CORPORATE
HIGH YIELD
FUND, INC.
FUND LOGO
Semi-Annual Report
November 30, 1994
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.
<PAGE>
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.
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
anticipates 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.
<PAGE>
Officers and
Directors
Arthur Zeikel, President and Director
Joe Grills, 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
DEAR SHAREHOLDER
During the six months ended November 30, 1994, the high-yield market
struggled in an environment of generally weaker prices in the
Government and high-grade bond markets and rising short-term
interest rates. Though high-yield securities fared better than
Treasury securities, which were down 1.64% for the period, the total
return of the unmanaged First Boston High Yield Index was
nonetheless -0.18% for the six-month period ended November 30, 1994.
Through August and September, the high-yield market benefited from
limited new-issue supply and continued cash inflows into mutual
funds. Starting in September, the cash flows into high-yield funds
became more volatile. This development, combined with an increasing
calendar of new issues timed to come out before year-end, had a
decidedly negative effect on the high-yield market.
<PAGE>
The high-yield market is at a tighter spread to the Treasury market
than it was on December 31, 1993, and the yield premiums are in the
low end of their historical range. The table below illustrates the
movement in yields, spreads and spread premiums of the ten-year
Treasury versus the First Boston High Yield Index.
Treasury Index Yield Yield
Yield Yield Spread Premium
12/31/93 5.79% 10.60% 4.81% 83%
11/30/94 7.90% 11.71% 3.81% 48%
We believe that the narrowing in yield spreads can be justified by
positive high-yield fundamentals. Default rates remain low even
given expected increases in defaults over the coming year. Most
companies in the high-yield universe have reported improved earnings
through the third calendar quarter, and reequitization has continued
to exert a positive effect on the market. Recently, several
companies represented in the portfolio--Clark R&M Holdings, Inc.,
American Standard Inc., John Q. Hammons Hotel and Fort Howard Paper
Corp.--have all announced initial public offerings of common equity.
Nevertheless, we would not expect further narrowing in yield
spreads. The high-yield market seems likely to be more sensitive to
movements in the Government bond market than it has been in recent
years.
Fund Performance
For the six-month period ended November 30, 1994, the total
investment return on the Fund's Common Stock was -1.83%, based on a
change in per share net asset value from $13.21 to $12.23, and
assuming reinvestment of $0.733 per share income dividends. During
the same period, the net annualized yield of the Fund's Common Stock
was 11.97%. Throughout the period, the Fund was on average 30.4%
leveraged. On November 30, the Fund was 30.7% leveraged, having
borrowed $113 million of the $150 million of credit available at an
average borrowing cost of 6.48%.
<PAGE>
Fund performance was hurt during the period by various factors, par-
ticularly leverage and the Fund's long average maturities. The
single largest contributor to the Fund's performance was the
negative impact of maintaining the Fund close to fully leveraged,
which magnified the reduction in net asset value as borrowings
remained fixed in the face of falling asset values. Increasing short-
term borrowing rates have narrowed the spread between investment
income and interest paid on our bank loans, thus reducing current
income available to shareholders. Our average borrowing cost has
risen steadily since mid-year: 5.51% at February 28; 5.49% on May
31; 5.72% on August 31; and 6.48% on November 30. The Fund's
relatively long average portfolio maturity for much of the period
also exposed us to the dramatic drops in long-term bond prices.
Therefore, we shortened the average maturity of the portfolio from
13 years, 9 months at May 31 to 8 years, 5 months at November 30,
1994.
Best-performing industry sectors included building materials, energy
and airlines. These first two sectors were aided by favorable
industry trends as well as expected and actual equity infusions for
American Standard Inc., Clark R&M Holdings, Inc., and Gulf Canada
Resource Ltd. Underperforming industries in the portfolio included
food and beverage, communications and casinos. Market intolerance for
earnings disappointments or for potential future credit weakness
has, in our view, excessively punished these and other sectors. The
food and beverage sector was especially hurt by earnings
disappointments and the announcement by Grand Union Co. of a planned
debt restructuring. The Fund's casino holdings are weighted toward
properties in Atlantic City. Atlantic City casino bonds have been
hard hit by investor concerns that Atlantic City will be seriously
damaged by potential gaming in Philadelphia. While we agree that new
competition will hurt the Atlantic City casinos, we believe that
these concerns are overdone.
Portfolio Strategy
During the period ended November 30, 1994, we increased exposure to
sectors where we see improving earnings trends or that we believe
are undervalued.
<PAGE>
The Fund's largest sector increase was in communications, where
names added include American Telecasting, Inc., Bell Cablemedia PLC,
EchoStar Communications Corp., Telefonica de Argentina, S.A. and
Videotron Holdings PLC. Bell Cablemedia and Videotron are both new
cable television/telephone companies in and near London with
excellent growth prospects and well-capitalized parent companies.
Telefonica de Argentina is an Argentine telephone company. American
Telecasting and EchoStar are new competitors to existing cable
television operators. These new companies provide wireless service
at lower cost and reach areas where it is uneconomic to operate
cable. We also added to utility exposure with Beaver Valley Funding
and CTC Mansfield Funding, and to hotel/casinos with positions in
Host Marriott Corp. and Harrah's Jazz Company, a land-based casino
to be constructed in New Orleans. In the paper sector, we bought
positions in Repap Wisconsin, Inc., a coated paper manufacturer, and
newsprint producer Rainy River Forest Products, Inc., a former
division of Boise Cascade.
During the six-month period ended November 30, 1994, fully valued
positions that were sold included Royal Crown Corp./Arby's, Southern
Pacific Rail Corp., USG Corp., Sealy Corp. and International
Shipholding Corp. The net effect of these transactions was to
enhance yield on the portfolio as the yield to the worst call date
on positions sold averaged 11.19% and the corresponding average on
positions added was 12.18%. At November 30, 1994, major industries
represented in the portfolio included: communications, 12.5% of net
assets; energy, 13.7%; food and beverage, 12.4%; hotels/casinos,
11.8%; and paper, 10.7%.
With the Fund fully invested and leveraged, our objective is to sell
what we believe are overvalued bonds and industry sectors and to buy
the attractive values that periodically emerge. We will continue to
invest selectively in attractively priced new issues. Given our view
that the market will not experience another dramatic downturn in the
near term and given the continued positive spread between interest
earned on our investments and interest paid on our borrowings, we
intend to remain close to fully leveraged to take advantage of the
potential for improved returns using leverage.
<PAGE>
In Conclusion
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 III)
Vincent T. Lathbury III
Vice President and Portfolio Manager
(Elizabeth M. Phillips)
Elizabeth M. Phillips
Vice President and Portfolio Manager
January 5, 1995
<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--6.9% BB+ Baa3 $ 7,250,000 Delta Air Lines, Inc., 10.06% due 1/02/2016 $ 7,322,500 $ 6,760,698
BB+ Baa2 4,000,000 United Airlines, Inc., 9.21% due 1/21/2017 4,067,280 3,429,200
USAir Inc.:
CCC+ B3 3,000,000 9.625% due 2/01/2001 2,385,000 1,770,000
B+ B2 3,345,733 11.20% due 3/19/2005** 2,944,246 3,078,075
B+ B2 1,000,000 10.375% due 3/01/2013 955,000 837,500
B+ B2 368,000 Series A, 10.33% due 6/27/2002 386,113 334,880
BB B2 740,000 Series C, 10.33% due 6/27/2002 776,423 673,400
BB B2 892,000 Series D, 10.33% due 6/27/2002 935,904 811,720
------------ ------------
19,772,466 17,695,473
<PAGE>
Automobiles--0.8% B B3 2,000,000 SPX, Inc., 11.75% due 6/01/2002 2,000,000 1,975,000
Broadcasting & B B1 5,000,000 American Media Operations, 11.625% due
Publishing--5.9% 11/15/2004 5,000,000 5,025,000
B B3 5,000,000 Katz Corporation (The), 12.75% due
11/15/2002 5,418,750 5,200,000
CCC+ B3 5,000,000 SCI Television Inc., 11.00% due 6/30/2005 5,272,500 4,975,000
------------ ------------
15,691,250 15,200,000
Building Products American Standard Inc.:
& Materials B B1 3,715,000 10.50%* due 6/01/1998 2,435,288 2,340,450
- --6.8% B+ Ba3 2,500,000 9.25% due 12/01/2016 2,518,750 2,262,500
B Ba3 5,000,000 Inter-City Products Corp., 9.75% due
3/01/2000 4,836,250 4,700,000
CCC B3 4,000,000 Nortek, Inc., 9.875% due 3/01/2004 3,968,560 3,520,000
B+ B3 5,000,000 Pacific Lumber Co., 10.50% due 3/01/2003 5,150,000 4,650,000
------------ ------------
18,908,848 17,472,950
Capital Goods-- Sequa Corp.:
1.8% BB B2 2,000,000 9.625% due 10/15/1999 2,055,000 1,920,000
B+ B3 3,000,000 9.375% due 12/15/2003 2,941,250 2,640,000
------------ ------------
4,996,250 4,560,000
Cellular B B3 5,000,000 Dial Page, Inc., 12.25% due 2/15/2000 5,400,000 4,900,000
Telephones--4.1% CCC+ Caa 7,784,000 Horizon Cellular Telephone Co., 11.38%*
due 10/01/1997 5,688,292 5,643,400
------------ ------------
11,088,292 10,543,400
Chemicals--2.0% B Ba3 8,680,000 ++G-I Holdings Inc., 11.38%* due 10/01/1998 5,678,747 5,208,000
<PAGE>
Communications-- B- Caa 9,145,000 American Telecasting, Inc., 12.50%* due
12.5% 6/15/1999 5,166,363 4,298,150
B+ B2 9,250,000 Bell Cablemedia PLC, 12.32%* due 7/15/1999 5,295,767 4,763,750
B- Caa 9,312,000 EchoStar Communications Corp., 12.875%*
due 6/01/1999 5,309,461 4,842,240
CCC- B3 4,000,000 Nextel Communications Inc., 11.97%* due
2/15/1999 2,244,007 1,490,000
B- B3 10,685,000 Pan Am Sat L.P., 11.375%* due 8/01/1998 7,145,140 7,052,100
BB- B1 5,000,000 Telefonica de Argentina, S.A., 11.875% due
11/01/2004 4,900,400 4,895,490
B+ B3 9,160,000 Videotron Holdings PLC, 12.00%* due
7/01/1999 5,205,006 4,648,700
------------ ------------
35,266,144 31,990,430
Conglomerates-- B+ B1 5,000,000 Coltec Industries, Inc., 10.25% due
4.4% 4/01/2002 5,325,000 4,900,000
B- B3 1,050,000 Interlake Corp., 12.125% due 3/01/2002 1,113,000 971,250
BB- Ba3 5,500,000 Sherritt Gordon Ltd., 9.75% due 4/01/2003 5,568,750 5,280,000
------------ ------------
12,006,750 11,151,250
Consumer B- Caa 4,000,000 ++Polymer Group Inc., 12.25% due 7/15/2002 3,982,500 3,900,000
Products--2.8% B- B3 3,000,000 Revlon Consumer Products Corp., 10.50%
due 2/15/2003 3,007,500 2,625,000
NR++++ B1 750,000 Tarkett International, 9.00% due 3/01/2002 686,250 682,500
------------ ------------
7,676,250 7,207,500
Containers--3.3% B- Caa 10,000,000 Ivex Packaging Corp., 13.25%* due 3/15/2000 5,616,144 4,200,000
B- B3 5,000,000 Silgan Holdings, Inc., 13.25%* due
6/15/1996 4,284,935 4,225,000
------------ ------------
9,901,079 8,425,000
Energy--13.7% B+ B1 11,500,000 Clark R&M Holdings, Inc., 10.54%* due
2/15/2000 6,736,744 6,670,000
NR++++ NR++++ 6,500,000 Consolidated Hydro Inc., 12.00%* due
7/15/1998 4,293,129 3,770,000
Gulf Canada Resource Ltd.:
BB B1 5,000,000 9.00% due 8/15/1999 4,950,000 4,800,000
B+ B2 1,000,000 9.25% due 1/15/2004 988,750 915,000
BB+ Ba3 4,000,000 Maxus Energy Corp., 11.50% due 11/15/2015 4,257,500 3,800,000
CCC B3 4,268,000 Mesa Capital Corp., 14.07%* due 6/30/1995 3,901,766 3,905,220
BB- Ba3 3,000,000 Noble Drilling Corp., 9.25% due 10/01/2003 3,000,000 2,835,000
BB+ Ba3 4,000,000 Seagull Energy Corp., 8.625% due 8/01/2005 4,000,000 3,500,000
BB- B1 5,000,000 Trans Texas Gas Corp., 10.50% due 9/01/2000 5,000,000 4,750,000
------------ ------------
37,127,889 34,945,220
<PAGE>
Entertainment-- B Caa 7,000,000 Marvel Holdings, Inc., 9.125% due 2/15/1998 6,195,000 6,125,000
3.5% B+ B2 6,985,000 SPI Holdings, Inc., 11.50%* due 10/01/1996 5,689,185 2,933,700
------------ ------------
11,884,185 9,058,700
Financial BB- B1 6,000,000 Reliance Group Holdings Inc., 9.75% due
Services--2.0% 11/15/2003 6,008,750 5,130,000
Food & B+ B3 5,000,000 Chiquita Brands International Inc., 11.50%
Beverage--12.4% due 6/01/2001 5,257,500 5,025,000
B B2 5,000,000 Coca Cola Bottling Group, 9.00% due
11/15/2003 5,000,000 4,400,000
BB- B1 5,000,000 Fresh Del Monte Produce, 10.00% due
5/01/2003 4,801,875 3,750,000
Grand Union Co.:
B B2 1,000,000 11.25% due 7/15/2000 1,051,250 820,000
CCC+ B2 4,000,000 12.25% due 7/15/2002 4,152,500 1,540,000
B B3 2,500,000++PF Acquisition Corp., 12.25% due 2/01/2005 2,500,000 2,506,250
B B2 5,000,000 Penn Traffic Co., 9.625% due 4/15/2005 5,197,500 4,262,500
B B2 4,000,000 Ralph's Grocery Co., 9.00% due 4/01/2003 3,941,250 3,840,000
B B2 6,000,000 Specialty Foods Corp., 10.25% due 8/15/2001 5,987,500 5,550,000
------------ ------------
37,889,375 31,693,750
</TABLE>
<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>
Health B+ B1 $5,000,000 Continental Medsystem Inc., 10.375% due
Services--1.7% 4/01/2003 $ 5,063,750 $ 4,300,000
Home Builders-- B- B2 5,000,000 Baldwin Homes Company, 10.375% due 8/01/2003 5,010,000 3,050,000
5.6% NR++++ NR++++ 3,000,000 Greystone Homes, Inc., 10.75% due 3/01/2004 3,000,000 2,820,000
B B2 5,000,000 NVR Development Inc., 11.00% due 4/15/2003 5,000,000 4,200,000
B B1 5,000,000 U.S. Home Corp., 9.75% due 6/15/2003 5,095,000 4,325,000
------------ ------------
18,105,000 14,395,000
<PAGE>
Hotels & BB B1 5,500,000 Bally's Park Place, Inc., 9.25% due
Casinos--11.8% 3/15/2004 5,003,750 4,551,250
BB- B2 2,000,000 GNS Mirage Finance Corp., 9.25% due
3/15/2003 1,990,000 1,850,000
B+ B2 6,000,000 Great Bay Property Funding Corp., 10.875%
due 1/15/2004 5,930,000 4,680,000
B+ B1 5,000,000 Harrah's Jazz Company, 14.25% due
11/15/2001 5,000,000 5,112,500
BB- B1 4,364,000 Host Marriott Corp., 10.375% due 6/15/2011 4,355,940 4,364,000
BB- B1 1,000,000 John Q. Hammons Hotel, 8.875% due 2/15/2004 880,000 872,500
B B2 5,000,000 Showboat, Inc., 13.00% due 8/01/2009 4,917,500 4,700,000
B B3 6,000,000 Trump Plaza Funding, Inc., 10.875% due
6/15/2001 5,953,750 4,110,000
------------ ------------
34,030,940 30,240,250
Industrial BB- B2 5,000,000 ADT Operations, Inc., 9.25% due 8/01/2003 5,000,000 4,562,500
Services--1.8%
Metals & Mining-- B- B3 8,000,000 Maxxam Group, Inc., 12.25%* due 8/01/1998 5,170,511 4,560,000
1.8%
Paper--10.7% B+ B2 4,000,000 Container Corporation of America, 9.75%
due 4/01/2003 4,080,000 3,720,000
B B2 5,000,000 Fort Howard Corp., 9.00% due 2/01/2006 4,923,750 4,212,500
BB- Ba3 4,000,000 Rainy River Forest Products, Inc., 10.75%
due 10/15/2001 3,989,224 3,940,000
B+ B1 4,000,000 Repap Wisconsin, Inc., 9.25% due 2/01/2002 3,766,250 3,460,000
B B1 7,000,000 Riverwood International Corp., 11.25% due
6/15/2002 7,723,750 7,140,000
Stone Container Corp.:
B B1 2,000,000 9.875% due 2/01/2001 1,862,500 1,825,000
B+ B1 2,000,000 10.75% due 10/01/2002 1,980,000 1,925,000
NR++++ B1 1,000,000 11.50% due 10/01/2004 992,820 982,500
------------ ------------
29,318,294 27,205,000
Pollution B B3 4,000,000 Mid-American Waste Systems, Inc., 12.25%
Control--1.6% due 2/15/2003 4,000,000 4,160,000
Restaurants--2.2% CCC+ B2 7,000,000 Flagstar Corp., 11.375% due 9/15/2003 7,262,500 5,740,000
Retail B- B3 5,000,000 Pamida Holdings Inc., 11.75% due 3/15/2003 4,978,750 4,750,000
Specialty--3.7% B- B3 5,000,000 Specialty Retailers, Inc., 11.00% due
8/15/2003 5,000,000 4,650,000
------------ ------------
9,978,750 9,400,000
<PAGE>
Steel--0.4% BB B1 1,250,000 Wheeling-Pittsburg Steel Corp., 9.375% due
11/15/2003 1,184,375 1,084,375
Textiles--2.4% B+ B3 7,000,000 Westpoint Stevens Inc., 9.375% due 12/15/2005 6,976,250 6,125,000
Transportation BB Ba2 3,000,000 Eletson Holdings, Inc., 9.25% due 11/15/2003 3,045,000 2,700,000
Services--1.1%
Utilities--9.4% B+ B1 3,000,000 Beaver Valley Funding, 9.00% due 6/01/2017 2,317,500 2,133,750
CTC Mansfield Funding:
BB+ Ba1 2,000,000 10.25% due 3/30/2003 1,855,625 1,860,000
BB+ Ba1 3,000,000 11.125% due 9/30/2016 3,213,750 2,767,500
BB Ba3 4,733,392 Midland Congeneration Venture Limited
Partnership, 10.33% due 7/23/2002** 4,638,724 4,449,388
Public Service Company of New Mexico:
B Ba3 1,000,000 10.30% due 1/15/2014 1,030,000 921,250
BB+ Ba3 4,000,000 10.15% due 1/15/2016 4,090,000 3,650,000
B B1 4,000,000 Texas-New Mexico Power Co., 10.75% due
9/15/2003 4,085,000 3,940,000
NR++++ NR++++ 5,106,532++Tucson Electric & Power Co., 10.21% due
1/01/2009 4,798,575 4,399,788
------------ ------------
26,029,174 24,121,676
Total Investments in Corporate Bonds--137.1% 391,060,819 350,850,474
<CAPTION>
Shares Held Preferred Stock & Warrants
<S> <C> <S> <C> <C>
Broadcasting & 95,665 K-III Communications Corp. 2,606,871 2,403,583
Publishing--0.9%
Communications-- 45,725 American Telecasting, Inc. (Warrants) (a) 106,976 91,450
0.0%
Total Investments in Preferred Stock--0.9% 2,713,847 2,495,033
<PAGE>
<CAPTION>
Face Amount Short-Term Securities
<S> <C> <S> <C> <C>
Commercial $1,537,000 General Electric Capital Corp., 5.70% due
Paper***--0.6% 12/01/1994 1,537,000 1,537,000
Total Investments in Short-Term Securities
--0.6% 1,537,000 1,537,000
Total Investments--138.6% $395,311,666 354,882,507
============
Liabilities in Excess of Other Assets--(38.6%) (98,811,839)
------------
Net Assets--100.0% $256,070,668
============
<FN>
*Represents a zero coupon or step bond, the interest rate
shown is the effective yield at the time of purchase.
**Subject to principal paydowns.
***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.
(a)Warrants entitle the Fund to purchase a predetermined
number of shares of common stock/face amount of bonds.
The purchase price and number of shares/face amount
are subject to adjustment under certain conditions
until the expiration date.
++Restricted securities as to resale. The value of the Fund's
investment in restricted securities was approximately
$16,014,000, representing 6.3% of net assets.
<CAPTION>
Acquisition Value
Issue Date(s) Cost (Note 1a)
<S> <C> <C> <C>
G-I Holdings Inc., 11.38% due 10/01/1998 9/28/1993 $ 5,678,747 $ 5,208,000
Polymer Group Inc., 12.25% due 7/15/2002 6/17/1994-11/16/1994 3,982,500 3,900,000
PF Acquisition Corp., 12.25% due
2/01/2005 10/21/1994 2,500,000 2,506,250
Tucson Electric & Power Co., 10.21% due
1/01/2009 6/25/1993-7/28/1993 4,798,575 4,399,788
----------- -----------
Total $16,959,822 $16,014,038
=========== ===========
++++Not Rated.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of November 30, 1994
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$395,311,666) (Note 1a) $354,882,507
Cash 3,923,415
Receivables:
Interest $ 8,792,429
Securities sold 3,036,625 11,829,054
------------
Deferred organization expense (Note 1d) 69,881
Prepaid expenses and other assets 129,654
------------
Total assets 370,834,511
------------
Liabilities: Loans (Note 5) 113,000,000
Payables:
Dividends to shareholders (Note 1e) 1,129,782
Interest on loans (Note 5) 299,198
Investment adviser (Note 2) 155,851
Commitment fees 14,889 1,599,720
------------
Accrued expenses and other liabilities 164,123
------------
Total liabilities 114,763,843
------------
Net Assets: Net assets $256,070,668
============
Capital: Common Stock, $.10 per share 200,000,000 shares authorized $ 2,093,666
Paid-in capital in excess of par 294,082,601
Undistributed investment income--net 5,238,883
Accumulated realized capital losses--net (4,915,323)
Unrealized depreciation on investments--net (40,429,159)
------------
Net Assets--Equivalent to $12.23 per share based on 20,936,657
shares of capital stock outstanding (market price $11.875) $256,070,668
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended November 30, 1994
<S> <S> <C>
Investment Interest and discount earned $ 22,361,481
Income Dividends 137,518
(Note 1c): Other 228,750
------------
Total income 22,727,749
------------
Expenses: Loan interest expense (Note 5) 3,459,482
Investment advisory fees (Note 2) 967,588
Professional fees 67,799
Borrowing costs (Note 5) 42,028
Transfer agent fees 37,924
Accounting services (Note 2) 32,710
Directors' fees and expenses 24,707
Printing and shareholder reports 21,838
Custodian fees 14,423
Amortization of organization expenses (Note 1d) 9,374
Pricing services 2,958
Registration fees 136
Other 133,169
------------
Total expenses 4,814,136
------------
Investment income--net 17,913,613
------------
Realized & Realized loss on investments--net (5,977,704)
Unrealized Change in unrealized depreciation on investments--net (17,146,345)
Loss on ------------
Investments Net Decrease in Net Assets Resulting from Operations $ (5,210,436)
(Notes 1c & 3): ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the For the
Six Months Period
Ended June 25,
November 30, 1993++ to
Increase (Decrease) in Net Assets: 1994 May 31, 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 17,913,613 $ 25,918,019
Realized gain (loss) on investments--net (5,977,704) 1,062,381
Change in unrealized depreciation on investments--net (17,146,345) (23,282,814)
------------ ------------
Net increase (decrease) in net assets resulting from operations (5,210,436) 3,697,586
------------ ------------
Dividends to Less dividends from:
Shareholders Investment income--net (15,272,086) (23,320,663)
(Note 1e): ------------ ------------
Net decrease in net assets resulting from dividends to shareholders (15,272,086) (23,320,663)
------------ ------------
Capital Stock Proceeds from issuance of Common Stock -- 279,956,250
Transactions Offering costs resulting from issuance of Common Stock 3,582 (372,991)
(Note 4): Value of shares issued in reinvestment of dividends 3,812,638 12,676,783
------------ ------------
Net increase in net assets derived from capital stock transactions 3,816,220 292,260,042
------------ ------------
Net Assets: Total increase (decrease) in net assets (16,666,302) 272,636,965
Beginning of period 272,736,970 100,005
------------ ------------
End of period* $256,070,668 $272,736,970
============ ============
*Undistributed investment income--net $ 5,238,883 $ 2,597,356
============ ============
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CASH FLOWS
<CAPTION>
For the
Six Months Ended
November 30, 1994
<S> <S> <C>
Cash Provided by Net decrease in net assets resulting from operations $ (5,210,436)
Operating Adjustments to reconcile net increase (decrease) in net assets
Activities: resulting from operations to net cash used for operating activities:
Decrease in receivables 867,499
Increase in other liabilities 30,948
Realized and unrealized loss on investments--net 23,124,049
Amortization of premium and discount (5,752,060)
------------
Net cash provided by operating activities 13,060,000
------------
Cash Provided by Proceeds from sales of long-term securities 115,028,212
Investing Purchases of long-term securities (103,143,067)
Activities: Purchases of short-term investments--net (391,753,646)
Proceeds from sales and maturities of short-term investments 392,058,000
------------
Net cash provided by investing activities 12,189,499
------------
Cash Used for Cash receipts from capital shares sold 3,582
Financing Repayments of borrowings--net (11,000,000)
Activities: Dividends paid to shareholders (10,329,666)
------------
Net cash used for financing activities (21,326,084)
------------
Cash: Net increase in cash 3,923,415
Cash at beginning of period 0
------------
Cash at end of period $ 3,923,415
============
Cash Flow Cash paid for interest $ 3,425,704
Information: ============
Non-Cash Capital stock issued in reinvestment of dividends paid to shareholders $ 3,812,638
Financing ============
Activities:
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
For the For the
The following per share data and ratios have been derived Six Months Period
from information provided in the financial statements. Ended June 25,
November 30, 1993++ to
Increase (Decrease) in Net Asset Value: 1994 May 31, 1994
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 13.21 $ 14.18
Operating ------------ ------------
Performance: Investment income--net .85 1.30
Realized and unrealized loss on investments--net (1.10) (1.10)
------------ ------------
Total from investment operations (.25) .20
------------ ------------
Less dividends from:
Investment income--net (.73) (1.17)
------------ ------------
Net asset value, end of period $ 12.23 $ 13.21
============ ============
Market price per share, end of period $ 11.875 $ 13.875
============ ============
Total Investment Based on net asset value per share (1.83%)+++ 1.08%+++
Return:** ============ ============
Based on market price per share (9.26%)+++ .36%+++
============ ============
Ratios to Expenses 2.48%* 1.76%*
Average ============ ============
Net Assets: Investment income--net 9.24%* 7.55%*
============ ============
Supplemental Net assets, end of period (in thousands) $ 256,071 $ 272,737
Data: ============ ============
Portfolio turnover 24.40% 45.82%
============ ============
<FN>
*Annualized.
**Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may
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. These unaudited interim financial
statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal
recurring nature. 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). Dividend income is recorded on the ex-
dividend dates. Interest income (including amortization of discount)
is recognized on the accrual basis. Realized gains and losses on
security transactions are determined on the identified cost basis.
(d) Deferred organization expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(e) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
<PAGE>
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML& Co."). The limited
partners are ML & Co. and Fund Asset Management, Inc. ("FAMI"),
which is also an indirect wholly-owned subsidiary of ML & Co.
FAM 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 plus the
proceeds of any outstanding borrowings used for leverage.
For the six months ended November 30, 1994, Merrill Lynch Security
Pricing Service, an affiliate of Merrill Lynch, Pierce, Fenner, &
Smith Inc. ("MLPF&S"), provided security price quotations to compute
the net asset value of the Fund.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAMI, PSI, FAM, MLPF&S, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended November 30, 1994 were $91,768,788 and
$107,757,286, respectively.
Net realized and unrealized losses as of November 30, 1994 were as
follows:
Realized Unrealized
Losses Losses
Long-term investments $ (5,977,704) $(40,429,159)
------------ ------------
Total $ (5,977,704) $(40,429,159)
============ ============
As of November 30, 1994, net unrealized depreciation for financial
reporting and Federal income tax purposes aggregated $40,429,159, of
which $453,468 related to appreciated securities and $40,882,627
related to depreciated securities. The aggregate cost of investments
at November 30, 1994 for Federal income tax purposes was
$395,311,666.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of Common Stock,
par value $.10 per share. For the six months ended November 30,
1994, shares issued and outstanding increased by 292,959 to
20,936,657 as a result of dividend reinvestment. At November 30,
1994, total paid-in capital amounted to $296,176,267.
5. Short-Term Borrowings:
On August 26, 1994, 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%. For the six months ended November 30, 1994, the
maximum amount borrowed was $129,000,000, the average amount
borrowed was $116,929,000 and the daily weighted average interest
rate was 5.76%. For the six months ended November 30, 1994, facility
and commitment fees aggregated approximately $42,000.
6. Subsequent Event:
On December 6, 1994, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $0.126811 per share, payable on December 19, 1994 to shareholders
of record as of December 12, 1994.
PER SHARE INFORMATION
<TABLE>
Per Share
Selected
Quarterly
Financial Data*
<CAPTION>
Net Realized Unrealized Dividends
Investment Gains Gains Net Investment
For the Period Income (Losses) (Losses) Income
<S> <C> <C> <C> <C>
June 25, 1993++ to August 31, 1993 $.16 -- $ (.03) --
September 1, 1993 to November 30, 1993 .37 $(.01) .28 $.39
December 1, 1993 to February 28, 1994 .38 .10 .18 .40
March 1, 1994 to May 31, 1994 .39 (.05) (1.57) .38
June 1, 1994 to August 31, 1994 .43 (.08) (.22) .38
September 1, 1994 to November 30, 1994 .42 (.20) (.60) .35
<PAGE>
<CAPTION>
Net Asset Value Market Price**
For the Period High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
June 25, 1993++ to August 31, 1993 $14.28 $14.15 $15.125 $15.00 923
September 1, 1993 to November 30, 1993 14.58 14.07 15.375 14.75 2,156
December 1, 1993 to February 28, 1994 15.06 14.58 15.625 14.75 1,705
March 1, 1994 to May 31, 1994 14.58 13.21 14.25 12.50 1,588
June 1, 1994 to August 31, 1994 13.45 12.83 14.125 12.625 1,570
September 1, 1994 to November 30, 1994 12.94 12.23 13.50 11.00 2,712
<FN>
++Commencement of Operations.
*Calculations are based upon shares of Common Stock outstanding at
the end of each period.
**As reported in the consolidated transaction reporting system.
***In thousands.
</TABLE>
PORTFOLIO INFORMATION
<TABLE>
Ten Largest
Holdings
<CAPTION>
Percent of
Net Assets
<S> <C> <S> <C>
USAir Inc. USAir is the sixth largest US airline with major hubs in Pittsburgh,
10.375% 3/01/2013 Charlotte, Philadelphia and Baltimore. Over two-thirds of our investment
10.33% 6/27/2002 is in equipment trust certificates secured by modern, saleable aircrafts.
9.625% 2/01/2001
11.25% 2/01/2001 2.9%
Riverwood International Riverwood is an international packaging and paper products company which
Corp. is one of the two US producers of beverage carrying containers. The company
11.25% 6/15/2002 also manufactures folding carton board and liner board. 2.8
Pan Am Sat L.P. Pan Am Sat operates two communications satellites that service the
11.38% 8/01/2003 Americas, especially Latin America and the Far East. Three additional
satellites are scheduled for launch in 1995 and 1996. 2.7
Delta Air Lines Inc. Delta is the third largest US airline with major hubs in Atlanta,
10.06% 1/02/2016 Cincinnati, Salt Lake City, Dallas and Frankfurt. Our investment is
in equipment trust certificates secured by aircrafts. 2.6
<PAGE>
Clark R&M Holdings, Inc. Clark Oil is an independent refiner and marketer of petroleum products
10.53% 2/15/2000 in the Midwest. The company operates gas stations under the Clark name. 2.6
Westpoint Stevens Inc. The company is a US manufacturer of bed and bath products such as sheets,
9.375% 12/15/2005 comforters, blankets, bedspreads and towels. Brand names include Martex,
Stevens, and Lady Pepperell. 2.4
Marvel Holdings, Inc. Marvel is a holding company that controls 80% of Marvel Entertainment.
9.125% 2/15/1998 Marvel Entertainment is the largest publisher of comic books, including
Spider-Man and X-Men, and a leading marketer of sports picture cards under
the Fleer trade name. 2.4
Flagstar Corp. Flagstar owns a portfolio of restaurant and food service businesses,
11.375% 9/15/2003 including Denny's and Quincy's. 2.2
Gulf Canada Resource Ltd. This company is one of Canada's leading independent producers of crude
9.25% 1/15/2004 oil, natural gas liquids and natural gas. Gulf Canada's oil and gas
9.00% 8/15/1999 exploration, development and production activities are focused primarily
in western Canada. 2.2
Horizon Cellular Horizon owns and operates cellular telephone systems, primarily in rural
Telephone Co. and suburban areas (RSAs), clustered in the Mid-Atlantic, Kentucky and Georgia. 2.2
0% 10/01/1997
</TABLE>
Quality
Ratings
The quality ratings of securities in the Fund as of
November 30, 1994 were as follows:
Percent of
Rating Net Assets
B 62.3%
BB 23.8
CCC 8.2
NR (Not Rated) 5.7
<PAGE>
