<PAGE>
MUNICIPAL HIGH INCOME FUND INC.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 28, 1994
------------------------------------------------------
To the Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders of Municipal
High Income Fund Inc. (the "Fund"), will be held at Two World Trade Center,
100th Floor, New York, New York on September 28, 1994, commencing at 9:30 a.m.
The Annual Meeting is being held for the purposes of:
1. electing three (3) Directors of the Fund (Proposal 1);
2. ratifying the selection of Coopers & Lybrand as the independent
accountants for the Fund for the current fiscal year of the Fund (Proposal 2);
and
3. transacting such other business as may properly come before the Annual
Meeting and any adjournments thereof.
The close of business on August 11, 1994 has been fixed as the record date
for the determination of shareholders of the Fund entitled to notice of and to
vote at the Annual Meeting and any adjournments thereof.
By Order of the Directors,
CHRISTINA T. SYDOR
Secretary
August 22, 1994
New York, New York
<PAGE>
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING ARE REQUESTED TO
COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH
NEEDS NO POSTAGE IF MAILED IN THE CONTINENTAL UNITED STATES. INSTRUCTIONS FOR
THE PROPER EXECUTION OF PROXY CARDS ARE SET FORTH BELOW. IT IS IMPORTANT THAT
PROXIES BE RETURNED PROMPTLY.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense to the Fund involved in validating your vote
if you fail to sign your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears in the
registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration on the
proxy card.
<TABLE>
3. ALL OTHER ACCOUNTS: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of registration. For
example:
<CAPTION>
REGISTRATION VALID SIGNATURE
- ------------------------------- -----------------------
<S> <C>
CORPORATE ACCOUNTS
(1) ABC Corp.................. ABC Corp.
(2) ABC Corp.................. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe,
Treasurer.............. John Doe
(4) ABC Corp. Profit Sharing
Plan .................. John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust................. Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78......... Jane B. Doe
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust.
f/b/o John B. Smith,
Jr. UGMA............... John B. Smith
(2) Estate of John B. Smith... John B. Smith, Jr., Executor
</TABLE>
<PAGE>
ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 28, 1994
---------------------------------------------
MUNICIPAL HIGH INCOME FUND INC.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
---------------------------------------------
PROXY STATEMENT
INTRODUCTION
This proxy statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Municipal High Income Fund Inc. (the
"Fund") for use at the Annual Meeting of Shareholders of the Fund, to be held on
September 28, 1994, or any adjournment or adjournments thereof (collectively,
the "Meeting"). Although the Fund scheduled an Annual Meeting of Shareholders
earlier this year, sufficient votes were not cast in person or by proxy to
transact business within the necessary time. Consequently, the Board of
Directors has rescheduled the Meeting. Proxies returned in connection with that
previous Meeting are not valid for purposes of the rescheduled Meeting. The
Meeting will be held at Two World Trade Center, 100th Floor, New York, New York,
at 9:30 a.m. This proxy statement and accompanying proxy card are first being
mailed on or about August 22, 1994. Proxy solicitations will be made primarily
by mail, but proxy solicitations also may be made by telephone, telegraph or
personal interviews conducted by officers and employees of the Fund; the
Greenwich Street Advisors Division of Mutual Management Corp. (the "Adviser"),
the adviser for the Fund; The Boston Company Advisors, Inc., the
sub-administrator for the Fund ("Boston Advisors"); and/or The Shareholder
Services Group, Inc. ("TSSG"), a subsidiary of First Data Corporation, the
transfer agent for the Fund. The costs of proxy solicitation and expenses
incurred in connection with the preparation of this proxy statement and its
enclosures will be paid by the Fund. The Fund will also reimburse brokerage
firms and others for their expenses in forwarding solicitation material to the
beneficial owners of Fund shares. The Annual Report of the Fund, including
audited financial statements for the fiscal year ended October 31, 1993, has
previously been furnished to all shareholders of the Fund.
If an enclosed proxy is properly executed and returned in time to be voted
at the Meeting, the shares represented thereby will be voted in accordance with
the instructions marked thereon. Unless instructions to the contrary are marked
thereon, a proxy will be voted FOR each of the nominees for director and FOR the
other matters listed in the accompanying Notice of Annual Meeting of
1
<PAGE>
Shareholders. For purposes of determining the presence of a quorum for
transacting business at the Meeting, abstentions and broker "non-votes"(that is,
proxies from brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other persons entitled to vote shares
on a particular matter with respect to which the brokers or nominees do not have
discretionary power) will be treated as shares that are present but which have
not been voted. Approval of Proposals 1 and 2 require the affirmative vote of a
plurality of shares voted. Because abstentions and broker non-votes are not
treated as shares voted, abstentions and broker non-votes would have no impact
on such Proposals. Any shareholder who has given a proxy has the right to revoke
it at any time prior to its exercise either by attending the Meeting and voting
his or her shares in person or by submitting a letter of revocation or a
later-dated proxy to the Fund at the above address prior to the date of the
Meeting.
In the event that a quorum is not present at a Meeting, or in the event
that a quorum is present but sufficient votes to approve any of the proposals
are not received, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. In
determining whether to adjourn the Meeting, the following factors may be
considered: the nature of the proposals that are the subject of the Meeting, the
percentage of votes actually cast, the percentage of negative votes actually
cast, the nature of any further solicitation and the information to be provided
to shareholders with respect to the reasons for the solicitation. Any
adjournment will require the affirmative vote of a majority of those shares
represented at the Meeting in person or by proxy. A shareholder vote may be
taken on any one of the proposals in this proxy statement prior to any
adjournment if sufficient votes have been received for approval. Under the
By-laws of the Fund, as applicable, a quorum is constituted by the presence in
person or by proxy of the holders of a majority of the outstanding shares
entitled to vote on the particular matter at the Meeting.
The Board has fixed the close of business on August 11, 1994 as the record
date (the "Record Date") for the determination of shareholders of the Fund
entitled to notice of and to vote at the Meeting. The Fund has one class of
common stock, which has a par value of $.01 per share. At the close of business
on the Record Date there were 19,642,696.209 shares of common stock outstanding
(the "Shares"). Each shareholder is entitled to one vote for each Share held and
a proportionate fraction of a vote for any fractional share held.
As of the Record Date, to the knowledge of the Fund and its Board, no
single shareholder or "group" (as that term is used in Section 13(d) of the
Securities Exchange Act of 1934 (the "Exchange Act")), except as set forth
below, beneficially owned more than 5% of the outstanding Shares of the Fund. As
of the Record Date, Cede & Co., a nominee partnership of the Depository Trust
Company, held 16,558,373 Shares, or 84% of the Fund's Shares. Of the Shares held
by Cede & Co., Smith Barney Inc. ("Smith Barney") held 9,649,801
2
<PAGE>
Shares, or 49% of the Fund's Shares, for which it has discretionary and non-
discretionary authority. As of the Record Date, the officers and Board Members
of the Fund as a group beneficially owned less than 1% of the shares of that
Fund.
In order that a shareholder's Shares may be represented at the Meeting,
shareholders are required to allow sufficient time for their proxies to be
received on or before 9:30 a.m. on September 28, 1994.
The following table shows certain information about the executive officers
of the Fund, other than Heath B. McLendon, for whom comparable information is
provided in the discussion of Proposal 1 below. Each officer of the Fund serves
at the discretion of the Board.
<TABLE>
<CAPTION>
AMOUNT (AND
PERCENTAGE) OF
OUTSTANDING
SHARES OF
COMMON STOCK PRINCIPAL
BENEFICIALLY OCCUPATION
OFFICE OWNED* AS OF DURING THE PAST
NAME (AGE) AND ADDRESS HELD THE RECORD DATE FIVE YEARS
- ----------------------------- ------------ ---------------- -----------------
<S> <C> <C> <C>
Stephen J. Treadway (46) President None Executive Vice
1345 Avenue of the Americas President and
New York, NY 10105 Director of Smith
Barney; Director
and President of
Mutual Management
Corp., Smith
Barney Advisors
Inc. and other
investment
companies
associated with
Smith Barney; and
Trustee of
Corporate Realty
Income Trust I
</TABLE>
<TABLE>
<S> <C> <C> <C>
Richard P. Roelofs (40) Executive None Managing Director
Two World Trade Center Vice of Smith Barney
New York, NY 10048 President and President of
Smith Barney
Investment
Strategy Advisors
Inc., an
investment
advisory
affiliate of
Smith Barney;
prior to July
1993, Senior Vice
President of
Shearson Lehman
Brothers Inc. and
Vice President of
Shearson Lehman
Strategy Advisors
Inc.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
AMOUNT (AND
PERCENTAGE) OF
OUTSTANDING
SHARES OF
COMMON STOCK PRINCIPAL
BENEFICIALLY OCCUPATION
OFFICE OWNED* AS OF DURING THE PAST
NAME (AGE) AND ADDRESS HELD THE RECORD DATE FIVE YEARS
- ----------------------------- ------------ ---------------- -----------------
<S> <C> <C> <C>
Lewis E. Daidone (37) Chief None Managing Director
1345 Avenue of the Americas Financial of Smith Barney
New York, NY 10105 and and Greenwich
Accounting Street Advisors;
Officer and Director and
Treasurer Senior Vice
President of
Mutual Management
Corp. and Smith
Barney Advisors;
prior to January
1990, Senior Vice
President and
Chief Financial
Officer of
Cortland
Financial Group,
Inc.
Christina T. Sydor (43) Secretary None Managing Director
1345 Avenue of the Americas of Smith Barney
New York, NY 10105 and Secretary of
Mutual Management
Corp. and Smith
Barney Advisors
Lawrence T. McDermott (45) Vice 431-(0.1%) Managing Director
Two World Trade Center President of Greenwich
New York, New York 10048 and Street Advisors;
Investment prior to July,
Officer 1993, Managing
Director of
Shearson Lehman
Advisors; prior
to May 1, 1988,
Senior Vice
President of
Shearson Asset
Management Inc.
Karen Mahoney-Malcomson (36) Vice None Senior Vice
Two World Trade Center President President of
New York, New York 10048 and Greenwich Street
Investment Advisors; prior
Officer to July, 1993,
Senior Vice
President of
Shearson Lehman
Advisors; prior
to March, 1991,
Vice President of
Shearson Lehman
Advisors
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
AMOUNT (AND
PERCENTAGE) OF
OUTSTANDING
SHARES OF
COMMON STOCK PRINCIPAL
BENEFICIALLY OCCUPATION
OFFICE OWNED* AS OF DURING THE PAST
NAME (AGE) AND ADDRESS HELD THE RECORD DATE FIVE YEARS
- ----------------------------- ------------ ---------------- -----------------
<S> <C> <C> <C>
Michael J. Maher (34) Investment None Vice President of
Two World Trade Center Officer Greenwich Street
New York, New York 10048 Advisors; prior
to July, 1993,
Vice President of
Shearson Lehman
Advisors; prior
to 1989,
Assistant Vice
President of
Shearson Lehman
Advisors
</TABLE>
- ---------------
* For this purpose "beneficial ownership" is defined under Section 13(d) of the
Exchange Act. The information as to beneficial ownership is based solely upon
information furnished to the Fund by the officers.
PROPOSAL 1: TO ELECT THREE (3) DIRECTORS OF THE FUND
The first proposal to be considered at the Meeting is the election of three
(3) Directors of the Fund.
The Board of Directors of the Fund is divided into three classes with the
terms of office of one class expiring each year. At the forthcoming Meeting, it
is proposed that Martin Brody and Allan J. Bloostein each be elected for a term
of three years (until the Annual Meeting in 1997) and that Robert A. Frankel be
elected for a term of one year (until the Annual Meeting in 1995) and in each
case until their respective successors are duly elected and qualified. Messrs.
Brody and Bloostein have previously been elected by the shareholders and are
currently serving as Class I Directors. Mr. Frankel is currently serving as a
Class II Director.
Messrs. Brody, Bloostein and Frankel have consented to serve as Directors
if elected at the Meeting. If a designated nominee declines or otherwise becomes
unavailable for election, however, the proxy confers discretionary power on the
persons named therein to vote in favor of a substitute nominee or nominees.
Section 16(a) of the Exchange Act requires the Fund's officers and
Directors, and persons who beneficially own more than ten percent of a
registered class of the Fund's equity securities, to file reports of ownership
with the Securities and Exchange Commission (the "SEC"), the New York Stock
Exchange and the Fund. Based solely upon its review of the copies of such forms
received by it and written representations from such persons, the Fund believes
that, during fiscal year 1993, all filing requirements applicable to such
persons were complied with.
5
<PAGE>
Each Director who is not an "interested person" of the Fund (an
"Independent Board Member") receives a fee of $5,000 per annum plus $500 per
meeting attended, and reimbursement for travel and out-of-pocket expenses. The
aggregate remuneration paid to Directors by the Fund for the fiscal year ended
October 31, 1993 amounted to $43,790 (including reimbursement for travel and
out-of-pocket expenses). The Board of Directors held nine meetings during the
fiscal year ended October 31, 1993, four of which were regular meetings.
The Board has an Audit Committee consisting of all Independent Board
Members. The Audit Committee reviews the scope and results of the Fund's annual
audit with the Fund's independent accountants and recommends the engagement of
accountants. The Audit Committee met twice during the fiscal year ended October
31, 1993. Each incumbent Director attended at least 75% of the meetings of the
Board and committees of which he is a member that were held in the last fiscal
year.
Each of the nominees for Director of the Fund currently serves as a
Director of the Fund. Any Director may resign and any Director may be removed at
any meeting of shareholders called for that purpose by a vote of a majority of
the votes entitled to be cast for election of Directors. In case a vacancy shall
exist for any reason, the remaining Directors may fill the vacancy by appointing
another Director. If at any time less than a majority of the Directors holding
office have been elected by shareholders, the Directors then in office will call
a shareholder's meeting for the purpose of electing Directors.
<TABLE>
Set forth in the following table are the existing Directors and nominees
for election to the Board of Directors of the Fund, together with certain other
information:
<CAPTION>
AMOUNT (AND
PERCENTAGE) OF
OUTSTANDING
SHARES OF PRINCIPAL
COMMON STOCK OCCUPATION
BENEFICIALLY AND OTHER
BOARD MEMBER OWNED** DIRECTORSHIPS***
OF FUND AS OF THE DURING THE
NAME (AGE) AND ADDRESS SINCE RECORD DATE PAST FIVE YEARS
- -------------------------- ------------ -------------- -----------------------------
<S> <C> <C> <C>
NOMINEES TO SERVE UNTIL
THE 1997 MEETING OF
SHAREHOLDERS:
Martin Brody (71) 1988 None Vice Chairman of the Board of
Three ADP Boulevard Directors of Restaurant
Roseland, NJ 07068 Associates Corp.; Director of
Jaclyn, Inc., an apparel
manufacturer
Allan J. Bloostein (63) 1992 None Consultant; formerly Vice
27 West 67th Street, Chairman of the Board of May
Apt. 5FW Department Stores Company;
New York, NY 10023 Director of Crystal Brands,
Inc., Melville Corp., R.G.
Barry Corp. and Hechinger Co.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
AMOUNT (AND
PERCENTAGE) OF
OUTSTANDING
SHARES OF PRINCIPAL
COMMON STOCK OCCUPATION
BENEFICIALLY AND OTHER
BOARD MEMBER OWNED** DIRECTORSHIPS***
OF FUND AS OF THE DURING THE
NAME (AGE) AND ADDRESS SINCE RECORD DATE PAST FIVE YEARS
- -------------------------- ------------ -------------- -----------------------------
<S> <C> <C> <C>
DIRECTORS TO SERVE UNTIL
THE 1996 MEETING OF
SHAREHOLDERS:
Dwight B. Crane (55) 1988 None Professor, Graduate School of
Harvard Business School Business Administration,
Soldiers Field Road Harvard University; Director
Boston, MA 02163 of Peer Review Analysis, Inc.
Charles Barber (75) 1989 1,427- Consultant; formerly Chairman
66 Glenwood Drive (.01%) of the Board, ASARCO
Greenwich, CT 06830 Incorporated
DIRECTOR TO SERVE UNTIL
THE 1995 MEETING OF
SHAREHOLDERS:
Robert A. Frankel (67) 1994 None Consultant; formerly
102 Grand Street Corporate Vice President of
Croton-on-Hudson, NY the Readers Digest
10520
Heath B. McLendon* (60) 1988 8,823- Executive Vice President of
Two World Trade Center (.05%) Smith Barney; Chairman of the
New York, NY 10048 Board of Smith Barney
Strategy Advisers Inc.; prior
to July 1993, Senior
Executive Vice President of
Shearson Lehman Brothers,
Vice Chairman of Shearson
Asset Management; Director of
PanAgora Asset Management,
Inc. and PanAgora Asset
Management Limited,
investment advisory
affiliates of Shearson Lehman
Brothers
All directors and officers 10,681-
as a group (12 persons (.06%)
including the foregoing)
</TABLE>
- ---------------
* "Interested person" of the Fund, as defined in the 1940 Act, by virtue of
his position as an officer or director of the Adviser or one of its
affiliates.
** For this purpose "beneficial ownership" is defined under Section 13(d) of
the Exchange Act. The information as to beneficial ownership is based solely
upon information furnished to the Fund by the nominees/directors.
*** Directorships, general partnerships or trusteeships of companies that are
required to report to the SEC, other than open-end registered investment
companies.
REQUIRED VOTE
Election of the listed nominees for Director will require the affirmative
vote of a plurality of the votes cast at the Meeting in person or by proxy.
7
<PAGE>
THE BOARD OF THE FUND, INCLUDING ALL THE INDEPENDENT BOARD MEMBERS,
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE ELECTION OF NOMINEES TO THE
BOARD.
PROPOSAL 2: TO RATIFY THE SELECTION OF COOPERS & LYBRAND AS THE INDEPENDENT
ACCOUNTANTS FOR THE FUND FOR THE CURRENT FISCAL YEAR
The second proposal to be considered at the Meeting is the ratification of
the selection of Coopers & Lybrand as the independent public accountants for the
Fund.
Coopers & Lybrand, One Post Office Square, Boston, Massachusetts 02109, has
served as independent accountants for the Fund for the fiscal year ended October
31, 1993, and has been selected to serve in this capacity for the Fund's current
fiscal year by at least a majority of the Independent Board Members. Coopers &
Lybrand has informed the Fund that it has no direct or indirect financial
interest in the Fund, Smith Barney, or any of their affiliates. Representatives
of Coopers & Lybrand are expected to be present at the Meeting and will be given
the opportunity to make a statement if they so desire and will respond to
appropriate questions.
REQUIRED VOTE
Ratification of the selection of Coopers & Lybrand as independent
accountants for the Fund requires the affirmative vote of the holders of a
plurality of the votes cast at the Meeting in person or by proxy.
THE BOARD OF THE FUND, INCLUDING ALL OF THE INDEPENDENT BOARD MEMBERS,
RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" RATIFICATION OF THE
SELECTION OF COOPERS & LYBRAND.
ADDITIONAL INFORMATION
INVESTMENT ADVISER
Greenwich Street Advisors (the "Adviser"), located at Two World Trade
Center, New York, New York 10048, has served as the investment adviser to the
Fund since July 31, 1993 pursuant to an investment advisory agreement dated July
31, 1993 (the "Advisory Agreement"). The Adviser (through its predecessors) has
been in the investment counseling business since 1934 and is a division of
Mutual Management Corp. ("MMC") which was incorporated in 1978. The Adviser
renders investment advice to investment companies that had assets under
management as of June 30, 1994 in excess of $47 billion. MMC is a wholly owned
subsidiary of Smith Barney Inc. ("Smith Barney") which in turn is a wholly owned
subsidiary of The Travelers Inc. ("Travelers"). The principal executive offices
of Smith Barney and Travelers are 1345 Avenue of the
8
<PAGE>
Americas, New York, New York 10105, and 65 East 55th Street, New York, New York
10022, respectively.
Prior to July 31, 1993, Shearson Lehman Advisors, a member of the
investment management group of the SLB Asset Management Division of Shearson
Lehman Brothers Inc., served as investment adviser to the Fund. As of the close
of business on July 30, 1993, Travelers (which at the time was known as
Primerica) and Smith Barney, Harris Upham & Co. Incorporated completed the
acquisition of substantially all of the domestic retail brokerage and asset
management businesses of Shearson Lehman Brothers Inc. and Smith Barney, Harris
Upham & Co. Incorporated was renamed Smith Barney Shearson Inc. On June 1, 1994,
Smith Barney Shearson Inc. was renamed Smith Barney Inc. As of the close of
business on July 30, 1993, the Adviser succeeded Shearson Lehman Advisors as the
Fund's investment adviser. The new investment advisory agreement with the
Adviser contains terms and conditions substantially similar to the investment
advisory agreement with the predecessor investment adviser and provides for
payment of fees at the same rate as was paid to such predecessor investment
adviser.
As of the Record Date, the Directors and/or executive officers of the Fund
beneficially owned (or were deemed to beneficially own pursuant to the rules of
the SEC) less than 1% of the shares of common stock of Travelers. The name,
principal occupation and address of each director and principal executive
officer of the Adviser are set forth in Exhibit A hereto. An audited
Consolidated Statement of Financial Condition for MMC as of December 31, 1993 is
set forth as Exhibit B hereto.
THE ADVISORY AGREEMENT
The Advisory Agreement was most recently approved by the Fund's Board of
Directors, including a majority of the Independent Board Members on April 7,
1993, and by the Fund's shareholders on June 9, 1993. Under the terms of the
Agreement, the Adviser is required, subject to the supervision and approval of
the Board of the Fund, to manage the Fund's investments in accordance with the
investment objectives and policies as stated in the Fund's Prospectus. The
Adviser is responsible for making investment decisions, supplying investment
research and Fund management services and placing orders to purchase and sell
securities on behalf of the Fund.
In consideration of services rendered by the Adviser pursuant to the
Advisory Agreement, the Fund pays a monthly fee at the annual rate of .40% of
the Fund's average monthly net assets. Pursuant to the Advisory Agreement, the
Fund paid a total of $737,798 in advisory fees for the fiscal year ended October
31, 1993.
The Adviser bears all expenses in connection with the performance of its
services under the Advisory Agreement. Other expenses incurred in the operation
9
<PAGE>
of the Fund are borne by the Fund, including taxes, interest, brokerage fees and
commissions, if any; fees of the Board Members who are not officers, directors,
shareholders or employees of the Adviser, the Fund's administrator and its
affiliates; SEC fees and state blue sky qualification fees; charges of custodian
and transfer and dividend disbursing agents; certain insurance premiums; outside
auditing and legal expenses; cost of investor services (including allocable
telephone and personnel expenses); costs of preparation and printing of
shareholders' reports; costs incurred in connection with meetings of the Board
and of the shareholders of the Fund; listing fees; and any extraordinary
expenses.
If in any fiscal year the aggregate expenses of the Fund (including fees
pursuant to the Advisory Agreement (and the administration agreement) but
excluding interest, taxes, brokerage and, if permitted by state securities
commissions, extraordinary expenses) exceed the expense limitation of any state
having jurisdiction over the Fund, the Adviser will reduce its advisory fees to
the Fund for the excess expense to the extent required by state law in the same
proportion as its advisory fee bears to the Fund's aggregate fees for investment
advice and administration. Proportionate reductions would also be made by the
Fund's administrator. This expense reimbursement, if any, will be estimated,
reconciled and paid on a monthly basis.
The Advisory Agreement provides that in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations thereunder,
the Adviser shall not be liable for any act or omission in the course of, or in
connection with, the rendering of its services thereunder.
Pursuant to its terms, the Advisory Agreement will remain in effect for an
initial two-year term and will continue in effect for successive periods if and
so long as such continuance is specifically approved annually by (a) the Fund's
Board or (b) a Majority Vote of the Fund's shareholders, provided that in either
event, the continuance also is approved by a majority of the Independent Board
Members by vote cast in person at a meeting called for the purpose of voting on
approval. The Advisory Agreement is terminable, without penalty, on 60 days'
written notice by the Board of the Fund or by a Majority Vote of the Fund's
shareholders, or on 90 days' written notice by the Adviser. The Advisory
Agreement will terminate automatically in the event of its assignment (as
defined in the Investment Company Act of 1940, as amended).
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for the Fund are made by the Adviser,
subject to the overall review of the Fund's Board. Although investment decisions
for the Fund are made independently from those of the other accounts managed by
the Adviser, investments of the type the Fund may make also may be made by those
other accounts. When the Fund and one or more other accounts managed by the
Adviser are prepared to invest in, or desire to dispose of, the same
10
<PAGE>
security, available investments or opportunities for sales will be allocated in
a manner believed by the Adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or the
size of the position obtained or disposed of by the Fund.
Transactions on U.S. stock exchanges and many foreign stock exchanges
involve the payment of negotiated brokerage commissions. On exchanges on which
commissions are negotiated, the cost of transactions may vary among different
brokers. No stated commission is generally applicable to securities traded in
U.S. over-the-counter markets, but the prices of those securities include
undisclosed commissions or mark-ups. The cost of securities purchased from
underwriters includes an underwriting commission or concession and the prices at
which securities are repurchased from and sold to dealers include a dealer's
mark-up or mark-down. U.S. government securities are generally purchased from
underwriters or dealers, although certain newly-issued U.S. government
securities may be purchased directly from the United States Treasury or from the
issuing agency or instrumentality.
In selecting brokers or dealers to execute Fund transactions on behalf of
the Fund, the Adviser seeks the best overall terms available. In assessing the
best overall terms available for any transaction, the Adviser will consider the
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer and the reasonableness of the commission, if any, for the
specific transaction and on a continuing basis. In addition, the Adviser is
authorized, in selecting brokers or dealers to execute a particular transaction
and in evaluating the best overall terms available, to consider the brokerage
and research services (as those terms are defined in Section 28(e) of the
Exchange Act) provided to the Fund and/or other accounts over which the Adviser
or its affiliates exercise investment discretion. The fees under an Agreement
are not reduced by reason of the Fund's or the Adviser's receiving brokerage and
research services. Research and investment services are those which brokerage
houses customarily provide to institutional investors and include statistical
and economic data and research reports on particular issues and industries.
These services are used by the Adviser in connection with all of its investment
activities, and some of the services obtained in connection with the execution
of transactions for the Fund may be used in managing other investment accounts.
Conversely, brokers furnishing these services may be selected for the execution
of transactions for these other accounts, whose aggregate assets may exceed
those of the Fund, and the services furnished by the brokers may be used by the
Adviser in providing investment management for the Fund. During the last fiscal
year of the Fund, neither the Fund nor its Adviser, pursuant to any agreement or
understanding with a broker or otherwise through an internal allocation
procedure, directed the Fund's brokerage transactions to a broker or brokers
because of research services provided. The Board of the Fund periodically will
review the commis-
11
<PAGE>
sions paid by the Fund to determine if the commissions paid over representative
periods of time were reasonable in relation to the benefits inuring to the Fund.
Over-the-counter purchases and sales by the Fund are transacted directly with
principal market makers except in those cases in which better prices and
executions may be obtained elsewhere.
To the extent consistent with applicable provisions of the 1940 Act and the
rules and exemptions adopted by the SEC under the 1940 Act, subject to the
approval of the Board of the Fund, transactions for the Fund may be executed
through Smith Barney and other affiliated broker-dealers if, in the judgment of
the Adviser, the use of an affiliated broker-dealer is likely to result in price
and execution at least as favorable as those of other qualified broker-dealers.
The Fund will not purchase any security, including U.S. government
securities, during the existence of any underwriting or selling group relating
to the security of which Smith Barney is a member, except to the extent
permitted by the SEC.
For the fiscal year ended October 31, 1993, the Fund did not incur any
brokerage commissions.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholders wishing to submit proposals for inclusion in a proxy statement
for the 1995 annual meeting of shareholders must submit their proposals for
inclusion in the proxy materials relating to the next annual meeting in writing
to the Secretary of the Fund, c/o Smith Barney Inc., 1345 Avenue of the
Americas, New York, New York 10105, no later than April 25, 1995.
SHAREHOLDERS' REQUEST FOR SPECIAL MEETING
Shareholders entitled to cast at least 25% of all votes entitled to be cast
at a meeting may require the calling of a meeting of shareholders for the
purpose of voting on the removal of any Board Member of the Fund. Meetings of
shareholders for any other purpose also shall be called by the Secretary of the
Fund when requested in writing by shareholders entitled to cast at least 25% of
all votes entitled to be cast at a meeting.
12
<PAGE>
OTHER MATTERS TO COME BEFORE THE MEETING
The Fund does not intend to present any other business at the Meeting, nor
is it aware that any shareholder intends to do so. If, however, any other
matters are properly brought before the Meeting, the persons named in the
accompanying proxy card(s) will vote thereon in accordance with their judgment.
August 22, 1994
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE MEETING ARE THEREFORE URGED TO COMPLETE, SIGN, DATE AND
RETURN THE PROXY AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
13
<PAGE>
EXHIBIT LIST
<TABLE>
<S> <C>
EXHIBIT A Name, Position with, Principal Occupation and Address
of each Director and Principal Executive Officer of
the Adviser.
EXHIBIT B Audited balance sheet of MMC.
</TABLE>
<PAGE>
EXHIBIT A
NAME, OCCUPATION AND ADDRESS OF
EXECUTIVE OFFICERS OF
GREENWICH STREET ADVISORS
The name, position with Greenwich Street Advisors and principal occupation
of each executive officer and director of Greenwich Street Advisors are set
forth in the following table. The business address of each such person is Two
World Trade Center, New York, New York 10048.
<TABLE>
<CAPTION>
POSITION WITH GREENWICH
NAME STREET ADVISORS PRINCIPAL OCCUPATION
- ---------------------- ------------------------ ----------------------
<S> <C> <C>
Thomas B. Stiles II Chairman and Chief Executive Vice
Executive Officer President of Smith
Barney
John C. Bianchi Managing Director Same
Robert Brady Managing Director Same
Ellen S. Cammer Managing Director Same
Peter M. Coffey Managing Director Same
James Conroy Managing Director Same
Joseph P. Deane Managing Director Same
Kenneth Egan Managing Director Same
Jay Gerken Managing Director Same
Jack Levande Managing Director Same
Lawrence T. McDermott Managing Director Same
George Novello Managing Director Same
Ronald Perry Managing Director Same
Kevin Reed Managing Director Same
Patrick Sheehan Managing Director Same
Phyllis M. Zahorodny Managing Director Same
</TABLE>
A-1
<PAGE>
EXHIBIT B
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
Mutual Management Corp.:
We have audited the accompanying consolidated statement of financial
condition of Mutual Management Corp. (a wholly-owned subsidiary of Smith Barney
Shearson Holdings Inc.) and its Subsidiary as of December 31, 1993. This
consolidated statement of financial condition is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
consolidated statement of financial condition based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated statement of financial
condition is free of material misstatement. An audit of a consolidated statement
of financial condition includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated statement of financial
condition. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated statement of financial condition presentation. We believe that our
audit of the consolidated statement of financial condition provides a reasonable
basis for our opinion.
In our opinion, the consolidated statement of financial condition referred
to above presents fairly, in all material respects, the financial position of
Mutual Management Corp. and its Subsidiary as of December 31, 1993 in conformity
with generally accepted accounting principles.
KPMG Peat Marwick
New York, New York
March 14, 1994
B-1
<PAGE>
<TABLE>
MUTUAL MANAGEMENT CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1993
<S> <C> <C>
ASSETS
Cash................................. $ 238
Management fees receivable........... 13,428,876
Investments in affiliated mutual
funds, at market................... 1,074,258
Furniture and fixtures, net of
accumulated depreciation and
amortization, of $142,035.......... 193,356
Investment advisory contracts, net of
accumulated amortization, of
$25,422,012........................ 476,513,983
Receivable from affiliate............ 208,595
Other assets......................... 24,513,330
------------
$515,932,636
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Note Payable to Parent............... $412,389,100
Payable to Parent and affiliate...... 37,487,039
Stockholder's equity:
Common stock ($1 par value)........ $ 500
Additional paid-in capital......... 49,053,121
Retained earnings.................. 16,836,177
Cumulative translation
adjustment...................... 166,699
-----------
$66,056,497
------------
$515,932,636
===========
</TABLE>
MUTUAL MANAGEMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED STATEMENT OF
FINANCIAL CONDITION
DECEMBER 31, 1993
(1) Organization -- Mutual Management Corp. ("MMC"), a wholly-owned subsidiary
of Smith Barney Shearson Holdings, Inc. ("Parent") (formerly Smith Barney
Holdings, Inc.), is a registered investment adviser and acts pursuant to
management agreements as investment manager to sixty-eight investment
company portfolios and as administrator of The Inefficient-Market Fund, Inc.
MMC provides each company with personnel, investment advice, office space
and administrative services at fees based on the net assets of each fund.
The consolidated statement of financial condition includes the accounts of
Smith Barney Asset Management Corp., a wholly-owned subsidiary of MMC.
Significant intercompany balances have been eliminated in consolidation.
(Continued)
B-2
<PAGE>
MUTUAL MANAGEMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED STATEMENT OF
FINANCIAL CONDITION (CONTINUED)
DECEMBER 31, 1993
(2) Shearson Acquisition -- On July 31, 1993, Smith Barney, Harris Upham & Co.
Incorporated ("SBHU"), together with certain of its affiliates (including
MMC) and The Travelers Inc. (formerly Primerica Corporation) acquired the
domestic retail brokerage and asset management businesses ("Shearson") of
Shearson Lehman Brothers Holdings Inc. and its subsidiaries, a subsidiary of
American Express Company. Shearson was combined with the operations of SBHU
and its affiliates, and SBHU was renamed Smith Barney Shearson Inc. ("SBS").
The acquisition included the contracts to manage fifty-four of Shearson's
investment company portfolios.
(3) Related Party Transactions -- SBS provides MMC with executive and
administrative services (e.g., accounting, legal, personnel, facilities,
mail and other support services) and order processing support on a basis
mutually agreed upon. Receivable from and payable to affiliate are non-
interest bearing. Investments in affiliated mutual funds represent shares of
Smith Barney Money Funds, Inc., Smith Barney Muni Funds and Smith Barney Tax
Free Money Fund, Inc. Such investments are carried at market value. In 1993,
MMC transferred a deferred tax liability, resulting from the adoption of
Statement of Financial Accounting Standard No. 109 on January 1, 1992, to
the Parent pursuant to a tax sharing agreement. The resulting payable to
Parent is non-interest bearing. Substantially all cash collected by MMC
relating to management fees is remitted to the Parent in the form of
dividends.
(4) Income Taxes -- Under an income tax allocation arrangement with the Parent
and The Travelers Inc., MMC's federal, state and local income taxes are
provided for on a separate return basis without regard to timing
differences, and are subject to the utilization of tax attributes in The
Travelers Inc. consolidated income tax provision. Under the tax sharing
agreement, MMC remits taxes to the Parent.
(5) Investment Advisory Contracts -- Investment advisory contracts include
$387,015,720 of value ascribed to the acquired Shearson investment company
advisory contracts purchased by MMC (see note 2). The cost of these
contracts is being amortized over twenty years on a straight-line basis.
In addition, the balance also includes the amortized cost assigned to
certain investment advisory contracts in connection with the acquisition of
the
(Continued)
B-3
<PAGE>
MUTUAL MANAGEMENT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED STATEMENT OF
FINANCIAL CONDITION (CONTINUED)
DECEMBER 31, 1993
Parent by Commercial Credit Group, Inc. in December 1988. The combined
successor firm subsequently changed its name to Primerica Corporation (now
The Travelers Inc.). The cost of these contracts is being amortized over
thirty years on a straight-line basis.
(6) Note Payable -- At December 31, 1993 note payable to Parent represents a
demand note at a rate of LIBOR plus .75%. The note was issued for the
financing of investment advisory contracts (purchased on July 31, 1993 (see
note 2) and certain deferred expenses originally paid by SBS relating to
closed end funds sponsored by MMC.
On November 1, 1993 MMC paid the third and final installment of a promissory
note to SBS relating to the transferral of the investment advisory contract
for the Vantage Money Market Funds from SBS in October, 1990.
(7) Stockholder's Equity -- Common shares authorized consist of 5,000 shares of
Class A (non-voting) and 5,000 shares of Class B (voting). At December 31,
1993, 449 Class A shares and 51 Class B shares were issued and outstanding.
In connection with the acquisition of Smith Barney Inc. by Primerica
Corporation on June 19, 1987 and the subsequent acquisition of Primerica
Corporation by Commercial Credit Group, Inc. in December 1988, MMC was
recapitalized and its retained earnings on both dates were transferred to
additional paid-in capital.
B-4
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . .
Please indicate your vote by an "X" in the appropriate box below.
This proxy, if properly executed, will be voted in the manner directed by
the undersigned shareholder.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION OF NOMINEES
AS DIRECTORS AND PROPOSAL 2.
Please refer to the Proxy Statement for a discussion of the Proposals.
1. ELECTION OF DIRECTORS FOR all nominees listed
WITHHOLD AUTHORITY
(except as marked to the
to vote for all nominees
Allan J. Bloostein, Martin Brody and contrary below)
Robert A. Frankel
(Instruction: To withhold authority for any nominee, write his name on the
line provided below.)
___________________________________________________________________________
2. To ratify the selection of Coopers & Lybrand as FOR
AGAINST ABSTAIN
independent accountants for the Fund
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . .
MUNICIPAL HIGH INCOME FUND INC. PROXY SOLICITED BY
THE BOARD OF DIRECTORS
The undersigned holder of shares of Municipal High Income Fund Inc.
(the "Fund"), a Maryland corporation, hereby appoints Heath B.
McLendon, Richard P. Roelofs, Christina T. Sydor and Lee D.
Augsburger attorneys and proxies for the undersigned with full
powers of substitution and revocation, to represent the undersigned
and to vote on behalf of the undersigned all shares of the Fund
that the undersigned is entitled to vote at the Annual Meeting of
Shareholders of Municipal High Income Fund Inc. to be held at the
offices of the Fund, Two World Trade Center, New York, New York on
September 28, 1994 at 9:30 a.m., and any adjournment or
adjournments thereof. The undersigned hereby acknowledges receipt
of the Notice of Meeting and Proxy Statement dated August 22, 1994
and hereby instructs said attorneys and proxies to vote said shares
as indicated herein. In their discretion, the proxies are
authorized to vote upon such other business as may properly come
before the Meeting. A majority of the proxies present and acting
at the Meeting in person or by substitute (or, if only one shall be
so present, then that one) shall have and may exercise all of the
power and authority of said proxies hereunder. The undersigned
hereby revokes any proxy previously given.
PLEASE
SIGN, DATE AND RETURN
PROMPTLY IN
THE ENCLOSED ENVELOPE
Note: Please sign exactly as your name appears on this
Proxy. If joint owners, EITHER may sign this Proxy.
When signing as attorney, executor, administrator,
trustee, guardian or corporate officer, please give your
full title.
DATE: _________________________________________
_______________________________________________
_______________________________________________
Signature(s) (Title(s), if applicable)
g:\shared\domestic\clients\shearson\funds\mhf\proxcd2.doc
