<PAGE>
MANAGED HIGH YEILD PLUS INC. ANNUAL REPORT
July 15, 2000
Dear Shareholder,
We are pleased to present you with the annual report for Managed High Yield Plus
Fund Inc. (the "Fund") for the fiscal year ended May 31, 2000.
MARKET REVIEW
The 12-month period ended May 31, 2000 was a difficult time for the fixed income
market, and particularly for the high-yield sector. Among the factors that
caused the difficult conditions were: the Federal Reserve (the "Fed") in
"tightening" mode, i.e., raising short-term interest rates; increasing
volatility in the equity markets; and the Treasury's announcement that it would
begin reducing the supply of 30-year bonds. The resulting surge in demand for
30-year Treasurys caused a drastic yield curve inversion, in which 10-year notes
yielded more than 30-year Treasurys.
The high-yield sector's troubles were worsened by heavy net redemptions of
mutual fund shares and by reduced liquidity as bond dealers backed away from
market-making activities. Moreover, this year there was no "January effect," a
rally in the high-yield sector which usually occurs early in the new year. These
factors and other adverse conditions produced some of the widest high-yield
spreads relative to U.S. Treasurys in the last 10 years. (The spread is the
difference in yield or income over Treasurys that fixed income securities must
pay to compensate investors for their greater risk.)
For the fiscal year ended May 31, 2000, the broad market, as measured by
the Lehman Brothers Aggregate Bond Index, gained 2.11%. The high-yield sector
fared much worse, losing 2.53% as measured by the CS First Boston High Yield
Bond Index.
Managed High Yield Plus Fund Inc.
Investment Goals:
Primarily, high income;
secondarily, capital
appreciation
Portfolio Manager:
James F. Keegan
Mitchell Hutchins Asset
Management Inc.
Commencement:
June 26, 1998
NYSE Symbol:
HYF
Dividend Payments:
Monthly
<PAGE>
ANNUAL REPORT MANAGED HIGH YIELD PLUS FUND INC.
PORTFOLIO REVIEW
AVERAGE ANNUAL RETURNS, PERIODS ENDED 5/31/00
Net Asset Value Returns+ Fund Lipper Median*
--------------------------------------------------------------------------------
6 Months -10.80% -4.28%
1 Year -10.22 -5.75
Since Inception 6/26/98 -10.04 -4.59
--------------------------------------------------------------------------------
Market Price Returns+ Fund Lipper Median*
--------------------------------------------------------------------------------
6 Months -5.16% 2.03%
1 Year -12.14 -12.42
Since Inception 6/26/98 -11.13 -9.04
--------------------------------------------------------------------------------
* Lipper High Current Yield Funds (Leveraged) Median. Lipper Peer Group data
calculated by Lipper Inc.; used with permission. Lipper total return
methodology compares a fund's NAV (or market price in the case of market
price returns) at the beginning and end of a period, with the result being
expressed as a percent change of the beginning net asset value (or market
price). The new net asset value (or market price) is adjusted to reflect
the compounding effect of reinvesting income dividends as well as capital
gains distributions, if any. Distributions are reinvested on the
ex-dividend date at the ex-dividend NAV (or market price on the pay date).
Lipper total returns do not reflect any commissions. The Lipper Median is
the return of the fund that places in the middle of the peer group.
+ Past performance is no guarantee of future results. The Fund's share price
and investment return will vary so that an investor's shares may be worth
more or less than their original cost. NAV and market price returns for
periods of one year or less are cumulative. NAV return assumes, for
illustration only, that dividends were reinvested at the net asset value on
the payable dates. Market price return assumes dividends were reinvested
under the Dividend Reinvestment Plan. Returns do not reflect any
commissions and are not representative of the performance of an individual
investment.
Share Price, Dividend and Yield 5/31/00++
--------------------------------------------------------------------------------
Market Price $ 9.44
Net Asset Value $ 9.73
12-Month Dividend $ 1.50
Current Month Dividend+ $0.125
Market Yield 15.89%
NAV Yield 15.42%
IPO Yield 10.00%
--------------------------------------------------------------------------------
++ Market yield is calculated by multiplying the current month's distribution
by 12 and dividing by the month-end market price. NAV yield is calculated
by multiplying the current month's distribution by 12 and dividing by the
month-end net asset value. IPO yield is calculated by multiplying the
current month's distribution by 12 and dividing by the initial public
offering price. Prices and yields will vary.
+ The monthly dividend was reduced to $0.11 as of July 2000.
2
<PAGE>
MANAGED HIGH YIELD PLUS FUND INC. ANNUAL REPORT
PORTFOLIO HIGHLIGHTS
During the period, the adverse conditions that impacted the broad fixed
income market hit the high-yield sector particularly hard. Fund performance
reflected these adverse market conditions, but was exacerbated by losses among
several of the Fund's small-capitalization holdings. For the fiscal year, the
Fund underperformed its Lipper peer group median.
The Fund's interest expense on its borrowings increased during the period
as interest rates rose. We therefore reduced the Fund's net leverage from 28.4%
at the beginning of the period to 26.0% at period-end. Fixed communications
(27.8% at period-end) remained the Fund's top-weighted sector.*
MANAGEMENT CHANGES
Effective February 2000, James F. (Jim) Keegan, Managing Director of the
Taxable Credit Group, assumed management responsibility for the Fund.
Previously, the Fund had focused on high income potential, emphasizing
lower-rated, smaller securities that provided higher yields. While the Fund will
continue to seek high income, the portfolio management team seeks to lower the
Fund's volatility and improve portfolio credit quality. Over the past several
months, adverse market conditions have impeded management's efforts to increase
the Fund's exposure to larger-cap, more liquid and higher-rated issues and to
place a smaller emphasis on smaller-cap names. Those efforts will continue,
consistent with market conditions and the interests of long-term shareholders.
In selecting holdings for the Fund, management will seek to add companies that
appear to offer the best relative values based on its analysis of cash flow,
leverage and other balance sheet and income statement factors.
* Weightings represent percentages of portfolio assets. The Fund's portfolio
is actively managed and its composition will vary over time.
<PAGE>
ANNUAL REPORT MANAGED HIGH YIELD PLUS FUND INC.
PORTFOLIO CHARACTERISTICS
Credit Quality* 5/31/00 11/30/99
--------------------------------------------------------------------------------
Cash 1.0% 0.6%
BB & Higher 25.9 19.9
B 54.8 59.6
CCC & Lower 6.6 9.2
Non-Rated 6.7 7.3
Equity/Preferred 5.0 3.4
--------------------------------------------------------------------------------
Total 100.0 100.0
Characteristics* 5/31/00 11/30/99
--------------------------------------------------------------------------------
Weighted Avg. Maturity 7.88 yrs. 7.43 yrs.
Weighted Avg. Price $82.89 $86.28
Net Leverage 26.00% 28.43%
Net Assets ($mm) $310.0 $371.9
--------------------------------------------------------------------------------
Top Ten Holdings* 5/31/00 11/30/99
--------------------------------------------------------------------------------
Lyondell Chemicals 2.1% Northeast Optic Network 1.7%
Williams Communications 2.0 Intersil 1.7
United Pan-Europe Communications 2.0 Verio 1.7
NorthEast Optic Network 1.9 Williams Communications 1.7
PTC International Finance 1.8 Alestra 1.6
Blount 1.8 Hyperion Telecommunications 1.6
Hyperion Telecommunications 1.8 Knology Holdings 1.6
Knology Holdings 1.7 Mrs. Fields Holdings 1.6
Tesoro Petroleum 1.7 Park N View 1.6
Charter Communications 1.5 Blount 1.5
--------------------------------------------------------------------------------
Total 18.3 Total 16.3
Top Five Sectors* 5/31/00 11/30/99
--------------------------------------------------------------------------------
Communications (fixed) 27.8% Communications (fixed) 20.3%
Cable 12.5 Technology 11.1
Energy 7.7 Cable 10.8
Communications (mobile) 6.7 Service 7.7
Service 5.6 Energy 5.9
--------------------------------------------------------------------------------
Total 60.3 Total 55.8
* Weightings represent percentages of portfolio assets as of the dates
indicated. The Fund's portfolio is actively managed and its composition
will vary over time.
4
<PAGE>
MANAGED HIGH YIELD PLUS FUND INC. ANNUAL REPORT
OUTLOOK
Although the Fed did not raise rates at its meeting on June 28, it did note
that inflation remained a concern. The economy appears to be slowing, although
it is unclear whether the slowdown will be sufficient to prevent another rate
increase. However, we believe that any further Fed actions will impact the
equities markets more seriously than bonds. While we think the economy will
slow, we do not expect it to slip into recession.
The spread sectors--agencies, mortgages, corporates and high-yield
bonds--have had to cope with a triple whammy of reduced Treasury supply,
equity-market volatility and rising interest rates. We believe current
valuations are extremely attractive, and these sectors are now displaying signs
of stability. We remain hopeful that spreads can narrow in the periods ahead.
The new-issue calendar for the high-yield sector appears light ($57 billion
run rate for 2000 vs. $100 billion in 1999) and is likely to continue to be
dominated by the cable and fixed-communication sectors. We believe the
high-yield market can stabilize once the Fed is largely through raising interest
rates. Against this favorable backdrop of good economic news and dwindling
supply, we think the high-yield sector is attractive and still offers potential
to income-oriented investors with a long-term perspective.
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued support
and welcome any comments or questions you may have. For a Quarterly Review on
Managed High Yield Plus Fund Inc. or a fund in the PaineWebber Family of Funds,1
please contact your Financial Advisor.
Sincerely,
/s/ Margo Alexandar /s/ Brian M. Storms
MARGO ALEXANDER BRIAN M. STORMS
Chairman and Chief Executive Officer President and Chief Operating Officer
Mitchell Hutchins Asset Management Inc. Mitchell Hutchins Asset Management Inc.
/s/ James F. Keegan
JAMES F. KEEGAN
Portfolio Manager
Managed High Yield Plus Fund Inc.
This letter is intended to assist shareholders in understanding how the Fund
performed during the fiscal year ended May 31, 2000, and reflects our views at
the time of its writing. Of course, these views may change in response to
changing circumstances. We encourage you to consult your Financial Advisor
regarding your personal investment program.
1 Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses,
and should be read carefully before investing.
5
<PAGE>
Managed High Yield Plus Fund Inc.
Portfolio of Investments May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- ------------------- -------------- ------------
<C> <S> <C> <C> <C>
CORPORATE BONDS -- 127.19%
Automotive -- 3.42%
$ 4,500 HDA Parts Systems
Incorporated........... 08/01/05 12.000% $ 2,970,000
4,000 J.L. French Automotive
Castings............... 06/01/09 11.500 3,720,000
4,250 Lear Corporation........ 05/15/05 7.960 3,912,282
------------
10,602,282
------------
Cable -- 15.17%
7,000 Charter Communications
Holdings**............. 04/01/09 10.000 6,405,000
4,663 CSC Holdings
Incorporated........... 11/01/05 9.250 4,569,740
11,450 Knology Holdings
Incorporated........... 10/15/07 11.875+ 7,099,000
5,000 NTL Communications
Incorporated........... 10/01/08 11.500 5,025,000
11,175 Park 'N View
Incorporated@.......... 05/15/08 13.000 3,240,750
10,500 RCN Corporation......... 10/15/07 11.125+ 6,090,000
3,000 UIH Australia Pacific
Incorporated........... 05/15/06 14.000+ 2,580,000
8,650 United Pan Europe
Communications......... 08/01/09 12.500+ 4,022,250
18,600 United Pan Europe
Communications**....... 11/01/09 13.375+ 7,998,000
------------
47,029,740
------------
Chemicals -- 4.89%
4,000 Avecia Group PLC........ 07/01/09 11.000 3,940,000
2,500 Huntsman ICI Chemicals
LLC.................... 07/01/09 10.125 2,437,500
9,100 Lyondell Chemical
Company................ 05/01/07 & 05/01/09 9.875 & 10.875 8,781,500
------------
15,159,000
------------
Communications -- Fixed -- 35.22%
6,500 Alestra S.A............. 05/15/06 12.125 5,785,000
5,000 Allegiance Telecom
Incorporated........... 05/15/08 12.875 5,400,000
4,600 Barak ITC............... 11/15/07 12.500+ 2,300,000
4,130 Esprit Telecom Group
PLC.................... 06/15/08 10.875 3,221,400
5,000 Flag Telecom Holdings
Limited**.............. 03/30/10 11.625 4,600,000
5,000 Global Crossing Holdings
Limited**.............. 11/15/09 9.500 4,700,000
6,500 Globenet Communications
Group.................. 07/15/07 13.000 6,483,750
5,000 Globix Corporation**.... 02/01/10 12.500 4,350,000
7,750 GT Group Telecom
Incorporated**#........ 02/01/10 13.250+ 3,952,500
7,750 Hyperion
Telecommunications
Incorporated........... 11/01/07 12.000 7,381,875
5,025 ICG Holdings
Incorporated........... 05/01/06 12.500+ 4,120,500
2,000 ICG Services
Incorporated........... 02/15/08 10.000+ 980,000
5,140 KMC Telecom Holdings
Incorporated........... 05/15/09 13.500 4,677,400
2,500 Level 3 Communications
Incorporated**......... 03/15/08 11.000 2,368,750
5,000 Metromedia Fiber Network
Incorporated........... 11/15/08 10.000 4,762,500
5,125 NEXTLINK Communications
Incorporated........... 06/01/09 10.750 4,920,000
8,500 NorthEast Optic Network
Incorporated........... 08/15/08 12.750 7,990,000
7,075 Pathnet Incorporated.... 04/15/08 12.250 4,174,250
4,750 Tele1 Europe BV**....... 05/15/09 13.000 4,655,000
5,275 Verio Incorporated...... 12/01/08 11.250 5,868,438
</TABLE>
6
<PAGE>
Managed High Yield Plus Fund Inc.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------- -------- ------------
<C> <S> <C> <C> <C>
CORPORATE BONDS -- (continued)
Communications -- Fixed -- (concluded)
$10,000 Viatel Incorporated................ 04/15/08 12.500%+ $ 5,100,000
8,250 Williams Communications Group...... 10/01/09 10.875 8,250,000
3,500 World Access Incorporated.......... 01/15/08 13.250 3,132,500
------------
109,173,863
------------
Communications -- Mobile -- 7.37%
5,000 Nextel Communications Incorporated. 02/15/08 9.950+ 3,450,000
5,900 Nextel International Incorporated.. 04/15/08 12.125+ 3,658,000
7,500 PTC International Finance**........ 12/01/09 11.250 7,462,500
10,625 Spectrasite Holdings Incorporated.. 04/15/09 11.250+ 5,737,500
2,500 Voicestream Wire**................. 11/15/09 10.375 2,550,000
------------
22,858,000
------------
Consumer Manufacturing -- 2.07%
4,500 Decora Industries Incorporated..... 05/01/05 11.000 1,845,000
6,000 Desa International Incorporated.... 12/15/07 9.875 4,560,000
------------
6,405,000
------------
Energy -- 10.11%
5,250 Cheasapeake Energy................. 05/01/05 9.625 5,013,750
4,000 Key Energy Services Incorporated... 01/15/09 14.000 4,320,000
8,401 Orion Refining Corporation**@...... 11/15/04 10.000+ 4,200,367
2,250 Pioneer Natural Resources Company.. 04/01/10 9.625 2,303,438
2,700 Pride International Incorporated... 06/01/09 10.000 2,713,500
5,750 R & B Falcon Corporation........... 12/15/08 9.500 5,750,000
7,500 Tesoro Petroleum Corporation....... 07/01/08 9.000 7,050,000
------------
31,351,055
------------
Finance -- 2.91%
4,939 Airplanes Pass-Through Trust....... 03/15/19 10.875 4,000,185
5,000 HSBC Capital Funding LP** ......... 06/30/30 10.176 5,033,015
5,050 Superior National Insurance
Group@(b)......................... 12/01/17 10.750+ 0
------------
9,033,200
------------
Food & Beverage -- 2.40%
15,875 Mrs. Field's Holdings Company
Incorporated**@#.................. 12/01/05 14.000+ 5,556,250
2,283 Packaged Ice Incorporated.......... 02/01/05 9.750 1,894,890
------------
7,451,140
------------
Gaming -- 3.36%
6,250 MGM Grand Incorporated............. 06/01/07 9.750 6,187,500
4,625 Park Place Entertainment
Corporation....................... 12/15/05 7.875 4,231,875
------------
10,419,375
------------
General Industrial -- 5.74%
6,500 Aqua Chemical Incorporated......... 07/01/08 11.250 3,770,000
7,500 Blount Incorporated................ 08/01/09 13.000 7,425,000
</TABLE>
7
<PAGE>
Managed High Yield Plus Fund Inc.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------- -------- ------------
<C> <S> <C> <C> <C>
CORPORATE BONDS -- (continued)
General Industrial -- (concluded)
$ 1,110 J.B. Poindexter & Company
Incorporated....................... 05/15/04 12.500% $ 1,021,200
7,000 Sabreliner Corporation**............ 06/15/08 11.000 5,565,000
------------
17,781,200
------------
Healthcare -- 1.91%
3,500 Tenet Healthcare Corporation........ 12/01/08 8.125 3,141,250
2,700 Triad Hospitals Holdings
Incorporated....................... 05/15/09 11.000 2,767,500
------------
5,908,750
------------
Hotels & Lodging -- 1.37%
4,650 Host Marriott L.P................... 02/15/06 8.375 4,231,500
------------
Media -- 2.07%
2,675 Inter Act Systems
Incorporated**@(b)................. 08/01/03 14.000+ 615,250
10,250 Wam! Net Incorporated............... 03/01/05 13.250+ 5,791,250
------------
6,406,500
------------
Metals -- 2.26%
6,000 Metal Management Incorporated....... 05/15/08 10.000 4,200,000
3,000 National Steel Corporation.......... 03/01/09 9.875 2,820,000
------------
7,020,000
------------
Paper & Packaging -- 1.85%
3,000 Packaging Corporation of America.... 04/01/09 9.625 2,932,500
3,000 Tembec Industry Incorporated........ 06/30/09 8.625 2,812,500
------------
5,745,000
------------
Real Estate -- 0.97%
3,575 D.R. Horton Incorporated............ 02/01/09 8.000 3,003,000
------------
Retail -- 3.78%
3,160 Advance Holding Corporation......... 04/15/09 12.875+ 1,200,800
2,400 Advance Stores Company Incorporated
................................... 04/15/08 10.250 1,872,000
5,500 Ames Department Stores Incorporated. 04/15/06 10.000 4,345,000
5,000 Saks Incorporated................... 07/15/04 7.000 4,308,950
------------
11,726,750
------------
Service -- 7.20%
7,500 Allied Waste North America
Incorporated....................... 08/01/09 10.000 5,925,000
5,995 American Eco Corporation@(b)........ 05/15/08 9.625 1,079,100
6,385 Atlantic Express Transportation
Corporation........................ 02/01/04 10.750 5,491,100
2,000 Avis Rent A Car Incorporated........ 05/01/09 11.000 2,040,000
8,250 Budget Group Incorporated........... 04/01/06 9.125 5,775,000
2,500 Nationwide Credit Incorporated...... 01/15/08 10.250 1,700,000
5,000 Premier Graphics Incorporated(b).... 12/01/05 11.500 300,000
------------
22,310,200
------------
</TABLE>
8
<PAGE>
Managed High Yield Plus Fund Inc.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------- -------- ------------
<C> <S> <C> <C> <C>
CORPORATE BONDS -- (concluded)
Supermarkets & Drugstores -- 1.80%
$ 6,000 The Pantry Incorporated............. 10/15/07 10.250% $ 5,580,000
------------
Technology -- 5.43%
3,500 Chippac International Limited**..... 08/01/09 12.750 3,675,000
8,000 Earthwatch Incorporated**#@......... 07/15/07 13.000+ 4,560,000
6,000 Fairchild Semiconductor Corporation. 03/15/07 10.125 5,910,000
2,500 SCG Holdings Corporation............ 08/01/09 12.000 2,700,000
------------
16,845,000
------------
Transportation -- 3.86%
6,500 Equimar Shipholdings Limited........ 07/01/07 9.875 2,340,000
4,350 Stena AB............................ 06/15/07 8.750 3,741,000
9,500 TFM S.A. de C.V..................... 06/15/09 11.750+ 5,890,000
------------
11,971,000
------------
Utilities -- 2.03%
5,250 AES Corporation..................... 06/01/09 9.500 5,053,334
1,306 Panda Funding Corporation........... 08/20/12 11.625 1,240,989
------------
6,294,323
------------
Total Corporate Bonds (cost -- $472,465,023)... 394,305,878
------------
<CAPTION>
Number of
Shares
---------
<C> <S> <C>
COMMON STOCK(a) -- 2.18%
Cable -- 1.34%
1,000 Knology Holdings Incorporated.......................... 4,500
81,941 Park 'N View Incorporated.............................. 209,974
170,418 RCN Corporation........................................ 3,930,264
------------
4,144,738
------------
Communications -- Fixed -- 0.70%
83,660 Tele1 Europe BV........................................ 962,090
48,600 Viatel Incorporated.................................... 1,211,963
------------
2,174,053
------------
Food & Beverage -- 0.03%
28,153 Packaged Ice Incorporated.............................. 98,536
------------
Media -- 0.01%
1,500 Wam!Net Incorporated................................... 16,500
------------
Service -- 0.10%
194,245 Waste Systems International Incorporated@.............. 315,648
------------
Total Common Stock (cost -- $7,284,068).......................... 6,749,475
------------
</TABLE>
9
<PAGE>
Managed High Yield Plus Fund Inc.
<TABLE>
<CAPTION>
Number of
Shares/Warrants Value
--------------- ------------
<C> <S> <C>
PREFERRED STOCK(a) -- 2.60%
Communications -- Fixed -- 0.78%
2,946 ICG Holdings Incorporated..................... $ 2,415,400
------------
Communications -- Mobile -- 1.47%
4,464 Crown Castle International Corporation........ 4,553,169
------------
Energy -- 0.06%
4,513 Orion Refining Corporation@................... 182,718
------------
Media -- 0.16%
5,000 Inter Act Systems Incorporated**@............. 500,000
------------
Service -- 0.13%
1,513 Waste Systems International Incorporated@..... 416,075
------------
Total Preferred Stock (cost -- $8,425,618).................... 8,067,362
------------
WARRANTS(a) -- 0.18%
Cable -- 0.01%
1,000 UIH Australia Pacific Incorporated............ 15,000
------------
Communications -- Fixed -- 0.02%
6,950 Pathnet Incorporated.......................... 69,500
------------
Energy -- 0.07%
4,000 Key Energy Services Incorporated.............. 220,000
------------
Media -- 0.08%
5,000 Inter Act Electronic Marketing Incorporated@.. 50
5,000 Inter Act Systems Incorporated@............... 25,000
20,250 Wam! Net Incorporated......................... 222,750
------------
247,800
------------
Total Warrants (cost -- $15,050).............................. 552,300
------------
<CAPTION>
Principal
Amount Maturity Interest
(000) Date Rate
--------- -------- --------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT -- 0.11%
$ 340 Repurchase Agreement dated
5/31/00 with State Street
Bank & Trust Company,
collateralized by $348,416
U.S. Treasury Notes,
5.500% due 08/31/01
(value -- $347,708);
Proceeds: $340,047
(cost -- $340,000)........
06/01/00 5.000% 340,000
------------
Total Investments (cost -- $488,529,759) --
132.26%................................... 410,015,015
Liabilities in excess of other assets --
(32.26)%.................................. (99,999,937)
------------
Net Assets -- 100.00%....................... $310,015,078
============
</TABLE>
---------
# Security represents a unit which is comprised of the stated bond with
attached warrants or common stock.
@ Illiquid securities representing 4.13% of net assets.
+ Denotes a step up bond or zero coupon bond that converts to the noted fixed
rate at a designated future date.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(a) Non-income producing security.
(b) Bond interest in default.
See accompanying notes to financial statements
10
<PAGE>
Managed High Yield Plus Fund Inc.
Statement of Assets and Liabilities May 31, 2000
<TABLE>
<S> <C>
Assets
Investments in securities, at value (cost -- $488,529,759)....... $410,015,015
Cash............................................................. 3,580
Interest receivable.............................................. 9,759,095
Interest receivable on interest rate swap........................ 30,928
Unrealized appreciation on interest rate swap.................... 311,972
Other assets..................................................... 52,913
------------
Total assets..................................................... 420,173,503
------------
Liabilities
Bank loan payable................................................ 109,000,000
Payable for interest on bank loan................................ 653,249
Payable to investment adviser and administrator.................. 257,181
Accrued expenses and other liabilities........................... 247,995
------------
Total liabilities................................................ 110,158,425
------------
Net Assets
Capital stock -- $0.001 par value; 200,000,000 shares authorized;
31,858,628 shares issued and outstanding........................ 474,827,071
Undistributed net investment income.............................. 5,175,683
Accumulated net realized loss from investment transactions....... (91,784,904)
Net unrealized depreciation of investments and interest rate
swap............................................................ (78,202,772)
------------
Net assets applicable to shares outstanding...................... $310,015,078
============
Net asset value per share........................................ $ 9.73
============
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
Managed High Yield Plus Fund Inc.
Statement of Operations
<TABLE>
<CAPTION>
For the
Year Ended
May 31, 2000
------------
<S> <C>
Investment Income:
Interest and dividends........................................... $ 60,404,673
------------
Expenses:
Interest expense, loan commitment and other fees................. 8,943,222
Investment advisory and administration........................... 3,598,783
Custody and accounting........................................... 311,927
Legal and audit.................................................. 252,615
Reports and notices to shareholders.............................. 98,500
Directors' fees.................................................. 10,500
Transfer agency and service fees................................. 7,345
Other expenses................................................... 57,178
------------
13,280,070
------------
Net Investment Income............................................ 47,124,603
------------
Realized and unrealized gains (losses) from investment
activities:
Net realized loss from investment transactions................... (58,128,549)
Net change in unrealized appreciation/depreciation of:
Investment transactions......................................... (24,914,366)
Interest rate swap.............................................. 228,541
------------
Net realized and unrealized loss from investment activities...... (82,814,374)
------------
Net decrease in net assets resulting from operations............. $(35,689,771)
============
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
Managed High Yield Fund Plus Inc.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Period
For the June 26, 1998+
Year Ended through
May 31, 2000 May 31, 1999
------------ --------------
<S> <C> <C>
From operations:
Net investment income............................. $ 47,124,603 $ 44,144,492
Net realized loss from investment transactions.... (58,128,549) (33,656,355)
Net change in unrealized appreciation/depreciation
of investments and interest rate swap............ (24,685,825) (53,516,947)
------------ ------------
Net decrease in net assets resulting from
operations....................................... (35,689,771) (43,028,810)
------------ ------------
Dividends to shareholders from:
Net investment income............................. (47,743,692) (38,535,123)
------------ ------------
Capital stock transactions:
Proceeds from shares issued....................... -- 460,575,000
Proceeds from dividends reinvested................ 4,519,779 9,817,675
------------ ------------
Net increase in net assets resulting from capital
stock transactions............................... 4,519,779 470,392,675
------------ ------------
Net increase (decrease) in net assets............. (78,913,684) 388,828,742
------------ ------------
Net Assets:
Beginning of year................................. 388,928,762 100,020
------------ ------------
End of year (including undistributed net
investment income of $5,175,683 and $5,623,231;
respectively).................................... $310,015,078 $388,928,762
============ ============
</TABLE>
---------
+ Commencement of operations
See accompanying notes to financial statements
13
<PAGE>
Managed High Yield Plus Fund Inc.
Statement of Cash Flows
<TABLE>
<CAPTION>
For the
Year Ended
May 31, 2000
-------------
<S> <C>
Cash flows provided from operating activities:
Interest received.............................................. $ 50,641,477
Operating expenses paid........................................ (4,303,141)
Interest paid.................................................. (8,987,103)
Sales of short-term portfolio investments, net................. 7,113,000
Purchase of long-term portfolio investments.................... (338,209,474)
Sales of long-term portfolio investments ...................... 372,904,388
-------------
Net cash provided from operating activities ................... 79,159,147
-------------
Cash flows used for financing activities:
Dividends paid to shareholders................................. (47,743,692)
Decrease in bank loan.......................................... (36,000,000)
Proceeds from capital stock transactions....................... 4,519,779
-------------
Net cash used for financing activities......................... (79,223,913)
-------------
Net decrease in cash........................................... (64,766)
Cash at beginning of period.................................... 68,346
-------------
Cash at end of period.......................................... $ 3,580
=============
Reconciliation of net decrease in net assets resulting from
operations to net cash provided from operating activities:
Net decrease in net assets resulting from operations........... $ (35,689,771)
-------------
Decrease in investments, at value.............................. 117,622,047
Decrease in receivable for investments sold.................... 6,492,440
Decrease in interest receivable................................ 2,711,695
Increase in interest receivable on swap contract............... (30,928)
Increase in unrealized appreciation on interest rate swap...... (228,541)
Increase in other assets....................................... (1,765)
Decrease in payable for investments purchased.................. (11,707,621)
Decrease in payable for interest on bank loan.................. (22,527)
Decrease in payable to investment adviser and administrator.... (65,480)
Decrease in interest payable on swap contract.................. (21,354)
Increase in accrued expenses & other liabilities............... 100,952
-------------
114,848,918
-------------
Net cash provided from operating activities.................... $ 79,159,147
=============
</TABLE>
See accompanying notes to financial statements
14
<PAGE>
Notes to Financial Statements
Organization and Significant Accounting Policies
Managed High Yield Plus Fund Inc. (the "Fund") was incorporated in Maryland on
April 24, 1998 and is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, as amended, as a closed-end diversi-
fied management investment company. The Fund's primary investment objective is
to seek high income. Its secondary objective is to seek capital appreciation.
Direct expenses of $1,071,662 relating to the public offering of the Fund's
shares were paid by PaineWebber Incorporated ("PaineWebber") at the time of is-
suance. Effective as of the close of business on June 2, 2000, the Fund ac-
quired all of the net assets of Managed High Yield Fund in a tax-free exchange
of shares. Managed High Yield Fund's net assets at that date, valued at
$57,293,104 were combined with those of the Fund.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and assump-
tions that affect the reported amounts and disclosures in the financial state-
ments. Actual results could differ from those estimates. The following is a
summary of significant accounting policies:
Valuation of Investments--The Fund calculates its net asset value based on the
current market value for its portfolio securities. The Fund normally obtains
market values for its securities from independent pricing sources and broker-
dealers. Independent pricing sources may use last reported last sale prices,
current market quotations or valuations from computerized "matrix" systems that
derive values based on comparable securities. Securities traded in the over-
the-counter ("OTC") market and listed on The Nasdaq Stock Market, Inc.
("Nasdaq") normally are valued at the last sale price on Nasdaq prior to valua-
tion. Other OTC securities are valued at the last bid price available prior to
valuation. Securities which are listed on U.S. and foreign stock exchanges nor-
mally are valued at the last sale price on the day the securities are valued
or, lacking any sales on such day, at the last available bid price. In cases
where securities are traded on more than one exchange, the securities are val-
ued on the exchange designated as the primary market by Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins"), a wholly owned asset management subsidi-
ary of PaineWebber and investment adviser and administrator of the Fund. If a
market value is not available from an independent pricing source for a particu-
lar security, that security is valued at fair value as determined in good faith
by or under the direction of the Fund's board of directors (the "board"). The
amortized cost method of valuation, which approximates market value, generally
is used to value short-term debt instruments with sixty days or less remaining
to maturity, unless the board determines that this does not represent fair val-
ue. All investments quoted in foreign currencies will be valued daily in U.S.
dollars on the basis of the foreign currency exchange rates prevailing at the
time such valuation is determined by the Fund's custodian.
Repurchase Agreements--The Fund's custodian takes possession of the collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a mark-to-market basis to ensure that the value, including ac-
crued interest, is at least equal to the repurchase price. In the event of de-
fault of the obligation to repurchase, the Fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. Under cer-
tain circumstances, in the event of default or bankruptcy by the other party to
the agreement, realization and/or retention of the collateral may be subject to
legal proceedings. The Fund occasionally participates in joint repurchase
agreement transactions with other funds managed by Mitchell Hutchins.
Investment Transactions and Investment Income--Investment transactions are re-
corded on the trade date. Realized gains and losses from investment transac-
tions are calculated on the identified cost method. Interest income is recorded
on an accrual basis. Discounts are accreted and premiums are amortized as ad-
justments to interest income and the identified cost of investments.
Dividends and Distributions--Dividends and distributions to stockholders are
recorded on the ex-dividend date. Dividends from net investment income and dis-
tributions from net realized capital gains are determined in accordance with
15
<PAGE>
Notes to Financial Statements
Organization and Significant Accounting Policies (concluded)
federal income tax regulations which may differ from generally accepted ac-
counting principles. These "book/tax" differences are either considered tempo-
rary or permanent in nature. To the extent theses differences are permanent in
nature, such amounts are reclassified within the capital accounts based on
their federal tax-basis treatment; temporary differences do not require reclas-
sification.
Borrowings
The Fund has a $200 million dollar committed credit facility ("facility"). Un-
der the terms of the facility, the Fund borrows at the London Interbank Over-
night Rate ("LIBOR") plus facility and administrative fees. In addition, the
Fund pays a liquidity fee on the unused portion of the facility. The Fund may
borrow up to 33 1/3% of its total assets up to the committed amount. In accor-
dance with the terms of the debt agreement, the Fund has pledged assets in the
amount of $277,561,663 on May 31, 2000 as collateral for the bank loan.
For the year ended May 31, 2000 the Fund borrowed a daily weighted average
balance of $143,180,328 at an interest rate of 6.02%.
Interest Rate Swap Agreement
The Fund entered into an interest rate swap to protect itself from interest
rate fluctuations on a portion of its borrowings. A swap is an agreement that
obligates two parties to exchange a series of cash flows at specified intervals
based upon or calculated by reference to interest rated for a specified amount.
The payment flows are usually netted against each other, with the difference
being paid by one party to the other.
Risks may arise as a result of the failure of the counterparty to the swap
contract to comply with the terms of the contract. The loss incurred by the
failure of a counterparty is generally limited to the net interest payment to
be received by the Fund. Therefore, the Fund considers the creditworthiness of
the counterparty to a swap contract in evaluating potential credit risk.
The Fund records a net receivable or payable on a daily basis for the net in-
terest income or expense expected to be received or paid in the interest peri-
od. Net interest received or paid on these contracts is recorded as interest
income (or as an offset to interest income). Fluctuations in the value of swap
contracts are recorded for financial statement purposes as unrealized apprecia-
tion or depreciation of investments.
At May 31, 2000, the Fund had an outstanding interest rate swap contract with
the following terms:
<TABLE>
<CAPTION>
Rate Type
----------------------------------
Notional Termination Payments made Payments received Unrealized
Amount Date by the Fund by the Fund Appreciation
----------- ----------- ------------- ----------------- ------------
<S> <C> <C> <C> <C>
$20,000,000 3/16/01 5.5125% 6.16%+ $311,972
</TABLE>
---------
+Rate based on LIBOR (London Interbank Offered Rate).
Concentration of Risk
The ability of the issuers of the debt securities held by the Fund to meet
their obligations may be affected by economic developments, including those
particular to a specific industry, country or region. In addition, the Fund's
use of leverage creates greater volatility in the Fund's net asset value and
market price of its shares.
Investment Adviser and Administrator
The Fund has entered into an Investment Advisory and Administration Contract
("Advisory Contract") with Mitchell Hutchins, under which Mitchell Hutchins
serves as investment adviser and administrator of the Fund. The Advisory
16
<PAGE>
Notes to Financial Statements
Investment Adviser and Administrator (concluded)
Contract provides Mitchell Hutchins with a fee, computed weekly and payable
monthly, in an amount equal to the annual rate of 0.70% of the Fund's average
weekly total assets minus liabilities other than the aggregate indebtedness
constituting leverage.
Investments in Securities
For federal income tax purposes, the cost of securities owned at May 31, 2000,
was substantially the same as the cost of securities for financial statement
purposes.
At May 31, 2000, the components of net unrealized depreciation of investments
(excluding interest rate swap) transactions were as follows:
<TABLE>
<S> <C>
Gross depreciation (investments having an excess of cost over
value)....................................................... $(83,325,562)
Gross appreciation (investments having an excess of value over
cost)........................................................ 4,810,818
------------
Net unrealized depreciation of investments.................... $(78,514,744)
============
</TABLE>
For the year ended May 31, 2000, aggregate purchases and sales of portfolio
securities, excluding short-term securities, were $326,501,853 and
$366,331,999, respectively.
Federal Tax Status
The Fund intends to distribute all of its taxable income and to comply with
the other requirements of the Internal Revenue Code applicable to regulated in-
vestment companies. Accordingly, no provision for federal income taxes is re-
quired. In addition, by distributing during each calendar year substantially
all of its net investment income, capital gains and certain other amounts, if
any, the Fund intends not to be subject to a federal excise tax.
At May 31, 2000, the Fund had a net capital loss carryover of $47,701,546.
This loss carryforward is available as a reduction, to the extent provided in
the regulations, of future net realized capital gains, and will expire between
May 31, 2007 and May 31, 2008. To the extent that such losses are used to off-
set future net realized capital gains, it is probable these gains will not be
distributed. In accordance with U.S. Treasury regulations, the Fund has elected
to defer $43,298,647 of net realized capital losses arising after October 31,
1999. Such losses are treated for tax purposes as arising on June 1, 2000.
To reflect reclassifications arising from permanent "book/tax" differences for
the year ended May 31, 2000, undistributed net investment income was increased
by $171,541 and capital stock was decreased by $171,541.
Capital Stock
There are 200,000,000 shares of $0.001 par value capital stock authorized. Of
the 31,858,628 shares of common stock outstanding 8,412 shares are owned by
Mitchell Hutchins.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Shares Amount
---------- ------------
<S> <C> <C>
For the Year Ended May 31, 2000
Dividends reinvested................................. 369,345 $ 4,519,779
========== ============
Period June 26, 1998 through May 31, 1999
Shares issued........................................ 30,705,000 $460,575,000
Dividends reinvested................................. 777,615 9,817,675
---------- ------------
Net increase......................................... 31,482,615 $470,392,675
========== ============
</TABLE>
17
<PAGE>
Managed High Yield Plus Fund Inc.
Financial Highlights
Selected data for a share of common stock outstanding throughout each period is
presented below:
<TABLE>
<CAPTION>
For the Period
For the June 26, 1998+
Year Ended through
May 31, 2000 May 31, 1999
------------ --------------
<S> <C> <C>
Net asset value, beginning of period............... $ 12.35 $ 15.00
-------- --------
Net investment income.............................. 1.48 1.42
Net realized and unrealized losses on investment
transactions ..................................... (2.60) (2.83)
-------- --------
Net decrease from investment activities............ (1.12) (1.41)
-------- --------
Dividends from net investment income............... (1.50) (1.24)
-------- --------
Net asset value, end of period..................... $ 9.73 $ 12.35
======== ========
Market value, end of period........................ $ 9.44 $ 12.31
======== ========
Total investment return(1)......................... (12.14)% (9.37)%
======== ========
Ratios/Supplemental data:
Net assets, end of period (000's).................. $310,015 $388,929
Expenses to average net assets, including interest
expense........................................... 3.59% 3.02%*
Expenses to average net assets, excluding interest
expense........................................... 1.17% 1.15%
Net investment income to average net assets........ 12.74% 11.82%*
Portfolio turnover rate............................ 66% 52%
Asset coverage++................................... $ 3,844 $ 3,682
</TABLE>
---------
+ Commencement of operations
++ Per $1,000 of bank loans outstanding
* Annualized
(1) Total investment return is calculated assuming a purchase of capital stock
at market value on the first day of the period reported and a sale at
market value on the last day of the period reported and assuming
reinvestment of dividends at prices obtained under the Fund's Dividend
Reinvestment Plan. Total investment return does not reflect brokerage
commissions and has not been annualized.
18
<PAGE>
Managed High Yield Plus Fund Inc.
Report of Independent Auditors
The Boards of Directors and Shareholders of
Managed High Yield Plus Fund Inc.
We have audited the accompanying statement of assets and liabilities of the
Managed High Yield Plus Fund Inc. (the "Fund"), including the portfolio of in-
vestments, as of May 31, 2000, and the related statements of operations for the
year then ended, changes in net assets for the year then ended and the period
June 26, 1998 through May 31, 1999, cash flows for the year then ended and the
financial highlights for the periods indicated. These financial statements and
financial highlights are the responsibility of the Fund's management. Our re-
sponsibility is to express an opinion on these financial statements and finan-
cial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally ac-
cepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included con-
firmation of investments owned at May 31, 2000, by correspondence with the cus-
todian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall fi-
nancial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund at May 31, 2000, and the results of its operations for the year then end-
ed, changes in its net assets for the year then ended and the period June 26,
1998 through May 31, 1999, cash flows for the year then ended, and the finan-
cial highlights for the periods indicated, in conformity with accounting prin-
ciples generally accepted in the United States.
/s/ Ernst & Young LLP
New York, New York
July 25, 2000
19
<PAGE>
Managed High Yield Plus Fund Inc.
Tax Information (unaudited)
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Fund's fiscal year end (May 31,
2000) as to the federal tax status of distributions received by stockholders
during such fiscal year. Accordingly, we are advising you that all dividends
paid during the fiscal year were derived from net investment income and are
taxable as ordinary income. Additionally, 0.61% of the distributions paid by
the Fund qualify for the dividend received deduction available for corporate
shareholders.
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not
be reported as taxable income. Some retirement trusts (e.g., corporate, Keogh,
and 403(b)(7) plans) may need this information for their annual reporting.
Because the Fund's fiscal year is not the calendar year, another notification
will be sent in respect of calendar year 2000. The second notification, which
reflects the amount to be used by calendar year taxpayers on their federal in-
come tax returns, will be made in conjunction with Form 1099 DIV and will be
mailed in January 2001. Stockholders are advised to consult their own tax ad-
visers with respect to the tax consequences of their investment in the Fund.
20
<PAGE>
Managed High Yield Plus Fund Inc.
General Information
The Fund
Managed High Yield Plus Fund Inc. (the "Fund") is a diversified, closed-end
management investment company whose shares trade on the New York Stock Ex-
change, Inc. ("NYSE"). The Fund's primary investment objective is to seek high
income. Its secondary objective is to seek capital appreciation. The Fund's in-
vestment adviser and administrator is Mitchell Hutchins Asset Management Inc.
("Mitchell Hutchins"), a wholly-owned asset management subsidiary of
PaineWebber Incorporated ("PaineWebber"), which has over $68.5 billion in asset
under management as of June 30, 2000.
Distribution Policy
The Fund's board of directors has established a Dividend Reinvestment Plan
(the "Plan") under which all stockholders whose shares are registered in their
own names, or in the name of PaineWebber or its nominee, will have all divi-
dends and other distributions on their shares of common stock automatically re-
invested in additional shares of commons stock, unless such stockholders elect
to receive cash. Stockholders who elect to hold their shares in the name of an-
other broker or nominee should contact such broker or nominee to determine
whether, or how, they may participate in the Plan. The ability of such stock-
holders to participate in the Plan may change if their shares are transferred
into the name of another broker or nominee.
A stockholder may elect not to participate in the Plan or may terminate par-
ticipation in the Plan at any time without penalty, and stockholders who have
previously terminated participation in the Plan may rejoin it at any time.
Changes in elections must be made in writing to the Fund's transfer agent and
should include the stockholder's name and address as they appear on that share
certificate or in the transfer agent's records. An election to terminate par-
ticipation in the Plan, until such election is changed, will be deemed an elec-
tion by stockholder to take all subsequent distributions in cash. An election
will be effective only for distributions declared and having a record date at
least ten days after the date on which the election is received.
The Transfer Agent will serve as agent for the stockholders in administering
the Plan. After the Fund declares a dividend or determines to make any other
distribution, the Transfer Agent, as agent for the participants, receives the
cash payment. Whenever the Fund declares an income dividend or a capital gain
distribution (collectively referred to in this section as "dividends") payable
either in shares or in cash, non-participants in the Plan will receive cash and
participants in the Plan will receive the equivalent in shares. The Transfer
Agent will acquire shares for the participants' accounts, depending upon the
circumstances described below, either (i) through receipt of unissued but au-
thorized shares from the Fund ("newly issued shares") or (ii) by purchase of
outstanding shares on the open market, on the NYSE or elsewhere ("open-market
purchases"). If, on the dividend payment date, the net asset value per share is
equal to or less than the market price per share plus estimated brokerage com-
missions (such condition being referred to herein as "market premium"), the
Transfer Agent will invest the dividend amount in newly issued shares on behalf
of the participants. The number of newly issued shares to be credited to each
participant's account will be determined by dividing the dollar amount of the
dividend by the net asset value per share (but in no event less than 95% of the
then current market price per share) on the date the shares are issued. If, on
the dividend payment date, the net asset value per share is greater than the
market value per share, plus estimated brokerage commissions (such condition
being referred to herein as "market discount"), the Transfer Agent will invest
the dividend amount in shares acquired on behalf of the participants in open-
market purchases. The number of outstanding shares purchased with each distri-
bution for a particular shareholder equals the result obtained by dividing the
21
<PAGE>
Managed High Yield Plus Fund Inc.
General Information (continued)
amount of the distribution payable to that shareholder by the average price per
share (including applicable brokerage commissions) that the Transfer Agent was
able to obtain in the open market.
In the event of a market discount on the dividend payment date, the Transfer
Agent will have until the last business day before the next date on which the
shares trade on an "ex-dividend" basis, but in no event more than 30 days after
the dividend payment date (the "last purchase date"), to invest the dividend
amount in shares acquired in open-market purchases. It is contemplated that the
Fund will pay monthly income dividends. Therefore, the period during which
open-market purchases can be made will exist only from the payment date of the
dividend through the date before the next "ex-dividend" date, which typically
will be approximately ten days. If, before the Transfer Agent has completed its
open-market purchases, the market price of a share, plus estimated brokerage
commissions, exceeds the net asset value per share, the average per share pur-
chase price paid by the Transfer Agent may exceed the Fund's net asset value
per share, resulting in the acquisition of fewer shares than if the dividend
had been paid in newly issued shares on the dividend payment date. Because of
the foregoing difficulty with respect to open-market purchases, the Plan pro-
vides that, if the Transfer Agent is unable to invest the full dividend amount
in open-market purchases during the purchase period or if the market discount
shifts to a market premium during the purchase period, the Transfer Agent will
cease making open-market purchases and will invest the uninvested portion of
the dividend amount in newly issued shares at the close of business on the ear-
lier of the last purchase date or the first day during the purchase period on
which the net asset value per share equals or is less than the market price per
share, plus estimated brokerage commissions. The Transfer Agent will maintain
all shareholder accounts in the Plan and will furnish written confirmations of
all transactions in the accounts, including information needed by shareholders
for personal and tax records. Shares in the account of each Plan participant
will be held by the Transfer Agent in non-certificated form in the name of the
participant, and each shareholder's proxy will include those shares purchased
pursuant to the Plan. There will be no charge to participants for reinvesting
dividends. However, each participant will pay a pro rata share of brokerage
commissions incurred with respect to the Transfer Agent's open market purchases
of shares in connection with the reinvestment of dividends.
The automatic reinvestment of dividends in shares will not relieve partici-
pants of any income tax that may be payable on such dividends.
Shareholders who participate in the Plan may receive benefits not available to
shareholders who do not participate in the Plan. If the market price (plus com-
missions) of the shares is above their net asset value, participants in the
Plan will receive shares at less than they could otherwise purchase them and
will have shares with a cash value greater than the value of any cash dividends
they would have received on their shares. If the market price plus commissions
is below the net asset value, participants will receive dividends in shares
with a net asset value greater than the value of any cash dividends they would
have received on their shares. However, there may be insufficient shares avail-
able in the market to distribute dividends in shares at prices below the net
asset value. Also, since the Fund does not redeem its shares, the price on re-
sale may be more or less than the net asset value.
Experience under the Plan may indicate that changes are desirable. According-
ly, the Fund reserves the right to amend or terminate the Plan with respect to
any dividend or other distribution if notice of the change is sent to Plan par-
ticipants at least 30 days before the record date for such distribution. The
Plan also may be amended or terminated by the transfer agent by at least 30
days' written notice to all Plan participants. Additional information regarding
the Plan may be obtained from, and all correspondence concerning the Plan
should be directed to, the transfer agent at PFPC Inc., P.O. Box 8950, Wilming-
ton, Delaware 19899.
22
<PAGE>
DIRECTORS
E. Garrett Bewkes, Jr. Meyer Feldberg
Chairman
George W. Gowen
Margo N. Alexander
Frederic V. Malek
Richard Q. Armstrong
Carl W. Schafer
Richard R. Burt
Brian M. Storms
Mary C. Farrell
PRINCIPAL OFFICERS
Margo N. Alexander Dennis L. McCauley
President Vice President
Dianne E. O'Donnell James F. Keegan
Vice President and Secretary Vice President
Paul H. Schubert
Vice President and Treasurer
INVESTMENT ADVISER
AND ADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
51 West, 52nd Street
New York, New York 10019
This report is sent to the shareholders of the Fund for their information. It is
not a prospectus, circular or representation intended for the use in the
purchase or sale of shares of the Fund or of any securities mentioned in this
report.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that from time to time the Fund may purchase shares of its
common stock in the open market at market prices.
<PAGE>
MANAGED HIGH
YIELD PLUS FUND INC.
ANNUAL REPORT
[LOGO OF PAIN WEBBER]
(C)2000 PaineWebber Incorporated
All Rights Reserved
Member SIPC
MAY 31, 2000
