-----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, VRnFWT3tiE4G065yPenVSJlk8qSjDKVCPXYMvbeBW95YqSHy/9smh7bO/dcetGDF QtD9yZxvuybz1y4pltEaXg== 0000898733-99-001041.txt : 19991210 0000898733-99-001041.hdr.sgml : 19991210 ACCESSION NUMBER: 0000898733-99-001041 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HIGH YIELD PLUS FUND INC CENTRAL INDEX KEY: 0000828990 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MD FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05468 FILM NUMBER: 99771185 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 THE HIGH YIELD PLUS FUND, INC. The High Yield Plus Fund, Inc. SEMI ANNUAL REPORT September 30, 1999 Letter To Shareholders October 15, 1999 Dear Shareholder: While the high yield market showed signs of strength during the first part of the six month period, that strength quickly ebbed during the summer, and it is fair to say that the high yield market experienced a difficult period from June through September. The last several months of the semi-annual period have been marked by poor demand for high yield securities, as reflected in redemptions from open-end mutual funds, generally weak liquidity in fixed income markets, and escalating credit problems, as evidenced by a sharply higher rate of default. With respect to the default rate, we would note that the par default rate, as tracked by Credit Suisse First Boston is running at 2.8% through August 31, 1999. Annualized, this would equate to a rate of 4.2%. This rate would be up significantly from last year's rate of 1.1%. Default rates for the overall market last peaked in the 1990-1991 time frame, when they ran at 8.0% and 9.3% respectively. Despite the rapid increase in the market's default rate, we see few similarities between the 1990 and 1999 markets. At the start of the decade, the US economy was in recession. (Leveraged companies tend to be more damaged by recession given their large, fixed, high cost debt.) More importantly, during the 1989--1990 timeframe, commercial banks, particularly the money center banks, were encountering severe credit problems and many were capital constrained. The FDIC acted to limit lending to "highly leveraged transactions" effectively restricting lending to high yield companies. This broad lack of financing proved fatal to many issuers already struggling with weak economic conditions. (In addition, the public debt markets and the insurance sector were also capital constrained at the time.) Today the US economy is firm, if not vibrant. While commercial banks may be less amenable to lending to certain leveraged sectors such as energy, finance and healthcare, these trends are on the margin and do not reflect regulatory prohibitions. In fact, most banks today are well capitalized. Perhaps more comforting, the global economy appears to be strengthening. Going forward, we expect that a stronger Asia and Europe will provide positive momentum for some of the more cyclical industries that have been hurt by commodity weakness over the last several years. This may give these issuers a spell of relief and also reopen their access to capital. (We would argue that over the last two years, the extreme recession in Asia and a sluggish Europe had a much more deleterious effect on US industrial companies than commonly supposed; most industries today are irreversibly global in nature.) While the high yield market appears to have priced in a fairly significant default rate, we believe that the overall default rate may moderate over the next year assuming the global economy progresses as expected. Given these observations, we believe that the market's weak technical conditions, exacerbated by credit fears, have created some compelling valuations. 1 Fund Performance. The Fund's total returns for periods ended September 30, 1999 are shown on the following table. For comparison, we have also provided the returns of the Lipper Closed-End Leveraged High Yield category, an average of 27 closed-end high yield leveraged funds; we would note that the degree of leverage varies substantially amongst the funds in the group. In addition, we have provided the returns of the First Boston Global High Yield Index, an unmanaged Trader Priced Portfolio constructed to mirror the high yield debt market including fixed income, non-convertible, and U.S. dollar denominated securities that must be rated BB or below by Moody's or S&P, which does not contain any leverage. The Fund's performance over the year benefited from its exposure to certain Yankee issues (US$ foreign issuers) that appreciated during the year, following upon extreme weakness a year ago. TOTAL RETURNS For the Periods Ended September 30, 1999
6 Months 12 Months 24 Months High Yield Plus Fund (NAV)1 (1.7)% 10.2% (2.4)% Lipper CEHY -- Leveraged (2.0) 3.4 (1.5) First Boston High Yield (0.5)% 3.9 -1.7
1 Represents NAV-basis performance calculations as provided by Lipper Analytical Services, Inc. Past performance is no guarantee of future results. During the period, the Fund was not immune to defaults. (Any default experience is included in the Fund's returns above.) While our experience with several defaults during the period was clearly disappointing, we would observe that our strategy of investing with a high degree of diversification, thereby limiting exposure to any single issuer, mitigates some degree of default risk. Because the market has been extremely risk averse as of late, valuations of "troubled" securities are perhaps unduly pressured. In some instances, this may create attractive investment opportunities. Our challenge is always to balance potential return relative to underlying risk. The Fund is leveraged and has a $50 million credit line provided by BankBoston and State Street Bank and Trust. As of September 30, 1999, the Fund had drawn $40 million on the line. Borrowings fluctuate depending on investment opportunities. As of September 30, 1999, the Fund's shares were priced at $7.25. This price reflected a 6.5% premium to the Fund's net asset value of $6.81 per share. The Fund's monthly dividend rate of $0.0725 per share equates to an annualized yield of 12.0% relative to the stock price. 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, 1999 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS--136.3% CORPORATE BONDS--130.1% - ------------------------------------------------------------------------------------------------------------------------------ Aerospace/Defense--3.1% Argo-Tech Corp., Sr. Sub. Notes B3 8.625% 10/01/07 $ 990 $ 846,450 L-3 Communications Corp., Sr. Sub. Notes B2 8.50 5/15/08 750 716,250 Loral Space & Communications Ltd., Sr. Notes B1 9.50 1/15/06 1,000 852,500 Moog, Inc., Sr. Sub. Notes, Ser. B B1 10.00 5/01/06 750 761,250 ------------ 3,176,450 - ------------------------------------------------------------------------------------------------------------------------------ Automotive--4.4% Accuride Corp., Sr. Sub. Notes B2 9.25 2/01/08 1,250 1,184,375 Exide Corp., Sr. Notes B1 10.00 4/15/05 850 841,500 Federal-Mogul Corp., Sr. Notes Ba2 8.80 4/15/07 500 494,765 Johnstown America Industries, Inc., Sr. Sub. Notes B2 11.75 8/15/05 1,000 1,020,000 Key Plastics, Inc., Sr. Sub. Notes, Ser. B B3 10.25 3/15/07 500 415,000 LDM Technologies, Inc., Sr. Sub. Notes, Ser. B B3 10.75 1/15/07 695 618,550 ------------ 4,574,190 - ------------------------------------------------------------------------------------------------------------------------------ Building & Related Industries--1.4% Anthony Crane Rental L.P., Sr. Notes B3 10.375 8/01/08 500 450,000 Nortek, Inc., Sr. Notes, Ser. B B1 9.25 3/15/07 350 340,375 Sr. Notes B1 8.875 8/01/08 750 710,625 ------------ 1,501,000 - ------------------------------------------------------------------------------------------------------------------------------ Cable--7.2% Adelphia Communications Corp., Sr. Notes B1 9.875 3/01/07 650 663,000 Sr. Notes, Ser. B B1 8.375 2/01/08 750 703,125 Sr. Notes, Ser. B B1 7.75 1/15/09 250 226,250 Cablevision S.A., Sr. Notes B1 13.75 5/01/09 500 465,000 Century Communications Corp., Sr. Disc. Notes B1 Zero 3/15/03 225 157,500 Charter Communications Holdings, Sr. Notes B2 8.25 4/01/07 2,000 1,865,000 Insight Midwest L.P., Sr. Notes B1 9.75 10/01/09 345 345,000 Multicanal S.A., Sr. Notes, Ser. E B1 13.125 4/15/09 450 419,625 Sr. Notes B1 10.50 2/01/07 500 397,500 Sr. Notes B1 10.50 4/15/18 230 174,800
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 3 Portfolio of Investments as of September 30, 1999 (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, Inc., Sr. Notes, Ser. B B3 10.00% 2/15/07 $ 750 $ 768,750 Optel, Inc., Sr. Notes Caa3 11.50 7/01/08 1,250 800,000 Rogers Communications, Inc., Sr. Notes B2 8.875 7/15/07 500 512,500 ------------ 7,498,050 - ------------------------------------------------------------------------------------------------------------------------------ Chemicals--6.6% Acetex Corp., Sr. Sec. Notes (Canada) B3 9.75 10/01/03 750 (d) 660,000 ARCO Chemical Co. Ba3 9.375 12/15/05 1,000 980,000 ARCO Chemical Co. Ba3 9.80 2/01/20 1,250 1,187,500 Huntsman ICI Chemicals LLC, Sr. Sub. Notes B2 10.125 7/01/09 805 790,913 Lyondell Chemical Co., Sr. Sub. Notes B2 10.875 5/01/09 655 658,275 PCI Chemicals Canada, Inc., Sr. Notes, Ser. B (Canada) B2 9.25 10/15/07 750 (d) 562,500 Philipp Brothers Chemicals, Inc., Sr. Sub. Notes B3 9.875 6/01/08 500 440,000 Pioneer Americas Acquisition Corp., Sr. Notes, Ser. B B2 9.25 6/15/07 15 11,550 Royster-Clark, Inc., First Mtge. Notes B2 10.25 4/01/09 490 445,900 Sterling Chemical Holdings, Inc., Sr. Sub. Notes Caa3 11.75 8/15/06 270 162,000 Sr. Sub. Notes Caa3 11.25 4/01/07 625 362,500 Texas Petrochemicals Corp., Sr. Sub. Notes, Ser. B B3 11.125 7/01/06 750 630,000 ------------ 6,891,138 - ------------------------------------------------------------------------------------------------------------------------------ Consumer Goods & Services--7.5% Allied Waste North America, Inc., Sr. Notes Ba3 7.625 1/01/06 750 667,500 Sr. Sub. Notes B2 10.00 8/01/09 750 684,375 Bell Sports, Inc., Sr. Sub. Notes B3 11.00 8/15/08 670 676,700 Corning Consumer Prod. Co., Sr. Sub. Notes B3 9.625 5/01/08 1,350 1,066,500 Evenflo Co., Inc., Sr. Notes, Ser. B B2 11.75 8/15/06 500 490,000 Pillowtex Corp., Sr. Sub. Notes, Ser. B B3 9.00 12/15/07 750 465,000 Polaroid Corp., Sr. Notes Ba3 11.50 2/15/06 905 944,594 Revlon Worldwide, Sr. Disc. Notes, Ser. B Caa3 Zero 3/15/01 750 412,500 Simmons Co., Sr. Sub. Notes B3 10.25 3/15/09 500 492,500 True Temper Sports, Inc., Sr. Sub. Notes B3 10.875 12/01/08 1,000 950,000 Westpoint Stevens, Inc., Sr. Notes Ba3 7.875 6/15/08 1,000 900,000 ------------ 7,749,669 - ------------------------------------------------------------------------------------------------------------------------------ Containers--2.5% BWay Corp., Sr. Sub. Notes, Ser. B B2 10.25 4/15/07 750 750,000 Consumers Packaging, Inc., Sr. Notes B1 9.75 2/01/07 730 657,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 4 Portfolio of Investments as of September 30, 1999 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Containers (cont'd.) Silgan Holdings, Inc., Sr. Sub. Deb. B1 9.00% 6/01/09 $ 1,000 $ 960,000 Sub. Deb., PIK B1 13.25 7/15/06 200 218,000 ------------ 2,585,000 - ------------------------------------------------------------------------------------------------------------------------------ Energy & Related Goods & Services--3.4% Abraxas Petroleum Corp., Sr. Notes, Ser. B Caa2 11.50 11/01/04 500 345,000 Clark R & M, Inc., Sr. Notes Ba3 8.625 8/15/08 500 437,500 Frontier Oil Corp., Sr. Notes B1 9.125 2/15/06 750 712,500 Kelley Oil & Gas Corp., Sr. Sub. Notes, Ser. B Ca 10.375 10/15/06 350 171,500 P & L Coal Holdings Corp., Sr. Notes Ba3 8.875 5/15/08 1,000 972,500 RAM Energy, Inc., Sr. Notes Caa1 11.50 2/15/08 635 295,275 RBF Finance Co., Sr. Sec. Notes Ba3 11.00 3/15/06 370 388,500 Tatneft Finance, Gtd. Bonds (Russia) Ca 9.00 10/29/02 500 (d) 242,500 ------------ 3,565,275 - ------------------------------------------------------------------------------------------------------------------------------ Entertainment--1.1% Carmike Cinemas, Inc., Sr. Sub. Notes, Ser. B B2 9.375 2/01/09 750 690,000 Loews Cineplex Entertainment Corp., Sr. Sub. Notes B3 8.875 8/01/08 500 445,000 ------------ 1,135,000 - ------------------------------------------------------------------------------------------------------------------------------ Financial Services--5.1% Bangkok Bank Public Co., Deb. (Thailand) B+(c) 8.75 3/15/07 1,000 (d) 799,300 FirstFed Financial Corp., Sr. Notes B2 11.75 10/01/04 500 505,000 Fugi JGB Investment LLC Ba1 9.87 12/31/49 500 505,000 Ocwen Federal Bank, Sub. Deb. B1 12.00 6/15/05 500 470,000 Olympic Financial, Ltd., Sr. Notes B3 11.50 3/15/07 750 (e) 562,500 Thai Farmers Bank Ltd., Sub. Notes (Thailand) Ba1 8.25 8/21/16 1,500 (d) 997,500 Western Financial Svgs. Bank, Sub. Cap. Deb. B2 8.875 8/01/07 1,640 1,451,400 ------------ 5,290,700 - ------------------------------------------------------------------------------------------------------------------------------ Food & Lodging--3.3% Del Monte Foods Co., Sr. Disc. Notes, Zero Coupon (until 12/15/02) Caa1 12.50 12/15/07 1,137 835,695 John Q. Hammons Hotels., First Mtge. Bonds B2 8.875 2/15/04 1,500 1,372,500 Purina Mills, Inc., Sr. Sub. Notes Ca 9.00 3/15/10 500 (b) 115,000 Vlasic Foods International, Inc., Sr. Sub. Notes B2 10.25 7/01/09 1,250 1,131,250 ------------ 3,454,445
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 5 Portfolio of Investments as of September 30, 1999 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Gaming--2.4% Hollywood Casino Corp., Sr. Sub. Notes B3 11.25% 5/01/07 $ 1,000 $ 1,007,500 Lady Luck Gaming Corp., First Mtge. Notes B2 11.875 3/01/01 1,000 1,010,000 Venetian Casino Resort LLC, First Mtge. Notes B3 12.25 11/15/04 600 474,000 ------------ 2,491,500 - ------------------------------------------------------------------------------------------------------------------------------ General Industrial--8.3% Anchor Glass Container Corp., First Mtge. Notes B2 11.25 4/01/05 685 685,000 AXA S.A. De CV, Gtd. Notes (Mexico) B1 9.00 8/04/04 850 (d) 714,000 Clark Material Handling Co., Sr. Notes, Ser. D B1 10.75 11/15/06 1,500 1,200,000 Grove Worldwide LLC, Sr. Sub. Notes Caa1 9.25 5/01/08 595 285,600 Henry Co., Sr. Notes, Ser. B B3 10.00 4/15/08 1,000 660,000 International Wire Group, Inc., Sr. Sub. Notes, Ser. B B3 11.75 6/01/05 750 766,875 IT Group, Inc., Sr. Sub. Notes B3 11.25 4/01/09 500 472,500 Neenah Corp., Sr. Sub. Notes, Ser. B B3 11.125 5/01/07 750 690,000 Numatics, Inc., Sr. Sub. Notes, Ser. B B3 9.625 4/01/08 375 315,000 Terex Corp., Sr. Sub. Notes, Ser. D B2 8.875 4/01/08 750 705,000 United Rentals, Inc., Sr. Sub. Notes B1 9.00 4/01/09 1,500 1,410,000 WESCO Distribution, Inc., Sr. Sub. Notes B2 9.125 6/01/08 750 705,000 ------------ 8,608,975 - ------------------------------------------------------------------------------------------------------------------------------ Grocery Stores--1.0% Homeland Stores, Inc., Sr. Notes NR 10.00 8/01/03 1,250 1,037,500 - ------------------------------------------------------------------------------------------------------------------------------ Health Care--8.0% Alaris Medical Systems, Inc., Sr. Sub. Notes B3 9.75 12/01/06 850 773,500 Alaris Medical, Inc., Sr. Disc. Notes Caa1 11.125 8/01/08 750 386,250 Beverly Enterprises, Inc., Sr. Notes Ba3 9.00 2/15/06 750 645,937 Columbia/HCA Healthcare Corp., Notes Ba2 7.25 5/20/08 720 630,029 Conmed Corp., Sr. Sub. Notes B3 9.00 3/15/08 750 690,000 DJ Orthopedics LLC, Sr. Sub. Notes B3 12.625 6/15/09 1,250 1,178,125 Mediq, Inc., Sr. Sub. Notes B3 11.00 6/01/08 1,250 812,500 Packard Bioscience Co., Sr. Sub. Notes, Ser. B B3 9.375 3/01/07 250 230,000 Tenet Healthcare Corp., Sr. Sub. Notes, Ser. B Ba3 8.125 12/01/08 850 775,625 Triad Hospitals Holdings, Inc., Sr. Sub. Notes B3 11.00 5/15/09 855 846,450 Universal Hospital Svcs., Sr. Notes B3 10.25 3/01/08 1,750 1,347,500 ------------ 8,315,916 - ------------------------------------------------------------------------------------------------------------------------------ Home Building & Real Estate--6.6% Beazer Homes USA, Inc., Sr. Notes Ba3 8.875 4/01/08 1,250 1,125,000 D.R. Horton, Inc., Sr. Notes Ba1 8.00 2/01/09 750 678,750
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 6 Portfolio of Investments as of September 30, 1999 (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.) Kaufman & Broad Home Corp., Sr. Sub. Notes B1 9.625% 11/15/06 $ 250 $ 251,250 LNR Property Corp., Sr. Sub. Notes B1 10.50 1/15/09 750 738,750 Presley Companies, Sr. Notes Caa3 12.50 7/01/01 1,000 835,000 Ryland Group, Inc., Sr. Sub. Notes B1 8.25 4/01/08 750 690,000 Standard Pacific Corp., Sr. Notes Ba2 8.50 6/15/07 750 708,750 U.S. Home Corp., Sr. Sub. Notes B1 8.88 8/15/07 500 450,000 Webb Delaware Corp., Sr. Sub. Deb. B2 10.25 2/15/10 1,500 1,395,000 ------------ 6,872,500 - ------------------------------------------------------------------------------------------------------------------------------ Media & Communications--11.5% Ackerley Group, Inc., Sr. Sub. Notes, Ser. B B2 9.00 1/15/09 750 716,250 Big Flower Press Holdings, Inc., Sr. Sub. Notes B2 8.625 12/01/08 750 720,000 Echostar DBS Corp., Notes B2 9.25 2/01/06 1,000 987,500 Fox/Liberty Networks LLC, Sr. Disc. Notes, Zero Coupon (until 8/15/02) Ba1 9.75 8/15/07 1,000 785,000 Sr. Notes Ba1 8.875 8/15/07 260 262,600 Globo Comunicacoes e Participacoes S.A., Notes (Brazil) B2 10.50 12/20/06 1,750 (d) 1,308,125 Innova S de R.L., Sr. Notes (Mexico) B3 12.875 4/01/07 1,750 (d) 1,426,250 Lin Holdings Corp., Sr. Disc. Notes, Zero Coupon (until 3/1/03) B3 10.00 3/01/08 1,350 884,250 Sullivan Graphics, Inc., Sr. Sub. Notes Caa1 12.75 8/01/05 1,000 1,020,000 Sun Media Corp., Sr. Sub. Notes B1 9.50 5/15/07 500 512,500 TV Azteca S.A. de CV, (Brazil) Gtd. Sr. Notes B1 10.50 2/15/07 1,250 (d) 962,500 Gtd. Sr. Notes, Ser. A B1 10.125 2/15/04 500 (d) 405,000 Von Hoffmann Press, Inc., Sr. Sub. Notes B3 10.875 5/15/07 700 686,000 World Color Press, Inc., Sr. Sub. Notes Baa3 8.375 11/15/08 1,250 1,237,500 ------------ 11,913,475 - ------------------------------------------------------------------------------------------------------------------------------ Metals, Mining & Related--6.3% AK Steel Corp., Sr. Notes Ba2 9.125 12/15/06 500 497,500 Ameristeel Corp., Sr. Notes Ba3 8.75 4/15/08 500 497,500 Bayou Steel Corp., First Mtge. Notes B1 9.50 5/15/08 1,250 1,181,250 Bulong Operation Pty Ltd., Sr. Notes B3 12.50 12/15/08 315 316,575 Companhia Vale do Rio Doce., Notes (Brazil) NR 10.00 4/02/04 750 (d) 742,500 CSN Iron S.A., Gtd. Notes (Brazil) B2 9.125 6/01/07 750 (d) 560,625 Freeport-McMoran Copper & Gold., Sr. Notes B3 7.50 11/15/06 480 355,200 Kaiser Aluminum & Chemical Corp., Sr. Notes, Ser. B B1 10.875 10/15/06 750 757,500
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 Portfolio of Investments as of September 30, 1999 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Metals, Mining & Related (cont'd.) Weirton Steel Corp., Sr. Notes B2 11.375% 7/01/04 $ 1,250 $ 1,212,500 Wells Aluminum Corp., Sr. Notes, Ser. B B2 10.125 6/01/05 440 422,400 ------------ 6,543,550 - ------------------------------------------------------------------------------------------------------------------------------ Paper & Packaging--10.9% American Pad & Paper Co., Sr. Sub. Notes, Ser. B Caa1 13.00 11/15/05 350 112,000 APP Int'l. Finance Co., (Indonesia) Sec. Notes Caa1 11.75 10/01/05 500 (d) 320,000 Sec. Notes Caa1 3.50 4/30/03 750 (d) 366,600 Aracruz Celulose S.A., Notes (Brazil) B2 10.375 1/31/02 1,750 (d) 1,736,875 Bahia Sul Celulose S.A., (Brazil) NR 10.625 7/10/04 1,350 (d) 1,242,000 Container Corp. of America, Sr. Notes B2 9.75 4/01/03 500 512,500 Sr. Notes, Ser. B B2 10.75 5/01/02 1,000 1,040,000 Doman Industries Ltd., (Canada) Sr. Notes Caa1 8.75 3/15/04 1,250 (d) 887,500 Sr. Sec. Notes B3 12.00 7/01/04 1,000 (d) 1,005,000 Klabin Fabricadora de Papel e Celulose S.A., Gtd. Notes (Brazil) NR 11.00 8/12/04 500 (d) 485,000 Pacifica Papers, Inc., Sr. Notes B1 10.00 3/15/09 750 761,250 Packaging Corp. of America, Sr. Sub. Notes B3 9.625 4/01/09 940 947,050 Pindo Deli Finance Mauritius Ltd., Gtd Sr. Notes (Indonesia) Caa1 10.75 10/01/07 1,750 (d) 936,250 Repap New Brunswick, Inc., Sr. Notes (Canada) Caa1 10.625 4/15/05 500 (d) 436,250 Tembec Inds, Inc., Gtd. Sr. Notes (Canada) Ba3 8.625 6/30/09 500 (d) 490,000 ------------ 11,278,275 - ------------------------------------------------------------------------------------------------------------------------------ Retail--0.1% Leslies Poolmart, Inc., Sr. Notes B2 10.375 7/15/04 100 96,000 - ------------------------------------------------------------------------------------------------------------------------------ Technology--11.0% Advanced Micro Devices, Inc., Sr. Sec. Notes B2 11.00 8/01/03 455 410,637 Amkor Technologies, Inc., Sr. Notes Ba3 9.25 5/01/06 1,500 1,485,000 Sr. Sub. Notes B2 10.50 5/01/09 500 480,000 Chippac International Ltd., Sr. Sub. Notes B3 12.75 8/01/09 365 366,825
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 8 Portfolio of Investments as of September 30, 1999 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Technology (cont'd) DecisionOne Holdings Corp., Sr. Disc. Deb., Zero Coupon (until 8/1/02) C(c) 11.50% 8/01/08 $ 1,000 (e) $ 7,500 Sr. Sub. Notes C(c) 9.75 8/01/07 500 20,000 Exodus Communications, Inc., Sr. Notes B-(c) 11.25 7/01/08 990 1,003,650 Fairchild Semiconductor Corp., Sr. Sub. Notes B3 10.375 10/01/07 145 142,825 Sr. Sub. Notes B3 10.125 3/15/07 745 726,375 Fisher Scientific International, Inc., Sr. Sub. Notes B3 9.00 2/01/08 1,500 1,402,500 Integrated Circuit Systems, Inc., Sr. Sub. Notes B3 11.50 5/15/09 850 816,000 Intersil Corp., Sr. Sub. Notes B3 13.25 8/15/09 500 515,000 Orbital Imaging Corp., Sr. Notes, Ser. D NR 11.625 3/01/05 750 510,000 Samsung Electronics America, Inc., Gtd. Notes Ba1 9.75 5/01/03 1,500 1,530,000 SCG Holding Corp., Sr. Notes B2 12.00 8/01/09 675 691,875 Zilog, Inc., Sr. Sec. Notes B2 9.50 3/01/05 1,500 1,368,750 ------------ 11,476,937 - ------------------------------------------------------------------------------------------------------------------------------ Telecommunications--15.0% American Mobile Satellite, Inc., Sr. Notes NR 12.25 4/01/08 500 (e) 355,000 Concentric Network Corp., Sr. Notes B-(c) 12.75 12/15/07 750 (e) 757,500 Covad Communications Group, Inc., Sr. Disc. Notes B3 12.50 2/15/09 500 472,500 Sr. Disc. Notes, Ser. B B3 13.50 3/15/08 1,000 515,000 E Spire Communications Insurance, Sr. Disc. Notes NR 12.75 4/01/06 500 260,000 GST Network Funding, Inc., Sr. Disc. Notes, Zero Coupon (until 5/1/03) NR 10.50 5/01/08 1,500 750,000 GST Telecommunications, Inc., Sr. Sub. Notes, Zero Coupon (until 11/15/02) NR 12.75 11/15/07 500 515,000 Hermes Europe Railtel BV, Sr. Notes B3 10.375 1/15/09 1,000 975,000 Hyperion Telecommunications, Inc., Sr. Disc. Notes, Zero Coupon (until 4/15/01) B3 13.00 4/15/03 265 223,925 Sr. Sec. Notes, Ser. B B3 12.25 9/01/04 1,250 1,318,750 ICO Global Commerce, Sr. Notes Caa2 15.00 8/01/05 250 (b) 47,500 Intermedia Communications, Inc., Sr. Notes B2 8.875 11/01/07 250 219,375 Sr. Notes B2 8.60 6/01/08 750 646,875 Sr. Notes, Ser. B B2 9.50 3/01/09 500 453,750 Iridium Cap. Corp., Gtd. Notes Caa3 14.00 7/15/05 750 (b) 75,000 Gtd. Sr. Notes, Ser. D Caa3 10.875 7/15/05 500 (b) 50,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 Portfolio of Investments as of September 30, 1999 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Principal Moody's Interest Maturity Amount Value Description Rating Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Telecommunications (cont'd.) McLeodUSA, Inc., Sr. Notes B1 9.25% 7/15/07 $ 750 $ 744,375 PsiNet, Inc., Sr. Notes B3 11.50 11/01/08 750 761,250 Sr. Notes B3 11.00 8/01/09 500 492,500 Sr. Notes B3 10.00 2/15/05 500 480,000 RCN Corp. B3 10.00 10/15/07 500 480,000 RSL Communications Plc. B2 9.875 11/15/09 750 660,000 Teligent, Inc., Sr. Notes Caa1 11.50 12/01/07 750 690,000 Time Warner Telecom LLC, Sr. Notes B2 9.75 7/15/08 500 510,000 Verio, Inc., Sr. Notes B3 11.25 12/01/08 350 358,750 Sr. Notes B3 10.375 4/01/05 500 495,000 Viatel, Inc., Sr. Notes Caa1 11.50 3/15/09 1,000 970,000 Winstar Communications, Inc., Sr. Disc. Notes, Zero Coupon (until 10/15/00) Caa1 14.00 10/15/05 1,500 1,282,500 ------------ 15,559,550 - ------------------------------------------------------------------------------------------------------------------------------ Transportation--3.1% Airtran Airlines, Sr. Sec. Notes, Ser. B B2 10.50 4/15/01 500 490,000 Atlas Air, Inc., Sr. Notes B3 10.75 8/01/05 240 242,400 MRS Logisticasa S.A., Sr. Notes (Brazil) B(c) 10.625 8/15/05 1,000 (d) 695,000 TFM S.A. De CV, Sr. Disc. Notes B2 11.75 6/15/09 750 420,000 Sr. Notes B2 10.25 6/15/07 350 311,500 Valujet, Inc., Sr. Notes B3 10.25 4/15/01 1,250 1,062,500 ------------ 3,221,400 - ------------------------------------------------------------------------------------------------------------------------------ Utilities--0.3% IEBA-Invers Electric Co., Notes BB(c) 9.00 9/16/04 500 315,000 ------------ Total corporate bonds (cost $150,094,572) 135,151,495 - ------------------------------------------------------------------------------------------------------------------------------ FOREIGN GOVERNMENT OBLIGATIONS--1.5% Republic of Brazil, Bonds B2 11.625 4/15/04 1,020 (d) 956,250 Republic of Brazil, Bonds, FRB B2 5.875 4/15/24 1,000 (d) 637,500 ------------ Total foreign government obligations (cost $1,533,396) 1,593,750
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 10 Portfolio of Investments as of September 30, 1999 (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Moodys Interest Maturity Value Description Rating Rate Date Shares (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS(a) Fitzgeralds Gaming Corp. -- -- -- 12,540 $ 12 SF Holding Group, Class C -- -- -- 4,070 41 ------------ Total common stocks (cost $125) 53 - ------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--4.4% Concentric Network Corp., PIK CCC-(c) 13.50% -- 1,069 983,623 Fairfield Mfg., Inc., Exchangeable, PIK B3 11.25 -- 1,000 990,000 Fitzgeralds Gaming Corp., Cumulative Redeemable NR 15.00 -- 10,000 20,000 Granite Broadcasting Corp., Cumulative Exchangeable, PIK B3 12.75 -- 423 410,475 IXC Communications, Inc., Jr. Pfd. Exchangeable Ser. Caa 6.75 -- 1 202 Lady Luck Gaming Corp., Ser. A NR 11.50 -- 7,000 294,000 R & B Falcon Corp., Sr. Pref. B-(c) 13.88 -- 831 788,999 SF Holdings Group, Inc., Exchangeable, PIK NR 13.75 -- 125 350,720 Superior Nat'l. Capital Trust B1 10.75 -- 750 693,750 ------------ Total preferred stocks (cost $5,456,681) 4,531,769 - ------------------------------------------------------------------------------------------------------------------------------ WARRANTS(a)--0.3% American Mobile Satellite Corp., expiring 4/1/08 -- -- -- 280 11,200 Benedek Communications Corp., expiring 7/1/07 -- -- -- 5,500 11,000 Concentric Network Corp., expiring 12/15/07 -- -- -- 255 45,900 MGC Communications, Inc., expiring 10/1/04 -- -- -- 500 44,750 R & B Falcon Corp., expiring 5/1/09 -- -- -- 800 200,000 ------------ Total warrants (cost $17,500) 312,850 - ------------------------------------------------------------------------------------------------------------------------------ Total Investments--136.3% (cost $157,102,274; Note 3) 141,589,917 Liabilities in excess of other assets--(36.3)% (37,689,556) ------------ Net Assets--100% $103,900,361 ------------ ------------
- --------------- (a) --Non-income-producing security. (b) --Represents issuer in default on interest payments; non-income-producing security. (c) --S&P rating because there is no Moody's Rating. (d) --US$ Denominated Foreign Bonds. (e) --Consists of more than 1 class of securities traded together as a unit; generally bonds with attached stock or warrants. NR --Not rated by Moody's or S&P. FRB --Floating Rate Bond. LLC --Limited Liability Corporation. L.P. --Limited Partnership. PIK --Payment in Kind. - -------------------------------------------------------------------------------- See Notes to Financial Statements. 11 Statement of Assets and Liabilities (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Assets September 30, 1999 Investments, at value (cost $157,102,274).............................................................. $ 141,589,917 Cash................................................................................................... 553,425 Interest receivable.................................................................................... 4,093,521 Receivable for investments sold........................................................................ 630,967 Other assets........................................................................................... 59,999 ------------------ Total assets........................................................................................ 146,927,829 ------------------ Liabilities Loan payable (Note 4).................................................................................. 40,000,000 Payable for investments purchased...................................................................... 1,285,656 Dividends payable...................................................................................... 1,108,271 Loan interest payable (Note 4)......................................................................... 484,031 Accrued expenses....................................................................................... 69,063 Advisory fee payable................................................................................... 43,617 Deferred directors' fees............................................................................... 19,383 Administration fee payable............................................................................. 17,447 ------------------ Total liabilities................................................................................... 43,027,468 ------------------ Net Assets............................................................................................. $ 103,900,361 ------------------ ------------------ Net assets were comprised of: Common stock, at par................................................................................ $ 152,644 Paid-in capital in excess of par.................................................................... 129,579,422 ------------------ 129,732,066 Undistributed net investment income................................................................. 802,319 Accumulated net realized loss on investments........................................................ (11,121,667 ) Net unrealized depreciation of investments.......................................................... (15,512,357 ) ------------------ Net assets, September 30, 1999...................................................................... $ 103,900,361 ------------------ ------------------ Net asset value per share ($103,900,361 / 15,264,445 shares of common stock issued and outstanding).... $6.81 ------------------ ------------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 12 THE HIGH YIELD PLUS FUND, INC. Statement of Operations (Unaudited) - ------------------------------------------------------------
Six Months Ended September 30, Net Investment Income 1999 Income Interest.............................. $ 8,451,571 Dividends............................. 143,773 ------------------ 8,595,344 ------------------ Expenses Investment advisory fee............... 277,555 Administration fee.................... 111,022 Custodian's fees and expenses......... 61,000 Transfer agent's fees and expenses.... 34,000 Legal fees and expenses............... 33,000 Reports to shareholders............... 26,000 Audit fee and expenses................ 14,000 Directors' fees and expenses.......... 7,000 Miscellaneous......................... 17,411 ------------------ Total operating expenses........... 580,988 Loan interest expense (Note 4)........ 1,246,871 ------------------ Total expenses..................... 1,827,859 ------------------ Net investment income.................... 6,767,485 ------------------ Realized and Unrealized Loss on Investments Net realized loss on investment transactions.......................... (3,823,596) Net change in unrealized depreciation of investments........................... (4,814,744) ------------------ Net loss on investments.................. (8,638,340) ------------------ Net Decrease in Net Assets Resulting from Operations................ $ (1,870,855) ------------------ ------------------
THE HIGH YIELD PLUS FUND, INC. Statement of Cash Flows (Unaudited) - ------------------------------------------------------------
Six Months Ended September 30, Increase (Decrease) in Cash 1999 Cash flows provided from operating activities Interest and dividends received (excluding discount amortization of $889,965)........ $ 7,467,643 Operating expenses paid...................... (141,999) Loan interest and commitment fee paid........ (1,432,133) Purchases of long-term portfolio investments............................... (59,927,748) Proceeds from disposition of long-term portfolio investments..................... 59,469,456 Deferred expenses and other assets........... (110) ------------ Net cash provided from operating activities................................ 5,435,109 ------------ Cash used for financing activities Net increase in notes payable................ 5,000,000 Cash dividends paid (excluding reinvestment of dividends of $405,330)................. (6,217,782) ------------ Net cash used for financing activities....... (1,217,782) ------------ Net increase in cash......................... 4,217,327 Cash (overdraft) at beginning of period...... (3,663,902) ------------ Cash at end of period........................ $ 553,425 ------------ ------------ Reconciliation of Net Decrease in Net Assets to Net Cash Provided from Operating Activities Net decrease in net assets resulting from operations................................... $(1,870,856) ------------ Increase in investments......................... (1,033,320) Net realized loss on investment transactions.... 3,823,596 Net change in unrealized depreciation of investments.................................. 4,814,744 Decrease in receivable for investments sold..... 1,360,359 Increase in interest and dividends receivable... (237,736) Increase in deferred expenses and other assets....................................... (110) Decrease in payable for investments purchased... (1,675,295) Increase in accrued expenses and other liabilities.................................. 253,727 ------------ Total adjustments............................ 7,305,965 ------------ Net cash provided from operating activities................................ $ 5,435,109 ------------ ------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 13 THE HIGH YIELD PLUS FUND, INC. Statement of Changes in Net Assets (Unaudited) - ------------------------------------------------------------
Six Months Ended September Year Ended Increase (Decrease) 30, March 31, in Net Assets 1999 1999 ------------ ------------ Operations Net investment income....... $ 6,767,485 $ 10,941,903 Net realized loss on investment transactions............. (3,823,596) (4,154,864) Net change in unrealized depreciation of investments.............. (4,814,744) (13,817,809) ------------ ------------ Net decrease in net assets resulting from operations............... (1,870,855) (7,030,770) Dividends from net investment income...................... (6,627,425) (10,590,243) Net proceeds from rights offering of Fund shares..... -- 24,581,103 Value of Fund shares issued to shareholders in reinvestment of dividends................ 405,330 474,849 ------------ ------------ Total increase (decrease)...... (8,092,950) 7,434,939 Net Assets Beginning of period............ 111,993,311 104,558,372 ------------ ------------ End of period(a)............... $103,900,361 $111,993,311 ------------ ------------ ------------ ------------ - --------------- (a) Includes undistributed net investment income of....... $ 802,319 $ 662,259 ------------ ------------
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. 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' in the Statement of Assets and Liabilities. - -------------------------------------------------------------------------------- 14 Notes to Financial Statements (Unaudited) THE HIGH YIELD PLUS FUND, INC. - -------------------------------------------------------------------------------- Securities Transactions and Net Investment Income: Security transactions are recorded on the trade date. Realized gains and losses from securities transactions are calculated on the identified cost basis. Interest income, which is comprised of three elements; stated coupon rate, original issue discount and market discount, is recorded on an accrual basis. Dividend income is recorded on the ex-dividend date. Expenses are recorded on the accrual basis which may require the use of certain estimates by management. Taxes: It is the Fund's policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to shareholders. Therefore, no federal income tax provision is required. Dividends and Distributions: The Fund expects to declare and pay dividends of net investment income monthly and make distributions at least annually of any net capital gains. Dividends and distributions are recorded on the ex-dividend date. Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. - ------------------------------------------------------------ Note 2. Agreements The Fund has agreements with the Investment Adviser and with Prudential Investments Fund Management LLC (the 'Administrator'). The Investment Adviser makes investment decisions on behalf of the Fund; the Administrator provides occupancy and certain clerical and accounting services to the Fund. The Fund bears all other costs and expenses. The investment advisory agreement provides for the Investment Adviser to receive a fee, computed weekly and payable monthly at an annual rate of .50% of the Fund's average weekly net assets. The administration agreement provides for the Administrator to receive a fee, computed weekly and payable monthly at an annual rate of .20% of the Fund's average weekly net assets. - ------------------------------------------------------------ Note 3. Portfolio Securities Purchases and sales of investment securities, other than short-term investments, for the six months ended September 30, 1999, were $58,252,453 and $58,109,097, respectively. The federal income tax basis of the Fund's investments, as of September 30, 1999, was $157,222,274 and, accordingly, net unrealized depreciation for federal income tax purposes was $15,635,683 (gross unrealized appreciation--$1,317,530; gross unrealized depreciation--($16,953,213). For federal income tax purposes, the Fund has a capital loss carryforward as of March 31, 1999 of approximately $3,646,000 of which $1,337,000 expires in 2003, $1,806,000 expires in 2004 and $503,000 expires in 2007. Accordingly, no capital gains distributions are expected to be paid to shareholders until net gains have been realized in excess of such carryforward. The Fund elected to treat net capital losses of approximately $3,378,600 incurred in the five month period ended March 31, 1999 as having incurred in this fiscal year. - ------------------------------------------------------------ Note 4. Borrowings The Fund has a credit agreement with two 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, 1999 was $44,000,000 at a weighted average interest rate of 5.63%. The maximum face amount of borrowings outstanding at any month-end during the six months ended September 30, 1999 was $47,000,000. The current borrowings of $40,000,000 (at a weighted average interest rate of 5.84%) mature throughout the period from October 8, 1999 to February 4, 2000. The Fund has paid commitment fees at an annual rate of .09 of 1% on any unused portion of the credit facility. Commitment fees are included in 'Loan Interest' as reported on the Statement of Assets and Liabilities and on the Statement of Operations. - ------------------------------------------------------------ Note 5. Capital There are 100 million shares of $.01 par value common stock authorized. During the six months ended September 30, 1999 and the fiscal year ended March 31, 1999, the Fund issued 55,649 and 60,734 shares in connection with reinvestment of dividends, respectively. - ------------------------------------------------------------ Note 6. Dividends On August 23, 1999 the Board of Directors of the Fund declared dividends of $0.0725 per share payable on October 8, November 5 and December 10 to shareholders of record on September 30, October 29 and November 30, respectively. - -------------------------------------------------------------------------------- See Notes to Financial Statements 15 Financial Highlights (Unaudited) THE HIGH YIELD PLUS FUND, INC. - --------------------------------------------------------------------------------
Six Months Ended Year Ended March 31, September 30, --------------------------------------------------------- 1999 1999 1998 1997 1996 1995 ------------- -------- -------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period................ $ 7.36 $ 9.21 $ 8.54 $ 8.44 $ 7.85 $ 8.38 ------------- -------- -------- ------- ------- ------- Income from investment operations Net investment income............................... .44 .88 .84 .82 .84 .87 Net realized and unrealized gain (loss) on investments...................................... (.55) (1.59) .67 .12 .59 (.54) ------------- -------- -------- ------- ------- ------- Total from investment operations................. (.11) (.71) 1.51 .94 1.43 .33 ------------- -------- -------- ------- ------- ------- Less dividends and distributions Dividends from net investment income................ (.44) (.88) (.84) (.82) (.84) (.86) Distributions in excess of net investment income.... -- -- -- (.02) -- -- ------------- -------- -------- ------- ------- ------- Total dividends.................................. (.44) (.88) (.84) (.84) (.84) (.86) ------------- -------- -------- ------- ------- ------- Capital change in respect to issuance of shares........................................ -- (.26) -- -- -- -- ------------- -------- -------- ------- ------- ------- Net asset value, end of period(a)................... $ 6.81 $ 7.36 $ 9.21 $ 8.54 $ 8.44 $ 7.85 ------------- -------- -------- ------- ------- ------- ------------- -------- -------- ------- ------- ------- Market price per share, end of period(a)............ $ 7.25 $ 7.1875 $ 9.125 $ 9.00 $ 8.75 $ 8.00 ------------- -------- -------- ------- ------- ------- ------------- -------- -------- ------- ------- ------- TOTAL INVESTMENT RETURN(b):......................... 6.93% (12.36)% 11.25% 13.38% 20.80% 6.33% ------------- -------- -------- ------- ------- ------- ------------- -------- -------- ------- ------- ------- RATIO/SUPPLEMENTAL DATA: Net assets, end of period (000 omitted)............. $ 103,900 $111,993 $104,558 $96,042 $94,091 $86,704 Average net assets (000 omitted).................... $ 108,571 $ 94,437 $100,766 $95,946 $92,855 $87,734 Ratio to average net assets: Expenses, before loan interest, commitment fees and nonrecurring expenses..................... 1.07%(c) 1.11% 1.07% 1.08% 1.01% 1.11% Total expenses................................... 3.37%(c) 3.14% 2.44% 2.32% 2.29% 2.71% Net investment income............................ 12.47%(c) 11.60% 9.41% 9.63% 10.18% 10.90% Portfolio turnover rate............................. 39% 94% 112% 60% 60% 47% Total debt outstanding at end of period (000 omitted)......................................... $ 40,000 $ 35,000 $ 30,000 $18,000 $17,000 $19,000 Asset coverage per $1,000 of debt outstanding....... $ 3,598 $ 4,204 $ 4,485 $ 6,336 $ 6,535 $ 5,563
- --------------- (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 period 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 period 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 23, 1999 at the offices of Prudential Investments Fund Management LLC, 751 Broad Street, Newark, New Jersey. The meeting was held for the following purposes: (1) To elect the following director to serve as follows: Director Class Term Expiring ----------------------------- ------ -------- --------- Douglas H. McCorkindale II 3 years 2002 Directors whose term of office continued beyond this meeting are Eugene C. Dorsey and Thomas T. Mooney. (2) To approve the proposed changes to the Fund's fundamental investment restrictions, including: (A) Minor wording changes in the Fund's fundamental investment restriction on underwriting securities. (B) Clarification in wording of the Fund's fundamental restriction on portfolio diversification with respect to 75% of the Fund's total assets. (C) Clarification of the Fund's fundamental restriction regarding real estate investments and the types of real estate related securities in which the Fund may invest. (D) Modification of the Fund's fundamental restriction on investing in commodities to broaden the exception to the prohibition on buying and selling physical commodities to cover all financial derivative instruments. (E) Elimination of the Fund's fundamental restriction on investments in oil, gas and mineral programs. (F) Elimination of the Fund's fundamental restriction on investing in companies for the purpose of exercising control or management. (G) Elimination of the Fund's fundamental restriction on purchasing securities issued by other investment companies. (H) Elimination of the Fund's fundamental restriction on selling securities short. (3) To ratify the selection of PricewaterhouseCoopers LLP as independent public accountants for the year ending March 31, 2000. The results of the proxy solicitation on the above matters were as follows:
Director/Matter Votes for Votes against Votes withheld Abstentions ---------------------------- ---------- -------------- --------------- ------------ (1) Douglas H. McCorkindale 8,309,513 -- 321,845 -- (2) Amendment of investment restrictions (A) 8,113,855 128,175 274,631 -- (B) 8,403,785 456,576 284,237 -- (C) 8,250,254 608,116 275,320 -- (D) 8,162,417 864,281 287,120 -- (E) 8,077,868 770,188 218,001 -- (F) 8,155,486 671,109 300,602 -- (G) 8,219,050 621,142 254,491 -- (H) 8,015,202 187,184 282,313 -- (3) PricewaterhouseCoopers LLP 8,295,886 140,901 -- 172,259
- -------------------------------------------------------------------------------- 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 Douglas H. McCorkindale Thomas T. Mooney Investment Adviser Wellington Management Company, LLP 75 State Street Boston, MA 02109 Administrator Prudential Investments Fund Management LLC Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 Custodian and Transfer Agent State Street Bank and Trust Company One Heritage Drive North Quincy, MA 02171 Independent Accountants PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, NY 10036 Legal Counsel Kirkpatrick & Lockhart LLP 1800 Massachusetts Avenue, N.W. Washington, D.C. 20036 Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may purchase, from time to time, shares of its common stock at market prices. The accompanying financial statements as of September 30, 1999, 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-----