The
High Yield
Plus Fund,
Inc.
ANNUAL
REPORT
March 31, 1997
<PAGE>
Letter To Shareholders April 10, 1997
Dear Shareholder:
The high yield market showed surprising strength during the fiscal
year ended March 31, 1997, despite the general increase in interest
rates that occurred during the period. Positive economic conditions
created an amenable operating environment for high yield issuers,
and strong demand for high yield instruments buoyed
valuations relative to US Treasury yields. Conditions were
apparently too favorable, however, and the Federal Reserve Board
acted to dampen exuberance in the markets on March 25, 1997, by
increasing the Federal Funds rate by 25 basis points. The
capital markets, including the high yield market, have been
somewhat destabilized by this move. We believe that economic
conditions remain reasonable and inflation is not a significant
threat. Therefore, we expect that the longer-term outlook for
the high yield market should not be threatened by the present
weakness in the financial markets, unless interest rates
increase significantly, thereby snuffing out economic growth.
Fund Performance.
The Fund's total returns for the periods ended March 31, 1997 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 17 closed-end high yield funds; we
would note that the degree of leverage varies substantially amongst
the funds in the group. In addition, we have included the returns
of the Lipper Closed-End Unleveraged High Yield category, an
average of 8 closed-end high yield funds which do not use leverage.
<TABLE>
TOTAL RETURNS
For the Periods Ended March 31, 1997
<CAPTION>
6 Months 12 Months 24 Months
<S> <C> <C> <C>
High Yield Plus Fund 4.1% 11.5% 32.4%
Lipper CEHY -- Leveraged 5.0% 13.1% 32.8%
Lipper CEHY -- Unleveraged 4.0% 10.5% 28.7%
</TABLE>
How We Invested.
As of March 31, 1997, the Fund's total invested assets of $112.5 million
represented 117% of the Fund's net assets of $96 million. Total
borrowings were $18 million, up modestly from $17 million as of the
March 31, 1996 year end. The yield to worst (incorporates potential
calls) and average years to worst were 9.7% and 7.1 years, respectively,
as of March 31, 1997; this compares to 9.8%and 7.0 years as of March 31,
1996. Average ratings have remained steady at B1/B+. In the table below
we have highlighted some of the Fund's industry exposures relative to
the Lehman Brothers High Yield Index, a proxy for the overall high
yield market:
<TABLE>
Overweighted Categories: Underweighted Categories:
<CAPTION>
Industry HYP* Lehman HY Industry HYP* Lehman HY
<S> <C> <C> <C> <C> <C>
Aerospace & Defense 8% 1% Cable 5% 11%
Auto & Related 9% 2% Media & Entertainment 7% 12%
Metals 12% 3% Telecom 3% 9%
</TABLE>
* Expressed as a percent of total corporate holdings as of 3/31/97.
1
<PAGE>
We have overweighted exposures to certain sectors that we believe offer
relatively attractive prospects. For instance, underlying demand
remains firm in many basic industries, and consolidation trends are
also a positive factor in sectors such as Aerospace and Automotive
Supply. With respect to underweighted categories, we have
some concerns about burgeoning technologies in the Telecommunications
and Cable sectors, and ultimate consumer demand for many of the
newer technologies (wireless communications, for instance) remains
untested. Furthermore, many of these companies will need to
spend aggressively to either develop their business or defend
their positions against the newer competition, suggesting that
their balance sheets may deteriorate.
Some of the Fund's specific larger holdings include securities of Fort
Howard Corporation, the leading US manufacturer of commercial tissue
paper; Container Corporation of America, a significant producer of
containerboard and other paper/packaging products; Bell & Howell
Company, an information services and document
management provider, AK Steel, an integrated steel producer;
and Collins & Aikman Products, one of the leading providers of
textile and plastic interior trim products for the automotive industry.
The Fund's shares closed its fiscal year at $9.00 per share. This
price reflected a premium of 5.4% to the Fund's net asset value of
$8.54 per share. The monthly dividend of $0.07 per share ($0.84 per
share annualized) equates to a yield of 9.3% on the closing stock
price. For comparison, this dividend yield was 240 basis points
in excess of the 10-year Treasury bond yield as of March 31, 1997.
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, LLP
2
<PAGE>
Portfolio of Investments as of March 31, 1997 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--115.0%
CORPORATE BONDS--109.2%
- ------------------------------------------------------------------------------------------------------------------------------
Aerospace/Defense--9.1%
Howmet Corp., Sr. Sub. Notes B2 10.00% 12/01/03 $ 1,605 $ 1,709,324
K & F Industries, Inc.,
Sr. Sec. Notes B1 11.875 12/01/03 350 365,750
Sr. Sub. Notes B2 10.375 9/01/04 1,250 1,306,250
Moog, Inc., Sr. Sub. Notes, Ser. B B2 10.00 5/01/06 1,285 1,333,187
Northrop Grumman Corp., Deb. Baa3 9.375 10/15/24 1,500 1,594,500
Rohr, Inc., Sr. Notes Ba3 11.625 5/15/03 1,250 1,343,750
Wyman-Gordon Co., Sr. Notes Ba3 10.75 3/15/03 1,000 1,070,000
------------
8,722,761
- ------------------------------------------------------------------------------------------------------------------------------
Automotive--10.0%
Collins & Aikman Products Co., Sr. Sub. Notes B3 11.50 4/15/06 1,750 1,933,750
Delco Remy International Inc., Sr. Sub. Notes B2 10.625 8/01/06 360 369,000
Exide Corp., Sr. Notes B1 10.00 4/15/05 500 500,000
Hayes Wheels International, Inc., Sr. Sub. Notes B3 11.00 7/15/06 340 370,600
Johnstown America Industries, Inc. Sr. Sub. Notes B3 11.75 8/15/05 1,500 1,455,000
Key Plastics, Inc., Sr. Sub. Notes B3 10.25 3/15/07 1,000 992,500
LDM Technologies, Inc., Sr. Sub. Notes B3 10.75 1/15/07 505 502,475
Lear Seating Corp.,
Sr. Sub. Notes Ba3 11.25 7/15/00 500 495,000
Sub. Notes B1 8.25 2/01/02 750 723,750
Penda Corp., Sr. Notes, Ser. B B2 10.75 3/01/04 750 746,250
Walbro Corp., Sr. Notes B1 9.875 7/15/05 1,500 1,485,000
------------
9,573,325
- ------------------------------------------------------------------------------------------------------------------------------
Basic Industries-Manufacturing--8.5%
Cabot Safety Acquisition Corp., Sr. Sub. Notes B3 12.50 7/15/05 750 806,250
Essex Group Inc., Sr. Notes B1 10.00 5/01/03 1,000 1,040,000
Graphic Contols Corp., Sr. Sub. Notes, Ser. A B3 12.00 9/15/05 500 548,750
Great Lakes Carbon Corp., Sr. Sec. Notes Ba3 10.00 1/01/06 1,000 1,045,000
IDEX Corp., Sr. Sub. Notes Ba3 9.75 9/15/02 250 260,000
Mettler-Toledo, Inc., Sr. Sub. Notes B2 9.75 10/01/06 350 357,000
PMI Acquisitions Corp., Sr. Sub. Notes B2 10.25 9/01/03 1,000 1,030,000
Specialty Equipment Cos., Inc., Sr. Sub. Notes B3 11.375 12/01/03 1,000 1,065,000
The Interlake Corp.,
Sr. Notes B2 12.00 11/15/01 250 271,250
Sr. Sub. Deb. B3 12.125 3/01/02 500 512,500
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of March 31, 1997 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-Manufacturing (cont'd.)
Thermadyne Holdings Corp., Sr. Notes B1 10.25% 5/01/02 $ 750 $ 768,750
UCAR Global Enterprises Inc., Sr. Sub. Notes B1 12.00 1/15/05 415 472,063
------------
8,176,563
- ------------------------------------------------------------------------------------------------------------------------------
Building & Related Industries--1.1%
Amtrol Acquisition Inc., Sr. Sub. Notes B3 10.625 12/31/06 500 517,500
Associated Materials, Inc., Sr. Sub. Notes B3 11.50 8/15/03 470 491,150
------------
1,008,650
- ------------------------------------------------------------------------------------------------------------------------------
Cable--5.9%
Cablevision Systems Corp.,
Sr. Sub. Notes B2 9.25 11/01/05 1,250 1,187,500
Sr. Sub. Notes B2 9.875 5/15/06 475 465,500
Comcast Corp., Sr. Sub. Deb. B1 9.125 10/15/06 250 247,500
Lenfest Communications, Inc., Sr. Notes Ba3 8.375 11/01/05 500 455,000
Marcus Cable Co., L.P., Sr. Disc. Notes, Zero Coupon
(until 6/15/00) Caa 14.25 12/15/05 250 172,500
Marcus Cable Operating Co., L.P., Sr. Sub. Disc. Notes,
Zero Coupon (until 8/1/99) B3 13.50 8/01/04 500 397,500
Rifkin Acquisition Partners L.L.L.P., Sr. Sub. Notes B3 11.125 1/15/06 1,000 1,000,000
Tele-Communications, Inc., Deb. Ba1 9.25 1/15/23 1,250 1,197,475
Videotron Ltd., Sr. Sub. Notes (Canada) Ba3 10.25 10/15/02 500 D 525,000
------------
5,647,975
- ------------------------------------------------------------------------------------------------------------------------------
Chemicals--5.8%
Acetex Corp., Sr. Sec. Notes (Canada) B1 9.75 10/01/03 1,650 D 1,617,000
Agriculture Minerals & Chemicals, Inc., Sr. Notes Ba3 10.75 9/30/03 500 527,500
Astor Corp., Sr. Sub. Notes B3 10.50 10/15/06 750 798,750
General Chemical Corp., Sr. Sub. Notes B2 9.25 8/15/03 500 506,250
Harris Chemical North America, Inc., Sr. Sec. Disc. Notes B2 10.25 7/15/01 250 250,000
Rexene Corp., Sr. Notes B1 11.75 12/01/04 500 560,000
Sterling Chemicals Inc., Sr. Sub. Notes B3 11.75 8/15/06 750 780,000
Texas Petrochemicals Corp., Sr. Sub. Notes B3 11.125 7/01/06 500 527,500
------------
5,567,000
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Goods & Services--1.4%
American Safety Razor Co., Sr. Notes, Ser. A B1 9.875 8/01/05 250 257,500
KinderCare Learning Centers, Inc., Sr. Sub. Notes B3 9.50 2/15/09 580 553,900
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as of March 31, 1997 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>
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Goods & Services (cont'd.)
Muzak L.P., Muzak Capital, Sr. Notes Ba3 10.00% 10/01/03 $ 350 $ 362,250
Revlon Worldwide (Parent) Corp., Sr. Sec. Disc. Notes B3 Zero 3/15/01 350 217,000
------------
1,390,650
- ------------------------------------------------------------------------------------------------------------------------------
Containers--1.9%
Sweetheart Cup Co. Inc., Sr. Sub. Notes B3 10.50 9/01/03 1,750 1,785,000
- ------------------------------------------------------------------------------------------------------------------------------
Energy & Related Goods & Services--8.4%
Cross Timbers Oil Co., Sr. Sub. Notes B2 9.25 4/01/07 1,000 972,500
Energy Ventures, Inc., Sr. Notes Ba2 10.25 3/15/04 750 798,750
Flores & Rucks Inc., Sr. Sub. Notes B3 9.75 10/01/06 335 341,700
Global Marine Inc., Sr. Sec. Notes Ba1 12.75 12/15/99 250 265,625
J. Ray McDermott S.A., Sr. Sub. Notes B1 9.375 7/15/06 500 505,000
Mesa Operating Co.,
Sr. Sub. Disc. Notes, Zero Coupon (until 7/1/01) B2 11.625 7/01/06 625 421,875
Sr. Sub. Notes B2 10.625 7/01/06 300 313,500
Plains Resources, Inc., Sr. Sub. Notes, Ser. B B2 10.25 3/15/06 1,000 1,030,000
Santa Fe Energy Resources, Inc., Sr. Sub. Deb. Notes B1 11.00 5/15/04 1,250 1,362,500
Seagull Energy Corp., Sr. Sub. Notes B1 8.625 8/01/05 250 250,000
Transportadora de Gas del Sur, S.A., (Argentina)
Med. Notes, B1 7.75 12/23/98 350 D 345,625
Notes B1 10.25 4/25/01 500 D 522,500
YPF Sociedad Anonima, Negotiable Obligations (Argentina) B1 8.00 2/15/04 1,000 D 960,000
------------
8,089,575
- ------------------------------------------------------------------------------------------------------------------------------
Financial Services--5.8%
Chevy Chase Bank F.S.B. Sub. Deb. B1 9.25 12/01/08 500 490,000
Dime Bancorp, Inc., Sr. Notes Ba3 10.50 11/15/05 1,250 1,343,750
First Nationwide Holdings, Inc., Sr. Notes B3 12.50 4/15/03 750 817,500
FirstFed Financial Corp., Notes B2 11.75 10/01/04 500 510,000
Imperial Credit Industries, Inc., Sr. Notes B1 9.875 1/15/07 1,000 980,000
Olympic Financial Ltd., Sr. Notes B2 11.50 3/15/07 1,250 @ 1,218,750
Western Financial Svgs. Bank F.S.B., Sub. Cap. Deb. Ba3 8.50 7/01/03 250 246,785
------------
5,606,785
- ------------------------------------------------------------------------------------------------------------------------------
Gaming--1.8%
GB Property Funding Corp., First Mtge. Notes B3 10.875 1/15/04 750 615,000
Trumps Atlantic City Assoc., First Mtge. Notes B1 11.25 5/01/06 1,250 1,137,500
------------
1,752,500
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5
<PAGE>
Portfolio of Investments as of March 31, 1997 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>
- ------------------------------------------------------------------------------------------------------------------------------
Grocery Stores--0.9%
Dominick's Finer Foods, Inc., Sr. Sub. Notes, Ser. B B2 10.875% 5/01/05 $ 250 $ 268,750
Smiths Food & Drug Ctrs., Inc., Sr. Sub. Notes B3 11.25 5/15/07 500 547,500
------------
816,250
- ------------------------------------------------------------------------------------------------------------------------------
Health Care--4.1%
Beverly Enterprises, Inc., Sr. Notes B1 9.00 2/15/06 375 373,125
Dade International Inc., Sr. Sub. Notes B3 11.125 5/01/06 390 442,650
Owens & Minor, Inc., Sr. Sub. Notes B1 10.875 6/01/06 1,085 1,169,088
Packard Bioscience Co., Sr. Sub. Notes B3 9.375 3/01/07 1,250 1,206,250
Quorum Health Group, Inc., Sr. Sub. Notes B1 8.75 11/01/05 500 505,000
Tenet Healthcare Corp., Sr. Notes Ba1 9.625 9/01/02 250 262,500
------------
3,958,613
- ------------------------------------------------------------------------------------------------------------------------------
Home Builder & Real Estate--0.9%
Del. Webb Corp., Sr. Sub. Deb. B2 9.00 2/15/06 350 344,750
Kaufman & Broad Home Corp., Sr. Sub. Notes Ba3 9.625 11/15/06 500 500,000
------------
844,750
- ------------------------------------------------------------------------------------------------------------------------------
Media & Communications--7.0%
Benedek Communications Inc., Sr. Sub. Disc. Notes,
Zero Coupon (until 5/15/01) B3 13.25 5/15/06 565 338,294
Chancellor Broadcasting Co., Sr. Sub. Notes B3 9.375 10/01/04 1,000 980,000
Granite Broadcasting Corp., Sr. Sub. Deb. B3 12.75 9/01/02 500 537,500
Heritage Media Corp., Sr. Sec. Notes Ba1 11.00 6/15/02 250 265,000
Jacor Communications Inc., Sr. Sub. Notes B2 9.75 12/15/06 250 250,000
JCAC, Inc., Sr. Sub. Notes B2 10.125 6/15/06 250 253,750
Plitt Theatres, Inc., Sr. Sub. Notes B3 10.875 6/15/04 1,250 1,250,000
World Color Press, Inc., Sr. Sub. Notes B1 9.125 3/15/03 1,250 1,250,000
Young Broadcasting Inc.,
Sr. Sub. Notes B2 11.75 11/15/04 1,000 1,065,000
Sr. Sub. Notes B2 10.125 2/15/05 500 495,000
------------
6,684,544
- ------------------------------------------------------------------------------------------------------------------------------
Metals--13.5%
Acindar Industria Argentina de Aceros S.A., Notes
(Argentina) B2 11.25 2/15/04 750 D 753,750
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6
<PAGE>
Portfolio of Investments as of March 31, 1997 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>
- ------------------------------------------------------------------------------------------------------------------------------
Metals (cont'd.)
AK Steel Corp.,
Sr. Notes Ba2 10.75% 4/01/04 $ 1,000 $ 1,065,000
Sr. Notes Ba2 9.125 12/15/06 1,000 985,000
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 1,300,000
Companhia Vale do Rio Doce, Notes (Brazil) NR 10.00 4/02/04 750 D 785,625
Echo Bay Mines Ltd., Capital Secs., Jr. Sub. Deb.
(Canada) B1 11.00 4/01/27 770 D 781,550
GS Technologies Operating Co., Inc., Sr. Notes B2 12.25 10/01/05 500 520,000
Metalurgica Gerdau S.A., Notes (Brazil) NR 11.125 5/24/04 375 D 388,125
Northwestern Steel & Wire Co., Sr. Notes B1 9.50 6/15/01 1,500 1,425,000
NS Group Inc., Sr. Sec. Notes B3 13.50 7/15/03 1,000 @ 1,095,000
Weirton Steel Corp.,
Sr. Notes B2 10.875 10/15/99 750 761,250
Sr. Notes B2 11.375 7/01/04 1,000 1,000,000
Wheeling-Pittsburgh Corp., Sr. Notes B1 9.375 11/15/03 420 399,000
------------
12,991,800
- ------------------------------------------------------------------------------------------------------------------------------
Paper & Packaging--10.4%
Aracruz Celulose S.A., Notes (Brazil) NR 10.375 1/31/02 1,035 D 1,071,225
Container Corp. of America,
Sr. Notes B1 9.75 4/01/03 1,250 1,300,000
Sr. Notes, Ser. B B1 10.75 5/01/02 1,000 1,080,000
Fonda Group Inc., Sr. Sub. Notes B3 9.50 3/01/07 1,500 1,436,250
Fort Howard Corp.,
Sr. Notes B1 9.25 3/15/01 2,000 2,070,000
Sr. Notes B1 8.25 2/01/02 200 199,000
Sr. Sub. Notes B2 9.00 2/01/06 750 757,500
S.D. Warren Co., Sr. Sub. Notes, Ser. B B1 12.00 12/15/04 795 866,550
Tembec Finance Corp., Sr. Notes (Canada) B1 9.875 9/30/05 1,250 D 1,243,750
------------
10,024,275
- ------------------------------------------------------------------------------------------------------------------------------
Retail--0.6%
Guitar Ctr. Mgmt. Co., Inc., Sr. Notes B1 11.00 7/01/06 500 546,250
- ------------------------------------------------------------------------------------------------------------------------------
Technology--5.3%
Advanced Micro Devices, Inc., Sr. Sec. Notes Ba1 11.00 8/01/03 500 540,000
Bell & Howell Co., Sr. Notes B1 9.25 7/15/00 750 750,000
Bell & Howell Holdings Co., Sr. Disc. Deb., Ser. B,
Zero Coupon (until 3/1/00) B3 11.50 3/01/05 2,000 1,540,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7
<PAGE>
Portfolio of Investments as of March 31, 1997 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>
- ------------------------------------------------------------------------------------------------------------------------------
Technology (cont'd.)
Fairchild Semiconductor Corp., Sr. Sub. Notes B2 10.125% 3/15/07 $ 985 $ 980,075
Unisys Corp.,
Sr. Notes B1 11.75 10/15/04 250 261,250
Sr. Notes, Ser. B B1 12.00 4/15/03 1,000 1,045,000
------------
5,116,325
- ------------------------------------------------------------------------------------------------------------------------------
Telecommunication Services--3.0%
MobileMedia Communications, Inc., Sr. Sub. Notes C 9.375 11/01/07 2,000 ** 460,000
Paging Network, Inc., Sr. Sub. Notes B2 11.75 5/15/02 250 265,000
Telefonica de Argentina, S.A., Notes (Argentina) B1 11.875 11/01/04 1,000 D 1,130,000
Teleport Communications Group Inc., Sr. Disc. Notes,
Zero Coupon (until 7/1/01) B1 11.125 7/01/07 1,500 1,005,000
------------
2,860,000
- ------------------------------------------------------------------------------------------------------------------------------
Textiles--0.8%
Westpoint Stevens Inc., Sr. Notes Ba3 8.75 12/15/01 750 750,000
- ------------------------------------------------------------------------------------------------------------------------------
Utilities--3.0%
Cleveland Electric Illuminating Co., First Mtge. Bonds,
Ser. B Ba2 9.50 5/15/05 250 267,215
El Paso Electric Co., First Mtge. Bonds, Ser. D Ba3 8.90 2/01/06 1,000 1,042,450
Texas-New Mexico Power Co., Sec. Deb. Ba3 10.75 9/15/03 1,500 1,616,250
------------
2,925,915
------------
Total corporate bonds (cost $103,995,026) 104,839,506
------------
- ------------------------------------------------------------------------------------------------------------------------------
Foreign Government ObligationsD--3.0%
Republic of Argentina,
Bonds B1 11.00 10/09/06 500 522,500
Global Bonds B1 8.375 12/20/03 500 479,375
Global Bonds B1 11.375 1/30/17 500 514,500
Republic of Brazil,
Exit Bonds B1 6.00 9/15/13 750 540,937
Ser. C B1 4.00 4/15/14 1,119 833,076
------------
Total foreign government obligations (cost $2,449,835) 2,890,388
- ------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS*--0.1%
Shares
----------
Triangle Wire & Cable, Inc.Pound
(cost $986,250; purchased 3/25/94) -- -- -- 94,444 94,444
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 8
<PAGE>
Portfolio of Investments as of March 31, 1997 THE HIGH YIELD PLUS FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's
Rating Interest Expiration Value
Description (Unaudited) Rate Date Shares (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--2.7%
California Federal Bank, Noncumulative Perpetual, Ser. B Ba2 10.625% -- 4,700 $ 507,600
Chevy Chase Preferred Capital Corp., Exchangeable, Ser. A B1 10.375 -- 16,575 812,175
Granite Broadcasting Corp., Cumulative Exchangeable, PIK NR 12.75 -- 755 708,187
Loral Space & Communications,
Convertible Preferred Equivalent Oblig. B1 6.00 -- 7,500 370,313
Silgan Holdings Inc., Exchangeable, PIK B3 13.25 -- 189 215,460
------------
Total preferred stocks (cost $2,602,375) 2,613,735
- ------------------------------------------------------------------------------------------------------------------------------
WARRANTS* Warrants
----------
Benedek Communications Corp.Pound
(cost $0; purchased 10/17/96) -- -- 7/01/07 5,500 13,750
------------
Total long-term investments (cost $110,033,486) 110,451,823
- ------------------------------------------------------------------------------------------------------------------------------
Principal
Maturity Amount
SHORT-TERM INVESTMENTS--2.2% Date (000)
---------- ----------
CORPORATE BOND--0.8%
Gruma S.A. de C.V., Notes (Mexico) NR 9.75 3/09/98 $ 700 D 714,000
REPURCHASE AGREEMENT--1.4%
Swiss Bank Corporation, dated 3/31/97, $1,350,238 due at
maturity (cost $1,350,000; approximate value of
collateral including accrued interest - $1,379,143) -- 6.35 4/01/97 1,350 1,350,000
------------
Total short-term investments (cost $2,012,055) 2,064,000
------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investments--117.2%
(cost $112,045,541; Note 3) 112,515,823
Liabilities in excess of other assets--(17.2)% (16,473,503)
------------
Net Assets--100% $ 96,042,320
------------
------------
</TABLE>
- ---------------
* --Non-income producing security.
** --Represents issuer in default on interest payments; non-income
producing security.
Pound --Indicates a restricted security; the aggregate cost of such
securities is $986,250. The aggregate value ($108,194) is
approximately 0.1% of net assets.
D --US$ Denominated Foreign Bonds.
@ --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 Standard & Poor's.
PIK --Payment in Kind.
L.L.L.P. --Limited Liability Limited Partnership
L.P. --Limited Partnership
F.S.B. --Federal Savings Bank
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 9
<PAGE>
Statement of Assets and Liabilities THE HIGH YIELD PLUS FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets March 31, 1997
<S> <C>
Investments, at value (cost $112,045,541).................................................................. $ 112,515,823
Cash....................................................................................................... 344
Interest receivable........................................................................................ 2,673,636
Receivable for investments sold............................................................................ 960,369
Dividends receivable....................................................................................... 21,496
Deferred expenses and other assets......................................................................... 60,448
--------------
Total assets............................................................................................ 116,232,116
--------------
Liabilities
Loan payable (Note 4)...................................................................................... 18,000,000
Payable for investments purchased.......................................................................... 1,118,402
Dividends payable.......................................................................................... 787,537
Loan interest payable (Note 4)............................................................................. 104,217
Accrued expenses........................................................................................... 99,332
Advisory fee payable....................................................................................... 41,950
Deferred directors' fees................................................................................... 21,578
Administration fee payable................................................................................. 16,780
--------------
Total liabilities....................................................................................... 20,189,796
--------------
Net Assets................................................................................................. $ 96,042,320
--------------
--------------
Net assets were comprised of:
Common stock, at par.................................................................................... $ 112,505
Paid-in capital in excess of par........................................................................ 103,281,800
--------------
103,394,305
Undistributed net investment income..................................................................... 330,378
Accumulated net realized loss on investments............................................................ (8,152,645)
Net unrealized appreciation of investments.............................................................. 470,282
--------------
Net assets, March 31, 1997.............................................................................. $ 96,042,320
--------------
--------------
Net asset value per share ($96,042,320 / 11,250,532 shares of common stock issued and outstanding)......... $8.54
--------------
--------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 10
<PAGE>
THE HIGH YIELD PLUS FUND, INC.
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income March 31, 1997
<S> <C>
Income
Interest................................. $ 11,360,077
Dividends................................ 101,494
--------------
11,461,571
--------------
Expenses
Investment advisory fee.................. 480,973
Administration fee....................... 192,389
Custodian's fees and expenses............ 90,000
Legal fees and expenses.................. 71,000
Transfer agent's fees and expenses....... 41,000
Reports to shareholders.................. 38,000
Insurance expense........................ 28,000
Audit fees and expenses.................. 27,000
Listing fee.............................. 24,000
Directors' fees and expenses............. 21,000
Miscellaneous............................ 25,675
--------------
Total operating expenses.............. 1,039,037
Loan interest expense (Note 4)........... 1,183,903
--------------
Total expenses........................ 2,222,940
--------------
Net investment income....................... 9,238,631
--------------
Realized and Unrealized
Gain on Investments
Net realized gain on investment
transactions............................. 2,559,619
Net change in unrealized
appreciation/depreciation of
investments.............................. (1,353,218)
--------------
Net gain on investments..................... 1,206,401
--------------
Net Increase in Net Assets
Resulting from Operations................... $ 10,445,032
--------------
--------------
</TABLE>
THE HIGH YIELD PLUS FUND, INC.
Statement of Cash Flows
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Increase (Decrease) in Cash March 31, 1997
<S> <C>
Cash flows provided from operating activities
Interest and dividends received (excluding
discount amortization of $791,415)...... $ 10,524,703
Operating expenses paid.................... (1,113,994)
Loan interest and commitment fee paid...... (1,157,705)
Maturities of short-term portfolio
investments, net........................ (1,080,000)
Purchases of long-term portfolio
investments............................. (67,132,879)
Proceeds from disposition of long-term
portfolio
investments............................. 67,430,607
Deferred expenses and other assets......... 36,137
--------------
Net cash provided from operating
activities.............................. 7,506,869
--------------
Cash used for financing activities
Net increase in notes payable.............. 1,000,000
Cash dividends paid (excluding reinvestment
of dividends of $915,455)............... (8,508,413)
--------------
Net cash used for financing activities..... (7,508,413)
--------------
Net decrease in cash....................... (1,544)
Cash at beginning of year.................. 1,888
--------------
Cash at end of year........................ $ 344
--------------
--------------
Reconciliation of Net Increase in Net Assets
to Net Cash from Operating Activities
Net increase in net assets resulting from
operations................................. $ 10,445,032
--------------
Increase in investments....................... (1,775,494)
Net realized gain on investment
transactions............................... (2,559,619)
Net change in unrealized depreciation of
investments................................ 1,353,218
Decrease in receivable for investments sold... 879,021
Increase in interest and dividends
receivable................................. (145,453)
Decrease in deferred expenses and other
assets..................................... 36,137
Decrease in payable for investments
purchased.................................. (677,214)
Decrease in accrued expenses and other
liabilities................................ (48,759)
--------------
Total adjustments.......................... (2,938,163)
--------------
Net cash provided from operating
activities.............................. $ 7,506,869
--------------
--------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 11
<PAGE>
THE HIGH YIELD PLUS FUND, INC.
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 31,
Increase (Decrease) ----------------------------
in Net Assets 1997 1996
----------- -----------
<S> <C> <C>
Operations
Net investment income......... $ 9,238,631 $ 9,449,328
Net realized gain on
investment transactions.... 2,559,619 757,420
Net change in unrealized
appreciation/depreciation
of investments............. (1,353,218) 5,744,996
----------- -----------
Net increase in net assets
resulting from
operations................. 10,445,032 15,951,744
Dividends paid to shareholders
from net investment income.... (9,238,631) (9,436,822)
Distributions paid to
shareholders in excess of net
investment income............. (170,811) --
Value of Fund shares issued to
shareholders in reinvestment
of dividends.................. 915,455 871,960
----------- -----------
Total increase................... 1,951,045 7,386,882
Net Assets
Beginning of year................ 94,091,275 86,704,393
----------- -----------
End of year...................... $96,042,320 $94,091,275
----------- -----------
----------- -----------
</TABLE>
Notes to Financial Statements THE HIGH YIELD PLUS FUND, INC.
- -------------------------------------------------------------------------------
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, 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 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.
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.
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.
The Fund may invest up to 25% of its total assets in securities which are not
readily marketable, including those which are restricted as to disposition under
securities law ('restricted securities'). With regard to the
- --------------------------------------------------------------------------------
12
<PAGE>
Notes to Financial Statements THE HIGH YIELD PLUS FUND, INC.
- -------------------------------------------------------------------------------
restricted securities held by the Fund at March 31, 1997, the Fund may not
demand registration by the issuers. Restricted securities are valued pursuant to
the valuation procedures noted above.
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.
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
Investments Fund Management LLC (the 'Administrator'). The Investment Adviser
makes investment decisions on behalf of the Fund; the Administrator provides
occupancy and certain clerical and accounting services to the Fund. The Fund
bears all other costs and expenses.
The investment advisory agreement provides for the Investment Adviser to receive
a fee, computed weekly and payable monthly at an annual rate of .50% of the
Fund's average weekly net assets. The administration agreement provides for the
Administrator to receive a fee, computed weekly and payable monthly at an annual
rate of .20% of the Fund's average weekly net assets.
- ------------------------------------------------------------
Note 3. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the year ended March 31, 1997, aggregated $66,455,665 and $66,551,585,
respectively.
During the year ended March 31, 1997, the Fund entered into $1,185,700 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,
1997, net unrealized appreciation for federal income tax purposes was $470,282
(gross unrealized appreciation--$3,684,091; gross unrealized
depreciation--$3,213,809).
For federal income tax purposes, the Fund has a capital loss carryforward as of
March 31, 1997 of approximately $8,153,000 of which $3,948,000 expires in 2000,
$2,399,000 expires in 2003 and $1,806,000 expires in 2004. Such carryforward is
after utilization of approximately $2,560,000 of net taxable gains realized and
recognized during the year ended March 31, 1997. 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, 1997 was $17,494,505 at a weighted
average interest rate of 6.77%. The maximum face amount of borrowings
outstanding at any month end during the year ended March 31, 1997 was
$19,000,000. The current borrowings of $18,000,000 (at a weighted average
interest rate of 6.59%) mature throughout the period from April 14, 1997 to
August 28, 1997.
The Fund has paid commitment fees at an annual rate of .10 of 1% on any unused
portion of the credit facility. Commitment fees are included in
- --------------------------------------------------------------------------------
13
<PAGE>
Notes to Financial Statements THE HIGH YIELD PLUS FUND, INC.
- -------------------------------------------------------------------------------
'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 fiscal years ended March 31, 1997 and March 31, 1996, the Fund issued
106,725 and 104,367 shares in connection with reinvestment of dividends,
respectively.
- ------------------------------------------------------------
Note 6. Dividends
On February 18, 1997 the Board of Directors of the Fund declared dividends of
$0.07 per share payable on May 9 and June 13, 1997, to shareholders of record on
April 30 and May 30, 1997, respectively.
- --------------------------------------------------------------------------------
14
<PAGE>
Financial Highlights THE HIGH YIELD PLUS FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year.................. $ 8.44 $ 7.85 $ 8.38 $ 8.48 $ 7.91
------- ------- ------- ------- -------
Income from investment operations
Net investment income............................... .82 .84 .87 .90 .89
Net realized and unrealized gain (loss) on
investments...................................... .12 .59 (.54) (.15) .52
------- ------- ------- ------- -------
Total from investment operations................. .94 1.43 .33 .75 1.41
------- ------- ------- ------- -------
Less dividends and distributions
Dividends from net investment income................ (.82) (.84) (.86) (.85) (.84)
Distributions in excess of net investment income.... (.02) -- -- -- --
------- ------- ------- ------- -------
Total dividends.................................. (.84) (.84) (.86) (.85) (.84)
------- ------- ------- ------- -------
Net asset value, end of year(a)..................... $ 8.54 $ 8.44 $ 7.85 $ 8.38 $ 8.48
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Market price per share, end of year(a).............. $ 9.00 $ 8.75 $ 8.00 $ 8.375 $ 8.875
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL INVESTMENT RETURN(b):......................... 13.38% 20.80% 6.33% 3.90% 27.02%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
RATIO/SUPPLEMENTAL DATA:
Net assets, end of year (000 omitted)............... $96,042 $94,091 $86,704 $91,698 $92,422
Average net assets (000 omitted).................... $95,946 $92,855 $87,734 $96,962 $88,142
Ratio to average net assets:
Expenses, before loan interest, commitment fees
and nonrecurring expenses..................... 1.08% 1.01% 1.11% 1.12% 1.20%
Total expenses................................... 2.32% 2.29% 2.71% 2.01% 2.03%
Net investment income............................ 9.63% 10.18% 10.90% 10.15% 10.94%
Portfolio turnover rate............................. 60% 60% 47% 100% 82%
Total debt outstanding at end of year (000
omitted)......................................... $18,000 $17,000 $19,000 $28,000 $15,000
Asset coverage per $1,000 of debt outstanding....... $ 6,336 $ 6,535 $ 5,563 $ 4,275 $ 7,161
</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>
Report of Independent Accountants THE HIGH YIELD PLUS FUND, INC.
- -------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
The High Yield Plus Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations, of cash
flows and of changes in net assets and the financial highlights present fairly,
in all material respects, the financial position of The High Yield Plus Fund,
Inc. (the 'Fund') at March 31, 1997, the results of its operations, its cash
flows, the changes in its net assets and the financial highlights for the year
then ended in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
'financial statements') are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit, which included confirmation of securities at March
31, 1997 by correspondence with the custodian, brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
The financial highlights of the Fund for each of the four years in the period
ended March 31, 1996, and the statement of changes in net assets for the year
ended March 31, 1996 were audited by other independent accountants whose report
dated May 9, 1996 expressed an unqualified opinion on those financial highlights
and that statement.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
May 21, 1997
- --------------------------------------------------------------------------------
16
<PAGE>
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
October 30, 1996 at the offices of Prudential Securities Incorporated, One
Seaport Plaza, New York, New York. The meeting was held for the following
purposes:
<TABLE>
<CAPTION>
(1) To elect the following directors to serve as follows:
Directors Class Term Expiring
------------------------------- ------ -------- ---------
<S> <C> <C> <C> <C>
Eugene C. Dorsey I 3 years 1998
Douglas H. McCorkindale II 3 years 1999
---------------
The director Thomas T. Mooney whose term of office continued beyond this meeting was not voted upon at this meeting.
(2) To ratify the selection of Deloitte & Touche LLP as independent public accountants for the year ending March 31, 1997.
(3) To transact such other business as may properly come before the meeting or any adjournment thereof.
</TABLE>
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
Director/Auditor Votes for Votes against Withheld/Abstentions
--------------------------------- ---------- -------------- ---------------------
<S> <C> <C> <C> <C>
(1) Eugene C. Dorsey 5,829,461 -- 116,028
Douglas H. McCorkindale 5,829,869 -- 115,621
(2) Deloitte & Touche LLP 5,834,322 42,466 68,702
(3) There was no other business voted upon at the annual meeting of shareholders.
</TABLE>
Federal Income Tax Information (Unaudited) 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, 1997) that 1.07% of the dividends paid in the
fiscal year ended March 31, 1997 qualified for the corporate dividends received
deduction available to corporate taxpayers.
- --------------------------------------------------------------------------------
17
<PAGE>
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
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
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 Auditors
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
Notice is hereby given in accordance with Section 23(c) of the
Investment Company Act of 1940 that the Fund may purchase, from
time to time, shares of its common stock at market prices.
The views expressed in this report and the information about the
Fund's portfolio holdings are for the period covered by this
report and are subject to change thereafter.
This report is for stockholder information. This is not a prospectus
intended for use in the purchase or sale of Fund shares.
The High Yield Plus Fund, Inc.
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
For information call toll-free (800) 451-6788
429906100
