sharply or in a manner not anticipated by the subadviser.

Large Shareholder and Large Scale Redemption Risk: Certain individuals, accounts, funds (including funds affiliated with the Manager) or institutions, including the Manager and its affiliates, may from time to time own or control a substantial amount of the Fund’s shares. There is no requirement that these entities maintain their investment in the Fund. There is a risk that such large shareholders or that the Fund’s shareholders generally may redeem all or a substantial portion of their investments in the Fund in a short period of time, which could have a significant negative impact on the Fund’s NAV, liquidity, and brokerage costs. Large redemptions could also result in tax consequences to shareholders and impact the Fund’s ability to implement its investment strategy. The Fund’s ability to pursue its

 

54


investment objective after one or more large scale redemptions may be impaired and, as a result, the Fund may invest a larger portion of its assets in cash or cash equivalents.

LIBOR Risk: Many financial instruments use or may use a floating rate based on the London Interbank Offered Rate, or “LIBOR,” which is the offered rate for short-term Eurodollar deposits between major international banks. Over the course of the last several years, global regulators have indicated an intent to phase out the use of LIBOR and similar interbank offering rates (IBOR). On November 30, 2020, the administrator of LIBOR announced a delay in the phase out of a majority of the U.S. dollar LIBOR publications until June 30, 2023, with the remainder of LIBOR publications to still end at the end of 2021. There still remains uncertainty regarding the nature of any replacement rates for LIBOR and the other IBORs as well as around fallback approaches for instruments extending beyond the any phase-out of these reference rates. The lack of consensus around replacement rates and the uncertainty of the phase out of LIBOR and other IBORs may result in increased volatility in corporate or governmental debt, bank loans, derivatives and other instruments invested in by a Fund as well as loan facilities used by a Fund. As such, the potential impact of a transition away from LIBOR on a Fund or the financial instruments in which a Fund invests cannot yet be determined. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect a Fund’s performance and/or net asset value. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR and the other IBORs as benchmarks could deteriorate during the transition period, these effects could begin to be experienced by the end of 2021 and beyond until the anticipated discontinuance date in 2023 for the majority of the LIBOR rates.

Liquidity Risk: Liquidity risk is the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of remaining investors’ interests in the Fund. The Fund may invest in instruments that trade in lower volumes and are more illiquid than other investments. If the Fund is forced to sell these investments to pay redemption proceeds or for other reasons, the Fund may lose money. In addition, when there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may have to accept a lower price or may not be able to sell the instrument at all. An inability to sell a portfolio position can adversely affect the Fund’s value or prevent the Fund from being able to take advantage of other investment opportunities.

Market Disruption and Geopolitical Risks: International wars or conflicts and geopolitical developments in foreign countries, along with instability in regions such as Asia, Eastern Europe, and the Middle East, possible terrorist attacks in the United States or around the world, public health epidemics such as the outbreak of infectious diseases like the recent outbreak of coronavirus globally or the 2014–2016 outbreak in West Africa of the Ebola virus, and other similar events could adversely affect the U.S. and foreign financial markets, including increases in market volatility, reduced liquidity in the securities markets and

 

PGIM Government Income Fund    55


Notes to Financial Statements (continued)

 

government intervention, and may cause further long-term economic uncertainties in the United States and worldwide generally. The coronavirus pandemic and the related governmental and public responses have had and may continue to have an impact on the Fund’s investments and net asset value and have led and may continue to lead to increased market volatility and the potential for illiquidity in certain classes of securities and sectors of the market. Preventative or protective actions that governments may take in respect of pandemic or epidemic diseases may result in periods of business disruption, business closures, inability to obtain raw materials, supplies and component parts, and reduced or disrupted operations for the issuers in which the Fund invests. Government intervention in markets may impact interest rates, market volatility and security pricing. The occurrence, reoccurrence and pendency of such diseases could adversely affect the economies (including through changes in business activity and increased unemployment) and financial markets either in specific countries or worldwide.

Market Risk: Securities markets may be volatile and the market prices of the Fund’s securities may decline. Securities fluctuate in price based on changes in an issuer’s financial condition and overall market and economic conditions. If the market prices of the securities owned by the Fund fall, the value of your investment in the Fund will decline.

Mortgage-Backed and Asset-Backed Securities Risk: Mortgage-backed and asset-backed securities tend to increase in value less than other debt securities when interest rates decline, but are subject to similar risk of decline in market value during periods of rising interest rates. The values of mortgage-backed and asset-backed securities become more volatile as interest rates rise. In a period of declining interest rates, the Fund may be required to reinvest more frequent prepayments on mortgage-backed and asset-backed securities in lower-yielding investments.

U.S. Government and Agency Securities Risk: U.S. Government and agency securities are subject to market risk, interest rate risk and credit risk. Not all U.S. Government securities are insured or guaranteed by the full faith and credit of the U.S. Government; some are only insured or guaranteed by the issuing agency, which must rely on its own resources to repay the debt. In addition, the value of U.S. Government securities may be affected by changes in the credit rating of the U.S. Government.

10.  Recent Accounting Pronouncement and Regulatory Developments

In March 2020, the FASB issued Accounting Standard Update (“ASU”) No. 2020-04, which provides optional guidance for applying GAAP to contract modifications, hedging relationships and other transactions affected by the reference rate reform if certain criteria are met. ASU 2020-04 is elective and is effective on March 12, 2020 through December 31,

 

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2022. At this time, management is evaluating the implications of certain provisions of the ASU and any impact on the financial statement disclosures has not yet been determined.

On December 3, 2020, the SEC announced that it voted to adopt a new rule that establishes an updated regulatory framework for fund valuation practices (the “Rule”). The Rule, in part, provides (i) a framework for determining fair value in good faith and (ii) provides for a fund Board’s assignment of its responsibility for the execution of valuation-related activities to a fund’s investment adviser. Further, the SEC is rescinding previously issued guidance on related issues. The Rule is scheduled to take effect on March 8, 2021,