-----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, C6Ea0FKve+mnlbGEaRaYhXnk/6SdkdPlmebFDz1WENQNuokz/MZjDhVXMXMFQdW4 as85F+oC+tJzx9/LNIw+jQ== /in/edgar/work/20000608/0000898733-00-000430/0000898733-00-000430.txt : 20000919 0000898733-00-000430.hdr.sgml : 20000919 ACCESSION NUMBER: 0000898733-00-000430 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000608 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HIGH YIELD PLUS FUND INC CENTRAL INDEX KEY: 0000828990 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] STATE OF INCORPORATION: MD FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05468 FILM NUMBER: 651263 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 0001.txt THE HIGH YIELD PLUS FUND, INC. The High Yield Plus Fund, Inc. ANNUAL REPORT March 31, 2000 Letter To Shareholders April 10, 2000 Dear Shareholder: The year ended March 31, 2000 proved to be a disappointing one for the high yield market. Despite the fact that the US economy remains robust, weak technical conditions, lack of demand, and a less than comforting level of credit deterioration have plagued the high yield market. While none of these factors is insignificant, we believe that long-term investment prospects may be able to overcome the market's recent difficulties. With respect to the market's weak technical conditions and related lack of demand, one can argue that the high yield market is suffering from the same kind of disinterest that old economy value stocks have been contending with. Demand has been poor for high yield investments; open-end mutual funds have generally been in a redemption pattern for a full year. (Fixed income funds broadly have been redeemed; some redemptions may reflect fears of interest rate hikes; others may simply reflect the shift of funds to higher spark, tech equity investments.) Trading volume has also been weak ever since the fall of 1998, when there was an implosion of liquidity with the potential failure of a very large, leveraged hedge fund. Wall Street broker dealers have generally been loath to take securities into inventory. Thus, the high yield market has been tending to gap upwards and downwards fairly erratically based on the slightest change in demand. While the weak technical conditions have created a downward valuation drift, we note that these conditions do not ultimately drive the long-term investment performance of the issuers in the marketplace. In addition, inefficiencies in valuation can create investment opportunity. Given the closed- end status of the Fund, we are fortunate that we do not have to manage cash flows, but can instead look for unusual valuations and potential investment opportunities. It is also true that credit health, as measured by the rate of default, deteriorated over the last year. As we noted in our September semi-annual shareholder letter, we do not see blatant similarity to the high default rates of the 1990 market, when among other things, the US was in a recession. We have seen some tightening in lending standards by the commercial banks, although it seems to be fairly industry specific. Perhaps not surprisingly, the new economy companies (telecommunications, internet related) still have ready access to funds, whereas older industrials are facing greater hurdles. Nevertheless, the prospects for the global economy are brighter today than they have been for several years. The European and Asian economies are strengthening, which is supportive of US industrials, given the global nature of business today. This trend should mitigate some of the credit-related pressures of the last 18 months. Given the above factors, we find that high yield valuations have widened relative to US Treasuries over the year. Using data tracked by Lehman, the difference in yield between US Treasuries and high yield securities has widened from 525 basis points a year ago to 650 basis points today. The average dollar price of the Credit Suisse First Boston High Yield index is 83% of par. Valuations and yields today would seem to be discounting at least some portion, if not all, of the lack of liquidity and potential for adverse credit action 1 in the markets. As always, our focus remains on long term investment potential. We continue to focus on finding securities with attractive risk adjusted returns, with diversified exposure to both lower risk/returns instruments as well as higher risk/reward situations, in a broad group of industries. Fund Performance. The Fund's total returns for periods ended March 31, 2000 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 27 closed-end high yield leveraged funds; we would note that the degree of leverage varies substantially amongst the funds in the group. The Fund's performance over the year benefited from its exposure to certain Yankee issues (US$ foreign issuers) that appreciated during the year, following upon extreme weakness a year ago. TOTAL RETURNS For the Periods Ended March 31, 2000 6 Months 1 Year 24 months* High Yield Plus Fund (NAV)1 0.9% (0.8)% (4.1)% Lipper CEHY -- Leveraged (0.3) (2.3) (3.4) 1 Represents NAV-basis performance calculations as provided by Lipper Analytical Services, Inc. Past performance is no guarantee of future results. * Annualized The Fund is leveraged and has a $50 million credit line provided by Fleet Bank and State Street Bank and Trust Co. As of March 31, 2000, the Fund had drawn $42 million on the line. Borrowings fluctuate depending on investment opportunities and relative valuations. As of March 31, 2000, the Fund's shares were priced at $6.1875. This price reflected a discount of 3.8% to the Fund's net asset value of $6.42 per share. (The average discount of the funds in the Lipper Leveraged Closed End universe was 7.3% as of March 31, 2000.) The Fund's monthly dividend rate of $0.0725 per share equates to an annualized yield of 14.1% relative to the stock price. This yield was more than twice the 6.0% yield of the US 10-Year Treasury as of March 31, 2000. As always, we appreciate your interest in the Fund. Sincerely yours, Catherine A. Smith Portfolio Manager Senior Vice President Wellington Management Company, LLP 2 Portfolio of Investments as of March 31, 2000 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS--139.1% CORPORATE BONDS--131.6% - ------------------------------------------------------------------------------------------------------------------------------ Aerospace/Defense--2.5% Argo-Tech Corp., Sr. Sub. Notes B3 8.625% 10/01/07 $ 1,000 $ 760,000 Hexcel Corp., Sr. Sub. Notes B2 9.75 1/15/09 500 425,000 Loral Space & Communications Ltd., Sr. Notes B1 9.50 1/15/06 750 532,500 Moog, Inc., Sr. Sub. Notes, Ser. B B1 10.00 5/01/06 750 742,500 ------------ 2,460,000 - ------------------------------------------------------------------------------------------------------------------------------ Automotive--3.9% Accuride Corp., Sr. Sub. Notes B2 9.25 2/01/08 1,250 1,062,500 Exide Corp., Sr. Notes B1 10.00 4/15/05 1,000 962,500 Federal-Mogul Corp., Sr. Notes Ba2 8.80 4/15/07 500 433,355 Key Plastics, Inc., Sr. Sub. Notes, Ser. B Caa2 10.25 3/15/07 1,250 (b) 87,500 LDM Technologies, Inc., Sr. Sub. Notes, Ser. B B3 10.75 1/15/07 695 521,250 Prestolite Electric, Inc., Gtd. Sr. Notes B3 9.625 2/01/08 1,235 728,650 ------------ 3,795,755 - ------------------------------------------------------------------------------------------------------------------------------ Building & Related Industries--0.8% Anthony Crane Rental L.P., Sr. Notes B3 10.375 8/01/08 1,000 780,000 - ------------------------------------------------------------------------------------------------------------------------------ Cable--7.2% Adelphia Communications Corp., Sr. Notes, Ser. B B1 9.875 3/01/07 650 630,500 Sr. Notes B1 8.375 2/01/08 750 667,500 Sr. Notes B1 7.75 1/15/09 250 210,625 Cablevision S.A., Sr. Notes (Argentina) B1 13.75 5/01/09 500 (d) 500,000 Charter Communications Holdings, Sr. Notes B2 10.00 4/01/09 500 480,000 Sr. Notes B2 8.25 4/01/07 1,500 1,335,000 Classic Cable, Sr. Sub. Notes B3 10.50 3/01/10 540 533,250 Multicanal S.A., (Argentina) Sr. Notes B1 10.50 2/01/07 500 (d) 470,000 Sr. Notes, Ser. E B1 13.125 4/15/09 450 (d) 465,750 Sr. Notes B1 10.50 4/15/18 230 (d) 202,170 NTL Communications Corp., Sr. Notes B3 9.875 11/15/09 EUR250 232,048 NTL, Inc., Sr. Notes, Ser. B B3 10.00 2/15/07 $ 850 824,500 Rogers Communications, Inc., Sr. Notes (Canada) B2 8.875 7/15/07 500 (d) 487,500 ------------ 7,038,843 - ------------------------------------------------------------------------------------------------------------------------------ Chemicals--8.3% Acetex Corp., Sr. Sec. Notes (Canada) B3 9.75 10/01/03 750 (d) 682,500 ARCO Chemical Co., Deb. Ba3 9.80 2/01/20 1,250 1,137,500 Deb. Ba3 9.375 12/15/05 1,000 950,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 3 Portfolio of Investments as of March 31, 2000 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Chemicals (cont'd.) Borden Chemical & Plastics Oper., Sr. Notes B1 9.50 % 5/01/05 $ 750 $ 701,250 Geo Specialty Chemicals, Inc., Sr. Sub. Notes B3 10.125 8/01/08 95 76,950 Georgia Gulf Corp., Sr. Sub. Notes B1 10.375 11/01/07 125 125,625 Huntsman ICI Chemicals LLC, Sr. Sub. Notes B2 10.125 7/01/09 805 770,787 Lyondell Chemical Co., Sr. Sub. Notes B2 10.875 5/01/09 655 609,150 PCI Chemicals Canada, Inc., Sr. Notes, Ser. B (Canada) B3 9.25 10/15/07 545 (d) 444,175 Philipp Brothers Chemicals, Inc., Sr. Sub. Notes B3 9.875 6/01/08 500 425,000 Sovereign Specialty Chemicals, Sr. Sub. Notes B3 11.875 3/15/10 540 534,600 Sterling Chemical Holdings, Inc., Sr. Sub. Notes Caa3 11.75 8/15/06 500 420,000 Sr. Sub. Notes Caa3 11.25 4/01/07 750 607,500 Texas Petrochemicals Corp., Sr. Sub. Notes Caa1 11.125 7/01/06 750 622,500 ------------ 8,107,537 - ------------------------------------------------------------------------------------------------------------------------------ Consumer Goods & Services--3.7% Bell Sports, Inc., Sr. Sub. Notes B3 11.00 8/15/08 670 656,600 Corning Consumer Prod. Co., Sr. Sub. Notes B3 9.625 5/01/08 1,350 850,500 Polaroid Corp., Sr. Notes Ba3 11.50 2/15/06 750 763,125 Simmons Co., Sr. Sub. Notes B3 10.25 3/15/09 500 420,000 True Temper Sports, Inc., Sr. Sub. Notes B3 10.875 12/01/08 1,000 950,000 ------------ 3,640,225 - ------------------------------------------------------------------------------------------------------------------------------ Containers--1.7% BWay Corp., Sr. Sub. Notes, Ser. B B2 10.25 4/15/07 650 568,750 Consumers Packaging, Inc., Sr. Notes (Canada) Caa1 9.75 2/01/07 750 (d) 391,875 Silgan Holdings, Inc., Sr. Sub. Deb. B1 9.00 6/01/09 500 462,500 Sub. Deb., PIK B1 13.25 7/15/06 200 216,000 ------------ 1,639,125 - ------------------------------------------------------------------------------------------------------------------------------ Energy & Related Goods & Services--3.4% Clark R & M, Inc., Sr. Notes Ba3 8.625 8/15/08 1,250 912,500 Frontier Oil Corp., Sr. Notes B2 9.125 2/15/06 750 645,000 P & L Coal Holdings Corp., Sr. Notes Ba3 8.875 5/15/08 500 451,250 Pen Holdings, Inc., Sr. Notes, Ser. B B2 9.875 6/15/08 750 637,500 RAM Energy, Inc., Sr. Notes Caa1 11.50 2/15/08 635 311,150 RBF Co., Sr. Sec. Notes Ba3 11.00 3/15/06 370 386,650 ------------ 3,344,050
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 4 Portfolio of Investments as of March 31, 2000 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Entertainment--0.8% Carmike Cinemas, Inc., Sr. Sub. Notes, Ser. B B2 9.375% 2/01/09 $ 750 $ 472,500 Loews Cineplex Entertainment Corp., Sr. Sub. Notes B3 8.875 8/01/08 500 312,500 ------------ 785,000 - ------------------------------------------------------------------------------------------------------------------------------ Financial Services--4.5% Bangkok Bank Public Co., Deb. (Thailand) B+(e) 8.75 3/15/07 1,000 (d) 895,860 Ocwen Federal Bank, Sub. Deb. B1 12.00 6/15/05 500 462,500 Olympic Financial, Ltd., Sr. Notes A1 11.50 3/15/07 750 (c) 795,000 Thai Farmers Bank Ltd., Sub. Notes (Thailand) B2 8.25 8/21/16 1,250 (d) 987,500 Western Financial Svgs. Bank, Sub. Deb. B2 8.875 8/01/07 1,505 1,301,825 ------------ 4,442,685 - ------------------------------------------------------------------------------------------------------------------------------ Food & Lodging--2.1% Del Monte Foods Co., Sr. Disc. Notes, Zero Coupon (until 12/15/02) Caa1 12.50 12/15/07 750 558,750 John Q. Hammons Hotels, First Mtge. Bonds B2 8.875 2/15/04 1,500 1,312,500 Purina Mills, Inc., Sr. Sub. Notes NR 9.00 3/15/10 500 (b) 145,000 Vlasic Foods International, Inc., Sr. Sub. Notes Caa1 10.25 7/01/09 120 74,400 ------------ 2,090,650 - ------------------------------------------------------------------------------------------------------------------------------ Gaming--0.5% Hollywood Casino Corp., Sr. Sub. Notes B3 11.25 5/01/07 500 503,750 - ------------------------------------------------------------------------------------------------------------------------------ General Industrial--8.6% Anchor Glass Container Corp., First Mtge. Notes B2 11.25 4/01/05 685 493,200 Allied Waste North America, Inc., Sr. Notes Ba3 7.625 1/01/06 750 611,250 Sr. Sub. Notes B2 10.00 8/01/09 1,350 1,012,500 Clark Material Handling Co., Sr. Notes, Ser. D Caa1 10.75 11/15/06 1,750 (b) 262,500 Grove Worldwide LLC, Sr. Sub. Notes Caa1 9.25 5/01/08 1,715 733,163 Henry Co., Sr. Notes, Ser. B Caa1 10.00 4/15/08 1,110 799,200 International Wire Group, Inc., Sr. Sub. Notes, Ser. B B3 11.75 6/01/05 500 505,000 IT Group, Inc., Sr. Sub. Notes B3 11.25 4/01/09 500 467,500 Mastec, Inc., Sr. Sub. Notes, Ser. B Ba1 7.75 2/01/08 250 230,000 Neenah Corp., Sr. Sub. Notes, Ser. B B3 11.125 5/01/07 750 645,000 Numatics, Inc., Sr. Sub. Notes, Ser. B B3 9.625 4/01/08 375 298,125 United Rentals, Inc., Sr. Sub. Notes B1 9.00 4/01/09 1,500 1,308,750 Waste Management, Inc., Sr. Notes Ba1 6.875 5/15/09 500 420,380 WESCO Distribution, Inc., Sr. Sub. Notes B2 9.125 6/01/08 750 656,250 ------------ 8,442,818
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 5 Portfolio of Investments as of March 31, 2000 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Grocery Stores--1.8% Homeland Stores, Inc., Sr. Notes NR 10.00% 8/01/03 $ 1,250 $ 987,500 Pathmark Stores, Inc., Sr. Sub. Notes Ca 11.625 6/15/02 750 (b) 225,000 Sr. Sub. Notes Caa3 9.625 5/01/03 750 (b) 540,000 ------------ 1,752,500 - ------------------------------------------------------------------------------------------------------------------------------ Health Care--7.7% Alaris Medical Systems, Inc., Sr. Sub. Notes B3 9.75 12/01/06 1,200 990,000 Alaris Medical, Inc., Sr. Disc. Notes Zero Coupon (until 8/1/03) Caa1 11.125 8/01/08 750 236,250 Beverly Enterprises, Inc., Sr. Notes B1 9.00 2/15/06 750 644,062 Bio-Rad Labs, Inc., Sr. Sub. Notes B2 11.625 2/15/07 550 553,438 Conmed Corp., Sr. Sub. Notes B3 9.00 3/15/08 1,020 928,200 DJ Orthopedics LLC, Sr. Sub. Notes B3 12.625 6/15/09 1,250 1,159,375 Kinetic Concepts, Inc., Sr. Sub. Notes, Ser. B B3 9.625 11/01/07 500 352,500 Mediq, Inc., Sr. Sub. Notes Caa3 11.00 6/01/08 1,740 174,000 Packard Bioscience Co., Sr. Sub. Notes, Ser. B B3 9.375 3/01/07 250 225,000 Tenet Healthcare Corp., Sr. Sub. Notes, Ser. B Ba3 8.125 12/01/08 850 777,750 Triad Hospitals Holdings, Inc., Sr. Sub. Notes B3 11.00 5/15/09 855 850,725 Universal Hospital Svcs., Sr. Notes B3 10.25 3/01/08 1,750 665,000 ------------ 7,556,300 - ------------------------------------------------------------------------------------------------------------------------------ Home Building & Real Estate--6.0% Beazer Homes USA, Inc., Sr. Notes Ba3 8.875 4/01/08 1,250 1,056,250 D.R. Horton, Inc., Sr. Notes Ba1 8.00 2/01/09 750 618,750 LNR Property Corp., Sr. Sub. Notes B1 10.50 1/15/09 750 693,750 Presley Companies, Sr. Notes Caa3 12.50 7/01/01 1,000 820,000 Ryland Group, Inc., Sr. Sub. Notes B1 8.25 4/01/08 750 573,750 Standard Pacific Corp., Sr. Notes Ba2 8.50 6/15/07 750 667,500 U.S. Home Corp., Sr. Sub. Notes B1 8.88 8/15/07 500 496,250 Webb Delaware Corp., Sr. Sub. Deb. B2 10.25 2/15/10 1,150 954,500 ------------ 5,880,750 - ------------------------------------------------------------------------------------------------------------------------------ Media & Communications--9.2% Echostar DBS Corp., Notes B2 9.25 2/01/06 750 725,625 Globo Comunicacoes e Participacoes S.A., Notes (Brazil) B2 10.50 12/20/06 1,750 (d) 1,531,250 Gray Communications Systems, Inc., Sr. Sub. Notes B3 10.625 10/01/06 500 502,500 Innova S-de R.L., Sr. Notes (Mexico) B3 12.875 4/01/07 500 (d) 472,500 Lin Holdings Corp., Sr. Disc. Notes, Zero Coupon (until 3/1/03) B3 10.00 3/01/08 750 463,125 Lin Televison Corp., Sr. Sub. Notes B2 8.375 3/01/08 350 306,250
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 6 Portfolio of Investments as of March 31, 2000 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Media & Communications (cont'd.) STC Broadcasting, Inc., Sr. Sub. Notes B3 11.00 % 3/15/07 $ 750 $ 742,500 Sullivan Graphics, Inc., Sr. Sub. Notes Caa1 12.75 8/01/05 1,000 1,035,000 Sun Media Corp., (Canada) Sr. Sub. Notes B1 9.50 2/15/07 250 (d) 246,250 Sr. Sub. Notes B1 9.50 5/15/07 500 (d) 477,500 TV Azteca S.A. de CV, (Brazil) Gtd. Sr. Notes B1 10.50 2/15/07 750 (d) 705,000 Gtd. Sr. Notes, Ser. A B1 10.125 2/15/04 500 (d) 476,250 Von Hoffmann Press, Inc., Sr. Sub. Notes B3 10.875 5/15/07 700 654,500 World Color Press, Inc., Sr. Sub. Notes Baa3 8.375 11/15/08 750 729,765 ------------ 9,068,015 - ------------------------------------------------------------------------------------------------------------------------------ Metals--8.3% Acindar Industria Argentina de Aceros S.A., Bonds (Argentina) B2 11.25 2/15/04 500 (d) 405,000 AK Steel Corp., Sr. Notes Ba2 9.125 12/15/06 500 488,750 Algoma Steel, Inc., First Mtge. Notes (Canada) B2 12.375 7/15/05 750 (d) 720,000 Bayou Steel Corp., First Mtge. Notes B1 9.50 5/15/08 1,250 1,118,750 Bucyrus Int'l, Inc., Sr. Notes B1 9.75 9/15/07 1,250 500,000 Bulong Operation Pty Ltd., Sr. Notes Caa1 12.50 12/15/08 315 236,250 CSN Iron S.A., Gtd. Notes (Brazil) B2 9.125 6/01/07 500 (d) 425,000 Freeport-McMoran Copper & Gold, Sr. Notes B3 7.50 11/15/06 1,250 950,000 Kaiser Aluminum & Chemical Corp., Sr. Notes, Ser. B B1 10.875 10/15/06 500 470,000 LTV Corp., Gtd. Sr. Notes Ba3 8.20 9/15/07 350 291,375 Sr. Notes Ba3 11.75 11/15/09 1,330 1,290,100 Weirton Steel Corp., Sr. Notes B2 11.375 7/01/04 1,250 1,275,000 ------------ 8,170,225 - ------------------------------------------------------------------------------------------------------------------------------ Paper & Packaging--8.8% APP Int'l. Co., (Indonesia) Sec. Notes B3 11.75 10/01/05 500 (d) 430,000 Sec. Notes Caa1 3.50 4/30/03 750 (d) 588,750 Aracruz Celulose S.A., Sr. Notes (Brazil) B2 10.375 1/31/02 715 (d) 723,938 Bahia Sul Celulose S.A., Notes (Brazil) NR 10.625 7/10/04 500 (d) 495,000 Container Corp. of America, Sr. Notes, Ser. B B2 10.75 5/01/02 1,000 1,015,000 Doman Industries Ltd., (Canada) Sr. Notes Caa1 8.75 3/15/04 1,250 (d) 1,062,500 Sr. Sec. Notes B3 12.00 7/01/04 1,000 (d) 1,035,000 Gaylord Container Corp., Sr. Sub. Notes Caa2 9.875 2/15/08 1,750 1,435,000 Pacifica Papers, Inc., Sr. Notes B1 10.00 3/15/09 750 731,250 Paperboard Industries Int'l., Inc., Sr. Notes Ba3 8.375 9/15/07 750 660,000 Pindo Deli Mauritius Ltd., Gtd. Sr. Notes (Indonesia) B3 10.75 10/01/07 650 (d) 448,500 ------------ 8,624,938
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 Portfolio of Investments as of March 31, 2000 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Retail--0.2% Leslie's Poolmart, Inc., Sr. Notes B3 10.375% 7/15/04 $ 350 $ 227,500 - ------------------------------------------------------------------------------------------------------------------------------ Technology--12.1% Advanced Micro Devices, Inc., Sr. Sec. Notes B2 11.00% 8/01/03 495 495,000 Amkor Technology, Inc., Sr. Notes Ba3 9.25 5/01/06 1,250 1,212,500 Sr. Sub. Notes B2 10.50 5/01/09 500 490,000 DecisionOne Holdings Corp., Sr. Disc. Deb., Zero Coupon (until 8/1/02) C(e) 11.50 8/01/08 1,000 (b) 620 Sr. Sub. Notes C(e) 9.75 8/01/07 500 (b) 250 Exodus Communications, Inc., Sr. Notes B-(e) 10.75 12/15/09 250 243,750 Sr. Notes B-(e) 11.25 7/01/08 990 990,000 Fairchild Semiconductor Corp., Sr. Sub. Notes B3 10.125 3/15/07 745 724,512 Fisher Scientific International, Inc., Sr. Sub. Notes B3 9.00 2/01/08 750 678,750 Hadco Corp., Sr. Sub. Notes B2 9.50 6/15/08 250 240,000 Integrated Circuit Systems, Inc., Sr. Sub. Notes B3 11.50 5/15/09 850 935,000 Intersil Corp., Sr. Sub. Notes B3 13.25 8/15/09 325 370,500 MCMS, Inc., Sr. Sub. Notes, Ser. B Caa3 9.75 3/01/08 2,500 1,212,500 Orbital Imaging Corp., Sr. Notes, Ser. D CCC+(e) 11.625 3/01/05 750 510,000 Rhythms Netconnections, Inc., Sr. Notes B3 14.00 2/15/10 750 663,750 Samsung Electronics America, Inc., Gtd. Notes Baa3 9.75 5/01/03 750 778,410 SCG Holding Corp., Sr. Notes B2 12.00 8/01/09 675 722,250 Viasystems, Inc., Sr. Sub. Notes B3 9.75 6/01/07 1,100 924,000 Zilog, Inc., Sr. Sec. Notes B2 9.50 3/01/05 750 671,250 ------------ 11,863,042 - ------------------------------------------------------------------------------------------------------------------------------ Telecommunications--23.3% AMSC Acquisition Co., Inc., Sr. Notes, Ser. B NR 12.25 4/01/08 500 392,500 Concentric Network Corp., Sr. Notes B-(e) 12.75 12/15/07 500 538,750 Covad Communications Group, Inc., Sr. Disc. Notes B3 12.00 2/15/10 460 404,800 Sr. Disc. Notes, Ser. B B3 12.50 2/15/09 500 455,000 E. Spire Communications Insurance, Sr. Disc. Notes Zero Coupon (until 4/1/01) NR 12.75 4/01/06 500 242,500 Flag Telecommunications Holdings Ltd., Sr. Notes (Bermuda) B2 11.625 3/30/10 1,000 (d) 930,000 Global Crossing Holdings, Ltd., Sr. Notes (Bermuda) Ba2 9.125 11/15/06 750 (d) 720,000 GST Network Funding, Inc., Sr. Disc. Notes, Zero Coupon (until 5/1/03) NR 10.50 5/01/08 945 415,800 GST Telecommunications, Inc., Sr. Sub. Notes, Zero Coupon (until 11/15/02) NR 12.75 11/15/07 500 425,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 8 Portfolio of Investments as of March 31, 2000 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Telecommunications (cont'd.) GT Group Telecommunications, Inc., Sr. Disc. Notes, Zero Coupon (until 2/1/05) (Canada) Caa1 13.25 % 2/01/10 $ 850 (d) $ 459,000 Hermes Europe Railtel BV, Sr. Notes (Netherlands) B3 10.375 1/15/09 1,000 (d) 895,000 Hyperion Telecommunications, Inc., Sr. Sec. Notes, Ser. B B3 12.25 9/01/04 1,250 1,300,000 Insight Midwest L.P., Sr. Notes B1 9.75 10/01/09 500 497,500 Intermedia Communications, Inc., Sr. Notes B2 8.875 11/01/07 250 226,875 Sr. Notes B2 8.60 6/01/08 750 652,500 Iridium Cap. Corp., Gtd. Notes Caa3 14.00 7/15/05 750 (b) 15,000 Gtd. Sr. Notes, Ser. D Caa3 10.875 7/15/05 500 (b) 10,000 Level 3 Communications, Inc., Sr. Disc. Notes, Zero Coupon (until 3/15/05) B3 12.875 3/15/10 500 245,000 Sr. Notes B3 11.00 3/15/08 EUR500 477,500 Sr. Notes B3 10.75 3/15/08 $ 465 449,888 Sr. Notes B3 9.125 5/01/08 500 430,000 McLeodUSA, Inc., Sr. Notes B1 9.25 7/15/07 750 708,750 Metromedia Fiber Network, Inc., Sr. Notes B2 10.00 12/15/09 750 720,000 Millicom Int'l. Cellular, Sr. Disc. Notes, Zero Coupon (until 6/1/01) Caa1 13.50 6/01/06 750 622,500 PsiNet, Inc., Sr. Notes B3 11.50 11/01/08 750 746,250 Sr. Notes B3 11.00 8/01/09 500 487,500 RCN Corp., Sr. Notes B3 10.125 1/15/10 500 450,000 Sr. Notes B3 10.00 10/15/07 500 450,000 RSL Communications plc, Sr. Notes (United Kingdom) B2 9.875 11/15/09 750 (d) 592,500 Teligent, Inc., Sr. Notes Caa1 11.50 12/01/07 750 675,000 Telewest Communication plc, Sr. Notes (United Kingdom) B1 9.875 2/01/10 500 (d) 495,000 Time Warner Telecom LLC, Sr. Notes B2 9.75 7/15/08 500 495,000 Total Access Communication, Notes (Thailand) B2 7.625 11/04/01 500 (d) 451,250 Verio, Inc., Sr. Notes B3 10.375 4/01/05 500 480,000 Sr. Notes B3 11.25 12/01/08 350 348,250 Viatel, Inc., Sr. Notes B3 11.50 3/15/09 1,000 920,000 Sr. Notes B3 11.25 4/15/08 250 227,500 Williams Communications Group, Sr. Notes B2 10.875 10/01/09 500 490,000 Winstar Communications, Inc., Sr. Disc. Notes, Zero Coupon (until 10/15/00) B3 14.00 10/15/05 1,500 1,537,500 Sr. Notes Caa1 12.50 4/15/08 1,750 1,715,000 ------------ 22,794,613
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 Portfolio of Investments as of March 31, 2000 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Transportation--4.2% Airtran Airlines, Sr. Sec. Notes, Ser. B B2 10.50% 4/15/01 $ 500 $ 485,000 Atlas Air, Inc., Sr. Notes B3 10.75 8/01/05 500 500,000 MRS Logisticasa S.A., Sr. Notes (Brazil) B(e) 10.625 8/15/05 1,000 (d) 840,000 TFM S.A. de CV (Mexico) Sr. Disc. Notes, Zero Coupon (until 6/15/02) B2 11.75 6/15/09 1,250 (d) 887,500 Sr. Notes B2 10.25 6/15/07 350 (d) 332,500 Valujet, Inc., Sr. Notes B3 10.25 4/15/01 1,250 1,112,500 ------------ 4,157,500 - ------------------------------------------------------------------------------------------------------------------------------ Textiles & Related Industries--1.5% Pillowtex Corp., Sr. Sub. Notes, Ser. B Ca 9.00 12/15/07 1,485 530,887 Westpoint Stevens, Inc., Sr. Notes Ba3 7.875 6/15/08 1,250 975,000 ------------ 1,505,887 - ------------------------------------------------------------------------------------------------------------------------------ Utilities--0.5% IEBA-Invers Electric Co., Notes BB(e) 9.00 9/16/04 1,000 540,000 ------------ Total corporate bonds (cost $148,337,344) 129,211,708 - ------------------------------------------------------------------------------------------------------------------------------ FOREIGN GOVERNMENT OBLIGATIONS--3.0% Province of Buenos Aires, Bonds B1 13.25 3/29/10 750 (d) 754,687 Republic of Argentina, Bonds NR 11.25 4/11/07 500 (d) 461,250 Republic of Brazil, Bonds B2 11.625 4/15/04 1,020 (d) 1,027,650 Bonds, FRB B2 14.50 10/15/09 693 (d) 750,866 ------------ Total foreign government obligations (cost $2,747,361) 2,994,453 - ------------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS(a) Shares Fitzgeralds Gaming Corp. -- -- -- 12,540 12 SF Holding Group, Class C -- -- -- 4,070 41 ------------ Total common stocks (cost $125) 53 - ------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--4.0% Concentric Network Corp., PIK CCC(e) 13.50 -- 1,143 1,163,245 Fairfield Mfg., Inc., Exchangeable, PIK B3 11.25 -- 1,000 890,000 Granite Broadcasting Corp., Cumulative Exchangeable, PIK B3 12.75 -- 290 255,547 R & B Falcon Corp., Sr. Pref. B-(e) 13.88 -- 889 986,790 SF Holdings, Group, Inc., Exchangeable, PIK NR 13.75 -- 139 660,250 ------------ Total preferred stocks (cost $4,047,136) 3,955,832
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 10 Portfolio of Investments as of March 31, 2000 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Expiration Value Description Date Warrants (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ WARRANTS(a)--0.5% American Mobile Satellite Corp. 4/1/08 280 $ 32,200 Benedek Communications Corp. 7/1/07 5,500 11,000 Concentric Network Corp. 12/15/07 255 119,850 R & B Falcon Corp. 5/1/09 800 280,000 ------------ Total warrants (cost $0) 443,050 - ------------------------------------------------------------------------------------------------------------------------------ Total Investments--139.1% (cost $155,131,966; Note 3) 136,605,096 Liabilities in excess of other assets--(39.1)% (38,393,378) ------------ Net Assets--100% $ 98,211,718 ------------ ------------
- --------------- (a)--Non-income producing security. (b)-- Represents issuer in default on interest payments; non-income producing security. (c)-- Consists of more than 1 class of securities traded together as a unit; generally bonds with attached stock or warrants. (d)--US$ Denominated Foreign Bonds. (e)--Standard & Poor's Rating. FRB--Floating Rate Bond. LLC--Limited Liability Corporation. L.P.--Limited Partnership. NR--Not rated by Moody's or Standard & Poor's. PIK--Payment in Kind. - -------------------------------------------------------------------------------- See Notes to Financial Statements. 11 Statement of Assets and Liabilities THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------- Assets March 31, 2000 Investments, at value (cost $155,131,966).................................................................. $136,605,096 Cash....................................................................................................... 186,843 Interest and dividends receivable.......................................................................... 4,088,777 Receivable for investments sold............................................................................ 2,821,354 Other assets............................................................................................... 104,116 Forward currency contracts-net amount receivable from counterparties....................................... 9,103 -------------- Total assets............................................................................................ 143,815,289 -------------- Liabilities Loan payable (Note 4)...................................................................................... 42,000,000 Payable for investments purchased.......................................................................... 1,829,297 Dividends payable.......................................................................................... 1,108,799 Loan interest payable (Note 4)............................................................................. 542,151 Advisory fee payable....................................................................................... 43,828 Accrued expenses........................................................................................... 41,855 Deferred directors' fees................................................................................... 20,110 Administration fee payable................................................................................. 17,531 -------------- Total liabilities....................................................................................... 45,603,571 -------------- Net Assets................................................................................................. $ 98,211,718 -------------- -------------- Net assets were comprised of: Common stock, at par.................................................................................... $ 152,909 Paid-in capital in excess of par........................................................................ 129,759,055 -------------- 129,911,964 Undistributed net investment income..................................................................... 772,552 Accumulated net realized loss on investments............................................................ (13,954,434) Net unrealized depreciation on investments and foreign currencies....................................... (18,518,364) -------------- Net assets, March 31, 2000.............................................................................. $ 98,211,718 -------------- -------------- Net asset value per share ($98,211,718 / 15,290,904 shares of common stock issued and outstanding)......... $6.42 -------------- --------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 12 THE HIGH YIELD PLUS FUND, INC. Statement of Operations - ------------------------------------------------------------
Year Ended March 31, Net Investment Income 2000 Income Interest................................. $ 17,062,437 Dividends................................ 263,282 -------------- 17,325,719 -------------- Expenses Investment advisory fee.................. 539,206 Administration fee....................... 215,683 Custodian's fees and expenses............ 124,000 Legal fees and expenses.................. 80,000 Reports to shareholders.................. 73,000 Transfer agent's fees and expenses....... 37,500 Audit fees and expenses.................. 27,000 Listing fee.............................. 25,000 Insurance expense........................ 19,500 Directors' fees and expenses............. 12,500 Miscellaneous............................ 7,380 -------------- Total operating expenses.............. 1,160,769 Loan interest expense (Note 4)........... 2,580,434 -------------- Total expenses........................ 3,741,203 -------------- Net investment income....................... 13,584,516 -------------- Realized and Unrealized Gain (Loss) on Investments and Foreign Currencies Net realized gain (loss) on: Investment transactions.................. (6,656,363) Foreign currency transactions............ 31,444 -------------- (6,624,919) Net change in unrealized appreciation (depreciation) on: Investments.............................. (7,829,257) Foreign currencies....................... 8,506 -------------- (7,820,751) -------------- Net loss on investments and foreign currencies............................... (14,445,670) -------------- Net Decrease in Net Assets Resulting from Operations................... $ (861,154) -------------- --------------
THE HIGH YIELD PLUS FUND, INC. Statement of Cash Flows - ------------------------------------------------------------
Year Ended March 31, Increase (Decrease) in Cash 2000 Cash flows provided from operating activities Interest and dividends received (excluding discount amortization of $1,985,331)..... $ 15,107,396 Operating expenses paid..................... (588,227) Loan interest and commitment fee paid....... (2,867,316) Purchases of long-term portfolio investments.............................. (122,911,134) Proceeds from disposition of long-term portfolio investments.................... 121,069,851 Deferred expenses and other assets.......... (44,227) ------------- Net cash provided from operating activities............................... 9,766,343 ------------- Cash used for financing activities Net increase in notes payable............... 7,000,000 Cash dividends paid (excluding reinvestment of dividends of $585,228)................ (12,915,598) ------------- Net cash used for financing activities...... (5,915,598) ------------- Net increase in cash........................ 3,850,745 Cash (overdraft) at beginning of year....... (3,663,902) ------------- Cash at end of year......................... $ 186,843 ------------- ------------- Reconciliation of Net Decrease in Net Assets to Net Cash Provided from Operating Activities Net decrease in net assets resulting from operations.................................. $ (861,154) ------------- Increase in investments........................ (1,864,335) Net realized loss on investment transactions... 6,624,919 Net decrease in unrealized appreciation/depreciation of investments.... 7,829,257 Increase in receivable for investments sold.... (839,131) Increase in interest and dividends receivable.................................. (232,992) Increase in deferred expenses and other assets...................................... (44,227) Decrease in payable for investments purchased................................... (1,131,654) Increase in accrued expenses and other liabilities................................. 285,660 ------------- Total adjustments........................... 10,627,497 ------------- Net cash provided from operating activities............................... $ 9,766,343 ------------- -------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 13 THE HIGH YIELD PLUS FUND, INC. Statement of Changes in Net Assets - ------------------------------------------------------------
Year Ended March 31, Increase (Decrease) ------------------------------ in Net Assets 2000 1999 ------------ ------------ Operations Net investment income....... $ 13,584,516 $ 10,941,903 Net realized loss on investment and foreign currency transactions.... (6,624,919) (4,154,864) Net change in unrealized appreciation (depreciation) on investments.............. (7,820,751) (13,817,809) ------------ ------------ Net decrease in net assets resulting from operations............... (861,154) (7,030,770) Dividends from net investment income...................... (13,505,667) (10,590,243) Fund shares transactions Net proceeds from rights offering of Fund shares................... -- 24,581,103 Value of Fund shares issued to shareholders in reinvestment of dividends................ 585,228 474,849 ------------ ------------ Total increase (decrease)...... (13,781,593) 7,434,939 Net Assets Beginning of year.............. 111,993,311 104,558,372 ------------ ------------ End of year(a)................. $ 98,211,718 $111,993,311 ------------ ------------ ------------ ------------ - --------------- (a) Includes undistributed net investment income of....... $ 772,552 $ 662,259 ------------ ------------
THE HIGH YIELD PLUS FUND, INC. Notes to Financial Statements - ------------------------------------------------------------ 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 nonrated 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. Foreign Currency Translation: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis: (i) market value of investment securities, other assets and liabilities--at the closing daily rate of exchange; (ii) purchases and sales of investment securities, income and expenses--at the rate of exchange prevailing on the respective dates of such transactions. Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the fiscal period, the Fund does not - -------------------------------------------------------------------------------- 14 Notes to Financial Statements THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------- isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held at the end of the fiscal period. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of long-term debt securities sold during the fiscal period. Accordingly, such realized foreign currency gains and losses are included in the reported net realized gains (losses) on investment transactions. Net realized gain on foreign currency transactions represents net foreign exchange gains or losses from sales and maturities of short-term securities, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of interest and foreign taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at fiscal period end exchange rates are reflected as a component of net unrealized appreciation/depreciation on investments and foreign currencies. Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. companies as a result of, among other factors, the possibility of political and economic instability and the level of governmental supervision and regulated foreign securities markets. 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' or 'Bankoverdraft' in the Statement of Assets and Liabilities. Forward Currency Contracts: A forward currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The Fund enters into a forward currency contract in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings or on specific receivables and payables denominated in a foreign currency. The contracts are valued daily at current exchange rates and any unrealized gain or loss is included in net unrealized appreciation or depreciation on investments and foreign currencies. Gain or loss is realized on the settlement date of the contract equal to the difference between the settlement value of the original and renegotiated forward contracts. This gain or loss, if any, is included in net realized gain (loss) on foreign currency transactions. Risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts. 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. 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. Withholding taxes on foreign dividends have been provided for in accordance with the Fund's understanding of the applicable country's tax rules and rates. 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. Reclassification of Capital Accounts: The Fund accounts and reports for distributions to shareholders in accordance with American Institute of Certified Public Accountants (AICPA) Statement of Position 93-2: Determination, Disclosure, and Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions by Investment Companies. The effect of applying this statement was to increase undistributed net investment income and increase accumulated net realized losses on investments by $31,444. This was primarily the result of net foreign currency gains incurred during the year ended March 31, 2000. Net investment income, net realized gains and net assets were not affected by this change. - ------------------------------------------------------------ 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; - -------------------------------------------------------------------------------- 15 Notes to Financial Statements THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------- 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, 2000, were $121,779,480 and $121,851,378, respectively. During the year ended March 31, 2000, the Fund entered into $560,656 of securities transactions on a principal basis with Prudential Securities Incorporated, an affiliate of the Administrator. The federal income tax basis of the Fund's investments, as of March 31, 2000, was $155,164,832 and, accordingly, net unrealized depreciation for federal income tax purposes was $18,559,736 (gross unrealized appreciation--$2,590,990; gross unrealized depreciation--$21,150,726). For federal income tax purposes, the Fund has a capital loss carryforward as of March 31, 2000 of approximately $11,849,000 of which $1,337,000 expires in 2003, $1,806,000 expires in 2004, $500,000 expires in 2007 and $8,206,000 expires in 2008. Accordingly, no capital gains distributions are expected to be paid to shareholders until net gains have been realized in excess of such carryforward. The Fund will elect to treat net capital losses of approximately $2,072,900 incurred in the five month period ended March 31, 2000 as having occurred in the following fiscal year. At March 31, 2000, the Fund had an outstanding forward currency contract to sell foreign currency as follows:
Value at Forward Currency Settlement Date Current Sale Contracts Receivable Value Appreciation - ------------------ --------------- -------- ------------ Euros, expiring 5/17/00 $ 695,488 $686,385 $9,103 --------------- -------- ------------ --------------- -------- ------------
- ------------------------------------------------------------ Note 4. Borrowings The Fund has a credit agreement with an unaffiliated lender. The maximum commitment under this agreement is $50,000,000. 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, 2000 was $43,207,650 at a weighted average interest rate of 5.97%. The maximum face amount of borrowings outstanding at any month-end during the year ended March 31, 2000 was $47,000,000 (November 30, 1999). The current borrowings of $42,000,000 (at a weighted average interest rate of 6.14%) mature throughout the period from April 4, 2000 to May 5, 2000. The Fund pays commitment fees at an annual rate of .09 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. - ------------------------------------------------------------ Note 5. Capital There are 100 million shares of $.01 par value common stock authorized. During the fiscal years ended March 31, 2000 and 1999, the Fund issued 82,108 and 60,734 shares in connection with reinvestment of dividends, respectively. In connection with a rights offering, shareholders of record on December 31, 1998 were issued one-third of a nontransferable right for each full share of common stock owned, entitling shareholders the opportunity to acquire one newly issued share of common stock for every whole right held at a subscription price equal to the lower of 97% of net asset value per share as of the close of business on the expiration date of the offering, or 95% of the average of the last reported sales prices per share on the New York Stock Exchange on the expiration date of the offering and the four preceding business days. On March 5, 1999 the Fund issued 3,799,518 shares of common stock at $6.804 per share and estimated rights offering costs of $366,000 ($.02 per share) and brokerage and dealer-manager commissions of $904,817 ($.06 per share) were charged to paid-in capital resulting in net proceeds to the Fund of $24,581,103. The net asset value per share of the Fund's common shareholders was reduced by approximately $.26 per share as a result of this issuance. - ------------------------------------------------------------ Note 6. Dividends On February 23, 2000 the Board of Directors of the Fund declared dividends of $0.0725 per share payable on May 12 and June 9 to shareholders of record on April 28 and May 31, respectively. - ------------------------------------------------------------ Note 7. Subsequent Event Effective April 3, 2000 the Fund's credit agreement with an unaffiliated lender expired and has been renewed as of April 3, 2000. The maximum commitment under this agreement is $50,000,000. - -------------------------------------------------------------------------------- 16 Financial Highlights THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Year Ended March 31, ---------------------------------------------------------- 2000 1999 1998 1997 1996 -------- -------- -------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of year........................... $ 7.36 $ 9.21 $ 8.54 $ 8.44 $ 7.85 -------- -------- -------- ------- ------- Income from investment operations Net investment income........................................ .89 .88 .84 .82 .84 Net realized and unrealized gain (loss) on investments....... (.94) (1.59) .67 .12 .59 -------- -------- -------- ------- ------- Total from investment operations.......................... (.05) (.71) 1.51 .94 1.43 -------- -------- -------- ------- Less dividends and distributions Dividends from net investment income......................... (.89) (.88) (.84) (.82) (.84) Distributions in excess of net investment income............. -- -- -- (.02) -- -------- -------- -------- ------- ------- Total dividends........................................... (.89) (.88) (.84) (.84) (.84) -------- -------- -------- ------- ------- Capital charge in respect to issuance of shares.............. -- (.26) -- -- -- -------- -------- -------- ------- ------- Net asset value, end of year(a).............................. $ 6.42 $ 7.36 $ 9.21 $ 8.54 $ 8.44 -------- -------- -------- ------- ------- -------- -------- -------- ------- ------- Market price per share, end of year(a)....................... $ 6.1875 $ 7.1875 $ 9.125 $ 9.00 $ 8.75 -------- -------- -------- ------- ------- -------- -------- -------- ------- ------- TOTAL INVESTMENT RETURN(b):.................................. (2.96)% (12.36)% 11.25% 13.38% 20.80% -------- -------- -------- ------- ------- -------- -------- -------- ------- ------- RATIO/SUPPLEMENTAL DATA: Net assets, end of year (000 omitted)........................ $ 98,212 $111,993 $104,558 $96,042 $94,091 Average net assets (000 omitted)............................. $107,803 $ 94,437 $100,766 $95,946 $92,855 Ratio to average net assets: Expenses, before loan interest and commitment fees........ 1.08% 1.11% 1.07% 1.08% 1.01% Total expenses............................................ 3.47% 3.14% 2.44% 2.32% 2.29% Net investment income..................................... 12.60% 11.60% 9.41% 9.63% 10.18% Portfolio turnover rate...................................... 83% 94% 112% 60% 60% Total debt outstanding at end of year (000 omitted).......... $ 42,000 $ 35,000 $ 30,000 $18,000 $17,000 Asset coverage per $1,000 of debt outstanding................ $ 3,338 $ 4,204 $ 4,485 $ 6,336 $ 6,535
- --------------- (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 year 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. 17 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, 2000, the results of its operations and its cash flows for the year then ended and the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended in conformity with accounting principles generally accepted in the United States. These financial statements and financial highlights (hereafter referred to as 'financial statements') are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States 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 audits, which included confirmation of securities at March 31, 2000 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. The accompanying financial highlights for the year ended March 31, 1996 were audited by other independent accountants, whose opinion dated May 9, 1996 was unqualified. PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York May 19, 2000 - -------------------------------------------------------------------------------- 18 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, 2000) that 2.14% of the dividends paid in the fiscal year ended March 31, 2000 qualified for the corporate dividends received deduction available to corporate taxpayers. 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. - -------------------------------------------------------------------------------- 19 Corporate Governance (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------- At its quarterly meeting in March 2000, the Fund's Board of Directors unanimously approved several changes to the Fund's By-Laws. These changes were as follows: - Increasing the percentage of outstanding shares necessary to call a special meeting of stockholders from 25 percent to 50 percent. - Clarifying that no business shall be transacted at any special stockholders' meeting except as provided in the notice of meeting. - Specifying the individuals with authority to conduct the Fund's stockholder meetings and the powers vested in those persons. - Modernizing the Fund's provisions to permit proxy voting through electronic means. - Clarifying that the Fund will indemnify its directors and officers to the maximum extent permitted by applicable federal and Maryland state law. - -------------------------------------------------------------------------------- 20 Directors Eugene C. Dorsey Robert E. LaBlanc Douglas H. McCorkindale Thomas T. Mooney Investment Adviser Wellington Management Company, llp 75 State Street Boston, MA 02109 Administrator Prudential Investments Fund Management LLP 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 PricewaterhouseCoopers 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-----