Managed High Yield Fund Inc.--Quarterly Commentary.

Business Editors

NEW YORK--(BUSINESS WIRE)--Feb. 29, 2000

Managed High Yield Fund Inc. (NYSE: PHT) is a closed-end management investment company seeking high current income through investments primarily in high yield, high-risk debt securities.

Management Change

Effective February 2000, James Keegan, Senior Vice President and head of the Taxable Credit Group, assumed management responsibility of the Fund.

Commentary

New high-yield supply continued to shrink during the quarter contrary to market expectations for a massive surge in supply. High-yield issuance in 1999 was about $60 billion--from $120 billion in 1998. According to the DLJ Default Study, the high-yield default rate in 1999 was 3.85%, with about 1% in three BB-rated securities and the energy sector--the highest default rate since 1991. The high-yield market, as measured by the CS First Boston High Yield Index, gained 2.1% in the fourth quarter compared to the Fund's 4.9% return based on net asset value.

Portfolio Positioning

The Fund has been overweight in the telecommunications sector for the past two years; this exposure helped its 1999 performance, as the sector was the top performer in 1999. The Fund's top sector remained fixed communications (conventional telephone systems), emphasizing companies that own fiber optic networks, such as Metromedia Fiber. We believe these companies will benefit as the standard for telecommunications service shifts to a combination of Internet access, voice and data transmission. In cable, we favor new entrants that offer integrated voice data and video, such as RCN Corporation and Knology Holdings in the U.S., and United Pan European Communications in Europe.

Outlook

We see the greatest potential in the high end of the single-B sector, where yields of up to 13% are available with what we believe to be less credit risk than CCC-rated bonds. Though we may raise some cash through sales of BB securities, we intend to use the Fund's credit facility as its primary source of cash.

The high yield sector has been in a bear market since August 1998, after Russia devalued the ruble. As of December 1999, the CS First Boston High Yield Index spread to Treasurys was 573 basis points--still above its average of 506 basis points since the end of the last recession in 1992. We believe the Fund is positioned to benefit from any market recovery.

The commentary reflects our views at the time of this writing. These views may change in response to changing circumstances.