[GRAPHIC OMITTED]
HIGH INCOME
Opportunity Fund Inc.
Annual Report
September 30, 1999
<PAGE>
High Income
Opportunity
Fund Inc.
[PHOTO OMITTED] [PHOTO OMITTED]
HEATH B. MCLENDON JOHN C. BIANCHI, CFA
Chairman Vice President
Dear Shareholder:
We are pleased to provide the annual report for the High Income Opportu nity
Fund Inc. ("Fund") for the year ended September 30, 1999. We hope you find this
report useful and informative. During the past year, the Fund paid income
dividends totaling $1.03 per share. The table below details the annualized
distribution rate total return for the Fund based on its September 30, 1999 net
asset value ("NAV") per share and the New York Stock Exchange ("NYSE") closing
price.
Price Annualized Twelve-Months
Per Share Distribution Rate(1) Total Return
------------- ----------------- ------------
$ 10.45 (NAV) 9.65% 2.74%
$ 9.125 (NYSE) 11.05% (9.36)%
The Fund generated a total return of 2.74% for the past twelve months,
outperforming its Lipper Inc. closed-end high yield bond funds peer group
average of a negative 0.97% over the same time period. (Lipper Inc. is a major
fund-tracking organization.) A full discussion of the past twelve months
economic and market conditions as well as the Fund's investment strategy pursued
during this time follows.
The Fund has initiated a program whereby it may repurchase shares of its common
stock in the open market. The Fund will make such purchases in an effort to
reduce the market discount and when we think a repurchase represents a favorable
investment opportunity. There can be no assurance that the Board of Directors
will continue this program.
Market and Economic Overview
The fixed income markets ended the third quarter of 1999 in a narrow trading
range with U.S. Treasuries fluctuating in the low 6% area. Bond investor
sentiment remained extremely negative with continued fears over stronger
worldwide growth and potentially higher inflation. So far, the Federal Reserve
- ----------
(1) This distribution assumes a current monthly income dividend rate of $0.084
per share for twelve months.
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High Income Opportunity Fund Inc. 1
<PAGE>
Board ("Fed") has raised short-term interest rates twice by a total of 50 basis
points. If the U.S. economy does not begin to slow, we would expect that the Fed
may be inclined to raise rates in November.(2) In our opinion, the fixed income
markets have already priced this increase into the markets and it is reflected
in current bond prices.
Despite the strength in the U.S. economy, inflation rates have remained
contained and have not accelerated over the past nine months. Nonetheless, the
Fed appears to be not only concerned with current inflation rates, but the
impact of stronger world economic growth on future rates of inflation. The
improving economic conditions in Europe and Asia may give further impetus to the
Fed fully reversing their 75 basis point easing which took place during the
emerging market crisis in 1998.
During the third quarter of 1999, the high yield bond market declined, with
higher quality segments of this market materially outperforming the lowest
quality segments. Lower quality issues generated much weaker results as
increasing default rates continued to negatively affect their performance. We do
not attribute the rising default trend in the high yield market to a
deteriorating economy. We believe that the rising default trend may be a natural
fallout from the increase of new issuance during the past three years when a lot
of merger and acquisition activity took place. A number of defaults are
occurring among the less viable companies that are simply not competitive in
today's challenging economy.
Portfolio Strategy and Market Outlook
The Fund remains cautiously positioned with a heavy emphasis in better quality,
intermediate maturity "B" and "BB" rated high-yield bonds. The strongest
performing industry sectors in the high yield market continued to be in basic
materials (i.e. forest products, metals, mining, etc.), cable and media, and oil
and natural gas. The worst performing sectors included healthcare, chemicals,
home builders, consumer products and textile/apparel.
The Fund's portfolio repositioning over the past several months continued to
benefit its performance in September. Also, our continued emphasis on better
quality issues and our increased focus on basic industry issues contributed to
the Fund's performance. During the first half of 1999, the higher quality issues
had actually underperformed the lower quality issues by a meaningful margin
because of their higher sensitivity to rising treasury rates. Given our
relatively higher quality orientation versus our peer group, our total return
performance was negatively impacted. We especially lagged our high yield peer
group since a number of our high yield fund competitors had emphasized a
combination of lower quality issues, emerging market debt as well as common and
preferred stock.
- ----------
(2) On Tuesday, November 16, 1999, the Federal Reserve Board raised short-term
rates by 25 basis points after this letter was written.
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2 1999 Annual Report to Shareholders
<PAGE>
So far, during the second half of this year we have seen a sharp reversal of the
first quarter trends and that has negatively impacted the more aggressive high
yield funds. We intend to maintain style purity in the Fund with a meaningful
emphasis on better quality issues. Moreover, given the higher volatility in the
financial markets, we will continue to maintain the Fund's relatively sound
credit quality orientation.
We eliminated several underperforming companies during the early part of the
year. We will continue to selectively add competitively priced industrials in an
effort to add more balance to the Fund. In terms of quality, we have been
increasing our exposure to the middle B rated segment of the market where we
have continued to find competitive yields.
And while no guarantees can be given, we are encouraged by our improved results
in the third quarter of 1999 and remain confident we can pick up additional
ground in the upcoming months. Also, we remain bullish on the total return
prospects of the high yield market at current valuation levels, especially given
the continued health of the economy.
Thank you for investing in the High Income Opportunity Fund Inc. We look forward
to continuing to help you pursue your investment goals. Should you have any
questions about your investment in the Fund, please call the First Data Investor
Services Group Inc. at (800) 331-1710.
Sincerely,
/s/ Heath B. McLendon /s/ John C. Bianchi, CFA
Heath B. McLendon John C. Bianchi, CFA
Chairman Vice President
October 15, 1999
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High Income Opportunity Fund Inc. 3
<PAGE>
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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 First Data Investors
Services Group, Inc. (the "Plan Agent"), 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 31. 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 SSB Citi Fund Management LLC.
To find out more detailed information about the Plan and about how you can
participate, please call First Data Investor Services Group, Inc. at (800)
331-1710.
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4 1999 Annual Report to Shareholders
<PAGE>
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Schedule of Investments September 30, 1999
- --------------------------------------------------------------------------------
FACE
AMOUNT++ RATING(a) SECURITY VALUE
================================================================================
CORPORATE BONDS AND NOTES -- 95.2%
Advertising -- 0.1%
775,000EUR B- GO Outdoor Systems, Sr. Sub.
Notes,
10.500% due 7/15/09+ $ 850,133
- ------------------------------------------------------------------------------
Aerospace -- 0.8%
2,725,000 B1* BE Aerospace, Inc., Sr. Sub.
Notes,
9.500% due 11/1/08+ 2,731,813
2,005,000 B- Dunlop Standard Aerospace, Sr. Notes,
11.875% due 5/15/09+ 2,025,050
1,345,000 B- Fairchild Corp., Company Guaranteed,
10.750% due 4/15/09+ 1,156,700
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5,913,563
- ------------------------------------------------------------------------------
Airlines -- 1.2%
10,080,000 BB Airplanes Pass-Through Trust,
Corporate Collateralized Mortgage
Obligation, Series 1, Class D,
10.875% due 3/15/19 9,072,000
- ------------------------------------------------------------------------------
Aluminium -- 0.7%
Kaiser Aluminium Chemical Corp.:
755,000 B1* Series B, Sr. Notes, 10.875%
due 10/15/06 871,250
850,000 B1* Series D, Sr. Notes, 10.875%
due 10/15/06 773,875
3,350,000 B3* Sr. Sub. Notes, 12.750% due
2/1/03 3,400,250
- ------------------------------------------------------------------------------
5,045,375
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Apparel -- 0.1%
930,000 B- Tropical Sportswear International
Corp., Series A,
Company Guaranteed, 11.000% due
6/15/08+ 837,000
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Auto Parts -- 0.8%
4,390,000 B Collins & Aikman Products Co.,
Company Guaranteed,
11.500% due 4/15/06 4,433,900
1,355,000 B Dura Operating Corp., Series B,
Company Guaranteed,
9.000% due 5/1/09+ 1,287,250
- ------------------------------------------------------------------------------
5,721,150
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Automotive Aftermarket -- 0.7%
5,305,000 B1* Exide Corp., Sr. Notes, 10.000%
due 4/15/05+ 5,278,475
- ------------------------------------------------------------------------------
Broadcasting -- 0.7%
890,000 B Capstar Broadcasting Partners,
Inc., Sr. Discount Notes,
step bond to yield 11.002% due 2/1/09 763,175
Citadel Broadcasting Co.:
2,645,000 B- Company Guaranteed, 9.250% due
11/15/08+ 2,611,937
1,350,000 B- Sr. Sub. Notes, 10.250% due
7/1/07+ 1,390,500
- ------------------------------------------------------------------------------
4,765,612
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Building Materials -- 0.3%
2,020,000 B Atrium Companies Inc., Series B,
Company Guaranteed,
10.500% due 5/1/09+ 1,939,200
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See Notes to Financial Statements.
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High Income Opportunity Fund Inc. 5
<PAGE>
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Schedule of Investments (continued) September 30, 1999
- --------------------------------------------------------------------------------
FACE
AMOUNT++ RATING(a) SECURITY VALUE
================================================================================
Building Products -- 1.8%
1,945,000 B Amatek Industries Property Ltd.,
Series B, Sr. Sub. Notes,
12.000% due 2/15/08+ $ 1,833,163
1,600,000 NR NCI Building Systems, Inc., Sr.
Sub. Notes,
9.250% due 5/1/09+ 1,520,000
Nortek, Inc., Series B, Sr. Notes:
3,800,000 B+ 9.250% due 3/15/07+ 3,714,500
5,660,000 B+ 9.125% due 9/1/07+ 5,490,200
845,000 B+ 8.875% due 8/1/08+ 802,750
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13,360,613
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Cable Television -- 12.2%
5,520,000 B+ Adelphia Communications Corp.,
Series B, Sr. Notes,
9.875% due 3/1/07 5,575,200
Century Communications Corp.:
4,420,000 BB- Sr. Discount Notes, step bond to yield
9.680% due 1/15/08 1,889,550
700,000 BB- Sr. Notes, 9.750% due 2/15/02 712,250
4,570,000 NR Charter Communications Holdings
Capital LLC, Sr.
Discount Notes, step bond to
yield 9.920% due 4/1/11+ 2,719,150
CSC Holdings Inc., Sr. Sub. Debentures:
11,340,000 BB- 9.875% due 2/15/13 11,935,350
5,525,000 BB- 10.500% due 5/15/16 5,994,625
1,900,000GBP B- Diamond Holdings PLC, Company
Guaranteed,
10.000% due 2/1/08+ 3,097,826
4,620,000 B Echostar DBS Corp., Sr. Notes,
9.375% due 2/1/09 4,568,025
2,170,000 B+ Insight Midwest Corp., Sr. Notes,
9.750% due 10/1/09+ 2,191,700
NTL Inc., Series B, Sr. Notes:
8,770,000 B- 11.500% due 10/1/08 9,427,750
1,415,000 B- Step bond to yield 11.980% due
10/1/08+ 944,513
7,260,000 BB- Rogers Cablesystems, Ltd., Company
Guaranteed,
11.000% due 12/1/15 8,203,800
3,650,000 B+ TeleWest Communications PLC, Sr. Notes,
11.250% due 11/1/08+ 3,914,625
27,880,000 B United International Holdings,
Inc., Series B, Sr. Discount Notes,
step bond to yield
11.176% due 2/15/08+ 16,937,100
22,000,000 B2* United Pan Europe Communications NV,
Sr. Discount Notes, step bond
to yield
12.500% due 8/1/09+ 12,457,500
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90,568,964
- ------------------------------------------------------------------------------
Casinos/Gambling -- 2.4%
705,000 BB+ Circus Circus Enterprises Inc.,
Sr. Sub. Debenture,
7.625% due 7/15/13 599,250
3,725,000 B Harveys Casino Resorts, Sr. Sub.
Notes,
10.625% due 6/1/06 3,780,875
See Notes to Financial Statements.
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6 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) September 30, 1999
- --------------------------------------------------------------------------------
FACE
AMOUNT++ RATING(a) SECURITY VALUE
================================================================================
Casinos/Gambling -- 2.4% (continued)
Hollywood Casino:
850,000 B 1st Mortgage Notes, 13.000% due
8/1/06+ $ 879,750
915,000 B Company Guaranteed, 11.250% due
5/1/07+ 926,438
3,510,000 B Hollywood Park, Inc., Series B,
Company Guaranteed,
9.250% due 2/15/07+ 3,395,925
3,335,000 B+ Horseshoe Gaming, Company Guaranteed,
8.625% due 5/15/09 3,176,588
2,470,000 B Isle of Capris Casinos, Inc.,
Company Guaranteed,
8.750% due 4/15/09+ 2,272,400
Station Casinos, Inc., Sr. Sub. Notes:
1,200,000 B+ 10.125% due 3/15/06 1,233,000
1,250,000 B+ 8.875% due 12/1/08+ 1,218,750
- ------------------------------------------------------------------------------
17,482,976
- ------------------------------------------------------------------------------
Chemicals - Major -- 1.2%
730,000 B2* Huntsman Corp., Sr. Sub. Notes,
9.500% due 7/1/07+ 675,250
Huntsman ICI Chemicals:
17,800,000 B+ Sr. Discount Notes, step bond to yield
12.570% due 12/31/09 4,628,000
3,880,000 B+ Sr. Sub. Notes, 10.125% due 7/1/09+ 3,792,700
- ------------------------------------------------------------------------------
9,095,950
- ------------------------------------------------------------------------------
Chemicals - Specialty -- 0.7%
Lyondell Chemical Co.:
1,685,000 BB Series A, Sr. Secured Notes,
9.625% due 5/1/07+ 1,672,363
2,665,000 BB Series B, Sr. Secured Notes,
9.875% due 5/1/07+ 2,645,012
705,000 B+ Sr. Sub. Notes, 10.875% due
5/1/09+ 712,050
- ------------------------------------------------------------------------------
5,029,425
- ------------------------------------------------------------------------------
Coal Mining -- 0.6%
4,750,000 B AEI Resources, Inc., Company
Guaranteed,
10.500% due 12/15/05+ 4,275,000
- ------------------------------------------------------------------------------
Construction/AG Equipment/Trucks -- 0.5%
3,775,000 B Columbus McKinnon Corp., Company
Guaranteed,
8.500% due 4/1/08+ 3,444,688
- ------------------------------------------------------------------------------
Containers/Packaging -- 3.2%
3,575,000 B AEP Industries Inc., Sr. Sub.
Notes,
9.875% due 11/15/07+ 3,414,125
5,500,000 EUR B1* BSN Financing Co., Company
Guaranteed,
10.250% due 8/1/09+ 5,989,275
1,195,000 B BWAY Corp., Series B, Company
Guaranteed,
10.250% due 4/15/07+ 1,200,975
3,250,000 B Huntsman Packaging Corp., Company
Guaranteed,
9.125% due 10/1/07+ 3,087,500
1,625,000 DEM B Impress Metal Packaging Holdings,
Sr. Sub. Notes,
9.875% due 5/29/07+ 937,874
See Notes to Financial Statements.
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High Income Opportunity Fund Inc. 7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) September 30, 1999
- --------------------------------------------------------------------------------
FACE
AMOUNT++ RATING(a) SECURITY VALUE
================================================================================
Containers/Packaging -- 3.2% (continued)
6,285,000 B Stone Container Finance Corp.,
Company Guaranteed,
11.500% due 8/15/06+ $ 6,591,394
Tekni-Plex Inc., Series B:
300,000 B- Company Guaranteed, 9.250% due
3/1/08+ 290,250
2,435,000 B- Sr. Sub. Notes, 11.250% due
4/1/07+ 2,568,925
- ------------------------------------------------------------------------------
24,080,318
- ------------------------------------------------------------------------------
Contract Drilling -- 1.4%
3,490,000 BB Pride International, Inc., Sr.
Notes,
10.000% due 6/1/09 3,585,975
3,375,000 Ba3* R&B Falcon Corp., Sr. Notes,
12.250% due 3/15/06+ 3,552,187
3,095,000 BB- RBF Finance Co., Company
Guaranteed,
11.375% due 3/15/09 3,257,488
- ------------------------------------------------------------------------------
10,395,650
- ------------------------------------------------------------------------------
Discount Stores -- 1.3%
6,370,000 B+ Ames Department Stores, Inc., Sr.
Notes,
10.000% due 4/15/06+ 6,194,825
2,900,000 BB+ Kmart Corp., Debentures, 12.500%
due 3/1/05 3,476,375
- ------------------------------------------------------------------------------
9,671,200
- ------------------------------------------------------------------------------
Diversified Commercial Services -- 1.8%
3,825,000 B+ Cia Latino Americana, Company
Guaranteed,
11.625% due 6/1/04+ 2,333,250
4,950,000 B2* Intertek Finance PLC, Series B,
Company Guaranteed,
10.250% due 11/1/06+ 4,603,500
6,675,000 B- Outsourcing Solutions Inc., Series
B, Sr. Sub. Notes,
11.000% due 11/1/06+ 6,491,437
- ------------------------------------------------------------------------------
13,428,187
- ------------------------------------------------------------------------------
Diversified Financial Services -- 0.3%
Amresco, Inc., Sr. Sub. Notes:
1,850,000 CCC+ Series 97-A, 10.000% due 3/15/04 1,202,500
1,890,000 CCC+ Series 98-A, 9.875% due 3/15/05 1,237,950
- ------------------------------------------------------------------------------
2,440,450
- ------------------------------------------------------------------------------
Diversified Manufacturing -- 0.8%
2,050,000 B- Blount Inc., Sr. Sub. Notes,
13.000% due 8/1/09+ 2,132,000
4,475,000 B+ Park-Ohio Industries, Inc., Sr.
Sub. Notes,
9.250% due 12/1/07+ 4,139,375
- ------------------------------------------------------------------------------
6,271,375
- ------------------------------------------------------------------------------
Drugs - Generic -- 1.4%
11,250,000 BB ICN Pharmaceuticals Inc., Series B, Sr.
Notes,
9.250% due 8/15/05 10,743,750
- ------------------------------------------------------------------------------
Electronic Components -- 1.6%
4,051,000 B+ Celestica International Inc., Sr.
Sub. Notes,
10.500% due 12/31/06+ 4,294,060
8,500,000 B- Viasystems, Inc., Sr. Sub. Notes,
9.750% due 6/1/07 7,310,000
- ------------------------------------------------------------------------------
11,604,060
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
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8 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) September 30, 1999
- --------------------------------------------------------------------------------
FACE
AMOUNT++ RATING(a) SECURITY VALUE
================================================================================
Engineering & Construction -- 1.5%
1,285,000 B- American Plumbing & Mechanical, Inc.,
Company Guaranteed, 11.625% due
10/15/08+ $ 1,156,500
3,830,000 B Group Maintenance America Corp.,
Company Guaranteed, 9.750% due
1/15/09+ 3,676,800
1,700,000 NR Integrated Electrical Services,
Inc., Sr. Sub. Notes,
9.375% due 2/1/09+ 1,657,500
4,360,000 BB- Williams Communications Group
Inc., Sr. Notes,
10.875% due 10/1/09 4,326,864
- --------------------------------------------------------------------------------
10,817,664
- --------------------------------------------------------------------------------
Environmental Services -- 2.8%
18,500,000 B+ Allied Waste Corp., Sr. Sub. Notes,
10.000% due 8/1/09+ 16,927,500
1,670,000 B+ IT Group, Inc., Sr. Sub. Notes,
11.250% due 4/1/09+ 1,586,500
2,560,000 B+ URS Corp., Series B, Sr. Sub.
Notes, 12.250% due 5/1/09 2,569,600
- --------------------------------------------------------------------------------
21,083,600
- --------------------------------------------------------------------------------
Food Distributors -- 2.4%
6,615,000 B2* Carrols Corp., Company Guaranteed,
9.500% due 12/1/08+ 5,672,362
7,075,000 B Imperial Holly Corp., Company
Guaranteed, 9.750% due 12/15/07+ 6,650,500
2,535,000 B- Premier International Foods PLC,
Sr. Notes, 12.000% due 9/1/09+ 2,560,350
3,195,000 B SC International Services, Inc.,
Series B, Company Guaranteed,
9.250% due 9/1/07+ 3,155,063
- --------------------------------------------------------------------------------
18,038,275
- --------------------------------------------------------------------------------
Foods - Specialty/Candy -- 0.8%
4,575,000 B- B&G Foods Inc., Company
Guaranteed, 9.625% due 8/1/07+ 4,243,312
2,105,000 B+ Chiquita Brands International,
Inc., Sr. Notes, 10.000% due 6/15/09 1,915,550
- --------------------------------------------------------------------------------
6,158,862
- --------------------------------------------------------------------------------
Forest Products -- 0.7%
4,955,000 B Ainsworth Lumber Co. Ltd., Sr. Notes,
12.500% due 7/15/07+ 5,462,888
- --------------------------------------------------------------------------------
Home Building -- 0.5%
4,280,000 BB- U.S. Home Corp., Sr. Sub. Notes,
8.875% due 2/15/09 3,926,900
- --------------------------------------------------------------------------------
Home Furnishing -- 0.3%
2,130,000 B Falcon Products, Inc., Series B,
Company Guaranteed,
11.375% due 6/15/09+ 2,082,075
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
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High Income Opportunity Fund Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) September 30, 1999
- --------------------------------------------------------------------------------
FACE
AMOUNT++ RATING(a) SECURITY VALUE
================================================================================
Hospital/Nursing Management -- 1.8%
3,575 Ba3* Fresenius Medical Care Capital Trust I,
Company Guaranteed, 9.000% due
12/1/06@ $ 3,503,500
11,530,000 B- Magellan Health Services, Inc., Sr. Sub.
Notes, 9.000% due 2/15/08+ 9,886,975
- --------------------------------------------------------------------------------
13,390,475
- --------------------------------------------------------------------------------
Hotels/Resorts -- 2.4%
5,375,000 B- Courtyard By Marriott II LP,
Series B, Sr. Notes, 10.750%
due 2/1/08+ 5,375,000
8,385,000 BB HMH Properties, Inc., Series C,
Sr. Notes, 8.450% due 12/1/08 7,777,088
4,890,000 B+ Intrawest Corp., Sr. Notes, 9.750%
due 8/15/08 4,743,300
- --------------------------------------------------------------------------------
17,895,388
- --------------------------------------------------------------------------------
Insurance - Multi-Line -- 1.0%
5,500,000 BB+ SIG Capital Trust I, Company
Guaranteed, 9.500% due 8/15/27+ 4,125,000
4,175,000 B Veritas Capital Trust, Trust
Preferred Securities,
10.000% due 1/1/28+ 3,173,000
- --------------------------------------------------------------------------------
7,298,000
- --------------------------------------------------------------------------------
Internet Services -- 3.9%
1,705,000 NR Cybernet Internet Services
International,
14.000% due 7/1/09+@ 1,696,475
PSINet Inc., Sr. Notes:
4,840,000 B- 11.500% due 11/1/08+ 4,900,500
4,725,000 B- 11.000% due 8/1/09+ 4,630,500
1,375,000EUR B- 11.000% due 8/1/09+ 1,420,439
6,500,000 B- Series B, 10.000% due 2/15/05+ 6,240,000
5,675,000 NR Splitrock Services, Inc., Series B,
Company Guaranteed,
11.750% due 7/15/08+ 5,107,500
3,545,000 B- Verio Inc., Sr. Notes, 11.250% due
12/1/08+ 3,642,488
2,605,000 CCC+ WAMINET Inc., Series B, Company
Guaranteed, step bond to yield
12.812% due 3/1/05+ 1,536,950
- --------------------------------------------------------------------------------
29,174,852
- --------------------------------------------------------------------------------
Leisure/Movies/Entertainment -- 0.9%
7,425,000 B- SFX Entertainment, Inc., Series B,
Company Guaranteed, 9.125%
due 2/1/08+ 6,831,000
- --------------------------------------------------------------------------------
Machinery - Industrial/Components -- 0.5%
3,812,000 B- Alvey Systems, Inc., Sr. Sub.
Notes, 11.375% due 1/31/03+ 3,869,180
- --------------------------------------------------------------------------------
Media Conglomerates -- 0.5%
2,100,000GBP B Polestar Corp. PLC, Series B, Sr.
Notes, 10.500% due 5/30/08+ 3,354,743
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) September 30, 1999
- --------------------------------------------------------------------------------
FACE
AMOUNT++ RATING(a) SECURITY VALUE
================================================================================
Medical Specialties -- 0.3%
2,045,000 B- Hanger Orthopedic Group, Inc.,
Sr. Sub. Notes, 11.250% due
6/15/09+ $ 2,065,450
- --------------------------------------------------------------------------------
Metals/Minerals - Other -- 0.3%
2,700,000 B- Haynes International, Inc., Sr.
Notes, 11.625% due 9/1/04 2,531,250
- --------------------------------------------------------------------------------
Miscellaneous -- 0.2%
2,110,000 B- Key Plastics, Inc., Series B, Sr.
Sub. Notes, 10.250% due 3/15/07+ 1,772,400
- --------------------------------------------------------------------------------
Multi-Sector Companies -- 0.5%
3,865,000 B- Triarc Consumer Beverage, Sr. Sub.
Notes, 10.250% due 2/15/09+ 3,662,087
- --------------------------------------------------------------------------------
Newspapers -- 0.5%
4,295,000 B+ Garden State Newspapers, Inc., Sr.
Sub. Notes, 8.625% due 7/1/11+ 3,897,713
- --------------------------------------------------------------------------------
Oil & Gas Production -- 4.9%
2,195,000 B1* Belco Oil & Gas Corp., Series B,
Sr. Sub. Notes,
8.875% due 9/15/07+ 2,096,225
1,835,000 B Canadian Forest Oil Ltd., Company
Guaranteed, 10.500% due 1/15/06 1,890,050
765,000 B Chesapeake Energy Corp., Series B,
Company Guaranteed,
9.625% due 5/1/05+ 734,400
6,350,000 B+ Clark USA Inc., Series B, Sr.
Notes, 10.875% due 12/1/05+ 5,429,250
1,200,000 B1* Coda Energy Inc., Series B,
Company Guaranteed,
10.500% due 4/1/06+ 1,236,000
3,850,000 BB- Flores & Rucks, Inc., Company
Guaranteed, 9.750% due 10/1/06 3,975,125
2,375,000 B Forest Oil Corp., 8.750% due
9/15/07+ 2,285,937
2,475,000 B+ Nuevo Energy Co., Sr. Sub. Notes,
9.500% due 6/1/08+ 2,468,813
2,355,000 B+ Parker Drilling Co., Series D,
Company Guaranteed,
9.750% due 11/15/06+ 2,278,463
Plains Resources Corp., Sr. Sub.
Notes:
4,125,000 B 10.250% due 3/15/06+ 4,176,563
1,205,000 B Series B, 10.250% due 3/15/06+ 1,220,062
2,555,000 B Stone Energy Corp., Company
Guaranteed, 8.750% due 9/15/07+ 2,516,675
5,675,000 BB- United Meridian Corp., Sr. Sub.
Notes, 10.375% due 10/15/05 5,944,563
545,000 B+ Vintage Petroleum, Inc., Sr. Sub.
Notes, 9.750% due 6/30/09+ 561,350
- --------------------------------------------------------------------------------
36,813,476
- --------------------------------------------------------------------------------
Oil & Gas Transmission -- 0.3%
2,175,000 BB- Leviathan Gas Pipeline Partners,
LP, Series B,
Company Guaranteed, 10.375% due
6/1/09+ 2,223,937
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) September 30, 1999
- --------------------------------------------------------------------------------
FACE
AMOUNT++ RATING(a) SECURITY VALUE
================================================================================
Packaged Goods/Cosmetics -- 0.4%
3,200,000 B- Revlon Consumer Products Corp.,
Sr. Sub. Notes,
8.625% due 2/1/08+ $ 2,656,000
- --------------------------------------------------------------------------------
Paper -- 3.2%
2,380,000 B Doman Industries Ltd., Sr. Notes,
8.750% due 3/15/04 1,689,800
4,260,000EUR B Kappa Beheer B.V., Company
Guaranteed, 10.625% due 7/15/09+ 4,593,597
4,940,000 CCC+ Repap New Brunswick Inc., Sr.
Notes, 10.625% due 4/15/05 4,297,800
Riverwood International Corp.,
Company Guaranteed:
4,295,000 B- 10.625% due 8/1/07 4,311,106
5,085,000 CCC+ 10.875% due 4/1/08+ 4,805,325
231,750 NR SD Warren Co., Debentures, 14.000%
due 12/15/06 265,354
3,800,000 BB+ Tembec Finance Corp., Sr. Notes,
9.875% due 9/30/05 3,933,000
- --------------------------------------------------------------------------------
23,895,982
- --------------------------------------------------------------------------------
Pharmaceuticals -- 0.4%
2,760,000 B King Pharmaceuticals, Inc.,
Company Guaranteed,
10.750% due 2/15/09+ 2,849,700
- --------------------------------------------------------------------------------
Photographic Products -- 0.5%
3,820,000 BB- Polaroid Corp., Sr. Notes, 11.500%
due 2/15/06 3,991,900
- --------------------------------------------------------------------------------
Printing/Forms -- 0.1%
1,065,000 Baa3* World Color Press, Inc., Sr. Sub.
Notes, 7.750% due 2/15/09+ 1,013,081
- --------------------------------------------------------------------------------
Real Estate Investment Trusts -- 0.9%
4,000,000 NR Ocwen Asset Investment Corp., Sr.
Notes, 11.500% due 7/1/05+ 3,380,000
3,100,000 Baa3* Trizec Finance Ltd., Sr. Notes,
10.875% due 10/15/05 3,309,250
- --------------------------------------------------------------------------------
6,689,250
- --------------------------------------------------------------------------------
Recreational Products/Toys -- 0.2%
1,700,000EUR B2* Head Holding Corp., Sr. Notes,
10.750% due 7/15/06+ 1,765,232
- --------------------------------------------------------------------------------
Rental/Leasing Companies -- 1.2%
3,605,000 BB- Avis Rent A Car, Inc., Sr. Sub.
Notes, 11.000% due 5/1/09+ 3,695,125
1,720,000 B NationsRent, Inc., Company
Guaranteed, 10.375% due 12/15/08+ 1,715,700
3,285,000 BB- United Rentals, Inc., Series B,
Company Guaranteed,
9.250% due 1/15/09+ 3,170,025
- --------------------------------------------------------------------------------
8,580,850
- --------------------------------------------------------------------------------
Restaurants -- 0.5%
4,625,000 B Advantica Restaurant Group, Inc.,
Sr. Notes, 11.250% due 1/15/08 4,035,313
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) September 30, 1999
- --------------------------------------------------------------------------------
FACE
AMOUNT++ RATING(a) SECURITY VALUE
================================================================================
Retail - Food Chains -- 0.3%
475,000 CCC+ Pathmark Stores, Inc., Sub. Notes,
12.625% due 6/15/02 $ 485,688
1,390,000 NR Stater Brothers Holdings Inc., Sr.
Notes, 10.750% due 8/15/06+ 1,423,013
- --------------------------------------------------------------------------------
1,908,701
- --------------------------------------------------------------------------------
Retail - Other Specialty Stores -- 0.7%
5,600,000 B- Advance Stores Co., Inc., Series
B, Company
Guaranteed, 10.250% due 4/15/08+ 5,236,000
- --------------------------------------------------------------------------------
Savings & Loan Associations -- 0.8%
5,500,000 B2* Ocwen Capital Trust I Corp.,
Company Guaranteed,
10.875% due 8/1/27 3,657,500
2,600,000 B+ Ocwen Financial Corp., Notes,
11.875% due 10/1/03 2,444,000
- --------------------------------------------------------------------------------
6,101,500
- --------------------------------------------------------------------------------
Semiconductors -- 0.9%
6,510,000 B Fairchild Semiconductor Corp., Sr.
Sub. Notes, 10.125% due 3/15/07+ 6,379,800
- --------------------------------------------------------------------------------
Steel/Iron Ore -- 1.5%
3,495,000 B+ Russel Metals Inc./RMI USA LLC Sr.
Notes, 10.000% due 6/1/09 3,368,306
4,650,000 B+ WCI Steel, Inc., Series B, Sr.
Notes, 10.000% due 12/1/04+ 4,510,500
3,270,000 B- WHX Corp., Sr. Notes, 10.500% due
4/15/05+ 3,073,800
- --------------------------------------------------------------------------------
10,952,606
- --------------------------------------------------------------------------------
Telecommunications - Other -- 10.7%
E.Spire Communications, Inc.:
7,820,000 NR Sr. Discount Notes,
step bond to yield 11.313%
due 7/1/08+ 2,893,400
700,000 NR Sr. Notes, 13.750% due 7/15/07+ 602,000
Esprit Telecom Group PLC, Sr.
Notes:
3,900,000 B- 11.500% due 12/15/07 4,056,000
4,000,000DEM B- 11.500% due 12/15/07 2,275,944
2,250,000 B- 10.875% due 6/15/08 2,289,375
6,575,000 NR FaciliCom International, Inc.,
Series B, Sr. Notes,
10.500% due 1/15/08+ 5,424,375
Hermes Europe Railtel B.V., Sr.
Notes:
6,250,000 B 11.500% due 8/15/07+ 6,390,625
2,050,000 B 10.375% due 1/15/09+ 2,044,875
ICG Holdings Inc.:
2,985,000 B- Company Guaranteed, step bond
to yield 12.604% due 5/1/01+ 2,343,225
1,775,000 B- Sr. Discount Notes, step bond to yield
12.935% due 9/15/05+ 1,562,000
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
High Income Opportunity Fund, Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) September 30, 1999
- --------------------------------------------------------------------------------
FACE
AMOUNT++ RATING(a) SECURITY VALUE
================================================================================
Telecommunications - Other -- 10.7% (continued)
Intermedia Communications Inc.:
1,870,000 B Series B, Sr. Discount Notes,
step bond to yield
11.213% due 7/15/07+ $ 1,252,900
2,170,000 B Series B, Sr. Notes, 9.500% due
3/1/09+ 2,018,100
295,000 B Sr. Discount Notes, step bond
to yield 11.289% due 5/15/06 241,163
1,535,000 B3* IXC Communications Inc., Sr. Sub.
Notes, 9.000% due 4/15/08+ 1,519,650
4,390,000 B- KMC Telecom Holdings, Inc., Sr.
Notes, 13.500% due 5/15/09+ 4,324,150
9,905,000 B* Level 3 Communications, Inc., Sr.
Discount Notes,
step bond to yield 11.235% due
12/1/08 5,608,706
Microcell Telecommunications Inc.,
Sr. Discount Notes:
1,610,000 B3* Series B, step bond to yield
11.843% due 6/1/06+ 1,348,375
4,790,000 B- Step bond to yield 11.757% due
6/1/09+ 2,814,125
NEXTLINK Communications, Inc.:
7,000,000 B Sr. Discount Notes, step bond
to yield 12.051% due 6/1/09 4,042,500
4,655,000 B Sr. Notes, 12.500% due 4/15/06+ 4,934,300
4,370,000 B Sr. Notes, 10.750% due 6/1/09 4,391,850
4,260,000 BB- Orange PLC, Sr. Notes, 9.000% due
6/1/09+ 4,281,300
6,035,000 B- Primus Telecommunications Group,
Inc., Sr. Notes,
11.750% due 8/1/04 5,929,387
Tele1 Europe B.V., Sr. Notes:
1,705,000 B- 13.000% due 5/15/09+ 1,670,900
1,675,000EUR B- 13.000% due 5/15/09+ 1,748,192
625,000 NR VersaTel Telecom International
N.V., Sr. Notes,
13.250% due 5/15/08+ 618,750
3,625,000 B- Viatel, Inc., Sr. Notes, 11.250%
due 4/15/08 3,452,813
- --------------------------------------------------------------------------------
80,078,980
- --------------------------------------------------------------------------------
Telephone - Cellular -- 6.2%
2,835,000 NR Airgate PCS Inc., step bond to yield
13.500% due 10/1/09@ 1,537,988
1,125,000 CCC+ Centennial Cellular Corp., Sr.
Sub. Notes, 10.750% due 12/15/08+ 1,175,625
5,440,000 B Crown Castle International Corp.,
Sr. Discount Notes,
step bond to yield 11.165% due
5/15/11 3,128,000
1,495,000 NR Dobson/Sygnet Corp., Sr. Notes,
12.250% due 12/15/08+ 1,562,275
Dolphin Telecom PLC, Sr. Discount
Notes:
8,675,000 CCC+ Step bond to yield 11.432% due
6/1/08+ 3,882,062
7,250,000EUR Caa* Step bond to yield 14.748% due
6/1/08+ 3,435,945
8,870,000 B- Millicom International Cellular
S.A., Sr. Discount Notes,
step bond to yield 13.452% due
6/1/06+ 6,297,700
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) September 30, 1999
- --------------------------------------------------------------------------------
FACE
AMOUNT++ RATING(a) SECURITY VALUE
================================================================================
Telephone - Cellular -- 6.2% (continued)
Nextel Communications, Inc., Sr.
Discount Notes:
6,000,000 B2* Step bond to yield 10.802% due
9/15/07+ $ 4,440,000
6,260,000 B2* Step bond to yield 10.712% due
2/15/08+ 4,382,000
2,695,000 B3* Omnipoint Corp., Sr. Notes,
11.500% due 9/15/09+ 2,775,850
4,155,000 NR Spectrasite Holdings Inc., Sr.
Discount Notes,
step bond to yield 11.218% due
4/15/09+ 2,067,113
2,815,000 B3* Telecorp PCS Inc., Sr. Discount
Notes, step bond to yield
12.382% due 4/15/09+ 1,650,294
Telesystem International Wireless
Inc., Sr. Discount Notes:
10,495,000 CCC+ Series B, step bond to yield 12.319%
due 6/30/07+ 5,221,262
6,250,000 CCC+ Series C, step bond to yield
11.200% due 11/1/07+ 2,625,000
2,670,000 B3* Triton PCS, Inc., Company
Guaranteed, step bond to yield
11.903% due 5/1/08+ 1,808,925
- --------------------------------------------------------------------------------
45,990,039
- --------------------------------------------------------------------------------
Textiles -- 0.4%
7,050,000DEM B3* Texon International PLC, Sr. Notes,
10.000% due 2/1/08+ 3,320,401
- --------------------------------------------------------------------------------
Transportation - Marine -- 0.3%
2,125,000 B- Oglebay Norton Co., Sr. Sub.
Notes, 10.000% due 2/1/09+ 2,066,563
15,000 BB- Sea Containers Ltd., Series A, Sr.
Sub. Debentures,
12.500% due 12/1/04 16,087
- --------------------------------------------------------------------------------
2,082,650
- --------------------------------------------------------------------------------
Unregulated Power Generation -- 2.4%
AES Corp.:
7,230,000 Ba1* Sr. Notes, 9.500% due 6/1/09 7,266,150
5,370,000 Ba3* Sr. Sub. Notes, 10.250% due
7/15/06 5,396,850
5,375,000 BB Calpine Corp., Sr. Notes, 10.500%
due 5/15/06 5,590,000
- --------------------------------------------------------------------------------
18,253,000
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES
(Cost -- $752,902,843) 709,446,314
================================================================================
SHARES SECURITY VALUE
================================================================================
COMMON STOCK -- 0.0%
Telecommunications - Other -- 0.0%
20,125 Pagemart Nationwide Inc.+ (Cost -- $0) 140,875
================================================================================
PREFERRED STOCK -- 1.0%
Broadcasting -- 0.6%
39,557 Capstar Broadcasting Partners,
Inc., Series E
Exchangeable 12.625% 4,667,726
- --------------------------------------------------------------------------------
Electronic Components -- 0.0%
3,953 Viasystems Inc., Payment-in-kind,
Series B 43,489
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
High Income Opportunity Fund, Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) September 30, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Savings & Loan Associations -- 0.4%
108,000 California Federal Preferred
Capital Corp., Series A,
Exchangeable 9.125% $ 2,538,000
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost -- $7,347,423) 7,249,215
================================================================================
WARRANTS# -- 0.3%
Broadcasting -- 0.1%
14,825 UIH Australia/Pacific, Inc.,
Expire 5/15/06 444,750
- --------------------------------------------------------------------------------
Cable -- 0.0%
5,700 Wireless One Inc., Expire 10/19/00 1,425
- --------------------------------------------------------------------------------
Internet Services -- 0.1%
6,975 Splitrock Services, Inc., Expire
7/15/08 502,200
13,950 WAM!NET Inc., Expire 3/1/05+ 317,363
- --------------------------------------------------------------------------------
819,563
- --------------------------------------------------------------------------------
Paper -- 0.0%
8,175 SDW Holdings Corp., Expire
12/15/06+ 143,880
- --------------------------------------------------------------------------------
Telecommunications - Other -- 0.1%
43,470 Pagemart, Inc., Expire 12/31/03 130,410
6,975 RSL Communications, Ltd., Expire
11/15/06 279,000
1,705 Tele1 Europe B.V., Expire 5/15/09 110,825
1,675 Tele1 Europe B.V. (EUR), Expire
5/15/09 115,951
625 VersaTel Telecom International
N.V., Expire 5/15/08+ 78,125
- --------------------------------------------------------------------------------
714,311
- --------------------------------------------------------------------------------
Telephone - Cellular -- 0.0%
6,725 Iridium World Communications Ltd.,
Expire 7/15/05+ 67
- --------------------------------------------------------------------------------
TOTAL WARRANTS
(Cost -- $1,052,627) 2,123,996
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) September 30, 1999
- --------------------------------------------------------------------------------
FACE
AMOUNT++ RATING(a) SECURITY VALUE
================================================================================
REPURCHASE AGREEMENT -- 3.5%
$26,205,000 Morgan Stanley, Dean Witter & Co.,
5.250% due 10/1/99;
Proceeds at maturity -- $26,208,822; (Fully
collateralized by U.S. Treasury Notes,
3.375% to 3.875% due 1/15/07 to
1/15/09;
Market value -- $26,432,612)
(Cost -- $26,205,000) $ 26,205,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $787,507,893**) $745,165,400
================================================================================
++ Face amount denominated in U.S. dollars unless otherwise indicated.
(a) All ratings are by Standard & Poor's Ratings Service, except those
identified by an asterisk (*) which 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.
@ Security has been issued with attached warrants.
Non-income producing securities.
** Aggregate cost for Federal income tax purposes is substantially the same.
See page 18 for definition of ratings.
Currency abbreviations used in this schedule:
DEM -- German Mark
EUR -- Euro
GBP -- British Pound
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
High Income Opportunity Fund, Inc. 17
<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
predominantly spec- and CCC ulative 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.
- --------------------------------------------------------------------------------
18 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
ASSETS:
<S> <C>
Investments, at value (Cost-- $787,507,893) $745,165,400
Cash 931
Receivable for securities sold 7,318,585
Receivable for open forward foreign currency contracts (Note 8) 3,522
Interest and dividends receivable 16,326,040
- -----------------------------------------------------------------------------------------
Total Assets 768,814,478
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 10,890,783
Dividends payable 1,417,724
Management fees payable 717,741
Payable for open forward foreign currency contracts (Note 8) 673,548
Accrued expenses 154,287
- -----------------------------------------------------------------------------------------
Total Liabilities 13,854,083
- -----------------------------------------------------------------------------------------
Total Net Assets $754,960,395
- -----------------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares $ 72,230
Capital paid in excess of par value 899,306,898
Overdistributed net investment income (1,389,020)
Accumulated net realized loss from security transactions (100,023,741)
Net unrealized depreciation of investments and foreign currencies (43,005,972)
- -----------------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $10.45 a share on 72,230,352 shares of
$0.001 par value outstanding; 500,000,000 shares authorized) $754,960,395
=========================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
High Income Opportunity Fund, Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended September 30, 199
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $82,405,729
Dividends 1,040,131
- --------------------------------------------------------------------------------
Total Investment Income 83,445,860
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 9,153,937
Shareholder communications 239,998
Custody 54,002
Shareholder and system servicing fees 38,000
Audit and legal 29,200
Directors' fees 11,001
Other 60,002
- --------------------------------------------------------------------------------
Total Expenses 9,586,140
- --------------------------------------------------------------------------------
Net Investment Income 73,859,720
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES (NOTES 3 AND 8):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) (42,869,517)
Foreign currency transactions 950,370
- --------------------------------------------------------------------------------
Net Realized Loss (41,919,147)
- --------------------------------------------------------------------------------
Change in Net Unrealized Depreciation of
Investments and Foreign Currencies:
Beginning of year (28,844,872)
End of year (43,005,972)
- --------------------------------------------------------------------------------
Increase in Net Unrealized Depreciation (14,161,100)
- --------------------------------------------------------------------------------
Net Loss on Investments and Foreign Currencies (56,080,247)
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $17,779,473
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended September 30,
1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 73,859,720 $ 77,058,960
Net realized gain (loss) (41,919,147) 4,505,920
Increase in net unrealized depreciation (14,161,100) (85,807,339)
- -------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations 17,779,473 (4,242,459)
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (74,284,603) (81,031,027)
Capital (454,788) --
- -------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (74,739,391) (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 (54,666,463) (73,061,759)
NET ASSETS:
Beginning of year 809,626,858 882,688,617
- -------------------------------------------------------------------------------------
End of year* $ 754,960,395 $ 809,626,858
=====================================================================================
* Includes overdistributed net investment income of: $ (1,389,020) $ (1,966,392)
=====================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
High Income Opportunity Fund, Inc. 21
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
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, 1999, reclassifications were made to the Fund's capital accounts
to reflect permanent book/tax differences and income and gains available for
distributions under income regulations. Accordingly, a portion of
overdistributed net investment income tax and net realized gains amounting to
$454,788 and $7,233, respectively, 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,
- --------------------------------------------------------------------------------
22 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ.
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
SSB Citi Fund Management LLC ("SSBC"), formerly known as SSBC Fund Management
Inc., 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 year ended September 30, 1999, the aggregate cost of pur chases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $643,177,895
- --------------------------------------------------------------------------------
Sales 682,233,021
================================================================================
At September 30, 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 $ 7,219,170
Gross unrealized depreciation (49,561,663)
- --------------------------------------------------------------------------------
Net unrealized depreciation $ (42,342,493)
================================================================================
4. Capital Loss Carryforward
At September 30, 1999, the Fund had, for Federal tax purposes, approximately
$65,210,000 of capital loss carryforwards available to offset future realized
- --------------------------------------------------------------------------------
High Income Opportunity Fund, Inc. 23
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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 amounts and expiration of carryforwards are indicated below.
Expiration occurs on September 30 in the year indicated:
2003 2004 2007
================================================================================
Carryforward Amounts $16,016,600 $38,118,000 $11,075,400
================================================================================
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 September 30, 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.
- --------------------------------------------------------------------------------
24 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
At September 30, 1999, the Fund did not have any open purchased call or put
option contracts.
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 year ended September 30, 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. 25
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
8. Forward Foreign Currency Contracts
At September 30, 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 unrealized gain (loss) on the contracts is
re flected as follows:
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Gain (Loss)
================================================================================
To Buy:
British Pound 1,005,000 $1,655,973 12/22/99 $ 3,522
- --------------------------------------------------------------------------------
To Sell:
British Pound 5,034,642 8,295,751 12/22/99 (76,446)
Euro 25,494,192 27,321,644 12/15/99 (597,102)
- --------------------------------------------------------------------------------
(673,548)
- --------------------------------------------------------------------------------
Net Unrealized Loss on Open
Forward Foreign Currency Contracts $(670,026)
================================================================================
9. Capital Shares
Capital stock transactions were as follows:
Year Ended Year Ended
September 30, 1999 September 30, 1998
-------------------- --------------------
Shares Amount Shares Amount
================================================================================
Shares issued on
dividend reinvestment 213,742 $2,293,455 995,988 $12,211,727
================================================================================
- --------------------------------------------------------------------------------
26 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each year ended September
30:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
============================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $ 11.24 $ 12.43 $ 11.72 $ 11.48 $ 11.20
- --------------------------------------------------------------------------------------------
Income (Loss) From
Operations:
Net investment income 1.03 1.08 1.15 1.14 1.14
Net realized and unrealized
gain (loss) (0.79) (1.14) 0.68 0.22 0.28
- --------------------------------------------------------------------------------------------
Total Income (Loss)
From Operations 0.24 (0.06) 1.83 1.36 1.42
- --------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (1.03) (1.13) (1.12) (1.12) (1.12)
Capital (0.00)* -- -- -- (0.02)
- --------------------------------------------------------------------------------------------
Total Distributions (1.03) (1.13) (1.12) (1.12) (1.14)
- --------------------------------------------------------------------------------------------
Net Asset Value,
End of Year $ 10.45 $ 11.24 $ 12.43 $ 11.72 $ 11.48
- --------------------------------------------------------------------------------------------
Total Return,
Based on Market Value(1) (9.36)% (1.65)% 18.18% 21.07% 9.90%
- --------------------------------------------------------------------------------------------
Total Return,
Based on Net Asset Value(1) 2.74% (0.58)% 16.48% 12.86% 13.99%
- --------------------------------------------------------------------------------------------
Net Assets,
End of Year (millions) $ 755 $ 810 $ 883 $ 819 $ 802
- --------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.20% 1.18% 1.21% 1.21% 1.20%
Net investment income 9.28 8.81 9.63 9.85 10.02
- --------------------------------------------------------------------------------------------
Portfolio Turnover Rate 83% 98% 87% 73% 59%
- --------------------------------------------------------------------------------------------
Market Value,
End of Year $ 9.125 $ 11.125 $ 12.438 $ 11.500 $ 10.500
============================================================================================
</TABLE>
(1) The total return calculation assumes that dividends are reinvested in
accordance with the Fund's dividend reinvestment plan.
* Amount represents less than $0.01 per share.
- --------------------------------------------------------------------------------
High Income Opportunity Fund, Inc. 27
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
High Income Opportunity Fund Inc.:
We have audited the accompanying statement of assets and liabilities, in clud
ing the schedule of investments, of High Income Opportunity Fund Inc. as of Sep
tem ber 30, 1999, the related statement of operations for the year then end ed,
the statements of changes in net assets for each of the years in the two-year
period then ended and financial highlights for each of the years in the
five-year period then ended. These financial statements and financial high
lights are the responsibility of the Fund's management. Our responsibility is to
ex press an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing stan
dards. Those standards require that we plan and perform the audit to obtain rea
son able assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evi dence supporting the amounts and disclosures in the financial
state ments. Our procedures included confirmation of securities owned as of
September 30, 1999, by correspondence with the custodian. As to securities pur
chased or sold but not received or delivered, we performed other appropriate
audit ing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of High
Income Opportunity Fund Inc. as of September 30, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
November 16, 1999
- --------------------------------------------------------------------------------
High Income Opportunity Fund, Inc. 28
<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
================================================================================
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
April 27 10.50 11.27 0.0860 10.720
May 25 10.38 10.97 0.0860 10.530
June 22 10.44 10.80 0.0860 10.450
July 23 10.19 10.83 0.0840 9.860
August 20 9.31 10.55 0.0840 9.460
September 17 9.00 10.46 0.0840 9.040
================================================================================
- --------------------------------------------------------------------------------
High Income Opportunity Fund, Inc. 29
<PAGE>
- --------------------------------------------------------------------------------
Financial Data (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:
<TABLE>
<CAPTION>
Shares Percentage Shares Percentage
Voted of Shares Voted of Shares
Name of Directors* For Voted Against Voted
==================================================================================
<S> <C> <C> <C> <C>
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
==================================================================================
</TABLE>
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.
- --------------------------------------------------------------------------------
30 1999 Annual Report to Shareholders
<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 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
- --------------------------------------------------------------------------------
High Income Opportunity Fund, Inc. 31
<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, MA 02266-8030 or by telephone at 1-800-331-1710.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
32 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
September 30, 1999:
o A corporate dividends received deduction of 1.39%.
- --------------------------------------------------------------------------------
High Income Opportunity Fund, Inc. 33
<PAGE>
- --------------------------------------------------------------------------------
HIGH INCOME
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
SSB Citi Fund Management LLC
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
------
Listed
------
NYSE
THE NEW YORK STOCK EXCHANGE
HIGH INCOME OPPORTUNITY FUND INC.
388 Greenwich Street
New York, New York 10013
FD0802 11/99
