Pacholder High Yield Fund (PHF) N-CSR Certified annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-05639

Pacholder High Yield Fund, Inc.

(Exact name of registrant as specified in charter)

245 Park Avenue

New York, NY 10167

(Address of principal executive offices) (Zip code)

Frank J. Nasta

270 Park Avenue

New York, NY 10017

(Name and Address of Agent for Service)

Registrant’s telephone number, including area code: (513) 985-3200

Date of fiscal year end: December 31

Date of reporting period: January 1, 2010 through December 31, 2010

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507.

ITEM 1. REPORTS TO STOCKHOLDERS.

The following is a copy of the report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).

PACHOLDER HIGH YIELD FUND, INC.

Directors and Officers

Fergus Reid, III Chairman and Director   William J. Armstrong Director   John F. Finn Director   Dr. Matthew Goldstein Director   Robert J. Higgins Director   Frankie D. Hughes Director   Peter C. Marshall Director   Marilyn McCoy Director   William G. Morton, Jr. Director Robert A. Oden, Jr. Director   Frederick W. Ruebeck Director   James J. Schonbachler Director   Leonard M. Spalding, Jr. Director   Patricia A. Maleski President and Principal Executive Officer   Joy C. Dowd Treasurer and Principal Financial Officer   Stephen M. Ungerman Chief Compliance Officer   Frank J. Nasta Secretary

Investment Objective

A closed-end fund seeking a high level of total return

through current income and capital appreciation by

investing primarily in high-yield, fixed income securities

of domestic companies.

Investment Advisor

J.P. Morgan Investment Management Inc.

Administrator

JPMorgan Funds Management, Inc.

Custodian

JPMorgan Chase Bank, N.A.

Transfer Agent

Computershare Trust Company, N.A.

Legal Counsel

Dechert LLP

Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP

Independent Directors’ Counsel

Kramer Levin Naftalis & Frankel LLP

Executive Offices

Pacholder High Yield Fund, Inc.

245 Park Avenue

New York, NY 10167

Shareholder Services

(877) 217-9502

Please visit our web site, www.pacholder.com, for information on the Fund’s NAV, share price, news releases, and SEC filings. We created this site to provide stockholders quick and easy access to the timeliest information available regarding the Fund.

This report is for the information of stockholders of Pacholder High Yield Fund, Inc. It is not a prospectus, offering circular or other representation intended for use in connection with the purchase or sale of shares of the Fund or any securities mentioned in this report.

PACHOLDER HIGH YIELD FUND, INC.

ANNUAL REPORT

DECEMBER 31, 2010

PACHOLDER HIGH YIELD FUND, INC.

(Unaudited)

Dear Stockholders:

2010 Annual Review

In December, volatility stemming from of the debt crisis in Europe, tighter policy initiatives from China and the worsening U.S. deficit picture lightened. For the fourth quarter 2010, returns were positive for risk assets, sparked by an upgraded view on the overall economy as strong retail sales figures and the extension of tax cuts for the next two years boosted the expectation for discretionary income and consumer spending in 2011. While the improved growth outlook and the extension of the tax cuts led to less volatility in high yield and equity assets, U.S. Treasury yields rose on expectations for increased Treasury supply to meet monetary policy. However, even with a rise in yields, strong demand for increased yield supported the high yield market as the new issue market showed strength and flows into high yield and leveraged loan mutual funds remained strongly positive. The market continued to weigh the anemic economic data; the improved GDP outlook, increased clarity on monetary and fiscal policy, strong demand, and improving credit fundamentals were all tailwinds for high yield in 2010.

For the quarter and year ended December 31, 2010, the Pacholder High Yield Fund, Inc. (the “Fund”) returned 6.67% and 24.10% respectively based on Net Asset Value (“NAV”) compared to the 3.13% and 14.39% returns for the Credit Suisse High Yield Index, Developed Countries Only (the “Index”) and the 4.27% and 18.72% average total returns of the Morningstar Closed-End High Yield Category.

The Fund’s relative outperformance for the year ended December 31, 2010 was due in large part to security selection in the aerospace, chemicals, food/drug/tobacco and information technology segments. Security selection in the financials, gaming/leisure, housing and manufacturing segments detracted from the Fund’s overall performance. The Fund’s relative outperformance in the fourth quarter and year-to-date was enhanced due to its leverage obtained through its Auction Rate Preferred Shares (“ARPS”).

According to Moody’s Investor Services, Inc. (Moody’s), the global speculative-grade issuer-weighted default rate declined to 3.1% in December 2010 from the December 2009 rate of 12.5%. Moody’s predicted, under its baseline scenario, that the global speculative-grade default rate will continue to fall to 2.1% by the 2011 year-end.

During the quarter, the Fund was well diversified, with investments in 513 securities in 52 different industries. As of December 31, the Fund’s largest industry concentration was in media, which accounted for 9.06% of its market value. For the year, the average price of the Index rose 7.59 points from $93.35 to $100.94, the average yield decreased 1.27% from 8.72% to 7.45% and the spread over the comparable U.S. Treasury narrowed 0.62% from 6.34% to 5.72%.

Fund Strategy

Our investment strategy is based upon a credit bar bell process that is intended to take specifically targeted credit risk when our analysis indicates a favorable risk reward opportunity, while maintaining a core of relatively stable credits. Generally, our credit barbell approach is implemented by establishing a core group of holdings of stable, liquid credits with improving fundamentals that represent the overall high yield market with total return ideas incorporated to take advantage of inefficiencies in the market.

Auction Rate Preferred Shares and Dividends

Since February 2008, most auctions for preferred shares of closed-end funds and auction rate securities of other issuers failed. The weekly auctions for the Fund’s ARPS have failed since February 13, 2008. Since that time, a number of broker-dealers announced that they will offer to repurchase auction rate securities from certain of their clients. Any action taken by the Fund to provide liquidity to the ARPS must be in the best interest of the Fund as a whole.

From January 2009 to February 2010, the Fund paid a monthly dividend of $0.055 per common share. Beginning with the March 2010 dividend, the Board of Directors authorized the Fund to increase the amount of monthly dividends from $0.055 to $0.060 per common share. In December 2010, the Fund also paid a special dividend of $0.205 per common share. The Fund anticipates paying a monthly dividend of $0.060, subject to market conditions and the requirement that the Fund maintain an asset coverage of at least 200% of the ARPS after payment of dividends

As always, we appreciate your interest in the Fund and look forward to your continued support.

Sincerely,

George C.W. Gatch

CEO-Investment Management Americas

J.P. Morgan Asset Management

PACHOLDER HIGH YIELD FUND, INC.

(Unaudited)

The performance quoted is past performance and is not a guarantee of future results. Closed-end funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown.

J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated and J.P. Morgan Alternative Asset Management, Inc.

Securities rated below investment grade are called “high-yield bonds,” “non-investment grade bonds,” “below investment-grade bonds,” or “junk bonds.” They generally are rated in the fifth or lower rating categories of Standard & Poor’s and Moody’s Investors Service. Although these securities tend to provide higher yields than higher rated securities, there is a greater risk that the Fund’s share value will decline. Because this Fund primarily invests in bonds, it is subject to interest rate risks. Bond prices generally fall when interest rates rise.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting and legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

Availability of Portfolio Holdings and Other Information

No sooner than 10 days after the end of each month, the Fund’s uncertified complete schedule of its portfolio holdings will be available on our website (www.pacholder.com) In addition, the Fund files its certified, complete schedule of its portfolio holdings with the U.S. Securities and

Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available, without charge, on the SEC’s website at www.sec.gov. The Fund’s Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be

obtained by calling 1-800-SEC-0330.

No sooner than 10 calendar days after the end of each month, the Fund’s top ten holdings as of the last day of each month as well as certain other fund facts including estimated undistributed net income and statistical information will also be available on the Fund’s website.

PACHOLDER HIGH YIELD FUND, INC.

(Unaudited)

Total Return *	Net Asset Value (NAV)			Market Price
1 Year		24.10	%**		27.90	%
5 Year		11.21	%		11.80	%
10 Year		11.29	%		10.39	%
Price per share at December 31, 2010	$	8.66		$	8.45

* Total returns assume the reinvestment of all dividends and capital gains, if any. Total returns shown are average annual returns unless otherwise noted.

** The return shown is based on net asset value and may differ from the return shown in the financial highlights, which reflects adjustments made to the net asset value in accordance with accounting principles generally accepted in the United States of America.

PACHOLDER HIGH YIELD FUND, INC.

Schedule of Portfolio Investments

As of December 31, 2010

Description	Par (000)			Value		Percent of Net Assets*
CORPORATE BONDS — 105.8%
CONSUMER DISCRETIONARY — 33.0%
AUTO COMPONENTS — 0.5%
DPH Holdings Corp., 7.125%, 05/01/291,4	$	626		$	25,040		0.0	%12
UCI Holdco, Inc., Sr Nt, PIK, 9.250%, 12/15/13		548			546,507		0.5
					571,547		0.5
AUTOMOBILES — 2.5%
Ford Holdings LLC,
9.300%, 03/01/30		262			305,230		0.3
9.375%, 03/01/2010		150			171,001		0.1
Ford Motor Co.,
7.750%, 06/15/43		750			750,000		0.7
8.900%, 01/15/32		125			143,125		0.1
Ford Motor Co., Nt, 9.980%, 02/15/47		125			148,750		0.2
Motors Liquidation Co.,
0.000%, 03/15/361,4		55	Units		9,625		0.0	12
5.250%, 03/06/32		25	Units		206,265		0.2
6.250%, 07/15/33		15	Units		125,102		0.1
7.250%, 04/15/41		—	Units11		1,723		0.0	12
7.250%, 07/15/41		—	Units11		737		0.0	12
7.250%, 02/15/52		7	Units		58,483		0.0	12
7.375%, 05/15/48		10	Units		77,345		0.1
7.375%, 10/01/51		—	Units11		1,955		0.0	12
Motors Liquidation Co., Debentures,
6.750%, 05/01/281,4		50			17,000		0.0	12
8.100%, 06/15/241,4		1,725			582,188		0.5
8.375%, 07/15/331,4		425			151,937		0.2
					2,750,466		2.5
BROADCASTING & CABLE TV — 3.4%
Adelphia Communications Corp., Pfd, 6.000%, 02/15/061,4		125			—		0.0
Adelphia Communications Corp., Sr Nt,
8.125%, 07/15/031,4		750			11,250		0.0	12
9.375%, 11/15/091,4		560			8,400		0.0	12
Cablevision Systems Corp., 8.000%, 04/15/20		95			101,650		0.1
Bresnan Broadband Holdings LLC, Private Placement, Co Guar, 8.000%, 12/15/182		125			128,750		0.1

Description	Par (000)		Value		Percent of Net Assets*
BROADCASTING & CABLE TV (continued)
CCO Holdings LLC/CCO Holdings Capital Corp., Co Guar,
7.250%, 10/30/17	$	240	$	243,600		0.2	%
7.875%, 04/30/18		90		93,150		0.1
8.125%, 04/30/20		200		210,500		0.2
Cequel Communications Holdings I LLC and Cequel Capital Corp., Private Placement, Sr Nt, 8.625%, 11/15/172		392		409,640		0.4
Charter Communications Operating LLC/Charter Communications Operating Capital, Private Placement, Nt, 10.875%, 09/15/142		150		167,625		0.2
Citadel Broadcasting Corp., Private Placement, Co Guar, 7.750%, 12/15/182		50		51,750		0.1
Mediacom LLC/Mediacom Capital Corp., 9.125%, 08/15/19		245		249,900		0.2
Sirius XM Radio, Inc., Private Placement,
8.750%, 04/01/152		180		194,850		0.2
9.750%, 09/01/152		150		168,375		0.1
Telesat Canada/Telesat LLC, (Canada),
11.000%, 11/01/15		136		152,660		0.1
12.500%, 11/01/1710		150		176,625		0.2
Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH, Private Placement, Sr Sec’d Nt, (Germany), 8.125%, 12/01/172		250		261,250		0.2
Virgin Media Finance plc, (United Kingdom), 8.375%, 10/15/19		225		245,813		0.2
Virgin Media Finance plc, Sr Nt, (United Kingdom), 9.125%, 08/15/16		450		479,250		0.4
XM Satellite Radio, Inc., Private Placement, Sr Nt, 13.000%, 08/01/132		330		392,700		0.4
				3,747,738		3.4
DISTRIBUTORS — 0.3%
McJunkin Red Man Corp., Private Placement, Sr Nt, 9.500%, 12/15/162		355		335,475		0.3

See Notes to Financial Statements.

4

PACHOLDER HIGH YIELD FUND, INC.

Schedule of Portfolio Investments (continued)

As of December 31, 2010

Description	Par (000)		Value		Percent of Net Assets*
DIVERSIFIED CONSUMER SERVICES — 1.2%
Knowledge Learning Corp., Inc., Private Placement, Sr Sub Nt, 7.750%, 02/01/152,10	$	700	$	686,000		0.6	%
Mac-Gray Corp., Sr Nt, 7.625%, 08/15/1510		650		638,625		0.6
				1,324,625		1.2
GAMING — 5.7%
Ceasars Entertainment Operating Co., Inc., 11.250%, 06/01/17		250		281,250		0.3
Chukchansi Economic Development Authority, Private Placement, 8.000%, 11/15/132		766		509,390		0.5
Isle of Capri Casinos, Inc., Sr Nt, 7.000%, 03/01/14		400		392,000		0.3
Mandalay Resort Group, Sr Nt, 7.625%, 07/15/13		200		189,500		0.2
Mashantucket Western Pequot Tribe, Private Placement,
5.912%, 09/01/211,2,4		475		214,743		0.2
8.500%, 11/15/151,2,4		820		107,625		0.1
MCE Finance Ltd., Sr Sec’d Nt, (Cayman Islands), 10.250%, 05/15/18		225		257,906		0.2
MGM Resorts International, 10.000%, 11/01/162		1,400		1,438,500		1.3
MGM Resorts International, Co Guar,
5.875%, 02/27/14		30		27,675		0.0	12
6.625%, 07/15/15		231		211,654		0.2
7.500%, 06/01/16		140		130,900		0.1
7.625%, 01/15/17		201		187,935		0.2
MGM Resorts International, Private Placement, 9.000%, 03/15/202		125		137,500		0.1
Midwest Gaming Borrower LLC/Midwest Finance Corp., Private Placement, 11.625%, 04/15/162		100		103,500		0.1
Peninsula Gaming LLC, 8.375%, 08/15/15		350		367,938		0.3
Pinnacle Entertainment, Inc., 8.750%, 05/15/20		100		103,500		0.1
San Pasqual Casino, Private Placement, 8.000%, 09/15/132		500		500,625		0.4
Seminole Hard Rock Entertainment, Inc., Private Placement, VAR, 2.802%, 03/15/142		500		457,500		0.4

Description	Par (000)		Value		Percent of Net Assets*
GAMING (continued)
Seminole Indian Tribe of Florida, Private Placement, 7.750%, 10/01/172	$	75	$	77,437		0.1	%
Shingle Springs Tribal Gaming Authority, Private Placement, Sr Nt, 9.375%, 06/15/152,10		1,000		690,000		0.6
				6,387,078		5.7
HOTELS, RESTAURANTS & LEISURE — 2.8%
Banc of America Large Loan, Inc., Private Placement, VAR, 2.010%, 11/15/152		598		533,370		0.5
CKE Restaurants, Inc., Sr Sec’d Nt, 11.375%, 07/15/18		350		387,625		0.3
Dave & Buster’s, Inc., 11.000%, 06/01/18		30		32,925		0.0	12
DineEquity, Inc., Private Placement, 9.500%, 10/30/182		170		180,200		0.2
Dunkin Finance Corp., Private Placement, 9.625%, 12/01/182		250		252,500		0.2
Landry’s Holdings, Inc., Private Placement, 11.500%, 06/01/142		100		98,000		0.1
Landry’s Restaurants, Inc., Private Placement, Sr Sec’d Nt, 11.625%, 12/01/152		120		128,100		0.1
Landry’s Restaurants, Inc., Sr Nt, 11.625%, 12/01/15		200		213,500		0.2
Real Mex Restaurants, Inc., 14.000%, 01/01/13		200		208,000		0.2
Royal Caribbean Cruises Ltd., Sr Nt, (Liberia), 11.875%, 07/15/15		231		285,285		0.3
Seneca Gaming Corp., Private Placement, 8.250%, 12/01/182		175		175,437		0.2
Speedway Motorsports, Inc., Sr Nt, 8.750%, 06/01/16		300		323,250		0.3
Universal City Development Partners Ltd./UCDP Finance, Inc., 10.875%, 11/15/16		250		273,125		0.2
				3,091,317		2.8	��
HOUSEHOLD DURABLES — 1.4%
K Hovnanian Enterprises, Inc., Sr Nt, 10.625%, 10/15/16		475		486,875		0.4
Lennar Corp., Sr Nt, 6.950%, 06/01/18		410		389,500		0.4

See Notes to Financial Statements.

5

PACHOLDER HIGH YIELD FUND, INC.

Schedule of Portfolio Investments (continued)

As of December 31, 2010

Description	Par (000)		Value		Percent of Net Assets*
HOUSEHOLD DURABLES (continued)
Meritage Homes Corp., Sr Nt,
6.250%, 03/15/15	$	75	$	75,375		0.1	%
7.150%, 04/15/20		260		258,700		0.2
Standard Pacific Corp., Private Placement, Co Guar, 8.375%, 05/15/182		165		165,000		0.1
Standard Pacific Corp., Sr Nt, 10.750%, 09/15/16		210		242,025		0.2
				1,617,475		1.4
INTERNET & CATALOG RETAIL — 0.2%
Affinion Group, Inc., Private Placement, 7.875%, 12/15/182		225		219,375		0.2
LEISURE EQUIPMENT & PRODUCTS — 1.4%
Da-Lite Screen Co., Inc., Sr Nt, 12.500%, 04/01/15		375		412,500		0.3
Eastman Kodak Co., Private Placement, 9.750%, 03/01/182		740		754,800		0.7
FGI Holding Co., Inc., Private Placement, Sr Nt, PIK, 11.250%, 10/01/152		231		221,555		0.2
Icon Health & Fitness, Private Placement, 11.875%, 10/15/162		225		227,250		0.2
				1,616,105		1.4
MEDIA — 8.1%
Barrington Broadcasting Group LLC and Barrington Broadcasting Capital Corp., Sr Sub Nt, 10.500%, 08/15/14		700		661,500		0.6
Block Communications, Inc., Private Placement, Sr Nt, 8.250%, 12/15/152,10		800		806,000		0.7
Clear Channel Worldwide Holdings, Inc., Sr Nt,
9.250%, 12/15/17		125		135,937		0.1
9.250%, 12/15/17		500		547,500		0.5
CSC Holdings LLC, 7.625%, 07/15/18		50		54,250		0.1
CSC Holdings LLC, Sr Nt, 7.875%, 02/15/18		96		106,800		0.1
DigitalGlobe, Inc., Sr Nt, 10.500%, 05/01/14		250		285,313		0.3
Fisher Communications, Inc., Sr Nt, 8.625%, 09/15/14		500		507,500		0.5
Gannett Co., Inc., 9.375%, 11/15/17		110		122,650		0.1

Description	Par (000)		Value		Percent of Net Assets*
MEDIA (continued)
Gannett Co., Inc., Private Placement,
6.375%, 09/01/152	$	50	$	50,375		0.0	%12
7.125%, 09/01/182		200		200,500		0.2
Intelsat Intermediate Holding Co. S.A., (Luxembourg), 9.500%, 02/01/157		400		412,000		0.4
Intelsat Jackson Holdings S.A., Private Placement, (Luxembourg), 7.250%, 10/15/202		150		151,500		0.1
Intelsat Jackson Holdings S.A., Private Placement, Sr Nt, (Luxembourg), 8.500%, 11/01/192		150		163,125		0.1
Intelsat Luxembourg S.A., (Luxembourg),
11.250%, 02/04/17		777		846,930		0.8
PIK, 11.500%, 02/04/17		516		569,911		0.5
Intelsat Subsidiary Holding Co. S.A., (Bermuda), 8.875%, 01/15/1510		140		143,850		0.1
Intelsat Subsidiary Holding Co. S.A., Private Placement, (Bermuda), 8.875%, 01/15/152		360		368,100		0.3
Lamar Media Corp., Sr Sub Nt, 6.625%, 08/15/15		125		126,875		0.1
McClatchy Co. (The), 11.500%, 02/15/17		125		140,469		0.1
Media General, Inc., 11.750%, 02/15/17		400		420,500		0.4
Nexstar Broadcasting, Inc./Mission Broadcasting Inc., Private Placement, 8.875%, 04/15/172		400		425,000		0.4
Nexstar Finance Holdings LLC/Nexstar Finance Holdings, Inc., Sr Disc Nt, 11.375%, 04/01/137		479		484,779		0.4
Nielsen Finance LLC/Nielsen Finance Co., 0.000%, 08/01/167		94		98,700		0.1
Nielsen Finance LLC/Nielsen Finance Co., Private Placement, 7.750%, 10/15/182		50		51,750		0.0	12
ProQuest LLC/ProQuest Notes Co., Private Placement, 9.000%, 10/15/182		125		128,750		0.1
Radio One, Inc., PIK, 12.500%, 05/11/162		475		460,750		0.4
Sinclair Television Group, Inc., Private Placement, 8.375%, 10/15/182		100		103,250		0.1

See Notes to Financial Statements.

6

PACHOLDER HIGH YIELD FUND, INC.

Schedule of Portfolio Investments (continued)

As of December 31, 2010

Description	Par (000)		Value		Percent of Net Assets*
MEDIA (continued)
WMG Acquisition Corp., 7.375%, 04/15/14	$	250	$	240,000		0.2	%
WMG Acquisition Corp., Nt, 9.500%, 06/15/16		61		65,423		0.1
WMG Holdings Corp., Nt, 9.500%, 12/15/147		250		239,375		0.2
				9,119,362		8.1
MULTILINE RETAIL — 0.3%
HSN, Inc., 11.250%, 08/01/16		323		368,624		0.3
SPECIALTY RETAIL — 4.2%
Burlington Coat Factory Investment Holdings, Inc., 14.500%, 10/15/147		82		86,305		0.1
General Nutrition Centers, Inc., PIK, 5.750%, 03/15/14		461		456,390		0.4
Giraffe Acquisition Corp., 9.125%, 12/01/182		300		312,750		0.3
Michael Foods, Inc., Private Placement, Sr Nt, 9.750%, 07/15/182		350		382,375		0.3
Michael’s Stores, Inc., Private Placement, 7.750%, 11/01/182		150		149,625		0.1
Michael’s Stores, Inc., Sr Nt, 0.000%, 11/01/167		1,400		1,386,000		1.2
NBC Acquisition Corp., 11.000%, 03/15/137		280		179,200		0.2
Nebraska Book Co., Inc.,
8.625%, 03/15/1210		245		214,375		0.2
10.000%, 12/01/11		345		343,275		0.3
PEP Boys-Manny Moe & Jack, Sr Nt, 7.500%, 12/15/14		500		507,500		0.5
Petco Animal Supplies, Inc., Private Placement, 9.250%, 12/01/182		240		252,900		0.2
Toys R Us Property Co II LLC, Sr Sec’d Nt, 8.500%, 12/01/17		285		306,375		0.3
Toys R Us, Inc., 7.875%, 04/15/13		118		124,195		0.1
				4,701,265		4.2
TEXTILES, APPAREL & LUXURY GOODS — 1.0%
Broder Brothers Co., Private Placement, PIK, 12.000%, 10/15/132,3,9		461		424,142		0.4

Description	Par (000)		Value		Percent of Net Assets*
TEXTILES, APPAREL & LUXURY GOODS (continued)
Quiksilver, Inc., 6.875%, 04/15/15	$	748	$	731,170		0.6	%
				1,155,312		1.0
Total Consumer Discretionary				37,005,764		33.0
CONSUMER STAPLES — 4.5%
BEVERAGES — 0.3%
Constellation Brands, Inc., Sr Nt, 8.375%, 12/15/14		315		344,137		0.3
FOOD & STAPLES RETAILING — 1.4%
Ingles Markets, Inc., 8.875%, 05/15/17		190		203,300		0.2
Rite Aid Corp., 9.500%, 06/15/17		1,000		850,000		0.7
Rite Aid Corp., Debentures, 7.500%, 03/01/17		600		576,750		0.5
				1,630,050		1.4
FOOD PRODUCTS — 1.3%
Eurofresh, Inc., 15.000%, 11/18/163,9		407		406,725		0.4
Simmons Foods, Inc., Private Placement, 10.500%, 11/01/172		325		346,938		0.3
Smithfield Foods, Inc., Nt, 7.750%, 05/15/1310		575		612,734		0.6
				1,366,397		1.3
HOUSEHOLD PRODUCTS — 0.6%
Spectrum Brands Holdings, Inc., PIK, 12.000%, 08/28/19		596		665,581		0.6
PERSONAL PRODUCTS — 0.5%
American Achievement Corp., 10.875%, 04/15/162		360		369,000		0.3
Visant Corp., Private Placement, 10.000%, 10/01/172		156		165,750		0.2
				534,750		0.5
TOBACCO — 0.4%
Alliance One International, Inc., Nt, 10.000%, 07/15/16		440		451,000		0.4
Total Consumer Staples				4,991,915		4.5
ENERGY — 11.1%
ENERGY EQUIPMENT & SERVICES — 2.4%							��
American Petroleum Tankers LLC/AP Tankers Co., Private Placement, 10.250%, 05/01/152		270		279,450		0.2

See Notes to Financial Statements.

7

PACHOLDER HIGH YIELD FUND, INC.

Schedule of Portfolio Investments (continued)

As of December 31, 2010

Description	Par (000)		Value		Percent of Net Assets*
ENERGY EQUIPMENT & SERVICES — (continued)
Calfrac Holdings LP, Private Placement, 7.500%, 12/01/202	$	100	$	101,250		0.1	%
Exterran Holdings, Inc., Private Placement, 7.250%, 12/01/182		230		228,850		0.2
Frac Tech Services LLC/Frac Tech Finance, Inc., Private Placement, 7.125%, 11/15/182		70		71,050		0.1
Global Geophysical Services, Inc., 10.500%, 05/01/17		85		84,575		0.1
Helix Energy Solutions Group, Inc., Private Placement, 9.500%, 01/15/162,10		500		513,750		0.4
Key Energy Services, Inc., Sr Nt, 8.375%, 12/01/14		338		356,590		0.3
Parker Drilling Co., 9.125%, 04/01/18		250		261,250		0.2
PHI, Inc., Private Placement, 8.625%, 10/15/182		310		317,750		0.3
Pride International, Inc., 6.875%, 08/15/20		65		67,437		0.1
Seadrill Ltd., (Bermuda), 6.500%, 10/05/15		300		291,750		0.3
Trinidad Drilling Ltd., Private Placement, Sr Unsec’d Nt, (Canada), 7.875%, 01/15/192		130		131,300		0.1
				2,705,002		2.4
OIL, GAS & CONSUMABLE FUELS — 8.7%
Alon Refining Krotz Springs, Inc., 13.500%, 10/15/14		260		249,600		0.2
Alta Mesa Holdings/Alta Mesa Finance Services Corp., 9.625%, 10/15/182		240		233,100		0.2
Antero Resources Finance Corp., Nt, 9.375%, 12/01/17		150		156,938		0.1
Arch Coal, Inc., 7.250%, 10/01/20		80		84,400		0.1
Bill Barrett Corp., 9.875%, 07/15/16		150		164,625		0.1
Brigham Exploration Co., Private Placement, 8.750%, 10/01/182		125		135,000		0.1
Carrizo Oil & Gas, Inc., Private Placement, 8.625%, 10/15/182		170		175,100		0.2
Citgo Petroleum Corp., Private Placement, Sr Nt, 11.500%, 07/01/172		300		336,000		0.3
Comstock Resources, Inc., Sr Nt, 8.375%, 10/15/17		406		407,015		0.4

Description	Par (000)		Value		Percent of Net Assets*
OIL, GAS & CONSUMABLE FUELS (continued)
Consol Energy, Inc., Private Placement, 8.250%, 04/01/202	$	125	$	135,000		0.1	%
Consol Energy, Inc., Private Placement, Sr Nt, 8.000%, 04/01/172		170		181,050		0.2
Continental Resources, Inc., Private Placement, 7.125%, 04/01/212		75		78,750		0.1
Crosstex Energy LP/Crosstex Energy Finance Corp., 8.875%, 02/15/18		120		128,550		0.1
Denbury Resources, Inc., 8.250%, 02/15/20		40		43,400		0.0	12
El Paso Performance-Linked Trust, Private Placement, Sr Nt, 7.750%, 07/15/112,10		450		460,655		0.4
El Paso Pipeline Partners Operating Co., LLC, 6.500%, 04/01/20		85		89,181		0.1
Ferrellgas Partners LP/Ferrellgas Partners Finance Corp., Sr Unsecd Nt, 8.625%, 06/15/20		325		349,375		0.3
Forbes Energy Services LLC/Forbes Energy Capital, Inc., 11.000%, 02/15/15		350		343,000		0.3
Foresight Energy LLC/Foresight Energy Corp., Private Placement, 9.625%, 08/15/172		180		191,700		0.2
Forest Oil Corp., Nt, 7.250%, 06/15/19		269		273,035		0.2
Frontier Oil Corp., 6.875%, 11/15/18		65		66,300		0.1
Gibson Energy ULC/GEP Midstream Finance Corp., Sr Nt, (Canada),
10.000%, 01/15/18		180		182,700		0.2
11.750%, 05/27/14		200		221,000		0.2
Hilcorp Energy I LP/Hilcorp Finance Co., Private Placement, 7.625%, 04/15/212		75		77,438		0.1
Holly Corp., 9.875%, 06/15/17		70		76,300		0.1
Holly Energy Partners LP/Holly Energy Finance Corp., Private Placement, 8.250%, 03/15/182		130		135,850		0.1
Inergy LP/Inergy Finance Corp., Private Placement, 7.000%, 10/01/182		250		251,875		0.2
MarkWest Energy Partners LP/MarkWest Energy Finance Corp., 6.750%, 11/01/20		150		150,000		0.1

See Notes to Financial Statements.

8

PACHOLDER HIGH YIELD FUND, INC.

Schedule of Portfolio Investments (continued)

As of December 31, 2010

Description	Par (000)		Value		Percent of Net Assets*
OIL, GAS & CONSUMABLE FUELS (continued)
NFR Energy LLC/NFR Energy Finance Corp., Private Placement,
9.750%, 02/15/172	$	360	$	355,500		0.3	%
Patriot Coal Corp., 8.250%, 04/30/18		125		127,187		0.1
Penn Virginia Corp., 10.375%, 06/15/16		21		23,415		0.0	12
Penn Virginia Resource Partners LP/Penn Virginia Resource Finance Corp., Sr Nt, 8.250%, 04/15/18		160		164,800		0.2
Petroleum Development Corp., Sr Nt, 12.000%, 02/15/18		48		53,760		0.1
Pioneer Drilling Co., 9.875%, 03/15/18		120		126,900		0.1
QEP Resources, Inc., 6.875%, 03/01/21		140		147,000		0.1
Range Resources Corp.,
6.750%, 08/01/20		20		20,625		0.0	12
7.250%, 05/01/18		25		26,375		0.0	12
Range Resources Corp., Sr Sub Nt, 7.500%, 05/15/16		267		277,013		0.3
Suburban Propane Partners LP/Suburban Energy Finance Corp., 7.375%, 03/15/20		65		69,387		0.1
Swift Energy Co., 8.875%, 01/15/20		100		108,250		0.1
Swift Energy Co., Sr Nt, 7.125%, 06/01/1710		1,260		1,263,150		1.1
Targa Resources Partners LP/Targa Resources Partners Finance Corp., 8.250%, 07/01/16		280		295,400		0.3
Targa Resources Partners LP/Targa Resources Partners Finance Corp., Private Placement, 7.875%, 10/15/182		130		136,500		0.1
W&T Offshore, Inc., Private Placement, Sr Nt, 8.250%, 06/15/142		650		632,125		0.6
Western Refining, Inc., Private Placement,
VAR, 10.750%, 06/15/142		225		239,625		0.2
11.250%, 06/15/172		225		243,000		0.2
				9,686,949		8.7
Total Energy				12,391,951		11.1

Description	Par (000)		Value		Percent of Net Assets*
FINANCIALS — 12.2%
COMMERCIAL BANKS — 1.3%
Bank of America Corp., VAR, 8.125%, 05/15/1814	$	160	$	161,248		0.2	%
BankAmerica Capital II, Nt, 8.000%, 12/15/26		30		30,188		0.0	12
BankAmerica Institutional Capital B, Private Placement, 7.700%, 12/31/262		250		250,000		0.2
Barclays Bank plc, Private Placement, (United Kingdom), VAR, 7.434%, 12/15/172,14		600		586,500		0.5
Wachovia Capital Trust III, VAR, 5.800%, 03/15/1114		545		472,787		0.4
				1,500,723		1.3
CONSUMER FINANCE — 1.6%
Ally Financial, Inc., 8.000%, 11/01/31		842		907,255		0.8
American General Finance Corp., 6.900%, 12/15/17		200		161,500		0.1
Ford Motor Credit Co. LLC, Nt, 8.000%, 12/15/1610		700		782,221		0.7
				1,850,976		1.6
DIVERSIFIED FINANCIAL SERVICES — 3.6%
ACE Cash Express, Inc., Private Placement, Sr Nt, 10.250%, 10/01/142,3,9		1,000		880,000		0.8
Aircastle Ltd., Sr Nt, (Bermuda), 9.750%, 08/01/18		75		81,937		0.1
CIT Group, Inc., Nt, 7.000%, 05/01/15		750		751,875		0.7
CNG Holdings, Inc., Private Placement,
12.250%, 02/15/152		140		152,950		0.1
13.750%, 08/15/152		250		252,500		0.2
ILFC E-Capital Trust I, Private Placement, VAR, 5.990%, 12/21/652		950		719,207		0.6
ILFC E-Capital Trust II, Private Placement, VAR, 6.250%, 12/21/652		270		210,600		0.2
International Lease Finance Corp., 8.875%, 09/01/17		300		323,625		0.3
Northern Tier Energy LLC and Norther Tier Finance Corp., Private Placement, 10.500%, 12/01/172		100		102,000		0.1

See Notes to Financial Statements.

9

PACHOLDER HIGH YIELD FUND, INC.

Schedule of Portfolio Investments (continued)

As of December 31, 2010

Description	Par (000)		Value		Percent of Net Assets*
DIVERSIFIED FINANCIAL SERVICES (continued)
SquareTwo Financial Corp., Private Placement, 11.625%, 04/01/172	$	425	$	418,625		0.4	%
Tops Holding Corp./Tops Markets LLC, 10.125%, 10/15/15		115		118,163		0.1
				4,011,482		3.6
INSURANCE — 5.3%
American International Group, Inc., VAR, 8.175%, 05/15/58		550		585,645		0.5
Crum and Forster Holdings Corp., 7.750%, 05/01/1710		600		624,000		0.6
Genworth Financial, Inc., VAR, 6.150%, 11/15/66		500		393,750		0.3
HUB International Holdings, Inc., Private Placement,
9.000%, 12/15/142		250		253,125		0.2
10.250%, 06/15/152,10		550		551,375		0.5
Liberty Mutual Group, Inc., Private Placement,
7.500%, 08/15/362		250		248,563		0.2
VAR, 10.750%, 06/15/582,10		1,720		2,081,200		1.9
Nationwide Mutual Insurance Co., Private Placement,
8.250%, 12/01/312		108		111,040		0.1
9.375%, 08/15/392		175		202,969		0.2
USI Holdings Corp., Private Placement, Sr Sub Nt, 9.750%, 05/15/152,10		842		850,420		0.8
				5,902,087		5.3
REAL ESTATE INVESTMENT TRUSTS (REITs) — 0.4%
CB Richard Ellis Services, Inc., 6.625%, 10/15/202		150		150,000		0.1
DuPont Fabros Technology LP, Nt, 8.500%, 12/15/17		105		112,350		0.1
First Industrial LP, Sr Nt, 6.420%, 06/01/14		180		178,850		0.2
				441,200		0.4
Total Financials				13,706,468		12.2
HEALTH CARE — 4.5%
HEALTH CARE EQUIPMENT & SUPPLIES — 0.1%
DJO Finance LLC/DJO Finance Corp., Sr Nt, 10.875%, 11/15/14		50		54,562		0.1

Description	Par (000)		Value		Percent of Net Assets*
HEALTH CARE PROVIDERS & SERVICES — 2.3%
Capella Healthcare, Inc., Private Placement, 9.250%, 07/01/172	$	165	$	174,900		0.2	%
HCA, Inc., 5.750%, 03/15/1410		195		192,075		0.2
HCA, Inc., Sec’d Nt, 9.250%, 11/15/1610		500		533,437		0.5
Multiplan, Inc., Private Placement, Nt, 9.875%, 09/01/182		450		478,125		0.4
OnCure Holdings, Inc., Private Placement, 11.750%, 05/15/172		775		732,375		0.6
Radiation Therapy Services, Inc., Private Placement, Nt, 9.875%, 04/15/172		225		224,438		0.2
Tenet Healthcare Corp., 8.875%, 07/01/1910		250		282,500		0.2
				2,617,850		2.3
PHARMACEUTICALS — 2.1%
Catalent Pharma Solutions, Inc., Nt, PIK, 10.250%, 04/15/15		402		406,376		0.4
Celtic Pharma Phinco B.V., (Bermuda), PIK, 17.000%, 06/15/123,9		1,865		932,291		0.8
Elan Finance plc/Elan Finance Corp., (Ireland), 8.750%, 10/15/16		500		502,500		0.5
Elan Finance plc/Elan Finance Corp., Private Placement, (Ireland), 8.750%, 10/15/162		500		501,250		0.4
				2,342,417		2.1
Total Health Care				5,014,829		4.5
INDUSTRIALS — 11.9%
AEROSPACE & DEFENSE — 0.4%
Bombardier, Inc., Private Placement, (Canada),
7.500%, 03/15/182		50		53,625		0.0	12
7.750%, 03/15/202		50		53,875		0.1
Colt Defense LLC/Colt Finance Corp., Private Placement, 8.750%, 11/15/172		72		53,280		0.0	12
Kratos Defense & Security Solutions, Inc., 10.000%, 06/01/17		210		232,575		0.2
Triumph Group, Inc., 8.625%, 07/15/18		80		87,400		0.1
				480,755		0.4

See Notes to Financial Statements.

10

PACHOLDER HIGH YIELD FUND, INC.

Schedule of Portfolio Investments (continued)

As of December 31, 2010

Description	Par (000)		Value		Percent of Net Assets*
AIR FREIGHT & LOGISTICS — 0.1%
AMGH Merger Sub, Inc., Private Placement, 9.250%, 11/01/182	$	72	$	75,600		0.1	%
AIRLINES — 1.5%
American Airlines Pass Through Trust 2001-01, 7.377%, 05/23/19		612		581,690		0.5
Continental Airlines 2005-ERJ1 Pass Through Trust, 9.798%, 04/01/2110		746		756,758		0.7
UAL 2007-1 Pass Through Trust, Private Placement,
VAR, 3.003%, 07/02/142		107		94,382		0.1
7.336%, 07/02/192		84		79,611		0.0	12
UAL 2009-2B Pass Through Trust, Private Placement, 12.000%, 01/15/162		194		215,240		0.2
				1,727,681		1.5
BUILDING PRODUCTS — 0.1%
Associated Materials LLC, Private Placement, 9.125%, 11/01/172		75		78,375		0.1
COMMERCIAL SERVICES & SUPPLIES — 2.3%
Cenveo Corp., Nt, 8.875%, 02/01/18		200		193,500		0.2
Cenveo Corp., Private Placement, 10.500%, 08/15/162		500		491,250		0.4
Garda World Security Corp., Private Placement, (Canada), 9.750%, 03/15/172		180		193,050		0.2
Harland Clarke Holdings Corp.,
VAR, 6.000%, 05/15/1510		350		290,938		0.3
9.500%, 05/15/15		500		475,000		0.4
Iron Mountain, Inc., 8.375%, 08/15/21		250		268,125		0.2
Liberty Tire Recycling, Private Placement, Nt, 11.000%, 10/01/162		275		291,500		0.3
Mobile Mini, Inc., Private Placement, 7.875%, 12/01/202		200		207,000		0.2
Quebecor World Capital Escrow Corp., (Canada),
6.125%, 11/15/131,3,4,9		1,415		70,750		0.1
6.500%, 08/01/271,3,4,9		810		40,500		0.0	12
9.750%, 01/15/151,3,4,9		585		29,250		0.0	12
				2,550,863		2.3

Description	Par (000)		Value		Percent of Net Assets*
CONSTRUCTION & ENGINEERING — 1.6%
New Enterprise Stone & Lime Co., Private Placement, Nt, 11.000%, 09/01/182	$	750	$	712,500		0.6	%
RSC Equipment Rental, Inc./RSC Holdings III LLC, Sr Nt, 9.500%, 12/01/1410		643		675,150		0.6
Tutor Perini Corp., Private Placement, 7.625%, 11/01/182		150		150,750		0.1
United Rentals North America, Inc.,
8.375%, 09/15/20		200		203,500		0.2
10.875%, 06/15/16		80		91,400		0.1
				1,833,300		1.6
ELECTRICAL EQUIPMENT — 0.4%
Belden, Inc., Sr Nt, 9.250%, 06/15/19		125		137,031		0.1
General Cable Corp., VAR, 2.665%, 04/01/15		250		238,125		0.2
International Wire Group, Inc., Private Placement, 9.750%, 04/15/152		100		104,500		0.1
				479,656		0.4
ELECTRONIC MANUFACTURING SERVICES — 0.4%
Kemet Corp., Private Placement, 10.500%, 05/01/182		375		403,125		0.4
INDUSTRIAL CONGLOMERATES — 0.4%
JB Poindexter & Co., Inc., Co. Guar, 8.750%, 03/15/1410		434		435,085		0.4
INDUSTRIAL MACHINERY — 0.1%
Severstal Columbus LLC, 10.250%, 02/15/182		100		105,500		0.1
MACHINERY — 0.6%
Thermadyne Holdings Corp., 9.000%, 12/15/172		525		541,406		0.5
Titan International, Inc., Private Placement, 7.875%, 10/01/172		125		131,875		0.1
				673,281		0.6
MARINE — 1.5%
CMA CGM S.A., Private Placement, (France), 7.250%, 02/01/132		200		200,151		0.2
Commercial Barge Line Co., Sr Nt, 12.500%, 07/15/17		350		404,250		0.3

See Notes to Financial Statements.

11

PACHOLDER HIGH YIELD FUND, INC.

Schedule of Portfolio Investments (continued)

As of December 31, 2010

Description	Par (000)		Value			Percent of Net Assets*
MARINE (continued)
General Maritime Corp., Sr Nt, 12.000%, 11/15/17	$	289	$	278,885			0.2	%
Navios Maritime Holdings Inc/Navios Maritime Finance U.S., Inc., 8.875%, 11/01/17		377		408,102			0.4
Sevan Marine ASA, Private Placement, (Norway), 12.000%, 08/10/152		100		105,500			0.1
Ultrapetrol Bahamas Ltd., 1st Mtg, (Bahamas), 9.000%, 11/24/1410		310		313,875			0.3
				1,710,763			1.5
ROAD & RAIL — 2.5%
Avis Budget Car Rental LLC/Avis Budget Finance, Inc., 9.625%, 03/15/18		290		312,475			0.3
Avis Budget Car Rental LLC/Avis Budget Finance, Inc., Nt, 7.750%, 05/15/16		200		204,000			0.2
Avis Budget Car Rental LLC/Avis Budget Finance, Inc., Private Placement, 8.250%, 01/15/192		150		151,500			0.1
Kansas City Southern de Mexico S.A. de C.V., Private Placement, Sr Nt, (Mexico), 6.625%, 12/15/202		113		113,282			0.1
Kansas City Southern Railway, Sr Nt, 8.000%, 06/01/15		250		268,750			0.2
Quality Distribution LLC/QD Capital Corp.,
9.875%, 11/01/182		1,100		1,091,750			1.0
PIK, 11.750%, 11/01/133,9		328		324,943			0.3
RailAmerica, Inc., 9.250%, 07/01/17		300		329,625			0.3
				2,796,325			2.5
Total Industrials				13,350,309	��		11.9
INFORMATION TECHNOLOGY — 5.3%
COMMUNICATIONS EQUIPMENT — 0.7%
Avaya, Inc., Sr Nt, 9.750%, 11/01/15		500		508,750			0.5
Brightstar Corp., Private Placement, 9.500%, 12/01/162		260		264,550			0.2
				773,300			0.7
COMPUTERS & PERIPHERALS — 0.8%
Seagate HDD Cayman, Private Placement, Co Guar, (Cayman Islands), 7.750%, 12/15/182		450		455,625			0.4

Description	Par (000)		Value		Percent of Net Assets*
COMPUTERS & PERIPHERALS (continued)
Seagate HDD Cayman, Private Placement, Sr Nt, (Cayman Islands), 6.875%, 05/01/202	$	170	$	162,350		0.1	%
Stratus Technologies, Inc., Private Placement, Sr Sec’d Nt, 12.000%, 03/29/152		380		319,200		0.3
				937,175		0.8
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS — 1.0%
Intcomex, Inc., Private Placement, 13.250%, 12/15/142		218		233,260		0.2
Sanmina-SCI Corp., Private Placement, Sr Nt, VAR, 3.052%, 06/15/142		200		189,000		0.2
Smart Modular Technologies WWH, Inc., Sr Nt, (Cayman Islands), VAR, 5.790%, 04/01/123,9		423		418,093		0.4
Viasystems, Inc., Private Placement, 12.000%, 01/15/152		225		251,438		0.2
				1,091,791		1.0
INTERNET SOFTWARE & SERVICES — 0.3%
Equinix, Inc., Sub Nt, 8.125%, 03/01/18		185		193,325		0.2
Terremark Worldwide, Inc., Sr Nt, 12.000%, 06/15/17		125		143,125		0.1
				336,450		0.3
IT SERVICES — 1.3%
Compucom Systems, Inc., Private Placement, 12.500%, 10/01/152		225		241,875		0.2
First Data Corp., 9.875%, 09/24/15		19		18,097		0.0	12
First Data Corp., Private Placement, Sr Nt, 12.625%, 01/15/212		80		76,400		0.1
First Data Corp., Private Placement, Sr Sec’d, 8.250%, 01/15/212		80		76,800		0.1
Sitel LLC/Sitel Finance Corp., Private Placement, Sr Nt, 11.500%, 04/01/182		850		701,250		0.6
Stream Global Services, Inc., Sr Nt, 11.250%, 10/01/14		100		100,750		0.1
Unisys Corp., Private Placement, 14.250%, 09/15/152		201		239,693		0.2
				1,454,865		1.3

See Notes to Financial Statements.

12

PACHOLDER HIGH YIELD FUND, INC.

Schedule of Portfolio Investments (continued)

As of December 31, 2010

Description	Par (000)		Value		Percent of Net Assets*
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.2%
Amkor Technology, Inc., 7.375%, 05/01/18	$	170	$	176,800		0.2	%
Freescale Semiconductor, Inc., Private Placement, Nt,
9.250%, 04/15/182		105		115,500		0.1
10.750%, 08/01/202		65		70,850		0.1
NXP B.V./NXP Funding LLC, Private Placement, (Netherlands), 9.750%, 08/01/182		100		112,500		0.1
NXP B.V./NXP Funding LLC, Sr Nt, (Netherlands), 7.875%, 10/15/1410		415		431,600		0.4
NXP B.V./NXP Funding LLC, Sr Nt, VAR, (Netherlands), VAR, 3.039%, 10/15/13		400		394,000		0.3
				1,301,250		1.2
Total Information Technology				5,894,831		5.3
MATERIALS — 9.1%
CHEMICALS — 2.3%
CF Industries, Inc., 7.125%, 05/01/20		90		98,550		0.1
Chemtura Corp., Private Placement, 7.875%, 09/01/182		150		159,375		0.1
LBI Escrow Corp., Private Placement, 8.000%, 11/01/172		292		323,025		0.3
Lyondell Chemical Co., 11.000%, 05/01/18		967		1,094,716		1.0
Nalco Co., Private Placement, Sr Nt, 6.625%, 01/15/192		185		189,163		0.2
Omnova Solutions, Inc., Private Placement, 7.875%, 11/01/182		40		40,300		0.0	12
PolyOne Corp., 7.375%, 09/15/20		280		290,150		0.2
Sterling Chemicals, Inc., 10.250%, 04/01/15		350		358,750		0.3
TPC Group LLC, Private Placement, 8.250%, 10/01/172		75		78,563		0.1
				2,632,592		2.3
CONSTRUCTION MATERIALS — 0.2%
Texas Industries, Inc., Private Placement, 9.250%, 08/15/202		200		212,500		0.2
U.S. Concrete, Inc., Private Placement Sec’d Nt, 9.500%, 08/31/152		46		52,670		0.0	12
				265,170		0.2

Description	Par (000)		Value		Percent of Net Assets*
CONTAINERS & PACKAGING — 3.0%
Ardagh Packaging Finance plc, Private Placement, Sr Sub Nt, (Ireland), 9.125%, 10/15/202	$	200	$	208,000		0.2	%
Berry Plastics Corp., 9.500%, 05/15/18		595		596,488		0.5
Berry Plastics Corp., Co Guar, 8.250%, 11/15/15		165		174,900		0.2
Berry Plastics Corp., Private Placement, 9.750%, 01/15/212		300		297,000		0.3
Berry Plastics Corp., Sr Nt, 10.250%, 03/01/16		37		36,306		0.0	12
Constar International, Inc., Co Guar, VAR, 3.661%, 02/15/121,4,10		950		693,500		0.6
Packaging Dynamics Finance Corp., Private Placement, Sr Sub Nt, 10.000%, 05/01/162		424		435,130		0.4
Reynolds Group Issuer, Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Lu, Private Placement, Nt,
8.500%, 05/15/182		400		402,000		0.4
9.000%, 04/15/192		125		129,531		0.1
Viskase Cos., Inc., Private Placement, Sr Nt, 9.875%, 01/15/182		350		364,875		0.3
				3,337,730		3.0
METALS & MINING — 1.4%
FMG Resources August 2006 Pty Ltd., Private Placement, (Australia), 7.000%, 11/01/152		150		153,750		0.1
Murray Energy Corp., Private Placement, 10.250%, 10/15/152		330		346,500		0.3
Noranda Aluminum Acquisition Corp., Sr Nt, PIK, 5.193%, 05/15/15		132		119,143		0.1
Novelis, Inc., Private Placement, Co Guar, (Canada),
8.375%, 12/15/172		300		310,500		0.3
8.750%, 12/15/202		225		233,437		0.2
Rain CII Carbon LLC and CII Carbon Corp., Private Placement, 8.000%, 12/01/182		75		76,875		0.1
Wolverine Tube, Inc., Sr Nt, 15.000%, 03/31/121,4		983		344,062		0.3
				1,584,267		1.4

See Notes to Financial Statements.

13

PACHOLDER HIGH YIELD FUND, INC.

Schedule of Portfolio Investments (continued)

As of December 31, 2010

Description	Par (000)		Value		Percent of Net Assets*
PAPER & FOREST PRODUCTS — 2.2%
ABI Escrow Corp., Private Placement, 10.250%, 10/15/182	$	480	$	525,600		0.5	%
Abitibi-Consolidated Co. of Canada, Escrow,
6.000%, 06/20/131,4		1,331		16,638		0.0	12
7.500%, 04/01/281,4		287		3,587		0.0	12
Abitibi-Consolidated Co. of Canada, Sr Nt, (Canada), Escrow,
7.750%, 06/15/111,4		479		5,988		0.0	12
8.375%, 04/01/151,4		2,485		31,062		0.0	12
8.850%, 08/01/301,4		102		1,275		0.0	12
Appleton Papers, Inc., Private Placement, Sr Sec’d Nt, 10.500%, 06/15/152		250		247,500		0.2
Bowater Canada Finance Corp., Nt, (Canada), 7.950%, 11/15/111,4		500		87,500		0.1
NewPage Corp., Sr Sec’d Nt, 11.375%, 12/31/14		1,500		1,410,000		1.3
Smurfit-Stone Container Corp., Sr Nt, 8.000%, 03/15/171,3,4,9		1,229		61,709		0.1
Smurfit-Stone Container Enterprises, Inc., 8.375%, 07/01/121,3,4,9		448		22,495		0.0	12
				2,413,354		2.2
Total Materials				10,233,113		9.1
TELECOMMUNICATION SERVICES — 8.1%
DIVERSIFIED TELECOMMUNICATION SERVICES — 4.5%
Cincinnati Bell, Inc., 8.750%, 03/15/18		120		112,500		0.1
Clearwire Communications LLC/Clearwire Finance, Inc., Private Placement,
12.000%, 12/01/152		113		122,040		0.1
12.000%, 12/01/152		1,387		1,494,493		1.3
12.000%, 12/01/172		65		67,275		0.1
Frontier Communications Corp., Sr Nt,
7.875%, 04/15/15		115		125,638		0.1
8.250%, 05/01/14		50		55,375		0.1
8.250%, 04/15/17		115		126,213		0.1
8.500%, 04/15/20		115		125,637		0.1
8.750%, 04/15/22		110		119,900		0.1

Description	Par (000)		Value		Percent of Net Assets*
DIVERSIFIED TELECOMMUNICATION SERVICES (continued)
Global Crossing Ltd., (Bermuda), 12.000%, 09/15/15	$	35	$	39,462		0.0	%12
Level 3 Financing, Inc., 10.000%, 02/01/18		105		100,800		0.1
Level 3 Financing, Inc., Co. Guar, 9.250%, 11/01/1410		1,000		992,500		0.9
PAETEC Holding Corp., Sr Sec’d Nt, 8.875%, 06/30/17		200		213,500		0.2
Qwest Communications International, Inc., Private Placement, Sr Sec’d Nt, 7.125%, 04/01/182		200		207,000		0.2
Qwest Corp., Sr Nt, 7.625%, 06/15/1510		515		580,662		0.5
Windstream Corp.,
7.875%, 11/01/17		320		336,400		0.3
8.125%, 09/01/18		250		262,500		0.2
				5,081,895		4.5
WIRELESS TELECOMMUNICATION SERVICES — 3.6%
Cricket Communications, Inc., 7.750%, 05/15/16		180		186,750		0.2
Cricket Communications, Inc., Private Placement, 7.750%, 10/15/202		375		357,187		0.3
MetroPCS Wireless, Inc., 7.875%, 09/01/18		145		150,438		0.1
Nextel Communications, Inc., 7.375%, 08/01/1510		1,025		1,026,281		0.9
NII Capital Corp., Sr Nt,
8.875%, 12/15/19		315		339,413		0.3
10.000%, 08/15/16		135		149,512		0.2
Sprint Nextel Corp., Nt, 6.000%, 12/01/1610		1,400		1,352,750		1.2
Wind Acquisition Finance S.A., Private Placement, (Luxembourg), 7.250%, 02/15/182		200		203,500		0.2
Wind Acquisition Holdings Finance S.A., Private Placement, Sr Sec’d Nt, (Luxembourg), PIK, 12.250%, 07/15/172		220		254,793		0.2
				4,020,624		3.6
Total Telecommunication Services				9,102,519		8.1

See Notes to Financial Statements.

14

PACHOLDER HIGH YIELD FUND, INC.

Schedule of Portfolio Investments (continued)

As of December 31, 2010

Description	Par (000)		Value		Percent of Net Assets*
UTILITIES — 6.1%
ELECTRIC UTILITIES — 0.1%
Homer City Funding LLC, 8.137%, 10/01/19	$	104	$	98,138		0.1	%
GAS UTILITIES — 0.1%
Genesis Energy LP/Genesis Energy Finance Corp., Private Placement, 7.875%, 12/15/182		160		159,200		0.1
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 5.6%
Calpine Construction Finance Co. LP and CCFC Finance Corp., Private Placement, 8.000%, 06/01/162		200		212,500		0.2
Calpine Corp., Private Placement, Sr Nt, 7.250%, 10/15/172		354		354,000		0.3
Calpine Generating Co. LLC, Sec’d Nt, 0.000%, 04/01/111,4		1,000		102,500		0.1
Dynegy Holdings, Inc., Sr Unsecd Nt, 7.125%, 05/15/18		500		317,500		0.3
Dynegy Roseton/Danskammer Pass Through Trust, Sr Unsecd Nt, 7.670%, 11/08/16		1,000		940,000		0.8
Edison Mission Energy, 7.200%, 05/15/19		500		386,250		0.3
Edison Mission Energy, Sr Nt, 7.750%, 06/15/16		1,000		860,000		0.8
GenOn Escrow Corp., Private Placement, 9.875%, 10/15/202		290		287,825		0.3
Midwest Generation LLC, 8.560%, 01/02/16		243		245,395		0.2
Mirant Americas Generation LLC, Sr Nt, 8.500%, 10/01/21		500		500,000		0.4
NRG Energy, Inc., Sr Nt, 7.375%, 01/15/1710		1,375		1,416,250		1.3
RRI Energy, Inc., 7.625%, 06/15/14		500		511,250		0.4
Texas Competitive Electric Holdings Co. LLC, Sr Nt, 10.250%, 11/01/15		350		197,750		0.2
				6,331,220		5.6
MULTI-UTILITIES — 0.3%
Energy Future Holdings Corp., 10.875%, 11/01/17		89		61,855		0.1

Description	Par (000)		Value		Percent of Net Assets*
MULTI-UTILITIES (continued)
Energy Future Intermediate Holding Co. LLC/EFIH Finance, Inc., 10.000%, 12/01/20	$	230	$	237,193		0.2	%
				299,048		0.3
Total Utilities				6,887,606		6.1
Total Corporate Bonds
(Cost $117,353,981)				118,579,305		105.8
LOAN PARTICIPATIONS & ASSIGNMENTS — 18.9%
CONSUMER DISCRETIONARY — 7.3%
AUTOMOBILES — 0.5%
Ford Motor Co., Term Loan B,
VAR, 3.020%, 12/15/13		364		362,853		0.3
VAR, 3.020%, 12/15/13		30		30,414		0.0	12
VAR, 3.040%, 12/15/13		158		157,996		0.2
				551,263		0.5
BROADCASTING & CABLE TV — 0.1%
Bresnan Communications, Term Loan B, VAR, 4.500%, 12/15/17		150		150,665		0.1
GAMING — 1.1%
Ceasars Entertainment Operating Co., Inc., Term B-2 Loan, VAR, 3.288%, 01/28/15		1,006		908,754		0.8
Suqarhouse HSP Gaming LP, Term Loan, VAR, 11.250%, 09/23/14		240		243,549		0.2
Suqarhouse HSP Gaming LP, Term Loan B, VAR, 11.250%, 09/23/14		23		23,506		0.1
				1,175,809		1.1
HOTELS, RESTAURANTS & LEISURE — 0.3%
Outback Steakhouse, Inc., Prefunded Revolving Commitment,
VAR, 0.122%, 06/14/13		1		1,122		0.0	12
VAR, 2.563%, 06/14/13		1		666		0.0	12
VAR, 2.563%, 06/14/13		3		3,331		0.0	12
Outback Steakhouse, Inc., Term Loan B, VAR, 2.625%, 06/14/14		391		372,443		0.3
				377,562		0.3
MEDIA — 4.1%
Cengage Learning Acquisitions, Term Loan, VAR, 2.550%, 07/03/14		491		462,725		0.4

See Notes to Financial Statements.

15

PACHOLDER HIGH YIELD FUND, INC.

Schedule of Portfolio Investments (continued)

As of December 31, 2010

Description	Par (000)		Value		Percent of Net Assets*
MEDIA (continued)
Clear Channel Communications, Inc., Term Loan B, VAR, 3.911%, 01/29/16	$	593	$	513,984		0.5	%
Dex Media West, New Term Loan,
VAR, 7.000%, 10/24/14		2		1,429		0.0	12
VAR, 7.000%, 10/24/14		13		11,665		0.0	12
VAR, 7.000%, 10/24/14		13		11,489		0.0	12
Entercom Radio LLC, Term Loan A,
VAR, 1.386%, 06/30/12		800		774,536		0.7
VAR, 3.375%, 06/30/12		20		19,503		0.0	12
High Plains Broadcasting Operating Co. LLC, Term Loan, VAR, 9.000%, 09/14/16		191		190,777		0.2
Newport Television LLC, Term Loan, VAR, 9.000%, 09/14/16		698		697,523		0.6
Newsday, Fixed Rate Term Loan, VAR, 10.500%, 08/01/13		250		266,875		0.3
R.H. Donnelley, Inc., Exit Term Loan,
VAR, 9.000%, 10/24/14		20		15,923		0.0	12
VAR, 9.000%, 10/24/14		213		167,884		0.2
VAR, 9.000%, 10/24/14		193		152,156		0.1
Univision Communications, Inc., 1st Lien Term Loan, VAR, 2.511%, 09/29/14		1,323		1,271,588		1.1
				4,558,057		4.1
SPECIALTY RETAIL — 0.4%
Burlington Coat Factory, Term Loan B,
VAR, 2.520%, 05/28/13		249		244,210		0.2
VAR, 2.540%, 05/28/13		251		246,830		0.2
				491,040		0.4
TEXTILES, APPAREL & LUXURY GOODS — 0.8%
Claire’s Stores, Term Loan B,
VAR, 3.038%, 05/29/14		142		130,455		0.1
VAR, 3.044%, 05/29/14		849		782,243		0.7
				912,698		0.8
Total Consumer Discretionary				8,217,094		7.3
CONSUMER STAPLES — 0.4%
FOOD & STAPLES RETAILING — 0.4%
Rite Aid Corp., Term Loan 3, VAR, 6.000%, 06/04/14		490		486,094		0.4

Description	Par (000)		Value		Percent of Net Assets*
ENERGY — 0.1%
OIL, GAS & CONSUMABLE FUELS — 0.1%
Big West Oil, Term Loan, VAR, 03/31/16^	$	150	$	151,500		0.1	%
FINANCIALS — 1.8%
DIVERSIFIED FINANCIAL SERVICES — 1.1%
Capmark Financial Group, U.S. Term Loan, VAR, 5.250%, 03/23/111,4		1,435		587,575		0.5
Capmark Financial Group, Unsecured Bridge Loan, VAR, 5.250%, 03/23/111,4		175		70,875		0.1
CIT Group, Inc., Tranche 3 Term Loan,
VAR, 6.250%, 07/27/15		125		127,897		0.1
VAR, 6.250%, 07/27/15		126		128,592		0.1
VAR, 6.250%, 07/27/15		16		16,738		0.0	12
VAR, 6.250%, 07/27/15		33		33,476		0.0	12
VAR, 6.250%, 07/27/15		30		30,480		0.0	12
VAR, 6.250%, 07/27/15		30		30,480		0.0	12
VAR, 6.250%, 07/27/15		54		54,640		0.1
VAR, 6.250%, 07/27/15		49		49,964		0.1
VAR, 6.250%, 07/27/15		41		42,084		0.1
				1,172,801		1.1
INSURANCE — 0.7%
HMSC Corp., 1st Lien Term Loan, VAR, 2.511%, 04/03/143,9		956		817,789		0.7
Total Financials				1,990,590		1.8
INDUSTRIALS — 2.3%
AIRLINES — 0.9%
Delta Air Lines, Inc., 1st Lien Credit Linked Deposit,
VAR, 0.094%, 04/30/12		72		70,570		0.1
VAR, 2.289%, 04/30/12		413		407,005		0.3
Delta Air Lines, Inc., Term Loan B, VAR, 8.750%, 09/30/13		494		496,939		0.5
				974,514		0.9
BUILDING PRODUCTS — 0.8%
Jacuzzi Brands, Inc., 1st Lien Term Loan B, VAR, 2.538%, 02/07/14		892		725,051		0.6
Jacuzzi Brands, Inc., Synthetic Credit Facility, First Lien, VAR, 0.203%, 02/07/14		81		65,991		0.1

See Notes to Financial Statements.

16

PACHOLDER HIGH YIELD FUND, INC.

Schedule of Portfolio Investments (continued)

As of December 31, 2010

Description	Par (000)		Value		Percent of Net Assets*
BUILDING PRODUCTS (continued)
Jacuzzi Luxco S.A.R.L., New Term Loan, VAR, 4.303%, 11/15/133,9	$	124	$	123,718		0.1	%
				914,760		0.8
COMMERCIAL SERVICES & SUPPLIES — 0.6%
Cenveo Corp., Term Loan, VAR, 6.250%, 12/21/16		200		201,416		0.2
Clarke American Corp., Term Loan B,
VAR, 2.761%, 06/30/14		71		64,199		0.1
VAR, 2.761%, 06/30/14		97		88,116		0.1
VAR, 2.803%, 06/30/14		101		91,640		0.1
VAR, 2.803%, 06/30/14		59		53,247		0.0	12
VAR, 2.803%, 06/30/14		155		140,104		0.1
				638,722		0.6
Total Industrials				2,527,996		2.3
INFORMATION TECHNOLOGY — 2.6%
IT SERVICES — 2.2%
Compucom Systems, Inc., Term Loan, VAR, 3.770%, 09/29/143,9		891		857,780		0.8
First Data Corp., Initial Tranche B-1 Term Loan, VAR, 3.011%, 09/24/14		373		344,298		0.3
First Data Corp., Initial Tranche B-3 Term Loan, VAR, 3.011%, 09/24/14		1,399		1,292,196		1.1
				2,494,274		2.2
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.4%
Freescale Semiconductor, Inc., Extended Maturity Term Loan, VAR, 4.508%, 11/29/13		391		377,516		0.4
Total Information Technology				2,871,790		2.6
MATERIALS — 2.5%
CHEMICALS — 1.5%
AZ Chem U.S., Inc., U.S. Term Loan, VAR, 11/30/16^		135		136,477		0.1
Cristal Inorganic Chemicals (Millenium), 1st Lien Term Loan, VAR, 2.553%, 05/15/14		881		873,442		0.8
Cristal Inorganic Chemicals (Millenium), 2nd Lien Term Loan, VAR, 6.053%, 11/14/143,9		500		493,750		0.5

Description	Par (000)		Value		Percent of Net Assets*
CHEMICALS (continued)
Styron LLC, Term Loan, VAR, 7.500%, 06/17/16	$	122	$	123,551		0.1	%
				1,627,220		1.5
DIVERSIFIED MANUFACTURING — 1.0%
BOC Edwards, 1st Priority Lien Term Loan, VAR, 2.294%, 05/31/14		1,184		1,155,741		1.0
Total Materials				2,782,961		2.5
TELECOMMUNICATION SERVICES — 0.4%
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.4%
Level 3 Communications, Tranche A Term Loan,
VAR, 2.539%, 03/13/14		179		168,695		0.1
VAR, 2.539%, 03/13/14		71		67,478		0.1
Level 3 Communications, Tranche B Term Loan, VAR, 11.500%, 03/13/14		250		269,532		0.2
				505,705		0.4
UTILITIES — 1.5%
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 1.5%
Calpine Corp., 1st Priority Lien Term Loan, VAR, 3.145%, 03/29/14		269		268,528		0.2
Texas Competitive Electric Holdings Co. LLC, Initial Tranche B-2 Term Loan,
VAR, 3.764%, 10/10/14		485		374,532		0.4
VAR, 3.764%, 10/10/14		483		372,862		0.3
Texas Competitive Electric Holdings Co. LLC, Initial Tranche B-3 Term Loan,
VAR, 3.764%, 10/10/14		242		186,868		0.2
VAR, 3.764%, 10/10/14		5		3,945		0.0	12
TPF Generation Holdings LLC, 2nd Lien Term Loan, VAR, 4.553%, 12/15/14		500		456,565		0.4
				1,663,300		1.5
Total Loan Participations & Assignments
(Cost $20,793,040)				21,197,030		18.9

See Notes to Financial Statements.

17

PACHOLDER HIGH YIELD FUND, INC.

Schedule of Portfolio Investments (continued)

As of December 31, 2010

Description	Shares/Par (000)			Value		Percent of Net Assets*
ASSET-BACKED SECURITIES — 1.3%
Countrywide Asset-Backed Certificates, Series 2004-13, Class MV8, VAR, 1.961%, 01/25/353,9	$	115		$	6,102		0.0	%12
Long Beach Mortgage Loan Trust, Series 2004-5, Class M6, VAR, 2.761%, 09/25/343,9		56			7,175		0.0	12
Unipac IX LLC, 13.000%, 04/11/133,9		1,500			1,475,262		1.3
Total Asset-Backed Securities
(Cost $1,639,747)					1,488,539		1.3
Total Fixed Income Investments
(Cost $139,786,768)					141,264,874		126.0
COMMON STOCKS — 7.1%
CONSUMER DISCRETIONARY — 0.3%
AUTO COMPONENTS — 0.0%
Glasstech, Inc., Class C1,3,9		—	11		—		0.0
BROADCASTING & CABLE TV — 0.0%12
Adelphia Recovery Trust3,9		157			2		0.0	12
Adelphia Recovery Trust, Contingent Value1		1,297			32,422		0.0	12
					32,424		0.0	12
LEISURE EQUIPMENT & PRODUCTS — 0.3%
True Temper Holdings, Inc. ADR1,3,9		43	��		343,968		0.3
TEXTILES, APPAREL & LUXURY GOODS — 0.0%
Broder Brothers Co.1,3,9		38			—		0.0
WestPoint International, Inc.1,3,9		28			—		0.0
					—		0.0
Total Consumer Discretionary					376,392		0.3
CONSUMER STAPLES — 1.0%
FOOD PRODUCTS — 0.2%
Eurofresh, Inc., ADR1,3,9		106			219,182		0.2
HOUSEHOLD PRODUCTS — 0.8%
Spectrum Brands Holdings, Inc.1		28			872,666		0.8
Total Consumer Staples					1,091,848		1.0
INDUSTRIALS — 0.3%
AIRLINES — 0.0%12
Delta Air Lines, Inc.1		4			50,728		0.0	12
BUILDING PRODUCTS — 0.2%
Jupiter Holding I Corp.1,3,9		8			187,887		0.2

Description	Shares (000)		Value		Percent of Net Assets*
COMMERCIAL SERVICES & SUPPLIES — 0.1%
Quad/Graphics, Inc.1		3	$	131,619		0.1	%
Total Industrials				370,234		0.3
INFORMATION TECHNOLOGY — 1.0%
COMPUTERS & PERIPHERALS — 0.0%
Stratus Technologies, Inc., ADR1,3,9		8		—		0.0
IT SERVICES — 0.1%
Unisys Corp.1		3		83,211		0.1
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.9%
MagnaChip Semiconductor S.A./MagnaChip Semiconductor Finance Co., (Luxembourg)1,3,9		793		1,030,974		0.9
Total Information Technology				1,114,185		1.0
MATERIALS — 4.1%
CHEMICALS — 1.9%
LyondellBasell Industries N.V., (Netherlands), Class A1		61		2,101,221		1.9
CONSTRUCTION MATERIALS — 0.1%
U.S. Concrete, Inc.1		10		76,761		0.1
METALS & MINING — 0.0%12
Lexington Coal Co.1,3,9		25		27,083		0.0	12
PAPER & FOREST PRODUCTS — 2.1%
AbitibiBowater, Inc.1		45		1,060,088		0.9
Smurfit-Stone Container Corp.1		53		1,356,672		1.2
				2,416,760		2.1
Total Materials				4,621,825		4.1
TELECOMMUNICATION SERVICES — 0.4%
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.4%
AboveNet, Inc.		7		391,214		0.4
XO Holdings, Inc.1		1		356		0.0	12
				391,570		0.4
UTILITIES — 0.0%12
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 0.0%12
GenOn Energy, Inc.1		3		10,085		0.0	12
Total Common Stocks
(Cost $9,029,787)1				7,976,139		7.1

See Notes to Financial Statements.

18

PACHOLDER HIGH YIELD FUND, INC.

Schedule of Portfolio Investments (continued)

As of December 31, 2010

Description	Shares (000)			Value		Percent of Net Assets*
PREFERRED STOCKS — 2.7%
CONSUMER DISCRETIONARY — 0.8%
AUTO COMPONENTS — 0.0%
Glasstech, Inc., Pfd, Series C,1,3,9		—	11	$	—		0.0	%
AUTOMOBILES — 0.3%
General Motors Co., Series B, 4.750%, 12/01/131		5			270,550		0.3
HOUSEHOLD DURABLES — 0.3%
M/I Homes, Inc., Pfd, Series A, 9.750%, 03/15/121,14		21			344,349		0.3
MEDIA — 0.2%
Spanish Broadcasting System, Inc., Pfd1,3,9		481			3,224		0.0	12
Spanish Broadcasting System, Inc., Pfd, Series B, PIK, 10.750%, 03/11/101,3,9,14		—	11		203,010		0.2
					206,234		0.2
Total Consumer Discretionary					821,133		0.8
CONSUMER STAPLES — 0.1%
FOOD PRODUCTS — 0.1%
Eurofresh, Inc., Pfd, ADR1,3,9		—	11		147,688		0.1
FINANCIALS — 1.8%
COMMERCIAL BANKS — 1.4%
CoBank ACB, Pfd, Series D, 11.000%, 10/01/143,9,14		30			1,622,814		1.4
CONSUMER FINANCE — 0.2%
Ally Financial, Inc., 7.000%, 12/31/112,14		—	11		236,289		0.2
DIVERSIFIED FINANCIAL SERVICES — 0.2%
Citi Group Capital XIII, VAR, 7.875%, 10/30/401		7			193,752		0.2
Total Financials					2,052,855		1.8

Description	Shares (000)		Value			Percent of Net Assets*
INFORMATION TECHNOLOGY — 0.0%
COMPUTERS & PERIPHERALS — 0.0%
Stratus Technologies, Inc., ADR1,3,9		2	$	—			0.0	%
Total Preferred Stocks
(Cost $3,614,737)				3,021,676			2.7
Total Equity Investments
(Cost $12,644,524)				10,997,815			9.8
SHORT-TERM INVESTMENT — 0.9%
INVESTMENT COMPANY — 0.9%
JPMorgan Prime Money Market Fund, Institutional Class Shares, 0.100%5,13
(Cost $1,053,355)		1,053		1,053,355			0.9
TOTAL INVESTMENTS
(Cost $153,484,647)				153,316,044			136.7
Preferred Stock and Liabilities in Excess of Other Assets				(41,192,958	)		(36.7	)
Net Assets Applicable to Common Stockholders			$	112,123,086			100.0	%

See Notes to Financial Statements.

19

PACHOLDER HIGH YIELD FUND, INC.

Schedule of Portfolio Investments (concluded)

As of December 31, 2010

ADR American Depositary Receipt

Co. Company

Disc Discount

Guar Guaranteed

Mtg Mortgage

Nt Note

Pfd Preferred

PIK Payment in-kind

Sec’d Secured

Sr Senior

Sub Subordinate

Unsec’d Unsecured

VAR Variable Rate Security. The interest rate shown is the rate in effect as of December 31, 2010.

* Applicable to common stockholders.

¹ Non-income producing security.

² Security is exempt from registration under Rule 144A of the Securities Act of 1933. Unless otherwise indicated, this security has been determined to be liquid under procedures established by the Board of Directors and may be resold in transactions exempt from registration, normally to qualified institutional buyers. These securities amounted to $49,026,546 and 43.7% of net assets applicable to common stockholders.

³ Fair valued security. These securities amounted to $11,178,306 and 10.0% of net assets applicable to common stockholders.

⁴ Security in default.

⁵ Investment in affiliate. Money market fund registered under the Investment Company Act of 1940, as amended, and advised by J.P. Morgan Investment Management Inc.

⁷ Step-up bond. Interest rate is effective rate as of December 31, 2010.

⁹ Security deemed to be illiquid. These securities amounted to $11,178,306 and 10.0% of net assets applicable to common stockholders.

¹⁰ All or a portion of the security is reserved for current or potential holdings of swaps, TBAs, when-issued securities and delayed delivery securities.

¹¹ Amount rounds to less than one thousand (par or shares).

¹² Amount rounds to less than 0.1%.

¹³ The rate shown is the current yield as of December 31, 2010.

¹⁴ Security is perpetual and, thus, does not have a predetermined maturity date. The coupon rate for this security is fixed for a period of time and may be structured to adjust thereafter. The date shown reflects the next call date. The coupon rate shown is the rate in effect as of December 31, 2010.

^ Unsettled security, coupon rate is undetermined at December 31, 2010.

See Notes to Financial Statements.

20

PACHOLDER HIGH YIELD FUND, INC.

Statement of Assets And Liabilities

As of December 31, 2010

ASSETS:
Investments in non-affiliates, at value	$	152,262,689
Investments in affiliates, at value		1,053,355
Total investment securities, at value		153,316,044
Cash		104,928
Receivables:
Investment securities sold		1,868,220
Interest and dividends		2,232,244
Securities lending income		50
Due from Administrator		33,722
Total Assets		157,555,208
LIABILITIES:
Payables:
Dividends on preferred stock		987
Investment securities purchased		2,013,921
Outstanding swap contract, at value		93,260
Accrued liabilities:
Investment advisory fees		192,045
Administration fees		9,645
Custodian and accounting fees		1,028
Trustees’ and Chief Compliance Officer’s fees		1,048
Excise tax payable (Note 1.B.)		59,359
Other		60,829
Total Liabilities		2,432,122
Less: Outstanding Preferred Stock (1,720 shares at $25,000 per share) at liquidation value		43,000,000
Net Assets applicable to common stockholders	$	112,123,086
NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:
Common Stock, $0.01 par value; 49,996,320 shares authorized 12,956,618 shares issued and outstanding	$	129,566
Capital in excess of par		160,192,132
Undistributed net investment income		1,688,060
Accumulated net realized gains (losses)		(49,624,809	)
Net unrealized appreciation (depreciation)		(261,863	)
Total Net Assets applicable to common stockholders	$	112,123,086
Shares Outstanding		12,956,618
Net asset value per Common Share ($112,123,086/12,956,618)	$	8.65
Cost of investments in non-affiliates	$	152,431,292
Cost of investments in affiliates		1,053,355

See Notes to Financial Statements.

Statement of Operations

For the Year Ended December 31, 2010

INVESTMENT INCOME:
Interest income from non-affiliates	$	13,565,496
Dividend income from non-affiliates		661,964
Interest income from affiliates		59
Dividend income from affiliates		2,898
Income from securities lending (net)		22,025
Total investment income		14,252,442
EXPENSES:
Investment advisory fees (Note 6)		2,059,474
Administration fees (Note 6)		150,631
Custodian and accounting fees (Note 6)		35,056
Audit fees		62,113
Legal fees		37,033
Directors’ and Chief Compliance Officer’s fees		600
Printing and mailing costs		121,690
Transfer agent fees		12,461
Stock exchange listing fees		20,062
Excise tax expense		59,359
Insurance		3,859
Operating expenses		2,562,338
Commissions on auction rate preferred stock		91,265
Total expenses		2,653,603
Less amounts waived		(5,919	)
Less expense reimbursement		(33,722	)
Net expenses		2,613,962
Net investment income (loss)		11,638,480
REALIZED/UNREALIZED GAINS (LOSSES):
Net realized gain (loss) on transactions from:
Investments in non-affiliates		(2,782,201	)
Swaps		(556,181	)
Net realized gain (loss)		(3,338,382	)
Change in net unrealized appreciation (depreciation) of:
Investments in non-affiliates		14,345,729
Swaps		491,201
Change in net unrealized appreciation (depreciation)		14,836,930
Net realized/unrealized gains (losses)		11,498,548
Change in net assets resulting from operations	$	23,137,028
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS FROM NET INVESTMENT INCOME		(108,868	)
NET INCREASE/(DECREASE) IN NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS RESULTING FROM OPERATIONS	$	23,028,160

See Notes to Financial Statements.

21

PACHOLDER HIGH YIELD FUND, INC.

Statement of Changes in Net Assets

For the Periods Indicated

	Year Ended 12/31/2010			Year Ended 12/31/2009
INCREASE/(DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	11,638,480		$	9,804,535
Net realized gain (loss)		(3,338,382	)		(6,776,763	)
Change in net unrealized appreciation (depreciation)		14,836,930			52,986,626
Distributions to preferred stockholders from net investment income		(108,868	)		(115,456	)
Net increase/(decrease) in net assets resulting from operations applicable to common stockholders		23,028,160			55,898,942
DISTRIBUTIONS TO COMMON STOCKHOLDERS FROM:
Net investment income		(11,852,808	)		(8,547,460	)
Total distributions to common stockholders		(11,852,808	)		(8,547,460	)
FUND SHARE TRANSACTIONS (NOTE 2):
Value of 5,713 and 2,494 shares issued in reinvestment of dividends to common stockholders in 2010 and 2009, respectively		47,803			11,098
Total increase in net assets derived from fund share transactions		47,803			11,098
Total net increase/(decrease) in net assets applicable to common stockholders		11,223,155			47,362,580
NET ASSETS APPLICABLE TO COMMON STOCKHOLDERS:
Beginning of period		100,899,931			53,537,351
End of period	$	112,123,086		$	100,899,931
Undistributed Net Investment Income	$	1,688,060		$	2,354,145

See Notes to Financial Statements.

Statement of Cash Flows

For the Year Ended December 31, 2010

INCREASE (DECREASE) IN CASH
Cash flows provided (used) by operating activities:
Net increase/decrease in net assets from operations	$	23,137,028
Adjustments to reconcile net increase/decrease in net assets from operations to net cash provided (used) by operating activities:
Purchase of investment securities		(87,203,219	)
Proceeds from disposition of investment securities		88,638,461
Proceeds from disposition of short-term investments, net		2,512,089
Proceeds from collateral for securities on loan, net		5,079,145
Unrealized appreciation/depreciation on swap contracts		(491,201	)
Unrealized appreciation/depreciation on investments		(14,345,729	)
Net realized gain/loss on investments		2,782,201
Net realized gain/loss on swap contracts		556,181
Decrease in due from Advisor and Affiliates		98,915
Increase in receivable for investments sold		(271,953	)
Increase in interest and dividends receivable		(76,766	)
Decrease in securities lending income receivable		3,216
Decrease in payable for investments purchased		(1,347,950	)
Decrease in collateral for securities lending payable		(5,079,145	)
Decrease in excise tax payable		(26,868	)
Decrease in accrued expenses and other liabilities		(813,684	)
Net (amortization)/accretion of income		(1,290,121	)
Net cash provided (used) by operating activities		11,860,600
Cash flows provided (used) by financing activities:
Cash distributions paid to shareholders (net of reinvestments of $47,803)		(11,805,005	)
Cash distributions paid to preferred stockholders		(108,289	)
Net cash provided (used) by financing activities		(11,913,294	)
Net increase/decrease in cash		(52,694	)
Cash:
Beginning of period		157,622
End of period	$	104,928

Supplemental information:

The Fund paid $84,457 in excise taxes.

For purposes of reporting the Statement of Cash Flows, the Fund considers all cash accounts that are not subject to withdrawal restrictions or penalties to be cash equivalents.

See Notes to Financial Statements.

22

PACHOLDER HIGH YIELD FUND, INC.

Financial Highlights

(Contained below is per share operating performance data for a share of common stock outstanding, total return performance, ratios to average net assets and other supplemental data. This information has been derived from information provided in the financial statements calculated using average shares outstanding and market price data for the Fund’s shares.)

	For the Year Ended December 31,
	2010			2009			2008			2007			2006
Net asset value, beginning of period	$	7.79		$	4.14		$	9.15		$	9.95		$	8.94
Net investment income		0.90			0.76			1.21			1.21			1.09
Net realized and unrealized gain/(loss) on investments .		0.89			3.56			(5.18	)		(0.84	)		1.07
Distributions to preferred stockholders from net investment income		(0.01	)		(0.01	)		(0.16	)		(0.27	)		(0.25	)
Net increase/(decrease) in net asset value resulting from operations		1.78			4.31			(4.13	)		0.10			1.91
Distributions to Common Stockholders from:
Net investment income		(0 .92	)		(0 .66	)		(0 .88	)		(0 .90	)		(0 .90	)
Total distributions to common stockholders		(0 .92	)		(0 .66	)		(0 .88	)		(0 .90	)		(0 .90	)
Net asset value, end of period	$	8 .65		$	7 .79		$	4 .14		$	9 .15		$	9.95
Market value per share, end of period	$	8 .45		$	7 .38		$	3 .68		$	8 .10		$	9 .80
TOTAL INVESTMENT RETURN:(1)
Based on market value per common share(2)		27 .90	%		126 .57	%		(47.76	)%		(9 .01	)%		26 .78	%
Based on net asset value per common share(3)(4)		24 .03	%		112 .51	%		(47.98	)%		1 .24	%		22 .38	%
RATIOS TO AVERAGE NET ASSETS:(5)(6)
Net expenses (including expenses related to leverage)(7)(8)		1.74	%(11)		1.73	%(11)		0.59	%		1.27	%		1.95	%
Applicable to common stockholders only(7)(9)		2.43	%(12)		2.70	%(12)		0.99	%		1.92	%		3.01	%
Net expenses (prior to expenses related to leverage)(7)(8)		1.67	%(11)		1.64	%(11)		0.49	%		1.18	%		1.86	%
Applicable to common stockholders only(7)(9)		2.34	%(12)		2.56	%(12)		0.82	%		1.79	%		2.87	%
Net investment income(9)		10 .81	%		12 .80	%		16 .22	%		12 .18	%		11 .61	%
SUPPLEMENTAL DATA:
Net assets at end of period, net of preferred stock (000).	$	112,123		$	100,900		$	53,537		$	118,402		$	128,712
Portfolio turnover rate		58	%		63	%		36	%		64	%		75	%
SENIOR SECURITIES:
Number of preferred shares outstanding at end of period		1,720			1,720			1,720			2,640			2,640
Asset coverage per share of preferred stock outstanding at end of period(10)	$	90,188		$	83,663		$	56,126		$	69,849		$	73,755
Involuntary liquidation preference and average market value per share of preferred stock	$	25,000		$	25,000		$	25,000		$	25,000		$	25,000

¹ Total investment return excludes the effects of commissions. Dividends and distributions to common stockholders, if any, are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. Rights offerings, if any, are assumed, for purposes of this calculation, to be fully subscribed under the terms of the rights offering.

² Assumes an investment at the common share market value at the beginning of the period indicated and sale of all shares at the closing common share market value at the end of the period indicated. Dividends and distributions are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund’s dividend reinvestment plan.

³ Assumes an investment at the common share net asset value at the beginning of the period indicated and sale of all shares at the closing common share net asset value at the end of the period indicated. Dividends and distributions are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund’s dividend reinvestment plan.

⁴ Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns as reported in the shareholder letter contained in this report.

⁵ Ratios do not include the effect of dividends to preferred stock.

⁶ See Note 6 in the Notes to Financial Statements.

⁷ Includes earnings credits and interest expense, each of which is less than 0.01%, if applicable or unless otherwise noted.

⁸ Ratios calculated relative to the average net assets of both common and preferred stockholders.

⁹ Ratios calculated relative to the average net assets of common stockholders only.

¹⁰ Calculated by subtracting the Fund’s total liabilities (not including the preferred stock) from the Fund’s total assets, and dividing this by the number of preferred shares outstanding.

¹¹ The Advisor and Administrator voluntarily agreed to waive/reimburse fees during the years ended December 31, 2010 and 2009. Without these waivers/reimbursements, the ratios would have been higher by less than 0.03% and 0.17%, respectively.

¹² The Advisor and Administrator voluntarily agreed to waive/reimburse fees during the years ended December 31, 2010 and 2009. Without these waivers/reimbursements, the ratios would have been higher by 0.04% and 0.27%, respectively.

See Notes to Financial Statements.

23

PACHOLDER HIGH YIELD FUND, INC.

Notes to Financial Statements

1. SIGNIFICANT ACCOUNTING POLICIES— Pacholder High Yield Fund, Inc. (the “Fund”) is a closed-end, diversified management investment company with a leveraged capital structure. The Fund’s investment objective is to provide a high level of total return through current income and capital appreciation. Under normal circumstances, the Fund invests at least 80% of the value of its assets in high yield debt securities. The Fund invests primarily in fixed income securities of domestic companies. The Fund was incorporated under the laws of the State of Maryland in August 1988.

The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies are in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates.

A. SECURITY VALUATIONS— Fixed income securities (other than certain short-term investments maturing in less than 61 days) are valued each day based on quotations received from third party broker-dealers of comparable securities or independent or affiliated pricing services approved by the Board of Directors. The broker-dealers or pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the broker-dealer or pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances, where sufficient market activity may not exist or is limited, the broker-dealers or pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, option-adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Generally, short-term investments of sufficient credit quality maturing in less than 61 days are valued at amortized cost, which approximates market value. Certain investments of the Fund may, depending upon market conditions, trade in relatively thin markets and/or in markets that experience significant volatility. As a result of these conditions, the prices used by the Fund to value securities may differ from the value that would be realized if these securities were sold, and the differences could be material. Futures and options shall generally be valued on the basis of available market quotations. Swaps and other derivatives are valued daily, primarily using independent or affiliated pricing services approved by the Board of Directors. If valuations are not available from such services or values received are deemed not representative of market value, values will be obtained from a third party broker-dealer or counterparty. Investments in other open-end investment companies are valued at such investment company’s current day closing net asset value per share. Equity securities listed on a North American, Central American, South American or Caribbean securities exchange shall generally be valued at the last sale price on the exchange on which the security is principally traded that is reported before the time when the net assets of the Fund are valued. The value of securities listed on The NASDAQ Stock Market LLC shall generally be the NASDAQ Official Closing Price.

Securities or other assets for which market quotations are not readily available or for which market quotations do not represent the value at the time of pricing (including certain illiquid securities) are fair valued in accordance with procedures established by and under the supervision and responsibility of the Board of Directors. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. It is possible that the estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and such differences could be material. At December 31, 2010, $11,261,517 of the Fund’s investments were fair valued.

Valuations reflected in this report are as of the report date. As a result, changes in valuation due to market events and/or issuer related events after the report date and prior to issuance of the report are not reflected herein.

The various inputs that are used in determining the fair value of the Fund’s investments are summarized into the three broad levels listed below.

• Level 1 — quoted prices in active markets for identical securities

• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

• Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

A financial instrument’s level within the fair value heirachy is based on the lowest level of any input both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

24

PACHOLDER HIGH YIELD FUND, INC.

Notes to Financial Statements (continued)

The following table represents each valuation input by sector as presented in the Schedule of Portfolio Investments (“SOI”):

	Level 1 Quoted prices			Level 2 Other significant observable inputs		Level 3 Significant unobservable inputs			Total
Investments in Securities
Common Stocks
Consumer Discretionary	$	—		$	32,422	$	343,970		$	376,392
Consumer Staples		872,666			—		219,182			1,091,848
Industrials		182,347			—		187,887			370,234
Information Technology		83,211			—		1,030,974			1,114,185
Materials		4,594,742			—		27,083			4,621,825
Telecommunication Services		391,570			—		—			391,570
Utilities		10,085			—		—			10,085
Total Common Stocks		6,134,621			32,422		1,809,096			7,976,139
Preferred Stocks			��
Consumer Discretionary		—			614,899		206,234			821,133
Consumer Staples		—			—		147,688			147,688
Financials		193,752			236,289		1,622,814			2,052,855
Information Technology		—			—		—	(a)		—	(a)
Total Preferred Stocks		193,752			851,188		1,976,736			3,021,676
Debt Securities
Asset-Backed Securities		—			—		1,488,539			1,488,539
Corporate Bonds
Consumer Discretionary		—			36,581,622		424,142			37,005,764
Consumer Staples		—			4,585,190		406,725			4,991,915
Energy		—			12,391,951		—			12,391,951
Financials		—			12,826,468		880,000			13,706,468
Health Care		—			4,082,538		932,291			5,014,829
Industrials		—			12,884,866		465,443			13,350,309
Information Technology		—			5,476,738		418,093			5,894,831
Materials		—			10,148,909		84,204			10,233,113
Telecommunication Services		—			9,102,519		—			9,102,519
Utilities		—			6,887,606		—			6,887,606
Total Corporate Bonds		—			114,968,407		3,610,898			118,579,305
Loan Participations & Assignments
Consumer Discretionary		—			8,217,094		—			8,217,094
Consumer Staples		—			486,094		—			486,094
Energy		—			151,500		—			151,500
Financials		—			1,172,801		817,789			1,990,590
Industrials		—			2,404,278		123,718			2,527,996
Information Technology		—			2,014,010		857,780			2,871,790
Materials		—			2,289,211		493,750			2,782,961
Telecommunication Services		—			505,705		—			505,705
Utilities		—			1,663,300		—			1,663,300
Total Loan Participations & Assignments		—			18,903,993		2,293,037			21,197,030

25

PACHOLDER HIGH YIELD FUND, INC.

Notes to Financial Statements (continued)

	Level 1 Quoted prices		Level 2 Other significant observable inputs			Level 3 Significant unobservable inputs		Total
Short-Term Investments
Investment Companies	$	1,053,355	$	—		$	—	$	1,053,355
Total Investments in Securities	$	7,381,728	$	134,756,010		$	11,178,306	$	153,316,044
Depreciation in Other Financial Instruments
Swaps	$	—	$	(93,260	)	$	—	$	(93,260	)

^(a) Security has a zero value.

There were no significant transfers between Levels 1 and 2 during the year ended December 31, 2010.

The following is a summary of investments for which significant unobservable inputs (Level 3) were used in determining fair value:

	Balance as of 12/31/09		Realized gain (loss)			Change in unrealized appreciation (depreciation)			Net amortization (accretion)			Net purchases (sales)			Transfers into Level 3		Transfers out of Level 3			Balance as of 12/31/10
Investments in Securities
Asset-Backed Securities	$	1,475,849	$	—		$	10,756		$	8,609		$	(6,675	)	$	—	$	—		$	1,488,539
Common Stocks — Consumer Discretionary		300,973		—			42,997			—			—			—		—			343,970
Common Stocks — Consumer Staples		52,943		—			1,802,214			—			(1,635,975	)		—		—			219,182
Common Stocks — Industrials		828,416		878,484			(442,336	)		—			(1,076,677	)		—		—			187,887
Common Stocks — Information Technology		111,036		—			919,938			—			—	(a)		—		—			1,030,974
Common Stocks — Materials		89,183		(208,800	)		191,700			—			(45,000	)		—		—			27,083
Corporate Bonds — Consumer Discretionary		291,226		—			72,023			(1,192	)		62,085			—		—			424,142
Corporate Bonds — Consumer Staples		2,518,525		(826,583	)		864,839			3,303			(2,153,359	)		—		—			406,725
Corporate Bonds — Financials		730,000		—			150,398			(398	)		—			—		—			880,000
Corporate Bonds — Health Care		950,328		—			(298,590	)		(150	)		280,703			—		—			932,291
Corporate Bonds — Industrials		1,873,259		(2,591,222	)		3,012,177			(26,050	)		(2,328,382	)		600,000		(74,339	)		465,443
Corporate Bonds — Information Technology		405,358		—			12,735			—			—			—		—			418,093
Corporate Bonds — Materials		871,033		—			(953,770	)		—			—			1,037,974		(871,033	)		84,204
Loan Participations & Assignments — Financials		—		—			44,236			—			(6,285	)		779,838		—			817,789
Loan Participations & Assignments — Industrials		828,353		(1,059,640	)		996,925			—			27,590			—		(669,510	)		123,718
Loan Participations & Assignments — Information Technology		2,046,167		—			510,993			4,813			(1,704,193	)		—		—			857,780

26

PACHOLDER HIGH YIELD FUND, INC.

Notes to Financial Statements (continued)

	Balance as of 12/31/09			Realized gain (loss)			Change in unrealized appreciation (depreciation)		Net amortization (accretion)			Net purchases (sales)			Transfers into Level 3		Transfers out of Level 3			Balance as of 12/31/10
Loan Participations & Assignments — Materials	$	1,185,084		$	—		$	98,750	$	—		$	—		$	—	$	(790,084	)	$	493,750
Preferred Stocks — Consumer Discretionary		77,723			—			128,511		—			—			—		—			206,234
Preferred Stocks — Consumer Staples		139,000			—			—		—			8,688			—		—			147,688
Preferred Stocks — Financials		421,800			49,843			101,710		(85	)		(443,893	)		1,493,439		—			1,622,814
Preferred Stocks — Information Technology		—			—			—		—			—	(a)		—		—			—	(a)
Warrants — Industrials		—	(a)		—			—		—			—	(a)		—		—			—
Warrants — Telecommunication Services		41,530			(18,792	)		167,070		—			(189,808	)		—		—			—
Total	$	15,237,786		$	(3,776,710	)	$	7,433,276	$	(11,150	)	$	(9,211,181	)	$	3,911,251	$	(2,404,966	)	$	11,178,306

^(a) Security has zero value.

Transfers into, and out of, Level 3 are valued utilizing values as of the beginning of the period.

Transfers from Level 2 to Level 3 or from Level 3 to Level 2 are due to a decline or an increase in market activity (e.g. frequency of trades), which resulted in a lack of or increase in available market inputs to determine price.

The change in unrealized appreciation (depreciation) attributable to securities owned at December 31, 2010, which were valued using significant unobservable inputs (Level 3) amounted to $3,314,999. This amount is included in Change in net unrealized appreciation (depreciation) of investments in non-affiliates on the Statement of Operations.

B. FEDERAL TAXES— It is the Fund’s policy to make distributions to stockholders of net investment income and net realized capital gains to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies.

The Fund intends to continue to qualify as a regulated investment company by complying with the appropriate provisions of the Internal Revenue Code and to distribute to stockholders each year substantially all of its taxable income, if any, including realized gains on investments.

The Fund reserves the right to retain investment company taxable income and/or net capital gains. As such, excise taxes may be recognized and paid on undistributed income and capital gain amounts. For the tax year ended 2010, the Fund retained approximately $1,712,162 in income and incurred an excise tax of $59,359.

Distributions paid by the Fund are subject to recharacterization for tax purposes. A portion of dividends paid may consist of net realized gains. To the extent that capital loss carryforwards are available to offset the distribution of capital gains but are not utilized at the end of the Fund’s fiscal year, such capital gain distributions may be taxable to stockholders as ordinary income.

The amount of dividends and distributions from net investment income and net realized capital gains is determined in accordance with Federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. To the extent these “book/tax” differences are permanent in nature (i.e., that they result from other than timing of recognition — “temporary differences”), such amounts are reclassified within the capital accounts based on their Federal tax-basis treatment.

27

PACHOLDER HIGH YIELD FUND, INC.

Notes to Financial Statements (continued)

The following amounts were reclassified within the capital accounts:

Capital in Excess of Par Value	Accumulated Undistributed/ (Overdistributed) Net Investment Income			Accumulated Net Realized Gain/Loss From Security Transactions
$(8,194,832)	$	(342,889	)	$	8,537,721

The reclassification for the Fund relates primarily to expiration of capital loss carryforwards.

The tax character of distributions paid during the years ended December 31, 2010 and 2009 was as follows:

	2010		2009
Common Stockholder Ordinary Income	$	11,852,808	$	8,547,460
Preferred Stockholder Ordinary Income	$	108,868	$	115,456

The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits or losses will significantly change in the next twelve months. However, the Fund’s conclusions may be subject to future review based on changes in, or the interpretation of, the accounting standards or tax laws and regulations. The Fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.

C. SECURITIES TRANSACTIONS AND INVESTMENT INCOME— Investment transactions are accounted for on the date the securities are purchased or sold (trade date). Realized gains and losses on securities transactions are determined on an identified cost basis. Interest income is determined on the basis of coupon interest accrued using the effective interest method adjusted for amortization of premiums and accretion of discounts. Dividend income is recorded on the ex-dividend date.

D. SECURITIES LENDING— The Fund may lend securities to brokers approved by J.P. Morgan Investment Management Inc. (“JPMIM” or the “Advisor”) in order to generate additional income. JPMorgan Chase Bank, N.A. (“JPMCB”), an affiliate of the Fund, serves as lending agent for the Fund pursuant to an Amended and Restated Securities Lending Agreement effective February 9, 2010 (“Securities Lending Agreement”). Securities loaned are collateralized by cash, which is invested in Capital Shares of the JPMorgan Prime Money Market Fund. Upon termination of a loan, the Fund is required to return to the borrower the posted cash collateral. Loans are subject to termination by the Fund or the borrower at any time.

Securities lending income is comprised of income earned on cash collateral investments (“Collateral Investments”), net of a rebate received from or paid to borrowers for use of cash collateral and lending agent fees. This amount is recorded as Income from securities lending (net) on the Statement of Operations. The Fund also receives payments from the borrower during the period of the loan, equivalent to dividends and interest earned on the securities loaned, which are recorded as Dividend or Interest income, respectively, on the Statement of Operations. For the year ended December 31, 2010, the Fund earned $5,060 from the investment of cash collateral, prior to rebates or fees, from an investment in an affiliated fund as described below.

At the inception of a loan, securities are exchanged for cash collateral equal to at least 102% of the value of loaned U.S. dollar-denominated securities, plus accrued interest, and 105% of the value of loaned non-dollar denominated securities, plus accrued interest. The Securities Lending Agreement requires that the loaned securities be marked to market on a daily basis and additional cash collateral is requested from borrowers when the cash received from borrowers becomes less than 102% and 105% of the value of loaned U.S. dollar-denominated and non-dollar denominated securities, respectively, subject to certain de minimis guidelines.

The value of the cash collateral received is recorded as a liability on the Statement of Assets and Liabilities and details of Collateral Investments are disclosed in the SOI. At December 31, 2010, the Fund did not have any outstanding securities on loan.

The Fund bears the risk of loss associated with the Collateral Investments and is not entitled to additional collateral from the borrower to cover any such losses. To the extent that the value of the Collateral Investments declines below the amount owed to a borrower, the Fund may incur losses that exceed the amount it earned on lending the security. Upon termination of a loan, the Fund may use leverage (borrow money) to repay the borrower for cash collateral posted, if the Advisor does not believe that it is prudent to sell the Collateral Investments to fund the payment of this liability.

28

PACHOLDER HIGH YIELD FUND, INC.

Notes to Financial Statements (continued)

Securities lending also involves counterparty risks, including the risk that the loaned securities may not be returned in a timely manner or at all. Subject to certain conditions, JPMCB has agreed to indemnify the Fund from losses resulting from a borrower’s failure to return a loaned security.

The Advisor waived fees associated with the Fund’s investment in JPMorgan Prime Money Market Fund in the amount of $3,197 for the year ended December 31, 2010. This amount offsets the administration fees and shareholder servicing fees incurred by JPMorgan Prime Money Market Fund related to the Fund’s investment in such fund. A portion of the waiver is voluntary.

Under the Securities Lending Agreement, JPMCB is entitled to a fee paid monthly in arrears equal to: (i) 0.03% of the average dollar value of the loans of U.S. dollar-denominated securities outstanding during a given month; and (ii) 0.09% of the average dollar value of loans of non-dollar-denominated securities outstanding during a given month.

The Fund incurred lending agent fees to JPMCB in the amount of $1,082 for the year ended December 31, 2010.

E. EXPENSES AND DISTRIBUTIONS— Expenses are accrued as incurred. Dividends to common stockholders are paid from net investment income monthly and distributions of net realized capital gains, if any, are paid at least annually. Dividends to preferred stockholders are accrued daily based on a variable interest rate set at weekly auctions or, in the absence of a successful auction, at a maximum rate as calculated in accordance with the Fund’s Articles Supplementary for Auction Rate Cumulative Preferred Stock and are paid weekly from net investment income. Distributions are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles.

F. WHEN, AS AND IF ISSUED SECURITIES— The Fund may engage in “when-issued” or “delayed delivery” transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis begin earning interest on the settlement date.

The Fund had no when-issued or delayed-delivery purchase commitments as of December 31, 2010.

G. LOAN PARTICIPATIONS AND ASSIGNMENTS— The Fund may invest in loan participations and assignments of all or a portion of the loans. When the Fund purchases a loan participation, the Fund typically enters into a contractual relationship with the lender or third party selling such participations (“Selling Participant”), but not the borrower. In contrast, the Fund has direct rights against the borrower on a loan when it purchases an assignment; provided, however, that the Fund’s rights may be more limited than the lender from which it acquired the assignment and the Fund may be able to enforce its rights only through an administrative agent. As a result, the Fund assumes the credit risk of the Borrower and the Selling Participant and any other persons interpositioned between the Fund and the Borrower (“Intermediate Participants”). Although certain loan assignments or participations are secured by collateral, the Fund could experience delays or limitations in realizing on such collateral or have its interest subordinated to other indebtedness of the obligor. In addition, loan assignments and participations are vulnerable to market conditions such that economic conditions or other events may reduce the demand for loan assignments and participations and certain loan assignments and participations which were liquid, when purchased, may become illiquid.

The Fund segregates sufficient liquid assets for unfunded and funded commitments that will settle on future dates.

H. UNFUNDED COMMITMENTS— The Fund may enter into commitments to buy and sell investments including commitments to buy loan assignments and participations to settle on future dates as part of its normal investment activities. Unfunded commitments are generally traded and priced as part of a related loan participation or assignment (Note 1G). The value of the unfunded portion of the investment is determined using a pro-rata allocation, based on its par value relative to the par value of the entire investment. The unrealized appreciation/depreciation from unfunded commitments is reported in the Statement of Assets and Liabilities. Credit risks exist on these commitments to the extent of any difference between the sales price and current value of the underlying securities sold. Market risk exists on these commitments to buy to the same extent as if the securities were owned on a settled basis and gains and losses are recorded and reported in the same manner. However, during the commitment period, these investments earn no interest or dividends.

At December 31, 2010, the Fund did not have any outstanding unfunded loan commitments.

29

PACHOLDER HIGH YIELD FUND, INC.

Notes to Financial Statements (continued)

2. COMMON STOCK— At December 31, 2010, there were 49,996,320 shares of common stock with a $.01 par value authorized and 12,956,618 shares outstanding. During the year ended December 31, 2010, and the year ended December 31, 2009, the Fund issued 5,713 and 2,494 shares of common stock, respectively, in connection with its dividend reinvestment plan.

3. PREFERRED STOCK— On June 29, 2001, the Fund issued shares of Series W Auction Rate Cumulative Preferred Stock (“ARPS”) at an offering price of $25,000 per share. Dividends on these shares are paid weekly at an annual rate determined by a weekly auction or, in the absence of a successful auction, at a maximum rate as calculated in accordance with the Fund’s Articles Supplementary for Auction Rate Cumulative Preferred Stock. In general, the holders of the ARPS and the common stock vote together as a single class, except that the ARPS stockholders, as a separate class, vote to elect two members of the Board of Directors. The ARPS has a liquidation value of $25,000 per share, plus accumulated and unpaid dividends. At December 31, 2010, accrued ARPS dividends were $987.

The Fund is subject to certain limitations and restrictions associated with outstanding shares of ARPS, including maintaining an asset coverage ratio of 200% for such shares. Failure to comply with these limitations and restrictions could preclude the Fund from declaring any dividends or distributions to common stockholders or repurchasing common shares and/or could trigger the mandatory redemption of Preferred Stock at their liquidation value.

The weekly auction for the ARPS issued by the Fund has failed since February 13, 2008, due to insufficient demand (bids to buy shares) to meet supply (shares offered for sale) at the auction. Holders of preferred shares who wish to sell will not be able to do so until there is a successful auction with sufficient demand for the shares. Failed auctions are not considered a default by the Fund and do not alter the credit quality of the ARPS. However, failed auctions may increase the cost of the Fund’s leverage and decrease the income available for common stockholders. ARPS holders have continued to receive dividends at the “maximum rate” set on the date of the failed auction, and the redemption price of $25,000 per share (plus accumulated but unpaid dividends, if any) is unaffected. Based on the rating assigned to the Fund’s ARPS, the maximum rate may range from 150%-275% of the “AA” Financial Composite Commercial Paper Rate as of a given auction date. The maximum rate incurred during the year ended December 31, 2010, ranged from 0.120% to 0.452%. The maximum rate as of the February 16, 2011 auction was 0.26%, which is 150% of the “AA” Financial Composite Commercial Paper Rate on that date.

See Footnote 4 for discussion of interest rate swaps used to partially hedge the ARPS dividend payment obligations.

4. INTEREST RATE SWAPS— Interest rate swaps are agreements between the counterparties to exchange periodic interest payments based on interest rates. One cash flow stream will typically be a floating rate payment based upon a specified interest rate while the other is typically a fixed interest rate.

The Fund entered into interest payment swap arrangements with Citibank, N.A. New York (“Citibank”) for the purpose of partially hedging its dividend payment obligations with respect to the ARPS.

The Fund may be subject to various risks from the use of interest rate swaps including: (i) the risk that changes in the value of an interest rate swap may not correlate perfectly with the underlying asset, rate or index; (ii) counterparty credit risk related to the failure, by the counterparty to the swap, to perform under the terms of the contract; (iii) liquidity risk related to the lack of a liquid market for these contracts allowing the Fund to close out its position(s); and, (iv) documentation risk relating to disagreement over contract terms. Investing in swaps also results in a form of leverage and as such, the Fund’s risk of loss associated with these instruments may exceed their value, as recorded in the Statement of Assets and Liabilities.

The table below discloses the volume of the Fund’s derivatives activities during the year ended December 31, 2010:

Interest Rate Swap Contracts:
Average Notional Balance Long	$	11,923,077
Ending Notional Balance Long		5,000,000

Pursuant to each of the swap arrangements, the Fund makes payments to Citibank on a monthly basis at fixed annual rates. In exchange for such payments Citibank makes payments to the Fund on a monthly basis at a variable rate determined with reference to the one month London Interbank Offered Rate (LIBOR). The variable rates ranged from 0.228% to 0.354% during the year ended December 31, 2010.

30

PACHOLDER HIGH YIELD FUND, INC.

Notes to Financial Statements (continued)

The effective date, upfront premiums, notional contract amount, maturity, fixed and floating annual rates and unrealized appreciation/depreciation of the swaps at December 31, 2010 are as follows:

Effective Date

Upfront Premiums (Paid)/ Received

Notional Contract Amount

Maturity

Payments Made by the Fund

Payments Received by the Fund

Floating Annual Rate*

Unrealized Appreciation/ (Depreciation)

11/30/2007

—

$

5 Million

06/01/11

4.000% monthly

1 month LIBOR monthly

0.261

%

$

(93,260

)

* Represents rate in effect at December 31, 2010.

For the year ended December 31, 2010, the Fund’s receipts under the swap agreements were less than the amount paid and accrued to Citibank by $556,181 and are shown in net realized gain (loss) in the accompanying Statement of Operations.

The estimated fair value of the interest rate swap agreement at December 31, 2010, amounted to approximately $93,260 in net unrealized depreciation and is included in the accompanying Statement of Assets and Liabilities.

5. PURCHASES AND SALES OF SECURITIES— Purchases and sales of securities (excluding short-term securities) for the year ended December 31, 2010, aggregated $87,203,219 and $88,638,461, respectively. During the year ended December 31, 2010, there were no purchases or sales of U.S. Government securities.

6. TRANSACTIONS WITH INVESTMENT ADVISOR, ADMINISTRATOR, ACCOUNTING SERVICES AGENT AND CUSTODIAN— JPMIM, an indirect, wholly-owned subsidiary of JPMorgan Chase & Co., serves as investment advisor to the Fund under an Investment Advisory Agreement (the “Advisory Agreement”), which was approved by shareholders at the Annual Meeting held on April 22, 2009 and which became effective on May 1, 2009. Under the Advisory Agreement, JPMIM is entitled to receive an annual investment advisory fee (the “Performance Fee”), computed and paid monthly after the end of each calendar month, at a rate that increases or decreases from a “fulcrum fee” of 0.90% of the Fund’s average net assets over a rolling 12-month period. The increase or decrease is calculated by comparing the total return investment performance of the Fund (net of all fees and expenses, including the advisory fee) for the prior 12-month period (the “Fund Return”) to the percentage change in the Credit Suisse First Boston High Yield Index, Developed Countries Only (the “Index”) for the same period. The fee rate is 0.90% of the Fund’s average net assets if the performance of the Fund Return equals the Index Return. The fee rate increases or decreases from the 0.90% “fulcrum fee” by 10% of the difference between the Fund Return and the Index Return, up to the maximum fee rate of 1.40% or down to the minimum fee rate of 0.40%. The fee rate is calculated monthly based on the performance of the Fund compared to the Index during the rolling twelve month period. This rate is applied to the average net assets (defined as the total assets of the Fund minus liabilities other than the principal amount of any outstanding senior securities representing indebtedness and the liquidation preference of the ARPS) during the entire 12-month period. The compensation due to the Advisor after the end of each month shall be equal to 1/12th of the amount of the advisory fee calculated as stated above.

During the 12-month period immediately following May 1, 2009 (the “Transition Period”), the Fund paid JPMIM the minimum fee payable under the Advisory Agreement and paid JPMIM any balance due based on the Fund’s investment performance during the Transition Period upon completion of such period.

The effective advisory fee rate calculated for the annual period ended December 31, 2010, was an annual effective rate of 1.40%. Advisory fees calculated for the annual period ended December 31, 2010, resulted in a net expense to the Fund of $2,059,474.

The Fund has an administrative services agreement with JPMorgan Funds Management, Inc. (the “Administrator” or “JPMFM”) (an affiliate of JPMIM) pursuant to which the Administrator provides administrative services to the Fund. Under the agreement, the Administrator receives from the Fund a fee, accrued at least weekly and paid monthly, at the annual rate of 0.10% of the average weekly net assets of the Fund. At December 31, 2010, accrued administrative fees were $9,645.

Effective January 2008, JPMFM and JPMIM have agreed that JPMFM will not increase the 10 basis point fee payable under the Fund’s administrative services contract through December 31, 2012.

31

PACHOLDER HIGH YIELD FUND, INC.

Notes to Financial Statements (continued)

J.P. Morgan Investor Services, Co. (“JPMIS”), an indirect, wholly-owned subsidiary of JPMorgan Chase & Co., is the Fund’s sub-administrator. For its services as sub-administrator, JPMIS receives a portion of the fees payable to the Administrator.

The Fund has a Global Custody and Fund Accounting Agreement (the “Agreement”) with JPMCB. For providing custody services under the Agreement, JPMCB is entitled to a fee from the Fund, accrued weekly and paid monthly. The amounts paid directly to JPMCB by the Fund for custody and accounting services are included in Custodian and accounting fees in the Statement of Operations. The custodian fees may be reduced by credits earned by the Fund, based on uninvested cash balances held by the custodian. Such earnings credits are presented separately in the Statement of Operations.

Interest expense, if any, paid to the custodian related to cash overdrafts is included in Interest expense to affiliates in the Statement of Operations.

For the year ended December 31, 2010, the Administrator voluntarily reimbursed fees in the amount of $33,722. The Administrator does not expect the Fund to repay such reimbursed fees in future years.

In addition, effective January 2008, JPMFM and JPMIM have agreed to cap director compensation expenses and legal fees payable by the Fund through December 31, 2012, at the amount of such compensation and fees for 2007 (exclusive of extraordinary director compensation and legal fees attributable to the 2008 Board consolidation whereby the former Board of Directors was elected). The agreed-upon cap does not apply to director compensation expenses for special meetings or to legal fees incurred with respect to matters not in the ordinary course of the Fund’s business.

In addition to investing cash collateral from securities lending in a J.P. Morgan money market fund, the Fund may invest in one or more money market funds advised by the Advisor or its affiliates. The Advisor and Administrator waive fees in an amount sufficient to offset the advisory, administration and shareholder servicing fees each charged to the affiliated money market fund on the Fund’s investment in such affiliated money market fund. A portion of the waiver is voluntary.

The amount of waivers resulting from investments in the money market funds for the year ended December 31, 2010, (excluding the waiver disclosed in Note 1.D. regarding cash collateral for securities lending invested in JPMorgan Prime Money Market Fund) was $5,919.

Certain officers of the Fund are affiliated with the Advisor, the Administrator and the Distributor. Such officers, with the exception of the Chief Compliance Officer, receive no compensation from the Fund for serving in their respective roles.

The Board of Directors appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. The Fund, along with other affiliated funds, makes reimbursement payments, on a pro-rata basis, to the Administrator for a portion of the fees associated with the Office of the Chief Compliance Officer. Such fees are included in Directors’ and Chief Compliance Officer’s fees in the Statement of Operations.

The Fund adopted a Directors’ Deferred Compensation Plan (the “Plan”) which allows the Independent Directors to defer the receipt of all or a portion of compensation related to performance of their duties as a Director. The deferred fees are invested in various J.P. Morgan Funds until distribution in accordance with the Plan.

7. COMPONENTS OF ACCUMULATED EARNINGS (LOSSES)— At December 31, 2010, the components of net assets applicable to common stockholders (excluding paid in capital) on a tax basis were as follows:

	December 31, 2010
Gross unrealized appreciation on investments	$	11,268,756
Gross unrealized depreciation on investments		(11,486,277	)
Net unrealized appreciation/(depreciation) on investments	$	(217,521	)
Cost of investments for Federal Tax purposes	$	153,533,565

The difference between the book-basis and tax basis unrealized appreciation/(depreciation) is attributable primarily to wash sale loss deferrals.

At December 31, 2010, the components of net assets (excluding paid in capital) on a tax basis were as follows:

Current Distributable Ordinary Income	Current Distributable Long Term Capital Gain or (Tax Basis Capital Loss Carryover)	Unrealized Appreciation (Depreciation)
$1,845,274	$(48,159,051)	$(295,239)

The cumulative timing differences primarily consist of swap interest accruals, post-October loss deferrals and defaulted bond interest.

32

PACHOLDER HIGH YIELD FUND, INC.

Notes to Financial Statements (continued)

Net capital losses incurred after October 31 and within the taxable year are deemed to arise on the first business day of the Fund’s next taxable year. For the year ended December 31, 2010, the Fund deferred to January 1, 2011 post October capital losses of $1,454,305.

At December 31, 2010, the Fund had available a capital loss carryforward of $48,159,051, of which $20,873,746 expires in 2011, $2,030,683 expires in 2012, $6,916,560 expires in 2013, $416,016 expires in 2015, $1,876,547 expires in 2016, $14,493,773 expires in 2017 and $1,551,726 expires in 2018, to offset any future net capital gains.

During the year ended December 31, 2010, $8,135,473 of the Fund’s capital loss carryovers expired.

8. ILLIQUID SECURITIES— Certain securities held by the Fund may be subject to legal or contractual restrictions on resale or are illiquid. An illiquid security is a security which cannot be disposed of promptly (within seven days) and in the usual course of business at approximately its fair value and includes, but is not limited to, repurchase agreements maturing in excess of seven days, time deposits with a withdrawal penalty, non-negotiable instruments and instruments for which no market exists. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at the current valuation may be difficult. At December 31, 2010, the Fund held illiquid securities representing 10.0% of net assets applicable to common stockholders.

9. RISKS, CONCENTRATIONS AND INDEMNIFICATIONS— The Fund invests at least 80% of its assets in high yield debt securities. Investments in lower-rated securities or unrated securities of comparable quality tend to be more sensitive to economic conditions than higher rated securities. These securities involve a greater risk of default by the issuer because such securities are generally unsecured and are often subordinated to other creditors’ claims.

The ability of the issuers of debt and asset-backed securities, including sub-prime securities, along with counterparties to swap agreements, to meet their obligations may be affected by the economic and political developments in a specific industry or region. The value of asset-backed securities, including sub-prime securities, can be significantly affected by changes in interest rates or rapid principal payments including prepayments.

The Fund’s officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide for general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects the risk of loss to be remote.

The Fund is party to a derivative contract governed by International Swaps and Derivatives Association Master Agreements (“ISDA agreements”) with a counterparty. The Fund’s ISDA agreement, which is separately negotiated with the dealer counterparty, may contain provisions allowing, absent other considerations, the counterparty to exercise rights, to the extent not otherwise waived, against the Fund in the event the Fund’s net assets decline over time by a pre-determined percentage or fall below a pre-determined floor. Such rights often include the ability to terminate (i.e., close out) open contracts at prices which may favor the counterparty, which could have an adverse impact on the Fund.

Citigroup and Morgan Stanley are beneficial owners of a significant portion of the Fund’s outstanding ARPS and based on such ownership, could each be deemed to be an affiliate of the Fund. Both Citigroup and Morgan Stanley have informed the Fund that they intend to comply with a No Action Letter that enables them not to be deemed affiliates of the Fund. These parties could have an impact on matters that affect the Fund’s shareholders due to the voting rights associated with the ARPS, as detailed in the “Preferred Stock” note, included in this report.

As of December 31, 2010, the Fund is a party to interest rate swaps, and certain securities loans and loan participations and assignments that were transacted with either Citigroup or Morgan Stanley in the normal course of business.

The Fund is subject to interest rate and credit risk. The value of debt securities may decline as interest rates increase. The Fund could lose money if the issuer of a fixed income security is unable to pay interest or repay principal when it is due. The ability of the issuers of debt to meet their obligations may be affected by the economic and political developments in a specific industry or region.

The Fund is also subject to counterparty credit risk, which is the risk that a counterparty fails to perform on agreements with the Fund such as swap contracts.

33

PACHOLDER HIGH YIELD FUND, INC.

Notes to Financial Statements (concluded)

The Fund is subject to risks associated with asset-backed and mortgage-related securities such as collateralized mortgage obligations backed by sub-prime mortgage loans. The value, liquidity and related income of these securities are sensitive to changes in economic conditions, including real estate value, prepayments, delinquencies and/or defaults, and may be adversely affected by shifts in the market’s perception of the issuers and changes in interest rates.

The Fund is subject to the risk that should the Fund decide to sell an illiquid investment when a ready buyer is not available at a price the Fund deems representative of its value, the value of the Fund’s net assets could be adversely affected.

34

PACHOLDER HIGH YIELD FUND, INC.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Pacholder High Yield Fund, Inc.:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of portfolio investments, and the related statements of operations, of changes in net assets and of cash flows and the financial highlights present fairly, in all material respects, the financial position of Pacholder High Yield Fund, Inc. (hereafter referred to as the “Fund”) at December 31, 2010, the results of its operations and cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

March 1, 2011

35

PACHOLDER HIGH YIELD FUND, INC.

Tax Letter (Unaudited)

Certain tax information for the Fund is required to be provided to shareholders based upon the Fund’s income and distributions for the taxable year ended December 31, 2010. The information and distributions reported is this letter may differ from the information and taxable distributions reported to the shareholders for the calendar year ending December 31, 2010. The information necessary to complete your income tax returns for the calendar year ending December 31, 2010 will be received under separate cover.

Dividends Received Deductions (DRD)

5.21% of ordinary income distributions qualified for the 70% dividends received deduction for corporate shareholders for the Fund’s fiscal year ended December 31, 2010.

36

PACHOLDER HIGH YIELD FUND, INC.

Directors (Unaudited)

Name (Year of Birth); Positions With the Fund(1)	Length of Time Served	Principal Occupations During Past 5 Years	Number of Portfolios in Fund Complex Overseen by  Director(2)		Other Directorships Held Outside Fund Complex
Independent Directors
William J. Armstrong (1941); Director of Fund since 2009; Trustee of heritage J.P. Morgan Funds since 1987.	Elected at 2009 Shareholder Meeting	Retired; CFO and Consultant, EduNeering, Inc. (internet business education supplier) (2000-2001); Vice President and Treasurer, Ingersoll-Rand Company (manufacturer of industrial equipment) (1972-2000).		145	None.
John F. Finn (1947); Director of Fund since 2009; Director of heritage One Group Mutual Funds since 1998.	Elected at 2009 Shareholder Meeting	Chairman (1985-present), President and Chief Executive Officer, Gardner, Inc. (supply chain management company serving industrial and consumer markets) (1974-present).		145	Director, Cardinal Health, Inc. (CAH) (1994-present); Director, Greif, Inc. (GEF) (industrial package products and services) (2007-present).
Dr. Matthew Goldstein (1941); Director of Fund since 2009; Director of heritage J.P. Morgan Funds since 2003.	Elected at 2009 Shareholder Meeting	Chancellor, City University of New York (1999-present); President, Adelphi University (New York) (1998-1999).		145	Director, New Plan Excel (NXL) (1999-2005); Director, National Financial Partners (NFP) (2003-2005); Director, Bronx-Lebanon Hospital Center; Director, United Way of New York City (2002-present).
Robert J. Higgins (1945); Director of Fund since 2009; Director of heritage J.P. Morgan Funds since 2002.	Elected at 2009 Shareholder Meeting	Retired; Director of Administration of the State of Rhode Island (2003-2004); President – Consumer Banking and Investment Services, Fleet Boston Financial (1971-2001).		145	None.
Peter C. Marshall (1942); Director of Fund since 2009; Director of heritage One Group Mutual Funds since 1985.	Elected at 2009 Shareholder Meeting	Self-employed business consultant (2002-Present).		145	Director, Center for Communication, Hearing and Deafness (1990-present).
Marilyn McCoy* (1948); Director of Fund since 2009; Director of heritage One Group Mutual Funds since 1999.	Elected at 2009 Shareholder Meeting	Vice President of Administration and Planning, Northwestern University (1985-present).		145	Trustee, Carleton College (2003-present).

37

PACHOLDER HIGH YIELD FUND, INC.

Directors (Unaudited) (continued)

Name (Year of Birth); Positions With the Fund(1)	Length of Time Served	Principal Occupations During Past 5 Years	Number of Portfolios in Fund Complex Overseen by  Director(2)		Other Directorships Held Outside Fund Complex
Independent Directors (continued)
William G. Morton, Jr. (1937); Director of Fund since 2009; Director of heritage J.P. Morgan Funds since 2003.	Elected at 2009 Shareholder Meeting	Retired; Chairman Emeritus (2001-2002), and Chairman and Chief Executive Officer, Boston Stock Exchange (1985-2001).		145	Director, Radio Shack Corp. (1987-2008); Trustee, Stratton Mountain School (2001-present).
Robert A. Oden, Jr. (1946); Director of Fund since 2009; Director of heritage One Group Mutual Funds since 1997.	Elected at 2009 Shareholder Meeting	Retired; President, Carleton College (2002-2010); President, Kenyon College (1995-2002).		145	Trustee, American University in Cairo (1999-present); Trustee, Carleton College (2002-2010).
Fergus Reid, III (1932); Director of Fund (Chairman) since 2009; Director (Chairman) of heritage J.P. Morgan Funds since 1987.	Elected at 2009 Shareholder Meeting	Chairman, Joe Pietryka, Inc. (formerly Lumelite Corporation) (plastics manufacturing) (2003-present); Chairman and Chief Executive Officer, Lumelite Corporation (1985-2002).		145	Trustee, Morgan Stanley Funds (105 portfolios) (1992-present).
Frederick W. Ruebeck (1939); Director of Fund since 2009; Director of heritage One Group Mutual Funds since 1994.	Elected at 2009 Shareholder Meeting	Consultant (2000-present); Advisor, JP Greene & Associates, LLC (broker-dealer) (2000-2009); Chief Investment Officer, Wabash College (2004-present); Director of Investments, Eli Lilly and Company (pharmaceuticals) (1988-1999).		145	Trustee, Wabash College (1988-present); Chairman, Indianapolis Symphony Orchestra Foundation (1994-present).
James J. Schonbachler (1943); Director of Fund since 2009; Director of heritage J.P. Morgan Funds since 2001.	Elected at 2009 Shareholder Meeting	Retired; Managing Director of Bankers Trust Company (financial services) (1968-1998).		145	None.

38

PACHOLDER HIGH YIELD FUND, INC.

Directors (Unaudited) (continued)

Name (Year of Birth); Positions With the Fund(1)	Length of Time Served	Principal Occupations During Past 5 Years	Number of Portfolios in Fund Complex Overseen by  Director(2)		Other Directorships Held Outside Fund Complex
Interested Directors
Frankie D. Hughes** (1952), Director of Fund since 2009; Trust of J.P. Morgan Funds since 2008.	Elected at 2009 Shareholder Meeting	Principal and Chief Investment Officer, Hughes Capital Management, Inc. (fixed income asset management) (1993-present).		145	Trustee, The Victory Portfolios (2000-2008).
Leonard M. Spalding, Jr.*** (1935); Director of Fund since 2009; Director of heritage J.P. Morgan Funds since 1998.	Elected at 2009 Shareholder Meeting	Retired; Chief Executive Officer, Chase Mutual Funds (investment company) (1989-1998); President and Chief Executive Officer, Vista Capital Management (investment management) (1990-1998); Chief Investment Executive, Chase Manhattan Private Bank (investment management) (1990-1998).		145	Director, Glenview Trust Company, LLC (2001-present); Trustee, St. Catharine College (1998-present); Trustee, Bellarmine University (2000-present); Director, Springfield-Washington County Economic Development Authority (1997-present); Trustee, Catholic Education Foundation (2005-present).

⁽¹⁾ Each Director serves for an indefinite term, subject to the Fund’s current retirement policy, which is age 75 for all Directors, except that the Board has determined Messrs. Reid and Spalding should continue to serve until December 31, 2012.

⁽²⁾ A Fund Complex means two or more registered investment companies that hold themselves out to investors as related companies for purposes of investment and investor services or have a common investment advisor or have an investment advisor that is an affiliated person of the investment advisor of any of the other registered investment companies. The J.P. Morgan Funds Complex for which the Board of Directors serves currently includes ten registered investment companies (145 funds).

* Ms. McCoy has served as Vice President of Administration and Planning for Northwestern University since 1985. William M. Daley was the Head of Corporate Responsibility for JPMorgan Chase & Co. prior to January 2011 and served as a member of the Board of Trustees of Northwestern University from 2005 through 2010. JPMIM, the Funds’ investment adviser, is a wholly-owned subsidiary of JPMorgan Chase & Co. Three other members of the Board of Trustees of Northwestern University are executive officers of registered investment advisers (not affiliated with JPMorgan) that are under common control with subadvisers to certain J.P. Morgan Funds.

** Ms. Hughes is treated as an “interested person” based on the portfolio holdings of clients of Hughes Capital Management, Inc.

*** Mr. Spalding is treated as an “interested person” due to his ownership of JPMorgan Chase stock.

The contact address for each of the Directors is 245 Park Avenue, New York, NY 10167.

39

PACHOLDER HIGH YIELD FUND, INC.

Officers (Unaudited)

Name (Year of Birth), Positions Held with the Fund (Since)	Principal Occupations During Past 5 Years
Patricia A. Maleski (1960), President and Principal Executive Officer (Position held since 2010)	Vice President of the Fund from 2007 to 2010; Chief Administrative Officer and Treasurer of the Fund from 2008 to 2010; Managing Director, J.P. Morgan Investment Management Inc. and Chief Administrative Officer, J.P. Morgan Funds and Institutional Pooled Vehicles since 2010; previously, Head of Funds Administration and Board Liaison, J.P. Morgan Funds prior to 2010. Ms. Maleski has been with JPMorgan Chase & Co. since 2001.
Joy C. Dowd (1972), Treasurer and Principal Financial Officer (Position held since 2010)	Assistant Treasurer of the Fund from 2009 to 2010; Vice President, JPMorgan Funds Management, Inc. since December 2008; prior to joining JPMorgan Chase, Ms. Dowd worked in MetLife’s investments audit group from 2005 through 2008, and Vice President of Credit Suisse, in the audit area from 1999 through 2005.
Frank J. Nasta (1964), Secretary (Position held since 2009)	Managing Director and Associate General Counsel, JPMorgan Chase since 2008; Previously, Director, Managing Director, General Counsel and Corporate Secretary, J. & W. Seligman & Co. Incorporated; Secretary of each of the investment companies of the Seligman Group of Funds and Seligman Data Corp.; Director and Corporate Secretary, Seligman Advisors, Inc. and Seligman Services, Inc.
Stephen M. Ungerman (1953), Chief Compliance Officer (Position held since 2008)	Managing Director, JPMorgan Chase & Co.; Mr. Ungerman was head of Fund Administration — Pooled Vehicles from 2000 to 2004. Mr. Ungerman has been with JPMorgan Chase & Co. since 2000.

The contact address for each of the officers, unless otherwise noted, is 245 Park Avenue, New York, NY 10167.

40

PACHOLDER HIGH YIELD FUND, INC.

Board Approval of Investment Advisory Agreement

The Board of Directors meets regularly throughout the year and considers factors that are relevant to its annual consideration of investment advisory agreements at each meeting. The Board of Directors has established various standing committees, composed of Directors with diverse backgrounds, to which the Board of Directors has assigned specific subject matter responsibilities to further enhance the effectiveness of the Board’s oversight and decision making. The Board of Directors and its investment subcommittees (money market and alternative products, equity, and fixed income) also meet as needed for the specific purpose of considering advisory contract annual renewals. The Board of Directors held meetings in person in June and August 2010, at which the Directors considered the continuation of the investment advisory agreement for the Fund (the “Advisory Agreement”). At the June meeting, the Board’s investment subcommittees met to review and consider performance, expense and related information for the Fund and other J.P. Morgan Funds. Each investment subcommittee reported to the full Board, which then considered the investment subcommittee’s preliminary findings. At the August meeting, the Directors continued their review and consideration. The Directors, including a majority of the Directors who are not “interested persons” (as defined in the 1940 Act) of any party to the Advisory Agreement or any of their affiliates, approved the continuation of the Advisory Agreement on August 18, 2010.

The Directors, as part of their review of the investment advisory arrangements for the J.P. Morgan Funds, considered and reviewed performance and other information received from the Advisor, on a regular basis over the course of the year, as well as information specifically prepared for their annual review. This information included the Fund’s performance compared to the performance of the Fund’s peers and benchmarks and analyses by the Advisor of the Fund’s performance. The Advisor also periodically provides comparative information regarding the Fund’s expense ratios and those of the peer groups. In addition, in preparation for the June and August meetings, the Directors requested, received and evaluated extensive materials from the Advisor, including, with respect to certain J.P. Morgan Funds, performance and expense information compiled by Lipper Inc. (“Lipper”), an independent provider of investment company data. Prior to voting, the Directors reviewed the proposed approval of the Advisory Agreement with representatives of the Advisor and with counsels to the Fund and independent Directors and received a memorandum from independent counsel to the Directors discussing the legal standards for their consideration of the proposed approval. The Directors also discussed the proposed approvals in executive sessions with counsels to the Fund and independent Directors at which no representatives of the Advisor were present. Set forth below is a summary of the material factors evaluated by the Directors in determining whether to approve the Advisory Agreement.

In their deliberations, there was a comprehensive consideration of the information received by the Directors. Each Director attributed different weights to the various factors and no factor alone was considered determinative. From year to year, the Directors consider and place emphasis on relevant information in light of changing circumstances in market and economic conditions. The Directors determined that the compensation to be received by the Advisor from the Fund under the Advisory Agreement was fair and reasonable and that the continuance of the investment advisory contract was in the best interests of the Fund and its shareholders.

The factors summarized below were considered and discussed by the Directors in reaching their conclusions:

Nature, Extent and Quality of Services Provided by the Advisor

The Directors received and considered information regarding the nature, extent and quality of the services provided to the Fund under the Advisory Agreement. The Directors took into account information furnished throughout the year at Board meetings, as well as the materials furnished specifically in connection with this annual review process. The Directors considered the background and experience of the Advisor’s senior management and the expertise of, and the amount of attention given to the Fund by, investment personnel of the Advisor. In addition, the Directors reviewed the qualifications, backgrounds and responsibilities of the portfolio management team primarily responsible for the day-to-day management of the Fund and the infrastructure supporting the team. The Directors also reviewed information relating to enhancements to the Advisor’s risk governance model in light of recent market turbulence and reports showing that the Advisor has consistently complied with the investment policies and restrictions of the Fund. The quality of the administrative services provided by JPMorgan Funds Management, Inc. (“JPMFM”), an affiliate of the Advisor, was also considered.

The Board of Directors also considered its knowledge of the nature and quality of the services provided by the Advisor to the Fund gained from their experience as Directors of the other J.P. Morgan Funds. In addition, they considered the overall reputation and capabilities of the Advisor and its affiliates, the commitment of the Advisor to provide high quality service to the Fund, their overall confidence in the Advisor’s integrity and the Advisor’s responsiveness to concerns raised by them, including the Advisor’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the Fund.

Based on these considerations and other factors, the Directors concluded that they were satisfied with the nature, extent and quality of the investment advisory services provided to the Fund by the Advisor.

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PACHOLDER HIGH YIELD FUND, INC.

Board Approval of Investment Advisory Agreement (continued)

Costs of Services Provided and Profitability to the Advisor and its Affiliates

The Directors received and considered information regarding the profitability to the Advisor and its affiliates in providing services to the Fund. The Directors reviewed and discussed this data. The Directors recognized that this data is not audited and represents the Advisor’s determination of its and its affiliates revenues from the contractual services provided to the Fund, less expenses of providing such services. Expenses include direct and indirect costs and are calculated using an allocation methodology developed by the Advisor. The Directors also recognized that it is difficult to make comparisons of profitability from fund investment advisory contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the fact that publicly-traded fund managers’ operating profits and net income are net of distribution and marketing expenses. Based on their review, the Directors concluded that the profitability to the Advisor of the Advisory Agreement was not unreasonable in light of the services and benefits provided to the Fund.

Fall-Out Benefits

The Directors reviewed information regarding potential “fallout” or ancillary benefits received by the Advisor and its affiliates as a result of their relationship with the Fund. The Directors also considered that JPMFM, an affiliate of the Advisor, earns fees from the Fund for providing administrative services. These fees were shown separately in the profitability analysis presented to the Directors. The Directors also considered the fees paid to JPMorgan Chase Bank, NA (“JPMCB”) for custody and fund accounting, securities lending, and other related services.

Economies of Scale

The Directors also considered possible economies of scale. The Directors noted management’s agreement to not increase administration fees and certain expenses for the Fund prior to December 31, 2012. The Directors also considered management’s investment in the business and that certain fees are negotiated on a complex-wide basis, permitting the Fund to share in the scale of the organization.

In light of all of the foregoing and under the circumstances, the Board concluded that there was an acceptable sharing of any economies of scale at the present time.

Independent Written Evaluation of the Fund’s Chief Compliance Officer

The Directors noted that, upon their direction, the Chief Compliance Officer for the Fund had prepared an independent written evaluation in order to assist the Directors in determining the reasonableness of the proposed management fees. The Directors considered the written evaluation in determining whether to continue the Advisory Agreement.

Fees Relative to Advisor’s Other Clients

The Directors received and considered information about the nature and extent of investment advisory services and fee rates offered to other clients of the Advisor for investment management styles substantially similar to that of the Fund. The Directors also considered the complexity of investment management for the Fund relative to the Advisor’s other clients and the differences in the nature and extent of the services provided to the different clients. The Directors concluded that the fee rates charged to the Fund in comparison to those charged to the Advisor’s other clients were reasonable.

Investment Performance

The Directors received and considered absolute and/or relative performance for the Fund in a report prepared by Lipper. The Directors considered the total return performance information, which included the ranking of the Fund within a performance universe made up of funds with the same Lipper investment classification and objective (the “Universe Group”) by total return for applicable one-, three- and five-year periods. The Directors reviewed a description of Lipper’s methodology for selecting closed end funds in the Fund’s peer group and Universe Group. The Lipper performance data noted by the Directors as part of their review and the determinations made by the Directors with respect to the Fund’s performance are summarized below:

The Directors noted that the Fund’s performance was in the first quintile for the one-, three-, five- and ten year periods ended December 31, 2009. The Directors discussed the performance and investment strategy of the Fund with the Advisor and, based upon this discussion and other factors, concluded that the performance was reasonable.

Advisory Fees and Total Expense

With respect to advisory fee and total expenses, the Board considered that actual advisory fees are in the first quintile and total expenses are in the third quintile. The Board also found that the Performance Fee was effective to align the Adviser’s interests with the interests of Fund shareholders, and to provide a level of compensation tied to investment performance.

42

PACHOLDER HIGH YIELD FUND, INC.

Board Approval of Investment Advisory Agreement (concluded)

The Board noted that the investment advisory fee schedule for the Fund does not contain breakpoints. The Board found that based on the size of the Fund, breakpoints were not yet warranted for the Fund. The Board considered that, although the Adviser manages other high yield accounts, the Adviser does not manage other funds or accounts in the same style as the Fund. The Board also noted that the Fund’s fee rate is higher than the Adviser’s published fee schedule for high yield assets by virtue of the performance based fee; but, at the lowest fee rate, the Fund’s fee is approximately the same as the published fee schedule. The Directors also considered that management had agreed that the administration fee and certain expenses will not increase prior to December 31, 2012 and that management continues to invest significantly in the business.

Based on the foregoing, the Directors concluded that after giving effect to expense caps and within the context of their deliberations about the Fund’s advisory arrangement, the proposed advisory fee of the Fund was reasonable.

43

PACHOLDER HIGH YIELD FUND, INC.

Supplemental Information (Unaudited)

Portfolio Holdings Information

No sooner than 10 days after the end of each month, the Fund’s uncertified complete schedule of its portfolio holdings as well as certain other fund facts and statistical information will be available on our website (www.phf-hy.com). In addition, the Fund files its certified, complete schedule of its portfolio holdings with the U.S. Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available, without charge, on the SEC’s website at www.sec.gov. The Fund’s Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

No sooner than 10 calendar days after the end of each month, the Fund’s top 10 holdings as of the last day of each month as well as certain other fund facts and statistical information will also be available on the Fund’s website.

Proxy Voting

A description of the policies and procedures used by the Fund to vote proxies relating to portfolio securities, as well as information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, is available (i) without charge, on the Fund’s website at www.phf-hy.com and (ii) on the SEC’s website at www.sec.gov.

Dividend Reinvestment Plan

The Fund’s Dividend Reinvestment Plan (the “Plan”) offers Common Stockholders (“Shareholders”) a convenient way to invest their income dividends and capital gain distributions in additional shares of the Fund’s common stock.

Shareholders who participate in the Plan will have all income dividends and capital gain distributions automatically reinvested by Computershare Investor Services LLC (the “Plan Agent”) pursuant to the Plan. When a dividend is declared, Shareholders who do not participate in the Plan will receive all distributions in cash, paid by check, mailed directly to the Shareholder of record (or if the shares are held in street name or nominee name, then to the nominee) by the Plan Agent, which serves as agent for the Shareholders in administering the Plan. Shareholders who participate in the Plan will receive the equivalent in shares of the Fund valued at the lower of market price or net asset valued as described below. (i) If the shares are trading at net asset value or at a premium above net asset value on the payment date, the Fund will issue new shares at the greater of net asset value or 95% of the current market price. (ii) If the shares are trading at a discount from net asset value on payment date, the Plan Agent will receive the dividend or distribution in cash and apply it to the purchase of the Fund’s shares in the open market, on the NYSE Amex or elsewhere, for the participants’ accounts. If before the Plan Agent has completed its purchases, the market price exceeds the net asset value per share, the average purchase price per share paid by the Plan Agent may exceed the exceed the net asset value of the Fund’s shares, resulting in the acquisition of fewer shares than if the dividend or distribution had been paid in shares issued by the Fund. If the purchases have not been made prior to 30 days after the payment date, the Plan Agent may receive the uninvested portion in newly issued shares.

The Plan Agent’s fees for handling the reinvestment of Dividends will be paid by the Fund. There will be no brokerage charge to Shareholders for shares issued directly by the Fund as a result of dividends or distributions payable either in stock or cash. Each Shareholder who participates in the Plan, however will pay pro rate share of brokerage commissions incurred with respect to the Plan Agent’s open-market-purchases in connection with the reinvestment of dividends or distributions.

The automatic reinvestment of income dividends and capital gain distributions will not relieve a Shareholder of any federal, state or local income tax that may be payable on such dividends. Therefore, income and capital gains may still be realized even though Shareholders do not receive cash.

A Shareholder may terminate his/her account under the Plan by notifying the Plan Agent in writing. Upon termination, a shareholder can either receive a certificate for the number of full shares held in the Plan and a check for fractional shares or have shares sold by the Plan Agent and the proceeds sent to the shareholder, less a transaction fee of $15 plus $0.07 per share.

The Fund reserves the right to amend or terminate the Plan. All correspondence concerning the Plan should be directed to the Plan Agent at Computershare Trust Company, N.A. Dividend Reinvestment Services, P.O. Box A3309, Chicago, IL 60690-3309, by calling 888-294-8217 or www.computershare.com.

44

Rev. January 2011

FACTS WHAT DOES PACHOLDER HIGH YIELD FUND, INC. DO WITH YOUR PERSONAL INFORMATION?

Why? Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.

What? The types of personal information we collect and share depend on the product or service you have with us. This information can include:   n  Social Security number and account balances   n  transaction history and account transactions   n  checking account information and wire transfer instructions   When you are no longer our customer, we continue to share your information as described in this notice.

How? All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons Pacholder High Yield Fund, Inc. chooses to share; and whether you can limit this sharing.

Reasons we can share your personal information	Does Pacholder High Yield Fund, Inc. share?	Can you limit this sharing?
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus	Yes	No
For marketing purposes – to offer our products and services to you	Yes	No
For joint marketing with other financial companies	No	We don’t share
For our affiliates’ everyday business purposes – information about your transactions and experiences	No	We don’t share
For our affiliates’ everyday business purposes – information about your creditworthiness	No	We don’t share
For nonaffiliates to market to you	No	We don’t share

Questions? Call 1-877-217-9502 or go to www.pacholder.com

Page 2

Who we are
Who is providing this notice?	Pacholder High Yield Fund, Inc.

What we do
How does Pacholder High Yield Fund, Inc. protect my personal information?	To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings. We authorize our employees to access your information only when they need it to do their work and we require companies that work for us to protect your information.
How does Pacholder High Yield Fund, Inc. collect my personal information?	We collect your personal information, for example, when you: n  open an account or provide account information n  give us your account information or pay us by check n  make a wire transfer We also collect your personal information from others, such as credit bureaus, affiliates and other companies.
Why can’t I limit all sharing?	Federal law gives you the right to limit only n  sharing for affiliates’ everyday business purposes – information about your creditworthiness n  affiliates from using your information to market to you n  sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing.

Definitions
Affiliates	Companies related by common ownership or control. They can be financial and nonfinancial companies. n  Pacholder High Yield Fund, Inc. does not share with our affiliates.
Nonaffiliates	Companies not related by common ownership or control. They can be financial and nonfinancial companies. n  Pacholder High Yield Fund, Inc. does not share with nonaffiliates so they can market to you.
Joint Marketing	A formal agreement between nonaffiliated financial companies that together market financial products or services to you. n  Pacholder High Yield Fund, Inc. doesn’t jointly market.

ITEM 2. CODE OF ETHICS.

Disclose whether, as of the end of the period covered by the report, the registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. If the registrant has not adopted such a code of ethics, explain why it has not done so.

The registrant must briefly describe the nature of any amendment, during the period covered by the report, to a provision of its code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item. The registrant must file a copy of any such amendment as an exhibit pursuant to Item 12(a)(1), unless the registrant has elected to satisfy paragraph (f) of this Item by positing its code of ethics on its website pursuant to paragraph (f)(2) of this Item, or by undertaking to provide its code of ethics to any person without charge, upon request, pursuant to paragraph (f)(3) of this Item.

If the registrant has, during the period covered by the report, granted a waiver, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or third party, that relates to one or more items set forth in paragraph (b) of this Item, the registrant must briefly describe the nature of the waiver, the name of the person to whom the waiver was granted, and the date of the waiver.

The Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer and principal financial officer. There were no amendments to the code of ethics or waivers granted with respect to the code of ethics in the period covered by the report.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

(a) (1) Disclose that the registrant’s board of directors has determined that the registrant either:

(i) Has at least one audit committee financial expert serving on its audit committee; or

(ii) Does not have an audit committee financial expert serving on its audit committee.

The Registrant’s Board of Trustees has determined that the Registrant has at least one audit committee financial expert serving on its audit committee. The Securities and Exchange Commission has stated that the designation or identification of a person as an audit committee financial expert pursuant to this Item 3 of Form N-CSR does not impose on such person any duties, obligations or liabilities that are greater than the duties, obligations and liabilities imposed on such person as a member of the Audit Committee and the Board of Trustees in the absence of such designation or identification.

(2) If the registrant provides the disclosure required by paragraph (a)(1)(i) of this Item, it must disclose the name of the audit committee financial expert and whether that person is “independent.” In order to be considered “independent” for purposes of this Item, a member of an audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee:

(i) Accept directly or indirectly any consulting, advisory, or other compensatory fee from the issuer; or

(ii) Be an “interested person” of the investment company as defined in Section 2(a)(19) of the Act (15 U.S.C. 80a-2(a)(19)).

The audit committee financial expert is William Armstrong. He is not an “interested person” of the Registrant and is also “independent” as defined by the U.S. Securities and Exchange Commission for purposes of audit committee financial expert determinations.

(3) If the registrant provides the disclosure required by paragraph (a)(1)(ii) of this Item, it must explain why it does not have an audit committee financial expert.

Not applicable.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(a) Disclose, under the caption Audit Fees, the aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years.

AUDIT FEES

2010 – $70,000

2009 – $42,500

(b) Disclose, under the caption Audit-Related Fees, the aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category.

AUDIT-RELATED FEES

2010 – $20,900

2009 – $13,900

The audit-related fees consist of aggregate fees billed for assurance and related services by the independent registered public accounting firm to the Registrant that were reasonably related to the performance of the annual audit of the Registrant’s financial statements.

(c) Disclose, under the caption Tax Fees, the aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. Registrants shall describe the nature of the services comprising the fees disclosed under this category.

TAX FEES

2010 – $9,400

2009 – $4,500

The tax fees consist of fees billed in connection with preparing the federal regulated investment company income tax returns for the Registrant for the tax years ended December 31, 2010 and 2009, respectively.

For the last fiscal year, no tax fees were required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.

(d) Disclose, under the caption All Other Fees, the aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category.

ALL OTHER FEES

2010 – Not applicable

2009 – Not applicable

(e) (1) Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.

Pursuant to the Registrant’s Audit Committee Charter and written policies and procedures for the pre-approval of audit and non-audit services (the “Pre-approval Policy”), the Audit Committee pre-approves all audit and non-audit services performed by the Registrant’s independent public registered accounting firm for the Registrant. In addition, the Audit Committee pre-approves the auditor’s engagement for non-audit services with the Registrant’s investment adviser (not including a sub-adviser whose role is primarily portfolio management and is sub-contracted or overseen by another investment adviser) and any Service Affiliate in accordance with paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, if the

engagement relates directly to the operations and financial reporting of the Registrant. Proposed services may be pre-approved either 1) without consideration of specific case-by-case services or 2) require the specific pre-approval of the Audit Committee. Therefore, initially the Pre-approval Policy listed a number of audit and non-audit services that have been approved by the Audit Committee, or which were not subject to pre-approval under the transition provisions of Sarbanes-Oxley Act of 2002 (the “Pre-approval List”). The Audit Committee annually reviews and pre-approves the services included on the Pre-approval List that may be provided by the independent public registered accounting firm without obtaining additional specific pre-approval of individual services from the Audit Committee. The Audit Committee adds to, or subtracts from, the list of general pre-approved services from time to time, based on subsequent determinations. All other audit and non-audit services not on the Pre-approval List must be specifically pre-approved by the Audit Committee.

One or more members of the Audit Committee may be appointed as the Committee’s delegate for the purposes of considering whether to approve such services. Any pre-approvals granted by the delegate will be reported, for informational purposes only, to the Audit Committee at its next scheduled meeting. The Audit Committee’s responsibilities to pre-approve services performed by the independent public registered accounting firm are not delegated to management.

(2) Disclose the percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

2010 – 0.0%

2009 – 0.0%

(f) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees.

None.

(g) Disclose the aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant.

The aggregate non-audit fees billed by the independent registered public accounting firm for services rendered to the Registrant, and rendered to Service Affiliates, for the last two calendar year ends were:

2010 - $31.8 million

2009 - $25.8 million

(h) Disclose whether the registrant’s audit committee of the board of directors has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

The Registrant’s Audit Committee has considered whether the provision of the non-audit services that were rendered to Service Affiliates that were not pre-approved (not requiring pre-approval) is compatible with maintaining the independent public registered accounting firm’s independence. All services provided by the independent public registered accounting firm to the Registrant or to Service Affiliates that were required to be pre-approved were pre-approved as required.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

(a) If the registrant is a listed issuer as defined in Rule 10A-3 under the Exchange Act (17CFR 240.10A-3), state whether or not the registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)). If the registrant has such a committee, however designated, identify each committee member. If the entire board of directors is acting as the registrant’s audit committee as specified in Section 3(a)(58)(B) of the Exchange Act (15 U.S.C. 78c(a)(58)(B)), so state.

The Registrant has a separately-designated standing Audit Committee established by the Board of Directors of the Registrant in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. It is composed of the following Directors, each of whom is not an “interested person” as defined in the Investment Company Act of 1940, as amended:

William J. Armstrong

John F. Finn

Robert J. Higgins

Frederick W. Ruebeck

James J. Schonbachler

(b) If applicable, provide the disclosure required by Rule 10A-3(d) under the Exchange Act (17CFR 240.10A-3(d)) regarding an exemption from the listing standards for all audit committees.

Not applicable.

ITEM 6. SCHEDULE OF INVESTMENTS.

File Schedule I – Investments in securities of unaffiliated issuers as of the close of the reporting period as set forth in Section 210.12-12 of Regulation S-X, unless the schedule is included as part of the report to shareholders filed under Item 1 of this Form.

Included in Item 1.

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

A closed-end management investment company that is filing an annual report on this Form N-CSR must, unless it invests exclusively in non-voting securities, describe the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities, including the procedures that the company uses when a vote presents a conflict between the interests of its shareholders, on the one hand, and those of the company’s investment adviser; principal underwriter; or any affiliated person (as defined in Section 2(a) (3) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules thereunder) of the company, its investment adviser, or its principal underwriter, on the other. Include any policies and procedures of the company’s investment adviser, or any other third party, that the company uses, or that are used on the company’s behalf, to determine how to vote proxies relating to portfolio securities.

The Registrant has adopted proxy voting policies and procedures, as defined in Item 7 of Form N-CSR. A copy of the policies and procedures is filed as Exhibit 12(a)(3) to this Form. The Board of Directors has delegated to the Fund’s investment adviser (the “Adviser”), proxy voting authority with respect to the Fund’s portfolio securities. To ensure that the proxies of portfolio companies are voted in the best interests of the Fund, the Fund’s Board of Directors has adopted the Adviser’s detailed proxy voting procedures (the “Procedures”) that incorporate guidelines (“Guidelines”) for voting proxies on specific types of issues.

The Adviser and its affiliated advisers are part of a global asset management organization with the capability to invest in securities of issuers located around the globe. Because the regulatory framework and the business cultures and practices vary from region to region, the Guidelines are customized for each region to take into account such variations. Separate Guidelines cover the regions of (1) North America, (2) Europe, Middle East, Africa, Central America and South America, (3) Asia (ex-Japan) and (4) Japan, respectively.

Notwithstanding the variations among the Guidelines, all of the Guidelines have been designed with the uniform objective of encouraging corporate action that enhances shareholder value. As a general rule, in voting proxies of a particular security, the Adviser will apply the Guidelines of the region in which the issuer of such security is organized. Except as noted below, proxy voting decisions will be made in accordance with the Guidelines covering a multitude of both routine and non-routine matters that the Adviser and its affiliated advisers have encountered globally, based on many years of collective investment management experience.

To oversee and monitor the proxy-voting process, the Adviser has established a proxy committee and appointed a proxy administrator in each global location where proxies are voted. The primary function of each proxy committee is to review periodically general proxy-voting matters, review and approve the Guidelines annually, and provide advice and recommendations on general proxy-voting matters as well as on specific voting issues. The procedures permit an independent voting service, currently Institutional Shareholder Services, Inc. (“ISS”) in the United States, to perform certain services otherwise carried out or coordinated by the proxy administrator.

Although for many matters the Guidelines specify the votes to be cast, for many others, the Guidelines contemplate case-by-case determinations. In addition, there will undoubtedly be proxy matters that are not contemplated by the Guidelines. For both of these categories of matters and to override the Guidelines, the Procedures require a certification and review process to be completed before the vote is cast. That process is designed to identify actual or potential material conflicts of interest (between the Fund on the one hand, and the Fund’s investment adviser or an affiliate of any of the foregoing, on the other hand) and ensure that the proxy vote is cast in the best interests of the Fund. When a potential material conflict of interest has been identified, the proxy administrator and a subgroup of proxy committee members (composed of a member from the Investment Department and one or more members from the Legal, Compliance or Risk Management Departments) will evaluate the potential conflict of interest and determine whether such conflict actually exists, and if so, will recommend how the Adviser will vote the proxy. In addressing any material conflict, the Adviser may take one or more of the following measures (or other appropriate action): removing or “walling off” from the proxy voting process certain Adviser personnel with knowledge of the conflict, voting in accordance with any applicable Guideline if the application of the Guideline would objectively result in the casting of a proxy vote in a predetermined manner, or deferring the vote to ISS, which will vote in accordance with its own recommendation.

The following summarizes some of the more noteworthy types of proxy voting policies of the non-U.S. Guidelines:

• Corporate governance procedures differ among the countries. Because of time constraints and local customs, it is not always possible for the Adviser to receive and review all proxy materials in connection with each item submitted for a vote. Many proxy statements are in foreign languages. Proxy materials are generally mailed by the issuer to the sub-custodian which holds the securities for the client in the country where the portfolio company is organized, and there may not be sufficient time for such materials to be transmitted to the Adviser in time for a vote to be cast. In some countries, proxy statements are not mailed at all, and in some locations, the deadline for voting is two to four days after the initial announcement that a vote is to be solicited. The Adviser also considers the cost of voting in light of the expected benefit of the vote.

• Where proxy issues concern corporate governance, takeover defense measures, compensation plans, capital structure changes and so forth, the Adviser pays particular attention to management’s arguments for promoting the prospective change. The Adviser’s sole criterion in determining its voting stance is whether such changes will be to the economic benefit of the beneficial owners of the shares.

• The Adviser is in favor of a unitary board structure of the type found in the United Kingdom as opposed to tiered board structures. Thus, the Adviser will generally vote to encourage the gradual phasing out of tiered board structures, in favor of unitary boards. However, since tiered boards are still very prevalent in markets outside of the United Kingdom, local market practice will always be taken into account.

• The Adviser will use its voting powers to encourage appropriate levels of board independence, taking into account local market practice.

• The Adviser will usually vote against discharging the board from responsibility in cases of pending litigation, or if there is evidence of wrongdoing for which the board must be held accountable.

• The Adviser will vote in favor of increases in capital which enhance a company’s long-term prospects. The Adviser will also vote in favor of the partial suspension of preemptive rights if they are for purely technical

reasons (e.g., rights offers which may not be legally offered to shareholders in certain jurisdictions). However, the Adviser will vote against increases in capital which would allow the company to adopt “poison pill” takeover defense tactics, or where the increase in authorized capital would dilute shareholder value in the long term.

• The Adviser will vote in favor of proposals which will enhance a company’s long-term prospects. The Adviser will vote against an increase in bank borrowing powers which would result in the company reaching an unacceptable level of financial leverage, where such borrowing is expressly intended as part of a takeover defense, or where there is a material reduction in shareholder value.

• The Adviser reviews shareholder rights plans and poison pill proposals on a case-by-case basis; however, the Adviser will generally vote against such proposals and vote for revoking existing plans.

• Where social or environmental issues are the subject of a proxy vote, the Adviser will consider the issue on a case-by-case basis, keeping in mind at all times the best economic interests of its clients.

• With respect to Asia, for routine proxies (e.g., in respect of voting at the Annual General Meeting of Shareholders) the Adviser’s position is to neither vote in favor or against. For Extraordinary General Meetings of Shareholders, however, where specific issues are put to a shareholder vote, these issues are analyzed by the respective country specialist concerned. A decision is then made based on his or her judgment.

The following summarizes some of the more noteworthy types of proxy voting policies of the U.S. Guidelines:

• The Adviser considers votes on director nominees on a case-by-case basis. Votes generally will be withheld from directors who: (a) attend less than 75% of board and committee meetings without a valid excuse; (b) implement or renew a dead-hand poison pill; (c) are affiliated directors who serve on audit, compensation or nominating committees or are affiliated directors and the full board serves on such committees or the company does not have such committees; or (d) ignore a shareholder proposal that is approved for two consecutive years by a majority of either the shares outstanding or the votes cast.

• The Adviser votes proposals to classify boards on a case-by-case basis, but will vote in favor of such proposal if the issuer’s governing documents contain each of eight enumerated safeguards (for example, a majority of the board is composed of independent directors and the nominating committee is composed solely of such directors).

• The Adviser also considers management poison pill proposals on a case-by-case basis, looking for shareholder-friendly provisions before voting in favor.

• The Adviser votes against proposals for a super-majority vote to approve a merger.

• The Adviser considers proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan on a case-by-case basis, taking into account the extent of dilution and whether the transaction will result in a change in control.

• The Adviser votes proposals on a stock option plan based primarily on a detailed, quantitative analysis that takes into account factors such as estimated dilution to shareholders’ equity and dilution to voting power. The Adviser generally considers other management compensation proposals on a case-by-case basis.

• The Adviser also considers on a case-by-case basis proposals to change an issuer’s state of incorporation, mergers and acquisitions and other corporate restructuring proposals and certain social and environmental issue proposals.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

PORTFOLIO MANAGEMENT TEAM

The portfolio management team for the Fund is led by William J. Morgan, Managing Director. Mr. Morgan has been the lead portfolio manager for the Fund since June 2000 and has been part of the team responsible for management of the Fund since its inception. Currently, Mr. Morgan is a high-yield team leader and the portfolio manager for accounts in the high yield, aggressive income high yield, and insurance asset BB styles. Mr. Morgan earned a B.A. from Kenyon College and an M.B.A. from Xavier University. James P. Shanahan, Jr., Managing Director, also serves as portfolio manager for the Fund focusing primarily on investments in distressed debt. Mr. Shanahan has been part of the team responsible for the management of the Fund since 1988. Mr. Shanahan holds a B.A. from Xavier University and a J.D. from the University of Cincinnati College of Law. James E. Gibson, Vice President, is primarily responsible for trading on behalf of the Fund and has been part of the portfolio management team for the Fund since 1988. Mr. Gibson is one of the principal high yield traders in the Adviser’s U.S. Fixed Income Group. Mr. Gibson holds a B.S. from the University of Cincinnati College of Business Administration in finance. Mr. Morgan, Mr. Shanahan, and Mr. Gibson were officers of the Fund’s former adviser, Pacholder & Company, LLC, since its inception in 1998 and have been officers of and/or associated with the Adviser since March 1, 2005.

OTHER ACCOUNTS MANAGED

As of December 31, 2010, Mr. Morgan was part of the portfolio management team for six other mutual funds with a total of approximately $10 billion in assets; nine pooled investment vehicles with a total of approximately $6.5 billion in assets; 13 other accounts with non-performance based fees and a total of approximately $898 million in assets and one other account with a performance based fee and approximately $270 million in assets. As of December 31, 2010, Mr. Shanahan was part of the portfolio management team for eight other mutual funds with a total of approximately $14 billion in assets; seven pooled investment vehicles with a total of approximately $2.2 billion in assets; eleven other accounts with non-performance based fees and a total of approximately $1.6 billion in assets and one other account with a performance based fee and approximately $270 million in assets. As of December 31, 2010, Mr. Gibson was part of the portfolio management team for four other mutual funds with a total of approximately $9.8 billion in assets. The Adviser is not paid a performance based fee in connection with the other mutual funds, or the pooled investment vehicles.

POTENTIAL CONFLICTS OF INTEREST

The potential for conflicts of interest exists when a portfolio manager manages other accounts with similar investment objectives and strategies as the Fund (“Similar Accounts”). Potential conflicts may include, for example, conflicts between investment strategies and conflicts in the allocation of investment opportunities.

Responsibility for managing the Adviser’s and its affiliates’ clients’ portfolios is organized according to investment strategies within asset classes. Generally, client portfolios with similar strategies are managed by portfolio managers in the same portfolio management group using the same objectives, approach and philosophy. Underlying sectors or strategy allocations within a larger portfolio are likewise managed by portfolio managers who use the same approach and philosophy as similarly managed portfolios. Therefore, portfolio holdings, relative position sizes and industry and sector exposures tend to be similar across similar portfolios and strategies, which minimizes the potential for conflicts of interest.

The Adviser and/or its affiliates may receive more compensation with respect to certain Similar Accounts than that received with respect to the Fund or may receive compensation based in part on the performance of certain Similar Accounts. This may create a potential conflict of interest for the Adviser and its affiliates or a portfolio manager by providing an incentive to favor these Similar Accounts when, for example, placing securities transactions. In addition, the Adviser or its affiliates could be viewed as having a conflict of interest to the extent that the Adviser or an affiliate has a proprietary investment in Similar Accounts, a portfolio manager has personal investments in Similar Accounts or the Similar Accounts are investment options in the Adviser’s or its affiliates’ employee benefit plans. Potential conflicts of interest may arise with both the aggregation and allocation of securities transactions and allocation of investment opportunities because of market factors or investment restrictions imposed upon the Adviser and its affiliates by law, regulation, contract or internal policies. Allocations of aggregated trades, particularly trade orders that were only partially completed due to limited availability and allocation of investment opportunities generally, could raise a potential conflict of interest, as the Adviser or its affiliates may have an incentive to allocate securities that are expected to increase in value to favored accounts. Initial public offerings, in particular, are frequently of very limited availability. The Adviser and its affiliates may be perceived as causing accounts they manage to participate in an offering to increase the Adviser’s and its affiliates’ overall allocation of securities in that offering. A potential conflict of interest also may be perceived to arise if transactions in one account closely follow related transactions in a different account, such as when a purchase increases the value of securities previously purchased by another account, or when a sale in one account lowers the sale price received in

a sale by a second account. If the Adviser or its affiliates manage accounts that engage in short sales of securities of the type in which the Fund invests, the Adviser or its affiliates could be seen as harming the performance of the Fund for the benefit of the accounts engaging in short sales if the short sales cause the market value of the securities to fall.

As an internal policy matter, the Adviser or its affiliates may from time to time maintain certain overall investment limitations on the securities positions or positions in other financial instruments the Adviser or its affiliates will take on behalf of its various clients due to, among other things, liquidity concerns and regulatory restrictions. Such policies may preclude the Fund from purchasing particular securities or financial instruments, even if such securities or financial instruments would otherwise meet the Fund’s objectives.

The goal of the Adviser and its affiliates is to meet their fiduciary obligation with respect to all clients. The Adviser and its affiliates have policies and procedures that seek to manage conflicts. The Adviser and its affiliates monitor a variety of areas, including compliance with fund guidelines, review of allocation decisions and compliance with the Adviser’s Codes of Ethics and JPMorgan Chase & Co.’s Code of Conduct. With respect to the allocation of investment opportunities, the Adviser and its affiliates also have certain policies designed to achieve fair and equitable allocation of investment opportunities among its clients over time. For example:

Orders for the same equity security traded through a single trading desk or system are aggregated on a continual basis throughout each trading day consistent with the Adviser’s and its affiliates’ duty of best execution for its clients. If aggregated trades are fully executed, accounts participating in the trade will be allocated their pro rata share on an average price basis. Partially completed orders generally will be allocated among the participating accounts on a pro-rata average price basis, subject to certain limited exceptions. For example, accounts that would receive a de minimis allocation relative to their size may be excluded from the order. Another exception may occur when thin markets or price volatility require that an aggregated order be completed in multiple executions over several days. If partial completion of the order would result in an uneconomic allocation to an account due to fixed transaction or custody costs, the Adviser and its affiliates may exclude small orders until 50% of the total order is completed. Then the small orders will be executed. Following this procedure, small orders will lag in the early execution of the order, but will be completed before completion of the total order.

Purchases of money market instruments and fixed income securities cannot always be allocated pro-rata across the accounts with the same investment strategy and objective. However, the Adviser and its affiliates attempt to mitigate any potential unfairness by basing non-pro rata allocations traded through a single trading desk or system upon an objective predetermined criteria for the selection of investments and a disciplined process for allocating securities with similar duration, credit quality and liquidity in the good faith judgment of the Adviser or its affiliates so that fair and equitable allocation will occur over time.

PORTFOLIO MANAGER COMPENSATION

The portfolio managers’ total compensation program includes a base salary fixed from year to year and a variable performance bonus consisting of cash incentives and restricted stock and may include mandatory notional investments (as described below) in selected funds advised by the Adviser or its affiliates. These elements reflect individual performance and the performance of the Adviser’s business as a whole.

The portfolio managers’ performance is formally evaluated annually based on a variety of factors including the aggregate size and blended performance of the portfolios a portfolio manager manages. Individual contribution relative to client goals carries the highest impact. Portfolio manager compensation is primarily driven by meeting or exceeding clients’ risk and return objectives, relative performance to competitors or competitive indices and compliance with firm policies and regulatory requirements. In evaluating a portfolio manager’s performance with respect to the funds he manages, the funds’ pre-tax performance is compared to the appropriate market peer group and to each fund’s benchmark over one, three and five year periods (or such shorter time as the portfolio manager has managed a fund). Investment performance is generally more heavily weighted to the long-term.

Awards of restricted stock are granted as part of an employee’s annual performance bonus and comprise from 0% to 35% of a portfolio manager’s total bonus. As the level of incentive compensation increases, the percentage of compensation awarded in restricted stock also increases. Up to 50% of the restricted stock portion of a portfolio manager’s bonus may instead be subject to mandatory notional investment in selected mutual funds advised by the Adviser or its affiliates. When these awards vest over time, the portfolio manager receives cash equal to the market value of the notional investment in the selected funds.

SECURITIES OWNERSHIP OF PORTFOLIO MANAGEMENT TEAM

Information concerning ownership of securities of the Fund owned by Mr. Morgan, Mr. Shanahan and Mr. Gibson as of December 31, 2010 is set forth below:

William J. Morgan: $500,001 - $1,000,000

James P. Shanahan, Jr.: $100,001 - $500,000

James E. Gibson: $100,001 - $500,000

ITEM 9. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

(a) If the registrant is a closed-end management investment company, provide the information specified in paragraph (b) of this Item with respect to any purchase made by or on behalf of the registrant or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the Exchange Act (17 CFR 240.10b-18(a)(3)), of shares or other units of any class of the registrant’s equity securities that is registered by the registrant pursuant to Section 12 of the Exchange Act (15 U.S.C. 781).

There were no purchases covered by this Item during the period covered by this report.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Describe any material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or this Item.

No material changes to report.

ITEM 11. CONTROLS AND PROCEDURES.

(a) Disclose the conclusions of the registrant’s principal executive and principal financial officers, or persons performing similar functions, regarding the effectiveness of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)).

The Registrant’s principal executive and principal financial officers have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant’s disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

(b) Disclose any change in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

There were no changes in the Registrant’s internal control over financial reporting that occurred during the last fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

ITEM 12. EXHIBITS.

(a) File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated.

(a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit.

Code of Ethics applicable to its Principal Executive and Principal Financial Officers pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 attached hereto.

The Registrant has adopted proxy voting policies and procedures, as defined in Item 7 of Form N-CSR. A copy of the policies and procedures is filed as Exhibit 12(a)(3) to this Form.

(a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2).

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

(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons.

Not applicable.

(b) A separate or combined certification for each principal executive officer and principal officer of the registrant as required by Rule 30a-2(b) under the Act of 1940.

Certifications pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 are 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.

Pacholder High Yield Fund, Inc.

By:	/s/
	Patricia A. Maleski
	President and Principal Executive Officer March 10, 2011

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:	/s/
	Patricia A. Maleski
	President and Principal Executive Officer March 10, 2011
By:	/s/
	Joy C. Dowd
	Treasurer and Principal Financial Officer March 10, 2011