CORPORATE
HIGH YIELD
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
November 30, 1998
<PAGE>
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.
Portfolio Profile As of November 30, 1998
The quality ratings* of securities in the Fund as of November 30, 1998 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Ratings/Moody's Ratings Long-Term Investments
- --------------------------------------------------------------------------------
BBB/Baa ........................................................... 5.7%
BB/Ba ............................................................. 23.0
B/B ............................................................... 63.6
CCC/Caa ........................................................... 4.3
CC/Ca and Lower ................................................... 0.0
NR(Not Rated) ..................................................... 3.4
- --------------------------------------------------------------------------------
* In cases where bonds are rated differently by Standard & Poor's Corp. and
Moody's Investors Service, Inc., bonds are categorized according to the
higher of the two ratings.
Percent of Total
Foreign Holdings Long-Term Investments
- --------------------------------------------------------------------------------
Total Foreign Holdings ............................................ 31.3%
Emerging Market Holdings .......................................... 12.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Percent of Total
Five Largest Foreign Countries* Long-Term Investments
- --------------------------------------------------------------------------------
Canada ............................................................ 8.7%
United Kingdom .................................................... 5.2
Argentina ......................................................... 3.3
Mexico ............................................................ 2.8
Colombia .......................................................... 2.7
- --------------------------------------------------------------------------------
* All holdings are denominated in US dollars.
<PAGE>
Corporate High Yield Fund, Inc., November 30, 1998
DEAR SHAREHOLDER
High-Yield Market Overview
The high-yield market experienced market extremes during the six months ended
November 30, 1998. The market ranged from overvalued as the period began, to
oversold during the dramatic revaluation of financial markets in the early fall,
and ended the period with a sharp recovery in the month of November. Investor
concerns about companies' ability to sustain earnings growth in the face of weak
overseas markets contributed to a sell-off that began in August and led to
unprecedented illiquidity in the high-yield market and to yield spreads relative
to Treasury securities that have not been seen in the high-yield market since
1990. The unmanaged CS First Boston Index returned -6.79% for the month of
August. Despite a strong rebound total return of +5.07% in November, the Index
returned -3.15% for the six months ended November 30, 1998. The Index includes
about 7% emerging markets bonds, which were especially hard hit. The yield
spread between ten-year Treasury securities and the high-yield market, as
measured by the CS First Boston High Yield Index, widened to 760 basis points
(7.60%) in mid-October from 371 basis points on February 28, 1998 and ended
November at 624 basis points.
Viewing the high-yield market from a yield spread perspective highlights the
good value we continue to see in the market over the long term, though
volatility resulting from ongoing earnings concerns and supply/demand imbalances
may hurt performance in the months ahead. The yield spread is the incremental
yield demanded by investors for the additional credit risk they take on by
investing in the high-yield market rather than in US Government obligations. The
average monthly yield spread between high-yield issues as measured by the CS
First Boston High Yield Index from 1986 to 1997 is 517 basis points compared to
624 basis points at November 30, 1998. This historical period includes 1990 and
1991, two years that experienced the unwinding of considerable speculative
excess in the market, the fall of the dominant high-yield dealer Drexel Burnham
Lambert, and the savings and loan crisis.
In our opinion, the high-yield market continues to offer a measure of
diversification to investors, as well as a reasonable risk/reward profile. The
high-yield market acts as a hybrid market, since it has characteristics of both
the fixed-income and equity markets, although it does not track either exactly.
The performance of the high-yield market has been more closely tied to the
Treasury market in a benign economic environment. On the other hand, when
corporate earnings concerns dominate, as was the case in early fall, the
performance of the high-yield market has more closely followed that of the
equity markets. On a historic basis, high-yield issues have tended to deliver
their returns with about half the volatility of stocks and about the same
volatility as Treasury securities.
Fund Performance
For the six months ended November 30, 1998, the total investment return on the
Fund's Common Stock was -5.50%, based on a change in the per share net asset
value from $13.95 to $12.46, and assuming reinvestment of $0.712 per share
income dividends. During the same period, the net annualized yield of the Fund's
Common Stock was 11.58%. The Fund's performance for the period reflects downward
pressure in emerging market issues, weakness in the high-yield market as a whole
and earnings weakness in specific credits generally related to international
economic upheaval. Weak performance was magnified during the period by leverage.
Leverage Strategy
The Fund was on average 23% leveraged during the six-month period ended November
30, 1998. This means that we borrowed the equivalent of 23% of total assets
invested, earning incremental yield on the investments we made with the borrowed
funds. We expect to maintain leverage in the coming months as market conditions
permit. On November 30, 1998, the Fund was 24.3% leveraged, having borrowed
$94.9 million at a borrowing cost of 5.875%. (For a complete explanation of the
benefits and risks of leveraging, see page 1 of this report to shareholders.)
Investment Strategy
Communications and media remained our largest broad sector category, at
approximately 33% of total long-term investments. Of the narrowly classified
industry groups, the largest allocations were: paper & forest products, 7.4% of
total long-term investments; media & communications--international, 6.5%;
telephony/competitive local exchange carriers, 6.3%; health services, 6.2%; and
transportation, 5.9%. Dollar-denominated non-US bonds totaled about 31% of the
portfolio, with emerging market holdings accounting for 12% of total long-term
investments. (See the foreign holdings table on page 1 of this report for the
distribution of non-US, dollar-denominated investments in the portfolio.) At
November 30, 1998, the average maturity for the portfolio was 6 years, 8 months.
We continue to search for value in the markets, discarding issues that we
believe have limited upside potential and adding to positions in companies that
we believe have solid fundamental characteristics.
In Conclusion
We thank you for your investment in Corporate High Yield Fund, Inc., and we look
forward to assisting you with your financial needs in the months and years
ahead.
Sincerely,
/s/ Arthur Zeikel
Arthur Zeikel
President
/s/ Vincent T. Lathbury III
Vincent T. Lathbury III
Senior Vice President and
Portfolio Manager
/s/ Elizabeth M. Phillips
Elizabeth M. Phillips
Vice President and Portfolio Manager
January 6, 1999
PROXY RESULTS
During the six-month period ended November 30, 1998, Corporate High Yield Fund,
Inc. stockholders voted on the following proposals. The proposals were approved
at the stockholders' meeting on September 14, 1998. The description of each
proposal and number of shares voted are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. To elect the Fund's Board of Directors: Joe Grills 22,645,095 581,344
Walter Mintz 22,645,292 581,147
Robert S. Salomon Jr 22,652,412 574,027
Melvin R. Seiden 22,650,894 575,545
Stephen B. Swensrud 22,653,493 572,946
Arthur Zeikel 22,642,021 584,417
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<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 Fund's
independent auditors for the current fiscal year. 22,677,319 179,236 369,883
- --------------------------------------------------------------------------------------------------------------
</TABLE>
2 & 3
<PAGE>
Corporate High Yield Fund, Inc., November 30, 1998
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
S&P Moody's Face Value
INDUSTRIES Ratings Ratings Amount Corporate Bonds Cost (Note 1a)
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Aerospace & L-3 Communications Corp.:
Defense--1.7% B B2 $1,850,000 10.375% due 5/01/2007 $ 1,850,000 $ 2,044,250
B B2 3,000,000 8.50% due 5/15/2008 2,997,900 3,082,500
------------ ------------
4,847,900 5,126,750
==================================================================================================================================
Airlines--1.1% USAir Inc.:
B+ B1 2,355,777 11.20% due 3/19/2005** 2,073,084 2,687,353
BB Ba2 500,000 10.375% due 3/01/2013 477,500 564,470
------------ ------------
2,550,584 3,251,823
==================================================================================================================================
Automotive--2.1% B+ B3 3,000,000 Breed Technologies, Inc., 9.25% due 4/15/2008(e) 3,000,000 2,490,000
B B2 1,875,000 Collins & Aikman Corp., 11.50% due 4/15/2006 1,875,000 1,950,000
B+ B2 1,875,000 Venture Holdings Trust, 9.50% due 7/01/2005 1,815,367 1,846,875
------------ ------------
6,690,367 6,286,875
==================================================================================================================================
Broadcasting/Radio B NR+ 2,000,000 Chancellor Media Corp., 9% due 10/01/2008(e) 2,000,000 2,120,000
& Television--4.0% CCC+ B3 2,000,000 Cumulus Media, Inc., 10.375% due 7/01/2008 2,000,000 2,140,000
BB- Ba2 3,750,000 EZ Communications, Inc., 9.75% due 12/01/2005 3,796,875 4,087,500
B B2 1,500,000 Sinclair Broadcast Group Inc., 10% due 9/30/2005 1,483,125 1,571,250
B B2 1,875,000 Young Broadcasting Corporation, 11.75% due
11/15/2004 2,085,938 1,987,500
------------ ------------
11,365,938 11,906,250
==================================================================================================================================
Cable--4.8% BB+ Ba2 2,250,000 CSC Holdings Inc., 7.625% due 7/15/2018 2,247,772 2,254,140
B- B2 3,750,000 Echostar Communications Corp., 10.923%* due
6/01/2004 3,623,293 3,768,750
B B2 3,000,000 Intermedia Capital Partners L.P., 11.25% due
8/01/2006 3,011,250 3,390,000
BB- B2 3,750,000 Lenfest Communications, Inc., 10.50% due
6/15/2006 3,803,438 4,246,875
CCC+ Ca 5,747,000 Wireless One Inc., 13.50%* due 8/01/2006(g) 3,953,090 459,760
------------ ------------
16,638,843 14,119,525
==================================================================================================================================
Cable-- Australis Media Ltd.(b)(c):
International--3.4% D C 118,416 1.75%/15.75% due 5/15/2003 65,146 1,184
NR+ NR+ 6,922,000 1.75%/15.75% due 5/15/2003(d) 4,874,096 86,525
Diamond Cable Communications PLC*:
B- Caa1 1,500,000 11.055% due 9/30/2004 1,441,021 1,440,000
B- Caa1 2,625,000 10.772% due 12/15/2005 2,154,802 2,191,875
B- Caa1 900,000 11.387% due 2/15/2007 616,030 639,000
B- B3 3,500,000 International Cabletel, Inc., Series B, 11.643%*
due 2/01/2006 2,723,985 2,765,000
B- B3 1,500,000 NTL, Inc., 10% due 2/15/2007 1,500,938 1,567,500
B+ B1 1,500,000 TeleWest Communications PLC, 10.509%* due
10/01/2007 1,266,679 1,260,000
------------ ------------
14,642,697 9,951,084
==================================================================================================================================
Chemicals--2.2% B+ B2 3,750,000 Huntsman Corporation, 9.50% due 7/01/2007(e) 3,671,250 3,750,000
B+ B2 2,750,000 Octel Developments PLC, 10% due 5/01/2006 2,750,000 2,860,000
------------ ------------
6,421,250 6,610,000
==================================================================================================================================
Computer Services-- B Ba3 3,750,000 Advanced Micro Devices, Inc., 11% due 8/01/2003 3,879,375 4,003,125
Electronics--5.3% B- B2 2,250,000 Amphenol Corporation, 9.875% due 5/15/2007 2,250,000 2,295,000
B+ B1 1,298,000 Celestica International Inc., 10.50% due
12/31/2006 1,298,000 1,418,065
B- B3 2,500,000 MCMS Inc., 9.75% due 3/01/2008 2,500,000 2,012,500
CCC NR+ 3,500,000 Splitrock Services Inc., 11.75% due 7/15/2008 3,500,000 3,150,000
B- B2 3,500,000 Zilog, Inc., 9.50% due 3/01/2005 3,269,375 2,660,000
------------ ------------
16,696,750 15,538,690
==================================================================================================================================
Conglomerates-- BBB Baa1 3,000,000 Cendant Corp., 7.75% due 12/01/2003 2,994,840 2,994,840
2.7% Sequa Corp.:
BB Ba2 2,000,000 9.625% due 10/15/1999 2,055,000 2,060,000
B+ B1 3,000,000 9.375% due 12/15/2003 2,941,250 3,060,000
------------ ------------
7,991,090 8,114,840
==================================================================================================================================
Consumer Products-- B- B2 3,000,000 Chattem, Inc., Series B, 12.75% due 6/15/2004 3,389,063 3,360,000
3.6% B B3 1,500,000 Corning Consumer Products, Series B, 9.625% due
5/01/2008 1,435,000 1,027,500
B- B2 3,750,000 Home Interiors & Gifts, 10.125% due 6/01/2008(e) 3,750,000 3,675,000
B- B3 3,175,000 Syratech Corp., 11% due 4/15/2007 2,621,000 2,540,000
------------ ------------
11,195,063 10,602,500
==================================================================================================================================
Diversified--1.9% B- B3 3,750,000 Foamex LP/Foamex Capital Corp. LP, 13.50% due
8/15/2005 4,275,000 4,125,000
B- B2 1,500,000 Koppers Industries, Inc., 9.875% due 12/01/2007 1,500,000 1,440,000
------------ ------------
5,775,000 5,565,000
==================================================================================================================================
Energy--4.1% B B1 1,750,000 Chesapeake Energy Corp., Series B, 9.625% due
5/01/2005 1,710,625 1,592,500
B B1 3,000,000 KCS Energy Inc., Series B, 11% due 1/15/2003 3,088,125 2,820,000
BBB- Baa3 4,531,250 Oleoducto Centrale S.A., 9.35% due
9/01/2005**(e) 4,531,250 3,919,531
NR+ B3 10,450,000 TransAmerican Energy Corp., 13.163%* due
6/15/2002 9,705,673 3,657,500
------------ ------------
19,035,673 11,989,531
==================================================================================================================================
Entertainment--1.4% B- B3 3,750,000 Six Flags Theme Parks Inc., 9.937%* due
6/15/2005 4,166,482 4,143,750
==================================================================================================================================
Financial Services-- CCC+ B2 4,500,000 AMRESCO, Inc., Series 98-A, 9.875% due 3/15/2005 4,518,750 3,195,000
1.8% BB+ Ba2 1,620,000 Reliance Group Holdings, Inc., 9.75% due
11/15/2003 1,619,725 1,676,327
BB NR+ 487,000 Veritas Holdings GMBH, 9.625% due 12/15/2003 491,261 500,393
------------ ------------
6,629,736 5,371,720
==================================================================================================================================
Food & Beverage-- B+ Ba3 750,000 COTT Corp., 9.375% due 7/01/2005 772,500 720,000
1.1% B- B3 3,000,000 Favorite Brands International Inc., 10.75% due
5/15/2006(e) 2,713,750 2,415,000
------------ ------------
3,486,250 3,135,000
==================================================================================================================================
Foreign Government BB- B2 2,000,000 Republic of Brazil, Global Bonds, 10.125% due
Obligations--0.5% 5/15/2027 1,799,180 1,507,500
==================================================================================================================================
Furniture--1.1% B B1 3,000,000 Lifestyle Furnishings, Inc., 10.875% due
8/01/2006 3,378,750 3,217,500
==================================================================================================================================
</TABLE>
4 & 5
<PAGE>
Corporate High Yield Fund, Inc., November 30, 1998
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
S&P Moody's Face Value
INDUSTRIES Ratings Ratings Amount Corporate Bonds Cost (Note 1a)
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Gaming--5.9% B+ B2 $ 6,000,000 Greate Bay Property Funding Corp., 10.875% due
1/15/2004(c) $ 5,930,000 $ 3,660,000
B+ B2 2,250,000 Hollywood Casino Corp., 12.75% due 11/01/2003 2,428,125 2,362,500
Jazz Casino Co. LLC:
NR+ NR+ 210,000 New Contingent Notes, due 11/15/2009(h) 0 0
NR+ NR+ 2,155,000 5.867% due 11/15/2009++ 1,026,900 969,750
B+ B2 2,250,000 Station Casinos Inc., 9.75% due 4/15/2007 2,104,284 2,379,375
BB- B1 5,000,000 Trump Atlantic City Associates/Funding Inc.,
11.25% due 5/01/2006 5,000,000 4,675,000
Venetian Casino Resorts LLC:
B- B3 750,000 12.25% due 11/15/2004 762,188 716,250
CCC+ Caa1 3,000,000 10% due 11/15/2005 2,892,492 2,670,000
------------ ------------
20,143,989 17,432,875
==================================================================================================================================
Health Services-- B- B3 4,750,000 ALARIS Medical Systems, Inc., 9.75% due
8.0% 12/01/2006 4,716,250 4,773,750
BBB Ba2 2,250,000 Columbia HCA/Healthcare Corp., 7.15% due
3/30/2004 2,160,000 2,198,160
B- B2 2,250,000 Extendicare Health Services, 9.35% due
12/15/2007 2,205,000 2,137,500
B+ Ba3 2,050,000 Fresenius Medical Capital Trust II, 7.875% due
2/01/2008 2,054,750 2,029,500
B+ Ba3 950,000 Fresenius Medical Care AG, 9% due 12/01/2006 995,125 992,750
B- B3 4,000,000 Kinetic Concepts, Inc., 9.625% due 11/01/2007 4,032,500 3,830,000
B- B3 3,375,000 Magellan Health Services, 9% due 2/15/2008 3,343,594 3,172,500
B- B3 1,500,000 Mariner Post--Acute Network, 9.50% due
11/01/2007 1,493,310 1,215,000
B+ B2 3,000,000 Quest Diagnostic Inc., 10.75% due 12/15/2006 3,000,000 3,210,000
------------ ------------
24,000,529 23,559,160
==================================================================================================================================
Independent Power B+ Ba1 2,250,000 AES Corporation, 8.50% due 11/01/2007 2,245,500 2,244,375
Producers--2.7% BB- Ba2 1,500,000 Calpine Corporation, 8.75% due 7/15/2007 1,494,529 1,530,000
Midland Cogeneration Venture Limited
Partnership**:
BB Ba3 2,732,274 10.33% due 7/23/2002 2,677,628 2,865,636
B B2 1,000,000 13.25% due 7/23/2006 1,263,750 1,276,940
------------ ------------
7,681,407 7,916,951
==================================================================================================================================
Industrial--Services-- B B3 3,000,000 Neff Corporation, 10.25% due 6/01/2008 3,000,000 3,000,000
1.0%
==================================================================================================================================
Media & BB- Ba3 3,000,000 Antenna TV S.A., 9% due 8/01/2007 2,912,552 2,550,000
Communications-- Call-Net Enterprises, Inc.*:
International-- BB- B1 3,750,000 10.927% due 12/01/2004 3,445,989 3,637,500
8.3% BB- B1 3,500,000 9.27% due 8/15/2007 2,500,966 2,327,500
BB- B1 3,250,000 Comtel Brasileira Ltd., 10.75% due 9/26/2004(e) 3,212,500 2,827,500
BB- B2 2,250,000 Globo Communicacoes e Participacoes, Ltd.,
10.50% due 12/20/2006(e) 2,244,428 1,687,500
BB Ba2 3,750,000 Grupo Televisa, S.A., 11.375% due 5/15/2003 3,750,000 3,843,750
B- B3 3,000,000 Satelites Mexicanos S.A., 10.125% due
11/01/2004(e) 3,000,000 2,467,500
BBB- Ba3 5,000,000 Telefonica de Argentina S.A., 11.875% due
11/01/2004 4,900,400 5,375,000
------------ ------------
25,966,835 24,716,250
==================================================================================================================================
Metals & Mining-- B- B3 3,750,000 Great Lakes Carbon Corp., Series B, 11.75% due
2.7% 5/15/2008++ 3,750,000 3,787,500
CCC+ B2 4,200,000 Kaiser Aluminum & Chemical Corp., 12.75% due
2/01/2003 4,389,000 4,158,000
------------ ------------
8,139,000 7,945,500
==================================================================================================================================
Packaging--2.6% B- B3 4,750,000 Indesco International Inc., 9.75% due 4/15/2008 4,717,188 4,429,375
B+ Ba3 3,750,000 Vicap S.A., 11.375% due 5/15/2007 3,730,125 3,356,250
------------ ------------
8,447,313 7,785,625
==================================================================================================================================
Paper & Forest B B3 4,500,000 Ainsworth Lumber Company, 12.50% due 7/15/2007++ 4,272,873 4,488,750
Products--9.5% B B2 3,000,000 Bear Island LLC, Series B, 10% due 12/01/2007 3,000,000 2,985,000
B- B2 4,000,000 Container Corporation of America, 9.75% due
4/01/2003 4,080,000 4,080,000
B+ B1 3,125,000 Doman Industries Ltd., 8.75% due 3/15/2004 2,885,000 2,625,000
BB Ba3 4,750,000 Malette Inc., 12.25% due 7/15/2004 5,184,900 5,130,000
P.T. Pabrik Kertas Tjiwa Kimia:
CCC+ B2 1,500,000 13.25% due 8/01/2001 1,665,000 1,110,000
BB Caa1 3,000,000 10% due 8/01/2004 2,983,650 1,875,000
B+ B1 4,000,000 S.D. Warren Co., 12% due 12/15/2004 4,000,000 4,320,000
B+ B1 1,500,000 US Timberlands Klamath Falls, 9.625% due
11/15/2007 1,500,000 1,500,000
------------ ------------
29,571,423 28,113,750
==================================================================================================================================
Product Distribution-- B- B3 3,000,000 AmeriServ Food Company, 10.125% due 7/15/2007 3,000,000 2,670,000
3.8% B B2 2,750,000 CEX Holdings Inc., 9.625% due 6/01/2008(e) 2,750,000 2,516,250
Fisher Scientific International Inc.:
B- B3 2,250,000 9% due 2/01/2008 2,250,000 2,250,000
B- B3 1,500,000 9% due 2/01/2008(e) 1,447,598 1,500,000
B- B3 2,500,000 Nebraska Book Company, 8.75% due 2/15/2008 2,500,000 2,368,750
------------ ------------
11,947,598 11,305,000
==================================================================================================================================
Publishing & BB+ Ba3 1,500,000 Hollinger International, Inc., 8.625% due
Printing--2.1% 3/15/2005 1,492,500 1,582,500
MDC Communications Corp.:
B B3 3,000,000 10.50% due 12/01/2006 2,981,250 3,045,000
B B3 1,500,000 10.50% due 12/01/2006(e) 1,470,225 1,500,000
------------ ------------
5,943,975 6,127,500
==================================================================================================================================
Real Estate--1.7% BB- Ba3 5,000,000 Forest City Enterprises Inc., 8.50% due
3/15/2008 5,005,000 5,025,000
==================================================================================================================================
Specialty Retailing-- B+ B1 3,000,000 NBTY, Inc., 8.625% due 9/15/2007 2,975,250 2,955,000
1.0%
==================================================================================================================================
Steel--0.6% NR+ B2 2,250,000 CSN Iron S.A., 9.125% due 6/01/2007(e) 1,826,250 1,687,500
==================================================================================================================================
Telephony/Competitive B- Caa1 2,750,000 Espirit Telecom Group PLC, 10.875% due 6/15/2008 2,807,813 2,667,500
Local Exchange B+ B2 3,000,000 GCI Inc., 9.75% due 8/01/2007 3,000,000 2,910,000
Carriers--7.5% Intermedia Communications Inc.:
B B2 1,500,000 10.503%* due 7/15/2007 1,054,158 1,057,500
B B2 1,000,000 8.60% due 6/01/2008 1,000,000 972,500
B B3 1,750,000 Level 3 Communications Corp., 9.125% due
5/01/2008 1,742,633 1,752,188
Metronet Communications:
B B3 4,500,000 9.95%* due 6/15/2008 2,895,390 2,790,000
B B3 1,500,000 10.625% due 11/01/2008(e) 1,500,000 1,605,000
</TABLE>
6 & 7
<PAGE>
Corporate High Yield Fund, Inc., November 30, 1998
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
S&P Moody's Face Value
INDUSTRIES Ratings Ratings Amount Corporate Bonds Cost (Note 1a)
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Telephony/Competitive Nextlink Communications Inc.:
Local Exchange B B3 $ 3,750,000 12.50% due 4/15/2006 $ 3,750,000 $ 4,125,000
Carriers B B3 1,500,000 9% due 3/15/2008 1,496,970 1,440,000
(concluded) RSL Communications PLC:
B- B3 500,000 10.502%* due 3/01/2008 319,381 283,750
B- B3 1,650,000 12% due 11/01/2008(e) 1,559,334 1,732,500
B- B2 700,000 Time Warner Telecom LLC, 9.75% due 7/15/2008 700,000 738,500
------------ ------------
21,825,679 22,074,438
==================================================================================================================================
Textiles--1.0% B B2 3,000,000 Polymer Group, Inc., 8.75% due 3/01/2008 3,000,000 2,947,500
==================================================================================================================================
Transportation--7.5% B B2 3,000,000 Alpha Shipping PLC, 9.50% due 2/15/2008 2,982,840 1,620,000
B+ B1 2,750,000 American Reefer Co. Ltd., 10.25% due 3/01/2008 2,750,000 2,062,500
BB- NR+ 3,750,000 Autopistas del Sol S.A., 10.25% due 8/01/2009(e) 3,675,000 2,746,875
BB- Ba2 4,000,000 Eletson Holdings, Inc., 9.25% due 11/15/2003 4,013,750 3,800,000
BB- B1 3,750,000 Sea Containers Ltd., 12.50% due 12/01/2004 4,106,250 4,050,000
B+ B2 3,000,000 TFM, S.A. de C.V., 11.974%* due 6/15/2009 1,970,157 1,560,000
B- B3 4,250,000 Transtar Holdings L.P., 12.625%* due 12/15/2003 3,753,008 4,058,750
B- Caa1 4,450,000 Trism Inc., 10.75% due 12/15/2000 4,238,625 2,269,500
------------ ------------
27,489,630 22,167,625
==================================================================================================================================
Utilities--4.4% BB+ Baa3 3,000,000 Empresa Elec del Norte, 10.50% due 6/15/2005(e) 3,000,000 2,190,000
BBB- Ba3 4,750,000 Metrogas S.A., 12% due 8/15/2000 4,803,281 4,880,625
NR+ NR+ 5,106,532 Tucson Electric & Power Co., 10.21% due
1/01/2009(f)** 4,798,574 5,846,060
------------ ------------
12,601,855 12,916,685
==================================================================================================================================
Waste Management-- D Ca 4,000,000 Mid-American Waste Systems, Inc., 12.25% due
0.0% 2/15/2003(c) 1,395,350 120,000
==================================================================================================================================
Wireless CCC+ B2 3,000,000 Cencall Communications Corporation, 13.935%* due
Communications-- 1/15/2004 2,481,474 2,977,500
Domestic Paging & Nextel Communications Inc.*:
Cellular--4.1% CCC+ B2 4,600,000 12.819% due 8/15/2004 3,891,644 4,508,000
CCC+ B2 2,250,000 9.505% due 10/31/2007 1,576,318 1,417,500
B- B3 3,000,000 Western Wireless Corp., 10.50% due 2/01/2007 2,987,813 3,210,000
------------ ------------
10,937,249 12,113,000
==================================================================================================================================
Wireless B- NR+ 3,000,000 Celcaribe S.A., 11.318%* due 3/15/2004 3,171,164 2,880,000
Communications-- B+ B3 6,208,000 Comunicacion Celular S.A., 13.154%* due
International Paging 11/15/2003 4,816,645 4,050,720
& Cellular--6.4% CCC+ Caa1 3,750,000 McCaw International Ltd., 11.757%* due 4/15/2007 2,618,267 2,062,500
B- B3 4,500,000 Millicom International Cellular S.A., 13.803%*
due 6/01/2006 3,178,407 3,161,250
B+ Ba3 3,500,000 Orange PLC, 8% due 8/01/2008 3,473,330 3,552,500
CCC+ Caa1 7,000,000 Telesystem International Wireless Inc.,
Series B, 17.337%* due 6/30/2007 3,482,274 3,150,000
------------ ------------
20,740,087 18,856,970
==================================================================================================================================
Total Investments in Corporate Bonds--123.6% 395,949,972 365,204,667
==================================================================================================================================
<CAPTION>
Shares
Held Common Stocks
==================================================================================================================================
<S> <C> <C> <C> <C>
Energy--1.4% 321,384 CHI Energy, Inc.(c) 5,096,857 4,177,992
==================================================================================================================================
Entertainment--0.5% 191,749 On Command Corporation(c) 5,573,706 1,533,992
==================================================================================================================================
Gaming--0.1% 60,892 JCC Holding Co.(c) 243,568 243,568
==================================================================================================================================
Wireless 10,611 Nextel Communications Inc. (Class A)(c) 171,223 228,137
Communications--
Domestic Paging &
Cellular--0.1%
==================================================================================================================================
Total Investments in Common Stocks--2.1% 11,085,354 6,183,689
==================================================================================================================================
<CAPTION>
Preferred Stocks & Warrants
==================================================================================================================================
<S> <C> <C> <C> <C>
Broadcasting/Radio 3,103 Cumulus Media, Inc., Series A++ 3,099,910 3,320,210
& Television--1.1%
==================================================================================================================================
Cable--0.0% 45,725 American Telecasting, Inc. (Warrants)(a) 0 457
5,747 Wireless One, Inc. (Warrants)(a) 121,377 57
------------ ------------
121,377 514
==================================================================================================================================
Entertainment--0.1% 61,014 On Command Corporation (Warrants)(a) 488,120 175,415
==================================================================================================================================
Supermarkets--0.0% 3,745 Grand Union Co. (Warrants)(a) 37 10,299
==================================================================================================================================
Telephony/Competitive 1,847 Intermedia Communications Inc. (Series B)
Local Exchange (Convertible)++ 1,893,770 1,902,410
Carriers--0.6%
==================================================================================================================================
Wireless 875 Nextel Communications Inc. (Series D)++ 886,365 905,625
Communications--
Domestic Paging &
Cellular--0.3%
==================================================================================================================================
Wireless 3,750 Cellular Communications International Inc.
Communications-- (Warrants)(a) 90,489 58,875
International Paging & 6,208 Comunicacion Celular S.A. (Warrants)(a)(e) 6,782 1,940
Cellular--0.0% ------------ ------------
97,271 60,815
==================================================================================================================================
Total Investments in Preferred Stocks &
Warrants--2.1% 6,586,850 6,375,288
==================================================================================================================================
</TABLE>
8 & 9
<PAGE>
Corporate High Yield Fund, Inc., November 30, 1998
SCHEDULE OF INVESTMENTS (concluded)
<TABLE>
<CAPTION>
Face Value
Amount Short-Term Securities Cost (Note 1a)
==================================================================================================================================
<S> <C> <C> <C> <C>
Commercial $ 259,000 Ford Motor Credit Company, 5.51% due 12/01/1998 $ 259,000 $ 259,000
Paper***--0.1%
==================================================================================================================================
Total Investments in Short-Term Securities--0.1% 259,000 259,000
==================================================================================================================================
Total Investments--127.9% $413,881,176 378,022,644
============
Liabilities in Excess of Other Assets--(27.9%) (82,523,695)
------------
Net Assets--100.0% $295,498,949
============
==================================================================================================================================
</TABLE>
* Represents a zero coupon or step bond; the interest rate shown is
the effective yield at the time of purchase by the Fund.
** Subject to principal paydowns.
*** Commercial Paper is traded on a discount basis; the interest rate
shown reflects the discount rates paid at the time of purchase by
the Fund.
+ Not Rated.
++ Represents a pay-in-kind security which may pay interest/dividends
in additional face amount/shares.
(a) Warrants entitle the Fund to purchase a predetermined number of
shares of Common Stock and are non-income producing. The purchase
price and number of shares are subject to adjustment under certain
conditions until the expiration date.
(b) Represents a step bond. Coupon payments are paid-in-kind, in which
the Fund receives additional face amount at an annual rate of 1.75%
until May 15, 2000. Subsequently, the Fund will receive cash coupon
payments at an annual rate of 15.75% until maturity.
(c) Non-income producing security.
(d) Each $1,000 face amount contains one warrant of Australis Media Ltd.
(e) The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(f) Restricted securities as to resale. The value of the Fund's
investment in restricted securities was approximately $5,846,000,
representing 2.0% of net assets.
--------------------------------------------------------------------
Acquisition Value
Issue Dates Cost (Note 1a)
--------------------------------------------------------------------
Tucson Electric & Power Co., 6/25/1993-
10.21% due 1/01/2009 7/28/1993 $4,798,574 $5,846,060
--------------------------------------------------------------------
Total $4,798,574 $5,846,060
========== ==========
--------------------------------------------------------------------
(g) Each $1,000 face amount contains one warrant of Wireless One, Inc.
(h) Represents an obligation by Jazz Casino Co. LLC to pay a semi-annual
amount to the Fund through 11/15/2009. The payments are based upon
varying interest rates and the amounts, which may be paid-in-kind,
are contingent upon the earnings before income taxes, depreciation
and amortization of Jazz Casino Co. LLC on a fiscal year basis.
See Notes to Financial Statements.
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
As of November 30, 1998
=====================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$413,881,176) (Note 1a) ...... $ 378,022,644
Cash ................................................................. 481
Receivables:
Interest ........................................................... $ 9,270,850
Securities sold .................................................... 3,535,323 12,806,173
-----------
Prepaid expenses and other assets .................................... 148,418
-------------
Total assets ......................................................... 390,977,716
-------------
=====================================================================================================================
Liabilities: Loans (Note 5) ....................................................... 94,900,000
Payables:
Interest on loans (Note 5) ......................................... 417,741
Investment adviser (Note 2) ........................................ 150,584
Commitment fees .................................................... 10,403
Dividends to shareholders (Note 1e) ................................ 39 578,767
----------- -------------
Total liabilities .................................................... 95,478,767
-------------
=====================================================================================================================
Net Assets: Net assets ........................................................... $ 295,498,949
=============
=====================================================================================================================
Capital: Common Stock, $.10 par value, 200,000,000 shares authorized .......... $ 2,372,052
Paid-in capital in excess of par ..................................... 331,221,670
Undistributed investment income--net ................................. 3,889,672
Accumulated realized capital losses on investments--net .............. (6,125,913)
Unrealized depreciation on investments--net .......................... (35,858,532)
-------------
Total--Equivalent to $12.46 per share based on 23,720,525 shares of
capital stock outstanding (market price $13.25) ...................... $ 295,498,949
=============
=====================================================================================================================
</TABLE>
See Notes to Financial Statements.
10 & 11
<PAGE>
Corporate High Yield Fund, Inc., November 30, 1998
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended November 30, 1998
================================================================================================================================
<S> <C>
Investment Income Interest and discount earned ......................................... $ 20,502,692
(Note 1d): Dividends ............................................................ 461,829
Other ................................................................ 77,680
------------
Total income ......................................................... 21,042,201
------------
================================================================================================================================
Expenses: Loan interest expense (Note 5) ....................................... $ 2,686,843
Investment advisory fees (Note 2) .................................... 985,894
Borrowing costs (Note 5) ............................................. 114,251
Accounting services (Note 2) ......................................... 38,372
Professional fees .................................................... 35,137
Transfer agent fees .................................................. 30,771
Printing and shareholder reports ..................................... 20,435
Directors' fees and expenses ......................................... 18,617
Custodian fees ....................................................... 12,951
Pricing services ..................................................... 5,245
Other ................................................................ 21,118
------------
Total expenses ....................................................... 3,969,634
------------
Investment income--net ............................................... 17,072,567
------------
================================================================================================================================
Realized & Unrealized Realized loss on investments--net .................................... (8,460,922)
Loss on Investments-- Change in unrealized depreciation on investments--net ................ (26,888,983)
Net (Notes 1b, 1d & 3): ------------
Net Decrease in Net Assets Resulting from Operations ................. $(18,277,338)
============
================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Nov. 30, 1998 May 31, 1998
================================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ............................................... $ 17,072,567 $ 32,679,569
Realized gain (loss) on investments--net ............................. (8,460,922) 9,402,781
Change in unrealized depreciation on investments--net ................ (26,888,983) (4,365,077)
------------ ------------
Net increase (decrease) in net assets resulting from operations ...... (18,277,338) 37,717,273
------------ ------------
================================================================================================================================
Dividends to Investment income--net ............................................... (16,773,168) (33,072,339)
Shareholders ------------ ------------
(Note 1e): Net decrease in net assets resulting from dividends to shareholders .. (16,773,168) (33,072,339)
------------ ------------
================================================================================================================================
Capital Stock Value of shares issued to Common Stock shareholders in
Transactions (Note 4): reinvestment of dividends ............................................ 3,620,921 9,374,343
------------ ------------
================================================================================================================================
Net Assets: Total increase (decrease) in net assets .............................. (31,429,585) 14,019,277
Beginning of period .................................................. 326,928,534 312,909,257
------------ ------------
End of period* ....................................................... $295,498,949 $326,928,534
============ ============
================================================================================================================================
*Undistributed investment income--net ................................. $ 3,889,672 $ 3,590,273
============ ============
================================================================================================================================
</TABLE>
See Notes to Financial Statements
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended November 30, 1998
================================================================================================================================
<S> <C> <C>
Cash Provided by Net decrease in net assets resulting from operations ................................. $(18,277,338)
Operating Activities: Adjustments to reconcile net decrease in net assets resulting from
operations to net cash provided by operating activities:
Increase in receivables ........................................................... (1,029,578)
Increase in other assets .......................................................... (47,149)
Decrease in other liabilities ..................................................... (362,819)
Realized and unrealized loss on investments--net .................................. 35,349,905
Amortization of discount .......................................................... (3,031,750)
------------
Net cash provided by operating activities ............................................ 12,601,271
------------
================================================================================================================================
Cash Used for Proceeds from sales of long-term investments ......................................... 70,043,934
Investing Activities: Purchases of long-term investments ................................................... (94,145,274)
Purchases of short-term investments .................................................. (50,421,184)
Proceeds from sales and maturities of short-term investments ......................... 50,472,000
------------
Net cash used for investing activities ............................................... (24,050,524)
------------
================================================================================================================================
Cash Provided by Cash receipts from borrowings ........................................................ 102,900,000
Financing Activities: Cash payments on borrowings .......................................................... (78,300,000)
Dividends paid to shareholders ....................................................... (13,152,208)
------------
Net cash provided by financing activities ............................................ 11,447,792
------------
================================================================================================================================
Cash: Net decrease in cash ................................................................. (1,461)
Cash at beginning of period .......................................................... 1,942
------------
Cash at end of period ................................................................ $ 481
============
================================================================================================================================
Cash Flow Cash paid for interest ............................................................... $ 2,947,596
Information: ============
================================================================================================================================
Non-Cash Financing Reinvestment of dividends paid to shareholders ....................................... $ 3,620,921
Activities: ============
================================================================================================================================
</TABLE>
See Notes to Financial Statements.
12 & 13
<PAGE>
Corporate High Yield Fund, Inc., November 30, 1998
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios For the
have been derived from information provided Six Months For the Year Ended
in the financial statements. Ended May 31,
Nov. 30, -----------------------------------------
Increase (Decrease) in Net Asset Value: 1998+ 1998+ 1997+ 1996+ 1995+
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ............... $ 13.95 $ 13.74 $ 13.68 $ 13.35 $ 13.21
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ............................. .73 1.42 1.44 1.46 1.62
Realized and unrealized gain (loss) on
investments--net ................................... (1.51) .25 .08 .33 .14
-------- -------- -------- -------- --------
Total from investment operations ................... (.78) 1.67 1.52 1.79 1.76
-------- -------- -------- -------- --------
Less dividends from investment income--net ......... (.71) (1.46) (1.46) (1.46) (1.62)
-------- -------- -------- -------- --------
Net asset value, end of period ..................... $ 12.46 $ 13.95 $ 13.74 $ 13.68 $ 13.35
======== ======== ======== ======== ========
Market price per share, end of period .............. $ 13.25 $14.1875 $ 14.125 $ 13.375 $ 13.625
======== ======== ======== ======== ========
==================================================================================================================================
Total Investment Based on market price per share .................... (1.19%)++ 11.33% 17.44% 9.35% 11.67%
Return:** ======== ======== ======== ======== ========
Based on net asset value per share ................. (5.50%)++ 12.53% 11.69% 14.15% 14.92%
======== ======== ======== ======== ========
==================================================================================================================================
Ratios to Average Expenses, excluding interest expense ............... .84%* .64% .66% .70% .69%
Net Assets: ======== ======== ======== ======== ========
Expenses ........................................... 2.61%* 1.45% 1.27% 1.62% 2.53%
======== ======== ======== ======== ========
Investment income--net ............................. 11.21%* 8.71% 9.43% 9.20% 9.03%
======== ======== ======== ======== ========
==================================================================================================================================
Leverage: Amount of borrowings outstanding, end of period
(in thousands) ..................................... $ 94,900 $ 70,300 $ 28,000 $ 54,000 $ 46,000
======== ======== ======== ======== ========
Average amount of borrowings outstanding during the
period (in thousands) .............................. $ 90,810 $ 52,080 $ 36,667 $ 49,424 $107,934
======== ======== ======== ======== ========
Average amount of borrowings outstanding per share
during the period .................................. $ 3.86 $ 2.26 $ 1.64 $ 2.27 $ 5.13
======== ======== ======== ======== ========
==================================================================================================================================
Supplemental Net assets, end of period (in thousands) ........... $295,499 $326,929 $312,909 $300,904 $287,285
Data: ======== ======== ======== ======== ========
Portfolio turnover ................................. 16.89% 55.42% 52.91% 65.68% 45.73%
======== ======== ======== ======== ========
==================================================================================================================================
</TABLE>
* 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.
+ Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
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.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management accruals
and estimates. 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.
(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 of such securities using market
information, transactions for comparable securities and various relationships
between securities which are generally recognized by institutional traders. 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.
Options written or purchased are valued at the last sale price in the case of
exchange-traded options. In the case of options traded in the over-the-counter
market, valuation is the last asked price (options written) or the last bid
price (options purchased). 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. Rights or warrants to acquire
stock, or stock acquired pursuant to the exercise of a right or warrant, may be
valued taking into account various factors such as original cost to the Fund,
earnings and net worth of the issuer, market prices for securities of similar
issuers, assessment of the issuer's future prosperity, liquidation value or
third party transactions involving the issuer's securities. Securities for which
there exist no price quotations or valuations and all other assets including
futures contracts and related options 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.
o Options--The Fund is authorized to write and purchase call and 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.
o Financial futures contracts--The Fund may purchase or sell financial 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
14 & 15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
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.
o 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.
(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) Dividends and distributions--Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
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 the operations of the Fund. 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 principal borrowed.
For the six months ended November 30, 1998, the Fund paid Merrill Lynch Security
Pricing Service, an affiliate of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), $647 for 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, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended November 30, 1998 were $78,979,400, and $65,117,797, respectively.
Net realized losses for the six months ended November 30, 1998 and net
unrealized losses as of November 30, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Losses Losses
- --------------------------------------------------------------------------------
Long-term investments ............................ $(8,469,252) $(35,858,532)
----------- ------------
Total ............................................ $(8,469,252) $(35,858,532)
=========== ============
- --------------------------------------------------------------------------------
As of November 30, 1998, net unrealized depreciation for financial reporting and
Federal income tax purposes aggregated $35,858,532, of which $9,805,317 related
to appreciated securities and $45,663,849 related to depreciated securities. The
aggregate cost of investments at November 30, 1998 for Federal income tax
purposes was $413,881,176.
4. Capital Share Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock, par value
$.10, all of which were initially classified as Common Stock. The Board of
Directors is authorized, however, to classify and reclassify any unissued shares
of capital stock without approval of the holders of Common Stock.
Shares issued and outstanding during the six months ended November 30, 1998 and
the year ended May 31, 1998 increased by 281,710 and 664,216, respectively, as a
result of dividend reinvestment.
5. Short-Term Borrowings:
On August 11, 1998, the Fund entered into a one-year credit agreement with State
Street Bank and Trust Company, Fleet National Bank and certain other
institutions party thereto. The agreement is a $150,000,000 credit facility
bearing interest at the Federal Funds Rate plus 0.50% and/or LIBOR plus 0.50%.
For the six months ended November 30, 1998, the average amount borrowed was
approximately $90,810,000 and the daily weighted average interest rate was
5.90%. For the six months ended November 30, 1998, facility and commitment fees
aggregated $114,251.
6. Subsequent Events:
On December 1, 1998, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.129574 per share,
payable on December 18, 1998 to shareholders of record as of December 11, 1998.
In addition, on December 22, 1998, the Fund's Board of Directors declared an
ordinary income dividend and a long-term capital gains distribution to Common
Stock shareholders in the amount of $.127592 and $.113893 per share,
respectively, payable on January 8, 1999 to shareholders of record on December
31, 1998.
16 & 17
<PAGE>
Corporate High Yield Fund, Inc., November 30, 1998
PORTFOLIO INFORMATION
Ten Largest Corporate Bond Holdings
Percent of Total
As of November 30, 1998 Long-Term Investments
================================================================================
Nextel Communications Inc. Nextel is building a network to provide
digital wireless communications services
that ultimately will have a nationwide
footprint. The company currently has service
in over 225 cities and expects service to
cover 85% of the US population by the end of
1998. The company has over 1.2 million units
in service. Our holdings include bonds of
100%-owned Cencall Communications. 2.7%
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Call-Net Enterprises, Inc. The company is the largest alternative
provider of long distance telephone services
in Canada, marketing under the brand name
Sprint Canada. Sprint Communications Company
L.P., the third-largest long distance
services carrier in the United States, owns
approximately 25% of the company's shares. 1.6
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Tucson Electric & Power Co. This electric utility serves Tucson,
Arizona, and surrounding areas. Our bonds
are secured lease obligation bonds on the
company's Springerville coal-fired power
generation plant. 1.6
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Nextlink Communications Inc. Nextlink provides local, long distance and
enhanced telephone communications services
to commercial customers. The company
operates in 24 markets in seven states. 1.5
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Cumulus Media, Inc. Cumulus is one of the largest radio
broadcasting companies in the United States,
owning and operating radio stations
throughout the country. The company also
provides sales and marketing services to
radio stations. 1.5
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Telefonica de Argentina S.A. Telefonica de Argentina provides monopoly
telephone service to the southern half of
Argentina, including about half the Buenos
Aires metropolitan area where nearly one
third of Argentina's population is located. 1.4
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Malette Inc. Malette is a Canadian producer of oriented
strand board panels and commodity 2x4 lumber
with facilities primarily located in the
province of Quebec. Malette is a wholly-
owned subsidiary of Canadian paper and
forest products producer Tembec, Inc. 1.4
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L-3 Communications Corp. The company is a supplier of secure
communications systems, avionics, telemetry,
instrumentation and other communications and
support services. Customers include
aerospace contractors and the US military
and Federal agencies. 1.4
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Sequa Corp. Sequa is a diversified industrial company
whose business lines include aerospace,
machinery and metal coatings, and specialty
chemicals. Within these categories, Sequa
produces such products as solid rocket fuel
propulsion systems, protective coatings and
a bleach activator. 1.4
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Forest City Enterprises Inc. Forest City is a diversified real estate
developer. The company develops, acquires,
owns and manages commercial and residential
real estate projects in 21 states and the
District of Columbia. 1.3
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OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Joe Grills, Director
Walter Mintz, Director
Robert S. Salomon Jr., Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Terry K. Glenn, Executive Vice President
Vincent T. Lathbury III, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President
Elizabeth M. Phillips, Vice President
Gerald M. Richard, Treasurer
Patrick D. Sweeney, Secretary
Custodian
The Chase Manhattan Bank
4 MetroTech Center, 18th Floor
Brooklyn, NY 11245
Transfer Agent
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
NYSE Symbol
COY
18 & 19
<PAGE>
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 are as dated and are subject to change.
Corporate High
Yield Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #16718--11/98
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