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Form N-CSRS PRUDENTIAL SECTOR FUNDS, For: May 31

July 27, 2022 12:29 PM EDT

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:    811-03175
Exact name of registrant as specified in charter:    Prudential Sector Funds, Inc.
Address of principal executive offices:    655 Broad Street, 6th Floor
   Newark, New Jersey 07102
Name and address of agent for service:    Andrew R. French
   655 Broad Street, 6th Floor
   Newark, New Jersey 07102
Registrant’s telephone number, including area code:    800-225-1852
Date of fiscal year end:    11/30/2022
Date of reporting period:    05/31/2022

 


Item 1 – Reports to Stockholders –

 


LOGO

PGIM JENNISON FINANCIAL SERVICES FUND

 

    

SEMIANNUAL REPORT

MAY 31, 2022

 

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  

Fees and Expenses

     7  

Holdings and Financial Statements

     9  

 

 

 

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

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

The accompanying financial statements as of May 31, 2022 were not audited and, accordingly, no auditor’s opinion is expressed on them.

Mutual funds are distributed by Prudential Investment Management Services LLC, member SIPC. Jennison Associates LLC is a registered investment adviser. Both are Prudential Financial companies. © 2022 Prudential Financial, Inc. and its related entities. Jennison Associates, Jennison, PGIM, and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

 

2    Visit our website at pgim.com/investments


 

Letter from the President

 

LOGO       

Dear Shareholder:

 

We hope you find the semiannual report for the PGIM Jennison Financial Services Fund informative and useful. The report covers performance for the six-month period ended May 31, 2022.

 

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 provide access to active investment strategies across the global markets in the pursuit of consistent outperformance for investors. PGIM is the world’s 11th largest investment manager with more than $1.5 trillion in assets under management. Our scale and investment expertise allow us to deliver a diversified suite of actively managed solutions across a broad spectrum of asset classes and investment styles.

Thank you for choosing our family of funds.

Sincerely,

 

LOGO

Stuart S. Parker, President

PGIM Jennison Financial Services Fund

July 15, 2022

 

PGIM Jennison Financial Services Fund    3


Your Fund’s Performance

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.

 

    

Total Returns as of 5/31/22

(without sales charges)

Six Months* (%)

  

Average Annual Total Returns as of 5/31/22

(with sales charges)

   One Year (%)    Five Years (%)    Ten Years (%)    Since Inception (%) 

Class A

   -12.34      -14.26      8.50      8.51   

Class C

   -12.66      -10.73      8.92      8.35   

Class R

   -12.43        -9.52      9.43      8.88   

Class Z

   -12.18        -8.97    10.08      9.47   

Class R6

   -12.18        -8.97    N/A    N/A    6.41 (01/26/2018)

S&P Composite 1500 Financials Index

           
   -5.44      -4.73    10.73    14.04   

S&P Composite 1500 Index

           
     -8.68      -0.91    13.04    14.21   
                   
Average Annual Total Returns as of 5/31/22 Since Inception (%)
                                   Class R6
           (01/26/2018)

S&P Composite 1500 Financials Index

                        6.19

S&P Composite 1500 Index

                            10.83

*Not annualized

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’s inception date.

 

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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

 

5.50% 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 $1 million 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)

 

0.30%

 

1.00%

 

0.75% (0.50% currently)

  None   None

Benchmark Definitions

S&P Composite 1500 Financials Index*—The S&P Composite 1500 Financials Index is an unmanaged index that comprises those companies included in the S&P Composite 1500, an index that combines the S&P 500 Index, the S&P MidCap 400 Index, and the S&P SmallCap 600 Index, that are classified as members of the GICS financials sector.

S&P Composite 1500 Index*—The S&P Composite 1500 Index is an unmanaged index of the stocks of 1,500 US companies, with market capitalizations ranging from small to large. The S&P Composite 1500 Index is a combination of three leading US stock indices: the S&P 500 Index (which measures the performance of US large cap stocks), the S&P MidCap 400 Index (which measures the performance of US mid cap stocks) and the S&P 600 Index (which measures the performance of US small cap stocks) and gives an indication of how the broad US stock market has performed.

* The S&P Composite 1500 Financials Index and the S&P Composite 1500 Index are products of S&P Dow Jones Indices LLC and/or its affiliates and have been licensed for use by PGIM, Inc. and/or its affiliates. Copyright © 2022 S&P Dow Jones Indices LLC, a division of S&P Global, Inc., and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC.

 

PGIM Jennison Financial Services Fund    5


Your Fund’s Performance (continued)

 

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.

Presentation of Fund Holdings as of 5/31/2022

 

  Ten Largest Holdings    Line of Business    % of Net Assets 

JPMorgan Chase & Co.

   Diversified Banks    7.8%

Goldman Sachs Group, Inc. (The)

   Investment Banking & Brokerage    6.5%

Chubb Ltd.

   Property & Casualty Insurance    6.4%

KKR & Co., Inc.

   Asset Management & Custody Banks    5.3%

Bank of America Corp.

   Diversified Banks    4.8%

Adyen NV (Netherlands), 144A

   Data Processing & Outsourced Services    4.5%

Citigroup, Inc.

   Diversified Banks    4.5%

MetLife, Inc.

   Life & Health Insurance    4.1%

RenaissanceRe Holdings Ltd. (Bermuda)

   Reinsurance    3.9%

PNC Financial Services Group, Inc. (The)

   Regional Banks    3.7%

Holdings reflect only long-term investments and are subject to change.

 

6    Visit our website at pgim.com/investments


Fees and Expenses

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 May 31, 2022. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.

Actual Expenses

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

Hypothetical Example for Comparison Purposes

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

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

 

PGIM Jennison Financial Services Fund    7


Fees and Expenses (continued)

 

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 Jennison Financial

Services Fund

 

Beginning

Account Value
    December 1, 2021    

  Ending
    Account Value     
May 31, 2022
 

Annualized

Expense
    Ratio Based on the    
Six-Month Period

 

Expenses Paid

During the

    Six-Month Period*    

   

Class A

  Actual   $1,000.00   $   876.60   1.30%   $   6.08
   
  Hypothetical   $1,000.00   $1,018.45   1.30%   $   6.54
   

Class C

  Actual   $1,000.00   $   873.40   2.06%   $   9.62
   
  Hypothetical   $1,000.00   $1,014.66   2.06%   $ 10.35
   

Class R

  Actual   $1,000.00   $   875.70   1.58%   $   7.39
   
  Hypothetical   $1,000.00   $1,017.05   1.58%   $   7.95
   

Class Z

  Actual   $1,000.00   $   878.20   1.01%   $   4.73
   
  Hypothetical   $1,000.00   $1,019.90   1.01%   $   5.09
   

Class R6

  Actual   $1,000.00   $   878.20   1.00%   $   4.68
   
    Hypothetical   $1,000.00   $1,019.95   1.00%   $   5.04

*Fund expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by the 182 days in the six-month period ended May 31, 2022, and divided by the 365 days in the Fund’s fiscal year ending November 30, 2022 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.

 

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Schedule of Investments  (unaudited)

as of May 31, 2022

 

  Description    Shares              Value            

LONG-TERM INVESTMENTS     99.8%

     

COMMON STOCKS

     

Application Software     0.4%

                 

Bill.com Holdings, Inc.*

               5,179      $ 612,365  

Asset Management & Custody Banks     12.4%

                 

Ares Management Corp. (Class A Stock)

     23,838        1,696,550  

AssetMark Financial Holdings, Inc.*

     38,058        795,032  

Blackstone, Inc.

     44,489        5,240,359  

Bridge Investment Group Holdings, Inc. (Class A Stock)

     48,150        929,777  

Brightsphere Investment Group, Inc.

     65,621        1,338,012  

Focus Financial Partners, Inc. (Class A Stock)*

     23,703        893,603  

KKR & Co., Inc.

     146,299        8,018,648  
     

 

 

 
        18,911,981  

Consumer Finance     4.4%

                 

Capital One Financial Corp.

     25,946        3,317,455  

SLM Corp.

     171,652        3,362,663  
     

 

 

 
        6,680,118  

Data Processing & Outsourced Services     14.7%

                 

Adyen NV (Netherlands), 144A*

     4,373        6,822,018  

FleetCor Technologies, Inc.*

     19,698        4,901,059  

Mastercard, Inc. (Class A Stock)

     15,634        5,594,940  

Visa, Inc. (Class A Stock)

     23,988        5,089,534  
     

 

 

 
        22,407,551  

Diversified Banks     17.1%

                 

Bank of America Corp.

     198,027        7,366,605  

Citigroup, Inc.

     127,303        6,799,253  

JPMorgan Chase & Co.

     90,344        11,946,187  
     

 

 

 
        26,112,045  

Financial Exchanges & Data     5.7%

                 

Moody’s Corp.

     17,979        5,421,927  

S&P Global, Inc.

     9,404        3,286,510  
     

 

 

 
        8,708,437  

 

See Notes to Financial Statements.

PGIM Jennison Financial Services Fund    9


Schedule of Investments  (unaudited) (continued)

as of May 31, 2022

 

  Description    Shares              Value            

COMMON STOCKS (Continued)

     

Insurance Brokers     5.5%

                 

Marsh & McLennan Cos., Inc.

     24,974      $ 3,994,591  

Ryan Specialty Group Holdings, Inc. (Class A Stock)*

             117,699        4,421,952  
     

 

 

 
        8,416,543  

Investment Banking & Brokerage     7.6%

                 

Goldman Sachs Group, Inc. (The)

     30,315        9,908,458  

Houlihan Lokey, Inc.

     19,779        1,699,807  
     

 

 

 
        11,608,265  

Life & Health Insurance     4.1%

                 

MetLife, Inc.

     92,305        6,220,434  

Mortgage REITs     1.3%

                 

Starwood Property Trust, Inc.

     81,152        1,938,721  

Other Diversified Financial Services     1.1%

                 

Apollo Global Management, Inc.

     29,333        1,690,754  

Property & Casualty Insurance     8.5%

                 

Axis Capital Holdings Ltd.

     54,536        3,194,173  

Chubb Ltd.

     46,807        9,889,851  
     

 

 

 
        13,084,024  

Real Estate Services     0.3%

                 

CBRE Group, Inc. (Class A Stock)*

     6,783        561,904  

Regional Banks     11.9%

                 

BankUnited, Inc.

     41,149        1,714,267  

Eastern Bankshares, Inc.

     67,793        1,319,930  

Enterprise Financial Services Corp.

     33,231        1,538,928  

Pinnacle Financial Partners, Inc.

     38,451        3,130,680  

PNC Financial Services Group, Inc. (The)

     31,912        5,597,684  

Truist Financial Corp.

     97,044        4,826,969  
     

 

 

 
        18,128,458  

Reinsurance     3.9%

                 

RenaissanceRe Holdings Ltd. (Bermuda)

     38,479        5,907,296  

 

See Notes to Financial Statements.

 

10


    

 

    

 

  Description    Shares      Value  

COMMON STOCKS (Continued)

     

Thrifts & Mortgage Finance     0.9%

                 

WSFS Financial Corp.

     33,547      $ 1,435,141  
     

 

 

 

TOTAL LONG-TERM INVESTMENTS
    (cost $108,704,924)

        152,424,037  
     

 

 

 

SHORT-TERM INVESTMENT     0.2%

     

UNAFFILIATED FUND

     

Dreyfus Government Cash Management (Institutional Shares)
    (cost $327,025)

             327,025        327,025  
     

 

 

 

TOTAL INVESTMENTS     100.0%
    
(cost $109,031,949)

        152,751,062  

Liabilities in excess of other assets     (0.0)%

        (29,305
     

 

 

 

NET ASSETS     100.0%

      $       152,721,757  
     

 

 

 

 

 

Below is a list of the abbreviation(s) used in the semiannual report:

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

LIBOR — London Interbank Offered Rate

REITs — Real Estate Investment Trust

 

*

Non-income producing security.

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 May 31, 2022 in valuing such portfolio securities:

 

     Level 1      Level 2      Level 3

Investments in Securities

        

Assets

        

Long-Term Investments

        

Common Stocks

        

Application Software

   $ 612,365      $              —      $—  

Asset Management & Custody Banks

      18,911,981            

Consumer Finance

     6,680,118            

 

See Notes to Financial Statements.

PGIM Jennison Financial Services Fund    11


Schedule of Investments  (unaudited) (continued)

as of May 31, 2022

 

     Level 1     Level 2     Level 3  

Investments in Securities (continued)

            

Assets (continued)

            

Long-Term Investments (continued)

            

Common Stocks (continued)

            

Data Processing & Outsourced Services

   $ 15,585,533        $ 6,822,018           $—     

Diversified Banks

     26,112,045                

Financial Exchanges & Data

     8,708,437                

Insurance Brokers

     8,416,543                

Investment Banking & Brokerage

     11,608,265                

Life & Health Insurance

     6,220,434                

Mortgage REITs

     1,938,721                

Other Diversified Financial Services

     1,690,754                

Property & Casualty Insurance

     13,084,024                

Real Estate Services

     561,904                

Regional Banks

     18,128,458                

Reinsurance

     5,907,296                

Thrifts & Mortgage Finance

     1,435,141                

Short-Term Investment

            

Unaffiliated Fund

     327,025                
  

 

 

   

 

 

      

 

  

Total

   $ 145,929,044     $ 6,822,018        $—     
  

 

 

   

 

 

   

 

 

 

Sector Classification:

The sector classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of May 31, 2022 were as follows:

 

Diversified Banks

     17.1

Data Processing & Outsourced Services

     14.7  

Asset Management & Custody Banks

     12.4  

Regional Banks

     11.9  

Property & Casualty Insurance

     8.5  

Investment Banking & Brokerage

     7.6  

Financial Exchanges & Data

     5.7  

Insurance Brokers

     5.5  

Consumer Finance

     4.4  

Life & Health Insurance

     4.1  

Reinsurance

     3.9  

Mortgage REITs

     1.3  

Other Diversified Financial Services

     1.1  

Thrifts & Mortgage Finance

     0.9

Application Software

     0.4  

Real Estate Services

     0.3  

Unaffiliated Fund

     0.2  
  

 

 

 
     100.0  

Liabilities in excess of other assets

     (0.0 )* 
  

 

 

 
     100.0
  

 

 

 

 

 

*

Less than +/- 0.05%

 

 

See Notes to Financial Statements.

 

12


Statement of Assets and Liabilities  (unaudited)

as of May 31, 2022

 

Assets

        

Unaffiliated investments (cost $109,031,949)

   $ 152,751,062  

Dividends receivable

     182,998  

Receivable for Fund shares sold

     92,874  

Tax reclaim receivable

     3,471  

Prepaid expenses and other assets

     25,822  
  

 

 

 

Total Assets

     153,056,227  
  

 

 

 

Liabilities

        

Payable for Fund shares purchased

     149,000  

Management fee payable

     93,883  

Distribution fee payable

     34,833  

Accrued expenses and other liabilities

     30,129  

Custodian and accounting fees payable

     16,835  

Affiliated transfer agent fee payable

     8,245  

Directors’ fees payable

     1,545  
  

 

 

 

Total Liabilities

     334,470  
  

 

 

 

Net Assets

   $ 152,721,757  
  

 

 

 
          

Net assets were comprised of:

  

Common stock, at par

   $ 85,865  

Paid-in capital in excess of par

     107,986,643  

Total distributable earnings (loss)

     44,649,249  
  

 

 

 

Net assets, May 31, 2022

   $ 152,721,757  
  

 

 

 

 

See Notes to Financial Statements.

PGIM Jennison Financial Services Fund    13


Statement of Assets and Liabilities  (unaudited)

as of May 31, 2022

 

Class A

        

Net asset value and redemption price per share,

($92,279,968 ÷ 5,185,748 shares of common stock issued and outstanding)

   $ 17.79          

Maximum sales charge (5.50% of offering price)

     1.04  
  

 

 

 

Maximum offering price to public

   $ 18.83  
  

 

 

 

Class C

        

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

($10,178,049 ÷ 658,632 shares of common stock issued and outstanding)

   $ 15.45  
  

 

 

 

Class R

        

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

($8,924,750 ÷ 503,025 shares of common stock issued and outstanding)

   $ 17.74  
  

 

 

 

Class Z

        

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

($30,581,909 ÷ 1,656,661 shares of common stock issued and outstanding)

   $ 18.46  
  

 

 

 

Class R6

        

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

($10,757,081 ÷ 582,467 shares of common stock issued and outstanding)

   $ 18.47  
  

 

 

 

 

See Notes to Financial Statements.

 

14


Statement of Operations  (unaudited)

Six Months Ended May 31, 2022

 

Net Investment Income (Loss)

        

Income

  

Unaffiliated dividend income

   $ 1,591,836  

Income from securities lending, net (including affiliated income of $33)

     18,034  

Affiliated dividend income

     375  
  

 

 

 

Total income

     1,610,245  
  

 

 

 

Expenses

  

Management fee

     619,510  

Distribution fee(a)

     246,580  

Transfer agent’s fees and expenses (including affiliated expense of $32,212)(a)

     105,762  

Registration fees(a)

     29,655  

Custodian and accounting fees

     26,540  

Shareholders’ reports

     12,111  

Audit fee

     11,867  

Legal fees and expenses

     10,077  

Directors’ fees

     5,654  

Miscellaneous

     15,789  
  

 

 

 

Total expenses

     1,083,545  

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

     (577

 Distribution fee waiver(a)

     (12,550
  

 

 

 

Net expenses

     1,070,418  
  

 

 

 

Net investment income (loss)

     539,827  
  

 

 

 

Realized And Unrealized Gain (Loss) On Investment And Foreign Currency Transactions

 

Net realized gain (loss) on:

  

Investment transactions

     2,426,216  

Foreign currency transactions

     (629
  

 

 

 
     2,425,587  
  

 

 

 

Net change in unrealized appreciation (depreciation) on:

  

Investments

     (24,952,997

Foreign currencies

     (780
  

 

 

 
     (24,953,777
  

 

 

 

Net gain (loss) on investment and foreign currency transactions

     (22,528,190
  

 

 

 

Net Increase (Decrease) In Net Assets Resulting From Operations

   $ (21,988,363
  

 

 

 

 

 

(a)

Class specific expenses and waivers were as follows:

 

    

Class A

  

Class C

  

Class R

 

Class Z

  

Class R6

Distribution fee

     149,675        59,254        37,651               

Transfer agent’s fees and expenses

     67,990        7,940        8,565       21,098        169  

Registration fees

     8,253        4,324        3,202       6,610        7,266  

Fee waiver and/or expense reimbursement

                                (577

Distribution fee waiver

                   (12,550             

 

See Notes to Financial Statements.

PGIM Jennison Financial Services Fund    15


Statements of Changes in Net Assets  (unaudited)

 

   

 Six Months Ended 

 May 31, 2022 

 

Year Ended

November 30, 2021

Increase (Decrease) in Net Assets

             

Operations

                                         

Net investment income (loss)

     $ 539,827          $ 413,513             

Net realized gain (loss) on investment and foreign currency transactions

                    2,425,587                                  14,724,305    

Net change in unrealized appreciation (depreciation) on investments and foreign currencies

       (24,953,777          31,799,051    
    

 

 

        

 

 

   

Net increase (decrease) in net assets resulting from operations

       (21,988,363          46,936,869    
    

 

 

        

 

 

   

Dividends and Distributions

             

Distributions from distributable earnings

             

Class A

       (9,847,959          (332,141  

Class C

       (1,323,503             

Class R

       (1,004,772          (20,326  

Class Z

       (3,358,342          (195,616  

Class R6

       (776,994          (389  
    

 

 

        

 

 

   
       (16,311,570          (548,472  
    

 

 

        

 

 

   

Fund share transactions (Net of share conversions)

             

Net proceeds from shares sold

       17,774,588            31,146,373    

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

       15,864,122            533,186    

Cost of shares purchased

       (18,022,346          (27,214,383  
    

 

 

        

 

 

   

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

       15,616,364            4,465,176    
    

 

 

        

 

 

   

Total increase (decrease)

       (22,683,569          50,853,573    

Net Assets:

             
             

Beginning of period

       175,405,326            124,551,753    
    

 

 

        

 

 

   

End of period

     $ 152,721,757          $ 175,405,326    
    

 

 

        

 

 

   

 

See Notes to Financial Statements.

 

16


Financial Highlights  (unaudited)

 

    

 

   

Class A Shares

                               
        

 Six Months 
Ended

May 31,

        
     Year Ended November 30,
         2022       2021   2020   2019   2018   2017
   

Per Share Operating Performance(a):

                                                                         

Net Asset Value, Beginning of Period

          $22.44                 $16.46       $15.93       $13.87       $14.49       $11.55

Income (loss) from investment operations:

                                                                         

Net investment income (loss)

          0.06                 0.05       0.07       0.08       0.04       0.17
Net realized and unrealized gain (loss) on investment and foreign currency transactions           (2.64 )                 6.00       0.55       2.07       (0.49 )       2.97

Total from investment operations

          (2.58 )                 6.05       0.62       2.15       (0.45 )       3.14

Less Dividends and Distributions:

                                                                         

Dividends from net investment income

          (0.04 )                 (0.07 )       (0.09 )       (0.03 )       (0.17 )       (0.20 )

Distributions from net realized gains

          (2.03 )                 -       -       (0.06 )       -       -

Total dividends and distributions

          (2.07 )                 (0.07 )       (0.09 )       (0.09 )       (0.17 )       (0.20 )

Net asset value, end of period

          $17.79                 $22.44       $16.46       $15.93       $13.87       $14.49

Total Return(b):

          (12.34 )%                 36.90 %       3.87 %       15.76 %       (3.14 )%       27.56 %
                                 

Ratios/Supplemental Data:

                                                                         

Net assets, end of period (000)

          $92,280                 $106,999       $74,696       $81,555       $76,836       $83,561

Average net assets (000)

          $100,058                 $99,402       $69,614       $77,111       $84,872       $82,660

Ratios to average net assets(c)(d):

                                                                         
Expenses after waivers and/or expense reimbursement           1.30 %(e)                 1.29 %       1.39 %       1.38 %       1.33 %       1.37 %
Expenses before waivers and/or expense reimbursement           1.30 %(e)                 1.29 %       1.39 %       1.38 %       1.33 %       1.37 %

Net investment income (loss)

          0.65 %(e)                 0.25 %       0.48 %       0.54 %       0.30 %       1.29 %

Portfolio turnover rate(f)

          23 %                 39 %       38 %       14 %       23 %       128 %

 

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized.

(c)

Does not include expenses of the underlying funds in which the Fund invests.

(d)

Effective December 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class.

(e)

Annualized.

(f)

The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher.

 

See Notes to Financial Statements.

PGIM Jennison Financial Services Fund    17


Financial Highlights  (unaudited) (continued)

 

   

Class C Shares

                                                                         
        

Six Months

Ended

May 31,

      Year Ended November 30,
         2022       2021   2020   2019   2018   2017
                                   
   

Per Share Operating Performance(a):

                                                                         

Net Asset Value, Beginning of Period

          $19.79                 $14.57       $14.13       $12.37       $12.96       $10.36

Income (loss) from investment operations:

                                                                         

Net investment income (loss)

          (0.01 )(b)                 (0.09 )(b)       (0.03 )(b)       (0.02 )       (0.05 )       0.07
Net realized and unrealized gain (loss) on investment and foreign currency transactions           (2.30 )                 5.31       0.47       1.84       (0.44 )       2.67

Total from investment operations

          (2.31 )                 5.22       0.44       1.82       (0.49 )       2.74

Less Dividends and Distributions:

                                                                         

Dividends from net investment income

          -                 -       (- )(c)       -       (0.10 )       (0.14 )

Distributions from net realized gains

          (2.03 )                 -       -       (0.06 )       -       -

Total dividends and distributions

          (2.03 )                 -       (- )(c)       (0.06 )       (0.10 )       (0.14 )

Net asset value, end of period

          $15.45                 $19.79       $14.57       $14.13       $12.37       $12.96

Total Return(d):

          (12.66 )%                 35.83 %       3.14 %       14.99 %       (3.81 )%       26.68 %
                                                                           

Ratios/Supplemental Data:

                                                                         

Net assets, end of period (000)

          $10,178                 $13,028       $11,366       $15,452       $25,457       $30,600

Average net assets (000)

          $11,883                 $13,144       $11,917       $19,307       $29,808       $30,591

Ratios to average net assets(e)(f):

                                                                         

Expenses after waivers and/or expense reimbursement

          2.06 %(g)                 2.03 %       2.14 %       2.09 %       2.02 %       2.07 %

Expenses before waivers and/or expense reimbursement

          2.06 %(g)                 2.03 %       2.14 %       2.09 %       2.02 %       2.07 %

Net investment income (loss)

          (0.10 )%(g)                 (0.47 )%       (0.26 )%       (0.18 )%       (0.39 )%       0.59 %

Portfolio turnover rate(h)

          23 %                 39 %       38 %       14 %       23 %       128 %

 

(a)

Calculated based on average shares outstanding during the period.

(b)

The per share amount of net investment income (loss) does not directly correlate to the amounts reported in the Statement of Operations due to class specific expenses.

(c)

Amount rounds to zero.

(d)

Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized.

(e)

Does not include expenses of the underlying funds in which the Fund invests.

(f)

Effective December 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class.

(g)

Annualized.

(h)

The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher.

 

See Notes to Financial Statements.

 

18


    

 

   

Class R Shares

                               
        

Six Months

Ended

May 31,

      Year Ended November 30,
          2022       2021   2020   2019   2018   2017
                                   
   

Per Share Operating Performance(a):

                                                                         

Net Asset Value, Beginning of Period

          $22.36                 $16.42       $15.89       $13.83       $14.47       $11.54
Income (loss) from investment operations:                                                                          

Net investment income (loss)

          0.04                 (- )(b)(c)       0.03       0.03       0.01       0.15
Net realized and unrealized gain (loss) on investment and foreign currency transactions           (2.63 )                 5.98       0.54       2.09       (0.50 )       2.96

Total from investment operations

          (2.59 )                 5.98       0.57       2.12       (0.49 )       3.11

Less Dividends and Distributions:

                                                                         

Dividends from net investment income

          -                 (0.04 )       (0.04 )       -       (0.15 )       (0.18 )

Distributions from net realized gains

          (2.03 )                 -       -       (0.06 )       -       -

Total dividends and distributions

          (2.03 )                 (0.04 )       (0.04 )       (0.06 )       (0.15 )       (0.18 )

Net asset value, end of period

          $17.74                 $22.36       $16.42       $15.89       $13.83       $14.47

Total Return(d):

          (12.43 )%                 36.47 %       3.66 %       15.43 %       (3.44 )%       27.27 %
                                                                           

Ratios/Supplemental Data:

                                                                         

Net assets, end of period (000)

          $8,925                 $11,121       $9,087       $12,077       $14,966       $17,092

Average net assets (000)

          $10,068                 $10,866       $9,490       $12,864       $17,663       $14,192

Ratios to average net assets(e)(f):

                                                                         

Expenses after waivers and/or expense reimbursement

          1.58 %(g)                 1.56 %       1.64 %       1.69 %       1.59 %       1.56 %
Expenses before waivers and/or expense reimbursement           1.83 %(g)                 1.81 %       1.89 %       1.94 %       1.84 %       1.81 %

Net investment income (loss)

          0.37 %(g)                 (0.01 )%       0.24 %       0.22 %       0.05 %       1.16 %

Portfolio turnover rate(h)

          23 %                 39 %       38 %       14 %       23 %       128 %

 

(a)

Calculated based on average shares outstanding during the period.

(b)

The per share amount of net investment income (loss) does not directly correlate to the amounts reported in the Statement of Operations due to class specific expenses.

(c)

Amount rounds to zero.

(d)

Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized.

(e)

Does not include expenses of the underlying funds in which the Fund invests.

(f)

Effective December 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class.

(g)

Annualized.

(h)

The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher.

 

See Notes to Financial Statements.

PGIM Jennison Financial Services Fund    19


Financial Highlights  (unaudited) (continued)

 

   

Class Z Shares

                                 
        

Six Months

Ended

May 31,

      Year Ended November 30,
          2022       2021   2020   2019   2018   2017
                                   
   

Per Share Operating Performance(a):

                                                                               

Net Asset Value, Beginning of Period

                $23.23                 $17.03       $16.47       $14.34       $14.97       $11.92

Income (loss) from investment operations:

                                                                               

Net investment income (loss)

                0.09                 0.12       0.12       0.13       0.10       0.22
Net realized and unrealized gain (loss) on investment and foreign currency transactions                 (2.73 )                 6.19       0.57       2.14       (0.52 )       3.06

Total from investment operations

                (2.64 )                 6.31       0.69       2.27       (0.42 )       3.28

Less Dividends and Distributions:

                                                                               

Dividends from net investment income

                (0.10 )                 (0.11 )       (0.13 )       (0.08 )       (0.21 )       (0.23 )

Distributions from net realized gains

                (2.03 )                 -       -       (0.06 )       -       -

Total dividends and distributions

                (2.13 )                 (0.11 )       (0.13 )       (0.14 )       (0.21 )       (0.23 )

Net asset value, end of period

                $18.46                 $23.23       $17.03       $16.47       $14.34       $14.97

Total Return(b):

                (12.18 )%                 37.25 %       4.22 %       16.18 %       (2.87 )%       27.96 %
                                                                                 

Ratios/Supplemental Data:

                                                                               

Net assets, end of period (000)

                $30,582                 $35,907       $29,391       $43,675       $46,317       $47,684

Average net assets (000)

                $34,452                 $36,604       $34,346       $40,671       $50,663       $44,492

Ratios to average net assets(c)(d):

                                                                               
Expenses after waivers and/or expense reimbursement                 1.01 %(e)                 1.00 %       1.09 %       1.04 %       1.01 %       1.06 %
Expenses before waivers and/or expense reimbursement                 1.01 %(e)                 1.00 %       1.09 %       1.04 %       1.01 %       1.06 %

Net investment income (loss)

                0.94 %(e)                 0.56 %       0.80 %       0.87 %       0.64 %       1.66 %

Portfolio turnover rate(f)

                23 %                 39 %       38 %       14 %       23 %       128 %

 

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized.

(c)

Does not include expenses of the underlying funds in which the Fund invests.

(d)

Effective December 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class.

(e)

Annualized.

(f)

The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher.

 

See Notes to Financial Statements.

 

20


    

 

   

Class R6 Shares

                           
    

Six Months

Ended

May 31,

      Year Ended November 30,  

January 26, 2018(a)

through

November 30,

    
     2022       2021   2020   2019   2018     
                               
   

Per Share Operating Performance(b):

                                                               

Net Asset Value, Beginning of Period

      $23.24                 $17.05       $16.48       $14.34       $16.00    

Income (loss) from investment operations:

                                                               

Net investment income (loss)

      0.09                 0.10       0.13       0.14       0.10    
Net realized and unrealized gain (loss) on investment and foreign currency transactions       (2.73 )                 6.21       0.58       2.14       (1.76 )    

Total from investment operations

      (2.64 )                 6.31       0.71       2.28       (1.66 )    

Less Dividends and Distributions:

                                                               

Dividends from net investment income

      (0.10 )                 (0.12 )       (0.14 )       (0.08 )       -    

Distributions from net realized gains

      (2.03 )                 -       -       (0.06 )       -    

Total dividends and distributions

      (2.13 )                 (0.12 )       (0.14 )       (0.14 )       -    

Net asset value, end of period

      $18.47                 $23.24       $17.05       $16.48       $14.34    

Total Return(c):

      (12.18 )%                 37.25 %       4.30 %       16.25 %       (10.38 )%    
                                                                 

Ratios/Supplemental Data:

                                                               

Net assets, end of period (000)

      $10,757                 $8,350       $12       $11       $9    

Average net assets (000)

      $9,196                 $4,471       $10       $10       $10    

Ratios to average net assets(d):

                                                               

Expenses after waivers and/or expense reimbursement

      1.00 %(e)                 1.00 %       1.00 %       1.00 %       1.00 %(e)    

Expenses before waivers and/or expense reimbursement

      1.01 %(e)                 1.15 %       77.93 %       263.59 %       272.24 %(e)    

Net investment income (loss)

      0.95 %(e)                 0.45 %       0.86 %       0.93 %      
0.80
%(e)
   

Portfolio turnover rate(f)

      23 %                 39 %       38 %       14 %       23 %    

 

(a)

Commencement of offering.

(b)

Calculated based on average shares outstanding during the period.

(c)

Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized.

(d)

Does not include expenses of the underlying funds in which the Fund invests.

(e)

Annualized.

(f)

The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher.

 

See Notes to Financial Statements.

PGIM Jennison Financial Services Fund    21


Notes to Financial Statements  (unaudited)

 

1.

Organization

Prudential Sector Funds, Inc. (the “Registered Investment Company” or “RIC”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company. The RIC is organized as a Maryland Corporation. These financial statements relate only to the PGIM Jennison Financial Services Fund (the “Fund”), a series of the RIC. The Fund is classified as a non-diversified fund for purposes of the 1940 Act.

The investment objective of the Fund is long-term capital appreciation.

 

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 RIC’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 period-end, securities and other assets and liabilities were fair valued at the close of the last U.S. business day. Trading in certain foreign securities may occur when the NYSE is closed (including weekends and holidays). Because such foreign securities trade in markets that are open on weekends and U.S. holidays, the values of some

 

22


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 Measurement.

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.

Foreign equities traded on foreign securities exchanges are generally valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy. The models generate an evaluated adjustment factor for each security, which is applied to the local closing price to adjust it for post closing market movements up to the time the Fund is valued. Utilizing that evaluated adjustment factor, the vendor provides an evaluated price for each security. If the vendor does not provide an evaluated price, securities are valued in accordance with exchange-traded common and preferred stock valuation policies discussed above.

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.

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

 

PGIM Jennison Financial Services Fund    23


Notes to Financial Statements  (unaudited) (continued)

 

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.

Foreign Currency Translation: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis:

(i) market value of investment securities, other assets and liabilities — at the exchange rate as of the valuation date;

(ii) purchases and sales of investment securities, income and expenses — at the rates of exchange prevailing on the respective dates of such transactions.

Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not generally isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities held at the end of the period. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities sold during the period. Accordingly, holding period unrealized and realized foreign currency gains (losses) are included in the reported net change in unrealized appreciation (depreciation) on investments and net realized gains (losses) on investment transactions on the Statements of Operations.

Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from the disposition of holdings of foreign currencies, currency gains (losses) realized between the trade and settlement dates on investment transactions, and the difference between the amounts of interest, dividends and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) arise from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates.

Master Netting Arrangements: The RIC, 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

 

24


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

Securities Lending: The Fund lends its portfolio securities to banks and broker-dealers. The loans are secured by collateral at least equal to the market value of the securities loaned. Collateral pledged by each borrower is invested in an affiliated money market fund and is marked to market daily, based on the previous day’s market value, such that the value of the collateral exceeds the value of the loaned securities. In the event of significant appreciation in value of securities on loan on the last business day of the reporting period, the financial statements may reflect a collateral value that is less than the market value of the loaned securities. Such shortfall is remedied as described above. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of the loan, the borrower will return to the Fund securities identical to the loaned securities. The remaining maturities of the securities lending transactions are considered overnight and continuous. Should the borrower of the securities fail financially, the Fund has the right to repurchase the securities in the open market using the collateral.

The Fund recognizes income, net of any rebate and securities lending agent fees, for lending its securities in the form of fees or interest on the investment of any cash received as collateral. The borrower receives all interest and dividends from the securities loaned and such payments are passed back to the lender in amounts equivalent thereto, which are reflected in interest income or unaffiliated dividend income based on the nature of the payment on the Statement of Operations. The Fund also continues to recognize any unrealized gain (loss) in the market price of the securities loaned and on the change in the value of the collateral invested that may occur during the term of the loan. In addition, realized gain (loss) is recognized on changes in the value of the collateral invested upon liquidation of the collateral. Net earnings from securities lending are disclosed in the Statement of Operations.

Equity and Mortgage Real Estate Investment Trusts (collectively REITs): The Fund invested in REITs, which report information on the source of their distributions annually. Based on current and historical information, a portion of distributions received from REITs during the period is estimated to be dividend income, capital gain or return of capital and recorded accordingly. When material, these estimates are adjusted periodically when the actual source of distributions is disclosed by the REITs.

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. 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

 

PGIM Jennison Financial Services Fund    25


Notes to Financial Statements   (unaudited) (continued)

 

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, 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: 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. The chart below sets forth the expected frequency of dividend and capital gains distributions to shareholders. Various factors may impact the frequency of dividend distributions to shareholders, including but not limited to adverse market conditions or portfolio holding-specific events.

 

   
  Expected Distribution Schedule to Shareholders*    Frequency  

Net Investment Income

     Annually    

Short-Term Capital Gains

     Annually    

Long-Term Capital Gains

     Annually    

 

*

Under certain circumstances, the Fund may make more than one distribution of short-term and/or long-term capital gains during a fiscal year.

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 RIC, 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.

 

26


The Manager has entered into a subadvisory agreement with Jennison Associates LLC (“Jennison” or the “subadviser”). The Manager pays for the services of Jennison.

Fees payable under the management agreement are computed daily and paid monthly. For the reporting period ended May 31, 2022, the contractual and effective management fee rates were as follows:

 

   
  Contractual Management Rate   

Effective Management Fee, before any waivers

and/or expense reimbursements

0.75% to $1 billion of average daily net assets;

   0.75%

0.70% over $1 billion of average daily net assets.

    

The Manager has contractually agreed, through March 31, 2023, to limit transfer agency, shareholder servicing, sub-transfer agency, and blue sky fees, as applicable. This contractual expense limitation excludes interest, brokerage, taxes (such as income and foreign withholding taxes, stamp duty and deferred tax expenses), acquired fund fees and expenses, extraordinary expenses, and certain other Fund expenses such as dividend and interest expense and broker charges on short sales.

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

 

   
  Class    Expense  
Limitations  

A

    

C

      

R

          

Z

      

R6

     1.00  

The RIC, 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 based on average daily net assets per class. PIMS has

 

PGIM Jennison Financial Services Fund    27


Notes to Financial Statements  (unaudited) (continued)

 

contractually agreed through March 31, 2023 to limit such fees on certain classes based on daily net assets. The distribution fees are accrued daily and payable monthly.

The Fund’s annual gross and net distribution rate, where applicable, are as follows:

 

     
  Class    Gross Distribution Fee      Net Distribution Fee 

A

   0.30%       0.30% 

C

   1.00          1.00    

R

   0.75          0.50    

Z

   N/A         N/A   

R6

   N/A         N/A   

For the reporting period ended May 31, 2022, PIMS received front-end sales charges (“FESL”) resulting from sales of certain class shares and contingent deferred sales charges (“CDSC”) imposed upon redemptions by certain shareholders. From these fees, PIMS paid such sales charges to broker-dealers, who in turn paid commissions to salespersons and incurred other distribution costs. The sales charges are as follows where applicable:

 

     
  Class    FESL        CDSC 

A

     $121,101         $ —  

C

     —         157

PGIM Investments, PIMS and Jennison 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.

The Fund may invest its overnight sweep cash in the PGIM Core Ultra Short Bond Fund (the “Core Fund”), and its securities lending cash collateral in the PGIM Institutional Money Market Fund (the “Money Market Fund”), each a fund 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 and the Money Market Fund. In addition to the realized and unrealized gains on investments in the Core Fund and Money Market Fund, earnings from such investments are disclosed on the Statement of Operations as “Affiliated dividend income” and “Affiliated income from securities lending, net”, respectively. Effective January 2022, the Fund changed its overnight cash sweep vehicle from the Core Fund to an unaffiliated money market fund.

 

28


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/trustees, and/or common officers. For the reporting period ended May 31, 2022, 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 reporting period ended May 31, 2022, were as follows:

 

   
Cost of Purchases    Proceeds from Sales

$40,577,321

   $38,243,142

A summary of the cost of purchases and proceeds from sales of shares of affiliated mutual funds for the reporting period ended May 31, 2022, is presented as follows:

 

               

Value,

Beginning

of

Period

   Cost of
Purchases
   Proceeds
from Sales
  

Change in 

Unrealized 

Gain 

(Loss) 

  

Realized 

Gain 

(Loss) 

  

Value, 

End of 

Period 

  

Shares, 

End 

of 

Period 

   Income 

  Short-Term Investments - Affiliated Mutual Funds:

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

  $3,021,536

   $4,650,675    $7,672,211     $—         $—         $—         —        $375

  PGIM Institutional Money Market Fund(1)(b)(wa)

     1,695,000      1,695,000     —       —       —       —                33(2)

  $3,021,536

   $6,345,675    $9,367,211     $—         $—         $—             $408

 

(1)

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

(2)

The amount, or a portion thereof, represents the affiliated securities lending income shown on the Statement of Operations.

(b)

Represents security, or portion thereof, purchased with cash collateral received for securities on loan and includes dividend reinvestment.

(wa)

PGIM Investments LLC, the manager of the Fund, also serves as manager of the PGIM Core Ultra Short Bond Fund and PGIM Institutional Money Market Fund, if applicable.

 

6.

Tax Information

The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of May 31, 2022 were as follows:

 

       
    Tax Basis       

Gross

Unrealized

Appreciation

  

Gross

Unrealized

Depreciation

 

Net

Unrealized

Appreciation

$109,275,241

   $44,972,050    $(1,496,229)   $43,475,821

 

PGIM Jennison Financial Services Fund    29


Notes to Financial Statements  (unaudited) (continued)

 

The GAAP basis may differ from tax basis due to certain tax-related adjustments.

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 November 30, 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 5.50%. Investors who purchase $1 million or more of Class A shares and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1%, although they are not subject to an initial 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. 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 eight years (ten years prior to January 22, 2021) after purchase. 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.

The RIC is authorized to issue 2,000,000,000 shares of common stock, $0.01 par value per share, 400,000,000 of which are designated as shares of the Fund. The authorized shares of the fund are currently classified and designated as follows:

 

   
  Class    Number of Shares  

A

     50,000,000           

B

     5,000,000           

C

     40,000,000           

R

     75,000,000           

Z

     90,000,000           

T

     50,000,000           

R6

     90,000,000           

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

 

30


As of May 31, 2022, Prudential, through its affiliated entities, including affiliated funds (if applicable), owned shares of the Fund as follows:

 

     
 Class      Number of Shares      Percentage of Outstanding Shares 

A

        280    0.1%

R

   47,420    9.4   

R6

        709    0.1   

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

 

     
        Number of Shareholders      Percentage of Outstanding Shares 

Affiliated

   —            —%   

Unaffiliated

   4    56.6   

Transactions in shares of common stock were as follows:

 

     
  Share Class    Shares     Amount

Class A

            

Six months ended May 31, 2022:

            

Shares sold

     351,007     $    6,792,665 

Shares issued in reinvestment of dividends and distributions

     481,906     9,435,715 

Shares purchased

     (449,442   (8,545,931)

Net increase (decrease) in shares outstanding before conversion

     383,471     7,682,449 

Shares issued upon conversion from other share class(es)

     57,839     1,105,744 

Shares purchased upon conversion into other share class(es)

     (23,821 )        (458,785)

Net increase (decrease) in shares outstanding

     417,489     $    8,329,408 

Year ended November 30, 2021:

            

Shares sold

     582,280     $  11,925,723 

Shares issued in reinvestment of dividends and distributions

     18,263     318,681 

Shares purchased

     (491,161   (10,132,227)

Net increase (decrease) in shares outstanding before conversion

     109,382     2,112,177 

Shares issued upon conversion from other share class(es)

     187,436     3,826,664 

Shares purchased upon conversion into other share class(es)

     (65,533   (1,371,291)

Net increase (decrease) in shares outstanding

     231,285     $    4,567,550 

 

PGIM Jennison Financial Services Fund    31


Notes to Financial Statements  (unaudited) (continued)

 

     
  Share Class    Shares     Amount

Class C

            

Six months ended May 31, 2022:

            

Shares sold

     67,829     $    1,175,297 

Shares issued in reinvestment of dividends and distributions

     77,515     1,322,406 

Shares purchased

     (71,025   (1,151,409)

Net increase (decrease) in shares outstanding before conversion

     74,319     1,346,294 

Shares purchased upon conversion into other share class(es)

     (73,932   (1,236,570)

Net increase (decrease) in shares outstanding

     387     $       109,724 

Year ended November 30, 2021:

            

Shares sold

     201,970     $    3,541,955 

Shares purchased

     (96,959 )        (1,776,209)

Net increase (decrease) in shares outstanding before conversion

     105,011     1,765,746 

Shares purchased upon conversion into other share class(es)

     (226,976   (4,085,567)

Net increase (decrease) in shares outstanding

     (121,965   $  (2,319,821)

Class R

            

Six months ended May 31, 2022:

            

Shares sold

     21,716     $       431,814 

Shares issued in reinvestment of dividends and distributions

     51,421     1,004,772 

Shares purchased

     (67,385   (1,297,710)

Net increase (decrease) in shares outstanding

     5,752     $       138,876 

Year ended November 30, 2021:

            

Shares sold

     189,170     $    3,881,896 

Shares issued in reinvestment of dividends and distributions

     1,166     20,326 

Shares purchased

     (246,483   (5,062,093)

Net increase (decrease) in shares outstanding

     (56,147   $  (1,159,871)

 

32


     
  Share Class    Shares     Amount

Class Z

            

Six months ended May 31, 2022:

            

Shares sold

     224,945     $   4,719,959 

Shares issued in reinvestment of dividends and distributions

     163,917     3,324,235 

Shares purchased

     (307,099   (5,988,666)

Net increase (decrease) in shares outstanding before conversion

     81,763     2,055,528 

Shares issued upon conversion from other share class(es)

     31,542     631,726 

Shares purchased upon conversion into other share class(es)

     (2,246   (42,115)

Net increase (decrease) in shares outstanding

     111,059     $   2,645,139 

Year ended November 30, 2021:

            

Shares sold

     515,048     $ 10,612,360 

Shares issued in reinvestment of dividends and distributions

     10,760     193,790 

Shares purchased

     (431,030   (9,178,724)

Net increase (decrease) in shares outstanding before conversion

     94,778     1,627,426 

Shares issued upon conversion from other share class(es)

     78,384     1,668,903 

Shares purchased upon conversion into other share class(es)

     (353,601   (7,881,414)

Net increase (decrease) in shares outstanding

     (180,439   $ (4,585,085)

Class R6

            

Six months ended May 31, 2022:

            

Shares sold

     236,798     $  4,654,853 

Shares issued in reinvestment of dividends and distributions

     38,294     776,994 

Shares purchased

     (51,931 )        (1,038,630)

Net increase (decrease) in shares outstanding

     223,161     $  4,393,217 

Year ended November 30, 2021:

            

Shares sold

     52,346     $  1,184,439 

Shares issued in reinvestment of dividends and distributions

     22     389 

Shares purchased

     (45,461   (1,065,130)

Net increase (decrease) in shares outstanding before conversion

     6,907     119,698 

Shares issued upon conversion from other share class(es)

     351,687     7,842,705 

Net increase (decrease) in shares outstanding

     358,594     $  7,962,403 

 

8.

Borrowings

The RIC, 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 SCA.

 

            SCA      

Term of Commitment

         10/1/2021 – 9/29/2022      

Total Commitment

         $ 1,200,000,000      

Annualized Commitment Fee on the Unused Portion of the SCA

         0.15%      

 

PGIM Jennison Financial Services Fund    33


Notes to Financial Statements  (unaudited) (continued)

 

   
          SCA    

Annualized Interest Rate on Borrowings

  

1.20% plus the higher of (1)

the effective federal funds

rate, (2) the one-month

LIBOR rate or (3) zero

percent

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

The Fund utilized the SCA during the reporting period ended May 31, 2022. The average daily balance for the 21 days that the Fund had loans outstanding during the period was approximately $218,048, borrowed at a weighted average interest rate of 1.81%. The maximum loan outstanding amount during the period was $593,000. At May 31, 2022, 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.

Currency Risk: The Fund’s net asset value could decline as a result of changes in exchange rates, which could adversely affect the Fund’s investments in currencies, or in securities that trade in, and receive revenues related to, currencies, or in derivatives that provide exposure to currencies. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payment of principal and interest or dividends to investors located outside the country, due to blockage of foreign currency exchanges or otherwise.

Economic and Market Events Risk: Events in the U.S. and global financial markets, including actions taken by the U.S. Federal Reserve or foreign central banks to stimulate or stabilize economic growth or the functioning of the securities markets, may at times result in unusually high market volatility, which could negatively impact performance. Relatively reduced liquidity in credit and fixed income markets could adversely affect issuers worldwide.

 

34


Equity and Equity-Related Securities Risk: Equity and equity-related securities may be subject to changes in value, and their values may be more volatile than those of other asset classes. In addition to an individual security losing value, the value of the equity markets or a sector in which the Fund invests could go down. Different parts of a market can react differently to adverse issuer, market, regulatory, political and economic developments.

Financial Services Related Companies Risk: The Fund concentrates its investments in securities of financial services related companies. Financial services related companies are subject to extensive government regulation and can be significantly affected by the availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, price competition, cyberattacks and technology malfunctions and failures and other financial services related factors. The profitability of financial services companies, therefore, may be adversely affected under certain circumstances and in certain market cycles. Because financial services companies are vulnerable to these factors and cycles, a large portion of the Fund’s investments may lose value during such periods.

Foreign Securities Risk: Investments in securities of non-U.S. issuers (including those denominated in U.S. dollars) may involve more risk than investing in securities of U.S. issuers. Foreign political, economic and legal systems, especially those in developing and emerging market countries, may be less stable and more volatile than in the United States. Foreign legal systems generally have fewer regulatory requirements than the U.S. legal system, particularly those of emerging markets. In general, less information is publicly available with respect to non-U.S. companies than U.S. companies. Non-U.S. companies generally are not subject to the same accounting, auditing, and financial reporting standards as are U.S. companies. Additionally, the changing value of foreign currencies and changes in exchange rates could also affect the value of the assets the Fund holds and the Fund’s performance. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payment of principal and interest or dividends to investors located outside the country, due to blockage of foreign currency exchanges or otherwise. Investments in emerging markets are subject to greater volatility and price declines.

In addition, the Fund’s investments in non-U.S. securities may be subject to the risks of nationalization or expropriation of assets, imposition of currency exchange controls or restrictions on the repatriation of non-U.S. currency, confiscatory taxation and adverse diplomatic developments. Special U.S. tax considerations may apply.

Increase in Expenses Risk: Your actual cost of investing in the Fund may be higher than the expenses shown in the expense table in the Fund’s prospectus for a variety of reasons. For example, expense ratios may be higher than those shown if average net assets decrease. Net assets are more likely to decrease and Fund expense ratios are more likely to increase when markets are volatile. Active and frequent trading of Fund securities can increase expenses.

Initial Public Offerings Risk: The volume of IPOs and the levels at which the newly issued stocks trade in the secondary market are affected by the performance of the stock market

 

PGIM Jennison Financial Services Fund    35


Notes to Financial Statements  (unaudited) (continued)

 

overall. If IPOs are brought to the market, availability may be limited and if the Fund desires to acquire shares in such an offering, it may not be able to buy any shares at the offering price, or if it is able to buy shares, it may not be able to buy as many shares at the offering price as it would like. The prices of securities involved in IPOs are often subject to greater and more unpredictable price changes than more established stocks. Such unpredictability can have a dramatic impact on the Fund’s performance (higher or lower) and any assumptions by investors based on the affected performance may be unwarranted. In addition, as Fund assets grow, the impact of IPO investments on performance will decline, which could reduce total returns.

Investment Style Risk: There is the risk that the particular investment style followed by the Fund may be out of favor for a period of time.

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 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.

Management Risk: The value of your investment may decrease if judgments by the subadviser about the attractiveness, value or market trends affecting a particular security, industry or sector or about market movements are incorrect.

Market Disruption and Geopolitical Risks: Market disruption can be caused by economic, financial or political events and factors, including but not limited to, international wars or conflicts (including Russia’s military invasion of Ukraine), geopolitical developments (including trading and tariff arrangements, sanctions and cybersecurity attacks), instability in regions such as Asia, Eastern Europe and the Middle East, terrorism, natural disasters and public health epidemics (including the outbreak of COVID-19 globally).

The extent and duration of such events and resulting market disruptions cannot be predicted, but could be substantial and could magnify the impact of other risks to the Fund. These and other similar events could adversely affect the U.S. and foreign financial markets and lead to increased market volatility, reduced liquidity in the securities markets, significant negative impacts on issuers and the markets for certain securities and commodities and/or

 

36


government intervention. They may also cause short- or long-term economic uncertainties in the United States and worldwide. As a result, whether or not the Fund invests in securities of issuers located in or with significant exposure to the countries directly affected, the value and liquidity of the Fund’s investments may be negatively impacted. Further, due to closures of certain markets and restrictions on trading certain securities, the value of certain securities held by the Fund could be significantly impacted, which could lead to such securities being valued at zero.

COVID-19 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. They have also had and may continue to 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. The occurrence, reoccurrence and pendency of public health epidemics could adversely affect the economies 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.

Non-Diversified Investment Company Risk: The Fund is non-diversified for purposes of the 1940 Act. This means that the Fund may invest a greater percentage of its assets in the securities of a single company or other issuer than a diversified fund. Investing in a non-diversified fund involves greater risk than investing in a diversified fund because a loss resulting from the decline in value of any one security may represent a greater portion of the total assets of a non-diversified fund.

 

10.

Recent Regulatory Developments

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 took effect on March 8, 2021, with a compliance date of September 8, 2022. Management is currently evaluating the Rule and its impact to the Fund.

 

PGIM Jennison Financial Services Fund    37


Liquidity Risk Management Program (unaudited)

 

Consistent with Rule 22e-4 under the 1940 Act (the “Liquidity Rule”), the Fund has adopted and implemented a liquidity risk management program (the “LRMP”). The Fund’s LRMP seeks to assess and manage the Fund’s liquidity risk, which is defined as the risk that the Fund is unable to meet investor redemption requests without significantly diluting the remaining investors’ interests in the Fund. The Board has approved PGIM Investments LLC (“PGIM Investments”), the Fund’s investment manager, to serve as the administrator of the Fund’s LRMP. As part of its responsibilities as administrator, PGIM Investments has retained a third party to perform certain functions, including providing market data and liquidity classification model information.

The Fund’s LRMP includes a number of processes designed to support the assessment and management of its liquidity risk. In particular, the Fund’s LRMP includes no less than annual assessments of factors that influence the Fund’s liquidity risk; no less than monthly classifications of the Fund’s investments into one of four liquidity classifications provided for in the Liquidity Rule; a 15% of net assets limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); establishment of a minimum percentage of the Fund’s assets to be invested in investments classified as “highly liquid” (as defined under the Liquidity Rule) if the Fund does not invest primarily in highly liquid investments; and regular reporting to the Board.

At a meeting of the Board on March 1-3, 2022, PGIM Investments provided a written report (“LRMP Report”) to the Board addressing the operation, adequacy, and effectiveness of the Fund’s LRMP, including any material changes to the LRMP for the period from January 1, 2021 through December 31, 2021 (“Reporting Period”). The LRMP Report concluded that the Fund’s LRMP was reasonably designed to assess and manage the Fund’s liquidity risk and was adequately and effectively implemented during the Reporting Period. There were no material changes to the LRMP during the Reporting Period. The LRMP Report further concluded that the Fund’s investment strategies continue to be appropriate given the Fund’s status as an open-end fund.

There can be no assurance that the LRMP will achieve its objectives in the future. Additional information regarding risks of investing in the Fund, including liquidity risks presented by the Fund’s investment portfolio, is found in the Fund’s Prospectus and Statement of Additional Information.

 

38


     

  MAIL

 

   655 Broad Street

 

   Newark, NJ 07102

  

  TELEPHONE

 

   (800) 225-1852

  

  WEBSITE

 

   pgim.com/investments

 

PROXY VOTING

The Board of Directors of the Fund has delegated to the Fund’s subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website.

 

DIRECTORS

Ellen S. Alberding Kevin J. Bannon Scott E. Benjamin Linda W. Bynoe Barry H. Evans Keith F. Hartstein Laurie Simon Hodrick Stuart S. Parker Brian K. Reid Grace C. Torres

 

OFFICERS

Stuart S. Parker, President Scott E. Benjamin, Vice President Christian J. Kelly, Treasurer and Principal Financial and Accounting Officer Claudia DiGiacomo, Chief Legal Officer Isabelle Sajous, Chief Compliance Officer Jonathan Corbett, Anti-Money Laundering Compliance Officer Andrew R. French, Secretary Melissa Gonzalez, Assistant Secretary Diana N. Huffman, Assistant Secretary Kelly A. Coyne, Assistant Secretary Patrick E. McGuinness, Assistant Secretary Debra Rubano, Assistant Secretary Lana Lomuti, Assistant Treasurer Russ Shupak, Assistant Treasurer Elyse M. McLaughlin, Assistant Treasurer Deborah Conway, Assistant Treasurer

 

MANAGER

   PGIM Investments LLC   

655 Broad Street

Newark, NJ 07102

SUBADVISER

   Jennison Associates LLC   

466 Lexington Avenue

New York, NY 10017

DISTRIBUTOR

   Prudential Investment Management Services LLC   

655 Broad Street

Newark, NJ 07102

CUSTODIAN

   The Bank of New York Mellon   

240 Greenwich Street

New York, NY 10286

TRANSFER AGENT

   Prudential Mutual Fund Services LLC   

PO Box 9658

Providence, RI 02940

INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

   PricewaterhouseCoopers LLP   

300 Madison Avenue

New York, NY 10017

FUND COUNSEL

   Willkie Farr & Gallagher LLP   

787 Seventh Avenue

New York, NY 10019


An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain the prospectus and summary prospectus by visiting our website at pgim.com/investments or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing.

 

E-DELIVERY

To receive your mutual fund documents online, go to pgim.com/investments/resource/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above.

 

SHAREHOLDER COMMUNICATIONS WITH DIRECTORS

Shareholders can communicate directly with the Board of Directors by writing to the Chair of the Board, PGIM Jennison Financial Services Fund, PGIM Investments, Attn: Board of Directors, 655 Broad Street, Newark, NJ 07102. Shareholders can communicate directly with an individual Director by writing to that Director at the same address. Communications are not screened before being delivered to the addressee.

 

AVAILABILITY OF PORTFOLIO HOLDINGS

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT filings are available on the Commission’s website at sec.gov.

  Mutual Funds:

 

     

ARE NOT INSURED BY THE FDIC OR ANY

FEDERAL GOVERNMENT AGENCY

       MAY LOSE VALUE       

ARE NOT A DEPOSIT OF OR GUARANTEED

BY ANY BANK OR ANY BANK AFFILIATE


LOGO

 

 

PGIM JENNISON FINANCIAL SERVICES FUND

 

  SHARE CLASS          A    C    R    Z    R6

  NASDAQ

     PFSAX     PUFCX     PSSRX     PFSZX     PFSQX 

  CUSIP

                  74441P106        74441P304        74441P783        74441P403        74441P734    

MF188E2


LOGO

PGIM JENNISON HEALTH SCIENCES FUND

 

    

SEMIANNUAL REPORT

MAY 31, 2022

 

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      

Fees and Expenses

     7      

Holdings and Financial Statements

     9      

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

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

The accompanying financial statements as of May 31, 2022 were not audited and, accordingly, no auditor’s opinion is expressed on them.

Mutual funds are distributed by Prudential Investment Management Services LLC, member SIPC. Jennison Associates LLC is a registered investment adviser. Both are Prudential Financial companies. © 2022 Prudential Financial, Inc. and its related entities. Jennison Associates, Jennison, PGIM, and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

 

2    Visit our website at pgim.com/investments


Letter from the President

 

LOGO

   Dear Shareholder:
   We hope you find the semiannual report for the PGIM Jennison Health Sciences Fund informative and useful. The report covers performance for the six-month period ended May 31, 2022.
   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 provide access to active investment strategies across the global markets in the pursuit of consistent outperformance for investors. PGIM is the world’s 11th largest investment manager with more than $1.5 trillion in assets under management. Our scale and investment expertise allow us to deliver a diversified suite of actively managed solutions across a broad spectrum of asset classes and investment styles.

Thank you for choosing our family of funds.

Sincerely,

 

LOGO

Stuart S. Parker, President

PGIM Jennison Health Sciences Fund

July 15, 2022

 

 

PGIM Jennison Health Sciences Fund    3


Your Fund’s Performance

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.

 

     Total Returns as of 5/31/22
(without sales charges)
 

Average Annual Total Returns as of 5/31/22

(with sales charges)

     Six Months* (%)   One Year (%)       Five Years (%)       Ten Years (%)    Since Inception (%)  

Class A

     -13.46       -18.10       9.09     13.52   

Class C

     -13.80       -14.51       9.54     13.35   

Class R

     -13.60       -13.60       9.94     13.85   

Class Z

     -13.34       -13.10       10.65     14.50   

Class R6

     -13.30       -13.00       10.71     N/A    11.08 (01/27/2016)

S&P 1500 Health Care Index

 

        
     1.50       6.67       13.64     16.01   

S&P Composite 1500 Index

 

        
       -8.68               -0.91           13.04           14.21   

 

Average Annual Total Returns as of 5/31/22 Since Inception (%)  
     Class R6  
(01/27/2016)  

S&P 1500 Health Care Index

     13.54        

S&P Composite 1500 Index

     14.63        
   

*Not annualized

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’s inception date.

 

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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   5.50% 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 $1 million 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)   0.30%   1.00%   0.75% (0.50% currently)   None   None

Benchmark Definitions

S&P 1500 Health Care Index*—The S&P 1500 Health Care Index is an unmanaged, capitalization-weighted index that measures the performance of the health care sector of the S&P Composite 1500 Index.

S&P Composite 1500 Index*—The S&P Composite 1500 Index is an unmanaged index of the stocks of 1,500 US companies, with market capitalizations ranging from small to large. The S&P Composite 1500 Index is a combination of three leading US stock indices: the S&P 500 Index (which measures the performance of US large cap stocks), the S&P MidCap 400 Index (which measures the performance of US mid cap stocks) and the S&P 600 Index (which measures the performance of US small cap stocks) and gives an indication of how the broad US stock market has performed.

*The S&P 1500 Health Care Index and S&P Composite 1500 Index products of S&P Dow Jones Indices LLC and/or its affiliates have been licensed for use by PGIM, Inc. and/or its affiliates. Copyright© 2022 S&P Dow Jones Indices LLC, a division of S&P Global, Inc., and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC.

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.

 

PGIM Jennison Health Sciences Fund    5


Your Fund’s Performance (continued)

Presentation of Fund Holdings as of 5/31/2022

 

  Ten Largest Holdings    Line of Business    % of Net Assets

UnitedHealth Group, Inc.

   Managed Health Care    10.3%

Merck & Co., Inc.

   Pharmaceuticals    5.9%

Abbott Laboratories

   Health Care Equipment    5.2%

Eli Lilly & Co.

   Pharmaceuticals    5.0%

Bristol-Myers Squibb Co.

   Pharmaceuticals    4.8%

Danaher Corp.

   Life Sciences Tools & Services    4.7%

Novo Nordisk A/S (Denmark), ADR

   Pharmaceuticals    4.5%

Vertex Pharmaceuticals, Inc.

   Biotechnology    3.8%

Humana, Inc.

   Managed Health Care    3.6%

Thermo Fisher Scientific, Inc.

   Life Sciences Tools & Services    3.6%

Holdings reflect only long-term investments and are subject to change.

 

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Fees and Expenses

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 May 31, 2022. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.

Actual Expenses

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

Hypothetical Example for Comparison Purposes

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

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

 

 

PGIM Jennison Health Sciences Fund    7


Fees and Expenses (continued)

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 Jennison Health Sciences

                           Fund

 

Beginning

Account Value

  December 1, 2021  

 

Ending        

  Account Value        

May 31, 2022      

 

Annualized

Expense
  Ratio Based on the      

Six-Month Period  

 

Expenses Paid

During the

  Six-Month Period*  

Class A

  Actual   $1,000.00   $    865.40   1.15%   $5.35
   
  Hypothetical   $1,000.00   $ 1,019.20   1.15%   $5.79
   

Class C

  Actual   $1,000.00   $    862.00   1.96%   $9.10
   
  Hypothetical   $1,000.00   $ 1,015.16   1.96%   $9.85
   

Class R

  Actual   $1,000.00   $    864.00   1.50%   $6.97
   
  Hypothetical   $1,000.00   $ 1,017.45   1.50%   $7.54
   

Class Z

  Actual   $1,000.00   $    866.60   0.87%   $4.05
   
  Hypothetical   $1,000.00   $ 1,020.59   0.87%   $4.38
   

Class R6

  Actual   $1,000.00   $    867.00   0.77%   $3.58
   
    Hypothetical   $1,000.00   $ 1,021.09   0.77%   $3.88

*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 182 days in the six-month period ended May 31, 2022, and divided by the 365 days in the Fund’s fiscal year ending November 30, 2022 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.

 

8    Visit our website at pgim.com/investments


Schedule of Investments  (unaudited)

as of May 31, 2022

 

  Description    Shares              Value  

LONG-TERM INVESTMENTS     94.4%

     

COMMON STOCKS     94.4%

     

Biotechnology     18.9%

                 

AbbVie, Inc.

     398,557      $ 58,735,345  

Apellis Pharmaceuticals, Inc.*(a)

     874,631        36,253,455  

Arcutis Biotherapeutics, Inc.*(a)

     301,782        6,301,208  

Argenx SE (Netherlands), ADR*

     114,903        35,539,498  

BioMarin Pharmaceutical, Inc.*

     525,074        39,448,810  

Galapagos NV (Belgium), ADR*

     222,574        12,243,796  

Horizon Therapeutics PLC*

     299,765        26,885,923  

Neurocrine Biosciences, Inc.*

     37,305        3,487,644  

Seagen, Inc.*

     262,235        35,580,045  

Vertex Pharmaceuticals, Inc.*(a)

     237,137        63,706,855  
     

 

 

 
        318,182,579  

Health Care Services     0.7%

                 

R1 RCM, Inc.*

     552,470        11,861,531  

Health Care Equipment     17.5%

                 

Abbott Laboratories

     738,183        86,706,975  

Axonics, Inc.*(a)

     217,741        10,887,050  

CONMED Corp.

     214,762        24,974,673  

Dexcom, Inc.*

     66,475        19,805,562  

Envista Holdings Corp.*(a)

     647,224        27,856,521  

Hologic, Inc.*

     304,949        22,953,511  

Intuitive Surgical, Inc.*

     138,402        31,505,831  

Shockwave Medical, Inc.*

     115,178        18,913,379  

Stryker Corp.

     211,028        49,486,066  
     

 

 

 
                293,089,568  

Health Care Supplies     0.5%

                 

DENTSPLY SIRONA, Inc.

     215,268        8,516,002  

Health Care Technology     0.5%

                 

Inspire Medical Systems, Inc.*(a)

     20,194        3,570,905  

Phreesia, Inc.*(a)

     275,321        4,994,323  
     

 

 

 
        8,565,228  

Life Sciences Tools & Services     13.6%

                 

Agilent Technologies, Inc.

     196,601        25,078,424  

Bio-Rad Laboratories, Inc. (Class A Stock)*

     41,838        22,500,058  

Danaher Corp.

     299,772        79,085,849  

IQVIA Holdings, Inc.*

     60,973        13,124,438  

 

See Notes to Financial Statements.

PGIM Jennison Health Sciences Fund    9


Schedule of Investments  (unaudited) (continued)

as of May 31, 2022

 

  Description    Shares              Value  

COMMON STOCKS (Continued)

     

Life Sciences Tools & Services (cont’d.)

                 

Lonza Group AG (Switzerland)

     14,098      $ 8,495,359  

QIAGEN NV*

     187,721        8,625,780  

Repligen Corp.*

     65,234        10,729,036  

Thermo Fisher Scientific, Inc.

     106,083        60,209,528  
     

 

 

 
        227,848,472  

Managed Health Care     17.3%

                 

Centene Corp.*

     697,652        56,816,779  

Humana, Inc.

     132,868        60,352,631  

UnitedHealth Group, Inc.

     349,624        173,686,211  
     

 

 

 
                290,855,621  

Pharmaceuticals     25.4%

                 

AstraZeneca PLC (United Kingdom), ADR

     619,157        41,161,557  

Bristol-Myers Squibb Co.

     1,075,187        81,122,859  

Catalent, Inc.*

     91,211        9,400,206  

Eli Lilly & Co.

     269,992        84,626,293  

Merck & Co., Inc.

     1,079,463        99,342,980  

Novo Nordisk A/S (Denmark), ADR

     687,112        75,857,165  

Revance Therapeutics, Inc.*

     243,784        3,334,965  

Zoetis, Inc.

     183,379        31,344,972  
     

 

 

 
        426,190,997  
     

 

 

 

TOTAL COMMON STOCKS
(cost $1,177,166,981)

        1,585,109,998  
     

 

 

 

PREFERRED STOCK     0.0%

     

Health Care Equipment

                 

ControlRad Systems, Inc., Private Placement, Reg D, Series A
(original cost $1,800,000; purchased 08/31/12)*^(f)
(cost $1,800,000)

     3,063,048        306  
     

 

 

 

 

See Notes to Financial Statements.

 

10


    

    

 

  Description    Units      Value  

WARRANTS*     0.0%

     

Biotechnology

                 

Aileron Therapeutics, Inc., expiring 03/29/24
(original cost $116,418; purchased 03/29/19)(f)
(cost $116,418)

     895,522      $  
     

 

 

 

TOTAL LONG-TERM INVESTMENTS
(cost $1,179,083,399)

        1,585,110,304  
     

 

 

 
    

Shares

        

SHORT-TERM INVESTMENTS     8.2%

     

AFFILIATED MUTUAL FUND     1.6%

     

PGIM Institutional Money Market Fund
(cost $27,122,006; includes $27,100,973 of cash collateral for securities on loan)(b)(wa)

     27,164,711        27,142,979  
     

 

 

 

UNAFFILIATED FUND    6.6%

     

Dreyfus Government Cash Management (Institutional Shares)
(cost $110,271,122)

     110,271,122        110,271,122  
     

 

 

 

TOTAL SHORT-TERM INVESTMENTS
(cost $137,393,128)

        137,414,101  
     

 

 

 

TOTAL INVESTMENTS     102.6%
(cost $1,316,476,527)

        1,722,524,405  

Liabilities in excess of other assets     (2.6)%

        (43,656,134
     

 

 

 

NET ASSETS     100.0%

      $   1,678,868,271  
     

 

 

 

 

 

Below is a list of the abbreviation(s) used in the semiannual report:

ADR — American Depositary Receipt

LIBOR — London Interbank Offered Rate

Reg D — Security was purchased pursuant to Regulation D under the Securities Act of 1933, providing exemption from the registration requirements. Unless otherwise noted, Regulation D securities are deemed to be liquid.

 

*

Non-income producing security.

^

Indicates a Level 3 instrument. The aggregate value of Level 3 instruments is $306 and 0.0% of net assets.

(a)

All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is $26,093,499; cash collateral of $27,100,973 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments. In the event of significant appreciation in value of securities on loan on the last business day of the reporting period, the Fund may reflect a collateral value that is less than the market value of the loaned securities and such shortfall is remedied the following business day.

(b)

Represents security, or portion thereof, purchased with cash collateral received for securities on loan and includes dividend reinvestment.

 

See Notes to Financial Statements.

PGIM Jennison Health Sciences Fund    11


Schedule of Investments  (unaudited) (continued)

as of May 31, 2022

 

(f)

Indicates a restricted security that is acquired in unregistered, private sales from the issuing company or from an affiliate of the issuer and is considered restricted as to disposition under federal securities law; the aggregate original cost of such securities is $1,916,418. The aggregate value of $306 is 0.0% of net assets.

(wa)

PGIM Investments LLC, the manager of the Fund, also serves as manager of the PGIM Core Ultra Short Bond Fund and PGIM Institutional Money Market Fund, if applicable.

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 May 31, 2022 in valuing such portfolio securities:

 

     Level 1             Level 2           Level 3

Investments in Securities

              

Assets

              

Long-Term Investments

              

Common Stocks

              

Biotechnology

   $ 318,182,579         $           $  —  

Health Care Services

     11,861,531                      

Health Care Equipment

     293,089,568                      

Health Care Supplies

     8,516,002                      

Health Care Technology

     8,565,228                      

Life Sciences Tools & Services

     219,353,113           8,495,359            

Managed Health Care

     290,855,621                      

Pharmaceuticals

     426,190,997                      

Preferred Stock

              

Health Care Equipment

                         306  

Warrants

              

Biotechnology

                          

Short-Term Investments

              

Affiliated Mutual Fund

     27,142,979                      

Unaffiliated Fund

     110,271,122                         —    
  

 

 

       

 

 

       

Total

   $ 1,714,028,740         $ 8,495,359           $306  
  

 

 

       

 

 

       

 

 

 

Sector Classification:

The sector classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of May 31, 2022 were as follows:

 

Pharmaceuticals

     25.4

Biotechnology

     18.9  

Health Care Equipment

     17.5  

Managed Health Care

     17.3

Life Sciences Tools & Services

     13.6  

Unaffiliated Fund

     6.6  
 

 

See Notes to Financial Statements.

 

12


    

    

 

Sector Classification (continued):

 

Affiliated Mutual Fund (1.6% represents investments purchased with collateral from securities on loan)

     1.6

Health Care Services

     0.7  

Health Care Supplies

     0.5  

Health Care Technology

     0.5  

Warrants

     0.0
  

 

 

 
     102.6  

Liabilities in excess of other assets

     (2.6
  

 

 

 
     100.0
  

 

 

 

    

 

 

*     Less than +/- 0.05%

Financial Instruments/Transactions—Summary of Offsetting and Netting Arrangements:

The Fund entered into financial instruments/transactions during the reporting period that are either offset in accordance with current requirements or are subject to enforceable master netting arrangements or similar agreements that permit offsetting. The information about offsetting and related netting arrangements for financial instruments/transactions where the legal right to set-off exists is presented in the summary below.

Offsetting of financial instrument/transaction assets and liabilities:

 

 Description  

Gross Market

Value of

Recognized

Assets/(Liabilities)

 

Collateral

Pledged/(Received)(1)

  

Net

Amount

 Securities on Loan

  $26,093,499   $(26,093,499)    $—

 

(1)

Collateral amount disclosed by the Fund is limited to the market value of financial instruments/transactions.

 

See Notes to Financial Statements.

PGIM Jennison Health Sciences Fund    13


Statement of Assets and Liabilities  (unaudited)

as of May 31, 2022

 

Assets

        

Investments at value, including securities on loan of $26,093,499:

  

Unaffiliated investments (cost $1,289,354,521)

   $ 1,695,381,426  

Affiliated investments (cost $27,122,006)

     27,142,979  

Receivable for investments sold

     4,186,362  

Receivable for Fund shares sold

     1,680,114  

Tax reclaim receivable

     1,094,626  

Dividends receivable

     383,161  

Prepaid expenses

     3,464  
  

 

 

 

Total Assets

     1,729,872,132  
  

 

 

 

Liabilities

        

Payable to broker for collateral for securities on loan

     27,100,973  

Payable for investments purchased

     19,051,037  

Payable for Fund shares purchased

     2,962,049  

Management fee payable

     1,040,643  

Accrued expenses and other liabilities

     613,445  

Distribution fee payable

     198,152  

Affiliated transfer agent fee payable

     31,067  

Directors’ fees payable

     6,495  
  

 

 

 

Total Liabilities

     51,003,861  
  

 

 

 

Net Assets

   $ 1,678,868,271  
  

 

 

 
          

Net assets were comprised of:

  

Common stock, at par

   $ 478,982  

Paid-in capital in excess of par

     1,300,457,519  

Total distributable earnings (loss)

     377,931,770  
  

 

 

 

Net assets, May 31, 2022

   $ 1,678,868,271  
  

 

 

 

 

See Notes to Financial Statements.

 

14


        

 

Class A

                     

Net asset value and redemption price per share,

($717,500,741 ÷ 22,498,310 shares of common stock issued and outstanding)

     $ 31.89            

Maximum sales charge (5.50% of offering price)

       1.86     
    

 

 

      

Maximum offering price to public

     $ 33.75     
    

 

 

      

Class C

                     

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

($17,662,342 ÷ 1,107,379 shares of common stock issued and outstanding)

     $ 15.95     
    

 

 

      

Class R

                     

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

($7,161,097 ÷ 238,104 shares of common stock issued and outstanding)

     $ 30.08     
    

 

 

      

Class Z

                     

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

($849,896,092 ÷ 21,843,330 shares of common stock issued and outstanding)

     $ 38.91     
    

 

 

      

Class R6

                     

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

($86,647,999 ÷ 2,211,069 shares of common stock issued and outstanding)

     $ 39.19     
    

 

 

      

 

See Notes to Financial Statements.

PGIM Jennison Health Sciences Fund    15


Statement of Operations  (unaudited)

Six Months Ended May 31, 2022

 

Net Investment Income (Loss)

        

Income

  

Unaffiliated dividend income (net of $86,386 foreign withholding tax)

   $ 7,089,215  

Income from securities lending, net (including affiliated income of $34,592)

     49,131  

Affiliated dividend income

     4,224  
  

 

 

 

Total income

     7,142,570  
  

 

 

 

Expenses

  

Management fee

     6,898,790  

Distribution fee(a)

     1,347,894  

Transfer agent’s fees and expenses (including affiliated expense of $151,734)(a)

     1,022,082  

Custodian and accounting fees

     73,505  

Registration fees(a)

     53,081  

Shareholders’ reports

     42,677  

Directors’ fees

     15,696  

Legal fees and expenses

     14,146  

Audit fee

     11,992  

Miscellaneous

     26,898  
  

 

 

 

Total expenses

     9,506,761  

Less: Distribution fee waiver(a)

     (10,436
  

 

 

 

Net expenses

     9,496,325  
  

 

 

 

Net investment income (loss)

     (2,353,755
  

 

 

 

Realized And Unrealized Gain (Loss) On Investment And Foreign Currency Transactions

        

Net realized gain (loss) on:

  

Investment transactions (including affiliated of $65,449)

     (17,607,963

Foreign currency transactions

     (27,243
  

 

 

 
     (17,635,206
  

 

 

 

Net change in unrealized appreciation (depreciation) on:

  

Investments (including affiliated of $(87,620))

     (247,741,278

Foreign currencies

     (20,595
  

 

 

 
     (247,761,873
  

 

 

 

Net gain (loss) on investment and foreign currency transactions

     (265,397,079
  

 

 

 

Net Increase (Decrease) In Net Assets Resulting From Operations

   $ (267,750,834 ) 
  

 

 

 

                                                         

(a)

Class specific expenses and waivers were as follows:

 

     Class A      Class C      Class R     Class Z      Class R6  

Distribution fee

     1,215,829        100,757        31,308              —      

Transfer agent’s fees and expenses

     404,485        14,569        7,259       594,682        1,087      

Registration fees

     14,134        7,275        3,515       19,557        8,600      

Distribution fee waiver

                   (10,436            —      

 

See Notes to Financial Statements.

 

16


Statements of Changes in Net Assets  (unaudited)

 

    Six Months Ended
May 31, 2022
 

Year Ended
    November 30, 2021    

Increase (Decrease) in Net Assets

                   

Operations

                                             

Net investment income (loss)

         $ (2,353,755 )              $ (12,448,569 )    

Net realized gain (loss) on investment and foreign currency transactions

           (17,635,206 )                553,607,789    

Net change in unrealized appreciation (depreciation) on investments and foreign currencies

           (247,761,873 )                (326,814,124 )    
        

 

 

              

 

 

     

Net increase (decrease) in net assets resulting from operations

           (267,750,834 )                214,345,096    
        

 

 

              

 

 

     

Dividends and Distributions

                         

Distributions from distributable earnings

                         

Class A

           (255,155,631 )                (185,156,351 )    

Class C

           (9,565,384 )                (12,379,993 )    

Class R

           (2,740,458 )                (2,193,004 )    

Class Z

           (254,026,720 )                (220,758,524 )    

Class R6

           (26,510,770 )                (3,308,694 )    
        

 

 

              

 

 

     
           (547,998,963 )                (423,796,566 )    
        

 

 

              

 

 

     

Fund share transactions (Net of share conversions)

                         

Net proceeds from shares sold

           200,698,079                328,100,762    

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

           507,831,992                390,237,765    

Cost of shares purchased

           (392,093,997 )                (516,456,846 )    
        

 

 

              

 

 

     

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

           316,436,074                201,881,681    
        

 

 

              

 

 

     

Total increase (decrease)

           (499,313,723 )                (7,569,789 )    

Net Assets:

                                                             

Beginning of period

           2,178,181,994                2,185,751,783    
        

 

 

              

 

 

     

End of period

         $ 1,678,868,271              $ 2,178,181,994    
        

 

 

              

 

 

     

 

See Notes to Financial Statements.

PGIM Jennison Health Sciences Fund    17


Financial Highlights  (unaudited)  

 

   

Class A Shares

              
     

Six Months

Ended

May 31,

    Year Ended November 30,  
   2022     2021     2020     2019     2018     2017  

Per Share Operating Performance(a):

                                                

Net Asset Value, Beginning of Period

     $50.57       $56.98       $44.29       $49.28       $46.25       $37.89  

Income (loss) from investment operations:

                                                

Net investment income (loss)

     (0.07     (0.36     (0.27     (0.24     (0.31     (0.26
Net realized and unrealized gain (loss) on investment and foreign currency transactions      (4.58     5.65       14.39       0.03       5.52       9.97  

Total from investment operations

     (4.65     5.29       14.12       (0.21     5.21       9.71  

Less Dividends and Distributions:

                                                

Distributions from net realized gains

     (14.03     (11.70     (1.43     (4.78     (2.18     (1.35

Net asset value, end of period

     $31.89       $50.57       $56.98       $44.29       $49.28       $46.25  

Total Return(b):

     (13.46 )%      9.66     32.85     1.58     11.81     26.61
                

Ratios/Supplemental Data:

                                                

Net assets, end of period (000)

     $717,501       $928,654       $905,865       $754,653       $767,277       $812,855  

Average net assets (000)

     $812,780       $983,670       $777,602       $733,289       $812,835       $835,255  

Ratios to average net assets(c)(d):

                                                

Expenses after waivers and/or expense reimbursement

     1.15 %(e)      1.12     1.14     1.15     1.14     1.15

Expenses before waivers and/or expense reimbursement

     1.15 %(e)      1.12     1.14     1.15     1.14     1.15

Net investment income (loss)

     (0.40 )%(e)      (0.68 )%      (0.58 )%      (0.57 )%      (0.64 )%      (0.61 )% 

Portfolio turnover rate(f)

     52     77     45     30     36     27

 

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized.

(c)

Does not include expenses of the underlying funds in which the Fund invests.

(d)

Effective December 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class.

(e)

Annualized.

(f)

The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher.

 

See Notes to Financial Statements.

 

18


        

 

Class C Shares

     

Six Months

Ended

May 31,

    Year Ended November 30,  
   2022     2021     2020     2019     2018     2017  

Per Share Operating Performance(a):

                                                

Net Asset Value, Beginning of Period

     $32.23       $40.50       $32.10       $37.50       $35.94       $29.94  

Income (loss) from investment operations:

                                                

Net investment income (loss)

     (0.11     (0.50     (0.42     (0.36     (0.48     (0.42
Net realized and unrealized gain (loss) on investment and foreign currency transactions      (2.14     3.93       10.25       (0.26     4.22       7.77  

Total from investment operations

     (2.25     3.43       9.83       (0.62     3.74       7.35  

Less Dividends and Distributions:

                                                

Distributions from net realized gains

     (14.03     (11.70     (1.43     (4.78     (2.18     (1.35

Net asset value, end of period

     $15.95       $32.23       $40.50       $32.10       $37.50       $35.94  

Total Return(b):

     (13.80 )%      8.78     31.93     0.92     11.06     25.75
                                                  

Ratios/Supplemental Data:

              

Net assets, end of period (000)

     $17,662       $22,824       $42,813       $55,821       $174,411       $181,567  

Average net assets (000)

     $20,207       $28,249       $45,302       $99,267       $183,807       $187,980  

Ratios to average net assets(c)(d):

                                                

Expenses after waivers and/or expense reimbursement

     1.96 %(e)      1.90     1.85     1.83     1.80     1.85

Expenses before waivers and/or expense reimbursement

     1.96 %(e)      1.90     1.85     1.83     1.80     1.85

Net investment income (loss)

     (1.21 )%(e)      (1.47 )%      (1.27 )%      (1.18 )%      (1.30 )%      (1.30 )% 

Portfolio turnover rate(f)

     52     77     45     30     36     27

 

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized.

(c)

Does not include expenses of the underlying funds in which the Fund invests.

(d)

Effective December 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class.

(e)

Annualized.

(f)

The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher.

 

See Notes to Financial Statements.

PGIM Jennison Health Sciences Fund    19


Financial Highlights  (unaudited) (continued)

 

Class R Shares

     Six Months
Ended
May 31,
    Year Ended November 30,  
  2022     2021     2020     2019     2018     2017  

Per Share Operating Performance(a):

                                               

Net Asset Value, Beginning of Period

    $48.53       $55.28       $43.16       $48.36       $45.58       $37.42  

Income (loss) from investment operations:

                                               

Net investment income (loss)

    (0.13     (0.50     (0.43     (0.41     (0.46     (0.33
Net realized and unrealized gain (loss) on investment and foreign currency transactions     (4.29     5.45       13.98       (0.01     5.42       9.84  

Total from investment operations

    (4.42     4.95       13.55       (0.42     4.96       9.51  

Less Dividends and Distributions:

                                               

Distributions from net realized gains

    (14.03     (11.70     (1.43     (4.78     (2.18     (1.35

Net asset value, end of period

    $30.08       $48.53       $55.28       $43.16       $48.36       $45.58  

Total Return(b):

    (13.60 )%      9.30     32.38     1.13     11.41     26.40
                                                 

Ratios/Supplemental Data:

             

Net assets, end of period (000)

    $7,161       $9,659       $10,288       $8,875       $12,016       $14,049  

Average net assets (000)

    $8,372       $10,707       $8,952       $9,831       $13,129       $13,552  

Ratios to average net assets(c)(d):

                                               

Expenses after waivers and/or expense reimbursement

    1.50 %(e)      1.44     1.49     1.60     1.47     1.35

Expenses before waivers and/or expense reimbursement

    1.75 %(e)      1.69     1.74     1.85     1.72     1.60

Net investment income (loss)

    (0.75 )%(e)      (1.00 )%      (0.93 )%      (1.00 )%      (0.97 )%      (0.80 )% 

Portfolio turnover rate(f)

    52     77     45     30     36     27

 

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized.

(c)

Does not include expenses of the underlying funds in which the Fund invests.

(d)

Effective December 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class.

(e)

Annualized.

(f)

The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher.

 

See Notes to Financial Statements.

 

20


        

 

Class Z Shares

     

Six Months

Ended

May 31,

    Year Ended November 30,  
   2022     2021     2020     2019     2018     2017  

Per Share Operating Performance(a):

                                                

Net Asset Value, Beginning of Period

     $58.61       $64.17       $49.56       $54.32       $50.62       $41.21  

Income (loss) from investment operations:

                                                

Net investment income (loss)

     (0.03     (0.24     (0.15     (0.12     (0.18     (0.14
Net realized and unrealized gain (loss) on investment and foreign currency transactions      (5.64     6.38       16.19       0.14       6.06       10.90  

Total from investment operations

     (5.67     6.14       16.04       0.02       5.88       10.76  

Less Dividends and Distributions:

              

Distributions from net realized gains

     (14.03     (11.70     (1.43     (4.78     (2.18     (1.35

Net asset value, end of period

     $38.91       $58.61       $64.17       $49.56       $54.32       $50.62  

Total Return(b):

     (13.34 )%      9.97     33.24     1.89     12.12     27.02
                

Ratios/Supplemental Data:

                                                

Net assets, end of period (000)

     $849,896       $1,105,132       $1,208,728       $1,057,204       $1,373,500       $1,259,584  
Average net assets (000)      $963,912       $1,247,474       $1,018,567       $1,158,525       $1,338,706       $1,142,806  
Ratios to average net assets(c)(d):                                                 
Expenses after waivers and/or expense reimbursement      0.87 %(e)       0.84     0.85     0.86     0.85     0.84
Expenses before waivers and/or expense reimbursement      0.87 %(e)       0.84     0.85     0.86     0.85     0.84
Net investment income (loss)      (0.12 )%(e)      (0.40 )%      (0.29 )%      (0.26 )%      (0.34 )%      (0.29 )% 

Portfolio turnover rate(f)

     52     77     45     30     36     27

 

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized.

(c)

Does not include expenses of the underlying funds in which the Fund invests.

(d)

Effective December 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class.

(e)

Annualized.

(f)

The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher.

 

See Notes to Financial Statements.

PGIM Jennison Health Sciences Fund    21


Financial Highlights  (unaudited) (continued)

 

Class R6 Shares

              
     

Six Months

Ended

May 31,

    Year Ended November 30,  
   2022     2021     2020     2019     2018     2017  

Per Share Operating Performance(a):

                                                

Net Asset Value, Beginning of Period

     $58.91       $64.40       $49.70       $54.45       $50.71       $41.25  

Income (loss) from investment operations:

              

Net investment income (loss)

     (- )(b)       (0.21     (0.09     (0.13     (0.15     (0.09
Net realized and unrealized gain (loss) on investment and foreign currency transactions      (5.69     6.42       16.22       0.16       6.07       10.90  

Total from investment operations

     (5.69     6.21       16.13       0.03       5.92       10.81  

Less Dividends and Distributions:

                                                

Distributions from net realized gains

     (14.03     (11.70     (1.43     (4.78     (2.18     (1.35

Net asset value, end of period

     $39.19       $58.91       $64.40       $49.70       $54.45       $50.71  

Total Return(c):

     (13.30 )%      10.06     33.33     1.93     12.18     27.12
                

Ratios/Supplemental Data:

                                                

Net assets, end of period (000)

     $86,648       $111,912       $18,058       $28,836       $9,513       $1,755  

Average net assets (000)

     $99,799       $78,211       $22,365       $14,164       $5,770       $517  
Ratios to average net assets(d)(e):                                                 
Expenses after waivers and/or expense reimbursement      0.77 %(f)      0.76     0.79     0.82     0.82     0.74
Expenses before waivers and/or expense reimbursement      0.77 %(f)      0.76     0.79     0.91     0.93     0.74
Net investment income (loss)      (0.01 )%(f)      (0.34 )%      (0.17 )%      (0.29 )%      (0.28 )%      (0.19 )% 
Portfolio turnover rate(g)      52     77     45     30     36     27

 

(a)

Calculated based on average shares outstanding during the period.

(b)

Amount rounds to zero.

(c)

Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized.

(d)

Does not include expenses of the underlying funds in which the Fund invests.

(e)

Effective December 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class.

(f)

Annualized.

(g)

The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher.

 

See Notes to Financial Statements.

 

22


Notes to Financial Statements  (unaudited)

 

1.

Organization

Prudential Sector Funds, Inc. (the “Registered Investment Company” or “RIC”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company. The RIC is organized as a Maryland Corporation. These financial statements relate only to the PGIM Jennison Health Sciences Fund (the “Fund”), a series of the RIC. The Fund is classified as a diversified fund for purposes of the 1940 Act.

The investment objective of the Fund is long-term capital appreciation.

 

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 RIC’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 period-end, securities and other assets and liabilities were fair valued at the close of the last U.S. business day. Trading in certain foreign securities may occur when the NYSE is closed (including weekends and holidays). Because such foreign securities trade in markets that are open on weekends and U.S. holidays, the values of some

 

PGIM Jennison Health Sciences Fund    23


Notes to Financial Statements  (unaudited) (continued)

 

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 Measurement.

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.

Foreign equities traded on foreign securities exchanges are generally valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy. The models generate an evaluated adjustment factor for each security, which is applied to the local closing price to adjust it for post closing market movements up to the time the Fund is valued. Utilizing that evaluated adjustment factor, the vendor provides an evaluated price for each security. If the vendor does not provide an evaluated price, securities are valued in accordance with exchange-traded common and preferred stock valuation policies discussed above.

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.

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.

 

24


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.

Foreign Currency Translation: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis:

(i) market value of investment securities, other assets and liabilities — at the exchange rate as of the valuation date;

(ii) purchases and sales of investment securities, income and expenses — at the rates of exchange prevailing on the respective dates of such transactions.

Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not generally isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities held at the end of the period. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities sold during the period. Accordingly, holding period unrealized and realized foreign currency gains (losses) are included in the reported net change in unrealized appreciation (depreciation) on investments and net realized gains (losses) on investment transactions on the Statements of Operations.

Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from the disposition of holdings of foreign currencies, currency gains (losses) realized between the trade and settlement dates on investment transactions, and the difference between the amounts of interest, dividends and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) arise from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates.

Master Netting Arrangements: The RIC, 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

 

 

PGIM Jennison Health Sciences Fund    25


Notes to Financial Statements  (unaudited) (continued)

 

Fund’s exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable. In addition to master netting arrangements, the right to set-off exists when all the conditions are met such that each of the parties owes the other determinable amounts, the reporting party has the right to set-off the amount owed with the amount owed by the other party, the reporting party intends to set-off and the right of set-off is enforceable by law.

Warrants: The Fund held warrants acquired either through a direct purchase or pursuant to corporate actions. Warrants entitle the holder to buy a proportionate amount of common stock, or such other security that the issuer may specify, at a specific price and time through the expiration dates. Such warrants are held as long positions by the Fund until exercised, sold or expired. Warrants are valued at fair value in accordance with the Board approved fair valuation procedures.

Securities Lending: The Fund lends its portfolio securities to banks and broker-dealers. The loans are secured by collateral at least equal to the market value of the securities loaned. Collateral pledged by each borrower is invested in an affiliated money market fund and is marked to market daily, based on the previous day’s market value, such that the value of the collateral exceeds the value of the loaned securities. In the event of significant appreciation in value of securities on loan on the last business day of the reporting period, the financial statements may reflect a collateral value that is less than the market value of the loaned securities. Such shortfall is remedied as described above. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of the loan, the borrower will return to the Fund securities identical to the loaned securities. The remaining maturities of the securities lending transactions are considered overnight and continuous. Should the borrower of the securities fail financially, the Fund has the right to repurchase the securities in the open market using the collateral.

The Fund recognizes income, net of any rebate and securities lending agent fees, for lending its securities in the form of fees or interest on the investment of any cash received as collateral. The borrower receives all interest and dividends from the securities loaned and such payments are passed back to the lender in amounts equivalent thereto, which are reflected in interest income or unaffiliated dividend income based on the nature of the payment on the Statement of Operations. The Fund also continues to recognize any unrealized gain (loss) in the market price of the securities loaned and on the change in the value of the collateral invested that may occur during the term of the loan. In addition, realized gain (loss) is recognized on changes in the value of the collateral invested upon liquidation of the collateral. Net earnings from securities lending are disclosed in the Statement of Operations.

 

26


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. 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, 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: 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. The chart below sets forth the expected frequency of dividend and capital gains distributions to shareholders. Various factors may impact the frequency of dividend distributions to shareholders, including but not limited to adverse market conditions or portfolio holding-specific events.

 

   
  Expected Distribution Schedule to Shareholders*    Frequency 

Net Investment Income

     Annually   

Short-Term Capital Gains

     Annually  

Long-Term Capital Gains

     Annually  

 

*

Under certain circumstances, the Fund may make more than one distribution of short-term and/or long-term capital gains during a fiscal year.

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.

 

 

PGIM Jennison Health Sciences Fund    27


Notes to Financial Statements  (unaudited) (continued)

 

3.

Agreements

The RIC, 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 Jennison Associates LLC (“Jennison” or the “subadviser”). The Manager pays for the services of Jennison.

Fees payable under the management agreement are computed daily and paid monthly. For the reporting period ended May 31, 2022, the contractual and effective management fee rates were as follows:

 

   
  Contractual Management Rate   

Effective Management Fee, before any waivers

and/or expense reimbursements

 

0.75% to $1 billion of average daily net assets;

     0.73%  

0.70% over $1 billion of average daily net assets.

        

The Manager has contractually agreed, through March 31, 2023, to limit transfer agency, shareholder servicing, sub-transfer agency, and blue sky fees, as applicable. This contractual expense limitation excludes interest, brokerage, taxes (such as income and foreign withholding taxes, stamp duty and deferred tax expenses), acquired fund fees and expenses, extraordinary expenses, and certain other Fund expenses such as dividend and interest expense and broker charges on short sales.

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

 

   
  Class   

Expense  

Limitations  

A

     %  

C

      

R

      

Z

      

R6

     0.82  

 

28


The RIC, 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 based on average daily net assets per class. PIMS has contractually agreed through March 31, 2023 to limit such fees on certain classes based on the daily net assets. The distribution fees are accrued daily and payable monthly.

The Fund’s annual gross and net distribution rate, where applicable, are as follows:

 

  Class        Gross Distribution Fee       Net Distribution Fee 

A

   0.30%   0.30%

C

   1.00       1.00    

R

   0.75       0.50    

Z

   N/A       N/A    

R6

   N/A       N/A    

For the reporting period ended May 31, 2022, PIMS received front-end sales charges (“FESL”) resulting from sales of certain class shares and contingent deferred sales charges (“CDSC”) imposed upon redemptions by certain shareholders. From these fees, PIMS paid such sales charges to broker-dealers, who in turn paid commissions to salespersons and incurred other distribution costs. The sales charges are as follows where applicable:

 

  Class   FESL      CDSC 

A

    $133,878        $2,066 

C

         1,673 

PGIM Investments, PIMS and Jennison 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.

The Fund may invest its overnight sweep cash in the PGIM Core Ultra Short Bond Fund (the “Core Fund”), and its securities lending cash collateral in the PGIM Institutional Money Market Fund (the “Money Market Fund”), each a fund 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 and the Money Market Fund. In addition to the realized and unrealized gains on investments

 

 

PGIM Jennison Health Sciences Fund    29


Notes to Financial Statements  (unaudited) (continued)

 

in the Core Fund and Money Market Fund, earnings from such investments are disclosed on the Statement of Operations as “Affiliated dividend income” and “Income from securities lending, net”, respectively. Effective January 2022, the Fund changed its overnight cash sweep vehicle from the Core Fund to an unaffiliated money market fund.

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/trustees, and/or common officers. For the reporting period ended May 31, 2022, 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 reporting period ended May 31, 2022, were as follows:

 

 

 Cost of Purchases    Proceeds from Sales

 

                               $975,644,743

   $1,272,241,382

 

A summary of the cost of purchases and proceeds from sales of shares of affiliated mutual funds for the reporting period ended May 31, 2022, is presented as follows:

 

 

 

Value,

Beginning

of

Period

 

Cost of

Purchases

 

Proceeds

from Sales

 

Change in

Unrealized

Gain

(Loss)

 

Realized

Gain

(Loss)

 

Value,

End of

Period

 

Shares,

End

of

Period

  Income   

 

 

Short-Term Investments - Affiliated Mutual Funds:

 

 

 

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

         

 

 

$  42,547,127

  $   164,922,949   $   207,470,076       $          —              $      —            $              —                       —          $  4,224    

 

 

PGIM Institutional Money Market Fund(1)(b)(wa)

         

 

 

  132,197,607

       900,835,609     1,005,868,066     (87,620)     65,449     27,142,979   27,164,711     34,592(2 ) 

 

 

$174,744,734

  $1,065,758,558   $1,213,338,142   $(87,620)   $65,449   $27,142,979       $38,816    

 

 

 

(1)

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

(2)

The amount, or a portion thereof, represents the affiliated securities lending income shown on the Statement of Operations.

(b)

Represents security, or portion thereof, purchased with cash collateral received for securities on loan and includes dividend reinvestment.

(wa)

PGIM Investments LLC, the manager of the Fund, also serves as manager of the PGIM Core Ultra Short Bond Fund and PGIM Institutional Money Market Fund, if applicable.

 

30


6.

Tax Information

The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of May 31, 2022 were as follows:

 

     Tax Basis       

Gross

Unrealized

Appreciation

 

Gross

Unrealized

Depreciation

      

Net

Unrealized

Appreciation

$1,323,475,648

       $456,303,102    $(57,254,345)        $399,048,757 

The GAAP basis may differ from tax basis due to certain tax-related adjustments.

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 November 30, 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 5.50%. Investors who purchase $1 million or more of Class A shares and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1%, although they are not subject to an initial 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. 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 eight years (ten years prior to January 22, 2021) after purchase. 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 Jennison Health Sciences Fund    31


Notes to Financial Statements  (unaudited) (continued)

 

The RIC is authorized to issue 2,000,000,000 shares of common stock, $0.01 par value per share, 515,000,000 of which are designated as shares of the Fund. The authorized shares of the Fund are currently classified and designated as follows:

 

  Class    Number of Shares  

A

     75,000,000      

B

     10,000,000  

C

     30,000,000  

R

     50,000,000  

Z

     150,000,000  

T

     70,000,000  

R6

     130,000,000  

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

As of May 31, 2022, Prudential, through its affiliated entities, including affiliated funds (if applicable), owned shares of the Fund as follows:

 

  Class   Number of Shares   Percentage of Outstanding Shares  

A

    8,603            0.1 %       

R

    221,384       93.0  

Z

    37       0.1  

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

 

          Number of Shareholders       Percentage of Outstanding Shares  

Affiliated

               %     

Unaffiliated

     6       60.5  

 

32


Transactions in shares of common stock were as follows:

 

       
 Share Class    Shares             Amount  

Class A

                          

Six months ended May 31, 2022:

                         

Shares sold

     736,360              $ 26,470,297  

Shares issued in reinvestment of dividends and distributions

     6,390,043                240,840,737  

Shares purchased

     (2,941,850              (106,175,580

Net increase (decrease) in shares outstanding before conversion

     4,184,553                161,135,454  

Shares issued upon conversion from other share class(es)

     91,685                3,458,649  

Shares purchased upon conversion into other share class(es)

     (142,967              (4,996,685

Net increase (decrease) in shares outstanding

     4,133,271              $ 159,597,418  

Year ended November 30, 2021:

                         

Shares sold

     984,041              $ 50,994,319  

Shares issued in reinvestment of dividends and distributions

     3,508,407                174,087,174  

Shares purchased

     (2,495,963              (129,357,342

Net increase (decrease) in shares outstanding before conversion

     1,996,485                95,724,151  

Shares issued upon conversion from other share class(es)

     704,400                37,452,139  

Shares purchased upon conversion into other share class(es)

     (232,408              (12,217,069

Net increase (decrease) in shares outstanding

     2,468,477              $ 120,959,221  

Class C

                         

Six months ended May 31, 2022:

                         

Shares sold

     130,156              $ 2,413,109  

Shares issued in reinvestment of dividends and distributions

     495,508                9,375,017  

Shares purchased

     (171,443              (3,383,451

Net increase (decrease) in shares outstanding before conversion

     454,221                8,404,675  

Shares purchased upon conversion into other share class(es)

     (55,124              (1,090,334

Net increase (decrease) in shares outstanding

     399,097              $ 7,314,341  

Year ended November 30, 2021:

                         

Shares sold

     276,491              $ 9,350,829  

Shares issued in reinvestment of dividends and distributions

     383,834                12,228,955  

Shares purchased

     (138,577              (4,634,135

Net increase (decrease) in shares outstanding before conversion

     521,748                16,945,649  

Shares purchased upon conversion into other share class(es)

     (870,678              (29,854,740

Net increase (decrease) in shares outstanding

     (348,930            $ (12,909,091

 

 

PGIM Jennison Health Sciences Fund    33


Notes to Financial Statements  (unaudited) (continued)

 

       
  Share Class    Shares           Amount  

Class R

                        

Six months ended May 31, 2022:

                     

Shares sold

     8,627          $ 290,065  

Shares issued in reinvestment of dividends and distributions

     76,979            2,740,458  

Shares purchased

     (46,525          (1,569,633

Net increase (decrease) in shares outstanding

     39,081          $ 1,460,890  

Year ended November 30, 2021:

                     

Shares sold

     35,224          $ 1,763,549  

Shares issued in reinvestment of dividends and distributions

     45,917            2,193,004  

Shares purchased

     (68,235          (3,352,590

Net increase (decrease) in shares outstanding

     12,906          $ 603,963  

Class Z

                     

Six months ended May 31, 2022:

                     

Shares sold

     3,721,172          $ 159,775,558  

Shares issued in reinvestment of dividends and distributions

     4,972,061            228,366,770  

Shares purchased

     (5,767,998          (258,014,701

Net increase (decrease) in shares outstanding before conversion

     2,925,235            130,127,627  

Shares issued upon conversion from other share class(es)

     121,511            5,181,752  

Shares purchased upon conversion into other share class(es)

     (58,804          (2,683,847

Net increase (decrease) in shares outstanding

     2,987,942          $ 132,625,532  

Year ended November 30, 2021:

                     

Shares sold

     4,005,657          $ 242,012,993  

Shares issued in reinvestment of dividends and distributions

     3,459,204            198,419,938  

Shares purchased

     (5,847,766          (348,265,291

Net increase (decrease) in shares outstanding before conversion

     1,617,095            92,167,640  

Shares issued upon conversion from other share class(es)

     213,937            13,001,022  

Shares purchased upon conversion into other share class(es)

     (1,811,856          (104,765,673

Net increase (decrease) in shares outstanding

     19,176          $ 402,989  

 

34


       
  Share Class    Shares           Amount  

Class R6

                     

Six months ended May 31, 2022:

                     

Shares sold

     270,273          $ 11,749,050  

Shares issued in reinvestment of dividends and distributions

     573,292            26,509,010  

Shares purchased

     (535,196          (22,950,632

Net increase (decrease) in shares outstanding before conversion

     308,369            15,307,428  

Shares issued upon conversion from other share class(es)

     2,912            130,465  

Net increase (decrease) in shares outstanding

     311,281          $ 15,437,893  

Year ended November 30, 2021:

                     

Shares sold

     394,151             $ 23,979,072  

Shares issued in reinvestment of dividends and distributions

     57,433            3,308,694  

Shares purchased

     (497,907           (30,847,488

Net increase (decrease) in shares outstanding before conversion

     (46,323          (3,559,722

Shares issued upon conversion from other share class(es)

     1,670,458            96,675,844  

Shares purchased upon conversion into other share class(es)

     (4,742          (291,523

Net increase (decrease) in shares outstanding

     1,619,393          $ 92,824,599  

 

8.

Borrowings

The RIC, 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 SCA.

 

      SCA

Term of Commitment

   10/1/2021 – 9/29/2022

Total Commitment

   $ 1,200,000,000

Annualized Commitment Fee on the Unused Portion of the SCA

   0.15%

Annualized Interest Rate on Borrowings

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

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

 

 

PGIM Jennison Health Sciences Fund    35


Notes to Financial Statements  (unaudited) (continued)

 

The Fund utilized the SCA during the reporting period ended May 31, 2022. The average daily balance for the 12 days that the Fund had loans outstanding during the period was approximately $3,644,333, borrowed at a weighted average interest rate of 1.40%. The maximum loan outstanding amount during the period was $10,826,000. At May 31, 2022, 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.

Currency Risk: The Fund’s net asset value could decline as a result of changes in exchange rates, which could adversely affect the Fund’s investments in currencies, or in securities that trade in, and receive revenues related to, currencies, or in derivatives that provide exposure to currencies. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payment of principal and interest or dividends to investors located outside the country, due to blockage of foreign currency exchanges or otherwise.

Economic and Market Events Risk: Events in the U.S. and global financial markets, including actions taken by the U.S. Federal Reserve or foreign central banks to stimulate or stabilize economic growth or the functioning of the securities markets, may at times result in unusually high market volatility, which could negatively impact performance. Relatively reduced liquidity in credit and fixed income markets could adversely affect issuers worldwide.

Equity and Equity-Related Securities Risk: Equity and equity-related securities may be subject to changes in value, and their values may be more volatile than those of other asset classes. In addition to an individual security losing value, the value of the equity markets or a sector in which the Fund invests could go down. Different parts of a market can react differently to adverse issuer, market, regulatory, political and economic developments.

Foreign Securities Risk: Investments in securities of non-U.S. issuers (including those denominated in U.S. dollars) may involve more risk than investing in securities of U.S. issuers. Foreign political, economic and legal systems, especially those in developing and emerging market countries, may be less stable and more volatile than in the United States. Foreign legal systems generally have fewer regulatory requirements than the U.S. legal system, particularly those of emerging markets. In general, less information is publicly available with respect to non-U.S. companies than U.S. companies. Non-U.S. companies generally are not subject to the same accounting, auditing, and financial reporting standards as are U.S. companies. Additionally, the changing value of foreign currencies and changes

 

36


in exchange rates could also affect the value of the assets the Fund holds and the Fund’s performance. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payment of principal and interest or dividends to investors located outside the country, due to blockage of foreign currency exchanges or otherwise. Investments in emerging markets are subject to greater volatility and price declines.

In addition, the Fund’s investments in non-U.S. securities may be subject to the risks of nationalization or expropriation of assets, imposition of currency exchange controls or restrictions on the repatriation of non-U.S. currency, confiscatory taxation and adverse diplomatic developments. Special U.S. tax considerations may apply.

Growth Style Risk: The Fund’s growth style may subject the Fund to above-average fluctuations as a result of seeking higher than average capital growth. Historically, growth stocks have performed best during later stages of economic expansion and value stocks have performed best during periods of economic recovery. Since the Fund follows a growth investment style, there is the risk that the growth investment style may be out of favor for long periods of time. At times when the style is out of favor, the Fund may underperform the market in general, its benchmark and other mutual funds.

Health Sciences Sector Risk: Investments in health sciences companies are subject to a number of risks, including the adverse impact of legislative actions and government regulations. These actions and regulations can affect the approval process for patents, medical devices, procedures and drugs, the funding of research and medical care programs, and the operation and licensing of facilities and personnel. Health sciences companies are affected by patent considerations, intense competition, pricing pressure, rapid technology change and obsolescence, changes in the demand for and costs of medical products and services, regulatory requirements of various federal and state agencies, product liability claims and other market developments. In addition, some of these companies are relatively small and have thinly traded securities, may not yet offer products or may offer a single product, and may have persistent losses during a new product’s transition from development to production, or erratic revenue patterns. The stock prices of these companies are very volatile, particularly when their products are up for regulatory approval and/or under regulatory scrutiny.

Increase in Expenses Risk: Your actual cost of investing in the Fund may be higher than the expenses shown in the Fund’s prospectus expense table for a variety of reasons. For example, expense ratios may be higher than those shown if average net assets decrease. Net assets are more likely to decrease and Fund expense ratios are more likely to increase when markets are volatile. Active and frequent trading of Fund securities can increase expenses.

Initial Public Offerings Risk: The volume of IPOs and the levels at which the newly issued stocks trade in the secondary market are affected by the performance of the stock market overall. If IPOs are brought to the market, availability may be limited and if the Fund desires to acquire shares in such an offering, it may not be able to buy any shares at the offering

 

 

PGIM Jennison Health Sciences Fund    37


Notes to Financial Statements  (unaudited) (continued)

 

price, or if it is able to buy shares, it may not be able to buy as many shares at the offering price as it would like. The prices of securities involved in IPOs are often subject to greater and more unpredictable price changes than more established stocks. Such unpredictability can have a dramatic impact on the Fund’s performance (higher or lower) and any assumptions by investors based on the affected performance may be unwarranted. In addition, as Fund assets grow, the impact of IPO investments on performance will decline, which could reduce total returns.

Investment Style Risk: There is the risk that the particular investment style followed by the Fund may be out of favor for a period of time.

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 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.

Management Risk: The value of your investment may decrease if judgments by the subadviser about the attractiveness, value or market trends affecting a particular security, industry or sector or about market movements are incorrect.

Market Capitalization Risk: The Fund may invest in companies of any market capitalization. Generally, the stock prices of small- and mid-cap companies are less stable than the prices of large-cap stocks and may present greater risks. Large capitalization companies as a group could fall out of favor with the market, causing the Fund to underperform compared to investments that focus on smaller capitalized companies.

Market Disruption and Geopolitical Risks: Market disruption can be caused by economic, financial or political events and factors, including but not limited to, international wars or conflicts (including Russia’s military invasion of Ukraine), geopolitical developments (including trading and tariff arrangements, sanctions and cybersecurity attacks), instability in regions such as Asia, Eastern Europe and the Middle East, terrorism, natural disasters and public health epidemics (including the outbreak of COVID-19 globally).

 

38


The extent and duration of such events and resulting market disruptions cannot be predicted, but could be substantial and could magnify the impact of other risks to the Fund. These and other similar events could adversely affect the U.S. and foreign financial markets and lead to increased market volatility, reduced liquidity in the securities markets, significant negative impacts on issuers and the markets for certain securities and commodities and/or government intervention. They may also cause short- or long-term economic uncertainties in the United States and worldwide. As a result, whether or not the Fund invests in securities of issuers located in or with significant exposure to the countries directly affected, the value and liquidity of the Fund’s investments may be negatively impacted. Further, due to closures of certain markets and restrictions on trading certain securities, the value of certain securities held by the Fund could be significantly impacted, which could lead to such securities being valued at zero.

COVID-19 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. They have also had and may continue to 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. The occurrence, reoccurrence and pendency of public health epidemics could adversely affect the economies 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.

 

10.

Recent Regulatory Developments

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 took effect on March 8, 2021, with a compliance date of September 8, 2022. Management is currently evaluating the Rule and its impact to the Fund.

 

 

PGIM Jennison Health Sciences Fund    39


Liquidity Risk Management Program (unaudited)

 

Consistent with Rule 22e-4 under the 1940 Act (the “Liquidity Rule”), the Fund has adopted and implemented a liquidity risk management program (the “LRMP”). The Fund’s LRMP seeks to assess and manage the Fund’s liquidity risk, which is defined as the risk that the Fund is unable to meet investor redemption requests without significantly diluting the remaining investors’ interests in the Fund. The Board has approved PGIM Investments LLC (“PGIM Investments”), the Fund’s investment manager, to serve as the administrator of the Fund’s LRMP. As part of its responsibilities as administrator, PGIM Investments has retained a third party to perform certain functions, including providing market data and liquidity classification model information.

The Fund’s LRMP includes a number of processes designed to support the assessment and management of its liquidity risk. In particular, the Fund’s LRMP includes no less than annual assessments of factors that influence the Fund’s liquidity risk; no less than monthly classifications of the Fund’s investments into one of four liquidity classifications provided for in the Liquidity Rule; a 15% of net assets limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); establishment of a minimum percentage of the Fund’s assets to be invested in investments classified as “highly liquid” (as defined under the Liquidity Rule) if the Fund does not invest primarily in highly liquid investments; and regular reporting to the Board.

At a meeting of the Board on March 1-3, 2022, PGIM Investments provided a written report (“LRMP Report”) to the Board addressing the operation, adequacy, and effectiveness of the Fund’s LRMP, including any material changes to the LRMP for the period from January 1, 2021 through December 31, 2021 (“Reporting Period”). The LRMP Report concluded that the Fund’s LRMP was reasonably designed to assess and manage the Fund’s liquidity risk and was adequately and effectively implemented during the Reporting Period. There were no material changes to the LRMP during the Reporting Period. The LRMP Report further concluded that the Fund’s investment strategies continue to be appropriate given the Fund’s status as an open-end fund.

There can be no assurance that the LRMP will achieve its objectives in the future. Additional information regarding risks of investing in the Fund, including liquidity risks presented by the Fund’s investment portfolio, is found in the Fund’s Prospectus and Statement of Additional Information.

 

40


 

       
   

  MAIL

  

  TELEPHONE

  

  WEBSITE

   

655 Broad Street

Newark, NJ 07102

  

(800) 225-1852

  

pgim.com/investments

 

PROXY VOTING

 

The Board of Directors of the Fund has delegated to the Fund’s subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website.

 

DIRECTORS

 

Ellen S. Alberding · Kevin J. Bannon · Scott E. Benjamin · Linda W. Bynoe · Barry H. Evans · Keith F. Hartstein · Laurie Simon Hodrick · Stuart S. Parker · Brian K. Reid · Grace C. Torres

 

OFFICERS

 

Stuart S. Parker, President · Scott E. Benjamin, Vice President · Christian J. Kelly, Treasurer and Principal Financial and Accounting Officer · Claudia DiGiacomo, Chief Legal Officer · Isabelle Sajous, Chief Compliance Officer · Jonathan Corbett, Anti-Money Laundering Compliance Officer · Andrew R. French, Secretary · Melissa Gonzalez, Assistant Secretary · Diana N. Huffman, Assistant Secretary · Kelly A. Coyne, Assistant Secretary · Patrick E. McGuinness, Assistant Secretary · Debra Rubano, Assistant Secretary · Lana Lomuti, Assistant Treasurer · Russ Shupak, Assistant Treasurer · Elyse M. McLaughlin, Assistant Treasurer · Deborah Conway, Assistant Treasurer

 

MANAGER   PGIM Investments LLC   

655 Broad Street

Newark, NJ 07102

     
SUBADVISER   Jennison Associates LLC   

466 Lexington Avenue

New York, NY 10017

DISTRIBUTOR   Prudential Investment Management Services LLC   

655 Broad Street

Newark, NJ 07102

     
CUSTODIAN   The Bank of New York Mellon   

240 Greenwich Street

New York, NY 10286

TRANSFER AGENT   Prudential Mutual Fund Services LLC   

PO Box 9658

Providence, RI 02940

     

INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

  PricewaterhouseCoopers LLP   

300 Madison Avenue

New York, NY 10017

FUND COUNSEL   Willkie Farr & Gallagher LLP   

787 Seventh Avenue

New York, NY 10019


 

An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain the prospectus and summary prospectus by visiting our website at pgim.com/investments or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing.

 

E-DELIVERY

 

To receive your mutual fund documents online, go to pgim.com/investments/resource/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above.

 

SHAREHOLDER COMMUNICATIONS WITH DIRECTORS

 

Shareholders can communicate directly with the Board of Directors by writing to the Chair of the Board, PGIM Jennison Health Sciences Fund, PGIM Investments, Attn: Board of Directors, 655 Broad Street, Newark, NJ 07102. Shareholders can communicate directly with an individual Director by writing to that Director at the same address. Communications are not screened before being delivered to the addressee.

 

AVAILABILITY OF PORTFOLIO HOLDINGS

 

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT filings are available on the Commission’s website at sec.gov.

  Mutual Funds:

 

     

ARE NOT INSURED BY THE FDIC OR ANY

FEDERAL GOVERNMENT AGENCY

   MAY LOSE VALUE   

ARE NOT A DEPOSIT OF OR GUARANTEED

BY ANY BANK OR ANY BANK AFFILIATE


LOGO

 

 

PGIM JENNISON HEALTH SCIENCES FUND

 

  SHARE CLASS   A    C    R    Z    R6

  NASDAQ

  PHLAX    PHLCX    PJHRX    PHSZX    PHLQX
  CUSIP   74441P502        74441P700        74441P791        74441P866        74441P775    
MF188E4              


LOGO

 

PGIM JENNISON UTILITY FUND

 

 

 

SEMIANNUAL REPORT

MAY 31, 2022

 

 

 

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

 

 

 

Fees and Expenses

 

    

 

    7

 

 

 

Holdings and Financial Statements

 

    

 

    9

 

 

 

 

 

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

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

The accompanying financial statements as of May 31, 2022 were not audited and, accordingly, no auditor’s opinion is expressed on them.

Mutual funds are distributed by Prudential Investment Management Services LLC, member SIPC. Jennison Associates LLC is a registered investment adviser. Both are Prudential Financial companies. © 2022 Prudential Financial, Inc. and its related entities. Jennison Associates, Jennison, PGIM, and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

 

2  

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Letter from the President

    

 

LOGO   

Dear Shareholder:

 

We hope you find the semiannual report for the PGIM Jennison Utility Fund informative and useful. The report covers performance for the six-month period ended May 31, 2022.

 

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 provide access to active investment strategies across the global markets in the pursuit of consistent outperformance for investors. PGIM is the world’s 11th largest investment manager with more than $1.5 trillion in assets under management. Our scale and investment expertise allow us to deliver a diversified suite of actively managed solutions across a broad spectrum of asset classes and investment styles.

Thank you for choosing our family of funds.

Sincerely,

 

LOGO

Stuart S. Parker, President

PGIM Jennison Utility Fund

July 15, 2022

 

PGIM Jennison Utility Fund

    3  


Your Fund’s Performance

    

 

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.

 

   

Total Returns as of 5/31/22
(without sales charges)

 

Average Annual Total Returns as of 5/31/22

(with sales charges)

   

Six Months* (%)

 

 

One Year (%)

 

 

Five Years (%)

 

   

Ten Years (%)

 

   

Since Inception (%)

 

 Class A   9.03     6.71       8.96       11.10    
 Class C   8.57   11.10       9.40       10.92    
 Class R   8.85   12.65       9.90       11.47    
 Class Z   9.13   13.29     10.55       12.07    
 Class R6   9.24   13.38     N/A       N/A     11.68 (01/26/2018)
 S&P 500 Utilities Index          
  14.74     17.68     10.30       11.48    
 S&P 500 Index          
    -8.85    -0.30     13.38       14.38    
         
Average Annual Total Returns as of 5/31/22 Since Inception (%)
     

Class R6
(01/26/2018)

 

 S&P 500 Utilities Index

 

  12.71
 S&P 500 Index                           11.14

*Not annualized

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’s inception date.

 

4  

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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   5.50% 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 $1 million 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)   0.30%   1.00%  

0.75% (0.50% currently)

 

  None   None

Benchmark Definitions

S&P 500 Utilities Index*—The S&P 500 Utilities Index is an unmanaged, market capitalization-weighted index including those companies considered electric, gas, or water utilities, or companies that operate as independent producers and/or distributors of power.

S&P 500 Index*—The S&P 500 Index is an unmanaged index of over 500 stocks of large US public companies. It gives a broad look at how stock prices in the United States have performed.

*The S&P 500 Utilities Index and the S&P 500 Index are products of S&P Dow Jones Indices LLC and/or its affiliates and have been licensed for use by PGIM, Inc. and/or its affiliates. Copyright © 2022 S&P Dow Jones Indices LLC, a division of S&P Global, Inc., and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC.

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.

 

 

PGIM Jennison Utility Fund

    5  


Your Fund’s Performance (continued)

    

 

Presentation of Fund Holdings as of 5/31/2022

 

 Ten Largest Holdings

 

  

Line of Business

 

 

 

% of Net Assets  

 

 NextEra Energy, Inc.    Electric Utilities   9.0%
 CenterPoint Energy, Inc.    Multi-Utilities   5.3%
 Cheniere Energy, Inc.    Oil & Gas Storage & Transportation   5.0%
 Ameren Corp.    Multi-Utilities   4.3%
 Dominion Energy, Inc.    Multi-Utilities   4.3%
 Public Service Enterprise Group, Inc.    Multi-Utilities   4.1%
 Targa Resources Corp.    Oil & Gas Storage & Transportation   3.9%
 CMS Energy Corp.    Multi-Utilities   3.9%
 Entergy Corp.    Electric Utilities   3.9%
 Exelon Corp.    Electric Utilities   3.7%

Holdings reflect only long-term investments and are subject to change.

 

6  

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Fees and Expenses

    

 

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 May 31, 2022. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.

Actual Expenses

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

Hypothetical Example for Comparison Purposes

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

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

 

 

PGIM Jennison Utility Fund

    7  


Fees and Expenses (continued)

    

 

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 Jennison Utility Fund

 

 

Beginning
Account Value
December 1, 2021  

 

 

Ending
Account Value  
May 31, 2022

 

 

Annualized
Expense
Ratio Based on the  

Six-Month Period

 

 

Expenses Paid
During the
Six-Month Period*  

 

       
 Class A   Actual   $1,000.00   $1,090.30   0.82%   $4.27
       
 

Hypothetical

 

  $1,000.00

 

  $1,020.84

 

  0.82%

 

  $4.13

 

       
 Class C   Actual   $1,000.00   $1,085.70   1.58%   $8.22
       
 

Hypothetical

 

  $1,000.00

 

  $1,017.05

 

  1.58%

 

  $7.95

 

       
 Class R   Actual   $1,000.00   $1,088.50   1.09%   $5.68
       
 

Hypothetical

 

  $1,000.00

 

  $1,019.50

 

  1.09%

 

  $5.49

 

       
 Class Z   Actual   $1,000.00   $1,091.30   0.54%   $2.82
       
 

Hypothetical

 

  $1,000.00

 

  $1,022.24

 

  0.54%

 

  $2.72

 

       
 Class R6   Actual   $1,000.00   $1,092.40   0.46%   $2.40
       
   

Hypothetical

 

  $1,000.00

 

  $1,022.64

 

  0.46%

 

  $2.32

 

*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 182 days in the six-month period ended May 31, 2022, and divided by the 365 days in the Fund’s fiscal year ending November 30, 2022 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.

 

8  

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Schedule of Investments  (unaudited)

as of May 31, 2022

 

 Description    Shares      Value  

 LONG-TERM INVESTMENTS    97.3%

     

 COMMON STOCKS    96.5%

     

 Electric Utilities    42.0%

                 

Alliant Energy Corp.

     1,587,782      $ 101,332,247  

American Electric Power Co., Inc.

     923,394        94,213,890  

Constellation Energy Corp.

     1,692,268        105,055,997  

Duke Energy Corp.

     518,286        58,317,541  

Edison International

     593,833        41,514,865  

Entergy Corp.

     1,186,159        142,718,651  

Evergy, Inc.

     1,056,593        73,898,114  

Eversource Energy

     603,140        55,681,885  

Exelon Corp.(a)

     2,800,739        137,656,322  

FirstEnergy Corp.

     2,160,526        92,816,197  

NextEra Energy, Inc.

     4,366,459        330,497,282  

OGE Energy Corp.

     982,521        40,578,117  

PG&E Corp.*(a)

     9,960,908        121,523,078  

PNM Resources, Inc.

     392,530        18,656,951  

SSE PLC (United Kingdom)

     1,562,697        34,856,919  

Xcel Energy, Inc.

     1,317,935        99,293,223  
     

 

 

 
            1,548,611,279  

 Independent Power Producers & Energy Traders    5.4%

                 

AES Corp. (The)

     1,821,831        40,153,155  

Clearway Energy, Inc. (Class C Stock)

     770,261        26,997,648  

Drax Group PLC (United Kingdom)

     4,235,005        36,044,619  

RWE AG (Germany)

     2,191,360        96,682,373  
     

 

 

 
        199,877,795  

 Integrated Telecommunication Services    1.1%

                 

Cellnex Telecom SA (Spain), 144A

     891,166        40,307,958  

 Multi-Utilities    30.0%

                 

Ameren Corp.

     1,657,003        157,730,116  

CenterPoint Energy, Inc.

     6,086,232        195,063,736  

CMS Energy Corp.

     2,009,739        142,771,858  

Dominion Energy, Inc.

     1,859,216        156,583,171  

DTE Energy Co.

     856,469        113,662,001  

NiSource, Inc.

     3,061,183        96,274,205  

Public Service Enterprise Group, Inc.

     2,227,974        152,705,338  

Sempra Energy

     548,902        89,943,082  
     

 

 

 
        1,104,733,507  

 

 

See Notes to Financial Statements.

PGIM Jennison Utility Fund    9


Schedule of Investments  (unaudited) (continued)

as of May 31, 2022

 

  Description    Shares      Value  

COMMON STOCKS (Continued)

     

Oil & Gas Storage & Transportation    11.9%

                 

Cheniere Energy, Inc.

     1,348,891      $ 184,487,822  

Energy Transfer LP

     4,579,760        53,400,002  

Targa Resources Corp.

     2,019,862        145,470,461  

Williams Cos., Inc. (The)

     1,522,696        56,431,114  
     

 

 

 
        439,789,399  

Renewable Electricity    3.9%

                 

China Longyuan Power Group Corp. Ltd. (China) (Class H Stock)

     8,972,233        19,242,987  

NextEra Energy Partners LP

     1,714,410        122,837,477  
     

 

 

 
        142,080,464  

Water Utilities    2.2%

                 

Essential Utilities, Inc.

     1,769,525        81,858,226  
     

 

 

 

TOTAL COMMON STOCKS

     

(cost $2,234,074,892)

            3,557,258,628  
     

 

 

 

PREFERRED STOCK    0.8%

     

Independent Power Producers & Energy Traders

                 

AES Corp. (The), CVT, 6.875%, Maturing 02/15/24(a)

     

(cost $30,548,400)

     305,484        27,371,366  
     

 

 

 

TOTAL LONG-TERM INVESTMENTS

     

(cost $2,264,623,292)

        3,584,629,994  
     

 

 

 

 

See Notes to Financial Statements.

 

10


  Description    Shares      Value  

SHORT-TERM INVESTMENTS    2.8%

     

AFFILIATED MUTUAL FUND    0.8%

     

PGIM Institutional Money Market Fund

     

(cost $30,641,579; includes $30,627,771 of cash collateral

for securities on loan)(b)(wa)

     30,668,750      $ 30,644,215  
     

 

 

 

UNAFFILIATED FUND    2.0%

     

Dreyfus Government Cash Management (Institutional Shares)

     

(cost $73,884,962)

     73,884,962        73,884,962  
     

 

 

 

TOTAL SHORT-TERM INVESTMENTS

     

(cost $104,526,541)

        104,529,177  
     

 

 

 

TOTAL INVESTMENTS    100.1%

     

(cost $2,369,149,833)

        3,689,159,171  

Liabilities in excess of other assets    (0.1)%

        (3,824,802
     

 

 

 

NET ASSETS    100.0%

      $         3,685,334,369  
     

 

 

 

 

Below is a list of the abbreviation(s) used in the semiannual report:

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

CVT — Convertible Security

LIBOR — London Interbank Offered Rate

LP — Limited Partnership

 

*

Non-income producing security.

(a)

All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is $29,761,975; cash collateral of $30,627,771 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments. In the event of significant appreciation in value of securities on loan on the last business day of the reporting period, the Fund may reflect a collateral value that is less than the market value of the loaned securities and such shortfall is remedied the following business day.

(b)

Represents security, or portion thereof, purchased with cash collateral received for securities on loan and includes dividend reinvestment.

(wa)

PGIM Investments LLC, the manager of the Fund, also serves as manager of the PGIM Core Ultra Short Bond Fund and PGIM Institutional Money Market Fund, if applicable.

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.

 

 

See Notes to Financial Statements.

PGIM Jennison Utility Fund    11


Schedule of Investments  (unaudited) (continued)

as of May 31, 2022

 

The following is a summary of the inputs used as of May 31, 2022 in valuing such portfolio securities:

 

     Level 1      Level 2      Level 3  

Investments in Securities

        

Assets

        

Long-Term Investments

        

Common Stocks

        

Electric Utilities

   $ 1,513,754,360      $ 34,856,919        $—  

Independent Power Producers & Energy Traders

     67,150,803        132,726,992          —  

Integrated Telecommunication Services

            40,307,958          —  

Multi-Utilities

     1,104,733,507                 —  

Oil & Gas Storage & Transportation

     439,789,399                 —  

Renewable Electricity

     122,837,477        19,242,987          —  

Water Utilities

     81,858,226                 —  

Preferred Stock

        

Independent Power Producers & Energy Traders

     27,371,366                 —  

Short-Term Investments

        

Affiliated Mutual Fund

     30,644,215                 —  

Unaffiliated Fund

     73,884,962                 —  
  

 

 

    

 

 

    

 

 

 

Total

   $ 3,462,024,315      $ 227,134,856        $—  
  

 

 

    

 

 

    

 

 

 

Sector Classification:

The sector classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of May 31, 2022 were as follows:

 

Electric Utilities

     42.0

Multi-Utilities

     30.0  

Oil & Gas Storage & Transportation

     11.9  

Independent Power Producers & Energy Traders

     6.2  

Renewable Electricity

     3.9  

Water Utilities

     2.2  

Unaffiliated Fund

     2.0  

Integrated Telecommunication Services

     1.1  

Affiliated Mutual Fund (0.8% represents investments purchased with collateral from securities on loan)

     0.8
  

 

 

 
     100.1  

Liabilities in excess of other assets

     (0.1
  

 

 

 
     100.0
  

 

 

 
 

 

See Notes to Financial Statements.

 

12


Financial Instruments/Transactions—Summary of Offsetting and Netting Arrangements:

The Fund entered into financial instruments/transactions during the reporting period that are either offset in accordance with current requirements or are subject to enforceable master netting arrangements or similar agreements that permit offsetting. The information about offsetting and related netting arrangements for financial instruments/transactions where the legal right to set-off exists is presented in the summary below.

Offsetting of financial instrument/transaction assets and liabilities:

 

       
  Description    Gross Market
Value of
Recognized
Assets/(Liabilities)
  

Collateral

Pledged/(Received)(1)

   Net
Amount   

  Securities on Loan

   $29,761,975    $(29,761,975)    $—   

 

(1)

Collateral amount disclosed by the Fund is limited to the market value of financial instruments/transactions.

 

See Notes to Financial Statements.

PGIM Jennison Utility Fund    13


Statement of Assets and Liabilities  (unaudited)

as of May 31, 2022

 

Assets

        

Investments at value, including securities on loan of $29,761,975:

  

Unaffiliated investments (cost $2,338,508,254)

   $ 3,658,514,956  

Affiliated investments (cost $30,641,579)

     30,644,215  

Receivable for investments sold

     59,060,149  

Dividends receivable

     9,630,926  

Receivable for Fund shares sold

     2,593,683  

Tax reclaim receivable

     1,142,326  

Prepaid expenses

     4,633  
  

 

 

 

Total Assets

     3,761,590,888  
  

 

 

 

Liabilities

        

Payable for investments purchased

     40,375,023  

Payable to broker for collateral for securities on loan

     30,627,771  

Payable for Fund shares purchased

     2,729,445  

Management fee payable

     1,268,916  

Distribution fee payable

     837,814  

Accrued expenses and other liabilities

     216,962  

Affiliated transfer agent fee payable

     193,288  

Directors’ fees payable

     7,300  
  

 

 

 

Total Liabilities

     76,256,519  
  

 

 

 

Net Assets

   $ 3,685,334,369  
  

 

 

 
          

Net assets were comprised of:

  

Common stock, at par

   $ 2,262,567  

Paid-in capital in excess of par

     2,215,961,757  

Total distributable earnings (loss)

     1,467,110,045  
  

 

 

 

Net assets, May 31, 2022

   $ 3,685,334,369  
  

 

 

 

 

See Notes to Financial Statements.

 

14


Class A

        

Net asset value and redemption price per share,

  

($3,016,151,032 ÷ 185,250,606 shares of common stock issued and outstanding)

   $ 16.28  

Maximum sales charge (5.50% of offering price)

     0.95  
  

 

 

 

Maximum offering price to public

   $ 17.23  
  

 

 

 

Class C

        

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

  

($59,596,779 ÷ 3,688,058 shares of common stock issued and outstanding)

   $ 16.16  
  

 

 

 

Class R

        

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

  

($92,239,175 ÷ 5,672,446 shares of common stock issued and outstanding)

   $ 16.26  
  

 

 

 

Class Z

        

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

  

($444,230,797 ÷ 27,167,117 shares of common stock issued and outstanding)

   $ 16.35  
  

 

 

 

Class R6

        

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

  

($73,116,586 ÷ 4,478,429 shares of common stock issued and outstanding)

   $ 16.33  
  

 

 

 

 

See Notes to Financial Statements.

PGIM Jennison Utility Fund    15


Statement of Operations  (unaudited)

Six Months Ended May 31, 2022

 

Net Investment Income (Loss)

        

Income

  

Unaffiliated dividend income (net of $531,002 foreign withholding tax)

   $ 47,505,945  

Income from securities lending, net (including affiliated income of $10,918)

     14,959  

Affiliated dividend income

     3,397  
  

 

 

 

Total income

     47,524,301  
  

 

 

 

Expenses

  

Management fee

     7,354,321  

Distribution fee(a)

     5,040,991  

Transfer agent’s fees and expenses (including affiliated expense of $948,583)(a)

     1,534,806  

Custodian and accounting fees

     124,438  

Shareholders’ reports

     55,113  

Registration fees(a)

     46,619  

Directors’ fees

     23,504  

Legal fees and expenses

     17,042  

Audit fee

     11,867  

Miscellaneous

     35,696  
  

 

 

 

Total expenses

     14,244,397  

Less: Distribution fee waiver(a)

     (108,689
  

 

 

 

Net expenses

     14,135,708  
  

 

 

 

Net investment income (loss)

     33,388,593  
  

 

 

 

Realized And Unrealized Gain (Loss) On Investment And Foreign Currency Transactions

        

Net realized gain (loss) on:

  

Investment transactions (including affiliated of $(5,318))

     130,177,030  

Foreign currency transactions

     (397,904
  

 

 

 
     129,779,126  
  

 

 

 

Net change in unrealized appreciation (depreciation) on:

  

Investments (including affiliated of $3,514)

     139,352,286  

Foreign currencies

     36,518  
  

 

 

 
     139,388,804  
  

 

 

 

Net gain (loss) on investment and foreign currency transactions

     269,167,930  
  

 

 

 

Net Increase (Decrease) In Net Assets Resulting From Operations

   $ 302,556,523  
  

 

 

 

 

(a)

Class specific expenses and waivers were as follows:

 

     Class A      Class C      Class R     Class Z      Class R6  

Distribution fee

     4,431,764        283,161        326,066               

Transfer agent’s fees and expenses

     1,259,693        35,927        65,273       172,922        991  

Registration fees

     13,220        7,135        3,675       15,276        7,313  

Distribution fee waiver

                   (108,689             

 

See Notes to Financial Statements.

 

16


Statements of Changes in Net Assets  (unaudited)

 

    

 

Six Months Ended
May 31, 2022

    

 

Year Ended
  November 30, 2021  

Increase (Decrease) in Net Assets

                                

Operations

              

Net investment income (loss)

     $ 33,388,593      $ 36,145,455     

Net realized gain (loss) on investment and foreign currency transactions

       129,779,126        412,736,668     

Net change in unrealized appreciation (depreciation) on investments and foreign currencies

       139,388,804        (171,190,828 )     
    

 

 

      

 

 

      

Net increase (decrease) in net assets resulting from operations

       302,556,523        277,691,295     
    

 

 

      

 

 

      

Dividends and Distributions

              

Distributions from distributable earnings

              

Class A

       (364,584,480 )        (51,239,984 )     

Class C

       (6,802,926 )        (663,920 )     

Class R

       (10,539,452 )        (1,244,722 )     

Class Z

       (40,305,933 )        (6,639,310 )     

Class R6

       (8,670,797 )        (469,477 )     
    

 

 

      

 

 

      
       (430,903,588 )        (60,257,413 )     
    

 

 

      

 

 

      

Fund share transactions (Net of share conversions)

              

Net proceeds from shares sold

       243,921,835        184,829,668     

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

       415,739,475        57,719,273     

Cost of shares purchased

       (254,857,667 )        (401,021,149 )     
    

 

 

      

 

 

      

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

       404,803,643        (158,472,208 )     
    

 

 

      

 

 

      

Total increase (decrease)

       276,456,578        58,961,674     

Net Assets:

                                

Beginning of period

       3,408,877,791        3,349,916,117     
    

 

 

      

 

 

      

End of period

     $ 3,685,334,369      $ 3,408,877,791     
    

 

 

      

 

 

      

 

See Notes to Financial Statements.

PGIM Jennison Utility Fund    17


Financial Highlights  (unaudited)

 

       

Class A Shares

       
     Six Months
Ended
May 31,
      Year Ended November 30,  
  2022       2021     2020     2019     2018     2017  

Per Share Operating Performance(a):

                                                   

Net Asset Value, Beginning of Period

    $17.01           $15.97       $15.72       $14.60       $15.06       $13.18  
Income (loss) from investment operations:                                                    

Net investment income (loss)

    0.15           0.17       0.24       0.28       0.29       0.24  
Net realized and unrealized gain (loss) on investment and foreign currency transactions     1.27           1.16       0.86       2.02       (0.12     2.62  

Total from investment operations

    1.42           1.33       1.10       2.30       0.17       2.86  

Less Dividends and Distributions:

                                                   

Dividends from net investment income

    (0.09         (0.21     (0.23     (0.29     (0.30     (0.23

Distributions from net realized gains

    (2.06         (0.08     (0.62     (0.89     (0.33     (0.75

Total dividends and distributions

    (2.15         (0.29     (0.85     (1.18     (0.63     (0.98

Net asset value, end of period

    $16.28           $17.01       $15.97       $15.72       $14.60       $15.06  

Total Return(b):

    9.03         8.46     7.47     17.53     1.42     22.87
                                                     
   

Ratios/Supplemental Data:

                                                   

Net assets, end of period (in millions)

    $3,016           $2,888       $2,878       $2,908       $2,644       $2,912  

Average net assets (in millions)

    $2,963           $2,895       $2,815       $2,787       $2,626       $2,791  

Ratios to average net assets(c)(d):

                                                   

Expenses after waivers and/or expense reimbursement

    0.82 %(e)          0.82     0.83     0.84     0.83     0.83

Expenses before waivers and/or expense reimbursement

    0.82 %(e)          0.82     0.83     0.84     0.83     0.83

Net investment income (loss)

    1.87 %(e)          1.06     1.61     1.92     2.10     1.74

Portfolio turnover rate(f)

    22         38     28     31     39     24

 

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized.

(c)

Does not include expenses of the underlying funds in which the Fund invests.

(d)

Effective December 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class.

(e)

Annualized.

(f)

The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher.

 

See Notes to Financial Statements.

 

18


    

    

 

       

Class C Shares

       
     Six Months
Ended
May 31,
     

Year Ended November 30,

 
  2022       2021     2020     2019     2018     2017  

Per Share Operating Performance(a):

                                                   

Net Asset Value, Beginning of Period

    $16.92           $15.89       $15.63       $14.53       $14.99       $13.12  
Income (loss) from investment operations:                                                    

Net investment income (loss)

    0.09           0.05       0.13       0.17       0.19       0.15  
Net realized and unrealized gain (loss) on investment and foreign currency transactions     1.26           1.16       0.87       2.00       (0.12     2.60  

Total from investment operations

    1.35           1.21       1.00       2.17       0.07       2.75  

Less Dividends and Distributions:

                                                   

Dividends from net investment income

    (0.05         (0.10     (0.12     (0.18     (0.20     (0.13

Distributions from net realized gains

    (2.06         (0.08     (0.62     (0.89     (0.33     (0.75

Total dividends and distributions

    (2.11         (0.18     (0.74     (1.07     (0.53     (0.88

Net asset value, end of period

    $16.16           $16.92       $15.89       $15.63       $14.53       $14.99  

Total Return(b):

    8.57         7.72     6.71     16.59     0.67     22.06
                                                     
   

Ratios/Supplemental Data:

                                                   

Net assets, end of period (in millions)

    $60           $55       $61       $68       $94       $115  

Average net assets (in millions)

    $57           $56       $63       $77       $98       $118  

Ratios to average net assets(c)(d):

                                                   

Expenses after waivers and/or expense reimbursement

    1.58 %(e)          1.59     1.59     1.59     1.57     1.53

Expenses before waivers and/or expense reimbursement

    1.58 %(e)          1.59     1.59     1.59     1.57     1.53

Net investment income (loss)

    1.12 %(e)          0.31     0.87     1.15     1.37     1.06

Portfolio turnover rate(f)

    22         38     28     31     39     24

 

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized.

(c)

Does not include expenses of the underlying funds in which the Fund invests.

(d)

Effective December 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class.

(e)

Annualized.

(f)

The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher.

 

See Notes to Financial Statements.

PGIM Jennison Utility Fund    19


Financial Highlights  (unaudited) (continued)

 

       
Class R Shares        
     Six Months
Ended
May 31,
     

Year Ended November 30,

 
  2022       2021     2020     2019     2018     2017  

Per Share Operating Performance(a):

                                                   

Net Asset Value, Beginning of Period

        $17.00           $15.95       $15.70       $14.59       $15.05       $13.17  

Income (loss) from investment operations:

                                                   

Net investment income (loss)

    0.13           0.13       0.20       0.24       0.25       0.21  
Net realized and unrealized gain (loss) on investment and foreign currency transactions     1.26           1.16       0.86       2.01       (0.12     2.62  

Total from investment operations

    1.39           1.29       1.06       2.25       0.13       2.83  

Less Dividends and Distributions:

                                                   

Dividends from net investment income

    (0.07         (0.16     (0.19     (0.25     (0.26     (0.20

Distributions from net realized gains

    (2.06         (0.08     (0.62     (0.89     (0.33     (0.75

Total dividends and distributions

    (2.13         (0.24     (0.81     (1.14     (0.59     (0.95

Net asset value, end of period

    $16.26           $17.00       $15.95       $15.70       $14.59       $15.05  

Total Return(b):

    8.85         8.24     7.14     17.23     1.15     22.64
                                                     
   

Ratios/Supplemental Data:

                                                   

Net assets, end of period (in millions)

    $92           $84       $82       $89       $77       $89  

Average net assets (in millions)

    $87           $84       $84       $83       $79       $81  

Ratios to average net assets(c)(d):

                                                   

Expenses after waivers and/or expense reimbursement

    1.09 %(e)          1.10     1.11     1.11     1.11     1.03

Expenses before waivers and/or expense reimbursement

    1.34 %(e)          1.35     1.36     1.36     1.36     1.28

Net investment income (loss)

    1.60 %(e)          0.78     1.34     1.64     1.82     1.53

Portfolio turnover rate(f)

    22         38     28     31     39     24

 

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized.

(c)

Does not include expenses of the underlying funds in which the Fund invests.

(d)

Effective December 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class.

(e)

Annualized.

(f)

The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher.

 

See Notes to Financial Statements.

 

20


    

    

 

       

Class Z Shares

       
     Six Months
Ended
May 31,
     

Year Ended November 30,

 
  2022       2021     2020     2019     2018     2017  

Per Share Operating Performance(a):

                                                   

Net Asset Value, Beginning of Period

    $17.08           $16.02       $15.74       $14.62       $15.08       $13.19  
Income (loss) from investment operations:                                                    

Net investment income (loss)

    0.18           0.22       0.28       0.32       0.33       0.28  
Net realized and unrealized gain (loss) on investment and foreign currency transactions     1.26           1.17       0.89       2.02       (0.12     2.63  

Total from investment operations

    1.44           1.39       1.17       2.34       0.21       2.91  

Less Dividends and Distributions:

                                                   

Dividends from net investment income

    (0.11         (0.25     (0.27     (0.33     (0.34     (0.27

Distributions from net realized gains

    (2.06         (0.08     (0.62     (0.89     (0.33     (0.75

Total dividends and distributions

    (2.17         (0.33     (0.89     (1.22     (0.67     (1.02

Net asset value, end of period

    $16.35           $17.08       $16.02       $15.74       $14.62       $15.08  

Total Return(b):

    9.13         8.84     7.96     17.83     1.70     23.29
                                                     
   

Ratios/Supplemental Data:

                                                   

Net assets, end of period (in millions)

    $444           $314       $323       $313       $227       $259  

Average net assets (in millions)

    $359           $325       $308       $271       $229       $237  

Ratios to average net assets(c)(d):

                                                   

Expenses after waivers and/or expense reimbursement

    0.54 %(e)          0.56     0.57     0.56     0.56     0.53

Expenses before waivers and/or expense reimbursement

    0.54 %(e)          0.56     0.57     0.56     0.56     0.53

Net investment income (loss)

    2.23 %(e)          1.32     1.85     2.18     2.37     2.03

Portfolio turnover rate(f)

    22         38     28     31     39     24

 

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized.

(c)

Does not include expenses of the underlying funds in which the Fund invests.

(d)

Effective December 1, 2017, class specific expenses include transfer agent fees and expenses and registration fees, which are charged to their respective share class.

(e)

Annualized.

(f)

The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher.

 

See Notes to Financial Statements.

PGIM Jennison Utility Fund    21


Financial Highlights  (unaudited) (continued)

 

     

Class R6 Shares

     
     Six Months
Ended
May 31,
      Year Ended November 30,   January 26, 2018(a)
through
November 30,
    
  2022       2021   2020   2019   2018     
   

 

 

 

   

 

 

 

 

 

 

 

   

Per Share Operating Performance(b):

                                               

Net Asset Value, Beginning of Period

    $17.05           $16.00       $15.75       $14.62       $13.96      

Income (loss) from investment operations:

                                               

Net investment income (loss)

    0.18           0.21       0.28       0.33       0.21      
Net realized and unrealized gain (loss) on investment and foreign currency transactions     1.28           1.18       0.87       2.03       0.73      

Total from investment operations

    1.46           1.39       1.15       2.36       0.94      

Less Dividends and Distributions:

                                               

Dividends from net investment income

    (0.12         (0.26     (0.28     (0.34     (0.28    

Distributions from net realized gains

    (2.06         (0.08     (0.62     (0.89     -      

Total dividends and distributions

    (2.18         (0.34     (0.90     (1.23     (0.28    

Net asset value, end of period

    $16.33           $17.05       $16.00       $15.75       $14.62      

Total Return(c):

    9.24         8.85     7.81     17.94     6.87    
                                                 
   

Ratios/Supplemental Data:

                                               

Net assets, end of period (in millions)

    $73           $66       $6       $3       $1      

Average net assets (in millions)

    $69           $38       $4       $3       $1      

Ratios to average net assets(d):

                                               

Expenses after waivers and/or expense reimbursement

    0.46 %(e)          0.48     0.52     0.52     0.52 %(e)     

Expenses before waivers and/or expense reimbursement

    0.46 %(e)          0.48     0.63     1.38     4.18 %(e)          

Net investment income (loss)

    2.23 %(e)          1.21     1.83     2.24     1.74 %(e)     

Portfolio turnover rate(f)

    22         38     28     31     39    

 

(a)

Commencement of offering.

(b)

Calculated based on average shares outstanding during the period.

(c)

Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions, if any. Total returns may reflect adjustments to conform to GAAP. Total returns for periods less than one full year are not annualized.

(d)

Does not include expenses of the underlying funds in which the Fund invests.

(e)

Annualized.

(f)

The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short-term investments, certain derivatives and in-kind transactions (if any). If such transactions were included, the Fund’s portfolio turnover rate may be higher.

 

See Notes to Financial Statements.

 

22


Notes to Financial Statements  (unaudited)

 

1.

Organization

Prudential Sector Funds, Inc. (the “Registered Investment Company” or “RIC”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as an open-end management investment company. The RIC is organized as a Maryland Corporation. These financial statements relate only to the PGIM Jennison Utility Fund (the “Fund”), a series of the RIC. The Fund is classified as a non-diversified fund for purposes of the 1940 Act.

The investment objective of the Fund is to seek total return through a combination of capital appreciation and current income.

 

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 RIC’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 period-end, securities and other assets and liabilities were fair valued at the close of the last U.S. business day. Trading in certain foreign securities may occur when the NYSE is closed (including weekends and holidays). Because such foreign securities trade in markets that are open on weekends and U.S. holidays, the values of some

 

PGIM Jennison Utility Fund    23


Notes to Financial Statements  (unaudited) (continued)

    

 

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 Measurement.

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.

Foreign equities traded on foreign securities exchanges are generally valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy. The models generate an evaluated adjustment factor for each security, which is applied to the local closing price to adjust it for post closing market movements up to the time the Fund is valued. Utilizing that evaluated adjustment factor, the vendor provides an evaluated price for each security. If the vendor does not provide an evaluated price, securities are valued in accordance with exchange-traded common and preferred stock valuation policies discussed above.

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.

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.

 

24


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.

Foreign Currency Translation: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis:

(i) market value of investment securities, other assets and liabilities — at the exchange rate as of the valuation date;

(ii) purchases and sales of investment securities, income and expenses — at the rates of exchange prevailing on the respective dates of such transactions.

Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not generally isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities held at the end of the period. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities sold during the period. Accordingly, holding period unrealized and realized foreign currency gains (losses) are included in the reported net change in unrealized appreciation (depreciation) on investments and net realized gains (losses) on investment transactions on the Statements of Operations.

Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from the disposition of holdings of foreign currencies, currency gains (losses) realized between the trade and settlement dates on investment transactions, and the difference between the amounts of interest, dividends and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) arise from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates.

Master Netting Arrangements: The RIC, 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

 

PGIM Jennison Utility Fund    25


Notes to Financial Statements  (unaudited) (continued)

    

 

Fund’s exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable. In addition to master netting arrangements, the right to set-off exists when all the conditions are met such that each of the parties owes the other determinable amounts, the reporting party has the right to set-off the amount owed with the amount owed by the other party, the reporting party intends to set-off and the right of set-off is enforceable by law.

Securities Lending: The Fund lends its portfolio securities to banks and broker-dealers. The loans are secured by collateral at least equal to the market value of the securities loaned. Collateral pledged by each borrower is invested in an affiliated money market fund and is marked to market daily, based on the previous day’s market value, such that the value of the collateral exceeds the value of the loaned securities. In the event of significant appreciation in value of securities on loan on the last business day of the reporting period, the financial statements may reflect a collateral value that is less than the market value of the loaned securities. Such shortfall is remedied as described above. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of the loan, the borrower will return to the Fund securities identical to the loaned securities. The remaining maturities of the securities lending transactions are considered overnight and continuous. Should the borrower of the securities fail financially, the Fund has the right to repurchase the securities in the open market using the collateral.

The Fund recognizes income, net of any rebate and securities lending agent fees, for lending its securities in the form of fees or interest on the investment of any cash received as collateral. The borrower receives all interest and dividends from the securities loaned and such payments are passed back to the lender in amounts equivalent thereto, which are reflected in interest income or unaffiliated dividend income based on the nature of the payment on the Statement of Operations. The Fund also continues to recognize any unrealized gain (loss) in the market price of the securities loaned and on the change in the value of the collateral invested that may occur during the term of the loan. In addition, realized gain (loss) is recognized on changes in the value of the collateral invested upon liquidation of the collateral. Net earnings from securities lending are disclosed in the Statement of Operations.

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. 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

 

26


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, 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: 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. The chart below sets forth the expected frequency of dividend and capital gains distributions to shareholders. Various factors may impact the frequency of dividend distributions to shareholders, including but not limited to adverse market conditions or portfolio holding-specific events.

 

 

 Expected Distribution Schedule to Shareholders*

 

 

  

 

Frequency  

 

 

 

 Net Investment Income

 

  

 

Quarterly  

 

 

 Short-Term Capital Gains

 

  

 

Annually  

 

 

 Long-Term Capital Gains

 

  

 

Annually  

 

 

*

Under certain circumstances, the Fund may make more than one distribution of short-term and/or long-term capital gains during a fiscal year.

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 RIC, 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 Jennison Associates LLC (“Jennison” or the “subadviser”). The Manager pays for the services of Jennison.

 

PGIM Jennison Utility Fund    27


Notes to Financial Statements  (unaudited) (continued)

    

 

Fees payable under the management agreement are computed daily and paid monthly. For the reporting period ended May 31, 2022, the contractual and effective management fee rates were as follows:

 

 Contractual Management Rate

 

  

 

Effective Management Fee, before any waivers  
and/or expense reimbursements

 

 

 0.60% to $250 million of average daily net assets;

 

  

0.42%

 

 

 0.50% on next $500 million of average daily net assets:

 

    

 

 0.45% on next $750 million of average daily net assets;

 

    

 

 0.40% on next $500 million of average daily net assets;

 

    

 

 0.35% on next $2 billion of average daily net assets;

 

    

 

 0.325% on next $2 billion of average daily net assets;

 

    

 

 0.30% over $6 billion of average daily net assets.

 

    

The Manager has contractually agreed, through March 31, 2023, to limit transfer agency, shareholder servicing, sub-transfer agency, and blue sky fees, as applicable. This contractual expense limitation excludes interest, brokerage, taxes (such as income and foreign withholding taxes, stamp duty and deferred tax expenses), acquired fund fees and expenses, extraordinary expenses, and certain other Fund expenses such as dividend and interest expense and broker charges on short sales.

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

 

 Class

 

  

 

Expense
Limitations  

 

 

 A

 

  

 

—%

 

 

 C

 

   —   

 

 

 R

 

   —   

 

 

 Z

 

   —   

 

 

 R6

 

   0.52      

 

The RIC, 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.

 

28


Pursuant to the Distribution Plans, the Fund compensates PIMS for distribution related activities at an annual rate based on average daily net assets per class. PIMS has contractually agreed through March 31, 2023 to limit such fees on certain classes based on the daily net assets. The distribution fees are accrued daily and payable monthly.

The Fund’s annual gross and net distribution rate, where applicable, are as follows:

 

 

 Class

 

 

 

Gross Distribution Fee

 

 

 

Net Distribution Fee  

 

 

 A

 

 

 

0.30%

 

 

 

0.30%

 

 

 C

 

 

 

1.00    

 

 

 

1.00    

 

 

 R

 

 

 

0.75    

 

 

 

0.50    

 

 

 Z

 

 

 

N/A    

 

 

 

N/A    

 

 

 R6

 

 

 

N/A    

 

 

 

N/A    

 

For the reporting period ended May 31, 2022, PIMS received front-end sales charges (“FESL”) resulting from sales of certain class shares and contingent deferred sales charges (“CDSC”) imposed upon redemptions by certain shareholders. From these fees, PIMS paid such sales charges to broker-dealers, who in turn paid commissions to salespersons and incurred other distribution costs. The sales charges are as follows where applicable:

 

 

 Class

 

 

 

FESL

 

  

 

CDSC

 

 

 A

 

 

 

$619,014

 

  

 

$   156

 

 

 C

 

 

 

          —

 

  

 

  3,407

 

PGIM Investments, PIMS and Jennison 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.

The Fund may invest its overnight sweep cash in the PGIM Core Ultra Short Bond Fund (the “Core Fund”), and its securities lending cash collateral in the PGIM Institutional Money Market Fund (the “Money Market Fund”), each a fund 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 and the Money Market Fund. In addition to the realized and unrealized gains on investments in the Core Fund and Money Market Fund, earnings from such investments are disclosed on the Statement of Operations as “Affiliated dividend income” and “Income from securities lending, net”, respectively. Effective January 2022, the Fund changed its overnight cash sweep vehicle from the Core Fund to an unaffiliated money market fund.

The Fund may enter into certain securities purchase or sale transactions under Board approved Rule 17a-7 procedures. Rule 17a-7 is an exemptive rule under the 1940 Act, that

 

PGIM Jennison Utility Fund    29


Notes to Financial Statements  (unaudited) (continued)

    

 

subject to certain conditions, permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors/trustees, and/or common officers. For the reporting period ended May 31, 2022, 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 reporting period ended May 31, 2022, were as follows:

 

 

  Cost of Purchases

 

  

 

Proceeds from Sales

 

 

                                     $755,310,329

 

  

 

$806,823,044

 

A summary of the cost of purchases and proceeds from sales of shares of affiliated mutual funds for the reporting period ended May 31, 2022, is presented as follows:

 

Value,
Beginning

of

Period

 

  

Cost of
Purchases

 

    

Proceeds
from Sales

 

    

 

Change in
Unrealized
Gain
    (Loss)    

 

    

Realized
Gain
  (Loss)  

 

   

Value,

End of
  Period  

 

    

Shares,
End

of
  Period  

 

    

Income

 

 

  Short-Term Investments - Affiliated Mutual Funds:

 

         

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

 

 

                                  

 

  $30,414,705

 

  

 

 

 

 

$  76,620,317

 

 

 

 

  

 

 

 

 

$107,035,022

 

 

 

 

  

 

 

 

 

$      —

 

 

 

 

  

 

 

 

 

$       —

 

 

 

 

 

 

 

 

 

$               —

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

$  3,397

 

 

 

 

  PGIM Institutional Money Market Fund(1)(b)(wa)

 

 

                                  

 

    52,991,554

 

    

 

296,397,750

 

 

 

    

 

318,743,285

 

 

 

    

 

3,514

 

 

 

    

 

(5,318

 

 

   

 

30,644,215

 

 

 

    

 

30,668,750

 

 

 

    

 

10,918

 

(2)  

 

 

  $83,406,259

 

    

 

$373,018,067

 

 

 

    

 

$425,778,307

 

 

 

    

 

$3,514

 

 

 

    

 

$(5,318

 

 

   

 

$30,644,215

 

 

 

             

 

$14,315

 

 

 

 

(1)

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

(2)

The amount, or a portion thereof, represents the affiliated securities lending income shown on the Statement of Operations.

(b)

Represents security, or portion thereof, purchased with cash collateral received for securities on loan and includes dividend reinvestment.

(wa)

PGIM Investments LLC, the manager of the Fund, also serves as manager of the PGIM Core Ultra Short Bond Fund and PGIM Institutional Money Market Fund, if applicable.

 

30


6.

Tax Information

The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of May 31, 2022 were as follows:

 

    Tax Basis

 

 

 

Gross

Unrealized

Appreciation

 

 

 

Gross

Unrealized

Depreciation

 

  

 

Net

Unrealized

Appreciation

 

 

  $2,370,151,104

 

 

 

$1,325,456,750

 

 

 

$(6,448,683)

 

  

 

$1,319,008,067

 

The GAAP basis may differ from tax basis due to certain tax-related adjustments.

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 November 30, 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 5.50%. Investors who purchase $1 million or more of Class A shares and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1%, although they are not subject to an initial 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. 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 eight years (ten years prior to January 22, 2021) after purchase. 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 Jennison Utility Fund    31


Notes to Financial Statements  (unaudited) (continued)

    

 

The RIC is authorized to issue 2,000,000,000 shares of common stock, $0.01 par value per share, 1,085,000,000 of which are designated as shares of the Fund. The authorized shares of the Fund are currently classified and designated as follows:

 

   
  Class    Number of Shares  

A

   500,000,000          

B

   10,000,000         

C

   75,000,000         

R

   75,000,000         

Z

   100,000,000         

T

   250,000,000         

R6

   75,000,000         

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

As of May 31, 2022, Prudential, through its affiliated entities, including affiliated funds (if applicable), owned shares of the Fund as follows:

 

     
  Class    Number of Shares    Percentage of Outstanding Shares  

A

   147,983      0.1%

R

   492,997    8.7 

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

 

     
      Number of Shareholders    Percentage of Outstanding Shares  

Affiliated

   —          —%

Unaffiliated

   2    25.2  

 

32


Transactions in shares of common stock were as follows:

 

     
  Share Class    Shares        Amount  

Class A

                   

Six months ended May 31, 2022:

                   

Shares sold

     3,153,048        $ 50,113,816  

Shares issued in reinvestment of dividends and distributions

     22,695,965          352,441,263  

Shares purchased

     (10,292,662        (164,129,452

Net increase (decrease) in shares outstanding before conversion

     15,556,351          238,425,627  

Shares issued upon conversion from other share class(es)

     352,064          5,629,003  

Shares purchased upon conversion into other share class(es)

     (429,780        (6,918,504

Net increase (decrease) in shares outstanding

     15,478,635        $ 237,136,126  

Year ended November 30, 2021:

                   

Shares sold

     3,097,365        $ 50,953,007  

Shares issued in reinvestment of dividends and distributions

     3,096,943          49,190,325  

Shares purchased

     (16,538,511        (271,996,873

Net increase (decrease) in shares outstanding before conversion

     (10,344,203        (171,853,541

Shares issued upon conversion from other share class(es)

     697,661          11,337,154  

Shares purchased upon conversion into other share class(es)

     (862,681        (14,231,213

Net increase (decrease) in shares outstanding

     (10,509,223      $ (174,747,600

Class C

                   

Six months ended May 31, 2022:

                   

Shares sold

     543,379        $ 8,694,132  

Shares issued in reinvestment of dividends and distributions

     427,619          6,600,727  

Shares purchased

     (260,648        (4,089,658

Net increase (decrease) in shares outstanding before conversion

     710,350          11,205,201  

Shares purchased upon conversion into other share class(es)

     (290,852        (4,631,136

Net increase (decrease) in shares outstanding

     419,498        $ 6,574,065  

Year ended November 30, 2021:

                   

Shares sold

     591,018        $ 9,664,009  

Shares issued in reinvestment of dividends and distributions

     41,161          647,028  

Shares purchased

     (545,528        (8,901,013

Net increase (decrease) in shares outstanding before conversion

     86,651          1,410,024  

Shares purchased upon conversion into other share class(es)

     (665,059        (10,731,094

Net increase (decrease) in shares outstanding

     (578,408      $ (9,321,070

 

PGIM Jennison Utility Fund    33


Notes to Financial Statements  (unaudited) (continued)

    

 

     
  Share Class    Shares        Amount  

Class R

                   

Six months ended May 31, 2022:

                   

Shares sold

     469,886        $ 7,541,165  

Shares issued in reinvestment of dividends and distributions

     679,183          10,539,452  

Shares purchased

     (442,753        (7,101,368

Net increase (decrease) in shares outstanding

     706,316        $ 10,979,249  

Year ended November 30, 2021:

                   

Shares sold

     472,730        $ 7,715,346  

Shares issued in reinvestment of dividends and distributions

     78,564          1,244,722  

Shares purchased

     (711,556        (11,670,012

Net increase (decrease) in shares outstanding

     (160,262      $ (2,709,944

Class Z

                   

Six months ended May 31, 2022:

                   

Shares sold

     9,979,186        $ 160,859,141  

Shares issued in reinvestment of dividends and distributions

     2,405,967          37,487,236  

Shares purchased

     (3,987,590        (63,364,653

Net increase (decrease) in shares outstanding before conversion

     8,397,563          134,981,724  

Shares issued upon conversion from other share class(es)

     442,158          7,141,689  

Shares purchased upon conversion into other share class(es)

     (82,951        (1,320,308

Net increase (decrease) in shares outstanding

     8,756,770        $ 140,803,105  

Year ended November 30, 2021:

                   

Shares sold

     6,470,240        $ 104,987,628  

Shares issued in reinvestment of dividends and distributions

     387,169          6,167,721  

Shares purchased

     (5,988,622        (97,988,596

Net increase (decrease) in shares outstanding before conversion

     868,787          13,166,753  

Shares issued upon conversion from other share class(es)

     888,008          14,697,821  

Shares purchased upon conversion into other share class(es)

     (3,497,586        (58,415,097

Net increase (decrease) in shares outstanding

     (1,740,791      $ (30,550,523

 

34


     
  Share Class

 

  

Shares

 

   

Amount

 

 

Class R6

                

Six months ended May 31, 2022:

                

Shares sold

     1,031,996     $ 16,713,581  

Shares issued in reinvestment of dividends and distributions

     557,241       8,670,797  

Shares purchased

     (1,009,866     (16,172,536

Net increase (decrease) in shares outstanding before conversion

     579,371       9,211,842  

Shares issued upon conversion from other share class(es)

     6,021       99,256  

Net increase (decrease) in shares outstanding

     585,392     $ 9,311,098  

Year ended November 30, 2021:

                

Shares sold

     689,731     $ 11,509,678  

Shares issued in reinvestment of dividends and distributions

     28,425       469,477  

Shares purchased

     (620,987     (10,464,655

Net increase (decrease) in shares outstanding before conversion

     97,169       1,514,500  

Shares issued upon conversion from other share class(es)

     3,437,758       57,342,429  

Net increase (decrease) in shares outstanding

     3,534,927     $ 58,856,929  

 

8.

Borrowings

The RIC, 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 SCA.

 

        SCA    

Term of Commitment

      10/1/2021 – 9/29/2022    

Total Commitment

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

Annualized Interest Rate on Borrowings

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

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

The Fund utilized the SCA during the reporting period ended May 31, 2022. The average daily balance for the 6 days that the Fund had loans outstanding during the period was

 

PGIM Jennison Utility Fund    35


Notes to Financial Statements  (unaudited) (continued)

    

 

approximately $14,300,833, borrowed at a weighted average interest rate of 1.30%. The maximum loan outstanding amount during the period was $19,706,000. At May 31, 2022, 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.

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 lower the credit quality of a bond, the more sensitive it is to credit risk.

Currency Risk: The Fund’s net asset value could decline as a result of changes in exchange rates, which could adversely affect the Fund’s investments in currencies, or in securities that trade in, and receive revenues related to, currencies, or in derivatives that provide exposure to currencies. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payment of principal and interest or dividends to investors located outside the country, due to blockage of foreign currency exchanges or otherwise.

Economic and Market Events Risk: Events in the U.S. and global financial markets, including actions taken by the U.S. Federal Reserve or foreign central banks to stimulate or stabilize economic growth or the functioning of the securities markets, may at times result in unusually high market volatility, which could negatively impact performance. Relatively reduced liquidity in credit and fixed income markets could adversely affect issuers worldwide.

Equity and Equity-Related Securities Risk: Equity and equity-related securities may be subject to changes in value, and their values may be more volatile than those of other asset classes. In addition to an individual security losing value, the value of the equity markets or a sector in which the Fund invests could go down. Different parts of a market can react differently to adverse issuer, market, regulatory, political and economic developments.

Foreign Securities Risk: Investments in securities of non-U.S. issuers (including those denominated in U.S. dollars) may involve more risk than investing in securities of U.S. issuers. Foreign political, economic and legal systems, especially those in developing and emerging market countries, may be less stable and more volatile than in the United States.

 

36


Foreign legal systems generally have fewer regulatory requirements than the U.S. legal system, particularly those of emerging markets. In general, less information is publicly available with respect to non-U.S. companies than U.S. companies. Non-U.S. companies generally are not subject to the same accounting, auditing, and financial reporting standards as are U.S. companies. Additionally, the changing value of foreign currencies and changes in exchange rates could also affect the value of the assets the Fund holds and the Fund’s performance. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payment of principal and interest or dividends to investors located outside the country, due to blockage of foreign currency exchanges or otherwise. Investments in emerging markets are subject to greater volatility and price declines.

In addition, the Fund’s investments in non-U.S. securities may be subject to the risks of nationalization or expropriation of assets, imposition of currency exchange controls or restrictions on the repatriation of non-U.S. currency, confiscatory taxation and adverse diplomatic developments. Special U.S. tax considerations may apply.

Geographic Concentration Risk: The Fund’s performance may be closely tied to the market, economic, political, regulatory or other conditions in the countries or regions in which the Fund invests. This can result in more pronounced risks based upon conditions that impact one or more countries or regions more or less than other countries or regions.

Increase in Expenses Risk: Your actual cost of investing in the Fund may be higher than the expenses shown in the Fund’s prospectus expense table for a variety of reasons. For example, expense ratios may be higher than those shown if average net assets decrease. Net assets are more likely to decrease and Fund expense ratios are more likely to increase when markets are volatile. Active and frequent trading of Fund securities can increase expenses.

Initial Public Offerings Risk: The volume of IPOs and the levels at which the newly issued stocks trade in the secondary market are affected by the performance of the stock market overall. If IPOs are brought to the market, availability may be limited and if the Fund desires to acquire shares in such an offering, it may not be able to buy any shares at the offering price, or if it is able to buy shares, it may not be able to buy as many shares at the offering price as it would like. The prices of securities involved in IPOs are often subject to greater and more unpredictable price changes than more established stocks. Such unpredictability can have a dramatic impact on the Fund’s performance (higher or lower) and any assumptions by investors based on the affected performance may be unwarranted. In addition, as Fund assets grow, the impact of IPO investments on performance will decline, which could reduce total returns.

Investment Style Risk: There is the risk that the particular investment style followed by the Fund may be out of favor for a period of time.

Large Shareholder and Large Scale Redemption Risk: Certain individuals, accounts, funds (including funds affiliated with the Manager) or institutions, including the Manager and its

 

PGIM Jennison Utility Fund    37


Notes to Financial Statements  (unaudited) (continued)

    

 

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 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.

Management Risk: The value of your investment may decrease if judgments by the subadviser about the attractiveness, value or market trends affecting a particular security, industry or sector or about market movements are incorrect.

Market Capitalization Risk: The Fund may invest in companies of any market capitalization. Generally, the stock prices of small- and mid-cap companies are less stable than the prices of large-cap stocks and may present greater risks. Large capitalization companies as a group could fall out of favor with the market, causing the Fund to underperform compared to investments that focus on smaller capitalized companies.

Market Disruption and Geopolitical Risks: Market disruption can be caused by economic, financial or political events and factors, including but not limited to, international wars or conflicts (including Russia’s military invasion of Ukraine), geopolitical developments (including trading and tariff arrangements, sanctions and cybersecurity attacks), instability in regions such as Asia, Eastern Europe and the Middle East, terrorism, natural disasters and public health epidemics (including the outbreak of COVID-19 globally).

The extent and duration of such events and resulting market disruptions cannot be predicted, but could be substantial and could magnify the impact of other risks to the Fund. These and other similar events could adversely affect the U.S. and foreign financial markets and lead to increased market volatility, reduced liquidity in the securities markets, significant negative impacts on issuers and the markets for certain securities and commodities and/or government intervention. They may also cause short- or long-term economic uncertainties in the United States and worldwide. As a result, whether or not the Fund invests in securities of issuers located in or with significant exposure to the countries directly affected, the value and liquidity of the Fund’s investments may be negatively impacted. Further, due to closures of certain markets and restrictions on trading certain securities, the value of certain securities held by the Fund could be significantly impacted, which could lead to such securities being valued at zero.

 

38


COVID-19 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. They have also had and may continue to 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. The occurrence, reoccurrence and pendency of public health epidemics could adversely affect the economies 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.

Non-Diversified Investment Company Risk: The Fund is non-diversified for purposes of the 1940 Act. This means that the Fund may invest a greater percentage of its assets in the securities of a single company or other issuer than a diversified fund. Investing in a non-diversified fund involves greater risk than investing in a diversified fund because a loss resulting from the decline in value of any one security may represent a greater portion of the total assets of a non-diversified fund.

Utility Sector Risk: The Fund is subject to risks of the utility industry, such as changing commodity prices, government regulation stipulating rates charged by utilities, increased tariffs, changes in tax laws, interest and exchange rate fluctuations, liabilities for environmental damage and changes in the cost of providing specific utility services, due to its concentration in utility securities. The utilities industry is also subject to potential terrorist attacks, natural disasters and severe weather conditions, as well as regulatory and operational burdens associated with the operation and maintenance of nuclear facilities. When interest rates go up, the value of securities issued by utility companies historically has gone down. Although the average dividend yield of utility industry stocks has been higher than those of other companies, the total return of utility securities has historically underperformed those of industrial companies. In most countries and localities, the utility industry is regulated by governmental entities, which can increase costs and delays for new projects and make it difficult to pass increased costs on to consumers. In certain areas, deregulation of utilities has resulted in increased competition and reduced profitability for certain companies, and increased the risk that a particular company will become bankrupt or fail completely. Reduced profitability, as well as new uses for or additional need of funds (such as for expansion, operations or stock buybacks), could result in reduced dividend payout rates for utility companies. In addition, utility companies face the risk of increases in the cost and reduced availability of fuel (such as oil, coal, natural gas or nuclear energy) and potentially high interest costs for borrowing to finance new projects. Energy conservation and changes in climate policy may also have a significant adverse impact on the revenues and expenses of utility companies. As a sector fund, the Fund’s holdings can vary significantly from broad market indexes and the performance of the Fund can deviate from

 

PGIM Jennison Utility Fund    39


Notes to Financial Statements  (unaudited) (continued)

    

 

the performance indexes.

 

10.

Recent Regulatory Developments

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 took effect on March 8, 2021, with a compliance date of September 8, 2022. Management is currently evaluating the Rule and its impact to the Fund.

 

40


Liquidity Risk Management Program (unaudited)

    

 

Consistent with Rule 22e-4 under the 1940 Act (the “Liquidity Rule”), the Fund has adopted and implemented a liquidity risk management program (the “LRMP”). The Fund’s LRMP seeks to assess and manage the Fund’s liquidity risk, which is defined as the risk that the Fund is unable to meet investor redemption requests without significantly diluting the remaining investors’ interests in the Fund. The Board has approved PGIM Investments LLC (“PGIM Investments”), the Fund’s investment manager, to serve as the administrator of the Fund’s LRMP. As part of its responsibilities as administrator, PGIM Investments has retained a third party to perform certain functions, including providing market data and liquidity classification model information.

The Fund’s LRMP includes a number of processes designed to support the assessment and management of its liquidity risk. In particular, the Fund’s LRMP includes no less than annual assessments of factors that influence the Fund’s liquidity risk; no less than monthly classifications of the Fund’s investments into one of four liquidity classifications provided for in the Liquidity Rule; a 15% of net assets limit on the acquisition of “illiquid investments” (as defined under the Liquidity Rule); establishment of a minimum percentage of the Fund’s assets to be invested in investments classified as “highly liquid” (as defined under the Liquidity Rule) if the Fund does not invest primarily in highly liquid investments; and regular reporting to the Board.

At a meeting of the Board on March 1-3, 2022, PGIM Investments provided a written report (“LRMP Report”) to the Board addressing the operation, adequacy, and effectiveness of the Fund’s LRMP, including any material changes to the LRMP for the period from January 1, 2021 through December 31, 2021 (“Reporting Period”). The LRMP Report concluded that the Fund’s LRMP was reasonably designed to assess and manage the Fund’s liquidity risk and was adequately and effectively implemented during the Reporting Period. There were no material changes to the LRMP during the Reporting Period. The LRMP Report further concluded that the Fund’s investment strategies continue to be appropriate given the Fund’s status as an open-end fund.

There can be no assurance that the LRMP will achieve its objectives in the future. Additional information regarding risks of investing in the Fund, including liquidity risks presented by the Fund’s investment portfolio, is found in the Fund’s Prospectus and Statement of Additional Information.

 

PGIM Jennison Utility Fund    41


     
   MAIL       TELEPHONE       WEBSITE

 

 655 Broad Street

 Newark, NJ 07102

  

 

 (800) 225-1852

  

 

 pgim.com/investments

 

PROXY VOTING

 

The Board of Directors of the Fund has delegated to the Fund’s subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website.

 

DIRECTORS

 

Ellen S. Alberding Kevin J. Bannon Scott E. Benjamin Linda W. Bynoe Barry H. Evans Keith F. Hartstein Laurie Simon Hodrick Stuart S. Parker Brian K. Reid Grace C. Torres

 

OFFICERS

 

Stuart S. Parker, President Scott E. Benjamin, Vice President Christian J. Kelly, Treasurer and Principal Financial and Accounting Officer Claudia DiGiacomo, Chief Legal Officer Isabelle Sajous, Chief Compliance Officer Jonathan Corbett, Anti-Money Laundering Compliance Officer Andrew R. French, Secretary Melissa Gonzalez, Assistant Secretary Diana N. Huffman, Assistant Secretary Kelly A. Coyne, Assistant Secretary Patrick E. McGuinness, Assistant Secretary Debra Rubano, Assistant Secretary Lana Lomuti, Assistant Treasurer Russ Shupak, Assistant Treasurer  Elyse M. McLaughlin, Assistant Treasurer Deborah Conway, Assistant Treasurer

 

MANAGER    PGIM Investments LLC    655 Broad Street
Newark, NJ 07102

 

SUBADVISER    Jennison Associates LLC    466 Lexington Avenue
New York, NY 10017

 

DISTRIBUTOR    Prudential Investment
Management Services LLC
   655 Broad Street
Newark, NJ 07102

 

CUSTODIAN    The Bank of New York Mellon    240 Greenwich Street
New York, NY 10286

 

TRANSFER AGENT    Prudential Mutual Fund Services LLC    PO Box 9658
Providence, RI 02940

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM    PricewaterhouseCoopers LLP    300 Madison Avenue
New York, NY 10017

 

FUND COUNSEL    Willkie Farr & Gallagher LLP    787 Seventh Avenue
New York, NY 10019

 


 

An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain the prospectus and summary prospectus by visiting our website at pgim.com/investments or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing.

 

 

 

E-DELIVERY

 

To receive your mutual fund documents online, go to pgim.com/investments/resource/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above.

 

 

 

SHAREHOLDER COMMUNICATIONS WITH DIRECTORS

 

Shareholders can communicate directly with the Board of Directors by writing to the Chair of the Board, PGIM Jennison Utility Fund, PGIM Investments, Attn: Board of Directors, 655 Broad Street, Newark, NJ 07102. Shareholders can communicate directly with an individual Director by writing to that Director at the same address. Communications are not screened before being delivered to the addressee.

 

 

 

AVAILABILITY OF PORTFOLIO HOLDINGS

 

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT filings are available on the Commission’s website at sec.gov.

 

Mutual Funds:

 

 

ARE NOT INSURED BY THE FDIC OR ANY
FEDERAL GOVERNMENT AGENCY

 

  MAY LOSE VALUE  

 

ARE NOT A DEPOSIT OF OR GUARANTEED
BY ANY BANK OR ANY BANK AFFILIATE

 


LOGO

 

 

PGIM JENNISON UTILITY FUND

 

 

  SHARE CLASS    

 

 

 

A

 

 

 

C

 

 

 

R

 

 

 

Z

 

 

 

R6

 

 

  NASDAQ

 

 

 

PRUAX

 

 

 

PCUFX

 

 

 

JDURX

 

 

 

PRUZX

 

 

 

PRUQX

 

 

  CUSIP

 

 

 

74441P858

 

 

 

74441P833

 

 

 

74441P825

 

 

 

74441P817

 

 

 

74441P726

 

MF105E2


Item 2 – Code of Ethics – Not required, as this is not an annual filing.

Item 3 – Audit Committee Financial Expert – Not required, as this is not an annual filing.

Item 4 – Principal Accountant Fees and Services – Not required, as this is not an annual filing.

Item 5 – Audit Committee of Listed Registrants – Not applicable.

Item 6 – Schedule of Investments – The schedule is included as part of the report to shareholders filed under Item 1 of this                   Form.

Item 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not                   applicable.

Item 8 – Portfolio Managers of Closed-End Management Investment Companies – Not applicable.

Item 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not                   applicable.

Item 10 – Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.

Item 11 – Controls and Procedures

 

  (a)

It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure.

 

  (b)

There has been no significant change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is likely to materially affect, the registrant’s internal control over financial reporting.

Item 12 – Controls and Procedures - Disclosure of Securities Lending Activities for Closed-End Management Investment                   Companies – Not applicable.

Item 13 – Exhibits

 

       (a)    (1) Code of Ethics – Not required, as this is not an annual filing.
     (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act – Attached hereto as Exhibit EX-99.CERT.
     (3) Any written solicitation to purchase securities under Rule 23c-1. – Not applicable.
  (b)    Certifications pursuant to Section 906 of the Sarbanes-Oxley Act – Attached hereto as Exhibit EX-99.906CERT.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Registrant:        Prudential Sector Funds, Inc.

 

By:    /s/ Andrew R. French
   Andrew R. French
   Secretary
Date:    July 19, 2022

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:    /s/ Stuart S. Parker
   Stuart S. Parker
   President and Principal Executive Officer
Date:    July 19, 2022
By:    /s/ Christian J. Kelly
   Christian J. Kelly
   Treasurer and Principal Financial and Accounting Officer
Date:    July 19, 2022

Item 13

Prudential Sector Funds, Inc.

Semi-Annual period ending 5/31/22

File No. 811-03175

CERTIFICATIONS

I, Stuart S. Parker, certify that:

 

  1.

I have reviewed this report on Form N-CSR of the above named Fund(s);

 

  2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report.

 

  4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

  a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and;

 

  d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5.

The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

1


  a)

All significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

  b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

July 19, 2022

 

/s/ Stuart S. Parker
Stuart S. Parker
President and Principal Executive Officer

 

2


Item 13

Prudential Sector Funds, Inc.

Semi-Annual period ending 5/31/22

File No. 811-03175

CERTIFICATIONS

I, Christian J. Kelly, certify that:

 

  1.

I have reviewed this report on Form N-CSR of the above named Fund(s);

 

  2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report.

 

  4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

  a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and;

 

  d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5.

The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

3


  a)

All significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

  b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

July 19, 2022

 

/s/ Christian J. Kelly
Christian J. Kelly

Treasurer and Principal Financial and

Accounting Officer

 

4

Certification Pursuant to 18 U.S.C. Section 1350

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Name of Issuer:             Prudential Sector Funds, Inc.

In connection with the Report on Form N-CSR of the above-named issuer that is accompanied by this certification, the undersigned hereby certifies, to his or her knowledge, that:

 

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

 

July 19, 2022      /s/ Stuart S. Parker
     Stuart S. Parker
     President and Principal Executive Officer
July 19, 2022      /s/ Christian J. Kelly
     Christian J. Kelly
    

Treasurer and Principal Financial and

Accounting Officer

This certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.



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