MANAGED HIGH YIELD FUND INC. SEMIANNUAL REPORT
March 15, 2000
Dear Shareholder,
We are pleased to present you with the semiannual report for the Managed High
Yield Fund Inc. (the "Fund") for the six-month period ended January 31, 2000.
MARKET REVIEW
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] Interest rates rose during the period, as the economy
expanded more briskly than had been widely anticipated. Building upon the
momentum of an upwardly revised 5.7% GDP annual growth rate in the third quarter
of 1999, economic activity showed no signs of abating through period-end.
The Federal Reserve (the Fed) again raised Fed Funds by 25 basis points (bps),
completing the reversal of the 75 bps reduction engineered in 1998 in the wake
of the global financial crisis. (A basis point equals 1/100th of one percent.)
By period end, the 30-year Treasury bond's yield had increased to 6.49%, above
the 6.11% level of July 31, 1999.
Short-term rates also rose significantly during the period, with 90-day T-bills
moving from a yield equivalent of 4.78% to begin the period, to a yield of 5.69%
at its close.
The high-yield sector sold down sharply during July and August both in
anticipation of strong issuance later in the year by corporations hoping to
complete their financing ahead of the Y2K date changeover, and due to investor
fears of purchasing these new high yield issues in advance of the date change.
In fact, neither the anticipated new supply or the feared Y2K problems
materialized. The high-yield sector rallied and outperformed the investment
grade sector in the fourth quarter of calendar 1999 with most of the performance
occurring in December. Single-B credits were the best performing quality sector
for the period.
Despite the late-1999 rebound, the high-yield sector has been in a bear market
since August 1998, after Russia devalued the ruble and investors fled from risky
credits for the safety of U.S. Treasury securities. Recent indications of strong
domestic and broadening global economic growth are restoring investor confidence
in high-yield credits, but the sector's spreads to Treasurys remain high by
historical standards. High-yield spreads to Treasurys as measured by the CS
First Boston High Yield Bond Index ended the period at 581 bps, above their
15-year average of 508 bps.
MANAGED HIGH YIELD FUND INC.
INVESTMENT OBJECTIVE:
High current income
PORTFOLIO MANAGER:
James F. Keegan
(since February 2000),
Mitchell Hutchins
Asset Management Inc.
COMMENCEMENT:
December 7, 1993
NYSE SYMBOL:
PHT
DIVIDEND PAYMENTS:
Monthly
1
<PAGE>
SEMIANNUAL REPORT
PORTFOLIO REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE
Since
AVERAGE ANNUAL RETURNS, PERIODS ENDED 1/31/001 Inception
6 Mos.2 1 Yr. 5 Yrs. 12/07/93
- --------------------------------------------------------------------------------
Net Asset Value Return3 1.64% 2.50% 7.91% 5.15%
Market Price Return4 -0.93% -0.10% 8.47% 4.54%
CS First Boston High Yield
Bond Index -0.01% 10.91% 8.76% N/A
- --------------------------------------------------------------------------------
SHARE PRICE, DIVIDEND AND YIELD 1/31/00 7/31/99
- --------------------------------------------------------------------------------
Net Asset Value $11.31 $11.76
Market Price $10.56 $11.31
12-Mo. Dividend $1.26 $1.26
Market Yield5 11.93% 11.14%
IPO Yield6 8.40% 8.40%
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
[GRAPHIC OMITTED] We sought to reduce the Fund's sensitivity to interest rates
during the period by selling some of its most rate-sensitive holdings. As a
consequence, we reduced the Fund's holdings of BB-rated bonds from 21.1% as of
July 31, 1999 to 18.7% at January 31, 2000.* Assets moved out of BB credits were
reinvested primarily in cash and preferred stocks.
We increased exposure to the energy, communications and cable sectors during
the period. We slightly reduced exposure to the technology and service sectors,
and sizably reduced our exposure to the food and beverage sector (see table next
page).
- ----------
1 Returns do not reflect any commissions and are not representative of the
performance of an individual investment. 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. Past performance is no guarantee of
future results.
2 NAV and market price returns for periods of less than one year are not
annualized.
3 NAV return assumes, for illustration only, that dividends were reinvested
at the net asset value on the payable dates.
4 Market price return assumes dividends were reinvested under the Dividend
Reinvestment Plan.
5 Market yield is calculated by multiplying the January distribution by 12
and dividing by the Fund's closing price on January 31, 2000.
6 IPO yield is calculated by multiplying the January distribution by 12 and
dividing by the initial public offering price.
* Weightings represent percentages of portfolio assets as of January 31, 2000
except where noted otherwise. The Fund's portfolio is actively managed and
its composition will vary over time.
2
<PAGE>
MANAGED HIGH YIELD FUND INC. SEMIANNUAL REPORT
<TABLE>
<CAPTION>
TOP FIVE SECTORS* 1/31/00 7/31/99
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Communications (fixed) 17.6% Communications (fixed) 12.5%
Cable 12.6 Service 11.1
Technology 8.7 Cable 10.4
Service 8.2 Technology 9.6
Energy 6.3 Food/Beverage 6.0
- ------------------------------------------------------------------------------------
Total 53.4 Total 49.6
</TABLE>
The Fund has been overweight in the telecommunications sector for the past two
years; this exposure helped performance, as the sector was the top performer
during the period. The Fund's top sector remained fixed communications
(conventional telephone systems), emphasizing companies that own fiber optic
networks, such as Metromedia Fiber (1.1%).* We believe these companies will
benefit as the standard for telecommunications service shifts to a combination
of Internet access, voice and data transmission. In cable, we favor new entrants
that offer integrated voice data and video, such as RCN Corporation (1.3%) and
Knology Holdings (2.0%) in the U.S., and United Pan European Communications
(1.0%) in Europe.
<TABLE>
<CAPTION>
TOP TEN HOLDINGS* 1/31/00 7/31/99
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Park N View Inc. 2.9% Nextel Communications Inc. 2.5%
UIH Australia/Pacific Inc. 2.7 Samsung Electronics America Inc. 2.3
Nextel Communications Inc. 2.6 UIH Australia/Pacific Inc. 2.3
Williams Communications Group 2.3 Packaged Ice Inc. 2.2
R&B Falcon Corp. 2.2 Airplane Pass-Through Trust 2.1
Intersil Corp. 2.1 R&B Falcon Corp. 2.0
Packaged Ice Inc. 2.1 Iowa Select Farms L.P. 1.9
Airplane Pass-Through Trust 2.0 Knology Holdings Inc. 1.7
Knology Holdings Inc. 2.0 Wam! Net Inc. 1.7
Wam! Net Inc. 1.8 NTL Inc. 1.6
- ------------------------------------------------------------------------------------
Total 22.7 Total 20.3
</TABLE>
PROPOSED FUND REORGANIZATION
The Fund's Board of Directors has approved a proposal to reorganize the Fund
into Managed High Yield Plus Fund Inc. (NYSE: HYF), also a diversified,
closed-end investment company. Shareholders of record as of January 25, 2000
will be asked to vote on this reorganization proposal at a special shareholder
meeting currently scheduled for April 24, 2000. You will receive a proxy
statement and prospectus that detail the terms of the reorganization.
* Weightings represent percentages of portfolio assets as of January 31, 2000
except where noted otherwise. The Fund's portfolio is actively managed and
its composition will vary over time.
3
<PAGE>
SEMIANNUAL REPORT
Managed High Yield Fund and Managed High Yield Plus Fund have similar investment
objectives and invest primarily in the same types of securities. As of January
31, 2000, Managed High Yield Fund had assets of approximately $68 million,
whereas Managed High Yield Plus Fund had assets of approximately $378 million.
We believe it makes sense to combine the two funds and take advantage of the
resulting larger asset pool for shareholders' benefit.
CREDIT QUALITY* 1/31/00 7/31/99
- --------------------------------------------------------------------------------
BB & Higher 18.7% 21.1%
B 55.5 56.7
CCC & Lower 9.1 9.2
Non-Rated 6.1 6.9
Cash 5.9 3.3
Equity/Preferred 4.7 2.8
- --------------------------------------------------------------------------------
Total 100.0 100.0
CHANGE IN PORTFOLIO MANAGER
Effective February 2000, James F. Keegan is responsible for the day-to-day
management of the Fund's portfolio. Mr. Keegan is a senior vice president of
Mitchell Hutchins. Prior to joining Mitchell Hutchins in March 1996, Mr. Keegan
was a director with Merrion Group, L.P.
CHARACTERISTICS* 1/31/00 7/31/99
- --------------------------------------------------------------------------------
Weighted Avg. Maturity 7.21 yrs 7.41 yrs
Weighted Avg. Price $84.08 $85.82
Net Assets ($mm) $68.2 $70.9
- --------------------------------------------------------------------------------
OUTLOOK
- --------------------------------------------------------------------------------
With Y2K apparently a non-event, we think the Fed will focus initially on its
near-term chore of mopping up the flood of liquidity it provided to the banking
system ahead of the year-end changeover. Beyond that, however, is the more
enduring question of how much growth the economy can enjoy without re-igniting
inflation. Interest rates appear headed higher, with unemployment at 30-year
lows, consumer confidence near record highs, equity markets ebullient and
economic expansion underway around much of the globe.
* Weightings represent percentages of portfolio assets as of January 31, 2000
except where noted otherwise. The Fund's portfolio is actively managed and
its composition will vary over time.
4
<PAGE>
MANAGED HIGH YIELD FUND INC. SEMIANNUAL REPORT
At its most recent Open Market Committee meeting in March the Fed again raised
rates by 25 bps, citing inflation risks to the economy. We expect an active Fed
and rising rates across the yield curve in the first half of 2000. We look for
moderating economic growth in the second half of the year, and believe interest
rates will recede in response to slowing growth and the absence of real
inflationary pressure. In this environment, we believe the spread
sectors--mortgages, agencies, investment-grade corporate bonds and high-yield
bonds--will perform well.
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 Fund Inc. or a fund in the PaineWebber Family of Funds,7 please contact
your Financial Advisor.
Sincerely,
/s/ MARGO ALEXANDER /s/ BRIAN M. STORMS
- ------------------------------------ -------------------------------------
MARGO ALEXANDER BRIAN M. STORMS
Chairman and Chief Executive Officer President and Chief Operating Officer
Mitchell Hutchins Asset Mitchell Hutchins Asset
Management Inc. Management Inc.
/s/ JAMES F. KEEGAN
- ------------------------------------
JAMES F. KEEGAN
Portfolio Manager,
Managed High Yield Fund Inc.
This letter is intended to assist shareholders in understanding how the Fund
performed during the six-month period ended January 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.
7 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 FUND INC.
PORTFOLIO OF INVESTMENTSJANUARY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
-------- --------- --------- ---------
<S> <C> <C> <C>
CORPORATE BONDS--87.87%
AUTOMOTIVE--2.11%
$ 750 HDA Parts Systems Incorporated............ 08/01/05 12.000% $ 678,750
750 J.L. French Automotive Castings........... 06/01/09 11.500 757,500
-----------
1,436,250
-----------
CABLE--11.93%
1,000 21st Century Telecommunications
Group Incorporated........................ 02/15/08 12.250+ 682,500
2,000 Knology Holdings Incorporated............. 10/15/07 11.875+ 1,335,000
1,000 NTL Incorporated.......................... 10/01/08 11.500 1,060,000
2,400 Park 'N View Incorporated................. 05/15/08 13.000 1,800,000
1,250 RCN Corporation........................... 10/15/07 11.125+ 862,500
2,000 UIH Australia Pacific Incorporated........ 05/15/06 14.000+ 1,720,000
600 United Pan Europe Communications.......... 08/01/09 12.500+ 327,000
650 United Pan Europe Communications**........ 11/01/09 13.375 354,250
----------
8,141,250
----------
CHEMICALS--1.76%
700 Lyondell Chemical Company................ 05/01/07 9.875 689,500
500 ZSC Specialty**.......................... 07/01/09 11.000 510,000
-----------
1,199,500
-----------
COMMUNICATIONS--FIXED--16.78%
1,000 Alestra S.A. ............................ 05/15/06 12.125 1,007,500
1,500 Barak ITC................................ 11/15/07 12.500+ 840,000
250 Carrier1 International S.A.#............. 02/15/09 13.250 280,000
413 Esprit Telecom Group PLC................. 06/15/08 10.875 388,220
250 Flag Limited............................. 01/30/08 8.250 227,500
500 Globenet Communications Group**.......... 07/15/07 13.000 490,000
1,000 GST Equipment Funding Incorporated....... 05/01/07 13.250 1,000,000
1,400 Hyperion Telecommunications
Incorporated............................. 09/01/04 to 11/01/07 12.000 to 12.250 1,475,000
1,000 ICG Services Incorporated................ 02/15/08 10.000+ 565,000
500 KMC Telecom Holdings Incorporated........ 05/15/09 13.500 500,000
750 Metromedia Fiber Network Incorporated.... 11/15/08 10.000 751,875
425 NEXTLINK Communications Incorporated..... 06/01/09 10.750 428,188
1,000 Pathnet Incorporated..................... 04/15/08 12.250 660,000
250 Tele1 Europe BV.......................... 05/15/09 13.000 258,750
1,000 Viatel Incorporated...................... 04/15/08 12.500+ 580,000
1,500 Williams Communications Group............ 10/01/09 10.875 1,545,000
500 World Access Incorporated................ 01/15/08 13.250 454,375
-----------
11,451,408
-----------
COMMUNICATIONS--MOBILE--5.70%
1,000 Crown Castle International Corporation... 08/01/11 11.125 605,000
500 ICO Global Communications Limited(b)#.... 08/01/05 15.000 245,000
2,500 Nextel Communications Incorporated....... 02/15/08 9.950+ 1,731,250
1,500 Nextel International Incorporated........ 04/15/08 12.125+ 937,500
375 PTC International Finance**.............. 12/01/09 11.250 373,125
-----------
3,891,875
-----------
</TABLE>
6
<PAGE>
MANAGED HIGH YIELD FUND INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
-------- --------- --------- ---------
<S> <C> <C> <C>
CORPORATE BONDS--(CONTINUED)
CONSUMER MANUFACTURING--2.27%
$ 1,250 Commemorative Brands Incorporated........ 01/15/07 11.000% $ 687,500
1,000 Decora Industries Incorporated........... 05/01/05 11.000 860,000
----------
1,547,500
----------
ENERGY--6.02%
500 Key Energy Services Incorporated#........ 01/15/09 14.000 545,000
1,000 Northern Offshore ASA.................... 05/15/05 10.000 590,000
572 Orion Refining Corporation**............. 12/01/03 10.000 514,603
300 Pride International Incorporated......... 06/01/09 10.000 300,000
1,500 R & B Falcon Corporation................. 12/15/08 9.500 1,462,500
750 Tesoro Petroleum Corporation............. 07/01/08 9.000 697,500
----------
4,109,603
----------
FINANCIAL SERVICES--3.55%
1,497 Airplane Pass-Through Trust.............. 03/15/19 10.875 1,340,080
750 Olympic Financial Limited................ 03/15/07 11.500 781,875
500 Superior National Insurance Group........ 12/01/17 10.750 300,000
----------
2,421,955
----------
FOOD & BEVERAGE--4.94%
1,625 Iowa Select Farms L.P.**................. 12/01/05 10.750 812,500
750 Mrs. Fields Holding Company
Incorporated**#.......................... 12/01/05 14.000+ 420,000
1,000 Mrs. Fields Original Cookies
Incorporated............................. 12/01/04 10.125 800,000
1,500 Packaged Ice Incorporated................ 02/01/05 9.750 1,335,000
----------
3,367,500
----------
GAMING--1.07%
250 Hollywood Casino Corporation............. 05/01/07 11.250 256,250
500 Park Place Entertainment Corporation..... 12/15/05 7.875 471,250
----------
727,500
----------
GENERAL INDUSTRIAL--3.39%
750 Blount Incorporated**.................... 08/01/09 13.000 793,125
750 J.B. Poindexter & Company Incorporated... 05/15/04 12.500 708,750
1,000 SabreLiner Corporation**................. 06/15/08 11.000 810,000
----------
2,311,875
----------
HEALTHCARE--2.44%
1,000 Fresenius Medical Care Capital Trust..... 02/01/08 7.875 895,000
500 Tenet Healthcare Corporation............. 12/01/08 8.125 461,250
300 Triad Hospitals Holdings Incorporated.... 05/15/09 11.000 310,500
----------
1,666,750
----------
HOTELS & LODGING--1.23%
1,250 Silverleaf Resorts Incorporated.......... 04/01/08 10.500 837,500
----------
MEDIA--0.60%
750 Inter Act Systems Incorporated**......... 08/01/03 14.000+ 412,500
----------
</TABLE>
<PAGE>
MANAGED HIGH YIELD FUND INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
-------- --------- --------- ---------
<S> <C> <C> <C>
CORPORATE BONDS--(CONCLUDED)
METALS--1.39%
$ 1,250 Metal Management Incorporated............. 05/15/08 10.000% $ 950,000
-----------
REAL ESTATE--1.25%
1,000 American Architectural Products
Corporation............................... 12/01/07 11.750 400,000
500 D.R. Horton Incorporated.................. 02/01/09 8.000 452,500
-----------
852,500
-----------
RESTAURANTS--0.88%
750 American Restaurant Group Incorporated.... 02/15/03 11.500 598,125
-----------
RETAIL--2.85%
1,550 Advance Holding Corporation.............. 04/15/09 12.875+ 821,500
750 Advance Stores Company Incorporated..... 04/15/08 10.250 645,000
500 Ames Department Stores Incorporated**.... 04/15/06 10.000 477,500
-----------
1,944,000
-----------
SERVICE--6.45%
1,000 Allied Waste North America
Incorporated**............................ 08/01/09 10.000 870,000
1,000 American Eco Corporation.................. 05/15/08 9.625 490,000
750 Atlantic Express Transportation
Corporation............................... 02/01/04 10.750 727,500
1,000 Budget Group Incorporated................. 04/01/06 9.125 917,500
1,000 Premier Graphics Incorporated............. 12/01/05 11.500 450,000
1,000 Waste Systems International
Incorporated#............................. 01/15/06 11.500 945,000
-----------
4,400,000
-----------
TECHNOLOGY--7.34%
500 Ampex Corporation++...................... 03/15/03 12.000 502,500
500 Chippac International Limited**.......... 08/01/09 12.750 517,500
690 Fairchild Semiconductor Corporation...... 03/15/07 10.125 691,725
1,000 Intersil Holding Corporation**........... 08/15/09 13.250 1,120,000
500 SCG Holdings Corporation**............... 08/01/09 12.000 531,250
500 Verio Incorporated....................... 12/01/08 11.250 523,750
2,000 Wam! Net Incorporated.................... 03/01/05 13.250+ 1,120,000
-----------
5,006,725
-----------
TRANSPORTATION--2.55%
1,500 Equimar Shipholdings Limited 07/01/07 9.875 990,000
1,250 Navigator Gas Transport PLC**# 06/30/07 12.000 37,500
500 Stena AB 06/15/07 8.750 410,000
500 TFM, S.A. de C.V. 06/15/09 11.750+ 302,500
-----------
1,740,000
-----------
UTILITIES--1.37%
500 AES Corporation 06/01/09 9.500 497,500
436 Panda Funding Corporation 08/20/12 11.625 436,490
-----------
933,990
-----------
TOTAL CORPORATE BONDS (cost--$69,008,987) 59,948,306
-----------
</TABLE>
8
<PAGE>
MANAGED HIGH YIELD FUND INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
-------- --------- --------- ---------
<S> <C> <C> <C>
CONVERTIBLE BONDS--1.48%
COMMUNICATIONS--FIXED--0.30%
$ 215 GST Telecommunciations
Incorporated.............................. 12/15/05 13.875%+ $ 204,250
----------
SERVICE--1.18%
996 Waste Systems International Incorporated.. 05/13/05 7.000 807,079
----------
TOTAL CONVERTIBLE BONDS (cost--$1,183,711)............ 1,011,329
----------
<CAPTION>
NUMBER OF
SHARES
--------
<S> <C>
COMMON STOCK(A)--2.47%
CABLE--0.02%
2,000 Knology Holdings Incorporated..................................................... 10,500
----------
COMMUNICATIONS--FIXED--0.04%
1,571 World Access Incorporated......................................................... 27,100
----------
FOOD & BEVERAGE--0.09%
12,796 Packaged Ice Incorporated......................................................... 59,182
----------
GAMING--0.06%
10,000 Hollywood Casino Corporation...................................................... 42,500
----------
MEDIA--0.73%
2,000 MediaNews Group Incorporated...................................................... 500,000
----------
RETAIL--0.54%
47,500 Samuels Jewelers Incorporated++................................................... 368,125
----------
SERVICE--0.33%
54,469 Waste Systems International Incorporated.......................................... 224,685
----------
TECHNOLOGY--0.66%
139,676 Ampex Corporation++............................................................... 453,946
----------
TOTAL COMMON STOCK (cost--$1,211,625)......................................................... 1,686,038
----------
PREFERRED STOCK(A)--1.26%
ENERGY--0.02%
20,766 Orion Refining Corporation........................................................ 14,183
----------
MEDIA--0.55%
1,500 Inter Act Systems Incorporated**.................................................. 375,000
----------
RESTAURANTS--0.69%
592 American Restaurant Group Incorporated............................................ 473,600
----------
TOTAL PREFERRED STOCK (cost--$1,177,870)...................................................... 862,783
----------
</TABLE>
9
<PAGE>
MANAGED HIGH YIELD FUND INC.
<TABLE>
<CAPTION>
NUMBER OF
WARRANTS VALUE
------- ---------
<S> <C>
WARRANTS(a)--0.98%
CABLE--0.32%
2,400 Park `N View Incorporated.......................................................... $ 156,000
2,000 UIH Australia Pacific Incorporated................................................. 60,000
---------
216,000
---------
COMMUNICATIONS--FIXED--0.08%
1,000 Pathnet Incorporated............................................................... 10,000
250 Tele1 Europe BV**.................................................................. 47,500
---------
57,500
---------
COMMUNICATIONS--MOBILE--0.01%
1,750 McCaw International Limited........................................................ 5,250
---------
ENERGY--0.04%
500 Key Energy Services Incorporated**................................................. 25,000
---------
FINANCIAL SERVICES--0.00%
750 Olympic Financial Limited.......................................................... 750
---------
MEDIA--0.05%
1,500 Inter Act Electronic Marketing Incorporated........................................ 15
1,500 Inter Act Systems Incorporated..................................................... 37,500
---------
37,515
---------
RESTAURANTS--0.00%
500 American Restaurant Group Incorporated............................................ 5
---------
SERVICE--0.02%
15,000 Waste Systems International Incorporated**........................................ 11,250
---------
TECHNOLOGY--0.46%
800 Electronic Retailing Systems International Incorporated........................... 800
1,000 Intersil Holding Corporation**.................................................... 250,000
6,000 Wam! Net Incorporated............................................................. 66,000
---------
316,800
---------
TOTAL WARRANTS (cost--$85,134)................................................................ 670,070
---------
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE VALUE
-------- --------- --------- ---------
<S> <C> <C> <C>
REPURCHASE AGREEMENT--3.12%
$ 2,128 Repurchase agreement dated 01/31/00 with
Zions Bancorp, collateralized by
$2,160,000 U.S. Treasury Notes, 5.500%
due 08/31/01 (value--$2,175,012);
Proceeds: $2,128,336 (cost--$2,128,000)...... 02/01/00 5.680% 2,128,000
-----------
Total Investments (cost--$74,795,327)--97.18%................................................. 66,306,526
Other assets in excess of liabilities--2.82%.................................................. 1,920,609
-----------
Net Assets--100.00%........................................................................... $68,227,135
===========
</TABLE>
- ----------
# Security represents a unit which is composed of the stated bond with
attached warrants or common stock.
++ Illiquid securities represent 2.00% of total investments. These securities
are valued at fair value as determined in good faith by a management
committee under the direction of the Fund's board of directors.
+ 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 securities.
(b) Bond interest in default.
See accompanying notes to financial statements
10
<PAGE>
MANAGED HIGH YIELD FUND INC.
STATEMENT OF ASSETS AND LIABILITIES JANUARY 31, 2000 (UNAUDITED)
ASSETS:
Investments in securities, at value (cost--$74,795,327) ....... $ 66,306,526
Cash .......................................................... 14,112
Receivable for investments sold ............................... 646,250
Interest receivable ........................................... 1,426,131
------------
Total assets .................................................. 68,393,019
------------
LIABILITIES:
Payable for investments purchased ............................. 13,154
Payable to investment adviser and administrator ............... 52,568
Accrued expenses and other liabilities ........................ 100,162
------------
Total liabilities ............................................. 165,884
------------
NET ASSETS:
Capital Stock--$0.001 par value; 100,000,000 shares
authorized; 6,031,667 shares issued and outstanding ......... 90,447,851
Undistributed net investment income ........................... 131,923
Accumulated net realized loss from investment transactions .... (13,863,838)
Net unrealized depreciation of investments .................... (8,488,801)
------------
Net assets applicable to shares outstanding ................... $ 68,227,135
============
Net asset value per share ..................................... $ 11.31
============
See accompanying notes to financial statements
11
<PAGE>
MANAGED HIGH YIELD FUND INC.
STATEMENT OF OPERATIONS
FOR THE SIX
MONTHS ENDED
JANUARY 31, 2000
(UNAUDITED)
----------------
INVESTMENT INCOME:
Interest .................................................. $ 4,096,350
-----------
EXPENSES:
Investment advisory and administration .................... 310,588
Reports and notices to shareholders ....................... 35,193
Legal and audit ........................................... 34,014
Custody and accounting .................................... 21,576
Transfer agency and service fees .......................... 18,237
Directors' fees ........................................... 5,250
Other expenses ............................................ 20,589
-----------
445,447
-----------
NET INVESTMENT INCOME ..................................... 3,650,903
-----------
REALIZED AND UNREALIZED GAINS (LOSSES)
FROM INVESTMENT ACTIVITIES:
Net realized loss from investment transactions ............ (2,906,013)
Net change in unrealized appreciation/depreciation
of investments.......................................... 377,225
-----------
NET REALIZED AND UNREALIZED LOSS FROM
INVESTMENT ACTIVITIES ................................... (2,528,788)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...... $ 1,122,115
===========
See accompanying notes to financial statements
12
<PAGE>
MANAGED HIGH YIELD FUND INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JANUARY 31, 2000 YEAR ENDED
(UNAUDITED) JULY 31,1999
---------------- ------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ........................................... $ 3,650,903 $ 7,633,077
Net realized loss from investment transactions .................. (2,906,013) (5,530,734)
Net change in unrealized appreciation/depreciation of investments 377,225 (9,122,545)
------------ ------------
Net increase (decrease) in net assets resulting from operations . 1,122,115 (7,020,202)
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ........................................... (3,799,950) (7,599,901)
------------ ------------
Net decrease in net assets ...................................... (2,677,835) (14,620,103)
NET ASSETS:
Beginning of period ............................................. 70,904,970 85,525,073
------------ ------------
End of period (including undistributed net
investment income of $131,923 and
$280,970, respectively) ...................................... $ 68,227,135 $ 70,904,970
============ ============
</TABLE>
See accompanying notes to financial statements
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Managed High Yield Fund Inc. (the "Fund") was incorporated in Maryland on
June 11, 1993 and is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, as amended, as a closed-end,
diversified management investment company. The investment objective of the Fund
is to seek high current income.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies:
VALUATION OF INVESTMENTS--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. Independent
pricing sources may use 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 valuation. 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 normally are valued at the last sale
price on the day the securities are valued or, lacking any sales on such day, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange designated as the
primary market by Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"),
a wholly owned asset management subsidiary of PaineWebber Incorporated
("PaineWebber") and investment adviser and administrator of the Fund. If a
market value is not available from an independent pricing source for a
particular security, that security is valued at fair value as determined in good
faith by or under the direction of the Fund's Board of Directors (the "board").
The amortized cost method of valuation, which approximates market value,
generally is used to value short-term debt instruments with sixty days or less
remaining to maturity, unless the board determines that this does not represent
fair value.
REPURCHASE AGREEMENTS--The Fund's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. The Fund occasionally
participates in joint repurchase agreement transactions with other funds managed
by Mitchell Hutchins.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions are calculated using the identified cost method. Interest income is
recorded on an accrual basis. Discounts are accreted and premiums are amortized
as adjustments to interest income and the identified cost of investments.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to stockholders are
recorded on the ex-dividend date. Dividends from net investment income and
distributions from net realized capital gains are determined in accordance with
federal income tax regulations which may differ from generally accepted
accounting principles. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts are reclassified within the capital accounts based on
their federal tax-basis treatment; temporary differences do not require
reclassification.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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.
INVESTMENT ADVISER AND ADMINISTRATOR
The Fund's board of directors has approved an Investment Advisory and
Administration Contract ("Advisory Contract") with Mitchell Hutchins, under
which Mitchell Hutchins serves as investment adviser and administrator of the
Fund. In accordance with the Advisory Contract, Mitchell Hutchins receives
compensation from the Fund, computed weekly and paid monthly, at the annual rate
of 0.90% of the Fund's average weekly net assets.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at January 31,
2000 was substantially the same as the cost of securities for financial
statement purposes.
At January 31, 2000, the components of net unrealized depreciation of
investments were as follows:
Gross depreciation (investments having
an excess of cost over value) ........................... $(10,496,440)
Gross appreciation (investments having
an excess of value over cost) ........................... 2,007,639
------------
Net unrealized depreciation of investments ................ $ (8,488,801)
============
For the six months ended January 31, 2000, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $14,210,147 and
$14,450,072, respectively.
CAPITAL STOCK
Of the 6,031,667 shares of common stock outstanding, 10,230 shares are owned
by Mitchell Hutchins.
FEDERAL TAX STATUS
The Fund intends to distribute all of its taxable income and to comply with
the other requirements of the Internal Revenue Code applicable to regulated
investment companies. Accordingly, no provision for federal income taxes is
required. 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 July 31, 1999, the Fund had a net capital loss carryforward of $8,617,094.
The loss carryforward is available as a reduction, to the extent provided in the
regulations, of future net realized capital gains, and will expire between July
31, 2003 and July 31, 2007. To the extent such losses are used to offset future
capital gains, it is probable that the gains so offset will not be distributed.
In accordance with U.S. Treasury regulations, the Fund has elected to defer
$2,340,785 of realized capital losses arising after October 31, 1998. Such
losses are treated for tax purposes as arising on August 1, 1999.
15
<PAGE>
MANAGED HIGH YIELD FUND INC.
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each period is
presented below:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED JULY 31,
JANUARY 31, 2000 --------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $11.76 $14.18 $14.30 $13.25 $13.44 $13.76
------ ------ ------ ------ ------ ------
Net investment income.................. 0.60 1.27 1.25 1.29 1.29 1.40
Net realized and unrealized gains
(losses) from investment
transactions......................... (0.42) (2.43) (0.11) 1.02 (0.16) (0.34)
------ ------ ------ ------ ------ ------
Net increase (decrease) from
investment operations................ 0.18 (1.16) 1.14 2.31 1.13 1.06
------ ------ ------ ------ ------ ------
Dividends from net investment income... (0.63) (1.26) (1.26) (1.26) (1.32) (1.38)
------ ------ ------ ------ ------ ------
Net asset value, end of period......... $11.31 $11.76 $14.18 $14.30 $13.25 $13.44
====== ====== ====== ====== ====== ======
Market value, end of period............ $10.56 $11.31 $13.44 $13.94 $12.50 $12.38
====== ====== ====== ====== ====== ======
Total investment return(1)............. (0.93)% (6.35)% 5.45% 22.59% 12.16% 11.87%
====== ====== ====== ====== ====== ======
Ratios/Supplemental Data:
Net assets, end of period (000's)...... $68,227 $70,905 $85,525 $86,232 $79,904 $81,081
Expenses to average net assets......... 1.29%* 1.19% 1.15% 1.34% 1.25% 1.21%
Net investment income to average
net assets.......................... 10.58%* 10.34% 8.71% 9.39% 9.87% 10.68%
Portfolio turnover rate................ 21% 102% 156% 122% 135% 103%
</TABLE>
- ----------
* Annualized
(1) Total investment return is calculated assuming a purchase of capital stock
at market value on the first day of each period reported and a sale at
market value on the last day of each 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. Total investment return for periods of less than one year has
not been annualized.
16
<PAGE>
MANAGED HIGH YIELD FUND INC.
GENERAL INFORMATION (UNAUDITED)
THE FUND
Managed High Yield Fund Inc. (the "Fund") is a diversified, closed-end
management investment company whose shares trade on the New York Stock Exchange
("NYSE"). The investment objective of the Fund is to seek high current income.
The Fund's investment adviser and administrator is Mitchell Hutchins Asset
Management Inc., a wholly owned asset management subsidiary of PaineWebber
Incorporated ("PaineWebber"), which has over $66 billion in assets under
management as of January 31, 2000.
SHAREHOLDER INFORMATION
The NYSE ticker symbol for the Managed High Yield Fund Inc. is "PHT." Weekly
comparative net asset value and market price information about the Fund is
published each Monday in THE WALL STREET JOURNAL, each Sunday in THE NEW YORK
TIMES and each week in BARRON'S, as well as in numerous other newspapers.
An annual meeting of shareholders of the Fund was held on November 18, 1999.
At the meeting, Margo N. Alexander, Richard Q. Armstrong, E. Garrett Bewkes,
Jr., Richard R. Burt, Mary C. Farrell, Meyer Feldberg, George W. Gowen, Frederic
V. Malek, Carl W. Schafer and Brian N. Storms were elected to serve as directors
until the next annual meeting of shareholders, or until their successors are
elected and qualified.
<TABLE>
<CAPTION>
1. To vote for or against
the election of: Shares For Shares Withhold
Voted Authority
------- ---------
<S> <C> <C>
Margo N. Alexander 5,753,260.295 86,090.000
Richard Q. Armstrong 5,753,860.295 85,490.000
E. Garrett Bewkes, Jr. 5,741,997.295 97,353.000
Richard R. Burt 5,756,860.295 82,490.000
Mary C. Farrell 5,758,244.295 81,106.000
Meyer Feldberg 5,754,829.018 84,521.277
George W. Gowen 5,742,561.018 96,789.277
Frederic V. Malek 5,748,488.295 90,862.000
Carl W. Schafer 5,756,518.018 82,832.277
Brian N. Storms 5,757,944.295 81,406.000
<CAPTION>
Shares For Shares Shares Withhold
Voted Against Authority
------ ------- --------
<C> <C> <C> <C>
2. Ratification of the 5,772,846.018 22,274.277 44,230.000
selection of Ernst & Young LLP
as the independent
auditors of Managed High
Yield Fund Inc. for the fiscal
year ending July 31, 2000.
</TABLE>
(Broker non-votes and abstentions are included within the "Shares Withhold
Authority" totals.)
17
<PAGE>
MANAGED HIGH YIELD FUND INC.
GENERAL INFORMATION (UNAUDITED) (CONCLUDED)
DISTRIBUTION POLICY
The Fund's Board of Directors has established a Dividend Reinvestment Plan
(the "Plan") under which all common stockholders whose shares are registered in
their own names, or in the name of PaineWebber or its nominee, will have all
dividends and other distributions on their shares automatically reinvested in
additional shares of common stock, unless such common stockholders elect to
receive cash. Common stockholders who elect to hold their shares in the name of
another broker or nominee should contact such broker or nominee to determine
whether, or how, they may participate in the Plan. The ability of such
stockholders to participate in the Plan may change if their shares are
transferred into the name of another broker or nominee.
A stockholder may elect not to participate in the Plan or may terminate
participation in the Plan at any time without penalty, and stockholders who have
previously terminated participation in the Plan may rejoin it at any time.
Changes in elections must be made in writing to the Fund's transfer agent and
should include the stockholder's name and address as they appear on the share
certificate or in the transfer agent's records. An election to terminate
participation in the Plan, until such election is changed, will be deemed an
election by a stockholder to take all subsequent distributions in cash. An
election will be effective only for distributions declared and having a record
date at least ten days after the date on which the election is received.
Additional shares of common stock acquired under the Plan will be purchased
in the open market, on the NYSE or otherwise, at prices that may be higher or
lower than the net asset value per share of the common stock at the time of the
purchase. The number of shares of common stock purchased with each dividend will
be equal to the result obtained by dividing the amount of the dividend payable
to a particular stockholder by the average price per share (including applicable
brokerage commissions) that the transfer agent was able to obtain in the open
market. The Fund will not issue any new shares of common stock in connection
with the Plan. There is no charge to participants for reinvesting dividends or
other distributions. The transfer agent's fees for handling the reinvestment of
distributions will be paid by the Fund. However, each participant pays a pro
rata share of brokerage commissions incurred with respect to the transfer
agent's open market purchases of common stock in connection with the
reinvestment of distributions. The automatic reinvestment of dividends and other
distributions in shares of common stock does not relieve participants of any
income tax that may be payable on such distributions. Dividends from the Fund's
investment company taxable income (whether received in cash or reinvested in
additional Fund shares) are taxable to its stockholders as ordinary income to
the extent of the Fund's earnings and profits. A participant in the Plan will be
treated as having received a distribution in the amount of the cash used to
purchase shares of common stock on his behalf, including a pro rata portion of
the brokerage commissions incurred by the transfer agent.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan with
respect to any dividend or other distribution if notice of the change is sent to
Plan participants at least 30 days before the record date for such distribution.
The Plan also may be amended or terminated by the transfer agent by at least 30
days' written notice to all Plan participants. Additional information regarding
the Plan may be obtained from, and all correspondence concerning the Plan should
be directed to, the transfer agent at PNC Bank, National Association, c/o PFPC
Inc., P.O. Box 8950, Wilmington, Delaware 19899.
18
<PAGE>
MANAGED HIGH YIELD FUND INC.
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 Paul H. Schubert
PRESIDENT VICE PRESIDENT AND TREASURER
Victoria E. Schonfeld James F. Keegan
VICE PRESIDENT VICE PRESIDENT
Dianne E. O'Donnell Dennis McCauley
VICE PRESIDENT AND SECRETARY VICE PRESIDENT
INVESTMENT ADVISER AND ADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
51 West 52nd Street
New York, New York 10019
NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT
COMPANY ACT OF 1940 THAT FROM TIME TO TIME THE FUND MAY PURCHASE SHARES OF ITS
COMMON STOCK IN THE OPEN MARKET AT MARKET PRICES.
THE FINANCIAL INFORMATION HEREIN IS TAKEN FROM THE RECORDS OF THE FUND WITHOUT
EXAMINATION BY INDEPENDENT AUDITORS WHO DO NOT EXPRESS AN OPINION THEREON.
THIS REPORT IS SENT TO THE SHAREHOLDERS OF THE FUND FOR THEIR INFORMATION. IT IS
NOT A PROSPECTUS, CIRCULAR OR REPRESENTATION INTENDED FOR THE USE IN THE
PURCHASE OR SALE OF SHARES OF THE FUND OR OF ANY SECURITIES MENTIONED IN THIS
REPORT.
19
<PAGE>
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S E M I A N N U A L R E P O R T
M A N A G E D H I G H
Y I E L D F U N D I N C.
J A N U A R Y 3 1, 2 0 0 0
===========
PAINEWEBBER
(C)2000 PaineWebber Incorporated
Member SIPC
All Rights Reserved
================================================================================
