CORPORATE
HIGH YIELD
FUND, INC.
FUND LOGO
Semi-Annual Report
November 30, 1995
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. Statements and other information herein as dated and
are subject to change.
<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.
<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
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.
DEAR SHAREHOLDER
After a strong start to the year, the high-yield market slowed its
pace of growth over the six months ended November 30, 1995. An
improved Treasury market, better technicals and strong corporate
earnings reports pushed up high-yield bond prices early in 1995. As
the year progressed, a heavy new-issue calendar and concerns about a
cyclical earnings slowdown moderated high-yield bond performance.
For the six months ended November 30, 1995, the total return on the
unmanaged Merrill Lynch High Yield Master Index was +5.46%,
underperforming the +6.52% of the ten-year Treasury bond as well as
the +14.89% total return of the Standard & Poor's 500 Index.
Overall, bonds in the higher rating categories outperformed lower
rating categories, as BB bonds generally are tied more closely to
Treasury yields and lower-rated bonds are more dependent on earnings
prospects. Sectors in the high-yield market with the best
performance in the past six months included airlines, cable TV,
homebuilders, utilities and media. Improved returns for these
sectors primarily reflect a more optimistic fundamental environment.
The retail sector and supermarkets have underperformed throughout
the six months ended November 30, 1995.
<PAGE>
In the near term, high-yield bond prices should remain fairly
stable. Though high-yield bonds are near historically tight spreads
relative to ten-year Treasury bonds, spreads have widened in recent
months. This gives the high-yield market modest upside potential
relative to Treasury securities or a possible "cushion" in the event
of a weakening Treasury market. The high-yield market received
sizeable inflows of cash during 1995, which lends further support to
market prices. Initial public equity offerings and equity infusions
may also continue to provide credit support. However, over the next
few months a slowing economy may lead to some earnings
disappointments and falling bond prices for specific issuers. We
also believe that defaults and credit problems will continue to
rise, but remain moderate by historic standards.
Fund Performance
For the six-month period ended November 30, 1995, the total
investment return on the Fund's Common Stock was +5.79%, based on a
change in the per share net asset value from $13.35 to $13.38, and
assuming reinvestment of $0.727 per share income dividends. During
the same period, the net annualized yield of the Fund's Common Stock
was 10.81%. Throughout the six-month period, the Fund was, on
average, 14% leveraged. On November 30, 1995, the Fund was 20%
leveraged, having borrowed $73 million of the $150 million of credit
available at an average borrowing cost of 6.32%.
The best-performing sectors in the Fund included airlines,
transportation and communications. The improvement in the airline
sector primarily reflects rebounding profitability at USAir Inc.,
one of our largest holdings. During the six-month period ended
November 30, 1995, we sold our entire positions in Delta Air Lines
Inc. and United Airlines, Inc., as prices on these bonds had risen
sharply. The transportation sector was buoyed by favorable earnings
reports as well as the initial public offering of Viking Star
Shipping Co., Inc., now known as Teekay Shipping Corp. In the
communications sector, cellular service and emerging markets phone
companies showed improved bond performance. Pan Am Sat L.P., our
largest Fund holding, strengthened on the news of a successful
initial public offering. Dial Page, Inc. bonds were called at a
profit when the company was bought by Mobile Media. We also took
advantage of market strength to sell our position in fully valued
Horizon Cellular Telephone Co.
Our single best-performing bond during the period was in computer
service sector as SHL Systemhouse, Inc. bonds soared over 20 points
when the company was bought out by MCI Communications. Cyclical
weakness dampened prices of steel and specialty retailing holdings.
Strong performance in most of our gaming holdings was more than
offset by the late November surprise Chapter 11 bankruptcy filing of
Harrah's Jazz Company. We believe asset values support our position
in this issue.
<PAGE>
Portfolio Strategy
Given the continued drop in interest rates and our moderately
positive outlook on the high-yield market during the six months
ended November 30, 1995, we increased the Fund's leverage somewhat.
At the same time, we attempted to buy bonds that were cushioned from
the effects of rising interest rates as well as having limited
potential for near-term earnings disappointments. Among these
purchases were Walter Industries Inc., 12.19% due 2000, Southdown
Inc., 14% due 2001, and Riverwood International Corp., 11.25% due
2002. As we anticipate continued favorable market conditions, we
expect to maintain our leverage position within the range of the
past six months. (For complete explanation of the benefits and risks
of leveraging, see page 1 of this report to shareholders.)
Generally, during the six-month period ended November 30, 1995, we
found better value in the B rating category than in higher-rated
paper. We added modestly to steel positions on weakness, buying WCI
Steel, Inc., Weirton Steel Corp. and Gulf States Steel Acquisition
Corp. in the belief that these companies were well-positioned to
weather a downturn in the steel markets. Emerging markets continued
to offer good value during the period. Positions added in Argentina
included Transport de Gas del Sur, a natural gas pipeline company,
Metrogas, a gas utility, Telecom Argentina STET S.A., a telephone
company, and Republic of Argentina, foreign government obligations.
In Colombia we purchased BBB-rated bonds of Oleoducto Central S.A.,
an oil pipeline construction project with strong ownership including
the Colombian government oil company, Transcanada Pipelines and
British Petroleum. We also purchased Comunicacion Celular, a
cellular telephone company owned 50% by Bell Canada and the
remainder by two large Colombian telephone companies. This brought
the Fund's emerging market position to 10% of total long-term
investments. Although emerging markets investment opportunities may
arise, we do not expect to significantly increase our exposure in
this sector for the foreseeable future.
Industry groups we have overweighted because of above-average value
included broadcasting & publishing, broadcasting/cable, and
communications, which aggregated 17.3% of total long-term
investments. This broad media category includes cable TV operations
in the United States, Canada, and Great Britain, television
broadcasting companies, as well as US and foreign cellular and
paging services. Also included in this category were large telephone
companies in Argentina and the Philippines whose bond ratings are
below investment grade because of the sovereign risk of investing in
these two countries. Other major industries represented in the
portfolio as a percentage of total high-yield investments included:
energy, 10.1%; utilities, 8.3%; gaming, 6.4%; and paper, 6.2%. The
average portfolio maturity at November 30, 1995 was 7 years, 5
months.
<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 3, 1996
PROXY RESULTS
During the six-month period ended November 30, 1995, Corporate High
Yield Fund, Inc. shareholders voted on the following proposals. The
proposals were approved at a special shareholders' meeting on
September 8, 1995. The description of each proposal and number of
shares voted are as follows:
<PAGE>
<TABLE>
<CAPTION>
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors: Joe Grills 20,695,604 622,396
Walter Mintz 20,690,670 627,330
Melvin R. Seiden 20,696,888 621,112
Stephen B. Swensrud 20,695,204 622,796
Harry Woolf 20,682,498 635,502
Arthur Zeikel 20,687,529 630,471
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP as the independent auditors
of the Fund to serve for the current fiscal year. 20,755,121 145,449 417,431
</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>
Airlines--2.2% USAir Inc.:
BB B1 $ 3,266,059 11.20% due 3/19/2005 $ 2,874,133 $ 3,396,539
BB- B1 1,000,000 10.375% due 3/01/2013 955,000 930,000
BB+ Ba2 368,000 Series A, 10.33% due 6/27/2002 386,113 369,159
BB+ Ba2 740,000 Series C, 10.33% due 6/27/2002 776,423 742,331
BB+ Ba2 892,000 Series D, 10.33% due 6/27/2002 935,904 894,810
------------ ------------
5,927,573 6,332,839
Automobiles--1.5% B B3 2,000,000 SPX, Inc., 11.75% due 6/01/2002 2,000,000 2,130,000
B+ Ba3 2,250,000 ++Walbro Corp., 9.875% due 7/15/2005 2,221,500 2,210,625
------------ ------------
4,221,500 4,340,625
Broadcasting & B B3 5,000,000 Katz Corporation (The), 12.75% due
Publishing--1.9% 11/15/2002 5,418,750 5,512,500
<PAGE>
Broadcasting/ CCC+ Caa 7,838,099 American Telecasting, Inc., 14.50%*
Cable--8.4% due 6/15/2004 5,045,451 5,173,145
B- B2 3,750,000 Argyle Television, 9.75% due 11/01/2005 3,750,000 3,693,750
CCC B3 3,922,000 Australis Media Ltd., 14%* due
5/15/2003 (d) 2,145,362 2,843,450
BB- B3 1,500,000 CAI Wireless Systems Inc., 12.25% due
9/15/2002 1,500,000 1,575,000
B- Caa 8,312,000 EchoStar Communications Corp.,
12.875%* due 6/01/1999 (f) 5,369,090 5,340,460
Videotron Holdings PLC:
B+ B3 6,160,000 11.125%* due 7/01/2004 3,930,141 4,142,600
B+ B3 3,000,000 11%* due 8/15/2005 1,811,833 1,770,000
------------ ------------
23,551,877 24,538,405
Building B Caa 5,000,000 Inter-City Products Corp., 9.75% due
Products & 3/01/2000 4,836,250 3,250,000
Materials--3.0% B B2 5,025,000 Southdown Inc., 14% due 10/15/2001 5,549,484 5,527,500
------------ ------------
10,385,734 8,777,500
Chemicals--3.8% NR+++ Baa1 5,000,000 ++Acetex Corporation, 9.75% due
10/01/2003 4,978,150 5,112,500
B+ Ba3 7,680,000 G-I Holdings Inc., 11.38%* due
10/01/1998 5,611,740 5,836,800
------------ ------------
10,589,890 10,949,300
Communications-- CCC+ B3 3,750,000 Cellular Communications, Inc.,
10.6% 13.25%* due 8/15/2000 (e) 2,202,747 2,221,875
B+ B3 8,458,000 Comunicacion Celular, 13.125%* due
5/15/2001 4,502,851 4,562,034
CCC+ B3 4,000,000 Nextel Communications Inc., 9.75%*
due 8/15/2004 2,521,100 2,070,000
B- B3 9,285,000 Pan Am Sat L.P., 11.375%* due 8/01/2003 6,929,512 7,474,425
BB Ba2 750,000 Philippine Long Distance Telephone
Co., 9.875% due 8/01/2005 749,903 780,000
BB- B2 5,000,000 Rogers Communications Inc., 10.875% due
4/15/2004 5,015,625 5,200,000
BB- B1 4,000,000 ++Telecom Argentina STET S.A., 8.375% due
10/18/2000 3,213,050 3,650,000
BB- B1 5,000,000 Telefonica de Argentina S.A., 11.875%
due 11/01/2004 4,900,400 5,012,500
------------ ------------
30,035,188 30,970,834
Computer B Baa3 3,750,000 SHL Systemhouse Inc., 12.25% due
Services--1.6% 9/01/2001 (g) 3,687,157 4,631,250
<PAGE>
Conglomerates-- BB- B1 5,000,000 Coltec Industries, Inc., 10.25% due
5.8% 4/01/2002 5,325,000 5,125,000
Sequa Corp.:
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 2,700,000
BB- B1 2,000,000 Sherritt Gordon Ltd., 9.75% due
4/01/2003 1,942,500 2,080,000
NR+++ NR+++ 5,000,000 ++Walter Industries Inc., 12.19% due
3/15/2000 5,075,000 5,062,500
------------ ------------
17,338,750 16,887,500
Consumer NR+++ B3 3,000,000 ++Cabot Safety, 12.50% due 7/15/2005 3,000,000 3,135,000
Products--6.9% B NR+++ 5,000,000 Coleman Holdings, Inc., 10.70%* due
5/27/1998 3,861,690 3,975,000
B- Caa 5,000,000 ++Polymer Group Inc., 12.25% due
7/15/2002 (c) 4,938,750 5,150,000
Revlon Consumer Products Corp.:
B B2 1,500,000 9.50% due 6/01/1999 1,366,882 1,515,000
B B2 1,500,000 9.375% due 4/01/2001 1,361,446 1,501,875
B- B3 2,250,000 ++Samsonite Corp., 11.125% due
7/15/2005 2,175,938 2,115,000
NR+++ B3 2,000,000 Selmer Company, Inc., 11% due
5/15/2005 2,000,000 1,970,000
NR+++ NR+++ 750,000 Tarkett International, 9% due
3/01/2002 686,250 795,000
------------ ------------
19,390,956 20,156,875
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
INDUSTRIES Rating Rating Amount Corporate Bonds Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Consumer B B2 $ 1,500,000 Affinity Group, Inc., 11.50% due
Services--0.5% 10/15/2003 $ 1,462,500 $ 1,545,000
Diversified--1.0% B- B3 3,000,000 ++Crain Industries, 13.50% due
8/15/2005 3,000,000 3,037,500
<PAGE>
Energy--12.3% BB- Ba3 1,000,000 California Energy Company, Inc.,
9.875% due 6/30/2003 1,000,000 1,035,000
B+ B1 8,275,000 Clark R&M Holdings, Inc., 10.54%*
due 2/15/2000 5,366,001 5,409,781
NR+++ NR+++ 6,500,000 Consolidated Hydro Inc., 12%* due
7/15/2003 4,811,618 3,802,500
BB B1 5,000,000 Gulf Canada Resource Ltd., 9% due
8/15/1999 4,950,000 5,175,000
BB- B1 4,000,000 Maxus Energy Corp., 11.50% due
11/15/2015 4,257,500 4,100,000
BBB- Baa3 5,000,000 ++Oleoducts Central S.A., 9.35% due
9/01/2005 5,000,000 4,987,500
B+ Ba3 750,000 Rowan Companies, Inc., 11.875% due
12/01/2001 810,000 808,125
B- Caa 3,000,000 Transamerican Refining Corporation,
16.50% due 2/15/2002 2,999,582 3,045,000
BB+ B2 5,000,000 TransTexas Gas Corp., 11.50% due
6/15/2002 (c) 5,000,000 5,162,500
BB- B1 2,500,000 Yacimientos Petroliferos Fiscales S.A.
(Sponsored) (ADR), 8% due 2/15/2004 (b) 1,697,500 2,237,500
------------ ------------
35,892,201 35,762,906
Entertainment-- BB- B1 6,000,000 Marvel Holdings, Inc., 9.125% due
2.4% 2/15/1998 5,310,000 5,520,000
D Caa 6,985,000 SPI Holdings, Inc., 11.50% due
10/01/2001 6,061,826 1,606,550
------------ ------------
11,371,826 7,126,550
Financial BB- B1 5,000,000 Reliance Group Holdings Inc., 9.75%
Services-- due 11/15/2003 5,008,750 5,118,750
1.8%
Food & Beverage-- B+ B3 3,000,000 Chiquita Brands International Inc.,
4.8% 11.50% due 6/01/2001 3,180,000 3,150,000
B B2 4,000,000 Coca-Cola Bottling Group, 9% due
11/15/2003 4,000,000 4,000,000
B B3 2,500,000 Curtice-Burns Foods, Inc., 12.25%
due 2/01/2005 2,500,000 2,575,000
B B3 5,000,000 Fresh Del Monte Produce, 10% due
5/01/2003 4,801,875 4,375,000
------------ ------------
14,481,875 14,100,000
<PAGE>
Foreign BB- B1 4,000,000 Republic of Argentina, 8.375% due
Government 12/20/2003 2,798,750 3,250,000
Obligations--
1.1%
Gaming--7.8% BB B1 5,500,000 Bally's Park Place, Inc., 9.25% due
3/15/2004 5,003,750 5,486,250
B+ B2 6,000,000 Greate Bay Property Funding Corp.,
10.875% due 1/15/2004 5,930,000 5,190,000
D B1 5,000,000 Harrah's Jazz Company, 14.25% due
11/15/2001 5,000,000 1,400,000
B B2 5,000,000 Showboat, Inc., 13% due 8/01/2009 4,917,500 5,550,000
B+ B3 5,000,000 Trump Plaza Funding, Inc., 10.875%
due 6/15/2001 4,948,750 5,000,000
------------ ------------
25,800,000 22,626,250
Home Builders-- B B3 3,000,000 Greystone Homes, Inc., 10.75% due
0.9% 3/01/2004 3,000,000 2,700,000
Industrial B- B3 3,100,000 ++Day International Corp., 11.125%
Services--2.8% due 6/01/2005 3,135,250 3,162,000
B- Caa 5,065,000 Southeastern Public Service
Company, 11.875% due 2/01/1998 5,064,295 5,065,000
------------ ------------
8,199,545 8,227,000
Metals & Mining-- B- B2 4,200,000 Kaiser Aluminum & Chemical Corp.,
5.2% 12.75% due 2/01/2003 4,389,000 4,599,000
B- B3 8,000,000 Maxxam Group, Inc., 12.25%* due
8/01/2003 5,823,270 5,480,000
NR+++ NR+++ 4,700,000 Renco Metals Inc., 12% due
7/15/2000 5,103,000 5,076,000
------------ ------------
15,315,270 15,155,000
Packaging--1.6% B- B3 5,000,000 Silgan Holdings, Inc., 13.25%*
due 12/15/2002 4,732,720 4,725,000
<PAGE>
Paper--7.5% B+ B2 4,000,000 Container Corporation of America,
9.75% due 4/01/2003 4,080,000 3,930,000
B B3 3,375,000 Crown Paper Co., 11% due 9/01/2005 3,142,969 3,155,625
BB- Ba3 2,000,000 Repap New Brunswick, Inc., 9.875%
due 7/15/2000 2,000,000 2,030,000
B+ B1 3,000,000 Repap Wisconsin Finance, Inc., 9.25%
due 2/01/2002 2,638,750 2,880,000
B B1 5,000,000 Riverwood International Corp., 11.25%
due 6/15/2002 5,409,375 5,362,500
B+ B1 4,000,000 S.D. Warren Co., 12% due 12/15/2004 4,000,000 4,420,000
------------ ------------
21,271,094 21,778,125
Restaurants & CCC+ Caa 6,000,000 Flagstar Corp., 11.375% due 9/15/2003 6,225,000 4,440,000
Food
Services--1.5%
Retail B- Caa 5,000,000 Pamida Holdings Inc., 11.75% due
Specialty-- 3/15/2003 4,978,750 4,000,000
2.6% B- B3 4,000,000 Specialty Retailers, Inc., 11% due
8/15/2003 4,000,000 3,640,000
------------ ------------
8,978,750 7,640,000
Steel--2.8% B1 NR+++ 3,500,000 Gulf States Steel Acquisition Corp.,
13.50% due 4/15/2003 3,424,413 3,080,000
B+ B1 2,750,000 WCI Steel, Inc., 10.50% due 3/01/2002 2,688,125 2,636,563
B B2 2,500,000 ++Weirton Steel Corp., 10.75% due
6/01/2005 2,350,000 2,325,000
------------ ------------
8,462,538 8,041,563
Supermarkets-- B- B3 1,137,396 Grand Union Co., 12% due 9/01/2004 1,151,684 998,065
2.0% Ralph's Grocery Co.:
B B1 1,000,000 10.45% due 6/15/2004 1,001,250 990,000
A A3 4,000,000 11% due 6/15/2005 3,861,250 3,840,000
------------ ------------
6,014,184 5,828,065
</TABLE>
<PAGE>
<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>
Textiles--2.0% NR+++ NR+++ $ 4,000,000 ++Decorative Home Accents, Inc., 13%
due 6/30/2002 $ 3,976,787 $ 3,960,000
B+ B3 2,000,000 Westpoint Stevens Inc., 9.375% due
12/15/2005 1,981,250 2,010,000
------------ ------------
5,958,037 5,970,000
Transportation BB- Ba2 4,000,000 Eletson Holdings, Inc., 9.25% due
Services--3.4% 11/15/2003 4,013,750 3,980,000
B- B3 4,250,000 Transtar Holdings, L.P., 13.375%*
due 12/15/2003 2,644,317 2,805,000
B+ Ba3 3,150,000 Viking Star Shipping Co., Inc.,
9.625% due 7/15/2003 2,919,500 3,236,625
------------ ------------
9,577,567 10,021,625
Utilities--10.0% B+ B1 2,954,000 Beaver Valley Funding Corp., 9%
due 6/01/2017 2,281,160 2,492,378
CTC Mansfield Funding Corp.:
B+ Ba3 2,000,000 10.25% due 3/30/2003 1,855,625 2,027,500
B+ Ba3 3,000,000 11.125% due 9/30/2016 3,213,750 3,130,950
BB- B1 4,000,000 ++Metrogas Inc., 12% due 8/15/2000 3,997,500 3,920,000
BB Ba3 4,329,158 Midland Cogeneration Venture Limited
Partnership, 10.33% due 7/23/2002** 4,242,575 4,545,616
B+ B1 4,000,000 Texas-New Mexico Power Co., 10.75% due
9/15/2003 4,085,000 4,320,000
NR+++ NR+++ 4,000,000 Transportadora de Gas Del Sur S.A.,
7.75% due 12/23/1998 3,544,687 3,660,000
NR+++ NR+++ 5,106,532 ++Tucson Electric & Power Co., 10.21%
due 1/01/2009 4,798,574 5,131,299
------------ ------------
28,018,871 29,227,743
Waste Manage- B B3 4,000,000 Mid-American Waste Systems, Inc.,
ment--1.3% 12.25% due 2/15/2003 4,000,000 3,720,000
Total Investments in
Corporate Bonds--121.0% 360,116,853 353,138,705
Shares Held Common Stock
Supermarkets-- 70,697 Grand Union Co. 4,152,500 530,228
0.2%
Textiles--0.0% 4,000 Decorative Home Accents, Inc. 30,713 40,000
Total Investments in
Common Stock--0.2% 4,183,213 570,228
Preferred Stock & Warrants
<PAGE>
Broadcasting & 95,665 K-III Communications Corp. 2,606,871 2,570,997
Publishing--0.9%
Broadcasting/ 45,725 American Telecasting, Inc. (Warrants)
Cable--0.0% (a) -- 137,175
Energy--0.0% 16,835 Transamerican Refining Corporation
(Warrants)(a) 40,388 58,922
Steel--0.0% 3,500 Gulf States Steel Acquisition Corp.
(Warrants)(a) 38,087 875
Total Investments in Preferred Stock
& Warrants--0.9% 2,685,346 2,767,969
Face Amount Short-Term Securities
Commercial $ 479,000 General Electric Capital Corp., 5.90%
Paper***--0.2% due 12/01/1995 479,000 479,000
Total Investments in Short-Term
Securities--0.2% 479,000 479,000
Total Investments--122.3% $367,464,412 356,955,902
============
Liabilities in Excess of Other
Assets--(22.3%) (65,077,077)
------------
Net Assets--100.0% $291,878,825
============
<PAGE>
<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.
(b)American Depositary Receipts (ADR).
(c)Non-income producing security.
(d)Each $1,000 face amount contains one warrant of Australis Media
Ltd.
(e)Each $1,000 face amount contains one warrant of Cellular
Communications Inc.
(f)Each $1,000 face amount contains six warrants of EchoStar
Communications Corp.
(g)Each $1,000 face amount contains one warrant of SHL Systemhouse
Inc.
+++Not Rated.
++Restricted security as to resale. The value of the Fund's
investment in restricted securities was approximately $52,959,000,
representing 18.1% of net assets.
<CAPTION>
Acquisition Value
Issue Date(s) Cost (Note 1a)
<S> <C> <C> <C>
Acetex Corporation, 9.75% due
10/01/2003 9/22/1995 $ 4,978,150 $ 5,112,500
Cabot Safety, 12.50% due 7/15/2005 6/29/1995 3,000,000 3,135,000
Crain Industries, 13.50% due
8/15/2005 8/22/1995 3,000,000 3,037,500
Day International Corp.,
11.125% due 6/01/2005 5/26/1995-10/02/1995 3,135,250 3,162,000
Decorative Home Accents, Inc.,
13% due 6/30/2002 6/30/1995-9/20/1995 3,976,787 3,960,000
Metrogas Inc., 12%
due 8/15/2000 8/07/1995-9/07/1995 3,997,500 3,920,000
Oleoducts Central S.A.,
9.35% due 9/01/2005 6/21/1995 5,000,000 4,987,500
Polymer Group Inc.,
12.25% due 7/15/2002 6/17/1994-11/16/1994 4,938,750 5,150,000
Samsonite Corp., 11.125%
due 7/15/2005 10/03/1995-10/13/1995 2,175,938 2,115,000
Telecom Argentina STET S.A.,
8.375% due 10/18/2000 3/14/1995-8/02/1995 3,213,050 3,650,000
Tucson Electric & Power Co.,
10.21% due 1/01/2009 6/25/1993-7/28/1993 4,798,574 5,131,299
Walbro Corp., 9.875%
due 7/15/2005 9/25/1995 2,221,500 2,210,625
Walter Industries Inc.,
12.19% due 3/15/2000 10/10/1995 5,075,000 5,062,500
Weirton Steel, Inc., 10.50%
due 6/01/2005 6/30/1995 2,350,000 2,325,000
Total $51,860,499 $52,958,924
=========== ===========
<PAGE>
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of November 30, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$367,464,412)
(Note 1a) $356,955,902
Cash 185
Receivables:
Interest $ 8,584,518
Securities sold 2,032,500 10,617,018
------------
Deferred organization expenses (Note 1e) 52,694
Prepaid expenses and other assets 47,030
------------
Total assets 367,672,829
------------
Liabilities: Loans (Note 5) 73,000,000
Payables:
Securities purchased 1,884,638
Interest on loans (Note 5) 688,412
Investment adviser (Note 2) 148,576
Commitment fees 23,189 2,744,815
------------
Accrued expenses and other liabilities 49,189
------------
Total liabilities 75,794,004
------------
Net Assets: Net assets $291,878,825
============
<PAGE>
Capital: Common Stock, $.10 par value, 200,000,000 shares authorized $ 2,181,983
Paid-in capital in excess of par 305,330,684
Undistributed investment income--net 2,577,784
Accumulated realized capital losses on investments--net (Note 6) (7,703,116)
Unrealized depreciation on investments--net (10,508,510)
------------
Total--Equivalent to $13.38 per share based on 21,819,834
shares of capital stock outstanding (market price $13.50) $291,878,825
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended November 30, 1995
<S> <S> <C>
Investment Income Interest and discount earned $ 18,027,762
(Note 1d): Dividends 137,519
Other 292,500
------------
Total income 18,457,781
------------
<PAGE>
Expenses: Loan interest expense (Note 5) 1,624,348
Investment advisory fees (Note 2) 845,542
Borrowing costs (Note 5) 133,277
Professional fees 57,253
Accounting services (Note 2) 46,322
Transfer agent fees 36,021
Printing and shareholder reports 33,214
Directors' fees and expenses 22,979
Custodian fees 13,669
Amortization of organization expenses (Note 1e) 8,724
Pricing services 3,983
Listing fees 190
Other 21,349
------------
Total expenses 2,846,871
------------
Investment income--net 15,610,910
------------
Realized & Realized gain on investments--net 1,090,294
Unrealized Gain Change in unrealized depreciation on investments--net (488,906)
(Loss) on ------------
Investments Net Increase in Net Assets Resulting from Operations $ 16,212,298
- --Net ============
(Notes 1b,
1d & 3):
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Nov. 30, 1995 May 31, 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 15,610,910 $ 33,990,666
Realized gain (loss) on investments--net 1,090,294 (9,784,578)
Change in unrealized depreciation on investments--net (488,906) 13,263,210
------------ ------------
Net increase in net assets resulting from operations 16,212,298 37,469,298
------------ ------------
Dividends to Investment income--net (15,701,432) (33,990,929)
Shareholders ------------ ------------
(Note 1f): Net decrease in net assets resulting from dividends to
shareholders (15,701,432) (33,990,929)
------------ ------------
<PAGE>
Capital Stock Offering costs resulting from the issuance of Common Stock -- 3,582
Transactions Value of shares issued to Common Stock shareholders in
(Note 4): reinvestment of dividends and distributions 4,082,489 11,066,549
------------ ------------
Net increase in net assets derived from capital stock
transactions 4,082,489 11,070,131
------------ ------------
Net Assets: Total increase in net assets 4,593,355 14,548,500
Beginning of period 287,285,470 272,736,970
------------ ------------
End of period* $291,878,825 $287,285,470
============ ============
<FN>
*Undistributed investment income--net $ 2,577,784 $ 2,668,306
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF CASH FLOWS
<CAPTION>
For the Six Months Ended November 30, 1995
<S> <S> <C>
Cash Provided by Net increase in net assets resulting from operations $ 16,212,298
Operating Adjustments to reconcile net increase (decrease) in net assets
Activities: resulting from operations to net cash provided by operating activities:
Increase in receivables (1,474,608)
Increase in other assets (1,623)
Increase in other liabilities 350,839
Realized and unrealized gain on investments--net (582,457)
Amortization of discount (3,907,625)
------------
Net cash provided by operating activities 10,596,824
------------
Cash Used for Proceeds from sales of long-term investments 108,672,072
Investing Purchases of long-term investments (134,773,372)
Activities: Purchases of short-term investments (202,609,380)
Proceeds from sales and maturities of short-term investments 202,732,000
------------
Net cash used for investing activities (25,978,680)
------------
<PAGE>
Cash Provided by Short-term borrowings--net 27,000,000
Financing Dividends paid to shareholders (11,618,943)
Activities: ------------
Net cash provided by financing activities 15,381,057
------------
Cash: Net increase in cash (799)
Cash at beginning of period 984
------------
Cash at end of period $ 185
============
Cash Flow Cash paid for interest $ 1,213,563
Information: ============
Non-Cash Reinvestment of dividends paid to shareholders $ 4,082,489
Financing ============
Activities:
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
For the
The following per share data and ratios have been For the For the Period
derived from information provided in the financial Six Months Year June 25,
statements. Ended Ended 1993++ to
Nov. 30, May 31, May 31,
Increase (Decrease) in Net Asset Value: 1995++++ 1995++++ 1994
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 13.35 $ 13.21 $ 14.18
Operating -------- -------- --------
Performance: Investment income--net .72 1.62 1.30
Realized and unrealized gain (loss) on
investments--net .04 .14 (1.10)
-------- -------- --------
Total from investment operations .76 1.76 .20
-------- -------- --------
Less dividends from investment income--net (.73) (1.62) (1.17)
-------- -------- --------
Net asset value, end of period $ 13.38 $ 13.35 $ 13.21
======== ======== ========
Market price per share, end of period $ 13.50 $ 13.625 $ 13.875
======== ======== ========
<PAGE>
Total Investment Based on market price per share 4.59%+++ 11.67% .36%+++
Return:** ======== ======== ========
Based on net asset value per share 5.79%+++ 14.92% 1.08%+++
======== ======== ========
Ratios to Average Expenses, excluding interest expense .72%* .69% .68%*
Net Assets: ======== ======== ========
Expenses 1.69%* 2.53% 1.76%*
======== ======== ========
Investment income--net 9.25%* 9.03% 7.55%*
======== ======== ========
Supplemental Net assets, end of period (in thousands) $291,879 $287,285 $272,737
Data: ======== ======== ========
Portfolio turnover 29.96% 45.73% 45.82%
======== ======== ========
<FN>
++Commencement of Operations.
++++Based on average shares outstanding during the period.
+++Aggregate total investment return.
*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.
See Notes to Financial Statements.
</TABLE>
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 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.
<PAGE>
(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. In
certain circumstances, portfolio securities are valued at the last
sale price on the exchange that is the primary market for such
securities, or the last quoted bid price for those securities for
which the over-the-counter market is the primary market or for
listed securities in which there were no sales during the day. The
value of interest rate swaps, caps, and floors is determined in
accordance with a formula and then confirmed periodically by
obtaining a bank quotation. Positions in options are valued at the
last sale price on the market where any such option is principally
traded. Obligations with remaining maturities of sixty days or less
are valued at amortized cost, which approximates market value,
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) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
<PAGE>
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When
an option expires (or the Fund enters into a closing transaction),
the Fund realizes a gain or loss on the option to the extent of the
premiums received or paid (or gain or loss to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
* Interest rate transactions--The Fund is authorized to enter into
interest rate swaps and purchase or sell interest rate caps and
floors. In an interest rate swap, the Fund exchanges with another
party their respective commitments to pay or receive interest on a
specified notional principal amount. The purchase of an interest
rate cap (or floor) entitles the purchaser, to the extent that a
specified index exceeds (or falls below) a predetermined interest
rate, to receive payments of interest equal to the difference
between the index and the predetermined rate on a notional principal
amount from the party selling such interest rate cap (or floor).
(c) 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.
NOTES TO FINANCIAL STATEMENTS (concluded)
(d) 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.
(e) Deferred organization expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(f) 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."), which is the
limited partner.
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, 1995, 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 FAM, PSI, MLPF&S, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended November 30, 1995 were $135,908,010 and
$99,787,503, respectively.
Net realized and unrealized gains (losses) as of November 30, 1995
were as follows:
Realized Unrealized
Gains Losses
Long-term investments $1,090,294 $(10,508,510)
---------- ------------
Total $1,090,294 $(10,508,510)
========== ============
As of November 30, 1995, net unrealized depreciation for financial
reporting and Federal income tax purposes aggregated $10,508,510, of
which $11,710,289 related to appreciated securities and $22,218,799
related to depreciated securities. The aggregate cost of investments
at November 30, 1995 for Federal income tax purposes was
$367,464,412.
<PAGE>
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,
1995, shares issued and outstanding increased by 304,310 to
21,819,834 as a result of dividend reinvestment. At November 30,
1995, total paid-in capital amounted to $307,512,667.
5. Short-Term Borrowings:
On August 15, 1995, 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, 1995, the
maximum amount borrowed was $75,000,000, the average amount borrowed
was $48,841,530 and the daily weighted average interest rate was
6.58%. For the six months ended November 30, 1995, facility and
commitment fees aggregated approximately $133,277.
6. Capital Loss Carryforward:
At May 31, 1995, the Fund had a capital loss carryforward of
approximately $4,386,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
7. Subsequent Event:
On December 1, 1995, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $0.119006 per share, payable on December 18, 1995 to shareholders
of record as of December 11, 1995.
PER SHARE INFORMATION
<TABLE>
Per Share
Selected Quarterly
Financial Data*
<CAPTION>
Net Realized Unrealized Dividends
Investment Gains Gains Net Investment
For the Quarter Income (Losses) (Losses) Income
<S> <C> <C> <C> <C>
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 .38 (.09) (.22) .38
September 1, 1994 to November 30, 1994 .36 (.20) (.60) .36
December 1, 1994 to February 28, 1995 .49 (.04) .50 .50
March 1, 1995 to May 31, 1995 .39 (.13) .92 .38
June 1, 1995 to August 31, 1995 .36 (.03) (.01) .37
September 1, 1995 to November 30, 1995 .36 .09 (.01) .36
<PAGE>
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
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 13.17 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
December 1, 1994 to February 28, 1995 12.55 11.86 13.00 11.375 2,147
March 1, 1995 to May 31, 1995 13.50 12.45 13.875 12.375 2,124
June 1, 1995 to August 31, 1995 13.52 13.19 13.875 13.00 2,191
September 1, 1995 to November 30, 1995 13.59 13.31 13.875 13.25 2,088
<FN>
*Calculations are based upon shares of Common Stock outstanding at
the end of each quarter.
**As reported in the consolidated transaction reporting system.
***In thousands.
</TABLE>
<TABLE>
PORTFOLIO INFORMATION
<CAPTION>
Percent of
Net Assets
<S> <S> <S> <C>
Ten Largest Pan Am Sat L.P. Pan Am Sat operates three communications satellites
Holdings 11.375% 8/01/2003 covering an area that includes 97% of the world's population,
especially Latin America and Asia. Additional satellites are
scheduled for launch in the coming years. 2.6%
USAir Inc. USAir is the sixth largest US airline with major hubs in
11.20% 3/19/2005 Pittsburgh, Charlotte, Philadelphia, and Baltimore. Our
10.375% 3/01/2013 investment is in equipment trust certificates secured by aircraft.
10.33% 6/27/2002 2.2
Videotron Holdings PLC Videotron is a start-up cable TV/telephone company operating
11% 8/15/2005 primarily in London. The company is owned 56% by Le Groupe
11.125% 7/01/2004 Videotron Ltee of Canada and 26% by a partnership between
Bell Canada and Cable and Wireless PLC. 2.0
G-I Holdings This holding company indirectly owns all common stock of GAF
11.38% 10/01/1998 Building Material Corp.and nearly 81% of NYSE-listed International
Specialty Products. These companies are leading manufacturers of
residential roofing materials and specialty chemical products. 2.0
<PAGE>
Showboat, Inc. Showboat owns and operates the Showboat casino/hotels in Las Vegas
13% 8/01/2009 and Atlantic City and is constructing a casino in Sydney, Australia. 1.9
Katz Corporation Katz is the largest broadcast media representation firm in the US.
12.75% 11/15/2002 The company sells and markets national spot advertising air time for
TV and radio stations. 1.9
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. 1.9
Southdown Inc. This company is a leading cement and ready-mixed concrete producer
14% 10/15/2001 with facilities in the Ohio Valley and in the Southwest and
Southeast US. Ready-mix operations are in Florida, Georgia and
Southern California. 1.9
Bally's Park Place, Inc Bally's Park Place is a center boardwalk casino/hotel in Atlantic
9.25% 3/15/2004 City. Our bonds are secured by a first mortgage lien on the property. 1.9
Maxxam Group, Inc. Maxxam is a holding company whose affiliate, Kaiser Aluminum is a
12.25% 8/01/2003 leading producer of aluminum. Kaiser's common stock secures these
bonds. Through subsidiaries, Pacific Lumber and Britt Lumber, Maxxam
is the largest producer of premium-grade redwood lumber in the world. 1.9
</TABLE>
Quality
Ratings
The quality ratings of securities in the Fund as of November 30,
1995 were as follows:
Percent of
Rating Net Assets
A 1%
B 70
BB 30
CCC 6
D 1
NR(Not Rated) 13
OFFICERS AND DIRECTORS
<PAGE>
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
