UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-08765
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Managed High Yield Plus Fund Inc.
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(Exact name of registrant as specified in charter)
51 West 52nd Street, New York, New York 10019-6114
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(Address of principal executive offices) (Zip code)
Mark F. Kemper, Esq.
UBS Global Asset Management
51 West 52nd Street
New York, NY 10019-6114
(Name and address of agent for service)
Copy to:
Jack W. Murphy, Esq.
Dechert LLP
1775 I Street, N.W.
Washington, DC 20006-2401
Registrant's telephone number, including area code: 212-882 5000
Date of fiscal year end: May 31
Date of reporting period: May 31, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
- --------------------------------
[LOGO OF UBS] UBS Global Asset
Management
MANAGED HIGH YIELD PLUS FUND INC.
ANNUAL REPORT
MAY 31, 2006
MANAGED HIGH YIELD PLUS FUND INC.
JULY 14, 2006
DEAR SHAREHOLDER,
We are pleased to present you with the annual report for Managed High Yield Plus
Fund Inc. (the "Fund") for the fiscal year ended May 31, 2006.
PERFORMANCE
Over the fiscal year ended May 31, 2006, the Fund returned 11.16% on a net asset
value basis and 5.26% on a market price basis, outperforming its peer group
median and, on a net asset value basis, benchmark index. Over the same period,
the median returns for the Fund's peer group, the Lipper High Current Yield
Funds (Leveraged) were 9.20% and 4.71% on a net asset value and market price
basis, respectively. The Fund's benchmark, the Merrill Lynch US High Yield Cash
Pay Constrained Index (the "Index") returned 6.65% over the annual period. (For
more performance information, please refer to "Performance at a Glance" on page
5.)
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MANAGED HIGH YIELD PLUS FUND INC.
INVESTMENT GOALS:
Primarily, high income; secondarily, capital appreciation
PORTFOLIO MANAGER:
Marianne Rossi* UBS Global Asset Management (Americas) Inc.
COMMENCEMENT:
June 26, 1998
NYSE SYMBOL:
HYF
DIVIDEND PAYMENTS:
Monthly
- --------------------------------------------------------------------------------
The Fund continued to use leverage during the period, which helped performance
on an absolute basis. As of May 31, 2006 leverage accounted for 32.5% of the
Fund's total assets. While short-term rates rose over the period and increased
the Fund's borrowing costs, the leverage still had a positive effect on the
Fund's income during the fiscal year, as the yields on the Fund's longer-term
bonds more than offset the borrowing costs. Leverage magnifies returns on both
the upside and on the downside.
AN INTERVIEW WITH PORTFOLIO MANAGER MARIANNE ROSSI
Q. HOW WOULD YOU DESCRIBE THE ECONOMIC ENVIRONMENT DURING THE
REPORTING PERIOD?
A. The past 12 months were a rather turbulent time for the economy. During the
summer months in 2005, a devastating and record-breaking hurricane season
drove already high energy prices even higher. By Labor
* A portfolio management change occurred after the date of this letter. Please
see the section titled "The Fund" on page 28 under "General Information" for
more details.
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1
MANAGED HIGH YIELD PLUS FUND INC.
Day weekend, in the immediate wake of Hurricane Katrina, crude oil prices
had topped $70 per barrel and gas prices averaged more than $3.00 a gallon
nationwide. Consumer confidence plummeted in the months that followed, and
during the fourth quarter of 2005, lackluster consumer spending drove gross
domestic product (GDP) down to a 1.7% growth rate--a three-year low.
By the end of the first quarter of 2006, however, a number of these
indicators reversed direction. Consumer confidence rebounded sharply
beginning in November 2005, and in April 2006 hit a four-year high. Final
data put GDP growth in the first quarter this year at 5.6%--a three-year
high. Unemployment trended steadily downward throughout the Fund's fiscal
year, hitting 4.6% in May, the lowest it has been since 2001. Inflation,
meanwhile, remained fairly benign for much of the period, but has raised
some concern among economists recently.
Q. HOW DID THE FEDERAL RESERVE BOARD (THE "FED") REACT IN THIS ECONOMIC
ENVIRONMENT?
A. The Fed continued its tightening campaign, raising short-term rates eight
times during the period and once after the period ended, bringing the
federal funds rate to 5.25%. (The federal funds rate is the interest rate
banks charge each other for overnight loans). In fact, the Fed has hiked
rates at 17 consecutive meetings dating back to June 2004. The market
consensus seems to be that the Fed may be near the end of this current
tightening policy. While we can't be certain exactly when the Fed will pause
or end its current policy, we believe it is unlikely that the Fed will
continue to hike rates for the remainder of 2006, as was the case in 2005.
Q. HOW DID HIGH YIELD BONDS PERFORM DURING THE REPORTING PERIOD?
A. The high yield market performed fairly well during the past year, despite
a number of highly publicized downgrades and bankruptcies. Over the course of
the year, Delta Airlines and Northwest Airlines both filed for bankruptcy,
which put considerable pressure on the entire airline industry as the market
braced for future filings. Delphi Automotive, an auto parts manufacturer,
also filed for Chapter 11 protection. GM and Ford were downgraded to
noninvestment-grade status, making them two of the largest issuers in the
high-yield debt sector. The automaker and auto parts sector posted fairly
solid returns during the past year, however, with both GM and Ford performing
well after their downgrade in credit quality.
By historical measures, default rates have been quite low, while new bond
issuance has been relatively limited. Also, corporate earnings were quite
strong during the reporting period. This combination created a
- --------------------------------------------------------------------------------
2
MANAGED HIGH YIELD PLUS FUND INC.
fairly stable high-yield market over the period, with strong demand and
limited supply. As a result, credit spreads (the difference in yield between
noninvestment-grade bonds and similarly dated treasuries) have been tight
compared to the historical average.
Q. HOW DID YOU POSITION THE FUND'S PORTFOLIO?
A. In terms of credit quality, for several months we have been repositioning the
portfolio, de-emphasizing CCC-rated securities, which performed quite well
for the Fund during the fiscal year, and adding to our positions in B-rated
bonds. We believe that the economy will remain stable over the coming months,
and that given the recent strong performance of the CCC sector, B-rated
securities generally appear more attractive from a valuation standpoint.
Q. WHICH INDUSTRIES DID YOU FIND ATTRACTIVE DURING THE REPORTING PERIOD?
A. Three of our largest overweight positions were in the chemicals, restaurants
and gaming industries. We found all three industries to offer some attractive
investment opportunities from a valuation perspective relative to the overall
high yield market. Within the chemicals industry, we found a number of
companies that exhibited what we believed were indicators of solid management
and well-run operations. We generally found the same to be true within the
gaming industry. Issue selection within these industries was quite strong,
making these sectors three of the Fund's top contributors to performance.
Q. WHICH INVESTMENTS DID NOT MEET YOUR EXPECTATIONS?
A. We held a fairly large position in the containers industry, which detracted
from total returns during the year. The containers industry as a whole
suffered from higher raw materials prices during the period, which cut into
companies' profitability. Within the paper industry, weak demand and a strong
Canadian dollar hurt performance.
Q. WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND THE HIGH YIELD MARKET?
A. We believe the economy will continue expanding while the Fed maintains its
hawkish stance on inflation. Against that backdrop, fundamentals for the
high-yield market appear firm. Although US mutual fund outflows have been
high in the high-yield sector, investors outside the US have helped to buoy
the market, and we feel that much of the positive factors at work in the
market are already reflected in security prices. We believe tight credit
spreads are likely to make active issue selection essential to performance,
as finding attractive values may become more challenging as the year
progresses.
- --------------------------------------------------------------------------------
3
MANAGED HIGH YIELD PLUS FUND INC.
We thank you for your continued support and welcome any comments or questions
you may have. For additional information regarding your fund, please contact
your financial advisor, or visit us at www.ubs.com/globalam-us.
Sincerely,
/s/ W. Douglas Beck
W. DOUGLAS BECK, CFA
President
Managed High Yield Plus Fund Inc.
Executive Director
UBS Global Asset Management (Americas) Inc.
/s/ Marianne Rossi
MARIANNE ROSSI, CFA
Portfolio Manager*
Managed High Yield Plus Fund Inc.
Managing Director
UBS Global Asset Management (Americas) Inc.
This letter is intended to assist shareholders in understanding how the Fund
performed during the fiscal year ended May 31, 2006. The views and opinions in
the letter were current as of July 14, 2006. They are not guarantees of
performance or investment results and should not be taken as investment advice.
Investment decisions reflect a variety of factors, and we reserve the right to
change our views about individual securities, sectors and markets at any time.
As a result, the views expressed should not be relied upon as a forecast of the
Fund's future investment intent. We encourage you to consult your financial
advisor regarding your personal investment program.
* A portfolio management change occurred after the date of this letter. Please
see the section titled "The Fund" on page 28 under "General Information" for
more details.
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4
MANAGED HIGH YIELD PLUS FUND INC.
PERFORMANCE AT A GLANCE (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 5/31/06
SINCE
TOTAL RETURNS 6 MONTHS 1 YEAR 5 YEARS INCEPTION*
- -----------------------------------------------------------------------------------------------------------------
MANAGED HIGH YIELD PLUS FUND INC.
- -----------------------------------------------------------------------------------------------------------------
Net Asset Value 7.78% 11.16% 6.48% -0.88%
- -----------------------------------------------------------------------------------------------------------------
Market Price 4.85% 5.26% 3.47% -1.43%
- -----------------------------------------------------------------------------------------------------------------
LIPPER HIGH CURRENT YIELD FUNDS (LEVERAGED) MEDIAN
- -----------------------------------------------------------------------------------------------------------------
Net Asset Value 4.78% 9.20% 9.64% 3.34%
- -----------------------------------------------------------------------------------------------------------------
Market Price 7.38% 4.71% 5.74% 1.69%
=================================================================================================================
MERRILL LYNCH US HIGH YIELD CASH PAY CONSTRAINED INDEX 4.00% 6.65% 8.17% 5.56%
=================================================================================================================
* Since inception returns for the Fund are calculated from the date of the
Fund's inception on June 26, 1998. Inception returns for the Lipper High
Current Yield Funds (Leveraged) median and Merrill Lynch US High Yield Cash
Pay Constrained Index are calculated from the month-end closest to the Fund's
inception: June 30, 1998.
Past performance does not predict future performance. The return and value of an
investment will fluctuate so that an investor's shares, when sold, may be worth
more or less than their original cost. Fund net asset value ("NAV") return
assumes, for illustration only, that dividends were reinvested at the net asset
value on the payable dates. NAV and market price returns for periods of less
than one year have not been annualized. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distribution or the sale of Fund
shares.
Lipper peer group data calculated by Lipper Inc.; used with permission. The
Lipper median is the return of the fund that places in the middle of the peer
group.
SHARE PRICE, DIVIDEND AND YIELDS AS OF 5/31/06
- -------------------------------------------------------------------------------------------------
Market Price $4.78
- -------------------------------------------------------------------------------------------------
Net Asset Value $4.82
- -------------------------------------------------------------------------------------------------
12-Month Dividend (period ended 5/31/06) $0.5650
- -------------------------------------------------------------------------------------------------
May 2006 Dividend $0.0450
- -------------------------------------------------------------------------------------------------
Market Yield* 11.3%
- -------------------------------------------------------------------------------------------------
NAV Yield* 11.2%
=================================================================================================
* Market yield is calculated by multiplying the May dividend by 12 and dividing
by the month-end market price. NAV yield is calculated by multiplying the May
dividend by 12 and dividing by the month-end net asset value. Prices and
yields will vary.
- --------------------------------------------------------------------------------
5
MANAGED HIGH YIELD PLUS FUND INC.
PORTFOLIO STATISTICS (UNAUDITED)#
CHARACTERISTICS 05/31/06 11/30/05 05/31/05
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets (mm) $291.2 $285.3 $292.0
- -----------------------------------------------------------------------------------------------------------------------------
Weighted Average Maturity 5.9 yrs. 5.6 yrs. 5.9 yrs.
- -----------------------------------------------------------------------------------------------------------------------------
Leverage** 32.5% 30.8% 32.3%
- -----------------------------------------------------------------------------------------------------------------------------
PORTFOLIO COMPOSITION* 05/31/06 11/30/05 05/31/05
- -----------------------------------------------------------------------------------------------------------------------------
Corporate Bonds 99.7% 99.1% 99.7%
- -----------------------------------------------------------------------------------------------------------------------------
Warrants 0.2 0.1 0.1
- -----------------------------------------------------------------------------------------------------------------------------
Stocks (common and preferred) 0.0+ 0.0+ 0.0+
- -----------------------------------------------------------------------------------------------------------------------------
Cash Equivalents 0.1 0.8 0.2
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL 100.0% 100.0% 100.0%
=============================================================================================================================
CREDIT QUALITY* 05/31/06 11/30/05 05/31/05
- -----------------------------------------------------------------------------------------------------------------------------
BB & Higher 3.5% 2.9% 3.5%
- -----------------------------------------------------------------------------------------------------------------------------
B 71.1 69.8 65.1
- -----------------------------------------------------------------------------------------------------------------------------
CCC & Lower 24.4 25.7 29.8
- -----------------------------------------------------------------------------------------------------------------------------
Not Rated 0.7 0.7 1.3
- -----------------------------------------------------------------------------------------------------------------------------
Equity/Preferred 0.2 0.1 0.1
- -----------------------------------------------------------------------------------------------------------------------------
Cash Equivalents 0.1 0.8 0.2
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL 100.0% 100.0% 100.0%
=============================================================================================================================
TOP 5 HOLDINGS* 05/31/06 11/30/05 05/31/05
- -----------------------------------------------------------------------------------------------------------------------------
Levi Strauss 1.9% Levi Strauss 1.7% Qwest Services 1.6%
- -----------------------------------------------------------------------------------------------------------------------------
Mediacom
Wheeling Island Gaming 1.6 Broadband 1.6 Levi Strauss 1.6
- -----------------------------------------------------------------------------------------------------------------------------
Mediacom Mediacom
Broadband 1.5 American Cellular 1.6 Broadband 1.6
- -----------------------------------------------------------------------------------------------------------------------------
Crown European
American Cellular 1.5 Rhodia 1.6 Holdings 1.4
- -----------------------------------------------------------------------------------------------------------------------------
Mission Energy 1.4 Dynegy Holdings 1.5 Jacobs Entertainment 1.3
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL 7.9% 8.0% 7.5%
==============================================================================================================================
TOP FIVE SECTORS* 05/31/06 11/30/05 05/31/05
- -----------------------------------------------------------------------------------------------------------------------------
Chemicals 9.5% Chemicals 8.7% Chemicals 7.9%
- -----------------------------------------------------------------------------------------------------------------------------
Gaming 8.2 Gaming 7.5 Gaming 6.5
- -----------------------------------------------------------------------------------------------------------------------------
Telecommunications 7.2 Telecommunications 7.2 Consumer Products 6.0
- -----------------------------------------------------------------------------------------------------------------------------
Printing & Publishing 6.3 Healthcare 6.0 Telecommunications 5.8
- -----------------------------------------------------------------------------------------------------------------------------
Healthcare 5.9 Restaurants 4.8 Healthcare 5.5
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL 37.1% 34.2% 31.7%
=============================================================================================================================
* Weightings represent percentages of portfolio assets as of the dates
indicated. Credit quality ratings shown are designated by Standard & Poor's
Ratings Group, an independent ratings agency.
** As a percentage of total assets.
+ Weighting represents less than 0.05% of portfolio assets as of the date
indicated.
# The Fund's portfolio is actively managed and its composition will vary over
time.
- --------------------------------------------------------------------------------
6
MANAGED HIGH YIELD PLUS FUND INC.
PORTFOLIO OF INVESTMENTS -- MAY 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- -----------------------------------------------------------------------------------
CORPORATE BONDS--144.05%
- -----------------------------------------------------------------------------------
AGRICULTURE--1.09%
$3,000 Southern States Cooperative, Inc.*+ 11/01/10 10.500% $3,180,000
===================================================================================
APPAREL/TEXTILES--4.97%
7,150 Levi Strauss & Co.* 12/15/12 12.250 8,043,750
- -----------------------------------------------------------------------------------
2,000 Propex Fabrics, Inc.* 12/01/12 10.000 1,880,000
- -----------------------------------------------------------------------------------
4,650 Rafaella Apparel Group*+ 06/15/11 11.250 4,557,000
- -----------------------------------------------------------------------------------
14,480,750
===================================================================================
AUTOMOTIVE--0.78%
3,000 General Motors* 07/15/33 8.375 2,276,250
===================================================================================
AUTO PARTS & EQUIPMENT--3.98%
5,250 Cooper Standard Automotive, Inc.*+ 12/15/14 8.375 4,350,911
- -----------------------------------------------------------------------------------
1,830 Dura Operating Corp., Series D* 05/01/09 9.000 1,061,400
- -----------------------------------------------------------------------------------
3,000 HLI Operating Co., Inc.* 06/15/10 10.500 2,475,000
- -----------------------------------------------------------------------------------
4,000 Stanadyne Corp.* 08/15/14 10.000 3,700,000
- -----------------------------------------------------------------------------------
11,587,311
===================================================================================
BEVERAGE--1.52%
4,225 Le-Natures, Inc.*+ 06/15/13 10.000 4,430,969
===================================================================================
BUILDING & CONSTRUCTION--2.55%
2,000 Stanley Martin-Community LLC*+ 08/15/15 9.750 1,770,000
- -----------------------------------------------------------------------------------
3,416 Technical Olympic USA, Inc.* 07/01/12 10.375 3,467,240
- -----------------------------------------------------------------------------------
2,500 Technical Olympic USA, Inc.* 01/15/15 7.500 2,193,750
- -----------------------------------------------------------------------------------
7,430,990
===================================================================================
BUILDING MATERIALS--7.51%
2,000 Coleman Cable, Inc.*+ 10/01/12 9.875 1,845,000
- -----------------------------------------------------------------------------------
3,500 Collins & Aikman Floorcovering,
Series B* 02/15/10 9.750 3,491,250
- -----------------------------------------------------------------------------------
4,000 Compression Polymers Holding
Corp.*+ 07/01/13 10.500 4,160,000
- -----------------------------------------------------------------------------------
3,750 FastenTech, Inc.* 05/01/11 11.500 3,834,375
- -----------------------------------------------------------------------------------
4,075 Interface, Inc.* 02/01/10 10.375 4,477,406
- -----------------------------------------------------------------------------------
4,825 Maax Corp.* 06/15/12 9.750 4,053,000
- -----------------------------------------------------------------------------------
21,861,031
===================================================================================
CHEMICALS--13.70%
3,000 Equistar Chemicals LP* 09/01/08 10.125 3,195,000
- -----------------------------------------------------------------------------------
1,643 Huntsman International LLC* 07/01/09 10.125 1,671,753
- -----------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
MANAGED HIGH YIELD PLUS FUND INC.
PORTFOLIO OF INVESTMENTS -- MAY 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- -----------------------------------------------------------------------------------
CORPORATE BONDS--(CONTINUED)
- -----------------------------------------------------------------------------------
CHEMICALS--(CONCLUDED)
$1,000 Imc Global, Inc.* 08/01/13 10.875% $1,132,500
- -----------------------------------------------------------------------------------
2,000 IMC Global, Inc., Series B* 06/01/11 11.250 2,112,500
- -----------------------------------------------------------------------------------
1,500 Ineos Group Holdings PLC*+ 02/15/16 8.500 1,402,500
- -----------------------------------------------------------------------------------
1,000 Millennium America, Inc.* 06/15/08 9.250 1,036,250
- -----------------------------------------------------------------------------------
5,050 Omnova Solutions, Inc.* 06/01/10 11.250 5,390,875
- -----------------------------------------------------------------------------------
3,500 Polyone Corp.* 05/15/10 10.625 3,771,250
- -----------------------------------------------------------------------------------
5,285 Resolution Performance
Products LLC* 11/15/10 13.500 5,641,737
- -----------------------------------------------------------------------------------
3,835 Rhodia SA* 06/01/10 10.250 4,213,706
- -----------------------------------------------------------------------------------
4,280 Rockwood Specialties Group, Inc.* 05/15/11 10.625 4,622,400
- -----------------------------------------------------------------------------------
3,735 Terra Capital, Inc.* 10/15/08 12.875 4,257,900
- -----------------------------------------------------------------------------------
1,300 Terra Capital, Inc.* 06/01/10 11.500 1,436,500
- -----------------------------------------------------------------------------------
39,884,871
===================================================================================
CONSUMER PRODUCTS--6.24%
3,350 Amscan Holdings, Inc.* 05/01/14 8.750 2,981,500
- -----------------------------------------------------------------------------------
2,500 Da-Lite Screen Co., Inc.* 05/15/11 9.500 2,650,000
- -----------------------------------------------------------------------------------
3,480 Jafra Cosmetics International, Inc.* 05/15/11 10.750 3,762,750
- -----------------------------------------------------------------------------------
750 Nutro Products, Inc.*+ 10/15/13 9.230 759,375
- -----------------------------------------------------------------------------------
1,000 Nutro Products, Inc.*+ 04/15/14 10.750 1,022,500
- -----------------------------------------------------------------------------------
4,060 Prestige Brands, Inc.* 04/15/12 9.250 4,080,300
- -----------------------------------------------------------------------------------
3,000 Revlon Consumer Products*+ 04/01/11 9.500 2,910,000
- -----------------------------------------------------------------------------------
18,166,425
===================================================================================
DIVERSIFIED CAPITAL GOODS--1.12%
3,000 Invensys PLC*+ 03/15/11 9.875 3,255,000
===================================================================================
ELECTRIC-GENERATION--3.14%
5,250 Mission Energy Holding Co.* 07/15/08 13.500 5,925,937
- -----------------------------------------------------------------------------------
3,185 Reliant Energy, Inc.* 07/15/10 9.250 3,212,869
- -----------------------------------------------------------------------------------
9,138,806
===================================================================================
ELECTRONICS--0.82%
2,250 Telex Communications, Inc.* 10/15/08 11.500 2,385,000
===================================================================================
FOOD & DRUG RETAILERS--3.30%
3,750 Jean Coutu Group PLC* 08/01/14 8.500 3,487,500
- -----------------------------------------------------------------------------------
2,000 Pathmark Stores, Inc.* 02/01/12 8.750 1,935,000
- -----------------------------------------------------------------------------------
4,000 Rite Aid Corp.* 02/15/11 9.500 4,180,000
- -----------------------------------------------------------------------------------
9,602,500
===================================================================================
- --------------------------------------------------------------------------------
8
MANAGED HIGH YIELD PLUS FUND INC.
PORTFOLIO OF INVESTMENTS -- MAY 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- -----------------------------------------------------------------------------------
CORPORATE BONDS--(CONTINUED)
- -----------------------------------------------------------------------------------
FOOD-WHOLESALE--2.44%
$2,000 pinnacle foods holding* 12/01/13 8.250% $1,965,000
- -----------------------------------------------------------------------------------
5,000 Wornick Co.* 07/15/11 10.875 5,143,750
- -----------------------------------------------------------------------------------
7,108,750
===================================================================================
FORESTRY/PAPER--2.45%
942 Buckeye Technologies, Inc.* 09/15/08 9.250 942,000
- -----------------------------------------------------------------------------------
4,500 Cellu Tissue Holdings, Inc.* 03/15/10 9.750 4,556,250
- -----------------------------------------------------------------------------------
2,083 Millar Western Forest* 11/15/13 7.750 1,624,740
- -----------------------------------------------------------------------------------
7,122,990
===================================================================================
GAMING--11.78%
4,500 Circus & Eldorado Joint Venture* 03/01/12 10.125 4,792,500
- -----------------------------------------------------------------------------------
4,400 Inn Of The Mountain Gods
Resort & Casino* 11/15/10 12.000 4,708,000
- -----------------------------------------------------------------------------------
5,250 Jacobs Entertainment, Inc. 02/01/09 11.875 5,571,563
- -----------------------------------------------------------------------------------
3,000 Little Traverse Bay
Bands of Odawa Indians*+ 02/15/14 10.250 2,970,000
- -----------------------------------------------------------------------------------
2,845 Majestic Star Casino LLC* 10/15/10 9.500 3,015,700
- -----------------------------------------------------------------------------------
1,000 Majestic Star Casino LLC
Capital II*+ 01/15/11 9.750 1,030,000
- -----------------------------------------------------------------------------------
2,525 MTR Gaming Group, Inc., Series B* 04/01/10 9.750 2,679,656
- -----------------------------------------------------------------------------------
2,750 River Rock Entertainment Authority* 11/01/11 9.750 2,935,625
- -----------------------------------------------------------------------------------
6,350 Wheeling Island Gaming, Inc.* 12/15/09 10.125 6,604,000
- -----------------------------------------------------------------------------------
34,307,044
===================================================================================
HEALTH SERVICES--8.46%
3,000 American Holding Co./Emcare
Holding Co.*+ 02/15/15 10.000 3,195,000
- -----------------------------------------------------------------------------------
4,750 Ameripath, Inc.* 04/01/13 10.500 5,070,625
- -----------------------------------------------------------------------------------
2,250 National Mentor, Inc.*+ 12/01/12 9.625 2,536,875
- -----------------------------------------------------------------------------------
4,500 Radiologix, Inc., Series B* 12/15/08 10.500 4,038,750
- -----------------------------------------------------------------------------------
2,000 Tenet Healthcare Corp.*+ 02/01/15 9.250 2,015,000
- -----------------------------------------------------------------------------------
4,000 Universal Hospital Services, Inc.* 11/01/11 10.125 4,200,000
- -----------------------------------------------------------------------------------
3,500 US Oncology Holdings, Inc.*+ 03/15/15 10.320++ 3,561,250
- -----------------------------------------------------------------------------------
24,617,500
===================================================================================
- --------------------------------------------------------------------------------
9
MANAGED HIGH YIELD PLUS FUND INC.
PORTFOLIO OF INVESTMENTS -- MAY 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- -----------------------------------------------------------------------------------
CORPORATE BONDS--(CONTINUED)
- -----------------------------------------------------------------------------------
LEISURE--1.54%
$1,000 Golfsmith International, Inc.* 10/15/09 8.375% $960,000
- -----------------------------------------------------------------------------------
3,500 Palace Funding, Inc.*+ 04/15/14 10.875 3,517,500
- -----------------------------------------------------------------------------------
4,477,500
===================================================================================
MEDIA-BROADCAST--3.86%
4,775 CMP Susquehanna*+ 05/15/14 9.875 4,643,688
- -----------------------------------------------------------------------------------
1,000 Rainbow National Services LLC*+ 09/01/14 10.375 1,117,500
- -----------------------------------------------------------------------------------
3,550 Sirius Satellite Radio*+ 08/01/13 9.625 3,354,750
- -----------------------------------------------------------------------------------
2,358 Young Broadcasting, Inc.* 03/01/11 10.000 2,133,990
- -----------------------------------------------------------------------------------
11,249,928
===================================================================================
MEDIA-CABLE--4.76%
3,000 CCH I Holdings LLC*+ 05/15/14 10.000 1,830,000
- -----------------------------------------------------------------------------------
5,295 Insight Midwest LP/Insight
Capital, Inc.* 11/01/10 10.500 5,553,131
- -----------------------------------------------------------------------------------
6,150 Mediacom Broadband LLC* 07/15/13 11.000 6,488,250
- -----------------------------------------------------------------------------------
13,871,381
===================================================================================
MEDIA-SERVICES--2.94%
4,100 Advanstar Communications, Inc.* 08/15/10 10.750 4,428,000
- -----------------------------------------------------------------------------------
4,000 Affinion Group, Inc.*+ 10/15/13 10.125 4,140,000
- -----------------------------------------------------------------------------------
8,568,000
===================================================================================
METALS/MINING EXCLUDING STEEL--1.67%
3,000 American Rock Salt Co. LLC* 03/15/14 9.500 3,030,000
- -----------------------------------------------------------------------------------
2,300 Better Minerals &
Aggregates Co.#(b) 09/15/09 13.000 1,840,000
- -----------------------------------------------------------------------------------
4,870,000
===================================================================================
NON-FOOD & DRUG RETAILERS--6.90%
4,400 Brookstone Co., Inc.*+ 10/15/12 12.000 3,938,000
- -----------------------------------------------------------------------------------
4,400 Gregg Appliances, Inc.*+ 02/01/13 9.000 4,081,000
- -----------------------------------------------------------------------------------
2,000 GSC Holdings Corp.*+ 10/01/12 8.000 1,990,000
- -----------------------------------------------------------------------------------
3,250 Mothers Work, Inc.* 08/01/10 11.250 3,396,250
- -----------------------------------------------------------------------------------
1,400 National Wine & Spirits, Inc.* 01/15/09 10.125 1,400,000
- -----------------------------------------------------------------------------------
2,935 PETCO Animal Supplies, Inc.* 11/01/11 10.750 3,107,431
- -----------------------------------------------------------------------------------
2,000 Stripes Acquisition/Susser Finance*+ 12/15/13 10.625 2,170,000
- -----------------------------------------------------------------------------------
20,082,681
===================================================================================
- --------------------------------------------------------------------------------
10
MANAGED HIGH YIELD PLUS FUND INC.
PORTFOLIO OF INVESTMENTS -- MAY 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- -----------------------------------------------------------------------------------
CORPORATE BONDS--(CONTINUED)
- -----------------------------------------------------------------------------------
OIL FIELD EQUIPMENT & SERVICES--1.87%
$5,250 Bluewater Finance Ltd.* 02/15/12 10.250% $5,433,750
===================================================================================
OIL REFINING & MARKETING--1.35%
3,605 Giant Industries, Inc.* 05/15/12 11.000 3,929,450
===================================================================================
PACKAGING--4.66%
4,750 Berry Plastics Corp.* 07/15/12 10.750 5,153,750
- -----------------------------------------------------------------------------------
3,500 Exopac Holding Corp.*+ 02/01/14 11.250 3,565,625
- -----------------------------------------------------------------------------------
3,000 Graham Packaging Co.*+ 10/15/14 9.875 3,060,000
- -----------------------------------------------------------------------------------
2,000 Solo Cup Co.* 02/15/14 8.500 1,800,000
- -----------------------------------------------------------------------------------
13,579,375
===================================================================================
PRINTING & PUBLISHING--9.11%
2,250 American Color Graphics, Inc.* 06/15/10 10.000 1,535,625
- -----------------------------------------------------------------------------------
4,000 American Media Operation,
Series B* 05/01/09 10.250 3,650,000
- -----------------------------------------------------------------------------------
3,500 Clarke American Corp.+ 12/15/13 11.750 3,675,000
- -----------------------------------------------------------------------------------
975 Hollinger, Inc.*+ 03/01/11 12.875 1,015,219
- -----------------------------------------------------------------------------------
4,000 Houghton Mifflin Co.* 02/01/13 9.875 4,220,000
- -----------------------------------------------------------------------------------
5,500 Sheridan Acquisition Corp.* 08/15/11 10.250 5,610,000
- -----------------------------------------------------------------------------------
2,250 Quebecor World Capital Corp.*+ 03/15/16 8.750 2,121,059
- -----------------------------------------------------------------------------------
3,250 Vertis, Inc.*+ 12/07/09 13.500 2,632,500
- -----------------------------------------------------------------------------------
2,125 Vertis, Inc., Series B* 06/15/09 10.875 2,071,875
- -----------------------------------------------------------------------------------
26,531,278
===================================================================================
REAL ESTATE INVESTMENT TRUST--0.78%
2,750 Structured Asset Securities Corp.,
Series 2006-S1, Class B2*+ 03/25/36 7.581++ 2,285,078
===================================================================================
RESTAURANTS--7.33%
4,900 Buffets, Inc.* 07/15/10 11.250 5,071,500
- -----------------------------------------------------------------------------------
2,000 Friendly Ice Cream Corp.*+ 06/15/12 8.375 1,770,000
- -----------------------------------------------------------------------------------
3,725 Restaurant Co.*+ 10/01/13 10.000 3,454,938
- -----------------------------------------------------------------------------------
5,160 Sbarro, Inc.* 09/15/09 11.000 5,211,600
- -----------------------------------------------------------------------------------
2,000 UNO Restaurants
Holdings Corp.*+ 02/15/11 10.000 1,610,000
- -----------------------------------------------------------------------------------
4,500 VICORP Restaurants, Inc.* 04/15/11 10.500 4,230,000
- -----------------------------------------------------------------------------------
21,348,038
===================================================================================
- --------------------------------------------------------------------------------
11
MANAGED HIGH YIELD PLUS FUND INC.
PORTFOLIO OF INVESTMENTS -- MAY 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- -----------------------------------------------------------------------------------
CORPORATE BONDS--(CONCLUDED)
- -----------------------------------------------------------------------------------
SOFTWARE/SERVICES--4.74%
$1,000 Serena Software, Inc.*+ 03/15/16 10.375% $1,045,000
- -----------------------------------------------------------------------------------
4,000 SS&C Technologies, Inc.*+ 12/01/13 11.750 4,250,000
- -----------------------------------------------------------------------------------
5,000 Sungard Data Systems, Inc.*+ 08/15/15 10.250 5,225,000
- -----------------------------------------------------------------------------------
3,500 Unisys Corp.* 10/15/15 8.500 3,272,500
- -----------------------------------------------------------------------------------
13,792,500
===================================================================================
STEEL PRODUCERS/PRODUCTS--0.60%
1,750 Edgen Acquisition Corp.*+ 02/01/11 9.875 1,758,750
===================================================================================
SUPPORT-SERVICES--6.72%
2,750 Ahern Rentals, Inc.*+ 08/15/13 9.250 2,825,625
- -----------------------------------------------------------------------------------
3,000 Brickman Group Ltd., Series B* 12/15/09 11.750 3,247,500
- -----------------------------------------------------------------------------------
4,000 Hertz Corp.*+ 01/01/16 10.500 4,330,000
- -----------------------------------------------------------------------------------
3,500 HydroChem Industrial
Services, Inc.*+ 02/15/13 9.250 3,482,500
- -----------------------------------------------------------------------------------
1,000 Ipayment, Inc.*+ 05/15/14 9.750 1,002,500
- -----------------------------------------------------------------------------------
1,000 Monitronics International, Inc.* 09/01/10 11.750 990,000
- -----------------------------------------------------------------------------------
3,500 Sunstate Equipment Co.*+ 04/01/13 10.500 3,701,250
- -----------------------------------------------------------------------------------
19,579,375
===================================================================================
TELECOM-FIXED LINE--1.04%
3,000 Level 3 Communications, Inc.*+ 03/01/10 11.500 3,015,000
===================================================================================
TELECOM-WIRELESS--7.97%
3,608 Alamosa Delaware, Inc.* 07/31/10 11.000 3,977,820
- -----------------------------------------------------------------------------------
6,000 American Cellular Corp., Series B* 08/01/11 10.000 6,442,500
- -----------------------------------------------------------------------------------
1,007 Centennial Cellular
Operating Co. LLC* 12/15/08 10.750 1,017,070
- -----------------------------------------------------------------------------------
3,000 Centennial Communications Corp.* 06/15/13 10.125 3,232,500
- -----------------------------------------------------------------------------------
2,000 Horizon PCS, Inc.*+ 07/15/12 11.375 2,270,000
- -----------------------------------------------------------------------------------
1,750 US Unwired, Inc., Series B* 06/15/12 10.000 1,953,437
- -----------------------------------------------------------------------------------
4,000 Wind Acquisition Finance SA*+ 12/01/15 10.750 4,310,000
- -----------------------------------------------------------------------------------
23,203,327
===================================================================================
THEATERS & ENTERTAINMENT--0.36%
1,000 Imax Corp.* 12/01/10 9.625 1,045,000
- -----------------------------------------------------------------------------------
Total Corporate Bonds (cost--$421,096,841) 419,456,598
===================================================================================
- --------------------------------------------------------------------------------
12
MANAGED HIGH YIELD PLUS FUND INC.
PORTFOLIO OF INVESTMENTS -- MAY 31, 2006
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------
COMMON STOCKS(a)--0.01%
- -----------------------------------------------------------------------------------
OIL REFINING & MARKETING--0.00%
1,253 Orion Refining Corp.#(b) $0
===================================================================================
RESTAURANTS--0.00%
129 American Restaurant Group, Inc.#(b) 0
===================================================================================
SUPPORT-SERVICES--0.00%
5,456 NCI Holdings, Inc.#(b) 0
===================================================================================
TELECOM-INTEGRATED/SERVICES--0.00%
929 XO Holdings, Inc. 4,859
===================================================================================
TELECOM-WIRELESS--0.01%
636 American Tower Corp., Class A* 19,697
===================================================================================
Total Common Stocks (cost--$2,716,866) 24,556
===================================================================================
PREFERRED STOCK(a)--0.00%
- -----------------------------------------------------------------------------------
MEDIA-BROADCAST--0.00%
20,000 Adelphia Communications Corp.,
Series B (cost--$2,042,500) 5,000
===================================================================================
NUMBER OF
WARRANTS
- -----------------------------------------------------------------------------------
WARRANTS(a)--0.27%
- -----------------------------------------------------------------------------------
BUILDING MATERIALS--0.00%
2,500 Dayton Superior Corp., strike @ $0.01,
expires 06/15/09#(b)(1) 0
===================================================================================
COMPUTER HARDWARE--0.00%
- -----------------------------------------------------------------------------------
3,000 Knology Holdings, Inc., strike @ $0.10,
expires 10/22/07#(b)(1) 0
===================================================================================
OIL FIELD EQUIPMENT & SERVICES--0.27%
- -----------------------------------------------------------------------------------
4,500 Key Energy Services, Inc., strike @ $4.88,
expires 01/15/09* 783,000
===================================================================================
TELECOM-INTEGRATED/SERVICES--0.00%
- -----------------------------------------------------------------------------------
4,950 Pathnet, Inc., strike @ $0.01,
expires 04/15/08#(b) 0
- -----------------------------------------------------------------------------------
1,859 XO Holdings, Inc., Series A, strike
@ $6.25, expires 01/16/10 1,803
- -----------------------------------------------------------------------------------
1,394 XO Holdings, Inc., Series B, strike
@ $7.50, expires 01/16/10 906
- -----------------------------------------------------------------------------------
1,394 XO Holdings, Inc., Series C, strike
@ $10.00, expires 01/16/10 530
- -----------------------------------------------------------------------------------
3,239
- -----------------------------------------------------------------------------------
Total Warrants (cost--$51,560) 786,239
===================================================================================
- --------------------------------------------------------------------------------
13
MANAGED HIGH YIELD PLUS FUND INC.
PORTFOLIO OF INVESTMENTS -- MAY 31, 2006
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE VALUE
- -----------------------------------------------------------------------------------
REPURCHASE AGREEMENT--0.17%
- -----------------------------------------------------------------------------------
$486 Repurchase Agreement dated
05/31/06 with State Street
Bank & Trust Co., collateralized
by $250,670 US Treasury Bills,
zero coupon due 08/24/06
and $250,328 US Treasury
Notes, 2.625% due 11/15/06
(value--$495,725); proceeds:
$486,061 (cost--$486,000) 06/01/06 4.500% $486,000
===================================================================================
Total Investments (cost--$426,393,767)--144.50% 420,758,393
- -----------------------------------------------------------------------------------
Liabilities in excess of other assets--(44.50)% (129,583,586)
===================================================================================
Net Assets--100.00% $291,174,807
===================================================================================
* Entire or partial amount pledged as collateral for bank loan.
# Illiquid securities representing 0.63% of net assets.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities, which represent 48.82% of net assets as of
May 31, 2006, are considered liquid and may be resold in transactions
exempt from registration, normally to qualified institutional buyers.
++ Floating rate securities. The interest rates shown are the current rates
as of May 31, 2006.
(a) Non-income producing securities.
(b) Security is being fair valued by a valuation committee under the
direction of the Board of Directors.
(1) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities, which represent 0.00% of net assets as of May
31, 2006, are considered illiquid and restricted. (See table below for
more information.)
ACQUISITION MARKET
COST AS A VALUE AS A
ACQUISITION ACQUISITION PERCENTAGE OF MARKET PERCENTAGE OF
RESTRICTED SECURITIES DATE(S) COST NET ASSETS VALUE NET ASSETS
- -------------------------------------------------------------------------------------------
Dayton Superior
Corp., warrants,
expiring 06/15/09 06/09/00 $46,550 0.02% $0 0.00%
- -------------------------------------------------------------------------------------------
Knology Holdings,
Inc., warrants, 06/08/98,
expiring 10/22/07 04/26/00 5,000 0.00 0 0.00
- -------------------------------------------------------------------------------------------
$51,550 0.02% $0 0.00%
===========================================================================================
- --------------------------------------------------------------------------------
14
MANAGED HIGH YIELD PLUS FUND INC.
PORTFOLIO OF INVESTMENTS -- MAY 31, 2006
ISSUER BREAKDOWN BY COUNTRY (UNAUDITED)
PERCENTAGE OF PORTFOLIO ASSETS
- -------------------------------------------------------------------------------
United States 92.4%
- -------------------------------------------------------------------------------
Canada 3.2
- -------------------------------------------------------------------------------
Cayman Islands 1.3
- -------------------------------------------------------------------------------
United Kingdom 1.1
- -------------------------------------------------------------------------------
Luxembourg 1.0
- -------------------------------------------------------------------------------
France 1.0
- -------------------------------------------------------------------------------
Total 100.0%
===============================================================================
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
15
MANAGED HIGH YIELD PLUS FUND INC.
STATEMENT OF ASSETS AND LIABILITIES -- MAY 31, 2006
ASSETS:
Investments in securities, at value (cost-$426,393,767) $420,758,393
- ----------------------------------------------------------------------------------
Cash 51,619
- ----------------------------------------------------------------------------------
Receivable for interest 12,182,178
- ----------------------------------------------------------------------------------
Other assets 22,073
- ----------------------------------------------------------------------------------
Total assets 433,014,263
==================================================================================
LIABILITIES:
Payable for bank loan 140,750,000
- ----------------------------------------------------------------------------------
Payable for interest on bank loan 649,618
- ----------------------------------------------------------------------------------
Payable to investment manager and administrator 257,836
- ----------------------------------------------------------------------------------
Accrued expenses and other liabilities 182,002
- ----------------------------------------------------------------------------------
Total liabilities 141,839,456
==================================================================================
NET ASSETS:
Capital Stock-$0.001 par value; 200,000,000 shares authorized;
60,440,767 shares issued and outstanding 684,676,952
- ----------------------------------------------------------------------------------
Accumulated undistributed net investment income 539,679
- ----------------------------------------------------------------------------------
Accumulated net realized loss from investment activities (388,406,450)
- ----------------------------------------------------------------------------------
Net unrealized depreciation of investments (5,635,374)
- ----------------------------------------------------------------------------------
Net assets $291,174,807
==================================================================================
Net asset value per share $4.82
==================================================================================
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
16
MANAGED HIGH YIELD PLUS FUND INC.
STATEMENT OF OPERATIONS
For the
Year Ended
May 31, 2006
- ---------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $44,297,296
- ---------------------------------------------------------------------------------------
EXPENSES:
Interest expense, loan commitment and other fees 6,330,427
- ---------------------------------------------------------------------------------------
Investment management and administration fees 3,021,074
- ---------------------------------------------------------------------------------------
Custody and accounting fees 160,901
- ---------------------------------------------------------------------------------------
Reports and notices to shareholders 138,075
- ---------------------------------------------------------------------------------------
Professional fees 130,152
- ---------------------------------------------------------------------------------------
Stock exchange listing fees 82,708
- ---------------------------------------------------------------------------------------
Transfer agency fees 33,034
- ---------------------------------------------------------------------------------------
Directors' fees 20,640
- ---------------------------------------------------------------------------------------
Insurance fees 11,957
- ---------------------------------------------------------------------------------------
Other expenses 20,581
- ---------------------------------------------------------------------------------------
9,949,549
- ---------------------------------------------------------------------------------------
Net investment income 34,347,747
- ---------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT ACTIVITIES:
Net realized loss from investment activities (20,646,706)
- ---------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of investments 17,105,929
- ---------------------------------------------------------------------------------------
Net realized and unrealized loss from investment activities (3,540,777)
- ---------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $30,806,970
=======================================================================================
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
17
MANAGED HIGH YIELD PLUS FUND INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended May 31,
-------------------------------
2006 2005
- ----------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $34,347,747 $28,686,224
- ----------------------------------------------------------------------------------------------
Net realized losses from investment activities (20,646,706) (29,749,928)
- ----------------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of
investments 17,105,929 16,072,749
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 30,806,970 15,009,045
==============================================================================================
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (34,021,749) (30,359,816)
==============================================================================================
CAPITAL STOCK TRANSACTIONS:
Proceeds from shares issued through rights offering
during the year ended May 31, 2005 (net of offering
costs of $448,053) -- 88,815,162
- ----------------------------------------------------------------------------------------------
Proceeds from shares issued through dividends reinvested 2,399,234 4,101,228
- ----------------------------------------------------------------------------------------------
Net increase in net assets from capital stock transactions 2,399,234 92,916,390
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (815,545) 77,565,619
==============================================================================================
NET ASSETS:
Beginning of year 291,990,352 214,424,733
- ----------------------------------------------------------------------------------------------
End of year $291,174,807 $291,990,352
==============================================================================================
Accumulated undistributed net investment income $539,679 $213,681
==============================================================================================
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
18
MANAGED HIGH YIELD PLUS FUND INC.
STATEMENT OF CASH FLOWS
For the
Year Ended
May 31, 2006
- ----------------------------------------------------------------------------------
CASH FLOWS PROVIDED FROM (USED FOR) OPERATING ACTIVITIES:
Interest and dividends received $46,067,860
- ----------------------------------------------------------------------------------
Operating expenses paid (3,547,924)
- ----------------------------------------------------------------------------------
Interest paid (6,102,391)
- ----------------------------------------------------------------------------------
Sale of short-term portfolio investments, net 300,000
- ----------------------------------------------------------------------------------
Purchase of long-term portfolio investments (174,183,022)
- ----------------------------------------------------------------------------------
Sale of long-term portfolio investments 168,034,685
==================================================================================
Net cash provided from operating activities 30,569,208
==================================================================================
CASH FLOWS PROVIDED FROM (USED FOR) FINANCING ACTIVITIES:
Dividends paid to shareholders (31,622,515)
- ----------------------------------------------------------------------------------
Increase in bank loan 250,000
- ----------------------------------------------------------------------------------
Net cash used for financing activities (31,372,515)
==================================================================================
Net decrease in cash (803,307)
==================================================================================
Cash at beginning of year 854,926
==================================================================================
Cash at end of year $51,619
==================================================================================
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH PROVIDED FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $30,806,970
- ----------------------------------------------------------------------------------
Increase in investments, at value (404,189)
- ----------------------------------------------------------------------------------
Decrease in receivable for investments sold 1,531,986
- ----------------------------------------------------------------------------------
Decrease in receivable for interest 426,290
- ----------------------------------------------------------------------------------
Decrease in other assets 25,394
- ----------------------------------------------------------------------------------
Decrease in payable for investments purchased (2,091,083)
- ----------------------------------------------------------------------------------
Increase in payable for interest on bank loan 228,036
- ----------------------------------------------------------------------------------
Increase in payable to investment manager and administrator 395
- ----------------------------------------------------------------------------------
Increase in accrued expenses and other liabilities 45,409
==================================================================================
Net cash provided from operating activities $30,569,208
==================================================================================
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
19
MANAGED HIGH YIELD PLUS FUND INC.
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Managed High Yield Plus Fund Inc. (the "Fund") was incorporated in Maryland on
April 24, 1998, and is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, as amended ("1940 Act"), as a
closed-end diversified management investment company. The Fund's primary
investment objective is to seek high income. Its secondary objective is to seek
capital appreciation.
In the normal course of business the Fund may enter into contracts that contain
a variety of representations or that provide indemnification for certain
liabilities. The Fund's maximum exposure under these arrangements is unknown, as
this would involve future claims that may be made against the Fund that have not
yet occurred. However, the Fund has not had prior claims or losses pursuant to
these contracts and expects the risk of loss to be remote.
The preparation of financial statements in accordance with US generally accepted
accounting principles requires the Fund's management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is
a summary of significant accounting policies:
VALUATION OF INVESTMENTS--The Fund calculates its net asset value based on the
current market value, where available, for its portfolio securities. The Fund
normally obtains market values for its securities from independent pricing
sources and broker-dealers. Independent pricing sources may use last reported
sale prices, current market quotations or valuations from computerized "matrix"
systems that derive values based on comparable securities. A matrix system
incorporates parameters such as security quality, maturity and coupon, and/or
research and evaluations by its staff, including review of broker-dealer market
price quotations, if available, in determining the valuation of the portfolio
securities. Securities traded in the over-the-counter ("OTC") market and listed
on The Nasdaq Stock Market, Inc. ("Nasdaq") normally are valued at the NASDAQ
Official Closing Price. Other OTC securities are valued at the last bid price
available on the valuation date prior to valuation. Securities which are listed
on US and foreign stock exchanges normally are valued at the last sale price on
the day the securities are valued or, lacking any sales on such day, at the last
available bid price. In cases where securities are traded on more than one
exchange, the securities are valued on the exchange designated as the primary
market by UBS Global Asset Management (Americas) Inc., the investment manager
and administrator of the Fund. If a market value is not available from an
independent pricing
- --------------------------------------------------------------------------------
20
MANAGED HIGH YIELD PLUS FUND INC.
NOTES TO FINANCIAL STATEMENTS
source for a particular security, that security is valued at fair value as
determined in good faith by or under the direction of the Fund's Board of
Directors (the "Board"). Various factors may be reviewed in order to make a good
faith determination of a security's fair value. These factors include, but are
not limited to, the type and cost of the security; contractual or legal
restrictions on resale of the security; relevant financial or business
developments of the issuer; actively traded similar or related securities;
conversion or exchange rights on the security; related corporate actions; and
changes in overall market conditions. If events occur that materially affect the
value of securities (particularly non-US securities) between the close of
trading in those securities and the close of regular trading on the New York
Stock Exchange ("NYSE"), the securities are fair valued. The amortized cost
method of valuation, which approximates market value, generally is used to value
short-term debt instruments with sixty days or less remaining to maturity,
unless the Board determines that this does not represent fair value. All
investments quoted in foreign currencies will be valued daily in US dollars on
the basis of the foreign currency exchange rates prevailing at the time such
valuation is determined by the Fund's custodian.
REPURCHASE AGREEMENTS--The Fund may purchase securities or other obligations
from a bank or securities dealer (or its affiliate), subject to the seller's
agreement to repurchase them at an agreed upon date (or upon demand) and price.
The Fund maintains custody of the underlying obligations prior to their
repurchase, either through its regular custodian or through a special
"tri-party" custodian or sub-custodian that maintains a separate account for
both the Fund and its counterparty. The underlying collateral is valued daily to
ensure that the value, including accrued interest, is at least equal to the
repurchase price. In the event of default of the obligation to repurchase, the
Fund generally has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. Repurchase agreements involving obligations
other than US government securities (such as commercial paper, corporate bonds
and mortgage loans) may be subject to special risks and may not have the benefit
of certain protections in the event of counterparty insolvency. If the seller
(or seller's guarantor, if any) becomes insolvent, the Fund may suffer delays,
costs and possible losses in connection with the disposition or retention of the
collateral. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. The Fund may participate in
joint repurchase agreement transactions with other funds managed, advised or
sub-advised by UBS Global Asset Management (Americas) Inc.
- --------------------------------------------------------------------------------
21
MANAGED HIGH YIELD PLUS FUND INC.
NOTES TO FINANCIAL STATEMENTS
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions are calculated using the identified cost method. Interest income is
recorded on an accrual basis. Dividend income is recorded on the ex-dividend
date ("ex-date"). Discounts are accreted and premiums are amortized as
adjustments to interest income and the identified cost of investments.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders are
recorded on the ex-date. The amount of dividends and distributions is determined
in accordance with federal income tax regulations, which may differ from US
generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification.
CONCENTRATION OF RISK
The ability of the issuers of the debt securities held by the Fund to meet their
obligations may be affected by economic developments, including those particular
to a specific industry, country or region. In addition, the Fund's use of
leverage creates greater volatility in the Fund's net asset value and market
price of its shares.
INVESTMENT MANAGER AND ADMINISTRATOR
UBS Global Asset Management (US) Inc. ("UBS Global AM--US") served as the Fund's
investment manager and administrator from May 1, 2005, until April 1, 2006. On
April 1, 2006, the Fund's Investment Management Contract ("Management Contract")
was transferred from UBS Global AM--US to UBS Global Asset Management (Americas)
Inc. ("UBS Global AM--Americas").
The transfer of the Management Contract between sister companies occurred in
connection with an internal reorganization involving UBS Global AM--US and UBS
Global AM--Americas. The Fund's Board of Directors approved the transfer of the
Management Contract effective April 1, 2006. All of the personnel of UBS Global
AM--US who previously provided investment management services to the Fund
continue to provide investment management services to the Fund as employees of
UBS Global AM--Americas. UBS Global AM--Americas has the same contractual
rights and responsibilities under the Management Contract as those previously
held by UBS Global AM--US. UBS Global AM--US and UBS Global AM--Americas are
both indirect wholly owned subsidiaries of UBS AG.
- --------------------------------------------------------------------------------
22
MANAGED HIGH YIELD PLUS FUND INC.
NOTES TO FINANCIAL STATEMENTS
In accordance with the Management Contract, the Fund paid UBS Global
AM--Americas (or UBS Global AM--US for periods prior to April 1, 2006) an
investment management and administration fee, which was accrued weekly and paid
monthly, at the annual rate of 0.70% of the Fund's average weekly total assets
minus liabilities other than the aggregate indebtedness constituting leverage.
ADDITIONAL INFORMATION REGARDING COMPENSATION TO AFFILIATE OF A BOARD MEMBER
Effective March 1, 2005, Professor Meyer Feldberg accepted the position of
senior advisor to Morgan Stanley, resulting in him becoming an interested
director of the Fund. The Fund has been informed that Professor Feldberg's role
at Morgan Stanley does not involve matters directly affecting any UBS funds.
Portfolio transactions are executed through Morgan Stanley based on that firm's
ability to provide best execution of the transactions. During the year ended May
31, 2006, the Fund purchased and sold certain securities (e.g., fixed income
securities) in principal trades with Morgan Stanley having an aggregate value of
$28,644,855. Morgan Stanley received compensation in connection with these
trades, which may have been in the form of a "mark-up" or "mark-down" of the
price of the securities, a fee from the issuer for maintaining a commercial
paper program or some other form of compensation. Although the precise amount of
this compensation is not generally known by UBS Global AM, UBS Global AM
believes that under normal circumstances it represents a small portion of the
total value of the transactions.
BORROWINGS
The Fund has a $175 million committed credit facility (the "Facility"). Under
the terms of the Facility, the Fund borrows at prevailing commercial paper rates
in effect at the time of borrowing plus facility and administrative fees. In
addition, the Fund pays a liquidity fee on the entire amount of the Facility.
The Fund may borrow up to 331/3% of its total assets up to the committed amount.
In accordance with the terms of the Facility, the Fund has pledged assets in the
amount of $406,838,697 on May 31, 2006 as collateral for the bank loan.
For the year ended May 31, 2006, the Fund borrowed a daily average balance of
$139,169,863 at a weighted average borrowing cost of approximately 4.55%.
- --------------------------------------------------------------------------------
23
MANAGED HIGH YIELD PLUS FUND INC.
NOTES TO FINANCIAL STATEMENTS
PURCHASES AND SALES OF SECURITIES
For the year ended May 31, 2006, aggregate purchases and sales of portfolio
securities, excluding short-term securities, were $172,091,939 and $166,467,022,
respectively.
FEDERAL TAX STATUS
The Fund intends to distribute substantially all of its income and to comply
with the other requirements of the Internal Revenue Code applicable to regulated
investment companies. Accordingly, no provision for federal income taxes is
required. In addition, by distributing during each calendar year substantially
all of its net investment income, net realized capital gains and certain other
amounts, if any, the Fund intends not to be subject to a federal excise tax.
The tax character of distributions paid during the fiscal years ended May 31,
2006 and May 31, 2005, were as follows:
DISTRIBUTIONS PAID FROM: 2006 2005
- -----------------------------------------------------------------------------------
Ordinary Income $34,021,749 $30,359,816
===================================================================================
At May 31, 2006, the components of accumulated deficit on a tax basis were as
follows:
Undistributed ordinary income $539,679
- -----------------------------------------------------------------------------------
Accumulated realized capital and other losses (388,406,450)
- -----------------------------------------------------------------------------------
Net unrealized depreciation of investments (5,635,374)
- -----------------------------------------------------------------------------------
Total accumulated deficit $(393,502,145)
===================================================================================
At May 31, 2006, the Fund had a net capital loss carryover of $373,150,238.
This loss carryforward is available as a reduction, to the extent provided in
the regulations, of future net realized capital gains, and will expire as
follows: $13,100,516 in 2007; $50,099,935 in 2008; $71,221,921 in 2009;
$71,854,329 in 2010; $95,911,016 in 2011; $27,212,620 in 2012; $13,297,624 in
2013; and $30,452,277 in 2014. To the extent that such losses are used to offset
future net realized capital gains, it is probable these gains will not be
distributed. Also, in accordance with US Treasury regulations, the Fund has
elected to defer $15,256,212 of net realized capital losses arising after
October 31, 2005. Such losses are treated for tax purposes as arising
on June 1, 2006.
- --------------------------------------------------------------------------------
24
MANAGED HIGH YIELD PLUS FUND INC.
NOTES TO FINANCIAL STATEMENTS
For federal income tax purposes, the tax cost of investments and the components
of net unrealized depreciation of investments at May 31, 2006 were as follows:
Tax cost of investments $426,393,767
- -----------------------------------------------------------------------------------------
Gross unrealized appreciation (from investments having an excess
of value over cost) 9,435,331
- -----------------------------------------------------------------------------------------
Gross unrealized depreciation (from investments having an excess
of cost over value) (15,070,705)
- -----------------------------------------------------------------------------------------
Net unrealized depreciation $(5,635,374)
=========================================================================================
RIGHTS OFFERING
During the year ended May 31, 2005, the Fund issued 16,499,670 shares in
connection with a rights offering of the Fund's common stock. Shareholders of
record on January 31, 2005, were issued one non-transferable right for each
share of common stock owned, entitling shareholders the opportunity to acquire
one newly issued share of common stock for every three rights held. The rights
offering commenced on January 31, 2005 and expired on February 28, 2005. The
subscription price per share was the greater of (i) the net asset value ("NAV")
per share on February 28, 2005 (the "expiration date") or (ii) 95% of the volume
weighted average share price of a share on the New York Stock Exchange on the
expiration date and the four preceding business days. The subscription price of
the offer was $5.41 per share, which was greater than the NAV per share of $5.37
on the expiration date. Offering costs attributed to the rights offering in the
amount of $448,053 were charged against additional paid-in-capital.
CAPITAL STOCK
There are 200,000,000 shares of $0.001 par value capital stock authorized and
60,440,767 shares outstanding at May 31, 2006. Transactions in shares of common
stock were as follows:
SHARES AMOUNT
=============================================================================================
FOR THE YEAR ENDED MAY 31, 2006:
Shares issued through Dividend Reinvestment Plan 493,670 $2,399,234
- ---------------------------------------------------------------------------------------------
FOR THE YEAR ENDED MAY 31, 2005:
Shares issued through Dividend Reinvestment Plan 760,466 $4,101,228
- ---------------------------------------------------------------------------------------------
Shares issued through rights offering 16,499,670 89,263,215
- ---------------------------------------------------------------------------------------------
Net increase 17,260,136 $93,364,443
=============================================================================================
- --------------------------------------------------------------------------------
25
MANAGED HIGH YIELD PLUS FUND INC.
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding throughout each year is
presented below:
For the Years Ended May 31,
------------------------------------------------------------------
2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF YEAR $4.87 $5.02 $4.75 $4.98 $6.99
- ---------------------------------------------------------------------------------------------------------------
Net investment income 0.57 0.61 0.65 0.66 0.96
- ---------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gains (losses) from
investment activities (0.05) (0.11) 0.23 (0.23) (1.99)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease)
from operations 0.52 0.50 0.88 0.43 (1.03)
- ---------------------------------------------------------------------------------------------------------------
Dividends from net
investment income (0.57) (0.65) (0.61) (0.66) (0.98)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $4.82 $4.87 $5.02 $4.75 $4.98
- ---------------------------------------------------------------------------------------------------------------
MARKET VALUE, END OF YEAR $4.78 $5.10 $5.42 $5.04 $5.64
- ---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN(1) 5.26% 5.99% 20.92% 3.85% (13.22)%
- ---------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $291,175 $291,990 $214,425 $198,229 $200,844
- ---------------------------------------------------------------------------------------------------------------
Expenses to average net assets,
including interest expense 3.41% 2.37% 1.82% 2.20% 2.58%
- ---------------------------------------------------------------------------------------------------------------
Expenses to average net assets,
excluding interest expense 1.24% 1.22% 1.16% 1.23% 1.18%
- ---------------------------------------------------------------------------------------------------------------
Net investment income to
average net assets 11.76% 11.89% 12.92% 15.03% 17.22%
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 40% 44% 53% 37% 40%
- ---------------------------------------------------------------------------------------------------------------
Asset coverage++ $3,069 $3,078 $3,430 $3,550 $3,131
===============================================================================================================
(1) Total investment return is calculated assuming a $10,000 purchase of common
stock at the current market price on the first day of each year reported
and a sale at the current market price on the last day of each year
reported, and assuming reinvestment of dividends at prices obtained under
the Fund's Dividend Reinvestment Plan. Total investment return does not
reflect brokerage commissions. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the sale of
Fund shares.
++ Per $1,000 of bank loans outstanding.
- --------------------------------------------------------------------------------
26
MANAGED HIGH YIELD PLUS FUND INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ERNST & YOUNG LLP
The Board of Directors and Shareholders
Managed High Yield Plus Fund Inc.
We have audited the accompanying statement of assets and liabilities of Managed
High Yield Plus Fund Inc. (the "Fund"), including the portfolio of investments,
as of May 31, 2006, and the related statements of operations and cash flows for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with 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. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of May 31, 2006, by correspondence with the custodian and
brokers. 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
Managed High Yield Plus Fund Inc. at May 31, 2006, the results of its operations
and its cash flows for the year then ended, 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 five years in the period then ended, in conformity with US generally
accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
July 13, 2006
- --------------------------------------------------------------------------------
27
MANAGED HIGH YIELD PLUS FUND INC.
GENERAL INFORMATION (UNAUDITED)
THE FUND
Managed High Yield Plus Fund Inc. (the "Fund") is a diversified, closed-end
management investment company whose shares trade on the New York Stock Exchange
("NYSE"). The Fund's primary investment objective is to seek high income. Its
secondary objective is to seek capital appreciation. The Fund's NYSE trading
symbol is "HYF". Comparative net asset value and market price information about
the Fund is available weekly in various publications. Effective April 1, 2006,
the Fund's investment advisor and administrator is UBS Global Asset Management
(Americas) Inc. ("UBS Global AM--Americas"), an indirect wholly owned asset
management subsidiary of UBS AG.
Marianne Rossi recently announced plans to leave UBS Global AM-- Americas in
October. UBS Global AM--America's high yield investment team is relocating to
Chicago, and Ms. Rossi has decided to remain in New York City. Ms. Rossi had
served as the portfolio manager of the Fund for many years and will be missed.
Shu-Yang Tan took over as the portfolio manager for the Fund on an interim basis
in late July 2006. Mr. Tan had served as a senior analyst on the high yield
fixed income team, assisting Ms. Rossi in managing the Fund. Mr. Tan joined UBS
Global Asset Management in 1995.
SHAREHOLDER MEETING INFORMATION
A special meeting of shareholders of the Fund was held on February 3, 2006. At
the meeting, Richard Q. Armstrong, David J. Beaubien, Alan S. Bernikow, Richard
R. Burt, Meyer Feldberg, Bernard H. Garil and Heather R. Higgins were elected to
serve as board members until the next annual meeting of shareholders or until
their successors are duly elected and qualified or until they retire, resign or
are earlier removed. The shares were voted as indicated below:
SHARES
TO VOTE FOR OR WITHHOLD AUTHORITY SHARES VOTED WITHHOLD
IN THE ELECTION OF: FOR AUTHORITY
- ----------------------------------------------------------------------------------
Richard Q. Armstrong 52,660,846.341 1,154,156.142
- ----------------------------------------------------------------------------------
David J. Beaubien 52,654,050.341 1,160,952.142
- ----------------------------------------------------------------------------------
Richard R. Burt 52,661,872.341 1,153,130.142
- ----------------------------------------------------------------------------------
Meyer Feldberg 52,667,589.341 1,147,413.142
- ----------------------------------------------------------------------------------
Alan S. Bernikow 52,632,010.341 1,182,992.142
- ----------------------------------------------------------------------------------
Bernard H. Garil 52,672,960.341 1,142,042.142
- ----------------------------------------------------------------------------------
Heather R. Higgins 52,633,744.341 1,181,258.142
- ----------------------------------------------------------------------------------
To the best of the Fund's knowledge, there were no "broker non-votes." (Broker
non-votes are shares held in street name for which the broker
- --------------------------------------------------------------------------------
28
MANAGED HIGH YIELD PLUS FUND INC.
GENERAL INFORMATION (UNAUDITED)
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and for which the broker does not have
discretionary voting authority.)
PROXY VOTING POLICIES, PROCEDURES AND RECORD
You may obtain a description of the Fund's (1) proxy voting policies, (2) proxy
voting procedures and (3) information regarding how the Fund voted any proxies
related to portfolio securities during the 12-month period ended June 30, 2005,
without charge, upon request by contacting the Fund directly at 1-800-647 1568,
online on the Fund's Web site: www.ubs.com/ubsglobalam-proxy, or on the EDGAR
Database on the SEC's Web site (http://www.sec.gov).
QUARTERLY FORM N-Q PORTFOLIO SCHEDULE
The Fund will file its complete schedule of portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third quarters of
each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the SEC's
Web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied
at the SEC's Public Reference Room in Washington, D.C. Information on the
operation of the SEC's Public Reference Room may be obtained by calling
1-800-SEC 0330. Additionally, you may obtain copies of Forms N-Q from the Fund
upon request by calling 1-800-647 1568.
DIVIDEND REINVESTMENT PLAN
The Fund's Board has established a Dividend Reinvestment Plan (the "Plan")
under which all shareholders whose shares are registered in their own names, or
in the name of UBS Financial Services Inc., or its nominee, will have all
dividends and other distributions on their shares automatically reinvested in
additional shares, unless such shareholders elect to receive cash. Shareholders
who elect to hold their shares in the name of another broker or nominee should
contact such broker or nominee to determine whether, or how, they may
participate in the Plan. The ability of such shareholders to participate in the
Plan may change if their shares are transferred into the name of another broker
or nominee.
A shareholder may elect not to participate in the Plan or may terminate
participation in the Plan at any time without penalty, and shareholders who have
previously terminated participation in the Plan may rejoin it at any time.
Changes in elections must be made in writing to the Fund's transfer agent and
should include the shareholder's name and address as they appear on that share
certificate or in the transfer agent's records. An election to terminate
participation in the Plan, until such election is changed, will be
- --------------------------------------------------------------------------------
29
MANAGED HIGH YIELD PLUS FUND INC.
GENERAL INFORMATION (UNAUDITED)
deemed an election by a shareholder to take all subsequent distributions in
cash. An election will be effective only for distributions declared and having a
record date at least ten days after the date on which the election is received.
The transfer agent will serve as agent for the shareholders in administering the
Plan. After the Fund declares a dividend or determines to make any other
distribution, the transfer agent, as agent for the participants, receives the
cash payment. Whenever the Fund declares an income dividend or a capital gain
distribution (collectively referred to in this section as "dividends") payable
either in shares or in cash, non-participants in the Plan will receive cash and
participants in the Plan will receive the equivalent in shares. The transfer
agent will acquire shares for the participants' accounts, depending upon the
circumstances described below, either (i) through receipt of unissued but
authorized shares from the Fund ("newly issued shares") or (ii) by purchase of
outstanding shares on the open market, on the NYSE or elsewhere ("open-market
purchases"). If, on the dividend payment date, the net asset value per share is
equal to or less than the market price per share, plus estimated brokerage
commissions (such condition being referred to herein as "market premium"), the
transfer agent will invest the dividend amount in newly issued shares on behalf
of the participants. The number of newly issued shares to be credited to each
participant's account will be determined by dividing the dollar amount of the
dividend by the net asset value per share (but in no event less than 95% of the
then current market price per share) on the date the shares were issued. If, on
the dividend payment date, the net asset value per share is greater than the
market value per share, plus estimated brokerage commissions (such condition
being referred to herein as "market discount"), the transfer agent will invest
the dividend amount in shares acquired on behalf of the participants in
open-market purchases. The number of outstanding shares purchased with each
distribution for a particular shareholder equals the result obtained by dividing
the amount of the distribution payable to that shareholder by the average price
per share (including applicable brokerage commissions) that the transfer agent
was able to obtain in the open market.
In the event of a market discount on the dividend payment date, the transfer
agent will have until the last business day before the next date on which the
shares trade on an "ex-dividend" basis, but in no event more than 30 days
after the dividend payment date (the "last purchase date"), to invest the
dividend amount in shares acquired in open-market purchases. It is contemplated
that the Fund will pay monthly income dividends. Therefore, the period during
which open-market purchases can be made will exist only from the payment date of
the dividend through the date before the next
- --------------------------------------------------------------------------------
30
MANAGED HIGH YIELD PLUS FUND INC.
GENERAL INFORMATION (UNAUDITED)
"ex-dividend" date, which typically will be approximately ten business days.
If, before the transfer agent has completed its open-market purchases, the
market price of a share, plus estimated brokerage commissions, exceeds the net
asset value per share, the average per share purchase price paid by the transfer
agent may exceed the Fund's net asset value per share, resulting in the
acquisition of fewer shares than if the dividend had been paid in newly issued
shares on the dividend payment date. Because of the foregoing difficulty with
respect to open-market purchases, the Plan provides that, if the transfer agent
is unable to invest the full dividend amount in open-market purchases during the
purchase period or if the market discount shifts to a market premium during the
purchase period, the transfer agent will cease making open-market purchases and
will invest the uninvested portion of the dividend amount in newly issued shares
at the close of business on the earlier of the last purchase date or the first
day during the purchase period on which the net asset value per share equals or
is less than the market price per share, plus estimated brokerage commissions.
The transfer agent will maintain all shareholder accounts in the Plan and will
furnish written confirmations of all transactions in the accounts, including
information needed by shareholders for personal and tax records. Shares in the
account of each Plan participant will be held by the transfer agent in
non-certificated form in the name of the participant, and each shareholder's
proxy will include those shares purchased pursuant to the Plan. There will be no
charge to participants for reinvesting dividends. However, each participant will
pay a pro rata share of brokerage commissions incurred with respect to the
transfer agent's open market purchases of shares in connection with the
reinvestment of dividends. The automatic reinvestment of dividends in shares
does not relieve participants of any income tax that may be payable on such
dividends.
Shareholders who participate in the Plan may receive benefits not available to
shareholders who do not participate in the Plan. If the market price (plus
commissions) of the shares is above their net asset value, participants in the
Plan will receive shares at less than they could otherwise purchase them and
will have shares with a cash value greater than the value of any cash dividends
they would have received on their shares. If the market price plus commissions
is below the net asset value, participants will receive dividends in shares with
a net asset value greater than the value of any cash dividends they would have
received on their shares. However, there may be insufficient shares available in
the market to distribute dividends in shares at prices below the net asset
value. Also, since the Fund does not redeem its shares, the price on resale may
be more or less than the net asset value.
- --------------------------------------------------------------------------------
31
MANAGED HIGH YIELD PLUS FUND INC.
GENERAL INFORMATION (UNAUDITED)
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan with respect to any
dividend or other distribution if notice of the change is sent to Plan
participants at least 30 days before the record date for such distribution. The
Plan also may be amended or terminated by the transfer agent by at least 30 days
written notice to all Plan participants. Additional information regarding the
Plan may be obtained from, and all correspondence concerning the Plan should be
directed to, the transfer agent at PFPC Inc., P.O. Box 8030, Boston,
Massachusetts 02266-8030. For further information regarding the Plan, you may
also contact the transfer agent directly at 1-800-331 1710.
- --------------------------------------------------------------------------------
32
MANAGED HIGH YIELD PLUS FUND INC.
BOARD APPROVAL OF INVESTMENT MANAGEMENT AND
ADMINISTRATION AGREEMENT (UNAUDITED)
BACKGROUND--At a meeting of the board of Managed High Yield Plus Fund Inc. (the
"Fund") on February 8, 2006, the members of the board, including the board
members who are not "interested persons" of the Fund ("Independent Directors"),
as defined in the Investment Company Act of 1940, as amended, considered and
approved the transfer of the current Investment Management and Administration
Agreement between the Fund and UBS Global Asset Management (US) Inc. ("UBS
Global AM") to UBS Global Asset Management (Americas) Inc. ("UBS Global
Americas"), an affiliate of UBS Global AM. The board received information and
materials about the proposed transfer both at its November 2005 meeting and at
its February 2006 meeting. In considering the approval of the transfer of the
Investment Management and Administration Agreement (such transfer referred to as
the "New Investment Management and Administration Agreement"), the board
reviewed a memorandum from UBS Global AM explaining the reasons for the proposed
transfer, including that the transfer would result in management efficiencies
and eliminate the duplication of functions that had resulted from having two
registered investment advisors, UBS Global AM and UBS Global Americas, providing
investment advisory services to the UBS funds. The board also reviewed material
provided by UBS Global AM on UBS Global Americas, including that the current
portfolio manager for the Fund would not change as a result of the transfer from
UBS Global AM to UBS Global Americas. The board also noted management's
explanation that any expenses resulting from the transfer would be borne by UBS
Global AM, and not the Fund. The board also received and reviewed a draft of an
opinion to be provided by Dechert LLP, counsel to the Fund, that the proposed
transfer would not be considered an "assignment" of the existing investment
advisory contract under the Investment Company Act of 1940, as amended, because
(1) there would be no change of actual control of the investment advisor to the
Fund; (2) there would be no change of management of the investment advisor to
the Fund; (3) the nature, quality and extent of the investment advisory services
provided by UBS Global AM under the current Investment Management and
Administration Agreement would not change as a result of the transfer; (4) the
transfer would not result in any change in the fundamental investment processes,
investment strategies or investment techniques currently employed by UBS Global
AM portfolio managers or other investment professionals in providing services to
the Fund; and (5) there would be no change to any of the material terms of the
Investment Management and Administration Agreements as a result
- --------------------------------------------------------------------------------
33
MANAGED HIGH YIELD PLUS FUND INC.
BOARD APPROVAL OF INVESTMENT MANAGEMENT AND
ADMINISTRATION AGREEMENT (UNAUDITED)
of the transfer. The board took note of its knowledge of UBS Global AM and its
affiliates, including UBS Global Americas, and the current Investment Management
and Administration Agreement for the Fund, including the extensive materials it
had reviewed at its annual contract renewal meeting in the summer of 2005 for
the Fund, and noted that it had at that time received a memorandum from its
independent legal counsel discussing, among other things, the duties of board
members in considering approval of advisory and administration agreements.
In its consideration of the approval of the New Investment Management and
Administration Agreement, the board considered the following factors:
NATURE, EXTENT AND QUALITY OF THE SERVICES UNDER THE NEW INVESTMENT MANAGEMENT
AND ADMINISTRATION AGREEMENT--The board took note that at its last annual
contract renewal meeting for the Fund, in connection with its review of the
Fund's advisory and distribution agreements, it had received and considered
extensive information regarding the nature, extent and quality of management
services generally provided to the Fund by UBS Global AM under the Investment
Management and Administration Agreement, and a description of the administrative
and other services rendered to the Fund and its shareholders by UBS Global AM
and UBS Global AM's role in coordinating providers of other services to the
Fund, including custody, accounting and transfer agency services. The board
considered management's explanation that UBS Global Americas would provide
identical services under the New Investment Management and Administration
Agreement as were provided by UBS Global AM under the current Investment
Management and Administration Agreement. The board's evaluation of the services
to be provided by UBS Global Americas to the Fund took into account the board's
knowledge and familiarity gained as board members of funds in the UBS New York
fund complex, including the scope and quality of investment management and other
capabilities and the quality of administrative and other services, and
considered that based on the materials presented to them these services would
remain the same. The board also considered, based on its knowledge of UBS Global
AM and UBS Global Americas, the financial resources available to UBS Global
Americas and its parent organization, UBS AG, one of the leading financial
services companies in the world.
The board concluded that, overall, it was satisfied with the nature, extent and
quality of services expected to be provided to the Fund under the New Investment
Management and Administration Agreement.
- --------------------------------------------------------------------------------
34
MANAGED HIGH YIELD PLUS FUND INC.
BOARD APPROVAL OF INVESTMENT MANAGEMENT AND
ADMINISTRATION AGREEMENT (UNAUDITED)
MANAGEMENT FEES--The board noted that the current contractual management fee for
the Fund under the current Investment Management and Administration Agreement
was not proposed to be changed under the New Investment Management and
Administration Agreement. The board also considered that at its most recent
annual contract renewal meeting during the summer of 2005 it had received and
reviewed information on the contractual management fee payable by the Fund to
UBS Global AM, including information of management fees paid by comparable
funds. The board recognized that the current fee arrangements would not change
as a result of the transfer.
Taking all of the above into consideration, the board determined that the
proposed contractual management fee was reasonable in light of the nature,
extent and quality of the services proposed to be provided to the Fund under the
New Investment Management and Administration Agreement.
FUND PERFORMANCE--The board took into consideration the reports on Fund
performance received by the board at each meeting and the more extensive review
and discussion of Fund performance at its most recent annual contract renewal
meeting. The board also noted that the transfer would not result in any change
in the fundamental investment processes, investment strategies or investment
techniques of the Fund and that no changes in the current Fund personnel
overseeing Fund management were proposed or anticipated as a result of the
transfer.
Based on its prior review and the more updated performance information provided,
the board concluded that the Fund's investment performance was satisfactory.
ADVISOR PROFITABILITY--As UBS Global Americas would be a new advisor to the
Fund, profitability of UBS Global Americas in providing services to the Fund was
not a primary factor considered by the board. The board did note that at its
most recent annual contract renewal meeting it received and considered a
profitability analysis of UBS Global AM and its affiliates in providing services
to the Fund and had determined at that time that UBS Global AM's profitability
was considered not excessive in light of the nature, extent and quality of the
services provided to the Fund. The board also recognized that the management fee
would not change as a result of the transfer and the services provided to the
Fund by UBS Global Americas would be identical to those currently provided by
UBS Global AM, making the profitability data received at its last contract
renewal meeting still of
- --------------------------------------------------------------------------------
35
MANAGED HIGH YIELD PLUS FUND INC.
BOARD APPROVAL OF INVESTMENT MANAGEMENT AND
ADMINISTRATION AGREEMENT (UNAUDITED)
some relevance. UBS Global AM also noted management's explanation that a
significant benefit of the transfer of the Investment Management and
Administration Agreement to UBS Global Americas was to reduce a regulatory
capital requirement imposed on UBS Global AM, which was expected to permit the
eventual transfer of certain financial assets owned by UBS Global AM to satisfy
regulatory requirements to other parts of UBS AG for other corporate purposes.
ECONOMIES OF SCALE--The board noted that it had previously considered whether
economies of scale in the provision of services to the Fund would be passed
along to the shareholders during its most recent consideration of the annual
renewal of the Investment Management and Administration Agreement and did not
see the need to reconsider this factor again in the context of the transfer of
the agreement to a sister investment advisor.
OTHER BENEFITS TO UBS GLOBAL AMERICAS--The board considered other benefits
received by UBS Global Americas and its affiliates as a result of its proposed
relationship with the Fund, including the potential opportunity to offer
additional products and services to Fund shareholders. The board also considered
the benefits to be realized when certain assets of UBS Global AM were freed from
certain regulatory requirements and were available to be paid as a dividend from
one part of UBS AG to another part of UBS AG for such purposes as UBS AG deemed
appropriate.
In light of the costs of providing investment management, administrative and
other services to the Fund and UBS Global America's expected ongoing commitment
to the Fund, the profits and other ancillary benefits that UBS Global Americas
and its affiliates received or would receive were considered reasonable.
In light of all of the foregoing, the board approved the New Investment
Management and Administration Agreement for the Fund.
No single factor reviewed by the board was identified by the board as the
principal factor in determining whether to approve the New Investment Management
and Administration Agreement. The Independent Directors were advised by separate
independent legal counsel throughout the process. The board discussed the
proposed approval of the New Investment Management and Administration Agreement
in a private session with their independent legal counsel at which no
representatives of UBS Global AM or UBS Global Americas were present.
- --------------------------------------------------------------------------------
36
(This page has been left blank intentionally)
- --------------------------------------------------------------------------------
37
MANAGED HIGH YIELD PLUS FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
BOARD OF DIRECTORS & OFFICERS
The Fund is governed by a Board of Directors which oversees the Fund's
operations. Each director serves until the next annual meeting of shareholders
or until his or her successor is elected and qualified or until he or she
resigns or is otherwise removed. Officers are appointed by the directors and
serve at the pleasure of the Board. The table below shows, for each director and
officer, his or her name, address and age, the position held with the Fund, the
length of time served as a director and officer of the Fund, the director's or
officer's principal occupations during the last five years, the number of funds
in the UBS fund complex overseen by the director or for which a person served as
an officer, and other directorships held by the director.
INTERESTED DIRECTOR
Term of
Position(s) Office+ and
Name, Address, Held with Length of Principal Occupation(s)
and Age Fund Time Served During Past 5 Years
- ----------------------------------------------------------------------------------------------------------------------------
Meyer Feldberg++; 64 Director Since 1998 Professor Feldberg is Dean Emeritus
Morgan Stanley and Sanford Bernstein Professor of
1585 Broadway Leadership and Ethics at Columbia
33rd Floor Business School, although on a two
New York, NY 10036 year leave of absence. He is also a
senior advisor to Morgan Stanley
(financial services) (since March 2005).
Prior to July 2004, he was Dean and
Professor of Management of the
Graduate School of Business at
Columbia University (since 1989).
- --------------------------------------------------------------------------------
38
MANAGED HIGH YIELD PLUS FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
Number of
Portfolios in Fund Complex Other Directorships
Overseen by Director Held by Director
- ---------------------------------------------------------------------------------------------------------------------------------
Professor Feldberg is a director or trustee of Professor Feldberg is also a director of
29 investment companies (consisting of Primedia Inc. (publishing), Federated Department
48 portfolios) for which UBS Global AM or one Stores, Inc. (operator of department stores),
of its affiliates serves as investment advisor, Revlon, Inc. (cosmetics), and SAPPI, Ltd.
sub-advisor or manager. (producer of paper).
- --------------------------------------------------------------------------------
39
MANAGED HIGH YIELD PLUS FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
INDEPENDENT DIRECTORS
Term of
Position(s) Office+ and
Name, Address, Held with Length of Principal Occupation(s)
and Age Fund Time Served During Past 5 Years
- ----------------------------------------------------------------------------------------------------------------------------
Richard Q. Armstrong; 71 Director and Since 1998 Mr. Armstrong is chairman and
c/o Willkie Farr & Chairman of (Director) principal of R.Q.A. Enterprises
Gallagher LLP the Board of Since 2004 (management consulting firm)
787 Seventh Avenue Directors (Chairman of (since April 1991 and principal
New York, NY 10019-6099 the Board occupation since March 1995).
of Directors)
David J. Beaubien; 71 Director Since 2001 Mr. Beaubien is retired (since
84 Doane Road 2003). He was chairman of Yankee
Ware, MA 01082 Environmental Systems, Inc., a
manufacturer of meteorological
measuring systems (since 1991).
Alan S. Bernikow; 65 Director Since 2006 Mr. Bernikow is a consultant on
207 Benedict Ave. non-management matters for
Staten Island, NY 10314 the firm of Deloitte & Touche
(international accounting and
consulting firm) (since June 2003).
Previously, he was Deputy Chief
Executive Officer at Deloitte &
Touche.
Richard R. Burt; 59 Director Since 1998 Mr. Burt is chairman of Diligence
1275 Pennsylvania Ave., N.W. Inc. (information and risk
Washington, D.C. 20004 management firm) and IEP
Advisors (international
investments and consulting firm).
Bernard H. Garil; 66 Director Since 2006 Mr. Garil is retired (since 2001).
6754 Casa Grande Way He was a Managing Director at PIMCO
Delray Beach, FL 33446 Advisory Services (from 1999 to
2001) where he served as President
of closed-end funds and
Vice-President of the variable
insurance product funds advised
by OpCap Advisors (until 2001).
- --------------------------------------------------------------------------------
40
MANAGED HIGH YIELD PLUS FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
Number of
Portfolios in Fund Complex Other Directorships
Overseen by Director Held by Director
- ---------------------------------------------------------------------------------------------------------------------------------
Mr. Armstrong is a director or trustee of 16 None
investment companies (consisting of 35 portfolios)
for which UBS Global AM or one of its affiliates
serves as investment advisor, sub-advisor or
manager.
Mr. Beaubien is a director or trustee of 16 Mr. Beaubien is also a director of IEC
investment companies (consisting of 35 portfolios) Electronics, Inc., a manufacturer of electronic
for which UBS Global AM or one of its affiliates assemblies.
serves as investment advisor, sub-advisor or
manager.
Mr. Bernikow is a director or trustee of 16 Mr. Bernikow is also a director of Revlon, Inc.
investment companies (consisting of 35 portfolios) (cosmetics) (and serves as the chair of its
for which UBS Global AM or one of its affiliates audit committee), a director of Mack-Cali
serves as investment advisor, sub-advisor or Realty Corporation (real estate investment
manager. trust) (and serves as the chair of its audit
committee) and a director of the Casual
Male Retail Group, Inc. (menswear).
Mr. Burt is a director or trustee of 16 investment Mr. Burt is also a director of The Central
companies (consisting of 35 portfolios) for which European Fund, Inc., The Germany Fund, Inc.,
UBS Global AM or one of its affiliates serves as The New Germany Fund, Inc., IGT, Inc.
investment advisor, sub-advisor or manager. (provides technology to gaming and
wagering industry) and The Protective Group,
Inc. (produces armor products).
Mr. Garil is a director or trustee of 16 investment Mr. Garil is also a director of OFI Trust
companies (consisting of 35 portfolios) for which Company (commercial trust company) and
UBS Global AM or one of its affiliates serves as a trustee for the Brooklyn College
investment advisor, sub-advisor or manager. Foundation, Inc. (charitable foundation).
- --------------------------------------------------------------------------------
41
MANAGED HIGH YIELD PLUS FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
INDEPENDENT DIRECTORS (CONCLUDED)
Term of
Position(s) Office+ and
Name, Address, Held with Length of Principal Occupation(s)
and Age Fund Time Served During Past 5 Years
- ----------------------------------------------------------------------------------------------------------------------------
Heather R. Higgins; 46 Director Since 2006 Ms. Higgins is the President and
255 E. 49th St., Suite 23D Director of The Randolph Foundation
New York, NY 10017 (charitable foundation) (since 1991).
Ms. Higgins also serves on the
boards of several non-profit
charitable groups, including the
Independent Women's Forum
(chairman), the Philanthropy
Roundtable (vice chairman) and the
Hoover Institution (executive
committee).
- --------------------------------------------------------------------------------
42
MANAGED HIGH YIELD PLUS FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
Number of
Portfolios in Fund Complex Other Directorships
Overseen by Director Held by Director
- ---------------------------------------------------------------------------------------------------------------------------------
Ms. Higgins is a director or trustee of 16 None
investment companies (consisting of 35 portfolios)
for which UBS Global AM or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
- --------------------------------------------------------------------------------
43
MANAGED HIGH YIELD PLUS FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
OFFICERS
Term of Principal Occupation(s)
Position(s) Office+ and During Past 5 Years;
Name, Address, Held with Length of Number of Portfolios in Fund Complex
and Age Fund Time Served for which person Serves as Officer
- ---------------------------------------------------------------------------------------------------------------------------------
Joseph Allessie*; 40 Vice President Since 2005 Mr. Allessie is a director and deputy
and Assistant general counsel at UBS Global Asset
Secretary Management (US) Inc. and UBS Global
Asset Management (Americas) Inc.
(collectively, "UBS Global AM--Americas
region") (since 2005). Prior to joining
UBS Global AM--Americas region, he
was senior vice president and general
counsel of Kenmar Advisory Corp. (from
2004 to 2005). Prior to that Mr. Allessie
was general counsel and secretary of
GAM USA Inc., GAM Investments, GAM
Services, GAM Funds, Inc. and the GAM
Avalon Funds (from 1999 to 2004).
Mr. Allessie is a vice president and
assistant secretary of 20 investment
companies (consisting of 90 portfolios)
for which UBS Global AM--Americas
region or one of its affiliates serves as
investment advisor, sub-advisor or
manager.
W. Douglas Beck*; 39 President Since 2005 Mr. Beck is an executive director and
head of product development and
management for UBS Global AM--
Americas region (since 2002). From
March 1998 to November 2002, he held
various positions at Merrill Lynch, the
most recent being first vice president and
co-manager of the managed solutions
group. Mr. Beck is president of
20 investment companies (consisting
of 90 portfolios) for which UBS Global
AM--Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager, and was vice
president of such investment companies
from 2003 to 2005.
- --------------------------------------------------------------------------------
44
MANAGED HIGH YIELD PLUS FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
OFFICERS (CONTINUED)
Term of Principal Occupation(s)
Position(s) Office+ and During Past 5 Years;
Name, Address, Held with Length of Number of Portfolios in Fund Complex
and Age Fund Time Served for which person Serves as Officer
- ---------------------------------------------------------------------------------------------------------------------------------
Thomas Disbrow*; 40 Vice President Since 2000 Mr. Disbrow is a director, head of retail
and Treasurer (Vice President) mutual fund operations and co-head
Since 2004 of the mutual fund finance department
(Treasurer) of UBS Global AM--Americas region.
Mr. Disbrow is a vice president and
treasurer of 16 investment companies
(consisting of 35 portfolios) and vice
president and assistant treasurer of four
investment companies (consisting of 55
portfolios) for which UBS Global AM--
Americas region or one of its affiliates
serves as investment advisor, sub-advisor
or manager.
Michael J. Flook*; 41 Vice President Since 2006 Mr. Flook is an associate director and
and Assistant a senior manager of the mutual fund
Treasurer finance department of UBS Global
AM--Americas region (since 2006).
Prior to joining UBS Global AM--
Americas region, he was a senior
manager with The Reserve (asset
management firm) from May 2005 to
May 2006. Prior to that he was a senior
manager with PFPC Worldwide since
October 2000. Mr. Flook is a vice
president and assistant treasurer of 16
investment companies (consisting of 35
portfolios) for which UBS Global AM--
Americas region or one of its affiliates
serves as investment advisor, sub-advisor
or manager.
- --------------------------------------------------------------------------------
45
MANAGED HIGH YIELD PLUS FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
OFFICERS (CONTINUED)
Term of Principal Occupation(s)
Position(s) Office+ and During Past 5 Years;
Name, Address, Held with Length of Number of Portfolios in Fund Complex
and Age Fund Time Served for which person Serves as Officer
- ---------------------------------------------------------------------------------------------------------------------------------
Mark F. Kemper**; 48 Vice President Since 2004 Mr. Kemper is general counsel of UBS
and Secretary Global AM--Americas region (since
July 2004). Mr. Kemper also is a
managing director of UBS Global AM--
Americas region (since 2006). He was
deputy general counsel of UBS Global
Asset Management (Americas) Inc.
("UBS Global AM (Americas)") from
July 2001 to July 2004. He has been
secretary of UBS Global AM (Americas)
since 1999 and assistant secretary of
UBS Global Asset Management Trust
Company since 1993. Mr. Kemper is
secretary of UBS Global AM--Americas
region (since 2004). Mr. Kemper is
vice president and secretary of 20
investment companies (consisting of
90 portfolios) for which UBS Global
AM--Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
Joanne M. Kilkeary*; 38 Vice President Since 2004 Ms. Kilkeary is an associate director
and Assistant (since 2000) and a senior manager
Treasurer (since 2004) of the mutual fund finance
department of UBS Global AM--Americas
region. Ms. Kilkeary is a vice
president and assistant treasurer of
16 investment companies (consisting of
35 portfolios) for which UBS Global
AM--Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
- --------------------------------------------------------------------------------
46
MANAGED HIGH YIELD PLUS FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
OFFICERS (CONTINUED)
Term of Principal Occupation(s)
Position(s) Office+ and During Past 5 Years;
Name, Address, Held with Length of Number of Portfolios in Fund Complex
and Age Fund Time Served for which person Serves as Officer
- ---------------------------------------------------------------------------------------------------------------------------------
Tammie Lee*; 35 Vice President Since 2005 Ms. Lee is a director and associate
and Assistant general counsel of UBS Global AM--
Secretary Americas region (since November
2005). Prior to joining UBS Global
AM--Americas region, she was vice
president and counsel at Deutsche
Asset Management/Scudder Investments
from April 2003 to October 2005. Prior
to that she was assistant vice president
and counsel at Deutsche Asset
Management/Scudder Investments from
July 2000 to March 2003. Ms. Lee is a
vice president and assistant secretary of
20 investment companies (consisting of
90 portfolios) for which UBS Global
AM--Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
Joseph T. Malone*; 38 Vice President Since 2004 Mr. Malone is a director (since 2001)
and Assistant (Vice and co-head of the mutual fund finance
Treasurer President) department (since 2004) of UBS Global
Since 2001 AM--Americas region. From August
(Assistant 2000 through June 2001, he was the
Treasurer) controller at AEA Investors Inc.
Mr. Malone is vice president and
assistant treasurer of 16 investment
companies (consisting of 35 portfolios)
and vice president, treasurer and
principal accounting officer of four
investment companies (consisting of
55 portfolios) for which UBS Global
AM--Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
- --------------------------------------------------------------------------------
47
MANAGED HIGH YIELD PLUS FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
OFFICERS (CONTINUED)
Term of Principal Occupation(s)
Position(s) Office+ and During Past 5 Years;
Name, Address, Held with Length of Number of Portfolios in Fund Complex
and Age Fund Time Served for which person Serves as Officer
- ---------------------------------------------------------------------------------------------------------------------------------
Joseph McGill*; 44 Vice President Since 2004 Mr. McGill is a managing director
and Chief (since 2006) and chief compliance officer
Compliance (since 2003) at UBS Global AM--
Officer Americas region. Prior to joining UBS
Global AM--Americas region, he was
assistant general counsel at J. P. Morgan
Investment Management (from 1999 to
2003). Mr. McGill is a vice president and
chief compliance officer of 20 investment
companies (consisting of 90 portfolios)
for which UBS Global AM--Americas
region or one of its affiliates serves as
investment advisor, sub-advisor or
manager.
John Penicook**; 48 Vice President Since 2002 Mr. Penicook is a managing director
(since 2000) and global head of fixed
income (since 2002) of UBS Global AM--
Americas region. Mr. Penicook is a vice
president of three investment companies
(consisting of three portfolios) for which
UBS Global AM--Americas region or one
of its affiliates serves as investment
advisor, sub-advisor or manager.
Marianne Rossi*; 46 Vice President Since 2004 Ms. Rossi is a managing director at UBS
Global AM--Americas region (since
2000). Prior to April 2000, she was a
managing director and part of the high
yield team at Credit Suisse Asset
Management. Ms Rossi is a vice
president of one investment company
(consisting of one portfolio) for which
UBS Global AM--Americas region or one
of its affiliates serves as investment
advisor, sub-advisor or manager.
- --------------------------------------------------------------------------------
48
MANAGED HIGH YIELD PLUS FUND INC.
SUPPLEMENTAL INFORMATION (UNAUDITED)
OFFICERS (CONCLUDED)
Term of Principal Occupation(s)
Position(s) Office+ and During Past 5 Years;
Name, Address, Held with Length of Number of Portfolios in Fund Complex
and Age Fund Time Served for which person Serves as Officer
- ---------------------------------------------------------------------------------------------------------------------------------
Eric Sanders*; 40 Vice President Since 2005 Mr. Sanders is a director and associate
and Assistant general counsel of UBS Global AM--
Secretary Americas region (since July 2005). From
1996 until June 2005, he held various
positions at Fred Alger & Company,
Incorporated, the most recent being
assistant vice president and associate
general counsel. Mr. Sanders is a vice
president and assistant secretary of
20 investment companies (consisting
of 90 portfolios) for which UBS Global
AM--Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
Keith A. Weller*; 44 Vice President Since 1998 Mr. Weller is an executive director and
and Assistant senior associate general counsel of UBS
Secretary Global AM--Americas region (since 2005)
and has been an attorney with affiliated
entities since 1995. Mr. Weller is a vice
president and assistant secretary of
20 investment companies (consisting of
90 portfolios) for which UBS Global
AM--Americas region or one of its
affiliates serves as investment advisor,
sub-advisor or manager.
* This person's business address is 51 West 52nd Street, New York, New York
10019-6114.
** This person's business address is One North Wacker Drive, Chicago, Illinois
60606.
+ Each director holds office until the next annual meeting of shareholders or
until his or her successor is elected and qualified, or until he or she
resigns or is otherwise removed. Each director who has attained the age of
seventy-two (72) years will be subject to retirement on the last day of the
month in which he or she attains such age. Officers are appointed by the
directors and serve at the pleasure of the board.
++ Professor Feldberg is deemed an "interested person" of the Fund as defined
in the Investment Company Act because he is a senior advisor to Morgan
Stanley, a financial services firm with which the Fund may conduct
transactions.
- --------------------------------------------------------------------------------
49
MANAGED HIGH YIELD PLUS FUND INC.
NEW YORK STOCK EXCHANGE CERTIFICATIONS (UNAUDITED)
Managed High Yield Plus Fund Inc. (the "Fund") is listed on the New York Stock
Exchange ("NYSE"). As a result, it is subject to certain corporate governance
rules and related interpretations issued by the exchange. Pursuant to those
requirements, the Fund must include information in this report regarding certain
certifications. The Fund's president and treasurer have filed certifications
with the SEC regarding the quality of the Fund's public disclosure. Those
certifications were made pursuant to Section 302 of the Sarbanes-Oxley Act
("Section 302 Certifications"). The Section 302 Certifications were filed as
exhibits to the Fund's annual report on Form N-CSR, which included a copy of
this annual report along with other information about the Fund. After the Fund's
2005 annual meeting of shareholders, it filed a certification with the NYSE on
October 5, 2005 stating that its president was unaware of any violation of the
NYSE's Corporation Governance listing standards.
- --------------------------------------------------------------------------------
50
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- --------------------------------------------------------------------------------
51
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- --------------------------------------------------------------------------------
52
DIRECTORS
Richard Q. Armstrong Meyer Feldberg
Chairman
Bernard H. Garil
David J. Beaubien Heather R. Higgins
Alan S. Bernikow
Richard R. Burt
PRINCIPAL OFFICERS
W. Douglas Beck Thomas Disbrow
President Vice President and Treasurer
Mark F. Kemper Marianne Rossi
Vice President and Secretary Vice President
INVESTMENT MANAGER AND ADMINISTRATOR
UBS Global Asset Management (Americas) Inc.
51 West 52nd Street
New York, New York 10019-6114
This report is sent to the shareholders of the Fund for their information. It is
not a prospectus, circular or representation intended for use in the purchase or
sale of shares of the Fund or of any securities mentioned in this report.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that from time to time the Fund may purchase shares of its
common stock in the open market at market prices.
(C) 2006 UBS Global Asset Management (Americas) Inc. All rights reserved.
[LOGO OF UBS] UBS
--------------
Presorted
Standard
US Postage
PAID
Smithtown, NY
Permit No. 700
--------------
UBS GLOBAL ASSET MANAGEMENT (AMERICAS) INC.
51 West 52nd Street
New York, New York 10019-6114
ITEM 2. CODE OF ETHICS.
- -----------------------
The registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions pursuant to Section 406 of
the Sarbanes-Oxley Act of 2002. (The registrant has designated the code of
ethics adopted pursuant to Sarbanes-Oxley as a "Code of Conduct" to lessen the
risk of confusion with its separate code of ethics adopted pursuant to Rule
17j-1 under the Investment Company Act of 1940, as amended.)
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
- -----------------------------------------
The registrant's Board has determined that the following person serving on the
registrant's Audit Committee is an "audit committee financial expert" as defined
in item 3 of Form N-CSR: Alan S. Bernikow. Mr. Bernikow is independent as
defined in item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
- -----------------------------------------------
(a) Audit Fees:
----------
For the fiscal years ended May 31, 2006 and May 31, 2005, the aggregate
Ernst & Young LLP (E&Y) audit fees for professional services rendered to
the registrant were approximately $51,400 and $67,300, respectively.
Fees included in the audit fees category are those associated with the
annual audits of financial statements and services that are normally
provided in connection with statutory and regulatory filings.
(b) Audit-Related Fees:
------------------
In each of the fiscal years ended May 31, 2006 and May 31, 2005, the
aggregate audit-related fees billed by E&Y for services rendered to the
registrant that are reasonably related to the performance of the audits
of the financial statements, but not reported as audit fees, were
approximately $22,212 and $20,500, respectively.
Fees included in the audit-related category are those associated with
(1) the reading and providing of comments on the 2005 and 2004
semiannual financial statements, (2) review of the consolidated 2004 and
2003 reports on the profitability of the UBS Funds to UBS Global Asset
Management (US) Inc. ("UBS Global AM") and its affiliates to assist the
board members in their annual advisory/administration contract reviews
and (3) agreed upon procedures for a revolving line of credit for the
Fund's fiscal years ended 2005 and 2004.
There were no audit-related fees required to be approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal
years indicated above.
(c) Tax Fees:
--------
In each of the fiscal years ended May 31, 2006 and May 31, 2005, the
aggregate tax fees billed by E&Y for professional services rendered to
the registrant were approximately $14,950 and $14,800, respectively.
Fees included in the tax fees category comprise all services performed
by professional staff in the independent accountant's tax division
except those services related to the audits. This category comprises
fees for review of tax compliance, tax return preparation and excise tax
calculations.
There were no tax fees required to be approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years
indicated above.
(d) All Other Fees:
--------------
In each of the fiscal years ended May 31, 2006 and May 31, 2005, there
were no fees billed by E&Y for products and services, other than the
services reported in Item 4(a)-(c) above, rendered to the registrant.
Fees included in the all other fees category would consist of services
related to internal control reviews, strategy and other consulting,
financial information systems design and implementation, consulting on
other information systems, and other tax services unrelated to the
registrant.
There were no "all other fees" required to be approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal
years indicated above.
(e) (1) Audit Committee Pre-Approval Policies and Procedures:
----------------------------------------------------
The registrant's Audit Committee ("audit committee") has adopted an
"Audit Committee Charter (Amended and Restated as of May 12, 2004 -
Revised as of February 3, 2006)" (the "charter"). The charter
contains the audit committee's pre-approval policies and procedures.
Reproduced below is an excerpt from the charter regarding
pre-approval policies and procedures:
The [audit] Committee shall:
...
2. Pre-approve (a) all audit and permissible non-audit
services(1) to be provided to the Fund and (b) all
permissible non-audit services to be provided by the Fund's
independent auditors to UBS Global [AM] and any Covered
Service Providers, if the engagement relates directly to the
operations and financial reporting of the Fund. In carrying
out this responsibility, the Committee shall seek
periodically from UBS Global [AM] and from the independent
auditors a list of such audit and permissible non-audit
services that can be expected to be rendered to the Fund,
UBS Global [AM] or any Covered Service Providers by the
Fund's independent auditors, and an estimate of the fees
sought to be paid in connection with such services. The
Committee may delegate its responsibility to pre-approve any
such audit and permissible non-audit services to a
sub-committee consisting of the Chairperson of the Committee
and two other members of the Committee as the Chairperson,
from time to time, may determine and appoint, and such
sub-committee shall report to the Committee, at its next
regularly scheduled meeting after the sub-committee's
meeting, its decision(s). From year to year, the Committee
shall report to the Board whether this system of
pre-approval has been effective and efficient or whether
this Charter should be amended to allow for pre-approval
pursuant to such policies and procedures as the Committee
shall approve, including the delegation of some or all of
the Committee's pre-approval responsibilities to other
persons (other than UBS Global [AM] or the Fund's officers).
-----------------
(1) The Committee will not approve non-audit services
that the Committee believes may taint the independence
of the auditors. Currently, permissible non-audit
services include any professional services (including
tax services) that are not prohibited services as
described below, provided to the Fund by the
independent auditors, other than those provided to the
Fund in connection with an audit or a review of the
financial statements of the Fund. Permissible non-audit
services may not include: (i) bookkeeping or other
services related to the accounting records or financial
statements of the Fund; (ii) financial information
systems design and implementation; (iii) appraisal or
valuation services, fairness opinions or
contribution-in-kind reports; (iv) actuarial services;
(v) internal audit outsourcing services; (vi)
management functions or human resources; (vii) broker
or dealer, investment adviser or investment banking
services; (viii) legal services and expert services
unrelated to the audit; and (ix) any other service the
Public Company Accounting Oversight Board determines,
by regulation, is impermissible.
Pre-approval by the Committee of any permissible
non-audit services is not required so long as: (i) the
aggregate amount of all such permissible non-audit
services provided to the Fund, UBS Global [AM] and any
service providers controlling, controlled by or under
common control with UBS Global [AM] that provide
ongoing services to the Fund ("Covered Service
Providers") constitutes not more than 5% of the total
amount of revenues paid to the independent auditors
(during the fiscal year in which the permissible
non-audit services are provided) by (a) the Fund, (b)
its investment adviser and (c) any entity controlling,
controlled by, or under common control with the
investment adviser that provides ongoing services to
the Fund during the fiscal year in which the services
are provided that would have to be approved by the
Committee; (ii) the permissible non-audit services were
not recognized by the Fund at the time of the
engagement to be non-audit services; and (iii) such
services are promptly brought to the attention of the
Committee and approved by the Committee (or its
delegate(s)) prior to the completion of the audit.
(e) (2) Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X:
Audit-Related Fees:
------------------
There were no amounts that were approved by the audit committee
pursuant to the de minimis exception for the fiscal years ended May
31, 2006 and May 31, 2005 on behalf of the registrant.
There were no amounts that were required to be approved by the audit
committee pursuant to the de minimis exception for the fiscal years
ended May 31, 2006 and May 31, 2005 on behalf of the registrant's
service providers that relate directly to the operations and
financial reporting of the registrant.
Tax Fees:
--------
There were no amounts that were approved by the audit committee
pursuant to the de minimis exception for the fiscal years ended May
31, 2006 and May 31, 2005 on behalf of the registrant.
There were no amounts that were required to be approved by the audit
committee pursuant to the de minimis exception for the fiscal years
ended May 31, 2006 and May 31, 2005 on behalf of the registrant's
service providers that relate directly to the operations and
financial reporting of the registrant.
All Other Fees:
--------------
There were no amounts that were approved by the audit committee
pursuant to the de minimis exception for the fiscal years ended May
31, 2006 and May 31, 2005 on behalf of the registrant.
There were no amounts that were required to be approved by the audit
committee pursuant to the de minimis exception for the fiscal years
ended May 31, 2006 and May 31, 2005 on behalf of the registrant's
service providers that relate directly to the operations and
financial reporting of the registrant.
(f) According to E&Y, for the fiscal year ended May 31, 2006, the percentage
of hours spent on the audit of the registrant's financial statements for
the most recent fiscal year that were attributed to work performed by
persons who are not full-time, permanent employees of E&Y was 0%.
(g) For the fiscal years ended May 31, 2006 and May 31, 2005, the aggregate
fees billed by E&Y of $45,162 and $163,800, respectively, for non-audit
services rendered on behalf of the registrant ("covered"), its
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by
another investment adviser) and any entity controlling, controlled by,
or under common control with the adviser ("non-covered") that provides
ongoing services to the registrant for each of the last two fiscal years
of the registrant is shown in the table below:
2006 2005
---- ----
Covered Services $37,162 $ 35,300
Non-Covered Services 8,000 128,500
(h) The registrant's audit committee was not required to consider whether the
provision of non-audit services that were rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another
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
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
- ---------------------------------------------
The registrant has a separately designated standing audit committee (the "Audit
Committee") established in accordance with Section 3(a)(58)(A) of the Securities
Exchange Act of 1934, as amended. The Audit Committee is comprised of the
following board members: Mr. Armstrong, Mr. Beaubien, Mr. Bernikow, Mr. Burt,
Mr. Garil and Ms. Higgins.
ITEM 6. SCHEDULE OF INVESTMENTS.
- -------------------------------
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.
- --------------------------------
The registrant's Board of Directors believes that the voting of proxies on
securities held by the registrant is an important element of the overall
investment process. As such, the Board has delegated the responsibility to vote
such proxies to the registrant's advisor. Following is a summary of the proxy
voting policy of the advisor.
CORPORATE GOVERNANCE PHILOSOPHY, VOTING GUIDELINES AND POLICY SUMMARY
The proxy voting policy of UBS Global AM is based on its belief that voting
rights have economic value and must be treated accordingly. Generally, UBS
Global AM expects the boards of directors of companies issuing securities held
by its clients to act as stewards of the financial assets of the company, to
exercise good judgment and practice diligent oversight with the management of
the company. While there is no absolute set of rules that determines appropriate
corporate governance under all circumstances and no set of rules will guarantee
ethical behavior, there are certain benchmarks, which, if substantial progress
is made toward, give evidence of good corporate governance. UBS Global AM may
delegate to an independent proxy voting and research service the authority to
exercise the voting rights associated with certain client holdings. Any such
delegation shall be made with the direction that the votes be exercised in
accordance with UBS Global AM's proxy voting policy.
When UBS Global AM's view of a company's management is favorable, UBS Global AM
generally supports current management initiatives. When UBS Global AM's view is
that changes to the management structure would probably increase shareholder
value, UBS Global AM may not support existing management proposals. In general,
UBS Global AM (1) opposes proposals which act to entrench management; (2)
believes that boards should be independent of company management and composed of
persons with requisite skills, knowledge and experience; (3) opposes structures
which impose financial constraints on changes in control; (4) believes
remuneration should be commensurate with responsibilities and performance; and
(5) believes that appropriate steps should be taken to ensure the independence
of auditors.
UBS Global AM has implemented procedures designed to identify whether it has a
conflict of interest in voting a particular proxy proposal, which may arise as a
result of its or its affiliates' client relationships,
marketing efforts or banking and broker/dealer activities. To address such
conflicts, UBS Global AM has imposed information barriers between it and its
affiliates who conduct banking, investment banking and broker/dealer activities
and has implemented procedures to prevent business, sales and marketing issues
from influencing our proxy votes. Whenever UBS Global AM is aware of a conflict
with respect to a particular proxy, its appropriate local corporate governance
committee is required to review and agree to the manner in which such proxy is
voted.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
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(a) (1) Name - Shu Yang Tan is the registrant's portfolio manager.
Title - His title is Executive Director, Portfolio Manager and Senior
High Yield Credit Analyst of UBS Global Asset Management (Americas) Inc.
("UBS Global AM"), the registrant's investment adviser.
Length of Service - He became interim portfolio manager effective
late July 2006. (Marianne Rossi, the prior portfolio manager, ceased
being responsible for the day-to-day management of the registrant towards
the end of July 2006.)
Business Experience Last 5 Years - Mr. Shu Yang Tan has been with UBS
Global AM since 1995 and has been a senior member of the High Yield team
for six years.
Information above regarding Mr. Shu Yang Tan is as of July 28, 2006.
(a) (2) (i) Mr. Shu Yang Tan is primarily responsible for the day-to-day
management of other accounts. Further information is provided below.
(a) (2) (ii) (A) Registered Investment Companies
The portfolio manager is responsible for 3 additional Registered
Investment Companies having $341,814,846 in total aggregate assets.
(a) (2) (ii) (B) Other Pooled Investment Vehicles
The portfolio manager is responsible for 23 Other Pooled
Investment Vehicles having $1,307,254,464 in total aggregate assets.
(a) (2) (ii) (C) Other Accounts
The portfolio manager is responsible for 9 Other Accounts having
$83,524,074 in total aggregate assets.
(a) (2) (iii) None of these accounts is subject to an advisory fee based on
the performance of the account.
(a) (2) (iv) Conflicts.
The management of the registrant and other accounts by a
portfolio manager could result in potential conflicts of interest if the
registrant and other accounts have different objectives, benchmarks and
fees because the portfolio manager and his team must allocate time and
investment expertise across multiple accounts, including the registrant.
The portfolio manager and his team manage the registrant and other
accounts utilizing an approach that groups similar accounts within a
model portfolio. The Advisor manages accounts according to their
respective objectives, including where possible, those accounts that
have specific investment restrictions. Accordingly, portfolio holdings,
position sizes, and industry and sector exposures tend to be similar
across accounts, which may minimize the potential for conflicts of
interest.
If a portfolio manager identifies a limited investment
opportunity that may be suitable for more than one account, the
registrant may not be able to take full advantage of that opportunity
due to an allocation of filled purchase or sale orders across all
eligible model portfolios and accounts. To deal with these situations,
the Advisor has adopted procedures for allocating portfolio trades
across multiple accounts to provide fair treatment to all accounts.
The management of personal accounts by a portfolio manager may
also give rise to potential conflicts of interest. The Advisor and the
registrant have adopted a Code of Ethics that governs such personal
trading, but there is no assurance that the Code will adequately address
all such conflicts.
(Information for Mr. Shu Yang Tan in Item 8 (a) (2) is provided as of
July 21, 2006, as he is the new portfolio manager for the registrant.)
(a) (3) Compensation.
The compensation received by portfolio managers at UBS Global
AM, including Mr. Shu Yang Tan, includes a base salary and incentive
compensation as detailed below. Overall compensation can be grouped into
three categories: base salary, annual bonuses and UBS AG equity. Base
salary is fixed compensation used to recognize the experience, skills
and knowledge that the investment professionals bring to their roles.
Annual bonuses are correlated with performance and are based on three
components: 1) the firm's overall business success; 2) the performance
of the respective asset class and/or investment mandate; and 3) an
individual's specific contribution to the firm's results. Senior
investment professionals may receive a portion of their annual
performance-based incentive in the form of deferred or restricted UBS AG
shares or employee stock options. Broader equity share ownership is
encouraged for all employees through "Equity Plus." This long-term
incentive program gives employees the opportunity to purchase UBS stock
with after-tax funds from their bonus or salary. Two UBS stock options
are given for each share acquired and held for two years.
(This information for Mr. Shu Yang Tan is provided as of July 21, 2006,
as he is the new portfolio manager for the registrant.)
(a) (4) Dollar Range of Securities of Registrant Beneficially Owned by
Portfolio Manager: None.
(This information for Mr. Shu Yang Tan is provided as of July 21, 2006,
as he is the new portfolio manager for the registrant.)
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
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COMPANY AND AFFILIATED PURCHASERS.
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There were no purchases made by or on behalf of the registrant or any
"affiliated purchaser," as defined in Rule 10b-18(a)(3) under the Securities
Exchange Act of 1934, as amended, of shares of the registrant's equity
securities made in the period covered by this report.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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The registrant's Board has established a Nominating and Corporate Governance
Committee. The Nominating and Corporate Governance Committee will consider
nominees recommended by shareholders if a vacancy occurs among those board
members who are not "interested persons" as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended. In order to recommend a nominee, a
shareholder should send a letter to the chairperson of the Nominating and
Corporate Governance Committee, Richard R. Burt, care of the Secretary of the
registrant at UBS Global Asset Management, 51 West 52nd Street, New York, New
York 10019-6114, and indicate on the envelope "Nominating and Corporate
Governance Committee." The shareholder's letter should state the nominee's name
and should include the nominee's resume or curriculum vitae, and must be
accompanied by a written consent of the individual to stand for election if
nominated for the Board and to serve if elected by shareholders.
ITEM 11. CONTROLS AND PROCEDURES.
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(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act
of 1940, as amended) are effective based on their evaluation of these
controls and procedures as of a date within 90 days of the filing date
of this document.
(b) The registrant's principal executive officer and principal financial
officer are aware of no changes in the registrant's internal control
over financial reporting (as defined in Rule 30a-3(d) under the
Investment Company Act of 1940, as amended) that occurred during the
registrant's last fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 12. EXHIBITS.
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(a) (1) Code of Ethics as required pursuant to Section 406 of the
Sarbanes-Oxley Act of 2002 (and designated by registrant as a "Code of
Conduct") is incorporated by reference herein from Exhibit EX-99.CODE
ETH to the registrant's Report on Form N-CSR filed August 9, 2004
(Accession Number: 0000950136-04-002500)(SEC File No. 811-08765).
(a) (2) Certifications of principal executive officer and principal
financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 is attached hereto as Exhibit EX-99.CERT.
(a) (3) Written solicitation to purchase securities under Rule 23c-1 under
the Investment Company Act of 1940 sent or given during the period
covered by the report by or on behalf of the registrant to 10 or more
persons - The registrant has not engaged in such a solicitation during
the period covered by this report.
(b) Certifications of principal executive officer and principal financial
officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is
attached hereto as Exhibit EX-99.906CERT.
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.
Managed High Yield Plus Fund Inc.
By: /s/ W. Douglas Beck
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W. Douglas Beck
President
Date: July 28, 2006
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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.
By: /s/ W. Douglas Beck
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W. Douglas Beck
President
Date: July 28, 2006
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By: /s/ Thomas Disbrow
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Thomas Disbrow
Vice President and Treasurer
Date: July 28, 2006
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