<PAGE> 1
SALOMON BROTHERS HIGH INCOME FUND INC
November 17, 1995
Dear Shareholder:
Net asset value for the Salomon Brothers High Income Fund (the "Fund") rose to
$13.28 per share as of September 30, 1995 from $13.09 at the beginning of the
quarter. Dividends of $0.375 per share were paid during the quarter. The net
asset value return for the period, assuming reinvestment of dividends in
additional shares of the Fund, was 4.38% compared with an increase of 3.01% in
the Salomon Brothers High-Yield Bond Index.
High-yield corporate bonds accounted for 69% of the Fund's total assets at the
end of the quarter and emerging markets sovereign debt securities accounted for
21% of total assets.
HIGH-YIELD BONDS
The market for high-yield bonds was strong in the latest quarter: the 3.01% gain
in the Salomon Brothers High-Yield Bond Index compares with a 1.68% advance for
the Salomon Brothers Treasury Index. Weak second quarter economic data caused
the Federal Reserve to cut the discount rate by 25 basis points. Lower rates
prompted investors to anticipate economic strengthening which produced some
narrowing in spreads between high-yield and Treasury bonds by mid-summer. By the
end of the quarter, however, market skittishness over a heavy financing calendar
in the fourth quarter brought yield spreads close to where they were at the
start of the period.
The transportation and media sectors continued to lead the market in the
September quarter. Fundamentals for airline companies have shown dramatic
improvement, reflecting strong pricing and utilization trends. Rail companies
have also been strong performers. The media sector is being driven by growing
acceptance and demand for new telecommunications technology. This sector has
also been boosted by investor optimism about the prospects for a bill, now
before Congress, that would liberalize regulation of the telecommunications
industry.
The consumer sector performed poorly in the quarter. Consumers are burdened with
high debt levels, and they are cautious in their approach to spending. Retailers
enjoy little pricing flexibility in this environment.
CURRENT HOLDINGS
We continue to steer the portfolio away from consumer cyclical industries: these
holdings were pared from 8.4% at the beginning of the quarter to 6.7% of total
assets at the end of the quarter. Consumer non-cyclicals, 28.1% of total assets
on September 30, have received greater emphasis. Media and telecommunications
companies accounted for 12.0% of total assets at quarter end. We are emphasizing
companies with strong financial fundamentals in the basic industries sector
(8.8% of total assets), given our forecast of a slowdown in the U.S. economy.
<PAGE> 2
SALOMON BROTHERS HIGH INCOME FUND INC
High-yield financings totaled almost $10 billion in the September quarter,
marking a slowdown from the $14 billion total for the prior period. High-yield
mutual funds saw inflows increase slightly in the quarter to $2.3 billion from
$2.0 billion, which helped absorb some of the new financing.
EMERGING MARKETS
In the latest quarter, the Salomon Brothers Brady Bond Index advanced 6.5%, down
from the 22% jump in the second quarter but still significantly above
Treasuries. Performance in the latest quarter was driven by Brazil, which was up
by 11.08%. Investments in Brazil, the Fund's largest holding, accounted for 5.6%
of total assets at quarter end. The outlook for Brazil appears good based on
ongoing constitutional reforms, a stable currency and progress against
inflation.
The market for Argentine debt has been volatile. Investors are concerned about
the possibility that Finance Minister Domingo Cavallo, who is seen as the
principal architect of economic reform, will leave the administration.
Investments in Argentina accounted for 3.4% of total assets at the end of the
quarter.
News from Mexico (1.6% of total assets on September 30) has been discouraging.
It now appears that any economic rebound in Mexico will not occur before 1996 at
the earliest.
We encourage you to read the financial statements that follow for further
details about the Fund. 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> 3
SALOMON BROTHERS HIGH INCOME FUND INC
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS
September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) CORPORATE BONDS -- 71.63% VALUE
------------------------------------------------------------------------------------------------------------
<C> <S> <C>
BASIC INDUSTRIES -- 9.11%
$ 750 Berry Plastics, 12.25%, 4/15/04.......................................... $ 787,500
1,000 Crown Paper Company, 11.00%, 9/01/05..................................... 985,000
1,000 Harris Chemical, Zero Coupon until 1/15/96 (10.25% thereafter),
7/15/01................................................................ 885,000
1,750 Ivex Holdings, Zero Coupon until 3/15/00 (13.25% thereafter), 3/15/05.... 1,015,000
1,000 Renco Metals Inc., 12.00%, 7/15/00....................................... 1,075,000
1,000 Repap Wisconsin, 9.875%, 5/01/06......................................... 960,000
------------
5,707,500
------------
CONSUMER CYCLICALS -- 6.97%
1,000 Carrols, 11.50%, 8/15/03................................................. 990,000
1,000 Cole National Group, Inc., 11.25%, 10/01/01.............................. 990,000
1,000 Family Restaurants, 9.75%, 2/01/02....................................... 510,000
1,000 Flagstar Corp., 10.75%, 9/15/01.......................................... 940,000
1,000 Specialty Retailer, 11.00%, 8/15/03...................................... 940,000
------------
4,370,000
------------
CONSUMER NON-CYCLICALS -- 29.18%
1,000 Bally's Grand, 10.375%, 12/15/03......................................... 985,000
1,000 Borg-Warner Security Corp., 9.125%, 5/01/03.............................. 820,000
1,000 Dade International Inc., 13.00%, 2/01/05................................. 1,067,500
1,000 Herff Jones, Inc., 11.00%, 8/15/05(A).................................... 1,025,000
2,000 International Semi-Tech, Zero Coupon until 8/15/00
(11.50% thereafter), 8/15/03........................................... 1,035,000
1,500 Mohegan Tribal Gaming, 13.50%, 11/15/02.................................. 1,556,250
1,000 Pathmark Stores, 9.625%, 5/01/03......................................... 985,000
1,000 Penn Traffic Co., 9.625%, 4/15/05........................................ 810,000
1,000 Ralph's Grocery, 11.00%, 6/15/05......................................... 935,000
1,000 Revlon Worldwide, Zero Coupon, 3/15/98................................... 731,250
1,000 Samsonite Corp., 11.125%, 7/15/05(A)..................................... 970,000
1,000 Selmer Co. Inc., 11.00%, 5/15/05(A)...................................... 970,000
1,000 Specialty Foods, 11.125%, 10/01/02....................................... 980,000
1,250 Telex Communications, Inc., 12.00%, 7/15/04.............................. 1,290,625
2,549 Trump Taj Mahal, 11.35%, 11/15/99**...................................... 2,153,259
2,000 William House Regency, Inc., 11.50%, 6/15/05............................. 1,980,000
------------
18,293,884
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 1
<PAGE> 4
SALOMON BROTHERS HIGH INCOME FUND INC
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (continued)
September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) CORPORATE BONDS (CONTINUED) VALUE
------------------------------------------------------------------------------------------------------------
<C> <S> <C>
ENERGY -- 3.03%
$3,000 Clark R&M Holdings, Zero Coupon, 2/15/00................................. $ 1,897,500
------------
INDUSTRIAL/MANUFACTURING -- 9.31%
1,150 Foamex, 11.875%, 10/01/04................................................ 1,127,000
1,500 Jordan Industries, 10.375%, 8/01/03...................................... 1,402,500
500 Motor Wheel, 11.50%, 3/01/00............................................. 453,750
1,000 Terex Corporation, 13.75%, 5/15/02....................................... 825,000
670 UCAR Global Enterprises, 12.00%, 1/15/05................................. 747,050
1,500 Venture Holdings Trust, 9.75%, 4/01/04................................... 1,278,750
------------
5,834,050
------------
MEDIA/TELECOMMUNICATIONS -- 12.44%
1,000 Adelphia Communications, 12.50%, 5/15/02................................. 1,002,500
2,500 Units In Flight Phone, Zero Coupon until 5/15/98 (14.00% thereafter),
5/15/02(A)#............................................................ 1,000,000
1,000 Katz Corporation, 12.75%, 11/15/02....................................... 1,080,000
1,750 Marcus Cable Co., Zero Coupon until 6/15/00
(14.25% thereafter), 12/15/05(A)....................................... 1,015,000
1,000 New City Communications, 11.375%, 11/01/03............................... 975,000
2,000 Units People's Choice TV Corp., Zero Coupon until 6/01/00
(13.135% thereafter), 6/01/04##........................................ 1,045,000
750 Sinclair Broadcasting, 10.00%, 9/30/05................................... 764,063
1,500 United International Holdings, Zero Coupon, 11/15/99..................... 915,000
------------
7,796,563
------------
TRANSPORTATION -- 1.59%
1,000 Petro PSC Properties, 12.50%, 6/01/02.................................... 997,500
------------
TOTAL CORPORATE BONDS (cost $45,580,430)................................. 44,896,997
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 2
<PAGE> 5
SALOMON BROTHERS HIGH INCOME FUND INC
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (continued)
September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) SOVEREIGN BONDS -- 19.74% VALUE
------------------------------------------------------------------------------------------------------------
<C> <S> <C>
$3,500 Republic of Argentina, FRB, 6.8125%, 3/31/05*............................ $ 2,176,563
4,503 Federal Republic of Brazil, C Bond, 8.00%, 4/15/14**..................... 2,405,031
2,000 Republic of Brazil, "New" New Money, 7.3125%, 4/15/09*................... 1,208,750
500 Republic of Bulgaria, Discount Bond, Series A, 6.75%, 7/28/24*........... 255,000
2,500 Republic of Bulgaria, FLIRB, Series A, 2.00%, 7/28/12*................... 659,375
2,300 Costa Rica Series A, Principal Bond, 6.25%, 5/21/10...................... 1,265,000
1,000 Republic of Panama, FRN, 7.25%, 5/10/02*................................. 810,000
4,000 Republic of Poland, PDI Bonds, 3.25%, 10/27/14*.......................... 2,535,000
1,750 United Mexican States, Par Bonds, Series B, 6.25%, 12/31/19 (including
1,750,000 rights)...................................................... 1,060,937
------------
TOTAL SOVEREIGN BONDS (cost $12,321,138)................................. 12,375,656
------------
</TABLE>
<TABLE>
<CAPTION>
LOAN PARTICIPATION -- 2.25%
------------------------------------------------------------------------------------------------------------
<C> <S> <C>
2,250 Kingdom of Morocco, Tranche A, 6.6875%, 1/01/09*
(Morgan Guaranty Trust Company of New York)+ (cost $1,306,535)......... 1,409,062
------------
WARRANTS(B) -- .24%
------------------------------------------------------------------------------------------------------------
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).......................................... 109,250
------------
TOTAL WARRANTS (cost $108,830)........................................... 152,625
------------
REPURCHASE AGREEMENT -- 1.84%
------------------------------------------------------------------------------------------------------------
1,156 State Street Bank and Trust Company, 5.75%, cost $1,156,000, dated
9/29/95, $1,156,554 due 10/2/95, (collateralized by $1,150,000, 6.125%
U.S. Treasury Notes due 5/15/98, valued at $1,181,625)................. 1,156,000
------------
TOTAL INVESTMENTS -- 95.70% (cost $60,472,933)........................... 59,990,340
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 3
<PAGE> 6
SALOMON BROTHERS HIGH INCOME FUND INC
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (concluded)
September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
VALUE
------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES -- 4.30%.................. $ 2,692,236
------------
NET ASSETS -- 100.00%
(equivalent to $13.28 per share on 4,721,633 common
shares outstanding).................................................. $ 62,682,576
------------
</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.
(A) 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.
(B) 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 4
<PAGE> 7
SALOMON BROTHERS HIGH INCOME FUND INC
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995 (unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost -- $60,472,933)................................................... $59,990,340
Cash.......................................................................................... 179,930
Receivable for investments sold............................................................... 3,233,750
Interest receivable........................................................................... 1,523,518
Unamortized organization expenses............................................................. 58,700
Prepaid expenses.............................................................................. 3,948
-----------
Total assets.......................................................................... 64,990,186
-----------
LIABILITIES
Payable for investments purchased............................................................. 2,160,000
Accrued audit and tax return preparation fees................................................. 38,720
Management fee payable to SBAM (Note 3)....................................................... 35,722
Accrued legal fee............................................................................. 29,875
Accrued annual meeting fee.................................................................... 10,059
Accrued printing expense...................................................................... 6,433
Accrued custodian fee......................................................................... 5,852
Accrued directors' fee........................................................................ 3,503
Other accrued expenses........................................................................ 17,446
-----------
Total liabilities..................................................................... 2,307,610
-----------
NET ASSETS
Common Stock ($.001 par value, authorized 100,000,000;
outstanding 4,721,633 shares)............................................................... 4,722
Additional paid-in capital.................................................................... 65,451,162
Undistributed net investment income........................................................... 201,926
Accumulated net realized loss on investments.................................................. (2,492,641)
Net unrealized depreciation on investments.................................................... (482,593)
-----------
Net assets............................................................................ $62,682,576
-----------
NET ASSET VALUE PER SHARE ($62,682,576 / 4,721,633 shares).................................... $13.28
-----------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 5
<PAGE> 8
SALOMON BROTHERS HIGH INCOME FUND INC
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the nine months ended September 30, 1995 (unaudited)
<TABLE>
<S> <C> <C>
INCOME
Interest (includes discount accretion of $1,425,705)....................................... $ 5,903,750
EXPENSES
Management fee.................................................................. $317,551
Audit and tax return preparation services....................................... 38,220
Legal........................................................................... 35,763
Transfer agent.................................................................. 27,300
Printing........................................................................ 26,208
Directors' fees and expenses.................................................... 22,386
Amortization of deferred organization costs..................................... 18,564
Annual meeting expense.......................................................... 14,742
Listing fee..................................................................... 13,759
Custodian....................................................................... 12,285
Other........................................................................... 12,574 539,352
-------- -----------
Net investment income........................................................... 5,364,398
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net Realized Loss on Investments........................................................... (2,378,838)
Change in Net Unrealized Depreciation on Investments....................................... 4,474,040
-----------
Net realized loss and change in net unrealized depreciation................................ 2,095,202
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS................................................. $ 7,459,600
-----------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 6
<PAGE> 9
SALOMON BROTHERS HIGH INCOME FUND INC
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income........................................... $ 5,364,398 $ 6,488,619
Net realized gain (loss) on investments......................... (2,378,838) 1,167,548
Change in net unrealized appreciation (depreciation)............ 4,474,040 (12,020,441)
------------------ ------------
Net increase (decrease) in net assets from operations........... 7,459,600 (4,364,274)
------------------ ------------
DIVIDENDS
From net investment income...................................... (5,288,632) (6,465,962)
From net realized gains......................................... (317,263) (1,797,896)
------------------ ------------
Net decrease in net assets from dividends....................... (5,605,895) (8,263,858)
------------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares issued in reinvestment of dividends
(37,220 and 34,248 shares issued)............................. 484,590 490,196
Additional offering expenses.................................... -- (13,000)
------------------ ------------
Net increase in net assets from capital share transactions...... 484,590 477,196
------------------ ------------
Total increase (decrease) in net assets......................... 2,338,295 (12,150,936)
NET ASSETS
Beginning of period............................................. 60,344,281 72,495,217
------------------ ------------
End of period (includes undistributed net investment income of
$201,926 and $126,160, respectively).......................... $ 62,682,576 $60,344,281
------------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 7
<PAGE> 10
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 commenced operations on January 29, 1993.
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. 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.
(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
PAGE 8
<PAGE> 11
SALOMON BROTHERS HIGH INCOME FUND INC
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
(unaudited)
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 nine months ended September 30, 1995, aggregated $54,759,283 and
$58,011,774, respectively. The federal income tax cost basis of the Fund's
investments at September 30, 1995 was substantially the same as the cost basis
for financial reporting. Gross unrealized appreciation and depreciation amounted
to $2,100,586 and $2,583,179, respectively, resulting in net unrealized
depreciation for federal income tax purposes of $482,593.
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
PAGE 9
<PAGE> 12
SALOMON BROTHERS HIGH INCOME FUND INC
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
(unaudited)
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 SEPTEMBER 30, 1995
On October 2, 1995, the Board of Directors of the Fund declared a common stock
dividend from net investment income of $0.125 per share payable on October 31,
1995 to shareholders of record on October 12, 1995.
On November 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 November 30,
1995 to shareholders of record on November 13, 1995.
PAGE 10
<PAGE> 13
SALOMON BROTHERS HIGH INCOME FUND INC
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 1995 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1994 1993*
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........ $12.88 $15.59 $13.95
------- ------------ ------------
Net investment income....................... 1.14 1.38 1.18
Net gain/(loss) on securities (both realized
and unrealized)........................... .45 (2.32) 1.94
------- ------------ ------------
Total from investment operations............ 1.59 (0.94) 3.12
------- ------------ ------------
Less distributions
Dividends from net investment income...... (1.12) (1.39) (1.16)
Dividends from net realized gains......... (.07) (0.38) (0.23)
------- ------------ ------------
Total distributions......................... (1.19) (1.77) (1.39)
------- ------------ ------------
Offering costs on issuance of common
stock..................................... -- -- (0.09)
------- ------------ ------------
Net asset value, end of period.............. $13.28 $12.88 $15.59
================== ============= =============
Per share market value, end of period....... $13.875 $12.875 $15.875
================== ============= =============
Total investment return based on market
price per share**......................... 18.05% (8.04%) 25.10%#
Ratios/supplemental data:
Net assets, end of period (000)............. $ 62,683 $ 60,344 $ 72,495
Ratio of expenses to average net assets..... 1.18%(a) 1.13% 1.09%(a)
Ratio of net investment income to average
net assets................................ 11.78%(a) 9.91% 8.64%(a)
Portfolio turnover rate..................... 93.49% 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 11
<PAGE> 14
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
September 30, 1995................................................ 1,746 .37 877 .19
</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 12
<PAGE> 15
SALOMON BROTHERS HIGH INCOME FUND INC
- -----------
DIRECTORS
CHARLES F. BARBER
Consultant; formerly Chairman,
ASARCO Incorporated
THOMAS W. BROCK
Chairman and Chief
Executive Officer, Salomon
Brothers Asset Management Inc
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
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
MICHAEL S. HYLAND
Chairman and President
PETER J. WILBY
Executive Vice President
LAWRENCE H. KAPLAN
Executive Vice President
ALAN M. MANDEL
Treasurer
LAURIE A. PITTI
Assistant Treasurer
TANA E. TSELEPIS
Secretary
- -----------------------------------------------------
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
INDEPENDENT ACCOUNTANTS
Price Waterhouse 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
HIF
- --------------------------------------------------------------------------------
<PAGE> 16
<TABLE>
<CAPTION>
<S> <C>
AMERICAN STOCK TRANSFER & TRUST COMPANY ---------------------
40 WALL STREET BULK RATE
NEW YORK, NEW YORK 10005 U.S. POSTAGE
PAID
STATEN ISLAND, NY
PERMIT NO.
169
---------------------
</TABLE>
<PAGE> 17
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SALOMON BROTHERS
HIGH INCOME FUND INC
INTERIM REPORT
SEPTEMBER 30, 1995
---------------------------------------
SALOMON BROTHERS ASSET MANAGEMENT
-----------------------------------
