|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Investments at value:
|
|
|
|
|
Unaffiliated investments (cost $701,186,096)
|
|
$
|
731,710,754
|
|
Affiliated investments (cost $20,682,185)
|
|
|
20,682,185
|
|
Cash
|
|
|
10,967
|
|
Dividends and interest receivable
|
|
|
10,367,339
|
|
Receivable for investments sold
|
|
|
5,216,198
|
|
Deposit with broker for centrally cleared/exchange-traded derivatives
|
|
|
400,000
|
|
Unrealized appreciation on unfunded loan commitment
|
|
|
2,148
|
|
Unrealized appreciation on OTC forward foreign currency exchange contracts
|
|
|
447
|
|
Prepaid expenses
|
|
|
813
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
768,390,851
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Loan payable
|
|
|
190,000,000
|
|
Payable for investments purchased
|
|
|
7,117,899
|
|
Management fee payable
|
|
|
516,223
|
|
Accrued expenses and other liabilities
|
|
|
151,601
|
|
Interest payable
|
|
|
138,701
|
|
Dividends payable
|
|
|
108,818
|
|
Deferred directors fees and directors fees payable
|
|
|
52,963
|
|
Exchange listing fees payable
|
|
|
34,088
|
|
Due to brokervariation margin swaps
|
|
|
9,080
|
|
Unrealized depreciation on OTC forward foreign currency exchange contracts
|
|
|
3,535
|
|
|
|
|
|
|
Total Liabilities
|
|
|
198,132,908
|
|
|
|
|
|
|
|
|
Net Assets
|
|
$
|
570,257,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets were comprised of:
|
|
|
|
|
Common stock, at par
|
|
$
|
33,257
|
|
Paid-in capital in excess of par
|
|
|
628,430,333
|
|
Total distributable earnings (loss)
|
|
|
(58,205,647
|
)
|
|
|
|
|
|
|
|
Net assets, May 31, 2021
|
|
$
|
570,257,943
|
|
|
|
|
|
|
|
|
Net asset value per share
|
|
|
|
|
($570,257,943 ÷ 33,256,724 shares of common stock issued and outstanding)
|
|
$
|
17.15
|
|
|
|
|
|
|
See Notes to Financial Statements.
PGIM High Yield Bond Fund, Inc. 49
Statement of Operations
Year Ended May 31, 2021
|
|
|
|
|
|
|
Net Investment Income (Loss)
|
|
|
|
|
Income
|
|
|
|
|
Interest income
|
|
|
$ 43,700,476
|
|
Unaffiliated dividend income
|
|
|
63,640
|
|
Affiliated dividend income
|
|
|
48,971
|
|
|
|
|
|
|
|
|
Total income
|
|
|
43,813,087
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
Management fee
|
|
|
5,825,107
|
|
Interest expense
|
|
|
1,643,168
|
|
Legal fees and expenses
|
|
|
119,761
|
|
Custodian and accounting fees
|
|
|
101,093
|
|
Shareholders reports
|
|
|
80,000
|
|
Audit fee
|
|
|
49,224
|
|
Registration fees
|
|
|
34,088
|
|
Transfer agents fees and expenses
|
|
|
20,420
|
|
Directors fees
|
|
|
16,777
|
|
Miscellaneous
|
|
|
18,483
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
7,908,121
|
|
|
|
|
|
|
Net investment income (loss)
|
|
|
35,904,966
|
|
|
|
|
|
|
|
|
Realized And Unrealized Gain (Loss) On
Investment And Foreign Currency Transactions
|
|
|
|
|
Net realized gain (loss) on:
|
|
|
|
|
Investment transactions
|
|
|
2,912,735
|
|
Swap agreement transactions
|
|
|
(6,134,683
|
)
|
Foreign currency transactions
|
|
|
480
|
|
|
|
|
|
|
|
|
|
(3,221,468
|
)
|
|
|
|
|
|
Net change in unrealized appreciation (depreciation) on:
|
|
|
|
|
Investments
|
|
|
75,291,260
|
|
Forward currency contracts
|
|
|
(3,088
|
)
|
Swap agreements
|
|
|
3,530,311
|
|
Foreign currencies
|
|
|
35
|
|
Unfunded loan commitments
|
|
|
2,148
|
|
|
|
|
|
|
|
|
|
78,820,666
|
|
|
|
|
|
|
Net gain (loss) on investment and foreign currency transactions
|
|
|
75,599,198
|
|
|
|
|
|
|
Net Increase (Decrease) In Net Assets Resulting From Operations
|
|
|
$111,504,164
|
|
|
|
|
|
|
See Notes to Financial Statements.
50
Statements of Changes in Net Assets
|
|
|
|
|
|
|
|
|
|
|
Year Ended
May 31,
|
|
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
Increase (Decrease) in Net Assets
|
|
|
|
|
|
|
|
|
|
|
|
Operations
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
|
$ 35,904,966
|
|
|
|
$ 37,502,748
|
|
Net realized gain (loss) on investment and foreign currency transactions
|
|
|
(3,221,468
|
)
|
|
|
9,883,819
|
|
Net change in unrealized appreciation (depreciation) on investments and foreign currencies
|
|
|
78,820,666
|
|
|
|
(44,193,664
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets resulting from operations
|
|
|
111,504,164
|
|
|
|
3,192,903
|
|
|
|
|
|
|
|
|
|
|
Dividends and Distributions
|
|
|
|
|
|
|
|
|
Distributions from distributable earnings
|
|
|
(37,167,898
|
)
|
|
|
(40,696,044
|
)
|
Tax return of capital distributions
|
|
|
(4,735,574
|
)
|
|
|
(708,577
|
)
|
|
|
|
|
|
|
|
|
|
Total dividends and distributions
|
|
|
(41,903,472
|
)
|
|
|
(41,404,621
|
)
|
|
|
|
|
|
|
|
|
|
Total increase (decrease)
|
|
|
69,600,692
|
|
|
|
(38,211,718
|
)
|
|
|
|
Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
500,657,251
|
|
|
|
538,868,969
|
|
|
|
|
|
|
|
|
|
|
End of year
|
|
|
$570,257,943
|
|
|
|
$500,657,251
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
PGIM High Yield Bond Fund, Inc. 51
Statement of Cash Flows
For Year Ended May 31, 2021
|
|
|
|
|
Cash Flows Provided by / (Used for) Operating Activities:
|
|
|
|
|
Net increase (decrease) in net assets resulting from operations
|
|
$
|
111,504,164
|
|
|
|
|
|
|
|
|
Adjustments to Reconcile Net Increase (Decrease) in Net Assets Resulting From Operations to Net Cash
Provided by / (Used For) Operating Activities:
|
|
|
|
|
Proceeds from disposition of long-term portfolio investments, net of amounts receivable
|
|
|
425,304,841
|
|
Purchases of long-term portfolio investments, net of amounts payable
|
|
|
(422,391,304
|
)
|
Net proceeds (purchases) of short-term portfolio investments
|
|
|
(11,610,581
|
)
|
Net premiums (paid) received for swap agreements
|
|
|
(2,604,372
|
)
|
Amortization of premium and accretion of discount on portfolio investments
|
|
|
(882,668
|
)
|
Net realized (gain) loss on investment transactions
|
|
|
(2,912,735
|
)
|
Net realized (gain) loss on swap agreement transactions
|
|
|
6,134,683
|
|
Net realized (gain) loss on foreign currency transactions
|
|
|
(480
|
)
|
Net change in unrealized (appreciation) depreciation on investments
|
|
|
(75,291,260
|
)
|
Net change in unrealized (appreciation) depreciation on swap agreements
|
|
|
(3,530,311
|
)
|
Net change in unrealized (appreciation) depreciation on forward currency contracts
|
|
|
3,088
|
|
Net change in unrealized (appreciation) depreciation on foreign currencies
|
|
|
(35
|
)
|
Net change in unrealized (appreciation) depreciation on unfunded loan commitments
|
|
|
(2,148
|
)
|
(Increase) Decrease in Assets:
|
|
|
|
|
Dividends and interest receivable
|
|
|
1,226,063
|
|
Prepaid expenses
|
|
|
43,244
|
|
Increase (Decrease) in Liabilities:
|
|
|
|
|
Management fee payable
|
|
|
68,103
|
|
Accrued expenses and other liabilities
|
|
|
62,339
|
|
Interest payable
|
|
|
(9,126
|
)
|
Dividends payable
|
|
|
4,146
|
|
Deferred directors fees and directors fees payable
|
|
|
(493
|
)
|
Exchange listing fees payable
|
|
|
34,088
|
|
Due to broker - variation margin swaps
|
|
|
(237,242
|
)
|
|
|
|
|
|
Total adjustments
|
|
|
(86,592,160
|
)
|
|
|
|
|
|
Net cash provided by (used for) operating activities
|
|
|
24,912,004
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
515
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) financing activities:
|
|
|
|
|
Increase in borrowing
|
|
|
10,000,000
|
|
Cash paid on distributions from distributable earnings
|
|
|
(41,903,472
|
)
|
|
|
|
|
|
Net cash provided by (used for) financing activities:
|
|
|
(31,903,472
|
)
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and restricted cash
|
|
|
(6,990,953
|
)
|
Cash and restricted cash at beginning of year
|
|
|
7,401,920
|
|
|
|
|
|
|
Cash and restricted cash at end of year
|
|
$
|
410,967
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
Cash paid during the year for interest expense
|
|
$
|
1,652,294
|
|
|
|
|
|
|
See Notes to Financial Statements.
52
Reconciliation of cash and restricted cash reported with the Statement of Assets and Liabilities to the Statement of
Cash Flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31, 2021
|
|
May 31, 2020
|
Cash
|
|
|
$
|
10,967
|
|
|
|
$
|
1,368,920
|
|
Restricted Cash:
|
|
|
|
|
|
|
|
|
|
|
Deposit with broker for centrally cleared/exchange-traded derivatives
|
|
|
|
400,000
|
|
|
|
|
6,033,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and restricted cash
|
|
|
$
|
410,967
|
|
|
|
$
|
7,401,920
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
PGIM High Yield Bond Fund, Inc. 53
Notes to Financial Statements
PGIM High Yield Bond 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.
Subsequent to May 31, 2021, the Funds fiscal and tax year changed from an annual reporting period that ends May 31 to one that ends July 31. This change
is not expected to have any impact on the way the Fund is managed. Shareholders will receive future annual and semi-annual reports on the new fiscal year end schedule.
The investment objective of the Fund is to provide a high level of current income.
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 is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform to U.S.
generally accepted accounting principles (GAAP). 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 as of the close of each day (generally, 4:00 PM Eastern
time) the New York Stock Exchange (NYSE) is open for trading. As described in further detail below, the Funds investments are valued daily based on a number of factors, including the type of investment and whether market quotations
are readily available. The Funds 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 Boards 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.
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. A record of the Valuation Committees actions is subject to the
Boards review at its first quarterly meeting following the quarter in which such actions take place.
54
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 Funds foreign investments may change on days when investors cannot purchase or sell Fund shares.
Various inputs determine
how the Funds 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.
Common or preferred stocks, exchange-traded funds and derivative instruments, if applicable, that are
traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange where the security principally trades. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To
the extent these securities are valued at the last sale price or NASDAQ official closing price, they are classified as Level 1 in the fair value hierarchy. In the event that no sale or official closing price on valuation date exists, these
securities are generally valued at the mean between the last reported bid and ask prices, or at the last bid price in the absence of an ask price. These securities are classified as Level 2 in the fair value hierarchy.
Investments in open-end funds (other than exchange-traded 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
PGIM High Yield Bond Fund,
Inc. 55
Notes to Financial Statements (continued)
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 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. Altering one or more unobservable inputs may result in a significant change to a Level 3
securitys fair value measurement.
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 issuers 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 securitys most recent closing price and from the price used by other unaffiliated mutual funds to calculate their
net asset values.
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:
56
(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 Funds 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 or 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 Funds 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 contracts life. A cross
PGIM High Yield Bond Fund,
Inc. 57
Notes to Financial Statements (continued)
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.
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 or 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 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.
58
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 issuers default or the reference entitys 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 Funds 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 entitys credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the
terms of the agreement.
Master Netting Arrangements: The Fund is subject to various Master Agreements, or netting arrangements, with select counterparties.
These are agreements which a subadviser may have negotiated and entered into on behalf of 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 Funds exposure to the counterparty. However, there is no assurance that such mitigating factors are easily
PGIM High Yield Bond Fund,
Inc. 59
Notes to Financial Statements (continued)
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.
Warrants: The Fund held warrants acquired either through a direct
purchase or pursuant to corporate actions. Warrants entitle the holder to buy a proportionate amount of common stock, or such other security that the issuer may specify, at a specific price and time through the expiration dates. Such warrants are
held as long positions by the Fund until exercised, sold or expired. Warrants are valued at fair value in accordance with the Board approved fair valuation procedures.
Payment-In-Kind: The Fund invested in the open market or received 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 Funds 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 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 Funds
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
60
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 GAAP, 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.
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 subadvisers performance of such services. PGIM Investment has entered into a subadvisory agreement with PGIM, Inc. , which provides subadvisory services to the Fund through its PGIM Fixed Income and PGIM, Inc. has entered into a
sub-subadvisory agreement with PGIM Limited (each a subadviser and collectively the subadvisers).
The management fee paid to the Manager is
accrued daily and payable monthly, at an annual rate of 0.80% of the average daily value of the Funds 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, PGIM Limited and PGIM, Inc. are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (Prudential).
PGIM High Yield Bond Fund,
Inc. 61
Notes to Financial Statements (continued)
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 PGIM Investments and/or its affiliates are paid fees or reimbursed for providing their services to the Core Fund. In addition to the realized and unrealized gains on investments in the
Core Fund, earnings from such investments 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/trustees, and/or common officers. For the year ended May 31, 2021, no 17a-7 transactions were entered into by the Fund.
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
May 31, 2021, were $397,092,787 and $401,993,851, respectively.
A summary of the cost of purchases and proceeds from sales of shares of an affiliated mutual
fund for the year ended May 31, 2021, is presented as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value,
Beginning
of Year
|
|
Cost of
Purchases
|
|
Proceeds
from Sales
|
|
Change in
Unrealized
Gain
(Loss)
|
|
Realized
Gain
(Loss)
|
|
Value,
End of Year
|
|
Shares,
End
of Year
|
|
Income
|
|
Short-Term Investments - Affiliated Mutual Fund:
|
|
PGIM Core Ultra Short Bond Fund (1)(wb)
|
$9,071,604
|
|
$215,237,657
|
|
$203,627,076
|
|
$
|
|
$
|
|
$20,682,185
|
|
20,682,185
|
|
$48,971
|
(1)
|
The Fund did not have any capital gain distributions during the reporting period.
|
(wb)
|
PGIM Investments LLC, the manager of the Fund, also serves as manager of the PGIM Core Ultra Short Bond Fund.
|
6.
|
Distributions and Tax Information
|
Distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from GAAP, are recorded on the ex-date.
For the year ended May 31, 2021, the tax character of dividends paid by the Fund were $37,167,898 of ordinary income
and $4,735,574 of tax return of capital. For the year ended
62
May 31, 2020, the tax character of dividends paid by the Fund were $40,696,044 of ordinary income and $708,577 of tax return of capital.
As of May 31, 2021, there were no accumulated undistributed earnings on a tax basis.
The United States federal income tax basis of the Funds investments and the net unrealized appreciation as of May 31, 2021 were as follows:
|
|
|
|
|
|
|
Tax Basis
|
|
Gross
Unrealized
Appreciation
|
|
Gross
Unrealized
Depreciation
|
|
Net
Unrealized
Appreciation
|
$725,583,740
|
|
$46,835,227
|
|
$(20,087,901)
|
|
$26,747,326
|
The difference between book basis and tax basis was primarily attributable to deferred losses on wash sales, swaps, differences in the
treatment of premium amortization for book and tax purposes, defaulted securities and other book to tax differences.
For federal income tax purposes, the Fund had a
capital loss carryforward as of May 31, 2021 of approximately $84,791,000 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.
The Manager has analyzed the Funds 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 Funds financial statements for the current reporting period. Since tax authorities can examine previously filed tax returns, the Funds U.S. federal and state tax returns for each of the
four fiscal years up to the most recent fiscal year ended May 31, 2021 are subject to such review.
There are 1 billion shares of $0.001 par value common stock authorized. As of May 31, 2021, Prudential, through its affiliated entities, including affiliated
funds (if applicable), owned shares of the Fund as follows:
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Percentage
of
Outstanding Shares
|
|
|
|
10,996
|
|
0.03%
|
For the period ended May 31, 2021, the Fund did not issue any shares of common stock in connection with the Funds dividend
reinvestment plan.
8.
|
Borrowings and Re-hypothecation
|
The Fund has entered into a committed credit facility agreement (the Credit Facility) with The Bank of Nova Scotia (the Financial Institution),
pursuant to which the Fund may borrow up to a maximum commitment amount of $240 million. The Fund will pay interest in
PGIM High Yield Bond Fund,
Inc. 63
Notes to Financial Statements (continued)
the amount of 0.75% plus the 1-month U.S. Dollar London Interbank Offered Rate (LIBOR) on the amount outstanding. Such interest expenses, as well as
fees for the Credit Facility (including commitment fees for any portion of the Credit Facility not drawn upon at any time during the period), are disclosed in the Statement of Operations under Interest and Miscellaneous expense, respectively. The
Funds obligations under the Credit Facility are secured by the assets of the Fund segregated for the purpose of securing the amount borrowed and are indicated in the Schedule of Investments. The purpose of the Credit Facility is to provide the
Fund with portfolio leverage and to meet its general cash flow requirements. If the Fund fails to meet certain requirements or maintain other financial covenants required under the Credit Facility, the Fund may be required to repay immediately, in
part or in full, the loan balance outstanding.
The Fund utilized the credit facility during the year ended May 31, 2021. The average daily outstanding loan
balance for the 365 days that the Fund utilized the facility during the period was $182,493,151, borrowed at a weighted average interest rate of 0.89%. The maximum loan balance outstanding during the period was $190,000,000. At May 31, 2021,
the Fund had an outstanding loan balance of $190,000,000.
Re-hypothecation: The credit facility permits, subject to
certain conditions, the Financial Institution to re-hypothecate, a portion of the 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 re-hypothecation of portfolio securities which reduces the interest expense on borrowings. Such earnings are disclosed in the Statement of Operations under
Interest income. For the year ended May 31, 2021, the Financial Institution re-hypothecated certain portfolio securities segregated as collateral by the Fund.
9.
|
Risks of Investing in the Fund
|
The Funds risks include, but are not limited to, some or all of the risks discussed below.
Bond Obligations Risk: As with credit risk, market risk and interest rate risk, the Funds 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 issuers goods
64
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 lose income.
Credit Risk: This is the risk that the issuer, the guarantor or the insurer of a fixed income
security, or the counterparty to a contract, may be unable or unwilling to make timely principal and interest payments, or to otherwise honor its obligations. Additionally, fixed income securities could lose value due to a loss of confidence in the
ability of the issuer, guarantor, insurer or counterparty to pay back debt. The longer the maturity and the lower the credit quality of a bond, the more sensitive it is to credit risk.
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 subadvisers 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. The Funds use of derivatives may also increase the amount of taxes payable by shareholders. Other risks arise
from the potential inability to terminate or sell derivatives positions. A liquid secondary market may not always exist for the Funds derivatives positions. In fact, many OTC derivative instruments lack 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.
Interest Rate Risk: The value of
your 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 debt securities. For example, a fixed income security with a duration of three years is expected to
decrease in value by approximately 3% if interest rates increase by 1%. This is referred to as duration risk. 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 Funds holdings may fall
sharply. This is referred to as extension risk. The Fund may lose money if short-term or long-term interest rates rise sharply or in a manner not anticipated by the subadviser.
Junk Bonds Risks: High-yield, high-risk bonds have predominantly speculative characteristics, including particularly high credit risk. Junk bonds tend to be less
liquid than higher-rated securities. The liquidity of particular issuers or industries within a particular investment category may shrink or disappear suddenly and without warning. The non-investment grade
bond market can experience sudden and sharp price swings and become illiquid due to a variety of factors, including changes in economic forecasts, stock market activity, large sustained sales by major investors, a high profile default or a change in
the markets psychology.
PGIM High Yield Bond Fund,
Inc. 65
Notes to Financial Statements (continued)
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 Funds 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. Over the course of the last several years, global regulators have indicated an intent to phase out the use of LIBOR and similar interbank offering rates (IBOR). On
November 30, 2020, the administrator of LIBOR announced a delay in the phase out of a majority of the U.S. dollar LIBOR publications until June 30, 2023, with the remainder of LIBOR publications to still end at the end of 2021. There still
remains uncertainty regarding the nature of any replacement rates for LIBOR and the other IBORs as well as around fallback approaches for instruments extending beyond the any phase-out of these reference
rates. The lack of consensus around replacement rates and the uncertainty of the phase out of LIBOR and other IBORs may result in increased volatility in corporate or governmental debt, bank loans, derivatives and other instruments invested in by a
Fund as well as loan facilities used by a Fund. As such, the potential impact of a transition away from LIBOR on a Fund or the financial instruments in which a 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 a Funds 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 and the other IBORs as benchmarks could deteriorate during the transition period, these effects could begin to be experienced by the end of 2021 and beyond until the
anticipated discontinuance date in 2023 for the majority of the LIBOR rates.
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 trade in lower volumes may be more difficult to value. If the Fund is forced to sell these investments for any reason, 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
66
less without the sale or disposition significantly changing the market value of the investment, the Fund may incur higher transaction costs when executing trade order of a given size. An
inability to sell a portfolio position can adversely affect the Funds value or prevent the Fund from being able to take advantage of other investment opportunities.
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
20142016 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. The coronavirus pandemic and the related governmental and public responses have had and may continue to have an impact on the
Funds investments and net asset value and have led and may continue to lead to increased market volatility and the potential for illiquidity in certain classes of securities and sectors of the market. Preventative or protective actions that
governments may take in respect of pandemic or epidemic diseases may result in periods of business disruption, business closures, inability to obtain raw materials, supplies and component parts, and reduced or disrupted operations for the issuers in
which the Fund invests. Government intervention in markets may impact interest rates, market volatility and security pricing. The occurrence, reoccurrence and pendency of such diseases could adversely affect the economies (including through changes
in business activity and increased unemployment) and financial markets either in specific countries or worldwide.
Market Risk: Securities markets may be
volatile and the market prices of the Funds securities may decline. Securities fluctuate in price based on changes in an issuers financial condition and overall market and economic conditions. If the market prices of the securities owned
by the Fund fall, the value of your investment in the Fund will decline.
Risks of Investments in Bank Loans: The Funds 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 Funds 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 Funds access to collateral, if any, may be limited by bankruptcy laws.
Due to the nature of the
private syndication of senior loans, including, for example, lack of publicly-available information, some senior loans are not as easily purchased or sold as
PGIM High Yield Bond Fund,
Inc. 67
Notes to Financial Statements (continued)
publicly-traded securities. In addition, loan participations generally are subject to restrictions on transfer, and only limited opportunities may exist to sell loan participations in secondary
markets. As a result, it may be difficult for the Fund to value loans or sell loans at an acceptable price when it wants to sell them. In some instances, loans and loan participations are not rated by independent credit rating agencies; in such
instances, a decision by the Fund to invest in a particular loan or loan participation could depend exclusively on the Subadvisers credit analysis of the borrower, or in the case of a loan participation, of the intermediary holding the portion
of the loan that the Fund has purchased. To the extent the Fund invests in loans of non-U.S. issuers, the risks of investing in non-U.S. issuers are applicable. Loans
may not be considered to be securities and as a result may not benefit from the protections of the federal securities laws, including anti-fraud protections and those with respect to the use of material
non-public information, so that purchasers, such as the Fund, may not have the benefit of these protections.
10.
|
Recent Accounting Pronouncement and Regulatory Developments
|
In March 2020, the FASB issued Accounting Standard Update (ASU) No. 2020-04, which provides optional guidance for
applying GAAP to contract modifications, hedging relationships and other transactions affected by the reference rate reform if certain criteria are met. ASU 2020-04 is elective and is effective on
March 12, 2020 through December 31, 2022. At this time, management is evaluating the implications of certain provisions of the ASU and any impact on the financial statement disclosures has not yet been determined.
On December 3, 2020, the SEC announced that it voted to adopt a new rule that establishes an updated regulatory framework for fund valuation practices (the
Rule). The Rule, in part, provides (i) a framework for determining fair value in good faith and (ii) provides for a fund Boards assignment of its responsibility for the execution of valuation-related activities to a
funds investment adviser. Further, the SEC is rescinding previously issued guidance on related issues. The Rule took effect on March 8, 2021, with a compliance date of September 8, 2022. Management is currently evaluating the Rule
and its impact to the Fund.
Dividends to shareholders: On May 28, 2021, the Fund declared monthly dividends of $0.105 per share payable on June 30, 2021, July 30, 2021,
August 31, 2021, respectively, to shareholders of record on June 11, 2021, July 16, 2021, August 13, 2021, respectively. The ex-dates are June 10, 2021, July 15, 2021, August 12,
2021, respectively.
68
Financial Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended May 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Per Share Operating Performance(a):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value, Beginning of Year
|
|
|
$15.05
|
|
|
|
$16.20
|
|
|
|
$16.29
|
|
|
|
$16.84
|
|
|
|
$16.79
|
|
Income (loss) from investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
|
1.08
|
|
|
|
1.13
|
|
|
|
0.91
|
|
|
|
0.90
|
|
|
|
0.98
|
|
Net realized and unrealized gain (loss) on investment and
foreign currency transactions
|
|
|
2.28
|
|
|
|
(1.03
|
)
|
|
|
0.07
|
|
|
|
(0.36
|
)
|
|
|
0.32
|
|
Total from investment operations
|
|
|
3.36
|
|
|
|
0.10
|
|
|
|
0.98
|
|
|
|
0.54
|
|
|
|
1.30
|
|
Less Dividends and Distributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from net investment income
|
|
|
(1.12
|
)
|
|
|
(1.23
|
)
|
|
|
(1.07
|
)
|
|
|
(1.09
|
)
|
|
|
(1.25
|
)
|
Tax return of capital distributions
|
|
|
(0.14
|
)
|
|
|
(0.02
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total dividends and distributions
|
|
|
(1.26
|
)
|
|
|
(1.25
|
)
|
|
|
(1.07
|
)
|
|
|
(1.09
|
)
|
|
|
(1.25
|
)
|
Net asset value, end of year
|
|
|
$17.15
|
|
|
|
$15.05
|
|
|
|
$16.20
|
|
|
|
$16.29
|
|
|
|
$16.84
|
|
Market price, end of year
|
|
|
$16.18
|
|
|
|
$13.38
|
|
|
|
$13.93
|
|
|
|
$14.07
|
|
|
|
$15.59
|
|
Total Return(b):
|
|
|
31.72
|
%
|
|
|
4.84
|
%
|
|
|
6.84
|
%
|
|
|
(2.89
|
)%
|
|
|
8.36
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of year (000)
|
|
|
$570,258
|
|
|
|
$500,657
|
|
|
|
$538,869
|
|
|
|
$541,660
|
|
|
|
$560,069
|
|
Average net assets (000)
|
|
|
$545,673
|
|
|
|
$533,714
|
|
|
|
$539,282
|
|
|
|
$550,742
|
|
|
|
$559,484
|
|
Ratios to average net assets(c)(d):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses after waivers and/or expense reimbursement
|
|
|
1.45
|
%
|
|
|
1.96
|
%
|
|
|
2.21
|
%
|
|
|
1.84
|
%
|
|
|
1.71
|
%
|
Expenses before waivers and/or expense reimbursement
|
|
|
1.45
|
%
|
|
|
1.96
|
%
|
|
|
2.21
|
%
|
|
|
1.84
|
%
|
|
|
1.71
|
%
|
Net investment income (loss)
|
|
|
6.58
|
%
|
|
|
7.03
|
%
|
|
|
5.58
|
%
|
|
|
5.43
|
%
|
|
|
5.84
|
%
|
Portfolio turnover rate(e)
|
|
|
56
|
%
|
|
|
60
|
%
|
|
|
87
|
%
|
|
|
72
|
%
|
|
|
65
|
%
|
Asset coverage
|
|
|
400
|
%
|
|
|
378
|
%
|
|
|
399
|
%
|
|
|
428
|
%
|
|
|
411
|
%
|
Total debt outstanding at period-end (000)
|
|
|
$190,000
|
|
|
|
$180,000
|
|
|
|
$180,000
|
|
|
|
$165,000
|
|
|
|
$180,000
|
|
(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 Funds dividend reinvestment plan. This amount does not reflect
brokerage commissions or sales load.
|
(c)
|
Does not include expenses of the underlying fund in which the Fund invests.
|
(d)
|
Includes interest expense of 0.30%, 0.81%, 1.06%, 0.71%, and 0.54%, for the years ended May 31, 2021, 2020, 2019,
2018, and 2017, respectively.
|
(e)
|
The Funds portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to
transactions involving short-term investments and certain derivatives. If such transactions were included, the Funds portfolio turnover rate may be higher.
|
See Notes to Financial Statements.
PGIM High Yield Bond Fund, Inc. 69
Report of Independent Registered Public Accounting Firm
To the Board of Directors of PGIM High Yield Bond Fund, Inc. and Shareholders of PGIM
High Yield Bond Fund, Inc.
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of PGIM High Yield Bond Fund, Inc. (the
Fund) as of May 31, 2021, and the related statements of operations, cash flows and changes in net assets, including the related notes, and the financial highlights for the year then ended (collectively referred to as the
financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of May 31, 2021, and the results of its operations, its cash flows, changes in its net
assets, and the financial highlights for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The financial statements of the Fund as of and for the year ended May 31, 2020 and the financial highlights for each of the periods ended on or prior to
May 31, 2020 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated July 20, 2020 expressed an unqualified opinion on those financial
statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements
based on our audit. 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 audit of these financial statements 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 are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, 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. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of May 31, 2021 by correspondence with the custodian, transfer agent and brokers; when replies were not received from
brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
New York, New York
July 20, 2021
We have served as the auditor of one or more investment companies in the PGIM Retail Funds complex since 2020.
Tax Information
(unaudited)
For the year ended May 31, 2021, the Fund reports the maximum amount allowable but not less than 95.52% as interest related dividends in accordance with
Section 871(k)(1) and 881(e)(1) of the Internal Revenue Code.
In
January 2022, you will be advised on IRS Form 1099-DIV or substitute 1099-DIV as to the federal tax status of distributions received by you in calendar year 2021.
|
|
|
|
|
PGIM High Yield Bond Fund, Inc.
|
|
|
71
|
|
Other Information
(unaudited)
Investment Objective and Policies
There have been no material changes to the investment objectives, policies and restrictions since the Funds 2020 Annual Report that have not been approved by
shareholders.
Investment Objective. The Funds investment objective is
to provide a high level of current income. The Funds investment objective is non-fundamental and may be changed without stockholder approval.
Investment Policies. Under normal market conditions, the Fund will invest at least 80% of its investable assets in a diversified
portfolio of high yield fixed income instruments that are rated below investment grade with varying maturities and other investments (including derivatives) with similar economic characteristics. This 80% policy is a
non-fundamental policy and may be changed by the Board of Directors of the Fund without stockholder approval and after providing holders of Common Stock with at least 60 days prior written notice of any
change as required by the rules under the Investment Company Act of 1940, as amended (the 1940 Act). The term investable assets refers to the total assets of the Fund (including any assets attributable to money borrowed,
including as a result of any shares of preferred stock or notes or other debt securities that may be issued by the Fund) minus the sum of (i) accrued liabilities of the Fund (other than liabilities for money borrowed, including the liquidation
preference of any outstanding preferred stock, and principal on notes and other debt securities issued by the Fund), (ii) any accrued and unpaid interest on money borrowed and (iii) accumulated dividends on any outstanding shares of Common
Stock and preferred stock issued by the Fund.
The Funds investments
in derivatives will be included under the 80% asset policy noted above so long as the underlying assets of such derivatives are based on one or more high yield fixed income instruments that are rated below investment grade. Such derivative
investments are subject to the Funds limit of investing up to 20% of its investable assets in derivatives.
The Fund may not invest in municipal debt obligations (except for temporary defensive measures), asset-backed securities (including collateralized debt obligations and collateralized loan obligations), and
mortgage-backed securities (including securities issued by the U.S. government and agencies as well as privately). The Fund defines the term asset-backed security as a type of pass through instrument that pays interest based upon the
cash flow of an underlying pool of assets, such as automobile loans or credit card receivables.
Foreign Instruments. Under normal market
conditions, the Fund may invest up to 20% of its investable assets in U.S. currency denominated and/or foreign currency denominated fixed income instruments issued by foreign issuers.
Investment Grade Investments. Under normal market conditions, the Fund may invest up to 20% of its investable assets in fixed income
instruments that are rated investment grade (Baa3 or higher by Moodys, BBB- or higher by S&P or Fitch, or comparably rated by another NRSRO) or, if unrated, are considered by the subadviser to be of
comparable quality.
Loan Participations and Assignments. Under normal
market conditions, the Fund may invest up to 20% of its investable assets in loan participations and assignments.
Derivatives. The Fund is permitted to invest up to 20% of its investable assets in derivatives but expects to maintain derivatives exposure of below 20% under normal market conditions. The Funds investments
in derivatives may be for hedging, investment or leverage purposes, or to manage interest rates or the duration of the Funds portfolio. Although the Fund is not limited in the types of derivatives it can use, the Fund currently expects that
its derivatives use will consist primarily of the following instruments and transactions: futures contracts, foreign currency forward contracts, U.S. Treasury swaps, interest rate swaps, credit default swaps on individual securities or groups or
indices of securities (including high yield fixed income instruments) and credit-linked notes.
Investment Restrictions.
Fundamental Investment Restrictions
The following are fundamental investment restrictions of the Fund and, prior to the issuance of any preferred stock, may not be changed
without the approval of the holders of a majority of the Funds outstanding shares of Common Stock. Subsequent to the issuance of a class of preferred stock, the following investment restrictions may not be changed without the approval of a
majority of the outstanding shares of Common Stock and of preferred stock, voting together as a class, and the approval of a majority of the outstanding shares of preferred stock, voting separately by class. In each case, a majority of the
Funds outstanding shares of Common Stock and/or preferred stock, as applicable, for this purpose and under the 1940 Act means the lesser of (i) 67% of the shares of Common Stock and/or preferred stock, as applicable, represented at a meeting
at which more than 50% of such shares are represented or (ii) more than 50% of the outstanding shares of Common Stock and/or preferred stock, as applicable. The Fund may not:
1. Purchase the securities of any issuer if, as a result, the Fund would fail to be a
diversified company within the meaning of the 1940 Act, and the rules and regulations promulgated
|
|
|
|
|
PGIM High Yield Bond Fund, Inc.
|
|
|
73
|
|
Other Information (unaudited)
(continued)
thereunder, as each may be amended from time to time, except to the extent that the Fund may be permitted to do so by exemptive order, SEC release, no-action letter or
similar relief or interpretations (collectively, the 1940 Act Laws, Interpretations and Exemptions).
2. Issue senior securities or borrow money or pledge its assets, except as permitted by the 1940 Act Laws, Interpretations and Exemptions.
3. Buy or sell real estate, except that investment in securities of issuers that invest
in real estate and investments in mortgage-backed securities, mortgage participations or other instruments supported or secured by interests in real estate are not subject to this limitation, and except that the Fund may exercise rights relating to
such securities, including the right to enforce security interests and to hold real estate acquired by reason of such enforcement until that real estate can be liquidated in an orderly manner.
4. Buy or sell physical commodities or contracts involving physical commodities. The Fund may purchase and sell (i) derivative,
hedging and similar instruments such as financial futures contracts and options thereon, and (ii) securities or instruments backed by, or the return from which is linked to, physical commodities or currencies, such as forward currency exchange
contracts, and the Fund may exercise rights relating to such instruments, including the right to enforce security interests and to hold physical commodities and contracts involving physical commodities acquired as a result of the Funds
ownership of instruments supported or secured thereby until they can be liquidated in an orderly manner.
5. Engage in the underwriting of securities except insofar as the Fund may be deemed an underwriter under the Securities Act in disposing of a portfolio security.
6. Purchase any security if as a result 25% or more of the Funds total assets
would be invested in the securities of issuers having their principal business activities in the same industry or group of industries, except for temporary defensive purposes, and except that this limitation does not apply to securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
7.
Make loans, except as permitted by the 1940 Act Laws, Interpretations and Exemptions. The acquisition of credit instruments, including without limitation, bonds, debentures, repurchase agreements, other debt securities or instruments, or
participations or other interests therein and investments in government obligations, commercial paper, certificates of deposit, bankers acceptances or instruments similar to any of the foregoing will not be considered the making of a loan, and
is permitted if consistent with the Funds investment objective and strategies.
For purposes of Investment Restriction 5, a technical provision of the Securities Act deems certain persons to be
underwriters if they purchase a security from an issuer and later sell it to the public. Although it is not believed that the application of this Securities Act provision would cause the Fund to be engaged in the business of
underwriting, the policy set forth in Investment Restriction 5 will be interpreted not to prevent the Fund from engaging in transactions involving the acquisition or disposition of portfolio securities, regardless of whether the Fund may be
considered to be an underwriter under the Securities Act. Under the Securities Act, an underwriter may be liable for material omissions or misstatements in an issuers registration statement or prospectus.
For purposes of Investment Restriction 7, the Fund may currently lend up to
33 1/3% of the value of its total assets.
Non-Fundamental Investment Restrictions
Although not fundamental, the Fund has the following additional investment restrictions which may be changed by the Board of Directors without stockholder approval.
The Fund may not:
1. Invest in securities of other investment companies, except as permitted under the 1940 Act Laws, Interpretations and Exemptions.
Compliance with any policy, investment restriction or limitation of the
Fund that is expressed as a percentage of assets is determined at the time of investment. The policy will not be violated if these limitations are exceeded because of changes in the market value or investment rating of the Funds assets. The
Fund interprets its policies with respect to borrowing and lending to permit such activities as may be lawful for the Fund, to the full extent permitted by the 1940 Act Laws, Interpretations and Exemptions.
Charter or Bylaws Amendment
There have not been changes in the Funds charter or by-laws that would delay or
prevent a change of control of the Fund that have not been approved by stockholders since the Funds 2020 Annual Report.
Principal Risk Factors
There have been no material changes to the principal risk factors since the Funds 2020 Annual Report.
|
|
|
|
|
PGIM High Yield Bond Fund, Inc.
|
|
|
75
|
|
Other Information (unaudited)
(continued)
The Funds risks include, but are not limited to, some or all of the risks discussed below. The Fund is not intended to be a complete investment program and, due to the uncertainty inherent in all investments,
there can be no assurance that the Fund will achieve its investment objective. Different risks may be more significant at different times depending on market conditions.
Bond Obligations Risk. As with credit risk, market risk and interest rate risk, the
Funds 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
issuers 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 lose income.
Credit Risk. This is the risk that the issuer, the
guarantor or the insurer of a fixed income security, or the counterparty to a contract, may be unable or unwilling to make timely principal and interest payments, or to otherwise honor its obligations. Additionally, fixed income securities could
lose value due to a loss of confidence in the ability of the issuer, guarantor, insurer or counterparty to pay back debt. The longer the maturity and the lower the credit quality of a bond, the more sensitive it is to credit risk.
Cyber Security Risk. Failures or breaches of the electronic systems of the Fund, the
Funds manager, subadviser and other service providers, or the issuers of securities in which the Fund invests have the ability to cause disruptions and negatively impact the Funds business operations, potentially resulting in financial
losses to the Fund and its shareholders. While the Fund has established business continuity plans and risk management systems seeking to address system breaches or failures, there are inherent limitations in such plans and systems. Furthermore, the
Fund cannot control the cyber security plans and systems of the Funds service providers or issuers of securities in which the Fund invests.
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 subadvisers ability to analyze and manage derivatives 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. The Funds use of derivatives may also increase the amount of taxes payable by shareholders.
Other risks arise from the potential inability to terminate or sell derivatives
positions. A liquid secondary market may not always exist for the Funds derivatives positions. In fact, many
over-the-counter derivative instruments will not have liquidity beyond the counterparty to the instrument. Over-the-counter
derivative instruments also involve the risk that the other party will not meet its obligations to the Fund.
The US Government and foreign governments have adopted (and may adopt further) regulations governing derivatives markets, including mandatory clearing of certain derivatives, margin and reporting requirements, and
risk exposure limitations. The ultimate impact of the regulations remains unclear. Additional regulation of derivatives may make derivatives more costly, limit their availability or utility, or otherwise adversely affect their performance or disrupt
markets.
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 Funds 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 Funds 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 your 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 debt securities. For example, a fixed income security with a duration of three years is expected to decrease in value by approximately 3% if interest rates
increase by 1%. This is referred to as duration risk. 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 Funds holdings may fall sharply. This is referred to as extension
risk. The Fund may lose money if short-term or long-term interest rates rise sharply or in a manner not anticipated by the subadviser.
Junk Bonds Risk. High-yield, high-risk bonds have predominantly speculative characteristics, including particularly high credit risk. Junk bonds tend to have lower
market liquidity than higher-rated securities. The liquidity of particular issuers or industries
|
|
|
|
|
PGIM High Yield Bond Fund, Inc.
|
|
|
77
|
|
Other Information (unaudited)
(continued)
within a particular investment category may shrink or disappear suddenly and without warning. The non-investment grade bond market can experience sudden and sharp price
swings and become illiquid due to a variety of factors, including changes in economic forecasts, stock market activity, large sustained sales by major investors, a high profile default or a change in the markets psychology.
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
Funds 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. Over the course of the last several years, global regulators have indicated an intent to phase out
the use of LIBOR and similar interbank offering rates (IBOR). There still remains uncertainty regarding the nature of any replacement rates for LIBOR and the other IBORs as well as around fallback approaches for instruments extending beyond the any phase-out of these reference rates. The lack of consensus around replacement rates and the uncertainty of the phase out of LIBOR and other IBORs may result in increased volatility in corporate or governmental debt,
bank loans, derivatives and other instruments invested in by the Fund as well as loan facilities used by the Fund.
The potential effect 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 Funds
performance and/or net asset value. Certain proposed replacement rates to LIBOR, such as the Secured Overnight Financing Rate (SOFR), are materially different from LIBOR, and changes in the applicable spread for instruments previously
linked to LIBOR will need to be made in order for instruments to pay similar rates. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or
instruments. Consequently, the transition away from LIBOR to other reference rates may lead to reduced coupons on debt held by the Fund, higher rates required to be paid by the Fund on bank lines of credit due to increases in spreads, increased
volatility and illiquidity in markets that are tied to LIBOR, fluctuations
in values of LIBOR-related investments or
investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, adversely affecting the Funds performance. 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 and the other IBORs as benchmarks
could deteriorate during the transition period, these effects could begin to be experienced by the end of 2021 and beyond until the anticipated discontinuance date in 2023 for the majority of the LIBOR rates.
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 for any reason, 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 Funds value or prevent the Fund from being able to take advantage of other investment opportunities.
Management Risk. The value of your investment may decrease if judgments by the subadviser about the attractiveness, value or market
trends affecting a particular security, industry or sector or about market movements are incorrect.
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 outbreak of COVID-19 globally in 2020 or the 20142016
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. The coronavirus pandemic and the related governmental and public responses have had and may continue to have an impact on the Funds
investments and net asset value and have led and may continue to lead to
|
|
|
|
|
PGIM High Yield Bond Fund, Inc.
|
|
|
79
|
|
Other Information (unaudited)
(continued)
increased market volatility and the potential for illiquidity in certain classes of securities and sectors of the market. Preventative or protective actions that governments may take in respect of pandemic or
epidemic diseases may result in periods of business disruption, business closures, inability to obtain raw materials, supplies and component parts, and reduced or disrupted operations for the issuers in which the Fund invests. Government
intervention in markets may impact interest rates, market volatility and security pricing. The occurrence, reoccurrence and pendency of such diseases could adversely affect the economies (including through changes in business activity and increased
unemployment) and financial markets either in specific countries or worldwide.
Market Risk. Securities markets may be volatile and the market prices of the Funds securities may decline. Securities fluctuate in price based on changes in an issuers financial condition and overall
market and economic conditions. If the market prices of the securities owned by the Fund fall, the value of your investment in the Fund will decline.
Risks of Investments in Bank Loans. The Funds 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 Funds 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 Funds
access to collateral, if any, may be limited by bankruptcy laws.
Risk of
Market Price Discount from Net Asset Value. Shares of closed-end funds frequently trade at a discount from their net asset value. This characteristic is a risk separate and distinct from the risk that net
asset value could decrease as a result of investment activities.
Portfolio Management. There have been no changes to the Funds portfolio managers who are responsible for the day-to-day management of the Fund since the Funds 2020 Annual Report.
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 Funds 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 stockholders common stock is registered. Whenever the Fund declares a Dividend
payable in cash, non-participants in the Plan will receive cash and participants in the Plan will receive the equivalent in common stock. The common stock will be acquired by the Plan Administrator for the
participants accounts, depending upon the circumstances described below, either (i) through receipt of additional unissued but authorized common stock from the Fund (Newly Issued common stock) or (ii) by purchase of
outstanding common stock on the open market (Open-Market Purchases) on the NYSE or elsewhere. If, on the payment date for any Dividend, the closing market price of the common stock plus per share fees (as defined below) is equal to or
greater than the NAV per share of common stock (such condition being referred to as market premium), the Plan Administrator will invest the Dividend amount in Newly Issued common stock on behalf of the participants. The number of Newly
Issued common stock to be credited to each participants 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
|
|
|
|
|
PGIM High Yield Bond Fund, Inc.
|
|
|
81
|
|
Other Information (unaudited)
(continued)
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 stockholders name and held for the account of beneficial owners who participate in the Plan.
The Plan Administrators 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 participants 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 Administrators 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 Administrators 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 participants shares with those of other selling
participants.
There will be no brokerage charges with respect to shares of
common stock issued directly by the Fund. However, each participant will pay a pro rata share of brokerage commissions incurred in connection with Open-Market Purchases. Each participant will be charged a per share fee (currently $0.05 per share) on
all Open-Market Purchases. The automatic reinvestment of Dividends will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such Dividends. See Tax Matters. Participants
that request a sale of common stock through the Plan Administrator are subject to brokerage commissions.
Each participant may terminate the participants account under the Plan by so notifying the Plan Administrator via the Plan Administrators website at www.computershare.com/ investor, by filling out the
transaction request form located at the bottom of the participants Statement and sending it to the Plan Administrator or by calling the Plan Administrator. Such termination will be effective immediately if the participants 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 Funds whole book-entry shares of common stock and a check for the cash adjustment of any fractional share at the market value of the Funds 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 participants 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.
|
|
|
|
|
PGIM High Yield Bond Fund, Inc.
|
|
|
83
|
|
Other Information (unaudited)
(continued)
The Fund reserves the right to amend or terminate the Plan. There is no direct service charge to participants with regard to purchases in the Plan; however, the Fund reserves the right to amend the Plan to include
a service charge payable by the participants.
All correspondence or
questions concerning the Plan should be directed to the Plan Administrator, Computershare Trust Company, N.A., P.O. Box 505000, Louisville, KY 40233-5000, by calling (toll free) 800-451-6788 or through the Plan Administrators website
www.computerhsare.com/investor.
Supplemental Proxy Information
(unaudited)
An Annual Meeting of Stockholders was held on April 16, 2021. At such meeting the stockholders elected the following Class III Director:
Approval of Director
|
|
|
|
|
|
|
|
|
Class III
|
|
Affirmative Votes Cast
|
|
|
Shares Against/Withheld
|
|
Scott E. Benjamin
|
|
|
24,964,990.000
|
|
|
|
2,966,747.000
|
|
|
|
|
|
|
PGIM High Yield Bond Fund, Inc.
|
|
|
85
|
|
Management of the Fund
(unaudited)
Information about the Directors (or Board Members) and Officers of the Fund is set forth below. Directors who are not deemed to be interested
persons of the Fund, as defined in the Investment Company Act of 1940 (the 1940 Act), are referred to as Independent Directors. Directors who are deemed to be interested persons of the Fund are referred to
as Interested Directors. The Directors are responsible for the overall supervision of the operations of the Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Board in turn elects
the Officers, who are responsible for administering the day-to-day operations of the Fund.