The
High Yield
Plus Fund,
Inc.
ANNUAL
REPORT
March 31, 1998
<PAGE>
Letter To Shareholders
April 13, 1998
Dear Shareholder:
Fiscal 1998 proved to be a healthy year for the
high yield market. Strong
returns were driven by favorable economic
conditions as well as broad-based
demand for high yield instruments. In addition,
the general strength of the
equity markets and liquidity in the commercial
banking system have both
supported the financial flexibility of high yield
issuers, insuring that
capital is readily available. The high yield
market witnessed a record amount
of new issuance during 1997 - nearly $140 billion.
The new issue market has
commenced 1998 at a blistering pace, and to date,
the vast majority of new
issues have been readily absorbed, validating the
strength of investor demand.
Fund Performance.
The Fund's total returns for the periods ended
March 31, 1998 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 19 closed-end
high yield funds. We would note that the degree of
leverage varies
substantially amongst the funds in this group. In
addition, we have included
the returns of the Lehman Brothers High Yield
Index, a proxy for high yield
market performance.
TOTAL RETURNS
For the Periods Ended March 31,
1998
<TABLE>
<CAPTION>
6 Months 12
Months 24 Months
<S> <C> <C>
<C>
High Yield Plus Fund (NAV)1 7.1%
18.3% 32.0%
Lipper CEHY - Leveraged 5.9%
18.4% 34.3%
Lehman Brothers 5.4%
15.3% 27.5%
High Yield Index
</TABLE>
1Source: Prudential Investments Fund Management.
The Fund's total return
represents the change in net asset value from the
beginning of the period
noted through March 31, 1998 and assumes the
reinvestment of dividends and
distributions. Past performance is no guaratee of
future results.
The Fund's shares closed the period at $9.125 per
share. This price reflected
a modest discount to the Fund's net asset value of
$9.21 per share as of March
31, 1998. The monthly dividend of $0.07 per share
($0.84 per share annualized)
equates to a yield of 9.2% on the closing stock
price. For reference, this
dividend yield was approximately 355 basis points
in excess of the 10-year
Treasury bond yield as of March 31.
Global High Yield Market Developments.
Perhaps the issue of most interest during the year
was the financial turmoil
that swept through Asia, wreaking havoc in the
emerging market sector. By the
end of the year, several previously highly rated
countries, most notably South
Korea, had suddenly achieved junk status. By year-
end 1997, virtually all
emerging market issues had depreciated sharply in
value, in sympathy with the
Asian crisis. While we remain circumspect of the
issues of investing outside
of the U.S., as well as of the complexities
created by severe market
dislocation, we believed that valuations of
selected issuers merited the
Fund's investment. Given the International
Monetary Fund's quick focus, as
well as South Korea's resounding resolve to build
anew its fiscal balance
sheet, the broader
- --------------------------------------------------
- -----------------------------
1
<PAGE>
emerging markets have recovered from their lows,
to the benefit of the Fund's
recent purchases in this arena. We believe that
the need for global capital
access will probably serve as the most compelling
force for longer-term market
liberalization and transparency. Parenthetically,
the Fund's overall exposure
to U.S. dollar-denominated issues outside of the
U.S. and Canada has increased
from approximately 10% to 23% over the six-month
period ended March 31, 1998.
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, 1998
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--125.4%
CORPORATE BONDS--113.8%
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Aerospace/Defense--3.6%
Argo-Tech Corp., Sr. Sub. Notes
B3 8.625% 10/01/07 $ 1,500
$ 1,533,750
K&F Industries, Inc., Sr. Sub. Notes, Ser. B
B3 9.25 10/15/07 750
783,750
Moog, Inc., Sr. Sub. Notes, Ser. B
B2 10.00 5/01/06 1,340
1,450,550
- ------------
3,768,050
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Automotive--4.1%
Accuride Corp., Sr. Sub. Notes
B2 9.25 2/01/08 450
447,750
Federal-Mogul Corp., Sr. Notes
Ba2 8.80 4/15/07 500
524,770
Johnstown America Industries, Inc., Sr. Sub. Notes
B3 11.75 8/15/05 1,500
1,676,250
Key Plastics, Inc., Sr. Sub. Notes, Ser. B
B3 10.25 3/15/07 750
796,875
LDM Technologies, Inc., Sr. Sub. Notes, Ser. B
B3 10.75 1/15/07 750
817,500
- ------------
4,263,145
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Basic Industries-Manufacturing--6.3%
Clark-Schwebel Inc., Sr. Notes, Ser. B
B2 10.50 4/15/06 465
520,800
Gaylord Container Corp., Sr. Notes
B3 9.375 6/15/07 1,000
1,000,000
Great Lakes Carbon Corp., Sr. Sec. Notes
Ba3 10.00 1/01/06 1,000
1,095,000
International Wire Group, Inc., Sr. Sub. Notes
B3 11.75 6/01/05 750
832,500
Neenah Corp., Sr. Sub. Notes, Ser. B
B3 11.125 5/01/07 750
830,625
Roller Bearing Co. Amer. Inc., Sr. Sub. Notes,
Ser. B B3 9.625
6/15/07 750 770,625
Thermadyne Holdings Corp., Sr. Notes
B1 10.25 5/01/02 750
780,000
UNICCO Service Co./UNICCO Fin. Corp., Sr. Sub.
Notes,
Ser. B
B3 9.875 10/15/07 750
768,750
- ------------
6,598,300
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Building & Related Industries--0.8%
Amtrol Inc., Sr. Sub. Notes
B3 10.625 12/31/06 500
518,750
Nortek Inc., Sr. Notes, Ser. B
B1 9.25 3/15/07 350
364,000
- ------------
882,750
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Cable--5.2%
Adelphia Communications Corp., Sr. Notes, Ser. B
B3 9.875 3/01/07 500
545,000
Century Communications Corp., Sr. Disc. Notes
Ba3 Zero 1/15/08 1,250
550,000
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of March 31, 1998
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>
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Cable (cont'd.)
CSC Holdings, Inc., Sr. Deb., Ser. B
Ba2 8.125% 8/15/09 $ 250
$ 261,875
Diamond Cable Co., Sr. Disc. Notes,
Zero Coupon (until 2/15/02) (United Kingdom)
B3 10.75 2/15/07 1,000D
707,500
Diamond Holdings, PLC, Sr. Notes (United Kingdom)
B3 9.125 2/01/08 240D
246,600
Falcon Holding Group L.P., Sr. Deb.
B2 8.375 4/15/10 845
842,735
Frontiervision Holdings L.P., Sr. Disc. Notes,
Zero Coupon (until 9/15/01)
B## 11.875 9/15/07 1,500
1,166,250
Rifkin Acquisition Partners L.L.L.P., Sr. Sub.
Notes B3 11.125
1/15/06 1,000 1,110,000
- ------------
5,429,960
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Chemicals--4.5%
Acetex Corp., Sr. Sec. Notes (Canada)
B1 9.75 10/01/03 750D
776,250
Huntsman Corp., Sr. Sub. Notes, F.R.N
B2 9.125 7/01/07 250
250,000
Laroche Industries, Inc., Sr. Sub. Notes
B3 9.50 9/15/07 1,000
987,500
PCI Chemicals Canada Inc., Sr. Sec. Notes, Ser. B
(Canada)
B2 9.25 10/15/07 250D
252,500
Pioneer Americas Acquisition Corp., Sr. Sec.
Notes, Ser.
B
B2 9.25 6/15/07 500
515,000
Sovereign Specialty Chemicals, Sr. Sub. Notes
B3 9.50 8/01/07 1,000
1,055,000
Terra Industries, Inc., Sr. Notes
Ba3 10.50 6/15/05 250
275,000
Texas Petrochemicals Corp., Sr. Sub. Notes
B3 11.125 7/01/06 500
551,250
- ------------
4,662,500
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Consumer Goods & Services--1.5%
Chattem Inc., Sr. Sub. Notes
B2 8.875 4/01/08 425
430,313
Muzak L.P., Muzak Capital, Sr. Notes
Ba3 10.00 10/01/03 500
522,500
Revlon Worldwide, Sr. Sec. Disc. Notes, Ser. B
B3 Zero 3/15/01 750
573,750
- ------------
1,526,563
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Containers--3.3%
BWay Corp., Sr. Sub. Notes, Ser B
B2 10.25 4/15/07 750
825,000
Calmar Inc., Sr. Sub. Notes, Ser. B
B3 11.50 8/15/05 500
531,250
Silgan Holdings Inc.,
Sr. Sub. Deb.
B1 9.00 6/01/09 1,750
1,837,500
Sub. Deb., PIK
NR 13.25 7/15/06 200
226,289
- ------------
3,420,039
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as of March 31, 1998
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>
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Energy & Related Goods & Services--11.0%
Abraxas Petroleum Corp., Sr. Notes, Ser. B
B2 11.50% 11/01/04 $ 1,500
$ 1,545,000
Costilla Energy Inc.,
Sr. Notes
B2 10.25 10/01/06 875
888,125
Sr. Sub. Notes
B2 10.25 10/01/06 375
380,625
Cross Timbers Oil Co., Sr. Sub. Notes, Ser. B
B2 9.25 4/01/07 1,250
1,296,875
Kelley Oil And Gas Corp., Sr. Sub. Notes, Ser. B
B3 10.375 10/15/06 500
517,500
Petroleos Mexicanos, Global Gtd. Notes (Mexico)
Ba2 8.85 9/15/07 1,500D
1,511,250
Plains Resources, Inc., Sr. Sub. Notes
B2 10.25 3/15/06 1,500
1,612,500
Pride Petroleum Services, Inc., Sr. Notes
Ba3 9.375 5/01/07 315
337,050
RAM Energy, Inc., Sr. Notes
B3 11.50 2/15/08 1,750
1,741,250
Tatneft Finance, Gtd. Bonds (Russia)
Ba3 9.00 10/29/02 750D
682,500
Transportadora de Gas del Sur, S.A., Notes
(Argentina) Ba3 10.25
4/25/01 250D 260,937
Wainoco Oil Corp., Sr. Notes
B1 9.125 2/15/06 750
753,750
- ------------
11,527,362
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Financial Services--13.1%
Bangkok Bank Public Co., Deb. (Thailand)
Ba1 7.25 9/15/05 1,000D
878,300
Chevy Chase Svgs. Bank, F.S.B., Sub. Deb.
B1 9.25 12/01/08 500
522,500
Emergent Group Inc., Sr. Notes, Ser. B
B3 10.75 9/15/04 1,000
942,500
First Nationwide Holdings, Inc., Sr. Notes
B3 12.50 4/15/03 750
855,000
FirstFed Financial Corp., Notes
B2 11.75 10/01/04 500
540,000
Guangdong Enterprises Hldgs., Ltd. (China),
Sr. Notes
Baa3 8.875 5/22/07 250D
224,182
Sr. Notes
Baa3 8.875 5/22/07 900D
806,625
Hawthorne Financial Corp., Notes
NR 12.50 12/31/04 1,250
1,284,375
Olympic Financial Ltd., Sr. Notes
B2 11.50 3/15/07 1,500@
1,477,500
Resource America, Inc., Sr. Notes
Caa 12.00 8/01/04 1,500
1,593,750
Southern Pacific Funding Corp., Sr. Notes
B3 11.50 11/01/04 350
346,500
Superior Nat'l. Cap. Trust I
B1 10.75 12/1/17 1,135
1,205,938
Thai Farmers Bank Ltd., Sub. Notes (Thailand)
Ba1 8.25 8/21/16 1,500D
1,288,650
Unibanco-Uniao de Bancos Brasileiros S.A., Unsub.
Notes
(Brazil)
B1 8.00 3/06/00 250D
245,000
Western Financial Svgs. Bank, F.S.B., Sub. Cap.
Deb. B1 8.875
8/01/07 1,500 1,440,000
- ------------
13,650,820
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Food & Lodging--3.9%
Aurora Foods Inc., Sr. Sub. Notes, Ser. D
B3 9.875 2/15/07 230
247,250
Capstar Hotel Co., Sr. Sub. Notes
B1 8.75 8/15/07 500
517,500
Del Monte Foods Co., Sr. Disc. Notes, Zero Coupon
(until
12/15/02)
Caa 12.50 12/15/07 1,400
924,000
Eagle Family Foods Inc., Sr. Sub. Notes
B3 8.75 1/15/08 350
350,000
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 5
<PAGE>
Portfolio of Investments as of March 31, 1998
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>
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Food & Lodging (cont'd.)
John Q. Hammons Hotels, First Mtge. Bonds
B1 8.875% 2/15/04 $ 2,070
$ 2,095,875
- ------------
4,134,625
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Gaming--3.5%
Argosy Gaming Co., First Mtge. Notes
B2 13.25 6/01/04 500
557,500
Fitzgeralds Gaming Corp., Sr. Sec. Notes
B3 12.25 12/15/04 1,000
1,020,000
Hollywood Casino Corp., Sr. Sec. Notes
B2 12.75 11/01/03 1,000
1,105,000
Lady Luck Gaming Corp., First Mtge. Notes
B2 11.875 3/01/01 1,000
1,030,000
- ------------
3,712,500
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Grocery Stores--1.6%
Homeland Stores, Inc., Sr. Sub. Notes
NR 10.00 8/01/03 1,000
940,000
Pathmark Stores, Inc., Sub. Notes
Caa 11.625 6/15/02 750
744,375
- ------------
1,684,375
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Health Care--4.3%
Columbia/HCA Healthcare Corp., Notes
Ba2 7.25 5/20/08 1,000
947,280
Owens & Minor Inc., Sr. Sub. Notes
B1 10.875 6/01/06 1,000
1,117,000
Pharmerica Inc., Sr. Sub. Notes
B2 8.375 4/01/08 625
628,125
Universal Hospital Svcs., Sr. Notes
B3 10.25 3/01/08 1,750
1,798,125
- ------------
4,490,530
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Home Builder & Real Estate--2.9%
BF Saul Real Estate Investment Trust, Sr. Sec.
Notes B3## 9.75
4/01/08 500 503,750
Kaufman & Broad Home Corp., Sr. Sub. Notes
Ba3 9.625 11/15/06 500
532,500
Presley Companies, Sr. Notes
B3 12.50 7/01/01 1,000
960,000
Standard Pacific Corp., Sr. Notes
Ba2 8.50 6/15/07 750
765,000
Toll Corp., Sr. Sub. Notes
Ba3 7.75 9/15/07 250
250,625
- ------------
3,011,875
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Media & Communications--9.5%
Allbritton Communications Co., Sr. Sub. Notes
B3 8.875 2/01/08 350
353,500
Big Flower Press Holdings Inc., Sr. Sub. Notes
B2 8.875 7/01/07 500
510,000
Chancellor Media Corp., Sr. Sub. Notes
B2 9.375 10/01/04 500
530,000
Echostar DBS Corp., Sr. Sec. Notes
Caa 12.50 7/01/02 900
1,019,250
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 6
<PAGE>
Portfolio of Investments as of March 31, 1998
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.)
Fox/Liberty Networks L.L.C., Sr. Disc. Notes,
Zero Coupon (until 8/15/02)
B1 9.75% 8/15/07 $ 1,500
$ 1,020,000
Globo Comunicacoes e Participacoes S.A., Notes
(Brazil) B1 10.50
12/20/06 1,250D 1,270,312
Innova S de R.L., Sr. Notes (Mexico)
B2 12.875 4/01/07 1,000D
1,067,500
Jacor Communications, Inc.,
Sr. Sub. Notes
B2 9.75 12/15/06 250
273,750
Sr. Sub. Notes
B2 8.00 2/15/10 270
271,688
JCAC, Inc., Sr. Sub. Notes
B2 10.125 6/15/06 250
274,375
Liberty Group Publishing Inc., Sr. Disc. Notes,
Zero Coupon (until 2/1/03)
Caa 11.625 2/01/09 415
254,188
Net Sat Servicos Ltda., Sr. Sec. Notes (Brazil)
B2 12.75 8/05/04 285D
292,125
Sullivan Graphics Inc., Sr. Sub. Notes
Caa 12.75 8/01/05 1,000
1,057,500
Tevecap S.A., Sr. Notes (Brazil)
B2 12.625 11/26/04 1,250D
1,265,625
TV Azteca S.A. de CV, Gtd. Sr. Notes (Brazil)
Ba3 10.50 2/15/07 500D
532,500
- ------------
9,992,313
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Metals--4.8%
Acindar Industria Argentina de Aceros S.A., Notes
(Argentina)
B2 11.25 2/15/04 750D
795,000
AK Steel Corp., Sr. Notes
Ba2 9.125 12/15/06 500
535,625
Armco, Inc., Sr. Notes
B2 9.00 9/15/07 250
260,625
Companhia Vale do Rio Doce, Notes (Brazil)
NR 10.00 4/02/04 750D
768,750
CSN Iron S.A., Gtd. Notes (Brazil)
B1 9.125 6/01/07 1,250D
1,170,313
GS Technologies Operating Co. Inc., Sr. Notes
B2 12.25 10/01/05 350
393,750
Weirton Steel Corp., Sr. Notes
B2 11.375 7/01/04 1,000
1,082,500
- ------------
5,006,563
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Paper & Packaging--11.1%
APP Int'l. Finance Co., Sec. Notes (Indonesia)
Caa 11.75 10/01/05 750D
720,000
Aracruz Celulose S. A., (Brazil),
Notes
B1 10.375 1/31/02 1,035D
1,068,637
Notes
B1 10.375 1/31/02 715D
738,238
Bahia Sul Celulose S.A., Notes (Brazil)
NR 10.625 7/10/04 500D
497,500
Container Corp. of America,
Sr. Notes
B1 9.75 4/01/03 1,000
1,075,000
Sr. Notes, Ser. B
B1 10.75 5/01/02 1,000
1,100,000
Doman Industries Ltd., Sr. Notes (Canada)
B1 8.75 3/15/04 750D
747,187
Fonda Group Inc., Sr. Sub. Notes, Ser. B
B3 9.50 3/01/07 750
735,000
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 7
<PAGE>
Portfolio of Investments as of March 31, 1998
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.)
Grupo Industrial Durango, S.A. de C.V., Notes
B1 12.625% 8/01/03 $ 350
$ 397,688
Klabin Fabricadora de Papel e Celulose S.A.,
Gtd. Notes (Brazil)
NR 11.00 8/12/04 1,000D
1,006,250
Pindo Deli Finance Mauritius Ltd., Gtd. Sr. Notes
(Indonesia)
Caa 10.75 10/01/07 1,250D
1,012,500
Repap New Brunswick, Inc., Sr. Sec. Notes (Canada)
Caa 10.625 4/15/05 1,500D
1,515,000
S.D. Warren Co., Sr. Sub. Notes, Ser. B
B1 12.00 12/15/04 350
390,250
Tembec Finance Corp., Sr. Notes (Canada)
B1 9.875 9/30/05 500D
530,000
- ------------
11,533,250
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Technology--4.6%
Advanced Micro Devices, Inc., Sr. Sec. Notes
Ba1 11.00 8/01/03 750
804,375
Concentric Network Corp., Notes
NR 12.75 12/15/07 255@
300,900
DecisionOne Corp., Sr. Sub. Notes
B3 9.75 8/01/07 500
487,500
DecisionOne Holdings Corp., Sr. Disc. Deb.,
Zero Coupon (until 8/1/02)
Caa 11.50 8/01/08 1,000@
600,000
Fairchild Semiconductor Corp., Sr. Sub. Notes
B2 10.125 3/15/07 500
522,500
Pierce Leahy Corp., Sr. Sub. Notes
B3 9.125 7/15/07 500
525,000
Unisys Corp., Sr. Notes, Ser. B
B1 12.00 4/15/03 500
565,000
Verio Inc., Sr. Notes
NR 10.375 4/01/05 960
998,400
- ------------
4,803,675
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Telecommunications--12.6%
Advanced Radio Telecom Corp., Sr. Notes
Caa## 14.00 2/15/07 850
935,000
American Communications Services, Sr. Disc. Notes,
Zero Coupon (until 4/1/01)
NR 12.75 4/01/06 750
596,250
American Mobile Satellite Corp., Notes
NR 12.25 4/01/08 280@
290,500
BTI Telecom Corp., Sr. Notes
B2 10.50 9/15/07 890
927,825
Clearnet Communications, Inc., Sr. Disc. Notes,
Zero Coupon (until 12/15/00) (Canada)
B3 14.75 12/15/05 750D
620,625
GST Telecommunications, Inc., Sr. Sub. Notes,
Zero Coupon (until 11/15/02)
NR 12.75 11/15/07 635
768,350
Hyperion Telecommunications Inc.,
Sr. Disc. Notes, Zero Coupon (until 4/15/01)
B3 13.00 4/15/03 350
269,500
Sr. Sec. Notes, Ser. B
B3 12.25 9/01/04 715
807,950
Intermedia Communications Inc.,
Sr. Notes
B2 8.50 1/15/08 150
157,125
Sr. Notes, Ser. B
B2 8.875 11/01/07 350
371,875
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 8
<PAGE>
Portfolio of Investments as of March 31, 1998
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>
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Telecommunications (cont'd.)
Iridium L.L.C./Iridium Capital Corp., Sr. Notes,
Ser. C B3 11.25%
7/15/05 $ 1,000 $ 1,061,250
ITC Deltacom Inc., Sr. Notes
B2 8.875 3/01/08 700
710,500
Korea Telecom (South Korea),
Notes
Ba1 7.50 6/01/06 500D
438,675
Notes
Ba1 7.625 4/15/07 1,000D
878,690
McLeodUSA Inc.,
Sr. Notes
B2 9.25 7/15/07 500
535,000
Sr. Notes
B2 8.375 3/15/08 140
145,250
MGC Communications Inc., Sr. Sec. Notes, Ser. B
Caa 13.00 10/01/04 500
517,500
MobileMedia Communications, Inc., Sr. Sub. Notes
C 9.375 11/01/07
2,000** 230,000
Philippine Long Dist. Tel. Co., Notes (The
Philippines) Ba2 7.85
3/06/07 1,750D 1,631,875
Winstar Communications, Inc., Sr. Disc. Notes,
Zero Coupon (until 10/15/00)
NR 14.00 10/15/05 1,500
1,260,000
- ------------
13,153,740
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Textiles--0.2%
Polysindo Int'l. Finance Co., Notes (Indonesia)
Caa 11.375 6/15/06 350D
234,500
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Transportation--0.9%
MRS Logistica S.A., Notes (Brazil)
B1## 10.625 8/15/05 500D
490,000
Valujet Inc., Sr. Notes
B3 10.25 4/15/01 500
475,000
- ------------
965,000
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Utilities--0.5%
Inversora Electrica de Buenos Aires S.A., Sr.
Notes, Ser.
B (Argentina)
Ba1## 9.00 9/16/04 500D
496,250
- ------------
Total corporate bonds (cost $116,837,701)
118,948,685
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Foreign Government ObligationsD--7.2%
Republic of Argentina,
Global Bonds
Ba3 11.00 10/09/06 1,750
1,946,875
Global Bonds
Ba3 8.375 12/20/03 500
497,500
Global Bonds
Ba3 11.375 1/30/17 500
565,625
Republic of Brazil, Ser. C
B1 4.50 4/15/14 2,317
1,949,477
Republic of Colombia, Global Bonds
Baa3 8.375 2/15/27 1,750
1,620,605
Republic of Venezuela, Bonds
Ba2 9.25 9/15/27 1,000
907,500
- ------------
Total foreign government obligations (cost
$6,786,157)
7,487,582
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 9
<PAGE>
Portfolio of Investments as of March 31, 1998
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--4.4%
Chevy Chase Capital Corp., Noncumulative
Exchangeable,
Ser. A
B1 10.375% -- 10,000
$ 536,250
Fairfield Mfg. Inc., Cumulative Exchangeable, PIK
B3 11.25 -- 1,000
1,045,000
Fitzgeralds Gaming Corp., Cumulative Redeemable
Ca 15.00 -- 10,000@
340,000
Granite Broadcasting Corp., Cumulative
Exchangeable, PIK B1## 12.75
- -- 566 647,820
IXC Communications Inc., Jr. Conv., PIK
NR 12.50 -- 670
817,782
Lady Luck Gaming Corp., Ser. A
NR 11.50 -- 7,000
273,000
SF Holdings Group Inc., Exchangeable, PIK
NR 13.75 -- 110@
1,006,500
- ------------
Total preferred stocks (cost $4,369,565)
4,666,352
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
WARRANTS*
Warrants
- ----------
Benedek Communications Corp.
(cost $0; acquired 10/17/96)
NR -- 7/1/07 5,500
11,000
MGC Communications, Inc.
NR -- 10/1/20 500
17,500
- ------------
Total warrants (cost $17,500)
28,500
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Total Investments--125.4%
(cost $128,010,923; Note 3)
131,131,119
Liabilities in excess of other assets--(25.4)%
(26,572,747)
- ------------
Net Assets--100%
$104,558,372
- ------------
- ------------
</TABLE>
- ---------------
* --Non-income-producing security.
** --Represents issuer in default on
interest payments; non-income-
producing security.
## --S&P Equivalent to Moody's Rating.
D --US$ 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.C. --Limited Liability Corporation.
L.L.L.P. --Limited Liability Limited Partnership.
L.P. --Limited Partnership.
F.R.N. --Floating Rate Note.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 10
<PAGE>
Statement of Assets and Liabilities
THE HIGH YIELD PLUS FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
Assets
March 31, 1998
<S>
<C>
Investments, at value (cost
$128,010,923).....................................
............................. $ 131,131,119
Cash..............................................
..................................................
....... 2,699,939
Receivable for investments
sold..............................................
.............................. 5,444,774
Interest and dividends
receivable........................................
..................................
2,910,517
Other
assets............................................
..................................................
. 54,770
- --------------
Total
assets............................................
................................................
142,241,119
- --------------
Liabilities
Loan payable (Note
4)................................................
......................................
30,000,000
Payable for investments
purchased.........................................
.................................
6,484,839
Dividends
payable...........................................
...............................................
795,221
Loan interest payable (Note
4)................................................
............................. 245,672
Accrued
expenses..........................................
.................................................
83,301
Advisory fee
payable...........................................
............................................
44,190
Administration fee
payable...........................................
......................................
17,676
Deferred directors'
fees..............................................
.....................................
11,848
- --------------
Total
liabilities.......................................
................................................
37,682,747
- --------------
Net
Assets............................................
..................................................
... $ 104,558,372
- --------------
- --------------
Net assets were comprised of:
Common stock, at
par...............................................
..................................... $
113,485
Paid-in capital in excess of
par...............................................
......................... 104,157,299
- --------------
104,270,784
Undistributed net investment
income............................................
......................... 310,599
Accumulated net realized loss on
investments.......................................
..................... (3,143,207 )
Net unrealized appreciation of
investments.......................................
....................... 3,120,196
- --------------
Net assets, March 31,
1998..............................................
................................ $
104,558,372
- --------------
- --------------
Net asset value per share ($104,558,372 /
11,348,544 shares of common stock issued and
outstanding)........ $9.21
- --------------
- --------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 11
<PAGE>
THE HIGH YIELD PLUS FUND, INC.
Statement of Operations
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income
March 31, 1998
<S> <C>
Income
Interest................................. $
11,712,150
Dividends................................
225,226
---
- -----------
11,937,376
---
- -----------
Expenses
Investment advisory fee..................
505,151
Administration fee.......................
202,061
Custodian's fees and expenses............
106,000
Legal fees and expenses..................
75,000
Reports to shareholders..................
57,000
Transfer agent's fees and expenses.......
39,000
Audit fee................................
27,000
Insurance expense........................
25,000
Listing fee..............................
25,000
Directors' fees and expenses.............
12,000
Miscellaneous............................
10,650
---
- -----------
Total operating expenses..............
1,083,862
Loan interest expense (Note 4)...........
1,374,351
---
- -----------
Total expenses........................
2,458,213
---
- -----------
Net investment income.......................
9,479,163
---
- -----------
Realized and Unrealized
Gain on Investments
Net realized gain on investment
transactions.............................
5,009,438
Net change in unrealized appreciation of
investments..............................
2,649,914
---
- -----------
Net gain on investments.....................
7,659,352
---
- -----------
Net Increase in Net Assets
Resulting from Operations................... $
17,138,515
---
- -----------
---
- -----------
</TABLE>
THE HIGH YIELD PLUS FUND, INC.
Statement of Cash Flows
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Year Ended
Increase (Decrease) in Cash
March 31, 1998
<S>
<C>
Cash flows used for operating activities
Interest and dividends received (excluding
discount amortization of $615,950)...... $
11,106,041
Operating expenses paid....................
(823,577)
Loan interest and commitment fee paid......
(1,515,806)
Maturities of short-term portfolio
investments, net........................
1,350,000
Purchases of long-term portfolio
investments.............................
(139,142,949)
Proceeds from disposition of long-term
portfolio investments...................
128,334,987
Deferred expenses and other assets.........
5,678
--
- ------------
Net cash used for operating activities.....
(685,626)
--
- ------------
Cash provided from financing activities
Net increase in notes payable..............
12,000,000
Cash dividends paid (excluding reinvestment
of dividends of $876,479)...............
(8,614,779)
--
- ------------
Net cash provided from financing
activities..............................
3,385,221
--
- ------------
Net increase in cash.......................
2,699,595
Cash at beginning of year..................
344
--
- ------------
Cash at end of year........................ $
2,699,939
--
- ------------
--
- ------------
Reconciliation of Net Increase in Net Assets
to Net Cash used for Operating Activities
Net increase in net assets resulting from
operations................................. $
17,138,515
--
- ------------
Increase in investments.......................
(10,955,944)
Net realized gain on investment
transactions...............................
(5,009,438)
Net change in unrealized appreciation of
investments................................
(2,649,914)
Increase in receivable for investments sold...
(4,484,405)
Increase in interest and dividends
receivable.................................
(215,385)
Decrease in deferred expenses and other
assets.....................................
5,678
Increase in payable for investments
purchased..................................
5,366,437
Increase in accrued expenses and other
liabilities................................
118,830
--
- ------------
Total adjustments..........................
(17,824,141)
--
- ------------
Net cash used for operating activities..... $
(685,626)
--
- ------------
--
- ------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 12
<PAGE>
THE HIGH YIELD PLUS FUND, INC.
Statement of Changes in Net Assets
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Year Ended
March 31,
Increase (Decrease) ---------------
- --------------
in Net Assets 1998
1997
------------
- -----------
<S> <C>
<C>
Operations
Net investment income........ $ 9,479,163
$ 9,238,631
Net realized gain on
investment transactions... 5,009,438
2,559,619
Net change in unrealized
appreciation/depreciation
of investments............ 2,649,914
(1,353,218)
------------
- -----------
Net increase in net assets
resulting from
operations................ 17,138,515
10,445,032
Dividends from net investment
income....................... (9,479,163)
(9,238,631)
Distributions in excess of net
investment income............ (19,779)
(170,811)
Value of Fund shares issued to
shareholders in reinvestment
of dividends................. 876,479
915,455
------------
- -----------
Total increase.................. 8,516,052
1,951,045
Net Assets
Beginning of year............... 96,042,320
94,091,275
------------
- -----------
End of year..................... $104,558,372
$96,042,320
------------
- -----------
------------
- -----------
</TABLE>
THE HIGH YIELD PLUS FUND, INC.
Notes to Financial Statements
- --------------------------------------------------
- ----------
The High Yield Plus Fund, Inc. (the 'Fund') was
organized in Maryland on
February 3, 1988, as a diversified, closed-end
management investment company.
The Fund had no transactions until April 4, 1988,
when it sold 11,000 shares of
common stock for $102,300 to Wellington Management
Company, LLP (the 'Investment
Adviser'). Investment operations commenced on
April 22, 1988. The Fund's primary
objective is to provide a high level of current
income to shareholders. The Fund
seeks to achieve this objective through investment
in publicly or privately
offered high yield debt securities rated in the
medium to lower categories by
recognized rating services or nonrated securities
of comparable quality. As a
secondary investment objective, the Fund will seek
capital appreciation, but
only when consistent with its primary objective.
The ability of issuers of debt
securities held by the Fund to meet their
obligations may be affected by
economic developments in a specific industry or
region.
- --------------------------------------------------
- ----------
Note 1. Accounting Policies
The following is a summary of significant
accounting policies followed by the
Fund in the preparation of its financial
statements.
Securities Valuation: Portfolio securities that
are actively traded in the
over-the-counter market, including listed
securities for which the primary
market is believed to be over-the-counter, are
valued at the closing bid price
or in the absence of such price, as determined in
good faith by the Board of
Directors of the Fund. Any security for which the
primary market is on an
exchange is valued at the last sales price on such
exchange on the day of
valuation or, if there was no sale on such day,
the closing bid price.
Securities for which no trades have taken place
that day and unlisted securities
for which market quotations are readily available
are valued at the latest bid
price.
Short-term securities which mature in more than 60
days are valued at current
market quotations. Short-term securities which
mature in 60 days or less are
valued at amortized cost.
Cash Flow Information: The Fund invests in
securities and pays dividends from
net investment income and distributions from net
realized gains which are paid
in cash or are reinvested at the discretion of
shareholders. These activities
are reported in the Statement of Changes in Net
Assets and additional
information on cash receipts and cash payments is
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements 13
<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.
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, 1998, were
$144,503,792 and $132,812,163,
respectively.
During the year ended March 31, 1998, the Fund
entered into $1,716,750 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 is substantially
the same as for financial reporting purposes and,
accordingly, as of March 31,
1998, net unrealized appreciation for federal
income tax purposes was $3,120,196
(gross unrealized appreciation--$5,238,705; gross
unrealized
depreciation--$2,118,509).
For federal income tax purposes, the Fund has a
capital loss carryforward as of
March 31, 1998 of approximately $3,143,000 of
which $1,337,000 expires in 2003
and $1,806,000 expires in 2004. Such carryforward
is after utilization of
approximately $5,010,000 of net taxable gains
realized and recognized during the
year ended March 31, 1998. 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, 1998
was $21,027,397 at a weighted
average interest rate of 6.54%. The maximum face
amount of borrowings
outstanding at any month end during the year ended
March 31, 1998 was
$30,000,000. The current borrowings of $30,000,000
(at a weighted average
interest rate of 6.28%) mature throughout the
period from April 3, 1998 to
September 28, 1998.
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 '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, 1998 and 1997,
the Fund issued 98,012 and
106,725 shares in connection with reinvestment of
dividends, respectively.
- --------------------------------------------------
- ----------
Note 6. Dividends
On February 11, 1998 the Board of Directors of the
Fund declared dividends of
$0.07 per share payable on April 9 and May 8, 1998
to shareholders of record on
March 31 and April 30, 1998, respectively.
- --------------------------------------------------
- ------------------------------
14
<PAGE>
Financial Highlights
THE HIGH YIELD PLUS FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Year Ended March 31,
- --------------------------------------------------
- ------
1998 1997 1996 1995
1994
- -------- ------- ------- ------- -
- ------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year........................ $ 8.54 $ 8.44
$ 7.85 $ 8.38 $ 8.48
- -------- ------- ------- ------- -
- ------
Income from investment operations
Net investment
income.....................................
.84 .82 .84 .87
.90
Net realized and unrealized gain (loss) on
investments.... .67 .12 .59
(.54) (.15)
- -------- ------- ------- ------- -
- ------
Total from investment
operations....................... 1.51
.94 1.43 .33 .75
- -------- ------- ------- ------- -
- ------
Less dividends and distributions
Dividends from net investment
income...................... (.84)
(.82) (.84) (.86) (.85)
Distributions in excess of net investment
income.......... -- (.02) --
- -- --
- -------- ------- ------- ------- -
- ------
Total
dividends........................................
(.84) (.84) (.84) (.86)
(.85)
- -------- ------- ------- ------- -
- ------
Net asset value, end of
year(a)........................... $ 9.21 $
8.54 $ 8.44 $ 7.85 $ 8.38
- -------- ------- ------- ------- -
- ------
- -------- ------- ------- ------- -
- ------
Market price per share, end of
year(a).................... $ 9.125 $ 9.00
$ 8.75 $ 8.00 $ 8.375
- -------- ------- ------- ------- -
- ------
- -------- ------- ------- ------- -
- ------
TOTAL INVESTMENT
RETURN(b):...............................
11.25% 13.38% 20.80% 6.33%
3.90%
- -------- ------- ------- ------- -
- ------
- -------- ------- ------- ------- -
- ------
RATIO/SUPPLEMENTAL DATA:
Net assets, end of year (000
omitted)..................... $104,558
$96,042 $94,091 $86,704 $91,698
Average net assets (000
omitted).......................... $100,766
$95,946 $92,855 $87,734 $96,962
Ratio to average net assets:
Expenses, before loan interest, commitment fees
and
nonrecurring
expenses............................... 1.07%
1.08% 1.01% 1.11% 1.12%
Total
expenses.........................................
2.44% 2.32% 2.29% 2.71%
2.01%
Net investment
income..................................
9.41% 9.63% 10.18% 10.90%
10.15%
Portfolio turnover
rate................................... 112%
60% 60% 47% 100%
Total debt outstanding at end of year (000
omitted)....... $ 30,000 $18,000 $17,000
$19,000 $28,000
Asset coverage per $1,000 of debt
outstanding............. $ 4,485 $ 6,336
$ 6,535 $ 5,563 $ 4,275
</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, 1998, the results
of its operations and its cash
flows for the year then ended and the changes in
its net assets and the
financial highlights for each of the two years in
the period 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 audits 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
audits, which included confirmation of securities
at March 31, 1998 by
correspondence with the custodian and 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 accompanying financial
highlights for each of the three years in the
period ended March 31, 1996 were
audited by other independent accountants, whose
opinion dated May 9, 1996 was
unqualified.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
May 14, 1998
- --------------------------------------------------
- ------------------------------
16
<PAGE>
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, 1998) that 2.23%
of the dividends paid in the
fiscal year ended March 31, 1998 qualified for the
corporate dividends received
deduction available to corporate taxpayers.
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.
Investment Policies. Based on the evolution of the
high yield market over the
past several years, the Fund has adopted certain
non-fundamental changes to its
investment policies. The Fund may invest up to 25%
of its total assets in
securities that are restricted as to disposition
under the federal securities
laws or otherwise not readily marketable. Given
the dramatic increase in the
number of securities issued under Rule 144A of the
Securities Act of 1933,
securities eligible for resale but are otherwise
liquid are no longer subject to
this limitation. In addition, given recent
developments in the high yield
market, the Fund amended its investment policy
regarding investment in foreign
securities to allow the Fund to invest up to 20%
of its total assets in non-U.S.
dollar denominated high yield foreign debt
securities.
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17
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Directors
Eugene C. Dorsey
Douglas H. McCorkindale
Thomas T. Mooney
Investment Adviser
Wellington Management Company, LLP
75 State Street
Boston, MA 02109
Administrator
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian and Transfer Agent
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Independent Accountants
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
