-----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, RzMfGhgIgTpTFIo/KDrh/wFEpPApFpLJ7cVeAJkbiBzPoSwtMew2Wlo2IsrOMS9+ jIdwUPd679yNwDGTqYwLVQ== 0000898733-00-000864.txt : 20001211 0000898733-00-000864.hdr.sgml : 20001211 ACCESSION NUMBER: 0000898733-00-000864 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HIGH YIELD PLUS FUND INC CENTRAL INDEX KEY: 0000828990 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MD FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05468 FILM NUMBER: 785386 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. SEMI ANNUAL REPORT September 30, 2000 Letter To Shareholders October 19, 2000 Dear Shareholder: Unfortunately, the high yield market has continued to experience difficult market conditions since the writing of our March 31, 2000 annual letter. Weak technical conditions, lack of demand, and a less than accommodating credit environment are plaguing the high yield market. We believe the market's weakness, however disappointing relative to absolute returns, has created select, compelling investment opportunities. Near-term we expect the market's performance to remain pressured given the overarching technical weakness. Contrary to the weakness of the high yield market, the US economy continues to thrive, unemployment is at record lows, and inflation is not an ungainly threat. Despite the tentative bounce in high yield sentiment during the month of June, which followed upon positive flows into the high yield mutual funds, negative sentiment returned during the latter half of the summer. High yield mutual fund outflows resumed their pace. The equity market has been following suit with high yield as of late. Valuations of companies that do not meet investors' expectations are sharply punished. The paucity of liquidity in the high yield market has probably not been enhanced by the merger and acquisition activity that has been taking place amongst the leading investment banks, broker-dealers and commercial banks. The CSFB and DLJ merger, for instance, consolidates two fairly active high yield desks into one. As we have remarked in our prior letters, credit quality continues to be a concern, and the commercial banks have been tightening their lending standards. (Despite the robust economy, the banking regulators have asked commercial banks to step up their standards to ensure strong loan quality in the future. It remains to be seen if the regulators overstep their bounds and force a credit recession.) One complicating factor that did not usually surface during the last credit recession is the advent of broad bank loan syndication. Thus, should a high yield company require covenant relief in its bank loans, it becomes a difficult process for the company to achieve consensus from a banking group that may involve a dozen or more disparately opinioned entities. Valuations appear attractive for the long-term investor. Select distressed credits appear particularly interesting. The difference in yield between the 10-year US Treasury and the high yield market as measured by Lehman widened another 50 odd basis points during the last six months to over 700 basis points. The average dollar price of the market is in the low $80's, as measured by several broad indices. Default rates for the market remain at high levels, running presently in a low 5% rate annualized. Market yields appear to be discounting for some, if not all, the credit and liquidity risk. 1 Fund Performance The Fund's total returns for periods ended September 30, 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. TOTAL RETURNS For the Periods Ended September 30, 2000
6 Months 1 Year 2 Years High Yield Plus Fund (NAV)1 -2.2% -1.3% 8.7% Lipper CEHY - Leveraged -2.0 -2.3 0.5
1 Represents NAV-basis performance calculations as provided by Lipper Analytical Services, Inc. Past performance is no guarantee of future results. The Fund is leveraged and has a $50 million credit line provided by BankBoston and State Street Bank and Trust. As of September 30, 2000, the Fund had drawn $34 million on the line. Borrowings fluctuate depending on investment opportunities and relative valuations. As of September 30, 2000, the Fund's shares were priced at $6.64. This price reflected a premium of 13.3% to the Fund's net asset value of $5.86 per share. (The average premium of the Funds in the Lipper Leveraged Closed End universe was 2.4% as of September 30, 2000.) The Fund's monthly dividend rate of $0.0725 per share equates to an annualized yield of 13.1% relative to the stock price. This yield was more than twice the 5.8% yield of the US 10-Year Treasury as of September 30, 2000. As always, we appreciate your interest in the Fund. Sincerely yours, Catherine A. Smith Portfolio Manager Senior Vice President Wellington Management Company, llp Portfolio of Investments as of September 30, 2000 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS--133.2% CORPORATE BONDS--127.2% - ------------------------------------------------------------------------------------------------------------------------------ Aerospace/Defense--2.6% Argo-Tech Corp., Sr. Sub. Notes B3 8.625% 10/01/07 $ 435 $ 358,875 Hexcel Corp., Sr. Sub. Notes B2 9.75 1/15/09 720 669,600 Loral Space & Communications Ltd., Sr. Notes B1 9.50 1/15/06 750 543,750 Moog, Inc., Sr. Sub. Notes, Ser. B B1 10.00 5/01/06 750 738,750 ------------ 2,310,975 - ------------------------------------------------------------------------------------------------------------------------------ Automotive--3.3% Accuride Corp., Sr. Sub. Notes B2 9.25 2/01/08 500 425,000 Exide Corp., Sr. Notes B1 10.00 4/15/05 1,000 770,000 Federal-Mogul Corp., Sr. Notes Ba2 8.80 4/15/07 500 190,000 Notes Ba2 7.75 7/01/06 500 195,000 Notes Ba2 7.50 1/15/09 500 190,000 Key Plastics, Inc., Sr. Sub. Notes, Ser. B Caa 10.25 3/15/07 1,250(b) 87,500 LDM Technologies, Inc., Sr. Sub. Notes, Ser. B B3 10.75 1/15/07 500 325,000 Prestolite Electric, Inc., Gtd. Sr. Notes B3 9.625 2/01/08 1,235 827,450 ------------ 3,009,950 - ------------------------------------------------------------------------------------------------------------------------------ Cable--11.0% Adelphia Communications Corp., Sr. Notes, Ser. B B2 9.875 3/01/07 650 612,625 Sr. Notes B2 8.375 2/01/08 1,000 865,000 Sr. Notes B2 7.75 1/15/09 250 208,125 Cablevision S.A., Sr. Notes (Argentina) B1 13.75 5/01/09 500(d) 446,250 Charter Communications Holdings, Sr. Notes B2 8.25 4/01/07 1,000 907,500 Sr. Notes B2 10.00 4/01/09 500 488,750 CSC Holdings, Inc., Debs., Ser B Ba1 8.125 8/15/09 750 742,972 Insight Midwest L.P., Sr. Notes B1 9.75 10/01/09 750 751,875 Multicanal S.A. (Argentina), Notes B1 10.50 2/01/07 500(d) 392,500 Notes B1 10.50 4/15/18 230(d) 154,100 NTL Communications Corp., Sr. Notes B2 9.875 11/15/09 EUR 250 191,775 NTL Inc., Sr. Notes, Ser. B B2 10.00 2/15/07 $ 500 462,500 RCN Corp., Sr. Notes B3 10.00 10/15/07 500 365,000 Sr. Notes B3 10.125 1/15/10 500 365,000 Rogers Communications, Inc., Sr. Notes (Canada) Ba2 8.875 7/15/07 500(d) 500,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 3 Portfolio of Investments as of September 30, 2000 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Cable (cont'd.) Telewest Communications PLC (United Kingdom), Sr. Notes B1 11.25% 11/01/08 $ 750(d) $ 750,000 Sr. Notes B1 9.875 2/01/10 500(d) 460,000 United Pan-Europe Communications N.V. (Netherlands), Sr. Notes B2 10.875 8/01/09 685(d) 580,538 Sr. Notes B2 11.25 2/01/10 750(d) 652,500 ------------ 9,897,010 - ------------------------------------------------------------------------------------------------------------------------------ Chemicals--7.8% Acetex Corp., Sr. Sec. Notes (Canada) B3 9.75 10/01/03 500(d) 480,000 ARCO Chemical Co., Deb. Ba3 9.375 12/15/05 1,000 990,000 Deb. Ba3 9.80 2/01/20 1,250 1,225,000 Borden Chemicals & Plastics L.P., Sr. Notes B1 9.50 5/01/05 915 667,950 Geo Specialty Chemicals, Inc., Sr. Sub. Notes B3 10.125 8/01/08 500 440,000 Georgia Gulf Corp., Sr. Notes B1 10.375 11/01/07 125 125,625 Huntsman ICI Chemicals LLC, Sr. Sub. Notes B2 10.125 7/01/09 805 792,925 Lyondell Chemical Co., Sr. Sub. Notes B2 10.875 5/01/09 655 636,988 PCI Chemicals Canada, Inc., Sr. Sec. Notes, Ser. B (Canada) B3 9.25 10/15/07 545(d) 343,350 Philipp Brothers Chemicals, Inc., Sr. Sub. Notes B3 9.875 6/01/08 500 375,000 Sterling Chemical Holdings, Inc., Sr. Sub. Notes Ca 11.75 8/15/06 500 375,000 Sr. Sub. Notes Ca 11.25 4/01/07 750 577,500 ------------ 7,029,338 - ------------------------------------------------------------------------------------------------------------------------------ Consumer Goods & Services--4.2% Bell Sports, Inc., Sr. Sub. Notes B3 11.00 8/15/08 670 676,700 Burlington Industries, Inc., Notes B1 7.25 9/15/05 1,000 540,000 Corning Consumer Products Co., Sr. Sub. Notes B3 9.625 5/01/08 1,500 570,000 Polaroid Corp., Notes Ba3 11.50 2/15/06 500 518,750 Simmons Co., Sr. Sub. Notes, Ser. B B3 10.25 3/15/09 500 470,000 True Temper Sports, Inc., Sr. Sub. Notes B3 10.875 12/01/08 1,000 975,000 ------------ 3,750,450 - ------------------------------------------------------------------------------------------------------------------------------ Containers--2.1% BWay Corp., Sr. Sub. Notes, Ser. B B2 10.25 4/15/07 650 624,000 Consumers Packaging, Inc., Sr. Notes (Canada) Caa1 9.75 2/01/07 750(d) 150,000 Owens Corning, Notes Ba2 7.50 5/01/05 1,500(b) 555,000 Silgan Holdings, Inc., Sub. Deb., PIK B1 13.25 7/15/06 200 212,000 Sr. Sub. Debs. B1 9.00 6/01/09 350 322,000 ------------ 1,863,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 4 Portfolio of Investments as of September 30, 2000 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Energy & Related Goods & Services--6.4% Canadian Forest Oil, Ltd., Sr. Sub. Notes B2 8.75% 9/15/07 $ 500 $ 485,000 Clark R & M, Inc., Sr. Notes Ba3 8.625 8/15/08 1,250 1,031,250 Frontier Oil Corp., Sr. Notes B2 9.125 2/15/06 750 675,000 Newpark Resources, Inc., Sr. Sub. Notes, Ser. B B2 8.625 12/15/07 330 311,850 P & L Coal Holdings Corp., Sr. Notes Ba3 8.875 5/15/08 500 495,000 Sr. Sub. Notes B2 9.625 5/15/08 350 339,500 Pen Holdings, Inc., Sr. Notes, Ser. B B2 9.875 6/15/08 1,000 750,000 Pioneer Natural Resources Co., Sr. Notes Ba2 9.625 4/01/10 500 526,250 RAM Energy, Inc., Sr. Notes Caa 11.50 2/15/08 985 748,600 RBF Finance Co., Notes Ba3 11.00 3/15/06 370 427,350 ------------ 5,789,800 - ------------------------------------------------------------------------------------------------------------------------------ Financial Services--4.2% Banco Nacional de Desenvolvimento Economico e Social, Notes (Brazil) B1 11.25 9/20/05 500(d) 502,500 Bangkok Bank Public Co., Debs. (Thailand) B+(c) 8.75 3/15/07 500(d) 439,975 GS Escrow Corp., Sr. Notes Ba1 7.125 8/01/05 750 691,005 Ocwen Federal Bank., Sub. Debs. B1 12.00 6/15/05 500 455,000 Thai Farmers Bank Ltd., Sub. Notes (Thailand) Ba3 8.25 8/21/16 500(d) 390,000 Western Financial Savings Bank, Sub. Debs. B2 8.875 8/01/07 1,505 1,339,450 ------------ 3,817,930 - ------------------------------------------------------------------------------------------------------------------------------ Food & Lodging--1.3% John Q. Hammons Hotels, First Mtge. Bonds B2 8.875 2/15/04 1,250 1,187,500 - ------------------------------------------------------------------------------------------------------------------------------ Gaming--0.6% Hollywood Casino Corp., Sr. Sub. Notes B3 11.25 5/01/07 500 523,750 - ------------------------------------------------------------------------------------------------------------------------------ General Industries--8.9% Allied Waste North America, Inc., Sr. Notes Ba3 7.625 1/01/06 750 671,250 Sr. Sub. Notes B2 10.00 8/01/09 1,350 1,174,500 Anchor Glass Container Corp., First Mtge. Notes B2 11.25 4/01/05 685 513,750 Aqua Chemical, Inc., Sr. Sub. Notes Caa2 11.25 7/01/08 640 448,000 Grove Worldwide LLC, Sr. Sub. Notes Caa 9.25 5/01/08 1,715 171,500 Haynes International, Inc., Sr. Notes B3 11.625 9/01/04 1,000 775,000 Henry Co., Sr. Notes, Ser. B Caa 10.00 4/15/08 1,110 555,000 IT Group, Inc., Sr. Sub. Notes, Ser. B B3 11.25 4/01/09 500 440,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 5 Portfolio of Investments as of September 30, 2000 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ General Industries (cont'd.) International Wire Group, Inc., Sr. Sub. Notes B3 11.75% 6/01/05 $ 250 $ 251,875 Sr. Sub. Notes, Ser. B B3 11.75 6/01/05 250 251,875 Mastec, Inc., Sr. Sub. Notes Ba1 7.75 2/01/08 250 237,500 Neenah Corp., Sr. Sub. Notes, Ser. B B3 11.125 5/01/07 500 387,500 Numatics Inc., Gtd. Sr. Notes B3 9.625 4/01/08 375 296,250 United Rentals, Inc., Sr. Sub. Notes B1 9.00 4/01/09 750 660,000 Waste Management, Inc., Sr. Notes Ba1 6.875 5/15/09 500 448,385 WESCO Distribution, Inc., Sr. Sub. Notes B2 9.125 6/01/08 750 705,000 ------------ 7,987,385 - ------------------------------------------------------------------------------------------------------------------------------ Grocery Stores--0.9% Homeland Stores, Inc., Sr. Notes NR 10.00 8/01/03 1,250 812,500 - ------------------------------------------------------------------------------------------------------------------------------ Health Care--8.8% Alaris Medical, Inc., Sr. Disc. Notes, Zero Coupon (until 8/1/03) Caa 11.125 8/01/08 750 180,000 Alaris Medcial Systems, Sr. Sub. Notes B3 9.75 12/01/06 700 507,500 Beverly Enterprises, Inc., Sr. Notes B1 9.00 2/15/06 750 697,500 Bio-Rad Labs, Inc., Sr. Sub. Notes B2 11.625 2/15/07 550 577,500 Conmed Corp., Sr. Sub. Notes B3 9.00 3/15/08 1,100 924,000 Dade International, Inc., Sr. Sub. Notes B2 11.125 5/01/06 2,000 640,000 DJ Orthopedics LLC, Sr. Sub. Notes B3 12.625 6/15/09 1,250 1,175,000 Mediq, Inc., Sr. Sub. Notes C 11.00 6/01/08 1,740(b) 52,200 Packard Bioscience Inc., Sr. Sub. Notes, Ser. B B3 9.375 3/01/07 250 228,750 Tenet Healthcare Corp., Sr. Sub. Notes, Ser. B Ba3 8.125 12/01/08 850 816,000 Triad Hospitals Holdings, Inc., Sr. Sub. Notes B3 11.00 5/15/09 855 876,375 Universal Hospital Services Inc., Sr. Sub. Notes B3 10.25 3/01/08 1,750 1,207,500 ------------ 7,882,325 - ------------------------------------------------------------------------------------------------------------------------------ Home Building & Real Estate--7.5% Anthony Crane Rental L.P., Sr. Notes Caa 10.375 8/01/08 1,000 510,000 Beazer Homes USA Inc., Sr. Notes Ba3 8.875 4/01/08 1,250 1,181,250 D.R. Horton, Inc., Sr. Notes Ba1 8.00 2/01/09 750 697,500 LNR Property Corp., Sr. Sub. Notes B1 10.50 1/15/09 750 742,500 Owens Illinois, Inc., Sr. Notes Ba1 7.85 5/15/04 205 174,250 Presley Companies, Sr. Notes Caa 12.50 7/01/01 1,000 945,000 Ryland Group, Inc., Sr. Sub. Notes B1 8.25 4/01/08 750 667,500 Standard Pacific Corp., Sr. Notes Ba2 8.50 6/15/07 750 708,750 Webb (Del E.) Corp., Sr. Sub. Debs. B2 10.25 2/15/10 1,150 1,098,250 ------------ 6,725,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 6 Portfolio of Investments as of September 30, 2000 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Media & Entertainment--9.3% Ackerley Group Inc., Sr. Sub. Notes, Ser. B B2 9.00% 1/15/09 $ 750 $ 705,000 American Color Graphics, Inc., Sr. Sub. Notes Caa 12.75 8/01/05 1,000 995,000 Carmike Cinemas, Inc., Sr. Sub. Notes, Ser. B C 9.375 2/01/09 635(b) 174,625 Echostar Corp., Sr. Notes B2 9.25 2/01/06 500 490,000 Globo Comunicacoes e Participacoes S.A., Notes (Brazil) B2 10.50 12/20/06 1,500(d) 1,335,000 Lin Holdings Corp., Sr. Disc. Notes, Zero Coupon (until 3/1/03) B3 10.00 3/01/08 750 543,750 Lin Televison Corp., Sr. Sub. Notes B2 8.375 3/01/08 500 476,250 Loews Cineplex Entertainment Corp., Sr. Sub. Notes Caa 8.875 8/01/08 500 200,000 STC Broadcasting, Inc., Sr. Sub. Notes B3 11.00 3/15/07 350 346,500 Sun Media Corp., Sr. Sub. Notes (Canada) B1 9.50 5/15/07 500(d) 503,750 TV Azteca S.A. de C.V. (Brazil), Gtd. Sr. Notes, Ser. A B1 10.125 2/15/04 500(d) 482,500 Gtd. Sr. Notes, Ser. B B1 10.50 2/15/07 750(d) 697,500 Von Hoffmann Press, Inc., Sr. Sub. Notes B3 10.875 5/15/07 700 644,000 World Color Press, Inc., Sr. Sub. Notes Baa3 8.375 11/15/08 750 727,733 ------------ 8,321,608 - ------------------------------------------------------------------------------------------------------------------------------ Metals--6.4% Alaska Steel Corp., Sr. Notes Ba2 9.125 12/15/06 500 496,250 Sr. Notes Ba2 7.875 2/15/09 250 227,500 Algoma Steel, Inc., First Mtge. Notes (Canada) B2 12.375 7/15/05 350(d) 250,250 Bayou Steel Corp., First Mtge. Notes B2 9.50 5/15/08 1,250 950,000 Bucyrus International, Inc., Sr. Notes Caa 9.75 9/15/07 750 225,000 Bulong Operation Pty. Ltd., Sr. Notes Caa 12.50 12/15/08 315(b) 151,200 CSN Iron S.A., Gtd. Notes (Brazil) B2 9.125 6/01/07 500(d) 412,500 Freeport-McMoran Copper & Gold, Inc., Sr. Notes B3 7.50 11/15/06 750 495,000 Kaiser Aluminum & Chemical Corp., Sr. Notes, Ser. B B1 10.875 10/15/06 750 735,000 LTV Corp., Gtd. Sr. Notes Ba3 8.20 9/15/07 350 175,000 Sr. Notes Ba3 11.75 11/15/09 1,330 691,600 Weirton Steel Corp., Sr. Notes B2 11.375 7/01/04 1,250 1,000,000 ------------ 5,809,300 - ------------------------------------------------------------------------------------------------------------------------------ Paper & Packaging--6.3% Container Corp. of America, Gtd. Sr. Notes, Ser. B B2 10.75 5/01/02 1,000 1,017,500 Doman Industries Ltd. (Canada), Sr. Notes Caa 8.75 3/15/04 1,005(d) 723,600 Sr. Sec. Notes B3 12.00 7/01/04 1,000(d) 1,005,000 Gaylord Container Corp., Sr. Sub. Notes Ca 9.875 2/15/08 1,750 700,000 Millar Western Forest Products Ltd., Sr. Notes (Canada) B2 9.875 5/15/08 500(d) 460,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 Portfolio of Investments as of September 30, 2000 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Paper & Packaging (cont'd.) Pacifica Papers, Inc., Sr. Notes B1 10.00% 3/15/09 $ 740 $ 740,000 Paperboard Industries International, Inc., Sr. Notes B2 8.375 9/15/07 750 630,000 Repap New Brunswick, Inc., Sr. Sec. Notes (Canada) B2 9.00 6/01/04 350(d) 364,000 ------------ 5,640,100 - ------------------------------------------------------------------------------------------------------------------------------ Retail--0.3% Leslie's Poolmart, Inc., Sr. Notes B3 10.375 7/15/04 350 269,500 - ------------------------------------------------------------------------------------------------------------------------------ Technology--9.9% Amkor Technology, Inc., Sr. Notes Ba3 9.25 5/01/06 1,250 1,246,875 Sr. Sub. Notes B1 10.50 5/01/09 500 508,750 Cooperative Computing, Inc., Sr. Sub. Notes B3 9.00 2/01/08 1,000 390,000 Details Holding Corp., Sr. Disc. Notes, Zero Coupon (until 11/15/02) Caa1 12.50 11/15/07 750 592,500 Exodus Communications, Inc., Sr. Notes B3 11.25 7/01/08 990 975,150 Sr. Notes B3 11.625 7/15/10 250 251,250 Fairchild Semiconductor Corp., Sr. Sub. Notes B2 10.125 3/15/07 745 745,000 Flextronics International Ltd., Sr. Sub. Notes Ba3 9.875 7/01/10 375 388,125 Intersil Corp., Sr. Notes B1 13.25 8/15/09 485 562,600 MCMS, Inc., Sr. Sub. Notes, Ser. B Ca 9.75 3/01/08 2,000 1,380,000 Orbital Imaging Corp., Sr. Notes, Ser. B CCC(c) 11.625 3/01/05 500 185,000 Viasystems, Inc., Sr. Sub. Notes B3 9.75 6/01/07 1,045 971,850 Sr. Sub. Notes, Ser. B B3 9.75 6/01/07 805 748,650 ------------ 8,945,750 - ------------------------------------------------------------------------------------------------------------------------------ Telecommunications--16.1% Call-Net Enterprises, Inc., Sr. Notes (Canada) B2 9.375 5/15/09 1,250(d) 562,500 Concentric Network Corp., Sr. Notes B(c) 12.75 12/15/07 500 521,250 Flag Telecommunications Holdings Ltd., Sr. Notes (Bermuda) B2 11.625 3/30/10 1,350(d) 1,188,000 Global Crossing Holdings Ltd. (Bermuda), Sr. Notes Ba2 9.125 11/15/06 750(d) 742,500 Sr. Notes Ba2 9.625 5/15/08 500(d) 497,500 GST Telecommunications, Inc., Sr. Disc. Notes, Zero Coupon (until 11/15/02) D 12.75 11/15/07 500 5,000 GT Group Telecommunications, Inc., Sr. Disc. Notes, Zero Coupon (until 2/1/05), Sen. Disc. Exch. Note (Canada) Caa 13.25 2/01/10 850 (d) 340,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 8 Portfolio of Investments as of September 30, 2000 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Telecommunications (cont'd.) Hermes Europe Railtel B.V. (Netherlands), Sr. Notes B3 11.50% 8/15/07 $ 250(d) $ 117,500 Sr. Notes B3 10.375 1/15/09 1,000(d) 450,000 Hyperion Telecommunications, Inc., Sr. Sec. Notes, Ser. B B3 12.25 9/01/04 1,000 985,000 Intermedia Communications, Inc., Sr. Notes, Ser. B B2 8.875 11/01/07 250 237,500 Sr. Notes, Ser. B B2 8.60 6/01/08 250 237,500 Iridium Cap. Corp., Sen. Notes, Ser. B C 14.00 7/15/05 750(b) 22,500 Gtd. Sr. Notes, Ser. D C 10.875 7/15/05 500(b) 15,000 Level 3 Communications, Inc., Sr. Notes B3 11.00 3/15/08 500 485,000 Sr. Notes B3 10.75 3/15/08 EUR 465 384,297 McLeod USA, Inc., Sr. Notes B1 9.25 7/15/07 $ 350 330,750 Metromedia Fiber Network, Inc., Sr. Notes B2 10.00 12/15/09 500 465,000 Millicom Int'l. Cellular S.A., Sr. Sub. Disc. Notes, Zero Coupon (until 6/1/01) (Luxembourg) Caa 13.50 6/01/06 1,250(d) 1,075,000 PsiNet Inc., Sr. Notes B3 10.00 2/15/05 535 347,750 Sr. Notes B3 11.50 11/01/08 500 335,000 Sr. Notes B3 11.00 8/01/09 500 325,000 Rhythms Netconnections, Inc., Sr. Notes, Ser. B B3 14.00 2/15/10 1,000 660,000 Teligent, Inc., Sr. Notes Caa 11.50 12/01/07 500 215,000 Time Warner Telecom LLC, Sr. Notes B2 9.75 7/15/08 500 450,000 Viatel, Inc., Sr. Notes B3 11.25 4/15/08 250 132,500 Sr. Notes B3 11.50 3/15/09 1,000 540,000 Williams Communications Group, Sr. Notes B2 10.875 10/01/09 500 460,000 Winstar Communicaions, Inc., Sr. Notes B3 12.50 4/15/08 1,750 1,242,500 Worldwide Fiber, Inc., Sr. Sub. Notes B3 12.00 8/01/09 1,250 1,100,000 ------------ 14,469,547 - ------------------------------------------------------------------------------------------------------------------------------ Textiles and Related Industries--2.1% Galey & Lord, Inc., Sr. Sub. Notes Ca 9.125 3/01/08 1,000 635,000 Pillowtex Corp., Sr. Sub. Notes, Ser. B Ca 9.00 12/15/07 2,250 405,000 Westpoint Stevens, Inc., Sr. Notes B1 7.875 6/15/08 1,000 832,500 ------------ 1,872,500 - ------------------------------------------------------------------------------------------------------------------------------ Transportation--4.3% Air Trans Airlines, Inc., Sr. Sec. Notes, Ser. B B2 10.50 4/15/01 500 485,000 Atlas Air, Inc., Sr. Notes B1 10.75 8/01/05 500 515,000 Kansas City Southern Railway Co., Sr. Notes Ba2 9.50 10/01/08 245 248,675
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 Portfolio of Investments as of September 30, 2000 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Transportation (cont'd.) MRS Logistica S.A., Sr. Notes (Brazil) B(c) 10.625% 8/15/05 $ 1,000(d) $ 865,000 TFM S.A. de C.V. (Mexico), Sr. Notes B2 10.25 6/15/07 750(d) 703,125 Sr. Disc. Debs., Zero Coupon (until 6/15/02) B2 11.75 6/15/09 500(d) 378,750 Valujet, Inc., Sr. Notes B3 10.25 4/15/01 750 690,000 ------------ 3,885,550 - ------------------------------------------------------------------------------------------------------------------------------ Utilities--2.9% Calpine Corp., Sr. Notes Ba1 8.625 8/15/10 1,000 993,350 CMS Energy Corp., Sub. Notes Ba3 7.625 11/15/04 500 482,740 Sr. Notes Ba3 7.50 1/15/09 250 222,985 IEBA-Invers Electric Co., Notes B+(c) 9.00 9/16/04 1,000 350,000 TNP Enterprises, Inc., Sr. Sub. Notes Ba3 10.25 4/01/10 500 515,000 ------------ 2,564,075 ------------ Total corporate bonds (cost $135,874,071) 114,364,843 - ------------------------------------------------------------------------------------------------------------------------------ FOREIGN GOVERNMENT OBLIGATIONS--0.9% Republic of Brazil, Bonds, FRB (cost $538,494) B2 14.50 10/15/09 693(d) 764,314 - ------------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS(a)--0.8% Shares --------- DecisionOne Holdings Corp. -- -- -- 1,387 39 Fitzgeralds Gaming Corp. -- -- -- 12,540 13 Pathmark Stores, Inc. -- -- -- 54,268 668,175 SF Holdings Group, Class C -- -- -- 219 1,095 ------------ Total common stocks (cost $1,978,513) 669,322 - ------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--4.1% Fairfield Mfg., Inc., Exchangeable, PIK B3 11.25 -- 1,000 810,000 Granite Broadcasting Corp., Cumulative Exchangeable, PIK B3 12.75 -- 290 217,796 NEXTLINK Communications, Inc., Sr. Preferred Exchangeable, PIK NR 13.80 -- 1,182 1,022,747 R & B Falcon Corp., Sr. Pref. B-(c) 13.88 -- 952 1,218,447 SF Holding Group, Inc., Exchangeable, PIK NR 13.75 -- 96 384,000 ------------ Total preferred stocks (cost $3,597,137) 3,652,990
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 10 Portfolio of Investments as of September 30, 2000 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------
Expiration Value Description Date Warrants (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ WARRANTS(a)--0.2% DecisionOne Holdings Corp., Class A 4/18/07 685 $ 57 Class B 4/18/07 1,180 99 Class C 4/18/07 700 59 GT Group Telecommmunications, Inc. 2/1/10 850 85,000 Motient Corp. 4/1/08 280 11,200 Benedek Communications Corp. 7/1/07 5,500 11,000 Concentric Network Corp. 12/15/07 255 102,000 Pathmark Stores, Inc. 9/19/10 10,086 12,607 ------------ Total warrants (cost $51,315) 222,022 ------------ Total long-term investments (cost $142,039,530) 119,673,491 - --------------------------------------------------------------------------------------------------------------------------------- Principal Interest Maturity Amount Rate Date (000) -------- ---------- --------- SHORT-TERM INVESTMENT--0.4% Repurchase Agreement Lehman Brothers Hldgs., Inc., dated 9/29/00, due in the 6 10/02/00 $ 389 389,000 amount of $389,212 (cost $389,000; collateralized by .53% $1,995,000 U.S. Treasury Bond strips, 11/25/27; approximate value $403,409) - ------------------------------------------------------------------------------------------------------------------------------ Total Investments--133.6% (cost $142,428,530; Note 3) 120,062,491 Other assets in excess of liabilities--(33.6)% (30,181,816) ------------ Net Assets--100% $ 89,880,675 ------------ ------------
- --------------- (a)--Non-income producing security. (b)-- Represents issuer in default on interest payments; non-income producing security. (c)--Standard & Poor's Rating. (d)--US$ Denominated Foreign Bonds. FRB--Floating Rate Bond. LLC--Limited Liability Corporation. L.P.--Limited Partnership. NR--Not rated by Moody's or Standard & Poor's. N.V.--Naamluze Vennootschap (Dutch). PIK--Payment in Kind. PLC--Public Limited Company (British). S.A.--Sociedad Anonima (Spanish) or Societe Anonyme (French). - -------------------------------------------------------------------------------- See Notes to Financial Statements. 11 Statement of Assets and Liabilities (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Assets September 30, 2000 - ------------------------------------------------------------------------------------------------------------------------------- Investments, at value (cost $142,428,530)................................................................. $120,062,491 Cash...................................................................................................... 498,090 Interest receivable....................................................................................... 3,834,883 Receivable for investments sold........................................................................... 1,685,532 Other assets.............................................................................................. 77,858 Unrealized appreciation on forward currency contracts..................................................... 12,560 ------------------ Total assets........................................................................................... 126,171,414 ------------------ Liabilities Loan payable (Note 4)..................................................................................... 34,000,000 Dividends payable......................................................................................... 1,107,516 Payable for investments purchased......................................................................... 644,523 Loan interest payable (Note 4)............................................................................ 402,385 Accrued expenses.......................................................................................... 57,323 Advisory fee payable...................................................................................... 40,204 Deferred directors' fees.................................................................................. 22,706 Administration fee payable................................................................................ 16,082 ------------------ Total liabilities...................................................................................... 36,290,739 ------------------ Net Assets................................................................................................ $ 89,880,675 ------------------ ------------------ Net assets were comprised of: Common stock, at par................................................................................... $ 153,499 Paid-in capital in excess of par....................................................................... 130,129,604 ------------------ 130,283,103 Undistributed net investment income.................................................................... 466,022 Accumulated net realized loss on investments and foreign currencies.................................... (18,514,647) Net unrealized depreciation on investments and foreign currencies...................................... (22,353,803) Net assets, September 30, 2000......................................................................... $ 89,880,675 ------------------ ------------------ Net asset value per share ($89,880,675 / 15,349,887 shares of common stock issued and outstanding)........ $5.86 ------------------ ------------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 12 THE HIGH YIELD PLUS FUND, INC. Statement of Operations (Unaudited) - ------------------------------------------------------------
Six Months Ended September 30, Net Investment Income 2000 Income Interest................................... $ 8,152,871 Dividends.................................. 56,250 ------------- 8,209,121 ------------- Expenses Investment advisory fee.................... 241,476 Administration fee......................... 96,590 Custodian's fees and expenses.............. 63,000 Legal fees and expenses.................... 55,000 Reports to shareholders.................... 49,000 Insurance expense.......................... 26,000 Transfer agent's fees and expenses......... 19,000 Audit fees................................. 14,000 Listing fee................................ 12,000 Directors' fees and expenses............... 8,000 Miscellaneous.............................. 8,679 ------------- Total operating expenses................ 592,745 Loan interest expense (Note 4)............. 1,266,541 ------------- Total expenses.......................... 1,859,286 ------------- Net investment income......................... 6,349,835 ------------- Realized and Unrealized Gain (Loss) on Investments and Foreign Currencies Net realized gain (loss) on: Investment transactions.................... (4,614,407) Foreign currency transactions.............. 54,194 ------------- (4,560,213) ------------- Net change in unrealized appreciation (depreciation) on: Investments................................ (3,839,168) Foreign currencies......................... 3,729 ------------- (3,835,439) ------------- Net loss on investments and foreign currencies................................. (8,395,652) ------------- Net Decrease in Net Assets Resulting from Operations..................... $(2,045,817) ------------- -------------
THE HIGH YIELD PLUS FUND, INC. Statement of Cash Flows (Unaudited) - ------------------------------------------------------------
Six Months Ended September 30, Increase (Decrease) in Cash 2000 Cash flows provided from operating activities Interest and dividends received (excluding discount amortization of $1,129,883)...... $ 7,333,132 Operating expenses paid...................... (859,286) Loan interest paid........................... (1,126,775) Purchases of short-term portfolio investments............................... (389,000) Purchases of long-term portfolio investments............................... (41,260,866) Proceeds from disposition of long-term portfolio investments..................... 50,874,293 Deferred expenses and other assets........... 26,258 ------------ Net cash provided from operating activities................................ 14,597,756 ------------ Cash used for financing activities Net decrease in notes payable................ (8,000,000) Cash dividends paid (excluding reinvestment of dividends of $371,139)................. (6,286,509) ------------ Net cash used for financing activities....... (14,286,509) ------------ Net increase in cash......................... 311,247 Cash at beginning of period.................. 186,843 ------------ Cash at end of period........................ $ 498,090 ------------ ------------ Reconciliation of Net Decrease in Net Assets to Net Cash Provided from Operating Activities Net decrease in net assets resulting from operations................................... $(2,045,817) ------------ Decrease in investments......................... 8,143,223 Net realized loss on investment transactions.... 4,560,213 Net decrease in unrealized appreciation/depreciation of investments..... 3,839,168 Decrease in receivable for investments sold..... 1,132,366 Decrease in interest and dividends receivable... 253,894 Increase in deferred expenses and other assets....................................... 26,258 Decrease in payable for investments purchased... (1,184,774) Increase in accrued expenses and other liabilities.................................. (126,775) ------------ Total adjustments............................ 16,643,573 ------------ Net cash provided from operating activities................................ $14,597,756 ------------ ------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 13 THE HIGH YIELD PLUS FUND, INC. Statement of Changes in Net Assets (Unaudited) - ------------------------------------------------------------
Six Months Ended September Year Ended Increase (Decrease) 30, March 31, in Net Assets 2000 2000 ------------ ------------ Operations Net investment income....... $ 6,349,835 $ 13,584,516 Net realized loss on investment and foreign currency transactions.... (4,560,213) (6,624,919) Net change in unrealized appreciation (depreciation) on investments and foreign currencies............... (3,835,439) (7,820,751) ------------ ------------ Net decrease in net assets resulting from operations............... (2,045,817) (861,154) Dividends from net investment income...................... (6,656,365) (13,505,667) Value of Fund shares issued to shareholders in reinvestment of dividends................ 371,139 585,228 ------------ ------------ Total decrease................. (8,331,043) (13,781,593) Net Assets Beginning of period............ 98,211,718 111,993,311 ------------ ------------ End of period(a)............... $ 89,880,675 $ 98,211,718 ------------ ------------ ------------ ------------ - --------------- (a) Includes undistributed net investment income of....... $ 466,022 $ 772,552 ------------ ------------
Notes to Financial Statements (Unaudited) 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 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 (Unaudited) 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. - ------------------------------------------------------------ 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. - -------------------------------------------------------------------------------- 15 Notes to Financial Statements (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------- Note 3. Portfolio Securities Purchases and sales of investment securities, other than short-term investments, for the six months ended September 30, 2000, were $40,076,092 and $49,684,004, respectively. The federal income tax basis of the Fund's investments, as of September 30, 2000, was $142,444,969 and, accordingly, net unrealized depreciation for federal income tax purposes was $22,382,478 (gross unrealized appreciation--$2,725,033; gross unrealized depreciation--$25,107,511). For federal income tax purposes, the Fund has a capital loss carryforward as of March 30, 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 current fiscal year. At September 30, 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 11/6/00 $ 613,907 $601,347 $ 12,560 --------------- -------- ------------ --------------- -------- ------------
- ------------------------------------------------------------ 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 six months ended September 30, 2000 was $35,967,213 at a weighted average interest rate of 6.92%. The maximum face amount of borrowings outstanding at any month-end during the six months ended September 30, 2000 was $39,000,000 (April 30, 2000). The current borrowings of $34,000,000 (at a weighted average interest rate of 7.12%) mature throughout the period from October 4, 2000 to March 12, 2001. The Fund pays commitment fees at an annual rate of .09 of 1% on any unused portion of the credit facility. - ------------------------------------------------------------ Note 5. Capital There are 100 million shares of $.01 par value common stock authorized. During the six months ended September 30, 2000 and the fiscal year ended March 31, 2000, the Fund issued 58,983 and 82,108 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 August 23, 2000 the Board of Directors of the Fund declared dividends of $0.0725 per share payable on October 9, November 10 and December 11 to shareholders of record on September 29, October 31 and November 30, respectively. - -------------------------------------------------------------------------------- 16 Financial Highlights (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Six Months Ended Year Ended March 31, September 30, ---------------------------------------------- 2000 2000 1999 1998 1997 ------------- -------- -------- -------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period...................... $ 6.42 $ 7.36 $ 9.21 $ 8.54 $ 8.44 ------ -------- -------- -------- ------- Income from investment operations Net investment income..................................... .41 .89 .88 .84 .82 Net realized and unrealized gain (loss) on investments.... (.53) (.94) (1.59) .67 .12 ------ -------- -------- -------- ------- Total from investment operations....................... (.12) (.05) (.71) 1.51 .94 ------ -------- -------- -------- ------- Less dividends and distributions Dividends from net investment income...................... (.44) (.89) (.88) (.84) (.82) Distributions in excess of net investment income.......... -- -- -- -- (.02) ------ -------- -------- -------- ------- Total dividends and distributions...................... (.44) (.89) (.88) (.84) (.84) ------ -------- -------- -------- ------- Capital charge in respect to issuance of shares........... -- -- (.26) -- -- ------ -------- -------- -------- ------- Net asset value, end of period(a)......................... $ 5.86 $ 6.42 $ 7.36 $ 9.21 $ 8.54 ------ -------- -------- -------- ------- ------ -------- -------- -------- ------- Market price per share, end of period(a).................. $ 6.64 $ 6.1875 $ 7.1875 $ 9.125 $ 9.00 ------ -------- -------- -------- ------- ------ -------- -------- -------- ------- TOTAL INVESTMENT RETURN(b):............................... 15.00% (2.96)% (12.36)% 11.25% 13.38% ------ -------- -------- -------- ------- ------ -------- -------- -------- ------- RATIO/SUPPLEMENTAL DATA: Net assets, end of period (000 omitted)................... $89,881 $ 98,212 $111,993 $104,558 $96,042 Average net assets (000 omitted).......................... $94,416 $107,803 $ 94,437 $100,766 $95,946 Ratio to average net assets: Expenses, before loan interest and commitment fees..... 1.25%(c) 1.08% 1.11% 1.07% 1.08% Total expenses......................................... 3.93%(c) 3.47% 3.14% 2.44% 2.32% Net investment income.................................. 13.41%(c) 12.60% 11.60% 9.41% 9.63% Portfolio turnover rate................................... 32% 83% 94% 112% 60% Total debt outstanding at end of period (000 omitted)..... $34,000 $ 42,000 $ 35,000 $ 30,000 $18,000 Asset coverage per $1,000 of debt outstanding............. $ 3,644 $ 3,338 $ 4,204 $ 4,485 $ 6,336 1996 ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period...................... $ 7.85 ------- Income from investment operations Net investment income..................................... .84 Net realized and unrealized gain (loss) on investments.... .59 ------- Total from investment operations....................... 1.43 ------- Less dividends and distributions Dividends from net investment income...................... (.84) Distributions in excess of net investment income.......... -- ------- Total dividends and distributions...................... (.84) ------- Capital charge in respect to issuance of shares........... -- ------- Net asset value, end of period(a)......................... $ 8.44 ------- ------- Market price per share, end of period(a).................. $ 8.75 ------- ------- TOTAL INVESTMENT RETURN(b):............................... 20.80% ------- ------- RATIO/SUPPLEMENTAL DATA: Net assets, end of period (000 omitted)................... $94,091 Average net assets (000 omitted).......................... $92,855 Ratio to average net assets: Expenses, before loan interest and commitment fees..... 1.01% Total expenses......................................... 2.29% Net investment income.................................. 10.18% Portfolio turnover rate................................... 60% Total debt outstanding at end of period (000 omitted)..... $17,000 Asset coverage per $1,000 of debt outstanding............. $ 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. Total returns for periods less than one year are not annualized. (c) Annualized. Contained above is selected data for a share of common stock outstanding, total investment return, ratios to average net assets and other supplemental data for the 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 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 August 24, 2000 at the offices of Prudential Investments Fund Management LLC, 751 Broad Street, Newark, New Jersey. The meeting was held for the following purposes:
(1) To elect the following directors to serve as follows: Director Class Term Expiring ------------------------------- ------ -------- --------- Robert E. LaBlanc I 2 years 2002 Thomas T. Mooney II 3 years 2003 Clay T. Whitehead II 3 years 2003 Directors whose term of office continued beyond this meeting are Eugene C. Dorsey and Douglas H. McCorkindale. (2) To ratify the selection of PricewaterhouseCoopers LLP as independent public accountants for the year ending March 31, 2001.
The results of the proxy solicitation on the above matters were as follows:
Director/Matter Votes for Votes against Votes withheld Abstentions ---------------------------- ----------- -------------- --------------- ------------ (1) Robert E. LaBlanc 13,071,799 -- 375,226 -- Thomas T. Mooney 13,044,291 -- 402,734 -- Clay T. Whitehead 13,038,928 -- 408,097 -- (2) PricewaterhouseCoopers LLP 13,152,627 40,367 -- 254,031
- -------------------------------------------------------------------------------- 18 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 Directors Eugene C. Dorsey Robert E. LaBlanc Douglas H. McCorkindale Thomas T. Mooney Clay T. Whitehead 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 -----END PRIVACY-ENHANCED MESSAGE-----