Prudential Short Duration High Yield Fund, Inc.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number:    811-22632
Exact name of registrant as specified in charter:    Prudential Short Duration High Yield Fund, Inc.
Address of principal executive offices:    Gateway Center 3,
   100 Mulberry Street,
   Newark, New Jersey 07102
Name and address of agent for service:   

Deborah A. Docs

Gateway Center 3,

100 Mulberry Street,

Newark, New Jersey 07102

Registrant’s telephone number, including area code:    800-225-1852
Date of fiscal year end:    5/31/2013
Date of reporting period:    8/31/2012

 

 

 

Item 1. Schedule of Investments

Prudential Short Duration High Yield Fund, Inc.

Schedule of Investments

as of August 31, 2012 (Unaudited)

 

Description

   

Moody’s
Ratings**†

    Interest
Rate		    

Maturity Date

   

Principal
Amount (000)#

   

Value

LONG-TERM INVESTMENTS — 126.9%

BANK LOANS(a) — 3.6%

Technology

              

First Data Corp.

    B1      2.987 %    09/24/14    $              2,869    $          2,828,239

Flextronics International Ltd.

    Ba1      2.482     10/01/14    7,481    7,430,071

Freescale Semiconductor, Inc.

    B1      4.496     12/01/16    13,000    12,447,500
             

 

TOTAL BANK LOANS
(cost $22,413,481)

    22,705,810
             

 

CORPORATE BONDS — 123.3%

Aerospace & Defense — 3.8%

              

Alliant Techsystems, Inc.,
Gtd. Notes

    Ba3      6.750     04/01/16    5,000    5,112,500

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

    Ba2      6.300     05/01/14    1,725    1,824,187

Esterline Technologies Corp.,
Gtd. Notes(b)

    Ba2      6.625     03/01/17    3,550    3,665,375

L-3 Communications Corp.,
Gtd. Notes, Ser. B

    Ba1      6.375     10/15/15    5,276    5,361,735

Moog, Inc., Sr. Sub. Notes(b)

    Ba3      6.250     01/15/15    5,000    5,062,500

TransDigm, Inc.,
Gtd. Notes

    B3      7.750     12/15/18    3,000    3,341,250
             

 

              24,367,547
             

 

Automotive — 4.4%

American Axle & Manufacturing Holdings, Inc.,
Sr. Sec’d. Notes, 144A(b)

    Ba1      9.250     01/15/17    10,900    12,235,250

Chrysler Group LLC/CG Co.-Issuer, Inc.,
Sec’d. Notes(b)

    B2      8.000     06/15/19    7,500    7,912,500

Delphi Corp., Gtd. Notes

    Ba2      5.875     05/15/19    1,500    1,620,000

Lear Corp., Gtd. Notes

    Ba2      7.875     03/15/18    5,350    5,864,937
             

 

              27,632,687
             

 

Banking — 2.8%

Bank of America Corp.,
Sr. Unsec’d. Notes

    Baa2      6.500     08/01/16    9,250    10,548,598

Morgan Stanley,
Sr. Unsec’d. Notes, MTN

    Baa1      5.750     10/18/16    7,000    7,450,541
             

 

              17,999,139
             

 

Building Materials & Construction — 2.2%

Beazer Homes USA, Inc.,
Sr. Sec’d. Notes, 144A

    B3      6.625     04/15/18    725    741,313

D.R. Horton, Inc., Gtd. Notes

    Ba2      4.750     05/15/17    3,000    3,161,250

Lennar Corp., Gtd. Notes, 144A(b)

    B2      4.750     12/15/17    5,075    5,062,312

Standard Pacific Corp., Gtd. Notes(b)

    B3      10.750     09/15/16    4,000    4,830,000
             

 

              13,794,875
             

 

Cable — 9.0%

Cablevision Systems Corp.,
Sr. Unsec’d. Notes

    B1      7.750     04/15/18    750    811,875

Sr. Unsec’d. Notes

    B1      8.625     09/15/17    1,400    1,603,000

CCH II LLC/CCH II Capital Corp.,
Gtd. Notes(b)

    B2      13.500     11/30/16    5,000    5,475,000

 

Cequel Communications Holdings I LLC and Cequel Capital Corp.,
Sr. Unsec’d. Notes, 144A(b)

    B3      8.625       11/15/17    7,700    8,267,875

CSC Holdings LLC,
Sr. Unsec’d. Notes(b)

    Ba3      8.500      04/15/14    4,840    5,317,950

Sr. Unsec’d. Notes

    Ba3      8.500      06/15/15    600    627,750

Sr. Unsec’d. Notes

    Ba3      8.625      02/15/19    2,500    2,925,000

DISH DBS Corp.,
Gtd. Notes, 144A(b)

    Ba2      4.625      07/15/17    4,500    4,545,000

Gtd. Notes(b)

    Ba2      7.750      05/31/15    5,765    6,427,975

UPC Holding BV (Netherlands),
Sec’d. Notes, 144A

    B2      9.875      04/15/18    4,000    4,490,000

Videotron LTee (Canada),
Gtd. Notes(b)

    Ba1      9.125      04/15/18    4,989    5,438,010

Virgin Media Finance PLC (United Kingdom),
Gtd. Notes, Ser. 1(b)

    Ba2      9.500      08/15/16    10,128    11,318,040
              

 

               57,247,475
              

 

Capital Goods — 8.0%

Altra Holdings, Inc.,
Sec’d. Notes

    Ba3      8.125      12/01/16    2,500    2,681,250

Avis Budget Car Rental LLC/Avis Budget Finance, Inc.,
Gtd. Notes(b)

    B2      9.625      03/15/18    5,115    5,677,650

CNH America LLC,
Gtd. Notes(b)

    Ba2      7.250      01/15/16    7,235    8,139,375

Griffon Corp.,
Gtd. Notes

    B1      7.125      04/01/18    3,000    3,146,250

Interline Brands, Inc., Gtd. Notes

    B2      7.000      11/15/18    2,275    2,420,031

SPX Corp., Gtd. Notes(b)

    Ba2      7.625      12/15/14    5,867    6,497,703

Terex Corp., Sr. Sub. Notes

    Caa1      8.000      11/15/17    2,235    2,341,163

Trimas Corp., Sec’d. Notes

    B1      9.750      12/15/17    5,637    6,285,255

United Rentals Merger Sub Corp.,
Gtd. Notes(b)

    B3      9.250      12/15/19    5,000    5,625,000

Gtd. Notes(b)

    B3      10.875      06/15/16    3,570    3,993,937

WireCo WorldGroup, Inc.,
Gtd. Notes(b)

    B3      9.500      05/15/17    4,000    4,150,000
              

 

               50,957,614
              

 

Chemicals — 3.6%

Huntsman International LLC,
Gtd. Notes(b)

    B1      5.500      06/30/16    10,000    10,012,500

Koppers, Inc., Gtd. Notes(b)

    B1      7.875      12/01/19    4,074    4,450,845

NOVA Chemicals Corp. (Canada),
Sr. Unsec’d. Notes(b)

    Ba2      8.375      11/01/16    7,673    8,517,030
              

 

               22,980,375
              

 

Consumer — 0.6%

               

Service Corporation International,
Sr. Unsec’d. Notes

    Ba3      7.000      05/15/19    735    804,825

Sr. Unsec’d. Notes

    Ba3      7.625      10/01/18    2,668    3,138,235
              

 

               3,943,060
              

 

Electric — 5.6%

AES Corp. (The),
Sr. Unsec’d. Notes(b)

    Ba3      8.000      10/15/17    4,000    4,670,000

Sr. Unsec’d. Notes(b)

    Ba3      9.750      04/15/16    6,120    7,313,400

Calpine Construction Finance Co. LP/CCFC Finance Corp.,
Sr. Sec’d. Notes, 144A

    Ba3      8.000      06/01/16    4,710    5,092,688

GenOn REMA LLC,
Pass-thru Certs., Ser. B(c)

    B1      9.237      07/02/17    1,050    1,128,980

Pass-thru Certs., Ser. C

    B1      9.681      07/02/26    900    967,500

Mirant Mid-Atlantic Pass-Through Trust B, Pass-thru Certs., Ser. B

    Ba1      9.125      06/30/17    1,030    1,106,909

 

NRG Energy, Inc.,
Gtd. Notes(b)

    B1      7.375      01/15/17    8,000    8,320,000

Public Service Co. of New Mexico,
Sr. Unsec’d. Notes

    Baa3      7.950       05/15/18    5,500    6,678,012
              

 

               35,277,489
              

 

Energy — Other — 5.9%

Cie Generale de Geophysique - Veritas (France),
Gtd. Notes(b)

    Ba3      9.500      05/15/16    8,025    8,747,250

Denbury Resources, Inc.,
Gtd. Notes(b)

    B1      9.750      03/01/16    7,500    8,137,500

Harvest Operations Corp. (Canada),
Gtd. Notes

    Ba2      6.875      10/01/17    2,850    3,049,500

Offshore Group Investments Ltd. (Cayman Islands),
Sr. Sec’d. Notes, 144A

    B3      11.500      08/01/15    5,000    5,525,000

Parker Drilling Co.,
Gtd. Notes(b)

    B1      9.125      04/01/18    5,000    5,362,500

Plains Exploration & Production Co.,
Gtd. Notes

    B1      8.625      10/15/19    2,000    2,265,000

Range Resources Corp.,
Gtd. Notes

    Ba3      7.250      05/01/18    2,000    2,120,000

WPX Energy, Inc.,
Sr. Unsec’d. Notes

    Ba1      5.250      01/15/17    2,000    2,105,000
              

 

               37,311,750
              

 

Foods — 8.3%

ARAMARK Corp., Gtd. Notes(b)

    B3      8.500      02/01/15    5,000    5,125,050

ARAMARK Holdings Corp.,
Sr. Unsec’d. Notes, PIK, 144A

    B3      8.625      05/01/16    2,000    2,047,520

Bumble Bee Acquisition Corp.,
Sr. Sec’d. Notes, 144A

    B2      9.000      12/15/17    2,780    2,842,550

Constellation Brands, Inc.,
Gtd. Notes

    Ba1      7.250      09/01/16    3,052    3,479,280

Cott Beverages, Inc.,
Gtd. Notes

    B3      8.375      11/15/17    3,499    3,827,031

Darling International, Inc.,
Gtd. Notes(b)

    Ba3      8.500      12/15/18    5,175    5,860,688

Dole Food Co., Inc.,
Sec’d. Notes, 144A(b)

    B2      8.000      10/01/16    5,000    5,225,000

Fiesta Restaurant Group, Inc.,
Sec’d. Notes

    B2      8.875      08/15/16    200    213,000

Ingles Markets, Inc.,
Sr. Unsec’d. Notes

    B1      8.875      05/15/17    3,000    3,240,000

JBS USA LLC/JBS USA Finance, Inc.,
Gtd. Notes
(original cost $2,315,000;
purchased 05/02/12)(c)(d)

    B1      11.625      05/01/14    2,000    2,255,000

Michael Foods Group, Inc.,
Gtd. Notes

    Caa1      9.750      07/15/18    2,505    2,768,025

Stater Bros. Holdings, Inc.,
Gtd. Notes

    B2      7.375      11/15/18    1,990    2,139,250

SUPERVALU, Inc.,
Sr. Unsec’d. Notes

    Caa1      7.500      11/15/14    4,419    4,242,240

Sr. Unsec’d. Notes

    Caa1      8.000      05/01/16    5,000    4,475,000

TreeHouse Foods, Inc.,
Gtd. Notes

    Ba2      7.750      03/01/18    4,600    5,014,000
              

 

               52,753,634
              

 

Gaming — 8.5%

Boyd Gaming Corp.,
Gtd. Notes(b)

    B3      9.125      12/01/18    5,000    5,181,250

Caesars Entertainment Operating Co., Inc.,
Sr. Sec’d. Notes(b)

    B2      11.250      06/01/17    10,000    10,775,000

MGM Resorts International,
Gtd. Notes

    B3      7.500      06/01/16    2,000    2,087,500

Gtd. Notes

    B3      10.000      11/01/16    3,000    3,341,250

Sr. Sec’d. Notes(b)

    Ba2      11.125      11/15/17    11,000    12,237,500

Peninsula Gaming LLC/Peninsula Gaming Corp.,
Sec’d. Notes

    Ba3      8.375      08/15/15    3,000    3,150,000

Pinnacle Entertainment, Inc.,
Gtd. Notes

    B1      8.625      08/01/17    3,125    3,414,063

 

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

    B2      8.625       04/15/16    5,000    5,325,000

Yonkers Racing Corp., Sec’d. Notes, 144A
(original cost $8,393,939;
purchased 05/03/12-05/09/12)(b)(c)(d)

    B1      11.375      07/15/16    7,681    8,141,860
              

 

               53,653,423
              

 

Healthcare & Pharmaceutical — 9.4%

               

Accellent, Inc., Sr. Sec’d. Notes

    B1      8.375      02/01/17    300    309,375

Biomet, Inc., Gtd. Notes(b)

    B3      10.000      10/15/17    7,421    7,852,346

Capella Healthcare, Inc., Gtd. Notes
(original cost $7,457,250;
purchased 04/27/12)(b)(c)(d)

    B3      9.250      07/01/17    7,320    7,768,350

HCA, Inc.,
Sr. Sec’d. Notes

    Ba3      8.500      04/15/19    4,000    4,510,000

Sr. Unsec’d. Notes(b)

    B3      6.375      01/15/15    7,500    7,996,875

Sr. Unsec’d. Notes, MTN

    B3      9.000      12/15/14    3,250    3,591,250

Mylan, Inc., Gtd. Notes, 144A

    Ba2      7.625      07/15/17    10,000    11,100,000

Tenet Healthcare Corp.,
Sr. Sec’d. Notes(b)

    B1      10.000      05/01/18    5,000    5,750,000

Valeant Pharmaceuticals International,
Gtd. Notes, 144A

    B1      6.500      07/15/16    10,000    10,550,000
              

 

               59,428,196
              

 

Lodging — 5.3%

               

FelCor Lodging LP, Sr. Sec’d. Notes(b)

    B2      10.000      10/01/14    14,296    16,404,660

Host Hotels & Resorts LP, Gtd. Notes(b)

    Ba1      9.000      05/15/17    15,925    17,358,250
              

 

               33,762,910
              

 

Media & Entertainment — 14.4%

               

AMC Entertainment, Inc., Gtd. Notes

    Caa1      9.750      12/01/20    2,275    2,513,875

Belo Corp., Gtd. Notes(b)

    Ba1      8.000      11/15/16    8,500    9,392,500

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

    B2      9.125      08/01/18    2,240    2,542,400

Clear Channel Worldwide Holdings, Inc., Gtd. Notes,
Ser. B(b)

    B1      9.250      12/15/17    12,500    13,578,125

Gannett Co., Inc., Gtd. Notes(b)

    Ba1      8.750      11/15/14    6,254    7,082,655

Inmarsat Finance PLC (United Kingdom),
Gtd. Notes, 144A(b)

    Ba2      7.375      12/01/17    8,300    9,026,250

Lamar Media Corp., Gtd. Notes

    Ba3      9.750      04/01/14    2,146    2,408,885

McClatchy Co. (The),
Sr. Sec’d. Notes

    B1      11.500      02/15/17    2,500    2,650,000

NAI Entertainment Holdings LLC,
Sr. Sec’d. Notes, 144A
(original cost $1,962,130;
purchased 06/05/12)(c)(d)

    B1      8.250      12/15/17    1,796    2,002,540

Newport Television LLC / NTV Finance Corp.,
Sr. Unsec’d. Notes, PIK, 144A
(original cost $7,930,883;
purchased 08/03/12-08/06/12)(c)(d)

    Caa3      13.000      03/15/17    7,318    7,921,735

Nielsen Finance LLC/Nielsen Finance Co.,
Gtd. Notes(b)

    B2      11.625      02/01/14    9,792    11,113,920

R.R. Donnelley & Sons Co.,
Sr. Unsec’d. Notes

    Ba2      6.125      01/15/17    500    497,500

Sinclair Television Group, Inc.,
Sec’d. Notes, 144A

    B1      9.250      11/01/17    4,000    4,450,000

SSI Investments II Ltd./SSI Co.-Issuer LLC,
Gtd. Notes

    Caa1      11.125      06/01/18    750    843,750

Telesat Canada/Telesat LLC (Canada),
Sr. Unsec’d. Notes, 144A(b)

    B3      6.000      05/15/17    5,750    5,980,000

WMG Acquisition Corp.,
Sr. Sec’d. Notes

    Ba2      9.500      06/15/16    3,251    3,559,845

Sr. Sec’d. Notes

    Ba2      9.500      06/15/16    5,326    5,818,655
              

 

               91,382,635
              

 

 

Metals — 6.7%

               

Arcelormittal (Luxembourg),
Sr. Unsec’d. Notes

    Baa3      5.375       06/01/13    3,225    3,297,372

Sr. Unsec’d. Notes

    Baa3      9.000      02/15/15    4,500    4,955,121

Arcelormittal USA LLC,
Gtd. Notes

    Baa3      6.500      04/15/14    2,000    2,084,078

Berau Capital Resources Pte Ltd. (Singapore),
Sr. Sec’d. Notes, 144A

    B1      12.500      07/08/15    5,000    5,437,500

CONSOL Energy, Inc., Gtd. Notes

    B1      8.000      04/01/17    1,200    1,293,000

FMG Resources (August 2006) Pty Ltd. (Australia),
Gtd. Notes, 144A

    Ba3      6.375      02/01/16    2,000    1,920,000

Gtd. Notes, 144A

    Ba3      7.000      11/01/15    6,000    5,895,000

Metals USA, Inc., Sr. Sec’d. Notes(b)

    B2      11.125      12/01/15    8,000    8,320,000

Optima Specialty Steel, Inc.,
Sr. Sec’d. Notes, 144A(b)

    B2      12.500      12/15/16    3,500    3,683,750

Peabody Energy Corp.,
Gtd. Notes, 144A

    Ba1      6.000      11/15/18    3,500    3,578,750

Steel Dynamics, Inc.,
Gtd. Notes, 144A

    Ba2      6.125      08/15/19    1,725    1,789,688
              

 

               42,254,259
              

 

Non-Captive Finance — 3.4%

               

Ally Financial, Inc.,
Gtd. Notes

    B1      4.625      06/26/15    1,625    1,667,676

Gtd. Notes

    B1      8.300      02/12/15    3,000    3,330,000

CIT Group, Inc., Gtd. Notes, 144A(b)

    B1      7.000      05/02/16    8,021    8,040,617

Sr. Unsec’d. Notes

    B1      4.250      08/15/17    8,750    8,873,541
              

 

               21,911,834
              

 

Packaging — 5.2%

               

Ardagh Packaging Finance PLC (Ireland),
Sr. Sec’d. Notes, 144A
(original cost $6,847,200;
purchased 05/07/12-05/18/12)(c)(d)

    Ba3      7.375      10/15/17    6,330    6,788,925

BWAY Holding Co., Gtd. Notes

    B3      10.000      06/15/18    1,000    1,110,000

Owens-Brockway Glass Container, Inc.,
Gtd. Notes(b)

    Ba3      7.375      05/15/16    5,965    6,800,100

Plastipak Holdings, Inc., Gtd. Notes, 144A
(original cost $3,092,500;
purchased 05/23/12-06/04/12)(c)(d)

    B3      8.500      12/15/15    3,000    3,090,000

Reynolds Group Issuer, Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer LU,
Gtd. Notes

    Caa1      9.875      08/15/19    5,000    5,287,500

Sr. Sec’d. Notes(b)

    Ba3      7.750      10/15/16    5,000    5,225,000

Sealed Air Corp., Gtd. Notes, 144A

    B1      8.125      09/15/19    4,000    4,450,000
              

 

               32,751,525
              

 

Paper — 0.5%

               

Longview Fibre Paper & Packaging, Inc.,
Sr. Sec’d. Notes, 144A
(original cost $2,907,000;
purchased 05/01/12-06/04/12)(c)(d)

    B2      8.000      06/01/16    2,850    2,949,750
              

 

Retailers — 1.6%

               

Dollar General Corp., Gtd. Notes

    Ba2      4.125      07/15/17    675    702,000

Rite Aid Corp., Sr. Sec’d. Notes(b)

    B2      9.750      06/12/16    5,000    5,487,500

Toys “R” Us Delaware, Inc.,
Sr. Sec’d. Notes, 144A

    B1      7.375      09/01/16    4,000    4,030,000
              

 

               10,219,500
              

 

Technology — 9.9%

               

Anixter, Inc., Gtd. Notes

    Ba3      5.950      03/01/15    1,000    1,042,500

Avaya, Inc., Gtd. Notes

    Caa2      9.750      11/01/15    4,000    3,470,000

CDW LLC/CDW Finance Corp.,
Gtd. Notes

    Caa1      12.535      10/12/17    8,410    9,019,725

DuPont Fabros Technology LP,
Gtd. Notes

    Ba1      8.500       12/15/17    1,825    2,016,625

 

Interactive Data Corp., Gtd. Notes

    Caa1      10.250      08/01/18    4,500    5,073,750

Jabil Circuit, Inc.,
Sr. Unsec’d. Notes

    Ba1      7.750      07/15/16    2,000    2,310,000

NXP BV/NXP Funding LLC (Netherlands),
Sr. Sec’d. Notes, 144A

    B3      9.750      08/01/18    2,500    2,856,250

Sr. Sec’d. Notes, 144A(b)

    BB(e)      10.000      07/15/13    6,000    6,390,000

Seagate HDD Cayman (Cayman Islands),
Gtd. Notes

    Ba1      7.750      12/15/18    1,500    1,646,250

Seagate Technology HDD Holdings (Cayman Islands), Gtd. Notes

    Ba1      6.800      10/01/16    170    187,425

STATS ChipPAC Ltd. (Singapore),
Gtd. Notes, 144A

    Ba1      7.500      08/12/15    6,625    7,105,312

SunGard Data Systems, Inc.,
Gtd. Notes

    Caa1      10.250      08/15/15    4,000    4,095,000

TransUnion LLC/TransUnion Financing Corp., Gtd. Notes(b)

    B3      11.375      06/15/18    9,500    11,210,000

Unisys Corp.,
Sr. Sec’d. Notes, 144A

    Ba1      12.750      10/15/14    1,308    1,412,640

Sr. Unsec’d. Notes

    B1      6.250      08/15/17    5,000    5,162,500
              

 

               62,997,977
              

 

Telecommunications — 4.2%

Brightstar Corp., Gtd. Notes, 144A
(original cost $4,220,000;
purchased 04/27/12)(b)(c)(d)

    B1      9.500      12/01/16    4,000    4,200,000

Cricket Communications, Inc.,
Sr. Sec’d. Notes(b)

    Ba2      7.750      05/15/16    8,643    9,118,365

Crown Castle International Corp.,
Sr. Unsec’d. Notes(b)

    B1      9.000      01/15/15    4,437    4,797,506

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

    Ba2      8.250      04/15/17    2,000    2,230,000

Nextel Communications, Inc.,
Gtd. Notes, Ser. C

    B+(e)      5.950      03/15/14    2,650    2,656,625

Sprint Nextel Corp., Sr. Unsec’d. Notes

    B3      8.375      08/15/17    2,500    2,750,000

Windstream Corp., Gtd. Notes

    Ba3      7.875      11/01/17    1,000    1,087,500
              

 

               26,839,996
              

 

TOTAL CORPORATE BONDS
(cost $779,720,676)

    782,417,650
              

 

TOTAL LONG-TERM INVESTMENTS
(cost $802,134,157)

    805,123,460
              

 

SHORT-TERM INVESTMENT —2.8%

      
    

Shares

     

AFFILIATED MONEY MARKET MUTUAL FUND

      

Prudential Investment Portfolios 2 — Prudential Core Taxable Money Market Fund(f)
(cost $18,093,009)

    18,093,009    18,093,009
              

 

TOTAL INVESTMENTS — 129.7%
(cost $820,227,166)(g)

       823,216,469

Liabilities in excess of other assets(h) — (29.7)%

       (188,583,332)
              

 

NET ASSETS — 100.0%

                $634,633,137
              

 

 

The following abbreviations are used in portfolio descriptions:

 

144A    Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. Unless otherwise noted, 144A securities are deemed to be liquid.
MTN    Medium Term Note
PIK    Payment-in-Kind

 

† The ratings reflected are as of August 31, 2012. Ratings of certain bonds may have changed subsequent to that date.
** The Fund’s current registration statement contains a description of Moody’s and Standard & Poor’s ratings.
# Principal amount shown in U.S. dollars unless otherwise stated.
(a) Variable rate instrument. The interest rate shown reflects the rate in effect at August 31, 2012.
(b) Represents security, or a portion thereof, segregated as collateral for loan outstanding. There was a loan balance of $200,000,000 outstanding at August 31, 2012, which was used to provide the Fund with portfolio leverage and meet its general cashflow requirements.
(c) Indicates a security that has been deemed illiquid.

 

(d) Indicates a restricted security; the aggregate original cost of such securities is $45,125,902. The aggregate value of $45,118,160 is approximately 7.1% of net assets.
(e) Standard & Poor’s Rating.
(f) Prudential Investments LLC, the manager of the Fund, also serves as manager of the Prudential Investment Portfolios 2 — Prudential Core Taxable Money Market Fund.
(g) The United States federal income tax basis of the Fund’s investments and the net unrealized depreciation as of August 31, 2012 were as follows:

 

Tax Basis     Appreciation     Depreciation     Net Unrealized
Depreciation		  
$ 823,913,748      $ 5,407,332      $ (6,104,611 )    $ (697,279 ) 

The difference between book basis and tax basis is primarily attributable to deferred losses on wash sales and differences in the treatment of premium amortization for book and tax purposes as of the most recent fiscal year end.

 

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

Credit default swap agreement outstanding at August 31, 2012:

 

Reference Entity/Obligation

   Termination
Date		     Fixed
Rate		     Notional
Amount
(000)#(3)		     Fair
Value(2)		     Upfront
Premiums
Paid/
(Received)		     Unrealized
Appreciation(4)		    

Counterparty

Over-the-counter credit default swaps on credit indices—Sell Protection(1):

  

  

CDX.NA.HY.15.V4

     12/20/15        5.000%      $ 24,000      $ 993,023      $ 355,333      $ 637,690     

Morgan Stanley Capital Services

       

 

 

    

 

 

    

 

 

    

 

The Fund entered into credit default swaps as the protection seller on credit indices to take an active short position with respect to the likelihood of a particular issuer’s default or the referenced entity’s credit soundness.

 

(1) If the Fund is a seller of protection, it receives the fixed rate. When a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
(2) The fair value of credit default swap agreements on asset-backed securities and credit indices serves as an indicator of the current status of the payment/performance risk and represents the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement be closed/sold as of the reporting date. Increasing fair value in absolute terms, represents a deterioration of the referenced entity’s credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement.
(3) Notional amount represents the maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.
(4) The amount represents fair value of derivative instruments subject to credit contracts risk exposure as of August 31, 2012.
# Notional amount is shown in U.S. dollars unless otherwise stated.

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

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

Level 2 - other significant observable inputs including, but not limited to, quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates, and amortized cost.

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

The following is a summary of the inputs used as of August 31, 2012 in valuing such portfolio securities:

 

     Level 1      Level 2      Level 3  

Investments in Securities

         

Bank Loans

    $ —         $ 22,705,810       $ —     

Corporate Bonds

      —           781,310,741         1,106,909   

Affiliated Money Market Mutual Fund

      18,093,009         —           —     

Other Financial Instruments*

         

Credit Default Swap Agreement

      —           637,690         —     
  

 

 

     

 

 

     

 

 

  

Total

    $ 18,093,009       $ 804,654,241       $ 1,106,909   
  

 

 

     

 

 

     

 

 

  

 

* Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as futures, forwards and swap contracts, which are recorded at the unrealized appreciation/depreciation on the instrument.

Notes to Schedule of Investments (Unaudited)

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

Various inputs are used in determining the value of the Fund’s investments, which are summarized in the three broad level hierarchies based on any observable inputs used as described in the table following the Schedule of Investments. The valuation methodologies and significant inputs used in determining the fair value of securities and other assets classified as Level 1, Level 2 and Level 3 of the hierarchy are as follows:

Common stock, exchange-traded funds and financial derivative instruments (including futures contracts and certain options contracts on securities), 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. 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 of the fair value hierarchy.

In the event there is no sale or official closing price on such day, these securities are valued at the mean between the last reported bid and asked prices, or at the last bid price in absence of an asked price. These securities are classified as Level 2 of the fair value hierarchy as these inputs are considered as significant other observable inputs to the valuation.

For common stocks traded on foreign securities exchanges, certain valuation adjustments will be applied when events occur after the close of the security’s foreign market and before the Fund’s normal pricing time. These securities are valued using pricing vendor services that provide adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such adjustment factors are classified as Level 2 of the fair value hierarchy.

Investments in open-end, non-exchange-traded mutual funds are valued at their net asset value as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 as these securities have the ability to be purchased or sold at their net asset value on the date of valuation.

Fixed income securities traded in the over-the-counter market, such as corporate bonds, municipal bonds, U.S. Government agencies, U.S. Treasury obligations, and sovereign issues are usually valued at prices provided by approved independent pricing vendors. The pricing vendors provide these prices usually after evaluating observable inputs including yield curves, prepayment speeds, credit spreads, default rates, cash flows as well as broker/dealer quotations and reported trades. Securities valued using such vendor prices are classified as Level 2 of the fair value hierarchy.

Asset-backed and mortgage-related securities are usually valued by approved independent pricing vendors. The pricing vendors provide the prices using their internal pricing model with input from deal term, tranche level attributes, yield curve, prepayment speeds, and broker/dealer quotes. Securities valued using such vendor prices are classified as Level 2 of the fair value hierarchy.

Short-term debt securities of sufficient credit quality which mature in 60 days or less are valued at amortized cost which approximates fair value. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between the principal amount due at maturity and cost. These securities are categorized as Level 2 of the fair value hierarchy.

 

Over-the-counter financial derivative instruments, such as option contracts, foreign currency contracts and swap agreements, are usually valued using pricing vendor services, which derive the valuation based on underlying asset prices, indices, spreads, and other inputs. These instruments are categorized as Level 2 of the fair value hierarchy.

Securities and other assets that cannot be priced using the methods described above are valued with pricing methodologies approved by the Valuation Committee. Where there are unobservable inputs used when determining such valuation, the securities will be classified as Level 3 of the fair value hierarchy.

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

The Fund may hold up to 15% of its net assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, certain securities with legal or contractual restrictions on resale (restricted securities, sometimes referred to as Private Placements) and securities that are not readily marketable. Restricted securities are valued pursuant to the valuation procedures noted above.

The Fund invests in the Prudential Core Taxable Money Market Fund, a portfolio of the Prudential Investment Portfolios 2, registered under the Investment Company Act of 1940, as amended, and managed by PI.

Other information regarding the Fund is available in the Fund’s most recent Report to Shareholders. This information is available on the Securities and Exchange Commission’s website. (www.sec.gov).

 

Item 2. Controls and Procedures

 

  (a) It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure.

 

  (b) There have been no significant changes in the registrant’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Item 3. Exhibits

Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 – Attached hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant) Prudential Short Duration High Yield Fund, Inc.

 

By (Signature and Title)*   

/s/ Deborah A. Docs

   
   Deborah A. Docs   
   Secretary of the Fund   

Date October 22, 2012

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By (Signature and Title)*   

/s/ Stuart S. Parker

   
   Stuart S. Parker   
   President and Principal Executive Officer   

Date October 22, 2012

 

By (Signature and Title)*   

/s/ Grace C. Torres

   
   Grace C. Torres   
   Treasurer and Principal Financial Officer   

Date October 22, 2012

 

* Print the name and title of each signing officer under his or her signature.