(ICON)
Prudential
High Yield
Fund, Inc.
SEMI
ANNUAL
REPORT
June 30, 1996
(LOGO)
<PAGE>
Prudential High Yield Fund, Inc.
Performance At A Glance.
Interest rates rose dramatically during the first half of 1996 as economic
growth accelerated, sending bond prices down. Despite some price erosion, high
yield bonds held their value better than any other type of U.S. bond, as
measured by total return. Your Fund provided positive returns during the six
months ended June 30, 1996, but finished below the average high yield bond fund.
Had we held a greater position in lower quality bonds, we believe we would have
finished stronger since lower quality bonds performed better.
<TABLE>
<CAPTION>
Cumulative Total Returns1 As of
6/30/96
Six One Five Ten
Since
Months Year Years Years
Inception2
<S> <C> <C> <C> <C> <C>
Class A 3.2% 10.9% 78.6% N/A
97.6%
Class B 2.9 10.2 73.4 122.5% 422.6
Class C 2.9 10.2 N/A N/A 19.9
Class Z N/A N/A N/A N/A -0.4
Lipper High Yield Avg3 4.8 11.2 83.7 136.4 500.0
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns1 As of 6/30/96
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 6.5% 11.4% N/A 10.5%
Class B 5.2 11.5 8.3% 10.1
Class C 9.2 N/A N/A 10.0
</TABLE>
<TABLE>
<CAPTION>
Dividends
& Yields
As of Total Dividends 30-Day
6/30/96 Paid for Six Mos. SEC Yield
<S> <C> <C>
Class A $0.39% 9.72%
Class B $0.37 9.52
Class C $0.37 9.52
Class Z $0.26 10.30
</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 declining
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. Class Z shares are not subject to a sales charge or
a distribution fee. Since Class Z shares have been in existence less than one
year, no average annual returns are shown.
2Inception dates: 1/22/90 Class A; 3/29/79 Class B; 8/1/94 Class C; 3/1/96
Class Z.
3Lipper average returns are for 151 funds for six months, 141 funds for one
year, 63 funds for five years, 36 funds for 10 years, and 19 funds since
inception of the Class B shares on 3/29/79.
How Investments Compared.
(As of 6/30/96)
(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 returns 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 included historical
20-year average annual returns. These returns assume the reinvestment of
dividends.
U.S. Growth Funds will fluctuate a great deal. Investors have received higher
historical total returns from stocks than from most other investments. Smaller
capitalization stocks offer greater potential for long-term growth but may be
more volatile than larger capitalization stocks.
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 significantly) and their returns have been historically lower than
those of stock funds.
General Municipal Debt Funds invest in bonds issued by state governments,
state agencies and/or municipalities. This investment provides income that is
usually exempt from federal and state income taxes.
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 M. Berkman, Fund Manager
(PHOTO)
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." As a result, these bonds are subject to greater risk of
default than investment grade bonds. The Fund is well diversified. Within the
"junk bond" market, our research staff looks for bonds with attractive yields
and improving credit quality. There can be no assurance that the Fund will
achieve its financial objective.
Better-Rated Junk Bonds?
It may sound strange, but we generally look for better-rated junk bonds, namely
those in the B and BB categories. Why? Because we're cautious. If the economy
weakens these bonds should hold their value better than weaker-rated bonds with
more credit risk. But we sometimes invest in bonds with lower ratings for
strong potential total return. In fact, you'll soon be asked to approve
investment in distressed securities -- those of financially troubled companies.
When carefully analyzed, these securities can offer value.
Strategy Session.
Interest Rates Rose.
Interest rates that fell so dramatically in 1995 rose once again with a
vengeance this year. Last year, the 10-year U.S. Treasury bond yield plummeted
by more than two full percentage points, to 5.57% at year end. In 1996, it rose
again by more than a full percentage point, closing June 30 at 6.71%. Why?
Because economic growth accelerated in 1996, rekindling inflation fears.
In the first half of 1996, it paid to be in junk bonds because they performed
better than other types of bonds (including investment grade corporates, U.S.
Treasurys, or mortgage backed securities). Why? The higher coupons of junk
bonds help cushion price declines in the underlying bonds and therefore make
them more attractive than lower-yielding bonds when interest rates rise.
Currently, the typical B-rated bond carries a yield that's more than four
percentage points higher than the 10-year U.S. Treasury, which of course is
rated AAA (Source: Prudential Mutual Funds).
High yield bonds returned a total of 4.84% through June 30, 1996, while U.S.
governments lost 2.62%, as measured by Lipper Analytical Services. That's more
than a seven percentage point advantage in total return, largely as a result
of the higher coupons on high yield bonds.
Throughout the last six months, our strategy was to invest in bonds of larger
companies within the junk bond market, because we believe they are generally
less susceptible to default. The default rate among high yield bonds rose
gradually last year to more than 3%, although it has fallen slightly this year.
We expect it will rise later this year or next year despite today's
strengthening economy, because historically defaults have increased three to
five years after a significant surge in issuance, such as occurred in 1992-93.
Credit Quality.
Expressed as a percentage of
total net assets as of 6/30/96.
(GRAPH)
<PAGE>
What Went Well.
Ratings Rise.
The credit ratings of a number of our largest holdings were upgraded in the
first half by the major rating agencies. While these are still junk bonds,
their credit upgrades benefit bondholders because the value of a bond
increases as the issuing company's ability to repay it increases. Those
upgraded include Cablevision Systems, which operate cable television systems;
Tenet Healthcare, which operates hospitals; and Trump Hotel & Casino, an
Atlantic City casino operator.
Mergers Materialize.
We also benefited from the bonds we held in companies that merged with other
companies. Mergers and acquisitions help increase the value of our holdings
when a larger company with a better credit rating buys a smaller company with
a lesser rating. For example, in February, U.S. West signed a merger agreement
with Continental Cablevision, one of our top five holdings. Since the former is
an investment-grade company (rated AA), the merger immediately benefited
holders of Continental, which had a lower credit rating (rated BB).
And Not So Well.
Downgrades.
While many of the credit ratings changes of our bonds were upgrades, there were
some downgrades, including Flagstar Corp., which operates Denny's restaurants.
Flagstar suffered from increased competition and its operating results were
weak. Additionally, Republic Engineered Steel, a manufacturer of specialty
steel, was downgraded when it encountered softening demand and difficulties
starting up a new facility. We sold both of these bonds, which amounted to less
than one percent of total net assets. The Fund is well diversified, holding
approximately 190 different bonds.
Worst Was Best.
Your Fund suffered from rising interest rates more than the high yield market
as a whole. That is because we are focused in the B and BB categories of the
market, making our portfolio more sensitive to the level of interest rates.
During the first six months of 1996 bonds in the BB category provided the
lowest returns, while those in the CCC category generated the highest returns.
We believe that rates may now be near their peak for the year and that the
trend of rising interest rates in the first half will not continue through the
end of the year.
Five Largest Holdings.
2.9% Cablevision Systems
Cable
2.1% Trump Atlantic City
Casinos
1.8% HMH Properties
Leisure & Tourism
1.8% Rogers Cablesystems
Cable
1.7% Exide Corp.
Automotive
Expressed as a percentage of total net assets as of 6/30/96.
Looking Ahead.
A rapidly growing economy has driven interest rates higher, knocking down U.S.
Treasury bond prices and suppressing high yield returns as well. Many worry
that even though inflation is currently subdued, the economy is currently
growing so rapidly that it could eventually push inflation higher, hurting
bond prices even further. While we believe the 30-year U.S. Treasury will
finish the year at a yield lower than today, the market is volatile and yields
could very well go higher before they go lower. We believe that the higher
coupons of high yield bonds offer bond investors a measure of protection given
today's interest rate uncertainties.
- - -------------------------------------------------------------------------------
1
<PAGE>
President's Letter August 1, 1996
(PHOTO)
Dear Shareholder:
Last year, U.S. stocks and bonds generally posted extraordinary returns.
Investors celebrated this performance by putting record amounts of new money
into mutual funds in the first few months of 1996. According to figures
released by the Investment Company Institute, a mutual fund industry trade
group, new investments in mutual funds reached an all-time monthly high of $33
billion in January of 1996. An additional $66 billion was invested in the
following three months, although this rapid inflow subsided somewhat in late
spring.
While we are pleased that mutual funds are attracting new investors, we're
concerned that some of them may be "buying last year's returns." Few expect
1995's virtual non-stop returns from the stock and bond markets. In fact,
1996's markets have been volatile so far (stock and bond prices go down just
as they go up). There's no better time than now to be talking with your
Financial Advisor or Registered Representative. She or he can help you
determine reasonable expectations about both the potential performance and
risks associated with your investments.
Board of Directors Election.
In addition to this report, we are including a notice about a special
shareholder meeting to elect new Prudential mutual fund boards of directors.
Your Board of Directors has approved a proposal to place a common board of
experienced directors across many of Prudential's mutual funds to improve
business efficiency. The enclosed material contains more complete information
about this proposal.
Changes at Prudential.
Finally, there have been some important changes recently at Prudential that
were made with you in mind. Prudential Mutual Funds has moved under the
umbrella of Prudential's newly created "Money Management Group." This group
manages and administers nearly $190 billion in client assets and provides
mutual funds, annuities, defined benefit and defined contribution plans to our
individual and institutional investors. We plan to improve the range and
quality of investment products and services that we can provide you by better
leveraging Prudential's strengths. There will, however, be no change in the
service you receive from your Financial Advisor, Registered Representative or
our Customer Service unit.
We're excited about our future and hope that you are, too. Thank you for your
continued support and confidence in Prudential Mutual Funds.
Sincerely,
Richard A. Redeker
President
- - -------------------------------------------------------------------------------
2
<PAGE>
Portfolio of Investments PRUDENTIAL HIGH YIELD
as of June 30, 1996 (Unaudited) FUND, INC.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's
Interest Maturity Amount Value
Description Rating Rate
Date (000) (Note 1)
<S> <C> <C>
<C> <C> <C>
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
LONG-TERM INVESTMENTS--93.2%
BONDS--89.7%
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Aerospace--0.9%
Sequa Corp., Sr. Sub. Notes B3
9.375% 12/15/03 $27,750 $ 26,640,000
UNC, Inc., Sr. Sub. Notes B3 11.00
6/01/06 8,000 8,080,000
--------------
34,720,000
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Automotive Parts--4.3%
Exide Corp.,
Sr. Notes B1 10.00
4/15/05 54,550 53,254,437
Sr. Sub. Notes, Zero Coupon (until 12/15/97) B2 12.25
12/15/04 18,000 15,075,000
Foamex JPS Automotive L.P.,
Sr. Notes B2
11.125 6/15/01 21,700 22,296,750
Sr. Disc. Notes, Zero Coupon (until 7/1/99) Caa 14.00
7/01/04 20,250 14,377,500
Sr. Sub. Deb., (cost $1,915,000; purchased - 1996) B3
11.875 10/01/04 2,000(c) 1,880,000
Foamex L.P.,
Sr. Notes B1 11.25
10/01/02 13,500 13,567,500
Sr. Sub. Deb., Ser. B NR
11.875 10/01/04 6,910 7,082,750
Harvard Industries, Inc., Sr. Notes B3 12.00
7/15/04 7,700 7,546,000
Hayes Wheels Int'l., Inc., Sr. Sub. Notes B3 11.00
7/15/06 8,000 8,100,000
SPX Corp., Sr. Sub. Notes B3 11.75
6/01/02 26,750 28,288,125
--------------
171,468,062
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Broadcasting & Other Media--3.4%
Adelphia Communications Corp., Sr. Notes, PIK B3
9.50 2/15/04 38,227 33,066,346
Allbritton Communications Co., Sr. Sub. Deb. B3
11.50 8/15/04 9,500 9,642,500
Benedek Broadcasting Corp., Sr. Notes Ba3
11.875 3/01/05 16,650 17,565,750
Benedek Communications, Inc., Sr. Disc. Notes,
Zero Coupon (until 5/15/01) B-(a)
13.25 5/15/06 36,000 18,360,000
Group Televisa S.A.,
Sr. Notes Ba3
11.375 5/15/03 13,500 13,685,625
Sr. Notes NR
11.875 5/15/06 9,000 9,213,750
Telemundo Group, Inc. B1
7.00 2/15/06 20,000 18,100,000
Young Broadcasting, Inc., Sr. Sub. Notes B2
10.125 2/15/05 16,000 15,280,000
--------------
134,913,971
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Building Related Industries--2.7%
Building Material Corp. of America, Sr. Notes,
Zero Coupon (until 7/1/99) B1
11.75 7/01/04 38,750 28,868,750
</TABLE>
- - --------------------------------------------------------------------------------
See Notes to Financial Statements. 3 -----
<PAGE>
<PAGE>
Portfolio of Investments PRUDENTIAL HIGH YIELD
as of June 30, 1996 (Unaudited) FUND, INC.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest
Maturity Amount Value
Description Rating Rate
Date (000) (Note 1)
<S> <C> <C>
<C> <C> <C>
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Building Related Industries (cont'd.)
Greystone Homes Corp., Sr. Notes B2
10.75% 3/01/04 $ 14,900 $ 14,602,000
Nortek, Inc., Sr. Sub. Notes B3
9.875 3/01/04 26,125 24,818,750
NVR, Inc., Sr. Notes B2
11.00 4/15/03 15,600 15,756,000
U.S. Home Corp., Sr. Notes Ba2
9.75 6/15/03 24,580 23,842,600
--------------
107,888,100
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Cable--16.0%
American Telecasting, Inc.,
Sr. Disc. Notes, Zero Coupon (until 6/15/99) Caa
14.50 6/15/04 7,500 5,325,000
Sr. Disc. Notes, Zero Coupon (until 8/15/00) Caa
14.50 8/15/05 37,000 21,460,000
Bell Cablemedia Co.,
Sr. Disc. Notes, Zero Coupon (until 7/15/99) B2
11.95 7/15/04 30,975 21,759,938
Sr. Disc. Notes, Zero Coupon (until 9/15/00) B2
11.875 9/15/05 30,150 18,316,125
C S Wireless Systems, Inc., Sr. Disc. Notes,
Zero Coupon (until 3/1/01) Caa
11.375 3/01/06 16,000 8,300,000
Cablevision Systems Corp.,
Sr. Sub. Notes B2
9.25 11/01/05 48,060 44,695,800
Sr. Sub. Notes B2
9.875 2/15/13 25,950 24,068,625
CAI Wireless Systems, Inc., Sr. Notes B3
12.25 9/15/02 10,250 10,711,250
Comcast Corp., Sr. Sub. Deb. B1
9.375 5/15/05 15,300 14,726,250
Comcast UK Cable Corp., Sr. Disc. Deb.,
Zero Coupon (until 11/15/00) B2
11.20 11/15/07 24,500 14,148,750
Continental Cablevision, Inc., Sr. Deb. Ba2
9.50 8/01/13 29,100 31,428,000
Cooke Media Group, Inc., Sub. Deb. NR
11.625 4/01/99 750 723,750
Diamond Cable Co.,
Sr. Disc. Notes, Zero Coupon (until 9/30/99) B3
13.25 9/30/04 27,400 18,769,000
Sr. Disc. Notes, Zero Coupon (until 12/15/00) B3
11.75 12/15/05 11,500 6,756,250
Echostar Communications Corp.,
Sr. Disc. Notes, Zero Coupon (until 6/1/99) B2
12.875 6/01/04 29,791 22,417,728
Sr. Sec'd. Disc. Notes, Zero Coupon (until
3/15/00) Caa
13.125 3/15/04 39,000 24,082,500
Falcon Holdings Corp. L.P., Sr. Sub. Notes, PIK NR
11.00 9/15/03 30,573 28,891,124
Heartland Wireless Communication, Inc., Sr. Notes NR
13.00 4/15/03 6,500 7,052,500
International Cabletel, Inc.,
Sr. Disc. Notes, Zero Coupon (until 2/1/01) B3
11.50 2/01/06 38,000 21,137,500
Sr. Disc. Notes, Zero Coupon (until 4/15/00) B3
12.75 4/15/05 25,950 16,413,375
JCAC, Inc., Sr. Sub. Notes B2
10.125 6/15/06 4,000 3,960,000
Lenfest Communications, Inc.,
Sr. Notes Ba3
8.375 11/01/05 22,600 20,622,500
Sr. Sub. Notes B2
10.50 6/15/06 20,000 20,100,000
Marcus Cable Operating Co., Sr. Sub. Disc. Notes,
Zero Coupon (until 8/1/99) B3
13.50 8/01/04 64,000 45,760,000
</TABLE>
- - --------------------------------------------------------------------------------
- - -----4 See Notes to Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL HIGH YIELD
as of June 30, 1996 (Unaudited) FUND, INC.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest
Maturity Amount Value
Description Rating Rate
Date (000) (Note 1)
<S> <C> <C>
<C> <C> <C>
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Cable (cont'd.)
Rifkin Acquisitions Partners L.P., Sr. Sub. Notes NR
11.125% 1/15/06 $22,100 $ 21,602,750
Rogers Cablesystems, Inc.,
Sec'd. Notes Ba3 10.00
3/15/05 61,825 60,897,625
Sr. Sec'd. Deb. Ba3 10.00
12/01/07 2,000 1,947,500
Sr. Sec'd. Deb. Ba3
10.125 9/01/12 10,000 9,600,000
Telewest Plc, Sr. Disc. Deb., Zero Coupon (until
10/1/00) B1 11.00
10/01/07 41,750 24,632,500
United Int'l. Holdings, Inc.,
Sr. Disc. Notes B3 Zero
11/15/99 72,550 47,520,250
Videotron Holdings Plc,
Sr. Disc. Notes, Zero Coupon (until 7/1/99) B3
11.125 7/01/04 12,375 9,095,625
Sr. Disc. Notes, Zero Coupon (until 8/15/00) B3 11.00
8/15/05 17,300 11,028,750
--------------
637,950,965
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Casinos--6.3%
Argosy Gaming Co., First Mtge. Notes B1
13.25 6/01/04 14,400 14,580,000
Bally's Grand, Inc., First Mtge. Notes B1
10.375 12/15/03 8,000 8,780,000
Bally's Park Place Funding, Inc., First Mtge. Bonds Ba3
9.25 3/15/04 28,200 29,997,750
Empress River Casino Finance Corp., Sr. Notes B1
10.75 4/01/02 16,000 16,720,000
GNF Corp., First Mtge. Bonds B1
10.625 4/01/03 14,575 15,850,312
Grand Casino, Inc., First Mtge. Notes Ba3
10.125 12/01/03 10,420 10,680,500
Majestic Star Casino, Sr. Notes NR
12.75 5/15/03 6,000 6,495,000
Mohegan Tribal Gaming Auth., Sr. Notes NR
13.50 11/15/02 14,500 18,197,500
Station Casinos, Inc., Sr. Sub. Notes B2
10.125 3/15/06 13,600 13,260,000
Trump Atlantic City Assocs., First Mtge. Notes B1
11.25 5/01/06 83,100 83,515,500
Trumps Castle Funding, Inc., First Mtge. Bonds Caa
11.75 11/15/03 34,200 34,969,500
--------------
253,046,062
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Chemicals--1.9%
G.I. Holdings, Inc., Sr. Notes Ba3
10.00 2/15/06 26,581 26,182,285
Terra Industries, Inc., Sr. Notes Ba3
10.50 6/15/05 15,750 16,301,250
Texas Petrochemical Corp., Sr. Sub. Notes B3
11.125 7/01/06 9,000 9,180,000
Viridian, Inc., Deb. Ba3
10.50 3/31/14 22,000 22,935,000
--------------
74,598,535
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Consumer Goods--0.6%
Knoll Furniture, Inc., Sr. Sub. Notes B3
10.875 3/15/06 16,500 16,912,500
Twin Laboratories, Inc., Sr. Sub. Notes B3
10.25 5/15/06 9,000 9,180,000
--------------
26,092,500
</TABLE>
- - --------------------------------------------------------------------------------
See Notes to Financial Statements. 5 -----
<PAGE>
<PAGE>
Portfolio of Investments PRUDENTIAL HIGH YIELD
as of June 30, 1996 (Unaudited) FUND, INC.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest
Maturity Amount Value
Description Rating Rate
Date (000) (Note 1)
<S> <C> <C>
<C> <C> <C>
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Diversified Industries--1.7%
Fairchild Corp., Sub. Deb. Caa
12.00% 10/15/01 $ 5,000 $ 5,050,000
Interlake Corp.,
Sr. Notes B2
12.00 11/15/01 12,350 12,967,500
Sr. Sub. Deb. B3
12.125 3/01/02 12,985 12,985,000
Jordan Industries, Inc., Sr. Notes B3
10.375 8/01/03 27,000 25,650,000
Newflo Corp., Sub. Notes B3
13.25 11/15/02 10,500 11,287,500
--------------
67,940,000
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Drugs & Health Care--3.8%
Dade Int'l., Inc., Sr. Sub. Notes B3
11.125 5/01/06 16,000 16,560,000
Integrated Health Services, Inc., Sr. Sub. Notes B1
10.25 4/30/06 37,500 37,125,000
Magellan Health Services, Inc., Sr. Sub. Notes B2
11.25 4/15/04 28,950 31,121,250
Owens & Minor, Inc., Sr. Sub. Notes B1
10.875 6/01/06 9,600 9,732,000
Tenet Healthcare Corp., Sr. Sub. Notes Ba3
10.125 3/01/05 53,000 55,915,000
--------------
150,453,250
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Energy--6.3%
AES Corp., Sr. Sub. Notes Ba1
10.25 7/15/06 25,000 25,140,625
Benton Oil & Gas Co., Sr. Notes B2
11.625 5/01/03 16,000 16,560,000
California Energy Co., Inc.,
Disc. Notes, Zero Coupon (until 1/15/97) Ba2
10.25 1/15/04 41,500 39,840,000
Sr. Notes Ba2
9.875 6/30/03 7,100 7,242,000
Cliffs Drilling, Sr. Notes B1
10.25 5/15/03 8,800 8,712,000
Coda Energy, Inc., Sr. Sub. Notes B3
10.50 4/01/06 10,000 9,875,000
Gulf Canada Resources, Ltd.,
Sr. Sub. Deb. Ba3
9.25 1/15/04 29,980 29,230,500
Sr. Sub. Notes Ba3
9.625 7/01/05 27,500 27,225,000
KCS Energy, Inc., Sr. Notes B1
11.00 1/15/03 14,250 15,122,812
Petroleum Heat & Power, Inc., Sub. Notes B2
10.125 4/01/03 8,010 7,729,650
Plains Resources, Inc., Sr. Sub. Notes B2
10.25 3/15/06 11,000 10,862,500
Transtexas Gas Corp., Sr. Sec'd. Notes B2
11.50 6/15/02 32,500 32,337,500
Triton Energy Corp., Sr. Sub. Disc. Notes,
Zero Coupon (until 12/15/96) B1
9.75 12/15/00 21,314 20,461,440
--------------
250,339,027
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Financial Services--0.7%
First Nationwide Holdings, Inc., Sr. Notes B2
12.50 4/15/03 25,000 26,125,000
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Food & Beverage--3.1%
Curtice Burns Foods, Inc., Sr. Sub. Notes B3
12.25 2/01/05 18,580 18,022,600
</TABLE>
- - --------------------------------------------------------------------------------
- - -----6 See Notes to Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL HIGH YIELD
as of June 30, 1996 (Unaudited) FUND, INC.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest
Maturity Amount Value
Description Rating Rate
Date (000) (Note 1)
<S> <C> <C>
<C> <C> <C>
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Food & Beverage (cont'd.)
Del Monte Corp., Sub. Notes, PIK,
(cost $20,894,271; purchased - 1993) NR
12.25% 9/01/02 $ 20,558 (c) $ 18,913,360
Fresh Del Monte Produce, N.V., Sr. Notes Caa
10.00 5/01/03 32,698 30,409,140
PM Holdings Corp., Notes, Zero Coupon (until 9/1/00) B3
11.50 9/01/05 13,237 7,445,813
Premium Standard Farms L. P.,
Sr. Sec'd. Notes, (cost $10,000,000; purchased -
1993) NR
12.25 6/15/04 10,000 (b)(c)(f) 8,200,000
Sr. Disc. Notes, Zero Coupon (until 9/15/96),
(cost $31,215,907; purchased - 1994) NR
12.00 9/15/03 34,627 (b)(c)(f) 27,009,060
Specialty Foods Corp., Sr. Unsec'd. Notes B3
10.25 8/15/01 14,500 13,485,000
--------------
123,484,973
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Industrials--1.1%
Envirosource, Inc., Sr. Notes B3
9.75 6/15/03 22,061 20,185,815
Envirotest Systems Corp., Sr. Notes B3
9.125 3/15/01 15,000 13,125,000
IMO Industries, Inc., Sr. Sub. Notes B3
11.75 5/01/06 10,000 10,200,000
--------------
43,510,815
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Leisure & Tourism--4.2%
HMC Acquisition Properties, Inc., Sr. Notes NR
9.00 12/15/07 47,000 43,005,000
HMH Properties, Inc., Sr. Notes B1
9.50 5/15/05 76,000 72,580,000
Host Marriott Travel Plazas, Inc., Sr. Notes B1
9.50 5/15/05 13,500 12,892,500
John Q Hammons Hotels,
First Mtge. Notes B1
8.875 2/15/04 30,165 28,204,275
First Mtge. Notes B1
9.75 10/01/05 12,750 12,303,750
--------------
168,985,525
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Miscellaneous Services--0.5%
United Stationer Supply Co., Sr. Sub. Notes B3
12.75 5/01/05 18,000 19,305,000
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Paper & Forest Producrts--6.0%
Buckeye Cellulose Corp., Sr. Sub. Notes Ba3
9.25 9/15/08 1,600 1,600,000
Container Corp., Sr. Notes B1
11.25 5/01/04 28,500 29,426,250
Gaylord Container Corp., Sr. Sub. Disc. Notes Caa
12.75 5/15/05 44,890 47,302,838
Ivex Packaging Corp., Sr. Sub. Notes B3
12.50 12/15/02 11,000 11,577,500
Pacific Lumber Co., Sr. Notes B3
10.50 3/01/03 27,653 26,823,410
Repap New Brunswick, Inc., Sr. Sec'd. Notes B2
10.625 4/15/05 24,350 22,889,000
Riverwood Int'l. Corp.,
Sr. Notes B2
10.25 4/01/06 14,400 14,292,000
Sr. Sub. Notes B3
10.875 4/01/08 19,000 18,715,000
</TABLE>
- - --------------------------------------------------------------------------------
See Notes to Financial Statements. 7 -----
<PAGE>
Portfolio of Investments PRUDENTIAL HIGH YIELD
as of June 30, 1996 (Unaudited) FUND, INC.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest
Maturity Amount Value
Description Rating Rate
Date (000) (Note 1)
<S> <C> <C>
<C> <C> <C>
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Paper & Forest Producrts (cont'd.)
SD Warren Co., Sr. Sub. Notes B1
12.00% 12/15/04 $ 24,150 $ 25,478,250
Stone Consolidated, Inc., Sr. Sec'd. Notes Ba1
10.25 12/15/00 41,900 43,209,375
--------------
241,313,623
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Plastic Products--0.8%
Applied Extrusion Technology, Inc., Sr. Notes B2
11.50 4/01/02 19,800 19,998,000
Plastic Specialty & Technology, Inc., Sr. Notes B3
11.25 12/01/03 12,000 11,520,000
--------------
31,518,000
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Publishing--1.6%
Affiliated Newspapers, Sr. Disc. Notes,
Zero Coupon (until 7/1/99) B3
13.25 7/01/06 12,250 8,513,750
American Media Operations, Inc., Sr. Sub. Notes B1
11.625 11/15/04 10,000 10,200,000
Big Flower Press, Inc., Sr. Sub. Notes B2
10.75 8/01/03 4,334 4,225,650
Marvel Holdings, Inc., Sr. Notes B3 Zero
4/15/98 22,750 18,200,000
Newsquest Capital Plc, Sr. Sub. Notes B2
11.00 5/01/06 13,000 13,000,000
Park Newspapers, Inc., Sr. Notes B2
11.875 5/15/04 10,000 10,100,000
--------------
64,239,400
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Retail--1.1%
Apparel Retailers, Inc., Sr. Disc. Deb.,
Zero Coupon (until 8/15/98) Caa
12.75 8/15/05 5,050 4,305,125
Brylane L.P., Sr. Sub. Notes B2
10.00 9/01/03 10,000 9,700,000
Hills Stores Co., Sr. Notes B1
12.50 7/01/03 15,750 15,435,000
Specialty Retailers, Inc., Sr. Sub. Notes B3
11.00 8/15/03 14,290 14,861,600
--------------
44,301,725
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Steel & Metals--1.3%
Kaiser Aluminum & Chemical Corp., Sr. Notes B1
9.875 2/15/02 42,075 41,233,500
Silgan Corp., Sr. Sub. Notes B3
11.75 6/15/02 11,695 11,870,425
--------------
53,103,925
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Supermarkets--3.7%
Food 4 Less Holdings, Inc., Sr. Disc. Deb.,
Zero Coupon (until 6/15/00) Caa
13.625 7/15/05 15,200 7,220,000
Grand Union Co., Sr. Notes B3
12.00 9/01/04 31,250 28,984,375
</TABLE>
- - --------------------------------------------------------------------------------
- - -----8 See Notes to Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL HIGH YIELD
as of June 30, 1996 (Unaudited) FUND, INC.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest
Maturity Amount Value
Description Rating Rate
Date (000) (Note 1)
<S> <C> <C>
<C> <C> <C>
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Supermarkets (cont'd.)
Pathmark Stores, Inc.,
Sr. Sub. Notes B2
9.625% 5/01/03 $35,788 $ 33,282,840
Sub. Notes B3
11.625 6/15/02 14,000 13,930,000
Sub. Notes B3
12.625 6/15/02 10,500 10,605,000
Pueblo Xtra Int'l., Inc., Sr. Notes B2 9.50
8/01/03 17,105 15,137,925
Smiths Food & Drug, Sr. Sub. Notes,
(cost $27,000,000; purchased - 1996) B3 11.25
5/15/07 27,000(c) 27,202,500
Southland Corp., Sr. Sub. Deb. B2 12.00
6/15/09 10,000 9,900,000
--------------
146,262,640
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Telecommunications--17.0%
Arch Communications Group, Inc., Sr. Disc. Notes,
Zero Coupon (until 3/15/01) B3
10.875 3/15/08 15,170 7,812,550
Cellnet Data Systems, Inc., Sr. Disc. Notes,
Zero Coupon (until 6/15/00) NR 13.00
6/15/05 27,000 19,170,000
Cellular Communications Int'l., Inc., Sr. Disc. Notes B3 Zero
8/15/00 22,250 13,572,500
Cencall Communications Corp., Sr. Disc. Notes,
Zero Coupon (until 1/15/99) Caa
10.125 1/15/04 67,930 41,267,475
Centennial Cellular Corp.,
Sr. Notes B2
8.875 11/01/01 29,575 27,356,875
Sr. Notes B2
10.125 5/15/05 11,945 11,467,200
Clearnet Communications, Inc., Sr. Disc. Notes,
Zero Coupon (until 12/15/00) B3
14.75 12/15/05 33,150 20,221,500
Communication Cellular, S.A., Sr. Def'd. Bonds B3 Zero
11/15/03 30,000 19,350,000
Dial Call Communications, Inc.,
Sr. Disc. Notes, Zero Coupon (until 4/15/99) Caa
12.25 4/15/04 13,000 8,320,000
Sr. Disc. Notes, Zero Coupon (until 12/15/98) Caa
10.25 12/15/05 4,250 2,550,000
Geotek Communications, Inc., Sr. Conv. Notes,
(cost $12,000,000; purchased - 1996) NR
12.00 2/15/01 12,000 (c) 16,440,000
GST Telecommunciations, Inc., Sr. Disc. Notes,
Zero Coupon (until 12/15/00) NR
13.875 12/15/05 2,262 2,239,380
GST USA, Inc., Notes, Zero Coupon (until 12/15/00) NR
13.875 12/15/05 18,096 9,952,800
Hyperion Telecommunications, Sr. Disc. Notes,
Zero Coupon (until 4/15/01) NR
13.00 4/15/03 22,000 (e) 12,210,000
Intelcom Group, Inc., Sr. Disc. Notes,
Zero Coupon (until 9/15/00) NR
13.50 9/15/05 48,730 29,238,000
Intercel, Inc.,
Sr. Disc. Notes, Zero Coupon (until 2/1/01) B2
12.00 2/01/06 16,800 (e) 10,080,000
Sr. Disc. Notes, Zero Coupon (until 5/1/01) B2
12.00 5/01/06 15,500 8,447,500
Intermedia Communications of Florida,
Sr. Disc. Notes, Zero Coupon (until 5/15/01) B3
12.50 5/15/06 25,000 14,000,000
Sr. Notes B3
13.50 6/01/05 11,250 12,600,000
</TABLE>
- - --------------------------------------------------------------------------------
See Notes to Financial Statements. 9 -----
<PAGE>
Portfolio of Investments PRUDENTIAL HIGH YIELD
as of June 30, 1996 (Unaudited) FUND, INC.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest
Maturity Amount Value
Description Rating Rate
Date (000) (Note 1)
<S> <C> <C>
<C> <C> <C>
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Telecommunications (cont'd.)
Metrocall, Inc., Sr. Sub. Notes B2
10.375% 10/01/07 $15,500 $ 14,337,500
MFS Communications, Inc.,
Sr. Disc. Notes, Zero Coupon (until 1/15/99) B1
9.375 1/15/04 54,950 41,212,500
Sr. Disc. Notes, Zero Coupon (until 1/15/01) B1
8.875 1/15/06 35,150 21,265,750
Millicom Int'l. Cellular, Sr. Disc. Notes,
Zero Coupon (until 6/1/01) B3 13.50
6/01/06 66,500 35,411,250
Mobilemedia Communications, Inc.,
Sr. Sub. Notes, Zero Coupon (until 12/1/98) B3 10.50
12/01/03 37,810 26,845,100
Sr. Sub. Notes B3
9.375 11/01/07 28,515 25,520,925
Nextel Communications, Inc., Sr. Disc. Notes,
Zero Coupon (until 9/1/98) B3 11.50
9/01/03 16,620 11,384,700
Pagemart, Inc., Sr. Disc. Notes, Zero Coupon (until
11/1/98) NR 12.25
11/01/03 16,525 12,559,000
Pagemart Nationwide, Inc., Sr. Disc. Notes,
Zero Coupon (until 2/1/01) NR 15.00
2/01/05 23,000 15,180,000
Paging Network, Inc.,
Sr. Sub. Notes B2
8.875 2/01/06 21,300 19,276,500
Sr. Sub. Notes B2
10.125 8/01/07 21,500 21,123,750
Pricellular Wireless Corp.,
Sr. Disc. Notes, Zero Coupon (until 11/15/97) B3 14.00
11/15/01 14,770 13,440,700
Sr. Disc. Notes, Zero Coupon (until 10/1/98) B3 12.25
10/01/03 33,100 26,149,000
Teleport Communications,
Sr. Disc. Notes, Zero Coupon (until 2/1/01) B1
11.125 7/01/07 47,000 27,377,500
Sr. Notes B1
9.875 7/01/06 10,400 10,400,000
USA Mobil Communications, Inc.,
Sr. Notes B2 9.50
2/01/04 7,350 6,982,500
Sr. Notes B2 14.00
11/01/04 8,000 9,120,000
Western Wireless Corp., Sr. Sub. Notes B3 10.50
6/01/06 12,000 11,880,000
Winstar Communications, Inc.,
Sr. Disc. Notes, Zero Coupon (until 10/15/00) NR 14.00
10/15/05 72,150 42,809,000
--------------
678,571,455
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Textiles--0.2%
Polysindo Int'l. Finance Co., Sr. Sec'd. Notes Ba3
11.375 6/15/06 10,250 10,429,375
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Transportation/Trucking/Shipping--0.5%
Ameritruck Distribution Corp., Sr. Sub. Notes B-(a)
12.25 11/15/05 8,500 8,160,000
TNT Transport, Sr. Notes B1
11.50 4/15/04 10,000 10,300,000
--------------
18,460,000
--------------
Total bonds (cost $3,585,490,339)
3,579,021,928
--------------
</TABLE>
- - --------------------------------------------------------------------------------
- - -----10 See Notes to Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL HIGH YIELD
as of June 30, 1996 (Unaudited) FUND, INC.
- - ------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 1)
<S> <C> <C>
- - ------------------------------------------------------------
PREFERRED STOCKS--3.1%
Benedek Communications Corp.,
(cost $4,500,000; purchased -
1995) 45,000 (c)(d) $ 4,500,000
Cablevision Systems Corp., 153,364
$11.75, PIK 14,799,626
Cablevision Systems Corp., 353,400
$11.25, PIK 33,042,900
El Paso Electric Co., PIK 67,500 (d) 7,087,500
Premium Standard Farms, $12.50
(cost $1,834,000; purchased
1992) 18,340 (c)(d) 917,000
Time Warner, Inc., Ser. K, PIK 650,000 63,700,000
--------------
Total preferred stocks
(cost $127,190,321) 124,047,026
--------------
- - ------------------------------------------------------------
COMMON STOCKS(d)--0.2%
Affiliated Newspapers 12,250 367,500
C S Wireless Systems, Inc. 4,400 0
Dr Pepper Bottling Co., Cl. A 72,580 344,755
EnviroSource, Inc. 428,333 1,499,166
Gaylord Container Corp., Cl.A 324,735 2,536,992
Metromedia Corp. 69,374 849,832
Pagemart Nationwide, Inc. 71,750 762,344
Peachtree Cable Assn., Ltd. 31,559 307,700
PM Holdings Corp. 3,679 919,750
Thrifty Payless Holdings, Inc. 96,900 1,635,187
Triton Group Ltd. 1,051,135 591,263
Walter Industries, Inc., 7,641 107,929
--------------
Total common stocks
(cost $11,523,420) 9,922,418
--------------
<CAPTION>
Value
Description Warrants (Note 1)
<S> <C> <C>
- - ------------------------------------------------------------
WARRANTS(d)--0.2%
American Telecasting, Inc.,
expiring 6/15/99 41,000 $ 1,025,000
Benedek Communications Corp.,
(cost $0; purchased - 1996)
expiring 1/1/49 65,700 (c) 0
expiring 1/1/49 45,000 (c) 0
Casino America Corp.,
expiring 11/15/96 22,841 228
Casino Magic Corp., expiring 60,000
10/14/96 600
Cellnet Data Systems, Inc.,
expiring 6/15/05 108,000 0
Cellular Communications Int'l.,
Inc., expiring 8/15/03 22,250 0
Clearnet Communications, Inc.,
expiring 9/15/05 109,395 0
Comcel, expiring 11/15/03,
(cost $0; purchased - 1995) 30,000 (c) 0
Empire Gas Corp., expiring
7/15/04, (cost $0; purchased -
1994) 14,835 (c) 14,835
Foamex JPS Automotive L.P.,
expiring 7/1/99 20,250 101,250
Gaylord Container Corp.,
expiring 11/01/02 417,518 3,261,859
Heartland Wireless Communication,
Inc., expiring 12/31/00,
(cost $0; purchased - 1995) 39,000 (c) 234,000
Hyperion Telecommunications,
expiring 4/15/03 22,000 0
Intelcom Group, Inc., expiring 127,809
9/15/05 2,044,944
Intercel, Inc., expiring 2/1/06 53,760 0
Intermedia Communications of
Florida, expiring 6/1/00 11,250 450,000
Nextel Communications, Inc.,
expiring 12/15/98 14,273 143
expiring 4/25/99 7,000 70
President Riverboat Casinos,
Inc., expiring 9/30/99 44,150 442
United Int'l. Holdings, Inc.,
expiring 11/15/99 44,500 1,290,500
--------------
Total warrants (cost $220,009) 8,423,871
--------------
Total long-term investments
(cost $3,724,424,089) 3,721,415,243
</TABLE>
- - --------------------------------------------------------------------------------
See Notes to Financial Statements. 11 -----
<PAGE>
Portfolio of Investments PRUDENTIAL HIGH YIELD
as of June 30, 1996 (Unaudited) FUND, INC.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Interest
Maturity Amount Value
Description Rate
Date (000) (Note 1)
<S> <C>
<C> <C> <C>
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
SHORT-TERM INVESTMENTS--5.6%
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Commercial Paper--3.1%
Enron Oil & Gas
5.65% 7/01/96 $ 10,000 $ 10,000,000
UBS Finance (Delaware), Inc.
5.58 7/01/96 111,565 111,565,000
--------------
121,565,000
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Repurchase Agreement--2.5%
Goldman Sachs & Co., dated 6/28/96, repurchase price
$100,061,667 (cost $100,000,000; the value of the
collateral including accrued interest is
$102,000,001)
5.55 7/02/96 100,000 100,000,000
--------------
Total short-term investments (cost $221,565,000)
221,565,000
--------------
- - -----------------------------------------------------------------------------
- - -------------------------------------------------
Total Investments--98.8%
(cost $ 3,945,989,089; Note 4)
3,942,980,243
Other assets in excess of liabilities--1.2%
48,930,191
--------------
Net Assets--100%
$3,991,910,434
--------------
--------------
</TABLE>
- - ---------------
(a) Standard & Poor's Rating.
(b) Represents issuer in default on interest payments; non-income producing
security.
(c) Indicates a restricted security; the aggregate cost of such securities is
$109,359,178. The aggregate value ($105,310,755) is approximately 2.6% of
net assets.
(d) Non-income producing securities.
(e) Consists of more than one class of securities traded together as a unit;
generally bonds with attached stock or warrants.
(f) Fair valued security.
NR--Not rated by Moody's or Standard & Poor's.
PIK--Payment in kind securities.
L.P.--Limited Partnership.
The Fund's current Prospectus contains a description of Moody's and Standard &
Poor's ratings.
- - --------------------------------------------------------------------------------
- - -----12 See Notes to Financial Statements.
<PAGE>
Statement of Assets and Liabilities (Unaudited) PRUDENTIAL HIGH YIELD
FUND, INC.
- - --------------------------------------------------------------------------------
<TABLE>
<S>
<C>
Assets
June 30, 1996
Investments, at value (cost
$3,945,989,089).................................................................
$3,942,980,243
Cash.........................................................................
............................... 215,134
Receivable for investments
sold.........................................................................
.... 108,981,724
Interest
receivable...................................................................
...................... 57,878,612
Receivable for Fund shares
sold.........................................................................
.... 35,290,334
Deferred expenses and other
assets..........................................................................
153,077
--------------
Total
assets.......................................................................
...................... 4,145,499,124
--------------
Liabilities
Payable for investments
purchased....................................................................
....... 132,497,537
Dividends
payable......................................................................
..................... 9,733,855
Payable for Fund shares
reacquired...................................................................
....... 6,357,298
Accrued
expenses.....................................................................
....................... 1,857,273
Due to
Distributor..................................................................
........................ 1,791,060
Due to
Manager......................................................................
........................ 1,351,667
--------------
Total
liabilities..................................................................
...................... 153,588,690
--------------
Net
Assets.......................................................................
........................... $3,991,910,434
--------------
--------------
Net assets were comprised of:
Common stock, at
par..........................................................................
........... $ 4,952,879
Paid-in capital in excess of
par.........................................................................
4,688,820,187
--------------
4,693,773,066
Distributions in excess of net investment
income.........................................................
(1,032,659)
Accumulated net realized loss on
investments.............................................................
(697,821,127)
Net unrealized depreciation on
investments...............................................................
(3,008,846)
--------------
Net assets, June 30,
1996.........................................................................
.......... $3,991,910,434
--------------
--------------
Class A:
Net asset value and redemption price per share
($1,361,047,694 / 168,723,623 shares of common stock issued and
outstanding).......................... $8.07
Maximum sales charge (4.00% of offering
price)...........................................................
.34
Maximum offering price to
public.........................................................................
8.41
Class B:
Net asset value, offering price and redemption price per share
($2,574,505,490 / 319,574,887 shares of common stock issued and
outstanding).......................... $8.06
Class C:
Net asset value, offering price and redemption price per share
($28,419,513 / 3,527,673 shares of common stock issued and
outstanding)............................... $8.06
Class Z:
Net asset value, offering price and redemption price per share
($27,937,737 / 3,461,711 shares of common stock issued and
outstanding)............................... $8.07
</TABLE>
- - --------------------------------------------------------------------------------
See Notes to Financial Statements. 13 -----
<PAGE>
PRUDENTIAL HIGH YIELD FUND, INC.
HIGH YIELD FUND, INC.
Statement of Operations (Unaudited)
- - ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
Net Investment Income 1996
<S> <C>
Income
Interest................................... $202,054,243
Dividends.................................. 4,757,527
------------
Total Income............................ 206,811,770
------------
Expenses
Distribution fee--Class A.................. 983,218
Distribution fee--Class B.................. 10,095,700
Distribution fee--Class C.................. 96,684
Management Fee............................. 8,325,720
Transfer agent's fees and expenses......... 2,558,000
Reports to shareholders.................... 411,000
Custodian's fees and expenses.............. 215,000
Registration fees.......................... 80,000
Insurance expense.......................... 42,000
Audit fee and expenses..................... 37,000
Legal fees and expenses.................... 19,000
Directors' fees and expenses............... 19,000
Miscellaneous.............................. 3,364
------------
Total operating expenses................ 22,885,686
Loan commitment fees (Note 2).............. 37,500
------------
Total expenses.......................... 22,923,186
------------
Net investment income......................... 183,888,584
------------
Realized and Unrealized Gain
(Loss) on Investments
Net realized gain on investment
transactions............................... 24,151,938
Net change in unrealized depreciation of
investments................................ (83,297,345)
------------
Net loss on investments....................... (59,145,407)
------------
Net Increase in Net Assets
Resulting from Operations..................... $124,743,177
------------
------------
</TABLE>
PRUDENTIAL HIGH YIELD FUND, INC.
HIGH YIELD FUND, INC.
Statement of Changes in Net Assets (Unaudited)
- - ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) June 30, December 31,
in Net Assets 1996 1995
<S> <C> <C>
Operations
Net investment income....... $ 183,888,584 $ 368,711,713
Net realized gain (loss) on
investment
transactions............. 24,151,938 (129,423,086)
Net change in unrealized
appreciation
(depreciation) of
investments.............. (83,297,345) 373,919,552
---------------- ----------------
Net increase in net assets
resulting from
operations............... 124,743,177 613,208,179
---------------- ----------------
Net equalization credits....... -- 155,052
---------------- ----------------
Dividends and distributions
(Note 1)
Dividends from net
investment income
Class A.................. (62,032,604) (107,009,035)
Class B.................. (119,831,900) (260,558,397)
Class C.................. (1,149,395) (1,144,281)
Class Z.................. (874,685) --
---------------- ----------------
(183,888,584) (368,711,713)
---------------- ----------------
Distributions in excess of
net investment income
Class A.................. (988,362) (2,494,359)
Class B.................. (1,909,275) (5,281,164)
Class C.................. (18,313) (32,071)
Class Z.................. (13,936) --
---------------- ----------------
(2,929,886) (7,807,594)
---------------- ----------------
Fund share transactions (Net of
share conversions) (Note 5)
Net proceeds from shares
sold..................... 1,071,556,547 1,732,422,699
Net asset value of shares
issued in reinvestment of
dividends and
distributions............ 86,779,969 180,623,667
Cost of shares reacquired... (1,195,629,023) (1,536,230,023)
---------------- ----------------
Net increase (decrease) in
net assets from Fund
share transactions....... (37,292,507) 376,816,343
---------------- ----------------
Total increase (decrease)...... (99,367,800) 613,660,267
Net Assets
Beginning of period............ 4,091,278,234 3,477,617,967
---------------- ----------------
End of period.................. $ 3,991,910,434 $ 4,091,278,234
---------------- ----------------
---------------- ----------------
</TABLE>
- - --------------------------------------------------------------------------------
- - -----14 See Notes to Financial Statements.
<PAGE>
Notes to Financial Statements (Unaudited) 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 June
30, 1996 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: Effective January 1, 1996, the Fund discontinued the accounting
practice of equalization. Equalization is a practice whereby a portion of the
proceeds from sales and costs of repurchases of capital shares, equivalent on
a
per share basis to the amount of distributable net
- - --------------------------------------------------------------------------------
15 -----
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL HIGH YIELD FUND, INC.
- - --------------------------------------------------------------------------------
investment income on the date of the transaction, is credited or charged to
undistributed net investment income. The balance of $6,076,709 of undistributed
net investment income at December 31, 1995, resulting from equalization, was
transferred to paid-in capital in excess of par. Such reclassification has no
effect on net assets, results of operations, or net asset value per share.
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 decrease distributions in excess of net
investment income and increase accumulated net realized loss on investments by
$4,002,741. This was primarily due to sale of securities purchased with market
discounts for the six months ended June 30, 1996. 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 has a distribution agreement with Prudential Securities Incorporated
(``PSI''), which acts as the distributor of the Class A, B, C and Z shares of
the Fund. The Fund compensates 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 for Class A, B and C shares are accrued daily and payable
monthly. No distribution or service fees are paid to PSI as distributor of the
Class Z shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensates PSI with respect
to
Class A, B and C 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 six months ended June 30, 1996.
PSI has advised the Fund that it has received approximately $610,900 in
front-end sales charges resulting from sales of Class A shares during the six
months ended June 30, 1996. From these fees, PSI paid such sales charges to
Pruco Securities Corporation, an affiliated broker-dealer, which in turn paid
commissions to salespersons and incurred other distribution costs.
PSI has advised the Fund that for the six months ended June 30, 1996, it
received approximately $2,598,800 and $18,300 in contingent deferred sales
charges imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
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, the unused portion of the credit facility.
- - ------------------------------------------------------------
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 six months ended June
30, 1996, the Fund incurred fees of approximately $1,816,500 for the services
of
PMFS. As of June 30, 1996, $301,700 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.
- - --------------------------------------------------------------------------------
- - -----16
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL HIGH YIELD FUND, INC.
- - --------------------------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the six months ended June 30, 1996 were $1,852,212,689 and $2,095,292,881,
respectively.
The federal income tax basis of the Fund's investments, including short-term
investments, as of June 30, 1996 was $3,947,610,065; accordingly, net unrealized
depreciation for federal income tax purposes was $4,629,822 (gross unrealized
appreciation--$90,175,499; gross unrealized depreciation--$94,805,321).
For federal income tax purposes, the Fund has a capital loss carryforward as of
December 31, 1995 of approximately $710,746,300 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 $162,249,600 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 current fiscal year.
- - ------------------------------------------------------------
Note 5. Capital
The Fund offers Class A, Class B, Class C and Class Z 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.
Effective March 1, 1996, the Fund commenced offering Class Z shares. Class Z
shares are not subject to any sales or redemption charge and are offered
exclusively for sale to the participants of the PSI 401(K) Plan, a defined
contribution plan sponsored by PSI.
The Fund has 3 billion shares of $.01 par value common stock authorized; equally
divided into four classes, designated Class A, Class B, Class C and Class Z
shares.
Transactions in shares of common stock for the six months ended June 30, 1996
and fiscal year ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- - ------------------------------ ------------ ---------------
<S> <C> <C>
Six months ended June 30,
1996:
Shares sold................... 63,911,044 $ 525,054,823
Shares issued in reinvestment
of
dividends and
distributions............... 3,883,525 31,804,887
Shares reacquired............. (80,007,605) (656,280,501)
------------ ---------------
Net decrease in shares
outstanding before
conversions................. (12,213,036) (99,420,791)
Shares issued upon conversion
from Class B................ 21,481,725 175,065,341
Shares reacquired upon
conversion into Class Z..... (3,749,095) (31,229,876)
------------ ---------------
Net increase in shares
outstanding................. 5,519,594 $ 44,414,674
------------ ---------------
------------ ---------------
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)
------------ ---------------
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
------------ ---------------
------------ ---------------
<CAPTION>
Class B
- - ------------------------------
<S> <C> <C>
Six months ended June 30,
1996:
Shares sold................... 61,982,333 $ 507,627,449
Shares issued in reinvestment
of
dividends and
distributions............... 6,544,120 53,537,849
Shares reacquired............. (61,302,559) (501,581,699)
------------ ---------------
Net increase in shares
outstanding before
conversion.................. 7,223,894 59,583,599
Shares reacquired upon
conversion into Class A..... (21,508,121) (175,065,341)
------------ ---------------
Net decrease in shares
outstanding................. (14,284,227) $ (115,481,742)
------------ ---------------
------------ ---------------
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)
------------ ---------------
------------ ---------------
</TABLE>
- - --------------------------------------------------------------------------------
17 -----
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL HIGH YIELD FUND, INC.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Shares Amount
- - ------------------------------ ------------ ---------------
<S> <C> <C>
Six months ended June 30,
1996:
Shares sold................... 3,716,710 $ 30,402,435
Shares issued in reinvestment
of
dividends and
distributions............... 78,227 639,568
Shares reacquired............. (3,204,019) (26,176,522)
------------ ---------------
Net increase in shares
outstanding................. 590,918 $ 4,865,481
------------ ---------------
------------ ---------------
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
------------ ---------------
------------ ---------------
<CAPTION>
Class Z Shares Amount
- - ------------------------------ ------------ ---------------
<S> <C> <C>
March 1, 1996(a) through
June 30, 1996:
Shares sold................... 1,033,054 $ 8,471,840
Shares issued in reinvestment
of dividends and
distributions............... 98,000 797,665
Shares reacquired............. (1,418,438) (11,590,301)
------------ ---------------
Net decrease in shares
outstanding before
conversion.................. (287,384) (2,320,796)
Shares issued upon conversion
from Class A................ 3,749,095 31,229,876
------------ ---------------
Net increase in shares
outstanding................. 3,461,711 $ 28,909,080
------------ ---------------
------------ ---------------
</TABLE>
- - ---------------
(a) Commencement of offering of Class Z shares.
- - --------------------------------------------------------------------------------
- - -----18
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL HIGH YIELD FUND, INC.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
- - ----------------------------------------------------------------------------
Six Months
Ended
Year Ended December 31,
June 30,
- - -------------------------------------------------------------
1996 1995
1994 1993 1992 1991
----------
- - ---------- -------- -------- -------- -------
<S> <C> <C>
<C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 8.19 $
7.68 $ 8.70 $ 8.19 $ 7.88 $ 6.72
----------
- - ---------- -------- -------- -------- -------
Income from investment operations
Net investment income............................... .38
.81 .80 .84 .90 .93
Net realized and unrealized gain (loss) on
investments...................................... (.11)
.53 (1.00) .52 .32 1.26
----------
- - ---------- -------- -------- -------- -------
Total from investment operations................. .27
1.34 (.20) 1.36 1.22 2.19
----------
- - ---------- -------- -------- -------- -------
Less distributions
Dividends from net investment income................ (.38)
(.81) (.80) (.84) (.90) (.93)
Distributions in excess of net investment income.... (.01)
(.02) (.02) (.01) -- --
Distributions from paid-in capital in excess of
par.............................................. --
- - -- -- -- (.01) (.10)
----------
- - ---------- -------- -------- -------- -------
Total distributions.............................. (.39)
(.83) (.82) (.85) (.91) (1.03)
----------
- - ---------- -------- -------- -------- -------
Net asset value, end of period...................... $ 8.07 $
8.19 $ 7.68 $ 8.70 $ 8.19 $ 7.88
----------
- - ---------- -------- -------- -------- -------
----------
- - ---------- -------- -------- -------- -------
TOTAL RETURN(a)..................................... 3.17%
18.17% (2.35)% 17.32% 15.97% 34.29%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $1,361,048
$1,336,354 $161,435 $171,364 $106,188 $54,025
Average net assets (000)............................ $1,318,161
$1,056,555 $165,517 $149,190 $ 81,129 $37,194
Ratios to average net assets:
Expenses, including distribution fees............ .73%(b)
.75% .78% .76% .85% .88%
Expenses, excluding distributions fees........... .58%(b)
.60% .63% .61% .70% .73%
Net investment income............................ 9.49%(b)
10.13% 9.86% 9.93% 10.96% 12.73%
Portfolio turnover rate............................. 47%
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 period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Annualized.
- - --------------------------------------------------------------------------------
See Notes to Financial Statements. 19 -----
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL HIGH YIELD FUND, INC.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
- - -----------------------------------------------------------------------
Six Months
Ended
Year Ended December 31,
June 30,
- - -------------------------------------------------------
1996 1995
1994 1993 1992
----------
- - ---------- ---------- ---------- ----------
<S> <C> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 8.18 $
7.67 $ 8.69 $ 8.19 $ 7.88
----------
- - ---------- ---------- ---------- ----------
Income from investment operations
Net investment income............................... .36
.76 .76 .79 .85
Net realized and unrealized gain (loss) on
investments...................................... (.11)
.53 (1.00) .51 .32
----------
- - ---------- ---------- ---------- ----------
Total from investment operations................. .25
1.29 (.24) 1.30 1.17
----------
- - ---------- ---------- ---------- ----------
Less distributions
Dividends from net investment income................ (.36)
(.76) (.76) (.79) (.85)
Distributions in excess of net investment income.... (.01)
(.02) (.02) (.01) --
Distributions from paid-in capital in excess of
par.............................................. --
-- -- -- (.01)
----------
- - ---------- ---------- ---------- ----------
Total distributions.............................. (.37)
(.78) (.78) (.80) (.86)
----------
- - ---------- ---------- ---------- ----------
Net asset value, end of period...................... $ 8.06 $
8.18 $ 7.67 $ 8.69 $ 8.19
----------
- - ---------- ---------- ---------- ----------
----------
- - ---------- ---------- ---------- ----------
TOTAL RETURN(a)..................................... 2.89%
17.49% (2.92)% 16.54% 15.30%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $2,574,505
$2,730,903 $3,311,323 $3,745,985 $2,887,698
Average net assets (000)............................ $2,706,979
$2,725,385 $3,566,709 $3,389,439 $2,582,922
Ratios to average net assets:
Expenses, including distribution fees............ 1.33%(b)
1.35% 1.38% 1.36% 1.45%
Expenses, excluding distributions fees........... .58%(b)
.60% .63% .61% .70%
Net investment income............................ 8.89%(b)
9.56% 9.28% 9.35% 10.29%
Portfolio turnover rate............................. 47%
78% 74% 85% 68%
<CAPTION>
1991
----------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 6.71
----------
Income from investment operations
Net investment income............................... .88
Net realized and unrealized gain (loss) on
investments...................................... 1.26
----------
Total from investment operations................. 2.14
----------
Less distributions
Dividends from net investment income................ (.88)
Distributions in excess of net investment income.... --
Distributions from paid-in capital in excess of
par.............................................. (.09)
----------
Total distributions.............................. (.97)
----------
Net asset value, end of period...................... $ 7.88
----------
----------
TOTAL RETURN(a)..................................... 33.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $2,199,127
Average net assets (000)............................ $1,970,257
Ratios to average net assets:
Expenses, including distribution fees............ 1.48%
Expenses, excluding distributions fees........... .73%
Net investment income............................ 11.65%
Portfolio turnover rate............................. 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 period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Annualized.
- - --------------------------------------------------------------------------------
- - -----20 See Notes to Financial Statements.
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL HIGH YIELD FUND, INC.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class
C Class Z
- - -------------------------------------------- ----------------
August 1,
Six Months
1994(c)
Ended Year
Ended Through March 1, 1996(d)
June 30, December
31, December 31, Through
1996 1995
1994 June 30, 1996
----------
- - ------------ ------------ ----------------
<S> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 8.18 $
7.67 $ 8.05 $ 8.34
----------
- - ------ ----- ------
Income from investment operations
Net investment income............................... .36
.76 .32 .25
Net realized and unrealized gain (loss) on
investments...................................... (.11)
.53 (.37) (.26)
----------
- - ------ ----- ------
Total from investment operations................. .25
1.29 (.05) (.01)
----------
- - ------ ----- ------
Less distributions
Dividends from net investment income................ (.36)
(.76) (.32) (.25)
Distributions in excess of net investment income.... (.01)
(.02) (.01) (.01)
----------
- - ------ ----- ------
Total distributions.............................. (.37)
(.78) (.33) (.26)
----------
- - ------ ----- ------
Net asset value, end of period...................... $ 8.06 $
8.18 $ 7.67 $ 8.07
----------
- - ------ ----- ------
----------
- - ------ ----- ------
TOTAL RETURN(a)..................................... 2.89%
17.49% (0.79)% (0.41)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $ 28,420 $
24,021 $4,860 $ 27,938
Average net assets (000)............................ $ 25,924 $
12,063 $2,840 $ 28,295
Ratios to average net assets:
Expenses, including distribution fees............ 1.33%(b)
1.35% 1.48%(b) .38%(b)
Expenses, excluding distributions fees........... .58%(b)
.60% .73%(b) .38%(b)
Net investment income............................ 8.91%(b)
9.49% 9.80%(b) 6.25%(b)
Portfolio turnover rate............................. 47%
78% 74% 47%
</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) Annualized.
(c) Commencement of offering of Class C shares.
(d) Commencement of offering of Class Z shares.
- - --------------------------------------------------------------------------------
See Notes to Financial Statements. 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, 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 perfor-mance is not
indicative of future results.
Portfolio Manager's Report
The portfolio manager who invests your money for you reports onsuccessful --
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. 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. 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 is fairly presented 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.
When you invest through Prudential Mutual Funds, you receive financial advice
through a Prudential Securities financial advisor or Prudential/Pruco
Securities registered representative. Your advisor or representative can
provide you with the following services:
There's No Reward Without Risk; But Is This Risk Worth It?
Your financial advisor or registered representative can help you match the
reward you seek with the risk you can tolerate. And risk can be difficult to
gauge -- sometimes even the simplest investments bear surprising risks. The
educated investor knows that markets seldom move in just one direction -- there
are times when a market sector or asset class will lose value or provide little
in the way of total return. Managing your own expectations is easier with help
from someone who understands the markets and who knows you!
Keeping Up With The Joneses.
A financial advisor or registered representative can help you wade through the
numerous mutual funds available to find the ones that fit your own individual
investment profile and risk tolerance. While the newspapers and popular
magazines are full of advice about investing, they are aimed at generic groups
of people or representative individuals, not at you personally. Your financial
advisor or registered representative will review your investment objectives
with you. This means you can make financial decisions based on the assets and
liabilities in your current portfolio and your risk tolerance -- not just based
on the current investment fad.
Buy Low, Sell High.
Buying at the top of a market cycle and selling at the bottom are among the
most common investor mistakes. But sometimes it's difficult to hold on to an
investment when it's losing value every month. Your financial advisor or
registered representative can answer questions when you're confused or worried
about your investment, and remind you that you're investing for the long haul.
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
(800) 225-1852
http:\\www.prudential.com
Directors
Delayne Dedrick Gold
Arthur Hauspurg
Harry A. Jacobs, Jr.
Stephen 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 C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, 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
The views expressed in this report and information about the Fund's portfolio
holdings are for the period covered by this report and are subject to change
thereafter.
The accompanying financial statements as of June 30, 1996 were not audited and,
accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
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Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
(800) 225-1852
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