SENIOR HIGH
INCOME
PORTFOLIO, INC.
FUND LOGO
Semi-Annual Report
August 31, 1999
This report, including the financial information herein, is
transmitted to the shareholders of Senior High Income Portfolio,
Inc. for their information. It is not a prospectus, circular or
representation intended for use in the purchase of shares of the
Fund or any securities mentioned in the report. Past performance
results shown in this report should not be considered a
representation of future performance. The Fund has leveraged its
Common Stock to provide Common Stock shareholders with a potentially
higher rate of return. Leverage creates risk for Common Stock
shareholders, including the likelihood of greater volatility of net
asset value and market price of Common Stock shares, and the risk
that fluctuations in short-term interest rates may reduce the Common
Stock's yield. Statements and other information herein are as dated
and are subject to change.
Senior High Income
Portfolio, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Senior High Income Portfolio, Inc.
DEAR SHAREHOLDER
For the six-month period ended August 31, 1999, Senior High Income
Portfolio, Inc.'s total investment return was +0.89%, based on a
change in per share net asset value from $8.40 to $8.03, and
assuming reinvestment of $0.430 per share income dividends. During
the same six-month period, the net annualized yield of the
Portfolio's Common Stock was 10.82%. Since inception (April 30,
1993) through August 31, 1999, the total investment return on the
Portfolio's Common Stock was +57.42%, based on a change in per share
net asset value from $9.50 to $8.03, and assuming reinvestment of
$5.612 per share income dividends. At the end of the August period,
the Portfolio was 29.9% leveraged as a percentage of total assets.
(For a complete explanation of the benefits and risks of leverage,
see page 4 of this report to shareholders.)
Investment Approach
The Portfolio's performance reflects the ongoing difficulties
experienced since 1998 in the markets in which the Portfolio
invests. We would like to remind shareholders that Senior High
Income Portfolio, Inc. is a non-diversified, closed-end fund that
seeks to provide current income by investing primarily in senior
debt obligations, including leveraged bank loans and high-yield
bonds that are rated in the lower rating categories of the
established rating services, or unrated debt obligations of
comparable quality. The debt obligations in which the Portfolio
invests will, in many instances, hold the most senior position in
the capital structure of the borrower (i.e. not subordinated in
right of payment to other debt obligations). These senior debt
obligations include leverged bank loans which, in addition to being
senior debt, are often secured obligations, thus generally offering
investors greater principal protection than unsecured bonds. In
addition, bank loans are floating rate instruments whose principal
value generally does not move conversely with interest rate
fluctuations, as is the case with fixed-income bonds. The senior
debt obligations in which the Portfolio may invest also includes
high-yield bonds, which are often unsecured debt securities with a
fixed rate of interest.
Market Review
Late in the summer of 1998, the high-yield bond market was pressured
by disruptions in the equity and emerging markets, which resulted in
a marked decrease in liquidity and, in turn, a decrease in prices in
all three markets virtually across the board. These events
negatively impacted the leveraged bank loan market as well.
After a brief period in early 1999 when the high-yield bond and bank
loan markets had begun to stabilize, a combination of rising
interest rates and widening credit spreads (that is, the spread over
a risk-free investment that an investor requires to invest in high-
yield bonds or leveraged loans) pushed the price of existing high-
yield bond issues and bank loans (which were issued at narrower
spreads) down. In addition, certain sectors experienced extreme
difficulties.
During the latter half of the six-month period ended August 31,
1999, the interest rate environment dominated the US capital
markets. Investors were concerned that the ongoing strength in the
economy would prompt the Federal Reserve Board into a round of
increasing of the Federal Funds rate. At the end of June, there was
relief when the Federal Reserve Board only raised interest rates by
25 basis points (0.25%). However, there were continued signs of
strength in the economy, and the Federal Reserve Board raised short-
term interest rates another 0.25% on August 24, 1999. During the six-
month period ended August 31, 1999, the bellwether ten-year Treasury
yield increased 0.68% to 5.97%, while credit spreads in both the
high-yield bond and bank loan markets increased throughout the
period to near historic highs.
During the same period, a number of cyclical industries including
paper, steel, and energy began to show signs of improvement.
However, certain sectors such as healthcare and mining continued to
experience difficulties, resulting in credit deterioration and
principal losses (realized and unrealized) for some of the Fund's
holdings. The healthcare situation is particularly problematic in
the long-term care sector (for example, nursing homes) as a result
of Federal legislation that effectively cut Medicaid/Medicare
reimbursement payments to these service providers by as much as 40%.
The mining industry is suffering through cyclical troughs in a
number of commodities.
This difficult market environment resulted in high-yield market
outflows rather consistently since July, which, in turn, dampened
investor interest in new issues. Despite a strong US economy, a
rebound in the equity markets and default rates at near historic
averages, the high-yield bond sector (as measured by the unmanaged
Donaldson, Lufkin and Jenrette High Yield Index) generated a total
return for the six-month period ended August 31, 1999 of +1.31%.
Bank loans (as measured by the unmanaged Donaldson, Lufkin and
Jenrette Leveraged Loan Index) faired better, given the floating
rate nature of the asset class, and generated a total return of
+3.86% for the same period. There is a growing correlation between
the leveraged loan market and the high-yield bond market.
Senior High Income Portfolio, Inc.
August 31, 1999
Correlation Between Markets
This correlation can be explained by the fact that high-yield bond
and bank loan markets are comprised of similar industry sectors and
often contain overlapping issuers. As a result, general economic
events and trends tend to move the two markets in the same
direction, although the bonds typically move to a greater degree
than the bank loans.
In fact, an analysis by Donaldson, Lufkin and Jenrette suggests that
the correlation is approximately 25% and that over time the loan
market has produced 80% of the return of the high-yield bond market
with only 30% of the volatility. That same study suggests that the
leveraged loan market has virtually no correlation to any other
major asset class (equities, investment-grade corporate bonds,
government securities or emerging market bonds), thus providing
investors with an attractive investment diversification alternative.
The "Risk/Reward of Various Assets" graph that appears on page 3 of
this report to shareholders plots the annualized return and
volatility experienced by several asset classes averaged over the
last seven years, eight months. Asset classes resting on the line
experienced a proportionate amount of return for the corresponding
amount of risk. Asset classes falling below the capital markets line
endured a disproportionate amount of risk relative to the return
they achieved. Finally, asset classes lying above the line achieved
higher returns than justified by the risk they experienced.
Leveraged bank loans and high-yield bonds are the only asset classes
to fall above the line, which illustrates that, compared to other
asset classes, the bank loan and high-yield bond markets provide
superior risk/reward characteristics.
Investment Strategy
Throughout the six months ended August 31, 1999, the Portfolio's
investment philosophy remained unchanged: to invest in leveraged
transactions in which borrowers have strong market shares,
experienced managements, consistent cash flows and appropriate risk/
reward characteristics. In addition, we look for companies with
significant underlying asset and franchise value, strong capital
structures and equity sponsors that support their investments. It is
these characteristics that we believe provide optimal downside
protection to the Fund's net asset value.
During the six months ended August 31, 1999, we focused on the new-
issue market. These new issues were clearing the market at spreads
higher than those required by investors earlier in the year. The new-
issue transactions were also much more conservatively structured,
with lower leverage and higher interest coverage as investors became
more demanding. We continuously monitor our positions and manage the
Portfolio's composition to reflect our views on industries and
specific issuers.
At August 31, 1999, 55% of the Portfolio's assets were allocated to
bonds and 45% to bank loans. This position reflected our belief that
bonds were very compelling given the wide credit spreads. More than
97% of the Portfolio's bank loan holdings were accruing interest at
a yield spread above the London Interbank Offered Rate (LIBOR), the
rate that major banks charge each other for US dollar-denominated
deposits outside of the United States. LIBOR tracks very closely
with other short-term interest rates, such as the Federal Funds
rate. Since the average interest rate reset across the bank loan
portion of the Portfolio is about 45 days, the yield on that portion
of the Portfolio will move within a two-month period of any change
in the Federal Funds rate. The Portfolio's stated average maturity
was approximately 6.8 years at August 31, 1999, but based on our
experience, the Portfolio's holdings can be expected to have an
actual average life of approximately 3 years--4 years in response
to the freely prepayable nature of the bank loans.
The Portfolio was approximately 29% leveraged as of August 31, 1999.
While we have the ability to adjust leverage to react to market
conditions, we believe the current level is appropriate given our
strategy, and we expect leverage to remain at present levels.
The Portfolio's investments were spread across 230 issuers in 52
industries. See the "Portfolio Information" section on page 21 of
this report to shareholders, which provides listings of the
Portfolio's ten largest holdings and five largest industries at
August 31, 1999.
While we expect that the Federal Reserve Board may increase short-
term interest rates by another 0.25% before year-end, and we
acknowledge that this may put pressure on high-yield bond prices
over the next few months, we are optimistic about the Portfolio as
we enter the year 2000. This is based on our expectations for a
continuation of the strong economy in the United States with a
relatively stable interest rate environment, a gradual improvement
in the Asian economies and a gradual decline in credit spreads to a
more normal range.
Senior High Income Portfolio, Inc.
August 31, 1999
In Conclusion
As difficult as the months of July and August 1999 were for the high-
yield bond and leveraged loan markets and the Portfolio, their
performances illustrate the bank loan market's ability to weather
market fluctuations with less volatility than the high-yield bond
market. This is what differentiates the Portfolio from a pure high-
yield bond fund. This attribute continues to draw many new
institutional buyers to the bank loan market. We believe that both
the technical and fundamental aspects are improving in both the high-
yield bond and bank loan sectors. We also believe we have positively
positioned the Portfolio to follow further expected improvements in
the marketplace in an effort to seek to enhance total return
potential over the coming months.
We thank you for your investment in Senior High Income Portfolio,
Inc., and we look forward to reviewing our outlook and strategy with
you again in our next report to shareholders.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Richard C. Kilbride)
Richard C. Kilbride
Vice President and Co-Portfolio Manager
(Gilles Marchand)
Gilles Marchand
Vice President and Co-Portfolio Manager
(Paul Travers)
Paul Travers
Vice President and Co-Portfolio Manager
October 14, 1999
ML Senior High Income Portfolio, Inc. Risk/Return of Various Assets
A line graph depicting the annualized return and volatility
for various assets from 1992 to July 1999
Volatility Return
Broad Equity Market 14.68% 19.94%
Emerging Market Bonds 20.61% 14.08%
High Yield Bonds 5.78% 10.56%
Leveraged Loans 1.92% 8.44%
U.S. Long-Term Treasury Bonds 9.17% 8.81%
Investment Grade Bonds 5.13% 7.73%
U.S. Intermediate Treasury Bonds 4.81% 6.25%
Mortgage Secs 3.27% 6.85%
Money Market Secs .30% 4.46%
U.S. Inflation .56% 2.57%
Source: Calculated by Merrill Lynch using information and data
presented in Ibbotson Investment Analysis Software, c1999 Ibbotson
Associates, Inc. All rights reserved. Used with permission.
The assets used in the above analysis are represented by the
following indexes: US 30-day Treasury Bill Index (Money Market
Securities); Merrill Lynch Mortgage Index (Mortgage Securities);
Ibbotson's U.S. IT (Intermediate Treasuries); Ibbotson's U.S.
LTIndex (Long-Term Treasuries); Merrill Lynch Corporate Index
(Investment Grade Bonds); Donaldson, Lufkin & Jenrette HY Index
(High Yield Bonds); Donaldson, Lufkin & Jenrette Leveraged Loan Index
(Leveraged Loans); EMBI Fixed Rate Index (Emerging Market Bonds);
and Standard &Poor's 500 Index (Broad Equity Market).
Senior High Income Portfolio, Inc.
August 31, 1999
THE BENEFITS AND RISKS OF LEVERAGING
Senior High Income Portfolio, Inc. has the ability to utilize
leverage through borrowings or issuance of short-term debt
securities or shares of Preferred Stock. The concept of leveraging
is based on the premise that the cost of assets to be obtained from
leverage will be based on short-term interest rates, which normally
will be lower than the return earned by the fund on its longer-term
portfolio investments. Since the total assets of the fund (including
the assets obtained from leverage) are invested in higher-yielding
portfolio investments, the fund's Common Stock shareholders are the
beneficiaries of the incremental yield. Should the differential
between the underlying interest rates narrow, the incremental yield
"pick up" will be reduced. Furthermore, if long-term interest rates
rise, the Common Stock's net asset value will reflect the full
decline in the entire portfolio holdings resulting therefrom since
the assets obtained from leverage do not fluctuate.
Leverage creates risks for holders of Common Stock including the
likelihood of greater net asset value and market price volatility.
In addition, there is the risk that fluctuations in interest rates
on borrowings (or in the dividend rates on any Preferred Stock, if
the fund were to issue the Preferred Stock) may reduce the Common
Stock's yield and negatively impact its market price. If the income
derived from securities purchased with assets received from leverage
exceeds the cost of leverage, the fund's net income will be greater
than if leverage had not been used. Conversely, if the income from
the securities purchased is not sufficient to cover the cost of
leverage, the fund's net income will be less than if leverage had
not been used, and therefore the amount available for distribution
to Common Stock shareholders will be reduced. In this case, the fund
may nevertheless decide to maintain its leveraged position in order
to avoid capital losses on securities purchased with leverage.
However, the fund will not generally utilize leverage if it
anticipates that its leveraged capital structure would result in a
lower rate of return for its Common Stock than would be obtained if
the Common Stock were unleveraged for any significant amount of
time.
<TABLE>
PROXY RESULTS
<CAPTION>
During the six-month period ended August 31, 1999, Senior High
Income Portfolio, Inc.'s shareholders voted on the following
proposals. The proposals were approved at a shareholders' meeting on
May 26, 1999. The description of each proposal and number of shares
voted are as follows:
Shares Shares Voted
Voted For Without Authority
<S> <S> <C> <C>
1. To elect the Portfolio's Board Terry K. Glenn 41,859,599 1,038,373
of Directors: Ronald W. Forbes 41,810,586 1,087,386
Cynthia A. Montgomery 41,800,090 1,097,882
Charles C. Reilly 41,841,667 1,058,305
Kevin A. Ryan 41,809,764 1,088,208
Richard R. West 41,807,050 1,090,922
Arthur Zeikel 41,865,513 1,032,459
<CAPTION>
Shares Shares Voted Shares Voted
Voted For Against Abstain
<S> <S> <C> <C> <C>
2. To select Deloitte & Touche LLP as the Portfolio's
independent auditors. 41,616,280 324,824 956,867
</TABLE>
Senior High Income Portfolio, Inc.
August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Corporate Debt Obligations Cost (Note 1B)
<S> <S> <S> <C> <S> <C> <C>
Advertising--1.2% B B1 $ 1,000,000 Outdoor Systems Inc., 8.875%
due 6/15/2007 $ 993,072 $ 1,027,500
NR* NR* 4,125,000 Petry Media, Term, due 3/31/2002+++ 4,112,456 4,021,875
------------ ------------
5,105,528 5,049,375
Agricultural B B2 2,000,000 Sun World International, Inc., 11.25%
Products--0.5% due 4/15/2004 2,000,000 2,060,000
Air Trans- NR* Ba3 4,100,000 Atlas Freighter Leasing II, Term,
portation--1.0% due 5/29/2004+++ 4,092,448 4,093,165
Aircraft & BB Ba2 2,000,000 Airplanes Pass Through Trust,
Parts--1.0% 10.875% due 3/15/2019 (d) 2,000,000 1,906,360
B+ B3 2,500,000 Derlan Manufacturing, 10% due 1/15/2007 2,479,084 2,425,000
------------ ------------
4,479,084 4,331,360
Amusement & AMC Entertainment Inc.:
Recreational B- B3 500,000 9.50% due 3/15/2009 (b) 497,675 430,000
Services--3.8% B- B3 1,475,000 9.50% due 2/01/2011 1,475,000 1,253,750
B B1 1,725,000 AMF Group, Inc., Term, due 3/31/2002+++ 1,722,261 1,619,344
B B2 800,000 Carmike Cinemas Inc., 9.375% due
2/01/2009 803,000 740,000
B- B3 2,000,000 Hollywood Entertainment, 10.625% due
8/15/2004 (b) 2,000,000 1,930,000
B+ B1 800,000 Intrawest Corp., 9.75% due 8/15/2008 824,000 776,000
Metro Goldwyn Mayer Co. (MGM)+++:
NR* NR* 615,000 Revolving Credit, due 9/30/2003 615,000 591,746
NR* NR* 4,000,000 Term A, due 12/31/2005 3,926,736 3,865,000
B B2 2,500,000 Riddell Sports, Inc., 10.50%
due 7/15/2007 2,358,917 2,112,500
NR* NR* 3,000,000 SFX Entertainment, Term B, due
6/30/2006+++ 2,981,277 2,979,375
------------ ------------
17,203,866 16,297,715
Apparel--2.0% Arena Brands, Inc.+++:
NR* NR* 651,180 Revolving Credit, due 6/01/2002 651,887 632,459
NR* NR* 926,212 Term A, due 6/01/2002 927,370 912,898
NR* NR* 1,998,216 Term B, due 6/01/2002 2,000,714 1,970,741
B- B3 1,500,000 GFSI Inc., 9.625% due 3/01/2007 1,500,000 1,198,125
NR* NR* 3,970,000 Norcross Safety, Term,
due 12/31/2005+++ 3,937,528 3,890,600
------------ ------------
9,017,499 8,604,823
Automotive CCC+ B3 4,000,000 Cambridge Industries Inc., 10.25%
Equipment-- due 7/15/2007 3,405,386 2,880,000
4.3% B B2 1,000,000 Delco Remy International Inc.,
10.625% due 8/01/2006 1,000,000 992,500
B B2 800,000 Hayes Lemmerz International Inc.,
8.25% due 12/15/2008 800,000 744,000
B- B3 3,635,000 Key Plastics, Inc., 10.25% due 3/15/2007 3,613,018 3,435,075
B- B3 1,500,000 Newcor Inc., 9.875% due 3/01/2008 1,500,000 1,342,500
Safelite Glass Corp.+++:
BB- B1 2,061,429 Term B, due 12/23/2003 2,022,612 2,051,121
BB- B1 2,061,429 Term C, due 12/23/2004 2,021,572 2,051,121
B- B3 1,600,000 Special Devices Inc., 11.375% due
12/15/2008 1,600,000 1,320,000
Venture Holdings Trust:
B B2 3,325,000 9.50% due 7/01/2005 3,330,000 3,092,250
B B2 700,000 11% due 6/01/2007 (b) 700,000 693,000
------------ ------------
19,992,588 18,601,567
Broadcast-- B B2 2,875,000 Ackerley Group Inc., 9% due 1/15/2009 2,960,500 2,817,500
Radio & TV-- B- B3 1,000,000 ++Acme Television/Finance, 10.875% due
3.2% 9/30/2004 891,786 825,000
B- B3 3,000,000 Albritton Communications, 9.75% due
11/30/2007 2,931,199 2,985,000
NR* Caa1 5,000,000 ++Radio Unica Corp., 14.636% due
8/01/2006 3,073,501 3,025,000
</TABLE>
Senior High Income Portfolio, Inc.
August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Corporate Debt Obligations Cost (Note 1B)
<S> <S> <S> <C> <S> <C> <C>
Broadcast-- Young Broadcasting Corporation:
Radio & TV B B2 $ 2,000,000 10.125% due 2/15/2005 $ 2,000,000 $ 2,060,000
(concluded) B B2 2,000,000 9% due 1/15/2006 1,952,938 1,970,000
------------ ------------
13,809,924 13,682,500
Building & B- B2 1,525,000 Webb (Del E.) Corp., 10.25% due
Construction-- 2/15/2010 1,501,112 1,433,500
0.3%
Building Dal Tile International, Inc.+++:
Materials--2.7% NR* NR* 1,283,422 Revolving Credit, due 12/31/2002 1,259,289 1,238,503
NR* NR* 1,978,610 Term, due 12/31/2002 1,950,249 1,922,550
B+ B1 5,468,391 Falcon, Term, due 6/30/2005+++ 5,468,391 5,431,933
Paint Sundry+++:
NR* NR* 886,076 Term, due 8/11/2008 882,968 859,494
NR* NR* 604,494 Term B, due 8/11/2005 602,491 602,227
NR* NR* 503,228 Term C, due 8/11/2006 501,523 501,341
B B2 1,000,000 Republic Group Inc., 9.50% due
7/15/2008 1,000,000 960,000
------------ ------------
11,664,911 11,516,048
Cable Television B B3 2,000,000 ++@Entertainment Inc., 17.50% due
Services--6.0% 2/01/2009 920,544 1,192,500
B+ Ba3 2,000,000 Avalon Cable, Term B, due 10/31/2006+++ 1,986,088 2,010,000
CSC Holdings Inc.:
BB+ Ba2 800,000 7.25% due 7/15/2008 800,000 741,432
BB+ Ba2 1,000,000 7.625% due 7/15/2018 999,035 889,140
Charter Communications Holdings
LLC (b):
B+ B2 2,500,000 8.625% due 4/01/2009 2,492,599 2,343,750
B+ B2 2,250,000 ++9.922% due 4/01/2011 1,443,759 1,350,000
B- B3 800,000 Classic Cable Inc., 9.375% due
8/01/2009 (b) 800,000 776,000
B B3 1,000,000 Coaxial Communications/Phoenix,
10% due 8/15/2006 1,052,500 1,000,000
BB+ Ba2 3,000,000 Lenfest Communications, Inc.,
8.375% due 11/01/2005 2,993,724 3,096,060
BB+ Ba3 1,500,000 Multicanal SA, 10.50% due 4/15/2018 1,507,500 1,050,000
CCC+ B3 500,000 Park N View Inc., 13% due 5/15/2008 470,266 151,250
B- B3 1,225,000 ++RCN Corp., 11% due 7/01/2008 812,496 765,625
D Caa3 1,575,000 Supercanal Holdings SA, 11.50% due
5/15/2005 (b)(e) 1,575,000 803,250
Telewest Communications PLC:
B+ B1 5,000,000 9.625% due 10/01/2006 5,000,000 5,050,000
B+ B1 2,875,000 ++8.97% due 4/15/2009 (b) 1,935,639 1,757,344
B- B2 3,000,000 United Pan-European Communications NV,
10.875% due 8/01/2009 (b) 3,000,000 3,026,250
------------ ------------
27,789,150 26,002,601
Chemicals--7.6% BB- B3 3,000,000 Acetex Corp., 9.75% due 10/01/2003 2,992,065 2,670,000
NR* NR* 5,000,000 Epsilon Products, Term B, due
12/31/2005+++ 4,989,523 4,989,523
BBB- Baa3 2,000,000 Equistar Chemicals LP, 8.75% due
2/15/2009 (b) 1,994,557 1,965,004
Huntsman Corp.:
B+ B2 6,000,000 8.873% due 7/01/2007 (b) 6,000,000 5,460,000
NR* NR* 3,477,209 Term, due 12/31/2002+++ 3,473,751 3,468,516
Lyondell Petrochemical Co.+++:
NR* Ba3 8,138,679 Term B, due 6/30/2005 8,151,972 8,107,434
NR* Ba3 1,995,000 Term E, due 5/17/2006 1,992,578 2,002,896
NR* NR* 4,049,864 Vinings Industries, Term B,
due 3/31/2005+++ 4,046,413 4,025,820
------------ ------------
33,640,859 32,689,193
</TABLE>
Senior High Income Portfolio, Inc.
August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Corporate Debt Obligations Cost (Note 1B)
<S> <S> <S> <C> <S> <C> <C>
Computer- NR* NR* $ 5,000,000 Bridge Information, Term B,
Related due 5/29/2005+++ $ 4,989,241 $ 5,003,125
Products--1.6% B- B3 2,000,000 Federal Data Corp., 10.125%
due 8/01/2005 2,000,000 1,800,000
------------ ------------
6,989,241 6,803,125
Consumer B+ B2 1,000,000 Evenflo Company Inc., 11.75% due
Products--1.8% 8/15/2006 1,000,000 991,250
B B3 1,050,000 Home Products International Inc.,
9.625% due 5/15/2008 1,050,000 924,000
B Ba3 4,455,000 Samsonite Corporation, Term, due
6/24/2005+++ 4,450,098 4,313,924
B+ B2 1,490,000 Scotts Company, 8.625% due 1/15/2009 (b) 1,490,000 1,445,300
------------ ------------
7,990,098 7,674,474
Drilling--2.3% BB- B1 4,000,000 Cliffs Drilling, 10.25% due 5/15/2003 4,325,000 3,910,000
BBB- NR* 2,000,000 Falcon Drilling Co. Inc., 9.75%
due 1/15/2001 2,115,000 1,937,500
B+ B1 2,475,000 Parker Drilling Co., 9.75% due
11/15/2006 2,137,939 2,369,813
NR* NR* 1,727,718 Rigco North America, Term,
due 9/30/1999+++ 1,727,718 1,684,525
------------ ------------
10,305,657 9,901,838
Educational B- B3 1,050,000 La Petite Academy/LPA Holdings,
Services--0.2% 10% due 5/15/2008 1,050,000 937,125
Electronics/ B B2 3,232,000 Advanced Glassfiber Yarn, 9.875%
Electrical due 1/15/2009 3,169,744 3,106,760
Components-- B B2 1,613,000 BGF Industries Inc., 10.25% due
3.6% 1/15/2009 1,581,906 1,443,635
Dynatech Corp.+++:
B+ NR* 1,648,556 Term B, due 3/31/2005 1,648,556 1,650,617
B+ NR* 1,648,556 Term C, due 3/31/2006 1,648,556 1,650,617
B+ NR* 1,648,556 Term D, due 3/31/2007 1,648,556 1,650,617
B- B3 2,000,000 Global Imaging Systems, 10.75%
due 2/15/2007 1,975,167 1,970,000
B+ B3 1,000,000 High Voltage Engineering, 10.50%
due 8/15/2004 1,000,000 930,000
B B3 3,000,000 Intersil Corporation, 13.25% due
8/15/2009 (b)(g) 3,000,000 3,045,000
------------ ------------
15,672,485 15,447,246
Energy--7.6% B B1 2,000,000 Belco Oil & Gas Corp., 8.875%
due 9/15/2007 2,000,000 1,920,000
B- B3 2,500,000 Bellwether Exploration, 10.875%
due 4/01/2007 2,500,000 2,303,125
BB Ba3 5,000,000 Clark Refining & Marketing, Term, due
11/15/2004+++ 5,000,000 4,750,000
CCC Caa1 1,000,000 Continental Resources, 10.25% due
8/01/2008 1,000,000 755,000
B B2 1,000,000 Cross Timbers Oil Company, 8.75% due
11/01/2009 1,000,000 960,000
B B2 1,500,000 Energy Corp. of America, 9.50% due
5/15/2007 1,500,000 1,331,250
NR* Ba2 5,000,000 Ferrell Companies, Inc., Term C,
due 6/17/2006+++ 5,000,000 5,006,250
NR* Ca 1,000,000 Forcenergy, Inc., 8.50% due 2/15/2007 987,689 820,000
B B2 2,000,000 Forest Oil Corporation, 10.50% due
1/15/2006 1,977,588 2,060,000
CCC+ B3 1,850,000 Gothic Production Corp., 11.125%
due 5/01/2005 1,850,000 1,572,500
BB- Ba2 2,000,000 Gulf Canada Resources Ltd., 9.25%
due 1/15/2004 2,105,000 2,004,420
CC Ca 2,000,000 Kelly Oil & Gas Corp., 10.375% due
10/15/2006 1,995,955 1,160,000
B+ B1 2,000,000 Nuevo Energy Co., 9.50% due
6/01/2008 (b) 1,913,334 1,995,000
BB+ Ba1 1,000,000 Santa Fe, 8.75% due 6/15/2007 1,002,500 987,500
BB- B1 2,000,000 Tesoro Petroleum Corp., 9% due
7/01/2008 1,989,449 1,960,000
B- B3 2,000,000 United Refining Co., 10.75% due
6/15/2007 2,000,000 1,340,000
B+ B1 2,000,000 Vintage Petroleum, Inc., 8.625%
due 2/01/2009 1,985,475 1,930,000
------------ ------------
35,806,990 32,855,045
Environmental-- B+ B3 3,200,000 IT Group Inc., 11.25% due 4/01/2009 (b) 3,200,000 3,072,000
0.7%
</TABLE>
Senior High Income Portfolio, Inc.
August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Corporate Debt Obligations Cost (Note 1B)
<S> <S> <S> <C> <S> <C> <C>
Financial NR* Ba3 $ 4,000,000 Highland Legacy Limited Co.,
Services--3.2% 12.139% due 6/01/2011 (b) $ 3,956,539 $ 3,956,800
NR* NR* 500,000 Investcorp SA, Term, due 10/21/2008+++ 500,000 500,000
BB- B2 4,849,944 Outsourcing, Term B, due 10/15/2003+++ 4,740,402 4,734,758
SKM-Libertyview CBO Limited (b):
NR* NR* 1,500,000 8.71% due 4/10/2011 1,500,000 1,363,845
NR* NR* 1,000,000 11.91% due 4/10/2011 984,960 931,562
B+ Ba3 2,475,000 Willis Corroon Corporation, 9% due
2/01/2009 (b) 2,475,000 2,301,750
------------ ------------
14,156,901 13,788,715
Food & Kindred B+ B1 3,000,000 Nebco Evans, 10.125% due 7/15/2007 3,000,000 2,295,000
Products--2.8% BB- Ba3 4,500,000 Pabst Brewing, Term B, due 4/30/2003+++ 4,500,135 4,500,000
B B2 3,000,000 SC International Services, Inc.,
9.25% due 9/01/2007 3,053,858 2,981,250
Snapple+++:
NR* NR* 724,927 Term B, due 2/25/2006 720,634 727,193
NR* NR* 1,768,823 Term C, due 2/25/2007 1,758,247 1,774,718
------------ ------------
13,032,874 12,278,161
Forest B B2 4,500,000 Ainsworth Lumber Company, 12.50% due
Products--4.5% 7/15/2007 (c) 4,489,020 4,950,000
B+ B3 550,000 Millar Western Forest, 9.875% due
5/15/2008 550,000 523,875
NR* NR* 5,000,000 Strategic Timber Inc., Bridge Loan, due
10/27/1999+++ 4,995,068 4,995,068
BB+ Ba3 6,000,000 Tembec Finance Corporation, 9.875% due
9/30/2005 6,110,000 6,120,000
B B3 4,000,000 Uniforet Inc., 11.125% due 10/15/2006 4,000,000 2,760,000
------------ ------------
20,144,088 19,348,943
Furniture & B- B3 3,150,000 Formica Corp., 10.875% due
Fixtures--0.9% 3/01/2009 (b) 3,150,000 2,964,938
Sealy Mattress+++:
B+ Ba3 369,629 Term B, due 12/15/2004 374,711 369,860
B+ Ba3 263,245 Term C, due 12/15/2005 266,865 263,410
B+ Ba3 340,291 Term D, due 12/15/2006 344,970 340,450
------------ ------------
4,136,546 3,938,658
Gaming--4.5% B- B3 1,375,000 Argosy Gaming Co., 10.75% due
6/01/2009 (b) 1,375,000 1,405,938
B B2 1,500,000 Harvey Casino Resorts, 10.625%
due 6/01/2006 1,500,000 1,545,000
B B2 1,275,000 Hollywood Park Inc., 9.25% due
2/15/2007 1,275,000 1,230,375
B B3 2,360,000 Isle of Capri Casinos, 8.75% due
4/15/2009 (b) 2,378,806 2,171,200
NR* NR* 707,200 Jazz Casino Co. LLC, 8% due
5/15/2010 (c) 687,397 236,912
B B2 5,000,000 Majestic Star Casino LLC, 10.875% due
7/01/2006 (b) 4,963,024 4,950,000
BB+ Ba2 2,550,000 Park Place Entertainment, 7.875%
due 12/15/2005 2,550,000 2,422,500
B B2 3,850,000 Peninsula Gaming LLC, 12.25% due
7/01/2006 (b)(h) 3,968,272 3,955,875
B B2 1,700,000 Trump Atlantic City Associates/Funding
Inc., 11.25% due 5/01/2006 1,468,483 1,445,000
------------ ------------
20,165,982 19,362,800
Grocery B B2 5,000,000 Grand Union Co., Term, due 8/17/2003+++ 4,978,153 4,987,500
Stores--1.2%
Healthcare B- B3 1,500,000 Alliance Imaging Inc., 9.54% due
Providers--4.0% 12/15/2005 1,500,000 1,350,000
Community Health Care Inc.+++:
NR* NR* 1,760,274 Term B, due 12/31/2003 1,754,500 1,755,873
NR* NR* 1,760,274 Term C, due 12/31/2004 1,753,984 1,755,873
NR* NR* 1,315,068 Term D, due 12/31/2005 1,310,075 1,312,329
</TABLE>
Senior High Income Portfolio, Inc.
August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Corporate Debt Obligations Cost (Note 1B)
<S> <S> <S> <C> <S> <C> <C>
Healthcare Integrated Health Services, Inc.:
Providers CCC B2 $ 3,000,000 9.50% due 9/15/2007 $ 3,000,000 $ 1,050,000
(concluded) NR* NR* 4,925,000 Term B, due 9/15/2003+++ 4,915,395 4,145,210
Mariner Post+++:
B+ Caa2 2,383,049 Term B, due 3/31/2005 2,381,111 1,176,630
B+ Caa2 2,383,049 Term C, due 3/31/2006 2,381,035 1,176,630
NR* B1 1,300,444 Paracelsus Healthcare Corp.,
Term A, due 3/31/2003+++ 1,295,350 1,235,422
BB- Ba3 2,500,000 Tenet Healthcare Corp., 8.625%
due 1/15/2007 2,497,840 2,375,000
------------ ------------
22,789,290 17,332,967
Hotels & B- B2 6,000,000 Extended Stay America, 9.15% due
Motels--7.2% 3/15/2008 6,000,000 5,700,000
HMH Properties, Inc.:
BB Ba2 1,075,000 7.875% due 8/01/2008 1,068,548 959,438
BB Ba2 1,600,000 8.45% due 12/01/2008 1,594,880 1,476,000
BB Ba2 3,000,000 Prime Hospitality Corporation,
9.25% due 1/15/2006 2,992,788 2,970,000
NR* Ba1 15,000,000 Starwood Hotels & Resorts, Bridge
Loan, due 2/23/2003+++ 14,991,555 15,003,120
Wyndam International, Term+++:
B+ B3 2,000,000 due 3/30/2004 1,990,267 1,988,126
B+ B3 3,000,000 due 6/30/2006 2,992,629 2,984,532
------------ ------------
31,630,667 31,081,216
Industrial-- B- B3 1,750,000 American Plumbing & Mechanic Inc.,
Consumer 11.625% due 10/15/2008 (b) 1,714,456 1,662,500
Services--0.7% B B2 1,450,000 Building One Services, 10.50%
due 5/01/2009 1,417,942 1,348,500
------------ ------------
3,132,398 3,011,000
Leasing & Rental Avis Rent A Car+++:
Services--3.9% BB+ Ba3 2,500,000 Term B, due 6/30/2006 2,500,000 2,481,250
BB+ Ba3 2,500,000 Term C, due 6/30/2007 2,500,000 2,482,812
B B1 5,000,000 MEDIQ Life Support Services, Inc.,
Term, due 6/30/2006+++ 5,025,000 4,937,500
National Equipment Services:
B B3 1,000,000 10% due 11/30/2004 990,014 1,000,000
B B3 500,000 10% due 11/30/2004 490,139 500,000
B B3 500,000 Neff Corp., 10.25% due 6/01/2008 492,930 505,000
Renters Choice Inc.+++:
NR* Ba3 1,865,625 Term B, due 1/31/2006 1,863,965 1,855,909
NR* Ba3 2,280,208 Term C, due 1/31/2007 2,278,238 2,268,333
B B3 1,000,000 Universal Hospital Services,
10.25% due 3/01/2008 855,378 740,000
------------ ------------
16,995,664 16,770,804
Manufacturing-- B- B2 1,932,000 Fairfield Manufacturing Company
3.2% Inc., 9.625% due 10/15/2008 1,932,000 1,832,985
CCC- Ca 1,500,000 Morris Materials Handling, 9.50%
due 4/01/2008 839,679 600,000
B- B3 1,250,000 Russell-Stanley Holdings Inc.,
10.875% due 2/15/2009 (b) 1,240,901 1,243,750
NR* B1 4,924,623 Terex Corp., Term B, due 3/06/2005+++ 4,902,172 4,904,102
B B2 5,000,000 WEC Company Inc., 12% due 7/15/2009 (b) 5,000,000 4,950,000
------------ ------------
13,914,752 13,530,837
Measuring, NR* NR* 3,687,502 Chronograph Ltd., Term B, due
Analyzing & 9/30/2001+++ 3,660,820 3,660,820
Controlling
Instruments--0.8%
</TABLE>
Senior High Income Portfolio, Inc.
August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Corporate Debt Obligations Cost (Note 1B)
<S> <S> <S> <C> <S> <C> <C>
Medical Alaris Medical Systems, Inc.+++:
Equipment-- B+ B1 $ 1,277,989 Term B, due 11/01/2003 $ 1,277,989 $ 1,279,586
0.9% B+ B1 1,277,989 Term C, due 11/01/2004 1,277,989 1,279,586
B+ B1 1,202,873 Term D, due 5/01/2005 1,202,873 1,204,377
CC Caa1 550,000 GrahamField Health Products, Inc.,
9.75% due 8/15/2007 (b) 578,750 341,000
------------ ------------
4,337,601 4,104,549
Metals & CC Ca 3,000,000 Anker Coal Group, Inc., 9.75% due
Mining--8.1% 10/01/2007 3,015,000 1,342,500
B B1 850,000 Bayou Steel Corp., 9.50% due 5/15/2008 842,569 799,000
BB- B2 2,000,000 CSN Iron SA, 9.125% due 6/01/2007 (b) 1,992,351 1,460,000
B- B3 2,000,000 Continental Global Group, 11% due
4/01/2007 2,000,000 1,345,000
GS Technologies Operating Co.:
B B2 1,000,000 12% due 9/01/2004 994,865 822,500
B B2 1,000,000 12.25% due 10/01/2005 1,000,000 770,000
D C 1,000,000 Geneva Steel, 9.50% due 1/15/2004 (e) 945,522 220,000
Ispat International N.V.+++:
BB Ba3 1,831,500 Term B, due 7/15/2005 1,829,497 1,818,337
BB Ba3 1,831,500 Term C, due 7/15/2006 1,829,451 1,818,337
B+ B1 3,500,000 Ivaco, Inc., 11.50% due 9/15/2005 3,444,641 3,692,500
CCC+ Caa2 1,600,000 Metal Management Inc., 10% due 5/15/2008 1,600,000 1,216,000
B+ B2 875,000 Pen Holdings Inc., 9.875% due 6/15/2008 868,667 831,250
B B3 3,000,000 Renco Metals Inc., 11.50% due 7/01/2003 3,007,500 2,790,000
B+ B1 2,000,000 Russel Metals Inc., 10% due 6/01/2009 2,000,000 2,027,500
UCAR International, Inc.+++:
NR* Ba3 3,385,714 Term B, due 12/31/2003 3,383,548 3,394,179
NR* Ba3 4,986,476 Term C, due 12/31/2003 4,975,253 4,997,387
Wheeling-Pittsburg Steel Corp., Term+++:
NR* NR* 2,500,000 due 11/15/2006 2,489,212 2,418,750
NR* NR* 3,500,000 due 11/15/2006 3,526,250 3,386,250
------------ ------------
39,744,326 35,149,490
Online B- B3 1,150,000 PSINet Inc., 11% due 8/01/2009 (b) 1,150,000 1,138,500
Services--0.3% B- B3 750,000 Verio Inc., 11.25% due 12/01/2008 750,000 761,250
------------ ------------
1,900,000 1,899,750
Packaging--2.0% B+ B2 4,000,000 Anchor Glass, 11.25% due 4/01/2005 4,000,000 3,980,000
B B1 675,000 Consumers Packaging Inc., 9.75% due
2/01/2007 675,000 627,750
B- B3 1,000,000 Fonda Group Inc., 9.50% due 3/01/2007 1,000,000 870,000
B B3 4,000,000 Spinnaker Industries Inc.,
10.75% due 10/15/2006 3,386,405 3,000,000
------------ ------------
9,061,405 8,477,750
Paper--6.2% B B3 1,150,000 American Tissue Inc., 12.50% due
7/15/2006 (b) 1,111,786 1,095,375
CCC Caa2 1,500,000 Four M Corp., 12% due 6/01/2006 1,500,000 1,335,000
B- Caa1 3,000,000 Gaylord Container Corp., 9.75%
due 6/15/2007 3,000,000 2,812,500
NR* Ba2 5,000,000 Pacifica, Term B, due 12/31/2006+++ 4,994,017 5,012,500
NR* NR* 5,000,000 Repap New Brunswick, Inc., Term B, due
6/01/2004+++ 5,000,000 4,837,500
Riverwood International, Inc.+++:
B+ B1 8,402,256 Term B, due 2/28/2004 8,320,556 8,424,312
B+ B1 3,360,144 Term C, due 8/28/2004 3,325,788 3,369,805
------------ ------------
27,252,147 26,886,992
</TABLE>
Senior High Income Portfolio, Inc.
August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Corporate Debt Obligations Cost (Note 1B)
<S> <S> <S> <C> <S> <C> <C>
Printing & Big Flower Press Holdings:
Publishing--1.7% B+ B2 $ 1,000,000 8.875% due 7/01/2007 $ 993,025 $ 961,250
B+ B2 1,375,000 8.625% due 12/01/2008 1,375,000 1,294,219
B+ B1 1,325,000 Mail-Well I Corp., 8.75% due 12/15/2008 1,322,317 1,272,000
B B3 800,000 Premier Graphics Inc., 11.50% due
12/01/2005 800,000 728,000
B- B3 900,000 Regional Independent Media, 10.50% due
7/01/2008 900,000 897,750
B- B3 1,500,000 T/SF Communications Corp., 10.375% due
11/01/2007 1,479,992 1,447,500
BB- Baa3 750,000 World Color Press Inc., 8.375%
due 11/15/2008 750,000 727,500
------------ ------------
7,620,334 7,328,219
Property BB- Ba3 2,000,000 Forest City Enterprises Inc.,
Management-- 8.50% due 3/15/2008 2,000,000 1,945,000
0.6% B+ Ba2 600,000 Prison Realty Trust Inc.,
12% due 6/01/2006 600,000 606,000
------------ ------------
2,600,000 2,551,000
Restaurants-- Domino & Bluefence+++:
2.9% B+ B1 909,495 Term B, due 12/21/2006 900,955 911,769
B+ B1 909,495 Term C, due 12/21/2007 900,864 911,769
NR* Ba3 7,000,000 Host Marriott Travel Plaza,
9.50% due 5/15/2005 6,865,423 7,210,000
NR* B1 3,448,254 Shoney's Inc., Term B, due 4/30/2002+++ 3,434,118 3,318,945
------------ ------------
12,101,360 12,352,483
Retail NR* NR* 4,000,000 Asbury Automotive, due 3/31/2005+++ 3,970,127 3,950,000
Specialty--1.7% B B3 1,575,000 TM Group Holdings, 11% due 5/15/2008 1,575,000 1,547,437
B- Caa1 2,000,000 United Auto Group, Inc., 11%
due 7/15/2007 1,974,431 1,800,000
------------ ------------
7,519,558 7,297,437
Satellite Echostar DBS Corporation:
Telecommuni- B B2 700,000 9.25% due 2/01/2006 700,000 686,000
cations B B2 3,275,000 9.375% due 2/01/2009 3,275,000 3,225,875
Distribution B- B3 350,000 Pegasus Communications, 9.75%
Systems--2.0% due 12/01/2006 350,000 348,250
NR* B1 4,428,000 Satelites Mexicanos SA, 9.08%
due 6/30/2004 (b) 4,419,005 4,184,460
------------ ------------
8,744,005 8,444,585
Shipbuilding & B+ B1 4,000,000 Newport News Shipbuilding, Inc.,
Repairing--1.0% 9.25% due 12/01/2006 4,000,000 4,080,000
Shipping--1.9% BB- Ba3 4,500,000 Eletson Holdings, Inc., 9.25%
due 11/15/2003 4,424,032 4,263,750
B+ B2 1,525,000 Enterprises Shipholding, 8.875%
due 5/01/2008 1,521,791 1,037,000
BB Ba2 3,000,000 Stena AB, 10.50% due 12/15/2005 3,000,000 2,985,000
------------ ------------
8,945,823 8,285,750
Textile Mill B Caa3 3,000,000 Galey & Lord, Inc., 9.125% due
Products--0.9% 3/01/2008 3,030,000 1,560,000
B- Caa1 900,000 Globe Manufacturing Corp.,
10% due 8/01/2008 900,000 603,000
BB Ba3 2,050,000 Westpoint Stevens Inc., 7.875%
due 6/15/2008 (f) 2,025,128 1,927,000
------------ ------------
5,955,128 4,090,000
Tower NR* NR* 4,000,000 American Tower Systems Co.,
Construction & Term, due 12/16/2006+++ 3,991,007 3,991,668
Leasing--2.0% Crown Castle International Corporation:
B B3 500,000 9% due 5/15/2011 500,000 465,000
B B3 1,150,000 ++10.375% due 5/15/2011 714,413 638,250
B B3 3,000,000 9.50% due 8/01/2011 (b) 3,000,000 2,872,500
NR* NR* 2,050,000 ++Spectrasite Holdings Inc.,
11.25% due 4/15/2009 (b) 1,236,003 1,035,250
------------ ------------
9,441,423 9,002,668
</TABLE>
Senior High Income Portfolio, Inc.
August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Corporate Debt Obligations Cost (Note 1B)
<S> <S> <S> <C> <S> <C> <C>
Transportation D Ca $ 4,000,000 AmeriTruck Distribution Corp.,
Services--0.1% 12.25% due 11/15/2005 (e) $ 3,964,991 $ 200,000
BB- NR* 2,000,000 Autopistas del Sol SA, 10.25%
due 8/01/2009 (b) 2,035,000 1,300,000
D Caa3 1,600,000 Trism Inc., 10.75% due 12/15/2000 (e) 1,499,687 408,000
------------ ------------
7,499,678 1,908,000
Utilities--1.0% B+ Ba3 4,500,000 AES Corporation, 8.50% due 11/01/2007 4,468,975 4,151,250
Waste Manage- Allied Waste+++:
ment--3.4% BBB- Ba3 2,272,727 Term B, due 6/30/2006 2,259,849 2,256,984
BBB- Ba3 2,727,273 Term C, due 6/30/2007 2,711,790 2,708,806
B+ B2 3,000,000 Allied Waste North America, 10% due
8/01/2009 (b) 2,990,091 2,895,000
BB- B3 5,000,000 ++Norcal Waste Systems, 13.50%
due 11/15/2005 5,144,014 5,375,000
B+ B3 1,350,000 Safety-Kleen Corporation, 9.25%
due 5/15/2009 (b) 1,350,000 1,333,125
------------ ------------
14,455,744 14,568,915
Wired B B3 3,375,000 Caprock Communications, 11.50% due
Telecommuni- 5/01/2009 (b) 3,326,529 3,375,000
cations--7.0% NR* NR* 3,350,000 ++E. Spire Communications, 10.521%
due 7/01/2008 2,267,363 1,344,187
BB Ba2 1,500,000 Global Cross, Term B, due 7/02/2007+++ 1,496,263 1,491,562
B B3 500,000 Hermes Europe RailTel BV, 10.375%
due 1/15/2009 500,000 501,250
Level 3 Communications Inc.:
B B3 2,850,000 9.125% due 5/01/2008 2,839,054 2,650,500
B B3 1,225,000 ++10.50% due 12/01/2008 792,850 704,375
B+ B2 2,500,000 McLeodUSA Inc., 10.50% due 3/01/2007 1,935,146 1,900,000
B B2 750,000 Metromedia Fiber Network, 10% due
11/15/2008 750,000 742,500
B B3 1,675,000 ++Metronet Communications, 9.95% due
6/15/2008 1,159,302 1,273,000
Nextlink Communications Inc.:
B B3 2,500,000 9% due 3/15/2008 2,495,449 2,356,250
B B3 3,000,000 ++12.25% due 6/01/2009 1,705,221 1,755,000
Primus Telecommunications Group:
B- B3 800,000 11.75% due 8/01/2004 828,000 780,000
B- B3 1,475,000 11.25% due 1/15/2009 1,475,000 1,408,625
RSL Communications PLC:
B- B2 3,000,000 9.125% due 3/01/2008 3,000,000 2,520,000
B- B2 3,000,000 ++11.965% due 3/01/2008 2,153,614 1,620,000
NR* B3 3,333,333 Teligent Inc., Term, due 7/01/2002+++ 3,315,467 3,187,500
NR* NR* 500,000 Versatel Telecom BV, 11.875% due
7/15/2009 (b) 496,383 479,130
Worldwide Fiber Inc.:
B B3 1,500,000 12.50% due 12/15/2005 1,500,000 1,530,000
B B3 500,000 12% due 8/01/2009 (b) 500,000 501,250
------------ ------------
32,535,641 30,120,129
Wireless American Cellular+++:
Telecommuni- NR* B2 2,493,750 Term B, due 6/30/2007 2,476,106 2,488,451
cations--9.4% NR* B2 2,493,750 Term C, due 9/30/2007 2,476,053 2,488,451
Cellular Finance Inc.+++:
NR* B1 586,527 Term B, due 9/30/2006 584,754 587,187
NR* B1 1,161,440 Term C, due 3/31/2007 1,157,882 1,162,747
NR* B1 3,252,033 Term D, due 9/30/2007 3,241,940 3,257,724
NR* B3 2,800,000 ++ClearNet Communications, 10.125% due
5/01/2009 1,765,623 1,638,000
NR* NR* 5,000,000 Iridium Operating LLC, Term, due
12/29/2000+++ (e) 4,952,755 1,487,500
B- Caa1 3,000,000 ++McCaw International Ltd., 13.355% due
4/15/2007 2,112,784 1,770,000
B- B3 1,650,000 ++Microcell Telecommunications, 12% due
6/01/2009 948,705 981,750
</TABLE>
Senior High Income Portfolio, Inc.
August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Corporate Debt Obligations Cost (Note 1B)
<S> <S> <S> <C> <S> <C> <C>
Wireless Omnipoint Communications Corp.+++:
Telecommuni- NR* B2 $ 5,742,064 Term A, due 2/17/2006 $ 5,737,128 $ 5,687,037
cations NR* B2 1,922,276 Term B, due 2/17/2006 1,920,624 1,903,855
(concluded) NR* B2 3,088,252 Term C, due 2/17/2006 3,075,042 3,058,657
NR* B2 1,000,000 ++PTC International Finance BV,
10.269% due 7/01/2007 760,546 680,000
NR* B2 5,000,000 Telecorp PCS, Inc., Term B,
due 1/15/2008+++ 4,990,806 4,956,250
CCC+ Caa1 2,000,000 ++Telesystem International Wireless Inc.,
16.147% due 6/30/2007 1,390,948 980,000
NR* NR* 7,500,000 VoiceStream PCS, Term B, due
6/30/2007+++ 7,468,978 7,478,122
------------ ------------
45,060,674 40,605,731
Total Corporate Debt
Obligations--141.4% 653,293,397 611,449,819
Shares
Held Equity Investments
<S> <C> <S> <C> <C>
Cable Television Services--0.0% 500 Park N View (Warrants)(a) 31,000 500
615,733 Supercanal Holdings SA (Warrants)(a) 0 6
------------ ------------
31,000 506
Financial Services--0.0% 1,500 Olympic Financial Limited (Warrants)(a) 25,650 1,500
Leasing & Rental Services--0.1% 13,398 CORT Business Services Corporation (e) 3,037 335,787
Metals & Mining--0.0% 3,000 Gulf States Steel (Warrants)(a)(b) 33,000 750
Telephone Communications--0.0% 1,000 Unifi Communications Inc. (Warrants)(a)(b) 56,590 10
Wired Telecommunications--0.0% 2,000 Metronet Communications (Warrants)(a)(b) 20,500 209,169
Wireless Telecommunications--0.0% 3,000 McCaw International Ltd. (Warrants)(a)(b) 46,799 6,750
Total Equity Investments--0.1% 216,576 554,472
Face
Amount Short-Term Investments
<S> <C> <S> <C> <C>
Commercial Paper**--0.2% $ 749,000 General Motors Acceptance Corp.,
5.56% due 9/01/1999 749,000 749,000
Total Short-Term Investments--0.2% 749,000 749,000
Total Investments--141.7% $654,258,973 612,753,291
============
Liabilities in Excess of Other Assets--(41.7%) (180,179,176)
------------
Net Assets--100.0% $432,574,115
============
<FN>
*Not Rated.
**Commercial Paper is traded on a discount basis; the interest rate
shown reflects the discount rate paid at the time of purchase by the
Fund.
++Represents a zero coupon or step bond; the interest rate shown
reflects the effective yield at the time of purchase by the Fund.
+++Floating or Variable Rate Corporate Debt--The interest rates on
floating or variable rate corporate debt are subject to change
periodically, based on the change in the prime rate of a US Bank,
LIBOR (London Interbank Offered Rate), or, in some cases, another
base lending rate. Corporate loans represent 61.9% of the Fund's net
assets.
(a)Warrants entitle the Fund to purchase a predetermined number of
shares of common share/face amount of bonds and are non-income
producing. The purchase price and number of shares/face amount are
subject to adjustments under certain conditions until the expiration
date.
(b)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(c)Represents a pay-in-kind security which may pay
interest/dividends in additional face/share.
(d)Pass-through security is subject to principal paydowns.
(e)Non-income producing security.
(f)Restricted securities as to resale. The value of the Fund's
investment in restricted securities was approximately $1,927,000,
representing 0.4% of net assets.
Acquisition Value
Issue Date Cost (Note 1b)
Westpoint Stevens Inc.,
7.875% due 6/15/2008 6/03/1998 $2,025,128 $1,927,000
Total $2,025,128 $1,927,000
========== ==========
(g)Each $1,000 face amount contains one warrant Intersil
Corporation.
(h)Each $1,000 face amount contains 7.042 convertible preferred
membership interests of Peninsula Gaming LLC.
See Notes to Financial Statements.
</TABLE>
Senior High Income Portfolio, Inc.
August 31, 1999
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of August 31, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$654,258,973) (Note 1b) $ 612,753,291
Cash 163,218
Receivables:
Interest $ 10,949,059
Securities sold 4,796,667 15,745,726
-------------
Deferred facility fees 21,955
Prepaid expenses and other assets 64,231
-------------
Total assets 628,748,421
-------------
Liabilities: Payables:
Loans (Note 6) 188,000,000
Securities purchased 4,796,667
Interest on loans (Note 6) 2,101,452
Dividends to shareholders (Note 1f) 699,382
Investment adviser (Note 2) 255,324
Commitment fees 12,956 195,865,781
-------------
Deferred income (Note 1e) 2,147
Accrued expenses and other liabilities 306,378
-------------
Total liabilities 196,174,306
-------------
Net Assets: Net assets $ 432,574,115
=============
Capital: Common Stock, par value $.10 per share; 200,000,000 shares
authorized (53,870,134 shares issued and outstanding) $ 5,387,013
Paid-in capital in excess of par 501,426,423
Undistributed investment income--net 3,851,279
Accumulated realized capital losses on investments--net (Note 7) (36,584,918)
Unrealized depreciation on investments--net (41,505,682)
-------------
Total Capital--Equivalent to $8.03 net asset value per share of
Common Stock (market price--$7.4375) $ 432,574,115
=============
See Notes to Financial Statements.
</TABLE>
Senior High Income Portfolio, Inc.
August 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended
August 31, 1999
<S> <S> <C> <C>
Investment Income Interest and discount earned $ 30,382,180
(Note 1e): Facility and other fees 208,175
-------------
Total income 30,590,355
-------------
Expenses: Loan interest expense (Note 6) $ 5,027,127
Investment advisory fees (Note 2) 1,595,334
Borrowing costs (Note 6) 201,522
Professional fees 73,116
Accounting services (Note 2) 68,840
Transfer agent fees (Note 2) 48,248
Custodian fees 35,755
Printing and shareholder reports 27,120
Listing fees 23,267
Directors' fees and expenses 14,247
Pricing services 7,602
Other 7,084
-------------
Total expenses 7,129,262
-------------
Investment income--net 23,461,093
-------------
Realized & Realized loss on investments--net (7,438,522)
Unrealized Loss on Change in unrealized depreciation on investments--net (12,867,205)
Investments--Net -------------
(Notes 1c, Net Increase in Net Assets Resulting from Operations $ 3,155,366
1e & 3): =============
See Notes to Financial Statements.
</TABLE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Aug. 31, 1999 Feb. 28, 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 23,461,093 $ 46,706,030
Realized loss on investments--net (7,438,522) (9,257,432)
Change in unrealized appreciation/depreciation
on investments--net (12,867,205) (42,080,592)
------------- -------------
Net increase (decrease) in net assets resulting from operations 3,155,366 (4,631,994)
------------- -------------
Dividends to Investment income--net (23,140,239) (47,373,187)
Shareholders ------------- -------------
(Note 1f): Net decrease in net assets resulting from
dividends to shareholders (23,140,239) (47,373,187)
------------- -------------
Capital Share Value of shares issued to Common Stock shareholders in
Transactions reinvestment of dividends -- 8,087,161
(Note 4): ------------- -------------
Net increase in net assets resulting from capital
share transactions -- 8,087,161
------------- -------------
Net Assets: Total decrease in net assets (19,984,873) (43,918,020)
Beginning of period 452,558,988 496,477,008
------------- -------------
End of period* $ 432,574,115 $ 452,558,988
============= =============
<FN>
*Undistributed investment income--net $ 3,851,279 $ 3,530,425
============= =============
See Notes to Financial Statements.
</TABLE>
Senior High Income Portfolio, Inc.
August 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Cash Flows
<CAPTION>
For the Six Months Ended
August 31, 1999
<S> <S> <C>
Cash Provided by Net increase in net assets resulting from operations $ 3,155,366
Operating Adjustments to reconcile net increase in net assets resulting
Activities: from operations to net cash provided by operating activities:
Decrease in receivables (472,367)
Decrease in other assets (14,633)
Increase in other liabilities 173,803
Realized and unrealized loss on investments--net 20,305,727
Amortization of discount--net (1,378,705)
-------------
Net cash provided by operating activities 21,769,191
-------------
Cash Provided by Proceeds from sales of long-term investments 163,077,968
Investing Purchases of long-term investments (150,914,389)
Activities: Purchases of short-term investments (62,471,203)
Proceeds from sales and maturities of short-term investments 62,631,000
-------------
Net cash provided by investing activities 12,323,376
-------------
Cash Used for Cash receipts of borrowings 127,000,000
Financing Cash payments on borrowings (138,000,000)
Activities: Dividends paid to shareholders (23,231,504)
-------------
Net cash used for financing activities (34,231,504)
-------------
Cash: Net decrease in cash (138,937)
Cash at beginning of period 302,155
-------------
Cash at end of period $ 163,218
=============
Cash Flow Cash paid for interest $ 4,780,440
=============
See Notes to Financial Statements.
</TABLE>
Senior High Income Portfolio, Inc.
August 31, 1999
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
For the
Six For the
The following per share data and ratios have been derived Months Year
from information provided in the financial statements. Ended For the Year Ended Ended
Aug. 31, February 28, Feb. 29,
Increase (Decrease) in Net Asset Value: 1999++ 1999++ 1998++ 1997++ 1996++
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.40 $ 9.37 $ 9.22 $ 9.21 $ 8.94
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .44 .87 .92 .89 .92
Realized and unrealized gain (loss) on
investments--net (.38) (.95) .14 .04 .27
-------- -------- -------- -------- --------
Total from investment operations .06 (.08) 1.06 .93 1.19
-------- -------- -------- -------- --------
Less dividends from investment income--net (.43) (.89) (.91) (.92) (.92)
-------- -------- -------- -------- --------
Net asset value, end of period $ 8.03 $ 8.40 $ 9.37 $ 9.22 $ 9.21
======== ======== ======== ======== ========
Market price per share, end of period $ 7.4375 $ 8.125 $ 10.125 $ 9.50 $ 9.25
======== ======== ======== ======== ========
Total Investment Based on net asset value per share .89%+++ (.87%) 11.95% 10.80% 14.14%
Return:** ======== ======== ======== ======== ========
Based on market price per share (3.40%)+++(11.26%) 17.41% 13.67% 18.82%
======== ======== ======== ======== ========
Ratios to Expenses, excluding interest expense .93%* .90% .83% .75% .92%
Average ======== ======== ======== ======== ========
Net Assets: Expenses 3.14%* 2.99% 2.66% 1.84% 2.92%
======== ======== ======== ======== ========
Investment income--net 10.33%* 9.87% 9.98% 9.45% 10.14%
======== ======== ======== ======== ========
Leverage: Amount of borrowings (in thousands) $188,000 $199,000 $181,200 $ 81,000 $ 47,000
======== ======== ======== ======== ========
Average amount of borrowings outstanding
during the period (in thousands) $184,364 $174,240 $149,166 $ 82,384 $ 68,473
======== ======== ======== ======== ========
Average amount of borrowings outstanding
per share during the period $ 4.09 $ 3.26 $ 2.85 $ 2.13 $ 2.68
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $432,574 $452,559 $496,477 $477,170 $236,136
Data: ======== ======== ======== ======== ========
Portfolio turnover 24.27% 68.52% 58.60% 98.51% 50.76%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns based on market price, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales charges.
++Based on average shares outstanding.
+++Aggregrate total investment return.
See Notes to Financial Statements.
</TABLE>
Senior High Income Portfolio, Inc.
August 31, 1999
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Senior High Income Portfolio, Inc. (the "Fund") is registered under
the Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. The Fund's financial statements are
prepared in accordance with generally accepted accounting
principles, which may require the use of management accruals and
estimates. These unaudited financial statements reflect all
adjustments which are, in the opinion of management, necessary to a
fair statement of the results for the interim period presented. All
such adjustments are of a normal recurring nature. The Fund
determines and makes available for publication the net asset value
of its Common Stock on a weekly basis. The Fund's Common Stock is
listed on the New York Stock Exchange under the symbol ARK.
(a) Corporate debt obligations--The Fund invests principally in
senior debt obligations ("Senior Debt") of companies, including
corporate loans made by banks and other financial institutions and
both privately and publicly offered corporate bonds and notes.
Because agents and intermediaries are primarily commercial banks,
the Fund's investment in corporate loans could be considered
concentrated in financial institutions.
(b) Valuation of investments--Corporate loans will be valued in
accordance with guidelines established by the Board of Directors.
Until July 9, 1999, Corporate Loans for which an active secondary
market exists and for which the Investment Advisor can obtain at
least two quotations from banks or dealers in Corporate Loans were
valued by calculating the mean of the last available bid and asked
prices in the markets for such Corporate Loans, and then using the
mean of those two means. If only one quote for a particular
Corporate Loan was available, such Corporate Loan will be valued on
the basis of the mean of the last available bid and asked prices in
the market. As of July 12, 1999, pursuant to the approval of the
Board of Directors, the Corporate Loans are valued at the mean
between the last available bid and asked prices from one or more
brokers or dealers as obtained from Loan Pricing Corporation. For
Corporate Loans for which an active secondary market does not exist
to a reliable degree in the opinion of the Investment Adviser, such
Corporate Loans will be valued by the Investment Adviser at fair
value, which is intended to approximate market value.
Other portfolio securities may be valued on the basis of prices
furnished by one or more pricing services, which determine prices
for normal, institutional-size trading units of such securities
using market information, transactions for comparable securities and
various relationships between securities that are generally
recognized by institutional traders. In certain circumstances,
portfolio securities are valued at the last sale price on the
exchange that is the primary market for such securities, or the last
quoted bid price for those securities for which the over-the-counter
market is the primary market or for listed securities in which there
were no sales during the day. The value of interest rate swaps,
caps, and floors is determined in accordance with a formula and then
confirmed periodically by obtaining a bank quotation. Positions in
options are valued at the sale price on the market where any such
option is principally traded. Short-term securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market
quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of
Directors of the Fund.
(c) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
Senior High Income Portfolio, Inc.
August 31, 1999
* Options--The Fund is authorized to write and purchase call and put
options. When the Fund writes an option, an amount equal to the
premium received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current market value of the option
written. When a security is purchased or sold through an exercise of
an option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction is less than or exceeds the premiums paid or
received).
Written and purchased options are non-income producing investments.
* Interest rate transactions--The Fund is authorized to enter into
interest rate swaps and purchase or sell interest rate caps and
floors. In an interest rate swap, the Fund exchanges with another
party their respective commitments to pay or receive interest on a
specified notional principal amount. The purchase of an interest
rate cap (or floor) entitles the purchaser, to the extent that a
specified index exceeds (or falls below) a predetermined interest
rate, to receive payments of interest equal to the difference
between the index and the predetermined rate on a notional principal
amount from the party selling such interest rate cap (or floor).
(d) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Realized gains and losses on security transactions are
determined on the identified cost basis. Facility fees are accreted
to income over the term of the related loan.
(f) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates. The Fund may at times pay out
less than the entire amount of net investment income earned in any
particular period and may at times pay out such accumulated
undistributed income in other periods to permit the Fund to maintain
a more stable level of dividends.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of .50% of
the Fund's average weekly net assets plus the proceeds of any
outstanding borrowings used for leverage.
Accounting services are provided to the Fund by FAM at cost.
During the six months ended August 31, 1999, the Fund paid Merrill
Lynch Security Pricing Service, an affiliate of Merrill Lynch,
Pierce, Fenner & Smith Incorporated, $1,196 for security price
quotations to compute the net asset value of the Fund.
Senior High Income Portfolio, Inc.
August 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended August 31, 1999 were $152,211,056 and
$166,997,492, respectively.
Net realized losses for the six months ended August 31, 1999 and net
unrealized losses as of August 31, 1999 were as follows:
Realized Unrealized
Losses Losses
Long-term investments $(7,438,522) $(41,505,682)
----------- ------------
Total $(7,438,522) $(41,505,682)
=========== ============
As of August 31, 1999, net unrealized depreciation for Federal
income tax purposes aggregated $41,505,682, of which $3,899,598
related to appreciated securities and $45,405,280 related to
depreciated securities. The aggregate cost of investments at August
31, 1999 for Federal income tax purposes was $654,258,973.
4. Capital Share Transaction:
The Fund is authorized to issue 200,000,000 shares of capital stock
par value $.10, all of which are initially classified as Common
Stock. The Board of Directors is authorized, however, to classify
and reclassify any unissued shares of capital stock without approval
of the holders of Common Stock.
Shares issued and outstanding during the six months ended August 31,
1999 remained constant and for the year ended February 28, 1999
increased by 909,410 as a result of dividend reinvestment.
5. Unfunded Corporate Loans:
As of August 31, 1999, the Fund had unfunded loan commitments of
$7,570,020, which would be extended at the option of the borrower,
pursuant to the following loan agreements:
Unfunded
Commitment
Borrower (in thousands)
Arena Brands, Inc. $1,085
Dal Tile International, Inc. 1,283
Metro Goldwyn Mayer Co. 202
Patriot American 5,000
6. Short-Term Borrowings:
On April 29, 1999, the Fund extended its one-year credit agreement
with a syndicate of banks led by The Bank of New York. The agreement
is a $245,000,000 credit facility bearing interest at the Prime
rate, the Federal Funds rate plus .55%, and/or the Eurodollar rate
plus .55%. For the six months ended August 31, 1999, the average
amount borrowed was approximately $184,364,130, and the daily
weighted average interest rate was 5.41%. For the six months ended
August 31, 1999, facility and commitment fees aggregated $201,522.
7. Capital Loss Carryforward:
At February 28, 1999, the Fund had a net capital loss carryforward
of approximately $24,172,000, of which $7,098,000 expires in 2003,
$12,057,000 expires in 2004, $734,000 expires in 2005 and $4,283,000
expires in 2007. This amount will be available to offset like
amounts of any future taxable gains.
8. Subsequent Event:
On September 8, 1999, the Board of Directors of the Fund declared an
ordinary income dividend in the amount of $.074162 per share,
payable on September 30, 1999 to shareholders of record as of
September 22, 1999.
Senior High Income Portfolio, Inc.
August 31, 1999
PORTFOLIO INFORMATION
As of August 31, 1999
Quality Ratings Percent of
S&P/Moody's Long-Term Investments
BBB/Baa 1.6%
BB/Ba 25.5
B/B 54.9
CCC/Caa 1.6
CC/Ca 0.6
NR (Not Rated) 15.8
Breakdown of Investments Percent of
by Country Long-Term Investments
United States 87.6%
Canada 5.5
United Kingdom 3.2
Greece 0.9
Mexico 0.7
Argentina 0.5
Sweden 0.5
Australia 0.4
Poland 0.3
Brazil 0.2
Belgium 0.1
Netherlands 0.1
Percent of
Ten Largest Holdings Total Assets
Starwood Hotels & Resorts 2.4%
Riverwood International, Inc. 1.9
Omnipoint Communications Corp. 1.7
Lyondell Petrochemical Co. 1.6
UCARInternational, Inc. 1.4
Allied Waste North America, Inc. 1.3
VoiceStream PCS 1.2
Host Marriott Travel Plaza 1.2
Tembec Finance Corporation 1.0
Wheeling-Pittsburg Steel Corp. 0.9
Percent of
Five Largest Industries Total Assets
Wireless Telecommunications 6.5%
Metals & Mining 5.6
Energy 5.2
Chemicals 5.2
Hotels & Motels 4.9
Senior High Income Portfolio, Inc.
August 31, 1999
YEAR 2000 ISSUES
Many computer systems were designed using only two digits to
designate years. These systems may not be able to distinguish the
Year 2000 from the Year 1900 (commonly known as the "Year 2000
Problem"). The Portfolio could be adversely affected if the computer
systems used by the Portfolio's management or other Portfolio
service providers do not properly address this problem before
January 1, 2000. The Portfolio's management expects to have
addressed this problem before then, and does not anticipate that the
services it provides will be adversely affected. The Portfolio's
other service providers have told the Portfolio's management that
they also expect to resolve the Year 2000 Problem, and the
Portfolio's management will continue to monitor the situation as the
Year 2000 approaches. However, if the problem has not been fully
addressed, the Portfolio could be negatively affected. The Year 2000
Problem could also have a negative impact on the issuers of
securities in which the Portfolio invests. This negative impact may
be greater for companies in foreign markets, particularly emerging
markets, since they may be less prepared for the Year 2000 Problem
than domestic companies and markets. If the companies in which the
Fund invests have Year 2000 Problems, the Fund's returns could be
adversely affected.
Senior High Income Portfolio, Inc.
August 31, 1999
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Arthur Zeikel, Director
Joseph T. Monagle Jr., Senior Vice President
Richard C. Kilbride, Vice President
Gilles Marchand, Vice President
Paul Travers, Vice President
Donald C. Burke, Vice President and Treasurer
Patrick D. Sweeney, Secretary
Custodian and Transfer Agent
The Bank of New York
110 Washington Street
New York, NY 10286
NYSE Symbol
ARK
