-----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, S2EMt6icpnTZP41iKR+kWx6BeGYg9shT2yVOCs0QjuQ0u/03OL/IDOOmBoAdx21N w7T6UM9CmUKJLk38mb+d9w== 0000898733-01-500528.txt : 20020411 0000898733-01-500528.hdr.sgml : 20020411 ACCESSION NUMBER: 0000898733-01-500528 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011123 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HIGH YIELD PLUS FUND INC CENTRAL INDEX KEY: 0000828990 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MD FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05468 FILM NUMBER: 1798635 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 mf15115.txt HIGH YIELD PLUS FUND -- 9/30/01 The High Yield Plus Fund, Inc. SEMI ANNUAL REPORT September 30, 2001 Letter To Shareholders October 12, 2001 Dear Shareholder: The high yield market was sharply impacted by the terrorist attacks. While the high yield market had enjoyed some stability and price appreciation during July and August, valuations in September were greatly reduced by the new economic uncertainties and the increased lack of liquidity in the markets. The overall yield difference between US Treasuries and high yield securities widened from 730 basis points at June 30, 2001 to 920 basis points at September 30, 2001. Specifically, post September 11, US Treasuries rallied in a classic flight to quality, while illiquid, higher risk assets faltered. Mirroring the activity in the equity markets, high yield sectors that have been particularly pressured by revised business outlooks include the airline, gaming and lodging, aerospace and automotive sectors. Since the attacks, more companies have announced dramatic slowdowns in business. The business trough for the technology and telecommunications industries has been pushed out significantly after the attacks, creating the potential for even further distress in these sectors. As always, we are monitoring the Fund's current positions in light of the changed environment. In some cases, we may trim or eliminate holdings whose prospects have dimmed significantly; in other cases, we are finding opportunities in companies whose valuations have been perhaps overly penalized by the broader market conditions. Prior to the attacks, according to data collected by the Federal Reserve Board, the percentage of commercial banks tightening their lending standards had dropped from roughly 60% in the spring to 40% in the most recent survey compiled in August. This trend may be further encouraged by the Fed's most recent rate cuts. We also believe that various government "economic rescue" packages may ultimately provide increased confidence in the US economy. Should this transpire, access to capital for leveraged companies may also improve. The US economy had already weakened meaningfully before September. It would now appear that the US government has only strengthened its resolve to act broadly to support and encourage growth. Nevertheless, uncertainty and volatility are sure to remain in the markets for the near future. Fund Performance The Fund's total returns for periods ended September 30, 2001 are shown in the following table. For comparison, we have also provided the returns of the Lipper Closed-End Leveraged High Yield category, an average of 25 closed- end high yield leveraged funds. Leverage varies substantially amongst the funds in the group. While we believe the Fund's returns have been competitive with other funds with similar objectives, we would observe that some funds in the category principally invest in bank loans and show different performance characteristics. 1 v TOTAL RETURNS For the Periods Ended Stptember 30, 2001 6 Months 1 Year 2 Years* High Yield Plus Fund (NAV)1 -13.4% -19.2% -10.7% Lipper CEHY -- Leveraged -13.1 -17.8 -10.5 1 Represents NAV-basis performance 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 As we noted in our annual letter to shareholders, over the twelve-month period 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, while decreasing exposure to the telecom and industrial sectors. (The three largest sector exposures for the Fund are comprised of cable at 9.5%, healthcare at 9.2% and media at 7.7%). As a result of the market's general risk aversion, we believe that the difference in yield between higher quality (BB) and mid quality (B) is unusually wide. The Fund has a higher percentage of investments in securities rated B, than BB, which has hurt its relative performance. However, we believe ultimately the unusual disparity in returns and yields between these "subsectors" of the high yield market will come back in line, creating appreciation opportunity for mid-tier quality issues. 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 September 30, the Fund had drawn $31 million on the line. However, given the unusual volatility and economic uncertainty in the market, we increased cash balances during September and subsequently reduced the leverage during the first week of October. The average cost of the Fund's borrowings has dropped fairly significantly from 6.4% at March 31, 2001 to 4.9% at September 30, 2001, reflecting the Fed's interest rate cuts. As of September 30, 2001, the Fund's shares were priced at $5.12. This price reflected a premium of 28% to the Fund's net asset value of $4.01 per share. The Fund's monthly dividend rate of $0.0625 per share equates to an annualized yield of 14.6% relative to the stock price. This yield was markedly in excess of the US 10-Year Treasury rate of 4.6% as of September 30, 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 September 30, 2001 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS--137.9% CORPORATE BONDS--136.2% - ------------------------------------------------------------------------------------------------------------------------------ Aerospace/Defense--1.7% Hexcel Corp., Sr. Sub. Notes B2 9.75% 1/15/09 $ 620 $ 310,000 Moog, Inc., Sr. Sub. Notes, Ser. B Ba3 10.00 5/01/06 750 768,750 ----------- 1,078,750 - ------------------------------------------------------------------------------------------------------------------------------ Automotive--2.2% Accuride Corp., Sr. Sub. Notes Caa1 9.25 2/01/08 750 435,000 Dana Corp., Notes Ba1 9.00 8/15/11 500 450,916 Exide Corp., Sr. Notes B1 10.00 4/15/05 500 342,500 Hayes Lemmerz International, Inc., Sr. Notes Caa1 11.875 6/15/06 110 58,300 Hayes Wheels International, Inc., Sr. Sub. Notes Caa2 11.00 7/15/06 350 56,000 ----------- 1,342,716 - ------------------------------------------------------------------------------------------------------------------------------ Building & Related Industries--1.1% Anthony Crane Rental L.P., Sr. Notes Caa1 10.375 8/01/08 1,000 435,000 Owens Corning, Sr. Notes Ca 7.50 5/01/05 750(b) 240,000 ----------- 675,000 - ------------------------------------------------------------------------------------------------------------------------------ Cable--13.7% Adelphia Communications Corp., Sr. Notes, Ser. B B2 9.875 3/01/07 650 573,625 Sr. Notes B2 8.375 2/01/08 500 410,000 Sr. Notes B2 10.875 10/01/10 250 220,000 Notes B2 10.25 6/15/11 750 652,500 Cablevision S.A., Sr. Notes (Argentina) Caa1 13.75 5/01/09 250(d) 112,500 Charter Communications Holdings, Sr. Notes B2 10.00 4/01/09 1,000 962,500 Sr. Notes B2 9.625 11/15/09 1,000 950,000 Sr. Notes B2 11.125 1/15/11 285 285,000 Insight Midwest L.P., Sr. Notes B1 9.75 10/01/09 645 664,350 Sr. Notes B1 10.50 11/01/10 1,000 1,055,000 Mediacom Broadband LLC, Sr. Notes B2 11.00 7/15/13 1,000 1,020,000 Multicanal S.A. (Argentina), Sr. Notes Caa1 10.50 2/01/07 550(d) 247,500 Sr. Notes, Ser. E Caa1 13.125 4/15/09 200(d) 100,000 Sr. Notes, Ser. C Caa1 10.50 4/15/18 230(d) 69,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 3 Portfolio of Investments as of September 30, 2001 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Cable (cont'd.) NTL Communications Corp., Sr. Notes B2 9.875% 11/15/09 EUR 250 $ 100,458 Sr. Notes B3 11.875 10/01/10 $ 500 251,250 Telewest Communications PLC (United Kingdom), Sr. Notes B2 11.25 11/01/08 750(d) 487,500 Sr. Notes B2 9.875 2/01/10 500(d) 310,000 United Pan-Europe Communications N.V. (Netherlands), Sr. Notes, Ser. B Caa1 10.875 8/01/09 500(d) 70,000 Notes Caa1 11.25 2/01/10 250(d) 35,000 ----------- 8,576,183 - ------------------------------------------------------------------------------------------------------------------------------ Chemicals--6.5% ARCO Chemical Co., Debs. Ba3 9.375 12/15/05 1,000 1,032,176 Debs. Ba3 9.799 2/01/20 500 483,689 Georgia Gulf Corp., Sr. Sub. Notes B2 10.375 11/01/07 750 738,750 Lyondell Chemical Co., Sr. Sub. Notes B2 10.875 5/01/09 655 537,100 Philipp Brothers Chemicals, Inc., Sr. Sub. Notes B3 9.875 6/01/08 500 250,000 Resolution Performance Products, Inc., Sr. Sub. Notes B2 13.50 11/15/10 1,000 1,030,000 ----------- 4,071,715 - ------------------------------------------------------------------------------------------------------------------------------ Consumer Goods & Services--1.2% Bausch & Lomb, Inc., Notes Baa3 6.75 12/15/04 500 495,838 Corning Consumer Products Co., Sr. Sub. Notes Ca 9.625 5/01/08 1,500 240,000 Polaroid Corp., Sr. Notes Ca 11.50 2/15/06 150(b) 21,000 Medium-Term Notes Ca 7.25 1/15/07 190(b) 24,700 ----------- 781,538 - ------------------------------------------------------------------------------------------------------------------------------ Containers--3.1% Crown, Cork & Seal, Inc., Notes Caa3 8.375 1/15/05 1,000 450,000 Owens-Illinois, Inc., Sr. Notes B3 7.85 5/15/04 205 172,200 Sr. Notes B3 7.15 5/15/05 250 195,000 Sr. Notes B3 8.10 5/15/07 1,000 760,000 Silgan Holdings, Inc., Sr. Sub. Debs. B1 9.00 6/01/09 350 344,750 ----------- 1,921,950
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 4 Portfolio of Investments as of September 30, 2001 (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--6.7% Canadian Forest Oil Ltd., Sr. Sub. Notes (Canada) B1 8.75% 9/15/07 $ 750(d) $ 727,500 Clark R & M, Inc., Sr. Notes Ba3 8.625 8/15/08 1,250 1,021,875 Forest Oil Corp., Sr. Notes Ba3 8.00 6/15/08 500 490,000 Frontier Oil Corp., Sr. Notes B2 9.125 2/15/06 750 750,000 P & L Coal Holdings Corp., Sr. Notes Ba3 8.875 5/15/08 500 515,000 Pioneer Natural Resources Co., Sr. Notes Ba1 9.625 4/01/10 500 538,957 Plains Resources, Inc., Sr. Sub. Notes, Ser. B B2 10.25 3/15/06 135 136,350 ----------- 4,179,682 - ------------------------------------------------------------------------------------------------------------------------------ Financial Services--6.2% Conseco, Inc., Sr. Notes B1 10.75 6/15/08 1,310 1,074,200 GS Escrow Corp., Sr. Notes Ba1 7.125 8/01/05 750 763,535 Ocwen Federal Savings Bank, Sub. Debs. B1 12.00 6/15/05 500 475,000 Peoples Bank of Bridgeport, Sub. Notes Baa3 9.875 11/15/10 750 819,910 Western Financial Savings Bank, Sub. Cap. Debs. B1 8.875 8/01/07 750 740,376 ----------- 3,873,021 - ------------------------------------------------------------------------------------------------------------------------------ Food & Lodging--0.7% John Q. Hammons Hotels, First Mtge. Bonds B2 8.875 2/15/04 500 440,000 - ------------------------------------------------------------------------------------------------------------------------------ General Industrial--10.2% 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 1,100 1,100,000 Foster Wheeler Ltd., Sr. Sub. Notes, Conv. B2 6.50 6/01/07 500 318,750 Haynes International, Inc., Sr. Notes Caa1 11.625 9/01/04 870 462,187 International Wire Group, Inc., Sr. Sub. Notes, Ser. B B3 11.75 6/01/05 250 225,000 IT Group, Inc., Sr. Sub. Notes, Ser. B B3 11.25 4/01/09 500 450,000 Lucent Technologies, Inc., Notes Ba3 7.25 7/15/06 565 457,650 Notes Ba3 5.50 11/15/08 250 177,500 Marconi PLC, Notes (United Kingdom) Ba1 7.75 9/15/10 1,000(d) 376,011 Nortel Networks Ltd., Notes (Canada) Baa1 6.125 2/15/06 750(d) 585,548 Numatics, Inc., Sr. Sub. Notes Caa2 9.625 4/01/08 375 202,500 United Rentals, Inc., Sr. Sub. Notes B2 9.00 4/01/09 750 652,500 WESCO Distribution, Inc., Sr. Sub. Notes B3 9.125 6/01/08 750 626,250 ----------- 6,367,021 - ------------------------------------------------------------------------------------------------------------------------------ Grocery Stores--1.4% Great Atlantic & Pacific Tea, Inc., Notes B2 7.75 4/15/07 1,000 899,029
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 5 Portfolio of Investments as of September 30, 2001 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Health Care--13.4% Alaris Medical Systems, Sr. Sub. Notes Caa1 9.75% 12/01/06 $ 730 $ 591,300 Beverly Enterprises, Inc., Sr. Notes B1 9.00 2/15/06 500 506,250 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 1,078,000 Dade International, Inc., Sr. Sub. Notes C 11.125 5/01/06 2,500(b) 725,000 DJ Orthopedics LLC, Sr. Sub. Notes B3 12.625 6/15/09 1,250 1,290,625 Manor Care, Inc., Notes Ba1 8.00 3/01/08 500 514,375 Mediq, Inc., Sr. Sub. Notes C 11.00 6/01/08 1,740(b) 0(e) Tenet Healthcare Corp., Sr. Sub. Notes, Ser. B Ba2 8.125 12/01/08 850 907,375 Triad Hospitals Holdings, Sr. Sub. Notes B2 11.00 5/15/09 855 921,263 Universal Hospital Services, Inc., Sr. Sub. Notes B3 10.25 3/01/08 500 480,000 ----------- 8,364,188 - ------------------------------------------------------------------------------------------------------------------------------ Home Building & Real Estate--4.1% Beazer Homes USA, Inc., Sr. Notes Ba2 8.875 4/01/08 1,250 1,200,000 Ryland Group, Inc., Notes Ba3 8.25 4/01/08 750 682,500 Standard Pacific Corp., Sr. Notes Ba2 8.50 6/15/07 750 697,500 ----------- 2,580,000 - ------------------------------------------------------------------------------------------------------------------------------ Media & Entertainment--11.4% Ackerley Group, Inc., Sr. Sub. Notes, Ser. B B2 9.00 1/15/09 750 592,500 Globo Comunicacoes e Participacoes S.A., Notes (Brazil) B1 10.50 12/20/06 1,750(d) 1,277,500 Quebecor Media, Inc., Sr. Notes (Canada) B2 11.125 7/15/11 1,500(d) 1,485,000 Rogers Communications, Inc., Sr. Notes (Canada) Ba1 8.875 7/15/07 500(d) 500,000 STC Broadcasting, Inc., Sr. Sub. Notes B3 11.00 3/15/07 350 322,000 TV Azteca S.A. (Mexico), Gtd. Sr. Notes, Ser. A B1 10.125 2/15/04 500(d) 475,000 Gtd. Sr. Notes, Ser. B B1 10.50 2/15/07 250(d) 212,500 Von Hoffman Press, Inc., Sr. Sub. Notes B3 10.875 5/15/07 700 651,000 World Color Press, Inc., Sr. Sub. Notes Baa2 8.375 11/15/08 750 785,882 Young Broadcasting, Inc., Sr. Sub. Notes B2 10.00 3/01/11 1,000 795,000 ----------- 7,096,382 - ------------------------------------------------------------------------------------------------------------------------------ Metals--5.3% AK Steel Corp., Sr. Notes Ba2 9.125 12/15/06 500 487,500 Bayou Steel Corp., First Mtge. Notes B3 9.50 5/15/08 1,250 687,500 Bucyrus International, Inc., Sr. Notes Caa1 9.75 9/15/07 500 175,000 Century Aluminum Co., Sr. Sec'd. First Mtge. Notes Ba3 11.75 4/15/08 500 490,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 6 Portfolio of Investments as of September 30, 2001 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Metals (cont'd.) National Steel Corp., Mtge. Notes, Ser. D Caa1 9.875% 3/01/09 $ 1,250 $ 475,000 United States Steel LLC, Sr. Notes Ba2 10.75 8/01/08 875 813,750 Weirton Steel Corp., Sr. Notes Caa3 11.375 7/01/04 750 180,000 ----------- 3,308,750 - ------------------------------------------------------------------------------------------------------------------------------ Paper & Packaging--7.2% Abitibi-Consolidated, Inc., Debs. (Canada) Baa3 8.55 8/01/10 500(d) 529,169 Caraustar Industries, Inc., Sr. Sub. Notes Ba1 9.875 4/01/11 500 490,000 Doman Indstries Ltd. (Canada), Sr. Notes Caa1 8.75 3/15/04 500(d) 155,000 Sr. Sec'd. Notes B3 12.00 7/01/04 500(d) 447,500 Gaylord Container Corp., Sr. Sub. Notes Caa3 9.875 2/15/08 1,000 255,000 Millar Western Forest Products Ltd., Sr. Notes (Canada) B2 9.875 5/15/08 1,250(d) 1,100,000 Norske Skog Ltd., Sr. Notes (Canada) Ba2 8.625 6/15/11 75(d) 74,813 Pacifica Papers, Inc., Sr. Notes (Canada) Ba2 10.00 3/15/09 750(d) 783,750 Paperboard Industries International, Inc., Sr. Notes (Canada) B2 8.375 9/15/07 750(d) 675,000 ----------- 4,510,232 - ------------------------------------------------------------------------------------------------------------------------------ Retail--6.6% CSK Auto, Inc., Sr. Sub. Notes B3 11.00 11/01/06 750 570,000 J.C. Penney, Inc., Notes Ba2 7.60 4/01/07 750 681,480 Rite Aid Corp., Notes Caa2 7.625 4/15/05 975 858,000 Notes Caa2 7.125 1/15/07 1,500 1,230,000 Sr. Notes Caa2 11.25 7/01/08 750 757,500 ----------- 4,096,980 - ------------------------------------------------------------------------------------------------------------------------------ Technology and Related--8.5% Amkor Technologies, Inc., Sr. Notes Ba3 9.25 5/01/06 500 405,000 Sr. Sub. Notes B2 10.50 5/01/09 500 387,500 Fairchild Semiconductor Corp., Sr. Sub. Notes B2 10.50 2/01/09 1,000 965,000 Juniper Networks, Inc., Sub. Notes, Conv. B2 4.75 3/15/07 500 307,500 MCMS, Inc., Sr. Sub. Notes, Ser. B C 9.75 3/01/08 1,500(b) 37,500 SCG Holdings Corp., Notes, Ser. B B3 12.00 8/01/09 620 272,800 Seagate Technology, Inc., Sr. Sub. Notes Ba3 12.50 11/15/07 1,500 1,485,000 Telecommunications Techniques Co., Sr. Sub. Notes B3 9.75 5/15/08 750 450,000 Viasystems, Inc., Sr. Sub. Notes, Ser. B B3 9.75 6/01/07 805 213,325 Sr. Sub. Notes B3 9.75 6/01/07 750 198,750 Xerox Capital Europe PLC, Gtd. Notes (United Kingdom) Ba1 5.875 5/15/04 750(d) 614,280 ----------- 5,336,655
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 Portfolio of Investments as of September 30, 2001 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Telecommunications--10.0% 360Networks, Inc., Sr. Notes (Canada) Ca 13.00% 5/01/08 $ 1,250(b)(d) $ 3,125 Alaska Communications Holdings, Inc., Sr. Sub. Notes B3 9.375 5/15/09 60 50,400 American Tower Corp., Sr. Notes B3 9.375 2/01/09 750 628,125 Call-Net Enterprises, Inc., Sr. Notes (Canada) Ca 9.375 5/15/09 1,250(d) 300,000 Concentric Network Corp., Sr. Notes CCC(c) 12.75 12/15/07 500 100,000 FLAG Telecommunications Holdings Ltd., Sr. Notes (Bermuda) B2 11.625 3/30/10 1,500(d) 540,000 Global Crossing Holdings Ltd., Sr. Notes (Bermuda) Ba2 9.125 11/15/06 750(d) 322,500 GT Group Telecommunications, Inc. (Canada), Sr. Disc. Exch. Notes, Zero Coupon (until 2/1/05) Caa1 13.25 2/01/10 850(d) 170,000 Hyperion Telecommunications, Inc., Sr. Sec'd. Notes, Ser. B Caa2 12.25 9/01/04 900 504,000 Iridium Cap. Corp., Sr. Notes, Ser. B C 14.00 7/15/05 750(b) 30,000 Gtd. Sr. Notes, Ser. D C 10.875 7/15/05 500(b) 20,000 ITC DeltaCom, Inc., Sr. Notes B2 11.00 6/01/07 250 87,500 Sr. Notes B2 8.875 3/01/08 540 162,000 Level 3 Communications, Inc., Sr. Notes Caa1 11.00 3/15/08 100 44,500 Sr. Notes Caa1 9.125 5/01/08 435 181,613 Sr. Notes Caa1 11.25 3/15/10 500 215,000 McLeodUSA, Inc., Sr. Notes B3 9.25 7/15/07 230 59,800 Sr. Notes B3 11.375 1/01/09 500 145,000 Millicom International Cellular S.A. (Luxembourg), Sr. Sub. Disc. Notes Caa1 13.50 6/01/06 1,250(d) 800,000 Nextel Communications, Inc., Sr. Notes B1 9.50 2/01/11 350 213,500 NEXTLINK Communications, Inc., Sr. Notes Caa1 10.75 6/01/09 895 174,525 Sr. Notes Caa1 10.50 12/01/09 105 18,900 Rogers Wireless, Inc., Sr. Sec'd. Notes (Canada) Baa3 9.625 5/01/11 500(d) 480,000 Williams Communications Group, Inc., Sr. Notes Caa1 10.875 10/01/09 500 207,500 Sr. Notes Caa1 11.875 8/01/10 1,750 735,000 Winstar Communications, Inc., Sr. Notes Ca 12.50 4/15/08 1,750(b) 17,500 Sr. Notes Ca 12.75 4/15/10 250(b) 2,500 Worldwide Fiber, Inc., Sr. Notes (Canada) Ca 12.00 8/01/09 1,250(b)(d) 3,125 ----------- 6,216,113
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 8 Portfolio of Investments as of September 30, 2001 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Textiles--1.0% Burlington Industries, Inc., Sr. Notes Caa2 7.25% 9/15/05 $ 1,500 $ 345,000 Pillowtex Corp., Sr. Sub. Notes, Ser. B C 9.00 12/15/07 2,025(b) 20,250 Westpoint Stevens, Inc., Sr. Notes Ca 7.875 6/15/08 750 255,000 ----------- 620,250 - ------------------------------------------------------------------------------------------------------------------------------ Transportation--5.5% Air Canada, Inc., Sr. Notes (Canada) B1 10.25 3/15/11 1,000(d) 430,000 Atlas Air, Inc., Notes B1 10.75 8/01/05 810 518,400 Sr. Notes B1 9.375 11/15/06 300 177,000 Delta Airlines, Inc., Notes Ba2 7.90 12/15/09 500 420,083 Kansas City Southern Railway Co., Sr. Notes Ba2 9.50 10/01/08 750 765,000 Northwest Airlines, Inc., Sr. Notes Ba3 8.875 6/01/06 400 273,113 TFM S.A. (Mexico), Sr. Notes B1 10.25 6/15/07 500(d) 440,000 Sr. Disc. Debs., Zero Coupon (until 6/1/02) B1 11.75 6/15/09 500(d) 395,000 ----------- 3,418,596 - ------------------------------------------------------------------------------------------------------------------------------ Utilities--8.5% AES Corp., Sr. Notes Ba1 8.75 6/15/08 500 431,250 Avista Corp., Sr. Notes Baa2 9.75 6/01/08 1,280 1,345,716 Calpine Corp., Sr. Notes Ba1 8.625 8/15/10 1,000 979,820 CMS Energy Corp., Sub. Notes Ba3 7.625 11/15/04 500 492,259 Sr. Notes Ba3 9.875 10/15/07 1,000 1,060,110 Sr. Notes Ba3 7.50 1/15/09 250 236,397 IBEA-Invers Electric Corp., Notes (Argentina) CCC+(c) 9.00 9/16/04 1,000(d) 200,000 TNP Enterprises, Inc., Sr. Sub. Notes Ba3 10.25 4/01/10 500 530,000 ----------- 5,275,552 ----------- Total long-term corporate bonds 85,030,303 - ------------------------------------------------------------------------------------------------------------------------------ FOREIGN GOVERNMENT OBLIGATION--1.1% Republic of Brazil, Bonds B1 14.50 10/15/09 693(d) 654,192 - ------------------------------------------------------------------------------------------------------------------------------ COMMON STOCK(a) Shares ---------- SF Holdings Group, Class C -- -- -- 219 0(e)
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 Portfolio of Investments as of September 30, 2001 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moody's Dividend Maturity Value Description Rating Rate Date Shares (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--0.6% SF Holding Group, Inc., Exchangeable, PIK NR 13.75% -- 48 $ 102,592 Exchangeable, Ser. B, PIK NR 13.75 -- 60 129,372 XO Communications, Inc., Exchangeable, Ser. E, PIK NR 13.50 -- 1,390 166,847 ----------- Total preferred stocks 398,811 - ------------------------------------------------------------------------------------------------------------------------------ WARRANTS(a) Expiration Date Warrants ---------- ---------- GT Group Telecommunications, Inc. -- -- 2/01/10 850 12,750 ----------- Total long-term investments (cost $114,628,368) 86,096,056 ----------- - ------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS--8.1% CORPORATE BOND - ------------------------------------------------------------------------------------------------------------------------------ Principal Interest Maturity Amount Rate Date (000) -------- ---------- ---------- Paper & Packaging--1.6% Container Corp. of America, Gtd. Sr. Notes, Ser. B B2 10.75 5/01/02 $ 1,000 1,015,000 - ------------------------------------------------------------------------------------------------------------------------------ REPURCHASE AGREEMENT--6.5% BNP Paribas, dated 9/28/01, due 10/1/01 in the amount of $4,027,090 (cost $4,026,000; collaterized by $3,187,000 U.S. Treasury Bonds, 7.50%, 11/15/24, value of collateral including accrued interest is $4,110,184) NR 3.25 10/01/01 4,026 4,026,000 ----------- Total short-term investments (cost $5,027,938) 5,041,000 ----------- - ------------------------------------------------------------------------------------------------------------------------------ Total Investments--146.0% (cost $119,656,306; Note 3) 91,137,056 Liabilities in excess of other assets--(46.0)% (28,718,828) ----------- Net Assets--100% $62,418,228 ----------- -----------
- --------------- (a)--Non-income producing security. (b)-- Represents issuer in default on interest payments; non-income producing security. (c)--Standard & Poor's Rating. (d)--US$ Denominated Foreign Bonds. (e)--Fair valued security. LLC--Limited Liability Company. 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. 10 Statement of Assets and Liabilities (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------- Assets September 30, 2001 - -------------------------------------------------------------------------------------------------------------------------------- Investments, at value (cost $119,656,306).................................................................. $ 91,137,056 Foreign currency (cost $11,106)............................................................................ 11,184 Cash....................................................................................................... 938 Interest receivable........................................................................................ 3,215,560 Receivable for investments sold............................................................................ 511,455 Other assets............................................................................................... 51,859 ------------------ Total assets............................................................................................ 94,928,052 ------------------ Liabilities Loan payable (Note 4)...................................................................................... 31,000,000 Dividends payable.......................................................................................... 972,041 Loan interest payable (Note 4)............................................................................. 345,780 Accrued expenses........................................................................................... 124,317 Advisory fee payable....................................................................................... 28,674 Deferred directors' fees................................................................................... 25,966 Administration fee payable................................................................................. 11,470 Unrealized depreciation on forward currency contracts...................................................... 1,576 ------------------ Total liabilities....................................................................................... 32,509,824 ------------------ Net Assets................................................................................................. $ 62,418,228 ------------------ ------------------ Net assets were comprised of: Common stock, at par.................................................................................... $ 155,501 Paid-in capital in excess of par........................................................................ 131,247,550 ------------------ 131,403,051 Distributions in excess of net investment income........................................................ (634,915) Accumulated net realized loss on investment and foreign currency transactions........................... (39,829,474) Net unrealized depreciation on investments and foreign currencies....................................... (28,520,434) ------------------ Net assets, September 30, 2001.......................................................................... $ 62,418,228 ------------------ ------------------ Net asset value per share ($62,418,228 / 15,550,140 shares of common stock issued and outstanding)......... $4.01 ------------------ ------------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 11 THE HIGH YIELD PLUS FUND, INC. Statement of Operations (Unaudited) - ------------------------------------------------------------
Six Months Ended September 30, Net Investment Income 2001 Income Interest................................... $ 6,948,842 Dividends.................................. 5,712 ------------- 6,954,554 ------------- Expenses Investment advisory fee.................... 183,401 Administration fee......................... 73,360 Custodian's fees and expenses.............. 59,000 Legal fees and expenses.................... 45,000 Reports to shareholders.................... 40,000 Insurance expense.......................... 20,000 Transfer agent's fees and expenses......... 19,000 Listing fee................................ 18,000 Audit fee.................................. 14,000 Directors' fees and expenses............... 6,000 Miscellaneous.............................. 7,755 ------------- Total operating expenses................ 485,516 Loan interest expense (Note 4)............. 797,048 ------------- Total expenses.......................... 1,282,564 ------------- Net investment income......................... 5,671,990 ------------- Realized and Unrealized Gain (Loss) on Investments and Foreign Currencies Net realized gain (loss) on: Investment transactions.................... (10,871,500) Foreign currency transactions.............. 6,261 ------------- (10,865,239) ------------- Net change in unrealized appreciation (depreciation) on: Investments................................ (4,401,110) Foreign currencies......................... (11,811) ------------- (4,412,921) ------------- Net loss on investments and foreign currencies................................. (15,278,160) ------------- Net Decrease in Net Assets Resulting from Operations..................... $ (9,606,170) ------------- -------------
THE HIGH YIELD PLUS FUND, INC. Statement of Cash Flows (Unaudited) - ------------------------------------------------------------
Six Months Ended September Increase (Decrease) in Cash 30, (Including Foreign Currency) 2001 Cash flows provided from operating activities Interest and dividends received (excluding discount amortization of $1,335,422)...... $ 6,006,849 Operating expenses paid...................... (327,990) Loan interest and commitment fee paid........ (890,663) Purchases of short-term portfolio investments............................... (4,026,000) Purchases of long-term portfolio investments............................... (34,088,364) Proceeds from disposition of long-term portfolio investments..................... 36,132,643 Deferred expenses and other assets........... 19,879 ------------ Net cash provided from operating activities................................ 2,826,354 ------------ Cash used for financing activities Net increase in notes payable................ 3,000,000 Cash dividends paid (excluding reinvestment of dividends of $556,549)................. (5,716,742) ------------ Net cash used for financing activities....... (2,716,742) ------------ Net increase in cash......................... 109,612 Payable to custodian at beginning of period.................................... (97,490) ------------ Cash at end of period........................ $ 12,122 ------------ ------------ 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................................... $(9,606,170) ------------ Increase in investments......................... (672,137) Net realized loss on investment and foreign currency transactions........................ 10,865,239 Net decrease in unrealized appreciation (depreciation) of investments and foreign currencies................................... 4,412,921 Increase in receivable for investments sold..... (257,267) Decrease in interest and dividends receivable... 387,717 Decrease in deferred expenses and other assets....................................... 19,879 Decrease in payable for investments purchased... (2,387,739) Increase in accrued expenses and other liabilities.................................. 63,911 ------------ Total adjustments............................ 12,432,524 ------------ Net cash provided from operating activities................................ $ 2,826,354 ------------ ------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 12 THE HIGH YIELD PLUS FUND, INC. Statement of Changes in Net Assets (Unaudited) - ------------------------------------------------------------
Six Months Ended Year September Ended Increase (Decrease) 30, March 31, in Net Assets 2001 2001 ------------ ------------ Operations Net investment income....... $ 5,671,990 $ 12,405,361 Net realized loss on investment and foreign currency transactions.... (10,865,239) (15,005,642) Net change in unrealized appreciation (depreciation) on investments and foreign currencies............... (4,412,921) (5,589,149) ------------ ------------ Net decrease in net assets resulting from operations............... (9,606,170) (8,189,430) Dividends from net investment income........ (5,490,389) (13,177,913) Distributions in excess of net investment income.... (634,915) (185,760) Value of Fund shares issued to shareholders in reinvestment of dividends................ 556,549 934,538 ------------ ------------ Total decrease................. (15,174,925) (20,618,565) Net Assets Beginning of period............ 77,593,153 98,211,718 ------------ ------------ End of period.................. $ 62,418,228 $ 77,593,153 ------------ ------------ ------------ ------------
THE HIGH YIELD PLUS FUND, INC. Notes to Financial Statements (Unaudited) - ------------------------------------------------------------ The High Yield Plus Fund, Inc. (the 'Fund') was organized in Maryland on February 3, 1988, as a diversified, closed-end management investment company. The Fund had no transactions until April 4, 1988, when it sold 11,000 shares of common stock for $102,300 to Wellington Management Company, LLP (the 'Investment Adviser'). Investment operations commenced on April 22, 1988. The Fund's primary objective is to provide a high level of current income to shareholders. The Fund seeks to achieve this objective through investment in publicly or privately offered high yield debt securities rated in the medium to lower categories by recognized rating services or 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. Repurchase Agreements: In connection with transactions in repurchase agreements with United States financial institutions, it is the Fund's policy that its custodian or designated subcustodians under triparty repurchase agreements, as the case may be, take possession of the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to ensure the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of - -------------------------------------------------------------------------------- 13 Notes to Financial Statements (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------- the security, realization of the collateral by the Fund may be delayed or limited. 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 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 portfolio 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 gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from the holding of foreign currencies, currency gains or losses realized between the amounts of dividends, interest and foreign taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. 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 regulation of 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 contracts 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. 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: Securities transactions are recorded on the trade date. Realized gains and losses on sales of investments are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. The Fund amortizes discounts on purchases of debt securities as adjustments to interest income. Expenses are recorded on the accrual basis which may require the use of certain estimates by management. Such estimates may differ from actuals. As required, effective April 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premiums on debt securities. Prior to April 1, 2001, the Fund did not amortize premiums on debt 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 does not affect the Fund's net asset value, but could change the classification of certain amounts between interest income and realized gain (loss) in the Statement of Operations. The Fund has determined that the impact of adopting this principle is not material to the financial statements; therefore no reclassifications have been booked to the financial statements. Dividends and Distributions: Dividends are declared and paid monthly. Distributions of capital gains, if any, will be declared at least annually. Dividends and distributions are recorded on the ex-dividend date. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. - -------------------------------------------------------------------------------- 14 Notes to Financial Statements (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------- Federal Income Taxes: It is the Fund's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net income and capital gains, if any, to shareholders. Therefore, no federal income tax provision is required. Withholding taxes on foreign interest have been provided for in accordance with the Fund's understanding of the applicable country's tax rules and rates. - ------------------------------------------------------------ Note 2. Agreements The Fund has agreements with the Investment Adviser and with Prudential Investments LLC (the 'Administrator'). The Investment Adviser makes investment decisions on behalf of the Fund; the Administrator provides occupancy and certain clerical and accounting services to the Fund. The Fund bears all other costs and expenses. The investment advisory agreement provides for the Investment Adviser to receive a fee, computed weekly and payable monthly at an annual rate of .50% of the Fund's average weekly net assets. The administration agreement provides for the Administrator to receive a fee, computed weekly and payable monthly at an annual rate of .20% of the Fund's average weekly net assets. - ------------------------------------------------------------ Note 3. Portfolio Securities Purchases and sales of investment securities, other than short-term investments for the six months ended September 30, 2001, aggregated $31,700,625 and $36,383,649, respectively. The United States federal income tax basis of the Fund's investments at September 30, 2001 was $119,696,285 and accordingly, net unrealized depreciation for the United States federal income tax purposes was $28,559,229 (gross unrealized appreciation--$1,786,781; gross unrealized depreciation--$30,346,010). For federal income tax purposes, the Fund had 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 distribution is expected to be paid to shareholders until net gains have been realized in excess of such carryforward. In addition, the Fund has elected 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 been incurred in the current fiscal year. At September 30, 2001, the Fund had outstanding forward currency contracts to sell foreign currency as follows:
Value at Foreign Currency Settlement Date Current Sale Contracts Receivable Value Depreciation - ------------------ --------------- -------- --------------- Euros, expiring 10/16/01 $ 212,004 $213,580 $ 1,576 --------------- -------- ------- --------------- -------- -------
- ------------------------------------------------------------ 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 six months ended September 30, 2001 was $30,355,191 at a weighted average interest rate of 5.14%. The maximum face amount of borrowings outstanding at any month-end during the six months ended September 30, 2001 was $31,000,000. The current borrowings of $31,000,000 (at a weighted average interest rate of 4.89%) mature throughout the period from October 1, 2001 to March 4, 2002. The Fund pays commitment fees at an annual rate of .10 of 1% on any unused portion of the credit facility. Commitment fees are included in 'Loan Interest' as reported on the Statement of Assets and Liabilities and on the Statement of Operations. - ------------------------------------------------------------ Note 5. Capital There are 100 million shares of common stock, $.01 par value per share. During the six months ended September 30, 2001 and the fiscal year ended March 31, 2001, the Fund issued 101,482 and 157,754 shares in connection with reinvestment of dividends, respectively. - ------------------------------------------------------------ Note 6. Dividends On September 12, 2001 the Board of Directors of the Fund declared dividends of $0.0625 per share payable on October 10, November 12 and December 10 to shareholders of record on September 28, October 31 and November 30, respectively. - -------------------------------------------------------------------------------- 15 Financial Highlights (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Six Months Ended Year Ended March 31, September 30, ----------------------------------------------- 2001 2001 2000 1999 1998 ------------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period...................... $ 5.02 $ 6.42 $ 7.36 $ 9.21 $ 8.54 ------ -------- -------- -------- -------- Income from investment operations Net investment income..................................... .37 .81 .89 .88 .84 Net realized and unrealized gain (loss) on investments.... (.99) (1.34) (.94) (1.59) .67 ------ -------- -------- -------- -------- Total from investment operations....................... (.62) (.53) (.05) (.71) 1.51 ------ -------- -------- -------- -------- Less dividends and distributions Dividends from net investment income...................... (.35) (.86) (.89) (.88) (.84) Distributions in excess of net investment income.......... (.04) (.01) -- -- -- ------ -------- -------- -------- -------- Total dividends........................................ (.39) (.87) (.89) (.88) (.84) ------ -------- -------- -------- -------- Capital charge in respect to issuance of shares........... -- -- -- (.26) -- ------ -------- -------- -------- -------- Net asset value, end of period(a)......................... $ 4.01 $ 5.02 $ 6.42 $ 7.36 $ 9.21 ------ -------- -------- -------- -------- ------ -------- -------- -------- -------- Market price per share, end of period(a).................. $ 5.12 $ 6.20 $ 6.1875 $ 7.1875 $ 9.125 ------ -------- -------- -------- -------- ------ -------- -------- -------- -------- TOTAL INVESTMENT RETURN(b):............................... (11.36)% 15.49% (2.96)% (12.36)% 11.25% ------ -------- -------- -------- -------- ------ -------- -------- -------- -------- RATIO/SUPPLEMENTAL DATA: Net assets, end of period (000 omitted)................... $62,418 $ 77,593 $ 98,212 $111,993 $104,558 Average net assets (000 omitted).......................... $72,959 $ 88,620 $107,803 $ 94,437 $100,766 Ratio to average net assets: Expenses, before loan interest and commitment fees..... 1.33%(c) 1.26% 1.08% 1.11% 1.07% Total expenses......................................... 3.51%(c) 3.92% 3.47% 3.14% 2.44% Net investment income.................................. 15.51%(c) 14.00% 12.60% 11.60% 9.41% Portfolio turnover rate................................... 32% 68% 83% 94% 112% Total debt outstanding at end of period (000 omitted)..... $31,000 $ 28,000 $ 42,000 $ 35,000 $ 30,000 Asset coverage per $1,000 of debt outstanding............. $ 3,013 $ 3,771 $ 3,338 $ 4,204 $ 4,485 1997 ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period...................... $ 8.44 ------- Income from investment operations Net investment income..................................... .82 Net realized and unrealized gain (loss) on investments.... .12 ------- Total from investment operations....................... .94 ------- Less dividends and distributions Dividends from net investment income...................... (.82) Distributions in excess of net investment income.......... (.02) ------- Total dividends........................................ (.84) ------- Capital charge in respect to issuance of shares........... -- ------- Net asset value, end of period(a)......................... $ 8.54 ------- ------- Market price per share, end of period(a).................. $ 9.00 ------- ------- TOTAL INVESTMENT RETURN(b):............................... 13.38% ------- ------- RATIO/SUPPLEMENTAL DATA: Net assets, end of period (000 omitted)................... $96,042 Average net assets (000 omitted).......................... $95,946 Ratio to average net assets: Expenses, before loan interest and commitment fees..... 1.08% Total expenses......................................... 2.32% Net investment income.................................. 9.63% Portfolio turnover rate................................... 60% Total debt outstanding at end of period (000 omitted)..... $18,000 Asset coverage per $1,000 of debt outstanding............. $ 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. 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. 16 Supplemental Proxy Information (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------- The annual meeting of shareholders of The High Yield Plus Fund, Inc. was held on August 30, 2001 at the offices of Prudential Investments LLC, 751 Broad Street, Newark, New Jersey. The meeting was held for the following purpose:
(1) To elect the following director to serve as follows: Director Class Term Expiring ------------------------------- ------ -------- --------- Eugene C. Dorsey I 3 years 2004 Directors whose term of office continued beyond this meeting are Robert E. LaBlanc, Douglas H. McCorkindale, Thomas T. Mooney and Clay T. Whitehead.
The results of the proxy solicitation on the above matter were as follows:
Director/Matter Votes for Votes against Votes withheld Abstentions ---------------------------- ----------- -------------- --------------- ------------ (1) Eugene C. Dorsey 13,308,977 -- 222,622 --
- -------------------------------------------------------------------------------- 17 Other Information (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------- Dividend Reinvestment Plan. Shareholders may elect to have all distributions of dividends and capital gains automatically reinvested in Fund shares ('Shares') pursuant to the Fund's Dividend Reinvestment Plan ('the Plan'). Shareholders who do not participate in the Plan will receive all distributions in cash paid by check in United States dollars mailed directly to the shareholders of record (or if the shares are held in street or other nominee name, then to the nominee) by the custodian, as dividend disbursing agent. Shareholders who wish to participate in the Plan should contact the Fund at (800) 451-6788. State Street Bank and Trust Co. (the 'Plan Agent') serves as agent for the shareholders in administering the Plan. After the Fund declares a dividend or capital gains distribution, if (1) the market price is lower than net asset value, the participants in the Plan will receive the equivalent in Shares valued at the market price determined as of the time of purchase (generally, following the payment date of the dividend or distribution); or if (2) the market price of Shares on the payment date of the dividend or distribution is equal to or exceeds their net asset value, participants will be issued Shares at the higher of net asset value or 95% of the market price. If net asset value exceeds the market price of Shares on the valuation date or the Fund declares a dividend or other distribution payable only in cash, the Plan Agent will, as agent for the participants, receive the cash payment and use it to buy Shares in the open market. If, before the Plan Agent has completed its purchases, the market price exceeds the net asset value per share, the average per share purchase price paid by the Plan Agent may exceed the net asset value per share, resulting in the acquisition of fewer shares than if the dividend or distribution had been paid in shares issued by the Fund. The Fund will not issue Shares under the Plan below net asset value. There is no charge to participants for reinvesting dividends or capital gain distributions, except for certain brokerage commissions, as described below. The Plan Agent's fees for the handling of the reinvestment of dividends and distributions will be paid by the Fund. There will be no brokerage commissions charged with respect to Shares issued directly by the Fund. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of dividends and distributions. The automatic reinvestment of dividends and distributions will not relieve participants of any federal income tax that may be payable on such dividends or distributions. The Fund reserves the right to amend or terminate the Plan upon 90 days' written notice to shareholders of the Fund. Participants in the Plan may withdraw from the Plan upon written notice to the Plan Agent and will receive certificates for whole Shares and cash for fractional Shares. All correspondence concerning the Plan should be directed to the Plan Agent, State Street Bank & Trust Company, P.O. Box 8200, Boston, MA 02266-8200. - -------------------------------------------------------------------------------- 18 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 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, DC 20036 Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may purchase, from time to time, shares of its common stock at market prices. The accompanying financial statements as of September 30, 2001 were not audited and, accordingly, no opinion is expressed on them. The views expressed in this report and the information about the Fund's portfolio holdings are for the period covered by this report and are subject to change thereafter. This report is for stockholder information. This is not a prospectus intended for use in the purchase or sale of Fund shares. The High Yield Plus Fund, Inc. Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 For information call toll-free (800) 451-6788 429906100 -----END PRIVACY-ENHANCED MESSAGE-----