As filed with the Securities and Exchange Commission on July
14, 1994
Registration Nos. 33-56408
and 811-7396
____________________________________________________________
__________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933 X
Pre-Effective Amendment No. __
Post-Effective Amendment No.
1
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 X
Amendment No. 3
X
(Check appropriate box or boxes)
______________________________
MANAGED HIGH INCOME PORTFOLIO INC.
Exact name of registrant as specified in its charter
Two World Trade Center
New York, New York 10048
Address of principal executive offices
Registrant's Telephone Number, including Area Code: (212)
720-9218
______________________________
HEATH B. MCLENDON
Chairman of the Board
Managed High Income Portfolio Inc.
Two World Trade Center
New York, New York 10048
Name and address of agent for service
______________________________
Copies to:
BURTON M. LEIBERT, ESQ.
Willkie Farr & Gallagher
One Citicorp Center
153 E. 53d Street
new York, New York 10022
______________________________
Approximate date of proposed public offering:
As soon as practicable after the effective date of this
Registration Statement.
______________________________
If any of the securities being registered on this Form
are to be offered on a delayed or continuous basis pursuant
to Rule 415 under the Securities Act of 1933, check the
following box. X
This Registration Statement relates to the
registration of an inderminate number of shares solely for
market-making transactions. A fee of $100 is being paid at
this time. This Registration Statement relates to shares
previously registered on Form N-2 (Registration No. 33-
56408).
The Registrant hereby amends this Registration
Statement under the Securities Act of 1933 on such date or
dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with the
provisions of Section 8(a) of the Securities Act of 1933 or
until the registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section
8(a), may determine.
MANAGED HIGH INCOME PORTFOLIO INC.
FORM N-2
Cross Reference Sheet
Part A.
Item No. Caption Prospectus Caption
1 Outside Front Cover Outside Front Cover of
Prospectus
2 Inside Front and
Outside Back Cover
Page Inside Front and Outside Back
Cover Page of Prospectus
3 Fee Table and Synopsis Prospectus Summary,
Portfolio
Expenses
4 Financial Highlights Financial Highlights
5 Plan of Distribution Prospectus Summary; The
Offering; Stock Purchases
and Tenders
6 Selling Shareholders Not Applicable
7 Use of Proceeds Use of Proceeds
8 General Description of
Registrant Prospectus Summary; The
Portfolio; Investment Objective
and Policies; Description of
Common Stock; Share Price
Data; Net Asset Value;
Certain Provisions of the
Articles of Incorporation;
Appendix
9 Management Management of the Portfolio;
Description of Common Stock;
Custodian, Transfer Agent,
Dividend-Paying Agent and
Registrar
10 Capital Stock, Long-Term
Debt and Other
Securities Dividends and Distributions;
Dividend Reinvestment Plan;
Taxation; Description of Common
Stock; Net Asset Value
11 Defaults and Arrears on
Senior Securities Not Applicable
12 Legal Proceedings Not Applicable
13 Table of Contents of the
Statement of Additional
Information Further Information
Part B. Statement of
Item No. Caption Additional Information
14 Cover Page Cover Page of Statement of
Additional Information
15 Table of Contents Cover Page of Statement of
Additional Information
16 General Information
and History The Portfolio (in Prospectus)
17 Investment Objectives
and Policies Investment Objective and
Policies;
Investment Objective and Policies
(in Prospectus)
18 Management Management of the Portfolio;
Directors and Executive Officers
of the Portfolio
19 Control Persons and
Principal Holders of
Securities Management of the Portfolio
20 Investment Advisory
and Other Services Investment Adviser;
Administrator
and Sub-Administrator;
Management of the Portfolio
21 Brokerage Allocation and
Other Practices Portfolio Transactions and
Turnover; Management of the
Portfolio
22 Tax Status Taxes; Taxation (in Prospectus)
23 Financial Statements Financial Statements;
Report of
Independent Accountants
PROSPECTUS DATED JULY 15, 1994
<PAGE>
PROSPECTUS
JULY 18, 1994
COMMON STOCK
MANAGED HIGH INCOME PORTFOLIO INC.
---------------
Managed High Income Portfolio Inc. (the "Portfolio")
is a diversified,
closed-end management investment company whose primary
investment objective is
high current income. Capital appreciation is a
secondary objective. The
Portfolio will seek to achieve its investment objectives
by investing, under
normal circumstances, at least 65% of its assets in
high-yielding corporate
bonds, debentures and notes. For a description of the
risks involved in
investing in high-yield securities, see "Investment
Objectives and Management
Policies -- Risk Factors and Special Considerations." The
Portfolio's address is
Two World Trade Center, New York, New York 10048 and the
Portfolio's telephone
number is (212) 720-9218.
The Portfolio seeks to invest substantially all
of its assets in
high-yielding corporate bonds, debentures and notes. Up to
35% of its assets may
be invested in common stock or other equity or equity-
related securities,
including convertible securities, preferred stock,
warrants and rights.
Securities purchased by the Portfolio generally will be
rated in the lower
rating categories of recognized rating agencies, as
low as C by Moody's
Investors Service, Inc. ("Moody's") or D by Standard &
Poor's Corporation
("S&P"), or in unrated securities that the Portfolio's
investment adviser deems
of comparable quality. See "Investment Objectives and
Policies."
This Prospectus is to be used by Smith Barney Inc.
("Smith Barney") in
connection with offers and sales of the Portfolio's
Common Stock (the "Common
Stock") in market-making activities in the over-the-counter
market at negotiated
prices related to prevailing market at the time of the sale.
The Common Stock is
listed on the New York Stock Exchange Inc. (the "NYSE")
under the symbol "MHY."
Smith Barney intends to make a market in the Common
Stock. Management is not
obligated to conduct market-making activities and any such
activities may be
discontinued at any time without notice, at the sole
discretion of Smith Barney.
The shares of Common Stock that may be offered from time to
time pursuant to the
Prospectus were issued and sold by the Portfolio in a
public offering which
commenced March 18, 1993, at a price of $12.00 per share.
No issuance can be
given as to liquidity of, or the trading market for,
the Common Stock as a
result of any market-making activities undertaken by Smith
Barney. The Portfolio
will not receive any proceeds from the sale of any Common
Stock offered pursuant
to this Prospectus.
INVESTORS ARE ADVISED TO READ THIS PROSPECTUS, WHICH
SETS FORTH CONCISELY
THE INFORMATION ABOUT THE PORTFOLIO THAT A PROSPECTIVE
INVESTOR OUGHT TO KNOW
BEFORE INVESTING, AND TO RETAIN IT FOR FUTURE
REFERENCE. A STATEMENT OF
ADDITIONAL INFORMATION ("SAI") DATED JULY 18, 1994 HAS
BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ("SEC") AND IS
INCORPORATED BY REFERENCE IN
ITS ENTIRETY INTO THIS PROSPECTUS. A TABLE OF CONTENTS FOR
THE SAI IS SET FORTH
ON PAGE 28 OF THIS PROSPECTUS. A COPY OF THE SAI CAN BE
OBTAINED WITHOUT CHARGE
BY CALLING OR WRITING TO THE PORTFOLIO AT THE TELEPHONE
NUMBER OR ADDRESS SET
FORTH ABOVE OR BY CONTACTING ANY SMITH BARNEY FINANCIAL
CONSULTANT.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL
OFFENSE.
--------------------------
SMITH BARNEY INC.
---------------
<PAGE>
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON
STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
- ----
<S>
<C>
Prospectus
Summary.....................................................
..... 3
Portfolio
Expenses....................................................
...... 7
Financial
Highlights..................................................
...... 8
The
Portfolio...................................................
............ 9
The
Offering....................................................
............ 9
Use of
Proceeds....................................................
......... 9
Investment Objective and
Policies........................................... 9
Investment
Techniques..................................................
..... 10
Share Price
Data........................................................
.... 19
Management of the
Portfolio.................................................
20
Dividends and Distributions; Dividend Reinvestment
Plan.................... 21
Net Asset
Value.......................................................
...... 23
Taxation....................................................
................ 24
Description of Common
Stock................................................ 26
Stock Purchases and
Tenders.................................................
26
Certain Provisions of the Articles of
Incorporation......................... 27
Custodian, Transfer Agent and Dividend-Paying Agent and
Registrar........... 27
Further
Information.................................................
........ 28
Appendix
A...........................................................
....... A-1
</TABLE>
------------
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY
BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN
THE SAI.
<TABLE>
<S> <C>
The Portfolio......... The Portfolio is a diversified,
closed-end management investment
company. See "The Portfolio."
Investment
Objective........... The Portfolio seeks high current
income. Capital appreciation is a
secondary objective. See
"Investment Objective and Policies."
Investments........... The Portfolio will seek to achieve
its investment objectives by
investing, under normal
circumstances, at least 65% of its assets in
high-yielding corporate bonds,
debentures and notes. Up to 35% of
its assets may be invested in
common stock or other equity or
equity-related securities,
including convertible securities,
preferred stock, warrants and
rights. Although the Portfolio may
invest in securities of any
maturity, under current market
conditions, the Portfolio
intends that its portfolio of
fixed-income securities will have
an average remaining maturity of
between 5 and 10 years.
Securities purchased by the Portfolio
generally will be rated in
the lower rating categories of
recognized rating agencies, as low
as C by Moody's or D by S&P, or
in unrated securities that the
Portfolio's investment adviser
deems of comparable quality.
However, the Portfolio will not
purchase securities rated lower
than B by both Moody's and S&P if,
immediately after such purchase,
more than 10% of its total assets
are invested in such securities.
The Portfolio may invest up to
20% of its assets in the
securities of foreign issuers that are
denominated in currencies other
than the U.S. dollar and may
invest without limitation in
securities of foreign issuers that
are denominated in U.S. dollars.
There is no guarantee that the
Portfolio's investment
objectives will be achieved. See
"Investment Objectives and
Policies" and Appendix A.
The Offering.......... Smith Barney intends to make a
market in the Common Stock in
addition to trading of the Common
Stock on the NYSE. Smith Barney,
however, is not obligated to
conduct market-making activities and
any such activities may be
discontinued at any time without
notice, at the sole discretion of
Smith Barney.
Listing............... NYSE
Symbol................ MHY
Investment Adviser.... Greenwich Street Advisors, a
division of Mutual Management Corp.
("Greenwich Street Advisors")
serves as the Portfolio's investment
adviser. Mutual Management Corp.
provides investment advisory and
management services to investment
companies affiliated with Smith
Barney. Smith Barney is a wholly
owned subsidiary of Smith Barney
Holdings Inc. ("Holdings"),
which is in turn a wholly owned
subsidiary
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
of The Travelers Inc.
("Travelers"), a diversified financial
services holding company
principally engaged in the business of
providing investment, consumer
finance and insurance services.
Greenwich Street Advisors
renders investment advice to a wide
variety of individual and
institutional clients that had aggregate
assets under management, as of
May 31, 1994, in excess of $39.1
billion. The Portfolio pays
Greenwich Street Advisors a fee for
services provided to the Portfolio
that is computed daily and paid
monthly at the annual rate of .90%
of the value of the Portfolio's
average daily net assets. See
"Management of the Portfolio --
Investment Adviser."
Administrator......... Smith, Barney Advisers, Inc.
("SBA"), a subsidiary of Holdings,
serves as the Portfolio's
administrator. The Portfolio pays SBA a
fee for services provided to the
Portfolio that is computed daily
and paid monthly at the annual
rate of .20% of the value of the
Portfolio's average daily net
assets. See "Management of the
Portfolio -- Administrator."
Sub-Administrator..... The Boston Company Advisors, Inc.
("Boston Advisors"), a wholly
owned subsidiary of The Boston
Company, Inc. ("TBC"), which is in
turn wholly owned by Mellon Bank
Corporation ("Mellon"), serves as
the Portfolio's Sub-Administrator.
Boston Advisors is paid a fee
by SBA for its services. See
"Management of the Portfolio --
Sub-Administrator."
Custodian, Transfer
Agent and Dividend-
Paying Agent and
Registrar........... Boston Safe Deposit and Trust
Company ("Boston Safe") serves as the
Portfolio's custodian. The
Shareholder Services Group, Inc.
("TSSG"), a subsidiary of First
Data Corporation, serves as the
Portfolio's transfer agent,
dividend-paying agent and registrar.
See "Custodian, Transfer Agent
and Dividend-Paying Agent and
Registrar."
Dividends and
Distributions;
Dividend
Reinvestment Plan... The Portfolio expects to pay
monthly dividends of net investment
income (that is, income other than
net realized capital gains) and
to distribute net realized
capital gains, if any, annually. All
dividends or distributions will
be reinvested automatically in
additional shares through
participation in the Portfolio's
Dividend Reinvestment Plan, unless
a shareholder elects to receive
cash. See "Dividends and
Distributions; Dividend Reinvestment
Plan."
Discount from Net
Asset Value......... The shares of closed-end
investment companies often, although not
always, trade at a discount from
their net asset value. Whether
investors will realize gains or
losses upon the sale of Common
Stock will not depend
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
upon the Portfolio's net asset
value, but will depend entirely on
whether the market price of the
Common Stock at the time of sale
is above or below the original
purchase price of the shares. Since
the market price of the Common
Stock will be determined by factors
such as relative demand for and
supply of such shares in the
market, general market and
economic conditions and other factors
beyond the control of the
Portfolio, the Portfolio cannot predict
whether the Common Stock will
continue to trade at, below or above
net asset value. For that reason,
shares of the Portfolio's Common
Stock are designed primarily
for long-term investors, and
investors in the Portfolio's
Common Stock should not view the
Portfolio as a vehicle for
trading purposes. See "Investment
Objective and Policies -- Risk
Factors and Special Considerations"
and "Share Price Data."
Risk Factors
and Special
Considerations...... The Portfolio is a closed-end
investment company that is designed
primarily for long-term investors
and not as a trading vehicle.
The net asset value of the Common
Stock will change with changes
in the value of the securities
held by the Portfolio. Because the
Portfolio will invest primarily
in fixed-income securities, the
net asset value of the Common
Stock can be expected to change as
levels of interest rates
fluctuate; generally, when prevailing
interest rates increase, the value
of fixed-income securities held
by the Portfolio can be expected
to decrease and when prevailing
interest rates decrease, the value
of the fixed-income securities
held by the Portfolio can be
expected to increase. The value of
the fixed-income securities held
by the Portfolio, and thus the
Portfolio's net asset value,
may also be affected by other
economic, market and credit
factors. See "Investment Objectives
and Policies -- Risk Factors and
Special Considerations."
The Portfolio will invest in
medium- or low-rated securities and
unrated securities of
comparable quality. Generally, these
securities offer a higher
return potential than higher-rated
securities but involve greater
volatility of price and risk of
loss of income and principal
including the possibility of default
or bankruptcy of the issuers
of such securities. Medium-and
low-rated and comparable unrated
securities will likely have large
uncertainties or major risk
exposures to adverse conditions and
are predominantly speculative
with respect to the issuer's
capacity to pay interest and
repay principal in accordance with
the terms of the obligations. Up
to 10% of the Portfolio's assets
may be invested in securities
rated lower than B by both Moody's
and S&P, including bonds rated as
low as C by Moody's or D by S&P.
These bonds can be regarded as
having extremely poor prospects of
ever attaining any real
investment standing and may be in default
with payment of interest and/or
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
repayment of principal in
arrears. Accordingly, it is possible
that these types of factors
could, in certain instances, reduce
the value of securities held by
the Portfolio, with a commensurate
effect on the value of the
Portfolio's shares. See "Investment
Objectives and Management
Policies -- Risk Factors and Special
Considerations" and Appendix A.
Certain of the instruments held by
the Portfolio, and certain of the
investment techniques that the
Portfolio may employ, might expose
the Portfolio to special risks.
The instruments presenting the
Portfolio with risks are medium-
, low-and unrated securities,
convertible and synthetic
convertible securities, foreign
securities, non-publicly traded
and illiquid securities and
securities of developing
countries and unseasoned issuers.
Engaging in financial futures and
options transactions, engaging
in currency exchange and
foreign currency option transactions,
entering into securities
transactions on a when-issued or delayed
delivery basis, entering into
repurchase agreements and lending
portfolio securities are
investment techniques involving risks to
the Portfolio. See "Investment
Objectives and Management Policies
-- Risk Factors and Special
Considerations."
The Portfolio's Articles of
Incorporation include provisions that
could have the effect of limiting
the ability of other entities or
persons to acquire control of
the Portfolio and of depriving
shareholders of an opportunity
to sell their shares of Common
Stock at a premium over
prevailing market prices. See "Certain
Provisions of the Articles of
Incorporation."
Stock Purchases and
Tenders............. The Portfolio's Board of Directors
currently contemplates that the
Portfolio may from time to time
consider the repurchase of its
Common Stock on the open market
or make tender offers of the
Common Stock. See "Stock Purchases
and Tenders."
</TABLE>
6
<PAGE>
PORTFOLIO EXPENSES
THE FOLLOWING TABLES ARE INTENDED TO ASSIST INVESTORS
IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN THE
PORTFOLIO.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S>
<C>
Sales Load (as a percentage of offering
price)........................ None
Dividend Reinvestment and Cash Purchase Plan
Fee...................... None
ANNUAL PORTFOLIO OPERATING EXPENSES (as a percentage of
net assets) (1)
Investment Advisory and Administration
Fees........................... 1.10%
Other
Expenses....................................................
.... 0.09
TOTAL ANNUAL
EXPENSES...................................................
1.19
<FN>
- ------------------------
(1) See "Management of the Portfolio" for additional
information. "Other
Expenses" are based on data from the Fund's fiscal
period ended February
28, 1994.
</TABLE>
HYPOTHETICAL EXAMPLE
An investor would directly or indirectly pay the
following expenses on a
$1,000 investment in the Portfolio, assuming a 5% annual
return:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ------------ ---------- ---------
<S> <C> <C> <C>
$12 $38 $65 $144
</TABLE>
This Hypothetical Example assumes that all dividends and
other distributions
are reinvested at net asset value and that the percentage
amounts listed under
Annual Portfolio Operating Expenses remain the same in
the years shown. The
above tables and assumptions in the Hypothetical Example of
a 5% annual return
and reinvestment at net asset value are required by
regulations of the SEC
applicable to all investment companies; the assumed 5%
return is not a
prediction of, and does not represent, the projected or
actual performance of
the Common Stock.
THIS HYPOTHETICAL EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST
OR FUTURE EXPENSES, AND THE PORTFOLIO'S ACTUAL EXPENSES MAY
BE MORE OR LESS THAN
THOSE SHOWN.
7
<PAGE>
FINANCIAL HIGHLIGHTS
THE TABLES BELOW SET FORTH SELECTED FINANCIAL DATA FOR
AN OUTSTANDING SHARE
OF COMMON STOCK THROUGHOUT THE PERIOD PRESENTED. THE
PER SHARE OPERATING
PERFORMANCE AND RATIOS FOR THE PERIOD SHOWN HAVE BEEN
AUDITED BY COOPERS &
LYBRAND, THE PORTFOLIO'S INDEPENDENT ACCOUNTANTS, AS
STATED IN THEIR REPORT
DATED APRIL 8, 1994, THAT IS CONTAINED IN THE SAI AND
CAN BE OBTAINED BY
SHAREHOLDERS. THE FOLLOWING INFORMATION SHOULD BE READ IN
CONJUNCTION WITH THE
PORTFOLIO'S FINANCIAL STATEMENTS DATED FEBRUARY 28, 1994,
AND NOTES TO THOSE
FINANCIAL STATEMENTS, WHICH ARE INCORPORATED BY REFERENCE
INTO THIS PROSPECTUS.
PER SHARE OPERATING PERFORMANCE FOR A SHARE
OF THE
PORTFOLIO'S COMMON STOCK OUTSTANDING THROUGHOUT
THE PERIOD
<TABLE>
<CAPTION>
3/26/93 TO
2/28/94 (1)
---
- ---------
<S> <C>
Net Asset Value, Beginning of Period..................
$ 12.00
Net Investment Income...............................
.98
Net Realized and Unrealized Gains on Investments....
.51
Total from Investment Operations......................
1.49
---
- ---------
Offering Cost
Charged to Paid in Capital..........................
(.02)
---
- ---------
Less Distributions
Dividends from net investment income................
(.96)
Distributions from capital gains....................
(.12)
---
- ---------
Total Distributions...................................
(1.08)
---
- ---------
Net Asset Value, End of Period........................
$ 12.39
Per Share Market Value, End of Period.................
$ 11.75
---
- ---------
TOTAL INVESTMENT RETURN (2)...........................
6.85%
---
- ---------
---
- ---------
RATIOS/SUPPLEMENTAL DATA (3)
Net Assets, End of Period (in 000's)..................
$520,091
Ratios to Average Net Assets:
Operating Expenses (4)..............................
1.19%
Net Investment Income (4)..............................
8.74%
---
- ---------
Portfolio Turnover Rate...............................
108%
---
- ---------
---
- ---------
<FN>
- ------------------------------
(1) The Portfolio commenced operations on March 26, 1993.
(2) Total return represents aggregate return based on
market value for the
period indicated, and assumes reinvestment of
dividends and distributions
at prices obtained under the Portfolio's Dividend
Reinvestment Plan.
(3) Upon commencement of its investment operations and
until July 30, 1993, the
Portfolio employed Shearson Lehman Advisors, a
member of the Asset
Management Group of Shearson Lehman Brothers Inc., as
investment adviser.
On July 30, 1993, Shearson Lehman Advisors' business
was combined with that
of Mutual Management Corp. and renamed Greenwich
Street Advisors. See
"Management of the Portfolio -- Investment Adviser"
below.
(4) Annualized.
</TABLE>
8
<PAGE>
THE PORTFOLIO
The Portfolio is a diversified, closed-end management
investment company
that seeks a high level of current income with capital
appreciation as a
secondary objective. The Portfolio, which was incorporated
under the laws of the
State of Maryland on December 24, 1992, is registered
under the Investment
Company Act of 1940 ("1940 Act"), and has its principal
office at Two World
Trade Center, New York, New York 10048. The Portfolio's
telephone number is
(212) 720-9218.
THE OFFERING
Smith Barney intends to make a market in the Common
Stock, although it is
not obligated to conduct market-making activities and any
such activities may be
discontinued at any time without notice at the sole
discretion of Smith Barney.
No assurance can be given as to the liquidity of, or the
trading market for, the
Common Stock as a result of any market-making activities
undertaken by Smith
Barney. This Prospectus is to be used by Smith Barney in
connection with offers
and sales of the Common Stock in market-making
transactions in the
over-the-counter market at negotiated prices related to
prevailing market prices
at the time of sale.
USE OF PROCEEDS
The Portfolio will not receive any proceeds from the
sale of any Common
Stock offered pursuant to this Prospectus. Proceeds received
by Smith Barney as
a result of its market-making in the Common Stock will
be utilized by Smith
Barney in connection with its secondary market
operations and for general
corporate purposes.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio's investment objective is high current
income with capital
appreciation as a secondary objective. Set out below is a
description of the
investment objectives and principal investment policies
of the Portfolio. No
assurances can be given that the Portfolio will be
able to achieve its
investment objective. The Portfolio's investment objective
may not be changed
without the affirmative vote of the holders of a majority
(as defined in the
1940 Act) of the Portfolio's outstanding shares.
In seeking its objective, the Portfolio will
invest, under normal
circumstances at least 65% of its assets in high-
yielding corporate bonds,
debentures and notes. Although the Portfolio may invest
in securities of any
maturity, under current market conditions the Portfolio
intends that its
portfolio of fixed-income securities will have an average
remaining maturity of
between 5 and 10 years. Greenwich Street Advisors may
adjust the Portfolio's
average maturity when, based on interest rate trends
and other market
conditions, it deems it appropriate to do so. Up to 35%
of the Portfolio's
assets may be invested in common stock or other
equity or equity-related
securities, including convertible securities, preferred
stock, warrants and
rights. Equity investments may be made in securities of
companies of any size
depending on the relative attractiveness of the company and
the economic sector
in which it operates. Securities purchased by the
Portfolio generally will be
rated in the lower categories of recognized rating
agencies, as low as C by
Moody's or D by S&P, or, if unrated, will be securities
that Greenwich Street
Advisors deems of comparable quality. However, the
Portfolio will not purchase
9
<PAGE>
securities rated lower than B by both Moody's and S&P if,
immediately after such
purchase, more than 10% of its total assets are invested in
such securities. The
Portfolio may hold securities with higher ratings when
the yield differential
between low-rated and higher-rated securities narrows and
the risk of loss may
be reduced substantially with only a relatively small
reduction in yield. The
Portfolio may also invest in higher-rated securities
when Greenwich Street
Advisors believes that a more defensive investment
strategy is appropriate in
light of market or economic conditions. The Portfolio
also may lend its
portfolio securities and purchase or sell securities
on a when-issued or
delayed-delivery basis.
The Portfolio may invest up to 20% of its assets in the
securities of foreign
issuers that are denominated in currencies other than the
U.S. dollar and may
invest without limitation in securities of foreign issuers
that are denominated
in U.S. dollars. In order to mitigate the effects of
uncertainty in future
exchange rates affecting the Portfolio's non-dollar
investments, the Portfolio
may engage in currency exchange transactions and currency
futures contracts and
related options and purchase options on foreign
currencies. The Portfolio also
may hedge against the effects of changes in the value of
its investments by
entering into interest rate futures contracts and
related options. Special
considerations associated with the Portfolio's investments
are described below.
INVESTMENT TECHNIQUES
The Portfolio may employ, among others, the investment
techniques described
below:
CORPORATE SECURITIES. Corporate securities in which
the Portfolio may
invest include corporate fixed-income securities of both
domestic and foreign
issuers, such as bonds, debentures, notes, equipment
lease certificates,
equipment trust certificates and preferred stock.
Certain of the corporate
fixed-income securities in which the Portfolio may invest
may involve equity
characteristics. In addition, the Portfolio may invest in
participations that
are based on revenues, sales or profits of an issuer or in
common stock offered
as a unit with corporate fixed-income securities.
MONEY-MARKET INSTRUMENTS. When Greenwich Street
Advisors believes that
economic circumstances warrant a temporary defensive
posture, the Portfolio may
invest without limitation in short-term money market
instruments rated Aaa or Aa
by Moody's or AAA or AA by S&P, or, if unrated, of
comparable quality in the
opinion of Greenwich Street Advisors. The Portfolio may
also invest in money
market instruments to help defray operating expenses, to
serve as collateral in
connection with certain investment techniques and to hold
as a reserve pending
the payment of dividends to investors. Money market
instruments in which the
Portfolio typically expects to invest include: U.S.
government securities; bank
obligations (including certificates of deposit, time
deposits and bankers'
acceptances of U.S. or foreign banks); commercial
paper; and repurchase
agreements. To the extent the Portfolio invests in
short-term money market
instruments, it may not be pursuing its investment
objectives.
REPURCHASE AGREEMENTS. The Portfolio may enter into
repurchase agreement
transactions with certain member banks of the Federal
Reserve System or with
certain dealers listed on the Federal Reserve Bank of
New York's list of
reporting dealers. Under the terms of a typical
repurchase agreement, the
Portfolio would acquire an underlying obligation for a
relatively short period
(usually not more than seven days) subject to an
obligation of the seller to
repurchase, and the Portfolio to resell, the obligation at
an agreed-upon price
and time, thereby determining the yield during the
Portfolio's holding period.
This arrangement results in a fixed rate of return that
is not subject to
10
<PAGE>
market fluctuations during the Portfolio's holding period.
Repurchase agreements
could involve certain risks in the event of default or
insolvency of the seller,
including possible delays or restrictions on the Portfolio's
ability to dispose
of the underlying securities, the risk of a possible decline
in the value of the
underlying securities during the period in which the
Portfolio seeks to assert
its rights to them, the risk of incurring expenses
associated with asserting
those rights and the risk of losing all or part of
the income from the
agreement. Greenwich Street Advisors, acting under the
supervision of the
Portfolio's Board of Directors, reviews on an ongoing
basis the value of the
collateral and the creditworthiness of the banks and
dealers with which the
Portfolio enters into repurchase agreements to evaluate
potential risk.
GOVERNMENT SECURITIES. U.S. government securities in
which the Portfolio
may invest include direct obligations of the United
States and obligations
issued by U.S. government agencies and instrumentalities.
Included among the
direct obligations of the United States are Treasury Bills,
Treasury Notes and
Treasury Bonds, which differ principally in terms of their
maturities. Included
among the securities issued by U.S. government agencies
and instrumentalities
are: securities that are supported by the full faith and
credit of the United
States (such as Government National Mortgage
Association certificates);
securities that are supported by the right of the issuer to
borrow from the U.S.
Treasury (such as securities of Federal Home Loan Banks);
and securities that
are supported by the credit of the instrumentality (such
as Federal National
Mortgage Association and Federal Home Loan Mortgage
Corporation bonds).
ZERO COUPON, PAY-IN-KIND AND DELAYED INTEREST
SECURITIES. The Portfolio may
invest in zero coupon, pay-in-kind and delayed interest
securities as well as
custodial receipts or certificates underwritten by
securities dealers or banks
that evidence ownership of future interest payments,
principal payments or both
on certain U.S. government securities. Zero coupon
securities pay no cash income
to their holders until they mature and are issued at
substantial discounts from
their value at maturity. When held to maturity, their
entire return comes from
the difference between their purchase price and
their maturity value.
Pay-in-kind securities pay interest through the issuance
to the holders of
additional securities, and delayed interest securities are
securities which do
not pay interest for a specified period. Custodial receipts
evidencing specific
coupon or principal payments have the same general
attributes as zero coupon
U.S. government securities but are not considered to
be U.S. government
securities. The Portfolio's investments in zero coupon, pay-
in-kind and delayed
interest securities will result in special tax
consequences. Although zero
coupon securities do not make interest payments, for tax
purposes a portion of
the difference between a zero coupon security's maturity
value and its purchase
price is taxable income of the Portfolio each year.
CONVERTIBLE SECURITIES AND SYNTHETIC CONVERTIBLE
SECURITIES. Convertible
securities are fixed-income securities that may be
converted at either a stated
price or stated rate into underlying shares of common
stock. Convertible
securities have general characteristics similar to both
fixed-income and equity
securities. Although to a lesser extent than with
fixed-income securities
generally, the market value of convertible securities
tends to decline as
interest rates increase and, conversely, tends to increase
as interest rates
decline. In addition, because of the conversion feature,
the market value of
convertible securities tends to vary with fluctuations in
the market value of
the underlying common stocks and, therefore, also will
react to variations in
the general market for equity securities. A unique
feature of convertible
securities is that as the market price of the underlying
common stock declines,
11
<PAGE>
convertible securities tend to trade increasingly on a
yield basis, and so may
not experience market value declines to the same extent as
the underlying common
stock. When the market price of the underlying common
stock increases, the
prices of the convertible securities tend to rise as a
reflection of the value
of the underlying common stock. While no securities
investments are without
risk, investments in convertible securities generally
entail less risk than
investments in common stock of the same issuer.
As fixed-income securities, convertible securities
are investments which
provide for a stable stream of income with generally higher
yields than common
stocks. Of course, like all fixed-income securities, there
can be no assurance
of current income because the issuers of the convertible
securities may default
on their obligations. Convertible securities, however,
generally offer lower
interest or dividend yields than non-convertible securities
of similar quality
because of the potential for capital appreciation. A
convertible security, in
addition to providing fixed income, offers the
potential for capital
appreciation through the conversion feature, which enables
the holder to benefit
from increases in the market price of the underlying
common stock. However,
there can be no assurance of capital appreciation
because securities prices
fluctuate.
Convertible securities generally are subordinated to
other similar but
non-convertible securities of the same issuer, although
convertible bonds, as
corporate debt obligations, enjoy seniority in right of
payment to all equity
securities, and convertible preferred stock is senior to
common stock of the
same issuer. Because of the subordination feature,
however, convertible
securities typically have lower ratings than similar non-
convertible securities.
Unlike a convertible security, which is a single
security, a synthetic
convertible security is comprised of two distinct
securities that together
resemble convertible securities in certain respects.
Synthetic convertible
securities are created by combining non-convertible bonds
or preferred stocks
with warrants or stock call options. The options that
will form elements of
synthetic convertible securities will be listed on a
securities exchange or on
the National Association of Securities Dealers Automated
Quotation System. The
two components of a synthetic convertible security, which
will be issued with
respect to the same entity, generally are not offered as
a unit, and may be
purchased and sold by the Portfolio at different times.
Synthetic convertible
securities differ from convertible securities in certain
respects, including
that each component of a synthetic convertible security
has a separate market
value and responds differently to market fluctuations.
Investing in synthetic
convertible securities involves the risk normally
involved in holding the
securities comprising the synthetic convertible security.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS.
When deemed advisable
by Greenwich Street Advisors, the Portfolio may enter
into interest rate and
currency futures contracts and may purchase and sell put
and call options on
such futures contracts. The Portfolio will enter into
such transactions for
hedging purposes or for other appropriate risk-management
purposes permitted
under the rules and regulations of the Commodity Futures
Trading Commission (the
"CFTC") and the SEC and may enter into closing
purchase transactions with
respect to options written by the Portfolio in order to
terminate existing
positions. There is no guarantee that such closing
transactions can be effected
at any particular time or at all. An interest rate
futures contract is a
standardized contract for the future delivery of a specified
security (such as a
U.S. Treasury Bond or U.S. Treasury Note) or its equivalent
at a future date at
a price set at the time of the contract. A
currency futures
12
<PAGE>
contract is a standardized contract for the future
delivery of a specified
amount of currency at a future date at a price set at the
time of the contract.
The Portfolio may only enter into futures contracts
traded on regulated
commodity exchanges.
An option on a futures contract, as contrasted with the
direct investment in
such a contract, gives the purchaser of the option the
right, in return for the
premium paid, to assume a position in a futures contract at
a specified exercise
price at any time on or before the expiration date of the
option. Upon exercise
of an option, the delivery of the futures position by the
writer of the option
to the holder of the option will be accomplished by delivery
of the accumulated
balance in the writer's futures margin account, which
represents the amount by
which the market price of the futures contract exceeds, in
the case of a call,
or is less than, in the case of a put, the exercise price
of the option on the
futures contract. The potential loss related to the
purchase of an option on a
futures contract is limited to the premium paid for the
option (plus transaction
costs). With respect to options purchased by the
Portfolio, there are no daily
cash payments made by the Portfolio to reflect changes
in the value of the
underlying contract; however, the value of the option does
change daily and that
change would be reflected in the net asset value of the
Portfolio.
The Portfolio may not enter into futures and options
contracts for which
aggregate initial margin deposits and premiums paid for
unexpired options to
establish positions that are not bona fide hedging
positions (as defined by the
CFTC), exceed 5% of the fair market value of the Portfolio's
total assets, after
taking into account unrealized profits and unrealized losses
on such contracts.
In the event that the Portfolio enters into short positions
in futures contracts
as a hedge against a decline in the value of the
Portfolio's portfolio
securities, the value of such futures contracts may not
exceed the total market
value of the Portfolio's investments. With respect to each
long position in a
futures contract or option thereon, the underlying
commodity value of such
contract always will be covered by cash or cash
equivalents set aside plus
accrued profits held in a segregated account. In addition,
certain provisions of
the Internal Revenue Code of 1986, as amended (the "Code"),
may limit the extent
to which the Portfolio may enter into futures contracts
or engage in options
transactions. See "Taxation."
CURRENCY EXCHANGE TRANSACTIONS AND OPTIONS ON FOREIGN
CURRENCIES. In order
to protect against uncertainty in the level of future
exchange rates, the
Portfolio may engage in currency exchange
transactions and purchase
exchange-traded put and call options on foreign currencies.
The Portfolio will
conduct its currency exchange transactions either on a
spot (i.e., cash) basis
at the rate prevailing in the currency exchange market or
through entering into
forward contracts to purchase or sell currencies. The
Portfolio's dealings in
forward currency exchange and options on Foreign
currencies are limited to
hedging involving either specific transactions or portfolio
positions.
A forward currency contract involves an obligation to
purchase or sell a
specific currency for an agreed-upon price at an agreed-upon
date, which may be
any fixed number of days from the date of the contract
agreed upon by the
parties. These contracts are entered into in the
interbank market conducted
directly between currency traders (usually large
commercial banks) and their
customers. Although these contracts are intended to
minimize the risk of loss
due to a decline in the value of the hedged currency, at the
same time they tend
to limit any potential gain that might result should the
value of the currency
increase.
13
<PAGE>
The Portfolio may purchase put options on a foreign
currency in which
securities held by the Portfolio are denominated to protect
against a decline in
the value of the currency in relation to the currency in
which the exercise
price is denominated. The Portfolio may purchase a call
option on a foreign
currency to hedge against an adverse exchange rate of the
currency in which a
security that it anticipates purchasing is denominated
in relation to the
currency in which the exercise price is denominated. An
option on a foreign
currency gives the purchaser, in return for a premium, the
right to sell, in the
case of a put, and buy, in the case of a call, the
underlying currency at a
specified price during the term of the option. Although
the purchaser of an
option on a foreign currency may constitute an effective
hedge by the Portfolio
against fluctuations in the exchange rates, in the
event of rate movements
adverse to the Portfolio's position, the Portfolio may
forfeit the entire amount
of the premium plus related transaction costs. Options on
foreign currencies
purchased by the Portfolio may be traded on domestic and
foreign exchanges or
traded over-the-counter.
Although the foreign currency market may not
necessarily be more volatile
than the market in other commodities, the foreign
currency market offers less
protection against defaults in the forward trading of
currencies than is
available when trading in currencies occurs on an
exchange. Because a forward
currency contract is not guaranteed by an exchange or
clearing-house, default on
the contract would deprive the Portfolio of unrealized
profits or force the
Portfolio to cover its commitments for the purchase or
resale, if any, at the
current market price.
WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY
TRANSACTIONS. In order to
secure yields or prices deemed advantageous at the
time, the Portfolio may
purchase or sell any portfolio securities on a when-issued
or delayed-delivery
basis. The Portfolio will enter into a when-issued
transaction for the purpose
of acquiring portfolio securities and not for the purpose
of leverage. In such
transactions delivery of the securities occurs beyond
the normal settlement
periods, but no payment or delivery is made by the Portfolio
prior to the actual
delivery or payment by the other party to the transaction.
Due to fluctuations
in the value of securities purchased or sold on
a when-issued or
delayed-delivery basis, the yields obtained on such
securities may be higher or
lower than the yields available in the market on the dates
when the investments
are actually delivered to the buyers. The Portfolio will
establish a segregated
account consisting of cash, U.S. government securities or
other high grade debt
obligations in an amount equal to the amount of
its when-issued and
delayed-delivery commitments. Placing securities rather
than cash in the
segregated account may have a leveraging effect on the
Portfolio's net assets.
The Portfolio will not accrue income with respect to a
when-issued security
prior to its stated delivery date.
LENDING OF PORTFOLIO SECURITIES. The Portfolio has
the ability to lend
portfolio securities to brokers, dealers and other
financial organizations.
These loans, if and when made, may not exceed 20% of the
Portfolio's assets
taken at value. Loans of portfolio securities will be
collateralized by cash,
letters of credit or U.S. government securities that are
maintained at all times
in an amount at least equal to the current market
value of the loaned
securities.
NON-PUBLICLY TRADED AND ILLIQUID SECURITIES. The
Portfolio may invest up to
20% of its assets in illiquid securities. The sale of
securities that are not
publicly traded is typically restricted under the Federal
securities laws. As a
result, the Portfolio may be forced to sell these
securities at less than fair
market value or may not be able to sell them when
Greenwich Street Advisors
believes it desirable to
14
<PAGE>
do so. The Portfolio's investments in illiquid securities
are subject to the
risk that should the Portfolio desire to sell any of
these securities when a
ready buyer is not available at a price that the Portfolio
deems representative
of its value, the value of the Portfolio's net assets
could be adversely
affected.
SECURITIES OF DEVELOPING COUNTRIES. A developing
country generally is
considered to be a country that is in the
initial stages of its
industrialization cycle. Investing in the equity and
fixed-income markets of
developing countries involves exposure to economic
structures that are generally
less diverse and mature, and to political systems that can
be expected to have
less stability, than those of developed countries.
Historical experience
indicates that the markets of developing countries have been
more volatile than
the markets of more mature economies of developed
countries; however, such
markets often have provided higher rates of return to
investors.
SECURITIES OF UNSEASONED ISSUERS. Securities in which
the Portfolio may
invest may have limited marketability and, therefore, may
be subject to wide
fluctuations in market value. In addition, the issuers of
certain securities may
lack a significant operating history and be dependent on
products or services
without an established market share.
SHORT SALES AGAINST THE BOX. The Portfolio may
make short sales of
securities in order to reduce market exposure and/or to
increase its income if,
at all times when a short position is open, the
Portfolio owns an equal or
greater amount of such securities or owns preferred
stock, debt or warrants
convertible or exchangeable into an equal or greater number
of the shares of the
securities sold short. Short sales of this kind are
referred to as short sales
"against the box." The broker-dealer that executes a
short sale generally
invests the cash proceeds of the sale until they are
paid to the Portfolio.
Arrangements may be made with the broker-dealer to
obtain a portion of the
interest earned by the broker on the investment of short
sale proceeds. The
Portfolio will segregate the securities against which
short sales against the
box have been made in a special account with its custodian.
Not more than 10% of
the Portfolio's net assets (taken at current value) may
be held as collateral
for such sales at any one time.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investment in the Portfolio involves risk factors and
special considerations,
such as those described below:
ZERO COUPON, PAY-IN-KIND AND DELAYED INTEREST
SECURITIES. As discussed
above, the Portfolio may invest in zero coupon, pay-in-kind
and delayed interest
securities as well as custodial receipts. Because
interest on zero coupon,
pay-in-kind and delayed interest securities is not paid on
a current basis, the
values of securities of this type are subject to greater
fluctuations than are
the values of securities that distribute income
regularly and may be more
speculative than such securities. Accordingly, the values
of these securities
may be highly volatile as interest rates rise or fall.
Additionally, although
typically under the terms of a custodial receipt the
Portfolio is authorized to
assert its rights directly against the issuer of the
underlying obligation, the
Portfolio may be required to assert through the custodian
bank such rights as
may exist against the underlying issuer. Thus, in the
event the underlying
issuer fails to pay principal and/or interest when due,
the Portfolio may be
subject to delays, expenses and risks that are greater
than those that would
have been involved if the Portfolio had purchased a
direct obligation of the
issuer. In addition, in the event that the
trust or custodial
15
<PAGE>
account in which the underlying security has been deposited
is determined to be
an association taxable as a corporation, instead of a
non-taxable entity, the
yield on the underlying security would be reduced in respect
of any taxes paid.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS.
Although the Fund
intends to enter into futures or options contracts only
if an active market
exists for the contracts, no assurance can be given that an
active market will
exist for the contracts at any particular time. If it is not
possible to close a
futures position in anticipation of adverse price
movements, the Fund would be
required to make daily cash payments of variation
margin. In those
circumstances, an increase in the value of the portion of
the portfolio being
hedged, if any, may offset partially or completely
losses on the futures
contract. No assurance can be given, however, that the
price of the securities
being hedged will correlate with the price movements in a
futures contract and,
thus, provide an offset to losses on the futures
contract or option on the
futures contract. In addition, in light of the risk of an
imperfect correlation
between securities in the Fund's portfolio that are the
subject of a hedging
transaction and the futures or options contract used as a
hedging device, the
hedge may not be fully effective because, for example,
losses on the portfolio
securities may be in excess of gains on the futures
contract or losses on the
futures contract may be in excess of gains on the portfolio
securities that were
the subject of the hedge. In an effort to compensate
for the imperfect
correlation of movements in the price of the securities
being hedged and
movements in the price of futures contracts, the Fund may
enter into futures
contracts or options on futures contracts in a greater or
lesser dollar amount
than the dollar amount of the securities being hedged
if the historical
volatility of the futures contract has been less or
greater than that of the
securities. This "over-hedging" or "under hedging" may
adversely affect the
Fund's net investment results if market movements are not
as anticipated when
the hedge is established.
If the Fund has hedged against the possibility of an
increase in interest
rates adversely affecting the value of securities held in
its portfolio and
rates decrease instead, the Fund will lose part or all of
the benefit of the
increased value of securities that it has hedged because it
will have offsetting
losses in its futures or options positions. In addition, in
those situations, if
the Fund has insufficient cash, it may have to sell
securities to meet daily
variation margin requirements on the futures contracts at a
time when it may be
disadvantageous to do so. These sales of securities
may, but will not
necessarily, be at increased prices that reflect the
decline in interest rates.
The Portfolio may enter into options transactions primarily
as hedges to reduce
investment risk, generally by making an investment
expected to move in the
opposite direction of a portfolio position. A hedge is
designed to offset a loss
on a portfolio position with a gain on the hedge position;
at the same time,
however, a properly correlated hedge will result in a
gain on the portfolio
position being offset by a loss on the hedge position. The
Portfolio bears the
risk that the prices of the securities being hedged will
not move in the same
amount as the hedge. The Portfolio will engage in hedging
transactions only when
deemed advisable by Greenwich Street Advisors. Successful
use by the Portfolio
of options will depend on Greenwich Street Advisors'
ability to correctly
predict movements in the direction of the stock underlying
the option used as a
hedge. Losses incurred in hedging transactions and
the costs of these
transactions will affect the Portfolio's performance.
The ability of the Portfolio to engage in closing
transactions with respect
to options depends on the existence of a liquid
secondary market. While the
Portfolio generally will purchase options only if
16
<PAGE>
there appears to be a liquid secondary market for the
options purchased or sold,
for some options no such secondary market may exist or the
market may cease to
exist.
FOREIGN SECURITIES. There are certain risks
involved in investing in
securities of companies and governments of foreign nations
which are in addition
to the usual risks inherent in domestic investments. These
risks include those
resulting from devaluation of currencies, future adverse
political and economic
developments and the possible imposition of currency
exchange blockages or other
foreign governmental laws or restrictions, reduced
availability of public
information concerning issuers and the lack of uniform
accounting, auditing and
financial reporting standards or of other regulatory
practices and requirements
comparable to those applicable to domestic companies. The
net asset value of the
Portfolio may be adversely affected by fluctuations in
value of one or more
foreign currencies relative to the U.S. dollar. Moreover,
securities of many
foreign issuers and their markets may be less liquid
and their prices more
volatile than those of securities of comparable domestic
issuers. In addition,
with respect to certain foreign countries, there is
the possibility of
expropriation, nationalization, confiscatory taxation and
limitations on the use
or removal of funds or other assets of the Portfolio,
including the withholding
of dividends. Foreign securities may be subject to foreign
government taxes that
could reduce the yield on such securities. Because the
Portfolio will invest in
securities denominated or quoted in currencies other
than the U.S. dollar,
changes in foreign currency exchange rates may adversely
affect the value of
portfolio securities and the appreciation or
depreciation of investments.
Investments in foreign securities also may result in higher
expenses due to the
cost of converting foreign currency to U.S. dollars,
the payment of fixed
brokerage commissions on foreign exchanges, the
expense of maintaining
securities with foreign custodians and the imposition of
transfer taxes or
transaction charges associated with foreign exchanges.
MEDIUM-, LOW- AND UNRATED SECURITIES. The Portfolio
may invest in medium-
or low-rated securities and unrated securities of comparable
quality. Generally,
these securities offer a higher return potential than
higher-rated securities
but involve greater volatility of price and risk of
loss of income and
principal, including the possibility of default or
bankruptcy of the issuers of
such securities. Medium- and low-rated and comparable
unrated securities will
likely have large uncertainties or major risk exposures to
adverse conditions
and are predominantly speculative with respect to the
issuer's capacity to pay
interest and repay principal in accordance with the terms
of the obligation.
Accordingly, it is possible that these types of
factors could, in certain
instances, reduce the value of securities held by the
Portfolio, with a
commensurate effect on the value of the Portfolio's shares.
The markets in which medium- and low-rated or
comparable unrated securities
are traded generally are more limited than those in
which higher-rated
securities are traded. The existence of limited markets for
these securities may
restrict the availability of securities for the Portfolio
to purchase and also
may have the effect of limiting the ability of the
Portfolio to (a) obtain
accurate market quotations for purposes of valuing
securities and calculating
net asset value and (b) sell securities at their fair
value to respond to
changes in the economy or the financial markets. The
market for medium- and
low-rated and comparable unrated securities is relatively
new and has not fully
weathered a major economic recession. Any such economic
downturn could adversely
affect the ability of the issuers of such securities to
repay principal and pay
interest thereon.
While the market values of medium- and low-rated and
comparable unrated
securities tend to react less to fluctuations in interest
rate levels than do
those of higher-rated securities, the market values of
certain of these
securities also tend to be more sensitive to individual
corporate developments
and changes in economic conditions than higher-rated
securities. In addition,
medium- and low-rated and comparable unrated securities
generally present a
higher degree of credit risk. Issuers of medium- and low-
rated and comparable
unrated securities are often highly leveraged
and may not
17
<PAGE>
have more traditional methods of financing available to
them so that their
ability to service their debt obligations during an
economic downturn or during
sustained periods of rising interest rates may be impaired.
The risk of loss due
to default by such issuers is significantly greater
because medium- and
low-rated and comparable unrated securities generally
are unsecured and
frequently are subordinated to the prior payment of
senior indebtedness. The
Portfolio may incur additional expenses to the extent
that it is required to
seek recovery upon a default in the payment of principal
or interest on its
portfolio holdings.
Fixed-income securities, including medium- and low-
rated and comparable
unrated securities, frequently have call or buy-back
features that permit their
issuers to call or repurchase the securities from their
holders, such as the
Portfolio. If an issuer exercises these rights during
periods of declining
interest rates, the Portfolio may have to replace the
security with a lower
yielding security, resulting in a decreased return to the
Portfolio.
Up to 10% of the Portfolio's assets may be invested in
securities rated lower
than B by both Moody's and S&P. Securities which are rated
Ba by Moody's or BB
by S&P have speculative characteristics with respect to
capacity to pay interest
and repay principal. Securities which are rated B generally
lack characteristics
of the desirable investment and assurance of interest
and principal payments
over any long period of time may be small. Securities which
are rated Caa or CCC
or below are of poor standing. Those issues may be in
default or present
elements of danger with respect to principal or interest.
Securities rated C by
Moody's and D by S&P are the lowest rating class and
indicate that payments are
in default or that a bankruptcy petition has been filed
with respect to the
issuer or that the issuer is regarded as having extremely
poor prospects. See
Appendix A for a description of corporate bond ratings by
Moody's and S&P.
In light of these risks, Greenwich Street Advisors,
in evaluating the
creditworthiness of an issue, whether rated or unrated,
will take various
factors into consideration, which may include, as
applicable, the issuer's
financial resources, its sensitivity to economic
conditions and trends, the
operating history of and the community support for the
facility financed by the
issue, the ability of the issuer's management and regulatory
matters.
RATINGS AS INVESTMENT CRITERIA. In general, the
ratings of nationally
recognized statistical rating organizations ("NRSROs")
represent the opinions of
these agencies as to the quality of securities that they
rate. Such ratings,
however, are relative and subjective, and are not absolute
standards of quality
and do not evaluate the market value risk of the
securities. These ratings will
be used by the Portfolio as initial criteria for the
selection of portfolio
securities, but the Portfolio also will rely upon the
independent advice of
Greenwich Street Advisors to evaluate potential
investments. Among the factors
that will be considered are the long-term ability of the
issuer to pay principal
and interest and general economic trends.
Subsequent to its purchase by the Portfolio, an issue of
securities may cease
to be rated or its rating may be reduced below the minimum
required for purchase
by the Portfolio. In addition, it is possible that an NRSRO
might not change its
rating of a particular issue to reflect subsequent events.
None of these events
will require sale of such securities by the Portfolio,
but Greenwich Street
Advisors will consider such events in its determination
whether the Portfolio
should continue to hold the securities. In addition, to
the extent that the
ratings change as a result of changes in such
organizations or their rating
systems, or due to a corporate reorganization, the Portfolio
will attempt to use
comparable ratings as standards for its investments in
accordance with its
investment objectives and policies.
18
<PAGE>
INVESTMENT RESTRICTIONS
The Portfolio has adopted certain fundamental
investment restrictions that
may not be changed without the prior approval of the
holders of a majority of
the Portfolio's outstanding voting securities. A "majority
of the Portfolio's
outstanding voting securities" for this purpose means the
lesser of (1) 67% or
more of the shares of the Portfolio's Common Stock
present at a meeting of
shareholders, if the holders of 50% of the outstanding
shares are present or
represented by proxy at the meeting or (2) more than 50%
of the outstanding
shares. Among the investment restrictions applicable to
the Portfolio is that
the Portfolio is prohibited from borrowing money,
except for temporary or
emergency purposes, in amounts not exceeding 10% of its
total assets (not
including the amount borrowed) and as otherwise described
in this Prospectus;
when the Portfolio's borrowings exceed 5% of the value of
its total assets, the
Portfolio will not make any additional investments. In
addition, the Portfolio
will not invest more than 25% of its total assets in the
securities of issuers
in any single industry, except that this limitation will
not be applicable to
the purchase of U.S. government securities. For a
complete listing of the
investment restrictions applicable to the
Portfolio, see "Investment
Restrictions" in the Portfolio Statement of Additional
Information dated July
15, 1994. All percentage limitations included in the
investment restrictions
apply immediately after a purchase or initial investment,
and any subsequent
change in any applicable percentage resulting from market
fluctuations will not
require the Portfolio to dispose of any security that it
holds.
SHARE PRICE DATA
The Common Stock is traded on the NYSE under the symbol
"MHY." Smith Barney
also intends to make a market in the Portfolio's Common
Stock.
The following table sets forth the high and low sales
prices for the Common
Stock, the net asset value per share and the discount or
premium to net asset
value represented by the quotation for each quarterly
period since the
Portfolio's commencement of operations.
<TABLE>
<CAPTION>
QUARTERLY HIGH PRICE
QUARTERLY LOW PRICE
----------------------------- ----------
- --------------------
NET PREMIUM NET
PREMIUM
ASSET NYSE (DISCOUNT) ASSET
NYSE (DISCOUNT)
VALUE PRICE TO NAV VALUE
PRICE TO NAV
-------- ------- --------- --------
- ------- ----------
<S> <C> <C> <C> <C>
<C> <C>
5/31/93* $ 12.10 $ 12.50 .40 $ 11.96
$ 11.875 (.085)
8/31/93 12.44 12.375 (.065) 12.11
12.00 (.11)
11/30/93 12.44 12.375 (.065) 12.20
12.00 (.20)
2/28/94 12.53 12.50 (.03)
12.26 11.625 .635
<FN>
- ------------------------
*The Portfolio commenced operations on March 26, 1993.
</TABLE>
As of May 31, 1994, the price of Common Stock as
quoted on the NYSE was
$11.00, representing a [discount] from the Common Stock's
net asset value of
$11.49 calculated on that day. Since the commencement
of the Portfolio's
operations, the Portfolio's shares have traded in the market
at prices that were
at times above, but generally were below, net asset value.
19
<PAGE>
MANAGEMENT OF THE PORTFOLIO
BOARD OF DIRECTORS
Overall responsibility for management and supervision of
the Portfolio rests
with the Portfolio's Board of Directors. The Directors
approve all significant
agreements with the Portfolio's investment
adviser, administrator,
sub-administrator, custodian and transfer agent. The day-
to-day operations of
the Portfolio are delegated to the Portfolio's investment
adviser, administrator
and sub-administrator. The SAI contains background
information regarding each
Director and executive officer of the Portfolio.
INVESTMENT ADVISER
Greenwich Street Advisors, a division of Mutual
Management Corp., located at
Two World Trade Center, New York, New York 10048, serves
as the Portfolio's
investment adviser. Greenwich Street Advisors, through
its predecessors, has
been in the investment counseling business since 1934
and renders investment
advice to a wide variety of individual, institutional and
investment company
clients with aggregate assets under management as of May
31, 1994 in excess of
$39 billion. Mutual Management Corp. is located at 1345
Avenue of the Americas,
New York, New York 10105 and is controlled by Holdings.
Smith Barney is located at 388 Greenwich Street, New
York, New York 10013.
Smith Barney, is also a wholly owned subsidiary of Holdings,
which in turn is a
wholly owned subsidiary of Travelers, a financial services
holding company which
provides through its subsidiaries investment, consumer
finance and insurance
services.
Subject to the supervision and direction of the
Portfolio's Board of
Directors, Greenwich Street Advisors manages the
securities held by the
Portfolio in accordance with the Portfolio's stated
investment objective and
policies, makes investment decisions for the
Portfolio, places orders to
purchase and sell securities on behalf of the Portfolio and
employs managers and
securities analysts who provide research services to
the Portfolio. The
Portfolio pays Greenwich Street Advisors a fee for
services provided to the
Portfolio that is computed daily and paid monthly at the
annual rate of .90% of
the value of the Portfolio's average daily net assets.
Transactions on behalf of the Portfolio are allocated
to various dealers by
Greenwich Street Advisors in its best judgment. The
primary consideration is
prompt and effective execution of orders at the most
favorable price. Subject to
that primary consideration, dealers may be selected
for their research,
statistical or other services to enable Greenwich Street
Advisors to supplement
its own research and analysis with the views and information
of other securities
firms. The Portfolio may use Smith Barney or a Smith Barney
affiliated broker in
connection with the purchase or sale of securities
when Greenwich Street
Advisors believes that the broker's charge for the
transaction does not exceed
usual and customary levels. The same standard applies to the
use of Smith Barney
as a broker in connection with entering into options and
futures contracts. The
Portfolio paid no brokerage commissions in the last fiscal
year.
PORTFOLIO MANAGEMENT
John C. Bianchi, Vice President and Investment Officer
of the Portfolio, is
primarily responsible for the management of the Portfolio's
assets. Mr. Bianchi
has served the Portfolio in this capacity since
20
<PAGE>
the Portfolio commenced operations in 1993 and manages the
day to day operations
of the Portfolio, including making all investment
decisions. Mr. Bianchi is a
Managing Director of Greenwich Street Advisors and, as such,
is the senior asset
manager for investment companies and other accounts
investing in high yield
securities.
ADMINISTRATOR
SBA, a wholly owned subsidiary of Holdings located at
1345 Avenue of the
Americas, New York, New York 10105, serves as the
Portfolio's administrator. SBA
provides investment management, investment advisory
and/or administrative
services to investment companies with total assets as of May
31, 1994 in excess
of $ 9 billion.
As the Portfolio's administrator, SBA generally manages
all aspects of the
Portfolio's administration and operation. The Portfolio
pays SBA a fee for
services that is computed daily and paid monthly at the
annual rate of .20% of
the Portfolio's average daily net assets. The combined
annual rate of fees paid
by the Portfolio for advisory and administrative services
is higher than the
rates for similar services paid by other publicly offered,
closed-end management
investment companies that have investment objectives and
policies similar to
those of the Portfolio.
SUB-ADMINISTRATOR
Boston Advisors, located at One Boston Place, Boston,
Massachusetts 02108,
serves as the Portfolio's sub-administrator pursuant to a
sub-administration
agreement between the Portfolio, SBA and Boston Advisers.
Boston Advisors is a
wholly owned subsidiary of TBC, a financial services
holding company, which is
in turn an indirect, wholly owned subsidiary of Mellon.
Boston Advisors provides
investment management, investment advisory and/or
administrative services to
investment companies with total assets, as of May 31,
1994, in excess of $89
billion. For its services, Boston Advisors receives a fee
from SBA.
Greenwich Street Advisors and SBA each bears all
expenses in connection with
the performance of the services it provides to the
Portfolio. The Portfolio will
bear all other expenses to be incurred in its operation,
including, but not
limited to: the costs incurred in connection with the
Portfolio's organization;
investment advisory and administration fees; fees for
necessary professional and
brokerage services; fees for any pricing service; the
costs of regulatory
compliance; the costs associated with maintaining the
Portfolio's corporate
existence; and costs of corresponding with the Portfolio's
shareholders.
DIVIDENDS AND DISTRIBUTIONS; DIVIDEND
REINVESTMENT PLAN
The Portfolio expects to pay monthly dividends of
net investment income
(that is, income other than net realized capital gains)
to the holders of the
Common Stock. Under the Portfolio's current policy, which
may be changed at any
time by its Board of Directors, the Portfolio's monthly
dividends will be made
at a level that reflects the past and projected
performance of the Portfolio,
which policy over time will result in the distribution of
all net investment
income of the Portfolio. Expenses of the Portfolio are
accrued each day. Net
realized capital gains, if any, will be distributed to the
shareholders at least
once a year.
21
<PAGE>
Under the Portfolio's Dividend Reinvestment Plan (the
"Plan"), a shareholder
whose shares of Common Stock are registered in his own
name will have all
distributions from the Portfolio reinvested automatically by
TSSG as agent under
the Plan, unless the shareholder elects to receive cash.
Distributions with
respect to shares registered in the name of a broker-
dealer or other nominee
(that is, in "Street Name") will be reinvested by the
broker or nominee in
additional shares under the Plan, unless the service is
not provided by the
broker or nominee or the shareholder elects to receive
distributions in cash.
Investors who own Common Stock registered in Street Name
should consult their
broker-dealers for details regarding reinvestment.
All distributions to
Portfolio shareholders who do not participate in the Plan
will be paid by check
mailed directly to the record holder by or under the
direction of TSSG as
dividend-paying agent.
The number of shares of Common Stock distributed to
participants in the Plan
in lieu of a cash dividend is determined in the following
manner. Whenever the
market price of the Common Stock is equal to or exceeds the
net asset value per
share at the time shares are valued for purposes of
determining the number of
shares equivalent to the cash dividend or capital gains
distribution, Plan
participants will be issued shares of Common Stock valued
at the greater of (1)
the net asset value per share most recently determined as
described below under
"Net Asset Value" or (2) 95% of the then current market
value. To the extent the
Portfolio issues shares to participants in the Plan at a
discount to net asset
value, the remaining shareholders' interests in the
Portfolio's net assets will
be proportionately diluted.
If the net asset value per share of Common Stock at
the time of valuation
exceeds the market price of the Common Stock or if the
Portfolio declares a
dividend or capital gains distribution payable only in
cash, TSSG will buy
Common Stock in the open market, on the NYSE or elsewhere,
for the participants'
accounts. If, following the commencement of the purchases
and before TSSG has
completed its purchases, the market price exceeds the net
asset value of the
Common Stock, TSSG will attempt to terminate purchases in
the open market and
cause the Portfolio to issue the remaining dividend or
distribution in shares at
net asset value per share. In this case, the number of
shares of Common Stock
received by a Plan participant will be based on the
weighted average of prices
paid for shares purchased in the open market and the
price at which the
Portfolio issues the remaining shares. To the extent TSSG is
unable to stop open
market purchases and cause the Portfolio to issue the
remaining shares, the
average per share purchase price paid by TSSG may exceed
the net asset value of
the Common Stock, resulting in the acquisition of fewer
shares than if the
dividend or capital gains distribution had been paid in
Common Stock issued by
the Portfolio at net asset value. TSSG will apply all
cash received as a
dividend or capital gains distribution to purchase
Common Stock on the open
market as soon as practicable after the payment date of the
dividend or capital
gains distribution, but in no event later than 30 days
after that date, except
when necessary to comply with applicable provisions of the
federal securities
laws.
TSSG maintains all shareholder accounts in the Plan
and furnishes written
confirmations of all transactions in each account, including
information needed
by a shareholder for personal and tax records. The
automatic reinvestment of
dividends and capital gains distributions will not relieve
Plan participants of
any income tax that may be payable on the dividends
or capital gains
distributions.
22
<PAGE>
Common Stock in the account of each Plan participant will
be held by TSSG in
uncertificated form in the name of the Plan participant,
and each shareholder's
proxy will include those shares purchased pursuant to the
Plan.
Plan participants are subject to no charge for
reinvesting dividends and
capital gains distributions. TSSG's fees for handling
the reinvestment of
dividends and capital gains distributions will be paid by
the Portfolio. No
brokerage charges apply with respect to shares of Common
Stock issued directly
by the Portfolio as a result of dividends or capital gains
distributions payable
either in Common Stock or in cash. Each Plan participant
will, however, bear a
proportionate share of brokerage commissions incurred
with respect to open
market purchases made in connection with the
reinvestment of dividends or
capital gains distributions.
Experience under the Plan may indicate that changes to
it are desirable. The
Portfolio reserves the right to amend or terminate the
Plan as applied to any
dividend or capital gains distribution paid subsequent to
written notice of the
change sent to participants at least 30 days before the
record date for the
dividend or capital gains distribution. The Plan also
may be amended or
terminated by TSSG, with the Portfolio's prior written
consent, on at least 30
days' written notice to Plan participants. All
correspondence concerning the
Plan should be directed by mail to The Shareholders
Services Group, Inc., One
Exchange Place, Boston, Massachusetts 02109 or by telephone
at (617) 573-9300.
NET ASSET VALUE
The net asset value of shares of the Common Stock is
calculated as of the
close of regular trading on the NYSE, currently 4:00 p.m.,
New York time, on
each day on which the NYSE is open for trading. The
Portfolio reserves the right
to cause its net asset value to be calculated on a
less frequent basis as
determined by the Portfolio's Board of Directors. For
purposes of determining
net asset value, futures contracts and options on
futures contracts will be
valued 15 minutes after the close of regular trading on the
NYSE.
Net asset value per share of Common Stock is calculated
by dividing the value
of the Portfolio's total assets less liabilities. In
general, the Portfolio's
investments will be valued at market value, or in the
absence of market value,
at fair value as determined by or under the direction of
the Portfolio's Board
of Directors. Portfolio securities which are traded
primarily on foreign
exchanges are generally valued at the preceding
closing values of such
securities on their respective exchanges, except that
when an occurrence
subsequent to the time a value was so established is likely
to have changed such
value, then the fair market value of those securities
will be determined by
consideration of other factors by or under the
direction of the Board of
Directors or delegates. A security that is traded
primarily on an exchange is
valued at the last sale price on that exchange or, if there
were no sales during
the day, at the current quoted bid price. Over-the-counter
securities are valued
on the basis of the bid price at the close of business on
each day. Investments
in U.S. government securities (other than short-term
securities) are valued at
the average of the quoted bid and asked prices in the
over-the-counter market.
Short-term investments that mature in 60 days or less are
valued on the basis of
amortized cost (which involves valuing an investment
at its cost and,
thereafter, assuming a constant amortization to maturity
of any discount or
premium, regardless of the effect of fluctuating interest
rates on the market
value of the investment) when the Board of Directors
has determined that
amortized cost is fair value.
23
<PAGE>
The valuation of the Portfolio's assets is made by SBA
or Boston Advisors
after consultation with an independent pricing service (the
"Service") approved
by the Portfolio's Board of Directors. When, in the
judgment of the Service,
quoted bid prices for investments are readily available
and are representative
of the bid side of the market, these investments are valued
at the mean between
the quoted bid prices and asked prices. Investments for
which, in the judgment
of the Service, no readily obtainable market quotation is
available, are carried
at fair value as determined by the Service, based on
methods that include
consideration of: yields or prices of securities of
comparable quality, coupon,
maturity and type; indications as to values from dealers;
and general market
conditions. The Service may use electronic data processing
techniques and/or a
matrix system to determine valuations. The procedures
of the Service are
reviewed periodically by the officers of the Portfolio
under the general
supervision and responsibility of the Board of Directors,
which may replace the
Service at any time if it determines it to be in the
best interests of the
Portfolio to do so.
TAXATION
The following is a summary of the material federal
tax considerations
affecting the Portfolio and its shareholders; see
the SAI for further
discussion. In addition to the considerations described
below and in the SAI,
which are applicable to any investment in the Portfolio,
there may be other
federal, state, local or foreign tax considerations
applicable to particular
investors. Prospective shareholders are therefore urged
to consult their tax
advisors with respect to the consequences to them of an
investment in the
Portfolio.
The Portfolio has qualified, and intends to
qualify each year, as a
"regulated investment company" under Subchapter M of the
Code. In each taxable
year that the Portfolio so qualifies, the Portfolio will be
relieved of federal
income tax on that part of its investment company taxable
income (consisting
generally of taxable net investment income, net short-term
capital gain and net
realized gains from certain hedging transactions) and
long-term capital gain
that is distributed to its shareholders.
To qualify under Subchapter M of the Code, the
Portfolio must meet certain
requirements of the Code. In meeting these requirements,
the Portfolio may be
restricted in the selling of securities held by the
Portfolio for less than
three months and in the utilization of certain of the
investment techniques
described above under "Investment Objectives and
Management Policies --
Investment Techniques." As a regulated investment company,
the Portfolio will be
subject to a 4% non-deductible excise tax measured with
respect to certain
undistributed amounts of ordinary income and capital gain.
The Portfolio expects
to pay the dividends and make the distributions
necessary to avoid the
application of this excise tax.
The Portfolio's transactions, if any, in foreign
currencies, forward
contracts, options and futures contracts (including
options and forward
contracts on foreign currencies) will be subject to
special provisions of the
Code that, among other things, may affect the character
of gains and losses
recognized by the Portfolio (i.e., may affect whether
gains or losses are
ordinary or capital), accelerate recognition of income to
the Portfolio, defer
Portfolio losses and cause the Portfolio to be subject
to hyperinflationary
currency rules. These rules could therefore affect the
character, amount and
timing of distributions to shareholders. These provisions
also (1) will require
the Portfolio to mark-to-market certain types of its
positions (i.e., treat them
as if they were closed out) and (2) may
cause the Portfolio
24
<PAGE>
to recognize income without receiving cash with which to
pay dividends or make
distributions in amounts necessary to satisfy the
distribution requirements for
avoiding income and excise taxes. The Portfolio will
monitor its transactions,
will make the appropriate tax elections and will make the
appropriate entries in
its book and records when it acquires any foreign
currency, forward contract,
option, futures contract or hedged investment so that (1)
neither the Portfolio
nor its shareholders will be treated as receiving a
materially greater amount of
capital gains or distributions than actually realized or
received, (2) these
special provisions will not prevent the Portfolio from
using substantially all
of its losses for the fiscal years in which the losses
actually occur and (3)
the Portfolio will continue to qualify as a regulated
investment company.
Dividends paid from the Portfolio's net investment
income and distributions
of the Portfolio's net realized short-term capital
gains are taxable to
shareholders of the Portfolio as ordinary income,
regardless of the length of
time shareholders have held shares of Common Stock and
whether the dividends or
distributions are received in cash or reinvested in
additional shares.
Distributions of net long-term capital gains, if any,
will be taxable as
long-term capital gains, whether received in cash or
reinvested in shares and
regardless of how long the shareholder has held the
Portfolio shares.
A shareholder of the Portfolio receiving dividends
or distributions in
additional shares pursuant to the Plan should be treated for
federal income tax
purposes as receiving a distribution in an amount equal to
the amount of money
that a shareholder receiving cash dividends or
distributions receives, and
should have a cost basis in the shares received equal to
that amount.
Investors considering buying shares just prior to a
dividend or capital gain
distribution should be aware that, although the price of
shares purchased at
that time may reflect the amount of the forthcoming
distribution, those who
purchase just prior to a distribution will receive a
distribution that will
nevertheless be taxable to them.
Each shareholder will receive an annual statement as
to the federal income
tax status of his dividends and distributions from the
Portfolio for the prior
calendar year. Furthermore, shareholders will also
receive, if appropriate,
various written notices after the close of the
Portfolio's taxable year
regarding the federal income tax status of certain
dividends and distributions
that were paid (or that are treated as having been paid) by
the Portfolio to its
shareholders during the preceding year.
If a shareholder fails to furnish a correct taxpayer
identification number,
fails to report fully dividend or interest income, or
fails to certify that he
has provided a correct taxpayer identification number and
that he is not subject
to "backup withholding," the shareholder may be subject
to a 31% "backup
withholding" tax with respect to (1) taxable dividends and
distributions and (2)
the proceeds of any sales or repurchases of shares
of Common Stock. An
individual's taxpayer identification number is his
social security number.
Corporate shareholders and other shareholders specified in
the Code are or may
be exempt from backup withholding. The backup
withholding tax is not an
additional tax and may be credited against a taxpayer's
federal income tax
liability.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN TAX
CONSEQUENCES AFFECTING THE
PORTFOLIO AND ITS SHAREHOLDERS. SHAREHOLDERS ARE ADVISED
TO CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE PARTICULAR TAX
CONSEQUENCES TO THEM OF AN
INVESTMENT IN THE PORTFOLIO.
25
<PAGE>
DESCRIPTION OF COMMON STOCK
<TABLE>
<CAPTION>
AMOUNT HELD
AMOUNT OUTSTANDING
BY PORTFOLIO FOR
EXCLUSIVE OF SHARES
ITS OWN ACCOUNT
HELD BY PORTFOLIO FOR
AMOUNT AS OF MAY 31, ITS
OWN ACCOUNT AS OF
TITLE OF CLASS AUTHORIZED 1994
MAY 31, 1994
- -------------- ------------------ ---------------- ---
- ------------------
<S> <C> <C> <C>
Common Stock 500,000,000 Shares
</TABLE>
No shares, other than those currently outstanding,
are offered for sale
pursuant to this Prospectus. All shares of Common
Stock have equal
non-cumulative voting rights and equal rights with respect
to dividends, assets
and liquidation. Shares of Common Stock will be fully paid
and non-assessable
when issued and have no preemptive, conversion or exchange
rights. A majority of
the votes cast at any meeting of shareholders is sufficient
to take or authorize
action, except for election of Directors or as
otherwise provided in the
Portfolio's Articles of Incorporation as described under
"Certain Provisions of
the Articles of Incorporation."
Under the rules of the NYSE applicable to listed
companies, the Portfolio
will be required to hold an annual meeting of shareholders
in each year. If the
Portfolio's shares are no longer listed on the NYSE (or
any other national
securities exchange the rules of which require annual
meetings of shareholders),
the Portfolio may decide not to hold annual meetings of
shareholders. See "Stock
Purchases and Tenders."
The Portfolio has no current intention of offering
additional shares, except
that additional shares may be issued under the Plan.
See "Dividends and
Distributions; Dividend Reinvestment Plan." Other offerings
of shares, if made,
will require approval of the Portfolio's Board of Directors
and will be subject
to the requirement of the 1940 Act that shares may not be
sold at a price below
the then current net asset value (exclusive of
underwriting discounts and
commissions) except in connection with an offering to
existing shareholders or
with the consent of a majority of the Portfolio's
outstanding shares.
STOCK PURCHASES AND TENDERS
Although shares of closed-end investment companies
sometimes trade at
premiums over net asset value, they frequently trade at
discounts. Since the
Portfolio's commencement of operations, the Common Stock has
primarily traded at
a slight discount from its net asset value per share.
The Portfolio cannot
predict whether the Common Stock will continue to trade
above, at or below net
asset value. The Portfolio believes that, if the Common
Stock trades at a
discount to net asset value, the share price will not
adequately reflect the
value of the Portfolio to investors and that investors'
financial interests will
be furthered if the price of the Common Stock more
closely reflects its net
asset value. For these reasons, the Portfolio's Board of
Directors currently
intends to consider from time to time repurchases of
Common Stock on the open
market or in private transactions or the making of tender
offers for Common
Stock.
The Portfolio may repurchase shares of its Common Stock
in the open market or
in privately negotiated transactions when the Portfolio
can do so at prices
below their then current net asset value per share on
terms that the Board of
Directors believes represent a favorable
investment opportunity.
26
<PAGE>
In addition, the Board of Directors currently intends to
consider, at least
once a year, making an offer to each Common Stock
shareholder of record to
purchase at net asset value shares of Common Stock owned by
the shareholder.
Before authorizing any repurchase of Common Stock or
tender offer to the
Common Stock shareholders, the Portfolio's Board of
Directors would consider all
relevant factors, including the market price of the Common
Stock, its net asset
value per share, the liquidity of the Portfolio's
securities positions, the
effect an offer or repurchase might have on the Portfolio
or its shareholders
and relevant market conditions. Any offer would be made in
accordance with the
requirements of the 1940 Act and the Securities Exchange
Act of 1934. Although
the matter will be subject to Board of Directors review at
the time, a tender
offer is not expected to be made if the anticipated benefit
to shareholders and
the Portfolio would not be commensurate with the
anticipated cost to the
Portfolio, or if the number of shares expected to be
tendered would not be
material.
CERTAIN PROVISIONS OF THE ARTICLES OF
INCORPORATION
The Portfolio's Articles of Incorporation include
provisions that could have
the effect of limiting the ability of other entities or
persons to (i) acquire
control of the Portfolio, (ii) to cause it to engage in
certain transactions or
(iii) to modify its structure. These provisions could
have the effect of
depriving shareholders of an opportunity to sell their
shares of Common Stock at
a premium over prevailing market prices by discouraging
a third party from
seeking to obtain control of the Portfolio. The
provisions include the
classification of the Board of Directors and requirements
for the approval of
substantial majorities of the Portfolio's shareholders
for certain matters.
These provisions are set forth in detail in the SAI.
The Board of Directors has determined that the increased
voting requirements
required by the Articles of Incorporation, which are
generally greater than the
minimum requirements under Maryland law and the 1940
Act, are in the best
interests of shareholders generally. Reference should be
made to the Articles of
Incorporation on file with the SEC for the full text of
their provisions.
CUSTODIAN, TRANSFER AGENT AND
DIVIDEND-PAYING AGENT AND REGISTRAR
Boston Safe, an indirect, wholly owned subsidiary of
TBC, which is in turn
an indirect, wholly owned subsidiary of Mellon, located
at One Boston Place,
Boston, Massachusetts 02108, acts as custodian of the
Portfolio's investments.
Boston Safe is also an affiliate of Boston
Advisors, the Portfolio's
sub-administrator.
TSSG, located at One Exchange Place, Boston,
Massachusetts 02109, serves as
the Portfolio's transfer agent, dividend-paying agent and
registrar. TSSG, a
subsidiary of First Data Corporation, also serves as agent
in connection with
the Plan. Neither Boston Safe nor TSSG assists in or
is responsible for
investment decisions involving assets of the Portfolio.
Under the Custody Agreement, Boston Safe holds the
Portfolio's assets in
accordance with the provisions of the 1940 Act. Under the
Transfer Agency and
Registrar Agreement, TSSG maintains the shareholder
account records for the
Portfolio, distributes dividends and distributions
payable by the
27
<PAGE>
Portfolio and produces statements with respect to
account activity for the
Portfolio and its shareholders. The services to be
provided by TSSG as agent
under the Plan are described under "Dividends and
Distributions; Dividend
Reinvestment Plan."
FURTHER INFORMATION
Further information concerning the Common Stock and
the Portfolio may be
found in the Registration Statement, of which this
Prospectus and the SAI
constitute a part, on file with the SEC.
The Table of Contents for the SAI is as follows:
<TABLE>
<CAPTION>
PAGE
- ----
<S>
<C>
Investment Objective and
Policies.....................................2
Management of the
Portfolio...........................................10
Taxes.......................................................
..........15
Stock Purchases and
Tenders...........................................18
Additional
Information................................................1
9
Financial
Statements..................................................
19
Report of Independent Certified Public
Accountants....................20
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED
BY THE PORTFOLIO OR THE PORTFOLIO'S INVESTMENT ADVISER. THIS
PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY SECURITY
OTHER THAN THE SHARES OF COMMON STOCK, NOR DOES IT
CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF
COMMON STOCK BY ANYONE IN
ANY JURISDICTION IN WHICH THE OFFER OR SOLICITATION WOULD
BE UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE
AFFAIRS OF THE PORTFOLIO SINCE THE DATE HEREOF. IF ANY
MATERIAL CHANGE OCCURS
WHILE THIS PROSPECTUS IS REQUIRED BY LAW TO BE
DELIVERED, HOWEVER, THIS
PROSPECTUS WILL BE SUPPLEMENTED OR AMENDED ACCORDINGLY.
28
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS
DESCRIPTION OF MOODY'S CORPORATE BOND
RATINGS:
Aaa Bonds that are rated Aaa are judged to be of the
best quality, carry
the smallest degree of investment risk and are generally
referred to as "gilt
edge." Interest payments with respect to these bonds are
protected by a large or
by an exceptionally stable margin, and principal is secure.
Although the various
protective elements applicable to these bonds are
likely to change, those
changes are most unlikely to impair the fundamentally
strong position of these
bonds.
Aa Bonds that are rated Aa are judged to be of
high quality by all
standards and together with the Aaa group comprise what are
generally known as
high grade bonds. They are rated lower than the best
bonds because margins of
protection may not be as large as in Aaa securities,
or fluctuation of
protective elements may be of greater amplitude, or
other elements may be
present that make the long-term risks appear somewhat
larger than in Aaa
securities.
A Bonds that are rated A possess many favorable
investment attributes and
are to be considered as upper medium grade obligations.
Factors giving security
to principal and interest with respect to these bonds are
considered adequate,
but elements may be present that suggest a susceptibility to
impairment sometime
in the future.
Baa Bonds rated Baa are considered to be medium grade
obligations, that is,
they are neither highly protected nor poorly secured.
Interest payment and
principal security appear adequate for the present but
certain protective
elements may be lacking or may be characteristically
unreliable over any great
length of time. These bonds lack outstanding investment
characteristics and may
have speculative characteristics as well.
Ba Bonds that are rated Ba are judged to have
speculative elements; their
future cannot be considered as well assured. Often the
protection of interest
and principal payments may be very moderate and thereby
not well safeguarded
during both good and bad times over the future.
Uncertainty of position
characterizes bonds in this class.
B Bonds that are rated B generally lack
characteristics of desirable
investments. Assurance of interest and principal payments
or of maintenance of
other terms of the contract over any long period of time may
be small.
Caa Bonds that are rated Caa are of poor standing.
These issues may be in
default or present elements of danger may exist with
respect to principal or
interest.
Ca Bonds that are rated Ca represent obligations which
are speculative in a
high degree. Such issues are often in default or have other
marked shortcomings.
C Bonds that are rated C are the lowest rated class of
bonds, and issues so
rated can be regarded as having extremely poor prospects of
ever attaining any
real investment standing.
A-1
<PAGE>
Moody's applies the numerical modifiers 1, 2 and 3 in
each generic rating
classification from Aa through B. The modifier 1 indicates
that the security
ranks in the higher end of its generic rating category; the
modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the
lower end of its generic rating category.
DESCRIPTION OF S&P CORPORATE BOND RATINGS:
AAA Bonds rated AAA have the highest rating assigned
by S&P to a debt
obligation. Capacity to pay interest and repay principal is
extremely strong.
AA Bonds rated AA have a very strong capacity to
pay interest and repay
principal and differ from the highest rated issues only in
small degree.
A Bonds rated A have a strong capacity to pay interest
and repay principal
although they are somewhat more susceptible to the adverse
effects of changes in
circumstances and economic conditions than bonds in higher
rated categories.
BBB Bonds rated BBB are regarded as having an
adequate capacity to pay
interest and repay principal. Whereas they normally exhibit
adequate protection
parameters, adverse economic conditions or changing
circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for
bonds in this category than for bonds in higher rated
categories.
BB, B AND CCC Bonds rated BB and B are
regarded, on balance, as
predominantly speculative with respect to capacity to pay
interest and repay
principal in accordance with the terms of the obligation.
BB represents a lower
degree of speculation than B and CCC the highest degree of
speculation. While
such bonds will likely have some quality and protective
characteristics, these
are outweighed by large uncertainties or major risk
exposures to adverse
conditions.
C The rating C is reserved for income bonds on which
no interest is being
paid.
D Bonds rated D are in default, and payment of interest
and/or repayment of
principal is in arrears.
S&P's letter ratings may be modified by the addition of
a plus or a minus
sign, which is used to show relative standing within
the major rating
categories, except in the AAA-Prime Grade category.
A-2
<PAGE>
- -------------------------------------------------------
MANAGED HIGH INCOME
PORTFOLIO INC.
PROSPECTUS
JULY 15, 1994
[LOGO]
- -------------------------------------------------------
C O M M O N S T O
C K
STATEMENT OF ADDITIONAL INFORMATION DATED JULY 15, 1994
MANAGED HIGH INCOME PORTFOLIO INC.
Two World Trade Center
New York, New York 10048
(212) 720-9218
STATEMENT OF ADDITIONAL INFORMATION
July 18, 1994
Managed High Income Portfolio Inc. (the
"Portfolio") is a diversified closed-end management
investment company that seeks a high level of current
income with capital appreciation as a secondary
objective. Under normal conditions, in seeking its
investment objective, the Portfolio will invest at
least 65% of its assets in high-yielding corporate
bonds, debentures and notes. Up to 35% of its assets
may be invested in common stock or other equity or
equity-related securities, including convertible
securities, preferred stock, warrants and rights.
Securities purchased by the Portfolio generally will
be rated in the lower categories of recognized
ratings agencies, as low as C by Moody's Investors
Service, Inc. ("Moody's") or D by Standard & Poor's
Corporation ("S&P"), or in unrated securities that
the Portfolio's investment adviser deems of
comparable quality. No assurance can be given that
the Portfolio will be able to achieve its investment
objective.
This Statement of Additional Information ("SAI")
expands upon and supplements the information
contained in the current prospectus of the Portfolio,
dated July 18, 1994, as amended or supplemented from
time to time (the "Prospectus"), and should be read
in conjunction with the Prospectus. The Prospectus
may be obtained from any Smith Barney Financial
Consultant or by writing or calling the Portfolio at
the address or telephone number set forth above.
This SAI, although not itself a prospectus, is
incorporated by reference into the Prospectus in its
entirety.
No person has been authorized to give any
information or to make any representations not
contained in the Prospectus or this SAI and, if given
or made, such information must not be relied upon as
having been authorized by the Portfolio or the
Portfolio's investment adviser. The Prospectus and
this SAI do not constitute an offer to sell or a
solicitation of any offer to buy any security other
than the shares of Common Stock. The Prospectus and
this SAI do not constitute an offer to sell or a
solicitation of an offer to buy the shares of Common
Stock by anyone in any jurisdiction in which such
offer or solicitation would be unlawful. Neither the
delivery of the Prospectus nor any sale made
hereunder shall, under any circumstances, create any
implication that there has been no change in the
affairs of the Portfolio since the date hereof. If
any materials change occurs while the Prospectus is
required by law to be delivered, however, the
Prospectus or this SAI will be supplemented or
amended accordingly.
TABLE OF CONTENTS
Page
Investment Objective and Policies (see in the
Prospectus "Investment Objective and Policies"
and "Appendix A") 2
Portfolio Transactions and Turnover 9
Management of the Portfolio (see in the Prospectus
"Management of the Portfolio") 10
Taxes (see in the Prospectus "Taxation") 15
Stock Purchases and Tenders (see in the Prospectus
"Stock Purchases and Tenders" and
"Description of Common Stock") 18
Additional Information (see in the Prospectus
"Custodian, Transfer Agent and Dividend-Paying
Agent and Registrar") 19
Financial Statements 19
Report of Independent Accountants 20
INVESTMENT OBJECTIVE AND POLICIES
The Prospectus discusses the Portfolio's
investment objective and the policies it employs to
achieve that objective. The following discussion
supplements the description of the Portfolio's
investment policies in the Prospectus.
General
The Portfolio's investment objective is high
current income, with capital appreciation a secondary
objective. The Portfolio seeks to achieve its
objective by investing at least 65% of its assets in
high yielding corporate bonds, debentures and notes.
Although the Portfolio may invest in securities of
any maturity, under current market conditions the
Portfolio intends that its portfolio of fixed-income
securities will have an average remaining maturity of
between 5 and 10 years The Portfolio's investment
adviser, Greenwich Street Advisors ("Greenwich Street
Advisors"), a division of Mutual Management Corp.,
may adjust the Portfolio's average maturity when,
based on interest rate trends and other market
conditions, it deems it appropriate to do so. Up to
35% of the Portfolio's assets may be invested in
common stock or other equity or equity-related
securities, including convertible securities,
preferred stock, warrants and rights. The
Portfolio's investment objective may not be changed
without the affirmative vote of the holders of a
majority (as defined in the Investment company Act of
1940, as amended (the "1940 Act")) of the Portfolio's
outstanding voting shares. No assurance can be given
that the Portfolio's investment objective will be
achieved.
The Portfolio may make equity investments in
securities of companies of any size depending on the
relative attractiveness of the company and the
economic sector in which it operates. Securities
purchased by the Portfolio generally will be rated in
the lower categories of recognized rating agencies,
as low as C or D by S&P, or, if unrated, will be
securities that Greenwich Street Advisors deems of
comparable quality. However, the Portfolio will not
purchase securities rated lower than B by both
Moody's and S&P if, immediately after such purchase,
more than 10% of its total assets are invested in
such securities. The Portfolio may hold securities
with higher ratings when the yield differential
between low-rated and higher-rated securities narrows
and the risk of loss may be reduced substantially
with only a relatively small reduction in yield. The
Portfolio may also invest in higher-rated securities
when Greenwich Street Advisors believes that a more
defensive investment strategy is appropriate in light
of market or economic conditions. The Portfolio also
may lend its portfolio securities and purchase or
sell securities on a when-issued or delayed-delivery
basis.
The Portfolio may invest up to 20% of its assets
in the securities of foreign issuers that are
denominated in currencies other than the U.S. dollar
and may invest without limitation in securities of
foreign issuers that are denominated in U.S. dollars.
In order to mitigate the effects of uncertainty in
future exchange rates affecting the Portfolio's non-
dollar investments, the Portfolio may engage in
currency exchange transactions and currency futures
contracts and related options and purchase options on
foreign currencies. The Portfolio also may hedge
against the effects of changes in the value of its
investments by entering into interest rate futures
contracts and related options.
Use of Ratings as Investment Criteria. In
general, the ratings of Moody's and S&P represent the
opinions of those agencies as to the quality of the
securities and long-term investments which they rate.
It should be emphasized, however, that such ratings
are relative and subjective; they are not absolute
standards of quality and do not evaluate the market
risk of securities. These ratings will be used as
initial criteria for the selection of securities, but
the Portfolio also will rely upon the independent
advice of Greenwich Street Advisors. Among the
factors that will also be considered by Greenwich
Street Advisors in evaluating potential investments
are the long-term ability of the issuer to pay
principal and interest and general economic trends.
To the extent the Portfolio invests in lower-rated
and comparable unrated securities, the Portfolio's
achievement of its investment objective may be more
dependent on Greenwich Street Advisors' credit
analysis of such securities than would be the case
for a portfolio consisting entirely of higher-rated
securities. The Appendix to the Prospectus contains
information concerning the ratings of Moody's and S&P
and their significance.
Subsequent to its purchase by the Portfolio, a
security may cease to be rated or its rating may be
reduced below the rating given at the time the
security was acquired by the Portfolio. Neither
event will require the sale of such securities by the
Portfolio, but Greenwich Street Advisors will
consider such event in its determination of whether
the Portfolio should continue to hold the security.
In addition, to the extent the ratings change as a
result of changes in the rating systems or due to a
corporate restructuring of Moody's or S&P, the
Portfolio will attempt to use comparable ratings as
standards for its investments in accordance with its
investment objective and policies.
As more fully described in the Prospectus, the
markets in which medium- and low-rated securities or
comparable unrated securities are traded generally
are more limited than those in which higher-rated
securities are traded. Accordingly, the Portfolio
may be limited as to securities eligible for purchase
and may have difficulty obtaining accurate market
quotations for portfolio securities, or disposing of
portfolio securities at fair value. The market for
certain lower-rated and comparable unrated securities
is relatively new and has not fully weathered a major
economic recession. Any economic downturn could
adversely affect the ability of the issuers of such
securities to repay principal and pay interest
thereon.
Investment Techniques
The Prospectus discusses the investment
objectives of the Portfolio and the polices to be
employed to achieve those objectives. This section
contains supplemental information concerning the
types of securities and other instruments in which
the Portfolio may invest, the investment policies
that the Portfolio may utilize, and certain risks
attendant to such investments and policies.
Money Market Instruments. For defensive
purposes, the Portfolio may invest, without
limitation, in short-term money market instruments
rated in the two highest short-term ratings
categories by Moody's or S&P, the equivalent from
another major rating service or comparable unrated
securities. Money market securities in which the
Portfolio typically expects to invest include: U.S.
government securities; bank obligations (including
certificates of deposit, time deposits and bankers'
acceptances of U.S. or foreign banks); commercial
paper; and repurchase agreements.
Futures Contracts and Options on Futures
Contracts. As set forth in the Prospectus, the
Portfolio may enter into interest rate and currency
futures contracts and may purchase and sell put and
call options on such futures contracts. The
Portfolio will enter into such transactions for
hedging purposes or for other appropriate risk
management purposes permitted under the rules and
regulations of the Commodity Futures Trading
Commission (the "CFTC") and the Securities and
Exchange Commission (the "SEC").
Parties to a futures contract must make initial
"margin" deposits to secure performance of the
contract. There are also requirements to make
"variation" margin deposits from time to time as the
value of the futures contract fluctuates. The
Portfolio is not a commodity pool and, in accordance
with CFTC regulations currently in effect, may enter
into futures contracts or options on futures contacts
(as described below) only for "bona fide hedging"
purposes (as defined in CFTC regulations) and, in
addition, for other purposes, provided that aggregate
initial margin and premiums required to establish
such positions other than those considered by the
CFTC to be for "bona fide hedging" purposes will not
exceed 5% of the fair market value of the Portfolio's
total assets, after taking into account unrealized
profits and unrealized losses on such contracts. In
the event that the Portfolio enters into short
positions in futures contracts as a hedge against a
decline in the value of the Portfolio's securities,
the value of such futures contracts may not exceed
the total market value of the Portfolio's
investments. In addition, certain provisions of the
Internal Revenue Code of 1986, as amended (the
"Code"), may limit the extent to which the Portfolio
may enter into futures contracts or engage in options
transactions. See "Taxes."
Under regulations of the CFTC currently in
effect, which may change from time to time, with
respect to futures contracts to purchase securities,
call options on futures purchased by the Portfolio
and put options on futures written by the Portfolio,
the Portfolio will set aside in a segregated account
cash, U.S. government securities or other U.S.
dollar-denominated, high quality, short-term or other
money market instruments at least equal to the value
of instruments underlying such futures contracts less
the amount of initial margin on deposit for such
contracts. The current view of the staff of the SEC
is that the Portfolio's positions in futures
contracts as well as options on futures written by it
must be collateralized with cash or certain liquid
assets held in a segregated account or covered in
order to eliminate any potential leveraging. Under
interpretations of the SEC currently in effect, which
may change from time to time, a "covered" call option
means that so long as the Portfolio is obligated to
the writer of the option, it will own (1) the
underlying instruments subject to the option, (2)
instruments convertible or exchangeable into the
instruments subject to the option or (3) a call
option on the relevant instruments with an exercise
price no higher than the exercise price on the call
option written.
The Portfolio may either accept or make delivery
of cash or the underlying instrument specified at the
expiration of a futures contact or, prior to
expiration, enter into a closing transaction
involving the purchase or sale of an offsetting
contract. Closing transactions with respect to
futures contracts are effected on the exchange on
which the contract was entered into (or a linked
exchange).
The Portfolio may purchase and write put and
call options on futures contracts in order to hedge
all or a portion of its investments and may enter
into closing purchase transactions with respect to
options written by the Portfolio in order to
terminate existing positions. There is no guarantee
that such closing transactions can be effected at any
particular time or at all. In addition, daily limits
on price fluctuations on exchanges on which the
Portfolio conducts its futures and options
transactions may prevent the prompt liquidation of
positions at the optimal time, thus subjecting the
Portfolio to the potential of greater losses.
An option on a futures contract, as contrasted
with the direct investment in such a contract, gives
the purchaser of the option the right, in return for
the premium paid, to assume a position in a futures
contract at a specified exercise price at any time on
or before the expiration date of the option. Upon
exercise of an option, the delivery of the futures
position by the writer of the option to the holder of
the option will be accomplished by delivery of the
accumulated balance in the writer's futures margin
account, which represents the amount by which the
market price of the futures contract exceeds, in the
case of a call, or is less than, in the case of a
put, the exercise price of the option on the futures
contract. The potential loss related to the purchase
of an option on a futures contract is limited to the
premium paid for the option (plus transaction costs).
With respect to options purchased by the Portfolio,
there are no daily cash payments made by the
Portfolio to reflect changes in the value of the
underlying contract; however, the value of the option
does change daily and that change would be reflected
in the net asset value of the Portfolio.
While the Portfolio may enter into futures
contracts and options on futures contracts for bona
fide hedging and other appropriate risk management
purposes, the use of futures contracts and options on
futures contracts might result in a poorer overall
performance for the Portfolio than if it had not
engaged in any such transactions. If, for example,
the Portfolio had insufficient cash, it may have to
sell a portion of its underlying portfolio of
securities in order to meet daily variation margin
requirements on its futures contracts or options on
futures contracts at a time when it may be
disadvantageous to do so. There may be an imperfect
correlation between the Portfolio's investments and
futures contracts or options on futures contracts
entered into by the Portfolio, which may prevent the
Portfolio from achieving the intended hedge or expose
the Portfolio to risk of loss. Further, the
Portfolio's use of futures contacts and options on
futures contracts to reduce risk involves cost and
will be subject to Greenwich Street Advisors' ability
to predict correctly changes in interest rate
relationships or other factors. No assurance can be
given that Greenwich Street Advisors' judgment in
this respect will be correct.
Lending Securities. The Portfolio is authorized
to lend securities it holds to brokers, dealers and
other financial institutions, other than Greenwich
Street Advisors and its affiliates. Such loans may
not exceed 20% of the Portfolio's assets taken at
value. By lending its securities, the Portfolio can
increase its income by continuing to receive interest
on the loaned securities, by investing the cash
collateral in short-term instruments or by obtaining
yield in the form of interest paid by the borrower
when U.S. government securities are used as
collateral. The Portfolio will adhere to the
following conditions whenever it lends its
securities: (1) the Portfolio must receive at least
100% cash collateral or equivalent securities from
the borrower, which will be maintained by daily
market-to-market; (2) the borrower must increase the
collateral whenever the market value of the
securities loaned raises above the level of the
collateral; (3) the Portfolio must be able to
terminate the loan at any time; (4) the Portfolio
must receive reasonable interest on the loan, as well
as any dividends, interest or other distributions on
the loaned securities, and any increase in market
value; (5) the Portfolio may pay only reasonable
custodian fees in connection with the loan; and (6)
voting rights on the loaned securities may pass to
the borrower, except that, if a material event
adversely affecting the investment in the loaned
securities occurs, the Portfolio's Board of Directors
must terminate the loan and retain the Portfolio's
right to vote the securities. From time to time, the
Portfolio may pay a part of the interest earned from
the investment of collateral received for securities
loaned to the borrower and/or a third party that is
unaffiliated with the Portfolio and that is acting as
a "finder."
Currency Exchange Transactions and Options on
Foreign Currencies. In order to protect against
uncertainty in the level of future exchange rates,
the Portfolio may engage in currency exchange
transactions and purchase exchange-traded put and
call options on foreign currencies. The Portfolio
will conduct its currency exchange transactions
either on a spot (i.e., cash) basis at the rate
prevailing in the currency exchange market or through
entering into forward contacts to purchase or sell
currencies.
The Portfolio's dealings in forward currency
exchange transactions will be limited to hedging
involving either specific transactions or portfolio
positions. Transaction hedging is the purchase or
sale of forward currency contracts with respect to
specific receivables or payables of the Portfolio
generally arising in connection with the purchase or
sale of its securities. Position hedging, generally,
is the sale of forward currency contracts with
respect to portfolio security positions denominated
or quoted in the currency. The Portfolio may not
position hedge with respect to a particular currency
to an extent greater than the aggregate market value
at any time of the security or securities held in its
portfolio denominated or quoted in or currently
convertible (such as through exercise of an option or
consummation of a forward currency contract) into
that particular currency. If the Portfolio enters
into a transaction hedging or position hedging
transaction, it will cover the transaction through
one or more of the following methods: (a) ownership
of the underlying currency or an option to purchase
such currency; (b) ownership of an option to enter
into an offsetting forward currency contract; (c)
entering into a forward contract to purchase currency
being sold or to sell currency being purchased,
provided that such covering contract is itself
covered by any one of these methods unless the
covering contract closes out the first contract; or
(d) depositing into a segregated account with the
custodian or a sub-custodian of the Portfolio cash or
readily marketable securities in an amount equal to
the value of the Portfolio's total assets committed
to the consummation of the forward currency contract
and not otherwise covered. In the case of
transaction hedging, securities placed in the account
must be liquid debt securities. In any case, if the
value of the securities placed in the segregated
account declines, additional cash or securities will
be placed in the account so that the value of the
account will equal the above amount. Hedging
transactions may be made from any foreign currency
into dollars or into other appropriate currencies.
At or before the maturity of a forward contract,
the Portfolio may sell a portfolio security and make
delivery of the currency, or retain the security and
offset its contractual obligation to deliver the
currency by purchasing a second contract pursuant to
which the Portfolio will obtain, on the same maturity
date, the same amount of the currency which it is
obligated to deliver. If the Portfolio retains the
portfolio security and engages in an offsetting
transaction, the Portfolio, at the time of execution
of the offsetting transaction, will incur a gain or
loss to the extent movement has occurred in forward
contract prices. Should forward prices decline
during the period between the Portfolio's entering
into a forward contract for the sale of a currency
and the date it enters into an offsetting contract
for the purchase of the currency, the Portfolio will
realize a gain to the extent that the price of the
currency it has agreed to sell exceeds the price of
the currency it as agreed to purchase. Should
forward prices increase, the Portfolio will suffer a
loss to the extent the price of the currency that it
has agreed to purchase excess the price of the
currency it has agreed to sell.
The cost to the Portfolio of engaging in
currency transactions varies with factors such as the
currency involved, the length of the contract period
and the market conditions then prevailing. Because
transactions in currency exchange are usually
conducted on a principal basis, no fees or
commissions are involved. The use of forward
currency contracts does not eliminate fluctuations in
the underlying prices of the securities, but it does
establish a rate of exchange that can be achieved in
the future. In addition, although forward currency
contacts limit the risk of loss due to a decline in
the value of the hedged currency, at the same time,
they limit any potential gain that might result
should the value of the currency increase.
The Portfolio may purchase put options on a
foreign currency in which securities held by the
Portfolio are denominated to protect against a
decline in the value of the currency in relation to
the currency in which the exercise price is
denominated. The Portfolio may purchase a call
option on a foreign currency to hedge against an
adverse exchange rate of the currency in which a
security that it anticipates purchasing is
denominated in relation to the currency in which the
exercise price is denominated. Put options convey
the right to sell the underlying currency at a price
which is anticipated to be higher than the spot price
of the currency at the time the option expires. Call
options convey the right to buy the underlying
currency at a price which is expected to be lower
than the spot price of the currency at the time the
option expires.
The Portfolio may use foreign currency options
under the same circumstances that it could use
forward currency exchange transactions. A decline in
the dollar value of a foreign currency in which the
Portfolio's securities are denominated, for example,
will reduce the dollar value of the securities, even
if their value in the foreign currency remains
constant. In order to protect against such
diminution in the value of securities it holds, the
Portfolio may purchase put options on the foreign
currency. If the value of the currency does decline,
the Portfolio will have the right to sell the
currency for a fixed amount in dollars and will
thereby offset, in whole or in part, the adverse
effect on its securities that otherwise would have
resulted. Conversely, if a rise in the dollar value
of a currency in which securities to be acquired are
denominated is projected, thereby potentially
increasing the cost of the securities, the Portfolio
may purchase call options on the particular currency.
The purchase of these options could offset, at least
partially, the effects of the adverse movements in
exchange rates. The benefit to the Portfolio derived
from purchases of foreign currency options, like the
benefit derived from other types of options, will be
reduced by the amount of the premium and related
transaction costs. In addition, if currency rates do
not move in the direction or to the extent
anticipated, the Portfolio could sustain losses on
transactions in foreign currency options that would
require it to forego a portion or all of the benefits
of advantageous changes in the rates. Options on
foreign currencies purchased by the Portfolio may be
traded on domestic and foreign exchanges or traded
over-the-counter.
Investment Restrictions
The investment restrictions numbered 1 through
12 below have been adopted by the Portfolio as
fundamental investment restrictions that may not be
changed without the prior approval of the holders of
a majority of the Portfolio's outstanding voting
securities. A "majority of the Portfolio's
outstanding voting securities" for this purpose means
the lesser of (1) 67% or more of the shares of the
Portfolio's Common Stock present at a meeting of
shareholders, if the holders of 50% of the
outstanding shares are present or represented by
proxy at the meetings, or (2) more than 50% of the
outstanding shares. Investment restrictions numbered
13 and 14 may be changed by vote of a majority of the
Board of Directors at any time. For purposes of the
restrictions listed below, all percentage limitations
apply immediately after a purchase or initial
investment, and any subsequent change in applicable
percentage resulting from market fluctuations will
not require elimination of any security from the
portfolio.
The investment policies adopted by the Portfolio
prohibit the Portfolio from:
1. Purchasing the securities of any issuer
(other than U.S. government securities) if, as a
result, more than 5% of the value of the Portfolio's
total assets would be invested in the securities of
the issuer, except that up to 25% of the value of the
Portfolio's total assets may be invested without
regard to this 5% limitation.
2. Purchasing more than 10% of the voting
securities of any one issuer (other than U.S.
government securities), except that up to 25% of the
value of the Portfolio's total assets may be invested
without regard to the 10% limitation.
3. Purchasing securities on margin, except
that the Portfolio may obtain any short-term credits
necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the
deposit or payment of initial or variation margin in
connection with futures contracts or related options
will not be deemed to be a purchase of securities on
margin.
4. Making short sales of securities or
maintaining a short position, except that the
Portfolio may engage in short sales "against the
box."
5. Borrowing money, except that (a) the
Portfolio may borrow from banks for temporary or
emergency (not leveraging) purposes in an amount not
exceeding 10% of the value of the Portfolio's total
assets (including the amount borrowed) valued at the
time the borrowing is made and (b) the Portfolio may
enter into futures contacts. Whenever borrowings
described in (a) exceed a 5% of the value of the
Portfolio's total assets, the Portfolio will not make
any additional investments.
6. Pledging, hypothecating, mortgaging or
otherwise encumbering more than 10% of the value of
the Portfolio's total assets. For purposes of this
restriction, (a) the deposit of assets in escrow in
connection with the writing of options, the purchase
of securities on a when-issued or delayed-delivery
basis and the entry into forward currency contracts
and securities lending transactions and (b)
collateral arrangements with respect to options
transactions and margin for futures contracts and
options on futures contracts, will not be deemed to
be pledges of the Portfolio's assets.
7. Underwriting the securities of other
issuers, except insofar as the Portfolio may be
deemed an underwriter under the Securities Act of
1933, as amended (the "1933 Act"), by virtue of
disposing of portfolio securities.
8. Purchasing or selling real estate or
interests in real estate, except that the Portfolio
may purchase and sell securities that are secured by
real estate or interests in real estate and may
purchase securities issued by companies that invest
or deal in real estate.
9. Investing in commodities, except that the
Portfolio may invest in futures contracts and options
on futures contracts and options on currencies as
described under "Investment Objectives and Management
Policies."
10. Making loans to others, except through the
purchase of qualified debt obligations, the entry
into repurchase agreements and loans of portfolio
securities consistent with the Portfolio's investment
objectives and policies.
11. Investing in securities of other
investment companies registered or required to be
registered under the 1940 Act, except as they may be
acquired as part of a merger, consolidation,
reorganization, acquisition of assets or an offer of
exchange or to the extent permitted by the 1940 Act.
12. Purchasing any securities which would
cause more than 25% of the value of the Portfolio's
total assets at the time of purchase to be invested
in the securities of issuers conducting their
principal business activities in the same industry,
provided that there shall be no limit on the purchase
of U.S. government securities.
13. Purchasing illiquid securities (such as
repurchase agreements with maturities in excess of
seven days) or other securities that are not readily
marketable if more than 20% of the total assets of
the Portfolio would be invested in such securities.
14. Making investments for the purpose of
exercising control or management. This restriction
shall not limit the Portfolio's ability to
participate on committees seeking to include the
reorganization of portfolio companies.
PORTFOLIO TRANSACTIONS AND TURNOVER
Portfolio Transactions. The Portfolio's
securities ordinarily are purchased from and sold to
parties acting as either principal or agent. Newly
issued securities normally are purchased directly
from the issuer or from an underwriter acting as
principal. Other purchases and sales usually are
placed with those dealers from which it appears the
best price or execution will be obtained; those
dealers may be acting as either agents or principal.
Usually no brokerage commissions, as such, are paid
by the Portfolio for purchases and sales undertaken
through principal transactions, although the price
paid usually includes an undisclosed compensation to
the dealer acting as agent. The purchase price paid
by the Portfolio to underwriters of newly issued
securities usually includes a concession paid by the
issuer to the underwriter, and purchases of after-
market securities from dealers normally are executed
at a price between the bid and asked prices. The
Portfolio paid $40,287 in brokerage commissions for
its fiscal period ended February 28, 1994.
Allocation of transactions, including their
frequency, to various dealers is determined by
Greenwich Street Advisors in its best judgment and in
a manner deemed fair and reasonable to shareholders.
The primary considerations are availability of the
desired security and the prompt execution of orders
in a effective manner at the most favorable prices.
Subject to these considerations, dealers that provide
supplemental investment research and statistical or
other services to Greenwich Street Advisors may
receive orders for portfolio transactions by the
Portfolio. Information so received is in addition
to, and not in lieu of, services required to be
performed by Greenwich Street Advisors, and the fees
of Greenwich Street Advisors are not reduced as a
consequence of their receipt of such supplemental
information. Such information may be useful to
Greenwich Street Advisors in serving both the
Portfolio and other clients and, conversely,
supplemental information obtained by the placement of
business of other clients may be useful to Greenwich
Street Advisors in carrying out its obligations to
the Portfolio.
The Portfolio will not purchase securities
during the existence of any underwriting or selling
group relating thereto of which Smith Barney or its
affiliates are members, except to the extent
permitted by the SEC. Under certain circumstances,
the Portfolio may be at a disadvantage because of
this limitation in comparison with other investment
companies which have a similar investment objective
but which are not subject to such limitation.
While investment decisions for the Portfolio are
made independently from those of the other accounts
managed by Greenwich Street Advisors, investments of
the type the Portfolio may make also may be made by
those other accounts. When the Portfolio and one or
more other accounts managed by Greenwich Street
Advisors are prepared to invest in, or desire to
dispose of, the same security, available investments
or opportunities for sales will be allocated in a
manner believed by Greenwich Street Advisors to be
equitable to each. In some cases, this procedure may
adversely affect the price paid or received by the
Portfolio or the size of the position obtained or
disposed of by the Portfolio.
The Portfolio's Board of Directors will review
periodically the commissions paid by the Portfolio to
determine if the commissions paid over representative
periods of time were reasonable in relation to the
benefits inurring to the Portfolio.
Portfolio Turnover. The Portfolio's portfolio
turnover rate (the lesser of the Portfolio's
purchases or sales of portfolio securities during the
last fiscal year, excluding any security the maturity
of which at the time of acquisition is one year or
less, divided by the average monthly value of
portfolio securities) generally is not expected to
exceed 150%, but the turnover rate will not be a
limiting factor whenever the Portfolio deems it
desirable to sell or purchase securities. For the
fiscal period ended February 28, 1994, the
Portfolio's portfolio turnover rate was 108%.
MANAGEMENT OF THE PORTFOLIO
Directors and Executive Officers of the Portfolio
The overall management of the business and
affairs of the Portfolio is vested with its Board of
Directors. The Board of Directors approves all
significant agreements between the Portfolio and
persons or companies furnishing services to it,
including the Portfolio's agreements with its
investment adviser, administrator, sub-administrator,
custodian, transfer agent, dividend paying agent,
registrar and plan agent. The day-to-day operations
of the Portfolio are delegated to its officers and to
Greenwich Street Advisors, subject always to the
investment objective and polices of the Portfolio and
to general supervision by the Portfolio's Board of
Directors.
The Directors and Executive Officers of the
Portfolio, their addresses and information as to
their principal business occupations during the past
five years, are shown in the table below:
Name
and
Addres
s
Positi
ons
Held
With
the
Portfo
lio
Princi
pal
Occupa
tions
During
Past 5
Years
* Heat
h B.
McLend
on
Two
World
Trade
Center
New
York,
NY
10048
Chairm
an of
the
Board
of
Direct
ors,
Chief
Execut
ive
Office
r and
Direct
or
Execut
ive
Vice
Presid
ent of
Smith
Barney
Inc.
("Smit
h
Barney
);
Chairm
an of
Smith
Barney
Strate
gy
Advise
rs
Inc.
("Stra
tegy
Adviso
rs").
Prior
to
July
1993,
Senior
Execut
ive
Vice
Presid
ent of
Shears
on
Lehman
Brothe
rs
Inc.
("Shea
rson
Lehman
Brothe
rs");
Vice
Chairm
an of
Shears
on
Asset
Manage
ment,
a
member
of the
Asset
Manage
ment
Group
of
Shears
on
Lehman
Brothe
rs.
James
J.
Crison
a
118 E.
60th
Street
New
York,
NY
10022
Direct
or
Retire
d;
prior
to
Decemb
er
1992,
attorn
ey in
privat
e
practi
ce.
Former
ly a
Justic
e of
the
Suprem
e
Court
of the
State
of New
York.
Paolo
M.
Cucchi
Drew
Univer
sity
Colleg
e of
Libera
l Arts
Madiso
n, NJ
07940
Direct
or
Dean
of the
Colleg
e of
Drew
Univer
sity.
Alessa
ndro
di
Montez
emolo
200 E.
65th
Street
New
York,
NY
10021
Direct
or
Retire
d;
Former
Chairm
an of
the
Board
and
Chief
Execut
ive
Office
r of
Marsh
&
McLenn
an,
Inc.
Andrea
Farace
153 E.
53rd
Street
New
York,
NY
10022
Direct
or
Execut
ive
Vice
Presid
ent
and
Senior
Managi
ng
Direct
or,
'21'
Intern
ationa
l
Holdin
gs,
Inc.;
from
April
1991
to
March
1993,
Presid
ent of
'21'
Intern
ationa
l
Holdin
gs,
Inc.;
From
May
1990
to
April
1991,
Execut
ive of
C.I.R.
S.p.A.
; from
Octobe
r 1989
to May
1990,
Managi
ng
Direct
or of
Shears
on
Lehman
Hutton
Holdin
gs,
Inc.;
prior
to
Octobe
r
1989,
Senior
Vice
Presid
ent of
Shears
on
Lehman
Hutton
Holdin
gs,
Inc.
Paul
M.
Hardin
UNC -
Chapel
Hill
103
South
Buildi
ng
Charlo
tte,
NC
27599
Direct
or
Chance
llor
of the
Univer
sity
of
North
Caroli
na at
Chapel
Hill.
George
M.
Pavia
600
Madiso
n
Avenue
New
York,
NY
10022
Direct
or
Senior
Partne
r,
Pavia
&
Harcou
rt,
Attorn
eys
Stephe
n J.
Treadw
ay
1345
Avenue
of the
Americ
as
New
York,
NY
10105
Presid
ent
Execut
ive
Vice
Presid
ent
and
Direct
or of
Smith
Barney
;
Direct
or and
Presid
ent of
Mutual
Manage
ment
Corp.
and
Smith,
Barney
Advise
rs,
Inc.
Richar
d P.
Roelof
s
Two
World
Trade
Center
New
York,
NY
10048
Execut
ive
Vice
Presid
ent
Managi
ng
Direct
or of
Smith
Barney
and
Presid
ent of
Strate
gy
Advise
rs;
prior
to
July
1993,
Senior
Vice
Presid
ent of
Shears
on
Lehman
Bother
s;
Vice
Presid
ent of
Shears
on
Lehman
Strate
gy
Adviso
rs
Inc.,
an
invest
ment
adviso
ry
affili
ate of
Shears
on
Lehman
Brothe
rs.
John
C.
Bianch
i
Two
World
Trade
Center
New
York,
NY
10048
Vice
Presid
ent
and
Invest
ment
Office
r
Managi
ng
Direct
or of
Greenw
ich
Street
Adviso
rs;
prior
to
July
1993,
Managi
ng
Direct
or of
Shears
on
Lehman
Adviso
rs, an
invest
ment
adviso
ry
affili
ate of
Shears
on
Lehman
Brothe
rs.
Lewis
E.
Daidon
e
1345
Avenue
of the
Americ
as
New
York,
NY
10105
Treasu
rer
Managi
ng
Direct
or of
Smith
Barney
;
Direct
or and
Senior
Vice
Presid
ent of
Mutual
Manage
ment
Corp.
Prior
to
1990,
Senior
Vice
Presid
ent
and
Chief
Financ
ial
Office
r of
Cortla
nd
Financ
ial
Group,
Inc.
Christ
ina T.
Sydor
1345
Avenue
of the
Americ
as
New
York,
NY
10105
Secret
ary
Managi
ng
Direct
or of
Smith
Barney
.
* "Interested person" of the Portfolio (as defined in
the 1940 Act).
Director and/or trustee of other registered investment
companies with which Smith Barney is affiliated.
The Portfolio pays each of its directors who is
not a director, officer or employee of Greenwich
Street Advisors, or any of its affiliates, an annual
fee of $5,000 plus $500 for each Board of Directors
meeting attended. In addition, the Portfolio will
reimburse these directors for travel and out-of-
pocket expenses incurred in connection with Board of
Directors meetings. For the fiscal period ended
February 28, 1994, such fees and expenses totaled
$47,155.
Principal Stockholders. There are no persons
known to the Portfolio to be control persons of the
Portfolio, as such term is defined in Section 2(a)(9)
of the 1940 Act. There is no person known to the
Portfolio to hold beneficially more than 5% of the
outstanding shares of the Common Stock except as set
forth below. The following person is the only person
holding more than 5% of the outstanding shares of
Common Stock as of June 30, 1994.
Name and Address
of Record Owner
A
m
o
u
n
t
o
f
R
e
c
o
r
d
O
w
n
e
r
s
h
i
p
P
e
r
c
e
n
t
o
f
C
o
m
m
o
n
S
t
o
c
k
O
u
t
s
t
a
n
d
i
n
g
Cede & Co.
as Nominee for The
Depository Trust
Company
P.O. Box 20
Bowling Green Station
New York, New York
10004
4
1
,
0
6
4
,
5
4
5
9
7
.
8
2
%
Of the shares held of record by Cede & Co.,
approximately 38,000,000 representing 92.54% of the
outstanding shares of Common Stock, were held by The
Depository Trust Company as nominee for Smith Barney,
representing accounts for which Smith Barney has
discretionary and non-discretionary authority.
As of June 30, 1994, the Directors and Officers
of the Portfolio, as a group, beneficially owned less
than 1% of the Portfolio's outstanding shares of
Common Stock.
Investment Adviser -- Greenwich Street Advisors
Administrator -- Smith, Barney Advisers, Inc.
Sub-Administrator -- Boston Advisors
Greenwich Street Advisors serves as investment
adviser to the Portfolio pursuant to a written
agreement dated July 30, 1993 (the "Advisory
Agreement"), a form of which was most recently
approved by the Board of Directors, including a
majority of those Directors who are not "interested
persons" of the Portfolio or Greenwich Street
Advisors ("Non-Interested Directors") on February 17,
1993. Unless terminated sooner, the Advisory
Agreement will continue for an initial two-year
period and will continue for successive annual
periods thereafter, provided that such continuance is
specifically approved at least annually: (1) by a
majority vote of the Non-Interested Directors cast in
person at a meeting called for the purpose of voting
on such approval; and (2) by the Board of Directors
or by a vote of a majority of the outstanding shares
of Common Stock. Greenwich Street Advisors is a
division of Mutual Management Corp., which provides
investment advisory and management services to
investment companies affiliated with Smith Barney.
Smith Barney is a wholly owned subsidiary of Smith
Barney Holdings Inc. ("Holdings") which is in turn a
wholly owned subsidiary of The Travelers Inc.
("Travelers"), a diversified financial services
holding company principally engaged in the business
of providing investment, consumer finance and
insurance services. Greenwich Street Advisors pays
the salary of any officer or employee who is employed
by both it and the Portfolio. Greenwich Street
Advisors bears all expenses in connection with the
performance of its services as investment adviser.
For services rendered to the Portfolio, Greenwich
Street Advisors receives from the Portfolio a fee,
computed and paid monthly at the annual rate of .90%
of the value of the Portfolio's average daily net
assets.
Prior to July 31, 1993, the Portfolio was party
to an investment advisory agreement with Shearson
Lehman Brothers on behalf of Shearson Lehman
Advisors, a member of the Asset Management group of
Shearson Lehman Brothers. For services rendered in
accordance with such agreement, the Portfolio paid a
monthly fee at the annual rate of .90% of the value
of its average daily net assets.
At the close of business on July 30, 1993,
Travelers (formerly known as Primerica Corporation)
and Smith Barney, Harris Upham & Co. Incorporated
completed the acquisition of substantially all of the
domestic retail brokerage and asset management
business of Shearson Lehman Brothers and Smith
Barney, Harris Upham & Co. Incorporated was renamed
Smith Barney Inc. Also as of that date, Greenwich
Street Advisors succeeded Shearson Lehman Advisors as
the Portfolio's investment adviser under the terms
discussed above.
For the fiscal period ended February 28, 1994,
total investment advisory fees paid by the Portfolio
amounted to $4,217,562.
Under the Advisory Agreement, Greenwich Street
Advisors will not be liable for any error of judgment
or mistake of law or for any loss suffered by the
Portfolio in connection with the Advisory Agreement,
except a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of Greenwich
Street Advisors in the performance of its duties or
from reckless disregard of its duties and obligations
under the Advisory Agreement. The Advisory Agreement
is terminable by vote of the Board of Directors or by
the holders of a majority of the Common Stock, at any
time without penalty, on 60 days' written notice to
Greenwich Street Advisors. The Advisory agreement
may also be terminated by Greenwich Street Advisors
on 90 days' written notice to the Portfolio. The
Advisory Agreement terminates automatically upon its
assignment.
Smith, Barney Advisers, Inc. ("SBA"), a wholly
owned subsidiary of Holdings, serves as administrator
to the Portfolio pursuant to a written agreement
dated May 18, 1994 (the "Administration Agreement"),
which was approved by the Board of Directors of the
Portfolio, including a majority of the Non-Interested
Directors, on May 18, 1994. Pursuant to the
Administration Agreement, SBA pays the salaries of
all officers and employees who are employed both by
it and the Portfolio, assists in providing
accounting, financial and tax support relating to
portfolio management, prepares and coordinates
communications to shareholders and provides the
Portfolio with certain legal, accounting and
financial reporting and corporate secretarial
services. As compensation for SBA's services, the
Portfolio pays a fee, computed daily and paid
monthly, at the annual rate of .20% of the
Portfolio's average daily net assets.
Boston Advisors serves as sub-administrator to
the Portfolio pursuant to a written agreement dated
May 18, 1994 (the "Sub-Administration Agreement").
Boston Advisors is an indirect wholly owned
subsidiary of Mellon Bank Corporation ("Mellon").
Pursuant to the Sub-Administration Agreement, Boston
Advisors pays the salaries of all officers and
employees who are employed by both it and the
Portfolio, maintains office facilities for the
Portfolio, furnishes the Portfolio with statistical
and research data, clerical help and accounting, data
processing, bookkeeping, internal auditing and legal
services and certain other services required by the
Portfolio, prepares reports to the Portfolio's
shareholders, and prepares tax returns and reports to
and filings with the SEC and state blue sky
authorities. Boston Advisors bears all expenses in
connection with the performance of its services.
Under the terms of the Sub-Administration Agreement,
Boston Advisors is compensated in such amounts as the
Portfolio, SBA and Boston Advisors shall from time to
time agree. The compensation of SBA is reduced by
amounts paid to Boston Advisors. The Portfolio pays
no fee directly to Boston Advisors.
Pursuant to the Administration Agreement and the
Sub-Administration Agreement (collectively, the
"Agreements"), SBA and Boston Advisors, respectively,
will exercise their best judgment in rendering
services to the Portfolio. Neither SBA nor Boston
Advisors will be liable for any error of judgment or
mistake of law or for any loss suffered by the
Portfolio in connection with the matters to which the
Agreements relate, except by reason of SBA's or
Boston Advisors' reckless disregard of obligations
and duties under the respective Agreements.
The Agreements will continue automatically for
successive annual periods provided that such
continuance is approved at least annually by the
Board of Directors of the Portfolio, including a
majority of the Non-Interested Directors, by vote
cast in person at a meeting called for the the
purpose of voting such approval. The Agreements are
terminable, without penalty, upon 60 days' written
notice, by the Board of Directors of the Portfolio or
by vote of holders of a majority of the Portfolio's
shares of Common Stock, or upon 90 days' written
notice by SBA or Boston Advisors.
The Portfolio bears expenses incurred in its
operation including: fees of the investment adviser
and administrator; taxes, interest, brokerage fees
and commissions, if any; fees of Directors who are
not officers, directors, shareholders or employees of
Smith Barney; SEC fees and state blue sky
qualification fees; charges of the custodian;
transfer and dividend disbursing agent's fees;
certain insurance premiums; outside auditing and
legal expenses; costs of any independent pricing
service; costs of maintaining corporate existence;
cost attributable to investor services (including
allocated telephone and personnel expenses); costs of
preparation and printing of prospectuses and
statements of additional information for regulatory
purposes and for distribution to shareholders;
shareholders' reports and corporate meetings of the
officers, Board of Directors and shareholders of the
Portfolio.
TAXES
The discussion set out below of tax
considerations generally affecting the Portfolio and
its shareholders is intended to be only a summary and
is not intended as a substitute for careful tax
planning by prospective shareholders.
Taxation of the Portfolio and its Investments
The Portfolio intends to quality as a "regulated
investment company" under Subchapter M of the Code.
If it qualifies as a regulated investment company,
the Portfolio will pay no federal income taxes on its
taxable net investment income (that is, taxable
income other than net realized capital gains) and its
net realized capital gains that are distributed to
shareholders. To qualify under Subchapter M of the
Code, the Portfolio must, among other things: (1)
distribute to its shareholders at lest 90% of its
taxable net investment income (for this purpose
consisting of taxable net investment income and net
realized short-term capital gains); (2) derive at
least 90% of its gross income from dividends,
interest, payments with respect to loans of
securities, gains from the sale or other disposition
of securities, or other income (including, but not
limited to, gains from options, futures, and forward
contracts) derived with respect to the Portfolio's
business of investing in securities; (3) derive less
than 30% of its annual gross income from the sale or
other disposition of securities, options, futures or
forward contracts held for less than three months;
and (4) diversify its holdings so that, at the end of
each fiscal quarter of the Portfolio (a) at least 50%
of the market value of the Portfolio's assets is
represented by cash, U.S. government securities and
other securities, with these other securities
limited, with respect to any one issuer, to an amount
not greater than 5% of the value of the Portfolio's
assets and not greater than 10% of the outstanding
voting securities of the issuer, and (b) not more
than 25% of the market value of the Portfolio's
assets is invested in the securities of any one
issuer (other than U.S. government securities or
securities of other regulated investment companies)
or of two or more issuers that the Portfolio controls
and that are determined to be in the same or similar
trades or businesses or related trades or businesses.
In meeting these requirements, the Portfolio may be
restricted in the selling of securities held by the
Portfolio for less than three months and in the
utilization of certain of the investment techniques
described above under "Investment Objectives and
Policies -- Investment Techniques." As a regulated
investment company, the Portfolio will be subject to
a 4% non-deductible excise tax measured with respect
to certain undistributed amounts of ordinary income
and capital gains. The Portfolio expects to pay the
dividends and make the distributions necessary to
avoid the application of this excise tax.
The Portfolio's transactions, if any, in foreign
currencies, forward contracts, options and futures
contracts (including options and forward contracts on
foreign currencies) will be subject to special
provisions of the Code that, among other things, may
affect the character of gains and losses recognized
by the Portfolio (i.e., may affect whether gains or
losses are ordinary or capital), accelerate
recognition of income to the Portfolio, defer
Portfolio losses and cause the Portfolio to be
subject to hyperinflationary currency rules. These
rules could therefore affect the character, amount
and timing of distributions to shareholders. The
provisions also (1) will require the Portfolio to
mark-to-market certain types of its positions (i.e.,
treat them as if they were closed out) and (2) may
cause the Portfolio to recognize income without
receiving cash with which to pay dividends or make
distributions in amounts necessary to satisfy the
distribution requirements for avoiding income and
excise taxes. The Portfolio will monitor its
transactions, will make the appropriate tax elections
and will make the appropriate entries in its books
and records when it acquires any foreign currency,
forward contract, option, futures contract or hedged
investment so that (1) neither the Portfolio nor its
shareholders will be treated as receiving a
materially greater amount of capital gains or
distributions than actually realized or received, (2)
these special provisions will not prevent the
Portfolio from using substantially all of its losses
for the fiscal years in which the losses actually
occur and (3) the Portfolio will continue to quality
as a regulated investment company.
Taxation of the Portfolio's Shareholders
Dividends paid from the Portfolio's net
investment income and distributions of the
Portfolio's net realized short-term capital gains are
taxable to shareholders of the Portfolio as ordinary
income, regardless of the length of time shareholders
have held shares of Common Stock and whether the
dividends or distributions are received in cash or
reinvested in additional shares. Distributions of
net long-term capital gains, if any, will be taxable
as long-term capital gains, whether received in cash
or reinvested in shares and regardless of how long
the shareholder has held the Portfolio shares. As a
general rule, a shareholder's gain or loss on a sale
of his shares of Common Stock will be a long-term
gain or loss if he has held his shares for more than
one year and will be a short-term capital gain or
loss if he has held his shares for one year or less.
If the Portfolio invests in equity securities, a
portion of the dividends and distributions paid by
the Portfolio may qualify for the federal dividends-
received deduction for corporations.
Dividend Reinvestment Plan
A shareholder of the Portfolio receiving
dividends or distributions in additional shares
pursuant to the Portfolio's Dividend Reinvestment
Plan (the "Plan") should be treated for federal
income tax purposes as receiving a distribution in an
amount equal to the amount of money that a
shareholder receiving cash dividends or distributions
receives, and should have a cost basis in the shares
received equal to that amount.
Return of Invested Capital
Investors considering buying shares just prior
to a dividend or capital gain distribution should be
aware that, although the price of shares purchased at
that time may reflect the amount of the forthcoming
distribution, those who purchase just prior to a
distribution will receive a distribution that will
nevertheselss be taxable to them.
Sale of Shares
Upon the sale or exchange of his shares, a
shareholder will realize a taxable gain or loss
depending upon the amount realized and his basis in
his shares. Such gain or loss will be treated as
capital gain or loss if the shares are capital assets
in the shareholder's hands, and will be long-term or
short-term depending upon the shareholder's holding
period for the shares. Any loss realized on a sale
or exchange will be disallowed to the extent the
shares disposed of are replaced, including
replacement through the reinvesting of dividends and
capital gains distributions in the Portfolio under
the Plan, within a period of 61 days beginning 30
days before and ending 30 days after the disposition
of the shares. In such a case, the basis of the
shares acquired will be increased to reflect the
disallowed loss. Any loss realized by a shareholder
on the sale of a Portfolio share held by the
shareholder for six months or less will be treated
for federal income tax purposes as a long-term
capital loss to the extent of any distributions or
deemed distributions of long-term capital gains
received by the shareholder with respect to such
share.
Tender Offers to Purchase Shares
Under current law, a holder of Common Stock who
tenders all shares of Common Stock owned by such
shareholder and any shares considered owned by such
shareholder under attribution rules contained in the
Code will realize a taxable gain or loss depending
upon such shareholder's basis in the shares. Such
gain or loss will be treated as capital gain or loss
if the shares are held as capital assets in the
shareholder's hands and will be long-term or short-
term depending upon the shareholder's holding period
of the shares. If a holder of Common Stock tenders
less than all shares owned by and attributed to such
shareholder (or if the Portfolio purchases only some
of the shares tendered by a holder of Common Stock),
and if the distribution to such shareholder does not
otherwise qualify as an exchange, the proceeds
received will be treated as a taxable dividend,
return of capital or capital gain depending on the
Portfolio's earnings and profits and the
shareholder's basis in the tendered shares.
Statements and Notices
Each shareholder will receive an annual
statement as to the federal income tax status of his
dividends and distributions from the Portfolio for
the prior calendar year. Furthermore, shareholders
will also receive, if appropriate, various written
notices after the close of the Portfolio's taxable
year regarding the federal income tax status of
certain dividends and distributions that were paid
(or that are treated as having been paid) by the
Portfolio to its shareholders during the preceding
year.
Backup Withholding
If a shareholder fails to furnish a correct
taxpayer identification number, fails to report fully
dividend or interest income, or fails to certify that
he has provided a correct taxpayer identification
number and that he is not subject to "backup
withholding," the shareholder may be subject to a 31%
"backup withholding" tax with respect to (1) taxable
dividends and distributions and (2) the proceeds of
any sale or repurchases of shares of Common Stock.
An individual's taxpayer identification number is his
social security number. Corporate shareholders and
other shareholders specified in the Code are or may
be exempt from backup withholding. The backup
withholding tax is not an additional tax and may be
credited against a taxpayer's federal income tax
liability.
Other Taxes
Dividends and distributions also may be subject
to state and local taxes depending on each
shareholders' particular situation.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN TAX
CONSEQUENCES AFFECTING THE PORTFOLIO AND ITS
SHAREHOLDERS. SHAREHOLDERS ARE ADVISED TO CONSULT
THEIR OWN TAX ADVISORS WITH RESPECT TO THE PARTICULAR
TAX CONSEQUENCES TO THEM OF AN INVESTMENT IN THE
PORTFOLIO.
STOCK PURCHASES AND TENDERS
The Portfolio may repurchase shares of its
Common Stock in the open market or in privately
negotiated transactions when the Portfolio can do so
at prices below their then current net asset value
per share on terms that the Portfolio's Board of
Directors believes represent a favorable investment
opportunity. In addition, the Board of Directors
currently intends to consider, at least one a year,
making an offer to each shareholder of record to
purchase at net asset value shares of Common Stock
owned by the shareholders.
No assurance can be given that repurchases
and/or tenders will result in the Portfolio's shares
trading at a price that is equal to their net asset
value. The market prices of the Portfolio's shares
will, among other things, be determined by the
relative demand for and supply of the shares in the
market, the Portfolio's investment performance, the
Portfolio's dividends and yields and investor
perception of the Portfolio's overall attractiveness
as an investment as compared with other investment
alternatives. The Portfolio's acquisition of Common
Stock will decrease the total assets of the Portfolio
and therefore have the effect of increasing the
Portfolio's expense ratio. The Portfolio may borrow
money to finance the repurchase of shares subject to
the limitations described in the Prospectus and this
SAI. Any interest on the borrowings will reduce the
Portfolio's net income. Because of the nature of the
Portfolio's investment objective, policies and
securities holdings, Greenwich Street Advisors does
not anticipate that repurchases and tenders will have
an adverse effect on the Portfolio's investment
performance and does not anticipate any material
difficulty in disposing of securities to consummate
Common Stock repurchases and tenders.
When a tender offer is authorized to be made by
the Portfolio's Board of Directors, it will be an
offer to purchase at a price equal to the net asset
value of all (but not less than all) of the shares
owned by the shareholder (or attributed to him for
federal income tax purposes under Section 38 of the
Code). A shareholder who tenders all shares owned or
considered owned by him, as required, will realize a
taxable gain or loss depending upon his basis in
those shares.
If the Portfolio liquidates securities in order
to repurchase shares of Common Stock, the Portfolio
may realize gains and losses. These gains, if any,
may be realized on securities held for less than
three months. Because the Portfolio must derive less
that 30% of its gross income for any taxable year
from the sale or disposition of stock and securities
held for less than three months (in order to retain
the Portfolio's regulated investment company status
under the Code), gains realized by the Portfolio due
to a liquidation of securities held for less than
three months would reduce the amount of gain on sales
of other securities held for less than three months
that the Portfolio could realize in the ordinary
course of its portfolio management, which may
adversely affect the Portfolio's performance. The
portfolio turnover rate of the Portfolio may or may
not be affected by the Portfolio's repurchases of
shares of Common Stock pursuant to a tender offer.
ADDITIONAL INFORMATION
Legal Matters
Willkie Farr & Gallagher serves as legal counsel
to the Portfolio. The Non-Interested Directors have
selected Stroock & Stroock & Lavan as their counsel.
Independent Public Accountants
Coopers & Lybrand, independent accountants, One
Post Office Square, Boston, Massachusetts 02109,
serve as auditors of the Portfolio and render an
opinion on the Portfolio's financial statements
annually.
Custodian and Transfer Agent
Boston Safe Deposit and Trust Company ("Boston
Safe"), an indirect wholly owned subsidiary of Mellon
and an affiliate of Boston Advisors, is located at
One Boston Place, Boston, Massachusetts 02108, and
serves as the Portfolio's custodian pursuant to a
custody agreement. Under the custody agreement,
Boston Safe holds the Portfolio's securities and
keeps all necessary accounts and records. The assets
of the Portfolio are held under bank custodianship in
compliance with the 1940 Act.
The Shareholder Services Group, Inc. ("TSSG"), a
subsidiary of First Data Corporation, is located at
Exchange Place, Boston, Massachusetts 02109, and
pursuant to a transfer agency agreement serves as the
Portfolio's transfer agent. Under the transfer
agency agreement, TSSG maintains the shareholder
account records for the Portfolio, handles certain
communications between shareholders and the
Portfolio, and distributions payable by the
Portfolio.
FINANCIAL STATEMENTS
The Portfolio sends unaudited semi-annual and
audited annual financial statements of the Portfolio
to shareholders, including a list of the investments
held by the Portfolio.
The Portfolio's Annual Report of the fiscal
period ended February 28, 1994 is incorporated into
its Statement of Additional Information by reference
in its entirety. A copy of the Annual Report may be
obtained from any Smith Barney Financial Consultant
or by calling or writing to the Portfolio at the
telephone number or address forth on the cover page
of this SAI.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Managed High Income Portfolio Inc.
We have audited the accompanying statement of
assets and liabilities of Managed High Income
Portfolio Inc., including the schedule of portfolio
investments, as of February 28, 1994, and the related
statement of changes in net assets and the financial
highlights of the period from March 26, 1993
(commencement of operations) to February 28, 1994.
These financial statements are the responsibility of
the Fund's management. Our responsibility is to
express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with
generally accepted auditing standards. Those
standards 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. Our
procedures included confirmation of investments and
cash held by the custodian as of February 28, 1994.
An audit also incudes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall
financial statement presentation. We believe that
our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and
financial highlights referred to above present
fairly, in all material respects, the financial
position of Manged High Income Portfolio Inc. as of
February 28, 1994, the results of its operations and
the changes in its net assets and the financial
highlights for the period from March 26, 1993
(commencement of operations) to February 28, 1994, in
conformity with the generally accepted accounting
principles.
/s/ Coopers & Lybrand
COOPERS & LYBRAND
Boston Massachusetts
July, 1994
shared/shearsn2/mgdhiinc/peas/sai.doc
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(1) Financial Statements:
- Included in Part A:
* Financial Highlights Table
- Included in Part B:
* Report of Independent
Accountants
- Incorporated by Reference into Part B:
* Annual Report (audited) for
period ended February 28, 1994 as filed
with The Securities and
Exchange Commission on May 4, 1994
(2) Exhibits:
(a) (i) Articles of Incorporation*
(ii) Articles of Amendment to
Articles of Incorporation **
(b) (i) Bylaws of Registrant *
(ii) Amended Bylaws of Registrant**
(c) Not Applicable
(d) Specimen Certificate of Common
Stock, par value $.01 per share**
(e) Dividend Reinvestment Plan**
(f) Not Applicable
(g) (i) Form of Investment Advisory Agreement between
Registrant and Shearson Lehman Advisors**
(ii) Form of Investment Advisory Agreement between
Registrant and Greenwich Street Advisors is filed herein
(h) Form of Underwriting Agreement between
Registrant and Shearson Lehman Brothers Inc.**
(i) Not Applicable
(j) Form of Custody Agreement between Registrant and
Boston Safe Deposit and Trust Company**
(k) (i) Transfer Agency and Registrar Agreement between
Registrant and TSSG**
(ii) Administration Agreement between Registrant and
Smith, Barney Advisors, Inc. is filed herein
(iii) Sub-Administration Agreement between Registrant
and
The Boston Company Advisors, Inc. is filed
herein
(iv) Market Making Agreement between Registrant and
Smith Barney Shearson Inc. is filed herein
(l) Opinion and Consent of Counsel***
(m) Not Applicable
(n) Consent of Independent Auditors is filed herein
(o) Not Applicable
(p) Form of Purchase Agreement between Registrant and
Shearson Lehman
Brothers Inc.**
(q) Not Applicable
(r) Not Applicable
________________________________________
* Incorporated by reference to the Registrant's initial
Registration Statement on Form N-2, Registration No. 33-56408,
filed with the SEC on December 28, 1992.
** Incorporated by reference to the Registrant's Pre-
Effective Amendment No. 1 to its Registration Statement on Form
N-2, Registration No. 33-56408, filed with the SEC on February
11, 1993.
*** Incorporated by reference to the Registrant's Pre-
Effective Amendment No. 2 to its Registration Statement on Form
N-2, Registration No. 33-56408, filed with the SEC on March 18,
1993.
Item 25. Marketing Arrangements
None
Item 26. Other Expenses of Issuance and Distribution
The following table sets forth the expenses to be
incurred in connection with the offering described in this
Registration Statement:
Securities and Exchange Commission Fees $100.00
Printing and Engraving Expenses *
Legal Fees *
Accounting Expenses *
Miscellaneous Expenses *
_________________________________________
* To be completed by Amendment
Item 27. Persons Controlled by or Under Common Control
None
Item 28. Number of Holders of Securities
Number
of
Record
Stockholders
as of
Title of Class July
13, 1994
Shares of Common Stock, par value
$0.01 per share 41,981,589.04
Item 29. Indemnification
Under Article VII of Registrant's Articles of
Incorporation, any past or present director or officer of
Registrant is indemnified to the fullest extent permitted by
law against liability and all expenses reasonably incurred
by him in connection with any action, suit or proceeding to
which he may be a party or otherwise involved by reason or
his being or having been a director or officer of
Registrant. This provision does not authorize
indemnification when it is determined that the director or
officer would otherwise be liable to Registrant or its
shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his duties.
Expenses may be paid by Registrant in advance of the final
disposition of any action, suit or proceeding upon receipt
of an undertaking by a director or officer to repay those
expenses to Registrant in the event that it is ultimately
determined that indemnification of the expenses is not
authorized under Registrant's Articles of Incorporation.
Insofar as indemnification for liability arising under
the Securities Act of 1933, as amended (the "Securities
Act"), may be permitted to directors, officers and
controlling persons of Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that
in the opinion of the Securities and Exchange Commission,
such indemnification is against policy as expressed in the
Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by Registrant of
expenses incurred or paid by a director, officer or
controlling person of Registrant in the successful defense
of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with
the securities being registered, Registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Securities Act
and will be governed by the final adjudication of such
issue.
Item 30. Business and Other Connections of Investment
Adviser
See "Management of the Portfolio" in the Prospectus.
Mutual Management Corp. ("MMC"), a New York
corporation, is a registered investment adviser and is
wholly owned by Smith Barney Inc., which in turn is wholly
owned by Primerica Corporation. MMC is primarily engaged in
the investment advisory business. Information as to
executive officers and directors of MMC is included in its
Form ADV filed with the SEC (Registration number 801-14437)
and is incorporated herein by reference.
Item 31. Location of Accounts and Records
The Boston Company Advisors, Inc.
One Exchange Place
Boston, Massachusetts 02109.
The Shareholder Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Boston Safe Deposit and Trust Company
Wellington Business Center
One Cabot Road
Medford, Massachusetts 02155
Managed High Income Portfolio Inc.
Two World Trade Center
New York, New York 10048
Item 32. Management Services
None
Item 33. Undertakings
1. Not Applicable.
2. Not Applicable.
3. Not Applicable.
4. The Portfolio hereby undertakes:
(a) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
Registration Statement:
(1) to include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933 (the "Act");
(2) to reflect in the Prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
Registration Statement; and
(3) to include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
(b) For the purpose of determining any liability under the
Act, each post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
(c) Not Applicable
5. The Portfolio hereby undertakes:
(a) for purposes of determining any liability under the
Act, the information omitted from the form of Prospectus
filed as part of this Registration Statement in reliance
upon Rule 430A and contained in a form of Prospectus filed
by the Portfolio under Rule 497(h) under the Act shall be
deemed to be part of this Registration Statement as of the
time it was declared effective; and
(b) for the purposes of determining any liability under
the Act, each post-effective amendment that contains a form
of Prospectus shall be deemed to be a new Registration
Statement relating to the securities offered therein and the
offering of the securities at that time shall be deemed to
be the initial bona fide offering thereof.
6. Not Applicable
7. The Portfolio undertakes to send by first class mail
or other means designed to ensure equally prompt delivery,
within two business days of receipt of a written or oral
request, any Statement of Additional Information.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, as amended, the
Registrant, MANAGED HIGH INCOME PORTFOLIO INC., has duly
caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York on the 14th day of July,
1994.
MANAGED HIGH INCOME PORTFOLIO INC.
By: /s/ Heath B. McLendon
Heath B. McLendon, Chief Executive
Officer
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed below by
the following persons in the capacities and on the dates
indicated.
Signature
Title
D
a
t
e
/s/ Heath B.
McLendon
Heath B.
McLendon
Chairman
of the
Board,
Chief
Executive
Officer
and
Director
J
u
l
y
1
4
,
1
9
9
4
/s Stephen J.
Treadway
Stephen J.
Treadway
President
J
u
l
y
1
4
,
1
9
9
4
/s/ Lewis E.
Daidone
Lewis E.
Daidone
Treasurer(
Chief
Financial
and
Accounting
Officer)
J
u
l
y
1
4
,
1
9
9
4
/s/ James J.
Crisona
James J.
Crisona
Director
J
u
l
y
1
4
,
1
9
9
4
/s/ Paolo M.
Cucchi
Paolo M. Cucchi
Director
J
u
l
y
1
4
,
1
9
9
4
Signature
Title
D
a
t
e
/s/ Alessandro
C. di
Montezemolo
Alessandro C.
di Montezemolo
Director
J
u
l
y
1
4
,
1
9
9
4
/s/ Andrea
Farace
Andrea Farace
Director
J
u
l
y
1
4
,
1
9
9
4
/s/ Paul
Hardin
Paul Hardin
Director
J
u
l
y
1
4
,
1
9
9
4
/s/ George M.
Pavia
George M. Pavia
Director
J
u
l
y
1
4
,
1
9
9
4
shared/shearsn2/mgdhiinc/n2/0794/formn2
SHEARSN2/MGDHIINC/N2/0794FORMN2
SHEARSN2/MGDHIINC/N2/0794FORMN2
SHARED/SHEARSN2/MGDHIINC/N2/0794/FORMN2.DOC
MANAGED HIGH INCOME PORTFOLIO INC.
July 30, 1993
Mutual Management Corp.
1345 Avenue of the Americas
New York, NY 10105
Dear Sirs:
Managed High Income Portfolio Inc. (the "Portfolio"),
a corporation organized under the laws of Maryland, confirms
its agreement with the Greenwich Street Advisors
Division of Mutual Management Corporation (the
"Adviser"), as follows:
1. Investment Description; Appointment
The Portfolio desires to employ its capital by
investing and reinvesting in investments of the kind and in
accordance with the investment objective(s), policies and
limitations specified in its Articles of Incorporation, as
amended from time to time (the "Charter"), in its prospectus
(the "Prospectus") filed with the Securities and Exchange
Commission as part of the Portfolio's Registration Statement
on Form N-2, as amended from time to time, and in the manner
and to the extent as may from time to time be approved by
the Board of Directors of the Portfolio ("Board"). Copies
of the Prospectus and the Charter have been submitted to the
Adviser. The Portfolio agrees to provide copies of all
amendments to the Prospectus and the Charter to the Adviser
on an on-going basis. The Portfolio desires to employ and
hereby appoints the Adviser to act as the investment adviser
to the Portfolio. The Adviser accepts the appointment and
agrees to furnish the services for the compensation set
forth below.
2. Services as Investment Adviser
Subject to the supervision, direction and
approval of the Board of the Portfolio, the Adviser will (a)
manage the Portfolio's holdings in accordance with the
Portfolio's investment objective(s) and policies as stated
in the Charter and the Prospectus; (b) make investment
decisions for the Portfolio; (c) place purchase and sale
orders for portfolio transactions for the Portfolio; and (d)
employ professional portfolio managers and securities
analysts who provide research services to the Portfolio. In
providing those services, the Adviser will conduct a
continual program of investment, evaluation and, if
appropriate, sale and reinvestment of the Portfolio's
assets.
3. Brokerage
In selecting brokers or dealers to execute
transactions on behalf of the Portfolio, the Adviser will
seek the best overall terms available. In assessing the
best overall terms available for any transaction, the
Adviser will consider factors it deems relevant, including,
but not limited to, the breadth of the market in the
security, the price of the security, the financial condition
and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In selecting brokers
or dealers to execute a particular transaction, and in
evaluating the best overall terms available, the Adviser is
authorized to consider the brokerage and research services
(as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934), provided to the Portfolio
and/or other accounts over which the Adviser or its
affiliates exercise investment discretion.
4. Information Provided to the Portfolio
The Adviser will keep the Portfolio informed of
developments materially affecting the Portfolio's holdings,
and will, on its own initiative, furnish the Portfolio from
time to time with whatever information the Adviser believes
is appropriate for this purpose.
5. Standard of Care
The Adviser shall exercise its best judgment in
rendering the services listed in paragraphs 2 and 3 above.
The Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Portfolio in
connection with the matters to which this Agreement relates,
provided that nothing in this Agreement shall be deemed to
protect or purport to protect the Adviser against any
liability to the Portfolio or to its shareholders to which
the Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in
the performance of its duties or by reason of the Adviser's
reckless disregard of its obligations and duties under this
Agreement.
6. Compensation
In consideration of the services rendered
pursuant to this Agreement, the Portfolio will pay the
Adviser on the first business day of each month a fee for
the previous month at the annual rate of 0.90% of the
Portfolio's average daily net assets. The fee for the
period from the Effective Date (defined below) of the
Agreement to the end of the month during which the Effective
Date occurs shall be prorated according to the proportion
that such period bears to the full monthly period. Upon any
termination of this Agreement before the end of a month, the
fee for such part of that month shall be prorated according
to the proportion that such period bears to the full monthly
period and shall be payable upon the date of termination of
this Agreement. For the purpose of determining fees payable
to the Adviser, the value of the Portfolio's net assets
shall be computed at the times and in the manner specified
in the Prospectus and/or the Statement.
7. Expenses
The Adviser will bear all expenses in connection
with the performance of its services under this Agreement.
The Portfolio will bear certain other expenses to be
incurred in its operation, including, but not limited to,
investment advisory and administration fees; fees for
necessary professional and brokerage services; fees for any
pricing service; the costs of regulatory compliance; listing
fees and costs associated with maintaining the Portfolio's
legal existence and shareholder relations.
8. Reduction of Fee
If in any fiscal year the aggregate expenses of
the Portfolio (including fees pursuant to this Agreement and
the Portfolio's administration agreement, but excluding
interest, taxes, brokerage and extraordinary expenses)
exceed the expense limitation of any state having
jurisdiction over the Portfolio, the Adviser will reduce its
fee to the Portfolio by the proportion of such excess
expense equal to the proportion that its fee hereunder bears
to the aggregate of fees paid by the Portfolio for
investment advice and administration in that year, to the
extent required by state law. A fee reduction pursuant to
this paragraph 8, if any, will be estimated, reconciled and
paid on a monthly basis.
9. Services to Other Companies or Accounts
The Portfolio understands that the Adviser now
acts, will continue to act and may act in the future as
investment adviser to fiduciary and other managed accounts,
and as investment adviser to other investment companies, and
the Portfolio has no objection to the Adviser's so acting,
provided that whenever the Portfolio and one or more other
investment companies advised by the Adviser have available
funds for investment, investments suitable and appropriate
for each will be allocated in accordance with a formula
believed to be equitable to each company. The Portfolio
recognizes that in some cases this procedure may adversely
affect the size of the position obtainable for the
Portfolio. In addition, the Portfolio understands that the
persons employed by the Adviser to assist in the performance
of the Adviser's duties under this Agreement will not devote
their full time to such service and nothing contained in
this Agreement shall be deemed to limit or restrict the
right of the Adviser or any affiliate of the Adviser to
engage in and devote time and attention to other businesses
or to render services of whatever kind or nature.
10. Term of Agreement
This Agreement shall become effective as of the
"Closing Date," as that term is defined in that certain
Asset Purchase Agreement executed among Smith Barney, Harris
Upham & Co. Incorporated, Primerica Corporation and Shearson
Lehman Brothers Inc. dated March 12, 1993, (the "Effective
Date") and shall continue for an initial two-year term.
Thereafter, this Agreement shall continue for successive
annual periods so long as such continuance is specifically
approved at least annually by (i) the Board of the Portfolio
or (ii) a vote of a "majority" (as that term is defined in
the Investment Company Act of 1940, as amended (the "1940
Act")) of the Portfolio's outstanding voting securities,
provided that in either event the continuance is also
approved by a majority of the Board who are not "interested
persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for
the purpose of voting on such approval. This Agreement is
terminable, without penalty, on 60 days' written notice, by
the Board of the Portfolio or by vote of holders of a
majority of the Portfolio's shares, or upon 90 days' written
notice by the Adviser. This Agreement will also terminate
automatically in the event of its assignment (as defined in
the 1940 Act and the rules thereunder).
If the foregoing is in accordance with your
understanding, kindly indicate your acceptance of this
Agreement by signing and returning the enclosed copy of this
Agreement.
Very truly yours,
MANAGED HIGH INCOME PORTFOLIO INC.
By: /s/ Heath B. McLendon
Name: Heath B. McLendon
Title: Chairman
Accepted:
GREENWICH STREET ADVISORS
DIVISION OF MUTUAL MANAGEMENT CORP.
By: /s/ Christina Sydor
Name: Christina T. Sydor
Title: Secretary
SHARED\GLOBAL\MGDHIINC\AGMTS\ADVAGREE.DOC
- -3-
ADMINISTRATION AGREEMENT
May 18, 1994
Smith, Barney Advisers, Inc.
1345 Avenue of the Americas
New York, New York 10019
Dear Sirs:
Managed High Income Portfolio Inc. (the "Portfolio"),
a corporation organized under the laws of the State of
Maryland, confirms its agreement with Smith, Barney
Advisors, Inc. ("SBA") as follows:
1. Investment Description; Appointment
The Portfolio desires to employ its capital by
investing and reinvesting in investments of the kind and in
accordance with the limitations specified in its Articles of
Incorporation dated December 8, 1992 as amended from time to
time (the "Articles"), in its Prospectus and Statement of
Additional Information as from time to time in effect and in
such manner and to such extent as may from time to time be
approved by the Board of Directors of the Portfolio (the
"Board"). Copies of the Portfolio's Prospectus, Statement
of Additional Information and Articles have been or will be
submitted to SBA. Greenwich Street Advisors Division of
Mutual Management Corporation ( the "Adviser") serves as the
Portfolio's investment adviser; and the Portfolio desires to
employ and hereby appoints SBA to act as its administrator.
SBA accepts this appointment and agrees to furnish the
services to the Portfolio for the compensation set forth
below. SBA is hereby authorized to retain third parties and
is hereby authorized to delegate some or all of its duties
and obligations hereunder to such persons provided that such
persons shall remain under the general supervision of SBA.
2. Services as Administrator
Subject to the supervision and direction of the
Board, SBA will: (a) assist in supervising all aspects of
the Portfolio's operations except those performed by the
Portfolio's investment adviser under its investment advisory
agreement; (b) supply the Portfolio with office facilities
(which may be in SBA's own offices), statistical and
research data, data processing services, clerical,
accounting and bookkeeping services, including, but not
limited to, the calculation of (i) the net asset value of
shares of the Portfolio, (ii) applicable contingent deferred
sales charges and similar fees and charges and (iii)
distribution fees, internal auditing and legal services,
internal executive and administrative services, and
stationary and office supplies; and (c) prepare reports to
shareholders of the Portfolio, tax returns and reports to
and filings with the Securities and Exchange Commission (the
"SEC") and state blue sky authorities.
3. Compensation
In consideration of services rendered pursuant
to this Agreement, the Portfolio will pay SBA on the first
business day of each month a fee for the previous month at
an annual rate of .20 of 1.00% of the Portfolio's average
daily net assets. The fee for the period from the date the
Portfolio's initial registration statement is declared
effective by the SEC to the end of the month during which
the initial registration statement is declared effective
shall be prorated according to the proportion that such
period bears to the full monthly period. Upon any
termination of this Agreement before the end of any month,
the fee for such part of a month shall be prorated according
to the proportion which such period bears to the full
monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of
determining fees payable to SBA, the value of the
Portfolio's net assets shall be computed at the times and in
the manner specified in the Portfolio's Prospectus and
Statement of Additional Information as from time to time in
effect.
4. Expenses
SBA will bear all expenses in connection with
the performance of its services under this Agreement. The
Portfolio will bear certain other expenses to be incurred in
its operation, including: taxes, interest, brokerage fees
and commissions, if any; fees of the members of the Board of
the Portfolio who are not officers, directors or employees
of Smith Barney Shearson Inc. or its affiliates or any
person who is an affiliate of any person to whom duties may
be delegated hereunder; SEC fees and state blue sky
qualification fees; charges of custodians and transfer and
dividend disbursing agents; the Portfolio's and Board
members' proportionate share of insurance premiums,
professional association dues and/or assessments; outside
auditing and legal expenses; costs of maintaining the
Portfolio's existence; costs attributable to investor
services, including, without limitation, telephone and
personnel expenses; costs of preparing and printing
prospectuses and statements of additional information for
regulatory purposes and for distribution to existing
shareholders; costs of shareholders' reports and meetings of
the officers or Board and any extraordinary expenses. In
addition, the Portfolio will pay all distribution fees
pursuant to a Distribution Plan adopted under Rule 12b-1 of
the Investment Company Act of 1940, as amended (the "1940
Act").
5. Reimbursement to the Portfolio
If in any fiscal year the aggregate expenses of
the Portfolio (including fees pursuant to this Agreement and
the Portfolio's investment advisory agreement (s), but
excluding distribution fees, interest, taxes, brokerage and,
if permitted by state securities commissions, extraordinary
expenses) exceed the expense limitations of any state having
jurisdiction over the Portfolio, SBA will reimburse the
Portfolio for that excess expense to the extent required by
state law in the same proportion as its respective fees bear
to the combined fees for investment advice and
administration. The expense reimbursement obligation of SBA
will be limited to the amount of its fees hereunder. Such
expense reimbursement, if any, will be estimated, reconciled
and paid on a monthly basis.
6. Standard of Care
SBA shall exercise its best judgment in
rendering the services listed in paragraph 2 above, and SBA
shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Portfolio in connection
with the matters to which this Agreement relates, provided
that nothing herein shall be deemed to protect or purport to
protect SBA against liability to the Portfolio or to its
shareholders to which SBA would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or by reason of
SBA's reckless disregard of its obligations and duties under
this Agreement.
7. Term of Agreement
This Agreement shall continue automatically for
successive annual periods, provided such continuance is
specifically approved at least annually by the Board.
8. Service to Other Companies or Accounts
The Portfolio understands that SBA now acts,
will continue to act and may act in the future as
administrator to one or more other investment companies, and
the Portfolio has no objection to SBA so acting. In
addition, the Portfolio understands that the persons
employed by SBA or its affiliates to assist in the
performance of its duties hereunder will not devote their
full time to such service and nothing contained herein shall
be deemed to limit or restrict the right of SBA or its
affiliates to engage in and devote time and attention to
other businesses or to render services of whatever kind or
nature.
9. Indemnification
The Portfolio agrees to indemnify SBA and its
officers, directors, employees, affiliates, controlling
persons, agents (including persons to whom responsibilities
are delegated hereunder) ("indemnitees") against any loss,
claim, expense or cost of any kind (including reasonable
attorney's fees) resulting or arising in connection with
this Agreement or from the performance or failure to perform
any act hereunder, provided that no such indemnification
shall be available if the indemnitee violated the standard
of care in paragraph 6 above. This indemnification shall be
limited by the 1940 Act, and relevant state law. Each
indemnitee shall be entitled to advancement of its expenses
in accordance with the requirements of the 1940 Act and the
rules, regulations and interpretations thereof as in effect
from time to time.
10. Limitation of Liability
The Portfolio, SBA and Boston Advisors agree
that the obligations of the Portfolio under this Agreement
shall not be binding upon any of the Board members,
shareholders, nominees, officers, employees or agents,
whether past, present or future, of the Portfolio
individually, but are binding only upon the assets and
property of the Portfolio, as provided in the Articles and
Bylaws. The execution and delivery of this Agreement has
been duly authorized by the Portfolio, SBA and Boston
Advisors, and signed by an authorized officer of each,
acting as such. Neither the authorization by the Board
members of the Portfolio, nor the execution and delivery by
the officer of the Portfolio shall be deemed to have been
made by any of them individually or to impose any liability
on any of them personally, but shall bind only the assets
and property of the Portfolio as provided in the Articles
and Bylaws.
If the foregoing is in accordance with your
understanding, kindly indicate your acceptance hereof by
singing and returning to us the enclosed copy hereof.
Very truly yours,
Managed High
Income Portfolio Inc.
By: /s/ Heath B.
McLendon
Heath B.
McLendon
Title:
Chairman of the Board
Accepted:
Smith, Barney Advisers, Inc.
By: /s/ Christina Sydor
Christina Sydor
Title: Secretary
shared/shearsn2/mgdhiinc/agrms/admin94
APPENDIX A
ADMINISTRATIVE SERVICES
Fund Accounting. Fund accounting services involve
comprehensive accrual-based recordkeeping and
management information. They include maintaining a
fund's books and records in accordance with the
Investment Company Act of 1940, as amended (the "1940
Act"), net asset value calculation, daily dividend
calculation, tax accounting and portfolio accounting.
The designated fund accountants interact with
the Fund's custodian, transfer agent and investment
adviser daily. As required, the responsibilities of
each fund accountant may include:
o Cash Reconciliation - Reconcile prior
day's ending cash balance per custodian's records and
the accounting system to the prior day's ending cash
balance per fund accounting's cash availability
report;
o Cash Availability - Combine all activity
affecting the Fund's cash account and produce a net
cash amount available for investment;
o Formal Reconciliations - Reconcile system
generated reports to prior day's calculations of
interest, dividends, amortization, accretion,
distributions, capital stock and net assets;
o Trade Processing - Upon receipt of
instructions from the investment adviser review,
record and transmit buys and sells to the custodian;
o Journal Entries - Input entries to the
accounting system reflecting shareholder activity and
Fund expense accruals;
o Reconcile and Calculate N.O.A. (net other
assets) - Compile all activity affecting asset and
liability accounts other than investment account;
o Calculate Net Income, Mil Rate and Yield
for Daily Distribution Funds - Calculate income on
purchase and sales, calculate change in income due to
variable rate change, combine all daily income less
expenses to arrive at net income, calculate mil rate
and yields (1 day, 7 day and 30 day);
o Mini-Cycle (except for Money Market Funds)
- - Review intra day trial balance and reports, review
trial balance N.O.A.;
o Holdings Reconciliation - Reconcile the
portfolio holdings per the system to custodian
records;
o Pricing - Determine N.A.V. for Fund using
market value of all securities and currencies (plus
N.O.A.), divided by the shares outstanding, and
investigate securities with significant price changes
(over 5%);
o Money Market Fund Pricing - Monitor
valuation for compliance with Rule 2a-7;
o System Check-Back - Verify the change in
market value of securities which saw trading activity
per the system;
o Net Asset Value Reconciliation - Identify
the impact of current day's Fund activity on a per
share basis;
o Reporting of Price to NASDAQ - 5:30 P.M.
is the final deadline for Fund prices being reported
to the newspaper;
o Reporting of Price to Transfer Agent-
N.A.V.s are reported to transfer agent upon total
completion of above activities.
In addition, fund accounting personnel:
communicate corporate actions of portfolio holdings to
portfolio managers; initiate notification to custodian
procedures on outstanding income receivables; provide
information to the Fund's treasurer for reports to
shareholders, SEC, Board members, tax authorities,
statistical and performance reporting companies and
the Fund's auditors; interface with the Fund's
auditors; prepare monthly reconciliation packages,
including expense pro forma; prepare amortization
schedules for premium and discount bonds based on the
effective yield method; prepare vault reconciliation
reports to indicate securities currently "out-for-
transfer;" and calculate daily expenses based on
expense ratios supplied by Fund's treasurer.
Financial Administration. The financial
administration services made available to the Fund
fall within three main categories: Financial
Reporting; Statistical Reporting; and Publications.
The following is a summary of the services made
available to the Fund by the Financial Administration
Division:
Financial Reporting
o Coordinate the preparation and
review of the annual, semi-annual and quarterly
portfolio of investments and financial statements
included in the Fund's shareholder reports.
Statistical Reporting
o Total return reporting;
o SEC 30-day yield reporting and 7-day
yield reporting (for money market funds);
o Prepare dividend summary;
o Prepare quarter-end reports;
o Communicate statistical data to the
financial media (Donoghue, Lipper, Morningstar, et
al.)
Publications
o Coordinate the printing and mailing
process with outside printers for annual and semi-
annual reports, prospectuses, statements of additional
information, proxy statements and special letters or
supplements;
o Provide graphics and design
assistance relating to the creation of marketing
materials and shareholder reports.
Treasury. The following is a summary of the treasury
services available to the Fund:
o Provide a Treasurer and Assistant
Treasurer for the Fund;
o Determine expenses properly
chargeable to the Fund;
o Authorize payment of bills for
expenses of the Fund;
o Establish and monitor the rate of
expense accruals;
o Prepare financial materials for
review by the Fund's Board (e.g., Rule 2a-7, 10f-3,
17a-7 and 17e-1 reports, repurchase agreement dealer
lists, securities transactions);
o Recommend dividends to be voted by
the Fund's Board;
o Monitor mark-to-market comparisons
for money market funds;
o Recommend valuation to be used for
securities which are not readily saleable;
o Function as a liaison with the
Fund's outside auditors and arrange for audits;
o Provide accounting, financial and
tax support relating to portfolio management and any
contemplated changes in the Fund's structure or
operations;
o Prepare and file forms with the
Internal Revenue Service
* Form 8613
* Form 1120-RIC
* Board Members' and
Shareholders' 1099s
* Mailings in connection with
Section 852 and related regulations.
Legal and Regulatory Services. The legal and
regulatory services made available to the Fund fall
within four main areas: SEC and Public Disclosure
Assistance; Corporate and Secretarial Services;
Compliance Services; and Blue Sky Registration. The
following is a summary of the legal and regulatory
services available to the Fund:
SEC and Public Disclosure Assistance
o File annual amendments to the Fund's
registration statements, including updating the
prospectus and statement of additional information
where applicable;
o File annual and semi-annual
shareholder reports with the appropriate regulatory
agencies;
o Prepare and file proxy statements;
o Review marketing material for SEC
and NASD clearance;
o Provide legal assistance for
shareholder communications.
Corporate and Secretarial Services
o Provide a Secretary and an Assistant
Secretary for the Fund;
o Maintain general corporate calendar;
o Prepare agenda and background
materials for Fund board meetings, make presentations
where appropriate, prepare minutes and follow-up
matters raised at Board meetings;
o Organize, attend and keep minutes of
shareholder meetings;
o Maintain Articles of Incorporation
and By-Laws of the Fund.
Legal Consultation and Business Planning
o Provide general legal advice on
matters relating to portfolio management, Fund
operations and any potential changes in the Fund's
investment policies, operations or structure;
o Maintain continuing awareness of
significant emerging regulatory and legislative
developments which may affect the Fund, update the
Fund's Board and the investment adviser on those
developments and provide related planning assistance
where requested or appropriate;
o Develop or assist in developing
guidelines and procedures to improve overall
compliance by the Fund and its various agents;
o Manage Fund litigation matters and
assume full responsibility for the handling of routine
Fund examinations and investigations by regulatory
agencies.
Compliance Services
The Compliance Department is responsible
for preparing compliance manuals, conducting seminars
for fund accounting and advisory personnel and
performing on-going testing of the Fund's portfolio to
assist the Fund's investment adviser in complying with
prospectus guidelines and limitations, 1940 Act
requirements and Internal Revenue Code requirements.
The Department may also act as liaison to the SEC
during its routine examinations of the Fund.
State Regulation
The State Regulation Department operates
in a fully automated environment using blue sky
registration software developed by Price Waterhouse.
In addition to being responsible for the initial and
on-going registration of shares in each state, the
Department acts as liaison between the Fund and state
regulators, and monitors and reports on shares sold
and remaining registered
shared/shearsn2/mgdhiinc/agrms/admin94
A-1
SUB-ADMINISTRATION AGREEMENT
May 18, 1994
The Boston Company Advisors, Inc.
One Exchange Place
Boston, MA 02210
Dear Sirs:
Managed High Income Portfolio Inc. (the
"Portfolio"), a corporation organized under the laws of the
State of Maryland and Smith, Barney Advisers, Inc. ("SBA")
confirm their agreement with The Boston Company Advisors,
Inc. ("Boston Advisors") as follows:
1. Investment Description; Appointment
The Portfolio desires to employ its capital by
investing and reinvesting in investments of the kind and in
accordance with the limitations specified in its Articles of
Incorporation dated December 8, 1992 as amended from time to
time (the "Articles"), in its Prospectus and Statement of
Additional Information as from time to time in effect, and
in such manner and to such extent as may from time to time
be approved by the Board of Directors of the Portfolio (the
"Board"). Copies of the Portfolio's Prospectus, Statement
of Additional Information and Articles have been or will be
submitted to you. The Portfolio employs SBA as its
administrator, and the Portfolio and SBA desire to employ
and hereby appoint Boston Advisors as the Portfolio's sub-
administrator. Boston Advisors accepts this appointment and
agrees to furnish the services to the Fund, for the
compensation set forth below, under the general supervision
of SBA.
2. Services as Sub-Administrator
Subject to the supervision and direction of the
Board and SBA, Boston Advisors will: (a) assist in
supervising all aspects of the Fund's operations except
those performed by the Fund's investment adviser under the
Fund's investment advisory agreement; (b) supply the Fund
with office facilities (which may be in Boston Advisor's own
offices), statistical and research data, data processing
services, clerical, accounting and bookkeeping services,
including, but not limited to, the calculation of (i) the
net asset value of shares of the Portfolio, (ii) applicable
contingent deferred sales charges and similar fees and
changes and (iii) distribution fees, internal auditing and
legal services, internal executive and administrative
services, and stationery and office supplies; and (c)
prepare reports to shareholders of the Portfolio, tax
returns and reports to and filings with the Securities and
Exchange Commission (the "SEC") and state blue sky
authorities.
3. Compensation
In consideration of services rendered pursuant
to this Agreement, SBA will pay Boston Advisors on the first
business day of each month a fee for the previous month
calculated in accordance with the terms set forth in
Appendix B, and as agreed to from time to time by the
Portfolio, SBA and Boston Advisors. Upon any termination of
this Agreement before the end of any month, the fee for such
part of a month shall be prorated according to the
proportion which such period bears to the full monthly
period and shall be payable upon the date of termination of
this Agreement. For the purpose of determining fees payable
to Boston Advisors, the value of the Portfolio's net assets
shall be computed at the times and in the manner specified
in the Portfolio's Prospectus and Statement of Additional
Information as from time to time in effect.
4. Expenses
Boston Advisors will bear all expenses in
connection with the performance of its services under this
Agreement. The Portfolio will bear certain other expenses
to be incurred in its operation, including: taxes, interest,
brokerage fees and commissions, if any; fees of the Board
members of the Portfolio who are not officers, directors or
employees of Smith Barney Shearson Inc., Boston Advisors of
their affiliates; SEC fees and state blue sky qualification
fees; charges of custodians and transfer and dividend
disbursing agents; the Portfolio's and its Board members'
proportionate share of insurance premiums, professional
association dues and/or assessments; outside auditing and
legal expenses; costs of maintaining the Portfolio's
existence; costs attributable to investor services,
including, without limitation, telephone and personnel
expenses; costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes
and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the officers or Board
and any extraordinary expenses. In addition, the Portfolio
will pay all distribution fees pursuant to a Distribution
Plan adopted under Rule 12b-1 of the Investment Company Act
of 1940, as amended (the "1940 Act").
5. Reimbursement of the Portfolio
If in any fiscal year the aggregate expenses of
the Portfolio (including fees pursuant to this Agreement and
the Portfolio's investment advisory agreement(s) and
administration agreement, but excluding distribution fees,
interest, taxes, brokerage and, if permitted by state
securities commissions, extraordinary expenses) exceed the
expense limitations of any state having jurisdiction over
the Portfolio, Boston Advisory will reimburse the Portfolio
for that excess expense to the extent required by state law
in the same proportion as its respective fees bear to the
combined fees for investment advice and administration. The
expense reimbursement obligation of Boston Advisors will be
limited to the amount of its fees hereunder. Such expense
reimbursement, if any, will be estimated, reconciled and
paid on a monthly basis.
6. Standard of Care
Boston Advisors shall exercise its best judgment
in rendering the services listed in paragraph 2 above.
Boston Advisors shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the
Portfolio in connection with the matters to which this
Agreement relates, provided that nothing herein shall be
deemed to protect or purport to protect Boston Advisors
against liability to the Portfolio or to its shareholders to
which Boston Advisors would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or by reason of Boston
Advisor's reckless disregard of its obligations and duties
under this Agreement.
7. Term of Agreement
This agreement shall continue automatically for
successive annual periods, provided that it may be
terminated by 90 days' written notice to the other parties
by any of the Portfolio, SBA or Boston Advisors. This
Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns,
provided, however, that this agreement may not be assigned,
transferred or amended without the written consent of all
the parties hereto.
8. Service to Other Companies or Accounts
The Portfolio understands that Boston Advisors
now acts, will continue to act and may act in the future as
administrator to one or more other investment companies, and
the Portfolio has no objection to Boston Advisors so acting.
In addition, the Portfolio understands that the persons
employed by Boston Advisors to assist in the performance of
its duties hereunder may or may not devote their full time
to such service and nothing contained herein shall be deemed
to limit or restrict the right of Boston Advisors or its
affiliates to engage in and devote time and attention to
other businesses or to render services of whatever kind of
nature.
9. Indemnification
SBA agrees to indemnify Boston Advisors and its
officers, directors, employees, affiliates, controlling
persons and agents ("indemnitees") to the extent that
indemnification is available from the Portfolio, and Boston
Advisors agrees to indemnify SBA and its indemnitees,
against any loss, claim, expenses or cost of any kind
(including reasonable attorney's fees) resulting or arising
in connection with this Agreement or from the performance or
failure to perform any act hereunder, provided that not such
indemnification shall be available if the indemnitee
violated the standard of care in paragraph 6 above. This
indemnification shall be limited by the 1940 Act, and
relevant state law. Each indemnitee shall be entitled to
advancement of its expenses in accordance with the
requirements of the 1940 Act and the rules, regulations and
interpretations thereof as in effect from time to time.
10. Limitations of Liability
The Portfolio, SBA and Boston Advisors agree
that the obligations of the Portfolio under this Agreement
shall not be binding upon any of the Board members,
shareholders, nominees, officers, employees or agents,
whether past, present or future, of the Portfolio
individually, but are binding only upon the assets and
property of the Portfolio, as provided in the Articles and
Bylaws. The execution and delivery of this Agreement has
been duly authorized by the Portfolio, SBA and Boston
Advisors, and signed by an authorized officer of each,
acting as such. Neither the authorization by the Board
Members of the Portfolio, nor the execution and delivery by
the officer of the Portfolio shall be deemed to have been
made by any of them individually or to impose any liability
on any of them personally, but shall bind only the assets
and property of the Portfolio as provided in the Articles.
If the foregoing is in accordance with your
understanding, kindly indicate your acceptance hereof by
signing and returning to us the enclosed copy hereof.
Very truly yours,
Managed High Income Portfolio
Inc.
By: /s/ Heath B. McLendon
Heath B. McLendon
Title: Chairman of the
Board
Smith, Barney Advisers, Inc.
By: /s/ Christina Sydor
Christina Sydor
Title: Secretary
Accepted:
The Boston Company Advisors, Inc.
By: /s/ Joseph Dello Russo
Joseph Dello Russo
Title: Senior Vice President
SHARED/SHEARSN2/MGDHIINC/AGRMTS/ADMIN942
Appendix A
ADMINISTRATIVE SERVICES
Fund Accounting. Fund accounting services involve
comprehensive accrual-based recordkeeping and
management information. They include maintaining a
fund's books and records in accordance with the
Investment Company Act of 1940, as amended (the "1940
Act" ), net asset value calculation, daily dividend
calculation, tax accounting and portfolio accounting.
The designated fund accountants interact with
the Fund's custodian, transfer agent and investment
adviser daily. As required, the responsibilities of
each fund accountant may include:
- Cash Reconciliation - Reconcile prior
day's ending cash balance per custodian's records and
the accounting system to the prior day's ending cash
balance per fund accounting's cash availability
report;
- Cash Availability - Combine all activity
affecting the Fund's cash account and produce a net
cash amount available for investment;
- Formal Reconciliation - Reconcile system
generated reports to prior day's calculations of
interest, dividends, amortization, accretion,
distributions, capital stock and net assets;
- Trade Processing - Upon receipt of
instructions from the investment adviser review,
record and transmit buys and sells to the custodian;
- Journal Entries - Input entries to the
accounting system reflecting shareholder activity and
Fund expense accruals;
- Reconcile and Calculate N.O.A. (net other
assets) - Compile all activity affecting asset and
liability accounts other than investment account;
- Calculate Net Income, Mil Rate and Yield
for Daily Distribution
Funds - Calculate income on purchases and
sales, calculate change in income due to variable rate
change; combine all daily income less expenses to
arrive at net income; calculate mil rate and yields (1
day, 7 day and 30 day);
- Mini-Cycle (except for Money Market Funds)
- - Review intra day trial balance and reports, review
trial balance N.O.A.;
- Holdings Reconciliation - Reconcile the
portfolio holdings per the system to custodian
reports;
- Pricing - Determine N.A.V. for the Fund
using market value of all securities and currencies
(plus N.O.A.), divided by the shares outstanding, and
investigate securities with significant price changes
(over 5%);
- Money Market Fund Pricing - Monitor
valuation for compliance with Rule 2a-7;
- System Check-Back - Verify the change in
market value of securities which saw trading activity
per the system;
- Net Asset Value Reconciliation - Identify
the impact of current day's Fund activity on a per
share basis;
- Reporting of Price to NASDAQ - 5:30 P.M.
is the final deadline for Fund prices being reported
to the newspaper;
- Reporting of Price to Transfer Agent -
N.A.V.s are reported to transfer agent upon total
completion of above activities.
In addition, fund accounting personnel:
communicate corporate actions of portfolio holdings to
portfolio mangers; initiate notification to custodian
procedures on outstanding income receivables; provide
information to the Fund's treasurer for reports to
shareholders, SEC, Board, tax authorities, statistical
and performance reporting companies and the Fund's
auditors; interface with Fund's auditors; prepare
monthly reconciliation packages, including expense pro
forma; prepare amortization schedules for premium and
discount bonds based on the effective yield method;
prepare vault reconciliation reports to indicate
securities currently "out-for-transfer;" and calculate
daily expenses based on expense ratios supplied by
Fund's treasurer.
Financial Administration. The financial
administration services made available to the Fund
fall within three main categories: Financial
Reporting; Statistical Reporting; and Publications.
The following is a summary of the services made
available to the Fund by the Financial Administration
Division:
Financial Reporting
- Coordinate the preparation and review of
the annual, semi-annual and quarterly portfolio of
investments and financial statements included in the
Fund's shareholder reports.
Statistical Reporting
- Total return reporting;
- SEC 30-day yield reporting and 7-day yield
reporting (for money market funds);
- Prepare dividend summary;
- Prepare quarter-end reports;
- Communicate statistical data to the
financial media (Donoghue, Lipper, Morningstar, et
al.).
Publications
- Coordinate the printing and mailing
process with outside printers for annual and semi-
annual reports, prospectuses, statements of additional
information, proxy statements and special letters or
supplements;
Treasury. The following is a summary of the treasury
services available to the Fund:
- Provide an Assistant Treasurer for the
Fund;
- Authorize payment of bills for expenses of
the Fund;
- Establish and monitor the rate of expense
accruals;
- Prepare financial materials for review by
the Fund's Board (e.g., Rule 2a-7, 10f-3 17a-7 and
17e-1 reports, repurchase agreement dealer lists,
securities transactions);
- Monitor mark-to-market comparisons for
money market funds;
- Recommend valuations to be used for
securities which are not readily saleable;
- Function as a liaison with the Fund's
outside auditors and arrange for audits;
- Provide accounting, financial and tax
support relating to portfolio management and any
contemplated changes in the fund's structure or
operations;
- Prepare and file forms with the Internal
Revenue Service
* Form 8613
* Form 1120-RIC
* Board Members' and Shareholders'
1099s
* Mailings in connection with Section
852 and related regulations.
Legal and Regulatory Services. The legal and
regulatory services made available to the Fund fall
within four main areas: SEC and Public Disclosure
Assistance; Corporate and Secretarial Services;
Compliance Services; and Blue Sky Registration. The
following is a summary of the legal and regulatory
services available to the Fund:
SEC and Public Disclosure Assistance
- File annual amendments to the Fund's
registration statements, including updating the
prospectus and statement of additional information
where applicable;
- File annual and semi-annual shareholder
reports with the appropriate regulatory agencies;
- Prepare and file proxy statements;
- Provide legal assistance for shareholder
communications.
Corporate and Secretarial Services
- Provide an Assistant Secretary for the
Fund;
- Maintain general corporate calendar;
- Prepare agenda and background materials
for Fund board meetings, make presentations where
appropriate, prepare minutes and follow-up matters
raised at Board meetings;
- Organize, attend and keep minutes of
shareholder meetings;
- Maintain Articles of Incorporation and By-
Laws of the Fund.
Legal Consultation and Business Planning
- Provide general legal advice on matters
relating to portfolio management, Fund operations and
any potential changes in the Fund's investment
policies, operations or structure;
- Maintain continuing awareness of
significant emerging regulatory and legislative
developments which may affect the Fund, update the
Fund's Board and the investment adviser on those
developments and provide related planning assistance
where requested or appropriate;
- Develop or assist in developing guidelines
and procedures to improve overall compliance by the
Fund and its various agents;
- Manage Fund litigation matters and assume
full responsibility for the handling of routine fund
examinations and investigations by regulatory
agencies.
Compliance Services
The Compliance Department is responsible for
preparing compliance manuals, conducting seminars for
fund accounting and advisory personnel and performing
on-going testing of the Fund's portfolio to assist the
Fund's investment adviser in complying with prospectus
guidelines and limitations, 1940 Act requirements and
Internal Revenue Code requirements. The Department
may also act as liaison to the SEC during its routine
examinations of the Fund.
State Regulation
The State Regulation Department operates in a
fully automated environment using blue sky
registration software development by Price Waterhouse.
In addition to being responsible for the initial and
on-going registration of shares in each state, the
Department acts as liaison between the Fund and state
regulators, and monitors and reports on shares sold
and remaining registered shares available for sale.
Schedule B
Fee
A-1
MARKET-MAKING AGREEMENT
August
18, 1993
Smith Barney Shearson Inc.
1345 Avenue of the Americas
New York, New York 10105
Gentlemen:
Managed High Income Portfolio Inc., a corporation
formed under the laws of the State of Maryland (the
"Portfolio"), and Smith Barney Shearson Inc., a corporation
formed under the laws of the State of Delaware ("Smith
Barney Shearson"), confirm their agreement, subject to the
terms and conditions set out below, pursuant to which Smith
Barney Shearson may engage in market-making transactions
with respect to the shares of the Common Stock.
1. Definitions.
The following terms have the following meanings
when used in this Agreement:
(a) "Acts" means the Securities Act and the
Investment Company Act collectively.
(b) "Administration Agreement" means the
Administration Agreement between the Portfolio and The
Boston Company Advisors, Inc. dated as of March 18, 1993.
(c) "Advisers Act" means the Investment
Advisers Act of 1940, as amended.
(d) "Advisers Act Rules" means those rules and
regulations adopted by the Commission under the Advisers
Act.
(e) "Advisory Agreement" means the Investment
Advisory Agreement between the Portfolio and Greenwich
Street Advisors Division of Mutual Management Corporation
dated as of July 30, 1993.
(f) "Agreement" means this Market-Making
Agreement as originally executed and as amended, modified,
supplemented or restated from time to time.
(g) "Business Day" means any day on which the
NYSE is open for trading.
(h) "Commission" means the Securities and
Exchange Commission.
(i) "Common Stock" means the Portfolio's
Common Stock, par value $.01 per share.
(j) "Custody Agreement" means the Custody
Agreement between the Portfolio and Boston Safe Deposit and
Trust company dated as of March 18, 1993.
(k) "Effective Date" means the date on which
the Registration Statement becomes effective.
(l) "Exchange Act" means the Securities
Exchange Act of 1934, as amended.
(m) "Final Amendment" means an amendment to
the Registration Statement necessary to permit the
Registration Statement to become effective.
(n) "Investment Company Act" means the
Investment Company act of 1940, as amended.
(o) "Investment Company Act Rules" means those
rules and regulations adopted by the Commission under the
Investment Company Act.
(p) "Notification" means a notification of
registration on Form N-8A under the Investment Company Act
on behalf of the Portfolio.
(q) "NYSE" means the New York Stock Exchange,
Inc.
(r) "Prospectus" means the prospectus and
statement of additional information contained in the
Registration Statement.
(s) "Registration Statement" means the
Registration Statement on Form N-2 under the Acts
(Registration Nos. 33-56408 and 811-7396), as supplemented
by any amendments to the Registration Statement, filed by
the Portfolio with the Commission relating to Smith Barney
Shearson's market-making activities in the Common Stock.
(t) "Rules and Regulations" means the
Investment Company Act Rules and the Securities Act Rules.
(u) "Securities Act" means the Securities Act
of 1933, as amended.
(v) "Securities Act Rules" means the rules and
regulations adopted by the Commission under the Securities
Act.
(w) "Shares" means the Common Stock.
(x) "Smith Barney Shearson" means, as the
context so requires, Smith Barney and certain of its
affiliates.
(y) "Transfer Agency Agreement" means the
Transfer Agent and Dividend-Paying and Registrar Agreement
between the Portfolio and TSSG dated as of March 18, 1993.
(z) "TSSG" means The Shareholder Services
Group, Inc., a subsidiary of First Data Corporation.
2. Secondary Market Activity.
The Portfolio acknowledges that Smith Barney
Shearson intends to engage in market-making transactions
with respect to Shares in the over-the-counter market at
negotiated prices relating to the prevailing market prices
at the time of sale of the Shares. The Portfolio
acknowledges and agrees that (i) Smith Barney Shearson may
act as principal or agent in such market-making transactions
and (ii) Smith Barney Shearson is under no obligation to
engage in such market-making transactions and may at any
time discontinue those transactions at its sole discretion
and without notice to the Portfolio.
3. Payment to Smith Barney Shearson Financial
Consultants.
The Portfolio acknowledges that Smith Barney
Shearson Financial Consultants will receive compensation
from Smith Barney Shearson in connection with sales of
Shares. In no event, however, will the Portfolio be
obligated to (a) reimburse Smith Barney Shearson for any
costs incurred in connection with so compensating its
Financial Consultants or (b) compensate those Financial
Consultants in any way out of its own assets.
4. Compliance with Applicable Rules.
In engaging in the activities contemplated under
this Agreement, Smith Barney Shearson will conform in all
material respects with all state and federal laws relating
to the sale of Shares and with all applicable rules and
regulations of all regulatory bodies, including, without
limitation, the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and the Rules and
Regulations. Neither Smith Barney Shearson nor any other
person is authorized by the Portfolio to give any
information or to make any representations in connection
with the sale of Shares, other than those contained in the
Registration Statement or the Prospectus with respect to the
sale of Shares, and in any information supplemental to the
Prospectus specifically approved by the Portfolio for use in
connection with the offer or sale of Shares, and neither
Smith Barney Shearson nor any other person is authorized to
act as agent for the Portfolio in connection with the
purchase and sale of Shares in the public or otherwise.
5. Registration Statement and Prospectus; Market-
Making.
(a) The Portfolio has filed with the
Commission, pursuant to the Acts and the Rules and
Regulations, the Registration Statement, and those
amendments to the Registration Statement as may have been
required to have been made prior to the date of this
Agreement. The Portfolio has furnished Smith Barney
Shearson with copies of the Registration Statement and each
amendment to the Registration Statement filed by the
Portfolio with the Commission. If the Registration
Statement has not become effective prior to the date of this
Agreement, the Portfolio will promptly file with the
Commission. If the Registration Statement has become
effective and the Prospectus omits certain information at
the time of effectiveness pursuant to Rule 430A under the
Securities Act, a final prospectus containing that
information will promptly be filed by the Portfolio with the
Commission in accordance with Rule 497(b) of the Securities
Act.
(b) The Portfolio understands that Smith
Barney Shearson proposes to make a market in the Shares, as
described in the Prospectus, as soon after the Effective
Date (or, if later, after the date this Agreement is signed)
as Smith Barney Shearson deems advisable. The Portfolio
confirms that Smith Barney Shearson has been authorized to
distribute the Prospectus and any amendments or supplements
to the Prospectus.
6. Representations and Warranties of the Portfolio.
The Portfolio represents and warrants to Smith
Barney Shearson that:
(a) on the Effective Date and the date the
Prospectus is first filed with the Commission pursuant to
Rule 497(b) or (h) under the Securities Act and the date
when any post-effective amendment to the Registration
Statement becomes effective or any amendment or supplement
to the Prospectus is filed with the Commission, the
Registration Statement, the Prospectus and any such
amendment or supplement did or will comply in all material
respects with the applicable requirements of the Acts and
the Rules and Regulations, except that the Portfolio makes
no representations, warranties or agreements as to
information contained in or omitted from the Registration
Statement, the Prospectus or any such amendment or
supplement in conformity with written information furnished
to the Portfolio by Smith Barney Shearson specifically for
inclusion in such document;
(b) on the Effective Date and when any post-
effective amendment to the Registration Statement becomes
effective, neither the Registration Statement nor any such
amendment did or will contain any untrue statement of a
material fact or omit to state a material fact required to
be stated in it or necessary to make the statements in it
not misleading, except that the Portfolio makes no
representations, warranties or agreements as to information
contained in or omitted from the Registration Statement or
such amendment in reliance upon or in conformity with
written information furnished to the Portfolio by Smith
Barney Shearson specifically for inclusion in such document;
(c) on the Effective Date and the date the
Prospectus or any amendment or supplement to the Prospectus
is filed with the Commission, the Prospectus or amendment or
supplement did not contain any untrue statement of a
material fact or omit to state a material fact necessary to
make the statements in it, in light of the circumstances
under which they were made, not misleading, except that the
Portfolio makes no representations, warranties or agreements
as to information contained in or omitted from the
Prospectus or amendment or supplement to the Prospectus in
reliance upon or in conformity with written information
furnished to the Portfolio by Smith Barney Shearson
specifically for inclusion in such document;
(d) the Notification complied, and any
amendment to the Notification will comply, in all material
respects, with the requirements of the Investment Company
Act;
(e) the Portfolio is not in violation of its
corporate charter or by-laws or in default under any
agreement, indenture or instrument to which the Portfolio is
a party, by which the Portfolio may be bound or to which any
of the properties or assets of the Portfolio is subject or,
to the best knowledge of the Portfolio, in breach or
violation of any judgment, decree, order, rule or regulation
of any court or governmental or regulatory agency or body,
the effect of which violation or default or breach would be
material to the Portfolio;
(f) each of the Advisory Agreement, the
Administration Agreement, the Custody Agreement and the
Transfer Agency Agreement has been duly authorized, executed
and delivered by the Portfolio, complies in all material
respects with all applicable provisions of the Investment
Company Act, the Investment Company Act Rules, the Advisers
Act and the Advisers Act Rules, and, assuming due
authorization, execution and delivery by the other party to
each such agreement, constitutes a legal, valid and binding
obligation of the Portfolio enforceable in accordance with
its terms, except as its enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights and
be general equity principles (regardless of whether
enforceability is considered in a proceeding in equity or at
law);
(g) this Agreement has been duly authorized,
executed and delivered by the Portfolio, complies in all
material respects with all applicable provision of the
Investment Company Act and the Investment Company Act Rules,
and, assuming due authorization, execution and delivery by
Smith Barney Shearson, constitutes the legal, valid and
binding obligation of the Portfolio, enforceable in
accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating
to or affecting creditors' rights and by general equity
principles (regardless of whether enforceability is
considered in a proceeding in equity or at law);
(h) no consent, approval, authorization or
order of any court or governmental agency or body is
required for the execution, delivery and performance of this
Agreement, the Advisory Agreement, the Administration
Agreement, the Custody Agreement and the Transfer Agency
Agreement by the Portfolio, or the consummation by the
Portfolio of the transactions contemplated by each of those
agreements, except those that have been obtained and those
that may be required under the Acts;
(i) the execution, delivery and performance of
this Agreement, the Advisory Agreement, the Administration
Agreement, the Custody Agreement and the Transfer Agency
Agreement, and the consummation by the Portfolio of the
transactions contemplated by each of those agreements, will
not conflict with, result in the creation or imposition of,
any lien, charge or encumbrance upon the assets of the
Portfolio pursuant to the terms of, result in a breach or
violation by the Portfolio of any material terms or
provisions of, or constitute a default by the Portfolio
under, any material contract, including any indenture,
mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which the Portfolio is a party or
to which its properties is subject, the corporate charter or
by-laws of the Portfolio, or, to the best knowledge of the
Portfolio, any statute (including the Acts), judgment,
decree, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the
Portfolio or any of its property;
(j) to the best of the Portfolio's knowledge,
subsequent to the dates as of which information is given in
the Registration Statement or the Prospectus, there has not
been any material adverse change in, or any adverse
development that materially affects, the business,
properties, financial condition, results of operations, or
prospects of the Portfolio;
(k) Coopers & Lybrand, whose report is
incorporated by reference into the Prospectus, are
independent public accountants as required by the Acts and
the Rules and Regulations;
(l) the Shares that are issued and outstanding
are validly authorized, issued and outstanding, fully paid
and non-assessable;
(m) the Shares of Common Stock conform in all
material respects to the descriptions of them contained in
the Registration Statement and the Prospectus;
(n) the financial statements of the Portfolio
incorporated by reference into the Registration Statement
present fairly the financial condition of the Portfolio at
the dates indicated in the financial statements and have
been prepared in accordance with generally accepted
accounting principles applied on a consistent basis;
(o) there is no litigation or proceeding
pending or, to the knowledge of the Portfolio, threatened
against the Portfolio that might result in any material
adverse change in the financial condition, results of
operations, business or prospects of the Portfolio or that
is required to be disclosed in the Registration Statement;
(p) there are no material contracts or other
documents that are required to be described in the
Prospectus or filed as exhibits to the Registration
Statement by the Acts or by the Rules and Regulations that
have not been described in the Prospectus or filed as
exhibits to the Registration Statement or incorporated in
the Registration Statement by reference as permitted by the
Rules and Regulations;
(q) the Portfolio is registered with the
Commission under the Investment Company Act as a closed-end,
diversified management investment company and is, and at all
times during the operation of this Agreement will be, in
compliance in all material respects with the terms and
provisions of the Acts;
(r) no person is serving or acting or is
proposed to serve or act as an officer, director or
investment adviser of the Portfolio except in accordance
with the provisions of the Investment Company Act and the
Advisers Act, the Investment Company Rules and the Advisers
Act Rules; and
(s) the Portfolio has been incorporated, is
validly existing and in good standing under the laws of the
State of Maryland, is duly qualified to do business and is
in good standing as a foreign corporation in each
jurisdiction in which its ownership of property or the
conduct of its business requires qualification, and has all
power and authority necessary to own or hold its property
and to conduct its business as described in the Prospectus.
7. Covenants of the Portfolio.
The Portfolio covenants and agrees:
(a) if the Registration Statement has not
become effective by the date of this Agreement, promptly to
file the Final Amendment with the Commission, to use its
best efforts to cause the Registration Statement to become
effective and, as soon as the Portfolio is advised, to
notify Smith Barney Shearson when the Registration Statement
or any amendment to it has become effective and, if
required, to file a Prospectus pursuant to Rule 497(b) under
the Securities Act as promptly as practicable, but no later
than the fifth Business Day following the date of the
Effective Date;
(b) if the Registration Statement has become
effective on or before the date of this Agreement and the
Prospectus contained in the Registration Statement omits
certain information at the time of effectiveness pursuant to
Rule 430A under the Securities Act, to file a Prospectus
pursuant to Rule 497(b) under the Securities Act as promptly
as practicable, but no later than the date the Prospectus is
first used after the Effective Date;
(c) not to file any Prospectus or any other
amendment or supplement to the Registration Statement or the
Prospectus unless a copy has first been submitted to Smith
Barney Shearson a reasonable time before its filing and
Smith Barney Shearson has not reasonably objected to it
within a reasonable period of time after receiving the copy;
(d) to furnish promptly to Smith Barney
Shearson a conformed copy of the Registration Statement as
originally filed with the Commission, and each amendment to
the Registration Statement filed with the Commission,
including all consents and exhibits filed with the
Registration Statement;
(e) to deliver to Smith Barney Shearson, as
soon as the Registration Statement becomes effective and
thereafter when the Prospectus is required to be delivered
under the Acts, as many copies of the Prospectus and as many
conformed copies of the Registration Statement and each
amendment to the Registration Statement (including exhibits
filed with the Registration Statement or incorporated by
reference in the Registration Statement) as Smith Barney
Shearson may reasonably request;
(f) to deliver promptly to Smith Barney
Shearson the number of copies of the Prospectus (as amended
or supplemented and including all documents incorporated by
reference in the Prospectus) as Smith Barney Shearson may
reasonably request;
(g) if the Commission issues a stop order
suspending the effectiveness of the Registration Statement
or an order pursuant to Section 8(e) of the Investment
Company Act, to make every reasonable effort to obtain the
lifting of the order at the earliest possible time;
(h) to furnish to Smith Barney Shearson copies
of all public reports and all financial statements furnished
by the Portfolio to the NYSE or any other securities
exchange upon which the Common Stock is listed or admitted
for trading, pursuant to requirements of or agreements with
those exchanges or to the Commission pursuant to the
Exchange Act, the Investment Company Act or any rule or
regulation of the Commission under the exchange Act or the
Investment Company Act;
(i) to take whatever actions Smith Barney
Shearson reasonably requests to continue the Shares'
qualification for offer and sale under the securities or
"blue sky" laws in jurisdictions where the Shares are
qualified for offer and sale and to qualify the Shares for
offer and sale under the blue sky laws of those
jurisdictions reasonably designated by Smith Barney
Shearson, except that, under no circumstances, will the
Portfolio be required to qualify as a foreign corporation or
to file a general consent to service of process in any
jurisdiction; and
(j) to use its best efforts to maintain the
Shares' listing on the NYSE or to list the Shares on any
other national securities exchange, or to have the Shares
traded on the NASDAQ National Market System or any other
national market system and to comply with the rules and
regulations of the exchange on which the Shares are listed
or the market system through which the Shares are traded.
8. Conditions of Smith Barney Shearson's Market-
Making Activities.
(a) Smith Barney Shearson will not undertake
market-making activities with respect to Shares if, on the
date of this Agreement, the representations and warranties
of the Portfolio contained in this Agreement shall be
inaccurate, the Portfolio shall not have performed its
obligations under this Agreement, or any of the following
additional terms and conditions shall not be met:
(i) the Registration Statement has
become effective by 5:30 p.m., New York City time, on the
date of this Agreement, or later date and time to which
Smith Barney Shearson has consented in writing;
(ii) the Prospectus has been timely filed
with the Commission in accordance with the provisions of
this Agreement;
(iii) on or before the Effective Date, no
stop order suspending the effectiveness of the Registration
Statement or order pursuant to Section 8(e) of the
Investment Company Act has been issued, and no stop order or
proceeding for an order pursuant to Section 8(e) of the
Investment Company Act has been initiated or threatened by
the Commission;
(iv) any request of the Commission for
inclusion of additional information in the Registration
Statement or the Prospectus or otherwise has been met;
(v) the Portfolio has not filed with the
Commission the Prospectus or any amendment or supplement to
the Registration Statement or the Prospectus without the
consent of Smith Barney Shearson, which consent has not been
unreasonably withheld;
(vi) Smith Barney Shearson has not
discovered and disclosed to the Portfolio, on or prior to
the Effective Date, that the Registration Statement or the
Prospectus or any amendment or supplement to the
Registration Statement or the Prospectus contains an untrue
statement of a fact that, in the reasonable opinion of
counsel to Smith Barney Shearson, is, as a matter of law,
material or omits to state a material fact that, in the
reasonable opinion of that counsel, is material and is
required to be stated therein or is necessary to make the
statements therein not misleading; and
(vii) all corporate proceedings and legal
matters incident to the authorization, form and validity of
this Agreement and the Shares and the form of the
Registration Statement and Prospectus, other than financial
statements and other financial data, and all other legal
matters relating to this Agreement and the transactions
contemplated by this Agreement are satisfactory in all
respects to counsel to Smith Barney Shearson, and the
Portfolio has furnished to that counsel all documents and
information that counsel may reasonably request to enable
counsel to pass upon those matters.
(b) All opinions, letters, evidence and
certificates described in this Section 8 or elsewhere in
this Agreement will be deemed to be in compliance with the
provisions of this Agreement only if they are in form and
substance reasonably satisfactory to counsel to Smith Barney
Shearson.
9. Expenses.
(a) The Portfolio will pay, or cause to be
paid, or reimburse if paid by Smith Barney Shearson or
other:
(i) all costs and expenses in connection
with the Registration Statement;
(ii) all costs and expenses of
maintaining the qualification of the Shares for sale under
the securities of "blue sky" laws of the various states
where the Shares are qualified or qualifying the Shares for
sale under the securities or "blue sky" laws of such other
states as may be reasonably designated by Smith Barney
Shearson;
(iii) the costs of preparing and issuing
any certificates that may be issued to represent Shares;
(iv) all expenses in connection with the
printing of any notices of meetings of the Portfolio's
shareholders, proxy and proxy statements and enclosures with
those documents, as well as any other notice or
communication sent to shareholders in connection with any
meeting of the shareholders or otherwise, any annual, semi-
annual or other report or communication sent to the
shareholders, and the expense of sending Prospectuses
relating to the Shares to existing shareholders;
(v) all expenses in connection with the
printing, copying and/or distribution of the Registration
Statement, the Prospectus or any post-effective amendments
or supplements to the Registration Statement or Prospectus;
and
(vi) all expenses in connection with
maintaining or obtaining the listing of the Shares on a
national securities exchange or national market system.
(b) Smith Barney Shearson will permit its
officers and employees to serve without compensation as
directors and/or officers of the Portfolio if those
employees are duly elected to those positions.
10. Indemnification and Contribution.
(a) The Portfolio agrees to indemnify Smith
Barney Shearson and hold harmless Smith Barney Shearson and
each person that controls Smith Barney Shearson within the
meaning of the Securities Act (a "Controlling Person") from
and against any loss, claim, damage or liability, joint or
several, and any action with respect to any such loss,
claim, damage or liability, to which Smith Barney Shearson
or any Controlling Person may become subject, under the
Securities Act or otherwise, insofar as the loss, claim,
damage, liability or action arises out of, is based upon, or
is alleged to arise out of or be based upon (i) any untrue
statement or alleged untrue statement of a material fact
contained in the Registration Statement, the Prospectus, or
the Registration Statement or the Prospectus as amended or
supplemented, or the omission or alleged omission to state
in any such document a material fact required to be stated
in the document or necessary to make the statements in the
document not misleading, except that the Portfolio will not
be liable to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, or is
alleged to arise out of or be based upon any untrue
statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement or the
Prospectus or any amendments or supplements to the
Registration Statement or the Prospectus, in reliance upon
or in conformity with written information furnished to the
Portfolio by Smith Barney Shearson specifically for
inclusion in the document, (ii) any action taken or omitted
to be taken by Smith Barney Shearson with the consent of the
Portfolio, (iii) any action taken or omitted to be taken by
the Portfolio, (iv) any breach by the Portfolio of any
representation or warranty, or any failure by the Portfolio
to comply with any agreement or covenant contained in this
Agreement, or (v) any of the other transactions contemplated
by Smith Barney Shearson's market-making activities with
respect to the Portfolio, and will reimburse Smith Barney
Shearson and each Controlling Person for any legal and other
expenses reasonably incurred by Smith Barney Shearson or the
Controlling Person in investigating or defending or
preparing to defend against any such loss, claim, damage,
liability or action, except that the Portfolio will not be
liable for indemnity under paragraph (a)(v) of this Section
10 to the extent that the action or omission to which that
indemnity relates has been determined by a court of
competent jurisdiction to have resulted directly from the
willful misconduct or gross negligence of Smith Barney
Shearson or any Controlling Person.
(b) Smith Barney Shearson will indemnify and
hold harmless the Portfolio, each of its directors, each of
its officers who signed the Registration Statement and any
person who controls the Portfolio within the meaning of the
Securities Act from and against any loss, claim, damage or
liability, joint or several, or any action with respect to
any such loss, claim, damage or liability, to which the
Portfolio or any such director, officer or controlling
person may become subject, under the Securities Act or
otherwise, insofar as the loss, claim, damage, liability or
action arises out or, or is based upon, or is alleged to
arise out of or be based upon, any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectus, or the Registration
Statement or the Prospectus as amended or supplemented, or
arises out of, or is based upon, or is alleged to arise out
of or be based upon, the omission or alleged omission to
state in any such documents a material fact required to be
stated in the document or necessary to make the statements
in the document not misleading, but in each case only to the
extent that the untrue statement or alleged untrue statement
or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the
Portfolio by Smith Barney Shearson specifically for
inclusion in the document, and will reimburse the Portfolio
for any legal and other expenses reasonably incurred by the
Portfolio or any such director, officer or controlling
person in investigating or defending or preparing to defend
against the loss, claim, damage, liability or action. The
indemnity agreement contained in this Section 10(b) is in
addition to any liability that Smith Barney Shearson may
otherwise have to the Portfolio or any of its directors,
officers or controlling persons.
(c) Promptly after receipt by an indemnified
party under this Section 10 of notice of any claim or the
commencement of any action, the indemnified party will
notify the indemnifying party in writing of this claim or
the commencement of that action, except that the failure to
notify the indemnifying party will not relieve the
indemnifying party from any liability that it may have to an
indemnified party under this Section 10 except to the extent
that the indemnifying party has been prejudiced in any
material respect by the failure or from any liability that
it may have to an indemnified party otherwise than under
this Section 10. If any such claim or action is brought
against an indemnified party, and the indemnified party
notifies the indemnifying party of the claim or action, the
indemnifying party will be entitled to participate in the
claim or action and, to the extent the indemnifying party
wishes, jointly with any other similarly notified
indemnifying party, to assume the defense of the claim or
action with counsel satisfactory to the indemnified party.
After the notice from the indemnifying party to the
indemnified party of the indemnifying party's election to
assume the defense of the claim or action, the indemnifying
party will not be liable under this Section 10 for any legal
or other expenses subsequently incurred by the indemnified
party in connection with the defense of the claim or action
other than reasonable costs of investigation and providing
evidence, except that the indemnified party will have the
right to employ counsel to represent the indemnified party,
its officers, directors, employees and controlling persons
who may be subject to liability arising out of any claim or
action with respect to which indemnity may be sought by the
indemnified party and any such officers, directors,
employees or controlling persons if, in the reasonable
judgment of the indemnified party, it is advisable for the
indemnified party to be represented by separate counsel, and
in that event, the fees and reasonable expenses of that
counsel will be paid by the indemnifying party.
(d) If the indemnification provided for in
this Section 10 is unavailable to an indemnified party with
respect to any loss, claim, damage or liability, or any
action with respect to any such loss, claim, damage or
liability referred to in this Section 10, then each
indemnifying party will, in lieu of indemnifying the
indemnified party, contribute to the amount paid or payable
by the indemnified party as a result of the loss, claim,
damage or liability, or action with respect to the loss,
claim, damage or liability in the proportion that is
appropriate to reflect the relative fault of the Portfolio
and Smith Barney Shearson with respect to the transaction to
which the loss, claim, damage or liability, or action with
respect to the loss, claim, damage or liability relates, as
well as any other relevant equitable considerations. The
relative fault of the Portfolio and Smith Barney Shearson
will be determined by reference to whether the untrue
statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by
the Portfolio or Smith Barney Shearson, the intent of the
parties and their relative knowledge, access to information
and opportunity to correct or prevent the statement or
omission, and other relevant equitable considerations. The
Portfolio and Smith Barney Shearson agree that it would not
be just and equitable if contributions pursuant to this
Section 10 were to be determined by a proportionate
allocation that does not take into account the equitable
considerations referred to in this paragraph (d). The
amount paid or payable by an indemnified party as a result
of the loss, claim, damage or liability, or action with to
the loss, claim, damage or liability referred to in this
Section 10, will be deemed to include, for purposes of this
Section 10, any legal or other expenses reasonably incurred
by the indemnified party in connection with investigating or
defending any such action or claim. No person found guilty
of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) by a court of competent
jurisdiction will be entitled to contribution pursuant to
this paragraph (d) from any person who was not found guilty
of fraudulent misrepresentation.
(e) The indemnity agreement contained in this
Section 10 and the representations, warranties, agreements
and covenants of the Portfolio made in this Agreement will
remain in full force and effect regardless of any
termination or amendment of this Agreement undertaken
pursuant to Section 11 of this Agreement or any
investigation made by or on behalf of an indemnified party.
11. Continuation, Amendment or Termination of
Agreement.
(a) This Agreement will become effective on
the Effective Date and will continue for an initial two-year
term and will continue thereafter, so long as such
continuance is specifically approved at least annually (i)
by the Board of Directors of the Portfolio or (ii) by a vote
of a majority of the outstanding voting securities of the
Portfolio entitled to vote, so long as in either case, the
continuance is also approved by a majority of the directors
of the Portfolio who are not interested persons of the
Portfolio or Smith Barney Shearson by vote cast in person at
a meeting called for the purpose of voting on the approval.
(b) This Agreement (i) may be terminated by
the Portfolio at any time on written notice to Smith Barney
Shearson; (ii) may be terminated by Smith Barney Shearson at
any time on written notice to the Portfolio; and (iii) will
terminate automatically in the event of its assignment by
either the Portfolio or Smith Barney Shearson.
(c) Upon termination of this Agreement, the
obligations of the Portfolio and Smith Barney Shearson under
this Agreement will cease and terminate as of the date of
the termination, except for any obligation to respond with
respect to a breach of this Agreement committed prior to the
termination.
(d) This Agreement may be amended at any time
by mutual consent of the Portfolio and Smith Barney Shearson
except that such consent on the part of the Portfolio must
have been approved (i) by the Board of Directors of the
Portfolio, or by a vote of a majority of the outstanding
voting securities of the Portfolio entitled to vote and (ii)
by vote of a majority of the directors of the Portfolio who
are not interested persons of the Portfolio cast in person
at a meeting called for the purpose of voting upon the
amendment.
(e) For purposes of this Section 11, the terms
"vote of a majority of the outstanding voting securities" of
the Portfolio, and "interested persons" and "assignment"
have the meanings given to them in the Investment Company
Act.
12. Notices.
Any notice by the Portfolio to Smith Barney
Shearson will be sufficient if given in writing, by
telegraph or by facsimile addressed to Smith Barney Shearson
at 1345 Avenue of the Americas, New York, New York 10105,
and any notice by Smith Barney Shearson to the Portfolio
will be sufficient if given in writing, by telegraph or by
facsimile addressed to the Portfolio at Two World Trade
Center -- 100th Floor, New York, New York 10048, Attention:
Mr. Richard P. Roelofs.
13. Parties.
This Agreement will inure to the benefit of, and
be binding upon, Smith Barney Shearson and the Portfolio and
their respective successors. This Agreement and its terms
and provisions are for the sole benefit of only those
persons, except that (a) the representations, warranties,
indemnities and agreements of the Portfolio contained in
this Agreement will also be deemed to be for the benefit of
the person or persons controlling Smith Barney Shearson
within the meaning of Section 15 of the Securities Act and
(b) the indemnity agreement of Smith Barney Shearson
contained in Section 10(b) of this Agreement will be deemed
to be for the benefit of the directors of the Portfolio and
officers of the Portfolio who have signed the Registration
Statement and any person controlling the Portfolio. Nothing
in this Agreement is intended or should be construed in any
way to give any person other than the persons referred to in
this Section 13 any legal or equitable right, remedy or
claim under, or with respect to, this Agreement or any
provision contained in this Agreement.
14. Governing Law.
This Agreement will be governed by and construed
in accordance with the laws of the State of New York.
15. Counterparts.
This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart,
the executed counterparts will each be deemed to be an
original but all such counterparts will together constitute
one and the same instrument.
16. Headings.
The headings used in this Agreement have been
inserted for convenience of reference only and are not
intended to be part of, or to affect the meaning or
interpretations of, this Agreement.
* * * * *
If the foregoing correctly sets forth the agreement
between the Portfolio and Smith Barney Shearson, please
indicate Smith Barney Shearson's acceptance in the space
provided for that purpose below.
Very truly yours,
MANAGED HIGH
INCOME
PORTFOLIO INC.
By:
/s/ Heath B. McLendon
Name: Heath
B. McLendon
Title:
Chairman of the Board
Accepted:
SMITH BARNEY SHEARSON INC.
By: /s/ Christina Sydor
Name: Christina T. Sydor
Title: Secretary
shared\global\mgdhinc\agmts\markmak.doc
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Managed High Income Portfolio Inc.:
We hereby consent to the following with respect to
Post-Effective Amendment No. 1 to the Registration Statement
on Form N-2 (File No. 33-56408) under the Securities Act of
1933, as amended, of Managed High Income Portfolio Inc.:
1. The incorporation by reference of our report dated
April 8, 1994 accompanying the Annual Report for the fiscal
year ended February 28, 1994 of Managed High Income
Portfolio Inc., in the Statement of Additional Information.
2. The reference to our firm under the heading "Financial
Highlights" in the Prospectus.
3. The reference to our firm under the heading "Counsel
and Auditors" in the Statement of Additional Information.
COOPERS & LYRBAND
Boston, Massachusetts
July 13, 1994
shared/shearsn2/mgdhiinc/n2/0794/coopcon
