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Prospectus                                                     February
28, 2001
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      Municipal High Income Fund Inc.
      Common Stock
            Listed on the New York Stock Exchange
            Trading symbol--MHF

      Municipal High Income Fund Inc. is a diversified, closed-end
management
investment company. The fund's investment objective is to seek high
current
income exempt from federal income tax. The fund invests primarily in
intermediate and long-term municipal debt securities issued by state
and local
governments including U.S. territories and possessions, political
subdivisions,
agencies and public authorities (municipal obligations).

      The market price of shares of closed-end funds may be less than
the net
asset value per share. For more information about this or other risks
of
investing in the fund, see "Risk Factors and Special Considerations"
beginning
on page 14.

      The prospectus contains important information about the fund. For
your
benefit and protection, please read it before you invest, and keep it
on hand
for future reference.


      The statement of additional information (SAI) provides more
detailed
information about the fund and is incorporated into this prospectus by
reference. The SAI and shareholder reports can be obtained without
charge from
your Salomon Smith Barney Financial Consultant or from the fund by
calling
1-800-331-1710 or writing to the fund at Seven World Trade Center, New
York, New
York 10048. You can review the fund's shareholder reports at the
Securities and
Exchange Commission's (the "Commission") Public Reference Room
in
Washington, D.C. Information about the Public Reference Room may be
obtained by
calling the Commission at 1-202-942-8090. Reports and other information
about
the fund are available on the EDGAR Database on the Commission's
Internet site
at http://www.sec.gov. Copies of this information may be obtained for a
duplicating fee by electronic request at the following E-mail address:
publicinfo@sec.gov, or by writing the Commission's Public Reference
Section,
Washington, D.C. 20549-0102.




SALOMON SMITH BARNEY INC.
SSB CITI FUND MANAGEMENT LLC
Investment Manager and Administrator


The Securities and Exchange Commission has not approved or disapproved
these
securities or determined whether this prospectus is accurate or
complete. Any
statement to the contrary is a crime.




1
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Table of Contents
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Prospectus Summary
3
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Fund Expenses
6
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Financial Highlights
7
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The Fund
9
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The Offering
9
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Use of Proceeds
9
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Investment Objective and Policies
9
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Risk Factors and Special Considerations
14
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Investment Restrictions
17
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Share Price Data
18
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Management of the Fund
18
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Dividends and Distributions; Dividend Reinvestment Plan
20
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Taxation
22
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Description of Common Stock
24
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Certain Provisions of the Articles of Incorporation and
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Market Discount
24
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Custodian, Transfer Agent, Dividend-Paying Agent,
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Registrar and Plan Agent
26
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Independent Auditors
26
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Further Information
26
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Appendix
A-1
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2
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Prospectus Summary
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      The following is a summary of more complete information appearing
later in
the prospectus. You should read the entire prospectus because it
contains
details that are not in the summary. Cross references in the summary to
headings
in the prospectus will help you locate information.

      INVESTMENT OBJECTIVE AND PRIMARY INVESTMENTS The fund's
investment
objective is high current income exempt from federal income tax. The
fund
generally invests in intermediate and long-term municipal obligations.

      The fund's municipal obligations may have all types of interest
rate
payment and reset terms, including fixed rate, adjustable rate, zero
coupon,
payment in kind and auction rate features. See "The Fund," "Investment
Objective
and Policies" and Appendix A.

      TAX-EXEMPT INCOME The fund invests with the objective that
dividends paid
by the fund may be excluded by shareholders from their gross income
for federal
income tax purposes. A portion of the fund's dividends may be taxable.
The fund
may invest without limit in private activity bonds. Income from these
bonds may
be a special preference item for purposes of the federal alternative
minimum tax
(AMT). The fund may not be a suitable investment if you are subject to
the AMT.
See "Investment Objective and Policies" and "Taxation."

      THE OFFERING The fund's shares of common stock trade on the New
York Stock
Exchange. Salomon Smith Barney Inc. ("Salomon Smith Barney") intends to
buy and
sell the fund's shares and make a market in the common stock. Salomon
Smith
Barney is not obligated to conduct market-making activities and may
stop doing
so at any time without notice. See "The Offering" and "Use of
Proceeds."

      LISTING NYSE.

      SYMBOL MHF.


      INVESTMENT MANAGER SSB CitiFund Management LLC("SSB Citi" or the
"manager"). The manager selects and manages the fund's investments in
accordance
with the fund's investment objective and policies. SSB Citi is also the
fund's
administrator and oversees the fund's non-investment operations and its
relations with its service providers. For these services, SSB Citi
receives a
combined annual fee equal to 0.60% of the fund's average daily net
assets.


      RISK FACTORS AND SPECIAL CONSIDERATIONS The value of the
securities in the
fund's portfolio fluctuate in price and the net asset value of the fund
will go
up and down in value. This means that you could lose money on your
investment in
the fund or the fund could perform less well than other similar
investments. In
addition, the price of the shares is determined by market prices on



3
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Prospectus Summary (continued)
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the NYSE and elsewhere, so you may receive a price that is less than
net asset
value when you sell your shares. The principal risks associated with an
investment in the fund are summarized below.

      Municipal Obligations. The fund invests primarily in municipal
obligations
and may be affected by any of the following:

      o     Interest rates rise, causing the value of the fund's
portfolio
            generally to decline.

      o     When interest rates are declining, the issuer of a security
            exercises its right to prepay principal earlier than
scheduled,
            forcing the fund to reinvest in lower yielding securities.
This is
            known as call or prepayment risk.

      o     The underlying revenue source for a municipal obligation
other than
            a general obligation bond is insufficient to pay principal
or
            interest in a timely manner.

      o     The credit rating of a security owned by the fund is
downgraded or
            the issuer defaults on its obligation to pay principal
and/or
            interest.

      o     The manager's judgment about the attractiveness, value or
income
            potential of a particular bond proves to be incorrect.

      o     Municipal obligations fall out of favor with investors.

      o     Unfavorable legislation affects the tax-exempt status of
municipal
            obligations.

      Below investment grade securities. The fund is allowed to invest
up to
100% of its assets in securities rated below investment grade or
considered by
the manager to be of comparable quality. (Investment grade debt
securities are
defined as those rated in one of the four highest rating categories by
a
nationally recognized statistical rating organization (NRSRO)).
Investing in
below investment grade securities involves a substantial risk of loss.
These
securities are considered speculative because they have a higher risk
of
default, tend to be less liquid, and may be more difficult to value
than
investment grade securities.

      The fund may invest in securities issued by municipalities that
are in
default on their obligations to pay interest and/or principal. The fund
may lose
all of its investment in these securities.

      Restricted securities. The fund may invest in securities for
which there
are restrictions on resale. There is a less liquid market for
restricted
securities than for publicly traded securities. Although such
securities
sometimes may be resold in private transactions, the prices realized
from the
sale may be less than what the fund considers the fair value of the
securities.

      Derivatives. The fund may hold securities or use investment
techniques
that provide for payments based on or "derived" from the performance of
an
underlying asset, index or other economic benchmark.

      Even a small investment in derivative contracts can have a big
impact on
the


4
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Prospectus Summary (continued)
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fund's interest rate exposure. Therefore, using derivatives can
disproportionately increase losses and reduce opportunities for gains
when
interest rates are changing. The fund may not fully benefit from or may
lose
money on derivatives if changes in their value do not correspond
accurately to
changes in the value of the fund's holdings. The other parties to
certain
derivative contracts present the same types of default risk as issuers
of fixed
income securities. Derivatives can also make the fund less liquid and
harder to
value, especially in declining markets. Derivatives include futures and
options
transactions.

      Closed-end investment company. The fund is a closed-end
investment company
and its shares may trade on the NYSE at a price that is less than its
net asset
value.

      See "Risk Factors and Special Considerations" and "Certain
Provisions of
the Articles of Incorporation and Market Discount."

      DIVIDENDS AND DISTRIBUTIONS Any dividends from net investment
income
(income other than net realized capital gains) are paid monthly and any
distributions of net realized capital gains are paid annually. Your
dividends or
distributions may be reinvested in additional fund shares if you
participate in
the Dividend Reinvestment Plan. The number of shares issued to you by
the plan
depends on the price of the shares. The price of the shares is
determined by the
market price at the time the shares are purchased.

  Market Price of Fund Shares         Price of Fund Shares Issued by
Plan
--------------------------------    -----------------------------------
---------

Greater than or equal to            Shares issued at 98% of net asset
value
98% net asset value                 or 95% of market price, whichever
is greater
Less than 98% of net asset value    Market price

      See "Dividends and Distributions -- Dividend Reinvestment Plan."

      CUSTODIAN PNC Bank, National Association (PNC Bank) is the fund's
custodian. See "Custodian, Transfer Agent, Dividend-Paying Agent,
Registrar and
Plan Agent."

      TRANSFER AGENT, DIVIDEND-PAYING AGENT, REGISTRAR AND PLAN AGENT
PFPC
Global Fund Services ("PFPC") is the fund's transfer agent, dividend-
paying
agent and registrar. See "Custodian, Transfer Agent, Dividend-Paying
Agent,
Registrar and Plan Agent."



5
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Fund Expenses
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      The following table shows the expenses the fund pays. As a
shareholder,
you indirectly bear these expenses.

=======================================================================
=========
Annual Expenses
      (as a percentage of net assets)(1)
      Management fees ................................................
0.60%
      Other expenses(2) ..............................................
0.11%
=======================================================================
=========
Total Annual Operating Expenses ......................................
0.71%
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=========

(1)   See "Management of the Fund" for additional information.

(2)   "Other Expenses," as shown above, are based upon expenses for the
fiscal
      year ended October 31, 2000.

      EXAMPLE

      An investor would directly pay the following expenses on a $1,000
investment in the fund, assuming(1) a 5% annual return and (2)
reinvestment of
all dividends:


              One Year     Three Years     Five Years     Ten Years
=======================================================================
=========
                 $7            $23            $40            $88
=======================================================================
=========


      This example assumes that all dividends and other distributions
are
reinvested at net asset value and that the percentage amounts listed
under
Annual Expenses remain the same in the years shown. This example should
not be
considered a representation of future expenses of the fund. Actual
expenses may
be more or less than those shown.


6
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Financial Highlights
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The following information for the six-year period ended October 31,
2000 has
been audited by KPMG LLP, independent auditors, whose report thereon
appears in
the fund's annual report dated October 31, 2000. The following
information for
the fiscal years ended October 31, 1991 through October 31, 1994 has
been
audited by other independent auditors. The following information should
be read
in conjunction with the financial statements and related notes that
also appear
in the fund's 2000 Annual Report, which is incorporated by reference
into this
prospectus and the Statement of Additional Information.


For a share of capital stock outstanding throughout each year:

<TABLE>
<CAPTION>
Year Ended October 31,                        2000       1999
1998        1997      1996
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--------------------------
<S>                                         <C>        <C>         <C>
<C>        <C>
Net Asset Value,
  Beginning of Year                         $ 9.00     $  9.77     $
9.76     $ 9.53     $ 9.51
Income (Loss) From Operations:
  Net investment income                       0.60        0.58
0.60       0.61       0.63
  Net realized and unrealized gain (loss)    (0.16)      (0.76)
0.03       0.24         --
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--------------------------
Total Income (Loss) From Operations           0.44       (0.18)
0.63       0.85       0.63
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--------------------------
Less Distributions From:
  Net investment income                      (0.58)      (0.59)
(0.61)     (0.62)     (0.61)
  In excess of net investment income            --          --
(0.01)        --         --
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--------------------------
Total Distributions                          (0.58)      (0.59)
(0.62)     (0.62)     (0.61)
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--------------------------
Net Asset Value, End of Year                $ 8.86     $  9.00     $
9.77     $ 9.76     $ 9.53
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--------------------------
Total Return, Based on Market Value           9.39%     (15.76)%
9.34%     17.22%     10.22%
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Total Return, Based on Net Asset Value        5.97%      (1.79)%
6.75%      9.41%      7.39%
Net Assets, End of Year (millions)          $  181     $   184     $
198     $  194     $  187
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Ratios to Average Net Assets:
  Expenses                                    0.71%       0.73%
0.74%      0.74%      0.77%
  Net investment income                       6.72        6.08
6.07       6.38       6.65
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Portfolio Turnover Rate                         27%         27%
57%        35%        17%
=======================================================================
==========================

Market Value, End of Year                   $8.125     $ 8.000
$10.125     $9.875     $9.000

=======================================================================
==========================
</TABLE>



7
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Financial Highlights (continued)
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For a share of capital stock outstanding throughout each year:

<TABLE>
<CAPTION>
Year Ended October 31,                      1995       1994      1993
1992      1991
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--------------------
<S>                                        <C>       <C>        <C>
<C>       <C>
Net Asset Value,
  Beginning of Year                        $ 8.98    $  9.72    $ 9.49
$ 9.42    $ 9.28
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--------------------
Income (Loss) From Operations:
  Net investment income                      0.64       0.65      0.67
0.70      0.74
  Net realized and unrealized gain (loss)    0.54      (0.72)     0.23
0.06      0.15

Total Income (Loss) From Operations          1.18      (0.07)     0.90
0.76      0.89

Less Distributions From:
  Net investment income                     (0.65)     (0.65)    (0.67)
(0.69)    (0.75)
  In excess of net investment income           --         --        --
--        --
  Net realized gains                           --      (0.02)       --
--        --
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--------------------
Total Distributions                         (0.65)     (0.67)    (0.67)
(0.69)    (0.75)
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--------------------
Net Asset Value, End of Year               $ 9.51    $  8.98    $ 9.72
$ 9.49    $ 9.42
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--------------------
Total Return, Based on Market Value         14.17%    (10.11)%   17.07%
2.74%    17.88%
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--------------------
Total Return, Based on Net Asset Value      14.00%     (0.54)%    9.87%
8.47%    10.15%
=======================================================================
====================
Net Assets, End of Year (millions)         $  187    $   176    $  188
$  179    $  173
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--------------------
Ratios to Average Net Assets:
  Expenses                                   0.84%      0.84%     0.87%
0.87%     0.90%
  Net investment income                      6.87       6.98      6.89
7.31      7.90
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--------------------
Portfolio Turnover Rate                        18%        17%       13%
12%       22%
=======================================================================
====================
Market Value, End of Year                  $9.000    $ 8.250    $9.875
$9.125    $ 9.50
=======================================================================
====================
</TABLE>


8
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The Fund
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      The fund was incorporated under the laws of the State of Maryland
on March
4, 1988 and is registered under the Investment Company Act of 1940, as
amended
(the "1940 Act"). Its principal office is located at Seven World Trade
Center,
New York, New York 10048. The fund's telephone number is (800) 331-
1710.


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The Offering
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      Salomon Smith Barney currently makes a market in the common stock
of the
fund. This prospectus is to be used by Salomon Smith Barney in
connection with
offers and sales of the common stock in market-making transactions in
the
over-the-counter market at negotiated prices related to prevailing
market prices
at the time of the sale. Salomon Smith Barney is not required
to make a
market in the common stock and may stop doing so at any time. You
should not
rely on Salomon Smith Barney's market making activities to provide an
active or
liquid trading market for the common stock.

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Use of Proceeds
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      The fund will not receive any proceeds from the sale of any
common stock
offered pursuant to this prospectus. Proceeds received by Salomon Smith
Barney
as a result of its market-making in common stock will be used by
Salomon Smith
Barney in connection with its secondary market operations and for
general
corporate purposes.

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Investment Objective and Policies
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      The fund's investment objective is high current
Income exempt from federal income tax. The
fund's investment objective may be changed only by the affirmative vote
of the
holders of a "majority of the fund's outstanding voting securities," as
defined
in the 1940 Act. To achieve this objective, the fund seeks to invest
substantially all of its assets in a diversified portfolio of long-term
municipal obligations. Under normal conditions, at least 80% of the
fund's
assets will be invested in municipal obligations. The fund may invest
up to 100%
of its assets in lower-rated municipal obligations (those that are not
"investment grade"). These securities are rated as low as Ba by Moody's
Investors Service, Inc. (Moody's), BB by Standard & Poor's Rating Group
(S&P) or
BB by Fitch IBCA (Fitch), or in unrated municipal obligations deemed to
be of
comparable quality. The fund will not invest in municipal obligations
rated
lower than Ba, MIG 1/VMIG 1 or P-2 by Moody's, BB, SP-1 or A-1 by S&P,
or BB by
Fitch. A



9
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Investment Objective and Policies (continued)
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description of relevant Moody's, S&P and Fitch ratings is set forth in
the
Appendix to the SAI. Lower-rated bonds are judged to have speculative
elements.
Although these bonds may have some quality and protective
characteristics, these
are outweighed by large uncertainties or major risk exposure to adverse
conditions. Often, protection of principal payments may be
characteristically
unreliable over any great length of time. The fund may invest up to to
30% of
its assets in non-publicly traded securities. No assurance can be given
that the
fund will achieve its investment objective.

      Municipal obligations are debt securities, the interest from
which is, in
the opinion of bond counsel to their issuer, excluded from gross income
for
regular Federal income tax purposes. Municipal obligations may bear
fixed,
floating or variable rates of interest. Municipal obligations include
"public
purpose" obligations, which generate interest that is exempt from
regular
Federal income tax and, for individual taxpayers, is not subject to the
AMT.
Municipal obligations also include qualified "private activity bonds",
which
generate interest that is exempt from regular Federal income tax but
that is
subject to the AMT. Various types of municipal obligations in which the
fund may
invest are described in the Appendix to this prospectus.

      The yields on and values of municipal obligations are dependent
on a
variety of factors, including general economic and monetary conditions,
money
market factors, conditions in the municipal obligations market, size of
a
particular offering, maturity of the obligation and rating of the
issue.
Consequently, municipal obligations with the same maturity, coupon and
rating
may have different yields or values, while obligations of the same
maturity and
coupon with different ratings may have the same yield or value.

      Certain municipal obligations held by the fund may permit the
issuer to
call or redeem the obligations, in whole or in part, at its option. If
an issuer
were to redeem municipal obligations held by the fund during a time of
declining
interest rates, the fund might realize capital gains or losses at a
time when it
would not otherwise do so, and the fund might not be able to reinvest
the
proceeds of the redemption in municipal obligations providing as high a
level of
income as the obligations redeemed.

      Opinions relating to the validity of municipal obligations and to
the
exemption of interest thereon from regular Federal income tax (and
also, when
applicable, from the AMT) are rendered by bond counsel to the issuer at
the time
of issuance. Neither the fund nor the manager reviews the proceedings
relating
to the issuance of municipal obligations or the bases for such
opinions. Issuers
of municipal obligations may be subject to the provisions of
bankruptcy,
insolvency and other laws, such as Federal bankruptcy laws, affecting
the rights
and remedies of creditors.


10
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Investment Objective and Policies (continued)
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      In addition, the obligations of those issuers may become subject
to laws
enacted in the future by Congress, state legislatures or referenda
extending the
time for payment of principal and/or interest, or imposing other
constraints
upon enforcement of the obligations or upon the ability of
municipalities to
levy taxes. The possibility also exists that, as a result of litigation
or other
conditions, the power or ability of any issuer to pay, when due, the
principal
of, and interest on, its obligations may be materially affected.

      Under normal conditions, the fund may hold up to 20% of its
assets in cash
or money market instruments, including taxable money market instruments
(taxable
investments). When the manager believes that long-term municipal
obligations
consistent with the fund's investment objective are unavailable, the
fund may
take a temporary defensive posture and invest without limitation in
short-term
municipal obligations and Taxable Investments. To the extent the fund
holds
taxable investments and, under certain market conditions, short-term
municipal
obligations, the fund may not fully achieve its investment objective.

      INVESTMENT TECHNIQUES

      The fund may employ, among others, the investment techniques
described
below, which may give rise to taxable income or gain.

      When-Issued Securities. New issues of municipal obligations
usually are
offered on a when-issued basis, which means that delivery and payment
for the
municipal obligations normally take place within 45 days after the date
of the
commitment to purchase. The payment obligation and the interest rate
that will
be received on the municipal obligations are fixed at the time the
buyer enters
into the commitment. The fund will make commitments to purchase when-
issued
municipal obligations only with the intention of acquiring the
securities, but
may sell these securities before the settlement date if the manager
deems it
advisable. Any gain realized on the sale would be taxable.

      Stand-By Commitments. The fund may acquire "stand-by commitments"
with
respect to municipal obligations held in its portfolio. Under a stand-
by
commitment, a dealer is obligated to repurchase at the fund's option
specified
securities at a specified price and, in this way, stand-by commitments
are
comparable to put options. The exercise of a stand-by commitment,
therefore, is
subject to the ability of the counterparty to make payment on demand.
The fund
will acquire stand-by commitments solely to facilitate portfolio
liquidity and
does not intend to exercise its rights thereunder for trading purposes.

      Financial Futures and Options Transactions. To protect against a
decline
in the value of municipal obligations it owns or an increase in the
price of
municipal obligations it proposes to purchase in the future, the fund
may engage
in financial futures and options transactions. The futures contracts or
options
on futures contracts



11
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---------
Investment Objective and Policies (continued)
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---------

that may be entered into by the fund will be restricted to those that
are either
based on an index of long-term municipal obligations or relate to debt
securities the prices of which are anticipated by the manager to
correlate with
the prices of the municipal obligations owned or to be purchased by the
fund.
Regulations by the Commodities Futures Trading Commission (the "CFTC")
applicable to the fund require that the fund's transactions in futures
and
options be engaged in for "bona fide hedging" purposes or other
permitted
purposes, provided that aggregate initial margin deposits and premiums
required
to establish positions other than those considered by the CFTC to be
"bona fide
hedging" will not exceed 5% of the fund's net asset value, after taking
into
account unrealized profits and unrealized losses on any such contracts.

      An interest rate futures contract provides for the future sale by
one
party and the purchase by the other party of a certain amount of a
specific debt
security at a specified price, date, time and place. The fund may enter
into
interest rate futures contracts in order to protect against the adverse
effect
of changing interest rates on its portfolio securities or those to be
purchased
by the fund.

      The fund may purchase and sell call and put options on interest
rate
futures contracts that are traded on a United States exchange or board
of trade.
Unlike the direct investment in a futures contract, an option on an
interest
rate futures contract gives the purchaser the right, in return for the
premium
paid, to assume a position in an interest rate futures contract at a
specified
exercise price at any time prior to the expiration date of the option.
Upon
exercise of an option, the delivery of the futures position by the
writer of the
option to the holder of the option will be accompanied by delivery of
the
accumulated balance in the writer's futures margin account, which
represents the
amount by which the market price of the futures contract exceeds, in
the case of
a call, or is less than, in the case of a put, the exercise price of
the option
on the futures contract. The potential loss related to the purchase of
an option
on interest rate futures contracts is limited to the premium paid for
the option
(plus transaction costs). The value of the option may change daily and
that
change would be reflected in the net asset value of the fund. The fund
may
purchase options on interest rate futures contracts to hedge its
portfolio
securities against the risk of adverse changes in interest rates. The
fund may
sell options on interest rate futures contracts as part of closing
purchase
transactions to terminate its options positions.

      The fund anticipates utilizing municipal bond index futures to
protect
against changes in the market value of the municipal obligations in its
portfolio or that it intends to acquire. Municipal bond index futures
contracts
are based on an index of long-term municipal obligations. The index
assigns
relative values to the municipal obligations included in the index, and
fluctuates with changes in the market value of the municipal
obligations. The
contract is an agreement pursuant to which two parties agree to take or
make
delivery of an amount of cash based upon the difference between the
value of the
index at the close of the last trading day of the contract and


12
<PAGE>

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---------
Investment Objective and Policies (continued)
-----------------------------------------------------------------------
---------

the price at which the index contract was originally written. The
acquisition or
sale of a municipal bond index futures contract enables the fund to
protect its
assets from fluctuations in the value of tax-exempt securities without
actually
buying or selling the securities. The fund may purchase and sell put
and call
options on municipal bond indexes and municipal bond index futures and
enter
into closing transactions with respect to those options.

      Lending Portfolio Securities. The fund is authorized to lend
securities it
holds to brokers, dealers and other financial organizations, but it
will not
lend securities to any affiliate of the manager unless the fund applies
for and
receives specific authority to do so from the SEC. Loans of the fund's
securities, if and when made, may not exceed 33 1/3% of the fund's
assets taken
at value. The fund's loans of securities will be collateralized by
cash, letters
of credit or U.S. Government securities that will be maintained at all
times in
a segregated account with the fund's custodian in an amount at least
equal to
100% of the current market value of the loaned securities.


      Repurchase Agreements. The fund may enter into repurchase
agreement
transactions with member banks of the Federal Reserve System or with
certain
dealers listed on the Federal Reserve Bank of New York's list of
reporting
dealers. A repurchase agreement is a contract under which the buyer of
a
security simultaneously commits to resell the security to the seller at
an
agreed-upon price on an agreed-upon date. Under the terms of a typical
repurchase agreement, the fund would acquire an underlying debt
obligation for a
relatively short period (usually not more than seven days) subject to
an
obligation of the seller to repurchase, and the fund to resell, the
obligation
at an agreed-upon price and time, thereby determining the yield during
the
fund's holding period. This arrangement results in a fixed rate of
return that
is not subject to market fluctuations during the fund's holding period.
Under
each repurchase agreement, the selling institution will be required to
maintain
the value of the securities subject to the repurchase agreement at not
less than
their repurchase price.




13
<PAGE>

-----------------------------------------------------------------------
---------
Risk Factors and Special Considerations
-----------------------------------------------------------------------
---------

      There are various risks associated with an investment in the
fund. You
should consider whether the fund is an appropriate investment for you.
The fund
invests substantially all of its assets in municipal obligations, and
circumstances or events that affect the value of municipal obligations
will
affect the fund's net asset value. The fund may invest primarily in
lower-rated
securities. An investment in these securities has speculative
characteristics
and may involve a substantial risk of loss. While certain risks are
discussed
elsewhere in this prospectus, the following is intended to provide a
summary of
the principal risks of an investment in the fund.

Interest rate sensitivity

      o Municipal obligations are fixed-income securities which are
sensitive to
changes in interest rates. Generally, when interest rates are rising,
the value
of the fund's fixed-income securities can be expected to decrease. When
interest
rates are declining, the value of the fund's fixed-income securities
can be
expected to increase. The fund's net asset value will fluctuate in
response to
the increasing or decreasing value of the fund's fixed-income
securities.

Less liquid markets for some municipal obligations

      o The market for municipal obligations, in particular those that
are rated
below investment grade or are unrated, may be less liquid than for
corporate
bonds. Less liquid markets tend to be more volatile and react more
negatively to
adverse publicity and investor perception than more liquid markets.

Call or prepayment risk

      o Municipal obligations frequently permit their issuers to
prepay, call or
repurchase the securities from their holders, such as the fund. As a
result of
declining interest rates, the issuer of a municipal obligation may
exercise its
prepayment, call or repurchase right on the security, forcing the fund
to
replace the security with a lower yielding security. This would
decrease the
return to the fund.


14
<PAGE>

-----------------------------------------------------------------------
---------
Risk Factors and Special Considerations (continued)
-----------------------------------------------------------------------
---------

      o If the fund purchased a municipal obligation at a premium, it
would
experience a loss of that premium if the issuer of that security
exercises its
prepayment, call or repurchase right.

Issuer of a municipal obligation defaults or rating is downgraded

      o The issuer of a municipal obligation may not be able to make
timely
payments of interest and principal because of general economic
downturns or
adverse allocation of government cost burdens. This could result in a
decrease
in the fund's net asset value. This risk of default may be greater for
private
activity bonds or other municipal obligations whose payments are
dependent upon
a specific source of revenue. Adverse changes in the issuer's financial
condition may negatively affect the credit rating of its securities.
These
developments would adversely affect the market value of the issuer's
obligations.

Below investment grade securities

      o The risk of default is greater for lower-rated securities than
for
investment grade securities. Issuers of below investment grade
securities may
have difficulty servicing their debt, especially during prolonged
economic
recessions or periods of rising interest rates. The prices of these
securities
are volatile and may go down due to market perceptions of deteriorating
issuer
creditworthiness or economic conditions. Below investment grade
securities may
become illiquid and hard to value in down markets.

      o Even if the issuer does not actually default, adverse changes
in the
issuer's financial condition may negatively affect its credit rating.
 The market value of lower-rated securities is more
sensitive
to changes in the issuer's financial condition and changes in economic
conditions than is the market value of investment grade securities.

      o The issuer of a below investment grade security might declare
bankruptcy
and the fund could experience loss or delays collecting interest and
principal.
To enforce its rights to collect principal and interest payments, the
fund might
be required to incur additional expenses which would reduce its net
asset value.
The fund may lose some or all of its investment in below investment
grade
securities upon default or bankruptcy because these securities are
generally not
secured by collateral.

Issuer of a municipal obligation declares bankruptcy

      o The issuer of a municipal obligation might declare bankruptcy.
To
enforce its rights to principal and interest, the fund might be
required to take
possession of and manage the assets securing the issuer's obligation.
This may
increase the fund's expenses and reduce its net asset value and
increase the
amount of the fund's distributions that are taxable.



15
<PAGE>

-----------------------------------------------------------------------
---------
Risk Factors and Special Considerations (continued)
-----------------------------------------------------------------------
---------

Adverse governmental action

      o The U.S. government has enacted laws that have eliminated,
restricted or
diminished the income tax exemption on some municipal obligations and
it may do
so again in the future. This could result in taxable income for
shareholders.

Other

      o The issuer of a municipal obligation may be obligated to redeem
the
security at face value, but if the fund paid more than face value for
the
security, the fund may lose money on the security when it is sold.

      o There may be less extensive information available about the
financial
condition of issuers of municipal obligations than for corporate
issuers with
publicly traded securities.

When-Issued and Delayed Delivery Transactions

      The fund may use when-issued and delayed delivery transactions to
purchase
securities. The value of securities purchased in these transactions may
decrease
before they are delivered to the fund. Also, the yield on securities
purchased
in these transactions may be higher in the market when the delivery
takes place.

Financial Futures and Options

      The fund may use financial futures contracts and options on these
contracts to protect the fund from a decline in the price of municipal
obligations it owns or an increase in the price of a municipal
obligation it
plans to buy. There are risks associated with futures and options
transaction.

      o Because it is not possible to correlate perfectly the price of
the
securities being hedged with the price movement in a futures or option
contract,
it is not possible to provide a perfect offset to losses on the
securities.
Losses on the fund's securities may be greater than gains on the
futures or
option contract, or losses on the futures or option contract may be
greater than
gains on the securities subject to the hedge.

      o To compensate for imperfect correlation, the fund may over-
hedge or
under-hedge by entering into futures contracts or options on futures
contracts
in dollar amounts greater or lesser than the dollar amounts of the
securities
being hedged. If market movements are not as anticipated, the fund
could lose
money from these positions.

      o If the fund hedges against an increase in interest rates, and
rates
decline instead, the fund will lose all or part of the benefit of the
increase
in value of the securities it hedged because it will have offsetting
losses in
its futures or options positions. Also, in order to meet margin
requirements,
the fund may have to sell securities at a time it would not normally
choose.


16
<PAGE>

-----------------------------------------------------------------------
---------
Investment Restrictions
-----------------------------------------------------------------------
---------

      The fund has adopted certain fundamental investment restrictions
that may
be changed only with the prior approval of the holders of a majority of
the
fund's outstanding voting securities. A "majority of the fund's
outstanding
voting securities" for this purpose means the lesser of (a) 67% or more
of the
shares of the Fund's common stock present at a meeting of shareholders,
if the
holders of 50% of the outstanding shares are present or represented by
proxy at
the meeting or (b) more than 50% of the outstanding shares. For a
complete
listing of the investment restrictions applicable to the fund, see
"Investment
Restrictions" in the SAI.

      The following are several of the restrictions applicable to the
fund. Any
percentage limits apply only at the time of initial investment. The
fund is not
required to sell securities if the limits are exceeded after the
investment is
completed. The fund may not:

      o     Borrow money, except for temporary or emergency purposes,
and then
            not in amounts that are greater than 15% of total assets
(including
            the amount borrowed).

      o     Buy more securities if the fund has borrowed money in
amounts
            greater than 5% of net assets.

      o     Invest more than 25% of total assets in securities of
issuers in a
            single industry. This restriction does not apply to the
fund's
            investments in municipal obligations and U.S. government
securities.



17
<PAGE>

-----------------------------------------------------------------------
---------
Share Price Data
-----------------------------------------------------------------------
---------

      The fund's common stock is listed on the NYSE under the symbol
"MHF."
Salomon Smith Barney intends to buy and sell the fund's shares in order
to make
a market in the common stock.

      The following table sets forth the high and low sales prices for
the
fund's common stock, the net asset value per share and the discount or
premium
to net asset value represented by the quotation for each quarterly
period for
the two most recent fiscal years and each full fiscal quarter since
then.

<TABLE>
<CAPTION>
                     Quarterly High Price
Quarterly Low Price
                     --------------------                      --------
-----------
                                         Premium
Premium
             Net Asset       NYSE      (Discount)     Net Asset
NYSE       (Discount)
               Value        Price        to NAV         Value
Price         to NAV
=======================================================================
====================
<S>             <C>        <C>          <C>              <C>
<C>          <C>
01/31/01        8.85         8.875         0.28%         8.76
7.8125       (10.18)%
10/31/00        8.91         8.625       (3.20)%         8.86
7.9375       (10.44)%
7/31/00         8.82          8.25       (6.46)%         8.65
7.3125       (15.46)%
4/30/00         8.82         7.575       (6.38)%         8.66
7.9375        (8.34)%
1/31/00         9.10        8.1875      (10.03)%         8.64
7.0625       (18.26)%
10/31/99        9.43        8.8750       (5.89)%         8.98
7.6250       (13.11)%
7/31/99         9.64        9.6875         0.49%         9.42
8.8125        (6.45)%
4/30/99         9.75        9.9375         3.85%         9.64
9.4375        (2.10)%
1/31/99         9.76       10.4375         6.94%         9.71
9.375        (3.45)%
=======================================================================
====================
</TABLE>

      As of February 9, 2001, the price per share of common stock as
quoted on
the NYSE was $8.92, representing a 1.25% premium to the common stock's
net asset
value calculated on that day.

      Since the fund's commencement of operations, the fund's common
stock has
traded in the market at prices that were generally below net asset
value.

-----------------------------------------------------------------------
---------
Management of the Fund
-----------------------------------------------------------------------
---------

      BOARD OF DIRECTORS

      Overall responsibility for management and supervision of the fund
rests
with the fund's Board of Directors (Board). The Board approves all
significant
agreements between the fund and the companies that furnish services to
the fund,
including agreements with the fund's investment adviser, administrator,
custodian and transfer agent. The day-to-day operations of the fund are
delegated to the manager. The SAI contains background information
regarding each
Director and executive officer of the fund.


18
<PAGE>

-----------------------------------------------------------------------
---------
Management of the Fund (continued)
-----------------------------------------------------------------------
---------

      INVESTMENT MANAGER AND ADMINISTRATOR

      SSB Citi, located at Seven World Trade Center, New York, New York
10048,
serves as the fund's investment manager. SSB Citi, through its
predecessors, has
been in the investment counseling business since 1968 and is a
registered
investment adviser. SSB Citi renders investment advice to a wide
variety of
individual, institutional and investment company clients that, as of
January 31,
2001, had aggregate assets under management in excess of $146 billion.
The
manager and Salomon Smith Barney are subsidiaries of Citigroup Inc
("Citigroup"). Citigroup businesses produce a broad range of financial
services--asset management, banking and consumer finance, credit and
charge
cards, insurance, investments, investment banking and trading--and use
diverse
channels to make them available to consumer and corporate customers
around the
world.

      Subject to the supervision and direction of the fund's Board, SSB
Citi
manages the fund's portfolio in accordance with the fund's investment
objective
and policies, places orders to purchase and sell securities and employs
professional portfolio managers and securities analysts who provide
research
services to the fund. For its services, SSB Citi is paid a management
fee at an
annual rate of 0.40% of the value of the fund's average daily net
assets. In
addition, SSB Citi serves as the fund's administrator and is paid an
administration fee by the fund that is computed daily and paid monthly
at an
annual rate of 0.20% of the value of its average daily net assets.

      Transactions on behalf of the fund are allocated to various
dealers by SSB
Citi in its best judgment. The primary consideration is prompt and
effective
execution of orders at the most favorable price. Subject to that
primary
consideration, dealers may be selected for research, statistical or
other
services that enable SSB Citi to supplement its own research and
analysis with
the views and information of other securities firms. The fund may
utilize
Salomon Smith Barney or a Salomon Smith Barney-affiliated broker-dealer
in
connection with a purchase or sale of securities when SSB Citi believes
that the
charge for the transaction does not exceed usual and customary levels.
The same
standard applies to the use of Salomon Smith Barney in connection with
entering
into options and futures contracts. The fund paid no brokerage
commissions in
the last fiscal year.

      PORTFOLIO MANAGEMENT

      Peter Coffey is a Vice President and Investment Officer of the
fund and
has served the fund in this capacity since 1999. He manages the day-to-
day
investment operations of the fund, including making all investment
decisions.
Mr. Coffey is a Managing Director of Salomon Smith Barney and is the
senior
asset manager for a number of investment companies and other accounts
investing
in tax-exempt securities.



19
<PAGE>

-----------------------------------------------------------------------
---------
Dividends and Distributions; Dividend Reinvestment Plan
-----------------------------------------------------------------------
---------

      The fund expects to pay monthly dividends of substantially all
net
investment income to the holders of the common stock. Net investment
income is
income (including tax-exempt income and accrued original issue discount
income)
other than net realized capital gains. Under the fund's current policy,
which
may be changed at any time by its Board, the fund's monthly dividends
will be
paid at a level that reflects the past and projected performance of the
fund,
which policy over time will result in the distribution of all net
investment
income of the fund. From time to time, when the fund makes a capital
gains
distribution, it may do so in lieu of paying its regular monthly
dividend. Net
income of the fund consists of all interest income accrued on the
fund's assets
less all expenses of the fund. Expenses of the fund are accrued each
day. Net
realized capital gains, if any, will be distributed to the shareholders
at least
once per year.

      Under the fund's Dividend Reinvestment Plan (plan), a shareholder
whose
shares of common stock are registered in his own name will have all
distributions from the fund reinvested automatically by PFPC as
purchasing agent
under the plan, unless the shareholder elects to receive cash.
Distributions
with respect to shares registered in the name of a broker-dealer or
other
nominee (that is, in street name) will be reinvested by the broker or
nominee in
additional shares under the plan, unless the service is not provided by
the
broker or nominee or the shareholder elects to receive distributions in
cash.
Investors who own common stock registered in street name should consult
their
broker-dealers for details regarding reinvestment. All distributions to
shareholders who do not participate in the plan will be paid by check
mailed
directly to the record holder by or under the direction of PFPC as
dividend
paying agent.

      The number of shares of common stock distributed to participants
in the
plan in lieu of a cash dividend is determined in the following manner.
When the
market price of the common stock is equal to or exceeds 98% of the net
asset
value per share of the common stock on the determination date
(generally, the
record date for the distribution), plan participants will be issued
shares of
common stock by the fund at a price equal to the greater of 98% of the
net asset
value determined as described below under "Net Asset Value" or 95% of
the market
price of the common stock.

      If the market price of the common stock is less than 98% of the
net asset
value of the common stock at the time of valuation (which is the close
of
business on the determination date), or if the fund declares a dividend
or
capital gains distribution payable only in cash, PFPC will buy common
stock in
the open market, on the NYSE or elsewhere, for the participants'
accounts. If
following the commencement of the purchases and before PFPC has
completed its
purchases, the market price exceeds 98% of the net asset value of the
common
stock as of the valuation time, PFPC will attempt to terminate
purchases in the
open market and cause the fund to


20
<PAGE>

-----------------------------------------------------------------------
---------
Dividends and Distributions; Dividend Reinvestment Plan (continued)
-----------------------------------------------------------------------
---------

issue the remaining portion of the dividend or distribution in shares
at a price
equal to the greater of (a) 98% of the net asset value as of the
valuation time
or (b) 95% of the then current market price. In this case, the number
of shares
received by a plan participant will be based on the weighted average of
prices
paid for shares purchased in the open market and the price at which the
fund
issues the remaining shares. To the extent PFPC is unable to stop open
market
purchases and cause the fund to issue the remaining shares, the average
per
share purchase price paid by PFPC may exceed 98% of the net asset value
of the
common stock as of the valuation time, resulting in the acquisition of
fewer
shares than if the dividend or capital gains distribution had been paid
in
common stock issued by the fund at 98% of net asset value. PFPC will
begin to
purchase common stock on the open market as soon as practicable after
the
determination date for the dividend or capital gains distribution, but
in no
event shall such purchases continue later than 30 days after the
payment date
for such dividend or distribution, or the record date for a succeeding
dividend
or distribution, except when necessary to comply with applicable
provisions of
the federal securities laws.

      PFPC maintains all shareholder accounts in the plan and furnishes
written
confirmations of all transactions in each account, including
information needed
by a shareholder for personal and tax records. The automatic
reinvestment of
dividends and capital gains distributions will not relieve plan
participants of
any income tax that may be payable on the dividends or capital gains
distributions. Common stock in the account of each plan participant
will be held
by PFPC in uncertificated form in the name of the plan participant.

      Plan participants are subject to no charge for reinvesting
dividends and
capital gains distributions under the plan. PFPC's fees for handling
the
reinvestment of dividends and capital gains distributions will be paid
by the
fund. No brokerage charges apply with respect to shares of common stock
issued
directly by the fund under the plan. Each plan participant will,
however, bear a
proportionate share of any brokerage commissions actually incurred with
respect
to any open market purchases made under the plan.


      Experience under the plan may indicate that changes to it are
desirable.
The fund reserves the right to amend or terminate the plan as applied
to any
dividend or capital gains distribution paid subsequent to written
notice of the
change sent to participants at least 30 days before the record date for
the
dividend or capital gains distribution. The plan also may be amended or
terminated by PFPC, with the fund's prior written consent, on at least
30 days'
written notice to plan participants. All correspondence concerning the
plan
should be directed by mail to PFPC Global Fund Services, P.O. Box 9699,
Providence, Rhode Island 02940-9699 or by telephone at 1-800-331-1710.




21
<PAGE>

-----------------------------------------------------------------------
---------
Dividends and Distributions; Dividend Reinvestment Plan (continued)
-----------------------------------------------------------------------
---------

      The fund's net asset value will be calculated as of the close of
regular
trading on the NYSE, currently 4:00 p.m. New York time, on the last day
of each week and month on which
the NYSE is open for trading. Net asset value is
calculated by dividing the value of the fund's net assets (the value of
its
assets less its liabilities, exclusive of capital stock and surplus) by
the
total number of shares of common stock outstanding. All other
securities and assets are taken at fair value
as
determined in good faith by or under the direction of the fund's Board.

      The valuation of the fund's assets is made by SSB Citi after
consultation
with an independent pricing service approved by the Board. When, in the
judgment
of the service, quoted bid prices for investments are readily available
and are
representative of the bid side of the market, these investments are
valued at
the mean between the quoted bid prices and asked prices. Investments
for which,
in the judgment of the service, no readily obtainable market quotation
is
available (which may constitute a majority of the fund's portfolio
securities),
are carried at fair value as determined by the service. The service may
use
electronic data processing techniques and/or a matrix system to
determine
valuations. The procedures of the service are reviewed periodically by
the
officers of the fund under the general supervision and responsibility
of the
Board, which may replace the service at any time if it determines it to
be in
the best interests of the fund to do so.

-----------------------------------------------------------------------
---------
Taxation
-----------------------------------------------------------------------
---------

      The following is a summary of the material federal tax
considerations
affecting the fund and fund shareholders; please refer to the SAI for
further
discussion. In addition to the considerations described below and in
the SAI,
there may be other Federal, state, local or foreign tax applications to
consider. Because taxes are a complex matter, you are urged to consult
your tax
adviser for more detailed information with respect to the tax
consequences of
any investment.

      The fund has qualified and intends to qualify, so long as such
qualification is in the best interests of its shareholders, under
subchapter M
of the Internal Revenue Code (the "Code") for tax treatment as a
regulated
investment company. In each taxable year that the fund qualifies, the
fund will
pay no Federal income tax on its net investment income and short-term
and
long-term capital gains that are distributed to shareholders. The fund
also
intends to satisfy conditions that will enable it to pay "exempt-
interest
dividends" to shareholders. Exempt-interest dividends are generally not
subject
to regular Federal income taxes but may be considered taxable for state
and
local income tax purposes, and shares of the fund may also be subject
to state
and local intangible property taxes.


22
<PAGE>

-----------------------------------------------------------------------
---------
Taxation (continued)
-----------------------------------------------------------------------
---------

      Exempt-interest dividends attributable to interest received by
the fund on
certain private activity bonds will be treated as a specific tax
preference item
to be included in a shareholder's Federal AMT computation. Under the
AMT,
corporate shareholders must include 75% of tax-exempt interest as an
adjustment
("the current earnings adjustment") in computing corporate minimum
taxable
income. Exempt-interest dividends derived from the interest earned on
private
activity bonds will not be exempt from Federal income tax for those
shareholders
who are "substantial users" (or persons related to "substantial users")
of the
facilities financed by these bonds.

      Shareholders who receive social security or equivalent railroad
retirement
benefits should note that exempt-interest dividends are one of the
items taken
into consideration in determining the amount of these benefits that may
be
subject to federal income tax.

      The interest expense incurred by a shareholder on borrowings
made to
purchase or carry fund shares are not deductible for Federal income tax
purposes
to the extent related to the exempt-interest dividends received on such
shares.

      Dividends paid by the fund from interest income on taxable
investments,
net realized short-term capital gains, and all or a portion of any
gains
realized from the sale or other disposition of certain market discount
bonds are
subject to Federal income tax as ordinary income.

      Distributions, if any, from net realized long-term capital gains
are
taxable as long-term capital gains, regardless of the length of time a
shareholder has owned fund shares.

      Shareholders are required to pay tax on all taxable distributions
even if
those distributions are automatically reinvested in additional fund
shares. None
of the dividends paid by the fund will qualify for the corporate
dividends
received deduction. The fund will inform shareholders of the source and
tax
status of all distributions promptly after the close of each calendar
year.

      The fund is required to withhold ("backup withholding") 31% of
all taxable
dividends, capital gain distributions, and the proceeds of any
repurchase,
regardless of whether gain or loss is realized upon the repurchase, for
shareholders who do not provide the fund with a correct taxpayer
identification
number (social security or employer identification number). Withholding
from the
repurchase proceeds and from taxable dividends and capital gain
distributions
also is required for shareholders who otherwise are subject to backup
withholding. Any tax withheld as a result of backup withholding does
not
constitute an additional tax, and may be claimed as a credit on the
shareholder's Federal income tax return.



23
<PAGE>

-----------------------------------------------------------------------
---------
Description of Common Stock
-----------------------------------------------------------------------
---------


                                                                 Amount

Outstanding
                                                           Exclusive of
Shares
                                         Amount Held      Held by Fund
for its
                         Amount        by Fund for its         Own
Account
   Title of Class      Authorized        Own Account      as of
February
14, 2001
=======================================================================
=========
       Common          500,000,000            0
20,482,327.044
        Stock            Shares
=======================================================================
=========


      No shares of common stock, other than those currently
outstanding, are
offered for sale pursuant to this prospectus. All shares of common
stock are
equal as to earnings, assets, dividends and voting privileges and, when
issued,
will be fully paid and non-assessable. Shares of common stock are
subject to no
conversion, preemptive or other subscription rights. In the event of
liquidation, each share of common stock is entitled to its proportion
of the
fund's assets after debts and expenses. Shareholders are entitled to
one vote
per share and do not have cumulative voting rights. A majority of the
votes cast
at any meeting of shareholders is sufficient to take or authorize
action, except
for election of Directors or as otherwise provided in the fund's
Articles of
Incorporation as described under "Certain Provisions of the Articles of
Incorporation and Market Discount."

      Under the rules of the NYSE applicable to listed companies, the
fund is
required to hold an annual meeting of shareholders in each year. If the
fund's
shares are no longer listed on the NYSE (or any other national
securities
exchange the rules of which require annual meetings of shareholders),
the fund
may decide not to hold annual meetings of shareholders. See "Certain
Provisions
of the Articles of Incorporation and Market Discount."

      The fund has no current intention of offering additional shares,
except
that additional shares may be issued under the plan. See "Dividends and
Distributions; Dividend Reinvestment Plan." Other offerings of shares,
if made,
will require approval of the fund's Board and will be subject to the
requirement
of the 1940 Act that shares may not be sold at a price below the then-
current
net asset value (exclusive of underwriting discounts and commissions)
except in
connection with an offering to existing shareholders or with the
consent of a
majority of the fund's outstanding shares.

-----------------------------------------------------------------------
---------
Certain Provisions of the Articles of Incorporation and Market Discount
-----------------------------------------------------------------------
---------

      The fund's Articles of Incorporation include provisions that
could have
the effect of limiting the ability of other entities or persons to
acquire
control of the fund or to change the composition of its Board and could
have the
effect of depriving shareholders of an opportunity to sell their shares
at a
premium over prevailing market


24
<PAGE>

-----------------------------------------------------------------------
---------
Certain Provisions of the Articles of Incorporation and Market Discount
(continued)
-----------------------------------------------------------------------
---------

prices by discouraging a third party from seeking to obtain control of
the fund.
The Board is divided into three classes, each having a term of three
years. At
the annual meeting of shareholders in each year, the term of one class
expires.
This provision could delay for up to two years the replacement of a
majority of
Directors. The Articles of Incorporation specify the maximum number of
Directors. A Director may be removed from office or the maximum number
of
Directors increased only by vote of the holders of at least 75% of the
shares of
the fund entitled to be voted on the matter.

      The Articles of Incorporation require the favorable vote of the
holders of
at least 75% of the shares of the fund then entitled to be voted to
approve,
adopt or authorize the following:

      (i)   merger or consolidation or statutory share exchange of the
fund with
            or into another corporation;

      (ii)  sale of all or substantially all of the fund's assets
(other than in
            the regular course of the fund's investment activities); or

      (iii) liquidation of the fund;

unless the action has been approved, adopted or authorized by the
affirmative
vote of two-thirds of the total number of Directors fixed in accordance
with the
fund's By-Laws, in which case the affirmative vote of a majority of the
outstanding shares is required. Conversion of the fund to an open-end
investment
company would require an amendment to the Articles of Incorporation.
Such an
amendment would require the affirmative vote of the holders of a
majority of the
shares entitled to vote on the matter. Such a vote also would satisfy a
separate
requirement in the 1940 Act that the change be approved by the
shareholders. At
any time, the amendment would have to be declared advisable by the
Board prior
to its submission to shareholders. Shareholders of an open-end
investment
company may require the company to redeem their shares at any time
(except in
certain circumstances as authorized by or under the 1940 Act) at their
net asset
value, less any redemption charges that might be in effect at the time
of a
redemption.

      The Board has determined that the 75% voting requirements
described above,
which are greater than the minimum requirements under Maryland law or
the 1940
Act and can only be changed by a similar 75% vote, are in the best
interests of
shareholders generally. Reference should be made to the Articles of
Incorporation on file with the SEC for the full text of these
provisions.

      MARKET DISCOUNT

      Shares of common stock of closed-end investment companies
frequently trade
at a discount from net asset value, or in some cases trade at a
premium. Shares
of closed-end investment companies investing primarily in fixed-income
securities



25
<PAGE>

-----------------------------------------------------------------------
---------
Certain Provisions of the Articles of Incorporation and Market Discount
(continued)
-----------------------------------------------------------------------
---------

tend to trade on the basis of income yield on the market price of the
shares and
the market price may also be affected by trading volume, general market
conditions and economic conditions and other factors beyond the control
of the
fund. As a result, the market price of the fund's shares may be greater
or less
than the net asset value. Since the commencement of the fund's
operations, the
fund's shares have traded in the market at prices that were at times
equal to,
but generally were below, net asset value.

      Some closed-end investment companies have taken certain actions,
including
the repurchase of common stock in the market at market prices and the
making of
one or more tender offers for common stock at net asset value, in an
effort to
reduce or mitigate the discount, and others have converted to an open-
end
investment company, the shares of which are redeemable at net asset
value.

      The fund's Board of Directors has seen no reason to adopt any of
the steps
specified above, which some other closed-end funds have used to address
the
discount. The experience of many closed-end funds suggests that the
effect of
many of these steps (other than open-ending) on the discount may be
temporary or
insignificant. Accordingly, there can be no assurance that any of these
actions
will be taken or, if undertaken, will cause the fund's shares to trade
at a
price equal to their net asset value. The manager may voluntarily waive
its fees
from time to time in order to increase the fund's dividend yield in an
effort to
reduce the discount. Any such waiver may be terminated at any time, and
there
can be no assurance that such actions would be successful at reducing
the
discount.

-----------------------------------------------------------------------
---------
Custodian, Transfer Agent, Dividend-Paying Agent, Registrar and Plan
-----------------------------------------------------------------------
---------


      PFPC Trust Company, located at 8800 Tinicum Blvd., Philadelphia,
Pennsylvania 19153, acts as custodian of the fund's investments.


      PFPC, One Exchange Place, Boston, Massachusetts 02109, acts as
the fund's
transfer agent, dividend paying agent, registrar and as agent under the
Plan.

-----------------------------------------------------------------------
---------
Independent Auditors
-----------------------------------------------------------------------
---------

      The audited financial statements have been incorporated by
reference in
the SAI in reliance upon the report of KPMG LLP, independent auditors.

-----------------------------------------------------------------------
---------
Further Information
-----------------------------------------------------------------------
---------

      Further information concerning the common stock and the fund may
be found
in the Registration Statement, of which this prospectus and the SAI
constitute a
part, on file with the Commission.


26
<PAGE>

-----------------------------------------------------------------------
---------
Appendix
-----------------------------------------------------------------------
---------

      TYPES OF MUNICIPAL OBLIGATIONS

      The fund may invest in the following types of municipal
obligations and in
such other types of municipal obligations as become available in the
market from
time to time.

      MUNICIPAL BONDS

      Municipal bonds are debt obligations issued to obtain funds for
various
public purposes. The two principal classifications of municipal bonds
are
"general obligation" and "revenue" bonds. General obligation bonds are
secured
by the issuer's pledge of its full faith, credit and taxing power for
the
payment of principal and interest. Revenue bonds are payable only from
the
revenues derived from a particular facility or class of facilities or,
in some
cases, from the proceeds of a special excise tax or from another
specific
source, such as the user of the facility being financed. Certain
municipal bonds
are "moral obligation" issues, which normally are issued by special
purpose
public authorities. In the case of such issues, an express or implied
"moral
obligation" of a related government unit is pledged to the payment of
the debt
service but is usually subject to annual budget appropriations.

      INDUSTRIAL DEVELOPMENT AND PRIVATE ACTIVITY BONDS

      Industrial development bonds ("IDBs") and private activity bonds
("PABs")
are municipal bonds issued by or on behalf of public authorities to
finance
various privately operated facilities, such as airports or pollution
control
facilities. IDBs and PABs are generally revenue bonds and thus are not
payable
from the unrestricted revenue of the issuer. The credit quality of IDBs
and PABs
is usually directly related to the credit standing of the user of the
facilities
being financed.

      MUNICIPAL LEASE OBLIGATIONS

      Municipal lease obligations are municipal obligations that may
take the
form of leases, installment purchase contracts or conditional sales
contracts,
or certificates of participation with respect to such contracts or
leases.
Municipal lease obligations are issued by state and local governments
and
authorities to purchase land or various types of equipment and
facilities.
Although municipal lease obligations do not constitute general
obligations of
the municipality for which the municipality's taxing power is pledged,
they
ordinarily are backed by the municipality's covenant to budget for,
appropriate
and make the payments due under the lease obligation. The leases
underlying
certain municipal obligations, however, provide that lease payments are
subject
to partial or full abatement if, because of material damage or
destruction of
the leased property, there is substantial interference with the
lessee's use or
occupancy of such property. This "abatement risk" may be reduced by the
existence of insurance covering the leased property, the maintenance by
the
lessee of reserve funds or the provision of credit enhancements such as
letters
of credit.



A1
<PAGE>

-----------------------------------------------------------------------
---------
Appendix (continued)
-----------------------------------------------------------------------
---------

      The liquidity of municipal lease obligations varies. Certain
municipal
lease obligations contain "non-appropriation" clauses which provide
that the
municipality has no obligation to make lease or installment purchase
payments in
future years unless money is appropriated for such purpose on a yearly
basis. In
the case of a "non-appropriation" lease, the fund's ability to recover
under the
lease in the event of non-appropriation or default will be limited
solely to the
repossession of the leased property, without recourse to the general
credit of
the lessee, and disposition of the property in the event of foreclosure
might
prove difficult. The fund will not invest more than 10% of its assets
in such
"non-appropriation" municipal lease obligations. There is no limitation
on the
fund's ability to invest in other municipal lease obligations.

      ZERO COUPON OBLIGATIONS

      The fund may invest up to 25% of its total assets in zero coupon
municipal
obligations. Such obligations include "pure zero" obligations, which
pay no
interest for their entire life (either because they bear no stated rate
of
interest or because their stated rate of interest is not payable until
maturity), and "zero/fixed" obligations, which pay no interest for an
initial
period and thereafter pay interest currently. Zero coupon obligations
also
include securities representing the principal-only components of
municipal
obligations from which the interest components have been stripped and
sold
separately by the holders of the underlying municipal obligations. Zero
coupon
securities usually trade at a deep discount from their face or par
value and
will be subject to greater fluctuations in market value in response to
changing
rates than obligations of comparable maturities that make current
distributions
of interest. While zero coupon municipal obligations will not
contribute to the
cash available to the fund for purposes of paying dividends to
stockholders, SSB
Citi believes that limited investments in such securities may
facilitate the
fund's ability to preserve capital while generating tax-free income
through the
accrual of original issue discount. Zero coupon municipal obligations
generally
are liquid, although such liquidity may be reduced from time to time
due to
interest rate volatility and other factors.

      FLOATING-RATE OBLIGATIONS

      The fund also may purchase floating- and variable-rate municipal
notes and
bonds, which frequently permit the holder to demand payment of
principal at any
time, or at specified intervals, and permit the issuer to prepay
principal, plus
accrued interest, at its discretion after a specified notice period.
The
issuer's obligations under the demand feature of such notes and bonds
generally
are secured by bank letters of credit or other credit support
arrangements.
There frequently will be no secondary market for variable- and
floating-rate
obligations held by the fund, although the fund may be able to obtain
payment of
principal at face value by exercising the demand feature of the
obligation.


A2
<PAGE>

-----------------------------------------------------------------------
---------
Appendix (continued)
-----------------------------------------------------------------------
---------

      PARTICIPATION INTERESTS

      The fund may invest in participation interests in municipal
bonds,
including IDBs, PABs and floating- and variable-rate securities. A
participation
interest gives the fund an undivided interest in a municipal bond owned
by a
bank. The fund has the right to sell the instrument back to the bank.
Such right
is generally backed by the bank's irrevocable letter of credit or
guarantee and
permits the fund to draw on the letter of credit on demand, after
specified
notice, for all or any part of the principal amount of the fund's
participation
interest plus accrued interest. Generally, the fund intends to exercise
demand
under the letters of credit or other guarantees only upon a default
under the
terms of the underlying bond, or to maintain the fund's portfolio in
accordance
with its investment objective and policies. The ability of a bank to
fulfill its
obligations under a letter of credit or guarantee might be affected by
possible
financial difficulties of its borrowers, adverse interest rate or
economic
conditions, regulatory limitations or other factors. SSB Citi will
monitor the
pricing, quality and liquidity of the participation interests held by
the fund,
and the credit standing of banks issuing letters of credit or
guarantees
supporting such participation interests on the basis of published
financial
information reports of rating services and bank analytical services.

      CUSTODIAL RECEIPTS

      The fund may acquire custodial receipts or certificates
underwritten by
securities dealers or banks that evidence ownership of future interest
payments,
principal payments or both on certain municipal obligations. The
underwriter of
these certificates or receipts typically purchases municipal
obligations and
deposits the obligations in an irrevocable trust or custodial account
with a
custodian bank, which then issues receipts or certificates that
evidence
ownership of the periodic unmatured coupon payments and the final
principal
payment on the obligations. Custodial receipts evidencing specific
coupon or
principal payments have the same economic attributes as zero coupon
municipal
obligations described herein. Although under the terms of a custodial
receipt
the fund would be typically authorized to assert its rights directly
against the
issuer of the underlying obligation, the fund could be required to
assert
through the custodian bank those rights that may exist against the
underlying
issuer. Thus, if the underlying issuer fails to pay principal or
interest when
due, the fund may be subject to delays, expenses and risks that are
greater than
those that would have been involved if the fund had purchased a direct
obligation of the issuer. In addition, if the trust or custodial
account in
which the underlying security has been deposited is determined to be an
association taxable as a corporation, instead of a non-taxable entity,
the yield
on the underlying security would be reduced in recognition of any taxes
paid,
and income earned by the fund could be taxable.



A3
<PAGE>

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<PAGE>

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<PAGE>

                                                            SALOMON
SMITH BARNEY
                                                            -----------
---------
                                                     A member of
citigroup[LOGO]

                                                        Municipal
                                                        High
                                                        Income
                                                        Fund Inc.

                                                        Seven World
Trade Center
                                                        New York, New
York 10048

                                                        Common Stock

                                                        (Investment
Company
                                                        Act File No.
811-5497)


                                                        FD 01257
2/01


All dealers effecting transactions in the fund's securities, whether or
not
participating in this distribution, may be required to give investors a
prospectus.

If someone makes a statement about the fund that is not in this
prospectus, you
should not rely upon that information. This prospectus does not offer
any
security other than the fund's shares of common stock. Neither the fund
nor
Salomon Smith Barney is offering to sell shares of the fund to any
person to
whom the fund may not lawfully sell its shares.

The fund will publish a supplement to the prospectus if there are any
material
changes in its business after the date of this prospectus.