<PAGE>
The
High Yield
Plus Fund,
Inc.
ANNUAL
REPORT
March 31, 2000
<PAGE>
Letter To Shareholders April 10, 2000
Dear Shareholder:
The year ended March 31, 2000 proved to be a
disappointing one for the high yield market. Despite
the fact that the US economy remains robust, weak
technical conditions, lack of demand, and a less than
comforting level of credit deterioration have plagued
the high yield market. While none of these factors is
insignificant, we believe that long-term investment
prospects may be able to overcome the market's recent
difficulties.
With respect to the market's weak technical conditions
and related lack of demand, one can argue that the high
yield market is suffering from the same kind of
disinterest that old economy value stocks have been
contending with. Demand has been poor for high yield
investments; open-end mutual funds have generally been
in a redemption pattern for a full year. (Fixed income
funds broadly have been redeemed; some redemptions may
reflect fears of interest rate hikes; others may simply
reflect the shift of funds to higher spark, tech equity
investments.) Trading volume has also been weak ever
since the fall of 1998, when there was an implosion of
liquidity with the potential failure of a very large,
leveraged hedge fund. Wall Street broker dealers have
generally been loath to take securities into inventory.
Thus, the high yield market has been tending to gap
upwards and downwards fairly erratically based on the
slightest change in demand. While the weak technical
conditions have created a downward valuation drift, we
note that these conditions do not ultimately drive the
long-term investment performance of the issuers in the
marketplace. In addition, inefficiencies in valuation
can create investment opportunity. Given the closed-
end status of the Fund, we are fortunate that we do not
have to manage cash flows, but can instead look for
unusual valuations and potential investment
opportunities.
It is also true that credit health, as measured by the
rate of default, deteriorated over the last year. As
we noted in our September semi-annual shareholder
letter, we do not see blatant similarity to the high
default rates of the 1990 market, when among other
things, the US was in a recession. We have seen some
tightening in lending standards by the commercial
banks, although it seems to be fairly industry
specific. Perhaps not surprisingly, the new economy
companies (telecommunications, internet related) still
have ready access to funds, whereas older industrials
are facing greater hurdles. Nevertheless, the
prospects for the global economy are brighter today
than they have been for several years. The European
and Asian economies are strengthening, which is
supportive of US industrials, given the global nature
of business today. This trend should mitigate some of
the credit-related pressures of the last 18 months.
Given the above factors, we find that high yield
valuations have widened relative to US Treasuries over
the year. Using data tracked by Lehman, the difference
in yield between US Treasuries and high yield
securities has widened from 525 basis points a year ago
to 650 basis points today. The average dollar price of
the Credit Suisse First Boston High Yield index is 83%
of par. Valuations and yields today would seem to be
discounting at least some portion, if not all, of the
lack of liquidity and potential for adverse credit action
1
<PAGE>
in the markets. As always, our focus remains on long
term investment potential. We continue to focus on
finding securities with attractive risk adjusted
returns, with diversified exposure to both lower
risk/returns instruments as well as higher risk/reward
situations, in a broad group of industries.
Fund Performance.
The Fund's total returns for periods ended March 31,
2000 are shown on the following table. For comparison,
we have also provided the returns of the Lipper Closed-
End Leveraged High Yield category, an average of 27
closed-end high yield leveraged funds; we would note
that the degree of leverage varies substantially
amongst the funds in the group. The Fund's
performance over the year benefited from its exposure
to certain Yankee issues (US$ foreign issuers) that
appreciated during the year, following upon extreme
weakness a year ago.
TOTAL RETURNS
For the Periods Ended March 31, 2000
6 Months 1 Year 24 months*
High Yield Plus Fund (NAV)1 0.9% (0.8)% (4.1)%
Lipper CEHY -- Leveraged (0.3) (2.3) (3.4)
1 Represents NAV-basis performance calculations as
provided by Lipper Analytical Services, Inc. Past
performance is no guarantee of future results.
* Annualized
The Fund is leveraged and has a $50 million credit line
provided by Fleet Bank and State Street Bank and Trust
Co. As of March 31, 2000, the Fund had drawn $42
million on the line. Borrowings fluctuate depending on
investment opportunities and relative valuations. As
of March 31, 2000, the Fund's shares were priced at
$6.1875. This price reflected a discount of 3.8% to
the Fund's net asset value of $6.42 per share. (The
average discount of the funds in the Lipper Leveraged
Closed End universe was 7.3% as of March 31, 2000.)
The Fund's monthly dividend rate of $0.0725 per share
equates to an annualized yield of 14.1% relative to the
stock price. This yield was more than twice the 6.0%
yield of the US 10-Year Treasury as of March 31, 2000.
As always, we appreciate your interest in the Fund.
Sincerely yours,
Catherine A. Smith
Portfolio Manager
Senior Vice President
Wellington Management Company, LLP
2
<PAGE>
Portfolio of Investments as of March 31, 2000 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--139.1%
CORPORATE BONDS--131.6%
------------------------------------------------------------------------------------------------------------------------------
Aerospace/Defense--2.5%
Argo-Tech Corp., Sr. Sub. Notes B3 8.625% 10/01/07 $ 1,000 $ 760,000
Hexcel Corp., Sr. Sub. Notes B2 9.75 1/15/09 500 425,000
Loral Space & Communications Ltd., Sr. Notes B1 9.50 1/15/06 750 532,500
Moog, Inc., Sr. Sub. Notes, Ser. B B1 10.00 5/01/06 750 742,500
------------
2,460,000
------------------------------------------------------------------------------------------------------------------------------
Automotive--3.9%
Accuride Corp., Sr. Sub. Notes B2 9.25 2/01/08 1,250 1,062,500
Exide Corp., Sr. Notes B1 10.00 4/15/05 1,000 962,500
Federal-Mogul Corp., Sr. Notes Ba2 8.80 4/15/07 500 433,355
Key Plastics, Inc., Sr. Sub. Notes, Ser. B Caa2 10.25 3/15/07 1,250 (b) 87,500
LDM Technologies, Inc., Sr. Sub. Notes, Ser. B B3 10.75 1/15/07 695 521,250
Prestolite Electric, Inc., Gtd. Sr. Notes B3 9.625 2/01/08 1,235 728,650
------------
3,795,755
------------------------------------------------------------------------------------------------------------------------------
Building & Related Industries--0.8%
Anthony Crane Rental L.P., Sr. Notes B3 10.375 8/01/08 1,000 780,000
------------------------------------------------------------------------------------------------------------------------------
Cable--7.2%
Adelphia Communications Corp.,
Sr. Notes, Ser. B B1 9.875 3/01/07 650 630,500
Sr. Notes B1 8.375 2/01/08 750 667,500
Sr. Notes B1 7.75 1/15/09 250 210,625
Cablevision S.A., Sr. Notes (Argentina) B1 13.75 5/01/09 500 (d) 500,000
Charter Communications Holdings,
Sr. Notes B2 10.00 4/01/09 500 480,000
Sr. Notes B2 8.25 4/01/07 1,500 1,335,000
Classic Cable, Sr. Sub. Notes B3 10.50 3/01/10 540 533,250
Multicanal S.A., (Argentina)
Sr. Notes B1 10.50 2/01/07 500 (d) 470,000
Sr. Notes, Ser. E B1 13.125 4/15/09 450 (d) 465,750
Sr. Notes B1 10.50 4/15/18 230 (d) 202,170
NTL Communications Corp., Sr. Notes B3 9.875 11/15/09 EUR250 232,048
NTL, Inc., Sr. Notes, Ser. B B3 10.00 2/15/07 $ 850 824,500
Rogers Communications, Inc., Sr. Notes (Canada) B2 8.875 7/15/07 500 (d) 487,500
------------
7,038,843
------------------------------------------------------------------------------------------------------------------------------
Chemicals--8.3%
Acetex Corp., Sr. Sec. Notes (Canada) B3 9.75 10/01/03 750 (d) 682,500
ARCO Chemical Co.,
Deb. Ba3 9.80 2/01/20 1,250 1,137,500
Deb. Ba3 9.375 12/15/05 1,000 950,000
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of March 31, 2000 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>
------------------------------------------------------------------------------------------------------------------------------
Chemicals (cont'd.)
Borden Chemical & Plastics Oper., Sr. Notes B1 9.50 % 5/01/05 $ 750 $ 701,250
Geo Specialty Chemicals, Inc., Sr. Sub. Notes B3 10.125 8/01/08 95 76,950
Georgia Gulf Corp., Sr. Sub. Notes B1 10.375 11/01/07 125 125,625
Huntsman ICI Chemicals LLC, Sr. Sub. Notes B2 10.125 7/01/09 805 770,787
Lyondell Chemical Co., Sr. Sub. Notes B2 10.875 5/01/09 655 609,150
PCI Chemicals Canada, Inc., Sr. Notes, Ser. B (Canada) B3 9.25 10/15/07 545 (d) 444,175
Philipp Brothers Chemicals, Inc., Sr. Sub. Notes B3 9.875 6/01/08 500 425,000
Sovereign Specialty Chemicals, Sr. Sub. Notes B3 11.875 3/15/10 540 534,600
Sterling Chemical Holdings, Inc.,
Sr. Sub. Notes Caa3 11.75 8/15/06 500 420,000
Sr. Sub. Notes Caa3 11.25 4/01/07 750 607,500
Texas Petrochemicals Corp., Sr. Sub. Notes Caa1 11.125 7/01/06 750 622,500
------------
8,107,537
------------------------------------------------------------------------------------------------------------------------------
Consumer Goods & Services--3.7%
Bell Sports, Inc., Sr. Sub. Notes B3 11.00 8/15/08 670 656,600
Corning Consumer Prod. Co., Sr. Sub. Notes B3 9.625 5/01/08 1,350 850,500
Polaroid Corp., Sr. Notes Ba3 11.50 2/15/06 750 763,125
Simmons Co., Sr. Sub. Notes B3 10.25 3/15/09 500 420,000
True Temper Sports, Inc., Sr. Sub. Notes B3 10.875 12/01/08 1,000 950,000
------------
3,640,225
------------------------------------------------------------------------------------------------------------------------------
Containers--1.7%
BWay Corp., Sr. Sub. Notes, Ser. B B2 10.25 4/15/07 650 568,750
Consumers Packaging, Inc., Sr. Notes (Canada) Caa1 9.75 2/01/07 750 (d) 391,875
Silgan Holdings, Inc.,
Sr. Sub. Deb. B1 9.00 6/01/09 500 462,500
Sub. Deb., PIK B1 13.25 7/15/06 200 216,000
------------
1,639,125
------------------------------------------------------------------------------------------------------------------------------
Energy & Related Goods & Services--3.4%
Clark R & M, Inc., Sr. Notes Ba3 8.625 8/15/08 1,250 912,500
Frontier Oil Corp., Sr. Notes B2 9.125 2/15/06 750 645,000
P & L Coal Holdings Corp., Sr. Notes Ba3 8.875 5/15/08 500 451,250
Pen Holdings, Inc., Sr. Notes, Ser. B B2 9.875 6/15/08 750 637,500
RAM Energy, Inc., Sr. Notes Caa1 11.50 2/15/08 635 311,150
RBF Co., Sr. Sec. Notes Ba3 11.00 3/15/06 370 386,650
------------
3,344,050
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as of March 31, 2000 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>
------------------------------------------------------------------------------------------------------------------------------
Entertainment--0.8%
Carmike Cinemas, Inc., Sr. Sub. Notes, Ser. B B2 9.375% 2/01/09 $ 750 $ 472,500
Loews Cineplex Entertainment Corp., Sr. Sub. Notes B3 8.875 8/01/08 500 312,500
------------
785,000
------------------------------------------------------------------------------------------------------------------------------
Financial Services--4.5%
Bangkok Bank Public Co., Deb. (Thailand) B+(e) 8.75 3/15/07 1,000 (d) 895,860
Ocwen Federal Bank, Sub. Deb. B1 12.00 6/15/05 500 462,500
Olympic Financial, Ltd., Sr. Notes A1 11.50 3/15/07 750 (c) 795,000
Thai Farmers Bank Ltd., Sub. Notes (Thailand) B2 8.25 8/21/16 1,250 (d) 987,500
Western Financial Svgs. Bank, Sub. Deb. B2 8.875 8/01/07 1,505 1,301,825
------------
4,442,685
------------------------------------------------------------------------------------------------------------------------------
Food & Lodging--2.1%
Del Monte Foods Co., Sr. Disc. Notes,
Zero Coupon (until 12/15/02) Caa1 12.50 12/15/07 750 558,750
John Q. Hammons Hotels, First Mtge. Bonds B2 8.875 2/15/04 1,500 1,312,500
Purina Mills, Inc., Sr. Sub. Notes NR 9.00 3/15/10 500 (b) 145,000
Vlasic Foods International, Inc., Sr. Sub. Notes Caa1 10.25 7/01/09 120 74,400
------------
2,090,650
------------------------------------------------------------------------------------------------------------------------------
Gaming--0.5%
Hollywood Casino Corp., Sr. Sub. Notes B3 11.25 5/01/07 500 503,750
------------------------------------------------------------------------------------------------------------------------------
General Industrial--8.6%
Anchor Glass Container Corp., First Mtge. Notes B2 11.25 4/01/05 685 493,200
Allied Waste North America, Inc.,
Sr. Notes Ba3 7.625 1/01/06 750 611,250
Sr. Sub. Notes B2 10.00 8/01/09 1,350 1,012,500
Clark Material Handling Co., Sr. Notes, Ser. D Caa1 10.75 11/15/06 1,750 (b) 262,500
Grove Worldwide LLC, Sr. Sub. Notes Caa1 9.25 5/01/08 1,715 733,163
Henry Co., Sr. Notes, Ser. B Caa1 10.00 4/15/08 1,110 799,200
International Wire Group, Inc., Sr. Sub. Notes, Ser. B B3 11.75 6/01/05 500 505,000
IT Group, Inc., Sr. Sub. Notes B3 11.25 4/01/09 500 467,500
Mastec, Inc., Sr. Sub. Notes, Ser. B Ba1 7.75 2/01/08 250 230,000
Neenah Corp., Sr. Sub. Notes, Ser. B B3 11.125 5/01/07 750 645,000
Numatics, Inc., Sr. Sub. Notes, Ser. B B3 9.625 4/01/08 375 298,125
United Rentals, Inc., Sr. Sub. Notes B1 9.00 4/01/09 1,500 1,308,750
Waste Management, Inc., Sr. Notes Ba1 6.875 5/15/09 500 420,380
WESCO Distribution, Inc., Sr. Sub. Notes B2 9.125 6/01/08 750 656,250
------------
8,442,818
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 5
<PAGE>
Portfolio of Investments as of March 31, 2000 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--1.8%
Homeland Stores, Inc., Sr. Notes NR 10.00% 8/01/03 $ 1,250 $ 987,500
Pathmark Stores, Inc.,
Sr. Sub. Notes Ca 11.625 6/15/02 750 (b) 225,000
Sr. Sub. Notes Caa3 9.625 5/01/03 750 (b) 540,000
------------
1,752,500
------------------------------------------------------------------------------------------------------------------------------
Health Care--7.7%
Alaris Medical Systems, Inc., Sr. Sub. Notes B3 9.75 12/01/06 1,200 990,000
Alaris Medical, Inc., Sr. Disc. Notes
Zero Coupon (until 8/1/03) Caa1 11.125 8/01/08 750 236,250
Beverly Enterprises, Inc., Sr. Notes B1 9.00 2/15/06 750 644,062
Bio-Rad Labs, Inc., Sr. Sub. Notes B2 11.625 2/15/07 550 553,438
Conmed Corp., Sr. Sub. Notes B3 9.00 3/15/08 1,020 928,200
DJ Orthopedics LLC, Sr. Sub. Notes B3 12.625 6/15/09 1,250 1,159,375
Kinetic Concepts, Inc., Sr. Sub. Notes, Ser. B B3 9.625 11/01/07 500 352,500
Mediq, Inc., Sr. Sub. Notes Caa3 11.00 6/01/08 1,740 174,000
Packard Bioscience Co., Sr. Sub. Notes, Ser. B B3 9.375 3/01/07 250 225,000
Tenet Healthcare Corp., Sr. Sub. Notes, Ser. B Ba3 8.125 12/01/08 850 777,750
Triad Hospitals Holdings, Inc., Sr. Sub. Notes B3 11.00 5/15/09 855 850,725
Universal Hospital Svcs., Sr. Notes B3 10.25 3/01/08 1,750 665,000
------------
7,556,300
------------------------------------------------------------------------------------------------------------------------------
Home Building & Real Estate--6.0%
Beazer Homes USA, Inc., Sr. Notes Ba3 8.875 4/01/08 1,250 1,056,250
D.R. Horton, Inc., Sr. Notes Ba1 8.00 2/01/09 750 618,750
LNR Property Corp., Sr. Sub. Notes B1 10.50 1/15/09 750 693,750
Presley Companies, Sr. Notes Caa3 12.50 7/01/01 1,000 820,000
Ryland Group, Inc., Sr. Sub. Notes B1 8.25 4/01/08 750 573,750
Standard Pacific Corp., Sr. Notes Ba2 8.50 6/15/07 750 667,500
U.S. Home Corp., Sr. Sub. Notes B1 8.88 8/15/07 500 496,250
Webb Delaware Corp., Sr. Sub. Deb. B2 10.25 2/15/10 1,150 954,500
------------
5,880,750
------------------------------------------------------------------------------------------------------------------------------
Media & Communications--9.2%
Echostar DBS Corp., Notes B2 9.25 2/01/06 750 725,625
Globo Comunicacoes e Participacoes S.A., Notes (Brazil) B2 10.50 12/20/06 1,750 (d) 1,531,250
Gray Communications Systems, Inc., Sr. Sub. Notes B3 10.625 10/01/06 500 502,500
Innova S-de R.L., Sr. Notes (Mexico) B3 12.875 4/01/07 500 (d) 472,500
Lin Holdings Corp., Sr. Disc. Notes,
Zero Coupon (until 3/1/03) B3 10.00 3/01/08 750 463,125
Lin Televison Corp., Sr. Sub. Notes B2 8.375 3/01/08 350 306,250
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 6
<PAGE>
Portfolio of Investments as of March 31, 2000 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.)
STC Broadcasting, Inc., Sr. Sub. Notes B3 11.00 % 3/15/07 $ 750 $ 742,500
Sullivan Graphics, Inc., Sr. Sub. Notes Caa1 12.75 8/01/05 1,000 1,035,000
Sun Media Corp., (Canada)
Sr. Sub. Notes B1 9.50 2/15/07 250 (d) 246,250
Sr. Sub. Notes B1 9.50 5/15/07 500 (d) 477,500
TV Azteca S.A. de CV, (Brazil)
Gtd. Sr. Notes B1 10.50 2/15/07 750 (d) 705,000
Gtd. Sr. Notes, Ser. A B1 10.125 2/15/04 500 (d) 476,250
Von Hoffmann Press, Inc., Sr. Sub. Notes B3 10.875 5/15/07 700 654,500
World Color Press, Inc., Sr. Sub. Notes Baa3 8.375 11/15/08 750 729,765
------------
9,068,015
------------------------------------------------------------------------------------------------------------------------------
Metals--8.3%
Acindar Industria Argentina de Aceros S.A., Bonds
(Argentina) B2 11.25 2/15/04 500 (d) 405,000
AK Steel Corp., Sr. Notes Ba2 9.125 12/15/06 500 488,750
Algoma Steel, Inc., First Mtge. Notes (Canada) B2 12.375 7/15/05 750 (d) 720,000
Bayou Steel Corp., First Mtge. Notes B1 9.50 5/15/08 1,250 1,118,750
Bucyrus Int'l, Inc., Sr. Notes B1 9.75 9/15/07 1,250 500,000
Bulong Operation Pty Ltd., Sr. Notes Caa1 12.50 12/15/08 315 236,250
CSN Iron S.A., Gtd. Notes (Brazil) B2 9.125 6/01/07 500 (d) 425,000
Freeport-McMoran Copper & Gold, Sr. Notes B3 7.50 11/15/06 1,250 950,000
Kaiser Aluminum & Chemical Corp., Sr. Notes, Ser. B B1 10.875 10/15/06 500 470,000
LTV Corp.,
Gtd. Sr. Notes Ba3 8.20 9/15/07 350 291,375
Sr. Notes Ba3 11.75 11/15/09 1,330 1,290,100
Weirton Steel Corp., Sr. Notes B2 11.375 7/01/04 1,250 1,275,000
------------
8,170,225
------------------------------------------------------------------------------------------------------------------------------
Paper & Packaging--8.8%
APP Int'l. Co., (Indonesia)
Sec. Notes B3 11.75 10/01/05 500 (d) 430,000
Sec. Notes Caa1 3.50 4/30/03 750 (d) 588,750
Aracruz Celulose S.A., Sr. Notes (Brazil) B2 10.375 1/31/02 715 (d) 723,938
Bahia Sul Celulose S.A., Notes (Brazil) NR 10.625 7/10/04 500 (d) 495,000
Container Corp. of America, Sr. Notes, Ser. B B2 10.75 5/01/02 1,000 1,015,000
Doman Industries Ltd., (Canada)
Sr. Notes Caa1 8.75 3/15/04 1,250 (d) 1,062,500
Sr. Sec. Notes B3 12.00 7/01/04 1,000 (d) 1,035,000
Gaylord Container Corp., Sr. Sub. Notes Caa2 9.875 2/15/08 1,750 1,435,000
Pacifica Papers, Inc., Sr. Notes B1 10.00 3/15/09 750 731,250
Paperboard Industries Int'l., Inc., Sr. Notes Ba3 8.375 9/15/07 750 660,000
Pindo Deli Mauritius Ltd., Gtd. Sr. Notes (Indonesia) B3 10.75 10/01/07 650 (d) 448,500
------------
8,624,938
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 7
<PAGE>
Portfolio of Investments as of March 31, 2000 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>
------------------------------------------------------------------------------------------------------------------------------
Retail--0.2%
Leslie's Poolmart, Inc., Sr. Notes B3 10.375% 7/15/04 $ 350 $ 227,500
------------------------------------------------------------------------------------------------------------------------------
Technology--12.1%
Advanced Micro Devices, Inc., Sr. Sec. Notes B2 11.00% 8/01/03 495 495,000
Amkor Technology, Inc.,
Sr. Notes Ba3 9.25 5/01/06 1,250 1,212,500
Sr. Sub. Notes B2 10.50 5/01/09 500 490,000
DecisionOne Holdings Corp.,
Sr. Disc. Deb., Zero Coupon (until 8/1/02) C(e) 11.50 8/01/08 1,000 (b) 620
Sr. Sub. Notes C(e) 9.75 8/01/07 500 (b) 250
Exodus Communications, Inc.,
Sr. Notes B-(e) 10.75 12/15/09 250 243,750
Sr. Notes B-(e) 11.25 7/01/08 990 990,000
Fairchild Semiconductor Corp., Sr. Sub. Notes B3 10.125 3/15/07 745 724,512
Fisher Scientific International, Inc., Sr. Sub. Notes B3 9.00 2/01/08 750 678,750
Hadco Corp., Sr. Sub. Notes B2 9.50 6/15/08 250 240,000
Integrated Circuit Systems, Inc., Sr. Sub. Notes B3 11.50 5/15/09 850 935,000
Intersil Corp., Sr. Sub. Notes B3 13.25 8/15/09 325 370,500
MCMS, Inc., Sr. Sub. Notes, Ser. B Caa3 9.75 3/01/08 2,500 1,212,500
Orbital Imaging Corp., Sr. Notes, Ser. D CCC+(e) 11.625 3/01/05 750 510,000
Rhythms Netconnections, Inc., Sr. Notes B3 14.00 2/15/10 750 663,750
Samsung Electronics America, Inc., Gtd. Notes Baa3 9.75 5/01/03 750 778,410
SCG Holding Corp., Sr. Notes B2 12.00 8/01/09 675 722,250
Viasystems, Inc., Sr. Sub. Notes B3 9.75 6/01/07 1,100 924,000
Zilog, Inc., Sr. Sec. Notes B2 9.50 3/01/05 750 671,250
------------
11,863,042
------------------------------------------------------------------------------------------------------------------------------
Telecommunications--23.3%
AMSC Acquisition Co., Inc., Sr. Notes, Ser. B NR 12.25 4/01/08 500 392,500
Concentric Network Corp., Sr. Notes B-(e) 12.75 12/15/07 500 538,750
Covad Communications Group, Inc.,
Sr. Disc. Notes B3 12.00 2/15/10 460 404,800
Sr. Disc. Notes, Ser. B B3 12.50 2/15/09 500 455,000
E. Spire Communications Insurance, Sr. Disc. Notes
Zero Coupon (until 4/1/01) NR 12.75 4/01/06 500 242,500
Flag Telecommunications Holdings Ltd., Sr. Notes
(Bermuda) B2 11.625 3/30/10 1,000 (d) 930,000
Global Crossing Holdings, Ltd., Sr. Notes (Bermuda) Ba2 9.125 11/15/06 750 (d) 720,000
GST Network Funding, Inc., Sr. Disc. Notes,
Zero Coupon (until 5/1/03) NR 10.50 5/01/08 945 415,800
GST Telecommunications, Inc., Sr. Sub. Notes,
Zero Coupon (until 11/15/02) NR 12.75 11/15/07 500 425,000
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 8
<PAGE>
Portfolio of Investments as of March 31, 2000 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.)
GT Group Telecommunications, Inc., Sr. Disc. Notes,
Zero Coupon (until 2/1/05) (Canada) Caa1 13.25 % 2/01/10 $ 850 (d) $ 459,000
Hermes Europe Railtel BV, Sr. Notes (Netherlands) B3 10.375 1/15/09 1,000 (d) 895,000
Hyperion Telecommunications, Inc.,
Sr. Sec. Notes, Ser. B B3 12.25 9/01/04 1,250 1,300,000
Insight Midwest L.P., Sr. Notes B1 9.75 10/01/09 500 497,500
Intermedia Communications, Inc.,
Sr. Notes B2 8.875 11/01/07 250 226,875
Sr. Notes B2 8.60 6/01/08 750 652,500
Iridium Cap. Corp.,
Gtd. Notes Caa3 14.00 7/15/05 750 (b) 15,000
Gtd. Sr. Notes, Ser. D Caa3 10.875 7/15/05 500 (b) 10,000
Level 3 Communications, Inc.,
Sr. Disc. Notes, Zero Coupon (until 3/15/05) B3 12.875 3/15/10 500 245,000
Sr. Notes B3 11.00 3/15/08 EUR500 477,500
Sr. Notes B3 10.75 3/15/08 $ 465 449,888
Sr. Notes B3 9.125 5/01/08 500 430,000
McLeodUSA, Inc., Sr. Notes B1 9.25 7/15/07 750 708,750
Metromedia Fiber Network, Inc., Sr. Notes B2 10.00 12/15/09 750 720,000
Millicom Int'l. Cellular, Sr. Disc. Notes, Zero Coupon
(until 6/1/01) Caa1 13.50 6/01/06 750 622,500
PsiNet, Inc.,
Sr. Notes B3 11.50 11/01/08 750 746,250
Sr. Notes B3 11.00 8/01/09 500 487,500
RCN Corp.,
Sr. Notes B3 10.125 1/15/10 500 450,000
Sr. Notes B3 10.00 10/15/07 500 450,000
RSL Communications plc, Sr. Notes (United Kingdom) B2 9.875 11/15/09 750 (d) 592,500
Teligent, Inc., Sr. Notes Caa1 11.50 12/01/07 750 675,000
Telewest Communication plc, Sr. Notes (United Kingdom) B1 9.875 2/01/10 500 (d) 495,000
Time Warner Telecom LLC, Sr. Notes B2 9.75 7/15/08 500 495,000
Total Access Communication, Notes (Thailand) B2 7.625 11/04/01 500 (d) 451,250
Verio, Inc.,
Sr. Notes B3 10.375 4/01/05 500 480,000
Sr. Notes B3 11.25 12/01/08 350 348,250
Viatel, Inc.,
Sr. Notes B3 11.50 3/15/09 1,000 920,000
Sr. Notes B3 11.25 4/15/08 250 227,500
Williams Communications Group, Sr. Notes B2 10.875 10/01/09 500 490,000
Winstar Communications, Inc.,
Sr. Disc. Notes, Zero Coupon (until 10/15/00) B3 14.00 10/15/05 1,500 1,537,500
Sr. Notes Caa1 12.50 4/15/08 1,750 1,715,000
------------
22,794,613
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 9
<PAGE>
Portfolio of Investments as of March 31, 2000 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>
------------------------------------------------------------------------------------------------------------------------------
Transportation--4.2%
Airtran Airlines, Sr. Sec. Notes, Ser. B B2 10.50% 4/15/01 $ 500 $ 485,000
Atlas Air, Inc., Sr. Notes B3 10.75 8/01/05 500 500,000
MRS Logisticasa S.A., Sr. Notes (Brazil) B(e) 10.625 8/15/05 1,000 (d) 840,000
TFM S.A. de CV (Mexico)
Sr. Disc. Notes, Zero Coupon (until 6/15/02) B2 11.75 6/15/09 1,250 (d) 887,500
Sr. Notes B2 10.25 6/15/07 350 (d) 332,500
Valujet, Inc., Sr. Notes B3 10.25 4/15/01 1,250 1,112,500
------------
4,157,500
------------------------------------------------------------------------------------------------------------------------------
Textiles & Related Industries--1.5%
Pillowtex Corp., Sr. Sub. Notes, Ser. B Ca 9.00 12/15/07 1,485 530,887
Westpoint Stevens, Inc., Sr. Notes Ba3 7.875 6/15/08 1,250 975,000
------------
1,505,887
------------------------------------------------------------------------------------------------------------------------------
Utilities--0.5%
IEBA-Invers Electric Co., Notes BB(e) 9.00 9/16/04 1,000 540,000
------------
Total corporate bonds (cost $148,337,344) 129,211,708
------------------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--3.0%
Province of Buenos Aires, Bonds B1 13.25 3/29/10 750 (d) 754,687
Republic of Argentina, Bonds NR 11.25 4/11/07 500 (d) 461,250
Republic of Brazil,
Bonds B2 11.625 4/15/04 1,020 (d) 1,027,650
Bonds, FRB B2 14.50 10/15/09 693 (d) 750,866
------------
Total foreign government obligations (cost $2,747,361) 2,994,453
------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS(a) Shares
Fitzgeralds Gaming Corp. -- -- -- 12,540 12
SF Holding Group, Class C -- -- -- 4,070 41
------------
Total common stocks (cost $125) 53
------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--4.0%
Concentric Network Corp., PIK CCC(e) 13.50 -- 1,143 1,163,245
Fairfield Mfg., Inc., Exchangeable, PIK B3 11.25 -- 1,000 890,000
Granite Broadcasting Corp., Cumulative Exchangeable, PIK B3 12.75 -- 290 255,547
R & B Falcon Corp., Sr. Pref. B-(e) 13.88 -- 889 986,790
SF Holdings, Group, Inc.,
Exchangeable, PIK NR 13.75 -- 139 660,250
------------
Total preferred stocks (cost $4,047,136) 3,955,832
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 10
<PAGE>
Portfolio of Investments as of March 31, 2000 THE HIGH YIELD PLUS FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Expiration Value
Description Date Warrants (Note 1)
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------
WARRANTS(a)--0.5%
American Mobile Satellite Corp. 4/1/08 280 $ 32,200
Benedek Communications Corp. 7/1/07 5,500 11,000
Concentric Network Corp. 12/15/07 255 119,850
R & B Falcon Corp. 5/1/09 800 280,000
------------
Total warrants (cost $0) 443,050
------------------------------------------------------------------------------------------------------------------------------
Total Investments--139.1%
(cost $155,131,966; Note 3) 136,605,096
Liabilities in excess of other assets--(39.1)% (38,393,378)
------------
Net Assets--100% $ 98,211,718
------------
------------
</TABLE>
---------------
(a)--Non-income producing security.
(b)-- Represents issuer in default on interest payments; non-income producing
security.
(c)-- Consists of more than 1 class of securities traded together as a unit;
generally bonds with attached stock or warrants.
(d)--US$ Denominated Foreign Bonds.
(e)--Standard & Poor's Rating.
FRB--Floating Rate Bond.
LLC--Limited Liability Corporation.
L.P.--Limited Partnership.
NR--Not rated by Moody's or Standard & Poor's.
PIK--Payment in Kind.
--------------------------------------------------------------------------------
See Notes to Financial Statements. 11
<PAGE>
Statement of Assets and Liabilities THE HIGH YIELD PLUS FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets March 31, 2000
Investments, at value (cost $155,131,966).................................................................. $136,605,096
Cash....................................................................................................... 186,843
Interest and dividends receivable.......................................................................... 4,088,777
Receivable for investments sold............................................................................ 2,821,354
Other assets............................................................................................... 104,116
Forward currency contracts-net amount receivable from counterparties....................................... 9,103
--------------
Total assets............................................................................................ 143,815,289
--------------
Liabilities
Loan payable (Note 4)...................................................................................... 42,000,000
Payable for investments purchased.......................................................................... 1,829,297
Dividends payable.......................................................................................... 1,108,799
Loan interest payable (Note 4)............................................................................. 542,151
Advisory fee payable....................................................................................... 43,828
Accrued expenses........................................................................................... 41,855
Deferred directors' fees................................................................................... 20,110
Administration fee payable................................................................................. 17,531
--------------
Total liabilities....................................................................................... 45,603,571
--------------
Net Assets................................................................................................. $ 98,211,718
--------------
--------------
Net assets were comprised of:
Common stock, at par.................................................................................... $ 152,909
Paid-in capital in excess of par........................................................................ 129,759,055
--------------
129,911,964
Undistributed net investment income..................................................................... 772,552
Accumulated net realized loss on investments............................................................ (13,954,434)
Net unrealized depreciation on investments and foreign currencies....................................... (18,518,364)
--------------
Net assets, March 31, 2000.............................................................................. $ 98,211,718
--------------
--------------
Net asset value per share ($98,211,718 / 15,290,904 shares of common stock issued and outstanding)......... $6.42
--------------
--------------
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 12
<PAGE>
THE HIGH YIELD PLUS FUND, INC.
Statement of Operations
------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
March 31,
Net Investment Income 2000
<S> <C>
Income
Interest................................. $ 17,062,437
Dividends................................ 263,282
--------------
17,325,719
--------------
Expenses
Investment advisory fee.................. 539,206
Administration fee....................... 215,683
Custodian's fees and expenses............ 124,000
Legal fees and expenses.................. 80,000
Reports to shareholders.................. 73,000
Transfer agent's fees and expenses....... 37,500
Audit fees and expenses.................. 27,000
Listing fee.............................. 25,000
Insurance expense........................ 19,500
Directors' fees and expenses............. 12,500
Miscellaneous............................ 7,380
--------------
Total operating expenses.............. 1,160,769
Loan interest expense (Note 4)........... 2,580,434
--------------
Total expenses........................ 3,741,203
--------------
Net investment income....................... 13,584,516
--------------
Realized and Unrealized Gain
(Loss) on Investments and Foreign Currencies
Net realized gain (loss) on:
Investment transactions.................. (6,656,363)
Foreign currency transactions............ 31,444
--------------
(6,624,919)
Net change in unrealized appreciation
(depreciation) on:
Investments.............................. (7,829,257)
Foreign currencies....................... 8,506
--------------
(7,820,751)
--------------
Net loss on investments and foreign
currencies............................... (14,445,670)
--------------
Net Decrease in Net Assets
Resulting from Operations................... $ (861,154)
--------------
--------------
</TABLE>
THE HIGH YIELD PLUS FUND, INC.
Statement of Cash Flows
------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
March 31,
Increase (Decrease) in Cash 2000
<S> <C>
Cash flows provided from operating activities
Interest and dividends received (excluding
discount amortization of $1,985,331)..... $ 15,107,396
Operating expenses paid..................... (588,227)
Loan interest and commitment fee paid....... (2,867,316)
Purchases of long-term portfolio
investments.............................. (122,911,134)
Proceeds from disposition of long-term
portfolio investments.................... 121,069,851
Deferred expenses and other assets.......... (44,227)
-------------
Net cash provided from operating
activities............................... 9,766,343
-------------
Cash used for financing activities
Net increase in notes payable............... 7,000,000
Cash dividends paid (excluding reinvestment
of dividends of $585,228)................ (12,915,598)
-------------
Net cash used for financing activities...... (5,915,598)
-------------
Net increase in cash........................ 3,850,745
Cash (overdraft) at beginning of year....... (3,663,902)
-------------
Cash at end of year......................... $ 186,843
-------------
-------------
Reconciliation of Net Decrease in Net Assets
to Net Cash Provided from Operating Activities
Net decrease in net assets resulting from
operations.................................. $ (861,154)
-------------
Increase in investments........................ (1,864,335)
Net realized loss on investment transactions... 6,624,919
Net decrease in unrealized
appreciation/depreciation of investments.... 7,829,257
Increase in receivable for investments sold.... (839,131)
Increase in interest and dividends
receivable.................................. (232,992)
Increase in deferred expenses and other
assets...................................... (44,227)
Decrease in payable for investments
purchased................................... (1,131,654)
Increase in accrued expenses and other
liabilities................................. 285,660
-------------
Total adjustments........................... 10,627,497
-------------
Net cash provided from operating
activities............................... $ 9,766,343
-------------
-------------
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 13
<PAGE>
THE HIGH YIELD PLUS FUND, INC.
Statement of Changes in Net Assets
------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 31,
Increase (Decrease) ------------------------------
in Net Assets 2000 1999
------------ ------------
<S> <C> <C>
Operations
Net investment income....... $ 13,584,516 $ 10,941,903
Net realized loss on
investment and foreign
currency transactions.... (6,624,919) (4,154,864)
Net change in unrealized
appreciation
(depreciation) on
investments.............. (7,820,751) (13,817,809)
------------ ------------
Net decrease in net assets
resulting from
operations............... (861,154) (7,030,770)
Dividends from net investment
income...................... (13,505,667) (10,590,243)
Fund shares transactions
Net proceeds from rights
offering of Fund
shares................... -- 24,581,103
Value of Fund shares issued
to shareholders in
reinvestment of
dividends................ 585,228 474,849
------------ ------------
Total increase (decrease)...... (13,781,593) 7,434,939
Net Assets
Beginning of year.............. 111,993,311 104,558,372
------------ ------------
End of year(a)................. $ 98,211,718 $111,993,311
------------ ------------
------------ ------------
---------------
(a) Includes undistributed net
investment income of....... $ 772,552 $ 662,259
------------ ------------
</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.
Foreign Currency Translation: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, other assets and liabilities--at the
closing daily rate of exchange;
(ii) purchases and sales of investment securities, income and expenses--at the
rate of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates
and market values at the close of the fiscal period, the Fund does not
--------------------------------------------------------------------------------
14
<PAGE>
Notes to Financial Statements THE HIGH YIELD PLUS FUND, INC.
--------------------------------------------------------------------------------
isolate that portion of the results of operations arising as a result of changes
in the foreign exchange rates from the fluctuations arising from changes in the
market prices of securities held at the end of the fiscal period. Similarly, the
Fund does not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of long-term debt
securities sold during the fiscal period. Accordingly, such realized foreign
currency gains and losses are included in the reported net realized gains
(losses) on investment transactions.
Net realized gain on foreign currency transactions represents net foreign
exchange gains or losses from sales and maturities of short-term securities,
holding of foreign currencies, currency gains or losses realized between the
trade and settlement dates on securities transactions, and the difference
between the amounts of interest and foreign taxes recorded on the Fund's books
and the U.S. dollar equivalent amounts actually received or paid. Net unrealized
currency gains and losses from valuing foreign currency denominated assets and
liabilities at fiscal period end exchange rates are reflected as a component of
net unrealized appreciation/depreciation on investments and foreign currencies.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. companies as a result of,
among other factors, the possibility of political and economic instability and
the level of governmental supervision and regulated foreign securities markets.
Cash Flow Information: The Fund invests in securities and pays dividends from
net investment income and distributions from net realized gains which are paid
in cash or are reinvested at the discretion of shareholders. These activities
are reported in the Statement of Changes in Net Assets and additional
information on cash receipts and cash payments is presented in the Statement of
Cash Flows. Accounting practices that do not affect reporting activities on a
cash basis include carrying investments at value and amortizing discounts on
debt obligations. Cash, as used in the Statement of Cash Flows, is the amount
reported as 'Cash' or 'Bankoverdraft' in the Statement of Assets and
Liabilities.
Forward Currency Contracts: A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The Fund enters into a forward currency contract in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings or on specific receivables and payables denominated in a foreign
currency. The contracts are valued daily at current exchange rates and any
unrealized gain or loss is included in net unrealized appreciation or
depreciation on investments and foreign currencies. Gain or loss is realized on
the settlement date of the contract equal to the difference between the
settlement value of the original and renegotiated forward contracts. This gain
or loss, if any, is included in net realized gain (loss) on foreign currency
transactions. Risks may arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their contracts.
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.
Withholding taxes on foreign dividends have been provided for in accordance with
the Fund's understanding of the applicable country's tax rules and rates.
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.
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with American Institute of Certified
Public Accountants (AICPA) Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect of applying
this statement was to increase undistributed net investment income and increase
accumulated net realized losses on investments by $31,444. This was primarily
the result of net foreign currency gains incurred during the year ended March
31, 2000. Net investment income, net realized gains and net assets were not
affected by this change.
------------------------------------------------------------
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;
--------------------------------------------------------------------------------
15
<PAGE>
Notes to Financial Statements THE HIGH YIELD PLUS FUND, INC.
--------------------------------------------------------------------------------
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, 2000, were $121,779,480 and $121,851,378,
respectively.
During the year ended March 31, 2000, the Fund entered into $560,656 of
securities transactions on a principal basis with Prudential Securities
Incorporated, an affiliate of the Administrator.
The federal income tax basis of the Fund's investments, as of March 31, 2000,
was $155,164,832 and, accordingly, net unrealized depreciation for federal
income tax purposes was $18,559,736 (gross unrealized appreciation--$2,590,990;
gross unrealized depreciation--$21,150,726).
For federal income tax purposes, the Fund has a capital loss carryforward as of
March 31, 2000 of approximately $11,849,000 of which $1,337,000 expires in 2003,
$1,806,000 expires in 2004, $500,000 expires in 2007 and $8,206,000 expires in
2008. Accordingly, no capital gains distributions are expected to be paid to
shareholders until net gains have been realized in excess of such carryforward.
The Fund will elect to treat net capital losses of approximately $2,072,900
incurred in the five month period ended March 31, 2000 as having occurred in the
following fiscal year.
At March 31, 2000, the Fund had an outstanding forward currency contract to sell
foreign currency as follows:
<TABLE>
<CAPTION>
Value at
Forward Currency Settlement Date Current
Sale Contracts Receivable Value Appreciation
<S> <C> <C> <C>
------------------ --------------- -------- ------------
Euros,
expiring 5/17/00 $ 695,488 $686,385 $9,103
--------------- -------- ------------
--------------- -------- ------------
</TABLE>
------------------------------------------------------------
Note 4. Borrowings
The Fund has a credit agreement with an unaffiliated lender. The maximum
commitment under this agreement is $50,000,000. Interest on any such borrowings
is based on market rates and is payable at maturity. The average daily balance
outstanding during the year ended March 31, 2000 was $43,207,650 at a weighted
average interest rate of 5.97%. The maximum face amount of borrowings
outstanding at any month-end during the year ended March 31, 2000 was
$47,000,000 (November 30, 1999). The current borrowings of $42,000,000 (at a
weighted average interest rate of 6.14%) mature throughout the period from April
4, 2000 to May 5, 2000.
The Fund pays commitment fees at an annual rate of .09 of 1% on any unused
portion of the credit facility. Commitment fees are included in 'Loan Interest'
as reported on the Statement of Assets and Liabilities and on the Statement of
Operations.
------------------------------------------------------------
Note 5. Capital
There are 100 million shares of $.01 par value common stock authorized. During
the fiscal years ended March 31, 2000 and 1999, the Fund issued 82,108 and
60,734 shares in connection with reinvestment of dividends, respectively.
In connection with a rights offering, shareholders of record on December 31,
1998 were issued one-third of a nontransferable right for each full share of
common stock owned, entitling shareholders the opportunity to acquire one newly
issued share of common stock for every whole right held at a subscription price
equal to the lower of 97% of net asset value per share as of the close of
business on the expiration date of the offering, or 95% of the average of the
last reported sales prices per share on the New York Stock Exchange on the
expiration date of the offering and the four preceding business days. On March
5, 1999 the Fund issued 3,799,518 shares of common stock at $6.804 per share and
estimated rights offering costs of $366,000 ($.02 per share) and brokerage and
dealer-manager commissions of $904,817 ($.06 per share) were charged to paid-in
capital resulting in net proceeds to the Fund of $24,581,103. The net asset
value per share of the Fund's common shareholders was reduced by approximately
$.26 per share as a result of this issuance.
------------------------------------------------------------
Note 6. Dividends
On February 23, 2000 the Board of Directors of the Fund declared dividends of
$0.0725 per share payable on May 12 and June 9 to shareholders of record on
April 28 and May 31, respectively.
------------------------------------------------------------
Note 7. Subsequent Event
Effective April 3, 2000 the Fund's credit agreement with an unaffiliated lender
expired and has been renewed as of April 3, 2000. The maximum commitment under
this agreement is $50,000,000.
--------------------------------------------------------------------------------
16
<PAGE>
Financial Highlights THE HIGH YIELD PLUS FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended March 31,
----------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........................... $ 7.36 $ 9.21 $ 8.54 $ 8.44 $ 7.85
-------- -------- -------- ------- -------
Income from investment operations
Net investment income........................................ .89 .88 .84 .82 .84
Net realized and unrealized gain (loss) on investments....... (.94) (1.59) .67 .12 .59
-------- -------- -------- ------- -------
Total from investment operations.......................... (.05) (.71) 1.51 .94 1.43
-------- -------- -------- -------
Less dividends and distributions
Dividends from net investment income......................... (.89) (.88) (.84) (.82) (.84)
Distributions in excess of net investment income............. -- -- -- (.02) --
-------- -------- -------- ------- -------
Total dividends........................................... (.89) (.88) (.84) (.84) (.84)
-------- -------- -------- ------- -------
Capital charge in respect to issuance of shares.............. -- (.26) -- -- --
-------- -------- -------- ------- -------
Net asset value, end of year(a).............................. $ 6.42 $ 7.36 $ 9.21 $ 8.54 $ 8.44
-------- -------- -------- ------- -------
-------- -------- -------- ------- -------
Market price per share, end of year(a)....................... $ 6.1875 $ 7.1875 $ 9.125 $ 9.00 $ 8.75
-------- -------- -------- ------- -------
-------- -------- -------- ------- -------
TOTAL INVESTMENT RETURN(b):.................................. (2.96)% (12.36)% 11.25% 13.38% 20.80%
-------- -------- -------- ------- -------
-------- -------- -------- ------- -------
RATIO/SUPPLEMENTAL DATA:
Net assets, end of year (000 omitted)........................ $ 98,212 $111,993 $104,558 $96,042 $94,091
Average net assets (000 omitted)............................. $107,803 $ 94,437 $100,766 $95,946 $92,855
Ratio to average net assets:
Expenses, before loan interest and commitment fees........ 1.08% 1.11% 1.07% 1.08% 1.01%
Total expenses............................................ 3.47% 3.14% 2.44% 2.32% 2.29%
Net investment income..................................... 12.60% 11.60% 9.41% 9.63% 10.18%
Portfolio turnover rate...................................... 83% 94% 112% 60% 60%
Total debt outstanding at end of year (000 omitted).......... $ 42,000 $ 35,000 $ 30,000 $18,000 $17,000
Asset coverage per $1,000 of debt outstanding................ $ 3,338 $ 4,204 $ 4,485 $ 6,336 $ 6,535
</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 year indicated. This information has been determined based upon information
provided in the financial statements and market price data for the Fund's
shares.
--------------------------------------------------------------------------------
See Notes to Financial Statements. 17
<PAGE>
Report of Independent Accountants THE HIGH YIELD PLUS FUND, INC.
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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, 2000, the results of its operations and its cash
flows for the year then ended and the changes in its net assets for each of the
two years in the period then ended and the financial highlights for each of the
four years in the period then ended in conformity with accounting principles
generally accepted in the United States. 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 audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States 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,
2000 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above. The accompanying financial highlights for
the year ended March 31, 1996 were audited by other independent accountants,
whose opinion dated May 9, 1996 was unqualified.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
May 19, 2000
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Federal Income Tax Information (Unaudited) THE HIGH YIELD PLUS FUND, INC.
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We are required by the Internal Revenue Code to advise you within 60 days of the
Fund's fiscal year end (March 31, 2000) that 2.14% of the dividends paid in the
fiscal year ended March 31, 2000 qualified for the corporate dividends received
deduction available to corporate taxpayers.
Other Information (Unaudited) THE HIGH YIELD PLUS FUND, INC.
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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.
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Corporate Governance (Unaudited) THE HIGH YIELD PLUS FUND, INC.
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At its quarterly meeting in March 2000, the Fund's Board of Directors
unanimously approved several changes to the Fund's By-Laws. These changes were
as follows:
- Increasing the percentage of outstanding shares necessary to call a
special meeting of stockholders from 25 percent to 50 percent.
- Clarifying that no business shall be transacted at any special
stockholders' meeting except as provided in the notice of meeting.
- Specifying the individuals with authority to conduct the Fund's
stockholder meetings and the powers vested in those persons.
- Modernizing the Fund's provisions to permit proxy voting through
electronic means.
- Clarifying that the Fund will indemnify its directors and officers to the
maximum extent permitted by applicable federal and Maryland state law.
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Directors
Eugene C. Dorsey
Robert E. LaBlanc
Douglas H. McCorkindale
Thomas T. Mooney
Investment Adviser
Wellington Management Company, llp
75 State Street
Boston, MA 02109
Administrator
Prudential Investments Fund Management LLP
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian and Transfer Agent
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
Notice is hereby given in accordance with Section 23(c)
of the Investment Company Act of 1940 that the Fund may
purchase, from time to time, shares of its common stock
at market prices.
The 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
