<PAGE>
MANAGED HIGH YIELD PLUS FUND INC. SEMIANNUAL REPORT
January 15, 1999
Dear Fellow Shareholder:
We are pleased to present you with the first semiannual report for the
Managed High Yield Plus Fund Inc. (the "Fund") for the period from
commencement of operations on June 26, 1998 through November 30, 1998.
MARKET REVIEW
- -------------------------------------------------------------------------------
[GRAPHIC]
"Flight to quality" remained the dominant theme in the bond markets
during the period, as investors sought the safety and liquidity of U.S.
Treasury securities, especially short- to intermediate-term debt.
Turmoil hit the global capital markets in August when Russia devalued its
currency and effectively defaulted on its internal debt. The ensuing sell-off
in the global equity and emerging debt markets spurred the flight to U.S.
Treasurys to an even higher pitch. All sectors of the bond market suffered as
risk premiums soared. Emerging market debt fared the worst, with the
high-yield sector following a distant second. U.S. corporate bonds were hard
hit, and corporations suffered from a market-induced credit crunch.
The global sell-off continued to disrupt the financial markets in
September. Initial public offerings of stocks and the entire high-yield debt
market ground to a virtual halt. With market conditions so fragile, the
Federal Reserve lowered the Fed Funds rate (the rate for overnight loans)
from 5.50% to 5.25%. As measured by the CS First Boston High Yield Index (the
"Index"), high-yield spreads widened from 409 basis points in June to more
than 750 basis points at the end of September, the widest spread since the
recession of 1991. (A basis point equals 1/100th of one percent.)
Barely two weeks into October, the Fed again lowered the Fed Funds rate
and also lowered the discount rate (the rate commercial banks pay to borrow
from the Federal Reserve). The market took this action as a sign of the Fed's
resolve to keep the economy growing in its effort to avoid a recession.
Investors reacted positively -- the stock market rose and shorter-maturity
Treasurys rallied. High-yield spreads began to recover but remained wide at
November 30.
The Fed lowered both rates again in November, and several European
central banks followed suit in preparation for the January 1, 1999 debut of
the euro currency. The third rate reduction in as many months gave the bond
markets a boost as both psychology and liquidity improved.
PERFORMANCE
- -------------------------------------------------------------------------------
[GRAPHIC]
From commencement of operations on June 26, 1998 through November 30,
1998, the Fund (NYSE symbol: HYF) lost 9.68% based on changes in the Fund's
net asset value (assuming, for illustration only, that dividends were
reinvested at the net asset value on the payable dates) and lost 10.35% based
on changes in its share price on the New York Stock Exchange (assuming
dividends were reinvested under the Dividend Reinvestment Plan).
At November 30, 1998, the Fund's net asset value per share was $13.04,
while its share price on the New York Stock Exchange was $12.94. Since
commencement through November 30, 1998, the Fund paid dividends from net
investment income totaling $0.49 per share.
MANAGED HIGH YIELD PLUS FUND INC.
FUND PROFILE
GOAL:
High Income; secondarily, capital appreciation
PORTFOLIO MANAGER:
Thomas J. Libassi, Mitchell Hutchins Asset Management Inc.
TOTAL NET ASSETS:
$404.9 million as of November 30, 1998
DIVIDEND PAYMENTS:
Monthly
1
<PAGE>
SEMIANNUAL REPORT
MANAGED HIGH YIELD PLUS FUND, INC.
CREDIT QUALITY(1)
[PIE CHART]
B 61.0%
BB & Higher 23.6%
Non-Rated 8.7%
Cash 2.3%
CCC & Lower 3.8%
Equity/Preferred 0.6%
PORTFOLIO HIGHLIGHTS
- -------------------------------------------------------------------------------
Performance was less than satisfactory during the Fund's first fiscal
period for several reasons:
1. It was a time of extreme volatility in the financial markets, though not
in the economy. Spreads, as measured by the Index, widened from 400 basis
points on August 1 to 617 basis points on September 1, a 50% increase.
The speed of the market decline made it extremely difficult to defend
against portfolio volatility. The Fund's market price stood at $15.06 on
July 1, and by September 4 had fallen to $12.25. The net asset value
did not decline to the same extent, declining from $15.00 on July 1 to
$13.02 on September 4.
2. Risk premiums for lower-quality credits expanded dramatically during the
period. The further down the credit spectrum you looked, the more
spreads to Treasurys widened. High-yield investments fared poorly
because of their greater credit risk.
3. For the first time ever, smaller high-yield issues (less than $200
million) underperformed larger issues (greater than $500 million). This
occurred across the entire credit quality spectrum. Since the Fund was
48% invested in smaller issues, it suffered in the reversal. We
believe smaller issues' underperformance was due to the increasing
influence of institutional investors (such as insurance companies and
pension plans), who tend to buy larger issues.
Despite these disappointments there were some positives during the
period. We invested the Fund's assets at very attractive levels in early July
and, as a result, the Fund was able to pay a higher than expected dividend.
In addition, based on the Fund' management fees and borrowing costs we were
able to construct a higher-quality portfolio than originally intended. For
example, the Fund's original targeted allocation called for a 20% weighting
in BB-rated credits (the top quality tier of the high-yield market). The
Fund' low leverage allowed us to take advantage of the market instability to
increase portfolio quality. As of November 30, 1998, the Fund had a 23.6%
weighting in BB credits, yet it achieved an income level we view as more
commensurate with a lower quality portfolio.
During the fiscal period communications (18.0%)(1) was the Fund's largest
sector allocation. Within the sector, the Fund focuses on "asset-rich"
companies that own fiberoptic lines. Line-use fees tend to give these
companies more stable revenues than the rest of the sector. Holdings included
Metromedia Fiber Network Inc. (0.6%), Northeast Optic Network Inc. (1.6%),
and Viatel Inc. (1.2%).(1) The Fund's second largest allocation was in the
general industrial sector (11.1%). Transport non-air was the Fund's third
largest sector weighting at 9.1%. The Fund's holdings consist of shipping
companies, auto parts suppliers and railroads -- we think increasing trade in
1999 will result in greater shipping activity. The Fund's cable allocation
(8.2%) focuses on new companies that are moving into established domestic
markets to offer combinations of cable, telephone and Internet services.
Positions include RCN Corp (1.1%) in the Northeast and Knology Holdings Inc.
(0.7%) in the Southeast, and companies such as United International Holdings
Inc. (1.1%), which offers cable service in Australia and Europe.
(1) All weights represent percentages of total portfolio assets as of
November 30, 1998, unless noted otherwise. The Fund is actively managed and
all holdings are subject to change.
2
<PAGE>
MANAGED HIGH YIELD PLUS FUND INC. SEMIANNUAL REPORT
OUTLOOK
- -------------------------------------------------------------------------------
We do not expect to change the Fund's investment strategy over the next
six months. We are optimistic about the high-yield market and expect it to
rebound. As of this writing, according to the CS First Boston Index
high-yield spreads are about 624 basis points, much wider than their
historical average of 491, suggesting they may narrow again and benefit the
Fund. Market prices seem to be factoring in a recession, which we do not
think likely. Instead, we expect a more supportive environment for high-yield
bonds -- slower economic growth, low inflation and low, stable interest rates.
We believe institutional investors will affect the dynamics of the
high-yield market until interest rates begin rising again. A-rated, 10-year
corporate bonds yielded 8.5% in 1994, whereas today, BB-rated 10-year bonds
yield 8.4%.(2) Institutional investors are unlikely to meet their income
targets with bonds from the investment grade sector alone -- we expect they
will turn increasingly to the high-yield market.
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued
support and welcome any comments or questions you may have.
For a QUARTERLY REVIEW on a fund in the PaineWebber Family of Funds,(3)
please contact your Investment Executive.
Sincerely,
/s/ Margo Alexander /s/ Thomas J. Libassi
MARGO ALEXANDER THOMAS J. LIBASSI
President Portfolio Manager,
Mitchell Hutchins Managed High Yield Plus Fund Inc.
Asset Management Inc.
This letter is intended to assist shareholders in understanding how the
Fund performed from commencement on June 26, 1998 through November 30, 1998,
and reflects our views at the time of writing this report. Of course, these
views may change in response to changing circumstances. We encourage you to
consult your Investment Executive regarding your personal investment
program.
(1) All weights represent percentages of total portfolio assets of November 30,
1998, unless noted otherwise. The Fund is actively managed and all holdings
are subject to change.
(2) Source: Donaldson, Lufkin & Jenrette, high-yield research, used with
permission.
(3) Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses,
and should be read carefully before investing.
3
MANAGED HIGH YIELD PLUS FUND INC.
TOP FIVE SECTORS(1)
Communications 18.0%
General Industrial 11.1%
Transport Non-Air 9.1%
Cable 8.2%
Consumer Manufacturing 6.5%
<PAGE>
MANAGED HIGH YIELD PLUS FUND INC.
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1998(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATES INTEREST RATES VALUE
- ------------- -------------------- ----------------- -------------
<C> <S> <C> <C> <C>
CORPORATE BONDS--125.46%
AEROSPACE--1.52%
$ 7,000 Sabreliner Corporation**...... 06/15/08 11.000% $ 6,160,000
-------------
AIRLINES--2.75%
6,000 Airplanes Pass-Through
Trust....................... 03/15/19 10.875 6,345,000
5,000 Morgan Stanley Aircraft....... 03/15/23 8.700 4,800,000
-------------
11,145,000
-------------
CABLE--10.73%
9,000 @Entertainment Incorporated... 07/15/08 14.500+ 3,960,000
8,000 Knology Holdings
Incorporated................ 10/15/07 11.875+ 3,920,000
8,000 NTL Incorporated**............ 10/01/08 11.500 8,930,000
7,750# Park 'N View Incorporated..... 05/15/08 13.000 6,587,500
10,000 RCN Corporation............... 10/15/07 11.125+ 5,750,000
3,000 TVN Entertainment
Corporation**............... 08/01/08 14.000 2,640,000
10,000 21st Century Telecom Group
Incorporated................ 02/15/08 12.250+ 4,200,000
3,000 UIH Australia/Pacific
Incorporated................ 05/15/06 14.000+ 1,620,000
10,000 United International Holdings
Incorporated**.............. 02/15/08 10.750+ 5,850,000
-------------
43,457,500
-------------
CHEMICALS--0.87%
3,500 American Pacific
Corporation................. 03/01/05 9.250 3,535,000
-------------
COMMUNICATIONS-FIXED--17.32%
5,000 Allegiance Telecom
Incorporated................ 05/15/08 12.875 5,000,000
5,750 Barak ITC..................... 11/15/07 12.500+ 2,961,250
4,000 Call-Net Enterprises
Incorporated................ 08/15/08 8.000 3,900,000
5,000 COLT Telecom Group PLC........ 12/15/06 12.000+ 4,200,000
4,000 Esprit Telecom Group PLC...... 06/15/08 10.875 3,920,000
3,500 Facilicom International
Incorporated................ 01/15/08 10.500 2,870,000
5,000 Flag Limited.................. 01/30/08 8.250 5,025,000
6,000 GST Equipment Funding
Incorporated................ 05/01/07 13.250 6,180,000
6,000 Hyperion Telecommunications
Incorporated................ 04/15/03 13.000+ 4,485,000
3,000 Metromedia Fiber Network
Incorporated**.............. 11/15/08 10.000 3,120,000
5,000 MetroNet Communications
Corporation................. 06/15/08 9.950+ 3,100,000
8,500 Northeast Optic Network
Incorporated................ 08/15/08 12.750 8,330,000
7,475 Pathnet Incorporated.......... 04/15/08 12.250 5,718,375
1,250 Qwest Communications
International
Incorporated**.............. 11/01/08 7.500 1,284,375
4,000* Time Warner Telecom........... 07/15/08 9.750 4,240,000
10,000 Viatel Incorporated........... 04/15/08 12.500+ 5,775,000
-------------
70,109,000
-------------
COMMUNICATIONS-MOBILE--5.63%
6,500# ICO Global Communications
Limited..................... 08/01/05 15.000 5,070,000
5,000 Nextel Communications
Incorporated................ 02/15/08 9.950+ 3,100,000
12,500 Nextel International
Incorporated................ 04/15/08 12.125+ 5,875,000
6,000 Orange PLC.................... 08/01/08 8.000 6,090,000
5,000 Spectrasite Holdings
Incorporated**.............. 07/15/08 12.000+ 2,650,000
-------------
22,785,000
-------------
</TABLE>
4
<PAGE>
MANAGED HIGH YIELD PLUS FUND INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATES INTEREST RATES VALUE
- ------------- -------------------- ----------------- -------------
<C> <S> <C> <C> <C>
</TABLE>
CORPORATE BONDS (CONTINUED)
<TABLE>
<C> <S> <C> <C> <C>
CONSUMER MANUFACTURING--8.56%
$ 6,000 AAI Fostergrant
Incorporated**.............. 07/15/06 10.750% $ 5,160,000
2,500 Apparel Ventures
Incorporated................ 12/31/00 12.250 2,275,000
3,500 Cluett American
Corporation**............... 05/15/08 10.125 3,307,500
4,000 Commemorative Brands
Incorporated................ 01/15/07 11.000 3,120,000
4,500 Decora Industries
Incorporated................ 05/01/05 11.000 4,050,000
3,000 J. Crew Operating
Corporation................. 10/15/07 10.375 2,700,000
3,700 Phillips Van-Heusen
Corporation................. 05/01/08 9.500 3,718,500
10,000 Westpoint Stevens
Incorporated................ 06/15/08 7.875 10,312,500
-------------
34,643,500
-------------
ENERGY--7.27%
5,000 American Eco Corporation...... 05/15/08 9.625 3,250,000
4,500 Clark Refining and Marketing
Incorporated**.............. 08/15/08 8.625 4,353,750
5,000 Grant Geophysical
Incorporated................ 02/15/08 9.750 3,750,000
9,000 GulfMark Offshore
Incorporated................ 06/01/08 8.750 8,775,000
4,000 Northern Offshore ASA**....... 05/15/05 10.000 2,560,000
5,000 Tesoro Petroleum
Corporation................. 07/01/08 9.000 5,012,500
5,000 TransAmerican Energy
Corporation................. 06/15/02 13.000+ 1,750,000
-------------
29,451,250
-------------
ENTERTAINMENT--1.59%
2,000# Discovery Zone
Incorporated**.............. 05/01/02 13.500 2,000,000
5,500 Silver Cinemas Incorporated... 04/15/05 10.500 4,455,000
-------------
6,455,000
-------------
FINANCE--4.11%
4,000 Nationwide Credit
Incorporated................ 01/15/08 10.250 3,320,000
5,500 Olympic Financial Limited..... 03/15/07 11.500 4,180,000
5,000 Signet Capital Trust I........ 08/15/27 9.500 4,100,000
5,050 Superior National Insurance
Group....................... 12/01/17 10.750 5,050,000
-------------
16,650,000
-------------
FOOD & BEVERAGE--3.30%
5,750 Ameriserve Food Distribution
Incorporated................ 07/15/07 10.125 5,117,500
5,000 Iowa Select Farms L. P.**..... 12/01/05 10.750 4,250,000
4,000 Packaged Ice Incorporated..... 02/01/05 9.750 4,000,000
-------------
13,367,500
-------------
GAMING--0.57%
2,250 Circus Circus Enterprises
Incorporated................ 12/01/05 9.250 2,323,125
-------------
GENERAL INDUSTRIAL--13.23%
6,000 Amtrol Incorporated........... 12/31/06 10.625 5,730,000
7,000 Aqua Chemical
Incorporated**.............. 07/01/08 11.250 6,580,000
5,000 Coltec Industries
Incorporated................ 04/15/08 7.500 5,225,000
10,000 Goss Graphic Systems
Incorporated................ 10/15/06 12.000 9,500,000
5,000 Grove Holdings LLC............ 05/01/09 11.625+ 2,350,000
5,000 Indesco International
Incorporated................ 04/15/08 9.750 4,662,500
5,800 Jackson Products
Incorporated................ 04/15/05 9.500 5,742,000
5,000 Jordan Telecommunication
Products.................... 08/01/07 11.750+ 3,850,000
</TABLE>
5
<PAGE>
MANAGED HIGH YIELD PLUS FUND INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATES INTEREST RATES VALUE
- ------------- -------------------- ----------------- -------------
<C> <S> <C> <C> <C>
</TABLE>
CORPORATE BONDS (CONTINUED)
GENERAL INDUSTRIAL (CONCLUDED)
<TABLE>
<C> <S> <C> <C> <C>
$ 2,225 Jordan Telecommunication
Products.................... 08/01/07 9.875% $ 2,225,000
3,000 J.B. Poindexter & Company
Incorporated................ 05/15/04 12.500 2,850,000
5,000 Roller Bearing Company of
America Incorporated........ 06/15/07 9.625 4,850,000
-------------
53,564,500
-------------
HEALTHCARE--3.38%
3,000 Fresenius Medical Care Capital
Trust....................... 02/01/08 7.875 2,985,000
3,000 InSight Health Services
Corporation................. 06/15/08 9.625 2,910,000
5,000 MEDIQ/PRN Life Support,
Incorporated**.............. 06/01/08 11.000 4,700,000
3,000 Tenet Healthcare
Corporation**............... 12/01/08 8.125 3,097,500
-------------
13,692,500
-------------
HOTELS & LODGING--1.81%
5,000 Raintree Resorts International
Incorporated................ 12/01/04 13.000 3,000,000
5,072 Silverleaf Resorts
Incorporated................ 04/01/08 10.500 4,311,200
-------------
7,311,200
-------------
MEDIA--2.49%
5,000 Fox Family Worldwide
Incorporated................ 11/01/07 9.250 5,025,000
2,000 Impac Group Incorporated...... 03/15/08 10.125 1,970,000
4,000 Source Media Incorporated..... 11/01/04 12.000 3,080,000
-------------
10,075,000
-------------
METALS--3.57%
3,000 AEI Holding Company**......... 11/15/07 10.000 3,090,000
6,000 Metal Management
Incorporated................ 05/15/08 10.000 3,480,000
4,000 Murrin Murrin Holdings Party
Limited..................... 08/31/07 9.375 3,780,000
4,000 WCI Steel Incorporated........ 12/01/04 10.000 4,090,000
-------------
14,440,000
-------------
PACKAGING--3.76%
2,000 Ball Corporation**............ 08/01/08 8.250 2,100,000
3,500 Bear Island LLC............... 12/01/07 10.000 3,543,750
1,500 Owens-Illinois Incorporated... 05/15/08 7.350 1,507,500
3,040 Portola Packaging
Incorporated................ 10/01/05 10.750 3,100,800
5,500 Vicap S.A..................... 05/15/07 11.375 4,950,000
-------------
15,202,050
-------------
REAL ESTATE--1.76%
6,000 American Architectural
Products Corporation........ 12/01/07 11.750 5,100,000
2,000 Forest City Enterprise
Incorporated................ 03/15/08 8.500 2,010,000
-------------
7,110,000
-------------
RESTAURANTS--1.00%
4,500 American Restaurant Group
Incorporated................ 02/15/03 11.500 4,050,000
-------------
RETAIL--6.20%
4,660 Advance Holding
Corporation**............... 04/15/09 12.875+ 2,749,400
6,000 Big 5 Corporation............. 11/15/07 10.875 6,180,000
</TABLE>
6
<PAGE>
MANAGED HIGH YIELD PLUS FUND INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATES INTEREST RATES VALUE
- ------------- -------------------- ----------------- -------------
<C> <S> <C> <C> <C>
</TABLE>
CORPORATE BONDS (CONCLUDED)
RETAIL (CONCLUDED)
<TABLE>
<C> <S> <C> <C> <C>
$ 5,000 Jafra Cosmetics International
Incorporated**.............. 05/01/08 11.750% $ 4,550,000
11,000# Mrs. Field's Holding Company
Incorporated**.............. 12/01/05 14.000+ 6,270,000
5,500 Tuesday Morning Corporation... 12/15/07 11.000 5,335,000
-------------
25,084,400
-------------
SUPERMARKETS & DRUGSTORES--1.55%
6,000 The Pantry Incorporated....... 10/15/07 10.250 6,270,000
-------------
TECHNOLOGY--8.54%
6,500 Ampex Corporation**++......... 03/15/03 12.000 6,500,000
6,000 Fairchild Semiconductor
Corporation................. 03/15/07 10.125 5,880,000
5,000 PSINet Incorporated........... 02/15/05 10.000 5,000,000
7,000 Samsung Electronics America
Incorporated**.............. 05/01/03 9.750 6,405,000
6,680 Verio Incorporated............ 04/01/05 10.375 6,713,400
8,000 Wam! Net Incorporated......... 03/01/05 13.250+ 4,080,000
-------------
34,578,400
-------------
TRANSPORTATION NON-AIR--11.90%
5,000 American Reefer Company
Limited..................... 03/01/08 10.250 3,800,000
4,000 Atlantic Express
Transportation
Corporation................. 02/01/04 10.750 4,050,000
1,500 Eletson Holdings
Incorporated................ 11/15/03 9.250 1,421,250
6,500 Equimar Shipholdings
Limited..................... 07/01/07 9.875 5,265,000
6,000 HDA Parts Systems
Incorporated**.............. 08/01/05 12.000 5,520,000
6,000 Millenium Seacarriers
Incorporated................ 07/15/05 12.000 4,950,000
3,000 Navigator Gas Transport
PLC**....................... 06/30/07 10.500 2,760,000
4,500 Pacific & Atlantic Holdings
Incorporated**.............. 05/30/08 11.500 3,780,000
5,000 Stanadyne Automotive
Corporation................. 12/15/07 10.250 5,100,000
6,250 Stena AB...................... 06/15/07 8.750 5,984,375
7,000 TFM S.A. de C.V............... 06/15/09 11.750+ 3,832,500
2,000 Transportacion Maritima Mexica
na S.A. de C.V.............. 11/15/06 10.000 1,720,000
-------------
48,183,125
-------------
UTILITIES--2.05%
5,000 Calpine Corporation........... 04/01/08 7.875 5,025,000
2,994 Panda Funding Corporation..... 08/20/12 11.625 3,293,245
-------------
8,318,245
-------------
Total Corporate Bonds (cost--$559,382,318)..... 507,961,295
-------------
CONVERTIBLE BONDS--2.58%
ENERGY--0.86%
6,000 Key Energy Group
Incorporated................ 09/15/04 5.000 3,495,000
-------------
GAMING--0.62%
2,500 Argosy Gaming Corporation..... 06/01/01 12.000 2,515,625
-------------
GENERAL INDUSTRIAL--1.10%
5,000 Corporate Express
Incorporated................ 07/01/00 4.500 4,450,000
-------------
Total Convertible Bonds (cost--$11,807,195).... 10,460,625
-------------
</TABLE>
7
<PAGE>
MANAGED HIGH YIELD PLUS FUND INC.
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
COMMON STOCK(A)--0.50%
GENERAL INDUSTRIAL--0.22%
156,775 Waste Systems International
Incorporated................ $ 901,456
-------------
TECHNOLOGY--0.28%
60,000 PSINet Incorporated........... 1,125,000
-------------
Total Common Stock (cost--$2,071,786).......... 2,026,456
-------------
PREFERRED STOCK--0.64%
COMMUNICATIONS-FIXED--0.64%
20,000 Global Crossing Holdings
Limited**(a)................ 2,000,000
5,032 Viatel Incorporated........... 578,680
-------------
Total Preferred Stock (cost--$2,000,000)....... 2,578,680
-------------
<CAPTION>
NUMBER OF
WARRANTS
- -------------
<C> <S> <C>
WARRANTS(A)--0.15%
CABLE--0.01%
36,000 @Entertainment Incorporated... 36,000
-------------
COMMUNICATIONS-FIXED--0.02%
7,475 Pathnet Incorporated.......... 74,750
-------------
FOOD & BEVERAGE--0.07%
2,750 Packaged Ice Incorporated..... 275,000
-------------
HOTELS & LODGING--0.00%
5,000 Club Regina Resorts
Incorporated................ 5,000
-------------
TECHNOLOGY--0.05%
24,000 Wam! Net Incorporated......... 192,000
-------------
TRANSPORTATION NON-AIR--0.00%
6,000 Millenium Seacarriers
Incorporated................ 3,750
-------------
Total Warrants (cost--$316,717)................ 586,500
-------------
</TABLE>
8
<PAGE>
MANAGED HIGH YIELD PLUS FUND INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATE INTEREST RATE VALUE
- ------------- -------------------- ----------------- -------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT--1.54%
$ 6,240 Repurchase Agreement dated
11/30/98 with Deustche Bank
Securities Incorporated,
collateralized by $5,470,000
U.S. Treasury Notes, 7.875%
due 11/15/04
(value-$6,364,837);
proceeds: $6,240,901
(cost--$6,240,000).......... 12/01/98 5.200% $ 6,240,000
-------------
Total Investments
(cost--$581,818,016)--130.87%................ 529,853,556
Liabilities in excess of other
assets--(30.87)%............................... (124,981,197)
-------------
Net Assets--100.00%............................ $ 404,872,359
-------------
-------------
</TABLE>
- -----------------
# Security represents a unit which is composed of the stated bond with attached
warrants or common stock.
++ Illiquid securities representing 1.6% of net assets. These securities are
valued at fair value as determined in good faith by a valuation committee
under the direction of the Fund's board of directors.
+ Denotes a step-up bond or zero coupon bond that converts to the noted fixed
rate at a designated future date.
* Partial principal amount pledged as collateral for reverse repurchase
agreement (with Morgan Stanley Incorporated, maturing December 2, 1998).
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(a) Non-income producing securities
See accompanying notes to financial statements
9
<PAGE>
MANAGED HIGH YIELD PLUS FUND INC.
STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1998(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value
(cost--$581,818,016).................. $ 529,853,556
Receivable for investments sold......... 13,419,273
Interest receivable..................... 12,924,725
Deferred organizational expenses........ 61,626
-----------------
Total assets............................ 556,259,180
-----------------
LIABILITIES
Loan payable............................ 131,000,000
Payable for investments purchased....... 16,333,675
Payable for reverse repurchase
agreements............................ 2,652,000
Payable for interest on bank loan....... 623,427
Payable to investment adviser and
administrator......................... 302,173
Payable to custodian.................... 259,940
Accrued expenses and other
liabilities........................... 215,606
-----------------
Total liabilities....................... 151,386,821
-----------------
NET ASSETS
Capital Stock--$0.001 par value;
200,000,000 shares authorized;
31,040,610 shares issued and
outstanding........................... 464,794,279
Undistributed net investment income..... 4,275,153
Accumulated net realized loss from
investment transactions............... (12,232,613)
Net unrealized depreciation of
investments........................... (51,964,460)
-----------------
Net assets applicable to shares
outstanding........................... $ 404,872,359
-----------------
-----------------
Net asset value per share............... $13.04
-----------------
-----------------
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
MANAGED HIGH YIELD PLUS FUND INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 26, 1998+
THROUGH
NOVEMBER 30,
1998
(UNAUDITED)
----------------
<S> <C>
INVESTMENT INCOME:
Interest and dividends.................. $ 24,248,201
----------------
EXPENSES:
Interest expense, loan commitment and
other fees............................ 3,005,320
Investment advisory and
administration........................ 1,558,827
Custody and accounting.................. 136,550
Legal and audit......................... 59,372
Amortization of organizational
expenses.............................. 47,038
Reports and notices to shareholders..... 35,893
Directors' fees......................... 5,250
Transfer agency and service fees........ 4,440
Other expenses.......................... 10,409
----------------
4,863,099
----------------
Net investment income................... 19,385,102
----------------
REALIZED AND UNREALIZED LOSSES FROM
INVESTMENT ACTIVITIES:
Net realized loss from investment
transactions.......................... (12,232,613)
Net unrealized appreciation/depreciation
of investments........................ (51,964,460)
----------------
NET REALIZED AND UNREALIZED LOSS FROM
INVESTMENT ACTIVITIES................. (64,197,073)
----------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... $(44,811,971)
----------------
----------------
</TABLE>
- ---------------
+ Commencement of operations
See accompanying notes to financial statements
11
<PAGE>
MANAGED HIGH YIELD PLUS FUND INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 26, 1998+
THROUGH
NOVEMBER 30, 1998
(UNAUDITED)
--------------------
<S> <C>
FROM OPERATIONS:
Net investment income................... $ 19,385,102
Net realized loss from investment
transactions.......................... (12,232,613)
Net unrealized appreciation/depreciation
of investments........................ (51,964,460)
--------------------
Net decrease in net assets resulting
from operations....................... (44,811,971)
--------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income................... (15,109,949)
--------------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from the sale of shares.... 460,575,000
Proceeds from dividends reinvested...... 4,119,259
--------------------
Net increase in net assets from capital
stock transactions.................... 464,694,259
--------------------
Net increase in net assets.............. 404,772,339
NET ASSETS:
Beginning of period..................... 100,020
--------------------
End of period (including undistributed
net investment income of
$4,275,153)........................... $404,872,359
--------------------
--------------------
</TABLE>
- -------------
+ Commencement of operations
See accompanying notes to financial statements
12
<PAGE>
MANAGED HIGH YIELD PLUS FUND INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 26, 1998+
THROUGH
NOVEMBER 30,
1998
(UNAUDITED)
--------------
<S> <C>
CASH FLOWS USED FOR OPERATING ACTIVITIES:
Interest received........................................... $ 7,235,758
Operating expenses paid..................................... (1,141,686)
Interest paid............................................... (2,381,893)
Purchase of short-term portfolio investments, net........... (6,240,000)
Purchase of long-term portfolio investments................. (860,016,762)
Sale of long-term portfolio investments..................... 279,208,253
--------------
Net cash used for operating activities...................... (583,336,330)
--------------
CASH FLOWS PROVIDED FROM FINANCING ACTIVITIES:
Dividends paid to shareholders.............................. (15,109,949)
Proceeds from bank loan..................................... 131,000,000
Proceeds from reverse repurchase agreements................. 2,652,000
Net proceeds from the sale of shares and dividends
reinvested................................................ 464,694,259
--------------
Net cash provided from financing activities................. 583,236,310
--------------
Net decrease in cash........................................ (100,020)
Cash at beginning of period................................. 100,020
--------------
Cash at end of period....................................... $ 0
--------------
--------------
RECONCILIATION OF NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH USED FOR OPERATING ACTIVITIES:
Net decrease in net assets resulting from operations........ $ (44,811,971)
--------------
Increase in investments, at value........................... (529,853,556)
Increase in receivable for investments sold................. (13,419,273)
Increase in interest receivable............................. (12,924,725)
Amortization of organizational expenses..................... 47,038
Increase in payable for investments purchased............... 16,333,675
Increase in payable for interest on bank loan............... 623,427
Increase in payable to investment adviser and
administrator............................................. 302,173
Increase in accrued expenses and other liabilities.......... 366,882
--------------
(538,524,359)
--------------
Net cash used for operating activities...................... $(583,336,330)
--------------
--------------
</TABLE>
- -------------
+ Commencement of operations
See accompanying notes to financial statements
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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, 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. Organizational costs have been deferred and are being amortized on
the straight line method through the period ended May 31, 1999. Direct expenses
of $1,071,662 relating to the public offering of the Fund's shares were paid by
PaineWebber Incorporated ("PaineWebber") at the time of issuance.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund 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--Where market quotations are readily available,
portfolio securities are valued thereon, provided such quotations adequately
reflect the fair value of the securities, in the judgment of Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins"), an asset management subsidiary of
PaineWebber and investment adviser and administrator of the Fund. When market
quotations are not readily available, securities are valued based upon
appraisals received from a pricing service using a computerized matrix system or
based upon appraisals derived from information concerning those securities or
similar securities received from recognized dealers in those securities. All
other securities are valued at fair value as determined in good faith by a
management committee under the direction of the Fund's board of directors. 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 Fund's board of directors determines that this does not
represent fair value.
REPURCHASE AGREEMENTS--The Fund's custodian takes possession of the collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a mark-to-market basis 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 has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. 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 occasionally participates in joint repurchase
agreement transactions with other funds managed by Mitchell Hutchins.
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. 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 stockholders are
recorded on the ex-dividend date. Dividends from net investment income and
distributions from net realized capital gains are determined in accordance with
federal income tax regulations which may differ from 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.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
BORROWINGS
REVERSE REPURCHASE AGREEMENTS--The Fund enters into reverse repurchase
agreements with qualified, third party broker-dealers as determined by, and
under the direction of, the Fund's board of directors. Interest on the value of
reverse repurchase agreements issued and outstanding is based upon competitive
market rates at the time of issuance. At the time the Fund enters into a reverse
repurchase agreement, it establishes and maintains a segregated account with the
Fund's custodian containing liquid securities having a value not less than the
repurchase price, including accrued interest, of the reverse repurchase
agreement.
The average monthly balance of reverse repurchase agreements outstanding
during the period ended November 30, 1998 was $109,720,855 at a weighted average
interest rate of 4.99%.
LOAN PAYABLE--The fund has a $200 million dollar committed credit facility
("facility"). Under the terms of the facility, the fund borrows at the London
Interbank Overnight Rate ("LIBOR") plus facility and administrative fees. In
addition, the fund pays a liquidity fee on the unused portion of the facility.
The fund may borrow up to 33 1/3% of its total assets up to the committed
amount. In accordance with the terms of the debt agreement, the fund has pledged
assets in the amount of $324,460,295 at 11/30/98 as collateral for the bank
loan.
For the period October 27, 1998 (commencement of borrowings) through November
30, 1998, the Fund borrowed a daily weighted average balance of $114,800,000 at
an interest rate of 5.41%.
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 ADVISER AND ADMINISTRATOR
The Fund has entered into an Investment Advisory and Administration Contract
("Advisory Contract") with Mitchell Hutchins, under which Mitchell Hutchins
serves as investment adviser and administrator of the Fund. The Advisory
Contract provides Mitchell Hutchins with a fee, computed weekly and payable
monthly, in an amount equal to the annual rate of 0.70% of the Fund's average
weekly total assets minus liabilities other than the aggregate indebtedness
constituting leverage.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at November 30,
1998 was substantially the same as the cost of securities for financial
statement purposes.
At November 30, 1998, the components of the net unrealized depreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross depreciation (investments having an excess of cost over value)........... $(56,083,298)
Gross appreciation (investments having an excess of value over cost)........... 4,118,838
------------
Net unrealized depreciation of investments..................................... $(51,964,460)
------------
------------
</TABLE>
For the period ended November 30, 1998, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $876,350,437 and
$292,627,526, respectively.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FEDERAL TAX STATUS
The Fund intends to distribute all of its taxable 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.
CAPITAL STOCK
There are 200,000,000 shares of $0.001 par value common stock authorized. Of
the 31,040,610 shares of common stock outstanding, 6,865 shares are owned by
Mitchell Hutchins.
Transactions in shares of common stock for the period ended November 30, 1998
were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
---------- ------------
<S> <C> <C>
Shares issued.......................................................................... 30,705,000 $460,575,000
Dividends reinvested................................................................... 328,942 4,119,259
---------- ------------
Net increase........................................................................... 31,033,942 $464,694,259
---------- ------------
---------- ------------
</TABLE>
16
<PAGE>
MANAGED HIGH YIELD PLUS FUND INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
Selected data for a share of capital stock outstanding throughout the period is
presented below:
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 26, 1998+
THROUGH
NOVEMBER 30, 1998
------------------
<S> <C>
Net asset value, beginning of period.... $ 15.00
--------
Net investment income................... 0.63
Net realized and unrealized loss from
investment transactions................ (2.10)
--------
Net decrease from investment
operations............................. (1.47)
--------
Dividends from net investment income.... (0.49)
--------
Net asset value, end of period.......... $ 13.04
--------
--------
Market value, end of period............. $ 12.94
--------
--------
Total investment return (1)............. (10.35)%
--------
--------
Ratios/Supplemental Data:
Net assets, end of period (000's)....... $404,872
Expenses to average net assets**........ 2.76%*
Net investment income to average net
assets................................. 10.99%*
Portfolio turnover rate................. 54%
Asset coverage++........................ $ 4,029
</TABLE>
- ---------------
+ Commencement of operations
++ Per $1,000 of reverse repurchase agreements and bank loans outstanding
* Annualized
** This ratio includes 1.70% related to interest expense for the period ended
November 30, 1998 which represents the cost of leverage to the Fund.
(1) Total investment return is calculated assuming a purchase of capital stock
at market value on the first day of the period reported and a sale at market
value on the last day of the period reported and assuming reinvestment of
dividends at prices obtained under the Fund's Dividend Reinvestment Plan.
Total investment return does not reflect brokerage commissions and has not
been annualized.
17
<PAGE>
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,
Inc. ("NYSE"). The Fund's primary investment objective is to seek high income.
Its secondary objective is to seek capital appreciation. The Fund's investment
adviser and administrator is Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), a wholly-owned asset management subsidiary of PaineWebber
Incorporated ("PaineWebber"), which has over $57 billion in assets under
management as of December 31, 1998.
SHAREHOLDER INFORMATION
The NYSE ticker symbol for the Managed High Yield Plus Fund Inc. is "HYF."
Weekly comparative net asset value and market price information about the Fund
is published each Monday in THE WALL STREET JOURNAL, each Sunday in THE NEW YORK
TIMES and each week in BARRON'S, as well as in numerous other newspapers.
The Fund's board of directors amended the Fund's bylaws to require that the
Fund receive notice of board nominations or proposals that any shareholder
wishes to be considered at an annual or special shareholder meeting. This notice
will give the Fund's management an opportunity to inform shareholders of and
respond to those nominations and proposals. The amendment will be effective for
meetings that occur after the Fund's 1999 annual meeting.
The amended bylaws require that the Fund receive notice of a nomination or
proposal for an annual meeting at least 120 days in advance of the anniversary
of the date that the Fund's proxy statement for the previous year's annual
meeting was first released to shareholders. For a special shareholder meeting,
the Fund must receive notice within seven days of the date on which notice of
the special meeting is first given to shareholders. In order to make a
nomination or proposal to be considered at the 1999 annual meeting of
shareholders, the Fund must receive notice of that nomination or proposal no
later than April 1, 1999.
YEAR 2000 RISKS
Like other funds and financial and business organizations around the world,
the Fund could be adversely affected if the computer systems used by its
investment adviser, other service providers and entities with computer systems
that are linked to Fund records do not properly process and calculate
date-related information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Issue."
Mitchell Hutchins is taking steps that it believes are reasonably designed to
address the Year 2000 Issue with respect to the computer systems that it uses,
and to obtain satisfactory assurances that each of the Fund's other major
service providers is taking comparable steps. However, there can be no assurance
that these steps will be sufficient to avoid any adverse impact on the Fund.
DISTRIBUTION POLICY
The fund's board of directors has established a Dividend Reinvestment Plan
(the "Plan") under which all stockholders whose shares are registered in their
own names, or in the name of PaineWebber or its nominee, will have all dividends
and other distributions on their shares of common stock automatically reinvested
in additional shares of common stock, unless such stockholders elect to receive
cash. Stockholders who elect to hold their shares in the name of
18
<PAGE>
MANAGED HIGH YIELD PLUS FUND INC.
GENERAL INFORMATION(UNAUDITED)(CONTINUED)
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
stockholders to participate in the Plan may change if their shares are
transferred into the name of another broker or nominee.
A stockholder may elect not to participate in the Plan or may terminate
participation in the Plan at any time without penalty, and stockholders 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 stockholder'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 deemed an
election by a stockholder 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 stockholders 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 are issued. If, on
the dividend payment date, the net asset value per Share is greater than the
market value per Share (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 "ex-dividend" date, which typically
will be approximately ten days. If, before the Transfer Agent has completed its
open-market purchases, the market price of a Share 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
19
<PAGE>
MANAGED HIGH YIELD PLUS FUND INC.
GENERAL INFORMATION(UNAUDITED)(CONCLUDED)
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 last purchase date. 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. The
Transfer Agent's fees for the handling of reinvestment of dividends will be paid
by the Fund. 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 will 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.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust 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 PNC Bank, National Association, c/o PFPC
Inc., P.O. Box 8950, Wilmington, Delaware 19899.
20
<PAGE>
DIRECTORS
E. Garrett Bewkes, Jr.
CHAIRMAN
Margo N. Alexander
Richard Q. Armstrong
Richard R. Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
PRINCIPAL OFFICERS
Margo N. Alexander
PRESIDENT
Victoria E. Schonfeld
VICE PRESIDENT
Dianne E. O'Donnell
VICE PRESIDENT AND SECRETARY
Paul H. Schubert
VICE PRESIDENT AND TREASURER
Thomas J. Libassi
VICE PRESIDENT
Dennis L. McCauley
VICE PRESIDENT
INVESTMENT ADVISER AND ADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
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.
THE FINANCIAL INFORMATION HEREIN IS TAKEN FROM THE RECORDS OF THE FUND WITHOUT
EXAMINATION BY INDEPENDENT AUDITORS WHO DO NOT EXPRESS AN OPINION THEREON.
THIS REPORT IS SENT TO THE SHAREHOLDERS OF THE FUND FOR THEIR INFORMATION. IT
IS NOT A PROSPECTUS, CIRCULAR OR REPRESENTATION INTENDED FOR THE USE IN THE
PURCHASE OR SALE OF SHARES OF THE FUND OR OF ANY SECURITIES MENTIONED IN THIS
REPORT.
<PAGE>
PAINEWEBBER
- -C-1999 PaineWebber Incorporated
Member SIPC
MANAGED HIGH YIELD PLUS FUND INC.
SEMIANNUAL REPORT
NOVEMBER 30, 1998
