SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
MUNICIPAL HIGH INCOME FUND INC.
----------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by the registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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MUNICIPAL HIGH INCOME FUND INC.
125 Broad Street
New York, New York 10004
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 26, 2004
--------------------
To the Stockholders of Municipal High Income Fund Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of
Municipal High Income Fund Inc. (the "Fund ") will be held at Citigroup Center,
153 E. 53rd Street, 14th Floor Conference Center, New York, New York at 2:00
p.m. on April 26, 2004 for the following purposes:
1. To elect two (2) Class II Directors of the Fund (PROPOSAL 1);
2. To consider and vote upon such other matters as may come before said
meeting or any adjournment thereof.
The close of business on February 27, 2004 has been fixed as the record
date (the "Record Date") for the determination of shareholders entitled to
notice of and to vote at the meeting and any adjournment thereof.
By Order of the Board of Directors,
Robert I. Frenkel
Secretary
March 26, 2004
================================================================================
YOUR VOTE IS IMPORTANT REGARDLESS OF THE SIZE OF YOUR HOLDINGS IN THE
FUND. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, WE ASK THAT YOU PLEASE
COMPLETE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE WHICH NEEDS NO POSTAGE IF MAILED IN THE CONTINENTAL UNITED STATES.
INSTRUCTIONS FOR THE PROPER EXECUTION OF PROXIES ARE SET FORTH ON THE INSIDE
COVER.
================================================================================
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance
to you and may 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.
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:
Registration Valid Signature
----------- --------------
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
Custodian or Estate Accounts
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA .................. John B. Smith
(2) John B. Smith .................................... John B. Smith, Executor
MUNICIPAL HIGH INCOME FUND INC.
125 Broad Street
New York, New York 10004
1-800-331-1710
--------------------
ANNUAL MEETING OF STOCKHOLDERS
APRIL 26, 2004
--------------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Municipal High Income Fund
Inc. (the "Fund") for use at the Annual Meeting of Shareholders (the "Meeting")
of the Fund to be held at 2:00 p.m. on April 26, 2004 at Citigroup Center, 153
East 53rd Street, 14th Floor Conference Center, New York, New York and at any
adjournments thereof. A Notice of Meeting of Shareholders (the "Notice") and a
proxy card accompany this Proxy Statement.
The cost of soliciting proxies and the expenses incurred in preparing this
proxy statement will be borne by the Fund. Solicitation costs are expected to be
approximately $18,000. In addition, the Fund will reimburse brokerage firms or
other record holders for their expenses in forwarding solicitation materials to
beneficial owners of shares of the Fund. Proxy solicitations will be made
primarily by mail, but proxy solicitations also may be made by telephone or
personal interview conducted by officers of the Fund and officers and regular
employees of Smith Barney Fund Management LLC ("SBFM" or the "Manager"), the
Fund's investment adviser and administrator, Citigroup Global Markets Inc.
("CGM") and PFPC Inc., the Fund's transfer agent. The cost of solicitations and
the expense incurred in connection with preparing the 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 materials to the
beneficial owners of shares.
The Annual Report of the Fund, including audited financial statements for
the fiscal year ended October 31, 2003, has previously been furnished to all
shareholders. This Proxy Statement is first being mailed to shareholders on or
about March 26, 2004. The Fund will provide additional copies of the annual
report to any shareholder upon request by calling the Fund at 1-800-331-1710.
If the enclosed Proxy is properly executed and returned in time to be
voted at the Meeting, the shares of capital stock of the Fund ("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 the matter listed in the accompanying Notice of Annual Meeting of
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 Proposal 1 requires
the affirmative vote of a plurality of the votes cast at the Meeting with a
quorum present. Because the Proposal requires a proportion of votes cast for its
approval, abstentions and broker non-votes may influence whether a quorum is
present, but will have no impact on the requisite approval of such Proposal. 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 the Meeting, or in the event
that a quorum is present but sufficient votes to approve the proposal are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitations of proxies. In determining whether
to adjourn the Meeting, the following factors may be considered: the nature of
the proposal that is 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 the Shares represented at the Meeting in
person or by proxy. A shareholder vote may be taken on the proposal in this
Proxy Statement prior to such adjournment if sufficient votes have been received
and it is otherwise appropriate. Under the Fund's By-laws, 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 at the Meeting.
The close of business on February 27, 2004 has been fixed as the record
date (the "Record Date") for the determination of shareholders entitled to
notice of and to vote at the Meeting and all adjournments thereof.
The Fund has one class of common stock which has a par value of $.001 per
Share. As of the Record Date, there were 20,979,997.942 Shares outstanding. 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 the Board, no
single shareholder or "group" (as that term is used in Section 13(d) of the
Securities and Exchange Act of 1934 (the "Exchange Act")) beneficially owned
more than 5% of the outstanding Shares of the Fund. As of the Record Date, Cede
& Co., as nominee of The Depository Trust Company, was the record holder of
19,198,017 Shares, or 91.5% of the Fund's outstanding Shares. As of the Record
Date, the officers and Board Members of the Fund as a group beneficially owned
less than 1% of the outstanding Shares of the Fund.
2
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 2:00 p.m. on April 26, 2004.
As of the Record Date, to the knowledge of the Fund, no shares of
securities issued by CGM's ultimate parent corporation, Citigroup Inc.
("Citigroup"), were held by Directors who are not "interested persons" of the
Fund as that term is used in the Investment Company Act of 1940, as amended (the
"1940 Act").
The Fund's investment advisor and administrator is Smith Barney Fund
Management LLC, located at 399 Park Avenue, New York, NY 10022.
PROPOSAL 1:
TO ELECT TWO (2) CLASS II DIRECTORS OF THE FUND
The Board of Directors of the Fund is divided into three classes. The
Directors serving in Class II have terms expiring at the Meeting; each Class II
Director currently serving on the Board has been nominated by the Board of
Directors for reelection at the Meeting to serve for a term of three years
(until the annual meeting in 2007) or until their successors have been duly
elected and qualified. Class III directors and Class I directors will continue
to serve until the 2005 annual meeting and 2006 annual meeting, respectively.
Each nominee has consented to serve as a Director 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.
Certain information concerning the nominees is set forth below. For any
nominee or Director indicated as owning shares of the Fund, such ownership
constituted less than 1% of the outstanding shares of the Fund as of the Record
Date. All of the nominees are currently Directors of the Fund. Except as
indicated, each nominee or Director has held the office shown or other offices
in the same company for the last five years.
Persons Nominated for Election as Directors
Number of
Portfolios
Principal in Fund Other
Position Length Occupations Complex Directorships
Held with of Time During Past Overseen Held by
Name, Address and Age Fund Served Five Years by Director Director
-----------------------------------------------------------------------------------------------------------------------------------
CLASS II DIRECTORS
Non-Interested Directors:
Robert A. Frankel+ Director Since Managing Partner of Robert 24 None
1961 Deergrass Way 1998 A. Frankel Management
Carlsbad, CA 92009 Consultants.
Age 76
Paolo M. Cucchi+ Director Since Vice President and Dean 7 None
Drew University 2001 of College of Liberal Arts
108 Brothers College at Drew University.
Madison, NJ07940
Age 62
3
Directors Continuing in Office
CLASS I DIRECTORS
Non-Interested Directors:
Allan J. Bloostein+ Director Since President, Allan J. 34 Director of
27 West 67th Street 1998 Bloostein Associates, a Taubman
New York, NY 10023 consulting firm. Centers, Inc.
Age 74 (real estate
investment
trust)
George M. Pavia+ Director Since Senior Partner, Pavia & 7 None
600 Madison Avenue 2001 Harcourt Attorneys.
New York, NY 10022
Age 76
Interested Director:
R. Jay Gerken* Chairman, Since Managing Director of 221 None
399 Park Avenue President 2002 CGM; Chairman,
New York, NY 10022 and Chief President and Chief
Age 52 Executive Executive Officer of Smith
Officer Barney Fund Management
LLC ("SBFM"), Travelers
Investment Advisor, Inc.
("TIA") and Citi Fund
Management Inc. ("CFM");
President and Chief Executive
Officer of certain mutual funds
associated with Citigroup;
formerly portfolio manager,
Smith Barney Growth and Income
Fund (1994-2000) and Smith
Barney Allocation Series
Inc. (1996-2001).
CLASS III DIRECTORS
Non-Interested Directors:
Dwight B. Crane+ Director Since Professor, Harvard 49 None
Harvard Business School 1998 Business School.
Soldiers Field Road
Morgan Hall #375
Boston, MA 02163
Age 66
Paul Hardin+ Director Since Chancellor Emeritus and 34 None
12083 Morehead 2001 Professor of Law at the
Chapel Hill, NC University of North Carolina
27514-8426 at Chapel Hill.
Age 72
William R. Hutchinson+ Director Since President, WR Hutchinson & 42 Director of
535 N. Michigan 1998 Associates, Inc. (oil industry Associated
Suite 1012 consulting); formerly Group Bank;
Chicago, IL 60611 Vice President, Mergers & Director of
Age 61 Acquisitions BP Amoco p.l.c. Associated
Banc-Corp.
-----------
+ Director, trustee and/or general partner of other investment companies
registered under the 1940 Act with which CGM is associated.
* An "interested person" of the Fund, as defined in the 1940 Act.
4
The following table provides information concerning the dollar range of
equity securities owned beneficially by each Director and nominee for election
as Director as of December 31, 2003:
Aggregate Dollar Range of Equity
Securities in All Funds Overseen
Dollar Range of Equity by Director/Nominee and
Name of Director/Nominee Securities in the Fund Advised by CFM
------------------------ ---------------------- --------------------------------
Non-Interested Directors/Nominees
Allan J. Bloostein $1-$10,000 Over $100,000
Dwight B. Crane $10,000-$50,000 $50,001-$100,000
Paolo M. Cucchi None $1-$10,000
Robert A. Frankel $10,000-$50,000 $10,001-$50,000
Dr. Paul Hardin $1-$10,000 Over $100,000
William R. Hutchinson $1-$10,000 $1-$10,000
George Pavia None None
Interested Directors/Nominees
R. Jay Gerken* $1-$10,000 Over $100,000
-----------
* Mr. Gerken is an "interested person" as defined in the 1940 Act.
During the Fund's fiscal year ended October 31, 2003, four regular and two
special meetings of the Board were held. In the last fiscal year, each Director
attended at least 75% of the regular and special meetings of the Board and each
of the audit and nominating committee meetings held. The Fund does not have a
formal policy regarding attendance by Directors at annual meetings but may
consider a policy in the future. At the 2003 Annual Meeting one Board member
attended.
5
COMPENSATION
Only the Independent Directors receive remuneration from the Fund for
acting as a Director. Aggregate expenses (including reimbursement for travel and
out-of-pocket expenses) of $13,860 were paid to such Directors by the Fund
during the calendar year ended December 31, 2003. Fees for the Independent
Directors are currently set at $5,000 per annum plus $500 per in-person Board
meeting and $100 per telephone conference call. Officers of the Fund are
compensated by CGM.
The following table shows the compensation paid by the Fund to each person
who was a Director during the Fund's last fiscal year:
Aggregate Pension or Total
Compensation Retirement Compensation Total Number
from Fund Benefits from Fund and of Funds for
for the fiscal Accrued as part Fund Complex Which Director
Name of year ended of Fund for the year Serves within
Person 10/31/03 Expenses ended 12/31/03 Fund Complex
--------- ------------- ------------- --------------- ----------------
Allan J. Bloostein $7,200 0 $122,250 34
Dwight B. Crane 7,100 0 152,200 49
Paolo M. Cucchi 7,200 0 44,400 7
Robert A. Frankel 7,500 0 73,450 24
Paul Hardin 7,200 0 132,300 34
William R. Hutchinson 7,200 0 46,750 42
George M. Pavia 7,100 0 57,800 7
Interested Director
R. Jay Gerken* 0 0 0 221
-----------
* Designates a Director who is an "interested person" of the Fund as defined
under the 1940 Act.
At the end of the calendar year in which they attain age 80, Fund
Directors are required to change to emeritus status. Directors Emeritus are
entitled to serve in emeritus status for a maximum of 10 years during which time
they are paid 50% of the annual retainer fee and meeting fees otherwise
applicable to Fund Directors, together with reasonable out-of-pocket expenses
for each meeting attended. During the Fund's last fiscal year, compensation paid
by the Fund to Directors Emeritus totalled $22,447.
Beneficial Ownership Reporting Compliance
Section 30(h) of the 1940 Act requires the Fund's officers and Directors,
investment adviser and certain affiliated persons thereof, and any persons who
beneficially own more than ten percent of the Fund's outstanding shares, to file
reports of ownership with the Securities and Exchange Commission (the "SEC"),
the New York Stock Exchange, Inc. (the "NYSE") and the Fund. Based solely upon
its review of the copies of such forms received by it and representations from
certain such persons, the Fund believes that during its fiscal year ended
October 31, 2003, all filing requirements applicable to such persons were met.
6
The names of the principal officers of the Fund are listed in the table
below together with certain additional information. Each of the officers of the
Fund will hold such office until a successor is voted upon by the Board of
Directors.
Principal Occupations and
Position Other Affiliations for the
Name (Year First Elected) Past Five Years and Age
----- -------------------- --------------------------
R. Jay Gerken Chief Executive Officer (See table of Directors)
Citigroup Asset (2002), Chairman of the
Management ("CAM") Board (2002) and
399 Park Avenue President (2002)
New York, NY 10022
Andrew B. Shoup Senior Vice President Director of CAM; Senior
CAM (2003) and Chief Vice President and Chief
125 Broad Street Administrative Officer Administrative Officer of
New York, NY 10005 (2003) mutual funds associated with
Citigroup; Treasurer of
certain mutual funds
associated with Citigroup;
Head of International
Funds Administration of CAM
(from 2001 to 2003);
Director of Global Funds
Administration of CAM (from
2000 to 2001); Head of U.S.
Citibank Funds
Administration of CAM (from
1998 to 2000); 47
Richard Peteka Treasurer and Chief Director of CGM; Chief
CAM Financial Officer Financial Officer and
125 Broad Street (2002) Treasurer of certain mutual
New York, NY 10005 funds associated with
Citigroup; Director and Head
of Internal Control for
Citigroup Asset Management
U.S. Mutual Fund
Administration from 1999-
2002; Vice President and
Head of Mutual Fund
Administration at
Oppenheimer Capital from
1996-1999; 42
Kaprel Ozsolak Controller (2002) Vice President of CGM;
CAM Controller of certain funds
125 Broad Street associated with Citigroup;
New York, NY 10005 38.
7
Principal Occupations and
Position Other Affiliations for the
Name (Year First Elected) Past Five Years and Age
----- -------------------- --------------------------
Peter Coffey Vice President and Managing Director of CGM
Investment Officer and investment officer of
(2002) certain other investment
companies affiliated with
Citigroup; 59
Robert I. Frenkel Secretary (2003) Managing Director and
General Counsel of Global
Mutual Funds for CAM and its
predecessor (since 1994);
Secretary of CFM; Secretary
and Chief Legal Officer of
mutual funds associated with
Citigroup; 48
The election of each Director will require a plurality of the votes cast
with a quorum present.
THE BOARD OF DIRECTORS, INCLUDING ALL THE INDEPENDENT DIRECTORS, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE ELECTION OF ALL NOMINEES TO THE BOARD.
The Fund has a separately designated standing Audit Committee. The Fund's
Audit Committee is composed of all Directors who are not "interested persons" of
the Fund, SBFM or their affiliates within the meaning of the 1940 Act, and who
are "independent" as defined in the NYSE listing standards, namely Messrs.
Bloostein, Crane, Frankel, Hardin, Hutchinson and Pavia. The principal functions
of the Audit Committee are to (a) assist Board oversight of (i) the integrity of
the Fund's financial statements, (ii) the Fund's compliance with legal and
regulatory requirements, (iii) the qualifications and independence of the Fund's
independent auditors, and (iv) the performance of the Fund's internal audit
functions and independent auditors; (b) approve, and recommend to the
Independent Board Members (as such term is defined in the Audit Committee
Charter) for their ratification, the selection, appointment, retention or
termination of the Fund's independent auditors, as well as approving the
compensation thereof; (c) approve all audit and permissible non-audit services
provided to the Fund and certain other persons by such independent auditors; and
(d) prepare the report required to be prepared by the Audit Committee pursuant
to SEC rules for inclusion in the Annual Proxy Statement. This Committee met
twice during the fiscal year ended October 31, 2003. The Fund adopted an Amended
and Restated Audit Committee Charter at a meeting held on February 11, 2004, a
copy of which is attached to this Proxy Statement as Annex A.
The Fund has a separately designated standing Nominating Committee. The
Nominating Committee, the principal function of which is to select and nominate
candidates for election or appointment by the Board as Directors of the Fund, is
currently composed of Messrs. Bloostein, Crane, Cucchi, Frankel, Hardin,
Hutchinson and Pavia. Only Directors who are not "interested persons" of the
Fund as defined
8
in the 1940 Act and who are "independent" as defined in the NYSE listing
standards are members of the Nominating Committee. The Nominating Committee may
consider nominees recommended by a shareholder as it deems appropriate.
Shareholders who wish to recommend a nominee should send recommendations to the
Fund's Secretary that include all information relating to such person that is
required to be disclosed in solicitations of proxies for the election of
Directors. A recommendation must be accompanied by a written consent of the
individual to stand for election if nominated by the Board of Directors and to
serve if elected by the shareholders. The Nominating Committee met once during
the Fund's fiscal year ended October 31, 2003. The Fund adopted a Nominating
Committee Charter at a meeting held on February 11, 2004, a copy of which is
attached to this Proxy Statement as Annex B.
The Nominating Committee identifies potential nominees through its network
of contacts, and may also engage, if it deems appropriate, a professional search
firm. The Committee meets to discuss and consider such candidates'
qualifications and then chooses a candidate by majority vote. The Nominating
Committee does not have specific, minimum qualifications for nominees and has
not established specific qualities or skills that it regards as necessary for
one or more of the Fund's Directors to possess (other than any qualities or
skills that may be required by applicable law, regulation or listing standard).
However, as set forth in the Nominating Committee Charter, in evaluating a
person as a potential nominee to serve as a Director of the Fund, the Committee
may consider the following factors, among any others it may deem relevant:
o whether or not the person is an "interested person" as defined in
the 1940 Act and whether the person is otherwise qualified under
applicable laws and regulations to serve as a Director of the Fund;
o whether or not the person has any relationships that might impair
his or her independence, such as any business, financial or family
relationships with Fund management, the investment manager of the
Fund, Fund service providers or their affiliates;
o whether or not the person serves on boards of, or is otherwise
affiliated with, competing financial service organizations or their
related mutual fund complexes;
o whether or not the person is willing to serve, and willing and able
to commit the time necessary for the performance of the duties of a
Director of the Fund;
o the contribution which the person can make to the Board and the Fund
(or, if the person has previously served as a Director of the Fund,
the contribution which the person made to the Board during his or
her previous term of service), with consideration being given to the
person's business and professional experience, education and such
other factors as the Committee may consider relevant;
9
o the character and integrity of the person; and
o whether or not the selection and nomination of the person would be
consistent with the requirements of the Fund's retirement policies.
Report of the Audit Committee
At a meeting of the Audit Committee on December 17, 2003, the Audit
Committee reported that it: (i) reviewed and discussed the Fund's audited
financial statements with management; (ii) discussed with KPMG LLP ("KMPG"), the
Fund's independent auditors, the matters required to be discussed by Statement
on Auditing Standards No. 61; and (iii) received written confirmation from KPMG
that it is independent and disclosures regarding such independence, as required
by Independence Standards Board Standard No. 1, and discussed with the auditors
the auditors' independence. Based on the review and discussions referred to in
items (i) through (iii) above, the Audit Committee recommended to the Board of
Directors (and the Board approved) that the audited financial statements be
included in the Fund's annual report for the Fund's fiscal year ended October
31, 2003.
Dwight B. Crane
Paolo M. Cucchi
Allan J. Bloostein
Robert A. Frankel
Dr. Paul Hardin
William R. Hutchinson
George M. Pavia
Audit Fees. Fees for the annual audit of the Fund's financial statements
by KPMG for the fiscal year ended October 31, 2003 were $33,250.
Financial Information Systems Design and Implementation Fees. Neither the
Fund nor SBFM or other entities controlling, controlled by, or under common
control with SBFM that provides services to the Fund engaged KPMG to provide
advice to the Fund, SBFM and entities controlled by or under common control with
SBFM regarding financial information system design and implementation during the
fiscal year ended October 31, 2003.
All Other Fees. The aggregate fees billed for all other non-audit
services, including fees for tax related services, rendered by KPMG to the Fund,
SBFM and entities controlled by or affiliated with SBFM that provide services to
the Fund for the fiscal year ended October 31, 2003 were $2,300. The audit
committee of the Fund has determined that provision of these non-audit services
is compatible with maintaining the independence of KPMG.
10
SHAREHOLDER PROPOSALS AND
OTHER SHAREHOLDER COMMUNICATIONS
Shareholder proposals intended to be presented at the 2005 Annual Meeting
of Shareholders of the Fund must be received by November 28, 2004 to be included
in the proxy statement and the form of proxy relating to that meeting, as the
Fund expects that the 2005 Annual Meeting will be held in April of 2005. The
submission by a shareholder of a proposal for inclusion in the proxy statement
does not guarantee that it will be included. Shareholder proposals are subject
to certain regulations under the federal securities laws.
The persons named as proxies for the 2005 Annual Meeting of Shareholders
will have discretionary authority to vote on any matter presented by a
shareholder for action at that meeting unless the Fund receives notice of the
matter by February 25, 2005, in which case these persons will not have
discretionary voting authority except as provided in the Securities and Exchange
Commission's rules governing shareholder proposals.
The Fund's Audit Committee has established guidelines and procedures
regarding the receipt, retention and treatment of complaints regarding
accounting, internal accounting controls or auditing matters (collectively,
"Accounting Matters"). Persons with complaints or concerns regarding Accounting
Matters may submit their complaints to the Citigroup Chief Compliance Officer
("CCO"). Persons who are uncomfortable submitting complaints to the CCO,
including complaints involving the CCO, may submit complaints directly to the
Fund's Audit Committee Chair (together with the CCO, "Complaint Officers").
Complaints may be submitted on an anonymous basis.
The CCO may be contacted at:
Citigroup Asset Management
Compliance Department
399 Park Avenue, 4th Floor
New York, NY 10022
Complaints may also be submitted by telephone at 800-742-5274. Complaints
submitted through this number will be received by the CCO.
The Fund's Audit Committee Chair may be contacted at:
Municipal High Income Fund Inc.
Audit Committee Chair
Robert A. Frankel
1961 Deergrass Way
Carlsbad, CA 92009
11
A shareholder who wishes to send any other communications to the Board
should also deliver such communications to the Secretary of the Fund, Robert I.
Frenkel, 300 First Stamford Place, 4th Floor, Stamford, CT 06902. The Secretary
is responsible for determining, in consultation with other officers of the Fund,
counsel, and other advisers as appropriate, which shareholder communications
will be relayed to the Board.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board does not intend to present any other business at the Meeting,
nor is the Fund aware of any shareholder proposals. If, however, any other
matters are properly brought before the Meeting, the persons named as proxies in
the accompanying form of proxy will vote thereon in accordance with their
judgment, to the extent permissible under applicable law.
March 26, 2004
It is important that proxies be returned promptly. Shareholders who do not
expect to attend the meeting are therefore urged to complete and sign, date and
return the proxy card as soon as possible in the enclosed postage-paid envelope.
12
ANNEX A
AUDIT COMMITTEE CHARTER
AMENDED AND RESTATED AS OF FEBRUARY 11, 2004
ESTABLISHMENT AND PURPOSE
This document serves as the Charter for the Audit Committee (the
"Committee") of the Board of each registered investment company (the "Fund")
advised by Smith Barney Fund Management or Salomon Brothers Asset Management or
one of their affiliates (each, an "Adviser") listed on Appendix A hereto (each
such Charter being a separate Charter). The primary purposes of the Committee
are to (a) assist Board oversight of (i) the integrity of the Fund's financial
statements, (ii) the Fund's compliance with legal and regulatory requirements,
(iii) the qualifications and independence of the Fund's independent auditors and
(iv) the performance of the Fund's internal audit function and independent
auditors; (b) approve, and recommend to the Independent Board Members (as such
term is defined below) for their ratification, the selection, appointment,
retention or termination of the Fund's independent auditors, as well as
approving the compensation thereof; (c) approve all audit and permissible
non-audit services provided to the Fund and certain other persons by the Fund's
independent auditors; and (d) for each closed-end Fund, prepare the report
required to be prepared by the Committee pursuant to the rules of the Securities
and Exchange Commission for inclusion in the Fund's annual Proxy Statement.
DUTIES AND RESPONSIBILITIES
The Fund's independent auditors are accountable to the Committee.
The Committee shall:
1. Bear direct responsibility for the appointment, compensation,
retention and oversight of the Fund's independent auditors, or of
any other public accounting firm engaged for the purpose of
performing other audit, review or attest services for the Fund.
2. Confirm with any independent auditor retained to provide audit
services that the independent auditor has ensured the appropriate
rotation of the lead audit partner pursuant to applicable
regulations.
3. Approve (a) all audit and permissible non-audit services(1) to be
provided to the Fund and (b) all permissible non-audit services to
be provided by the Fund's independent auditors to the Adviser and
any Covered Service
------------
(1) The Committee shall not approve non-audit services that the Committee
believes may impair the independence of the auditors. As of the date of
the approval of this Audit Committee Charter, permissible non-audit
services include any professional services (including tax services), that
are not prohibited services as described below, provided to the Fund by
the independent auditors, other than those provided to the Fund in
connection with an audit or a review of the financial statements of the
Fund.
A-1
Providers if the engagement relates directly to the operations and
financial reporting of the Fund. The Committee may implement
policies and procedures by which such services are approved other
than by the full Committee.
4. Discuss with the independent auditors any disclosed relationships or
services that may diminish the objectivity and independence of the
independent auditors and, if so determined by the Committee,
recommend that the Board take appropriate action to ensure the
independence of the independent auditors.
5. Review, in consultation with the independent auditors, the proposed
scope of the Fund's audit each year, including the audit procedures
to be utilized in the review of the Fund's financial statements.
6. Inquire of the Adviser and the independent auditors as to
significant tax and accounting policies elected by the Fund
(including matters affecting qualification under Subchapter M of the
Internal Revenue Code).
7. Review with the independent auditors any problems or difficulties
the auditors may have encountered during the conduct of the audit
and management's response, including a discussion with the
independent auditors of the matters required to be discussed by
Statement on Auditing Standards No. 61, 89, 90 or any subsequent
Statement, relating to the conduct of the audit.
8. Review, in consultation, as appropriate, with the independent
auditors and significant Fund service providers, matters relating to
internal controls over financial reporting and disclosure controls
and procedures of the Fund and of the Fund's significant service
providers.
9. Request, receive and/or review from the independent auditors such
other materials as deemed necessary or advisable by the Committee in
the exer-
--------------------------------------------------------------------------------
Permissible non-audit services may not include: (i) bookkeeping or other
services related to the accounting records or financial statements of the
Fund; (ii) financial information systems design and implementation; (iii)
appraisal or valuation services, fairness opinions or contribution-in-kind
reports; (iv) actuarial services; (v) internal audit outsourcing services;
(vi) management functions or human resources; (vii) broker or dealer,
investment adviser or investment banking services; (viii) legal services
and expert services unrelated to the audit; and (ix) any other service the
Public Company Accounting Oversight Board determines, by regulation, is
impermissible.
Pre-approval by the Committee of any permissible non-audit services is not
required so long as: (i) the aggregate amount of all such permissible
non-audit services provided to the Fund, the Adviser and any service
providers controlling, controlled by or under common control with the
Adviser that provide ongoing services to the Fund ("Covered Service
Providers") constitutes not more than 5% of the total amount of revenues
paid to the independent auditors during the fiscal year in which the
permissible non-audit services are provided to (a) the Fund, (b) the
Adviser and (c) any entity controlling, controlled by or under common
control with the Adviser that provides ongoing services to the Fund during
the fiscal year in which the services are provided that would have to be
approved by the Committee; (ii) the permissible non-audit services were
not recognized by the Fund at the time of the engagement to be non-audit
services; and (iii) such services are promptly brought to the attention of
the Committee and approved by the Committee (or its delegate(s)) prior to
the completion of the audit.
A-2
cise of its duties under this Charter; such materials may include, without
limitation, any other material written communications bearing on the
Fund's financial statements, or internal or disclosure controls, between
the independent auditors and the Fund, the Adviser or other Fund service
providers, such as any management letter or schedule of unadjusted
differences, and any comment or "deficiency" letter (to the extent such
letters relate to financial reporting) received from a regulatory or
self-regulatory organization addressed to the Fund or the Adviser that
relates to services rendered to the Fund.
10. For each closed-end Fund, establish procedures regarding the
receipt, retention and treatment of complaints that the Fund may
receive regarding Fund accounting, internal accounting controls or
auditing matters, including procedures for the confidential or
anonymous submission by Fund officers, employees, stockholders or
service providers of concerns regarding questionable accounting or
auditing matters related to the Fund.
11. For each closed-end Fund, obtain and review a report by the Fund's
independent auditors describing (i) the auditing firm's internal
quality-control procedures; (ii) any material issues raised by the
most recent internal quality-control review, or peer review, of the
auditing firm, or by any inquiry or investigation by governmental or
professional authorities, within the preceding five years,
respecting one or more independent audits carried out by the
auditing firm, and any steps taken to deal with any such issues; and
(iii) (to assess the auditor's independence) all relationships
between the independent auditor and the Fund.
12. For each closed-end Fund, discuss policies with respect to risk
assessment and risk management.
13. For each closed-end Fund, review hiring policies for employees or
former employees of the Fund's independent auditors.
14. For each closed-end Fund, discuss with management and the Fund's
independent auditors the Fund's audit and discuss with management
the Fund's unaudited financial statements, including any narrative
discussion by management concerning the Fund's financial condition
and investment performance and, if appropriate, recommend the
publication of the Fund's annual audited financial statements in the
Fund's annual report in advance of the printing and publication of
the annual report.
15. For each closed-end Fund, discuss the Fund's earnings press
releases, as well as financial information and earnings guidance
provided to analysts and rating agencies;
16. For each closed-end Fund, review and evaluate annually the
performance of the Committee and the adequacy of this Charter and
recommend any proposed changes to the Charter to the Board for
approval.
A-3
The Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the authority to retain, as it deems
necessary to carry out its duties, special counsel and other experts or
consultants at the expense of the Fund. The Fund shall provide appropriate
funding, as determined by the Committee, for the Committee to carry out its
duties and its responsibilities, including (a) for compensation to be paid to,
or services to be provided by, the Fund's independent auditors or other public
accounting firm providing audit, review or attest services for the Fund, (b) for
payment of compensation to any outside legal, accounting or other advisors,
counsel or consultants employed by the Committee and (c) for the ordinary
administrative expenses of the Committee. In performing its duties, the
Committee shall consult as it deems appropriate with the members of the Board,
officers and employees of the Fund, the Adviser, the Fund's sub-adviser(s), if
any, the Fund's counsel, counsel to the Independent Board Members and the Fund's
other service providers.
COMPOSITION
The Committee shall be composed of each Board member who has been
determined not to be an "interested person," as that term is defined in Section
2(a)(19) of the Investment Company Act of 1940, as amended ("1940 Act"), of the
Fund (the "Independent Board Members"), or such lesser number as the Board of
the Fund may specifically determine and reflect in the Board's minutes, each of
whom shall be financially literate and at least one of whom shall have
accounting or related financial management expertise as determined by the Fund's
Board in its business judgment. Each member of the Committee must also meet the
independence and experience requirements as set forth in Section 303.01(B) of
the New York Stock Exchange's Listed Company Manual or as set forth in Section
121(a) of the American Stock Exchange's listing standards, as applicable, and
the independence requirements applicable to investment companies set forth in
Rule 10A-3 under of the Securities Exchange Act of 1934. For those Funds listed
on the New York Stock Exchange, no member of the Committee may serve on the
audit committees of more than three public companies, including the Funds,
unless the Board determines that such simultaneous service would not impair the
ability of such member to serve on the Committee effectively. The Committee
shall elect a Chairperson, who shall preside over Committee meetings. The
Chairperson shall serve for a term of three years, which term may be renewed
from time to time.
MEETINGS
The Committee shall meet on a regular basis, but not less frequently than
twice a year. Special meetings may also be held upon reasonable notice to the
members of the Committee. An agenda shall be established for each meeting. The
Committee may request any officer or employee of the Fund, the Fund's counsel,
counsel to the Independent Board Members, the Adviser, the Fund's independent
auditors or other interested persons to attend a meeting of the Committee or to
meet with any members of, or consultants to, the Committee. The Committee will
meet periodically with the Fund's independent auditors outside the presence of
the Fund's and the
A-4
Adviser's officers and employees. The Committee will also meet periodically with
the Fund's management outside the presence of the Fund's independent auditors.
Meetings of the Committee may be held in person, by telephone or by other
appropriate means.
One-third of the Committee's members, but not fewer than two members,
shall constitute a quorum. At any meeting of the Committee, the decision of a
majority of the members present and voting shall be determinative as to any
matter submitted to a vote.
REPORTING
The Chairperson shall report regularly to the Board on the result of the
Committee's deliberations and make such recommendations as deemed appropriate.
LIMITS ON ROLE OF COMMITTEE
The function of the Committee is oversight. The Fund's management is
responsible for (i) the preparation, presentation and integrity of the Fund's
financial statements, (ii) the maintenance of appropriate accounting and
financial reporting principles and policies and (iii) the maintenance of
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The independent auditors are
responsible for planning and carrying out proper audits and reviews. In
fulfilling their responsibilities hereunder, it is recognized that members of
the Committee are not employees of the Fund. As such, it is not the duty or
responsibility of the Committee or its members to conduct "field work" or other
types of auditing or accounting reviews or procedures or to set auditor
independence standards. Each member of the Committee shall be entitled to rely
on (i) the integrity of those persons and organizations within and outside the
Fund from which it receives information and (ii) the accuracy of the financial
and other information provided to the Committee by such persons and
organizations absent actual knowledge to the contrary (which shall be promptly
reported to the Fund's Board) and (iii) statements made by the officers and
employees of the Fund, the Adviser or other third parties as to any information
technology, internal audit and other non-audit services provided by the
independent auditors to the Fund. The designation of a person as an "audit
committee financial expert," within the meaning of the rules adopted and
implemented under Section 407 of the Sarbanes-Oxley Act of 2002, shall not
impose any greater responsibility or liability on that person than the
responsibility and liability imposed on such person as a member of the
Committee, nor does it decrease the duties and obligations of other Committee
members or the Board.
In carrying out its responsibilities, the Committee's policies and
procedures shall be adapted, as appropriate, in order to best react to a
changing environment.
AMENDMENTS
This Charter may be amended by a vote of a majority of the Board members.
A-5
Appendix A
Citigroup Investments Corporate Loan Fund Inc.*
Managed High Income Portfolio Inc.*
Managed Municipals Portfolio Inc.*
Municipal High Income Fund Inc.*
Real Estate Income Fund Inc.*
SB Adjustable Rate Income Fund
Zenix Income Fund Inc.*
----------
* Closed-end Fund. The duties and responsibilities of paragraphs 10, 11, 12
and 13 and any other provision applicable exclusively to closed-end funds
apply to these funds only.
A-6
ANNEX B
NOMINATING COMMITTEE CHARTER
ORGANIZATION
The Nominating Committee of each registered investment company listed on
Appendix A hereto (each, a "Fund" and together, the "Funds") shall be composed
solely of Directors who are not "interested persons" of the Fund as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as amended (the "1940
Act") and, with respect to those Funds listed on the New York Stock Exchange,
who are "independent" as defined in the New York Stock Exchange listing
standards ("Independent Directors"). The Board of Directors of the Fund (the
"Board") shall nominate the members of the Committee and shall designate the
Chairperson of the Committee. The Chairperson shall preside at each meeting of
the Committee.
RESPONSIBILITIES
The Committee shall select and nominate persons for election or appointment by
the Board as Directors of the Fund.
EVALUATION OF POTENTIAL NOMINEES
In evaluating a person as a potential nominee to serve as a Director of the
Fund, the Committee should consider among other factors it may deem relevant:
o whether or not the person is an "interested person" as defined in
the 1940 Act and whether the person is otherwise qualified under
applicable laws and regulations to serve as a Director of the Fund;
o whether or not the person has any relationships that might impair
his or her independence, such as any business, financial or family
relationships with Fund management, the investment manager of the
Fund, other Fund service providers or their affiliates;
o whether or not the person serves on boards of, or is otherwise
affiliated with, competing financial service organizations or their
related mutual fund complexes;
o whether or not the person is willing to serve, and willing and able
to commit the time necessary for the performance of the duties of a
Director of the Fund;
o the contribution which the person can make to the Board and the Fund
(or, if the person has previously served as a Director of the Fund,
the contribution which the person made to the Board during his or
her previous term of service), with consideration being given to the
person's business and professional experience, education and such
other factors as the Committee may consider relevant;
o the character and integrity of the person; and
o whether or not the selection and nomination of the person would be
consistent with the requirements of the Fund's retirement policies.
B-1
While the Committee is solely responsible for the selection and nomination of
Directors, the Committee may consider nominees recommended by Fund stockholders
as it deems appropriate. Stockholders who wish to recommend a nominee should
send nominations to the Secretary of the Fund that include all information
relating to such person that is required to be disclosed in solicitations of
proxies for the election of Directors. The recommendation must be accompanied by
a written consent of the individual to stand for election if nominated by the
Board of Directors and to serve if elected by the stockholders.
QUORUM
A majority of the members of the Committee shall constitute a quorum for the
transaction of business, and the act of a majority of the members of the
Committee present at any meeting at which there is a quorum shall be the act of
the Committee.
NOMINATION OF DIRECTORS
After a determination by the Committee that a person should be selected and
nominated as a Director of the Fund, the Committee shall present its
recommendation to the Board for its consideration.
MEETINGS
The Committee may meet either on its own or in conjunction with meetings of the
Board. Meetings of the Committee may be held in person, video conference or by
conference telephone. The Committee may take action by unanimous written consent
in lieu of a meeting.
Adopted: February 11, 2004
B-2
Appendix A
Citigroup Investments Corporate Loan Fund Inc.
Managed High Income Portfolio Inc.
Managed Municipals Portfolio Inc.
Municipal High Income Fund Inc.
Real Estate Income Fund Inc.
SB Adjustable Rate Income Fund
Zenix Income Fund Inc.
B-3
Please mark 3200
|X| votes as in
this example.
This proxy, when properly executed, will be voted in the manner directed by the
undersigned shareholder. If no direction is made, this proxy will be voted FOR
each nominee for director.
The Board of Directors recommends a vote "FOR" the following proposal:
1. ELECTION OF DIRECTORS:
Nominees: (01) Robert A. Frankel
(02) Paolo M. Cucchi
FOR WITHHELD
ALL |_| |_| FROM ALL
NOMINEES NOMINEES
|_| ________________________________________
For all nominees except as noted above
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name appears to the left. When shares are held by joint
tenants, both should sign, or if one signs, that shareholder's vote binds both
shareholders. When signing as attorney, executor, administrator, agent, trustee,
or guardian, please give full title as such. If a corporation, please sign in
full corporate name by a President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Signature: ________________ Date: ______ Signature: _______________ Date: ______
PROXY
MUNICIPAL HIGH INCOME FUND INC.
125 Broad Street
New York, New York 10004
This Proxy is Solicited on Behalf of the Board of Directors of the Fund
The undersigned hereby appoints R. JAY GERKEN, ROBERT I. FRENKEL and ROBERT M.
NELSON, and each of them acting in absence of the other, as Proxies, each with
the power to appoint a substitute, and hereby authorizes them to represent and
to vote, as designated herein, all the shares of common stock of Municipal High
Income Fund Inc. held of record by the undersigned on February 27, 2004 at a
Meeting of Shareholders to be held on April 26, 2004 or any adjournment thereof.
----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
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