<PAGE>
O O
MUNICIPAL
HIGH INCOME
FUND INC.
QUARTERLY
REPORT
Fund name
centered on cover,
no graphics or charts
O
JANUARY
31, 1995
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O
MUNICIPAL HIGH INCOME FUND INC.
Dear Shareholder:
We are pleased to provide the quarterly report for Municipal High Income
Fund Inc. for the quarter ended January 31, 1995. Over the past three months,
the Fund paid dividends totaling $0.162 per share, equivalent to an annualized
distribution rate of 7.15% based on the Fund's January 31, 1995 net asset value
of $9.06 per share and 7.41% based on the New York Stock Exchange closing price
on that date of $8.75.
MARKET AND PORTFOLIO UPDATE
The fixed-income markets, both tax-exempt and taxable, continued to be
extremely volatile in the last two months of 1994 amid concerns about the
Federal Reserve's tighter monetary policy and the potential for higher
short-term interest rates to control inflation, tax selling by investors and, in
early December, the bankruptcy filing by Orange County, California. These three
events rattled the tax-exempt market and resulted in a negative total return on
most longer-term, tax-exempt investments.
It was not until late December and early January that the municipal market
began to rebound. Investors became more convinced that the declines in price for
most fixed income securities now provided an excellent investment opportunity.
Prices for tax-exempt bonds rebounded as demand from investors exceeded supply.
Although the tax-exempt market could experience some bouts of downward price
pressure should supply unexpectedly increase, we still view this as a buying
opportunity. The Federal Reserve has been successful in slowing the rate of
economic growth and controlling the potential for higher inflation. Although
most market watchers expect some slight increase in the Federal funds rate (the
rate banks charge each other for overnight loans and a sensitive indicator of
the direction of short-term interest rates), long-term interest rates are likely
to be less volatile than they were in 1994. In fact, we believe that municipal
securities have the potential this year to be one of the best-performing sectors
of the fixed-income market.
The Fund was fully invested in long-term tax-exempt issues during the past
quarter because we believe the longer maturities currently offer the best
investment value. At the end of this quarter, nearly 52% of the portfolio was
invested in securities rated as investment grade by either Standard & Poor's
Corporation or Moody's Investors Service. The Fund did not hold any securities
issued by Orange County, California; in fact, at the end of this quarter, only
1.2% of the portfolio was invested in California bonds.
We are pleased to report that Morningstar, Inc., a widely-recognized mutual
fund evaluation organization, in its September 23, 1994 review, awarded the Fund
a four-star rating (out of a possible five) for the most recent review period as
well as a four-star rating for three and five years. The March 1995 issue of THE
CLOSED-END FUND DIGEST also
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O
recommends the Fund as a "Buy." We are pleased with this recognition and will
endeavor to maintain this performance record. We appreciate your continued
confidence and support, and look forward to reporting to you in the Fund's
semi-annual report. Should you have any questions about your investment in the
Fund, please call The Shareholder Services Group, Inc. at (800) 331-1710.
Sincerely,
<TABLE>
<S> <C>
Heath B. McLendon Lawrence T. McDermott
CHAIRMAN OF THE VICE PRESIDENT AND INVESTMENT
BOARD OFFICER
March 20, 1995
</TABLE>
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>
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
8/24/94 8/31/94 8.750 9.22 .0540 -- 8.87
9/23/94 9/30/94 8.500 9.13 .0540 -- 8.66
10/24/94 10/31/94 8.375 9.03 .0540 -- 8.17
11/22/94 11/30/94 8.125 8.71 .0540 -- 8.34
12/22/94 12/31/94 8.125 8.84 .0540 -- 8.29
1/24/95 1/31/95 8.625 8.99 .0540 -- 8.83
</TABLE>
DIVIDEND DATA**
<TABLE>
<CAPTION>
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>
$ 0.648 7.15% 9.93% 10.36% 11.17% 11.84%
<FN>
------------
* As of Record Date.
** Based on January 31, 1995 net asset value of $9.06 per share.
</TABLE>
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., 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
January 31, 1995 (unaudited)
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------------
KEY TO INSURANCE ABBREVIATIONS
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
<TABLE>
<CAPTION>
RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
---------- ------- ---------- -------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--99.0%
ALABAMA--2.7%
$ 655,000 Alabama Housing Finance Authority, Single
Family Mortgage Revenue,
10.500% due 12/01/02........................ A1 AA $ 687,750
4,000,000 Butler, Alabama, Industrial Development
Revenue,
8.000% due 09/01/28......................... NR BBB- 4,095,000
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 3,579,375
ARKANSAS--1.6%
2,750,000 Pope County, Arkansas, Pollution Control
Revenue, (Arkansas Power & Light Company
Project),
11.000% due 12/01/15........................ Baa2 BBB 2,904,688
CALIFORNIA--1.2%
2,000,000 Los Angeles County, California, Regional
Airport Authority, (Continental Airlines,
Inc.),
9.000% due 08/01/17......................... NR NR 2,127,500
COLORADO--2.6%
1,250,000 Colorado Health Facilities, Authority Revenue
Project, (Beth Israel at Shalom Park
Project),
8.000% due 12/15/22......................... NR NR 1,260,938
Denver, Colorado, Airport, Series A:
1,650,000 8.500% due 11/15/23......................... Baa BBB- 1,716,000
1,600,000 8.000% due 11/15/25......................... Baa BB 1,620,000
CONNECTICUT--0.8%
1,500,000 Connecticut State, Development Authority,
Health Care Revenue, Series B,
8.000% due 07/01/17......................... NR NR 1,443,750
</TABLE>
See Notes to Portfolio of Investments.
4
<PAGE>
MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
January 31, 1995 (unaudited)
O
------------
<TABLE>
<CAPTION>
RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
---------- ------- ---------- -------------
MUNICIPAL BONDS AND NOTES (CONTINUED)
<C> <S> <C> <C> <C>
FLORIDA--6.8%
$1,000,000 Hillsborough County, Florida, Industrial
Development Revenue, (Seaboard Tampa
Terminals Venture Project),
8.600% due 01/15/22......................... B2 B- $ 873,750
1,000,000 Homestead, Florida, Industrial Development
Revenue, Project A,
7.950% due 11/01/18......................... NR NR 920,000
2,090,000 Jacksonville, Florida, Health Facilities
Authority, Health Facilities Revenue,
9.125% due 10/15/19......................... NR NR 2,123,963
1,000,000 Lady Lake, Florida, Industrial Development
Project Revenue, (Sunbelt Utilities Inc.
Project),
9.500% due 07/01/10......................... NR NR 1,195,000
2,000,000 Martin County, Florida, Industrial Development
Revenue,
7.875% due 12/15/25......................... Baa3 BBB- 2,075,000
1,500,000 Ocean Highway & Port Authority, Florida,
Pollution Control Revenue, Solid Waste,
9.375% due 11/01/04......................... NR B+ 1,498,125
Palm Beach County, Florida, Health Facilities
Authority, Insured Hospital Revenue, (JFK
Medical Center):
1,125,000 8.875% due 12/01/18......................... NR BBB 1,215,000
1,320,000 8.875% due 12/01/18 (prerefunded)........... NR NR 1,496,550
650,000 Tampa, Florida, (Aquarium Inc. Revenue
Project),
7.750% due 05/01/27......................... NR NR 659,750
GEORGIA--0.6%
1,000,000 Walton County, Georgia, Industrial Development
Authority, (Walton Project),
8.500% due 09/01/07......................... NR NR 1,012,500
ILLINOIS--6.8%
2,987,500 Chicago, Illinois, O'Hare International
Airport, Special Facilities Revenue Bonds,
Series B,
8.950% due 05/01/18......................... Baa2 BB 3,222,226
1,700,000 Chicago, Illinois, Skyway Toll Bridge,
6.750% due 01/01/17......................... Baa BBB- 1,634,125
2,000,000 East Chicago, Illinois, Industrial Pollution
Control Revenue, (Inland Steel Company),
Project 10,
6.800% due 06/01/13......................... Ba3 BB- 1,847,500
</TABLE>
See Notes to Portfolio of Investments.
5
<PAGE>
MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
January 31, 1995 (unaudited)
O
------------
<TABLE>
<CAPTION>
RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
---------- ------- ---------- -------------
MUNICIPAL BONDS AND NOTES (CONTINUED)
<C> <S> <C> <C> <C>
ILLINOIS (CONTINUED)
$1,915,000 Hanover Park, Illinois, First Mortgage,
(Windsor Project),
9.250% due 12/01/07......................... NR NR $ 1,936,544
1,750,000 Hennepin, Illinois, Industrial Development
Revenue,
10.250% due 01/01/05 (in default)........... NR NR 157,500
1,500,000 Illinois Housing Development Authority, Series
5,
6.650% due 09/01/14......................... A1 A+ 1,507,500
795,000 Loves Park, Illinois, First Mortgage Revenue,
(Hoosier Care Project), Series A,
9.750% due 08/01/19......................... NR NR 827,794
1,000,000 Sterling, Illinois, First Mortgage Revenue,
(Hoosier Care Project), Series A,
9.750% due 08/01/19......................... NR NR 1,036,250
INDIANA--0.8%
1,500,000 Sullivan, Indiana, Pollution Control Revenue
Refunding, (Indiana Michigan Power Company),
5.950% due 05/01/09......................... Baa2 BBB 1,357,500
IOWA--0.7%
1,240,000 Marion, Iowa, Multi-family Housing Revenue,
9.500% due 07/01/18......................... NR NR 1,241,550
KENTUCKY--2.8%
1,410,000 Jefferson County, Kentucky, Health Facilities
Authority,
10.125% due 05/01/08........................ A1 NR 1,549,238
Kenton County, Kentucky, Airport Board:
1,000,000 (Delta Airlines),
6.750% due 02/01/02......................... Ba1 BB 971,250
1,500,000 (Greater Cincinnati Airport Revenue),
Project A,
7.500% due 02/01/20......................... Ba1 BB 1,470,000
1,000,000 Pendleton County, Kentucky, Multi-Lease
Revenue, Series A,
6.500% due 03/01/19......................... NR A 993,750
LOUISIANA--5.5%
1,200,000 Lake Charles, Louisiana, (Harbor & Terminal
Project),
7.750% due 08/15/22......................... Baa3 NR 1,240,500
</TABLE>
See Notes to Portfolio of Investments.
6
<PAGE>
MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
January 31, 1995 (unaudited)
O
------------
<TABLE>
<CAPTION>
RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
---------- ------- ---------- -------------
MUNICIPAL BONDS AND NOTES (CONTINUED)
<C> <S> <C> <C> <C>
LOUISIANA (CONTINUED)
Port New Orleans, Louisiana, Industrial
Development Revenue:
$2,000,000 8.250% due 07/01/04......................... NR NR $ 2,040,000
3,000,000 8.500% due 06/01/14......................... NR NR 3,060,000
1,000,000 (Continental Grain Company Project),
7.500% due 07/01/13......................... NR BB- 968,750
2,400,000 West Feliciana Parish, Louisiana, Pollution
Control Revenue,
8.000% due 12/01/24......................... Baa3 BBB- 2,499,000
MAINE--1.7%
Maine State Housing Authority:
Mortgage Purchases,
500,000 Series C-2,
7.000% due 11/15/32......................... A1 AA- 486,875
2,500,000 Series D-1,
8.300% due 11/15/28......................... A1 AA- 2,537,500
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 3,498,750
MASSACHUSETTS--5.8%
1,980,000 Commonwealth of Massachusetts Health &
Educational Facilities Authority Revenue,
(North Adams State College),
9.625% due 07/01/18......................... NR NR 1,999,800
Commonwealth of Massachusetts Industrial
Finance Agency:
1,700,000 Series A, (S.E. Mass Project),
9.000% due 07/01/15......................... NR NR 1,859,375
5,940,000 Series B, (S.E. Mass Project),
9.250% due 07/01/15......................... NR NR 6,526,575
MICHIGAN--2.4%
1,855,000 Greater Detroit, Michigan, Recreation
Authority, Series C,
9.250% due 12/13/08......................... NR BBB- 1,938,475
755,000 Greater Detroit, Michigan, Resource Recovery
Authority Revenue, Series B,
9.250% due 12/13/08......................... NR BBB- 788,975
</TABLE>
See Notes to Portfolio of Investments.
7
<PAGE>
MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
January 31, 1995 (unaudited)
O
------------
<TABLE>
<CAPTION>
RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
---------- ------- ---------- -------------
MUNICIPAL BONDS AND NOTES (CONTINUED)
<C> <S> <C> <C> <C>
MICHIGAN (CONTINUED)
$1,500,000 Western Townships, Michigan, Utility Revenue,
Sewage System,
8.300% due 01/01/19......................... NR BBB+ $ 1,545,000
MINNESOTA--1.1%
2,000,000 Minnesota Housing Finance Authority,
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 3,724,875
2,000,000 Mississippi Hospital Equipment & Facilities
Authority, (Methodist Hospital),
9.375% due 05/01/12......................... NR NR 2,277,500
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- 1,081,250
2,500,000 Series B,
10.750% due 10/01/12........................ Ba1 BBB- 2,837,500
NEW JERSEY--3.1%
1,300,000 New Jersey Educational Facilities, Series C,
6.625% due 07/01/23......................... NR NR 1,088,750
1,000,000 New Jersey Health Care Facilities:
7.250% due 07/01/27......................... NR NR 897,500
1,685,000 Finance Authority Revenue:
7.600% due 07/01/21......................... Ba NR 1,579,687
1,500,000 (Zurbrugg Memorial Hospital), Series C,
8.500% due 07/01/12......................... Baa BBB- 1,550,625
310,000 New Jersey Housing and Mortgage Finance
Agency, Home Buyer Revenue, Series E, (MBIA
Insured),
7.650% due 10/01/16......................... Aaa AAA 324,338
NEW MEXICO--1.0%
1,665,000 New Mexico Mortgage Finance Authority, Single
Family Mortgage Program, Series B,
8.300% due 03/01/20......................... NR AA 1,739,925
</TABLE>
See Notes to Portfolio of Investments.
8
<PAGE>
MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
January 31, 1995 (unaudited)
O
------------
<TABLE>
<CAPTION>
RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
---------- ------- ---------- -------------
MUNICIPAL BONDS AND NOTES (CONTINUED)
<C> <S> <C> <C> <C>
NEW YORK--5.3%
$1,680,000 Babylon, New York, Industrial Development
Agency, (Recycling Project), Series A,
8.875% due 03/01/11 (in default)............ NR NR $ 672,000
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 11/01/2022....................... A A 1,221,500
New York City, New York, Certificates of
Participation:
875,000 Series C,
7.750% due 09/01/05......................... Baa1 A- 904,531
2,000,000 Series E,
6.000% due 05/15/15......................... Baa1 A- 1,720,000
1,000,000 Series H,
7.000% due 02/01/21......................... Baa1 A- 973,750
2,000,000 Sub-Series H-1,
6.125% due 08/01/10......................... Baa1 A- 1,787,500
1,950,000 New York State, Energy, Research & Development
Authority, Electric Facility Revenue,
7.150% due 12/01/20......................... Ba1 BB+ 1,798,875
NORTH CAROLINA--2.3%
1,750,000 Martin County, North Carolina, Industrial
Facilities Pollution Control,
6.800 due 05/01/24.......................... A2 A 1,741,250
2,300,000 North Carolina, Eastern Municipal Power
Agency, Power Systems Revenue,
7.000% due 01/01/08......................... A A- 2,340,250
OHIO--2.7%
1,000,000 Cleveland, Ohio, Airport Special Revenue,
(Continental Airlines Inc.),
9.000% due 12/01/19......................... NR NR 1,017,500
1,000,000 Cuyahoga County, Ohio, Health Care Facilities,
Judson Retirement Community,
8.875% due 11/15/19......................... NR NR 1,060,000
1,500,000 Montgomery County, Ohio, Health Systems
Revenue, Series B,
8.100% due 07/01/18......................... Baa BBB- 1,537,500
</TABLE>
See Notes to Portfolio of Investments.
9
<PAGE>
MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
January 31, 1995 (unaudited)
O
------------
<TABLE>
<CAPTION>
RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
---------- ------- ---------- -------------
MUNICIPAL BONDS AND NOTES (CONTINUED)
<C> <S> <C> <C> <C>
OHIO (CONTINUED)
$ 105,000 Ohio Housing Finance Agency, Single Family
Mortgage Revenue,
11.375% due 08/01/14........................ Aa A $ 108,544
1,000,000 Ohio Water Development Authority, Pollution
Control Revenue, Series A,
8.100% due 10/01/23......................... Baa3 BB+ 1,035,000
PENNSYLVANIA--10.4%
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+ 1,930,500
1,500,000 Delaware County Pennsylvania, Industrial
Development Authority, First Mortgage,
(White Horse),
9.700% due 07/01/09......................... NR NR 1,545,000
3,000,000 Lebanon County, Pennsylvania, (Samaritan
Hospital), Series B,
8.250% due 11/01/18......................... NR BBB+ 3,382,500
2,500,000 Luzerne County, Pennsylvania, Industrial
Development Authority,
7.125% due 12/01/22......................... Baa3 BBB- 2,418,750
2,000,000 Montgomery County, Pennsylvania, Higher
Education & Health Authority,
8.375% due 11/01/11......................... Ba1 NR 2,042,500
625,000 Northumberland County, Pennsylvania,
Industrial Development Authority Revenue,
6.875% due 02/01/03......................... NR NR 593,750
1,500,000 Pennsylvania Housing Finance Authority, Series
C,
6.900% due 04/01/25......................... Aa AA 1,503,750
1,985,000 Philadelphia, Pennsylvania, Gas Revenue,
Series B,
6.400% due 11/15/16......................... Ba BB 1,744,319
960,000 Schuylkill County, Pennsylvania, Industrial
Development Revenue,
6.500% due 01/01/10......................... NR NR 858,000
1,500,000 Scranton-Lackawanna, Pennsylvania, Health &
Welfare Authority, (Mercy Health Systems),
Series B,
8.500% due 07/01/20......................... NR BB+ 1,535,625
</TABLE>
See Notes to Portfolio of Investments.
10
<PAGE>
MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
January 31, 1995 (unaudited)
O
------------
<TABLE>
<CAPTION>
RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
---------- ------- ---------- -------------
MUNICIPAL BONDS AND NOTES (CONTINUED)
<C> <S> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
$1,250,000 Sharon, Pennsylvania, Regional Health Systems,
(Project B),
6.875% due 12/01/22......................... NR BBB+ $ 1,168,750
SOUTH CAROLINA--0.5%
940,000 McCormick County, South Carolina, Certificates
of Participation,
9.750% due 07/01/09......................... NR NR 957,625
SOUTH DAKOTA--2.3%
Oglala Sioux Tribe, South Dakota, Pine Ridge
County, Revenue Bonds:
290,000 7.000% due 07/01/99......................... NR NR 286,737
1,865,000 7.500% due 07/01/13......................... NR NR 1,811,381
1,875,000 10.000% due 07/01/13........................ Aaa NR 1,973,268
TENNESSEE--0.4%
750,000 SCA Tax Exempt Trust Mortgage Revenue,
7.125% due 01/01/30......................... Aaa AAA 755,625
TEXAS--12.4%
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 1,095,000
2,000,000 8.250% due 01/01/19......................... Baa2 BBB 2,130,000
1,500,000 Dallas-Fort Worth, Texas, International
Airport Facilities,
7.500% due 11/01/25......................... Baa2 BB+ 1,477,500
1,470,000 El Paso, Texas, Housing Finance Corporation,
Single Family Mortgage Revenue,
8.750% due 10/01/11......................... A NR 1,593,112
2,000,000 El Paso, Texas, International Airport Revenue
Bonds,
7.750% due 03/01/12......................... B2 B 1,947,500
</TABLE>
See Notes to Portfolio of Investments.
11
<PAGE>
MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
January 31, 1995 (unaudited)
O
------------
<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)
$1,215,612 Harris County, Texas, Industrial Development
Corporation,
7.950% due 07/01/19......................... NR NR $ 1,115,323
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 1,482,250
1,400,000 North Central, Texas, Health Facilities
Development Project, (Hospital-Baylor Health
Care Systems, Project A),
6.400% due 05/15/08......................... Aa AA 1,400,000
Northgate Crossing, Texas, Municipal Utilities
District:
1,000,000 Series 1,
8.875% due 12/01/13......................... NR NR 985,000
1,000,000 Series 2,
8.875% due 12/01/13......................... NR NR 985,000
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- 2,759,375
2,000,000 Series B,
10.625% due 06/01/08........................ Baa3 BBB- 2,222,500
2,000,000 San Saba County, Texas, Certificates of
Obligation,
8.625% due 02/15/19......................... NR NR 2,000,000
UTAH--1.1%
1,780,000 Hurricane, Utah, Health Services Project,
10.500% due 07/01/20........................ NR NR 1,920,175
</TABLE>
See Notes to Portfolio of Investments.
12
<PAGE>
MUNICIPAL HIGH INCOME FUND INC.
Portfolio of Investments (continued)
January 31, 1995 (unaudited)
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------------
<TABLE>
<CAPTION>
RATINGS
------------------- MARKET
FACE STANDARD & VALUE
VALUE MOODY'S POOR'S (NOTE 1)
---------- ------- ---------- -------------
MUNICIPAL BONDS AND NOTES (CONTINUED)
<C> <S> <C> <C> <C>
VERMONT--1.4%
$2,365,000 Vermont Housing Finance Agency, Home Mortgage,
Series B,
8.100% due 06/01/22......................... A1 NR $ 2,456,644
VIRGINIA--1.2%
2,000,000 Hopwell, Virginia, Industrial Development
Resource Authority,
8.250% due 06/01/16......................... NR NR 2,077,500
WEST VIRGINIA--1.3%
2,500,000 Marion County, West Virginia, County
Commission,
7.750% due 12/01/11......................... NR NR 2,278,125
PUERTO RICO--0.1%
200,000 Commonwealth of Puerto Rico, General
Obligatiion Bonds,
8.000% due 07/01/08......................... Baa1 A 217,250
-------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $179,300,317*)................................ 99.0% $176,276,025
OTHER ASSETS AND LIABILITIES (Net).................................... 1.0 1,727,829
------ ----------
NET ASSETS............................................................ 100.0% $178,003,854
------ ----------
---- ----------
<FN>
---------------
* Aggregate cost for Federal tax purposes.
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF MUNICIPAL BONDS
BY COMBINED RATINGS
JANUARY 31, 1995
STANDARD & PERCENT
MOODY'S OR POOR'S OF VALUE
--------- ---------- ----------
<S> <C> <C> <C>
Aaa AAA 2.6%
Aa AA 5.9
A A 11.6
Baa BBB 31.8
Ba BB 7.9
B B 3.5
NR NR 36.7
---
100%
---
---
</TABLE>
See Notes to Portfolio of Investments.
13
<PAGE>
MUNICIPAL HIGH INCOME FUND INC.
Notes to Portfolio of Investments (unaudited)
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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. ("Boston Advisors") 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, 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 .03 3,803,947 0.20
October 31, 1994....... 3,519,883 0.18 3,164,312 0.16 (5,145,173) (0.26) (1,980,861) (0.10)
January 31, 1995....... 3,592,468 0.18 3,185,620 0.16 (3,081,865) (0.16) 103,756 0.01
</TABLE>
14
<PAGE>
MUNICIPAL HIGH INCOME FUND INC.
Management of the Fund
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------------
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
Jessica M. Bibliowicz
PRESIDENT
Lawrence T. McDermott
VICE PRESIDENT AND
INVESTMENT OFFICER
Karen Mahoney-Malcolmson
INVESTMENT OFFICER
Michael J. Maher
INVESTMENT OFFICER
Lewis E. Daidone
SENIOR VICE PRESIDENT
AND TREASURER
Christina T. Sydor
SECRETARY
INVESTMENT ADVISER AND ADMINISTRATOR
Smith Barney Mutual Funds
Management Inc.
388 Greenwich Street
New York, New York 10013
AUDITORS AND COUNSEL
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
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
15
<PAGE>
O
This report is sent to shareholders of the 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.
388 Greenwich Street
New York, NY 10013
(212) 723-9218
