<PAGE>
The High
Yield Income
Fund, Inc.
- -------------------------------------------------------------------
Semiannual Report
February 29, 2000
<PAGE>
Letter to Shareholders
April 17, 2000
Dear Shareholder:
Performance at a Glance
The six months that ended February 29, 2000,
presented significant challenges for fixed-income
investors of all kinds. Although they were spared
the crisis conditions seen in 1998, rising interest
rates limited returns in many bond markets. As
evidence continued to point to a much stronger-
than-expected U.S. economy, the Federal Reserve
raised short-term interest rates in November 1999
and February 2000, following similar rate hikes in
June and August 1999. Reacting to the Fed's actions
and the increasing risk of rekindled inflation,
investors pushed bond yields higher and bond prices
lower, including those of high-yield (junk) bonds.
A rise in the junk bond default rate during 1999
was another negative influence on the high-yield
market. This rate expresses the percentage of high-
yield debt securities that failed to make timely
interest and principal payments. Many of the
defaults were concentrated in the healthcare and
energy sectors. Many were also simply lower-quality
bonds issued during a more receptive, arguably
overly receptive market environment that lasted
from the mid-1990s through the first half of 1998.
On the positive side, the Fund performed well
relative to its benchmark, the Lipper Closed-End
High Current Yield Average. Its performance was
helped by our focus on B-rated securities, one of
the best-performing grades of high-yield bonds
during the review period.
<TABLE>
FUND'S PERFORMANCE
As of 2/29/00
<CAPTION>
Total Return Total Return NAV Market Price
6 months 12 months 2/29/00 2/29/00
<S> <C> <C> <C> <C>
High Yield
Income Fund1 2.44% 3.29% $6.37 $5.31
Lipper Closed-End
High Current Yield Avg.2 1.31 2.10 N/A N/A
Lipper Open-End
High Current Yield Avg.3 2.16 3.42 N/A N/A
</TABLE>
1Source: Prudential Investments Fund Management
LLC. Total return of the Fund represents the
change in net asset value from the beginning of the
period (9/1/99) through the end (2/29/00), and
assumes the reinvestment of dividends and
distributions. Shares of the Fund are traded on
the NYSE using the symbol HYI. Past performance is
no guarantee of future results.
2Source: Lipper Inc. These are the average
returns of 27 funds in the Closed-End High Current
Yield category for six months.
3Source: Lipper Inc. These are the average
returns of 364 funds in the Open-End High Current
Yield category.
1
<PAGE>
YIELD AND DIVIDEND
As of 2/29/00
Total Monthly Dividends Paid Per Share
Total Monthly Dividends
Paid Per Share Yield At Market Price
6 months
$0.36 6.78%
The Fund's primary investment objective is to
maximize current income to shareholders. As a
secondary investment objective, the Fund will seek
capital appreciation, but only when consistent with
its primary objective. The Fund will seek to
achieve its objective by investing primarily in
corporate bonds rated BBB or lower by independent
rating agencies. Bonds rated less than BBB are
below investment grade and are commonly known as
"junk bonds." Below-investment-grade bonds are
subject to greater risk of default and higher
volatility than investment-grade bonds.
Furthermore, these bonds tend to be less liquid
than higher-quality bonds. The Fund is well
diversified, and we carefully research companies to
find those with attractive yields and improving
credit quality.
Market Background
Aggressive Fed tightening sinks U.S. bond markets
Rising interest rates kept fixed-income investors
on the defensive during our six-month review
period. After hiking U.S. short-term rates in June
and August 1999 (before our review period began),
the Federal Reserve implemented a third increase in
November 1999 in the face of continued economic
strength.
Investors were hopeful that the rate hikes would
end there, and that the Fed would be content with
offsetting the three rate cuts it had made in the
fall of 1998, when financial markets were reeling
from Russia's debt default and the near-collapse of
a prominent hedge fund. But the Fed was not done
tightening monetary policy.
Another rate increase became a virtual certainty
when U.S. gross domestic product for the fourth
quarter of 1999 was reported to have grown at a
robust rate. In spite of the economy's strength,
inflation remained quiescent at both the producer
and consumer levels, aided by solid gains in
productivity. The energy sector was one of the few
pockets of inflation. Crude oil and natural gas
prices continued to advance, with oil topping $30
per barrel late in the period.
In early February 2000, the Fed raised the federal
funds rate (what U.S. banks charge each other for
overnight loans) to 5.75% and its discount rate on
loans to banks from the Federal Reserve system to
5.25%, both 0.25% increases. As our review period
drew to a close, the question on most investors'
minds was not whether there would be more rate
hikes in the first half of 2000, but how many there
would be.
2
<PAGE>
U.S. Treasury unveils its buyback program
On the same day in February 2000 that the Fed
raised short-term rates, the U.S. Treasury
Department officially announced its buyback
program. The program was prompted by the budget
surpluses generated during the past several fiscal
years, which have reduced the need for government
borrowing. The Treasury Department hopes to buy
back up to $30 billion in Treasuries by the end of
2000. It also stated that issuance of new two-,
five-, and 10-year notes would be reduced, as would
issuance of 30-year bonds.
The prospect of decreased supply and increased
demand for Treasuries pushed their prices higher
and yields lower, especially at the longer end of
the market. This trend widened yield spreads
between Treasuries and high-yield bonds,
contributing to the poor relative performance of
the latter.
Another factor weighing on the junk bond market was
an increase in the default rate during 1999. High-
yield bonds tend to be sensitive to changes in the
default rate, and the latest increase caused yield
spreads in the high-yield market to widen as
investors required more generous yields to justify
the greater credit risk. Finally, because of the
relatively weak market conditions, it was difficult
to bring new junk bond issues to market. What
issues there were, however, tended to be of high
quality.
Our Strategy
We maintained our conservative emphasis...
Debt securities rated B were one of the best-
performing credit tiers in the junk bond market
during our six-month review period, attracting
investors with a mix of relative safety and high
yield. The Fund was well positioned in this
respect, with more than half of its holdings in B-
rated securities. In addition, the Fund was helped
by its underweighting in CCC-rated securities,
which performed poorly. That sector still hasn't
recovered from the credit crunch of 1998, when a
heightened aversion to risk caused investors to
flee CCC-rated securities in droves. One
indication of the overall higher quality of the
Fund's holdings was the fact that CCC-rated
securities remained at roughly 4.00% of its total
investments, well below the approximately 8% of the
high-yield universe.
. . . while looking for opportunities in growth
industries
The telecommunications, energy, and cable
industries were well represented in the Fund, and
we increased its holdings in those areas during our
review period. Our aim was to focus on noncyclical
industries benefiting from strong fundamentals and
good earnings trends. In addition, we looked to
acquire issues that might benefit from merger and
acquisition activity. On the other hand, we cut
exposure to industries that tend to be most
sensitive to interest rates, such as financial
services and construction.
Our purchases were focused on the new issues
market. The rationale here was that since the new
issues market was weak, only strong companies
offering attractive yields would be able to sell
new bonds. For example, we
3
<PAGE>
purchased new offerings
from Level 3 Communications--a provider of advanced
Internet Protocol networks--and from Nextlink
Communications--a local and long-distance telephone
service company. On the sell side of the ledger,
we significantly reduced our position in Pagemart
Nationwide, formerly one of the Fund's largest
holdings. This move was triggered by slowing
growth in the paging industry as consumers
increasingly chose other forms of communication,
such as cellular phones over paging devices.
Looking Ahead
Rates could stabilize soon despite more Fed
tightenings
We are cautiously optimistic about the near-term
outlook. While some additional tightening by the
Fed seems likely, we are probably close to a peak
in interest rates. Indeed, if the Fed can achieve
its goal of gradually slowing the economy, there
may be some possibility of modestly lower rates.
Overall, the Fund should do reasonably well if
rates stabilize and move neither sharply higher nor
sharply lower from current levels.
We also believe that defaults on junk bonds might
have peaked and could decline later in the year,
enabling yield spreads in the high-yield sector to
narrow. Finally, solid economic growth and a
rising stock market should continue to provide a
positive backdrop for the high-yield market.
Because of their place near the upper end of the
risk spectrum, high-yield securities are especially
dependent on the financial health of the companies
that issue them. A strong economy provides an
environment in which more companies, and therefore
more high-yield investments, can flourish. We look
for these favorable influences to continue as 2000
unfolds.
Sincerely,
John R. Strangfeld
President
The High Yield Income Fund, Inc.
4
<PAGE>
Portfolio of Investments as
of February 29, 2000 (Unaudited) THE HIGH YIELD INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount Value
Description(a) (Unaudited) Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--117.6%
CORPORATE BONDS--113.2%
- ------------------------------------------------------------------------------------------------------------------------------
Aerospace--1.0%
BE Aerospace, Inc., Sr. Sub. Notes B1 9.50 % 11/01/08 $ 150 (a) $ 138,000
K & F Industries, Inc., Sr. Sub. Notes, Ser. B B3 9.25 10/15/07 300 (a) 282,000
Stellex Industries, Inc., Sr. Sub. Notes B3 9.50 11/01/07 500 (a) 325,000
-----------
745,000
- ------------------------------------------------------------------------------------------------------------------------------
Airlines--0.9%
Continental Airlines, Inc., Sr. Notes Ba2 8.00 12/15/05 150 (a) 136,232
US Airways, Inc., Pass-Through Cert. Ba3 9.82 1/01/13 500 (a) 478,890
-----------
615,122
- ------------------------------------------------------------------------------------------------------------------------------
Automotive--3.6%
Collins & Aikman Products Co.,
Sr. Sub. Notes B2 11.50 4/15/06 50 (a) 49,000
Sr. Sub. Notes B3 10.00 1/15/07 30 (a) 29,175
Federal Mogul Corp., Sub. Notes Ba2 7.50 1/15/09 145 125,761
Foamex JPS Automotive LP,
Sr. Notes B1 11.125 6/15/01 375 (a) 377,813
Sr. Sub. Notes B3 9.875 6/15/07 150 (a) 124,500
Hayes Lemmerz International, Inc., Sr. Sub. Notes, Ser.
B B2 8.25 12/15/08 200 (a) 176,500
Lear Corp.,
Sr. Notes, Ser. B Ba1 7.96 5/15/05 200 189,500
Sr. Notes, Ser. B Ba1 8.11 5/15/09 500 (a) 462,500
Sub. Notes Ba3 8.25 2/01/02 275 268,812
MSX International, Inc., Sr. Sub. Notes B3 11.375 1/15/08 105 (a) 97,650
Standyne Automotive Corp., Sr. Sub. Notes Caa1 10.25 12/15/07 175 (a) 136,500
Tenneco, Inc., Sr. Sub. Notes B2 11.625 10/15/09 340 346,375
Venture Holdings, Sr. Notes B2 9.50 7/01/05 250 227,500
-----------
2,611,586
- ------------------------------------------------------------------------------------------------------------------------------
Beverages--0.6%
Cott Corp., Sr. Notes B1 8.50 5/01/07 500 (a) 462,500
- ------------------------------------------------------------------------------------------------------------------------------
Building Materials & Components--1.4%
Building Materials Corp.,
Sr. Notes Ba3 7.75 7/15/05 10 (a) 8,900
Sr. Notes Ba3 8.00 12/01/08 150 (a) 130,500
Congoleum Corp., Sr. Notes B1 8.625 8/01/08 500 (a) 435,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5
<PAGE>
Portfolio of Investments as
of February 29, 2000 (Unaudited) THE HIGH YIELD INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount Value
Description(a) (Unaudited) Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Building Materials & Components (cont'd.)
Nortek, Inc.,
Sr. Notes B1 9.25 % 3/15/07 $ 250 $ 234,375
Sr. Notes B1 9.125 9/01/07 250 (a) 233,125
-----------
1,041,900
- ------------------------------------------------------------------------------------------------------------------------------
Cable--13.3%
Adelphia Communications Corp.,
Sr. Notes B1 9.50 2/15/04 85 84,024
Sr. Notes B1 10.50 7/15/04 500 (a) 505,000
Sr. Notes B1 7.875 5/01/09 500 432,500
Century Communications Corp., Sr. Disc. Notes B1 Zero 3/15/03 250 179,375
Charter Communications Holdings LLC,
Sr. Disc. Notes, Zero Coupon (until 4/1/04) B2 9.92 4/01/11 235 138,062
Sr. Notes B2 8.625 4/01/09 500 (a) 460,000
Sr. Notes B2 10.25 1/15/10 500 495,000
Classic Cable Inc.,
Sr. Sub. Notes B3 9.375 8/01/09 130 122,200
Sr. Sub. Notes B3 10.50 3/01/10 600 603,000
Coaxial Commerce Central Ohio, Inc., Sr. Notes B3 10.00 8/15/06 250 (a) 238,750
Comcast UK Cable Corp., Sr. Disc. Deb., Zero Coupon
(until 11/15/00) (UK) B2 11.20 11/15/07 225 (a)(d) 216,563
CSC Holdings, Inc., Sr. Sub. Deb. Ba3 10.50 5/15/16 170 187,000
Diamond Cable Co.,
Sr. Disc. Notes, Zero Coupon (until 12/15/00) (UK) B3 11.75 12/15/05 625 (d) 598,438
Sr. Disc. Notes, Zero Coupon (until 2/15/02) (UK) B3 10.75 2/15/07 500 (a)(d) 396,250
International Cabletel, Inc.,
Sr. Disc. Notes, Zero Coupon (until 4/15/00) B3 12.75 4/15/05 250 252,500
Sr. Notes, Ser. B, Zero Coupon (until 2/1/01) B3 11.50 2/01/06 650 (a) 607,750
Lenfest Communications, Inc., Sr. Sub. Notes Baa3 10.50 6/15/06 500 (a) 547,500
Mediacom LLC, Sr. Notes B2 7.875 2/15/11 500 (a) 430,000
Rogers Cablesystems, Inc., Sr. Notes (CA) Ba3 10.00 3/15/05 575 (a)(d) 603,750
Telewest Communications PLC,
Sr. Disc. Deb., Zero Coupon (until 10/1/00) (UK) B1 11.00 10/01/07 300 (d) 282,750
Sr. Disc. Notes, Zero Coupon (until 2/1/05) (UK) B1 11.375 2/01/10 285 (d) 168,150
United International Holdings, Inc., Sr. Sec'd. Disc.
Notes,
Zero Coupon (until 2/15/03) B3 10.34 2/15/08 500 355,000
United Pan Europe,
Sr. Disc. Notes, Zero Coupon (until 8/1/04) (NL) B2 12.50 8/01/09 1,095 (d) 591,300
Sr. Notes (NL) B2 10.875 8/01/09 1,130 (a)(d) 1,098,925
-----------
9,593,787
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6
<PAGE>
Portfolio of Investments as of
February 29, 2000 (Unaudited) THE HIGH YIELD INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount Value
Description(a) (Unaudited) Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Chemicals--4.5%
Avecia Group PLC, Sr. Notes NR 11.00 % 7/01/09 $ 375 $ 382,500
Huntsman ICI Chemicals, Inc., Sr. Sub. Notes B2 10.125 7/01/09 575 577,875
Huntsman Polymers Corp., Sr. Notes B1 11.75 12/01/04 250 261,875
Lyondell Chemical Co.,
Sr. Sec'd. Notes, Ser. A Ba3 9.625 5/01/07 125 120,000
Sr. Sec'd. Notes, Ser. B Ba3 9.875 5/01/07 515 (a) 491,825
Polymer Group, Inc., Sr. Sub. Notes B2 9.00 7/01/07 1,000 (a) 940,000
Sterling Chemical Holdings, Inc.,
Sr. Sec. Notes B3 12.375 7/15/06 185 (a) 191,475
Sr. Sub. Notes B3 11.75 8/15/06 315 (a) 265,387
-----------
3,230,937
- ------------------------------------------------------------------------------------------------------------------------------
Construction--0.4%
Del Webb Corp., Sr. Sub. Deb. B2 9.375 5/01/09 285 (a) 235,125
Standard Pacific Corp., Sr. Sub. Notes Ba2 8.50 4/01/09 20 17,550
-----------
252,675
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Products--5.3%
Coinstar, Inc., Sr. Sub. Disc. Notes, Zero Coupon
(until 10/1/99) NR 13.00 10/01/06 250 (a) 255,000
Corning Consumer Products Co., Sr. Sub. Notes B3 9.625 5/01/08 500 (a) 370,000
French Fragrances, Inc.,
Sr. Notes, Ser. B B2 10.375 5/15/07 750 (a) 720,000
La Petite Academy, Inc., Sr. Notes B3 10.00 5/15/08 250 165,000
Mail Well Corp., Sr. Notes B1 8.75 12/15/08 750 (a) 675,000
Packaged Ice, Inc., Sr. Notes B3 9.75 2/01/05 250 (a) 222,500
Revlon Consumer Products Corp., Sr. Notes B3 9.00 11/01/06 285 209,475
United Stationer Supply Co., Sr. Sub. Notes B1 12.75 5/01/05 700 (a) 749,875
Windmere Durable Holdings, Inc., Sr. Notes B3 10.00 7/31/08 500 (a) 488,750
-----------
3,855,600
- ------------------------------------------------------------------------------------------------------------------------------
Containers--0.1%
Owens-Illinois, Inc., Sr. Deb. Ba1 7.50 5/15/10 45 (a) 39,961
- ------------------------------------------------------------------------------------------------------------------------------
Energy--2.5%
AES Corp.,
Sr. Notes Ba1 9.50 6/01/09 500 (a) 493,750
Sr. Sub. Notes Ba3 10.25 7/15/06 500 (a) 502,500
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7
<PAGE>
Portfolio of Investments as of
February 29, 2000 (Unaudited) THE HIGH YIELD INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount Value
Description(a) (Unaudited) Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Energy (cont'd)
CMS Energy Corp., Sr. Notes Ba3 8.375% 7/01/03 $ 750 (a) $ 734,820
Eott Energy Partners LP, Sr. Notes Ba2 11.00 10/01/09 95 95,000
-----------
1,826,070
- ------------------------------------------------------------------------------------------------------------------------------
Environmental Services--1.9%
Allied Waste North America, Inc.,
Sr. Notes Ba3 7.625 1/01/06 500 (a) 430,000
Sr. Notes Ba3 7.875 1/01/09 250 (a) 210,000
Sr. Sub. Notes B2 10.00 8/01/09 900 (a) 733,500
-----------
1,373,500
- ------------------------------------------------------------------------------------------------------------------------------
Financial--1.9%
Americredit Corp., Sr. Notes, Ser. B Ba1 9.875 4/15/06 200 (a) 200,000
CB Richards Ellis Services, Inc., Sr. Sub. Notes Ba3 8.875 6/01/06 400 (a) 353,000
Chevy Chase Savings Bank, Sub. Deb. B1 9.25 12/01/05 250 (a) 240,000
Delta Financial Corp., Sr. Notes B3 9.50 8/01/04 160 (a) 104,000
Meditrust Ba2 7.82 9/10/26 100 55,000
Metris Companies, Inc., Sr. Notes Ba3 10.125 7/15/06 150 (a) 144,000
Sovereign Bancorp, Sr. Notes Ba3 10.50 11/15/06 250 (a) 250,000
-----------
1,346,000
- ------------------------------------------------------------------------------------------------------------------------------
Foods--4.2%
Agrilink Foods, Inc., Sr. Sub. Notes B3 11.875 11/01/08 250 245,000
Aurora Foods, Inc., Sr. Sub. Notes, Ser. D B1 9.875 2/15/07 340 190,400
Borden, Inc., Sr. Notes Ba1 9.20 3/15/21 500 (a) 458,150
Dominos, Inc., Sr. Sub. Notes B3 10.375 1/15/09 15 (a) 14,138
Pilgrim's Pride Corp., Sr. Sub. Notes B1 10.875 8/01/03 1,000 (a) 1,010,000
PSF Finance LP, Sr. Sec'd. Notes, Payment in Kind
(cost $324,232; purchased - 3/8/94) NR 11.00 9/17/03 361 368,999
Purina Mills, Inc., Sr. Sub. Notes B2 9.00 3/15/10 1,000 (a) 300,000
Sbarro, Inc., Sr. Notes Ba3 11.00 9/15/09 145 146,812
Vlasic Foods International, Inc., Sr. Sub. Notes, Ser.
B Caa1 10.25 7/01/09 425 (a) 276,250
-----------
3,009,749
- ------------------------------------------------------------------------------------------------------------------------------
Gaming--3.1%
Alliance Gaming Corp., Sr. Sub. Notes, Ser. B B3 10.00 8/01/07 340 (a) 187,850
Casino Magic Corp., Sr. Notes B1 13.00 8/15/03 250 (a) 275,000
Circus Circus Enterprises, Inc., Sr. Notes Ba2 7.625 7/15/13 200 (a) 170,500
Coast Hotels & Casinos, Inc., Sr. Sub. Notes B3 9.50 4/01/09 110 (a) 103,125
Harrahs Operating, Inc., Sr. Sub. Notes Ba2 7.875 12/15/05 250 235,000
Harveys Casino Resorts, Sr. Sub. Notes B2 10.625 6/01/06 125 128,594
Hollywood Park, Inc., Sr. Sub. Notes, Ser. B B2 9.25 2/15/07 500 (a) 481,250
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 8
<PAGE>
Portfolio of Investments as of
February 29, 2000 (Unaudited) THE HIGH YIELD INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount Value
Description(a) (Unaudited) Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Gaming (cont'd.)
Mohegan Tribal Gaming Authority,
Sr. Notes Ba2 8.125% 1/01/06 $ 500 (a) $ 473,750
Sr. Notes Ba3 8.75 1/01/09 100 95,750
Trump Atlantic City Assocs., First Mtge. Notes B2 11.25 5/01/06 115 (a) 78,775
-----------
2,229,594
- ------------------------------------------------------------------------------------------------------------------------------
Gas Pipelines--0.4%
Leviathan Gas Pipeline Corp., Sr. Sub. Notes B2 10.375 6/01/09 300 (a) 310,500
- ------------------------------------------------------------------------------------------------------------------------------
Health Care--4.7%
Abbey Healthcare Group, Inc., Sr. Sub. Notes B3 9.50 11/01/02 200 (a) 194,500
Bio Rad Labs, Inc., Sr. Sub. Notes B2 11.625 2/15/07 100 101,125
Biovail Corp., Sr. Notes B2 10.875 11/15/05 500 527,500
Columbia/HCA Healthcare Corp.,
Deb. Ba2 7.05 12/01/27 205 (a) 155,800
Deb. Ba2 7.50 11/15/95 75 (a) 56,906
Concentra Operating Corp., Sr. Sub. Notes, Ser. A B3 13.00 8/15/09 155 131,750
Fresenius Medical Care, Inc., Deb. NR 9.00 12/01/06 500 475,000
HEALTHSOUTH Corp., Sr. Notes Baa3 6.875 6/15/05 180 (a) 156,831
Iasis Healthcare Corp., Sr. Sub. Notes B3 13.00 10/15/09 165 166,650
ICN Pharmaceuticals, Inc., Sr. Notes Ba3 8.75 11/15/08 500 (a) 472,500
Lifepoint Hosps Holdings, Inc., Sr. Sub. Notes B3 10.75 5/15/09 150 153,000
Magellan Health Services, Inc., Sr. Sub. Notes B3 9.00 2/15/08 500 (a) 407,500
Triad Hospitals Holdings, Inc., Sr. Sub. Notes B3 11.00 5/15/09 390 401,700
-----------
3,400,762
- ------------------------------------------------------------------------------------------------------------------------------
Industrials--2.3%
Applied Power, Inc., Sr. Sub. Notes B1 8.75 4/01/09 175 (a) 179,375
Eagle Picher Industries, Inc., Sr. Sub. Notes B3 9.375 3/01/08 350 (a) 301,875
Gentek, Inc., Sr. Sub. Notes B2 11.00 8/01/09 300 (a) 307,500
Motors & Gears, Inc. B3 10.75 11/15/06 500 (a) 492,500
Thermadyne Mfg., Sr. Sub. Notes B3 9.875 6/01/08 425 (a) 348,500
-----------
1,629,750
- ------------------------------------------------------------------------------------------------------------------------------
Leisure--1.7%
Ballys Health & Tennis Corp., Sr. Sub. Notes, Ser. C B3 9.875 10/15/07 445 (a) 416,075
Imax Corp., Sr. Notes (CA) Ba2 7.875 12/01/05 250 (d) 232,500
Premier PKS, Inc., Sr. Notes B3 9.75 6/15/07 350 (a) 332,500
Six Flags Entertainment Corp., Sr. Notes B2 8.875 4/01/06 250 (a) 236,250
-----------
1,217,325
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 9
<PAGE>
Portfolio of Investments as of
February 29, 2000 (Unaudited) THE HIGH YIELD INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount Value
Description(a) (Unaudited) Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Lodging--1.1%
HMH Properties, Inc., Sr. Sec'd. Notes Ba2 7.875% 8/01/08 $ 670 (a) $ 579,550
ITT Corp., Deb. Ba1 7.375 11/15/15 150 121,695
La Quinta Inns, Inc., Sr. Notes Ba2 7.40 9/15/05 100 (a) 62,000
-----------
763,245
- ------------------------------------------------------------------------------------------------------------------------------
Media--4.6%
Ackerley Group, Inc., Sr. Sub. Notes, Ser. B B2 9.00 1/15/09 250 (a) 236,250
Alliance Atlantis Commerce, Inc., Sr. Sub. Notes B2 13.00 12/15/09 195 191,100
American Lawyer Media Holdings, Sr. Disc. Notes,
Zero Coupon (until 12/15/02) B3 12.25 12/15/08 300 (a) 198,750
Capstar Radio Broadcasting, Inc., Sr. Sub. Notes B1 9.25 7/01/07 125 126,250
Chancellor Media Corp., Sr. Sub. Notes B1 9.00 10/01/08 500 (a) 510,000
Echostar DBS Corp., Sr. Notes B2 9.375 2/01/09 150 146,250
Lin Holdings Corp., Sr. Disc. Notes, Zero Coupon (until
3/1/03) B3 10.00 3/01/08 95 60,800
Paxson Communications Corp., Sr. Sub. Notes B3 11.625 10/01/02 150 154,875
Sullivan Graphics Inc., Sr. Sub. Notes Caa1 12.75 8/01/05 500 (a) 525,625
Susquehanna Media Co., Sr. Sub. Notes B1 8.50 5/15/09 500 (a) 480,000
Transwestern Publishing Co., Sr. Sub. Notes, Ser. D B2 9.625 11/15/07 250 (a) 242,500
World Color Press, Inc.,
Sr. Sub. Notes Baa3 8.375 11/15/08 125 117,812
Sr. Sub. Notes Baa3 7.75 2/15/09 375 (a) 348,750
-----------
3,338,962
- ------------------------------------------------------------------------------------------------------------------------------
Metals--4.0%
Algoma Steel, Inc., First Mtge. Notes B2 12.375 7/15/05 55 54,175
Continental Global Group, Inc., Sr. Notes, Ser. A B2 11.00 4/01/07 250 (a) 122,500
Golden Northwest Aluminum Inc., First Mtge. Notes B2 12.00 12/15/06 115 119,600
Great Lakes Carbon Corp., Sr. Sub. Notes B3 10.25 5/15/08 500 (a) 462,500
Kaiser Aluminum & Chemical Corp., Sr. Sub. Notes B3 12.75 2/01/03 310 (a) 304,575
LTV Corp., Sr. Notes Ba3 11.75 11/15/09 160 163,200
Maxxam Group Holdings, Inc., Sr. Sec'd. Notes B3 12.00 8/01/03 500 (a) 465,000
National Steel Corp., First Mtge. Notes, Ser. D Ba3 9.875 3/01/09 250 248,125
P & L Coal Holdings Corp., Sr. Sub. Notes B2 9.625 5/15/08 75 (a) 68,062
RMI USA LLC, Sr. Notes B1 10.00 6/01/09 100 98,750
Russel Metals, Inc., Sr. Notes B1 10.00 6/01/09 150 148,125
Sheffield Steel Corp., First Mtge. Notes, Ser. B Caa2 11.50 12/01/05 140 116,900
UCAR Global Enterprises, Inc., Sr. Sub. Notes B2 12.00 1/15/05 250 (a) 258,750
WHX Corp., Sr. Notes B3 10.50 4/15/05 250 242,500
-----------
2,872,762
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 10
<PAGE>
Portfolio of Investments as of
February 29, 2000 (Unaudited) THE HIGH YIELD INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount Value
Description(a) (Unaudited) Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Miscellaneous--1.2%
Iron Mountain, Inc., Sr. Sub. Notes B2 8.25 % 7/01/11 $ 500 (a) $ 425,000
IT Group, Inc., Sr. Sub. Notes, Ser. B B3 11.25 4/01/09 190 182,400
Sun World International, Inc., First Mtge. Notes, Ser.
B B2 11.25 4/15/04 30 (a) 30,300
United Rentals, Inc., Sr. Sub. Notes, Ser. B B1 9.25 1/15/09 225 208,125
-----------
845,825
- ------------------------------------------------------------------------------------------------------------------------------
Oil & Gas Exploration/Production--7.3%
Canadian Forest Oil Ltd., Sr. Sub. Notes (CA) B2 8.75 9/15/07 140 (d) 128,800
Chesapeake Energy Corp., Sr. Notes B3 9.625 5/01/05 685 (a) 650,750
Comstock Resources Inc., Sr. Notes B2 11.25 5/01/07 20 19,700
DI Industies, Inc., Sr. Notes B1 8.875 7/01/07 250 224,375
Gulf Canada Resources Ltd.,
Sr. Notes (CA) Ba1 8.35 8/01/06 295 (a)(d) 286,887
Sr. Sub. Deb. (CA) Ba2 9.625 7/01/05 80 (a)(d) 80,800
Parker Drilling Co., Sr. Notes B1 9.75 11/15/06 500 (a) 481,250
Plains Resources, Inc.,
Sr. Sub. Notes, Ser. B B2 10.25 3/15/06 225 (a) 216,000
Sr. Sub. Notes, Ser. D B2 10.25 3/15/06 250 (a) 240,000
R & B Falcon Corp., Sr. Notes Ba3 12.25 3/15/06 275 295,625
RBF Finance Co.,
Sr. Sec'd. Notes Ba3 11.00 3/15/06 255 272,850
Sr. Sec'd. Notes Ba3 11.375 3/15/09 600 (a) 636,000
Snyder Oil Corp., Sr. Sub. Notes Ba3 8.75 6/15/07 500 (a) 495,000
Swift Energy Co., Sr. Sub. Notes B2 10.25 8/01/09 235 229,125
Tesoro Petroleum Corp., Sr. Sub. Notes B1 9.00 7/01/08 250 230,625
Veritas DGC, Inc., Sr. Notes, Ser. C Ba3 9.75 10/15/03 500 (a) 502,500
Vintage Petroleum, Inc., Sr. Sub. Notes B1 9.75 6/30/09 300 303,000
-----------
5,293,287
- ------------------------------------------------------------------------------------------------------------------------------
Paper & Packaging--6.4%
Ball Corp., Sr. Sub. Notes B1 8.25 8/01/08 750 (a) 703,125
Consumers International, Inc., Sr. Sec'd. Notes B3 10.25 4/01/05 200 (a) 144,000
Doman Industries Ltd.,
Sr. Notes (CA) B1 8.75 3/15/04 285 (d) 246,525
Sr. Notes, Ser. B (CA) B1 9.25 11/15/07 60 (a)(d) 49,500
Graham Packaging Holdings Co.,
Sr. Disc. Notes, Zero Coupon (until 1/15/03) Caa1 10.75 1/15/09 100 65,000
Sr. Sub. Notes B3 8.75 1/15/08 100 (a) 90,250
Radnor Holdings, Corp., Sr. Notes, Ser. B B2 10.00 12/01/03 500 (a) 460,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 11
<PAGE>
Portfolio of Investments as of
February 29, 2000 (Unaudited) THE HIGH YIELD INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount Value
Description(a) (Unaudited) Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Paper & Packaging (cont'd.)
Silgan Holdings, Inc.,
Sr. Sub. Deb. B1 9.00 % 6/01/09 $ 500 (a) $ 477,500
Sub. Deb., Payment in Kind
(cost $700,000; purchased - 6/13/97) B1 13.25 7/15/06 786 (a) 848,880
Stone Container Corp., Sr. Sub. Deb. B3 12.25 4/01/02 950 (a) 945,250
Stone Container Finance Co., Sr. Notes B2 11.50 8/15/06 65 69,063
Tekni Plex, Inc., Sr. Sub. Notes B3 9.25 3/01/08 550 (a) 528,000
-----------
4,627,093
- ------------------------------------------------------------------------------------------------------------------------------
Real Estate--0.2%
Intrawest Corp., Sr. Notes B1 10.50 2/01/10 150 150,000
- ------------------------------------------------------------------------------------------------------------------------------
Restaurants--0.6%
Carrols Corp., Sr. Sub. Notes B2 9.50 12/01/08 250 217,500
CKE Restaurants, Inc., Sr. Sub. Notes B2 9.125 5/01/09 300 219,000
-----------
436,500
- ------------------------------------------------------------------------------------------------------------------------------
Retail--4.0%
Big 5 Corp., Sr. Notes, Ser. B B2 10.875 11/15/07 200 (a) 194,000
Duane Reade Inc., Sr. Sub. Notes B3 9.25 2/15/08 570 (a) 554,325
Franks Nursery & Crafts, Inc., Sr. Sub. Notes B3 10.25 3/01/08 400 (a) 164,000
K-Mart Corp. Ba1 8.25 1/01/22 750 (a) 696,952
Musicland Group, Inc., Sr. Sub. Notes B3 9.00 6/15/03 150 141,375
Phar-Mor, Inc., Sr. Notes B3 11.72 9/11/02 1,250 (a) 1,150,000
-----------
2,900,652
- ------------------------------------------------------------------------------------------------------------------------------
Supermarkets--2.2%
Marsh Supermarkets Inc., Sr. Sub. Notes B2 8.875 8/01/07 500 (a) 472,500
Pantry, Inc., Sr. Sub. Notes B3 10.25 10/15/07 750 (a) 712,500
Stater Brothers Holdings, Inc., Sr. Notes B2 10.75 8/15/06 390 (a) 390,975
-----------
1,575,975
- ------------------------------------------------------------------------------------------------------------------------------
Technology--3.4%
Details Holding Corp., Sr. Disc. Notes, Zero Coupon
(until 11/15/02) Caa1 12.50 11/15/07 150 96,750
DII Group, Inc., Sr. Sub. Notes B1 8.50 9/15/07 160 (a) 160,000
Exodus Communications Inc., Sr. Notes B2 10.75 12/15/09 195 196,950
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 12
<PAGE>
Portfolio of Investments as of
February 29, 2000 (Unaudited) THE HIGH YIELD INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount Value
Description(a) (Unaudited) Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Technology (cont'd.)
Interact Operating Co., Sr. Notes NR 14.00 % 8/01/03 $ 550 $ 302,500
Intersil Corp., Sr. Notes B3 13.25 8/15/09 95 106,400
IPC Information Systems, Inc., Sr. Notes B3 10.875 5/01/08 500 (a) 425,000
SCG Holdings & Semiconductor Co., Sr. Notes B2 12.00 8/01/09 225 243,563
Unisys Corp., Sr. Notes, Ser. B Ba1 12.00 4/15/03 500 (a) 531,250
Viasystems, Inc., Sr. Sub. Notes B3 9.75 6/01/07 455 (a) 364,000
-----------
2,426,413
- ------------------------------------------------------------------------------------------------------------------------------
Telecommunications--22.4%
Allegiance Telecommunications, Inc., Sr. Notes B1 12.875 5/15/08 750 (a) 825,000
AMSC Acquisition, Inc., Sr. Notes NR 12.25 4/01/08 100 (a) 89,000
Clearnet Communications Inc., Sr. Disc. Notes, Zero
Coupon
(until 5/1/04) (CA) B3 10.125 5/01/09 60 (d) 36,000
Firstworld Communications, Inc., Sr. Disc. Notes, Zero
Coupon
(until 4/15/03) NR 13.00 4/15/08 225 112,500
Global Crossing Holdings Ltd., Sr. Notes Ba2 9.50 11/15/09 305 294,325
GST Telecommunications, Inc.,
Sr. Disc. Conv. Notes, Zero Coupon (until 12/15/00) NR 13.875 12/15/05 110 121,000
Sr. Sub. Notes NR 12.75 11/15/07 100 (a) 94,000
GST USA, Inc., Sr. Disc. Notes, Zero Coupon (until
12/15/00) NR 13.875 12/15/05 405 (a) 255,150
Hyperion Telecommunications, Inc.,
Sr. Disc. Notes, Zero Coupon (until 4/15/01)
(cost $30,826; purchased - 9/23/99) B3 13.00 4/15/03 35 (b) 32,200
Sr. Sec. Notes, Ser. B B3 12.25 9/01/04 200 213,500
ICG Holdings, Sr. Disc. Notes, Zero Coupon (until
9/15/00) B3 13.50 9/15/05 235 (a) 222,663
Impsat Corp.,
Sr. Notes B2 12.125 7/15/03 245 (a) 236,425
Sr. Notes B3 12.375 6/15/08 250 232,500
Intermedia Communications, Inc.,
Sr. Disc. Notes, Zero Coupon (until 5/15/01) B2 12.50 5/15/06 500 (a) 470,000
Sr. Disc. Notes, Zero Coupon (until 7/15/02) B2 11.25 7/15/07 825 (a) 664,125
ITC Deltacom, Inc., Sr. Notes B2 9.75 11/15/08 1,000 (a) 990,000
Level 3 Communications, Inc.,
Sr. Disc. Notes, Zero Coupon (until 12/1/03) B3 10.50 12/01/08 280 162,400
Sr. Disc. Notes, Zero Coupon (until 3/15/05) B3 12.875 3/15/10 2,000 1,070,000
Sr. Notes B3 9.125 5/01/08 240 216,600
Mastec, Inc., Sr. Sub. Notes Ba3 7.75 2/01/08 250 (a) 230,000
McLeod USA Inc.,
Sr. Disc. Notes, Zero Coupon (until 3/1/02) B1 10.50 3/01/07 250 (a) 201,875
Sr. Notes B1 9.25 7/15/07 400 (a) 384,000
Sr. Notes B1 8.125 2/15/09 580 (a) 519,100
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 13
<PAGE>
Portfolio of Investments as of
February 29, 2000 (Unaudited) THE HIGH YIELD INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount Value
Description(a) (Unaudited) Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Telecommunications (cont'd.)
Metromedia Fiber Network Inc., Sr. Notes B2 10.00 % 12/15/09 $ 345 $ 338,963
Millicom International Cellular, Inc., Sr. Disc. Notes,
Zero Coupon (until 12/1/01) B3 13.25 6/01/06 220 189,750
Nextel Communications, Inc.,
Sr. Disc. Notes, Zero Coupon (until 9/15/02) B1 10.65 9/15/07 700 533,750
Sr. Notes B1 9.375 11/15/09 815 (a) 782,400
Nextlink Communications, Inc.,
Sr. Disc. Notes, Zero Coupon (until 12/1/04) B2 12.125 12/01/09 445 251,425
Sr. Notes B3 9.625 10/01/07 400 (a) 383,000
Sr. Notes B3 10.75 6/01/09 470 (a) 471,175
Sr. Notes B2 10.50 12/01/09 50 49,937
Pagemart Nationwide, Inc., Sr. Disc. Notes, Zero Coupon
(until 2/1/00) B3 15.00 2/01/05 225 (a) 230,625
Price Communications Wireless, Sr. Sub. Notes B3 11.75 7/15/07 650 (a) 708,500
Primus Telecommunications, Inc., Sr. Notes B3 12.75 10/15/09 280 285,600
PSINET, Inc., Sr. Notes B3 11.00 8/01/09 800 (a) 790,000
RCN Corp.,
Sr. Notes B3 10.00 10/15/07 35 32,550
Sr. Notes B3 10.125 1/15/10 210 196,350
Rogers Cantel, Inc., Deb. (CA) Ba3 9.375 6/01/08 600 (a)(d) 612,000
RSL Communications PLC, Sr. Notes B2 12.00 11/01/08 250 (a) 246,250
Telegroup, Inc., Sr. Disc. Notes, Zero Coupon (until
11/1/00) NR 10.50 11/01/04 500 (a) 170,000
Tritel PCS, Inc., Sr. Disc. Notes, Zero Coupon (until
5/15/04) B3 12.75 5/15/09 350 227,500
Triton PCS, Inc., Sr. Disc. Notes, Zero Coupon (until
5/1/03) B3 11.00 5/01/08 75 53,625
Verio Inc.,
Sr. Notes B3 11.25 12/01/08 25 (a) 25,375
Sr. Notes B3 10.625 11/15/09 365 (a) 361,350
Voicestream Wireless Corp.,
Sr. Disc. Notes, Zero Coupon (until 11/15/04) B2 11.875 11/15/09 355 221,875
Sr. Notes B2 10.375 11/15/09 485 (a) 499,550
Williams Communications Group, Sr. Notes B2 10.875 10/01/09 655 (a) 666,462
Worldwide Fiber, Inc., Sr. Notes B3 12.00 8/01/09 105 106,575
-----------
16,106,950
- ------------------------------------------------------------------------------------------------------------------------------
Textiles--0.9%
Phillips Van Heusen Corp., Sr. Sub. Notes B1 9.50 5/01/08 250 231,250
Worldtex, Inc., Sr. Notes, Ser. B B1 9.625 12/15/07 475 (a) 389,500
-----------
620,750
- ------------------------------------------------------------------------------------------------------------------------------
Transportation--1.1%
American Commercial Lines LLC, Sr. Notes B1 10.25 6/30/08 275 (a) 240,625
Holt Group, Inc., Sr. Notes Caa1 9.75 1/15/06 150 (a) 93,000
Kitty Hawk, Inc., Sr. Sec'd. Notes B1 9.95 11/15/04 500 (a) 475,000
-----------
808,625
-----------
Total corporate bonds (cost $86,837,231) 81,559,357
-----------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 14
<PAGE>
Portfolio of Investments as of
February 29, 2000 (Unaudited) THE HIGH YIELD INCOME FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description(a) Shares (Note 1)
<S> <C> <C>
- ------------------------------------------------------------
COMMON STOCKS(c)
Star Gas Partners LP, 308 $ 4,434
UnitedGlobalCom, Inc., Class A 2 209
--------------
Total common stocks (cost $15) 4,643
--------------
COMMON TRUST UNIT(c)--0.4% Units
PSF Finance LP, (cost $462,534;
purchased - 3/8/94) 27,924 (e) 307,164
--------------
PREFERRED STOCKS--3.2% Shares
Clark USA, Inc., 11.50%,
Payment in Kind 125 18,752
CSC Holdings, Inc.,
11.125%, Payment in Kind 1,952 212,768
11.125%, Payment in Kind 12 459,900
Intermedia Communications, Inc.,
Ser. B, 13.50%, Payment in Kind 12 11,586
Intermediate Act Systems, Inc.,
Ser. B, 14.00% 1,100 286,000
Nextel Communications, Inc., Ser.
E, 11.25%, Payment in Kind 183 179,292
Packaging Corp., 12.375%,
Payment in Kind 1,587 185,695
Primedia, Inc., 8.625% 3,000 256,500
R & B Falcon Corp., 13.875%,
Payment in Kind 85 87,958
Sinclair Broadcast Group. Inc.,
11.625%, Payment in Kind 5,000 465,000
Viasystems Group, Inc., 8.00% 11,951 107,558
--------------
Total preferred stocks (cost $2,479,618) 2,271,009
--------------
Value
Description(a) Warrants (Note 1)
<S> <C> <C>
- ------------------------------------------------------------
WARRANTS(c)--0.8%
American Mobile Satellite Corp.,
expiring 4/1/08 100 $ 9,000
Cellnet Data Systems, Inc.,
expiring 9/15/07 2,029 0
Clearnet Communications, Inc.,
expiring 9/15/05 (CA) 2,475 (d) 61,875
Firstworld Communications, Inc.,
expiring 4/15/08 225 45,000
Intelcom Group, Inc., expiring
9/15/05 9,900 217,800
Interact Electronic Marketing,
Inc., expiring 12/15/09 1,100 27,500
Interact Systems, Inc., expiring
8/1/03 1,100 11
Intermedia Communications, Inc.,
expiring 6/1/00 750 146,250
MGC Communications, Inc.,
expiring 1/1/49 200 59,000
Pagemart Nationwide, Inc.,
expiring 12/31/03 4,600 11,500
R & B Falcon Corp., expiring
5/1/09 75 20,625
Sterling Chemical Holdings, Inc.,
expiring 8/15/08 140 2,520
--------------
Total warrants (cost $41,839) 601,081
--------------
Total long-term investments
(cost $89,821,237) 84,743,254
--------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 15
<PAGE>
Portfolio of Investments as of
February 29, 2000 (Unaudited) THE HIGH YIELD INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Interest Maturity Amount Value
Description(a) Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--1.0%
Joint Repurchase Agreement Account
(cost $738,000; Note 4) 5.66 % 3/01/00 $ 738 $ 738,000
------------
Total Investments--118.6%
(cost $90,559,237; Note 3) 85,481,254
Other assets in excess of liabilities--(18.6)% (13,416,754)
------------
Net Assets--100% $ 72,064,500
------------
------------
</TABLE>
- ---------------
(a) Total or partial principal amount segregated as collateral for line of
credit. Aggregate value of segregated securities--$58,052,395; (Note 5).
(b) Indicates a security is restricted as to resale; the aggregate cost of such
securities is $30,826. The aggregate value $32,200 is approximately .04% of
net assets.
(c) Non-income producing securities.
(d) US $ Denominated Bonds-Foreign Issuers.
(e) Portion of units represent ownership in PSF Holdings, Inc.
NR--Not rated by Moody's or Standard & Poor's.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 16
<PAGE>
THE HIGH YIELD INCOME FUND, INC.
Statement of Assets and Liabilities (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Assets February 29, 2000
<S> <C>
Investments, at value (cost $90,559,237)..... $85,481,254
Cash......................................... 583
Receivable for investments sold.............. 1,692,485
Interest and dividends receivable............ 1,885,722
Prepaid expenses and other assets............ 1,594
-----------------
Total assets.............................. 89,061,638
-----------------
Liabilities
Loan payable (Note 5)........................ 16,000,000
Payable for investments purchased............ 582,925
Accrued expenses............................. 167,323
Loan interest payable........................ 86,861
Deferred directors' fees..................... 59,201
Dividends payable............................ 52,231
Due to Manager............................... 48,597
-----------------
Total liabilities......................... 16,997,138
-----------------
Net Assets................................... 72,064,500
-----------------
-----------------
Net assets were comprised of:
Common stock, at par...................... $ 113,191
Paid-in capital in excess of par.......... 97,915,423
-----------------
98,028,614
Distributions in excess of net investment
income................................. (512,870)
Accumulated net realized loss on
investments............................ (20,373,261)
Net unrealized depreciation on
investments............................ (5,077,983)
-----------------
Net assets, February 29, 2000................ $72,064,500
-----------------
-----------------
Net asset value and redemption price per
share
($72,064,500 / 11,319,116 shares of common
stock issued and outstanding)............. $ 6.37
-----------------
-----------------
</TABLE>
THE HIGH YIELD INCOME FUND, INC.
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
Net Investment Income February 29, 2000
<S> <C>
Income
Interest.................................. $ 4,388,259
Dividends................................. 78,244
-----------------
4,466,503
-----------------
Expenses
Management fee............................ 256,231
Custodian's fees and expenses............. 81,000
Transfer agent's fees and expenses........ 21,000
Reports to shareholders................... 20,000
Audit fee and expenses.................... 15,000
Registration fees......................... 13,000
Directors' fees and expenses.............. 7,000
Legal fees and expenses................... 3,000
Miscellaneous............................. 4,042
-----------------
Total operating expenses............... 420,273
Loan interest expense (Note 5)............ 523,279
-----------------
Total expenses......................... 943,552
-----------------
Net investment income........................ 3,522,951
-----------------
Realized and Unrealized
Loss on Investments
Net realized loss on investment
transactions.............................. (1,105,837)
Net change in unrealized depreciation on
investments............................... (1,249,269)
-----------------
Net loss on investments...................... (2,355,106)
-----------------
Net Increase in Net Assets
Resulting from Operations.................... $ 1,167,845
-----------------
-----------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 17
<PAGE>
THE HIGH YIELD INCOME FUND, INC.
Statement of Cash Flows (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
February 29,
Increase (Decrease) in Cash 2000
<S> <C>
Cash flows provided from (used for) operating
activities:
Interest and dividends received (excluding
discount amortization of $501,304)........ $ 3,906,898
Operating expenses paid...................... (390,021)
Loan interest paid........................... (541,661)
Maturities of short-term portfolio
investments, net.......................... 3,456,000
Purchases of long-term portfolio
investments............................... (34,444,746)
Proceeds from disposition of long-term
portfolio investments..................... 35,980,313
Prepaid expenses............................. 294
------------
Net cash provided from operating
activities................................ 7,967,077
------------
Cash flows used for financing activities:
Loan reduction............................... (4,000,000)
Cash dividends paid (excluding reinvestment
of dividends of $109,445)................. (3,967,245)
------------
Net cash used for financing activities....... (7,967,245)
------------
Net decrease in cash............................ (168)
Cash at beginning of period..................... 751
------------
Cash at end of period........................... 583
------------
------------
Reconciliation of Net Increase in Net Assets to
Net Cash Provided from (used for) Operating
Activities
Net increase in net assets resulting from
operations................................... 1,167,845
------------
Decrease in investments......................... 5,444,210
Net realized loss on investment transactions.... 1,105,837
Net change in net unrealized depreciation on
investments.................................. 1,249,269
Increase in receivable for investment sold...... (1,536,872)
Increase in interest receivable................. (58,301)
Decrease in prepaid expenses and other assets... 294
Increase in payables for investments
purchased.................................... 582,925
Increase in accrued expenses and other
liabilities.................................. 11,870
------------
Total adjustments............................ 6,799,232
------------
Net cash provided from operating activities..... $ 7,967,077
------------
------------
</TABLE>
THE HIGH YIELD INCOME FUND, INC.
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) February 29, August 31,
in Net Assets 2000 1999
<S> <C> <C>
Operations
Net investment income............ $ 3,522,951 $ 8,017,096
Net realized loss on investment
transactions.................. (1,105,837) (4,543,476)
Net change in unrealized
appreciation/depreciation of
investments................... (1,249,269) 1,432,237
------------ -----------
Net increase in net assets
resulting from operations..... 1,167,845 4,905,857
Dividends paid to shareholders
from net investment income....... (4,073,311) (8,112,556)
Net asset value of shares issued to
shareholders in reinvestment of
dividends........................ 109,445 435,530
------------ -----------
Total decrease...................... (2,796,021) (2,771,169)
Net Assets
Beginning of period................. 74,860,521 77,631,690
------------ -----------
End of period....................... $ 72,064,500 $74,860,521
------------ -----------
------------ -----------
Undistributed net investment
income........................... -- 37,490
------------ -----------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 18
<PAGE>
Notes to Financial Statements (Unaudited) THE HIGH YIELD INCOME FUND, INC.
- --------------------------------------------------------------------------------
The High Yield Income Fund, Inc. (the 'Fund') was organized in Maryland on
August 21, 1987 as a diversified, closed-end management investment company. The
Fund's primary investment objective is to maximize current income to
shareholders through investment in a diversified portfolio of high-yield,
fixed-income securities rated in the medium to lower categories by recognized
rating services, or nonrated securities of comparable quality. As a secondary
investment objective, the Fund will seek capital appreciation, but only when
consistent with its primary objective. The ability of issuers of debt securities
held by the Fund to meet their obligations may be affected by economic or
political 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.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian or designated
subcustodians, as the case may be under triparty repurchase agreements, take
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction including accrued interest.
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's
custodian will maintain, in a segregated account of the Fund, cash, U.S.
Government securities, equity securities or other liquid, unencumbered assets
marked to market daily, having a value equal to or greater than the Fund's
purchase commitments with respect to certain investments.
The Fund may invest up to 20% of its total assets in securities which are not
readily marketable, including those which are restricted as to disposition under
securities law ('restricted securities').
Cash Flow Information: The Fund invests in securities and distributes dividends
from net investment income which are paid in cash or are reinvested at the
discretion of shareholders. These activities are reported in the Statement of
Changes in Net Assets and additional information on cash receipts and cash
payments is presented in the Statement of Cash Flows.
Accounting practices that do not affect reporting activities on a cash basis
include carrying investments at value, accruing income on PIK (payment-in-kind)
securities and amortizing discounts on debt obligations. Cash, as used in the
Statement of Cash Flows, is the amount reported as 'Cash' in the Statement of
Assets and Liabilities.
Security Transactions and Investment Income: Security transactions are recorded
on the trade date. Realized and unrealized gains and losses from securities
transactions are calculated on the identified cost basis. Interest income, which
is comprised of three elements: stated coupon rate, original issue discount and
market discount, is recorded on the accrual basis. Dividend income is recorded
on the ex-dividend date. Expenses are recorded on the accrual basis which may
require the use of certain estimates by management.
Federal Income Taxes: It is the Fund's policy to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to shareholders.
Therefore, no federal income tax provision is required.
Dividends and Distributions: The Fund expects to pay dividends of net investment
income monthly and make distributions at least annually of net capital gains, if
any. 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.
- ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PIFM 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. PIFM pays for the services of PIC,
the cost
- --------------------------------------------------------------------------------
19
<PAGE>
Notes to Financial Statements (Unaudited) THE HIGH YIELD INCOME FUND, INC.
- --------------------------------------------------------------------------------
of 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 PIFM is computed weekly and payable monthly, at an
annual rate of .70 of 1% of the Fund's average weekly net assets.
PIFM and PIC are wholly owned subsidiaries of The Prudential Insurance Company
of America ('Prudential').
- ------------------------------------------------------------
Note 3. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the six months ended February 29, 2000 aggregated $35,000,767 and
$37,517,185, respectively.
The cost basis of investments for federal income tax purposes at February 29,
2000 was $90,620,638 and net unrealized depreciation for federal income tax
purposes was $5,139,384 (gross unrealized appreciation--$1,655,315; gross
unrealized depreciation--$6,794,699).
For federal income tax purposes, the Fund had a capital loss carryforward as of
August 31, 1999 of approximately $16,085,300 of which $8,891,400 expires in
2000, $263,000 expires in 2003, $5,569,500 expires in 2004 and $1,361,400 in
2007. Approximately $3,463,600 of the Fund's capital loss carryforward expired
as of August 31, 1999. In addition, the Fund elected to treat net capital losses
of approximately $3,163,400 incurred in the ten month period ended August 31,
1999 as having been incurred in the following fiscal year. Accordingly, no
capital gains distribution is expected to be paid to shareholders until net
realized gains have been realized in excess of such amounts.
- ------------------------------------------------------------
Note 4. Joint Repurchase Agreement Account
The Fund, along with other affiliated registered investment companies, transfers
uninvested cash balances into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements
collaterialized by U.S. Treasury or federal agency obligations. As of February
29, 2000, the Fund had a 0.10% undivided interest in the repurchase agreements
in the joint account. The undivided interest for the Fund represented $738,000
in principal amount. As of such date, each repurchase agreement in the joint
account and the collateral therefor was as follows:
Bear, Stearns & Co. Inc., 5.78%, in the principal amount of $130,000,000,
repurchase price $130,020,872, due 3/1/00. The value of the collateral including
accrued interest was $133,586,248.
Credit Suisse First Boston Corp., 5.80%, in the principal amount of
$150,000,000, repurchase price $150,024,167, due 3/1/00. The value of the
collateral including accrued interest was $155,522,342.
Deutsche Bank Securities, Inc., 5.48%, in the principal amount of $241,170,000,
repurchase price $241,206,711, due 3/1/00. The value of the collateral including
accrued interest was $245,993,670.
Warburg Dillon Read LLC, 5.55%, in the principal amount of $80,000,000,
repurchase price $80,012,333, due 3/1/00. The value of the collateral including
accrued interest was $81,604,059.
Warburg Dillon Read LLC, 5.75%, in the principal amount of $160,000,000,
repurchase price $160,025,556, due 3/1/00. The value of the collateral including
accrued interest was $163,202,757.
- ------------------------------------------------------------
Note 5. Borrowings
The Fund has approved a $25,000,000 uncommitted line of credit with State Street
Bank & Trust Co. Interest on any such borrowings outstanding fluctuates daily,
at one percentage point over the Federal Funds rate.
The average daily balance outstanding and the maximum face amount of borrowings
outstanding at any month end for the six months ended February 29, 2000 was
$16,021,978 at a weighted average interest rate of 6.49%.
- ------------------------------------------------------------
Note 6. Capital
There are 200 million shares of $.01 par value common stock authorized.
Prudential owned 11,000 shares of common stock as of February 29, 2000.
During the six months ended February 29, 2000 and the fiscal year ended August
31, 1999, the Fund issued 16,671 and 63,171 shares, respectively, in connection
with the reinvestment of dividends.
- ------------------------------------------------------------
Note 7. Dividends and Distributions
On March 1 and April 1, 2000 the Board of Directors of the Fund declared
dividends of $.050 per share payable on March 31 and April 30, respectively, to
shareholders of record on March 15 and April 15, 2000, respectively.
- --------------------------------------------------------------------------------
20
<PAGE>
Financial Highlights (Unaudited) THE HIGH YIELD INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended August 31,
February 29, -------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
------ ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period(a)................... $ 6.62 $ 6.91 $ 7.58 $ 7.24 $ 7.12
------ ------- ------- ------- -------
Net investment income..................................... .31 .71 .74 .74 .77
Net realized and unrealized gain (loss) on investments.... (.20) (.28) (.69) .35 .16
------ ------- ------- ------- -------
Total from investment operations....................... .11 .43 .05 1.09 .93
------ ------- ------- ------- -------
Dividends paid to shareholders from net investment
income................................................. (.36) (.72) (.72) (.74) (.77)
Distributions to shareholders in excess of net investment
income................................................. -- -- -- (.01) --
Return of capital distributions........................... -- -- -- -- (.04)
------ ------- ------- ------- -------
Total dividends and distributions...................... (.36) (.72) (.72) (.75) (.81)
------ ------- ------- ------- -------
Net asset value, end of period(a)......................... $ 6.37 $ 6.62 $ 6.91 $ 7.58 $ 7.24
------ ------- ------- ------- -------
------ ------- ------- ------- -------
Market price per share, end of period(a).................. $ 5.31 $ 6.81 $ 6.38 $ 7.81 $ 7.75
------ ------- ------- ------- -------
------ ------- ------- ------- -------
TOTAL INVESTMENT RETURN(b)................................ (16.95)% 18.55% (10.19)% 11.47% 8.05%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........................... $ 72,065 $74,861 $77,632 $84,581 $80,174
Average net assets (000).................................. $ 73,242 $77,389 $85,511 $81,788 $79,408
Ratio of expenses to average net assets................... 2.59%(c) 2.69% 2.64% 2.79% 2.89%
Ratio of net investment income to average net assets...... 9.67%(c) 10.36% 9.64% 10.04% 10.62%
Portfolio turnover rate................................... 44% 85% 73% 82% 97%
Asset coverage............................................ 550% 474% 488% 526% 501%
Total debt outstanding at period-end (000)................ $ 16,000 $20,000 $20,000 $20,000 $20,000
<CAPTION>
1995
<S> <C>
-------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period(a)................... $ 7.21
-------
Net investment income..................................... .86
Net realized and unrealized gain (loss) on investments.... (.08)
-------
Total from investment operations....................... .78
-------
Dividends paid to shareholders from net investment
income................................................. (.87)
Distributions to shareholders in excess of net investment
income................................................. --
Return of capital distributions........................... --
-------
Total dividends and distributions...................... (.87)
-------
Net asset value, end of period(a)......................... $ 7.12
-------
-------
Market price per share, end of period(a).................. $ 8.00
-------
-------
TOTAL INVESTMENT RETURN(b)................................ 12.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........................... $78,255
Average net assets (000).................................. $76,345
Ratio of expenses to average net assets................... 3.03%
Ratio of net investment income to average net assets...... 12.36%
Portfolio turnover rate................................... 106%
Asset coverage............................................ 491%
Total debt outstanding at period-end (000)................ $20,000
</TABLE>
- ---------------
(a) NAV and market value are published in The Wall Street Journal each Monday.
(b) Total investment return is calculated assuming a purchase of common stock at
the current market price on the first day and a sale at the closing market
price on the last day of each period reported. Dividends are assumed, for
purposes of this calculation, to be reinvested at prices obtainable under
the Fund's dividend reinvestment plan. This amount does not reflect
brokerage commissions. Total returns for periods of less than a full year
are not annualized.
(c) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 21
<PAGE>
Other Information (Unaudited) THE HIGH YIELD INCOME FUND, INC.
- --------------------------------------------------------------------------------
At an annual shareholder meeting held on December 9, 1999, shareholders elected
David R. Odenath, Jr. as Class I and Eugene C. Dorsey, Stephen P. Munn, Richard
A. Redeker and John S. Strangfeld, Jr. as Class III Directors of the Fund.
Shareholders also approved the selection of PricewaterhouseCoopers LLP as the
independent certified public accountants for the Fund for the fiscal year ending
August 31, 2000. The results of the matters voted upon were as follows:
<TABLE>
<CAPTION>
Number of Shares
---------------------------------------------------------------------
Withheld
For Authority Against Abstain
--------- ---------- ------- -------
<S> <C> <C> <C> <C>
Election of David R. Odenath, Jr. 9,467,368 202,866
Election of Eugene C. Dorsey 9,462,405 207,829
Election of Stephen P. Munn 9,473,479 196,755
Election of Richard A. Redeker 9,472,223 198,011
Election of John S. Strangfeld, Jr. 9,472,223 227,221
Selection of PricewaterhouseCoopers
LLP 9,457,838 134,416 77,980
</TABLE>
Dividend Reinvestment Plan. Shareholders may elect to have all distributions of
dividends and capital gains automatically reinvested in Fund shares (Shares)
pursuant to the Fund's Dividend Reinvestment Plan (the Plan). Shareholders who
do not participate in the Plan will receive all distributions in cash paid by
check mailed directly to the shareholders of record (or, if the shares are held
in street or other nominee name, then to the nominee) by the custodian, as
dividend disbursing agent. Shareholders who wish to participate in the Plan
should contact the Fund at (800) 451-6788.
State Street Bank and Trust Co. (the Plan Agent) serves as agent for the
shareholders in administering the Plan. After the Fund declares a dividend or
capital gains distribution, if (1) the market price is lower than net asset
value, the participants in the Plan will receive the equivalent in Shares valued
at the market price determined as of the time of purchase (generally, following
the payment date of the dividend or distribution); or if (2) the market price of
Shares on the payment date of the dividend or distribution is equal to or
exceeds their net asset value, participants will be issued Shares at a price
equal to net asset value but not less than 95% of the market price. If net asset
value exceeds the market price of Shares on the payment date or the Fund
declares a dividend or other distribution payable only in cash, the Plan Agent
will, as agent for the participants, receive the cash payment and use it to buy
Shares in the open market. If, before the Plan Agent has completed its
purchases, the market price exceeds the net asset value per share, the average
per share purchase price paid by the Plan Agent may exceed the net asset value
per share, resulting in the acquisition of fewer shares than if the dividend or
distribution had been paid in shares issued by the Fund. The Fund will not issue
Shares under the Plan below net asset value.
There is no charge to participants for reinvesting dividends or capital gain
distributions, except for certain brokerage commissions, as described below. The
Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Fund. There will be no brokerage commissions
charged with respect to shares issued directly by the Fund. However, each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases in connection with the
reinvestment of dividends and distributions. The automatic reinvestment of
dividends and distributions will not relieve participants of any federal income
tax that may be payable on such dividends or distributions.
The Fund reserves the right to amend or terminate the Plan upon 90 days' written
notice to shareholders of the Fund.
Participants in the Plan may withdraw from the Plan upon written notice to the
Plan Agent and will receive certificates for whole Shares and cash for
fractional Shares.
All correspondence concerning the Plan should be directed to the Plan Agent,
State Street Bank & Trust Company, P.O. Box 8200, Boston, MA 02266-8200.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 22
<PAGE>
<PAGE>
- -------------------------------------------------------------------
Directors
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
John R. Strangfeld
Nancy H. Teeters
Louis A. Weil, III
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr. Vice President
Grace Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Deborah A. Docs, Secretary
William V. Healey, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Custodian and Transfer Agent
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
This report is for stockholder information. This is not a
prospectus intended for use in the purchase or sale of fund shares.
The High Yield Income Fund, Inc.
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Toll free (800) 451-6788
The views expressed in this report and information about the
fund's holdings are for the period covered by this report and are
subject to change thereafter.
The accompanying financial statements as of February 29, 2000,
were not audited and, accordingly, no opinion is expressed on them.
The Prudential Insurance Company of America
751 Broad Street
Newark, NJ 07102
429904105
