<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
November 30, 1998
Dear Shareholders:
We are pleased to provide this semi-annual report for the Salomon Brothers High
Income Fund II Inc ("Fund") as of October 31, 1998. Included are market
commentary, a schedule of the Fund's investments as of October 31, 1998 and
financial statements for the period ended October 31, 1998. The Fund distributed
income dividends totaling $0.46 per share during this period. The table below
shows the annualized distribution rate and the total return for the period
covered by this report based on the Fund's October 31, 1998, net asset value
("NAV") per share and its New York Stock Exchange ("NYSE") closing price:
Price Annualized
Per Share Distribution Rate Total Return
--------- ----------------- ------------
$12.79 (NAV) 10.79% (11.67)%
$13.063 (NYSE) 10.56% (9.90)%
In comparison, during the same period, the Salomon Smith Barney High Yield
Market Index showed a loss of 5.64%, and the JP Morgan Emerging Markets Bond
Index Plus (EMBI+) showed a loss of 21.34%.
On October 31, 1998, 74% of the Fund's long-term investments were in U.S. high-
yield corporate bonds. The remaining 26% were invested in securities of emerging
market issuers, including both obligations of sovereign governments and
corporate issuers.
U.S. HIGH YIELD MARKET
Just prior to the period ended October 31, 1998, the high-yield market
experienced a surprising resilience to the Asian currency crisis. In the
beginning of the period, however, much of this strength became unhinged, as the
high-yield market was impacted by the distress in world financial markets
ensuing from the Russian crisis.
While July's performance was relatively stable, reflecting the behavior of the
equity market, August and September saw a substantial increase in volatility. A
"flight-to-quality" (increase in investors' need for higher-quality credits)
ensued, with upper-tier companies dramatically outperforming the lower-tier
sector. The high-yield market was also hurt by an outflow of money from mutual
funds and a lack of capital from broker/dealers to support high-yield positions.
In the final month of the period, this difficult trend began to reverse,
following the surprising rate cut by the Federal Reserve Board. The result was
that returns in the high-yield market became decidedly better. Liquidity
improved, spreads to treasuries tightened significantly and funds began to flow
back to the high-yield markets. New issue activity picked up as well, though
issuers were limited to large, well-established names who were willing to price
new issues at a significant discount to existing ones.
Leading industries in the high-yield market during the period were Aerospace,
Banking, Building Products, Cable & Media, Containers, Housing, Restaurants and
Utilities. Sectors that lagged most during the period included Consumer
Products, Energy, Finance, Steel/Metal, Paper & Forest Products,
Pharmaceuticals, Telecommunications and Textiles/Apparel.
The Fund's portfolio was helped the most by its overweightings in Publishing and
Services, and its underweightings in Steel/Metal and Paper & Forest Products.
The Fund was hurt, however, by its underweightings in Housing, Cable & Media and
Utilities.
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
EMERGING DEBT MARKET
During the period ended October 31, 1998, the emerging debt market experienced
an initial period of strength, a period of extreme volatility in the month of
August and a partial recovery towards the end of the period.
Performance was poor in August due to continued fall-out from Asian countries
combined with Russia's economic and political turmoil. Toward the end of the
period, these problems exerted pressure on Latin American credits as investors
reduced their exposure to all emerging market countries. Russia's dramatic
decline during the period was due to a number of factors: 1) the government
forced a restructuring of all domestic debt; 2) the ruble was devalued; 3)
Yeltsin dismissed his Cabinet and reappointed Viktor Chernomyrdin as Prime
Minister; 4) the Duma refused to approve Chernomyrdin. These developments
devastated Russian dollar denominated bond prices (prices declined as much as
25% in a single day). The timing of the debt restructuring and devaluation,
coming less than a month after Russia's latest IMF financing, was a tremendous
shock to the market and caused a wide-spread sell-off across all emerging
markets.
At the end of the period, however, market concerns of global contagion lessened
in the emerging debt market due to a number of positive world events. An
illustration of the recovery in the emerging markets was shown during September,
when the EMBI+ returned 9.78%, the second largest monthly gain since the Index's
inception.
Many of the market-positive developments that occurred during the period were in
its final month, including the Clinton administration and the US Congress
reaching an agreement on additional funding for the International Monetary Fund
("IMF") totaling $17.9 billion. This US funding is crucial if the IMF is to play
a major role in preventing a financial meltdown in Latin America. Subsequent to
the additional funding announcement, the Brazilian government reached an
agreement with the IMF on fiscal targets for the next three years, which lead to
an IMF loan aid package totaling approximately US$42 billion. Also, in a long
anticipated move, Ecuadorian President Mahuad and Peruvian President Fujimori
reached a peace agreement on the border dispute between the two countries. The
agreement will pave the way for billions of dollars in trade and investment for
both countries.
Although performance improved at the end of the period and the worst of the
crisis appears to have passed, the emerging debt market will continue to be
negatively impacted by the global trend of investors reducing their appetite for
risk. Beginning with Asian currency problems in the fall of 1997 and compounded
by the extended Japanese recession and recent weakness in US equity prices,
investors are demanding a higher risk premium for investing in credit sensitive
fixed income assets. This higher risk premium leads to higher borrowing costs
for countries that still have access to the capital markets, and shuts other
countries out of the capital markets completely. Although market sentiment has
certainly improved, we do expect this volatile period in the emerging markets to
continue for the medium term. Therefore, our focus will continue to be on those
credits that have suffered minimally from the global contagion, and/or that face
the smallest financing needs for 1999.
For the period ended October 31, 1998, outperformers in the emerging debt market
were Argentina, Brazil, Bulgaria, Mexico, Morocco, Nigeria, Panama, Peru and
Poland. Underperformers included Ecuador, Russia and Venezuela.
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
* * *
In a continuing effort to provide timely information concerning the Salomon
Brothers High Income Fund II Inc, shareholders may call 1-888-777-0102 (toll
free), Monday through Friday from 8:00 am to 6:00 pm EST, for the Fund's current
net asset value, market price and other information regarding the Fund's
portfolio holdings and allocations. For information concerning your Salomon
Brothers High Income Fund II Inc stock account, please call First Data Investor
Services Group, Inc. at 1-800-331-1710.
All of us at Salomon Brothers Asset Management appreciate the confidence you
have demonstrated in the past and hope to continue to serve you in the future
years.
Sincerely,
/s/ Heath B. McLendon /s/ Peter J. Wilby
Heath B. McLendon Peter J. Wilby
Chairman Executive Vice President
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
SCHEDULE OF INVESTMENTS (unaudited)
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CORPORATE BONDS - 74.4% VALUE
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BASIC INDUSTRIES - 9.1%
$10,000,000 AEI Holding Co. Inc., 10.000% due 11/15/07 (a).................................... $ 9,300,000
Ball Corp.:
1,000,000 7.750% due 8/1/06 (a)............................................................. 1,040,000
5,250,000 8.250% due 8/1/08 (a)............................................................. 5,433,750
10,000,000 Glencore Nickel, 9.000% due 12/1/14............................................... 7,600,000
7,500,000 Huntsman Packaging, 9.125% due 10/1/07............................................ 6,675,000
10,000,000 Millar Western, 9.875% due 5/15/08................................................ 6,050,000
10,000,000 PCI Chemicals Canada Inc., 9.250% due 10/15/07.................................... 9,000,000
9,500,000 Philipp Brothers, 9.875% due 6/1/08 (a)........................................... 8,846,875
7,000,000 Radnor Holdings, 10.000% due 12/1/03.............................................. 6,825,000
Tekni-Plex Inc.:
3,000,000 11.250% due 4/1/07............................................................. 3,090,000
5,500,000 9.250% due 3/1/08.............................................................. 5,417,500
6,000,000 Texas Petrochemical, 11.125% due 7/1/06........................................... 5,677,500
------------
74,955,625
------------
CONSUMER CYCLICALS - 4.6%
6,000,000 Advance Stores, 10.250% due 4/15/08 (a)........................................... 5,700,000
4,000,000 Cole National Group, 8.625% due 8/15/07........................................... 3,720,000
10,000,000 HMH Properties Inc., 7.875% due 8/1/08............................................ 9,700,000
10,000,000 Musicland Group, 9.875% due 3/15/08............................................... 9,112,500
10,000,000 Synthetic Industries, 9.250% due 2/15/07.......................................... 10,000,000
------------
38,232,500
------------
CONSUMER NON-CYCLICALS - 18.5%
12,000,000 AKI Inc., 10.500% due 7/1/08 (a).................................................. 11,430,000
5,000,000 Alaris Medical Systems, Inc., 9.750% due 12/1/06.................................. 4,862,500
2,250,000 American Safety Razor, 9.875% due 8/1/05.......................................... 2,182,500
10,000,000 Ameriserve Food, 10.125% due 7/15/07.............................................. 8,212,500
10,000,000 Derby Cycle Corp., 10.000% due 10/15/08 (a)....................................... 9,225,000
7,500,000 Empress Entertainment, 8.125% due 7/1/06 (a)...................................... 7,443,750
8,500,000 French Fragrance Inc., 10.375% due 5/15/07........................................ 8,797,500
10,000,000 Home Interiors, 10.125% due 6/1/08 (a)............................................ 9,500,000
7,750,000 Horseshoe Gaming, 9.375% due 6/15/07.............................................. 7,440,000
6,000,000 Imperial Holly Corp., 9.750% due 12/15/07......................................... 5,670,000
----------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
</TABLE>
Page 4
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
SCHEDULE OF INVESTMENTS (unaudited) (continued)
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CORPORATE BONDS - 74.4% (CONTINUED) VALUE
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER NON-CYCLICALS - 18.5% (CONTINUED)
$5,000,000 Integrated Health Services, 9.500% due 9/15/07.................................... $ 4,600,000
10,000,000 Iowa Select Farms, 10.750% due 12/1/05 (a)........................................ 8,600,000
5,000,000 Lady Luck Gaming Corp., 11.875% due 3/1/01........................................ 4,962,500
10,000,000 Moll Industries, 10.500% due 7/1/08 (a)........................................... 9,175,000
12,500,000 Pueblo Xtra International, 9.500% due 8/1/03...................................... 12,062,500
11,500,000 Revlon Worldwide, zero coupon due 3/15/01......................................... 6,785,000
10,000,000 SC International Services, 9.250% due 9/1/07...................................... 9,800,000
37,500,000 Sunbeam Corp., zero coupon due 3/25/18 (a)........................................ 4,078,125
Sun International Hotels:
2,165,000 9.000% due 3/15/07.............................................................. 2,240,775
4,500,000 8.625% due 12/15/07............................................................. 4,404,375
7,500,000 Vencor Inc., 9.875% due 5/1/05.................................................... 5,475,000
7,000,000 Windmere-Durable Holdings, 10.000% due 7/31/08.................................... 5,958,750
------------
152,905,775
------------
ENERGY - 4.4%
10,000,000 Canadian Forest Oil Ltd., 8.750% due 9/15/07...................................... 8,925,000
10,000,000 Continental Resources, 10.250% due 8/1/08 (a)..................................... 8,312,500
10,000,000 Dailey International Inc., 9.500% due 8/15/08..................................... 4,800,000
10,000,000 Dawson Product Services, 9.375% due 2/1/07........................................ 9,975,000
10,000,000 TransAmerican Energy, 11.500% due 6/15/02......................................... 4,000,000
------------
36,012,500
------------
FINANCIAL - 2.9%
10,000,000 Morgan Stanley Aircraft Finance, Series 1A, Class D1, 8.700% due 3/15/23 (a)...... 9,200,000
7,500,000 Nationwide Credit, 10.250% due 1/15/08 (a)........................................ 6,956,250
7,500,000 Williams Scotsman Inc., 9.875% due 6/1/07......................................... 7,556,250
------------
23,712,500
------------
HOUSING RELATED - 0.2%
2,000,000 Forest City Enterprises, 8.500% due 3/15/08....................................... 1,942,500
------------
----------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
</TABLE>
Page 5
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
SCHEDULE OF INVESTMENTS (unaudited) (continued)
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CORPORATE BONDS - 74.4% (CONTINUED) VALUE
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL/MANUFACTURING - 9.9%
$10,000,000 Aqua Chemical Inc., 11.250% due 7/1/08 (a)............................................. $ 9,150,000
3,125,000 Breed Technologies, 9.250% due 4/15/08 (a)............................................. 2,500,000
8,500,000 Communication Instruments, 10.000% due 9/15/04......................................... 8,521,250
5,000,000 International Utility, 10.750% due 2/1/08.............................................. 4,325,000
14,475,000 Jordan Industries Inc., zero coupon until 4/1/02 (11.750% thereafter), due 4/1/10...... 9,227,813
10,000,000 Key Plastics Inc., 10.250% due 3/15/07................................................. 9,475,000
8,000,000 Motors & Gears Inc., 10.750% due 11/15/06.............................................. 7,900,000
7,250,000 Neenah Corp., 11.125% due 5/1/07....................................................... 7,340,625
Polymer Group:
6,500,000 9.000% due 7/1/07.................................................................... 6,110,000
1,000,000 8.750% due 3/1/08.................................................................... 940,000
5,000,000 Roller Bearing Co., 9.625% due 6/15/07................................................. 4,550,000
7,750,000 Thermadyne Manufacturing, 9.875% due 6/1/08............................................ 6,994,375
5,000,000 Venture Holdings Trust, 9.500% due 7/1/05.............................................. 4,675,000
------------
81,709,063
------------
MEDIA/TELECOMMUNICATIONS - 18.8%
12,500,000 Adelphia Communications, 9.500% due 2/15/04............................................ 12,859,375
10,000,000 Advanstar Communications, 9.250% due 5/1/08 (a)........................................ 9,350,000
2,000,000 Call Net Enterprises Inc., zero coupon until 8/15/03 (8.940% thereafter), due 8/15/08.. 1,140,000
21,500,000 Century Communications, zero coupon due 1/15/08........................................ 10,158,750
8,000,000 Granite Broadcasting, 10.375% due 5/15/05.............................................. 6,880,000
15,000,000 GST Telecommunications, zero coupon until 5/1/03 (10.500% thereafter), due 5/1/08 (a).. 6,712,500
10,000,000 Hollinger International, 9.250% due 2/1/06............................................. 10,400,000
10,000,000 Intermedia Communications, 8.600% due 6/1/08........................................... 9,550,000
14,000,000 Lin Holdings Corp., zero coupon until 3/1/03 (10.000% thereafter), due 3/1/08.......... 9,047,500
8,500,000 Loews Cineplex, 8.875% due 8/1/08 (a).................................................. 8,245,000
10,000,000 Metronet Communications, zero coupon until 6/15/03 (9.950% thereafter), due 6/15/08.... 5,600,000
Nextel Communications:
9,750,000 Zero coupon until 2/15/99 (9.750% thereafter), due 8/15/04........................... 9,140,625
3,000,000 Zero coupon until 2/15/03 (9.950% thereafter), due 2/15/08........................... 1,635,000
5,000,000 NTL Inc., zero coupon until 2/1/01 (11.500% thereafter), due 2/1/06.................... 3,868,750
8,250,000 Price Communications Wireless, 9.125% due 12/15/06 (a)................................. 8,023,125
10,000,000 R.H. Donnelley, 9.125% due 6/1/08...................................................... 10,000,000
10,000,000 Rogers Communications, 8.875% due 7/15/07.............................................. 9,750,000
10,000,000 Sun Media Corp., 9.500% due 2/15/07.................................................... 10,012,500
---------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
</TABLE>
Page 6
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
SCHEDULE OF INVESTMENTS (unaudited) (continued)
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CORPORATE BONDS - 74.4% (CONTINUED) VALUE
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MEDIA/TELECOMMUNICATIONS - 18.8% (CONTINUED)
$5,000,000 Telewest Communications, 9.625% due 10/1/06............................................... $ 4,900,000
16,500,000 United International Holdings, zero coupon until 2/15/03 (10.750% thereafter), due 2/15/08 7,755,000
------------
155,028,125
------------
SERVICES/OTHER - 3.7%
2,500,000 Allied Waste Industries, zero coupon until 6/1/02 (11.300% thereafter), due 6/1/07........ 1,875,000
7,000,000 American Business Information, 9.500% due 6/15/08 (a)..................................... 6,431,250
10,000,000 Kindercare Learning, 9.500% due 2/15/09................................................... 9,437,500
9,000,000 Marsulex Inc., 9.625% due 7/1/08 (a)...................................................... 8,685,000
Pierce Leahy Corp.:
2,250,000 11.125% due 7/15/06..................................................................... 2,424,375
2,000,000 8.125% due 5/15/08 (a).................................................................. 1,872,500
------------
30,725,625
------------
TECHNOLOGY/ELECTRONICS - 1.2%
10,000,000 Amphenol Corp., 9.875% due 5/15/07........................................................ 9,700,000
------------
TRANSPORTATION - 1.1%
10,000,000 Stena Line, 10.625% due 6/1/08............................................................ 8,950,000
------------
TOTAL CORPORATE BONDS (Cost - $688,074,362)............................................... 613,874,213
------------
----------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
</TABLE>
Page 7
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
SCHEDULE OF INVESTMENTS (unaudited) (continued)
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SOVEREIGN BONDS - 23.0% VALUE
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ARGENTINA - 2.4%
Republic of Argentina:
$2,626,160 BOCON, Pre 4, 5.385% due 9/1/02 (b)............................................. $ 2,173,486
11,755,387 BOCON, Pro 1, 3.048% due 4/1/07 (b)............................................. 6,958,390
4,371,000 FRB, Series L, 6.1875% due 3/13/05 (b).......................................... 3,617,003
3,000,000 Global Bond, 12.142% due 4/10/05................................................ 2,640,000
4,650,000 Global Bond, 11.375% due 1/13/17................................................ 4,510,500
------------
19,899,379
------------
BRAZIL - 2.2%
Federal Republic of Brazil:
8,880,000 EI Bond, Series L, 6.125% due 4/15/06........................................... 5,705,400
13,500,000 FLIRB, Series L, 5.000% due 4/15/09............................................. 6,480,000
9,285,800 Varig Receivables Ltd., 9.600% due 2/10/05...................................... 6,221,486
------------
18,406,886
------------
BULGARIA - 2.4%
15,000,000 Republic of Bulgaria, FLIRB, Series A, 2.500% due 7/28/12 (b)..................... 8,287,500
17,250,000 Republic of Bulgaria, IAB, 6.6875% due 7/28/11 (b)................................ 11,579,063
------------
19,866,563
------------
CROATIA - 1.3%
6,500,000 Croatia Government, Series A, 6.5625% due 7/31/10 (b)............................. 5,102,500
6,785,842 Croatia Government, Series B, 6.5625% due 7/31/06 (b)............................. 5,700,107
------------
10,802,607
------------
COLOMBIA - 1.6%
11,250,000 Republic of Colombia, 7.250% due 2/15/03 (b)...................................... 9,225,000
5,000,000 Republic of Colombia, 8.820% due 8/13/05 (b)...................................... 4,306,250
------------
13,531,250
------------
ECUADOR - 1.7%
Republic of Ecuador, Bearer:
7,425,000 EI Bond, 6.5625% due 12/21/04 (b)............................................... 4,482,844
22,199,636 PDI Bond, 6.625% due 2/27/15 (b)(c)............................................. 9,684,591
------------
14,167,435
------------
----------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
</TABLE>
Page 8
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
SCHEDULE OF INVESTMENTS (unaudited) (continued)
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SOVEREIGN BONDS - 23.0% (CONTINUED) VALUE
-------------------------------------------------------------------------------------------
<S> <C> <C>
MEXICO - 2.7%
United Mexican States, Global Bond:
$4,000,000 9.875% due 11/15/07.................................. $ 3,790,000
18,750,000 11.375% due 9/15/16.................................. 18,750,000
-----------
22,540,000
-----------
PANAMA - 1.2%
13,250,000 Republic of Panama, IRB, 4.000% due 7/17/14 (b)........ 9,705,625
-----------
PERU - 1.6%
Republic of Peru:
6,500,000 FLIRB, 3.250% due 3/7/17 (b)......................... 3,347,500
17,000,000 PDI, 4.000% due 3/7/17 (b)........................... 9,775,000
-----------
13,122,500
-----------
PHILIPPINES - 1.0%
Republic of Philippines:
5,980,000 Series B, 6.5625% due 12/1/09........................ 4,544,800
5,000,000 Series B, 6.500% due 12/1/17......................... 4,050,000
-----------
8,594,800
-----------
RUSSIA - 1.1%
Russia Ministry of Finance, Global Bond:
1,275,000 11.750% due 6/10/03 (a).............................. 318,750
5,275,000 11.000% due 7/24/18.................................. 1,074,781
32,300,000 12.750% due 6/24/28 (a).............................. 7,752,000
280,361 Russia, IAN, 6.625% due 12/15/15 (a)(c)................ 26,985
-----------
9,172,516
-----------
South Korea - 0.9%
2,000,000 Korea Development Bank, Global Bond, 7.900% due 2/1/02. 1,789,800
6,000,000 Republic of Korea, Global Bond, 8.875% due 4/15/08..... 5,550,000
-----------
7,339,800
-----------
-------------------------------------------------------------------------------------------
See notes to financial statements.
</TABLE>
Page 9
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
SCHEDULE OF INVESTMENTS (unaudited) (continued)
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SOVEREIGN BONDS - 23.0% (CONTINUED) VALUE
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
VENEZUELA - 2.9%
$12,666,640 Republic of Venezuela, DCB, Series DL, 6.625% due 12/18/07 (b)................. $ 7,702,901
28,535,580 Republic of Venezuela, FLIRB, Series A, 6.125% due 3/31/07 (b)................. 16,051,264
------------
23,754,165
------------
TOTAL SOVEREIGN BONDS (Cost - $215,452,914).................................... 190,903,526
------------
LOAN PARTICIPATIONS (d) - 2.6%
----------------------------------------------------------------------------------------------------------------
20,600,000 Kingdom of Morocco, Tranche A, 6.5625% due 1/1/09 (J.P. Morgan Securities) (b). 13,596,000
16,650,000 Russia, Principal Loan, 6.625% due 12/15/20 (Chase Manhattan Bank) (b)(e)...... 1,247,294
14,500,000 The People's Democratic Republic of Algeria, Tranche 1, 6.375% due 9/4/06
(Chase Manhattan) (b).......................................................... 6,887,500
------------
TOTAL LOAN PARTICIPATIONS (Cost - $38,122,446)................................. 21,730,794
------------
TOTAL INVESTMENTS - 100% (Cost - $941,649,722*)................................ $826,508,533
--------------------------- ============
</TABLE>
(a) Pursuant to Rule 144A under the Securities Act of 1933, this security
can only be sold to qualified institutional buyers.
(b) Rate shown reflects the current rate on variable rate or step coupon
rate instruments.
(c) Payment-in-kind security for which part of the income earned is paid in
the form of additional principal.
(d) Participation interests were acquired through the financial
institutions indicated parenthetically.
(e) Portion of income earned is capitalized as Russia Interest in Arrears
Notes.
* Aggregate cost for Federal income tax purposes is substantially the
same.
BOCON - Bonos De Consolidacion
DCB - Debt Conversion Bond
EI - Eligible Interest
FLIRB - Front Loaded Interest Reduction Bond
FRB - Floating Rate Bond
IAB - Interest in Arrears Bond
IAN - Interest in Arrears Note
IRB - Interest Reduction Bond
PDI - Past Due Interest
- --------------------------------------------------------------------------------
See notes to financial statements.
Page 10
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
STATEMENT OF ASSETS AND LIABILITIES (unaudited)
October 31, 1998
<TABLE>
ASSETS
<S> <C>
Investments, at value (Cost --- $941,649,722)........................... $ 826,508,533
Cash.................................................................... 42,805
Interest receivable..................................................... 22,593,630
Receivable for investments sold......................................... 8,106,532
Deferred organization costs............................................. 77,782
Prepaid expenses........................................................ 1,860
-------------
Total Assets............................................................ 857,331,142
-------------
LIABILITIES
Payable for investments purchased....................................... 5,088,713
Dividends payable....................................................... 3,006,563
Management fees payable................................................. 691,474
Accrued offering expenses............................................... 341,116
Administration fees payable............................................. 69,147
Accrued organization costs.............................................. 39,700
Accrued expenses........................................................ 295,924
-------------
Total Liabilities....................................................... 9,532,637
-------------
Total Net Assets........................................................ $ 847,798,505
=============
NET ASSETS
Common stock ($0.001 par value, 100,000,000 shares authorized;
66,293,241 shares outstanding)...................................... $ 66,293
Additional paid-in capital.............................................. 992,016,703
Undistributed net investment income..................................... 4,032,094
Accumulated net realized loss on investments............................ (33,175,396)
Net unrealized depreciation on investments.............................. (115,141,189)
-------------
Total Net Assets........................................................ $ 847,798,505
=============
NET ASSET VALUE, PER SHARE ($847,798,505 / 66,293,241 shares)................ $12.79
======
- -------------------------------------------------------------------------------------------------
See notes to financial statements.
</TABLE>
Page 11
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
STATEMENT OF OPERATIONS (unaudited)
For the Period Ended October 31, 1998
<TABLE>
<S> <C> <C>
INCOME
Interest.................................................... $39,053,458
EXPENSES
Management fees (Note 2)...................... $ 3,884,407
Administration fees (Note 2).................. 388,441
Printing...................................... 140,000
Legal......................................... 50,000
Audit......................................... 25,000
Custody....................................... 19,000
Registration.................................. 18,000
Directors..................................... 17,000
Transfer agent................................ 12,500
Amortization of deferred organization costs... 7,218
Other......................................... 106,828
-----------
Total Expenses.............................................. 4,668,394
-------------
Net Investment Income............................................ 34,385,064
-------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments............................ (33,175,396)
Change in net unrealized appreciation on investments........ (115,141,189)
-------------
Net Realized Loss and Change in Net Unrealized Appreciation...... (148,316,585)
-------------
NET DECREASE IN NET ASSETS FROM OPERATIONS....................... $(113,931,521)
=============
- ---------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
Page 12
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
STATEMENT OF CHANGES IN NET ASSETS (unaudited)
For the Period Ended October 31, 1998
<TABLE>
<S> <C>
OPERATIONS
Net investment income....................................................... $ 34,385,064
Net realized loss on investments............................................ (33,175,396)
Change in net unrealized appreciation....................................... (115,141,189)
-------------
Decrease in Net Assets From Operations...................................... (113,931,521)
-------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income....................................................... (30,352,970)
-------------
Decrease in Net Assets From Distributions to Shareholders................... (30,352,970)
-------------
CAPITAL SHARE TRANSACTIONS
Proceeds from initial offering (65,676,667 shares issued, net of
$1,545,000 accrued offering costs)...................................... 983,605,005
Proceeds from shares issued on reinvestment of dividends
(616,574 shares issued)................................................. 8,477,991
-------------
992,082,996
-------------
Increase in Net Assets........................................................... 847,798,505
NET ASSETS
Beginning of period......................................................... --
-------------
END OF PERIOD (includes undistributed net investment income of $4,032,094).. $ 847,798,505
=============
- ------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
Page 13
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
NOTES TO FINANCIAL STATEMENTS (unaudited)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Salomon Brothers High Income Fund II Inc ("Fund") was incorporated in Maryland
and is registered as a diversified, closed-end, management investment company
under the Investment Company Act of 1940, as amended.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in accordance with GAAP requires management
to make estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual amounts could differ from those
estimates.
(a) Securities Valuation. In valuing the Fund's assets, all securities for which
market quotations are readily available are valued (i) at the last sale price
prior to the time of determination if there were a sale on the date of
determination, (ii) at the mean between the last current bid and asked prices if
there were no sales on such date and bid and asked quotations are available, and
(iii) at the bid price if there were no sales price on such date and only bid
quotations are available. Publicly traded foreign government debt securities are
typically traded internationally in the over-the-counter market, and are valued
at the mean between the last current bid and asked price as at the close of
business of that market. However, when the spread between bid and asked price
exceeds five percent of the par value of the security, the security is valued at
the bid price. Securities may also be valued by independent pricing services
which use prices provided by market-makers or estimates of market values
obtained from yield data relating to instruments or securities with similar
characteristics. Short-term investments having a maturity of 60 days or less are
valued at amortized cost which approximates market value. Securities for which
reliable quotations are not readily available and all other securities and
assets are valued at fair value as determined in good faith by, or under
procedures established by, the Board of Directors.
(b) Investment Transactions. Investment transactions are recorded on the trade
date. Interest income is accrued on a daily basis. Market discount or premium on
securities purchased is accreted or amortized, respectively, on an effective
yield basis over the life of the security. The Fund uses the specific
identification method for determining realized gain or loss on investments.
Dividend income is recorded on ex-dividend date.
(c) Federal Income Taxes. The Fund has complied and intends to continue to
comply with the requirements of the Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies, and to distribute all of its
income to its shareholders. Therefore, no federal income tax or excise tax
provision is required.
Page 14
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
(d) Dividends and Distributions. The Fund declares and pays dividends to
shareholders monthly from net investment income. Net realized gains, if any, in
excess of loss carryovers are expected to be distributed annually. Dividends and
distributions to shareholders are recorded on the ex-dividend date. The amount
of dividends and distributions from net investment income and net realized gains
are determined in accordance with federal income tax regulations, which may
differ from GAAP. To the extent these differences are permanent in nature, such
amounts are reclassified within the components of net assets.
(e) Deferred Organization Costs. Organization costs amounting to $85,000 were
incurred in connection with the organization of the Fund. These costs have been
deferred and are being amortized ratably over a five-year period from
commencement of operations in May 1998.
(f) Repurchase Agreements. When entering into repurchase agreements, it is the
Fund's policy to take possession, through its custodian, of the underlying
collateral and to monitor its value at the time the arrangement is entered into
and during the term of the repurchase agreement to ensure that it equals or
exceeds the repurchase price. In the event of default of the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. Under certain circumstances, in the
event of default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral may be subject to legal proceedings.
NOTE 2. MANAGEMENT FEE AND OTHER TRANSACTIONS
Salomon Brothers Asset Management Inc, a wholly-owned subsidiary of Salomon
Smith Barney Holdings ("SSBH"), acts as investment manager ("Investment
Manager") to the Fund. The Investment Manager is responsible on a day-to-day
basis for the management of the Fund's portfolio in accordance with the Fund's
investment objectives and policies and for making decisions to buy, sell or hold
particular securities of the Fund. The management fee for these services is
payable monthly at an annual rate of 1.00% of the Fund's average weekly net
assets plus the proceeds of any outstanding borrowings used for leverage.
Mutual Management Corp., ("MMC"), another subsidiary of SSBH, acts as the Fund's
administrator ("Administrator") for which the Fund pays a monthly fee at an
annual rate of 0.10% of the value of the Fund's average weekly net assets plus
the proceeds of any outstanding borrowings used for leverage. The administrator
performs certain administrative services necessary for the operation of the
Fund.
During periods in which the Fund is utilizing financial leverage, the fees which
are payable to the Investment Manager and Administrator as a percentage of the
Fund's assets will be higher than if the Fund did not utilize a leveraged
capital structure because the fees are calculated as a percentage of the Fund's
assets, including those purchased with leverage.
Certain officers and/or directors of the Fund are also officers and/or directors
of the investment manager.
Page 15
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
NOTE 3. PORTFOLIO ACTIVITY
Purchases and sales of investment securities, other than short-term investments,
for the period ended October 31, 1998, aggregated $1,174,675,600 and
$203,271,840, respectively. The Federal income tax cost basis of the Fund's
investments at October 31, 1998 was substantially the same as the cost basis for
financial reporting. Gross unrealized appreciation and depreciation amounted to
$5,171,058 and $120,312,247, respectively, resulting in net unrealized
depreciation for Federal income tax purposes of $115,141,189.
NOTE 4. LOAN PARTICIPATIONS
The Fund invests in fixed and floating rate loans arranged through private
negotiations between a foreign sovereign entity and one or more financial
institutions. The Fund's investment in any such loan may be in the form of a
participation in or an assignment of the loan.
In connection with purchasing participations, the Fund generally will have no
right to enforce compliance by the borrower with the terms of the loan agreement
relating to the loan, nor any rights of set-off against the borrower, and the
Fund may not benefit directly from any collateral supporting the loan in which
it has purchased the participation. As a result, the Fund will assume the credit
risk of both the borrower and the lender that is selling the participation. In
the event of the insolvency of the lender selling the participation, the Fund
may be treated as a general creditor of the lender and may not benefit from any
set-off between the lender and the borrower.
NOTE 5. CREDIT RISK
The yields of emerging markets debt obligations and high-yield corporate debt
obligations reflect, among other things, perceived credit risk. The Fund's
investment in securities rated below investment grade typically involve risks
not associated with higher rated securities including, among others, overall
greater risk of timely and ultimate payment of interest and principal, greater
market price volatility and less liquid secondary market trading. The
consequences of political, social, economic or diplomatic changes may have
disruptive effects on the market prices of investments held by the Fund.
NOTE 6. DIVIDENDS SUBSEQUENT TO OCTOBER 31, 1998
The Board of Directors of the Fund declared a common stock dividend from net
investment income of $0.115 per share for the months of November and December
1998 and January 1999, payable on November 27, 1998, December 24, 1998 and
January 29, 1999 to shareholders of record on November 17, 1998, December 15,
1998 and January 12, 1999, respectively.
Page 16
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
FINANCIAL HIGHLIGHTS
Data for a share of capital stock outstanding throughout the period:
1998(1)
- ------------------------------------------------------------------------
Net asset value, beginning of period........................ $ 15.00
--------
Net investment income....................................... 0.52
Net realized and unrealized loss on securities.............. (2.25)
--------
Total from operations....................................... (1.73)
--------
Offering costs on issuance of common stock.................. (0.02)
--------
Less distributions
From net investment income............................. (0.46)
--------
Net asset value, end of period.............................. $ 12.79
========
Per share market value, end of period....................... $ 13.063
========
Total return, based on market price per share*.............. (9.90)%++
Total return, based on net asset value per share............ (11.67)%++
Ratios to average net assets:
Operating expenses..................................... 1.20%+
Net investment income.................................. 8.85%+
Net assets, end of period (000s)............................ $847,799
Portfolio turnover rate..................................... 28%
- --------------------------------------------------------------------------------
(1) For the period May 28, 1998 (commencement of investment operations)
through October 31, 1998 (unaudited).
* For purposes of this calculation, dividends are assumed to be
reinvested at prices obtained under the Fund's dividend reinvestment
plan and the broker commission paid to purchase or sell a share is
excluded.
++ Total return is not annualized, as it may not be representative of the
total return of the year.
+ Annualized.
Page 17
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
SELECTED QUARTERLY FINANCIAL INFORMATION (unaudited)
Summary of quarterly results of operations:
<TABLE>
<CAPTION>
Net Realized (Loss)
& Change in
Net Unrealized
Net Investment Appreciation
Income (Depreciation)
------------------------- ---------------------------
Quarters Ended(1) Total Per Share Total Per Share
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
July 31, 1998 (2) $11,896 $0.18 $ (9,730) $(0.15)
October 31, 1998 22,489 0.34 (138,586) (2.10)
</TABLE>
- ----------
(1) Totals expressed in thousands of dollars except per share amounts.
(2) For the period May 28, 1998 (commencement of investment operations)
through July 31, 1998.
OTHER INFORMATION (unaudited)
Year 2000. The investment management services provided to the Fund by the
Investment Manager depend in large part on the smooth functioning of its
computer systems. Many computer software systems in use today cannot recognize
the year 2000, but revert to 1900 or some other date, due to the manner in which
the dates were encoded or calculated. The capability of these systems to
recognize the year 2000 could have a negative impact on the Investment Manager's
provision of investment management services, including handling of securities
trades, pricing and account services. The Investment Manager has advised the
Fund that it has been reviewing all of their computer systems and actively
working on necessary changes to its systems to prepare for the year 2000 and
expects that given the extensive testing which it is undertaking its systems
will be year 2000 compliant before such date. In addition, the Investment
Manager has been advised by certain of the Fund's service providers that they
are also in the process of modifying their systems with the same goal. There
can, however, be no assurance that the Investment Manager or any other service
provider will be successful in achieving year 2000 compliance, or that
interaction with other non-complying computer systems will not impair services
to the Fund at that time.
Page 18
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
DIVIDEND REINVESTMENT PLAN (unaudited)
Pursuant to certain rules of the Securities and Exchange Commission the
following additional disclosure is provided.
Each shareholder purchasing shares of common stock ("Shares") of Salomon
Brothers High Income Fund II Inc. ("Fund") will be deemed to have elected to be
a participant in the Dividend Reinvestment Plan ("Plan"), unless the shareholder
specifically elects in writing (addressed to the Agent at the address below or
to any nominee who holds Shares for the shareholder in its name) to receive all
income dividends and distributions of capital gains in cash, paid by check,
mailed directly to the record holder by or under the direction of First Data
Investor Services Group, Inc. as the Fund's dividend-paying agent ("Agent"). A
shareholder whose Shares are held in the name of a broker or nominee who does
not provide an automatic reinvestment service may be required to take such
Shares out of "street name" and register such Shares in the shareholder's name
in order to participate, otherwise dividends and distributions will be paid in
cash to such shareholder by the broker or nominee. Each participant in the Plan
is referred to herein as a "Participant." The Agent will act as Agent for each
Participant, and will open accounts for each Participant under the Plan in the
same name as their Shares are registered.
Unless the Fund declares a dividend or distribution payable only in the form of
cash, the Agent will apply all dividends and distributions in the manner set
forth below.
If, on the determination date (as defined below), the market price per Share
equals or exceeds the net asset value per Share on that date (such condition, a
"market premium"), the Agent will receive the dividend or distribution in newly
issued Shares of the Fund on behalf of Participants. If, on the determination
date, the net asset value per Share exceeds the market price per Share (such
condition, a "market discount"), the Agent will purchase Shares in the open
market. The determination date will be the fourth New York Stock Exchange
trading day (a New York Stock Exchange trading day being referred to herein as a
"Trading Day") preceding the payment date for the dividend or distribution. For
purposes herein, "market price" will mean the average of the highest and lowest
prices at which the Shares sell on the New York Stock Exchange on the particular
date, or if there is no sale on that date, the average of the closing bid and
asked quotations.
Purchases made by the Agent will be made as soon as practicable commencing on
the Trading Day following the determination date and terminating no later than
30 days after the dividend or distribution payment date except where temporary
curtailment or suspension of purchase is necessary to comply with applicable
provisions of federal securities law; provided, however, that such purchases
will, in any event, terminate on the Trading Day prior to the "ex-dividend" date
next succeeding the dividend or distribution payment date.
Page 19
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
DIVIDEND REINVESTMENT PLAN (unaudited) (continued)
If (i) the Agent has not invested the full dividend amount in open market
purchases by the date specified at the bottom of the prior page as the date on
which such purchases must terminate or (ii) a market discount shifts to a market
premium during the purchase period, then the Agent will cease making open market
purchases and will receive the uninvested portion of the dividend amount in
newly issued Shares (x) in the case of (i) above, at the close of business on
the date the Agent is required to terminate making open market purchases as
specified at the bottom of the prior page or (y) in the case of (ii) above, at
the close of business on the date such shift occurs; but in no event prior to
the payment date for the dividend or distribution.
In the event that all or part of a dividend or distribution amount is to be paid
in newly issued Shares, such Shares will be issued to Participants in accordance
with the following formula: (i) if, on the valuation date, the net asset value
per share is less than or equal to the market price per Share, then the newly
issued Shares will be valued at net asset value per Share on the valuation date
provided, however, that if the net asset value is less than 95% of the market
price on the valuation date, then such Shares will be issued at 95% of the
market price and (ii) if, on the valuation date, the net asset value per share
is greater than the market price per Share, then the newly issued Shares will be
issued at the market price on the valuation date. The valuation date will be the
dividend or distribution payment date, except that with respect to Shares issued
pursuant to the paragraph above, the valuation date will be the date such Shares
are issued. If a date that would otherwise be a valuation date is not a Trading
Day, the valuation date will be the next preceding Trading Day.
The open market purchases provided for above may be made on any securities
exchange on which the Shares of the Fund are traded, in the over-the-counter
market or in negotiated transactions, and may be on such terms as to price,
delivery and otherwise as the Agent shall determine. Funds held by the Agent
uninvested will not bear interest, and it is understood that, in any event, the
Agent shall have no liability in connection with any inability to purchase
Shares within the time periods herein provided, or with the timing of any
purchases effected. The Agent shall have no responsibility as to the value of
the Shares acquired for the Participant's account. The Agent may commingle
amounts of all Participants to be used for open market purchases of Shares and
the price per Share allocable to each Participant in connection with such
purchases shall be the average price (including brokerage commissions) of all
Shares purchased by the Agent.
The Agent will maintain all Participant accounts in the Plan and will furnish
written confirmations of all transactions in each account, including information
needed by Participants for personal and tax records. The Agent will hold Shares
acquired pursuant to the Plan in noncertificated form in the Participant's name
or that of its nominee, and each Participant's
Page 20
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
DIVIDEND REINVESTMENT PLAN (unaudited) (continued)
proxy will include those Shares purchased pursuant to the Plan. The Agent will
forward to Participants any proxy solicitation material and will vote any Shares
so held for Participants only in accordance with the proxy returned by
Participants to the Fund. Upon written request, the Agent will deliver to
Participants, without charge, a certificate or certificates for the full Shares.
The Agent will confirm to Participants each acquisition made for their
respective accounts as soon as practicable but not later than 60 days after the
date thereof. Although Participants may from time to time have an undivided
fractional interest (computed to three decimal places) in a Share of the Fund,
no certificates for fractional shares will be issued. Dividends and
distributions on fractional shares will be credited to each Participant's
account. In the event of termination of a Participant's account under the Plan,
the Agent will adjust for any such undivided fractional interest in cash at the
market value of the Fund's Shares at the time of termination less the pro rata
expense of any sale required to make such an adjustment.
Any share dividends or split shares distributed by the Fund on Shares held by
the Agent for Participants will be credited to their respective accounts. In the
event that the Fund makes available to Participants rights to purchase
additional Shares or other securities, the Shares held for Participants under
the Plan will be added to other Shares held by the Participants in calculating
the number of rights to be issued to Participants.
The Agent's service fee for handling capital gains distributions or income
dividends will be paid by the Fund. Participants will be charged a pro rata
share of brokerage commissions on all open market purchases.
Participants may terminate their accounts under the Plan by notifying the Agent
in writing or by calling 1-800-331-1710. Such termination will be effective
immediately if notice is received by the Agent not less than ten days prior to
any dividend or distribution record date; otherwise such termination will be
effective on the first Trading Day after the payment due for such dividend or
distribution with respect to any subsequent dividend or distribution. The Plan
may be amended or terminated by the Fund as applied to any dividend or capital
gains distribution paid subsequent to written notice of the change or
termination sent to Participants at least 30 days prior to the record date for
the dividend or capital gains distribution. The Plan may be amended or
terminated by the Agent, with the Fund's prior written consent, on at least 30
days' written notice to Plan Participants. Notwithstanding the preceding two
sentences, the Agent or the Fund may amend or supplement the Plan at any time or
times when necessary or appropriate to comply with applicable law or rules or
policies of the Securities and Exchange Commission or any other regulatory
authority. Upon any termination, the Agent will cause a certificate or
certificates for the full Shares held by each Participant under the Plan and
cash adjustment for any fraction to be delivered to each Participant without
charge. If the Participant elects by notice
Page 21
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
DIVIDEND REINVESTMENT PLAN (unaudited) (continued)
to the Agent in writing in advance of such termination to have the Agent sell
part or all of a Participant's Shares and remit the proceeds to Participant, the
Agent is authorized to deduct a $2.50 fee plus brokerage commission for this
transaction from the proceeds.
Any amendment or supplement shall be deemed to be accepted by each Participant
unless, prior to the effective date thereof, the Agent receives written notice
of the termination of the Participant's account under the Plan. Any such
amendment may include an appointment by the Agent in its place and stead of a
successor Agent under these terms and conditions, with full power and authority
to perform all or any of the acts to be performed by the Agent under these terms
and conditions. Upon any such appointment of an Agent for the purpose of
receiving dividends and distributions, the Fund will be authorized to pay to
such successor Agent, for each Participant's account, all dividends and
distributions payable on Shares of the Fund held in each Participant's name or
under the Plan for retention or application by such successor Agent as provided
in these terms and conditions.
In the case of Participants, such as banks, broker-dealers or other nominees,
which hold Shares for others who are beneficial owners ("Nominee Holders"), the
Agent will administer the Plan on the basis of the number of Shares certified
from time to time by each Nominee Holder as representing the total amount
registered in the Nominee Holder's name and held for the account of beneficial
owners who are to participate in the Plan.
The Agent shall at all times act in good faith and use its best efforts within
reasonable limits to insure the accuracy of all services performed under this
Agreement and to comply with applicable law, but assumes no responsibility and
shall not be liable for loss or damage due to errors unless such error is caused
by its negligence, bad faith, or willful misconduct or that of its employees.
All correspondence concerning the Plan should be directed to the Agent at P.O.
Box 8030, Boston, Massachusetts 02266-8030.
ADDITIONAL SHAREHOLDER INFORMATION (unaudited)
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that from time to time the Fund may purchase,
at market prices, shares of its common stock in the open market.
Page 22
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND II INC
Directors
Charles F. Barber
Consultant; formerly Chairman,
ASARCO Incorporated
Daniel P. Cronin
Vice President -- General Counsel,
Pfizer International Inc
Heath B. McLendon
Managing Director, Salomon Smith Barney Inc.;
President and Director, Mutual Management Corp. and Travelers Investment
Advisors, Inc.;
Chairman, Smith Barney Strategy Advisors Inc.
Riordan Roett
Professor and Director,
Latin American Studies Program,
Paul H. Nitze School of Advanced
International Studies,
Johns Hopkins University
Jeswald W. Salacuse
Henry J. Braker Professor of
Commercial Law, and formerly Dean,
The Fletcher School of Law & Diplomacy
Tufts University
OFFICERS
Heath B. McLendon
Chairman and President
Lewis E. Daidone
Executive Vice President and Treasurer
Maureen O'Callaghan
Executive Vice President
James E. Craige
Executive Vice President
Thomas K. Flanagan
Executive Vice President
Beth A. Semmel
Executive Vice President
Peter J. Wilby
Executive Vice President
Anthony Pace
Assistant Controller
SALOMON BROTHERS HIGH INCOME FUND II INC
7 World Trade Center
New York, New York 10048
Telephone 1-888-777-0102
Investment Manager
Salomon Brothers Asset Management Inc
7 World Trade Center
New York, New York 10048
Custodian
PNC Bank, N.A.
17th and Chestnut Streets
Philadelphia, PA 19103
Dividend Disbursing and Transfer Agent
First Data Investor Services Group, Inc.
P.O. Box 8030
Boston, MA 02266-8030
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
New York Stock Exchange Symbol
HIX
Page 23
<PAGE>
SALOMON BROTHERS
HIGH INCOME FUNDS II INC
SEMI-ANNUAL REPORT
OCTOBER 31, 1998
- -------------------------------------------------------
SALOMON BROTHERS ASSET MANAGEMENT
-------------------------------------------------------
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
----------------
BULK RATE
U.S. POSTAGE
PAID
STATEN ISLAND, NY
PERMIT NO.169
-----------------
