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MUNICIPAL
HIGH INCOME
FUND INC.
QUARTERLY
REPORT
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JULY
31, 1994
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MUNICIPAL HIGH INCOME FUND INC.
Dear Shareholder:
We are pleased to provide the quarterly report and portfolio of investments
for Municipal High Income Fund Inc. for the third quarter ended July 31, 1994.
The volatile market environment we described in the Fund's semi-annual
report abated somewhat during the past quarter, and although the municipal
market will undoubtedly encounter periodic volatility and downturns, we believe
the worst is now behind us. We attribute the improvement in market conditions to
several factors. Inflation fears appear to be gradually ebbing from the market
as recent economic data indicates a slowing in the rate of growth of the
economy. In addition, the decline in bond prices resulted in very attractive
yields of six to six and one-half percent on high-quality municipals bonds,
which attracted investors to the market. Finally, the new-issue supply of
long-term municipal bonds has virtually evaporated. Versus last year, long-term
issuance has declined by 40 percent. The majority of municipal issuance is in
the short-term market, which is more affected by Federal Reserve activity. The
result of these factors is greater confidence on the part of investors and a
greater willingness to commit money to long-term municipal securities.
The high yielding sector of the municipal market in which the Fund invests
was less volatile than the higher-quality sectors of the market. High yield
issues generally do not react as quickly or with as much volatility because
there is less issuance in this sector. Consequently, the total return
performance of this Fund was better than some closed-end funds investing
generally in more highly rated instruments. The Fund's net asset value showed
some slight improvement during the past three months, increasing to $9.24 per
share on July 29, 1994 from $9.21 on May 2, 1994. The Fund's stock price
rebounded quite nicely to $9.125 on July 29, 1994 from $8.875 on May 2, 1994,
the beginning of the fiscal quarter. The Fund generated a total return for this
quarter of 2.13% based on net asset value, and 2.05% based on its stock price.
The Fund continues to be managed with the objective of providing investors
with tax-free income through investments in securities exempt from Federal
personal income taxes. In an effort to reach this goal we have invested the
majority of the portfolio in hospital, industrial development, and housing
bonds. Although the Fund has the ability to invest more heavily in lower-rated
issues than it does, we continue to focus on longer-term securities and have
eschewed the lowest rated instruments. Even in an improving economic
environment, the yields of lower-rated issues do not adequately compensate
investors for their additional risk. We also used the decline in the bond market
as an
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opportunity to trade into higher-rated, higher-yielding issues, which made it
unnecessary to purchase more speculative issues. Believing the worst of the
volatility is behind us, we also extended the average maturity of the Fund to 21
years during the past three months.
We are pleased to share with you that the Fund continues to be awarded a
four-star rating from Morningstar Closed-End Funds, and a "Buy" recommendation
from Frank Cappiello's Closed-End Fund Digest. Both publications are
well-respected sources of information about closed-end funds.
Additionally, at their June meeting, the Board of Directors of the Fund
approved an amendment to the Fund's Dividend Reinvestment Plan. Under the Plan,
a shareholder can elect to have dividends automatically reinvested in shares of
the Fund. If 98% of the net asset value per share of the Fund's stock at the
time of valuation for purposes of the dividend distribution exceeds the market
price of the stock, or if the Fund declares a dividend or capital gains
distribution payable only in cash, the Plan's purchasing agent will buy shares
of the Fund's stock in the open market for the plan participants' accounts.
Under the current Plan, these purchases commence on the dividend payment date.
The Directors revised the Plan to provide that the purchasing agent may commence
purchases of shares on the open market as of record date in anticipation of the
dividend payment. It is hoped that this will decrease the cost of the
repurchased shares by increasing the amount of time over which such purchases
can be made, so that purchases on the open market will not be compacted into a
small window following the payment date. This revision will be effective upon
the first dividend declaration after December 1, 1994
The stock price of the Fund is reported in most daily newspapers in the
listing for securities traded on the New York Stock Exchange, Inc. Its weekly
closing price and net asset value per share are reported in Barron's and the
Monday edition of The Wall Street Journal. Please call The Shareholders Services
Group, Inc. at (800) 331-1710 if you have any questions about your investment in
the Fund. We look forward to reporting to you in the upcoming annual report.
Sincerely,
Heath B. McLendon Lawrence T. McDermott
CHAIRMAN OF THE BOARD VICE PRESIDENT AND INVESTMENT OFFICER
August 15, 1994
2
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UNAUDITED FINANCIAL DATA
PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
CAPITAL
NYSE GAINS DIVIDEND
RECORD PAY CLOSING NET ASSET DIVIDEND DIVIDEND REINVESTMENT
DATE DATE PRICE* VALUE* PAID PAID PRICE
-------------------- -------- ------------- --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
11/22/93 11/30/93 $9.375 $9.60 $.0540 -- $9.55
12/23/93 12/31/93 9.375 9.65 .0540 $.0210 9.47
1/24/94 1/31/94 9.625 9.66 .0540 -- 9.47
2/18/94 2/28/94 9.500 9.60 .0540 -- 9.41
3/24/94 3/31/94 9.125 9.42 .0540 -- 8.96
4/22/94 4/30/94 8.875 9.21 .0540 -- 9.01
5/23/94 5/31/94 9.000 9.18 .0540 -- 9.00
6/23/94 6/30/94 9.000 9.23 .0540 -- 8.98
7/22/94 7/31/94 9.125 9.20 .0540 -- 9.02
</TABLE>
DIVIDEND DATA**
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EQUIVALENT TAXABLE DISTRIBUTION RATE
----------------------------------------------------
PER SHARE ANNUALIZED ASSUMING ASSUMING ASSUMING ASSUMING
DIVIDEND DISTRIBUTION 28% FEDERAL 31% FEDERAL 36% FEDERAL 39.6% FEDERAL
DISTRIBUTIONS RATE TAX BRACKET TAX BRACKET TAX BRACKET TAX BRACKET
------------ ------------ ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
$0.486 7.01% 9.74% 10.16% 10.95% 11.61%
</TABLE>
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* As of Record Date.
** Based on July 31, 1994 net asset value of $9.24 per share. Does not include
capital gains dividend of $.021 per share.
Generally, each registered shareholder is considered a participant in the
Fund's Dividend Reinvestment Plan, unless the shareholder elects to receive all
dividends and distributions in cash, or unless the shareholder's shares are
registered in the name of a broker, bank or nominee (other than Smith Barney
Inc.) which does not provide the service. Questions and correspondence
concerning the Dividend Reinvestment Plan should be directed to The Shareholder
Services Group, Inc. ("TSSG"), P.O. Box 1376, Boston, Massachusetts 02104. If
interested in joining or for more information concerning the Dividend
Reinvestment Plan, please call TSSG at 1-800-331-1710.
3
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MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments
July 31, 1994 (unaudited)
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KEY TO INSURANCE ABBREVIATIONS
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
<TABLE>
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RATINGS
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FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
---------- ------- ---------- -------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--98.6%
ALABAMA--0.4%
$ 740,000 Alabama Housing Finance Authority, Single
Family Mortgage Revenue,
10.500% due 12/01/02........................ A1 AA- $ 788,100
ARIZONA--2.0%
3,300,000 Gila County, Arizona, Industrial Development
Authority, Pollution Control Revenue,
(ASARCO), Series 1985,
8.900% due 07/01/06......................... Baa2 BBB 3,680,625
ARKANSAS--1.7%
2,750,000 Pope County, Arkansas, Pollution Control
Revenue, (Arkansas Power & Light Company
Project),
11.000% due 12/01/15........................ Baa2 BBB 3,011,250
CALIFORNIA--1.2%
2,000,000 Los Angeles County, California, Regional
Airport Authority, (Continental Airlines,
Inc.),
9.000% due 08/01/17......................... NR NR 2,185,000
COLORADO--0.7%
1,250,000 Colorado Health Facilities, Authority Revenue
Project, (Beth Israel at Shalom Park
Project),
8.000% due 12/15/22......................... NR NR 1,289,063
CONNECTICUT--0.8%
1,500,000 Connecticut State, Development Authority,
Health Care Revenue, Series B,
8.000% due 07/01/17......................... NR NR 1,513,125
FLORIDA--6.6%
1,500,000 Broward County, Florida, Educational
Facilities, (NOVA Project),
8.500% due 04/01/10......................... NR BBB 1,740,000
</TABLE>
See Notes to Portfolio of Investments.
4
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MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
July 31, 1994 (unaudited)
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RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
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MUNICIPAL BONDS AND NOTES (CONTINUED)
<C> <S> <C> <C> <C>
FLORIDA (CONTINUED)
$1,000,000 Hillsborough County, Florida, Industrial
Development Revenue, (Seaboard Tampa
Terminals Venture Project),
8.600% due 01/15/22......................... B2 B $ 985,000
1,000,000 Homestead, Florida, Industrial Development
Revenue, Project A,
7.950% due 11/01/18......................... NR NR 950,000
2,110,000 Jacksonville, Florida, Health Facilities
Authority, Health Facilities Revenue,
9.125% due 10/15/19......................... NR NR 2,183,850
1,000,000 Lady Lake, Florida, Industrial Development
Project Revenue, (Sunbelt Utilities Inc.
Project),
9.500% due 07/01/10......................... NR NR 1,042,500
100,000 Martin County, Florida Pollution Control,
2.900% due 09/01/24......................... A2 A+ 100,000
1,500,000 Ocean Highway & Port Authority, Florida,
Pollution Control Revenue, Solid Waste,
9.375% due 11/01/04......................... NR B+ 1,515,000
Palm Beach County, Florida, Health Facilities
Authority, Insured Hospital Revenue,
(JFK Medical Center):
1,155,000 8.875% due 12/01/18......................... NR BBB 1,280,606
1,320,000 8.875% due 12/01/18 (prerefunded 12/01/98).. NR NR 1,544,400
650,000 Tampa, Florida, (Aquarium Inc. Revenue
Project),
7.750% due 05/01/27......................... NR NR 697,937
GEORGIA--0.6%
1,000,000 Walton County, Georgia, Industrial Development
Authority, (Walton Project),
8.500% due 09/01/07......................... NR NR 1,037,500
ILLINOIS--6.9%
2,987,000 Chicago, Illinois, O'Hare International
Airport, Special Facilities Revenue Bonds,
Series B,
8.950% due 05/01/18......................... Baa2 BB 3,308,102
1,700,000 Chicago, Illinois Skyway Toll Bridge,
6.750% due 01/01/17......................... Baa BBB- 1,689,375
2,000,000 East Chicago, Illinois, Industrial Pollution
Control Revenue, (Inland Steel Company),
Project 10,
6.800% due 06/01/13......................... Ba3 BB- 1,957,500
</TABLE>
See Notes to Portfolio of Investments.
5
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MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
July 31, 1994 (unaudited)
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RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
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MUNICIPAL BONDS AND NOTES (CONTINUED)
<C> <S> <C> <C> <C>
ILLINOIS (CONTINUED)
$1,960,000 Hanover Park, Illinois, First Mortgage,
(Windsor Project),
9.250% due 12/01/07......................... NR NR $ 2,035,950
1,750,000 Hennepin, Illinois, Industrial Development
Revenue,
10.250% due 01/01/05 (in default)........... NR NR 218,750
1,500,000 Illinois Housing Development Authority, Series
5,
6.650% due 09/01/14......................... A1 A+ 1,505,625
795,000 Loves Park, Illinois, First Mortgage Revenue,
(Hoosier Care Project), Series A,
9.750% due 08/01/19......................... NR NR 815,869
1,000,000 Sterling, Illinois, First Mortgage Revenue,
(Hoosier Care Project), Series A,
9.750% due 08/01/19......................... NR NR 1,042,500
INDIANA--0.8%
1,500,000 Sullivan, Indiana, Pollution Control Revenue
Refunding, (Indiana Michigan Power Company),
5.950% due 05/01/09......................... Baa2 BBB 1,423,125
IOWA--0.7%
1,240,000 Marion, Iowa, Multi-family Housing Revenue,
9.500% due 07/01/18......................... NR NR 1,252,400
KENTUCKY--2.8%
1,410,000 Jefferson County, Kentucky, Health Facilities
Authority,
10.125% due 05/01/08........................ A1 NR 1,596,825
Kenton County, Kentucky, Airport Board:
1,000,000 (Delta Airlines),
6.750% due 02/01/02......................... Ba1 BB 981,250
1,500,000 (Greater Cincinnati Airport Revenue),
Project A,
7.500% due 02/01/20......................... Ba1 BB 1,500,000
1,000,000 Pendleton County, Kentucky, Multi-Lease
Revenue, Series A,
6.500% due 03/01/19......................... NR A 1,003,750
</TABLE>
See Notes to Portfolio of Investments.
6
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MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
July 31, 1994 (unaudited)
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RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
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MUNICIPAL BONDS AND NOTES (CONTINUED)
<C> <S> <C> <C> <C>
LOUISIANA--4.0%
$1,200,000 Lake Charles, Louisiana, (Harbor & Terminal
Project),
7.750% due 08/15/22......................... Ba1 NR $ 1,278,000
25,000 Louisiana Housing Finance Agency, Single
Family Mortgage Revenue,
13.625% due 09/01/02........................ A1 BB 26,156
Port New Orleans, Louisiana, Industrial
Development Revenue, (Continental Grain
Company Project),
1,000,000 7.500% due 07/01/13......................... NR BB- 1,005,000
2,000,000 8.250% due 06/01/14......................... NR NR 2,000,000
3,000,000 8.500% due 06/01/14......................... NR NR 3,000,000
MAINE--1.4%
2,500,000 Maine State Housing Authority, Mortgage
Purchases, Series D-1,
8.300% due 11/15/28......................... A1 AA- 2,565,625
MARYLAND--2.0%
3,000,000 Maryland State Health & Higher Education
Facilities Authority, (Doctors Community
Hospital Project),
8.750% due 07/01/22 (prerefunded 07/01/00).. Aaa NR 3,600,000
MASSACHUSETTS--5.9%
1,980,000 Commonwealth of Massachusetts Health &
Educational Facilities Authority Revenue,
(North Adams State College),
9.625% due 07/01/18......................... NR NR 2,041,875
Commonwealth of Massachusetts Industrial
Finance Agency:
1,700,000 Series A, (S.E. Mass Project),
9.000% due 07/01/15......................... NR NR 1,899,750
5,940,000 Series B, (S.E. Mass Project),
9.250% due 07/01/15......................... NR NR 6,667,650
MICHIGAN--2.4%
1,855,000 Greater Detroit, Michigan, Recreation
Authority, Series C,
9.250% due 12/13/08......................... NR BBB- 1,977,894
</TABLE>
See Notes to Portfolio of Investments.
7
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MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
July 31, 1994 (unaudited)
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RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
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MUNICIPAL BONDS AND NOTES (CONTINUED)
<C> <S> <C> <C> <C>
MICHIGAN (CONTINUED)
$ 755,000 Greater Detroit, Michigan, Resource Recovery
Authority Revenue, Series B,
9.250% due 12/13/08......................... NR BBB- $ 805,019
1,500,000 Western Townships, Michigan, Utility Revenue,
Sewage System,
8.300% due 01/01/19......................... NR BBB+ 1,571,250
MINNESOTA--1.1%
2,000,000 Minnesota State Housing Finance Agency,
6.700% due 01/01/18......................... Aa AA+ 2,007,500
MISSISSIPPI--3.4%
3,300,000 Claiborne County, Mississippi, Pollution
Control Revenue, Series C,
9.875% due 12/01/14......................... NR NR 3,848,625
2,000,000 Mississippi Hospital Equipment & Facilities
Authority, (Methodist Hospital),
9.375% due 05/01/12......................... NR NR 2,352,500
MONTANA--1.1%
2,000,000 Montana State Board Investment Resource
Recovery Revenue, (Yellowstone Energy LP
Project),
7.000% due 12/31/19......................... NR NR 1,945,000
NEW HAMPSHIRE--2.2%
New Hampshire State Industrial Development
Authority, (United Illuminating Company):
1,000,000 Series A,
9.375% due 07/01/12......................... Baa3 BBB- 1,103,750
2,500,000 Series B,
10.750% due 10/01/12........................ Ba1 BBB- 2,915,625
NEW JERSEY--2.7%
1,300,000 New Jersey Educational Facilities, Series C,
6.625% due 07/01/23......................... NR NR 1,215,500
New Jersey Health Care Facilities, Finance
Authority Revenue:
1,730,000 7.600% due 07/01/21......................... Ba NR 1,734,325
1,500,000 (Zurbrugg Memorial Hospital), Series C,
8.500% due 07/01/12......................... Baa BBB- 1,576,875
</TABLE>
See Notes to Portfolio of Investments.
8
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MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
July 31, 1994 (unaudited)
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RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
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MUNICIPAL BONDS AND NOTES (CONTINUED)
<C> <S> <C> <C> <C>
NEW JERSEY (CONTINUED)
$ 310,000 New Jersey Housing and Mortgage Finance
Agency, Home Buyer Revenue, Series E, (MBIA
Insured),
7.650% due 10/01/16......................... Aaa AAA $ 328,987
NEW MEXICO--1.1%
1,860,000 New Mexico Mortgage Finance Authority, Single
Family Mortgage Program, Series B,
8.300% due 03/01/20......................... NR AA 1,985,550
NEW YORK--6.2%
1,680,000 Babylon, New York, Industrial Development
Agency, (Recycling Project), Series A,
8.875% due 03/01/11 (in default)............ NR NR 840,000
2,055,000 New York City Industrial Development Agency,
Civic Facility Revenues, (International
Center for Integrated Studies -- Door
Project),
9.000% due 03/01/09 (in default)............ NR NR 411,000
1,400,000 New York City, New York, Battery Park
Authority Revenue,
5.800% due 11/01/22......................... A A 1,286,250
New York City, New York, Certificates of
Participation:
875,000 Series C,
7.750% due 09/01/05......................... Baa1 A- 939,531
2,000,000 Series E,
6.000% due 05/15/15......................... Baa1 A- 1,897,500
Series H:
1,000,000 7.000% due 02/01/21......................... Baa1 A- 1,055,000
2,000,000 Sub-Series H-1,
6.125% due 08/01/10......................... Baa1 A- 1,942,500
1,000,000 New York City, New York, Health & Hospital
Corporation, Series A,
6.300% due 02/15/20......................... Baa BBB 983,750
1,950,000 New York State, Energy, Research & Development
Authority, Electric Facility Revenue,
7.150% due 12/01/20......................... Baa1 BB+ 1,971,937
</TABLE>
See Notes to Portfolio of Investments.
9
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MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
July 31, 1994 (unaudited)
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<CAPTION>
RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
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MUNICIPAL BONDS AND NOTES (CONTINUED)
<C> <S> <C> <C> <C>
NORTH CAROLINA--2.4%
$1,750,000 Martin County, North Carolina, Industrial
Facility and Pollution Control Revenue,
6.800% due 05/01/24......................... A2 A $ 1,782,813
2,300,000 North Carolina, Eastern Municipal Power
Agency, Power Systems Revenue,
7.000% due 01/01/08......................... A A- 2,486,875
OHIO--2.8%
1,000,000 Cleveland, Ohio, Airport Special Revenue,
(Continental Airlines Inc.),
9.000% due 12/01/19......................... NR NR 1,046,250
1,000,000 Cuyahoga County, Ohio Health Care Facilities,
(Judson Retirement Community),
8.875% due 11/15/19......................... NR NR 1,087,500
1,500,000 Montgomery County, Ohio, Health Systems
Revenue, Series B,
8.100% due 07/01/18......................... Baa BBB- 1,642,500
145,000 Ohio Housing Finance Agency, Single Family
Mortgage Revenue,
11.375% due 08/01/14........................ Aa A 150,619
1,000,000 Ohio Water Development Authority, Pollution
Control Revenue, Series A,
8.100% due 10/01/23......................... Baa3 BB+ 1,077,500
OKLAHOMA--0.4%
625,000 Oklahoma Housing Finance Agency, Single Family
Housing,
10.750% due 03/01/07........................ Aa A+ 638,281
PENNSYLVANIA--13.5%
2,200,000 Allegheny County, Pennsylvania, Industrial
Development Authority, Special Facilities
Revenue, Series B, (U.S. Air Project),
8.500% due 03/01/21......................... B2 B+ 2,200,000
1,500,000 Delaware County, Pennsylvania, Industrial
Development Authority, First Mortgage,
(White Horse),
9.700% due 07/01/09......................... NR NR 1,543,125
</TABLE>
See Notes to Portfolio of Investments.
10
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MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
July 31, 1994 (unaudited)
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<CAPTION>
RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
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MUNICIPAL BONDS AND NOTES (CONTINUED)
<C> <S> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$3,000,000 Lebanon County, Pennsylvania, (Samaritan
Hospital), Series B,
8.250% due 11/01/18......................... NR BBB+ $ 3,495,000
2,500,000 Luzerne County, Pennsylvania, Industrial
Development Authority,
7.125% due 12/01/22......................... Baa3 BBB- 2,528,125
2,000,000 Montgomery County, Pennsylvania, Higher
Education & Health Authority,
8.375% due 11/01/11......................... Ba1 NR 2,102,500
4,440,000 Montgomery County, Pennsylvania, Industrial
Development Authority, Pollution Control
Revenue, (Philadelphia Electric Company),
Series A,
10.500% due 05/15/15........................ Baa1 BBB 4,756,350
625,000 Northumberland County, Pennsylvania,
Industrial Development Authority Revenue,
6.875% due 02/01/03......................... NR NR 625,000
2,000,000 Philadelphia, Pennsylvania, Gas Revenue,
Series B,
6.400% due 11/15/16......................... Ba BB 1,880,000
1,500,000 Pennsylvania Housing Finance Agency,
6.900% due 04/01/25......................... Aa AA 1,518,750
1,000,000 Schuylkill County, Pennsylvania, Industrial
Development Revenue,
6.500% due 01/01/10......................... NR NR 943,750
1,500,000 Scranton-Lackawanna, Pennsylvania, Health &
Welfare Authority, (Mercy Health Systems),
Series B,
8.500% due 07/01/20......................... NR BB+ 1,605,000
1,250,000 Sharon, Pennsylvania, Regional Health Systems,
(Project B),
6.875% due 12/01/22......................... NR BBB+ 1,239,063
SOUTH CAROLINA--0.5%
940,000 McCormick County, South Carolina, Certificates
of Participation,
9.750% due 07/01/09......................... NR NR 971,725
</TABLE>
See Notes to Portfolio of Investments.
11
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MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
July 31, 1994 (unaudited)
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<CAPTION>
RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
---------- ------- ---------- -------------
MUNICIPAL BONDS AND NOTES (CONTINUED)
<C> <S> <C> <C> <C>
SOUTH DAKOTA--2.3%
Oglala Sioux Tribe, South Dakota, Pine Ridge
County, Revenue Bonds:
$ 315,000 7.000% due 07/01/99......................... NR NR $ 315,000
1,865,000 7.500% due 07/01/13......................... NR NR 1,865,000
1,890,000 10.000% due 07/01/13........................ Aaa NR 2,048,042
TEXAS--12.3%
600,000 Angelina County, Texas, Jail Facilities
Financing Corporation, (Criminal Detention
Center), Mortgage Revenue Bonds,
9.750% due 08/01/09 (in default)............ NR NR 6,000
1,000,000 Bell County, Texas, Health Facilities
Development Corporation, (Living Tech, Inc.
Project), Series A,
10.500% due 06/15/18........................ NR NR 920,000
Brazos River, Texas, Pollution Control
Revenue, (Collateral-Tax, Project A):
1,000,000 9.875% due 10/01/17......................... Baa2 BBB 1,136,250
2,000,000 8.250% due 01/01/19......................... Baa2 BBB 2,222,500
1,000,000 Dallas-Fort Worth, Texas, International
Airport Facilities, (Delta Airlines Inc.),
6.250% due 11/01/13......................... Ba1 BB 896,250
1,580,000 El Paso, Texas, Housing Finance Corporation,
Single Family Mortgage Revenue,
8.750% due 10/01/11......................... A NR 1,726,150
2,000,000 El Paso, Texas, International Airport Revenue
Bonds,
7.750% due 03/01/12......................... B2 B 2,027,500
1,215,612 Harris County, Texas, Industrial Development
Corporation,
7.950% due 07/01/19......................... NR NR 1,173,066
840,000 La Salle County, Texas, Jail Facilities
Financing Corporation, (Criminal Detention
Center), Revenue Mortgage Bonds,
9.750% due 08/01/09 (in default)............ NR NR 8,400
1,400,000 Matagorda County, Texas, Navigation District
No. 1, Pollution Control Revenue, (Houston
Lighting & Power Company Project), Series A,
7.875% due 02/01/19......................... A3 A 1,508,500
</TABLE>
See Notes to Portfolio of Investments.
12
<PAGE>
MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
July 31, 1994 (unaudited)
[LOGO]
- ------------
<TABLE>
<CAPTION>
RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
---------- ------- ---------- -------------
MUNICIPAL BONDS AND NOTES (CONTINUED)
<C> <S> <C> <C> <C>
TEXAS (CONTINUED)
$1,400,000 North Central, Texas, Health Facilities
Development Project, (Hospital-Baylor Health
Care Systems, Project A),
8.980% due 05/15/08......................... Aa AA $ 1,422,750
Northgate Crossing, Texas, Municipal Utilities
District:
1,000,000 Series 1, 8.875% due 12/01/13............... NR NR 1,010,000
1,000,000 Series 2, 8.875% due 12/01/13............... NR NR 1,010,000
570,000 Pecos County, Texas, Jail Facilities Financing
Corporation, (Criminal Detention Center),
Mortgage Revenue Bonds,
9.750% due 08/01/09 (in default)............ NR NR 5,700
Port Corpus Christi, Texas, Industrial
Development Corporation Revenue, (Valero
Refinancing and Marketing Company):
2,500,000 Series A, 10.250% due 06/01/17.............. Baa3 BBB- 2,821,875
2,000,000 Series B, 10.625% due 06/01/08.............. Baa3 BBB- 2,277,500
2,000,000 San Saba County, Texas, Certificates of
Participation,
8.625% due 02/15/19......................... NR NR 2,112,500
UTAH--1.0%
1,780,000 Hurricane, Utah, Health Services Project,
10.500% due 07/01/20........................ NR NR 1,900,150
VERMONT--1.4%
2,365,000 Vermont Housing Finance Agency, Home Mortgage,
Series B,
8.100% due 06/01/22......................... A1 NR 2,447,775
VIRGINIA--1.5%
2,600,000 Hopwell, Virginia, Industrial Development
Resource Authority,
8.250% due 06/01/16......................... NR NR 2,655,250
WEST VIRGINIA--1.4%
2,500,000 Marion County, West Virginia,
County Commission,
7.750% due 12/01/11......................... NR NR 2,468,750
</TABLE>
See Notes to Portfolio of Investments.
13
<PAGE>
MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
July 31, 1994 (unaudited)
[LOGO]
- ------------
<TABLE>
<CAPTION>
RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
---------- ------- ---------- -------------
MUNICIPAL BONDS AND NOTES (CONTINUED)
<C> <S> <C> <C> <C>
PUERTO RICO--0.4%
$ 200,000 Commonwealth of Puerto Rico, General
Obligation Bonds,
8.000% due 07/01/08......................... Baa1 A $ 223,750
500,000 Commonwealth of Puerto Rico, Government
Development Bank,
2.550% due 12/01/15......................... A1 A-1 500,000
-------------
TOTAL MUNICIPAL BONDS AND NOTES (Cost $176,124,008)............................ 178,684,285
SHORT TERM MUNICIPAL NOTES--0.1% (Cost $100,000)
NEW YORK--0.1%
100,000 New York City, New York, Certificates of
Participation, Sub-Series E-3,
1.250% due 08/01/23+........................ Baa BBB 100,000
-------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $176,224,008*)................................ 98.7% $178,784,285
OTHER ASSETS AND LIABILITIES (Net).................................... 1.3 2,335,856
----- ----------
NET ASSETS............................................................ 100.0% $181,120,141
----- ----------
----- ----------
<FN>
- ---------------
* Aggregate cost for Federal tax purposes.
+ Variable rate demand bonds are payable upon not more than seven calendar days'
notice.
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF MUNICIPAL BONDS
BY COMBINED RATINGS
JULY 31, 1994
STANDARD & PERCENT
MOODY'S OR POOR'S OF VALUE
- --------- ---------- ----------
<S> <C> <C> <C>
Aaa AAA 3%
Aa AA 6
A A 12
Baa BBB 29
Ba BB 8
B B 4
NR NR 38
--
100%
--
--
</TABLE>
See Notes to Portfolio of Investments.
14
<PAGE>
MUNICIPAL HIGH INCOME FUND INC.
Notes to Portfolio of Investments (unaudited)
[LOGO]
- ------------
1. SIGNIFICANT ACCOUNTING POLICIES
Municipal High Income Fund Inc. (the "Fund") was organized as a corporation
under the laws of the State of Maryland on March 4, 1988 and is registered with
the Securities and Exchange Commission as a diversified, closed-end management
investment company under the Investment Company Act of 1940, as amended. The
policies described below are followed consistently by the Fund in the valuation
of its portfolio.
PORTFOLIO VALUATION: Investments are valued by The Boston Company Advisors,
Inc. after consultation with an independent pricing service (the "Service")
approved by the Fund's Board of Directors. When, in the judgment of the Service,
quoted bid prices for investments are readily available and are representative
of the bid side of the market, these investments are valued at the mean between
the quoted bid prices and asked prices. Investments for which, in the judgment
of the Service, no readily obtainable market quotations are available, are
carried at fair value as determined by the Service or by the Fund's Board of
Directors. The Service may use electronic data processing techniques and/ or a
matrix system to determine valuations. Short-term investments that mature in
fewer than 60 days are valued at amortized cost.
QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
NET INCREASE/
NET REALIZED (DECREASE)
NET AND UNREALIZED IN NET ASSETS
INVESTMENT INVESTMENT GAIN/(LOSS) RESULTING FROM
INCOME INCOME ON INVESTMENTS OPERATIONS
----------------- ----------------- ---------------------- -------------------
PER PER PER PER
QUARTER ENDED TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
----------------------- ---------- ----- ---------- ----- ------------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 31, 1992....... $3,703,283 $0.20 $3,308,313 $0.18 $ 598,707 $ 0.03 $ 3,907,020 $ 0.20
April 30, 1992......... 3,602,971 0.19 3,244,453 0.17 (657,952) (0.03) 2,586,501 0.14
July 31, 1992.......... 3,723,175 0.20 3,295,472 0.18 5,255,933 0.28 8,551,405 0.46
October 31, 1992....... 3,491,667 0.19 3,126,003 0.17 (3,926,544) (0.22) (800,541) (0.05)
January 31, 1993....... 3,823,950 0.20 3,413,585 0.18 2,944,261 0.16 6,357,846 0.34
April 30, 1993......... 3,416,422 0.18 3,042,358 0.16 241,324 0.01 3,283,682 0.17
July 31, 1993.......... 3,503,367 0.18 3,094,861 0.16 (691,663) (0.04) 2,403,198 0.12
October 31, 1993....... 3,570,033 0.18 3,158,719 0.17 1,925,858 0.10 5,084,577 0.27
January 31, 1994....... 3,648,178 0.19 3,253,314 0.17 (48,811) -- 3,204,503 0.17
April 30, 1994......... 3,536,568 0.18 3,168,209 0.16 (9,555,061) (0.50) (6,386,852) (0.34)
July 31, 1994.......... 3,603,790 0.18 3,191,200 0.16 612,747 0.03 3,803,947 0.20
</TABLE>
15
<PAGE>
MUNICIPAL HIGH INCOME FUND INC.
Management of the Fund
[LOGO]
- ------------
DIRECTORS
Charles F. Barber
Allan J. Bloostein
Martin Brody
Dwight B. Crane
Robert A. Frankel
Heath B. McLendon
OFFICERS
Heath B. McLendon
CHAIRMAN OF THE BOARD
Stephen J. Treadway
PRESIDENT
Richard P. Roelofs
EXECUTIVE VICE PRESIDENT
Lawrence T. McDermott
VICE PRESIDENT AND
INVESTMENT OFFICER
Karen Mahoney-Malcolmson
VICE PRESIDENT AND
INVESTMENT OFFICER
Michael J. Maher
INVESTMENT OFFICER
Lewis E. Daidone
TREASURER
Christina T. Sydor
SECRETARY
INVESTMENT ADVISER
Greenwich Street Advisors
Two World Trade Center
New York, New York 10048
ADMINSTRATOR
Smith, Barney Advisers, Inc.
1345 Avenue of the Americas
New York, New York 10019
SUB-ADMINISTRATOR
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
AUDITORS AND COUNSEL
Coopers & Lybrand
One Post Office Square
Boston, Massachusetts 02109
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
TRANSFER AGENT
The Shareholder Services Group, Inc.
Exchange Place
Boston, Massachusetts 02109
CUSTODIAN
Boston Safe Deposit and
Trust Company
One Boston Place
Boston, Massachusetts 02108
16
<PAGE>
[LOGO]
This report is sent to shareholders of Municipal High Income Fund Inc. for their
information. 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.
MUNICIPAL HIGH INCOME FUND INC.
Two World Trade Center
New York, NY 10048
(212) 720-9218
