<PAGE> 1
---------------------------------------------------------------------
SALOMON BROTHERS
HIGH INCOME FUND INC
SEMI-ANNUAL REPORT
----------------------------------------------
JUNE 30, 1995
---------------------------------------
SALOMON BROTHERS ASSET MANAGEMENT
-----------------------------------
<PAGE> 2
SALOMON BROTHERS HIGH INCOME FUND INC
August 18, 1995
Dear Shareholder:
Net asset value for the Salomon Brothers High Income Fund (the "Fund") increased
to $13.09 per share as of June 30, 1995 from $12.57 per share as of the
beginning of the quarter. Dividends of $0.375 per share in income plus $0.0675
per share in capital gains were paid during the quarter. The investment return
for the period was 7.75%, assuming the reinvestment of dividends in additional
shares of the Fund. The Salomon Brothers High-Yield Bond Index was up 6.14% in
the second quarter.
U.S. high-yield investments accounted for about 74% of total assets during the
quarter, with the balance in emerging markets debt.
HIGH-YIELD BONDS
High-yield bond markets performed fairly well during the quarter. However, the
high-yield market underperformed the Treasury market: the Salomon Brothers
Treasury Index rose 6.21%, slightly exceeding the Salomon Brothers High-Yield
Index which gained 6.14%. Weak U.S. economic data spurred the Treasury rally and
caused skittishness in the high-yield market during the latter part of the
quarter. High-yield investors' concerns that a subpar economy would weaken
credit quality caused spreads between high-yield bonds and U.S. Treasuries to
widen by 25 basis points during the quarter.
The slowing economy also caused cyclical bonds to underperform non-cyclical
bonds by roughly 160 basis points. During the quarter, the Fund increased its
allocation to non-cyclical bonds from roughly 45% to 50%. The transportation,
media and energy sectors turned in the best performances in the latest quarter.
Transportation bonds were helped by improving operations at U.S. airlines while
the media sector was helped by the potential for easing of regulation in the
Telecommunications Bill moving through Congress. Consumer cyclicals turned in
the poorest performance, hurt by a lack of consumer spending and the financial
distress of several retailers and restaurant companies. Performance in the basic
industries sector also lagged due to investor disfavor with cyclical issues.
The Fund's largest industry holdings at quarter end continued to be in consumer
non-cyclical industries. The Fund increased its exposure to both consumer
non-cyclicals and the media sector, and de-emphasized the
industrial/manufacturing sector during the quarter which was consistent with our
view of a slowing economy.
New issue volume reached its highest level since the first quarter of 1994 with
roughly $14.0 billion of offerings being completed. The buoyant new issue market
was helped by the strong Treasury rally, demand from investors who added almost
$2 billion to high-yield oriented mutual funds during the quarter and by the
relatively high cash positions in such mutual funds at the start of the quarter.
EMERGING MARKETS
The emerging debt market was up over 22% for the second quarter of 1995 as
represented by the Salomon Brothers Brady Bond Index. Brady bond prices
rebounded during the quarter due to an improving outlook for sovereign risk and
the calming of panicked sellers who negatively impacted the price action during
the first quarter.
<PAGE> 3
SALOMON BROTHERS HIGH INCOME FUND INC
The Fund's emerging market assets remain positioned in countries we expect will
provide shareholders with superior risk-adjusted returns. Accordingly, as of
June 30, 1995, the Fund's largest holdings, as a percentage of total assets,
were in Brazil (5.3%), Poland (3.9%), Argentina (3.5%), and Morocco (2.1%).
In Brazil, President Cardoso continues to push to accelerate constitutional
reforms. We believe that the newly-elected Cardoso has the political willpower
and correct fiscal discipline to manage Brazil towards its economic potential.
Polish Brady debt increased over 30% during the quarter as the country received
sovereign debt ratings from Standard and Poor's and Moody's. Standard and Poor's
assigned Poland a BB+ rating while Moody's assigned the country an investment
grade rating of Baa3. The Moody's rating is the first investment grade rating
assigned to a country that has gone through the Brady restructuring. It is an
indication of Moody's view of the strength of Poland's economic fundamentals.
Argentina's President, Carlos Menem, was re-elected for a second term on May 14,
winning over 50% of the vote. This election was important as it reaffirms
Argentina's commitment to a continuation of economic reforms in the face of the
current recession, largely caused by the Mexican peso crisis.
The Fund's Moroccan holdings posted positive performance during the quarter but
lagged the overall emerging markets index. The continued drought in Morocco is
likely to contract GDP by approximately 4.2% this year. We believe that efforts
to diversify Morocco's economy away from the agricultural sector are a high
priority for the government but will take time to implement. Morocco has made
significant fundamental economic advances since the last drought in 1992 and
should have little problem working through this recession.
The Fund held its annual meeting of shareholders on April 10, 1995. At the
meeting, shareholders elected each of the nominees proposed for election to the
Fund's Board of Directors and ratified the selection of Price Waterhouse LLP as
the independent accountants of the Fund. The following table provides
information concerning the matters voted on at the meeting:
<TABLE>
<CAPTION>
1. ELECTION OF DIRECTORS
-------------------
<S> <C> <C>
NOMINEES VOTES FOR VOTES AGAINST
----------------------------------------------------
Daniel P. Cronin 3,764,840 68,458
Thomas W. Brock 3,764,939 68,359
<CAPTION>
2. RATIFICATION OF PRICE WATERHOUSE LLP AS THE INDEPENDENT ACCOUNTANTS OF THE FUND
-------------------------------------------------------------------------------
<S> <C> <C> <C>
VOTES FOR VOTES AGAINST VOTES ABSTAINED UNVOTED
-------------------------------------------------------------------------------
3,756,708 31,266 45,323 5
</TABLE>
We encourage you to read the financial statements that follow for further
details about the Fund. In addition, a recorded periodic update reviewing the
performance of the high-yield corporate and sovereign debt markets and the net
asset value and share price of the Fund is available by calling (800) 725-6666.
Sincerely,
/s/ MICHAEL S. HYLAND
---------------------
MICHAEL S. HYLAND
Chairman and President
<PAGE> 4
SALOMON BROTHERS HIGH INCOME FUND INC
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS
June 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
000'S CORPORATE BONDS -- 71.94% VALUE
------------------------------------------------------------------------------------------------------------
<C> <S> <C>
BASIC INDUSTRIES -- 9.08%
$ 750 Berry Plastics, 12.25%, 4/15/04, callable at 106.125 on 4/15/99.......... $ 757,500
1,000 Harris Chemical, Zero Coupon until 1/15/96 (10.25% thereafter),
7/15/01................................................................ 907,500
1,750 Ivex Holdings, Zero Coupon until 3/15/00 (13.25% thereafter), 3/15/05.... 945,000
1,000 Renco Metals Inc., 12.00%, 7/15/00....................................... 1,030,000
1,000 Repap Wisconsin, 9.875%, 5/01/06......................................... 967,500
1,000 Stone Container, 9.875%, 2/01/01......................................... 991,250
------------
5,598,750
------------
CONSUMER CYCLICALS -- 8.40%
1,000 Carrols, 11.50%, 8/15/03................................................. 957,500
1,000 Cole National Group, Inc., 11.25%, 10/01/01, callable at 105.625 on
10/01/98............................................................... 935,000
1,000 Family Restaurants, 9.75%, 2/01/02, callable at 102.79 on 2/01/99........ 650,000
1,000 Flagstar Corp., 10.75%, 9/15/01.......................................... 940,000
1,000 Parisian, 9.875%, 7/15/03................................................ 780,000
1,000 Specialty Retailer, 11.00%, 8/15/03...................................... 920,000
------------
5,182,500
------------
CONSUMER NON-CYCLICALS -- 24.08%
1,000 Bally's Grand, 10.375%, 12/15/03......................................... 975,000
10 Capital Gaming, Zero Coupon, 8/01/95..................................... 10,000
1,000 Comcast Corporation, 9.375%, 5/15/05..................................... 997,500
1,000 Dade International Inc., 13.00%, 2/01/05***.............................. 1,055,000
1,000 Integrated Health Services, 9.625%, 5/31/02***........................... 1,010,000
1,000 Pathmark Stores, 9.625%, 5/01/03......................................... 975,000
1,000 Penn Traffic Co., 9.625%, 4/15/05, callable at 104 on 4/15/98............ 942,500
500 Pharmaceutical Marketing, 6.25%, 2/01/03, callable at 103.25 on
2/01/96***............................................................. 330,000
1,000 Ralph's Grocery, 11.00%, 6/15/05......................................... 962,500
1,000 Selmer Co. Inc., 11.00%, 5/15/05......................................... 975,000
1,500 Showboat Inc., 9.25%, 5/01/08, callable at 102.7 on 5/01/00.............. 1,376,250
1,250 Telex Communications, Inc., 12.00%, 7/15/04.............................. 1,265,625
2,549 Trump Taj Mahal, 11.35%, 11/15/99**...................................... 1,983,407
2,000 William House Regency, Inc., 11.50%, 6/15/05............................. 1,990,000
------------
14,847,782
------------
</TABLE>
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 2
<PAGE> 5
SALOMON BROTHERS HIGH INCOME FUND INC
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (continued)
June 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
000'S CORPORATE BONDS (CONTINUED) VALUE
------------------------------------------------------------------------------------------------------------
<C> <S> <C>
ENERGY -- 4.44%
$3,000 Clark R&M Holdings, Zero Coupon, 2/15/00 callable at 100 on 12/15/98..... $ 1,845,000
1,000 Petroleum Heat & Power, 9.375%, 2/01/06, callable at 104.69 on 2/01/99... 895,000
------------
2,740,000
------------
FINANCIAL -- 1.66%
1,000 Olympic Financial Ltd., 13.00%, 5/01/00.................................. 1,025,000
------------
INDUSTRIAL/MANUFACTURING -- 9.80%
1,150 Foamex, 11.875%, 10/01/04................................................ 1,092,500
1,500 Jordan Industries, 10.375%, 8/01/03...................................... 1,383,750
500 Motor Wheel, 11.50%, 3/01/00............................................. 430,000
1,750 UCAR Global Enterprises, 12.00%, 1/15/05, callable at 104 on 1/15/00..... 1,890,000
1,500 Venture Holdings Trust, 9.75%, 4/01/04, callable at 104.875 on 4/01/99... 1,245,000
------------
6,041,250
------------
MEDIA/TELECOMMUNICATIONS -- 10.19%
1,000 Adelphia Communications, 12.50%, 5/15/02................................. 995,000
1,500 Units In Flight Phone, Zero Coupon until 5/15/98 (14.00% thereafter), 5/15/02,
callable at 107 on 5/15/99***, #....................................... 885,000
1,500 Katz Corporation, 12.75%, 11/15/02....................................... 1,627,500
1,000 New City Communications, 11.375%, 11/01/03............................... 970,000
2,000 Units People's Choice TV Corp., Zero Coupon, 6/01/04##......................... 950,000
1,500 United International Holdings, Zero Coupon, 11/15/99..................... 855,000
------------
6,282,500
------------
TRANSPORTATION -- 4.29%
1,000 Petro PSC Properties, 12.50%, 6/01/02.................................... 1,005,000
2,781 Transtar Holdings, Zero Coupon until 12/15/99 (13.375% thereafter),
12/15/03, callable at 104.458 on 12/15/99.............................. 1,640,790
------------
2,645,790
------------
TOTAL CORPORATE BONDS (cost $45,107,016)................................. 44,363,572
------------
</TABLE>
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 3
<PAGE> 6
SALOMON BROTHERS HIGH INCOME FUND INC
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (continued)
June 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
000'S SOVEREIGN BONDS -- 19.03% VALUE
------------------------------------------------------------------------------------------------------------
<C> <S> <C>
$3,500 Republic of Argentina, FRB, 7.3125%, 3/31/05*............................ $ 2,152,500
4,459 Federal Republic of Brazil, C Bond, 8.00%, 4/15/14**..................... 2,207,224
2,000 Republic of Brazil, "New" New Money, 7.3125%, 4/15/09*................... 1,070,000
500 Republic of Bulgaria, Discount Bond, Series A, 7.5625%, 7/28/24*......... 249,375
2,500 Republic of Bulgaria, FLIRB, Series A, 2.00%, 7/28/12*................... 643,750
2,300 Costa Rica Series A, Principal Bond, 6.25%, 5/21/10...................... 1,196,000
1,000 Republic of Panama, FRN, 7.25%, 5/10/02*................................. 751,250
4,000 Republic of Poland, PDI Bonds, 3.25%, 10/27/14*.......................... 2,400,000
1,750 United Mexican States, Par Bonds, Series B, 6.25%, 12/31/19 (including
1,750,000 rights)...................................................... 1,066,406
------------
TOTAL SOVEREIGN BONDS (cost $12,150,973)................................. 11,736,505
------------
</TABLE>
<TABLE>
<CAPTION>
LOAN PARTICIPATION -- 2.13%
------------------------------------------------------------------------------------------------------------
<C> <S> <C>
2,250 Kingdom of Morocco, Tranche A, 7.375%, 1/01/09*
(Morgan Guaranty Trust Company of New York)+ (cost $1,284,164)......... 1,310,625
------------
PREFERRED STOCK -- 2.03%
------------------------------------------------------------------------------------------------------------
12,896 Shares K-III Communications, Series B, 11.625% (cost $1,000,000)................ 1,250,950
------------
WARRANTS(A) -- .21%
------------------------------------------------------------------------------------------------------------
750 Warrants Berry Plastics (exercise price of $18.797 per share expiring on 4/15/04
for 1.13237 shares of common stock).................................... 9,375
1,000 Warrants Petro PSC Properties (exercise price of $0, expiring on 7/01/97;
exchangeable for $55,380 principal amount of Notes or an equivalent
number of shares)...................................................... 34,000
2,875 Warrants United International Holdings (exercise price of $15 per share expiring
on 11/15/99 for common stock).......................................... 86,250
------------
TOTAL WARRANTS (cost $108,830)........................................... 129,625
------------
REPURCHASE AGREEMENT -- .73%
------------------------------------------------------------------------------------------------------------
453 State Street Bank and Trust Company, 5.90%, cost $453,000, dated 6/30/95,
$453,371 due 7/5/95, (collateralized by $455,000, 6.25% U.S. Treasury
Notes due 8/31/96, valued at $466,375)................................. 453,000
------------
TOTAL INVESTMENTS -- 96.07% (cost $60,103,983)........................... 59,244,277
------------
</TABLE>
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 4
<PAGE> 7
SALOMON BROTHERS HIGH INCOME FUND INC
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (concluded)
June 30, 1995 (unaudited)
<TABLE>
<CAPTION>
VALUE
------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES -- 3.93%.................. $ 2,426,659
------------
NET ASSETS -- 100.00%
(equivalent to $13.09 per share on 4,709,913 common
shares outstanding).................................................. $ 61,670,936
------------
</TABLE>
--------------------------------------------------------------------------------
* Rate shown reflects current rate on instrument with variable rate or step
coupon rate.
** Payment-in-kind security for which part of the interest earned is
capitalized as additional principal.
*** Pursuant to Rule 144A under the Securities Act of 1933, this security can
only be sold to qualified institutional investors.
# Each unit is comprised of a $1,000 par Senior Discount Note due 5/15/02
and a warrant to purchase one share of common stock.
## Each unit is comprised of a $1,000 par Senior Discount Note due 6/01/04
and a warrant to purchase 1.427 shares of common stock.
+ Participation interest was acquired through the financial institution
indicated parenthetically.
(a) Non-income producing security.
FLIRB -- Front-Loaded Interest Reduction Bonds.
FRB -- Floating Rate Bonds.
FRN -- Floating Rate Notes.
PDI -- Past Due Interest.
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 5
<PAGE> 8
SALOMON BROTHERS HIGH INCOME FUND INC
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost -- $60,103,983)................................................... $59,244,277
Cash.......................................................................................... 30,834
Receivable for investments sold............................................................... 1,120,000
Interest receivable........................................................................... 1,361,823
Unamortized organization expenses............................................................. 64,956
Prepaid expenses.............................................................................. 1,756
-----------
Total assets.......................................................................... 61,823,646
-----------
LIABILITIES
Accrued audit and tax return preparation fees................................................. 55,840
Accrued legal fee............................................................................. 39,273
Management fee payable to SBAM (Note 3)....................................................... 35,347
Accrued printing expense...................................................................... 7,026
Accrued custodian fee......................................................................... 6,771
Accrued annual meeting fee.................................................................... 5,091
Accrued directors' fee........................................................................ 1,809
Other accrued expenses........................................................................ 1,553
-----------
Total liabilities..................................................................... 152,710
-----------
NET ASSETS
Common Stock ($.001 par value, authorized 100,000,000;
outstanding 4,709,913 shares)............................................................... 4,710
Additional paid-in capital.................................................................... 65,295,894
Undistributed net investment income........................................................... 223,068
Accumulated net realized loss on investments.................................................. (2,993,030)
Net unrealized depreciation on investments.................................................... (859,706)
-----------
Net assets............................................................................ $61,670,936
-----------
NET ASSET VALUE PER SHARE ($61,670,936 / 4,709,913 shares).................................... $13.09
-----------
</TABLE>
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 6
<PAGE> 9
SALOMON BROTHERS HIGH INCOME FUND INC
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the six months ended June 30, 1995 (unaudited)
<TABLE>
<S> <C> <C>
INCOME
Interest (includes discount accretion of $926,635, net of premium amortization of
$456,472)................................................................................. $ 3,973,022
EXPENSES
Management fee.................................................................. $208,098
Audit and tax return preparation services....................................... 25,340
Legal........................................................................... 23,711
Transfer agent.................................................................. 18,100
Printing........................................................................ 17,376
Directors' fees and expenses.................................................... 14,842
Amortization of deferred organization costs..................................... 12,308
Annual meeting expense.......................................................... 9,774
Listing fee..................................................................... 9,122
Custodian....................................................................... 8,145
Other........................................................................... 8,354 355,170
-------- -----------
Net investment income........................................................... 3,617,852
-----------
NET REALIZED LOSS ON INVESTMENTS............................................................... (2,879,227)
CHANGE IN NET UNREALIZED DEPRECIATION ON INVESTMENTS........................................... 4,096,927
-----------
Net realized loss and change in net unrealized depreciation.................................... 1,217,700
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS..................................................... $ 4,835,552
-----------
</TABLE>
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 7
<PAGE> 10
SALOMON BROTHERS HIGH INCOME FUND INC
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED
1995 DECEMBER
(UNAUDITED) 31, 1994
------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income.................................................. $ 3,617,852 $ 6,488,619
Net realized gain (loss) on investments................................ (2,879,227) 1,167,548
Change in net unrealized appreciation (depreciation)................... 4,096,927 (12,020,441)
----------- -----------
Net increase (decrease) in net assets from operations.................. 4,835,552 (4,364,274)
----------- -----------
DIVIDENDS
From net investment income............................................. (3,520,944) (6,465,962)
From net realized gains................................................ (317,263) (1,797,896)
----------- -----------
Net decrease in net assets from dividends.............................. (3,838,207) (8,263,858)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares issued in reinvestment of dividends
(25,500 and 34,248 shares issued).................................... 329,310 490,196
Additional offering expenses (Note 1).................................. -- (13,000)
----------- -----------
Net increase in net assets from capital share transactions............. 329,310 477,196
----------- -----------
Total increase (decrease) in net assets................................ 1,326,655 (12,150,936)
NET ASSETS
Beginning of period.................................................... 60,344,281 72,495,217
----------- -----------
End of period (includes undistributed net investment income of
$223,068 and $126,160, respectively)................................. $61,670,936 $60,344,281
----------- -----------
</TABLE>
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 8
<PAGE> 11
SALOMON BROTHERS HIGH INCOME FUND INC
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(unaudited)
NOTE 1. ORGANIZATION AND COMMON STOCK OFFERING
Salomon Brothers High Income Fund Inc (the "Fund") was incorporated in Maryland
on September 14, 1992 and is registered as a diversified, closed-end, management
investment company under the Investment Company Act of 1940, as amended.
The Fund had no transactions until January 13, 1993 when it sold 7,169 shares of
its common stock to Salomon Brothers Asset Management Inc ("SBAM") for an
aggregate purchase price of $100,008.
The Fund sold 4,600,000 shares of common stock in its initial public offering at
a price of $15 per share and received proceeds of $63,733,928, after deducting
offering expenditures of $436,072 and underwriting commissions of $4,830,000.
Total underwriting commissions paid to Salomon Brothers Inc amounted to
$202,281.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
(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 and (ii) at the bid price if there were no sales price on such
date. 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. 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
PAGE 9
<PAGE> 12
SALOMON BROTHERS HIGH INCOME FUND INC
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
(unaudited)
investment companies, and to distribute all of its income to its shareholders.
Therefore, no federal income tax or excise tax provision is required.
(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 generally accepted accounting principles.
(e) UNAMORTIZED ORGANIZATION EXPENSES. Organization expenses amounting to
$125,000 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.
(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 at all times during the term of the repurchase agreement to ensure that it
always 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 3. MANAGEMENT FEE AND OTHER TRANSACTIONS
The Fund has retained SBAM, an indirect wholly owned subsidiary of Salomon Inc,
to act as investment manager and administrator of the Fund subject to
supervision by the Board of Directors of the Fund. The management fee for these
services is payable monthly at an annual rate of 0.70% of the Fund's average
weekly net assets.
Certain officers and/or directors of the Fund are also officers and/or directors
of the investment manager and administrator.
The Fund pays each Director not affiliated with SBAM a fee of $5,000 per year,
plus a fee of $700 and reimbursement for travel and out-of-pocket expenses for
each board and committee meeting attended.
NOTE 4. PORTFOLIO ACTIVITY
Purchases and sales of investment securities, other than short-term investments,
for the six months ended June 30, 1995, aggregated $37,313,268 and $39,232,250,
respectively. The federal income tax cost basis of the Fund's investments at
June 30, 1995 was substantially the same as the cost basis for financial
reporting. Gross unrealized appreciation and depreciation amounted
PAGE 10
<PAGE> 13
SALOMON BROTHERS HIGH INCOME FUND INC
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
(unaudited)
to $1,836,049 and $2,695,755, respectively, resulting in net unrealized
depreciation for federal income tax purposes of $859,706.
NOTE 5. 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 6. 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 7. DIVIDENDS SUBSEQUENT TO JUNE 30, 1995
On July 3, 1995, the Board of Directors of the Fund declared a common stock
dividend from net investment income of $0.125 per share payable on July 31, 1995
to shareholders of record on July 13, 1995.
On August 1, 1995, the Board of Directors of the Fund declared a common stock
dividend from net investment income of $0.125 per share payable on August 31,
1995 to shareholders of record on August 11, 1995.
PAGE 11
<PAGE> 14
SALOMON BROTHERS HIGH INCOME FUND INC
-----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD:
<TABLE>
<CAPTION>
SIX MONTHS PERIOD
ENDED YEAR ENDED ENDED
JUNE 30, DECEMBER DECEMBER
1995 31, 31,
(UNAUDITED) 1994 1993*
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period.................. $12.88 $15.59 $13.95
----------- ----------- -----------
Net investment income................................. .77 1.38 1.18
Net gain/(loss) on securities (both realized and
unrealized)......................................... .26 (2.32) 1.94
----------- ----------- -----------
Total from investment operations...................... 1.03 (0.94) 3.12
----------- ----------- -----------
Less distributions
Dividends from net investment income................ (.75) (1.39) (1.16)
Dividends from net realized gains................... (.07) (0.38) (0.23)
----------- ----------- -----------
Total distributions................................... (.82) (1.77) (1.39)
----------- ----------- -----------
Offering costs on issuance of common stock............ -- -- (0.09)
----------- ----------- -----------
Net asset value, end of period........................ $13.09 $12.88 $15.59
========== ========== ==========
Per share market value, end of period................. $13.75 $12.875 $15.875
========== ========== ==========
Total investment return based on market price per
share**............................................. 13.74% (8.04%) 25.10%#
Ratios/supplemental data:
Net assets, end of period............................. $61,670,936 $60,344,281 $72,495,217
Ratio of expenses to average net assets............... 1.19%(a) 1.13% 1.09%(a)
Ratio of net investment income to average net
assets.............................................. 12.08%(a) 9.91% 8.64%(a)
Portfolio turnover rate............................... 63.5% 76.6% 49.6%
</TABLE>
--------------------------------------------------------------------------------
* For the period January 29, 1993 (commencement of investment operations)
through December 31, 1993.
** Dividends are assumed, for purposes of this calculation, to be reinvested at
prices obtained under the Fund's dividend reinvestment plan.
# Return calculated based on beginning of period price of $13.95 (initial
offering price of $15.00 less sales load of $1.05) and end of period market
value of $15.875 per share. The calculated return has not been annualized.
(a) Annualized
See accompanying notes to financial statements.
PAGE 12
<PAGE> 15
SALOMON BROTHERS HIGH INCOME FUND INC
--------------------------------------------------------------------------------
SELECTED QUARTERLY FINANCIAL INFORMATION
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
<TABLE>
<CAPTION>
NET REALIZED GAIN
(LOSS) & CHANGE IN
NET UNREALIZED
NET INVESTMENT APPRECIATION
INCOME (DEPRECIATION)
------------------ ---------------------
QUARTERS ENDED(A) TOTAL PER SHARE TOTAL PER SHARE
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March 31, 1993(b)................................................. $ 855 $ .19 $ 2,012 $ .44
June 30, 1993..................................................... 1,718 .37 2,629 .57
September 30, 1993................................................ 1,498 .32 841 .18
December 31, 1993................................................. 1,434 .30 3,460 .75
March 31, 1994.................................................... 1,589 .34 (5,201) (1.12)
June 30, 1994..................................................... 1,578 .33 (1,684) (.35)
September 30, 1994................................................ 1,620 .35 (302) (.07)
December 31, 1994................................................. 1,702 .36 (3,666) (.78)
March 31, 1995.................................................... 1,829 .39 (1,529) (.33)
June 30, 1995..................................................... 1,789 .38 2,747 .59
</TABLE>
--------------------------------------------------------------------------------
(a) Totals expressed in thousands of dollars except per share amounts.
(b) For the period January 29, 1993 (commencement of investment operations)
through March 31, 1993.
See accompanying notes to financial statements.
PAGE 13
<PAGE> 16
SALOMON BROTHERS HIGH INCOME FUND INC
-----------
DIRECTORS
CHARLES F. BARBER
Consultant; formerly Chairman,
ASARCO Incorporated
DANIEL P. CRONIN
Vice President -- General Counsel,
Pfizer International Inc
ALLAN C. HAMILTON
Consultant, formerly
Vice President and
Treasurer, Exxon Corp.
MICHAEL S. HYLAND
Chairman and President;
President, Salomon Brothers
Asset Management Inc
THOMAS W. BROCK
Chairman and Chief
Executive Officer, Salomon
Brothers Asset Management Inc
---------
OFFICERS
MICHAEL S. HYLAND
Chairman and President
PETER J. WILBY
Executive Vice President
ALAN M. MANDEL
Treasurer
TANA E. TSELEPIS
Secretary
LAURIE A. PITTI
Assistant Treasurer
-----------------------------------------------------
SALOMON BROTHERS HIGH INCOME FUND INC
7 World Trade Center
New York, New York 10048
TELEPHONE
1-800-725-6666
INVESTMENT MANAGER
Salomon Brothers Asset Management Inc
7 World Trade Center
New York, New York 10048
CUSTODIAN
The Chase Manhattan Bank, N.A.
Four Metrotech Center
Brooklyn, New York 11245
DIVIDEND DISBURSING AND TRANSFER AGENT
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
NEW YORK STOCK EXCHANGE SYMBOL
HIF
--------------------------------------------------------------------------------
<PAGE> 17
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
---------------------
