Letter from the President

PGIM Ultra Short Bond ETF

Strategy and Performance Overview

PGIM Active High Yield Bond ETF

Strategy and Performance Overview

PGIM Active Aggregate Bond ETF

Strategy and Performance Overview

PGIM Total Return Bond ETF

Strategy and Performance Overview

PGIM Floating Rate Income ETF

Strategy and Performance Overview

PGIM AAA CLO ETF

Strategy and Performance Overview

PGIM Short Duration Multi-Sector Bond ETF

Strategy and Performance Overview

Fees and Expenses

Holdings and Financial Statements

Approval of Advisory Agreements

Dear Shareholder:

We hope you find the annual report for the PGIM Fixed Income ETFs informative and useful. The report covers performance for the 12-month period that ended August 31, 2023.

Although central banks raised interest rates aggressively to tame surging inflation during the period, the global economy and financial markets demonstrated resilience. Employers continued to hire, consumers continued to spend, home prices rose, and recession fears receded.

Stuart S. Parker, President

PGIM Fixed Income ETFs

October 16, 2023

Net Asset Value (NAV)

Market Price*

ICE BofA US 3-Month Treasury Bill Index

Credit Quality expressed as a percentage of total investments as of 8/31/23 (%)

AAA

AA

A

BBB

Cash/Cash Equivalents

Total

While there was no shortage of fear in the bond markets during the reporting period, which was largely marked by an overhang of uncertainty and economic negatives, the interest rate volatility, COVID-19-era supply/demand imbalances, and steep losses that predominated during the first half of the reporting period showed signs of dissipating in the second half.

Despite a series of rolling crises—including a string of regional bank failures, the debt ceiling debate, ongoing recession concerns, and still-high inflation—the US economy avoided the worst of potential outcomes, and fixed income returns skewed largely positive over the last six months of the reporting period.

Against the backdrop of historic lows in unemployment and still-high inflation, the US Federal Reserve (the Fed) continued its monetary tightening path, raising interest rates by an additional 300 basis points (bps) in a succession of rate hikes over the reporting period. (One basis point equals 0.01%.) Although the Fed raised interest rates by 25 bps and indicated that its inflation fight was not yet over at the July Federal Open Market Committee (FOMC) meeting, the main signal from the meeting was that the end of the rate-hiking cycle was likely close.

A sharply higher federal funds rate, coupled with macroeconomic uncertainty, led to enormous volatility being priced into developed market interest rates, with sharply higher front-end rates and lower long-dated yields. From -0.30% on August 31, 2022, the 10-year/2-year US Treasury spread declined to -0.76% at the end of the reporting period, while the 2-year US Treasury yield rose by 140 bps to end the reporting period at 4.85%.

Just as longer-term US Treasuries saw substantial volatility throughout the reporting period, yields on short-term securities, which influence money market yields, also rose substantially. The 3-month US Treasury bill rose from 2.96% to 5.56% during the reporting period, while the Secured Overnight Financing Rate rose from 2.29% to 5.30%.

In the short-term credit markets, investment-grade credit spreads were relatively unchanged over the entirety of the reporting period, despite experiencing heightened intra-quarter volatility. The Bloomberg 1-3 Year Credit Index, a proxy for the short-term spread market, outperformed similar short-duration US Treasuries by 0.66% during the reporting period.

During the reporting period, the Fund emphasized spread assets—including short-term, investment-grade debt of financial, consumer cyclical and non-cyclical,

Overall positioning in short-term, investment-grade corporates, CLOs, and CMBS contributed to performance during the reporting period.

Within credit, selections in banking, automotive, and electric utilities contributed to performance.

Overall yield curve positioning also contributed to performance during the period. (A yield curve is a line graph that illustrates the relationship between the yields and maturities of fixed income securities. It is created by plotting the yields of different maturities for the same type of bonds.)

Although the rate-hike debate continues for the Fed, the increments of its hikes are getting smaller, and it declined to raise rates at all at its June 2023 FOMC meeting—signs that most of the increases are behind us and that the hikes to come will increasingly be “fine-tuning” exercises. With the prospect of balance returning to the labor market, PGIM Fixed Income sees a path for core personal consumption expenditures to decelerate below 3.0% by the end of 2023, driven lower by core non-housing services prices.

Clear and sustained evidence of a downshift on inflation, coupled with below-trend growth, should be enough, in PGIM Fixed Income’s view, for the Fed to pause its rate-hike campaign at 5.5%. With the pace of central bank tightening expected to dramatically downshift in the quarters ahead, PGIM Fixed Income’s expectation is for interest rate volatility to continue to decline.

PGIM Fixed Income continues to emphasize well-researched, short-term credit sectors in the expectation that these assets are likely to offer the most value from a total return perspective. PGIM Fixed Income also continues to seek out investments with the best total return potential.

PGIM Fixed Income continues to find value within investment-grade corporates and structured products (CLOs, CMBS), which represent attractive value in relation to US Treasuries and agency mortgage-backed securities.

Net Asset Value (NAV)

Market Price*

Bloomberg US High Yield Very Liquid Index

Credit Quality expressed as a percentage of total investments as of 8/31/23 (%)

AAA

BBB

BB

B

CCC

CC

D

Not Rated

Cash/Cash Equivalents

Total

US high yield bonds posted gains over the reporting period amid limited new issuance, resilient economic data, and an ongoing supply deficit fueled by a high volume of calls, tenders, maturities, and coupon payments.

Spreads on the Bloomberg US Corporate High Yield Bond Index tightened 113 basis points (bps) to 372 bps as of the end of the reporting period. (One basis point equals 0.01%.) Meanwhile, fundamentals remained solid, with leverage remaining low and coverage ratios remaining strong despite recession concerns and a series of rolling crises, including a string of regional bank failures, the debt ceiling debate, and still-high inflation.

After posting outflows of $47 billion during 2022, high yield bond mutual funds saw $11.7 billion of outflows during the first eight months of 2023. However, technicals remained supportive as subdued primary activity helped to offset the headwinds from negative fund flows. After totaling just $106.5 billion in 2022, high yield gross issuance totaled $111.2 billion through the first eight months of 2023, or just $40.8 billion excluding refinancing activity.

By quality, all credit tiers posted positive returns over the reporting period, with CCC-rated credits outperforming their B-rated and BB-rated peers. Meanwhile, the par-weighted US high yield default rate, including distressed exchanges, ended the reporting period at 2.40%, which was below its long-term historical average but 75 bps higher than the beginning of the year and 119 bps higher than a year earlier, according to J.P. Morgan.

Overall sector allocation contributed to the Fund’s performance during the reporting period, with an overweight relative to the Index to building materials & home construction, along with underweights relative to the Index to media & entertainment and telecom being the largest contributors.

While overall security selection detracted from performance, selections in healthcare & pharmaceuticals, technology, and building materials & home construction contributed.

In individual security selection, positioning in Bausch Health Americas Inc. (healthcare & pharmaceuticals), Altice France Holding SA (telecom), and Lumen Technologies Inc. (telecom) were among the largest contributors to performance.

Overall security selection was the largest detractor from the Fund’s performance during the reporting period, with selections in media & entertainment, telecom, and upstream energy detracting the most.

While overall sector allocation contributed, underweights relative to the Index to gaming/lodging/leisure and transportation & environment services, along with an overweight to cable & satellite, detracted.

In individual security selection, positioning in Diamond Sports Group LLC (media & entertainment), Digicel Ltd. (telecom), and Venator Materials LLC (chemicals) detracted from results.

Having less beta, on average, in the Fund relative to the Index over the reporting period had a negative impact on returns. (Beta is a measure of the volatility or risk of a security or portfolio compared to the market or index.)

While PGIM Fixed Income expects to see some deterioration of fundamentals, some mitigating factors will likely keep US high yield spreads from widening sharply from current levels. The market is of a higher quality than prior cycles, with BB-rated credits comprising nearly 50% of the market, net leverage remaining near all-time lows, and interest coverage near all-time highs. Meanwhile, the technical backdrop remains supportive due to a variety of factors, including lower gross new issuance and sizeable rising stars leading to a meaningful supply deficit and an overall shrinking high yield market.

PGIM Fixed Income does not expect defaults to be as severe as in previous downturns due to the strength of most issuers’ balance sheets and the absence of a near-term maturity wall, as many issuers have already termed out debt at low interest rates. Should the economy follow its base-case recession scenario, PGIM Fixed Income expects defaults to remain manageable, rising to 5% over the next 12 months.

While the short-term outlook is somewhat positive, PGIM Fixed Income forecasts a flat excess return over the next 12 months. In terms of positioning, PGIM Fixed Income remains defensive but is looking to opportunistically add higher-quality and short-duration risk on pullbacks from here.

Net Asset Value (NAV)

Market Price*

Bloomberg US Aggregate Bond Index

 Credit Quality expressed as a percentage of total investments as of 8/31/23 (%)

 AAA

 AA

 A

 BBB

 Cash/Cash Equivalents

Total

While there was no shortage of fear in the bond markets during the reporting period, which was largely marked by an overhang of uncertainty and economic negatives, the interest rate volatility, COVID-19-era supply/demand imbalances, and steep losses that predominated during the first half of the reporting period showed signs of dissipating in the second half.

Despite a series of rolling crises—including a string of regional bank failures, the debt ceiling debate, ongoing recession concerns, and still-high inflation—the US economy avoided the worst of potential outcomes, and fixed income returns skewed largely positive over the last six months of the reporting period.

Against the backdrop of historic lows in unemployment and still-high inflation, the US Federal Reserve (the Fed) continued its monetary tightening path, raising interest rates by an additional 300 basis points (bps) in a succession of rate hikes over the reporting period. (One basis point equals 0.01%.) Although the Fed raised interest rates by 25 bps and indicated that its inflation fight was not yet over at the July Federal Open Market Committee (FOMC) meeting, the main signal from the meeting was that the end of the rate-hiking cycle was likely close.

A sharply higher federal funds rate, coupled with macroeconomic uncertainty, led to enormous volatility being priced into developed market interest rates, with sharply higher front-end rates and lower long-dated yields. From –0.30% on August 31, 2022, the 10-year/2-year US Treasury spread declined to –0.76% at the end of the reporting period, while the 2-year US Treasury yield rose by 140 bps to end the reporting period at 4.85%.

Despite elevated volatility, US investment-grade corporate spreads tightened over the reporting period, as expectations for an economic hard landing moderated and fundamentals remained solid. Securitized credit spreads were mixed, with high-quality collateralized loan obligation (CLO) spreads tightening over the reporting period and commercial mortgage-backed securities (CMBS) spreads widening as the commercial real estate sector remained challenged. After posting steep losses in 2022, the emerging markets sector posted positive total returns, and spreads tightened through the first part of 2023 as headwinds turned to tailwinds. Meanwhile, agency mortgage-backed securities (MBS) underperformed versus US Treasuries over the reporting period, as elevated interest rate volatility weighed on the sector over the first half of the reporting period.

Overall security selection and sector allocation both contributed to the Fund’s performance over the reporting period. Within security selection, selections in investment-grade corporates, Treasuries, and emerging markets contributed the most.

Within sector allocation, overweights relative to the Index to CLOs, municipal bonds, and asset-backed securities (ABS) contributed the most.

Within credit, positioning in foreign non-corporates, midstream energy, and banking contributed to results.

In individual security selection, the Fund benefited from positioning in J.P Morgan Chase &Co. (banking), Toll Brothers Finance Corp. (building materials & home construction), and Mexico City Airport Trust (foreign non-corporates).

While overall security selection contributed to the Fund’s performance during the reporting period, selection in MBS and municipal bonds detracted from performance.

While overall sector allocation contributed, an underweight to investment-grade corporates relative to the Index detracted from performance.

Within credit, positioning in electric utilities was a modest detractor.

In individual security selection, the Fund’s positioning in Berkshire Hathaway Inc. (electric utilities), Oracle Corp. (technology), and The Republic of Indonesia detracted from performance.

The Fund’s yield curve and duration positioning detracted from performance during the reporting period. (A yield curve is a line graph that illustrates the relationship between the yields and maturities of fixed income securities. It is created by plotting the yields of different maturities for the same type of bonds.) (Duration measures the sensitivity of the price—the value of principal—of a bond to a change in interest rates.)

Although the rate-hike debate continues for the Fed, the increments of its hikes are getting smaller, and it declined to raise rates at all at its June 2023 FOMC meeting—signs that most of the increases are behind us and that the hikes to come will increasingly be “fine-tuning” exercises. With the prospect of balance returning to the labor market, PGIM Fixed Income sees a path for core personal consumption expenditures to decelerate below 3.0% by the end of 2023, driven lower by core non-housing services prices.

Clear and sustained evidence of a downshift on inflation, coupled with below-trend growth, should be enough, in PGIM Fixed Income’s view, for the Fed to pause its rate-hike campaign at 5.5%, prior to initiating a 50–75 bps fine-tuning campaign of cuts as early as the fourth quarter of 2023.

PGIM Fixed Income sees the US yield curve remaining solidly inverted due to only marginal repricing at the front end. Meanwhile, PGIM Fixed Income believes demand at the back end of the curve should remain consistent—particularly given the relatively high level of rates compared to past years—based on the rolling series of crises that continue to emerge but have yet to produce the more-feared outcomes.

With the pace of central bank tightening expected to dramatically downshift in the quarters ahead, and given PGIM Fixed Income’s expectation for interest rate volatility to continue to decline, spreads should remain range bound or, more likely, narrow in the months ahead, boosting fixed income returns. The combination of increased income and the potential for capital appreciation creates an attractive total return profile for those with longer-term time horizons, in PGIM Fixed Income’s view.

PGIM Fixed Income maintains its positive view of the spread sectors over the medium to long term, and the Fund is overweight investment-grade corporates and securitized products (CLOs, CMBS, ABS). The Fund continues to hold a significant underweight to US Treasuries in favor of more attractive opportunities across spread sectors.

Net Asset Value (NAV)

Market Price*

Bloomberg US Aggregate Bond Index

Credit Quality expressed as a percentage of total investments as of 8/31/23 (%)

AAA

AA

A

BBB

BB

B

CCC

Not Rated

Cash/Cash Equivalents

Total

Distributions and Yields as of 8/31/23

While there was no shortage of fear in the bond markets during the reporting period, which was largely marked by an overhang of uncertainty and economic negatives, the interest rate volatility, COVID-19-era supply/demand imbalances, and steep losses that predominated during the first half of the reporting period showed signs of dissipating in the second half.

Despite a series of rolling crises—including a string of regional bank failures, the debt ceiling debate, ongoing recession concerns, and still-high inflation—the US economy avoided the worst of potential outcomes, and fixed income returns skewed largely positive over the last six months of the reporting period.

Against the backdrop of historic lows in unemployment and still-high inflation, the US Federal Reserve (the Fed) continued its monetary tightening path, raising interest rates by an additional 300 basis points (bps) in a succession of rate hikes over the reporting period. (One basis point equals 0.01%.) Although the Fed raised interest rates by 25 bps and indicated that its inflation fight was not yet over at the July Federal Open Market Committee (FOMC) meeting, the main signal from the meeting was that the end of the rate-hiking cycle was likely close.

A sharply higher federal funds rate, coupled with macroeconomic uncertainty, led to enormous volatility being priced into developed market interest rates, with sharply higher front-end rates and lower long-dated yields. From –0.30% on August 31, 2022, the 10-year/2-year US Treasury spread declined to –0.76% at the end of the reporting period, while the 2-year US Treasury yield rose by 140 bps to end the reporting period at 4.85%.

Despite elevated volatility, US investment-grade corporate spreads tightened over the reporting period, as expectations for an economic hard landing moderated, and fundamentals remained solid. US high yield bonds posted gains over the reporting period amid limited new issuance, resilient economic data, and an ongoing supply deficit. Securitized credit spreads were mixed, with high-quality collateralized loan obligation (CLO) spreads tightening over the reporting period and commercial mortgage-backed securities (CMBS) spreads widening as the commercial real estate sector remained challenged. After posting steep losses in 2022, the emerging markets sector posted positive total returns, and spreads tightened through the first part of 2023 as headwinds turned to tailwinds. Meanwhile, agency mortgage-backed securities (MBS) underperformed versus US Treasuries over the reporting period, as elevated interest rate volatility weighed on the sector over the first half of the reporting period.

Overall sector allocation and security selection both contributed to the Fund’s performance during the reporting period. Within sector allocation, overweights relative to the Index to high yield, CLOs, and municipal bonds, along with an underweight relative to the Index to MBS, contributed the most.

Within security selection, selections in investment-grade corporates, CLOs, non-agency MBS, and emerging markets contributed the most.

Within credit, positioning in foreign non-corporates, banking, and building materials & home construction contributed to results.

In individual security selection, the Fund benefited from positioning in JP Morgan Chase &Co. (banking), UBS Group AG (banking), and the Republic of Serbia.

The Fund’s yield curve positioning, particularly in US rates, contributed to returns. (A yield curve is a line graph that illustrates the relationship between the yields and maturities of fixed income securities. It is created by plotting the yields of different maturities for the same type of bonds.)

While overall sector allocation contributed to the Fund’s performance during the reporting period, an underweight relative to the Index to investment-grade corporates detracted from returns.

While overall security selection contributed, selections in US Treasuries and MBS detracted.

Within credit, positioning in cable & satellite and media & entertainment detracted.

In individual security selection, the Fund’s positioning in CSC Holdings LLC (cable & satellite), Diamond Sports Group LLC (media & entertainment), and MPT Operating Partnership LP (REITS) detracted from performance.

The Fund’s duration positioning detracted from returns during the reporting period. (Duration measures the sensitivity of the price—the value of principal—of a bond to a change in interest rates.)

Although the rate-hike debate continues for the Fed, the increments of its hikes are getting smaller, and it declined to raise rates at all at its June 2023 FOMC meeting—signs that most of the increases are behind us and that the hikes to come will increasingly be “fine-tuning” exercises. With the prospect of balance returning to the

labor market, PGIM Fixed Income sees a path for core personal consumption expenditures to decelerate below 3.0% by the end of 2023, driven lower by core non-housing services prices.

Clear and sustained evidence of a downshift on inflation, coupled with below-trend growth, should be enough, in PGIM Fixed Income’s view, for the Fed to pause its rate-hike campaign at 5.5%, prior to initiating a 50–75 bps fine-tuning campaign of cuts as early as the fourth quarter of 2023.

PGIM Fixed Income sees the US yield curve remaining solidly inverted due to only marginal repricing at the front end. Meanwhile, PGIM Fixed Income believes demand at the back end of the curve should remain consistent—particularly given the relatively high level of rates compared to past years—based on the rolling series of crises that continue to emerge but have yet to produce the more-feared outcomes.

With the pace of central bank tightening expected to dramatically downshift in the quarters ahead, and given PGIM Fixed Income’s expectation for interest rate volatility to continue to decline, spreads should remain range bound or, more likely, narrow in the months ahead, boosting fixed income returns. The combination of increased income and the potential for capital appreciation creates an attractive total return profile for those with longer-term time horizons, in PGIM Fixed Income’s view.

PGIM Fixed Income maintains its positive view of the spread sectors over the medium to long term, and the Fund is overweight investment-grade corporates, high yield, securitized products (CLOs, CMBS), and emerging markets. The Fund holds a significant underweight to MBS and US Treasuries in favor of more attractive opportunities across spread sectors.

Net Asset Value (NAV)

Market Price*

Credit Suisse Leveraged Loan Index

Credit Quality expressed as a percentage of total investments as of 8/31/23 (%)

AAA

AA

A

BBB

BB

B

CCC

Not Rated

Cash/Cash Equivalents

Total

Distributions and Yields as of 8/31/23

US leveraged loans posted positive total returns over the reporting period amid rising short-term interest rates, robust collateralized loan obligation (CLO) demand, negligible net new supply, and resilient economic data.

Most of the Index’s gains during the reporting period were driven by interest income. By quality, CCC-rated loans outperformed both B-rated loans and BB-rated loans, as investors reached down the ratings spectrum in search of yield.

Despite sizeable outflows from bank loan mutual funds and ETFs as well as significant intra-quarter volatility, an improved growth outlook, better-than-expected earnings, and a decline in interest rate volatility in the latter part of the reporting period drove loan prices higher. The average price of all loans in the Index began the reporting period at $94.19, declining to a 12-month low of $91.58 in the fourth quarter of 2022 before ending the reporting period at $94.54.

Shifting monetary policy expectations, combined with a series of crises—including a string of regional bank failures and the debt ceiling debate—resulted in sizeable outflows from bank loan mutual funds and ETFs throughout much of the reporting period. Following a stretch of 15 consecutive monthly outflows totaling $56.7 billion, loan funds saw a $215 million inflow in August 2023. Meanwhile, CLO formation in 2023 slowed from the pace in 2022 but showed signs of accelerating in August 2023.

While gross loan issuance remained relatively stable, net new supply declined sharply. Through the first eight months of 2023, leveraged loan issuance totaled $199.8 billion, up 1.7% from the year-earlier period, while net new supply totaled $41.9 billion, down 69.6% from the year-earlier period.

Meanwhile, average spreads ended the reporting period at 556 basis points (bps), down from 564 bps at the beginning of the reporting period; and average yields rose to approximately 9.9% at the end of the reporting period from approximately 9.2% at the beginning of the reporting period, as the impact of rising interest rates contributed to higher all-in coupons. (One basis point equals 0.01%.)

Despite broad market volatility, solid credit fundamentals and a lack of near-term maturities continued to keep default rates below the long-term average of 3.1%. The par-weighted loan default rate, including distressed exchanges, ended the reporting period at 2.92%, up 156 bps from August 2022.

Overall, security selection was the largest contributor to the Fund’s performance during the reporting period, with selections in banking, technology, and telecom contributing the most.

From a single-name credit perspective, positioning in JP Morgan Chase & Co. (banking), Lumen Technologies Inc. (telecom), and Cinemark USA Inc. (gaming, lodging & leisure) added value.

While overall sector allocation detracted, underweights relative to the Index to healthcare & pharmaceuticals and technology, along with overweights relative to the Index to electric utilities and paper & packaging, contributed to performance.

Overall, sector allocation detracted from the Fund’s performance during the reporting period. Overweights relative to the Index to banking and telecom, along with an underweight relative to the Index to finance & insurance, were the largest detractors.

While overall security selection contributed to performance, selections in media & entertainment, electric utilities, and paper & packaging detracted.

US Bancorp (banking), City Brewing Company LLC (consumer non-cyclical), and Sound Inpatient Physicians Holdings LLC (healthcare & pharmaceuticals) were the largest single-name detractors from performance.

The average market risk of the Fund was lower than that of the Index over the reporting period, which also detracted from performance.

With its outlook tempered by recession risk, and against the backdrop of strong total returns so far this year, PGIM Fixed Income recently boosted its 2023 total return forecast to 8.75% from a range of 6% to 6.5%, supported by high all-in current coupons of approximately 8.9% and a yield-to-maturity of over 10%.

Ratings downgrades have started to pick up, and PGIM Fixed Income expects ratings agencies to downgrade credits more quickly than they upgrade them going forward. Given that the loan market is of lower quality than in prior cycles, with sponsor-owned low single-B-rated loans comprising a large portion of the overall market and the expectation that the rising cost of capital will reduce free cash flow, PGIM Fixed Income expects loan default rates to rise to a range of 4% to 4.5% by year-end 2023.

Given the macroeconomic concerns, PGIM Fixed Income favors public BB-rated and high single-B-rated loans over sponsor-owned, low single-B-rated and CCC-rated loans, as those lower-quality loans are expected to be most impacted by the more challenging fundamental backdrop. Credit selection and deep, fundamental credit research/modeling is becoming increasingly important, and the avoidance of defaults is expected to be the biggest driver of alpha over the next 12 to 24 months.

 Total Returns as of 8/31/23* 

 Since Inception (%) 

 Net Asset Value (NAV)

 Market Price**

 JP Morgan CLOIE AAA Index

Credit Quality expressed as a percentage of total investments as of 8/31/23 (%)

AAA

Cash/Cash Equivalents

Total

Distributions and Yields as of 8/31/23

The overhang of uncertainty and economic negatives, interest rate volatility, and COVID-19-era supply/demand imbalances that prevailed through the first part of 2023 showed signs of dissipating during the reporting period.

US Treasuries sold off during the reporting period, and the yield curve steepened following a slew of encouraging economic news, including strong economic growth, a resilient labor market, and declining inflation. (A yield curve is a line graph that illustrates the relationship between the yields and maturities of fixed income securities. It is created by plotting the yields of different maturities for the same type of bonds.) US 10-year Treasury yields rose 34 basis points (bps) over the reporting period while US 2-year Treasury yields rose 11 bps, and the 2-year/10-year curve steepened to –0.76%. (One basis point equals 0.01%.)

Although the US Federal Reserve (the Fed) raised interest rates by 25 bps during the reporting period and indicated that its inflation fight was not yet over at the July 2023 Federal Open Market Committee (FOMC) meeting, the main signal from the meeting was that the end of the rate-hiking cycle was likely close.

Amid a generally more constructive tone in spread markets, PGIM Fixed Income saw a shift by investors to put money to work in floating rate products—specifically collateralized loan obligations (CLOs)—as the Fed signaled rates would remain higher for longer. Thus, CLO spreads remained resilient over the reporting period, with AAA-rated CLO spreads tightening approximately 10 bps since the Fund’s inception.

Since the Fund’s inception, PGIM Fixed Income looked to capitalize on price appreciation throughout the rally. Thus, sourcing lower-dollar-priced AAA-rated tranches contributed to performance during the reporting period as prices rallied.

Additionally, PGIM Fixed Income looked to source a mix of assets in both the primary and secondary markets to balance the carry/convexity component of the Fund’s portfolio. (“Carry” is the coupon income received on a bond. “Convexity” measures the sensitivity of a bond’s duration to changes in yield.)

Ramping up of the Fund’s portfolio detracted 7 bps of excess returns over the reporting period due to wide bid/ask spreads.

Although the broader CLO market rallied throughout the reporting period, manager tiering (whereby the tranches of certain managers rallied more than others) was

PGIM Fixed Income opportunistically looked to cover the secondary AAA-rated short positioning in the primary market. Thus, as CLOs rallied during the Fund’s ramp-up period, those tranches marginally contributed to the Index’s performance.

Although the rate-hike debate continues for the Fed, the increments of its hikes are getting smaller—signs that most of the increases are behind us and that any hikes to come are likely to be “fine-tuning” exercises. With the prospect of balance returning to the labor market, PGIM Fixed Income sees a path for core personal consumption expenditures to decelerate below 3% by the end of 2023, driven lower by core non-housing services prices.

Clear and sustained evidence of a downshift in inflation, coupled with below-trend growth, should be enough, in PGIM Fixed Income’s view, for the Fed to pause its rate-hike campaign at 5.5% prior to initiating a 50 to 75 bps “fine-tuning” campaign of cuts as early as the fourth quarter of 2023.

PGIM Fixed Income believes senior CLO tranches remain attractive versus a variety of fixed income alternatives, including mezzanine tranches, on the basis of their high Sharpe ratios, favorable drawdown history, and robust structural protections. (A Sharpe ratio is a measure of risk-adjusted performance.)

Despite the general trend tighter over the past couple of months, PGIM Fixed Income remains opportunistic in the United States, as potential macroeconomic volatility still exists and deteriorating credit fundamentals on company bottom lines weigh on CLO valuations.

PGIM Fixed Income continues to favor high-quality bonds, which typically exhibit lower sensitivity to the underlying collateral. While underlying bank loans have been technically supported by low loan supply and strong demand, PGIM Fixed Income expects further deterioration in credit fundamentals, supporting its up-in-quality bias.

 Total Returns as of 8/31/23* 

 Since Inception (%) 

 Net Asset Value (NAV)

 Market Price**

 Bloomberg US Government/Credit 1-3 Year Index

Credit Quality expressed as a percentage of total investments as of 8/31/23 (%)

AAA

AA

A

BBB

BB

B

CCC

Cash/Cash Equivalents

Total

Distributions and Yields as of 8/31/23

The overhang of uncertainty and economic negatives, interest rate volatility, and COVID-19-era supply/demand imbalances that prevailed through the first part of 2023 showed signs of dissipating during the reporting period.

US Treasuries sold off during the reporting period, and the yield curve steepened following a slew of encouraging economic news, including strong economic growth, a resilient labor market, and declining inflation. (A yield curve is a line graph that illustrates the relationship between the yields and maturities of fixed income securities. It is created by plotting the yields of different maturities for the same type of bonds.) US 10-year Treasury yields rose 34 basis points (bps) over the reporting period while US 2-year Treasury yields rose 11 bps, and the 2-year/10-year curve steepened to –0.76%. (One basis point equals 0.01%.)

Although the US Federal Reserve (the Fed) raised interest rates by 25 bps during the reporting period and indicated that its inflation fight was not yet over at the July 2023 Federal Open Market Committee (FOMC) meeting, the main signal from the meeting was that the end of the rate-hiking cycle was likely close.

Amid a generally constructive tone in spread markets, US investment-grade corporate spreads tightened over the reporting period, as expectations for an economic hard landing moderated and fundamentals remained solid. Securitized credit spreads tightened, with high-quality collateralized loan obligation (CLO) and commercial mortgage-backed securities (CMBS) spreads both tightening. After posting steep losses in 2022, the emerging markets sector posted positive total returns, and spreads tightened throughout the reporting period.

Overall sector allocation and security selection both contributed to the Fund’s performance over the reporting period. Within sector allocation, overweights relative to the Index to high yield, CLOs, and investment-grade corporates contributed the most.

Within security selection, selections in CLOs, investment-grade corporates, and CMBS contributed the most.

Within credit, positioning in healthcare & pharmaceuticals, cable & satellite, and midstream energy contributed to results.

In individual security selection, the Fund benefited from positioning in Dish Network Corp. (cable & satellite), LifePoint Health Inc. (healthcare & pharmaceuticals), and Energy Transfer LP (midstream energy).

The Fund’s duration positioning was a positive contributor over the period, as US Treasury yields rose and the curve steepened. (Duration measures the sensitivity of the price—the value of principal—of a bond to a change in interest rates.)

While overall security selection contributed to the Fund’s performance during the reporting period, selections in high yield detracted.

Within credit, positioning in automotive and building materials & home construction detracted.

In individual security selection, the Fund’s positioning in Ford Motor Co. (automotive), Nexi S.p.A (technology), and Ziggo Bond Company BV (cable & satellite) detracted from performance.

The Fund’s yield curve positioning detracted from performance.

Although the rate-hike debate continues for the Fed, the increments of its hikes are getting smaller, and it declined to raise rates at all at its June 2023 FOMC meeting—signs that most of the increases are behind us and that the hikes to come will increasingly be “fine-tuning” exercises. With the prospect of balance returning to the labor market, PGIM Fixed Income sees a path for core personal consumption expenditures to decelerate below 3% by the end of 2023, driven lower by core non-housing services prices.

Clear and sustained evidence of a downshift in inflation, coupled with below-trend growth, should be enough, in PGIM Fixed Income’s view, for the Fed to pause its rate-hike campaign at 5.5% prior to initiating a 50 to 75 bps “fine-tuning” campaign of cuts as early as the fourth quarter of 2023.

PGIM Fixed Income sees the US yield curve remaining solidly inverted due to only marginal repricing at the front end. Meanwhile, it believes demand at the back end of the curve should remain consistent—particularly given the relatively high level of rates compared to past years—based on the rolling series of crises that continue to emerge but have yet to produce the more-feared outcomes.

With the pace of central bank tightening expected to dramatically downshift in the quarters ahead, and given PGIM Fixed Income’s expectation for interest rate volatility to continue to decline, spreads should remain range bound or, more likely, narrow in

PGIM Fixed Income maintains its positive view of spread sectors over the medium to long term. The Fund holds a significant underweight to US Treasuries in favor of more attractive opportunities across spread sectors.

PGIM Active High Yield

Bond ETF

Beginning

Account Value

March 1, 2023

PGIM Active

Aggregate Bond ETF

Beginning

Account Value

March 1, 2023

PGIM Total Return

Bond ETF

Beginning

Account Value

March 1, 2023

PGIM Floating Rate

Income ETF

Beginning

Account Value

March 1, 2023

Beginning

Account Value

March 1, 2023

PGIM Short Duration

Multi-Sector Bond ETF

Beginning

Account Value

March 1, 2023

LONG-TERM INVESTMENTS 72.2%

ASSET-BACKED SECURITIES 20.1%

Automobiles 2.8%

Americredit Automobile Receivables Trust,
Series 2023-01, Class A2A

ARI Fleet Lease Trust,
Series 2022-A, Class A2, 144A

Avis Budget Rental Car Funding AESOP LLC,
Series 2022-03A, Class A, 144A

Donlen Fleet Lease Funding LLC,
Series 2021-02, Class A2, 144A

Enterprise Fleet Financing LLC,
Series 2021-02, Class A2, 144A

Series 2022-01, Class A2, 144A

Series 2022-03, Class A2, 144A

Series 2023-01, Class A2, 144A

Series 2023-02, Class A2, 144A

Ford Credit Floorplan Master Owner Trust A,
Series 2023-01, Class A1, 144A

GM Financial Consumer Automobile Receivables Trust,
Series 2022-02, Class A2

Hertz Vehicle Financing III LLC,
Series 2023-03A, Class A, 144A

OneMain Direct Auto Receivables Trust,
Series 2023-01A, Class A, 144A

World Omni Automobile Lease Securitization Trust,
Series 2022-A, Class A2

Collateralized Loan Obligations 16.3%

Allegro CLO Ltd. (Cayman Islands),
Series 2016-01A, Class AR2, 144A, 3 Month SOFR + 1.212% (Cap N/A, Floor 0.950%)

Anchorage Capital CLO Ltd. (Cayman Islands),
Series 2015-07A, Class AR2, 144A, 3 Month SOFR + 1.352% (Cap N/A, Floor 1.090%)

Ares CLO Ltd. (Cayman Islands),
Series 2016-40A, Class A1RR, 144A, 3 Month SOFR + 1.132% (Cap N/A, Floor 0.870%)

Series 2018-50A, Class AR, 144A, 3 Month SOFR + 1.312% (Cap N/A, Floor 1.050%)

ASSET-BACKED SECURITIES (Continued)

Collateralized Loan Obligations (cont’d.)

Atlas Senior Loan Fund Ltd. (Cayman Islands),
Series 2013-01A, Class AR, 144A, 3 Month SOFR + 1.092% (Cap N/A, Floor 0.000%)

Bain Capital Credit CLO Ltd. (Cayman Islands),
Series 2018-01A, Class A1, 144A, 3 Month LIBOR + 0.960% (Cap N/A, Floor 0.000%)

Series 2019-02A, Class AR, 144A, 3 Month LIBOR + 1.100% (Cap N/A, Floor 1.100%)

Series 2020-05A, Class A1, 144A, 3 Month SOFR + 1.482% (Cap N/A, Floor 1.482%)

Ballyrock CLO Ltd. (Cayman Islands),
Series 2020-02A, Class A1R, 144A, 3 Month SOFR + 1.272% (Cap N/A, Floor 1.010%)

Battalion CLO Ltd. (Cayman Islands),
Series 2018-12A, Class A1, 144A, 3 Month SOFR + 1.332% (Cap N/A, Floor 1.070%)

Benefit Street Partners CLO Ltd. (Cayman Islands),
Series 2013-IIA, Class A1R2, 144A, 3 Month SOFR + 1.132% (Cap N/A, Floor 1.132%)

Series 2017-12A, Class A1R, 144A, 3 Month SOFR + 1.212% (Cap N/A, Floor 0.950%)

BlueMountain CLO Ltd. (Cayman Islands),
Series 2018-22A, Class A1, 144A, 3 Month SOFR + 1.342% (Cap N/A, Floor 0.000%)

Canyon Capital CLO Ltd. (Cayman Islands),
Series 2016-01A, Class AR, 144A, 3 Month SOFR + 1.332% (Cap N/A, Floor 0.000%)

Series 2017-01A, Class AR, 144A, 3 Month SOFR + 1.262% (Cap N/A, Floor 1.000%)

Series 2019-01A, Class A1R, 144A, 3 Month SOFR + 1.362% (Cap N/A, Floor 1.100%)

Carlyle CLO Ltd. (Cayman Islands),
Series C17A, Class A1AR, 144A, 3 Month SOFR + 1.292% (Cap N/A, Floor 0.000%)

Carlyle Global Market Strategies CLO Ltd. (Cayman Islands),
Series 2014-01A, Class A1R2, 144A, 3 Month SOFR + 1.232% (Cap N/A, Floor 0.970%)

Series 2015-05A, Class A1RR, 144A, 3 Month SOFR + 1.342% (Cap N/A, Floor 1.080%)

ASSET-BACKED SECURITIES (Continued)

Collateralized Loan Obligations (cont’d.)

Carlyle US CLO Ltd. (Cayman Islands),
Series 2017-01A, Class A1R, 144A, 3 Month SOFR + 1.262% (Cap N/A, Floor 1.000%)

Series 2018-01A, Class A1, 144A, 3 Month SOFR + 1.282% (Cap N/A, Floor 0.000%)

CarVal CLO Ltd. (Cayman Islands),
Series 2019-01A, Class ANR, 144A, 3 Month SOFR + 1.372% (Cap N/A, Floor 1.372%)

CIFC Funding Ltd. (Cayman Islands),
Series 2013-03RA, Class A1, 144A, 3 Month SOFR + 1.242% (Cap N/A, Floor 0.980%)

Series 2017-01A, Class AR, 144A, 3 Month SOFR + 1.272% (Cap N/A, Floor 1.010%)

Series 2017-04A, Class A1R, 144A, 3 Month SOFR + 1.212% (Cap N/A, Floor 0.950%)

Crestline Denali CLO Ltd. (Cayman Islands),
Series 2018-01A, Class AR, 144A, 3 Month SOFR + 1.322% (Cap N/A, Floor 1.060%)

Elevation CLO Ltd. (Cayman Islands),
Series 2014-02A, Class A1R, 144A, 3 Month SOFR + 1.492% (Cap N/A, Floor 0.000%)

Ellington CLO Ltd. (Cayman Islands),
Series 2019-04A, Class AR, 144A, 3 Month SOFR + 1.842% (Cap N/A, Floor 1.580%)

Generate CLO Ltd. (Cayman Islands),
Series 02A, Class AR, 144A, 3 Month SOFR + 1.412% (Cap N/A, Floor 1.150%)

Greywolf CLO Ltd. (Cayman Islands),
Series 2018-02A, Class A1, 144A, 3 Month SOFR + 1.440% (Cap N/A, Floor 1.440%)

HPS Loan Management Ltd. (Cayman Islands),
Series 11A-17, Class AR, 144A, 3 Month SOFR + 1.282% (Cap N/A, Floor 1.020%)

ICG US CLO Ltd. (Cayman Islands),
Series 2014-03A, Class A1RR, 144A, 3 Month SOFR + 1.292% (Cap N/A, Floor 0.000%)

JMP Credit Advisors CLO Ltd. (Cayman Islands),
Series 2017-01A, Class AR, 144A, 3 Month SOFR + 1.542% (Cap N/A, Floor 1.280%)

ASSET-BACKED SECURITIES (Continued)

Collateralized Loan Obligations (cont’d.)

KKR CLO Ltd. (Cayman Islands),
Series 11, Class AR, 144A, 3 Month SOFR + 1.442% (Cap N/A, Floor 1.442%)

Series 18, Class AR, 144A, 3 Month SOFR + 1.202% (Cap N/A, Floor 0.940%)

KKR CLO Ltd.,
Series 30A, Class A1R, 144A, 3 Month SOFR + 1.282% (Cap N/A, Floor 1.020%)

Madison Park Funding Ltd. (Cayman Islands), Series 12A, Class AR, 144A, 3 Month SOFR + 1.092% (Cap N/A, Floor 0.000%)

Series 2015-18A, Class ARR, 144A, 3 Month SOFR + 1.202% (Cap N/A, Floor 0.940%)

Series 2019-34A, Class AR, 144A, 3 Month SOFR + 1.382% (Cap N/A, Floor 1.120%)

Series 2021-38A, Class X, 144A, 3 Month SOFR + 1.212% (Cap N/A, Floor 1.212%)

MidOcean Credit CLO (Cayman Islands),
Series 2017-07A, Class A1R, 144A, 3 Month SOFR + 1.302% (Cap N/A, Floor 0.000%)

Series 2018-09A, Class A1, 144A, 3 Month SOFR + 1.412% (Cap N/A, Floor 1.150%)

Mountain View CLO Ltd. (Cayman Islands),
Series 2013-01A, Class ARR, 144A, 3 Month SOFR + 1.262% (Cap N/A, Floor 1.000%)

Nassau Ltd. (United Kingdom),
Series 2022-01A, Class A1, 144A, 3 Month SOFR + 2.130% (Cap N/A, Floor 2.130%)

Oaktree CLO Ltd. (Cayman Islands),
Series 2019-01A, Class A1R, 144A, 3 Month SOFR + 1.372% (Cap N/A, Floor 1.110%)

Ocean Trails CLO (Cayman Islands),
Series 2019-07A, Class AR, 144A, 3 Month SOFR + 1.272% (Cap N/A, Floor 1.010%)

Octagon Investment Partners 49 Ltd. (Cayman Islands),
Series 2020-05A, Class A1, 144A, 3 Month SOFR + 1.482% (Cap N/A, Floor 1.220%)

OZLM Ltd. (Cayman Islands),
Series 2014-06A, Class A1S, 144A, 3 Month SOFR + 1.342% (Cap N/A, Floor 0.000%)

ASSET-BACKED SECURITIES (Continued)

Collateralized Loan Obligations (cont’d.)

OZLM Ltd. (Cayman Islands), (cont’d.)
Series 2014-09A, Class A1A3, 144A, 3 Month SOFR + 1.362% (Cap N/A, Floor 1.100%)

Palmer Square CLO Ltd. (Cayman Islands),
Series 2014-01A, Class A1R2, 144A, 3 Month SOFR + 1.392% (Cap N/A, Floor 1.130%)

Series 2015-02A, Class A1R2, 144A, 3 Month SOFR + 1.362% (Cap N/A, Floor 0.000%)

Palmer Square Loan Funding Ltd. (Cayman Islands),
Series 2021-03A, Class A1, 144A, 3 Month SOFR + 1.062% (Cap N/A, Floor 1.062%)

Series 2021-04A, Class A1, 144A, 3 Month SOFR + 1.062% (Cap N/A, Floor 1.062%)

Series 2022-03A, Class A1A, 144A, 3 Month SOFR + 1.820% (Cap N/A, Floor 1.820%)

Park Avenue Institutional Advisers CLO Ltd. (Cayman Islands),
Series 2018-01A, Class A1AR, 144A, 3 Month SOFR + 1.262% (Cap N/A, Floor 1.000%)

PPM CLO Ltd. (Cayman Islands),
Series 2018-01A, Class A, 144A, 3 Month SOFR + 1.412% (Cap N/A, Floor 0.000%)

Race Point CLO Ltd. (Cayman Islands),
Series 2013-08A, Class AR2, 144A, 3 Month SOFR + 1.302% (Cap N/A, Floor 1.040%)

Rockford Tower CLO Ltd. (Cayman Islands),
Series 2017-03A, Class A, 144A, 3 Month SOFR + 1.452% (Cap N/A, Floor 0.000%)

Rockford Tower CLO Ltd.,
Series 2017-02A, Class AR, 144A, 3 Month SOFR + 1.282% (Cap N/A, Floor 1.020%)

Romark WM-R Ltd. (Cayman Islands),
Series 2018-01A, Class A1, 144A, 3 Month SOFR + 1.292% (Cap N/A, Floor 0.000%)

Shackleton CLO Ltd. (Cayman Islands),
Series 2014-05RA, Class A, 144A, 3 Month SOFR + 1.362% (Cap N/A, Floor 0.262%)

Sound Point CLO Ltd. (Cayman Islands),
Series 2014-03RA, Class A1R, 144A, 3 Month SOFR + 1.332% (Cap N/A, Floor 1.070%)

ASSET-BACKED SECURITIES (Continued)

Collateralized Loan Obligations (cont’d.)

Sound Point CLO Ltd. (Cayman Islands), (cont’d.)

Series 2017-03A, Class A1R, 144A, 3 Month SOFR + 1.242% (Cap N/A, Floor 0.980%)

Series 2019-01A, Class AR, 144A, 3 Month SOFR + 1.342% (Cap N/A, Floor 1.080%)

Tikehau US CLO Ltd. (Bermuda),

Series 2022-02A, Class A1, 144A, 3 Month SOFR + 2.390% (Cap N/A, Floor 2.390%)

Trinitas CLO Ltd. (Cayman Islands),

Series 2016-04A, Class A1L2, 144A, 3 Month SOFR + 1.362% (Cap N/A, Floor 1.100%)

Series 2016-05A, Class ARR, 144A, 3 Month SOFR + 1.292% (Cap N/A, Floor 1.030%)

Venture CLO Ltd. (Cayman Islands),

Series 2016-24A, Class ARR, 144A, 3 Month SOFR + 1.162% (Cap N/A, Floor 0.900%)

Voya CLO Ltd. (Cayman Islands),

Series 2013-02A, Class A1R, 144A, 3 Month SOFR + 1.232% (Cap N/A, Floor 0.970%)

Series 2013-03A, Class A1RR, 144A, 3 Month SOFR + 1.411% (Cap N/A, Floor 1.150%)

Series 2014-01A, Class AAR2, 144A, 3 Month SOFR + 1.252% (Cap N/A, Floor 0.000%)

Series 2014-02A, Class A1RR, 144A, 3 Month SOFR + 1.282% (Cap N/A, Floor 1.020%)

Series 2016-01A, Class A1R, 144A, 3 Month SOFR + 1.332% (Cap N/A, Floor 1.070%)

Wellfleet CLO Ltd. (Cayman Islands),

Series 2016-02A, Class A1R, 144A, 3 Month SOFR + 1.402% (Cap N/A, Floor 1.140%)

Series 2017-02A, Class A1R, 144A, 3 Month SOFR + 1.322% (Cap N/A, Floor 0.000%)