UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT

INVESTMENT COMPANIES

 

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Item 1 – Reports to Stockholders – [ INSERT REPORT ]

 

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The High Yield Plus Fund, Inc.

ANNUAL REPORT

 

March 31, 2005

 

Directors

David E. A. Carson

Eugene C. Dorsey

Robert E. La Blanc

Douglas H. McCorkindale

Thomas T. Mooney

Richard A. Redeker

Robin B. Smith

Stephen D. Stoneburn

Clay T. Whitehead

 

Investment Adviser

Wellington Management Company, LLP

75 State Street

Boston, MA 02109

 

Administrator

Prudential Investments LLC

Gateway Center Three

100 Mulberry Street

Newark, NJ 07102-4077

 

Custodian

The Bank of New York

One Wall Street

New York, NY 10286

 

Transfer Agent

Equiserve Trust Company, N.A.

P.O. Box 43011

Providence, RI 02940-3011

 

Independent Registered Public Accounting Firm

KPMG LLP

345 Park Avenue

New York, NY 10154

 

Legal Counsel

Kirkpatrick & Lockhart Nicholson Graham 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 High Yield Plus Fund, Inc. (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

 

CUSIP 429906100

HYPS

 

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Dear Shareholder:

 

The high yield market posted a positive 6.8% return for the twelve months ended March 31, as measured by the Lehman Brothers High Yield Index, significantly outperforming investment-grade bonds, which returned 1.1% for the same time period, as measured by the Lehman Brothers Aggregate Index.

 

Market Update

High yield spreads tightened 14 basis points during the Fund’s fiscal year to 324 basis points over the 10-year US Treasury. The yield on the 10-year Treasury increased by 64 basis points over the year from 3.84% to 4.48%, while the yield on the high yield market increased by 50 basis points from 7.22% at the end of March 2004 to 7.72% at the end of March 2005. Spreads remain well inside their 10-year historical average of 506 basis points, and spreads between BB-, B- and CCC-rated bonds are compressed. While fundamentals and market technicals remain solid, we believe valuation has become somewhat stretched.

 

Within high yield, lower-quality bonds outperformed the higher-quality segment of the market. BB-rated bonds returned 4.1% this period, while B-rated bonds returned 6.7%, and CCC-rated bonds returned 11.6%.

 

Investor interest in high yield was weak during the year, with negative cash flows to the asset class of US$4.9 billion. During the first quarter of 2005, high yield mutual funds experienced net outflows of US$4.6 billion. By comparison, fund flows were a negative US$2.3 billion for the first quarter of 2004. Although mutual funds represent only a portion of the market, the trend does suggest negative sentiment among one segment of investors. For the broad market, the supply of high yield new issues priced in the first quarter of 2005 was US$38.5 billion versus US$42.6 billion for 2004, according to Merrill Lynch. The impact of less supply coming to market mitigates the impact of the decline in demand, as indicated by negative mutual fund flows.

 

Fund Performance

The Fund’s total returns for the periods ended March 31, 2005 are shown on the following table. For comparison, we have also provided the returns of the Lehman Brothers High Yield Index and the Lipper Closed-End Leveraged High Yield category, an average of 28 closed-end high yield leveraged funds; we would note that the degree of leverage varies substantially amongst the funds in the group and can affect performance.

 

 

Source: Lipper Analytical Services, Inc.

 

The Fund is leveraged and has a $35 million credit line provided by Bank of America. The Fund had drawn $28.5 million on the line at quarter end, $0.5 million more than the Fund’s prior fiscal year-end. Borrowings fluctuate depending on investment outlook and

 

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opportunities. As of March 31, 2005, the Fund’s shares were priced at $4.10. This price reflected a premium of 6.2% to the Fund’s net asset value of $3.85 per share. (On average, the funds in the Lipper Leveraged Closed End universe were trading at a discount of 2.7% as of March 31, 2005.) On March 31, 2005, the Fund’s monthly dividend rate of $0.035 per share equated to an annualized yield of 10.2% relative to the Fund’s stock price.

 

Underperformance versus the benchmark was primarily the result of a relatively conservative posture in the Utilities sector where higher risk names rallied ahead of lower risk names. Our security selection within Capital Goods and Technology also contributed to the underperformance. Partially offsetting these negative relative contributors was strong performance among the securities in the Consumer Cyclical sector, primarily Retail, and in the Energy Sector.

 

We are gradually reducing our exposure to the higher-risk portions of the market as valuations become less attractive. This is expressed in a move toward higher rated credits, a reduction in our exposure to high beta names and a move away from cyclical toward non-cyclical sectors.

 

Currently, we do not see any endogenous catalysts on the horizon that will pressure high yield spreads to widen. Although credit quality of new issuance is declining, the magnitude of this issuance is not yet sufficient to create systemic market risk.

 

However, there are some exogenous factors that could drive credit spreads wider (e.g. autos coming into high yield market, oil prices heading higher, reinvestment of high yield cash flow into other markets). These factors are difficult to anticipate and, we believe, not reflected in the current pricing of the market.

 

As always, we appreciate your interest in the Fund.

 

Sincerely yours,

 

Earl McEvoy

Portfolio Manager

Senior Vice President

Wellington Management Company, LLP

 

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See Notes to Financial Statements.

 

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See Notes to Financial Statements.

 

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See Notes to Financial Statements.

 

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See Notes to Financial Statements.

 

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See Notes to Financial Statements.

 

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See Notes to Financial Statements.

 

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See Notes to Financial Statements.

 

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See Notes to Financial Statements.

 

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See Notes to Financial Statements.

 

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See Notes to Financial Statements.

 

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See Notes to Financial Statements.

 

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See Notes to Financial Statements.

 

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See Notes to Financial Statements.

 

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THE HIGH YIELD PLUS FUND, INC.

Statement of Operations

 

 

 

THE HIGH YIELD PLUS FUND, INC.

Statement of Cash Flows

 

 

See Notes to Financial Statements.

 

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THE HIGH YIELD PLUS FUND, INC.

Statement of Changes in Net Assets

 

 

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’s primary objective is to provide a high level of current income to shareholders. The Fund seeks to achieve this objective through investment of at least 80% of its investable assets 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.

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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:  Securities for which market quotations are readily available—including securities listed on national securities exchanges and those traded over-the-counter—are valued at the last quoted sales price on the valuation date on which the security is traded. If such securities were not traded on the valuation date, but market quotations are readily available, they are valued at the most recently quoted bid price provided by an independent pricing service or by principal market makers. Securities for which market quotations are not readily available or for which the pricing agent or market makers does not provide a valuation or methodology, or provides a valuation or methodology that, in the judgment of the adviser, does not represent fair value, are valued by a Valuation Committee appointed by the Board of Directors, in consultation with the adviser.

 

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, which approximates market value.

 

Repurchase Agreements:  In connection with transactions in repurchase agreements with United States financial institutions, it is the Fund’s policy that its custodian or designated subcustodians under triparty repurchase agreements, as the case may be, take possession of the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to ensure the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited.

 

 

See Notes to Financial Statements

 

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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 current daily rate of exchange.

 

(ii)  purchases and sales of investment securities, income and expenses—at the rates 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 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 long-term 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 portfolio securities sold during the fiscal period. Accordingly, realized foreign currency gains or losses are included in the reported net realized gains or losses on investment transactions.

 

Net realized gains or losses on foreign currency transactions represent net foreign exchange gains or losses from the holding of foreign currencies, currency gains or losses realized between the trade date and settlement date on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains or losses from valuing foreign currency denominated assets and liabilities (other than investments) at 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 domestic origin as a result of, among other factors, the possibility of political and economic instability and the level of governmental supervision and regulation of 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 and premiums on debt obligations.

 

Securities Transactions and Net Investment Income:  Securities transactions are recorded on the trade date. Realized gains or losses on sales of securities are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date; interest income including amortization of premium and accretion of discount on debt securities, as required is recorded on the accrual basis. Expenses are recorded on the accrual basis.

 

Dividends and Distributions:  The Fund expects to pay dividends of net investment income monthly and distributions of net realized capital and currency gains, if any, annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-dividend date. Permanent book/tax differences relating to income and gains are reclassified to paid-in capital when they arise.

 

Federal Income Taxes: It is the Fund’s policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required.

 

Estimates:  The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

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Note 2. Agreements

 

The Fund has agreements with, among others, Wellington Management Company, LLP (the “Investment Adviser”) and Prudential Investments 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.

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Note 3. Portfolio Securities

 

Purchases and sales of investment securities, other than short-term investments for the year ended March 31, 2005, aggregated $50,987,839 and $50,489,770, respectively.

 

 

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Note 4. Tax Information

 

In order to present undistributed (overdistribution of) net investment income (loss) and accumulated net realized gains (losses) on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital in excess of par, overdistribution of net investment income and accumulated net realized gain (loss) on investments. For the year ended March 31, 2005, the adjustments were to decrease overdistribution of net investment income by and increase accumulated net realized loss on investment transactions by $256,064 due primarily to differences in the treatment of amortization and consent fees between financial and tax reporting. Net investment income, net realized losses and net assets were not affected by this change.

 

For the years ended March 31, 2005 and 2004, the tax character of total dividends paid of $6,718,890 and $6,570,916, respectively, were from ordinary income.

 

As of March 31, 2005, the accumulated undistributed earnings on a tax basis was $125,393 of ordinary income. The tax basis differs from the amount shown on the Statement of Assets and Liabilities primarily due to the tax treatment of amortization and other cumulative timing differences.

 

In addition, the Fund had a capital loss carryforward as of March 31, 2005, of approximately $68,596,000, of which $6,738,000 expires in 2008, $8,395,000 expires in 2009, $24,697,000 expires in 2010, $26,140,000 expires in 2011 and $2,626,000 expires in 2012. Accordingly, no capital gains distribution is expected to be paid to shareholders until net gains have been realized in excess of such carryforward. The Fund utilized approximately $1,968,000 of its capital loss carryforward to offset net taxable gains realized in the fiscal year ended March 31, 2005.

 

The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of March 31, 2005 was as follows:

 

 

The difference between book basis and tax basis was primarily attributable to deferred losses on wash sales and differences in the treatment of premium amortization for book and tax purposes.

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Note 5. Borrowings

 

The Fund has a credit agreement with an unaffiliated lender. The maximum commitment under this agreement is $35,000,000. Interest on any such borrowings is based on market rates and is payable quarterly and at maturity. The Fund may utilize these borrowings (leverage) in order to increase the potential for gain on amounts invested. There can be no guarantee that these gains will be realized. There are increased risks associated with the use of leverage. The average daily balance outstanding during the year ended March 31, 2005, was $28,279,452 at a weighted average interest rate of 2.55%. The maximum face amount of borrowings outstanding at any month-end during the year ended March 31, 2004 was $29,000,000. The current borrowings of $28,500,000 (at a weighted average interest rate of 3.97%) will mature between April 29, 2005 and September 30, 2005.

 

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 Operations.

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Note 6. Capital

 

There are 100 million shares of common stock authorized at $.01 par value per share. During the years ended March 31, 2005 and March 31, 2004, the Fund issued 123,661 and 153,853 shares in connection with reinvestment of dividends, respectively.

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Note 7. Dividends

 

On May 24, 2005, the Board of Directors of the Fund declared dividends of $0.030 per share payable on July 8, 2005, August 12, 2005 and September 9, 2005, to stockholders of record on June 30, 2004, July 29, 2004 and August 31, 2005, respectively.

 

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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.

 

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Report of Independent Registered Public Accounting Firm

 

The Board of Trustees and Shareholders of The High Yield Plus Fund, Inc.:

 

We have audited the accompanying statement of assets and liabilities of The High Yield Plus Fund, Inc., including the portfolio of investments, as of March 31, 2005, and the related statements of operations and cash flows for the year then ended, and the statements of changes in net assets and the financial highlights for each of the years in the two-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the years presented prior to April 1, 2003, were audited by another independent registered public accounting firm, whose report, dated May 28, 2003, expressed an unqualified opinion thereon.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of March 31, 2005, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The High Yield Plus Fund, Inc., as of March 31, 2005, and the results of its operations and its cash flow for the year then ended, and the changes in its net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with U.S. generally accepted accounting principles.

 

New York, New York

May 23, 2005

 

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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, 2005) as to the federal tax status of dividends and distributions paid by the Fund during such fiscal year. Accordingly, we are advising you that during the fiscal year ended March 31, 2005, the Fund paid dividends of $0.42 per share, which are taxable as ordinary income.

 

In January 2006, shareholders will receive a Form 1099-DIV or substitute Form 1099-DIV which reflects the amount of dividends to be used by calendar year taxpayers on their 2005 federal income tax returns. Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in the Fund.

 

Other Information (Unaudited)

 

 

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.

 

Equiserve Trust Company, N.A. (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, Equiserve Trust Company, N.A., P.O. Box 43011, Providence, RI 02940-3011.

Proxy Voting Policies and Procedures. The Fund votes proxies related to the portfolio’s securities according to a set of policies and procedures approved by the Fund’s board. A description of the policies and procedures may be obtained, without charge, by calling (800) 451-6788 or by visiting the SEC’s website at www.sec.gov.

 

Availability Of Quarterly Portfolio Schedule. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at http://www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330 (732-0330).

 

Certifications. The required annual certification for the previous year was submitted to the NYSE. The Fund also has included the certifications of the Fund’s CEO and CFO required by Section 302 of the Sarbanes-Oxley Act in the Fund’s Form N-CSR filed with the SEC, for the period of this report.

 

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Information pertaining to the Directors of the Fund is set forth below.

 

Directors

 

 

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Information pertaining to the officers of the Fund, other than Mr. Mooney (who is listed above), is set forth below.

 

Officers

 

 

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Item 2 – Code of Ethics — See Exhibit (a)

 

As of the end of the period covered by this report, the registrant has adopted a code of ethics (the “Section 406 Standards for Investment Companies – Ethical Standards for Principal Executive and Financial Officers”) that applies to the registrant’s Principal Executive Officer and Principal Financial Officer; the registrant’s Principal Financial Officer also serves as the Principal Accounting Officer.

 

The registrant hereby undertakes to provide any person, without charge, upon request, a copy of the code of ethics. To request a copy of the code of ethics, contact the registrant 973-367-7521, and ask for a copy of the Section 406 Standards for Investment Companies—Ethical Standards for Principal Executive and Financial Officers.

 

Item 3 – Audit Committee Financial Expert –

 

The registrant’s Board has determined that Mr. David Carson, member of the Board’s Audit Committee is an “audit committee financial expert,” and that he is “independent,” for purposes of this Item.

 

Item 4 – Principal Accountant Fees and Services –

 

(a) Audit Fees

 

For the fiscal years ended March 31, 2005 and March 31, 2004, KPMG LLP (“KPMG”), the Registrant’s principal accountant, billed the Registrant $22,500 and $22,500, respectively, for professional services rendered for the audit of the Registrant’s annual financial statements or services that are normally provided in connection with statutory and regulatory filings.

 

(b) Audit-Related Fees

 

None.

 

(c) Tax Fees

 

None.

 

(d) All Other Fees

 

None.

 

(e) (1) Audit Committee Pre-Approval Policies and Procedures

 

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AUDIT COMMITTEE POLICY

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Pre-Approval of Services Provided by the Independent Accountants

 

The Audit Committee is charged with the responsibility to monitor the independence of the Fund’s independent accountants. As part of this responsibility, the Audit Committee must pre-approve any independent accounting firm’s engagement to render audit and/or permissible non-audit services, as required by law. In evaluating a proposed engagement of the independent accountants, the Audit Committee will assess the effect that the engagement might reasonably be expected to have on the accountant’s independence. The Committee’s evaluation will be based on:

 

 

 

 

Policy for Audit and Non-Audit Services Provided to the Funds

 

On an annual basis, the scope of audit for the Fund, audit fees and expenses, and audit-related and non-audit services (and fees proposed in respect thereof) proposed to be performed by the Fund’s independent accountants will be presented by the Treasurer and the independent accountants to the Audit Committee for review and, as appropriate, approval prior to the initiation of such services. Such presentation shall be accompanied by confirmation by both the Treasurer and the independent accountants that the proposed services will not adversely affect the independence of the independent accountants. Proposed services shall be described in sufficient detail to enable the Audit Committee to assess the appropriateness of such services and fees, and the compatibility of the provision of such services with the auditor’s independence. The Committee shall receive periodic reports on the progress of the audit and other services which are approved by the Committee or by the Committee Chair pursuant to authority delegated in this Policy.

 

The categories of services enumerated under “Audit Services”, “Audit-related Services”, and “Tax Services” are intended to provide guidance to the Treasurer and the independent accountants as to those categories of services which the Committee believes are generally consistent with the independence of the independent accountants and which the Committee (or the Committee Chair) would expect upon the presentation of specific proposals to pre-approve. The enumerated categories are not intended as an exclusive list of audit, audit-related or tax services which the Committee (or the Committee Chair) would consider for pre-approval.

 

Audit Services

 

The following categories of audit services are considered to be consistent with the role of the Fund’s independent accountants:

 

 

 

 

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Audit-related Services

 

The following categories of audit-related services are considered to be consistent with the role of the Fund’s independent accountants:

 

 

 

 

 

 

Individual audit-related services that fall within one of these categories and are not presented to the Audit Committee as part of the annual pre-approval process will be subject to pre-approval by the Committee Chair (or any other Committee member on whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $50,000.

 

Tax Services

 

The following categories of tax services are considered to be consistent with the role of the Fund’s independent accountants:

 

 

 

 

 

 

 

 

 

 

 

Individual tax services that fall within one of these categories and are not presented to the Audit Committee as part of the annual pre-approval process will be subject to pre-approval by the Committee Chair (or any other Committee member on whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $50,000.

 

Other Non-audit Services

 

Certain non-audit services that the independent accountants are legally permitted to render will be subject to pre-approval by the Committee or by one or more Committee members to whom the Committee has delegated this authority and who will report to the full Committee any pre-approval decisions made pursuant to this Policy. Non-audit services presented for pre-approval pursuant to this paragraph will be accompanied by a confirmation from both the Treasurer and the independent accountants that the proposed services will not adversely affect the independence of the independent accountants.

 

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Proscribed Services

 

The Fund’s independent accountants will not render services in the following categories of non-audit services:

 

 

 

 

 

 

 

 

 

 

Pre-approval of Non-Audit Services Provided to Other Entities Within the Prudential Fund Complex

 

Certain non-audit services provided to Prudential Investments LLC or any of its affiliates that also provide ongoing services to the Prudential Mutual Funds will be subject to pre-approval by the Audit Committee. The only non-audit services provided to these entities that will require pre-approval are those related directly to the operations and financial reporting of the Funds. Individual projects that are not presented to the Audit Committee as part of the annual pre-approval process, will be subject to pre-approval by the Committee Chair (or any other Committee member on whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $50,000. Services presented for pre-approval pursuant to this paragraph will be accompanied by a confirmation from both the Treasurer and the independent accountants that the proposed services will not adversely affect the independence of the independent accountants.

 

Although the Audit Committee will not pre-approve all services provided to Prudential Investments LLC and its affiliates, the Committee will receive an annual report from the Fund’s independent accounting firm showing the aggregate fees for all services provided to Prudential Investments and its affiliates.

 

(e) (2) Percentage of services referred to in 4(b)- (4)(d) that were approved by the audit committee –

 

Not applicable.

 

(f) Percentage of hours expended attributable to work performed by other than full time employees of principal accountant if greater than 50%.

 

Not applicable.

 

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(g) Non-Audit Fees

 

Not applicable to Registrant and to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant.

 

(h) Principal Accountants Independence

 

Not applicable as KPMG has not provided non-audit services to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X.

 

Item 5 – Audit Committee of Listed Registrants – Not applicable.

 

Item 6 – Schedule of Investments – The schedule is included as part of the report to shareholders filed under Item 1 of this Form.

 

Item 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies –

 

Wellington Management Company, LLP

 

Proxy Policies and Procedures

 

Dated: April 30, 2004

 

 

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Item 8 – Portfolio Managers of Closed-End Management Investment Companies – Not applicable.

 

Item 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers –

 

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REGISTRANT PURCHASES OF EQUITY SECURITIES

 

 

Item 10 – Submission of Matters to a Vote of Security Holders – Not applicable.

 

Item 11 – Controls and Procedures

 

 

 

Item 12 – Exhibits

 

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

(Registrant) The High Yield Plus Fund, Inc.

 

 

Date May 26, 2005

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 

Date May 26, 2005

 

 

Date May 26, 2005