HIGH INCOME
---------------------
Opportunity Fund Inc.
[GRAPHIC]
Semi-Annual Report
March 31, 1999
<PAGE>
[PHOTO] [PHOTO]
HEATH B. JOHN C.
MCLENDON BIANCHI, CFA
Chairman Vice President
High Income
Opportunity
Fund Inc.
Dear Shareholder:
We are pleased to provide the semi-annual report for the High Income Opportunity
Fund Inc. ("Fund") for the period ended March 31, 1999. During the six months,
the Fund paid income dividends totaling $0.53 per share. The table below details
the annualized distribution rate and the six-month total return for the Fund
based on its March 31, 1999 net asset value ("NAV") per share and the New York
Stock Exchange ("NYSE") closing price. We hope you find this report to be useful
and informative.
Price Annualized Six-Month
Per Share Distribution Rate Total Return
------------ ----------------- ------------
$11.16 (NAV) 9.25% 4.28%
$10.688 (NYSE) 9.66% 0.90%
The Fund generated a total return of 4.28% over the past six months. In
comparison, closed-end, non-leveraged high-yield funds averaged a total return
based on NAV of 5.62% for the same period according to Lipper, Inc. (Lipper is a
major fund-tracking organization.)
Market and Economic Overview
The high-yield bond market finished the first quarter of 1999 on a strong note
with the meaningful rally in the stock markets fueling renewed investor interest
in high-yield bonds. Given the continued strength in the U.S. economy, the
high-yield bond market outperformed both the U.S. Treasury and investment grade
corporate bond markets. Interest rates moved higher in a meaningful way with the
higher quality end of the bond markets performing poorly. For example, 30-Year
U.S. Treasuries generated the worst performance with a negative 7.0% return and
10-Year U.S. Treasuries returned a negative 3.17%.
For the first quarter of 1999, the U.S. high-yield bond market generated a
roughly 2.0% total return. The only bonds that did better during the first
quarter of 1999 were emerging market bonds that returned in excess of 5.5%. The
high yield bond market's performance in the first quarter of 1999 fell in the
middle of the range
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High Income Opportunity Fund Inc. 1
<PAGE>
of the performance for U.S. Treasuries and stocks. The lowest quality sectors of
the high-yield bond market generated the strongest total returns. The strongest
performing industry sectors during the reporting period were basic materials
(i.e., forest products, metals and mining), media (i.e., cable TV, and
broadcasting), and telecommunications. The weakest industry sectors included
health care and energy.
The High Income Opportunity Fund's performance lagged the various high yield
indices somewhat in the first quarter with returns modestly below the domestic
high-yield bond market. We were held back by our lower weightings in basic
materials companies and our heavier weightings in health care companies. We have
continued to maintain a meaningful emphasis on better quality issues and our
strategy clearly did not help performance in the first quarter of 1999. Put
simply, our expectation of slower U.S. economic growth and lower interest rates
simply has not materialized and does not appear likely to happen for the
foreseeable future.
Portfolio Strategy
During the period under review, we have started a multi-pronged investment
strategy of eliminating underperforming companies such as some of our
deteriorating credits in health care and selectively raising our exposure to
basic industries that should benefit from continued economic growth. We have
even modestly increased our energy exposure by investing in some of the
higher-quality energy issues. We believe that our pro-growth sector strategy
should work more effectively going forward. In terms of quality, we have been
increasing our exposure to the middle B-rated segment of the market where we
continue to find attractive yields. Some of our recent additions include US
Home, Nortek, Packaging Materials Corporation of America, Tembec, Industries,
and Ainsworth Lumber.*
Conclusion
We think that the middle B-rated segment of the high-yield bond market
represents the best value given the U.S. economy's continued strength. Moreover,
we believe our current strategy makes sense as long as economic growth continues
to be strong. The Fund's average maturity of approximately 6 to 7 years on a
call-adjusted basis should also somewhat limit the impact of rising rates.
Over the course of 1999, we expect a continuation of solid economic growth with
modest inflation. This bodes well for the stock markets as well as the
high-yield bond market. If our expectations come true, middle quality high-yield
issues should do better. In addition, we will continue to focus closely on some
of the
- ----------
*As of 3/31/99. Please note that these holdings are subject to change.
- --------------------------------------------------------------------------------
2 1999 Semi-Annual Report to Shareholders
<PAGE>
stronger companies in select commodity sectors such as paper, energy and steel
where conditions appear to be improving. We remain bullish on the total return
prospects of high-yield bonds at current valuation levels, especially given the
health of the U.S.
economy.
Thank you for investing in the High Income Opportunity Fund Inc. We look forward
to continuing to help you pursue your investment goals. If you have any
questions about the Fund, please call the First Data Investor Services Group
Inc. at (800) 331-1710.
Sincerely,
/s/ Heath B. McLendon /s/ John C. Bianchi
Heath B. McLendon John C. Bianchi, CFA
Chairman Vice President
April 27, 1999
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High Income Opportunity Fund Inc. 3
<PAGE>
Take Advantage of the Fund's Dividend Reinvestment Plan!
Did you know that Fund investors who reinvest their dividends are taking
advantage of one of the most effective wealth-building tools available today?
Systematic investments put time to work for you through the strength of
compounding.
As an investor in the Fund, you can participate in its Dividend Reinvestment
Plan ("Plan"), a convenient, simple and efficient way to reinvest your dividends
and capital gains distributions, if any, in additional shares of the Fund. Below
is a short summary of how the Plan works.
Plan Summary
If you are a Plan participant who has not elected to receive your dividends in
the form of a cash payment, then your dividend and capital gain distributions
will be reinvested automatically in additional shares of the Fund.
The number of common stock shares in the Fund you will receive in lieu of a cash
dividend is determined in the following manner. If the market price of the
common stock is equal to or exceeds the net asset value ("NAV") per share on the
determination date, you will be issued shares by the Fund at a price reflecting
the NAV, or 95% of the market price, whichever is greater.
If the market price is less than the NAV at the time of valuation (the close of
business on the determination date), or if the Fund declares a dividend or
capital gains distribution payable only in cash, the Plan Agent (First Data)
will buy common stock for your account in the open market.
If the Plan Agent begins to purchase additional shares in the open market and
the market price of the shares subsequently rises above the NAV previously
determined before the purchases are completed, the Plan Agent will attempt to
terminate purchases and have the Fund issue the remaining dividend or
distribution in shares at the greater of the previously determined NAV. In that
case, the number of Fund shares you receive will be based on the weighted
average of prices paid for shares purchased in the open market and the price at
which the Fund issues the remaining shares.
Restated Plan Adopted
A more complete description of the current Plan appears in the section of this
report beginning on page 28. The descriptions in here are based on a restated
version of the Plan, which was recently adopted to reflect current practices of
the Plan Agent and for the purpose of standardizing the terms among all
closed-end funds managed by SSBC Fund Management Inc., formerly known as Mutual
Management Corp.
To find out more detailed information about the Plan and about how you can
participate, please call First Data Investor Services Group at
(800) 331-1710.
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4 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
==================================================================================================================
<S> <C> <C> <C>
CORPORATE BONDS AND NOTES -- 96.5%
Aerospace -- 0.4%
2,725,000 B1* BE Aerospace, Sr. Sub. Notes, 9.500% due 11/1/08+ $ 2,915,750
- ------------------------------------------------------------------------------------------------------------------
Airlines -- 1.5%
10,080,000 BB Airplanes Pass Through Trust, Corporate Collateralized
Mortgage Obligation, Series D, 10.875% due 3/15/19 10,240,978
2,060,000 Ba2* Continental Airlines, Notes, 8.000% due 12/15/05 2,029,100
- ------------------------------------------------------------------------------------------------------------------
12,270,078
- ------------------------------------------------------------------------------------------------------------------
Auto Parts -- 0.2%
4,500,000 B- Breed Technologies Inc., Sr. Sub. Notes,
9.250% due 4/15/08+ 1,800,000
- ------------------------------------------------------------------------------------------------------------------
Automotive Aftermarket -- 0.7%
5,305,000 B1* Exide Corp., Sr. Notes, 10.000% due 4/15/05 5,245,319
- ------------------------------------------------------------------------------------------------------------------
Broadcasting -- 2.8%
890,000 B- Capstar Broadcasting, Sr. Discount Notes, step bond to
yield 11.002% due 2/1/09 758,725
10,320,000 B1* Chancellor Media, Company Guaranteed, Sr. Sub. Notes,
9.000% due 10/1/08+ 11,094,000
Citadel Broadcasting Co., Sr. Sub. Notes:
1,350,000 B- 10.250% due 7/1/07 1,490,063
2,645,000 B- 9.250% due 11/15/08+ 2,836,762
3,870,000 CCC+ Telemundo Holdings, Sr. Discount Notes,
step bond to yield 11.365% due 8/15/03+ 2,205,900
TV Azteca SA De C.V., Sr. Notes:
3,560,000 B+ 10.125% due 2/15/04 3,008,200
950,000 B+ 10.500% due 2/15/07 798,000
- ------------------------------------------------------------------------------------------------------------------
22,191,650
- ------------------------------------------------------------------------------------------------------------------
Building Materials Chains -- 0.6%
Building Material Corp., Sr. Notes:
1,250,000 BB 7.750% due 7/15/05 1,218,750
2,665,000 BB 8.000% due 12/1/08+ 2,658,337
750,000 BB Step bond to yield 10.015% due 7/1/04 781,875
- ------------------------------------------------------------------------------------------------------------------
4,658,962
- ------------------------------------------------------------------------------------------------------------------
Building Products -- 1.5%
1,945,000 B Amatek Industries, Sr. Sub. Notes, 12.000% due 2/15/08+ 1,872,062
Nortek Inc., Sr. Notes:
3,800,000 B+ 9.250% due 3/15/07 3,971,000
4,995,000 B+ 9.125% due 9/1/07 5,219,775
845,000 B+ 8.875% due 8/1/08 870,350
- ------------------------------------------------------------------------------------------------------------------
11,933,187
- ------------------------------------------------------------------------------------------------------------------
Cable Television -- 12.6%
3,470,000 BB- Century Communications, Sr. Notes, 8.750% due 10/1/07 3,634,825
6,320,000 B+ Charter Communications Holdings, Sr. Discount Notes,
step bond to yield 9.920% due 4/1/11+ 4,084,300
2,585,000 B+ Charter Communications, Sr. Notes, 8.625% due 4/1/09+ 2,659,319
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 5
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
==================================================================================================================
<S> <C> <C> <C>
Cable Television -- 12.6% (continued)
6,700,000 B2* Comcast UK Cable, Sr. Unsecured Discount Debentures,
step bond to yield 11.613% due 11/15/07 $ 5,929,500
CSC Holdings, Inc.:
1,115,000 BB+ Debentures, 7.875% due 2/15/18 1,149,844
Sr. Sub. Debentures:
12,910,000 BB- 9.875% due 2/15/13 14,362,375
5,525,000 BB- 10.500% due 5/15/16 6,588,562
1,075,000 BB- 9.875% due 4/1/23 1,206,687
2,315,000 B Echostar DBS Corp., Sr. Notes, 9.375% due 2/1/09+ 2,407,600
NTL Inc., Sr. Notes:
4,950,000 B- 11.500% due 10/1/08+ 5,581,125
1,930,000 B- Step bond to yield 12.375% due 10/1/08+ 1,322,050
Rogers Cablesystems, Sr. Secured Second Priority:
4,250,000 BB+ Company Guaranteed Debentures, 10.000% due 12/1/07 4,781,250
11,970,000 BB- Company Guaranteed Sr. Sub. Debentures,
11.000% due 12/1/15 14,079,713
1,750,000 BB+ Debentures, 10.000% due 3/15/05 1,977,500
2,250,000 BB- Rogers Communications, Sr. Notes, 9.125% due 1/15/06 2,368,125
3,650,000 B+ Telewest Communications PLC, Sr. Notes,
11.250% due 11/1/08+ 4,261,375
34,980,000 B United International Holdings Inc., Sr. Discount Notes,
step bond to yield 11.084% due 2/15/08 23,786,400
- ------------------------------------------------------------------------------------------------------------------
100,180,550
- ------------------------------------------------------------------------------------------------------------------
Casinos/Gambling -- 2.0%
Circus Circus Enterprises, Sr. Sub. Notes:
705,000 BB+ 7.625% due 7/15/13 645,956
1,705,000 BBB- 6.700% due 11/15/2096 1,630,406
4,080,000 BB+ Harrahs Operating Inc., Company Guaranteed Notes,
7.875% due 12/15/05 4,110,600
3,725,000 B Harvey Casinos Resorts, Sr. Sub. Notes,
10.625% due 6/1/06 3,948,500
3,510,000 B Hollywood Park Inc., Sr. Notes, 9.250% due 2/15/07 3,606,525
Station Casinos, Sr. Sub. Notes:
855,000 B+ 10.125% due 3/15/06 908,437
1,250,000 B+ 8.875% due 12/1/08+ 1,284,375
- ------------------------------------------------------------------------------------------------------------------
16,134,799
- ------------------------------------------------------------------------------------------------------------------
Chemicals - Major -- 0.1%
1,155,000 NR Huntsman Corp., Sr. Sub. Notes, 9.500% due 7/1/07+ 1,137,675
- ------------------------------------------------------------------------------------------------------------------
Coal Mining -- 0.3%
2,715,000 B AEI Holding Resources Inc., Sr. Sub. Notes,
10.500% due 12/15/05 + 2,742,150
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
6 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
==================================================================================================================
<S> <C> <C> <C>
Construction/AG Equipment/Trucks -- 0.5%
3,775,000 B Columbus McKinnon Corp., Sr. Sub. Notes,
8.500% due 4/1/08 $ 3,718,375
- ------------------------------------------------------------------------------------------------------------------
Containers/Packaging -- 1.5%
335,000 B AEP Industries, Sr. Sub. Notes, 9.875% due 11/15/07 345,887
3,250,000 B Huntsman Packaging Corp., Sr. Sub. Notes,
9.125% due 10/1/07 3,245,938
5,125,000DEM B Impress Metal Packaging, Sr. Sub. Notes,
9.875% due 5/29/07 3,140,180
1,600,000 B Stone Container, Sr. Notes, 11.500% due 8/15/06+ 1,744,000
Tekni-Plex, Inc., Sr. Sub. Notes:
2,760,000 B- 9.250% due 4/1/07 2,822,100
500,000 B- 11.250% due 3/1/08 548,750
- ------------------------------------------------------------------------------------------------------------------
11,846,855
- ------------------------------------------------------------------------------------------------------------------
Contract Drilling -- 0.8%
3,375,000 Ba3* R&B Falcon Corp., Sr. Notes, 12.250% due 3/15/06+ 3,543,750
RBF Finance Co., Sr. Notes:
960,000 BB- 11.000% due 3/15/06+ 1,015,200
2,020,000 BB- 11.375% due 3/15/09+ 2,141,200
- ------------------------------------------------------------------------------------------------------------------
6,700,150
- ------------------------------------------------------------------------------------------------------------------
Discount Stores -- 0.8%
2,930,000 BB DR Structured Finance Co., Pass Through Certificates,
8.375% due 8/15/15 2,964,253
2,900,000 BB+ KMart Corp., Debentures, 12.500% due 3/1/05 3,686,625
- ------------------------------------------------------------------------------------------------------------------
6,650,878
- ------------------------------------------------------------------------------------------------------------------
Diversified Commercial Services -- 1.7%
3,825,000 BB- CIA Latino Americana, Company Guaranteed Sr. Notes,
11.625% due 6/1/04+ 2,122,875
4,950,000 B2* Intertek Finance PLC, Company Guaranteed Notes,
10.250% due 11/1/06 4,615,875
6,675,000 B- Outsourcing Solutions, Sr. Sub. Notes,
11.000% due 11/1/06+ 6,608,250
- ------------------------------------------------------------------------------------------------------------------
13,347,000
- ------------------------------------------------------------------------------------------------------------------
Diversified Financial Services -- 0.3%
Amresco Inc., Sr. Sub. Notes:
750,000 CCC+ 10.000% due 3/15/04 596,250
1,890,000 CCC+ 9.875% due 3/15/05 1,493,100
- ------------------------------------------------------------------------------------------------------------------
2,089,350
- ------------------------------------------------------------------------------------------------------------------
Diversified Manufacturing -- 1.6%
1,150,000 B- Eagle-Picher Industrial Inc., Sr. Sub. Notes,
9.375% due 3/1/08 1,115,500
8,550,000 B Outboard Marine Corp., Sr. Notes, 10.750% due 6/1/08+ 7,021,687
4,475,000 B+ Park-Ohio Industries, Sr. Sub. Notes, 9.250% due 12/1/07 4,620,437
- ------------------------------------------------------------------------------------------------------------------
12,757,624
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
==================================================================================================================
<S> <C> <C> <C>
Drugs - Generic -- 1.4%
11,250,000 BB ICN Pharmaceuticals Inc., Sr. Notes,
9.250% due 8/15/05 $ 11,475,000
- ------------------------------------------------------------------------------------------------------------------
Electric Utilities -- 0.5%
3,880,000 BB CMS Energy, Sr. Notes, 7.500% due 1/15/09 3,923,650
- ------------------------------------------------------------------------------------------------------------------
Electronic Components -- 2.0%
4,051,000 B+ Celestica International, Sr. Sub. Notes,
10.500% due 12/31/06 4,476,355
11,575,000 B- Viasystems Inc., Sr. Sub. Notes, 9.750% due 6/1/07 11,083,063
- ------------------------------------------------------------------------------------------------------------------
15,559,418
- ------------------------------------------------------------------------------------------------------------------
Electronic Data Processing -- 3.6%
Unisys Corp., Sr. Notes:
10,875,000 BB- 12.000% due 4/15/03 12,057,656
14,550,000 BB- 11.750% due 10/15/04 16,514,250
- ------------------------------------------------------------------------------------------------------------------
28,571,906
- ------------------------------------------------------------------------------------------------------------------
Engineering & Construction -- 1.2%
3,830,000 B Group Maintenance, Sr. Sub. Notes, 9.750% due 1/15/09+ 3,925,750
1,700,000 B+ Integrated Electrical Inc., Sr. Sub. Notes, 9.375% due 2/1/09+ 1,742,500
3,705,000 B Metromedia Fiber Network, Sr. Notes,
10.000% due 11/15/08+ 3,982,875
- ------------------------------------------------------------------------------------------------------------------
9,651,125
- ------------------------------------------------------------------------------------------------------------------
Environmental Services -- 0.5%
3,780,000 BB Allied Waste North America, Sr. Sub. Notes,
7.875% due 1/1/09+ 3,694,950
- ------------------------------------------------------------------------------------------------------------------
Food Distributors -- 2.7%
6,615,000 B2* Carrols Corp., Sr. Sub. Notes, 9.500% due 12/1/08+ 6,697,688
7,075,000 B Imperial Holly Corp., Company Guaranteed, Sr. Sub. Notes,
9.750% due 12/15/07 7,145,750
2,275,000 B- Purina Mills, Sr. Sub. Notes, 9.000% due 3/15/10 1,831,375
5,640,000 B SC International Services Inc., Sr. Sub. Notes,
9.250% due 9/1/07 6,126,450
- ------------------------------------------------------------------------------------------------------------------
21,801,263
- ------------------------------------------------------------------------------------------------------------------
Foods - Specialty/Candy -- 0.6%
4,575,000 B- B&G Foods Inc., Company Guaranteed Sr. Sub. Notes,
9.625% due 8/1/07 4,506,375
- ------------------------------------------------------------------------------------------------------------------
Forest Products -- 0.7%
4,955,000 B Ainsworth Lumber, Sr. Notes, 12.500% due 7/15/07 5,264,687
- ------------------------------------------------------------------------------------------------------------------
Home Furnishings -- 0.1%
700,000 B- Simmons Co., Sr. Sub. Notes, 10.250% due 3/15/09+ 724,500
- ------------------------------------------------------------------------------------------------------------------
Homebuilding -- 0.9%
3,160,000 Ba1* Dr. Horton Inc., Notes, 8.000% due 2/1/09 3,104,700
4,280,000 BB- US Home Corp., Sr. Sub. Notes, 8.875% due 2/15/09 4,194,400
- ------------------------------------------------------------------------------------------------------------------
7,299,100
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
==================================================================================================================
<S> <C> <C> <C>
Hospital/Nursing Management -- 3.6%
Columbia/HCA Healthcare, Notes:
1,065,000 BB+ 7.000% due 7/1/07 $ 963,825
1,000,000 BB+ 7.250% due 5/20/08 912,500
1,000,000 BB+ 8.700% due 2/10/10 997,500
2,000,000 BB+ 6.630% due 7/15/45 1,932,500
Fresenius Medical Capital Trust, Trust Preferred Security:
2,825,000 B+ 9.000% due 12/1/06 2,902,688
4,850,000 Ba3* 7.875% due 2/1/08 4,777,250
Integrated Health Services Inc., Sr. Sub. Notes:
2,200,000 B2* 9.500% due 9/15/07 1,408,000
230,000 B2* 9.250% due 1/15/08 144,900
14,765,000 B- Magellan Health Services, Sr. Sub. Notes,
9.000% due 2/15/08 12,734,813
Sun Healthcare Group Inc., Sr. Sub. Notes:
4,200,000 B2* 9.500% due 7/1/07 840,000
5,400,000 B2* 9.375% due 5/1/08+ 1,080,000
- ------------------------------------------------------------------------------------------------------------------
28,693,976
- ------------------------------------------------------------------------------------------------------------------
Hotels/Resorts -- 2.1%
5,375,000 B- Courtyard by Marriott, Sr. Secured Notes,
10.750% due 2/1/08 5,576,563
HMH Properties:
4,105,000 BB Company Guaranteed Notes, 7.875% due 8/1/08 4,012,637
5,280,000 BB Sr. Notes, 8.450% due 12/1/08 5,253,600
Intrawest Corp., Sr. Notes:
1,285,000 B+ 9.750% due 8/15/08+ 1,326,763
665,000 B+ 9.750% due 8/15/08 689,937
- ------------------------------------------------------------------------------------------------------------------
16,859,500
- ------------------------------------------------------------------------------------------------------------------
Insurance - Multi-Line -- 1.0%
5,500,000 BB+ SIG Capital Trust, Notes, 9.500% due 8/15/27 4,317,500
4,175,000 BB- Veritas Capital Trust, Trust Certificates, 10.000% due 1/1/28 3,835,781
- ------------------------------------------------------------------------------------------------------------------
8,153,281
- ------------------------------------------------------------------------------------------------------------------
Internet Services -- 3.3%
Psinet Inc., Sr. Notes:
6,500,000 B- 10.000% due 2/15/05 6,922,500
4,840,000 B- 11.500% due 11/1/08+ 5,481,300
6,975,000 NR Splitrock Services, Company Guaranteed,
11.750% due 7/15/08 6,661,125
3,545,000 B- Verio Inc., Sr. Notes, 11.250% due 12/1/08+ 3,996,987
4,650,000 NR WAM!Net Inc., Sr. Discount Notes,
step bond to yield 13.004% due 3/1/05 2,836,500
- ------------------------------------------------------------------------------------------------------------------
25,898,412
- ------------------------------------------------------------------------------------------------------------------
Leisure/Movies/Entertainment -- 1.7%
6,085,000 B Regal Cinemas Inc., Sr. Sub. Notes, 9.500% due 6/1/08+ 6,221,913
7,425,000 B- SFX Entertainment Inc., Sr. Sub. Notes, 9.125% due 2/1/08 7,592,062
- ------------------------------------------------------------------------------------------------------------------
13,813,975
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
==================================================================================================================
<S> <C> <C> <C>
Machinery - Industrial/Components -- 0.8%
3,812,000 B- Alvey Systems Inc., Sr. Sub. Notes, 11.375% due 1/31/03 $ 3,859,650
1,140,000 B+ Applied Power Inc., Sr. Sub. Notes, 8.750% due 4/1/09 1,154,250
950,000 Ba3* Westinghouse Air Brake Inc., Sr. Notes,
9.375% due 6/15/05+ 971,375
- ------------------------------------------------------------------------------------------------------------------
5,985,275
- ------------------------------------------------------------------------------------------------------------------
Media Conglomerates -- 0.4%
2,100,000GBP B Polestar PLC, Sr. Notes, 10.500% due 5/30/08 3,440,900
- ------------------------------------------------------------------------------------------------------------------
Metal Fabrications -- 0.2%
1,330,000 BB California Steel Industries, Sr. Notes, 8.500% due 4/1/09+ 1,349,950
- ------------------------------------------------------------------------------------------------------------------
Metals/Minerals - Other -- 0.5%
5,050,000 B- Haynes International Inc., Sr. Notes, 11.625% due 9/1/04 4,090,500
- ------------------------------------------------------------------------------------------------------------------
Multi-Sector Companies -- 0.4%
3,465,000 Baa3* Triarc Consumer Beverage, Sr. Sub. Notes,
10.250% due 2/15/09+ 3,465,000
- ------------------------------------------------------------------------------------------------------------------
Office Equipment/Supplies -- 0.4%
3,100,000 B3* Axiohm Transaction Solutions, Sr. Sub. Notes,
9.750% due 10/1/07 2,821,000
- ------------------------------------------------------------------------------------------------------------------
Oil & Gas Production -- 2.5%
2,375,000 B Canadian Forest Oil Ltd., Sr. Sub. Notes,
8.750% due 9/15/07 2,291,875
6,350,000 B+ Clark USA Inc., Sr. Notes, 10.875% due 12/1/05 5,143,500
Ocean Energy:
3,600,000 BB- Sr. Sub. Debentures, 9.750% due 10/1/06 3,672,000
5,425,000 BB- Sr. Sub. Notes, 10.375% due 10/15/05 5,533,500
3,200,000 B2* Stone Energy Corp., Sr. Sub. Notes, 8.750% due 9/15/07 3,152,000
- ------------------------------------------------------------------------------------------------------------------
19,792,875
- ------------------------------------------------------------------------------------------------------------------
Oilfield Services/Equipment -- 0.2%
2,570,000 B+ ICO Inc., Sr. Notes, 10.375% due 6/1/07 1,754,025
- ------------------------------------------------------------------------------------------------------------------
Package Goods/Cosmetics -- 0.4%
3,200,000 B- Revlon Consumer Products, Sr. Sub. Notes,
8.625% due 2/1/08 2,912,000
- ------------------------------------------------------------------------------------------------------------------
Paper -- 1.6%
4,900,000 BB Mallette Inc., Sr. Secured Notes, 12.250% due 7/15/04 5,304,250
Riverwood International Corp., Company Guaranteed:
3,945,000 CCC+ 10.625% due 8/1/07 4,161,975
1,065,000 B- 10.875% due 4/1/08 1,033,050
1,835,000 BB+ Tembec Industries, Sr. Notes, 8.625% due 6/30/09 1,864,819
- ------------------------------------------------------------------------------------------------------------------
12,364,094
- ------------------------------------------------------------------------------------------------------------------
Photographic Products -- 0.5%
3,820,000 BB- Polaroid Corp., Sr. Notes, 11.500% due 2/15/06+ 3,963,250
- ------------------------------------------------------------------------------------------------------------------
Printing/Forms -- 0.4%
3,565,000 BB- World Color Press Inc., Sr. Sub. Notes,
7.750% due 2/15/09+ 3,511,525
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
==================================================================================================================
<S> <C> <C> <C>
Real Estate Investment Trusts -- 0.8%
4,000,000 NR Ocwen Asset Investment, Sr. Notes,
11.500% due 7/1/05+ $ 3,160,000
3,100,000 Baa3* Trizec Finance, Sr. Notes, 10.875% due 10/15/05 3,363,500
- ------------------------------------------------------------------------------------------------------------------
6,523,500
- ------------------------------------------------------------------------------------------------------------------
Rental/Leasing Companies -- 0.6%
1,720,000 B Nationsrent Inc., Company Guaranteed Sr. Sub. Notes,
10.375% due 12/15/08+ 1,810,300
3,285,000 BB- United Rentals Inc., Sr. Sub. Notes, 9.250% due 1/15/09+ 3,338,380
- ------------------------------------------------------------------------------------------------------------------
5,148,680
- ------------------------------------------------------------------------------------------------------------------
Retail - Food Chains -- 0.1%
475,000 CCC+ Pathmark Stores Inc., Sub. Notes,
12.625% due 6/15/02 489,844
- ------------------------------------------------------------------------------------------------------------------
Retail - Other Specialty Stores -- 0.7%
5,600,000 B- Advance Stores Co., Sr. Sub. Notes, 10.250% due 4/15/08 5,712,000
- ------------------------------------------------------------------------------------------------------------------
Savings & Loan Associations -- 1.0%
5,500,000 B2* Ocwen Capital Trust, Company Guaranteed Notes,
10.875% due 8/1/27 4,441,250
3,400,000 BB- Ocwen Financial Corp., Sr. Notes,
11.875% due 10/1/03 3,213,000
- ------------------------------------------------------------------------------------------------------------------
7,654,250
- ------------------------------------------------------------------------------------------------------------------
Semiconductors -- 0.8%
6,510,000 B Fairchild Semiconductor Corp., Sr. Sub. Notes,
10.125% due 3/15/07 6,510,000
- ------------------------------------------------------------------------------------------------------------------
Steel/Iron Ore -- 1.2%
4,490,000 B1* Algoma Steel Inc., First Mortgage Notes,
12.375% due 7/15/05 4,377,750
1,735,000 Ba3* National Steel Corp., Sr. Notes, 9.875% due 3/1/09+ 1,787,050
3,270,000 B WHX Corp., Sr. Notes, 10.500% due 4/15/05 3,171,900
- ------------------------------------------------------------------------------------------------------------------
9,336,700
- ------------------------------------------------------------------------------------------------------------------
Telecommunications - Other -- 15.0%
Colt Telecommunications Group PLC, Sr. Notes:
1,390,000DEM B1* 8.875% due 11/30/07 809,478
400,000GBP B1* 10.125% due 11/30/07 700,610
995,000DEM B 7.625% due 7/31/08 558,850
11,750,000DEM B1* 7.625% due 7/31/08 6,599,484
E.Spire Communications, Sr. Notes:
700,000 NR 13.750% due 7/15/07 693,000
13,610,000 NR Step bond to yield 11.013% due 7/1/08 6,566,825
Esprit Telecommunications Group, Sr. Notes:
3,900,000 B- 11.500% due 12/15/07 4,163,250
4,000,000DEM B- 11.500% due 12/15/07 2,384,632
2,250,000 B- 10.875% due 6/15/08 2,373,750
6,575,000 NR Facilicom International Inc., Sr. Notes,
10.500% due 1/15/08 5,095,625
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
==================================================================================================================
<S> <C> <C> <C>
Telecommunications - Other -- 15.0% (continued)
Hermes Europe Railtel Intelcom, Sr. Notes:
6,250,000 B 11.500% due 8/15/07 $ 6,890,625
2,050,000 NR 10.375% due 1/15/09+ 2,198,625
1,250,000 BB- Impsat Corp., Sr. Notes, 12.125% due 7/15/03 1,168,750
Intermedia Communications Inc., Sr. Discount
Unsecured Notes:
800,000 B 8.600% due 6/1/08 804,000
2,870,000 B 9.500% due 3/1/09+ 3,020,675
9,545,000 B Step bond to yield 11.925% due 5/15/06 8,137,113
1,535,000 CCC+ IXC Communications Inc., Sr. Sub. Notes,
9.000% due 4/15/08 1,584,887
Metronet Communications:
19,375,000 B Sr. Discount Notes, step bond to yield
10.038% due 6/15/08 15,015,625
Sr. Notes:
9,000,000 B 12.000% due 8/15/07 10,687,500
3,030,000 B 10.625% due 11/1/08+ 3,529,950
7,455,000 B Nextlink Communications, Sr. Notes, 12.500% due 4/15/06 8,256,413
4,550,000 NR Pagemart Nationwide, Inc., Sr. Discount Notes,
step bond to yield 13.126% due 2/1/05 3,822,000
11,075,000 NR Pagemart Wireless Inc., Sr. Discount Notes,
step bond to yield 11.250% due 2/1/08 4,014,687
8,600,000 B- Primus Telecom Group, Sr. Notes, 11.750% due 8/1/04 8,922,500
RCN Corp.:
6,275,000 B3* Sr. Discount Notes, step bond to yield
11.146% due 10/15/07 4,235,625
2,355,000 B3* Sr. Notes, 10.000% due 10/15/07 2,425,650
625,000 NR Versatel Telecommunications, Sr. Notes,
13.250% due 5/15/08 651,563
3,625,000 Caa1* Viatel, Sr. Notes, 11.250% due 4/15/08 3,751,875
- ------------------------------------------------------------------------------------------------------------------
119,063,567
- ------------------------------------------------------------------------------------------------------------------
Telephone - Cellular -- 7.6%
3,460,000 CCC+ Centennial Cellular, Sr. Sub. Notes, 10.750% due 12/15/08+ 3,658,950
8,849,000 B3* Clearnet Communications, Inc., Sr. Discount Notes,
step bond to yield 12.468% due 12/15/05 8,141,080
Dolphin Telecom PLC, Sr. Discount Notes:
8,675,000 B- Step bond to yield 11.432% due 6/1/08+ 4,445,937
8,025,000ECU CCC+ Step bond to yield 12.702% due 6/1/08 4,266,912
7,585,000 B3* Iridium LLC/Capital Corp., Company Guaranteed
Sr. Notes, 14.000% due 7/15/05 3,564,950
11,370,000 B- Millicom International Cellular S.A., Sr. Discount Notes,
step bond to yield 13.462% due 6/1/06 8,499,075
Nextel Communications, Sr. Discount Notes:
3,925,000 B2* Step bond to yield 10.944% due 9/15/07 2,904,500
5,170,000 B2* Step bond to yield 10.714% due 2/15/08 3,657,775
9,265,000 Ba3* Orange PLC, Sr. Notes, 8.000% due 8/1/08 9,519,788
Telesystems Communications, Sr. Discount Notes:
16,375,000 CCC+ Step bond to yield 12.586% due 6/30/07 9,006,250
6,250,000 CCC+ Step bond to yield 11.200% due 11/1/07 3,000,000
- ------------------------------------------------------------------------------------------------------------------
60,665,217
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
==================================================================================================================
<S> <C> <C> <C>
Textiles -- 0.5%
7,050,000 B Texon International, Sr. Notes, 10.000% due 2/1/08 $ 3,580,260
- ------------------------------------------------------------------------------------------------------------------
Transportation - Marine -- 1.1%
2,125,000 B- Oglebay Norton Co., Sr. Notes, 10.000% due 2/1/09+ 2,071,875
3,315,000 BB- Sea Containers Limited, Sr. Sub. Debentures,
12.500% due 12/1/04 3,580,200
3,950,000 B+ Stena Line AB, Sr. Notes, 10.625% due 6/1/08 3,046,438
- ------------------------------------------------------------------------------------------------------------------
8,698,513
- ------------------------------------------------------------------------------------------------------------------
Unregulated Power Generation -- 2.7%
AES Corp., Sr. Sub. Notes:
3,250,000 Ba1* 10.250% due 7/15/06 3,445,000
10,110,000 Ba1* 8.500% due 11/1/07 9,983,625
Calpine Corp., Sr. Notes:
5,375,000 Ba2* 10.500% due 5/15/06 5,912,500
1,550,000 Ba2* 8.750% due 7/15/07 1,615,875
617,137 BBB- Midland Cogeneration Venture Limited Partnership,
Midland Funding, Debentures, Sr. Secured Lease
Obligation Bond, Series C, 10.330% due 7/23/02 647,994
- ------------------------------------------------------------------------------------------------------------------
21,604,994
- ------------------------------------------------------------------------------------------------------------------
Wholesale Distributors -- 0.3%
Fisher Scientific International, Sr. Sub. Notes:
2,275,000 B- 9.000% due 2/1/08 2,303,438
390,000 B- 9.000% due 2/1/08+ 394,875
- ------------------------------------------------------------------------------------------------------------------
2,698,313
- ------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES
(Cost -- $791,909,477) 767,347,702
==================================================================================================================
<CAPTION>
SHARES SECURITY VALUE
==================================================================================================================
<S> <C> <C>
COMMON STOCK -- 0.0%
Telecommunications - Other -- 0.0%
20,125 Pagemart Nationwide Inc. (Cost-- $0) 115,719
==================================================================================================================
PREFERRED STOCK -- 1.1%
Broadcasting -- 0.6%
37,209 Capstar Communications, Exchangeable 12.625% 4,465,080
- ------------------------------------------------------------------------------------------------------------------
Electronic Components -- 0.1%
63,722 Viasystems Inc., Series B, Payment-in-kind 892,107
- ------------------------------------------------------------------------------------------------------------------
Paper -- 0.0%
5,000 SD Warren, Series B, Exchangeable 14.000% 255,000
- ------------------------------------------------------------------------------------------------------------------
Savings & Loan Associations -- 0.4%
108,000 California Federal, Series A, Exchangeable 9.125% 2,862,000
- ------------------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost -- $8,558,119) 8,474,187
==================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
==================================================================================================================
<S> <C> <C>
WARRANTS# -- 1.0%
Broadcasting -- 0.0%
9,225 Australis Holdings, Expire 10/30/01+ $ 0
14,825 United International Holdings Australia Inc.,
Expire 5/15/06 14,825
- ------------------------------------------------------------------------------------------------------------------
14,825
- ------------------------------------------------------------------------------------------------------------------
Cable Television -- 0.0%
5,700 Wireless One, Inc., Expire 10/15/03 1,425
- ------------------------------------------------------------------------------------------------------------------
Internet Services -- 0.1%
6,975 Splitrock Service Inc., Expire 7/15/08+ 418,500
13,950 WAM!Net Inc., Expire 3/1/05+ 317,363
- ------------------------------------------------------------------------------------------------------------------
735,863
- ------------------------------------------------------------------------------------------------------------------
Paper -- 0.0%
8,175 SD Warren Corp., Expire 12/5/06+ 143,880
- ------------------------------------------------------------------------------------------------------------------
Telecommunications - Other -- 0.7%
7,800 Allegiance Telecommunications Inc., Expire 2/3/08 85,800
8,000 Colt Telecommunications Group PLC, Expire 12/31/06+ 4,000,000
102,250 Metronet Communications, Expire 8/15/07+ 357,875
43,470 Pagemart Inc., Expire 12/31/03+ 217,350
7,600 Primus Telecomm Group, Expire 8/1/04 64,600
6,975 RSL Communications Ltd., Expire 11/15/06+ 272,025
625 Versatel Telecom Inc., Expire 5/15/08+ 43,750
- ------------------------------------------------------------------------------------------------------------------
5,041,400
- ------------------------------------------------------------------------------------------------------------------
Telephone - Cellular -- 0.2%
55,110 Clearnet Communications Inc., Expire 9/15/05+ 220,440
7,500 Globalstar LP, Expire 2/15/04+ 412,500
6,725 Iridium LLC Corp., Expire 7/15/05+ 934,640
6,575 Nextel Communications, Inc., Expire 4/25/99 68,906
- ------------------------------------------------------------------------------------------------------------------
1,636,486
- ------------------------------------------------------------------------------------------------------------------
TOTAL WARRANTS
(Cost -- $2,576,034) 7,573,879
==================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
==================================================================================================================
<S> <C> <C>
REPURCHASE AGREEMENT -- 1.4%
$10,993,000 Morgan Stanley Dean Witter & Co., Inc., 4.930%
due 4/1/99; Proceeds at maturity -- $10,994,505;
(Fully collateralized by U.S. Treasury Notes, 4.875%
due 3/31/01; Market value -- $11,266,983)
(Cost -- $10,993,000) $ 10,993,000
==================================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $814,036,630**) $794,504,487
==================================================================================================================
</TABLE>
++ Face amount denominated in U.S. dollars unless otherwise indicated.
(a) All ratings are by Standard & Poor's Ratings Service, except that those
identified by an asterisk (*) are rated by Moody's Investors Service, Inc.
+ Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
# Non-income producing securities.
** Aggregate cost for Federal income tax purposes is substantially the same.
See page 16 for definition of ratings.
Currency Abbreviations:
-----------------------
ECU -- European Currency Unit
DEM -- German Mark
GBP -- British Pound
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings (unaudited)
- --------------------------------------------------------------------------------
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's")-- Ratings from "BBB" to
"CCC" may be modified by the addition of a plus (+) or a minus (-) sign to show
relative standings within the major rating categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this
category than for bonds in higher rated categories.
BB, B -- Bonds rated "BB", "B" and "CCC" are regarded, on balance, as
and CCC predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation.
"BB" represents a lower degree of speculation than "B", and "CCC"
the highest degree of speculation. While such bonds will likely
have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to
adverse conditions.
Moody's Investors Service, Inc. ("Moody's")-- Numerical modifiers 1, 2 and 3 may
be applied to each generic rating from "Baa" to "Caa", where 1 is the highest
and 3 the lowest rating within its generic category.
Baa -- Bonds rated "Baa" are considered to be medium grade obligations;
that is, they are neither highly protected nor poorly secured.
Interest payment and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. These
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their
future cannot be con sidered as well assured. Often the protection
of interest and principal payments may be very moderate, and
thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this
class.
B -- Bonds rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or
maintenance of other terms of the contract over any long period of
time may be small.
Caa -- Bonds that are rated "Caa" are of poor standing. These issues
may be in default, or there may be present elements of danger with
respect to principal or interest.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
- --------------------------------------------------------------------------------
16 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) March 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost-- $814,036,630) $ 794,504,487
Interest receivable 16,970,543
Receivable for securities sold 4,170,782
Receivable for open forward foreign currency contracts 248,365
- -----------------------------------------------------------------------------------
Total Assets 815,894,177
- -----------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 6,859,025
Dividends payable 1,714,316
Management fees payable 835,388
Payable to bank 13,549
Payable for open forward foreign currency contracts 6,380
Accrued expenses 181,200
- -----------------------------------------------------------------------------------
Total Liabilities 9,609,858
- -----------------------------------------------------------------------------------
Total Net Assets $ 806,284,319
===================================================================================
NET ASSETS:
Par value of capital shares $ 72,230
Capital paid in excess of par value 899,768,919
Overdistributed net investment income (1,613,943)
Accumulated net realized loss from security transactions (72,635,336)
Net unrealized depreciation of investments and foreign currencies (19,307,551)
- -----------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $11.16 a share on 72,230,352 shares of
$0.001 par value outstanding; 500,000,000 shares authorized) $ 806,284,319
===================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 17
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 1999
INVESTMENT INCOME:
Interest $ 42,733,646
Dividends 391,627
- --------------------------------------------------------------------------------
Total Investment Income 43,125,273
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 4,624,337
Shareholder communication fees 119,670
Custody 26,927
Shareholder and system servicing fees 18,948
Audit and legal 14,560
Directors' fees 5,485
Other 29,920
- --------------------------------------------------------------------------------
Total Expenses 4,839,847
- --------------------------------------------------------------------------------
Net Investment Income 38,285,426
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES (NOTES 3 AND 8):
Realized Loss From:
Securities transactions (excluding short-term securities) (15,523,847)
Foreign currency transactions (32,982)
- --------------------------------------------------------------------------------
Net Realized Loss (15,556,829)
- --------------------------------------------------------------------------------
Change in Net Unrealized Depreciation of Investments
and Foreign Currencies:
Beginning of period (28,844,872)
End of period (19,307,551)
- --------------------------------------------------------------------------------
Decrease in Net Unrealized Depreciation 9,537,321
- --------------------------------------------------------------------------------
Net Loss on Investments and Foreign Currencies (6,019,508)
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 32,265,918
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 1999 (unaudited)
and the Year Ended September 30, 1998
<TABLE>
<CAPTION>
1999 1998
=====================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 38,285,426 $ 77,058,960
Net realized gain (loss) (15,556,829) 4,505,920
(Increase) decrease in net unrealized depreciation 9,537,321 (85,807,339)
- -------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations 32,265,918 (4,242,459)
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (37,901,912) (81,031,027)
- -------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (37,901,912) (81,031,027)
- -------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net asset value of shares issued
for reinvestment of dividends 2,293,455 12,211,727
- -------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 2,293,455 12,211,727
- -------------------------------------------------------------------------------------
Decrease in Net Assets (3,342,539) (73,061,759)
NET ASSETS:
Beginning of period 809,626,858 882,688,617
- -------------------------------------------------------------------------------------
End of period* $ 806,284,319 $ 809,626,858
=====================================================================================
* Includes overdistributed net investment income of: $ (1,613,943) $ (1,966,392)
=====================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The High Income Opportunity Fund Inc. ("Fund"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended, as a
diversified, closed-end management investment company.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities are valued
at the mean between the quoted bid and ask prices provided by an independent
pricing service that are based on transactions in corporate obligations,
quotations from corporate bond dealers, market transactions in comparable
securities and various relationships between securities; (c) securities maturing
within 60 days or less are valued at cost plus accreted dis count or minus
amortized premium, which approximates value; (d) gains or losses on the sale of
securities are calculated by using the specific identification method; (e)
dividend income is recorded on the ex-dividend date; foreign dividend income is
recorded on the ex-dividend date or as soon as practical after the Fund
determines the existence of a dividend declaration after exercising reasonable
due diligence; (f) interest income, adjusted for accretion of original issue
discount, is recorded on an accrual basis; (g) dividends and distributions to
shareholders are recorded on the ex-dividend date; (h) the accounting records
are maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies are translated into U.S. dollars based on the rate of
exchange of such currencies against U.S. dollars on the date of valuation.
Purchases and sales of securities, and income and expenses are translated at the
rate of exchange quoted on the respective date that such transactions are
recorded. Differences between income or expense amounts recorded and collected
or paid are adjusted when reported by the custodian bank; (i) the character of
income and gains to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles. At
September 30, 1998, reclassifications were made to the Fund's capital accounts
to reflect permanent book/tax differences and income and gains available for
distributions under income tax regulations. Accordingly, a portion of
overdistributed net investment income amounting to $695,344 was reclassified to
paid-in capital. Net investment income, net realized gains and net assets were
not affected by this change; (j) the Fund intends to comply with the
requirements of the Internal Revenue Code of 1986, as amended, pertaining to
regulated investment companies and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes;
and (k) estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
- --------------------------------------------------------------------------------
20 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ.
In addition, the Fund may enter into forward exchange contracts in order to
hedge against foreign currency risk. These contracts are marked to market daily
by recognizing the difference between the contract exchange rate and the current
market rate as an unrealized gain or loss. Realized gains or losses are
recognized when contracts are settled.
2. Management Agreement and Other Transactions
SSBC Fund Management Inc. ("SSBC"), formerly known as Mutual Management Corp., a
subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), acts as investment
manager of the Fund. The Fund pays SSBC a management fee calculated at an annual
rate of 1.15% of the Fund's average daily net assets. This fee is calculated
daily and paid monthly.
All officers and one director of the Fund are employees of Salomon Smith Barney
Inc., another subsidiary of SSBH.
3. Investments
During the six months ended March 31, 1999, the aggregate cost of pur chases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $300,161,315
- --------------------------------------------------------------------------------
Sales 318,329,862
================================================================================
At March 31, 1999, the aggregate gross unrealized appreciation and de pre ci
ation of investments for Federal income tax purposes were substantially as
follows:
================================================================================
Gross unrealized appreciation $ 30,658,446
Gross unrealized depreciation (50,190,589)
- --------------------------------------------------------------------------------
Net unrealized depreciation $ (19,532,143)
================================================================================
4. Capital Loss Carryforward
At September 30, 1998, the Fund had, for Federal tax purposes, approximately
$54,135,000 of capital loss carryforwards available to offset future realized
capital gains. To the extent that these capital loss carryforwards can be used
to offset net realized capital gains, such gains, if any, will not be
distributed. The
- --------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 21
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
amounts and expiration of carryforwards are indicated below. Expiration occurs
on September 30 in the year indicated:
2003 2004
================================================================================
Carryforward Amounts $16,017,000 $38,118,000
================================================================================
5. Futures Contracts
Initial margin deposits are made upon entering into futures contracts and are
recog nized as assets. Securities equal to the initial margin amount are
segregated by the custodian in the name of the broker. Additional securities are
also segregated up to the current market value of the futures contract. During
the period the futures contract is open, changes in the value of the contract
are recognized as unrealized gains or losses by "marking to market" on a daily
basis to reflect the market value of the contract at the end of each day's
trading. Variation margin payments are received or made and recognized as assets
due from or liabilities due to broker, depending upon whether unrealized gains
or losses are incurred. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the proceeds from (or cost of) the
closing transaction and the Fund's basis in the contract.
The Fund enters into such contracts to hedge a portion of its portfolio. The
Fund bears the market risk that arises from changes in the value of the
financial instruments and securities indices (futures contracts).
At March 31, 1999, the Fund did not have any open futures contracts.
6. Options Contracts
Premiums paid when put or call options are purchased by the Fund, represent
investments, which are marked-to-market daily. When a purchased option expires,
the Fund will realize a loss in the amount of the premium paid. When the Fund
enters into a closing sales transaction, the Fund will realize a gain or loss
depending on whether the proceeds from the closing sales transaction are greater
or less than the premium paid for the option. When the Fund exercises a put
option, it will realize a gain or loss from the sale of the underlying security
and the proceeds from such sale will be decreased by the premium originally
paid. When the Fund exercises a call option, the cost of the security which the
Fund purchases upon exercise will be increased by the premium originally paid.
At March 31, 1999, the Fund did not have any open purchased call or put option
contracts.
- --------------------------------------------------------------------------------
22 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
When the Fund writes a call or put option, an amount equal to the premium
received by the Fund is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Fund realizes a gain
equal to the amount of the premium received. When the Fund enters into a closing
purchase transaction, the Fund realizes a gain or loss depending upon whether
the cost of the closing transaction is greater or less than the premium
received, without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is eliminated. When a written
call option is exercised, the cost of the security sold will be decreased by the
premium originally received. When a written put option is exercised, the amount
of the premium originally received will reduce the cost of the security which
the Fund purchased upon exercise. When written index options are exercised,
settlement is made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Fund enters into options for hedging purposes. The risk in writing a
covered call option is that the Fund gives up the opportunity to participate in
any increase in the price of the underlying security beyond the exercise price.
The risk in writing a put option is that the Fund is exposed to the risk of loss
if the market price of the underlying security declines.
During the six months ended March 31, 1999, the Fund had not written any call or
put options.
7. Repurchase Agreements
The Fund purchases (and its custodian takes possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date, (generally, the next business day)at
an agreed-upon higher repurchase price. The Fund requires continual maintenance
of the market value of the collateral in amounts at least equal to the
repurchase price.
- --------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 23
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
8. Forward Foreign Currency Contracts
At March 31, 1999, the Fund had open forward foreign currency contracts as
described below. The Fund bears the market risk that arises from changes in
foreign currency exchange rates. The realized and unrealized loss on the
contracts is re flected as follows:
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Gain (Loss)
================================================================================
To Buy:
German Mark 1,876,667 $ 1,040,125 6/10/99 $ (6,380)
To Sell:
British Pound 2,649,700 4,267,928 9/22/99 50,739
European Currency Unit 3,264,169 3,538,316 6/10/99 32,685
German Mark 33,750,867 18,706,105 6/10/99 164,941
- --------------------------------------------------------------------------------
248,365
- --------------------------------------------------------------------------------
Total Unrealized Gain on Forward
Foreign Currency Contracts $ 241,985
================================================================================
9. Capital Shares
Capital stock transactions were as follows:
Six Months Ended Year Ended
March 31, 1999 September 30, 1998
--------------------- ---------------------
Shares Amount Shares Amount
================================================================================
Shares issued on
dividend reinvestment 213,742 $ 2,293,455 995,988 $12,211,727
================================================================================
- --------------------------------------------------------------------------------
24 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each year ended September
30, except where noted:
<TABLE>
<CAPTION>
1999(1) 1998 1997 1996 1995 1994(2)(3)
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $11.24 $12.43 $11.72 $11.48 $11.20 $12.50
- ---------------------------------------------------------------------------------------------------------------------
Income (Loss) From
Operations:
Net investment income(4) 0.53 1.08 1.15 1.14 1.14 1.01
Net realized and unrealized
gain (loss) (0.08) (1.14) 0.68 0.22 0.28 (1.30)
- --------------------------------------------------------------------------------------------------------------------
Total Income (Loss)
From Operations 0.45 (0.06) 1.83 1.36 1.42 (0.29)
- ---------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.53) (1.13) (1.12) (1.12) (1.12) (1.01)
Capital -- -- -- -- (0.02) --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.53) (1.13) (1.12) (1.12) (1.14) (1.01)
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $11.16 $11.24 $12.43 $11.72 $11.48 $11.20
- ---------------------------------------------------------------------------------------------------------------------
Total Return,
Based on Market Value* 0.90%++ (1.65)% 18.18% 21.07% 9.90% (7.33)%++
- ---------------------------------------------------------------------------------------------------------------------
Total Return,
Based on Net Asset Value* 4.28%++ (0.58)% 16.48% 12.86% 13.99% (2.31)%++
- ---------------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (millions) $806 $810 $883 $819 $802 $783
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 1.20%+ 1.18% 1.21% 1.21% 1.20% 1.15%+
Net investment income 9.52+ 8.81 9.63 9.85 10.02 9.09+
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 38% 98% 87% 73% 59% 69%
- ---------------------------------------------------------------------------------------------------------------------
Market Value,
End of Period $10.688 $11.125 $12.438 $11.500 $10.500 $10.625
=====================================================================================================================
</TABLE>
(1) For the six months ended March 31, 1999 (unaudited).
(2) For the period from October 22, 1993 (commencement of operations) to
September 30, 1994.
(3) Based on the weighted average shares outstanding for the period.
(4) The Manager waived a part of its fee for the period ended September 30,
1994. If such fees were not waived, the per share decrease in net
investment income would have been $0.01 and the ratio of expenses to
average net assets would have been 1.21% (annualized).
* The total return calculation assumes that dividends are reinvested in
accordance with the Fund's dividend reinvestment plan.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 25
<PAGE>
- --------------------------------------------------------------------------------
Financial Data (unaudited)
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each period:
Income Dividend
NYSE Net Asset Dividend Reinvestment
Closing Price Value Paid Price
================================================================================
1997
October 22 $11.38 $11.65 0.0930 11.375
November 25 11.25 11.77 0.0930 11.375
December 23 11.38 11.84 0.0930 11.490
January 28 11.75 11.94 0.0930 11.872
February 25 11.75 12.09 0.0930 11.895
March 24 11.75 11.81 0.0930 11.710
April 22 11.75 11.67 0.0930 11.670
May 27 11.88 11.92 0.0930 11.920
June 24 12.06 12.13 0.0930 12.120
July 22 12.31 12.17 0.0930 12.170
August 26 12.25 12.24 0.0930 12.240
September 23 12.38 12.38 0.0930 12.380
1998
October 28 11.69 12.30 0.0930 12.200
November 24 12.31 12.23 0.0930 12.230
December 22 12.44 12.26 0.0930 12.260
December 31 12.50 12.24 0.0375 12.240
January 27 12.63 12.24 0.0930 12.240
February 24 12.69 12.30 0.0930 12.300
March 24 11.88 12.29 0.0930 11.990
April 21 11.94 12.32 0.0890 11.880
May 26 11.50 12.25 0.0890 11.930
June 23 11.81 12.16 0.0890 11.900
July 28 11.56 12.21 0.0890 11.790
August 25 11.69 11.82 0.0890 10.810
September 22 10.69 11.16 0.0890 10.850
1999
October 27 11.06 10.73 0.0890 10.730
November 23 11.19 11.29 0.0890 11.150
December 21 10.44 11.18 0.0890 10.610
January 26 10.38 11.30 0.0860 10.390
February 23 10.50 11.16 0.0860 10.560
March 23 10.69 11.15 0.0860 10.570
================================================================================
- --------------------------------------------------------------------------------
26 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
- --------------------------------------------------------------------------------
On February 24, 1999, the annual meeting of shareholders of the Fund was held
for the purpose of voting on the following matters:
1. To vote on the election of Lee Abraham; Allan J. Bloostein, Jane F. Dasher
and Richard E. Hanson, Jr. as Directors; and
2. To approve or disapprove the selection of KPMG LLP as the independent
auditors for the current fiscal year of the Fund.
The results of the vote on Proposal 1 were as follows:
Shares Percentage Shares Percentage
Voted of Shares Voted of Shares
Name of Directors* For Voted Against Voted
================================================================================
Lee Abraham 68,089,341.957 98.478% 1,052,642.835 1.522%
Allan J. Bloostein 68,143,476.809 98.556% 998,507.983 1.444%
Jane F. Dasher 68,155,384.809 98.573% 986,599.983 1.427%
Richard E. Hanson, Jr. 68,122,137.957 98.525% 1,019,846.835 1.475%
================================================================================
The results of the vote on Proposal 2 were as follows:
Shares Percentage Shares Percentage Percentage
Voted of Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
================================================================================
68,174,360,680 98.601% 367,437.497 0.531% 600,186.615 0.868%
================================================================================
* The following Directors, representing the balance of the Board of
Directors, continue to serve as Directors: Donald R. Foley, Paul Hardin,
Heath B. McLendon, Roderick C. Rasmussen and John P. Toolan.
- --------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 27
<PAGE>
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan (unaudited)
- --------------------------------------------------------------------------------
Under the Fund's Dividend Reinvestment Plan ("Plan"), a shareholder whose shares
of Common Stock are registered in his own name will have all distributions from
the Fund reinvested automatically by First Data Investor Services Group, Inc.
("First Data") as purchasing agent under the Plan, unless the shareholder elects
to receive cash. Distributions with respect to shares registered in the name of
a broker-dealer or other nominee (that is, in "street name") will be reinvested
by the broker or nominee in additional shares under the Plan, unless the service
is not provided by the broker or nominee or the shareholder elects to receive
distributions in cash. Investors who own common stock registered in street name
should consult their broker-dealers for details regarding reinvestment. All
distributions to share holders who do not participate in the Plan will be paid
by check mailed directly to the record holder by or under the direction of First
Data as dividend paying agent.
The number of shares of common stock distributed to participants in the Plan in
lieu of a cash dividend is determined in the following manner. When the market
price of the common stock is equal to or exceeds the net asset value ("NAV") per
share of the common stock on the determination date (generally, the record date
for the distribution), the Plan participants will be issued shares of common
stock by the Fund at a price equal to the greater of NAV determined as described
below under NAV or 95% of the market price of the common stock.
If the market price of the common stock is less than the NAV of the common stock
at the time of valuation (which is the close of business on the determination
date), or if the Fund declares a dividend or capital gains distribution payable
only in cash, First Data will buy common stock in the open market, on the stock
exchange or elsewhere, for the participants' accounts. If following the
commencement of the purchases and before First Data has completed its purchases,
the market price exceeds the NAV of the common stock as of the valuation time,
First Data will attempt to terminate purchases in the open market and cause the
Fund to issue the remaining portion of the dividend or distribution in shares at
a price equal to the greater of (a) NAV as of the valuation time or (b) 95% of
the then current market price. In this case, the number of shares received by a
Plan participant will be based on the weighted average of prices paid for shares
purchased in the open market and the price at which the Fund issues the
remaining shares. To the extent First Data is unable to stop open market
purchases and cause the Fund to issue the remaining shares, the average per
share purchase price paid by First Data may exceed the NAV of the common stock
as of the valuation time, resulting in the acquisition of fewer shares than if
the dividend or capital gains distribution had
- --------------------------------------------------------------------------------
28 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan (unaudited) (continued)
- --------------------------------------------------------------------------------
been paid in common stock issued by the Fund at such net asset value. First Data
will begin to purchase common stock on the open market as soon as practicable
after the determination date for the dividend or capital gains distribution, but
in no event shall such purchases continue later than 30 days after the payment
date for such dividend or distribution, or the record date for a succeeding
dividend or distribution, except when necessary to comply with applicable
provisions of the federal securities laws.
First Data maintains all shareholder accounts in the Plan and furnishes written
confirmation of all transactions in each account, including information needed
by a shareholder for personal and tax records. The automatic reinvestment of
dividends and capital gains distributions will not relieve Plan participants of
any income tax that may be payable on the dividends or capital gains
distributions. Common stock in the account of each Plan participant will be held
by First Data in uncertificated form in the name of each Plan participant.
Plan participants are subject to no charge for reinvesting dividends and capital
gains distributions under the Plan. First Data's fees for handling the
reinvestment of dividends and capital gains distributions will be paid by the
Fund. No brokerage charges apply with respect to shares of common stock issued
directly by the Fund under the Plan. Each Plan participant will, however, bear a
proportionate share of any brokerage commissions actually incurred with respect
to any open market purchases made under the Plan.
Experience under the Plan may indicate that changes to it are desirable. The
Fund reserves the right to amend or terminate the Plan as applied to any
dividend or capital gains distribution paid subsequent to written notice of the
change sent to participants at least 30 days before the record date for the
dividend or capital gains distribution. The Plan also may be amended or
terminated by First Data, with the Fund's prior written consent, on at least 30
days' written notice to Plan participants. All correspondence concerning the
Plan should be directed by mail to First Data Investor Services Group, Inc.,
P.O. Box 8030, Boston, Massachusetts 02266-8030 or by telephone at
1-800-451-2010.
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
- --------------------------------------------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that from time to time the Fund may purchase,
at market prices, shares of its common stock in the open market.
- --------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 29
<PAGE>
- --------------------------------------------------------------------------------
HIGH INCOME
- --------------------- [GRAPHIC]
Opportunity Fund Inc.
- --------------------------------------------------------------------------------
DIRECTORS
Lee Abraham
Allan J. Bloostein
Jane F. Dasher
Donald R. Foley
Richard E. Hanson, Jr.
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
OFFICERS
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
John C. Bianchi, CFA
Vice President
Paul A. Brook
Controller
Christina T. Sydor
Secretary
INVESTMENT MANAGER
SSBC Fund Management Inc.
CUSTODIAN
PNC Bank, N.A.
SHAREHOLDER
SERVICING AGENT
First Data Investor Services Group, Inc.
P.O. Box 8030
Boston, MA 02266-8030
This report is intended only for the shareholders of the High Income Opportunity
Fund Inc. It is not a Prospectus, circular or representation intended for use in
the purchase or sale of shares of the Fund or of any securities mentioned in the
report.
HIO HIGH INCOME OPPORTUNITY FUND INC.
Listed 388 Greenwich Street
NYSE[LOGO] New York, New York 10013
THE NEW YORK STOCK EXCHANGE
FD0802 5/99
