PGIM
JENNISON FOCUSED VALUE ETF
PROSPECTUS
— December 12, 2022
INVESTMENT
OBJECTIVE
Long-term
growth of capital.
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PGIM
JENNISON FOCUSED VALUE ETF | ||||||||
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Ticker
Symbol: PJFV |
Listing
Exchange: NYSE Arca, Inc. |
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The
Securities and Exchange Commission
(“SEC”)
has not approved or disapproved the
Fund's
shares, nor has the SEC determined
that
this prospectus is complete or accurate.
It
is a criminal offense to state otherwise. Exchange
traded 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, the
Prudential
logo and the Rock symbol are
service
marks of Prudential Financial, Inc.
and
its related entities, registered in many
jurisdictions
worldwide. |
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To
enroll in e-delivery, go to pgim.com/investments/resource/edelivery
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Management
fee |
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Distribution
and service (12b-1) fees |
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Other
expenses |
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Total
annual Fund operating expenses |
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Number
of Years You Own Shares |
1
Year |
3
Years |
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$ |
$ |
Visit our website
at www.pgim.com/investments
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PGIM JENNISON
FOCUSED VALUE ETF
Visit our website
at www.pgim.com/investments
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PGIM JENNISON
FOCUSED VALUE ETF
Visit our website
at www.pgim.com/investments
7
MANAGEMENT
OF THE FUND
The following
individuals are jointly and primarily responsible for the day-to-day management
of the Fund.
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Investment
Manager |
Subadviser |
Portfolio
Managers |
Title |
Service
Date |
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PGIM
Investments LLC |
Jennison
Associates LLC |
Warren
N. Koontz, Jr.,
CFA |
Managing
Director |
December
2022 |
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Joseph
C. Esposito,
CFA |
Managing
Director |
December
2022 |
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Jason
T. McManus |
Managing
Director |
December
2022 |
BUYING
AND SELLING FUND SHARES
Individual shares
of the Fund may only be purchased and sold in secondary market transactions
through brokers or other financial intermediaries at market prices and are not
individually redeemable by the ETF. Shares of the Fund are listed for trading on
the Exchange, and because the shares of the Fund trade at market prices rather
than NAV, shares of the Fund may trade at a price greater than NAV (a “premium”)
or less than NAV (a “discount”). You may incur costs attributable to the
difference between the highest price a buyer is willing to pay to purchase
shares of the Fund (“bid”) and the lowest price a seller is willing to accept
for shares of the Fund (“ask”) when buying or selling shares in the secondary
market (the “bid-ask spread”).
TAX
INFORMATION
Dividends,
Capital Gains and Taxes. The Fund's
dividends and distributions are taxable and will be taxed as ordinary income or
capital gains, unless you are investing through a tax-deferred arrangement, such
as a 401(k) plan or an individual retirement account. Such tax-deferred
arrangements may be taxed later upon withdrawal of monies from those
arrangements.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIaries
If you purchase
shares of the Fund through a broker-dealer or other financial intermediary (such
as a bank), PGIM or other related companies may pay the intermediary for
marketing activities and presentations, educational training programs,
conferences, the development of technology platforms and reporting systems or
other services related to the sale or promotion of the Fund. These payments may
create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the Fund over another investment.
Ask your salesperson or visit your financial intermediary’s website for more
information.
8
PGIM JENNISON
FOCUSED VALUE ETF
MORE ABOUT THE
FUND'S PRINCIPAL AND NON-PRINCIPAL INVESTMENT STRATEGIES, INVESTMENTS AND
RISKS
INVESTMENT
STRATEGIES AND INVESTMENTS
The Fund's
investment objective is long-term
growth of capital. The Fund invests,
under normal market conditions, at least 80% of its investable assets in equity
and equity-related securities. The Fund follows a value investment style to
select equities of approximately 25 to 40 issuers. The Fund seeks to achieve its
investment objective by investing, under normal circumstances, in companies that
it believes are undervalued compared to their perceived worth (“value
companies”). The Fund may invest in companies of any market capitalization.
Under normal market conditions, the Fund is expected to invest predominantly in
large capitalization companies, which are companies with market capitalizations
(measured at the time of purchase) of $1 billion or more and are selected by the
subadviser using a combination of fundamental research and systematic portfolio
construction. The Fund is an actively managed exchange-traded fund (“ETF”) and,
thus, does not seek to replicate the performance of a specified
index.
The term
“investable assets” refers to the Fund’s net assets plus any borrowings for
investment purposes. The Fund’s investable assets will be less than its total
assets to the extent that it has borrowed money for non-investment purposes,
such as to meet anticipated redemptions.
The Fund’s subadviser selects
investments for the Fund using a proprietary combination of bottom-up
fundamental research and systematic portfolio construction to build a portfolio
of high-conviction stocks reflecting the views of the subadivser.
High-conviction stocks reflect those stocks that the subadviser believes are
strong investments and the subadviser may allocate and rotate portfolio assets
more heavily toward those stocks it believes are stronger investments. The
subadviser will actively manage the Fund and will seek to invest in companies
that it believes will provide investment returns above those of the Russell 1000
Value Index. As a result of these processes, the subadviser seeks to construct a
portfolio of companies that have one or more of the following characteristics –
attractive valuation metrics that are unique to that business, high levels of
durability and viability of the business, good business models that are being
mispriced, high returns on assets and/or equity, high free cash flow yields,
management teams that are willing to make changes, and/or something
operationally wrong that can be fixed or is temporary. Valuation metrics are
ratios or data-points that can help provide guidance as to the value of a
company and common valuation metrics that the subadviser may use among others
are price to earnings, price to free-cash-flow, price to book, price to
operating earnings, price to revenues, and price to dividend yield ratios.
The subadviser
employs a systematic portfolio optimization process that seeks to manage overall
investment risk exposures and characteristics in order to manage liquidity
considerations and maintain consistency with the Fund’s objective.
In addition to common stocks,
nonconvertible preferred stocks and convertible securities, equity-related
securities in which the Fund invests include American Depositary Receipts
(“ADRs”); warrants and rights that can be exercised to obtain stock or other
eligible investments; investments in various types of business ventures,
including partnerships and joint ventures; securities of real estate investment
trusts (“REITs”) and similar securities. Convertible securities are
securities—like bonds, corporate notes and preferred stocks—that the Fund can
convert into the company's common stock, the cash value of common stock or some
other equity security. The Fund may invest up to 35% of its investable assets in
foreign securities.
The Fund engages in
active trading—that is, frequent trading of its securities—in order to take
advantage of new investment opportunities.
The
Fund’s investment objective is not a fundamental policy, and therefore may be
changed by the Board without shareholder approval.
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9
Foreign
Securities
The Fund may invest in securities
of non-U.S. issuers, or foreign securities, including stocks and other
equity-related securities, money market instruments and other fixed income
securities of foreign issuers. Foreign securities may include securities from
emerging market issuers.
Fixed
Income Obligations
Fixed income
obligations include bonds and notes. Notes are typically issued with two-,
three-, five- or ten-year terms to maturity, whereas bonds may be longer-term
investments issued with terms to maturity of 10 years or more. The Fund may
invest in investment-grade corporate or government obligations. Investment-grade
obligations are rated in one of the top four long-term quality ratings by a
major rating service (such as Baa or better by Moody's Investors Service, Inc.
or BBB or better by S&P Global Ratings). The Fund also may invest in high
yield debt obligations that at the time of investment are rated below investment
grade by a nationally recognized statistical rating organization (“junk bonds”)
or that are unrated but judged to be of comparable quality by the subadviser.
Junk bonds tend to offer higher yields, but also offer greater credit risks than
higher-rated securities.
U.S.
Government and Agency Securities
The Fund may invest
in securities issued or guaranteed by the U.S. Government or by an agency or
instrumentality of the U.S. Government. Some U.S. Government securities are
backed by the full faith and credit of the United States, which means that
payment of principal and interest is guaranteed but market value is
not.
Short
Sales
The Fund may make
short sales of a security. This means that the Fund may sell a security that it
does not own, which it may do, for example, when the subadviser thinks the value
of the security will decline. The Fund generally borrows the security to deliver
to the buyers in a short sale. The Fund must then replace the borrowed security
by purchasing it at the market price at the time of replacement. The Fund may
make short sales “against the box.” In a short sale against the box, at the time
of sale, the Fund owns or has the right to acquire the identical security at no
additional cost through conversion or exchange of other securities it
owns.
Real
Estate Investment Trusts
The Fund may invest
in the equity securities of real estate investment trusts known as REITs. REITs
are like corporations, except that they do not pay income taxes if they meet
certain Internal Revenue Code of 1986, as amended (the “Code”) requirements.
However, while REITs themselves do not pay income taxes, the distributions they
make to investors are taxable. REITs invest primarily in real estate and
distribute almost all of their income—most of which comes from rents, mortgages
and gains on sales of property—to shareholders.
Investments
in Affiliated and Unaffiliated Funds
The Fund may invest
its assets in affiliated or unaffiliated short-term bond funds and/or money
market funds. The affiliated funds are registered investment companies under the
Investment Company Act of 1940 (the “1940 Act”). The Fund can invest its free
cash balances in the funds to obtain income on short-term cash balances while
awaiting attractive investment opportunities, to provide liquidity in
preparation for anticipated redemptions or for defensive purposes. Such
investments could also allow the Fund to obtain the benefits of a more
diversified portfolio available in the funds than might otherwise be available
through direct investments in those asset classes, and will subject the Fund to
the risks associated with the particular asset class. The investment results of
the portions of the Fund's assets invested in the funds will be based on the
investment results of the funds.
Temporary
Defensive Investments
In response to
adverse market, economic or political conditions, the Fund may take a temporary
defensive position and invest up to 100% of its total assets in money market
instruments, including short-term obligations of, or securities guaranteed by,
the U.S. Government, its agencies or instrumentalities, or in high-quality
obligations of U.S. or non-U.S. banks and corporations, and may hold up to 100%
of its total assets in cash or cash equivalents. Although the subadviser has the
ability to take defensive positions, it may choose not to do so for a variety of
reasons, even during volatile market conditions. Investing heavily in these
securities is inconsistent with and limits the Fund's ability to achieve its
investment objective, but may help to preserve the Fund's assets.
10
PGIM JENNISON
FOCUSED VALUE ETF
Securities
Lending
Consistent with
applicable regulatory requirements, the Fund may lend portfolio securities with
a value up to 33 1∕3% of its total
assets to brokers, dealers and other financial organizations to earn additional
income. Loans of portfolio securities will be collateralized by cash. Cash
collateral will be invested in an affiliated prime money market
fund.
Other
Investments
In addition to the
strategies and securities discussed above, the Fund may use other strategies or
invest in other types of securities as described in the Statement of Additional
Information (“SAI”). The Fund might not use all of the strategies or invest in
all of the types of securities as described in the Prospectus or in the
SAI.
The table below
summarizes the investment limits applicable to the Fund’s principal investment
strategies and certain non-principal investment strategies.
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Principal
Strategies: Investment Limits |
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◾Equity
and equity-related securities: At least 80% of investable
assets ◾Foreign
Securities: Up to 35% of investable
assets |
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Certain
Non-Principal Strategies: Investment Limits |
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◾Short
Sales (excluding short sales against the box): Up to 25% of net
assets ◾Fixed-income
securities: Up to 20% of investable assets ◾U.S.
Government and agency securities: Up to 20% of investable
assets ◾Illiquid
Investments: Up to 15% of net
assets |
RISKS
OF INVESTING IN THE FUND
The order of the
below risk factors does not indicate the significance of any particular risk
factor.
Active
Trading Risk. The Fund actively
and frequently trades its portfolio securities. High portfolio turnover results
in higher transaction costs, which can affect the Fund’s performance and have
adverse tax consequences. In addition, high portfolio turnover may also mean
that a proportionately greater amount of distributions to shareholders will be
taxed as ordinary income rather than long-term capital gains compared to
investment companies with lower portfolio turnover.
Authorized
Participant Concentration Risk. Only an Authorized
Participant (as defined in “How to Buy and Sell Shares of the Fund” in the
Fund’s Prospectus) may engage in creation or redemption transactions directly
with the Fund. The Fund has a limited number of intermediaries that act as
Authorized Participants and none of these Authorized Participants is or will be
obligated to engage in creation or redemption transactions. To the extent that
these Authorized Participants exit the business or are unable to or choose not
to proceed with creation and/or redemption orders with respect to the Fund and
no other Authorized Participant creates or redeems, shares of the Fund may trade
at a substantial discount or premium to net asset value (“NAV”), may trade at
larger spreads, and possibly face trading halts and/or delisting.
Cash
Transactions Risk. Unlike certain
ETFs, the Fund may effect its creations and redemptions in cash or partially in
cash. As a result, an investment in the Fund may be less tax-efficient than an
investment in other ETFs. Other ETFs generally make in-kind redemptions and
avoid realizing gains in connection with transactions designed to raise cash to
meet redemption requests. If the Fund effects a portion of redemptions for cash,
it may be required to sell portfolio securities in order to obtain the cash
needed to distribute redemption proceeds, which involves transaction costs. If
the Fund recognizes gain on these sales, this generally will cause the Fund to
recognize gain it might not otherwise have recognized if it were to distribute
portfolio securities in-kind, or to recognize such gain sooner than would
otherwise be required. The Fund generally intends to distribute these gains to
shareholders to avoid being taxed on this gain at the Fund level and otherwise
comply with the special tax rules that apply to it. This strategy may cause
shareholders to be subject to tax on gains they would not otherwise be subject
to, or at an earlier date than, if they had made an investment in a different
ETF.
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11
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.
Cyber
Security Risk. Failures or
breaches of the electronic systems of the Fund, the Fund's manager, subadviser,
distributor, and other service providers, or the issuers of securities in which
the Fund invests have the ability to cause disruptions and negatively impact the
Fund's business operations, potentially resulting in financial losses to the
Fund and its shareholders. While the Fund has established business continuity
plans and risk management systems seeking to address system breaches or
failures, there are inherent limitations in such plans and systems. Furthermore,
the Fund cannot control the cyber security plans and systems of the Fund's
service providers or issuers of securities in which the Fund
invests.
Debt
Obligations Risk. Debt obligations
are subject to credit risk, market risk and interest rate risk. The Fund's
holdings, share price, yield and total return may also fluctuate in response to
bond market movements. The value of bonds may decline for issuer-related
reasons, including management performance, financial leverage and reduced demand
for the issuer’s goods and services. Certain types of fixed income obligations
also may be subject to “call
and redemption risk,”
which
is the risk that the issuer may call a bond held by the Fund for redemption
before it matures and the Fund may not be able to reinvest at the same rate of
interest and therefore would earn less income.
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, stabilize economic growth or the
functioning of the securities markets, or otherwise reduce inflation may at
times result in unusually high market volatility, which could negatively impact
performance. Governmental efforts to curb inflation often have negative effects
on the level of economic activity. Relatively reduced liquidity in credit and
fixed income markets could adversely affect issuers worldwide.
Equity
and Equity-Related Securities Risks. 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.
ETF
Shares Trading Risk. Fund shares are
listed for trading on NYSE Arca, Inc. (the “Exchange”) and the shares are bought
and sold in the secondary market at market prices. The market prices of the
shares of the Fund are expected to fluctuate in response to changes in the
Fund's NAV, the intraday value of the Fund's holdings and supply and demand for
shares of the Fund. We cannot predict whether shares of the Fund will trade
above, below or at their NAV. Trading on the Exchange, including trading of Fund
shares, may be halted in certain circumstances and shareholders may not be able
to sell Fund shares at the time or price desired. During periods of stressed
market conditions, the market for the shares of the Fund may become less liquid
in response to deteriorating liquidity in the markets for the Fund's portfolio
investments. This adverse effect on the liquidity of the Fund's shares could
lead to differences between the market price of the Fund's shares and the NAV of
those shares. There can be no assurance that the requirements of the Exchange to
maintain the listing of shares of the Fund will continue to be met. At times,
trading in the securities of ETFs has become volatile and unpredictable and the
price of ETF shares has diverged from market driven fundamentals.
Disruptions to
creations and redemptions, the existence of significant market volatility or
potential lack of an active trading market for the shares of the Fund (including
through a trading halt), as well as other factors, may result in the Fund's
shares trading on the Exchange significantly above (at a premium) or below (at a
discount) to NAV or to the intraday value of the Fund's holdings. Premiums and
discounts relate to differences between the market price and NAV of the Fund's
shares. During such periods, you may incur significant losses if you sell your
shares of the Fund. The securities held by the Fund may be traded in markets
that close at a different time than the Exchange and may trade outside of a
collateralized settlement system. Liquidity in those securities may be reduced
after the applicable closing
12
PGIM JENNISON
FOCUSED VALUE ETF
times. Accordingly,
during the time when the Exchange is open but after the applicable market
closing, fixing or settlement times, bid-ask spreads for the Fund's shares on
the Exchange and the corresponding premium or discount between the market price
for Fund shares and their NAV may widen. Additionally, during times when the
Exchange is open but after the applicable market is closed, there may be changes
between the last quote from the closed foreign market and the value of such
security during the Fund's trading day on the Exchange and this may lead to
differences between the market price of the Fund's shares and the underlying
value of those shares.
Cost of Buying
or Selling Shares.
When you buy or sell shares of the Fund through a broker, you will likely incur
a brokerage commission or other charges imposed by brokers. In addition, the
market price of shares of the Fund, like the price of any exchange-traded
security, includes a “bid-ask spread” charged by the market makers or other
participants that trade the particular security. The spread of the Fund's shares
varies over time based on the Fund's trading volume, the spread of the Fund's
underlying securities, and market liquidity and may increase if the Fund's
trading volume or market liquidity decreases, or if the spread on the Fund's
underlying securities increases. In times of severe
market disruption, including when trading of the Fund's holdings may be halted,
the bid-ask spread may increase significantly. This means that the shares may
trade at a discount to the Fund's NAV, and the discount is likely to be greatest
during significant market volatility.
No
Guarantee of Active Trading Market Risk. While shares of
the Fund are listed on the Exchange, there can be no assurance that active
trading markets for the shares will develop or be maintained by market makers or
by Authorized Participants. The distributor of the Fund's shares does not
maintain a secondary market in the shares.
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 for a variety of reasons.
Interest Rate
Risk. The value of
your investment may go down when interest rates rise. A rise in rates tends to
have a greater impact on the prices of longer term or duration debt securities.
Similarly, a rise in interest rates may also have a greater negative impact on
the value of equity securities whose issuers expect earnings further out in the
future. For example, a fixed income security with a duration of three years is
expected to decrease in value by approximately 3% if interest rates increase by
1%. This is referred to as “duration
risk.”
When interest rates
fall, the issuers of debt obligations may prepay principal more quickly than
expected, and the Fund may be required to reinvest the proceeds at a lower
interest rate. This is referred to as “prepayment
risk.” When interest
rates rise, debt obligations may be repaid more slowly than expected, and the
value of the Fund's holdings may fall sharply. This is referred to as
“extension
risk.” The Fund may lose money if
short-term or long-term interest rates rise sharply or in a manner not
anticipated by the subadviser.
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13
Junk
Bonds Risk. High-yield,
high-risk bonds have predominantly speculative characteristics, including
particularly high credit risk. Junk bonds tend to have lower market liquidity
than higher-rated securities. The liquidity of particular issuers or industries
within a particular investment category may shrink or disappear suddenly and
without warning. The non-investment grade bond market can experience sudden and
sharp price swings and become illiquid due to a variety of factors, including
changes in economic forecasts, stock market activity, large sustained sales by
major investors, a high profile default or a change in the market's
psychology.
Large
Capitalization Company Risk. Companies with
large market capitalizations go in and out of favor based on market and economic
conditions. Larger companies tend to be less volatile than companies with
smaller market capitalizations. In exchange for this potentially lower risk, the
Fund's value may not rise or fall as much as the value of funds that emphasize
companies with smaller market capitalizations.
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.
Certain of these
entities may use predetermined, nondiscretionary mathematical formulas in their
investment process that may result in large-scale asset flows into and out of
the Fund. These shareholders may also pledge or loan Fund shares (to secure
financing or otherwise), which may result in the shares becoming concentrated in
another party. 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.
Such redemptions may cause the Fund to have to sell securities at inopportune
times or prices. These transactions may adversely affect the Fund’s performance
and increase transaction costs. In addition, large redemption requests may
exceed the cash balance of the Fund and result in credit line borrowing fees
and/or overdraft charges to the Fund until the sales of portfolio securities
necessary to cover the redemption request settle. To the extent a large
shareholder in the Fund is an entity subject to domestic and/or international
regulations governing banking, insurance,
or
other financial institutions, changes in those regulations (e.g., capital
requirements) or in the shareholder’s financial status may cause or require the
shareholder to redeem its investment in the Fund when it otherwise would not
choose to redeem that investment. It is also possible that a significant
redemption could result in an increase in Fund expenses on account of being
spread over a smaller asset base, and therefore make it more difficult for the
Fund to implement its investment strategy. Large redemptions could also result
in tax consequences to shareholders. 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.
Liquidity
Risk. The Fund may
invest in instruments that trade in lower volumes and are more illiquid than
other investments. If the Fund is forced to sell these investments to pay
redemption proceeds or for other reasons, the Fund may lose money. In addition,
when there is no willing buyer and investments cannot be readily sold at the
desired time or price, the Fund may have to accept a lower price or may not be
able to sell the instrument at all. An inability to sell a portfolio position
can adversely affect the Fund's value or prevent the Fund from being able to
take advantage of other investment opportunities.
Management Risk.
Actively managed funds
are subject to management risk. The subadviser will apply investment techniques
and risk analyses in making investment decisions for the Fund, but the
subadviser judgments about the attractiveness, value or market trends affecting
a particular security, industry or sector or about market movements may be
incorrect. Additionally, the investments selected for the Fund may underperform
the markets in general, the Fund's benchmark and other funds with similar
investment objectives.
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.
14
PGIM JENNISON
FOCUSED VALUE ETF
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.
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.
New/Small
Fund Risk. The Fund recently
commenced operations and has a limited operating history. As a new and
relatively small fund, the Fund's performance may not represent how the Fund is
expected to or may perform in the long term if and when it becomes larger and
has fully implemented its investment strategies. Investment positions may have a
disproportionate impact (negative or positive) on performance in new and smaller
funds. New and smaller funds may also require a period of time before they are
invested in securities that meet their investment objectives and policies and
achieve a representative portfolio composition. Fund performance may be lower or
higher during this “ramp-up” period, and may also be more volatile, than would
be the case after the Fund is fully invested. Similarly, a new or smaller fund's
investment strategy may require a longer period of time to show returns that are
representative of the strategy. New funds have limited performance histories for
investors to evaluate and new and smaller funds may not attract sufficient
assets to achieve investment and trading efficiencies. If the Fund were to fail
to successfully implement its investment strategies or achieve its investment
objective, performance may be negatively impacted, and any resulting liquidation
could create negative transaction costs for the Fund and tax consequences for
investors. Since the Fund is new, an active secondary market for the shares of
the Fund may not develop or may not continue once developed. Shareholders
holding large blocks of shares of the Fund, including the Manager and its
affiliates, may hold their shares for long periods of time, which may lead to
reduced trading volumes, wider trading spreads and impede the development or
maintenance of an active secondary trading market for Fund shares. These large
shareholders may also loan or sell all or a portion of their Fund shares, which
may result in increasing concentration of Fund shares in a small number of
holders, and the potential for large redemptions, decreases in Fund assets and
increased expenses for remaining shareholders.
Securities
Lending Risk. Securities
lending involves the risk that the borrower may fail to return the securities in
a timely manner or at all. As a result, the Fund may lose money and there may be
a delay in recovering the loaned securities. Additionally, losses could result
from the reinvestment of collateral received on loaned securities in investments
that decline in value, default, or do not perform as well as expected. The
affiliated prime money market fund in which cash collateral generally is
invested may impose liquidity fees or temporary gates on redemptions if its
weekly liquid assets
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15
fall below a
designated threshold. If this were to occur, the Fund may lose money on its
investment of cash collateral in the affiliated prime money market fund, or the
Fund may not be able to redeem its investment of cash collateral in the
affiliated prime money market fund, which might cause the Fund to liquidate
other holdings in order to return the cash collateral to the borrower upon
termination of a securities loan. These events could trigger adverse tax
consequences for the Fund.
Short
Sales Risk. Short sales
involve costs and risks. The Fund must pay the lender interest on the security
it borrows, and the Fund will lose money to the extent that the price of the
security increases between the time of the short sale and the date when the Fund
replaces the borrowed security. Although the Fund’s gain is limited to the price
at which it sold the securities short, its potential loss is limited only by the
maximum attainable price of the securities, less the price at which the security
was sold and may, theoretically, be unlimited. The Fund may also make short
sales “against the box.” When selling short against the box, the Fund gives up
the opportunity for capital appreciation in the security.
U.S.
Government and Agency Securities Risk. U.S. Government
and agency securities are subject to market risk, interest rate risk and credit
risk. Not all U.S. Government securities are insured or guaranteed by the full
faith and credit of the U.S. Government; some are only insured or guaranteed by
the issuing agency, which must rely on its own resources to repay the debt. Some
agency securities carry no guarantee whatsoever and the risk of default
associated with these securities would be borne by the Fund. The maximum
potential liability of the issuers of some U.S. Government securities held by
the Fund may greatly exceed their current resources, including their legal right
to support from the U.S. Treasury. No assurance can be given that the U.S.
Government would provide financial support to any such issuers if it is not
obligated to do so by law. It is possible that these issuers will not have the
funds to meet their payment obligations in the future. In addition, the value of
U.S. Government securities may be affected by changes in the credit rating of
the U.S. Government.
Value
Style Risk. Since the Fund
follows a value investment style, there is the risk that the value style may be
out of favor for long periods of time, that the market will not recognize a
security's intrinsic value for a long time or at all, or that a stock judged to
be undervalued may actually be appropriately priced or overvalued. Issuers of
value stocks may have experienced adverse business developments or may be
subject to special risks that have caused the stock to be out of favor. In
addition, the Fund's value investment style may go out of favor with investors,
negatively affecting the Fund's performance. If the Fund's assessment of market
conditions or a company's value is inaccurate, the Fund could suffer losses or
produce poor performance relative to other funds.
Please note that,
in addition to the risks discussed above, there are many other factors that may
impact the Fund’s ability to achieve its investment objective and which could
result in a loss of all or a part of your investment.
More information
about the Fund’s investment strategies and risks appears in the SAI.
16
PGIM JENNISON
FOCUSED VALUE ETF
PRIOR HISTORICAL
PERFORMANCE OF SIMILARLY MANAGED ACCOUNTS
Once the Fund has a
performance record of at least one calendar year, the Fund’s performance will be
included in the prospectus.
Performance of the
subadviser’s Focused Large Cap Value Composite (the “Composite”) is summarized
below. The Composite (inception date January 31, 2018) currently comprises of
two accounts and includes all discretionary portfolios managed by the
subadviser, Jennison Associates LLC, which the subadviser considers
substantially similar to the Fund, and which have similar investment objectives,
strategies, and policies to those of the Fund.
The Composite
includes a mutual fund and a portion of a mutual fund registered under the
Investment Company Act of 1940, as amended (the “1940 Act”). The portfolio
holdings of the Fund may differ from those of the accounts in included in the
Composite due to the timing of the investment, liquidity needs, and other
reasons.
All historical returns shown below
with respect to the Composite reflect the reinvestment of dividends and other
earnings and the deduction of trading expenses, but do not reflect the deduction
of custody fees. These returns also are gross of reclaimable withholding taxes,
if any, and net of non-reclaimable withholding taxes. Gross of fee returns do
not reflect the deduction of advisory fees. The net of fee performance for the
Composite in the table below reflects the deduction of the annual operating
expense of the Fund which is higher than any fee or other expense paid to the
subadvisor by accounts in the
Composite.
The performance of
the Composite is compared to the performance of the Russell 1000 Value Index
(the “Index”) which will be the performance benchmark of the Fund. The Index is
an unmanaged index comprising those securities in the Russell 1000 Index with a
less-than-average growth orientation. Companies in the Russell 1000 Value Index
generally have low price-to-book and price-to-earnings ratios, higher dividend
yields, and lower forecasted growth values. These returns do not include the
effect of any sales charges, operating expenses of an ETF or taxes. These
returns would be lower if they included the effect of these expenses. The
benchmark index cannot be purchased directly by investors.
The historical
performance data below is provided solely to illustrate the subadviser’s
experience in managing accounts with an investment objective, strategy, and
policies substantially similar to the investment objective, strategy, and
policies of the Fund.
The
historical performance information set forth below does not represent the
performance of the Fund. Investors should not rely on the historical performance
data shown below as an indication of the actual or future performance of the
Fund.
Historical
Performance of Focused Large Cap Value Composite
|
Annualized
Returns | |||
|
As of
December 31, 2021 |
Net of Fee
Return |
Gross of
Fee Return |
Russell
1000 Value Index |
|
Since
Inception (01/31/2018) |
9.50% |
10.32% |
9.71% |
|
Calendar
Year Returns | |||
|
Year |
Net of Fee
Return |
Gross of
Fee Return |
Russell
1000 Value Index |
|
2021 |
27.62% |
28.58% |
25.16% |
|
2020 |
1.27% |
2.03% |
2.80%
|
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17
|
Calendar
Year Returns | |||
|
Year |
Net of Fee
Return |
Gross of
Fee Return |
Russell
1000 Value Index |
|
2019 |
27.39% |
28.35% |
26.54% |
|
2018* |
-13.32% |
-12.73% |
-11.68% |
*The returns shown
are for the period January 31, 2018 through December 31, 2018.
Performance for the
Composite has been calculated in a manner that differs from the performance
calculations the SEC requires for registered funds. The subadviser claims
compliance with the Global Investment Performance Standards (GIPS®); however
there is no representation that the above performance is presented in accordance
with GIPS. Performance for the Composite has not been audited.
The historical
performance information presented is current as of the date indicated, but may
not be current as of the date you are reviewing this information. Performance
results fluctuate, and there can be no assurance that objectives will always be
achieved. Other methods of computing returns may produce different results, and
the results for different periods will vary.
18
PGIM JENNISON
FOCUSED VALUE ETF
HOW THE FUND IS
MANAGED
BOARD
OF TRUSTEES
The Fund is
overseen by a Board of Trustees (hereafter referred to as “Trustees”, or the
“Board”). The Board oversees the actions of the Manager, subadviser and
distributor and decides on general policies. The Board also oversees the Fund's
officers, who conduct and supervise the daily business operations of the
Fund.
MANAGER
PGIM
Investments LLC (“PGIM Investments”)
655 Broad Street
Newark, NJ 07102-4410
655 Broad Street
Newark, NJ 07102-4410
As manager, PGIM
Investments manages the Fund's investment operations and administers its
business affairs and is responsible for supervising the Fund's subadviser.
Pursuant to the management agreement relating to the Fund, PGIM Investments is
responsible for substantially all expenses of the Fund, except taxes, brokerage
expenses, interest expenses, distribution fees or expenses, expenses incident to
shareholder meetings and extraordinary expenses. The Fund may also pay for any
costs or expenses of investing in other funds. The Fund pays PGIM Investments
management fees at the rate of 0.75% of the Fund's average daily net
assets.
PGIM Investments and its
predecessors have served as a manager or administrator to investment companies
since 1987. As of September 30, 2022, PGIM Investments, a wholly-owned
subsidiary of Prudential, served as the investment manager to all of the
Prudential U.S. and offshore open-end investment companies, and as the manager
or administrator to closed-end investment companies, with aggregate assets of
approximately $276.9 billion.
Subject to the
supervision of the Board, PGIM Investments is responsible for conducting the
initial review of prospective subadvisers for the Fund. In evaluating a
prospective subadviser, PGIM Investments considers many factors, including the
firm's experience, investment philosophy and historical performance. Subject to
the Board’s oversight, PGIM Investments is also responsible for monitoring the
performance of the Fund's subadviser and recommending termination and
replacement when deemed appropriate. PGIM Investments may provide a subadviser
with additional investment guidelines consistent with the Fund's investment
objective and restrictions.
PGIM Investments
and the Fund operate under an exemptive order (the “Order”) from the SEC that
generally permits PGIM Investments to enter into or amend agreements with
unaffiliated subadvisers and certain subadvisers that are affiliates of PGIM
Investments without obtaining shareholder approval. This authority is subject to
certain conditions, including the requirement that the Board must approve any
new or amended agreements with a subadviser. Shareholders of the Fund still have
the right to terminate these agreements at any time by a vote of the majority of
the outstanding shares of the Fund. The Fund will notify shareholders of any new
subadvisers engaged or material amendments to subadvisory agreements made
pursuant to the Order. Any new subadvisory agreement or amendment to the Fund’s
management agreement or current subadvisory agreement that directly or
indirectly results in an increase in the aggregate management fee rate payable
by the Fund will be submitted to the Fund’s shareholders for their approval.
PGIM Investments does not currently intend to retain unaffiliated
subadvisers.
A discussion of the
basis for the Board's approvals of the management and subadvisory agreements
will be available in the Fund's Semi-Annual Report to shareholders dated
February 28.
SUBADVISER
Jennison
Associates LLC (“Jennison”) is a wholly-owned subsidiary of
PGIM, Inc., which is an indirect wholly-owned subsidiary of Prudential
Financial, Inc. Its address is 466 Lexington Avenue, New York, New York 10017.
PGIM Investments has responsibility for all investment advisory services,
supervises Jennison and pays Jennison for its services. As of November 30, 2022,
Jennison managed in excess of $174.5 billion in assets. Jennison (including its
predecessor, Jennison Associates Capital Corp.) is a registered investment
adviser founded in 1969.
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19
PORTFOLIO
MANAGERS
Warren
N. Koontz, Jr., CFA, Joseph C. Esposito, CFA and Jason T. McManus are the portfolio
managers of the Fund and are jointly and primarily responsible for the
day-to-day management of the Fund.
Warren
N. Koontz, Jr., CFA, is a Managing
Director, the Head of Value Equity, and a large cap value portfolio manager. He
joined Jennison in September 2014. Prior to joining Jennison, Mr. Koontz was a
portfolio manager at Loomis, Sayles & Company for nineteen years where he
managed diversified and concentrated value strategies. Prior to that, he was a
senior portfolio manager at Comerica Bank and also worked for three years as
chief investment officer for The Jeffrey Company, a private investment firm and
the Public Employees’ Retirement System of Ohio. Mr. Koontz earned a BS in
finance and an MBA from The Ohio State University, and he holds the Chartered
Financial Analyst (CFA) designation.
Joseph
C. Esposito, CFA, is a Managing
Director and a large cap value portfolio manager. He joined Jennison in
September 2014. Mr. Esposito was previously a senior equity analyst at Loomis,
Sayles & Company for seven years. Prior to that, he was a business systems
analyst at AXA Financial. Mr. Esposito earned a BA from the College of New
Jersey, an MBA from Columbia Business School, and he holds the Chartered
Financial Analyst (CFA) designation.
Jason
T. McManus is a Managing
Director, the Head of Custom Solutions and a custom solutions portfolio manager.
He joined Jennison in July 1997. Mr. McManus began managing quantitative
portfolios and custom solutions for clients in August 2006. From 2003 to 2006,
he was part of Jennison's Applied Research team focusing on quantitative
research projects and portfolio analytics. Prior to that, he was a research
associate on the International Equity team. Mr. McManus earned a BS in economics
and computer science from the University at Albany, State University of New
York, and an MBA in quantitative finance from The New York University Stern
School of Business.
The portfolio
managers for the Fund are supported by other Jennison portfolio managers,
research analysts and investment professionals. Team members conduct research,
make securities recommendations and support the portfolio managers in all
activities. Members of the team may change from time to time.
Additional
information about portfolio manager compensation, other accounts managed, and
portfolio manager ownership of Fund securities may be found in the
SAI.
DISTRIBUTOR
The Fund's
Distributor is Prudential Investment Management Services LLC (“PIMS” or the
“Distributor”). The Distributor is a broker-dealer registered with the SEC. The
Distributor distributes Creation Units (as defined below in the section “How to
Buy and Sell Shares”) for the Fund and does not maintain a secondary market in
shares of the Fund.
Distribution
and Service Plan
The Fund has
adopted a Distribution and Service Plan (the “12b-1 Plan”) pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended (the “1940 Act”). The
12b-1 Plan permits compensation in connection with the distribution and
marketing of Fund shares and/or the provision of certain shareholder services.
The 12b-1 Plan permits the Fund to pay compensation at an annual rate of up to
0.25% of the Fund's average daily net assets. However, the Board has determined
not to authorize payment of a 12b-1 Plan fee at this time.
The 12b-1 fee may
only be imposed or increased when the Board determines that it is in the best
interests of shareholders to do so. Because these fees, when and if authorized,
will be paid out of the Fund's assets on an ongoing basis, over time they will
increase the cost of an investment in the Fund.
PGIM or its
affiliates make payments to broker-dealers, registered investment advisers,
banks or other intermediaries (together, “intermediaries”) related to marketing
activities and presentations, educational training programs, conferences, the
development of technology platforms and reporting systems, or their making Fund
shares available to their customers generally and in certain investment
programs. Such payments, which may be significant to the intermediary, are not
made by the Fund. Rather, such payments are made by PGIM or its affiliates from
their own resources, which come directly or indirectly in part from fees paid by
the Fund. A financial intermediary may make
20
PGIM JENNISON
FOCUSED VALUE ETF
decisions about
which investment options it recommends or makes available, or the level of
services provided, to its customers based on the payments it is eligible to
receive. Therefore, such payments to an intermediary create conflicts of
interest between the intermediary and its customers and may cause the
intermediary to recommend the funds over another investment. More information
regarding these payments is contained in the Fund’s SAI.
Please contact your
salesperson or other investment professional for more information regarding any
such payments his or her firm may receive from PGIM or its
affiliates.
DISCLOSURE
OF PORTFOLIO HOLDINGS
Fund policies and
procedures with respect to the disclosure of the Fund's portfolio securities are
described in the Fund's SAI. On each business day, before commencement of
trading on the Exchange, the Fund will disclose on pgim.com/investments the Fund's
portfolio holdings that will form the basis for the Fund's calculation of NAV at
the end of the business day.
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21
FUND
DISTRIBUTIONS AND TAX ISSUES
DISTRIBUTIONS
The Fund
distributes dividends out of any net investment income to shareholders. For
example, if the Fund owns an ACME Corp. bond and the bond pays interest, the
Fund will pay out a portion of this interest as a dividend to its shareholders,
assuming the Fund’s income is more than its costs and expenses.
The Fund also
distributes any realized net capital gains to shareholders. Capital gains are
generated when the Fund sells its assets for a profit. For example, if the Fund
bought 100 bonds of ACME Corp. for a total of $1,000 and more than one year
later sold the bonds for a total of $1,500, the Fund has net long-term capital
gains of $500, which it will pass on to shareholders (assuming the Fund’s
remaining total gains are greater than any losses it may have).
Dividends and other
distributions on shares of the Fund are distributed on a pro rata basis to
beneficial owners of such shares.
Dividend payments
are made through DTC participants and indirect participants to beneficial owners
then of record with proceeds received from the Fund.
Dividend
Reinvestment Service. No dividend
reinvestment service is provided by the Fund. Broker-dealers may make available
the DTC book-entry Dividend Reinvestment Service for use by beneficial owners of
the Fund for reinvestment of their dividend distributions. Beneficial owners
should contact their broker to determine the availability and costs of the
service and the details of participation therein. Brokers may require beneficial
owners to adhere to specific procedures and timetables. If this service is
available and used, dividend distributions of both income and realized gains
will be automatically reinvested in additional whole shares of the Fund
purchased in the secondary market. Dividend distributions of both income and
realized gains will be subject to taxation whether or not they are reinvested in
the Fund.
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* |
|
|
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.
TAX
ISSUES
Investors who buy
shares of the Fund should be aware of some important tax issues. For example,
the Fund distributes dividends of net investment income and realized net capital
gains, if any, to shareholders. These distributions are subject to federal
income taxes, unless you hold your shares in a 401(k) plan, an Individual
Retirement Account (“IRA”) or some other qualified or tax-deferred plan or
account. Dividends and distributions from the Fund also may be subject to state
and local income tax in the state where you live. Also, if you sell shares of
the Fund for a profit, you may have to pay capital gains taxes on the amount of
your profit, unless you hold your shares in a qualified or tax-deferred plan or
account.
The following
briefly discusses some of the important income tax issues you should be aware
of, but is not meant to be tax advice. For tax advice, please speak with your
tax adviser.
Fund
Distributions
22
PGIM JENNISON
FOCUSED VALUE ETF
Dividends of net
investment income will generally be taxable to shareholders at ordinary income
rates. Dividends from net investment income paid to a non-corporate U.S.
shareholder that are reported as qualified dividend income will generally be
taxable to such shareholder at the long-term capital gain tax rate. Also, a
portion of the dividends paid to corporate shareholders of the Fund will be
eligible for the dividends received deduction to the extent the Fund’s income is
derived from certain dividends received from U.S. corporations. Because of the
nature of the Fund’s investments, the Fund does not expect to pay dividends that
for noncorporate shareholders are treated as qualified dividend income or that
for corporate shareholders are eligible for the dividends received
deduction.
Fund distributions
of net capital gains are taxed differently depending on how long the Fund holds
the security. If the Fund holds a security for more than one year before selling
it, any gain is treated as long-term capital gain which is generally taxed at
rates of up to 15% or 20% for noncorporate U.S. shareholders, depending on
whether their income exceeds certain threshold amounts which are adjusted
annually for inflation. If the Fund holds the security for one year or less, any
gain is treated as short-term capital gain, which is taxed at rates applicable
to ordinary income. Different rates apply to corporate shareholders.
A U.S. shareholder
that is an individual, estate, or certain type of trust is subject to a 3.8%
Medicare contribution tax on the lesser of (1) the U.S. shareholder’s “net
investment income,” including Fund distributions and net gains from the
disposition of Fund shares, and (2) the excess of the U.S. shareholder’s
modified adjusted gross income for the taxable year over $200,000 (or $250,000
for married couples filing jointly). For this purpose, net investment income
includes interest, dividends, annuities, royalties, capital gain and income from
a passive activity business or a business of trading in financial instruments or
commodities.
Form
1099
For every year the
Fund declares a dividend, you will receive a Form 1099, which reports the amount
of ordinary income distributions and long-term capital gains we distributed to
you during the prior year unless you own shares of the Fund as part of a
qualified or tax-deferred plan or account. If you do own shares of the Fund as
part of a qualified or tax-deferred plan or account, your taxes are deferred, so
you will not receive a Form 1099 annually, but instead you will receive a Form
1099 when you take any distribution from your qualified or tax-deferred plan or
account.
Fund distributions
are generally taxable to you in the calendar year in which they are received,
except when we declare certain dividends and distributions in the fourth
quarter, with a record date in such quarter, and actually pay them in January of
the following year. In such cases, the dividends and distributions are treated
as if they were paid on December 31st of the prior year.
Withholding
Taxes
If federal tax law
requires you to provide the Fund with your taxpayer identification number and
certifications as to your tax status and you fail to do this, or if you are
otherwise subject to backup withholding, we will withhold and pay to the U.S.
Treasury a portion of your distributions and sale proceeds based on the
applicable backup withholding rate.
Taxation
of Non-U.S. Shareholders
For a discussion
regarding the taxation of non-U.S. shareholders, please see the SAI and contact
your tax adviser.
If
You Purchase on or Before a Record Date
If you buy shares
of the Fund on or before the record date for a distribution (the date that
determines who receives the distribution), we will pay that distribution to you.
As explained above, the distribution may be subject to taxes. You may think
you’ve done well since you bought shares one day and soon thereafter received a
distribution. That is not so, because when dividends are paid out, the value of
each share of the Fund decreases by the amount of the dividend to
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23
reflect the payout,
although this may not be apparent because the value of each share of the Fund
also will be affected by market changes, if any. However, the timing of your
purchase does mean that part of your investment may have come back to you as
taxable income.
TAXES
WHEN SHARES ARE SOLD
Any capital gain or
loss realized upon a sale of shares is generally treated as long-term capital
gain or loss if the shares have been held for more than one year and as
short-term capital gain or loss if the shares have been held for one year or
less. Capital loss realized on the sale or exchange of shares held for six
months or less will be treated as long-term capital loss to the extent of any
capital gain dividends received by the shareholder. The ability to deduct
capital losses may be limited. Net gains from the sale of shares are included in
“net investment income” for purposes of the 3.8% Medicare contribution tax
mentioned above.
For shares
purchased and sold from a taxable account, your intermediary will report cost
basis information to you and to the IRS. Your intermediary will permit
shareholders to elect their preferred cost basis method. In the absence of an
election, your cost basis method will be your intermediary’s default method,
which is often the average cost method. Please consult your tax adviser to
determine the appropriate cost basis method for your particular tax situation
and to learn more about how the cost basis reporting laws apply to you and your
investments.
The above is a
general summary of tax implications of investing in the Fund. Because each
investor’s tax consequences are unique, please consult your tax advisor to see
how investing in the Fund and, for individuals and S corporations, selection of
a particular cost method of accounting will affect your own tax
situation.
24
PGIM JENNISON
FOCUSED VALUE ETF
HOW TO BUY AND
SELL SHARES
Secondary
Market
Most investors will
buy and sell Fund shares in secondary market transactions through brokers.
Shares of the Fund are listed and traded on the secondary market on the
Exchange. Shares can be bought and sold throughout the trading day like other
publicly traded securities. There is no minimum investment. When buying or
selling shares through a broker, you will incur customary brokerage commissions
and charges, and you may pay some or all of the spread between the bid and the
offered price in the secondary market on each leg of a round trip (purchase and
sale) transaction. The spread varies over time for Fund shares based on the
Fund’s trading volume and market liquidity, and is generally lower if the Fund
has a lot of trading volume and market liquidity.
Shares of the Fund
trade on the Exchange at prices that may differ to varying degrees from the
daily NAV of the shares.
Directly
with the Fund
Fund shares are
issued or redeemed by the Fund at NAV per share only in aggregations of a
specified number of shares (“Creation Units”). An Authorized Participant is a
member or participant of a clearing agency registered with the SEC, which has a
written agreement with the Fund or one of its service providers that allows the
Authorized Participant to place orders for the purchase and redemption of
Creation Units.
A creation
transaction, which is subject to acceptance by the Distributor and the Fund,
generally takes place when an Authorized Participant deposits into the Fund a
designated portfolio of securities, assets or other positions (a “creation
basket”, and an amount of cash (including any cash representing the value of
substituted securities, assets or other positions), if any, which together
approximate the holdings of the Fund in exchange for a specified number of
Creation Units. Similarly, shares can be redeemed only in Creation Units,
generally for a designated portfolio of securities, assets or other propositions
(the “redemption basket”) held by the Fund and an amount of cash (including any
portion of such securities for which cash may be substituted). The Fund may, in
certain circumstances, offer Creation Units partially or solely for cash. Except
when aggregated in Creation Units, shares are not redeemable by the Fund.
Creation and redemption baskets may differ and the Fund may accept “custom
baskets.”
For more detailed
information, see “Creations and Redemptions of Fund Shares” in the Fund’s
SAI.
Beneficial
Ownership
The Depository
Trust Company (“DTC”) serves as securities depository for Fund shares. Shares of
the Fund may be held only in book-entry form; stock certificates will not be
issued. DTC, or its nominee, is the record or registered owner of all
outstanding shares of the Fund. Beneficial ownership of shares will be shown on
the records of DTC or its participants. Beneficial owners of shares are not
entitled to have shares registered in their names, will not receive or be
entitled to receive physical delivery of certificates in definitive form and are
not considered the registered holder thereof. Accordingly, to exercise any
rights of a holder of shares of the Fund, each beneficial owner must rely on the
procedures of: (i) DTC; (ii) “DTC Participants,” i.e., securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations, some of whom (and/or their representatives) own DTC; and
(iii) “Indirect Participants,” i.e., brokers, dealers, banks and trust
companies that clear through or maintain a custodial relationship with a DTC
Participant, either directly or indirectly, through which such beneficial owner
holds its interests.
The Fund
understands that under existing industry practice, in the event the Fund
requests any action of holders of shares, or a beneficial owner desires to take
any action that DTC, as the record owner of all outstanding shares, is entitled
to take, DTC would authorize the DTC Participants to take such action and that
the DTC Participants would authorize the Indirect Participants and beneficial
owners acting through such DTC Participants to take such action and would
otherwise act upon the instructions of beneficial owners owning through them. As
described above, the Fund recognizes DTC or its nominee as the owner of all
shares of the Fund for all purposes. For more detailed information, see “Book
Entry Only System” in the Fund’s SAI.
Visit our website
at www.pgim.com/investments
25
Shares of the Fund
have not been registered for sale outside of the United States.
Understanding
the Price You'll Pay for the Shares
Market
Trading Price. The trading price
of the Fund’s shares on the Exchange may differ from the Fund’s daily NAV and
can be affected by market forces of supply and demand, economic conditions and
other factors.
Premiums
and Discounts. Information
regarding how often the shares of the Fund traded on the Exchange at a price
above (i.e., at a premium) or below (i.e., at a discount) the NAV since the
inception of the Fund, as applicable, can be found at pgim.com/investments.
Net
Asset Value. The share value of
a fund—known as the net
asset value or NAV—is determined by a
simple calculation: it's the total value of the Fund (assets minus liabilities)
divided by the total number of shares outstanding. For example, if the value of
the investments held by Fund XYZ (minus its liabilities) is $1,000 and there are
100 shares of Fund XYZ owned by shareholders, the value of one share of Fund
XYZ—or the NAV—is $10 ($1,000 divided by 100).
The Fund's NAV will
be determined every day on which the Fund is open as of the close of regular
trading on the New York Stock Exchange (“NYSE”) (generally, 4:00 p.m. Eastern
Time). The price at which a purchase of a Creation Unit is effected is based on
the next calculation of NAV after the order is received in proper form in
accordance with this prospectus and the requirements of the Authorized
Participant agreement.
The Fund's
portfolio securities are valued based upon market quotations or, if market
quotations are not readily available, at fair value as determined in good faith
under procedures established by the Board. These procedures include pricing
methodologies for determining the fair value of certain types of securities and
other assets held by the Fund that do not have quoted market prices, and
authorize the use of other pricing sources, such as bid prices supplied by a
principal market maker and evaluated prices supplied by pricing vendors that
employ analytic methodologies that take into account the prices of similar
securities and other market factors.
If the Fund
determines that a market quotation for a security is not reliable based on,
among other things, events or market conditions that occur with respect to one
or more securities held by the Fund or the market as a whole, after the
quotation is derived or after the closing of the primary market on which the
security is traded, but before the time that the Fund's NAV is determined, the
Fund may use “fair value pricing,” which is implemented by a valuation committee
(“Valuation Committee”) consisting of representatives of the Manager or by the
Board. The subadviser often provides relevant information for the Valuation
Committee meeting. In addition, the Fund may use fair value pricing determined
by the Valuation Committee or Board if the pricing source does not provide an
evaluated price for a security or provides an evaluated price that, in the
judgment of the Manager (which may be based upon a recommendation from the
subadviser), does not represent fair value. Equity securities that are traded on
foreign exchanges are valued using pricing vendor services that provide fair
value model prices. 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. Utilizing that evaluated adjustment factor, the
vendor provides an evaluated price for each security. Non-U.S. securities
markets are open for trading on weekends and other days when the Fund does not
price shares. Therefore, the value of the Fund’s shares may change on days when
you will not be able to purchase or redeem the Fund’s shares.
Investments in
open-end non-exchange-traded mutual funds will be valued at their NAV as
determined as of the close of the NYSE on the date of valuation, which will
reflect the mutual fund’s fair valuation procedures.
Different valuation
methods may result in differing values for the same security. The fair value of
a portfolio security that the Fund uses to determine its NAV may differ from the
security's quoted or published price. If the Fund needs to implement fair value
pricing after the NAV publishing deadline but before shares of the Fund are
processed, the NAV you receive or pay may differ from the published NAV price.
The prospectuses of any other mutual funds or ETFs in which the Fund invests
will explain each fund’s procedures and policies with respect to the use of fair
value pricing.
26
PGIM JENNISON
FOCUSED VALUE ETF
Fair value pricing
procedures are designed to result in prices for the Fund's securities and its
NAV that are reasonable in light of the circumstances which make or have made
market quotations unavailable or unreliable, and may have the effect of reducing
arbitrage opportunities available to short-term traders. There is no assurance,
however, that fair value pricing will more accurately reflect the market value
of a security than the market price of such security on that day or that it will
prevent dilution of the Fund's NAV by short-term traders.
Frequent
Purchases and Redemptions
The Fund does not
impose restrictions on the frequency of purchases and redemptions. The Board
evaluated the risks of market timing activities by Fund shareholders when they
considered whether a restriction or policy was necessary. The Board considered
that, unlike mutual funds, the Fund issues and redeems its shares at NAV only in
Creation Units, and the Fund’s shares may be purchased and sold on the Exchange
at prevailing market prices.
“Revenue
Sharing” Payments
The Manager or
certain of its affiliates (but not the Distributor) may make payments (which are
often referred to as “revenue sharing” payments) to financial intermediaries
from the Manager's or certain affiliates' own resources, including from the
profits derived from management fees or other fees received from the Fund,
without additional direct or indirect cost to the Fund or its shareholders.
Revenue sharing payments are usually calculated based on Fund assets
attributable to a particular financial services firm, and the amount of the
payments varies among financial intermediaries. The Manager or certain of its
affiliates may revise the terms of any existing revenue sharing arrangement, and
may enter into additional revenue sharing arrangements with other financial
intermediaries in the future. Revenue sharing arrangements are intended to
foster the sale of Fund shares and/or to compensate financial intermediaries for
assisting in marketing or promotional activities in connection with the sale of
Fund shares. In exchange for revenue sharing payments, it is expected that the
Fund will receive the opportunity to be sold through the financial
intermediaries' sales force or gain access to third-party platforms or other
marketing programs, including but not limited to “supermarket” platforms or
other sales programs. Both the Manager and Fund shareholders may receive
services from the financial intermediary in exchange for the revenue sharing
payments. Because the Manager's management fee is based on Fund assets, to the
extent that financial intermediaries receiving revenue sharing payments results
in an increase in the sale of Fund shares, the Manager and/or its affiliates
will benefit from the increase in Fund assets. From time to time the Manager
and/or an affiliate of the Fund (and not the Fund itself) may pay certain
administrative fees in order to make the Fund available to shareholders. Such
fees are not included in, and are paid separate and apart from, any revenue
sharing payments. Revenue sharing payments, or other similar payments, may
provide an incentive for financial intermediaries and their registered
representatives to recommend or sell shares of the Fund to you and in doing so
may create conflicts of interest between such intermediaries' financial
interests and their duties to customers. Please contact the registered
representative (or the financial intermediary) who sold shares of the Fund to
you for details about any payments the financial intermediary may receive from
the Manager and/or certain of its affiliates.
Visit our website
at www.pgim.com/investments
27
FINANCIAL
HIGHLIGHTS
No financial
highlights information is available for the Fund as of the date of this
Prospectus, as the Fund is new and has no prior financial highlights
information. As of the date of this Prospectus, the Fund has not yet commenced
investment operations.
28
PGIM JENNISON
FOCUSED VALUE ETF
|
FOR
MORE INFORMATION
Please read
this Prospectus before you invest in the Fund and keep it for future
reference. Information on the Fund's
net asset
value, market price, premiums and discounts, and bid-ask spreads can be
found at pgim.com/investments.
For
information or shareholder questions contact: | |
|
◾MAIL
PGIM
Investments LLC
655 Broad
Street, 6th Floor
Newark, NJ
07102 ◾WEBSITE
pgim.com/investments |
◾TELEPHONE
(888)
247-8090
(973)
802-2093
(from
outside the U.S.) |
|
◾E-DELIVERY
You
may request e-delivery of Fund documents by contacting your financial
intermediary directly or by going to
www.icsdelivery.com.
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. |
|
The
Annual and Semi-Annual Reports and the SAI contain additional information
about the Fund. Shareholders may
obtain
free copies of the SAI, Annual Report and Semi-Annual Report as well as
other information about the Fund
and
may make other shareholder inquiries through the telephone number, address
and website listed above. | |
|
◾STATEMENT
OF ADDITIONAL INFORMATION (SAI)
(incorporated
by reference into this Prospectus) ◾SEMI-ANNUAL
REPORT |
◾ANNUAL
REPORT
(contains
a discussion of the market conditions and
investment
strategies that significantly affected the
Fund's
performance during the last fiscal
year) |
|
You
can also obtain copies of Fund documents, including the SAI, from the
Securities and Exchange Commission as
follows
(the SEC charges a fee to copy documents): | |
|
◾ELECTRONIC
REQUEST
|
◾VIA
THE INTERNET
on
the EDGAR Database at
www.sec.gov |
|
PGIM
Jennison Focused Value ETF | |
|
Ticker
Symbol |
PJFV |
|
Listing
Exchange |
NYSE Arca,
Inc. |
ETF1009STAT
The
Fund's Investment Company Act File No. 811-23324