SENIOR HIGH INCOME PORTFOLIO INC, DEF 14A, 1998-06-01

SENIOR HIGH INCOME PORTFOLIO INC
DEF 14A, 1998-06-01

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<PAGE> 1

SCHEDULE 14A
(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>

SENIOR HIGH INCOME PORTFOLIO, INC.
P.O. Box 9011
Princeton, New Jersey 08543-9011
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

------------------------------------------------------------------------

(2) Aggregate number of securities to which transaction applies:

------------------------------------------------------------------------

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

------------------------------------------------------------------------

(4) Proposed maximum aggregate value of transaction:

------------------------------------------------------------------------
(5) Total fee paid:

------------------------------------------------------------------------

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

------------------------------------------------------------------------

(2) Form, Schedule or Registration Statement No.:

------------------------------------------------------------------------

(3) Filing Party:

------------------------------------------------------------------------

(4) Date Filed:

------------------------------------------------------------------------
<PAGE> 2

SENIOR HIGH INCOME PORTFOLIO, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011

------------------

NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
JULY 9, 1998
------------------

TO THE STOCKHOLDERS OF SENIOR HIGH INCOME PORTFOLIO, INC.:

Notice is hereby given that the 1998 Annual Meeting of Stockholders (the
"Meeting") of Senior High Income Portfolio, Inc. (the "Fund") will be held at
the offices of Merrill Lynch Asset Management, L.P., 800 Scudders Mill Road,
Plainsboro, New Jersey, on Thursday, July 9, 1998 at 9:30 A.M. for the following
purposes:

(1) To elect a Board of Directors to serve for the ensuing year;

(2) To consider and act upon a proposal to ratify the selection of
Deloitte & Touche LLP to serve as independent auditors of the Fund for its
current fiscal year; and

(3) To transact such other business as may properly come before the
Meeting or any adjournment thereof.

The Board of Directors has fixed the close of business on May 13, 1998 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Meeting or any adjournment thereof.

A complete list of the stockholders of the Fund entitled to vote at the
Meeting will be available and open to the examination of any stockholder of the
Fund for any purpose germane to the Meeting during ordinary business hours from
and after June 25, 1998 at the office of the Fund, 800 Scudders Mill Road,
Plainsboro, New Jersey. You are cordially invited to attend the Meeting.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE REQUESTED TO
COMPLETE, DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED FOR THIS PURPOSE. The enclosed proxy is being solicited on
behalf of the Board of Directors of the Fund.

By Order of the Board of Directors
PATRICK D. SWEENEY
Secretary

Plainsboro, New Jersey
Dated: June 1, 1998
<PAGE> 3

PROXY STATEMENT

------------------------
SENIOR HIGH INCOME PORTFOLIO, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
------------------------
1998 ANNUAL MEETING OF STOCKHOLDERS
JULY 9, 1998
INTRODUCTION

This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Senior High Income Portfolio,
Inc., a Maryland corporation (the "Fund"), to be voted at the 1998 Annual
Meeting of Stockholders of the Fund (the "Meeting"), to be held at the offices
of Merrill Lynch Asset Management, L.P. ("MLAM"), 800 Scudders Mill Road,
Plainsboro, New Jersey, on Thursday, July 9, 1998 at 9:30 A.M. The approximate
mailing date of this Proxy Statement is June 3, 1998.

All properly executed proxies received prior to the Meeting will be voted
at the Meeting in accordance with the instructions marked thereon or otherwise
as provided therein. Unless instructions to the contrary are marked, proxies
will be voted for the election of the Board of Directors to serve for the
ensuing year and for the ratification of the selection of independent auditors
to serve for the Fund's current fiscal year. Any proxy may be revoked at any
time prior to the exercise thereof by giving written notice to the Secretary of
the Fund at the Fund's address indicated above or by voting in person at the
Meeting.

The Board of Directors has fixed the close of business on May 13, 1998 as
the record date (the "Record Date") for the determination of stockholders
entitled to notice of and to vote at the Meeting and at any adjournment thereof.
Stockholders on the Record Date will be entitled to one vote for each share
held, with no shares having cumulative voting rights. As of the Record Date, the
Fund had outstanding 53,154,095 shares of common stock, par value $.10 per share
("Common Stock"). To the knowledge of the Fund, as of the Record Date, no person
is the beneficial owner of more than five percent of its outstanding shares of
Common Stock.

Approval of Items 1 and 2 will require the affirmative vote of a majority
of votes cast by the Fund's stockholders, voting in person or by proxy, at a
meeting at which a quorum is present and duly constituted. The Board of
Directors of the Fund knows of no business other than that mentioned in Items 1
and 2 of the Notice of Meeting that will be presented for consideration at the
Meeting. If any other matter is properly presented, it is the intention of the
persons named in the enclosed proxy to vote in accordance with their best
judgment.
<PAGE> 4

ITEM 1. ELECTION OF DIRECTORS

At the Meeting, the Board of Directors will be elected to serve until the
next Annual Meeting of Stockholders and until their successors are elected and
qualified. It is intended that all properly executed proxies will be voted
(unless such authority has been withheld in the proxy) in favor of the six (6)
persons designated as Directors to be elected by holders of Common Stock.

The Board of Directors of the Fund knows of no reason why any of these
nominees will be unable to serve, but in the event of any such unavailability,
the proxies received will be voted for such substitute nominee or nominees as
the Board of Directors may recommend.

Certain information concerning the nominees, including their designated
classes, is set forth as follows:

2
<PAGE> 5

<TABLE>
<CAPTION>
SHARES
OF COMMON STOCK
OF THE FUND
BENEFICIALLY
PRINCIPAL OCCUPATIONS DURING PAST DIRECTOR OWNED AT
NAME AND ADDRESS AGE FIVE YEARS AND PUBLIC DIRECTORSHIP(1) SINCE THE RECORD DATE
---------------- --- ------------------------------------- -------- ---------------
<S> <C> <C> <C> <C>
Charles C. Reilly(1)(2)........ 66 Self-employed financial consultant 1993 0
9 Hampton Harbor Road Hampton since 1990; President and Chief
Bays, New York 11946 Investment Officer of Verus Capital,
Inc. from 1979 to 1990; Senior Vice
President of Arnhold and S.
Bleichroeder, Inc. from 1973 to 1990;
Adjunct Professor, Columbia
University Graduate School of
Business from 1990 to 1991; Adjunct
Professor, Wharton School, The
University of Pennsylvania from 1989
to 1990; Partner, Small Cities Cable
Television from 1986 to 1997.
Kevin A. Ryan(1)(2)............ 65 Founder and current Director of The 1993 0
127 Commonwealth Avenue Boston University Center for the
Chestnut Hill, Advancement of Ethics and Character;
Massachusetts 02167 Professor of Education at Boston
University since 1982; formerly
taught on the faculties of The
University of Chicago, Stanford
University and Ohio State University.
Richard R. West(1)(2).......... 60 Professor of Finance since 1984, and 1993 28,008
Box 604 Dean from 1984 to 1993, and currently
Genoa, Nevada 89411 Dean Emeritus of New York University,
Leonard N. Stern School of Business
Administration; Director of Bowne &
Co., Inc. (financial printers),
Vornado Realty Trust, Inc. (real
estate holding company) and
Alexander's Inc. (real estate
company).
</TABLE>

3
<PAGE> 6

- ------------------
(1) Each of the nominees is a director, trustee or member of an advisory board
of one or more additional investment companies for which FAM, MLAM or their
affiliates act as investment adviser. See "Compensation of Directors" below.

(2) Member of Audit Committee of the Board of Directors.

* Interested person, as defined in the Investment Company Act of 1940, as
amended, of the Fund.

Committee and Board of Directors Meetings. The Board of Directors has a
standing Audit Committee, which consists of Directors who are not "interested
persons" of the Fund within the meaning of the Investment Company Act of 1940,
as amended (the "Investment Company Act"). The principal purpose of the Audit
Committee is to review the scope of the annual audit conducted by the Fund's
independent auditors and the evaluation by such auditors of the accounting
procedures followed by the Fund. The non-affiliated Directors have retained
independent legal counsel to assist them in connection with these duties. The
Board of Directors does not have a nominating committee.

During the fiscal year ended February 28, 1998, the Board of Directors held
eight meetings and the Audit Committee held four meetings. All of the Directors
attended at least 75% of the aggregate of the total number of meetings of the
Board of Directors held during the last fiscal year and, if a member, the total
number of meetings of the Audit Committee held during such period.

Compliance with Section 16(a) of the Securities Exchange Act of
1934. Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Fund's officers, directors and persons who own
more than ten percent of a registered class of the Fund's equity securities, to
file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission ("SEC") and the New York Stock Exchange.
Officers, directors and greater than ten percent stockholders are required by
SEC regulations to furnish the Fund with copies of all Forms 3, 4 and 5 they
file.

Based solely on the Fund's review of the copies of such forms, and
amendments thereto, furnished to it during or with respect to its most recent
fiscal year, and written representations from certain reporting persons that
they were not required to file Form 5 with respect to the most recent fiscal
year, the Fund believes that all

4
<PAGE> 7

of its officers, directors, greater than ten percent beneficial owners and other
persons subject to Section 16 of the Exchange Act because of the requirements of
Section 30 of the Investment Company Act, i.e., any advisory board member,
investment adviser or affiliated person of the Fund's investment adviser, have
complied with all filing requirements applicable to them with respect to
transactions during the Fund's most recent fiscal year, except that Michael
Hennewinkel inadvertently failed to make a timely Form 3 filing to report his
election as a Senior Vice President of FAM.

Interested Persons. The Fund considers Mr. Zeikel to be an "interested
person" of the Fund within the meaning of Section 2(a)(19) of the Investment
Company Act because of the positions he holds with FAM and its affiliates. Mr.
Zeikel is the President of the Fund and the Chairman of FAM and MLAM.

Compensation of Directors. FAM, the Fund's investment adviser, pays all
compensation to all officers of the Fund and all Directors of the Fund who are
affiliated with ML & Co. or its subsidiaries. The Fund pays each Director not
affiliated with FAM (each a "non-affiliated Director") a fee of $4,500 per year
plus $400 per meeting attended, together with such Director's actual
out-of-pocket expenses relating to attendance at meetings. The Fund also pays
each member of its Audit Committee, which consists of all of the non-affiliated
Directors, a fee of $1,400 per year, together with such Director's out-of-pocket
expenses relating to attendance at meetings. The Chairman of the Audit Committee
receives an additional annual fee of $1,000. These fees and expenses aggregated
$24,568 for the fiscal year ended February 28, 1998.

The following table sets forth for the fiscal year ended February 28, 1998
compensation paid by the Fund to the non-affiliated Directors and, for the
calendar year ended December 31, 1997, the aggregate compensation paid by all
registered investment companies advised by FAM and its affiliate MLAM ("FAM/MLAM
Advised Funds"), to the non-affiliated Directors.

<TABLE>
<CAPTION>
PENSION OR RETIREMENT AGGREGATE COMPENSATION FROM
COMPENSATION BENEFITS ACCRUED AS PART FUND AND FAM/MLAM
NAME OF DIRECTOR FROM FUND OF FUND EXPENSES ADVISED FUNDS PAID TO DIRECTORS
---------------- ------------ ------------------------ -------------------------------
<S> <C> <C> <C>
Ronald W. Forbes(1)............ $4,600 None $153,500
Cynthia A. Montgomery(1)....... $4,600 None $153,500
Charles C. Reilly(1)........... $5,600 None $313,000
Kevin A. Ryan(1)............... $4,600 None $153,500
Richard R. West(1)............. $4,600 None $299,000
</TABLE>

- ------------------
(1) The Directors serve on the Boards of other FAM/MLAM Advised Funds as
follows: Mr. Forbes (29 registered investment companies consisting of 42
portfolios); Ms. Montgomery (29 registered investment companies consisting
of 42 portfolios); Mr. Reilly (47 registered investment companies consisting
of 60 portfolios); Mr. Ryan (29 registered investment companies consisting
of 42 portfolios); and Mr. West (48 registered investment companies
consisting of 70 portfolios).

5
<PAGE> 8

Officers of the Fund. The Board of Directors has elected seven officers of
the Fund. The following sets forth information concerning each of these
officers:

<TABLE>
<CAPTION>
OFFICER
OFFICE AGE SINCE
NAME AND PRINCIPAL OCCUPATION ------ --- -------
<S> <C> <C> <C>
Arthur Zeikel........................................... President 65 1993
Chairman of MLAM and its affiliate FAM since 1997;
President of FAM and MLAM from 1977 to 1997; Chairman
of Princeton Services since 1997 and Director thereof
since 1993; President of Princeton Services from 1993
to 1997; Executive Vice President of ML & Co. since
1990.
Terry K. Glenn.......................................... Executive Vice President 57 1993
Executive Vice President of FAM and MLAM since 1983;
President of Merrill Lynch Funds Distributor, Inc.
("MLFD" or the "Distributor") since 1986 and Director
thereof since 1991; Executive Vice President and
Director of Princeton Services since 1993; President
of Princeton Administrators, L.P. since 1988.
Joseph T. Monagle, Jr................................... Senior Vice President 49 1996
Senior Vice President of FAM and MLAM since 1990;
Department Head of the Global Fixed Income Division of
FAM and MLAM since 1997; Senior Vice President of
Princeton Services since 1993.
R. Douglas Henderson.................................... Senior Vice President 40 1993
First Vice President of MLAM since 1997; Vice
President of MLAM from 1989 to 1997.
Donald C. Burke......................................... Vice President 37 1993
First Vice President of MLAM since 1997; Vice
President of MLAM from 1990 to 1997; and Director of
Taxation of MLAM since 1990.
Gerald M. Richard....................................... Treasurer 49 1993
Senior Vice President and Treasurer of FAM and MLAM
since 1984; Senior Vice President and Treasurer of
Princeton Services since 1993; Vice President of MLFD
since 1981 and Treasurer of MLFD since 1984.
Patrick D. Sweeney...................................... Secretary 44 1993
First Vice President of MLAM since 1997; Vice
President of MLAM from 1990 to 1997.
</TABLE>

Stock Ownership. At the Record Date, the Directors and officers of the
Fund as a group (twelve persons) owned an aggregate of less than 1% of the
Common Stock of the Fund outstanding at such date. At such date, Mr. Zeikel, an
officer and a Director of the Fund, and the other officers of the Fund owned an
aggregate of less than 1% of the outstanding shares of common stock of ML & Co.

6
<PAGE> 9

ITEM 2. SELECTION OF INDEPENDENT AUDITORS

The Board of Directors of the Fund, including a majority of the Directors
who are not interested persons of the Fund, has selected the firm of Deloitte &
Touche LLP ("D&T"), independent auditors, to examine the financial statements of
the Fund for the current fiscal year. The Fund knows of no direct or indirect
financial interest of such firm in the Fund. Such appointment is subject to
ratification or rejection by the stockholders of the Fund. Unless a contrary
specification is made, the accompanying proxy will be voted in favor of
ratifying the selection of such auditors.

D&T also acts as independent auditors for ML & Co. and all of its
subsidiaries and for most other investment companies for which FAM or MLAM acts
as investment adviser. The fees received by D&T from these other entities are
substantially greater, in the aggregate, than the total fees received by it from
the Fund. The Board of Directors of the Fund considered the fact that D&T has
been retained as the independent auditors for such other entities in its
evaluation of the independence of D&T with respect to the Fund.

Representatives of D&T are expected to be present at the Meeting and will
have the opportunity to make a statement if they so desire and to respond to
questions from stockholders.

ADDITIONAL INFORMATION

The expenses of preparation, printing and mailing of the enclosed form of
proxy and accompanying Notice and Proxy Statement will be borne by the Fund. The
Fund will reimburse banks, brokers and others for their reasonable expenses in
forwarding proxy solicitation material to the beneficial owners of the shares of
the Fund. The Fund may also hire proxy solicitors at the expense of the Fund.

In order to obtain the necessary quorum at the Meeting (i.e., a majority of
the shares of each class of the Fund's securities entitled to vote at the
Meeting, present in person or by proxy), supplementary solicitation may be made
by mail, telephone, telegraph or personal interview by officers of the Fund. It
is anticipated that the cost of such supplementary solicitation, if any, will be
nominal.

Approval of Items 1 and 2 will require the affirmative vote of a majority
of votes cast by the Fund's stockholders, voting in person or by proxy, at a
meeting in which a quorum is duly constituted.

All shares represented by properly executed proxies, unless such proxies
have previously been revoked, will be voted at the Meeting in accordance with
the directions on the proxies. If no direction is indicated, the shares will be
voted "FOR" the Director nominees and "FOR" the ratification of D&T as
independent auditors.

Broker-dealer firms, including Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), holding Fund shares in "street name" for the
benefit of their customers and clients will request the instructions of such
customers and clients on how to vote their shares on each Item before the
Meeting. The Fund understands that, under the rules of the New York Stock
Exchange, such broker-dealer firms may, without instructions from their
customers and clients, grant authority to the proxies designated to vote on the
election of Directors (Item 1) and ratification of the selection of independent
auditors (Item 2) if no instructions have been received prior to the date
specified in the broker-dealer firm's request for voting instructions.
Accordingly, the Fund will include shares held of record by broker-dealers as to
which such authority has been granted in its tabulation of the total number of
votes present for purposes of determining whether the necessary quorum of
shareholders exists. Proxies that are returned but that are marked "abstain" or
on which

7
<PAGE> 10

a broker-dealer has declined to vote on any proposal ("broker non-votes") will
be counted as present for purposes of a quorum. Merrill Lynch has advised the
Fund that it intends to vote shares held in its name for those shares for which
no instructions have been received, whether or not held in nominee name.
Abstentions and broker non-votes will not be counted as votes cast. Abstentions
and broker non-votes, therefore, will not have an effect on the vote on Item 1
or Item 2.

ADDRESS OF INVESTMENT ADVISER

The principal office of FAM is located at 800 Scudders Mill Road,
Plainsboro, New Jersey 08536.

ANNUAL REPORT DELIVERY

THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT FOR THE
FISCAL YEAR ENDED FEBRUARY 28, 1998 TO ANY STOCKHOLDER UPON REQUEST. Such
requests should be directed to Senior High Income Portfolio, Inc., P.O. Box
9011, Princeton, New Jersey 08543-9011, Attention: Patrick D. Sweeney,
Secretary, or to 1-800-456-4587 ext. 123.

STOCKHOLDER PROPOSALS

It is currently intended that the 1999 Annual Meeting of Stockholders of
the Fund will be held in May, 1999. If a stockholder intends to present a
proposal at the 1999 Annual Meeting of Stockholders of the Fund, and desires to
have the proposal included in the Fund's proxy statement and form of proxy for
that meeting, the stockholder must deliver the proposal to the offices of the
Fund by December 15, 1998.

By Order of the Board of Directors
PATRICK D. SWEENEY
Secretary

Dated: June 1, 1998

8
<PAGE> 11

[This Page Intentionally Left Blank]
<PAGE> 12

SENIOR HIGH INCOME PORTFOLIO, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011

P R O X Y

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Arthur Zeikel, Terry K. Glenn and Patrick
D. Sweeney as proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated on the reverse hereof,
all the common stock of Senior High Income Portfolio, Inc. (the "Fund") held of
record by the undersigned on May 13, 1998 at the annual meeting of the
stockholders of the Fund to be held on July 9, 1998 or any adjournment thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1 AND FOR PROPOSAL 2.

(Continued and to be signed on the reverse side)
<PAGE> 13

PLEASE MARK BOXES M OR [X] IN BLUE OR BLACK INK.

<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees listed below
(except as marked to the contrary below) [ ]

<CAPTION>
<S> <C>
1. WITHHOLD AUTHORITY
to vote for all nominees listed below
[ ]
</TABLE>

(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
RONALD W. FORBES, CYNTHIA A. MONTGOMERY, CHARLES C. REILLY, KEVIN A. RYAN,
RICHARD R. WEST, ARTHUR ZEIKEL

<TABLE>
<S> <C> <C> <C>
2. Proposal to ratify the selection of Deloitte & Touche LLP FOR [ AGAINST [ ABSTAIN [
as the independent auditors of the Fund to serve for the ] ] ]
current fiscal year.
</TABLE>

3. In the discretion of such proxies, upon such other business as may properly
come before the meeting or any adjournment thereof.

Please sign exactly as name
appears hereon. When shares are
held by joint tenants, both
should sign. When signing as
attorney or as executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by president or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.

Dated:

--------------------------------,
1998

X
--------------------------------
Signature

X
--------------------------------
Signature, if held jointly
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.