(File Nos. 333-5107 and 811-08765)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
MANAGED HIGH YIELD PLUS FUND INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction
applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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MANAGED HIGH YIELD PLUS FUND INC.
December __, 2000
Dear Shareholder,
The enclosed proxy materials relate to a special meeting of the
shareholders of Managed High Yield Plus Fund Inc. ("Fund") to be held on
February 8, 2001. The Fund's Board of Directors ("Board") has called this
meeting to request shareholder approval of new investment management and
investment sub-advisory agreements and a new sub-adviser approval policy for the
Fund.
The proposed investment management and investment sub-advisory
agreements would allow the Fund to implement, on a long-term basis, a
restructuring of the Fund's investment management arrangements that was approved
by the Board and implemented on an interim basis in October, 2000. Under the
restructuring, the primary investment advisory role of the Fund's investment
manager, Mitchell Hutchins Asset Management Inc., is to oversee the management
of the Fund's portfolio by UBS Asset Management (New York), Inc., which serves
as the Fund's sub-adviser. Mitchell Hutchins would continue to provide
administrative services to the Fund, as it has in the past.
The proposed sub-adviser approval policy would permit Mitchell Hutchins
and the Board to change the Fund's sub-advisory arrangements from time to time,
subject to ratification and approval by the Fund's shareholders at the next,
regularly scheduled annual meeting. Implementation of this policy would be
subject to the issuance of an exemptive order that has been requested from the
Securities and Exchange Commission.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THESE PROPOSALS.
YOUR VOTE IS VERY IMPORTANT. Please take the time to review the
enclosed proxy statement and vote your shares today by signing and returning the
enclosed proxy card. We have retained an outside firm that specializes in proxy
solicitation to assist us with any necessary follow-up. If we have not received
your vote as the meeting date approaches, you may receive a telephone call from
Shareholder Communications Corporation to ask for your vote. We hope that their
telephone call does not inconvenience you.
Thank you for your attention to this matter and for your continuing
investment in the Fund.
Very truly yours,
Brian M. Storms
President
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MANAGED HIGH YIELD PLUS FUND INC.
51 West 52nd Street
New York, New York 10019-6114
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
February 8, 2001
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To the Shareholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders
("Meeting") of Managed High Yield Plus Fund Inc. ("Fund") will be held on
February 8, 2001, at 1285 Avenue of the Americas, 14th Floor, New York, New
York, 10019-6028, at 12:00 noon, Eastern time, for the following purposes:
1. To approve a new Investment Management and Administration
Contract between Mitchell Hutchins Asset Management Inc.
("Mitchell Hutchins") and the Fund;
2. To approve a new Sub-Advisory Contract between Mitchell Hutchins
Asset Management Inc. and UBS Asset Management (New York), Inc.;
and
3. To approve a new sub-adviser approval policy for the Fund.
Shareholders of record as of the close of business on November 30,
2000, are entitled to notice of, and to vote at, the Meeting or any adjournment
thereof.
Please execute and return promptly in the enclosed envelope the
accompanying proxy, which is being solicited by the Fund's Board of Directors.
Returning your proxy promptly is important to ensure a quorum at the Meeting.
You may revoke your proxy at any time before it is exercised by the subsequent
execution and submission of a revised proxy, by giving written notice of
revocation to the Fund at any time before the proxy is exercised or by voting in
person at the Meeting.
By Order of the Board of Directors,
Dianne E. O'Donnell
Secretary
December __, 2000
51 West 52nd Street
New York, New York 10019-6114
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YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN.
Please indicate your voting instructions on the enclosed proxy card,
sign and date the card and return it in the envelope provided. IF YOU SIGN, DATE
AND RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE
VOTED "FOR" THE NEW INVESTMENT MANAGEMENT AND ADMINISTRATION CONTRACT, THE NEW
SUB-ADVISORY CONTRACT, AND THE SUB-ADVISER APPROVAL POLICY, AND "FOR" OR
"AGAINST" ANY OTHER BUSINESS WHICH MAY PROPERLY ARISE AT THE MEETING, IN THE
PROXIES' DISCRETION. In order to avoid the additional expense of further
solicitation, we ask your cooperation in mailing your proxy card promptly.
If we do not receive your completed proxy cards after several weeks,
our proxy solicitor, Shareholder Communications Corporation, may contact you.
Our proxy solicitor will remind you to vote your shares or will record your vote
over the phone if you choose to vote in that manner.
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INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and avoid the time and expense involved in validating your
vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the
registration on the proxy card.
3. All Other Accounts: The capacity of the individual signing the
proxy card should be indicated unless it is reflected in the form
of registration. For example:
Registration Valid Signature
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Corporate Accounts
(1) ABC Corp............................... ABC Corp.
John Doe, Treasurer
(2) ABC Corp............................... John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer...... John Doe
(4) ABC Corp. Profit Sharing Plan.......... John Doe, Trustee
Partnership Accounts
(1) The XYZ Partnership.................... Jane B. Smith,
Partner
(2) Smith and Jones, Limited Partnership... Jane B. Smith,
General Partner
Trust Accounts
(1) ABC Trust Account...................... Jane B. Doe,
Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78.... Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o
John B. Smith, Jr.,
UGMA/UTMA.............................. John B. Smith
(2) Estate of John B. Smith................ John B. Smith, Jr.,
Executor
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MANAGED HIGH YIELD PLUS FUND INC.
51 West 52nd Street
New York, New York 10019-6114
1-800-647-1568
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PROXY STATEMENT
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SPECIAL MEETING OF SHAREHOLDERS
February 8, 2001
This Proxy Statement is furnished to the shareholders of Managed High
Yield Plus Fund Inc. ("Fund") in connection with the solicitation by the Fund's
Board of Directors ("Board") of proxies to be used at the special meeting of
shareholders to be held on February 8, 2001, at 1285 Avenue of the Americas,
14th Floor, New York, New York, 10019-6028, at 12:00 noon, Eastern time or any
adjournments thereof ("Meeting"). This Proxy Statement and the accompanying
proxy card are first being mailed to shareholders on or about December __, 2000.
The presence, in person or by proxy, of a majority of the shares of the
Fund outstanding as of the close of business on November 30, 2000 ("Record
Date") will constitute a quorum for the transaction of business at the Meeting.
If a quorum is not present at the Meeting, or if a quorum is present but
sufficient votes to approve any of the proposals are not received, the persons
named as proxies may propose one or more adjournments of the Meeting to permit
further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares represented at the Meeting in
person or by proxy. The persons named as proxies will vote those proxies that
they are entitled to vote "FOR" for any such proposal in favor of such an
adjournment and will vote those proxies required to be voted "AGAINST" any such
proposal against such adjournment. A shareholder vote may be taken on one or
more of the proposals in this Proxy Statement prior to any such adjournment if
sufficient votes have been received and it is otherwise appropriate.
Broker non-votes are shares held in "street name" for which the broker
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. Abstentions and broker non-votes will be counted
as shares present for purposes of determining whether a quorum is present but
will not be voted for or against any adjournment or proposal. Accordingly,
abstentions and broker non-votes effectively will be votes against Proposals 1,
2 and 3, which require the affirmative vote of a specified majority of the
Fund's outstanding shares.
All properly executed and unrevoked proxies received in time for the
Meeting will be voted as instructed by shareholders. Approval of each proposal
requires the affirmative vote of the lesser of (1) 67% or more of the shares of
the Fund present at the Meeting, if more than 50% of the outstanding shares are
represented at the Meeting in person or by proxy, or (2) more than 50% of the
outstanding shares entitled to vote at the Meeting. If you execute your proxy
but give no voting instructions, your shares will be voted "FOR" each of the
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proposals described in this Proxy Statement and, in the proxies' discretion,
either "FOR" or "AGAINST" any other business which may properly arise at the
Meeting. You may revoke any proxy at any time prior to its exercise by executing
a superseding proxy or by submitting a written notice of revocation to the
Secretary of the Fund ("Secretary"). To be effective, your revocation must be
received by the Secretary prior to the Meeting and must indicate your name and
account number. In addition, if you attend the Meeting in person, you may, if
you wish, vote by ballot at the Meeting, thereby canceling any proxy that you
have previously given.
As of the Record Date, the Fund had 38,263,222 shares of common stock
outstanding. Shareholders are entitled to one vote for each full share held and
a fractional vote for each fractional share held. As of the Record Date,
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), the investment
manager and administrator of the Fund, does not know of any person who owns
beneficially or of record more than 5% of the outstanding shares of the Fund. As
of that same date, the Directors and officers, as a group, owned less than 1% of
the Fund's outstanding shares.
The solicitation of proxies, the cost of which will be borne by
Mitchell Hutchins, will be made by mail, telephone and via the Internet. The
Fund's officers and employees of Mitchell Hutchins who assist in the proxy
solicitation will not receive any additional or special compensation for any
such efforts. The Fund has engaged the services of Shareholder Communications
Corporation to assist it in the solicitation of proxies for the Meeting.
Shareholder Communications Corporation will be paid approximately $32,000 for
proxy solicitation services. The Fund will request broker/dealer firms,
custodians, nominees and fiduciaries to forward proxy materials to the
beneficial owners of the shares held of record by such persons. Mitchell
Hutchins may reimburse such broker/dealer firms, custodians, nominees and
fiduciaries for their reasonable expenses incurred in connection with such proxy
solicitation.
COPIES OF THE FUND'S MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS,
INCLUDING FINANCIAL STATEMENTS, HAVE PREVIOUSLY BEEN DELIVERED TO SHAREHOLDERS.
SHAREHOLDERS MAY REQUEST COPIES OF THE FUND'S ANNUAL AND SEMI-ANNUAL REPORTS BY
WRITING THE FUND AT 51 WEST 52ND STREET, NEW YORK, NEW YORK 10019-6114, OR BY
CALLING 1-800-647-1568.
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INTRODUCTION
In October, the Board approved and implemented, on an interim basis,
recommendations by Mitchell Hutchins to restructure the management of the Fund's
assets and to appoint UBS Asset Management (New York), Inc. ("UBS Asset
Management"), an investment management company that is affiliated with Mitchell
Hutchins, as the Fund's investment sub-adviser. Under the revised structure,
Mitchell Hutchins' primary investment management role was changed from direct
responsibility for portfolio management to oversight of the investment
sub-advisory services provided to the Fund. Mitchell Hutchins also provides
administrative services to the Fund, as it has in the past.
Effective October 10, 2000, the Board terminated the Fund's
then-existing investment advisory and administration contract with Mitchell
Hutchins ("Old Advisory Contract") and approved a new, interim investment
management and administration contract ("Interim Management Contract") between
the Fund and Mitchell Hutchins that reflects the revised structure. The Board
also approved an interim sub-advisory contract ("Interim Sub-Advisory Contract")
that was entered into as of October 10, 2000 between Mitchell Hutchins and UBS
Asset Management.
Under the Interim Management Contract, Mitchell Hutchins serves as
investment manager for the Fund and oversees the portfolio management services
performed by UBS Asset Management. The Fund pays Mitchell Hutchins the same
annual fee, 0.70% of the Fund's average weekly total assets minus liabilities
other than the Fund's aggregate indebtedness constituting leverage, under the
Interim Management Contract that it paid under the Old Advisory Contract. Under
the Interim Sub-Advisory Contract, UBS Asset Management provides the Fund with a
continuous investment program for which Mitchell Hutchins, not the Fund, pays
UBS Asset Management at an annual rate of 0.2375% of the Fund's average weekly
net assets. The Interim Management Contract and the Interim Sub-Advisory
Contract each will terminate automatically on the earlier of 150 days from its
effective date or the date on which new investment management and sub-advisory
contracts, respectively, are approved by the Fund's shareholders as recommended
by the Board under Proposals 1 and 2 below.
In Proposal 3 below, the Board is asking shareholders to approve a
policy allowing Mitchell Hutchins and the Board to change the Fund's
sub-advisory arrangements from time to time by appointing or replacing one or
more sub-advisers, or by amending their sub-advisory contracts, in each case
subject to later ratification and approval by the Fund's shareholders.
PROPOSAL 1 - APPROVAL OF A NEW INVESTMENT MANAGEMENT AND ADMINISTRATION
CONTRACT WITH MITCHELL HUTCHINS.
At its meeting on November 8, 2000, the Board approved a new Investment
Management and Administration Contract ("New Management Contract") between the
Fund and Mitchell Hutchins. The New Management Contract is substantially the
same as the Interim Management Contract and will implement, on a long-term
basis, the restructuring contemplated by that interim contract. Under the New
Management Contract, Mitchell Hutchins will receive the same compensation as
under the Interim Management Contract and the Old Advisory Contract.
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The form of the New Management Contract is attached as Appendix B.
Further information about Mitchell Hutchins is set forth in Appendix C.
COMPARISON BETWEEN THE OLD ADVISORY CONTRACT AND THE NEW MANAGEMENT CONTRACT
The main difference between the Old Advisory Contract and the New
Management Contract is the change of Mitchell Hutchins' investment advisory
role. Under the Old Advisory Contract, Mitchell Hutchins was required to provide
a continuous investment program for the Fund, including investment research and
management with respect to all securities, investments and cash equivalents in
the Fund, and it determined what securities and other investments would be
purchased, retained or sold by the Fund. As under the Interim Management
Contract, the primary investment advisory role of Mitchell Hutchins under the
New Management Contract will be to oversee the management of the Fund's
portfolio by one or more investment sub-advisers. Mitchell Hutchins will provide
initial reviews of prospective sub-advisers and will oversee and monitor the
performance of those sub-advisers that are selected. Mitchell Hutchins also will
report to the Board the results of its evaluation, supervision, and monitoring
duties, keep related books and records of the Fund in connection therewith and
make recommendations to the Board concerning renewals, modifications or
termination of the Fund's sub-advisory arrangements. The New Management Contract
differs from the Interim Management Contract in that it provides that, if so
requested by the Board, Mitchell Hutchins will also perform direct portfolio
management with respect to any portion of the Fund's assets for which no
sub-advisory arrangements are in effect.
While the Old Advisory Contract permitted Mitchell Hutchins to delegate
some or all of its duties to a sub-adviser, the New Management Contract
specifically contemplates that portfolio management duties normally will be
performed by one or more sub-advisers. Each sub-advisory agreement entered into
between Mitchell Hutchins and a sub-adviser is required to be in substantially
the form previously approved by the Board. As described in Proposal 3, Mitchell
Hutchins and the Fund have filed an exemptive application with the Securities
and Exchange Commission ("SEC") that would permit a sub-adviser to be appointed
upon the approval of the Board, subject to shareholder ratification and approval
at the Fund's next, regularly scheduled annual meeting. See Proposal 3 for more
information.
Mitchell Hutchins' duties as the Fund's administrator under the New
Management Contract will be substantially identical to its duties as
administrator under the Old Advisory Contract. Mitchell Hutchins will administer
the affairs of the Fund, subject to the supervision of the Board, and will
provide the Fund with such corporate, administrative and clerical personnel
(including officers of the Fund) and services as are deemed reasonably necessary
or advisable by the Board, including the maintenance of certain books and
records of the Fund. Mitchell Hutchins will arrange, but not pay, for the
periodic preparation, updating, filing and dissemination (as applicable) of
reports to the Fund's shareholders and the SEC and other appropriate federal or
state regulatory authorities. Mitchell Hutchins will provide the Fund with, or
obtain for it, adequate office space and all necessary office equipment and
services, including telephone service, heat, utilities, stationery supplies and
similar items. Mitchell Hutchins will provide the Board on a regular basis with
economic and investment analyses and reports and make available to the Board,
upon request, any economic, statistical and investment services normally
available to institutional or other customers of Mitchell Hutchins.
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Both the Old Advisory Contract and the New Management Contract provide
that Mitchell Hutchins will not be liable for any error in judgment or mistake
of law or for any loss suffered by the Fund or its shareholders in connection
with the matters to which the Contracts relate, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of Mitchell
Hutchins in the performance of its duties or from reckless disregard by it of
its obligations and duties under the Contracts. The New Management Contract
expressly extends this limitation of liability to any sub-advisers or
sub-administrators to the Fund and specifies that Mitchell Hutchins is not
responsible for the actions or inactions of any sub-adviser in the performance
of the duties assigned to it.
The New Management Contract provides that, for the services provided
and the expenses assumed by Mitchell Hutchins, the Fund will pay to Mitchell
Hutchins a fee, computed weekly and paid monthly, at an annual rate of 0.70% of
the Fund's average weekly total assets minus liabilities other than the Fund's
aggregate indebtedness constituting leverage. This fee is identical to the fee
payable to Mitchell Hutchins under the Old Advisory Contract.
As under the Old Advisory Contract, the New Management Contract will
terminate automatically upon assignment and is terminable at any time without
penalty by the Board or by vote of the holders of a majority of the Fund's
outstanding voting securities on sixty days' written notice to Mitchell
Hutchins, or by Mitchell Hutchins on sixty days' written notice to the Fund.
If approved by the Fund's shareholders, the New Management Contract
will become effective on the date of approval and will remain in effect for an
initial two-year term. Thereafter, the New Management Contract will continue in
effect if it is approved at least annually by a vote of the Fund's shareholders
or by the Board, provided that, in either event, continuance is approved by the
vote of a majority of the Board who are not "interested persons," as defined by
the Investment Company Act of 1940, as amended ("1940 Act"), of the Fund or
Mitchell Hutchins ("Independent Directors"), which vote must be cast in person
at a meeting called for the purpose of voting on such approval.
The Old Advisory Contract was dated June 22, 1998, and was last
submitted to a vote of the shareholders of the Fund on that date in connection
with the Fund's commencement of operations. The Interim Management Contract is
dated October 10, 2000 and has not been submitted to the shareholders for
approval. The Fund paid or accrued investment advisory and administrative fees
to Mitchell Hutchins under the Old Advisory Contract in the amount of $3,598,783
during the fiscal year ended May 31, 2000.
EVALUATION BY THE BOARD
In approving the New Management Contract, the Board reviewed and
analyzed the factors its members deemed relevant, including: (1) the services
previously and now being provided by Mitchell Hutchins; (2) the nature, quality,
and scope of such services as well as the Fund's investment performance; (3) the
nature and scope of the services to be provided to the Fund by Mitchell Hutchins
under the New Management Contract; (4) the ability of Mitchell Hutchins to
provide such services; and (5) the potential effect of the New Management
Contract on shareholders. The Board reviewed the proposed fees payable to
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Mitchell Hutchins under the New Management Contract and considered the
management, advisory and/or administration fees paid by other investment
companies with similar objectives and characteristics.
After full consideration of the above listed and other factors, the
Board, including the Independent Directors, approved the New Management Contract
and authorized the submission of the New Management Contract to the Fund's
shareholders for their approval at the Meeting.
REQUIRED VOTE
Approval of Proposal 1 requires the affirmative vote of the lesser of
(1) 67% or more of the shares of the Fund present at the Meeting, if more than
50% of the outstanding shares are represented at the Meeting in person or by
proxy, or (2) more than 50% of the outstanding shares entitled to vote at the
Meeting. If Proposal 1 is not approved by shareholders, the Interim Management
Contract will continue in effect for the remainder of its original 150-day term,
and the Board will consider what measures are necessary or appropriate to ensure
the continuation of advisory services to the Fund.
THE BOARD RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 1.
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PROPOSAL 2 - APPROVAL OF A NEW SUB-ADVISORY CONTRACT BETWEEN MITCHELL
HUTCHINS AND UBS ASSET MANAGEMENT.
At the November 8, 2000 meeting of the Board, Mitchell Hutchins
proposed, and the Board approved, a sub-advisory contract between Mitchell
Hutchins and UBS Asset Management ("New Sub-Advisory Contract"). The New
Sub-Advisory Contract is substantially identical to the Interim Sub-Advisory
Contract, except that it is for a longer term and it can be terminated by the
Fund or Mitchell Hutchins on sixty days' notice to UBS Asset Management. The New
Sub-Advisory Contract provides for Mitchell Hutchins (not the Fund) to pay UBS
Asset Management sub-advisory fees at the same rate as under the Interim
Sub-Advisory Contract.
The form of the New Sub-Advisory Contract is attached as Appendix D.
Further information about UBS Asset Management is set forth in Appendix E.
NEW SUB-ADVISORY CONTRACT
Under the New Sub-Advisory Contract, UBS Asset Management will be
responsible, subject to the supervision of the Board and Mitchell Hutchins, for
the actual investment management of the Fund's assets or, if Mitchell Hutchins
so specifies at a subsequent time, a designated portion of those assets,
including placing purchase and sell orders for investments and for other related
transactions. UBS Asset Management will provide a continuous investment program
for the Fund's assets, including investment research and management. The New
Sub-Advisory Contract recognizes that UBS Asset Management may, under certain
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circumstances, pay higher brokerage commissions by executing portfolio
transactions with brokers that provide the sub-adviser with research, analysis,
advice or similar services. The New Sub-Advisory Contract also provides that UBS
Asset Management will (1) maintain all books and records required to be
maintained by it pursuant to the 1940 Act and the rules and regulations
promulgated thereunder with respect to transactions the sub-adviser effects on
behalf of the Fund, and will furnish the Board and Mitchell Hutchins with such
periodic and special reports as the Board or Mitchell Hutchins may reasonably
request; (2) provide the Board or Mitchell Hutchins with economic and investment
analyses and reports, as well as quarterly reports, setting forth the Fund's
performance with respect to its investments and make available to the Board and
Mitchell Hutchins any economic, statistical and investment services that UBS
Asset Management normally makes available to its institutional investors or
other customers; and (3) provide assistance in the fair valuation of, and use
reasonable efforts to arrange for the provision of a price or prices from one or
more parties independent of UBS Asset Management, for each portfolio security
for which the Fund's custodian does not obtain prices in the ordinary course of
business from an automated pricing service.
The New Sub-Advisory Contract provides that UBS Asset Management will
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund, its shareholders or Mitchell Hutchins in connection with
the matters to which the New Sub-Advisory Contract relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
UBS Asset Management in the performance of its duties or from reckless disregard
by it of its obligations and duties under the New Sub-Advisory Contract. In
addition, UBS Asset Management will not have any responsibilities for any
portion of the Fund's assets that it does not manage or for the acts or
omissions of any other sub-adviser for the Fund. If at any time UBS Asset
Management only manages a portion of the Fund's assets, UBS Asset Management
will have no responsibility for the Fund being in violation of any law or
regulation or Fund policy or restriction or for the Fund's failure to qualify as
a "regulated investment company" for federal tax purposes, if the portion of the
Fund's portfolio managed by UBS Asset Management would not be in such violation
or fail to so qualify if such portion were deemed a separate "regulated
investment company."
The New Sub-Advisory Contract provides that the Fund, by the vote of a
majority of the Board of Directors or a majority of its outstanding voting
securities, may terminate the New Sub-Advisory Contract, without penalty, on
sixty days' written notice to UBS Asset Management and UBS Asset Management may
terminate the New Sub-Advisory Contract, without penalty, on sixty days' written
notice to Mitchell Hutchins. The New Sub-Advisory Contract also permits Mitchell
Hutchins to terminate the New Sub-Advisory Contract, without penalty: (1) upon
sixty days' written notice to UBS Asset Management; (2) upon material breach by
UBS Asset Management of any of the representations and warranties in paragraph 7
of the New Sub-Advisory Contract (e.g., registration as an investment adviser,
adoption of a code of ethics, notification of changes in control, prohibition on
referring to the relationship between UBS Asset Management and the Fund or
Mitchell Hutchins in promotional materials without prior consent), if such
breach is not cured within a twenty day period after notice of such breach or
(3) if, in the reasonable judgment of Mitchell Hutchins, UBS Asset Management
becomes unable to discharge its duties and obligations under the New
Sub-Advisory Contract, including circumstances such as financial insolvency of
UBS Asset Management or any other circumstances which could adversely affect the
Fund. In addition, the New Sub-Advisory Contract automatically terminates upon
assignment.
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Under the New Sub-Advisory Contract, for the services it performs and
the expenses it assumes, UBS Asset Management will receive a sub-advisory fee
paid by Mitchell Hutchins (not the Fund), computed weekly and paid monthly, at
an annual rate of 0.2375% of the Fund's average weekly net assets.
If approved by the Fund's shareholders, the New Sub-Advisory Contract
will become effective on the date of approval and will remain in effect for an
initial two-year term. Thereafter, the New Sub-Advisory Contract will continue
in effect if it is approved at least annually by a vote of the Fund's
shareholders or by the Board, provided that, in either event, continuance is
approved by the vote of a majority of the Independent Directors, which vote must
be cast in person at a meeting called for the purpose of voting on such
approval.
EVALUATION BY BOARD
At its October and November meetings, the Board determined that it
would be in the best interest of the Fund's shareholders to retain UBS Asset
Management as the Fund's sub-adviser and to approve the New Sub-Advisory
Contract. In making these determinations, the Board analyzed the factors it
deemed relevant, including the following: (1) UBS Asset Management's experience
in managing high-yield, fixed income assets in the U.S. and foreign markets,
including its risk controls, and its country, sector, industry and company
credit analysis, its reputation, the past performance of other high-yield, fixed
income funds managed by UBS Asset Management, its overall capabilities to
perform the services under the New Sub-Advisory Contract and its willingness to
perform those services for the Fund; (2) the sub-advisory fees that would be
payable to UBS Asset Management; (3) the services provided by UBS Asset
Management to its other investment company clients; (4) the ability of UBS Asset
Management to provide sub-advisory services to the Fund, including the quality
of its personnel, operations and financial condition; and (5) other factors that
would affect positively or negatively the provision of those services. After
full consideration of these and other factors, the Board of Directors, including
a majority of the Independent Directors, approved the proposed New Sub-Advisory
Contract and recommended that it be submitted to Fund shareholders for approval.
REQUIRED VOTE
Approval of Proposal 2 requires the affirmative vote of the lesser of
(1) 67% or more of the shares of the Fund present at the Meeting, if more than
50% of the outstanding shares are represented at the Meeting in person or by
proxy, or (2) more than 50% of the outstanding shares entitled to vote at the
Meeting. If Proposal 2 is not approved by shareholders, the Interim Sub-Advisory
Contract will continue in effect for the remainder of its original 150-day term,
and the Board and Mitchell Hutchins will consider what sub-advisory services
should be provided to the Fund.
THE BOARD RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 2.
----------------------------
8
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PROPOSAL 3 - TO APPROVE A NEW SUB-ADVISER APPROVAL POLICY FOR THE
TRUST.
At its meeting on November 8, 2000, the Board approved, and recommended
that the shareholders of the Fund also be asked to approve, a policy to permit
Mitchell Hutchins, subject to the approval of the Board, to appoint and replace
sub-advisers, to enter into sub-advisory contracts and to amend sub-advisory
contracts on behalf of the Fund subject to ratification and approval by the
Fund's shareholders at the Fund's next, regularly scheduled annual meeting
("Sub-Adviser Approval Policy"). Shareholders are being asked to approve this
policy at the meeting to permit Mitchell Hutchins to make changes in the
sub-advisory arrangements for the Fund in the future without having to incur the
expense of a special shareholder meeting. If approved by the Fund's
shareholders, the policy would apply only to sub-advisers that are not
affiliated with Mitchell Hutchins and thus would not permit Mitchell Hutchins
and the Board to appoint any Mitchell Hutchins affiliate to serve as sub-adviser
to the Fund without immediate shareholder approval. Implementation of the
Sub-Adviser Approval Policy is subject to the receipt of an exemptive order that
has been requested from the SEC.
THE REQUESTED EXEMPTIVE ORDER
On June 30, 2000, the Fund filed an application ("Exemptive
Application") with the SEC seeking an exemption from provisions of the 1940 Act
that, subject to certain exceptions such as for the Interim Sub-Advisory
Contract, prohibit any party from serving as a sub-adviser to the Fund except
pursuant to a contract that has been approved by the Fund's shareholders. If the
Exemptive Application is granted by the SEC, and if the shareholders approve
this proposal, Mitchell Hutchins will be authorized, subject to approval by the
Board, including a majority of the Independent Directors, to evaluate, select
and retain unaffiliated sub-advisers for the Fund and to modify the sub-advisory
contracts without obtaining immediate shareholder approval. The Fund would
announce the appointment of any new sub-advisers by press release promptly
following any such Board action. Moreover, the Exemptive Application would
require the Fund to obtain shareholder ratification and approval of the new
sub-advisory contracts at its next, regularly scheduled annual meeting.
Deferring shareholder approval until the next annual meeting would allow the
Fund to avoid the cost of having a special shareholder meeting for that purpose.
There can be no assurance that the SEC will grant the relief requested in the
Exemptive Application.
CURRENT SUB-ADVISER APPROVAL PROCESS
Currently, any sub-advisory contract relating to the Fund between
Mitchell Hutchins and another investment adviser must be approved by the holders
of a majority of the Fund's outstanding shares before it can take effect (other
than on an interim basis, as for the Interim Sub-Advisory Contract). Such
shareholder approval is in addition to approval by the Board, including a
majority of the Independent Directors.
PROPOSED SUB-ADVISER APPROVAL POLICY
The proposed Sub-Adviser Approval Policy would permit Mitchell
Hutchins, subject to the approval of the Board, including a majority of the
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Independent Directors, to appoint and replace sub-advisers and to amend
sub-advisory contracts without obtaining shareholder approval until the next,
regularly scheduled annual meeting. The Sub-Adviser Approval Policy thus would
permit Mitchell Hutchins to change sub-advisers or sub-advisory arrangements if,
among other things: (1) the sub-adviser has a record of substandard performance;
(2) the individual employees responsible for portfolio management of the Fund
move from the sub-adviser to another investment advisory firm; (3) there is a
change of control of the sub-adviser; (4) Mitchell Hutchins decides to diversify
the Fund's management by adding another sub-adviser; or (5) there is a change in
the investment style of the Fund. The Sub-Adviser Approval Policy will not be
used to approve any sub-adviser that is affiliated with Mitchell Hutchins, as
that term is used in the 1940 Act, or materially amend any sub-advisory contract
with an affiliated sub-adviser.
Approval of the Sub-Adviser Approval Policy will not affect any of the
requirements under the federal securities laws that govern the Fund, Mitchell
Hutchins, any sub-adviser, or any sub-advisory contract, other than the
requirement to call and hold a special meeting of the Fund's shareholders for
the purpose of approving a sub-advisory contract. The Board, including the
Independent Directors, will continue to evaluate and approve all new
sub-advisory contracts between Mitchell Hutchins and any sub-adviser as well as
all changes to existing sub-advisory contracts. In addition, if the SEC grants
the requested relief, the Fund and Mitchell Hutchins will be subject to
conditions designed to ensure that the interests of the Fund's shareholders are
adequately protected whenever Mitchell Hutchins acts under the Sub-Adviser
Approval Policy. Finally, the Fund will be required to announce the appointment
of a new sub-adviser by press release promptly following the Board's action, and
notice of the new sub-advisory contract, together with a description of the new
sub-adviser, will be included in the Fund's next report to the shareholders.
Shareholders who are not satisfied with any sub-advisory arrangements that
Mitchell Hutchins and the Board implement under the Sub-Adviser Approval Policy
would be able to vote against the new sub-advisory contract at the next annual
meeting of shareholders or, of course, sell their shares.
Shareholder approval of this Proposal 3 will not change the management
fees paid by the Fund to Mitchell Hutchins or by Mitchell Hutchins to UBS Asset
Management, nor will it change the duties and responsibilities of either
Mitchell Hutchins or UBS Asset Management under their respective management or
sub-advisory contracts relating to the Fund.
BENEFITS OF THE SUB-ADVISER APPROVAL POLICY
The Board believes that it is in the best interests of the Fund's
shareholders to give Mitchell Hutchins the maximum flexibility to select,
supervise and evaluate sub-advisers without incurring the expense and potential
delay of seeking immediate shareholder approval through a special meeting of the
Fund shareholders. While Rule 15a-4 under the 1940 Act provides a limited
exception to the shareholder approval requirements for an interim advisory
contract (pursuant to which the Fund's Interim Management Contract and Interim
Sub-Advisory Contract were adopted), a Fund's current advisory contract must be
terminated before the Rule can apply and the Fund's shareholders still must
approve both the resulting interim advisory and sub-advisory contracts no later
than 150 days after their effective date. Thus, even when a change in investment
management arrangements involving one or more sub-advisers can be put into place
on a temporary basis, the Fund must immediately call and hold a special meeting
10
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of the Fund's shareholders, create and distribute proxy materials, and arrange
for the solicitation of voting instructions from shareholders. This process is
time-intensive, slow and costly. These costs generally are borne entirely by the
Fund, although in the case of this solicitation, they are being borne by
Mitchell Hutchins. If Mitchell Hutchins and the Board can rely on the
Sub-Adviser Approval Policy, the Board would be able to act more quickly and
with less expense to appoint an unaffiliated sub-adviser when the Board and
Mitchell Hutchins believe that the appointment would benefit the Fund and its
shareholders.
Also, the Board believes that it is appropriate to vest the selection,
supervision and evaluation of the sub-advisers in Mitchell Hutchins, subject to
review by the Board, in light of Mitchell Hutchins' significant experience and
expertise in this area. The Board believes that investors may choose to invest
in the Fund because of Mitchell Hutchins' experience in this respect.
Finally, the Board will oversee the sub-adviser selection process to
ensure that shareholders' interests are protected whenever Mitchell Hutchins
selects a sub-adviser or modifies a sub-advisory contract. The Board, including
a majority of the Independent Directors, will continue to evaluate and approve
all new sub-advisory contracts as well as any modification to existing
sub-advisory contracts. In each review, the Board will analyze all factors that
it considers to be relevant to the determination, including the nature, quality
and scope of services provided by the sub-advisers. The Board will compare the
investment performance of the assets managed by the sub-adviser with other
accounts with similar investment objectives managed by other advisers and will
review the sub-adviser's compliance with federal securities laws and
regulations. The Board believes that its review will ensure that Mitchell
Hutchins continues to act in the best interests of the Fund and its
shareholders.
REQUIRED VOTE
Approval of Proposal 3 requires the affirmative vote of the lesser of
(1) 67% or more of the shares of the Fund present at the Meeting, if more than
50% of the outstanding shares are represented at the Meeting in person or by
proxy, or (2) more than 50% of the outstanding shares entitled to vote at the
Meeting. If the Fund's shareholders do not approve the proposed Sub-Adviser
Approval Policy, the Fund will continue to be required to call a special meeting
whenever necessary to obtain immediate shareholder approval of any changes in
the Fund's sub-advisory arrangements. Implementation of the Sub-Adviser Approval
Policy is also conditioned upon receipt of the requested exemptive relief from
the SEC.
THE BOARD RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL 3.
----------------------------
INFORMATION ABOUT CERTAIN DIRECTORS AND OFFICERS OF THE TRUST
Officers are appointed by the Board and serve at the pleasure of the
Board. Information regarding officers and Directors of the Fund who are
employees or directors of Mitchell Hutchins, PaineWebber or UBS Asset Management
is provided below.
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Margo N. Alexander: age 53, director. Mrs. Alexander is Chairman (since
March 1999), and a director of Mitchell Hutchins (since January 1995) and an
executive vice president and director of PaineWebber (since March 1984). She was
chief executive officer of Mitchell Hutchins from January 1995 to October 2000.
Mrs. Alexander is a director or trustee of 30 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates serves as investment
adviser.
E. Garrett Bewkes Jr.: age 74, director and chairman of the Board of
Directors. Mr. Bewkes serves as a consultant to PaineWebber (since May 1999).
Prior to November 2000, he was a director of Paine Webber Group Inc. ("PW
Group," formerly the holding company of PaineWebber and Mitchell Hutchins) and
prior to 1996, he was a consultant to PW Group. Prior to 1988, he was chairman
of the board, president and chief executive officer of American Bakeries
Company. Mr. Bewkes is a director of Interstate Bakeries Corporation. Mr. Bewkes
is a director or trustee of 40 investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment adviser.
Brian M. Storms: age 46, director and president. Mr. Storms is chief
executive officer (since October 2000) and president of Mitchell Hutchins (since
March 1999). Mr. Storms was president of Prudential Investments (1996-1999).
Prior to joining Prudential he was a managing director at Fidelity Investments.
Mr. Storms is president and a director or trustee of 30 investment companies for
which Mitchell Hutchins, PaineWebber or one of their affiliates serves as
investment adviser.
Thomas Disbrow: age 34, vice president and assistant treasurer. Mr.
Disbrow is a first vice president and a senior manager of the mutual fund
finance department of Mitchell Hutchins. Prior to November 1999, he was a vice
president of Zweig/Glaser Advisers. Mr. Disbrow is a vice president and
assistant treasurer of 30 investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment adviser.
Amy R. Doberman: age 38, vice president. Ms. Doberman is a senior vice
president and general counsel of Mitchell Hutchins. From December 1996 through
July 2000, she was general counsel of Aeltus Investment Management, Inc. Prior
to working at Aeltus, Ms. Doberman was a Division of Investment Management
Assistant Chief Counsel at the SEC. Ms. Doberman is a vice president of 29
investment companies and a vice president and secretary of one investment
company for which Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
John J. Lee: age 32, vice president and assistant treasurer. Mr. Lee is
a vice president and a manager of the mutual fund finance department of Mitchell
Hutchins. Prior to September 1997, he was an audit manager in the financial
services practice of Ernst & Young LLP. Mr. Lee is a vice president and
assistant treasurer of 30 investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment adviser.
Kevin J. Mahoney: age 35, vice president and assistant treasurer. Mr.
Mahoney is a first vice president and a senior manager of the mutual fund
finance department of Mitchell Hutchins. From August 1996 through March 1999, he
was the manager of the mutual fund internal control group of Salomon Smith
Barney. Prior to August 1996, he was an associate and assistant treasurer for
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<PAGE>
BlackRock Financial Management L.P. Mr. Mahoney is a vice president and
assistant treasurer of 30 investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment adviser.
Ann E. Moran: age 43, vice president and assistant treasurer. Ms. Moran
is a vice president and a manager of the mutual fund finance department of
Mitchell Hutchins. Ms. Moran is a vice president and assistant treasurer of 30
investment companies for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Dianne E. O'Donnell: age 48, vice president and secretary. Ms.
O'Donnell is a senior vice president and deputy general counsel of Mitchell
Hutchins. Ms. O'Donnell is a vice president and secretary of 29 investment
companies and vice president and assistant secretary of one investment company
for which Mitchell Hutchins, PaineWebber or one of their affiliates serves as
investment adviser.
Paul H. Schubert: age 37, vice president and treasurer. Mr. Schubert is
a senior vice president and the director of the mutual fund finance department
of Mitchell Hutchins. Mr. Schubert is a vice president and treasurer of 30
investment companies for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
Barney A. Taglialatela: age 39, vice president and assistant treasurer.
Mr. Taglialatela is a vice president and a manager of the mutual fund finance
department of Mitchell Hutchins. Mr. Taglialatela is a vice president and
assistant treasurer of 30 investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment adviser.
Keith A. Weller: age 39, vice president and assistant secretary. Mr.
Weller is a first vice president and senior associate general counsel of
Mitchell Hutchins. Mr. Weller is a vice president and assistant secretary of 30
investment companies for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
SHAREHOLDER PROPOSALS
Any shareholder who wishes to submit proposals to be considered at the
Fund's 2001 annual meeting of shareholders should send such proposals to the
Fund at 51 West 52nd Street, New York, New York 10019-6114. In order to be
considered at that meeting, shareholder proposals must be received by the Fund
no later than April 2, 2001 and must satisfy the other requirements of the
federal securities laws.
OTHER BUSINESS
Management knows of no other business to be presented to the Meeting
other than the matters set forth in this proxy statement, but should any other
matter requiring a vote of shareholders arise, the proxies will vote thereon
according to their best judgment in the interests of the Fund.
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By Order of the Board of Directors,
Dianne E. O'Donnell
Secretary
December __, 2000
It is important that you execute and return your proxy promptly.
14
<PAGE>
APPENDIX A
To the best knowledge of the Fund's management, the executive officers and
Directors of the Fund, as a group, own less than 1% of the Fund's outstanding
shares. As of November 30, 2000, no shareholder was shown on the Fund's records
as owning more than 5% of its shares.
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APPENDIX B
FORM OF NEW INVESTMENT MANAGEMENT AND
ADMINISTRATION CONTRACT
Contract made as of February __, 2001, between MANAGED HIGH YIELD PLUS
FUND INC., a Maryland corporation ("Fund"), and MITCHELL HUTCHINS ASSET
MANAGEMENT INC. ("Mitchell Hutchins"), a Delaware corporation registered as an
investment adviser under the Investment Advisers Act of 1940, as amended
("Advisers Act"), and as a broker-dealer under the Securities Exchange Act of
1934, as amended ("1934 Act").
WHEREAS the Fund is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as a closed-end, diversified management
investment company, and has registered shares of its common stock ("Shares") for
sale to the public under the Securities Act of 1933, as amended ("1933 Act");
and
WHEREAS the Fund desires and intends to have one or more investment
advisers ("Sub-Advisers") provide investment advisory and portfolio management
services to the Fund; and
WHEREAS the Fund desires to retain Mitchell Hutchins as investment
manager and administrator to furnish certain administrative and portfolio
management services to the Fund, and Mitchell Hutchins is willing to furnish
such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Fund hereby appoints Mitchell Hutchins as
investment manager and administrator of the Fund for the period and on the terms
set forth in this Contract. Mitchell Hutchins accepts such appointment and
agrees to render the services herein set forth, for the compensation herein
provided.
2. DUTIES AS INVESTMENT MANAGER; APPOINTMENT OF SUB-ADVISERS
(a) Subject to the oversight and direction of the Fund's Board of
Directors ("Board"), Mitchell Hutchins will provide to the Fund investment
management evaluation services principally by performing initial reviews of
prospective Sub-Advisers for the Fund and overseeing and monitoring performance
of the Sub-Advisers thereafter. Mitchell Hutchins agrees to report to the Fund
the results of its evaluation, oversight and monitoring functions and to keep
books and records of the Fund in connection therewith. Upon the request of the
Board, Mitchell Hutchins will provide portfolio management services with respect
to any portion of the Fund's assets for which no Sub-Adviser is responsible.
Mitchell Hutchins further agrees to communicate performance expectations and
evaluations to the Sub-Advisers, and to recommend to the Fund whether agreements
with the Sub-Advisers should be renewed, modified or terminated.
(b) Mitchell Hutchins is responsible for informing the
Sub-Advisers of the investment objective(s), policies and restrictions of the
Fund, for informing or ascertaining that it is aware of other legal and
regulatory responsibilities applicable to the Sub-Advisers with respect to the
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Fund, and for monitoring the Sub-Advisers' discharge of their duties; but
Mitchell Hutchins is not responsible for the specific actions (or inactions) of
any Sub-Adviser in the performance of the duties assigned to it.
(c) With respect to each Sub-Adviser for the Fund, Mitchell
Hutchins shall enter into an agreement ("Sub-Advisory Agreement") with the
Sub-Adviser in substantially the form previously approved by the Board and shall
seek approval of the Board or the Fund's shareholders in a manner consistent
with the 1940 Act, the rules thereunder or any applicable exemptive order.
(d) Mitchell Hutchins shall be responsible for the fees payable to
and shall pay the Sub-Advisers of the Fund the fee as specified in the
Sub-Advisory Agreement relating thereto.
(e) In the event that the Board shall request that Mitchell
Hutchins provide portfolio management services to the Fund, Mitchell Hutchins
shall comply with this paragraph 2(e). Mitchell Hutchins agrees that in placing
orders with brokers, it will attempt to obtain the best net result in terms of
price and execution; provided that Mitchell Hutchins may, in its discretion, use
brokers who provide the Fund with research, analysis, advice and similar
services to execute portfolio transactions on behalf of the Fund, and Mitchell
Hutchins may pay to those brokers in return for brokerage and research services
a higher commission than may be charged by other brokers, subject to Mitchell
Hutchins' determining in good faith that such commission is reasonable in terms
either of the particular transaction or of the overall responsibility of
Mitchell Hutchins to the Fund and its other clients and that the total
commissions paid by the Fund will be reasonable in relation to the benefits to
the Fund over the long term. In no instance will portfolio securities be
purchased from or sold to Mitchell Hutchins, or any affiliated person thereof,
except in accordance with the federal securities laws and the rules and
regulations thereunder. Mitchell Hutchins may aggregate sales and purchase
orders with respect to the assets of the Fund with similar orders being made
simultaneously for other accounts advised by Mitchell Hutchins or its
affiliates. Whenever Mitchell Hutchins simultaneously places orders to purchase
or sell the same security on behalf of the Fund and one or more other accounts
advised by Mitchell Hutchins, such orders will be allocated as to price and
amount among all such accounts in a manner believed to be equitable over time to
each account. The Fund recognizes that in some cases this procedure may
adversely affect the results obtained for the Fund. In providing any portfolio
management services, Mitchell Hutchins will oversee the maintenance of all books
and records with respect to the securities transactions of the Fund, and will
furnish the Board with such periodic and special reports as the Board reasonably
may request. In compliance with the requirements of Rule 31a-3 under the 1940
Act, Mitchell Hutchins hereby agrees that all records that it maintains for the
Fund are the property of the Fund, agrees to preserve for the periods prescribed
by Rule 31a-2 under the 1940 Act any records that it maintains for the Fund and
that are required to be maintained by Rule 31a-1 under the 1940 Act and further
agrees to surrender promptly to the Fund any records that it maintains for the
Fund upon request by the Fund. In providing any portfolio management services,
Mitchell Hutchins will oversee the computation of the net asset value and the
net income of the Fund as described in the currently effective registration
statement of the Fund under the 1933 Act and the 1940 Act and any supplements
thereto ("Registration Statement") or as more frequently requested by the Board.
The Fund hereby authorizes Mitchell Hutchins and any entity or persons
associated with Mitchell Hutchins which is a member of a national securities
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exchange to effect any transaction on such exchange for the account of the Fund,
which transaction is permitted by Section 11(a) of the 1934 Act and Rule
11a2-2(T) thereunder, and the Fund hereby consents to the retention of
compensation by Mitchell Hutchins or any entity or persons associated with
Mitchell Hutchins for such transactions.
3. DUTIES AS ADMINISTRATOR. Mitchell Hutchins will administer the
affairs of the Fund subject to the oversight and direction of the Board and the
following understandings:
(a) Mitchell Hutchins will supervise all aspects of the operations
of the Fund, including oversight of transfer agency, custodial and accounting
services, except as hereinafter set forth; provided, however, that nothing
herein contained shall be deemed to relieve or deprive the Board of any of its
responsibilities with respect to the conduct of the affairs of the Fund.
(b) Mitchell Hutchins will provide the Fund with such corporate,
administrative and clerical personnel (including officers of the Fund) and
services as are reasonably deemed necessary or advisable by the Board, including
the maintenance of books and records of the Fund in connection with the
administration of the Fund.
(c) Mitchell Hutchins will arrange, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of the Fund's
Registration Statement, proxy material, tax returns and required reports to the
Fund's shareholders and the Securities and Exchange Commission ("Commission")
and other appropriate federal or state regulatory authorities.
(d) Mitchell Hutchins will provide the Fund with, or obtain for it,
adequate office space and all necessary office equipment and services, including
telephone service, heat, utilities, stationery supplies and similar items.
(e) Mitchell Hutchins will provide the Board on a regular basis
with economic and investment analyses and reports and make available to the
Board upon request any economic, statistical and investment services normally
available to institutional or other customers of Mitchell Hutchins.
4. FURTHER DUTIES. In all matters relating to the performance of this
Contract, Mitchell Hutchins will act in conformity with the Articles of
Incorporation, By-Laws and the Registration Statement of the Fund and with the
instructions and directions of the Board and will comply with the requirements
of the 1940 Act, the Advisers Act, and the rules under each, and all other
applicable federal and state laws and regulations.
5. SERVICES NOT EXCLUSIVE. The services furnished by Mitchell Hutchins
hereunder are not to be deemed exclusive and Mitchell Hutchins shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Mitchell Hutchins, who may also be
a director, officer or employee of the Fund, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature.
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6. EXPENSES.
(a) During the term of this Contract, the Fund will bear all
expenses, not specifically assumed by Mitchell Hutchins, incurred in its
operations and the offering of its shares.
(b) Expenses borne by the Fund will include but not be limited to
the following (which shall be in addition to the fees payable to and expenses
incurred on behalf of the Fund by Mitchell Hutchins under this contract): (i)
the cost (including brokerage commissions) of securities purchased or sold by
the Fund and any losses incurred in connection therewith; (ii) fees payable to
and expenses incurred on behalf of the Fund by Mitchell Hutchins under this
Contract; (iii) organizational and offering expenses of the Fund, whether or not
advanced by Mitchell Hutchins; (iv) filing fees and expenses relating to the
registration and qualification of the Fund's Shares under the federal and state
securities laws; (v) fees and salaries payable to the Fund's directors and
officers who are not interested persons of the Fund or Mitchell Hutchins; (vi)
all expenses incurred in connection with the directors' services, including
travel expenses; (vii) taxes (including any income or franchise taxes) and
governmental fees; (viii) costs of any liability, uncollectible items of deposit
and any other insurance and fidelity bonds; (ix) any costs, expenses or losses
arising out of a liability of or claim for damages or other relief asserted
against the Fund for violation of any law; (x) legal, accounting and auditing
expenses, including legal fees of special counsel for those directors of the
Fund who are not interested persons of the Fund; (xi) charges of custodians,
transfer agents and other agents (including any lending agent); (xii) costs of
preparing share certificates; (xiii) costs of setting in type, printing and
mailing reports and proxy materials to shareholders; (xiv) any extraordinary
expenses (including fees and disbursements of counsel, costs of actions, suits
or proceedings to which the Fund is a party and the expenses the Fund may incur
as a result of its legal obligation to provide indemnification to its officers,
directors and agents) incurred by the Fund; (xv) fees, voluntary assessments and
other expenses incurred in connection with membership in investment company
organizations; (xvi) costs of mailing and tabulating proxies and costs of
meetings of shareholders, the Board and any committees thereof; (xvii) the costs
of investment company literature and other publications provided by the Fund to
its directors and officers; (xviii) costs of mailing, stationery and
communications equipment; (xix) charges and expenses of any outside pricing
service used to value portfolio securities; (xx) interest on borrowings of the
Fund; (xxi) fees and expenses of listing and maintaining any listing of the
Fund's Shares on any national securities exchange; (xxii) expenses incident to
any dividend reinvestment plan; and (xxiii) costs and expenses (including rating
agency fees) associated with the issuance of any preferred stock.
(c) The Fund may pay directly any expenses incurred by it in its
normal operations and, if any such payment is consented to by Mitchell Hutchins
and acknowledged as otherwise payable by Mitchell Hutchins pursuant to this
Contract, the Fund may reduce the fee payable to Mitchell Hutchins pursuant to
Paragraph 7 thereof by such amount. To the extent that such deductions exceed
the fee payable to Mitchell Hutchins on any monthly payment date, such excess
shall be carried forward and deducted in the same manner from the fee payable on
succeeding monthly payment dates.
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(d) Mitchell Hutchins will assume the cost of any compensation for
services provided to the Fund received by the officers of the Fund and by those
directors who are interested persons of the Fund.
(e) The payment or assumption by Mitchell Hutchins of any expenses
of the Fund that Mitchell Hutchins is not required by this Contract to pay or
assume shall not obligate Mitchell Hutchins to pay or assume the same or any
similar expense of the Fund on any subsequent occasion.
7. COMPENSATION.
(a) For the services provided and the expenses assumed pursuant to
this Contract, the Fund will pay to Mitchell Hutchins a fee, computed weekly and
paid monthly, at an annual rate of 0.70% of the Fund's average weekly total
assets minus liabilities other than the Fund's aggregate indebtedness
constituting leverage.
(b) The fee shall be computed weekly and paid monthly to Mitchell
Hutchins on or before the first business day of the next succeeding calendar
month.
(c) If this Contract becomes effective or terminates before the end
of any month, the fee for the period from the effective day to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
8. LIMITATION OF LIABILITY OF MITCHELL HUTCHINS. Mitchell Hutchins and
its officers, directors, employees and delegates, including any Sub-Adviser or
sub-administrator to the Fund, shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund or any of its shareholders,
in connection with the matters to which this Contract relates, except to the
extent that such a loss results from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Contract. Any person,
even though also an officer, director, employee, or agent of Mitchell Hutchins,
who may be or become an officer, director, employee or agent of the Fund, shall
be deemed, when rendering services to the Fund or acting with respect to any
business of the Fund, to be rendering such service to or acting solely for the
Fund and not as an officer, director, employee, or agent or one under the
control or direction of Mitchell Hutchins even though paid by it.
9. DURATION AND TERMINATION.
(a) This Contract shall become effective upon the day and year
first written above, provided that this Contract shall not take effect unless it
has first been approved (i) by a vote of a majority of those directors of the
Fund who are not parties to this Contract or interested persons of any such
party ("Independent Directors"), cast in person at a meeting called for the
purpose of voting on such approval and (ii) by vote of a majority of the Fund's
outstanding voting securities.
B-5
<PAGE>
(b) Unless sooner terminated as provided herein, this Contract
shall continue in effect for two years from the date first above written.
Thereafter, if not terminated, this Contract shall continue automatically for
successive periods of twelve months each, provided that such continuance is
specifically approved at least annually (i) by a vote of a majority of the
Independent Directors of the Fund, cast in person at a meeting called for the
purpose of voting on such approval, and (ii) by the Board or by vote of a
majority of the outstanding voting securities of the Fund.
(c) Notwithstanding the foregoing, this Contract may be terminated
at any time, without the payment of any penalty, by vote of the Board or by a
vote of a majority of the outstanding voting securities of the Fund on sixty
days' written notice to Mitchell Hutchins and may be terminated by Mitchell
Hutchins at any time, without the payment of any penalty, on sixty days' written
notice to the Fund. Termination of this Contract shall in no way affect the
continued validity of this Contract. This contract will terminate automatically
in the event of its assignment.
10. AMENDMENT OF THIS CONTRACT. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this contract shall be
effective until approved by vote of the Independent Directors or a majority of
the Fund's outstanding voting securities.
11. GOVERNING LAW. This Contract shall be construed in accordance with
the laws of the State of New York, without giving effect to the conflicts of
laws principles thereof, and in accordance with the 1940 Act. To the extent that
the applicable laws of the State of New York conflict with the applicable
provisions of the 1940 Act, the latter shall control.
12. MISCELLANEOUS. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "affiliated person,"
"interested person," "assignment," "broker," "investment adviser," "national
securities exchange," "net assets," "prospectus," "sale," "sell" and "security"
shall have the same meaning as such terms have in the 1940 Act, subject to such
exemption as may be granted by the Commission by any rule, regulation or order.
Where the effect of a requirement of the 1940 Act reflected in any provision of
this contract is relaxed by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
B-6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated as of the day and year first above
written.
MANAGED HIGH YIELD PLUS FUND INC.
Attest: By
------------------------------- --------------------------------
Name:
Title:
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
Attest: By
------------------------------- --------------------------------
Name: Keith A. Weller Name: Dianne E. O'Donnell
Title: First Vice President Title: Senior Vice President and
Deputy General Counsel
B-7
<PAGE>
APPENDIX C
More Information About Mitchell Hutchins
Mitchell Hutchins, a Delaware corporation, is a wholly owned asset management
subsidiary of PaineWebber Incorporated, which is a wholly owned indirect
subsidiary of UBS AG, an internationally diversified organization with
headquarters in Zurich, Switzerland and operations in many areas of the
financial services industry. Mitchell Hutchins is located at 51 West 52nd
Street, New York, New York 10019-6114. The principal business offices of
PaineWebber are located at 1285 Avenue of the Americas, New York, New York
10019-6028. The principal business offices of UBS AG are located at
Bahnhofstrasse 45, Zurich, Switzerland. As of October 31, 2000, Mitchell
Hutchins was the adviser or sub-adviser of 31 investment companies with 75
separate portfolios and aggregate assets of approximately $58.3 billion.
Since June 1, 1999 (the beginning of the Fund's most recently completed fiscal
year), purchases and sales of the securities of PW Group (the ultimate parent
company of PaineWebber and Mitchell Hutchins prior to November 3, 2000) or UBS
AG by the directors of the Fund did not exceed 1% of the outstanding securities
of any class of PW Group or UBS AG.
During its fiscal year ended May 31, 2000, the Fund paid no brokerage
commissions to PaineWebber.
The following is a list of the directors and principal executive
officers of Mitchell Hutchins. The business address of each individual listed
below is 51 West 52nd Street, New York, New York 10019-6114.
--------------------------------------------------------------------------------
Position(s) with Mitchell Principal
Name Hutchins Occupation
--------------------------------------------------------------------------------
Margo N. Alexander Chairman and Director Same
--------------------------------------------------------------------------------
Brian M. Storms President and Chief Executive
Officer Same
--------------------------------------------------------------------------------
Julian Sluyters Director Same
--------------------------------------------------------------------------------
C-1
<PAGE>
Other Investment Company Clients
Mitchell Hutchins also serves as investment adviser to the following
investment companies, which have investment objectives similar to the Fund's, at
the fee rates set forth below.
<TABLE>
<CAPTION>
Approximate Net
Assets as of
October 31, 2000 Annual Investment
Fund (in millions) Advisory Fee
---- ------------- ------------
<S> <C> <C>
2002 Target Term Fund Inc. $109.9 0.50% of average weekly net
assets
All American Term Trust Inc. $159.4 0.90% of average weekly net
assets
Global High Income Dollar Fund Inc. $282.0 1.25% of average weekly net
assets
Insured Municipal Income Fund Inc. $455.3 0.90% of average weekly net
assets
Investment Grade Municipal Income
Fund Inc. $244.9 0.90% of average weekly net
assets
Strategic Global Income Fund, Inc. $220.4 1.00% of average weekly net
assets
Mitchell Hutchins Series Trust-- $6.2 0.75% of average daily net
Global Income Portfolio assets
Mitchell Hutchins Series Trust-- $2.5 0.50% of average daily net
High Grade Fixed Income Portfolio assets
Mitchell Hutchins Series Trust-- $10.7 0.50% of average daily net
High Income Portfolio assets
Mitchell Hutchins Series Trust-- $13.4 0.75% of average daily net
Strategic Income Portfolio assets
Mitchell Hutchins Series Trust-- $4.3 0.50% of average daily net
Strategic Fixed Income Portfolio assets
PACE Global Fixed Income $96.7 0.60% of average daily net assets
Investments (subject to a waiver of the
advisory fee and/or a
reimbursement to the extent the
Fund's "Net Expenses" exceed 0.95%)
PACE Government Securities Fixed $202.6 0.50% of average daily net assets
Income Investments (subject to a waiver of the
advisory fee and/or a
reimbursement to the extent the
Fund's "Net Expenses" exceed 0.87%)
C-2
<PAGE>
Approximate Net
Assets as of
October 31, 2000 Annual Investment
Fund (in millions) Advisory Fee
---- ------------- ------------
PACE Intermediate Fixed Income $134.2 0.40% of average daily net
Investments assets
PACE Municipal Fixed Income $53.1 0.40% of average daily net assets
Investments (subject to a waiver of the
advisory fee and/or a
reimbursement to the extent the
Fund's "Net Expenses" exceed 0.85%)
PACE Strategic Fixed Income $238.6 0.50% of average daily net assets
Investments (subject to a waiver of the
advisory fee and/or a
reimbursement to the extent the
Fund's "Net Expenses" exceed 0.85%)
PaineWebber California Tax-Free $123.0 0.50% of average daily net assets
Income Fund (subject to a waiver of 0.20%)
PaineWebber Global Income Fund $253.3 0.75% of average daily net assets
PaineWebber Investment Grade $219.0 0.50% of average daily net assets
Income Fund
PaineWebber Municipal High Income Fund $83.5 0.60% of average daily net assets
PaineWebber National Tax-Free Income Fund $239.5 0.50% of average daily net assets
PaineWebber New York Tax-Free Income Fund $35.6 0.60% of average daily net
PaineWebber Low Duration U.S. Government $164.1 0.50% of average daily net assets
Income Fund
PaineWebber Strategic Income Fund $77.7 0.75% of average daily net assets
PaineWebber U.S. Government $231.2 0.50% of average daily net assets
Income Fund
</TABLE>
C-3
<PAGE>
APPENDIX D
FORM OF NEW SUB-ADVISORY CONTRACT
Agreement made as of February __, 2001 ("Contract") between MITCHELL
HUTCHINS ASSET MANAGEMENT INC., a Delaware corporation ("Mitchell Hutchins"),
and UBS ASSET MANAGEMENT (NEW YORK), INC., a New York corporation
("Sub-Adviser").
RECITALS
(1) Mitchell Hutchins has entered into an Investment Management and
Administration Agreement, dated February __, 2001 ("Management Agreement"), with
Managed High Yield Plus Fund Inc., a closed-end management investment company
registered under the Investment Company Act of 1940, as amended ("1940 Act")
("Fund");
(2) Mitchell Hutchins wishes to retain the Sub-Adviser to furnish
certain investment advisory services to Mitchell Hutchins and the Fund; and
(3) The Sub-Adviser is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, Mitchell Hutchins and the Sub-Adviser agree as follows:
1. APPOINTMENT. Mitchell Hutchins hereby appoints the Sub-Adviser as an
investment sub-adviser with respect to the Fund for the period and on the terms
set forth in this Contract. The Sub-Adviser accepts that appointment and agrees
to render the services herein set forth, for the compensation herein provided.
2. DUTIES AS SUB-ADVISER.
(a) Subject to the supervision and direction of the Fund's Board of
Directors ("Board") and review by Mitchell Hutchins, and any written guidelines
adopted by the Board or Mitchell Hutchins, the Sub-Adviser will provide a
continuous investment program for all or, if subsequently so specified by
Mitchell Hutchins, a designated portion ("Segment") of the assets of the Fund,
including investment research and discretionary management with respect to all
securities and investments and cash equivalents in the Fund or Segment. The
Sub-Adviser will determine from time to time what investments will be purchased,
retained or sold by the Fund or Segment. The Sub-Adviser will be responsible for
placing purchase and sell orders for investments and for other related
transactions for the Fund or Segment. The Sub-Adviser will be responsible for
voting proxies of issuers of securities held by the Fund or Segment. The
Sub-Adviser understands that the Fund's assets need to be managed so as to
permit it to qualify or to continue to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code, as amended ("Code"). The
Sub-Adviser will provide services under this Contract in accordance with the
Fund's investment objectives, policies and restrictions as stated in the Fund's
currently effective registration statement under the 1940 Act, and any
amendments or supplements thereto ("Registration Statement").
D-1
<PAGE>
(b) The Sub-Adviser agrees that, in placing orders with brokers, it
will obtain the best net result in terms of price and execution; provided that,
on behalf of the Fund, the Sub-Adviser may, in its discretion, use brokers that
provide the Sub-Adviser with research, analysis, advice and similar services to
execute portfolio transactions on behalf of the Fund or Segment, and the
Sub-Adviser may pay to those brokers in return for brokerage and research
services a higher commission than may be charged by other brokers, subject to
the Sub-Adviser's determining in good faith that such commission is reasonable
in terms either of the particular transaction or of the overall responsibility
of the Sub-Adviser to the Fund and its other clients and that the total
commissions paid by the Fund or Segment will be reasonable in relation to the
benefits to the Fund over the long term. In no instance will portfolio
securities be purchased from or sold to Mitchell Hutchins or the Sub-Adviser, or
any affiliated person thereof, except in accordance with the federal securities
laws and the rules and regulations thereunder. The Sub-Adviser may aggregate
sales and purchase orders with respect to the assets of the Fund or Segment with
similar orders being made simultaneously for other accounts advised by the
Sub-Adviser or its affiliates. Whenever the Sub-Adviser simultaneously places
orders to purchase or sell the same security on behalf of the Fund and one or
more other accounts advised by the Sub-Adviser, the orders will be allocated as
to price and amount among all such accounts in a manner believed to be equitable
over time to each account. Mitchell Hutchins recognizes that in some cases this
procedure may adversely affect the results obtained for the Fund or Segment.
(c) The Sub-Adviser will maintain all books and records required to be
maintained pursuant to the 1940 Act and the rules and regulations promulgated
thereunder with respect to transactions by the Sub-Adviser on behalf of the Fund
or Segment, and will furnish the Board and Mitchell Hutchins with such periodic
and special reports as the Board or Mitchell Hutchins reasonably may request. In
compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Sub-Adviser hereby agrees that all records that it maintains for the Fund are
the property of the Fund, agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act any records that it maintains for the Fund and that are
required to be maintained by Rule 31a-1 under the 1940 Act, and further agrees
to surrender promptly to the Fund any records that it maintains for the Fund
upon request by the Fund.
(d) At such times as shall be reasonably requested by the Board or
Mitchell Hutchins, the Sub-Adviser will provide the Board and Mitchell Hutchins
with economic and investment analyses and reports as well as quarterly reports
setting forth the performance of the Fund or Segment and make available to the
Board and Mitchell Hutchins any economic, statistical and investment services
that the Sub-Adviser normally makes available to its institutional or other
customers.
(e) In accordance with procedures adopted by the Board, as amended from
time to time, the Sub-Adviser is responsible for assisting in the fair valuation
of all portfolio securities in the Fund or Segment and will use its reasonable
efforts to arrange for the provision of a price from one or more parties
independent of the Sub-Adviser for each portfolio security for which the
custodian does not obtain prices in the ordinary course of business from an
automated pricing service.
3. FURTHER DUTIES. In all matters relating to the performance of this
Contract, the Sub-Adviser will act in conformity with the Fund's Articles of
Incorporation, By-Laws and Registration Statement and with the written
D-2
<PAGE>
instructions and written directions of the Board and Mitchell Hutchins; and will
comply with the requirements of the 1940 Act and the Investment Advisers Act of
1940, as amended ("Advisers Act") and the rules under each; Subchapter M of the
Internal Revenue Code ("Code"), as applicable to regulated investment companies;
and all other federal and state laws and regulations applicable to the Fund.
Mitchell Hutchins agrees to provide to the Sub-Adviser copies of the Fund's
Articles of Incorporation, By-Laws, Registration Statement, written
instructions, directions and guidelines of the Board and Mitchell Hutchins, and
any amendments or supplements to any of these materials as soon as practicable
after such materials become available; and further agrees to identify to the
Sub-Adviser in writing any broker-dealers that are affiliated with Mitchell
Hutchins (other than PaineWebber Incorporated and Mitchell Hutchins itself).
4. EXPENSES. During the term of this Contract, the Sub-Adviser will
bear all expenses incurred by it in connection with its services under this
Contract. The Sub-Adviser shall not be responsible for any expenses incurred by
the Fund or Mitchell Hutchins.
5. COMPENSATION.
(a) For the services provided and the expenses assumed by the
Sub-Adviser pursuant to this Contract, Mitchell Hutchins, not the Fund, will pay
to the Sub-Adviser a sub-advisory fee, computed weekly and paid monthly, at an
annual rate of 0.2375% of the average weekly net assets of the Fund (computed in
the manner specified in the Management Agreement). Mitchell Hutchins will
provide the Sub-Adviser with a schedule showing the manner in which the fee was
computed. If the Sub-Adviser is managing a Segment, its fees will be based on
the value of assets of the Fund within the Sub-Adviser's Segment.
(b) The fee shall be accrued weekly and payable monthly to the
Sub-Adviser on or before the last business day of the next succeeding calendar
month.
(c) If this Contract becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be pro-rated according to the proportion that such period
bears to the full month in which such effectiveness or termination occurs.
6. LIMITATION OF LIABILITY.
(a) The Sub-Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund, its shareholders or by
Mitchell Hutchins in connection with the matters to which this Contract relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Contract.
(b) In no event will the Sub-Adviser have any responsibilities for any
portion of the Fund's investments not managed by the Sub-Adviser or for the acts
or omissions of any other sub-adviser to the Fund.
In particular, in the event the Sub-Adviser shall manage only a portion
of the Fund's investments, the Sub-Adviser shall have no responsibility for the
Fund's being in violation of any applicable law or regulation or investment
policy or restriction applicable to the Fund as a whole or for the Fund's
D-3
<PAGE>
failing to qualify as a regulated investment company under the Code, if the
securities and other holdings of the Segment managed by the Sub-Adviser are such
that such Segment would not be in such violation or fail to so qualify if such
segment were deemed a separate "regulated investment company" under the Code.
Nothing in this section shall be deemed a limitation or waiver of any
obligation or duty that may not by law be limited or waived.
7. REPRESENTATIONS OF SUB-ADVISER. The Sub-Adviser represents, warrants
and agrees as follows:
(a) The Sub-Adviser (i) is registered as an investment adviser under
the Advisers Act and will continue to be so registered for so long as this
Contract remains in effect; (ii) is not prohibited by the 1940 Act or the
Advisers Act from performing the services contemplated by this Contract; (iii)
has met and will seek to continue to meet for so long as this Contract remains
in effect, any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency necessary to
be met in order to perform the services contemplated by this Contract; (iv) has
the authority to enter into and perform the services contemplated by this
Contract; and (v) will promptly notify Mitchell Hutchins of the occurrence of
any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
(b) The Sub-Adviser has adopted a written code of ethics and
appropriate procedures complying with the requirements of Rule 17j-1 under the
1940 Act and will provide Mitchell Hutchins and the Board with a copy of such
code of ethics, together with evidence of its adoption. Within fifteen days of
the end of the last calendar quarter of each year that this Contract is in
effect, an officer of the Sub-Adviser shall certify to Mitchell Hutchins that
the Sub-Adviser has complied with the requirements of Rule 17j-1 during the
previous year and that there has been no material violation of the Sub-Adviser's
code of ethics or, if such a violation has occurred, that appropriate action was
taken in response to such violation. Upon the written request of Mitchell
Hutchins, the Sub-Adviser shall permit Mitchell Hutchins, its employees or its
agents to examine the reports required to be made by the Sub-Adviser pursuant to
Rule 17j-1 and all other records relevant to the Sub-Adviser's code of ethics.
(c) The Sub-Adviser has provided Mitchell Hutchins with a copy of its
Form ADV, as most recently filed with the Securities and Exchange Commission
("SEC"), and promptly will furnish a copy of all amendments to Mitchell Hutchins
at least annually.
(d) The Sub-Adviser will notify Mitchell Hutchins of any change of
control of the Sub-Adviser, including any change of its general partners or 25%
shareholders or 25% limited partners, as applicable, and any changes in the key
personnel who are either the portfolio manager(s) of the Fund or senior
management of the Sub-Adviser, in each case prior to, or promptly after, such
change.
(e) The Sub-Adviser agrees that neither it, nor any of its affiliates,
will in any way refer directly or indirectly to its relationship with the Fund,
Mitchell Hutchins or any of their respective affiliates in offering, marketing
or other promotional materials without the prior express written consent of
Mitchell Hutchins.
D-4
<PAGE>
8. SERVICES NOT EXCLUSIVE. The services furnished by the Sub-Adviser
hereunder are not to be deemed exclusive and the Sub-Adviser shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby or unless otherwise agreed to by the parties hereunder
in writing. Nothing in this Contract shall limit or restrict the right of any
director, officer or employee of the Sub-Adviser, who may also be a director,
officer or employee of the Fund, to engage in any other business or to devote
his or her time and attention in part to the management or other aspects of any
other business, whether of a similar nature or a dissimilar nature.
9. DURATION AND TERMINATION.
(a) This Contract shall become effective upon the day and year first
written above, provided that this Contract shall not take effect unless it has
first been approved (i) by a vote of a majority of those directors of the Fund
who are not parties to this Contract or interested persons of any such party
("Independent Directors"), cast in person at a meeting called for the purpose of
voting on such approval and (ii) by vote of a majority of the Fund's outstanding
voting securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the date first above written. Thereafter,
if not terminated, this Contract shall continue automatically for successive
periods of twelve months each, provided that such continuance is specifically
approved at least annually (i) by a vote of a majority of the Independent
Directors of the Fund, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by the Board or by vote of a majority of the
outstanding voting securities of the Fund.
(c) Notwithstanding the foregoing, with respect to the Fund, this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board or by a vote of a majority of the outstanding voting
securities of the Fund on sixty days' written notice to the Sub-Adviser and may
be terminated by the Sub-Adviser at any time, without the payment of any
penalty, on sixty days' written notice to Mitchell Hutchins. The Contract may
also be terminated, without payment of penalty, by Mitchell Hutchins (i) upon
sixty days written notice to the Sub-Adviser, (ii) upon material breach by the
Sub-Adviser of any of the representations and warranties set forth in Paragraph
7 of this Contract, if such breach shall not have been cured within a 20 day
period after notice of such breach or (iii) if, in the reasonable judgment of
Mitchell Hutchins, the Sub-Adviser becomes unable to discharge its duties and
obligations under this Contract, including circumstances such as financial
insolvency of the Sub-Adviser or other circumstances that could adversely affect
the Fund. This contract will terminate automatically in the event of its
assignment.
10. AMENDMENT OF THIS CONTRACT. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Contract as to the Fund
shall be effective until approved by vote of the Independent Directors or a
majority of the Fund's outstanding voting securities.
11. GOVERNING LAW. This Contract shall be construed in accordance with
the 1940 Act and the laws of the State of New York, without giving effect to the
D-5
<PAGE>
conflicts of laws principles thereof. To the extent that the applicable laws of
the State of New York conflict with the applicable provisions of the 1940 Act,
the latter shall control.
12. MISCELLANEOUS. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "affiliated person,"
"interested person," "assignment," "broker," "investment adviser," "net assets,"
"sale," "sell" and "security" shall have the same meaning as such terms have in
the 1940 Act, subject to such exemption as may be granted by the SEC by any
rule, regulation or order. Where the effect of a requirement of the federal
securities laws reflected in any provision of this Contract is made less
restrictive by a rule, regulation or order of the SEC, whether of special or
general application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order. This Contract may be signed in counterpart.
13. NOTICES. Any notice herein required is to be in writing and is
deemed to have been given to the Sub-Adviser or Mitchell Hutchins upon receipt
of the same at their respective addresses set forth below. All written notices
required or permitted to be given under this Contract will be delivered by
personal service, by postage mail - return receipt requested or by facsimile
machine or a similar means of same day delivery which provides evidence of
receipt (with a confirming copy by mail as set forth herein). All notices
provided to Mitchell Hutchins will be sent to the attention of Dianne E.
O'Donnell, Deputy General Counsel. All notices provided to the Sub-Adviser will
be sent to the attention of Larysa Bemko, Director.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized signatories as of the date and year first
above written.
MITCHELL HUTCHINS ASSET
MANAGEMENT INC.
51 West 52nd Street
Attest: New York, New York 10019-6114
By: By:
------------------------------- -----------------------------------
Name: Keith A. Weller Name: Dianne E. O'Donnell
Title: First Vice President Title: Senior Vice President and
Deputy General Counsel
UBS ASSET MANAGEMENT (NEW YORK),
INC.
10 East 50th Street
Attest: New York, New York 10022
By: By:
------------------------------- -----------------------------------
Name: Name:
Title: Title:
D-6
<PAGE>
APPENDIX E
MORE INFORMATION ABOUT UBS ASSET MANAGEMENT
UBS Asset Management (New York), Inc. ("UBS Asset Management") is a New
York corporation and is an indirect, wholly owned subsidiary of UBS AG, a Swiss
banking corporation. UBS Asset Management is a member of the UBS Asset
Management Division of UBS AG, one of the strongest financial services firms in
the world. Other members of the Division include Brinson Partners, Phillips &
Drew, O'Connor, UBS Realty Investors, LLC, and Global Asset Management (GAM).
The UBS Asset Management Division is a leading global institutional asset
manager, with strong market positions in the U.S, U.K. and Switzerland. It is
also one of the largest active foreign managers in Japan. The Division has a
well-diversified client base including public and corporate pension funds,
foundations and endowments, and central banks. Investment capabilities are based
on comprehensive proprietary research in major equity, fixed income and currency
markets around the world. The principal method of delivering value is to
identify periodic discrepancies between market price and investment value and
turn them to clients' advantage. Investment solutions are tailored to clients'
investment needs based on global investment capabilities. Mandates range from
global asset allocation portfolios to single country equity or fixed income
portfolios or alternative investments such as private equity and real estate.
As of September 30, 2000, UBS Asset Management had over $15 billion of
assets under management and the UBS Asset Management Division had over $321
billion of assets under management. UBS Asset Management is located at 10 East
50th Street, 17th Floor, New York, New York 10022.
Since June 1, 1999 (the beginning of the Fund's most recently completed
fiscal year), purchases and sales of the securities of UBS AG by the directors
of the Fund did not exceed 1% of the outstanding securities of any class of UBS
AG. During its fiscal year ended May 31, 2000, the Fund paid no brokerage
commissions to UBS AG or any of its affiliates.
The following is a list of the directors and principal executive
officers of UBS Asset Management. The business address of each individual listed
below is 10 East 50th Street, 17th Floor, New York, New York 10022.
--------------------------------------------------------------------------------
Name Position with UBS Asset Principal Occupation
Management
--------------------------------------------------------------------------------
Benjamin F. Lenhardt, Jr. President, CEO and Director Investment Management
--------------------------------------------------------------------------------
Carlos Penny Director Investment Management
--------------------------------------------------------------------------------
Andrew J. O'Reilly Treasurer Investment Management
--------------------------------------------------------------------------------
Mark F. Kemper Secretary Investment Management
--------------------------------------------------------------------------------
E-1
<PAGE>
OTHER INVESTMENT COMPANY CLIENTS
UBS Asset Management also serves as investment adviser or sub-adviser
to the following investment companies, which have similar investment objectives
to the Fund's, at the fee rates set forth below.
--------------------------------------------------------------------------------
Approximate Net Assets as
of
October 31, 2000 Annual Investment
Fund (in millions) Advisory Fee
--------------------------------------------------------------------------------
The Brinson Funds-High Yield
Fund $45.5 0.10% of average daily
net assets
--------------------------------------------------------------------------------
Brinson Relationship Funds-High
Yield Fund $344.2 __% of average daily net
assets
--------------------------------------------------------------------------------
E-2
<PAGE>
PROXY PROXY
MANAGED HIGH YIELD PLUS FUND INC.
SPECIAL MEETING OF SHAREHOLDERS - FEBRUARY 8, 2001
THIS PROXY IS BEING SOLICITED FOR THE BOARD OF DIRECTORS OF MANAGED HIGH YIELD
PLUS FUND INC. ("FUND") AND RELATES TO THE PROPOSALS INDICATED BELOW. The
undersigned hereby appoints as proxies SCOTT H. GRIFF and VICTORIA DRAKE and
each of them (with the power of substitution) to vote for the undersigned all
shares of common stock of the undersigned in the Fund at the Special Meeting of
Shareholders to be held at 12:00 noon, Eastern time, on February 8, 2001 at 1285
Avenue of the Americas, 14th Floor, New York, New York 10019, and any
adjournment thereof ("Meeting"), with all the power the undersigned would have
if personally present. The shares represented by this card will be voted as
instructed. UNLESS INDICATED TO THE CONTRARY, THIS PROXY SHALL BE DEEMED TO
GRANT AUTHORITY TO VOTE "FOR" ALL PROPOSALS INDICATED BELOW, WITH DISCRETIONARY
POWER TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
If shares are held by an individual, sign your
name exactly as it appears on this card. If shares
are held jointly, either party may sign, but the
name of the party signing should conform exactly
to the name shown on this card. If shares are held
by a corporation, partnership or similar account,
the name and the capacity of the individual
signing should be indicated, unless it is
reflected in the form of registration. For
example: "ABC Corp., John Doe, Treasurer."
________________________________________
Signature
________________________________________
Signature (if held jointly)
__________________________________, 2001
Date
PLEASE MARK YOUR VOTE ON THE REVERSE SIDE OF THIS CARD.
<PAGE>
Please date and sign the reverse side of this proxy and return it promptly in
the enclosed envelope. This proxy will not be voted unless it is dated and
signed exactly as instructed.
When properly signed, the proxy will be voted as instructed below. If no
instruction is given for a proposal, voting will be made "FOR" that proposal.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE FOLLOWING PROPOSALS. PLEASE
INDICATE YOUR VOTE BY FILLING IN THE BOX COMPLETELY. EXAMPLE: / /
FOR AGAINST ABSTAIN
1. Approve a new Investment Advisory and / / / / / /
Administration Contract between Mitchell
Hutchins Asset Management Inc. ("Mitchell
Hutchins") and the Fund.
2. Approve a new Sub-Advisory Contract between / / / / / /
Mitchell Hutchins and Wellington Management
Company, LLP.
3. Approve a new Sub-Adviser Approval Policy / / / / / /
for the Fund.
PLEASE DATE AND SIGN THE REVERSE SIDE OF THIS CARD.
