UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-5497
Municipal High Income Fund Inc.
(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004
(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Smith Barney Fund Management LLC
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 451-2010
Date of fiscal year end: October 31
Date of reporting period: April 30, 2004
ITEM 1. REPORT TO STOCKHOLDERS.
The Semi-Annual Report to Stockholders is filed herewith.
[CLIP ART]
Municipal
High Income
Fund Inc.
[GRAPHIC OMITTED]
Semi-Annual
Report
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April 30,
2004
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Municipal High Income Fund Inc.
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WHAT'S INSIDE
Letter from the Chairman .................................................... 1
Schedule of Investments ..................................................... 5
Statement of Assets and Liabilities ......................................... 18
Statement of Operations ..................................................... 19
Statements of Changes in Net Assets ......................................... 20
Notes to Financial Statements ............................................... 21
Financial Highlights ........................................................ 25
Financial Data .............................................................. 26
Additional Shareholder Information .......................................... 27
Dividend Reinvestment Plan .................................................. 28
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Municipal High Income Fund Inc.
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LETTER FROM THE CHAIRMAN
[PHOTO OMITTED]
R. JAY GERKEN, CFA
Chairman, President and
Chief Executive Officer
Dear Shareholder,
Bond investors spent much of the six months ended April 30, 2004 dissecting
language from the Federal Reserve for clues on its assessment of the U.S.
economy. During this time, the economy's quarterly pace of growth continued to
advance at a moderate rate that significantly exceeded levels in early 2003.(i)
Even the labor market, which generated lackluster results over most of the
period, grew significantly in March by some measures.(ii) On a local level,
state-tax revenues remained stronger versus the first half of last year.
The combination of stronger economic growth and recent comments from the Fed
exacerbated bond investors' concerns about the course of interest rates. As a
result the yields on municipal bonds, which move opposite to their prices, rose
over the period following their sharp spike in April.(iii) However, given that
the fund's manager had anticipated that the U.S. economy could begin to pick up,
the manager maintained a defensive posture in managing the fund's exposure to
interest rate sensitivity. Although this approach detracted from the fund's
performance during times when bond prices rose, it diminished the downward
pricing pressures on the portfolio when bond prices declined, such as in April.
Your fund returned 1.61%, based on its New York Stock Exchange ("NYSE") market
price and 2.47% based on its net asset value ("NAV")(iv) per share during the
six months ended April 30. In comparison, the unmanaged Lehman Brothers
Municipal Bond Index(v) returned 1.19% and its Lipper high-yield municipal debt
closed-end funds category average was 3.09% over the same time frame.(vi) Please
note that Lipper performance returns are based on each fund's NAV.
During this six-month period, the fund distributed dividends to shareholders
totaling $0.28 per share. The performance table shows the fund's 30-day SEC and
annualized distribution yields as well as its six-month total return based on
its NAV and market price as of April 30, 2004. Past performance is not
indicative of future results. The fund's yields will vary.
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FUND PERFORMANCE AS OF APRIL 30, 2004
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Annualized Six-Month
30-Day Distribution Total
Price Per Share SEC Yield Yield Return
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$7.83 (NAV) 6.95% 6.97% 2.47%
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$7.50 (NYSE) 7.26% 7.28% 1.61%
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All figures represent past performance and are not a guarantee of future
results. The fund's yields will vary.
Total returns are based on changes in NAV or market price, respectively. Total
returns assume the reinvestment of all dividends and/or capital gains
distributions, if any, in additional shares. Annualized distribution yield is
the fund's current monthly income dividend rate, annualized, and then divided by
the NAV or the market price noted in this report. The annualized distribution
yield assumes a current monthly income dividend rate of $0.0455 for 12 months.
The "SEC yield" is a return figure often quoted by bond and other fixed income
mutual funds. This quotation is based on the most recent 30-day (or one month)
period covered by the fund's filings with the SEC. The yield figure reflects the
dividends and interest earned during the period after deduction of the fund's
expenses for the period. These yields are as of April 30, 2004 and are subject
to change.
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Information About Your Fund
In recent months several issues in the mutual fund industry have come under the
scrutiny of federal and state regulators. The fund's Adviser and some of its
affiliates have received requests for information from various government
regulators regarding market timing, late trading, fees and other mutual fund
issues in connection with various investigations. The fund has been informed
that the Adviser and its affiliates are responding to those information
requests, but are not in a position to predict the outcome of these requests and
investigations.
Looking for Additional Information?
The fund is traded under the symbol "MHF" and its closing market price is
available in most newspapers under the NYSE listings. The daily NAV is available
online under symbol XMHFX. Barron's and The Wall Street Journal's Monday
editions carry closed-end fund tables that will provide additional information.
In addition, the fund issues a quarterly press release that can be found on most
major financial web sites as well as www.citigroupassetmanagement.com.
In a continuing effort to provide information concerning the fund, shareholders
may call 1-888-735-6507, Monday through Friday from 8:00 a.m. to 6:00 p.m.
Eastern Time, for the fund's current net asset value, market price and other
information regarding the fund's portfolio holdings and allocations.
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Thank you for your investment in the Municipal High Income Fund Inc. We
appreciate that you have entrusted us to manage your money and value our
relationship with you.
Sincerely,
/s/ R. Jay Gerken
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
May 8, 2004
The information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. Views expressed may differ
from those of the firm as a whole.
RISKS: The fund may use derivatives, such as options and futures, which can be
illiquid, may disproportionately increase losses, and have a potentially large
impact on fund performance. High yield bonds involve greater credit and
liquidity risks than investment grade bonds. Certain investors may be subject to
the Federal Alternative Minimum Tax (AMT), and state and local taxes may apply.
Capital gains, if any, are fully taxable.
All index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
(i) Source: Based upon gross domestic product data from the Bureau of Economic
Analysis (January 30, 2004). Gross domestic product is a market value of
goods and services produced by labor and property in a given country.
(ii) Based upon data released on April 1, 2004 from the U.S. Department of
Labor.
(iii) Source: Based upon data reflecting average yields on a universe of general
obligation municipal bonds derived via Bloomberg LLP.
(iv) NAV is a price that reflects the value of the fund's underlying portfolio
plus other assets, less the fund's liabilities. However, the price at
which an investor may buy or sell shares of the fund is at the fund's
market price as determined by supply of and demand for the fund's common
shares, which may be more or less than the fund's NAV.
(v) The Lehman Brothers Municipal Bond Index is a broad measure of the
municipal bond market with maturities of at least one year.
(vi) Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the six-month period ended April 30, 2004, calculated
among the 14 funds in the fund's Lipper category including the
reinvestment of dividends and capital gains, if any.
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Take Advantage of the Fund's Dividend Reinvestment Plan!
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, if any, in additional shares of the Fund. A more complete
description of the Plan begins on page 28. 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 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 shares is equal
to or higher than 98% of the net asset value ("NAV") per share on the date of
valuation, you will be issued shares for the equivalent of either 98% of the
most recently determined NAV per share or 95% of the market price, whichever is
greater.
If 98% of the NAV per share at the time of valuation is greater than the market
price of the common stock, the Fund will buy shares for your account in the open
market or on the New York Stock Exchange.
If the Fund begins to purchase additional shares in the open market and the
market price of the shares subsequently rises above 98% of the NAV before the
purchases are completed, the Fund will attempt to cancel any remaining orders
and issue the remaining dividend or distribution in shares at 98% of the Fund's
NAV per share. 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.
To find out more detailed information about the Plan and about how you can
participate, please call PFPC Inc. at 1 (800) 331-1710.
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Municipal High Income Fund Inc.
[CLIP ART] Schedule of Investments (unaudited)
April 30, 2004
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FACE
AMOUNT RATING(a) SECURITY VALUE
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MUNICIPAL BONDS -- 100.0%
Alabama -- 4.0%
$ 4,000,000 BB+ Butler, AL IDB, Solid Waste Disposal Revenue, (James River
Corp. Project), 8.000% due 9/1/28 (b) ..................... $ 4,102,280
615,000 NR Capstone Improvement District of Brookwood, AL, Series A,
7.700% due 8/15/23 (c) .................................... 153,750
11,765 D Mobile, AL IDB, Solid Waste Disposal Revenue, (Mobile
Energy Services Co. Project), 6.950% due 1/1/20 (c) ....... 86
1,000,000 NR Rainbow City, AL Special Health Care Facility Financing
Authority, Series A, 8.250% due 1/1/31 .................... 1,036,030
1,000,000 AAA West Jefferson, AL Amusement & Public Park Authority
Revenue, (Visionland Project), (Call 12/1/06 @ 102),
8.000% due 12/1/26 (d) .................................... 1,170,070
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6,462,216
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Alaska -- 0.7%
1,055,000 NR Alaska Industrial Development & Export Authority
Revenue, Williams Lynxs Alaska Cargoport,
8.125% due 5/1/31 (b)(e) .................................. 1,091,028
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Arizona -- 3.1%
1,500,000 NR Casa Grande, AZ IDA, Hospital Revenue, Casa Grande Regional
Medical Center, Series A, 7.625% due 12/1/29 .............. 1,549,260
1,000,000 CCC+ Gila County, AZ IDA Revenue, ASARCO Inc.,
5.550% due 1/1/27 (e) ..................................... 684,940
960,000 NR Maricopa, AZ IDA, MFH Revenue, (Gran Victoria Housing
LLC Project), Series B, 10.000% due 5/1/31 (e) ............ 957,312
1,810,000 NR Phoenix, AZ IDA, MFH Revenue, (Ventana Palms Apartments
Project), Series B, 8.000% due 10/1/34 .................... 1,759,628
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4,951,140
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Arkansas -- 1.1%
Arkansas State Development Finance Authority:
1,000,000 BBB++ Hospital Revenue, (Washington Regional Medical Center
Project), 7.375% due 2/1/29 ............................ 1,110,800
600,000 BB+ Industrial Facilities Revenue, (Potlatch Corp. Project),
Series A, 7.750% due 8/1/25 (b) ........................ 637,788
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1,748,588
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California -- 6.6%
1,500,000 NR Barona, CA Band of Mission Indians GO,
8.250% due 1/1/20 (e) ..................................... 1,603,395
California State Department of Water Resources,
Power Supply Revenue:
1,500,000 AAA++ MBIA-Insured, RITES, 9.402% due 5/1/11 (f) ............. 1,667,310
750,000 NR XLCA-Insured, RITES, 9.402% due 5/1/10 (f) ............. 856,455
See Notes to Financial Statements.
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Municipal High Income Fund Inc.
[CLIP ART] Schedule of Investments (unaudited) (continued)
April 30, 2004
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FACE
AMOUNT RATING(a) SECURITY VALUE
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California -- 6.6% (continued)
$ 1,500,000 NR California Statewide Communities Development Authority
Revenue, (East Valley Tourist Project), Series A,
9.250% due 10/1/20 ........................................ $ 1,583,310
Golden State Tobacco Securitization Corp., Tobacco
Settlement Revenue:
1,000,000 Baa2* 5.625% due 6/1/38 (e) .................................. 1,000,300
2,000,000 BBB 7.800% due 6/1/42 (e) .................................. 2,112,840
1,865,000 Ba3* Vallejo, CA COP, Touro University, 7.375% due 6/1/29 ........ 1,903,456
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10,727,066
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Colorado -- 0.3%
999,000 NR Highline Business Improvement District, Littleton, CO GO,
Series B, 8.750% due 12/15/19 (c)(e) ...................... 449,550
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District of Columbia -- 1.3%
1,895,000 AAA District of Columbia COP, AMBAC-Insured,
5.500% due 1/1/20 ......................................... 2,051,224
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Florida -- 12.2%
1,000,000 NR Beacon Lakes Community Development District, Special
Assessment, Series A, 6.900% due 5/1/35 ................... 1,008,640
Capital Projects Finance Authority, FL:
2,000,000 NR Continuing Care Retirement, Glenridge on Palmer Ranch,
Series A, 8.000% due 6/1/32 ............................ 1,988,740
2,000,000 NR Student Housing Revenue, Florida University, Series A,
7.850% due 8/15/31 ..................................... 1,964,360
1,000,000 NR Capital Trust Agency Revenue, Seminole Tribe Convention
Center, Series A, 10.000% due 10/1/33 ..................... 1,217,950
995,000 NR Century Parc Community Development District, Special
Assessment, 7.000% due 11/1/31 ............................ 1,024,273
1,000,000 A Highlands County, FL, Health Facilities Authority Revenue,
Adventist Health Systems, 6.000% due 11/15/25 (e) ......... 1,055,930
2,750,000 NR Hillsborough County, FL IDA Revenue, (Lake Shore Villas
Project), Series A, 6.750% due 7/1/29 (e) ................. 2,340,525
875,000 NR Homestead, FL IDR, Community Rehabilitation Providers
Program, Series A, 7.950% due 11/1/18 (e) ................. 891,441
2,000,000 BBB- Martin County, FL IDA Revenue, (Indiantown Cogeneration
Project), Series A, 7.875% due 12/15/25 (b)(e) ............ 2,056,420
1,000,000 NR Orange County, FL Health Facilities Authority Revenue, First
Mortgage, (GF/Orlando, Inc. Project), 9.000% due 7/1/31 ... 1,017,210
570,000 AAA Palm Beach County, FL Health Facilities Authority Revenue,
(John F. Kennedy Memorial Hospital Inc. Project),
9.500% due 8/1/13 (g) ..................................... 741,034
See Notes to Financial Statements.
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Municipal High Income Fund Inc.
[CLIP ART] Schedule of Investments (unaudited) (continued)
April 30, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
=====================================================================================================
Florida -- 12.2% (continued)
$ 2,000,000 NR Reunion East Community Development District, Special
Assessment, Series A, 7.375% due 5/1/33 ................... $ 2,120,500
1,000,000 BB-++ Santa Rosa Bay Bridge Authority, FL Revenue,
6.250% due 7/1/28 ......................................... 808,870
1,475,000 NR Waterlefe Community Development District, Golf Course
Revenue, 8.125% due 10/1/25 ............................... 1,518,100
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19,753,993
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Georgia -- 4.0%
1,000,000 AAA Atlanta, GA Airport Revenue, Series B, FGIC-Insured,
5.625% due 1/1/30 (b) ..................................... 1,033,960
2,500,000 NR Atlanta, GA Tax Allocation, (Atlantic Station Project),
7.900% due 12/1/24 ........................................ 2,605,425
1,000,000 NR Atlanta, GA Urban Residential Finance Authority, MFH Revenue,
Park Place Apartments, Series A, 6.750% due 3/1/31 ........ 793,400
1,000,000 BBB+++ Gainesville & Hall County, GA Development Authority Revenue,
Senior Living Facility, Lanier Village Estates, Series C,
7.250% due 11/15/29 (e) ................................... 1,066,140
1,005,000 NR Walton County, GA IDA Revenue, (Walton Manufacturing Co.
Project), 8.500% due 9/1/07 ............................... 952,810
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6,451,735
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Illinois -- 2.1%
2,000,000 AAA Chicago, IL GO, Neighborhoods Alive 21 Program,
FGIC-Insured, 5.500% due 1/1/31 ........................... 2,060,440
1,380,000 A Illinois Finance Authority Revenue, 5.250% due 11/15/21 ..... 1,384,250
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3,444,690
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Indiana -- 2.1%
2,500,000 B- East Chicago, IN PCR, (Inland Steel Co. Project No. 10),
6.800% due 6/1/13 ......................................... 2,164,875
1,000,000 CCC Indiana State Development Finance Authority, PCR, (Inland
Steel Co. Project No. 13), 7.250% due 11/1/11 (b)(e) ...... 831,980
975,000 NR Indianapolis, IN MFH Revenue, (Lake Nora Fox Club Project),
Series B, 7.500% due 10/1/29 (c)(e) ....................... 380,250
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3,377,105
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Louisiana -- 5.6%
1,000,000 NR Epps, LA COP, 8.000% due 6/1/18 (e) ......................... 979,310
2,000,000 NR Louisiana Local Government Environmental Facilities,
Community Development Authority Revenue, St. James
Place, Series A, 8.000% due 11/1/25 (e) ................... 1,658,460
2,975,000 NR Louisiana Public Facilities Authority Hospital Revenue,
(Lake Charles Memorial Hospital Project),
8.625% due 12/1/30 (e) .................................... 2,242,466
See Notes to Financial Statements.
7
Municipal High Income Fund Inc.
[CLIP ART] Schedule of Investments (unaudited) (continued)
April 30, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
=====================================================================================================
Louisiana -- 5.6% (continued)
Port of New Orleans, LA IDR:
Avondale Industries, Inc. Project:
$ 335,000 NR 8.250% due 6/1/04 (g) .................................. $ 336,732
2,785,000 NR Call 6/1/04 @ 103, 8.500% due 6/1/14 (d) ............... 2,878,242
1,000,000 BB- Continental Grain Co. Project, 7.500% due 7/1/13 .......... 1,029,580
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9,124,790
--------------
Maryland -- 1.8%
3,000,000 NR Maryland State Economic Development Corp. Revenue,
Chesapeake Bay, Series A, 7.730% due 12/1/27 (e) .......... 2,874,660
--------------
Massachusetts -- 5.7%
Boston, MA IDA Financing Revenue:
750,000 NR Crosstown Center Project, 8.000% due 9/1/35 (b) ........... 750,908
970,000 NR Roundhouse Hospitality LLC Project,
7.875% due 3/1/25 (b) ................................. 967,371
1,000,000 NR Massachusetts State Development Finance Agency Revenue,
Briarwood, Series B, 8.250% due 12/1/30 (e) ............... 1,049,720
Massachusetts State Health & Education Facilities
Authority Revenue:
1,000,000 AAA Beth Israel Deaconess Medical Center, Series G-4,
AMBAC-Insured, INFLOS, 10.653% due 7/1/25 (e)(f) ..... 1,013,180
1,000,000 BBB Caritas Christi Obligation, Series B,
6.750% due 7/1/16 (e) ................................ 1,099,350
2,000,000 VMIG 1* LOC-Fleet National Bank, Series E,
1.100% due 1/1/35 (h) ................................ 2,000,000
430,000 AA Massachusetts State HFA, Single-Family Housing Revenue,
Series 38, 7.200% due 12/1/26 (b) ......................... 441,326
1,940,000 NR Massachusetts State Industrial Finance Agency Revenue,
Assisted Living Facility, (Marina Bay LLC Project),
7.500% due 12/1/27 (b)(e) ................................. 1,956,800
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9,278,655
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Michigan -- 4.7%
2,130,000 NR Allen Academy COP, 7.500% due 6/1/23 (e) .................... 2,040,519
1,000,000 NR Cesar Chavez Academy COP, 8.000% due 2/1/33 ................. 1,002,660
2,000,000 Ba2* Garden City, MI Hospital Finance Authority, Hospital Revenue,
Garden City Hospital Obligation Group, Series A,
5.625% due 9/1/10 (e) ..................................... 1,866,040
1,000,000 NR Gaudior Academy Michigan Certificates,
7.250% due 4/1/34 (e) ..................................... 976,070
See Notes to Financial Statements.
8
Municipal High Income Fund Inc.
[CLIP ART] Schedule of Investments (unaudited) (continued)
April 30, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
=====================================================================================================
Michigan -- 4.7% (continued)
$ 1,750,000 NR Kalamazoo Advantage Academy COP, 8.000% due 12/1/33 (e) ..... $ 1,707,318
2,000,000 NR Michigan State Strategic Fund, Resource Recovery Limited
Obligation Revenue, Central Wayne Energy Recovery L.P.,
Series A, 6.900% due 7/1/19 (b)(c) ........................ 100,000
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7,692,607
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Minnesota -- 0.5%
1,000,000 NR Minneapolis & St. Paul, MN Metropolitan Airports Community
Special Facility Revenue, (Northwest Airlines Project),
Series A, 7.000% due 4/1/25 (b) ........................... 899,150
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Missouri -- 0.2%
250,000 NR St. Joseph, MO IDA, (Living Community of St. Joseph Project),
7.000% due 8/15/32 ........................................ 255,658
--------------
Montana -- 1.9%
4,515,000 NR Montana State Board of Investment, Resource Recovery
Revenue, (Yellowstone Energy L.P. Project),
7.000% due 12/31/19 (b) ................................... 3,153,953
--------------
New Jersey -- 5.2%
1,000,000 NR New Jersey EDA, Series A, Retirement Community Revenue,
8.250% due 11/15/30 ....................................... 1,067,710
3,000,000 BBB- New Jersey Health Care Facilities Financing Authority Revenue,
Trinitas Hospital Obligation Group, 7.500% due 7/1/30 ..... 3,281,640
2,000,000 AAA New Jersey State Turnpike Authority, Turnpike Revenue,
AMBAC-Insured, 5.000% due 1/1/30 .......................... 2,013,020
Tobacco Settlement Financing Corp. Revenue:
1,000,000 BBB 6.750% due 6/1/39 ......................................... 946,300
1,215,000 BBB 6.125% due 6/1/42 ......................................... 1,045,787
--------------
8,354,457
--------------
New Mexico -- 0.1%
125,000 AAA Albuquerque, NM Hospital Revenue, Southwest Community
Health Services, (Call 8/1/08 @ 100),
10.125% due 8/1/12 (d) .................................... 154,285
--------------
New York -- 4.7%
700,000 NR Brookhaven, NY IDA, Civic Facility Revenue, Memorial Hospital
Medical Center, Series A, 8.250% due 11/15/30 ............. 738,780
2,000,000 AAA Metropolitan Transportation Authority, NY Series A,
5.000% due 7/1/30 (e) ..................................... 2,002,520
1,000,000 NR Monroe County, NY IDA, Woodland Village Project,
8.550% due 11/15/32 ....................................... 1,063,940
New York City, NY IDA, Civic Facility Revenue:
1,360,000 NR Community Residence for the Developmentally Disabled,
7.500% due 8/1/26 ...................................... 1,439,465
See Notes to Financial Statements.
9
Municipal High Income Fund Inc.
[CLIP ART] Schedule of Investments (unaudited) (continued)
April 30, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
=====================================================================================================
New York -- 4.7% (continued)
$ 1,230,000 NR Special Needs Facility Pooled Program, Series A-1,
8.125% due 7/1/19 ...................................... $ 1,316,727
980,000 NR Suffolk County, NY IDA, Civic Facility Revenue, Southampton
Hospital Association, Series A, 7.750% due 1/1/22 ......... 992,142
--------------
7,553,574
--------------
North Carolina -- 2.4%
1,000,000 NR Charlotte, NC Special Facilities Revenue, Charlotte/Douglas
International Airport, 5.600% due 7/1/27 (b) .............. 544,600
North Carolina Medical Care Commission, Health Care
Facilities Revenue, First Mortgage, (De Paul Community
Facilities Project):
1,240,000 NR 6.125% due 1/1/28 ...................................... 1,133,943
980,000 NR 7.625% due 11/1/29 ..................................... 1,005,480
1,000,000 AAA North Carolina Municipal Power Agency, Catawba Electric
Revenue, MBIA-Insured, TICs, 13.214% due 1/1/11 (f) ....... 1,179,520
--------------
3,863,543
--------------
Ohio -- 3.3%
1,500,000 BBB Cuyahoga County, OH Hospital Facilities Revenue,
(Canton Inc. Project), 7.500% due 1/1/30 .................. 1,645,710
Montgomery County, OH Health Systems Revenue,
Series B-1, (Escrowed with state and local government
securities to 7/1/06 Call @ 102):
1,035,000 AAA 8.100% due 7/1/18 ...................................... 1,188,532
375,000 AAA Unrefunded Balance, 8.100% due 7/1/18 .................. 412,946
2,000,000 Baa3* Ohio State Air Quality Development Authority Revenue,
Cleveland Pollution Control, Series A, 6.000% due 12/1/13 . 2,062,840
1,250,000 NR Ohio State Solid Waste Revenue, Republic Engineered
Steels Inc., 9.000% due 6/1/21 (b)(c) 0
--------------
5,310,028
--------------
Oklahoma -- 0.7%
1,500,000 B1* Oklahoma Development Finance Authority Revenue, Hillcrest
Healthcare System, Series A, 5.625% due 8/15/29 1,183,125
--------------
Pennsylvania -- 7.3%
2,200,000 NR Allegheny County, PA IDA, Airport Special Facilities Revenue,
(USAir Inc. Project), Series B, 8.500% due 3/1/21 (b)(c) .. 151,250
Beaver County, PA IDA, PCR:
1,500,000 Baa2* Cleveland Electric Illuminating Co. Project,
7.625% due 5/1/25 ...................................... 1,603,125
2,000,000 Baa2* Toledo Edison Co. Project, 7.625% due 5/1/20 .............. 2,138,520
1,000,000 NR Cumberland County, PA Municipal Authority Retirement
Community Revenue, (Wesley Affiliated Services Inc.
Project), Series A, 7.250% due 1/1/35 ..................... 1,002,610
See Notes to Financial Statements.
10
Municipal High Income Fund Inc.
[CLIP ART] Schedule of Investments (unaudited) (continued)
April 30, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
=====================================================================================================
Pennsylvania -- 7.3% (continued)
$ 3,000,000 NR Dauphin County, PA General Authority Revenue, Hotel &
Conference Center -- Hyatt Regency, 6.200% due 1/1/29 ..... $ 1,755,840
2,640,000 NR Montgomery County, PA Higher Education & Health Authority
Revenue, Temple Continuing Care Center,
6.625% due 7/1/19 (c) ..................................... 1,003,200
1,000,000 NR Northumberland County, PA IDA, (NHS Youth Services Inc.
Project), Series A, 7.500% due 2/15/29 .................... 977,850
1,000,000 NR Philadelphia, PA Authority for IDR, (Host Marriott L.P.
Project), Remarketed 10/31/95, 7.750% due 12/1/17 ......... 1,010,760
2,000,000 NR Westmoreland County, PA IDA, Healthcare Facilities, Redstone
Highlands Health, Series B, 8.125% due 11/15/30 ........... 2,150,700
--------------
11,793,855
--------------
Rhode Island -- 1.3%
2,500,000 NR Tobacco Settlement Financing Corp. Revenue, RITES,
10.072% due 6/1/08 (f) .................................... 2,090,750
--------------
South Carolina -- 2.9%
Connector 2000 Association Inc., SC Toll Road Revenue:
Capital Appreciation, Series B:
3,100,000 B- Zero coupon bond to yield 8.802% due 1/1/27 ............ 326,027
7,750,000 B- Zero coupon bond to yield 10.074% due 1/1/34 ........... 535,835
2,000,000 B- Southern Connector Project, Series A, 5.375% due 1/1/38 ... 1,297,020
335,000 NR Florence County, SC IDR, Stone Container Corp.,
7.375% due 2/1/07 (e) ..................................... 338,531
530,000 NR McCormick County, SC COP, 9.750% due 7/1/09 (e) ............. 531,961
2,000,000 NR Tobacco Settlement Revenue Management Authority, RITES,
11.102% due 5/15/28 (f) ................................... 1,646,480
--------------
4,675,854
--------------
Tennessee -- 1.1%
1,915,000 NR Shelby County, TN Health, Educational & Housing Facilities
Board Revenue, MFH, (Hedgerow Apartments Project),
6.875% due 7/1/36 ......................................... 1,746,537
--------------
Texas -- 8.2%
Bexar County, TX Housing Financial Corp., MFH:
995,000 NR Continental Lady Ester, Series A, 6.875% due 6/1/29 ....... 910,186
1,175,000 Baa3* Nob Hill Apartments, Series B, 8.500% due 6/1/31 .......... 1,115,768
240,000 Baa3* Waters at Northern Hills, Series C, 7.750% due 8/1/36 ..... 224,952
1,000,000 NR Grand Prairie, TX Housing Finance Corp., Independent Senior
Living Center Revenue, 7.750% due 1/1/34 (e) .............. 961,810
2,000,000 Ba3* Gulf Coast, TX IDA, Solid Waste Disposal Revenue, (CITGO
Petroleum Corp. Project), 7.500% due 5/1/25 (b)(e) ........ 2,089,600
See Notes to Financial Statements.
11
Municipal High Income Fund Inc.
[CLIP ART] Schedule of Investments (unaudited) (continued)
April 30, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
=====================================================================================================
Texas -- 8.2% (continued)
$ 2,750,000 B- Houston, TX Airport Systems Revenue, Special Facilities,
Continental Airlines Inc., Series C,
6.125% due 7/15/27 (b)(e) ................................. $ 2,122,093
1,000,000 BB Port Corpus Christi, TX Industrial Development Corp.,
(CITGO Petroleum Corp. Project), 8.250% due 11/1/31 (b) ... 1,048,490
975,000 Ba1* Texas State Affordable Housing Corp., MFH Revenue, HIC
Arborstone Baybrook, Series C, 7.250% due 11/1/31 ......... 927,274
1,405,000 B3* Travis County, TX HFA, MFH Revenue, (Lakeview Apartments
Project), Series A, 6.375% due 1/1/34 ..................... 968,649
1,865,000 NR West Texas Detention Facility Corp. Revenue,
8.000% due 2/1/25 ......................................... 1,847,898
1,000,000 NR Willacy County, TX, (Public Facility Corp. Project),
Series A-1, 8.250% due 12/1/23 ............................ 1,010,420
--------------
13,227,140
--------------
Utah -- 1.7%
1,615,000 NR Hurricane, UT Health Facilities Development Revenue, (Mission
Health Services Project), 10.500% due 7/1/20 (c)(e) ....... 807,500
2,000,000 NR Utah State HFA Revenue, (RHA Community Services of Utah Inc.
Project), Series A, 6.875% due 7/1/27 ..................... 1,935,740
--------------
2,743,240
--------------
Virginia -- 2.9%
510,000 NR Alexandria, VA Redevelopment & Housing Authority,
MFH Revenue, (Parkwood Court Apartments Project),
Series C, 8.125% due 4/1/30 ............................... 508,026
1,000,000 NR Broad Street Community Development Authority Revenue,
7.500% due 6/1/33 ......................................... 983,090
1,000,000 NR Fairfax County, VA EDA Revenue, Retirement Community,
Greenspring Village Inc., Series A, 7.500% due 10/1/29 (e) 1,048,990
23,400,000 BBB-++ Pocahontas Parkway Association, VA Toll Road Revenue,
Capital Appreciation, Series B, zero coupon bond to yield
8.323% due 8/15/34 ........................................ 2,101,788
--------------
4,641,894
--------------
Wisconsin -- 0.3%
1,745,000 NR Wisconsin State Health & Educational Facilities Authority
Revenue, (Benchmark Healthcare of Green Bay Inc. Project),
Series A, 7.750% due 5/1/27 (c) ........................... 575,850
--------------
TOTAL MUNICIPAL BONDS
(Cost -- $177,953,058) ...................................... 161,701,940
--------------
See Notes to Financial Statements.
12
Municipal High Income Fund Inc.
[CLIP ART] Schedule of Investments (unaudited) (continued)
April 30, 2004
================================================================================
SHARES SECURITY VALUE
=====================================================================================================
COMMON STOCK -- 0.0%
3,180 Mobile Energy Services Co. LLC (i) (Cost -- $988,235) ....... $ 0
--------------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $178,941,293**) .................................... $ 161,701,940
--------
(a) All ratings are by Standard & Poor's Ratings Service, except for those
which are identified by an asterisk (*), are rated by Moody's Investors
Service and those which are identified by a double dagger (++), are rated
by Fitch Ratings.
(b) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) Security is currently in default.
(d) Pre-Refunded bonds are escrowed with U.S. government securities and are
considered by the manager to be triple-A rated even if the issuer has not
applied for new ratings.
(e) All or a portion of this security is segregated and/or held as collateral
for open futures contracts.
(f) Inverse floating rate security -- coupon varies inversely with level of
short-term tax exempt interest rates.
(g) Bonds are escrowed to maturity with U.S. government securities and are
considered by the manager to be triple-A rated even if issuer has not
applied for new ratings.
(h) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(i) Non-income producing security.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 15 through 17 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
13
Municipal High Income Fund Inc.
[CLIP ART] Summary of Investments by Industry*
April 30, 2004 (unaudited)
================================================================================
Hospitals ............................................................... 15.4%
Lifecare Systems ........................................................ 14.7
Industrial Development .................................................. 12.2
Transportation .......................................................... 8.6
Pollution Control ....................................................... 7.4
Education ............................................................... 7.2
Multi-Family Housing .................................................... 6.4
Tobacco ................................................................. 5.5
Cogeneration Facilities ................................................. 3.2
Other ................................................................... 19.4
------
100.0%
======
--------
* As a percentage of total investments. Please note that Fund holdings are
as of April 30, 2004 and are subject to change.
14
Municipal High Income Fund Inc.
[CLIP ART] Bond Ratings (unaudited)
================================================================================
The definitions of the applicable ratings symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to
"CCC" may be modified by the addition of a plus (+) or a minus (-) sign to show
relative standings within the major rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differ from the highest rated issue only in a
small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
bonds in higher rated 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 in higher rated categories.
BB, B, CCC, -- Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded, on
CC and C balance, as predominantly speculative and 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 "C" 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.
D -- Bond rated "D" are in default, and payment of interest and/or
repayment of principal is in arrears.
Moody's Investors Service ("Moody's") -- Numerical modifiers 1, 2 and 3 may be
applied to each generic rating from "Aa" to "Caa," where 1 is the highest and 3
the lowest rating within its generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
in "Aaa" securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in "Aaa"
securities.
A -- Bonds rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to
impairment some time in the future.
15
Municipal High Income Fund Inc.
[CLIP ART] Bond Ratings (unaudited) (continued)
================================================================================
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 many long period
of time may be small.
Caa -- Bonds rated "Caa" are of poor standing. These issues may be in
default, or there may be present elements of danger with respect
to principal or interest.
Ca -- Bonds rated "Ca" represent obligations which are speculative in a
high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds rated "C" are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Fitch Ratings ("Fitch") -- Ratings from "A" to "CCC" may be modified by the
addition of a plus (+) or a minus (-) sign to show relative standings with the
major ratings categories.
AAA -- Bonds rated "AAA" by Fitch have the lowest expectation of credit
risk. The obligor has an exceptionally strong capacity for timely
payment of financial commitments which is highly unlikely to be
adversely affected by foreseeable events.
A -- Bonds rated "A" have a low expectation of credit risk. The
capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more
vulnerable to changes in circumstances or in economic conditions
than is the case for higher ratings.
BBB -- Bonds rated "BBB" currently have a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to impair this
capacity. This is the lowest investment grade category assigned
by Fitch.
BB -- Bonds rated "BB" carry the possibility of credit risk developing,
particularly as the result of adverse economic change over time.
Business or financial alternatives may, however, be available to
allow financial commitments to be met. Securities rated in this
category are not considered by Fitch to be investment grade.
CCC, -- Bonds rated "CCC", "CC" and "C" carry the real possibility of
CC and C defaulting. The capacity to meet financial commitments depends
solely on a sustained, favorable business and economic
environment. Default of some kind on bonds rated "CC" appears
probable, a "C" rating indicates imminent default.
NR -- Indicates that the bond is not rated by Standard & Poor's,
Moody's or Fitch.
16
Municipal High Income Fund Inc.
[CLIP ART] Short-Term Bond Ratings (unaudited)
================================================================================
A-1 -- Standard & Poor's highest commercial paper and variable-rate
demand obligation (VRDO) rating indicating that the degree of
safety regarding timely payment is either overwhelming or very
strong; those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature --
VRDO.
Abbreviations* (unaudited)
================================================================================
ABAG -- Association of Bay Area Governments
AIG -- American International Guaranty
AMBAC -- Ambac Assurance Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance Company
CHFCLI -- California Health Facility Construction Loan Insurance
CONNIE LEE -- College Construction Loan Insurance Association
COP -- Certificate of Participation
EDA -- Economic Development Authority
ETM -- Escrowed to Maturity
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FLAIRS -- Floating Adjustable Interest Rate Securities
FNMA -- Federal National Mortgage Association
FRTC -- Floating Rate Trust Certificates
FSA -- Financing Security Assurance
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
IBC -- Insured Bond Certificates
IDA -- Industrial Development Authority/Agency
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
ISD -- Independent School District
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MFH -- Multi-Family Housing
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PCR -- Pollution Control Revenue
PSFG -- Permanent School Fund Guaranty
RADIAN -- Radian Asset Assurance
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt Securities
SYCC -- Structured Yield Curve Certificate
TAN -- Tax Anticipation Notes
TECP -- Tax-Exempt Commercial Paper
TICs -- Tender Inverse Certificates
TOB -- Tender Option Bonds
TRAN -- Tax and Revenue Anticipation Notes
VA -- Veterans Administration
VRDD -- Variable Rate Daily Demand
VRWE -- Variable Rate Wednesday Demand
--------
* Abbreviations may or may not appear in the schedule of investments.
17
Municipal High Income Fund Inc.
Statement of Assets and Liabilities (unaudited)
[CLIP ART] April 30, 2004
================================================================================
ASSETS:
Investments, at value (Cost -- $178,941,293) ............................. $ 161,701,940
Interest receivable ...................................................... 4,261,807
Receivable for securities sold ........................................... 929,310
-------------
Total Assets ............................................................. 166,893,057
-------------
LIABILITIES:
Payable for securities purchased ......................................... 1,396,101
Bank overdraft ........................................................... 533,537
Payable to broker -- variation margin .................................... 200,000
Dividends payable ........................................................ 169,650
Investment advisory fee payable .......................................... 54,213
Administration fee payable ............................................... 27,106
Accrued expenses ......................................................... 137,942
-------------
Total Liabilities ........................................................ 2,518,549
-------------
Total Net Assets ............................................................. $ 164,374,508
=============
NET ASSETS:
Par value of capital shares .............................................. $ 210,022
Capital paid in excess of par value ...................................... 193,037,485
Undistributed net investment income ...................................... 270,713
Accumulated net realized loss from investment transactions and
futures contracts ..................................................... (13,629,359)
Net unrealized depreciation of investments and futures contracts ......... (15,514,353)
-------------
Total Net Assets ............................................................. $ 164,374,508
=============
Shares Outstanding ........................................................... 21,002,201
-------------
Net Asset Value .............................................................. $ 7.83
-------------
See Notes to Financial Statements.
18
Municipal High Income Fund Inc.
Statement of Operations (unaudited)
[CLIP ART] For the Six Months Ended April 30, 2004
================================================================================
INVESTMENT INCOME:
Interest .................................................. $ 6,040,781
----------------
EXPENSES:
Investment advisory fee (Note 3) .......................... 331,549
Administration fee (Note 3) ............................... 165,774
Audit and legal ........................................... 48,512
Transfer agency services .................................. 35,130
Shareholder communications ................................ 33,832
Directors' fees ........................................... 30,938
Custody ................................................... 13,007
Stock exchange listing fees ............................... 10,716
Other ..................................................... 12,081
----------------
Total Expenses ............................................ 681,539
----------------
Net Investment Income ......................................... 5,359,242
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURE CONTRACTS (NOTES 4 AND 5):
Realized Loss From:
Investment transactions ................................ (2,727,319)
Futures contracts ...................................... (2,968,508)
----------------
Net Realized Loss ......................................... (5,695,827)
----------------
Change in Net Unrealized Depreciation of Investments
and Futures Contracts:
Beginning of period .................................... (19,699,180)
End of period .......................................... (15,514,353)
----------------
Decrease in Net Unrealized Depreciation ................... 4,184,827
----------------
Net Loss on Investments and Futures Contracts ................. (1,511,000)
----------------
Increase in Net Assets From Operations ........................ $ 3,848,242
================
See Notes to Financial Statements.
19
Municipal High Income Fund Inc.
Statements of Changes in Net Assets
For the Six Months Ended April 30, 2004 (unaudited)
[CLIP ART] and the Year Ended October 31, 2003
================================================================================
2004 2003
------------- -------------
Operations:
Net investment income .................................. $ 5,359,242 $ 11,870,452
Net realized loss ...................................... (5,695,827) (4,908,356)
(Increase) decrease in net unrealized depreciation ..... 4,184,827 (404,539)
------------- -------------
Increase in Net Assets From Operations ................. 3,848,242 6,557,557
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income .................................. (5,805,116) (11,657,895)
------------- -------------
Decrease in Net Assets From
Distributions to Shareholders ....................... (5,805,116) (11,657,895)
------------- -------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net asset value of shares issued for
reinvestment of dividends ........................... 524,963 398,716
------------- -------------
Increase in Net Assets From
Fund Share Transactions ............................. 524,963 398,716
------------- -------------
Decrease in Net Assets ..................................... (1,431,911) (4,701,622)
NET ASSETS:
Beginning of period .................................... 165,806,419 170,508,041
------------- -------------
End of period* ......................................... $ 164,374,508 $ 165,806,419
============= =============
* Includes undistributed net investment income of: ......... $ 270,713 $ 716,587
------------- -------------
See Notes to Financial Statements.
20
Municipal High Income Fund Inc.
[CLIP ART] Notes to Financial Statements (unaudited)
================================================================================
1. Significant Accounting Policies
Municipal High Income 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 following are significant accounting policies consistently followed by
the Fund and are in conformity with generally accepted accounting principles
("GAAP"): (a) security transactions are accounted for on trade date; (b)
securities are valued at the mean between the bid and asked prices provided by
an independent pricing service that are based on transactions in municipal
obligations, quotations from municipal bond dealers, market transactions in
comparable securities and various relationships between securities; securities
with no readily obtainable market quotations are valued in good faith at fair
value by or under the direction of the Fund's Board of Directors; (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) interest income, adjusted for amortization of premium and accretion of
discount, is recorded on an accrual basis; (f) dividends and distributions to
shareholders are recorded on the ex-dividend date; (g) in accordance with
Statement of Position 93-2 Determination, Disclosure, and Financial Statement
Presentation of Income, Capital Gain, and Return of Capital Distributions by
Investment Companies, book and tax basis differences relating to shareholder
distributions and other permanent book and tax differences are reclassified to
paid-in capital. In addition, the character of income and gains to be
distributed is determined in accordance with income tax regulations which may
differ from U.S. generally accepted accounting principles; (h) the Fund intends
to comply with the applicable provisions 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 (i) estimates and assumptions are required
to be made regarding assets, 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 invests in high-yield instruments that are subject
to certain credit and market risks. The yields of high-yield debt obligations
reflect, among other things, perceived credit risk. The Fund's investment in
securities rated below investment-grade typically involve risks not associated
with higher rated securities including, among others, greater risk of timely and
ultimate payment of interest and principal, greater market price volatility and
less liquid secondary market trading.
2. Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from
municipal securities, which is exempt from Federal income tax, to retain such
tax-exempt status when distributed to the shareholders of the Fund.
21
Municipal High Income Fund Inc.
[CLIP ART] Notes to Financial Statements (unaudited) (continued)
================================================================================
It is the Fund's policy to distribute dividends monthly. Capital gains
distributions, if any, are taxable to shareholders, and are declared and paid at
least annually.
3. Investment Advisory Agreement, Administration Agreement
and Other Transactions
Smith Barney Fund Management LLC ("SBFM"), an indirect wholly-owned
subsidiary of Citigroup Inc. ("Citigroup"), acts as investment adviser to the
Fund. The Fund pays SBFM an investment advisory fee calculated at an annual rate
of 0.40% of the Fund's average daily net assets. SBFM also acts as the
administrator of the Fund for which it receives a fee calculated at an annual
rate of 0.20% of the Fund's average daily net assets. These fees are calculated
daily and paid monthly.
All officers and one Director of the Fund are employees of Citigroup or
its affiliates.
4. Investments
During the six months ended April 30, 2004, the aggregate cost of
purchases and proceeds from sales of investments (including maturities of
long-term investments, but excluding short-term investments) were as follows:
Purchases ........................................................ $ 22,229,632
============
Sales ............................................................ $ 23,341,322
============
At April 30, 2004, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
Gross unrealized appreciation ................................... $ 3,999,151
Gross unrealized depreciation ................................... (21,238,504)
------------
Net unrealized depreciation ..................................... $(17,239,353)
============
5. Futures Contracts
Securities or cash equal to the initial margin amount are either deposited
with the broker or segregated by the custodian upon entering into the futures
contract. Additional securities are also segregated up to the current market
value of the futures contracts. 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 transactions and
the Fund's basis in the contract. The Fund enters into such contracts typically
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.
22
Municipal High Income Fund Inc.
[CLIP ART] Notes to Financial Statements (unaudited) (continued)
================================================================================
At April 30, 2004, the Fund had the following open futures contracts:
Number of Basis Market Unrealized
Contracts Expiration Value Value Gain
--------- ---------- ----------- ----------- ----------
Contracts to Sell:
U.S. Treasury 20 Year Bond ..... 400 6/04 $44,562,500 $42,837,500 $1,725,000
6. Capital Shares
At April 30, 2004, the Fund had 500,000,000 shares of capital stock
authorized with a par value of $0.01 per share.
Capital stock transactions were as follows:
Six Months Ended Year Ended
April 30, 2004 October 31, 2003
-------------------- --------------------
Shares Amount Shares Amount
-------- -------- -------- --------
Shares issued on reinvestment ............ 67,379 $524,963 51,722 $398,716
======== ======== ======== ========
7. Additional Information
The Fund has received the following information from Citigroup Asset
Management ("CAM"), the Citigroup business unit which includes the Fund's
Investment Manager and other investment advisory companies, all of which are
indirect, wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry,
through an affiliate, into the transfer agent business in the period 1997-1999.
As CAM currently understands the facts, at the time CAM decided to enter the
transfer agent business, CAM sub-contracted for a period of five years certain
of the transfer agency services to a third party and also concluded a revenue
guarantee agreement with this sub-contractor providing that the sub-contractor
would guarantee certain benefits to CAM or its affiliates (the "Revenue
Guarantee Agreement"). In connection with the subsequent purchase of the
sub-contractor's business by an affiliate of the current sub-transfer agent
(PFPC Inc.) used by CAM on many of the funds it manages, this Revenue Guarantee
Agreement was amended eliminating those benefits in exchange for arrangements
that included a one-time payment from the sub-contractor.
The Boards of CAM-managed funds (the "Boards") were not informed of the
Revenue Guarantee Agreement with the sub-contractor at the time the Boards
considered and approved the transfer agent arrangements. Nor were the Boards
informed of the subsequent amendment to the Revenue Guarantee Agreement when
that occurred.
CAM has begun to take corrective actions. CAM will pay to the applicable
funds approximately $17 million (plus interest) that CAM and its affiliates
received from the Revenue Guarantee Agreement and its amendment. CAM also plans
an independent review to verify that the transfer agency fees charged by CAM
were fairly priced as compared to competitive alternatives. CAM is instituting
new procedures and making changes designed to ensure no similar arrangements are
entered into in the future.
23
Municipal High Income Fund Inc.
[CLIP ART] Notes to Financial Statements (unaudited) (continued)
================================================================================
CAM has briefed the SEC, the New York State Attorney General and other
regulators with respect to this matter, as well as the U.S. Attorney who is
investigating the matter. CAM is cooperating with governmental authorities on
this matter, the ultimate outcome of which is not yet determinable.
The Fund's transfer agent is PFPC Inc., which is not affiliated with CAM.
24
Municipal High Income Fund Inc.
[CLIP ART] Financial Highlights
================================================================================
For a share of capital stock outstanding throughout each year ended October 31,
unless otherwise noted:
2004(1) 2003 2002 2001 2000 1999
------ ------ ------ ------ ------ ------
Net Asset Value,
Beginning of Period $ 7.92 $ 8.16 $ 8.67 $ 8.86 $ 9.00 $ 9.77
------ ------ ------ ------ ------ ------
Income (Loss) From
Operations:
Net investment income(2) ....... 0.26 0.57 0.58 0.59 0.60 0.58
Net realized and
unrealized loss(2) .............. (0.07) (0.25) (0.52) (0.20) (0.16) (0.76)
------ ------ ------ ------ ------ ------
Total Income (Loss)
From Operations ................ 0.19 0.32 0.06 0.39 0.44 (0.18)
------ ------ ------ ------ ------ ------
Less Distributions From:
Net investment income .......... (0.28) (0.56) (0.57) (0.58) (0.58) (0.59)
------ ------ ------ ------ ------ ------
Total Distributions .............. (0.28) (0.56) (0.57) (0.58) (0.58) (0.59)
------ ------ ------ ------ ------ ------
Net Asset Value,
End of Period .................. $ 7.83 $ 7.92 $ 8.16 $ 8.67 $ 8.86 $ 9.00
====== ====== ====== ====== ====== ======
Total Return,
Based on Market Price .......... 1.61%++ 7.17% (4.70)% 13.85% 9.39% (15.76)%
====== ====== ====== ====== ====== ======
Total Return,
Based on Net Asset Value ....... 2.47%++ 4.42% 0.91% 4.77% 5.97% (1.79)%
====== ====== ====== ====== ====== ======
Net Assets,
End of Period (millions) ....... $ 164 $ 166 $ 171 $ 180 $ 181 $ 184
====== ====== ====== ====== ====== ======
Ratios to Average Net Assets:
Expenses ....................... 0.82%+ 0.80% 0.80% 0.82% 0.71% 0.73%
Net investment income(2) ....... 6.47+ 7.13 6.84 6.74 6.72 6.08
Portfolio Turnover Rate .......... 14% 28% 33% 15% 27% 27%
Market Price, End of Period ...... $7.500 $7.650 $7.680 $8.640 $8.125 $8.000
--------
(1) For the six months ended April 30, 2004 (unaudited).
(2) Effective November 1, 2001, the Fund adopted a change in the accounting
method that requires the Fund to amortize premiums and accrete all
discounts. Without the adoption of this change, for the year ended October
31, 2002, the ratio of net investment income to average net assets would
have been 6.80%. Per share information, ratios and supplemental data for
the periods prior to November 1, 2001 have not been restated to reflect
this change in presentation. In addition, the impact of this change to net
investment income and net realized and unrealized loss was less than $0.01
per share.
++ Total return is not annualized, as it may not be representative of the
total for the year.
+ Annualized.
25
Municipal High Income Fund Inc.
[CLIP ART] Financial Data Per Share of Common Stock (unaudited)
================================================================================
Dividend
Record Payable NYSE Net Asset Dividend Reinvestment
Date Date Closing Price* Value* Paid Price
------ ------- ------------- ------ ------- ------
Fiscal Year 2002
11/27/01 11/30/01 $8.50 $8.59 $0.0485 $8.42
12/24/01 12/28/01 7.89 8.42 0.0485 8.16
1/22/02 1/25/02 8.30 8.45 0.0485 8.28
2/19/02 2/22/02 8.35 8.40 0.0485 8.23
3/19/02 3/22/02 8.16 8.34 0.0485 8.11
4/23/02 4/26/02 8.07 8.36 0.0485 8.18
5/28/02 5/31/02 8.12 8.36 0.0485 8.19
6/25/02 6/28/02 8.16 8.43 0.0465 8.25
7/23/02 7/26/02 8.07 8.46 0.0465 8.22
8/27/02 8/30/02 8.16 8.41 0.0465 8.23
9/24/02 9/27/02 8.31 8.40 0.0465 8.23
10/22/02 10/25/02 7.62 8.15 0.0465 7.79
Fiscal Year 2003
11/25/02 11/29/02 7.26 8.12 0.0465 7.35
12/23/02 12/27/02 7.34 8.11 0.0465 7.42
1/28/03 1/31/03 7.39 8.03 0.0465 7.50
2/25/03 2/28/03 7.40 7.99 0.0465 7.51
3/25/03 3/28/03 7.40 7.93 0.0465 7.48
4/22/03 4/25/03 7.44 7.88 0.0465 7.49
5/27/03 5/30/03 7.75 7.93 0.0465 7.78
6/24/03 6/27/03 7.67 7.87 0.0465 7.83
7/22/03 7/25/03 7.73 7.88 0.0465 7.72
8/26/03 8/29/03 7.63 7.81 0.0465 7.78
9/23/03 9/26/03 7.72 7.87 0.0465 7.71
10/28/03 10/31/03 7.70 7.91 0.0465 7.73
Fiscal Year 2004
11/24/03 11/28/03 7.76 7.96 0.0465 7.79
12/22/03 12/26/03 7.68 7.96 0.0465 7.73
1/27/04 1/30/04 7.95 7.98 0.0465 7.82
2/24/04 2/27/04 7.83 7.97 0.0465 7.81
3/23/04 3/26/04 7.98 7.90 0.0455 7.74
4/27/04 4/30/04 7.20 7.82 0.0455 7.39
-------
* As of record date.
26
Municipal High Income Fund Inc.
[CLIP ART] Additional Shareholder Information (unaudited)
================================================================================
Result of Annual Meeting of Shareholders
The Annual Meeting of Shareholders of Municipal High Income Fund Inc. was
held on April 26, 2004, for the purpose of considering and voting upon the
election of two Directors. The following table provides information concerning
the matters voted upon at the Meeting:
1. Election of Directors*
Nominees Votes For Votes Withheld
-------- --------- --------------
Paolo M. Cucchi 17,449,641 267,412
Robert A. Frankel 17,476,121 240,932
---------
* The following Directors, representing the balance of the Board of
Directors, continue to serve as Directors: Allan J. Bloostein, Dwight B.
Crane, R. Jay Gerken, Paul Hardin, William R. Hutchinson and George M.
Pavia.
27
Municipal High Income Fund Inc.
[CLIP ART] Dividend Reinvestment Plan (unaudited)
================================================================================
The Fund's policy, which may be changed by the Fund's Board of Directors,
is generally to make monthly distributions of substantially all its net
investment income (i.e., income other than net realized capital gains) to the
holders of the Fund's capital shares. From time to time, when the Fund makes a
substantial capital gains distribution, it may do so in lieu of paying its
regular monthly dividend. Net income of the Fund consists of all income accrued
on portfolio assets less all expenses of the Fund. Expenses of the Fund are
accrued each day. Net realized capital gains, if any, will be distributed to
shareholders at least once a year.
Under the Fund's Dividend Reinvestment Plan ("Plan"), a shareholder whose
capital shares is registered in his or her own name will have all distributions
reinvested automatically by PFPC Inc. ("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 capital shares 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 capital shares distributed to participants in the
Plan in lieu of a cash dividend is determined in the following manner. Whenever
the market price of the common stock is equal to or exceeds 98% of net asset
value ("NAV") per share on the determination date (generally, the record date
for the distribution), participants will be issued shares of common stock valued
at the greater of (1) 98% of the NAV or (2) 95% of the market price. To the
extent that the Fund issues shares to participants in the Plan at a discount to
NAV, the interests of remaining shareholders (i.e., those who do not participate
in the Plan) in the Fund's net assets will be proportionately diluted.
If 98% of the NAV per share of the capital shares at the time of valuation
(which is the close of business on the determination date) exceeds the market
price of capital shares, PFPC will buy capital shares in the open market, on the
NYSE or elsewhere, for the participants' accounts. If, following the
commencement of the purchases and before PFPC has completed its purchases, the
market price exceeds 98% of what the NAV per share of the capital shares was at
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 by issuing shares at a price equal to the greater of (1) 98% of the
NAV per share as of the valuation time, or (2) 95% of the then current market
price. In this case, the number of shares of capital 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
28
Municipal High Income Fund Inc.
[CLIP ART] Dividend Reinvestment Plan (unaudited) (continued)
================================================================================
and cause the Fund to issue the remaining shares, the average per share price
paid by PFPC may exceed 98% of the NAV per share of the capital shares. PFPC
will begin to purchase capital shares on the open market as soon as practicable
after the payment date of the dividend or capital gains distribution, but in no
event shall such purchases continue later than 30 days after that date, except
when necessary to comply with applicable provisions of the Federal securities
laws.
PFPC maintains all shareholder accounts in the Plan and furnishes written
confirmations 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. Capital shares in the account of each Plan participant will be
held by PFPC in uncertificated form in the name of the 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 shall apply with respect to shares of capital shares
issued directly by the Fund under the Plan. Each Plan participant will, however,
bear a pro-rata share of 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 or the Fund on at least 30 days' written notice to Plan
participants. All correspondence concerning the Plan should be directed by mail
to PFPC Inc., P.O. Box 43027, Providence, Rhode Island 02940-3027 or by
telephone at 1 (800) 331-1710.
---------------------------
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 capital shares in the open market. For the six
months ended April 30, 2004, the Fund has not repurchased any shares.
29
Municipal High Income Fund Inc.
[CLIP ART] Management of the Fund
================================================================================
Directors
Allan J. Bloostein
Dwight B. Crane
Paolo M. Cucchi
Robert A. Frankel
R. Jay Gerken, CFA
Chairman
Paul Hardin
William R. Hutchinson
George M. Pavia
Officers
R. Jay Gerken, CFA
President and Chief
Executive Officer
Andrew B. Shoup
Senior Vice President and
Chief Administrative Officer
Peter M. Coffey
Vice President and
Investment Officer
George Benoit
Investment Officer
Kaprel Ozsolak
Controller
Robert I. Frenkel
Secretary and
Chief Legal Officer
Investment Adviser and Administrator
Smith Barney Fund Management LLC
399 Park Avenue
New York, New York 10022
Transfer Agent
PFPC Inc.
P.O. Box 43027
Providence, RI 02940-3027
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
30
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[GRAPHIC OMITTED]
[CLIP ART]
This report is intended only for shareholders of Municipal High Income 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 this
report.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by telephoning the Fund (toll-free) at 1-800-451-2010 and by
visiting the SEC's web site at www.sec.gov.
Municipal High Income Fund Inc.
125 Broad Street
10th Floor, MF-2
New York, NY 10004
FD1139 6/04
04-6790
ITEM 2. CODE OF ETHICS.
Not Applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Board of Directors of the Fund has delegated the authority to
develop policies and procedures relating to proxy voting to the
Manager. The Manager is part of Citigroup Asset Management ("CAM"), a
group of investment adviser affiliates of Citigroup, Inc.
("Citigroup"). Along with the other investment advisers that comprise
CAM, the Manager has adopted a set of proxy voting policies and
procedures (the "Policies") to ensure that the Manager votes proxies
relating to equity securities in the best interest of clients.
In voting proxies, the Manager is guided by general fiduciary
principles and seeks to act prudently and solely in the best interest
of clients. The Manager attempts to consider all factors that could
affect the value of the investment and will vote proxies in the
manner that it believes will be consistent with efforts to maximize
shareholder values. The Manager may utilize an external service
provider to provide it with information and/or a recommendation with
regard to proxy votes. However, such recommendations do not relieve
the Manager of its responsibility for the proxy vote.
In the case of a proxy issue for which there is a stated position in
the Policies, CAM generally votes in accordance with such stated
position. In the case of a proxy issue for which there is a list of
factors set forth in the Policies that CAM considers in voting on
such issue, CAM votes on a case-by-case basis in accordance with the
general principles set forth above and considering such enumerated
factors. In the case of a proxy issue for which there is no stated
position or list of factors that CAM considers in voting on such
issue, CAM votes on a case-by-case basis in accordance with the
general principles set forth above. Issues for which there is a
stated position set forth in the Policies or for which there is a
list of factors set forth in the Policies that CAM considers in
voting on such issues fall into a variety of categories, including
election of directors, ratification of auditors, proxy and tender
offer defenses, capital structure issues, executive and director
compensation, mergers and corporate restructurings, and social and
environmental issues. The stated position on an issue set forth in
the Policies can always be superseded, subject to the duty to act
solely in the best interest of the beneficial owners of accounts, by
the investment management professionals responsible for the account
whose shares are being voted. Issues applicable to a particular
industry may cause CAM to abandon a policy that would have otherwise
applied to issuers generally. As a result of the independent
investment advisory services provided by distinct CAM business units,
there may be occasions when different business units or different
portfolio managers within the same business unit vote differently on
the same issue.
In furtherance of the Manager's goal to vote proxies in the best
interest of clients, the Manager follows procedures designed to
identify and address material conflicts that may arise between the
Manager's interests and those of its clients before voting proxies on
behalf of such clients. To seek to identify conflicts of interest,
CAM periodically notifies CAM employees (including employees of the
Manager) in writing that they are under an obligation (i) to be aware
of the potential for conflicts of interest with respect to voting
proxies on behalf of client accounts both as a result of their
personal relationships and due to special circumstances that may
arise during the conduct of CAM's and the Manager's business, and
(ii) to bring conflicts of interest of which they become aware to the
attention of compliance personnel. The Manager also maintains and
considers a list of significant relationships that could present a
conflict of interest for the Manager in voting proxies. The Manager
is also sensitive to the fact that a significant, publicized
relationship between an issuer and a non-CAM affiliate might appear
to the public to influence the manner in which the Manager decides to
vote a proxy with respect to such issuer. Absent special
circumstances or a significant, publicized non-CAM affiliate
relationship that CAM or the Manager for prudential reasons treats as
a potential conflict of interest because such relationship might
appear to the public to influence the manner in which the Manager
decides to vote a proxy, the Manager generally takes the position
that non-CAM relationships between Citigroup and an issuer (e.g.
investment banking or banking) do not present a conflict of interest
for the Manager in voting proxies with respect to such issuer. Such
position is based on the fact that the Manager is operated as an
independent business unit from other Citigroup business units as well
as on the existence of information barriers between the Manager and
certain other Citigroup business units.
CAM maintains a Proxy Voting Committee, of which the Manager
personnel are members, to review and address conflicts of interest
brought to its attention by compliance personnel. A proxy issue that
will be voted in accordance with a stated position on an issue or in
accordance with the recommendation of an independent third party is
not brought to the attention of the Proxy Voting Committee for a
conflict of interest review because the Manager's position is that to
the extent a conflict of interest issue exists, it is resolved by
voting in accordance with a pre-determined policy or in accordance
with the recommendation of an independent third party. With respect
to a conflict of interest brought to its attention, the
Proxy Voting Committee first determines whether such conflict of
interest is material. A conflict of interest is considered material
to the extent that it is determined that such conflict is likely to
influence, or appear to influence, the Manager's decision-making in
voting proxies. If it is determined by the Proxy Voting Committee
that a conflict of interest is not material, the Manager may vote
proxies notwithstanding the existence of the conflict.
If it is determined by the Proxy Voting Committee that a conflict of
interest is material, the Proxy Voting Committee is responsible for
determining an appropriate method to resolve such conflict of
interest before the proxy affected by the conflict of interest is
voted. Such determination is based on the particular facts and
circumstances, including the importance of the proxy issue and the
nature of the conflict of interest. Methods of resolving a material
conflict of interest may include, but are not limited to, disclosing
the conflict to clients and obtaining their consent before voting, or
suggesting to clients that they engage another party to vote the
proxy on their behalf.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's
disclosure controls and procedures (as defined in Rule
30a- 3(c) under the Investment Company Act of 1940, as
amended (the "1940 Act")) are effective as of a date
within 90 days of the filing date of this report that
includes the disclosure required by this paragraph, based
on their evaluation of the disclosure controls and
procedures required by Rule 30a-3(b) under the 1940 Act
and 15d-15(b) under the Securities Exchange Act of 1934.
(b) There were no changes in the registrant's internal control
over financial reporting (as defined in Rule 30a-3(d)
under the 1940 Act) that occurred during the registrant's
last fiscal half-year (the registrant's second fiscal
half-year in the case of an annual report) that have
materially affected, or are likely to materially affect
the registrant's internal control over financial
reporting.
ITEM 10. EXHIBITS.
(a) Not applicable.
(b) Attached hereto.
Exhibit 99.CERT Certifications pursuant to section 302
of the Sarbanes-Oxley Act of 2002
Exhibit 99.906CERT Certifications pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this Report to be
signed on its behalf by the undersigned, there unto duly authorized.
Municipal High Income Fund Inc.
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Municipal High Income Fund Inc.
Date: July 6, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
(R. Jay Gerken)
Chief Executive Officer of
Municipal High Income Fund Inc.
Date: July 6, 2004
By: /s/ Andrew B. Shoup
(Andrew B. Shoup)
Chief Administrative Officer of
Municipal High Income Fund Inc.
Date: July 6, 2004