Western Asset Municipal High Income Fund Inc. (MHF)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-05497

Western Asset Municipal High Income Fund Inc.

(Exact name of registrant as specified in charter)

620 Eighth Avenue, 49th Floor, New York, NY 10018

(Address of principal executive offices) (Zip code)

Robert I. Frenkel, Esq.

Legg Mason & Co., LLC

100 First Stamford Place

Stamford, CT 06902

(Name and address of agent for service)

Registrant’s telephone number, including area code: (888)-777-0102

Date of fiscal year end: October 31

Date of reporting period: July 31, 2018

 

 

 

ITEM 1.

SCHEDULE OF INVESTMENTS.

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

FORM N-Q

JULY 31, 2018

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited)    July 31, 2018

 

SECURITY

    RATE     MATURITY
DATE		      FACE
AMOUNT		      VALUE  
MUNICIPAL BONDS - 98.5%           

Alabama - 6.7%

           

County of Jefferson, AL, Sewer Revenue:

           

AGM

      5.500 %      10/1/53      $ 400,000      $ 444,968  

Convertible CAB, Subordinated Lien, (Step bond, 0.000% until 10/1/23, 7.900%)

      0.000 %      10/1/50        3,020,000        2,591,039  

Subordinated Lien Warrants

      6.000 %      10/1/42        1,120,000        1,286,936  

Subordinated Lien Warrants

      6.500 %      10/1/53        3,000,000        3,517,080  

Lower Alabama Gas District, Gas Project Revenue

      5.000 %      9/1/46        1,700,000        2,043,604  

Southeast Alabama Gas Supply District, Natural Gas Revenue, Project #2

      4.000 %      6/1/24        1,400,000        1,490,370 (a)  
          

 

 

  

Total Alabama

              11,373,997  
          

 

 

  

Arizona - 3.5%

           

Industrial Development Authority of the City of Phoenix, AZ, Education Revenue:

           

Basis School Inc.

      5.000 %      7/1/35        1,000,000        1,032,990 (b)  

Great Hearts Academies

      5.000 %      7/1/41        1,200,000        1,268,112  

La Paz County, AZ, Industrial Development Authority Revenue, Charter School Solutions, Harmony Public School Project

      5.000 %      2/15/36        1,000,000        1,050,550 (b)  

Navajo Nation, AZ, Revenue

      5.500 %      12/1/30        190,000        213,326 (b)  

Salt Verde, AZ, Financial Corp., Senior Gas Revenue

      5.000 %      12/1/37        1,500,000        1,783,620  

University Medical Center Corp., AZ, Hospital Revenue

      6.250 %      7/1/29        500,000        521,140 (c)  
          

 

 

  

Total Arizona

              5,869,738  
          

 

 

  

California - 10.7%

           

Alameda, CA, Corridor Transportation Authority Revenue, Second Subordinated Lien

      5.000 %      10/1/34        500,000        564,575  

Anaheim, CA, Public Financing Authority, Lease Revenue

      5.000 %      5/1/46        2,000,000        2,236,500  

California Municipal Finance Authority Revenue, Senior Lien, Linux Apartment Project

      5.000 %      12/31/43        500,000        561,005 (d)  

California Pollution Control Financing Authority, Water Furnishing Revenue

      5.000 %      11/21/45        2,960,000        2,995,994 (b)  

California State Public Works Board, Lease Revenue, Various Capital Project

      5.125 %      10/1/31        1,500,000        1,645,395  

California Statewide Communities Development Authority, Student Housing Revenue:

           

Provident Group-Pomona Properties LLC

      5.600 %      1/15/36        500,000        534,005 (b)  

Provident Group-Pomona Properties LLC

      5.750 %      1/15/45        360,000        384,505 (b)  

Golden State, CA, Tobacco Securitization Corp.

      5.000 %      6/1/47        300,000        308,286  

 

See Notes to Schedule of Investments.

 

1

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    July 31, 2018

 

SECURITY

    RATE     MATURITY
DATE		      FACE
AMOUNT		      VALUE  

California - (continued)

           

Inland Valley Development Agency, Successor Agency Tax Allocation Revenue

      5.000 %      9/1/44      $ 500,000      $ 543,255  

M-S-R Energy Authority, CA:

           

Gas Revenue

      7.000 %      11/1/34        2,000,000        2,836,960  

Gas Revenue

      6.500 %      11/1/39        2,000,000        2,829,940  

Gas Revenue

      6.500 %      11/1/39        1,000,000        1,414,970  

Redding, CA, Redevelopment Agency, Tax Allocation Revenue, Shastec Redevelopment Project

      5.000 %      9/1/29        600,000        601,566  

River Islands, CA, Public Financing Authority, Special Tax Revenue, Community Facilities District No. 2003-1

      5.500 %      9/1/45        620,000        664,249  
          

 

 

  

Total California

              18,121,205  
          

 

 

  

Colorado - 3.4%

           

Colorado High Performance Transportation Enterprise Revenue, C-470 Express Lanes

      5.000 %      12/31/51        150,000        162,500  

North Range, CO, Metropolitan District #2, GO

      5.625 %      12/1/37        500,000        504,285  

Public Authority for Colorado Energy, Natural Gas Purchase Revenue

      6.125 %      11/15/23        4,000,000        4,621,440  

Solaris Metropolitan District #3, GO

      7.000 %      12/15/46        500,000        495,485  
          

 

 

  

Total Colorado

              5,783,710  
          

 

 

  

Connecticut - 0.3%

           

State of Connecticut Special Tax Revenue, Transportation Infrastructure Purpose

      5.000 %      1/1/37        500,000        555,880  
          

 

 

  

Delaware - 1.2%

           

Delaware State Economic Development Authority Revenue, Indian River Power LLC

      5.375 %      10/1/45        2,000,000        2,085,900  
          

 

 

  

District of Columbia - 1.6%

           

District of Columbia Revenue:

           

Friendship Public Charter School Inc.

      5.000 %      6/1/42        2,000,000        2,107,160  

Ingleside Rock Creek Project

      4.125 %      7/1/27        100,000        101,574  

KIPP Charter School

      6.000 %      7/1/33        200,000        236,952 (c)  

KIPP Charter School

      6.000 %      7/1/43        250,000        296,190 (c)  
          

 

 

  

Total District of Columbia

              2,741,876  
          

 

 

  

Florida - 2.3%

           

Florida State Development Finance Corp., Educational Facilities Revenue:

           

Renaissance Charter School Inc. Project

      6.000 %      6/15/35        250,000        263,482 (b)  

Renaissance Charter School Inc. Project

      6.125 %      6/15/46        215,000        223,581 (b)  

Florida State Mid-Bay Bridge Authority Revenue

      5.000 %      10/1/28        500,000        563,670  

 

See Notes to Schedule of Investments.

 

2

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    July 31, 2018

 

SECURITY

    RATE     MATURITY
DATE		      FACE
AMOUNT		      VALUE  

Florida - (continued)

           

Martin County, FL, Industrial Development Authority, Indiantown Cogeneration LP Project

      4.200 %      12/15/25      $ 1,500,000      $ 1,525,320 (b)  

Palm Beach County, FL, Health Facilities Authority Revenue, Sinai Residences Boca Raton Project

      7.500 %      6/1/49        400,000        460,124  

Reunion, FL, East Community Development District Revenue:

           

Special Assessment

      6.600 %      5/1/33        295,000        301,065  

Special Assessment

      7.375 %      5/1/33        285,000        3 *(e) 

Santa Rosa, FL, Bay Bridge Authority Revenue

      6.250 %      7/1/28        762,049        563,916 *(e) 
          

 

 

  

Total Florida

              3,901,161  
          

 

 

  

Georgia - 1.9%

           

City of Atlanta, GA, Water & Wastewater Revenue

      6.250 %      11/1/39        2,000,000        2,116,640 (c)  

DeKalb, Newton & Gwinnett Counties, GA, Joint Development Authority Revenue, GGC Foundation LLC Project

      6.125 %      7/1/40        1,000,000        1,041,150 (c)  
          

 

 

  

Total Georgia

              3,157,790  
          

 

 

  

Hawaii - 1.2%

           

State of Hawaii Department of Budget & Finance, Special Purpose Revenue, Hawaiian Electric Co.

      6.500 %      7/1/39        2,000,000        2,079,200  
          

 

 

  

Illinois - 8.0%

           

Chicago, IL, O’Hare International Airport Revenue:

           
     5.000 %      1/1/31        1,500,000        1,654,485 (d)  

Senior Lien

      5.000 %      1/1/42        500,000        546,235 (d)  

Chicago, IL, Transit Authority, Sales Tax Receipts Revenue, Second Lien

      5.000 %      12/1/51        1,000,000        1,066,550  

Chicago, IL, Wastewater Transmission Revenue, Second Lien

      5.000 %      1/1/38        500,000        542,470  

Chicago, IL, Waterworks Revenue:

           

Second Lien

      5.000 %      11/1/29        500,000        564,690  

Second Lien, AGM

      5.000 %      11/1/32        1,260,000        1,421,948  

City of Chicago, IL, GO:

           
     5.000 %      1/1/25        500,000        535,615  
     5.500 %      1/1/34        1,250,000        1,340,487  
     6.000 %      1/1/38        300,000        338,610  

City of Chicago, IL, Motor Fuel Tax Revenue, AGM

      5.000 %      1/1/32        1,000,000        1,068,280  

Illinois State Finance Authority Revenue, Franciscan Communities Inc.

      5.250 %      5/15/47        1,000,000        1,053,010  

Illinois State University, Auxiliary Facilities System, AGM

      5.000 %      4/1/28        100,000        112,292  

 

See Notes to Schedule of Investments.

 

3

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    July 31, 2018

 

SECURITY

    RATE     MATURITY
DATE		      FACE
AMOUNT		      VALUE  

Illinois - (continued)

           

Metropolitan Pier & Exposition Authority, IL, Dedicated State Tax Revenue, McCormick Project, State Appropriations

      5.000 %      6/15/50      $ 155,000      $ 157,982  

Metropolitan Pier & Exposition Authority, IL, Revenue:

           

McCormick Place Expansion Project

      5.000 %      6/15/57        350,000        373,443  

McCormick Place Expansion Project, CAB

      0.000 %      12/15/52        700,000        130,389  

State of Illinois, GO:

           
     5.000 %      2/1/26        650,000        700,472  
     5.000 %      11/1/26        1,200,000        1,296,648  
     5.000 %      2/1/27        250,000        270,293  
     5.000 %      2/1/29        300,000        320,763  
          

 

 

  

Total Illinois

              13,494,662  
          

 

 

  

Indiana - 1.6%

           

City of Valparaiso, IN, Exempt Facilities Revenue, Pratt Paper LLC Project

      7.000 %      1/1/44        500,000        587,225 (d)  

Indiana State Finance Authority Revenue, Private Activity Ohio River Bridges East End Crossing Project

      5.000 %      7/1/48        2,000,000        2,125,940  
          

 

 

  

Total Indiana

              2,713,165  
          

 

 

  

Kentucky - 1.2%

           

County of Owen, KY, Waterworks System Revenue, Kentucky American Water Co. Project

      6.250 %      6/1/39        2,000,000        2,073,820  
          

 

 

  

Louisiana - 0.5%

           

Louisiana State Public Facilities Authority, Lease Revenue, Provident Group, Flagship Property, Louisiana State University Greenhouse Development

      5.000 %      7/1/42        700,000        766,871  

Village of Epps, LA, COP

      8.000 %      6/1/18        775,000        69,750 *(f) 
          

 

 

  

Total Louisiana

              836,621  
          

 

 

  

Maryland - 2.0%

           

Maryland State Health & Higher Educational Facilities Authority Revenue, Mercy Medical Center

      6.250 %      7/1/31        3,000,000        3,277,920  
          

 

 

  

Massachusetts - 1.6%

           

Massachusetts State Development Finance Agency Revenue:

           

Newbridge Charles Inc.

      5.000 %      10/1/47        250,000        267,228 (b)  

Partners Healthcare System

      5.000 %      7/1/47        1,000,000        1,110,910  

Tufts Medical Center Inc.

      6.875 %      1/1/41        600,000        670,842 (c)  

 

See Notes to Schedule of Investments.

 

4

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    July 31, 2018

 

SECURITY

    RATE     MATURITY
DATE		      FACE
AMOUNT		      VALUE  

Massachusetts - (continued)

           

Tufts Medical Center Inc.

      6.875 %      1/1/41      $ 400,000      $ 443,716  

UMass Boston Student Housing Project

      5.000 %      10/1/41        200,000        217,432  
          

 

 

  

Total Massachusetts

              2,710,128  
          

 

 

  

Michigan - 2.8%

           

Great Lakes, MI, Water Authority Water Supply System Revenue, Senior Lien

      5.000 %      7/1/35        200,000        228,138  

Michigan State Finance Authority:

           

Limited Obligation Revenue, Higher Education, Thomas M Cooley Law School Project

      6.000 %      7/1/24        310,000        324,886 (b)  

Limited Obligation Revenue, Higher Education, Thomas M Cooley Law School Project

      6.750 %      7/1/44        330,000        331,568 (b)  

Senior Lien Detroit Water & Sewer

      5.000 %      7/1/33        260,000        285,173  

Senior Lien Detroit Water & Sewer

      5.000 %      7/1/44        270,000        290,623  

Michigan Strategic Fund:

           

Limited Obligation Revenue, Evangelical Homes of Michigan

      5.250 %      6/1/32        500,000        518,545  

Limited Obligation Revenue, Evangelical Homes of Michigan

      5.500 %      6/1/47        750,000        778,477  

Royal Oak, MI, Hospital Finance Authority Revenue, William Beaumont Hospital

      8.250 %      9/1/39        2,000,000        2,011,180 (c)  
          

 

 

  

Total Michigan

              4,768,590  
          

 

 

  

Missouri - 2.2%

           

Health & Educational Facilities Authority of the State of Missouri:

           

Lutheran Senior Services

      6.000 %      2/1/41        500,000        535,330  

Lutheran Senior Services

      5.000 %      2/1/44        750,000        795,420  

Kansas City, MO, Industrial Development Authority, Senior Living Facilities Revenue, Kansas City United Methodist Retirement Home Inc.

      6.000 %      11/15/51        200,000        193,824 (b)  

St Louis County, MO, Industrial Development Authority, Senior Living Facilities Revenue, Friendship Village of Sunset Hills

      5.875 %      9/1/43        2,000,000        2,258,980  
          

 

 

  

Total Missouri

              3,783,554  
          

 

 

  

Nebraska - 2.2%

           

Central Plains Energy Project, NE, Gas Project Revenue, Project #3

      5.000 %      9/1/42        3,340,000        3,655,162  
          

 

 

  

Nevada - 0.5%

           

State of Nevada Department of Business & Industry Revenue:

           

Somerset Academy of Las Vegas

      5.000 %      12/15/35        300,000        310,635 (b)  

Somerset Academy of Las Vegas

      5.125 %      12/15/45        500,000        516,855 (b)  
          

 

 

  

Total Nevada

              827,490  
          

 

 

  

 

See Notes to Schedule of Investments.

 

5

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    July 31, 2018

 

SECURITY

    RATE     MATURITY
DATE		      FACE
AMOUNT		      VALUE  

New Jersey - 6.3%

           

Gloucester County, NJ, Pollution Control Financing Authority Revenue, Keystone Urban Renewal, Logan Generating

      5.000 %      12/1/24      $ 450,000      $ 485,887 (d)  

New Jersey State Economic Development Authority Revenue:

           

Private Activity-The Goethals Bridge Replacement Project

      5.375 %      1/1/43        1,500,000        1,642,215 (d)  

Special Facility Revenue, Port Newark Container Terminal LLC Project

      5.000 %      10/1/37        125,000        135,103 (d)  

New Jersey State Health Care Facilities Financing Authority Revenue, Hackensack Meridian Health

      5.000 %      7/1/38        100,000        113,778  

New Jersey State Higher Education Assistance Authority, Student Loan Revenue

      5.000 %      12/1/44        640,000        672,928 (d)  

New Jersey State Transportation Trust Fund Authority Revenue, Transportation Program

      5.250 %      6/15/32        4,720,000        5,190,018  

Salem County, NJ, Pollution Control Financing Authority Revenue, Chambers Project

      5.000 %      12/1/23        2,000,000        2,148,660 (d)  

Tobacco Settlement Financing Corp., NJ, Revenue

      5.000 %      6/1/46        150,000        165,160  
          

 

 

  

Total New Jersey

              10,553,749  
          

 

 

  

New York - 3.4%

           

Brooklyn Arena, NY, Local Development Corp. Revenue, Barclays Center Project

      6.250 %      7/15/40        2,000,000        2,136,300 (c)  

New York State Dormitory Authority, State Personal Income Tax Revenue

      5.000 %      2/15/37        1,000,000        1,147,880  

New York State Liberty Development Corp., Liberty Revenue, 3 World Trade Center LLC Project

      5.000 %      11/15/44        1,205,000        1,273,384 (b)  

New York State Transportation Development Corp., Special Facilities Revenue:

           

LaGuardia Airport Terminal B Redevelopment Project

      5.000 %      7/1/46        300,000        321,690 (d)  

LaGuardia Airport Terminal C&D Redevelopment Project

      5.000 %      1/1/33        750,000        840,180 (d)  
          

 

 

  

Total New York

              5,719,434  
          

 

 

  

North Carolina - 0.3%

           

North Carolina State Turnpike Authority, Monroe Expressway Toll Revenue

      5.000 %      7/1/47        500,000        543,870  
          

 

 

  

Ohio - 0.5%

           

State of Ohio, Private Activity Revenue, Portsmouth Bypass Project

      5.000 %      6/30/53        700,000        763,490 (d)  
          

 

 

  

Oklahoma - 1.0%

           

Payne County, OK, Economic Development Authority Revenue, Epworth Living at The Ranch

      6.250 %      11/1/31        215,000        107,500 *(e) 

 

See Notes to Schedule of Investments.

 

6

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    July 31, 2018

 

SECURITY

    RATE     MATURITY
DATE		      FACE
AMOUNT		      VALUE  

Oklahoma - (continued)

           

Tulsa County, OK, Industrial Authority, Senior Living Community Revenue:

           

Montereau Inc. Project

      7.125 %      11/1/30      $ 1,000,000      $ 1,091,330 (c)  

Montereau Inc. Project

      5.250 %      11/15/37        500,000        553,675  
          

 

 

  

Total Oklahoma

              1,752,505  
          

 

 

  

Oregon - 0.8%

           

Clackamas County Hospital Facility Authority, Senior Living, Willamette View Project

      5.000 %      11/15/37        500,000        549,485  

Yamhill County, OR, Hospital Authority Revenue, Friendsview Retirement Community

      5.000 %      11/15/51        725,000        768,312  
          

 

 

  

Total Oregon

              1,317,797  
          

 

 

  

Pennsylvania - 5.2%

           

Commonwealth Financing Authority, PA, Tobacco Master Settlement Payment Revenue, Tobacco Master Settlement Payment Bonds

      5.000 %      6/1/33        200,000        225,116  

Cumberland County, PA, Municipal Authority Revenue, Diakon Lutheran Social Ministries Project

      5.000 %      1/1/28        350,000        387,328  

Erie County, PA, Convention Center Authority Gtd. Hotel Revenue, County GTD

      5.000 %      1/15/36        750,000        836,933  

Montgomery County, PA, Industrial Development Authority:

           

Acts Retirement-Life-Communities

      5.000 %      11/15/28        1,400,000        1,502,046  

Acts Retirement-Life-Communities

      5.000 %      11/15/29        1,350,000        1,445,391  

Pennsylvania State Turnpike Commission Revenue, Turnpike Subordinate Revenue Refunding Bonds

      5.000 %      6/1/39        3,170,000        3,465,824  

Philadelphia, PA, Authority for Industrial Development Revenue:

           

Discovery Charter School Inc. Project

      6.250 %      4/1/37        500,000        509,260  

Performing Arts Charter School Project

      6.000 %      6/15/23        360,000        375,998 (b)  
          

 

 

  

Total Pennsylvania

              8,747,896  
          

 

 

  

Texas - 20.7%

           

Arlington, TX, Higher Education Finance Corp., Education Revenue, Uplift Education

      5.000 %      12/1/46        200,000        215,510  

Arlington, TX, Special Tax Revenue, Subordinated Lien, BAM

      5.000 %      2/15/41        500,000        550,220  

Central Texas Regional Mobility Authority Revenue

      5.000 %      1/1/42        2,000,000        2,137,680  

Dallas Love Field, TX, Airport Modernization Corp., General Airport Revenue

      5.000 %      11/1/33        20,000        22,529 (d)  

Dallas Love Field, TX, Airport Modernization Corp., General Airport Revenue

      5.000 %      11/1/36        20,000        22,360 (d)  

Dallas Love Field, TX, Airport Modernization Corp., Special Facilities Revenue, Southwest Airlines Co. Project

      5.250 %      11/1/40        5,000,000        5,305,250  

 

See Notes to Schedule of Investments.

 

7

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    July 31, 2018

 

SECURITY

    RATE     MATURITY
DATE		      FACE
AMOUNT		      VALUE  

Texas - (continued)

           

Dallas/Fort Worth, TX, International Airport Revenue, Joint Improvement

      5.000 %      11/1/42      $ 4,000,000      $ 4,257,080 (d)  

Grand Parkway Transportation Corp., TX, System Toll Revenue, Convertible CAB, (Step bond, 0.000% until 10/1/23; 5.500%)

      0.000 %      10/1/35        1,500,000        1,415,550  

Gulf Coast, TX, Industrial Development Authority Revenue, Citgo Petroleum Corp. Project

      4.875 %      5/1/25        1,000,000        1,033,590 (d)  

Harris County, TX, Cultural Education Facilities Finance Corp., Medical Facilities Revenue, Baylor College of Medicine

      5.625 %      11/15/32        2,000,000        2,024,860 (c)  

New Hope Cultural Education Facilities Finance Corp., TX:

           

Cardinal Bay Inc., Village on the Park Carriage Inn Project

      5.000 %      7/1/46        150,000        158,935  

Retirement Facility Revenue, MRC Crestview

      5.000 %      11/15/36        550,000        576,565  

Retirement Facility Revenue, MRC Senior Living-Langford Project

      5.375 %      11/15/36        475,000        482,738  

Retirement Facility Revenue, Westminster Manor Project

      5.000 %      11/1/40        1,000,000        1,088,360  

Senior Living Revenue, Cardinal Bay Inc., Village on the Park Carriage Inn Project

      5.000 %      7/1/46        100,000        108,488  

Senior Living Revenue, Cardinal Bay Inc., Village on the Park Carriage Inn Project

      5.000 %      7/1/51        150,000        162,198  

Student Housing Revenue, Collegiate Housing Stephenville II LLC, Tartleton State University Project

      5.000 %      4/1/39        1,165,000        1,241,074  

Tarrant County, TX, Cultural Education Facilities Finance Corp., Retirement Facility Revenue, Buckner Retirement Services Inc. Project

      5.000 %      11/15/37        700,000        770,350  

Texas Midwest Public Facility Corp. Revenue, Secure Treatment Facility Project

      9.000 %      10/1/30        2,000,000        460,000 *(e) 

Texas State Municipal Gas Acquisition & Supply Corp. I, Gas Supply Revenue

      6.250 %      12/15/26        1,000,000        1,164,150  

Texas State Municipal Gas Acquisition & Supply Corp. III, Gas Supply Revenue

      5.000 %      12/15/28        1,500,000        1,630,275  

Texas State Private Activity Bond Surface Transportation Corp. Revenue:

           

LBJ Infrastructure Group LLC

      7.000 %      6/30/40        4,000,000        4,336,080  

Senior Lien, Blueridge Transportation Group LLC

      5.000 %      12/31/40        1,000,000        1,084,940 (d)  

Senior Lien, NTE Mobility Partners LLC

      6.875 %      12/31/39        2,000,000        2,124,220  

Texas State Public Finance Authority, Charter School Finance Corp. Revenue, Cosmos Foundation Inc.

      6.200 %      2/15/40        1,000,000        1,066,200 (c)  

 

See Notes to Schedule of Investments.

 

8

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    July 31, 2018

 

SECURITY

    RATE     MATURITY
DATE		      FACE
AMOUNT		      VALUE  

Texas - (continued)

           

Texas State Water Development Board Revenue, Implementation Fund

      5.000 %      10/15/42      $ 1,000,000      $ 1,152,800  

Willacy County, TX, Jail Public Facilities Corp., Project Revenue, County Jail

      7.500 %      11/1/25        395,000        357,447  
          

 

 

  

Total Texas

              34,949,449  
          

 

 

  

U.S. Virgin Islands - 1.4%

           

Virgin Islands Public Finance Authority Revenue, Matching Fund Loan

      6.750 %      10/1/37        2,500,000        2,318,750  
          

 

 

  

Utah - 0.5%

           

Utah State Charter School Finance Authority, Charter School Revenue, Syracuse Arts Academy Project, UT CSCE

      5.000 %      4/15/42        250,000        274,585  

Utah State Infrastructure Agency Revenue

      5.250 %      10/15/33        550,000        618,233  
          

 

 

  

Total Utah

              892,818  
          

 

 

  

Virginia - 2.3%

           

Virginia State Port Authority Port Facility Revenue:

           
     5.000 %      7/1/41        250,000        278,093 (d)  
     5.000 %      7/1/45        300,000        331,518 (d)  

Virginia State Small Business Financing Authority:

           

OpCo LLC Project

      5.500 %      1/1/42        2,000,000        2,168,520  

Senior Lien, Elizabeth River Crossings

      5.250 %      1/1/32        1,000,000        1,078,260  
          

 

 

  

Total Virginia

              3,856,391  
          

 

 

  

Wisconsin - 0.7%

           

Public Finance Authority, WI, Ltd. Obligation Pilot Revenue, American Dream @ Meadowlands Project

      7.000 %      12/1/50        250,000        287,300 (b)  

Public Finance Authority, WI, Revenue:

           

Celanese Project

      5.000 %      12/1/25        550,000        620,724 (b)  

Church Home of Hartford Inc.

      5.000 %      9/1/38        250,000        258,863 (b)  
          

 

 

  

Total Wisconsin

              1,166,887  
          

 

 

  

TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS
(Cost - $157,826,774)

              166,394,605  
          

 

 

  
SHORT-TERM INVESTMENTS - 0.9%           
MUNICIPAL BONDS - 0.9%           

California - 0.2%

           

Alameda County Industrial Development Authority, CA, JMS Family Partnership, Industrial Revenue

      1.500 %      10/1/25        200,000        200,000 (g)(h)  

Santa Clara Valley Transportation Authority, CA

      1.150 %      4/1/36        100,000        100,000 (g)(h)  
          

 

 

  

Total California

              300,000  
          

 

 

  

Georgia - 0.0%

           

Municipal Electric Authority of Georgia, Project 1

      1.380 %      1/1/48        100,000        100,000 (g)(h)  
          

 

 

  

 

See Notes to Schedule of Investments.

 

9

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    July 31, 2018

 

SECURITY

    RATE     MATURITY
DATE		      FACE
AMOUNT		      VALUE  

Massachusetts - 0.1%

           

University of Massachusetts Building Authority, MA

      1.370 %      11/1/34      $ 100,000      $ 100,000 (g)(h)  
          

 

 

  

Mississippi - 0.0%

           

Mississippi State Business Finance Corp., Chevron USA Inc.

      1.260 %      12/1/30        100,000        100,000 (g)(h)  
          

 

 

  

New York - 0.1%

           

City of New York, NY, GO

      1.420 %      3/1/40        200,000        200,000 (g)(h)  
          

 

 

  

North Carolina - 0.2%

           

City of Charlotte, NC, 2003 Governmental Facilities Project, COP

      1.370 %      6/1/33        285,000        285,000 (g)(h)  
          

 

 

  

Oregon - 0.2%

           

Oregon State Facilities Authority, Peacehealth

      1.450 %      8/1/34        300,000        300,000 (g)(h)  
          

 

 

  

Texas - 0.1%

           

Permanent University Fund - University of Texas System, TX

      1.230 %      7/1/38        100,000        100,000 (g)(h)  
          

 

 

  

TOTAL MUNICIPAL BONDS
(Cost - $1,485,000)

              1,485,000  
          

 

 

  
                  SHARES         
MONEY MARKET FUNDS - 0.0%           

Dreyfus Government Cash Management, Institutional Shares
(Cost - $35,262)

      1.829 %         35,262        35,262  
          

 

 

  

TOTAL SHORT-TERM INVESTMENTS
(Cost - $1,520,262)

              1,520,262  
          

 

 

  

TOTAL INVESTMENTS - 99.4%
(Cost - $159,347,036)

              167,914,867  

Other Assets in Excess of Liabilities - 0.6%

              975,833  
          

 

 

  

Total Net Assets - 100.0%

            $ 168,890,700  
          

 

 

  

 

See Notes to Schedule of Investments.

 

10

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    July 31, 2018

 

 

*

Non-income producing security.

 

(a)

Maturity date shown represents the mandatory tender date.

 

(b)

Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Directors.

 

(c)

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

 

(d)

Income from this issue is considered a preference item for purposes of calculating the alternative minimum tax (“AMT”).

 

(e)

The coupon payment on these securities is currently in default as of July 31, 2018.

 

(f)

The maturity principal is currently in default as of July 31, 2018.

 

(g)

Variable rate demand obligations (“VRDOs”) have a demand feature under which the Fund can tender them back to the issuer or liquidity provider on no more than 7 days notice. The interest rate generally resets on a daily or weekly basis and is determined on the specific interest rate reset date by the Remarketing Agent, pursuant to a formula specified in official documents for the VRDO, or set at the highest rate allowable as specified in official documents for the VRDO. VRDOs are benchmarked to the Securities Industry and Financial Markets Association (“SIFMA”) Municipal Swap Index. The SIFMA Municipal Swap Index is compiled from weekly interest rate resets of tax-exempt VRDOs reported to the Municipal Securities Rulemaking Board’s Short-term Obligation Rate Transparency System.

 

(h)

Maturity date shown is the final maturity date. The security may be sold back to the issuer before final maturity.

Abbreviations used in this schedule:

 

AGM    — Assured Guaranty Municipal Corporation - Insured Bonds
BAM    — Build America Mutual - Insured Bonds
CAB    — Capital Appreciation Bonds
COP    — Certificates of Participation
CSCE    — Charter School Credit Enhancement
GO    — General Obligation
GTD    — Guaranteed

This Schedule of Investments is unaudited and is intended to provide information about the Fund’s investments as of the date of the schedule. Other information regarding the Fund is available in the Fund’s most recent annual or semi-annual shareholder report.

 

See Notes to Schedule of Investments.

 

11

Notes to Schedule of Investments (unaudited)

 

1. Organization and significant accounting policies

Western Asset Municipal High Income Fund Inc. (the “Fund”) was incorporated in Maryland and is registered as a diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund seeks high current income exempt from federal income taxes. The Fund invests primarily in intermediate and long-term municipal debt securities issued by state and local governments. However, the Fund may invest in municipal obligations of any maturity. There can be no assurance that the Fund will achieve its investment objective.

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

(a) Investment valuation. The valuations for fixed income securities (which may include, but are not limited to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of valuation techniques and methodologies. The independent third party pricing services use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar securities. Prior to December 1, 2017, short-term fixed income securities that would mature in 60 days or less were valued at amortized cost, unless it was determined that using this method would not reflect an investment’s fair value. Investments in open-end funds are valued at the closing net asset value per share of each fund on the day of valuation. If independent third party pricing services are unable to supply prices for a portfolio investment, or if the prices supplied are deemed by the manager to be unreliable, the market price may be determined by the manager using quotations from one or more broker/dealers or at the transaction price if the security has recently been purchased and no value has yet been obtained from a pricing service or pricing broker. When reliable prices are not readily available, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund values these securities as determined in accordance with procedures approved by the Fund’s Board of Directors.

The Board of Directors is responsible for the valuation process and has delegated the supervision of the daily valuation process to the Legg Mason North Atlantic Fund Valuation Committee (the “Valuation Committee”). The Valuation Committee, pursuant to the policies adopted by the Board of Directors, is responsible for making fair value determinations, evaluating the effectiveness of the Fund’s pricing policies, and reporting to the Board of Directors. When determining the reliability of third party pricing information for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices and reviews transactions among market participants.

 

12

Notes to Schedule of Investments (unaudited) (continued)

 

The Valuation Committee will consider pricing methodologies it deems relevant and appropriate when making fair value determinations. Examples of possible methodologies include, but are not limited to, multiple of earnings; discount from market of a similar freely traded security; discounted cash-flow analysis; book value or a multiple thereof; risk premium/yield analysis; yield to maturity; and/or fundamental investment analysis. The Valuation Committee will also consider factors it deems relevant and appropriate in light of the facts and circumstances. Examples of possible factors include, but are not limited to, the type of security; the issuer’s financial statements; the purchase price of the security; the discount from market value of unrestricted securities of the same class at the time of purchase; analysts’ research and observations from financial institutions; information regarding any transactions or offers with respect to the security; the existence of merger proposals or tender offers affecting the security; the price and extent of public trading in similar securities of the issuer or comparable companies; and the existence of a shelf registration for restricted securities.

For each portfolio security that has been fair valued pursuant to the policies adopted by the Board of Directors, the fair value price is compared against the last available and next available market quotations. The Valuation Committee reviews the results of such back testing monthly and fair valuation occurrences are reported to the Board of Directors quarterly.

The Fund uses valuation techniques to measure fair value that are consistent with the market approach and/or income approach, depending on the type of security and the particular circumstance. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable securities. The income approach uses valuation techniques to discount estimated future cash flows to present value.

GAAP establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:

 

  •  

Level 1 – quoted prices in active markets for identical investments

 

  •  

Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

 

  •  

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

13

Notes to Schedule of Investments (unaudited) (continued)

 

The following is a summary of the inputs used in valuing the Fund’s assets carried at fair value:

 

ASSETS

  

DESCRIPTION

    QUOTED PRICES
(LEVEL 1)		      OTHER SIGNIFICANT
OBSERVABLE INPUTS
(LEVEL 2)		      SIGNIFICANT
UNOBSERVABLE
INPUTS
(LEVEL 3)		      TOTAL  

Municipal Bonds

      —        $ 166,394,605        —        $ 166,394,605  

Short-Term Investments:

            

Municipal Bonds

      —          1,485,000        —          1,485,000  

Money Market Funds

    $ 35,262        —          —          35,262  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Short-Term Investments

      35,262        1,485,000        —          1,520,262  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Investments

    $ 35,262      $ 167,879,605        —        $ 167,914,867  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

14

ITEM 2.

CONTROLS AND PROCEDURES.

 

  (a)

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

 

  (b)

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

 

ITEM 3.

EXHIBITS.

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

SIGNATURES

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

Western Asset Municipal High Income Fund Inc.

 

By   /s/    JANE TRUST        
  Jane Trust
  Chief Executive Officer

Date:

  

September 24, 2018

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

 

By   /s/    JANE TRUST        
  Jane Trust
  Chief Executive Officer

Date:

  

September 24, 2018

By   /s/    RICHARD F. SENNETT        
  Richard F. Sennett
  Principal Financial Officer

Date:

  

September 24, 2018