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:    5/31/2017
Date of reporting period:    5/31/2017

 

 

 


Item 1 – Reports to Stockholders


LOGO

 

     PRUDENTIAL SHORT DURATION HIGH YIELD FUND, INC.

 

 

ANNUAL REPORT

MAY 31, 2017

 

LOGO

 

To enroll in e-delivery, go to pgiminvestments.com/edelivery


Objective: High level of current income

 

Highlights

 

 

Relative to the Fund’s benchmark, the Bloomberg Barclays US High Yield Ba/B 1-5 Year 1% Issuer Constrained Index (the Index), the Fund benefited from strong security selection during the period highlighted by positioning in the industrial, health care & pharmaceutical, gaming/lodging/leisure and building materials & home construction sectors.

 

 

In individual company selection, the Fund’s overweight to Unifrax (industrial) was the largest contributor to performance. Avoiding Noble Group (industrial), and overweights to Laureate Education (services), Beazer Homes (building materials & home construction) and BMC Software (technology) added value as well.

 

 

Sector allocation hurt performance for the one-year period. An overweight to the health care & pharmaceutical sector was the largest detractor from performance as the sector struggled at the end of 2016, exacerbated by declining volumes for hospitals and headline volatility within pharmaceuticals. Underweights to the upstream energy (exploration and production) and metals & mining sectors also limited results.

 

 

 

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.

 

PGIM Fixed Income is a unit of PGIM, Inc. (PGIM), a registered investment adviser. PGIM is a Prudential Financial Company. © 2017 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.

 

2   Visit our website at pgiminvestments.com


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 ended May 31, 2017.

 

Effective April 3, 2017, Prudential Investments became known as PGIM®

Investments. Why PGIM? This new name was chosen to further align with the global investment management businesses of Prudential Financial, which rebranded from Prudential Investment Management in January 2016. This new name allows for one brand and reflects our ability and commitment to delivering investment solutions to clients around the globe. Please keep in mind that only the Fund adviser’s name was changed: the name of your Fund and its management and operation will remain the same.

 

Major global events during the reporting period included the US presidential election and domestic issues related to the new administration’s policy initiatives. The US economy experienced weak growth during the first quarter of 2017, although expectations for a healthier rebound were expected for the second quarter. Britain began its formal legal process to leave the European Union, and recent parliamentary elections resulted in a “hung parliament,” meaning no party could claim a majority. Global geopolitical tensions generally heightened, and political concerns arose over growing internal divisions in some key developing nations.

 

Despite these global uncertainties, the worldwide economy continued to grow at a slow pace and international equities markets rose significantly. Equities in the US reached new highs. European stocks posted impressive results. Asian markets were solid, and emerging markets outperformed most regions.

 

Shortly after the reporting period, in mid-June, the Federal Reserve raised its Federal Funds rate by 0.25% for the second time in 2017. Fixed income markets were mixed, as rising interest rates affected bond markets. High yield and emerging markets bonds were among the top performers.

 

Given the uncertainty in today’s investment environment, we believe that active professional portfolio management offers a potential advantage. Active managers often have the knowledge and flexibility to find the best investment opportunities in the most challenging markets.

 

Even so, it’s best if investment decisions are based on your long-term goals rather than on short-term market and economic developments. We also encourage you to work with an experienced financial advisor who can help you set goals, determine your tolerance for risk, and build a diversified plan that’s right for you and make adjustments when necessary.

 

Prudential Short Duration High Yield Fund, Inc.     3  


Letter from the President (continued)

 

 

At PGIM Investments, we consider it a great privilege and responsibility to help investors participate in opportunities across global markets while meeting their toughest investment challenges. We’re part of PGIM, the 9th-largest global investment manager with more than $1 trillion in assets under management. This investment expertise allows us to deliver actively managed funds and strategies to meet the needs of investors around the globe.

 

Thank you for choosing our family of funds.

 

Sincerely,

 

LOGO

 

Stuart S. Parker, President

Prudential Short Duration High Yield Fund, Inc.

July 14, 2017

 

4   Visit our website at pgiminvestments.com


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.pgiminvestments.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 S&P Global Ratings (S&P) and Fitch, Inc. (Fitch); or comparably rated by another nationally recognized statistical rating organization (NRSRO), or if unrated, are considered by PGIM Fixed Income to be of comparable quality.

 

Performance Snapshot as of 5/31/17
Price Per Share   Total Return For
12 Months Ended
5/31/17
$16.84 (NAV)   8.05%
$15.59 (Market Price)   8.36%

 

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: PGIM Investments LLC

 

Key Fund Statistics as of 5/31/17          
Duration    2.1 years        Average Maturity    3.4 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.

 

Prudential Short Duration High Yield Fund, Inc.     5  


Your Fund’s Performance (continued)

 

 

Credit Quality expressed as a percentage of total investments as of 5/31/17 (%)  
BBB     8.4  
BB     49.8  
B     35.5  
CCC     5.0  
Cash/Cash Equivalents     1.3  
Total Investments     100.0  

 

Source: PGIM Fixed Income

 

Credit ratings reflect the highest rating assigned by a NRSRO such as Moody’s, S&P or 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 5/31/17     
Total Monthly Dividends
Paid per Share for Period
  Current Monthly Dividend
Paid per Share
   Yield at Market Price
as of 5/31/17
$1.2525   $0.1025    7.89%

 

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, 2017.

 

6   Visit our website at pgiminvestments.com


Strategy and Performance Overview

 

How did the Fund perform?

For the 12-month reporting period that ended May 31, 2017, the Prudential Short Duration High Yield Fund generated a positive NAV return of 8.05%, underperforming both the 9.24% return of the Index and the 17.20% return of the Lipper High Current Yield Funds (Leveraged) Average.

 

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

High yield bonds posted very strong results for the period with the broad high yield index returning 13.58%. The short duration, higher quality sub-style of high yield, as measured by the Index, also produced solid performance but underperformed the broad index.

 

During the reporting period, the market experienced several significant events including the aftermath of the Brexit vote, a surprise Trump victory in the US Presidential election and two Federal Reserve rate hikes. Early in the period, commodities, particularly the metals & mining, chemicals, and energy sectors, outperformed the broad market. Energy benefited from a jump in oil prices as OPEC’s agreement to reduce supply brought forward expectations of a balanced market.

 

In the second half of the period, health care rebounded with investors taking comfort that the Senate would be a more difficult place to pass a bill to repeal Obamacare. The lack of onerous language regarding drug pricing was also a benefit for pharmaceutical companies.

 

For the full 12-month period, the best performing sectors included metals & mining, upstream and midstream energy and capital goods. The health care & pharmaceutical, industrial and electric & water sectors struggled during the one-year period.

 

The par-weighted US High Yield default rate ended May at 1.31% versus 3.57% at the start of 2017. That is well below the historical average range of 3.5% to 4%, and it’s the lowest rate since March of 2014, when the default rate was 0.61%.

 

What worked?

 

The Fund benefited from strong security selection during the period highlighted by positioning in the industrial, health care & pharmaceutical, gaming/lodging/leisure and building materials & home construction sectors.

 

 

In individual company selection, the Fund’s overweight to Unifrax (industrial) was the largest contributor to performance. Avoiding Noble Group (industrial), and overweights to Laureate Education (services), Beazer Homes (building materials & home construction) and BMC Software (technology) added value as well.

 

Prudential Short Duration High Yield Fund, Inc.     7  


Strategy and Performance Overview (continued)

 

 

 

The Fund’s underweight to the banking sector and overweights to the technology and chemicals sectors added to performance.

 

What didn’t work?

 

Sector allocation hurt performance during the reporting period. An overweight to the health care & pharmaceutical sector was the largest detractor from performance as the sector struggled at the end of 2016 exacerbated by declining volumes for hospitals and headline volatility within pharmaceuticals. Underweights to the upstream energy and metals & mining sectors also limited results.

 

 

Security selection in the retailers & restaurants, paper & packaging and electric & water sectors hindered the Fund’s performance.

 

 

In individual company selection, an overweight to issuers in the retail sector including Neiman Marcus and Claire’s hurt performance. An overweight to NRG Energy (electric & water) and an underweight to First Quantum Minerals (metals & mining) also detracted from performance.

 

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 were in excess of the cost of borrowing. As of May 31, 2017, the Fund had borrowed $180 million and was about 24.3% leveraged. During the reporting period, the average amount of leverage utilized by the Fund was about 26.6%.

 

Did the Fund use derivatives and how did they affect performance?

The Fund used derivatives, specifically currency forwards to hedge the currency risk from owning non-dollar denominated bonds, and US Treasury futures to hedge interest rate risk relative to the Index. The derivatives help immunize any impact from fluctuating currencies and interest rates.

 

Were there any changes to the management of the Fund’s portfolio?

Effective October 31, 2017, Michael Collins will no longer serve as a portfolio manager for the Fund. Mr. Collins’ responsibilities in PGIM Fixed Income have increased due to substantial asset growth in both the institutional and retail multi-sector fixed income strategies. Accordingly, PGIM Fixed Income believes it is appropriate to remove him as a portfolio manager to better represent the portfolio management of the Fund. Given the depth and experience of the Fund’s existing portfolio management team, PGIM Fixed Income does not believe that any additional portfolio managers are currently necessary, and that Mr. Collins’ removal will not have any material impact on the Fund’s investment strategy.

 

8   Visit our website at pgiminvestments.com


Current outlook

Long-term demand for high yield is supported by a thirst for yield as interest rates are low due to low inflation and central bank support, although waning somewhat. Default rates outside of the energy and basic materials sectors should remain benign through 2018. Recent mergers & acquisitions (M&A) have generally been positive for high yield credits and are expected to increase under Republican oversight.

 

However, many macroeconomic concerns could weigh on the market including uncertainty in China, North Korea, the Middle East, European elections, and the Fed. Populism, nationalism and isolationism are on the rise globally, which is negative for economic growth over the longer term. While pro-business, President Trump’s anti-globalization policies and his unpredictable positions should elevate risk premiums.

 

Key positioning themes continue to be underweights in the energy, finance & insurance and banking sectors. Overweights include gaming/lodging/leisure, building materials & home construction, health care & pharmaceutical, and technology.

 

Benchmark Definitions

 

Bloomberg Barclays US High Yield Ba/B 1-5 Year 1% Issuer Constrained Index—The Bloomberg 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: Bloomberg 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) universe.

 

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.pgiminvestments.com.

 

In a continuing effort to provide information concerning the Fund, shareholders may go to www.pgiminvestments.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.

 

Prudential Short Duration High Yield Fund, Inc.     9  


Schedule of Investments

as of May 31, 2017

 

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

LONG-TERM INVESTMENTS    129.1%

       

BANK LOANS(c)    5.6%

       

Chemicals    0.3%

                               

MacDermid, Inc.

    4.602     06/07/20       1,423     $ 1,434,681  

Commercial Services    0.8%

                               

Laureate Education, Inc.

    5.656       04/30/24       4,194       4,200,771  

Lodging    0.2%

                               

Golden Nugget, Inc.

    4.672       11/21/19       653       662,437  

Golden Nugget, Inc.

    4.678       11/21/19       280       283,902  
       

 

 

 
    946,339  

Media & Entertainment    0.3%

                               

LSC Communications, Inc.^

    7.045       09/30/22       1,626       1,634,280  

Packaging    0.2%

                               

Coveris Holdings SA (Luxembourg)

    4.655       05/08/19       1,389       1,376,642  

Retail    0.3%

                               

Rite Aid Corp.

    4.875       06/21/21       1,700       1,703,897  

Software    0.9%

                               

Symantec Corp.

    2.900       08/01/21       5,128       5,096,154  

Technology    2.2%

                               

BMC Software Finance, Inc.

    1.150       09/12/22       3,577       3,593,046  

Dell International LLC

    3.150       12/31/18       4,500       4,504,689  

First Data Corp.

    3.656       04/26/24       936       941,459  

Genesys Telecom Labs, Inc.

    5.150       12/01/23       1,621       1,630,366  

Informatica Corp.

    4.647       08/05/22       1,750       1,746,355  
       

 

 

 
    12,415,915  

Wireless    0.4%

                               

Digicel International Finance Ltd.

    4.940       05/31/24       2,400       2,419,001  
       

 

 

 

TOTAL BANK LOANS
(cost $30,635,810)

 

    31,227,680  
       

 

 

 

CORPORATE BONDS    122.9%

       

Airlines    0.5%

                               

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

    6.636       01/02/24       2,800       3,013,564  

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     11  


Schedule of Investments (continued)

as of May 31, 2017

 

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

CORPORATE BONDS (Continued)

 

   

Auto Manufacturers    0.3%

                               

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

    4.250     11/15/19       1,600     $ 1,652,000  

Auto Parts & Equipment    1.5%

                               

American Axle & Manufacturing, Inc.,

       

Gtd. Notes

    5.125       02/15/19       1,415       1,433,064  

Gtd. Notes(aa)

    7.750       11/15/19       3,020       3,329,550  

IHO Verwaltungs GmbH (Germany), Sr. Sec’d. Notes, PIK, 144A

    4.125       09/15/21       2,200       2,246,750  

Meritor, Inc., Gtd. Notes

    6.750       06/15/21       1,200       1,242,000  
       

 

 

 
    8,251,364  

Building Materials    1.3%

                               

Cemex Finance LLC (Mexico),

       

First Lien, RegS

    9.375       10/12/22       750       801,000  

Sr. Sec’d. Notes, 144A

    9.375       10/12/22       2,000       2,136,000  

Griffon Corp., Gtd. Notes

    5.250       03/01/22       1,708       1,746,430  

Standard Industries, Inc., Sr. Unsec’d. Notes, 144A(g)

    5.125       02/15/21       675       703,687  

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

    8.500       04/15/22       1,750       1,964,375  
       

 

 

 
          7,351,492  

Chemicals    4.6%

 

A. Schulman, Inc., Gtd. Notes

    6.875       06/01/23       1,250       1,328,125  

Ashland LLC, Gtd. Notes

    4.750       08/15/22       1,650       1,718,063  

CF Industries, Inc., Gtd. Notes(aa)

    7.125       05/01/20       3,970       4,386,850  

Chemours Co. (The), Gtd. Notes

    6.625       05/15/23       2,780       2,967,344  

Chemtura Corp., Gtd. Notes(aa)

    5.750       07/15/21       3,369       3,474,281  

Hexion, Inc., Sr. Sec’d. Notes, 144A(aa)

    10.375       02/01/22       1,285       1,301,063  

Platform Specialty Products Corp., Sr. Unsec’d. Notes, 144A

    10.375       05/01/21       475       526,656  

Rain CII Carbon LLC/CII Carbon Corp., Sec’d. Notes, 144A

    8.250       01/15/21       3,175       3,300,031  

Tronox Finance LLC, Gtd. Notes

    6.375       08/15/20       2,440       2,464,400  

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

    5.125       10/01/21       2,107       2,243,955  

Westlake Chemical Corp., Gtd. Notes

    4.625       02/15/21       2,000       2,080,000  
       

 

 

 
          25,790,768  

Coal    0.7%

 

CONSOL Energy, Inc.,

       

Gtd. Notes

    5.875       04/15/22       2,458       2,424,203  

Gtd. Notes

    8.000       04/01/23       264       278,190  

Peabody Energy Corp., Sr. Sec’d. Notes, 144A

    6.000       03/31/22       1,050       1,055,250  
       

 

 

 
          3,757,643  

 

See Notes to Financial Statements.

 

12  


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

CORPORATE BONDS (Continued)

 

   

Commercial Services    1.6%

 

Jaguar Holding Co. II/Pharmaceutical Product Development LLC, Gtd. Notes, 144A(aa)(g)

    6.375     08/01/23       4,175     $ 4,415,062  

Nielsen Finance LLC/Nielsen Finance Co.,

       

Gtd. Notes

    4.500       10/01/20       325       330,688  

Gtd. Notes, 144A

    5.000       04/15/22       1,500       1,543,125  

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

    7.625       10/01/18       2,603       2,791,717  
       

 

 

 
          9,080,592  

Computers    2.7%

 

Dell International LLC/EMC Corp., Gtd. Notes, 144A(aa)

    5.875       06/15/21       5,150       5,442,906  

NCR Corp.,

       

Gtd. Notes(aa)

    5.875       12/15/21       2,685       2,799,113  

Gtd. Notes

    6.375       12/15/23       1,800       1,926,000  

Western Digital Corp.,

       

Gtd. Notes

    10.500       04/01/24       1,694       1,985,368  

Sr. Sec’d. Notes, 144A(aa)

    7.375       04/01/23       2,850       3,119,325  
       

 

 

 
          15,272,712  

Distribution/Wholesale    0.0%

 

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

    5.250       06/15/20       248       254,306  

Diversified Financial Services    3.3%

 

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

    8.000       12/31/18       2,975       3,224,156  

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

    5.000       08/15/22       4,175       4,518,185  

FBM Finance, Inc., Sr. Sec’d. Notes, 144A

    8.250       08/15/21       850       913,750  

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

    6.875       03/15/20       1,050       1,090,031  

Navient Corp.,

       

Sr. Unsec’d. Notes

    6.625       07/26/21       525       557,970  

Sr. Unsec’d. Notes(aa)

    6.500       06/15/22       4,965       5,166,728  

Sr. Unsec’d. Notes, MTN

    8.000       03/25/20       425       469,625  

OneMain Financial Holdings LLC, Gtd. Notes, 144A(aa)(g)

    6.750       12/15/19       2,575       2,697,313  
       

 

 

 
          18,637,758  

Electric    5.3%

                               

AES Corp., Sr. Unsec’d. Notes

    7.375       07/01/21       1,250       1,428,125  

DPL, Inc.,

       

Sr. Unsec’d. Notes(aa)

    6.750       10/01/19       3,160       3,310,100  

Sr. Unsec’d. Notes(aa)

    7.250       10/15/21       2,325       2,481,937  

Dynegy, Inc.,

       

Gtd. Notes(aa)

    6.750       11/01/19       3,253       3,346,524  

Gtd. Notes(aa)

    7.375       11/01/22       5,925       5,836,125  

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     13  


Schedule of Investments (continued)

as of May 31, 2017

 

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

CORPORATE BONDS (Continued)

 

   

Electric (cont’d.)

                               

GenOn Energy, Inc,

       

Sr. Unsec’d. Notes (original cost $714,375; purchased 09/29/15)(dd)(f)(g)

    7.875     06/15/17       750     $ 547,500  

Sr. Unsec’d. Notes (original cost $2,620,781; purchased
05/18/15 - 09/09/15)(dd)(f)(g)

    9.500       10/15/18       2,625       1,890,000  

Sr. Unsec’d. Notes (original cost $941,438; purchased
12/08/15 - 02/03/16)(dd)(f)(g)

    9.875       10/15/20       1,400       1,018,500  

Mirant Mid-Atlantic LLC, Series B, Pass-Through Trust, Pass-Through Certificates (original cost $1,441,878; purchased
05/15/12 - 02/26/16)(aa)(f)(g)

    9.125       06/30/17       1,485       1,380,808  

NRG Energy, Inc., Gtd. Notes(aa)(g)

    7.625       01/15/18       6,850       7,055,500  

NRG REMA LLC,

       

Series B, Pass-Through Certificates(g)

    9.237       07/02/17       915       756,791  

Series C, Pass-Through Certificates(aa)(g)

    9.681       07/02/26       1,100       833,250  
       

 

 

 
          29,885,160  

Electronics    0.6%

                               

Jabil Circuit, Inc.,

       

Sr. Unsec’d. Notes

    5.625       12/15/20       690       748,650  

Sr. Unsec’d. Notes(aa)

    8.250       03/15/18       2,700       2,821,500  
       

 

 

 
          3,570,150  

Entertainment    6.2%

                               

CCM Merger, Inc., Sr. Unsec’d. Notes, 144A (original cost $3,200,000; purchased 03/08/17)(aa)(f)(g)

    6.000       03/15/22       3,200       3,304,000  

Churchill Downs, Inc., Gtd. Notes(aa)

    5.375       12/15/21       4,740       4,929,600  

GLP Capital LP/GLP Financing II, Inc.,

       

Gtd. Notes(aa)

    4.375       11/01/18       3,175       3,262,312  

Gtd. Notes

    4.375       04/15/21       1,000       1,052,500  

International Game Technology PLC, Sr. Sec’d. Notes, 144A(aa)

    6.250       02/15/22       3,150       3,406,725  

Isle of Capri Casinos, Inc., Gtd. Notes

    8.875       06/15/20       8,160       8,357,472  

Jacobs Entertainment, Inc., Sec’d. Notes, 144A

    7.875       02/01/24       450       474,750  

NAI Entertainment Holdings/NAI Entertainment Holdings Finance Corp., Sr. Sec’d. Notes, 144A(aa)(g)

    5.000       08/01/18       4,550       4,567,062  

National CineMedia LLC, Sr. Sec’d. Notes

    6.000       04/15/22       1,310       1,331,288  

Scientific Games International, Inc.,

       

Gtd. Notes

    6.625       05/15/21       1,975       1,955,250  

Gtd. Notes

    10.000       12/01/22       500       544,375  

Sr. Sec’d. Notes, 144A

    7.000       01/01/22       1,225       1,307,688  
       

 

 

 
          34,493,022  

 

See Notes to Financial Statements.

 

14  


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

CORPORATE BONDS (Continued)

 

   

Environmental Control    0.6%

                               

Clean Harbors, Inc.,

       

Gtd. Notes

    5.125     06/01/21       2,600     $ 2,661,750  

Gtd. Notes

    5.250       08/01/20       850       863,813  
       

 

 

 
          3,525,563  

Food    2.5%

                               

Hearthside Group Holdings LLC/Hearthside Finance Co., Gtd. Notes, 144A

    6.500       05/01/22       1,000       1,002,500  

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

    7.750       10/28/20       1,500       1,460,250  

JBS USA LUX SA/JBS USA Finance, Inc. (Brazil),

       

Gtd. Notes, 144A(g)

    7.250       06/01/21       1,500       1,496,250  

Gtd. Notes, 144A(g)

    7.250       06/01/21       4,150       4,139,625  

Gtd. Notes, 144A(g)

    8.250       02/01/20       275       277,750  

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

    9.000       11/01/19       3,325       3,476,287  

SUPERVALU, Inc.,

       

Sr. Unsec’d. Notes

    6.750       06/01/21       1,600       1,634,000  

Sr. Unsec’d. Notes

    7.750       11/15/22       450       462,375  
       

 

 

 
          13,949,037  

Forest Products & Paper    0.8%

                               

Cascades, Inc. (Canada), Gtd. Notes, 144A

    5.500       07/15/22       1,982       2,016,685  

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

    7.750       12/01/22       2,085       2,236,163  
       

 

 

 
          4,252,848  

Gas    0.2%

                               

NGL Energy Partners LP/NGL Energy Finance Corp.,
Gtd. Notes, 144A

    7.500       11/01/23       975       987,188  

Hand/Machine Tools    0.1%

                               

Apex Tool Group LLC, Gtd. Notes, 144A(g)

    7.000       02/01/21       850       787,313  

Healthcare-Products    0.7%

                               

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

    4.875       04/15/20       3,775       3,775,000  

Healthcare-Services    9.4%

                               

Acadia Healthcare Co., Inc., Gtd. Notes

    5.125       07/01/22       500       510,000  

Centene Corp., Sr. Unsec’d. Notes

    5.625       02/15/21       2,375       2,480,402  

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     15  


Schedule of Investments (continued)

as of May 31, 2017

 

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

CORPORATE BONDS (Continued)

 

   

Healthcare-Services (cont’d.)

                               

CHS/Community Health Systems, Inc.,

       

Gtd. Notes(aa)

    8.000     11/15/19       7,500     $ 7,537,500  

Sr. Sec’d. Notes

    6.250       03/31/23       1,600       1,658,800  

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

    6.250       02/15/21       1,750       1,911,875  

HCA, Inc.,

       

Gtd. Notes(aa)

    8.000       10/01/18       1,855       2,003,400  

Sr. Sec’d. Notes(aa)

    3.750       03/15/19       3,075       3,140,344  

Sr. Sec’d. Notes

    4.250       10/15/19       1,625       1,691,950  

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

    8.000       01/15/20       6,775       7,092,612  

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

    5.500       12/01/21       3,150       3,272,062  

Molina Healthcare, Inc., Gtd. Notes

    5.375 (c)      11/15/22       1,975       2,095,969  

Select Medical Corp., Gtd. Notes(aa)

    6.375       06/01/21       3,000       3,067,500  

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

    8.875       04/15/21       1,850       1,977,187  

Tenet Healthcare Corp.,

       

Sr. Sec’d. Notes

    4.375       10/01/21       175       179,638  

Sr. Sec’d. Notes

    4.750       06/01/20       1,525       1,576,469  

Sr. Sec’d. Notes(aa)

    6.250       11/01/18       3,875       4,088,125  

Sr. Unsec’d. Notes

    6.750       02/01/20       925       955,063  

Sr. Unsec’d. Notes

    6.750       06/15/23       4,775       4,750,313  

Sr. Unsec’d. Notes

    8.000       08/01/20       1,000       1,017,500  

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

    4.750       08/01/22       1,325       1,358,125  
       

 

 

 
          52,364,834  

Home Builders    10.2%

                               

AV Homes, Inc., Sr. Unsec’d. Notes, 144A

    6.625       05/15/22       625       637,500  

Beazer Homes USA, Inc.,

       

Gtd. Notes

    5.750       06/15/19       2,550       2,680,687  

Gtd. Notes

    8.750       03/15/22       2,800       3,129,000  

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

    6.500       12/15/20       2,765       2,854,862  

CalAtlantic Group, Inc.,

       

Gtd. Notes

    6.250       12/15/21       350       388,938  

Gtd. Notes(aa)

    8.375       05/15/18       4,200       4,442,340  

KB Home,

       

Gtd. Notes(aa)

    4.750       05/15/19       3,609       3,717,270  

Gtd. Notes(aa)

    7.250       06/15/18       2,000       2,090,000  

Lennar Corp.,

       

Gtd. Notes

    4.125       01/15/22       2,600       2,665,000  

Gtd. Notes

    4.500       11/15/19       1,000       1,041,250  

Gtd. Notes(aa)

    4.750       12/15/17       5,075       5,113,062  

M/I Homes, Inc., Gtd. Notes(aa)

    6.750       01/15/21       2,075       2,178,750  

 

See Notes to Financial Statements.

 

16  


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

CORPORATE BONDS (Continued)

 

   

Home Builders (cont’d.)

                               

Mattamy Group Corp. (Canada),

       

Gtd. Notes, 144A(g)

    6.500     11/15/20       1,525     $ 1,559,313  

Sr. Unsec’d. Notes, 144A(g)

    6.875       12/15/23       1,225       1,240,313  

Meritage Homes Corp., Gtd. Notes(aa)

    4.500       03/01/18       3,900       3,958,500  

New Home Co., Inc. (The), Gtd. Notes, 144A

    7.250       04/01/22       1,525       1,578,375  

PulteGroup, Inc., Gtd. Notes

    4.250       03/01/21       1,850       1,919,375  

Taylor Morrison Communities, Inc. /Taylor Morrison Holdings II, Inc., Gtd. Notes, 144A(aa)

    5.250       04/15/21       3,400       3,480,750  

Toll Brothers Finance Corp., Gtd. Notes(aa)

    8.910       10/15/17       1,600       1,642,000  

TRI Pointe Group, Inc., Gtd. Notes

    4.875       07/01/21       2,400       2,496,000  

WCI Communities, Inc./Lennar Corp., Gtd. Notes

    6.875       08/15/21       5,250       5,486,250  

William Lyon Homes, Inc.,

       

Gtd. Notes

    5.750       04/15/19       2,500       2,525,000  

Gtd. Notes

    7.000       08/15/22       400       416,000  
       

 

 

 
          57,240,535  

Iron/Steel     2.4%

                               

ArcelorMittal (Luxembourg), Sr. Unsec’d. Notes(aa)

    6.125       06/01/18       7,200       7,487,280  

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

    6.500       05/15/21       4,180       4,425,575  

Signode Industrial Group Lux SA/Signode Industrial Group US, Inc., Gtd. Notes, 144A(g)

    6.375       05/01/22       625       651,563  

Steel Dynamics, Inc., Gtd. Notes

    6.375       08/15/22       1,095       1,134,967  
       

 

 

 
          13,699,385  

Leisure Time    0.6%

                               

NCL Corp. Ltd., Sr. Unsec’d. Notes, 144A

    4.625       11/15/20       1,725       1,768,125  

Viking Cruises Ltd., Sr. Unsec’d. Notes, 144A(g)

    8.500       10/15/22       1,475       1,545,063  
       

 

 

 
          3,313,188  

Lodging    5.9%

                               

Boyd Gaming Corp., Gtd. Notes

    6.875       05/15/23       300       324,750  

Caesars Entertainment Resort Properties LLC/Caesars Entertainment Resort Properties, Sr. Sec’d. Notes(aa)

    8.000       10/01/20       7,575       7,849,594  

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

    8.500       12/01/21       2,550       2,722,125  

Jack Ohio Finance LLC/Jack Ohio Finance 1 Corp.,

       

Sec’d. Notes, 144A

    10.250       11/15/22       975       1,060,313  

Sr. Sec’d. Notes, 144A

    6.750       11/15/21       1,125       1,165,781  

MGM Resorts International, Gtd. Notes(aa)

    8.625       02/01/19       10,805       11,939,525  

Station Casinos LLC, Gtd. Notes(aa)

    7.500       03/01/21       2,253       2,337,488  

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     17  


Schedule of Investments (continued)

as of May 31, 2017

 

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

CORPORATE BONDS (Continued)

 

   

Lodging (cont’d.)

                               

Sugarhouse HSP Gaming Prop Mezz LP/Sugarhouse HSP Gaming Finance Corp., Sr. Sec’d. Notes, 144A(g)

    6.375     06/01/21       3,425     $ 3,479,594  

Wynn Macau Ltd. (Macau), Sr. Unsec’d. Notes, 144A

    5.250       10/15/21       1,925       1,994,781  
       

 

 

 
    32,873,951  

Machinery-Diversified    1.6%

                               

Cleaver-Brooks, Inc., Sr. Sec’d. Notes, 144A(aa)(g)

    8.750       12/15/19       1,425       1,467,750  

CNH Industrial Capital LLC, Gtd. Notes(aa)

    4.375       11/06/20       1,900       1,983,125  

Zebra Technologies Corp., Sr. Unsec’d. Notes(aa)

    7.250       10/15/22       5,380       5,775,430  
       

 

 

 
          9,226,305  

Media    14.0%

                               

Cablevision Systems Corp.,

       

Sr. Unsec’d. Notes(aa)

    7.750       04/15/18       2,250       2,344,905  

Sr. Unsec’d. Notes(aa)

    8.625       09/15/17       3,781       3,847,167  

CCO Holdings LLC/CCO Holdings Capital Corp.,

       

Sr. Unsec’d. Notes

    5.250       03/15/21       1,030       1,062,188  

Sr. Unsec’d. Notes(aa)

    5.250       09/30/22       5,485       5,687,287  

Cequel Communications Holdings I LLC/Cequel Capital Corp.,

       

Sr. Unsec’d. Notes, 144A

    5.125       12/15/21       2,160       2,204,561  

Sr. Unsec’d. Notes, 144A(aa)

    5.125       12/15/21       3,845       3,921,900  

Sr. Unsec’d. Notes, 144A(aa)

    6.375       09/15/20       6,586       6,750,650  

Clear Channel Worldwide Holdings, Inc.,

       

Series A, Gtd. Notes(aa)

    6.500       11/15/22       2,965       3,024,300  

Series A, Gtd. Notes

    7.625       03/15/20       465       460,350  

Series B, Gtd. Notes

    6.500       11/15/22       1,385       1,431,744  

Series B, Gtd. Notes

    7.625       03/15/20       660       663,300  

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

    4.875       05/01/20       2,500       2,553,125  

CSC Holdings LLC, Sr. Unsec’d. Notes

    7.875       02/15/18       880       916,300  

DISH DBS Corp.,

       

Gtd. Notes(aa)

    4.250       04/01/18       4,590       4,658,850  

Gtd. Notes

    4.625       07/15/17       1,800       1,802,250  

Gtd. Notes(aa)

    5.125       05/01/20       2,875       3,033,125  

Mediacom Broadband LLC/Mediacom Broadband Corp.,

       

Sr. Unsec’d. Notes

    5.500       04/15/21       1,800       1,849,500  

Sr. Unsec’d. Notes(aa)

    6.375       04/01/23       3,279       3,434,752  

Midcontinent Communications/Midcontinent Finance Corp., Gtd. Notes,
144A(aa)

    6.250       08/01/21       4,175       4,321,125  

Nexstar Broadcasting, Inc., Gtd. Notes, 144A

    6.125       02/15/22       1,035       1,089,337  

 

See Notes to Financial Statements.

 

18  


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

CORPORATE BONDS (Continued)

 

   

Media (cont’d.)

                               

SFR Group SA (France), Sr. Sec’d. Notes, 144A(aa)

    6.000     05/15/22       2,000     $ 2,092,500  

Sinclair Television Group, Inc.,

       

Gtd. Notes

    5.375       04/01/21       2,585       2,656,087  

Gtd. Notes

    6.125       10/01/22       1,225       1,278,594  

TEGNA, Inc.,

       

Gtd. Notes

    5.125       10/15/19       650       665,438  

Gtd. Notes, 144A(aa)

    4.875       09/15/21       3,030       3,120,900  

Tribune Media Co., Gtd. Notes

    5.875       07/15/22       2,925       3,082,219  

Univision Communications, Inc.,
Sr. Sec’d. Notes, 144A(aa)(g)

    6.750       09/15/22       9,666       10,100,970  

Videotron Ltd. (Canada), Gtd. Notes

    5.000       07/15/22       345       367,425  
       

 

 

 
          78,420,849  

Mining    7.1%

                               

Constellium NV (Netherlands), Sr. Sec’d. Notes, 144A

    7.875       04/01/21       1,785       1,921,106  

First Quantum Minerals Ltd. (Canada), Gtd. Notes, 144A

    7.000       02/15/21       1,365       1,429,565  

FMG Resources August 2006 Pty Ltd. (Australia),

       

Gtd. Notes, 144A

    4.750       05/15/22       975       987,188  

Sr. Sec’d. Notes, 144A

    9.750       03/01/22       5,724       6,557,557  

Freeport-McMoRan, Inc.,

       

Gtd. Notes(aa)

    2.300       11/14/17       10,175       10,149,562  

Gtd. Notes

    2.375       03/15/18       1,419       1,417,581  

Gtd. Notes, 144A

    6.500       11/15/20       2,000       2,070,160  

Gtd. Notes, 144A

    6.625       05/01/21       1,110       1,134,975  

International Wire Group, Inc., Sec’d.
Notes, 144A (original cost $1,444,870; purchased 07/12/16 -
08/04/16)(f)(g)

    10.750       08/01/21       1,500       1,389,375  

Kinross Gold Corp. (Canada), Gtd. Notes

    5.125       09/01/21       915       965,325  

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

    7.500       11/01/20       5,075       5,367,371  

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

    7.000       04/15/20       3,125       3,179,687  

Teck Resources Ltd. (Canada), Gtd. Notes(aa)

    4.500       01/15/21       3,124       3,264,580  
       

 

 

 
          39,834,032  

Miscellaneous Manufacturing    0.8%

                               

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

    8.750       12/01/21       3,475       3,865,937  

EnPro Industries, Inc., Gtd. Notes, 144A

    5.875       09/15/22       500       522,500  
       

 

 

 
          4,388,437  

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     19  


Schedule of Investments (continued)

as of May 31, 2017

 

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

CORPORATE BONDS (Continued)

 

   

Oil & Gas    3.9%

                               

Antero Resources Corp., Gtd. Notes

    5.375     11/01/21       750     $ 771,563  

Ascent Resources Utica Holdings LLC/ARU Finance Corp., Sr. Unsec’d. Notes, 144A

    10.000       04/01/22       2,883       2,955,075  

Endeavor Energy Resources LP/EER Finance, Inc., Sr. Unsec’d. Notes, 144A

    7.000       08/15/21       2,500       2,587,500  

Extraction Oil & Gas Holdings LLC/Extraction Finance Corp., Gtd. Notes, 144A

    7.875       07/15/21       1,900       1,985,500  

MEG Energy Corp. (Canada), Gtd. Notes, 144A

    6.375       01/30/23       775       664,563  

Noble Holding International Ltd. (United Kingdom), Gtd. Notes

    7.750       01/15/24       950       838,080  

Range Resources Corp., Gtd. Notes, 144A

    5.875       07/01/22       700       715,750  

RSP Permian, Inc., Gtd. Notes

    6.625       10/01/22       1,375       1,448,906  

Sunoco LP/Sunoco Finance Corp.,

       

Gtd. Notes

    5.500       08/01/20       850       877,625  

Gtd. Notes(aa)

    6.250       04/15/21       2,750       2,901,250  

Tesoro Corp., Gtd. Notes(aa)

    4.250       10/01/17       3,675       3,688,781  

Western Refining, Inc., Gtd. Notes

    6.250       04/01/21       876       903,375  

WPX Energy, Inc., Sr. Unsec’d. Notes

    7.500       08/01/20       1,525       1,608,875  
       

 

 

 
          21,946,843  

Oil & Gas Services    0.3%

                               

SESI LLC, Gtd. Notes

    6.375       05/01/19       1,790       1,763,150  

Packaging & Containers    4.7%

                               

Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc. (Ireland),

       

Gtd. Notes, 144A

    6.000       06/30/21       1,000       1,030,000  

Sr. Sec’d. Notes, 144A

    4.250       09/15/22       2,300       2,343,125  

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

    7.875       11/01/19       4,375       4,265,625  

Greif, Inc., Sr. Unsec’d. Notes(aa)

    7.750       08/01/19       6,050       6,662,563  

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

    9.500       08/15/19       3,000       2,317,500  

Plastipak Holdings, Inc., Sr. Unsec’d. Notes, 144A(aa)(g)

    6.500       10/01/21       3,275       3,356,875  

Reynolds Group Issuer, Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer LU (New Zealand), Sr. Sec’d. Notes(aa)

    5.750       10/15/20       4,775       4,902,731  

Sealed Air Corp., Gtd. Notes, 144A(aa)

    6.500       12/01/20       1,045       1,165,175  
       

 

 

 
          26,043,594  

 

See Notes to Financial Statements.

 

20  


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

CORPORATE BONDS (Continued)

 

   

Pharmaceuticals    3.0%

                               

Allergan, Inc., Gtd. Notes(aa)

    1.350     03/15/18       2,240     $ 2,241,039  

Capsugel SA, Gtd. Notes, PIK, 144A

    7.000       05/15/19       2,878       2,880,159  

Endo Finance LLC, Gtd. Notes, 144A

    5.750       01/15/22       175       167,781  

Endo Finance LLC/Endo Finco, Inc., Gtd. Notes, 144A

    7.250 (c)      01/15/22       1,500       1,496,250  

Nature’s Bounty Co. (The), Sr. Unsec’d. Notes, 144A(aa)(g)

    7.625       05/15/21       2,800       2,926,000  

Valeant Pharmaceuticals International, Inc.,

       

Gtd. Notes, 144A(aa)

    7.000       10/01/20       4,025       3,843,875  

Gtd. Notes, 144A(aa)

    7.500       07/15/21       2,725       2,525,748  

Sr. Sec’d. Notes, 144A

    6.500       03/15/22       775       813,595  
       

 

 

 
          16,894,447  

Pipelines    1.7%

                               

Rockies Express Pipeline LLC,

       

Sr. Unsec’d. Notes, 144A(g)

    5.625       04/15/20       2,050       2,183,250  

Sr. Unsec’d. Notes, 144A(aa)(g)

    6.000       01/15/19       2,150       2,256,167  

Sr. Unsec’d. Notes, 144A(g)

    6.850       07/15/18       1,900       1,990,250  

Tesoro Logistics LP/Tesoro Logistics Finance Corp., Gtd. Notes(aa)

    6.125       10/15/21       2,875       2,998,984  
       

 

 

 
          9,428,651  

Real Estate    0.7%

                               

Crescent Communities LLC/Crescent Venture, Inc., Sr. Sec’d. Notes, 144A

    8.875       10/15/21       1,575       1,649,812  

Greystar Real Estate Partners LLC, Sr. Sec’d. Notes, 144A (original cost $962,470; purchased 02/10/17)(f)(g)

    8.250       12/01/22       883       951,433  

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

    5.250       12/01/21       1,425       1,496,250  
       

 

 

 
          4,097,495  

Real Estate Investment Trusts (REITs)    2.6%

                               

DuPont Fabros Technology LP, Gtd. Notes(aa)

    5.875       09/15/21       4,826       5,019,040  

Equinix, Inc., Sr. Unsec’d. Notes(aa)

    4.875       04/01/20       3,000       3,078,750  

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

    6.375       02/15/22       1,500       1,550,625  

RHP Hotel Properties LP/RHP Finance Corp.,

       

Gtd. Notes

    5.000       04/15/21       1,150       1,175,875  

Gtd. Notes

    5.000       04/15/23       500       511,875  

Sabra Health Care LP/Sabra Capital Corp., Gtd. Notes(aa)

    5.500       02/01/21       2,625       2,736,562  

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

    4.875       07/15/22       500       516,875  
       

 

 

 
          14,589,602  

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     21  


Schedule of Investments (continued)

as of May 31, 2017

 

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

CORPORATE BONDS (Continued)

 

   

Retail    6.9%

                               

1011778 BC ULC/New Red Finance, Inc. (Canada), Sec’d. Notes, 144A

    6.000     04/01/22       1,675     $ 1,743,591  

Claire’s Stores, Inc.,

       

Sr. Sec’d. Notes, 144A(g)

    6.125       03/15/20       400       170,000  

Sr. Sec’d. Notes, 144A(g)

    9.000       03/15/19       4,200       2,037,000  

Ferrellgas Partners LP/Ferrellgas Partners Finance Corp.,

       

Sr. Unsec’d. Notes

    8.625       06/15/20       900       873,000  

Sr. Unsec’d. Notes, 144A

    8.625       06/15/20       1,500       1,455,000  

Hot Topic, Inc., Sr. Sec’d. Notes, 144A(g)

    9.250       06/15/21       1,530       1,552,950  

L Brands, Inc.,

       

Gtd. Notes

    6.625       04/01/21       2,500       2,768,750  

Gtd. Notes

    7.000       05/01/20       2,000       2,219,160  

Gtd. Notes

    8.500       06/15/19       975       1,087,125  

Men’s Wearhouse, Inc. (The), Gtd. Notes

    7.000       07/01/22       1,350       1,150,875  

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

    8.000       10/15/21       2,112       1,092,960  

PetSmart, Inc., Sr. Unsec’d. Notes, 144A

    7.125       03/15/23       2,750       2,564,375  

PF Chang’s China Bistro, Inc., Gtd. Notes, 144A

    10.250       06/30/20       1,150       1,173,000  

Rite Aid Corp.,

       

Gtd. Notes

    9.250       03/15/20       1,200       1,242,156  

Gtd. Notes, 144A(aa)

    6.125       04/01/23       4,650       4,618,845  

Ruby Tuesday, Inc., Gtd. Notes

    7.625       05/15/20       2,025       1,923,750  

Sally Holdings LLC/Sally Capital, Inc., Gtd. Notes(aa)

    5.750       06/01/22       2,900       2,990,625  

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

    7.375       07/15/19     EUR  4,000       4,618,071  

Tops Holding LLC/Tops Markets II Corp., Sr. Sec’d. Notes, 144A(g)

    8.000       06/15/22       725       609,000  

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

    3.875       11/01/20       2,400       2,460,000  
       

 

 

 
          38,350,233  

Semiconductors    1.9%

                               

Micron Technology, Inc., Sr. Sec’d. Notes

    7.500       09/15/23       3,515       3,926,606  

NXP BV/NXP Funding LLC (Netherlands),

       

Gtd. Notes, 144A(aa)

    4.125       06/15/20       2,900       3,052,250  

Gtd. Notes, 144A

    4.125       06/01/21       2,200       2,321,000  

Sr. Unsec’d. Notes, 144A

    3.875       09/01/22       1,500       1,565,625  
       

 

 

 
          10,865,481  

Software    2.0%

                               

BMC Software Finance, Inc., Sr. Unsec’d. Notes, 144A

    8.125       07/15/21       1,000       1,021,300  

BMC Software, Inc., Sr. Unsec’d. Notes

    7.250       06/01/18       904       931,120  

Infor US, Inc., Sr. Sec’d. Notes, 144A(aa)(g)

    5.750       08/15/20       5,340       5,540,250  

Nuance Communications, Inc., Gtd. Notes, 144A(aa)

    5.375       08/15/20       3,380       3,443,375  
       

 

 

 
          10,936,045  

 

See Notes to Financial Statements.

 

22  


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

CORPORATE BONDS (Continued)

 

   

Telecommunications    8.8%

                               

Aegis Merger Sub., Inc., Sr. Unsec’d. Notes, 144A

    10.250     02/15/23       2,000     $ 2,210,000  

Anixter, Inc., Gtd. Notes(aa)

    5.625       05/01/19       1,500       1,578,750  

Centurylink, Inc., Series S, Sr. Unsec’d. Notes(aa)

    6.450       06/15/21       3,050       3,297,812  

CommScope, Inc., Gtd. Notes, 144A(aa)

    5.000       06/15/21       5,305       5,440,914  

Frontier Communications Corp.,

       

Sr. Unsec’d. Notes

    6.250       09/15/21       475       445,313  

Sr. Unsec’d. Notes

    8.125       10/01/18       1,775       1,877,062  

Sr. Unsec’d. Notes

    8.500       04/15/20       235       249,100  

Sr. Unsec’d. Notes

    9.250       07/01/21       750       762,656  

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

    6.125       01/15/21       5,350       5,470,375  

Qwest Capital Funding, Inc., Gtd. Notes

    6.500       11/15/18       1,000       1,053,750  

Sprint Communications, Inc.,

       

Gtd. Notes, 144A(aa)(g)

    7.000       03/01/20       5,035       5,588,850  

Gtd. Notes, 144A(g)

    9.000       11/15/18       6,080       6,672,800  

T-Mobile USA, Inc.,

       

Gtd. Notes

    6.000       03/01/23       875       930,738  

Gtd. Notes

    6.625       04/01/23       1,730       1,841,931  

Telecom Italia Capital SA (Italy), Gtd. Notes

    6.999       06/04/18       2,060       2,157,850  

Wind Acquisition Finance SA (Italy),

       

Sec’d. Notes, 144A(aa)

    7.375       04/23/21       3,500       3,647,000  

Sr. Sec’d. Notes, 144A(aa)

    6.500       04/30/20       4,300       4,445,125  

Xplornet Communications, Inc. (Canada), Sr. Unsec’d. Notes, PIK, 144A

    9.625       06/01/22       1,350       1,404,000  
       

 

 

 
          49,074,026  

Textiles    0.7%

                               

Springs Industries, Inc., Sr. Sec’d. Notes(aa)

    6.250       06/01/21       3,550       3,665,375  

Transportation    0.2%

                               

XPO Logistics, Inc., Gtd. Notes, 144A

    6.500       06/15/22       925       982,073  
       

 

 

 

TOTAL CORPORATE BONDS
(cost $684,396,799)

          688,286,011  
       

 

 

 

NON-CORPORATE FOREIGN AGENCY    0.6%

       

Nova Chemicals Corp. (Canada), Sr. Unsec’d. Notes, 144A
(cost $3,350,000)

    4.875       06/01/24       3,350       3,358,375  
       

 

 

 

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     23  


Schedule of Investments (continued)

as of May 31, 2017

 

Description              

    

Shares

    Value  

COMMON STOCK    0.0%

       

Oil, Gas & Consumable Fuels

                               

Pacific Exploration and Production Corp. (Colombia)*
(cost $43,940)

        1,033     $ 29,032  
       

 

 

 

TOTAL LONG-TERM INVESTMENTS
(cost $718,426,549)

          722,901,098  
       

 

 

 

SHORT-TERM INVESTMENT    3.4%

       

AFFILIATED MUTUAL FUND

                               

Prudential Investment Portfolios 2 - Prudential Core Ultra Short Bond Fund
(cost $19,392,059)(w)

        19,392,059       19,392,059  
       

 

 

 

TOTAL INVESTMENTS    132.5%
(cost $737,818,608)

          742,293,157  

Liabilities in excess of other assets(z)    (32.5)%

          (182,223,948
       

 

 

 

NET ASSETS    100.0%

        $ 560,069,209  
       

 

 

 

 

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

LIBOR—London Interbank Offered Rate

MTN—Medium Term Note

OTC—Over-the-counter

PIK—Payment-in-Kind

# Principal amount is shown in U.S. dollars unless otherwise stated.
* Non-income producing security.
^ Indicates a Level 3 security. The aggregate value of Level 3 securities is $1,634,280 and 0.3% of net assets.
(aa) Represents security, or a portion thereof, with aggregate value of $381,045,961 segregated as collateral for amount of $180,000,000 borrowed and outstanding as of May 31, 2017. Of such securities, securities in the amount of $35,563,378 have been loaned for which, the amount borrowed serves as collateral.
(c) Variable rate instrument. The interest rate shown reflects the rate in effect at May 31, 2017.
(dd) On June 14, 2017, GenOn Energy, Inc. and its subsidiaries filed for bankruptcy under Chapter 11. In connection with the Chapter 11 plan of reorganization (the “GenOn Reorganization Plan”), GenOn Energy, Inc. and its subsidiaries will issue a 144A high yield bond offering for the exit financing of the bankruptcy. As part of the GenOn Reorganization Plan and restructuring of the existing bond, on behalf of the Fund, PGIM, Inc. has agreed to participate in the backstop commitment of $5,230,000 for the new bond offering. The Fund has received a backstop fee of $261,500 subsequent to its fiscal year end in conjunction with this commitment.
(f) Indicates a restricted security; the aggregate original cost of such securities is $11,325,812. The aggregate value of $10,481,616, is approximately 1.9% of net assets.

 

See Notes to Financial Statements.

 

24  


(g) Indicates a security that has been deemed illiquid; the aggregate value of $93,139,177 is approximately 16.6% of net assets. (unaudited)
(w) PGIM Investments LLC, the manager of the Fund, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Ultra Short Bond Fund.
(z) Includes net unrealized appreciation (depreciation) on the following derivative contracts held at reporting period end:

 

Forward foreign currency exchange contracts outstanding at May 31, 2017:

 

Purchase Contracts

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

OTC forward foreign currency exchange contracts:

 

     

Euro,

         

Expiring 06/02/17

  Goldman Sachs & Co.   EUR  3,961     $ 4,444,869     $ 4,450,017     $ 5,148  
     

 

 

   

 

 

   

 

 

 

Sale Contracts

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

OTC forward foreign currency exchange contracts:

 

Euro,

         

Expiring 06/02/17

  Goldman Sachs & Co.   EUR  3,961     $ 4,335,036     $ 4,450,017     $ (114,981

Expiring 07/05/17

  Goldman Sachs & Co.   EUR  3,961       4,452,775       4,458,574       (5,799
     

 

 

   

 

 

   

 

 

 
      $ 8,787,811     $ 8,908,591       (120,780
     

 

 

   

 

 

   

 

 

 
          $ (115,632
         

 

 

 

 

Fair Value Measurements:

 

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—unadjusted 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, 2017 in valuing such portfolio securities:

 

      Level 1         Level 2         Level 3    

Investments in Securities

     

Bank Loans

  $     —     $ 29,593,400     $ 1,634,280  

Corporate Bonds

          688,286,011        

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     25  


Schedule of Investments (continued)

as of May 31, 2017

 

      Level 1         Level 2         Level 3    

Non-Corporate Foreign Agency

  $     $ 3,358,375     $  

Common Stock

    29,032              

Affiliated Mutual Fund

    19,392,059              

Other Financial Instruments*

     

OTC Forward Foreign Currency Exchange Contracts

          (115,632      
 

 

 

   

 

 

   

 

 

 

Total

  $ 19,421,091     $ 721,122,154     $ 1,634,280  
 

 

 

   

 

 

   

 

 

 

 

* Other financial instruments are derivative instruments not reflected in the Schedule 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.

 

During the period, there were no transfers between Level 1, Level 2 and Level 3 to report.

 

Industry Classification:

 

The industry classification of investments and liabilities in excess of other assets shown as a percentage of net assets as of May 31, 2017 were as follows (unaudited):

 

Media

    14.0

Home Builders

    10.2  

Healthcare-Services

    9.4  

Telecommunications

    8.8  

Retail

    7.2  

Mining

    7.1  

Entertainment

    6.2  

Lodging

    6.1  

Electric

    5.3  

Chemicals

    4.9  

Packaging & Containers

    4.7  

Oil & Gas

    3.9  

Affiliated Mutual Fund

    3.4  

Diversified Financial Services

    3.3  

Pharmaceuticals

    3.0  

Software

    2.9  

Computers

    2.7  

Real Estate Investment Trusts (REITs)

    2.6  

Food

    2.5  

Iron/Steel

    2.4  

Commercial Services

    2.4  

Technology

    2.2  

Semiconductors

    1.9  

Pipelines

    1.7  

Machinery-Diversified

    1.6  

Auto Parts & Equipment

    1.5  

Building Materials

    1.3

Miscellaneous Manufacturing

    0.8  

Forest Products & Paper

    0.8  

Real Estate

    0.7  

Healthcare-Products

    0.7  

Coal

    0.7  

Textiles

    0.7  

Electronics

    0.6  

Environmental Control

    0.6  

Non-Corporate Foreign Agency

    0.6  

Leisure Time

    0.6  

Airlines

    0.5  

Wireless

    0.4  

Oil & Gas Services

    0.3  

Auto Manufacturers

    0.3  

Media & Entertainment

    0.3  

Packaging

    0.2  

Gas

    0.2  

Transportation

    0.2  

Hand/Machine Tools

    0.1  

Distribution/Wholesale

    0.0

Oil, Gas & Consumable Fuels

    0.0
 

 

 

 
    132.5  

Liabilities in excess of other assets

    (32.5
 

 

 

 
    100.0
 

 

 

 

 

* Less than +/- 0.05%

 

See Notes to Financial Statements.

 

26  


Effects of Derivative Instruments on the Financial Statements and Primary Underlying Risk Exposure:

 

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.

 

Fair values of derivative instruments as of May 31, 2017 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    $ 5,148      Unrealized depreciation on OTC forward foreign currency exchange contracts    $ 120,780  
     

 

 

       

 

 

 

 

The effects of derivative instruments on the Statement of Operations for the year ended May 31, 2017 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(1)
 

Foreign exchange contracts

     $ 228,809  
    

 

 

 

 

(1) 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(2)
 

Foreign exchange contracts

     $ (193,255
    

 

 

 

 

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

 

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     27  


Schedule of Investments (continued)

as of May 31, 2017

 

 

For the year ended May 31, 2017, 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)
 
$ 4,433,568     $ 8,883,095  

 

(1) Value at Settlement Date

 

Financial Instruments/Transactions—Summary of Offsetting and Netting Arrangements:

 

The Fund invested in OTC derivatives and entered into financial instruments/transactions 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 and financial instruments/transactions, where the legal right to set-off exists, is presented in the summary below.

 

Offsetting of financial instruments/transactions assets and liabilities:

 

Description

  Gross
Amounts of
Recognized
Assets(3)
    Collateral
Pledged(4)
    Net
Amount
 

Securities on Loan

  $ 35,563,378     $ (35,563,378   $  —  
 

 

 

     

 

Offsetting of OTC derivative assets and liabilities:

 

Counterparty

  Gross
Amounts of
Recognized
Assets(1)
    Gross
Amounts
Available
for Offset
    Collateral
Received
    Net
Amount
 

Goldman Sachs & Co.

  $ 5,148     $ (5,148   $   —     $  
 

 

 

       

Counterparty

  Gross
Amounts of
Recognized
Liabilities(2)
    Gross
Amounts
Available
for Offset
    Collateral
Pledged
    Net
Amount
 

Goldman Sachs & Co.

  $ (120,780   $ 5,148     $   —     $ (115,632
 

 

 

       

 

(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.
(3) Amount represents market value.
(4) Collateral amount disclosed by the Fund is limited to the market value of financial instruments/transactions.

 

See Notes to Financial Statements.

 

28  


Statement of Assets & Liabilities

as of May 31, 2017

 

Assets

 

Investments at value, including securities on loan of $35,563,378

 

Unaffiliated investments (cost $718,426,549)

   $ 722,901,098  

Affiliated investments (cost $19,392,059)

     19,392,059  

Cash

     63,225  

Foreign currency, at value (cost $199,649)

     213,455  

Dividends and interest receivable

     11,450,381  

Unrealized appreciation on OTC forward foreign currency exchange contracts

     5,148  

Prepaid expenses

     1,254  
  

 

 

 

Total Assets

     754,026,620  
  

 

 

 

Liabilities

 

Loan payable

     180,000,000  

Payable for investments purchased

     12,838,209  

Management fee payable

     505,631  

Loan interest payable

     305,586  

Unrealized depreciation on OTC forward foreign currency exchange contracts

     120,780  

Dividends payable

     78,043  

Accrued expenses

     68,548  

Deferred directors’ fees

     40,614  
  

 

 

 

Total Liabilities

     193,957,411  
  

 

 

 

Net Assets

   $ 560,069,209  
  

 

 

 
          

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

     2,436,730  

Accumulated net realized loss on investment and foreign currency transactions

     (80,653,155

Net unrealized appreciation on investments and foreign currencies

     4,377,893  
  

 

 

 

Net assets, May 31, 2017

   $ 560,069,209  
  

 

 

 

Net asset value per share
($560,069,209 ÷ 33,256,724 shares of common stock issued and outstanding)

   $ 16.84  
  

 

 

 

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     29  


Statement of Operations

Year Ended May 31, 2017

 

Net Investment Income (Loss)

 

Income

 

Interest income (net of foreign withholding taxes of $11,412)

  $ 42,082,936  

Affiliated dividend income

    131,832  
 

 

 

 

Total income

    42,214,768  
 

 

 

 

Expenses

 

Management fee

    6,099,981  

Loan interest expense

    2,993,458  

Legal fees and expenses

    118,000  

Custodian and accounting fees

    114,000  

Shareholders’ reports

    64,000  

Audit fee

    43,000  

Directors’ fees

    40,000  

Registration fees

    34,000  

Transfer agent’s fees and expenses

    20,000  

Miscellaneous

    16,799  
 

 

 

 

Total expenses

    9,543,238  
 

 

 

 

Net investment income (loss)

    32,671,530  
 

 

 

 

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

 

Net realized gain (loss) on:

 

Investment transactions

    (638,716

Foreign currency transactions

    213,472  
 

 

 

 
    (425,244
 

 

 

 

Net change in unrealized appreciation (depreciation) on:

 

Investments

    11,247,508  

Foreign currencies

    (173,682
 

 

 

 
    11,073,826  
 

 

 

 

Net gain (loss) on investment and foreign currency transactions

    10,648,582  
 

 

 

 

Net Increase (Decrease) In Net Assets Resulting From Operations

  $ 43,320,112  
 

 

 

 

 

See Notes to Financial Statements.

 

30  


Statement of Changes in Net Assets

     Year Ended May 31,  
     2017      2016  

Increase (Decrease) in Net Assets

                 

Operations

     

Net investment income (loss)

   $ 32,671,530      $ 35,256,102  

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

     (425,244      (21,149,978

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

     11,073,826        (3,722,120
  

 

 

    

 

 

 

Net increase (decrease) in net assets resulting from operations

     43,320,112        10,384,004  
  

 

 

    

 

 

 

Dividends from net investment income

     (41,654,047      (45,146,003
  

 

 

    

 

 

 

Total increase (decrease)

     1,666,065        (34,761,999

Net Assets:

                 

Beginning of year

     558,403,144        593,165,143  
  

 

 

    

 

 

 

End of year(a)

   $ 560,069,209      $ 558,403,144  
  

 

 

    

 

 

 

(a) Includes undistributed net investment income of:

   $ 2,436,730      $ 3,499,918  
  

 

 

    

 

 

 

 

See Notes to Financial Statements.

 

Prudential Short Duration High Yield Fund, Inc.     31  


Statement of Cash Flows

For Year Ended May 31, 2017

 

Increase (Decrease) in Cash

        

Cash flows from operating activities:

  

Interest and dividends paid (excluding discount and premium amortization of $(6,329,271))

   $ 49,710,648  

Operating expenses paid

     (6,557,817

Loan interest paid

     (2,915,114

Purchases of long-term portfolio investments

     (480,107,698

Proceeds from disposition of long-term portfolio investments

     494,614,053  

Net purchases and sales of short-term investments

     9,063,941  

Decrease in receivable for investments sold

     560,000  

Increase in payable for investments purchased

     2,141,118  

Increase in prepaid expenses

     (87

Net cash received from foreign currency transactions

     213,472  

Effect of exchange rate changes

     19,574  
  

 

 

 

Net cash provided from operating activities

     66,742,090  
  

 

 

 

Cash flows from financing activities:

  

Cash dividends paid

     (41,672,822

Net decrease in borrowings

     (25,000,000
  

 

 

 

Net cash used in financing activities

     (66,672,822
  

 

 

 

Net increase (decrease) in cash

     69,268  

Cash at beginning of year, including foreign currency

     207,412  
  

 

 

 

Cash at end of year, including foreign currency

   $ 276,680  
  

 

 

 

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

        

Net increase in net assets resulting from operations

   $ 43,320,112  
  

 

 

 

Increase in investments

     29,899,567  

Net realized loss on investment and foreign currency transactions

     425,244  

Increase in net unrealized appreciation on investments and foreign currencies

     (11,073,826

Net cash received from foreign currency transactions

     213,472  

Effect of exchange rate changes

     19,574  

Decrease in interest and dividends receivable

     1,166,609  

Decrease in receivable for investments sold

     560,000  

Increase in prepaid expenses

     (87

Increase in payable for investments purchased

     2,141,118  

Increase in loan interest payable

     78,344  

Decrease in management fee payable and accrued expenses and other liabilities

     (18,216

Increase in deferred directors’ fees

     10,179  
  

 

 

 

Total adjustments

     23,421,978  
  

 

 

 

Net cash provided from operating activities

   $ 66,742,090  
  

 

 

 

 

See Notes to Financial Statements.

 

32  


Notes to Financial Statements

 

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

 

The investment objective of the Fund is to provide a high level of current income.

 

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 PGIM Investments LLC (“PGIM Investments” or “the Manager”) (formerly known as Prudential Investments LLC). 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 Schedule 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 classified as Level 2 in the fair value hierarchy. Such fixed income securities are typically valued using the market

 

Prudential Short Duration High Yield Fund, Inc.     33  


Notes to Financial Statements (continued)

 

approach which generally involves obtaining data from an approved independent third-party vendor source. The Fund utilizes the market approach as the primary method to value securities when market prices of identical or comparable instruments are available. The third-party vendors’ valuation techniques used to derive the evaluated bid price are based on evaluating observable inputs, including but not limited to, yield curves, yield spreads, credit ratings, deal terms, tranche level attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations and reported trades. Certain Level 3 securities are also valued using the market approach when obtaining a single broker quote or when utilizing recent transaction prices for identical or comparable securities. During the reporting period, there were no changes to report with respect to the valuation approach and/or valuation techniques.

 

Bank loans 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. Bank loans valued based on a single broker quote or at the original transaction price are classified as Level 3 in the fair value hierarchy.

 

OTC derivative instruments are generally classified as Level 2 in the fair value hierarchy. Such derivative instruments are typically valued using the market approach and/or income approach which generally involves obtaining data from an approved independent third-party vendor source. The Fund utilizes the market approach when quoted prices in broker-dealer markets are available but also includes consideration of alternative valuation approaches, including the income approach. In the absence of reliable market quotations, the income approach is typically utilized for purposes of valuing OTC derivatives such as interest rate swaps based on a discounted cash flow analysis whereby the value of the instrument is equal to the present value of its future cash inflows or outflows. Such analysis includes projecting future cash flows and determining the discount rate (including the present value factors that affect the discount rate) used to discount the future cash flows. In addition, the third-party vendors’ valuation techniques used to derive the evaluated OTC derivative price is based on evaluating observable inputs, including but not limited to, underlying asset prices, indices, spreads, interest rates and exchange rates. Certain OTC derivatives may be classified as Level 3 when valued using the market approach by obtaining a single broker quote or when utilizing significant unobservable inputs in the income approach. During the reporting period, there were no changes to report with respect to the valuation approach and/or valuation techniques discussed above.

 

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.

 

34  


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 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(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.

 

Foreign Currency Translation: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis:

 

(i) market value of investment securities, other assets and liabilities—at the current rates of exchange;

 

(ii) purchases and sales of investment securities, income and expenses—at the rates of exchange prevailing on the respective dates of such transactions.

 

Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not generally isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities held at the end of the period. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities sold during the period. Accordingly, holding period realized foreign currency gains (losses) are included in the reported net realized gains (losses) on

 

Prudential Short Duration High Yield Fund, Inc.     35  


Notes to Financial Statements (continued)

 

investment transactions. Notwithstanding the above, the Fund does isolate the effect of fluctuations in foreign currency exchange rates when determining the gain (loss) upon the sale or maturity of foreign currency denominated debt obligations; such amounts are included in net realized gains (losses) on foreign currency transactions.

 

Additionally, net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from holdings of foreign currencies, forward currency contracts, disposition of foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference between the amounts of interest, dividends and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates are reflected as a component of net unrealized appreciation (depreciation) on foreign currencies.

 

Concentration of Risk: The ability of debt securities issuers (other than those issued or guaranteed by the U.S. Government), held by the Fund to meet its obligations may be affected by the economic or political developments in a specific industry, region or country. Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin as a result of, among other factors, the possibility of political or economic instability or the level of governmental supervision and regulation of foreign securities markets.

 

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 (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.

 

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

 

36  


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 Schedule of Investments. Collateral pledged by the Fund is segregated by the Fund’s custodian and identified in the Schedule 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.

 

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, the Selling Participant and any other persons positioned 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: 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

 

Prudential Short Duration High Yield Fund, Inc.     37  


Notes to Financial Statements (continued)

 

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.

 

Accounting practices that do not affect reporting activities on a cash basis include carrying investments at value, accruing income on PIK 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 specific identification method. 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 the accrual basis. Expenses are recorded on the accrual basis, which may require the use of certain estimates by management that may differ from actual.

 

Taxes: 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. Withholding taxes on foreign dividends, interest and capital gains, if any, are recorded, net of reclaimable amounts, at the time the related income is earned. 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.

 

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.

 

38  


PGIM Investments has received an order from the Securities and Exchange Commission (the “SEC”) 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 PGIM Investments 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 PGIM Investments, adopt a managed distribution policy.

 

Dividends and 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. Permanent book/tax differences relating to income and gain (loss) are reclassified amongst undistributed net investment income, accumulated net realized gain (loss) and paid-in capital in excess of par, as appropriate.

 

Estimates: The preparation of 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.

 

2. Agreements

 

The Fund has a management agreement with PGIM Investments. Pursuant to this agreement, PGIM Investments has responsibility for all investment advisory services and supervises the subadviser’s performance of such services. PGIM Investments has entered into a subadvisory agreement with PGIM, Inc., which provides subadvisory services to the Fund through its PGIM Fixed Income unit. The subadvisory agreement provides that PGIM, Inc. will furnish investment advisory services in connection with the management of the Fund. In connection therewith, PGIM, Inc. is obligated to keep certain books and records of the Fund. PGIM Investments pays for the services of PGIM, Inc., 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.

 

The management fee paid to PGIM Investments is accrued 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.

 

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

 

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,

 

Prudential Short Duration High Yield Fund, Inc.     39  


Notes to Financial Statements (continued)

 

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. For the year ended May 31, 2017 no such transactions were entered into by the Fund.

 

The Fund may invest its overnight sweep cash in the Prudential Core Ultra Short Bond Fund (the “Core Fund”), a series of Prudential Investment Portfolios 2, registered under the 1940 Act and managed by PGIM Investments. Earnings from the Core Fund are disclosed on the Statement of Operations as “Affiliated dividend income”.

 

4. Portfolio Securities

 

The aggregate cost of purchases and proceeds from sales of portfolio securities (excluding short-term investments and U.S. Treasury securities) for the year ended May 31, 2017, were $477,333,050 and $487,885,413, respectively.

 

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, 2017, the adjustments were to increase undistributed net investment income and increase accumulated net realized loss on investment and foreign currency transactions by $7,919,329 due to differences in the treatment for book and tax purposes of premium amortization and certain transactions involving foreign securities, paydowns and other book to tax differences. 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, 2017 and May 31, 2016, the tax character of dividends paid by the Fund were $41,654,047 and $45,146,003 of ordinary income, respectively.

 

As of May 31, 2017, the accumulated undistributed earnings on a tax basis was $2,439,755. This differs from the amount shown on the Statement of Assets and Liabilities primarily due to cumulative timing differences between financial and tax reporting.

 

40  


The United States federal income tax basis of the Fund’s investments and the net unrealized depreciation as of May 31, 2017 were as follows:

 

Tax Basis

 

Appreciation

 

Depreciation

 

Net Unrealized
Depreciation

 

Other Cost Basis
Adjustments

 

Total Net
Unrealized
Depreciation

$746,385,192   $11,152,488   $(15,244,523)   $(4,092,035)   $18,976   $(4,073,059)

 

The difference between book basis and tax basis was primarily attributable to deferred losses on wash sales and differences in the treatment of premium amortization for book and tax purposes. The other cost basis adjustments are primarily attributable to appreciation of foreign currencies and mark-to-market of receivables and payables.

 

For federal income tax purposes, the Fund had a capital loss carryforward as of May 31, 2017 of approximately $72,087,000 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.

 

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.

 

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, 2017, Prudential owned 7,974 shares of the Fund.

 

For the year ended May 31, 2017, the Fund did not issue any shares of Common Stock in connection with the Fund’s dividend reinvestment plan.

 

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 $240 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 to meet its general cash flow requirements.

 

Prudential Short Duration High Yield Fund, Inc.     41  


Notes to Financial Statements (continued)

 

 

The Fund utilized the credit facility during the year ended May 31, 2017. The average daily outstanding loan balance for the 365 days that the Fund utilized the facility during the period was $202,808,219, borrowed at a weighted average interest rate of 1.46%. The maximum loan balance outstanding during the period was $205,000,000. At May 31, 2017, the Fund had an outstanding loan balance of $180,000,000.

 

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, 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 rehypothecation of portfolio securities.

 

8. Subsequent Event

 

Dividends and Distributions: On June 1, 2017 the Fund declared monthly dividends of $0.0925 per share payable on June 30, 2017, July 31, 2017 and August 31, 2017, respectively, to shareholders of record on June 16, 2017, July 14, 2017 and August 18, 2017, respectively. The ex-dates were determined to be June 14, 2017, July 12, 2017 and August 16, 2017, respectively.

 

9. Recent Accounting Pronouncements and Reporting Updates

 

On October 13, 2016, the SEC adopted new rules and forms and amended existing rules and forms which are intended to modernize and enhance the reporting and disclosure of information by registered investment companies and to improve the quality of information that funds provide to investors, including modifications to Regulation S-X which would require standardized, enhanced disclosure about derivatives in investment company financial statements. The new rules also enhance disclosure regarding fund liquidity and redemption practices. The compliance dates of the modifications to Regulation S-X are August 1, 2017 and other amendments and rules are generally June 1, 2018 and December 1, 2018. Management is currently evaluating the impacts to the financial statement disclosures.

 

42  


Financial Highlights

 

     Year Ended May 31,  
     2017     2016     2015     2014     2013  
Per Share Operating Performance(a):                                        
Net Asset Value, Beginning Of Year     $16.79       $17.84       $18.82       $19.18       $18.75  
Income (loss) from investment operations:                                        
Net investment income (loss)     .98       1.06       1.20       1.22       1.24  
Net realized and unrealized gain (loss) on investment transactions     .32       (.75     (.59     .02       .74  
Total from investment operations     1.30       .31       .61       1.24       1.98  
Less Dividends:                                        
Dividends from net investment income     (1.25     (1.36     (1.59     (1.60     (1.57
Fund share transactions:                                        
Common stock offering costs charged to paid-in capital in excess of par     -       -       -       -       - (e) 
Accretion to net asset value from the exercise of the underwriters over-allotment option     -       -       -       -       .02  
Total of share transactions     -       -       -       -       .02  
Net asset value, end of year     $16.84       $16.79       $17.84       $18.82       $19.18  
Market price, end of year     $15.59       $15.58       $15.75       $17.84       $19.45  
Total Return(b):     8.36%       8.23%       (2.92 )%      .24%       4.97%  
Ratios/Supplemental Data:  
Net assets, end of year (000)     $560,069       $558,403       $593,165       $626,021       $637,704  
Average net assets (000)     $559,484       $560,771       $602,489       $630,017       $635,754  
Ratios to average net assets(c):                                        
Expenses after waivers and/or expense reimbursement     1.71% (d)      1.55% (d)      1.58% (d)      1.52% (d)      1.47% (d) 
Expenses before waivers and/or expense reimbursement     1.71% (d)      1.55% (d)      1.58% (d)      1.52% (d)      1.53% (d) 
Net investment income (loss)     5.84%       6.29%       6.60%       6.45%       6.45%  
Portfolio turnover rate     65%       58%       58%       75%       74%  
Asset coverage     411%       372%       439%       363%       405%  
Total debt outstanding at year-end (000)     $180,000       $205,000       $175,000       $238,000       $209,000  

 

(a) Calculated based on average shares outstanding during the year.
(b) 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 year 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.
(c) Does not include expenses of the underlying portfolio in which the Fund invests.
(d)