Notes to Financial Statements
1. Organization
PGIM Global 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 July 23, 2012.
The investment objective of the Fund is to provide a high level of current income by
investing primarily in below investment-grade fixed income instruments of issuers located around the world, including emerging markets.
2. Accounting Policies
The Fund follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard
Codification (“ASC”) 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 and liabilities 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 Fund’s 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”). Pursuant to the Board’s delegation, the Manager has established a Valuation Committee responsible for
supervising the fair valuation of portfolio securities and other assets and liabilities. 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.
For the fiscal reporting
year-end, securities and other assets and liabilities were fair valued at the close of the last U.S. business day. Trading in certain foreign securities may occur when the NYSE is closed (including weekends
and holidays). Because such foreign securities trade in markets that are open on weekends and U.S. holidays, the values of some of the Fund’s foreign investments may change on days when investors cannot purchase or redeem Fund shares.
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 and referred to
herein as the “fair value hierarchy” in accordance with FASB ASC Topic 820 - Fair Value Measurements and Disclosures.
Investments in open-end (other than exchange-traded mutual funds) 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 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 transaction prices for identical securities that have been used in excess of five business days. During the reporting period, there were no changes to
report with respect to the valuation approach and/or valuation techniques discussed above.
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 in excess of five business days are classified as
Level 3 in the fair value hierarchy.
OTC and centrally cleared
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 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 derivative price is based on evaluating observable inputs, including but not limited to, underlying asset prices, indices, spreads, interest rates and exchange rates.
Certain
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Notes to Financial Statements
(continued)
derivatives may be classified as Level 3 when valued using the market approach by obtaining a single broker quote or when utilizing 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.
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
Manager 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 unaffiliated
mutual funds to calculate their net asset values.
Illiquid Securities:
Subject to guidelines adopted by the Board, the Fund may invest without limit in illiquid securities. Illiquid securities are those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale,
may not reasonably be expected to be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. The Fund may find it difficult to sell
illiquid securities at the time considered most advantageous by its subadviser and may incur transaction costs that would not be incurred in the sale of securities that were freely marketable.
Restricted Securities: Securities acquired in unregistered, private sales from the issuing company or from an affiliate of the
issuer are considered restricted as to disposition under federal securities law (“restricted securities”). Such restricted securities are valued pursuant to the valuation procedures noted above. Restricted securities that would otherwise
be considered illiquid investments 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. Therefore, these Rule 144A securities, as well as
commercial paper that is sold in private placements under Section 4(2) of the Securities Act of 1933, may be deemed liquid by the Fund’s subadviser under the guidelines adopted by the Board. However, the liquidity of the Fund’s
investments in restricted 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 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 the disposition of holdings of foreign currencies, currency gains (losses) realized between the trade and settlement dates on investment 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) arise from valuing foreign currency denominated assets and liabilities
(other than investments) at period end exchange rates.
Forward and Cross
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, as defined in the prospectus, in order to
hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings or on specific receivables and payables denominated in a foreign currency and to gain exposure to certain currencies. The contracts are valued daily
at current forward exchange rates and any unrealized gain (loss) is included in net unrealized appreciation (depreciation) on forward and cross currency contracts. 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 forward and cross currency contract 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
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Notes to Financial Statements
(continued)
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. A cross currency contract is a forward contract where a specified amount of one foreign currency will be exchanged for a specified amount of another foreign currency. The cash amounts pledged for forward currency contracts are
considered restricted cash and are included in “Cash segregated for counterparty - OTC” in the Statement of Assets and Liabilities.
Bank Loans: The Fund invested in bank loans. Bank loans include fixed and floating rate loans that are privately negotiated between a corporate borrower and
one or more financial institutions, including, but not limited to, term loans, revolvers, and other instruments issued in the bank loan market. The Fund acquires interests in loans directly (by way of assignment from the selling institution) and/or
indirectly (by way of the purchase of a participation interest from the selling institution). Under a bank loan assignment, the Fund generally will succeed to all the rights and obligations of an assigning lending institution and becomes a lender
under the loan agreement with the relevant borrower in connection with that loan. Under a bank loan participation, the Fund generally will have a contractual relationship only with the lender, not with the relevant borrower. As a result, the Fund
generally will have the right to receive payments of principal, interest, and any fees to which it is entitled only from the lender selling the participation and only upon receipt by the lender of the payments from the relevant borrower. The Fund
may not directly benefit from the collateral supporting the debt obligation in which it has purchased the participation. As a result, the Fund will assume the credit risk of both the borrower and the institution selling the participation to the
Fund.
Swap Agreements: The Fund entered into certain types of swap
agreements detailed in the disclosures below. A swap agreement is an agreement to exchange the return generated by one instrument for the return generated by another instrument. Swap agreements are negotiated in the OTC market and may be executed
either directly with a counterparty (“OTC-traded”) or through a central clearing facility, such as a registered exchange. Swap agreements are valued daily at current market value and any change in
value is included in the net unrealized appreciation (depreciation) on swap agreements. Centrally cleared swaps pay or receive an amount known as “variation margin”, based on daily changes in the valuation of the swap contract. For OTC-traded, upfront premiums paid and received are shown as swap premiums paid and swap premiums received in the Statement of Assets and Liabilities. Risk of loss may exceed amounts recognized on the Statement of
Assets and Liabilities. Swap agreements outstanding at period end, if any, are listed on the Schedule of Investments. The cash amounts pledged for swaps contracts are considered restricted cash and are included in “Due from broker-variation
margin swaps” and “Deposit with broker for centrally cleared/exchange-traded derivatives” in the Statement of Assets and Liabilities.
Credit Default Swaps (“CDS”): CDS involve one party (the protection buyer) making a stream of payments to another party (the protection seller) in
exchange for the right to receive a
specified payment in the event of a default or as a result of a default (collectively a “credit event”) for the referenced entity (typically corporate issues or sovereign issues of an
emerging country) on its obligation; or in the event of a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising a credit index.
The Fund is subject to credit risk in the normal course of pursuing its investment objectives, and as such, has entered into CDS
contracts to provide a measure of protection against defaults or to take an active long or short position with respect to the likelihood of a particular issuer’s default or the reference entity’s credit soundness. CDS contracts generally
trade based on a spread which represents the cost a protection buyer has to pay the protection seller. The protection buyer is said to be short the credit as the value of the contract rises the more the credit deteriorates. The value of the CDS
contract increases for the protection buyer if the spread increases. The Fund’s maximum risk of loss from counterparty credit risk for purchased CDS is the inability of the counterparty to honor the contract up to the notional value due to a
credit event.
As a seller of protection on credit default swap agreements,
the Fund generally receives an agreed upon payment from the buyer of protection throughout the term of the swap, provided no credit event occurs. As the seller, the Fund effectively increases its investment risk because, in addition to its total net
assets, the Fund may be subject to investment exposure on the notional amount of the swap.
The maximum amount of the payment that the Fund, as a seller of protection, could be required to make under a credit default swap agreement would be equal to the notional amount of the underlying security or index
contract as a result of a credit event. This potential amount will be partially offset by any recovery values of the respective referenced obligations, or net amounts received from the settlement of buy protection credit default swap agreements
which the Fund entered into for the same referenced entity or index. As a buyer of protection, the Fund generally receives an amount up to the notional value of the swap if a credit event occurs.
Implied credit spreads, represented in absolute terms, utilized in determining the
market value of credit default swap agreements where the Fund is the seller of protection as of period end are disclosed in the footnotes to the Schedule of Investments, if applicable. These spreads serve as indicators of the current status of the
payment/performance risk and represent the likelihood of default risk for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to
enter into the agreement. Wider credit spreads and increased market value in absolute terms, when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood of
risk of default or other credit event occurring as defined under the terms of the agreement.
Master Netting Arrangements: The Fund is subject to various Master Agreements, or netting arrangements, with select counterparties. These are agreements which a subadviser may
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Notes to Financial Statements
(continued)
have negotiated and entered into on behalf of all or a portion 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 International Swaps and Derivatives Association, Inc.
(“ISDA”) 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.
In addition to each instrument’s primary underlying risk exposure (e.g. interest rate, credit, equity or foreign exchange, etc.), swap agreements involve, to
varying degrees, elements of credit, market and documentation risk. Such risks involve the possibility that no liquid market for these agreements will exist, the counterparty to the agreement may default on its obligation to perform or disagree on
the contractual terms of the agreement, and changes in net interest rates will be unfavorable. In connection with these agreements, securities in the portfolio may be identified or received as collateral from the counterparty in accordance with
the terms of the respective swap agreements to provide or receive assets of value and to serve as recourse in the event of default or bankruptcy/insolvency of either party. Such OTC derivative
agreements include conditions which, when materialized, give the counterparty the right to cause an early termination of the transactions under those agreements. Any election by the counterparty for early termination of the contract(s) may impact
the amounts reported on financial statements.
As of July 31, 2020, the
Fund has not met conditions under such agreements which give the counterparty the right to call for an early termination.
Forward currency contracts, forward rate agreements, written options, short sales, swaps and financial futures contracts involve elements of both market and credit
risk in excess of the amounts reflected on the Statement of Assets and Liabilities. Such risks may be mitigated by engaging in master netting arrangements.
Payment-In-Kind: The Fund invested in the open market or receive pursuant to
debt restructuring, securities that pay-in-kind (PIK) the interest due on such debt instruments. The PIK interest, computed at the contractual rate specified, is added
to the existing principal balance of the debt when issued bonds have same terms as the bond or recorded as a separate bond when terms are different from the existing debt, and is recorded as interest income.
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, or for certain
foreign securities, when the Fund becomes aware of such dividends. 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 an 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 investment income
and capital gains, if any, to its shareholders. 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. The Fund paid approximately $75,000 of Federal
excise taxes attributable to calendar year 2019 in March 2020. 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.
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Notes to Financial Statements
(continued)
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.
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 total distributable earnings (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.
3. 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 PGIM Fixed Income a business unit of PGIM, Inc. 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 costs and expenses. PGIM, Inc.
has entered into a sub-subadvisory agreement with PGIM Limited which provides that PGIM Limited will furnish investment advisory services in connection
with the management of the Fund.
The management fee paid to the Manager is
accrued daily and payable monthly, at an annual rate of 0.85% 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”).
4. Other Transactions with
Affiliates
The Fund may invest its overnight sweep cash in the PGIM
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. Through the Fund’s investments in the mentioned underlying fund, PGIM
Investments and/or its affiliates are paid fees or reimbursed for providing their services. Earnings from the Core Fund, are disclosed on the Statement of Operations as “Affiliated dividend income”.
The Fund may enter into certain securities purchase or sale transactions under Board
approved Rule 17a-7 procedures. Rule 17a-7 is an exemptive rule under the 1940 Act, that subject to certain conditions, 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. Pursuant to the Rule 17a-7 procedures and consistent with guidance issued by the SEC, the Fund’s Chief Compliance Officer (“CCO”) prepares a quarterly summary of all such transactions for submission to the Board, together
with the CCO’s written representation that all such 17a-7 transactions were effected in accordance with the Fund’s Rule 17a-7 procedures. For the year ended
July 31, 2020, no 17a-7 transactions were entered into by the Fund.
5. Portfolio Securities
The
aggregate cost of purchases and proceeds from sales of portfolio securities (excluding short-term investments and U.S. Government securities) for the year ended July 31, 2020, were $414,003,923 and $490,454,345, respectively.
A summary of the cost of purchases and proceeds from sales of shares of an affiliated
investment for the year ended July 31, 2020, is presented as follows:
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Notes to Financial Statements
(continued)
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Value,
Beginning
of Year
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Cost of
Purchases
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Proceeds
from Sales
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Change in
Unrealized
Gain
(Loss)
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Realized
Gain
(Loss)
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Value,
End of Year
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Shares,
End
of Year
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Income
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PGIM Core Ultra Short Bond Fund*
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$7,364,470
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$316,853,933
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$306,465,237
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$—
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$—
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$17,753,166
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17,753,166
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$240,013
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*
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The Fund did not have any capital gain distributions during the reporting period.
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6. Distributions and Tax Information
Distributions to shareholders, 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 total distributable earnings (loss) 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 total distributable earnings (loss) and paid-in capital in excess of par. For the tax year ended July 31, 2020, the adjustments were to decrease total distributable loss and decrease paid-in capital in excess
of par by $75,498 due to non-deductible excise tax. Net investment income, net realized gain (loss) on investments and foreign currency transactions and net assets were not affected by this change.
For the year ended July 31, 2020, the tax character of dividends paid by the Fund
was $51,359,468 of ordinary income. For the year ended July 31, 2019, the tax character of dividends paid by the Fund was $44,095,480 of ordinary income.
As of July 31, 2020, there were no undistributed earnings on a tax basis.
The United States federal income tax basis of the Fund’s investments and the net
unrealized depreciation as of July 31, 2020 were as follows:
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Tax Basis
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Gross
Unrealized
Appreciation
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Gross
Unrealized
Depreciation
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Net
Unrealized
Depreciation
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$875,543,198
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$40,922,204
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$(91,792,052)
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$(50,869,848)
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The difference between book basis and tax basis was
primarily attributable to deferred losses on wash sales, differences in the treatment of premium amortization for book and tax purposes, securities in default and
mark-to-market of forwards, receivables and payables.
For federal income tax purposes, the Fund had a capital loss carryforward as of July 31, 2020 of approximately $86,646,000 which can be carried forward for an
unlimited period. The Fund utilized approximately $24,162,000 of its capital loss carryforward to offset net
taxable gains realized in the fiscal year ended July 31, 2020. No capital gains distributions are expected to be
paid to shareholders until net gains have been realized in excess of such losses.
The Fund elected to treat late year losses of approximately $3,262,000 as having been incurred in the following fiscal year (July 31, 2021).
The Manager 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. Since tax authorities can examine previously filed tax returns,
the Fund’s U.S. federal and state tax returns for each of the four fiscal years up to the most recent fiscal year ended July 31, 2020 are subject to such review.
7. Capital and Ownership
There are 1 billion shares of $0.001 par value common stock authorized. As of
July 31, 2020, Prudential owned 9,922 shares of the Fund.
For the
reporting year ended July 31, 2020, the Fund did not issue any shares of common stock in connection with the Fund’s dividend reinvestment plan.
8. Borrowings and Re-hypothecation
The Fund currently is a party to a committed credit facility (the “credit
facility”) with a financial institution. The credit facility provides for a maximum commitment of $300 million or 50% of the net asset value based on the most recent fiscal year end. 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.
The Fund
utilized the credit facility during the year ended July 31, 2020. The average daily outstanding loan balance for the 366 days that the Fund utilized the facility during the period was $226,199,454, borrowed at a weighted average interest rate
of 2.07%. The maximum loan balance outstanding during the period was $284,000,000. At July 31, 2020, the Fund had an outstanding loan balance of $224,000,000.
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,
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(continued)
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. Such earnings are disclosed in the Statement of Operations under Other income. As of July 31, 2020,
there were no earnings to be disclosed.
9. Risks of Investing in the
Fund
The Fund’s risks include, but are not limited to, some or
all of the risks discussed below. For further information on the Fund’s risks, please refer to the Fund’s Prospectus and Statement of Additional Information.
Bond Obligations Risk: The Fund’s holdings, share price, yield and total
return may fluctuate in response to bond market movements. The value of bonds may decline for issuer-related reasons, including management performance, financial leverage and reduced demand for the issuer’s goods and services. Certain types of
fixed-income obligations also may be subject to “call and redemption risk,” which is the risk that the issuer may call a bond held by the Fund for redemption before it matures and the Fund may not be able to reinvest at the same level and
therefore would earn less income.
Derivatives Risk: Derivatives
involve special risks and costs and may result in losses to the Fund. The successful use of derivatives requires sophisticated management, and, to the extent that derivatives are used, the Fund will depend on the subadviser’s ability to analyze
and manage derivative transactions. The prices of derivatives may move in unexpected ways, especially in abnormal market conditions. Some derivatives are “leveraged” and therefore may magnify or otherwise increase investment losses to the
Fund. Other risks arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the Fund’s derivatives positions. In fact, many OTC derivative instruments will not have
liquidity beyond the counterparty to the instrument. OTC derivative instruments also involve the risk that the other party will not meet its obligations to the Fund.
Emerging Markets Risk: The risks of foreign investments are greater for
investments in or exposed to emerging markets. Emerging market countries typically have economic and political systems that are less fully developed, and can be expected to be less stable, than those of more developed countries. For example, the
economies of such countries can be subject to rapid and unpredictable rates of inflation or deflation. Low trading volumes may result in a lack of liquidity and price volatility.
Foreign Securities Risk: The Fund’s investments in securities of foreign issuers or issuers with
significant exposure to foreign markets involve additional risk. Foreign countries in which the Fund may invest may have markets that are less liquid, less regulated and more volatile than US markets. The value of the Fund’s investments may
decline because of factors affecting the particular issuer as well as foreign markets and issuers generally, such as unfavorable government actions, and political or financial instability.
Interest Rate Risk: The value of an investment may go down when interest rates rise. A rise in rates tends to have a greater
impact on the prices of longer term or duration securities. When interest rates fall, the issuers of debt obligations may prepay principal more quickly than expected, and the Fund may be required to reinvest the proceeds at a lower interest rate.
This is referred to as “prepayment risk.” When interest rates rise, debt obligations may be repaid more slowly than expected, and the value of the Fund’s holdings may fall sharply. This is referred to as “extension risk”.
The Fund may face a heightened level of interest rate risk as a result of the U.S. Federal Reserve Board’s policies. The Fund’s investments may lose value if short-term or long-term interest rates rise sharply or in a manner not
anticipated by the subadviser.
Leverage Risk: The Fund may seek to
enhance the level of its current distributions to holders of common stock through the use of leverage. The Fund may use leverage through borrowings, including loans from certain financial institutions. The Fund may borrow in amounts up to 33 1/3%
(as determined immediately after borrowing) of the Fund’s investable assets. The use of leverage can create special risks. There can be no assurance that any leveraging strategy the Fund employs will be successful during any period in which it
is employed.
LIBOR Risk: Many financial instruments use or may use a
floating rate based on the London Interbank Offered Rate, or “LIBOR,” which is the offered rate for short-term Eurodollar deposits between major international banks. On July 27, 2017, the Financial Conduct Authority announced a desire
to phase out the use of LIBOR by the end of 2021. There remains uncertainty regarding the future utilization of LIBOR and the nature of any replacement rate. As such, the potential impact of a transition away from LIBOR on the Fund or the financial
instruments in which the Fund invest cannot yet be determined. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the
market for, or value of, any securities or payments linked to those reference rates, which may adversely affect the Fund’s performance and/or net asset value. Furthermore, the risks associated with the expected discontinuation of LIBOR and
transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period,
these effects could occur prior to the end of 2021.
Liquidity Risk:
The Fund may invest in instruments that trade in lower volumes and are less liquid than other investments. Liquidity risk exists when particular investments made by the Fund are difficult to purchase or sell. Liquidity risk includes the risk
that the Fund may make
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investments that may become less liquid in response to market developments or adverse investor perceptions. Investments that are illiquid or that trade in lower
volumes may be more difficult to value. If the Fund is forced to sell these investments to pay redemption proceeds or for other reasons, the Fund may lose money. In addition, when there is no willing buyer and investments may not reasonably be
expected to be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment, the Fund may incur higher transaction costs when executing
trade orders of a given size. The reduction in dealer market-making capacity in the fixed-income markets that has occurred in recent years also has the potential to reduce liquidity. An inability to sell a portfolio position can adversely affect the
Fund’s value or prevent the Fund from being able to take advantage of other investment opportunities.
Market and Credit Risk: Securities markets may be volatile and the market prices of the Fund’s securities may decline. Securities fluctuate in price based on changes in an issuer’s financial
condition and overall market and economic conditions. If the market prices of the securities owned by the Fund fall, the value of an investment in the Fund will decline. Additionally, the Fund may also be exposed to credit risk in the event that an
issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
Market Disruption and Geopolitical Risks: International wars or conflicts and geopolitical developments in foreign countries, along with instability in
regions such as Asia, Eastern Europe, and the Middle East, possible terrorist attacks in the United States or around the world, public health epidemics such as the outbreak of infectious diseases like the recent outbreak of coronavirus globally or
the 2014–2016 outbreak in West Africa of the Ebola virus, and other similar events could adversely affect the U.S. and foreign financial markets, including increases in market volatility, reduced liquidity in the securities markets and
government intervention, and may cause further long-term economic uncertainties in the United States and worldwide generally.
Risks of Investments in Bank Loans: The Fund’s ability to receive payments of principal and interest and other amounts in connection with loans (whether
through participations, assignments or otherwise) will depend primarily on the financial condition of the borrower. The failure by the Fund’s scheduled interest or principal payments on a loan because of a default, bankruptcy or any other
reason would adversely affect the income of the Fund and would likely reduce the value of its assets. Even with loans secured by collateral, there is the risk that the value of the collateral may decline, may be insufficient to meet the obligations
of the borrower, or be difficult to liquidate. In the event of a default, the Fund may have difficulty collecting on any collateral and would not have the ability to collect on any collateral for an uncollateralized loan. Further, the Fund’s
access to collateral, if any, may be
limited by bankruptcy laws.
10. Subsequent Event
Dividends to Shareholders: On August 31, 2020, the Fund declared monthly dividends of $0.105 per share payable on September 30, 2020, October 30, 2020 and November 30, 2020, respectively,
to shareholders of record on September 11, 2020, October 16, 2020 and November 13, 2020, respectively. The ex-dates are September 10, 2020, October 15, 2020 and November 12, 2020,
respectively.
Report of Independent Registered Public Accounting Firm
To the Shareholders of PGIM Global High Yield Fund, Inc. and Board of Directors PGIM
Global High Yield Fund, Inc.:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of PGIM Global High Yield Fund, Inc. (the Fund), including the schedule of
investments, as of July 31, 2020, the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the
financial statements) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the
Fund as of July 31, 2020, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the
five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the
Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of July 31, 2020, by correspondence with the custodian, transfer agent, and brokers, or by
other appropriate auditing procedures when replies were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more PGIM
and/or Prudential Retail investment companies since 2003.
New York, New
York
September 16, 2020
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Tax Information
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For the year ended July 31, 2020, the Fund reports the maximum amount allowable but not less than 59.90% as interest related dividends in accordance with
Section 871(k)(1) and 881(e)(1) of the Internal Revenue Code.
In
January 2021, you will be advised on IRS Form 1099-DIV or substitute 1099-DIV as to the federal tax status of dividends received by you in calendar year 2020.
Other Information
(unaudited)
INVESTMENT OBJECTIVE AND POLICIES
Investment Objective. The Fund seeks to provide a high level of current income by investing primarily in below investment-grade fixed income instruments of issuers
located around the world, including emerging markets.
Investment
Policies. The Fund seeks to achieve its objective by investing primarily in high yield fixed income instruments of issuers located around the world, including emerging markets. Under normal market conditions and after the initial investment
period following this offering, at least 80% of the Fund’s investable assets will be invested in a portfolio of global high yield fixed income instruments with varying maturities and other investments (including derivatives) with similar
economic characteristics. The Fund may invest in fixed income instruments that are denominated in U.S. dollars or foreign currencies. High yield fixed income instruments (commonly referred to as “junk bonds”) are regarded as having
predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.
BYLAWS AMENDMENT
The following information in this Annual Report is a summary of certain changes since July 31, 2019. This information may not reflect all of the changes that
have occurred since you purchased this Fund.
On July 9, 2020, the
Board of Directors of the Fund amended the Fund’s Bylaws, effective immediately, to elect to be subject to the Maryland Control Share Acquisition Act (MCSAA).
The MCSSA provides that a holder of “control shares” of a Maryland
corporation “acquired in a control share acquisition” may not exercise voting rights with respect to control shares, except to the extent approved at a meeting of stockholders by a vote of
two-thirds of all votes entitled to be cast on the matter, not including votes entitled to be cast by the person who has made or proposes to make a control share acquisition (an Acquiring Person) or by
officers or employees-directors of the corporation. Generally, “control shares” are shares that, when aggregated with shares already owned by an Acquiring Person or which the Acquiring Person is entitled to exercise voting power, would
entitle the Acquiring Person to exercise 10% or more, 33-1/3% or more, or a majority of the total voting power of shares entitled to vote in the election of directors.
The MCSSA will only apply to “control shares” acquired after July 9,
2020, the date that the Fund elected to be subject to the MCSSA by the Bylaws amendment.
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The above description of the provisions of the MCSSA is only a summary and does not purport to be complete. Stockholders should refer to the actual provisions of the MCSSA for more information, including key terms,
various exclusions from the MCSSA’s scope, and the procedure by which stockholders may approve the reinstatement of voting rights to holders of “control shares”.
CHANGE TO PRINCIPAL RISK FACTORS
The following information in this Annual Report is a summary of certain changes to the
Principal Risk Factors since July 31, 2019. This information may not reflect all of the changes that have occurred since you purchased this Fund.
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Due to the current market and geopolitical environment, the Fund added the risk factor “Market Disruption and Geopolitical Risks” to address the
associated risks to the Fund.
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PRINCIPAL RISK
FACTORS
The Fund’s risks include, but are not limited to,
some or all of the risks discussed below. For further information on the Fund’s risks, please refer to the Fund’s Prospectus and Statement of Additional Information.
Bond Obligations Risk
The Fund’s holdings, share price, yield and total return may fluctuate in response to bond market movements. The value of bonds may decline for issuer-related reasons, including management performance,
financial leverage and reduced demand for the issuer’s goods and services. Certain types of fixed-income obligations also may be subject to “call and redemption risk,” which is the risk that the issuer may call a bond held by the Fund
for redemption before it matures and the Fund may not be able to reinvest at the same level and therefore would earn less income.
Derivatives Risk
Derivatives involve special risks and costs
and may result in losses to the Fund. The successful use of derivatives requires sophisticated management, and, to the extent that derivatives are used, the Fund will depend on the subadviser’s ability to analyze and manage derivative
transactions. The prices of derivatives may move in unexpected ways, especially in abnormal market conditions. Some derivatives are “leveraged” and therefore may magnify or otherwise increase investment losses to the Fund. Other risks
arise from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the Fund’s derivatives positions. In fact, many OTC derivative instruments will not have liquidity beyond the
counterparty to the instrument. OTC derivative instruments also involve the risk that the other party will not meet its obligations to the Fund.
Emerging Markets Risk
The risks of foreign investments are greater for investments in or exposed to emerging markets. Emerging market countries typically have economic and political systems that are less fully developed, and can be
expected to be less stable, than those of more developed countries. For example, the economies of such countries can be subject to rapid and unpredictable rates of inflation or deflation. Low trading volumes may result in a lack of liquidity and
price volatility.
Foreign Securities Risk
The Fund’s investments in securities of foreign issuers or issuers with significant exposure to foreign markets involve additional risk. Foreign countries in
which the Fund may invest may have markets that are less liquid, less regulated and more volatile than US markets. The value of the Fund’s investments may decline because of factors affecting the particular issuer as well as foreign markets and
issuers generally, such as unfavorable government actions, and political or financial instability.
Interest Rate Risk
The value of an investment may go down when interest rates rise. A rise in rates tends to
have a greater impact on the prices of longer term or duration securities. When interest rates fall, the issuers of debt obligations may prepay principal more quickly than expected, and the Fund may be required to reinvest the proceeds at a lower
interest rate. This is referred to as “prepayment risk.” When interest rates rise, debt obligations may be repaid more slowly than expected, and the value of the Fund’s holdings may fall sharply. This is referred to as “extension
risk”. The Fund may face a heightened level of interest rate risk as a result of the U.S. Federal Reserve Board’s policies. The Fund’s investments may lose value if short-term or long-term interest rates rise sharply or in a manner
not anticipated by the subadviser.
Leverage Risk
The Fund may seek to enhance the level of its current distributions to holders of common stock through the use of leverage. The Fund may use leverage through
borrowings, including loans from certain financial institutions. The Fund may borrow in amounts up to 33 1/3% (as determined immediately after borrowing) of the Fund’s investable assets. The use of leverage can create special risks. There can
be no assurance that any leveraging strategy the Fund employs will be successful during any period in which it is employed.
LIBOR Risk
Many financial instruments use or may use a
floating rate based on the London Interbank Offered Rate, or “LIBOR,” which is the offered rate for short-term Eurodollar deposits between major international banks. On July 27, 2017, the Financial Conduct Authority
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Other Information (unaudited)
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announced a desire to phase out the use of LIBOR by the end of 2021. There remains uncertainty regarding the future utilization of LIBOR and the nature of any replacement rate. As such, the potential impact of a
transition away from LIBOR on the Fund or the financial instruments in which the Fund invests cannot yet be determined. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision
of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect the Fund’s performance and/or net asset value. Furthermore, the risks
associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a
benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
Liquidity Risk
The Fund may invest in instruments that trade in lower volumes and are less liquid than other
investments. Liquidity risk exists when particular investments made by the Fund are difficult to purchase or sell. Liquidity risk includes the risk that the Fund may make investments that may become less liquid in response to market developments or
adverse investor perceptions. Investments that are illiquid or that trade in lower volumes may be more difficult to value. If the Fund is forced to sell these investments to pay redemption proceeds or for other reasons, the Fund may lose money. In
addition, when there is no willing buyer and investments may not reasonably be expected to be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of
the investment, the Fund may incur higher transaction costs when executing trade orders of a given size. The reduction in dealer market-making capacity in the fixed-income markets that has occurred in recent years also has the potential to reduce
liquidity. An inability to sell a portfolio position can adversely affect the Fund’s value or prevent the Fund from being able to take advantage of other investment opportunities.
Market and Credit Risk
Securities
markets may be volatile and the market prices of the Fund’s securities may decline. Securities fluctuate in price based on changes in an issuer’s financial condition and overall market and economic conditions. If the market prices of the
securities owned by the Fund fall, the value of an investment in the Fund will decline. Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which
the Fund has unsettled or open transactions defaults.
Market Disruption
and Geopolitical Risks
International wars or conflicts and geopolitical developments in foreign countries, along with instability in regions such as
Asia, Eastern Europe, and the Middle East, possible terrorist
attacks in the United States or around the world, public health epidemics such as the outbreak of infectious diseases like the recent outbreak of coronavirus globally or the 2014–2016
outbreak in West Africa of the Ebola virus, and other similar events could adversely affect the U.S. and foreign financial markets, including increases in market volatility, reduced liquidity in the securities markets and government intervention,
and may cause further long-term economic uncertainties in the United States and worldwide generally.
Risks of Investments in Bank Loans
The Fund’s ability to receive payments of principal and interest and
other amounts in connection with loans (whether through participations, assignments or otherwise) will depend primarily on the financial condition of the borrower. The failure by the Fund’s scheduled interest or principal payments on a loan
because of a default, bankruptcy or any other reason would adversely affect the income of the Fund and would likely reduce the value of its assets. Even with loans secured by collateral, there is the risk that the value of the collateral may
decline, may be insufficient to meet the obligations of the borrower, or be difficult to liquidate. In the event of a default, the Fund may have difficulty collecting on any collateral and would not have the ability to collect on any collateral for
an uncollateralized loan. Further, the Fund’s access to collateral, if any, may be limited by bankruptcy laws.
Dividend Reinvestment Plan. Unless a holder of common stock elects to receive cash by contacting Computershare Trust Company, N.A. (the “Plan Administrator”), all dividends declared on common stock
will be automatically reinvested by the Plan Administrator pursuant to the Fund’s Automatic Dividend Reinvestment Plan (the “Plan”), in additional common stock. The holders of common stock who elect not to participate in the Plan will
receive all dividends and other distributions (together, a “Dividend”) in cash paid by check mailed directly to the stockholder of record (or, if the common stock is held in street or other nominee name, then to such nominee) by the Plan
Administrator as dividend disbursing agent. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by notice if received and processed by the Plan Administrator prior to the Dividend record
date; otherwise such termination or resumption will be effective with respect to any subsequently declared Dividend. Such notice will be effective with respect to a particular Dividend. Some brokers may automatically elect to receive cash on behalf
of the holders of common stock and may re-invest that cash in additional common stock.
The Plan Administrator will open an account for each common stockholder under the Plan in the same name in which such common stockholder’s common stock is
registered. Whenever the Fund declares a Dividend payable in cash, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent in common stock. The common stock will
be acquired by the Plan Administrator for the participants’ accounts,
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Other Information (unaudited)
(continued)
depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized common stock from the Fund (“Newly Issued common stock”) or (ii) by purchase of
outstanding common stock on the open market (“Open-Market Purchases”) on the NYSE or elsewhere. If, on the payment date for any Dividend, the closing market price of the common stock plus per share fees (as defined below) is equal to or
greater than the NAV per share of common stock (such condition being referred to as “market premium”), the Plan Administrator will invest the Dividend amount in Newly Issued common stock on behalf of the participants. The number of Newly
Issued common stock to be credited to each participant’s account will be determined by dividing the dollar amount of the Dividend by the NAV per share of common stock on the payment date, provided that, if the NAV per share of common stock is
less than or equal to 95% of the closing market price per share of common stock on the payment date, the dollar amount of the Dividend will be divided by 95% of the closing market price per common stock on the payment date. If, on the payment date
for any Dividend, the NAV per share of common stock is greater than the closing market value per share of common stock plus per share fees (such condition being referred to as “market discount”), the Plan Administrator will invest the
Dividend amount in shares of common stock acquired on behalf of the participants in Open-Market Purchases.
“Per share fees” include any applicable brokerage commissions the Plan Administrator is required to pay.
In the event of a market discount on the payment date for any Dividend, the Plan Administrator will have until the last business day before the next date on which
the common stock trades on an “ex-dividend” basis or 30 days after the payment date for such Dividend, whichever is sooner (the “Last Purchase Date”), to invest the Dividend amount in
common stock acquired in Open-Market Purchases on behalf of participants. If, before the Plan Administrator has completed its Open-Market Purchases, the market price per share of common stock exceeds the NAV per share of common stock, the average
per share purchase price paid by the Plan Administrator for common stock may exceed the NAV per share of the common stock, resulting in the acquisition of fewer shares of common stock than if the Dividend had been paid in Newly Issued common stock
on the Dividend payment date. Because of the foregoing difficulty with respect to Open-Market Purchases, the Plan provides that if the Plan Administrator is unable to invest the full Dividend amount in Open-Market Purchases during the purchase
period or if the market discount shifts to a market premium during the purchase period, the Plan Administrator may cease making Open-Market Purchases and may invest the uninvested portion of the Dividend amount in Newly Issued common stock at the
NAV per share of common stock at the close of business on the Last Purchase Date, provided that, if the NAV is less than or equal to 95% of the then current market price per share of common stock, the dollar amount of the Dividend will be divided by
95% of the market price on the payment date for purposes of determining the number of shares issuable under the Plan.
The Plan Administrator maintains all stockholder accounts in the Plan and furnishes written confirmation of all
transactions in the accounts, including information needed by stockholders for tax records. Common stock in the account of each Plan participant will be held by the Plan Administrator on behalf of the Plan participant, and each stockholder proxy
will include those shares purchased or received pursuant to the Plan. The Plan Administrator will forward all proxy solicitation materials to participants and vote proxies for shares held under the Plan in accordance with the instructions of the
participants.
In the case of the holders of common stock such as banks,
brokers or nominees that hold shares of common stock for others who are the beneficial owners, the Plan Administrator will administer the Plan on the basis of the number of shares of common stock certified from time to time by the record
stockholder’s name and held for the account of beneficial owners who participate in the Plan.
The Plan Administrator’s service fee, if any, and expenses for administering the plan will be paid for by the Fund. If a participant elects by written, Internet or telephonic notice to the Plan Administrator
to have the Plan Administrator sell part or all of the shares held by the Plan Administrator in the participant’s account and remit the proceeds to the participant, the Plan Administrator is authorized to deduct a $15.00 transaction fee plus a
$0.12 per share fee. If a participant elects to sell his or her shares of common stock, the Plan Administrator will process all sale instructions received no later than five business days after the date on which the order is received by the Plan
Administrator, assuming the relevant markets are open and sufficient market liquidity exists (and except where deferral is required under applicable federal or state laws or regulations). Such sale will be made through the Plan Administrator’s
broker on the relevant market and the sale price will not be determined until such time as the broker completes the sale. In every case the price to the participant shall be the weighted average sale price obtained by the Plan Administrator’s
broker net of fees for each aggregate order placed by the participant and executed by the broker. To maximize cost savings, the Plan Administrator will seek to sell shares in round lot transactions. For this purpose the Plan Administrator may
combine a participant’s shares with those of other selling participants.
There will be no brokerage charges with respect to shares of common stock issued directly by the Fund. However, each participant will pay a pro rata share of
brokerage commissions incurred in connection with Open-Market Purchases. Each participant will be charged a per share fee (currently $0.05 per share) on all Open-Market Purchases. The automatic reinvestment of Dividends will not relieve participants
of any federal, state or local income tax that may be payable (or required to be withheld) on such Dividends. See “Tax Matters.” Participants that request a sale of common stock through the Plan Administrator are subject to brokerage
commissions.
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Other Information (unaudited)
(continued)
Each participant may terminate the participant’s account under the Plan by so notifying the Plan Administrator via the Plan Administrator’s website at www.computershare.com/ investor, by filling out the
transaction request form located at the bottom of the participant’s Statement and sending it to the Plan Administrator or by calling the Plan Administrator. Such termination will be effective immediately if the participant’s notice is
received by the Plan Administrator prior to any dividend or distribution record date. Upon any withdrawal or termination, the Plan Administrator will cause to be delivered to each terminating participant a statement of holdings for the appropriate
number of the Fund’s whole book-entry shares of common stock and a check for the cash adjustment of any fractional share at the market value of the Fund’s shares of common stock as of the close of business on the date the termination is
effective less any applicable fees. In the event a participant’s notice of termination is on or after a record date (but before payment date) for an account whose dividends are reinvested, the Plan Administrator, in its sole discretion, may
either distribute such dividends in cash or reinvest them in shares of common stock on behalf of the terminating participant. In the event reinvestment is made, the Plan Administrator will process the termination as soon as practicable, but in no
event later than five business days after the reinvestment is completed. The Plan may be terminated by the Fund upon notice in writing mailed to each participant at least 30 days prior to any record date for the payment of any dividend or
distribution by the Fund.
The Fund reserves the right to amend or terminate
the Plan. There is no direct service charge to participants with regard to purchases in the Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable by the participants.
All correspondence or questions concerning the Plan should be directed to the Plan
Administrator, Computershare Trust Company, N.A., P.O. Box 43078, Providence, RI 02940-3078 or by calling (toll free) 800-451-6788.
Management of the Fund
(unaudited)
Information about Board Members and Officers of the Fund is set forth below. Board Members who are not deemed to be “interested persons” of the Fund, as
defined in the 1940 Act, are referred to as “Independent Board Members.” Board Members who are deemed to be “interested persons” of the Fund are referred to as “Interested Board Members.” The Board Members are
responsible for the overall supervision of the operations of the Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Board in turn elects the Officers, who are responsible for administering the day-to-day operations of the Fund.
|
|
|
|
|
|
|
|
|
|
|
Independent Board Members
|
Name, Year of Birth,
Position(s), Portfolios
Overseen
|
|
Principal Occupation(s) During Past
Five Years
|
|
Term of
Office &
Length of
Time Served
|
|
Other Directorships
Held
|
|
Ellen S. Alberding
1958
Board Member
Portfolios Overseen: 95
|
|
President and Board Member, The Joyce Foundation (charitable foundation) (since 2002); Vice Chair, City Colleges of Chicago (community college system)
(2011-2015); Trustee, National Park Foundation (charitable foundation for national park system) (2009-2018); Trustee, Economic Club of Chicago (2009-2016); Trustee, Loyola University (since 2018).
|
|
Since 2013 (Class I)
|
|
None.
|
|
Kevin J. Bannon
1952
Board Member
Portfolios Overseen: 95
|
|
Retired; Managing Director (April 2008-May 2015) and Chief Investment Officer (October 2008-November 2013) of
Highmount Capital LLC (registered investment adviser); formerly Executive Vice President and Chief Investment Officer (April 1993-August 2007) of Bank of New York Company; President (May 2003-May 2007) of BNY
Hamilton Family of Mutual Funds.
|
|
Since 2011 (Class II)
|
|
Director of Urstadt Biddle Properties (equity real estate investment trust) (since September
2008).
|
|
Linda W. Bynoe
1952
Board Member
Portfolios Overseen: 95
|
|
President and Chief Executive Officer (since March 1995) and formerly Chief Operating Officer (December 1989-February 1995) of Telemat Limited LLC
(formerly, Telemat Ltd). (management consulting); formerly Vice President (January 1985-June 1989) at Morgan Stanley & Co. (broker-dealer).
|
|
Since 2011 (Class III)
|
|
Director of Anixter International, Inc. (communication products distributor) (since January
2006-June 2020); Director of Northern Trust Corporation (financial services) (since April 2006); Trustee of Equity Residential (residential real estate) (since December 2009).
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PGIM Global High Yield Fund, Inc.
|
Management of the Fund
(continued)
|
|
|
|
|
|
|
|
|
|
|
Independent Board Members
|
Name, Year of Birth,
Position(s), Portfolios
Overseen
|
|
Principal Occupation(s) During Past
Five Years
|
|
Term of
Office &
Length of
Time Served
|
|
Other Directorships
Held
|
|
Barry H. Evans
1960
Board Member
Portfolios Overseen: 94
|
|
Retired; formerly President (2005-2016), Global Chief Operating Officer (2014-2016), Chief Investment Officer-Global Head of Fixed Income (1998-2014),
and various portfolio manager roles (1986-2006), Manulife Asset Management U.S.
|
|
Since 2017
(Class I)
|
|
Formerly Director, Manulife Trust Company (2011-2018); formerly Director, Manulife Asset Management
Limited (2015-2017); formerly Chairman of the Board of Directors of Manulife Asset Management U.S. (2005-2016); formerly Chairman of the Board, Declaration Investment Management and Research (2008-2016).
|
|
Keith F. Hartstein
1956
Board Member &
Independent Chair
Portfolios Overseen: 95
|
|
Executive Committee of the IDC Board of Governors (since October 2019); Retired; Member (since November 2014) of the Governing Council of the
Independent Directors Council (IDC) (organization of independent mutual fund directors); formerly President and Chief Executive Officer (2005-2012), Senior Vice President (2004-2005), Senior Vice President of Sales and Marketing (1997-2004), and
various executive management positions (1990-1997), John Hancock Funds, LLC (asset management); Chairman, Investment Company Institute’s Sales Force Marketing Committee (2003-2008).
|
|
Since 2013 (Class II)
|
|
None.
|
|
Laurie Simon Hodrick
1962
Board Member
Portfolios Overseen: 94
|
|
A. Barton Hepburn Professor Emerita of Economics in the Faculty of Business, Columbia Business School (since 2018); Visiting Professor of Law, Stanford
Law School (since 2015); Visiting Fellow at the Hoover Institution, Stanford University (since 2015); Sole Member, ReidCourt LLC (since 2008) (a consulting firm); formerly A. Barton Hepburn Professor of Economics in the Faculty of Business, Columbia
Business School (1996-2017); formerly Managing Director, Global Head of Alternative Investment Strategies, Deutsche Bank (2006-2008).
|
|
Since 2017
(Class III)
|
|
Independent Director, Synnex Corporation (since April 2019) (information technology); Independent
Director, Kabbage, Inc. (since July 2018) (financial services); Independent Director, Corporate Capital Trust (2017-2018) (a business development company).
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|
|
|
|
Visit our website at www.pgim.com/investments
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|
|
|
|
|
|
|
|
|
|
|
|
|
Independent Board Members
|
Name, Year of Birth,
Position(s), Portfolios
Overseen
|
|
Principal Occupation(s) During Past
Five Years
|
|
Term of
Office &
Length of
Time Served
|
|
Other Directorships
Held
|
|
Michael S. Hyland, CFA
1945
Board Member
Portfolios Overseen: 95
|
|
Retired (since February 2005); formerly Senior Managing Director (July 2001-February 2005) of Bear Stearns & Co, Inc.; Global Partner, INVESCO
(1999-2001); Managing Director and President of Salomon Brothers Asset Management (1989-1999).
|
|
Since 2011 (Class III)
|
|
None.
|
|
Brian K. Reid
1961
Board Member
Portfolios Overseen: 94
|
|
Retired; formerly Chief Economist for the Investment Company Institute (ICI) (2005-2017); formerly Senior Economist and Director of Industry and
Financial Analysis at the ICI (1998-2004); formerly Senior Economist, Industry and Financial Analysis at the ICI (1996-1998); formerly Staff Economist at the Federal Reserve Board (1989-1996); Director, ICI Mutual Insurance Company
(2012-2017).
|
|
Since 2018
(Class I)
|
|
None
|
|
Grace C. Torres
1959
Board Member
Portfolios Overseen: 94
|
|
Retired; formerly Treasurer and Principal Financial and Accounting Officer of the PGIM Funds, Target Funds, Advanced Series Trust, Prudential Variable
Contract Accounts and The Prudential Series Fund (1998-June 2014); Assistant Treasurer (March 1999-June 2014) and Senior Vice President (September 1999-June 2014) of PGIM Investments LLC; Assistant Treasurer (May 2003-June 2014) and Vice President
(June 2005-June 2014) of AST Investment Services, Inc.; Senior Vice President and Assistant Treasurer (May 2003-June 2014) of Prudential Annuities Advisory Services, Inc.
|
|
Since 2015 (Class II)
|
|
Formerly Director (July 2015-January 2018) of Sun Bancorp, Inc. N.A. and Sun National Bank; Director
(since January 2018) of OceanFirst Financial Corp. and OceanFirst Bank.
|
|
|
|
|
|
PGIM Global High Yield Fund, Inc.
|
Management of the Fund
(continued)
|
|
|
|
|
|
|
|
|
|
|
Interested Board Members
|
|
Name, Year of Birth,
Position(s), Portfolios
Overseen
|
|
Principal Occupation(s) During Past Five Years
|
|
Term of
Office &
Length of
Time Served
|
|
Other Directorships
Held
|
|
Stuart S. Parker
1962
Board Member &
President
Portfolios Overseen: 96
|
|
President of PGIM Investments LLC (formerly known as Prudential Investments LLC) (since January 2012); Executive Vice President of Prudential
Investment Management Services LLC (since December 2012); formerly Executive Vice President of Jennison Associates LLC and Head of Retail Distribution of PGIM Investments LLC (June 2005-December 2011).
|
|
Since 2015 (Class I)
|
|
None.
|
|
Scott E. Benjamin
1973
Board Member & Vice President
Portfolios Overseen: 96
|
|
Executive Vice President (since June 2009) of PGIM Investments LLC; Vice President (since June 2012) of Prudential Investment Management Services LLC;
Executive Vice President (since September 2009) of AST Investment Services, Inc.; Senior Vice President of Product Development and Marketing, PGIM Investments (since February 2006); formerly Vice President of Product Development and Product
Management, PGIM Investments LLC (2003-2006).
|
|
Since 2011 (Class III)
|
|
None.
|
|
|
|
|
|
|
|
|
|
Fund
Officers(a)
|
Name, Year of Birth,
Position with Fund
|
|
Length of Time Served
|
|
Principal Occupation(s) During Past Five Years
|
|
Claudia DiGiacomo
1974
Chief Legal Officer
|
|
Since 2011
|
|
Vice President and Corporate Counsel (since January 2005) of Prudential; Chief Legal Officer of PGIM Investments LLC (since August 2020); Chief Legal
Officer of Prudential Mutual Fund Services LLC (since August 2020); Chief Legal Officer of PIFM Holdco, LLC (since August 2020); and Corporate Counsel of AST Investment Services, Inc. (since August 2020); formerly Associate at Sidley Austin
Brown & Wood LLP (1999-2004).
|
|
Dino Capasso
1974
Chief Compliance Officer
|
|
Since 2018
|
|
Chief Compliance Officer (July 2019-Present) of PGIM Investments LLC; Chief Compliance Officer (July 2019-Present) of the PGIM Funds, Target Funds,
Advanced Series Trust, The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc., PGIM Global High Yield Fund, Inc., and PGIM High Yield Bond Fund, Inc.; Vice President and Deputy Chief Compliance Officer (June 2017-2019) of PGIM
Investments LLC; formerly, Senior Vice President and Senior Counsel (January 2016-June 2017), and Vice President and Counsel (February 2012-December 2015) of Pacific Investment Management Company
LLC.
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|
|
|
|
|
Visit our website at www.pgim.com/investments
|
|
|
|
|
|
|
|
|
|
|
|
Fund
Officers(a)
|
Name, Year of Birth,
Position with Fund
|
|
Length of Time Served
|
|
Principal Occupation(s) During Past Five Years
|
|
Andrew R. French
1962
Secretary
|
|
Since 2011
|
|
Vice President (since December 2018-present) of PGIM Investments LLC; Formerly, Vice President and Corporate Counsel (2010-2018) of Prudential;
formerly Director and Corporate Counsel (2006-2010) of Prudential; Vice President and Assistant Secretary (since January 2007) of PGIM Investments LLC; Vice President and Assistant Secretary (since January 2007) of Prudential Mutual Fund Services
LLC.
|
|
Jonathan D. Shain
1958
Assistant Secretary
|
|
Since 2011
|
|
Vice President and Corporate Counsel (since August 1998) of Prudential; Vice President and Assistant Secretary (since May 2001) of PGIM Investments
LLC; Vice President and Assistant Secretary (since February 2001) of Prudential Mutual Fund Services LLC; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc.
|
|
Diana N. Huffman
1982
Assistant Secretary
|
|
Since 2019
|
|
Vice President and Corporate Counsel (since September 2015) of Prudential; Vice President and Assistant Secretary (since August 2020) of PGIM
Investments LLC; formerly Associate at Willkie Farr & Gallagher LLP (2009-2015).
|
|
Melissa Gonzalez
1980
Assistant Secretary
|
|
Since 2020
|
|
Vice President and Corporate Counsel (since September 2018) of Prudential; Vice President and Assistant Secretary (since August 2020) of PGIM
Investments LLC; formerly Director and Corporate Counsel (March 2014-September 2018) of Prudential.
|
|
Patrick E. McGuinness
1986
Assistant Secretary
|
|
Since 2020
|
|
Vice President and Assistant Secretary (since August 2020) of PGIM Investments LLC; Director and Corporate Counsel (since February 2017) of Prudential;
and Corporate Counsel (2012-2017) of IIL, Inc.
|
|
Christian J. Kelly
1975
Treasurer and Principal Financial and Accounting Officer
|
|
Since 2019
|
|
Vice President, Head of Fund Administration of PGIM Investments LLC (since November 2018); formerly, Director of Fund Administration of Lord
Abbett & Co. LLC (2009-2018), Treasurer and Principal Accounting Officer of the Lord Abbett Family of Funds (2017-2018); Director of Accounting, Avenue Capital Group (2008-2009); Senior Manager, Investment Management Practice of
Deloitte & Touche LLP (1998-2007).
|
|
Elyse M. McLaughlin
1974
Assistant Treasurer
|
|
Since 2019
|
|
Vice President (since 2017) and Director (2011-2017), within PGIM Investments Fund Administration.
|
|
Lana Lomuti
1967
Assistant Treasurer
|
|
Since 2014
|
|
Vice President (since 2007) and Director (2005-2007), within PGIM Investments Fund Administration; formerly Assistant Treasurer (December 2007-February
2014) of The Greater China Fund, Inc.
|
|
|
|
|
|
PGIM Global High Yield Fund, Inc.
|
Management of the Fund
(continued)
|
|
|
|
|
|
|
|
|
Fund
Officers(a)
|
Name, Year of Birth,
Position with Fund
|
|
Length of Time Served
|
|
Principal Occupation(s) During Past Five Years
|
|
Russ Shupak
1973
Assistant Treasurer
|
|
Since 2019
|
|
Vice President (since 2017) and Director (2013-2017), within PGIM Investments Fund Administration.
|
|
Deborah Conway
1969
Assistant Treasurer
|
|
Since 2019
|
|
Vice President (since 2017) and Director (2007-2017), within PGIM Investments Fund Administration.
|
|
(a)
|
Excludes Mr. Parker and Mr. Benjamin, Interested Board Members who also serve as President and Vice President, respectively.
|
Explanatory Notes to Tables:
|
|
•
|
|
Board Members are deemed to be “Interested,” as defined in the 1940 Act, by reason of their affiliation with PGIM Investments LLC and/or an affiliate
of PGIM Investments LLC.
|
|
|
•
|
|
Unless otherwise noted, the address of all Board Members and Officers is c/o PGIM Investments LLC, 655 Broad Street, Newark, New Jersey 07102-4410.
|
|
|
•
|
|
The Board is divided into three classes, each of which has three-year terms. Class I term expires in 2022, Class II term expires in 2023 and
Class III term expires in 2021. Officers are generally elected by the Board to one-year terms.
|
|
|
•
|
|
There is no set term of office for Board Members or Officers. The Board Members have adopted a retirement policy, which calls for the retirement of Board Members
on December 31 of the year in which they reach the age of 75.
|
|
|
•
|
|
“Other Directorships Held” includes only directorships of companies required to register or file reports with the SEC under the Securities Exchange Act
of 1934 (that is, “public companies”) or other investment companies registered under the 1940 Act.
|
|
|
•
|
|
“Portfolios Overseen” includes all investment companies managed by PGIM Investments LLC. The investment companies for which PGIM Investments LLC serves
as manager include the PGIM Funds, The Prudential Variable Contract Accounts, Target Mutual Funds, PGIM High Yield Bond Fund, Inc., PGIM Global High Yield Fund, Inc., The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc. and the
Advanced Series Trust.
|
|
|
•
|
|
As used in the Fund Officers table “Prudential” means The Prudential Insurance Company of America.
|
|
|
|
|
|
Visit our website at www.pgim.com/investments
|
|
|
Approval of Advisory Agreements