-----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, ETk0625Kucb7lyycze5n8/4XXjH9ufxEbGtVfwsvHnEuTopNg/ayckTvmISm2Euw g5dyEWDl9fac0tIWsdjLiA== 0000828990-97-000002.txt : 19970610 0000828990-97-000002.hdr.sgml : 19970610 ACCESSION NUMBER: 0000828990-97-000002 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970609 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: 1940 Act SEC FILE NUMBER: 811-05468 FILM NUMBER: 97621079 BUSINESS ADDRESS: STREET 1: 199 WATER ST CITY: NEW YORK STATE: NY ZIP: 10292 BUSINESS PHONE: 2122141250 MAIL ADDRESS: STREET 1: ONE SEAPORT PLAZA CITY: NEW YORK STATE: NY ZIP: 10292 N-30D 1 HIGH YIELD PLUS FUND The High Yield Plus Fund, Inc. ANNUAL REPORT March 31, 1997 Letter To Shareholders April 10, 1997 Dear Shareholder: The high yield market showed surprising strength during the fiscal year ended March 31, 1997, despite the general increase in interest rates that occurred during the period. Positive economic conditions created an amenable operating environment for high yield issuers, and strong demand for high yield instruments buoyed valuations relative to US Treasury yields. Conditions were apparently too favorable, however, and the Federal Reserve Board acted to dampen exuberance in the markets on March 25, 1997, by increasing the Federal Funds rate by 25 basis points. The capital markets, including the high yield market, have been somewhat destabilized by this move. We believe that economic conditions remain reasonable and inflation is not a significant threat. Therefore, we expect that the longer-term outlook for the high yield market should not be threatened by the present weakness in the financial markets, unless interest rates increase significantly, thereby snuffing out economic growth. Fund Performance. The Fund's total returns for the periods ended March 31, 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 Lipper Closed-End Unleveraged High Yield category, an average of 8 closed-end high yield funds which do not use leverage. TOTAL RETURNS For the Periods Ended March 31, 1997
6 Months 12 Months 24 Months High Yield Plus Fund 4.1% 11.5% 32.4% Lipper CEHY -- Leveraged 5.0% 13.1% 32.8% Lipper CEHY -- Unleveraged 4.0% 10.5% 28.7%
How We Invested. As of March 31, 1997, the Fund's total invested assets of $112.5 million represented 117% of the Fund's net assets of $96 million. Total borrowings were $18 million, up modestly from $17 million as of the March 31, 1996 year end. The yield to worst (incorporates potential calls) and average years to worst were 9.7% and 7.1 years, respectively, as of March 31, 1997; this compares to 9.8%and 7.0 years as of March 31, 1996. 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 8% 1% Cable 5% 11% Auto & Related 9% 2% Media & Entertainment 7% 12% Metals 12% 3% Telecom 3% 9%
* Expressed as a percent of total corporate holdings as of 3/31/97. 1 We have overweighted exposures to certain sectors that we believe offer relatively attractive prospects. For instance, underlying demand remains firm in many basic industries, and consolidation trends are also a positive factor in sectors such as Aerospace and Automotive Supply. With respect to underweighted categories, we have some concerns about burgeoning technologies in the Telecommunications and Cable sectors, and ultimate consumer demand for many of the newer technologies (wireless communications, for instance) remains untested. Furthermore, many of these companies will need to spend aggressively to either develop their business or defend their positions against the newer competition, suggesting that their balance sheets may deteriorate. Some of the Fund's specific larger holdings include securities of Fort Howard Corporation, the leading US manufacturer of commercial tissue paper; Container Corporation of America, a significant producer of containerboard and other paper/packaging products; Bell & Howell Company, an information services and document management provider, AK Steel, an integrated steel producer; and Collins & Aikman Products, one of the leading providers of textile and plastic interior trim products for the automotive industry. The Fund's shares closed its fiscal year at $9.00 per share. This price reflected a premium of 5.4% to the Fund's net asset value of $8.54 per share. The monthly dividend of $0.07 per share ($0.84 per share annualized) equates to a yield of 9.3% on the closing stock price. For comparison, this dividend yield was 240 basis points in excess of the 10-year Treasury bond yield as of March 31, 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 March 31, 1997 THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS--115.0% CORPORATE BONDS--109.2% - ------------------------------------------------------------------------------------------------------------------------------ Aerospace/Defense--9.1% Howmet Corp., Sr. Sub. Notes B2 10.00% 12/01/03 $ 1,605 $ 1,709,324 K & F Industries, Inc., Sr. Sec. Notes B1 11.875 12/01/03 350 365,750 Sr. Sub. Notes B2 10.375 9/01/04 1,250 1,306,250 Moog, Inc., Sr. Sub. Notes, Ser. B B2 10.00 5/01/06 1,285 1,333,187 Northrop Grumman Corp., Deb. Baa3 9.375 10/15/24 1,500 1,594,500 Rohr, Inc., Sr. Notes Ba3 11.625 5/15/03 1,250 1,343,750 Wyman-Gordon Co., Sr. Notes Ba3 10.75 3/15/03 1,000 1,070,000 ------------ 8,722,761 - ------------------------------------------------------------------------------------------------------------------------------ Automotive--10.0% Collins & Aikman Products Co., Sr. Sub. Notes B3 11.50 4/15/06 1,750 1,933,750 Delco Remy International Inc., Sr. Sub. Notes B2 10.625 8/01/06 360 369,000 Exide Corp., Sr. Notes B1 10.00 4/15/05 500 500,000 Hayes Wheels International, Inc., Sr. Sub. Notes B3 11.00 7/15/06 340 370,600 Johnstown America Industries, Inc. Sr. Sub. Notes B3 11.75 8/15/05 1,500 1,455,000 Key Plastics, Inc., Sr. Sub. Notes B3 10.25 3/15/07 1,000 992,500 LDM Technologies, Inc., Sr. Sub. Notes B3 10.75 1/15/07 505 502,475 Lear Seating Corp., Sr. Sub. Notes Ba3 11.25 7/15/00 500 495,000 Sub. Notes B1 8.25 2/01/02 750 723,750 Penda Corp., Sr. Notes, Ser. B B2 10.75 3/01/04 750 746,250 Walbro Corp., Sr. Notes B1 9.875 7/15/05 1,500 1,485,000 ------------ 9,573,325 - ------------------------------------------------------------------------------------------------------------------------------ Basic Industries-Manufacturing--8.5% Cabot Safety Acquisition Corp., Sr. Sub. Notes B3 12.50 7/15/05 750 806,250 Essex Group Inc., Sr. Notes B1 10.00 5/01/03 1,000 1,040,000 Graphic Contols Corp., Sr. Sub. Notes, Ser. A B3 12.00 9/15/05 500 548,750 Great Lakes Carbon Corp., Sr. Sec. Notes Ba3 10.00 1/01/06 1,000 1,045,000 IDEX Corp., Sr. Sub. Notes Ba3 9.75 9/15/02 250 260,000 Mettler-Toledo, Inc., Sr. Sub. Notes B2 9.75 10/01/06 350 357,000 PMI Acquisitions Corp., Sr. Sub. Notes B2 10.25 9/01/03 1,000 1,030,000 Specialty Equipment Cos., Inc., Sr. Sub. Notes B3 11.375 12/01/03 1,000 1,065,000 The Interlake Corp., Sr. Notes B2 12.00 11/15/01 250 271,250 Sr. Sub. Deb. B3 12.125 3/01/02 500 512,500
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 3 Portfolio of Investments as of March 31, 1997 THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Basic Industries-Manufacturing (cont'd.) Thermadyne Holdings Corp., Sr. Notes B1 10.25% 5/01/02 $ 750 $ 768,750 UCAR Global Enterprises Inc., Sr. Sub. Notes B1 12.00 1/15/05 415 472,063 ------------ 8,176,563 - ------------------------------------------------------------------------------------------------------------------------------ Building & Related Industries--1.1% Amtrol Acquisition Inc., Sr. Sub. Notes B3 10.625 12/31/06 500 517,500 Associated Materials, Inc., Sr. Sub. Notes B3 11.50 8/15/03 470 491,150 ------------ 1,008,650 - ------------------------------------------------------------------------------------------------------------------------------ Cable--5.9% Cablevision Systems Corp., Sr. Sub. Notes B2 9.25 11/01/05 1,250 1,187,500 Sr. Sub. Notes B2 9.875 5/15/06 475 465,500 Comcast Corp., Sr. Sub. Deb. B1 9.125 10/15/06 250 247,500 Lenfest Communications, Inc., Sr. Notes Ba3 8.375 11/01/05 500 455,000 Marcus Cable Co., L.P., Sr. Disc. Notes, Zero Coupon (until 6/15/00) Caa 14.25 12/15/05 250 172,500 Marcus Cable Operating Co., L.P., Sr. Sub. Disc. Notes, Zero Coupon (until 8/1/99) B3 13.50 8/01/04 500 397,500 Rifkin Acquisition Partners L.L.L.P., Sr. Sub. Notes B3 11.125 1/15/06 1,000 1,000,000 Tele-Communications, Inc., Deb. Ba1 9.25 1/15/23 1,250 1,197,475 Videotron Ltd., Sr. Sub. Notes (Canada) Ba3 10.25 10/15/02 500 D 525,000 ------------ 5,647,975 - ------------------------------------------------------------------------------------------------------------------------------ Chemicals--5.8% Acetex Corp., Sr. Sec. Notes (Canada) B1 9.75 10/01/03 1,650 D 1,617,000 Agriculture Minerals & Chemicals, Inc., Sr. Notes Ba3 10.75 9/30/03 500 527,500 Astor Corp., Sr. Sub. Notes B3 10.50 10/15/06 750 798,750 General Chemical Corp., Sr. Sub. Notes B2 9.25 8/15/03 500 506,250 Harris Chemical North America, Inc., Sr. Sec. Disc. Notes B2 10.25 7/15/01 250 250,000 Rexene Corp., Sr. Notes B1 11.75 12/01/04 500 560,000 Sterling Chemicals Inc., Sr. Sub. Notes B3 11.75 8/15/06 750 780,000 Texas Petrochemicals Corp., Sr. Sub. Notes B3 11.125 7/01/06 500 527,500 ------------ 5,567,000 - ------------------------------------------------------------------------------------------------------------------------------ Consumer Goods & Services--1.4% American Safety Razor Co., Sr. Notes, Ser. A B1 9.875 8/01/05 250 257,500 KinderCare Learning Centers, Inc., Sr. Sub. Notes B3 9.50 2/15/09 580 553,900
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 4 Portfolio of Investments as of March 31, 1997 THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Consumer Goods & Services (cont'd.) Muzak L.P., Muzak Capital, Sr. Notes Ba3 10.00% 10/01/03 $ 350 $ 362,250 Revlon Worldwide (Parent) Corp., Sr. Sec. Disc. Notes B3 Zero 3/15/01 350 217,000 ------------ 1,390,650 - ------------------------------------------------------------------------------------------------------------------------------ Containers--1.9% Sweetheart Cup Co. Inc., Sr. Sub. Notes B3 10.50 9/01/03 1,750 1,785,000 - ------------------------------------------------------------------------------------------------------------------------------ Energy & Related Goods & Services--8.4% Cross Timbers Oil Co., Sr. Sub. Notes B2 9.25 4/01/07 1,000 972,500 Energy Ventures, Inc., Sr. Notes Ba2 10.25 3/15/04 750 798,750 Flores & Rucks Inc., Sr. Sub. Notes B3 9.75 10/01/06 335 341,700 Global Marine Inc., Sr. Sec. Notes Ba1 12.75 12/15/99 250 265,625 J. Ray McDermott S.A., Sr. Sub. Notes B1 9.375 7/15/06 500 505,000 Mesa Operating Co., Sr. Sub. Disc. Notes, Zero Coupon (until 7/1/01) B2 11.625 7/01/06 625 421,875 Sr. Sub. Notes B2 10.625 7/01/06 300 313,500 Plains Resources, Inc., Sr. Sub. Notes, Ser. B B2 10.25 3/15/06 1,000 1,030,000 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 B1 8.625 8/01/05 250 250,000 Transportadora de Gas del Sur, S.A., (Argentina) Med. Notes, B1 7.75 12/23/98 350 D 345,625 Notes B1 10.25 4/25/01 500 D 522,500 YPF Sociedad Anonima, Negotiable Obligations (Argentina) B1 8.00 2/15/04 1,000 D 960,000 ------------ 8,089,575 - ------------------------------------------------------------------------------------------------------------------------------ Financial Services--5.8% Chevy Chase Bank F.S.B. Sub. Deb. B1 9.25 12/01/08 500 490,000 Dime Bancorp, Inc., Sr. Notes Ba3 10.50 11/15/05 1,250 1,343,750 First Nationwide Holdings, Inc., Sr. Notes B3 12.50 4/15/03 750 817,500 FirstFed Financial Corp., Notes B2 11.75 10/01/04 500 510,000 Imperial Credit Industries, Inc., Sr. Notes B1 9.875 1/15/07 1,000 980,000 Olympic Financial Ltd., Sr. Notes B2 11.50 3/15/07 1,250 @ 1,218,750 Western Financial Svgs. Bank F.S.B., Sub. Cap. Deb. Ba3 8.50 7/01/03 250 246,785 ------------ 5,606,785 - ------------------------------------------------------------------------------------------------------------------------------ Gaming--1.8% GB Property Funding Corp., First Mtge. Notes B3 10.875 1/15/04 750 615,000 Trumps Atlantic City Assoc., First Mtge. Notes B1 11.25 5/01/06 1,250 1,137,500 ------------ 1,752,500
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 5 Portfolio of Investments as of March 31, 1997 THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Grocery Stores--0.9% Dominick's Finer Foods, Inc., Sr. Sub. Notes, Ser. B B2 10.875% 5/01/05 $ 250 $ 268,750 Smiths Food & Drug Ctrs., Inc., Sr. Sub. Notes B3 11.25 5/15/07 500 547,500 ------------ 816,250 - ------------------------------------------------------------------------------------------------------------------------------ Health Care--4.1% Beverly Enterprises, Inc., Sr. Notes B1 9.00 2/15/06 375 373,125 Dade International Inc., Sr. Sub. Notes B3 11.125 5/01/06 390 442,650 Owens & Minor, Inc., Sr. Sub. Notes B1 10.875 6/01/06 1,085 1,169,088 Packard Bioscience Co., Sr. Sub. Notes B3 9.375 3/01/07 1,250 1,206,250 Quorum Health Group, Inc., Sr. Sub. Notes B1 8.75 11/01/05 500 505,000 Tenet Healthcare Corp., Sr. Notes Ba1 9.625 9/01/02 250 262,500 ------------ 3,958,613 - ------------------------------------------------------------------------------------------------------------------------------ Home Builder & Real Estate--0.9% Del. Webb Corp., Sr. Sub. Deb. B2 9.00 2/15/06 350 344,750 Kaufman & Broad Home Corp., Sr. Sub. Notes Ba3 9.625 11/15/06 500 500,000 ------------ 844,750 - ------------------------------------------------------------------------------------------------------------------------------ Media & Communications--7.0% Benedek Communications Inc., Sr. Sub. Disc. Notes, Zero Coupon (until 5/15/01) B3 13.25 5/15/06 565 338,294 Chancellor Broadcasting Co., Sr. Sub. Notes B3 9.375 10/01/04 1,000 980,000 Granite Broadcasting Corp., Sr. Sub. Deb. B3 12.75 9/01/02 500 537,500 Heritage Media Corp., Sr. Sec. Notes Ba1 11.00 6/15/02 250 265,000 Jacor Communications Inc., Sr. Sub. Notes B2 9.75 12/15/06 250 250,000 JCAC, Inc., Sr. Sub. Notes B2 10.125 6/15/06 250 253,750 Plitt Theatres, Inc., Sr. Sub. Notes B3 10.875 6/15/04 1,250 1,250,000 World Color Press, Inc., Sr. Sub. Notes B1 9.125 3/15/03 1,250 1,250,000 Young Broadcasting Inc., Sr. Sub. Notes B2 11.75 11/15/04 1,000 1,065,000 Sr. Sub. Notes B2 10.125 2/15/05 500 495,000 ------------ 6,684,544 - ------------------------------------------------------------------------------------------------------------------------------ Metals--13.5% Acindar Industria Argentina de Aceros S.A., Notes (Argentina) B2 11.25 2/15/04 750 D 753,750
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 6 Portfolio of Investments as of March 31, 1997 THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Metals (cont'd.) AK Steel Corp., Sr. Notes Ba2 10.75% 4/01/04 $ 1,000 $ 1,065,000 Sr. Notes Ba2 9.125 12/15/06 1,000 985,000 Armco, Inc., Sr. Notes B2 9.375 11/01/00 1,750 1,732,500 Bethlehem Steel Corp., Sr. Notes B1 10.375 9/01/03 1,250 1,300,000 Companhia Vale do Rio Doce, Notes (Brazil) NR 10.00 4/02/04 750 D 785,625 Echo Bay Mines Ltd., Capital Secs., Jr. Sub. Deb. (Canada) B1 11.00 4/01/27 770 D 781,550 GS Technologies Operating Co., Inc., Sr. Notes B2 12.25 10/01/05 500 520,000 Metalurgica Gerdau S.A., Notes (Brazil) NR 11.125 5/24/04 375 D 388,125 Northwestern Steel & Wire Co., Sr. Notes B1 9.50 6/15/01 1,500 1,425,000 NS Group Inc., Sr. Sec. Notes B3 13.50 7/15/03 1,000 @ 1,095,000 Weirton Steel Corp., Sr. Notes B2 10.875 10/15/99 750 761,250 Sr. Notes B2 11.375 7/01/04 1,000 1,000,000 Wheeling-Pittsburgh Corp., Sr. Notes B1 9.375 11/15/03 420 399,000 ------------ 12,991,800 - ------------------------------------------------------------------------------------------------------------------------------ Paper & Packaging--10.4% Aracruz Celulose S.A., Notes (Brazil) NR 10.375 1/31/02 1,035 D 1,071,225 Container Corp. of America, Sr. Notes B1 9.75 4/01/03 1,250 1,300,000 Sr. Notes, Ser. B B1 10.75 5/01/02 1,000 1,080,000 Fonda Group Inc., Sr. Sub. Notes B3 9.50 3/01/07 1,500 1,436,250 Fort Howard Corp., Sr. Notes B1 9.25 3/15/01 2,000 2,070,000 Sr. Notes B1 8.25 2/01/02 200 199,000 Sr. Sub. Notes B2 9.00 2/01/06 750 757,500 S.D. Warren Co., Sr. Sub. Notes, Ser. B B1 12.00 12/15/04 795 866,550 Tembec Finance Corp., Sr. Notes (Canada) B1 9.875 9/30/05 1,250 D 1,243,750 ------------ 10,024,275 - ------------------------------------------------------------------------------------------------------------------------------ Retail--0.6% Guitar Ctr. Mgmt. Co., Inc., Sr. Notes B1 11.00 7/01/06 500 546,250 - ------------------------------------------------------------------------------------------------------------------------------ Technology--5.3% Advanced Micro Devices, Inc., Sr. Sec. Notes Ba1 11.00 8/01/03 500 540,000 Bell & Howell Co., Sr. Notes B1 9.25 7/15/00 750 750,000 Bell & Howell Holdings Co., Sr. Disc. Deb., Ser. B, Zero Coupon (until 3/1/00) B3 11.50 3/01/05 2,000 1,540,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 Portfolio of Investments as of March 31, 1997 THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Technology (cont'd.) Fairchild Semiconductor Corp., Sr. Sub. Notes B2 10.125% 3/15/07 $ 985 $ 980,075 Unisys Corp., Sr. Notes B1 11.75 10/15/04 250 261,250 Sr. Notes, Ser. B B1 12.00 4/15/03 1,000 1,045,000 ------------ 5,116,325 - ------------------------------------------------------------------------------------------------------------------------------ Telecommunication Services--3.0% MobileMedia Communications, Inc., Sr. Sub. Notes C 9.375 11/01/07 2,000 ** 460,000 Paging Network, Inc., Sr. Sub. Notes B2 11.75 5/15/02 250 265,000 Telefonica de Argentina, S.A., Notes (Argentina) B1 11.875 11/01/04 1,000 D 1,130,000 Teleport Communications Group Inc., Sr. Disc. Notes, Zero Coupon (until 7/1/01) B1 11.125 7/01/07 1,500 1,005,000 ------------ 2,860,000 - ------------------------------------------------------------------------------------------------------------------------------ Textiles--0.8% Westpoint Stevens Inc., Sr. Notes Ba3 8.75 12/15/01 750 750,000 - ------------------------------------------------------------------------------------------------------------------------------ Utilities--3.0% Cleveland Electric Illuminating Co., First Mtge. Bonds, Ser. B Ba2 9.50 5/15/05 250 267,215 El Paso Electric Co., First Mtge. Bonds, Ser. D Ba3 8.90 2/01/06 1,000 1,042,450 Texas-New Mexico Power Co., Sec. Deb. Ba3 10.75 9/15/03 1,500 1,616,250 ------------ 2,925,915 ------------ Total corporate bonds (cost $103,995,026) 104,839,506 ------------ - ------------------------------------------------------------------------------------------------------------------------------ Foreign Government ObligationsD--3.0% Republic of Argentina, Bonds B1 11.00 10/09/06 500 522,500 Global Bonds B1 8.375 12/20/03 500 479,375 Global Bonds B1 11.375 1/30/17 500 514,500 Republic of Brazil, Exit Bonds B1 6.00 9/15/13 750 540,937 Ser. C B1 4.00 4/15/14 1,119 833,076 ------------ Total foreign government obligations (cost $2,449,835) 2,890,388 - ------------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS*--0.1% Shares ---------- Triangle Wire & Cable, Inc.Pound (cost $986,250; purchased 3/25/94) -- -- -- 94,444 94,444 ------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 8 Portfolio of Investments as of March 31, 1997 THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Moody's Rating Interest Expiration Value Description (Unaudited) Rate Date Shares (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--2.7% California Federal Bank, Noncumulative Perpetual, Ser. B Ba2 10.625% -- 4,700 $ 507,600 Chevy Chase Preferred Capital Corp., Exchangeable, Ser. A B1 10.375 -- 16,575 812,175 Granite Broadcasting Corp., Cumulative Exchangeable, PIK NR 12.75 -- 755 708,187 Loral Space & Communications, Convertible Preferred Equivalent Oblig. B1 6.00 -- 7,500 370,313 Silgan Holdings Inc., Exchangeable, PIK B3 13.25 -- 189 215,460 ------------ Total preferred stocks (cost $2,602,375) 2,613,735 - ------------------------------------------------------------------------------------------------------------------------------ WARRANTS* Warrants ---------- Benedek Communications Corp.Pound (cost $0; purchased 10/17/96) -- -- 7/01/07 5,500 13,750 ------------ Total long-term investments (cost $110,033,486) 110,451,823 - ------------------------------------------------------------------------------------------------------------------------------ Principal Maturity Amount SHORT-TERM INVESTMENTS--2.2% Date (000) ---------- ---------- CORPORATE BOND--0.8% Gruma S.A. de C.V., Notes (Mexico) NR 9.75 3/09/98 $ 700 D 714,000 REPURCHASE AGREEMENT--1.4% Swiss Bank Corporation, dated 3/31/97, $1,350,238 due at maturity (cost $1,350,000; approximate value of collateral including accrued interest - $1,379,143) -- 6.35 4/01/97 1,350 1,350,000 ------------ Total short-term investments (cost $2,012,055) 2,064,000 ------------ - ------------------------------------------------------------------------------------------------------------------------------ Total Investments--117.2% (cost $112,045,541; Note 3) 112,515,823 Liabilities in excess of other assets--(17.2)% (16,473,503) ------------ Net Assets--100% $ 96,042,320 ------------ ------------
- --------------- * --Non-income producing security. ** --Represents issuer in default on interest payments; non-income producing security. Pound --Indicates a restricted security; the aggregate cost of such securities is $986,250. The aggregate value ($108,194) is approximately 0.1% of net assets. D --US$ 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.S.B. --Federal Savings Bank - -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 Statement of Assets and Liabilities THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Assets March 31, 1997 Investments, at value (cost $112,045,541).................................................................. $ 112,515,823 Cash....................................................................................................... 344 Interest receivable........................................................................................ 2,673,636 Receivable for investments sold............................................................................ 960,369 Dividends receivable....................................................................................... 21,496 Deferred expenses and other assets......................................................................... 60,448 -------------- Total assets............................................................................................ 116,232,116 -------------- Liabilities Loan payable (Note 4)...................................................................................... 18,000,000 Payable for investments purchased.......................................................................... 1,118,402 Dividends payable.......................................................................................... 787,537 Loan interest payable (Note 4)............................................................................. 104,217 Accrued expenses........................................................................................... 99,332 Advisory fee payable....................................................................................... 41,950 Deferred directors' fees................................................................................... 21,578 Administration fee payable................................................................................. 16,780 -------------- Total liabilities....................................................................................... 20,189,796 -------------- Net Assets................................................................................................. $ 96,042,320 -------------- -------------- Net assets were comprised of: Common stock, at par.................................................................................... $ 112,505 Paid-in capital in excess of par........................................................................ 103,281,800 -------------- 103,394,305 Undistributed net investment income..................................................................... 330,378 Accumulated net realized loss on investments............................................................ (8,152,645) Net unrealized appreciation of investments.............................................................. 470,282 -------------- Net assets, March 31, 1997.............................................................................. $ 96,042,320 -------------- -------------- Net asset value per share ($96,042,320 / 11,250,532 shares of common stock issued and outstanding)......... $8.54 -------------- --------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 10 THE HIGH YIELD PLUS FUND, INC. Statement of Operations - ------------------------------------------------------------
Year Ended Net Investment Income March 31, 1997 Income Interest................................. $ 11,360,077 Dividends................................ 101,494 -------------- 11,461,571 -------------- Expenses Investment advisory fee.................. 480,973 Administration fee....................... 192,389 Custodian's fees and expenses............ 90,000 Legal fees and expenses.................. 71,000 Transfer agent's fees and expenses....... 41,000 Reports to shareholders.................. 38,000 Insurance expense........................ 28,000 Audit fees and expenses.................. 27,000 Listing fee.............................. 24,000 Directors' fees and expenses............. 21,000 Miscellaneous............................ 25,675 -------------- Total operating expenses.............. 1,039,037 Loan interest expense (Note 4)........... 1,183,903 -------------- Total expenses........................ 2,222,940 -------------- Net investment income....................... 9,238,631 -------------- Realized and Unrealized Gain on Investments Net realized gain on investment transactions............................. 2,559,619 Net change in unrealized appreciation/depreciation of investments.............................. (1,353,218) -------------- Net gain on investments..................... 1,206,401 -------------- Net Increase in Net Assets Resulting from Operations................... $ 10,445,032 -------------- --------------
THE HIGH YIELD PLUS FUND, INC. Statement of Cash Flows - ------------------------------------------------------------
Year Ended Increase (Decrease) in Cash March 31, 1997 Cash flows provided from operating activities Interest and dividends received (excluding discount amortization of $791,415)...... $ 10,524,703 Operating expenses paid.................... (1,113,994) Loan interest and commitment fee paid...... (1,157,705) Maturities of short-term portfolio investments, net........................ (1,080,000) Purchases of long-term portfolio investments............................. (67,132,879) Proceeds from disposition of long-term portfolio investments............................. 67,430,607 Deferred expenses and other assets......... 36,137 -------------- Net cash provided from operating activities.............................. 7,506,869 -------------- Cash used for financing activities Net increase in notes payable.............. 1,000,000 Cash dividends paid (excluding reinvestment of dividends of $915,455)............... (8,508,413) -------------- Net cash used for financing activities..... (7,508,413) -------------- Net decrease in cash....................... (1,544) Cash at beginning of year.................. 1,888 -------------- Cash at end of year........................ $ 344 -------------- -------------- Reconciliation of Net Increase in Net Assets to Net Cash from Operating Activities Net increase in net assets resulting from operations................................. $ 10,445,032 -------------- Increase in investments....................... (1,775,494) Net realized gain on investment transactions............................... (2,559,619) Net change in unrealized depreciation of investments................................ 1,353,218 Decrease in receivable for investments sold... 879,021 Increase in interest and dividends receivable................................. (145,453) Decrease in deferred expenses and other assets..................................... 36,137 Decrease in payable for investments purchased.................................. (677,214) Decrease in accrued expenses and other liabilities................................ (48,759) -------------- Total adjustments.......................... (2,938,163) -------------- Net cash provided from operating activities.............................. $ 7,506,869 -------------- --------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 11 THE HIGH YIELD PLUS FUND, INC. Statement of Changes in Net Assets - ------------------------------------------------------------
Year Ended March 31, Increase (Decrease) ---------------------------- in Net Assets 1997 1996 ----------- ----------- Operations Net investment income......... $ 9,238,631 $ 9,449,328 Net realized gain on investment transactions.... 2,559,619 757,420 Net change in unrealized appreciation/depreciation of investments............. (1,353,218) 5,744,996 ----------- ----------- Net increase in net assets resulting from operations................. 10,445,032 15,951,744 Dividends paid to shareholders from net investment income.... (9,238,631) (9,436,822) Distributions paid to shareholders in excess of net investment income............. (170,811) -- Value of Fund shares issued to shareholders in reinvestment of dividends.................. 915,455 871,960 ----------- ----------- Total increase................... 1,951,045 7,386,882 Net Assets Beginning of year................ 94,091,275 86,704,393 ----------- ----------- End of year...................... $96,042,320 $94,091,275 ----------- ----------- ----------- -----------
Notes to Financial Statements THE HIGH YIELD PLUS FUND, INC. - ------------------------------------------------------------------------------- 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, 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 - -------------------------------------------------------------------------------- 12 Notes to Financial Statements THE HIGH YIELD PLUS FUND, INC. - ------------------------------------------------------------------------------- restricted securities held by the Fund at March 31, 1997, the Fund may not demand registration by the issuers. 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 year ended March 31, 1997, aggregated $66,455,665 and $66,551,585, respectively. During the year ended March 31, 1997, the Fund entered into $1,185,700 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 March 31, 1997, net unrealized appreciation for federal income tax purposes was $470,282 (gross unrealized appreciation--$3,684,091; gross unrealized depreciation--$3,213,809). 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. Such carryforward is after utilization of approximately $2,560,000 of net taxable gains realized and recognized during the year ended March 31, 1997. 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 year ended March 31, 1997 was $17,494,505 at a weighted average interest rate of 6.77%. The maximum face amount of borrowings outstanding at any month end during the year ended March 31, 1997 was $19,000,000. The current borrowings of $18,000,000 (at a weighted average interest rate of 6.59%) mature throughout the period from April 14, 1997 to August 28, 1997. 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 - -------------------------------------------------------------------------------- 13 Notes to Financial Statements THE HIGH YIELD PLUS FUND, INC. - ------------------------------------------------------------------------------- 'Loan Interest' as reported on the Statement of Assets and Liabilities and on the Statement of Operations. - ------------------------------------------------------------ Note 5. Capital There are 100 million shares of $.01 par value common stock authorized. During the fiscal years ended March 31, 1997 and March 31, 1996, the Fund issued 106,725 and 104,367 shares in connection with reinvestment of dividends, respectively. - ------------------------------------------------------------ Note 6. Dividends On February 18, 1997 the Board of Directors of the Fund declared dividends of $0.07 per share payable on May 9 and June 13, 1997, to shareholders of record on April 30 and May 30, 1997, respectively. - -------------------------------------------------------------------------------- 14 Financial Highlights THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Year Ended March 31, ------------------------------------------------------- 1997 1996 1995 1994 1993 ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of year.................. $ 8.44 $ 7.85 $ 8.38 $ 8.48 $ 7.91 ------- ------- ------- ------- ------- Income from investment operations Net investment income............................... .82 .84 .87 .90 .89 Net realized and unrealized gain (loss) on investments...................................... .12 .59 (.54) (.15) .52 ------- ------- ------- ------- ------- Total from investment operations................. .94 1.43 .33 .75 1.41 ------- ------- ------- ------- ------- Less dividends and distributions Dividends from net investment income................ (.82) (.84) (.86) (.85) (.84) Distributions in excess of net investment income.... (.02) -- -- -- -- ------- ------- ------- ------- ------- Total dividends.................................. (.84) (.84) (.86) (.85) (.84) ------- ------- ------- ------- ------- Net asset value, end of year(a)..................... $ 8.54 $ 8.44 $ 7.85 $ 8.38 $ 8.48 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Market price per share, end of year(a).............. $ 9.00 $ 8.75 $ 8.00 $ 8.375 $ 8.875 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL INVESTMENT RETURN(b):......................... 13.38% 20.80% 6.33% 3.90% 27.02% ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- RATIO/SUPPLEMENTAL DATA: Net assets, end of year (000 omitted)............... $96,042 $94,091 $86,704 $91,698 $92,422 Average net assets (000 omitted).................... $95,946 $92,855 $87,734 $96,962 $88,142 Ratio to average net assets: Expenses, before loan interest, commitment fees and nonrecurring expenses..................... 1.08% 1.01% 1.11% 1.12% 1.20% Total expenses................................... 2.32% 2.29% 2.71% 2.01% 2.03% Net investment income............................ 9.63% 10.18% 10.90% 10.15% 10.94% Portfolio turnover rate............................. 60% 60% 47% 100% 82% Total debt outstanding at end of year (000 omitted)......................................... $18,000 $17,000 $19,000 $28,000 $15,000 Asset coverage per $1,000 of debt outstanding....... $ 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 year 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. 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 years 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 Report of Independent Accountants THE HIGH YIELD PLUS FUND, INC. - ------------------------------------------------------------------------------- To the Board of Directors and Shareholders of The High Yield Plus Fund, Inc. In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations, of cash flows and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of The High Yield Plus Fund, Inc. (the 'Fund') at March 31, 1997, the results of its operations, its cash flows, the changes in its net assets and the financial highlights for the year then ended in conformity with generally accepted accounting principles. 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 audit. We conducted our audit of these financial statements in accordance with generally accepted auditing standards which 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 audit, which included confirmation of securities at March 31, 1997 by correspondence with the custodian, brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. The financial highlights of the Fund for each of the four years in the period ended March 31, 1996, and the statement of changes in net assets for the year ended March 31, 1996 were audited by other independent accountants whose report dated May 9, 1996 expressed an unqualified opinion on those financial highlights and that statement. PRICE WATERHOUSE LLP 1177 Avenue of the Americas New York, New York May 21, 1997 - -------------------------------------------------------------------------------- 16 Supplemental Proxy Information (Unaudited) THE HIGH YIELD PLUS FUND, INC. - ------------------------------------------------------------------------------- The annual meeting of shareholders of The High Yield Plus Fund, Inc. was held on October 30, 1996 at the offices of Prudential Securities Incorporated, One Seaport Plaza, New York, New York. The meeting was held for the following purposes:
(1) To elect the following directors to serve as follows: Directors Class Term Expiring ------------------------------- ------ -------- --------- Eugene C. Dorsey I 3 years 1998 Douglas H. McCorkindale II 3 years 1999 --------------- The director Thomas T. Mooney whose term of office continued beyond this meeting was not voted upon at this meeting. (2) To ratify the selection of Deloitte & Touche LLP as independent public accountants for the year ending March 31, 1997. (3) To transact such other business as may properly come before the meeting or any adjournment thereof.
The results of the proxy solicitation on the above matters were as follows:
Director/Auditor Votes for Votes against Withheld/Abstentions --------------------------------- ---------- -------------- --------------------- (1) Eugene C. Dorsey 5,829,461 -- 116,028 Douglas H. McCorkindale 5,829,869 -- 115,621 (2) Deloitte & Touche LLP 5,834,322 42,466 68,702 (3) There was no other business voted upon at the annual meeting of shareholders.
Federal Income Tax Information (Unaudited) THE HIGH YIELD PLUS FUND, INC. - ------------------------------------------------------------------------------- We are required by the Internal Revenue Code to advise you within 60 days of the Fund's fiscal year end (March 31, 1997) that 1.07% of the dividends paid in the fiscal year ended March 31, 1997 qualified for the corporate dividends received deduction available to corporate taxpayers. - -------------------------------------------------------------------------------- 17 Other Information (Unaudited) THE HIGH YIELD PLUS FUND, INC. - ------------------------------------------------------------------------------- Dividend Reinvestment Plan. Shareholders may elect to have all distributions of dividends and capital gains automatically reinvested in Fund shares (Shares) pursuant to the Fund's Dividend Reinvestment Plan (the Plan). Shareholders who do not participate in the Plan will receive all distributions in cash paid by check in United States dollars mailed directly to the shareholders of record (or if the shares are held in street or other nominee name, then to the nominee) by the custodian, as dividend disbursing agent. Shareholders who wish to participate in the Plan should contact the Fund at (800) 451-6788. State Street Bank and Trust Co. (the Plan Agent) serves as agent for the shareholders in administering the Plan. After the Fund declares a dividend or capital gains distribution, if (1) the market price is lower than net asset value, the participants in the Plan will receive the equivalent in Shares valued at the market price determined as of the time of purchase (generally, following the payment date of the dividend or distribution); or if (2) the market price of Shares on the payment date of the dividend or distribution is equal to or exceeds their net asset value, participants will be issued Shares at the higher of net asset value or 95% of the market price. If net asset value exceeds the market price of Shares on the valuation date or the Fund declares a dividend or other distribution payable only in cash, the Plan Agent will, as agent for the participants, receive the cash payment and use it to buy Shares in the open market. If, before the Plan Agent has completed its purchases, the market price exceeds the net asset value per share, the average per share purchase price paid by the Plan Agent may exceed the net asset value per share, resulting in the acquisition of fewer shares than if the dividend or distribution had been paid in shares issued by the Fund. The Fund will not issue Shares under the Plan below net asset value. There is no charge to participants for reinvesting dividends or capital gain distributions, except for certain brokerage commissions, as described below. The Plan Agent's fees for the handling of the reinvestment of dividends and distributions will be paid by the Fund. There will be no brokerage commissions charged with respect to shares issued directly by the Fund. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of dividends and distributions. The automatic reinvestment of dividends and distributions will not relieve participants of any federal income tax that may be payable on such dividends or distributions. The Fund reserves the right to amend or terminate the Plan upon 90 days' written notice to shareholders of the Fund. Participants in the Plan may withdraw from the Plan upon written notice to the Plan Agent and will receive certificates for whole Shares and cash for fractional Shares. All correspondence concerning the Plan should be directed to the Plan Agent, State Street Bank & Trust Company, P.O. Box 8200, Boston, MA 02266-8200. - -------------------------------------------------------------------------------- 18 [THIS PAGE INTENTIONALLY LEFT BLANK] 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 Auditors 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 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 -----END PRIVACY-ENHANCED MESSAGE-----