SALOMON BROTHERS HIGH INCOME FUND INC
February 8, 2000
Dear Shareholders:
We are pleased to provide this annual report for the Salomon Brothers High
Income Fund Inc ("Fund") as of December 31, 1999. Included are market
commentary, a schedule of the Fund's investments as of December 31, 1999 and
financial statements for the period ended December 31, 1999. The Fund
distributed dividends totaling $1.50 per share during the period. This total
represents $1.34 and $0.16 per share from net investment income and capital,
respectively. The table below shows the annualized distribution rate and the
total return for the period covered by this report based on the Fund's December
31, 1999 net asset value ("NAV") per share and its New York Stock Exchange
("NYSE") closing price.1
Price Annualized 12-Month
Per Share Distribution Rate2 Total Return
---------- ----------------- ------------
$12.00 (NAV) 12.50% 6.16%
$11.4375 (NYSE) 13.11% (12.06%)
In comparison, during the same period, the Salomon Smith Barney High-Yield
Market Index3 returned 1.73% and the JP Morgan Emerging Markets Bond Index Plus
("EMBI+")4 had a return of 25.99%. On December 31, 1999, approximately 65% of
the Fund's long-term investments were in U.S. high-yield corporate bonds.
Approximately 35% of the Fund was invested in securities of emerging market
issuers, including both obligations of sovereign and corporate issuers. U.S.
HIGH-YIELD MARKET
The U.S. high-yield market returned 1.73% for the 12-month period ended December
31, 1999, as reported by the Salomon Smith Barney High Yield Market Index. While
benefiting from a strong economy, the high-yield market suffered from the
following:
1. a backup in U.S. Treasuries due to concern about rising inflation;
2. mutual fund outflows;
3. a heavy new issues calendar;
4. a reduction in broker/dealer liquidity;
5. a volatile equity market; and,
6. a rise in default rates, especially among marginal commodity producers.
- ------------
1 The NAV is calculated by subtracting total liabilities from the closing
value of all securities held by the Fund plus all other assets. This result
(net assets) is divided by the total number of shares outstanding. The
NAV fluctuates with changes in the market prices of securities in which the
Fund has invested. However, the price at which an investor buys or sells
shares of the Fund is its market price as determined by supply and demand.
2 Total returns are based on changes in NAV or the market value and assume the
reinvestment of all dividends and/or capital gains distributions in
additional shares. The annualized distribution rate is the Fund's current
monthly income dividend rate, annualized, and then divided by the NAV or the
market value noted in the report. This annualized distribution rate assumes
a current monthly income dividend rate of $0.125 for twelve months. This
rate is as of January 31, 2000 and is subject to change. The important
difference between a total return and an annualized distribution rate is
that the total return takes into consideration a number of factors including
the fluctuation of the NAV or the market value during the period reported.
The NAV fluctuation includes the effects of unrealized appreciation or
depreciation in the Fund. Accordingly, since an annualized distribution rate
only reflects the current monthly income dividend rate annualized, it should
not be used as the sole indicator to judge the return you receive from your
fund investment. Past performance is not indicative of future results.
3 The Salomon Smith Barney High-Yield Market Index covers a significant
portion of the below-investment-grade U.S. corporate bond market. All
figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost.
4 The EMBI+ is a total return index that tracks the traded market for U.S.
dollar-denominated Brady and other similar sovereign restructured bonds
traded in emerging markets.
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
The period began with concerns that a weak recovery in Asia and
recession in Latin America would trigger a slowdown in the U.S. economy.
However, economic growth in the U.S. was stronger than anticipated and the
high-yield market rallied in the first four months of the year. However, in the
second quarter, continued strong U.S. economic growth led to concerns about
rising inflation. Heightened credit concerns also developed as default rates
increased, particularly in commodities issuers due to global competition and in
more speculative telecommunications issuers whose access to alternative capital
markets was limited. The aforementioned factors rattled individual investors,
resulting in prolonged mutual fund outflows. These outflows occurred for as long
as nine consecutive weeks through the end of October 1999 and totaled $422
million for the year. Finally, tightening broker-dealer liquidity and a heavy
new issues calendar in the second and third quarters further constrained
liquidity in the high-yield market. As a result of these factors, high-yield
market returns were negative for the period from May through October.
As the year progressed, the high-yield market, driven by technical, credit and
liquidity concerns, became increasingly selective in the new issues and
secondary market. Larger, more liquid issues from higher quality issuers
generally outperformed. In addition, investors demanded tighter covenant
packages and higher yields from new issues, effectively repricing the secondary
market to lower levels.
New-issue volume declined to relatively low levels late in the year while mutual
fund outflows moderated and collateralized bond obligation ("CBO") buying
activity picked up dramatically. This combination of factors in the fourth
quarter alleviated some of the pressure on liquidity in the high-yield market
and enabled the market to recover modestly and post a positive return for the
year.
For the period, the high-yield market's top performers included: commodities
industries such as metals/mining, energy and paper & forest products, which
benefited from material improvement in commodities prices; telecommunications,
due to explosive industry growth, mergers & acquisitions activity and private
equity investment; gaming, which benefited from investors' preference for
defensive credits; and cable & media, which benefited from merger and
acquisition activity. The financial sector also outperformed as a result of
savings & loans benefiting from: (i) strong new home mortgage volume and (ii)
their use of adjustable-rate mortgages, a natural hedge against rising interest
rates. The worst performers included: health care, due to the industry's
troubles with the recently imposed Medicare reimbursement system; textiles,
which is suffering from cheaper imports; and consumer products,
supermarkets/drugstores, automotive and services/other, which were all adversely
affected by credit concerns at certain issuers. The capital goods sector also
underperformed due to the market's preference for more defensive, higher growth
industry sectors. In terms of credit quality, investors favored the
higher-quality credit tiers, such as BB issues, as they shunned CCC and
lower-quality single-B issues due to heightened credit concerns; BB, B and CCC
issues showed returns of 2.34%, 1.02% and (8.43)%, respectively.
The Fund's performance was helped by overweightings in metals/mining, gaming and
financial and underweightings in textiles and health care. The Fund's
performance was adversely impacted by overweightings in consumer products,
automotive, services and capital goods and underweightings in
telecommunications, energy, cable and other media. During the course of the
period, the Fund responded to market conditions by increasing its exposure to
the energy, paper & forest products, telecommunications and financial sectors
and decreasing its exposure to the health care and services sectors.
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
On December 31, 1999, the high-yield market yielded 11.41%, up from 10.28% at
year-end 1998. The excess yield over Treasuries was 5.00%, down from 5.66% at
1998 year-end. We believe that these levels still represent attractive long-term
value.
Going forward, we expect the high-yield market to modestly improve over the next
six months as expectations for continued robust economic growth and improved
technical factors, including: (i) mutual fund investors returning to the market
after selling in late 1999 for tax or Y2K reasons, (ii) continued strong CBO
demand and (iii) fund managers investing excess balance sheet cash held over the
New Year for Y2K reasons, are partially offset by continued interest rate and
credit concerns.
EMERGING DEBT MARKET
Emerging markets debt had a very strong year, returning 25.99% as measured by
the EMBI+. Returns for the year were dominated by Russia and Brazil. The Fund's
fiscal year opened with concerns over the Brazilian devaluation of its local
currency, which led to investors demanding a higher risk premium from emerging
markets debt. Spreads widened to 1500 basis points over Treasuries before
stabilizing and recovering to end the year at 824 basis points over Treasuries.
Returns in emerging markets debt were skewed with only five of 13 Index
countries outperforming. Russia, Brazil, Venezuela, Bulgaria and Morocco
provided the best returns in the Index in 1999.
The following is a brief description of developments in these key countries over
the past twelve months:
Russia. Russia was the best performing country in the Index over the past 12
months, returning 165.70%. During the year Russia made substantial progress in
restructuring its defaulted Soviet-era debt. Relations with the IMF continued to
improve and the country exceeded some of its targets for extended financing. Oil
price strength also contributed to the improved economic picture. At year-end,
President Yeltsin resigned and named Prime Minister Putin acting President. New
presidential elections will be held by the end of March 2000.
Brazil. The most notable event to occur in Brazil during the period was the
devaluation of the country's local currency, the real, in January. The
devaluation caused spillover throughout Latin America, but the deterioration in
market sentiment was short lived. Brazil's recovery from the effects of its
January currency devaluation continues to be impressive. Brazil continues to
have an ambitious structural reform agenda, which includes changes to the
taxation and social security schemes. Despite recent political noise, the
working relationship between the administration and congress remains intact and
we expect further positive developments on these important initiatives in 2000.
Brazil returned 40.68% during 1999.
Venezuela. Venezuela was the third best performing emerging markets debt issuer
in the Index over the past 12 months, returning 29.86%. Oil price increases in
1999 eased fiscal pressure in Venezuela and permitted President Chavez to
proceed with his reform agenda. The Constituent Assembly, a key element of
President Chavez's plan to reform the Venezuelan political system, was elected
in July. In a stunning development, 91% of the seats were won by allies of
President Chavez. The agenda for the Assembly revolves around the drafting of a
new constitution for Venezuela. The initial draft of the constitution was
delivered in early November 1999. This document will have important implications
for the future of external capital investment in Venezuela. We believe the
political agenda will continue to take precedence over any economic issues
during the early months of 2000 as the new constitution is
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
reviewed and ratified. Oil prices at current levels are giving Venezuela the
economic flexibility to address the constitutional changes.
Bulgaria. Bulgaria returned 27.28% during 1999. The country continues to recover
from the effects of the war in Kosovo. The currency board is imposing fiscal
discipline on the economy as trade with Europe recovers in the aftermath of the
war. We continue to believe that Bulgaria is an undervalued portfolio.
Morocco. King Hassan II died after 38 years on the throne. He has been replaced
by his eldest son, King Mohammed VI. We expect the policies that have made
Morocco a steadily improving credit will be continued by the new king. In
another important development in Morocco, a cellular telephone license has been
awarded to Telefonica for a price of $1.1 billion and a commitment to spend an
additional $700 million developing the network. The proceeds from this sale will
be used to fund a variety of government initiatives in Morocco. Morocco returned
26.97% during 1999.
OUTLOOK
Our outlook for emerging markets debt is positive based upon the current spread
level of approximately 900 over Treasuries. The economic rebound in Asia and the
apparent bottoming of the recession in many Latin American countries points to
an improving macroeconomic environment for emerging countries. We believe
continued stability will attract additional investors into the market.
# # # #
In a continuing effort to provide information concerning the Salomon Brothers
High Income Fund Inc, shareholders may call 1-888-777-0102 (toll free), Monday
through Friday from 8:00 a.m. to 6:00 p.m. Eastern Standard Time (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 Inc stock account, please call American Stock
Transfer & Trust Company at 1-800-937-5449. (1-718-921-8200 if you are calling
from within New York City.)
We at Salomon Brothers Asset Management appreciate your investment in the
Salomon Brothers High Income Fund Inc. We look forward to helping you pursue
your financial goals in the new century.
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 INC
Schedule of Investments
December 31, 1999
<TABLE>
<CAPTION>
Face
Amount Security Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Corporate Bonds -- 63.3%
Basic Industries -- 11.9%
$ 500,000 AEI Holding Co., Inc., Company Guaranteed, 10.500% due 12/15/05 (a)...... $ 355,000
800,000 Berry Plastics Corp., Sr. Sub. Notes, 12.250% due 4/15/04................ 820,000
1,000,000 Breed Technologies, Inc., Sr. Sub. Notes, 9.250% due 4/15/08 (b)(c)...... 30,000
Doman Industries Ltd.:
500,000 Secured Notes, 12.000% due 7/1/04...................................... 521,250
500,000 Sr. Notes, 8.750% due 3/15/04.......................................... 430,000
500,000 Glencore Nickel Ltd., Company Guaranteed, 9.000% due 12/1/14............. 433,125
750,000 LTV Corp., Sr. Notes, 11.750% due 11/15/09 (a)........................... 783,750
1,000,000 PCI Chemicals Canada Inc., Company Guaranteed, 9.250% due 10/15/07....... 772,500
Radnor Holdings Corp.:
150,000 Series B, Company Guaranteed, 10.000% due 12/1/03...................... 150,375
350,000 Sr. Notes, 10.000% due 12/1/03......................................... 350,875
750,000 Republic Technology/RTICapital, 13.750% due 7/15/09...................... 525,000
1,000,000 Teekay Shipping Corp., Company Guaranteed, 8.320% due 2/1/08............. 900,000
750,000 ZSC Specialty Chemicals PLC, Sr. Notes, 11.000% due 7/1/09 (a)........... 780,000
----------
6,851,875
----------
Consumer Cyclicals -- 6.5%
500,000 Ameriking Inc.,Sr. Notes, 10.750% due 12/1/06 ........................... 465,000
1,000,000 Cole National Group, Inc., Sr. Sub. Notes, 8.625% due 8/15/07............ 760,000
1,000,000 Mattress Discounters Co., Sr. Notes, 12.625% due 7/15/07................. 977,500
750,000 Musicland Group Inc., Company Guaranteed, 9.875% due 3/15/08............. 686,250
1,000,000 Pillowtex Corp., Series B, Company Guaranteed, 9.000% due 12/15/07....... 430,000
500,000 Worldtex Inc., Series B, Company Guaranteed, 9.625% due 12/15/07......... 405,000
----------
3,723,750
----------
Consumer Non-Cyclicals -- 7.3%
500,000 Alaris Medical Systems Inc., Company Guaranteed, 9.750% due 12/1/06...... 444,375
750,000 Moll Industries, Inc., Sr. Sub. Notes, 10.500% due 7/1/08................ 300,000
1,400,000 Nebco Evans Holding Co., Sr. Discount Notes, zero coupon until 7/15/02,
(12.375% thereafter) due 7/15/07 (c)(d)................................ 182,000
750,000 North Atlantic Trading, Company Guaranteed, 11.000% due 6/15/04.......... 686,250
500,000 Polaroid Corp., Sr. Notes, 11.500% due 2/15/06........................... 487,500
750,000 Pueblo Xtra International, Inc., Sr. Notes, Series C, 9.500% due 8/1/03.. 453,750
Revlon Consumer Products:
500,000 Sr. Notes, 9.000% due 11/1/06.......................................... 370,000
175,000 Sr. Sub. Notes, 8.625% due 2/1/08...................................... 89,250
- ---------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 5
</TABLE>
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
Schedule of Investments (continued)
December 31, 1999
<TABLE>
<CAPTION>
Face
Amount Security Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer Non-Cyclicals -- 7.3% (continued)
$ 733,000 Waterford Gaming LLC, Sr. Notes, 9.500% due 3/15/10 (a).................. $ 722,005
500,000 Winsloew Furniture, Inc., Sr. Sub. Notes, 12.750% due 8/15/07 (a)........ 452,500
----------
4,187,630
----------
Energy -- 3.4%
500,000 Benton Oil & Gas Co., Sr. Notes, 11.625% due 5/1/03...................... 350,000
500,000 Continental Resources, Company Guaranteed, 10.250% due 8/1/08............ 437,500
750,000 Plains Resources Inc., Sr. Sub. Notes, 10.250% due 3/15/06 (a)........... 731,250
500,000 Range Resources Corp., Lomak Petroleum, Company Guaranteed,
8.750% due 1/15/07..................................................... 456,250
----------
1,975,000
----------
Financial -- 3.6%
500,000 Airplanes Pass Through Trust, 10.875% due 3/15/19........................ 432,805
750,000 Avis Rent A Car, Inc., Company Guaranteed, 11.000% due 5/1/09............ 793,125
Contifinancial Corp., Sr. Notes:
500,000 7.500% due 3/15/02..................................................... 60,000
1,000,000 8.375% due 8/15/03..................................................... 120,000
250,000 8.125% due 4/1/08...................................................... 30,000
750,000 Morgan Stanley Aircraft Finance, Series 1A,
Class D1, 8.700% due 3/15/23........................................... 645,000
----------
2,080,930
----------
Housing Related -- 1.8%
1,000,000 Panolam Industries International Inc., Sr. Sub. Notes,
11.500% due 2/15/09 (a)................................................ 1,027,500
----------
Industrial/Manufacturing -- 10.7%
500,000 Alvey Systems Inc., Sr. Sub. Notes, 11.375% due 1/31/03.................. 517,500
750,000 Axiohm Transaction Solutions Inc., Company Guaranteed,
9.750% due 10/1/07 (b)(c).............................................. 172,500
750,000 Foamex L.P., Company Guaranteed, 9.875% due 6/15/07...................... 631,875
600,000 High Voltage Engineering Corp., Sr. Notes, 10.500% due 8/15/04........... 531,000
750,000 JH Heafner Co., Sr. Notes, 10.000% due 5/15/08........................... 686,250
1,000,000 JLFrench Auto Casting, Sr. Sub. Notes, 11.500% due 6/1/09................ 1,010,000
500,000 Key Plastics, Inc.,Sr. Sub. Notes, Series B, 10.250% due 3/15/07......... 235,000
750,000 Motors & Gears, Inc., Sr. Notes, 10.750% due 11/15/06.................... 720,937
1,000,000 Neenah Corp., Sr. Discount Notes, 11.125% due 5/1/07..................... 930,000
750,000 Tenneco Automotive Inc., Sr. Sub. Notes, 11.625% due 10/15/09 (a)........ 767,813
----------
6,202,875
----------
- ---------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 6
</TABLE>
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
Schedule of Investments (continued)
December 31, 1999
<TABLE>
<CAPTION>
Face
Amount Security Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Media/Telecommunications -- 12.3%
$ 170,970 Adelphia Communications Corp., Sr. Notes, 9.500% due 2/15/04 (e)......... $ 168,405
350,000 Charter Communications Inc., Sr. Discount Notes, zero coupon
until 4/1/04 (9.920% thereafter) due 4/1/11............................ 206,500
500,000 Diamond Cable Co., Sr. Discount Notes, zero coupon until 12/15/00........
(11.750% thereafter) due 12/15/05...................................... 475,000
500,000 Granite Broadcasting Corp., Sr. Sub. Notes, 10.375% due 5/15/05.......... 508,750
1,500,000 ICG Holdings Inc., Sr. Discount Notes, zero coupon until 9/15/00
(13.500% thereafter) due 9/15/05....................................... 1,305,000
1,000,000 Intermedia Communications of Florida, Sr. Discount Notes,
zero coupon until 7/15/02 (11.250% thereafter) due 7/15/07............. 750,000
1,500,000 Nextel Communications, Inc., Sr. Discount Notes, zero coupon until
2/15/03 (9.950% thereafter) due 2/15/08................................ 1,061,250
1,250,000 NTL Inc., Sr. Notes, zero coupon until 2/1/01 (11.500% thereafter)
due 2/15/06............................................................ 1,131,250
500,000 Transwestern Publishing Co., Sr. Sub. Notes, 9.625% due 11/15/07......... 500,000
1,000,000 United Pan-Europe Communications, N.V., Sr. Notes, Series B,
10.875% due 8/1/09 (a)................................................. 1,018,750
----------
7,124,905
----------
Services/Other -- 4.6%
750,000 Allied Waste Industries, Inc., Sr. Sub. Notes, 10.000% due 8/1/09 (a).... 671,250
250,000 La Petite Academy Inc., Company Guaranteed, 10.000% due 5/15/08.......... 183,750
1,000,000 Loomis Fargo & Co., Company Guaranteed, 10.000% due 1/15/04.............. 985,000
500,000 Millar Western Forest Products, Sr. Notes, 9.875% due 5/15/08............ 500,000
675,000 Protection One Alarm Co., Sr. Sub. Notes, 8.125% due 1/15/09 (a)......... 325,688
----------
2,665,688
----------
Transportation -- 1.2%
1,000,000 Holt Group, Sr. Notes, 9.750% due 1/15/06................................ 675,000
----------
TOTAL CORPORATE BONDS (Cost -- $42,556,657).............................. 36,515,153
----------
Convertible Bonds -- 1.0%
750,000 Quantum Corp., 7.000% due 8/1/04 (Cost -- $610,012)...................... 570,000
----------
Sovereign Bonds -- 31.8%
Republic of Argentina:
1,975,000 11.750% due 4/7/09..................................................... 1,989,813
836,000 FRB, 6.8125% due 3/31/05 (f)........................................... 764,940
75,000 Variable Bond, 11.786% due 4/10/05..................................... 69,000
- ---------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 7
</TABLE>
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
Schedule of Investments (continued)
December 31, 1999
<TABLE>
<CAPTION>
Face
Amount Security Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sovereign Bonds -- 31.8% (continued)
Federal Republic of Brazil:
$ 288,000 14.500% due 10/15/09................................................... $ 319,824
1,693,384 C Bond, 8.000% due 4/15/14 (e)(f)...................................... 1,274,272
750,000 DCB, Series L, 7.000% due 4/15/12 (f).................................. 561,562
500,000 FLIRB, Series L, 5.000% due 4/15/09 (f)................................ 372,500
2,276,351 MYDFA, 6.8125% due 9/15/07 (f)......................................... 1,826,771
1,725,000 Republic of Bulgaria, FLIRB, Series A, 2.750% due 7/28/12 (f)............ 1,246,313
800,000 Republic of Colombia, 11.442% due 8/13/05 (f)............................ 774,000
500,000 Croatia, Series A, 6.456% due 7/31/10 (f)................................ 447,500
4,000,000 Ivory Coast, FLIRB, 2.000% due 3/29/18 (f)............................... 740,000
700,000 United Mexican States, 11.375% due 9/15/16............................... 791,875
1,300,000 Republic of Peru, PDI, 4.500% due 3/7/17 (f)............................. 892,125
Russia:
350,000 Federation, 9.250% due 11/27/01........................................ 278,250
3,350,000 Federation, 11.750% due 6/10/03........................................ 2,571,125
300,000 Ministry of Finance, 12.750% due 6/24/28............................... 209,250
Republic of Venezuela:
2,050,000 13.625% due 8/15/18.................................................... 1,834,750
714,280 FLIRB Series A, 6.875% due 3/31/07 (f)................................. 564,281
1,071,426 FLIRB Series B, 6.875% due 3/31/07 (f)................................. 846,426
----------
TOTAL SOVEREIGN BONDS (Cost -- $16,618,581).............................. 18,374,577
----------
Loan Participations (f)(g) -- 3.4%
588,094 Kingdom of Morocco, Tranche A, 6.8438% due 1/1/09
(Chase Manhattan, Morgan Guaranty Trust Company of New York)........... 536,636
The People's Democratic Republic of Algeria:
90,909 Tranche A, 7.500% due 3/4/00 (Chase Manhattan)......................... 90,000
1,545,455 Tranche 1, 6.8125% due 9/4/06 (Chase Manhattan)........................ 1,193,864
200,000 Tranche 3, 6.8125% due 3/4/10 (First Boston)........................... 143,500
----------
TOTAL LOAN PARTICIPATIONS (Cost -- $1,787,016)........................... 1,964,000
----------
- ---------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 8
</TABLE>
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
Schedule of Investments (continued)
December 31, 1999
<TABLE>
<CAPTION>
Shares Security Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock (c) -- 0.0%
500 AmeriKing, Inc. (Cost -- $22,000)........................................ $ 5,000
----------
Preferred Stock -- 0.0%
896 AmeriKing, Inc. (e)...................................................... 16,128
TCR Holding Corp.:
803 Class B (c)............................................................ 8
442 Class C (c)............................................................ 4
1,165 Class D (c)............................................................ 12
2,410 Class E (c)............................................................ 24
----------
TOTAL PREFERRED STOCK (Cost -- $5,786)................................... 16,176
----------
Warrants (c) -- 0.1%
2,500 In Flight Phone (Exercise price of $0.01 per share expiring 8/31/02,
each warrant exercisable for one share of common stock)................ 0
200 United Mexican States, expire 2/18/00.................................... 19,000
500 Winsloew Furniture, Inc., expire 1/1/01.................................. 26,250
----------
TOTAL WARRANTS (Cost -- $53,377)......................................... 45,250
----------
Face
Amount Security Value
- ---------------------------------------------------------------------------------------------------------
Repurchase Agreement -- 0.4%
$229,000 State Street Bank & Trust Co., 3.000% due 1/3/00; Proceeds at maturity --
$229,057; (Fully collateralized by U.S. Treasury Notes, 12.750%
due 11/15/10; Market Value -- $235,125) (Cost -- $229,000)............. 229,000
-----------
TOTAL INVESTMENTS -- 100% (Cost -- $61,882,429*)......................... $57,719,156
===========
<FN>
- -----------
(a) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
(b) Security is currently in default.
(c) Non-income producing securities.
(d) Security went into default subsequent to the year ended 12/31/99.
(e) Payment-in-kind security for which part of the income earned may be paid as
additional principal.
(f) Rate shown reflects current rate on instrument with variable rate or step
coupon rates.
(g) Participation interest was acquired through the financial institution
indicated parenthetically.
* Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviations used in schedule:
C Bond -- Capitalization Bond.
DCB -- Debt Conversion Bond.
FLIRB -- Front-Loaded Interest Reduction Bond.
FRB -- Floating Rate Bond.
PDI -- Past Due Interest.
</FN>
- ---------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 9
</TABLE>
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
Statement of Assets and Liabilities
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $61,882,429).................................... $57,719,156
Cash........................................................................... 980
Interest receivable............................................................ 1,535,186
-----------
Total Assets................................................................... 59,255,322
-----------
LIABILITIES:
Management fee payable......................................................... 34,901
Accrued expenses............................................................... 196,482
-----------
Total Liabilities.............................................................. 231,383
-----------
Total Net Assets................................................................. $59,023,939
===========
NET ASSETS:
Par value of capital shares ($0.001 par value, authorized 100,000,000 shares;
4,917,594 shares outstanding)............................................... $ 4,918
Capital paid in excess of par value............................................ 66,872,964
Accumulated net realized loss on investments................................... (3,690,670)
Net unrealized depreciation on investments..................................... (4,163,273)
-----------
Total Net Assets................................................................. $59,023,939
===========
Net Asset Value, Per Share ($59,023,939 / 4,917,594 shares)...................... $12.00
======
- ----------------------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 10
</TABLE>
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
Statement of Operations For the Year
Ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest....................................................................... $ 7,287,823
-----------
EXPENSES:
Management fees (Note 2)....................................................... 422,886
Audit.......................................................................... 60,999
Directors' fees & expenses .................................................... 48,001
Shareholder and system servicing fees.......................................... 46,001
Printing and mailing........................................................... 46,001
Legal ......................................................................... 45,001
Registration fees.............................................................. 21,662
Custody........................................................................ 18,002
Other ......................................................................... 16,512
-----------
Total Expenses................................................................. 725,065
-----------
Net Investment Income............................................................ 6,562,758
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 3):
Realized Loss From Securities Transactions
(excluding short-term securities):
Proceeds from sales......................................................... 58,828,616
Cost of securities sold..................................................... 61,866,844
-----------
Net Realized Loss.............................................................. (3,038,228)
-----------
Change in Net Unrealized Depreciation on Investments:
Beginning of year........................................................... (4,262,632)
End of year................................................................. (4,163,273)
-----------
Decrease in Net Unrealized Depreciation........................................ 99,359
-----------
Net Loss on Investments.......................................................... (2,938,869)
-----------
Increase in Net Assets From Operations........................................... $ 3,623,889
===========
- ----------------------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 11
</TABLE>
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
Statements of Changes in Net Assets
For the Years Ended December 31,
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income .................................................... $ 6,562,758 $ 6,510,806
Net realized loss......................................................... (3,038,228) (499,892)
(Increase) decrease in net unrealized depreciation........................ 99,359 (8,716,126)
----------- -----------
Increase (Decrease) in Net Assets From Operations ........................ 3,623,889 (2,705,212)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .................................................... (6,562,758) (6,480,394)
Net realized gains........................................................ -- (729,016)
Capital................................................................... (779,990) (595,795)
----------- -----------
Decrease in Net Assets From Distributions to Shareholders ................ (7,342,748) (7,805,205)
----------- -----------
FUND SHARE TRANSACTIONS:
Proceeds from shares issued in reinvestment of dividends.................. 627,981 674,341
----------- -----------
Decrease in Net Assets.................................................... (3,090,878) (9,836,076)
NET ASSETS:
Beginning of year......................................................... 62,114,817 71,950,893
----------- -----------
End of year............................................................... $59,023,939 $62,114,817
=========== ===========
- --------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 12
</TABLE>
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
Notes to Financial Statements
Note 1. Organization and Significant Accounting Policies
Salomon Brothers High Income Fund Inc ("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 seeks to maintain a high level of current income by investing primarily in
a diversified portfolio of high-yield U.S. corporate debt securities and
high-yield foreign sovereign debt securities. As a secondary objective, the Fund
seeks capital appreciation.
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 generally accepted
accounting principles ("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.
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 was 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 was 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.
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.
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 and capital gains, if any, to its shareholders. Therefore, no federal
income tax or excise tax provision is required.
Page 13
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
Notes to Financial Statements (continued)
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. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
distributions in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income and
net realized capital gains for tax purposes, they are reported as distributions
from capital.
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.
YEAR END TAX RECLASSIFICATIONS. The character of income and gains to be
distributed are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. At December 31, 1999,
reclassifications were made to the Fund's capital accounts to reflect permanent
book/tax differences and income and gains available for distributions under
income tax regulations. Net investment income, net realized gains and net assets
were not affected by this change.
Note 2. Management Fee and Other Transactions
Salomon Brothers Asset Management Inc. ("SBAM"), a wholly owned subsidiary of
Salomon Brothers Holding Company Inc., which in turn is wholly owned by Salomon
Smith Barney Holdings, Inc. ("SSBH"), acts as 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
and is responsible for day-to-day administration 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.
The Investment Manager has delegated certain administrative responsibilities to
SSB Citi Fund Management LLC ("SSBC"), formerly known as SSBC Fund Management
Inc., an affiliate of the Investment Manager pursuant to a Sub-Administration
Agreement between the Investment Manager and SSBC.
Page 14
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
Notes to Financial Statements (continued)
At December 31, 1999, the Investment Manager owned 10,056 shares of the Fund.
Certain officers and/or directors of the Fund are also officers and/or directors
of the investment manager.
Note 3. Portfolio Activity and Federal Income Tax Status
For the year ended December 31, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
Purchases......................................................... $58,324,980
===========
Sales............................................................. $58,828,616
===========
At December 31, 1999, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
Gross unrealized appreciation..................................... $ 2,794,447
Gross unrealized depreciation..................................... (6,957,720)
-----------
Net unrealized depreciation....................................... $(4,163,273)
===========
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. The cost of the Fund's loan
participations was $1,787,016.
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.
Page 15
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
Notes to Financial Statements (continued)
Note 6. Dividends Subsequent to December 31, 1999
The Board of Directors of the Fund declared a common stock dividend from net
investment income of $0.125 per share for the months of January and February
2000, payable on January 28, 2000 and February 25, 2000 to shareholders of
record on January 19, 2000 and February 15, 2000.
Note 7. Capital Loss Carryforward
At December 31, 1999, the Fund had, for Federal income tax purposes, a capital
loss carryforward of approximately $2,961,000, available to offset future
capital gains through December 31, 2007. To the extent that these carryforward
losses are used to offset capital gains, it is probable that any gains so offset
will not be distributed.
Note 8. Capital Shares
During the years ended December 31, transactions in shares of the Fund were as
follows:
1999 1998
----------------- -----------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Shares issued on reinvestment 48,282 $627,981 45,507 $674,341
- --------------------------------------------------------------------------------
Page 16
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
Financial Highlights
Data for a share of capital stock outstanding throughout each year ended
December 31:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year............. $ 12.76 $ 14.92 $ 14.72 $ 13.50 $ 12.88
-------- ------- ------- ------- -------
Income (Loss) From Operations:
Net investment income....................... 1.34 1.34 1.43 1.52 1.52
Net realized and unrealized gain (loss)..... (0.60) (1.89) 0.71 1.22 0.70
-------- ------- ------- ------- -------
Total Income (Loss) From Operations............ 0.74 (0.55) 2.14 2.74 2.22
-------- ------- ------- ------- -------
Less Distributions From:
Net investment income....................... (1.34) (1.34) (1.43) (1.52) (1.53)
Net realized gains.......................... -- (0.15) (0.51) -- (0.07)
Capital..................................... (0.16) (0.12) -- -- --
-------- ------- ------- ------- -------
Total Distributions............................ (1.50) (1.61) (1.94) (1.52) 1.60)
-------- ------- ------- ------- -------
Net Asset Value, End of Year................... $ 12.00 $ 12.76 $ 14.92 $ 14.72 $ 13.50
======== ======= ======= ======= =======
Per Share Market Value, End of Year............ $11.4375 $14.625 $16.438 $15.375 $14.125
======== ======= ======= ======= =======
Total Return, Based on Market Price(1)......... (12.06)% (0.89)% 20.93% 20.98% 23.83%
======== ======= ======= ======= =======
Ratios to Average Net Assets:
Operating expenses.......................... 1.20% 1.08% 1.10% 1.16% 1.22%
Net investment income....................... 10.86% 9.62% 9.53% 10.76% 11.68%
Net Assets, End of Year (000s)................. $59,024 $62,115 $71,951 $70,301 $63,931
Portfolio Turnover Rate........................ 100.3% 110.8% 112.2% 110.4% 128.2%
<FN>
- ------------
(1) 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.
</FN>
</TABLE>
Page 17
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
Report of Independent Accountants
To the Board of Directors and Shareholders of
Salomon Brothers High Income Fund Inc
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Salomon Brothers High Income
Fund Inc (the "Fund") at December 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 1999 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
February 11, 2000
- ------------------------------------------------------------------------------
See accompanying notes to financial statements.
Page 18
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
Selected Quarterly Financial Information (unaudited)
Summary of quarterly results of operations:
<TABLE>
<CAPTION>
Net Realized
Net Investment & Unrealized
Income Gain (Loss)
------------------ --------------------
Quarters Ended* Total Per Share Total Per Share
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March 31, 1998............................................... 1,663 0.34 959 0.20
December 31, 1998............................................ 1,546 0.32 (2,419) (0.50)
September 30, 1998........................................... 1,651 0.34 (9,027) (1.86)
December 31, 1998............................................ 1,651 0.34 1,271 0.27
March 31, 1999............................................... 1,593 0.33 166 0.03
June 30, 1999................................................ 1,505 0.31 (645) (0.13)
September 30, 1999........................................... 1,701 0.34 (3,265) (0.66)
December 31, 1999............................................ 1,764 0.36 805 0.16
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Totals expressed in thousands of dollars except per share amounts.
Other Information (unaudited)
Year 2000 Issue. As the year 2000 began, there were few problems caused by the
inability of certain computer systems to tell the difference between the year
2000 and the year 1900 (commonly known as the "Year 2000" issue). It is still
possible that some computer systems could malfunction in the future because of
the year 2000 issue or as a result of actions taken to address the Year 2000
issue. The Investment Adviser does not anticipate that its services or those of
the Fund's other service providers will be adversely affected, but the
Investment Adviser will continue to monitor the situation. If malfunctions
related to the Year 2000 issue do arise, the Fund and its investments could be
negatively affected.
Page 19
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
Dividend Reinvestment Plan (unaudited)
Pursuant to certain rules of the Securities and Exchange Commission the
following additional disclosure is provided.
Pursuant to the Fund's Dividend Reinvestment and Cash Purchase Plan ("Plan")
shareholders whose shares of Common Stock are registered in their own names will
be deemed to have elected to have all distributions automatically reinvested by
American Stock Transfer & Trust Company ("Plan Agent") in Fund shares pursuant
to the Plan, unless such shareholders elect to receive distributions in cash.
Shareholders who elect to receive distributions in cash will receive all
distributions in cash paid by check in dollars mailed directly to the
shareholder by American Stock Transfer & Trust Company, as dividend paying
agent. In the case of shareholders, such as banks, brokers or nominees, that
hold shares for others who are beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholders as representing the total amount registered in such shareholders'
names and held for the account of beneficial owners that have not elected to
receive distributions in cash. Investors that own shares registered in the name
of a bank, broker or other nominee should consult with such nominee as to
participation in the Plan through such nominee, and may be required to have
their shares registered in their own names in order to participate in the Plan.
The Plan Agent serves as agent for the shareholders in administering the Plan.
If the directors of the Fund declare an income dividend or a capital gains
distribution payable either in the Fund's Common Stock or in cash,
nonparticipants in the Plan will receive cash and participants in the Plan will
receive Common Stock, to be issued by the Fund or purchased by the Plan Agent in
the open market, as provided below. If the market price per share on the
valuation date equals or exceeds net asset value per share on that date, the
Fund will issue new shares to participants at net asset value; provided,
however, 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. The
valuation date will be the dividend or distribution payment date or, if that
date is not a New York Stock Exchange trading day, the next preceding trading
day. If net asset value exceeds the market price of Fund shares at such time, or
if the Fund should declare an income dividend or capital gains distribution
payable only in cash, the Plan Agent will, as agent for the participants, buy
Fund shares in the open market, on the New York Stock Exchange or elsewhere, for
the participants' accounts on, or shortly after, the payment date. If, before
the Plan Agent has completed its purchases, the market price exceeds the net
asset value of a Fund share, the average per share purchase price paid by the
Plan Agent may exceed the net asset value of the Fund's shares, resulting in the
acquisition of fewer shares than if the distribution had been paid in shares
issued by the Fund on the dividend payment date. Because of the foregoing
difficulty with respect to open-market purchases, the Plan provides that if the
Plan Agent is unable to invest the full dividend amount in open-market purchases
during the purchase period or if the market discount shifts to a market premium
during the purchase period, the Plan Agent will cease making open-market
purchases and will
Page 20
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
Dividend Reinvestment Plan (unaudited) (continued)
receive the uninvested portion of the dividend amount in newly issued shares at
the close of business on the last purchase date.
Participants have the option of making additional cash payments to the Plan
Agent, monthly, in a minimum amount of $250, for investment in the Fund's Common
Stock. The Plan Agent will use all such funds received from participants to
purchase Fund shares in the open market on or about the first business day of
each month. Any voluntary cash payments received more than 30 days prior to
these dates will be returned by the Plan Agent, and interest will not be paid on
any uninvested cash payments. To avoid unnecessary cash accumulations, and also
to allow ample time for receipt and processing by the Plan Agent, it is
suggested that participants send in voluntary cash payments to be received by
the Plan Agent approximately ten days before an applicable purchase date
specified above. A participant may withdraw a voluntary cash payment by written
notice, if the notice is received by the Plan Agent not less than 48 hours
before such payment is to be invested.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in an account, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in the name of the
participant, and each shareholder's proxy will include those shares purchased
pursuant to the Plan.
There is no charge to participants for reinvesting dividends or capital gains
distributions or voluntary cash payments. The Plan Agent's fees for the
reinvestment of dividends and capital gains distributions and voluntary cash
payments will be paid by the Fund. There will be no brokerage charges with
respect to shares issued directly by the Fund as a result of dividends or
capital gains distributions payable either in stock or in cash. However, each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases in connection with the
reinvestment of dividends and capital gains distributions and voluntary cash
payments made by the participant or any dividends or capital gains distributions
payable only in cash. Brokerage charges for purchasing small amounts of stock
for individual accounts through the Plan are expected to be less than the usual
brokerage charges for such transactions, because the Plan Agent will be
purchasing stock for all participants in blocks and prorating the lower
commission thus attainable.
The receipt of dividends and distributions under the Plan will not relieve
participants of any income tax which may be payable on such dividends or
distributions.
Participants may terminate their accounts under the Plan by notifying the Plan
Agent in writing. Such termination will be effective immediately if notice is
received by the Plan Agent not less than ten days prior to any dividend or
distribution record date. Upon termination, the Plan Agent will send the
participant a certificate for the full shares held in the account and a cash
adjustment for any fractional shares to be delivered to each shareholder without
charge.
Page 21
<PAGE>
SALOMON BROTHERS HIGH INCOME FUND INC
Dividend Reinvestment Plan (unaudited) (continued)
Experience under the Plan may indicate that changes in the Plan are desirable.
Accordingly, the Fund and the Plan Agent reserve the right to terminate the Plan
as applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to notice of the termination sent to members of the Plan at
least 30 days before the record date for such dividend or distribution. The Plan
also may be amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
authority) only by at least 30 days' written notice to participants in the Plan.
All correspondence concerning the Plan should be directed to the Plan Agent at
40 Wall Street, 46th floor, New York, New York 10005.
Page 22
<PAGE>
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
HEATH B. MCLENDON
Managing Director, Salomon Smith Barney Inc.;
President and Director,
SSB Citi Fund Management LLC
and Travelers Investment 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
Controller
CHRISTINA T. SYDOR
Secretary
Salomon Brothers High Income Fund 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
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
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
HIF
<PAGE>
Salomon Brothers
High Income Fund Inc
Annual Report
December 31, 1999
-----------------------------------------
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
\ HIFANN 12/99
