ANNUAL REPORT March 31, 1996
The High Yield
Plus Fund, Inc.
(LOGO)
<PAGE>
Letter To Shareholders April 9, 1996
Dear Shareholder:
The high yield market enjoyed a fairly robust year during the twelve months
ended March 31, 1996. Market strength was driven by a combination of strong
investor demand for high yield securities, a generally positive interest rate
environment, and a modestly growing economy. While the key concern of the high
yield marketplace last fall was the risk that a recession was likely during
1996, the most recent releases of economic statistics would indicate that the
economy may be brighter than expected. As a result, while the Treasury bond
market had rallied in the December quarter of the year given expectations that
the Federal Reserve Board would be forced to cut short term rates in 1996, the
overall market has now reversed itself, and interest rates have increased quite
sharply since the first of the year.
The high yield market is to some degree trapped between dueling expectations:
it is a clear positive from a fundamental credit perspective to have a healthy
economy; however, as interest rates increase, demand for high yield securities
(and other fixed income securities) is apt to decrease. Mutual fund inflows,
which were a buoyant driver of demand during 1995, may weaken or even become
negative if interest rates continue to increase. If this shift in flows
transpires, the high yield market would be negatively affected, at least from
a short-term perspective. With respect to our investment strategy, we continue
to target those issuers that offer the potential for improved financial
prospects, either through internal growth or debt reduction strategies that
should occur irrespective of broader economic trends.
The Fund's total return was as follows for the periods ended March 31, 1996. We
have also provided the returns of the Lipper Closed-End Leveraged High Yield
category, an average of 19 closed-end high yield funds; we would note that
the degree of leverage varies substantially amongst the funds in the group.
Investment Objective
The Fund seeks high current income by invest-ing in a portfolio of high yield
debt securities. Capital appreciation is a secondary objective.
TOTAL RETURNS
As of 3/31/96
<TABLE>
<CAPTION>
6 Months 12 Months 24 Months
<S> <C> <C> <C>
HYP 6.5% 18.7% 23.9%
Lipper CELHY 6.4% 16.6% 20.0%
</TABLE>
As of March 31, 1996, the Fund's total invested assets of $110 million
represented 116% of the Fund's net assets of $94 million. Total borrowings
were $17 million, a decrease of $2 million from March 31, 1995. The yield to
maturity, average years to maturity and duration were 10.1%, 8.6 years and 5.2
years respectively as of March 31, 1996. This compares to 11.3%, 8.5 years and
5.5 years respectively as of March 31, 1995. Average ratings have remained
steady at B1/B+. Some of the Portfolio's larger holdings include securities of
Fort Howard Paper Corp., the leading US manufacturer of commercial tissue
paper; Sweetheart Cup, Inc., a major producer of disposable food containers;
K & F Industries, Inc., the leading manufacturer of aircraft braking systems;
Young Broadcasting, Inc., a rapidly growing operator of network television
stations; and Container Corporation of America, a significant producer of
containerboard and other paper/packaging products.
1
<PAGE>
Stock Listing
The High Yield Plus Fund, Inc.'s common stock is traded onthe New York Stock
Exchange under the symbol "HYP" and is frequently listed as "HighYld-PlsFd"
in the financial sections of newspapers. It is also listed in a closed-end
fund table every Monday in The Wall Street Journal.
The Fund's shares closed the period at $8.75 per share. This price reflected
a premium of 3.7% to the Fund's net asset value of $8.44 per share. The monthly
dividend of $0.07 per share ($0.84 per share annualized) equates to a yield of
9.6% on the closing stock price. For comparison, this dividend yield was 330
basis points in excess of the 10-year Treasury Bond yield as of March 31, 1996.
The dividend rate is reviewed by the Board of Directors and is subject to
change based upon market conditions; past performance is not indicative of
future results.
Thank you for your interest in the Fund, and we look forward to continuing the
Fund's investment program.
Sincerely yours,
Catherine A. Smith
Portfolio Manager
Senior Vice President
Wellington Management Company
2
<PAGE>
Portfolio of Investments as of March 31, 1996 THE HIGH YIELD PLUS FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating
Interest Maturity Amount Value
Description (Unaudited)
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
LONG-TERM INVESTMENTS--116.1%
CORPORATE BONDS--112.3%
- -----------------------------------------------------------------------------
- -------------------------------------------------
Aerospace/Defense--9.1%
Howmet Corp., Sr. Sub. Notes B3
10.00% 12/01/03 $ 1,500 $ 1,563,750
K & F Industries, Inc.,
Sr. Sec. Notes B1
11.875 12/01/03 350 379,750
Sr. Sub. Deb. B2
13.75 8/01/01 2,143 2,228,720
Northrop Grumman Corp., Sr. Deb. Baa3
9.375 10/15/24 525 567,641
Rohr, Inc., Sr. Notes Ba3
11.625 5/15/03 1,250 1,387,500
Sabreliner Corp., Sr. Notes, Ser. B B2
12.50 4/15/03 625@ 592,187
Wyman Gordon Co., Sr. Notes B1
10.75 3/15/03 1,750 1,855,000
------------
8,574,548
- -----------------------------------------------------------------------------
- -------------------------------------------------
Basic Industries--23.9%
American Standard, Inc.,
Sr. Deb. Ba3
11.375 5/15/04 250 272,500
Sr. Sub. Deb., Zero Coupon, (until 6/1/98) B1
10.50 6/01/05 2,000 1,705,000
Bell & Howell Co.,
Sr. Disc. Deb., Ser. B, Zero Coupon, (until 3/1/00) B3
11.50 3/01/05 1,870 1,215,500
Sr. Notes B1
9.25 7/15/00 750 765,000
Cabot Safety Acquisition Corp., Sr. Sub. Notes B3
12.50 7/15/05 750 830,625
Calmar Inc., Sr. Sub. Notes, Ser. B B3
11.50 8/15/05 950 950,000
Coltec Industries, Sr. Notes B1
9.75 4/01/00 900 918,000
Companhia Vale do Rio Doce, Notes, (Brazil) Ba3
10.00 4/2/04 750D 755,625
Dominion Textile USA, Inc.,
Sr. Notes Ba2
8.875 11/01/03 350 343,000
Sr. Notes Ba2
9.25 4/01/06 435 435,000
Envirosource, Inc., Sr. Notes B3
9.75 6/15/03 850 765,000
Essex Group, Inc., Sr. Notes B1
10.00 5/01/03 1,000 1,010,000
Exide Corp.,
Sr. Notes B1
10.75 12/15/02 350 359,625
Sr. Notes B1
10.00 4/15/05 500 508,750
Graphic Controls Corp., Sr. Sub. Notes, Ser. A B3
12.00 9/15/05 500 532,500
Great Lakes Carbon Corp., Sr. Sec. Notes Ba3
10.00 1/01/06 1,000 1,025,000
Haynes International Inc., Sr. Sub. Notes Ca
13.50 8/15/99 750 712,500
IDEX Corp., Sr. Sub. Notes, Ba3
9.75 9/15/02 250 261,250
Interlake Corp.,
Sr. Notes B2
12.00 11/15/01 250 255,000
Sr. Sub. Deb. B3
12.125 3/01/02 1,150 1,072,375
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
3
<PAGE>
Portfolio of Investments as of March 31, 1996 THE HIGH YIELD PLUS FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating
Interest Maturity Amount Value
Description (Unaudited)
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
Basic Industries (cont'd.)
Lear Seating Corp.,
Sr. Sub. Notes B1
11.25% 7/15/00 $ 500 $ 520,000
Sub. Notes B2
8.25 2/01/02 750 720,000
Lone Star Industries, Inc., Sr. Notes NR
10.00 7/31/03 117 118,316
Overhead Door Corp., Sr. Notes B1
12.25 2/01/00 1,000 980,000
Penda Corp., Sr. Notes, Ser. B B2
10.75 3/01/04 750 630,000
Portola Packaging Inc., Sr. Notes B2
10.75 10/01/05 250 262,500
Silgan Holdings, Inc., Sr. Deb., Zero Coupon, (until
6/15/96) B3
13.25 12/15/02 785 769,300
Specialty Equipment Cos. Inc., Sr. Sub. Notes B3
11.375 12/01/03 1,000 1,047,500
Thermadyne Holdings Corp., Sr. Notes B3
10.25 5/01/02 750 753,750
Ucar Global Enterprises Inc., Sr. Sub. Notes B2
12.00 1/15/05 415 477,250
Walbro Corp., Sr. Notes, Ser. B Ba3
9.875 7/15/05 750 765,000
Westinghouse Electric Corp.,
Sr. Notes Ba1
8.875 6/01/01 425 439,633
Sr. Notes Ba1
8.375 6/15/02 300 305,235
------------
22,480,734
- -----------------------------------------------------------------------------
- -------------------------------------------------
Cable--6.7%
Cablevision Industries Corp., Sr. Deb., Ser. B Ba2
9.25 4/01/08 500 540,000
Cablevision Systems Corp., Sr. Sub. Notes B2
9.25 11/01/05 1,000 1,000,000
Comcast Corp.,
Sr. Sub. Deb. B1
9.375 5/15/05 400 404,000
Sr. Sub. Deb. B1
9.125 10/15/06 750 746,250
Continental Cablevision, Inc.,
Sr. Deb. Ba2
9.00 9/01/08 250 270,000
Sr. Sub. Deb. B1
11.00 6/01/07 450 513,000
Marcus Cable Operating Co., L.P.,
Sr. Disc. Notes, Zero Coupon, (until 2/1/00) B3
13.50 8/01/04 500 362,500
Sr. Sub. Notes, Zero Coupon, (until 6/15/00) Caa
14.25 12/15/05 250 160,000
Tele Communications Inc., Sr. Deb. Baa3
9.25 1/15/23 1,250 1,298,687
Videotron Ltd., Sr. Sub. Notes, (Canada) Ba3
10.25 10/15/02 1,000 D 1,035,000
------------
6,329,437
- -----------------------------------------------------------------------------
- -------------------------------------------------
Chemicals--3.0%
Agriculture Minerals & Chemicals, Inc., Sr. Notes Ba3
10.75 9/30/03 500 542,500
Arcadian Partners L.P., Sr. Notes, Ser. B B2
10.75 5/01/05 1,000 1,087,500
General Chemical Corp., Sr. Sub. Notes B2
9.25 8/15/03 500 502,500
Rexene Corp., Sr. Notes B1
11.75 12/01/04 215 222,525
Sherritt, Inc., Deb. B1
10.50 3/31/14 450 500,063
------------
2,855,088
</TABLE>
- --------------------------------------------------------------------------------
4 See Notes to Financial Statements.
<PAGE>
Portfolio of Investments as of March 31, 1996 THE HIGH YIELD PLUS FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating
Interest Maturity Amount Value
Description (Unaudited)
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
Computers & Electrical Equipment--1.3%
Digital Equipment Corp., Deb. Ba1
7.75% 4/01/23 $ 750 $ 683,062
Unisys Corp., Sr. Notes NR
12.00 4/15/03 525 522,047
------------
1,205,109
- -----------------------------------------------------------------------------
- -------------------------------------------------
Consumer Goods & Services--5.8%
American Safety Razor Co., Sr. Notes, Ser. B B1
9.875 8/01/05 500 513,125
Ekco Group Inc., Sr. Notes NR
9.25 4/01/06 675 684,281
Gruma S.A. de C.V., Notes, (Mexico) NR
9.75 3/09/98 700D 696,500
Sweetheart Cup, Inc., Sr. Sub. Notes B2
10.50 9/01/03 2,750 2,805,000
Westpoint Stevens, Inc., Sr. Notes B1
8.75 12/15/01 750 748,125
------------
5,447,031
- -----------------------------------------------------------------------------
- -------------------------------------------------
Energy & Related Goods & Services--6.4%
Energy Ventures Inc., Sr. Notes B1
10.25 3/15/04 750 786,563
Global Marine, Inc., Sr. Sec. Notes B1
12.75 12/15/99 250 275,000
Oryx Energy Co., Ba3
8.125 10/15/05 725 709,550
Plains Resources Inc.,
Sr. Sub. Notes B2
12.00 10/01/99 500 530,000
Sr. Sub. Notes B2
10.25 3/15/06 640 644,800
Santa Fe Energy Resources, Inc., Sr. Sub. Deb. B1
11.00 5/15/04 1,250 1,343,750
Seagull Energy Corp., Sr. Sub. Notes B2
8.625 8/01/05 500 480,000
Transportadora De Gas, Medium-Term Notes, (Argentina) B1
7.75 12/23/98 350D 334,250
YPF Sociedad Anonima, Unsec'd. Notes, (Argentina) B1
8.00 2/15/04 1,000D 887,500
------------
5,991,413
- -----------------------------------------------------------------------------
- -------------------------------------------------
Financial Services--3.0%
Dime Bancorp, Inc., Sr. Notes Ba3
10.50 11/15/05 1,250 1,375,000
Firstfed Financial Corp., Notes B2
11.75 10/01/04 500 475,000
Imperial Credit Industries, Inc., Sr. Notes B1
9.75 1/15/04 1,000 940,000
------------
2,790,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
Food & Lodging--3.1%
ARA Services, Inc., Sr. Notes Ba1
10.625 8/01/00 500 553,750
La Quinta Motor Inns, Inc., Sr. Sub. Notes Ba3
9.25 5/15/03 1,000 1,045,000
Purina Mills Inc., Sr. Sub. Notes B2
10.25 9/01/03 1,250 1,281,250
------------
2,880,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
5
<PAGE>
Portfolio of Investments as of March 31, 1996 THE HIGH YIELD PLUS FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating
Interest Maturity Amount Value
Description (Unaudited)
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
Gaming--0.7%
GB Property Funding Corp., First Mtge. Notes B2
10.875% 1/15/04 $ 750 $ 667,500
- -----------------------------------------------------------------------------
- -------------------------------------------------
Grocery Stores--2.9%
Big V Supermarkets, Sr. Sub. Notes, Ser. B B3
11.00 2/15/04 1,750 1,557,500
Brunos Inc., Sr. Sub. Notes B3
10.50 8/01/05 500 480,000
Dominick's Finer Foods, Inc. Sr. Sub. Notes, Ser. B B3
10.875 5/01/05 500 526,250
Eagle Food Centers Inc., Sr. Notes B1
8.625 4/15/00 250 200,000
------------
2,763,750
- -----------------------------------------------------------------------------
- -------------------------------------------------
Health Care--3.6%
Beverly Enterprises, Sr. Notes B1
9.00 2/15/06 750 712,500
OrNda Healthcorp, Sr. Sub. Notes B2
11.375 8/15/04 1,250 1,406,250
Quorum Health Group Inc., Sr. Sub. Notes B1
8.75 11/01/05 250 251,250
Tenet Healthcare Corp.,
Sr. Notes Ba1
9.625 9/01/02 325 348,563
Sr. Sub. Notes Ba3
10.125 3/01/05 600 642,000
------------
3,360,563
- -----------------------------------------------------------------------------
- -------------------------------------------------
Home Building & Real Estate--2.7%
Continental Homes Holdings, Sr. Notes Ba3
12.00 8/01/99 1,000 1,080,000
Del Webb Corp.,
Sr. Notes Ba3
10.875 3/31/00 500 502,500
Sr. Sub. Deb. B2
9.00 2/15/06 350 336,000
Toll Corp., Sr. Sub. Notes Ba3
10.50 3/15/02 600 630,000
------------
2,548,500
- -----------------------------------------------------------------------------
- -------------------------------------------------
Media & Communications--16.2%
Arch Communications Group, Inc., Sr. Disc. Notes, Zero
Coupon, (until 3/15/01) B3
10.875 3/15/08 1,250 715,625
Chancellor Broadcasting Co., Sr. Sub. Notes B3
9.375 10/01/04 1,000 945,000
Cobb Theaters, Sr. Sec. Notes B2
10.625 3/01/03 250 255,000
EZ Communications Inc., Sr. Sub. Notes B2
9.75 12/01/05 1,000 990,000
Granite Broadcasting Corp.,
Sr. Sub. Deb. B3
12.75 9/01/02 500 555,000
Sr. Sub. Notes B3
10.375 5/15/05 800 809,000
Sr. Sub. Notes, Ser. A B-*
9.375 12/01/05 380 359,100
Heritage Media Services Inc., Sr. Sec. Notes Ba1
11.00 6/15/02 500 535,000
Infinity Broadcasting Corp., Sr. Sub. Notes Ba3
10.375 3/15/02 250 265,000
MobileMedia Communications, Inc., Sr. Sub. Notes B3
9.375 11/01/07 1,250 1,225,000
</TABLE>
- --------------------------------------------------------------------------------
6 See Notes to Financial Statements.
<PAGE>
Portfolio of Investments as of March 31, 1996 THE HIGH YIELD PLUS FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating
Interest Maturity Amount Value
Description (Unaudited)
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
Media & Communications (cont'd.)
Paging Network, Inc.,
Sr. Sub. Notes B2
11.75% 5/15/02 $ 500 $ 545,000
Sr. Sub. Notes B2
10.125 8/01/07 375 393,750
Rifkin Acquistion Partners L.P., Sr. Sub. Notes B3
11.125 1/15/06 850 862,750
SFX Broadcasting, Inc., Sr. Sub. Notes B2
11.375 10/01/00 325 351,000
Telefonica de Argentina, S.A., Notes, (Argentina) B1
11.875 11/01/04 1,500D 1,552,500
Turner Broadcasting Systems, Inc., Sr. Deb. Ba2
8.40 2/01/24 1,500 1,386,765
World Color Press, Inc., Sr. Sub. Notes B1
9.125 3/15/03 1,000 1,010,000
Young Broadcasting Inc.,
Sr. Sub. Notes B2
11.75 11/15/04 1,000 1,090,000
Sr. Sub. Notes, Ser. B B2
10.125 2/15/05 500 505,000
Sr. Sub. Notes B2
9.00 1/15/06 1,000 935,000
------------
15,285,490
- -----------------------------------------------------------------------------
- -------------------------------------------------
Metals--6.9%
AK Steel Corp., Sr. Notes Ba3
10.75 4/01/04 1,000 1,100,000
Armco, Inc., Sr. Notes B2
9.375 11/01/00 1,750 1,732,500
Bethlehem Steel Corp., Sr. Notes B1
10.375 9/01/03 1,250 1,325,000
Kaiser Aluminum & Chemical Corp., Sr. Notes B1
9.875 2/15/02 350 349,125
Magma Copper Co., Sr. Sub. Notes Baa2
12.00 12/15/01 250 272,835
Weirton Steel Corp., Sr. Notes B2
10.875 10/15/99 750 766,875
Wheeling Pittsburgh Corp., Sr. Notes B1
9.375 11/15/03 1,000 940,000
------------
6,486,335
- -----------------------------------------------------------------------------
- -------------------------------------------------
Paper & Packaging--11.2%
Aracruz Celulose, S.A., Bonds, (Brazil) NR
9.00 7/22/98 250 D 248,437
Container Corp. of America,
Sr. Notes, Ser. B B1
10.75 5/01/02 1,000 1,022,500
Sr. Notes B1
9.75 4/01/03 1,250 1,237,500
Domtar, Inc., Sr. Notes Ba1
11.75 3/15/99 1,500 1,642,500
Fort Howard Paper Corp.,
Sr. Notes B1
9.25 3/15/01 2,000 2,015,000
Sr. Notes B1
8.25 2/01/02 200 193,000
Sr. Sub. Notes B2
9.00 2/01/06 750 727,500
Rainy River Forest Products, Inc., Sr. Sec. Notes Ba1
10.75 10/15/01 500 537,500
Repap New Brunswick Inc.,
First Priority, Sr. Sec. Notes Ba3
9.875 7/15/00 750 750,000
Second Priority, Sr. Sec. Notes B2
10.625 4/15/05 750 723,750
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
7
<PAGE>
Portfolio of Investments as of March 31, 1996 THE HIGH YIELD PLUS FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating
Interest Maturity Amount Value
Description (Unaudited)
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
Paper & Packaging (cont'd.)
Repap Wisconsin Inc., First Priority, Sr. Sec. Notes B1
9.25% 2/01/02 $ 250 $ 239,375
S.D. Warren Co., Sr. Sub. Notes, Ser. B B1
12.00 12/15/04 425 448,375
Stone Container Corp., Sr. Notes B1
11.875 12/01/98 750 783,750
------------
10,569,187
- -----------------------------------------------------------------------------
- -------------------------------------------------
Transportation--0.8%
Northwest Airlines, Inc., Notes B1
8.625 8/01/96 750 750,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
Utilities--5.0%
Cleveland Electric Illuminating Co., First Mtge. Bonds,
Ser. B Ba2
9.50 5/15/05 500 503,650
El Paso Electric Co.,
First Mtge. Bonds, Ser. C Ba3
8.25 2/01/03 300 297,000
First Mtge. Bonds, Ser. D Ba3
8.90 2/01/06 1,295 1,311,188
Long Island Lighting Co., Deb. Ba1
8.90 7/15/19 500 466,885
Midland Funding Corp., Sec. Lease Oblig. Bond, Ser. A B2
11.75 7/23/05 500 527,695
Texas-New Mexico Pwr. Co., Sec. Deb. B1
10.75 9/15/03 1,500 1,605,000
------------
4,711,418
------------
Total corporate bonds (cost $103,125,729)
105,696,103
- -----------------------------------------------------------------------------
- -------------------------------------------------
Foreign Government ObligationsD--2.8%
Republic of Argentina, Notes B1
8.375 12/20/03 1,250 1,053,125
Republic of Argentina, Par Bonds B1
4.25 3/31/23 1,000 517,500
Republic of Brazil,
Capitalization Bonds B1
8.00 4/15/14 1,082 635,675
Exit Bonds B1
6.00 9/15/13 750 427,500
------------
Total foreign government obligations (cost $2,565,304)
2,633,800
- -----------------------------------------------------------------------------
- -------------------------------------------------
Shares
Common Stocks**--0.2%
Triangle Wire & Cable, Inc.#
(cost $986,250; purchased 1994) --
-- -- 94,444 141,666
------------
- -----------------------------------------------------------------------------
- -------------------------------------------------
Preferred Stocks--0.8%
BCP Essex Holdings, Ser. A, exchangeable, redeemable, PIK B3
15.00 9/30/04 11,167 284,759
California Federal Bank, noncumulative B2
10.625 -- 4,700 507,600
------------
Total preferred stocks (cost $763,145)
792,359
------------
Total long-term investments (cost $107,440,428)
109,263,928
</TABLE>
- --------------------------------------------------------------------------------
8 See Notes to Financial Statements.
<PAGE>
Portfolio of Investments as of March 31, 1996 THE HIGH YIELD PLUS FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Interest Maturity Amount Value
Description
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
SHORT-TERM INVESTMENTS--0.3%
- -----------------------------------------------------------------------------
- -------------------------------------------------
PaineWebber Inc., Repurchase Agreement, dated 3/29/96, due
in the amount of $270,124 (cost $270,000; approximate
value of collateral including accrued
interest--$283,200)
5.50% 4/01/96 $ 270 $ 270,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
Total Investments--116.4 %
(cost $ 107,710,428; Note 3)
109,533,928
Liabilities in excess of other assets--(16.4)%
(15,442,653)
------------
Net Assets--100%
$ 94,091,275
------------
------------
</TABLE>
- ---------------
* --Standard & Poor's rating.
** --Non-income producing securities.
NR --Not rated by Moody's or Standard & Poor's.
D --US$ Denominated Foreign Bonds.
@ --Consists of bonds with attached stock or warrants.
# --Indicates a restricted security; the cost of such security is $986,250.
The aggregate value ($141,666) is approximately 0.2% of net assets.
PIK --Payment in Kind.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
9
<PAGE>
Statement of Assets and Liabilities THE HIGH YIELD PLUS FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets
<S> <C>
March 31, 1996
--------------
Investments, at value (cost
$107,710,428)..................................................................
$109,533,928
Cash.........................................................................
.............................. 1,888
Interest
receivable...................................................................
..................... 2,549,679
Receivable for investments
sold............................................................................
1,839,390
Deferred expenses and other
assets.........................................................................
96,585
--------------
Total
assets.......................................................................
..................... 114,021,470
--------------
Liabilities
Loan payable (Note
4)...........................................................................
........... 17,000,000
Payable for investments
purchased....................................................................
...... 1,795,616
Dividends
payable......................................................................
.................... 801,963
Loan interest payable (Note
4).............................................................................
130,415
Accrued
expenses.....................................................................
...................... 128,538
Advisory fee
payable......................................................................
................. 40,508
Deferred director's
fees.........................................................................
.......... 16,952
Administration fee
payable......................................................................
........... 16,203
--------------
Total
liabilities..................................................................
..................... 19,930,195
--------------
Net
Assets.......................................................................
.......................... $ 94,091,275
--------------
--------------
Net assets were comprised of:
Common stock, at
par..........................................................................
.......... $ 111,438
Paid-in capital in excess of
par........................................................................
102,367,412
--------------
102,478,850
Undistributed net investment
income.....................................................................
501,189
Accumulated net realized loss on
investments............................................................
(10,712,264)
Net unrealized appreciation of
investments..............................................................
1,823,500
--------------
Net assets, March 31,
1996.........................................................................
..... $ 94,091,275
--------------
--------------
Net asset value per share ($94,091,275 / 11,143,807 shares of common stock
issued and outstanding)......... $8.44
--------------
--------------
</TABLE>
- --------------------------------------------------------------------------------
10 See Notes to Financial Statements.
<PAGE>
THE HIGH YIELD PLUS FUND, INC. THE HIGH YIELD PLUS FUND, INC.
Statement of Operations Statement of Cash Flows
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income March 31, 1996
<S> <C>
Income
Interest................................. $ 11,499,290
Dividends................................ 80,979
--------------
11,580,269
--------------
Expenses
Investment advisory fee.................. 466,661
Administration fee....................... 186,665
Custodian's fees and expenses............ 70,000
Legal fees and expenses.................. 44,000
Transfer agent's fees and expenses....... 38,000
Reports to shareholders.................. 35,000
Insurance expense........................ 31,000
Audit fees and expenses.................. 30,000
Directors fees and expenses.............. 25,000
Miscellaneous............................ 8,816
--------------
Total operating expenses.............. 935,142
Loan interest expense (Note 4)........... 1,195,799
--------------
Total expenses........................ 2,130,941
--------------
Net investment income....................... 9,449,328
--------------
Realized and Unrealized
Gain on Investments
Net realized gain on investment
transactions............................. 757,420
Net change in unrealized
appreciation/depreciation of
investments.............................. 5,744,996
--------------
Net gain on investments..................... 6,502,416
--------------
Net Increase in Net Assets
Resulting from Operations................... $ 15,951,744
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended
Increase (Decrease) in Cash March 31, 1996
<S> <C>
Cash flows provided from operating activities
Interest and dividends received (excluding
discount amortization of $852,468)....... $ 10,775,758
Operating expenses paid..................... (1,016,664)
Loan interest and commitment fee paid....... (1,450,340)
Maturities of short-term portfolio
investments, net......................... 3,245,000
Purchases of long-term portfolio
investments.............................. (63,213,514)
Proceeds from disposition of long-term
portfolio investments.................... 62,192,660
Deferred expenses and other assets.......... 2,604
--------------
Net cash provided from operating
activities............................... 10,535,504
--------------
Cash used for financing activities
Net decrease in notes payable............... (2,000,000)
Cash dividends paid (excluding reinvestment
of dividends of $871,960)................ (8,533,818)
--------------
Net cash used for financing activities...... (10,533,818)
--------------
Net increase in cash........................ 1,686
Cash at beginning of year................... 202
--------------
Cash at end of year......................... $ 1,888
--------------
--------------
Reconciliation of Net Increase in Net Assets
to Net Cash from Operating Activities
Net increase in net assets resulting from
operations.................................. $ 15,951,744
--------------
Decrease in investments........................ 2,772,253
Net realized gain on investment transactions... (757,420)
Net change in unrealized appreciation of
investments................................. (5,744,996)
Increase in receivable for investments sold.... (1,540,171)
Decrease in interest receivable................ 47,957
Decrease in deferred expenses and other
assets...................................... 2,604
Increase in payable for investments
purchased................................... 139,596
Decrease in accrued expenses and other
liabilities................................. (336,063)
--------------
Total adjustments........................... (5,416,240)
--------------
Net cash provided from operating
activities............................... $ 10,535,504
--------------
--------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
11
<PAGE>
THE HIGH YIELD PLUS FUND, INC. THE HIGH YIELD PLUS FUND, INC.
Statement of Changes in Net Assets Notes to Financial Statements
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 31,
Increase (Decrease) ------------------------------
in Net Assets 1996 1995
------------ ------------
<S> <C> <C>
Operations
Net investment income....... $ 9,449,328 $ 9,564,828
Net realized gain (loss) on
investment
transactions............. 757,420 (4,961,981)
Net change in unrealized
appre-
ciation/depreciation of
investments.............. 5,744,996 (906,562)
------------ ------------
Net increase in net assets
resulting from
operations............... 15,951,744 3,696,285
Dividends paid to shareholders
from net investment
income...................... (9,436,822) (9,430,522)
Value of Fund shares issued to
shareholders in reinvestment
of dividends................ 871,960 740,429
------------ ------------
Total increase (decrease)...... 7,386,882 (4,993,808)
Net Assets
Beginning of year.............. 86,704,393 91,698,201
------------ ------------
End of year.................... $ 94,091,275 $ 86,704,393
------------ ------------
------------ ------------
</TABLE>
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 (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
through investment in publicly or privately offered high yield debt securities
rated in the medium to lower categories by recognized rating services or
non-rated 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.
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.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian take possession of the
underlying collateral securities, the value of which exceeds the principal
amount of the repurchase transaction including accrued interest. If the seller
defaults, and the value of the collateral declines or if bankruptcy proceedings
are commenced with respect to the seller of the security, realization of the
collateral by the Fund may be delayed or limited.
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
- --------------------------------------------------------------------------------
12 See Notes to Financial Statements
<PAGE>
Notes to Financial Statements THE HIGH YIELD PLUS FUND, INC.
- -------------------------------------------------------------------------------
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.
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.
Federal Income Taxes: It is the Fund's policy to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to shareholders.
Therefore, no federal income tax provision is required.
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 Mutual
Fund Management, Inc. (the ``Administrator''). The Investment Adviser makes
investment decisions on behalf of the Fund; the Administrator provides occupancy
and certain clerical and accounting services to the Fund. The Fund bears all
other costs and expenses.
The investment advisory agreement provides for the Investment Adviser to receive
a fee, computed weekly and payable monthly at an annual rate of .50% of the
Fund's average weekly net assets. The administration agreement provides for the
Administrator to receive a fee, computed weekly and payable monthly at an annual
rate of .20% of the Fund's average weekly net assets.
Note 3. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the year ended March 31, 1996, aggregated $63,353,110 and $63,732,831,
respectively.
During the year ended March 31, 1996, the Fund entered into $3,050,777 of
securities transactions on a principal basis with Prudential Securities
Incorporated, an affiliate of the Administrator.
The cost basis of investments for federal income tax purposes was substantially
the same as for financial reporting purposes and, accordingly, as of March 31,
1996, net unrealized appreciation for federal income tax purposes was $1,823,500
(gross unrealized appreciation--$3,829,820; gross unrealized
depreciation--$2,006,320).
For federal income tax purposes, the Fund has a capital loss carryforward as of
March 31, 1996 of approximately $10,712,000 of which $6,507,000 expires in 2000,
$2,399,000 expires in 2001 and $1,806,000 expires in 2004. Accordingly, no
capital gains distributions are expected to be paid to shareholders until net
gains have been realized in excess of such carryforward.
- ------------------------------------------------------------
Note 4. Borrowings
The Fund has a credit agreement with an unaffiliated lender. The maximum
commitment under this agreement is $30,000,000. Interest on any such borrowings
is based on market rates and is payable at maturity. The average daily balance
outstanding during the year ended March 31, 1996 was $16,095,628 at a weighted
average interest rate of 7.43%. The maximum face amount of borrowings
outstanding at any month end during the year ended March 31, 1996 was
$20,000,000. The current borrowings of $17,000,000 (at a weighted average
interest rate of 6.48%) mature throughout the period from April 8, 1996 to
August 30, 1996.
The Fund has paid commitment fees at an annual rate of .25 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.
- -------------------------------------------------------------------------------
13
<PAGE>
Notes to Financial Statements THE HIGH YIELD PLUS FUND, INC.
- -------------------------------------------------------------------------------
Note 5. Capital
There are 100 million shares of $.01 par value common stock authorized. During
the fiscal years ended March 31, 1996 and March 31, 1995, the Fund issued
104,367 and 92,154 shares in connection with reinvestment of dividends,
respectively.
- ------------------------------------------------------------
Note 6. Dividends
On April 15, 1996 the Board of Directors of the Fund declared a dividend of
$0.07 per share payable on May 10, 1996, to shareholders of record on April 30,
1996.
- --------------------------------------------------------------------------------
14
<PAGE>
Financial Highlights THE HIGH YIELD PLUS FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year
Ended March 31,
- -------------------------------------------------------
1996 1995
1994 1993 1992
------- -------
------- ------- -------
<S> <C> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year.................. $ 7.85 $ 8.38
$ 8.48 $ 7.91 $ 6.80
------- -------
------- ------- -------
Income from investment operations
Net investment income............................... .84 .87
.90 .89 .87
Net realized and unrealized gain (loss) on
investments...................................... .59 (.54)
(.15) .52 1.11
------- -------
------- ------- -------
Total from investment operations................. 1.43 .33
.75 1.41 1.98
------- -------
------- ------- -------
Less dividends and distributions
Dividends from net investment income................ (.84) (.86)
(.85) (.84) (.87)
Distributions in excess of net investment income.... -- --
-- -- --
------- -------
------- ------- -------
Total dividends and distributions................ (.84) (.86)
(.85) (.84) (.87)
------- -------
------- ------- -------
Net asset value, end of year(a)..................... $ 8.44 $ 7.85
$ 8.38 $ 8.48 $ 7.91
------- -------
------- ------- -------
------- -------
------- ------- -------
Market price per share, end of year(a).............. $ 8.75 $ 8.00
$ 8.375 $ 8.875 $ 7.75
------- -------
------- ------- -------
------- -------
------- ------- -------
TOTAL INVESTMENT RETURN(b):......................... 20.80% 6.33%
3.90% 27.02% 34.28%
------- -------
------- ------- -------
------- -------
------- ------- -------
RATIO/SUPPLEMENTAL DATA:
Net assets, end of year (000 omitted)............... $94,091 $86,704
$91,698 $92,422 $85,742
Average net assets (000 omitted).................... $92,855 $87,734
$96,962 $88,142 $80,703
Ratio to average net assets:
Expenses, before loan interest, commitment fees
and nonrecurring expenses..................... 1.01% 1.11%
1.12% 1.20% 1.28%
Total expenses................................... 2.29% 2.71%
2.01% 2.03% 2.26%
Net investment income............................ 10.18% 10.90%
10.15% 10.94% 11.69%
Portfolio turnover rate............................. 60% 47%
100% 82% 46%
Total debt outstanding at end of year (000
omitted)......................................... $17,000 $19,000
$28,000 $15,000 $15,000
Asset coverage per $1,000 of debt outstanding....... $ 6,535 $ 5,563
$ 4,275 $ 7,161 $ 6,716
</TABLE>
- ---------------
(a) NAV and market value are published in The Wall Street Journal each Monday.
(b) Total investment return is calculated assuming a purchase of common stock
at
the current market value on the first day and a sale at the current market
value on the last day of each year reported. Dividends and distributions are
assumed for purposes of this calculation to be reinvested at prices obtained
under the dividend reinvestment plan. This calculation does not reflect
brokerage commissions.
Contained above is selected data for a share of common stock outstanding, total
investment return, ratios to average net assets and other supplemental data for
the years 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.
15
<PAGE>
Independent Auditors' Report THE HIGH YIELD PLUS FUND, INC.
- -------------------------------------------------------------------------------
The Shareholders and Board of Directors
The High Yield Plus Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of The High Yield Plus Fund, Inc. as of March 31,
1996, the related statements of operations and of cash flows for the year then
ended and of changes in net assets for each of the years in the two year period
then ended, and the financial highlights for each of the years in the five year
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
March 31, 1996, by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The High Yield Plus
Fund, Inc. as of March 31, 1996, the results of its operations, its cash flows,
the changes in its net assets and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
May 9, 1996
Federal Income Tax Information THE HIGH YIELD PLUS FUND, INC.
- -------------------------------------------------------------------------------
We are required by the Internal Revenue Code to advise you within 60 days of the
Fund's fiscal year end (March 31, 1996) that 0.97% of the dividends paid in the
fiscal year ended March 31, 1996 qualified for the corporate dividends received
deduction available to corporate taxpayers.
- -------------------------------------------------------------------------------
16
<PAGE>
Supplemental Proxy Information THE HIGH YIELD PLUS FUND, INC.
- -------------------------------------------------------------------------------
The Annual Meeting of Shareholders of The High Yield Plus Fund, Inc. (The
``Fund'') was held on July 31, 1995 at the offices of Prudential Securities
Incorporated, One Seaport Plaza, New York, New York. The meeting was held for
the following purposes:
(1) To elect the following director to serve as follows:
Director Class Term Expiring
---------------------- ------ -------- ---------
Daniel S. Ahearn I 3 years 1998
Directors whose term of office continued beyond this meeting are
Edward D. Beach, Thomas T. Mooney and Robin B. Smith.
(2) To ratify the selection of Deloitte & Touche LLP as independent
public accountants for the year ending March 31, 1996.
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
Director/Auditor Votes for Votes against Votes
withheld Abstentions
------------------------ ---------- --------------
- --------------- ------------
<S> <C> <C> <C> <C>
<C>
(1) Daniel S. Ahearn 8,862,409 --
135,239 --
(2) Deloitte & Touche LLP 8,885,332 44,117
- -- 132,999
(3) There was no other business voted upon at the Annual Meeting of
Shareholders.
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
Other Information 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
<PAGE>
Directors
Edward D. Beach
Eugene C. Dorsey
Thomas T. Mooney
Robin B. Smith
Investment Adviser
Wellington Management Company
75 State Street
Boston, MA 02109
Administrator
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Custodian and Transfer Agent
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Independent Auditors
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
Notice is hereby given in accordance with Section 23(c) of the
Investment Company Act of 1940 that the Fund may purchase,
from time to time, shares of its common stock at market prices.
The views expressed in this report and the information about the
Fund's portfolio holdings are for the period covered by this report
and are subject to change thereafter.
This report is for stockholder information. This is not a prospectus
intended for use in the purchase or sale of Fund shares.
The High Yield Plus Fund, Inc.
One Seaport Plaza
New York, NY 10292
For information call toll-free (800) 451-6788
429906100
