(ICON)
Prudential
High Yield
Fund, Inc.
ANNUAL
REPORT
Dec. 31, 1995
(LOGO)
<PAGE>
Prudential High Yield Fund, Inc.
Performance At A Glance.
Receding inflation fears, a slower economy and rising corporate profits
helped high yield bond investors earn strong total returns in 1995. We're
pleased that shareholders of the Prudential High Yield Fund, Inc. enjoyed
better returns than shareholders of the average high yield bond fund in
1995, as measured by Lipper Analytical Services.
<TABLE>
Cumulative Total Returns1 As of 12/31/95
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 18.2% 111.1% N/A 91.5%
Class B 17.5 104.8 138.8% 407.9
Class C 17.5 N/A N/A 16.6
Lipper High Current Yield Avg3 16.4 116.4 148.7 477.0
<CAPTION>
Average Annual Total Returns1 As of 12/31/95
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 13.4% 15.2% N/A 10.8%
Class B 12.5 15.3 9.1% 10.2
Class C 16.5 N/A N/A 11.5
</TABLE>
<TABLE>
<CAPTION>
Total Dividends 30-Day
Paid for 12 Mos. SEC Yield
<C> <S> <C> <C>
Dividends Class A $0.83 9.61%
& Yields Class B $0.78 9.41
As of Class C $0.78 9.42
12/31/95
</TABLE>
Past performance is not indicative of future results. Principal and
investment return will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
1Source: Prudential Mutual Fund Management and Lipper Analytical Services.
The cumulative total returns do not take into account sales charges. The
average annual returns do take into account applicable sales charges. The
Fund charges a maximum front-end sales load of 4% for Class A shares and
a contingent deferred sales charge of 5%, 4%, 3%, 2%, 1% and 1% for six
years, for Class B shares. Class C shares have a 1% CDSC for one year.
Class B shares automatically convert to Class A shares on a quarterly
basis, after approximately seven years.
2Inception dates: 1/22/90 Class A; 3/29/79, Class B; 8/1/94 Class C.
3Lipper average returns are for 119 funds for one year, 61 funds for
five years, 33 funds for 10 years, and 19 funds since inception of the
Class B shares on 3/29/79.
How Investments Compared.
(As of 12/31/95)
(GRAPH)
Source: Lipper Analytical Services. Financial markets change, so a mutual
fund's past performance should never be used to predict future results.
The risks to each of the investments listed above are different -- we
provide 12-month total return averages for several Lipper mutual fund
categories to show you that reaching for higher yields means tolerating
more risk. The greater the risk, the larger the potential reward or loss.
In addition, we've added historical 20-year average annual returns. These
returns assume the reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal. Smaller capitalization
stocks offer greater potential for long-term growth but may be more
volatile than larger capitalization stocks. Investors historically
received higher historical total returns from stocks than from most
other investments.
General Bond Funds provide more income than stock funds, which can help
smooth out their total returns year by year. But their prices still
fluctuate (sometimes a great deal) and their returns have been historically
lower than those of stock funds. Unlike bond funds, bonds, if held to
maturity, generally offer a fixed rate of return and fixed principal value.
High Yield Bond Funds generally provide more income than general bond funds,
but are also subject to greater credit risk.
Money Market Funds attempt to preserve a constant share value; they don't
fluctuate much in price but, historically, their returns have been generally
among the lowest of the major investment categories.
<PAGE>
Lars Berkman, Fund Manager (PICTURE)
Portfolio
Manager's Report
The Fund invests primarily in corporate bonds rated BBB or lower by
independent rating agencies. These bonds are below investment grade
and are commonly known as "junk bonds." Below investment grade bonds
are subject to greater risk of default than investment grade bonds. The
Fund is well diversified and we research bonds to find those with
attractive yields and improving credit quality.
Strategy Session.
Interest rates fell far and fast last year. The 10-year U.S. Treasury
bond yield plummeted by more than two full percentage points to 5.6% at
year end. While falling interest rates are generally good for bond funds
because bond prices are pushed higher, they also signal a slowing economy,
which concerns high yield bond investors. If the economy grows too
slowly, some corporations will find it more difficult to pay the interest
on their bonds, increasing the potential for default.
Considering this environment, we bought single-B rated bonds. They are
still "junk bonds" -- in 1995 they yielded between 8.75% and 9.25%, more
than three full percentage points more than the 10-year U.S. Treasury bond.
But, we believed that they were good investment opportunities among the
below-investment grade companies in the market. We found these bonds in
several industries, including gaming, cable/telecommunications and health
care. These types of companies provide services and products that tend
to remain in strong demand regardless of the economic climate.
Our focus on single-B rated bonds did not prevent us from purchasing
select bonds with even higher yields and lower credit quality -- when
we felt comfortable with their underlying businesses. For example, we
bought bonds issued by several companies that provide local telephone
service, directly competing with the regional Bell telephone companies.
We thought that some of those businesses might be eventually acquired by
a Bell company, which would likely increase the bonds' prices. In the
meantime, these bonds yield in excess of 12%.
Credit Quality Breakdown.
Prudential High Yield Fund
as of 12/31/95. Subject to change.
(PIE CHART)
About Your Dividend.
While falling interest rates raise bond fund prices, they also reduce fund
income. We generally focus on bonds rated single-B, which we believe is a
more prudent approach in a slow growth economy. But, these bonds typically
provide less income than bonds with the lowest credit ratings. Since your
Fund's income is falling, we are required to lower the dividend rate.
The first dividend payment using the new rates will be on March 21,
1996:
<TABLE>
Monthly Dividend per Share
<CAPTION>
Old New
<S> <C> <C>
Class A: $ 0.069 $0.064
Class B: $ 0.065 $0.060
Class C: $ 0.065 $0.060
</TABLE>
These rates are subject to change again in response to market conditions.
<PAGE>
What Went Well.
Our focus on single-B rated bonds improved the Fund's overall credit quality,
helping the Fund during 1995's slower economy. Bond selection also helped.
Here are two examples of companies that provided current return in addition
to appreciation potential:
Revlon: Colorful Success.
For some time, we had expected a turnaround at Revlon. Last year, the
cosmetics company lived up to our expectations, as cash flow increased
20% each quarter. Much of the company's success was the result of new
products, such as ColorStay Lipstick, which had a leading market share
only a year after its introduction. As a result of its improving operations,
Revlon plans to issue stock through an initial public offering, which has
boosted the price of its bonds. Revlon was our seventh largest holding,
at 1.8% of net assets.
Trump Taj Mahal Wins.
We decided to purchase Trump Taj Mahal bonds beginning last June, when they
were very low-priced. We believed they would recover since the Trump Taj
Mahal is the premier casino property in Atlantic City, New Jersey. We also
thought the gaming industry would benefit from plans to build a new casino
in the area. Other investors felt the same way and our Trump bonds
appreciated substantially. Trump bonds were approximately 1.5% of net
assets at year end.
And Not So Well.
High yield bond issuers historically face their greatest period of financial
stress in the two-to-three years after the initial issuance. Since an
exceptionally large number of high yield bonds were issued in 1992 and
1993 (when interest rates fell sharply), we expected an increase in the
default rate in 1995. What we didn't expect was to own some of these
defaulted issues. But we did:
- -- G. Heileman Brewery: Despite its well-known brand names, a heavy debt
load prevented the company from withstanding competition from Anheuser
Busch, Miller and Adolph Coors.
- -- Color Tile: This do-it-yourself home improvement retailer was hurt by
competition, a significant debt burden and a lack of funds to expand and
remodel stores.
Five Largest Holdings.
2.9% Tenet Healthcare
2.5% Cablevision Systems
2.4% Continental Cablevision
2.2% Comcast
1.9% Gulf Canada
Expressed as a percentage of total net assets as of 12/31/95. Holdings
subject to change.
Looking Ahead.
In 1996, we expect continued slow economic growth without recession and a
further modest decline in interest rates -- a healthy climate for bonds.
If the U. S. Treasury market rallies, and stocks continue to climb, we expect
that high yield bonds could do well.
Under this scenario, we think that high yield bond investors should earn
their coupon income, plus perhaps some slight price appreciation. However,
we are also concerned about a decline in the credit quality of some of the
weaker high yield companies. We cannot ignore that a slow-growing economy
may not stimulate enough sales for less creditworthy companies -- the types
that often issue high yield bonds. We'll try to focus on healthier companies.
We do expect the high yield bond default rate in 1996 to increase, as it did
in 1995. Therefore, we will continue to carefully scrutinize our holdings
and avoid bonds of companies that are most prone to weakening credit quality.
1
<PAGE>
President's Letter February 5, 1996
(PICTURE)
Dear Shareholder:
For many investors, 1995 was a profitable year -- most stock and bond funds
enjoyed healthy returns from the U.S. markets. While climbing returns can
tempt even the most skittish investors to start buying again, it is important
to remember that the stock and bond markets go down just as they go up. At
times like these, remember the importance of working with your Financial
Advisor or Registered Representative to help you find investments that are
consistent with your risk tolerance and time horizon. Your Financial Advisor
or Registered Representative can help you maintain realistic expectations
about both the potential performance and risks associated with your
investments.
Shareholder Legislative Action Program.
From time to time we've been informing you about significant legislation
before Congress, such as the American Dream Savings Account, that may
potentially impact mutual fund investors. We want to make it easier for
you to share your views with your Congressional member. So, beginning in
1996, whenever Congress is considering legislation that would affect you,
we'll send you postage-paid message cards that you simply drop in the mail
if you want to let your senator or representative know how you want him or
her to vote.
Fund Profiles.
Over the past year, we've worked to make your shareholder reports more
interesting, informative and easy to read. This year, we'll be considering
"fund profiles." Some mutual fund companies now offer one to shareholders
along with a full prospectus. The purpose of a fund profile is to provide
a very brief, reader-friendly summary of a fund's objective, investments,
risks and expenses. Would you like to see fund profiles from us? Please
call your Financial Advisor or Registered Representative to share your
views.
As always, thank you for your confidence in Prudential Mutual Funds.
Sincerely,
Richard A. Redeker
President
2
<PAGE>
Portfolio of Investments
as of December 31, 1995 PRUDENTIAL HIGH YIELD FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
<C> <C> <S> <C>
- ------------------------------------------------------------
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--97.0%
BONDS--96.0%
- ------------------------------------------------------------
Aerospace--1.6%
B1 $17,515 K & F Industries, Inc.,
Sr. Sec'd. Notes,
11.875%, 12/1/03 $ 18,828,625
Ba3 18,500 Rohr, Inc., Sr. Notes,
11.625%, 5/15/03 19,841,250
B3 27,750 Sequa Corp.,
Sr. Sub. Notes,
9.375%, 12/15/03 25,807,500
--------------
64,477,375
- ------------------------------------------------------------
Automotive Parts--3.9%
Exide Corp.,
B1 23,000 Sr. Notes,
10.00%, 4/15/05 24,955,000
B2 18,000 Sr. Sub. Def'd. Deb.,
Zero Coupon (until
12/15/97),
12.25%, 12/15/04 15,210,000
Foamex JPS Automotive
L.P.,
Caa 20,250 Sr. Disc. Notes,
Zero Coupon (until
7/1/99),
14.00%, 7/1/04 11,340,000
B2 21,700 Sr. Notes,
11.125%, 6/15/01 21,591,500
Foamex L.P.,
B3 6,910 Sr. Deb., Ser. B,
11.875%, 10/1/04 6,633,600
B1 13,500 Sr. Notes,
11.25%, 10/1/02 13,500,000
Harvard Industries, Inc.,
Sr. Notes,
B3 16,500 12.00%, 7/15/04 17,366,250
B3 7,000 11.125%, 8/1/05 7,000,000
B3 10,130 Motor Wheel Corp.,
Sr. Notes,
11.50%, 3/1/00 8,914,400
B3 $31,750 SPX Corp.,
Sr. Sub. Notes,
11.75%, 6/1/02 $ 33,655,000
--------------
160,165,750
- ------------------------------------------------------------
Broadcasting & Other Media--23.3%
B3 20,643 Adelphia Communications
Corp., Sr. Notes,
9.50%, 2/15/04, PIK 17,030,545
B3 9,500 Allbritton Communications
Co.,
Sr. Sub. Deb.,
11.50%, 8/15/04 9,975,000
American Telecasting,
Inc.,
Caa 41,000D/@ Sr. Disc. Notes,
(cost $21,840,878;
purchased-1995),
Zero Coupon (until
8/15/00),
14.25%, 8/15/05 25,881,250
Caa 4,500 Sr. Notes,
Zero Coupon (until
6/15/99),
14.50%, 6/15/04 3,093,750
Bell Cablemedia Co.,
Sr. Disc. Notes,
B2 30,975 Zero Coupon (until
7/15/99),
11.95%, 7/15/04 21,837,375
B2 15,150D (cost $8,779,295;
purchased-1995)
Zero Coupon (until
9/15/00),
11.875%, 9/15/05 9,506,625
B2 15,450 Benedek Broadcasting
Corp.,
Sr. Notes,
11.875%, 3/1/05 16,415,625
Cablevision System Corp.,
B3 22,310 Sr. Sub. Deb.,
10.75%, 4/1/04 23,537,050
Sr. Sub. Notes,
B3 35,010 9.25%, 11/1/05 36,585,450
B3 25,950 9.875%, 2/15/13 27,571,875
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3 -----
<PAGE>
<PAGE>
Portfolio of Investments
as of December 31, 1995 PRUDENTIAL HIGH YIELD FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
<C> <C> <S> <C>
- ------------------------------------------------------------
Broadcasting & Other Media (cont'd.)
B2 $15,250 CAI Wireless Systems,
Inc.,
Sr. Notes,
12.25%, 9/15/02 $ 16,393,750
B2 33,385 Century Communications
Corp., Sr. Sub. Notes,
11.875%, 10/15/03 35,972,338
B3 9,600 Chancellor Broadcasting
Co.,
Sr. Sub. Notes,
12.50%, 10/1/04 10,248,000
Comcast Corp.,
B1 45,500 Sr. Sub. Deb.,
9.375%, 5/15/05 48,116,250
B1 38,500 Sr. Sub. Notes,
9.125%, 10/15/06 40,136,250
B2 22,500 Comcast UK Cable Corp.,
Deb.,
Zero Coupon (until
11/15/00),
11.20%, 11/15/07 13,162,500
Continental Cablevision,
Inc.,
Ba2 51,100 Sr. Deb.,
9.50%, 8/1/13 54,932,500
B1 38,140 Sr. Sub. Deb.,
11.00%, 6/1/07 42,621,450
NR 750 Cooke Media Group, Inc.,
Sub. Deb.,
11.625%, 4/1/99 735,000
Diamond Cable Co.,
B3 27,400 Sr. Disc. Notes,
Zero Coupon (until
9/30/99),
13.25%, 9/30/04 19,317,000
B3 26,500 Sr. Notes,
Zero Coupon (until
12/15/00),
11.75%, 12/15/05 15,568,750
NR 28,979 Falcon Holdings Corp.
L.P.,
Sr. Sub. Notes, PIK
11.00%, 9/15/03 27,674,739
B3 10,800 Granite Broadcasting
Corp.,
Sr. Notes,
10.375%, 5/15/05 11,070,000
B3 $25,950 International Cabletel,
Inc.,
Sr. Notes,
Zero Coupon (until
4/15/00),
12.75%, 4/15/05 $ 16,413,375
Jones Intercable, Inc.,
Sr. Sub. Deb.,
B1 25,000 11.50%, 7/15/04 27,750,000
B1 18,645 10.50%, 3/1/08 20,416,275
Ba3 45,000 Lenfest Communications,
Inc.,
Sr. Notes,
8.375%, 11/1/05 45,168,750
B3 64,000 Marcus Cable Operating
Co.,
Sr. Sub. Disc. Notes,
Zero Coupon (until
8/1/99),
13.50%, 8/1/04 48,160,000
Repap New Brunswick, Inc.,
Sr. Notes,
Ba3 18,900 9.875%, 7/15/00 18,711,000
B2 24,350 10.625%, 4/15/05 23,863,000
Rogers Cablesystems, Inc.,
Ba3 61,825 Sr. Notes,
10.00%, 3/15/05 66,461,875
Ba3 10,000 Sr. Sec'd. Deb.,
10.125%, 9/1/12 10,525,000
B1 30,900 Sinclair Broadcast Group,
Inc.,
Sr. Notes,
10.00%, 9/30/05 31,595,250
B1 69,450 Telewest Plc,
Sr. Disc. Deb.,
Zero Coupon (until
10/1/00),
11.00%, 10/1/07 41,930,437
United Int'l. Holdings,
Inc.,
B3 15,000 Disc. Notes,
Zero Coupon, 11/15/99 9,375,000
B3 44,500 Sr. Disc. Notes,
Zero Coupon, 11/15/99 27,812,500
Videotron Holdings Plc,
Sr. Disc. Notes,
B3 17,300 Zero Coupon (until
8/15/00),
11.00%, 8/15/05 10,726,000
B3 12,375 Zero Coupon (until
7/1/99),
11.125%, 7/1/04 8,631,563
</TABLE>
- --------------------------------------------------------------------------------
- ----- 4 See Notes to Financial Statements.
<PAGE>
<PAGE>
Portfolio of Investments
as of December 31, 1995 PRUDENTIAL HIGH YIELD FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
<C> <C> <S> <C>
- ------------------------------------------------------------
Broadcasting & Other Media (cont'd.)
B2 $16,000 Young Broadcasting, Inc.,
Sr. Notes,
10.125%, 2/15/05 $ 16,880,000
--------------
951,803,097
- ------------------------------------------------------------
Building & Related Industries--3.4%
B1 27,500 American Standard, Inc.,
Sr. Sub. Deb.,
Zero Coupon (until
6/1/98),
10.50%, 6/1/05 23,581,250
B1 38,750 Building Material Corp. of
America,
Sr. Notes, Ser. B,
Zero Coupon (until
11/1/99),
11.75%, 7/1/04 26,350,000
Ba3 10,000 Continental Homes
Holdings,
Sr. Notes,
12.00%, 8/1/99 10,800,000
B3 14,900 Greystone Homes, Inc.,
Sr. Notes,
10.75%, 3/1/04 13,894,250
B3 25,125 Nortek, Inc.,
Sr. Sub. Notes,
9.875%, 3/1/04 23,491,875
B2 15,600 NVR, Inc.,
Sr. Notes,
11.00%, 4/15/03 15,697,500
Ba3 26,580 U.S. Home Corp.,
Sr. Notes,
9.75%, 6/15/03 27,211,275
--------------
141,026,150
- ------------------------------------------------------------
Casinos--4.8%
B1 26,220 Bally's Grand, Inc.,
First Mtge. Notes,
10.375%, 12/15/03 26,744,400
Ba3 19,200 Bally's Park Place
Funding, Inc.,
First Mtge. Bonds,
9.25%, 3/15/04 19,536,000
B2 $12,500 Boyd Gaming Corp.,
Sr. Sub. Notes,
10.75%, 9/1/03 $ 13,187,500
B1 16,000 Empress River Casino
Finance
Corp., Sr. Notes,
10.75%, 4/1/02 16,520,000
B2 14,575 GNF Corp.,
First Mtge. Bonds,
10.625%, 4/1/03 13,591,187
Ba3 30,000 Grand Casino, Inc.,
10.125%, 12/1/03 31,462,500
NR 17,000D Mohegan Tribal Gaming
Auth.,
Sr. Notes,
(cost $17,942,500;
purchased-1995),
13.50%, 11/15/02 18,360,000
Caa 62,974 Trump Taj Mahal Funding,
Inc.,
First Mtge. Bonds, Class
B,
11.35%, 11/15/99, PIK 60,612,076
--------------
200,013,663
- ------------------------------------------------------------
Chemicals--3.4%
B2 20,000 Arcadian Partners L.P.,
Sr. Notes, Ser. A,
10.75%, 5/1/05 22,100,000
Ba3 49,800 G.I. Holdings, Inc.,
Zero Coupon, 10/1/98 38,595,000
B1 13,000 Huntsman Corp.,
First Mtge. Notes,
10.625%, 4/15/01 14,508,000
NR 19,427 Indspec Chemical Corp.,
Sr. Sub. Notes,
Zero Coupon (until
12/1/98),
11.50%, 12/1/03 16,221,545
B1 4,800 Sherritt Gordon Ltd.,
Sr. Notes,
9.75%, 4/1/03 5,112,000
B1 25,000 Sherritt, Inc., Deb.,
10.50%, 3/31/14 27,281,250
NR 16,500 Terra Industries, Inc.,
Sr. Notes,
10.50%, 6/15/05 18,191,250
--------------
142,009,045
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5 -----
<PAGE>
Portfolio of Investments
as of December 31, 1995 PRUDENTIAL HIGH YIELD FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
<C> <C> <S> <C>
- ------------------------------------------------------------
Consumer Goods--2.2%
NR $ 6,000D Hines Horticulture, Inc.,
Sr. Sub. Notes,
(cost $6,000,000;
purchased-1995),
11.75%, 10/15/05 $ 6,240,000
B2 31,345 Revlon Consumer Products
Corp., Sr. Notes,
9.375%, 4/1/01 31,736,813
B3 57,500 Revlon Worldwide Corp.,
Sr. Sec'd. Notes,
Zero Coupon, 3/15/98 42,693,750
B2 10,500 Samsonite Corp.,
Sr. Notes,
11.125%, 7/15/05 10,080,000
--------------
90,750,563
- ------------------------------------------------------------
Diversified Industries--3.5%
NR 4,000 Envirodyne Industries,
Inc.,
Sr. Notes,
12.00%, 6/15/00 3,890,000
Caa 5,000 Fairchild Corp.,
Sub. Deb.,
12.00%, 10/15/01 4,700,000
B3 14,800 Fairchild Industries,
Inc.,
Sr. Sec'd. Notes,
12.25%, 2/1/99 15,688,000
IMO Industries, Inc.,
Sr. Sub. Deb.,
B3 9,659 12.25%, 8/15/97 9,659,000
B3 5,750 12.00%, 11/1/01 5,865,000
Interlake Corp.,
B2 12,350 Sr. Notes,
12.00%, 11/15/01 12,473,500
B3 24,170 Sr. Sub. Deb.,
12.125%, 3/1/02 22,961,500
B3 27,000 Jordan Industries, Inc.,
Sr. Notes,
10.375%, 8/1/03 24,030,000
Caa 12,850 Kenetech Corp.,
Sr. Sec'd. Notes,
12.75%, 12/15/02 4,754,500
B3 $10,500 Newflo Corp.,
Sub. Notes,
13.25%, 11/15/02 $ 10,920,000
B2 5,800D Remington Arms, Inc.,
Sr. Sub. Notes,
(cost $5,002,375;
purchased-1994),
10.00%, 12/1/03 4,814,000
NR 29,000D/@ Terex Corp.,
Sr. Notes,
(cost $28,950,000;
purchased-1995),
13.75%, 5/15/02 25,375,000
--------------
145,130,500
- ------------------------------------------------------------
Drugs & Health Care--3.8%
B2 36,950 Magellan Health Services,
Inc.,
11.25%, 4/15/04 40,460,250
Tenet Healthcare Corp.,
Ba2 43,000 Sr. Notes,
8.625%, 12/1/03 45,150,000
Ba3 64,500 Sr. Sub. Notes,
10.125%, 3/1/05 71,756,250
--------------
157,366,500
- ------------------------------------------------------------
Energy--5.8%
California Energy Co.,
Inc.,
Ba3 30,250 Disc. Notes,
Zero Coupon (until
1/15/97),
10.25%, 1/15/04 28,586,250
Ba3 10,000 Sr. Notes,
9.875%, 6/30/03 10,500,000
NR 30,000 Clark R&M Holdings, Inc.,
Sr. Sec'd. Notes,
Zero Coupon, 2/15/00 19,912,500
B1 20,000D Clark USA, Inc.,
Sr. Notes,
(cost $20,000,000;
purchased-1995),
10.875%, 12/1/05 21,000,000
</TABLE>
- --------------------------------------------------------------------------------
- ----- 6 See Notes to Financial Statements.
<PAGE>
<PAGE>
Portfolio of Investments
as of December 31, 1995 PRUDENTIAL HIGH YIELD FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
<C> <C> <S> <C>
- ------------------------------------------------------------
Energy (cont'd.)
Caa $11,750 Empire Gas Corp.,
Sr. Sec'd. Notes,
7.00% (until 7/15/99),
12.875%, 7/15/04 $ 10,222,500
B2 10,250 Falcon Drilling, Inc.,
Sr. Notes,
9.75%, 1/15/01 10,531,875
Gulf Canada Resources,
Ltd.,
Ba3 35,480 Sr. Sub. Deb.,
9.25%, 1/15/04 36,721,800
Ba3 40,000 Sr. Sub. Notes,
9.625%, 7/1/05 42,200,000
Petroleum Heat & Power,
Inc.,
B2 11,980 Sub. Deb.,
9.375%, 2/1/06 11,500,800
B2 8,010 Sub. Notes,
10.125%, 4/1/03 7,849,800
B1 23,814 Triton Energy Corp.,
Sr. Sub. Disc. Notes,
Zero Coupon (until
12/15/96),
9.75%, 12/15/00 22,444,695
B2 6,500 United Meridian Corp.,
Sr. Sub. Notes,
10.375%, 10/15/05 6,873,750
B1 10,800 Vintage Petroleum, Inc.,
Sr. Sub. Notes,
9.00%, 12/15/05 10,921,500
--------------
239,265,470
- ------------------------------------------------------------
Financial Services--0.5%
B1 18,700 Reliance Group Holdings,
Inc.,
Sr. Sub. Deb.,
9.75%, 11/15/03 19,261,000
- ------------------------------------------------------------
Food & Beverage--3.0%
B3 12,500 Curtice Burns Foods, Inc.,
Sr. Sub. Notes,
12.25%, 2/1/05 12,812,500
NR $19,372D Del Monte Corp.,
Sub. Notes,
(cost $19,726,434;
purchased-1993),
12.25%, 9/1/02, PIK $ 15,303,880
Caa 28,698 Fresh Del Monte Produce,
N.V.,
Sr. Notes,
10.00%, 5/1/03 25,828,200
Ca 12,531* Heileman Acquisition
Corp.,
Sr. Sub. Notes,
9.625%, 1/31/04 3,383,370
B3 7,475 Pilgrim's Pride Corp.,
Sr. Sub. Notes,
10.875%, 8/1/03 6,615,375
B3 13,237 PM Holdings Corp.,
Sub. Notes,
Zero Coupon (until
9/1/00),
11.50%, 9/1/05 6,949,425
Premium Standard Farms
L.P.,
NR 34,627 Sr. Disc. Notes,
Zero Coupon (until
9/15/96),
12.00%, 9/15/03 27,009,060
NR 10,000 Sr. Notes,
12.25%, 6/15/04 9,200,000
Specialty Foods Corp.,
Caa 9,550 Sr. Sub. Notes,
11.25%, 8/15/03 8,595,000
B3 7,000 Sr. Unsec'd. Notes,
10.25%, 8/15/01 6,580,000
--------------
122,276,810
- ------------------------------------------------------------
Leisure & Tourism--4.6%
NR 26,000D HMC Acquisition
Properties,
Inc., Sr. Notes,
(cost $26,000,000;
purchased-1995),
9.00%, 12/15/07 26,260,000
B1 68,000 HMH Properties, Inc.,
Sr. Notes,
9.50%, 5/15/05 69,530,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7 -----
<PAGE>
Portfolio of Investments
as of December 31, 1995 PRUDENTIAL HIGH YIELD FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
<C> <C> <S> <C>
- ------------------------------------------------------------
Leisure & Tourism (cont'd.)
B1 $54,000 Host Marriott Travel
Plazas,
Inc., Sr. Notes,
9.50%, 5/15/05 $ 53,460,000
John Q Hammonds Hotels,
First Mtge. Notes,
B1 25,615 8.875%, 2/15/04 25,358,850
B1 12,750D 9.75%, 10/1/05
(cost $12,776,250;
purchased-1995), 13,132,500
--------------
187,741,350
- ------------------------------------------------------------
Miscellaneous Services--0.5%
B2 1,150 Clean Harbors, Inc.,
Sr. Notes,
12.50%, 5/15/01 517,500
NR 18,000 United Stationers Supply
Co.,
Sr. Notes,
12.75%, 5/1/05 19,665,000
--------------
20,182,500
- ------------------------------------------------------------
Paper & Forest Products--6.0%
B1 28,500 Container Corp.,
Sr. Notes,
11.25%, 5/1/04 29,355,000
Gaylord Container Corp.,
B3 4,250 Sr. Notes,
11.50%, 5/15/01 4,377,500
Caa 32,890 Sr. Sub. Disc. Deb.,
Zero Coupon (until
5/15/96),
12.75%, 5/15/05 32,396,650
Ba3 25,500 Indah Kiat Int'l. Finance
Co.,
Sr. Sec'd. Notes, Ser. C,
12.50%, 6/15/06 25,245,000
B3 10,750 Ivex Packaging Corp.,
Sr. Sub. Notes,
12.50%, 12/15/02 11,395,000
Ba3 $ 9,500 Malette, Inc.,
Sr. Sec'd. Notes,
12.25%, 7/15/04 $ 10,640,000
B3 38,653 Pacific Lumber Co.,
Sr. Notes,
10.50%, 3/1/03 36,623,717
B1 15,000 SD Warren Co.,
Sr. Sub. Notes,
12.00%, 12/15/04 16,537,500
Ba1 38,900 Stone Consolidated, Inc.,
Sr. Sub. Notes,
10.25%, 12/15/00 41,623,000
Stone Container Corp.,
B1 19,500 First Mtge. Notes,
10.75%, 10/1/02 20,133,750
Sr. Notes,
B1 1,000 12.625%, 7/15/98 1,055,000
B1 14,272 11.875%, 12/1/98 14,878,560
--------------
244,260,677
- ------------------------------------------------------------
Plastic Products--0.8%
B2 19,800 Applied Extrusion
Technology, Inc.,
Sr. Notes,
11.50%, 4/1/02 21,285,000
B3 12,000 Plastic Specialty &
Technology, Inc.,
Sr. Notes,
11.25%, 12/1/03 10,860,000
--------------
32,145,000
- ------------------------------------------------------------
Printing--0.3%
Caa 10,000D Sullivan Graphics Inc.,
Sr. Sub. Notes,
(cost $10,000,000;
purchased-1995),
12.75%, 8/1/05 10,200,000
</TABLE>
- --------------------------------------------------------------------------------
- ----- 8 See Notes to Financial Statements.
<PAGE>
Portfolio of Investments
as of December 31, 1995 PRUDENTIAL HIGH YIELD FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
<C> <C> <S> <C>
- ------------------------------------------------------------
Publishing--1.1%
B3 $12,250 Affiliated Newspapers,
Sr. Disc. Notes,
Zero Coupon (until
7/1/99),
13.25%, 7/1/06 $ 7,533,750
B1 10,000 American Media Operations,
Inc., Sr. Sub. Notes,
11.625%, 11/15/04 10,100,000
B2 8,334 Big Flower Press, Inc.,
Sr. Sub. Notes,
10.75%, 8/1/03 8,875,710
B3 22,750 Marvel Holdings, Inc.,
Sr. Notes,
Zero Coupon, 4/15/98 16,380,000
--------------
42,889,460
- ------------------------------------------------------------
Restaurants--0.5%
B2 20,700 Flagstar Corp.,
Sr. Notes,
10.75%, 9/15/01 18,837,000
- ------------------------------------------------------------
Retail--1.2%
Caa 12,250 Apparel Retailers, Inc.,
Sr. Disc. Deb.,
Zero Coupon (until
8/15/98),
12.75%, 8/15/05 7,472,500
B2 10,000 Brylane L.P.,
Sr. Sub. Notes,
10.00%, 9/1/03 8,850,000
B3 14,290 Specialty Retailers, Inc.,
Sr. Sub. Notes,
11.00%, 8/15/03 13,003,900
NR 24,000D Thrifty Payless Holdings,
Inc.,
Sr. Notes,
(cost $21,026,649;
purchased-1995),
11.625%, 4/15/06,PIK 21,600,000
--------------
50,926,400
Steel & Metals--3.5%
B3 $22,061 Envirosource, Inc., Sr.
Notes,
9.75%, 6/15/03 $ 19,303,375
B2 10,000 Horsehead Industries,
Inc.,
Sub. Notes,
14.00%, 6/1/99 10,467,000
B1 42,075 Kaiser Aluminum & Chemical
Corp., Sr. Notes,
9.875%, 2/15/02 43,232,063
B3 11,695 Silgan Corp.,
Sr. Sub. Deb.,
11.75%, 6/15/02 12,513,650
B2 9,840 Ucar Global Enterprises,
Inc.,
Sr. Sub. Notes,
12.00%, 1/15/05 11,365,200
B1 27,000 WCI Steel, Inc.,
Sr. Notes,
10.50%, 3/1/02 26,257,500
B1 20,000 Wheeling Pittsburgh Corp.,
Sr. Notes,
9.375%, 11/15/03 18,900,000
--------------
142,038,788
- ------------------------------------------------------------
Supermarkets--4.7%
B3 26,350 Brunos, Inc.,
Sr. Sub. Notes,
10.50%, 8/1/05 26,086,500
B3 15,610 Dominicks Finer Foods,
Inc.,
Sr. Sub. Notes,
10.875%, 5/1/05 16,585,625
Caa 15,200 Food 4 Less Holdings,
Inc.,
Sr. Disc. Deb.,
Zero Coupon (until
6/15/00),
13.625%, 7/15/05 7,220,000
Pathmark Stores, Inc.,
B2 35,788 Sr. Sub. Notes,
9.625%, 5/1/03 34,803,830
Sub. Notes,
B3 14,000 11.625%, 6/15/02 14,035,000
B3 10,500 12.625%, 6/15/02 10,815,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 9 -----
<PAGE>
<PAGE>
Portfolio of Investments
as of December 31, 1995 PRUDENTIAL HIGH YIELD FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
<C> <C> <S> <C>
- ------------------------------------------------------------
Supermarkets (cont'd.)
Penn Traffic Co.,
Sr. Notes,
Ba3 $ 6,695 10.375%, 10/1/04 $ 6,326,775
Ba3 18,750 10.65%, 11/1/04 17,906,250
B2 21,605 Pueblo Xtra Int'l., Inc.,
Sr. Notes,
9.50%, 8/1/03 20,632,775
B1 26,795 Ralphs Grocery Co.,
Sr. Notes,
10.45%, 6/15/04 27,196,925
B2 10,000 Southland Corp.,
Sr. Sub. Deb.,
12.00%, 6/15/09 9,950,000
--------------
191,558,680
- ------------------------------------------------------------
Technology--0.2%
NR 8,750 Waters Corp.,
Sr. Sub. Notes,
12.75%, 9/30/04 7,350,560
- ------------------------------------------------------------
Telecommunications--11.9%
B2 18,000 Call-Net Enterprises,
Sr. Disc. Notes,
Zero Coupon (until
12/1/99),
13.25%, 12/1/04 12,870,000
NR 27,000D/@ Cellnet Data Systems,
Inc.,
Sr. Disc. Notes,
(cost $15,328,273;
purchased-1995),
Zero Coupon (until
6/15/00),
13.00%, 6/15/05 16,200,000
B3 22,250@ Cellular Communications
Int'l., Inc.,
Sr. Disc. Notes,
Zero Coupon, 8/15/00 13,683,750
Caa 58,305 Cencall Communications
Corp.,
Sr. Disc. Notes,
Zero Coupon (until
1/15/99),
10.125%, 1/15/04 32,942,325
Centennial Cellular Corp.,
Sr. Notes,
B2 $29,925 8.875%, 11/1/01 $ 29,476,125
B2 15,495 10.125%, 5/15/05 16,308,487
B3 12,650@ Clearnet Communications,
Inc., Sr. Disc. Notes,
Zero Coupon (until
12/15/00),
14.75%, 12/15/05 6,609,625
NR 38,000D/@ Comcel, Notes,
(cost $20,450,551;
purchased-1995),
Zero Coupon (until
11/15/00),
13.125%, 11/15/03 21,565,000
Dial Call Communications,
Inc.,
Sr. Disc. Notes,
Caa 13,000 Zero Coupon (until
4/15/99),
12.25%, 4/15/04 7,410,000
Caa 4,250 Zero Coupon (until
12/15/98),
10.25%, 12/15/05 2,252,500
B3 7,000 Dictaphone Corp.,
Sr. Notes,
11.75%, 8/1/05 6,930,000
GST Telecommunciations,
Inc.,
NR 17,360D/@ Sr. Disc. Notes,
(cost $8,928,806;
purchased-1995),
Zero Coupon (until
12/15/00),
13.875%, 12/15/05 8,246,000
NR 2,170D Sr. Notes,
(cost $1,116,101;
purchased-1995),
Zero Coupon (until
12/15/00),
13.875%, 12/15/05 1,030,750
B3 6,500D/@ Heartland Wireless
Communication, Inc.,
Sr. Notes,
(cost $6,500,000;
purchased-1995),
13.00%, 4/15/03 7,345,000
NR 38,730D Intelcom Group, Inc.,
Sr. Disc. Notes,
(cost $21,231,677;
purchased-1995),
Zero Coupon (until
9/15/00),
13.50%, 9/15/05 22,463,400
</TABLE>
- --------------------------------------------------------------------------------
- ----- 10 See Notes to Financial Statements.
<PAGE>
Portfolio of Investments
as of December 31, 1995 PRUDENTIAL HIGH YIELD FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
<C> <C> <S> <C>
- ------------------------------------------------------------
Telecommunications (cont'd.)
B3 $11,250 Intermedia Communications
of Florida,
Sr. Notes,
13.50%, 6/1/05 $ 12,543,750
B2 11,500 Metrocall, Inc.,
Sr. Sub. Notes,
10.375%, 10/1/07 12,190,000
B2 43,805 MFS Communications, Inc.,
Disc. Notes,
Zero Coupon (until
1/15/99),
9.375%, 1/15/04 35,372,537
Mobilemedia
Communications, Inc.,
B3 32,810 Sr. Notes,
Zero Coupon (until
12/1/98),
10.50%, 12/1/03 25,591,800
B3 25,000 Sr. Sub. Notes,
9.375%, 11/1/07 25,750,000
Nextel Communications,
Inc.,
Sr. Disc. Notes,
B3 22,120 Zero Coupon (until
9/1/98),
11.50%, 9/1/03 13,935,600
B3 23,025 Zero Coupon (until
2/15/99),
9.75%, 8/15/04 12,491,063
Pagemart Nationwide, Inc.,
Sr. Disc. Notes,
NR 16,525 Zero Coupon (until
11/1/98),
12.25%, 11/1/03 12,269,813
NR 23,000 Zero Coupon (until
12/1/00),
15.00%, 2/1/05 15,065,000
Paging Network, Inc.,
Sr. Sub. Notes,
B2 29,300 8.875%, 2/1/06 30,032,500
B2 16,000 10.125%, 8/1/07 17,320,000
Pricellular Wireless
Corp.,
Sr. Disc. Notes,
B3 10,000 Zero Coupon (until
11/15/97),
14.00%, 11/15/01 8,800,000
B3 25,100 Zero Coupon (until
10/1/98),
12.25%, 10/1/03 19,389,750
USA Mobile Communications,
Inc.,
Sr. Notes,
B3 $ 5,350 9.50%, 2/1/04 $ 5,296,500
B3 8,000 14.00%, 11/1/04 9,360,000
Winstar Communications, Inc.,
Sr. Notes,
NR 15,550D/@ (cost $8,116,850;
purchased-1995),
Zero Coupon (until
10/15/00),
14.00%, 10/15/05 8,215,065
NR 31,100D/@ (cost $16,233,700;
purchased-1995) Zero
Coupon (until 10/15/00),
14.00%, 10/15/05 16,430,130
--------------
485,386,470
- ------------------------------------------------------------
Textiles--0.7%
Ca 1* Forstmann Textiles, Inc.,
Sr. Sub. Notes,
14.75%, 4/15/99 200
B3 28,850 Westpoint Stevens, Inc.,
Sr. Sub. Deb.,
9.375%, 12/15/05 28,489,375
--------------
28,489,575
- ------------------------------------------------------------
Transportation/Trucking/Shipping--0.8%
B3 11,200 OMI Corp.,
Sr. Notes,
10.25%, 11/1/03 9,968,000
B1 10,000 TNT Transport,
Sr. Notes,
11.50%, 4/15/04 10,475,000
B2 11,535 Trism, Inc.,
Sr. Sub. Notes,
10.75%, 12/15/00 11,361,975
--------------
31,804,975
--------------
Total bonds
(cost $3,837,080,734) 3,927,357,358
--------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 11 -----
<PAGE>
<PAGE>
Portfolio of Investments
as of December 31, 1995 PRUDENTIAL HIGH YIELD FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Description Value
Shares Description Value (Note 1)
- -------------------------------------------------------------
PREFERRED STOCKS--0.7%
144,500D Cablevision Systems Corp., $11.75
(cost $14,450,000;
purchased-1995) $ 14,883,500
20,000DD Color Tile, Inc., $14.50, Sr. Cum. 20,000
18,340D Premium Standard Farms, $12.50
(cost $1,834,000;
purchased-1992) 1,283,800
354,240 Riggs National Corp. Washington
D.C., $10.75 9,830,160
West Federal Holdings, Inc.,
81,631D/DD Cum. Sr. Pfd., $15.50
(cost $8,000,000;
purchased-1988) 816
26,078D/DD Sr. Pfd., Ser. A, $15.50 (cost
$674,047;
purchased-1990) 261
---------------
Total preferred stocks (cost
$37,869,027) 26,018,537
---------------
COMMON STOCKSDD--0.2%
12,250 Affiliated Newspapers 367,500
7,000D Dial Call Communications, Inc.
(cost $0; purchased-1995) 70
72,580D Dr Pepper Bottling Co., C1.A,
(cost $65,322; purchased-1992) 254,030
428,333 EnviroSource, Inc. 1,284,999
324,735 Gaylord Container Corp., C1.A 2,618,176
6,500 Heartland Wireless Communications,
Inc. 0
69,374 Metromedia Corp. 971,236
71,750D PageMart Nationwide, Inc.
(cost $502,250; purchased-1995) 672,656
31,559D Peachtree Cable Assn., Ltd.
(cost $315,590; purchased-1986) 307,700
3,679D PM Holdings Corp; (cost $0;
purchased-1993) 0
4,500 Smittys Supermarkets, Inc. 27,000
116,000D Terex Corp. (cost $0;
purchased-1995) 0
323,000 Thrifty Payless Holdings, Inc. 1,372,750
1,051,135 Triton Group Ltd. 525,568
7,641 Walter Industries, Inc. 100,288
---------------
Total common stocks (cost
$11,523,420) 8,501,973
---------------
WARRANTSDD--0.1%
41,000D American Telecasting, Inc. (cost
$0; purchased-1995), expiring
8/10/00 $ 0
22,841 Casino America Corp.,
expiring 11/15/96 228
60,000 Casino Magic Corp.,
expiring 10/14/96 600
108,000 Cellnet Data Systems, Inc.
expiring 6/15/05 0
22,250 Cellular Communications Int'l.,
Inc.,
expiring 8/15/03 0
41,745 Clearnet Communications, Inc.,
expiring 9/15/05 0
38,000 Comcel,
expiring 11/15/03 0
14,273D Dial Call Communications, Inc.,
(cost $0; purchased-1993)
expiring 12/15/98 143
14,835 Empire Gas Corp.,
expiring 7/15/04 29,670
20,250 Foamex JPS Automotive L.P.,
expiring 7/1/99 101,250
417,518 Gaylord Container Corp.,
expiring 7/31/96 3,131,385
127,809D Intelecom Group, Inc.,
(cost $0; purchased-1995),
expiring 9/15/05 639,045
11,250D Intermedia Communications of
Florida,
(cost $0; purchased-1995),
expiring 6/1/00 0
44,150D President Riverboat Casinos Inc.
(cost $0; purchased-1994),
expiring 9/30/99 0
44,500 United Int'l. Holdings, Inc.,
expiring 11/15/99 1,201,500
---------------
Total warrants (cost $220,009) 5,103,821
---------------
Total long-term investments
(cost $3,886,693,190) 3,966,981,689
---------------
</TABLE>
- --------------------------------------------------------------------------------
- ----- 12 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL HIGH YIELD FUND, INC.
Portfolio of Investments as of December 31, 1995
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
<C>
------------------------------------------------------------
SHORT-TERM INVESTMENTS--1.2%
- ------------------------------------------------------------
Commercial Paper--1.2%
$ 49,805 Lehman Brothers Hldgs., Inc.
6.10%, 1/2/96
(cost $49,796,561) $ 49,796,561
- ------------------------------------------------------------
Total Investments--98.2%
(cost $3,936,489,751; Note 4) 4,016,778,250
Other assets in excess of
liabilities--1.8% 74,499,984
---------------
Net Assets--100% $ 4,091,278,234
---------------
---------------
- ---------------
NR--Not rated by Moody's or Standard & Poor's.
PIK--Payment in kind securities.
L.P.--Limited Partnership.
* Represents issuer in default on interest payments;
non-income producing security.
D Indicates a restricted security; the aggregate cost of
such securities is $321,791,548. The aggregate value
($317,210,621) is approximately 7.8% of net assets.
DD Non-income producing securities.
@ Consists of more than one class of securities traded
together as a unit; generally bonds with attached stock
or warrants.
The Fund's current Prospectus contains a description of
Moody's and Standard & Poor's ratings.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 13 -----
<PAGE>
Statement of Assets and Liabilities PRUDENTIAL HIGH YIELD FUND, INC.
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S>
<C>
Assets
December 31, 1995
Investments, at value (cost
$3,936,489,751).............................................................
$ 4,016,778,250
Cash.........................................................................
........................... 222,341
Interest
receivable...................................................................
.................. 66,607,313
Receivable for Fund shares
sold.........................................................................
49,917,012
Receivable for investments
sold.........................................................................
2,535,553
Deferred expenses and other
assets......................................................................
99,657
-----------------
Total
assets.......................................................................
.................. 4,136,160,126
-----------------
Liabilities
Payable for investments
purchased.......................................................................
30,362,554
Payable for Fund shares
reacquired......................................................................
6,685,107
Dividends
payable......................................................................
................. 3,187,182
Due to
Distributors.................................................................
.................... 1,899,981
Due to
Manager......................................................................
.................... 1,392,793
Accrued
expenses.....................................................................
................... 1,354,275
-----------------
Total
liabilities..................................................................
.................. 44,881,892
-----------------
Net
Assets.......................................................................
....................... $ 4,091,278,234
-----------------
-----------------
Net assets were comprised of:
Common stock, at
par..........................................................................
....... $ 4,999,999
Paid-in capital in excess of
par.....................................................................
4,719,988,865
-----------------
4,724,988,864
Undistributed net investment
income..................................................................
3,971,195
Accumulated net realized loss on
investments.........................................................
(717,970,324)
Net unrealized appreciation of
investments...........................................................
80,288,499
-----------------
Net assets, December 31,
1995...........................................................................
$ 4,091,278,234
-----------------
-----------------
Class A:
Net asset value and redemption price per share
($1,336,354,256 / 163,204,029 shares of common stock issued and
outstanding)...................... $8.19
Maximum sales charge (4.00% of offering
price).......................................................
.34
Maximum offering price to
public.....................................................................
$8.53
Class B:
Net asset value, offering price and redemption price per share
($2,730,903,446 / 333,859,114 shares of common stock issued and
outstanding)...................... $8.18
Class C:
Net asset value, offering price and redemption price per share
($24,020,532 / 2,936,755 shares of common stock issued and
outstanding)........................... $8.18
</TABLE>
- --------------------------------------------------------------------------------
- ----- 14 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL HIGH YIELD FUND, INC.
Statement of Operations
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income December 31, 1995
-----------------
<S> <C>
Income
Interest.............................. $ 410,479,460
Dividends............................. 3,195,802
-----------------
Total income....................... 413,675,262
-----------------
Expenses
Distribution fee--Class A............. 1,584,833
Distribution fee--Class B............. 20,440,387
Distribution fee--Class C............. 90,469
Management fee........................ 15,779,009
Transfer agent's fees and expenses.... 4,819,000
Reports to shareholders............... 883,000
Custodian's fees and expenses......... 445,000
Franchise taxes....................... 287,000
Registration fees..................... 191,000
Insurance expense..................... 114,000
Audit fee and expenses................ 77,000
Directors' fees and expenses.......... 37,000
Legal fees and expenses............... 25,000
Miscellaneous......................... 12,351
-----------------
Total operating expenses........... 44,785,049
Loan commitment fees (Note 2)......... 178,500
-----------------
Total expenses..................... 44,963,549
-----------------
Net investment income.................... 368,711,713
-----------------
Realized and Unrealized Gain
(Loss) on Investments
Net realized loss on investment
transactions.......................... (129,423,086)
Net change in unrealized appreciation of
investments........................... 373,919,552
-----------------
Net gain on investments.................. 244,496,466
-----------------
Net Increase in Net Assets
Resulting from Operations................ $ 613,208,179
-----------------
-----------------
</TABLE>
PRUDENTIAL HIGH YIELD FUND, INC.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended December 31,
in Net Assets 1995 1994
<S> <C> <C>
Operations
Net investment income....... $ 368,711,713 $ 347,531,971
Net realized loss on
investment
transactions............. (129,423,086) (17,213,168)
Net change in unrealized
appreciation
(depreciation) of
investments.............. 373,919,552 (437,098,902)
---------------- ----------------
Net increase (decrease) in
net assets resulting from
operations............... 613,208,179 (106,780,099)
---------------- ----------------
Net equalization credits....... 155,052 53,408
---------------- ----------------
Dividends and distributions (Note 1)
Dividends from net
investment income
Class A.................. (107,009,035) (16,316,609)
Class B.................. (260,558,397) (331,100,240)
Class C.................. (1,144,281) (115,122)
---------------- ----------------
(368,711,713) (347,531,971)
---------------- ----------------
Distributions in excess of
net investment income
Class A.................. (2,494,359) (381,078)
Class B.................. (5,281,164) (9,346,220)
Class C.................. (32,071) (3,979)
---------------- ----------------
(7,807,594) (9,731,277)
---------------- ----------------
Fund share transactions (net of
share conversions) (Note 5)
Net proceeds from shares
sold..................... 1,732,422,699 1,151,307,757
Net asset value of shares
issued in reinvestment of
dividends and
distributions............ 180,623,667 169,199,573
Cost of shares reacquired... (1,536,230,023) (1,294,875,001)
---------------- ----------------
Net increase in net assets
from Fund share
transactions............. 376,816,343 25,632,329
---------------- ----------------
Total increase (decrease)...... 613,660,267 (438,357,610)
Net Assets
Beginning of year.............. 3,477,617,967 3,915,975,577
---------------- ----------------
End of year.................... $ 4,091,278,234 $ 3,477,617,967
---------------- ----------------
---------------- ----------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 15 -----
<PAGE>
<PAGE>
Notes to Financial Statements PRUDENTIAL HIGH YIELD FUND, INC.
- --------------------------------------------------------------------------------
Prudential High Yield Fund, Inc. (the ``Fund'') is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The primary investment objective of the Fund is to maximize current
income through investment in a diversified portfolio of high yield fixed-income
securities which, in the opinion of the Fund's investment adviser, do not
subject the Fund to unreasonable risks. As a secondary investment objective, the
Fund will seek capital appreciation but only when consistent with its primary
objective. Lower rated or unrated (i.e. high yield) securities are more likely
to react to developments affecting market risk (general market liquidity) and
credit risk (an issuer's inability to meet principal and interest payments on
its obligations) than are more highly rated securities, which react primarily
to
movements in the general level of interest rates. The ability of issuers of debt
securities held by the Fund to meet their obligations may be affected by
economic developments in a specific industry or region.
- ------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Security Valuation: Portfolio securities that are actively traded in the
over-the-counter market, including listed securities for which the primary
market is believed to be over-the-counter, are valued at prices provided by
principal market makers and pricing agents. Any security for which the primary
market is on an exchange is valued at the last sales price on such exchange on
the day of valuation or, if there was no sale on such day, the last bid price
quoted on such day. Securities issued in private placements are valued at the
bid price or the mean between the bid and asked prices, if available, provided
by principal market makers. Any security for which a reliable market quotation
is unavailable is valued at fair value as determined in good faith by or under
the direction of the Fund's Board of Directors.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost, which approximates market value.
In connection with transactions in repurchase agreements, it is the Fund's
policy that its custodian or designated subcustodians, under triparty repurchase
agreements as the case may be, take possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest and, to the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. If
the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
The Fund may hold up to 15% of its net assets in illiquid securities, including
those which are restricted as to disposition under securities law (``restricted
securities''). Certain issues of restricted securities held by the Fund at
December 31, 1995 include registration rights under which the Fund may demand
registration by the issuer, some of which are currently under contract to be
registered. Restricted securities, sometimes referred to as private placements,
are valued pursuant to the valuation procedures noted above.
Securities Transactions and Net Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of portfolio
securities are calculated on an identified cost basis. Interest income is
recorded on an accrual basis and dividend income is recorded on the ex-dividend
date. The Fund accretes original issue discounts as adjustments to interest
income. Income from payment-in-kind bonds is recorded daily based on an
effective interest method. Expenses are recorded on the accrual basis which may
require the use of certain estimates by management.
Net investment income (other than distribution fees) and unrealized and realized
gains or losses are allocated daily to each class of shares of the Fund based
upon the relative proportion of net assets of each class at the beginning of the
day.
Federal Income Taxes: It is the intent of the Fund to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
Dividends and Distributions: The Fund declares daily and pays dividends of net
investment income monthly and makes distributions at least annually of any net
capital gains. Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
market discount and wash sales.
Equalization: The Fund follows the accounting practice known as equalization,
by
which a portion of the proceeds from sales and costs of reacquisitions of Fund
shares, equivalent on a per share basis to the amount of distributable net
investment income on the date of the transaction, is
- --------------------------------------------------------------------------------
- ----- 16
<PAGE>
<PAGE>
Notes to Financial Statements PRUDENTIAL HIGH YIELD FUND, INC.
- --------------------------------------------------------------------------------
credited or charged to undistributed net investment income. As a result,
undistributed net investment income per share is unaffected by sales or
reacquisitions of the Fund's shares.
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with AICPA Statement of Position
93-2: Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. The
effect of applying this statement was to increase undistributed net investment
income and increase accumulated net realized loss on investments by $5,713,830.
This was primarily due to sale of securities purchased with market discounts for
the year ended December 31, 1995. Net investment income, net realized gains and
net assets were not affected by this change.
- ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential Mutual Fund Management, Inc.
(``PMF''). Pursuant to this agreement PMF has responsibility for all investment
advisory services and supervises the subadviser's performance of such services.
PMF has entered into a subadvisory agreement with The Prudential Investment
Corporation (``PIC''); PIC furnishes investment advisory services in connection
with the management of the Fund. PMF pays for the cost of the subadviser's
services, the compensation of officers of the Fund, occupancy and certain
clerical and bookkeeping costs of the Fund. The Fund bears all other costs and
expenses.
The management fee paid PMF is computed daily and payable monthly, at an annual
rate of .50% of the Fund's average daily net assets up to $250 million, .475%
of
the next $500 million, .45% of the next $750 million, .425% of the next $500
million, .40% of the next $500 million, .375% of the next $500 million and .35%
of the Fund's average daily net assets in excess of $3 billion.
The Fund had a distribution agreement with Prudential Mutual Fund Distributors,
Inc. (``PMFD''), which acted as the distributor of the Class A shares of the
Fund through January 1, 1996. Prudential Securities Incorporated (``PSI'') is
the distributor of the Class B and Class C shares of the Fund. The Fund
compensated PMFD and PSI for distributing and servicing the Fund's Class A,
Class B and Class C shares, pursuant to plans of distribution (the ``Class A,
B
and C Plans''), regardless of expenses actually incurred by them. The
distribution fees are accrued daily and payable monthly. Effective January 2,
1996, PSI became the distributor of the Class A shares of the Fund and is
serving the Fund under the same terms and conditions as under the arrangement
with PMFD.
Pursuant to the Class A, B and C Plans, the Fund compensates PSI, and PMFD for
the year ended December 31, 1995 with respect to Class A shares, for
distribution-related activities at an annual rate of up to .30 of 1%, .75 of 1%
and 1%, of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the Plans were .15 of 1%, .75 of 1% and .75
of
1% of the average daily net assets of the Class A, B and C shares, respectively,
for the year ended December 31, 1995.
PMFD has advised the Fund that it has received approximately $1,137,900 in
front-end sales charges resulting from sales of Class A shares during the year
ended December 31, 1995. From these fees, PMFD paid such sales charges to
dealers (PSI and Prusec) which in turn paid commissions to salespersons.
PSI has advised the Fund that for the year ended December 31, 1995, it received
approximately $5,035,900 and $13,100 in contingent deferred sales charges
imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
The Fund has entered into a credit agreement (the ``Agreement'') with State
Street Bank and Trust Co. with a maximum commitment under the Agreement of
$75,000,000 which expires on December 2, 1996. Interest on any such borrowings
outstanding will be at market rates. The Fund has not borrowed any monies
pursuant to the Agreement. The Fund pays commitment fees at an annual rate of
.10 of 1% on the $75,000,000 (unused portion of the credit facility). Prior to
December 2, 1995, the Fund paid commitment fees at an annual rate of .25 of 1%.
- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services Inc. (``PMFS''), a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent and during the year ended December 31,
1995, the Fund incurred fees of approximately $3,590,000 for the services of
PMFS. As of December 31, 1995, $301,000 of such fees were due to PMFS. Transfer
agent fees and expenses in the Statement of Operations include certain
out-of-pocket expenses paid to non-affiliates.
- --------------------------------------------------------------------------------
17 -----
<PAGE>
<PAGE>
Notes to Financial Statements PRUDENTIAL HIGH YIELD FUND, INC.
- --------------------------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the year ended December 31, 1995 were $3,145,471,164 and $2,810,034,331,
respectively.
The federal income tax basis of the Fund's investments, including short-term
investments, as of December 31, 1995 was $3,937,930,238; accordingly, net
unrealized appreciation for federal income tax purposes was $78,848,012 (gross
unrealized appreciation--$170,085,126; gross unrealized
depreciation--$91,237,114).
For federal income tax purposes, the Fund has a capital loss carryforward as of
December 31, 1995 of approximately $710,666,900 of which $34,055,200 expires in
1997, $326,104,800 expires in 1998, $77,895,200 expires in 1999, $110,441,500
expires in 2000 and $162,170,200 expires in 2003. Accordingly, no capital gains
distribution is expected to be paid to shareholders until net gains have been
realized in excess of the aggregate of such amounts.
For federal income tax purposes, the Fund will elect to treat net capital losses
of approximately $5,862,900 incurred in the two month period ended December 31,
1995 as having been incurred in the following fiscal year.
- ------------------------------------------------------------
Note 5. Capital
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge of up to 4.00%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Class C shares are sold with a contingent
deferred sales charge of 1% during the first year. Class B shares will
automatically convert to Class A shares on a quarterly basis approximately seven
years after purchase. A special exchange privilege is also available for
shareholders who qualify to purchase Class A shares at net asset value.
The Fund has 3 billion shares of $.01 par value common stock authorized; equally
divided into Class A, B and C shares.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------ ------------ ---------------
<S> <C> <C>
Year ended December 31, 1995:
Shares sold................... 85,065,787 $ 680,939,054
Shares issued in reinvestment
of
dividends and
distributions............... 7,260,503 58,391,158
Shares reacquired............. (86,586,970) (693,700,291)
------------ ---------------
<CAPTION>
Class A Shares Amount
- ------------------------------ ------------ ---------------
<S> <C> <C>
Net increase in shares
outstanding before
conversion.................. 5,739,320 $ 45,629,921
Shares issued upon conversion
from Class B................ 136,453,614 1,063,977,235
------------ ---------------
Net increase in shares
outstanding................. 142,192,934 $ 1,109,607,156
------------ ---------------
------------ ---------------
Year ended December 31, 1994:
Shares sold................... 19,908,158 $ 161,976,895
Shares issued in reinvestment
of
dividends and
distributions............... 1,113,364 9,044,345
Shares reacquired............. (19,711,310) (160,632,506)
------------ ---------------
Net increase in shares
outstanding................. 1,310,212 $ 10,388,734
------------ ---------------
------------ ---------------
<CAPTION>
Class B
- ------------------------------
<S> <C> <C>
Year ended December 31, 1995:
Shares sold................... 127,682,310 $ 1,017,983,490
Shares issued in reinvestment
of
dividends and
distributions............... 15,200,641 121,565,304
Shares reacquired............. (104,007,242) (826,907,079)
------------ ---------------
Net increase in shares
outstanding before
conversion.................. 38,875,709 312,641,715
Shares reacquired upon
conversion into Class A..... (136,628,901) (1,063,977,235)
------------ ---------------
Net decrease in shares
outstanding................. (97,753,192) $ (751,335,520)
------------ ---------------
------------ ---------------
Year ended December 31, 1994:
Shares sold................... 118,792,264 $ 983,331,141
Shares issued in reinvestment
of
dividends and
distributions............... 19,713,254 160,105,285
Shares reacquired............. (138,058,355) (1,133,205,930)
------------ ---------------
Net increase in shares
outstanding................. 447,163 $ 10,230,496
------------ ---------------
------------ ---------------
<CAPTION>
Class C
- ------------------------------
<S> <C> <C>
Year ended December 31, 1995:
Shares sold................... 4,161,922 $ 33,500,155
Shares issued in reinvestment
of
dividends and
distributions............... 82,802 667,205
Shares reacquired............. (1,941,398) (15,622,653)
------------ ---------------
Net increase in shares
outstanding................. 2,303,326 $ 18,544,707
------------ ---------------
------------ ---------------
August 1, 1994* through
December 31, 1994:
Shares sold................... 757,753 $ 5,999,721
Shares issued in reinvestment
of
dividends and
distributions............... 6,428 49,943
Shares reacquired............. (130,752) (1,036,565)
------------ ---------------
Net increase in shares
outstanding................. 633,429 $ 5,013,099
------------ ---------------
------------ ---------------
- ---------------
*Commencement of offering of Class C shares.
</TABLE>
- --------------------------------------------------------------------------------
- ----- 18
<PAGE>
<PAGE>
Financial Highlights PRUDENTIAL HIGH YIELD FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
- -------------------------------------------------------------
Year Ended
December 31,
- -------------------------------------------------------------
1995 1994
1993 1992 1991
---------- --------
- -------- -------- -------
<S> <C> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year............ $ 7.68 $ 8.70
$ 8.19 $ 7.88 $ 6.72
---------- --------
- -------- -------- -------
Income from investment operations
Net investment income......................... .81 .80
.84 .90 .93
Net realized and unrealized gain (loss) on
investments................................. .53 (1.00)
.52 .32 1.26
---------- --------
- -------- -------- -------
Total from investment operations............ 1.34 (.20)
1.36 1.22 2.19
---------- --------
- -------- -------- -------
Less distributions
Dividends from net investment income.......... (.81) (.80)
(.84) (.90) (.93)
Distributions in excess of net investment
income...................................... (.02) (.02)
(.01) -- --
Distributions from paid-in capital
in excess of par............................ -- --
-- (.01) (.10)
---------- --------
- -------- -------- -------
Total distributions......................... (.83) (.82)
(.85) (.91) (1.03)
---------- --------
- -------- -------- -------
Net asset value, end of year.................. $ 8.19 $ 7.68
$ 8.70 $ 8.19 $ 7.88
---------- --------
- -------- -------- -------
---------- --------
- -------- -------- -------
TOTAL RETURN(a)............................... 18.17% (2.35)%
17.32% 15.97% 34.29%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................. $1,336,354 $161,435
$171,364 $106,188 $54,025
Average net assets (000)...................... $1,056,555 $165,517
$149,190 $ 81,129 $37,194
Ratios to average net assets:
Expenses, including distribution fees....... .75% .78%
.76% .85% .88%
Expenses, excluding distributions fees...... .60% .63%
.61% .70% .73%
Net investment income....................... 10.13% 9.86%
9.93% 10.96% 12.73%
Portfolio turnover rate....................... 78% 74%
85% 68% 51%
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total
return is calculated assuming a purchase of shares on the first
day and a sale on the last day of each year reported and includes
reinvestment of dividends and distributions.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 19 -----
<PAGE>
<PAGE>
Financial Highlights PRUDENTIAL HIGH YIELD FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
- ----------------------------------------------------------------------
Year
Ended December 31,
- ----------------------------------------------------------------------
1995 1994
1993 1992 1991
---------- ----------
---------- ---------- ----------
<S> <C> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 7.67 $ 8.69
$ 8.19 $ 7.88 $ 6.71
---------- ----------
---------- ---------- ----------
Income from investment operations
Net investment income......................... .76 .76
.79 .85 .88
Net realized and unrealized gain (loss) on
investments................................. .53 (1.00)
.51 .32 1.26
---------- ----------
---------- ---------- ----------
Total from investment operations............ 1.29 (.24)
1.30 1.17 2.14
---------- ----------
---------- ---------- ----------
Less distributions
Dividends from net investment income.......... (.76) (.76)
(.79) (.85) (.88)
Distributions in excess of net investment
income...................................... (.02) (.02)
(.01) -- --
Distributions from paid-in capital
in excess of par............................ -- --
-- (.01) (.09)
---------- ----------
---------- ---------- ----------
Total distributions......................... (.78) (.78)
(.80) (.86) (.97)
---------- ----------
---------- ---------- ----------
Net asset value, end of period................ $ 8.18 $ 7.67
$ 8.69 $ 8.19 $ 7.88
---------- ----------
---------- ---------- ----------
---------- ----------
---------- ---------- ----------
TOTAL RETURN(a)............................... 17.49% (2.92)%
16.54% 15.30% 33.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $2,730,903 $3,311,323
$3,745,985 $2,887,698 $2,199,127
Average net assets (000)...................... $2,725,385 $3,566,709
$3,389,439 $2,582,922 $1,970,257
Ratios to average net assets:
Expenses, including distribution fees....... 1.35% 1.38%
1.36% 1.45% 1.48%
Expenses, excluding distributions fees...... .60% .63%
.61% .70% .73%
Net investment income....................... 9.56% 9.28%
9.35% 10.29% 11.65%
Portfolio turnover rate....................... 78% 74%
85% 68% 51%
<CAPTION>
Class C
August 1,
Year Ended Through
December 31, December 31,
1995 1994
<S> <C> <C>
------------ ------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 7.67 $ 8.05
------ -----
Income from investment operations
Net investment income......................... .76 .32
Net realized and unrealized gain (loss) on
investments................................. .53 (.37)
------ -----
Total from investment operations............ 1.29 (.05)
------ -----
Less distributions
Dividends from net investment income.......... (.76) (.32)
Distributions in excess of net investment
income...................................... (.02) (.01)
Distributions from paid-in capital
in excess of par............................ -- --
------ -----
Total distributions......................... (.78) (.33)
------ -----
Net asset value, end of period................ $ 8.18 $ 7.67
------ -----
------ -----
TOTAL RETURN(a)............................... 17.49% (0.79)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $ 24,021 $4,860
Average net assets (000)...................... $ 12,063 $2,840
Ratios to average net assets:
Expenses, including distribution fees....... 1.35% 1.48%(c)
Expenses, excluding distributions fees...... .60% .73%(c)
Net investment income....................... 9.49% 9.80%(c)
Portfolio turnover rate....................... 78% 74%
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total
return is calculated assuming a purchase of shares on the first
day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total returns for
periods of less than a full year are not annualized.
(b) Commencement of offering of Class C shares.
(c) Annualized.
- --------------------------------------------------------------------------------
- ----- 20 See Notes to Financial Statements.
<PAGE>
<PAGE>
Report of Independent Accountants PRUDENTIAL HIGH YIELD FUND, INC.
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
Prudential High Yield Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential High Yield Fund, Inc.
(the ``Fund'') at December 31, 1995, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
``financial statements'') are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1995 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 20, 1996
- --------------------------------------------------------------------------------
21 -----
<PAGE>
Getting
The Most
From Your
Prudential
Mutual
Fund
Some mutual fund shareholders won't ever read this -- they don't read annual
and semi-annual reports. It's quite understandable. These annual and
semi-annual reports are prepared to comply with Federal regulations.
They are often written in language that is difficult to understand. So
when most people run into those particularly daunting sections of these
reports, they don't read them.
We think that's a mistake.
At Prudential Mutual Funds, we've made some changes to our report to make
it easier to understand and more pleasant to read, in hopes you'll find it
profitable to spend a few minutes familiarizing yourself with your investment.
Here's what you'll find in the report:
At A Glance
Since an investment's performance is often a shareholder's primary concern,
we present performance information in two different formats. You'll find it
first on the "At A Glance" page where we compare the Fund and the comparable
average calculated by Lipper Analytical Services, Inc., a nationally
recognized mutual fund rating agency. We report both the cumulative total
returns and the average annual total returns. The cumulative total return
is the total amount of income and appreciation the Fund has achieved in
various time periods. The average annual total return is an annualized
representation of the Fund's performance -- it generally smoothes out returns
and gives you an idea how much the Fund has earned in an average year, for
a given time period. Under the performance box, you'll see legends that
explain the performance information, whether fees and sales charges have
been included in returns, and the inception dates for the Fund's share
classes.
See the performance comparison charts at the back of the report for more
performance information. And keep in mind that past performance is not
indicative of future results.
Portfolio
Manager's Report
The portfolio manager who invests your money for you reports on
successful -- and not-so-successful -- strategies in this section of
your report. Look for recent purchases and sales here, as well as
information about the sectors the portfolio manager favors and any
changes that are on the drawing board.
Portfolio
Of Investments
This is where the report begins to look technical, but it's really
just a listing of each security held at the end of the reporting
period, along with valuations and other information. Please note
that sometimes we discuss a security in the Portfolio Manager's Report
that doesn't appear in this listing because it was sold before the close
of the reporting period.
<PAGE>
Statement Of Assets
And Liabilities
The balance sheet shows the assets (the value of the Fund's holdings),
liabilities (how much the Fund owes) and net assets (the Fund's equity,
or holdings after the Fund pays its debts) as of the end of the reporting
period. It also shows how we calculate the net asset value per share for
each class of shares. The net asset value is reduced by payment of your
dividend, capital gain, or other distribution, but remember that the
money or new shares are being paid or issued to you and thus is not
a realized loss. The net asset value fluctuates daily along with the
value of every security in the portfolio.
Statement Of
Operations
This is the income statement, which details income (mostly interest and
dividends earned) and expenses (including what you pay us to manage
your money). You'll also see capital gains here -- both realized and
unrealized.
Statement Of Changes
In Net Assets
This schedule shows how income and expenses translate into changes in
net assets, compared to last year's performance. The Fund is required
to pay out the bulk of its income to shareholders every year, and this
statement shows you how we do it -- through dividends and distributions
- -- and how that affects the net assets. This statement also shows how
money from investors flowed into and out of the Fund.
Notes To Financial
Statements
This is the kind of technical material that can intimidate readers, but
it does contain useful information. The Notes provide a brief history and
explanation of your Fund's objectives. In addition, they also outline how
Prudential Mutual Funds prices securities. The Notes also explain who
manages and distributes the Fund's shares, and more importantly, how
much they are paid for doing so. Finally, the Notes explain how many
shares are outstanding and the number issued and redeemed over the period.
Financial Highlights
This information contains many elements from prior pages, but on a per
share basis. It is designed to help you understand how the Fund performed
and to compare this year's performance and expenses to those of prior years.
Independent
Auditor's Report
Once a year, an outside auditor looks over our books and certifies that
the information we've presented is fair and complies with generally
accepted accounting principles.
Tax Information
This is information which we report annually about how much of your total
return is taxable. Should you have any questions, you may want to consult
a tax advisor.
Performance Comparison
These charts are included in the annual report and are required by
the Securities Exchange Commission. Performance is presented here as
a hypothetical $10,000 investment in the Fund since its inception or
for 10 years (whichever is shorter). To help you put that return in
context, we are required to include the performance of an unmanaged,
broad based securities index, as well. The index does not reflect the
cost of buying the securities it contains or the cost of managing a
mutual fund. Of course, the index holdings do not mirror those of the
fund -- the index is a broadly based reference point commonly used by
investors to measure how well they are doing. A definition of the
selected index is also provided. Investors generally cannot invest
directly in an index.
<PAGE>
Getting
The Most
From Your
Prudential
Mutual
Fund
How many times have you read these letters -- or other financial
materials -- and stumbled across a word that you don't understand?
Many shareholders have run into the same problem. We'd like to help.
So we'll use this space from time to time to explain some of the words
you might have read, but not understood. And if you have a favorite word
that no one can explain to your satisfaction, please write to us.
Basis Point: One 1/100th of 1%. For example, one half of one percentage
point is 50 basis points.
Call Option: A contract giving the holder a right to buy stocks or bonds
at a predetermined price (called the strike price) before a predetermined
expiration date. A buyer of a call option generally expects to benefit
from a rise in the price of the stock or bond.
Capital Gain/Capital Loss: The difference between the cost of a capital
asset (for example, a stock, bond or mutual fund share) and its selling
price. Under current law the federal income tax rate for individuals on
a long-term gain is 28%.
Collateralized Mortgage Obligations (CMOs): Pools of mortgage-backed
securities sliced in maturity ranges that bear differing interest rates.
These instruments are sensitive to changes in interest rates and homeowner
refinancing activity. They are subject to prepayment and maturity extension
risk.
Derivatives: Securities that derive their value from another security. The
rate of return of these financial products rise and fall -- sometimes very
suddenly -- in response to changes in some specific interest rate, currency,
stock or other variable.
Discount Rate: The interest rate charged by the Federal Reserve on loans
to banks and other depository institutions.
Federal Funds Rate: The interest rate charged by one bank to another on
overnight loans.
Futures Contract: An agreement to deliver a specific amount of a commodity
or financial instruments at a set price at a stipulated time in the future.
Leverage: The use of borrowed assets to enhance return on equity. The
expectation is that the interest rate charged will be lower than the
return on the investment. While leverage can increase profits, it can
also magnify losses.
Liquidity: The ease with which a financial instrument (or mutual fund)
can be bought or sold (converted into cash) in the financial markets.
Option: An agreement to buy something, such as shares of stock, by a
certain time for a specified price. An option need not be exercised. In
fact, most expire unexercised.
Price/Earnings Ratio: The price of a share of stock divided by the earnings
per share for a 12-month period.
Spread: The difference between two values; most often used to describe the
difference between prices bid and asked for a security.
Yankee Bond: A bond denominated in U.S. dollars but sold by a foreign
company or government in the U.S. market.
<PAGE>
- -- Prudential High Yield Fund, Inc. == Lehman High Yield Bond Index
The Prudential High Yield Fund, Inc. and the Lehman
High Yield Bond Index: Comparing a $10,000 Investment.
Average Annual
Total Returns
- -------------------
With Sales Load
10.8% Since Inception
15.2% for 5 Years
13.4% for 1 Year
Class A
(GRPAH)
Without Sales Load
11.6% Since Inception
16.1% for 5 Years
18.2% for 1 Year
Average Annual
Total Returns
- ----------------------
With Sales Load
10.2% Since Inception
9.1% for 10 Years
15.3% for 5 Years
12.5% for 1 Year
Class B
(GRPAH)
Without Sales Load
10.2% Since Inception
9.1% for 10 Years
15.4% for 5 Years
17.5% for 1 Year
Average Annual
Total Returns
- ----------------------
With Sales Load
11.5% Since Inception
16.5% for 1 Year
Class C
(GRPAH)
Without Sales Load
11.5% Since Inception
17.5% for 1 Year
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so an investor's shares, when redeemed,
will be worth more or less than their original cost. The charts on the
right are designed to give you an idea how much the Fund's returns can
fluctuate from year to year by measuring the best and worst calendar years
in terms of total annual return since inception of each share class.
These graphs are furnished to you in accordance with SEC regulations.
They compare a $10,000 investment in the Prudential High Yield Fund (Class
A, Class B and Class C) with a similar investment in the Lehman Brothers
High Yield Bond Index by portraying the initial account values at the
commencement of operations of Class A and C shares and for 10 years for
the Class B shares, and subsequent account values at the end of this
reporting period (December 31), as measured on a quarterly basis, beginning
in 1990 for Class A shares, in 1985 for Class B shares and in 1994 for
Class C shares. For purposes of the graphs, and unless otherwise indicated,
in the accompanying tables it has been assumed (a) that the maximum
applicable front-end sales charge was deducted from the initial $10,000
investment in Class A shares; (b) the maximum applicable contingent
deferred sales charge was deducted from the value of the investment in
Class B and Class C shares, assuming full redemption on December 31, 1995;
(c) all recurring fees (including management fees) were deducted; and (d)
all dividends and distributions were reinvested. Class B shares will
automatically convert to Class A shares, on a quarterly basis, beginning
approximately seven years after purchase. This conversion feature is not
reflected in the graph.
The High Yield Bond Index is a weighted index comprised of corporate
securities with one or more years remaining to maturity that are publicly
issued, rated below investment grade and have $50 million or more
outstanding. The High Yield Bond Index is an unmanaged index and
includes the reinvestment of all dividends, but does not reflect the
payment of transaction costs and advisory fees associated with an
investment in the Fund. The securities in the High Yield Bond Index
may differ substantially from the securities in the Fund. The High
Yield Bond Index is not the only index that may be used to characterize
performance of bond funds and other indexes may portray different
comparative performance.
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
Internet Address:
http:\\www.prudential.com
(LOGO)
Directors
Delayne Dedrick Gold
Arthur Hauspurg
Harry A. Jacobs, Jr.
Steven P. Munn
Richard A. Redeker
Louis A. Weil, III
Officers
Richard A. Redeker, President
David W. Drasnin, Vice President
Robert F. Gunia, Vice President
Grace Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Ronald Amblard, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
74435F106 MF110E
74435F205 Cat. #440262A
74435F304
