<PAGE>
[GRAPHIC]
A reddish square located under the fund name showing a bunch of leaves
hanging downward, gently
flowing to the left side in a curled up motion. MANAGED
HIGH INCOME
P O R T F O L I O I N C .
Quarterly Report
May 31, 1994
[LOGO]
<PAGE>
- - ------------------------------------------------------------------------------
- - --
LETTER TO SHAREHOLDERS MAY 31, 1994
MANAGED HIGH INCOME
PORTFOLIO INC. Dear
Shareholder:
We are pleased to provide the quarterly report for the Managed High Income
Portfolio Inc. for the period ended May 31, 1994. Over the past three months,
the Portfolio paid dividends totaling $0.273 per share, equivalent to an
annualized distribution rate of 9.50% based on the May 31, 1994 net asset
value of $11.49 per share and 9.93% based on the Portfolio's New York Stock
Exchange closing price of $11.00 on that date. In May, the Portfolio declared
a monthly dividend of $0.093 per share that was paid in June. Between February
and May of 1994, it paid a dividend of $0.091 per share; it previously paid a
dividend of $0.096 per share until a defensive restructuring of the
Portfolio's holdings to include a large cash position temporarily reduced its
income stream.
The Portfolio generated a negative total return of (4.86)% based on market
price and (5.01)% based on net asset value over the past three months. This
was in line with the return earned by the Salomon Brothers High Yield Index
for the same period, and was a result of declining prices in both the stock
and bond markets.
MARKET AND ECONOMIC OVERVIEW
The high yield market underwent a meaningful correction over the first
five months of 1994 along with the rest of the fixed income markets. The
strengthening economic recovery worried fixed income investors who became
concerned about potentially higher inflation rates. We believe that after a
very strong fourth quarter and a more modest first quarter, the economy will
settle into a moderate growth pattern with only a modest bias for higher
inflation. Nevertheless, we believe that the Federal Reserve will continue to
move to a more
1
<PAGE>
restrictive monetary policy. In fact, in the first five months of 1994, the
Federal Reserve raised the short-term Federal funds rate to 4.25% in four
policy moves from a rate of 3.00% in December. The Federal Reserve also
signaled that further increases were possible given the strengthening economy
and the potential in future months for higher inflation rates. This shift
towards higher interest rates will make fixed income investing more
challenging.
PORTFOLIO STRATEGY
After being relatively defensively postured with cash reserves
comprising nearly 8% of assets in January, during the last fiscal quarter we
reinvested in the market in attractively-valued new issues as well as
secondary issues. We also moved the Portfolio's holdings from lower coupon
and/or fully-valued issues to higher coupon issues that will tend to be less
sensitive to general interest rates changes. This combination of actions has
improved the earnings stream of the Portfolio and allowed for an increase in
its monthly payout to shareholders.
We continue to emphasize the more economically-sensitive companies that we
believe will benefit from the improving economy. This would include such
industries as automobile manufacturing and related suppliers, general
manufacturing, residential home builders, paper and forest products,
containers, transportation, and metals and mining, especially steel producers.
These industries continue to experience improving sales and profitability in
reaction to the strengthening economic recovery.
SUMMARY THOUGHTS
We would continue to advise investors that total returns in the
financial markets are likely to be lower than in previous years as interest
rates move higher. Our goal is to limit the Portfolio's net asset value
volatility, maintain the Portfolio's stock price and generate the most
attractive current yield attainable without incurring undue credit risk. In
this more difficult investment environment, we believe this more defensive
strategy will generate superior results.
The stock price of the Portfolio is reported in most daily newspapers in the
listings for securities traded on the New York Stock Exchange. Its
2
<PAGE>
weekly closing price and net asset value per share are reported in BARRON'S
and the Monday edition of THE WALL STREET JOURNAL. If you have any questions
or comments about your investment in the
Portfolio, please contact The Shareholder Services Group, Inc. at (800) 331-
1710. We appreciate your past support and look forward to helping you reach
your financial goals.
Sincerely,
Heath B. McLendon John C. Bianchi, CFA CHAIRMAN OF THE BOARD
INVESTMENT OFFICER
July 5, 1994
3
<PAGE>
- - ------------------------------------------------------------------------------
- - --
UNAUDITED FINANCIAL DATA
PER SHARE OF COMMON STOCK
MAY 31, 1994
<TABLE>
<CAPTION>
INCOME CAPITAL GAINS DIVIDEND
NYSE NET ASSET DIVIDEND DIVIDEND REINVESTMENT
CLOSING PRICE VALUE PAID PAID PRICE
- - --------------------------------------------------------------------------------<S>
<C> <C> <C> <C> <C>
June 30, 1993 $12.250 $12.34 $0.096
-- $12.28
July 31, 1993 12.125 12.33 0.096 --
12.23
August 31, 1993 12.000 12.33 0.096 --
12.22
September 30, 1993 12.125 12.24 0.096 --
12.19
October 31, 1993 12.250 12.39 0.096 --
12.38
November 30, 1993 12.125 12.37 0.096 --
12.38
December 31, 1993 12.250 12.30 0.096
$0.120 12.25
January 31, 1994 12.375 12.50 0.096 --
12.41
February 28, 1994 11.750 12.39 0.091 --
11.83
March 31, 1994 10.500 11.82 0.091 --
10.97
April 30, 1994 10.380 11.54 0.091 --
11.26
May 31, 1994 11.000 11.49 0.091 --
11.30
</TABLE>
- - --------------------------------------------------------------------------------
DIVIDEND DATA
<TABLE>
<CAPTION>
PER SHARE ANNUALIZED
DIVIDEND DISTRIBUTION
DISTRIBUTIONS* RATE**
- - ------------------------------------------------------------------------
<S> <C> <C>
$1.092 9.50%
- - -----------------------------------------------------------------------<FN>
*Assuming the May 31, 1994 income dividend of $0.091 for 12 months. **Based on May 31, 1994 net asset
value of $11.49 per share.
Each registered shareholder is considered a participant in the Fund's Dividend Reinvest-
ment Plan, unless the shareholder elects to receive all dividends and distributions in cash,
or unless the shareholder's shares are registered in the name of a broker, bank or nominee
(other than Smith Barney Inc.) which does not provide the service. Questions and correspondence
concerning the Dividend Reinvestment Plan should be directed
to The Shareholder Services Group, Inc., P.O. Box 1376, Boston, Massachusetts 02104.
</TABLE>
4
<PAGE>
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS MAY 31, 1994 (Unaudited)
<TABLE>
<CAPTION>
MARKET FACE
RATINGS VALUE
VALUE MOODY'S S&P (NOTE 1)
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES - 86.8%
HOTELS, CASINOS AND GAMING - 9.9%
$ 4,405,000 Bally's Park Place Funding,
Inc.,
1st Mortgage,
11.875% due 8/15/1999......... B1 BB $ 4,647,275
4,300,000 Empress River Boat Casino
Financial Corporation, Note,
10.750% due 4/1/2002.......... B1 BB 4,230,125
5,450,000 GNF Corporation, First
Mortgage Note, Series B,
10.625% due 4/1/2003.......... B2 NR 4,087,500
6,550,000 Lady Luck Gambling Financial
Corporation, Note,
10.500% due 3/1/2001+......... B1 B+ 6,107,875
3,030,000 Santa Fe Hotel Inc., Unit
Guaranteed Note,
11.000% due 12/15/2000........ B2 B- 2,969,400
9,200,000 Station Casinos, Inc., Sr.
Sub. Note,
9.625% due 6/1/2003........... B2 B 8,447,500
6,375,000 Trump Plaza Funding, Inc.,
1st Mortgage, Note,
10.875% due 6/15/2001......... B3 B 5,498,437
13,662,706 Trump Taj Mahal Funding, Unit
Building 1 Management,
11.350% due 11/15/1999
(Pay-in-Kind)................. Caa NR 11,989,024
- - -----------------------------------------------------------------------------47,977,136
- - -----------------------------------------------------------------------------PACKAGING AND CONTAINERS -
9.4%
Container Corporation of America:
5,000,000 Sr. Note,
11.250% due 5/1/2004.......... B2 B+ 5,200,000
9,850,000 Sr. Sub. Note,
13.500% due 12/1/1999......... B2 B 10,822,687
7,265,000 Gaylord Container Corporation,
Sr. Note,
11.500% due 5/15/2001......... B3 B 7,482,950
</TABLE>
5 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
MAY 31, 1994 (Unaudited) (Continued)
<TABLE>
<CAPTION>
MARKET FACE
RATINGS VALUE
VALUE MOODY'S S&P (NOTE 1)
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES - (continued)
PACKAGING AND CONTAINERS - (CONTINUED)
$ 1,725,000 Silgan Holdings Inc., Sr.
Discount Debenture, Step up
Bond,
Zero Coupon to 6/15/1996,
13.250% due 12/15/2002........ B3 B- $ 1,326,094
9,525,000 Stone Consolidated,
Sr. Secured Note,
9.875% due 2/1/2001........... B1 B 9,048,750 Stone Container Corporation,
Sr. Secured Note:
800,000 12.625% due 7/15/1998......... B1 B 846,000
4,100,000 10.250% due 12/15/2000........ B1 B+ 4,059,000
2,325,000 Sweetheart Cup Inc., Sr. Sub.
Note,
10.500% due 9/1/2003.......... B2 B- 2,255,250
3,400,000 United States Can Company,
Sr. Sub. Note,
13.500% due 1/15/2002......... B3 B- 3,893,000
- - -----------------------------------------------------------------------------44,933,731
- - -----------------------------------------------------------------------------GROCERY AND RETAIL - 8.8%
5,075,000 Barnes & Noble Inc., Sr. Sub.
Note, Series B,
11.875% due 1/15/2003......... B2 B 5,500,031
2,200,000 Big V Supermarket Inc., Sr.
Sub. Note,
11.000% due 2/15/2004......... B3 B- 2,065,250
4,535,000 Bradlees, Inc., Sr. Sub. Note,
11.000% due 8/1/2002.......... B2 B+ 4,580,350
2,675,000 Farm Fresh, Inc. Sr. Sub.
Note,
12.250% due 10/1/2000......... B2 B+ 2,634,875
6,725,000 Grand Union Corporation, Sr.
Note,
11.250% due 7/15/2000......... B2 B+ 6,758,625 Pathmark Stores Inc.:
4,375,000 Sr. Sub. Note,
9.625% due 5/1/2003........... B2 B 4,068,750 Sub. Notes:
3,550,000 11.625% due 6/15/2002......... B3 B 3,621,000
4,050,000 12.625% due 6/15/2002......... B3 B 4,449,938
</TABLE>
6 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
MAY 31, 1994 (Unaudited) (Continued)
<TABLE>
<CAPTION>
MARKET FACE
RATINGS VALUE
VALUE MOODY'S S&P (NOTE 1)
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES - (continued)
GROCERY AND RETAIL - (CONTINUED)
$ 5,675,000 Penn Traffic Company, Sr. Sub.
Note,
9.625% due 4/15/2005.......... B2 B $ 5,448,000
3,115,000 Wickes Lumber Company, Sr.
Sub. Note,
11.625% due 12/15/2003........ B3 B- 3,157,831
- - -----------------------------------------------------------------------------42,284,650
- - -----------------------------------------------------------------------------BUILDING AND CONSTRUCTION -
7.1%
American Standard, Inc.:
9,575,000 Sr. Debenture,
11.375% due 5/15/2004......... Ba3 B+ 10,077,687
1,900,000 Sr. Sub. Debenture,
Zero coupon to 6/1/1998,
10.500% due 6/1/2005.......... B1 B 1,170,875
5,350,000 Greystone Homes, Inc.,
Guaranteed
Sr. Note,
10.750% due 3/1/2004+......... B3 B 5,216,250 Hovnanian (K.) Enterprises
Inc.,
(Home Builder):
1,450,000 Guaranteed Note,
11.250% due 4/15/2002......... B1 B 1,551,500
3,450,000 Sr. Sub. Note,
9.750% due 6/1/2005........... B1 B 3,406,875
3,050,000 Miles Homes Services, Inc.,
Sr. Note,
12.000% due 4/1/2001.......... B2 B- 3,072,875
5,145,000 UDC Homes, Sr. Notes,
11.750% due 4/30/2003......... B2 B+ 5,080,688
5,410,000 US Home Corporation, Sr. Note,
9.750% due 6/15/2003.......... Ba3 B+ 5,173,313
- - -----------------------------------------------------------------------------34,750,063
- - -----------------------------------------------------------------------------HEALTH CARE - 6.0%
2,871,000 Alco Health Distributor
Corporation,
Sr. Debenture,
11.250% due 7/15/2005......... B3 B- 2,960,719
</TABLE>
7 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
MAY 31, 1994 (Unaudited) (Continued)
<TABLE>
<CAPTION>
MARKET FACE
RATINGS VALUE
VALUE MOODY'S S&P (NOTE 1)
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES - (continued)
HEALTH CARE - (CONTINUED)
$ 7,425,000 American Medical
International, Inc.,
Sr. Sub. Note,
13.500% due 8/15/2001......... B1 B $ 8,325,281
2,250,000 Charter Medical Corporation,
Sr. Sub. Note,
11.250% due 4/15/2004......... B2 B 2,300,625
7,350,000 Healthtrust, Inc., The
Hospital Company, Sub. Note,
10.750% due 5/1/2002.......... B1 B 7,570,500
7,075,000 Ornda Healthcorp, Sr. Sub.
Note,
12.250% due 5/15/2002......... B3 B- 7,649,844
- - -----------------------------------------------------------------------------28,806,969
- - -----------------------------------------------------------------------------METAL AND MINING - 5.1%
5,000,000 AK Steel Holding Corporation,
Sr. Note,
10.750% due 4/1/2004.......... B2 B 5,100,000
1,000,000 Armco, Inc., Sr. Note,
11.375% due 10/15/1999........ B2 B 1,037,500
3,200,000 Essex Group, Inc., Sr. Note,
10.000% due 5/1/2003.......... B1 B+ 3,112,000
3,900,000 Federal Industries Ltd., Sr.
Note,
10.250% due 6/15/2000......... B3 B- 3,778,125
1,000,000 Geneva Steel Company, Sr.
Note,
11.125% due 3/15/2001......... B1 B+ 1,040,000
1,500,000 Jorgensen (Earle) Company, Sr.
Note,
10.750% due 3/1/2000.......... B2 B 1,526,250
5,000,000 Republic Engineered Steels,
1st Mortgage Note,
9.875% due 12/15/2001......... B2 B 4,775,000
CAD 4,650,000 Stelco Inc., Canadian Dollar,
Debenture Note, Retractable,
10.400% due 11/30/2009........ NR NR 3,182,458
$ 1,000,000 Wierton Steel Corporation, Sr.
Note,
11.500% due 3/1/1998.......... B2 B 1,050,000
- - ------------------------------------------------------------------24,601,333
------------------------------------------------------------------</TABLE>
8 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
MAY 31, 1994 (Unaudited) (Continued)
<TABLE>
<CAPTION>
MARKET FACE
RATINGS VALUE
VALUE MOODY'S S&P (NOTE 1)
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES - (continued)
OIL AND NATURAL GAS - 5.0%
$ 2,000,000 Dual Drilling Company, Sr.
Sub. Note,
9.875% due 1/15/2004.......... B3 B- $ 1,835,000
3,300,000 Giant Industries Inc.,
Guaranteed Sr. Sub. Note,
9.750% due 11/15/2003......... B2 B+ 3,118,500
4,900,000 Gulf CDA Resources Ltd., Sr.
Sub. Note, (Yankee Bond),
9.250% due 1/15/2004.......... B2 B+ 4,471,250
11,900,000 Mesa Petroleum Capital
Corporation, Secured Discount
Note, Step up Bond,
Zero coupon to 6/30/1995,
12.750% due 6/30/1998......... B3 CCC+ 10,620,750
2,350,000 Santa Fe Energy Resources,
Inc.,
Sr. Sub. Note,
11.000% due 5/15/2004......... B2 B 2,373,500
1,545,000 Transco Energy Company, Note,
11.250% due 7/1/1999.......... Ba3 B+ 1,639,631
- - -----------------------------------------------------------------------------24,058,631
- - -----------------------------------------------------------------------------CONSUMER DURABLES - 4.2%
13,275,000 Colman Holdings Inc., Sr.
Secured Note,
Zero coupon due 5/27/1998..... NR B 8,695,125
19,750,000 International Semi-Tech, Sr.
Note,
Step up Bond,
Zero coupon to 8/15/2000,
11.500% due 8/15/2003......... Ba2 B+ 9,726,875
2,100,000 Remington Arms Inc., Sr. Note,
9.500% due 12/1/2003+......... B3 B 1,950,375
- - -----------------------------------------------------------------------------20,372,375
- - -----------------------------------------------------------------------------FOREST PRODUCTS/PAPER - 4.1%
Domtar Inc.:
550,000 Debenture,
11.250% due 9/15/2017......... Ba1 BB- 542,438
</TABLE>
9 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
MAY 31, 1994 (Unaudited) (Continued)
<TABLE>
<CAPTION>
MARKET FACE
RATINGS VALUE
VALUE MOODY'S S&P (NOTE 1)
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES - (continued)
FOREST PRODUCTS/PAPER - (CONTINUED) Domtar Inc. (continued):
Sr. Note:
$ 1,200,000 11.750% due 3/15/1999......... Ba1 BB- $ 1,272,000 5,150,000 12.000% due
4/15/2001......... Ba1 BB- 5,523,375 1,300,000 Fort Howard Corporation,
Sr. Sub. Note,
9.000% due 2/1/2006........... B2 B 1,105,000
3,305,000 Repap Wisconsin Inc., Sr.
Secured Notes,
Second Priority,
9.875% due 05/1/2006.......... B3 B 3,057,125
7,875,000 Riverwood International
Corporation, Sr. Sub. Notes,
11.250% due 6/15/2002......... B1 B 8,151,487
- - -----------------------------------------------------------------------------19,651,425
- - -----------------------------------------------------------------------------PUBLISHING - 3.7%
AUD 6,400,000 News America Holdings, Inc.,
Australian Dollar, Debenture,
8.625% due 2/7/2014........... Ba1 BBB- 3,858,185
$ 11,275,000 Bell & Howell Holdings
Company, Series A, Step up
Bond,
Zero coupon to 3/1/2000,
11.500% due 3/1/2005.......... B3 B- 5,975,750
7,325,000 Marvel Holdings, Inc.,
Sr. Discount Note,
Zero coupon due 4/15/1998..... B3 B 4,468,250
4,475,000 Marvel III Holdings, Inc., Sr.
Note,
9.125% due 2/15/1998.......... NR NR 4,010,719
- - -----------------------------------------------------------------------------18,312,904
- - -----------------------------------------------------------------------------INSURANCE - 3.3%
4,000,000 Bankers Life Holdings
Corporation,
Sr. Sub. Note, Series B,
13.000% due 11/1/2002......... Ba3 BB+ 4,595,000
5,950,000 Life Partners Group Inc., Sr.
Sub. Note,
12.750% due 7/15/2002......... Ba3 BB- 6,775,562
</TABLE>
10 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
MAY 31, 1994 (Unaudited) (Continued)
<TABLE>
<CAPTION>
MARKET FACE
RATINGS VALUE
VALUE MOODY'S S&P (NOTE 1)
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES - (continued)
INSURANCE - (CONTINUED)
Reliance Group Holdings Inc.:
$ 2,975,000 Sr. Note,
9.000% due 11/15/2000......... Ba3 BB+ $ 2,737,000
2,000,000 Note,
9.750% due 11/15/2003......... B1 BB- 1,850,000
- - -----------------------------------------------------------------------------15,957,562
- - -----------------------------------------------------------------------------PERSONAL CARE - 3.0%
3,800,000 MacAndrews & Forbes Group,
Sub. Note,
12.250% due 7/1/1996.......... NR NR 3,895,000
4,815,000 Revlon Consumer Products
Corporation, Sr. Sub. Note,
10.500% due 2/15/2003......... B3 NR 3,972,375
15,100,000 Revlon Worldwide Corporation,
Sr. Secured Note,
Zero coupon due 3/15/1998..... B3 B- 6,379,750
- - -----------------------------------------------------------------------------14,247,125
- - -----------------------------------------------------------------------------ELECTRONICS/COMPUTERS - 2.8%
11,940,000 Anacomp, Inc., Sr. Sub. Note,
15.000% due 11/1/2000......... B3 CCC+ 13,313,100
- - -----------------------------------------------------------------------------TEXTILES AND APPAREL - 2.6%
4,100,000 CMI Industries Sr., Sub Note,
9.500% due 10/1/2003.......... B1 B+ 3,843,750
1,000,000 Dan River Inc., Sr. Sub Note,
10.125% due 12/15/2003........ B3 B 928,750
4,575,000 Hartmarx Corporation, Sr. Sub.
Note,
10.875% due 1/15/2002......... B3 B 4,437,750 JPS Textile Group Inc.:
1,300,000 Sr. Note,
11.750% due 6/1/1996.......... B3 CCC 1,319,500
570,000 Sr. Sub. Note,
10.850% due 6/1/1999.......... Caa CCC- 546,488
</TABLE>
11 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
MAY 31, 1994 (Unaudited) (Continued)
<TABLE>
<CAPTION>
MARKET FACE
RATINGS VALUE
VALUE MOODY'S S&P (NOTE 1)
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES - (continued)
TEXTILES AND APPAREL - (CONTINUED) JPS Textile Group Inc.
(continued):
$ 1,525,000 Sub. Note,
10.250% due 6/1/1999.......... Caa CCC- $ 1,464,000
- - -----------------------------------------------------------------------------12,540,238
- - -----------------------------------------------------------------------------AUTOMOBILE/TRUCK - 2.3%
2,950,000 Fairfield Manufacturing Inc.,
Sr. Sub. Note,
11.375% due 7/1/2001.......... Caa CCC+ 2,961,063
2,350,000 SPX Corporation, Sr. Sub.
Note,
11.750% due 6/1/2002.......... B3 B 2,373,500
5,550,000 Truck Components, Inc. Sr.
Note,
12.750% due 6/30/2001......... B2 NA 5,640,188
- - -----------------------------------------------------------------------------10,974,751
- - -----------------------------------------------------------------------------TELE-COMMUNICATIONS - 2.3%
2,310,000 Dial Call Communication,
Sr. Discount Note, Step up
Bond,
Zero coupon to 12/15/1998,
10.250% due 12/15/2005........ NR NR 1,351,350
2,050,000 Mobilemedia Communication, Sr.
Sub. Note, Step up Bond,
Zero coupon to 12/1/1998,
10.500% due 12/1/2003......... B3 CCC+ 1,214,625
5,000,000 Pagemart Inc., Sr. Discount
Note,
Step up Bond,
Zero coupon due 11/1/1998
12.250% due 11/1/2003+........ NR NR 3,125,000
3,500,000 Paging Network, Inc. Sr. Sub.
Note,
Zero coupon due 11/1/2003..... B2 B 3,740,625
1,600,000 USA Mobile Communication Inc.,
Sr. Note,
9.500% due 2/1/2004........... B3 CCC+ 1,484,000
- - -------------------------------------------------------------------10,915,600
--------------------------------------------------------------------</TABLE>
12 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
MAY 31, 1994 (Unaudited) (Continued)
<TABLE>
<CAPTION>
MARKET FACE
RATINGS VALUE
VALUE MOODY'S S&P (NOTE 1)
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES - (continued)
BROADCASTING/CABLE T.V. - 2.2%
$ 1,725,000 Continental Cablevision, Inc.,
Sr. Note,
11.000% due 6/1/2007.......... B1 BB- $ 1,765,969
Rogers Cablesystems Ltd.:
CAD 4,900,000 Canadian Dollar Debenture,
9.650% due 1/15/2014.......... Ba1 BB+ 3,061,560
$ 1,150,000 Guaranteed Sr. Note,
9.625% due 8/1/2002........... Ba3 BB+ 1,127,000
1,825,000 Sr. Secured 2nd Priority
Debenture,
10.125% due 9/1/2012.......... Ba1 BB+ 1,834,125
3,000,000 Rogers Communication, Inc.,
Sr. Debenture,
10.875% due 4/15/2004......... Ba3 BB- 3,052,500
- - -----------------------------------------------------------------------------10,841,154
- - -----------------------------------------------------------------------------CHEMICALS - 1.8%
1,200,000 Buckeye Celluose Corporation,
Sr. Note,
10.250% due 5/15/2001......... B2 B 1,176,000
1,900,000 Harris Chemical North
American, Inc., Sr. Sub. Note,
10.750% due 10/15/2003........ B3 B 1,767,000
1,200,000 NL Industries, Inc., Sr.
Secured Note,
11.750% due 10/15/2003........ B1 B 1,242,000
2,250,000 OSI Specialties Holdings
Company,
Step up Bond,
Zero coupon to 4/19/1998,
11.500% due 4/15/2004......... NR NR 1,361,250
4,800,000 UCC Investors Holding, Inc.,
Sub. Notes, Step up Bond,
Zero coupon to 5/1/1998,
12.000% due 5/1/2005.......... B3 B- 3,066,000
- - -----------------------------------------------------------------------------8,612,250
- - -----------------------------------------------------------------------------FINANCIAL SERVICES - 1.3%
2,525,000 Coldwell Banker Corporation,
Note,
10.250% due 6/30/2003......... NR B+ 2,537,625
</TABLE>
13 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
MAY 31, 1994 (Unaudited) (Continued) <TABLE>
<CAPTION>
MARKET FACE
RATINGS VALUE
VALUE MOODY'S S&P (NOTE 1)
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES - (continued)
FINANCIAL SERVICES - (CONTINUED)
$ 3,875,000 Lomas Mortgage USA Inc., Sr.
Note,
10.250% due 10/1/2002......... Ba1 BB $ 3,894,375
- - ------------------------------------------------------------------------------
6,432,000
- - -----------------------------------------------------------------------------ELECTRIC UTILITIES - 0.9%
4,319,488 Midland Funding Corporation I,
Sr. Secured Note, Series C,
10.330% due 7/23/2002+........ Ba3 BB 4,276,293
- - -----------------------------------------------------------------------------LEISURE - 0.5%
2,126,000 Gillett Holdings, Inc., Sr.
Sub. Note,
12.250% due 6/30/2002......... NR NR 2,269,505
- - -----------------------------------------------------------------------------AEROSPACE - 0.5%
2,175,000 Tracor Inc., Sr. Sub. Note,
10.875% due 8/15/2001......... B2 B 2,204,906
- - -----------------------------------------------------------------------------TOTAL CORPORATE BONDS AND
NOTES
(Cost $438,976,792) 418,333,701
- - ------------------------------------------------------------------------------
<CAPTION>
Shares
<S> <C> <C> <C> <C> <C> CONVERTIBLE
PREFERRED STOCKS - 4.4%
22,900 Geneva Steel Company, Series
B, Convertible Preferred,
Exch. 14.000%................. 2,908,300 K-III Communications
Corporation, Convertible
Preferred:
69,500 Exch. 11.500%................. 1,833,063
44,415 Series B, Exch. $11.625....... 4,241,602
96,125 Navistar International
Corporation, Series G,
Convertible Preferred $6.00... 4,842,297
190,200 Unisys Corporation, Series A,
Convertible Preferred $3.75... 7,394,025
- - ------------------------------------------------TOTAL CONVERTIBLE PREFERRED
STOCKS
(Cost $23,660,593) 21,219,287
--------------------------------------------------------------------</TABLE>
14 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
MAY 31, 1994 (Unaudited) (Continued) <TABLE>
<CAPTION>
Market Value
Shares
(Note 1)
<S> <C> <C> <C> <C> <C>
PREFERRED STOCKS - 1.8%
326,294 Algoma Finance Corporation,
Series A,
5.500% Cum. Preferred......... $ 4,713,784
422,050 Gulf CDA Resources Ltd.,
Series 1...................... 1,051,752
86,353 National Intergroup Inc.,
Series A, $4.20............... 2,968,384
- - -----------------------------------------------------------------------------TOTAL PREFERRED STOCKS
(Cost $10,062,431) 8,733,920
-----------------------------------------------------------------------------WARRANTS - 0.2%
219,350 Gaylord Container Corporation,
Expires 1996++................ 849,981
260 Trump Plaza Holding
Association,
Expires 1996++................ 188,500
- - -----------------------------------------------------------------------------TOTAL WARRANTS
(Cost $1,220,770) 1,038,481
-----------------------------------------------------------------------------COMMON STOCKS - 0.2%
(Cost $1,360,000)
68,000 Station Casinos, Inc.......... 1,003,000
- - ------------------------------------------------------------------------------
<CAPTION>
Face
Value
<S> <C> <C> <C> <C> <C> REPURCHASE
AGREEMENT - 4.4%
(Cost $21,373,000)
$21,373,000 Agreement with Credit Lyonnais, 4.250% dated
5/31/1994, to be repurchased at $21,375,523 on
6/1/1994, collateralized by $21,430,000 U.S.
Treasury Note, 4.625% due 12/31/1994............. 21,373,000
- - ---------------------------------------------------------------------------TOTAL INVESTMENTS
(Cost $496,653,586*)................... 97.8% 471,701,389 OTHER ASSETS AND LIABILITIES
(Net)..... 2.2 10,581,311
- - ---------------------------------------------------------------------------NET
ASSETS............................. 100.0% $482,282,700
---------------------------------------------------------------------------<FN>
* Aggregate cost for Federal tax purposes.
+ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration to qualified institutional
buyers.
++ Non-income producing security. </TABLE>
15 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- - --------------------------------------------------------------------------------
SUMMARY OF BONDS BY COMBINED RATINGS MAY 31, 1994 (Unaudited)
<TABLE>
<CAPTION>
PERCENT OF TOTAL
STANDARD & CORPORATE BONDS MOODY'S OR POOR'S AND NOTES
<S> <C> <C> <C> <C>
Baa BBB 1.0%
Ba BB 18.6
B B 71.8
Caa CCC 4.1
NR NR 4.5
- - ------
100.0% -----------
</TABLE>
16 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- - --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS MAY 31, 1994 (UNAUDITED)
1. Significant Accounting Policies
Managed High Income Portfolio Inc. (the "Portfolio") was organized as a
corporation under the laws of the State of Maryland on December 24, 1992
and is registered with the Securities and Exchange Commission as a
non-diversified, closed-end management investment company under
the Investment Company Act of 1940, as amended. The policies describe
the Portfolio in the preparation of its financial statements in
accounting principles.
PORTFOLIO VALUATION: Investments are valued by The Boston Company
Advisors, Inc. ("Boston Advisors") after consultation with an independent
pricing service (the "Service")
approved by the 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
the quoted bid prices and asked prices. Investments for which, in the
judgment of the Service, no readily obtainable market quotations
are available, are carried at fair value as determined by the
Service, based on methods that include consideration of: yields or prices of hi
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. Short-term investments that
mature in fewer than 60 days are valued at amortized cost.
REPURCHASE AGREEMENTS: The Portfolio may engage in repurchase
agreement transactions. Under the terms
of a typical repurchase agreement, the Portfolio takes possession of an
underlying debt obligation
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
market fluctuations during the
Portfolio's holding period. The value of the collateral is at least equal
at all times to the total
amount of the repurchase obligations, including interest. In the event of
counterparty default, the
Portfolio has the right to use the collateral to offset losses incurred.
There is potential loss to the
Portfolio in the event that the Portfolio is delayed or prevented from
exercising its rights to dispose
of the collateral securities, including the risk of a possible decline
in the value of the underlying
securities during
17
<PAGE>
- - --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
MAY 31, 1994 (UNAUDITED) (Continued)
the period while the Portfolio seeks to assert its rights. The Portfolio's
investment adviser, acting
under the supervision of the Portfolio's Board of Directors, reviews the
value of the collateral and the
creditworthiness of those banks and dealers with which the Portfolio enters
into repurchase agreements to
evaluate potential risks.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------
QUARTERLY RESULTS OF OPERATIONS NET INCREASE/
NET REALIZED (DECREASE) IN
AND UNREALIZED NET ASSETS
INVESTMENT NET INVESTMENT GAIN/(LOSS) RESULTING FROM
INCOME INCOME ON INVESTMENT OPERATIONS
QUARTER PER PER PER
PER ENDED TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
- - ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
May 31,
1993* $7,383,178 $0.18 $6,294,236 $0.15 $ 2,272,520 $0.06
$ 8,566,756 $0.21
August 31,
1993 12,752,722 0.30 11,200,876 0.27 10,769,274 0.26 21,970,150 0.53
November 30,
1993 13,389,378 0.32 11,792,080 0.28 1,588,864 0.04 13,380,944 0.32
February 28,
1994 13,009,454 0.32 11,670,246 0.28 5,952,903 0.15 17,623,149 0.43
May 31, 1994
13,770,124 0.33 12,213,050 0.29 (29,239,421) (0.70) (17,026,371)
(0.41)
- - -------------------------------------------------------------------------------
<FN>
* The Portfolio commenced operations on March 26, 1993.
</TABLE>
18
<PAGE>
- - --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The Dividend Reinvestment and Cash Purchase Plan (the "Plan") offers you an
automatic way to reinvest your dividends and capital gains distributions in
shares of the Portfolio. The Plan
also allows participants to make optional cash investments
in Portfolio shares of $100 to $3,000 semi-annually
through a purchasing agent, after consultation with The Shareholder Services
Group, ("TSSG"), a subsidiary of
First Data Corporation, the Plan Agent. For an enrollment form and detailed
information about the Plan, please
contact Managed High Income Portfolio Inc., Dividend Reinvestment and Cash
Purchase Plan, c/o TSSG, P.O. Box
1376, Boston, Massachusetts 02104, (800) 331-1710.
If you own shares that are held in the name of a brokerage firm, bank or
other nominee, you should contact
your nominee to arrange for it to participate on your behalf.
19
<PAGE>
- - -----------------------------------------------------------------MANAGED
HIGH INCOME
PORTFOLIO INC.
DIRECTORS
James J. Crisona Paolo M. Cucchi Allesandro C. diMontezemolo Andrea
Farace Paul R. Hardin George M. Pavia Heath
B. McLendon
OFFICERS
Heath B. McLendon CHAIRMAN OF THE BOARD
Stephen J. Treadway PRESIDENT
Richard P. Roelofs EXECUTIVE VICE PRESIDENT
John C. Bianchi VICE PRESIDENT AND INVESTMENT OFFICER
Lewis E. Daidone TREASURER
Christina T. Sydor SECRETARY
INVESTMENT ADVISER
Greenwich Street Advisors Two World Trade Center New York, New York 10048
ADMINISTRATOR
Smith, Barney Advisers, Inc.
1345 Avenue of the Americas New York, New York 10105
SUB-ADMINISTRATOR
The Boston Company Advisors, Inc. One Boston Place
Boston, Massachusetts 02108
AUDITORS AND COUNSEL
Coopers & Lybrand One Post Office Square Boston, Massachusetts 02109
Willkie Farr & Gallagher 153 East 53rd Street New York, New York 10022
TRANSFER AGENT
The Shareholder Services Group, Inc. Exchange Place
Boston, Massachusetts 02109
CUSTODIAN
Boston Safe Deposit and Trust Company
One Boston Place Boston, Massachusetts 02108
20 <PAGE>
THIS REPORT IS SENT TO THE SHARE-
HOLDERS OF MANAGED HIGH INCOME
PORTFOLIO INC. FOR THEIR INFORMATION.
IT IS NOT A PROSPECTUS, CIRCULAR OR
REPRESENTATION INTENDED FOR USE IN
THE PURCHASE OR SALE OF SHARES OF
THE PORTFOLIO OR OF ANY SECURITIES
MENTIONED IN THE REPORT.
FD2248 G4
