UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-5497

Municipal High Income Fund Inc.

(Exact name of registrant as specified in charter)

125 Broad Street, New York, NY 10004
(Address of principal executive offices) (Zip code)

Robert I. Frenkel, Esq.
Salomon Brothers Asset Management Inc.
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)

Registrant’s telephone number, including area code: 1-800-725-6666

Date of fiscal year end: October 31
Date of reporting period: January 31, 2005

ITEM 1. SCHEDULE OF INVESTMENTS



MUNICIPAL HIGH INCOME FUND INC.

FORM N-Q
JANUARY 31, 2005
Municipal High Income Fund Inc.
Schedule of Investments (unaudited)
January 31, 2005
FACE
AMOUNT 		  RATING(a) SECURITY VALUE
MUNICIPAL BONDS — 98.9%
Alabama — 1.1%
$ 615,000   NR Capstone Improvement District of Brookwood, AL, Series A,    
                7.700% due 8/15/23 (b) $ 61,500

 

11,765   D Mobile, AL IDB, Solid Waste Disposal Revenue, (Mobile    

 

              Energy Services Co. Project), 6.950% due 1/1/20 (b)   74

 

1,000,000   NR Rainbow City, AL Special Health Care Facility Financing    

 

              Authority, Series A, 8.250% due 1/1/31 (b)   691,670

 

1,000,000   AAA West Jefferson, AL Amusement & Public Park Authority    

 

              Revenue, (Visionland Project), (Call 12/1/06 @ 102),    

 

              8.000% due 12/1/26 (c)   1,119,620
 

 

          1,872,864
 
Alaska — 1.9%
  2,000,000   AAA Alaska Housing Finance Corporation, Series A, FGIC-Insured,    
                5.000% due 12/1/26 (d)   2,116,060

 

1,055,000   NR Alaska Industrial Development & Export Authority Revenue,    

 

              Williams Lynxs Alaska Cargoport, 8.125% due 5/1/31 (e)   1,122,066
 

 

          3,238,126
 
Arizona — 3.1%

 

1,500,000   NR Casa Grande, AZ IDA, Hospital Revenue, Casa Grande    

 

              Regional Medical Center, Series A, 7.625% due 12/1/29   1,604,370

 

1,000,000   BB- Gila County, AZ IDA Revenue, ASARCO Inc.,    

 

              5.550% due 1/1/27   839,930

 

935,000   NR Maricopa, AZ IDA, MFH Revenue, (Gran Victoria Housing    

 

              LLC Project), Series B, 10.000% due 5/1/31 (f)   943,733

 

1,795,000   NR Phoenix, AZ IDA, MFH Revenue, (Ventana Palms   Apartments    

 

              Project), Series B, 8.000% due 10/1/34   1,792,667
 

 

          5,180,700
 
Arkansas — 1.1%

 

      Arkansas State Development Finance Authority:    

 

1,000,000   BBB-         Hospital Revenue, (Washington Regional Medical Center    

 

                     Project), 7.375% due 2/1/29   1,115,920

 

600,000   BB+           Industrial Facilities Revenue, (Potlatch Corp. Project),    

 

                     Series A, 7.750% due 8/1/25 (e)   661,596
 

 

          1,777,516
 
California — 8.5%

 

1,500,000   NR Barona, CA Band of Mission Indians, GO,    

 

              8.250% due 1/1/20 (f)   1,619,160

 

3,000,000   A-1+ California Pollution Control Financing Authority, Pollution    

 

              Control Revenue, Pacific Gas & Electric Corp., Series F,    

 

              1.890% due 11/1/26 (g)   3,000,000
             
See Notes to Schedule of Investments.
 
1
 


Municipal High Income Fund Inc.
Schedule of Investments (unaudited) (continued)
January 31, 2005
FACE
AMOUNT 		  RATING(a) SECURITY VALUE
California — 8.5% (continued)  
        California State Department of Water Resources,  
                Power Supply Revenue:    
$ 1,500,000   AAA‡                  MBIA-Insured, RITES, 8.311% due 5/1/11 (h) $ 1,829,490
750,000   NR                  XLCA-Insured, RITES, 7.798% due 5/1/10 (h)   934,035
1,500,000   NR California Statewide Communities Development Authority    
                Revenue, (East Valley Tourist Project), Series A,    
                9.250% due 10/1/20   1,623,330
        Golden State Tobacco Securitization Corp., Tobacco    
                Settlement Revenue:    
1,000,000   A-               5.625% due 6/1/38   1,078,070
2,000,000   BBB               7.800% due 6/1/42 (d)   2,205,460
1,865,000   Ba2* Vallejo, CA COP, Touro University, 7.375% due 6/1/29   1,937,660
 
    14,227,205
 
Colorado — 2.7%
  Colorado Education and Cultural Facilities Authority Revenue:  
2,000,000   NR         Colorado Lutheran High School Project, Series A,  
                 7.625% due 6/1/34 (d)   2,039,060
910,000   AAA         Peak to Peak Project, (Call 8/5/11 @ 100),  
                 7.500% due 8/15/21 (c)   1,105,195
785,000   NR Elbert County Charter, 7.375% due 3/1/35   793,454
500,000   NR Southlands Medical District, CO, 7.125% due 12/1/34   513,245
 
    4,450,954
 
District of Columbia — 1.3%
1,895,000   AAA District of Columbia COP, AMBAC-Insured,  
          5.500% due 1/1/20 (d)   2,125,868
 
Florida — 11.6%
1,000,000   NR Beacon Lakes Community Development District, Special  
          Assessment, Series A, 6.900% due 5/1/35   1,041,250
1,500,000   NR Bonnet Creek Resort Community Development District,  
          FL Special Assessment, 7.500% due 5/1/34   1,613,670
  Capital Projects Finance Authority, FL:  
2,000,000   NR         Continuing Care Retirement, Glenridge on Palmer Ranch,  
                 Series A, 8.000% due 6/1/32 (d)   2,111,200
2,000,000   NR         Student Housing Revenue, Florida University, Series A,  
                 7.850% due 8/15/31 (d)   2,012,220
1,000,000   NR Capital Trust Agency Revenue, Seminole Tribe Convention  
          Center, Series A, 10.000% due 10/1/33   1,144,940
980,000   NR Century Parc Community Development District, Special  
          Assessment, 7.000% due 11/1/31   1,042,279
1,000,000   A Highlands County, FL Health Facilities Authority Revenue,  
         Adventist Health Systems, 6.000% due 11/15/25   1,108,580

See Notes to Schedule of Investments.
 
2
 


Municipal High Income Fund Inc.
Schedule of Investments (unaudited) (continued)
January 31, 2005
FACE
AMOUNT 		  RATING(a) SECURITY VALUE

Florida — 11.6% (continued)
$ 875,000   NR Homestead , FL IDR, Community Rehabilitation Providers    
                Program, Series A, 7.950% due 11/1/18   $ 888,606

 

2,000,000   BB+ Martin County , FL IDA Revenue, (Indiantown Cogeneration
   

 

              Project), Series A, 7.875% due 12/15/25 (d)(e)   2,051,500

 

1,000,000   NR Orange County , FL Health Facilities Authority Revenue, First    

 

              Mortgage, (GF/Orlando, Inc. Project), 9.000% due 7/1/31   1,028,270

 

535,000   AAA Palm Beach County , FL Health Facilities Authority Revenue,    

 

              (John F. Kennedy Memorial Hospital Inc. Project),    
                9.500% due 8/1/13 (i)   689,481

 

2,000,000   NR Reunion East Community Development District, Special    

 

              Assessment, Series A, 7.375% due 5/1/33   2,177,340
  1,000,000   B- Santa Rosa Bay Bridge Authority, FL Revenue,
   
                6.250% due 7/1/28   924,970
  1,450,000   NR Waterlefe Community Development District, Golf Course    

 

              Revenue, 8.125% due 10/1/25   1,573,120
 

 

          19,407,426
         

Georgia — 4.2%
  1,000,000   AAA Atlanta, GA Airport Revenue, Series B, FGIC-Insured,    
                5.625% due 1/1/30 (e)  

1,058,430

  2,500,000   NR Atlanta, GA Tax Allocation, (Atlantic Station Project),    
                7.900% due 12/1/24 (d)  

2,751,300

  1,000,000   NR Brunswick & Glynn County, GA Development Authority    
                Revenue, First Mortgage, Coastal Community Retirement,    
                Series A, 7.250% due 1/1/35   1,015,350
  1,000,000   BBB+‡ Gainesville & Hall County, GA Development Authority Revenue,    
                Senior Living Facility, Lanier Village Estates, Series C,
   
                7.250% due 11/15/29   1,085,400
  1,005,000   NR Walton County, GA IDA Revenue, (Walton Manufacturing Co.    
                Project), 8.500% due 9/1/07  

1,045,170

         
            6,955,650
 

Illinois — 1.3%

 

2,000,000   AAA Chicago , IL GO, Neighborhoods Alive 21 Program,
 		   
                FGIC-Insured, 5.500% due 1/1/31 (d)   2,186,160
 
Indiana — 2.1%

 

2,500,000   BBB- East Chicago , IN PCR, (Inland Steel Co. Project No. 10),
   

 

              6.800% due 6/1/13 (d)   2,530,800

 

1,000,000   BB+ Indiana State Development Finance Authority, PCR,    

 

              (Inland Steel Co. Project No. 13), 7.250% due 11/1/11 (e)   1,050,740
 

 

          3,581,540
 
See Notes to Schedule of Investments.
 
3
 


Municipal High Income Fund Inc.
Schedule of Investments (unaudited) (continued)
January 31, 2005
FACE
AMOUNT 		  RATING(a) SECURITY VALUE

Kentucky — 0.6%

 
$ 1,000,000   A-1+ Louisville & Jefferson County, KY Metropolitan Sewer District,
 
          Sewer & Drain System, Series B, FSA-Insured,  
          1.830% due 5/15/23 (g) $ 1,000,000
 

Louisiana — 2.1%

1,000,000   NR Epps , LA COP, 8.000% due 6/1/18   1,039,710
1,600,000   NR Louisiana Local Government Environmental Facilities,  
         Community Development Authority Revenue Refunding,  
          St. James Place , Series A, 7.000% due 11/1/25   1,542,768
1,000,000   BB- Port of New Orleans, LA IDR, (Continental Grain Co. Project),  
         7.500% due 7/1/13   1,014,590
 
    3,597,068
 

Maryland — 1.9%

3,000,000   NR Maryland State Economic Development Corp. Revenue,  
          Chesapeake Bay, Series A, 7.730% due 12/1/27 (d)   3,183,930
 

Massachusetts — 4.2%

       

Boston, MA IDA Financing Revenue:

   
750,000   NR         Crosstown Center Project, 8.000% due 9/1/35 (e)   767,010
970,000   NR         Roundhouse Hospitality LLC Project,  
                 7.875% due 3/1/25 (e)   985,365
1,000,000   BBB Caritas Christi Obligation, Series B, 6.750% due 7/1/16   1,138,790
1,000,000   NR Massachusetts State Development Finance Agency  
          Revenue Briarwood, Series B, (Call 12/1/10 @ 101),    
                8.250% due 12/1/30 (c)   1 ,277,860
200,000   A-1+   Massachusetts State Health & Educational Facilities    
          Authority Revenue, Partners Healthcare System,    
                Series D-5, 1.880% due 7/1/17 (g)   200,000
1,900,000   NR   Massachusetts State Industrial Finance Agency Revenue,
 
          Assisted Living Facility, (Marina Bay LLC Project),
   
                7.500% due 12/1/27 (d)(e)   1,951,851
455,000   AAA   Massachusetts State Port Authority Revenue,
 
          13.000% due 7/1/13 (i)  

662,607

 
          6,983,483
 

Michigan — 6.3%

2,130,000   NR Allen Academy, COP, 7.500% due 6/1/23 (d)   2,129,659
1,000,000   NR Cesar Chavez Academy, COP, 8.000% due 2/1/33   1,041,850
  1,900,000   Ba2* Garden City, MI Hospital Finance Authority, Hospital Revenue,    
               Garden City Hospital Obligation Group, Series A,    
               5.625% due 9/1/10   1,888,695
  1,000,000   NR Gaudior Academy, MI COP, 7.250% due 4/1/34   1,019,780
  1,750,000   NR Kalamazoo Advantage Academy, COP, 8.000% due 12/1/33  

1,780,083

  1,000,000   NR Merritt Academy, MI COP, 7.250% due 12/1/24  

1,011,730


See Notes to Schedule of Investments.
 
4
 


Municipal High Income Fund Inc.
Schedule of Investments (unaudited) (continued)
Janury 31, 2005
FACE
AMOUNT 		  RATING(a) SECURITY VALUE
Michigan — 6.3% (continued)
$ 1,000,000 NR Star International Academy, MI COP, 7.000% due 3/1/33 $ 1,020,920
  700,000 NR William C. Abney Academy, MI COP, 6.750% due 7/1/19 696,759
         
  10,589,476
         
Minnesota — 0.6%
  1,000,000 NR Minneapolis & St. Paul, MN Metropolitan Airports Community
       Special Facility Revenue, (Northwest Airlines Project),
       Series A, 7.000% due 4/1/25 (e) 940,410
         
Missouri — 0.2%
  250,000 NR St. Joseph, MO IDA, (Living Community of St. Joseph Project),
       7.000% due 8/15/32 265,150
         
Montana — 2.3%
  4,515,000 NR Montana State Board of Investment, Resource Recovery
       Revenue, (Yellowstone Energy L.P. Project),
       7.000% due 12/31/19 (d)(e) 3,780,816
         
New Jersey — 3.8%
  1,000,000 NR New Jersey EDA, Series A, Retirement Community Revenue,
       8.250% due 11/15/30 1,104,730
  3,000,000 BBB- New Jersey Health Care Facilities Financing Authority Revenue,
       Trinitas Hospital Obligation Group, 7.500% due 7/1/30 (d) 3,401,940
  1,750,000 BBB Tobacco Settlement Financing Corp. Revenue,
       6.750% due 6/1/39 1,780,958
         
  6,287,628
         
New Mexico — 1.5%
Albuquerque, NM Hospital Revenue, Southwest Community
       Health Services:
  220,000 AAA               Call 8/1/08 @ 100, 10.000% due 8/1/12 (c) 262,651
  115,000 AAA               Call 8/1/08 @ 100, 10.125% due 8/1/12 (c) 137,695
  1,000,000 NR Otero County, (Detention Facility Project), COP,
       7.500% due 12/1/24 1,003,830
  1,000,000 NR Sandoval County, NM Project Revenue, (Santa Ana Pueblo
       Project), 7.750% due 7/1/15 1,042,300
         
  2,446,476
         
New York — 5.5%
  700,000 NR Brookhaven, NY IDA, Civic Facility Revenue, Memorial
       Hospital Medical Center, Series A, 8.250% due 11/15/30 754,593
  2,000,000 AAA Metropolitan Transportation Authority, NY, Series A,
       AMBAC-Insured, 5.000% due 7/1/30 (d) 2,086,680
  1,000,000 NR Monroe County, NY IDA, Woodland Village Project,
       8.550% due 11/15/32 1,088,430
  1,000,000 A-1+ New York, NY GO, Series B2, Sub. Series B9, LOC-JPMorgan
       Chase & Co., 1.820% due 8/15/23 (g) 1,000,000
 
See Notes to Schedule of Investments.
 
5
 


Municipal High Income Fund Inc.
Schedule of Investments (unaudited) (continued)
Janury 31, 2005
FACE
AMOUNT 		  RATING(a) SECURITY VALUE
New York — 5.5% (continued)
  New York City, NY IDA, Civic Facility Revenue:
$ 1,360,000 NR        Community Residence for the Developmentally Disabled,
                 7.500% due 8/1/26 $ 1,446,020
  1,120,000 NR         Special Needs Facility Pooled Program, Series A-1,
                 8.125% due 7/1/19 1,221,416
  500,000 A-1+ Port Authority of New York & New Jersey, Special Obligation
          Revenue, Versatile Structure Obligation, Series 3,
          1.930% due 6/1/20 (g) 500,000
  970,000 NR Suffolk County, NY IDA, Civic Facility Revenue, Southampton
          Hospital Association, Series A, 7.750% due 1/1/22 1,011,739
         
  9,108,878
         
North Carolina — 1.7%
  1,000,000 NR Charlotte, NC Special Facilities Revenue, Charlotte/Douglas
          International Airport, 5.600% due 7/1/27 (b)(e) 463,720
  965,000 NR North Carolina Medical Care Commission, Health Care
          Facilities Revenue, First Mortgage, (De Paul Community
          Facilities Project), 7.625% due 11/1/29 1,010,529
  1,000,000 AAA North Carolina Municipal Power Agency, Catawba Electric
          Revenue, MBIA-Insured, TICS, 9.389% due 1/1/11 (h) 1,294,720
         
  2,768,969
         
Ohio — 2.9%
  1,500,000 BBB Cuyahoga County, OH Hospital Facilities Revenue,
          (Canton Inc. Project), 7.500% due 1/1/30 1,695,630
  Montgomery County, OH Health Systems Revenue, Series B-1:
  1,035,000 AAA                Call 7/1/06 @ 102, 8.100% due 7/1/18 (c) 1,136,358
  315,000 AAA                Unrefunded Balance, 8.100% due 7/1/18 339,132
  1,500,000 BB+ Ohio State Air Quality Development Authority Revenue, Cleveland
          Pollution Control, Series A, 6.000% due 12/1/13 1,598,580
  1,250,000 NR Ohio State Solid Waste Revenue, Republic Engineered
          Steels Inc., 9.000% due 6/1/21 (b)(e)(j) 0
         
  4,769,700
         
Pennsylvania — 6.0%
  2,200,000 NR Allegheny County, PA IDA, Airport Special Facilities Revenue,
          (USAir Inc. Project), Series B, 8.500% due 3/1/21 (b)(e) 46,750
  Beaver County, PA IDA, PCR:
  1,500,000 BBB-         Cleveland Electric Illuminating Co. Project,
                 7.625% due 5/1/25 1,550,430
  2,000,000 BBB-         Toledo Edison Co. Project, 7.625% due 5/1/20 (d) 2,067,340
 
See Notes to Schedule of Investments.
 
6
 


Municipal High Income Fund Inc.
Schedule of Investments (unaudited) (continued)
January 31, 2005
FACE
AMOUNT 		  RATING(a) SECURITY VALUE
Pennsylvania — 6.0% (continued)
$ 1,000,000   NR Cumberland County, PA Municipal Authority Retirement    
               Community Revenue, (Wesley Affiliated Services Inc.    
                Project), Series A, 7.250% due 1/1/35 $ 1,064,790
  2,640,000   NR Montgomery County, PA Higher Education & Health Authority    
                Revenue, Temple Continuing Care Center,    
                6.625% due 7/1/19 (b)   158,400
  1,000,000   NR Northumberland County, PA IDA, (NHS Youth Services Inc.    
                Project), Series A, 7.500% due 2/15/29   1,024,000
  1,000,000   NR Philadelphia, PA Authority for IDR, (Host Marriott L.P. Project)    
                Remarketed 10/31/95, 7.750% due 12/1/17   1,019,530
  1,000,000   A-1+ Philadelphia, PA Hospitals & Higher Education Facilities    
                Authority Revenue, (Children’s Hospital Project),    
                MBIA-Insured, Series C, 1.890% due 7/1/31 (g)   1,000,000
  2,000,000   NR Westmoreland County, PA IDA, Healthcare Facilities, Redstone    
                Highlands Health, Series B, 8.125% due 11/15/30   2,165,100
 
            10,096,340
 
South Carolina — 2.0%
        Connector 2000 Association Inc., SC Toll Road Revenue:    
                Capital Appreciation, Series B:    
  3,100,000   B-               Zero coupon bond to yield 8.600% due 1/1/27   479,725
  7,750,000   B-                Zero coupon bond to yield 9.730% due 1/1/34   720,052
  2,000,000   B-         Southern Connector Project, Series A, 5.375% due 1/1/38   1,522,080
  225,000   NR Florence County, SC IDR, Stone Container Corp.,    
                7.375% due 2/1/07   226,260
  460,000   NR McCormick County, SC COP, 9.750% due 7/1/09   465,423
 
            3,413,540
 
Texas — 10.9%
        Bexar County, TX Housing Financial Corp., MFH:    
  980,000   NR         Continental Lady Ester, Series A, 6.875% due 6/1/29   921,886
  1,165,000   Ba1*         Nob Hill Apartments, Series B, 8.500% due 6/1/31   1,117,701
  235,000   Baa3*         Waters at Northern Hills, Series C, 7.750% due 8/1/36   226,451
  1,515,000   Baa2* El Paso County, TX Housing Financial Corp., MFH,    
                Las Lomas Apartments, Series A, 6.450% due 12/1/19   1,531,968
  1,000,000   NR Grand Prairie, TX Housing Finance Corp., Independent    
                Senior Living Center Revenue, 7.750% due 1/1/34   1,014,640
  2,000,000   Ba2* Gulf Coast, TX IDA, Solid Waste Disposal Revenue, (CITGO    
                Petroleum Corp. Project), 7.500% due 5/1/25 (d)(e)   2,210,240
  2,750,000   B- Houston, TX Airport Systems Revenue, Special Facilities,    
                (Continental Airlines Inc. Project), Series C,    
                6.125% due 7/15/27 (d)(e)   2,125,200
  1,100,000   NR Intercontinental Airport/Houston, Public Facility Corp.    
                Project Revenue, 7.750% due 5/1/26   1,095,259

See Notes to Schedule of Investments.
 
7
 


Municipal High Income Fund Inc.
Schedule of Investments (unaudited) (continued)
January 31, 2005
FACE
AMOUNT 		  RATING(a) SECURITY VALUE
Texas — 10.9% (continued)
$ 1,000,000   AAA Laredo, TX Independent School District Public Facility Corp.    
               Lease Revenue, Series A, AMBAC-Insured,    
                5.000% due 8/1/29 $ 1,029,020
  1,000,000   NR Midlothian, TX Development Authority, Tax Increment    
                Contract Revenue, 6.200% due 11/15/29   1,015,430
  1,000,000   BB Port Corpus Christi, TX Industrial Development Corp.,    
                (CITGO Petroleum Corp. Project), 8.250% due 11/1/31 (e)   1,082,630
  970,000   Ba3* Texas State Affordable Housing Corp., MFH Revenue,    
                HIC Arborstone Baybrook, Series C, 7.250% due 11/1/31   894,330
  1,865,000   NR West Texas Detention Facility Corp. Revenue,    
                8.000% due 2/1/25   1,926,433
        Willacy County, TX, (Public Facility Corp. Project):    
  1,000,000   NR         7.500% due 11/1/25   1,020,380
  1,000,000   NR         Series A-1, 8.250% due 12/1/23   1,038,660
 
            18,250,228
         

Utah — 0.6%

   
  1,000,000   A-1+ Weber County, UT Hospital Revenue, IHC Health Services,    
                Series C, 1.900% due 2/15/35 (g)   1,000,000
 
Virginia — 5.9%
  510,000   NR Alexandria, VA Redevelopment & Housing Authority,    
                MFH Revenue, (Parkwood Court Apartments Project),    
               Series C, 8.125% due 4/1/30   515,243
  1,000,000   NR Broad Street Community Development Authority Revenue,    
                7.500% due 6/1/33   1,048,170
  1,000,000   NR Fairfax County, VA EDA Revenue, Retirement Community,    
                Greenspring Village Inc, Series A, 7.500% due 10/1/29   1,071,900
        Pocahontas Parkway Association, VA Toll Road Revenue,    
                Capital Appreciation, Series B:    
  5,000,000   BB                Zero coupon bond to yield 6.170% due 8/15/30   1,139,000
  10,000,000   BB                Zero coupon bond to yield 7.250% due 8/15/33   1,892,100
  23,400,000   BB                Zero coupon bond to yield 8.110% due 8/15/34 (d)   4,175,496
 
            9,841,909
 
Wisconsin — 1.0%
        Wisconsin State Health & Educational Facilities    
                Authority Revenue:    
  1,000,000   BBB+                Aurora Health Care, 6.400% due 4/15/33   1,108,030
  1,745,000   NR                Benchmark Healthcare of Green Bay Inc Project,    
                            Series A, 7.750% due 5/1/27 (b)   575,850
 
            1,683,880
 
        TOTAL MUNICIPAL BONDS — 98.9%    
        (Cost — $166,709,493) 165,011,890
 

See Notes to Schedule of Investments.
8


Municipal High Income Fund Inc.
Schedule of Investments (unaudited) (continued)
January 31, 2005
SHARES     SECURITY   VALUE
COMMON STOCK — 0.0%    
  3,180     Mobile Energy Services Co. LLC (j)(k) (Cost — $988,235) $ 0
         
       

TOTAL INVESTMENTS — 98.9%

   
        (Cost — $167,697,728**) 165,011,890
        Other Assets in Excess of Liabilities — 1.1%   1,916,321
         
        TOTAL NET ASSETS — 100.0% $ 166,928,211
         
___________

(a)

All ratings are by Standard & Poor’s Rating Service, except for those identified by an asterisk (*), which are rated by Moody’s Investors Service and for those identified by a double dagger (‡), which are rated by Fitch Ratings.

(b)

Security is currently in default.

(c)

Pre-Refunded bonds are escrowed with U.S. government securities and/or U.S. government agency securities and are considered by the investment adviser to be triple-A rated even if the issuer has not applied for new ratings.

(d)

All or a portion of this security is segregated for open futures contracts.

(e)

Income from this issue is considered a preference item for purposes of calculating the alternative minimum tax.

(f)

All or a portion of this security is held as collateral for open futures contracts.

(g)

Variable rate obligation — payable at par on demand at any time on no more than seven days notice.

(h)

Inverse floating rate security — coupon varies inversely with level of short-term tax-exempt interest rates.

(i)

Bonds escrowed to maturity with U.S. government securities are considered by the investment adviser to be triple-A rated even if the issuer has not applied for new ratings.

(j)

Security is valued in good faith by or under the direction of the Board of Directors.

(k)

Non-income producing security.

**

Aggregate cost for federal income tax purposes is substantially the same.
   
 

Please see pages 11 through 13 for definitions of ratings and certain abbreviations.

See Notes to Schedule of Investments.
 
9
 


Municipal High Income Fund Inc.
 Summary of Investments by Industry* (unaudited)
January 31, 2005
     
Hospitals   13.4 %
Transportation   11.4  
Industrial Development   10.9  
Education   10.7  
Lifecare Systems   10.5  
Pollution Control   4.9  
Multi-Family Housing   4.8  
Congeneration Facilities   3.5  
General Obligation   3.2  
Public Facilities   3.2  
Tobacco   3.1  
Utilities   2.6  
Other   17.8  
   
 
    100.0 %
   
 
____________
*

As a percentage of total investments. Please note that Fund holdings are as of January 31, 2005 and are subject to change.
 

See Notes to Schedule of Investments.
 
10
 


Municipal High Income Fund Inc.
Bond Ratings (unaudited)
 
The definitions of the applicable ratings symbols are set forth below:
     
Standard & Poor’s Ratings Service (“Standard & Poor’s”) — Ratings from “AA” to “CCC” may be modified by the addition of a plus (+) or a minus (–) sign to show relative standings within the major rating categories.
     
AAA —
Bonds rated “AAA” have the highest rating assigned by Standard & Poor’s. Capacity to pay interest and repay principal is extremely strong.
AA —
Bonds rated “AA” have a very strong capacity to pay interest and repay principal and differ from the highest rated issue only in a small degree.
A —
Bonds rated “A” have a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than bonds in higher rated categories.
BBB —
Bonds rated “BBB” are regarded as having an adequate capacity to pay interest and repay principal. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for bonds in this category than in higher rated categories.
BB, B, CCC,
CC and C 		—
Bonds rated “BB”, “B”, “CCC”, “CC” and “C” are regarded, on balance, as predominantly speculative and with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. “BB” represents a lower degree of speculation than “B”, and “C” the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.
D —
Bond rated “D” are in default, and payment of interest and/or repayment of principal is in arrears.
     
Moody’s Investors Service (“Moody’s”) — Numerical modifiers 1, 2 and 3 may be applied to each generic rating from “Aa” to “Caa,” where 1 is the highest and 3 the lowest rating within its generic category.
     
Aaa —
Bonds rated “Aaa” are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as “gilt edge.” Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
Aa —
Bonds rated “Aa” are judged to be of high quality by all standards. Together with the “Aaa” group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large in “Aaa” securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in “Aaa” securities.
A —
Bonds rated “A” possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment some time in the future.
 

11
 


Municipal High Income Fund Inc.
Bond Ratings (unaudited) (continued)
     
Baa —
Bonds rated “Baa” are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.
Ba —
Bonds rated “Ba” are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B —
Bonds rated “B” generally lack characteristics of desirable investments. Assurance of interest and principal payments or of maintenance of other terms of the contract over a long period of time may be small.
Caa —
Bonds rated “Caa” are of poor standing. These issues may be in default, or there may be present elements of danger with respect to principal or interest.
Ca —
Bonds rated “Ca” represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C  —
Bonds rated “C” are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
     
Fitch Ratings (“Fitch”) — Ratings from “A” to “CCC” may be modified by the addition of a plus (+) or a minus (-) sign to show relative standings with the major ratings categories.
     
AAA —
Bonds rated “AAA” by Fitch have the lowest expectation of credit risk. The obligor has an exceptionally strong capacity for timely payment of financial commitments which is highly unlikely to be adversely affected by foreseeable events.
     
A —
Bonds rated “A” have a low expectation of credit risk. The capacity for timely payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings.
     
BBB  —
Bonds rated “BBB” currently have a low expectation of credit risk. The capacity for timely payment of financial commitments is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to impair this capacity. This is the lowest investment grade category assigned by Fitch.
     
BB —
Bonds rated “BB” carry the possibility of credit risk developing, particularly as the result of adverse economic change over time. Business or financial alternatives may, however, be available to allow financial commitments to be met. Securities rated in this category are not considered by Fitch to be investment grade.
     
CCC,
CC and C  		—
Bonds rated “CCC”, “CC” and “C” carry the real possibility of defaulting. The capacity to meet financial commitments depends solely on a sustained, favorable business and economic environment. Default of some kind on bonds rated “CC” appears probable, a “C” rating indicates imminent default.
     
NR —
Indicates that the bond is not rated by Standard & Poor’s, Moody’s or Fitch.
 

12
 


Municipal High Income Fund Inc.
Short-Term Bond Ratings (unaudited)
     
A-1 —
Standard & Poor’s highest commercial paper and variable-rate demand obligation (VRDO) rating indicating that the degree of safety regarding timely payment is either overwhelming or very strong; those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) sign.
   
VMIG 1 — Moody’s highest rating for issues having a demand feature — VRDO.
     

Abbreviations* (unaudited)
           
ABAG

—

 Association of Bay Area Governments IDA

—

 Industrial Development
AIG

—

 American International Guaranty  

 

    Authority/Agency
AMBAC

—

Ambac Assurance Corporation IDB

—

 Industrial Development Board
BAN

—

 Bond Anticipation Notes IDR

—

 Industrial Development Revenue
BIG 

—

 Bond Investors Guaranty INFLOS

—

 Inverse Floaters
CGIC

—

 Capital Guaranty Insurance Company ISD

—

 Independent School District
CHFCLI

—

 California Health Facility LOC

—

 Letter of Credit
 

 

    Construction Loan Insurance MBIA

—

 Municipal Bond Investors
CONNIE

—

 College Construction Loan  

 

    Assurance Corporation
   LEE

   Insurance Association MFH

—

 Multi-Family Housing
COP

—

 Certificate of Participation MVRICS

—

 Municipal Variable Rate Inverse
EDA

—

 Economic Development Authority  

 

    Coupon Security
ETM

—

 Escrowed to Maturity PCR

—

 Pollution Control Revenue
FGIC

—

 Financial Guaranty Insurance PSFG

—

 Permanent School Fund
       Company        Guaranty
FHA — Federal Housing Administration RADIAN — Radian Asset Assurance
FHLMC — Federal Home Loan Mortgage RAN — Revenue Anticipation Notes
       Corporation RIBS — Residual Interest Bonds
FLAIRS — Floating Adjustable Interest Rate RITES — Residual Interest
       Securities        Tax-Exempt Securities
FNMA — Federal National Mortgage SYCC — Structured Yield Curve
       Association        Certificate
FRTC — Floating Rate Trust Certificates TAN  — Tax Anticipation Notes
FSA — Financing Security Assurance TECP — Tax-Exempt Commercial Paper
GIC — Guaranteed Investment Contract TICS — Tender Inverse Certificates
GNMA — Government National Mortgage TOB  — Tender Option Bonds
       Association TRAN — Tax and Revenue Anticipation
GO — General Obligation        Notes
HDC — Housing Development Corporation VA — Veterans Administration
HFA — Housing Finance Authority VRDD — Variable Rate Daily Demand
IBC — Insured Bond Certificates VRWE — Variable Rate Wednesday
             Demand
      XLCA — XL Capital Assurance Inc.
__________
* Abbreviations may or may not appear in the schedule of investments.
 

13
 


Municipal High Income Fund Inc.
 Notes to Schedule of Investments (unaudited)
 

          1.  Organization and Significant Accounting Policies

          Municipal High Income Fund Inc. (“Fund”), a Maryland corporation, is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company.

          The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles (“GAAP”).

          (a) Investment Valuation.   Fixed income securities are valued at the mean between the bid and asked prices provided by an independent pricing service that are based on transactions in municipal obligations, quotations from municipal bond dealers, market transactions in comparable securities and various relationships between securities. When market quotations or official closing prices are not readily available, or are determined not to reflect fair value, the Fund may value such investments at fair value as determined in accordance with the procedures approved by the Fund’s Board of Directors. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates value.

          (b) Financial Futures Contracts.  The Fund may enter into futures contracts to the extent permitted by its investment policies and objectives. Upon entering into a futures contract, the Fund is required to deposit cash or securities as initial margin. Additional securities are also segregated up to the current market value of the futures contracts. Subsequent payments, which are dependent on the daily fluctuations in the value of the underlying financial instrument, are made or received by the Fund each day (daily variation margin) and are recorded as unrealized gains or losses until the contracts are closed. When the contracts are closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transactions and the Fund’s basis in the contracts. The Fund enters into such contracts typically to hedge a portion of the portfolio. The risks associated with entering into futures contracts include the possibility that a change in the value of the contract may not correlate with the changes in the value of the underlying financial instruments. In addition, investing in futures contracts involves the risk that the Fund could lose more than the original margin deposit and subsequent payments required for a futures transaction.

          (c) Security Transactions.   Security transactions are accounted for on a trade date basis.

          (d) Credit and Market Risk.  The Fund invests in high-yield instruments that are subject to certain credit and market risks. The yields of high-yield debt obligations reflect, among other things, perceived credit risk. The Fund’s investments in securities rated below investment-grade typically involve risks not associated with higher rated securities including, among others, greater risk of timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading.
 

14
 


Municipal High Income Fund Inc.
 Notes to Schedule of Investments (unaudited) (continued)
 

          2.  Investments

          At January 31, 2005, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:
 
Gross unrealized appreciation $ 9,338,986  
Gross unrealized depreciation   (12,024,824 )
 
 
Net unrealized depreciation $ (2,685,838 )
 
 
   
            At Janury 31, 2005, the Fund had the following open futures contracts:
   
       Number of
Contracts 		  Expiration
Date 		  Basis
Value 		  Market
Value 		  Unrealized
Loss 		 
         
 
 
 
 
 
 
Contracts to Sell:
U.S. Treasury 20 Year Bond 400   3/05   $ 43,800,000   $ 45,937,500   $ (2,137,500 )



15
 
ITEM 2. CONTROLS AND PROCEDURES.

  (a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934

  (b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant’s last fiscal quarter that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting.

ITEM 3. EXHIBITS.

  Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are attached hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Municipal High Income Fund Inc.

By /s/ R. Jay Gerken                     
R. Jay Gerken
Chief Executive Officer

Date March 30, 2005                    

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By /s/ R. Jay Gerken                     
R. Jay Gerken
Chief Executive Officer

Date March 30, 2005                    

By /s/ Kaprel Ozsolak                     
Kaprel Ozsolak
Chief Financial Officer

Date March 30, 2005