-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BCBXJemSWxboSndm0QvEcVlHgejohpHk3ZEn4jzRYZG20xy/04DlujPyeH1HBTir 9RFhDF83Zsw7QWEvg16e3A== 0000828990-97-000007.txt : 19971211 0000828990-97-000007.hdr.sgml : 19971211 ACCESSION NUMBER: 0000828990-97-000007 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971210 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HIGH YIELD PLUS FUND INC CENTRAL INDEX KEY: 0000828990 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MD FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05468 FILM NUMBER: 97735181 BUSINESS ADDRESS: STREET 1: GATEWAY CENTER THREE 100 MULBERRT ST CITY: NEWARK STATE: NJ ZIP: 07102 BUSINESS PHONE: 2013671495 MAIL ADDRESS: STREET 1: GATEWAY CENTER THREE 100 MULBERRY STREET CITY: NEWARK STATE: NJ ZIP: 07102 N-30D 1 HIGH YIELD PLUS FUND The High Yield Plus Fund, Inc. SEMI ANNUAL REPORT September 30, 1997 Letter To Shareholders October 13, 1997 Dear Shareholder: The high yield market again demonstrated strength during the six-month period ended September 30, 1997. Benevolent economic and capital market conditions continued to foster strong demand for high yield issues. Valuations appear full in a historical sense, yet the growth and breadth of demand in the marketplace suggest that perhaps these valuations are merited, particularly if the economic conditions remain amenable. Fund Performance. The Fund's total returns for the periods ended September 30, 1997 are shown on the following table. For comparison, we have also provided the returns of the Lipper Closed-End Leveraged High Yield category, an average of 17 closed-end high yield funds; we would note that the degree of leverage varies substantially amongst the funds in the group. In addition, we have included the returns of the Lehman Brothers High Yield Index, a proxy for high yield market performance.
TOTAL RETURNS For the Periods Ended September 30, 1997 6 Months 12 Months 24 Months High Yield Plus Fund (at NAV)* 10.5% 15.0% 31.4% Lipper CEHY -- Leveraged 11.8% 17.6% 35.2% Lehman Brothers 09.4% 14.5% 27.0% High Yield Index * The Fund's total return represents the change in net asset value from the beginning of the period noted through September 30, 1997 and assumes the reinvestment of dividends and distributions. Shares of the Fund are traded on the NYSE. Past performance is no quarantee of future results. How We Invested. As of September 30, 1997, the Fund's total invested assets of $120 million represented 118% of the Fund's net assets; total borrowings were $19 million, up modestly from $18 million as of March 31, 1997. Average ratings have remained steady at B1/B+. In the table below we have highlighted some of the Fund's industry exposures relative to the Lehman Brothers High Yield Index, a proxy for the overall high yield market: Overweighted Categories: Underweighted Categories: Industry HYP* Lehman HY Industry HYP* Lehman HY Aerospace & Defense 7% 1% Gaming 1% 4% Chemicals & Related 9% 3% Food & Lodging 1% 5% Automotive & Related 8% 2% Telecom 4% 12% * Expressed as a percent of total corporate holdings as of 9/30/97. 1 The Fund's aggregate overweighted positions in certain sectors reflect holdings of issues in these sectors that we believe have favorable outlooks. The commercial aerospace business, for instance, is currently very strong, and many companies that were forced to retrench and become more productive during the cyclical trough during the early 1990's are now reaping the rewards of their efforts as demand continues to grow. Likewise, the Fund is underweighted in certain sectors relative to the market given our longer term concerns about certain issuers or industry outlooks. We are concerned about proliferation in the gaming sector. We also remain concerned about the potential for too much competition in the telecommunications area with product and technology proliferation as well. However, we will note that this sector has recently outperformed the market overall as a result of takeover potential/consolidation plays. We are actively monitoring this area, but ultimately believe that the securities of many of these companies, which in many instances have limited revenues and negative cash flows, are not offering adequate returns relative to the long-term risk involved. Merger and acquisition activity has been on the increase. During the six-month reporting period, several of the Fund's positions were beneficiaries of buyouts or mergers from better capitalized partners, including Fort Howard (James River), Smith's Food & Drug (Fred Meyer), Rohr (BFGoodrich) and most recently, Astor Holdings (AlliedSignal). In each case the buyer was an investment grade company, and the Fund's high yield holdings appreciated. Given the apparent surfeit of "liquidity" in the financial system, we expect that acquisition activity may remain high or increase further. The Fund's shares closed the period at a (NYSE) markeet price $9.375 per share. This price reflected a premium of 4.2% to the Fund's net asset value of $9.00 per share. The monthly dividend of $0.07 per share ($0.84 per share annualized) equates to a yield of 9.0% on the closing stock price. For comparison, this dividend yield was approximately 290 basis points in excess of the 10-year Treasury bond yield as of September 30, 1997. Thank you for your interest in the Fund, and we look forward to continuing the Fund's investment program. Sincerely yours, Catherine A. Smith Portfolio Manager Senior Vice President Wellington Management Company, LLP 2 Portfolio of Investments as of September 30, 1997 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------- - ------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - -------------------------------------------------- - -------------------------------------------------- - -------------------------- LONG-TERM INVESTMENTS--117.0% CORPORATE BONDS--111.1% - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Aerospace/Defense--8.3% Argo-Tech Corp., Sr. Sub. Notes B3 8.625% 10/01/07 $ 1,215 $ 1,218,038 Howmet Corp., Sr. Sub. Notes B2 10.00 12/01/03 1,605 1,749,450 K & F Industries, Inc., Sr. Sec. Notes B1 11.875 12/01/03 245 259,087 Sr. Sub. Notes B3 10.375 9/01/04 1,250 1,415,625 Moog, Inc., Sr. Sub. Notes, Ser. B B2 10.00 5/01/06 1,285 1,362,100 Rohr, Inc., Sr. Notes Ba3 11.625 5/15/03 1,250 1,400,000 Wyman-Gordon Co., Sr. Notes Ba3 10.75 3/15/03 1,000 1,067,500 - ------------ 8,471,800 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Automotive--9.3% Collins & Aikman Products Co., Sr. Sub. Notes B3 11.50 4/15/06 1,500 1,713,750 Delco Remy International Inc., Sr. Sub. Notes B2 10.625 8/01/06 360 385,200 Exide Corp., Sr. Notes B1 10.00 4/15/05 500 530,000 Federal-Mogul Corp., Sr. Notes Ba2 8.80 4/15/07 235 250,275 Hayes Wheels International, Inc., Sr. Sub. Notes B3 11.00 7/15/06 340 380,800 Sr. Sub. Notes B3 9.125 7/15/07 400 412,000 Johnstown America Industries, Inc., Sr. Sub. Notes B3 11.75 8/15/05 1,500 1,612,500 Key Plastics, Inc., Sr. Sub. Notes, Ser. B B3 10.25 3/15/07 1,000 1,050,000 LDM Technologies, Inc., Sr. Sub. Notes, Ser. B B3 10.75 1/15/07 750 808,125 Lear Corp., Sub. Notes Ba3 9.50 7/15/06 1,000 1,095,000 Lear Seating Corp., Sub. Notes Ba3 8.25 2/01/02 750 760,312 Walbro Corp., Sr. Notes B1 9.875 7/15/05 500 515,000 - ------------ 9,512,962 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Basic Industries-Manufacturing--8.8% Cabot Safety Acquisition Corp., Sr. Sub. Notes B3 12.50 7/15/05 750 826,875 Clark-Schwebel Inc., Sr. Notes, Ser. B B2 10.50 4/15/06 465 506,850 Essex Group Inc., Sr. Notes B1 10.00 5/01/03 750 791,250 Graphic Controls Corp., Sr. Sub. Notes, Ser. A B3 12.00 9/15/05 500 560,000 Great Lakes Carbon Corp., Sr. Sec. Notes Ba3 10.00 1/01/06 1,000 1,060,000 IDEX Corp., Sr. Sub. Notes Ba3 9.75 9/15/02 250 259,375 International Wire Group, Inc., Sr. Sub. Notes, Ser. B B3 11.75 6/01/05 1,000 1,095,000 Mettler-Toledo, Inc., Sr. Sub. Notes B2 9.75 10/01/06 350 392,000 Neenah Corp., Sr. Sub. Notes, Ser. B B3 11.125 5/01/07 750 815,625
- -------------------------------------------------- - ------------------------------ See Notes to Financial Statements. 3 Portfolio of Investments as of September 30, 1997 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------- - ------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Basic Industries-Manufacturing (cont'd.) Roller Bearing Co. Amer. Inc., Sr. Sub. Notes B3 9.625% 6/15/07 $ 300 $ 306,750 Specialty Equipment Cos., Inc., Sr. Sub. Notes B3 11.375 12/01/03 1,000 1,085,000 Thermadyne Holdings Corp., Sr. Notes B1 10.25 5/01/02 750 780,000 UCAR Global Enterprises Inc., Sr. Sub. Notes B1 12.00 1/15/05 415 472,581 - ------------ 8,951,306 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Building & Related Industries--1.5% Amtrol Inc., Sr. Sub. Notes B3 10.625 12/31/06 500 510,000 Associated Materials, Inc., Sr. Sub. Notes B3 11.50 8/15/03 470 500,550 Nortek, Inc., Sr. Notes, Ser. B B1 9.25 3/15/07 465 471,975 - ------------ 1,482,525 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Cable--4.9% Cablevision Systems Corp., Sr. Deb. Ba2 8.125 8/15/09 645 653,063 Sr. Sub. Notes B1 9.25 11/01/05 1,250 1,306,250 Sr. Sub. Notes B1 9.875 5/15/06 475 513,000 Comcast Corp., Sr. Sub. Deb. Ba3 9.125 10/15/06 250 267,500 Marcus Cable Co., L.P., Sr. Disc. Notes, Zero Coupon (until 6/15/00) Caa 14.25 12/15/05 250 207,500 Marcus Cable Operating Co., L.P., Sr. Sub. Disc. Notes, Zero Coupon (until 8/1/99) B3 13.50 8/01/04 500 450,625 Rifkin Acquisition Partners L.L.L.P., Sr. Sub. Notes B3 11.125 1/15/06 1,000 1,085,000 Videotron Ltd., Sr. Sub. Notes (Canada) Ba3 10.25 10/15/02 500 D 527,500 - ------------ 5,010,438 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Chemicals--9.7% Acetex Corp., Sr. Sec. Notes (Canada) B1 9.75 10/01/03 1,750 D 1,811,250 Agriculture Minerals & Chemicals, Inc., Sr. Notes Ba3 10.75 9/30/03 500 541,875 Astor Corp., Sr. Sub. Notes B3 10.50 10/15/06 1,275 1,351,500 Borden Chemicals & Plastics Operating L.P., Notes Ba2 9.50 5/01/05 245 259,700 Buckeye Cellulose Corp., Sr. Sub. Notes Ba3 8.50 12/15/05 350 356,563 Freedom Chemicals Co., Sr. Sub. Notes B3 10.625 10/15/06 1,250 1,325,000 General Chemical Corp., Sr. Sub. Notes B2 9.25 8/15/03 500 510,000 Huntsman Corp., Sr. Sub. F.R.N. B2 9.094 7/01/07 480 495,600 Sr. Sub. Notes B2 9.50 7/01/07 500 525,000 Huntsman Polymers Corp., Sr. Notes B1 11.75 12/01/04 500 570,000 Pioneer Americas Acquisition Corp., Sr. Notes B1 9.25 6/15/07 500 500,000
- -------------------------------------------------- - ------------------------------ See Notes to Financial Statements. 4 Portfolio of Investments as of September 30, 1997 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------- - ------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Chemicals (cont'd.) Sovereign Specialty Chemicals, Sr. Sub. Notes B3 9.50% 8/01/07 $ 525 $ 535,500 Terra Industries, Inc., Sr. Notes Ba3 10.50 6/15/05 500 543,750 Texas Petrochemicals Corp., Sr. Sub. Notes B3 11.125 7/01/06 500 545,000 - ------------ 9,870,738 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Consumer Goods & Services--0.5% Muzak L.P., Muzak Capital, Sr. Notes Ba3 10.00 10/01/03 500 525,000 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Containers--3.2% Bway Corp., Sr. Sub. Notes B2 10.25 4/15/07 750 813,750 Calmar Inc., Sr. Sub. Notes, Ser. B B3 11.50 8/15/05 360 392,400 Silgan Holdings Inc., Sr. Sub. Deb. B1 9.00 6/01/09 1,750 1,789,375 Sub. Deb., PIK NR 13.25 7/15/06 200 228,292 - ------------ 3,223,817 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Energy & Related Goods & Services--8.8% Cliffs Drilling Co., Sr. Notes, Ser. C B1 10.25 5/15/03 270 291,600 Cross Timbers Oil Co., Sr. Sub. Notes, Ser. B B2 9.25 4/01/07 1,000 1,031,250 Dailey Petroleum Services Corp., Sr. Notes B1 9.75 8/15/07 275 280,500 Energy Ventures, Inc., Sr. Notes Ba2 10.25 3/15/04 750 810,000 Flores & Rucks Inc., Sr. Sub. Notes B3 9.75 10/01/06 350 373,625 Global Marine Inc., Sr. Sec. Notes Baa1 12.75 12/15/99 250 260,625 Mesa Operating Co., Sr. Sub. Notes Ba2 10.625 7/01/06 300 343,500 Ocean Energy Inc., Sr. Sub. Notes B3 8.875 7/15/07 150 153,750 Petroleos Mexicanos, Gtd. Sr. Notes (Mexico) Ba2 8.85 9/15/07 1,500 D 1,530,000 Plains Resources, Inc., Sr. Sub. Notes B2 10.25 3/15/06 1,250 1,343,750 Pride Petroleum Services, Inc., Sr. Notes Ba3 9.375 5/01/07 315 337,050 Santa Fe Energy Resources, Inc., Sr. Sub. Deb. Notes B1 11.00 5/15/04 1,250 1,362,500 Seagull Energy Corp., Sr. Sub. Notes Ba3 8.625 8/01/05 250 262,500 Transportadora de Gas del Sur, S.A., Notes (Argentina) B1 10.25 4/25/01 500 D 541,250 - ------------ 8,921,900 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Financial Services----6.9% Chevy Chase Bank F.S.B., Sub. Deb. B1 9.25 12/01/08 500 507,500 Dime Bancorp, Inc., Sr. Notes Ba2 10.50 11/15/05 1,250 1,356,250 First Nationwide Holdings, Inc., Sr. Notes B3 12.50 4/15/03 750 843,750 FirstFed Financial Corp., Notes B2 11.75 10/01/04 500 510,000
- -------------------------------------------------- - ------------------------------ See Notes to Financial Statements. 5 Portfolio of Investments as of September 30, 1997 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------- - ------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Financial Services (cont'd.) Navistar Financial Corp., Sr. Sub. Notes, Ser. B B1 9.00% 6/01/02 $ 720 $ 743,400 Olympic Financial Ltd., Sr. Notes B2 11.50 3/15/07 1,500 @ 1,545,000 Western Financial Svgs. Bank, F.S.B., Sub. Cap. Deb. B1 8.875 8/01/07 1,500 1,492,500 - ------------ 6,998,400 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Food & Lodging--1.5% John Q. Hammons Hotels, First Mtge. Bonds B1 8.875 2/15/04 1,000 1,013,750 PMI Acquisition Corp., Sr. Sub. Notes B2 10.25 9/01/03 500 531,250 - ------------ 1,545,000 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Gaming--0.7% GB Property Funding Corp., First Mtge. Bonds B3 10.875 1/15/04 750 673,125 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Grocery Stores--0.9% Homeland Stores Inc., Sr. Notes NR 10.00 8/01/03 1,000 940,000 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Health Care--5.0% Beverly Enterprises, Inc., Sr. Notes B1 9.00 2/15/06 375 392,813 Dade International Inc., Sr. Sub. Notes B3 11.125 5/01/06 390 439,237 Genesis Health Ventures Inc., Sr. Sub. Notes B2 9.25 10/01/06 130 132,925 Owens & Minor, Inc., Sr. Sub. Notes B1 10.875 6/01/06 1,250 1,378,125 Packard Bioscience Co., Sr. Sub. Notes, Ser. B B3 9.375 3/01/07 1,250 1,278,125 Quorum Health Group, Inc., Sr. Sub. Notes Ba3 8.75 11/01/05 350 364,875 Vencor, Inc., Sr. Sub. Notes B1 8.625 7/15/07 1,045 1,060,675 - ------------ 5,046,775 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Home Builder & Real Estate--1.4% Kaufman & Broad Home Corp., Sr. Sub. Notes Ba3 9.625 11/15/06 500 521,875 Standard Pacific Corp., Sr. Notes Ba2 8.50 6/15/07 925 934,250 - ------------ 1,456,125 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Media & Communications--6.1% Chancellor Media Corp., Sr. Sub. Notes B2 9.375 10/01/04 500 526,250 Echostar DBS Corp., Sr. Sec. Notes Caa 12.50 7/01/02 900 991,125 Heritage Media Services Inc., Sr. Sec. Notes Ba1 11.00 6/15/02 250 263,125 Jacor Communications, Inc., Sr. Sub. Notes B2 9.75 12/15/06 250 267,500 Sr. Sub. Notes B2 8.75 6/15/07 150 153,000 JCAC, Inc., Sr. Sub. Notes B2 10.125 6/15/06 250 271,250
- -------------------------------------------------- - ------------------------------ See Notes to Financial Statements. 6 Portfolio of Investments as of September 30, 1997 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------- - ------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Media & Communications (cont'd.) Plitt Theatres, Inc., Sr. Sub. Notes B3 10.875% 6/15/04 $ 1,250 $ 1,325,000 World Color Press, Inc., Sr. Sub. Notes B1 9.125 3/15/03 1,250 1,306,250 Young Broadcasting Inc., Sr. Sub. Notes B2 11.75 11/15/04 1,000 1,110,000 - ------------ 6,213,500 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Metals--11.4% Acindar Industria Argentina de Aceros S.A., Notes (Argentina) B2 11.25 2/15/04 750 D 814,687 AK Steel Corp., Sr. Notes Ba2 10.75 4/01/04 1,000 1,085,000 Sr. Notes Ba2 9.125 12/15/06 1,000 1,052,500 Armco, Inc., Sr. Notes B2 9.375 11/01/00 500 516,250 Sr. Notes B2 9.00 9/15/07 210 212,625 Bethlehem Steel Corp., Sr. Notes B1 10.375 9/01/03 1,250 1,331,250 Companhia Vale do Rio Doce, Notes (Brazil) NR 10.00 4/02/04 750 D 789,375 CSN Iron S.A., Gtd. Notes (Brazil) B1 9.125 6/01/07 1,000 D 981,250 GS Technologies Operating Co. Inc., Sr. Notes B2 12.25 10/01/05 750 836,250 Hylsa S.A. de C.V., Bonds (Mexico) Ba3 9.25 9/15/07 365 D 373,213 NS Group Inc., Sr. Sec. Notes B3 13.50 7/15/03 1,000 1,160,000 Sheffield Steel Corp., First Mtge. Bonds Caa 12.00 11/01/01 610 628,300 Weirton Steel Corp., Sr. Notes B2 10.875 10/15/99 750 798,750 Sr. Notes B2 11.375 7/01/04 1,000 1,085,000 - ------------ 11,664,450 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Paper & Packaging--9.9% Aracruz Celulose S. A., Notes (Brazil) NR 10.375 1/31/02 1,035 D 1,086,750 Bahia Sul Celulose S.A., Gtd. Notes (Brazil) NR 10.625 7/10/04 500 D 516,250 Container Corp. of America, Sr. Notes B1 9.75 4/01/03 1,250 1,350,000 Sr. Notes, Ser. B B1 10.75 5/01/02 1,000 1,105,000 Doman Industries Ltd., Sr. Notes (Canada) B1 8.75 3/15/04 1,250 D 1,234,375 Fonda Group Inc., Sr. Sub. Notes, Ser. B B3 9.50 3/01/07 1,500 1,440,000 Paperboard Industries International, Inc., Sr. Notes (Canada) Ba3 8.375 9/15/07 245 D 248,675 Pindo Deli Finance Mauritius Ltd., Gtd. Sr. Notes (Indonesia) Ba3 10.75 10/01/07 910 D 924,787 S.D. Warren Co., Sr. Sub. Notes, Ser. B B1 12.00 12/15/04 795 898,350 Tembec Finance Corp., Sr. Notes (Canada) B1 9.875 9/30/05 1,250 D 1,321,875 - ------------ 10,126,062 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Retail--0.4% Guitar Ctr. Mgmt. Co., Inc., Sr. Notes B1 11.00 7/01/06 333 369,630
- -------------------------------------------------- - ------------------------------ See Notes to Financial Statements. 7 Portfolio of Investments as of September 30, 1997 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------- - ------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Technology--4.8% Advanced Micro Devices, Inc., Sr. Sec. Notes Ba1 11.00% 8/01/03 $ 500 $ 562,500 Bell & Howell Co., Sr. Notes B1 9.25 7/15/00 750 784,687 DecisionOne Holdings Corp., Sr. Disc. Deb., Zero Coupon (until 8/1/02) Caa 11.50 8/01/08 500 @ 332,500 Fairchild Semiconductor Corp., Sr. Sub. Notes B2 10.125 3/15/07 1,250 1,340,625 Pierce Leahy Corp., Sr. Sub. Notes B3 9.125 7/15/07 395 411,788 Unisys Corp., Sr. Notes B1 11.75 10/15/04 250 282,500 Sr. Notes, Ser. B B1 12.00 4/15/03 1,000 1,122,500 - ------------ 4,837,100 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Telecommunication Services--4.2% Comcast Cellular Holdings Inc., Sr. Notes Ba3 9.50 5/01/07 250 261,250 MobileMedia Communications, Inc., Sr. Sub. Notes C 9.375 11/01/07 2,000 ** 445,000 Rogers Cantel Inc., Sr. Sec. Notes Ba3 8.30 10/01/07 1,240 1,240,000 Telefonica de Argentina, S.A., Notes (Argentina) B1 11.875 11/01/04 1,000 D 1,212,500 Teleport Communications Group Inc., Sr. Disc. Notes, Zero Coupon (until 7/1/01) B1 11.125 7/01/07 1,500 1,162,500 - ------------ 4,321,250 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Textiles--0.8% Westpoint Stevens Inc., Sr. Notes Ba3 8.75 12/15/01 750 780,000 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Utilities--2.1% El Paso Electric Co., First Mtge. Bonds, Ser. D Ba3 8.90 2/01/06 500 542,195 Texas-New Mexico Power Co., Deb. Ba3 10.75 9/15/03 1,500 1,616,250 - ------------ 2,158,445 - ------------ Total corporate bonds (cost $108,637,026) 113,100,348 - ------------ - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Foreign Government ObligationsD--3.2% Republic of Argentina, Bonds B1 11.00 10/09/06 500 573,750 Global Bonds B1 8.375 12/20/03 500 503,750 Global Bonds B1 11.375 1/30/17 500 582,250 Republic of Brazil, Exit Bonds B1 6.00 9/15/13 750 614,063 Ser. C Bonds B1 4.50 4/15/14 1,139 969,363 - ------------ Total foreign government obligations (cost $2,490,089) 3,243,176
- -------------------------------------------------- - ------------------------------ See Notes to Financial Statements. 8 Portfolio of Investments as of September 30, 1997 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------- - ------------------------------
Moody's Interest Expiration Value Description Rating Rate Date Shares (Note 1) - -------------------------------------------------- - -------------------------------------------------- - -------------------------- PREFERRED STOCKS--2.7% California Federal Bank, Noncumulative Perpetual, Ser. B Ba2 10.625% -- 2,500 $ 278,437 Chevy Chase Preferred Capital Corp., Exchangeable, Ser. A B1 10.375 -- 16,575 866,044 Fairfield Mfg. Inc., Exchangeable, PIK B3 11.25 -- 1,000 1,020,000 Granite Broadcasting Corp., Cumulative Exchangeable, PIK B3PoundPound 12.75 - -- 532 561,128 - ------------ Total preferred stocks (cost $2,584,500) 2,725,609 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- WARRANTS* Warrants - ---------- Benedek Communications Corp.Pound (cost $0; purchased 10/17/96) - -- -- 7/01/07 5,500 11,000 - ------------ Total long-term investments (cost $113,711,615) 119,080,133 - ------------ - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Principal SHORT-TERM INVESTMENTS--1.3% Maturity Amount REPURCHASE AGREEMENT Date (000) - ---------- ---------- PaineWebber Inc., dated 9/30/97, $1,331,223 due at maturity (cost $1,331,000; approximate value of collateral including accrued interest - $1,361,790) NR 6.03 10/01/97 $ 1,331 1,331,000 - -------------------------------------------------- - -------------------------------------------------- - -------------------------- Total Investments--118.3% (cost $115,042,615; Note 3) 120,411,133 Liabilities in excess of other assets--(18.3)% (18,652,565) - ------------ Net Assets--100% $101,758,568 - ------------ - ------------
- --------------- * --Non-income-producing security. ** --Represents issuer in default on interest payments; non-income-producing security. Pound --Indicates a restricted security; there was no cost associated with this security. The value ($11,000) is approximately 0.01% of net assets. PoundPound --Moody's Equivalent to S&P Rating. D --US$ Denominated Foreign Bonds. @ --Consists of more than 1 class of securities traded together as a unit; generally bonds with attached stock or warrants. NR --Not rated by Moody's or Standard & Poor's. PIK --Payment in Kind. L.L.L.P. --Limited Liability Limited Partnership L.P. --Limited Partnership F.R.N. --Floating Rate Note F.S.B. --Federal Savings Bank - -------------------------------------------------- - ------------------------------ See Notes to Financial Statements. 9 Statement of Assets and Liabilities (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------- - ------------------------------ Assets September 30, 1997 Investments, at value (cost $115,042,615)..................................... ......................... $ 120,411,133 Cash.............................................. .................................................. ... 306 Interest receivable........................................ ............................................ 2,826,266 Deferred expenses and other assets............................................ ......................... 47,524 - ------------------ Total assets............................................ ............................................ 123,285,229 - ------------------ Liabilities Loan payable (Note 4)................................................ .................................. 19,000,000 Payable for investments purchased......................................... ............................. 1,350,762 Dividends payable........................................... ........................................... 791,945 Loan interest payable (Note 4)................................................ ......................... 209,682 Accrued expenses.......................................... ............................................. 91,901 Advisory fee payable........................................... ........................................ 41,682 Deferred director's fees.............................................. ................................. 24,016 Administration fee payable........................................... .................................. 16,673 - ------------------ Total liabilities....................................... ............................................ 21,526,661 - ------------------ Net Assets............................................ ................................................. $ 101,758,568 - ------------------ - ------------------ Net assets were comprised of: Common stock, at par............................................... ................................. $ 113,048 Paid-in capital in excess of par............................................... ..................... 103,759,401 - ------------------ 103,872,449 Undistributed net investment income............................................ ..................... 208,223 Accumulated net realized loss on investments....................................... ................. (7,690,622 ) Net unrealized appreciation of investments....................................... ................... 5,368,518 - ------------------ Net assets, September 30, 1997.............................................. ........................ $ 101,758,568 - ------------------ - ------------------ Net asset value per share ($101,758,568 / 11,304,788 shares of common stock issued and outstanding).... $9.00 - ------------------ - ------------------
- -------------------------------------------------- - ------------------------------ See Notes to Financial Statements. 10 THE HIGH YIELD PLUS FUND, INC. Statement of Operations (Unaudited) - -------------------------------------------------- - ----------
Six Months Ended September 30, Net Investment Income 1997 Income Interest.............................. $5,626,737 Dividends............................. 114,902 ------ - ------------ 5,741,639 ------ - ------------ Expenses Investment advisory fee............... 249,654 Administration fee.................... 99,861 Custodian's fees and expenses......... 55,000 Legal fees and expenses............... 35,000 Reports to shareholders............... 20,000 Transfer agent's fees and expenses.... 19,000 Audit fee............................. 13,500 Insurance expense..................... 13,000 Directors' fees and expenses.......... 6,000 Miscellaneous......................... 12,459 ------ - ------------ Total operating expenses........... 523,474 Loan interest expense (Note 4)........ 601,707 ------ - ------------ Total expenses..................... 1,125,181 ------ - ------------ Net investment income.................... 4,616,458 ------ - ------------ Realized and Unrealized Gain on Investments Net realized gain on investment transactions.......................... 462,023 Net change in unrealized appreciation/depreciation of investments........................... 4,898,236 ------ - ------------ Net gain on investments.................. 5,360,259 ------ - ------------ Net Increase in Net Assets Resulting from Operations................ $9,976,717 ------ - ------------ ------ - ------------
THE HIGH YIELD PLUS FUND, INC. Statement of Cash Flows (Unaudited) - -------------------------------------------------- - ----------
Six Months Ended September 30, Increase (Decrease) in Cash 1997 Cash flows provided from operating activities Interest and dividends received (excluding discount amortization of $239,526)........................... $ 5,370,979 Operating expenses paid................ (317,911) Loan interest and commitment fee paid................................ (707,172) Maturities of short-term portfolio investments, net.................... 19,000 Purchases of long-term portfolio investments......................... (45,097,645) Proceeds from disposition of long-term portfolio investments............... 43,975,848 Deferred expenses and other assets..... 12,924 ------ - ------------ Net cash provided from operating activities.......................... 3,256,023 ------ - ------------ Cash used for financing activities Net increase in notes payable.......... 1,000,000 Cash dividends paid (excluding reinvestment of dividends of $478,144)........................... (4,256,061) ------ - ------------ Net cash used for financing activities.......................... (3,256,061) ------ - ------------ Net decrease in cash................... (38) Cash at beginning of period............ 344 ------ - ------------ Cash at end of period.................. $ 306 ------ - ------------ ------ - ------------ Reconciliation of Net Increase in Net Assets to Net Cash from Operating Activities Net increase in net assets resulting from operations............................. $ 9,976,717 ------ - ------------ Increase in investments................... (2,535,051) Net realized gain on investment transactions........................... (462,023) Net change in unrealized appreciation of investments............................ (4,898,236) Decrease in receivable for investments sold................................... 960,369 Increase in interest and dividends receivable............................. (131,134) Decrease in deferred expenses and other assets................................. 12,924 Increase in payable for investments purchased.............................. 232,360 Increase in accrued expenses and other liabilities............................ 100,097 ------ - ------------ Total adjustments...................... (6,720,694) ------ - ------------ Net cash provided from operating activities.......................... $ 3,256,023 ------ - ------------ ------ - ------------
- -------------------------------------------------- - ------------------------------ See Notes to Financial Statements. 11 THE HIGH YIELD PLUS FUND, INC. Statement of Changes in Net Assets (Unaudited) - -------------------------------------------------- - ----------
Six Months Ended Year Ended Increase (Decrease) September 30, March 31, in Net Assets 1997 1997 Operations Net investment income........... $ 4,616,458 $ 9,238,631 Net realized gain on investment transactions................. 462,023 2,559,619 Net change in unrealized appreciation/depreciation of investments.................. 4,898,236 (1,353,218) ------------- - ----------- Net increase in net assets resulting from operations.... 9,976,717 10,445,032 Dividends paid to shareholders from net investment income........... (4,616,458) (9,238,631) Distributions paid to shareholders in excess of net investment income.......................... (122,155) (170,811) Value of Fund shares issued to shareholders in reinvestment of dividends....................... 478,144 915,455 ------------- - ----------- Total increase..................... 5,716,248 1,951,045 Net Assets Beginning of period................ 96,042,320 94,091,275 ------------- - ----------- End of period...................... $ 101,758,568 $96,042,320 ------------- - ----------- ------------- - -----------
THE HIGH YIELD PLUS FUND, INC. Notes to Financial Statements (Unaudited) The High Yield Plus Fund, Inc. (the 'Fund') was organized in Maryland on February 3, 1988, as a diversified, closed-end management investment company. The Fund had no transactions until April 4, 1988, when it sold 11,000 shares of common stock for $102,300 to Wellington Management Company, LLP (the 'Investment Adviser'). Investment operations commenced on April 22, 1988. The Fund's primary objective is to provide a high level of current income to shareholders. The Fund seeks to achieve this objective through investment in publicly or privately offered high yield debt securities rated in the medium to lower categories by recognized rating services or non-rated securities of comparable quality. As a secondary investment objective, the Fund will seek capital appreciation, but only when consistent with its primary objective. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic developments in a specific industry or region. - -------------------------------------------------- - ---------- Note 1. Accounting Policies The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. Securities Valuation: Portfolio securities that are actively traded in the over-the-counter market, including listed securities for which the primary market is believed to be over-the-counter, are valued at the closing bid price or in the absence of such price, as determined in good faith by the Board of Directors of the Fund. Any security for which the primary market is on an exchange is valued at the last sales price on such exchange on the day of valuation or, if there was no sale on such day, the closing bid price. Securities for which no trades have taken place that day and unlisted securities for which market quotations are readily available are valued at the latest bid price. Short-term securities which mature in more than 60 days are valued at current market quotations. Short-term securities which mature in 60 days or less are valued at amortized cost. In connection with transactions in repurchase agreements with U.S. financial institutions, it is the Fund's policy that its custodian take possession of the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction including accrued interest. If the seller defaults, and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. The Fund may invest up to 25% of its total assets in securities which are not readily marketable, including those which are restricted as to disposition under securities law ('restricted securities'). With regard to the restricted security held by the Fund at September 30, 1997, the Fund may - -------------------------------------------------- - ------------------------------ 12 Notes to Financial Statements (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------- - ------------------------------ not demand registration by the issuer. Restricted securities are valued pursuant to the valuation procedures noted above. Cash Flow Information: The Fund invests in securities and pays dividends from net investment income and distributions from net realized gains which are paid in cash or are reinvested at the discretion of shareholders. These activities are reported in the Statement of Changes in Net Assets and additional information on cash receipts and cash payments is presented in the Statement of Cash Flows. Accounting practices that do not affect reporting activities on a cash basis include carrying investments at value and amortizing discounts on debt obligations. Cash, as used in the Statement of Cash Flows, is the amount reported as 'Cash' in the Statement of Assets and Liabilities. Securities Transactions and Net Investment Income: Security transactions are recorded on the trade date. Realized gains and losses from securities transactions are calculated on the identified cost basis. Interest income, which is comprised of three elements; stated coupon rate, original issue discount and market discount, is recorded on an accrual basis. Dividend income is recorded on the ex-dividend date. Expenses are recorded on the accrual basis which may require the use of certain estimates by management. Federal Income Taxes: It is the Fund's policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to shareholders. Therefore, no federal income tax provision is required. Dividends and Distributions: The Fund expects to declare and pay dividends of net investment income monthly and make distributions at least annually of any net capital gains. Dividends and distributions are recorded on the ex-dividend date. Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. - -------------------------------------------------- - ---------- Note 2. Agreements The Fund has agreements with the Investment Adviser and with Prudential Investments Fund Management LLC (the 'Administrator'). The Investment Adviser makes investment decisions on behalf of the Fund; the Administrator provides occupancy and certain clerical and accounting services to the Fund. The Fund bears all other costs and expenses. The investment advisory agreement provides for the Investment Adviser to receive a fee, computed weekly and payable monthly at an annual rate of .50% of the Fund's average weekly net assets. The administration agreement provides for the Administrator to receive a fee, computed weekly and payable monthly at an annual rate of .20% of the Fund's average weekly net assets. - -------------------------------------------------- - ---------- Note 3. Portfolio Securities Purchases and sales of investment securities, other than short-term investments, for the six months ended September 30, 1997, aggregated $45,324,403 and $43,015,479, respectively. During the six months ended September 30, 1997, the Fund entered into $10,550 of securities transactions on a principal basis with Prudential Securities Incorporated, an affiliate of the Administrator. The cost basis of investments for federal income tax purposes was substantially the same as for financial reporting purposes and, accordingly, as of September 30, 1997, net unrealized appreciation for federal income tax purposes was $5,368,518 (gross unrealized appreciation-- $6,735,300; gross unrealized depreciation--$1,366,782). For federal income tax purposes, the Fund has a capital loss carryforward as of March 31, 1997 of approximately $8,153,000 of which $3,948,000 expires in 2000, $2,399,000 expires in 2003 and $1,806,000 expires in 2004. Accordingly, no capital gains distributions are expected to be paid to shareholders until net gains have been realized in excess of such carryforward. - -------------------------------------------------- - ---------- Note 4. Borrowings The Fund has a credit agreement with an unaffiliated lender. The maximum commitment under this agreement is $30,000,000. Interest on any such borrowings is based on market rates and is payable at maturity. The average daily balance outstanding during the six months ended September 30, 1997 was $17,956,284 at a weighted average interest rate of 6.68%. The maximum face amount of borrowings outstanding at any month end during the six months ended September 30, 1997 was $19,000,000. The current borrowings of $19,000,000 (at a weighted average interest rate of 6.62%) mature throughout the period from October 3, 1997 to February 27, 1998. The Fund has paid commitment fees at an annual rate of .10 of 1% on any unused portion of the credit facility. Commitment fees are included in 'Loan Interest' as reported on the Statement of Assets and Liabilities and on the Statement of Operations. - -------------------------------------------------- - ------------------------------ 13 Notes to Financial Statements (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------- - ------------------------------ Note 5. Capital There are 100 million shares of $.01 par value common stock authorized. During the six months ended September 30, 1997 and the fiscal year ended March 31, 1997, the Fund issued 54,256 and 106,725 shares in connection with reinvestment of dividends, respectively. - -------------------------------------------------- - ---------- Note 6. Dividends On November 12, 1997 the Board of Directors of the Fund declared dividends of $0.07 per share payable on December 5, 1997, January 9 and February 6, 1998, to shareholders of record on November 28, December 31, 1997 and January 30, 1998, respectively. - -------------------------------------------------- - ------------------------------ 14 Financial Highlights (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------- - ------------------------------
Six Months Ended Year Ended March 31, September 30, -------------------------------- - ----------------------- 1997 1997 1996 1995 1994 1993 - ------------- ------- ------- ------- - ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period................ $ 8.54 $ 8.44 $ 7.85 $ 8.38 $ 8.48 $ 7.91 - ------------- ------- ------- ------- - ------- ------- Income from investment operations Net investment income............................... .41 .82 .84 .87 .90 .89 Net realized and unrealized gain (loss) on investments...................................... .47 .12 .59 (.54) (.15) .52 - ------------- ------- ------- ------- - ------- ------- Total from investment operations................. .88 .94 1.43 .33 .75 1.41 - ------------- ------- ------- ------- - ------- ------- Less dividends and distributions Dividends from net investment income................ (.41) (.82) (.84) (.86) (.85) (.84) Distributions in excess of net investment income.... (.01) (.02) -- - -- -- -- - ------------- ------- ------- ------- - ------- ------- Total dividends.................................. (.42) (.84) (.84) (.86) (.85) (.84) - ------------- ------- ------- ------- - ------- ------- Net asset value, end of period(a)................... $ 9.00 $ 8.54 $ 8.44 $ 7.85 $ 8.38 $ 8.48 - ------------- ------- ------- ------- - ------- ------- - ------------- ------- ------- ------- - ------- ------- Market price per share, end of period(a)............ $ 9.375 $ 9.00 $ 8.75 $ 8.00 $ 8.375 $ 8.875 - ------------- ------- ------- ------- - ------- ------- - ------------- ------- ------- ------- - ------- ------- TOTAL INVESTMENT RETURN(b):......................... 16.23% 13.38% 20.80% 6.33% 3.90% 27.02% - ------------- ------- ------- ------- - ------- ------- - ------------- ------- ------- ------- - ------- ------- RATIO/SUPPLEMENTAL DATA: Net assets, end of period (000 omitted)............. $ 101,758 $96,042 $94,091 $86,704 $91,698 $92,422 Average net assets (000 omitted).................... $ 95,775 $95,946 $92,855 $87,734 $96,962 $88,142 Ratio to average net assets: Expenses, before loan interest, commitment fees and nonrecurring expenses..................... 1.09%(c) 1.08% 1.01% 1.11% 1.12% 1.20% Total expenses................................... 2.34%(c) 2.32% 2.29% 2.71% 2.01% 2.03% Net investment income............................ 9.61%(c) 9.63% 10.18% 10.90% 10.15% 10.94% Portfolio turnover rate............................. 38% 60% 60% 47% 100% 82% Total debt outstanding at end of period (000 omitted)......................................... $ 19,000 $18,000 $17,000 $19,000 $28,000 $15,000 Asset coverage per $1,000 of debt outstanding....... $ 6,356 $ 6,336 $ 6,535 $ 5,563 $ 4,275 $ 7,161 - --------------- (a) NAV and market value are published in The Wall Street Journal each Monday. (b) Total investment return is calculated assuming a purchase of common stock at the current market value on the first day and a sale at the current market value on the last day of each period reported. Dividends and distributions are assumed for purposes of this calculation to be reinvested at prices obtained under the dividend reinvestment plan. This calculation does not reflect brokerage commissions. Total returns for periods less than one year are not annualized. (c) Annualized. Contained above is selected data for a share of common stock outstanding, total investment return, ratios to average net assets and other supplemental data for the periods indicated. This information has been determined based upon information provided in the financial statements and market price data for the Fund's shares. - -------------------------------------------------- - ------------------------------ See Notes to Financial Statements. 15 Other Information (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------- - ------------------------------ Changes in Fund's Non-fundamental Investment Policy. On November 12, 1997, the Fund's Board of Directors approved amendments to the Fund's non-fundamental investment policies regarding investment in: i) restricted and illiquid securities, and ii) foreign securities, as follows (new language is underlined and text to be deleted is in brackets [ ]): i) The Fund may invest up to 25% of its total assets in securities that are restricted as to disposition under the federal securities laws or otherwise not readily marketable, including Bridge Loans and Mezzanine Debt Investments (as well as repurchase agreements maturing in more than seven days). However, no more than 10% of the Fund's total assets will be invested in any one private offering. Securities eligible for resale in accordance with Rule 144A under the Securities Act of 1933, as amended, that have legal or contractual restrictions on resale but are otherwise liquid shall not be subject to this limitation. The Investment Adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. ii) The Fund may invest in U.S. and non-U.S. dollar-denominated high yield foreign debt securities issued by foreign companies. U.S. and non-U.S. dollar-denominated high yield debt securities issued or guaranteed by foreign governments, quasi-governmental entities, governmental agencies, supranational entities and other governmental entities, and high yield debt securities of U.S. corporate and governmental issuers [principally traded in foreign markets] may also be purchased. [The Fund will invest only in dollar-denominated foreign debt or equity foreign securities.] No more than 20% of the Fund's total assets will be invested in non-U.S. dollar-denominated foreign debt or equity. [The term 'foreign securities' as used in the Fund's prospectus does not include U.S. dollar-denominated issues principally traded in public U.S. markets.] - -------------------------------------------------- - ------------------------------ 16 Directors Eugene C. Dorsey Douglas H. McCorkindale Thomas T. Mooney Investment Adviser Wellington Management Company, LLP 75 State Street Boston, MA 02109 Administrator Prudential Investments Fund Management LLC Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 Custodian and Transfer Agent State Street Bank and Trust Company One Heritage Drive North Quincy, MA 02171 Independent Accountants Price Waterhouse LLP 1177 Avenue of the Americas New York, NY 10036 Legal Counsel Kirkpatrick & Lockhart LLP 1800 Massachusetts Avenue, N.W. Washington, D.C. 20036 Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may purchase, from time to time, shares of its common stock at market prices. The accompanying financial statements as of September 30, 1997, were not audited and, accordingly, no opinion is expressed on them. The views expressed in this report and the information about the Fund's portfolio holdings are for the period covered by this report and are subject to change thereafter. This report is for stockholder information. This is not a prospectus intended for use in the purchase or sale of Fund shares. The High Yield Plus Fund, Inc. Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 For information call toll-free (800) 451-6788 429906100
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