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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Managed High Yield Plus Fund, Inc. | NYSE:HYF | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 1.88 | 0 | 01:00:00 |
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT
OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file
number: 811-08765
______________________________________________
Managed High Yield Plus Fund
Inc.
______________________________________________________________________________
(Exact name of registrant as specified in charter)
51 West 52
nd
Street,
New York, New York 10019-6114
______________________________________________________________________________
(Address of principal executive offices) (Zip code)
Mark F. Kemper, Esq. |
UBS Global Asset Management |
51 West 52 nd Street |
New York, NY 10019-6114 |
(Name and address of agent for service) |
Copy to: |
Jack W. Murphy, Esq. |
Dechert LLP |
1775 I Street, N.W. |
Washington, DC 20006-2401 |
Registrants telephone number, including area code: 212-882 5000
Date of fiscal year end: May 31
Date of reporting period: November 30, 2008
Item 1. Reports to Stockholders.
Managed High Yield Plus Fund Inc.
January 15, 2009
Dear shareholder,
We present you with the semiannual report for Managed High Yield Plus Fund Inc. (the Fund) for the six months ended November 30, 2008. Performance Over the six-month period, the Fund declined 53.81% on a net asset value basis and 59.99% on a market price basis. Over the same period, the median for the Funds peer group, the Lipper High Current Yield Funds (Leveraged), declined 42.00% and 48.13% on a net asset value and market price basis, respectively. The Funds benchmark, the Merrill Lynch US High Yield Cash Pay Constrained Index (the Index), declined 31.88% during that time. While the Fund and its peer group employed leverage during the period, the Index did not. (For more performance information, please refer to Performance at a glance on page 8.) |
Managed High Yield Plus Fund Inc. Investment goals: Primarily, high income; secondarily, capital appreciation Portfolio Manager: Shu-Yang Tan, CFA* UBS Global Asset Management (Americas) Inc. Commencement: June 26, 1998 NYSE symbol: HYF Dividend payments: Monthly |
For a number of years, the high yield bond market had performed well against the backdrop of positive economic growth, generally solid corporate profits and benign default rates. However, these trends reversed course markedly in 2008 and during the six-month reporting period. Given the weakening global economy, turmoil in the financial markets and a severe credit crunch, investor risk aversion increased significantly, causing the high yield market to perform extremely poorly. The Fund lagged its benchmark and peer group during this time due to its overweight to lower-quality high yield securities. Historically, the Fund has been aggressively positioned in order to help seek its primary goal, high income. While this positioning had helped the Funds performance in prior years, it proved detrimental during the six-month reporting period as high yield prices declined significantly.
|
|
* | Note: A management change occurred during the reporting period. On October 17, 2008, Shu-Yang Tan, Head of High Yield Research, UBS Global Asset Management (Americas) Inc, assumed primary responsibility for the Fund, replacing Thomas Haag. |
Managed High Yield Plus Fund Inc.
Over the period the Fund maintained a high
level of leverage, which we believed was appropriate as we sought to achieve the
Funds primary goalhigh income. While use of leveragewhich magnifies
returns on both the upside and the downsidehelped deliver high current yield,
it magnified the impact of negative performance within the Fund. Following a change
in the Funds portfolio manager on October 17, 2008, we sought to reduce the
risk profile of the Fund and to lower the level of leverage in expectation that
we may be entering a difficult period for the high yield market, with rising defaults.
While we did seek to lower the percentage of leverage the Fund employed, toward
the end of the reporting period the market value of the Funds securities fell.
As a result, although the amount of the loan for the leverage was reduced in absolute
terms, this reduction was not reflected in the amount of leverage as a percentage
of the Funds assets. At the end of the period, leverage represented 31.85%
of the Funds total assets. We continue to monitor the Funds level of
risk and leverage, and seek to position it appropriately in light of changing market
conditions.
During the reporting period, the Fund traded at an average discount of
8.6% to its net asset value (NAV) per share.
1
We believe this was due,
in part, to investors aversion to risk, given the escalating issues and
uncertainty surrounding the financial markets and the US economy.
An interview with Portfolio Manager Shu-Yang Tan | ||
Q. | How would you describe the economic environment during the reporting period? | |
A. | US economic growth weakened during the six-month reporting period. At the beginning of 2008, there were fears that the US economy was contracting. However, US gross domestic product (GDP) grew a surprising 0.9% during the first quarter of 2008. The Commerce Department then reported that second quarter 2008 GDP growth accelerated to 2.8%. This relatively strong showing was due in part to rising exports and the declining dollar, which made US goods more attractive overseas. In addition, consumer spending strengthened, helped by the governments tax rebate program. |
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|
(1) | A fund trades at a premium when the market price at which its shares trade is more than its NAV per share. Alternatively, a fund trades at a discount when the market price at which its shares trade is less than its NAV per share. The market price is the price the market is willing to pay for shares of a fund at a given time, and may be influenced by a range of factors, including supply and demand and market conditions. NAV per share is determined by dividing the value of the Funds securities, cash and other assets, less all liabilities, by the total number of common shares outstanding. |
Managed High Yield Plus Fund Inc.
Economic growth then significantly weakened in the third quarter of 2008. Given a sharp decline in personal spending, intensification of the credit crunch and ongoing housing market weakness, third quarter GDP growth was 0.5%. | ||
Following the conclusion of the reporting period, the National Bureau of Economic Research (NBER) announced that a recession began back in December 2007. The NBER defines a recession as being a significant decline in economic activity, lasting more than a few months, normally visible in production, employment, real income and other indicators. | ||
Q. | How did the Federal Reserve Board (the Fed) react to the economic environment and the issues in the subprime mortgage market? | |
A. | The Fed has been aggressive in attempting to stabilize the markets and keep the US economy from falling into a deep and prolonged recession. As the fallout from subprime mortgages escalated, the Fed moved into action, pumping substantial amounts of liquidity into the financial system in order to facilitate normal market operations. For example, in March 2008prior to the beginning of the reporting periodthe Fed established a new lending program allowing certain brokerage firms to take loans from its discount window. During the month, it also orchestrated the purchase of Bear Stearns by JPMorgan Chase. | |
As the year progressed, the Fed pumped billions of dollars into the financial system in an attempt to stabilize the markets following Lehman Brothers bankruptcy. It also announced an $85 billion rescue plan for insurance giant AIG. The US Treasury Department was actively involved as well, as it took over mortgage finance companies Fannie Mae and Freddie Mac and introduced its Troubled Assets Rescue Programthe implementation of which continues to evolve. | ||
The Fed also reduced the federal funds rate on two occasions during the reporting period. Due to inflationary pressures, the Fed held interest rates steady from May through September 2008. However, with the global financial crisis rapidly escalating, the Fed moved into action in October 2008. It first lowered rates on October 8, as the Fed joined several other central banks from around the world in a coordinated interest rate cut. This was followed by another rate reduction at the Feds regularly scheduled meeting on October 29. Together, these cuts brought the federal funds rate to 1.0%. | ||
Then, on December 16, after the reporting period ended, the Fed again reduced the rate, bringing it to a historic low. Citing the need to promote |
Managed High Yield Plus Fund Inc.
the resumption of sustainable economic growth and to preserve price stability in strained financial markets and under tight credit conditions, the Fed cut the rate to a range of 0.0% to 0.25%, pledging to use all available tools to revive the US economy. | ||
Q. | How did the high yield market perform during the reporting period? | |
A. | The high yield bond market generated extremely poor results during the six-month period. The weakening economy, turmoil in the financial markets and a severe credit crunch led to periods of extreme risk aversion, causing high yield spreadsthe difference between the yield paid on US Treasury securities and higher risk securitiesto widen to unprecedented levels. | |
The high yield market started the period on a weak note, as the Index fell 2.47% in June 2008. This decline was triggered, in part, by concerns regarding the economy, plunging equity markets and problems within the automobile industry. After largely treading water in July and August 2008, the high yield market then fell sharply during the last three months of the period. | ||
The September 2008 bankruptcy of Lehman Brothers triggered a series of events that negatively impacted the global financial markets. This included a seizing up of the credit markets and a severe flight to quality, as investors flocked to the safety of US Treasuries and shunned securities they perceived to be riskier. | ||
When risk aversion risesand when defaults increasehigh yield bonds tend to underperform Treasuries and spreads widen. In September 2008, high yield securities spreads were 1,096 basis points (10.96%) higher than US Treasury securities of a similar maturitya record high, and the Index fell 7.68% during the month. | ||
With the credit markets remaining essentially frozen, highly leveraged investors, including many hedge funds, were forced to sell securities at distressed prices in order to meet margin calls. (Margin calls occur when securities bought with borrowed money decrease in value past a certain point, forcing the borrower to sell off some assets in order to repay debt.) This put further pressure on high yield bond prices. By the end of October, high yield spreads had widened to 1,617 basis points (16.17%) and the Index fell a significant 16.09% during the month. Prior to this reporting period, the worst ever monthly performance in the high yield market was a 7% decline in June 2002. |
Managed High Yield Plus Fund Inc.
The same issues facing the high yield market continued in November, including fears of a deep and prolonged recession, an extreme flight to quality and expectations for a sharp increase in high yield default rates. This caused the Index to fall another 7.99% in November and spreads to widen to 1,969 basis points(19.69%). | ||
Q. | How did you position the Funds portfolio during the reporting period? | |
A. | The Fund was positioned significantly more aggressively than its benchmark. In particular, the Fund maintained an overweight position in lower-rated CCC bonds or the equivalent. An obligation rated CCC by Standard and Poors, Inc. 2 is defined as currently vulnerable, and is dependent upon favorable business, financial, and economic conditions to meet its financial commitments. While this strategy helped the Fund deliver high current yield, it detracted from total returns as heightened investor risk aversion caused lower-rated high yield bonds to underperform their higher-rated counterparts. | |
Q. | Which strategies enhanced results during the reporting period? | |
A. | The Funds durationwhich measures its sensitivity to changing interest rateswas lower than that of its benchmark during the reporting period. This helped to reduce somewhat the Funds level of risk. In addition, the Fund benefited from the attractive yields offered by its lower-duration bonds. | |
Q. | Which strategies or investments detracted from the Funds performance? | |
A. | As discussed earlier, the Funds exposure to lower-quality, CCC rated securities (or the equivalent) detracted from its results. Exposure to the financials, publishing and paper sectorsand security selection within those sectorsalso had a negative impact on performance. As risk aversion rose and the market suffered the negative effects of deleveraging, investors sold bonds issued by companies in out-of-favor sectors. The basic materials sectorsincluding paper, chemicals, and metalsfell due to concerns of a global recession, while the publishing sector suffered as part of a continuing shift away from print to electronic media. | |
Finally, the Funds use of leverage further detracted from performance, given the weakness in the high yield market. Also, the Fund recently negotiated the continuance of the line of credit that provides the Fund with leverage. The terms of the continuance curtail the Funds ability |
|
|
(2) | Standard and Poors, Inc. (S&P), is a division of the McGraw-Hill Companies, Inc. |
Managed High Yield Plus Fund Inc.
to invest in lower-rated debt, and increase the cost of such leverage. However, we believe that such increased costs are in line with those experienced by many of the Funds peers and are manageable. We continue to carefully monitor the degree of the Funds use of leverage. | ||
Q. | What is your outlook for the economy and the high yield market? | |
A. | Based on the market conditions at the time of this writing, we believe that investors are now being reasonably compensated for risk in the high yield market, and that overall spread levels have built in expectations of a severe default scenario. While the extraordinary actions by the Fed and other government initiatives to add liquidity and restore confidence have provided some relief to the credit-related issues plaguing the markets, we expect volatility to remain elevated and high yield default rates to rise. Given the ongoing credit crunch, the still-slowing housing market and a weakening labor market, we believe it is likely that the US economy could continue to contract in the upcoming months. | |
We expect it is likely that overall defaults could rise, and that the difficult high yield market could continue well into 2009. However, given that we believe investors are being compensated for taking risk in the high yield market, we believe this asset class could offer opportunities for investors with a long-term horizon. Looking ahead, we plan to closely monitor the factors likely to influence the high yield market, and to position the Fund accordingly. |
Managed High Yield Plus Fund Inc.
We thank you for your continued support,
and welcome any comments or questions you may have. For additional information regarding
your Fund, please contact your financial advisor, or visit us at www.ubs.com/globalam-us.
Sincerely,
President
Managed High Yield Plus Fund
Inc.
HeadAmericas
UBS Global Asset Management (Americas) Inc.
Portfolio Manager
Managed High Yield Plus Fund Inc.
Head of High Yield Research
UBS Global Asset Management (Americas)
Inc.
This letter is intended to assist shareholders in understanding how the
Fund performed during the six months ended November 30, 2008. The views and opinions
in the letter were current as of January 15, 2009. They are not guarantees of performance
or investment results and should not be taken as investment advice. Investment decisions
reflect a variety of factors, and we reserve the right to change our views about
individual securities, sectors and markets at any time. As a result, the views expressed
should not be relied upon as a forecast of the Funds future investment intent.
We encourage you to consult your financial advisor regarding your personal investment
program
.
Managed High Yield Plus Fund Inc.
Performance at a glance (unaudited)
Average annual total returns for periods ended 11/30/08 | ||||||||||||
Net asset value returns | 6 months | 1 year | 5 years | 10 years | ||||||||
|
||||||||||||
Managed High Yield Plus Fund Inc. | (53.81 | )% | (56.19 | )% | (10.58 | )% | (7.56 | )% | ||||
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Lipper High Current Yield Funds | ||||||||||||
(Leveraged) median | (42.00 | ) | (43.00 | ) | (4.53 | ) | (0.46 | ) | ||||
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Market price returns | ||||||||||||
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Managed High Yield Plus Fund Inc. | (59.99 | )% | (60.86 | )% | (14.66 | )% | (9.11 | )% | ||||
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Lipper High Current Yield Funds | ||||||||||||
(Leveraged) median | (48.13 | ) | (46.05 | ) | (8.62 | ) | (3.56 | ) | ||||
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Index returns | ||||||||||||
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Merrill Lynch US High Yield | ||||||||||||
Cash Pay Constrained Index (1) | (31.88 | )% | (30.69 | )% | (1.81 | )% | 1.65 | % | ||||
|
Past performance does not predict future performance. The return and value of an investment will fluctuate so that an investors shares, when sold, may be worth more or less than their original cost. The Funds net asset value (NAV) returns assume, for illustration only, that dividends and other distributions, if any, were reinvested at the NAV on the payable dates. The Funds market price returns assume that all dividends and other distributions, if any, were reinvested at prices obtained under the Funds Dividend Reinvestment Plan. Returns for the period of less than one year have not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends and other distributions, if any, or the sale of Fund shares.
(1) | The Merrill Lynch US High Yield Cash Pay Constrained Index is the index of publicly placed non-convertible, coupon-bearing non-investment grade US domestic debt with a term to maturity of at least one year. The index is market weighted, so that larger bond issuers have a greater effect on the indexs return. However, the representation of any single bond issue is restricted to a maximum of 2% of the total index. The index is not leveraged. Investors should note that indices do not reflect fees and expenses. |
Lipper peer group data calculated by Lipper Inc.; used with permission. The Lipper median is the return of the fund that places in the middle of the peer group.
Managed High Yield Plus Fund Inc.
Portfolio statistics (unaudited) (1)
Characteristics | 11/30/08 | 05/31/08 | 11/30/07 | ||||||||||
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Net assets (mm) | $95.7 | $225.9 | $253.7 | ||||||||||
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Weighted average maturity | 6.0 | yrs | 5.9 | yrs | 6.7 | yrs | |||||||
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Leverage (2) | 31.9 | % | 31.4 | % | 32.3 | % | |||||||
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Portfolio composition (3) | 11/30/08 | 05/31/08 | 11/30/07 | ||||||||||
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Corporate bonds | 97.0 | % | 92.7 | % | 99.8 | % | |||||||
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Warrants | 0.0 | (4) | 0.2 | 0.2 | |||||||||
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Stocks and other equity | |||||||||||||
securities | 0.3 | 0.0 | (4) | 0.0 | (4) | ||||||||
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Cash equivalents | 2.7 | 7.1 | | ||||||||||
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Total | 100.0 | % | 100.0 | % | 100.0 | % | |||||||
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Credit quality (3) | 11/30/08 | 05/31/08 | 11/30/07 | ||||||||||
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BB & higher | 12.5 | % | 9.2 | % | 9.2 | % | |||||||
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B | 68.6 | 61.1 | 69.5 | ||||||||||
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CCC & lower | 15.6 | 19.4 | 19.3 | ||||||||||
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Not rated | 0.3 | 3.0 | 1.8 | ||||||||||
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Equity/preferred | 0.3 | 0.2 | 0.2 | ||||||||||
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Cash equivalents | 2.7 | 7.1 | | ||||||||||
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Total | 100.0 | % | 100.0 | % | 100.0 | % | |||||||
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Top 5 bond holdings (3) | 11/30/08 | 05/31/08 | 11/30/07 | ||||||||||
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Residential Capital | |||||||||||||
Xerox Capital Trust | 3.3 | % | LLC | 2.4 | % | Xerox Capital Trust | 1.9 | % | |||||
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Univision | |||||||||||||
Sheridan Acquisition | 3.2 | Ford Motor Credit | 2.1 | Communications | 1.9 | ||||||||
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Sungard Data | Ford Motor | ||||||||||||
Cellu Tissue Holdings | 3.0 | Systems | 2.0 | Credit | 1.8 | ||||||||
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Harland Clarke | 2.5 | Harland Clarke | 2.0 | Harland Clarke | 1.8 | ||||||||
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Residential Capital | |||||||||||||
CPG International | 2.5 | Xerox Capital Trust | 1.8 | LLC | 1.8 | ||||||||
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Total | 14.5 | % | 10.3 | % | 9.2 | % | |||||||
|
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Top five sectors (3) | 11/30/08 | 05/31/08 | 11/30/07 | ||||||||||
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Gaming | 15.3 | % | Paper/forest products | 8.6 | % | Gaming | 9.9 | % | |||||
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Paper/forest products | 9.8 | Building materials | 7.9 | Paper/forest products | 9.5 | ||||||||
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Building materials | 8.3 | Gaming | 7.1 | Building materials | 7.5 | ||||||||
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Business services/office | Media-broadcast/ | Media-broadcast/ | |||||||||||
equipment | 5.9 | outdoor | 4.9 | outdoor | 5.5 | ||||||||
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Media-publishing | 4.6 | Media-publishing | 4.7 | Media-publishing | 4.7 | ||||||||
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Total | 43.9 | % | 33.2 | % | 37.1 | % | |||||||
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(1) | The Funds portfolio is actively managed and its composition will vary over time. |
(2) | As a percentage of total assets. |
(3) | Weightings represent percentages of total investments as of the dates indicated. Credit quality ratings shown are designated by Standard & Poors Ratings Group, an independent ratings agency. |
(4) | Weighting represents less than 0.05% of total investments as of the date indicated. |
Managed High Yield Plus Fund Inc.
Portfolio of investmentsNovember 30, 2008 (unaudited)
Face | ||||||
Security description | amount | Value | ||||
|
||||||
Corporate bonds136.06% | ||||||
|
||||||
Agriculture2.79% | ||||||
Southern States Cooperative, Inc. | ||||||
10.500%, due 10/15/10 (1),(2) |
$3,000,000 | $2,670,000 | ||||
|
||||||
Automobile OEM0.24% | ||||||
General Motors | ||||||
8.375%, due 07/15/33 |
1,055,000 | 232,100 | ||||
|
||||||
Automotive parts2.80% | ||||||
Stanadyne Corp. | ||||||
10.000%, due 08/15/14 (2) |
4,000,000 | 2,680,000 | ||||
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Building materials11.69% | ||||||
Coleman Cable, Inc. | ||||||
9.875%, due 10/01/12 (2) |
4,850,000 | 3,128,250 | ||||
|
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CPG International, Inc. | ||||||
10.500%, due 07/01/13 (2) |
6,000,000 | 3,360,000 | ||||
|
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Interface, Inc. | ||||||
10.375%, due 02/01/10 (2) |
2,075,000 | 2,002,375 | ||||
|
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US Concrete, Inc. | ||||||
8.375%, due 04/01/14 (2) |
4,800,000 | 2,688,000 | ||||
|
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11,178,625 | ||||||
|
||||||
Business services/office equipment8.25% | ||||||
Harland Clarke Holdings | ||||||
9.500%, due 05/15/15 (2) |
7,750,000 | 3,410,000 | ||||
|
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Xerox Capital Trust I | ||||||
8.000%, due 02/01/27 (2) |
6,100,000 | 4,477,315 | ||||
|
||||||
7,887,315 | ||||||
|
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Chemicals 3.97% | ||||||
Ineos Group Holdings PLC | ||||||
8.500%, due 02/15/16 (1),(2) |
6,000,000 | 1,065,000 | ||||
|
||||||
Momentive Performance | ||||||
9.750%, due 12/01/14 (2) |
2,500,000 | 968,750 | ||||
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10.125%, due 12/01/14 (2),(3) |
4,000,000 | 1,180,000 | ||||
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11.500%, due 12/01/16 (2) |
1,000,000 | 265,000 | ||||
|
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Montell Finance Co. BV | ||||||
8.100%, due 03/15/27 (1),(2) |
2,012,000 | 321,920 | ||||
|
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3,800,670 | ||||||
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Managed High Yield Plus Fund Inc.
Portfolio of investmentsNovember 30, 2008 (unaudited)
Face | ||||||
Security description | amount | Value | ||||
|
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Corporate bonds(continued) | ||||||
|
||||||
Consumer products0.16% | ||||||
Yankee Acquisition Corp., Series B | ||||||
8.500%, due 02/15/15 |
$325,000 | $151,125 | ||||
|
||||||
Consumer products-durables2.31% | ||||||
Da-Lite Screen Co., Inc. | ||||||
9.500%, due 05/15/11 (2) |
2,500,000 | 2,212,500 | ||||
|
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Consumer services5.15% | ||||||
Ahern Rentals, Inc. | ||||||
9.250%, due 08/15/13 (2) |
4,750,000 | 1,330,000 | ||||
|
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Hertz Corp. | ||||||
10.500%, due 01/01/16 (2) |
4,000,000 | 1,600,000 | ||||
|
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Sunstate Equipment Co. | ||||||
10.500%, due 04/01/13 (1),(2) |
3,500,000 | 1,995,000 | ||||
|
||||||
4,925,000 | ||||||
|
||||||
Defense/aerospace2.68% | ||||||
DAE Aviation Holdings, Inc. | ||||||
11.250%, due 08/01/15 (1),(2) |
1,000,000 | 700,000 | ||||
|
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Hawker Beechcraft Acquisition Co. | ||||||
8.875%, due 04/01/15 (2),(3) |
3,750,000 | 1,537,500 | ||||
|
||||||
9.750%, due 04/01/17 (2) |
1,000,000 | 325,000 | ||||
|
||||||
2,562,500 | ||||||
|
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Electric-generation2.20% | ||||||
Mirant Americas Generation LLC | ||||||
9.125%, due 05/01/31 (2) |
3,000,000 | 2,100,000 | ||||
|
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Electric-integrated2.34% | ||||||
Texas Competitive Electric Holdings Co. LLC | ||||||
10.250%, due 11/01/15 (1),(2) |
3,500,000 | 2,240,000 | ||||
|
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Electronics2.46% | ||||||
Sanmina-SCI Corp. | ||||||
5.569%, due 06/15/14 (1),(2),(4) |
1,500,000 | 1,005,000 | ||||
|
||||||
8.125%, due 03/01/16 (2) |
3,000,000 | 1,350,000 | ||||
|
||||||
2,355,000 | ||||||
|
||||||
Finance-noncaptive diversified0.83% | ||||||
GMAC LLC | ||||||
8.000%, due 11/01/31 (2) |
3,000,000 | 788,976 | ||||
|
Managed High Yield Plus Fund Inc.
Portfolio of investmentsNovember 30, 2008 (unaudited)
Face | ||||||
Security description | amount | Value | ||||
|
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Corporate bonds(continued) | ||||||
|
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Food2.51% | ||||||
Ameriqual Group LLC | ||||||
9.500%, due 04/01/12 (1),(2) |
$4,000,000 | $2,400,000 | ||||
|
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Gaming21.49% | ||||||
Caesars Entertainment, Inc. | ||||||
7.875%, due 03/15/10 (2) |
3,000,000 | 1,560,000 | ||||
|
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Circus & Eldorado Joint Venture | ||||||
10.125%, due 03/01/12 (2) |
4,500,000 | 2,902,500 | ||||
|
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FireKeepers Development Authority | ||||||
13.875%, due 05/01/15 (1),(2) |
2,000,000 | 1,300,000 | ||||
|
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Harrahs Operating Co., Inc. | ||||||
10.750%, due 02/01/16 (1),(2) |
3,000,000 | 667,500 | ||||
|
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Inn Of The Mountain Gods Resort & Casino | ||||||
12.000%, due 11/15/10 (2) |
4,400,000 | 1,452,000 | ||||
|
||||||
Jacobs Entertainment, Inc. | ||||||
9.750%, due 06/15/14 (2) |
6,750,000 | 3,105,000 | ||||
|
||||||
Little Traverse Bay Bands of Odawa Indians | ||||||
10.250%, due 02/15/14 (1),(2) |
3,000,000 | 1,965,000 | ||||
|
||||||
MGM Mirage, Inc. | ||||||
13.000%, due 11/15/13 (1) |
1,000,000 | 835,000 | ||||
|
||||||
MTR Gaming Group, Inc., Series B | ||||||
9.750%, due 04/01/10 (2) |
2,525,000 | 1,881,125 | ||||
|
||||||
Pokagon Gaming Authority | ||||||
10.375%, due 06/15/14 (1),(2) |
2,983,000 | 2,520,635 | ||||
|
||||||
River Rock Entertainment Authority | ||||||
9.750%, due 11/01/11 (2) |
2,836,000 | 2,325,520 | ||||
|
||||||
Tropicana Entertainment LLC/Finance Corp. | ||||||
9.625%, due 12/15/14 (5), * |
1,200,000 | 42,000 | ||||
|
||||||
20,556,280 | ||||||
|
||||||
Gas distributors0.73% | ||||||
Ferrellgas L.P./Finance | ||||||
6.750%, due 05/01/14 (2) |
1,000,000 | 700,000 | ||||
|
||||||
Gas pipelines0.68% | ||||||
Atlas Pipeline Partner/Finance | ||||||
8.125%, due 12/15/15 (2) |
1,000,000 | 650,000 | ||||
|
||||||
Health care4.13% | ||||||
Community Health Systems | ||||||
8.875%, due 07/15/15 (2) |
2,900,000 | 2,327,250 | ||||
|
Managed High Yield Plus Fund Inc.
Portfolio of investmentsNovember 30, 2008 (unaudited)
Face | ||||||
Security description | amount | Value | ||||
|
||||||
Corporate bonds(continued) | ||||||
|
||||||
Health care(concluded) | ||||||
HCA, Inc. | ||||||
9.125%, due 11/15/14 (2) |
$2,000,000 | $1,625,000 | ||||
|
||||||
3,952,250 | ||||||
|
||||||
Home construction0.55% | ||||||
Stanley Martin-Community LLC | ||||||
9.750%, due 08/15/15 (2) |
2,000,000 | 530,000 | ||||
|
||||||
Industrial-other5.35% | ||||||
ARAMARK Services, Inc. | ||||||
6.693%, due 02/01/15 (2),(4) |
4,145,000 | 2,901,500 | ||||
|
||||||
Mobile Services/Storage Group | ||||||
9.750%, due 08/01/14 (2) |
3,000,000 | 2,220,000 | ||||
|
||||||
5,121,500 | ||||||
|
||||||
Media-broadcast/outdoor4.42% | ||||||
CMP Susquehanna | ||||||
9.875%, due 05/15/14 (2) |
5,775,000 | 1,025,062 | ||||
|
||||||
LIN Television Corp. | ||||||
6.500%, due 05/15/13 (2) |
2,000,000 | 930,000 | ||||
|
||||||
Series B, 6.500%, due 05/15/13 (2) |
1,750,000 | 813,750 | ||||
|
||||||
Sirius Satellite Radio | ||||||
9.625%, due 08/01/13 (2) |
3,450,000 | 845,250 | ||||
|
||||||
Univision Communications | ||||||
9.750%, due 03/15/15 (1),(2),(3) |
4,550,000 | 580,125 | ||||
|
||||||
Young Broadcasting, Inc. | ||||||
10.000%, due 03/01/11 (2) |
2,358,000 | 35,370 | ||||
|
||||||
4,229,557 | ||||||
|
||||||
Media-cable0.42% | ||||||
CCH I Holdings LLC | ||||||
10.000%, due 05/15/14 (2) |
3,000,000 | 405,000 | ||||
|
||||||
Media-publishing6.45% | ||||||
American Media Operations, Series B | ||||||
10.250%, due 05/01/09 (5) |
4,000,000 | 1,600,000 | ||||
|
||||||
10.250%, due 05/01/09 (1),(5) |
145,440 | 58,176 | ||||
|
||||||
Hollinger, Inc. | ||||||
12.875%, due 03/01/11 (1),(5), * |
975,000 | 19,500 | ||||
|
||||||
Sheridan Acquisition Corp. | ||||||
10.250%, due 08/15/11 (2) |
5,500,000 | 4,235,000 | ||||
|
Managed High Yield Plus Fund Inc.
Portfolio of investmentsNovember 30, 2008 (unaudited)
Face | ||||||
Security description | amount | Value | ||||
|
||||||
Corporate bonds(continued) | ||||||
|
||||||
Media-publishing(concluded) | ||||||
Vertis, Inc. | ||||||
13.500%, due 04/01/14 (3),(6),(7) |
$2,097,142 | $260,000 | ||||
|
||||||
6,172,676 | ||||||
|
||||||
Media-services3.79% | ||||||
Affinion Group, Inc. | ||||||
10.125%, due 10/15/13 (2) |
2,000,000 | 1,370,000 | ||||
|
||||||
Baker & Taylor, Inc. | ||||||
11.500%, due 07/01/13 (1),(2) |
4,500,000 | 2,250,000 | ||||
|
||||||
3,620,000 | ||||||
|
||||||
Metals/mining excluding steel2.43% | ||||||
Neenah Corp. | ||||||
9.500%, due 01/01/17 (2) |
4,000,000 | 2,320,000 | ||||
|
||||||
Packaging & containers4.61% | ||||||
Exopack Holding Corp. | ||||||
11.250%, due 02/01/14 (2) |
4,000,000 | 2,520,000 | ||||
|
||||||
Graham Packaging Co. | ||||||
9.875%, due 10/15/14 (2) |
3,000,000 | 1,890,000 | ||||
|
||||||
4,410,000 | ||||||
|
||||||
Paper/forest products13.40% | ||||||
Ainsworth Lumber | ||||||
11.000%, due 07/29/15 (1),(2),(3) |
1,144,753 | 747,587 | ||||
|
||||||
Boise Cascade LLC | ||||||
7.125%, due 10/15/14 (2) |
955,000 | 534,800 | ||||
|
||||||
Cellu Tissue Holdings, Inc. | ||||||
9.750%, due 03/15/10 (2) |
5,000,000 | 4,000,000 | ||||
|
||||||
Millar Western Forest | ||||||
7.750%, due 11/15/13 (2) |
1,000,000 | 420,000 | ||||
|
||||||
Newpage Corp. | ||||||
10.000%, due 05/01/12 (2) |
4,000,000 | 2,160,000 | ||||
|
||||||
12.000%, due 05/01/13 (2) |
1,000,000 | 345,000 | ||||
|
||||||
Stone Container Finance | ||||||
7.375%, due 07/15/14 (2) |
6,250,000 | 2,093,750 | ||||
|
||||||
Verso Paper Holdings LLC | ||||||
9.125%, due 08/01/14 (2) |
1,000,000 | 480,000 | ||||
|
||||||
11.375%, due 08/01/16 (2) |
5,500,000 | 2,035,000 | ||||
|
||||||
12,816,137 | ||||||
|
Managed High Yield Plus Fund Inc.
Portfolio of investmentsNovember 30, 2008 (unaudited)
Face | ||||||
Security description | amount | Value | ||||
|
||||||
Corporate bonds(concluded) | ||||||
|
||||||
Pharmaceuticals1.69% | ||||||
Axcan Intermediate Holdings | ||||||
12.750%, due 03/01/16 (1),(2) |
$1,950,000 | $1,618,500 | ||||
|
||||||
Retail-discount0.53% | ||||||
Dollar General Corp. | ||||||
11.875%, due 07/15/17 (3) |
625,000 | 501,563 | ||||
|
||||||
Retail-restaurants0.01% | ||||||
Buffets, Inc. | ||||||
12.500%, due 11/01/14 (5), * |
4,500,000 | 11,250 | ||||
|
||||||
Retail-specialty2.30% | ||||||
Brookstone Co., Inc. | ||||||
12.000%, due 10/15/12 (2) |
2,400,000 | 1,464,000 | ||||
|
||||||
GameStop Corp. | ||||||
8.000%, due 10/01/12 (2) |
850,000 | 739,500 | ||||
|
||||||
2,203,500 | ||||||
|
||||||
Steel producers/products0.65% | ||||||
Ryerson, Inc. | ||||||
12.000%, due 11/01/15 (1),(2) |
1,000,000 | 620,000 | ||||
|
||||||
Technology-software3.85% | ||||||
Sungard Data Systems, Inc. | ||||||
10.250%, due 08/15/15 (2) |
4,000,000 | 2,320,000 | ||||
|
||||||
Unisys Corp. | ||||||
8.500%, due 10/15/15 (2) |
3,500,000 | 1,365,000 | ||||
|
||||||
3,685,000 | ||||||
|
||||||
Telecom-wireless3.43% | ||||||
Wind Acquisition Finance SA | ||||||
10.750%, due 12/01/15 (1),(2) |
4,000,000 | 3,280,000 | ||||
|
||||||
Telecom-wirelines3.45% | ||||||
Citizens Communications | ||||||
9.000%, due 08/15/31 (2) |
6,000,000 | 3,300,000 | ||||
|
||||||
Textile/apparel1.32% | ||||||
Rafaella Apparel Group | ||||||
11.250%, due 06/15/11 |
3,310,000 | 1,257,800 | ||||
|
||||||
Total corporate bonds (cost$260,530,466) | 130,144,824 | |||||
|
Managed High Yield Plus Fund Inc.
Portfolio of investmentsNovember 30, 2008 (unaudited)
Number of | ||||||
Security description | shares/units | Value | ||||
|
||||||
Common stocks*0.41% | ||||||
|
||||||
Consumer services0.00% | ||||||
NCI Holdings, Inc. (6),(7) | 5,456 | $0 | ||||
|
||||||
Energy-refining & marketing0.00% | ||||||
Orion Refining Corp. (6),(7) | 1,253 | 0 | ||||
|
||||||
Media-publishing0.00% | ||||||
Vertis Holdings, Inc. (6),(7) | 109,870 | 0 | ||||
|
||||||
Paper/forest products0.39% | ||||||
Ainsworth Lumber Co. Ltd. (2) | 351,057 | 372,015 | ||||
|
||||||
Retail-restaurants0.00% | ||||||
American Restaurant Group, Inc. (6),(7) | 129 | 0 | ||||
|
||||||
Technology-software0.00% | ||||||
Knology, Inc. (2) | 693 | 3,936 | ||||
|
||||||
Telecom-wireless0.02% | ||||||
American Tower Corp., Class A (2) | 636 | 17,325 | ||||
|
||||||
Telecom-wirelines0.00% | ||||||
XO Holdings, Inc. (2) | 1,052 | 206 | ||||
|
||||||
Total common stocks (cost$5,476,585) | 393,482 | |||||
|
||||||
Other equity security*0.00% | ||||||
|
||||||
Media-cable0.00% | ||||||
Adelphia Contingent Value Vehicle (6),(7),(8) (cost$0) | 2,000,000 | 0 | ||||
|
||||||
Number of | ||||||
warrants | ||||||
|
||||||
Warrants*0.00% | ||||||
|
||||||
Building materials0.00% | ||||||
Dayton Superior Corp., strike @ $0.01 | ||||||
expires 06/15/09 (6),(7),(9) |
2,500 | 0 | ||||
|
||||||
Energy-oilfield services0.00% | ||||||
Key Energy Services, Inc., strike @ $4.88 | ||||||
expires 01/15/09 (2) |
4,500 | 45 | ||||
|
||||||
Telecom-wirelines0.00% | ||||||
XO Holdings, Inc., | ||||||
Series A, strike @ $6.25, expires 01/16/10 (2) |
2,105 | 17 | ||||
|
||||||
Series B, strike @ $7.50, expires 01/16/10 (2) |
1,578 | 6 | ||||
|
||||||
Series C, strike @ $10.00, expires 01/16/10 (2) |
1,578 | 8 | ||||
|
||||||
31 | ||||||
|
||||||
Total warrants (cost$46,550) | 76 | |||||
|
Managed High Yield Plus Fund Inc.
Portfolio of investmentsNovember 30, 2008 (unaudited)
Face | |||||||
Security description | amount | Value | |||||
|
|||||||
Repurchase agreement3.80% | |||||||
|
|||||||
Repurchase agreement dated 11/28/08 | |||||||
with State Street Bank & Trust Co., 0.080% |
|||||||
due 12/01/08, collateralized by $3,706,247 |
|||||||
US Treasury Bills, zero coupon due 02/19/09 |
|||||||
to 05/28/09; (value$3,705,697); |
|||||||
proceeds: $3,633,024 (cost$3,633,000) |
$3,633,000 | $3,633,000 | |||||
|
|||||||
Total investments (cost$269,686,601)140.27% | 134,171,382 | ||||||
|
|||||||
Liabilities in excess of other assets(40.27)% | (38,516,863 | ) | |||||
|
|||||||
Net assets100.00% | $95,654,519 | ||||||
|
* | Non-income producing security. | |
(1) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities, which represent 30.17% of net assets as of November 30, 2008, are considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. | |
(2) | Entire or partial amount pledged as collateral for bank loan. | |
(3) | Payment-in-kind security. Income may be paid in cash or additional notes, at the discretion of the issuer. | |
(4) | Floating rate security. The interest rate shown is the current rate as of November 30, 2008. | |
(5) | Bond interest in default. | |
(6) | Illiquid securities representing 0.27% of net assets as of November 30, 2008. | |
(7) | Security is being fair valued by a valuation committee under the direction of the board of directors. | |
(8) | Represents contingent value vehicle (CVV) obligations. The CVV obligations represent units in a trust that was formed pursuant to a Plan of Reorganization of Adelphia Communications Corporation to hold certain litigation claims against Adelphias third party lenders, accountants, and other parties. | |
(9) | Security exempt from registration under Rule 144A of the Securities Act of 1933. This security, which represents 0.00% of net assets as of November 30, 2008, is considered illiquid and restricted. (See table below for more information). |
Acquisition | ||||||||||||
cost as a | Value as a | |||||||||||
Acquisition | Acquisition | percentage | Value at | percentage | ||||||||
Restricted security | date | cost | of net assets | 11/30/08 | of net assets | |||||||
|
||||||||||||
Dayton Superior | ||||||||||||
Corp., warrants, | ||||||||||||
expiring 06/15/09 | 06/09/00 | $46,550 | 0.05 | % | $0 | 0.00 | % | |||||
|
GMAC | General Motors Acceptance Corporation | |
OEM | Original Equipment Manufacturer |
Managed High Yield Plus Fund Inc.
Portfolio of investmentsNovember 30, 2008 (unaudited)
Issuer breakdown by country of origin | |||
Percentage of total investments | |||
|
|||
United States | 93.9 | % | |
|
|||
Canada | 2.7 | ||
|
|||
Luxembourg | 2.4 | ||
|
|||
United Kingdom | 0.8 | ||
|
|||
Netherlands | 0.2 | ||
|
|||
Total | 100.0 | % | |
|
See accompanying notes to financial statements
Managed High Yield Plus Fund Inc.
Statement of assets and liabilitiesNovember 30, 2008 (unaudited)
Assets: | ||||
Investments in securities, at value (cost$269,686,601) | $134,171,382 | |||
|
||||
Cash | 903 | |||
|
||||
Receivable for interest | 7,091,519 | |||
|
||||
Other assets | 5,463 | |||
|
||||
Total assets | 141,269,267 | |||
|
||||
Liabilities: | ||||
Payable for bank loan | 45,000,000 | |||
|
||||
Payable for interest on bank loan | 368,966 | |||
|
||||
Payable to investment manager and administrator | 90,715 | |||
|
||||
Accrued expenses and other liabilities | 155,067 | |||
|
||||
Total liabilities | 45,614,748 | |||
|
||||
Net assets: | ||||
Capital stock$0.001 par value; 200,000,000 shares | ||||
authorized; 61,254,927 shares issued and outstanding | 625,022,200 | |||
|
||||
Accumulated undistributed net investment income | 1,114,569 | |||
|
||||
Accumulated net realized loss from investment activities | (394,967,031 | ) | ||
|
||||
Net unrealized depreciation of investments | (135,515,219 | ) | ||
|
||||
Net assets | $95,654,519 | |||
|
||||
Net asset value per share | $1.56 | |||
|
See accompanying notes to financial statements
Managed High Yield Plus Fund Inc.
Statement of operations
For the six | ||||
months ended | ||||
November 30, 2008 | ||||
(unaudited) | ||||
|
||||
Investment income: | ||||
Interest and other income | $15,705,587 | |||
|
||||
Expenses: | ||||
Interest expense, loan commitment and other loan fees | 1,863,607 | |||
|
||||
Investment management and administration fees | 930,861 | |||
|
||||
Professional fees | 58,295 | |||
|
||||
Reports and notices to shareholders | 45,503 | |||
|
||||
Custody and accounting fees | 39,699 | |||
|
||||
Stock exchange listing fees | 30,477 | |||
|
||||
Directors fees | 9,054 | |||
|
||||
Transfer agency fees | 5,625 | |||
|
||||
Insurance fees | 4,762 | |||
|
||||
Other expenses | 7,035 | |||
|
||||
2,994,918 | ||||
|
||||
Net investment income | 12,710,669 | |||
|
||||
Net realized and unrealized losses from investment activities: | ||||
Net realized loss from investments | (49,548,369 | ) | ||
|
||||
Net change in unrealized appreciation/depreciation of investments | (79,642,301 | ) | ||
|
||||
Net realized and unrealized loss from investment activities | (129,190,670 | ) | ||
|
||||
Net decrease in net assets resulting from operations | $(116,480,001 | ) | ||
|
See accompanying notes to financial statements
Managed High Yield Plus Fund Inc.
Statement of changes in net assets
For the six | ||||||||
months ended | For the | |||||||
November 30, 2008 | year ended | |||||||
(unaudited) | May 31, 2008 | |||||||
|
||||||||
From operations: | ||||||||
Net investment income | $12,710,669 | $29,323,520 | ||||||
|
||||||||
Net realized losses from investments | (49,548,369 | ) | (12,868,727 | ) | ||||
|
||||||||
Net change in unrealized appreciation/depreciation | ||||||||
of investments | (79,642,301 | ) | (61,661,496 | ) | ||||
|
||||||||
Net decrease in net assets resulting from operations | (116,480,001 | ) | (45,206,703 | ) | ||||
|
||||||||
Dividends to shareholders from: | ||||||||
Net investment income | (13,836,053 | ) | (29,319,540 | ) | ||||
|
||||||||
Capital stock transactions: | ||||||||
Proceeds from shares issued through | ||||||||
dividends reinvested | 72,946 | 1,087,795 | ||||||
|
||||||||
Net decrease in net assets | (130,243,108 | ) | (73,438,448 | ) | ||||
|
||||||||
Net assets: | ||||||||
Beginning of period | 225,897,627 | 299,336,075 | ||||||
|
||||||||
End of period | $95,654,519 | $225,897,627 | ||||||
|
||||||||
Accumulated undistributed net investment income | $1,114,569 | $2,239,953 | ||||||
|
See accompanying notes to financial statements
Managed High Yield Plus Fund Inc.
Statement of cash flows
For the six | ||||
months ended | ||||
November 30, 2008 | ||||
(unaudited) | ||||
|
||||
Cash flows provided from (used for) operating activities: | ||||
Interest received | $16,220,865 | |||
|
||||
Operating expenses paid | (1,221,466 | ) | ||
|
||||
Sale of short-term portfolio investments, net | 19,100,000 | |||
|
||||
Purchase of long-term portfolio investments | (25,822,739 | ) | ||
|
||||
Sale of long-term portfolio investments | 66,033,949 | |||
|
||||
Net cash provided from operating activities | 74,310,609 | |||
|
||||
Cash flows used for financing activities: | ||||
Dividends paid to shareholders | (13,763,107 | ) | ||
|
||||
Paydown of bank loan | (58,750,000 | ) | ||
|
||||
Interest paid | (1,797,035 | ) | ||
|
||||
Net cash used for financing activities | (74,310,142 | ) | ||
|
||||
Net increase in cash | 467 | |||
|
||||
Cash at beginning of period | 436 | |||
|
||||
Cash at end of period | $903 | |||
|
||||
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 | $(116,480,001 | ) | ||
|
||||
Accretion of bond discount, net | (403,446 | ) | ||
|
||||
Interest expense, loan commitment and other loan fees | 1,863,607 | |||
|
||||
Decrease in investments, at cost | 108,859,579 | |||
|
||||
Increase in unrealized depreciation of investments | 79,642,301 | |||
|
||||
Decrease in receivable for interest | 918,724 | |||
|
||||
Decrease in other assets | 35,241 | |||
|
||||
Decrease in payable to investment manager and administrator | (105,804 | ) | ||
|
||||
Decrease in accrued expenses and other liabilities | (19,592 | ) | ||
|
||||
Net cash provided from operating activities | $74,310,609 | |||
|
||||
Non-cash financing transactions: | ||||
Reinvestment of dividends | $72,946 | |||
|
See accompanying notes to financial statements
(This page has been left blank intentionally)
Managed High Yield Plus Fund Inc.
Financial highlights
Selected data for a share of common stock outstanding throughout each period is presented below:
For the six | ||||
months ended | ||||
November 30, 2008 | ||||
(unaudited) | ||||
|
||||
Net asset value, beginning of period | $3.69 | |||
|
||||
Net investment income | 0.21 | (1) | ||
|
||||
Net realized and unrealized gains (losses) from investment activities | (2.11 | ) | ||
|
||||
Net increase (decrease) from operations | (1.90 | ) | ||
|
||||
Dividends from net investment income | (0.23 | ) | ||
|
||||
Net asset value, end of period | $1.56 | |||
|
||||
Market price, end of period | $1.31 | |||
|
||||
Total net asset value return (2) | (53.81 | )% | ||
|
||||
Total market price return (3) | (59.99 | )% | ||
|
||||
Ratios/supplemental data: | ||||
Net assets, end of period (000s) | $95,655 | |||
|
||||
Expenses to average net assets, including interest expense | 3.32 | % (4) | ||
|
||||
Expenses to average net assets, excluding interest expense | 1.25 | % (4) | ||
|
||||
Net investment income to average net assets | 14.10 | % (4) | ||
|
||||
Portfolio turnover | 11 | % | ||
|
||||
Asset coverage (5) | $3,126 | |||
|
(1) | Calculated using the average shares method. | |
(2) | Total net asset value return is calculated assuming a $10,000 purchase of common stock at the current net asset value on the first day of each period reported and a sale at the current net asset value on the last day of each period reported, and assuming reinvestment of dividends at the net asset value on the payable dates. Total return based on net asset value is hypothetical as investors can not purchase or sell Fund shares at net asset value but only at market prices. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends or the sale of Fund shares. Total net asset value return for the period of less than one year has not been annualized. | |
(3) | Total market price return is calculated assuming a $10,000 purchase of common stock at the current market price on the first day of each period reported and a sale at the current market price on the last day of each period reported, and assuming reinvestment of dividends at prices obtained under the Funds Dividend Reinvestment Plan. Total market price return does not reflect brokerage commissions. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends or the sale of Fund shares. Total market price return for the period of less than one year has not been annualized. | |
(4) | Annualized. | |
(5) | Per $1,000 of bank loans outstanding. |
See accompanying notes to financial statements
For the years ended May 31, | |||||||||||||
|
|||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | |||||||||
|
|||||||||||||
$4.91 | $4.82 | $4.87 | $5.02 | $4.75 | |||||||||
|
|||||||||||||
0.48 | (1) | 0.53 | (1) | 0.57 | 0.61 | 0.65 | |||||||
|
|||||||||||||
(1.22 | ) | 0.06 | (0.05 | ) | (0.11 | ) | 0.23 | ||||||
|
|||||||||||||
(0.74 | ) | 0.59 | 0.52 | 0.50 | 0.88 | ||||||||
|
|||||||||||||
(0.48 | ) | (0.50 | ) | (0.57 | ) | (0.65 | ) | (0.61 | ) | ||||
|
|||||||||||||
$3.69 | $4.91 | $4.82 | $4.87 | $5.02 | |||||||||
|
|||||||||||||
$3.60 | $5.14 | $4.78 | $5.10 | $5.42 | |||||||||
|
|||||||||||||
(15.41 | )% | 12.93 | % | 11.16 | % | 9.86 | % | 19.15 | % | ||||
|
|||||||||||||
(21.02 | )% | 19.13 | % | 5.26 | % | 5.99 | % | 20.92 | % | ||||
|
|||||||||||||
$225,898 | $299,336 | $291,175 | $291,990 | $214,425 | |||||||||
|
|||||||||||||
3.79 | % | 3.88 | % | 3.41 | % | 2.37 | % | 1.82 | % | ||||
|
|||||||||||||
1.25 | % | 1.20 | % | 1.24 | % | 1.22 | % | 1.16 | % | ||||
|
|||||||||||||
11.59 | % | 10.88 | % | 11.76 | % | 11.89 | % | 12.92 | % | ||||
|
|||||||||||||
29 | % | 46 | % | 40 | % | 44 | % | 53 | % | ||||
|
|||||||||||||
$3,177 | $3,205 | $3,069 | $3,078 | $3,430 | |||||||||
|
Managed High Yield Plus Fund Inc.
Notes to financial statements (unaudited)
Organization and significant accounting policies
Managed High Yield
Plus Fund Inc. (the Fund) was incorporated in Maryland on April 24,
1998, and is registered with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended (1940 Act), as a closed-end diversified
management investment company. The Funds primary investment objective is to
seek high income. Its secondary objective is to seek capital appreciation.
In
the normal course of business the Fund may enter into contracts that contain a variety
of representations or that provide indemnification for certain liabilities. The
Funds maximum exposure under these arrangements is unknown, as this would
involve future claims that may be made against the Fund that have not yet occurred.
However, the Fund has not had prior claims or losses pursuant to these contracts
and expects the risk of loss to be remote.
The preparation of financial statements
in accordance with US generally accepted accounting principles requires the Funds management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from those
estimates. The following is a summary of significant accounting policies:
Valuation of investments
The Fund calculates its net asset value based on
the current market value, where available, for its portfolio securities. The Fund
normally obtains market values for its securities from independent pricing sources
and broker-dealers. Independent pricing sources may use last reported sale prices,
current market quotations or valuations from computerized matrix systems
that derive values based on comparable securities. A matrix system incorporates
parameters such as security quality, maturity and coupon, and/or research and evaluations
by its staff, including review of broker-dealer market price quotations, if available,
in determining the valuation of the portfolio securities. Securities traded in the
over-the-counter (OTC) market and listed on The Nasdaq Stock Market,
Inc. (Nasdaq) normally are valued at the NASDAQ Official Closing Price.
Other OTC securities are valued at the last bid price available on the valuation
date prior to valuation. Securities which are listed on US and foreign stock exchanges
normally are valued at the last sale price on the day the securities are valued or,
lacking any sales on such day, at the last available bid price. In cases where securities
are traded on more than one exchange, the securities are valued on the exchange
designated as the
Managed High Yield Plus Fund Inc.
Notes to financial statements (unaudited)
primary market by UBS Global Asset Management (Americas) Inc. (UBS Global
AM), the investment manager and administrator of the Fund. UBS Global AM is
an indirect wholly owned asset management subsidiary of UBS AG, an internationally
diversified organization with headquarters in Zurich and Basel, Switzerland and
operations in many areas of the financial services industry. 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 Funds Board of Directors (the Board). Various factors may
be reviewed in order to make a good faith determination of a securitys fair
value. These factors include, but are not limited to, the type and cost of the security;
contractual or legal restrictions on resale of the security; relevant financial
or business developments of the issuer; actively traded similar or related securities;
conversion or exchange rights on the security; related corporate actions; and changes
in overall market conditions. Occasionally, events affecting the value of foreign
investments occur between the time at which they are determined and the close of
the New York Stock Exchange (NYSE), which will not be reflected in the
computation of the Funds net asset value. If events materially affecting the
value of such securities occur during such time periods, the securities will be
valued at their fair value as determined in good faith by or under the direction
of 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. All investments quoted in foreign currencies will be valued daily in
US dollars on the basis of the foreign currency exchange rates prevailing at the
time such valuation is determined by the Funds custodian.
On June 1, 2008,
the Fund adopted
Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (FAS 157).
FAS 157 requires disclosure
surrounding the various inputs that are used in determining the value of the Funds investments. These inputs are summarized into the three broad levels listed
below:
Level 1Quoted prices in active markets for identical securities.
Level 2Other significant observable inputs, including but not limited to,
quoted prices for similar securities, interest rates, prepayment speeds and credit
risks.
Level 3Unobservable inputs inclusive of the Funds own assumptions
in determining the fair value of investments.
Managed High Yield Plus Fund Inc.
Notes to financial statements (unaudited)
The following is a summary of the inputs used as of November 30, 2008 in valuing the Funds assets:
Quoted prices in | Significant | ||||||||
active markets | other | ||||||||
for identical | observable | Unobservable | |||||||
assets | inputs | inputs | |||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | |||||
|
|||||||||
Assets: | |||||||||
Securities | $393,482 | $133,517,900 | $260,000 | $134,171,382 | |||||
|
The following is a rollforward of the Funds assets that were valued using unobservable inputs for the period:
Measurements using unobservable inputs (Level 3) | |||
Securities | |||
|
|||
Assets | |||
|
|||
Beginning balance | $0 | ||
|
|||
Accrued discounts/(premiums) | 0 | ||
|
|||
Total gains or losses (realized/unrealized) included in earnings | (5,006,972 | ) | |
|
|||
Purchases, sales, issuances and settlements (net) | 5,266,972 | ||
|
|||
Transfers in and/or out of Level 3 | 0 | ||
|
|||
Ending balance | $260,000 | ||
|
|||
The amount of total gains or losses for the period included in earnings | |||
attributable to the change in unrealized gains or losses relating to assets | |||
still held at 11/30/08 | $(5,006,972 | ) | |
|
Repurchase agreements The Fund may purchase securities or other obligations from a bank or securities dealer (or its affiliate), subject to the sellers agreement to repurchase them at an agreed upon date (or upon demand) and price. The Fund maintains custody of the underlying obligations prior to their repurchase, either through its regular custodian or through a special tri-party custodian or sub-custodian that maintains a separate account for both the Fund and its counterparty. The underlying collateral is valued daily to ensure that the value, including accrued interest, is at least equal to the repurchase price. In the event of default of the obligation to repurchase, the Fund generally has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Repurchase agreements involving obligations other than US government securities (such as commercial paper, corporate bonds and mortgage loans) may be subject to special risks and may not have the benefit of certain protections in the event of counterparty insolvency. If the seller (or sellers guarantor, if any) becomes insolvent, the Fund may suffer delays, costs
Managed High Yield Plus Fund Inc.
Notes to financial statements (unaudited)
and possible losses in connection with the disposition
or retention of the collateral. Under certain circumstances, in the event of default
or bankruptcy by the other party to the agreement, realization and/or retention
of the collateral may be subject to legal proceedings. The Fund may participate
in joint repurchase agreement transactions with other funds managed, advised or
sub-advised by UBS Global AM.
Restricted securities
The Fund may invest
in securities that are subject to legal or contractual restrictions on resale. Frequently,
these securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these securities
may involve time-consuming negotiations and expense, and prompt sale at an acceptable
price may be difficult. Information regarding restricted securities is included
at the end of the Funds Portfolio of investments.
Investment
transactions and investment income
Investment transactions are recorded
on the trade date. Realized gains and losses from investment transactions are calculated
using the identified cost method. Interest income is recorded on an accrual basis.
Dividend income is recorded on the ex-dividend date (ex-date). Discounts
are accreted and premiums are amortized as adjustments to interest income and the
identified cost of investments.
Dividends and distributions
Dividends
and distributions to shareholders are recorded on the ex-date. The amount of dividends
and distributions is determined in accordance with federal income tax regulations,
which may differ from US generally accepted accounting principles. These book/tax differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification.
Concentration of risk
The ability of the issuers of the debt securities held by the Fund to meet their
obligations may be affected by economic and political developments, including those
particular to a specific industry, country, state or region. In addition, the Funds use of leverage creates greater volatility in the Funds net asset value
and market price of its shares.
Managed High Yield Plus Fund Inc.
Notes to financial statements (unaudited)
Investment manager and administrator
The board has approved an investment management and administration contract (Management Contract) with UBS Global AM, under which UBS Global AM serves
as investment manager and administrator of the Fund. In accordance with the Management
Contract, the Fund pays UBS Global AM an investment management and administration
fee, which is accrued weekly and paid monthly, at the annual rate of 0.70% of the
Funds average weekly total assets minus liabilities other than the aggregate
indebtedness constituting leverage.
Additional information regarding compensation
to affiliate of a board member
Effective March 1, 2005, Professor Meyer Feldberg
accepted the position of senior advisor to Morgan Stanley, resulting in him becoming
an interested director of the Fund. The Fund has been informed that Professor Feldbergs role at Morgan Stanley does not involve matters directly affecting any UBS
funds. Portfolio transactions are executed through Morgan Stanley based on that
firms ability to provide best execution of the transactions. During the six
months ended November 30, 2008, the Fund purchased and sold certain securities (e.g.,
fixed income securities) in principal trades with Morgan Stanley having an aggregate
value of $1,065,925. Morgan Stanley received compensation in connection with these
trades, which may have been in the form of a mark-up or mark-down of the price of the securities, a fee from the issuer for maintaining a commercial
paper program, or some other form of compensation. Although the precise amount of
this compensation is not generally known by UBS Global AM, UBS Global AM believes
that under normal circumstances it represents a small portion of the total value
of the transactions.
Borrowings
The Fund has a committed credit facility
(the Facility) pursuant to which the Fund was able to borrow up to $175
million during the period June 1, 2008 through October 31, 2008. Effective November
1, 2008, the Fund reduced the amount committed under the Facility to $80 million.
Under the terms of the Facility, the Fund borrows at prevailing commercial paper
rates in effect at the time of borrowing plus facility and administrative fees.
In addition, the Fund pays a liquidity fee on the entire amount of the Facility.
The Fund may borrow up to 33
1
/
3
% of its total assets up to
the committed amount. In accordance with the terms of the Facility, the Fund has
pledged assets in the amount of $124,429,266 on November 30, 2008 as collateral for
the Facility.
Managed High Yield Plus Fund Inc.
Notes to financial statements (unaudited)
For the six months ended November 30, 2008,
the Fund borrowed a daily average balance of $83,591,530 at a weighted average borrowing
cost of approximately 4.386%.
Purchases and sales of securities
For
the six months ended November 30, 2008, aggregate purchases and sales of portfolio
securities, excluding short-term securities, were $25,822,739 and $66,032,133, respectively.
Federal tax status
The Fund intends to distribute substantially all
of its income and to comply with the other requirements of the Internal Revenue
Code applicable to regulated investment companies. Accordingly, no provision for
federal income taxes is required. If the Fund does not distribute substantially all
of its net investment income, net realized capital gains and certain other amounts,
if any, during each calendar year, the Fund may be subject to a federal excise tax.
The tax character of distributions paid during the fiscal year ended May 31, 2008
was as follows:
Distributions paid from: | 2008 | |
|
||
Ordinary income | $29,319,540 | |
|
The tax character of distributions paid
and the components of accumulated earnings (deficit) on a tax basis for the current
fiscal year will be calculated after the Funds fiscal year ending May 31, 2009.
At May 31, 2008, the Fund had a net capital loss carryforward of $334,133,768.
This loss carryforward is available as a reduction, to the extent provided in the
regulations, of future net realized capital gains, and will expire as follows:
2009 | $71,221,921 | |
|
||
2010 | 71,854,329 | |
|
||
2011 | 95,911,016 | |
|
||
2012 | 27,212,620 | |
|
||
2013 | 13,297,624 | |
|
||
2014 | 30,452,277 | |
|
||
2015 | 15,905,876 | |
|
||
2016 | 8,278,105 | |
|
||
Total | $334,133,768 | |
|
Managed High Yield Plus Fund Inc.
Notes to financial statements (unaudited)
To the extent that such losses are used
to offset future net realized capital gains, it is probable these gains will not
be distributed. Also, in accordance with US Treasury regulations, the Fund has elected
to defer $11,284,894 of net realized capital losses arising after October 31, 2007.
Such losses are treated for tax purposes as arising on June 1, 2008.
For federal
income tax purposes, which is substantially the same for book purposes, the tax
cost of investments and the components of net unrealized depreciation of investments
at November 30, 2008 were as follows:
Tax cost of investments | $269,686,601 | ||
|
|||
Gross unrealized appreciation (from investments having an excess of value over cost) | 17,607 | ||
|
|||
Gross unrealized depreciation (from investments having an excess of cost over value) | (135,532,826 | ) | |
|
|||
Net unrealized depreciation | $(135,515,219 | ) | |
|
As of and for the period ended November
30, 2008, the Fund did not have any liabilities for any unrecognized tax benefits.
The Fund recognizes interest and penalties, if any, related to unrecognized tax
benefits as income tax expense in the Statement of operations. During the six months
ended, the Fund did not incur any interest or penalties.
Each of the tax years
in the four year period ended May 31, 2008 remains subject to examination by the Internal
Revenue Service and state taxing authorities.
Capital stock
There are
200,000,000 shares of $0.001 par value capital stock authorized and 61,254,927 shares
outstanding at November 30, 2008. Transactions in shares of common stock were as
follows:
Shares | Amount | |||
|
||||
For the six months ended November 30, 2008: | ||||
Shares issued through Dividend Reinvestment Plan | 39,176 | $72,946 | ||
|
||||
For the year ended May 31, 2008: | ||||
Shares issued through Dividend Reinvestment Plan | 267,932 | $1,087,795 | ||
|
Managed High Yield Plus Fund Inc.
General information (unaudited)
The Fund
Managed High Yield Plus
Fund Inc. (the Fund) is a diversified, closed-end management investment
company whose shares trade on the New York Stock Exchange (NYSE). The
Funds primary investment objective is to seek high income. Its secondary objective
is to seek capital appreciation. The Funds NYSE trading symbol is HYF. Comparative net asset value and market price information about the Fund is
available weekly in various publications. The Funds investment manager and
administrator is UBS Global Asset Management (Americas) Inc. (UBS Global AM), an indirect wholly
owned asset management subsidiary of UBS AG.
Portfolio manager change
Shu-Yang Tan, CFA, assumed day-to-day portfolio management
responsibilities for the Fund, effective October 17, 2008. He replaced
Tom Haag, formerly Senior Portfolio ManagerUS High Yield at UBS
Global AM, which serves as the Funds investment manager and
administrator. Mr. Tan had most recently served as the Head of High
Yield Research at UBS Global AM and has been with that firm since
1995. He is a long-standing member of the team that has been involved
in the management of the Fund. Mr. Tan previously served as the
portfolio manager for the Fund.
Shareholder meeting information
An annual meeting of shareholders of the Fund was held on September 18, 2008.
At the meeting, Richard Q. Armstrong, Alan S. Bernikow, Richard R. Burt, Meyer Feldberg,
Bernard H. Garil and Heather R. Higgins were elected to serve as board members until
the next annual meeting of shareholders and until their successors are duly elected
and qualified or until they retire, resign or are earlier removed. The shares were
voted as indicated below:
Shares | ||||
To vote for or withhold authority | Shares | withhold | ||
in the election of: | voted for | authority | ||
|
||||
Richard Q. Armstrong | 53,373,790.549 | 2,083,175.737 | ||
|
||||
Alan S. Bernikow | 53,416,594.639 | 2,040,371.647 | ||
|
||||
Richard R. Burt | 53,446,166.639 | 2,010,799.647 | ||
|
||||
Meyer Feldberg | 53,418,158.639 | 2,038,807.647 | ||
|
||||
Bernard H. Garil | 53,403,322.639 | 2,053,643.647 | ||
|
||||
Heather R. Higgins | 53,428,333.639 | 2,028,632.647 | ||
|
The Fund is not aware of any broker non-votes. (Broker non-votes are shares held in street name for which the broker indicates that instructions have not been received from the beneficial owners or other persons entitled to vote and for which the broker does not have discretionary voting authority.)
Managed High Yield Plus Fund Inc.
General information (unaudited)
Proxy voting policies, procedures and
record
You may obtain a description of the Funds (1) proxy voting policies,
(2) proxy voting procedures and (3) information regarding how the Fund voted any proxies
related to portfolio securities during the most recent 12-month period ended June 30
for which an SEC filing has been made, without charge, upon request by contacting
the Fund directly at 1-800-647 1568, online on the Funds Web site: www.ubs.com/ubsglobalam-proxy,
or on the EDGAR Database on the SECs Web site (http://www.sec.gov).
Quarterly Form N-Q portfolio schedule
The Fund will file its complete schedule
of portfolio holdings with the Securities and Exchange Commission (SEC)
for the first and third quarters of each fiscal year on Form N-Q. The Funds
Forms N-Q are available on the SECs Web site at http://www.sec.gov. The Funds Forms N-Q may be reviewed and copied at the SECs Public Reference Room in
Washington, D.C. Information on the operation of the SECs Public Reference
Room may be obtained by calling 1-800-SEC 0330. Additionally, you may obtain copies
of Forms N-Q from the Fund upon request by calling 1-800-647 1568.
Dividend
reinvestment plan
The Funds Board has established a Dividend Reinvestment
Plan (the Plan) under which all shareholders whose shares are registered
in their own names, or in the name of UBS Financial Services Inc., or its nominee,
will have all dividends and other distributions on their shares automatically reinvested
in additional shares, unless such shareholders elect to receive cash. Shareholders
who elect to hold their shares in the name of another broker or nominee should contact
such broker or nominee to determine whether, or how, they may participate in the
Plan. The ability of such shareholders to participate in the Plan may change if
their shares are transferred into the name of another broker or nominee.
A shareholder
may elect not to participate in the Plan or may terminate participation in the Plan
at any time without penalty, and shareholders who have previously terminated participation
in the Plan may rejoin it at any time. Changes in elections must be made in writing
to the Funds transfer agent and should include the shareholders name
and address as they appear on that share certificate or in the transfer agents
records. An election to terminate participation in the Plan, until such election
is changed, will be deemed an election by a shareholder to take all subsequent distributions
in cash. An election will be effective only for distributions
Managed High Yield Plus Fund Inc.
General information (unaudited)
declared and having a record date at least
ten days after the date on which the election is received.
The transfer agent
will serve as agent for the shareholders in administering the Plan. After the Fund
declares a dividend or determines to make any other distribution, the transfer agent,
as agent for the participants, receives the cash payment. Whenever the Fund declares
an income dividend or a capital gain distribution (collectively referred to in this
section as dividends) payable either in shares or in cash, non-participants
in the Plan will receive cash and participants in the Plan will receive the equivalent
in shares. The transfer agent will acquire shares for the participants accounts,
depending upon the circumstances described below, either (i) through receipt of
unissued but authorized shares from the Fund (newly issued shares) or
(ii) by purchase of outstanding shares on the open market, on the NYSE or elsewhere
(open-market purchases). If, on the dividend payment date, the net asset
value per share is equal to or less than the market price per share, plus estimated
brokerage commissions (such condition being referred to herein as market premium), the transfer agent will invest the dividend amount in newly issued shares
on behalf of the participants. The number of newly issued shares to be credited
to each participants account will be determined by dividing the dollar amount
of the dividend by the net asset value per share (but in no event less than 95%
of the then current market price per share) on the date the shares were issued.
If, on the dividend payment date, the net asset value per share is greater than
the market value per share, plus estimated brokerage commissions (such condition
being referred to herein as market discount), the transfer agent will
invest the dividend amount in shares acquired on behalf of the participants in open-market
purchases. The number of outstanding shares purchased with each distribution for
a particular shareholder equals the result obtained by dividing the amount of the
distribution payable to that shareholder by the average price per share (including
applicable brokerage commissions) that the transfer agent was able to obtain in
the open market.
In the event of a market discount on the dividend payment date,
the transfer agent will have until the last business day before the next date on
which the shares trade on an ex-dividend basis, but in no event more
than 30 days after the dividend payment date (the last purchase date),
to invest the dividend amount in shares acquired in open-market purchases. It is
contemplated that the Fund will pay monthly income dividends. Therefore, the period
during which open-market purchases can be made will exist only from the payment
date of the dividend through the date
Managed High Yield Plus Fund Inc.
General information (unaudited)
before the next ex-dividend
date, which typically will be approximately ten to fifteen business days. If, before the transfer
agent has completed its open-market purchases, the market price of a share, plus
estimated brokerage commissions, exceeds the net asset value per share, the average
per share purchase price paid by the transfer agent may exceed the Funds net
asset value per share, resulting in the acquisition of fewer shares than if the
dividend had been paid in newly issued shares on the dividend payment date. Because
of the foregoing difficulty with respect to open-market purchases, the Plan provides
that, if the transfer agent is unable to invest the full dividend amount in open-market
purchases during the purchase period or if the market discount shifts to a market
premium during the purchase period, the transfer agent will cease making open-market
purchases and will invest the uninvested portion of the dividend amount in newly
issued shares at the close of business on the earlier of the last purchase date
or the first day during the purchase period on which the net asset value per share
equals or is less than the market price per share, plus estimated brokerage commissions.
The transfer agent will maintain all shareholder accounts in the Plan and will furnish
written confirmations of all transactions in the accounts, including information
needed by shareholders for personal and tax records. Shares in the account of each
Plan participant will be held by the transfer agent in non-certificated form in
the name of the participant, and each shareholders 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 agents open market purchases
of shares in connection with the reinvestment of dividends. The automatic reinvestment
of dividends in shares does not relieve participants of any income tax that may
be payable on such dividends.
Shareholders who participate in the Plan may receive
benefits not available to shareholders who do not participate in the Plan. If the
market price (plus commissions) of the shares is above their net asset value, participants
in the Plan will receive shares at less than they could otherwise purchase them
and will have shares with a cash value greater than the value of any cash dividends
they would have received on their shares. If the market price plus commissions is
below the net asset value, participants will receive dividends in shares with a
net asset value greater than the value of any cash dividends they would have received
on their shares. However, there may be insufficient shares available in the market
to distribute dividends in shares at prices below the net asset value. Also, since
the Fund does not redeem its shares, the price on resale may be more or less than
the net asset value.
Managed High Yield Plus Fund Inc.
General information (unaudited)
Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund reserves the right to amend or terminate the Plan with respect to any dividend or other distribution if notice of the change is sent to Plan participants at least 30 days before the record date for such distribution. The Plan also may be amended or terminated by the transfer agent by at least 30 days written notice to all Plan participants. Additional information regarding the Plan may be obtained from, and all correspondence concerning the Plan should be directed to, the transfer agent at PNC Global Investment Servicing, P.O. Box 43027, Providence, RI 02940-3027. For further information regarding the Plan, you may also contact the transfer agent directly at 1-800-331 1710.
Managed High Yield Plus Fund Inc.
Board approval of investment management and administration agreement (unaudited)
Background
At a meeting of the
board of Managed High Yield Plus Fund Inc. (the Fund) on July 16, 2008,
the members of the board, including the directors who are not interested persons of the Fund (Independent Directors), as defined in the Investment
Company Act of 1940, as amended (the 1940 Act), considered and approved
the continuance of the Investment Management and Administration Agreement of the
Fund with UBS Global Asset Management (Americas) Inc. (UBS Global AM).
In preparing for the meeting, the board members had requested and received extensive
information from UBS Global AM to assist them. The board received and considered
a variety of information about UBS Global AM, as well as the advisory and administrative
arrangements for the Fund.
The Independent Directors discussed the materials
initially provided by management prior to the scheduled board meeting in a session
with their independent legal counsel and requested, and received from management,
supplemental materials to assist them in their consideration of the contracts. The
Independent Directors also met in executive session after managements presentation
was completed to review the disclosure that had been made to them at the meeting.
At all of these sessions the Independent Directors met in session with their independent
legal counsel. The Independent Directors also received a memorandum from their independent
legal counsel discussing the duties of board members in considering approval of
advisory and administration agreements.
In its consideration of the approval
of the Investment Management and Administration Agreement, the board considered
the following factors:
Nature, extent and quality of the services under the
investment management and administration agreement
The board received and
considered information regarding the nature, extent and quality of advisory services
provided to the Fund by UBS Global AM under the Investment Management and Administration
Agreement during the past year. The board also considered the nature, extent and
quality of administrative and other services performed by UBS Global AM and the
resources devoted to, and the record of compliance with, the Funds compliance
policies and procedures. The board noted that it received information at regular
meetings throughout the year regarding the services rendered by UBS Global AM concerning
the management of the Funds affairs and UBS Global AMs role in coordinating
providers of other services to the Fund. The boards evaluation of the services
provided by
Managed High Yield Plus Fund Inc.
Board approval of investment management and administration agreement (unaudited)
UBS Global AM took into account the boards knowledge and familiarity gained as board members of funds in the UBS New
York fund complex, including the scope and quality of UBS Global AMs investment
advisory and other capabilities and the quality of administrative and other services.
The board observed that the scope of services provided by UBS Global AM had expanded
over time as a result of regulatory and other developments, including maintaining
and monitoring its own and the Funds expanded compliance programs.
The
board had available to it the qualifications, backgrounds and responsibilities of
the Funds senior personnel and the portfolio manager primarily responsible
for the day-to-day portfolio management of the Fund and recognized that many of
these persons report to the board regularly and that at each regular meeting the
board receives a detailed report on the Funds performance. The board also
considered, based on its knowledge of UBS Global AM and its affiliates, the financial
resources available to management and its parent organization, UBS AG. In that regard,
the board received extensive financial information regarding UBS Global AM and noted
that it was a wholly owned, indirect subsidiary of one of the largest financial
services firms in the world. It was also noted that UBS Global AM had well over
$100 billion in assets under management and was part of the UBS Global Asset Management
Division, which had well over $700 billion of assets under management worldwide
as of March 2008. The board was also cognizant of, and considered, the regulatory
and litigation actions and investigations occurring in the past year involving UBS
AG, UBS Global AM and certain of their affiliates.
The board concluded that,
overall, it was satisfied with the nature, extent and quality of services provided
(and expected to be provided) to the Fund under the Investment Management and Administration
Agreement, except that the Funds performance would be scrutinized over the
upcoming year for the reasons discussed further below.
Advisory fees and expense
ratios
The board reviewed and considered the contractual management fee
(Contractual Management Fee) payable by the Fund to UBS Global AM in
light of the nature, extent and quality of the management and administrative services
provided by UBS Global AM. The board also reviewed and considered any fee waiver
and/or expense reimbursement arrangements currently in place and considered the
actual fee rate (after taking any waivers and reimbursements into account) (Actual
Managed High Yield Plus Fund Inc.
Board approval of investment management and administration agreement (unaudited)
Management Fee). Additionally, the
board received and considered information comparing the Funds Contractual
Management Fee, Actual Management Fee and overall expenses with those of funds in
a group of funds selected and provided by Lipper, Inc. (Lipper), an
independent provider of investment company data (the Expense Group).
In connection with its consideration of the Funds advisory fees, the board
also received information on UBS Global AMs standard institutional account
fees for accounts of a similar investment type to the Fund. The board noted that,
in general, these fees were lower than the Contractual Management Fee and Actual
Management Fee for the Fund, but also noted managements explanation that comparisons
with such accounts may be of limited relevance given the different structures and
regulatory requirements of funds versus such accounts and the differences in the
levels of services required by funds and such accounts. The board also received
information on fees charged to other funds managed by UBS Global AM.
The comparative
Lipper information showed that the Funds Contractual Management Fee and total
expenses were in the second quintile and its Actual Management Fee was in the third
quintile (with the first quintile representing that fifth of the funds in the Expense
Group with the lowest level of fees or expenses, as applicable, and the fifth quintile
representing that fifth of the funds in the Expense Group with the highest level
of fees or expenses, as applicable).
Taking all of the above into consideration,
the board determined that the management fee was reasonable in light of the nature,
extent and quality of the services provided to the Fund under the Investment Management
and Administration Agreement.
Fund performance
The board received
and considered (a) annualized total return information of the Fund compared to other
funds (the Performance Universe) selected by Lipper over the one-, three-
and five-year and since inception periods ended April 30, 2008 and (b) annualized
performance information for each year ended April 30, since the inception of the
Fund. The board was provided with a description of the methodology Lipper used to
determine the similarity of the Fund with the funds included in its Performance Universe.
The board also noted that it had received information throughout the year at periodic
intervals
Managed High Yield Plus Fund Inc.
Board approval of investment management and administration agreement (unaudited)
with respect to the Funds performance,
including with respect to its benchmark index. The comparative Lipper information
showed that the Funds performance was in the fifth quintile for all comparative
periods (with the first quintile representing that fifth of the funds in the Performance
Universe with the highest performance and the fifth quintile representing that fifth
of the funds in the Performance Universe with the lowest performance). Management
explained that the Funds underperformance over the past year was largely due
to its exposure to lower quality securities, as well as aggressive use of leverage
as compared to its Performance Universe. Management further explained the effect
of the sub-prime mortgage crisis on the Funds portfolio and investment strategy,
noting that the Funds use of leverage amplified the weakness in the Funds
below investment grade (junk bonds) holdings. Management explained that the Funds mid-and long-term performance was impacted by a number of defaulted and/or
illiquid securities that were purchased by the portfolio during a prior portfolio
managers tenure. Based on its review and managements explanation, the
board concluded that the Funds investment performance was satisfactory, but
would be scrutinized over the upcoming year.
Adviser profitability
The
board received and considered a profitability analysis of UBS Global AM and its
affiliates in providing services to the Fund. The board also received profitability
information with respect to the UBS New York fund complex as a whole. UBS Global
AMs profitability was considered not excessive in light of the nature, extent
and quality of the services provided to the Fund.
Economies of scale
The
board received and considered information from management regarding whether UBS
Global AM has achieved economies of scale with respect to the management of the
Fund, whether the Fund has appropriately benefited from any economies of scale,
and whether there is potential for realization of further economies of scale for
the Fund. The board considered whether economies of scale in the provision of services
to the Fund were being passed along to shareholders. The board also considered whether
alternative fee structures (such as breakpoints) would be more appropriate or reasonable
taking into consideration economies of scale or other efficiencies.
In conducting
its review, the board noted that the Funds Contractual Management Fee did
not contain any breakpoints. Further, the board
Managed High Yield Plus Fund Inc.
Board approval of investment management and administration agreement (unaudited)
noted that advisory agreements of closed-end
funds frequently do not contain breakpoints. Management informed the board that
the Fund, as a closed-end investment company, was not expected to materially increase
in size; thus, UBS Global AM would not benefit from economies of scale.
Other
benefits to UBS Global AM
The board considered other benefits received
by UBS Global AM and its affiliates as a result of its relationship with the Fund,
including the opportunity to offer additional products and services to Fund shareholders.
In light of the costs of providing investment management, administrative and
other services to the Fund and UBS Global AMs ongoing commitment to the Fund,
the profits and other ancillary benefits that UBS Global AM and its affiliates received
were considered reasonable.
In light of all of the foregoing, the board approved
the Investment Management and Administration Agreement to continue for another year.
In making its decision, the board identified no single factor as being determinative
in approving the Investment Management and Administration Agreement. The Independent
Directors were advised by separate independent legal counsel throughout the entire
process. The board discussed the proposed continuance of the Investment Management
and Administration Agreement in a private session with their independent legal counsel
at which no representatives of UBS Global AM were present.
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Directors | ||
Richard Q. Armstrong | Meyer Feldberg | |
Chairman | ||
Bernard H. Garil | ||
Alan S. Bernikow | ||
Heather R. Higgins | ||
Richard R. Burt | ||
Principal Officers | ||
Kai R. Sotorp | Thomas Disbrow | |
President | Vice President and Treasurer | |
Mark F. Kemper | ||
Vice President and Secretary |
Investment Manager and Administrator
UBS Global Asset Management (Americas) Inc.
51 West 52nd Street
New York, New
York 10019-6114
This report is sent to the shareholders
of the Fund for their information. It is not a prospectus, circular or representation
intended for use in the purchase or sale of shares of the Fund or of any securities
mentioned in this report.
Notice is hereby given in accordance with Section 23(c)
of the Investment Company Act of 1940 that from time to time the Fund may purchase
shares of its common stock in the open market at market prices.
The financial
information included herein is taken from the records of the Fund without examination
by independent registered public accountants who do not express an opinion thereon.
© 2009 UBS Global Asset Management (Americas) Inc. All rights reserved.
PRESORTED
STANDARD U.S. POSTAGE PAID COMPUTERSHARE |
UBS Global Asset Management (Americas) Inc.
51 West 52nd Street
New York, New York 10019-6114
Item 2. Code of Ethics.
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
Item 3. Audit Committee Financial Expert.
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
Item 4. Principal Accountant Fees and Services.
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
Item 5. Audit Committee of Listed Registrants.
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
Item 6. Investments.
(a) |
Included as
part of the report to shareholders filed under Item 1 of this form.
|
||
(b) |
Not applicable.
|
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
There were no purchases made by or on behalf of the registrant or any affiliated purchaser, as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, of shares of the registrants equity securities that are registered by the Registrant pursuant to Section 12 of the Exchange Act made in the period covered by this report.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrants Board has established a Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee will consider nominees recommended by shareholders if a vacancy occurs among those board members who are not interested persons as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended. In order to recommend a nominee, a shareholder should send a letter to the chairperson of the Nominating and Corporate Governance Committee, Richard R. Burt, care of the Secretary of the registrant at UBS Global Asset Management, UBS Building, One North Wacker Drive, Chicago, IL 60606, and indicate on the envelope Nominating and Corporate Governance Committee. The shareholders letter should state the nominees name and should include the nominees resume or curriculum vitae, and must be accompanied by a written consent of the individual to stand for election if nominated for the Board and to serve if elected by shareholders.
Item 11. Controls and Procedures.
(a) |
The registrants principal executive officer and principal financial officer have concluded
that the registrants disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended) are effective based
on their evaluation of these controls and procedures as of a date within 90 days
of the filing date of this document.
|
||
(b) |
The registrants principal executive officer and principal financial officer are aware of
no changes in the registrants internal control over financial reporting (as
defined in Rule 30a-3(d) under the Investment Company Act of 1940, as amended) that
occurred during the registrants last fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the registrants internal control
over financial reporting.
|
Item 12. Exhibits.
(a) |
(1) Code of
Ethics Form N-CSR disclosure requirement not applicable to this filing of
a semi-annual report.
|
||
(a) |
(2) Certifications
of principal executive officer and principal financial officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit EX-99.CERT.
|
||
(a) |
(3) Written
solicitation to purchase securities under Rule 23c-1 under the Investment Company
Act of 1940 sent or given during the period covered by the report by or on behalf
of the registrant to 10 or more persons The registrant has not engaged in
such a solicitation during the period covered by this report.
|
||
(b) |
Certifications
of principal executive officer and principal financial officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 is attached hereto as Exhibit EX-99.906CERT.
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Managed High Yield Plus Fund Inc.
By: | /s/ Kai R. Sotorp | |
Kai R. Sotorp | ||
President | ||
Date: | January 29, 2009 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Kai R. Sotorp | |
Kai R. Sotorp | ||
President | ||
Date: | January 29, 2009 | |
By: | /s/ Thomas Disbrow | |
Thomas Disbrow | ||
Vice President and Treasurer | ||
Date: | January 29, 2009 |
1 Year Managed High Yield Plus Fund, Inc. Chart |
1 Month Managed High Yield Plus Fund, Inc. Chart |
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