-----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, UP6tXHsbOiTUySNPblwwlvfOINn5q/RlcrcZt+Np60gLFTYL176c88mJUZhlDobI 1rVRFAmNMc3GpbQCPlLIdA== 0000898733-01-500150.txt : 20010601 0000898733-01-500150.hdr.sgml : 20010601 ACCESSION NUMBER: 0000898733-01-500150 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010531 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: 1651584 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 mf14681.txt HIGH YIELD PLUS -- 3/01 -- FINANCIALS The High Yield Plus Fund, Inc. ANNUAL REPORT March 31, 2001 Letter To Shareholders April 9, 2001 Dear Shareholder: The high yield market closed upon its third poor year of absolute returns. Poor returns have derived from the adverse credit environment, limited market liquidity, and weak demand. Recent market behavior has shown some signs of change, however. The Federal Reserve Board has reduced short-term interest rates, improving sentiment towards income products, and fueling some renewed investor demand in the high yield market specifically. Nevertheless, the liquidity situation has not improved as yet. Commercial banks continue to tighten their credit standards, limiting financial flexibility for below investment grade constituents. We believe we may be at an inflection point in this regard, as the Federal Reserve Board and Office of the Comptroller may suggest that banks limit further tightening, given the adverse economic impact of the same. The economic outlook has weakened markedly. However, one can argue that certain segments of the economy, such as general manufacturing and industrial, have already been in recession mode, and the Fed's actions may ease some of the crunch. This mixed outlook suggests that market volatility and reduced liquidity may be with us for some time. The difference in yield between the high yield market (Lehman) and US Treasuries reached a recent spread of over 900 basis points at calendar year-end, but tightened to the 760 basis point range by the end of March. Despite the recent market move, valuations appear attractive for the long-term investor. The average dollar price of the market is in the high $70's-low $80's, as measured by several broad indices; this price along with the imbedded high yield differential appears to offer reasonable protection from the market's presently high rate of default, tracking in the 5 - 6% range on an annualized basis. Fund Performance. The Fund's total returns for periods ended March 31, 2001 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. We believe the Fund's returns have been competitive with other funds with similar objectives. Several funds in the category, however, principally invest in bank loans and showed different performance characteristics. TOTAL RETURNS For the Periods Ended March 31, 2001
6 Months 1 Year 2 Years* High Yield Plus Fund (NAV)1 -6.7% -8.8% -4.9% Lipper CEHY -- Leveraged -5.6 -7.5 -5.1
1 Represents NAV-basis performance calculations as provided by Lipper Analytical Services, Inc. Past performance is no guarantee of future results. Returns based on market performance of the Fund's shares would be different. * Annualized 1 With respect to portfolio positioning, over the last twelve months we have upgraded the quality of the portfolio given the adverse credit environment. With respect to sector exposure, we have notably increased exposure to the healthcare, utility, cable and retail sectors. We have decreased exposure to the telecom and general industrial sectors over the last twelve months. We believe that the difference in yield between higher quality (BB) and mid quality (B) is unusually wide, reflecting the market's overall risk aversion. This may create investment opportunities in the coming months, should the market show signs of improved capital access and liquidity. The Fund is leveraged and has a $50 million credit line provided by Fleet National Bank and State Street Bank and Trust Company. As of March 31, 2001, the Fund had drawn $28 million on the line; this reflects a reduction of $14 million since the Fund's prior fiscal year-end, and a $6 million reduction since September 30, 2000. Borrowings fluctuate depending on investment outlook and opportunities. As of March 31, 2001, The Fund's last sale price of shares was $6.20. This price reflected a premium of 23.5% to the Fund's net asset value of $5.02 per share. (The average premium of the funds in the Lipper Leveraged Closed End universe was 8.9% as of March 31, 2001.) The Fund's monthly dividend rate of $0.0725 per share as of year end equated to an annualized yield of 14.0% relative to the stock price. This yield was significantly in excess of the US 10-Year Treasury rate of 4.92% on March 31, 2001. 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, 2001 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS--133.5% CORPORATE BONDS--130.4% - ------------------------------------------------------------------------------------------------------------------------------ Aerospace/Defense--1.9% Hexcel Corp., Sr. Sub. Notes B2 9.75% 1/15/09 $ 720 $ 691,200 Moog, Inc., Sr. Sub. Notes, Ser. B B1 10.00 5/01/06 750 757,500 ------------ 1,448,700 - ------------------------------------------------------------------------------------------------------------------------------ Automotive--2.5% Accuride Corp., Sr. Sub. Notes B2 9.25 2/01/08 750 510,000 Exide Corp., Sr. Notes B1 10.00 4/15/05 1,000 790,000 Federal-Mogul Corp., Sr. Notes B3 7.75 7/01/06 500 70,000 Sr. Notes B3 7.50 1/15/09 500 65,000 Key Plastics, Inc., Sr. Sub. Notes, Ser. B D(c) 10.25 3/15/07 1,250(b) 0 LDM Technologies, Inc., Sr. Sub. Notes, Ser. B B3 10.75 1/15/07 500 195,000 Prestolite Electric, Inc., Gtd. Sr. Notes B3 9.625 2/01/08 750 335,625 ------------ 1,965,625 - ------------------------------------------------------------------------------------------------------------------------------ Building & Related Industries--0.9% Anthony Crane Rental L.P., Sr. Notes Caa1 10.375 8/01/08 1,000 445,000 Owens Corning, Sr. Notes Ca 7.50 5/01/05 1,000(b) 270,000 ------------ 715,000 - ------------------------------------------------------------------------------------------------------------------------------ Cable--11.8% Adelphia Communications Corp., Sr. Notes, Ser. B B2 9.875 3/01/07 650 650,000 Sr. Notes B2 8.375 2/01/08 1,000 930,000 Sr. Notes B2 10.875 10/01/10 250 265,625 Cablevision S.A., Sr. Notes (Argentina) B2 13.75 5/01/09 575(d) 396,750 Charter Communications Holdings, Sr. Notes B2 10.00 4/01/09 1,000 1,040,000 Sr. Notes B2 11.125 1/15/11 285 304,950 Insight Midwest L.P., Sr. Notes B1 9.75 10/01/09 645 667,575 Sr. Notes B1 10.50 11/01/10 1,000 1,067,500 Multicanal S.A. (Argentina), Notes B2 10.50 2/01/07 550(d) 368,500 Notes, Ser. C B2 10.50 4/15/18 230(d) 121,900 NTL Communications Corp., Sr. Notes B2 9.875 11/15/09 EUR 250 186,466 Sr. Notes B2 11.875 10/01/10 $ 250 224,375
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 3 Portfolio of Investments as of March 31, 2001 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Cable (cont'd.) NTL, Inc., Sr. Notes, Ser. B B2 10.00% 2/15/07 $ 250 $ 218,750 Rogers Communications, Inc., Sr. Notes (Canada) Ba2 8.875 7/15/07 500(d) 510,000 Telewest Communications PLC (United Kingdom), Sr. Notes B2 11.25 11/01/08 750(d) 735,000 Sr. Notes B2 9.875 2/01/10 500(d) 465,000 United Pan-Europe Communications N.V. (Netherlands), Sr. Notes B2 10.875 8/01/09 685(d) 458,950 Notes B2 11.25 2/01/10 750(d) 510,000 ------------ 9,121,341 - ------------------------------------------------------------------------------------------------------------------------------ Chemicals--8.8% Acetex Corp., Sr. Sec'd. Notes (Canada) B3 9.75 10/01/03 500(d) 490,000 ARCO Chemical Co., Debs. Ba3 9.375 12/15/05 1,000 1,010,000 Debs. Ba3 9.799 2/01/20 920 883,200 Borden Chemicals & Plastics L.P., Notes Ca 9.50 5/01/05 1,000(b) 350,000 Geo Specialty Chemicals, Inc., Sr. Sub. Notes B3 10.125 8/01/08 500 445,000 Georgia Gulf Corp., Sr. Sub. Notes B1 10.375 11/01/07 750 778,125 Lyondell Chemical Co., Sr. Sub. Notes B2 10.875 5/01/09 655 669,738 Philipp Brothers Chemicals, Inc., Sr. Sub. Notes B3 9.875 6/01/08 500 335,000 PMD Group, Inc., Sr. Sub. Notes B3 11.00 2/28/11 175 182,000 Resolution Performance Products, Inc., Sr. Sub. Notes B2 13.50 11/15/10 945 1,006,425 Royster-Clark, Inc., First Mtge. Notes B2 10.25 4/01/09 434 347,200 Sterling Chemical Holdings, Inc., Sr. Sub. Notes Caa3 11.25 4/1/07 750 337,500 ------------ 6,834,188 - ------------------------------------------------------------------------------------------------------------------------------ Consumer Goods & Services--2.4% Bausch & Lomb, Inc., Notes Baa3 6.75 12/15/04 500 481,000 Corning Consumer Products Co., Sr. Sub. Notes Caa1 9.625 5/01/08 1,500 150,000 Polaroid Corp., Notes Ba3 11.50 2/15/06 250 122,500 Medium-Term Notes Ba3 7.25 1/15/07 190 85,500 True Temper Sports, Inc., Sr. Sub. Notes B3 10.875 12/01/08 1,000 1,010,000 ------------ 1,849,000 - ------------------------------------------------------------------------------------------------------------------------------ Containers--2.0% Consumers Packaging, Inc., Sr. Notes (Canada) Caa2 9.75 2/01/07 750(b)(d) 22,500 Owens-Illinois, Inc., Sr. Notes B1 7.85 5/15/04 205 177,325 Sr. Notes B1 7.15 5/15/05 250 202,500 Sr. Notes B1 8.10 5/15/07 1,000 788,750
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 4 Portfolio of Investments as of March 31, 2001 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Containers (cont'd.) Silgan Holdings, Inc., Sr. Sub. Debs. B1 9.00% 6/01/09 $ 350 $ 350,000 ------------ 1,541,075 - ------------------------------------------------------------------------------------------------------------------------------ Energy & Related Goods & Services--7.0% Canadian Forest Oil, Ltd., Sr. Sub. Notes (Canada) B1 8.75 9/15/07 750(d) 763,125 Clark R & M, Inc., Sr. Notes Ba3 8.625 8/15/08 1,250 962,500 Frontier Oil Corp., Sr. Notes B2 9.125 2/15/06 750 712,500 P & L Coal Holdings Corp., Sr. Notes Ba3 8.875 5/15/08 500 521,250 Sr. Sub. Notes B2 9.625 5/15/08 500 523,750 Pen Holdings, Inc. Sr. Notes, Ser. B B3 9.875 6/15/08 750 487,500 Pioneer Natural Resources Co., Sr. Notes Ba2 9.625 4/01/10 500 547,500 Plains Resources, Inc., Sr. Sub. Notes, Ser. B B2 10.25 3/15/06 135 136,350 RAM Energy, Inc., Sr. Notes Caa1 11.50 2/15/08 985 788,000 ------------ 5,442,475 - ------------------------------------------------------------------------------------------------------------------------------ Financial Services--3.5% GS Escrow Corp., Sr. Notes Ba1 7.125 8/01/05 750 730,222 Ocwen Federal Savings Bank, Sub. Debs. B1 12.00 6/15/05 500 475,000 Peoples Bank of Bridgeport, Sub. Notes Baa3 9.875 11/15/10 750 816,143 Western Financial Savings Bank, Sub. Cap. Debs. B2 8.875 8/01/07 750 705,000 ------------ 2,726,365 - ------------------------------------------------------------------------------------------------------------------------------ Food & Lodging--0.9% John Q. Hammon Hotels, First Mtge. Bonds B2 8.875 2/15/04 750 723,750 - ------------------------------------------------------------------------------------------------------------------------------ Gaming--0.7% Hollywood Casino Corp., Sr. Sec'd. Notes B3 11.25 5/01/07 500 531,250 - ------------------------------------------------------------------------------------------------------------------------------ General Industrial--7.4% Allied Waste North America, Inc., Sr. Notes Ba3 7.625 1/01/06 750 733,125 Sr. Sub. Notes B2 10.00 8/01/09 1,350 1,380,375 Aqua Chemical, Inc., Sr. Sub. Notes Caa2 11.25 7/01/08 500 350,000 Haynes International, Inc., Sr. Notes Caa1 11.625 9/01/04 1,000 600,000 International Wire Group, Inc., Sr. Sub. Notes, Ser. B B3 11.75 6/01/05 250 250,000 IT Group, Inc., Sr. Sub. Notes, Ser. B B3 11.25 4/01/09 500 421,250 Lucent Technologies, Inc., Notes Baa3 5.50 11/15/08 500 360,000 Numatics, Inc., Sr. Sub. Notes B3 9.625 4/01/08 375 255,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 5 Portfolio of Investments as of March 31, 2001 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ General Industrial (cont'd.) United Rentals, Inc., Sr. Sub. Notes B2 9.00% 4/01/09 $ 750 $ 663,750 WESCO Distribution, Inc., Sr. Sub. Notes B2 9.125 6/01/08 750 712,500 ------------ 5,726,000 - ------------------------------------------------------------------------------------------------------------------------------ Grocery Stores--1.3% Great Atlantic & Pacific Tea, Inc., Notes B2 7.75 4/15/07 1,000 720,000 Homeland Stores, Inc., Sr. Notes NR 10.00 8/01/03 1,250 262,500 ------------ 982,500 - ------------------------------------------------------------------------------------------------------------------------------ Health Care--10.9% Alaris Medical Systems, Sr. Sub. Notes B3 9.75 12/01/06 635 361,950 Beverly Enterprises, Inc., Sr. Notes B1 9.00 2/15/06 500 501,250 Bio-Rad Labs., Inc., Sr. Sub. Notes B2 11.625 2/15/07 1,250 1,350,000 Conmed Corp., Sr. Sub. Notes B3 9.00 3/15/08 1,100 1,034,000 Dade International, Inc., Sr. Sub. Notes Caa2 11.125 5/01/06 2,500 450,000 DJ Orthopedics LLC, Sr. Sub. Notes B3 12.625 6/15/09 1,250 1,225,000 HCR Manor Care, Inc., Sr. Notes Ba1 8.00 3/01/08 150 152,023 Mediq, Inc., Sr. Sub. Notes C 11.00 6/01/08 1,740(b) 17,400 Omnicare, Inc., Sr. Sub. Notes Ba2 8.125 3/15/11 310 316,200 Tenet Healthcare Corp., Sr. Sub. Notes, Ser. B Ba3 8.125 12/01/08 850 871,250 Triad Hospitals Holdings, Inc., Sr. Sub. Notes B2 11.00 5/15/09 855 940,500 Universal Hospital Services, Inc., Sr. Sub. Notes B3 10.25 3/01/08 1,500 1,275,000 ------------ 8,494,573 - ------------------------------------------------------------------------------------------------------------------------------ Home Building & Real Estate--5.3% Beazer Homes USA, Inc., Sr. Notes Ba3 8.875 4/01/08 1,250 1,231,250 D.R. Horton, Inc., Sr. Notes Ba1 8.00 2/01/09 500 485,000 LNR Property Corp., Sr. Sub. Notes B1 10.50 1/15/09 500 500,000 Ryland Group, Inc., Notes B1 8.25 4/01/08 750 690,000 Standard Pacific Corp., Sr. Notes Ba2 8.50 6/15/07 750 727,500 Webb (Del E.) Corp., Sr. Sub. Debs. B2 10.25 2/15/10 500 482,500 ------------ 4,116,250 - ------------------------------------------------------------------------------------------------------------------------------ Media & Entertainment--7.8% Ackerley Group Inc., Sr. Sub. Notes, Ser. B B2 9.00 1/15/09 365 332,150 Echostar Corp., Sr. Notes B1 9.25 2/01/06 500 500,000 Globo Comunicacoes e Participacoes S.A., Sr. Notes (Brazil) B1 10.50 12/20/06 1,500(d) 1,312,500 Lin Television Corp., Sr. Sub. Notes B2 8.375 3/01/08 500 455,000 STC Broadcasting, Inc., Sr. Sub. Notes B3 11.00 3/15/07 350 327,250
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 6 Portfolio of Investments as of March 31, 2001 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Media & Entertainment (cont'd.) Sun Media Corp., Sr. Sub. Notes (Canada) B1 9.50% 5/15/07 $ 500(d) $ 502,500 TV Azteca S.A. (Mexico), Gtd. Sr. Notes, Ser. A B1 10.125 2/15/04 500(d) 490,000 Gtd. Sr. Notes, Ser. B B1 10.50 2/15/07 250(d) 243,750 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 11/15/08 750 773,842 Young Broadcasting, Inc., Sr. Sub. Notes B2 10.00 3/01/11 500 485,000 ------------ 6,065,992 - ------------------------------------------------------------------------------------------------------------------------------ Metals--4.8% AK Steel Corp., Sr. Notes Ba2 9.125 12/15/06 500 493,750 Algoma Steel, Inc., First Mtge. Notes (Canada) Caa1 12.375 7/15/05 235(d) 70,500 Bayou Steel Corp., First Mtge. Notes B2 9.50 5/15/08 1,250 718,750 Bethlehem Steel Corp., Notes Caa1 10.375 9/01/03 750 457,500 Bucyrus International, Inc., Sr. Notes Caa1 9.75 9/15/07 750 337,500 Bulong Operation Pty., Ltd., Sr. Notes (Australia) Ca 12.50 12/15/08 315(b)(d) 110,250 Century Aluminum Co., Sr. Sec'd. First Mtge. Notes Ba3 11.75 4/15/08 630 642,600 National Steel Corp., Sr. Sub. Notes, Ser. D Caa1 9.875 3/01/09 1,250 475,000 Weirton Steel Corp., Sr. Notes Caa1 11.375 7/01/04 1,250 450,000 ------------ 3,755,850 - ------------------------------------------------------------------------------------------------------------------------------ Paper & Packaging--9.0% Abitibi-Consolidated, Inc., Debs. (Canada) Baa3 8.55 8/01/10 500(d) 531,900 Caraustar Industries, Inc., Sr. Sub. Notes Ba1 9.875 4/01/11 500 480,625 Container Corp. of America, Gtd. Sr. Notes, Ser. B B2 10.75 5/01/02 1,000 1,020,000 Corporacion Durango S.A., Sr. Notes (Mexico) B2 13.125 8/01/06 750(d) 706,875 Doman Industries Ltd. (Canada), Sr. Notes Caa1 8.75 3/15/04 895(d) 510,150 Sr. Sec'd. Notes B3 12.00 7/01/04 500(d) 512,500 Gaylord Container Corp., Sr. Sub. Notes Caa3 9.875 2/15/08 1,750 507,500 Millar Western Forest Products Ltd., Sr. Notes (Canada) B2 9.875 5/15/08 1,250(d) 1,062,500 Pacifica Papers, Inc., Sr. Notes (Canada) B1 10.00 3/15/09 750(d) 802,500 Paperboard Industries International, Inc., Sr. Notes (Canada) B2 8.375 9/15/07 750(d) 645,000 Stone Container Corp., Sr. Notes B2 9.25 2/01/08 200 202,000 ------------ 6,981,550 - ------------------------------------------------------------------------------------------------------------------------------ Retail--4.5% CSK Auto Inc., Sr. Sub. Notes B2 11.00 11/01/06 750 600,000 K-Mart Corp., Sr. Notes Baa3 9.375 2/01/06 170 170,425 Leslie's Poolmart, Inc., Sr. Notes B3 10.375 7/15/04 350 287,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 Portfolio of Investments as of March 31, 2001 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Retail (cont'd.) Penney (J.C.) Co., Inc., Medium Term Notes Ba2 7.05% 5/23/05 $ 250 $ 206,250 Sr. Notes Ba2 7.60 4/01/07 1,250 1,012,500 Rite Aid Corp., Notes Caa3 7.625 4/15/05 975 702,000 Notes Caa3 7.125 1/15/07 750 491,250 ------------ 3,469,425 - ------------------------------------------------------------------------------------------------------------------------------ Technology and Related--8.8% Amkor Technology, Inc., Sr. Notes Ba3 9.25 5/01/06 500 480,000 Sr. Sub. Notes B1 10.50 5/01/09 500 485,000 Fairchild Semiconductor Corp., Sr. Sub. Notes B2 10.50 2/01/09 1,000 965,000 MCMS, Inc., Sr. Sub. Notes, Ser. B Caa3 9.75 3/01/08 2,000 600,000 Seagate Technology, Sr. Sub. Notes B1 12.50 11/15/07 1,500 1,496,250 Telecommunications Techniques Co., Sr. Sub. Notes B3 9.75 5/15/08 750 615,000 Viasystems, Inc., Sr. Sub. Notes B3 9.75 6/01/07 1,045 606,100 Sr. Sub. Notes, Ser. B B3 9.75 6/01/07 805 466,900 Xerox Corp., Notes Ba1 7.15 8/01/04 1,500 1,080,000 ------------ 6,794,250 - ------------------------------------------------------------------------------------------------------------------------------ Telecommunications--15.1% 360Networks, Inc., Sr. Notes (Canada) B3 13.00 5/01/08 1,000(d) 380,000 AT&T Wireless Services, Inc. Sr. Notes Baa2 7.875 3/01/11 500 500,025 Call-Net Enterprises, Inc., Sr. Notes (Canada) Ca 9.375 5/15/09 1,250(d) 437,500 Concentric Network Corp., Sr. Notes B(c) 12.75 12/15/07 500 377,500 Exodus Communications, Inc., Sr. Notes B3 11.25 7/01/08 1,340 1,065,300 Sr. Notes B3 11.625 7/15/10 250 201,250 Flag Telecommunications Holdings Ltd., Sr. Notes (Bermuda) B2 11.625 3/30/10 1,500(d) 1,170,000 Global Crossing Holdings Ltd., Sr. Notes (Bermuda) Ba2 9.125 11/15/06 300(d) 285,000 GST Telecommunications, Inc., Sr. Sub. Notes D(c) 12.75 11/15/07 500(b) 5,000 GT Group Telecommunications, Inc. (Canada), Sr. Disc. Exch. Notes, Zero Coupon (until 2/1/05) Caa1 13.25 2/01/10 850(d) 323,000 Hyperion Telecommunications, Inc., Sr. Sec'd. Notes, Ser. B B3 12.25 9/01/04 1,000 950,000 Iridium Cap. Corp., Sr. 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
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 8 Portfolio of Investments as of March 31, 2001 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Telecommunications (cont'd.) ITC DeltaCom, Inc., Sr. Notes B2 11.00% 6/01/07 $ 250 $ 212,500 Sr. Notes B2 8.875 3/01/08 540 432,000 Level 3 Communications, Inc., Sr. Notes B3 9.125 5/01/08 435 311,025 Sr. Notes B3 11.25 3/15/10 350 273,000 McLeodUSA, Inc., Sr. Notes B1 9.25 7/15/07 350 315,000 Sr. Notes B1 11.375 1/01/09 325 318,500 Millicom International Cellular S.A. (Luxembourg), Sr. Sub. Disc. Notes, Zero Coupon (until 6/1/01) Caa1 13.50 6/01/06 1,250(d) 1,087,500 Nextel Communications, Inc. Sr. Notes B1 9.50 2/01/11 350 295,750 Rhythms Netconnections, Inc., Notes Caa1 12.75 4/15/09 195 36,075 Sr. Notes, Ser. B Caa1 14.00 2/15/10 1,000 80,000 Satelites Mexicanos S.A., Sr. Notes (Mexico) B3 10.125 11/01/04 750(d) 487,500 Teligent, Inc., Sr. Notes Ca 11.50 12/01/07 500 20,000 Williams Communications Group, Inc., Sr. Notes B2 10.875 10/01/09 500 370,000 Sr. Notes B2 11.875 8/01/10 750 570,000 Winstar Communications, Inc., Sr. Notes B3 12.50 4/15/08 1,750 647,500 Sr. Notes B3 12.75 4/15/10 250 92,500 Worldwide Fiber, Inc., Sr. Notes (Canada) B3 12.00 8/01/09 1,250(d) 475,000 ------------ 11,755,925 - ------------------------------------------------------------------------------------------------------------------------------ Textiles--1.7% Burlington Industries, Inc., Notes Caa2 7.25 9/15/05 1,500 450,000 Pillowtex Corp., Sr. Sub. Notes, Ser. B C 9.00 12/15/07 2,250(b) 90,000 Westpoint Stevens, Inc., Sr. Notes B1 7.875 6/15/08 1,000 790,000 ------------ 1,330,000 - ------------------------------------------------------------------------------------------------------------------------------ Transportation--5.1% Air Canada, Inc., Sr. Notes (Canada) B1 10.25 3/15/11 1,000(d) 970,000 Atlas Air, Inc., Notes B1 10.75 8/01/05 500 520,000 Delta Airlines, Inc., Notes Baa3 7.90 12/15/09 500 483,185 Kansas City Southern Railway Co., Sr. Notes Ba2 9.50 10/01/08 750 768,750 Navistar International Corp., Sr. Sub. Notes Ba2 8.00 2/01/08 350 321,125 TFM S.A. (Mexico), Sr. Notes B1 10.25 6/15/07 500(d) 475,000 Sr. Disc. Debs., Zero Coupon (until 6/1/02) B1 11.75 6/15/09 500(d) 406,250 ------------ 3,944,310
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 Portfolio of Investments as of March 31, 2001 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Utilities--6.3% Avista Corp., Sr. Notes Baa2 9.75% 6/01/08 $ 1,280 $ 1,305,600 Calpine Corp., Sr. Notes Ba1 8.625 8/15/10 1,000 1,025,750 CMS Energy Corp., Sub. Notes Ba3 7.625 11/15/04 500 497,665 Sr. Notes Ba3 9.875 10/15/07 1,000 1,060,000 Sr. Notes Ba3 7.50 1/15/09 250 236,193 IEBA-Invers Electric Corp., Notes NR 9.00 9/16/04 1,000 200,000 TNP Enterprises, Inc., Sr. Sub. Notes Ba3 10.25 4/01/10 500 540,000 ------------ 4,865,208 ------------ Total long-term corporate bonds (cost $124,764,716) 101,180,602 - ------------------------------------------------------------------------------------------------------------------------------ FOREIGN GOVERNMENT OBLIGATION--1.0% Republic of Brazil, Bonds (cost $547,013) B1 14.50 10/15/09 693(d) 745,252 - ------------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS(a)--1.1% Shares ---------- Immunex Corp. -- -- -- 25,000 356,250 Pathmark Stores, Inc. -- -- -- 30,000 516,000 SF Holdings Group, Class C -- -- -- 219 0 ------------ Total common stocks (cost $715,441) 872,250 - ------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--0.9% Dividend Rate -------- SF Holding Group, Inc., Exchangeable, PIK NR 13.75 -- 41 82,000 Exchangeable, Ser. B, PIK NR 13.75 -- 60 120,000 XO Communications, Inc., Exchangeable, Ser. B, PIK NR 13.50 -- 1,302 494,760 ------------ Total preferred stocks (cost $1,521,235) 696,760 - ------------------------------------------------------------------------------------------------------------------------------ WARRANTS(a)--0.1% Expiration Date Warrants ---------- ---------- GT Group Telecommunications, Inc. -- -- 2/1/10 850 29,750 Pathmark Stores, Inc. -- -- 9/19/10 10,085 47,904 ------------ Total warrants (cost $51,310) 77,654 ------------ Total long-term investments (cost $127,599,715) 103,572,518 ------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 10 Portfolio of Investments as of March 31, 2001 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ SHORT TERM INVESTMENTS--2.8% CORPORATE BONDS - ------------------------------------------------------------------------------------------------------------------------------ Home Building & Real Estate--1.2% Presley Companies, Sr. Notes Caa3 12.50% 7/01/01 $ 1,000 $ 922,500 - ------------------------------------------------------------------------------------------------------------------------------ Media & Entertainment Carmike Cinemas, Inc., Sr. Sub. Notes, Ser. B D(c) 9.375 2/1/01 0(b) 0 - ------------------------------------------------------------------------------------------------------------------------------ Transportation--1.6% Air Trans Airlines, Inc., Sr. Sec'd. Notes, Ser. B B2 10.50 4/15/01 500 490,000 Valujet, Inc., Sr. Notes B3 10.25 4/15/01 750 746,250 ------------ 1,236,250 ------------ Total short-term corporate bonds (cost $2,249,693) 2,158,750 ------------ - ------------------------------------------------------------------------------------------------------------------------------ Total Investments--136.3% (cost $129,849,408; Note 3) 105,731,268 Liabilities in excess of other assets--(36.3%) (28,138,115) ------------ Net Assets--100% $ 77,593,153 ------------ ------------
- --------------- (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. 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 THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Assets March 31, 2001 - -------------------------------------------------------------------------------------------------------------------------------- Investments, at value (cost $129,849,408).................................................................... $ 105,731,268 Interest receivable.......................................................................................... 3,602,662 Receivable for investments sold.............................................................................. 254,188 Other assets................................................................................................. 71,738 Unrealized appreciation on forward currency contracts........................................................ 10,850 -------------- Total assets.............................................................................................. 109,670,706 -------------- Liabilities Payable to custodian......................................................................................... 97,490 Loan payable (Note 4)........................................................................................ 28,000,000 Payable for investments purchased............................................................................ 2,387,739 Dividends payable............................................................................................ 1,120,028 Loan interest payable (Note 4)............................................................................... 252,165 Accrued expenses............................................................................................. 115,501 Advisory fee payable......................................................................................... 66,328 Deferred directors' fees..................................................................................... 24,487 Administration fee payable................................................................................... 13,815 -------------- Total liabilities......................................................................................... 32,077,553 -------------- Net Assets................................................................................................... $ 77,593,153 -------------- -------------- Net assets were comprised of: Common stock, at par...................................................................................... $ 154,487 Paid-in capital in excess of par.......................................................................... 130,692,015 -------------- 130,846,502 Distributions in excess of net investment income.......................................................... (181,601) Accumulated net realized loss on investments.............................................................. (28,964,235) Net unrealized depreciation on investments and foreign currencies......................................... (24,107,513) -------------- Net assets, March 31, 2001................................................................................ $ 77,593,153 -------------- -------------- Net asset value per share ($77,593,153 / 15,448,658 shares of common stock issued and outstanding)........... $5.02 -------------- --------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 12 THE HIGH YIELD PLUS FUND, INC. Statement of Operations - ------------------------------------------------------------
Year Ended March 31, Net Investment Income 2001 Income Interest.................................... $ 15,825,735 Dividends................................... 56,286 ------------ 15,882,021 ------------ Expenses Investment advisory fee..................... 444,318 Administration fee.......................... 177,727 Custodian's fees and expenses............... 124,000 Legal fees and expenses..................... 110,000 Reports to shareholders..................... 93,000 Transfer agent's fees and expenses.......... 39,000 Listing fee................................. 35,000 Audit fees and expenses..................... 27,000 Insurance expense........................... 22,000 Directors' fees and expenses................ 17,000 Miscellaneous............................... 29,378 ------------ Total operating expenses................. 1,118,423 Loan interest expense (Note 4).............. 2,358,237 ------------ Total expenses........................... 3,476,660 ------------ Net investment income.......................... 12,405,361 ------------ Realized and Unrealized Gain (Loss) on Investments and Foreign Currencies Net realized gain (loss) on: Investment transactions..................... (15,009,801) Foreign currency transactions............... 4,159 ------------ (15,005,642) ------------ Net change in unrealized appreciation (depreciation) on: Investments................................. (5,591,271) Foreign currencies.......................... 2,122 ------------ (5,589,149) ------------ Net loss on investments and foreign currencies.................................. (20,594,791) ------------ Net Decrease in Net Assets Resulting from Operations...................... $ (8,189,430) ------------ ------------
THE HIGH YIELD PLUS FUND, INC. Statement of Cash Flows - ------------------------------------------------------------
Year Ended Increase (Decrease) in Cash March 31, (Including Foreign Currency) 2001 Cash flows provided from operating activities Interest and dividends received (excluding discount amortization of $2,456,366)...... $ 13,912,139 Operating expenses paid...................... (1,601,588) Loan interest and commitment fee paid........ (2,068,251) Purchases of long-term portfolio investments............................... (79,536,766) Proceeds from disposition of long-term portfolio investments..................... 95,395,661 Deferred expenses and other assets........... 32,378 ------------ Net cash provided from operating activities................................ 26,133,573 ------------ Cash used for financing activities Net decrease in notes payable................ (14,000,000) Cash dividends paid (excluding reinvestment of dividends of $934,538)................. (12,417,906) ------------ Net cash used for financing activities....... (26,417,906) ------------ Net decrease in cash......................... (284,333) Cash at beginning of year.................... 186,843 ------------ Payable to custodian at end of year.......... $ (97,490) ------------ ------------ Reconciliation of Net Decrease in Net Assets to Net Cash (Including Foreign Currency) Provided from Operating Activities Net decrease in net assets resulting from operations................................... $ (8,189,430) ------------ Decrease in investments......................... 10,276,921 Net realized loss on investment and foreign currency transactions........................ 15,005,642 Net decrease in unrealized appreciation (depreciation) of investments and foreign currencies................................... 5,589,149 Decrease in receivable for investments sold..... 2,567,166 Decrease in interest and dividends receivable... 486,484 Decrease in deferred expenses and other assets....................................... 32,378 Increase in payable for investments purchased... 558,442 Decrease in accrued expenses and other liabilities.................................. (193,179) ------------ Total adjustments............................ 34,323,003 ------------ Net cash provided from operating activities................................ $ 26,133,573 ------------ ------------
- -------------------------------------------------------------------------------- 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 2001 2000 ------------ ------------ Operations Net investment income....... $ 12,405,361 $ 13,584,516 Net realized loss on investment and foreign currency transactions.... (15,005,642) (6,624,919) Net change in unrealized appreciation (depreciation) on investments and foreign currencies............... (5,589,149) (7,820,751) ------------ ------------ Net decrease in net assets resulting from operations............... (8,189,430) (861,154) Dividends from net investment income........ (13,177,913) (13,505,667) Distributions in excess of net investment income.... (185,760) -- Value of Fund shares issued to shareholders in reinvestment of dividends................ 934,538 585,228 ------------ ------------ Total decrease................. (20,618,565) (13,781,593) Net Assets Beginning of year.............. 98,211,718 111,993,311 ------------ ------------ End of year(a)................. $ 77,593,153 $ 98,211,718 ------------ ------------ ------------ ------------ - --------------- (a) Includes undistributed net investment income of....... $ -- $ 772,552 ------------ ------------ ------------ ------------
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 long-term 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 securities sold during the fiscal period. Accordingly, realized foreign currency gains (losses) are included in the reported net realized gains (losses) on investment transactions. Net realized gain (loss) 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 (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 domestic origin 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 'Payable to Custodian' 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 forward 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. The Fund accretes discounts on purchases of portfolio securities as adjustments to interest income. Expenses are recorded on the accrual basis which may require the use of certain estimates by management. Such expenses may differ from actuals. In November 2000, a revised AICPA Audit and Accounting Guide, Audits of Investment Companies (the 'Guide'), was issued, and is effective for fiscal years beginning after December 15, 2000. The revised Guide will require the Fund to amortize premiums on all fixed-income securities. Upon initial adoption, the Fund will be required to adjust the cost of its fixed-income securities by the cumulative amount that would have been recognized had the amortization been in effect from the purchase date of each holding. Adopting this accounting principle will not affect the Fund's net asset value, but will change the classification of certain amounts between interest income and realized and unrealized gain (loss) in the Statement of Operations. The Fund expects that the impact of the adoption of this principle will not be material to the financial statements. Federal Income Taxes: It is the Fund's policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to shareholders. Therefore, no federal income tax provision is required. 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. - -------------------------------------------------------------------------------- 15 Notes to Financial Statements THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------- 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 decrease distributions in excess of net investment income and increase accumulated net realized losses on investments by $4,159. This was primarily the result of net foreign currency gains incurred during the year ended March 31, 2001. 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; 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, 2001, were $80,095,208 and $92,828,495, respectively. The federal income tax basis of the Fund's investments, as of March 31, 2001, was $129,899,558 and, accordingly, net unrealized depreciation for federal income tax purposes was $24,168,290 (gross unrealized appreciation--$2,577,492; gross unrealized depreciation--$26,745,782). For federal income tax purposes, the Fund has a capital loss carryforward as of March 31, 2001 of approximately $20,244,000 of which $1,337,000 expires in 2003, $1,806,000 expires in 2004, $500,000 expires in 2007, $8,206,000 expires in 2008 and $8,395,000 expires in 2009. 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 $8,670,000 and net foreign currency losses of approximately $72,700 incurred in the five month period ended March 31, 2001 as having occurred in the following fiscal year. At March 31, 2001, the Fund had outstanding forward currency contracts to purchase and sell foreign currency as follows:
Foreign Currency Value at Purchase Settlement Date Current Contracts Payable Value Appreciation - --------------- --------------- -------- --------------- Euros, expiring 4/04/01 $ 206,393 $207,170 $ 777 --------------- -------- --------------- --------------- -------- ---------------
Foreign Value at Currency Settlement Date Current Appreciation Sale Contracts Receivable Value (Depreciation) - --------------- --------------- -------- --------------- Euros, expiring 4/04/01 $ 218,783 $207,170 $11,613 expiring 5/03/01 205,684 207,224 (1,540) --------------- -------- --------------- $ 424,467 $414,394 $10,073 --------------- -------- --------------- --------------- -------- ---------------
- ------------------------------------------------------------ Note 4. Borrowings The Fund has a credit agreement with unaffiliated lenders. 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, 2001 was $32,950,685 at a weighted average interest rate of 7.01%. The maximum face amount of borrowings outstanding at any month-end during the year ended March 31, 2001 was $39,000,000. The current borrowings of $28,000,000 (at a weighted average interest rate of 6.40%) mature throughout the period from April 2, 2001 to June 28, 2001. The Fund paid 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. Effective April 2, 2001, under the renewed credit agreement with an unaffiliated lender, the Fund pays commitment fees at an annual rate of .10 of 1% on any unused portion of the credit facility. In addition, the interest rate spread on any of the Fund's borrowings will be equal to the Eurodollar Loan Rate or Federal Funds Rate plus 0.625%. Under the previous credit agreement, this spread was equal to 0.500%. The renewed credit agreement expires on April 2, 2002. - -------------------------------------------------------------------------------- 16 Notes to Financial Statements THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------- Note 5. Capital There are 100 million shares of $.01 par value common stock authorized. During the fiscal years ended March 31, 2001 and 2000, the Fund issued 157,754 and 82,108 shares in connection with reinvestment of dividends, respectively. - ------------------------------------------------------------ Note 6. Dividends On February 27, 2001 the Board of Directors of the Fund declared dividends of $0.0725 per share payable on April 9, May 10 and June 11 to shareholders of record on March 30, April 30 and May 31, respectively. - -------------------------------------------------------------------------------- 17 Financial Highlights THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Year Ended March 31, ----------------------------------------------------------- 2001 2000 1999 1998 1997 -------- -------- -------- -------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of year........................... $ 6.42 $ 7.36 $ 9.21 $ 8.54 $ 8.44 -------- -------- -------- -------- ------- Income from investment operations Net investment income........................................ .81 .89 .88 .84 .82 Net realized and unrealized gain (loss) on investments....... (1.34) (.94) (1.59) .67 .12 -------- -------- -------- -------- ------- Total from investment operations.......................... (.53) (.05) (.71) 1.51 .94 -------- -------- -------- -------- ------- Less dividends and distributions Dividends from net investment income......................... (.86) (.89) (.88) (.84) (.82) Distributions in excess of net investment income............. (.01) -- -- -- (.02) -------- -------- -------- -------- ------- Total dividends........................................... (.87) (.89) (.88) (.84) (.84) -------- -------- -------- -------- ------- Capital charge in respect to issuance of shares.............. -- -- (.26) -- -- -------- -------- -------- -------- ------- Net asset value, end of year(a).............................. $ 5.02 $ 6.42 $ 7.36 $ 9.21 $ 8.54 -------- -------- -------- -------- ------- -------- -------- -------- -------- ------- Market price per share, end of year(a)....................... $ 6.20 $ 6.1875 $ 7.1875 $ 9.125 $ 9.00 -------- -------- -------- -------- ------- -------- -------- -------- -------- ------- TOTAL INVESTMENT RETURN(b):.................................. 15.49% (2.96)% (12.36)% 11.25% 13.38% -------- -------- -------- -------- ------- -------- -------- -------- -------- ------- RATIO/SUPPLEMENTAL DATA: Net assets, end of year (000 omitted)........................ $ 77,593 $ 98,212 $111,993 $104,558 $96,042 Average net assets (000 omitted)............................. $ 88,620 $107,803 $ 94,437 $100,766 $95,946 Ratio to average net assets: Expenses, before loan interest and commitment fees........ 1.26% 1.08% 1.11% 1.07% 1.08% Total expenses............................................ 3.92% 3.47% 3.14% 2.44% 2.32% Net investment income..................................... 14.00% 12.60% 11.60% 9.41% 9.63% Portfolio turnover rate...................................... 68% 83% 94% 112% 60% Total debt outstanding at end of year (000 omitted).......... $ 28,000 $ 42,000 $ 35,000 $ 30,000 $18,000 Asset coverage per $1,000 of debt outstanding................ $ 3,771 $ 3,338 $ 4,204 $ 4,485 $ 6,336
- --------------- (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. 18 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, 2001, 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 five years in the period then ended in conformity with accounting principles generally accepted in the United States of America. 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 of America, which require that we plan and perform the audits 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, 2001 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York May 15, 2001 - -------------------------------------------------------------------------------- 19 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. - -------------------------------------------------------------------------------- 20 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 LLC Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 Custodian and Transfer Agent State Street Bank and Trust Company One Heritage Drive North Quincy, MA 02171 Independent Accountants 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-----