[GRAPHIC OMITTED]
HIGH INCOME
----------------------
[LOGO] Opportunity Fund, Inc.
Semi-Annual Report
March 31, 2000
<PAGE>
[PHOTO OMITTED] [PHOTO OMITTED]
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, 2000. Any discussion of the
Fund's holdings is as of March 31, 2000. Please refer to pages six through 18
for a list of the Fund's holdings.
During the past six months, the Fund paid income dividends totaling $0.50 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.(1)
Price Annualized Six-Month
Per Share Distribution Rate(2) Total Return
------------- -------------------- ------------
$10.07 (NAV) 10.01% 2.09%
$8.625 (NYSE) 11.69% 0.14%
The Fund generated a return based on NAV of 2.09% for the past six months. These
results were significantly better than the six-month average total return of
0.35% for non-leveraged, closed-end, high-yield bond funds as reported by
Lipper, Inc., an independent mutual fund performance tracking organization.
Again, past performance is not indicative of future results.
----------
(1) The NAV is calculated by subtracting total liabilities from the closing
value of all securities held by the Fund, plus all other assets, and
dividing the result (total net assets) by the total number of shares
outstanding. The NAV fluctuates with the changes in the market price of
the securities in which the Fund had invested. However, the price at which
the investors buys or sells shares of the Fund is its market (NYSE) price
as determined by supply and demand.
(2) Total returns are based on changes in net asset value ("NAV") and the
market value, respectively, and assume the reinvestment of all dividends
and/or capital gains distributions in additional shares. Annualized
distribution rate is the Fund's current monthly income dividend rate,
annualized and then divided by the NAV or the market value noted in the
above chart. This annualized distribution rate assumed a current monthly
income dividend rate of $0.084 for twelve months. This rate is as of April
20, 2000 and is subject to change. The important difference between a
total return and an annualized distribution rate is that the total return
takes into consideration a number of factors including the fluctuation of
the NAV or the market value during the period reported. The NAV
fluctuation includes the effects of unrealized appreciation or
depreciation in the Fund. Accordingly, since an annualized distribution
rate only reflects the current monthly income dividend rate annualized, it
should not be used as the sole indicator to judge the return you receive
from your fund investment. Past performance is not indicative of future
results.
--------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 1
<PAGE>
Special Shareholder Notice -- Share Repurchase Program
We have continued our effort to reduce the Fund's shares' discount to NAV
through our share repurchase program. This program, which commenced on October
19, 1999, is believed to be an opportunity to take advantage of market price
fluctuations with the objective of offering long-term value to the Fund's
shareholders. The Fund intends to purchase shares of its stock in the open
market at such times, prices and amounts deemed advisable and subsequently
retire them.
This repurchase program has added liquidity to the market for the benefit of
investors who wish to sell their shares, while also seeking to benefit current
shareholders by increasing the Fund's shares' NAV. Since the inception of the
program, the Fund has repurchased and retired 2,734,300 shares at a cost of
approximately $24,128,827. As of March 31, 2000, this repurchase program has
increased the Fund's shares' NAV by $0.0633.
The Board of Directors ("Board") believes that this share repurchase program is
an opportunity to take advantage of market price fluctuations with the objective
of increasing the Fund's per share NAV. However, there can be no assurance that
the Board will continue this program.
Market and Economic Overview
During the past nine months, the Federal Reserve Board ("Fed") raised short-term
interest rates five times for a total of 125 basis points. (A basis point is
0.01% or one one-hundredth of a percent.) In our view, the Fed may increase
rates again at its next meeting scheduled on May 16, 2000.(3) And while no
assurances can be made, we believe the Fed's actions may slow down the historic
rate of economic growth as well as help to reduce the amount of speculation in
the stock market.
Primarily due to rising interest rates and a potential slowdown in economic
growth later on in 2000, we have begun to see higher volatility in the stock
market in recent weeks, which, in our opinion, may ultimately dampen investors'
exuberance for stocks. As many investors reassess the total return prospects of
stocks and look to reallocate their portfolios, the bond market, including
high-yield bonds, may eventually benefit from any renewed interest. However,
this potential shift in investor psychology may not become pronounced until the
second half of the year.
During the past six months, the high-yield sector of the U.S. bond market
continued to go down due to investor fears over continued economic growth,
potentially higher inflation and a more restrictive Fed monetary policy. In
addition, the high-yield bond market underperformed the overall bond market
----------
(3) On Tuesday, May 16, 2000 the Fed raised interest rates by 0.50%, to 6.50%,
after this letter was written.
--------------------------------------------------------------------------------
2 2000 Semi-Annual Report to Shareholders
<PAGE>
with modestly negative total returns in the negative 1.00% to negative 1.25%
range, compared to the 1.25% return of 10-Year U.S. Treasuries which are fast
becoming the new bond market benchmark. In addition, the high-yield bond market
was negatively affected by continued outflows from open-end high-yield bond
mutual funds, rate increases by the Fed, higher default rates in the overall
high-yield market and growing fears over slower economic growth given the
increase in short-term interest rates.
Recently, it appears that bond investors are beginning to believe that the Fed
should be able to engineer a "soft landing" for the U.S. economy, which, in our
view, would be a positive development for high-yield bonds. On the other hand,
depending upon the severity of any eventual economic slowdown, high-yield bonds
may also be negatively affected.
While market conditions for high-yield bonds remained challenging during the
past six months, we remain optimistic that we may be nearing a bottom in prices
in the high-yield bond market and expect to see improving trends in the second
half of 2000. In the near term, we remain cautious given the increased
volatility in the stock market and the potential for additional interest rate
increases by the Fed, as it attempts to contain excessive economic growth and
any subsequent inflationary pressures. Yet, despite our short-term caution, we
believe the high-yield bond market is attractively valued at current levels and
that we are in a strong position to take advantage of any economic or market
dislocations that may occur over the next six months.
Portfolio Strategy
During the reporting period, we sought to maintain a balance in the Fund's
portfolio between the higher growth sectors such as telecommunications,
technology, and cable & media and some of what we believed were issues from
better-positioned basic industries such as forest products, paper, energy and
specialty chemicals. During the period, we had added to our basic industry
positions on the assumption that stronger U.S. and global economic growth would
benefit a number of the U.S. economy's industrial segments. Some of the Fund's
better-performing investments during the period included:
o Huntsman Corp., a large specialty chemical company
o R & B Falcon, a major oil and gas services company
o Tembec, a paper and forest products company
o Nextel, a fast-growing wireless communications company
o NEXTLINK, a fast-growing local telecommunications company
o Verio, a fast-growing Internet service provider (ISP)
--------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 3
<PAGE>
Our yield-oriented strategy did penalize us somewhat from a performance
standpoint in the first quarter of 2000 as the high-yield bond market reacted
negatively to higher short-term interest rates, new issue supply pressure in the
middle-quality segment of the market and higher stock market volatility.
We have continued to reposition the portfolio with a continued emphasis on
middle-quality B/B rated issues that offer what we think are the best yield
potential. We also believe our yield-oriented strategy should work more
effectively if rates continue to rise. Moreover, we have sought to eliminate
underperforming companies that appear to be increasingly vulnerable to default.
We are pleased to report that the Fund had no defaulting issues in the past six
months and, while no guarantees can be made, we intend to work diligently to
minimize any potential problems in the portfolio going forward.
Conclusion
We see many compelling values in the high-yield bond market with many issues
trading at what we view are attractive discounts. Our strategy going forward
will be to focus on what we believe are the better-quality names in each sector
and look to pick up additional yield potential when deemed prudent. As
previously noted, we have a positive outlook on the total return prospects for
the high-yield bond market at current valuation levels, especially given the
continued health of the U.S. economy.
And while the future is always uncertain, we remain confident that our patience
may be rewarded later on this year since we expect that the Fed may be
ultimately successful in limiting the amount of excess speculation in the
financial markets. Should you have any questions about your investment in the
Fund, please call PFPC Global Services at (800) 331-1710. Thank you for your
continued confidence in our investment management approach.
Sincerely,
Sincerely,
/s/ Heath B. McLendon /s/ John C. Bianchi
Heath B. McLendon John C. Bianchi, CFA
Chairman Vice President
April 20, 2000
--------------------------------------------------------------------------------
4 2000 Semi-Annual Report to Shareholders
<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, PFPC Global Fund Services
("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.
A more complete description of the current Plan appears in the section of this
report beginning on page 30. To find out more detailed information about the
Plan and about how you can participate, please call PFPC Global Fund Services at
(800) 331-1710.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 5
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
=================================================================================================================================
CORPORATE BONDS AND NOTES-- 92.4%
<S> <C> <C> <C>
Aerospace-- 0.5%
Be Aerospace:
1,025,000 B Sr. Sub. Notes, 9.875% due 2/1/06 $ 925,063
745,000 B1* Sr. Sub. Notes, 9.500% due 11/1/08 644,425
2,005,000 B- Dunlop Standard Aerospace, Sr. Notes,
11.875% due 5/15/09 2,045,100
---------------------------------------------------------------------------------------------------------------------------------
3,614,588
---------------------------------------------------------------------------------------------------------------------------------
Airlines-- 1.2%
9,969,120 BB Airplanes Pass-Through Trust, Collateralized Mortgage
Obligation, Series D, 10.875% due 3/15/12 8,553,206
---------------------------------------------------------------------------------------------------------------------------------
Aluminium-- 1.5%
Kaiser Aluminium Chemical Corp.:
850,000 B1* Series B, Sr. Notes, 10.875% due 10/15/06 824,500
755,000 B1* Series D, Sr. Notes, 10.875% due 10/15/06 732,350
9,175,000 B3* Sr. Sub. Notes, 12.750% due 2/1/03 8,762,125
---------------------------------------------------------------------------------------------------------------------------------
10,318,975
---------------------------------------------------------------------------------------------------------------------------------
Apparel-- 0.1%
930,000 B- Tropical Sportswear International Corp., Series A,
Company Guaranteed, 11.000% due 6/15/08 864,900
---------------------------------------------------------------------------------------------------------------------------------
Auto Parts:O.E.M-- 1.7%
5,520,000 B Collins & Aikman Products Co., Company Guaranteed,
11.500% due 4/15/06 5,416,500
1,355,000 B Dura Operating Corp., Series B, Company Guaranteed,
9.000% due 5/1/09 1,212,725
Hayes Lemmerz International Inc., Company Guaranteed:
1,195,000 B Series B, 8.250% due 12/15/08 1,039,650
1,160,000 B 11.000% due 7/15/06 1,180,300
3,065,000 B+ Tenneco Automotive Inc., Series B, Company Guaranteed,
11.625% due 10/15/09 2,996,038
---------------------------------------------------------------------------------------------------------------------------------
11,845,213
---------------------------------------------------------------------------------------------------------------------------------
Broadcasting-- 0.8%
3,955,700 NR AMFM Operating, Inc., Debentures, 12.625%
due 10/31/06 4,549,055
890,000 B Capstar Broadcasting Partners, Inc., Sr. Discount Notes,
step bond to yield 11.002% due 2/1/09 799,887
---------------------------------------------------------------------------------------------------------------------------------
5,348,942
---------------------------------------------------------------------------------------------------------------------------------
Building Products-- 1.4%
1,945,000 B Amatek Industries Property Ltd., Sr. Sub. Notes,
12.000% due 2/15/08 1,840,456
2,020,000 B Atrium Companies Inc., Series B, Company Guaranteed,
10.500% due 5/1/09 1,913,950
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
6 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
=================================================================================================================================
<S> <C> <C> <C>
Building Products-- 1.4% (continued)
Nortek Inc., Series B, Sr. Notes:
3,420,000 B+ 9.250% due 3/15/07 $ 3,180,600
3,150,000 B+ 9.125% due 9/1/07 2,898,000
---------------------------------------------------------------------------------------------------------------------------------
9,833,006
---------------------------------------------------------------------------------------------------------------------------------
Cable Television-- 11.2%
Adelphia Communications Corp., Sr. Notes:
5,520,000 B+ 9.875% due 3/1/07 5,354,400
1,790,000 BB- 8.375% due 11/15/17 1,432,000
890,000 CCC+ Cable Satisfaction International, Sr. Notes,
12.750% due 3/1/10 876,650
Century Communications Corp.:
4,760,000 BB- Series B, Sr. Discount Notes, step bond to yield
10.710% due 1/15/08 1,975,400
700,000 BB- Sr. Notes, 9.750% due 2/15/02 703,500
Charter Communications Holdings Capital LLC:
8,500,000 B+ Sr. Discount Notes, step bond to yield
11.713% due 1/15/10+ 4,653,750
2,160,000 B+ Sr. Notes, 10.000% due 4/1/09+ 2,089,800
3,625,000 BB- CSC Holdings Inc., Sr. Sub. Debentures,
10.500% due 5/15/16 4,001,094
1,900,000 GBP B- Diamond Holdings PLC, Company Guaranteed,
10.000% due 2/1/08 2,955,299
1,835,000 B Echostar DBS Corp., Sr. Notes, 9.375% due 2/1/09 1,775,363
6,485,000 B- NTL Inc., Series B, Sr. Notes, 11.500% due 10/1/08 6,695,762
2,505,000 B- RCN Corp., Sr. Discount Notes, step bond to yield
11.461% due 10/15/07 1,609,462
7,260,000 BB- Rogers Cablesystems, Ltd., Company Guaranteed,
11.000% due 12/1/15 8,131,200
3,650,000 B+ TeleWest Communications PLC, Sr. Notes,
11.250% due 11/1/08 3,777,750
27,880,000 B- United International Holdings, Inc., Series B,
Sr. Discount Notes, step bond to yield
11.176% due 2/15/08 19,237,200
22,000,000 B United Pan Europe Communications NV, Series B,
Sr. Discount Notes, step bond to yield
12.500% due 8/1/09 11,715,000
---------------------------------------------------------------------------------------------------------------------------------
76,983,630
---------------------------------------------------------------------------------------------------------------------------------
Casinos/Gambling-- 2.1%
705,000 BB+ Circus Circus Enterprises Inc., Sr. Sub. Debenture,
7.625% due 7/15/13 549,900
1,790,000 B Harveys Casino Resorts, Sr. Sub. Notes,
10.625% due 6/1/06 1,834,750
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 7
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
=================================================================================================================================
<S> <C> <C> <C>
Casinos/Gambling -- 2.1% (continued)
Hollywood Casino:
3,185,000 B Company Guaranteed, 11.250% due 5/1/07 $ 3,208,888
850,000 B 1st Mortgage Notes, 13.000% due 8/1/06+ 909,500
1,450,000 NR Jazz Casino Co LLC, Sr. Sub. Notes,
5.867% due 11/15/09 456,750
Sun International Hotels, Company Guaranteed:
2,110,000 Ba3* 9.000% due 3/15/07 1,899,000
2,645,000 Ba3* 8.625% due 12/15/07 2,413,563
3,230,000 B- Venetian Casino, Company Guaranteed,
12.250% due 11/15/04 3,052,350
---------------------------------------------------------------------------------------------------------------------------------
14,324,701
---------------------------------------------------------------------------------------------------------------------------------
Chemicals - Major-- 1.6%
Huntsman Corp.:
3,880,000 B+ Company Guaranteed, 10.125% due 7/1/09 3,744,200
17,800,000 B+ Sr. Discount Notes, 12.710% due 12/31/09 5,251,000
2,265,000 B+ Terra Industries, Series B, Sr. Notes, 10.500% due 6/15/05 1,721,400
---------------------------------------------------------------------------------------------------------------------------------
10,716,600
---------------------------------------------------------------------------------------------------------------------------------
Chemicals - Specialty-- 0.5%
3,295,000 B Avecia Group PLC, Company Guaranteed,
11.000% due 7/1/09 3,311,475
---------------------------------------------------------------------------------------------------------------------------------
Coal Mining-- 0.2%
4,750,000 Caa* AEI Resources Inc., Company Guaranteed,
10.500% due 12/15/05+ 1,045,000
---------------------------------------------------------------------------------------------------------------------------------
Construction/AG Equipment/Trucks-- 0.5%
3,775,000 B Columbus McKinnon Corp., Company Guaranteed,
8.500% due 4/1/08 3,317,281
---------------------------------------------------------------------------------------------------------------------------------
Containers/Packaging-- 3.3%
5,500,000 EUR B1* BSN Financing Co.,Series B, Company Guaranteed,
10.250% due 8/1/09+ 5,499,789
1,195,000 B BWAY Corp., Company Guaranteed,
10.250% due 4/15/07 1,076,994
3,250,000 B Huntsman Packaging Corp., Company Guaranteed,
9.125% due 10/1/07 3,071,250
6,285,000 B Stone Container Finance Corp., Company Guaranteed,
11.500% due 8/15/06+ 6,654,244
3,725,000 B- Sweetheart Cup Co Inc., Sr. Sub Notes,
10.500% due 9/1/03 3,529,437
Tekni-Plex Inc., Series B:
150,000 B- Company Guaranteed, 9.250% due 3/1/08 143,250
2,435,000 B- Sr. Sub. Notes, 11.250% due 4/1/07 2,501,963
---------------------------------------------------------------------------------------------------------------------------------
22,476,927
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
8 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
=================================================================================================================================
<S> <C> <C> <C>
Contract Drilling-- 1.8%
Parker Drilling Co.:
1,655,000 B+ Company Guaranteed, Series D, 9.750% due 11/15/06 $ 1,601,212
595,000 B- 5.500% due 8/1/04 449,969
3,490,000 BB Pride International Inc., Sr. Notes, 10.000% due 6/1/09 3,437,650
3,375,000 Ba3* R&B Falcon Co., Sr. Notes, 12.250% due 3/15/06 3,623,906
3,095,000 BB- RBF Finance Co., Company Guaranteed,
11.375% due 3/15/09 3,346,469
---------------------------------------------------------------------------------------------------------------------------------
12,459,206
---------------------------------------------------------------------------------------------------------------------------------
Discount Stores-- 0.9%
3,340,000 B+ Ames Department Stores Inc., Sr. Notes,
10.000% due 4/15/06 3,097,850
2,900,000 BB+ Kmart Corp., Debentures, 12.500% due 3/1/05 3,277,000
---------------------------------------------------------------------------------------------------------------------------------
6,374,850
---------------------------------------------------------------------------------------------------------------------------------
Diversified Commercial Services-- 1.5%
4,950,000 B2* Intertek Finance PLC., Series B, Company Guaranteed,
10.250% due 11/1/06 4,207,500
6,675,000 B- Outsourcing Solutions Inc., Series B, Sr. Sub. Notes,
11.000% due 11/1/06 6,032,531
---------------------------------------------------------------------------------------------------------------------------------
10,240,031
---------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services-- 0.4%
Amresco, Inc., Sr. Sub. Notes:
1,850,000 Caa* Series 97-A, 10.000% due 3/15/04 1,341,250
1,890,000 Caa* Series 98-A, 9.875% due 3/15/05 1,370,250
---------------------------------------------------------------------------------------------------------------------------------
2,711,500
---------------------------------------------------------------------------------------------------------------------------------
Diversified Manufacturing-- 0.9%
2,050,000 B- Blount Inc., Company Guaranteed, 13.000% due 8/1/09 2,111,500
4,475,000 B+ Park-Ohio Industries Inc., Sr. Sub. Notes,
9.250% due 12/1/07 3,938,000
---------------------------------------------------------------------------------------------------------------------------------
6,049,500
---------------------------------------------------------------------------------------------------------------------------------
Drugs - Generic-- 1.3%
9,535,000 BB ICN Pharmaceuticals Inc., Series B, Sr. Notes,
9.250% due 8/15/05 9,272,788
---------------------------------------------------------------------------------------------------------------------------------
Electronic Components-- 0.5%
2,996,000 B+ Celestica International Inc., Sr. Sub. Notes,
10.500% due 12/31/06 3,145,800
---------------------------------------------------------------------------------------------------------------------------------
Engineering and Construction-- 1.2%
1,285,000 B- American Plumbing & Mechanical Inc., Series B,
Company Guaranteed, 11.625% due 10/15/08 1,169,350
1,700,000 BB- Integrated Electrical Services, Inc., Series B,
Company Guaranteed, 9.375% due 2/1/09 1,449,250
2,155,000 B- Orius Capital Corp., Sr. Sub. Notes, 12.750% due 2/1/10+ 2,165,775
3,870,000 B+ URS Corp., Series B, Sr. Sub. Notes, 12.250% due 5/1/09 3,908,700
---------------------------------------------------------------------------------------------------------------------------------
8,693,075
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 9
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
=================================================================================================================================
<S> <C> <C> <C>
Environmental Services-- 1.8%
Allied Waste Corp., Series B, Company Guaranteed:
1,160,000 BB 7.875% due 1/1/09 $ 928,000
13,430,000 B+ 10.000% due 8/1/09 9,971,775
1,670,000 B+ IT Group, Inc., Series B, Company Guaranteed,
11.250% due 4/1/09 1,592,763
---------------------------------------------------------------------------------------------------------------------------------
12,492,538
---------------------------------------------------------------------------------------------------------------------------------
Food Distributors-- 2.2%
2,625,000 B- Agrilink Foods Inc., Company Guaranteed,
11.875% due 11/1/08 2,480,625
6,615,000 B2* Carrols Corp., Company Guaranteed,
9.500% due 12/1/08 5,672,363
2,535,000 B- Premier International Foods PLC, Sr. Notes,
12.000% due 9/1/09+ 2,382,900
4,870,000 B SC International Services, Inc., Series B,
Company Guaranteed, 9.250% due 9/1/07 4,675,200
---------------------------------------------------------------------------------------------------------------------------------
15,211,088
---------------------------------------------------------------------------------------------------------------------------------
Foods - Specialty/Candy-- 0.7%
4,575,000 B- B&G Foods Inc., Company Guaranteed,
9.625% due 8/1/07 3,682,875
5,340,000 B2* Imperial Holly Corp., Company Guaranteed,
9.750% due 12/15/07 1,388,400
---------------------------------------------------------------------------------------------------------------------------------
5,071,275
---------------------------------------------------------------------------------------------------------------------------------
Forest Products-- 1.1%
4,955,000 B Ainsworth Lumber Co. Ltd., Sr. Notes,
12.500% due 7/15/07 5,382,369
2,070,000 B+ Millar Western Forest, Sr. Notes, 9.875% due 5/15/08 1,950,975
---------------------------------------------------------------------------------------------------------------------------------
7,333,344
---------------------------------------------------------------------------------------------------------------------------------
Home Furnishing-- 0.3%
2,130,000 B Falcon Products, Inc., Series B, Company Guaranteed,
11.375% due 6/15/09 1,988,888
---------------------------------------------------------------------------------------------------------------------------------
Hospital/Nursing Management-- 1.7%
3,575,000 Ba3* Fresenius Medical Care Capital Trust I, Company
Guaranteed Trust Preferred Securities,
9.000% due 12/1/06 3,396,250
11,530,000 B- Magellan Health Services, Inc., Sr. Sub. Notes,
9.000% due 2/15/08 8,532,200
---------------------------------------------------------------------------------------------------------------------------------
11,928,450
---------------------------------------------------------------------------------------------------------------------------------
Hotel/Resort-- 1.5%
1,765,000 B- Courtyard By Marriott II LP, Series B,
Sr. Notes, 10.750% due 2/1/08 1,709,844
2,825,000 BB HMH Properties, Inc., Sr. Notes, Series C,
8.450% due 12/1/08 2,464,813
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
10 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
=================================================================================================================================
<S> <C> <C> <C>
Hotel/Resort-- 1.5% (continued)
Intrawest Corp., Sr. Notes:
3,150,000 B+ 9.750% due 8/15/08+ $ 2,992,500
3,490,000 B+ 10.500% due 2/1/10+ 3,420,200
---------------------------------------------------------------------------------------------------------------------------------
10,587,357
---------------------------------------------------------------------------------------------------------------------------------
Insurance - Multi-Line-- 0.4%
4,175,000 B Veritas Capital Trust, Company Guaranteed Trust
Preferred Securities, 10.000% due 1/1/28 2,546,750
---------------------------------------------------------------------------------------------------------------------------------
Internet Services-- 5.8%
920,000 NR Colo.com, 13.875% due 3/15/10 @ 929,200
1,705,000 Caa* Cybernet Internet Services International, Sr. Notes,
14.000% due 7/1/09 1,364,000
4,350,000 B- Exodus Communications Inc., Sr. Notes,
10.750% due 12/15/09 4,263,000
3,110,000 NR Globix Corp., Sr. Notes, 12.500% due 2/1/10 2,845,650
PSINet Inc., Sr. Notes:
4,840,000 B- 11.500% due 11/1/08 4,791,600
3,285,000 B- 11.000% due 8/1/09 3,161,813
1,375,000 EUR B- 11.000% due 8/1/09 1,289,424
4,725,000 B- 11.000% due 8/1/09 4,583,250
2,260,000 B3* Rhythms Netconnections, Sr. Notes, 14.000% due 2/15/10+ 1,966,200
5,675,000 NR Splitrock Services, Inc., Series B, Company Guaranteed,
11.750% due 7/15/08 6,015,500
Verio Inc., Sr. Notes:
3,545,000 B- 11.250% due 12/1/08 3,518,413
3,530,000 B- 10.625% due 11/15/09+ 3,441,750
2,605,000 CCC+ WAM!NET Inc., Series B, Company Guaranteed,
step bond to yield 12.812% due 3/1/05 1,484,850
---------------------------------------------------------------------------------------------------------------------------------
39,654,650
---------------------------------------------------------------------------------------------------------------------------------
Leisure/Movies/Entertainment-- 0.6%
3,750,000 B- Premier Parks Inc., Sr. Discount Notes,
step bond to yield 10.873% due 4/1/08 2,400,000
2,050,000 B- SFX Entertainment, Inc., Series B, Company Guaranteed,
9.125% due 2/1/08 2,034,625
---------------------------------------------------------------------------------------------------------------------------------
4,434,625
---------------------------------------------------------------------------------------------------------------------------------
Medical Specialties-- 0.4%
3,450,000 B- Hanger Orthopedic Group, Inc., Sr. Sub. Notes,
11.250% due 6/15/09 2,760,000
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 11
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
=================================================================================================================================
<S> <C> <C> <C>
Multi-Sector Companies-- 0.5%
3,865,000 B- Triarc Consumer Beverage, Company Guaranteed,
10.250% due 2/15/09 $ 3,652,425
---------------------------------------------------------------------------------------------------------------------------------
Newspapers-- 0.6%
4,295,000 B+ Garden State Newspapers, Inc., Sr. Sub. Notes,
8.625% due 7/1/11 3,795,706
---------------------------------------------------------------------------------------------------------------------------------
Oil and Gas Production-- 2.5%
Belco Oil & Gas Corp., Series B:
1,200,000 B1* Company Guaranteed, 10.500% due 4/1/06 1,219,500
2,195,000 B1* Sr. Sub. Notes, 8.875% due 9/15/07 2,046,838
2,375,000 B Canadian Forest Oil Ltd., Company Guaranteed,
8.750% due 9/15/07 2,190,937
3,450,000 B Chesapeake Energy Corp., Series B, Company Guaranteed,
9.625% due 5/1/05 3,234,375
2,705,000 B Forest Oil Corp., Company Guaranteed,
10.500% due 1/15/06 2,745,575
2,905,000 B+ Nuevo Energy Co., Sr. Sub. Notes, 9.500% due 6/1/08 2,817,850
2,555,000 B Stone Energy Corp., Company Guaranteed,
8.750% due 9/15/07 2,376,150
545,000 B+ Vintage Petroleum, Inc., Sr. Sub. Notes,
9.750% due 6/30/09 552,494
---------------------------------------------------------------------------------------------------------------------------------
17,183,719
---------------------------------------------------------------------------------------------------------------------------------
Oil Refining/Marketing-- 0.3%
3,740,000 B Clark USA Inc., Series B, Sr. Notes,
10.875% due 12/1/05 2,019,600
---------------------------------------------------------------------------------------------------------------------------------
Oil and Gas Transmission-- 0.3%
2,175,000 BB- Leviathan Gas Pipeline Partners, LP, Series B,
Company Guaranteed, 10.375% due 6/1/09 2,229,375
---------------------------------------------------------------------------------------------------------------------------------
Paper-- 3.0%
Doman Industries Ltd.:
6,055,000 B Sr. Notes, 8.750% due 3/15/04 4,995,375
1,165,000 B Sr. Notes, 9.250% due 11/15/07 897,050
3,110,000 CCC+ Repap New Brunswick Inc., Sr. Notes,
10.625% due 4/15/05 2,791,225
Riverwood International Corp., Company Guaranteed:
3,430,000 B- 10.625% due 8/1/07 3,378,550
7,390,000 CCC+ 10.875% due 4/1/08 6,909,650
231,750 NR SD Warren Co., Debentures, 14.000% due 12/15/06 257,242
1,240,000 BB+ Tembec Finance Corp., Sr. Notes, 9.875% due 9/30/05 1,240,000
---------------------------------------------------------------------------------------------------------------------------------
20,469,092
---------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals-- 0.5%
3,510,000 B King Pharmaceuticals, Inc., Company Guaranteed,
10.750% due 2/15/09 3,492,450
---------------------------------------------------------------------------------------------------------------------------------
Photographic Products-- 0.6%
3,820,000 BB- Polaroid Corp., Sr. Notes, 11.500% due 2/15/06 3,867,750
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
12 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
=================================================================================================================================
<S> <C> <C> <C>
Printing/Forms-- 0.7%
1,765,000 B Merrill Corp., 12.000% due 5/1/09@ $ 1,720,875
2,100,000 GBP B Polestar Corp. PLC, Series B, Sr. Notes,
10.500% due 5/30/08 3,182,630
---------------------------------------------------------------------------------------------------------------------------------
4,903,505
---------------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts-- 0.5%
4,000,000 NR Ocwen Asset Investment Corp., Sr. Notes,
11.500% due 7/1/05 3,240,000
---------------------------------------------------------------------------------------------------------------------------------
Rental/Leasing Companies-- 0.7%
2,825,000 BB- Avis Rent a Car, Inc., Company Guaranteed,
11.000% due 5/1/09 2,817,938
820,000 B NationsRent, Inc., Company Guaranteed,
10.375% due 12/15/08 742,100
United Rentals, Inc., Series B, Company Guaranteed:
910,000 BB- 9.250% due 1/15/09 823,550
870,000 BB- 9.000% due 4/1/09 774,300
---------------------------------------------------------------------------------------------------------------------------------
5,157,888
---------------------------------------------------------------------------------------------------------------------------------
Retail - Food Chains-- 0.2%
1,390,000 B+ Stater Brothers Holdings Inc., Sr. Notes,
10.750% due 8/15/06 1,379,575
---------------------------------------------------------------------------------------------------------------------------------
Retail - Other Specialty Stores-- 0.4%
3,065,000 B- Advance Stores Co., Inc., Series B, Company Guaranteed,
10.250% due 4/15/08 2,452,000
---------------------------------------------------------------------------------------------------------------------------------
Savings and Loan Associations-- 0.8%
Ocwen Capital Trust I Corp.:
5,500,000 B2* Company Guaranteed, 10.875% due 8/1/27 3,245,000
2,600,000 B+ Notes, 11.875% due 10/1/03 2,366,000
---------------------------------------------------------------------------------------------------------------------------------
5,611,000
---------------------------------------------------------------------------------------------------------------------------------
Semiconductors-- 0.9%
6,510,000 B Fairchild Semiconductor Corp., Sr. Sub. Notes,
10.125% due 3/15/07 6,347,250
---------------------------------------------------------------------------------------------------------------------------------
Steel/Iron Ore-- 2.1%
600,000 B1* Algoma Steel Inc., 1st Mortgage Notes,
12.375% due 7/15/05 583,500
1,875,000 BB- LTV Corp.,Sr. Notes, 11.750% due 11/15/09+ 1,837,500
3,280,000 CCC+ Metal Management Inc., Company Guaranteed,
10.000% due 5/15/08 2,488,700
3,495,000 B+ Russel Metals Inc./RMI USA LLC,
10.000% due 6/1/09@ 3,451,313
4,075,000 B+ WCI Steel, Inc., Series B, Sr. Notes, 10.000% due 12/1/04 3,993,500
2,045,000 B- WHX Corp., Sr. Notes, 10.500% due 4/15/05 1,901,850
---------------------------------------------------------------------------------------------------------------------------------
14,256,363
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 13
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
=================================================================================================================================
<S> <C> <C> <C>
Telecommunications - Major U.S.-- 0.3%
1,760,000 B2* Omnipoint Corp., Series A, Sr. Notes,
11.625% due 8/15/06 $ 1,881,000
---------------------------------------------------------------------------------------------------------------------------------
Telecommunications-Other-- 11.9%
1,390,000 B+ Call-Net Enterprises, Inc., Sr. Notes,
9.375% due 5/15/09 1,070,300
1,250,000 EUR B+ Esat Telecom Group PLC, Sr. Notes,
11.875% due 11/1/09 1,519,080
Focal Communications Corp.:
1,750,000 B Series B, Sr. Discount Notes, step bond to yield
12.978% due 2/15/08 1,155,000
1,395,000 B Sr. Notes 11.875% due 1/15/10+ 1,408,950
3,400,000 EUR B Global Telesystems, Bonds, 11.000% due 12/1/09+ 3,123,325
2,490,000 CCC+ Gt Group Telecom, step bond to yield
13.250% due 2/1/10@ 1,394,400
Esprit Telecom Group PLC, Sr. Notes:
3,900,000 B- 11.500% due 12/15/07 3,588,000
4,000,000 DEM B- 11.500% due 12/15/07 1,859,099
2,250,000 B- 10.875% due 6/15/08 2,030,625
Hermes Europe Railtel B.V., Sr. Notes:
6,250,000 B 11.500% due 8/15/07 5,906,250
1,170,000 B 10.375% due 1/15/09 1,053,000
ICG Holdings Inc.:
1,695,000 B- Company Guaranteed, step bond to yield
13.156% due 5/1/06 1,402,613
1,165,000 B- Sr. Discount Notes, step bond to yield
12.957% due 9/15/05 1,103,837
2,300,000 EUR CCC+ Jazztel PLC, Sr. Notes, 13.250% due 12/15/09 2,250,392
KMC Telecom Holdings, Inc.:
2,865,000 B- Sr. Notes, 13.500% due 5/15/09 2,807,700
4,030,000 B- Sr. Discount Notes, step bond to yield
15.899% due 2/15/08 2,166,125
Level 3 Communications, Inc.:
12,055,000 B Sr. Discount Notes, step bond to yield
12.846% due 3/15/10+ 6,027,500
5,300,000 EUR B Sr. Notes, 11.250% due 3/15/10+ 5,020,860
NEXTLINK Communications, Inc.:
7,000,000 B Sr. Discount Notes, step bond to yield
12.051% due 6/1/09 3,955,000
4,815,000 B Sr. Discount Notes, step bond to yield
12.125% due 12/1/09+ 2,551,950
4,610,000 B Sr. Notes, 12.500% due 4/15/06 4,909,650
4,370,000 B Sr. Notes, 10.750% due 6/1/09 4,227,975
6,035,000 B- Primus Telecommunications Group, Inc., Sr. Notes,
11.750% due 8/1/04 5,823,775
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
14 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
=================================================================================================================================
<S> <C> <C> <C>
Telecommunications-Other-- 11.9% (continued)
3,260,000 B- Tele1 Europe B.V., Sr. Notes, 13.000% due 5/15/09 $ 3,423,000
625,000 Caa* Versatel Telecom International NV., Sr. Notes,
13.250% due 5/15/08 639,062
3,625,000 B- Viatel, Inc., Sr. Notes, 11.250% due 4/15/08 3,298,750
2,900,000 BB- Williams Communications Group Inc., Sr. Notes,
10.875% due 10/1/09 2,863,750
6,575,000 NR World Access Inc., Series B, Sr. Notes,
13.250% due 1/15/08 5,621,625
---------------------------------------------------------------------------------------------------------------------------------
82,201,593
---------------------------------------------------------------------------------------------------------------------------------
Telephone - Cellular-- 10.5%
4,600,000 CCC Airgate PCS Inc., Sr. Sub. Notes, step bond to yield
13.304% due 10/1/09 2,507,000
4,090,000 CCC+ Alamosa PCS Holdings, Inc., Company Guaranteed,
step bond to yield 12.723% due 2/15/10 1,983,650
1,125,000 B- Centennial Cellular Corp., Sr. Sub. Notes,
10.750% due 12/15/08 1,113,750
Clearnet Communications:
3,000,000 NR Sr. Secured Notes, 10.125% due 7/7/07+ 3,000,000
5,250,000 CAD B Sr. Discount Notes, step bond to yield
13.450% due 5/15/08 2,242,044
5,440,000 B Crown Castle International Corp., Sr. Discount Notes,
step bond to yield 11.165% due 5/15/11 3,100,800
1,855,000 NR Dobson / Sygnet Corp., Sr. Notes, 12.250% due 12/15/08 1,947,750
Dolphin Telecom PLC, Sr. Discount Notes:
3,125,000 CCC+ Step bond to yield 11.564% due 6/1/08 1,359,375
4,750,000 EUR Caa* Step bond to yield 9.780% due 6/1/08 1,931,744
4,100,000 BB Global Crossing Holdings LTD, Sr. Notes,
9.500% due 11/15/09+ 3,977,000
Microcell Telecommunications Inc., Sr. Discount Notes:
1,610,000 B3* Series B, step bond to yield 11.843% due 6/1/06 1,432,900
4,790,000 B- Step bond to yield 11.757% due 6/1/09 3,053,625
7,590,000 B- Millicom International Cellular S.A., Sr. Discount Notes,
step bond to yield 14.082% due 6/1/06 6,669,713
Nextel Communications, Inc., Sr. Discount Notes:
875,000 B1* Sr. Notes, 9.375% due 11/15/09 807,188
6,000,000 B1* Step bond to yield 10.802% due 9/15/07 4,380,000
14,270,000 B1* Step bond to yield 10.795% due 2/15/08 9,846,300
935,000 B2* Omnipoint Corp., Sr. Notes, 11.500% due 9/15/09+ 1,016,812
1,985,000 NR Spectrasite Holdings Inc., Sr. Discount Notes,
Step bond to yield 11.250% due 4/15/09 1,032,200
Telesystem International Wireless Inc., Sr. Discount Notes:
10,245,000 CCC+ Series B, step bond to yield 12.886% due 6/30/07 6,454,350
5,205,000 CCC+ Series C, step bond to yield 12.270% due 11/1/07 2,875,763
6,275,000 B3* Triton PCS, Inc., Company Guaranteed,
step bond to yield 11.296% due 5/1/08 4,282,687
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 15
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT++ RATING(a) SECURITY VALUE
=================================================================================================================================
<S> <C> <C> <C>
Telephone - Cellular-- 10.5% (continued)
Voicestream Wire Co.:
2,515,000 B2* Sr. Discount Notes, step bond to yield
11.875% due 4/15/10+ $ 1,509,000
4,345,000 B2* Sr. Notes, 10.375% due 11/15/09+ 4,323,275
Winstar Communications Corp.:
950,000 B- Sr. Discount Notes, step bond to yield
14.811% due 4/15/10+ 446,500
875,000 B- Sr. Notes, 12.750% due 4/15/10+ 842,188
---------------------------------------------------------------------------------------------------------------------------------
72,135,614
---------------------------------------------------------------------------------------------------------------------------------
Textiles-- 0.3%
4,550,000 DEM B Texon International PLC, Sr. Notes,
10.000% due 2/1/08 2,081,335
---------------------------------------------------------------------------------------------------------------------------------
Transportation - Marine-- 0.3%
2,125,000 B- Oglebay Norton Co., Sr. Sub. Notes,
10.000% due 2/1/09 1,981,562
15,000 BB- Sea Containers Ltd., Series A, Sr. Sub. Debentures,
12.500% due 12/1/04 13,950
---------------------------------------------------------------------------------------------------------------------------------
1,995,512
---------------------------------------------------------------------------------------------------------------------------------
Unregulated Power Generation-- 2.6%
AES Corp.:
7,510,000 Ba1* Sr. Notes, 9.500% due 6/1/09 7,209,600
5,370,000 Ba3* Sr. Sub. Notes, 10.250% due 7/15/06 5,289,450
5,375,000 BB Calpine Corp., Sr. Notes, 10.500% due 5/15/06 5,650,469
---------------------------------------------------------------------------------------------------------------------------------
18,149,519
---------------------------------------------------------------------------------------------------------------------------------
Wholesale Distributors-- 0.3%
1,775,000 B Buhrmann US, Inc., Sr. Sub. Notes, 12.250% due 11/1/09+ 1,806,063
---------------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES
(Cost-- $733,343,529) 635,818,493
=================================================================================================================================
</TABLE>
================================================================================
SHARES SECURITY VALUE
================================================================================
COMMON STOCK-- 0.1%
Telecommunications - Other-- 0.1%
20,125 Pagemart Nationwide Inc.+ 430,172
--------------------------------------------------------------------------------
Telecommunications Equipment-- 0.0%
20,659 World Access, Inc. 395,103
--------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost-- $373,320) 825,275
================================================================================
See Notes to Financial Statements.
--------------------------------------------------------------------------------
16 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 2000
--------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
PREFERRED STOCK-- 0.0%
Electronic Components-- 0.0%
4,032 Viasystems Inc., Payment-in-kind, Series B $ 72,588
--------------------------------------------------------------------------------
Savings and Loan Associations-- 0.0%
8,000 California Federal Preferred Capital Corp.,
Series A, Exchangeble 9.125% 175,000
--------------------------------------------------------------------------------
Telephone - Cellular-- 0.0%
85 Dobson Communications Corp., Payment-in-kind,
Exchangeble 13.000% 8,160
--------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost-- $260,372) 255,748
================================================================================
WARRANTS-- 0.9%
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-- 0.3%
1,705 Cybernet Internet Services, Expire 7/1/09 179,025
6,975 Splitrock Services, Inc., Expire 7/15/08 1,674,000
13,950 WAM!NET Inc., Expire 3/1/05+ 162,169
--------------------------------------------------------------------------------
2,015,194
--------------------------------------------------------------------------------
Paper-- 0.0%
8,175 SDW Holdings Corp., Expire 12/15/06+ 143,880
--------------------------------------------------------------------------------
Telecommunications - Other-- 0.4%
43,470 Pagemart, Inc., Expire 12/31/03 673,785
6,975 RSL Communications, Ltd., Expire 11/15/06 279,000
30,029 Tele 1 Europe B.V., Expire 5/15/09 574,316
1,675 Tele 1 Europe B.V.(EUR), Expire 5/15/09 575,983
625 VersaTel Telecom International N.V., Expire
5/15/08+ 378,125
--------------------------------------------------------------------------------
2,481,209
--------------------------------------------------------------------------------
Telephone - Cellular-- 0.1%
3,485 Airgate PCS Inc., Expire 10/1/09 627,300
6,725 Iridium World Communications Ltd., Expire
7/15/05+ 67
--------------------------------------------------------------------------------
627,367
--------------------------------------------------------------------------------
TOTAL WARRANTS
(Cost-- $1,748,885) 5,713,825
================================================================================
See Notes to Financial Statements.
--------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 17
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) March 31, 2000
--------------------------------------------------------------------------------
FACE
AMOUNT SECURITY VALUE
================================================================================
REPURCHASE AGREEMENT-- 6.6%
$45,421,000 Goldman Sachs & Co., 6.090% due 4/3/00;
Proceeds at maturity-- $45,444,051;
(Fully collateralized by U.S. Treasury Notes,
Bonds and Bills, 0.000% to 6.875%
due 4/6/00 to 5/15/30;
Market value-- $46,329,542)
(Cost-- $45,421,000) $ 45,421,000
================================================================================
TOTAL INVESTMENTS-- 100%
(Cost-- $735,726,106**) $688,034,341
================================================================================
++ 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
security.
** Aggregate cost for Federal income tax purposes is substantially the same.
See page 19 for definition of ratings.
Currency abbreviations used in this schedule:
CAD -- Canadian Dollar
DEM -- German Mark
EUR -- Euro
GBP -- British Pound
See Notes to Financial Statements.
--------------------------------------------------------------------------------
18 2000 Semi-Annual Report to Shareholders
<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 as medium grade obligations,
i.e., they are neither highly protected nor poorly secured.
Interest payments 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. Such 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 considered as well assured. Often the
protection of interest and principal payments may be very
moderate 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
of maintenance of other terms of the contract over any long
period of time may be small.
Caa -- Bonds rated "Caa" are of poor standing. These issues may be in
default, or present elements of danger may exist with respect
to principal or interest.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
--------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 19
<PAGE>
--------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) March 31, 2000
--------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost-- $735,726,106) $ 688,034,341
Cash 161
Receivable for securities sold 406,765
Receivable for open forward foreign currency contracts
(Note 8) 2,722,818
Interest and dividends receivable 15,618,233
--------------------------------------------------------------------------------
Total Assets 706,782,318
--------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 3,654,470
Dividends payable 1,914,827
Management fees payable 701,809
Payable for open forward foreign currency contracts (Note 8) 591,434
Accrued expenses 117,908
--------------------------------------------------------------------------------
Total Liabilities 6,980,448
--------------------------------------------------------------------------------
Total Net Assets $ 699,801,870
================================================================================
NET ASSETS:
Par value of capital shares $ 69,496
Capital paid in excess of par value 875,180,805
Undistributed net investment income 416,763
Accumulated net realized loss from security transactions (130,264,229)
Net unrealized depreciation of investments and foreign
currencies (45,600,965)
--------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $10.07 per share on 69,496,052 shares of
$0.001 par value outstanding; 500,000,000 shares authorized) $ 699,801,870
================================================================================
See Notes to Financial Statements.
--------------------------------------------------------------------------------
20 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations (unaudited)
--------------------------------------------------------------------------------
For the Six Months Ended March 31, 2000
INVESTMENT INCOME:
Interest $ 41,097,693
Dividends 355,380
--------------------------------------------------------------------------------
Total Investment Income 41,453,073
--------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 4,264,844
Shareholder communications 120,328
Custody 27,075
Shareholder and system servicing fees 19,052
Audit and legal 14,640
Directors' fees 5,516
Other 30,083
--------------------------------------------------------------------------------
Total Expenses 4,481,538
--------------------------------------------------------------------------------
Net Investment Income 36,971,535
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES (NOTES 3 AND 8):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) (30,240,488)
Foreign currency transactions 549,587
--------------------------------------------------------------------------------
Net Realized Loss (29,690,901)
--------------------------------------------------------------------------------
Change in Net Unrealized Depreciation of
Investments and Foreign Currencies:
Beginning of period (43,005,972)
End of period (45,600,965)
--------------------------------------------------------------------------------
Increase in Net Unrealized Depreciation (2,594,993)
--------------------------------------------------------------------------------
Net Loss on Investments and Foreign Currencies (32,285,894)
--------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 4,685,641
================================================================================
See Notes to Financial Statements.
--------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 21
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
For the Six Months Ended March 31, 2000 (unaudited) and the Year Ended September
30, 1999
2000 1999
================================================================================
OPERATIONS:
Net investment income $ 36,971,535 $ 73,859,720
Net realized loss (29,690,901) (41,919,147)
Increase in net unrealized depreciation (2,594,993) (14,161,100)
--------------------------------------------------------------------------------
Increase in Net Assets From Operations 4,685,641 17,779,473
--------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (35,715,339) (74,284,603)
Capital -- (454,788)
--------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (35,715,339) (74,739,391)
--------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Treasury stock acquired (24,128,827) --
Net asset value of shares issued
for reinvestment of dividends -- 2,293,455
--------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions (24,128,827) 2,293,455
--------------------------------------------------------------------------------
Decrease in Net Assets (55,158,525) (54,666,463)
NET ASSETS:
Beginning of period 754,960,395 809,626,858
--------------------------------------------------------------------------------
End of period* $ 699,801,870 $ 754,960,395
================================================================================
* Includes undistributed (overdistributed) net
investment income of: $ 416,763 $ (1,389,020)
================================================================================
See Notes to Financial Statements.
--------------------------------------------------------------------------------
22 2000 Semi-Annual Report to Shareholders
<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 discount 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,
--------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 23
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (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"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), which, in turn, is a subsidiary of Citigroup Inc.
("Citigroup"), 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, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $217,507,036
--------------------------------------------------------------------------------
Sales 265,709,337
================================================================================
At March 31, 2000, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $ 10,373,863
Gross unrealized depreciation (58,065,628)
--------------------------------------------------------------------------------
Net unrealized depreciation $(47,691,765)
================================================================================
--------------------------------------------------------------------------------
24 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
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
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
recognized 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, 2000, the Fund did not have any open futures contracts.
--------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 25
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
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, 2000, 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 six months ended March 31, 2000, the Fund did not write any call or
put options.
--------------------------------------------------------------------------------
26 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
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.
8. Forward Foreign Currency Contracts
At March 31, 2000, 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
reflected as follows:
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Gain (Loss)
================================================================================
To Buy:
Euro 17,609,290 $ 16,939,397 6/15/00 $ (561,587)
--------------------------------------------------------------------------------
To Sell:
British Pound 3,918,000 6,252,633 6/22/00 66,396
Canadian Dollar 3,307,500 2,282,146 6/8/00 (29,847)
Euro 43,799,665 42,133,437 6/15/00 2,656,422
--------------------------------------------------------------------------------
2,692,971
--------------------------------------------------------------------------------
Net Unrealized Gain on Open
Forward Foreign Currency Contracts $2,131,384
================================================================================
9. Capital Shares
At March 31, 2000, the Fund had 500,000,000 shares of common stock authorized
with a par value of $0.001.
On October 19, 1999, the Fund commenced a share repurchase plan. As of March 31,
2000, repurchased shares totaled 2,734,300.
--------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 27
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each year ended September
30, except where noted:
<TABLE>
<CAPTION>
2000(1) 1999 1998 1997 1996 1995
================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $10.45 $11.24 $12.43 $11.72 $11.48 $11.20
----------------------------------------------------------------------------------------------------------------
Income (Loss) From
Operations:
Net investment income 0.53 1.03 1.08 1.15 1.14 1.14
Net realized and unrealized
gain (loss) (0.47) (0.79) (1.14) 0.68 0.22 0.28
----------------------------------------------------------------------------------------------------------------
Total Income (Loss)
From Operations 0.06 0.24 (0.06) 1.83 1.36 1.42
----------------------------------------------------------------------------------------------------------------
Gains From Repurchase
of Treasury Stock 0.06 -- -- -- -- --
----------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.50) (1.03) (1.13) (1.12) (1.12) (1.12)
Capital -- (0.00)* -- -- -- (0.02)
----------------------------------------------------------------------------------------------------------------
Total Distributions (0.50) (1.03) (1.13) (1.12) (1.12) (1.14)
----------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.07 $10.45 $11.24 $12.43 $11.72 $11.48
----------------------------------------------------------------------------------------------------------------
Total Return,
Based on Market Value(2) 0.14%++ (9.36)% (1.65)% 18.18% 21.07% 9.90%
----------------------------------------------------------------------------------------------------------------
Total Return,
Based on Net Asset Value(2) 2.09%++ 2.74% (0.58)% 16.48% 12.86% 13.99%
----------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (millions) $700 $755 $810 $883 $819 $802
----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.21%+ 1.20% 1.18% 1.21% 1.21% 1.20%
Net investment income 10.00+ 9.28 8.81 9.63 9.85 10.02
----------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 31% 83% 98% 87% 73% 59%
----------------------------------------------------------------------------------------------------------------
Market Value,
End of Period $8.625 $9.125 $11.125 $12.438 $11.500 $10.500
================================================================================================================
</TABLE>
(1) For the six months ended March 31, 2000 (unaudited).
(2) 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.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
--------------------------------------------------------------------------------
28 2000 Semi-Annual Report to Shareholders
<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
2000
October 22 8.63 10.36 0.0840 9.190
November 18 8.94 10.40 0.0840 8.570
December 22 8.56 10.49 0.0840 8.490
January 21 9.00 10.42 0.0840 8.940
February 17 8.56 10.35 0.0840 8.430
March 24 8.63 10.07 0.0840 8.570
================================================================================
--------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 29
<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 PFPC Global Fund Services ("PFPC"), 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
shareholders who do not participate in the Plan will be paid by check mailed
directly to the record holder by or under the direction of PFPC 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, PFPC 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 PFPC has completed its purchases, the
market price exceeds the NAV of the common stock as of the valuation time, PFPC
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 PFPC is unable to stop open market purchases and
cause the Fund to issue the remaining shares, the average per share purchase
price paid by PFPC may exceed the NAV of the common stock as of the valuation
time, resulting in the acquisition of fewer shares than if the
--------------------------------------------------------------------------------
30 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Dividend Reinvestment Plan (unaudited) (continued)
--------------------------------------------------------------------------------
dividend or capital gains distribution had been paid in common stock issued by
the Fund at such net asset value. PFPC 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.
PFPC 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 PFPC 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. PFPC'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 PFPC, 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 PFPC Global Fund Services, P.O. Box 8030, Boston,
Massachusetts 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.
--------------------------------------------------------------------------------
High Income Opportunity Fund Inc. 31
<PAGE>
--------------------------------------------------------------------------------
Additional Shareholder Information (unaudited) (continued)
--------------------------------------------------------------------------------
On February 23, 2000, 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 Heath B. McLendon, Roderick C. Rasmussen and
John P. Toolan, 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
================================================================================
Heath B. McLendon 66,260,425.057 93.088% 1,230,404.269 1.729%
Roderick C. Rasmussen 66,225,233.057 93.039 1,265,596.269 1.778
John P. Toolan 66,123,119.283 92.895 1,367,710.043 1.921
================================================================================
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
================================================================================
66,525,198.300 93.46% 323,025.109 0.454% 642,605.917 0.903%
================================================================================
* The following Directors, representing the balance of the Board of
Directors, continue to serve as Directors: Lee Abraham, Allan J.
Bloostein, Jane F. Dasher, Donald R. Foley, Richard E. Hanson, Jr. and
Paul Hardin.
--------------------------------------------------------------------------------
32 2000 Semi-Annual Report to Shareholders
<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
PFPC Trust Company
TRANSFER AGENT
PFPC Global Fund Services
P.O. Box 8030
Boston, Massachusetts 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.
HIGH INCOME OPPORTUNITY FUND INC.
388 Greenwich Street
New York, New York 10013
FD0802 5/00
HIO
------
Listed
------
NYSE
THE NEW YORK STOCK EXCHANGE
