Prudential Short Duration High Yield Fund, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT

COMPANIES

 

Investment Company Act file number:    811-22632
Exact name of registrant as specified in charter:    Prudential Short Duration High Yield Fund, Inc.
Address of principal executive offices:    655 Broad Street, 17th Floor
   Newark, New Jersey 07102
Name and address of agent for service:    Deborah A. Docs
   655 Broad Street, 17th Floor
   Newark, New Jersey 07102
Registrant’s telephone number, including area code:    973-367-7521
Date of fiscal year end:    5/31/2016
Date of reporting period:    5/31/2016


Item 1 – Reports to Stockholders


PRUDENTIAL INVESTMENTS, A PGIM BUSINESS  |  CLOSED-END FUNDS

 

     Prudential Short Duration High Yield Fund, Inc.

 

 

ANNUAL REPORT   MAY 31, 2016

 

LOGO

 

To enroll in e-delivery, go to

prudentialfunds.com/edelivery

 

  LOGO


Objective: High level of current income

 

Highlights

 

PRUDENTIAL SHORT DURATION HIGH YIELD FUND, INC.

 

 

Relative to the Fund’s benchmark, the Barclays US High Yield Ba/B 1-5 Year 1% Issuer Constrained Index, underweight to the energy sector, which struggled for much of the period, was the largest contributor to the Fund’s performance. Overweights in the gaming & lodging & leisure sectors, along with technology, building materials & home construction, and health care & pharmaceuticals sectors also turned in positive returns.

 

 

The Fund’s solid security selection in the technology, paper & packaging, transportation & environmental services, upstream energy (production and exploration), and cable & satellite sectors all contributed positively to the Fund’s performance.

 

 

Security selection in the retailers & restaurants, metals & mining, and industrial sectors hindered the Fund’s performance.

 

 

 

The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter.

 

Prudential Fixed Income is a unit of PGIM, Inc. (PGIM), a registered investment adviser. PGIM is a Prudential Financial Company. © 2016 Prudential Financial, Inc. and its related entities. The Prudential logo and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

 

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Letter from the President

 

LOGO

 

Dear Shareholder:

 

We hope you find the annual report for the Prudential Short Duration High Yield Fund, Inc. informative and useful. The report covers performance for the 12-month period that ended May 31, 2016.

 

Since market conditions change over time, we believe it is important to

maintain a diversified portfolio of funds consistent with your tolerance for risk, time horizon, and financial goals.

 

Your financial advisor can help you create a diversified investment plan that may include funds covering all the basic asset classes and that reflects your personal investor profile and risk tolerance. Keep in mind, however, that diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.

 

Prudential Investments® is dedicated to helping you solve your toughest investment challenges—whether it’s capital growth, reliable income, or protection from market volatility and other risks. We offer the expertise of Prudential Financial’s affiliated asset managers that strive to be leaders in a broad range of funds to help you stay on course to the future you envision. They also manage money for major corporations and pension funds around the world, which means you benefit from the same expertise, innovation, and attention to risk demanded by today’s most sophisticated investors.

 

Thank you for choosing the Prudential Investments family of funds.

 

Sincerely,

 

LOGO

 

Stuart S. Parker, President

Prudential Short Duration High Yield Fund, Inc.

July 15, 2016

 

Prudential Short Duration High Yield Fund, Inc.     3   


Your Fund’s Performance (unaudited)

 

Performance data quoted represent past performance and assume the reinvestment of all dividends. Past performance does not guarantee future results. An investor may obtain performance data as of the most recent month-end by visiting our website at www.prudentialfunds.com.

 

Investment Objective

The Fund seeks to provide a high level of current income by investing primarily in higher-rated, below-investment-grade fixed income instruments.* The Fund seeks to maintain a weighted average portfolio duration of three years or less and a weighted average maturity of five years or less.

 

*There can be no guarantee the Fund will achieve its objective. Higher-rated high yield bonds, commonly referred to as “junk bonds,” are below investment grade and are considered speculative. They are rated Ba, B by Moody’s Investors Service, Inc. (Moody’s); BB, B by Standard & Poor’s Ratings Services (S&P) and Fitch, Inc. (Fitch); or comparably rated by another nationally recognized statistical rating organization (NRSRO), or if unrated, are considered by PGIM to be of comparable quality.

 

Performance Snapshot as of 5/31/16
Price Per Share   Total Return For
12-Months Ended
5/31/16
$16.79 (NAV)   2.00%
$15.58 (Market Price)   8.23%

 

Total returns are based on changes in net asset value (NAV) or market price, respectively. NAV total return assumes the reinvestment of all distributions, including returns of capital, if any, at NAV. Market Price total return assumes the reinvestment of all distributions, including returns of capital, if any, in additional shares in accordance with the Fund’s Dividend Reinvestment Plan.

 

Source: Prudential Investments LLC.

 

Key Fund Statistics as of 5/31/16          
Duration    2.5 years        Average Maturity    3.3 years

 

Duration shown includes the impact of leverage. Duration measures investment risk that takes into account both a bond’s interest payments and its value to maturity. Average Maturity is the average number of years to maturity of the Fund’s bonds.

 

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Credit Quality expressed as a percentage of total investments as of 5/31/16 (%)  
BBB     7.1   
BB     45.2   
B     39.0   
CCC     6.2   
Cash/Cash Equivalents     2.5   
Total Investments     100.0   

 

Source: PGIM, Inc.

 

Credit ratings reflect the highest rating assigned by a nationally recognized statistical rating organization (NRSRO) such as Moody’s Investor Service, Inc. (Moody’s), Standard & Poor’s (S&P) or Fitch, Inc. (Fitch). Credit ratings reflect the common nomenclature used by both S&P and Fitch. Where applicable, ratings are converted to the comparable S&P/Fitch rating tier nomenclature. These rating agencies are independent, and are widely used. Credit ratings are subject to change. Values may not sum to 100.0% due to rounding.

 

Yield and Dividends as of 5/31/16     
Total Monthly Dividends
Paid per Share for Period
  Current Monthly Dividend
Paid per Share
   Yield at Market Price
as of 5/31/16
$1.358   $0.11    8.47%

 

Yield at market price is the annualized rate determined by dividing current monthly dividend paid per share by the market price per share as of May 31, 2016.

 

Prudential Short Duration High Yield Fund, Inc.     5   


Strategy and Performance Overview

 

How did the Fund perform?

For the 12-month reporting period that ended May 31, 2016, the Prudential Short Duration High Yield Fund’s NAV per share decreased by $1.05 from $17.84 to $16.79. The Fund generated a positive NAV return of 2.00%, outperforming both the –1.10% return of the Barclays US High Yield Ba/B 1-5 Year 1% Issuer Constrained Index (the Index) and the –4.06% return of the Lipper High Current Yield Funds (Leveraged) Average. The Fund’s market price decreased by $0.17 from $15.75 to $15.58, and the Fund’s market price total return, including the reinvestment of distributions, was 8.23% for the reporting period.

 

What were conditions like in the short-term US high yield corporate bond market?

 

High yield bonds struggled throughout the period with the broad high yield market posting a modestly negative return. In the first half of the reporting period, concerns about the Chinese economy, renewed declines in commodity prices, and outflows from retail mutual funds troubled the market and contributed to the volatility experienced in high yield. Energy companies continued to head lower early in the first quarter of 2016 as oil prices were routed, dragging the sector down through mid-February. However, a rebound in crude oil prices subsequently lifted the sector to a positive return as the quarter ended. Not to be outdone, another 2015 laggard, the metals & mining sector also posted a double-digit return in the first quarter of 2016. Metals & mining companies strongly outperformed in 2016. However, in May those bonds underperformed the rest of the market, as iron ore prices pulled back from their highs in April.

 

 

As the market experienced volatility, credits with healthier fundamentals outperformed, while still posting negative returns. Over the period, BB-rated bonds had a positive return while lower quality B-rated bonds and CCC-rated bonds posted negative performance. The gaming & lodging & leisure, railroads, midstream energy (refining and infrastructure), and retailers & restaurants sectors were among the best performers, returning between 2% and 3%, respectively, over the period. Upstream energy (exploration and production) was the largest laggard, posting a return of –17.8%. Transportation & environmental services and life insurance also struggled, posting negative returns during the period.

 

What worked?

 

The Fund benefited from both strong sector and security selection during the period.

 

 

An underweight to the energy sector, which struggled for much of the period, was the largest contributor to the Fund’s performance. Overweights in the gaming & lodging & leisure sector, along with technology, building materials & home construction, and health care & pharmaceuticals sectors also turned in positive returns.

 

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The Fund’s solid security selection in the technology, paper & packaging, transportation & environmental services, upstream energy, and cable & satellite sectors all contributed positively to the Fund’s performance.

 

 

In individual company selection, the Fund’s underweight positions in upstream energy names including Linn Energy, Chesapeake Energy, and Energy XXI contributed positively to performance.

 

 

Avoiding Abengoa (transportation and environmental services) and overweights to names in the technology sector including Nokia, NXP Semiconductors, and Solera all added to performance over the reporting period.

 

What didn’t work?

 

Security selection in the retailers & restaurants, metals & mining, and industrial sectors hindered the Fund’s performance.

 

 

The Fund’s underweighting to the metals & mining, telecom, and finance & insurance sectors detracted from performance, as did an overweight position within the paper & packaging sector.

 

 

In individual company selection, an overweight to Unifrax, in the industrial sector, was the largest detractor from performance. The Fund held a higher weighting of debt securities in metals and mining companies Murray Energy Holdings, Arcelormittal, and Berau Coal, which detracted from performance, as these securities underperformed throughout the reporting period. An overweight to the retailer Claires also detracted.

 

How did the Fund’s borrowing (leverage) strategy affect its performance?

The Fund’s use of leverage contributed positively to results as the returns of the securities purchased was in excess of the cost of borrowing. As of May 31, 2016, the Fund had borrowed $205 million and was about 26.9% leveraged. During the reporting period, the average amount of leverage utilized by the Fund was about 25.5%.

 

Current Outlook

Were there any changes to the Fund’s management?

Paul Appleby, CFA, Managing Director for Prudential Fixed Income retired in January 2016. The Fund continues to be managed by a team of seven portfolio managers, which includes Robert Cignarella, CFA, who is a Managing Director and head of Prudential Fixed Income’s Global Leveraged Finance Team.

 

Prudential Fixed Income has a positive long-term outlook for high yield with demand for the asset class supported by a thirst for yield as interest rates fall globally due to low inflation. Default rates outside of the energy and basic materials sectors should remain manageable through 2017. Mergers and acquisitions have generally been positive for high yield credits

 

Prudential Short Duration High Yield Fund, Inc.     7   


Strategy and Performance Overview (continued)

 

and should continue into the year. Earnings in the US are poised to rebound with the bounce in commodities and weaker US dollar.

 

However, many macro concerns could weigh on the market including uncertainty in China, the Middle East, and the Fed. In addition, credit metrics are slipping and defaults are increasing. Despite the recent rebound in oil, prices are still at historically low levels. Many high yield energy companies cannot survive unless oil prices move materially higher. Key positioning themes continue to be underweights in commodity-related sectors including energy and metals and mining. The Fund is also underweight the finance and insurance and banking sectors. Overweights include gaming, lodging, leisure, technology, and health care and pharmaceuticals.

 

The recent UK referendum to leave the European Union led to a bout of intense market volatility. Prudential Fixed Income believes the policy responses that follow the Brexit vote consist of monetary policy accommodation and rhetoric regarding political cohesion, considering that the Brexit result may embolden populist political movements in Europe and elsewhere. Policy responses will likely blunt the effect of risk-off sentiment in the short term, and the longer-term duration of the risk-off environment will depend on the overall effectiveness of these responses.

 

Benchmark Definitions

 

Barclays US High Yield Ba/B 1-5 Year 1% Issuer Constrained Index—The Barclays US High Yield Ba/B 1-5 Year 1% Issuer Constrained Index is an unmanaged index which represents performance of US higher-rated short duration high yield bonds.

 

Source: Barclays.

 

Lipper High Current Yield Funds (Leveraged) Average—The Lipper High Current Yield Funds (Leveraged) Average (Lipper Average) represents returns based on an average return of 35 funds in the Closed-End High Current Yield Funds (Leveraged) category.

 

Investors cannot invest directly in an index or average.

 

Looking for additional information?

The Fund is traded under the symbol “ISD” and its closing market price is available in most newspapers under the NYSE listings. The daily NAV is available online under the symbol “XISDX” on most financial websites. Barron’s and The Wall Street Journal’s Monday edition both carry closed-end fund tables that provide additional information. In addition, the Fund issues press releases that can be found on most major financial websites as well as on www.prudentialfunds.com.

 

In a continuing effort to provide information concerning the Fund, shareholders may go to www.prudentialfunds.com or call (800) 451-6788 (toll free), Monday through Friday from 8:00 a.m. to 5:30 p.m. Eastern Time, for the Fund’s current NAV, market price, and other information.

 

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Portfolio of Investments

as of May 31, 2016

 

Description   Interest
Rate
    Maturity
Date
    Principal
Amount (000)#
    Value (Note 1)  

LONG-TERM INVESTMENTS    131.3%

  

BANK LOANS(a)    4.0%

  

Chemicals    1.2%

  

Axalta Coating Systems US Holdings, Inc.

    3.750     02/01/20        848      $ 849,489   

MacDermid, Inc.

    5.500        06/07/20        5,671        5,652,970   
       

 

 

 
          6,502,459   

Food    0.2%

  

Albertson’s LLC

    5.500        03/21/19        1,346        1,346,149   

Healthcare-Products    0.1%

  

Kinetic Concepts, Inc.

    4.500        05/04/18        750        749,197   

Home Builders    0.2%

  

Beazer Homes USA, Inc.(b)

    0.635        03/12/18        1,250        1,237,500   

Lodging    0.2%

  

Golden Nugget, Inc.

    5.500        11/21/19        987        987,935   

Media & Entertainment    0.2%

  

Nielsen Finance LLC

    2.687        05/30/17        1,281        1,280,432   

Mining    0.1%

  

Freeport-McMoRan, Inc.(b)

    3.210        05/31/18        732        713,381   

Technology    1.3%

  

BMC Software Finance, Inc.

    5.000        09/10/20        3,294        2,930,750   

First Data Corp.

    4.443        03/24/21        1,048        1,050,529   

Kronos, Inc.

    9.750        04/30/20        1,865        1,894,535   

TransUnion LLC(b)

    2.879        06/30/20        1,357        1,303,077   
       

 

 

 
          7,178,891   

Telecommunications    0.5%

  

Communications Sales & Leasing, Inc.

    5.000        10/24/22        2,556        2,532,528   
       

 

 

 

TOTAL BANK LOANS
(cost $22,494,759)

          22,528,472   
       

 

 

 

CORPORATE BONDS    127.3%

  

Agriculture    0.2%

  

Vector Group Ltd., Sr. Sec’d. Notes, 144A

    7.750        02/15/21        1,350        1,407,375   

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     9   


Portfolio of Investments (continued)

as of May 31, 2016

 

Description   Interest
Rate
    Maturity
Date
    Principal
Amount (000)#
    Value (Note 1)  

CORPORATE BONDS (Continued)

  

Airlines    2.2%

  

Continental Airlines, Inc., Series 2012-3, Class C, Pass-Through Certificates(c)

    6.125 %       04/29/18        8,800      $ 9,240,000   

United Airlines Pass-Through Trust, Series 2007-1, Class A, Pass-Through Certificates(c)

    6.636        07/02/22        3,076        3,206,504   
       

 

 

 
          12,446,504   

Apparel    0.2%

  

Levi Strauss & Co., Sr. Unsec’d. Notes

    6.875        05/01/22        975        1,040,403   

Auto Manufacturers    0.5%

  

Fiat Chrysler Automobiles NV (United Kingdom), Sr. Unsec’d. Notes

    4.500        04/15/20        1,050        1,060,500   

Jaguar Land Rover Automotive PLC (United Kingdom), Gtd. Notes, 144A

    4.250        11/15/19        1,600        1,656,000   
       

 

 

 
          2,716,500   

Auto Parts & Equipment    1.8%

  

American Axle & Manufacturing, Inc.,

       

Gtd. Notes

    5.125        02/15/19        1,415        1,443,300   

Gtd. Notes(c)

    7.750        11/15/19        3,020        3,359,750   

Meritor, Inc., Gtd. Notes

    6.750        06/15/21        1,200        1,125,000   

Schaeffler Holding Finance BV (Germany),

       

Sr. Sec’d. Notes, PIK, 144A

    6.250        11/15/19        1,200        1,254,000   

Sr. Sec’d. Notes, PIK, 144A(c)

    6.875        08/15/18        2,650        2,716,169   

ZF North America Capital, Inc. (Germany), Gtd. Notes, 144A

    4.000        04/29/20        250        258,438   
       

 

 

 
          10,156,657   

Banks    0.8%

  

CIT Group, Inc., Sr. Unsec’d. Notes(c)

    4.250        08/15/17        4,175        4,224,265   

Beverages    1.7%

  

Constellation Brands, Inc.,

       

Gtd. Notes

    3.875        11/15/19        2,025        2,121,187   

Gtd. Notes(c)

    7.250        09/01/16        3,052        3,090,150   

Cott Beverages, Inc. (Canada), Gtd. Notes(c)

    6.750        01/01/20        3,875        4,049,375   
       

 

 

 
          9,260,712   

Building Materials    3.6%

  

Cemex Finance LLC (Mexico),

       

Sr. Sec’d. Notes, 144A

    9.375        10/12/22        2,000        2,180,200   

 

See Notes to Financial Statements.

 

10  


Description   Interest
Rate
    Maturity
Date
    Principal
Amount (000)#
    Value (Note 1)  

CORPORATE BONDS (Continued)

  

Building Materials (cont’d.)

  

Cemex Finance LLC (Mexico), (cont’d.)

       

Sr. Sec’d. Notes, RegS

    9.375 %       10/12/22        750      $ 817,575   

Standard Industries, Inc., Sr. Unsec’d. Notes, 144A (original cost $675,000; purchased 02/18/16)(d)(e)

    5.125        02/15/21        675        700,313   

Summit Materials LLC/Summit Materials Finance Corp., Gtd. Notes, 144A

    8.500        04/15/22        1,750        1,863,750   

US Concrete, Inc., Sr. Sec’d. Notes

    8.500        12/01/18        7,675        8,019,607   

USG Corp.,

       

Gtd. Notes, 144A

    5.875        11/01/21        788        826,904   

Sr. Unsec’d. Notes(c)

    9.750        01/15/18        5,000        5,588,850   
       

 

 

 
          19,997,199   

Chemicals    4.9%

  

Axalta Coating Systems US Holdings, Inc./Axalta Coating Systems Dutch Holdings BV, Gtd. Notes, 144A(c)

    7.375        05/01/21        11,626        12,315,422   

Chemtura Corp., Gtd. Notes

    5.750        07/15/21        1,984        2,008,800   

East Dubuque Nitrogen Partners LP/East Dubuque Finance Corp., Sec’d. Notes, 144A

    6.500        04/15/21        1,655        1,677,756   

Hexion, Inc., Sr. Sec’d. Notes

    8.875        02/01/18        1,190        1,011,500   

Kissner Milling Co., Ltd. (Canada), Sr. Sec’d. Notes, 144A
(original cost $751,000; purchased 05/15/14)(d)(e)

    7.250        06/01/19        751        751,000   

Unifrax I LLC/Unifrax Holding Co., Gtd. Notes, 144A (original cost $9,944,030; purchased 05/14/14 - 07/28/14)(d)(e)

    7.500        02/15/19        9,538        7,630,400   

W.R. Grace & Co., Gtd. Notes, 144A

    5.125        10/01/21        2,107        2,184,685   
       

 

 

 
          27,579,563   

Commercial Services    4.4%

  

Hertz Corp. (The),

       

Gtd. Notes(c)

    4.250        04/01/18        3,875        3,917,625   

Gtd. Notes

    6.750        04/15/19        925        937,254   

Gtd. Notes(c)

    7.500        10/15/18        2,400        2,437,680   

Laureate Education, Inc., Gtd. Notes, 144A(d)

    10.000        09/01/19        3,875        3,565,000   

Safway Group Holding LLC/Safway Finance Corp., Sec’d. Notes, 144A(c)

    7.000        05/15/18        7,474        7,548,740   

Service Corp. International, Sr. Unsec’d. Notes(c)

    7.625        10/01/18        5,403        6,024,345   
       

 

 

 
          24,430,644   

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     11   


Portfolio of Investments (continued)

as of May 31, 2016

 

Description   Interest
Rate
    Maturity
Date
    Principal
Amount (000)#
    Value (Note 1)  

CORPORATE BONDS (Continued)

  

Computers    1.3%

  

Denali Borrower LLC/Denali Finance Corp., Sr. Sec’d. Notes, 144A(c)

    5.625 %       10/15/20        5,650      $ 5,940,975   

Diamond 1 Finance Corp./Diamond 2 Finance Corp., Sr. Sec’d. Notes, 144A

    4.420        06/15/21        1,325        1,351,458   
       

 

 

 
          7,292,433   

Distribution/Wholesale    0.1%

  

Rexel SA (France), Sr. Unsec’d. Notes, 144A

    5.250        06/15/20        375        390,000   

Diversified Financial Services    4.6%

  

Ally Financial, Inc., Sub. Notes(c)

    8.000        12/31/18        2,975        3,246,469   

CoreLogic, Inc., Gtd. Notes(c)

    7.250        06/01/21        5,277        5,488,080   

International Lease Finance Corp.,

       

Sr. Unsec’d. Notes(c)

    3.875        04/15/18        1,350        1,370,250   

Sr. Unsec’d. Notes

    6.250        05/15/19        600        648,000   

Sr. Unsec’d. Notes(c)

    8.875        09/01/17        4,000        4,280,000   

KCG Holdings, Inc., Sr. Sec’d. Notes, 144A

    6.875        03/15/20        1,050        947,625   

Navient Corp.,

       

Sr. Unsec’d. Notes, MTN

    8.000        03/25/20        425        436,687   

Sr. Unsec’d. Notes, MTN(c)

    8.450        06/15/18        4,550        4,902,625   

OneMain Financial Holdings, Inc., Gtd. Notes, 144A(c)

    6.750        12/15/19        4,400        4,444,000   
       

 

 

 
          25,763,736   

Electric    6.1%

  

AES Corp., Sr. Unsec’d. Notes

    7.375        07/01/21        1,250        1,425,000   

DPL, Inc.,

       

Sr. Unsec’d. Notes

    6.500        10/15/16        115        116,725   

Sr. Unsec’d. Notes(c)

    6.750        10/01/19        3,160        3,239,000   

Sr. Unsec’d. Notes(c)

    7.250        10/15/21        3,350        3,492,710   

Dynegy, Inc., Gtd. Notes(c)

    6.750        11/01/19        9,200        9,223,000   

GenOn Energy, Inc.,

       

Sr. Unsec’d. Notes

    7.875        06/15/17        750        631,875   

Sr. Unsec’d. Notes

    9.500        10/15/18        2,625        2,067,187   

Sr. Unsec’d. Notes(d)

    9.875        10/15/20        1,400        1,004,500   

Mirant Mid-Atlantic LLC, Pass-Through Trust, Series B, Pass-Through Certificates

    9.125        06/30/17        2,285        2,193,286   

NRG Energy, Inc., Gtd. Notes

    7.625        01/15/18        6,850        7,380,875   

NRG REMA LLC,

       

Series B, Pass-Through Certificates(b)(c)(d)

    9.237        07/02/17        2,062        2,020,706   

 

See Notes to Financial Statements.

 

12  


Description   Interest
Rate
    Maturity
Date
    Principal
Amount (000)#
    Value (Note 1)  

CORPORATE BONDS (Continued)

  

Electric (cont’d.)

  

NRG REMA LLC, (cont’d.)

       

Series C, Pass-Through Certificates(c)(d)

    9.681 %       07/02/26        1,100      $ 1,056,000   
       

 

 

 
          33,850,864   

Electrical Components & Equipment    0.5%

  

Anixter, Inc., Gtd. Notes(c)

    5.625        05/01/19        1,500        1,605,000   

International Wire Group Holdings, Inc., Sec’d. Notes, 144A(c)

    8.500        10/15/17        1,000        992,500   
       

 

 

 
          2,597,500   

Electronics    0.7%

  

Jabil Circuit, Inc.,

       

Sr. Unsec’d. Notes

    5.625        12/15/20        690        731,400   

Sr. Unsec’d. Notes(c)

    8.250        03/15/18        2,700        2,936,250   
       

 

 

 
          3,667,650   

Entertainment    9.1%

  

CCM Merger, Inc., Gtd. Notes, 144A
(original cost $3,999,595; purchased 09/04/13 - 11/17/15)(d)(e)

    9.125        05/01/19        3,818        4,004,127   

Cedar Fair LP/Canada’s Wonderland Co./Magnum Management Corp., Gtd. Notes(c)

    5.250        03/15/21        4,350        4,524,000   

Churchill Downs, Inc.,

       

Gtd. Notes

    5.375        12/15/21        2,025        2,085,750   

Gtd. Notes, 144A

    5.375        12/15/21        2,115        2,178,450   

GLP Capital LP/GLP Financing II, Inc.,

       

Gtd. Notes(c)

    4.375        11/01/18        3,775        3,897,688   

Gtd. Notes

    4.375        04/15/21        1,325        1,358,125   

Gtd. Notes

    4.875        11/01/20        1,725        1,804,781   

Greektown Holdings LLC/Greektown Mothership Corp., Sr. Sec’d. Notes, 144A(c)(d)

    8.875        03/15/19        2,600        2,723,500   

Isle of Capri Casinos, Inc.,

       

Gtd. Notes

    5.875        03/15/21        1,250        1,304,688   

Gtd. Notes(c)

    8.875        06/15/20        8,160        8,557,800   

NAI Entertainment Holdings/NAI Entertainment Holdings Finance Corp., Sr. Sec’d. Notes, 144A
(original cost $4,651,513; purchased 07/30/13 - 08/25/15)(c)(d)(e)

    5.000        08/01/18        4,550        4,641,000   

National CineMedia LLC,

       

Sr. Sec’d. Notes

    6.000        04/15/22        1,310        1,365,675   

Sr. Unsec’d. Notes

    7.875        07/15/21        1,500        1,563,750   

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     13   


Portfolio of Investments (continued)

as of May 31, 2016

 

Description   Interest
Rate
    Maturity
Date
    Principal
Amount (000)#
    Value (Note 1)  

CORPORATE BONDS (Continued)

  

Entertainment (cont’d.)

  

Peninsula Gaming LLC/Peninsula Gaming Corp., Gtd. Notes, 144A

    8.375 %       02/15/18        4,000      $ 4,040,000   

Penn National Gaming, Inc., Sr. Unsec’d. Notes

    5.875        11/01/21        1,550        1,592,625   

Scientific Games Corp., Gtd. Notes(c)

    8.125        09/15/18        5,425        5,262,250   
       

 

 

 
          50,904,209   

Environmental Control    0.6%

  

Clean Harbors, Inc.,

       

Gtd. Notes

    5.250        08/01/20        850        868,062   

Gtd. Notes, 144A

    5.125        06/01/21        2,400        2,424,000   

Covanta Holding Corp., Sr. Unsec’d. Notes

    7.250        12/01/20        200        207,500   
       

 

 

 
          3,499,562   

Food    2.6%

  

Bertin SA/Bertin Finance Ltd. (Brazil), Gtd. Notes, 144A

    10.250        10/05/16        1,300        1,326,000   

JBS Investments GmbH (Brazil), Gtd. Notes, 144A

    7.750        10/28/20        2,000        2,095,000   

JBS USA LLC/JBS USA Finance, Inc. (Brazil), Gtd. Notes, 144A
(original cost $3,784,375; purchased 06/17/14)(c)(d)(e)

    7.250        06/01/21        3,500        3,605,000   

Shearer’s Foods LLC/Chip Finance Corp., Sr. Sec’d. Notes, 144A(c)

    9.000        11/01/19        2,900        3,059,500   

Smithfield Foods, Inc.,

       

Sr. Unsec’d. Notes, 144A(c)

    5.250        08/01/18        2,300        2,325,875   

Sr. Unsec’d. Notes, 144A

    5.875        08/01/21        500        521,250   

SUPERVALU, Inc., Sr. Unsec’d. Notes

    6.750        06/01/21        1,800        1,543,500   
       

 

 

 
          14,476,125   

Food Service    0.2%

  

Aramark Services, Inc., Gtd. Notes

    5.750        03/15/20        910        939,006   

Forest Products & Paper    1.2%

  

Mercer International, Inc. (Canada), Sr. Unsec’d. Notes

    7.000        12/01/19        1,675        1,687,562   

Smurfit Kappa Acquisitions (Ireland), Gtd. Notes, 144A

    4.875        09/15/18        3,450        3,613,875   

Tembec Industries, Inc. (Canada), Sr. Sec’d. Notes, 144A

    9.000        12/15/19        1,575        1,228,500   
       

 

 

 
          6,529,937   

 

See Notes to Financial Statements.

 

14  


Description   Interest
Rate
    Maturity
Date
    Principal
Amount (000)#
    Value (Note 1)  

CORPORATE BONDS (Continued)

  

Gas    0.3%

  

AmeriGas Partners LP/AmeriGas Finance Corp., Sr. Unsec’d. Notes

    6.500 %       05/20/21        1,725      $ 1,772,438   

Healthcare-Products    2.0%

  

ConvaTec Finance International SA (Luxembourg), Gtd. Notes, PIK, 144A

    8.250        01/15/19        1,235        1,231,913   

ConvaTec Healthcare E SA (Luxembourg), Gtd. Notes, 144A

    10.500        12/15/18        4,115        4,243,594   

Kinetic Concepts, Inc./KCI USA, Inc., Sec’d. Notes

    10.500        11/01/18        2,125        2,119,687   

Mallinckrodt International Finance SA/Mallinckrodt CB LLC, Gtd. Notes, 144A

    4.875        04/15/20        3,775        3,661,750   
       

 

 

 
          11,256,944   

Healthcare-Services    8.8%

  

Centene Corp., Sr. Unsec’d. Notes, 144A

    5.625        02/15/21        2,375        2,470,000   

CHS/Community Health Systems, Inc., Gtd. Notes(c)

    8.000        11/15/19        11,300        11,158,750   

HCA Holdings, Inc., Sr. Unsec’d. Notes

    6.250        02/15/21        1,000        1,070,000   

HCA, Inc.,

       

Gtd. Notes(c)

    8.000        10/01/18        1,855        2,077,600   

Sr. Sec’d. Notes(c)

    3.750        03/15/19        3,075        3,167,250   

Sr. Sec’d. Notes

    4.250        10/15/19        1,625        1,685,937   

Sr. Sec’d. Notes

    6.500        02/15/20        1,000        1,100,000   

Kindred Healthcare, Inc., Gtd. Notes(c)

    8.000        01/15/20        6,350        6,342,062   

LifePoint Health, Inc., Gtd. Notes(c)

    5.500        12/01/21        2,400        2,496,000   

Select Medical Corp., Gtd. Notes(c)

    6.375        06/01/21        3,000        2,887,500   

Surgery Center Holdings, Inc., Gtd. Notes, 144A

    8.875        04/15/21        1,200        1,206,000   

Tenet Healthcare Corp.,

       

Sr. Sec’d. Notes(c)

    6.250        11/01/18        5,400        5,710,500   

Sr. Unsec’d. Notes

    5.000        03/01/19        4,775        4,626,068   

Sr. Unsec’d. Notes

    6.750        02/01/20        925        908,813   

Sr. Unsec’d. Notes

    8.000        08/01/20        1,000        1,021,875   

Universal Health Services, Inc., Sr. Sec’d. Notes, 144A

    4.750        08/01/22        1,325        1,348,188   
       

 

 

 
          49,276,543   

Holding Companies - Diversified    0.7%

  

Carlson Travel Holdings, Inc., Sr. Unsec’d. Notes, PIK, 144A (original cost $3,812,250; purchased 06/26/14 - 08/04/14)(c)(d)(e)

    7.500        08/15/19        3,800        3,676,500   

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     15   


Portfolio of Investments (continued)

as of May 31, 2016

 

Description   Interest
Rate
    Maturity
Date
    Principal
Amount (000)#
    Value (Note 1)  

CORPORATE BONDS (Continued)

  

Home Builders    10.6%

  

Beazer Homes USA, Inc.,

       

Gtd. Notes

    5.750 %       06/15/19        3,450      $ 3,113,625   

Sec’d. Notes(c)

    6.625        04/15/18        7,275        7,422,464   

Brookfield Residential Properties, Inc. (Canada), Gtd. Notes, 144A(c)

    6.500        12/15/20        2,765        2,806,475   

CalAtlantic Group, Inc.,

       

Gtd. Notes(c)

    8.375        05/15/18        4,200        4,641,000   

Gtd. Notes(c)

    10.750        09/15/16        3,225        3,305,625   

D.R. Horton, Inc., Gtd. Notes(c)

    4.750        05/15/17        3,000        3,067,500   

KB Home,

       

Gtd. Notes(c)

    4.750        05/15/19        5,659        5,644,852   

Gtd. Notes

    7.250        06/15/18        2,000        2,137,500   

Lennar Corp.,

       

Gtd. Notes(c)

    4.500        06/15/19        2,600        2,684,500   

Gtd. Notes

    4.500        11/15/19        1,000        1,036,250   

Gtd. Notes(c)

    4.750        12/15/17        5,075        5,214,563   

M/I Homes, Inc., Gtd. Notes

    6.750        01/15/21        2,075        2,085,375   

Meritage Homes Corp., Gtd. Notes

    4.500        03/01/18        1,500        1,530,000   

Taylor Morrison Communities, Inc./Monarch Communities, Inc., Gtd. Notes, 144A

    5.250        04/15/21        850        852,125   

Toll Brothers Finance Corp.,

       

Gtd. Notes

    4.000        12/31/18        400        415,000   

Gtd. Notes(c)

    8.910        10/15/17        1,600        1,748,000   

TRI Pointe Group, Inc., Gtd. Notes

    4.875        07/01/21        2,400        2,403,000   

WCI Communities, Inc., Gtd. Notes(c)

    6.875        08/15/21        5,250        5,263,125   

William Lyon Homes, Inc.,

       

Gtd. Notes

    5.750        04/15/19        1,350        1,333,125   

Gtd. Notes

    8.500        11/15/20        2,300        2,392,000   
       

 

 

 
          59,096,104   

Internet    0.7%

  

Ancestry.com, Inc., Gtd. Notes

    11.000        12/15/20        3,835        4,141,800   

Iron/Steel    1.8%

  

ArcelorMittal (Luxembourg),

       

Sr. Unsec’d. Notes

    6.125        06/01/18        5,200        5,427,500   

Sr. Unsec’d. Notes

    10.850        06/01/19        980        1,153,950   

BlueScope Steel Finance Ltd./BlueScope Steel Finance USA LLC (Australia), Gtd. Notes, 144A

    6.500        05/15/21        2,020        2,075,550   

United States Steel Corp., Sr. Sec’d. Notes, 144A

    8.375        07/01/21        1,535        1,584,887   
       

 

 

 
          10,241,887   

 

See Notes to Financial Statements.

 

16  


Description   Interest
Rate
    Maturity
Date
    Principal
Amount (000)#
    Value (Note 1)  

CORPORATE BONDS (Continued)

  

Leisure Time    0.9%

  

NCL Corp. Ltd.,

       

Sr. Unsec’d. Notes, 144A

    4.625 %       11/15/20        1,725      $ 1,759,500   

Sr. Unsec’d. Notes, 144A

    5.250        11/15/19        2,400        2,448,000   

Viking Cruises Ltd., Sr. Unsec’d. Notes, 144A
(original cost $1,176,563; purchased 04/19/16)(d)(e)

    8.500        10/15/22        1,250        1,112,500   
       

 

 

 
          5,320,000   

Lodging    3.3%

  

Boyd Gaming Corp., Gtd. Notes

    9.000        07/01/20        2,389        2,505,464   

Golden Nugget Escrow, Inc., Sr. Unsec’d. Notes, 144A

    8.500        12/01/21        1,500        1,556,250   

MGM Resorts International, Gtd. Notes(c)

    8.625        02/01/19        6,280        7,112,100   

Station Casinos LLC, Gtd. Notes

    7.500        03/01/21        4,491        4,726,777   

Sugarhouse HSP Gaming Prop Mezz LP/Sugarhouse HSP Gaming Finance Corp., Sr. Sec’d. Notes, 144A
(original cost $2,719,250; purchased 03/14/16 - 04/01/16)(d)(e)

    6.375        06/01/21        2,800        2,772,000   
       

 

 

 
          18,672,591   

Machinery-Construction & Mining    0.4%

  

Terex Corp.,

       

Gtd. Notes

    6.000        05/15/21        750        741,563   

Gtd. Notes

    6.500        04/01/20        1,425        1,417,875   
       

 

 

 
          2,159,438   

Machinery-Diversified    1.2%

  

Cleaver-Brooks, Inc., Sr. Sec’d. Notes, 144A
(original cost $3,350,250; purchased 03/21/14 - 02/26/16)(c)(d)(e)

    8.750        12/15/19        3,400        3,357,500   

CNH Industrial Capital LLC, Gtd. Notes(c)

    4.375        11/06/20        1,900        1,885,750   

SPX FLOW, Inc., Gtd. Notes

    6.875        09/01/17        1,525        1,587,906   
       

 

 

 
          6,831,156   

Media    9.9%

  

Cablevision Systems Corp.,

       

Sr. Unsec’d. Notes(c)

    7.750        04/15/18        2,250        2,396,250   

Sr. Unsec’d. Notes(c)

    8.625        09/15/17        7,300        7,765,375   

CCO Holdings LLC/CCO Holdings Capital Corp., Sr. Unsec’d. Notes

    6.625        01/31/22        4,050        4,297,050   

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     17   


Portfolio of Investments (continued)

as of May 31, 2016

 

Description   Interest
Rate
    Maturity
Date
    Principal
Amount (000)#
    Value (Note 1)  

CORPORATE BONDS (Continued)

  

Media (cont’d.)

  

Cequel Communications Holdings I LLC/Cequel Capital Corp.,

       

Sr. Unsec’d. Notes, 144A

    5.125 %       12/15/21        2,345      $ 2,239,475   

Sr. Unsec’d. Notes, 144A

    6.375        09/15/20        4,175        4,250,192   

Clear Channel Worldwide Holdings, Inc., Series A, Gtd. Notes

    7.625        03/15/20        215        197,800   

Cogeco Communications, Inc. (Canada), Gtd. Notes, 144A(c)

    4.875        05/01/20        2,500        2,559,375   

DISH DBS Corp.,

       

Gtd. Notes(c)

    4.250        04/01/18        4,590        4,704,750   

Gtd. Notes

    4.625        07/15/17        1,800        1,842,750   

Gtd. Notes

    5.125        05/01/20        225        228,094   

Gtd. Notes(c)

    7.875        09/01/19        1,000        1,103,750   

Entercom Radio LLC, Gtd. Notes(c)

    10.500        12/01/19        4,000        4,230,000   

Mediacom LLC/Mediacom Capital Corp., Sr. Unsec’d. Notes

    7.250        02/15/22        1,045        1,105,088   

Midcontinent Communications & Midcontinent Finance Corp., Gtd. Notes, 144A

    6.250        08/01/21        1,025        1,060,875   

Sinclair Television Group, Inc.,

       

Gtd. Notes

    5.375        04/01/21        1,225        1,267,875   

Gtd. Notes

    6.375        11/01/21        1,010        1,065,550   

TEGNA, Inc., Gtd. Notes

    5.125        10/15/19        650        669,500   

Univision Communications, Inc.,
Gtd. Notes, 144A
(original cost $3,260,985; purchased 08/26/15 - 05/31/16)(c)(d)(e)

    8.500        05/15/21        3,111        3,250,995   

Sr. Sec’d. Notes, 144A
(original cost $4,085,731; purchased 4/29/16 - 05/09/16)(c)(d)(e)

    6.750        09/15/22        3,840        4,075,200   

UPCB Finance V Ltd. (Netherlands), Sr. Sec’d. Notes, 144A

    7.250        11/15/21        4,487        4,722,041   

UPCB Finance VI Ltd. (Netherlands), Sr. Sec’d. Notes, 144A

    6.875        01/15/22        2,022        2,133,526   
       

 

 

 
          55,165,511   

Mining    4.3%

  

Alamos Gold, Inc. (Canada), Sec’d. Notes, 144A(c)

    7.750        04/01/20        1,500        1,462,500   

Alcoa, Inc., Sr. Unsec’d. Notes(c)

    6.750        07/15/18        3,000        3,240,000   

Freeport-McMoRan, Inc., Gtd. Notes

    2.300        11/14/17        1,660        1,618,500   

Kaiser Aluminum Corp., Gtd. Notes

    8.250        06/01/20        1,200        1,249,500   

Lundin Mining Corp. (Canada), Sr. Sec’d. Notes, 144A(c)

    7.500        11/01/20        3,825        3,891,937   

 

See Notes to Financial Statements.

 

18  


Description   Interest
Rate
    Maturity
Date
    Principal
Amount (000)#
    Value (Note 1)  

CORPORATE BONDS (Continued)

  

Mining (cont’d.)

  

New Gold, Inc. (Canada), Gtd. Notes, 144A

    7.000     04/15/20        1,325      $ 1,329,969   

Teck Resources Ltd. (Canada),

       

Gtd. Notes

    3.000        03/01/19        3,995        3,825,212   

Gtd. Notes

    3.150        01/15/17        3,450        3,485,915   

Gtd. Notes

    3.850        08/15/17        2,000        2,060,000   

Gtd. Notes, 144A

    8.000        06/01/21        1,750        1,785,000   
       

 

 

 
          23,948,533   

Miscellaneous Manufacturing    1.3%

  

Bombardier, Inc. (Canada), Sr. Unsec’d. Notes, 144A(c)

    7.500        03/15/18        2,633        2,685,660   

Koppers, Inc., Gtd. Notes(c)

    7.875        12/01/19        4,249        4,360,536   
       

 

 

 
          7,046,196   

Oil & Gas    1.7%

  

Pacific Exploration & Production Corp. (Colombia), Gtd. Notes, 144A
(original cost $231,250; purchased 12/19/12)(d)(e)(f)

    7.250        12/12/21        200        30,500   

Sunoco LP/Sunoco Finance Corp.,

       

Gtd. Notes, 144A

    5.500        08/01/20        850        843,625   

Gtd. Notes, 144A(c)

    6.250        04/15/21        2,750        2,750,000   

Tesoro Corp., Gtd. Notes(c)

    4.250        10/01/17        3,675        3,757,687   

Western Refining, Inc., Gtd. Notes

    6.250        04/01/21        976        880,840   

WPX Energy, Inc., Sr. Unsec’d. Notes

    7.500        08/01/20        1,525        1,494,500   
       

 

 

 
          9,757,152   

Oil & Gas Services    0.4%

  

PHI, Inc., Gtd. Notes

    5.250        03/15/19        700        628,250   

SESI LLC, Gtd. Notes

    6.375        05/01/19        1,565        1,459,363   
       

 

 

 
          2,087,613   

Packaging & Containers    5.3%

  

AEP Industries, Inc., Sr. Unsec’d. Notes(c)

    8.250        04/15/19        5,100        5,202,000   

Ardagh Packaging Finance PLC (Ireland), Gtd. Notes, 144A

    9.125        10/15/20        838        878,224   

Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc. (Ireland), Gtd. Notes, 144A

    6.250        01/31/19        650        658,125   

Beverage Packaging Holdings Luxembourg II SA/Beverage Packaging Holdings II Issuer, Inc. (New Zealand), Gtd. Notes, 144A

    6.000        06/15/17        1,900        1,900,000   

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     19   


Portfolio of Investments (continued)

as of May 31, 2016

 

Description   Interest
Rate
    Maturity
Date
    Principal
Amount (000)#
    Value (Note 1)  

CORPORATE BONDS (Continued)

  

Packaging & Containers (cont’d.)

  

Coveris Holdings SA (Luxembourg), Gtd. Notes, 144A

    7.875 %       11/01/19        1,200      $ 1,176,000   

Greif, Inc.,

       

Sr. Unsec’d. Notes(c)

    6.750        02/01/17        1,200        1,236,000   

Sr. Unsec’d. Notes(c)

    7.750        08/01/19        6,050        6,768,437   

PaperWorks Industries, Inc., Sr. Sec’d. Notes, 144A(c)

    9.500        08/15/19        3,000        2,782,500   

Plastipak Holdings, Inc., Sr. Unsec’d. Notes, 144A
(original cost $2,506,125; purchased 11/04/15 - 02/09/16)(c)(d)(e)

    6.500        10/01/21        2,550        2,616,938   

Reynolds Group Issuer, Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer LU (New Zealand),

       

Gtd. Notes

    9.000        04/15/19        575        586,500   

Gtd. Notes

    9.875        08/15/19        4,700        4,882,125   

Sealed Air Corp., Gtd. Notes, 144A

    6.500        12/01/20        1,045        1,191,300   
       

 

 

 
          29,878,149   

Pharmaceuticals    2.6%

  

Allergan, Inc., Gtd. Notes(c)

    1.350        03/15/18        2,240        2,219,764   

Capsugel SA, Sr. Unsec’d. Notes, PIK, 144A

    7.000        05/15/19        2,878        2,888,793   

NBTY, Inc., Sr. Unsec’d. Notes, 144A

    7.625        05/15/21        2,775        2,830,500   

Valeant Pharmaceuticals International, Inc.,

       

Gtd. Notes, 144A(c)

    5.375        03/15/20        4,025        3,552,062   

Gtd. Notes, 144A

    6.375        10/15/20        900        801,000   

Gtd. Notes, 144A

    7.500        07/15/21        2,250        2,036,250   
       

 

 

 
          14,328,369   

Pipelines    0.6%

  

Rockies Express Pipeline LLC, Sr. Unsec’d. Notes, 144A
(original cost $2,144,688; purchased 01/10/13 - 05/02/13)(c)(d)(e)

    6.000        01/15/19        2,150        2,230,625   

Tesoro Logistics LP/Tesoro Logistics Finance Corp., Gtd. Notes

    6.125        10/15/21        1,325        1,368,062   
       

 

 

 
          3,598,687   

Real Estate    0.3%

  

Realogy Group LLC/Realogy Co-Issuer Corp., Gtd. Notes, 144A

    5.250        12/01/21        1,425        1,474,875   

Real Estate Investment Trusts (REITs)    1.0%

  

DuPont Fabros Technology LP, Gtd. Notes(c)

    5.875        09/15/21        3,691        3,875,550   

MPT Operating Partnership LP/MPT Finance Corp., Gtd. Notes

    6.375        02/15/22        1,500        1,571,415   
       

 

 

 
          5,446,965   

 

See Notes to Financial Statements.

 

20  


Description   Interest
Rate
    Maturity
Date
    Principal
Amount (000)#
    Value (Note 1)  

CORPORATE BONDS (Continued)

  

Retail    5.1%

  

AmeriGas Finance LLC/AmeriGas Finance Corp., Gtd. Notes

    6.750 %       05/20/20        300      $ 310,125   

Claire’s Stores, Inc.,

       

Sr. Sec’d. Notes, 144A

    6.125        03/15/20        400        204,000   

Sr.Sec’d. Notes, 144A(c)

    9.000        03/15/19        4,200        2,583,000   

Dollar Tree, Inc., Gtd. Notes, 144A

    5.250        03/01/20        700        729,750   

Ferrellgas Partners LP/Ferrellgas Partners Finance Corp., Sr. Unsec’d. Notes

    8.625        06/15/20        1,300        1,267,500   

GameStop Corp., Gtd. Notes, 144A

    6.750        03/15/21        2,250        2,199,375   

L Brands, Inc.,

       

Gtd. Notes

    6.625        04/01/21        800        891,000   

Gtd. Notes

    8.500        06/15/19        975        1,133,438   

Landry’s, Inc., Gtd. Notes, 144A
(original cost $10,220,414; purchased 05/27/14 - 05/06/16)(c)(d)(e)

    9.375        05/01/20        9,470        9,943,500   

Neiman Marcus Group Ltd. LLC, Gtd. Notes, 144A

    8.000        10/15/21        2,490        1,879,950   

THOM Europe SAS (France), Sr. Sec’d. Notes, 144A

    7.375        07/15/19      EUR  4,000        4,723,174   

Yum! Brands, Inc., Sr. Unsec’d. Notes(c)

    3.875        11/01/20        2,400        2,403,000   
       

 

 

 
          28,267,812   

Semiconductors    2.3%

  

Freescale Semiconductor, Inc., Sr. Sec’d. Notes, 144A(c)

    6.000        01/15/22        6,610        7,011,227   

NXP BV/NXP Funding LLC (Netherlands), Gtd. Notes, 144A(c)

    4.125        06/15/20        2,900        2,958,000   

Gtd. Notes, 144A

    4.125        06/01/21        2,200        2,216,500   

Gtd. Notes, 144A

    5.750        02/15/21        500        520,625   
       

 

 

 
          12,706,352   

Software    4.5%

  

Activision Blizzard, Inc., Gtd. Notes, 144A

    5.625        09/15/21        2,895        3,039,750   

Change Healthcare Holdings, Inc., Gtd. Notes(c)

    11.000        12/31/19        8,000        8,480,000   

First Data Corp., Sr. Sec’d. Notes, 144A(c)

    6.750        11/01/20        5,223        5,497,207   

Infor U.S., Inc., Sr. Sec’d. Notes, 144A
(original cost $5,345,725; purchased 08/11/15 - 02/22/16)(c)(d)(e)

    5.750        08/15/20        5,340        5,593,063   

Nuance Communications, Inc., Gtd. Notes, 144A

    5.375        08/15/20        2,335        2,372,944   
       

 

 

 
          24,982,964   

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     21   


Portfolio of Investments (continued)

as of May 31, 2016

 

Description   Interest
Rate
    Maturity
Date
    Principal
Amount (000)#
    Value (Note 1)  

CORPORATE BONDS (Continued)

  

Telecommunications    9.1%

  

CenturyLink, Inc., Sr. Unsec’d. Notes, Series N

    6.000 %       04/01/17        1,100      $ 1,133,000   

Clearwire Communications LLC/Clearwire Finance, Inc., Sr. Sec’d. Notes, 144A(c)

    14.750        12/01/16        5,950        6,292,125   

CommScope Holding Co., Inc., Sr. Unsec’d. Notes, PIK, 144A(c)

    6.625        06/01/20        4,670        4,827,612   

CommScope, Inc., Sr. Sec’d. Notes, 144A(c)

    4.375        06/15/20        3,975        4,094,250   

Embarq Corp., Sr. Unsec’d. Notes

    7.082        06/01/16        46        46,000   

Frontier Communications Corp., Sr. Unsec’d. Notes

    8.125        10/01/18        1,775        1,925,875   

Intelsat Jackson Holdings SA (Luxembourg), Gtd. Notes

    7.250        04/01/19        1,710        1,273,950   

Level 3 Financing, Inc., Gtd. Notes(c)

    6.125        01/15/21        5,350        5,590,750   

Qwest Capital Funding, Inc., Gtd. Notes

    6.500        11/15/18        1,000        1,045,000   

Sprint Communications, Inc., Gtd. Notes, 144A(c)

    9.000        11/15/18        3,830        4,074,163   

T-Mobile USA, Inc.,

       

Gtd. Notes

    6.464        04/28/19        825        838,922   

Gtd. Notes

    6.542        04/28/20        1,150        1,188,065   

Gtd. Notes

    6.625        11/15/20        1,000        1,032,700   

Telecom Italia Capital SA (Italy), Gtd. Notes

    6.999        06/04/18        2,060        2,240,250   

Telesat Canada/Telesat LLC (Canada), Gtd. Notes, 144A(c)

    6.000        05/15/17        6,000        6,000,000   

Wind Acquisition Finance SA (Italy), Sr. Sec’d. Notes, 144A

    6.500        04/30/20        3,300        3,390,750   

Windstream Services LLC, Gtd. Notes(c)

    7.875        11/01/17        5,750        6,059,062   
       

 

 

 
          51,052,474   

Textiles    0.2%

  

Springs Industries, Inc., Sr. Sec’d. Notes

    6.250        06/01/21        1,325        1,341,563   

Transportation    0.7%

  

XPO Logistics, Inc., Sr. Unsec’d. Notes, 144A(c)

    7.875        09/01/19        3,750        3,900,000   
       

 

 

 

TOTAL CORPORATE BONDS
(cost $717,406,132)

          710,599,460   
       

 

 

 

TOTAL LONG-TERM INVESTMENTS
(cost $739,900,891)

          733,127,932   
       

 

 

 

 

See Notes to Financial Statements.

 

22  


Description           Shares     Value (Note 1)  

SHORT-TERM INVESTMENT    5.1%

       

AFFILIATED MUTUAL FUND

       

Prudential Investment Portfolios 2 - Prudential Core
Ultra Short Bond Fund
(cost $28,456,001)(Note 3)(g)

        28,456,001      $ 28,456,001   
       

 

 

 

TOTAL INVESTMENTS    136.4%
(cost $768,356,892)(Note 5)

          761,583,933   

Liabilities in excess of other assets(h)    (36.4)%

          (203,180,789
       

 

 

 

NET ASSETS    100.0%

        $ 558,403,144   
       

 

 

 

 

The following abbreviations are used in the annual report:

144A—Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. Unless otherwise noted, 144A securities are deemed to be liquid.

RegS—Regulation S. Security was purchased pursuant to Regulation S and may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.

EUR—Euro

L2—Level 2

L3—Level 3

MTN—Medium Term Note

OTC—Over-the-counter

PIK—Payment-in-Kind

# Principal amount is shown in U.S. dollars unless otherwise stated.
(a) Variable rate instrument. The interest rate shown reflects the rate in effect at May 31, 2016.
(b) Indicates a Level 3 security. The aggregate value of Level 3 securities is $5,274,664 and 0.9% of net assets.
(c) Represents security, or a portion thereof, with aggregate value of $403,700,010 segregated as collateral for amount of $205,000,000 borrowed and outstanding as of May 31, 2016. Of such securities, securities in the amount of $135,746,653 have been loaned for which, the amount borrowed serves as collateral. Securities on loan are subject to contractual netting arrangements.
(d) Indicates a security that has been deemed illiquid. (unaudited)
(e) Indicates a restricted security; the aggregate original cost of the restricted securities is $62,658,744. The aggregate value, $59,991,161, is approximately 10.7% of net assets.
(f) Represents issuer in default on interest payments and/or principal repayment. Non-income producing security.
(g) Prudential Investments LLC, the manager of the Fund, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Ultra Short Bond Fund.

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     23   


Portfolio of Investments (continued)

as of May 31, 2016

 

(h) Includes net unrealized appreciation (depreciation) on the following derivative contracts held at reporting period end:

 

Forward foreign currency exchange contracts outstanding at May 31, 2016:

 

Purchase Contracts

  Counterparty   Notional
Amount
(000)
    Value at
Settlement
Date
    Current
Value
    Unrealized
Appreciation
(Depreciation)
 

OTC forward foreign currency exchange contracts:

  

Euro,

         

Expiring 06/02/16

  Goldman Sachs & Co.     EUR 4,065      $ 4,531,142      $ 4,523,069      $ (8,073
     

 

 

   

 

 

   

 

 

 

Sale Contracts

  Counterparty   Notional
Amount
(000)
    Value at
Settlement
Date
    Current
Value
    Unrealized
Appreciation
(Depreciation)
 

OTC forward foreign currency exchange contracts:

  

Euro,

         

Expiring 06/02/16

  Goldman Sachs & Co.     EUR 4,065      $ 4,601,428      $ 4,523,069      $ 78,359   

Expiring 07/05/16

  Goldman Sachs & Co.     EUR 4,065        4,536,386        4,529,049        7,337   
     

 

 

   

 

 

   

 

 

 
      $ 9,137,814      $ 9,052,118      $ 85,696   
     

 

 

   

 

 

   

 

 

 
          $ 77,623   
         

 

 

 

 

Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below.

 

Level 1—quoted prices generally in active markets for identical securities.

 

Level 2—quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates and other observable inputs.

 

Level 3—unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.

 

The following is a summary of the inputs used as of May 31, 2016 in valuing such portfolio securities:

 

       Level 1           Level 2           Level 3     

Investments in Securities

     

Bank Loans

  $      $ 19,274,514      $ 3,253,958   

Corporate Bonds

           708,578,754        2,020,706   

Affiliated Mutual Fund

    28,456,001                 

Other Financial Instruments*

     

OTC Forward Foreign Currency Exchange Contracts

           77,623          
 

 

 

   

 

 

   

 

 

 

Total

  $ 28,456,001      $ 727,930,891      $ 5,274,664   
 

 

 

   

 

 

   

 

 

 

 

See Notes to Financial Statements.

 

24  


The following is a reconciliation of assets in which unobservable inputs (Level 3) were used in determining fair value:

 

    Bank
Loans
    Corporate
Bonds
 

Balance as of 05/31/15

  $      $ 12,888,346   

Realized gain (loss)

    5,004        1,015   

Change in unrealized appreciation (depreciation)**

    (6,041     (91,793

Purchases

    3,420,901        1,569,505   

Sales/Paydowns

    (168,327     (212,388

Accrued discount/premium

    2,421          

Transfers into Level 3

           754,367   

Transfers out of Level 3

           (12,888,346
 

 

 

   

 

 

 

Balance as of 05/31/16

  $ 3,253,958      $ 2,020,706   
 

 

 

   

 

 

 

 

* Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as futures, forwards and centrally cleared swap contracts, which are recorded at the unrealized appreciation/depreciation on the instrument, and OTC swap contracts which are recorded at fair value.
** Of which, $(97,834) was relating to securities held at the reporting period end.

 

Level 3 securities as presented in the table above are being fair valued using pricing methodologies approved by Board, which contain unobservable inputs as follows:

 

Level 3 Securities

  Fair Value as of
May 31, 2016
    Valuation
Methodology
    Unobservable Inputs  

Bank Loans

  $ 3,253,958        Market Approach        Single Broker Indicative Quote   

Corporate Bonds

    2,020,706        Market Approach        Single Broker Indicative Quote   
 

 

 

     
  $ 5,274,664       
 

 

 

     

 

It is the Fund’s policy to recognize transfers in and transfers out at the fair value as of the beginning of period. At the reporting period end, securities transferred levels as follows:

 

Investments in
Securities

  Amount Transferred     Level Transfer     Logic  

Corporate Bonds

  $ 754,367        L2 to L3        Evaluated Bid to Single Broker Indicative Quote   

Corporate Bonds

  $ 12,888,346        L3 to L2        Single Broker Indicative Quote to Evaluated Bid  

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     25   


Portfolio of Investments (continued)

as of May 31, 2016

 

 

The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of May 31, 2016 were as follows (unaudited):

 

Home Builders

    10.8

Media

    9.9   

Telecommunications

    9.6   

Entertainment

    9.1   

Healthcare—Services

    8.8   

Chemicals

    6.1   

Electric

    6.1   

Packaging & Containers

    5.3   

Affiliated Mutual Fund

    5.1   

Retail

    5.1   

Diversified Financial Services

    4.6   

Software

    4.5   

Mining

    4.4   

Commercial Services

    4.4   

Building Materials

    3.6   

Lodging

    3.5   

Food

    2.8   

Pharmaceuticals

    2.6   

Semiconductors

    2.3   

Airlines

    2.2   

Healthcare—Products

    2.1   

Iron/Steel

    1.8   

Auto Parts & Equipment

    1.8   

Oil & Gas

    1.7   

Beverages

    1.7   

Computers

    1.3   

Technology

    1.3   

Miscellaneous Manufacturing

    1.3   

Machinery—Diversified

    1.2

Forest Products & Paper

    1.2   

Real Estate Investment Trusts (REITs)

    1.0   

Leisure Time

    0.9   

Banks

    0.8   

Internet

    0.7   

Transportation

    0.7   

Holding Companies—Diversified

    0.7   

Electronics

    0.7   

Pipelines

    0.6   

Environmental Control

    0.6   

Auto Manufacturers

    0.5   

Electrical Components & Equipment

    0.5   

Machinery—Construction & Mining

    0.4   

Oil & Gas Services

    0.4   

Gas

    0.3   

Real Estate

    0.3   

Agriculture

    0.2   

Textiles

    0.2   

Media & Entertainment

    0.2   

Apparel

    0.2   

Food Service

    0.2   

Distribution/Wholesale

    0.1   
 

 

 

 
    136.4   

Liabilities in excess of other assets

    (36.4
 

 

 

 
    100.0
 

 

 

 

 

The Fund invested in derivative instruments during the reporting period. The primary type of risk associated with these derivative instruments is foreign exchange risk. The effect of such derivative instruments on the Fund’s financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.

 

See Notes to Financial Statements.

 

26  


Fair values of derivative instruments as of May 31, 2016 as presented in the Statement of Assets and Liabilities:

 

Derivatives not accounted
for as hedging instruments,
carried at fair value

  

Asset Derivatives

    

Liability Derivatives

 
  

Balance Sheet
Location

   Fair
Value
    

Balance Sheet
Location

   Fair
Value
 
Foreign exchange contracts    Unrealized appreciation on OTC forward foreign currency exchange contracts    $ 85,696       Unrealized depreciation on OTC forward foreign currency exchange contracts    $ 8,073   
     

 

 

       

 

 

 

 

The effects of derivative instruments on the Statement of Operations for the year ended May 31, 2016 are as follows:

 

Amount of Realized Gain (Loss) on Derivatives Recognized in Income

 

Derivatives not accounted for as hedging
instruments, carried at fair value

     Forward
Currency
Contracts*
 

Foreign exchange contracts

     $ 78,098   
    

 

 

 

 

* Included in net realized gain (loss) on foreign currency transactions in the Statement of Operations.

 

Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Income

 

Derivatives not accounted for as hedging
instruments, carried at fair value

     Forward
Currency
Contracts*
 

Foreign exchange contracts

     $ 127,110   
    

 

 

 

 

* Included in net change in unrealized appreciation (depreciation) on foreign currencies in the Statement of Operations.

 

For the year ended May 31, 2016, the Fund’s average volume of derivative activities is as follows:

 

Forward Foreign Currency
Exchange Contracts—Purchased(1)
    Forward Foreign Currency
Exchange Contracts—Sold(1)
 
$ 6,474,382      $ 12,481,020   

 

(1) Value at Settlement Date.

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     27   


Portfolio of Investments (continued)

as of May 31, 2016

 

 

Offsetting of OTC derivative assets and liabilities:

 

The Fund invested in OTC derivatives during the reporting period that are either offset in accordance with current requirements or are subject to enforceable master netting arrangements or similar agreements that permit offsetting. The information about offsetting and related netting arrangements for OTC derivatives, where the legal right to set-off exists, is presented in the summary below.

 

Counterparty

  Gross
amounts of
recognized
assets(1)
    Gross
amounts
available
for offset
    Collateral
Received
    Net
Amount
 

Goldman Sachs & Co.

  $ 85,696      $ (8,073   $      $ 77,623   
 

 

 

       

Counterparty

  Gross
amounts of
recognized
liabilities(2)
    Gross
amounts
available
for offset
    Collateral
Pledged
    Net
Amount
 

Goldman Sachs & Co.

  $ (8,073   $ 8,073      $   —      $  —   
 

 

 

       

 

(1) Includes unrealized appreciation on swaps and forwards, premiums paid on swap agreements and market value of purchased options.
(2) Includes unrealized depreciation on swaps and forwards, premiums received on swap agreements and market value of written options.

 

See Notes to Financial Statements.

 

28  


Statement of Assets & Liabilities

as of May 31, 2016

 

Assets

        

Investments at value, including securities on loan of $135,746,653:

  

Unaffiliated investments (cost $739,900,891)

   $ 733,127,932   

Affiliated investments (cost $28,456,001)

     28,456,001   

Cash

     207,412   

Dividends and interest receivable

     12,616,990   

Receivable for investments sold

     560,000   

Unrealized appreciation on OTC forward foreign currency exchange contracts

     85,696   

Prepaid expenses

     1,167   
  

 

 

 

Total assets

     775,055,198   
  

 

 

 

Liabilities

        

Loan payable

     205,000,000   

Payable for investments purchased

     10,697,091   

Management fee payable

     511,289   

Loan interest payable

     227,242   

Dividends payable

     96,818   

Accrued expenses

     81,106   

Deferred directors’ fees

     30,435   

Unrealized depreciation on OTC forward foreign currency exchange contracts

     8,073   
  

 

 

 

Total liabilities

     216,652,054   
  

 

 

 

Net Assets

   $ 558,403,144   
  

 

 

 
          

Net assets were comprised of:

  

Common stock, at par

   $ 33,257   

Paid-in capital in excess of par

     633,874,484   
  

 

 

 
     633,907,741   

Undistributed net investment income

     3,499,918   

Accumulated net realized loss on investment and foreign currency transactions

     (72,308,582

Net unrealized depreciation on investments and foreign currencies

     (6,695,933
  

 

 

 

Net assets, May 31, 2016

   $ 558,403,144   
  

 

 

 

Net asset value per share
($558,403,144 ÷ 33,256,724 shares of common stock issued and outstanding)

   $ 16.79   
  

 

 

 

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     29   


Statement of Operations

Year Ended May 31, 2016

 

Net Investment Income (Loss)

        

Income

  

Interest income (net of foreign withholding taxes of $2,554)

   $ 43,828,042   

Other income

     52,876   

Affiliated dividend income

     42,763   
  

 

 

 

Total income

     43,923,681   
  

 

 

 

Expenses

  

Management fee

     6,024,854   

Loan interest expense

     2,243,483   

Legal fees and expenses

     89,000   

Custodian and accounting fees

     80,000   

Shareholders’ reports

     70,000   

Audit fee

     47,000   

Directors’ fees

     41,000   

Registration fees

     34,000   

Transfer agent’s fees and expenses

     19,000   

Insurance expenses

     7,000   

Miscellaneous

     12,242   
  

 

 

 

Total expenses

     8,667,579   
  

 

 

 

Net investment income (loss)

     35,256,102   
  

 

 

 

Realized And Unrealized Gain (Loss) On Investment And Foreign Currency Transactions

        

Net realized gain (loss) on:

  

Investment transactions

     (20,993,168

Foreign currency transactions

     (156,810
  

 

 

 
     (21,149,978
  

 

 

 

Net change in unrealized appreciation (depreciation) on:

  

Investments

     (3,849,569

Foreign currencies

     127,449   
  

 

 

 
     (3,722,120
  

 

 

 

Net gain (loss) on investment and foreign currency transactions

     (24,872,098
  

 

 

 

Net Increase (Decrease) In Net Assets Resulting From Operations

   $ 10,384,004   
  

 

 

 

 

See Notes to Financial Statements.

 

30  


Statement of Changes in Net Assets

     Year Ended May 31,  
     2016      2015  

Increase (Decrease) in Net Assets

                 

Operations

     

Net investment income (loss)

   $ 35,256,102       $ 39,764,071   

Net realized gain (loss) on investment and foreign currency transactions

     (21,149,978      (6,951,976

Net change in unrealized appreciation (depreciation) on investments and foreign currencies

     (3,722,120      (12,935,914
  

 

 

    

 

 

 

Net increase (decrease) in net assets resulting from operations

     10,384,004         19,876,181   
  

 

 

    

 

 

 

Dividends from net investment income (Note 1)

     (45,146,003      (52,731,862
  

 

 

    

 

 

 

Total increase (decrease)

     (34,761,999      (32,855,681

Net Assets:

                 

Beginning of year

     593,165,143         626,020,824   
  

 

 

    

 

 

 

End of year(a)

   $ 558,403,144       $ 593,165,143   
  

 

 

    

 

 

 

(a) Includes undistributed net investment income of:

   $ 3,499,918       $ 4,648,041   
  

 

 

    

 

 

 

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     31   


Statement of Cash Flows

For Year Ended May 31, 2016

 

Increase (Decrease) in Cash

        

Cash flows from operating activities:

  

Interest and dividends paid (excluding discount and premium amortization of $(8,403,699))

   $ 53,975,355   

Operating expenses paid

     (6,468,880

Loan interest paid

     (2,026,316

Purchases of long-term portfolio investments

     (438,734,807

Proceeds from disposition of long-term portfolio investments

     423,256,110   

Net purchases and sales of short-term investments

     (21,436,797

Decrease in receivable for investments sold

     12,915,702   

Decrease in payable for investments purchased

     (6,086,858

Decrease in prepaid expenses

     201   

Net cash paid from foreign currency transactions

     (156,810

Effect of exchange rate changes

     339   
  

 

 

 

Net cash provided from operating activities

     15,237,239   
  

 

 

 

Cash flows from financing activities:

  

Cash dividends paid

     (45,174,143

Decrease in payable to custodian

     (38,510

Increase in borrowing

     30,000,000   
  

 

 

 

Net cash used in financing activities

     (15,212,653
  

 

 

 

Net increase/(decrease) in cash

     24,586   

Cash at beginning of year, including foreign currency

     182,826   
  

 

 

 

Cash at end of year, including foreign currency

   $ 207,412   
  

 

 

 

Reconciliation of Net Decrease in Net Assets to Net Cash Provided from Operating Activities

        

Net increase in net assets resulting from operations

   $ 10,384,004   
  

 

 

 

Increase in investments

     (28,511,795

Net realized loss on investment transactions

     21,149,978   

Decrease in net unrealized depreciation on investments

     3,722,120   

Net cash paid for foreign currency transactions

     (156,810

Effect of exchange rate changes

     339   

Decrease in interest and dividends receivable

     1,647,975   

Decrease in receivable for investments sold

     12,915,702   

Decrease in prepaid expenses

     201   

Decrease in payable for investments purchased

     (6,086,858

Increase in loan interest payable

     217,167   

Decrease in management fee payable and accrued expenses and other liabilities

     (52,984

Increase in deferred directors’ fees

     8,200   
  

 

 

 

Total adjustments

     4,853,235   
  

 

 

 

Net cash provided from operating activities

   $ 15,237,239   
  

 

 

 

 

See Notes to Financial Statements.

 

32  


Notes to Financial Statements

 

Prudential Short Duration High Yield Fund, Inc. (the “Fund”) is a diversified, closed-end management investment company, registered under the Investment Company Act of 1940, as amended (“1940 Act”). The Fund was incorporated as a Maryland corporation on November 14, 2011. The Fund’s investment objective is to provide a high level of current income.

 

Note 1. Accounting Policies

 

The Fund follows investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The following accounting policies conform to U.S. generally accepted accounting principles. The Fund consistently follows such policies in the preparation of its financial statements.

 

Securities Valuation: The Fund holds securities and other assets that are fair valued at the close of each day (generally, 4:00 PM Eastern time) the New York Stock Exchange (“NYSE”) is open for trading. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Board of Directors (the “Board”) has adopted Valuation Procedures for security valuation under which fair valuation responsibilities have been delegated to Prudential Investments LLC (“PI” or “Manager”). Under the current Valuation Procedures, the established Valuation Committee is responsible for supervising the valuation of portfolio securities and other assets. The Valuation Procedures permit the Fund to utilize independent pricing vendor services, quotations from market makers, and alternative valuation methods when market quotations are either not readily available or not deemed representative of fair value. A record of the Valuation Committee’s actions is subject to the Board’s review, approval, and ratification at its next regularly-scheduled quarterly meeting.

 

Various inputs determine how the Fund’s investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the table following the Portfolio of Investments.

 

Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.

 

Fixed income securities traded in the OTC market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors provide these prices after evaluating observable inputs including, but not limited to yield curves, yield spreads, credit

 

Prudential Short Duration High Yield Fund, Inc.     33   


Notes to Financial Statements (continued)

 

ratings, deal terms, tranche level attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations, and reported trades. Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.

 

Bank loans traded in the OTC market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors utilize broker/dealer quotations and provide prices based on the average of such quotations. Bank loans valued using such vendor prices are generally classified as Level 2 in the fair value hierarchy.

 

OTC derivative instruments are generally valued using pricing vendor services, which derive the valuation based on inputs such as underlying asset prices, indices, spreads, interest rates, and exchange rates. These instruments are categorized as Level 2 in the fair value hierarchy.

 

Centrally cleared swaps listed or traded on a multilateral or trade facility platform, such as a registered exchange, are generally valued at the daily settlement price determined by the respective exchange. These securities are classified as Level 2 in the fair value hierarchy, as the daily settlement price is not public.

 

Securities and other assets that cannot be priced according to the methods described above are valued based on pricing methodologies approved by the Board. In the event that unobservable inputs are used when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.

 

When determining the fair value of securities, some of the factors influencing the valuation include: the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition and the markets in which it does business; the cost of the investment; the size of the holding and the capitalization of the issuer; the prices of any recent transactions or bids/offers for such securities or any comparable securities; any available analyst media or other reports or information deemed reliable by the investment adviser regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values.

 

Restricted and Illiquid Securities: Subject to guidelines adopted by the Board, the Fund may invest without limit in illiquid securities, including those which are restricted as to disposition under securities law (“restricted securities”). Restricted securities are valued pursuant to the valuation procedures noted above. Illiquid securities are those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale, cannot be sold within seven days in the ordinary course of business

 

34  


at approximately the amount at which the Fund has valued the investment. Therefore, the Fund may find it difficult to sell illiquid securities at the time considered most advantageous by its subadviser and may incur expenses that would not be incurred in the sale of securities that were freely marketable. Certain securities that would otherwise be considered illiquid because of legal restrictions on resale to the general public may be traded among qualified institutional buyers under Rule 144A of the Securities Act of 1933. These Rule 144A securities, as well as commercial paper that is sold in private placements under Section 4(a)(2) of the Securities Act, may be deemed liquid by the Fund’s subadviser under the guidelines adopted by the Directors of the Fund. However, the liquidity of the Fund’s investments in Rule 144A securities could be impaired if trading does not develop or declines.

 

Forward Currency Contracts: A forward currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The Fund enters into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings or specific receivables and payables denominated in a foreign currency. The contracts are valued daily at current exchange rates and any unrealized gain (loss) is included in net unrealized appreciation or depreciation on foreign currencies. Gain (loss) is realized on the settlement date of the contract equal to the difference between the settlement value of the original and negotiated forward contracts. This gain (loss), if any, is included in net realized gain (loss) on foreign currency transactions. Risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts. Forward currency contracts involve risks from currency exchange rate and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities. The Fund’s maximum risk of loss from counterparty credit risk is the net value of the cash flows to be received from the counterparty at the end of the contract’s life.

 

Swap Agreements: The Fund may enter into credit default, interest rate, total return and other forms of swap agreements. A swap agreement is an agreement to exchange the return generated by one instrument for the return generated by another instrument. Swap agreements are negotiated in the OTC market and may be executed either directly with counterparty (“OTC-traded”) or through a central clearing facility, such as a registered commodities exchange. Swap agreements are valued daily at current market value and any change in value is included in the net unrealized appreciation or depreciation on investments. Centrally cleared swaps pay or receive an amount known as “variation margin”, based on daily changes in the valuation of the swap contract. Payments received or paid by the Fund are recorded as realized gains (losses) upon termination or maturity of the swap. Risk of loss may exceed amounts recognized on the Statements of Assets and Liabilities. Swap agreements outstanding at period end, if any, are listed on the Portfolio of Investments.

 

Credit Default Swaps: Credit default swaps (“CDS”) involve one party (the protection buyer) making a stream of payments to another party (the protection seller) in exchange for the right to receive a specified payment in the event of a default or as a result of a default

 

Prudential Short Duration High Yield Fund, Inc.     35   


Notes to Financial Statements (continued)

 

(collectively a “credit event”) for the referenced entity (typically corporate issues or sovereign issues of an emerging country) on its obligation; or in the event of a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising a credit index.

 

The Fund is subject to credit risk in the normal course of pursuing its investment objectives. The Fund may enter into CDS contracts to provide a measure of protection against defaults or to take an active long or short position with respect to the likelihood of a particular issuer’s default or the reference entity’s credit soundness. CDS contracts generally trade based on a spread which represents the cost a protection buyer has to pay the protection seller. The protection buyer is said to be short the credit as the value of the contract rises the more the credit deteriorates. The value of the CDS contract increases for the protection buyer if the spread increases. The Fund may sell protection using credit default swaps to take an active short position with respect to the likelihood of a particular issuer’s default. The Fund’s maximum risk of loss from counterparty credit risk for purchased credit default swaps is the inability of the counterparty to honor the contract up to the notional value due to a credit event.

 

As a seller of protection on credit default swap agreements, the Fund generally receives an agreed upon payment from the buyer of protection throughout the term of the swap, provided no credit event occurs. As the seller, the Fund effectively increases its investment risk because, in addition to its total net assets, the Fund may be subject to investment exposure on the notional amount of the swap.

 

The maximum amount of the payment that the Fund, as a seller of protection, could be required to make under a credit default swap agreement would be equal to the notional amount of the underlying security or index contract as a result of a credit event. This potential amount will be partially offset by any recovery values of the respective referenced obligations, or net amounts received from the settlement of buy protection credit default swap agreements which the Fund entered into for the same referenced entity or index. As a buyer of protection, the Fund generally receives an amount up to the notional value of the swap if a credit event occurs.

 

Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues of an emerging country as of period end are disclosed in the footnotes to the Portfolio of Investments, if applicable. These spreads serve as indicators of the current status of the payment/performance risk and represent the likelihood of default risk for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to enter into the agreement. For credit default swap agreements on asset-backed securities and credit indices, the quoted

 

36  


market prices and resulting values serve as indicators of the current status of the payment/performance risk. Wider credit spreads and increased market value in absolute terms, when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement.

 

Master Netting Arrangements: The Fund is subject to various Master Agreements, or netting arrangements, with select counterparties. These are agreements which a subadviser may have negotiated and entered into on behalf of the Fund. A master netting arrangement between the Fund and the counterparty permits the Fund to offset amounts payable by the Fund to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Fund to cover the Fund’s exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable. In addition to master netting arrangements, the right to set-off exists when all the conditions are met such that each of the parties owes the other determinable amounts, the reporting party has the right to set-off the amount owed with the amount owed by the other party, the reporting party intends to set-off and the right of set-off is enforceable by law. During the reporting period, there was no intention to settle on a net basis and all amounts are presented on a gross basis on the Statement of Assets and Liabilities.

 

The Fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements with certain counterparties that govern OTC derivative and foreign exchange contracts entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral posted to the Fund is held in a segregated account by the Fund’s custodian and with respect to those amounts which can be sold or re-pledged, is presented in the Portfolio of Investments. Collateral pledged by the Fund is segregated by the Fund’s custodian and identified in the Portfolio of Investments. Collateral can be in the form of cash or debt securities issued by the U.S. Government or related agencies or other securities as agreed to by the Fund and the applicable counterparty. Collateral requirements are determined based on the Fund’s net position with each counterparty. Termination events applicable to the Fund may occur upon a decline in the Fund’s net assets below a specified threshold over a certain period of time. Termination events applicable to counterparties may occur upon a decline in the counterparty’s long-term and short term credit ratings below a specified level. In each case, upon occurrence, the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contracts outstanding, including the payment of any losses and costs resulting from such early termination, as reasonably determined by the terminating party. Any decision by one or more of the Fund’s counterparties to elect early termination could impact the Fund’s future derivative activity.

 

In addition to each instrument’s primary underlying risk exposure (e.g. interest rate, credit, equity or foreign exchange, etc.), swap agreements involve, to varying degrees, elements of credit, market and documentation risk. Such risks involve the possibility that no liquid

 

Prudential Short Duration High Yield Fund, Inc.     37   


Notes to Financial Statements (continued)

 

market for these agreements will exist, the counterparty to the agreement may default on its obligation to perform or disagree on the contractual terms of the agreement, and changes in net interest rates will be unfavorable. In connection with these agreements, securities in the portfolio may be identified or received as collateral from the counterparty in accordance with the terms of the respective swap agreements to provide or receive assets of value and to serve as recourse in the event of default or bankruptcy/insolvency of either party. Such OTC derivative agreements include conditions which, when materialized, give the counterparty the right to cause an early termination of the transactions under those agreements. Any election by the counterparty for early termination of the contract(s) may impact the amounts reported on financial statements.

 

As of May 31, 2016, the Fund has not met conditions under such agreements which give the counterparty the right to call for an early termination.

 

Forward currency contracts, forward rate agreements, written options, short sales, swaps and financial futures contracts involve elements of both market and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities. Such risks may be mitigated by engaging in master netting arrangements.

 

Loan Participations: The Fund may invest in loan participations. When the Fund purchases a loan participation, the Fund typically enters into a contractual relationship with the lender or third party selling such participations (“Selling Participant”), but not the borrower. As a result, the Fund assumes the credit risk of the borrower and any other persons interpositioned between the Fund and the borrower.

 

The Fund may not directly benefit from the collateral supporting the senior loan in which it has purchased the loan participation.

 

Payment In Kind Securities: The Fund may invest in the open market or receive pursuant to debt restructuring, securities that pay in kind (PIK) the interest due on such debt instruments. The PIK interest, computed at the contractual rate specified, is added to the existing principal balance of the debt when issued bonds have same terms as the bond or recorded as a separate bond when terms are different from the existing debt, and is recorded as interest income.

 

Cash Flow Information: The Fund invests in securities and distributes dividends from net investment income, which are paid in cash or are reinvested at the discretion of stockholders. These activities are reported in the Statement of Changes in Net Assets and additional information on cash receipts and cash payments is presented in the Statement of Cash Flows.

 

38  


Accounting practices that do not affect reporting activities on a cash basis include carrying investments at value, accruing income on PIK (payment-in-kind) securities and accreting discounts and amortizing premiums on debt obligations.

 

Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains (losses) from investment and currency transactions are calculated on the identified cost basis. Dividend income is recorded on the ex-date. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on an accrual basis. Expenses are recorded on an accrual basis, which may require the use of certain estimates by management that may differ from actual.

 

Dividends and Distributions: The Fund intends to make a level dividend distribution each month to the holders of Common Stock. The level dividend rate may be modified by the Board from time to time, and will be based upon the past and projected performance and expenses of the Fund. The Fund intends to also make a distribution during or with respect to each calendar year (which may be combined with a regular monthly distribution), which will generally include any net investment income and net realized capital gain for the year not otherwise distributed.

 

PI has received an order from the Securities and Exchange Commission granting the Fund an exemption from Section 19(b) of the 1940 Act and Rule 19b-1 thereunder to permit certain closed-end funds managed by PI to include realized long-term capital gains as a part of their respective regular distributions to the holders of Common Stock more frequently than would otherwise be permitted by the 1940 Act (generally once per taxable year). The Fund intends to rely on this exemptive order. The Board may, at the request of PI, adopt a managed distribution policy.

 

Dividends and distributions to stockholders, which are determined in accordance with federal income tax regulations and may differ from generally accepted accounting principles, are recorded on the ex-date. Permanent book/tax differences relating to income and gains are reclassified amongst undistributed net investment income (loss), accumulated net realized gain (loss) and paid-in capital in excess of par, as appropriate.

 

Taxes: For federal income tax purposes, it is the Fund’s policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net income and capital gains, if any, to its stockholders. Therefore, no federal income tax provision is required. However, due to the timing of when distributions are made by the Fund, the Fund may be subject to an excise tax of 4% of the amount by which 98% of the Fund’s annual taxable income for the calendar year and 98.2% of its net capital gains for a one-year period ending on October 31 exceed the distributions from such taxable income and net capital gains for the calendar year.

 

Estimates: The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

 

Prudential Short Duration High Yield Fund, Inc.     39   


Notes to Financial Statements (continued)

 

 

Note 2. Agreements

 

The Fund has a management agreement with PI. Pursuant to this agreement, PI has responsibility for all investment advisory services and supervises the subadviser’s performance of such services. PI has entered into a subadvisory agreement with Prudential Fixed Income (“PFI”), which is a business unit of PGIM, Inc. The subadvisory agreement provides that PFI will furnish investment advisory services in connection with the management of the Fund. In connection therewith, PFI is obligated to keep certain books and records of the Fund. PI pays for the services of PFI, the cost of compensation of officers of the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears all other cost and expenses. Prior to January 4, 2016, PGIM, Inc. was known as Prudential Investment Management, Inc. (“PIM”).

 

The management fee paid to PI is computed daily and payable monthly, at an annual rate of .80% of the average daily value of the Fund’s investable assets. “Investable assets” refers to the net assets attributable to the outstanding Common Stock of the Fund plus the liquidation preference of any outstanding preferred stock issued by the Fund, the principal amount of any borrowings and the principal on any debt securities issued by the Fund.

 

PI and PGIM, Inc. are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).

 

Note 3. Other Transactions with Affiliates

 

The Fund may enter into certain securities purchase or sale transactions under Board approved Rule 17a-7 procedures. Rule 17a-7 is an exemptive rule under the 1940 Act, that permits purchase and sale transactions among affiliated investment companies, or between an investment company and a person that is affiliated solely by reason of having a common (or affiliated) investment adviser, common directors, and/or common officers. Such transactions are subject to ratification by the Board.

 

The Fund invests in the Prudential Core Ultra Short Bond Fund, (formerly known as Prudential Core Taxable Money Market Fund), (the “Core Fund”), a portfolio of the Prudential Investment Portfolios 2, registered under 1940 Act, and managed by PI. Earnings from the Core Fund are disclosed on the Statement of Operations as “Affiliated dividend income”.

 

Note 4. Portfolio Securities

 

The cost of purchases and proceeds from sales of portfolio securities, other than short-term investments, for the year ended May 31, 2016, aggregated $434,060,849 and $422,274,226, respectively.

 

40  


Note 5. Distributions and Tax Information

 

Distributions to stockholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-date. In order to present undistributed net investment income, accumulated net realized loss on investment and foreign currency transactions and paid-in capital in excess of par on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to undistributed net investment income and accumulated net realized loss on investment and foreign currency transactions. For the year ended May 31, 2016, the adjustments were to increase undistributed net investment income and increase accumulated net realized loss on investment and foreign currency transactions by $8,741,778 due to differences in the treatment for book and tax purposes of premium amortization and certain transactions involving foreign securities and paydowns. Net investment income, net realized gain (loss) on investment and foreign currency transactions and net assets were not affected by this change.

 

For the years ended May 31, 2016 and May 31, 2015, the tax character of dividends paid by the Fund were $45,146,003 and $52,731,862 of ordinary income, respectively.

 

As of May 31, 2016, the accumulated undistributed earnings on a tax basis was $3,681,256. This differs from the amount shown on the Statement of Assets and Liabilities primarily due to cumulative timing differences between financial and tax reporting.

 

The United States federal income tax basis of the Fund’s investments and the net unrealized depreciation as of May 31, 2016 were as follows:

 

Tax Basis

 

Appreciation

 

Depreciation

 

Net

Unrealized

Depreciation

 

Other Cost Basis
Adjustments

 

Total Net
Unrealized
Depreciation

$780,994,508   $6,024,986   $(25,435,561)   $(19,410,575)   $(597)   $(19,411,172)

 

The difference between book basis and tax basis was primarily attributable to deferred losses on wash sales, differences in the treatment of premium amortization for book and tax purposes and other book to tax differences.

 

For federal income tax purposes, the Fund had a capital loss carryforward as of May 31, 2016 of approximately $36,008,000 which can be carried forward for an unlimited period. No capital gains distributions are expected to be paid to shareholders until net gains have been realized in excess of such losses.

 

In accordance with the provision of Subchapter M of the Internal Revenue Code and the excise tax requirements, the Fund elected to treat post-October capital losses of approximately $23,670,000 as having been incurred in the following fiscal year (May 31, 2017).

 

Prudential Short Duration High Yield Fund, Inc.     41   


Notes to Financial Statements (continued)

 

 

Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years and has concluded that no provision for income tax is required in the Fund’s financial statements for the current reporting period. The Fund’s federal, state and local income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

 

Note 6. Capital

 

There are 1 billion shares of $0.001 par value common stock authorized. Prior to commencement of operations on April 30, 2012, the Fund issued 5,240 shares of common stock to Prudential at an aggregate purchase price of $100,084. As of May 31, 2016, Prudential owned 7,362 shares of the Fund.

 

For the year ended May 31, 2016, the Fund did not issue shares in connection with the Fund’s dividend reinvestment plan.

 

Note 7. Borrowings and Re-hypothecation

 

The Fund currently is a party to a committed credit facility (the “credit facility”) with a financial institution. The credit facility provides for a maximum commitment of $300 million. Interest on any borrowings under the credit facility is payable at the negotiated rates. The Fund’s obligations under the credit facility are secured by the assets of the Fund segregated for the purpose of securing the amount borrowed. The purpose of the credit facility is to provide the Fund with portfolio leverage and meet its general cash flow requirements.

 

During the year ended May 31, 2016, the Fund utilized the credit facility and had an average daily outstanding loan balance of $192,500,000 during the 366 day period that the facility was utilized, at an average interest rate of 1.17%. The maximum amount of loan outstanding during the period was $210,000,000. There was a balance of $205,000,000 outstanding at May 31, 2016.

 

Re-hypothecation: The credit facility agreement permits, subject to certain conditions, the financial institution to re-hypothecate, up to the amount outstanding under the facility, portfolio securities segregated by the Fund as collateral. The Fund continues to receive interest on re-hypothecated securities. The Fund also has the right under the agreement to recall the re-hypothecated securities from the financial institution on demand. If the financial institution fails to deliver the recalled security in a timely manner, the Fund will be compensated by the financial institution for any fees or losses related to the failed delivery or, in the event a recalled security will not be returned by the financial institution, the Fund,

 

42  


upon notice to the financial institution, may reduce the loan balance outstanding by the value of the recalled security failed to be returned plus accrued interest. The Fund will receive a portion of the fees earned by the financial institution in connection with the re-hypothecation of portfolio securities. Such earnings are disclosed in the statement of operations under Other Income.

 

Note 8. Subsequent Event

 

Dividends and Distributions: On May 26, 2016 the Fund declared monthly dividends of $0.11 per share payable on June 30, 2016, July 29, 2016 and August 31, 2016, respectively, to shareholders of record on June 17, 2016, July 15, 2016 and August 19, 2016, respectively. The ex-dates were June 15, 2016, July 13, 2016 and August 17, 2016, respectively.

 

Note 9. New Accounting Pronouncements

 

In May 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-07 regarding “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share”. The amendments in this update are effective for the Fund for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. ASU No. 2015-07 will eliminate the requirement to categorize investments in the fair value hierarchy if their fair value is measured at net asset value (“NAV”) per share (or its equivalent) using the practical expedient in the FASB’s fair value measurement guidance. Management has evaluated the implications of ASU No. 2015-07 and has determined that there is no impact on the financial statement disclosures.

 

In January 2016, the FASB issued ASU No. 2016-01 regarding “Recognition and Measurement of Financial Assets and Financial Liabilities”. The new guidance is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The new standard affects all entities that hold financial assets or owe financial liabilities. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. At this time, management is evaluating the implications of ASU No. 2016-01 and its impact on the financial statements and disclosures has not yet been determined.

 

Prudential Short Duration High Yield Fund, Inc.     43   


Financial Highlights

 

     Year Ended May 31,          April 30,
2012(a)
through
May 31,
 
     2016(b)     2015(b)     2014(b)     2013(b)          2012  
Per Share Operating Performance:                                            
Net Asset Value, Beginning Of Period     $17.84        $18.82        $19.18        $18.75            $19.10
Income (loss) from investment operations:                                            
Net investment income (loss)     1.06        1.20        1.22        1.24            .07   
Net realized and unrealized gain (loss) on investment transactions     (.75     (.59     .02        .74            (.38
Total from investment operations     .31        .61        1.24        1.98            (.31
Less Dividends:                                            
Dividends from net investment income     (1.36     (1.59     (1.60     (1.57         -   
Fund share transactions:                                            
Common stock offering costs charged to paid-in capital in excess of par     -        -        -        - (g)          (.04
Accretion to net asset value from the exercise of the underwriters over-allotment option     -        -        -        .02            -   
Total of share transactions     -        -        -        .02            (.04
Net asset value, end of period     $16.79        $17.84        $18.82        $19.18            $18.75   
Market price, end of period     $15.58        $15.75        $17.84        $19.45            $20.09   
Total Return(c):     8.23%        (2.92)%        .24%        4.97%            .35%   
Ratios/Supplemental Data:  
Net assets, end of period (000)     $558,403        $593,165        $626,021        $637,704            $571,884   
Average net assets (000)     $560,771        $602,489        $630,017        $635,754            $576,384   
Ratios to average net assets(d):                                            
Expenses after waivers and/or expense reimbursement     1.55% (e)      1.58% (e)      1.52% (e)      1.47% (e)          1.16% (e)(f) 
Expenses before waivers and/or expense reimbursement     1.55% (e)      1.58% (e)      1.52% (e)      1.53% (e)          1.20% (e)(f) 
Net investment income (loss)     6.29%        6.60%        6.45%        6.45%            4.20% (f) 
Portfolio turnover rate     58%        58%        75%        74%            12% (h) 
Asset coverage     372%        439%        363%        405%            524%   
Total debt outstanding at period-end (000)     $205,000        $175,000        $238,000        $209,000            $135,000   

 

* Initial public offering price of $20.00 per share less sales load of $.90 per share.
(a) Commencement of operations.
(b) Calculated based on average shares outstanding during the period.
(c) Total return is calculated assuming a purchase of common stock at the current market price on the first day and a sale at the closing market price on the last day for the period reported. Dividends are assumed, for the purpose of this calculation, to be reinvested at prices obtainable under the Fund’s dividend reinvestment plan. This amount does not reflect brokerage commissions or sales load. Total returns for periods less than a full year are not annualized.
(d) Does not include expenses of the underlying portfolio in which the Fund invests.
(e) Includes interest expense of .40% for the year ended May 31, 2016, .41% for the year ended May 31, 2015, .36% for the year ended May 31, 2014, .35% for the year ended May 31, 2013 and .08% for the period ended May 31, 2012.
(f) Annualized.
(g) Less than $.005 per share.
(h) Not annualized.

 

See Notes to Financial Statements.

 

44  


Report of Independent Registered Public

Accounting Firm

 

The Board of Directors and Shareholders

Prudential Short Duration High Yield Fund, Inc.:

 

We have audited the accompanying statement of assets and liabilities of Prudential Short Duration High Yield Fund, Inc. (hereafter referred to as the “Fund”), including the portfolio of investments, as of May 31, 2016, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the four-year period then ended and for the period April 30, 2012 (commencement of operations) through May 31, 2012. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2016, by correspondence with the custodian, transfer agent and brokers or by other appropriate auditing procedures when replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fund as of May 31, 2016, and the results of its operations, cash flows, changes in its net assets and the financial highlights for the periods described in the first paragraph above, in conformity with U.S. generally accepted accounting principles.

 

LOGO

 

New York, New York

July 18, 2016

 

Prudential Short Duration High Yield Fund, Inc.     45   


Tax Information (unaudited)

 

For the year ended May 31, 2016, the Fund reports the maximum amount allowable but not less than 82.23% as interest related dividends in accordance with Section 871(k)(1) and 881(e)(1) of the Internal Revenue Code.

 

In January 2017, you will be advised on IRS Form 1099-DIV or substitute 1099-DIV as to the federal tax status of distributions received by you in calendar year 2016.

 

46  


Other Information (unaudited)

 

Dividend Reinvestment Plan. Unless a holder of Common Stock elects to receive cash by contacting Computershare Trust Company, N.A. (the “Plan Administrator”), all dividends declared on Common Stock will be automatically reinvested by the Plan Administrator pursuant to the Fund’s Automatic Dividend Reinvestment Plan (the “Plan”), in additional Common Stock. The holders of Common Stock who elect not to participate in the Plan will receive all dividends and other distributions (together, a “Dividend”) in cash paid by check mailed directly to the stockholder of record (or, if the Common Stock is held in street or other nominee name, then to such nominee) by the Plan Administrator as dividend disbursing agent. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by notice if received and processed by the Plan Administrator prior to the Dividend record date; otherwise such termination or resumption will be effective with respect to any subsequently declared Dividend. Such notice will be effective with respect to a particular Dividend. Some brokers may automatically elect to receive cash on behalf of the holders of Common Stock and may re-invest that cash in additional Common Stock.

 

The Plan Administrator will open an account for each common stockholder under the Plan in the same name in which such common stockholder’s Common Stock is registered. Whenever the Fund declares a Dividend payable in cash, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent in Common Stock. The Common Stock will be acquired by the Plan Administrator for the participants’ accounts, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized Common Stock from the Fund (“Newly Issued Common Stock”) or (ii) by purchase of outstanding Common Stock on the open market (“Open-Market Purchases”) on the NYSE or elsewhere. If, on the payment date for any Dividend, the closing market price of the Common Stock plus per share fees (as defined below) is equal to or greater than the NAV per share of Common Stock (such condition being referred to as “market premium”), the Plan Administrator will invest the Dividend amount in Newly Issued Common Stock on behalf of the participants. The number of Newly Issued Common Stock to be credited to each participant’s account will be determined by dividing the dollar amount of the Dividend by the NAV per share of Common Stock on the payment date, provided that, if the NAV per share of Common Stock is less than or equal to 95% of the closing market price per share of Common Stock on the payment date, the dollar amount of the Dividend will be divided by 95% of the closing market price per Common Stock on the payment date. If, on the payment date for any Dividend, the NAV per share of Common Stock is greater than the closing market value per share of Common Stock plus per share fees (such condition being referred to as “market discount”), the Plan Administrator will invest the Dividend amount in shares of Common Stock acquired on behalf of the participants in Open-Market Purchases. “Per share fees” include any applicable brokerage commissions the Plan Administrator is required to pay.

 

Prudential Short Duration High Yield Fund, Inc.     47   


Other Information (unaudited) (continued)

 

 

In the event of a market discount on the payment date for any Dividend, the Plan Administrator will have until the last business day before the next date on which the Common Stock trades on an “ex-dividend” basis or 30 days after the payment date for such Dividend, whichever is sooner (the “Last Purchase Date”), to invest the Dividend amount in Common Stock acquired in Open-Market Purchases on behalf of participants. If, before the Plan Administrator has completed its Open-Market Purchases, the market price per share of Common Stock exceeds the NAV per share of Common Stock, the average per share purchase price paid by the Plan Administrator for Common Stock may exceed the NAV per share of the Common Stock, resulting in the acquisition of fewer shares of Common Stock than if the Dividend had been paid in Newly Issued Common Stock on the Dividend payment date. Because of the foregoing difficulty with respect to Open-Market Purchases, the Plan provides that if the Plan Administrator is unable to invest the full Dividend amount in Open-Market Purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Administrator may cease making Open-Market Purchases and may invest the uninvested portion of the Dividend amount in Newly Issued Common Stock at the NAV per share of Common Stock at the close of business on the Last Purchase Date, provided that, if the NAV is less than or equal to 95% of the then current market price per share of Common Stock, the dollar amount of the Dividend will be divided by 95% of the market price on the payment date for purposes of determining the number of shares issuable under the Plan.

 

The Plan Administrator maintains all stockholder accounts in the Plan and furnishes written confirmation of all transactions in the accounts, including information needed by stockholders for tax records. Common Stock in the account of each Plan participant will be held by the Plan Administrator on behalf of the Plan participant, and each stockholder proxy will include those shares purchased or received pursuant to the Plan. The Plan Administrator will forward all proxy solicitation materials to participants and vote proxies for shares held under the Plan in accordance with the instructions of the participants.

 

In the case of the holders of Common Stock such as banks, brokers or nominees that hold shares of Common Stock for others who are the beneficial owners, the Plan Administrator will administer the Plan on the basis of the number of shares of Common Stock certified from time to time by the record stockholder’s name and held for the account of beneficial owners who participate in the Plan.

 

The Plan Administrator’s service fee, if any, and expenses for administering the plan will be paid for by the Fund. If a participant elects by written, Internet or telephonic notice to the Plan Administrator to have the Plan Administrator sell part or all of the shares held by the Plan Administrator in the participant’s account and remit the proceeds to the participant, the Plan Administrator is authorized to deduct a $15.00 transaction fee plus a $0.12 per

share fee. If a participant elects to sell his or her shares of Common Stock, the Plan

 

48  


Administrator will process all sale instructions received no later than five business days after the date on which the order is received by the Plan Administrator, assuming the relevant markets are open and sufficient market liquidity exists (and except where deferral is required under applicable federal or state laws or regulations). Such sale will be made through the Plan Administrator’s broker on the relevant market and the sale price will not be determined until such time as the broker completes the sale. In every case the price to the participant shall be the weighted average sale price obtained by the Plan Administrator’s broker net of fees for each aggregate order placed by the participant and executed by the broker. To maximize cost savings, the Plan Administrator will seek to sell shares in round lot transactions. For this purpose the Plan Administrator may combine a participant’s shares with those of other selling participants.

 

There will be no brokerage charges with respect to shares of Common Stock issued directly by the Fund. However, each participant will pay a pro rata share of brokerage commissions incurred in connection with Open-Market Purchases. Each participant will be charged a per share fee (currently $0.05 per share) on all Open-Market Purchases. The automatic reinvestment of Dividends will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such Dividends. See “Tax Matters.” Participants that request a sale of Common Stock through the Plan Administrator are subject to brokerage commissions.

 

Each participant may terminate the participant’s account under the Plan by so notifying the Plan Administrator via the Plan Administrator’s website at www.computershare.com/investor, by filling out the transaction request form located at the bottom of the participant’s Statement and sending it to the Plan Administrator or by calling the Plan Administrator. Such termination will be effective immediately if the participant’s notice is received by the Plan Administrator prior to any dividend or distribution record date. Upon any withdrawal or termination, the Plan Administrator will cause to be delivered to each terminating participant a statement of holdings for the appropriate number of the Fund’s whole book-entry shares of Common Stock and a check for the cash adjustment of any fractional share at the market value of the Fund’s shares of Common Stock as of the close of business on the date the termination is effective less any applicable fees. In the event a participant’s notice of termination is on or after a record date (but before payment date) for an account whose dividends are reinvested, the Plan Administrator, in its sole discretion, may either distribute such dividends in cash or reinvest them in shares of Common Stock on behalf of the terminating participant. In the event reinvestment is made, the Plan Administrator will process the termination as soon as practicable, but in no event later than five business days after the reinvestment is completed. The Plan may be terminated by the Fund upon notice in writing mailed to each participant at least 30 days prior to any record date for the payment of any dividend or distribution by the Fund.

 

Prudential Short Duration High Yield Fund, Inc.     49   


Other Information (unaudited) (continued)

 

 

The Fund reserves the right to amend or terminate the Plan. There is no direct service charge to participants with regard to purchases in the Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable by the participants.

 

All correspondence or questions concerning the Plan should be directed to the Plan Administrator, Computershare Trust Company, N.A., P.O. Box 43078, Providence, RI 02940-3078 or by calling (toll free) 800-451-6788.

 

50  


Supplemental Proxy Information (unaudited)

 

 

An Annual Meeting of Stockholders was held on March 11, 2016. At such meeting the stockholders elected the following Class I Directors:

 

Approval of Directors

 

Class I

  Affirmative Votes Cast     Shares Against/Withheld  

Ellen S. Alberding

    29,594,475        869,846   

Stuart S. Parker

    29,630,094        834,227   

Richard A. Redeker

    29,607,637        856,684   

 

Prudential Short Duration High Yield Fund, Inc.     51   


Management of the Fund (unaudited)

 

Information about the Directors and Officers of the Fund is set forth below. Directors who are not deemed to be “interested persons” of the Fund, as defined in the Investment Company Act of 1940 (the “1940 Act”), are referred to as “Independent Directors.” Directors who are deemed to be “interested persons” of the Fund are referred to as “Interested Directors.” The Directors are responsible for the overall supervision of the operations of the Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Board in turn elects the Officers, who are responsible for administering the day-to-day operations of the Fund.

 

Independent Directors
Name, Address, Age Position(s) Portfolios Overseen   Principal Occupation(s) During Past Five Years   Term of Office & Length of Time Served   Other Directorships
Held

Ellen S. Alberding (58)

Director

Portfolios Overseen: 67

  President and Board Member, The Joyce Foundation (charitable foundation) (since 2002); Vice Chair, City Colleges of Chicago (community college system) (since 2011); Trustee, Skills for America’s Future (national initiative to connect employers to community colleges) (since 2011); Trustee, National Park Foundation (charitable foundation for national park system) (since 2009); Trustee, Economic Club of Chicago (since 2009).   Since 2013 (Class I)   None.

Kevin J. Bannon (64)

Director

Portfolios Overseen: 67

  Managing Director (April 2008-May 2015) and Chief Investment Officer (October 2008-November 2013) of Highmount Capital LLC (registered investment adviser); formerly Executive Vice President and Chief Investment Officer (April 1993-August 2007) of Bank of New York Company; President (May 2003-May 2007) of BNY Hamilton Family of Mutual Funds.   Since 2011 (Class II)   Director of Urstadt Biddle Properties (since September 2008).

Linda W. Bynoe (64)

Director

Portfolios Overseen: 67

  President and Chief Executive Officer (since March 1995) and formerly Chief Operating Officer (December 1989-February 1995) of Telemat Ltd. (management consulting); formerly Vice President (January 1985-June 1989) at Morgan Stanley & Co. (broker-dealer).   Since 2011 (Class III)   Director of Simon Property Group, Inc. (retail real estate) (May 2003-May 2012); Director of Anixter International, Inc. (communication products distributor) (since January 2006); Director of Northern Trust Corporation (financial services) (since April 2006); Trustee of Equity Residential (residential real estate) (since December 2009).

 

Prudential Short Duration High Yield Fund, Inc.


Management of the Fund (continued)

 

Independent Directors
Name, Address, Age Position(s) Portfolios Overseen   Principal Occupation(s) During Past Five Years   Term of Office & Length of Time Served   Other Directorships
Held

Keith F. Hartstein (59)

Director

Portfolios Overseen: 67

  Retired; Member (since November 2014) of the Governing Council of the Independent Directors Council (organization of independent mutual fund directors); formerly President and Chief Executive Officer (2005-2012), Senior Vice President (2004-2005), Senior Vice President of Sales and Marketing (1997-2004), and various executive management positions (1990-1997), John Hancock Funds, LLC (asset management); Chairman, Investment Company Institute’s Sales Force Marketing Committee (2003-2008).   Since 2013 (Class II)   None.

Michael S. Hyland, CFA (70)

Director

Portfolios Overseen: 67

  Retired (since February 2005); formerly Senior Managing Director (July 2001-February 2005) of Bear Stearns & Co, Inc.; Global Partner, INVESCO (1999-2001); Managing Director and President of Salomon Brothers Asset Management (1989-1999).   Since 2011 (Class III)   None.

Richard A. Redeker (72)

Director & Independent Chair

Portfolios Overseen: 67

  Retired Mutual Fund Senior Executive (47 years); Management Consultant; Director, Mutual Fund Directors Forum (since 2014); Independent Directors Council (organization of independent mutual fund directors) – Executive Committee, Chair of Policy Steering Committee, Governing Council.   Since 2011 (Class I)   None.

Stephen G. Stoneburn (73)

Director

Portfolios Overseen: 67

  Chairman (since July 2011), President and Chief Executive Officer (since June 1996) of Quadrant Media Corp. (publishing company); formerly President (June 1995-June 1996) of Argus Integrated Media, Inc.; Senior Vice President and Managing Director (January 1993-1995) of Cowles Business Media; Senior Vice President of Fairchild Publications, Inc. (1975-1989).   Since 2011 (Class II)   None.

 

Visit our website at prudentialfunds.com  


Interested Directors
Name, Address, Age Position(s) Portfolios Overseen   Principal Occupation(s) During Past Five Years   Term of Office & Length of Time Served   Other Directorships
Held

Stuart S. Parker (53)

Director & President

Portfolios Overseen: 67

  President of Prudential Investments LLC (since January 2012); Executive Vice President of Prudential Investment Management Services LLC (since December 2012); Executive Vice President of Jennison Associates LLC and Head of Retail Distribution of Prudential Investments LLC (June 2005-December 2011).   Since 2015 (Class I)   None.

Scott E. Benjamin (43)

Director & Vice President

Portfolios Overseen: 67

  Executive Vice President (since June 2009) of Prudential Investments LLC; Executive Vice President (June 2009-June 2012) and Vice President (since June 2012) of Prudential Investment Management Services LLC; Executive Vice President (since September 2009) of AST Investment Services, Inc.; Senior Vice President of Product Development and Marketing, Prudential Investments (since February 2006); Vice President of Product Development and Product Management, Prudential Investments (2003-2006).   Since 2011 (Class III)   None.

Grace C. Torres (57)*

Director

Portfolios Overseen: 65

  Retired; formerly Treasurer and Principal Financial and Accounting Officer of the Prudential Investments Funds, Target Funds, Advanced Series Trust, Prudential Variable Contract Accounts and The Prudential Series Fund (1998-June 2014); Assistant Treasurer (March 1999-June 2014) and Senior Vice President (September 1999-June 2014) of Prudential Investments LLC; Assistant Treasurer (May 2003-June 2014) and Vice President (June 2005-June 2014) of AST Investment Services, Inc.; Senior Vice President and Assistant Treasurer (May 2003-June 2014) of Prudential Annuities Advisory Services, Inc.   Since 2015 (Class II)   Director (since July 2015) of Sun Bancorp, Inc. N.A.

 

* Note: Prior to her retirement in 2014, Ms. Torres was employed by Prudential Investments LLC. Due to her prior employment, Ms. Torres is considered to be an “interested person” under the 1940 Act. Ms. Torres serves as a non-management Interested Director, and receives compensation from the Fund for her service as a Director.

 

Prudential Short Duration High Yield Fund, Inc.


Management of the Fund (continued)

 

Fund Officers(a)
Name, Address and Age Position with Fund   Term of Office   Principal Occupation(s) During Past Five Years

Raymond A. O’Hara (60)

Chief Legal Officer

  Since 2012   Vice President and Corporate Counsel (since July 2010) of Prudential Insurance Company of America (Prudential); Vice President (March 2011-Present) of Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey; Vice President and Corporate Counsel (March 2011-Present) of Prudential Annuities Life Assurance Corporation; Chief Legal Officer of Prudential Investments LLC (since June 2012); Chief Legal Officer of PMFS (since June 2012) and Corporate Counsel of AST Investment Services, Inc. (since June 2012); formerly Assistant Vice President and Corporate Counsel (September 2008-July 2010) of The Hartford Financial Services Group, Inc.; formerly Associate (September 1980-December 1987) and Partner (January 1988-August 2008) of Blazzard & Hasenauer, P.C. (formerly, Blazzard, Grodd & Hasenauer, P.C.).

Chad A. Earnst (40)

Chief Compliance Officer

  Since 2014   Chief Compliance Officer (September 2014-Present) of Prudential Investments LLC; Chief Compliance Officer (September 2014-Present) of the Prudential Investments Funds, Target Funds, Advanced Series Trust, The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc., Prudential Global Short Duration High Yield Income Fund, Inc., Prudential Short Duration High Yield Fund, Inc. and Prudential Jennison MLP Income Fund, Inc.; formerly Assistant Director (March 2010-August 2014) of the Asset Management Unit, Division of Enforcement, US Securities & Exchange Commission; Assistant Regional Director (January 2010-August 2014), Branch Chief (June 2006-December 2009) and Senior Counsel (April 2003-May 2006) of the Miami Regional Office, Division of Enforcement, US Securities & Exchange Commission.
Deborah A. Docs (58) Secretary   Since 2011   Vice President and Corporate Counsel (since January 2001) of Prudential; Vice President (since December 1996) and Assistant Secretary (since March 1999) of Prudential Investments LLC; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc.

Jonathan D. Shain (57)

Assistant Secretary

  Since 2011   Vice President and Corporate Counsel (since August 1998) of Prudential; Vice President and Assistant Secretary (since May 2001) of Prudential Investments LLC; Vice President and Assistant Secretary (since February 2001) of PMFS; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc.

Claudia DiGiacomo (41)

Assistant Secretary

  Since 2011   Vice President and Corporate Counsel (since January 2005) of Prudential; Vice President and Assistant Secretary of Prudential Investments LLC (since December 2005); Associate at Sidley Austin Brown & Wood LLP (1999-2004).

 

Visit our website at prudentialfunds.com  


Fund Officers(a)
Name, Address and Age Position with Fund   Term of Office   Principal Occupation(s) During Past Five Years

Andrew R. French (53)

Assistant Secretary

  Since 2011   Vice President and Corporate Counsel (since February 2010) of Prudential; formerly Director and Corporate Counsel (2006-2010) of Prudential; Vice President and Assistant Secretary (since January 2007) of Prudential Investments LLC; Vice President and Assistant Secretary (since January 2007) of PMFS.

Amanda S. Ryan (38)

Assistant Secretary

  Since 2011   Director and Corporate Counsel (since March 2012) of Prudential; Director and Assistant Secretary (since June 2012) of Prudential Investments LLC; Associate at Ropes & Gray (2008-2012).

Theresa C. Thompson (54)

Deputy Chief Compliance Officer

  Since 2013   Vice President, Compliance, Prudential Investments LLC (since April 2004); and Director, Compliance, Prudential Investments LLC (2001-2004).

M. Sadiq Peshimam (52)

Treasurer & Principal Financial and Accounting Officer

  Since 2011   Assistant Treasurer of funds in the Prudential Mutual Fund Complex (2006-2014); Vice President (since 2005) of Prudential Investments LLC.

Peter Parrella (57)

Assistant Treasurer

  Since 2011   Vice President (since 2007) and Director (2004-2007) within Prudential Mutual Fund Administration; formerly Tax Manager at SSB Citi Fund Management LLC (1997-2004).

Lana Lomuti (49)

Assistant Treasurer

  Since 2014   Vice President (since 2007) and Director (2005-2007), within Prudential Mutual Fund Administration; formerly Assistant Treasurer (December 2007-February 2014) of The Greater China Fund, Inc.

Linda McMullin (55)

Assistant Treasurer

  Since 2014   Vice President (since 2011) and Director (2008-2011) within Prudential Mutual Fund Administration.

 

(a)

Excludes Mr. Parker and Mr. Benjamin, Interested Directors of the Fund who also serve as President and Vice President, respectively.

 

Explanatory Notes to Tables:

   

Directors are deemed to be “Interested,” as defined in the 1940 Act, by reason of their affiliation with Prudential Investments LLC and/or an affiliate of Prudential Investments LLC.

   

Unless otherwise noted, the address of all Directors and Officers is c/o Prudential Investments LLC, 655 Broad Street, Newark, New Jersey 07102-4077.

   

The Board of Directors is divided into three classes, each of which has three year terms. Class I term expires in 2019, Class II term expires in 2017 and Class III term expires in 2018. Officers are generally elected by the Board to one-year terms.

   

There is no set term of office for Directors or Officers. The Directors have adopted a retirement policy, which calls for the retirement of Directors on December 31 of the year in which they reach the age of 75.

   

“Other Directorships Held” includes only directorships of companies required to register or file reports with the SEC under the Securities Exchange Act of 1934 (that is, “public companies”) or other investment companies registered under the 1940 Act.

   

“Portfolios Overseen” includes all investment companies managed by Prudential Investments LLC. The investment companies for which Prudential Investments LLC serves as manager include the Prudential Investments Mutual Funds, The Prudential Variable Contract Accounts, Target Mutual Funds, Prudential Short Duration High Yield Fund, Inc., Prudential Global Short Duration High Yield Fund, Inc., The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc. and the Advanced Series Trust.

 

Prudential Short Duration High Yield Fund, Inc.


Privacy Notice

 

Prudential values your business and your trust. We respect the privacy of your personal information and take our responsibility to protect it seriously. This privacy notice is provided on behalf of the Prudential family of companies listed at the end of this notice (Prudential), and applies to our current and former customers. This notice describes new ways in which we will share your personal information within Prudential and your right to opt out of such sharing.

 

Protecting Your Personal Information

We maintain physical, electronic and procedural safeguards to protect your personal information. The people who are authorized to have access to your personal information need it to do their jobs, and we require them to keep that information secure and confidential.

 

Personal Information We Collect

We collect your personal information when you fill out applications and other forms, when you enter personal details on our websites, when you respond to our emails, and when you provide us information over the telephone. We also collect personal information that others give us about you. This information includes, for example:

   

name

   

address, email address, telephone number, and other contact information

   

income and financial information

   

Social Security number

   

transaction history

   

medical information for insurance applications

   

consumer reports from consumer reporting agencies

   

participant information from organizations that purchase products or services from us for the benefit of their members or employees

 

Using Your Information

We use your personal information for various business purposes, including:

   

normal everyday business purposes, such as providing service to you and administrating your account or policy

   

processing transactions and claims

   

business research and analysis

   

marketing products and services of Prudential and other companies in which you may be interested

   

compliance with laws

 

LOGO

 

 

Prudential, the Prudential logo and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

D6021 PGIM    Privacy Ed. 4/2016


Sharing Your Information

We may share your personal information, including information about your transactions and experiences, within Prudential and with other companies who perform services for us or on our behalf, for our everyday business purposes, such as providing services to you and administering your account or policy. We may also share your personal information with another financial institution if you agree that your account or policy can be transferred to that financial company.

 

We may share your personal information within Prudential so that the Prudential companies can market their products and services to you. We may also share consumer report information within Prudential which may include information about you from credit reports and certain information that we receive from you and from consumer reporting agencies or other third parties. For those customers who have one of our products through a plan sponsored by an employer or other organization, we will share your personal information either in a manner consistent with the terms of the plan agreement or in a manner consistent with our agreement with you.

 

We may also share your personal information as permitted or required by law, including, for example, to law enforcement officials and regulators, in response to subpoenas, and to prevent fraud.

 

Unless you agree otherwise, we do not share your personal information with other companies for them to market their products or services to you. We may tell you about a product or service that other companies offer and, if you respond, that company will know that we selected you to receive the information.

 

Limiting Our Sharing – Opt Out/Privacy Choice

You may tell us not to share your personal information within Prudential for marketing purposes, and not to share consumer report information within Prudential, by “opting out” of such sharing. To limit our sharing for these purposes:

   

visit us online at: www.prudential.com/privacyoptout

   

call us at: 1-877-248-4019

 

If you previously told us not to share your personal information within Prudential for marketing purposes, or not to share your consumer report information, you must renew your “opt out” of such sharing through the methods noted above. If you are no longer our customer, we will continue to share your information as described in this notice.

 

You are not able to limit our ability to share your personal information within Prudential and other companies for servicing and administration purposes.

 

Questions and Corrections

We will send notices at least once a year, as federal and state laws require. If you have any questions about how we protect, use, and share your personal information or about this privacy notice, please call us. The toll-free number is 1-877-248-4019.

 

We reserve the right to modify this notice at any time. This notice is also available anytime at www.prudential.com.

 


This notice is being provided to customers and former customers of the Prudential companies listed below. If we acquire a company prior to delivery of the next annual notice, we may share your information with the acquired company in the same manner as other Prudential companies described in this notice.

 

Insurance Companies and Insurance Company Separate Accounts

The Prudential Insurance Company of America; Prudential Annuities Life Assurance Corporation; Pruco Life Insurance Company; Pruco Life Insurance Company of New Jersey; Prudential Retirement Insurance and Annuity Company (PRIAC); PRIAC Variable Contract Account A; CG Variable Annuity Account I & II (Connecticut General); Pruco Insurance Company of Iowa; All insurance company separate accounts that include the following names: Prudential, Pruco, or PRIAC

 

Insurance Agencies

Prudential Insurance Agency, LLC; Mullin TBG Insurance Agency Services, LLC; MC Insurance Agency Services, LLC

 

Broker-Dealers and Registered Investment Advisers

AST Investment Services, Inc.; Prudential Annuities Distributors, Inc.; Global Portfolio Strategies, Inc.; Pruco Securities, LLC; PGIM, Inc.; Prudential Investment Management Services LLC; Prudential Investments LLC; Prudential Private Placement Investors, L.P.

 

Bank and Trust Companies

Prudential Bank & Trust, FSB; Prudential Trust Company

 

Investment Companies and Other Investment Vehicles

The Asia Pacific Fund, Inc.; Prudential Investments Mutual Funds; Prudential Capital Partners, L.P.; Target Asset Allocation Funds; The Target Portfolio Trust; Advanced Series Trust; The Prudential Series Fund; Private Placement Trust Investors, LLC; All funds that include the following names: Prudential, PCP, PGIM, or PCEP

 

Vermont Residents: We will comply with Vermont law when sharing information we collect from or about Vermont residents. Consequently, we will automatically treat all customers who are Vermont residents as having told us not to share their personal information for marketing purposes and not to share consumer report information.