Beginning with its dividend payable on October 10, 2003, the Pacholder High Yield Fund, Inc. (the “Fund”) will reduce its dividend from $0.08 to $0.075 per share per month (from $0.96 to $0.90 annually). Based on the Fund’s current share price, the yield on the Fund’s shares at the new dividend rate is approximately 10.8%.

The Fund’s dividend rate is determined primarily by the level of interest income earned on the Fund’s portfolio. The Fund’s interest income has been negatively impacted by the higher than normal credit defaults in the high yield market over the past four and a half years, the general decline in interest rates, which has reduced the rate at which the Fund is able to reinvest its assets, and the redemption of $26 million of Auction Rate Preferred Stock between June and October 2002 to maintain the required level of asset coverage.

In addition to the factors above, the Fund’s Board and Advisor believe it has generally been prudent to hold, and in certain cases to add to, the non-accruing securities in the portfolio because of the potential for recovery of value in these investments, and these investments have appreciated substantially this year. While holding these non-accruing securities has impacted the dividend capabilities of the Fund, it has had a very positive impact on the Fund’s NAV and is an important factor in the Fund’s outperforming the high yield market thus far in 2003. The Fund expects to harvest these non-accruing securities if and when they become fully valued and to reinvest the proceeds in performing debt securities.

The Fund’s Board and Advisor will strive to maintain the new dividend rate for as long as is consistent with the prudent management of the Fund’s assets. There are a number of variables that materially affect the amount of dividends available for common shareholders, including:

- The dividend yield on the Fund’s Auction Rate Preferred Stock;

- Credit defaults and losses;

- The reinvestment rate on securities sold, matured or called; and

- The variability of the Advisor’s investment performance based management fee.

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 securities. The Fund invests primarily in fixed income securities of domestic companies. The Fund’s common stock is traded on the American Stock Exchange under the symbol “PHF.”