CORPORATE
HIGH YIELD
FUND, INC.
Semi-Annual Report November 30, 1993
This report, including the financial information herein, is
transmitted to the shareholders of Corporate High Yield Fund,
Inc. for their information. It is not a prospectus, circular or
representation intended for use in the purchase of shares of the
Fund or any securities mentioned in the report. Past performance
results shown in this report should not be considered a representation
of future performance. The Fund has leveraged its Common Stock to
provide Common Stock shareholders with a potentially higher rate of
return. Leverage creates risk for Common Stock shareholders, including
the likelihood of greater volatility of net asset value and market
price of Common Stock shares, and the risk that fluctuations in
short-term interest rates may reduce the Common Stock's yield.
Corporate High
Yield Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
CORPORATE HIGH YIELD FUND, INC.
The Benefits and
Risks of
Leveraging
Corporate High Yield Fund, Inc. has the ability to utilize
leverage through borrowings or issuance of short-term debt
securities or shares of preferred stock. The concept of
leveraging is based on the premise that the cost of assets to
be obtained from leverage will be based on short-term interest
rates, which normally will be lower than the return earned by the
Fund on its longer-term portfolio investments. Since the total
assets of the Fund (including the assets obtained from leverage)
are invested in higher-yielding portfolio investments, the Fund's
Common Stock shareholders are the beneficiaries of the
incremental yield.
<PAGE>
Leverage creates risks for holders of Common Stock including the
likelihood of greater net asset value and market price volatility.
In addition, there is the risk that fluctuations in interest rates
on borrowings (or in the dividend rates on any preferred stock, if
the Fund were to issue preferred stock) may reduce the Common Stock's
yield and negatively impact its market price. If the income derived
from securities purchased with assets received from leverage exceeds
the cost of leverage, the Fund's net income will be greater than
if leverage had not been used. Conversely, if the income from the
securities purchased is not sufficient to cover the cost of
leverage, the Fund's net income will be less than if leverage had
not been used, and therefore the amount available for distribution
to Common Stock shareholders will be reduced. In this case, the Fund
may nevertheless decide to maintain its leveraged position in order
to avoid capital losses on securities purchased with leverage.
However, the Fund will not generally utilize leverage if it antici-
pates that its leveraged capital structure would result in a lower
rate of return for its Common Stock than would be obtained if the
Common Stock were unleveraged for any significant amount of time.
DEAR SHAREHOLDER
We are pleased to provide you with this first semi-annual report to
shareholders for Corporate High Yield Fund, Inc. In this and future
shareholder reports, we will highlight the Fund's performance, describe
recent investment activities, and examine some of the important market
developments that helped shape our investment strategy during the period
under review.
The Fund seeks to provide shareholders with as high a level of
current income as is consistent with reasonable risk by investing
principally in fixed-income securities which are rated in the lower
rating categories of the established rating agencies or are unrated
securities of comparable quality. On November 29, 1993, the Fund
was 29% leveraged, having borrowed $120 million of the $150 million
line of credit available at an average borrowing cost of 4.62%.
Since inception (June 25, 1993) through November 30, 1993, the
total investment return on the Fund's Common Stock was +5.27%,
based on a change in per share net asset value from $14.18 to
$14.54, and assuming reinvestment of $0.386 per share income
dividends. During the same period, the net annualized yield of
the Fund's Common Stock was 8.13%, reflecting the initial invest-
ment process as the Fund started operations. Now that the Fund is
fully invested and utilizing leverage, the 30-day yield as of
November 30, 1993 was 10.42%.
<PAGE>
Investment Strategy & Outlook
The first five months of the Fund's operation provided an
excellent opportunity for investment. While high-grade bond
prices were quite strong, particularly during the July through
September period, high-yield bond prices languished as the result
of heavy supply. These conditions allowed us to structure a port-
folio of a quality somewhat higher than the market average and a
yield modestly higher than we had anticipated. The portfolio we
have assembled represents a group of companies carefully selected
to balance yield and credit quality. Given our leveraging strategy,
we have emphasized larger and more liquid companies. We have
attempted to choose well-positioned companies with favorable
industry prospects and manageable debt burdens. A broad range
of industries is represented in the Fund's portfolio, the largest
of which include energy, 14%; conglomerates, 11.7%; food and
beverage, 14.8%; broadcasting and publishing, 7.9%; and airlines,
6.7%.
We believe that the outlook for the high-yield market remains attractive.
Our positive view reflects:
Attractive valuations--The spread between high-yield issues and
US Treasury securities of comparable maturities remains compelling
at 4%. Also yield premiums, which measure the incremental yield provided
by high-yield bonds over US Treasury securities of similar maturity, are
in the highest quartile of their range over the past ten years.
Low short-term interest rates--We believe that short-term interest
rates are likely to remain low over the next few quarters, stimulating
the demand for high-yield bonds. As the Fund also borrows at short-term
floating interest rates, low interest rates also enhance the income
benefits from leveraging. Although the Fund's use of leverage is
currently increasing its net income, it also creates special risks. For
a complete explanation, see page 1 of this report to shareholders.
A benign environment for high- yield investments--The economy
has been expanding moderately throughout the year and we believe
that growth is likely to continue over at least the next few quarters.
This means generally improving corporate profits, a positive particular-
ly for cyclical companies. In addition, relatively high valuations for
equities have encouraged re-equitization or the substitution of debt
with equity on the balance sheets of leveraged companies. These trends
have resulted in the lowest default rates in years: below 1% for the
first nine months of 1993. We believe that low default rates will con-
tinue through 1994.
An improving technical situation--The high-yield bond market was
depressed in the third quarter of 1993 by a record supply of new
issues in the face of modest flows of cash from the market. Much
of the supply reflected the desire of companies to reduce short-term
bank debt, extend the maturity of debt obligations and reduce annual
debt repayment requirements. Since that time, cash inflows have in-
creased sharply though supply has remained heavy. We believe supply
could ease in mid 1994, permitting the prices of outstanding bonds to
rise.
<PAGE>
Given our positive outlook, we are maintaining a leveraged position.
We believe that the increased exposure to the market we gain by using
leverage will enhance capital appreciation to shareholders. In addition,
income is higher because of the wide spread between the Fund's borrowing
cost and the yields on the securities in which it invests.
We thank you for your investment in Corporate High Yield Fund, Inc., and
we look forward to assisting you with your financial goals in the months
and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent T. Lathbury)
Vincent T. Lathbury III
Vice President and Portfolio Manager
(Elizabeth M. Phillips)
Elizabeth M. Phillips
Vice President and Portfolio Manager
January 3, 1994
Officers and
Directors
Arthur Zeikel, President and Director
Walter Mintz, Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Harry Woolf, Director
Terry K. Glenn, Executive Vice President
N. John Hewitt, Senior Vice President
Donald C. Burke, Vice President
Vincent T. Lathbury III, Vice President
Elizabeth M. Phillips, Vice President
Gerald M. Richard, Treasurer
Michael J. Hennewinkel, Secretary
Custodian
The Chase Manhattan Bank, N.A.
4 MetroTech Center, 18th Floor
Brooklyn, New York 11245
Transfer Agent
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
NYSE Symbol
COY
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Value
INDUSTRIES Rating Rating Amount Corporate Bonds Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Airlines--6.7% BB+ Baa3 $ 7,250,000 Delta Air Lines Inc., 10.06% due 1/02/2016 $ 7,322,500 $ 7,538,855
BB+ Baa1 4,000,000 United Airlines, Inc., 9.21% due 1/21/2017 4,067,280 4,119,972
USAIR Inc.:
BB+ Ba2 368,000 Series A, 10.33% due 6/27/2002 386,113 368,000
BB+ Ba2 740,000 Series C, 10.33% due 6/27/2002 776,423 740,000
BB+ Ba2 892,000 Series D, 10.33% due 6/27/2002 935,904 892,000
B+ Ba3 3,000,000 10.00% due 7/01/2003 3,000,000 2,857,500
BB+ Ba2 3,000,000 10.375% due 3/01/2013 3,000,000 2,960,979
----------- -----------
19,488,220 19,477,306
Broadcasting & BB- Ba2 5,000,000 Continental Cablevision Inc., 9.50% due
Publishing--7.9% 8/01/2013 5,015,313 5,550,000
B B3 5,000,000 Katz Corporation (The), 12.75% due 11/15/2002 5,418,750 5,550,000
CCC+ B3 6,500,000 SCI Television Inc., 11.00% due 6/30/2005 6,870,000 6,695,000
BB- B1 5,000,000 World Color Press Inc., 9.125% due 3/15/2003 4,987,500 5,162,500
----------- -----------
22,291,563 22,957,500
Building B+ B3 5,000,000 Pacific Lumber Co., 10.50% due 3/01/2003 5,150,000 5,050,000
Materials--3.3% B- B3 5,000,000 USG Corp., 8.75% due 3/01/2017 4,443,750 4,625,000
----------- -----------
9,593,750 9,675,000
Building B+ Ba3 5,000,000 American Standard Inc., 9.25% due 12/01/2016 5,037,500 5,012,500
Products--3.4% B Ba3 5,000,000 Inter-City Products Corp., 9.75% due 3/01/2000 4,836,250 4,900,000
----------- -----------
9,873,750 9,912,500
Capital Goods--0.7% BB B2 2,000,000 Sequa Corp., 9.625% due 10/15/1999 2,055,000 2,070,000
Cellular B B1 5,000,000 Comcast Corp., 9.50% due 1/15/2008 5,175,000 5,387,500
Telephones--5.6% B- B3 5,000,000 Dial Page, Inc., 12.25% due 2/15/2000 5,400,000 5,575,000
CCC+ Caa 7,784,000 ++Horizon Cellular Telephone Co., 11.38% due
10/01/2000* 5,052,900 5,413,772
----------- -----------
15,627,900 16,376,272
Chemicals--6.4% B B2 3,000,000 Agriculture Minerals & Chemicals, 10.75%
due 9/30/2003 3,000,000 3,060,000
B+ Ba3 8,680,000 ++G-I Holding Inc., 11.38% due 10/01/1998* 5,084,003 5,370,750
B B3 6,250,000 Harris Chemical North America, 10.25%
due 7/15/2001* 5,022,090 5,156,250
BB- Ba3 5,000,000 Methanex Corp., 8.875% due 11/15/1998 4,964,900 5,037,500
----------- -----------
18,070,993 18,624,500
<PAGE>
Communications-- CCC- B3 2,750,000 Nextel Communications, 10.96% due 9/01/2003* 1,665,394 1,856,250
3.0% B- B3 10,685,000 Pan Am Sat L.P., 11.00% due 8/01/2003* 6,303,521 6,891,825
----------- -----------
7,968,915 8,748,075
Conglomerates-- B+ B1 7,000,000 Coltec Industries, Inc., 10.25% due 4/01/2002 7,460,375 7,376,250
11.7% Foamex L.P.:
BB- B1 2,000,000 9.50% due 6/01/2000 1,965,000 2,060,000
B+ B1 3,000,000 11.25% due 10/01/2002 3,221,250 3,240,000
B+ Ba3 6,000,000 Interco Inc., 10.00% due 6/01/2001 6,066,250 6,000,000
B- B3 5,050,000 Interlake Corp., 12.125% due 3/01/2002 5,353,000 4,999,500
B+ B3 5,000,000 Jordan Industries, Inc., 10.375% due 8/01/2003 5,000,000 4,950,000
BB- Ba3 5,500,000 Sherritt Gordon Ltd., 9.75% due 4/01/2003 5,568,750 5,493,125
----------- -----------
34,634,625 34,118,875
Consumer NR NR 750,000 ++Formica Corporation, 15.75% due 10/01/2001* 694,763 697,500
Products--4.8% NR B3 3,000,000 Revlon Consumer Products Corp., 10.50% due
2/15/2003 3,007,500 2,857,500
B B3 6,665,000 Revlon Worldwide Corp., 15.02% due 3/15/1998* 3,569,393 3,399,150
B+ B1 7,000,000 Sealy Corp., 9.50% due 5/01/2003 7,151,500 7,227,500
----------- -----------
14,423,156 14,181,650
Containers--5.0% B+ B2 5,000,000 Owens-Illinois, Inc., 10.50% due 6/15/2002 5,465,000 5,418,750
B- B3 5,000,000 Silgan Holdings, Inc., 10.18% due 12/15/2002* 3,891,058 3,875,000
B+ Ba3 5,000,000 Sweetheart Cup, 9.625% due 9/01/2000 5,068,750 5,200,000
----------- -----------
14,424,808 14,493,750
Energy--14.0% B+ B1 11,500,000 Clark R&M Holdings Inc., 10.54% due 2/15/2000* 6,089,093 6,152,500
NR NR 6,500,000 ++Consolidated Hydro Inc., 11.80% due 7/15/2003* 3,747,340 3,575,000
B B2 5,500,000 Ferrell Gas Companies Inc., 11.625%
due 12/15/2003 5,981,250 5,981,250
BB B1 5,000,000 Gulf Canada Resource Ltd., 9.00% due 8/15/1999 4,950,000 4,966,120
BB- Ba3 3,000,000 Noble Drilling, 9.25% due 10/01/2003 3,000,000 3,120,000
BB- Ba3 5,000,000 Seagull Energy Corp., 8.625% due 8/01/2005 5,000,000 5,025,000
BB- B1 5,000,000 Trans Texas Gas Corp., 10.50% due 9/01/2000 5,000,000 5,300,000
B+ B1 9,525,000 Triton Energy Corp., 10.29% due 11/01/1997* 6,507,368 6,667,500
----------- -----------
40,275,051 40,787,370
Entertainment--3.3% B B3 7,000,000 Marvel Holdings Inc., 11.45% due 4/15/1998* 4,379,633 4,305,000
B+ B2 6,985,000 SPI Holdings, 11.50% due 10/01/2001* 5,032,849 5,291,137
----------- -----------
9,412,482 9,596,137
Financial BB- B1 5,000,000 Reliance Group Holdings Inc., 9.75% due
Services--1.7% 11/15/2003 5,023,750 5,112,500
<PAGE>
Food & B+ B3 3,000,000 Chiquita Brands International Inc., 11.50%
Beverage--14.8% due 6/01/2001 3,112,500 3,142,500
B B2 6,000,000 Coca Cola Bottling Group, 9.00% due 11/15/2003 6,000,000 5,992,500
Grand Union Co.:
B+ B2 1,000,000 11.25% due 7/15/2000 1,051,250 1,055,000
B+ B2 5,000,000 12.25% due 7/15/2002 5,197,500 5,262,500
B B2 5,000,000 Penn Traffic Co., 9.625% due 4/15/2005 5,197,500 5,175,000
B- B2 5,000,000 Pueblo Xtra International Inc., 9.50%
due 8/01/2003 5,000,000 5,075,000
B B2 3,000,000 Ralphs Grocery Co., 9.00% due 4/01/2003 2,958,750 2,985,000
B+ B1 7,000,000 Royal Crown Corp., 9.75% due 8/01/2000 7,005,000 7,122,500
B+ Ba3 1,250,000 Safeway Inc., 9.65% due 1/15/2004 1,325,625 1,346,875
B B2 6,000,000 ++Specialty Foods, 10.75% due 8/15/2001 5,987,500 6,060,000
----------- -----------
42,835,625 43,216,875
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face Value
INDUSTRIES Rating Rating Amount Corporate Bonds Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Health B- B1 $ 2,000,000 Abbey Healthcare, 9.50% due 11/01/2002 $ 2,000,000 $ 2,035,000
Services--3.1% B+ B1 5,000,000 Continental Medsysten Inc., 10.375% due
4/01/2003 5,063,750 5,112,500
B+ B1 1,800,000 Healthtrust Inc., 8.75% due 3/15/2005 1,811,250 1,854,000
------------ ------------
8,875,000 9,001,500
Home Builders--3.9% B- B2 1,000,000 ++Baldwin Homes Company, 10.375% due 8/01/2003 1,000,000 945,000
B B2 5,000,000 NVR Development Inc., 11.00% due 4/15/2003 5,000,000 5,225,000
B+ Ba3 5,000,000 U.S. Home Corp., 9.75% due 6/15/2003 5,095,000 5,175,000
------------ ------------
11,095,000 11,345,000
Hotels & B+ B2 5,000,000 GNS Mirage Finance Corp., 9.25% due 3/15/2003 4,975,000 5,125,000
Casinos--5.2% BB- Ba3 6,000,000 Showboat, Inc., 9.25% due 5/01/2008 6,041,750 6,105,000
B B3 4,000,000 Trump Plaza Funding, Inc., 10.875% due
6/15/2001 4,020,000 3,990,000
------------ ------------
15,036,750 15,220,000
Industrial BB- B2 7,000,000 ADT Operations Inc., 9.25% due 8/01/2003 7,000,000 7,175,000
Services--3.9% B+ B2 4,000,000 Blount, Inc., 9.00% due 6/15/2003 3,997,500 4,140,000
------------ ------------
10,997,500 11,315,000
<PAGE>
Metals & Mining-- B- B3 8,000,000 Maxxam Group, Inc., 12.25% due 8/01/2003* 4,504,173 4,440,000
1.5%
Paper--8.0% Container Corporation of America:
B B3 2,000,000 14.00% due 12/01/2001 2,220,000 2,232,500
B+ B2 4,000,000 9.75% due 4/01/2003 4,080,000 4,110,000
B B3 5,000,000 Gaylord Container Corp., 11.50% due 5/15/2001 5,100,000 5,287,500
B B1 7,000,000 Riverwood International Corp., 11.25%
due 6/15/2002 7,723,750 7,577,500
B B1 4,000,000 Stone Container Corp., 12.625% due 7/15/1998 4,000,000 4,080,000
------------ ------------
23,123,750 23,287,500
Railroads--1.7% B+ Ba3 5,000,000 Southern Pacific Rail Corp., 9.375%
due 8/15/2005 5,000,000 5,168,750
Restaurants--3.8% B- B2 7,000,000 Flagstar Corp., 11.25% due 11/01/2004 7,202,500 7,017,500
B- B2 4,000,000 Foodmaker, Inc., 9.75% due 6/01/2002 4,000,000 4,080,000
------------ ------------
11,202,500 11,097,500
Retail B- B3 6,500,000 Pamida Holdings Inc., 11.75% due 3/15/2003 6,488,125 6,540,625
Specialty--4.6% ++Specialty Retailers, Inc.:
B+ B1 2,000,000 10.00% due 8/15/2000 1,947,500 2,005,000
B- B3 5,000,000 11.00% due 8/15/2003 5,000,000 5,000,000
------------ ------------
13,435,625 13,545,625
Transportation BB Ba2 3,000,000 Eletson Holdings, 9.25% due 11/15/2003 3,045,000 3,037,500
Services--2.7% BB- B1 4,750,000 International Shipholding Corp., 9.00%
due 7/01/2003 4,738,438 4,797,500
------------ ------------
7,783,438 7,835,000
Utilities--7.0% B Ba1 3,000,000 CTC Mansfield Funding, 11.125% due 9/30/2016 3,213,750 3,269,610
BB- Ba2 4,643,461 Midland Congeneration Venture Limited
Partnership, 10.33% due 7/23/2002*** 4,829,199 4,805,295
Texas-New Mexico Power:
BB Ba3 3,000,000 9.25% due 9/15/2000 3,000,000 3,120,000
B B1 4,000,000 10.75% due 9/15/2003 4,085,000 4,210,000
NR NR 5,106,532 ++Tucson Electric & Power Co., 10.21067%
due 1/01/2009 4,798,574 4,953,336
------------ ------------
19,926,523 20,358,241
Total Corporate Bonds--137.7% 396,979,847 401,962,426
<PAGE>
<CAPTION>
SHORT-TERM
SECURITIES
<S>
Commercial 698,000 General Electric Capital Corp., 3.20%
Paper**--0.2% due 12/01/1993 698,000 698,000
Total Investments in Short-Term Securities
--0.2% 698,000 698,000
Total Investments--137.9% $397,677,847 402,660,426
============
Liabilities in Excess of Other Assets--(37.9%) (110,805,075)
------------
Net Assets--100.0% $291,855,351
============
<FN>
*Represents the effective yield at the time of purchase.
**Commercial Paper is traded on a discount basis; the interest rates
shown are the discount rates paid at the time of purchase by the Fund.
***Subject to principal paydowns.
++Restricted securities as to resale. The value of the Fund's investment
in restricted securities was approximately $34,020,000, representing
11.66% of net assets.
Acquisition Value
Issue Date Cost (Note 1a)
Baldwin Homes Company,
10.375% due 8/01/2003 7/15/1993 $1,000,000 $945,000
Consolidated Hydro Inc.,
11.80% due 7/15/2003 7/08/1993 3,747,340 3,575,000
Formica Corporation,
15.75% due 10/01/2001 9/23/1993 694,763 697,500
G-I Holding Inc.,
11.38% due 10/01/1998 9/28/1993 5,084,003 5,370,750
Horizon Cellular Telephone
Co., 11.38% due 10/01/2000 9/24/1993 5,052,900 5,413,772
Specialty Foods,
10.75% due 8/15/2001 9/02/1993-9/20/1993 5,987,500 6,060,000
Specialty Retailers, Inc.,
10.00% due 8/15/2000 9/22/1993 1,947,500 2,005,000
Specialty Retailers, Inc.,
11.00% due 8/15/2003 7/22/1993 5,000,000 5,000,000
Tucson Electric & Power
Co.,10.21067% due
1/01/2009 6/25/1993-7/28/1993 4,798,574 4,953,336
Total $33,312,580 $34,020,358
=========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
<S> <S> <C> <C>
As of November 30, 1993
Assets: Investments, at value (identified cost--$397,677,847) (Note 1a) $ 402,660,426
Cash 739
Receivables:
Interest $ 8,959,642
Securities sold 7,353,368 16,313,010
------------
Deferred organization expenses (Note 1d) 83,278
Prepaid expenses and other assets (Note 1d) 23,732
-------------
Total assets 419,081,185
-------------
Liabilities: Loans (Note 5) 120,000,000
Payables:
Securities purchased 6,298,597
Interest on loans (Note 5) 238,948
Investment adviser (Note 2) 160,950
Commitment fees 24,681 6,723,176
------------
Deferred income (Note 1d) 9,066
Accrued expenses and other liabilities 493,592
-------------
Total liabilities 127,225,834
-------------
Net Assets: Net assets $ 291,855,351
=============
Net Assets Common stock, par value $.10 per share; 200,000,000 shares authorized $ 2,007,668
Consist of: Paid-in capital in excess of par 282,346,920
Undistributed investment income--net 2,580,155
Accumulated realized capital losses--net (61,971)
Unrealized appreciation on investments--net (Note 3) 4,982,579
-------------
Net Assets--Equivalent to $14.54 per share based on 20,076,681 shares of
capital stock outstanding (market price $14.875) $ 291,855,351
=============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATMENT OF OPERATIONS
<CAPTION>
For the Period
June 25, 1993++
to November 30, 1993
<S> <S> <C> <C>
Investment Income Interest and discount earned $ 12,482,114
(Note 1d): Other 15,381
-------------
Total income 12,497,495
Expenses: Loan interest expense (Note 5) $ 1,043,252
Investment advisory fees (Note 2) 698,726
Syndication fee amortization (Note 5) 217,535
Borrowing costs (Note 5) 55,590
Accounting services (Note 2) 42,470
Printing and shareholder reports 25,698
Amortization of organization expenses (Note 1d) 23,309
Custodian fees 21,776
Professional fees 19,341
Directors' fees and expenses 15,645
Transfer agent fees 13,571
Pricing services 12,173
Other 59,332
------------
Total expenses 2,248,418
-------------
Investment income--net 10,249,077
-------------
Realized & Realized loss on investments--net (61,971)
Unrealized Gain Unrealized appreciation on investments--net 4,982,579
(Loss) on -------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 15,169,685
(Notes 1d & 3): =============
<FN>
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
For the Period
June 25, 1993++
Increase (Decrease) in Net Assets: to November 30, 1993
<S> <S> <C>
Operations: Investment income--net $ 10,249,077
Realized loss on investments--net (61,971)
Unrealized appreciation on investments--net 4,982,579
-------------
Net increase in net assets resulting from operations 15,169,685
-------------
Dividends to Investment income--net (7,668,922)
Shareholders -------------
(Note 1e): Net decrease in net assets resulting from dividends to shareholders (7,668,922)
-------------
Capital Share Net increase in net assets resulting from capital share transactions 284,254,583
Transactions -------------
(Note 4):
Net Assets: Total increase in net assets 291,755,346
Beginning of period 100,005
-------------
End of period* $ 291,855,351
=============
$ 2,580,155
<FN> =============
*Undistributed investment income--net
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CASH FLOWS
<CAPTION>
For the Period
June 25, 1993++
to November 30, 1993
<S> <S> <C>
Cash Provided by Net increase in net assets resulting from operations $ 15,169,685
Operating Activities: Adjustments to reconcile net increase (decrease) in net assets resulting from
operations to net cash provided by operating activities:
Increase in receivables (8,959,642)
Increase in other assets (107,010)
Increase in other liabilities 927,237
Unrealized gain on investments--net (4,982,579)
Amortization of discount (1,807,709)
-------------
Net cash provided by operating activities 239,982
-------------
Cash Used For Proceeds from sales of long-term investment 27,488,080
Investing Activities: Purchases of long-term investments (424,319,880)
Purchases of short-term investments (825,674,190)
Proceeds from sales and maturities of short-term investments 825,581,081
-------------
Net cash used for investing activities (396,924,909)
-------------
Cash Provided by Cash receipts on capital shares sold 284,254,583
Financing Activities: Dividends paid to shareholders (7,668,922)
Short-term borrowings 120,000,000
-------------
Net cash provided by financing activities 396,585,661
-------------
Cash: Net decrease in cash (99,266)
Cash at beginning of period 100,005
-------------
Cash at end of period $ 739
=============
Cash Flow Cash paid for interest $ 593,334
Information: =============
Non-Cash Financing Reinvestment of dividends paid to shareholders $ 4,671,324
Activities: =============
<FN>
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Period
June 25, 1993++
Increase (Decrease) in Net Asset Value: to November 30, 1993
<S> <S> <C>
Per Share Net asset value, beginning of period $ 14.18
Operating -------------
Performance: Investment income--net .52
Realized and unrealized gain on investments--net .23
-------------
Total from investment operations .75
-------------
Less dividends:
Investment income--net (.39)
-------------
Total dividends (.39)
-------------
Net asset value, end of period $ 14.54
=============
Market price per share, end of period $ 14.875
=============
Total Investment Based on net asset value per share 5.27%+++
Return:** =============
Based on market price per share 1.81%+++
=============
Ratios to Expenses 1.61%*
Average Net Assets: =============
Investment income--net 7.33%*
=============
Supplemental Net assets, end of period (in thousands) $ 291,855
Data: =============
Portfolio turnover 14.04%
=============
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads. Total investment returns based on
market value, which can be significantly greater or lesser than the net asset value, result in
substantially different returns.
Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Corporate High Yield Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, closed-end management
investment company. Prior to commencement of operations on June 25, 1993,
the Fund had no operations other than those relating to organizational
matters and the issue of 7,055 capital shares of the Fund to Fund Asset
Management, Inc. ("FAMI") for $100,005. The Fund determines and makes
available for publication the net asset value of its common stock on a
weekly basis. The Fund's common stock is listed on the New York Stock
Exchange under the symbol COY.
(a) Valuation of investments--Portfolio securities are valued on the basis
of prices furnished by one or more pricing services which determine prices
for normal, institutional-size trading units. Obligations with remaining
maturities of sixty days or less are valued at amortized cost unless this
method no longer produces fair valuations. Securities for which there exist
no price quotations or valuations and all other assets are valued at fair
value as determined in good faith by or on behalf of the Board of Directors
of the Fund.
(b) Income taxes--It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(c) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified cost
basis.
(d) Deferred organization expenses and prepaid registration fees--Deferred
organization expenses are amortized on a straight-line basis over a five-
year period. Prepaid registration fees are charged to expense as the related
shares are issued.
(e) Dividends and distributions--Dividends from net investment income are
declared daily and paid monthly. Distributions of capital gains are recorded
on the ex-dividend dates.
2. Investment Advisory and Administrative Services Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement
with FAMI, a wholly-owned subsidiary of Merrill Lynch Investment Management,
Inc. ("MLIM"). MLIM is an indirect wholly-owned subsidiary of Merrill Lynch
& Co., Inc.
FAMI is responsible for the management of the Fund's portfolio and provides
the necessary personnel, facilities, equipment and certain other services
necessary to perform the investment advisory function. For such services the
Fund pays a monthly fee at an annual rate of 0.50% of the Fund's average
weekly net assets.
<PAGE>
Effective January 1, 1994, the investment advisory business of FAMI
reorganized from a corporation to a limited partnership. The general
partner of FAMI is Princeton Services, Inc., an indirect wholly-owned
subsidiary of Merrill Lynch & Co.
Accounting services are provided to the Fund by FAMI at cost.
Certain officers and/or directors of the Fund are officers and/or directors
of MLIM, FAMI, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and/or
Merrill Lynch & Co., Inc.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for
the period ended November 30, 1993 were $430,294,477 and $34,769,432,
respectively.
Net realized and unrealized gains (losses) as of November 30, 1993 were
as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ (72,016) $ 4,982,579
Short-term investments 10,045 --
---------- ------------
Total $ (61,971) $ 4,982,579
========== ============
As of November 30, 1993, net unrealized appreciation for financial reporting
and Federal income tax purposes aggregated $4,982,579, of which $7,363,391
related to appreciated securities and $2,380,812 related to depreciated
securities. The aggregate cost of investments at November 30, 1993 for
Federal income tax purposes was $397,677,847.
NOTES TO FINANCIAL STATEMENTS (concluded)
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Period June 25, 1993++ Dollar
to November 30, 1993 Shares Amount
Shares sold 19,750,000 $279,583,259
Shares issued to shareholders in
reinvestment of dividends 319,626 4,671,324
---------- ------------
Total issued 20,069,626 284,254,583
---------- ------------
Net increase 20,069,626 $284,254,583
========== ============
[FN]
++Prior to June 25, 1993 (commencement of operations), the Fund
issued 7,055 shares to FAMI for $100,005.
5. Short-Term Borrowings:
On August 26, 1993, the Fund entered into a one-year loan commitment in
the amount of $150,000,000. For this commitment, the Fund pays one
quarter of 1%. From August 26, 1993 to November 30, 1993, the maximum
amount borrowed was $120,000,000, the average amount borrowed was
$67,474,000 and the daily weighted average interest rate was 4.58%.
For the period ended November 30, 1993, facility and commitment fees
aggregated approximately $55,590.
<PAGE>
<TABLE>
PORTFOLIO INFORMATION
<CAPTION>
Percent of
Net Assets
<S> <C> <S> <C>
Ten Largest Riverwood International Riverwood is an international packaging and paper products company
Holdings Corp. which is one of the two US producers of beverage carrying containers.
11.25% 6/15/02 The company also manufactures folding carton board and liner board. 2.6%
Delta Airlines Inc. Delta is the third largest US airline with major hubs in Atlanta, Cincinnati,
10.06% 1/02/16 Salt Lake City, Dallas and Frankfurt. Our investment is in equipment
trust certificates. 2.6
Coltec Industries, Inc. Coltec is a major capital goods producer for aerospace, government, automotive
10.25% 4/01/02 and industrial markets. Major products include aircraft landing gears, turbine
blades, fuel injection system components, transmission controls and industrial
seals and gaskets. 2.5
Flagstar Corp. Flagstar owns a portfolio of restaurant and food service businesses,
11.25% 11/01/04 including Denny's and Quincy's and a sizable institutional food service. 2.5
Sealy Corp. Sealy is the largest mattress manufacturer in the US. Its two main brand names
9.50% 5/01/03 are Sealy and Sterns & Foster. 2.4
ADT Operations, Inc. ADT is the largest single provider of electronic security services in North America
9.25% 8/01/03 as well as the largest provider of vehicle auction services in the UK and second 2.4
largest in the US.
Royal Crown Corp. Royal Crown operates the third largest soft drink manufacturer in the US and the
9.75% 8/01/00 Arbys fast food chain. Royal Crown's main brand of cola is RC Cola and the company
is a major private label cola producer. 2.4
Pan Am Sat L.P. Pan Am Sat operates PAS I, a communications satellite that services the Americas,
0% 8/01/03 especially Latin America. Three additional satellites are scheduled for launch in
1994 and 1995 providing a world-wide satellite network. 2.4
SCI Television Inc. SCI operates network affiliated TV stations in Detroit, Cleveland, Atlanta,
11.00% 6/30/2005 San Diego and Tampa, and an independent station in Boston. 2.3
Triton Energy Corp. Triton energy is an independent oil and gas exploration company. Triton has interests
0% 11/01/97 in properties throughout the world, with its largest site in the potentially high
production Cusiana field in Colombia. 2.2
</TABLE>
Quality The quality ratings of securities in the Fund as of
Ratings November 30, 1993 were as follows:
Percent of
Rating Net Assets
BBB 2.9%
BB 31.7
B 61.8
CCC 1.3
NR (Not Rated) 2.3
