HYF Managed High Yield Plus Fund, Inc.

Managed High Yield Plus Fund Inc. (NYSE: HYF) (the “Fund”) is a closed-end management investment company seeking high income, and secondarily, capital appreciation, primarily through investments in lower- rated, income-producing debt and related equity securities.

Fund Commentary for the fourth quarter of 2014 from UBS Global Asset Management (Americas) Inc. (“UBS Global AM”), the Fund’s investment manager

Market review

The overall US fixed income market moved higher during the fourth quarter. Despite improving growth and the end of the Federal Reserve Board’s (the “Fed”) asset purchase program, intermediate- and long-term yields declined. In contrast, short-term rates increased given expectations for Fed rate hikes in 2015. All told, the yield on the two-year Treasury rose from 0.58% to 0.67%, whereas the yield on the 10-year Treasury fell from 2.52% to 2.17% during the fourth quarter. In its official statement following its last meeting of the year in December, the Fed stated: “Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy.” The overall US bond market, as measured by the Barclays US Aggregate Index, returned 1.79% during the fourth quarter, lifting its 2014 gain to 5.97%.1

Many US spread sectors posted positive total returns during the fourth quarter.2 Among them, long-term investment grade corporate bonds posted the strongest total returns, supported by declining yields over the quarter. In contrast, high yield corporate bonds generated weak results. For the quarter, the BofA Merrill Lynch US High Yield Cash Pay Constrained Index (the “Index”) declined 1.04%.3 From a ratings perspective, BB-rated high yield debt generated the best relative results, as it gained 0.71% for the quarter. Elsewhere B-rated and CCC-rated securities in the Index declined 1.66% and 5.43%, respectively.

Performance review

For the fourth quarter of 2014, the Fund posted a net asset value total return of -2.27% and a market price total return of -7.65%. On a net asset value basis, the Fund underperformed the Index, which, as previously stated, declined 1.04% for the quarter.

The Fund’s exposure to the energy sector was the largest detractor from performance during the quarter. Oil prices started to decline over the summer as the global economic landscape showed signs of slowing, which caused oil demand to weaken. At the same time, oil supply was greater than anticipated, largely due to production from North America. All told, the price of oil fell 46% in 2014. Against this backdrop, the energy sector of the Index declined 10.61% during the fourth quarter and 7.34% in 2014. Elsewhere, the Fund’s exposures to the telecommunications and broadcasting sectors were negative for performance. Finally, the use of leverage was a drag on returns during the period given weak performance from the overall high yield market.

The largest contributor to performance during the quarter was the Fund's allocation to the health care sector. Security selection and having an overweight to this defensive area of the high yield market was helpful. The sector outperformed the Index, as volatility increased during the fourth quarter. The Fund’s underweight to the weak performing metals and mining sector was beneficial for results. Elsewhere, security selection in the services sector contributed to performance.

There were no material changes to the portfolio during the quarter.

Outlook

The US high yield asset class is currently a bifurcated market, with the energy sector trading at elevated spread levels. Within the portfolio, we continue to overweight the energy sector in light of our expectation for supply-driven stability and the eventual recovery of the price of oil. Within energy, we maintain a diverse exposure to many different business models and risk profiles. Beyond oil market fundamentals, we are keeping a careful eye on “falling angels” from the investment grade space (that is, formerly higher rated bonds that were downgraded). Finally, given the fragile state of the high yield sector, large inflows of bond supply would be difficult to manage in the current environment.

Portfolio statistics as of December 31, 20144

  Top ten corporate bonds, including coupon and maturity   Percentage of total portfolio assets SquareTwo Financial Corp., 11.625%, 04/01/2017   1.4 % International Lease Finance Corp., 7.125%, 09/01/2018   1.2   Sabine Pass Liquefaction LLC, 5.625%, 02/01/2021   1.1   First Data Corp., 12.625%, 01/15/2021   1.0   Hecla Mining Co., 6.875%, 05/01/2021   1.0   DISH DBS Corp., 7.875%, 09/01/2019   0.9   Intelsat Jackson Holdings SA, 7.250%, 10/15/2020   0.8   Pacific Drilling SA, 5.375%, 06/01/2020   0.8   Westmoreland Coal Co./Westmoreland Partners

10.750%, 02/01/18

  0.7   Windstream Corp. 7.750%, due 10/01/21   0.7   Top five industries   Percentage of total portfolio assets Energy - exploration & production     7.2 % Media - cable & satellite TV     6.5   Support - services     4.9   Gas distribution     4.4   Consumer/commercial/lease financing     4.4     Credit quality5   Percentage of total portfolio assets BB- or higher     44.1 % B     44.1   CCC+ and lower     7.7   Cash equivalents     3.6   Not Rated     0.5   Total     100.0     Characteristics     Net asset value per share6   $ 2.13   Market price per share6   $ 1.80   Weighted average life   5.59 yrs Weighted average life to maturity   6.74 yrs Duration7   4.39 yrs Duration-leverage adjusted7   6.21 yrs

Leverage8

    29.31 %  

1

 

The Barclays US Aggregate Index is an unmanaged broad-based index designed to measure the US dollar-denominated, investment grade, taxable bond market. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed, asset-backed and commercial mortgage-backed sectors.

2

A spread sector refers to non-government fixed income sectors, such as investment grade or high yield bonds, commercial mortgage-backed securities (CMBS), etc.

3

The BofA Merrill Lynch US High Yield Cash Pay Constrained Index is an unmanaged index of publicly placed nonconvertible, coupon-bearing US dollar-denominated below investment grade corporate debt with a term to maturity of at least one year. The index is market-capitalization weighted, so that larger bond issuers have a greater effect on the index’s 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 the deduction of fees and expenses.

4

The Fund's portfolio is actively managed, and its portfolio composition will vary over time.

5

Credit quality ratings shown in the table are based on those assigned by Standard & Poor’s Financial Services LLC, a part of McGraw-Hill Financial (“S&P”), to individual portfolio holdings. S&P is an independent ratings agency. Credit ratings range from AAA, being the highest, to D, being the lowest based on S&P’s measures; ratings of BBB or higher are considered to be investment grade quality. Unrated securities do not necessarily indicate low quality. Further information regarding S&P’s rating methodology may be found on its website at www.standardandpoors.com. Please note that any references to credit quality made in the commentary preceding the table may reflect ratings based on multiple providers (not just S&P) and thus may not align with the data represented in this table.

6

Net asset value (NAV) and market price will fluctuate.

7

Duration is a measure of price sensitivity of a fixed income investment or portfolio (expressed as % change in price) to a 1 percentage point (i.e., 100 basis points) change in interest rates, accounting for optionality in bonds such as prepayment risk and call/put features. Duration is unadjusted for leverage. Duration-leverage adjusted is estimated by dividing duration by an amount equal to 1 minus the leverage percentage.

8

As a percentage of adjusted assets. Adjusted net assets equals total assets minus liabilities, excluding liabilities for borrowed money.

Any performance information reflects the deduction of the Fund’s fees and expenses, as indicated in its shareholder reports, such as investment advisory and administration fees, custody fees, exchange listing fees, etc. It does not reflect any transaction charges that a shareholder may incur when (s)he buys or sells shares (e.g., a shareholder’s brokerage commissions).

Disclaimers Regarding Fund Commentary - The Fund Commentary is intended to assist shareholders in understanding how the Fund performed during the period noted. The views and opinions were current as of the date of this press release. 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 the Fund and UBS Global AM reserve the right to change 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 Fund’s future investment intent.

Past performance does not predict future performance. The return and value of an investment will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. Any Fund net asset value ("NAV") returns cited in a Fund Commentary assume, for illustration only, that dividends and other distributions, if any, were reinvested at the NAV on the payable dates. Any Fund market price returns cited in a Fund Commentary assume that all dividends and other distributions, if any, were reinvested at prices obtained under the Fund's Dividend Reinvestment Plan. Returns for periods 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 on the sale of Fund shares.

Investing in the Fund entails specific risks, such as interest rate risk, the greater credit risks inherent in investing primarily in lower-rated, higher-yielding bonds as well as the increased risk of using leverage (that is, borrowing money to invest in additional portfolio securities). Further detailed information regarding the Fund, including a discussion of principal objectives, principal investment strategies and principal risks, may be found in the fund overview located at http://www.ubs.com/closedendfundsinfo. You may also request copies of the fund overview by calling the Closed-End Funds Desk at 888-793 8637.

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UBS Global Asset ManagementClosed-End Funds Desk: 888-793 8637ubs.com