<PAGE>
[GRAPHIC]
Small box with picture of fall leaves and
above box fund name centered on page.
QUARTERLY
REPORT
[LOGO]
NOVEMBER 30, 1994
<PAGE>
MANAGED HIGH INCOME
PORTFOLIO INC.
LETTER TO
SHAREHOLDERS
NOVEMBER 30, 1994
Dear Shareholder:
We are pleased to provide the third quarter report for the Managed High
Income Portfolio Inc. (the "Portfolio") for the 3 months ended November
30, 1994. During its third quarter, the Portfolio paid income dividends
totaling $0.279 per share, which is equivalent to an annualized
distribution rate of 10.45% based on the November 30, 1994 net asset value
of $10.68 per share. The Portfolio generated a negative total return of
-1.19% for the 3 months, and -3.61% for the 12 months ended November 30,
1994, based on the Portfolio's net asset value. These results were either
in line with or superior to the median total returns for closed-end high
yield funds as reported by Lipper Analytical Services Inc., an independent
performance tracking organization. The Portfolio's performance continued
to be negatively impacted by a combination of factors with the major one
being the significant rise in interest rates in 1994. It should be noted
that our negative performance was not the result of holding any defaulting
issues or derivative securities, but was more a result of the significant
rise in general interest rates resulting from the Federal Reserve's
tightening of monetary policy. In this environment, even relatively
conservative intermediate maturity (3-7 years) Treasury notes have
experienced a meaningful erosion in principal value over the course of the
past 11 months.
MARKET AND ECONOMIC OVERVIEW
While the economic expansion remains on track, it appears that
consumption may finally be slowing as evidenced by weaker-than-expected
retail sales in the final months of 1994. Throughout 1994, individuals
financed a large portion of their purchases with debt. As a result, debt
levels are back to their historical highs. This may be starting to act as
a drag on consumption expenditures. The industrial side of the economy
remains strong, however, with factory capacity utilization at
1
<PAGE>
relatively high levels. The Federal Reserve's fear is that, given the
high levels of employment and robust industrial production, inflation
rates may begin to move unacceptably higher. So far, inflation has
not increased as evidenced by the relatively modest 2.70% increase in
the Consumer Price Index in 1994. However, to prevent the general
economy from over-heating with unacceptably higher inflation rates,
the Federal Reserve will most likely raise short term interest rates
again in the first half of 1995 on top of the 250 basis point (2.50
percentage points) increase in short-term interest rates in 1994.
On the political front, the recent overwhelming Republican
victories in Congress may mark a watershed event in economic circles
as well. In addition to the expected changes in fiscal policy where
government may actually be downsized for the first time in over 40
years, some market analysts feel that the recent Republican victories
will alter the relationship between the U.S. Congress and the Federal
Reserve Bank. In effect the Federal Reserve may be given stronger
support to pursue a more consistent anti-inflationary monetary policy
which would be welcomed by the bond market. In any event, we believe
that the Federal Reserve will succeed in controlling economic growth
and limiting inflationary pressures which should allow interest rates
to once again move lower with corresponding bond price appreciation.
This interest rate decline may not occur for at least another three
months as economic growth and inflation shift to a more moderate
trajectory. In the meantime, we would not be surprised to see
additional interest rate increases on the part of the Federal Reserve
to ensure a continuation of the moderate inflation rates we have
witnessed over the past several years.
PORTFOLIO STRATEGY
Throughout 1994, we have shifted the Portfolio into higher-coupon,
intermediate-maturity (5-10 years) issues of relatively more
economically-sensitive companies in order to limit interest rate risk
and to capitalize on the improving economy. Our largest industry
weightings remain in forest products, paper and containers, metals
and mining, and general manufacturing. We have been very slowly
reducing our gaming exposure given the increasingly competitive
conditions in that industry. Since we believe that the high yield
market is in a bottoming phase, we have moved to a relatively fully
invested position with an average maturity of between 7
2
<PAGE>
and 8 years. At some point, as we become more confident of a
sustainable market upturn in 1995, we will begin to favor deeper
discount securities which should provide greater price appreciation
potential during market rallies.
SUMMARY THOUGHTS
We believe that the worst of the bond market correction is behind
us and that the high yield market offers reasonable value at current
levels. However, we also believe that the market may not move higher
in price until the Federal Reserve is closer to completing its
monetary tightening. We remain confident that the Federal Reserve
will succeed in controlling economic growth and inflation with
short-term interest rates peaking in the first half of 1995. This
hopefully should mark the end of one of the worst bond market
declines in the past century.
We appreciate your past support during these difficult times and
look forward to achieving improving results over the course of 1995.
While patience may still be required as the financial markets bottom
in 1995, we believe that patience will be rewarded as market
conditions strengthen. Should you have any questions about your
investment in the Portfolio, please call The Shareholder Services
Group, Inc. at (800) 331-1710.
Sincerely,
Heath B. McLendon John C. Bianchi, CFA
CHAIRMAN OF THE BOARD VICE PRESIDENT AND
INVESTMENT OFFICER
January 17, 1995
3
<PAGE>
- --------------------------------------------------------------------------------
UNAUDITED FINANCIAL DATA
PER SHARE OF COMMON STOCK
NOVEMBER 30, 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>
September 30, 1993....... $12.125 $12.24 $0.096 -- $12.19
October 31, 1993......... 12.250 12.39 0.096 -- 12.28
November 30, 1993........ 12.125 12.37 0.096 -- 12.38
December 31, 1993........ 12.250 12.30 0.096 $0.120 12.42**
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........... 10.875 11.54 0.091 -- 11.26
May 31, 1994............. 11.000 11.49 0.091 -- 11.30
June 30, 1994............ 10.750 11.47 0.093 -- 10.98
July 31, 1994............ 11.000 11.34 0.093 -- 10.98
August 31, 1994.......... 10.500 11.11 0.093 -- 10.73
September 30, 1994....... 10.375 11.00 0.093 -- 10.40
October 31, 1994......... 10.000 10.91 0.093 -- 9.93
November 30, 1994........ 10.125 10.68 0.093 -- 9.97
<FN>
**During reinvestment period: NAV ranged $12.30-$12.45, market ranged
$12.25-$12.50.
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND DATA For the Period Ended November 30, 1994
<TABLE>
<CAPTION>
PER SHARE ANNUALIZED
DIVIDEND DISTRIBUTION
DISTRIBUTIONS RATE*
---------------------------------------
<S> <C> <C>
$0.093 10.45%
---------------------------------------
<FN>
*Based on November 30, 1994 net asset value of $10.68 per share.
Each registered shareholder is considered a participant in the
Portfolio's Dividend Reinvestment 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
NOVEMBER 30, 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 - 88.5%
PACKAGING AND CONTAINERS - 8.8%
Container Corporation of
America:
$ 5,000,000 Sr. Note,
11.250% due 5/1/2004.......... B2 B+ $ 5,068,750
7,625,000 Sr. Sub. Note,
13.500% due 12/1/1999......... B2 B+ 8,139,687
7,415,000 Gaylord Container Corporation,
Sr. Note,
11.500% due 5/15/2001......... B3 B 7,618,913
5,860,000 Silgan Holdings Inc., Sr.
Discount Debenture, Step up
Bond, Zero coupon to
6/15/1996,
13.250% due 12/15/2002........ B3 B- 4,783,225
Stone Container Corporation:
Sr. Notes:
800,000 12.625% due 7/15/1998......... B1 B 839,000
1,000,000 11.875% due 12/1/1998......... B1 B 1,030,000
2,900,000 10.750% due 10/1/2002......... B1 B 2,805,750
5,650,000 11.500% due 10/1/2004......... B1 B 5,586,438
3,400,000 United States Can Company,
Sr. Sub. Note,
13.500% due 1/15/2002......... B3 B- 3,791,000
- ------------------------------------------------------------------------------------
39,662,763
- ------------------------------------------------------------------------------------
FOREST PRODUCTS/PAPER - 7.8%
Domtar Inc.:
Sr. Notes:
1,400,000 11.750% due 3/15/1999......... Ba1 BB- 1,457,750
7,275,000 12.000% due 4/15/2001......... Ba1 BB- 7,675,125
Indah Kiat International
Finance Company, B.V.,
Guaranteed Notes:
3,300,000 11.375% due 6/15/1999......... Ba3 BB 3,333,000
3,600,000 11.875% due 6/15/2002......... Ba3 BB 3,559,500
6,605,000 Repap Wisconsin Inc., Sr.
Secured Note, Second Priority,
9.875% due 05/1/2006.......... B3 B 5,713,325
</TABLE>
5 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 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)
Riverwood International
Corporation, Sr. Sub. Notes,
$7,875,000 11.250% due 6/15/2002......... B1 B $ 8,151,487
5,050,000 Stone Consolidated, Sr.
Secured Note,
10.250% due 12/15/2000........ B1 B 4,892,187
- ------------------------------------------------------------------------------------
34,782,374
- ------------------------------------------------------------------------------------
HOTELS, CASINOS, AND GAMING - 7.2%
3,875,000 Boyd Gaming Corporation,
Series B,
10.750% due 9/1/2003.......... B2 B+ 3,594,063
3,500,000 Empress River Casino Financial
Corporation, Note,
10.750% due 4/1/2002.......... B1 BB 3,158,750
6,200,000 GNF Corporation, First
Mortgage Note, Series B,
10.625% due 4/1/2003.......... B2 BB 3,580,500
3,030,000 Santa Fe Hotel Inc., Unit
Guaranteed Note,
11.000% due 12/15/2000........ B2 B- 2,696,700
9,200,000 Station Casinos, Inc., Sr.
Sub. Note,
9.625% due 6/1/2003........... B2 B 7,768,094
4,550,000 Trump Plaza Funding, Inc.,
1st Mortgage, Note,
10.875% due 6/15/2001......... B3 B 3,150,875
13,662,706 Trump Taj Mahal Funding, Unit
Building 1 Management,
11.350% due 11/15/1999
(Pay-in-Kind)................. Caa NR 8,470,878
- ------------------------------------------------------------------------------------
32,419,860
- ------------------------------------------------------------------------------------
BUILDING AND CONSTRUCTION - 6.4%
9,875,000 American Standard, Inc.,
Sr. Debenture,
11.375% due 5/15/2004......... Ba3 B+ 10,356,406
</TABLE>
6 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 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)
BUILDING AND CONSTRUCTION - (CONTINUED)
$,350,000 Greystone Homes, Inc.,
Guaranteed Sr. Note,
10.750% due 3/1/2004.......... B3 B $ 4,741,438
Hovnanian (K.) Enterprises
Inc., (Home Builder),
Sub. Notes:
1,450,000 11.250% due 4/15/2002......... B1 B 1,243,375
1,525,000 9.750% due 6/1/2005........... B1 B 1,157,094
3,050,000 Miles Homes Services, Inc.,
Sr. Note,
12.000% due 4/1/2001.......... B2 B- 2,603,937
5,145,000 UDC Homes, Sr. Notes,
11.750% due 4/30/2003......... B2 B+ 4,064,550
5,410,000 US Home Corporation, Sr. Note,
9.750% due 6/15/2003.......... Ba3 B+ 4,726,987
- ------------------------------------------------------------------------------------
28,893,787
- ------------------------------------------------------------------------------------
HEALTH CARE - 6.1%
7,550,000 American Medical
International, Inc., Sr. Sub.
Note,
13.500% due 8/15/2001......... B1 B 8,295,563
3,050,000 Charter Medical Corporation,
Sr. Sub. Note,
11.250% due 4/15/2004......... B2 B 3,076,688
5,300,000 Healthtrust, Inc., The
Hospital Company, Sub. Note,
10.750% due 5/1/2002.......... B1 B 5,710,750
9,725,000 Ornada Healthcorp, Sr. Sub.
Note,
12.250% due 5/15/2002......... B3 B- 10,247,719
- ------------------------------------------------------------------------------------
27,330,720
- ------------------------------------------------------------------------------------
GROCERY AND RETAIL - 6.0%
5,075,000 Barnes & Noble Inc., Sr. Sub.
Note, Series B,
11.875% due 1/15/2003......... B1 B 5,487,344
</TABLE>
7 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 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)
$ 2,200,000 Big V Supermarket Inc., Sr.
Sub. Note,
11.000% due 2/15/2004......... B3 B- $ 1,782,000
4,535,000 Bradlees, Inc., Sr. Sub. Note,
11.000% due 8/1/2002.......... B2 B+ 4,274,238
5,500,000 Farm Fresh, Inc., Sr. Sub.
Note,
12.250% due 10/1/2000......... B2 B+ 4,736,875
Pathmark Stores Inc., Sub.
Notes:
3,550,000 11.625% due 6/15/2002......... B3 B 3,408,000
4,050,000 12.625% due 6/15/2002......... B3 B 4,181,625
3,115,000 Wickes Lumber Company,
Sr. Sub. Note,
11.625% due 12/15/2003........ B3 B- 3,095,531
- ------------------------------------------------------------------------------------
26,965,613
- ------------------------------------------------------------------------------------
METAL AND MINING - 5.2%
3,125,000 AK Steel Holding Corporation,
Sr. Note,
10.750% due 4/1/2004.......... B2 B 3,019,531
175,000 Armco, Inc., Sr. Note,
11.375% due 10/15/1999........ B1 B 178,719
1,105,000 Essex Group Inc., Sr. Note,
10.000% due 5/1/2003.......... B1 B+ 1,041,462
3,600,000 Federal Industries Ltd., Sr.
Note,
10.250% due 6/15/2000......... B3 B- 3,442,500
1,000,000 Geneva Steel Company, Sr.
Note,
11.125% due 3/15/2001......... B1 B+ 935,000
1,000,000 Inland Steel Company, 1st
Mortgage Note, Series T,
12.000% due 12/1/1998......... Ba3 BB- 1,085,000
4,050,000 Interlake Corporation, Sr.
Sub. Note,
12.125% due 3/1/2002.......... B3 CCC+ 3,801,938
5,000,000 Republic Engineered Steels,
1st Mortgage Note,
9.875% due 12/15/2001......... B2 B 4,500,000
</TABLE>
8 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 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)
METAL AND MINING - (CONTINUED)
CAD 7,954,000 Stelco Inc., Canadian Dollar,
Debenture Note, Retractable,
10.400% due 11/30/2009........ NR NR $ 5,451,114
- ------------------------------------------------------------------------------------
23,455,264
- ------------------------------------------------------------------------------------
CONSUMER DURABLES - 4.4%
$9,175,000 Colman Holdings Inc.,
Sr. Secured Note,
Zero coupon due 5/27/1998..... NR B 6,216,062
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+ 8,912,188
5,275,000 Remington Arms Inc., Sr. Note,
10.500% due 12/1/2003+........ B3 B 4,483,750
- ------------------------------------------------------------------------------------
19,612,000
- ------------------------------------------------------------------------------------
BROADCASTING/CABLE T.V. - 4.3%
7,150,000 Bell Cablemedia PLC, Sr.
Discount Note, Step up Bond,
Zero coupon due 7/15/1999
11.950% due 7/15/2004......... B2 B+ 3,852,063
Cablevision System
Corporation:
1,950,000 Note,
9.875% due 2/15/2013.......... B2 B 1,762,312
1,000,000 Sr. Sub. Note,
9.875% due 4/1/2023........... B3 B 898,750
3,450,000 Continental Cablevision, Inc.,
Sr. Sub. Debenture,
11.000% due 6/1/2007.......... B1 BB- 3,480,187
Rogers Cablesystems Ltd.:
CAD 4,900,000 Canadian Dollar Debenture,
9.650% due 1/15/2014.......... Ba3 BB+ 2,903,836
$1,825,000 Sr. Secured 2nd Priority
Debenture,
10.125% due 9/1/2012.......... Ba3 BB+ 1,742,875
</TABLE>
9 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 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. - (CONTINUED)
$ 3,000,000 Rogers Communication, Inc.,
Sr. Debenture,
10.875% due 4/15/2004......... Ba3 BB- $ 3,045,000
1,550,000 Young Broadcasters Inc.,
Guaranteed Note,
11.750% due 11/15/2004 B2 B 1,555,812
- ------------------------------------------------------------------------------------
19,240,835
- ------------------------------------------------------------------------------------
PUBLISHING - 4.2%
1,575,000 American Media Operations,
Inc.,
11.625% due 11/15/2004........ B1 B 1,576,969
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- 5,750,250
13,400,000 Marvel Holdings, Inc.,
Sr. Discount Note,
Zero coupon due 4/15/1998..... B3 B 8,341,500
AUD 6,400,000 News America Holdings, Inc.,
Australian Dollar Debenture,
8.625% due 2/7/2014........... Ba1 BBB- 3,555,625
- ------------------------------------------------------------------------------------
19,224,344
- ------------------------------------------------------------------------------------
PERSONAL CARE - 3.9%
$4,705,000 MacAndrews & Forbes Group,
Sub. Note,
12.250% due 7/1/1996.......... NR NR 4,681,475
5,215,000 Revlon Consumer Products
Corporation, Sr. Sub. Note,
10.500% due 2/15/2003......... B3 NR 4,576,163
15,525,000 Revlon Worldwide Corporation,
Sr. Secured Note,
Zero coupon due 3/15/1998..... B3 B- 8,402,906
- ------------------------------------------------------------------------------------
17,660,544
- ------------------------------------------------------------------------------------
</TABLE>
10 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 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 - 3.3%
$ 3,300,000 Giant Industries Inc.,
Guaranteed
Sr. Sub. Note,
9.750% due 11/15/2003......... B2 B+ $ 3,027,750
11,900,000 Mesa Petroleum Capital
Corporation,
Secured Discount Note, Step up
Bond,
Zero coupon to 6/30/1995,
12.750% 6/30/1998............. B3 CCC+ 9,490,250
2,350,000 Santa Fe Energy Resources,
Inc.,
Sr. Sub. Note,
11.000% due 5/15/2004......... B2 B 2,279,500
- ------------------------------------------------------------------------------------
14,797,500
- ------------------------------------------------------------------------------------
CHEMICALS - 3.3%
1,200,000 Buckeye Celluose Corporation,
Sr. Note,
10.250% due 5/15/2001......... B2 B 1,150,500
3,100,000 Huntsman Corporation,
1st Mortgage Note,
11.000% due 4/15/2004......... B1 BB- 3,158,125
7,350,000 NL Industries, Inc., Sr.
Secured Note,
11.750% due 10/15/2003........ B1 B 7,184,625
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- 3,120,000
- ------------------------------------------------------------------------------------
14,613,250
- ------------------------------------------------------------------------------------
TELE-COMMUNICATIONS - 3.0%
Dial Call Communications Inc:
3,100,000 Step up Bond,
Zero coupon to 10/15/1999
12.250% due 4/15/2004......... Caa CCC 1,209,000
2,310,000 Sr. Discount Note, Step up
Bond, Zero coupon to
12/15/1998
10.250% due 12/15/2005........ NR NR 990,412
</TABLE>
11 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 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)
TELE-COMMUNICATIONS - (CONTINUED)
$17,275,000 Nextel Communications, Inc.,
Sr. Note,
Zero coupon due 8/15/2004..... B3 CCC+ $ 6,564,500
5,400,000 Pagemart Inc., Sr. Discount
Note, Step up Bond, Zero
coupon to 5/1/1999,
12.250% due 11/1/2003......... NR NR 3,408,750
1,600,000 USA Mobile Communication Inc.,
Sr. Note,
9.500% due 2/1/2004........... B3 CCC+ 1,372,000
- ------------------------------------------------------------------------------------
13,544,662
- ------------------------------------------------------------------------------------
ELECTRONICS/COMPUTERS - 3.0%
11,940,000 Anacomp, Inc., Sr. Sub. Note,
15.000% due 11/1/2000......... B3 CCC+ 13,268,325
- ------------------------------------------------------------------------------------
INSURANCE - 2.5%
4,000,000 Bankers Life Holdings
Corporation, Sr. Sub.
Debenture, Series B,
13.000% due 11/1/2002......... Ba3 BB+ 4,585,000
5,950,000 Life Partners Group Inc.,
Sr. Sub. Note,
12.750% due 7/15/2002......... Ba3 BB 6,522,687
- ------------------------------------------------------------------------------------
11,107,687
- ------------------------------------------------------------------------------------
TEXTILES AND APPAREL - 2.1%
4,100,000 CMI Industries Sr., Sub Notes,
9.500% due 10/1/2003.......... B1 B+ 3,413,250
1,000,000 Dan River Inc., Sr. Sub Note,
10.125% due 12/15/2003........ B3 B 895,000
5,075,000 Hartmarx Corporation, Sr. Sub.
Note,
10.875% due 1/15/2002......... B3 B 4,688,031
628,000 JPS Textile Group Inc., Sr.
Sub. Note,
10.250% due 6/1/1999.......... Caa CCC- 485,915
- ------------------------------------------------------------------------------------
9,482,196
- ------------------------------------------------------------------------------------
</TABLE>
12 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 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)
AUTOMOBILE/TRUCK - 1.7%
$ 2,950,000 Fairfield Manufacturing Inc.,
Sr. Sub. Note,
11.375% due 7/1/2001.......... Caa CCC+ $ 2,950,000
2,250,000 Harvard Industies, Inc., Sr.
Note,
12.000% due 7/15/2004......... B2 B 2,272,500
2,200,000 Truck Components, Inc., Sr.
Note,
12.250% due 6/30/2001......... B2 B 2,329,250
- ------------------------------------------------------------------------------------
7,551,750
- ------------------------------------------------------------------------------------
TRANSPORTATION SERVICES - 1.4%
4,725,000 Gearbulk Holdings, Ltd., Sr.
Note,
11.250% due 12/1/2004......... Ba2 BB 4,713,187
1,525,000 Sea Containers Ltd., Sr. Sub.
Debenture,
12.500% due 12/1/2004......... B1 BB- 1,586,000
- ------------------------------------------------------------------------------------
6,299,187
- ------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 0.9%
4,118,051 Midland Funding Corporation I,
Debenture, Series C,
10.330% due 7/23/2002......... Ba3 BB 3,984,214
- ------------------------------------------------------------------------------------
FINANCIAL SERVICES - 0.8%
3,875,000 Lomas Mortgage USA Inc., Sr.
Note,
10.250% due 10/1/2002......... Ba1 BB 3,434,219
- ------------------------------------------------------------------------------------
MACHINERY - 0.7%
3,350,000 SPX Coporation, Sr. Sub. Note,
11.750% due 6/1/2002.......... B3 B 3,316,500
- ------------------------------------------------------------------------------------
LEISURE - 0.5%
2,126,000 Gillett Holdings, Inc., Sr.
Sub. Note,
12.250% due 6/30/2002......... NR NR 2,245,588
- ------------------------------------------------------------------------------------
</TABLE>
13 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 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)
AEROSPACE - 0.5%
$ 2,175,000 Tracor Inc., Sr. Sub. Note,
10.875% due 8/15/2001......... B2 B $ 2,131,500
- ------------------------------------------------------------------------------------
TOBACCO - 0.5%
2,250,000 Consolidated Cigar, Sr. Sub.
Note,
10.500% due 3/1/2003.......... B3 B 2,022,188
- ------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $437,841,159) 397,046,870
- ------------------------------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C> <C> <C> <C>
CONVERTIBLE PREFERRED STOCKS -- 4.5%
176,382 Foxmeyer Health Corporation,
Series A, Preferred,
Exch. $4.20 (Pay-in-Kind)..... 5,666,272
22,900 Geneva Steel Company, Series
B, Preferred,
Exch. 14.000% (Pay-in-Kind)... 2,679,300
K-III Communications
Corporation, Convertible
Preferred:
91,500 Exch. 11.500%................. 2,298,937
47,034 Series B, Exch. $11.625
(Pay-in-Kind)................. 4,515,223
96,125 Navistar International
Corporation, Series G,
Convertible Preferred $6.00... 5,022,531
- ------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $21,920,602) 20,182,263
- ------------------------------------------------------------------------------------
PREFERRED STOCKS - 1.4%
326,294 Algoma Finance Corporation,
Series A, 5.500% Cum. Pfd..... 5,041,809
422,050 Gulf CDA Resources Ltd.,
Series 1...................... 1,150,836
- ------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost $6,887,413) 6,192,645
- ------------------------------------------------------------------------------------
</TABLE>
14 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994 (Unaudited) (Continued)
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES (NOTE 1)
<S> <C> <C> <C> <C> <C>
WARRANTS - 0.4%
229,875 Gaylord Container Corporation,
Expires 1996++................ $ 1,580,390
36,600 Miles Homes Inc.,
Expires 1997++................ 18,300
24,840 Pagemart Inc.,
Expires 2003++................ 74,520
260 Trump Plaza Holding
Association,
Expires 1996++................ 104,000
- ------------------------------------------------------------------------------------
TOTAL WARRANTS
(Cost $1,282,897) 1,777,210
- ------------------------------------------------------------------------------------
COMMON STOCKS - 0.1%
(Cost $656,000)
32,800 Station Casinos, Inc.++....... 369,000
- ------------------------------------------------------------------------------------
<CAPTION>
FACE
VALUE
<S> <C> <C> <C> <C> <C>
REPURCHASE AGREEMENT - 4.5%
(Cost $20,353,000)
$20,353,000 Agreement with Credit Lyonnais, 5.700% dated
11/30/1994, to be repurchased at $20,356,223 on
12/1/1994, collateralized by $20,000,000 U.S.
Treasury Note, 5.375% due 5/31/1998 and
$2,420,000 U.S. Treasury Bond, 7.125% due
2/15/1923...................................... 20,353,000
- ------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $488,941,071*)......................99.4% 445,920,988
OTHER ASSETS AND LIABILITIES (Net)......... 0.6 2,625,654
- ------------------------------------------------------------------------------------
NET ASSETS.............................. 100.0% $448,546,642
- ------------------------------------------------------------------------------------
<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
NOVEMBER 30, 1994 (Unaudited)
<TABLE>
<CAPTION>
PERCENT
TOTAL
STANDARD & CORPORATE BONDS
MOODY'S OR POOR'S AND NOTES
<S> <C> <C> <C>
Ba BB 22.8%
B B 69.7
Caa CCC 3.3
NR NR 4.2
------
100.0%
------
------
</TABLE>
16 SEE NOTES TO PORTFOLIO OF INVESTMENTS.
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 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 described below are
followed consistently by the Portfolio in the valuation of its portfolio.
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 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 quotations are available, are carried at fair value as
determined by the Service, based on methods that include consideration of:
yields or prices of high income obligations 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. 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
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
17
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994 (Unaudited) (Continued)
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.
PAYMENT-IN-KIND SECURITIES: The Portfolio may invest in payment-in-kind
("pay-in-kind") securities. Pay-in-kind securities are recorded at fair
value on the ex-dividend date. Pay-in-kind securities pay interest through
the issuance to the holders of additional securities. Because interest on
pay-in-kind 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.
18
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994 (Unaudited) (Continued)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
QUARTERLY RESULTS OF OPERATIONS NET INCREASE/
NET REALIZED AND
UNREALIZED GAIN/ (DECREASE)
IN NET ASSETS
INVESTMENT NET INVESTMENT (LOSS) RESULTING FROM
INCOME INCOME ON INVESTMENT OPERATIONS
PER PER PER PER
QUARTER ENDED TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
----------------------------------------------------------------------------
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)
August 31, 1994 13,186,368 0.31 11,777,589 0.28 (25,175,803) (0.60) (13,398,214) (0.32)
November 30,
1994 12,957,354 0.31 11,569,422 0.28 (27,152,279) (0.65) (15,582,858) (0.37)
-------------------------------------------------------------------------------------
<FN>
*Portfolio commenced operations on March 26, 1993.
</TABLE>
19
<PAGE>
MANAGED HIGH INCOME
PORTFOLIO INC.
DIRECTORS
James J. Crisona
Paolo M. Cucchi
Alessandro 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
John C. Bianchi
VICE PRESIDENT AND
INVESTMENT OFFICER
Lewis E. Daidone
SENIOR VICE PRESIDENT
AND TREASURER
Christina T. Sydor
SECRETARY
INVESTMENT ADVISER
Greenwich Street Advisors
388 Greenwich Street
New York, New York 10013
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.
FD 0839 A5
