Edgar Filing: Prudential Short Duration High Yield Fund, Inc.

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, 17^th Floor
		Newark, New Jersey 07102

Name and address of agent for service:		Deborah A. Docs
		655 Broad Street, 17^th 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.

•


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)