As filed with the Securities and Exchange Commission on January 13, 1997
	Securities Act Registration	No. 33-20507
	Investment Company Act Registration	No. 811-5497
	
	SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C.  20549
	
	FORM N-2
	REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
	Pre-Effective Amendment No.___
	Post-Effective Amendment No. 	x
   		
	and/or	
	REGISTRATION STATEMENT UNDER
	THE INVESTMENT COMPANY ACT OF 1940
	AMENDMENT NO.  9	x
	__________________
	Municipal High Income Fund Inc.
	(a Maryland Corporation)
	(Exact Name of Registrant as Specified in Charter)
	388 Greenwich Street 
	New York, New York  10013
	(Address of Principal Executive Offices)
	(212) 723-9218
	(Registrant's Telephone Number, including Area Code)
	Christina T. Sydor, Secretary
	Municipal High IncomeFund Inc.
	388 Greenwich Street
	New York, New York  10013
	(Name and Address of Agent for Service)
	_____________________
	Copies to:
	Burton M. Leibert, Esq.
	Willkie Farr & Gallagher
	One Citicorp Center
	153 East 53rd Street	
	New York, New York  10022
	_______________
	Approximate Date of Proposed Public Offering:  As soon as practicable after
	the effective date of this Registration Statement.

	If any securities being registered on this form will be offered on a 
delayed or continuous basis in reliance 
on Rule 415 under the Securities Act of 1933, other than securities 
offered in connection with a dividend 
reinvestment plan, check the following box.  x_______________
This Registration Statement relates to the registration of an indeterminate 
number of shares solely for 
market-making transactions.  Pursuant to Rule 429, this Registration 
Statement relates to shares previously 
registered on Form N-2. (Registration No. 33-20507).

	It is proposed that this filing will become effective: x when 
declared effective pursuant to section 8(c).

	Registrant amends this Registration Statement under the Securities 
Act of 1933, as amended, on such date 
as may be necessary to delay its effective date until Registrant files a 
further amendment that specifically states that 
this Registration Statement will thereafter become effective in accordance 
with the provisions of Section 8(a) of the 
Securities Act of 1933, as amended, or until the Registration Statement 
becomes effective on such date as the 
Securities and Exchange Commission, acting pursuant to 
Section 8(a), may determine.





	MUNICIPAL HIGH INCOME FUND INC.

	Form N-2
	Cross Reference Sheet

Part A
Item No.	Caption	Prospectus Caption

1.	Outside Front Cover		Outside Front Cover of Prospectus
2.	Inside Front and Outside Back Cover Page		Inside Front 
and Outside Back Cover Page
		of Prospectus
3.	Fee Table and Synopsis		Prospectus Summary; Fund Expenses
4.	Financial Highlights		Financial Highlights
5.	Plan of Distribution		Prospectus Summary; The Offering		
6.	Selling Shareholders		Not Applicable
7.	Use of Proceeds..	Use of Proceeds 
8.  General Description of the Registrant.....	Prospectus Summary;  The Fund; 		
	Investment Objectives and Policies;  	
	Description of Common Stock; Share Price 	
	Data;  Certain Provisions of the Articles of 
	Incorporation; Appendix.
9.	Management		Management of the Fund; Description of 
		Common Stock; Custodian and Transfer 	
		Agent
10.	Capital Stock, Long-Term Debt, and Other
	Securities 		Taxation; Dividend Reinvestment Plan;
		Dividends and Distributions; Description of 
		Common Stock; Share Price Data
11.	Defaults and Arrears on Senior Securities		Not Applicable
12.	Legal Proceedings		Not Applicable
13.	Table of Contents of the Statement of
	Additional Information		Further Information

Part B		Statement of Additional
Item No.		Information Caption     

14.	Cover Page		Cover Page
15.	Table of Contents		Cover Page
16.	General Information and History.........	The Fund; Description of Common 	
		Stock (see Prospectus) 
17.	Investment Objective and Policies		Investment Objective and Policies; 
Investment Restrictions
18.	Management.................	Management of the Fund; Directors and 	
		Executive Officers of the Fund
19.	Control Persons and Principal Holders of
	 Securities		Not Applicable
20.	Investment Advisory and Other Services		Management of the Fund
21.	Brokerage Allocation and Other Practices		Fund Transactions
22.	Tax Status		Taxes; Taxation (see Prospectus)
23.	Financial Statements		Financial Statements






Part C
Item No.

	Information required to be included in Part C is set forth, under the 
appropriate item so numbered, in Part C of this Registration Statement.




<PAGE>

Municipal High Income Fund Inc.
   
--------------------------------------------------------------------------------
Prospectus                                                 January 15, 1997
--------------------------------------------------------------------------------

     388 Greenwich Street
     New York, New York  10013
     (212) 723-9218
    
     Municipal High Income Fund Inc. (the "Fund") is a diversified, closed-end
management investment company that seeks high tax-exempt current income by
investing primarily in a variety of obligations issued by or on behalf of
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities or
multi-state agencies or authorities ("Municipal Obligations"). For a discussion
of the risks associated with certain of the Fund's investments, see "Investment
Objective and Policies."

     This Prospectus is to be used by Smith Barney Inc. ("Smith Barney ") in
connection with offers and sales of the Common Stock in market-making activities
in the over-the-counter market at negotiated prices related to prevailing market
prices at the time of the sale.
   
     Investors are advised to read this Prospectus, which sets forth concisely
the information about the Fund that a prospective investor ought to know before
investing, and to retain it for future reference. A Statement of Additional
Information ("SAI") dated January 15, 1997 has been filed with the Securities
and Exchange Commission and is incorporated by reference in its entirety into
this Prospectus. A copy of the SAI can be obtained without charge by calling or
writing to the Fund at the telephone number or address set forth above or by
contacting any Smith Barney Financial Consultant.
    
                                                           (Continued on page 2)


SMITH BARNEY INC.
Distributor

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.


                                                                               1

<PAGE>

Municipal High Income Fund Inc.

--------------------------------------------------------------------------------
Prospectus (continued)                                    January 15 , 1997
--------------------------------------------------------------------------------

   
   Smith Barney intends to make a market in the Fund's Common Stock, although it
is not obligated to conduct market-making activities and any such activities may
be discontinued at any time, without notice by Smith Barney . The shares of
Common Stock that may be offered from time to time pursuant to this Prospectus
were issued and sold by the Fund on November 28, 1988 in an initial public
offering at a price of $10.00 per share. No assurance can be given as to the
liquidity of, or the trading market for, the Common Stock as a result of any
market-making activities undertaken by Smith Barney. The Fund will not receive
any proceeds from the sale of any Common Stock offered pursuant to this
Prospectus. The Fund's Common Stock is listed on the New York Stock Exchange
("NYSE") under the symbol "MHF."
    

   All dealers effecting transactions in the registered securities, whether or
not participating in this distribution, may be required to deliver a Prospectus.


2

<PAGE>

Municipal High Income Fund Inc.
   
--------------------------------------------------------------------------------
Table of Contents
--------------------------------------------------------------------------------
Prospectus Summary                                                             4
--------------------------------------------------------------------------------
Fund Expenses                                                                  7
--------------------------------------------------------------------------------
Financial Highlights                                                           8
--------------------------------------------------------------------------------
The Fund                                                                      10
--------------------------------------------------------------------------------
The Offering                                                                  10
--------------------------------------------------------------------------------
Use of Proceeds                                                               10
--------------------------------------------------------------------------------
Investment Objective and Policies                                             10
--------------------------------------------------------------------------------
Share Price Data                                                              17
--------------------------------------------------------------------------------
Management of the Fund                                                        17
--------------------------------------------------------------------------------
Dividends and Distributions; Dividend Reinvestment Plan                       19
--------------------------------------------------------------------------------
Net Asset Value                                                               21
--------------------------------------------------------------------------------
Taxation                                                                      21
--------------------------------------------------------------------------------
Description of Common Stock                                                   23
--------------------------------------------------------------------------------
Stock Purchases and Tenders                                                   24
--------------------------------------------------------------------------------
Custodian, Transfer Agent, Dividend-Paying Agent,
Registrar and Plan Agent                                                      26
--------------------------------------------------------------------------------
Further Information                                                           26
--------------------------------------------------------------------------------
Appendix                                                                     A-1
--------------------------------------------------------------------------------
    

                                                                               3

<PAGE>

Municipal High Income Fund Inc.

--------------------------------------------------------------------------------
Prospectus Summary
--------------------------------------------------------------------------------

     The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus and in the SAI.

THE FUND The Fund is a diversified, closed-end management investment company
that invests substantially all of its assets in Municipal Obligations. See "The
Fund" and "Investment Objective and Policies."

INVESTMENT OBJECTIVE The Fund's objective is high tax-exempt current income.

   
INVESTMENTS The Fund ordinarily invests at least 80% of its net assets in
Municipal Obligations. The Fund generally invests in intermediate- and long-term
Municipal Obligations. Thus, under normal market conditions, the Fund will
invest in obligations with remaining maturities at the time of purchase from
three to in excess of twenty years. No assurance can be given that the Fund's
investment objective will be achieved. See "Investment Objective and Policies."
    

THE OFFERING The Common Stock is listed for trading on the New York Stock
Exchange. ("NYSE") In addition, Smith Barney intends to make a market in the
Common Stock. Smith Barney , however, is not obligated to conduct market-making
activities and any such activities may be discontinued at any time without
notice, at the sole discretion of Smith Barney.

LISTING NYSE.

SYMBOL MHF.

   
INVESTMENT MANAGER AND ADMINISTRATOR Greenwich Street Advisors (the "Investment
Manager"), a division of Smith Barney Mutual Funds Management Inc. ("SBMFM")
serves as the Fund's investment manager. The Investment Manager provides
investment advisory and management services to investment companies affiliated
with Smith Barney. SBMFM is a wholly owned subsidiary of Smith Barney Holdings
Inc., ("Holdings") the parent company of Smith Barney. Holdings is a wholly
owned subsidiary of Travelers Group Inc. ("Travelers"). SBMFM also acts as
administrator of the Fund and in that capacity provides certain administrative
services, including overseeing the Fund's non-investment operations and its
relations with other service providers and providing executive and other
officers to the Fund. The Fund pays the Investment Manager a fee ("Management
Fee") for its services provided to the Fund at an annual rate of 0.40 % of the
value of the Fund's average daily net assets. The Fund pays SBMFM a fee for
administrative services provided to the Fund that is computed daily and paid
monthly at the annual rate of 0.20% of the value of the Fund's average daily net
assets. The Fund will bear other expenses and 
    


4

<PAGE>

Municipal High Income Fund Inc.

--------------------------------------------------------------------------------
Prospectus Summary (continued)
--------------------------------------------------------------------------------

costs in connection with its operation in addition to the costs of investment
management services. See "Management of the Fund -- Investment Manager and
Administrator."

CUSTODIAN, TRANSFER AGENT, DIVIDEND-PAYING AGENT, REGISTRAR AND PLAN AGENT 
PNC Bank, NA ("PNC Bank") serves as the Fund's custodian. First Data Investor
Services Group, Inc. ("First Data") serves as the Fund's transfer agent,
dividend-paying agent, registrar and plan agent under the Fund's Dividend
Reinvestment Plan. See "Custodian, Transfer Agent and Dividend-Paying Agent,
Registrar and Plan Agent."

DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT PLAN The Fund expects to make
monthly distributions of net investment income and to distribute net realized
capital gains, if any, annually. All distributions will be reinvested
automatically in additional shares through participation in the Fund's Dividend
Reinvestment Plan unless a shareholder elects to receive cash. See "Dividends
and Distributions; Dividend Reinvestment Plan."

DISCOUNT FROM NET ASSET VALUE OF SHARES The Fund is a closed-end investment
company. Shares of closed-end investment companies frequently trade at a
discount from net asset value. Whether investors will realize gains or losses
upon the sale of Common Stock will not depend upon the Fund's net asset value,
but will depend entirely upon whether the market price of the Common Stock at
the time of sale is above or below the original purchase price for the shares.
Since the market price of the Fund's Common Stock will be determined by such
factors as relative demand for and supply of such shares in the market, general
market and economic conditions and other factors beyond the control of the Fund,
the Fund cannot predict whether the Common Stock will trade at, below or above
net asset value. For that reason, shares of the Fund's Common Stock are designed
primarily for long-term investors, and investors in the Fund's Common Stock
should not view the Fund as a vehicle for trading purposes. See "Investment
Objective and Policies--Risk Factors and Special Considerations" and "Share
Price Data."

   
RISK FACTORS AND SPECIAL CONSIDERATIONS The Fund may invest up to 100% of its
assets in Municipal Obligations rated as low as Ba by Moody's Investors Service
Inc. ("Moody's") or BB by S&P Ratings Group ("S&P") or BB by Fitch Investors
Service, Inc. ("Fitch") or in unrated Municipal Obligations deemed to be of
comparable quality. These low-rated Municipal Obligations are regarded by
Moody's as having speculative elements and by S&P as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal and generally involve greater volatility of price and risk of
principal and income than 
    


                                                                               5

<PAGE>

Municipal High Income Fund Inc.

--------------------------------------------------------------------------------
Prospectus Summary (continued)
--------------------------------------------------------------------------------

   
do higher rated securities. In addition, low-rated and unrated securities are
frequently subordinated to the prior payment of senior indebtedness and are
traded in markets that may be relatively less liquid than the market for higher
rated securities. Moreover, because dealers may not maintain daily markets in
Municipal Obligations, retail secondary markets for many of these securities may
not exist. The Fund anticipates that, if a secondary market for securities it
wishes to sell does not exist, the Fund could sell the securities only to
institutional investors. As a result, the Fund's ability to sell these
securities when the Investment Manager deems it appropriate may be diminished.
The Fund is not restricted in its ability to purchase illiquid securities;
however, the Fund is subject to the risk that should it desire to sell any of
these securities when a ready buyer is not available at a price the Fund deems
representative of their value, the value of the Fund's net assets could be
adversely affected. The Fund may also invest up to 30% of its assets in
securities that are not publicly traded. The Fund may be forced to sell these
securities at less than fair market value or may not be able to sell them when
the Investment Manager believes it desirable to do so. The Fund has the right to
invest without limitation in Municipal Obligations that are private activity
bonds, the income from which may be taxable as a specific preference item for
purposes of the Federal alternative minimum tax. Thus, the Fund may not be a
suitable investment for investors who are subject to the alternative minimum
tax. See "Investment Objective and Policies" and "Taxation."
    

     Certain of the investment techniques that the Fund may employ might expose
the Fund to certain risks. These investment techniques include purchasing
municipal leases, securities on a when-issued basis, stand-by commitments and
floating and variable rate demand notes, entering into repurchase agreements,
lending portfolio securities and engaging in financial futures and options
transactions. See "Investment Objective and Policies--Risk Factors and Special
Considerations."

     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 and of depriving shareholders of an opportunity to sell their shares
at a premium over prevailing market prices. See "Certain Provisions of the
Articles of Incorporation."

STOCK PURCHASES AND TENDERS The Fund's Board of Directors currently contemplates
that the Fund may from time to time consider the repurchase of its Common Stock
on the open market or make tender offers for the Common Stock. See "Stock
Purchases and Tenders."


6

<PAGE>

Municipal High Income Fund Inc.

--------------------------------------------------------------------------------
Fund Expenses
--------------------------------------------------------------------------------

     The following tables are intended to assist investors in understanding the
various costs and expenses associated with investing in the Fund.

================================================================================
Shareholder Transaction Expenses
    Sales Load (as a percentage of offering price) .................  None
    Dividend Reinvestment and Cash Purchase Plan Fees ..............  None
================================================================================
   
Annual Fund Operating Expenses
    (as a percentage of net assets)(1)
    Investment Advisory and Administration Fees.....................  0.60%
    Other Expenses..................................................  0.17%
================================================================================
TOTAL ANNUAL FUND OPERATING EXPENSES................................  0.77%
===========================================================================
    
(1) See "Management of the Fund" for additional information.

     HYPOTHETICAL EXAMPLE

     An investor would directly or indirectly pay the following expenses on a
$1,000 investment in the Fund, assuming a 5% annual return:
   
        One Year      Three Years        Five Years         Ten Years
================================================================================
           $8             $25               $43                $95
===========================================================================    

     This "Hypothetical Example" assumes that all dividends and other
distributions are reinvested at net asset value and that the percentage amounts
listed under Annual Fund Operating Expenses remain the same in the years shown.
The above tables and the assumptions in the Hypothetical Example of a 5% annual
return and reinvestment at net asset value are required by regulations of the
Securities and Exchange Commission ("SEC") applicable to all investment
companies; the assumed 5% annual return is not a prediction of, and does not
represent, the projected or actual performance of the Fund's Common Stock. This
Example should not be considered a representation of past or future expenses,
and the Fund's actual expenses may be more or less than those shown.


                                                                               7

<PAGE>

Municipal High Income Fund Inc.

--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
   
The following information for the two-year period ended October 31, 1996 has
been audited by KPMG Peat Marwick, LLP independent auditors whose report thereon
appears in the Fund's annual report dated October 31, 1996. The following
information for the fiscal years ended October 31, 1989 through October 31, 1994
has been audited by other independent auditors. This information should be read
in conjunction with the financial statements and related notes that also appear
in the Fund's Annual Report, which is incorporated by reference into the
Statement of Additional Information.

               Per Share Operating Performance For a Share of the
             Fund's Common Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
=====================================================================================================
                               Year             Year           Year            Year           Year
                              Ended            Ended          Ended           Ended          Ended
                             10/31/96         10/31/95       10/31/94        10/31/93       10/31/92
-----------------------------------------------------------------------------------------------------
<S>                          <C>             <C>             <C>             <C>             <C>          
Net Asset Value,
Beginning of Period          $   9.51        $   8.98        $   9.72        $   9.49        $   9.42     
-----------------------------------------------------------------------------------------------------
Net Investment Income            0.63            0.64            0.65            0.67            0.70
Net Realized and                                                                             
Unrealized Gains                                                                             
(Losses) on Investments            --            0.54           (0.72)           0.23            0.06
-----------------------------------------------------------------------------------------------------
Total Income (Loss)                                                                          
from Operations                  0.63            1.18           (0.07)           0.90            0.76
-----------------------------------------------------------------------------------------------------

Less Distributions                                                                           
Dividends from net                                                                           
investment income               (0.61)          (0.65)          (0.65)          (0.67)          (0.69)
Distributions from
capital gains                      --              --           (0.02)              0               0

-----------------------------------------------------------------------------------------------------
Total Distributions             (0.61)          (0.65)          (0.67)          (0.67)          (0.69)
-----------------------------------------------------------------------------------------------------
Net Asset Value,                                                                             
End of Period                $   9.53        $   9.51        $   8.98        $   9.72        $   9.49
Per Share Market Value,                                                                      
End of Period                $  9.000        $   9.00        $  8.250        $  9.875        $  9.125
-----------------------------------------------------------------------------------------------------
Total Investment Return         10.22%          14.17%         (10.11%)         17.76%           3.37%
=====================================================================================================
Ratios/Supplemental                                                                          
Data Net Assets, End                                                                         
of Period (in 000's)         $187,303        $187,048        $176,379        $188,294        $179,104
=====================================================================================================
Ratios to Average                                                                            
Net Assets:                                                                                  
Operating Expenses               0.77%           0.84%           0.84%           0.87%           0.87%
Average Net Income               6.65            6.87            6.98            6.89            7.31
Portfolio Turnover Rate            17%             18%             17%             13%             12%
=====================================================================================================
</TABLE>


8

<PAGE>

Municipal High Income Fund Inc.

--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------

               Per Share Operating Performance For a Share of the
             Fund's Common Stock Outstanding Throughout Each Period
================================================================================
                                       Year         Year           Year
                                      Ended        Ended          Ended
                                     10/31/91      10/31/90       10/31/89(1)
--------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period                  $   9.28      $   9.52      $    9.35
--------------------------------------------------------------------------------
Net Investment Income                    0.74          0.75           0.66
Net Realized and                                                
Unrealized Gains                                                
(Losses) on Investments                  0.15         (0.23)          0.15
--------------------------------------------------------------------------------
Total from Investment                                           
Operations                               0.89          0.52           0.81
Less Distributions                                              
Dividends from net                                              
investment income                       (0.75)        (0.76)         (0.64)
Distributions from                                              
capital gains                               0             0              0
Total Distributions                     (0.75)        (0.76)         (0.64)
--------------------------------------------------------------------------------
Net Asset Value,                                                
End of Period                        $   9.42      $   9.28      $    9.52
Per Share Market Value,                                         
End of Period                        $   9.50      $   9.00      $    9.50
--------------------------------------------------------------------------------

Total Investment Return                 17.88%        (1.45%)        (1.72%)#

================================================================================
Ratios/Supplemental                                             
Data Net Assets, End                                            
of Period (in 000's)                 $173,290      $164,531      $ 164,221
================================================================================
Ratios to Average                                               
Net Assets:                                                     
Operating Expenses                        .90%          .87%           .86%*(2)
Average Net Income                       7.90%         8.00%          7.54%*
Portfolio Turnover Rate                    22%           11%            16%
================================================================================
(1)  For the period from November 28, 1988 (commencement of operations) to
     October 31, 1989.
(2)  Annualized expense ratio before fees waived by investment adviser was 0.88%
*    Annualized
#    Total return is not annualized, as it may not be representative of the
     total return for the year.

    
                                                                               9

<PAGE>

Municipal High Income Fund Inc.

--------------------------------------------------------------------------------
The Fund
--------------------------------------------------------------------------------
   
     The Fund is a diversified, closed-end management investment company
designed to invest primarily in Municipal Obligations. The Fund, which was
incorporated under the laws of the State of Maryland on March 4, 1988, is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), and has its principal office at 388 Greenwich Street, New York, New York
10013. The Fund's telephone number is (212) 723-9218.
    
--------------------------------------------------------------------------------
The Offering
--------------------------------------------------------------------------------

     Smith Barney intends to make a market in the Common Stock, although it is
not obligated to conduct market-making activities and any such activities may be
discontinued at any time without notice at the sole discretion of Smith Barney .
No assurance can be given as to the liquidity of, or the trading market for, the
Common Stock as a result of any market-making activities undertaken by Smith
Barney. This Prospectus is to be used by 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.

--------------------------------------------------------------------------------
Use of Proceeds
--------------------------------------------------------------------------------

     The Fund will not receive any proceeds from the sale of any Common Stock
offered pursuant to this Prospectus. Proceeds received by Smith Barney as a
result of its market-making in Common Stock will be utilized by Smith Barney in
connection with its secondary market operations and for general corporate
purposes.

--------------------------------------------------------------------------------
Investment Objective and Policies
--------------------------------------------------------------------------------
   
     The Fund's investment objective is high tax-exempt current income. The
Fund's investment objective may not be changed without the affirmative vote of
the holders of a majority (as defined in the 1940 Act) of the Fund's outstanding
shares. To achieve this objective, the Fund seeks to invest substantially all of
its assets in a diversified portfolio of long-term Municipal Obligations, the
interest from which is, in the opinion of the issuers' counsels, excluded from
gross income for regular federal tax purposes. 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 Municipal Obligations rated as low as Ba by
Moody's or BB by S&P or in unrated 


10

<PAGE>

Municipal High Income Fund Inc.

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

Municipal Obligations deemed to be of comparable quality. The Fund will not
invest in Municipal Obligations that are rated lower than Baa, MIG 1/VMIG 1 or
P-2 by Moody's or BB, SP-1 or A-1 by S&P. A 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; their future cannot be considered as well
assured. Although these bonds will likely 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 is not
restricted in its ability to purchase securities for which a liquid market does
not exist and up to 30% of the Fund's assets may be invested in non-publicly
traded securities. No assurance can be given that the Fund's investment
objective will be achieved.
    
     Municipal Obligations are debt securities, the interest from which is, in
the opinion of bond counsel to their issuer, excluded from gross income for
Federal income tax purposes. Municipal Obligations bear fixed, floating and
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 alternative minimum tax
("AMT"), and qualified "private activity" obligations, which generate interest
that is exempt from regular federal income tax but that, if obligations were
issued after August 7, 1986, is subject to the AMT. Variations exist in the
security of Municipal Obligations, both within a particular classification and
between classifications. The types of Municipal Obligations in which the Fund
may invest are described in an 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, whereas 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 that 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 that were redeemed.


                                                                              11

<PAGE>

Municipal High Income Fund Inc.

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

     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 Investment Manager will review 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 the Federal Bankruptcy Reform
Act of 1978, affecting the rights and remedies of creditors.

     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
(collectively, "Taxable Investments"). When the Investment 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 will not be fully
achieving its investment objective.

     INVESTMENT TECHNIQUES

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

     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 Investment 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, 


12

<PAGE>

Municipal High Income Fund Inc.

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

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 seller 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 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 Investment
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 its 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 


                                                                              13

<PAGE>

Municipal High Income Fund Inc.

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

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 will 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 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 Investment 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 


14

<PAGE>

Municipal High Income Fund Inc.
--------------------------------------------------------------------------------
Investment Objective and Policies (continued)
--------------------------------------------------------------------------------

will be required to maintain the value of the securities subject to the
repurchase agreement at not less than their repurchase price.

     RISK FACTORS AND SPECIAL CONSIDERATIONS

     Even though interest-bearing securities, like Municipal Obligations, are
investments that promise a stable stream of income, their prices are inversely
affected by changes in interest rates and, therefore, are subject to the risk of
market price fluctuations. The values of Municipal Obligations with longer
remaining maturities typically fluctuate more than those of similarly rated
Municipal Obligations with shorter remaining maturities. The values of fixed
income securities also may be affected by changes in the credit rating or
financial condition of the issuing entities.

     Although they may offer higher current yields than do higher rated
securities, low-rated and unrated securities generally involve greater
volatility of price and risk of principal and income, including the possibility
of default by, or bankruptcy of, the issuers of the securities; the Fund may
incur additional expenses to the extent it is required to seek recovery upon a
default in the payment of principal or interest on its portfolio holdings.

     Municipal leases in which the Fund may invest have special risks not
normally associated with Municipal Obligations. These obligations frequently
contain "non-appropriation" clauses that provide that the governmental issuer of
the obligation has no obligation to make future payments under the lease or
contract unless money is appropriated for that purpose by the legislative body
on a yearly or other periodic basis. Moreover, although a municipal lease will
be secured by financed equipment, the disposition of the equipment in the event
of foreclosure might prove difficult.

     The sale of securities that are not traded publicly is typically restricted
under the Federal securities laws. As a result, the Fund may be forced to sell
these securities at less than fair market value or may not be able to sell them
when the Investment Manager believes it desirable to do so.

     The Fund's investments in illiquid securities are subject to the risk that
should the Fund desire to sell any of these securities when a ready buyer is not
available at a price the Fund deems representative of their value, the value of
the Fund's net assets could be adversely affected.

     The purchase of securities on a when-issued or delayed-delivery basis
involves the risk that, as a result of an increase in yields available in the
market-place, the value of the securities purchased will decline prior to the
settlement date. The sale of securities for delayed delivery involves the risk
that the prices available in the market on the delivery date may be greater than
those obtained in the sale transaction.

     The risks associated with lending portfolio securities, as with other
extensions of 


                                                                              15
<PAGE>

Municipal High Income Fund Inc.

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

credit, consist of possible loss of rights in the collateral should the borrower
fail financially.

     There are several risks in connection with the use of futures contracts and
options on futures contracts as a hedging device. A decision of whether, when
and how to hedge involves the exercise of skill and judgment, and even a
well-conceived hedge may be unsuccessful to some degree because of market
behavior or unexpected trends in interest rates. There can be no assurance that
there will be a correlation between price movements in the securities underlying
the futures or options thereon, on the one hand, and price movements in the
Fund's portfolio securities which are the subject of the hedge, on the other
hand. In addition, the Fund's transactions in futures contracts or put or call
options on them will be based upon predictions as to anticipated interest rate
trends, which could prove to be inaccurate. The potential loss related to the
purchase of an option on a futures contract is limited to the premium paid for
the option. Positions in futures contracts and options on futures contracts may
be closed out only on the exchange or board of trade on which they were entered
into, and there can be no assurance that an active market will exist or be
maintained or that closing transactions can be effected. Losses incurred in
hedging transactions and the costs of these transactions will affect the Fund's
performance.

     INVESTMENT RESTRICTIONS

     The Fund has adopted certain fundamental investment restrictions that may
not be changed without 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. Among the investment
restrictions applicable to the Fund is that the Fund is prohibited from
borrowing money, except for temporary or emergency purposes, or for clearance of
transactions, in amounts not exceeding 15% of its total assets (not including
the amount borrowed) and as otherwise described in this Prospectus--when the
Fund's borrowings exceed 5% of the value of its total assets, the Fund will not
make any additional investments. In addition, the Fund will not invest more than
25% of its total assets in the securities of issuers in any single industry,
except that this limitation will not be applicable to the purchase of Municipal
Obligations and U.S. Government securities. For purposes of this restriction,
industrial development bonds, with respect to which the payment of principal and
interest is the ultimate responsibility of companies within the same industry,
are grouped together as an "industry." For a complete listing of the investment
restrictions applicable to the Fund, see "Investment Restrictions" in the SAI.


16
<PAGE>

Municipal High Income Fund Inc.

--------------------------------------------------------------------------------
Share Price Data
--------------------------------------------------------------------------------
   
     The Fund's Common Stock is listed on the NYSE under the symbol "MHF." Smith
Barney also intends 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.

                Quarterly High Price              Quarterly Low Price
                --------------------              -------------------
                                Premium                            Premium
            Net Asset  NYSE    (Discount)    Net Asset  NYSE      (Discount)
              Value    Price     to NAV        Value    Price       to NAV
================================================================================
1/31/95         9.04   8.750     (3.21%)        8.71     7.750     (11.02%)
4/30/95         9.34   9.000     (3.64%)        9.12     8.500      (6.80%)
7/31/95         9.49   9.125     (3.85%)        9.33     8.625      (7.56%)
10/31/95        9.55   9.125     (4.45%)        9.35     8.750      (6.42%)
1/31/96         9.63   9.000     (6.54%)        9.52     8.375     (12.03%)
4/31/96         9.64   9.000     (6.64%)        9.36     8.625      (7.85%)
7/31/96         9.42   9.000     (4.46%)        9.31     8.500      (8.70%)
10/31/96        9.54   9.000     (5.66%)        9.40     8.750      (6.92%)
===========================================================================

     As of December 27, 1996, the price per share of Common Stock as quoted on
the NYSE was $9.250, representing a 3.44% discount from the Common Stock's net
asset value calculated on that day.

     Since the Fund's commencement of operations, the Fund's Common Stock have
traded in the market at prices that were at times above, but generally were
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. The Directors approve 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 SBMFM. The SAI contains background information regarding each
Director and executive officer of the Fund.


                                                                              17
<PAGE>

Municipal High Income Fund Inc.

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

     INVESTMENT MANAGER AND ADMINISTRATOR
   
     SBMFM, through its Greenwich Street Advisors division, located at 388
Greenwich Street , New York, New York 10013, serves as the Fund's investment
manager. SBMFM, through its predecessors, has been in the investment counseling
business since 1934 and is a registered investment adviser. SBMFM renders
investment advice to a wide variety of individual, institutional and investment
company clients that, as of September 30, 1996, had aggregate assets under
management in excess of $77 billion.
    
     Subject to the supervision and direction of the Fund's Board of Directors,
The Investment Manager 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, the Investment
Manager is paid a fee computed and paid monthly at an annual rate of 0.40% of
the value of the Fund's average daily net assets. In addition, SBMFM serves as
the Fund's administrator and is paid a fee by the Fund that is computed daily
and paid monthly at a 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 the
Investment Manager 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 to enable the Investment Manager to supplement its own research
and analysis with the views and information of other securities firms. The Fund
may utilize Smith Barney or a Smith Barney affiliated broker in connection with
a purchase or sale of securities when the Investment Manager believes that the
broker's charge for the transaction does not exceed usual and customary levels.
The same standard applies to the use of Smith Barney as a broker in connection
with entering into options and futures contracts. The Fund paid no brokerage
commissions in the last fiscal year.

     PORTFOLIO MANAGEMENT
   
     Lawrence T. McDermott, a Vice President and Investment Officer of the Fund,
is primarily responsible for the management of the Fund's assets. Mr. McDermott
has served the Fund in this capacity since the Fund commenced operations in 1988
and manages the day-to-day operations of the Fund, including making all
investment decisions. Mr. McDermott is a Senior Vice President and Managing
Director of Greenwich Street Advisors and is the senior asset manager for a
number of investment companies and other accounts investing in tax-exempt
securities. Prior to August 1993, Mr. McDermott was a Managing Director of
Shearson Lehman Advisors.
    

18
<PAGE>

Municipal High Income Fund Inc.

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

     The Fund's policy, which may be changed by the Fund's Board of Directors,
is to make monthly distributions of substantially all its net investment income
(i.e., income other than market discount net realized capital gains) to the
holders of the Fund's Common Stock. Net income of the Fund consists of all
interest income accrued on portfolio 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 a year.

     Under the Fund's Dividend Reinvestment Plan (the "Plan") a shareholder
whose Common Stock is registered in his own name will have all distributions
reinvested automatically by First Data as 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 (i.e., 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.
All distributions to investors who do not participate in the Plan will be paid
by check mailed directly to the record holder by or under the direction of First
Data, as dividend-paying agent.

     If the Fund declares a dividend or capital gains distribution payable
either in shares of Common Stock or in cash, non-participants in the Plan will
receive cash, and Plan participants will receive the equivalent in shares of
Common Stock valued in the manner described below. Whenever market price is
equal to or exceeds 98% of net asset value at the time shares are valued for the
purpose of determining the number of shares equivalent to the cash dividend or
capital gains distribution, participants will be issued shares of Common Stock
valued at the greater of (1) 98% of the net asset value most recently determined
as provided under "Net Asset Value" or (2) 95% of the then current market price
of the Fund's Common Stock. To the extent the Fund issues shares to participants
in the Plan at a discount to net asset value, the remaining shareholders'
interests in the Fund's net assets will be proportionately diluted.

     If the net asset value of the Common Stock at the time of valuation exceeds
the market price of Common Stock, or if the Fund declares a dividend or capital
gains distribution payable only in cash, First Data 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 First Data has completed
its purchases, the market price exceeds the net asset value of the Common Stock,
First Data will attempt to terminate purchases in the open market and cause the
Fund to issue the remaining dividend or distribution in shares at net asset
value per share. In this case, the number of shares of Common Stock received by
a Plan participant will be based 


                                                                              19
<PAGE>

Municipal High Income Fund Inc.

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

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 First
Data is unable to stop open market purchases and cause the Fund to issue the
remaining shares, the average per share price paid by First Data may exceed the
net asset value of the Common Stock, resulting in the acquisition of fewer
shares of Common Stock than if the dividend or capital gains distribution had
been paid in Common Stock issued by the Fund. First Data will apply all cash
received as a dividend or capital gains distribution to purchase Common Stock on
the open market as soon as practicable after the payment date of the dividend or
capital gains distribution, but in no event later than 30 days after such date,
except when necessary to comply with applicable provisions of the Federal
securities laws.

     First Data 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 First Data in uncertificated form in the name of the Plan participant, and
each shareholder's proxy will include those shares purchased pursuant to the
Plan.

     Plan participants are subject to no charge for reinvesting dividends and
capital gains distributions. First Data's fees for handling the reinvestment of
dividends and capital gains distributions will be paid by the Fund. There will
be no brokerage charges with respect to shares of Common Stock issued directly
by the Fund as a result of dividends or capital gains distributions payable
either in stock or in cash. Each Plan participant will, however, bear a pro-rata
share of brokerage commissions incurred with respect to First Data's open market
purchases in connection with the reinvestment of dividends or capital gains
distributions.

     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 90 days before the record date for the
dividend or capital gains distribution. The Plan also may be amended or
terminated by First Data or the Fund on at least 90 days' written notice to Plan
participants. All correspondence concerning the Plan should be directed by mail
to First Data Investor Services Group, Inc., P.O. Box 1376, Boston,
Massachusetts 02104. 


20
<PAGE>

Municipal High Income Fund Inc.

--------------------------------------------------------------------------------
Net Asset Value
--------------------------------------------------------------------------------

     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 on
which the NYSE is open for trading of each week and month. 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. Investments in U.S.
Government securities having a maturity of 60 days or less are valued at
amortized cost. All other securities and assets are taken at fair value as
determined in good faith by or under the direction of the Board of Directors.

     The valuation of the Fund's assets is made by the Investment Manager after
consultation with an independent pricing service (the "Service") approved by the
Board of Directors. When, in the judgment of the Service, quoted bid prices for
investments are readily available and are representative of the bid side of the
market, these investments are valued at the mean between the quoted bid prices
and asked prices. Investments for which, in the judgment of the Service, no
readily obtainable market 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 of Directors, 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 its Common Stockholders; see the SAI for a further
discussion. In addition to the considerations described below and in the SAI,
which are applicable to any investment in the Fund, there may be other Federal,
state, local or foreign tax considerations applicable to particular investors.
Prospective stockholders are therefore urged to consult their tax advisers with
respect to the tax consequences to them of an investment in the Fund.

     The Fund has qualified, and intends to continue to qualify each taxable
year, as a regulated investment company ("RIC") under Subchapter M of the
Internal Revenue Code. In each taxable year that the Fund so qualifies, the Fund
will be relieved of Federal income tax on that part of its investment company
taxable income (consisting generally of taxable net investment income, net
short-term capital gain and net realized gains from certain hedging
transactions) and long-term capital gain that is distributed to its
stockholders.


                                                                              21
<PAGE>

Municipal High Income Fund Inc.

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

     Distributions that the Fund designates as "exempt-interest dividends"
generally may be excluded from gross income by its stockholders for Federal
income tax purposes; those distributions may, however, be taxable for state and
local tax purposes. In order to pay exempt-interest dividends, the Fund must
(and intends to) satisfy the requirement that, at the close of each quarter of
its taxable year, at least 50% of the value of its total assets consists of
obligations the interest on which is tax-exempt.

     Interest on indebtedness incurred by a stockholder to purchase or carry
Fund shares is not deductible to the extent that interest relates to
exempt-interest dividends received from the Fund. If the Fund invests in certain
private activity bonds ("PABs"), the portion of the Fund's exempt-interest
dividends that is attributable to the interest it earns thereon and that is
specified in an annual notice from the Fund must be included by its stockholders
in calculating their liability for the AMT. Corporate stockholders, however,
must include all of their exempt-interest dividends in calculating their
adjusted current earnings for purposes of the AMT.

     Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by industrial development bonds
("IDBs") or PABs should consult their tax advisers before purchasing the Common
Stock because, for users of certain of these facilities, the interest on such
bonds is not exempt from Federal income tax. For these purposes, the term
"substantial user" is defined generally to include a "non-exempt person" who
regularly uses in trade or business a part of a facility financed from the
proceeds of IDBs or PABs.

     The Fund will notify its stockholders following the end of each calendar
year of the amounts of exempt-interest dividends, taxable dividends and capital
gain distributions paid (or deemed paid) that year and of any portion thereof
that is subject to the AMT for individuals.

     Upon a sale or exchange of shares of Common Stock, a Common Stockholder
will realize a taxable gain or loss equal to the difference between his adjusted
basis for the shares and the amount realized. Any such gain or loss will be
treated as a capital gain or loss if the shares are capital assets in the
stockholder's hands and will be a long-term capital gain or loss if the shares
have been held for more than one year. Any loss realized on a sale or exchange
of shares of Common Stock that were held for six months or less will be
disallowed to the extent of any exempt-interest dividends received on those
shares and (to the extent not so disallowed) will be treated as a long-term,
rather than as a short-term, capital loss to the extent of any capital gain
distributions received thereon. A loss realized on a sale or exchange of shares
of Common Stock also will be disallowed to the extent those shares are replaced
by other shares of Common Stock within a period of 61 days beginning 30 


22
<PAGE>

Municipal High Income Fund Inc.

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

days before and ending 30 days after the date of disposition of the shares
(which could occur, for example, as the result of participation in the Plan). In
that event, the basis of the replacement shares will be adjusted to reflect the
disallowed loss.

   Investors also should be aware that if shares of the Common Stock are
purchased shortly before the record date for any distribution, the investor will
pay full price for the shares and could receive some portion of the price back
as an exempt-interest dividend, a taxable dividend or capital gain distribution.

   The Fund is required to withhold 31% of all taxable dividends, capital gain
distributions and repurchase proceeds payable to any individuals and certain
other non-corporate stockholders who do not provide the Fund with a correct
taxpayer identification number. Withholding from taxable dividends and capital
gain distributions also is required for stockholders who otherwise are subject
to backup withholding.

--------------------------------------------------------------------------------
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 December 18, 1996
================================================================================
     Common         500,000,000              0                 19,659,883
      Stock           Shares
===========================================================================    

     No shares, 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."

     Under the rules of the NYSE applicable to listed companies, the Fund will
be required to hold an annual meeting of shareholders in each year. If the
Fund's shares 


                                                                              23
<PAGE>

Municipal High Income Fund Inc.

--------------------------------------------------------------------------------
Description of Common Stock (continued)
--------------------------------------------------------------------------------

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 "Stock Purchases and Tenders."

     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 of Directors 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.

--------------------------------------------------------------------------------
Stock Purchases and Tenders
--------------------------------------------------------------------------------

   
     Although shares of closed-end investment companies sometimes trade at a
premium over net asset value, they frequently trade at a discount, and the Fund
cannot predict whether its shares will trade above, at, or below net asset
value. The Fund believes that, if its shares trade at a discount to net asset
value, the share price will not adequately reflect the value of the Fund to
investors and that investors' financial interests will be furthered if the price
of the Fund's shares more closely reflects its net asset value. For these
reasons, the Board of Directors currently intends to consider from time to time
the repurchase of shares of its Common Stock on the open market or the making of
tender offers for Common Stock.
    

     The Fund may repurchase shares of its Common Stock in the open market or in
privately negotiated transactions when the Fund can do so at prices below their
then current net asset value per share on terms that the Fund's Board believes
represent a favorable investment opportunity. In addition, the Board of
Directors currently intends to consider, at least once a year, making an offer
to each shareholder of record to purchase at net asset value shares of Common
Stock owned by the shareholder.

     Before authorizing any repurchase of Common Stock or offer to the Fund's
shareholders, the Board would consider all relevant factors, including the
market price of the shares of Common Stock, their net asset value per share, the
liquidity of the Fund's portfolio, the effect an offer or repurchase might have
on the Fund or its shareholders and relevant market conditions. Any offer would
be made in accordance with the requirements of the 1940 Act and the Securities
Exchange Act of 1934, as amended. Although the matter will be subject to Board
review at the time, it is not expected that a tender offer would be made if the
anticipated benefit to shareholders 


24
<PAGE>

Municipal High Income Fund Inc.

--------------------------------------------------------------------------------
Stock Purchases and Tenders (continued)
--------------------------------------------------------------------------------

and the Fund would not be commensurate with the anticipated cost to the Fund or
if the number of shares expected to be tendered would not be material.

     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 of Directors and could
have the effect of depriving shareholders of an opportunity to sell their shares
at a premium over prevailing market prices by discouraging a third party from
seeking to obtain control of the Fund. The Board of Directors 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 the Board 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)   a merger or consolidation or statutory share exchange of the Fund
           with or into another corporation;

     (ii)  a 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) a 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
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 of Directors 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 of Directors 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


                                                                              25
<PAGE>

Municipal High Income Fund Inc.

--------------------------------------------------------------------------------
Stock Purchases and Tenders (continued)
--------------------------------------------------------------------------------

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.

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

   
     PNC Bank located at 17th and Chestnut Street, Philadelphia, Pennsylvania
19103 acts as custodian of the Fund's investments. First Data, 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 Peat Marwick LLP, independent auditors,
and upon the reliance of said firm as experts in accounting and auditing,
    
--------------------------------------------------------------------------------
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 SEC.

     No person has been authorized to give any information or to make any
representations not contained in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Fund or the Fund's investment adviser. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any security
other than the shares of Common Stock, nor does it constitute an offer to sell
or a solicitation of an offer to buy the shares of Common Stock by anyone in any
jurisdiction in which such offer or solicitation would be unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Fund since the date hereof. If any material change occurs while
this Prospectus is required by law to be delivered, however, this Prospectus
will be supplemented or amended accordingly.


26
<PAGE>

Municipal High Income Fund Inc.

--------------------------------------------------------------------------------
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 on 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 


A-1
<PAGE>

Municipal High Income Fund Inc.

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

covering the leased property, the maintenance by the lessee of reserve funds or
the provision of credit enhancements such as letters of credit.

     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,
Greenwich Street Advisors 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 


                                                                             A-2
<PAGE>

Municipal High Income Fund Inc.

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

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.

     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 due
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. Greenwich Street
Advisors 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 


A-3
<PAGE>

Municipal High Income Fund Inc.

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

may exist against the underlying issuer. Thus, in the event 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, in the event that 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.


                                                                             A-4



SMITH BARNEY
                                               ------------

                                               A Member of TravelersGroup [Logo]

                                               Municipal 
                                               High Income 
                                               Fund Inc.

                                               Common Stock

                                               388 Greenwich Street
                                               New York, New York 10013

                                               FD

Municipal High Income Fund Inc.
   
388 Greenwich Street
New York, New York  10013
(212) 723-9218

	January  15, 1997
    
Municipal High Income Fund Inc. (the "Fund") is a diversified, closed-end 
management investment company.  The Fund's investment objective is to achieve 
high tax-exempt current income by investing primarily in a variety of 
obligations issued by or on behalf of states, territories and possessions of 
the United States and the District of Columbia and their political 
subdivisions, agencies and instrumentalities or multi-state agencies or 
authorities ("Municipal Obligations"). No assurance can be given that the Fund 
will be able to achieve its investment objective. 
   The Greenwich Street Advisors Division of Smith Barney Mutual Funds 
Management Inc. (the "Investment Manager") serves as investment manager of the 
Fund.  This Statement of Additional Information ("SAI") is not a prospectus 
and should be read only in conjunction with the Fund's Prospectus, dated 
January 15, 1997 (the "Prospectus").  A copy of the Prospectus may be obtained 
by calling any Smith Barney Financial Consultant or by writing or calling the 
Fund at the address or telephone number set forth above. This SAI, although 
not itself a prospectus, is incorporated by reference into the Prospectus in 
its entirety.      
No person has been authorized to give any information or to make any 
representations not contained in the Prospectus or this Statement of 
Additional Information and, if given or made, such information or 
representations must not be relied upon as having been authorized by the Fund 
or the Fund's investment adviser.  The Prospectus and this Statement of 
Additional Information does not constitute an offer to sell or a solicitation 
of an offer to buy any security other than the shares of Common Stock.  The 
Prospectus and this Statement of Additional Information do not constitute an 
offer to sell or a solicitation of an offer to buy the shares of Common Stock 
by anyone in any jurisdiction in which such offer or solicitation would be 
unlawful.  Neither the delivery of the Prospectus nor any sale made hereunder 
shall, under any circumstances, create any implication that there has been no 
change in the affairs of the Fund since the date hereof.  If any material 
change occurs while the Prospectus is required by law to be delivered, 
however, the Prospectus or this Statement of Additional Information will be 
supplemented or amended accordingly.
CONTENTS


Investment Objective and Policies 
(see in the Prospectus "Appendix")	
	2
Directors and Officers (see in the 
Prospectus "Management of the 
Fund")		10
Portfolio Transactions and Turnover	
	13
Valuation of Shares (see in the 
Prospectus
"Net Asset Value")		14


Stock Purchases and Tenders (see in 
the
Prospectus "Stock Purchases and
Tenders" and "Description of 
Common
Stock")		14
Taxes (see in the Prospectus 
"Taxation")		15
Additional Information		18
Financial Statements		18
Appendix		A-1



INVESTMENT OBJECTIVE AND POLICIES
General
The Fund's investment objective is high tax-exempt current income.  The Fund's 
investment objective may not be changed without the affirmative vote of the 
holders of a majority (as defined in the Investment Company Act of 1940, as 
amended (the "1940 Act")) of the Fund's outstanding shares.  No assurance can 
be given that the Fund's investment objective will be achieved.  
As described in the Prospectus, the Fund will seek to invest substantially all 
of its assets in Municipal Obligations and, under normal conditions, at least 
80% of the Fund's assets will be invested in Municipal Obligations.  In 
determining whether the Fund should invest in particular Municipal 
Obligations, the Investment Manager will consider factors such as: the price, 
coupon and yield to maturity; the Investment Manager's assessment of the 
credit quality of the issuer; the issuer's available cash flow and the related 
coverage ratios; the property, if any, securing the obligation; and the terms 
of the Municipal Obligations, including the subordination, default, sinking 
fund and early redemption provisions, if any.  The Investment Manager will 
also review, in considering particular securities for investment by the Fund, 
the ratings, if any, assigned to the securities by Moody's Investors Service, 
Inc. ("Moody's"), Standard & Poor's Ratings Group ("S&P"), Fitch Investors 
Service, Inc. ("Fitch") or other recognized rating agencies.  The ratings of 
Moody's, S&P, Fitch and other agencies represent their opinions as to the 
quality of the Municipal Obligations that they undertake to rate; the ratings 
are relative and subjective and are not absolute standards of quality.  The 
Investment Manager's judgment as to credit quality of a Municipal Obligation 
may, thus, differ from that suggested by the ratings published by a rating 
service.  A description of relevant Moody's, S&P's and Fitch's ratings is set 
forth below in the Appendix to this SAI.  
   The Fund will not invest in Municipal Obligations that are rated lower than 
Ba, MIG 1/VMIG 1 or P-2 by Moody's or BB, SP-1 or A-1 by S&P or BB by Fitch 
Investors Service, Inc.  Additional information about these ratings is 
included in the Appendix to this SAI.  The Fund will invest in unrated 
Municipal Obligations that, in the judgment of the Investment Manager, are of 
comparable quality to rated securities in which the Fund may invest.  The Fund 
is subject to no limit on the amount of assets that it may invest in Municipal 
Obligations rated Ba by Moody's or BB by S&P or in unrated Municipal 
Obligations that are of comparable quality.  Municipal Obligations rated Ba by 
Moody's are regarded as having speculative elements while Municipal 
Obligations rated BB by S&P are regarded as having predominantly speculative 
characteristics with respect of capacity to pay interest and repay principal.  
Special risks associated with these low-rated and unrated securities are 
described below under "Risk Factors and Special Considerations."      
The Fund will generally invest in long-term Municipal Obligations.  Thus, 
under normal market conditions, the weighted average maturity of the Fund's 
portfolio is expected to exceed ten years.  The Fund may invest without limit 
in Municipal Obligations that are repayable out of revenue streams generated 
from economically related projects or facilities.  Sizeable investments in 
those obligations could involve an increased risk to the Fund should any of 
the related projects or facilities experience financial difficulties.  
The Fund is not restricted in its ability to purchase securities as to which a 
liquid trading market does not exist.  These illiquid securities may include 
securities for which market quotations are not readily available, certain 
municipal leases, time deposits and repurchase agreements maturing in more 
than seven days, options traded in the over-the-counter market and securities 
used to cover these options.  Special risks associated with investing in 
illiquid securities are described below under "Risk Factors and Special 
Considerations." 
The Fund may invest up to 30% of its assets in non-publicly traded Municipal 
Obligations. The Investment Manager believes that these securities, which may 
be considered speculative, often provide attractive high yields.  Investment 
in non-publicly traded securities involves certain risks, which are described 
below under "Risk Factors and Special Considerations." 
The Fund may invest without limit in Municipal Obligations that are tax-exempt 
private "activity bonds," as defined in the Internal Revenue Code of 1986 (the 
"Code"), which are in most cases revenue bonds and generally do not carry the 
pledge of the credit of the issuing municipality, but are guaranteed by the 
corporate entity on whose behalf they are issued.  Interest income on certain 
types of private activity bonds issued after August 7, 1986 to finance 
nongovernmental activities is a specific tax preference item for purposes of 
the Federal individual and corporate alternative minimum taxes. Individual and 
corporate shareholders may be subject to a Federal alternative minimum tax to 
the extent the Fund's dividends are derived from interest on these bonds.  
Dividends derived from interest income on Municipal Obligations are a "book 
income" adjustment item for purposes of the Federal corporate alternative 
minimum tax.  See "Taxes." Private activity bonds held by the Fund will be 
included in the term "Municipal Obligations" for purposes of determining 
compliance with the 80% limitation described above.  
Among the Municipal Obligations in which the Fund may invest are municipal 
leases and zero coupon securities.  Municipal leases, which are generally 
participations in intermediate- and short-term obligations issued by 
municipalities consisting of leases or installment purchase contracts for 
property or equipment, are subject to special risks described below under 
"Risk Factors and Special Considerations." 
The Fund may invest up to 25% of its assets in zero coupon Municipal 
Obligations.  A zero coupon Municipal Obligation is an obligation that does 
not pay interest currently for its entire life (a "Pure Zero Coupon Municipal 
Obligation") or for some initial period, following which interest is paid 
currently (a "Zero/Fixed Interest Municipal Obligation").  In the case of a 
Pure Zero Coupon Municipal Obligation, the failure to pay interest currently 
may result from the obligation's having no stated interest rate, in which case 
the Municipal Obligation pays only principal at maturity and is sold at a 
discount. The value to the investor of a zero coupon Municipal Obligation 
consists of the economic accretion either of the difference between the 
purchase price and the nominal principal amount (if no interest is stated to 
accrue) or of accrued, unpaid interest during the Municipal Obligations' life 
or payment deferral period.  
The Fund may purchase floating and variable rate demand notes, which are tax-
exempt obligations normally having a stated maturity in excess of one year, 
but which permit the holder to demand payment of principal at any time, or at 
specified intervals.  The issuer of these notes normally has a corresponding 
right, after a given period, to prepay at its discretion the outstanding 
principal amount of the notes plus accrued interest upon a specified number of 
days' notice to the noteholders.  The interest rate on a floating rate demand 
note is based on a known lending rate, such as a bank's prime rate, and is 
adjusted automatically each time the rate is adjusted.  The interest rate on a 
variable rate demand note is adjusted automatically at specified intervals.  
Frequently, floating and variable rate obligations are secured by letters of 
credit or other credit support arrangements provided by banks.  Use of letters 
of credit or other credit support arrangements will not adversely affect the 
tax-exempt status of these obligations.  Because they are direct lending 
arrangements between the lender and borrower, floating and variable rate notes 
will generally not be traded.  In addition, no secondary market generally 
exists for these notes, although they are putable at face value.  For these 
reasons, when floating and variable rate notes held by the Fund are not 
secured by letters of credit or other credit support arrangements, the Fund's 
right to demand payment is dependent on the ability of the borrower to pay 
principal and interest on demand.  The Investment Manager, on behalf of the 
Fund, will consider the creditworthiness of the issuers of floating and 
variable rate demand notes in the Fund's portfolio on an ongoing basis. 
The Fund may purchase from financial institutions tax-exempt participation 
interests in Municipal Obligations (such as private activity bonds and 
municipal lease/purchase agreements).  A participation interest gives the Fund 
an undivided interest in the Municipal Obligation in the proportion that the 
Fund's participation interest bears to the total amount of the Municipal 
Obligation.  These instruments may have floating or variable rates of 
interest.  If the participation interest is unrated, it will be backed by an 
irrevocable letter of credit or guarantee of a bank that the Fund's Board of 
Directors has determined meets certain quality standards or the payment 
obligation otherwise will be collateralized by obligations of the United 
States government and its agencies and instrumentalities ("Government 
Securities").  For certain participation interests, the Fund will have the 
right to demand payment, on a specified number of days' notice, for all or any 
part of the Fund's participation interest in the Municipal Obligation, plus 
accrued interest.  The Fund intends to exercise its right with respect to 
these instruments to demand payment only upon a default under the terms of the 
Municipal Obligation or to maintain or improve the quality of the investment 
portfolio. 
Taxable Investments
Under normal conditions, the Fund may hold up to 20% of its assets in cash or 
money market instruments, including taxable money market instruments 
(collectively, "Taxable Investments").  When the Investment 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 will not 
be fully achieving its investment objective. 
Money market instruments in which the Fund may invest include: Government 
Securities; bank obligations (including certificates of deposit, time deposits 
and bankers' acceptances of domestic or foreign banks, domestic savings and 
loan associations and similar institutions); commercial paper rated no lower 
than A-1 by S&P or P-2 by Moody's or the equivalent from another major rating 
service or, if unrated, of an issuer having an outstanding, unsecured debt 
issue then rated within the three highest rating categories; and repurchase 
agreements. 
The Fund will invest in an obligation of a foreign bank or foreign branch of a 
United States bank only if the Investment Manager determines that the 
obligation presents minimal credit risks.  Obligations of foreign banks or 
foreign branches of United States banks in which the Fund will invest may be 
traded in the United States or outside the United States, but denominated in 
United States Dollars.  These obligations entail risks that are different from 
those of investments in obligations of United States banks. These risks 
include foreign economic and political developments, foreign governmental 
restrictions that may adversely affect payment of principal and interest on 
the obligations, foreign exchange controls and foreign withholding or other 
taxes on income.  Foreign branches of domestic banks are not necessarily 
subject to the same or similar regulatory requirements that apply to domestic 
banks, such as mandatory reserve requirements, loan limitations, and 
accounting, auditing and financial record-keeping requirements.  In addition, 
less information may be publicly available about a foreign branch of a 
domestic bank than about a domestic bank. 
Government Securities in which the Fund may invest include direct obligations 
of the United States Treasury and obligations issued by United States 
government agencies and instrumentalities.  Included among direct obligations 
of the United States are Treasury Bills, Treasury Notes and Treasury Bonds, 
which differ principally in terms of their maturities.  Included among the 
securities issued by those agencies and instrumentalities are: securities that 
are supported by the full faith and credit of the United States (such as 
Government National Mortgage Association certificates); securities that are 
supported by the right of the issuer to borrow from the United States Treasury 
(such as securities of Federal Home Loan Banks); and securities that are 
supported by the credit of the instrumentality (such as Federal National 
Mortgage Association and Federal Home Loan Mortgage Corporation bonds). 
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. 
Investment Techniques
The Fund may employ, among others, the investment techniques described below, 
which may give rise to taxable income. 
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 
Investment 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 seller 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.  The 
Fund anticipates that stand-by commitments will be available from brokers, 
dealers and banks without the payment of any direct or indirect consideration. 
The Fund may pay for stand-by commitments if payment were deemed necessary, 
thus, increasing to a degree the cost of the underlying Municipal Obligation 
and similarly decreasing the security's yield to investors. 
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 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 Investment Manager to correlate with the prices of the Municipal 
Obligations owned or to be purchased by the Fund. 
In entering into a futures contract, the Fund will be required to deposit with 
the broker an amount of cash or cash equivalents equal to approximately 5% of 
the contract amount.  This amount is subject to change by the exchange or 
board of trade on which the contract is traded and members of the exchange or 
board of trade may charge a higher amount.  This amount is known as "initial 
margin" and is in the nature of a performance bond or good faith deposit on 
the contract that is returned to the Fund upon termination of the futures 
contract, assuming all contractual obligations have been satisfied. In 
accordance with a process known as "marking-to-market," subsequent payments, 
known as "variation margin," to and from the broker will be made daily as the 
price of the index or securities underlying the futures contract fluctuates, 
making the long and short positions in the futures contract more or less 
valuable.  At any time prior to the expiration of a futures contract, the Fund 
may elect to close the position by taking an opposite position, which will 
operate to terminate the Fund's existing position in the contract. 
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 will 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 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. 
Regulations of the Commodity Futures Trading Commission (the "CFTC") 
applicable to the Fund require that its transactions in futures and opinions 
on futures be engaged in for "bona fide hedging" purposes or other permitted 
purposes, provided that the 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.  In addition, the Fund will maintain cash and cash equivalents in a 
segregated account in an amount at least equal to the commodity value of each 
long futures or opinions position less any accrued profit on those positions 
held by a futures commission merchant.  The Fund's ability to trade in futures 
and opinions on futures may be limited to some extent by the requirements of 
the Code applicable to a regulated investment company described below under 
"Taxes."
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 Investment Manager unless the Fund 
applies for and receives specific authority to do so from the Securities and 
Exchange Commission ("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 
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 the current 
market value of the loaned securities.  From time to time, the Fund may pay a 
part of the interest earned from the investment of collateral received for 
securities loaned to the borrower and/or a third party that is unaffiliated 
with the Fund and that is acting as a "finder."
By lending its portfolio securities, the Fund can increase its income by 
continuing to receive interest on the loaned securities, by investing the cash 
collateral in short-term instruments or by obtaining yield in the form of 
interest paid by the borrower when Government Securities are used as 
collateral.  The Fund will adhere to the following conditions whenever it 
lends its securities: (1) the Fund must receive at least 100% cash collateral 
or equivalent securities from the borrower, which will be maintained by daily 
marking-to-market; (2) the borrower must increase the collateral whenever the 
market value of the securities loaned rises above the level of the collateral; 
(3) the Fund must be able to terminate the loan at any time; (4) the Fund must 
receive reasonable interest on the loan, as well as any dividends, interest or 
other distributions on the loaned securities, and any increase in market 
value; (5) the Fund may pay only reasonable custodian fees in connection with 
the loan; and (6) voting rights on the loaned securities may pass to the 
borrower, except that, if a material event adversely affecting the investment 
in the loaned securities occurs, the Fund's Board of Directors must terminate 
the loan and regain the Fund's right to vote the securities.
Risk Factors and Special Considerations
Investment in the Fund involves risk factors and special considerations, such 
as those described below: 
Municipal Obligations.   Even though interest-bearing securities are 
investments that promise a stable stream of income, their prices are inversely 
affected by changes in interest rates and, therefore, are subject to the risk 
of market price fluctuations.  The values of Municipal Obligations with longer 
remaining maturities typically fluctuate more than those of similarly rated 
Municipal Obligations with shorter remaining maturities.  The values of fixed 
income securities also may be affected by changes in the rating or financial 
condition of the issuing entities. 
Low-rated and Unrated Municipal Obligations.   Although they may offer higher 
current yields than do higher rated securities, low-rated and unrated 
securities generally involve greater volatility of price and risk of principal 
and income, including the possibility of default by, or bankruptcy of, the 
issuers of the securities; the Fund may incur additional expenses to the 
extent it is required to seek recovery upon a default in the payment of 
principal or interest on its portfolio holdings.  Low-rated and unrated 
securities held by the Fund are frequently subordinated to the prior payment 
of senior indebtedness and are traded in markets that may be relatively less 
liquid than the market for higher rated securities.  Moreover, because dealers 
may not maintain daily markets in Municipal Obligations, retail secondary 
markets for many of these securities may not exist.  The Fund anticipates 
that, if a secondary market for securities it wished to sell did not exist, 
the Fund could sell the securities only to institutional investors.  The 
existence of limited markets for particular securities may diminish the Fund's 
ability to sell low-rated or unrated Municipal Obligations at fair value to 
respond to changes in the economy or in the financial markets. 
Municipal Leases.   Municipal leases in which the Fund may invest have special 
risks not normally associated with Municipal Obligations.  These obligations 
frequently contain "non-appropriation" clauses that provide that the 
governmental issuer of the obligation has no obligation to make future 
payments under the lease or contract unless money is appropriated for that 
purpose by the legislative body on a yearly or other periodic basis.  
Moreover, although a municipal lease will be secured by financed equipment, 
the disposition of the equipment in the event of foreclosure might prove 
difficult.  In order to limit the risks, the Fund will purchase either: (a) 
municipal leases rated in the four highest categories by Moody's or S&P or (b) 
unrated municipal leases purchased principally from domestic banks or other 
responsible third parties that have entered into an agreement with the Fund 
providing the seller will either remarket or repurchase the municipal leases 
within a short period after demand by the Fund.  The Fund will not invest more 
than 10% of its assets in lease obligations that contain "non-appropriation" 
clauses and will purchase those "non-appropriation" lease obligations when the 
lease payments will commence amortization of principal at an early date 
resulting in an average life of seven years or less for the lease obligation. 
Non-Publicly Traded Securities.   The sale of securities that are not traded 
publicly is typically restricted under the Federal securities laws.  As a 
result, the Fund may be forced to sell these securities at less than fair 
market value or may not be able to sell when the Investment Manager believes 
it desirable to do so. 
Illiquid Securities.   The Fund's investments in illiquid securities are 
subject to risk that should the Fund desire to issue any of these securities 
when a ready buyer is not available at a price the Fund deems representative 
of their value, the value of the Fund's net assets could be adversely 
affected.  
Potential Legislation.  In past years, the Federal government has enacted 
various laws that have restricted or diminished the income tax exemption on 
various types of Municipal Obligations and may enact other similar laws in the 
future.  If any such laws were enacted that would reduce the availability of 
Municipal Obligations for investment by the Fund so as to affect Fund 
shareholders adversely, the Fund would reevaluate its investment objective and 
policies and might submit possible changes in the Fund's structure to 
shareholders for their consideration.  If legislation were enacted that would 
treat a type of Municipal Obligation as taxable for Federal income tax 
purposes, the Fund would treat the security as a permissible Taxable 
Investment within the applicable limits set forth in this Prospectus. 
Organization of the Fund.   The Fund is a closed-end investment company.  
Shares of closed-end investment companies frequently trade at a discount from 
net asset value.  Since the Fund's commencement of operations, the Fund's 
Common Stock has generally traded at a slight discount from its net asset 
value per share.  The market value of Municipal Obligations (and, accordingly, 
the Fund's net asset value) generally increases when interest rates decline 
and decrease when interest rates rise.  Whether investors will realize gains 
or losses upon the sale of Common Stock will not depend upon the Fund's net 
asset value, but will depend entirely upon whether the market price of the 
Common Stock at the time of sale is above or below the original purchase price 
for the shares.  Since the market price of the Fund's Common Stock will be 
determined by such factors as relative demand for and supply of such shares in 
the market, general market and economic conditions and other factors beyond 
the control of the Fund, the Fund cannot predict whether the Common Stock will 
trade at, below or above net asset value.  For that reason, shares of the 
Fund's Common Stock are designed primarily for long-term investors, and 
investors in the Fund's Common Stock should not view the Fund as a vehicle for 
trading purposes. 
Repurchase Agreements.   Repurchase agreements could involve certain risks in 
the event of default or insolvency of the seller, including possible delays or 
restrictions upon the Fund's ability to dispose of the underlying securities.  
In evaluating these potential risks, the Investment Manager, acting under the 
supervision of the Fund's Board of Directors, and on an ongoing basis, 
monitors (1) the value of the collateral underlying each repurchase agreement 
of the Fund to ensure that the value is at least equal to the total amount of 
the purchase obligation, including interest, and (2) the creditworthiness of 
the banks and dealers with which the Fund enters into repurchase agreements. 
When-Issued Securities.   Municipal Obligations purchased on a when-issued 
basis and the securities held in the Fund's portfolio are generally subject to 
changes in value (both generally changing in the same way, i.e., appreciating 
when interest rates decline and depreciating when interest rates rise) based 
upon the public's perception of the creditworthiness of the issuer and 
changes, real or anticipated, in the level of interest rates.  Municipal 
Obligations purchased on a when-issued basis may expose the Fund to risk 
because they may experience these fluctuations prior to their actual delivery.  
The Fund will not accrue income with respect to a when-issued security prior 
to its stated delivery rate.  Purchasing Municipal Obligations on a when-
issued basis can involve the additional risk that the yield available in the 
market when the delivery takes place actually may be higher than that obtained 
in the transaction itself.  A segregated account of the Fund consisting of 
cash or liquid debt securities equal at all times to the amount of the when-
issued commitments will be established and maintained with the Fund's 
custodian. 
Financial Futures and Options.   Although the Fund intends to enter into 
futures or options contracts only if an active market exists for the 
contracts, no assurance can be given that an active market will exist for the 
contracts at any particular time.  If it is not possible to close a futures 
position in anticipation of adverse price movements, the Fund  would be 
required to make daily cash payments of variation margin.  In those 
circumstances, an increase in the value of the portion of the portfolio being 
hedged, if any, may offset partially or completely losses on the futures 
contract. No assurance can be given, however, that the price of the securities 
being hedged will correlate with the price movements in a futures contract 
and, thus, provide an offset to losses on the futures contract or option on 
the futures contract.  In addition, in light of the risk of an imperfect 
correlation between securities in the Fund's portfolio that are the subject of 
a hedging transaction and the futures or options contract used as a hedging 
device, the hedge may not be fully effective because, for example, losses on 
the portfolio securities may be in excess of gains on the futures contract or 
losses on the futures contract may be in excess of gains on the portfolio 
securities that were the subject of the hedge.  In an effort to compensate for 
the imperfect correlation of movements in the price of the securities being 
hedged and movements in the price of futures contracts, the Fund may enter 
into futures contracts or options on futures contracts in a greater or lesser 
dollar amount than the dollar amount of the securities being hedged if the 
historical volatility of the futures contract has been less or greater than 
that of the securities.  This "over hedging" or "under hedging" may adversely 
affect the Fund's net investment results if market movements are not as 
anticipated when the hedge is established. 
If the Fund has hedged against the possibility of an increase in interest 
rates adversely affecting the value of securities held in its portfolio and 
rates decrease instead, the Fund will lose part or all of the benefit of the 
increased value of securities that it has hedged because it will have 
offsetting losses in its futures or options positions.  In addition, in those 
situations, if the Fund has insufficient cash, it may have to sell securities 
to meet daily variation margin requirements on the futures contracts at a time 
when it may be disadvantageous to do so.  These sales of securities may, but 
will not necessarily, be at increased prices that reflect the decline in 
interest rates. 
Investment Restrictions
The Fund has adopted certain fundamental investment restrictions that may not 
be changed without 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 purposes 
of the restrictions listed below, all percentage limitations apply immediately 
after a purchase or initial investment, and any subsequent change in any 
applicable percentage resulting from market fluctuations does not require 
elimination of any security from the Fund's portfolio.  Under its fundamental 
restrictions, the Fund may not: 
1. Purchase securities other than Municipal Obligations and Taxable 
Investments as those terms are described in the Prospectus.
2. Purchase securities (other than Government Securities) of any issuer 
if as a result of the purchase more than 5% of the value of the 
Fund's total assets would be invested in the securities of the 
issuer, except that up to 25% of the value of the Fund's total assets 
may be invested without regard to this 5% limitation. 
3. Purchase more than 10% of the voting securities of any one issuer, 
except that this limitation is not applicable to the Fund's 
investments in Government Securities. 
4. Borrow money, except for temporary or emergency purposes, or for 
clearance of transactions, in amounts not exceeding 15% of its total 
assets (not including the amount borrowed) and as otherwise described 
in the Prospectus.  When the Fund's borrowings exceed 5% of the value 
of its total assets, the Fund will not make any additional 
investments. 
5. Sell securities short or purchase securities on margin, except for 
such short-term credits as are necessary for the clearance of 
transactions, but the Fund may make margin deposits in connection 
with transactions in options, futures and options on futures. 
6. Underwrite any issue of securities, except to the extent that the 
purchase of Municipal Obligations may be deemed to be an 
underwriting. 
7. Purchase, hold or deal in real estate or oil and gas interests, 
except that the Fund may invest in Municipal Obligations secured by 
real estate or interests in real estate. 
8. Invest in commodities, except that the Fund may enter into futures 
contracts, including those relating to indexes, and options on 
futures contracts or indexes, as described in the Prospectus. 
9. Lend any funds or other assets, except through purchasing Municipal 
Obligations or Taxable Investments, lending portfolio securities and 
entering into repurchase agreements consistent with the Fund's 
investment objective. 
10. Issue senior securities. 
11. Invest more than 25% of its total assets in the securities of issuers 
in any single industry, except that this limitation will not be 
applicable to the purchase of Municipal Obligations and Government 
Securities.  For purposes of this restriction, industrial development 
bonds, with respect to which the payment of principal and interest is 
the ultimate responsibility of companies within the same industry, 
are grouped together as an "industry."
12. Make any investments for the purpose of exercising control or 
management of any company.


DIRECTORS AND OFFICERS 
The overall management of the business and affairs of the Fund is vested with 
its board of directors.  The board of directors approves all significant 
agreements between the Fund and persons or companies furnishing services to 
it, including the Fund's agreements with the Investment Manager and SBMFM, 
custodian and transfer agent, dividend paying agent, registrar and plan agent.  
The day-to-day operations of the Fund are delegated to its officers and to the 
Investment Manager and SBMFM, subject always to investment objective and 
policies of the Fund and to general supervision by the Fund's Board of 
Directors. 
   The directors and officers of the Fund, their addresses and their principal 
occupations for at least the past five years are set forth below:

Name and Address
Positions Held
with the Fund
Principal Occupations
During Past 5 Years

*Heath B. McLendon, age 
63	
388 Greenwich Street
New York, New York  
10013
Chairman of the 
Board of 
Directors, Chief 
Executive Officer 
and Director
Managing Director of Smith 
Barney Inc.; Director and 
President of SBMFM; Chairman of 
Smith Barney Strategy Advisers 
Inc.; prior to July, 1993, 
Senior Executive Vice President 
of Shearson and Vice Chairman of 
the Board of Shearson Asset 
Management..

Charles Barber, age 79	
66 Glenwood Drive
Greenwich, Connecticut 
06830
Director
Consultant; formerly Chairman of 
the Board, ASARCO Incorporated.

Martin Brody, age 75	
Three ADP Boulevard
Roseland, New Jersey  
07068
Director
Retired Vice Chairman of the 
Board of Restaurant Associates 
Corp.; Director of Jaclyn, Inc. 

Allen J. Bloostein, age 
67	
27 West 67th Street, 
Apt. 5FW
New York, New York  
10023
Director
Consultant; formerly Vice 
Chairman of the Board of 
Directors of May Department 
Stores; Director of Crystal 
Brands, Inc., Melville Corp., 
R.G. Barry Corp. and Hechinger 
Co.

Dwight B. Crane, age 58	
Graduate School of 
Business
  Administration
Harvard University
Soldiers Field Road
Boston, Massachusetts  
02163
Director
Professor, Graduate School of 
Business Administration, Harvard 
University; Director, Peer 
Review Analysis, Inc.

Robert A. Frankel, age 
69...............
    102 Grand Street
    Croton-on-Hudson
     New York, New York 
10520
Director
Managing Partner of Robert A. 
Frankel Managing Consultants; 
formerly Vice President  of the 
Reader's Digest Association, 
Inc.

William R. Hutchinson, 
age 53....... 
    Amoco Corp
    200 East Randolph 
Drive
    Chicago, Illinois 
60601
Director
Vice President, Financial 
Operations of Amoco Corp.; 
Director of Associated Bank 
Corp.

Jessica M. Bibliowicz, 
age 36	
388 Greenwich Street
New York, New York  
10013
President
Executive Vice President of 
Smith Barney Inc.; Chairman and 
Chief Executive Officer of 
SBMFM; prior to 1994, Director 
of Sales and Marketing for 
Prudential Mutual Funds.

Lawrence T. McDermott, 
age 48.......
388 Greenwich Street
New York, New York  
10013
Vice President 
and Investment 
Officer
Managing Director of Smith 
Barney Inc; prior to July, 1993, 
Managing Director of Shearson 
Lehman Advisors.

Michael J. Maher, age 34	
388 Greenwich Street
New York, New York  
10013
Investment 
Officer
Vice President of Smith Barney 
Inc.; prior to July, 1993, Vice 
President of Shearson Lehman 
Advisors.

Lewis E. Daidone, age 38	
388 Greenwich Street
New York, New York
Senior Vice 
President; Chief 
Financial and 
Accounting 
Officer and 
Treasurer
Managing Director of Smith 
Barney Inc.; Director and Senior 
Vice President of SBMFM.

Christina T. Sydor, Esq, 
age 45.	
388 Greenwich Street
New York, New York
Secretary
Managing Director of Smith 
Barney Inc.; General Counsel and 
Secretary of SBMFM.

___________
__


* "Interested person" of the Fund (as defined in the 1940 Act).
 Director and/or trustee of other registered investment companies with which 
Smith Barney is affiliated.

____________________

The Fund pays each of its directors who is not a director, officer or employee 
of the Investment Manager or any of its affiliates an annual fee of $5,000 
plus $500 for each Board of Directors meeting attended, and $100 for each 
Board meeting held via telephone.  In addition, the Fund will reimburse these 
directors for travel and out-of-pocket expenses incurred in connection with 
Board of Directors meetings.  For the fiscal year ended October 31, 1996, such 
fees and expenses totalled $43,000.			 
                                                                              
Number of Funds
		                                                            	
	Total 		        for which
                                   		Total                  		
	Compensation             Director Serves
                                		Compensation               	
	from Fund 	        Within Fund	
  Name of Person              		from Fund                	
	Complex 	        Complex 	
------------------------      		--------------           	
	----------------               -------------------
Charles Barber	              	$7,000*                    		$ 
38,700 		  6
Martin Brody	                 	$6,500                    	
	$115,850 		19
Dwight Crane	                	$7,000                    	
	$134,200 		22
Allan Bloostein	              	$7,000                    		$ 
82,850 		  8
Robert Frankel	               	$7,000                    		$ 
65,900 		  8
William R. Hutchinson	         	$7,000  				$ 38,600 	
	  6
Heath B. McLendon	             	    --         			      -- 	
		42
---------- 
* Mr. Barber's total compensation from the Fund is deferred, of which is 
$7,000.
     
Principal Stockholders
   There are no persons known to the Fund to be control persons of the Fund, 
as such term is defined in Section 2(a)(9) of the 1940 Act.  There is no 
person known to the Fund to hold beneficially more than 5% of the outstanding 
shares of the Common Stock.  The following person is the only person holding 
of record more than 5% of the outstanding shares of Common Stock as of 
  December 18, 1996:

Name and Address
of Record Owner
Amount of
Record
Ownership
Percent of
Common Stock
Outstanding

Cede & Co., as Nominee for The Depository Trust 
Company	
P.O. Box 20
Bowling Green Station
New York, New York  10004
17,019,791
86.57%


17,019,791  of the shares held of record by Cede & Co., representing  86.57% 
of the outstanding shares of Common Stock, were held by The Depository Trust 
Company as nominee for Smith Barney, representing accounts for which Smith 
Barney has discretionary and non-discretionary authority. 
As of December  18, 1996, the Directors and officers of the Fund, as a group, 
beneficially owned less than 1% of the Fund's outstanding shares of Common 
Stock.      
INVESTMENT MANAGER AND ADMINISTRATOR
The Investment Manager serves as the Fund's investment adviser pursuant to a 
written agreement dated         
(the "Advisory Agreement").  Subject to the supervision and direction of the 
Fund's Board of Directors, Greenwich Street Advisors manages the Fund's 
portfolio in accordance with the Fund's stated investment objective and 
policies, makes investment decisions for the Fund, places orders to purchase 
and sell securities and employs professional portfolio managers and securities 
analysts who provide research services to the Fund.  The Investment Manager 
bears all expenses in connection with the performance of its services and pays 
the salaries of all officers or employees who are employed by both it and the 
Fund.
   As compensation for Investment Manager's services rendered to the Fund, the 
Fund pays a fee computed and paid monthly at an annual rate of 0.40% of the 
value of the Fund's average daily net assets.  For the fiscal years ended 
October 31, 1994, 1995 and 1996 the Fund paid the Investment Manager $731,864, 
$726,621 and $747,137 respectively, in investment advisory fees.      
The Advisory Agreement was initially approved by the Fund's Board of Directors 
and by a majority of the directors who are not "interested persons" of the 
Fund or the Investment Manager ("Non-Interested Directors") on April 7, 1993 
and by its shareholders at an annual shareholder meeting of the holders of the 
Common Stock of the Fund on June 9, 1993. The Advisory Agreement became 
effective upon the Closing and, unless sooner terminated, the Advisory 
Agreement will continue for an initial two-year period and will continue for 
successive annual periods thereafter provided that such continuance is 
specifically approved at least annually: (1) by a majority vote of the Non-
Interested Directors cast in person at a meeting called for the purpose of 
voting on such approval; and (2) by the Board of Directors or by vote of a 
majority of the outstanding voting securities (i.e., the holders of the Common 
Stock). 
Under the Advisory Agreement, the Investment Manager will not be liable for 
any error of judgment or mistake of law or for any loss suffered by the Fund 
in connection with the Advisory Agreement, except a loss resulting from 
willful misfeasance, bad faith or gross negligence on the part of the 
Investment Manager in the performance of its duties or from reckless disregard 
of its duties and obligations under the Advisory Agreement.  The Advisory 
Agreement is terminable by vote of the Board of Directors or by the holders of 
a majority of the Common Stock, at any time without penalty, on 60 days' 
written notice to Investment Manager.  The Advisory Agreement may also be 
terminated by the Investment Manager on 90 days' written notice to the Fund. 
The Advisory Agreement terminates automatically upon its assignment. 
   SBMFM serves as administrator to the Fund pursuant to a written agreement 
dated June 1, 1994 (the "Administration Agreement").   SBMFM calculates the 
net asset value of the Fund's shares and generally assists in all aspects of 
the Fund's administration and operation.  In addition, SBMFM pays the salaries 
of all officers and employees who are employed both by it and the Fund, 
maintains office facilities for the Fund, furnishes the Fund with statistical 
and research data, clerical help and accounting, data processing, bookkeeping, 
internal auditing and legal services and certain other services required by 
the Fund, prepares reports to the Fund's shareholders and prepares tax returns 
and reports to and filings with the SEC and state blue sky authorities.  SBMFM 
bears all expenses in connection with the performance of its services.   As 
compensation for SBMFM's services rendered to the Fund, the Fund pays a fee 
computed and paid monthly at an annual rate of 0.20% of the value of the 
Fund's average daily net assets.   For the 1994, 1995 and 1996 fiscal years, 
the Fund paid SBMFM $365,932, $363,310 and $373,569 respectively, in fees.   
    
Pursuant to the Administration Agreement, SBMFM will exercise its best 
judgment in rendering the services listed above.  SBMFM will not be liable for 
any error of judgment or mistake of law or for any loss suffered by the Fund 
in connection with the matters to which the Administration Agreement relates 
except by reason of SBMFM's willful misfeasance, bad faith or gross negligence 
on its part in the performance of its duties or by reason of SBMFM's reckless 
disregard of its obligations and duties under the Administration Agreement.
The Administration Agreement will continue automatically for successive annual 
periods provided that such continuance is specifically approved at least 
annually by the Board of Directors of the Fund including a majority of the 
Non-Interested Directors, by vote cast in person at a meeting called for the 
purpose of voting such approval.   The Administration Agreement is terminable, 
without penalty, on 60 days' written notice, by the Board of Directors of the 
Fund or by vote of holders of a majority of the Fund's shares, or upon 90 
days' written notice, by SBMFM.
PORTFOLIO TRANSACTIONS AND TURNOVER
Portfolio Transactions
Portfolio securities transactions for the Fund are placed on behalf of the 
Fund by the Investment Manager. In selecting brokers or dealers to execute 
portfolio transactions for the Fund, the Investment Manager seeks the best 
overall terms available. The Advisory Agreement provides that, in assessing 
the best overall terms available for any transaction, the Investment Manager 
will consider the factors it deems relevant, including the breadth of the 
market in the security, the financial condition and execution capability of 
the broker or dealer, and the reasonableness of the commission, if any, for 
the specific transaction and on a continuing basis.   In addition, the 
Advisory Agreement authorizes the Investment Manager, in selecting brokers or 
dealers, to execute a particular transaction, and, in evaluating the best 
overall terms available, to consider the brokerage and research services 
provided to the Fund and/or other accounts over which the Investment Manager 
or an affiliate exercises investment discretion.  The Investment Manager's fee 
under the Advisory Agreement is not reduced by reason of its receiving such 
brokerage and research services.  
The Fund's portfolio securities ordinarily are purchased from and sold to 
parties acting as either principal or agent.  Newly-issued securities 
ordinarily are purchased directly from the issuer or from an underwriter; 
other purchases and sales usually are placed with those dealers from which it 
appears that the best price or execution will be obtained.  Usually no 
brokerage commissions, as such, are paid by the Fund for such purchases and 
sales, although the price paid usually includes an undisclosed compensation to 
the dealer acting as agent.  The prices paid to underwriters of newly-issued 
securities usually include a concession paid by the issuer to the underwriter, 
and purchases of after-market securities from dealers ordinarily are executed 
at a price between the bid and asked price.  The Fund has paid no brokerage 
commissions since commencement of its operations.  
Although investment decisions for the Fund are made independently from those 
of other accounts managed by the Investment Manager, investments of the type 
the Fund may make may also be made by those other accounts.  When the Fund and 
one or more other accounts managed by the Investment Manager are prepared to 
invest in, or desire to dispose of, the same security, available investments 
or opportunities for sales will be allocated in a manner believed by the 
Investment Manager to be equitable to each.  In some cases, this procedure may 
adversely affect the size of the position obtained for or disposed of by the 
Fund or the price paid or received by the Fund.  
The Fund may, from time to time, in accordance with an exemptive order granted 
by the SEC, enter into principal transactions involving certain money market 
instruments with dealers affiliated with the Investment Manager.   
The Fund's Board of Directors will review periodically the commissions paid by 
the Fund to determine if the commissions paid over representative periods of 
time were reasonable in relation to the benefits inuring to the Fund.   
Portfolio Turnover
The Fund cannot accurately predict its portfolio turnover rate, but 
anticipates that its annual turnover rate will not exceed 100%.  Portfolio 
turnover rate is calculated by dividing the lesser of the Fund's annual sales 
or purchases of portfolio securities by the monthly average value of 
securities in the portfolio during the year, excluding any portfolio security 
the maturity of which at the time of acquisition was one year or less.  Higher 
portfolio turnover rates can result in corresponding increases in brokerage 
commissions.  The Fund will not consider turnover rate a limiting factor in 
making investment decisions consistent with its investment objective and 
policies.  For the 1994, 1995 and 1996  fiscal years, the Fund's portfolio 
turnover rates were 17%, 18% and 17% respectively. 
VALUATION OF SHARES
The Fund's net asset value will be calculated as of the close of regular 
trading on the New York Stock Exchange, Inc.  ("NYSE"), currently 4:00 p.m., 
New York time, on the last day on which the NYSE is open for trading of each 
week and month.  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.  Investments in Government Securities having a maturity of 60 
days or less are valued at amortized cost.  All other securities and assets 
are taken at fair value as determined in good faith by or under the direction 
of the Board of Directors. 
The valuation of the Fund's assets is made by SBMFM after consultation with an 
independent pricing service (the "Service") approved by the Board of 
Directors.  When, in the judgment of the Service, quoted bid prices for 
investments are readily available and are representative of the bid side of 
the market, these investments are valued at the mean between the quoted bid 
prices and asked prices.  Investments for which, in the judgment of the 
Service, no readily obtainable market 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 of 
Directors, which may replace the Service at any time if it determines it to be 
in the best interests of the Fund to do so. 
STOCK PURCHASES AND TENDERS
The Fund may repurchase shares of its Common Stock in the open market or in 
privately negotiated transactions when the Fund can do so at prices below 
their then current net asset value per share on terms that the Fund's Board of 
Directors believes represent a favorable investment opportunity.  In addition, 
the Board of Directors currently intends to consider at least once a year 
making an offer to each shareholder of record to purchase at net asset value 
shares of Common Stock owned by the shareholder.
No assurance can be given that repurchases and/or tenders will result in the 
Fund's shares trading at a price that is equal to their net asset value.  The 
market prices of the Fund's shares will, among other things, be determined by 
the relative demand for and supply of the shares in the market, the Fund's 
investment performance, the Fund's dividends and yield and investor perception 
of the Fund's overall attractiveness as an investment as compared with other 
investment alternatives.  The Fund's acquisition of Common Stock will decrease 
the total assets of the Fund and therefore have the effect of increasing the 
Fund's expense ratio.  The Fund may borrow money to finance the repurchase of 
shares subject to the limitations described in the Prospectus.  Any interest 
on the borrowings will reduce the Fund's net income.  Because of the nature of 
the Fund's investment objective, policies and portfolio, the Investment 
Manager does not anticipate that repurchases and tenders will have an adverse 
effect on the Fund's investment performance and does not anticipate any 
material difficulty in disposing of portfolio securities to consummate Common 
Stock repurchases and tenders. 
When a tender offer is authorized to be made by the Fund's Board of Directors, 
it will be an offer to purchase at a price equal to the net asset value of all 
(but not less than all) of the shares owned by the shareholder (or attributed 
to him for Federal income tax purposes under Section 318 of the Code).  A 
shareholder who tenders all shares owned or considered owned by him, as 
required, will realize a taxable gain or loss depending upon his basis in his 
shares. 
The policy of the Fund's Board of Directors with respect to tender offers and 
to repurchases, which may be changed by the Board, is that the Fund will not 
accept tenders or effect repurchases if (1) those transactions, if 
consummated, would (a) result in the delisting of the Common Stock from the 
NYSE (the NYSE having advised the Fund that it would consider delisting if the 
aggregate market value of the Fund's outstanding publicly held Common Stock is 
less than $5,000,000, the number of publicly held shares of Common Stock falls 
below 600,000 or the number of round-lot holders falls below 1,200), or (b) 
impair the Fund's status as a regulated investment company under the Code; (2) 
the Fund would not be able to liquidate portfolio securities in an orderly 
manner and consistently with the Fund's investment objective and policies to 
repurchase Common Stock; or (3) there is, in the Board's judgment, any (a) 
material legal action or proceeding instituted or threatened challenging the 
transactions or otherwise materially adversely affecting the Fund, (b) 
suspension of or limitation on prices for trading securities generally on the 
NYSE or any exchange on which portfolio securities of the Fund are traded, (c) 
declaration of a banking moratorium by Federal or state authorities or any 
suspension of payment by banks in the United States, (d) limitation affecting 
the Fund or issuers of its portfolio securities imposed by Federal, state or 
local authorities on the extension of credit by lending institutions, (e) 
commencement of war, armed hostilities or other international or national 
calamity directly or indirectly involving the United States, or (f) other 
event or condition that would have a material adverse effect on the Fund or 
its shareholders if shares of Common Stock were repurchased.  The Board of 
Directors may modify these conditions in light of experience. 
If the Fund liquidates portfolio securities in order to repurchase shares of 
Common Stock, the Fund may realize gains and losses.  These gains, if any, may 
be realized on securities held for less than three months.  Because the Fund 
must derive less than 30% of its gross income for any taxable year from the 
sale or disposition of stock and securities held less than three months (in 
order to retain the Fund's regulated investment company status under the 
Code), gains realized by the Fund due to a liquidation of portfolio securities 
held for less than three months would reduce the amount of gain on sale of 
other securities held for less than three months that the Fund could realize 
in the ordinary course of its portfolio management, which may adversely affect 
the Fund's performance.  The portfolio turnover rate of the Fund may or may 
nor be affected by the Fund's repurchases of shares of Common Stock pursuant 
to a tender offer. 
TAXES
Taxation of the Fund and its Investments
The Fund has qualified, and intends to continue to qualify each taxable year, 
as a "regulated investment company" under Subchapter M of the Code.  In 
addition, the Fund has satisfied and intends to satisfy each taxable year 
conditions contained in the Code that will enable interest from Municipal 
Obligations, excluded from gross income for Federal income tax purposes with 
respect to the Fund, to retain that tax-exempt status when distributed to the 
shareholders of the Fund (i.e., to be classified as "exempt-interest" 
dividends of the Fund). 
If it qualifies as a regulated investment company, the Fund will pay no 
Federal income taxes on its taxable net investment income (i.e., taxable 
income other than net realized capital gains) and its net realized capital 
gains that are distributed to shareholders.  To qualify under Subchapter M of 
the Code, the Fund must, among other things: (1) distribute to its 
shareholders at least 90% of its taxable net investment income (for this 
purpose consisting of taxable net investment income and net realized short-
term capital gains) and 90% of its tax-exempt income (reduced by certain 
expenses); (2) derive less than 30% of its annual gross income from the sale 
or other disposition of stock, securities, options, futures or forward 
contracts held for less than three months; and (3) diversify its holdings so 
that, at the end of each fiscal quarter of the Fund (a) at least 50% of the 
market value of the Fund's assets is represented by cash, Government 
Securities and other securities, with these other securities limited, with 
respect to any one issuer, to an amount no greater than 5% of the Fund's 
assets and (b) not more than 25% of the market value of the Fund's assets is 
invested in the securities of any one issuer (other than Government Securities 
or securities of other regulated investment companies).  In meeting these 
requirements, the Fund may be restricted in the selling of portfolio 
securities held for less than three months and in the utilization of certain 
of the investment techniques described under "Investment Objective and 
Policies" "Investment Techniques." As a regulated investment company, the Fund 
will be subject to a 4% non-deductible excise tax measured with respect to 
certain undistributed amounts of ordinary income and capital gain. The Fund 
expects to pay dividends and distributions necessary to avoid the application 
of this excise tax. 
Financial Futures and Options.   Under Section 1256 of the Code, gain or loss 
realized by the Fund from certain financial futures and options transactions 
will be treated as 60% long-term capital gain or loss and 40% short-term 
capital gain or loss.  Gain or loss will arise upon exercise or lapse of those 
options transactions as well as from closing purchase transactions.  In 
addition, futures and options positions remaining open at the end of the 
Fund's taxable year will be treated as sold for their then fair market value, 
resulting in additional gain or loss in the Fund characterized in the manner 
described above. 
Offsetting positions held by the Fund involving financial futures and options 
transactions may be considered, for tax purposes, to constitute "straddles," 
which are defined to include "offsetting positions" in actively traded 
personal property.  The tax treatment of "straddles" is governed by Section 
1092 of the Code, which, in certain circumstances, overrides or modifies the 
provisions of Section 1256.  If the Fund was treated as entering into 
"straddles" by reason of its futures and options transactions, the "straddles" 
could be characterized as mixed "straddles" if the futures and options 
transactions constituting a part of the "straddles" arc governed by Section 
1256.  The Fund may make one or more elections with respect to "mixed 
straddles." Depending on which election is made, if any, the results to the 
Fund may differ.  If no election is made, to the extent the "straddle" rules 
apply to positions established by the Fund, losses realized by the Fund would 
be deferred to the extent of unrealized gain in the offsetting position.  
Moreover, as a result of the "straddle" rules, short-term capital losses on 
"straddle" positions may be recharacterized as long-term capital losses, and 
long-term capital gains may be treated as short-term capital gains. 
Taxation of the Fund's Shareholders
The Fund anticipates that all dividends it pays, other than dividends from 
Taxable Investments and from income or gain derived from securities 
transactions and from the use of certain of the investment techniques 
described under "Investment Objective and Policies" "Investment Techniques," 
will be exempt-interest dividends that may be excluded by shareholders from 
their gross income for Federal income tax purposes.  Dividends derived from 
Taxable Investments, and distributions derived from any realized short-term 
capital gains, are taxable as ordinary income whether or not reinvested in 
additional Fund shares.  Dividends paid by the Fund will not qualify for the 
dividends-received deduction for corporations. 
Any net long-term capital gains realized by the Fund will be distributed 
annually as described below. Such distributions ("capital gain dividends") 
will be taxable to shareholders as long-term capital gains, regardless of how 
long a shareholder has held Fund shares, and will be designated as capital 
gain dividends in a written notice mailed by the Fund to shareholders after 
the close of the Fund's taxable year.  If a shareholder receives a capital 
gain dividend with respect to any share and if the share has been held by the 
shareholder for six months or less, then any loss (to the extent not 
disallowed pursuant to the other six-month rule described in the Prospectus 
relating to exempt-interest dividends) on the sale or exchange of such share 
will be treated as a long-term capital loss to the extent of the capital gain 
dividend. 
If, as described above under "Stock Purchases and Tenders," the Fund 
repurchases Common Stock pursuant to a tender offer, then, as a general rule, 
pursuant to Section 302 of the Code, a sale by a shareholder pursuant to a 
tender offer will be treated as a sale or exchange of Fund shares if the 
receipt of cash upon the sale (1 ) is not essentially equivalent to a dividend 
with respect to the selling shareholder, (2) is substantially disproportionate 
with respect to the selling shareholder or (3) results in a complete 
redemption of the selling shareholder's interest in the Fund.  If a 
shareholder is unable to satisfy any of these three conditions, then, 
depending upon the Fund's earnings and profits and the shareholder's basis in 
his Common Stock, amounts received pursuant to a tender offer could be treated 
as ordinary income, as capital gains, or as a non-taxable return of capital. 
As a general rule, dividends and distributions paid by the Fund are treated as 
received when actually received by the shareholder.  If, however, any dividend 
or distribution is declared by the Fund in any October, November or December, 
payable to shareholders of record on a specified date in October, November or 
December and actually paid during January of the following year, then the 
dividend or distribution will be treated as received on December 31 of the 
preceding calendar year. 
Exempt-Interest Dividends.   Because the Fund will distribute exempt-interest 
dividends, interest on indebtedness incurred by a shareholder to purchase or 
carry Fund shares is not deductible for Federal income tax purposes.  If a 
shareholder receives exempt-interest dividends with respect to any share and 
if the share is held by the shareholder for six months or less, then any loss 
on the sale or exchange of the share may, to the extent of the exempt-interest 
dividends, be disallowed.  The Code may also require a shareholder, if he 
receives exempt-interest dividends, to treat as taxable income a portion of 
certain otherwise non-taxable social security and railroad retirement benefit 
payments.  In addition, that portion of any exempt interest dividend paid by 
the Fund that represents income derived from private activity bonds held by 
the Fund may not retain its tax-exempt status in the hands of a shareholder 
who is a "substantial user" of a facility financed by the bonds, or a "related 
person" of the substantial user.  Moreover, although the Fund's exempt-
interest dividends may be excluded by shareholders from their gross incomes 
for Federal income tax purposes, all or a portion of the exempt-interest 
dividends will be a specific preference item for purposes of the Federal 
individual and corporate alternative minimum taxes to the extent that they are 
derived from certain types of private activity bonds issued after August 7, 
1986, and all the Fund's exempt-interest dividends will be a component of the 
"adjusted current earnings" adjustment item for purposes of the Federal 
corporate alternative minimum tax.  The receipt of Fund dividends and capital 
gain distributions may affect a corporate shareholder's Federal 
"environmental" tax liability, a foreign corporate shareholder's Federal 
"branch profits" tax liability and a Subchapter S corporation shareholder's 
Federal "excess net passive income" tax liability. 
Shareholders should consult their tax advisors to determine whether (1) a 
portion of their otherwise non-taxable social security and railroad benefits 
will be treated as taxable income, (2) they are "substantial users" with 
respect to a facility or "related" to these users within the meaning of the 
Code and (3) they are subject to a Federal alternative minimum tax, the 
Federal "environmental" tax, the Federal "branch profits" tax, and the Federal 
"excess net passive income" tax. 
Dividend Reinvestment Plan.   Shareholders receiving dividends or 
distributions in the form of additional shares pursuant to the Plan should be 
treated for United States federal income tax purposes as receiving a 
distribution in the amount equal to the amount of money that the shareholders 
receiving cash dividends will receive, and should have a cost basis in the 
shares received equal to such amount.  If the Fund distributes cash to First 
Data Investor Services Group, Inc., the Plan administrator ("First Data"), to 
be used by First Data to purchase shares of Common Stock on the open market, a 
Plan participant will be deemed to have received a cash distribution in the 
amount of the cash distribution to First Data on his behalf. 
Statements and Notices.   Each shareholder will receive after the close of the 
calendar year an annual statement as to the Federal income tax status of his 
dividends and capital gain distributions from the Fund for the prior calendar 
year.  These statements will also designate the amount of exempt-interest 
dividends that is a specific preference item for purposes of the Federal 
individual and corporate alternative minimum taxes.  Each shareholder will 
also receive, if appropriate, various written notices after the close of the 
Fund's prior taxable year as to the Federal income tax status of his dividends 
and capital gain distributions that were received from the Fund during the 
Fund's prior taxable year.  Shareholders should consult their tax advisors as 
to any state and local taxes that may apply to these dividends and capital 
gain distributions.  The dollar amount of dividends exempt from Federal income 
taxation and the dollar amount subject to state and local taxation will vary 
for each shareholder depending upon the size and duration of each 
shareholder's investment in the Fund.  In the event that the Fund earns 
taxable net investment income, it intends to designate as taxable dividends 
the same percentage of each day's dividend as its taxable net investment 
income bears to its total net investment income earned on that day.  
Therefore, the percentage of the dividend designated as taxable, if any, may 
vary from day to day. 
Backup Withholding.   If a shareholder fails to furnish a correct taxpayer 
identification number, fails to report fully dividend or interest income, or 
fails to certify that he has provided a correct taxpayer identification number 
and that he is not subject to backup withholding, the shareholder may be 
subject to a 31% "backup withholding" tax with respect to (1) taxable 
dividends and capital gain distributions and (2) the proceeds of any sales or 
repurchases of Fund shares.  An individual's taxpayer identification number is 
his social security number.  The 31% backup withholding tax is not an 
additional tax and may be credited against a taxpayer's Federal income tax 
liability.
ADDITIONAL INFORMATION
Legal Matters
Willkie Farr & Gallagher serves as counsel to the Fund.  The Directors who are 
not "interested persons" of the Fund have selected Stroock & Stroock & Lavan 
as their counsel. 
Independent Public Accountants
   KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154, has been 
selected to serve as the Fund's independent auditor to examine and report on 
the Fund's financial statements and highlights for the fiscal year ending 
October 31, 1997.      
Custodian and Transfer Agent
   PNC Bank, N.A. is located at 17th and Chestnut Streets, Philadelphia, 
Pennsylvania 19103, and serves as the Fund's custodian pursuant to a custody 
agreement.  Under the custody agreement, PNC Bank holds the Fund's portfolio 
securities and keeps all necessary accounts and records.  The assets of the 
Fund are held under bank custodianship in compliance with the 1940 Act. 
First Data Investors Services Group Inc, ("First Data")is located at Exchange 
Place, Boston, Massachusetts 02109, and pursuant to a transfer agency 
agreement serves as the Fund's transfer agent.  Under the transfer agency 
agreement, First Data maintains the shareholder account records for the Fund, 
handles certain communications between shareholders and the Fund, and 
distributes dividends and distributions payable by the Fund.       
FINANCIAL STATEMENTS
The Fund will send unaudited semiannual and audited annual financial 
statements of the Fund to shareholders, including a list of the portfolio of 
investments held by the Fund.   
   THE AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996 
ARE INCORPORATED BY REFERENCE INTO THIS SAI FROM THE FUND'S ANNUAL REPORT. 
COPIES OF THE ANNUAL REPORT MAY BE OBTAINED FROM ANY SMITH BARNEY FINANCIAL 
CONSULTANT OR BY CALLING OR WRITING TO THE FUND AT THE TELEPHONE NUMBER OR 
ADDRESS SET FORTH ON THE COVER PAGE OF THIS SAI.     



APPENDIX
DESCRIPTION OF MOODY'S, S&P AND FITCH RATINGS
Description of Moody's Municipal Bond Ratings: 
Aaa Bonds that are rated Aaa are judged to be of the best quality, carry the 
smallest degree of investment risk and are generally referred to as "gilt 
edge." Interest payments with respect to these bonds are protected by a large 
or by an exceptionally stable margin, and principal is secure.  Although the 
various protective elements applicable to these bonds are likely to change, 
those changes are most unlikely to impair the fundamentally strong position of 
these bonds. 
Aa Bonds that are rated Aa are judged to be of high quality by all standards 
and together with the Aaa group comprise what are generally known as high 
grade bonds.  They are rated lower than the best bonds because margins of 
protection may not be as large as in Aaa securities, or fluctuation of 
protective elements may be of greater amplitude, or other elements may be 
present that make the long-term risks appear somewhat larger than in Aaa 
securities. 
A Bonds that are rated A possess many favorable investment attributes and are 
to be considered as upper medium grade obligations.  Factors giving security 
to principal and interest with respect to these bonds are considered adequate, 
but elements may be present that suggest a susceptibility to impairment 
sometime in the future. 
Baa Bonds rated Baa are considered to be medium grade obligations, that is 
they are neither highly protected nor poorly secured.  Interest payment and 
principal security appear adequate for the present but certain protective 
elements may be lacking or may be characteristically unreliable over any great 
length of time.  These bonds lack outstanding investment characteristics and 
may have speculative characteristics as well. 
Ba Bonds which are rated Ba are judged to have speculative elements; their 
future cannot be considered as well assured.  Often the protection of interest 
and principal payments may be very moderate and thereby not well safeguarded 
during both good and bad times over the future.  Uncertainty of position 
characterizes bonds in this class. 
Moody's applies the numerical modifiers 1, 2 and 3 in each generic rating 
classification from Aa through B.  The modifier 1 indicates that the security 
ranks in the higher end of its generic rating category; the modifier 2 
indicates a mid-range ranking; and the modifier 3 indicates that the issue 
ranks in the lower end of its generic rating category. 
Description of Moody's Municipal Note Ratings:
Moody's ratings for state and municipal notes and other short-term loans are 
designated Moody's Investment Grade (MIG) and for variable demand obligations 
are designated Variable Moody's Investment Grade (VMIG).  This distinction 
recognizes the differences between short-term credit risk and long-term risk.  
Loans bearing the designation MIG 1/VMIG 1 are of the best quality, enjoying 
strong protection from established cash flows of funds for their servicing or 
from established and broad-based access to the market for refinancing, or 
both.  Loans bearing the designation MIG 2/VMIG 2 are of high quality, with 
margins of protection ample, although not as large as the preceding group.  
Loans bearing the designation MIG 3/VMIG 3 are of favorable quality, with all 
security elements accounted for but lacking the undeniable strength of the 
preceding grades.  Market access for refinancing, in particular, is likely to 
be less well established. 
Description of Moody's Commercial Paper Ratings:
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.  
Issuers rated Prime-1 (or related supporting institutions) are considered to 
have a superior capacity for repayment of short-term promissory obligations.  
Issuers rated Prime-2 (or related supporting institutions) are considered to 
have a strong capacity for repayment of short-term promissory obligations 
normally evidenced by many of the characteristics of issuers rated P-1 but to 
a lesser degree.  Earnings trends and coverage ratios, while sound, will be 
more subject to variation.  Capitalization characteristics, while still 
appropriate, may be more affected by external conditions.  Ample alternative 
liquidity is maintained. 
Description of S&P Municipal Bond Ratings: 
AAA These bonds are the obligations of the highest quality and have the 
strongest capacity for timely payment of debt service. 
General Obligation Bonds Rated AAA In a period of economic stress, the issuers 
of these bonds will suffer the smallest declines in income and will be least 
susceptible to autonomous decline.  Debt burden is moderate.  A strong revenue 
structure appears more than adequate to meet future expenditure requirements.  
Quality of management appears superior. 
Revenue Bonds Rated AAA Debt service coverage with respect to these bonds has 
been, and is expected to remain, substantial.  Stability of the pledged 
revenues is also exceptionally strong due to the competitive position of the 
municipal enterprise or to the nature of the revenues.  Basic security 
provisions (including rate covenant, earnings test for issuance of additional 
bonds, debt service reserve requirements) are rigorous.  There is evidence of 
superior management. 
AA The investment characteristics of bonds in this group are only slightly 
less marked than those of the prime quality issues.  Bonds rated AA have the 
second strongest capacity for payment of debt service. 
A Principal and interest payments on bonds in this category are regarded as 
safe although the bonds are somewhat more susceptible to the adverse effects 
of changes in circumstances and economic conditions than bonds in higher rated 
categories.  This rating describes the strongest capacity for payment of debt 
service. 
General Obligation Bonds Rated A There is some weakness, either in the local 
economic base, in debt burden, in the balance between revenues and 
expenditures, or in quality of management.  Under certain adverse 
circumstances, any one such weakness might impair the ability of the issuer to 
meet debt obligations at future date. 
Revenue Bonds Rated A Debt service is good, but not exceptional.  Stability of 
the pledged revenues could show some variations because of increased 
competition or economic influences on revenues.  Basic security provisions, 
while satisfactory, are less stringent.  Management performance appearance 
appears adequate. 
BBB The bonds in this group are regarded as having an adequate capacity to pay 
interest and repay principal.  Whereas bonds in this group normally exhibit 
adequate protection parameters, adverse economic conditions or changing 
circumstances are more likely to lead to a weakened capacity to pay interest 
and repay principal for debt in this category than in higher rated categories.  
Bonds rated BBB have the fourth strongest capacity for payment of debt 
service. 
BB Bonds rated BB are regarded, on balance, as predominately speculative with 
respect to capacity to pay interest and repay principal in accordance with the 
terms of the obligation.  BB indicates the lowest degree of speculation.  
While such bonds will likely have some quality and protective characteristics, 
these are outweighed by large uncertainties or major risk exposures to adverse 
conditions. 
S&P's letter ratings may be modified by the addition of a plus or minus sign, 
which is used to show relative standing within the major rating categories, 
except in the AAA category. 
Description of S&P Municipal Note Ratings:
Municipal notes with maturities of three years or less are usually given note 
ratings (designated SP-1, -2 or -3) to distinguish more clearly the credit 
quality of notes as compared to bonds.  Notes rated SP-1 have a very strong or 
strong capacity to pay principal and interest.  Those issues determined to 
possess overwhelming safety characteristics are given the designation of SP-
1+.  Notes rated SP-2 have a satisfactory capacity to pay principal and 
interest. 
Description of S&P Commercial Paper Ratings:
Commercial paper rated A-1 by S&P indicates that the degree of safety 
regarding timely payment is either overwhelming or very strong.  Those issues 
determined to possess overwhelming safety characteristics are denoted A-1+.  
Capacity for timely payment on commercial paper rated A-2 is strong, but the 
relative degree of safety is not as high as for issues designated A-1.



Municipal High
Income Fund Inc.

Statement of



Additional Information









PART C - OTHER INFORMATION

Item 24. Financial Statements and Exhibits


	(1)	Financial Statements:

		- Included in Part A:

			*     Financial Highlights

		- Included in Part B:

			*        The Registrant's Annual Report for the 
				fiscal year ended October 31, 1996 and 
				Report of Independent Accountants 
				dated December 10, 1996 are incorporated by 
				reference to the Definitive 30(b)2-1 filed 
				on January 13, 1997, 
				Accession #  91155-97-18      

	(2)	Exhibits:  

(a)	(i)	Articles of Incorporation are 
incorporated by reference to the 
Registrant's initial Registration 
Statement, Registration No.33-20507,
		filed with the SEC on March 8, 1988.

	(ii)	First Amendment to Articles of 
Incorporation are incorporated by 
reference to Registrant's Amendment 
No. 2 to the Registration Statement, 
Registration No. 33-20507, filed with the 
SEC on October 24, 1988. 

	(iii)	Second Amendment to Articles of 
Incorporation are incorporated by 
reference to Registrant's Amendment 
No. 3 to the Registration Statement, 
Registration No. 33-20507, filed with the 
SEC on November 17, 1988
(b)	(i)	Amended Bylaws of Registrant are 
incorporated by reference to the  
Registrant's Amendment No. 3 to the 
Registration Statement, Registration No. 
33-20507, filed with the SEC on 
November 17, 1988

	(ii)	Amendment to the Amended Bylaws of 
Registrant are incorporated by reference 
to the Registrant's Amendment No.4 to 
its Registration Statement, Registration 
No.811-5497, filed with the SEC on 
March 1, 1990.

		(c)	Not Applicable

(d)	Specimen Certificate of Common Stock, par 
value $.01 per share is incorporated by reference 
to the Registrant's Amendment No. 3 to the 
Registration Statement, Registration No. 33-
20507, filed with the SEC on November 17, 
1988

(e)	Dividend Reinvestment Plan

		(f)	Not Applicable

   		(g)(i)	Form of Investment Advisory Agreement 
			between Registrant and Greenwich Street 
			Advisors
				   		

    
   		(h)	Form of Distribution Agreement between 
			Registrant and Smith Barney Shearson.

		(i)	Not Applicable


    
   		(j)	Form of Custody Agreement between Registrant 
			and PNC Bank, National Association (filed herewith)

		(k)	(i)	Form of Administration Agreement between 
				Registrant and Smith Barney Mutual Funds 
				Management, Inc.,
    				is filed herewith.


		 (l)	Opinion and Consent of Counsel is incorporated by
			reference to Pre-Effective Amendment No.1.

		(m)	Not Applicable
		(n)	Consent of  Independent Auditors is filed herein.

		(o)	Not Applicable

		(p)	Subsciption Agreement between Registrant and Shearson 
	incorporated by reference to Registrant's 
Amendment No. 3 to the Registration Statement, 
Registration No. 33-20507, filed with the SEC 
on November 17, 1988

		(q)	Not Applicable

		(r)	Financial Data Schedule for Registrant as of October 31, 1996
			is filed herein.

Item 25.	Marketing Arrangements

	None

Item 26.	Other Expenses of Issuance and Distribution

	The following table sets forth the expenses to be incurred in 
connection with the offering described in this Registration Statement:

Securities and Exchange Commission Fees       0
Printing and Engraving Expenses	  	$5000
Legal Fees		   			$0
Accounting Expenses		   		$0
Miscellaneous Expenses		   		$0    
		                

Item 27.	Persons Controlled by or Under Common Control

			None

Item 28.	Number of Holders of Securities

   Title of Class		Number of 
				Record
				Stockholders
17,019,791			as of   December 18, 1996

Shares of Common Stock, 	
par value $0.01 per share	1,749	
    

Item 29.	Indemnification

	Under Article VII of Registrant's Articles of Incorporation, any past 
or present director or officer of Registrant is indemnified to the fullest 
extent permitted by law against liability and all expenses reasonably 
incurred by him in connection with any action, suit or proceeding to which 
he may be a party or otherwise involved by reason or his being or having 
been a director or officer of Registrant.  This provision does not 
authorize indemnification when it is determined that the director or 
officer would otherwise be liable to Registrant or its shareholders by 
reason of willful misfeasance, bad faith, gross negligence or reckless 
disregard of his duties.  Expenses may be paid by Registrant in advance of 
the final disposition of any action, suit or proceeding upon receipt of an 
undertaking by a director or officer to repay those expenses to Registrant 
in the event that it is ultimately determined that indemnification of the 
expenses is not authorized under Registrant's Articles of Incorporation.

	Insofar as indemnification for liability arising under the Securities 
Act of 1933, as amended (the "Securities Act"), may be permitted to 
directors, officers and controlling persons of Registrant pursuant to the 
foregoing provisions, or otherwise, Registrant has been advised that in the 
opinion of the Securities and Exchange Commission, such indemnification is 
against policy as expressed in the Securities Act and is, therefore, 
unenforceable.  In the event that a claim for indemnification against such 
liabilities (other than the payment by Registrant of expenses incurred or 
paid by a director, officer or controlling person of Registrant in the 
successful defense of any action, suit or proceeding) is asserted by such 
director, officer or controlling person in connection with the securities 
being registered, Registrant will, unless in the opinion of its counsel the 
matter has been settled by controlling precedent, submit to a court of 
appropriate jurisdiction the question whether such indemnification by it is 
against public policy as expressed in the Securities Act and will be 
governed by the final adjudication of such issue.

Item 30.	Business and Other Connections of Investment Adviser

	See "Management of the Fund" in the Prospectus.
   
	Smith Barney Mutual Funds Management Inc., ("Funds Management") 
	a New York corporation, is a registered investment adviser and is 
	wholly owned by Smith Barney Holdings Inc., which in turn is 
	wholly owned by Travelers Group Inc.  Funds Management is 
	primarily engaged in the investment advisory business. Information 
	as to executive officers and directors of Funds Management is 
	included in its Form ADV filed with the Securities and Exchange 
	Commission (Registration number 801-3387) and is incorporated 
	herein by reference.    

Item 31.	Location of Accounts and Records

	   Smith Barney Mutual Funds Management Inc.
	388 Greenwich Street
	New York, New York 10013    
	       

	    First Data Investor Services Group, Inc.
	One Exchange Place
	Boston, Massachusetts 02109    

	   PNC Bank, N.A.
	17th & Chestnut Streets
	Philadelphia, Pennsylvania 19103    

Item 32.	Management Services

		None

Item	33.	Undertakings

	1.	Not Applicable

	2.	Not Applicable

	3.	Not Applicable

4.	The Fund hereby undertakes:

(a)	To file, during any period in which offers or sales are being made, a 
post-effective amendment to this Registration Statement:

	(1)	to include any prospectus required by Section 10(a)(3) of the 
		Securities Act of 1933 (the "Act");

	(2)	to reflect in the Prospectus any facts or events arising after the 
		effective date of the Registration Statement (or the most recent post-
		effective amendment thereof) which, individually or in the aggregate, 
		represent a fundamental change in the information set forth in the 
		Registration Statement; and

	(3)	to include any material information with respect to the plan of 
		distribution not previously disclosed in the Registration Statement or any 
		material change to such information in the Registration Statement.

(b)	For the purpose of determining any liability under the Act, each 
post-effective amendment shall be deemed to be a new Registration Statement 
relating to the securities offered therein, and the offering of such 
securities at that time shall be deemed to be the initial bona fide 
offering thereof.

(c)	Not Applicable

5.	Not Applicable
6.	The Fund undertakes to send by first class mail or other means 
designed to ensure equally prompt delivery, within two business days of 
receipt of a written or oral request, any Statement of Additional 
Information.


SIGNATURES

	Pursuant to the requirements of the Securities Act of 1933, as 
amended, and the Investment Company Act of 1940, as amended, the 
Registrant, MUNICIPAL HIGH INCOME FUND INC., has duly caused this 
Amendment to the Registration Statement on Form N-2 to be signed on its 
behalf by the undersigned, thereunto duly authorized, all in the City of 
New York, State of New York on the   13th day of January, 1997.

					MUNICIPAL HIGH INCOME FUND INC.



					By: /s/ Heath B. McLendon  
					      Heath B. McLendon
					      Chief Executive Officer 

   
	We, the undersigned, hereby severally constitute and appoint Heath B. 
McLendon, Christina T. Sydor and Michael Kocur
, our true and lawful attorneys, with full power, 
to sign for us, and in our hands and in the capacities indicated below, 
any and all 
Post-Effective Amendments to this Registration Statement and to file the 
same, with all exhibits thereto, and other documents therewith, with the 
Securities and Exchange Commission, granting unto said attorneys full power to 
do and perform each and every act and thing requisite or necessary to be done 
in the premises, as fully to all intents and purposes as he might or could 
do in person, hereby ratifying and confirming all that said attorneys or 
any of them may lawfully do or cause to be done by virtue thereof.

WITNESS our hands on the date set forth below.

	Pursuant to the requirements of the Securities Act of 1933, as 
amended, this Amendment to the Registration Statement and the above Power 
of Attorney has been signed below by the following persons in the 
capacities and on the dates indicated.

Signature				Title					Date



    
   
 /s/ Heath B. McLendon 
Heath B. McLendon			 Chairman of the Board			1/13/97
					 Chief Executive Officer
/s/ Lewis E. Daidone
Lewis E. Daidone			Treasurer (Chief Financial 		1/ 13 /97
					and Accounting Officer)

/s/ Charles F. Barber* 
Charles F. Barber				Director			1/13/97


/s/ Allan J. Bloostein*
Allan J. Bloostein				Director			1/13/97


/s/ Martin Brody*
Martin Brody					Director			1/13/97


/s/ Dwight B. Crane*
Dwight B. Crane				Director			1/13/97


/s/ Robert A. Frankel*
Robert A. Frankel				Director			1/13/97



    
   /s/ William R. Hutchinson*
William Hutchinson				Director			1/13/97
    

*Signed by Heath B. McLendon, their duly authorized attorney-in-fact, 
pursuant to power-of-attorney dated December 3, 1996.

EXHIBIT  INDEX


2(j)		Custody Agreement

2(k)		Administration Agreement

2(n)		Auditors' Consent



























Municipal High Income Fund Inc.
388 Greenwich Street
New York, New York  10013








	A-3