-----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, BLGv5yMyksyPrIGH8u1c8SFbDpJ9UT/POat+zgufDHJv/q8lPryn/KWC8iIaoVDK +duEw6TrDf3eGItoaBlrUA== 0000898733-03-000562.txt : 20031209 0000898733-03-000562.hdr.sgml : 20031209 20031209172832 ACCESSION NUMBER: 0000898733-03-000562 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031209 EFFECTIVENESS DATE: 20031209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HIGH YIELD PLUS FUND INC CENTRAL INDEX KEY: 0000828990 IRS NUMBER: 133459204 STATE OF INCORPORATION: MD FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05468 FILM NUMBER: 031045526 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-CSRS 1 mf16201ncsr.txt THE HIGH YIELD PLUS FUND, INC. -- 09/30/2003 SEMIANNUAL UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811- 5468 Exact name of registrant as specified in charter: The High Yield Plus Fund, Inc. Address of principal executive offices: Gateway Center 3 100 Mulberry Street Newark, New Jersey 07102 Name and address of agent for service: Lori Bostrom Gateway Center 3 100 Mulberry Street Newark, New Jersey 07102 Registrant's telephone number, including area code: 973-367-1495 Date of fiscal year end: March 31, 2004 Date of reporting period: September 30, 2003 Item 1 -- Reports to Stockholders The High Yield Plus Fund, Inc. SEMI- ANNUAL REPORT September 30, 2003 Letter To Shareholders October 27, 2003 Dear Shareholder: The high yield market returned 13.2% for the fiscal first half ended September 30th as measured by the Lehman Brothers High Yield Index. High yield thus significantly outperformed investment grade bonds, which returned 2.4% over the same period, as measured by the Lehman Brothers Aggregate Index. An accommodating Federal Reserve, clear signs of an improving economy, corporate balance sheet repair, improved access to capital, declining default rates, and an attractive yield have boosted the high yield market this year. Although the high yield market is now trading inside its 5 and 10 year historical averages, we remain upbeat about the prospects for high yield as fundamentals remain strong. Moody's 5.7% issuer default rate for September is the lowest default rate we have seen since November of 2000. The rating agency predicts default rates will drop to 3.9% by September of 2004. Declining default rates, signs of renewed earnings growth, and improved balance sheets in this low nominal interest rate environment bode well for high yield going forward. We have seen record-breaking demand for high yield this calendar year as evidenced by the fact that $16.5 billion has flowed into high yield mutual funds year-to-date, nearly five times the $3.4 billion reported for the same period last year, as measured by AMG Data Services. New issuance struggled to keep up with demand this year until July, when a supply of new issuance flooded the market just as demand eased. The forward calendar slowed in August, however, and with it the number of lower-quality issues that were choking the market by the end of July. Lower-quality credits have continued to outperform the higher-quality segment of the market over the last six months, although the gap is narrowing between the two as the amount of distressed credits in the market declines. Distressed bonds, which constituted 12% of the market at the start of the calendar year, have now shrunk to 1% of the total market. This is evidenced by the fact that over the fiscal first half, double-B rated bonds returned 9.5%, while single-B rated bonds returned 11.4%, and triple-C rated bonds returned 23.9%, due mainly to capital appreciation. TOTAL RETURNS For Periods Ended March 31, 2003 6 Months 1 Year 2 Years* High Yield Plus Fund (NAV)(1.) 15.9% 40.9% 11.1% Lipper CEHY -- Leveraged 19.0 41.5 14.7 * Annualized 1 Represents NAV-based performance calculation 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. Fund Performance The Fund's total returns for periods ended September 30, 2003 are shown on the table above. For comparison, we have also provided the returns of the Lipper Closed-End Leveraged High Yield category, an average of 26 closed-end high yield leveraged funds; we - -------------------------------------------------------------------------------- -1- would note that the degree of leverage varies substantially amongst the funds in the group. The Fund is leveraged and has a $35 million credit line provided by Fleet National Bank as of September 30, 2003. The Fund had drawn $26 million on the line at quarter end; this reflects an increase of $5 million since the Fund's prior fiscal year-end. Borrowings fluctuate depending on investment outlook and opportunities. As of September 30, 2003, the Fund's shares were priced at $4.05. This price reflected a premium of 6.0% to the Fund's net asset value of $3.82 per share. (The average premium of the funds in the Lipper Leveraged Closed End universe was 4.7% as of September 30, 2003.) The Fund's monthly dividend rate of $0.035 per share equates to an annualized yield of 10.4% relative to the stock price. This yield was significantly in excess of the US 10-Year Treasury rate of 3.9% on September 30, 2003. Among the industries that added the most value to the Fund on an absolute basis during the first half of the fiscal year were Utilities, Technology, Automotive, Telecommunications and Transportation. Utilities and Telecommunications benefited from improved access to capital, leading to added liquidity and balance sheet repair. Automotive, Technology and Transportation each improved in anticipation of a cyclical improvement in the economy. Many of the sectors that lagged in the period were those characterized by lower yields and more stable operating metrics such as Food, Consumer Products, Environmental and Home Construction. The only sector that provided a negative return in the period was Textiles in which the Fund held only a 1% position. Relative to a broad market index such as the Lehman Brothers High Yield Index, the Fund outperformed in the Technology, Automotive and Pharmaceutical sectors due mainly to positive security selection within those sectors. Underperforming industries, however, more than offset the outperformers on a relative basis during the period. Relative underperformers include Cable, Utilities and Telecommunications. Despite positive absolute returns in these sectors, as mentioned above, the Fund, with a primary focus on income generation, was not aggressively positioned in the more distressed segment of these industries and therefore lagged as they rallied off of low levels While spreads have compressed significantly this year, valuation of the high yield market remains attractive on a relative basis. Low absolute yields will temper further dramatic capital appreciation, but fundamental and technical drivers remain positive. We believe that the second half of the fiscal year should be positive for the high yield market. Our focus continues to be on seeking out attractive yields in the high yield market while minimizing credit losses. We expect defaults to continue to decline going forward, and with this decline, the risk premium associated with high yield bonds should continue to narrow. The Fund remains positioned to capture the beneficial effects of an improving economy. As always, we appreciate your interest in the Fund. Sincerely yours, Earl McEvoy Portfolio Manager Senior Vice President Wellington Management Company, LLP - -------------------------------------------------------------------------------- -2- Portfolio of Investments as of September 30, 2003 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS--138.9% CORPORATE BONDS--138.9% - ------------------------------------------------------------------------------------------------------------------------------ Aerospace/Defense--1.9% Argo-Technology Corp., Gtd. Notes B3 8.625% 10/1/07 $ 600 $ 582,000 Sequa Corp., Sr. Notes B1 9.00 8/1/09 500 547,500 ------------ 1,129,500 - ------------------------------------------------------------------------------------------------------------------------------ Automotive--6.8% Accruride Corp., Sr. Sub. Notes, Ser. B Caa1 9.25 2/1/08 1,150 1,147,125 Advanced Accessory Systems LLC, Sr. Notes B2 10.75 6/15/11 135 145,125 Dana Corp., Notes Ba3 10.125 3/15/10 75 83,812 Notes Ba3 9.00 8/15/11 475 520,125 Delco Remy International, Inc., Sr. Notes B3 10.625 8/1/06 95 90,013 Sr. Notes B3 8.625 12/15/07 174 171,390 Dura Operating Corp., Sr. Sub. Notes, Ser. D B2 9.00 5/1/09 370 344,100 Goodyear Tire & Rubber Co., Notes B1 8.50 3/15/07 55 51,700 Notes B1 7.857 8/15/11 510 428,400 Lear Corp., Sr. Sub. Notes, Ser. B Ba1 8.11 5/15/09 365 419,750 Navistar International Corp., Gtd. Notes, Ser. B Ba3 9.375 6/1/06 195 212,794 Tenneco Automotive, Inc., Sr. Notes, Ser. B Caa1 11.625 10/15/09 130 128,050 Sr. Notes Caa1 10.25 7/15/13 120 130,200 TRW Automative, Inc., Sr. Sub. Notes B2 11.00 2/15/13 210 244,650 ------------ 4,117,234 - ------------------------------------------------------------------------------------------------------------------------------ Cable--6.6% Charter Communications Holdings LLC, Sr. Notes Ca 10.75 10/1/09 755 617,213 Sr. Notes Ca 9.625 11/15/09 450 347,625 Sr. Notes Ca 11.125 1/15/11 285 232,987 CSC Holdings Corp., Sr. Notes, Ser. B B1 8.125 7/15/09 720 741,600 Insight Midwest L.P., Sr. Notes B2 10.50 11/1/10 1,100 1,149,500 Mediacom Broadband LLC, Gtd. Notes B2 11.00 7/15/13 725 763,062 Rogers Cable, Inc., Sr. Notes (Canada) Baa3 6.25 6/15/13 100 (b) 99,875
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 3 Portfolio of Investments as of September 30, 2003 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Cable (cont'd.) Shaw Communications, Inc., (Canada) Sr. Notes Ba2 8.25% 4/11/10 $ 30 (b) $ 33,075 Sr. Notes Ba2 7.25 4/6/11 15 (b) 15,938 ------------ 4,000,875 - ------------------------------------------------------------------------------------------------------------------------------ Chemicals--5.4% ARCO Chemical Co., Debs. Ba3 9.375 12/15/05 700 703,500 IMC Global, Inc., Sr. Sub. Notes, Ser. B B1 11.25 6/1/11 835 868,400 Lyondell Chemical Co., Sr. Sub. Notes B2 10.875 5/1/09 655 582,950 Methanex Corp., Sr. Notes (Canada) Ba1 8.75 8/15/12 135 (b) 145,125 Omnova Solutions, Inc., Sr. Sec'd. Notes B2 11.25 6/1/10 200 212,000 PolyOne Corp., Gtd. Notes B2 10.625 5/15/10 200 169,000 Resolution Performance Products, Inc., Sr. Sub. Notes Caa1 13.50 11/15/10 665 595,175 ------------ 3,276,150 - ------------------------------------------------------------------------------------------------------------------------------ Construction Machinery--1.9% Case New Holland, Inc., Sr. Notes Ba2 9.25 8/1/11 635 682,625 United Rentals, Inc., Sr. Sub. Notes, Ser. B B2 9.00 4/1/09 400 414,000 Wabtec Corp., Sr. Notes Ba2 6.875 7/31/13 75 75,938 ------------ 1,172,563 - ------------------------------------------------------------------------------------------------------------------------------ Consumer Goods & Services--4.6% Flour Corp., Notes Ba3 6.95 3/1/07 280 276,500 Icon Health & Fitness, Inc., Sr. Sub. Notes B3 11.25 4/1/12 500 536,250 Iron Mountain, Inc., Sr. Sub. Notes B2 8.25 7/1/11 425 442,000 Sr. Sub. Notes B2 7.75 1/15/15 150 154,875 Playtex Products, Inc., Sr. Sub. Notes B3 9.375 6/1/11 300 288,000 Rayovac Corp., Sr. Sub. Notes B3 8.50 10/1/13 210 216,300 Remington Arms Co., Gtd. Notes B2 10.50 2/1/11 295 302,375 Revlon Consumer Products, Inc., Sr. Sub. Notes Caa1 12.00 12/1/05 335 335,000 Service Corporation International, Inc., Notes B1 7.70 4/15/09 15 15,337 United Industries Corp., Sr. Sub. Notes, Ser. D B3 9.875 4/1/09 185 190,550 ------------ 2,757,187 - ------------------------------------------------------------------------------------------------------------------------------ Diversified Manufacturing--2.3% Tyco International Group S.A., (Luxembourg) Gtd. Notes Ba2 6.375 2/15/06 105 (b) 109,988 Gtd. Notes Ba2 5.80 8/1/06 60 (b) 62,250
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 4 Portfolio of Investments as of September 30, 2003 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Diversified Manufacturing (cont'd.) Gtd. Notes Ba2 6.125% 1/15/09 $ 215 (b) $ 224,675 Gtd. Notes Ba2 6.75 2/15/11 110 (b) 116,050 Gtd. Notes Ba2 6.375 10/15/11 860 (b) 886,875 ------------ 1,399,838 - ------------------------------------------------------------------------------------------------------------------------------ Energy & Related Goods & Services--8.6% Clark R&M, Inc., Sr. Notes Ba3 8.625 8/15/08 750 772,500 Energy Corporation of America, Sr. Sub. Notes, Ser. A Caa3 9.50 5/15/07 925 666,000 Forest Oil Corp., Sr. Notes Ba3 8.00 6/15/08 627 666,188 Frontier Oil Corp., Sr. Notes, Ser. A Ba3 9.125 2/15/06 375 386,250 Giant Industries, Inc., Sr. Sub. Notes B3 11.00 5/15/12 430 423,550 Parker Drilling Co., Sr. Sub. Notes, Ser. D B2 9.75 11/15/06 250 255,625 Pioneer Natural Resources Co., Sr. Notes Ba1 9.625 4/1/10 500 622,500 PREMCOR Refining Group, Inc., Sr. Notes Ba3 9.50 2/1/13 155 170,500 Tesoro Petroleum Corp., Sr. Sub. Notes B2 8.00 4/15/08 125 128,125 Sr. Sub. Notes B2 9.625 11/1/08 275 273,625 Sr. Sub. Notes B2 9.625 4/1/12 690 686,550 Tom Brown, Inc., Sr. Notes Ba3 7.25 9/15/13 45 46,575 Westport Resources Corp., Sr. Sub. Notes Ba3 8.25 11/1/11 60 65,550 ------------ 5,163,538 - ------------------------------------------------------------------------------------------------------------------------------ Environmental--2.4% Allied Waste North America, Inc., Sr. Notes, Ser. B Ba3 7.625 1/1/06 600 627,000 Sr. Notes, Ser. B Ba3 8.50 12/1/08 450 486,000 Waste Management, Inc., Sr. Notes Baa3 7.375 8/1/10 300 350,689 ------------ 1,463,689 - ------------------------------------------------------------------------------------------------------------------------------ Financial Services--1.0% CBRE Escrow, Inc., Sr. Notes B1 9.75 5/15/10 80 86,600 Fairfax Final Holdings Ltd., Notes (Canada) Ba2 7.375 3/16/06 485 (b) 485,000 ------------ 571,600 - ------------------------------------------------------------------------------------------------------------------------------ Food & Lodging--1.9% Dole Food Co., Sr. Notes B2 8.875 3/15/11 150 159,750 Host Marriot L.P., Sr. Sub. Notes, Ser. I Ba3 9.50 1/15/07 715 782,925 Sr. Sub. Notes, Ser. G Ba3 9.25 10/1/07 210 229,163 ------------ 1,171,838
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 5 Portfolio of Investments as of September 30, 2003 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Gaming--4.6% Harrah's Operating Co., Inc., Sr. Sub. Notes Ba1 7.875% 12/15/05 $ 375 $ 405,937 Mandalay Resort Group, Sr. Sub. Notes Ba3 9.375 2/15/10 375 430,313 MGM Mirage, Inc., Sr. Sub. Notes Ba1 8.50 9/15/10 700 787,500 Park Place Entertainment, Inc., Sr. Sub. Notes Ba2 8.125 5/15/11 355 382,512 Sr. Sub. Notes Ba2 7.00 4/15/13 135 139,556 Riviera Holdings Corp., Sr. Sec'd. Notes B2 11.00 6/15/10 625 619,531 ------------ 2,765,349 - ------------------------------------------------------------------------------------------------------------------------------ General Industrial--1.6% Koppers, Inc., Sr. Sec'd. Notes B2 9.875 10/15/13 120 121,825 Thomas & Betts Corp., Notes Ba1 7.25 6/1/13 30 30,600 UCAR Finance, Inc., Gtd. Notes B3 10.25 2/15/12 125 136,562 WESCO Distribution, Inc., Sr. Sub. Notes, Ser. B B3 9.125 6/1/08 650 646,750 ------------ 935,737 - ------------------------------------------------------------------------------------------------------------------------------ Health Care--6.4% Alaris Medical Systems, Inc., Sr. Sec'd. Notes B2 7.25 7/1/11 165 165,825 Apogent Technologies, Inc., Sr. Notes Baa2 6.50 5/15/13 60 61,500 Beverly Enterprises, Inc., Sr. Notes B1 9.00 2/15/06 500 507,500 Sr. Notes B1 9.625 4/15/09 485 515,313 ExtendiCare Health Services, Inc., Sr. Sub. Notes B3 9.35 12/15/07 110 113,300 HCA, Inc., Notes Ba1 6.30 10/1/12 700 713,457 Kinnetic Concepts, Inc., Sr. Sub. Notes B3 7.375 5/15/13 60 61,200 NDCHealth Corp., Sr. Sub. Notes B2 10.50 12/1/12 425 461,125 Omnicare, Inc., Sr. Sub. Notes Ba2 6.125 6/1/13 70 68,600 Radiologix, Inc., Sr. Notes B2 10.50 12/15/08 770 748,825 Sybron Dental Specialities, Inc., Sr. Sub. Notes B2 8.125 6/15/12 100 106,500 Universal Hospital Services, Inc., Sr. Sub. Notes B3 10.25 3/1/08 350 364,000 ------------ 3,887,145 - ------------------------------------------------------------------------------------------------------------------------------ Home Building & Real Estate--3.2% Beazer Homes USA, Inc., Sr. Sub. Notes Ba2 8.625 5/15/11 100 108,000 Champion Enterprises, Inc., Sr. Sub. Notes B3 7.625 5/15/09 80 67,200 Champion Home Builders Co., Sr. Sub. Notes B2 11.25 4/15/07 60 61,800 D.R. Horton, Inc., Sr. Sub. Notes Ba2 9.75 9/15/10 110 123,750 Sr. Sub. Notes Ba2 9.375 3/15/11 500 545,000 Sr. Sub. Notes Ba2 6.875 5/1/13 200 201,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 6 Portfolio of Investments as of September 30, 2003 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Home Building & Real Estate (cont'd.) Standard Pacific Corp., Sr. Notes Ba2 8.50% 6/15/07 $ 250 $ 256,875 Sr. Notes, Ser. A Ba2 8.00 2/15/08 575 595,125 ------------ 1,958,750 - ------------------------------------------------------------------------------------------------------------------------------ Media & Entertainment--14.0% AdvanStar Communications, Inc., Sr. Sec'd. Notes B3 10.75 8/15/10 210 216,825 CanWest Media, Inc., Sr. Sub. Notes (Canada) B2 10.625 5/15/11 350 (b) 397,250 Corus Entertainment, Inc., Sr. Sub. Notes (Canada) B1 8.75 3/1/12 205 (b) 223,450 Dex Media, Inc., Sr. Sub. Notes B3 9.875 8/15/13 605 683,650 EchoStar DBS Corp., Sr. Notes B1 9.125 1/15/09 607 687,427 Houton Mufflin Co., Sr. Notes B3 9.875 2/1/13 185 196,100 Lamar Media Corp., Sr. Sub. Notes Ba3 7.25 1/1/13 55 57,475 Lin Television Corp., Sr. Sub. Notes B2 6.50 5/13/13 260 252,850 LodgeNet Enterprises Corp., Sr. Sub. Debs. B3 9.50 6/15/13 140 148,400 Moore North American Finance Corp., Sr. Notes B1 7.875 1/15/11 155 164,688 Pegasus Satelite Communications, Inc., Sr. Notes Ca 12.375 8/1/06 225 180,000 PRIMEDIA, Inc., Sr. Notes B1 8.875 5/15/11 410 425,375 Quebecor Media, Inc., Sr. Notes (Canada) B2 11.125 7/15/11 1,050 (b) 1,197,000 RH Donnelly Finance Corp. I, Sr. Sub. Notes B2 10.875 12/15/12 455 536,900 Six Flags, Inc., Sr. Notes B2 9.75 4/15/13 520 488,800 Sinclair Broadcast Group, Inc., Sr. Sub. Notes B2 8.00 3/15/11 190 200,450 Time Warner, Inc., Debs. Baa1 9.125 1/15/13 425 540,053 Vivandi Universal S.A., Sr. Notes (France) B1 9.25 4/15/10 455 (b) 522,681 Von Hoffman Press, Inc., Gtd. Notes B3 10.375 5/15/07 550 552,750 Gtd. Notes B2 10.25 3/15/09 345 368,287 World Color Press, Inc., Sr. Sub. Notes Baa2 8.375 11/15/08 375 396,448 ------------ 8,436,859 - ------------------------------------------------------------------------------------------------------------------------------ Metals--4.3% AK Steel Corp., Sr. Sub. Notes B1 7.875 2/15/09 1,080 772,200 Arch-Western Finance Corp., Sr. Notes Ba2 6.75 7/1/13 225 231,750 Century Aluminum Co., Sr. Sec'd. First Mtge. Notes Ba3 11.75 4/15/08 495 529,650 Numatics, Inc., Sr. Sub. Notes, Ser. B Caa2 9.625 4/1/08 160 118,400 Peabody Energy Corp., Sr. Sub. Notes, Ser. B Ba3 6.875 3/15/13 100 104,250 Steel Dynamics, Inc., Sr. Notes B2 9.50 3/15/09 65 69,550 United States Steel LLC, Sr. Notes Ba3 10.75 8/1/08 715 761,475 ------------ 2,587,275
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 Portfolio of Investments as of September 30, 2003 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Paper & Packaging--11.4% Abiti-Consolidated, Inc., Debs. (Canada) Ba1 8.55% 8/1/10 $ 525 (b) $ 573,244 AEP Industries, Inc., Sr. Sub. Notes B3 9.875 11/15/07 225 220,500 Anchor Glass Container Corp., Sr. Sec'd. Notes B2 11.00 2/15/13 390 436,800 Bowater, Inc., Sr. Notes (Canada) Ba1 7.95 11/15/11 175 (b) 180,343 Caraustar Industries, Inc., Sr. Sub. Notes B2 9.875 4/1/11 675 661,500 Georgia-Pacific Corp., Sr. Notes Ba2 8.875 2/10/10 1,000 1,095,000 Sr. Notes Ba2 9.375 2/1/13 225 251,156 Jefferson Smurfit Corp., Sr. Sub. Notes B2 7.50 6/1/13 155 157,325 MDP Acquisitions PLC, Sr. Sub. Notes (Ireland) Caa2 9.625 10/1/12 135 (b) 147,825 Owens-Brockway Glass Container, Inc., Sr. Sec'd. Notes B1 8.875 2/15/09 815 867,975 Pacifica Papers, Inc., Sr. Notes (Canada) Ba2 10.00 3/15/09 750 (b) 795,000 Silgan Corp., Sr. Sub. Debs. B1 9.00 6/1/09 662 685,170 Stone Container Corp., Sr. Notes B2 9.25 2/1/08 450 489,375 Sr. Notes B2 8.375 7/1/12 325 341,250 ------------ 6,902,463 - ------------------------------------------------------------------------------------------------------------------------------ Pharmaceutical--1.1% Athena Neurosciences Finance LLC, Gtd. Notes Caa2 7.25 2/21/08 835 676,350 - ------------------------------------------------------------------------------------------------------------------------------ Retail--3.4% CSK Auto, Inc., Gtd. Notes B2 12.00 6/15/06 390 435,825 GAP, Inc., Notes Ba3 10.55 12/15/08 370 444,925 J.C. Penney, Inc., Sr. Notes Ba3 7.60 4/1/07 150 162,000 Sr. Notes Ba3 7.375 8/15/08 100 106,500 Rite Aid Corp., Gtd. Notes Caa2 7.125 1/15/07 790 799,875 Gtd. Notes Caa2 11.25 7/1/08 100 112,000 ------------ 2,061,125 - ------------------------------------------------------------------------------------------------------------------------------ Supermarkets--2.6% Delhaize America, Inc., Gtd. Notes Ba1 8.125 4/15/11 370 407,000 Great Atlantic & Pacific Tea, Inc., Sr. Notes B3 9.125 12/15/11 810 761,400 Winn-Dixxie Stores, Inc., Sr. Notes Ba2 8.875 4/1/08 415 429,525 ------------ 1,597,925
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 8 Portfolio of Investments as of September 30, 2003 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Technology--8.8% Amkor Technologies, Inc., Sr. Sub. Notes B3 10.50% 5/1/09 $ 750 $ 798,750 Sr. Sub. Notes B3 7.75 5/15/13 240 241,200 ASAT Finance LLC, Gtd. Notes B3 12.50 11/1/06 33 34,125 Avaya, Inc., Sr. Sec'd. Notes Ba2 11.25 4/1/09 595 688,713 Lucent Technologies, Inc., Notes Caa1 7.25 7/15/06 240 231,000 Notes Caa1 5.50 11/15/08 425 361,250 Nortel Networks Ltd., Notes (Canada) Ba3 6.125 2/15/06 645 (b) 648,225 Sanmina-SCI Corp., Sr. Sec'd. Notes Ba2 10.375 1/15/10 440 515,900 SCG Holdings Corp., Sr. Sub. Notes Caa2 12.00 8/1/09 690 719,325 Selectron Corp., Sr. Notes Ba3 9.625 2/15/09 255 281,138 Xerox Corp., Gtd. Notes B1 9.75 1/15/09 305 338,550 Gtd. Notes B1 7.625 6/15/13 450 443,813 ------------ 5,301,989 - ------------------------------------------------------------------------------------------------------------------------------ Telecommunications--13.5% ACC Escrow Corp., Sr. Notes B2 10.00 8/1/11 200 215,000 Alaska Communications, Inc., Sr. Notes B2 9.875 8/15/11 190 193,800 American Tower Corp., Sr. Notes Caa1 9.375 2/1/09 285 290,700 Crown Castle International Corp., Sr. Notes B3 9.375 8/1/11 245 261,537 Sr. Notes B3 10.75 8/1/11 345 382,950 Fairpoint Communications, Inc., Sr. Notes B3 11.875 3/1/10 45 51,300 GCI, Inc., Sr. Notes B2 9.75 8/1/07 1,000 1,012,500 Nextel Communications, Inc., Sr. Notes B3 9.375 11/15/09 50 54,250 Sr. Notes B3 9.50 2/1/11 1,475 1,629,875 Nextel Partners, Inc., Sr. Notes Caa1 12.50 11/15/09 425 484,500 Qwest Capital Funding, Inc., Sr. Sub. Notes Caa2 7.90 8/15/10 250 227,500 Sr. Sub. Notes Caa2 7.25 2/15/11 700 623,000 Qwest Services Corp., Sr. Notes Caa1 14.00 2/15/14 670 805,675 Rogers Wireless, Inc., Sr. Sec'd. Notes (Canada) Baa3 9.625 5/1/11 450 (b) 517,500 Triton PCS, Inc., Sr. Sub. Notes B3 9.375 2/1/11 280 284,900 Sr. Sub. Notes B3 8.75 11/15/11 795 793,012 Western Wireless, Inc., Sr. Notes Caa2 9.25 7/15/13 210 214,200 U.S. West Capital Funding, Inc., Sr. Notes Ca1 6.375 7/15/08 100 88,500 ------------ 8,130,699
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 Portfolio of Investments as of September 30, 2003 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Textile--0.8% Levi Strauss & Co., Sr. Notes Ca 11.625% 1/15/08 $ 470 $ 385,400 Oxford Industries, Inc., Sr. Notes B2 8.875 6/1/11 80 85,200 ------------ 470,600 - ------------------------------------------------------------------------------------------------------------------------------ Transportation--4.5% American Air Lines, Inc., Pass-Thru Certificates, Ser. 1999-1, Class A-2 Baa3 7.024 10/15/09 130 126,992 Ser. 2001-01, Class A-2 Ba1 6.817 5/23/11 265 227,378 Continental Air Lines, Inc., Pass-Thru Certificates, Ser. 2001-1, Class A-2 Baa3 6.503 6/15/11 465 455,997 Delta Air Lines, Inc., Notes B3 7.90 12/15/09 1,260 935,550 Debs. B3 10.375 2/1/11 45 34,313 Kansas City Southern Railway Co., Gtd. Notes Ba3 9.50 10/1/08 825 909,562 ------------ 2,689,792 - ------------------------------------------------------------------------------------------------------------------------------ Utilities--15.3% AES Corp., Sr. Sec'd. Notes Ba3 8.875 2/15/11 825 820,875 Avista Corp., Sr. Notes Ba1 9.75 6/1/08 380 442,700 Calpine Corp., Sr. Notes B1 8.50 2/15/11 1,485 1,046,925 Calpine Canada Energy Finance LLC, Gtd. Notes (Canada) B1 8.50 5/1/08 45 (b) 32,400 CenterPoint Energy, Inc., Bonds Ba1 6.85 6/1/15 595 581,414 CMS Energy Corp., Sr. Notes B3 9.875 10/15/07 700 749,000 Sr. Notes B3 8.90 7/15/08 160 165,600 Sr. Notes B3 8.50 4/15/11 165 167,888 Dynegy Holdings, Inc., Sr. Sec'd. Notes B3 10.125 7/15/13 510 538,050 El Paso Energy Corp., Sr. Notes Caa1 6.75 5/15/09 870 726,450 Sr. Notes Caa1 7.00 5/15/11 605 499,125 Illinois Power Co., First Mtge. Bonds B3 11.50 12/15/10 155 186,000 Nevada Power Co., Notes, Ser. E Ba2 10.875 10/15/09 115 124,344 Second Mtge. Bonds Ba2 9.00 8/15/13 275 283,937 Reliant Resources, Inc., Sr. Sec'd. Notes B1 9.25 7/15/10 395 357,475 Semco Energy, Inc., Sr. Notes Ba2 7.125 5/15/08 20 20,100 Sr. Notes Ba2 7.750 5/15/13 35 35,262
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 10 Portfolio of Investments as of September 30, 2003 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Utilities (cont'd.) The Williams Companies, Inc., Notes B3 7.125% 9/1/11 $ 980 $ 967,750 Notes B3 8.125 3/15/12 25 26,000 TNP Enterprises, Inc., Sr. Sub. Notes, Ser. B Ba3 10.25 4/1/10 500 515,000 Western Resources, Inc., Sr. Notes Ba2 9.75 5/1/07 200 224,500 Sr. Notes Ba2 7.125 8/1/09 705 720,863 ------------ 9,231,658 ------------ Total long-term corporate bonds 83,857,728 ------------------------------------------------------------------------------------------------------------------------------ COMMON STOCK Shares --------- World Kitchen, Inc.(a) 6,031 (c) 0 ------------ Total long-term investments (cost $80,162,156) 83,857,728 ------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENT--1.3% Principal Amount REPURCHASE AGREEMENT (000) --------- ABN AMRO, Incorporated, dated 9/30/03, due 10/1/03 in the amount of $800,024 (cost $800,000; collateralized by $1,611,645 Federal Mortgage Association, 6.50%, due 5/1/17, value of collateral including accrued interest is $816,000) -- 1.08 10/1/03 $ 800 800,000 - ------------------------------------------------------------------------------------------------------------------------------ Total Investments--140.2% (cost $80,962,156; Note 4) 84,657,728 Liabilities in excess of other assets--(40.2%) (24,265,931) ------------ Net Assets--100% $ 60,391,797 ------------ ------------
- --------------- (a)--Non-income producing securities. (b)--US$ denominated foreign bonds. (c)--Fair-valued security--value is determined by the Valuation Committee in consultation with the investment adviser. - -------------------------------------------------------------------------------- See Notes to Financial Statements. 11 Statement of Assets and Liabilities (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
September 30, 2003 Assets - -------------------------------------------------------------------------------------------------------------------------------- Investments, at value (cost $80,962,156)................................................................... $ 84,657,728 Cash....................................................................................................... 321,640 Interest receivable........................................................................................ 2,130,139 Receivable for investments sold............................................................................ 1,435,613 Other assets............................................................................................... 45,886 ------------------ Total assets............................................................................................ 88,591,006 ------------------ Liabilities Loan payable (Note 5)...................................................................................... 26,000,000 Payable for investments purchased.......................................................................... 1,400,071 Dividends payable.......................................................................................... 554,043 Accrued expenses........................................................................................... 161,700 Deferred directors' fees payable........................................................................... 31,705 Advisory fee payable....................................................................................... 24,729 Loan interest payable (Note 5)............................................................................. 17,069 Administration fee payable................................................................................. 9,892 ------------------ Total liabilities....................................................................................... 28,199,209 ------------------ Net Assets................................................................................................. $ 60,391,797 ------------------ ------------------ Net assets were comprised of: Common stock, at par.................................................................................... $ 158,298 Paid-in capital in excess of par........................................................................ 130,911,213 ------------------ 131,069,511 Overdistribution of net investment income............................................................... (412,294) Accumulated net realized loss on investment transactions................................................ (73,960,992) Net unrealized appreciation on investments and foreign currencies....................................... 3,695,572 ------------------ Net assets, September 30, 2003.......................................................................... $ 60,391,797 ------------------ ------------------ Net asset value per share ($60,391,797 / 15,829,787 shares of common stock issued and outstanding)......... $3.82 ------------------ ------------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 12 THE HIGH YIELD PLUS FUND, INC. Statement of Operations (Unaudited) - ------------------------------------------------------------
Six Months Ended September 30, 2003 Net Investment Income Income Interest................................... $ 4,025,894 ------------- Expenses Investment advisory fee.................... 147,568 Administration fee......................... 59,027 Legal fees and expenses.................... 57,000 Custodian's fees and expenses.............. 53,000 Reports to shareholders.................... 32,000 Listing fee................................ 21,000 Transfer agent's fees and expenses......... 18,000 Audit fee.................................. 15,000 Directors' fees and expenses............... 15,000 Insurance expense.......................... 8,000 Miscellaneous.............................. 1,472 ------------- Total operating expenses................ 427,067 Loan interest expense (Note 5)............. 261,027 ------------- Total expenses.......................... 688,094 ------------- Net investment income......................... 3,337,800 ------------- Realized and Unrealized Gain (Loss) on Investments Net realized loss on investment transactions............................... (2,946,657) Net change in unrealized appreciation (depreciation) on investments.............. 8,136,103 ------------- Net gain on investments....................... 5,189,446 ------------- Net Increase in Net Assets Resulting from Operations..................... $ 8,527,246 ------------- -------------
THE HIGH YIELD PLUS FUND, INC. Statement of Cash Flows (Unaudited) - ------------------------------------------------------------
Six Months Ended September 30, 2003 Increase (Decrease) in Cash Cash flows from operating activities: Interest and dividends received.............. $ 3,607,927 Operating expenses paid...................... (437,629) Loan interest and commitment fees paid....... (309,481) Purchases of long-term portfolio investments............................... (20,674,207) Proceeds from acquiring of short-term portfolio investments..................... (11,000) Proceeds from acquiring of long-term portfolio investments..................... 16,040,434 Decrease in other assets..................... 7,750 ------------ Net cash used in operating activities........ (1,776,206) ------------ Cash flows from financing activities: Net increase in loan payable................. 5,000,000 Cash dividends paid (excluding reinvestment of dividends of $293,098)................. (2,902,953) ------------ Net cash provided by financing activities.... 2,097,047 ------------ Net increase in cash......................... 320,841 Cash at beginning of period.................. 799 ------------ Cash at end of period........................ $ 321,640 ------------ ------------ Reconciliation of Net Decrease in Net Assets to Net Cash Provided from Operating Activities Net increase in net assets resulting from operations................................... $ 8,527,246 ------------ Increase in investments......................... (5,066,563) Net realized loss on investment transactions.... 2,946,657 Net increase in unrealized appreciation on investments.................................. (8,136,103) Increase in receivable for investments sold..... (1,255,238) Increase in interest receivable................. (141,010) Decrease in other assets........................ 7,750 Increase in payable for investments purchased... 1,400,071 Decrease in accrued expenses and other liabilities.................................. (59,016) ------------ Total adjustments............................ (10,303,452) ------------ Net cash flows provided from operating activities................................ $(1,776,206) ------------ ------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 13 THE HIGH YIELD PLUS FUND, INC. Statement of Changes in Net Assets (Unaudited) - ------------------------------------------------------------
Six Months Year Ended Ended September 30, March 31, 2003 2003 ------------ ------------ Increase (Decrease) in Net Assets Operations Net investment income....... $ 3,337,800 $ 6,311,561 Net realized loss on investment transactions............. (2,946,657) (11,741,163) Net change in unrealized appreciation (depreciation) on investments.............. 8,136,103 4,974,881 ------------ ------------ Net increase (decrease) in net assets resulting from operations............... 8,527,246 (454,721) Dividends from net investment income (Note 1). (3,238,176) (6,439,615) Value of Fund shares issued to shareholders in reinvestment of dividends (Note 6)................. 293,098 364,950 ------------ ------------ Total increase (decrease)...... 5,582,168 (6,529,386) Net Assets Beginning of period............ 54,809,629 61,339,015 ------------ ------------ End of period.................. $ 60,391,797 $ 54,809,629 ------------ ------------ ------------ ------------
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's primary objective is to provide a high level of current income to shareholders. The Fund seeks to achieve this objective through investment of at least 80% of its investable assets 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: Securities for which market quotations are readily available--including securities listed on national securities exchanges and those traded over-the-counter--are valued at the last quoted sales price on the valuation date on which the security is traded. If such securities were not traded on the valuation date, but market quotations are readily available, they are valued at the most recently quoted bid price provided by an independent pricing service or by principal market makers. Securities for which market quotations are not readily available or for which the pricing agent or market maker does not provide a valuation or methodology, or provides a valuation or methodology that, in the judgment of the adviser, does not represent fair value, are valued by a Valuation Committee appointed by the Board of Directors, in consultation with the advisor. 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, which approximates market value. 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 - -------------------------------------------------------------------------------- 14 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 current daily rate of exchange. (ii) purchases and sales of investment securities, income and expenses--at the rates 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 long-term portfolio securities sold during the fiscal period. Accordingly, realized foreign currency gains or losses are included in the reported net realized gains or losses on investment transactions. Net realized gains or losses on foreign currency transactions represent net foreign exchange gains or losses from the holding of foreign currencies, currency gains or losses realized between the trade date and settlement date on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains or losses from valuing foreign currency denominated assets and liabilities (other than investments) at 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 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 and premiums 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. Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains or losses on sales of securities are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date; interest income including amortization of premium and accretion of discount on debt securities, as required is recorded on the accrual basis. Expenses are recorded on the accrual basis, which may require the use of certain estimates by management. Dividends and Distributions: The Fund expects to pay dividends of net investment income monthly and distributions of net realized capital and currency gains, if any, annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-dividend date. Permanent book/tax differences relating to income and gains are reclassified to paid-in capital when they arise. 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 net income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required. - ------------------------------------------------------------ Note 2. Agreements The Fund has agreements with, among others, Wellington Management Company, LLP (the 'Investment Adviser') and 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. - -------------------------------------------------------------------------------- 15 Notes to Financial Statements (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------- Note 3. Portfolio Securities Purchases and sales of investment securities, other than short-term investments for the six months ended September 30, 2003, aggregated $22,513,125 and $17,295,672, respectively. - ------------------------------------------------------------ Note 4. Tax Information For federal income tax purposes, the Fund had a capital loss carryforward as of March 31, 2003 was approximately $69,744,000, of which $1,806,000 expires in 2004, $500,000 expires in 2007, $8,206,000 expires in 2008, $8,395,000 expires in 2009, $24,697,000 expires in 2010 and $26,140,000 expires in 2011. Accordingly, no capital gains distribution is expected to be paid to shareholders until net gains have been realized in excess of such carryforward. The capital loss carryforward differs from the amount on the Statement of Assets and Liabilities primarily due to the Fund electing to treat post-October capital losses of approximately $751,000 as having occurred in the current fiscal year and differences in the treatment of discount and premium amortization for book and tax purposes. The United States federal income tax basis of the Fund's investments and the net unrealized appreciation as of September 30, 2003 was as follows: Tax Basis of Net Unrealized Investments Appreciation Depreciation Appreciation - --------------- ------------ ------------- -------------- $81,401,003 $6,148,137 $ 2,891,412 $3,256,725 The difference between book basis and tax basis was primarily attributable to deferred losses on wash sales and differences in the treatment of premium amortization for book and tax purposes. - ------------------------------------------------------------ Note 5. Borrowings The Fund has a credit agreement with an unaffiliated lender. The maximum commitment under this agreement is $35,000,000. Interest on any such borrowings is based on market rates and is payable quarterly and at maturity. The Fund may utilize these borrowings (leverage) in order to increase the potential for gain on amounts invested. There can be no guarantee that these gains will be realized. There are increased risks associated with the use of leverage. The average daily balance outstanding during the six months ended September 30, 2003 was $24,486,339 at a weighted average interest rate of 3.02%. The maximum face amount of borrowings outstanding at any month-end during the six months ended September 30, 2003 was $27,000,000. The current borrowings of $26,000,000 (at a weighted average interest rate of 2.00%) will mature on March 30, 2004. 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 6. Capital There are 100 million shares of common stock authorized at $.01 par value per share. During the six months ended September 30, 2003 and the fiscal year ended March 31, 2003, the Fund issued 78,473 and 99,359 shares in connection with reinvestment of dividends, respectively. - ------------------------------------------------------------ Note 7. Dividends On November 18, 2003, the Board of Directors of the Fund declared dividends of $0.0350 per share payable on January 9, 2004, February 9, 2004 and March 8, 2004 to stockholders of record on December 31, 2003, January 30, 2004 and February 27, 2004, respectively. - -------------------------------------------------------------------------------- 16 Financial Highlights (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Six Months Ended Year Ended March 31, September 30, ----------------------------------------------- 2003 2003 2002 2001 2000 ------------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period...................... $ 3.48 $ 3.92 $ 5.02 $ 6.42 $ 7.36 ------ -------- -------- -------- -------- Income from investment operations Net investment income..................................... .22 .42 .62 .81 .89 Net realized and unrealized gain (loss) on investments.... .33 (.45) (1.00) (1.34) (.94) ------ -------- -------- -------- -------- Total from investment operations....................... .55 (.03) (.38) (.53) (.05) ------ -------- -------- -------- -------- Less dividends and distributions Dividends from net investment income...................... (.21) (.41) (.72) (.86) (.89) Distributions in excess of net investment income.......... -- -- -- (.01) -- ------ -------- -------- -------- -------- Total dividends and distributions...................... (.21) (.41) (.72) (.87) (.89) ------ -------- -------- -------- -------- Capital charge in respect to issuance of shares........... -- -- -- -- -- ------ -------- -------- -------- -------- Net asset value, end of period(a)......................... $ 3.82 $ 3.48 $ 3.92 $ 5.02 $ 6.42 ------ -------- -------- -------- -------- ------ -------- -------- -------- -------- Market price per share, end of period(a).................. $ 4.05 $ 3.63 $ 4.38 $ 6.20 $ 6.1875 ------ -------- -------- -------- -------- ------ -------- -------- -------- -------- TOTAL INVESTMENT RETURN(b):............................... 17.76% (6.41)% (19.20)% 15.49% (2.96)% ------ -------- -------- -------- -------- ------ -------- -------- -------- -------- RATIO/SUPPLEMENTAL DATA: Net assets, end of period (000 omitted)................... $60,392 $ 54,810 $ 61,339 $ 77,593 $ 98,212 Average net assets (000 omitted).......................... $58,702 $ 53,407 $ 67,722 $ 88,620 $107,803 Ratio to average net assets: Expenses, before loan interest and commitment fees..... 1.45%(c) 1.53% 1.33% 1.26% 1.08% Total expenses......................................... 2.34%(c) 2.72% 3.19% 3.92% 3.47% Net investment income.................................. 11.37%(c) 11.82% 14.15% 14.00% 12.60% Portfolio turnover rate................................... 21%(d) 87% 76% 68% 83% Total debt outstanding at end of period (000 omitted)..... $26,000 $ 21,000 $ 22,000 $ 28,000 $ 42,000 Asset coverage per $1,000 of debt outstanding............. $ 3,323 $ 3,610 $ 3,788 $ 3,771 $ 3,338 1999 -------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period...................... $ 9.21 -------- Income from investment operations Net investment income..................................... .88 Net realized and unrealized gain (loss) on investments.... (1.59) -------- Total from investment operations....................... (.71) -------- Less dividends and distributions Dividends from net investment income...................... (.88) Distributions in excess of net investment income.......... -- -------- Total dividends and distributions...................... (.88) -------- Capital charge in respect to issuance of shares........... (.26) -------- Net asset value, end of period(a)......................... $ 7.36 -------- -------- Market price per share, end of period(a).................. $ 7.1875 -------- -------- TOTAL INVESTMENT RETURN(b):............................... (12.36)% -------- -------- RATIO/SUPPLEMENTAL DATA: Net assets, end of period (000 omitted)................... $111,993 Average net assets (000 omitted).......................... $ 94,437 Ratio to average net assets: Expenses, before loan interest and commitment fees..... 1.11% Total expenses......................................... 3.14% Net investment income.................................. 11.60% Portfolio turnover rate................................... 94% Total debt outstanding at end of period (000 omitted)..... $ 35,000 Asset coverage per $1,000 of debt outstanding............. $ 4,204
- --------------- (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. (d) Not annualized. Contained above is selected data for a share of common stock outstanding, total investment return, ratios to average net assets and other supplemental data for the year indicated. This information has been determined based upon information provided in the financial statements and market price data for the Fund's shares. - -------------------------------------------------------------------------------- See Notes to Financial Statements. 17 Supplemental Proxy Information (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------- The annual meeting of shareholders of The High Yield Plus Fund, Inc. was held on July 28, 2003 at the offices of Prudential Investments LLC, 100 Mulberry Street, Newark, New Jersey. The meeting was held for the following purpose:
(1) To elect the following directors to serve as follows: Directors Class Term Expiring ------------------------------- ------ -------- --------- Thomas T. Mooney III 3 years 2006 Clay T. Whitehead III 3 years 2006 Directors whose term of office continued beyond this meeting are Eugene C. Dorsey, Robert E. La Blanc and Douglas H. McCorkindale.
The results of the proxy solicitation on the above matter were as follows:
Directors Votes for Votes against Votes withheld Abstentions ---------------------------- ----------- -------------- --------------- ------------ Thomas T. Mooey 13,369,723 -- 334,672 -- (1) Clay T. Whitehead 13,448,764 -- 255,631 --
- -------------------------------------------------------------------------------- 18 Other Information (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------- Dividend Reinvestment Plan. Shareholders may elect to have all distributions of dividends and capital gains automatically reinvested in Fund shares ('Shares') pursuant to the Fund's Dividend Reinvestment Plan (the 'Plan'). Shareholders who do not participate in the Plan will receive all distributions in cash paid by check in United States dollars mailed directly to the shareholders of record (or if the shares are held in street or other nominee name, then to the nominee) by the custodian, as dividend disbursing agent. Shareholders who wish to participate in the Plan should contact the Fund at (800) 451-6788. Equiserve Trust Company, N.A. (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, Equiserve Trust Company, N.A., P.O. Box 43011, Providence, RI 02940-3011. - -------------------------------------------------------------------------------- 19 Directors Eugene C. Dorsey Robert E. La Blanc 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 The Bank of New York One Wall Street New York, NY 10286 Transfer Agent Equiserve Trust Company, N.A. P.O. Box 43011 Providence, RI 02940-3011 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 accompanying financial statements as of September 30, 2003 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 CUSIP 429906100 HYPS Item 2 -- Code of Ethics -- Not required as this is not an annual filing. Item 3 -- Audit Committee Financial Expert -- Not required in this filing. Item 4 -- Principal Accountant Fees and Services -- Not required in this filing Item 5 -- Reserved Item 6 -- Reserved Item 7 -- Disclosure of Proxy Voting Policies and Procedures for Closed- End Management Investment Companies -- Not required in this filing Item 8 -- Reserved Item 9 -- Controls and Procedures (a) It is the conclusion of the registrant's principal executive officer and principal financial officer that the effectiveness of the registrant's current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission's rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant's principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure. (b) There have been no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Item 10 -- Exhibits (a) Code of Ethics -- Not applicable with semi-annual filing (b) Certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act -- Attached hereto SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) The High Yield Plus Fund, Inc. By (Signature and Title)* /s/Arthur J. Brown ------------------ Arthur J. Brown Secretary Date November 26, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/Thomas Mooney ------------------ Thomas Mooney President and Principal Executive Officer Date November 26, 2003 By (Signature and Title)* /s/Grace C. Torres ------------------ Grace C. Torres Treasurer and Principal Financial Officer Date November 26, 2003 * Print the name and title of each signing officer under his or her signature. EX-99.CERT 3 mf16201ex99cert.txt SECTION 302 SARBANES-OXLEY CERTIFICATIONS Item 10 The High Yield Plus Fund, Inc. Semi-annual period ending 9/30/03 File No. 811-5468 CERTIFICATIONS I, Thomas Mooney, certify that: 1. I have reviewed this report on Form N-CSR of The High Yield Plus Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report. 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and; c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half- year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 26, 2003 /s/Thomas Mooney ------------------------- Thomas Mooney President and Principal Executive Officer Item 10 The High Yield Plus Fund, Inc. Semi-annual period ending 9/30/03 File No. 811-5468 CERTIFICATIONS I, Grace C. Torres, certify that: 1. I have reviewed this report on Form N-CSR of The High Yield Plus Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report. 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and; c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half- year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 26, 2003 /s/Grace C. Torres ------------------------- Grace C. Torres Treasurer and Chief Financial Officer EX-99.906 CERT 4 mf16201ex906cert.txt SECTION 906 SARBANES-OXLEY CERTIFICATIONS Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Issuer: The High Yield Plus Fund, Inc. In connection with the Report on Form N-CSR of the above-named issuer that is accompanied by this certification, the undersigned hereby certifies, to his or her knowledge, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: November 26, 2003 /s/Thomas Mooney -------------------- Thomas Mooney President and Principal Executive Officer Date: November 26, 2003 /s/Grace C. Torres -------------------- Grace C. Torres Treasurer and Principal Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----