Managed
HIGH INCOME
--------------
Portfolio Inc.
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[Graphic Omitted]
Quarterly
Report
November 30, 1996
SMITH BARNEY
------------
A Member of TravelersGroup [Logo]
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Managed
HIGH INCOME
--------------
Portfolio Inc.
--------------
LETTER TO
SHAREHOLDERS
November 30, 1996
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to provide you with the third quarter report for the Managed
High Income Portfolio for the nine months ended November 30, 1996. The table
below shows the annualized distribution rates and the nine-month total returns
for the Portfolio based on the Portfolio's November 30, 1996 net asset value
(NAV) per share and New York Stock Exchange (NYSE) closing price.
Annualized
Price Per Share Distribution Rate Total Return
--------------- ----------------- ------------
$11.38 (NAV) 9.61% 8.07%
$11.25 (NYSE) 9.71% 9.09%
In comparison, the nine-month total return based on NAV for closed-end high
yield funds for the same time period was 9.67%, as reported by Lipper Analytical
Services Inc. (Lipper is an independent fund tracking organization.) Because of
its relatively higher credit quality orientation, the Portfolio had been
generating total returns in 1996 that were below the median returns for high
yield closed-end funds. Furthermore, the Managed High Income Fund, unlike other
closed-end high yield bond funds, does not use leverage. However, in the past
three months, the Portfolio's performance has been superior to that of its high
yield peer group because the better quality high yield issues that we focus on
have recently outperformed the more speculative issues.
Market and Economic Overview
The fixed income markets began to rally in the fourth quarter of 1996, with
strong performance gains by investment grade and U.S. Treasury bonds. The
ongoing slowdown in U.S. economic growth over the past three months, combined
with favorable inflation data, helped to bolster the domestic fixed income
markets. The recent bond market rally was also fueled by the Federal Reserve
Board's (the "Fed") decision to remain on the sidelines, and not raise interest
rates. In our opinion, it appears highly likely that the Fed will refrain from
adjusting short-term interest rates over the near term, given the modest
economic growth trends and moderate inflation rates that we have seen during the
fourth quarter of 1996.
While the high yield market has generally outperformed the more interest-rate
sensitive, longer maturity Treasury and investment grade markets throughout most
of the period covered by this report, the high yield market's performance
1
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lagged that of the other bond markets during the past three months. In our view,
this underperformance is most likely due to the slowdown in U.S. economic
growth.
Within the high yield market, the performance of the better quality issues
(B/B and BB/Ba) exceeded that of the more speculative, lower quality issues
(CCC/Caa and CC/Ca) during the last three months of the reporting period. This
is in direct contrast to the first six months of the reporting period, when the
lower quality high yield issues materially outperformed the higher quality
issues. We are not surprised by the recent strong performance of the better
quality high yield issues given the slower growth environment and the increasing
number of bond defaults. We view this development as a natural result of a much
more competitive economic landscape with increasing industry competition and
little pricing power across a broad array of industries.
Portfolio Strategy
We believe the Managed High Income Portfolio is well-positioned for the
current moderate pace of U.S. economic growth. We have continued to maintain a
relatively conservative portfolio posture, with a higher emphasis on better
quality intermediate maturity B/B rated and Ba/BB rated issues. We remain
committed to our prudent investment strategy of focusing on the better quality
issues given their superior risk adjusted returns and lower default risk
relative to lower-rated issues. In our opinion, the key to outperforming the
rest of the high yield market over the next twelve months will be to maintain
our current investment strategy of focusing on the upper-and middle- rated tiers
of the high yield market. In addition, we will continue to avoid or eliminate
securities of companies that have deteriorating futures and that are unlikely to
receive credit upgrades.
Throughout the period covered by this report, the Portfolio has maintained
a heavy exposure to the telecommunications and cable sectors. These sectors have
continued to generate strong corporate earnings and are not particularly
sensitive to the economic cycle. Because of our positive view on these
industries, we have added to our holdings in Time Warner, a leader in media and
entertainment; Intermedia Communications, a rapidly growing provider of
integrated telecommunications services; and Brooks Fiber, a competitive local
telecommunications service company. Both Intermedia Communications and Brooks
Fiber reported record revenues for the third quarter of 1996, up 234% and 241%
respectively over the prior year's third quarter. Time Warner registered double
digit gains during the third quarter in each of its primary businesses except
music.
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Outlook
In our view, U.S. economic growth will continue to moderate into 1997. As a
result, we do not expect any meaningful rise in inflation from the current range
of 2.5% to 3.0%. We also believe that interest rates will remain confined to a
narrow range, with no major shifts in either direction. The current U.S. economy
- -- not too hot and not too cold -- has its pluses and minuses for the high yield
investor. While an economy that is growing at a moderate pace is generally
positive for most bond sectors, it can present more of a challenge to less
discriminating high yield investors. We have begun to witness an increasing
number of companies (particularly those among the lower rated issues) that have
released negative news as a result of the more challenging economic environment
in the U.S. Nevertheless, we believe the Managed High Income Portfolio is
well-positioned in less vulnerable, better quality issues which we believe
should continue to perform well in the upcoming months.
In closing, thank you for investing in the Managed High Income Portfolio.
We look forward to continuing to help you achieve your investment goals.
Sincerely,
/s/ Heath B. McLendon /s/ John C. Bianchi, CFA
Heath B. McLendon John C. Bianchi, CFA
Chairman and Vice President and
Chief Executive Officer Investment Officer
December 16, 1996
3
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SCHEDULE OF INVESTMENTS
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November 30, 1996 (unaudited)
Face
Amount Rating Security Value
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CORPORATE BONDS AND NOTES -- 92.5%
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Aerospace/Defense -- 2.3%
$ 3,925,000 BB Airplanes Pass Through Trust, Corporate
Collateralized Mortgage Obligation,
10.875% due 3/15/19........................ $ 4,405,577
2,760,000 BB Howmet Corp., Sr. Sub. Notes,
10.000% due 12/1/03+....................... 3,008,400
2,175,000 B Tracor Inc., Sr. Sub. Notes,
10.875% due 8/15/01........................ 2,321,813
1,350,000 B UNC Inc., Sr. Sub. Notes,
11.000% due 6/1/06+........................ 1,431,000
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11,166,790
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Banking -- 1.8%
7,775,000 B First Nationwide Parent Holdings Ltd.,
Sr. Exchange Notes, 12.500% due 4/15/03.... 8,552,500
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Broadcasting -- 19.2%
1,000,000 B- All American Communications Inc.,
Sr. Sub. Notes, 10.875% due 10/15/01+...... 1,007,500
5,150,000 NR Australis Holdings Property Ltd., Sr.
Secured Discount Notes, step bond to
yield 15.000% due 11/1/02+................. 2,987,000
10,995,000 CCC+ Australis Media Ltd., Sr. Discount Notes,
step bond to yield 12.791% due 5/15/03++... 6,322,125
Bell Cablemedia, Sr. Discount Notes:
9,725,000 BB- Step bond to yield 12.110% due 7/15/04..... 8,363,500
3,575,000 BB- Step bond to yield 11.523% due 9/15/05+.... 2,842,125
Cablevision Systems Corp., Sr. Sub. Debentures:
6,250,000 B 10.750% due 4/1/04......................... 6,468,750
7,520,000 B 9.875% due 2/15/13......................... 7,275,600
2,900,000 B 10.500% due 5/15/16........................ 2,943,500
6,000,000 B Comcast UK Cable, Sr. Discount Debentures,
step bond to yield 11.424% due 11/15/07.... 4,125,000
14,500,000 B Marcus Cable Capital Corp., Sr. Discount Notes,
step bond to yield 11.966% due 8/1/04...... 11,382,500
See Notes to Financial Statements.
4
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SCHEDULE OF INVESTMENTS
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November 30, 1996 (unaudited)(continued)
Face
Amount Rating Security Value
- --------------------------------------------------------------------------------
Broadcasting -- 19.2% (continued)
$10,025,000 B NWCG Holdings, Sr. Discount Notes,
zero coupon bond to yield 10.780%
due 6/15/99................................ $ 8,320,750
Rogers Cablesystems Ltd.:
Sr. Secured Debentures:
2,575,000 BB+ 10.000% due 12/1/07...................... 2,697,313
3,150,000 BB- 11.000% due 12/1/15...................... 3,354,750
3,200,000 BB+ Sr. Secured Second Priority Debentures,
9.650% due 1/15/14....................... 2,354,369
1,750,000 BB- SCI Television Inc., Sr. Notes,
11.000% due 6/30/05........................ 1,883,438
3,675,000 B- SFX Broadcasting Inc., Sr. Sub. Notes,
10.750% due 5/15/06+....................... 3,858,750
United International Holdings Inc.,
Sr. Discount Notes:
3,975,000 B- Zero coupon bond to yield 12.830%
due 11/15/99............................. 2,827,219
5,925,000 B- Zero coupon bond to yield 13.120%
due 11/15/99............................. 4,214,156
1,515,000 BB+ Videotron Group Ltd., Sr. Notes,
10.625% due 2/15/05........................ 1,674,075
3,325,000 B+ Videotron Holdings PLC, Sr. Discount Notes,
step bond to yield 11.312% due 8/15/05..... 2,614,281
2,475,000 BB+ Videotron Ltd., Sr. Sub. Notes,
10.250% due 10/15/02....................... 2,673,000
1,550,000 B Young Broadcasting Corp., Guaranteed
Secured Notes, 11.750% due 11/15/04........ 1,666,250
- --------------------------------------------------------------------------------
91,855,951
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Building/Construction -- 0.4%
1,575,000 BB- American Standard Inc., Sr. Sub. Debentures,
11.375% due 5/15/04........................ 1,697,063
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Chemicals -- 6.1%
3,925,000 B+ Clark USA Inc., Sr. Notes,
10.875% due 12/1/05........................ 4,072,188
See Notes to Financial Statements.
5
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SCHEDULE OF INVESTMENTS
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November 30, 1996 (unaudited)(continued)
Face
Amount Rating Security Value
- --------------------------------------------------------------------------------
Chemicals -- 6.1% (continued)
$4,025,000 B- Haynes International Inc., Sr. Notes,
11.625% due 9/1/04......................... $ 4,206,125
NL Industries, Sr. Secured Notes:
3,475,000 B 13.000% due 10/15/03....................... 3,570,563
5,630,000 B Step bond to yield 12.301% due 10/15/05.... 4,672,900
3,462,000 BB- Pt. Polysindo Eka Perkasa, Sr. Notes,
13.000% due 6/15/01........................ 3,903,405
1,100,000 B Spinnaker Industries Inc., Sr. Notes,
10.750% due 10/15/06+...................... 1,128,875
4,350,000 B+ Terra Industries, Inc., Sr. Notes,
10.500% due 6/15/05........................ 4,736,063
1,350,000 B Texas Petrochemical Corp., Sr. Sub. Notes,
11.125% due 7/1/06+........................ 1,447,875
1,600,000 BB- Tri Polyta Finance, Guaranteed Secured Notes,
11.375% due 12/1/03........................ 1,632,000
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29,369,994
- --------------------------------------------------------------------------------
Communications -- 20.1%
2,625,000 B- Allbritton Communications Co., Sr. Sub.
Debentures, 11.500% due 8/15/04............ 2,749,688
Brooks Fiber Properties Inc., Sr. Discount Notes:
5,475,000 NR Step bond to yield 12.138% due 3/1/06...... 3,640,875
9,700,000 NR Step bond to yield 11.817% due 11/1/06..... 6,159,500
2,450,000 B Celestica International Inc., Guaranteed Sr.
Sub. Notes, 10.500% due 12/31/06+.......... 2,541,875
9,750,000 NR Clearnet Communications Inc., Sr. Discount
Notes, step bond to yield 13.948%
due 12/15/05............................... 6,288,750
Dial Call Communications, Inc.,
Sr. Discount Notes:
4,700,000 CCC- Step bond to yield 13.494% due 4/15/04+.. 3,278,250
2,310,000 Caa* Step bond to yield 9.880% due 12/15/05+.. 1,507,275
2,425,000 B+ Fonorola Inc., Sr. Sub. Notes,
12.500% due 8/15/02........................ 2,649,313
8,750,000 NR Intelcom Group USA Inc., Sr. Discount Notes,
step bond to yield 12.500% due 5/1/06+..... 5,643,750
See Notes to Financial Statements.
6
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SCHEDULE OF INVESTMENTS
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November 30, 1996 (unaudited)(continued)
Face
Amount Rating Security Value
- --------------------------------------------------------------------------------
Communications -- 20.1% (continued)
$ 7,375,000 B- Intermedia Communications, Sr. Discount Notes,
step bond to yield 12.530% due 5/15/06..... $ 4,885,938
7,975,000 B- Millicom International Cellular SA, Sr.
Sub. Discount Notes, step bond to yield
13.500% due 6/1/06+........................ 4,745,125
2,875,000 B- Mobile Telecommunications Technology Corp.,
Sr. Notes, 13.500% due 12/15/02............ 2,982,813
9,700,000 CCC- Nextel Communications Inc., Sr. Discount Notes,
step bond to yield 12.403% due 8/15/04..... 6,523,250
4,575,000 NR Nextlink Communications, Sr. Discount Notes,
12.500% due 4/15/06+....................... 4,826,625
Omnipoint Corp., Sr. Notes:
3,625,000 NR 11.625% due 8/15/06+....................... 3,824,375
2,000,000 CCC+ 11.625% due 8/15/06+....................... 2,110,000
Pagemart Nationwide, Inc., Sr. Discount Notes:
5,400,000 NR Step bond to yield 11.950% due 11/1/03..... 4,245,750
2,800,000 NR Step bond to yield 13.297% due 2/1/05...... 1,883,000
1,900,000 B Pricellular Wireless Corp., Sr. Notes,
10.750% due 11/1/04+....................... 1,980,750
6,135,000 BB- Rogers Communications Inc., Sr. Debentures,
10.875% due 4/15/04........................ 6,441,750
2,050,000 NR RSL Communications Ltd., Sr. Notes,
12.250% due 11/15/06+...................... 2,019,250
5,650,000 B Teleport Communications Inc., Sr. Discount
Notes, step bond to yield 11.442% due 7/1/01 3,842,000
10,225,000 BB Telewest Communications PLC,
Sr. Discount Debentures, step bond to yield
11.073% due 10/1/07........................ 6,953,000
3,250,000 CCC+ USA Mobile Communications Inc., Sr.
Discount Notes, 14.000% due 11/1/04........ 3,652,188
1,125,000 B- Wireless One Inc., Sr. Discount Notes,
3.000% due 10/15/03........................ 1,116,563
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96,491,653
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See Notes to Financial Statements.
7
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SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
November 30, 1996 (unaudited)(continued)
Face
Amount Rating Security Value
- --------------------------------------------------------------------------------
Consumer Durables -- 2.6%
$13,500,000 B+ International Semi-Tech., Sr. Discount
Secured Notes, step bond to yield
11.432% due 8/15/03........................ $ 8,403,750
1,700,000 B+ Pillowtex Corp., Guaranteed Debentures,
10.000% due 11/15/06....................... 1,746,750
1,934,000 B- TAG-Heuer International Inc., Sr. Sub. Notes,
12.000% due 12/15/05....................... 2,214,430
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12,364,930
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Diversified/Conglomerate Manufacturing -- 1.3% Interlake Corp.:
1,225,000 B- Sr. Notes, 12.000% due 11/15/01............ 1,316,875
2,565,000 CCC+ Sr. Sub. Debentures, 12.125% due 3/1/02.... 2,654,775
2,175,000 B Unifrax Investment Corp., Sr. Notes,
10.500% due 11/1/03........................ 2,248,406
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6,220,056
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Electric Equipment -- 0.6%
3,000,000 B Goss Graphic Systems Inc., Sr. Sub. Notes,
12.000% due 10/15/06....................... 3,030,000
- --------------------------------------------------------------------------------
Electric Utilities -- 1.3%
4,250,000 B Calpine Corp., Sr. Notes,
10.500% due 5/15/06+....................... 4,462,500
1,512,845 BB- Midland Cogeneration Venture Limited
Partnership, Midland Funding,
Sr. Secured Lease Obligation Bond,
Series C, 10.330% due 7/23/02.............. 1,618,744
- --------------------------------------------------------------------------------
6,081,244
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Electronics/Computers -- 2.9%
2,675,000 B- Graphic Controls Corp., Sr. Sub. Notes,
12.000% due 9/15/00+....................... 2,942,500
Unisys Corp., Sr. Notes:
4,600,000 B+ 12.000% due 4/15/03+....................... 4,830,000
5,700,000 B+ 11.750% due 10/15/04....................... 5,970,750
- --------------------------------------------------------------------------------
13,743,250
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See Notes to Financial Statements.
8
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SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
November 30, 1996 (unaudited)(continued)
Face
Amount Rating Security Value
- --------------------------------------------------------------------------------
Finance -- 1.0%
$ 4,300,000 BB- Trizec Finance, Sr. Notes,
10.875% due 10/15/05....................... $ 4,740,750
- --------------------------------------------------------------------------------
Foods -- 0.8%
2,050,000 BB- TLC Beatrice International Inc.,
Sr. Secured Notes, 11.500% due 10/1/05..... 2,175,563
1,365,000 B- Van de Kamp Inc., Sr. Sub. Notes,
12.000% due 9/15/05+....................... 1,503,206
- --------------------------------------------------------------------------------
3,678,769
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Grocery/Convenience Stores -- 1.9%
1,950,000 B- International Home Foods, Sr. Sub. Notes,
10.375% due 11/1/06+....................... 2,008,500
573 B- Kash-N-Karry Food Stores Inc., Sr. Notes,
11.500% due 2/1/03......................... 579
Pathmark Stores Inc.:
4,450,000 B Sub. Debentures, 12.625% due 6/15/02....... 4,644,688
2,200,000 B Sub. Notes, 11.625% due 6/15/02............ 2,282,500
- --------------------------------------------------------------------------------
8,936,267
- --------------------------------------------------------------------------------
Healthcare -- 3.2%
3,900,000 B Magellan Health Services Inc., Sr. Sub. Notes,
11.250% due 4/15/04........................ 4,314,375
10,375,000 B- Ornda Healthcorp, Sr. Sub. Notes,
12.250% due 5/15/02........................ 11,166,094
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15,480,469
- --------------------------------------------------------------------------------
Hotel, Casinos and Gaming -- 4.5%
2,525,000 B Aztar Corp., Sr. Sub. Notes,
13.750% due 10/1/04........................ 2,638,625
6,900,000 BB Bally's Grand Inc., 1st Mortgage Notes,
10.375% due 12/15/03....................... 7,745,250
3,250,000 B- Courtyard by Marriott Ltd., Sr. Secured Notes,
10.750% due 2/1/08+........................ 3,436,875
3,025,000 NR Mohegan Tribal Gaming Authority, Sr. Secondary
Notes, 13.500% due 11/15/02+............... 3,932,500
See Notes to Financial Statements.
9
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<PAGE>
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SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
November 30, 1996 (unaudited)(continued)
Face
Amount Rating Security Value
- --------------------------------------------------------------------------------
Hotel, Casinos and Gaming -- 4.5% (continued)
$ 3,275,000 B Showboat Inc., Sr. Sub. Notes,
13.000% due 8/1/09......................... $ 3,729,406
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21,482,656
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Leisure -- 0.8%
1,682,390 NR Gillett Holdings Inc., Sr. Sub. Notes,
12.250% due 6/30/02........................ 1,766,510
2,350,000 B Remington Arms Co., Inc., Sr. Sub. Notes,
9.500% due 12/1/03 (Current penalty
coupon 10.000%)+........................... 1,968,125
- --------------------------------------------------------------------------------
3,734,635
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Machinery -- 0.6%
1,750,000 B- Alvey Systems Inc., Sr. Sub. Notes,
11.325% due 1/31/03+....................... 1,835,313
1,200,000 B+ Hawk Corp., Sr. Notes,
10.250% due 12/1/03+....................... 1,224,000
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3,059,313
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Metals/Mining -- 4.8%
268,000 B Algoma Steel Inc., 1st Mortgage Notes,
12.375% due 7/15/05........................ 281,400
2,225,000 B- Commonwealth Aluminum Co., Sr. Sub. Notes,
10.750% due 10/1/06+....................... 2,280,625
2,650,000 NR Intertek Finance PLC, Sr. Sub. Notes,
10.250% due 11/1/06+....................... 2,716,250
11,325,000 B- Kaiser Aluminum Corp., Sr. Sub. Notes,
12.750% due 2/1/03......................... 12,032,813
1,850,000 B- Russel Metals Inc., Sr. Notes,
10.250% due 6/15/00+....................... 1,850,000
3,205,000 B+ UCAR Global Enterprises Inc.,
Sr. Sub Notes, 12.000% due 1/15/05......... 3,705,781
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22,866,869
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See Notes to Financial Statements.
10
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SCHEDULE OF INVESTMENTS
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November 30, 1996 (unaudited)(continued)
Face
Amount Rating Security Value
- --------------------------------------------------------------------------------
Miscellaneous Services -- 0.5%
$ 2,300,000 B- Outsourcing Solutions Inc., Sr. Sub. Notes,
11.000% due 11/1/06+....................... $ 2,400,625
- --------------------------------------------------------------------------------
Oil/Natural Gas -- 4.4%
3,860,000 B+ Global Marine Inc., Sr. Secured Notes,
12.750% due 12/15/99....................... 4,173,625
2,175,000 B+ Kelley Oil & Gas Corp., Sr. Notes,
13.500% due 6/15/99........................ 2,234,813
4,575,000 B+ Parker Drilling Co., Sr. Notes,
9.750% due 11/15/06+....................... 4,746,563
4,300,000 B+ RM Clark Holdings Inc., Sr. Notes,
zero coupon bond to yield 10.590%
due 2/15/00................................ 3,096,000
3,550,000 BB- Santa Fe Energy Resources Inc., Sr. Sub.
Debentures, 11.000% due 5/15/04............ 3,949,375
2,625,000 B United Meridian Corp., Sr. Sub. Notes,
10.375% due 10/15/05....................... 2,861,250
- --------------------------------------------------------------------------------
21,061,626
- --------------------------------------------------------------------------------
Packaging/Containers -- 0.7%
525,000 B- Gaylord Container Corp., Sr. Sub. Debentures,
step bond to yield 11.054% due 5/15/05..... 577,500
4,000,000 B- Ivex Holdings Corp., Sr. Sub. Debentures,
step bond to yield 12.910% due 3/15/05..... 2,980,000
- --------------------------------------------------------------------------------
3,557,500
- --------------------------------------------------------------------------------
Paper/Printing -- 5.1%
2,616,000 B American Pad & Paper Co., Sr. Sub. Notes,
13.000% due 11/15/05....................... 3,080,340
8,725,000 BB Indah Kiat International Finance Co.,
Sr. Secured Notes, 11.875% due 6/15/02..... 9,521,156
3,925,000 B+ SD Warren Co., Sr. Sub. Notes,
12.000% due 12/15/04....................... 4,140,875
3,725,000 BB Tjiwi Kimia International, Sr. Notes,
13.250% due 8/1/01......................... 4,255,813
6,725,000 B- UIH Australia Inc., Sr. Discount Notes,
step bond to yield 14.000% due 5/15/06+.... 3,623,094
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24,621,278
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See Notes to Financial Statements.
11
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SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
November 30, 1996 (unaudited)(continued)
Face
Amount Rating Security Value
- --------------------------------------------------------------------------------
Personal Care -- 2.7%
$ 2,000,000 B- Revlon Consumer Products Corp.,
Sr. Sub. Notes 10.500% due 2/15/03......... $ 2,097,500
12,825,000 B- Revlon Worldwide Corp., Sr. Secured Notes,
zero coupon bond to yield 23.840%
due 3/15/98................................ 11,061,563
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13,159,063
- --------------------------------------------------------------------------------
Pollution Control -- 0.5%
2,325,000 B+ Allied Waste North America Inc., Sr. Sub. Notes,
10.250% due 12/1/06+....................... 2,388,938
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Retail -- 1.0%
4,325,000 B Barnes and Noble, Sr. Sub. Notes,
11.875% due 1/15/03........................ 4,735,875
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Tobacco -- 0.6%
3,000,000 B Consolidated Cigar Corp., Sr. Sub. Notes,
10.500% due 3/1/03......................... 3,135,000
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Transportation -- 0.8%
3,630,000 BB- Sea Containers Ltd., Sr. Sub. Debentures,
Series A, 12.500% due 12/1/04.............. 3,970,313
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TOTAL CORPORATE BONDS AND NOTES
(Cost -- $427,092,074)....................... 443,583,377
================================================================================
Shares Security Value
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COMMON STOCKS -- 0.5%
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Communications -- 0.0%
32,175 Clearnet Communications Inc.................. 209,138
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Metals/Mining -- 0.2%
193,537 Algoma Steel Inc............................. 825,730
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Oil/Natural Gas -- 0.3%
84,400 Freeport McMoRan Resource Partners,
LP Depository Unit......................... 1,466,450
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TOTAL COMMON STOCKS
(Cost -- $2,989,747)......................... 2,501,318
================================================================================
See Notes to Financial Statements.
12
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<PAGE>
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SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
November 30, 1996 (unaudited)(continued)
Shares Security Value
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 4.4%
- --------------------------------------------------------------------------------
Broadcasting -- 1.5%
6,566 Time Warner Inc., Series K,
Exchange 0.000%+........................... $ 7,124,110
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Healthcare and Pharmaceuticals -- 0.7%
156,014 Foxmeyer Health Corp., Series A,
Payment-in-kind, Exchange $4.200@.......... 1,677,151
1,700 Fresensius Medical Care Capital Trust ....... 1,729,750
- --------------------------------------------------------------------------------
3,406,901
- --------------------------------------------------------------------------------
Publishing -- 0.0%
912 K-III Communications Corp.,
Series B, Exchange 11.625%+++.............. 90,794
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Telecommunications -- 2.2%
8,431 PanAmSat Corp., Series A,
Exchange $31.875........................... 10,370,391
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TOTAL PREFERRED STOCKS
(Cost -- $22,487,690)........................ 20,992,196
================================================================================
- --------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK -- 1.0%
- --------------------------------------------------------------------------------
Automobiles/Trucking -- 1.0%
87,625 Navistar International, Series G,
Convertible $6.00 (Cost -- $4,915,186)..... 4,819,375
================================================================================
- --------------------------------------------------------------------------------
WARRANTS -- 0.1%
- --------------------------------------------------------------------------------
18,000 Degeorge Financial Corp., Expire 4/1/97+++... 2,250
3,900 Nextel Communications Inc., Expire 4/25/99... 39
12,250 Pagemart Inc., Expire 12/31/04+.............. 87,281
24,840 Pagemart Nationwide, Expire 12/31/03+........ 117,990
4,800 SD Warren Co., Expire 12/15/06+.............. 62,400
3,375 Wireless One Inc., Expire 10/15/03.......... 23,612
- --------------------------------------------------------------------------------
TOTAL WARRANTS
(Cost -- $84,046)............................ 293,572
================================================================================
See Notes to Financial Statements.
13
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
November 30, 1996 (unaudited)(continued)
Face
Amount Rating Security Value
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT-- 1.5%
- --------------------------------------------------------------------------------
$7,099,000 Chase Manhattan Bank, 5.600% due 12/2/96;
Proceeds at maturity -- $7,333,689;
(Fully collateralized by U.S. Treasury Bill
due 2/20/97; Market value -- $7,245,684)
(Cost -- $7,099,000)....................... $ 7,099,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $464,667,743**)..................... $479,288,838
================================================================================
+ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
++ Security issued with attached warrants.
+++ Non-income producing security.
@ Formerly known as National Intergroup.
** Aggregate cost for Federal income tax purposes is substantially the same.
See page 15 for definitions of ratings.
================================================================================
Summary of Bonds by Combined Ratings
% of Total Corporate
Moody's and/or Standard & Poor's Bonds and Notes
- --------------------------------------------------------------------------------
Ba BB 20.0%
B B 63.0
Caa CCC 6.0
NR NR 11.0
-----
100.0%
=====
================================================================================
See Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION OF RATINGS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Ratings Service ("Standard & Poor's"),
except that those identified by an asterisk(*) are rated by Moody's Investors
Service Inc. ("Moody's"). The definitions of the applicable rating symbols are
set forth below:
Standard &Poor's -- Ratings from "BBB" to "D" may be modified by the addition of
a plus (+) or minus (-) sign to show relative standings within the major rating
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.
Moody's -- Numerical modifiers 1, 2 and 3 may be applied to each generic rating
from "Baa" to "C," where 1 is the highest and 3 the lowest ranking within its
generic category.
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.
NR -- Indicates that the bond is not rated by Standard & Poor's
or Moody's.
15
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
November 30, 1996 (unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost-- $464,667,743).......... $479,288,838
Cash................................................. 113
Receivable for securities sold....................... 1,243,863
Dividends and interest receivable.................... 7,925,961
- --------------------------------------------------------------------------------
Total Assets......................................... 488,458,775
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased..................... 4,414,550
Dividends payable.................................... 1,486,406
Investment advisory fees payable..................... 350,392
Administration fees payable.......................... 83,698
Accrued expenses..................................... 338,633
- --------------------------------------------------------------------------------
Total Liabilities.................................... 6,673,679
- --------------------------------------------------------------------------------
Total Net Assets........................................ $481,785,096
- --------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares.......................... $ 42,336
Capital paid in excess of par value.................. 506,025,942
Overdistributed net investment income................ (681,957)
Accumulated net realized loss on security transactions,
options and futures contracts...................... (38,222,320)
Net unrealized appreciation on investments........... 14,621,095
- --------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $11.38 a share on 42,336,004
shares of $0.001 par value outstanding;
500,000,000 shares authorized)....................... $481,785,096
================================================================================
See Notes to Financial Statements.
16
- --------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
For the Nine Months Ended November 30, 1996 (unaudited)
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest............................................. $37,104,388
Dividends............................................ 2,411,935
- -------------------------------------------------------------------------------
Total Investment Income.............................. 39,516,323
- -------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2).................... 3,177,777
Administration fees (Note 2)......................... 706,173
Shareholder and system servicing fees................ 116,779
Shareholder communications........................... 106,425
Custody.............................................. 61,422
Audit and legal...................................... 57,750
Directors' fees...................................... 33,000
Registration fees.................................... 32,480
Other................................................ 21,464
- -------------------------------------------------------------------------------
Total Expenses....................................... 4,313,270
- -------------------------------------------------------------------------------
Net Investment Income................................... 35,203,053
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, FOREIGN CURRENCIES, OPTIONS
AND FUTURES CONTRACTS (NOTES 3, 5 AND 6):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) (2,304,315)
Foreign currency transactions...................... 211,160
Options purchased.................................. (391,916)
Futures contracts.................................. 596,142
- -------------------------------------------------------------------------------
Net Realized Loss.................................... (1,888,929)
- -------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period................................ 12,189,381
End of period...................................... 14,621,095
- -------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation.............. 2,431,714
- -------------------------------------------------------------------------------
Net Gain on Investments, Foreign Currencies,
Options and Futures Contracts........................ 542,785
- -------------------------------------------------------------------------------
Increase in Net Assets From Operations.................. $35,745,838
================================================================================
See Notes to Financial Statements.
17
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Nine Months Ended November 30, 1996 (unaudited)
and the Year Ended February 29, 1996
- --------------------------------------------------------------------------------
November 30 February 29
================================================================================
OPERATIONS:
Net investment income......................... $ 35,203,053 $ 45,933,323
Net realized loss............................. (1,888,929) (9,713,821)
Increase in net unrealized appreciation ...... 2,431,714 38,580,381
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations........ 35,745,838 74,799,883
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income......................... (34,716,355) (53,548,915)
Capital....................................... -- (1,215,693)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders............... (34,716,355) (54,764,608)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net asset value of shares issued for
reinvestment of dividends................... 3,931,348 --
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions..................... 3,931,348 --
- --------------------------------------------------------------------------------
Increase in Net Assets........................... 4,960,831 20,035,275
NET ASSETS:
Beginning of period........................... 476,824,265 456,788,990
- --------------------------------------------------------------------------------
End of period*................................ $481,785,096 $476,824,265
================================================================================
*Includes overdistributed net investment
income of: $ (681,957) $ (1,379,815)
================================================================================
See Notes to Financial Statements.
18
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
November 30, 1996 (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Managed High Income Portfolio Inc. ("Fund"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended, as a
diversified, closed-end management investment company.
The following are significant accounting policies consistently followed by
the Fund: (a) security transactions are accounted for on trade date; (b)
securities are valued at the mean between the quoted bid and ask prices provided
by an independent pricing service that are based on transactions in corporate
obligations, quotations from corporate bond dealers, market transactions in
comparable securities and various relationships between securities; (c)
securities maturing within 60 days are valued at cost plus accreted discount or
minus amortized premium, as applicable; (d) gains or losses on the sale of
securities are calculated by using the specific identification method; (e)
interest income, adjusted for accretion of original issue discount, is recorded
on the accrual basis; (f) dividends are recorded by the Fund on the ex-dividend
date; foreign dividends are recorded on the ex-dividend date or as soon as
practical after the Fund determines the existence of a dividend declaration
after exercising reasonable due diligence; (g) the accounting records of the
Fund are maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies are translated into U.S. dollars on the date of valuation.
Purchases and sales of securities and income and expenses are translated at the
rate of exchange quoted on the respective date that such transactions are
recorded. Differences between income and expense amounts recorded and collected
or paid are adjusted when reported by the custodian; (h) the Fund intends to
comply with the applicable provisions of the Internal Revenue Code of 1986, as
amended, pertaining to regulated investment companies and to make distributions
of taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; (i) the character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. At February 29, 1996,
reclassifications were made to the Fund's capital accounts to reflect permanent
book/tax differences and income and gains available for distributions under
income tax regulations. Accordingly, $215,598 of foreign currency gains was
reclassified to overdistributed net investment income and a portion of
overdistributed net investment income amounting to $1,215,693 has been
reclassified to paid-in capital. Net investment income, net realized gains and
net assets were not affected by this change; and (j) estimates and assumptions
are
19
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
November 30, 1996 (unaudited)(continued)
- --------------------------------------------------------------------------------
required to be made regarding assets, liabilities and changes in net assets
resulting from operations when financial statements are prepared. Changes in the
economic environment, financial markets and any other parameters used in
determining these estimates could cause actual results to differ.
2. Investment Advisory Agreement, Administration Agreement and Other
Transactions
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings ("SBH"), through its Greenwich Street Advisors division, acts as
investment adviser to the Fund. The Fund pays SBMFM an advisory fee calculated
at an annual rate of 0.90% of the average daily net assets. This fee is
calculated daily and paid monthly.
SBMFM also acts as the Fund's administrator for which the Fund pays a fee
calculated at an annual rate of 0.20% of the average daily net assets. This fee
is calculated daily and paid monthly.
All officers and one Director of the Fund are employees of Smith Barney
Inc.
3. Investment Transactions
For the nine months ended November 30, 1996, the aggregate cost of
purchases and proceeds from sales of investments (including maturities but
excluding short-term securities) were:
================================================================================
Purchases $249,715,622
- --------------------------------------------------------------------------------
Sales 262,610,712
================================================================================
At November 30, 1996, the aggregate gross unrealized appreciation and
depreciation of investments were as follows:
================================================================================
Gross unrealized appreciation $33,496,790)*
Gross unrealized depreciation (18,875,695)*
- --------------------------------------------------------------------------------
Net unrealized appreciation $14,621,095)*
================================================================================
* Substantially the same for Federal income tax purposes.
4. Repurchase Agreements
The Fund purchases, and its custodian takes possession of, U.S. Government
securities from banks subject to agreements to resell the securities to the
sellers at a future date (generally, the next business day) at an agreed-upon
higher repurchase price. The Fund requires continual maintenance of the market
value of the collateral in amounts at least equal to the repurchase price.
20
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
November 30, 1996 (unaudited)(continued)
- --------------------------------------------------------------------------------
5. Futures Contracts
Initial margin deposits made upon entering into futures contracts are
recognized as assets. The initial margin is segregated by the custodian and is
noted in the schedule of investments. During the period the futures contract is
open, changes in the value of the contract are recognized as unrealized gains or
losses by marking to market on a daily basis to reflect the market value of the
contract at the end of each day's trading. Variation margin payments are made or
received and recognized as assets due from or liabilities due to broker,
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transactions and
the Fund's basis in the contract. The Fund enters into such contracts to hedge a
portion of its portfolio. The Fund bears the market risk that arises from
changes in the value of the financial instruments and securities indices
(futures contracts)and the credit risk should a counterparty fail to perform
under such contracts.
At November 30, 1996, the Fund had no open futures contracts.
6. Options Contracts
Premiums paid when put or call options are purchased by the Fund, represent
investments, which are marked-to-market daily. When a purchased option expires,
the Fund will realize a loss in the amount of the premium paid. When the Fund
enters into closing sales transaction, the Fund will realize a gain or loss
depending on whether the sales proceeds from the closing sales transaction are
greater or less than the premium paid for the option. When the Fund exercises a
put option, it will realize a gain or loss from the sale of the underlying
security and the proceeds from such sale will be decreased by the premium
originally paid. When the Fund exercises a call option, the cost of the security
which the Fund purchases upon exercise will be increased by the premium
originally paid.
As of November 30, 1996, the Fund had no open purchased call or put option
contracts.
When a Fund writes a covered call or put option, an amount equal to the
premium received by the Fund is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Fund realizes a gain
equal to the amount of the premium received. When the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss if the cost of the
closing purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security,
21
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
November 30, 1996 (unaudited)(continued)
- --------------------------------------------------------------------------------
and the liability related to such option is eliminated. When a written call
option is exercised the cost of the security sold will be reduced by the premium
originally received. When a written put option is exercised, the amount of the
premium received will reduce the cost of the security which the Fund purchased
upon exercise. When written index options are exercised, settlement is made in
cash. The risk associated with purchasing options is limited to the premium
originally paid. The Fund enters into options for the hedging purposes. The risk
in writing a call option is that the Fund gives up the opportunity to
participate in any increase in the price of the underlying security beyond the
exercise price. The risk in writing a put option is that the Fund is exposed to
the risk of loss if the market price of the underlying security declines.
As of November 30, 1996, the Fund had no written call options.
7. Payment-in-Kind Securities
The Fund may invest in payment-in-kind ("PIK") securities. PIK securities
pay interest through the issuance of additional securities. PIK bonds carry a
risk in that, unlike bonds which pay interest throughout the period to maturity,
the Fund will realize no cash until the cash payment dates unless a portion of
such securities is sold. If the issuer of a PIK bond defaults, the Fund may
obtain no return at all on its investment.
8. Capital Loss Carryforward
At February 29, 1996, the Fund had, for Federal tax purposes, $36,118,795
of loss carryforwards available to offset future capital gains. To the extent
that these carryforward losses are used to offset capital gains, it is probable
that the gains so offset will not be distributed. The amount and expiration of
the carryforwards are indicated below. Expiration occurs on the last day in
February of the year indicated:
2003 2004
================================================================================
Carryforward Amounts $18,004,113 $18,114,682
================================================================================
9. Common Stock
During the nine months ended November 30, 1996, common stock transactions
were as follows:
Shares Amount
================================================================================
Shares issued on reinvestment 354,415 $3,931,348
================================================================================
22
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each period:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996(1) 1996 1995 1994(2)
==========================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .... $ 11.36 $ 10.88 $ 12.39 $ 12.00
- ------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income ................. 0.84 1.13 1.12 0.98
Net realized and unrealized gain (loss) 0.01 0.65 (1.48) 0.51
- ------------------------------------------------------------------------------------------
Total Income (Loss) From Operations ..... 0.85 1.78 (0.36) 1.49
- ------------------------------------------------------------------------------------------
Offering Costs Credited (Charged)
to Paid-In Capital .................... -- -- 0.00* (0.02)
- ------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income ................. (0.83) (1.27) (1.00) (0.96)
Net realized gains .................... -- -- (0.15) (0.12)
Capital ............................... -- (0.03) -- --
- ------------------------------------------------------------------------------------------
Total Distributions ..................... (0.83) (1.30) (1.15) (1.08)
- ------------------------------------------------------------------------------------------
Net Asset Value, End of Period .......... $ 11.38 $ 11.36 $ 10.88 $ 12.39
- ------------------------------------------------------------------------------------------
Total Return, Based on Market Value ..... 9.09%++ 18.82% (0.43)% 6.85%++
- ------------------------------------------------------------------------------------------
Total Return, Based on Net Asset Value .. 8.07%++ 17.80% (2.18)% 12.67%++
- ------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) ........ $481,785 $476,824 $456,789 $520,091
- ------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses .............................. 1.22%+ 1.24% 1.24% 1.19%+
Net investment income ................. 9.94+ 9.74 9.96 8.74+
- ------------------------------------------------------------------------------------------
Portfolio Turnover Rate ................. 55% 73% 62% 108%
- ------------------------------------------------------------------------------------------
Market Value, End of Period ............. $ 11.250 $ 11.125 $ 10.500 $ 11.750
==========================================================================================
</TABLE>
(1) For the nine months ended November 30, 1996 (unaudited).
(2) For the period from March 26, 1993 (commencement of operations) to February
28, 1994.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
23
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
QUARTERLY RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
November 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Net Increase
Net Realized (Decrease) in
and Unrealized Net Assets
Investment Net Investment Gain (Loss) From
Income Income on Investments 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,
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 12,944,849 0.31 11,569,422 0.28 (17,816,469) (0.42) (6,247,047) (0.14)
February 28,
1995 12,720,474 0.30 11,250,507 0.27 10,275,042 0.24 21,525,549 0.51
May 31,
1995 12,525,032 0.30 11,084,402 0.27 14,597,234 0.35 25,681,636 0.61
August 31,
1995 13,294,948 0.32 11,827,361 0.28 1,313,938 0.03 13,141,299 0.31
November 30,
1995 13,166,852 0.31 11,710,524 0.28 1,796,990 0.04 13,507,514 0.32
February 29,
1996 12,770,322 0.30 11,311,036 0.27 11,158,398 0.26 22,469,434 0.53
May 31,
1996 13,001,508 0.31 11,542,616 0.27 (7,102,523) (0.17) 4,440,093 0.10
August 31,
1996 13,247,484 0.31 11,804,210 0.29 (7,860,018) (0.19) 3,944,192 0.10
November 30,
1996 13,267,331 0.31 11,856,227 0.28 15,505,326 0.37 27,361,553 0.65
====================================================================================================
</TABLE>
24
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL DATA
- --------------------------------------------------------------------------------
November 30, 1996 (unaudited)
For a share of capital stock outstanding throughout each period:
- --------------------------------------------------------------------------------
Dividend
NYSE Net Asset Distributions Reinvestment
Closing Price Value Paid Price
================================================================================
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
December 31, 1994 9.500 10.62 0.131 9.99
January 31, 1995 10.125 10.59 0.093 10.44
February 28, 1995 10.500 10.88 0.093 10.54
March 31, 1995 10.625 10.90 0.093 10.23
April 30, 1995 10.125 11.04 0.093 10.81
May 31, 1995 10.750 11.21 0.093 10.87
June 30, 1995 10.500 11.15 0.093 10.67
July 31, 1995 10.625 11.31 0.093 10.65
August 31, 1995 10.625 11.25 0.093 10.68
September 30, 1995 10.375 11.26 0.093 10.67
October 31, 1995 10.500 11.31 0.093 10.68
November 30, 1995 10.750 11.29 0.093 10.71
December 31, 1995 10.500 11.20 0.093 10.76
December 31, 1995* 10.500 11.20 0.188 10.76
January 31, 1996 11.188 11.35 0.093 11.19
February 29, 1996 11.125 11.36 0.093 11.09
March 31, 1996 10.875 11.18 0.093 10.79
April 30, 1996 10.750 11.20 0.093 10.79
May 31, 1996 10.625 11.18 0.093 10.56
June 30, 1996 10.625 11.07 0.093 10.71
July 31, 1996 10.875 10.98 0.093 10.91
August 31, 1996 11.000 11.01 0.093 11.01
September 30, 1996 11.125 11.27 0.091 11.12
October 31, 1996 11.125 11.21 0.091 11.19
November 30, 1996 11.250 11.38 0.091 11.16
================================================================================
*Includes capital gain.
25
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 First Data
Investor Services Group, Inc. ("First Data") 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 Fund 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 First Data as dividend-paying agent.
If the Fund declares a dividend or capital gains distribution payable
either in shares of Common Stock or in cash, shareholders who are not Plan
participants will receive cash, and Plan participants will receive the
equivalent amount in shares of Common Stock. When the market price of the Common
Stock is equal to or exceeds the net asset value per share of the Common Stock
on the Valuation Date (as defined below), Plan participants will be issued
shares of Common Stock valued at the net asset value most recently determined as
described below under "Net Asset Value" or, if net asset value is less than 95%
of the then current market price of the Common Stock, then at 95% of the market
value. The Valuation Date is the dividend or capital gains distribution payment
date or, if that date is not a New York Stock Exchange, Inc. ("NYSE") trading
day, the immediately preceding trading day.
If the market price of the Common Stock is less than the net asset value of
the Common Stock, or if the Fund declares a dividend or capital gains
distribution payable only in cash, a broker-dealer not affiliated with Smith
Barney, as purchasing agent for Plan participants (the "Purchasing Agent"), will
buy Common Stock in the open market, on the NYSE or elsewhere, for the
participants' accounts (effective June 1, 1996, the Plan's valuation date will
change from the payable date to the record date). If, following the commencement
of the purchases and before the Purchasing Agent has completed its purchases,
the market price exceeds the net asset value of the Common Stock, the average
per share purchase price paid by the Purchasing Agent 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 Fund at net asset value. Additionally, if the market price exceeds the
net asset value of shares before the Purchasing Agent has completed its
purchases, the Purchasing Agent is permitted to cease purchasing shares and the
Fund may issue the remaining shares at a price equal to the
26
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN (unaudited) (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
greater of (a) net asset value or (b) 95% of the then current market price. In a
case where the Purchasing Agent has terminated open market purchases and the
Fund has issued the remaining shares, the number of shares received by the
participant in respect of the cash dividend or distribution will be based on the
weighted average of prices paid for shares purchased in the open market and the
price at which the Fund issues the remaining shares. First Data 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 payable 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.
First Data will maintain all shareholder accounts in the Plan and will
furnish 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. Common Stock in the account of each Plan participant will
be held by First Data on behalf 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. First Data's fees for handling the reinvestment of
dividends and capital gains distributions will be paid by the Fund. No brokerage
charges apply with respect to shares of Common Stock issued directly by the Fund
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 Fund 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 First Data, with the Fund'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 First Data Investor Services Group, Inc.,
P.O. Box 1376, Boston, Massachusetts 02104 or by telephone at (800) 331-1710.
---------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that from time to time the Fund may purchase at
market prices shares of its common stock in the open market.
27
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<PAGE>
Managed
HIGH INCOME
--------------
Portfolio Inc.
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Directors
Paolo M. Cucchi
Alessandro C. di Montezemolo
Andrea Farace
Paul R. Hardin
George M. Pavia
Heath B. McLendon, Chairman
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
John C. Bianchi
Vice President and
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Adviser and
Administrator
Smith Barney Mutual Funds Management Inc.
388 Greenwich Street
New York, New York 10013
Transfer Agent
First Data Investor Services Group, Inc.
P.O. Box 1376
Boston, Massachusetts 02104
Custodian
PNC Bank, N.A.
17th and Chestnut Streets
Philadelphia, Pennsylvania 19103
28
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<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 Fund or of any securities men-
tioned in the report.
FD0882 1/97
